Document:

Exhibit
10.01

 

 

1060
East. Arques Ave.

Sunnyvale
CA 94085

Ph:   (408) 616-4000

Fax:
(408) 830-9525

 

April 17, 2004

 

Robert Valiton

[address]

 

Dear Rob:

 

Silicon Image, Inc. (the
“Company”) is pleased to confirm our offer of continued employment to you. The
terms of our offer and the benefits provided by the Company are as follows:

 

1.                                       You will report to the Chief Executive
Officer in the position of Vice President, Worldwide Sales of the Company.  By your signature below, you hereby
concurrently resign from your other sales positions at the Company.

 

2.                                       Your annual base salary will be $240,000
per year, effective as of April 1, 2004. 
You will be eligible to receive a cash incentive bonus of $60,000 for
achievement of on-target IC product revenues for the 2004 fiscal year.  Any additional cash incentive bonus for
over-achievement beyond on-target IC product revenues for the 2004 fiscal year
will be memorialized in an addendum to this letter.  You will receive a one-time relocation incentive payment of $60,000
and reimbursement of your actual relocation costs, up to $40,000.  We will also recommend that the Compensation
Committee grant you a stock option for 300,000 shares with an exercise price
equal to the closing price of our stock on the date of grant which will vest
monthly over four years provided you continue to be employed by us.

 

3.                                       You will be eligible to participate in
the employee benefit plans and executive compensation programs maintained by
the Company applicable to other employees and key executives of the Company,
including, without limitation, retirement plans, savings or profit-sharing
plans, deferred compensation plans, supplemental retirement or excess-benefit
plans, stock option, stock purchase, incentive or other bonus plans, life, disability,
health, accident and other insurance programs, and similar plans or
programs.  You will be eligible for the
applicable number of days of paid PTO per year, per the PTO policy.

 

4.                                       Upon termination of your employment with
the Company for any reason, you will receive payment for all unpaid salary and
PTO accrued to the date of your termination of employment and your benefits
will be continued under the Company’s then

 

1

 

existing benefit plans
and policies for so long as provided under the terms of such plans and policies
and as required by applicable law.  You
will not otherwise be entitled to any other compensation, award or damages with
respect to your employment or termination, except that in the event that your
employment is terminated by the Company without “Cause” (as defined following)
you will also be entitled to receive cash severance in an amount equal to six
months of your then-applicable annual base salary, net of applicable taxes
(which may be paid in the Company’s discretion in a lump sum or according to
its normal payroll cycle).

 

As used herein, “Cause”
means (i) any breach of this agreement, the employee inventions and
confidentiality agreement between you and the Company, or any other written
agreement between you and the Company, if such breach causes harm to the
Company; (ii) any negligence or willful misconduct by you in your performance
of duties to the Company that causes harm to the Company; (iii) your repeated
failure to diligently follow the lawful directions of the Board of Directors of
the Company or the person to whom you report or your repeated failure to
diligently perform your duties in a reasonable manner pursuant to this
agreement; (iv) commission of a felony under the laws of the United States or
any state thereof; (v) commission of any act of fraud, embezzlement or
dishonesty or breach of fiduciary duties; (vi) the abuse of alcohol or
controlled substances that has a detrimental effect upon your performance of
your duties under this agreement; or (vii) a good faith determination by the
Company’s Board of Directors or the person to whom you report that your
performance is unsatisfactory.

 

In consideration of and
as a condition to receiving the severance set forth in this Section 4,
concurrently with your termination of employment, you will execute an agreement
in form acceptable to the Company providing for a full unilateral release in
favor of the Company and its directors, officers and other related persons.  However, you will not be required to release
any right to indemnification that you may have under applicable law, the
Company’s bylaws or the Indemnity Agreement between you and the Company.

 

5.                                       During the term of your employment with
the Company and for one year thereafter, you will not, on behalf of yourself or
any third party, solicit or attempt to induce any employee of the Company to
terminate his or her employment with the Company.

 

6.                                       Should you decide to accept our offer,
you will remain an at-will employee of the Company, which means the employment
relationship can be terminated by either of us for any reason at any time.  Any statements or representations to the
contrary (and, indeed, any statements contradicting any provision in this
letter) should be regarded by you as ineffective.  Further, your participation in any stock option or benefit
program is not to be regarded as assuring you of continuing employment for any
particular period of time.

 

7.                                       This letter agreement constitutes the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect to such subject matter, including
without limitation the letter agreement between you and the Company dated
July 16, 1999.  This agreement will
be governed by the laws of the State of California

 

2

 

without reference to
conflict of laws provisions.  The
parties agree that any dispute regarding the interpretation or enforcement of
this agreement shall be decided by confidential, final and binding arbitration
conducted by Judicial Arbitration and Mediation Services (“JAMS”) under the
then existing JAMS rules rather than by litigation in court, trial by jury,
administrative proceeding or in any other forum.

 

8.                                       If you decide to accept our offer, and I
hope you will, please sign the enclosed copy of this letter agreement in the
space indicated below and return it to me. 
Your signature will acknowledge that you have read and understood and
agreed to the terms and conditions of this offer.  Should you have anything else that you wish to discuss, please do
not hesitate to call me.

 

We look forward to the
opportunity to continue working together.

 

[Remainder of Page
Intentionally Left Blank]

 

3

 

Very truly yours,

 

Silicon Image, Inc.

 

 

	
  By:

  	
  /s/
  David D. Lee

  	
   

  
	
   

  	
  David
  D. Lee, CEO

  

 

 

	
  Acknowledged, Accepted
  and Agreed

  
	
   

  
	
   

  
	
  /s/ Robert Valiton

  	
   

  
	
  Robert Valiton

  

 

4

 

ADDENDUM

 

2004 VP Worldwide Sales Bonus Plan

 

	
  Performance

  to Plan (PTP)

  	
   

  	
  Base

  	
   

  	
  Revenue-based

  Incentive

  	
   

  	
  Percent of

  PTP@100%

  	
   

  	
  Total Cash

  Compensation

  	
   

  
	
  70

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  21,000

  	
   

  	
  35.0

  	
  %

  	
  $

  	
  261,000

  	
   

  
	
  75

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  22,500

  	
   

  	
  37.5

  	
  %

  	
  $

  	
  262,500

  	
   

  
	
  80

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  30,000

  	
   

  	
  50.0

  	
  %

  	
  $

  	
  270,000

  	
   

  
	
  85

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  37,500

  	
   

  	
  62.5

  	
  %

  	
  $

  	
  277,500

  	
   

  
	
  90

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  45,000

  	
   

  	
  75.0

  	
  %

  	
  $

  	
  285,000

  	
   

  
	
  95

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  52,500

  	
   

  	
  87.5

  	
  %

  	
  $

  	
  292,500

  	
   

  
	
  100

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  60,000

  	
   

  	
  100.0

  	
  %

  	
  $

  	
  300,000

  	
   

  
	
  105

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  86,400

  	
   

  	
  144.0

  	
  %

  	
  $

  	
  326,400

  	
   

  
	
  110

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  112,800

  	
   

  	
  188.0

  	
  %

  	
  $

  	
  352,800

  	
   

  
	
  115

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  139,200

  	
   

  	
  232.0

  	
  %

  	
  $

  	
  379,200

  	
   

  
	
  120

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  165,600

  	
   

  	
  276.0

  	
  %

  	
  $

  	
  405,600

  	
   

  
	
  125

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  192,000

  	
   

  	
  320.0

  	
  %

  	
  $

  	
  432,000

  	
   

  
	
  130

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  224,400

  	
   

  	
  374.0

  	
  %

  	
  $

  	
  464,400

  	
   

  
	
  135

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  256,800

  	
   

  	
  428.0

  	
  %

  	
  $

  	
  496,800

  	
   

  
	
  140

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  289,200

  	
   

  	
  482.0

  	
  %

  	
  $

  	
  529,200

  	
   

  
	
  145

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  321,600

  	
   

  	
  536.0

  	
  %

  	
  $

  	
  561,600

  	
   

  
	
  150

  	
  %

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  354,000

  	
   

  	
  590.0

  	
  %

  	
  $

  	
  594,000

  	
   

  

 

	
  Accelerator
  Ramp

  	
   

  
	
  Percent of
  Quota Achieved

  	
   

  	
  Accelerator

  	
   

  	
  Annual
  Payout

  per%

  	
   

  
	
  0%

  	
   

  	
  75

  	
  %

  	
  50

  	
  %

  	
  $

  	
  300

  	
   

  
	
  76%

  	
   

  	
  100

  	
  %

  	
  163

  	
  %

  	
  $

  	
  1,500

  	
   

  
	
  101%

  	
   

  	
  125

  	
  %

  	
  320

  	
  %

  	
  $

  	
  5,280

  	
   

  
	
  126%

  	
   

  	
  150

  	
  %

  	
  370

  	
  %

  	
  $

  	
  6,480

  	
   

  
										

 

5EXHIBIT
10.17

 

[ * ] = CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

DISTRIBUTION,
MANUFACTURING AND SUPPLY AGREEMENT

 

THIS
DISTRIBUTION, MANUFACTURING AND SUPPLY AGREEMENT (the “Agreement”) is made and entered into as of
September 30, 2003 (the “Effective Date”)
by and between AEROGEN, INC., a Delaware
corporation, with offices at 2071 Stierlin Court, Mountain View, CA  94043 (“Aerogen”), and MEDICAL INDUSTRIES AMERICA, INC.,  an
Iowa corporation, with offices at 2636 289th Place, Adel, IA  50003 (“MIA”).  Aerogen and MIA may be referred to herein
individually as a “Party” or
collectively as the “Parties”.

 

BACKGROUND

 

WHEREAS,
Aerogen has designed and developed a proprietary, open-cup, continuous-flow,
general-purpose portable nebulizer and desires to have MIA manufacture and
distribute that product for use by customers solely in the home or in alternate
care facilities;

 

WHEREAS,
MIA is engaged in the manufacture, distribution and sale of medical products
and desires to obtain such rights to manufacture and distribute Aerogen’s
nebulizer product; and

 

WHEREAS,
the Parties also desire to provide terms under which Aerogen will supply to
MIA, or allow MIA to manufacture, a key component of the Aerogen nebulizer
product.

 

NOW,
THEREFORE, in consideration of the foregoing premises and the
covenants contained herein, the Parties hereby agree as follows:

 

AGREEMENT

 

1.                                      DEFINITIONS.

 

In addition to the terms
defined in the other provisions of this Agreement, the following capitalized
terms shall have the meanings indicated for purposes of this Agreement:

 

1.1                               “Aerogen Patents” means all patents and patent applications
that are Controlled by Aerogen during the Term and
that claim the Product.  The Aerogen
Patents as of the Effective Date are listed on Exhibit
K.

 

1.2                               “Aerogen Licensed Rights” means the claims within the Aerogen
Patents that specifically claim the Product and the Aerogen Technology.

 

1.3                               “Aerogen Technology” means proprietary trade secrets,
know-how, techniques, methods, technical specifications, and test data that are
Controlled by Aerogen and are necessary or useful for the manufacture or
marketing of the Product.

 

 

1.4                               “Affiliate”  means, with
respect to a Party, any natural person, company or entity controlled by,
controlling, or under common control with such Party.  As used in this Section 1.4,
the term “controlling” (with correlative meanings for the terms “controlled by”
and “under common control with”) means possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
the controlled entity, whether by ownership of a majority of the voting
securities of such entity, by contract, or otherwise.

 

1.5                               “Approval Date” means the first day of the first month after
the date upon which 510(k) marketing clearance is first obtained for the
Product in the United States.

 

1.6                               “Confidential Information”  means
any information deemed by a Party to be its confidential or proprietary
information that it discloses to the other Party under this Agreement and marks
as “confidential” or the equivalent at the time of disclosure, which may
include, without limitation, engineering designs and drawings, know-how, trade
secrets, research data, processes, techniques, research projects, work in
process, future developments, and any scientific, manufacturing, marketing,
business plan, financial or personnel matters relating to a Party or its
present or future products, sales, suppliers, customers and patients,
employees, investors or business.  Any
“Confidential Information” as defined in the Letter Agreement dated
February 25, 2003 between the Parties and exchanged pursuant thereto,
shall be deemed to be Confidential Information for purposes of this Agreement.

 

1.7                               “Controlled” means, with respect to particular information or
intellectual property, that the applicable Party owns or has a license to such
information or intellectual property and has the right to grant to the other
Party access and a license to such information or intellectual property as
provided in this Agreement without violating any obligations to any third
party.

 

1.8                               “Cost of Goods” means MIA’s actual direct costs associated
with the manufacturing and assembling of the Product, to include:  materials and labor, and reasonable overhead
and administrative costs to the extent directly allocable to such manufacturing
activity of such Products (such as ordering process, collections, and account
maintenance for those Products), and shipping.

 

1.9                               “FDA” means the United States Food and Drug Administration,
and any successor thereto.

 

1.10                        “Financing Event” means either (a) a merger or combination
after which the combined entity has not less than twelve million dollars
($12,000,000) in cash post closing or (b) guaranteed financing (contractual
obligations to provide funding) to Aerogen after August 25, 2003 of not
less than twelve million dollars ($12,000,000) in cumulative gross proceeds
(excluding amounts paid by MIA pursuant to Sections 5.3 and 5.5), including without limitation through the sale of
equity, debt financing, the sale or grant of rights to assets, grant of product
rights or any combination thereof.

 

1.11                        “Gross Selling Price” means, on a country-by-country basis,
the actual, bona fide gross selling price, before term discounts, at which MIA
or its Affiliate (or a Related Sub-

 

2

 

Distributor, if
applicable) sells or otherwise markets Product, including Product components
and Product accessories, to sub-distributors and to end users in such country; provided, however, that the Gross Selling Price for
transfers from MIA to a Related Sub-Distributor shall be the greater of (i) the
actual, bona fide gross selling price, before discounts, by such Related
Sub-Distributor to an unaffiliated third party, or (ii) the fair market value,
based on arms-length sales, of Product, including Product components and
Product accessories.  If MIA sells the
Product at more than one gross selling price in a given country within the
Territory, the Gross Selling Price in such country with respect to Product
shall mean the total revenue at such bona fide gross selling prices, in the
relevant Sales Quarterly accounting period, divided by the number of Products
sold in that period in such country.  No
Gross Selling Price shall be assessed on units of Product transferred free of
charge by MIA to sub-distributors solely for use for marketing purposes and not
for resale.  The Gross Selling Price for
Product sold in combination or bundled with other products shall be determined
on a country-by-country basis as follows:

 

(a)                                  If
the Product and each of the other products in the combination or bundle are
sold separately in such country, the Gross Selling Price shall be calculated by
multiplying the gross selling price of the combination or bundle by the
fraction A/(A+B) where A is the average Gross Selling
Price of Product when sold separately, and B is the gross selling price of the
other product(s) in the combination or bundle.

 

(b)                                  If
each of the other products in the combination or bundle are not sold separately
in such country, but the Product is sold separately in such country, the Gross
Selling Price shall be calculated by multiplying the gross selling price of the
combination or bundle by the fraction A/C where A is the Gross Selling Price of
the Product when sold separately, and C is the gross selling price of the
combination or bundle.

 

(c)                                  If
the Product is not sold separately in such country, Gross Selling Price shall
be calculated by multiplying the gross selling price of the combination or
bundle by the fraction D/(D+E), where D is the fair market
value of the Product and E is the fair market value of the other product(s) in
the combination or bundle, as such fair market values are determined in good
faith by the Parties.

 

1.12                        “Manufacturing Improvements” has the meaning set forth in Section 3.4(a).

 

1.13                        “OnQ Aerosol Generator” means Aerogen’s proprietary aerosol
generator, as described in Exhibit A.

 

1.14                        “OnQ Aerosol Generator Manufacturing Facility” means the
facility at which manufacture and assembly of OnQ Aerosol Generators is
conducted, which shall either be the facility being
used as of the Effective Date, or such other location and facility as
established by mutual agreement of the Parties pursuant to Section 3.8.

 

1.15                        “OnQ Manufacturing Period” means that period of time
commencing on the Effective Date and ending upon the exercise by Aerogen of its
Repurchase Option.

 

3

 

1.16                        “Product” means Aerogen’s proprietary Aeroneb® Go open-cup,
continuous-flow, general-purpose portable nebulizer, and described on Exhibit B, incorporating the OnQ
Aerosol Generator, and including any Product Improvement incorporated therein.

 

1.17                        “Product Improvement” means, on a country-by-country basis,
any modification or line extension of the Product, or accessory that is
designed for use with the Product, that: 
(a) is developed by Aerogen, or by MIA as permitted in Section 3.4(a); and (b) does not require any separate
510(k) marketing clearance, Premarket approval (PMA) application, Biologics
License Application (BLA), or New Drug Application (NDA) regulatory filing or
approval, or any foreign equivalent thereto, to promote, market and sell a
Product containing such modification or line extension or accessory in the
Territory.

 

1.18                        “Related Sub-Distributor” means any distributor (or similar
entity) (a) to which MIA (or its Affiliate) sells or otherwise transfers
Products for resale or redistribution, and (b) with which MIA or any Affiliate
of MIA has any direct or indirect financial relationship (which may include,
without limitation, equity ownership, credit facilities, rebates, profit or
revenue interest, etc.).

 

1.19                        “Regulatory Agency” means any national, supranational,
regional, state, provincial or local regulatory agency or other governmental
entity that has authority, responsibility or jurisdiction with regard to the
manufacture, marketing and sale of the Product within the Territory.

 

1.20                        “Repurchase Option” has the meaning set forth in Section 3.8(f).

 

1.21                        “Sales Quarter” means a period of three (3) successive
calendar months commencing on the later of (a) the first day of the first full
month following delivery of [ * ] OnQ
Aerosol Generators or (b) the Approval Date, and each three (3) successive
calendar month period thereafter during the Term.

 

1.22                        “Sales Year”  means the
period of twelve (12) successive calendar months commencing on the later of (a)
the first day of the first full month following delivery of [ * ] OnQ Aerosol Generators or (b) the Approval Date, and
each successive twelve (12) month period thereafter during the Term.

 

1.23                        “Specifications” means the technical and performance
specifications for the OnQ Aerosol Generators or the Product, as may be amended
from time to time to incorporate any improvements, modifications, changes or
revisions thereto.  The Specifications
for the OnQ Aerosol Generator are attached as Exhibit
A, and the  Specifications
for the Product are attached as Exhibit B.

 

1.24                        “Supply Quarter” means a period of three (3) successive
calendar months commencing on the later of (a) the first day of the first full
month following delivery of [ * ] OnQ
Aerosol Generators or (b) the Approval Date, and each three (3) successive
calendar month period thereafter during the Term.

 

4

 

1.25                        “Term” means the term of this Agreement, more fully described
in Section 13.1.

 

1.26                        “Territory” means those countries identified on Exhibit C, as may be amended by the
Parties pursuant to Section 2.4.

 

1.27                        “Trademarks”  shall mean
those trademarks and trade names of Aerogen that Aerogen from time to time
during the Term deems appropriate for use in connection with the marketing and
sale of the Product, the current versions of which are listed on Exhibit D.  Jointly developed or applied-for trademarks
and/or trade names pursuant to Section 8.1
shall be considered Trademarks.

 

2.                                      DISTRIBUTION
RIGHTS.

 

2.1                               Distribution
Rights.  Subject to the terms of this
Agreement, Aerogen hereby appoints MIA as its distributor during the Term to
market, promote, distribute and sell the Product in the Territory:  (a) on an exclusive basis solely for use in
the home-based, open-cup, continuous-flow, general-purpose nebulizer market
(e.g., not for use in hospitals); and (b) on a non-exclusive basis solely for
use in alternate care facilities. 
Subject to the terms of Section 2.2
and Section 5.2, MIA may appoint
sub-distributors in the Territory subject to approval by Aerogen, which
approval shall not be unreasonably withheld. 
Subject to the terms of the Agreement, Aerogen hereby grants to MIA
during the Term the royalty-bearing, non-transferable right and license under
the Aerogen Licensed Rights to import, export, offer for sale and sell the
Product in the Territory solely for use by end users in the home-based, open-cup,
continuous-flow, general purpose nebulizer market and in alternate care
facilities.

 

2.2                               Sub-Distributor
Obligation.  In order for MIA to
retain distribution rights in each Expansion Country of the Territory (as
defined in Exhibit C), MIA shall complete
and present to Aerogen a definitive business plan, including a distribution
strategy with either intent to contract or hire sales representatives, or a
letter of intent and a draft definitive agreement with a sub-distributor, in
each such Expansion Country within the first six (6) months following the
Effective Date.  The business terms of
each such agreement shall be subject to approval by Aerogen.  At any time during such six (6) month period,
MIA may elect to terminate the Agreement with respect to any Expansion Country,
which will result in a commensurate reduction of the minimum royalties and
Product System (as Systems are defined on Exhibit A)
sales requirements attributable to such country as reflected in Exhibit  I
and Exhibit J; provided,
however, that the aggregate minimum
Product System sales requirements for Europe in its entirety (as defined in Exhibit J) shall remain unchanged
and the minimums for the remaining individual European countries adjusted as
mutually agreed upon by the Parties.  If
as to any particular Expansion Country, MIA has not met the preceding
requirements of this section by the end of such six (6) month period, then
Aerogen may thereafter terminate MIA’s rights under this Agreement with respect
to such country, by written notice, and on such termination such country shall
no longer be in the Territory and all rights in such country shall revert
exclusively to Aerogen.  MIA will provide
Aerogen with written notice regarding any direct or indirect financial
affiliation that arises between MIA (or any of its Affiliates) and any of its
existing or proposed sub-distributors during the Term, with such notice to be
given promptly upon the commencement of negotiations with a sub-distributor
involving any financial interest (including, but not limited to, equity
ownership, credit facilities, rebates,

 

5

 

profit
or revenue interest, etc.), with full details of the final relationship to be
provided to Aerogen upon final deal closure. 
MIA shall require that any Related Sub-Distributors make complete and
accurate reports to MIA in writing on a quarterly basis of all Gross Selling
Prices for Products sold or otherwise transferred by such Related
Sub-Distributor, and Aerogen shall have the right to inspect and audit all such
reports pursuant to Section 5.7.

 

2.3                               No
Conflicts.

 

(a)                                  Notwithstanding
any term or provision of this Agreement, Aerogen retains the right to develop
and/or commercialize products for use in hospitals, alternate care facilities,
and any other use, and products for home-based use other than the Product; provided, however, that
during the Term, other than through MIA, Aerogen agrees not to introduce in the
Territory, nor grant to any third party the right to introduce in the Territory,
any open-cup, continuous-flow, general-purpose nebulizer for home-based use
incorporating the OnQ Aerosol Generator.

 

(b)                                  During
the Term, MIA agrees that neither it nor its Affiliates or sub-distributors
will develop, market or distribute in the Territory, either directly or through
a third party, any products (other than the Product) that contain an aerosol
generator utilizing a vibrating element that would directly compete with or
otherwise reduce the sales of the Product.

 

(c)                                  MIA
covenants that it and its Affiliates and sub-distributors shall not market,
promote, distribute or sell the Product for any use other than home-based use
or use in an alternate care facility.

 

2.4                               Right
of First Negotiation to Expand the Territory.  During the Term, but no sooner than six (6)
months from the Effective Date, MIA shall have a right of first negotiation to
obtain rights to distribute the Product in a country that is not listed on Exhibit C.  MIA shall notify Aerogen of its intent in
writing, and, if the marketing rights for the Product in such country are
available for licensing to MIA, then the Parties shall negotiate in good faith
to reach an agreement regarding the expansion of the Territory to include such
country.  If the Parties reach agreement
on the expansion of the Territory, Exhibit C
shall be amended to reflect the additional country(ies)
in which MIA may distribute the Product pursuant to this Agreement.

 

3.                                      PRODUCT
MANUFACTURE.

 

3.1                               Product
Manufacturing License.  Subject to
the terms of this Agreement,  Aerogen hereby
grants to MIA during the Term, the non-transferable license (without the right
to grant sublicenses, except to subcontractors and/or vendors that fabricate
and/or supply components of the Product on behalf of MIA as shall be mutually
agreed to from time to time) under the Aerogen Licensed Rights and the
Manufacturing Improvements to manufacture and assemble components of the
Product (excluding the OnQ Aerosol Generator) and to assemble final Product for
distribution and sale in the Territory as permitted under Section 2.1.

 

3.2                               Manufacture
of Product.  MIA shall be responsible
for manufacturing all of its (and its
sub-distributors’) requirements for the Product (excluding the OnQ Aerosol
Generator component, which shall be supplied by Aerogen as provided in this
Agreement), in order to meet

 

6

 

on a
timely basis all market demand therefore. 
With respect to such manufacturing, MIA shall:  (a) manufacture, assemble and distribute the
Product in accordance with the Quality System Regulations; (b) maintain
certification to current, applicable EN/ISO standards and any future
amendments; (c) maintain certification compliant with all European regulations
and directives applicable to the manufacture of medical devices; and (d) comply
with applicable requirements of any other Regulatory Agencies having
jurisdiction over the development, manufacture, testing or use of the
Product.  MIA shall, at its own expense,
obtain and maintain the necessary licenses and permits required to manufacture
and distribute the Product in accordance with this Agreement.

 

3.3                               Product
Quality.  At Aerogen’s request, MIA
shall provide Aerogen samples of the Product being manufactured and distributed
by MIA (or its Affiliates or sub-distributors), for inspection by Aerogen to
assure that the quality of such Product meets with Aerogen’s approval, not to
be unreasonably withheld.  If Aerogen
determines that any such Product sample is deficient (e.g., because such
Product or its packaging does not meet the applicable Product Specifications or
quality of manufacture), then Aerogen may give MIA written notice of such
deficiencies, and MIA shall promptly thereafter remedy such deficiencies to
Aerogen’s reasonable satisfaction.

 

3.4                               Product
Modifications.

 

(a)                                  MIA
may make manufacturing changes to the Product for the purpose of reducing
Product manufacture and assembly costs (“Manufacturing Improvements”),
subject to Aerogen’s written consent, which shall not be unreasonably withheld.  All such Manufacturing Improvements shall be
disclosed to Aerogen in writing.  MIA
will make no changes to the OnQ Aerosol Generator.  If MIA desires to make any other changes to
the Product or any components thereof, MIA shall first request the right to
make such changes, and such proposed changes shall be discussed with Aerogen
and shall not be made without Aerogen’s prior written consent.  If any changes are agreed upon, they will be
made, either (i) by MIA at MIA’s expense or (ii) by Aerogen, with Aerogen’s
activities to be reimbursed by MIA.  For
clarity, the only changes or modifications that MIA may make that relate to the
Product or its manufacture are changes that would qualify as Product
Improvements, Manufacturing Improvements, or cost reductions, and any such
changes or modifications require Aerogen’s prior written consent as provided
above.

 

(b)                                  Nothing
in the Agreement, other than the restrictions described in Section 2.3(b),
will prevent MIA from continuing to develop and commercialize products for the
home market in the respiratory field separate from the Product or from making
any Manufacturing Improvements to the Product as permitted by subclause (a)
above, (but no such development will negate or limit MIA’s obligation to make
minimum purchases as provided in Section 6.1);
provided, however, MIA will have no
right to use the OnQ Aerosol Generator or any Aerogen Licensed Rights in
connection with any such activities. 
Subject to the foregoing, MIA will be free to use any inventions MIA may
make outside the scope of the Agreement in such other products.

 

3.5                               [ * ] Arrangement. 
Aerogen agrees to work with MIA in good faith to devise a work plan for
the development and regulatory activities associated with a new product that
would

 

7

 

include
[ * ]. 
If a work plan is agreed upon, the Parties will negotiate in good faith
an agreement for the development and commercialization of that new
product.  If no agreement is reached by
August 31, 2004, then neither Party will have any further obligation to
negotiate with the other concerning such a new product.

 

3.6                               Quality
Control Procedures.  MIA shall
maintain all documentation and quality control test results relating to the
quality control procedures for each Product for a period of three (3) years
after it delivers such Product to any sub-distributor or customer.  During the Term, Aerogen may periodically
review MIA’s quality control program documentation, and may work with MIA to
audit, survey, or verify the adherence of MIA to the quality control and to
assess its compliance with the quality control procedures, and to discuss any
related issues with MIA’s manufacturing and management personnel.

 

3.7                               OnQ
Aerosol Generator Manufacturing.  Other than as provided
for during the OnQ Manufacturing Period in Section 3.8
below, Aerogen will be solely responsible during the Term for the manufacture
and supply to MIA of its requirements of the OnQ Aerosol Generator for
incorporation into the Product, pursuant to the terms of Article 4.  Aerogen will use reasonable efforts to time
its production of OnQ Aerosol Generators so as to maintain in stock not less
than the number of OnQ Aerosol Generators firm-ordered by MIA (in accordance
with appropriate forecasts) for delivery within the next thirty (30) days, as
provided in Section 4.1.

 

3.8                               OnQ
Manufacturing Period.

 

(a)                                  MIA
Manufacturing.  During the OnQ
Manufacturing Period, MIA shall have the right, but not the obligation, to
manufacture, pursuant to the terms of this Section 3.8,
all its requirements of OnQ Aerosol Generators for use in assembling Product
for sale and distribution by MIA as permitted in Section 2.1.  MIA shall comply with all applicable Aerogen
Specifications and protocols for the OnQ Aerosol Generators it manufactures as
disclosed by Aerogen as part of the Aerogen Technology.

 

(b)                                  OnQ
Aerosol Generator Manufacturing License.  Aerogen hereby grants to MIA a
non-exclusive, non-transferable license (without the right to grant
sublicenses) under the Aerogen Technology to manufacture and assemble the OnQ
Aerosol Generator at the OnQ Aerosol Generator Manufacturing Facility solely
during the OnQ Manufacturing Period, and solely for use in assembling the
Product that MIA is permitted to distribute and sell pursuant to Section 2.1, and for use by Aerogen pursuant to Section 3.8(e).

 

(c)                                  Equipment
Sale.  Upon Aerogen’s receipt of the
payments owed in Section 5.1, Aerogen sells
and assigns to MIA Aerogen’s entire right, title and interest in the equipment
listed in Exhibit E (the “Equipment”).  During
the OnQ Manufacturing Period, the Equipment will continue to be housed at the
OnQ Aerosol Generator Manufacturing Facility. 
Upon the Effective Date, MIA shall have the right to assume full
authority over the manufacturing of the OnQ Aerosol Generator at the OnQ
Aerosol Generator Manufacturing Facility in the event of Aerogen’s
non-performance under Section 3.8(d) that
results in a failure to satisfy MIA’s requirements for quantities of OnQ
Aerosol Generators set forth in the forecasts and purchase orders provided by
MIA in accordance with Sections 4.1
and 4.2,  until
expiration

 

8

 

of the OnQ Manufacturing
Period, including the authority to direct Aerogen as to the operational
objectives to be achieved by the key manufacturing personnel to be provided by
Aerogen pursuant to Section 3.8(d),
but subject to Section 3.8(e).  During the OnQ Manufacturing Period, MIA
shall obtain and maintain all-risk insurance coverage with respect to the
Equipment insuring against, among other things: 
casualty, including loss or damage due to fire and the risks normally
included in extended coverage, malicious mischief and vandalism, for not less
than the full replacement value of said Equipment.

 

(d)                                  Contract
Manufacturing Services.  During the
OnQ Manufacturing Period, Aerogen shall provide to MIA and MIA agrees to accept
from Aerogen contract manufacturing services for the manufacture of MIA’s
requirements of OnQ Aerosol Generators (subject to the forecasts in Exhibit F) at the OnQ Aerosol
Generator Manufacturing Facility using the Equipment (the “Services”).  In connection with the Services, Aerogen
shall:  (i) provide and supervise
appropriately trained personnel resources necessary to manufacture MIA’s
requirements of OnQ Aerosol Generators (but not to exceed that number of
manufacturing personnel employed by Aerogen as of the Effective Date in
conducting its manufacture of OnQ Aerosol Generators at the OnQ Aerosol
Generator Manufacturing Facility at its location as of the Effective Date
unless additional personnel are necessary to satisfy MIA’s requirements for
quantities of OnQ Aerosol Generators set forth in the forecasts and purchase
orders provided by MIA in accordance with Sections 4.1
and 4.2); and (ii) maintain the Equipment
at the OnQ Aerosol Generator Manufacturing Facility in good working condition;
and (iii) if applicable, transfer manufacturing activities, including moving
all Equipment, to the new location for the OnQ Aerosol Generator Manufacturing
Facility, if such location is agreed to and secured by the Parties pursuant to Section 3.9.  The
methods, details and means of performing such services will be determined by
Aerogen in its reasonable discretion.  In
connection with the Services, Aerogen will be solely responsible for all
monthly expenses associated with the current OnQ Aerosol Generator
Manufacturing Facility, including without limitation, all rents, taxes,
equipment maintenance, payroll and employee benefit and insurance expenses,
utilities, and phone charges.  In the
event of commencement of bankruptcy proceedings against Aerogen, MIA’s right to
access and use the Equipment, and to manufacture the OnQ Aerosol Generator
shall not be limited, prohibited, or encumbered by Aerogen.  The terms and conditions of Article 4 shall apply to the order, purchase and
delivery of OnQ Aerosol Generators manufactured by Aerogen pursuant to the
Services.  OnQ Aerosol Generators
manufactured by Aerogen in the course of providing the Services shall meet the
OnQ Aerosol Generator Specifications set forth in Exhibit
A and shall be subject to the warranty set forth in Section 9.4.

 

(e)                                  Manufacturing
Capacity.  It is understood and
agreed that during the OnQ Manufacturing Period, production of OnQ Aerosol
Generators shall include making OnQ Aerosol Generators required by MIA for use
in MIA’s assembly of the Product and also for use by Aerogen in making other
Aerogen products and for Aerogen’s research purposes (which estimated
requirements are set forth in Exhibit F);
provided that MIA is appropriately
reimbursed, to the extent that MIA bears associated costs for such production.

 

(f)                                    Repurchase
Option.  Following the earliest of
(a) occurrence of a Financing Event, (b) any termination of the Agreement for
any reason or (c) the first (1st) anniversary of the Effective Date provided
that Aerogen has met its obligations under the

 

9

 

Agreement up to and
including that date, Aerogen shall have the right to repurchase the Equipment
from MIA, and to simultaneously revoke and terminate the rights granted to MIA
under Section 3.8(a), (the “Repurchase Option”). 
Aerogen may exercise the Repurchase Option upon thirty (30) days written
notice to MIA and including with such notice, delivery of evidence of the
Financing Event, if applicable, and payment to MIA of one dollar ($1.00) as
consideration for the repurchase of the Equipment and the termination and
revocation of rights.  Within such thirty
(30) day notice period, MIA shall sell and assign to Aerogen the entire right,
title and interest in the Equipment, free and clear of any and all
encumbrances, and shall take such action as reasonably requested by Aerogen to
document and perfect such sale and assignment. 
MIA covenants that it shall not sell, lease, mortgage or otherwise
encumber in any manner its interest in the Equipment.

 

3.9                               Leasehold.  Following the Effective Date, and
provided that Aerogen terminates its obligations under the lease to the current
OnQ Aerosol Generator Manufacturing Facility, Aerogen and MIA shall mutually
negotiate with appropriate third parties in an effort to secure a new location
for the OnQ Aerosol Generator Manufacturing Facility.  The terms of such lease shall be mutually
agreeable to both MIA and Aerogen.  MIA
shall sign as lessee of such leasehold, and Aerogen will be solely responsible
for all monthly expenses associated with such new OnQ Aerosol Generator
Manufacturing Facility, including without limitation, all rents, taxes,
equipment maintenance, payroll, utilities, and phone charges.  Aerogen agrees to sublease the facility from
MIA on the same terms and conditions of said lease, upon the end of the OnQ
Manufacturing Period, and MIA agrees to grant such sublease to Aerogen on such
terms.  If Aerogen does not terminate its
obligations under the lease to the current OnQ Aerosol Generator Manufacturing
Facility, it will provide for access by MIA to the OnQ Aerosol Generator
Manufacturing Facility for a period of sixty (60) days, in the event of
Aerogen’s default under such lease.

 

3.10                        Back-Up
Manufacturing Right.  Following the
end of the OnQ Manufacturing Period, if at any time during the remainder of the
Term, Aerogen (or its Affiliate or assignee, as applicable) either:  (a) is not financially able to maintain the
OnQ Aerosol Generator Manufacturing Facility, and therefore ceases operating
such facility; or (b) fails to timely supply to MIA a material quantity of the
OnQ Aerosol Generators ordered by MIA in accordance with the terms and
conditions of Article 4, then MIA may, by
written notice to Aerogen, require that Aerogen meet immediately with MIA to
resolve the problem.  In such case, the
Parties shall discuss in good faith the issue and seek to achieve a resolution
as soon as possible.  If such resolution
is not reached within sixty (60) days of such notice from MIA, and Aerogen has
not by that date otherwise cured the problem and supply deficiency, then
Aerogen shall grant to MIA a non-exclusive, non-transferable license (without
the right to grant sublicenses) under the Aerogen Technology to manufacture and
assemble the OnQ Aerosol Generator solely for MIA’s use in assembling the
Product for sale and distribution as permitted in Section 2.1,
which license shall automatically terminate on the earlier of August 1,
2009, or termination of the Agreement by MIA or by Aerogen pursuant to Article 13.

 

10

 

4.                                      ONQ
AEROSOL GENERATOR FORECASTS, ORDERS AND DELIVERY.

 

4.1                               Forecasts.  On the first day of each calendar month
during the Term, MIA shall provide to Aerogen a rolling forecast of MIA’s
anticipated OnQ Aerosol Generator purchases for the following [ * ] period.  MIA
shall provide each forecast to Aerogen thirty (30) days in advance of the
beginning of the forecast period to which the forecast pertains.  The [ * ] of each such forecast shall constitute an order to buy
the amount of OnQ Aerosol Generators listed in the forecast for such [ * ]; the remaining [ * ] of each
forecast will constitute a non-binding, good faith forecast.  An initial forecast is shown on Exhibit F; the forecast shown in [ * ] shall constitute a firm order by MIA for which MIA
will promptly submit a purchase order to Aerogen on the Effective Date for at
least the quantities indicated for such [ * ].

 

4.2                               Purchase
Orders.  Each forecast shall be
accompanied by a binding purchase order for [ * ] of the
forecast period.  The quantity requested
in such purchase order may not deviate from the amount previously forecasted
for such [ * ] in the most recent prior forecast by more than [ * ], unless Aerogen otherwise agrees.  The quantities forecasted for [ * ]
of each forecast shall not deviate from the quantities forecasted for the same [ * ] period in the prior forecast by more than [ * ], unless Aerogen otherwise agrees.  MIA shall place each purchase order for
quantities of the OnQ Aerosol Generator at least [ * ] prior to the
delivery date specified therein, and each such purchase order shall be binding
on MIA upon receipt by Aerogen.  MIA may
use its standard purchase order form to order OnQ Aerosol Generators; provided, however, that all purchase orders and confirmation
memoranda exchanged in connection with an order and delivery of the Product
shall be subject to the terms of this Agreement, and any conflicting or
additional terms are hereby expressly rejected. 
Aerogen shall use reasonable efforts to deliver the OnQ Aerosol
Generators ordered by MIA under such binding purchase orders by the delivery
dates specified in such orders.

 

4.3                               Order
Limits.  Aerogen shall not be
obligated to supply in a calendar month a quantity of OnQ Aerosol Generators
that is more than [ * ] of the
amount previously forecasted for such [ * ] in the
prior forecast submitted by MIA (each, an “Order Limit”).  However, if requested by MIA, Aerogen will
use reasonable efforts to supply any amounts of OnQ Aerosol Generators in
excess of the Order Limit for a particular [ * ].  Aerogen shall notify MIA in writing promptly
after receiving a purchase order from MIA whether it is able to supply the
amount of such purchase order that exceeds such Order Limit.  Any excess amounts that Aerogen accepts (in
whole or in part) pursuant to this Section 4.3
within ten (10) business days after the date of such purchase order shall be
binding upon MIA.  If Aerogen fails to
respond within ten (10) business days after the date of a purchase order that
requests delivery of amounts in excess of the Order Limit, then Aerogen shall
be deemed to have accepted only the amount of such purchase order that falls
within the Order Limit.

 

4.4                               Delivery.  Each shipment of OnQ Aerosol Generators will
be delivered FCA (Incoterms 2000) the OnQ Aerosol Generator Manufacturing
Facility in accordance with the instructions in MIA’s purchase orders.  Upon MIA’s written instructions, and at MIA’s
risk and expense, Aerogen shall arrange for shipment of OnQ Aerosol Generators
to MIA’s Product manufacturing location(s). 
MIA shall maintain a direct-billed account with the common

 

11

 

carrier(s)
of its choice, and shall inform Aerogen in a timely manner as to which such
carrier(s) Aerogen shall use for all OnQ Aerosol Generator shipments.

 

4.5                               Inspection;
Defective OnQ Aerosol Generators.

 

(a)                                  Inspection;
Rejection; Acceptance.  MIA will
visually inspect all deliveries of the OnQ Aerosol Generators on arrival.  Within ten (10) days of receipt of shipment
of OnQ Aerosol Generators, MIA shall promptly give notice to Aerogen of any
complaint regarding qualitative and/or quantitative defects of the delivered
OnQ Aerosol Generators that are or would have been discovered by a reasonable
visual inspection and of its rejection of such OnQ Aerosol Generators.  If MIA fails to notify Aerogen of any such
defects within such period, MIA shall be deemed to have accepted the OnQ
Aerosol Generators.  Rejected goods shall
be returned freight prepaid to Aerogen within ten (10) days of rejection.

 

(b)                                  Sole
Remedies.  With respect to any such
OnQ Aerosol Generators that Aerogen reasonably determines, pursuant to its
failure investigation process, in which MIA may participate at its reasonable
request, to have been defective at the time of delivery to MIA pursuant to Section 4.5(a), Aerogen shall, at its option, either
repair or replace the defective OnQ Aerosol Generators free of charge, or
credit the MIA with the purchase price of the defective OnQ Aerosol
Generators.  Any replacement goods shall
be shipped by Aerogen to MIA freight prepaid. 
The remedies set forth in this Section 4.5(b)
are MIA’s sole and exclusive remedies for claims based on defective OnQ Aerosol
Generators supplied by Aerogen prior to incorporation into assembled Product by
MIA, subject to the limited warranty set forth in Section 9.4
below and the applicable remedies set forth in Section 9.5.

 

4.6                               Inventory.  In order to prevent out-of-stock
situations, at any time during the Term upon Aerogen’s request, MIA shall keep
an inventory of OnQ Aerosol Generators for assembly into Product in amounts to
cover at least MIA’s forecasted requirements for the following calendar
month.  Aerogen will time its production
of OnQ Aerosol Generators so as to maintain in stock not less than the number
of OnQ Aerosol Generators firm-ordered by MIA for delivery within the next
thirty (30) days.

 

5.                                      PAYMENTS.

 

5.1                               Up
Front Payments.

 

(a)                                  In
consideration of the Product distribution rights granted by Aerogen to MIA
pursuant to Section 2.1 and the exclusive
Product manufacturing and assembly license granted by Aerogen to MIA pursuant
to Section 3.1, MIA will pay to
Aerogen one million five hundred thousand U.S. dollars ($1,500,000), payable in
one installment of five hundred thousand U.S. dollars ($500,000) to be paid
within two (2) business days of the Effective Date, a second installment of
three hundred thousand U.S. dollars ($300,000) to be paid within nine (9)
business days of the Effective Date, and a third installment of seven hundred
thousand U.S. dollars ($700,000) to be paid within fifteen (15) business days
of the Effective Date.

 

12

 

(b)                                  In
consideration of the sale by Aerogen to MIA of the Equipment, MIA will pay to
Aerogen within fifteen (15) business days of the Effective Date one million
U.S. dollars ($1,000,000).

 

5.2                               Sub-Distributor
Agreement Revenue.  MIA shall pay to
Aerogen [ * ] of any upfront fees, milestone payments and any other
payments or consideration obtained by MIA pursuant to the terms of any
sub-distributor agreement entered into by MIA as permitted by this Agreement, but excluding amounts paid by such sub-distributor, as long
as MIA has no financial interest in such sub-distributor, as transfer price for
purchase of the Product from MIA, on which amounts Aerogen is paid royalties as
specified in Section 5.3.

 

5.3                               Sales-Based
Payments.  In consideration of the
rights granted by Aerogen to MIA under this Agreement, MIA will make payments
to Aerogen based on the Gross Selling Price of each unit of Product, including
Product components and Product accessories, sold by MIA (or its Affiliate or
Related Sub-Distributor, as applicable) to sub-distributors or to end-user
customers in the Territory.  Such
payments shall be as set forth in
Exhibit G.  Commencing with the first commercial sale of
the Product in the Territory, sales based payments payable to Aerogen under
this Section 5.3 shall be paid on a
Sales Quarterly basis during each Sales Year of the Term, within thirty (30)
days following the end of each such Sales Quarter.

 

5.4                               Transfer
Pricing.

 

(a)           The transfer price for the first
thirty thousand (30,000) OnQ Aerosol Generators to be supplied by Aerogen to
MIA pursuant to this Agreement will be equal to [ * ] per unit.  The transfer price for the next fifty two
thousand five hundred (52,500) OnQ Aerosol Generators to be supplied by Aerogen
to MIA pursuant to this Agreement will be equal to [ *
] per unit.  Aerogen will use reasonable
efforts to supply to MIA the first [ * ] OnQ Aerosol
Generators no later than fifty (50) calendar days following the Effective Date,
and [ * ] additional OnQ Aerosol Generators no later than one hundred and ten
(110) calendar days following the Effective Date.

 

(b)           During the six (6) months immediately
following the later of (i) the delivery of the first eighty two thousand five
hundred (82,500) OnQ Aerosol Generators or (ii) the Approval Date, up to sixty
seven thousand five hundred (67,500) additional OnQ Aerosol Generators will be
provided to MIA at [ * ] for which Aerogen will
invoice MIA, such invoice to be paid within thirty (30) days of receipt.  Such quantity of sixty seven thousand five
hundred (67,500) OnQ Aerosol Generators excludes any OnQ Aerosol Generators
used in Product provided to Aerogen pursuant to Section 5.4(e).

 

(c)           After the earlier of:  (i) the end of such six-month period
(provided that Aerogen has satisfied MIA’s requirements for quantities of OnQ
Aerosol Generators set forth in the forecasts and purchase orders submitted by
MIA in accordance with Sections 4.1 and 4.2); or (ii) the shipment by Aerogen
to MIA of a total of one hundred fifty thousand (150,000) OnQ Aerosol
Generators, the transfer price for OnQ Aerosol Generators from Aerogen to MIA
will be equal to [ * ] per unit, subject to subclause (d) below and the other
provisions of the Agreement, and exclusive of taxes, shipping and similar
items.

 

13

 

(d)                                  Aerogen’s
transfer price to MIA for the OnQ Aerosol Generator may be increased by
Aerogen, no more frequently than once in any twelve (12) month period, in an
amount not to exceed [ * ], the first such increase to be effective on the earlier
of:  (i) shipment by Aerogen of a total
of [ * ] OnQ Aerosol Generators; or (ii)
the second (2nd) anniversary of the Agreement. 
Notwithstanding the foregoing, Aerogen may adjust the transfer price of
OnQ Aerosol Generators to reflect increases in the costs (if any) of unique or
scarce materials used in the manufacture of OnQ Aerosol Generators or changes
in regulatory requirements that create an increase in OnQ Aerosol Generator
manufacturing costs.  The Parties will
negotiate in good faith the transfer prices for any Product Improvements
created during the Term as provided in this Agreement.

 

(e)                                  Subject
to the quantity limits set forth in the forecast to be provided by Aerogen
within sixty (60) days after the Effective Date and the minimum order quantity
of [ * ] per order, MIA will supply Product to Aerogen at MIA’s
Cost of Goods [ * ], to be used by Aerogen to
satisfy its Aeroneb® Portable Nebulizer System warranty replacement obligations
and distributor and pharmaceutical partner/customer requirements.  MIA will receive a credit under Section 5.4(c) for its cost of each OnQ Aerosol
Generator assembled into Product that is delivered by MIA to Aerogen under this
Section 5.4(e).  If so requested by Aerogen, MIA also agrees
to negotiate in good faith a supply agreement on commercially reasonable terms
under which MIA would supply to Aerogen additional Product for use by Aerogen
in its business (i.e., outside of the rights granted to MIA under this
Agreement).

 

5.5                               Payment
Terms; Reports.  For the first [ * ] OnQ Aerosol Generators delivered by Aerogen to MIA
pursuant to this Agreement, MIA shall pay Aerogen the purchase price for OnQ
Aerosol Generators as stated on Aerogen’s invoice for each shipment via wire
transfer initiated within five business (5) days of receipt of each
shipment.  For the next [ * ]
OnQ Aerosol Generators delivered by Aerogen to MIA pursuant to this Agreement,
MIA shall pay Aerogen the purchase price for OnQ Aerosol Generators as stated
on Aerogen’s invoice for each shipment via wire transfer initiated within five
business (5) days of the later of:  (a)
receipt of written notice from Aerogen confirming that 510(k) marketing
clearance has been obtained for the Product; or (b) receipt of each
shipment.  Thereafter, MIA shall pay
Aerogen the purchase price for OnQ Aerosol Generators as stated on Aerogen’s
invoice for each shipment within thirty (30) days from the date of the
invoice.  In addition, commencing with
the first commercial sale of Product, within thirty (30) days of the end of
each Sales Quarter, MIA will provide Aerogen with written sales report listing
all Product and components sold, by part number, by country, by country and by
sub-distributor and channel of sale, and providing the gross selling price for
each such Product, and calculating the royalties owed pursuant to Section 5.3.  Any
payments to Aerogen under this Agreement shall be made by wire transfer to such
bank or account as Aerogen shall specify from time to time.

 

5.6                               Late
Payments.  Any amounts not paid by
MIA when due under this Agreement shall be subject to interest from the date
payment is due through the date upon which Aerogen has collected immediately
available funds in an account designated by Aerogen at a rate equal to the sum
of [ * ] or, if lower, the highest rate
permitted under applicable law.  In the
event that MIA fails to make payments for an invoice relating to any of the
first [ * ] OnQ Aerosol

 

14

 

Generators when due as
specified in Section 5.5, such failure
shall constitute a material breach of the Agreement, and MIA shall have five
(5) business days from the date of written notice by Aerogen to cure such
breach by payment via wire transfer to Aerogen of an amount equal to the
invoice amount due plus [ * ].

 

5.7                               Records
and Audit.  MIA shall keep, and shall
require all its Affiliates and Related Sub-Distributors to keep, complete and
accurate records pertaining to the manufacture, sale or other disposition of
the Product and components sold and of the amounts payable under this Agreement
in sufficient detail to allow the determination of the payments due to Aerogen,
or payments owed by Aerogen under Section 5.4(e).  Aerogen shall have the right to cause an
independent, certified public accountant designated by Aerogen and reasonably
acceptable to MIA to audit such records to confirm the accuracy of MIA’s
payments due hereunder or amounts owed by Aerogen.  Such audit rights may be exercised no more
often than once a year, within three (3) years after the Sales Quarter to which
such records relate, upon reasonable notice to MIA and during normal business
hours.  Aerogen will bear the full cost
of such audit unless such audit discloses an underpayment by MIA, or
overpayment by Aerogen, as applicable, of more than five percent (5%) from the
amount of payments due, in which case MIA shall bear the full cost of such
audit.  Within thirty (30) days of the
completion of such audit, MIA shall pay to Aerogen the amount of any such
payment discrepancy disclosed in such audit, or Aerogen shall pay to MIA the
amount of any overpayment disclosed in such audit, as applicable.  The terms of this Section 5.7
shall survive any termination or expiration or termination of this
Agreement for a period of three (3) years.

 

5.8                               Taxes
and Duties.

 

(a)                                  MIA
shall pay all import duties, any and all sales, use, excise, value added,
transfer, export or other taxes or assessments, imposed by any governmental
authority on any sale to MIA under this Agreement or any of MIA’s or its
sub-distributors activities, except for any taxes which are imposed on
Aerogen’s net income, gross receipts or other similar direct taxable income of
Aerogen.

 

(b)                                  If
MIA is required to withhold any taxes on amounts payable to Aerogen pursuant to
the laws and regulations of a jurisdiction within the Territory, MIA shall
deduct withholding taxes from the amounts otherwise payable by MIA hereunder
for payment to the proper tax authorities on behalf of Aerogen.  MIA agrees to cooperate with Aerogen in the
event Aerogen claims exemption from such withholding or seeks deductions under
any double taxation or other similar treaty or agreement from time to time in force, such cooperation to consist of providing receipts of
payment of such withheld tax or other documents reasonably available to
Aerogen.

 

6.                                      MINIMUMS.

 

6.1                               Minimum
OnQ Aerosol Generator Purchases. 
Commencing on the Effective Date, MIA shall purchase during the Term, on
a Supply Quarterly basis, those quantities of OnQ Aerosol Generators set forth
in Exhibit H for assembly into Systems
(as described on Exhibit B) of the
Product.  Such quantities are in addition
to the first [ * ] units to be provided pursuant to

 

15

 

Section 5.4
above.  Failure by MIA to purchase
the minimum quantities during a particular Supply Quarter as set forth in Exhibit H shall be deemed to be a
material breach for which Aerogen may terminate the Agreement pursuant to Section 13.5, unless MIA has purchased, during the
calendar year in which such Supply Quarter occurs, more than the aggregate
minimum quantities required under Exhibit H
for such calendar year through such Supply Quarter, and subject further to
MIA’s right to cure in accordance with Section 6.2
below, unless such failure is due to supply shortages of the OnQ Aerosol
Generators (provided that MIA’s orders conform to the terms of Section 4.2).

 

6.2                               Minimum
Purchase Shortfalls.  If MIA has not
met its minimum Supply Quarterly purchase requirements (as described on Exhibit H and Exhibit
F), and Aerogen intends to terminate the Agreement pursuant to Section 13.5, Aerogen will provide ninety (90) days
prior written notice to MIA of its intent to terminate the Agreement for MIA’s
failure to meet minimum purchasing requirements.  Upon notice of intended termination, MIA
shall have the right to cure such shortfall in MIA’s minimum purchase requirement
by purchasing during such ninety-day notice period the amount of such OnQ
Aerosol Generators equal to such shortfall plus also purchasing at least MIA’s
minimum purchase requirements for the Supply Quarter(s) in which the ninety-day
cure period falls (linearly prorated for the fraction of the second Supply
Quarter, if any, in which a portion of the ninety-day-notice period may
fall).  If MIA purchases such quantities
of OnQ Aerosol Generators to cure the minimum purchase shortfall during the
ninety-day notice period, and also purchases its prorated minimum purchase
requirements for the Supply Quarter(s) in which said cure period falls,
Aerogen’s notice of termination shall not become effective and the Agreement
will continue in full force and effect. 
Aerogen shall provide to MIA the ninety (90) day notice of termination
described in this Section 6.2,
no later than one hundred twenty (120) days after the end of the Supply Quarter
in which such minimum purchase shortfall failure occurs, after which Aerogen’s
option to terminate for said breach based upon MIA’s failure to meet its
minimum purchasing requirements for the applicable Supply Quarter will lapse.

 

6.3                               Minimum
Royalties.  Commencing with the third
(3rd) Sales Quarter of the first Sales Year, and on a Sales Quarterly basis
thereafter, MIA shall pay to Aerogen, on a country-by-country basis, minimum
quarterly royalties which shall be calculated as set forth on Exhibit I.  Minimum royalties due for each
Sales Quarter shall be payable within thirty (30) days following the end of
such quarter and shall be credited against sales-based royalty payments due and
payable to Aerogen pursuant to Section 5.3
above.  Such minimum royalties will be
due and payable with respect to any country that is part of the Territory for
any portion of a Sales Quarter, regardless of whether that country remains a
part of the Territory thereafter. 
Notwithstanding this Section 6.3,
if Aerogen fails, for a period of greater than sixty (60) days, to supply OnQ
Aerosol Generators in fulfillment of MIA’s purchase orders submitted in
accordance with Section 4.2,  and such supply failure results in Product System
backorders for the United States, then during the Sales Quarter(s) in which
such OnQ Aerosol Generator supply shortage occurs, MIA shall only be required
to pay the actual sales-based royalty payments due and payable to Aerogen
pursuant to Section 5.3 above for Product
sales in the United States in such Sales Quarter(s).  The minimum royalty requirement for the
United States shall be reinstated in the first full Sales Quarter following
resolution of the OnQ Aerosol Generator supply shortage.

 

16

 

6.4                               Minimum
Product System Sales Requirements. 
Notwithstanding MIA’s satisfaction of its OnQ Aerosol Generator purchase
requirements as described in Sections 6.1
and 6.2 above, MIA shall also be required
to sell Product Systems (as Systems are defined on Exhibit
A) in the Sales Quarterly quantities specified for each country
on Exhibit J.  Failure by MIA to sell the minimum quantities
as set forth in Exhibit J for a particular
country in any particular Sales Quarter shall be deemed to be a material breach
for which Aerogen may terminate the Agreement with respect to such country
pursuant to Section 13.5, or the
Agreement in its entirety if such country is the United States, in each case
unless MIA has sold, during the Sales Year in which such Sales Quarter occurs,
more than the aggregate minimum required sales of Product Systems in such
country for such Sales Year through such Sales Quarter, as specified in Exhibit J, but subject to MIA’s
right to cure in accordance with Section 6.5(a)
below, and unless such failure is due to Aerogen’s failure to supply OnQ
Aerosol Generators (ordered by MIA in compliance with Section 4.2)
for a period exceeding sixty (60) days that results in Product System
backorders in such country immediately following such failure by Aerogen.  Aerogen may terminate the Agreement with
respect to all of Europe (as defined in Exhibit J)
if MIA fails to sell the aggregate minimum quantities, in any particular Sales
Quarter, for all of Europe (as determined by aggregating the minimum sales
quantities in Exhibit J for each country in
Europe in such Sales Quarter), unless MIA has sold, during the Sales Year in
which such Sales Quarter occurs, more than the aggregate minimum required sales
of Product Systems in all of Europe for such Sales Year through such Sales
Quarter, as specified in Exhibit J and
determined as above, and subject to MIA’s right to cure in accordance with Section 6.5(b) below, and unless such failure is due to
Aerogen’s failure to supply OnQ Aerosol Generators (ordered by MIA in
compliance with Section 4.2) for a period
exceeding sixty (60) days that results in Product System backorders in Europe
immediately following such failure by Aerogen.

 

6.5                               Minimum
Sales Shortfalls.

 

(a)                                  Individual
Countries.  If MIA has not met its
minimum Sales Quarterly sales requirements for a particular country (as
described on Exhibit J), and Aerogen
intends to terminate the Agreement with respect to such country, or, in the
case of the United States, the Agreement in its entirety, pursuant to Section 13.5, Aerogen will provide ninety (90) days
prior written notice to MIA of its intent to terminate the Agreement with
respect to such country for MIA’s failure to meet minimum sales
requirements.  Upon notice of intended
termination, MIA shall have the right to cure such shortfall in MIA’s minimum
sales requirement by selling during such ninety-day notice period the amount of
such Product Systems equal to such shortfall in the particular country plus
also selling at least MIA’s minimum sales requirements in the particular
country for the Sales Quarter(s) in which the ninety-day cure period falls
(linearly prorated for the fraction of the second Sales Quarter, if any, in
which a portion of the ninety-day-notice period may fall).  If MIA sells such quantities of Product
Systems in the particular country to cure the minimum sales shortfall during
the ninety-day notice period, and also sells its prorated minimum sales
requirements in the particular country for the Sales Quarter(s) in which said
cure period falls, Aerogen’s notice of termination shall not become effective
and the Agreement will continue in full force and effect with respect to the
country.

 

(b)                                  Europe.  If MIA has not met its aggregate minimum
Sales Quarterly sales requirement for all of Europe (as indicated in Exhibit J)  by
aggregating the minimum sales

 

17

 

quantities for each
country in Europe in such Sales Quarter, and Aerogen intends to terminate the
Agreement with respect to Europe pursuant to Section 13.5,
Aerogen will provide ninety (90) days prior written notice to MIA of its intent
to terminate the Agreement with respect to Europe for MIA’s failure to meet the
aggregate minimum sales requirements. 
Upon notice of intended termination, MIA shall have the right to cure
such shortfall in MIA’s minimum sales requirement by selling during such
ninety-day notice period that quantity of Product Systems equal to such
shortfall in Europe plus also selling at least MIA’s minimum sales requirements
in Europe for the Sales Quarter(s) in which the ninety-day cure period falls
(linearly prorated for the fraction of the second Sales Quarter, if any, in
which a portion of the ninety-day-notice period may fall).  If MIA sells such quantities of Product
Systems in Europe to cure the minimum sales shortfall during the ninety-day
notice period, and also sells its prorated minimum sales requirements in Europe
for the Sales Quarter(s) in which said cure period falls, Aerogen’s notice of
termination shall not become effective and the Agreement will continue in full
force and effect with respect to the country. 
Such sales may occur in any country then currently within MIA’s Europe
territory (as indicated in Exhibit J,
as may be amended by the Parties from time to time); provided,
however, that individual countries within Europe may nevertheless be
lost if shortfalls in such countries are not cured as provided in Section 6.5(a) above.

 

(c)                                  Notice
Requirement.  Aerogen shall provide
to MIA the ninety (90) day notice of termination described in this Section 6.5 with respect to a particular country,
Europe or the Agreement in its entirety (for a Sales Quarterly minimum sales
short fall in the United States), as the case may be, no later than one hundred
twenty (120) days after MIA provides to Aerogen pursuant to Section 5.5 all required reports for the Sales Quarter
in which said failure occurs in said area, after which Aerogen’s option to
terminate for said breach based upon MIA’s failure to meet its minimum Sales
Quarterly Product System sales in said area for the applicable Sales Quarter
will lapse.

 

6.6                               Adjustments
to Minimum Purchase, Minimum Royalties and Product System Sales Requirements.

 

(a)                                  Europe,
Expansion Country Minimum Purchases. 
If Aerogen terminates the Agreement with respect to any country in
Europe (as described in Exhibit J)
due to MIA’s failure to cure its Sales Quarterly minimum Product System sales
shortfalls in such country, MIA’s future minimum Supply Quarterly OnQ Aerosol
Generator purchases (as described in Exhibit H)
shall remain firm commitments; however, if
termination occurs (either by Aerogen as provided above or by MIA as provided
in Section 13.3) with respect to any
other country in the Territory (other than the United States), or for Europe in
its entirety, MIA’s future minimum Supply Quarterly OnQ Aerosol Generator
purchases will be adjusted to reflect such termination.

 

(b)                                  Europe,
Expansion Country Royalty, Sales Reductions.  Any termination of the Agreement with respect
to a particular country or Europe in its entirety will result in a commensurate
reduction of the minimum royalties (Exhibit I)
and Product System sales requirements (Exhibit J)
attributable to such country or Europe, effective in the first Sales Quarter in
which such country or Europe is no longer part of the Territory.

 

18

 

(c)                                  U.S.
Minimums Adjustments.  The minimum
Supply Quarterly OnQ Aerosol Generator purchase quantities and minimum Sales
Quarterly Product Systems sales requirements for the United States, as
described in Exhibit H and Exhibit J, respectively, for Sales
Quarters nine (Q9) through twenty (Q20) shall be discussed by the Parties in
Sales Quarter seven (Q7) of the Term, and, if mutually agreed upon, adjusted to
no less than [ * ] of the stated minimum for said quarters as of the
Effective Date.

 

7.                                      REGULATORY
AND CUSTOMER SUPPORT MATTERS.

 

7.1                               Regulatory
Filings.  Aerogen will be solely
responsible for obtaining FDA 510(k) marketing clearance for the Product and
marketing clearance in the European Union, at no expense to MIA.  For all other countries in the Territory, MIA
shall be responsible for preparing a reasonably detailed plan and practical
schedule for obtaining all necessary marketing clearances for each such
country within sixty (60) days following the Effective Date.  Aerogen, and/or its authorized agent(s), will
be responsible for obtaining marketing clearance from the appropriate
Regulatory Agency at MIA’s expense, provided that, for clarity, MIA shall have
no responsibility for any expenses associated with Aerogen’s ISO
compliance.  MIA shall provide all
regulatory and technical information relating to its manufacture of the Product
as reasonably requested by Aerogen, and shall otherwise assist Aerogen in
obtaining any necessary or desirable regulatory approvals in the
Territory.  Aerogen will promptly advise
MIA each time that it obtains marketing clearance for the Product in a country
or jurisdiction in the Territory. 
Aerogen shall grant to MIA a right of reference to the marketing
clearances obtained by Aerogen in the Territory.

 

7.2                               Medical
Device and Vigilance Reporting.  MIA
shall be responsible for receiving, investigating, and documenting all
complaints which may, or may not, be Medical Device Reportable (“MDR”) events and other adverse experiences relating to the
use of the Product sold or distributed by MIA or its Affiliates or
sub-distributors.  MIA will be solely
responsible for filing all reports of such events, including, but not limited
to, MDR Reports, Vigilance Reports, Reports of Corrections and Removals,
recalls and any other reports required by Regulatory Agencies, or as required
by applicable laws or regulations.  In
the event that MIA receives a report of an adverse experience relating to the
use of the Product anywhere in the world, it shall notify Aerogen in writing within
five (5) business days, or if such event is serious and unexpected, within
forty eight (48) hours.

 

7.3                               Customer
Support.  MIA shall have sole
responsibility for providing first-line Product support to sub-distributors and
customers, and for responding to questions and complaints relating to Product
from its sub-distributors and customers, all at MIA’s expense.  Complaints received by MIA from
sub-distributors or customers, which MIA determines to be related to the OnQ
Aerosol Generator, shall be promptly referred to Aerogen.  MIA shall cooperate as reasonably required to
allow Aerogen to determine the cause of and resolve any complaints regarding
the OnQ Aerosol Generator.  Any such
complaints that are determined by Aerogen to relate solely to OnQ Aerosol
Generator performance shall be investigated and resolved at Aerogen’s
expense.  MIA will provide Aerogen with
monthly reports of complaints received, and actions taken.  MIA will be responsible for coordinating and
handling product returns and replacements relating to customer complaints, and
shall bear the costs thereof.

 

19

 

Aerogen will provide
administration/support for MIA’s customer support activities, if requested by
MIA, at an agreed upon rate of reimbursement to Aerogen.  MIA shall be responsible for complying with
all applicable regulations and laws as they relate to complaint handling and
closure.

 

7.4                               Recall.  If either Party believes or is notified that
a recall in the Territory of the Product is desirable or required by law, it
will promptly notify the other Party. 
The Parties will then discuss reasonably and in good faith whether such
recall is appropriate or required and the manner in which any mutually agreed
recall shall be handled.  In the event of
a recall, the Parties shall bear the expenses incurred in connection with such
recall ratably and in proportion to their, or their
agents’ and/or Affiliates’, relative responsibility for the cause of such
recall.

 

7.5                               Inspections.  MIA shall notify Aerogen promptly of any
inspection or regulatory actions by representatives of any governmental agency
within the Territory concerning the Product and shall provide Aerogen with
copies of all correspondence relating to the inspection and/or action,
including, but not limited to, any Form 483s, Establishment Inspection Reports,
FDA Warning Letters, and/or Untitled Letters. 
MIA shall also provide Aerogen with a summary of the results of such
inspection and such actions, if any, taken to remedy conditions cited in such
inspections.  Both Parties agree to
cooperate fully with each other in connection with any inquiry or inspection
conducted by a governmental agency concerning the Product.

 

8.                                      PRODUCT
BRANDING; MARKETING MATERIALS; TRADEMARKS.

 

8.1                               Co-Branding.  MIA agrees that it will brand the Product
distributed by it (and its Affiliates and sub-distributors) in the Territory
using both MIA and Aerogen brands and trademarks (including the Trademarks) as
jointly agreed by the Parties, and in conformance with the agreed upon branding
strategy for each country in the Territory.

 

8.2                               Annual
Business Plan and Review.  During the
Term,  Representatives from MIA and Aerogen
shall meet annually, no later than October 31 of each year, to present and
discuss MIA’s detailed marketing plans and budgets for the following calendar
year in each of the countries in the Territory. 
To the extent that MIA markets the Product entirely via sub-distributors
in a country, MIA shall present said sub-distributors plans in comparable
detail to MIA’s own plans.

 

8.3                               Product
Marketing Materials.  Aerogen will
make available to MIA any marketing materials for the Product that have been
prepared by Aerogen as of the Effective Date, including Aerogen’s Product
branding and messaging, brand standards, retail packaging design, and
pre-launch marketing materials.  During
the Term, Aerogen shall provide such additional marketing support as reasonably
requested by MIA, at MIA’s expense.  MIA
will provide to Aerogen copies of all promotional literature, sales aids,
technical information, and clinical publications intended to be used by MIA in
connection with promotion or distribution of the Product for review and final
approval by Aerogen.  Each Party will
provide the other with reports available to it of any clinical studies and in
vitro data for the Product that may be performed by or on behalf of such Party, and Aerogen will provide reasonable technical support
and technical troubleshooting expertise as it relates to the OnQ Aerosol
Generator, and Product design.  In the

 

20

 

event
that MIA requires Aerogen’s assistance with issues relating to Product
manufacture, such assistance will be provided by Aerogen on an as-available
basis, and at MIA’s expense.  MIA will be
obligated to provide to Aerogen no more than [ * ] Product
Systems per year, [ * ], for use
in Aerogen’s marketing, research activities, and other purposes.

 

8.4                               Trademark
License.  Subject to the terms of
this Agreement, Aerogen hereby grants to MIA during the Term a non-exclusive,
nontransferable, royalty-free license (with no right to sublicense) to use the
Trademarks in each country of the Territory in connection with the marketing,
sale and distribution of Product in the Territory as permitted under Sections 2.1 and 3.1.

 

8.5                               Trademark
Use.  MIA will display the Trademarks
designated by Aerogen for the OnQ Aerosol Generator on each Product component
that bears a Trademark, and on all packaging and labeling.  Any use of the Trademarks by MIA shall be in
conformity with Aerogen’s trademark usage guidelines and other
instructions.  MIA may use its own
trademarks and trade names on Product labeling and packaging for the purpose of
identifying MIA as manufacturer and distributor of the Product in the Territory
to the extent permitted by law; provided, however,
that in no event shall MIA’s trademarks or trade names appear more prominent
than Aerogen’s Trademarks.  Aerogen
grants no rights other than those expressly granted hereunder, and MIA hereby
agrees to and recognizes Aerogen’s exclusive ownership of the Trademarks.  MIA agrees not to take any action
inconsistent with such ownership and further agrees to take any action, at
Aerogen’s expense, which Aerogen reasonably deems necessary to establish and
preserve Aerogen’s exclusive rights in and to the Trademarks including but not
limited to cooperating in the registration of the Trademarks on trademark
registries or other appropriate registration procedure in the Territory.  If MIA, in the course of distributing
Product, acquires any goodwill or reputation in the Trademarks, then at the
expiration or termination of this Agreement all such goodwill and reputation
automatically shall vest in Aerogen without any separate payment or
consideration of any kind to MIA, and MIA agrees to take all actions necessary
to effect such vesting.

 

8.6                               No
Similar Marks.  MIA shall not adopt,
use, or register any acronym, trademark, trade names, service mark or other
marketing name that is confusingly similar to the Trademarks or the Aerogen
name, other than in connection with distribution of Product pursuant to this
Agreement, and shall not use the Trademarks or the Aerogen name other than in
connection with distribution of Product pursuant to this Agreement.

 

9.                                      REPRESENTATIONS
AND WARRANTIES; LIMITATION OF LIABILITY.

 

9.1                               Mutual
Representations and Warranties.  Each
Party hereby represents and warrants that:

 

(a)                                  it is duly organized and validly existing under the laws of
the state of its incorporation and has full corporate power and authority to enter
into this Agreement and to carry out the provisions hereof;

 

21

 

(b)                                  it is duly authorized to execute and deliver this Agreement
and to perform its obligations hereunder;

 

(c)                                  the person executing this Agreement on its behalf has been
duly authorized to do so by all requisite corporate action;

 

(d)                                  this
Agreement is a legal and valid obligation binding upon it and enforceable in
accordance with its terms, subject to bankruptcy, insolvency or similar laws of
general application affecting the enforcement of rights of creditors, and
subject to equitable principles limiting rights to specific performance or
other equitable remedies, and subject to the effect of federal and state
securities laws on the enforceability of indemnification provisions relating to
liabilities arising under such laws;

 

(e)                                  the
execution, delivery and performance of this Agreement does not conflict with
any agreement, instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any material law or regulation
of any court, governmental body, or administrative or other agency having
jurisdiction over it;

 

(f)                                    it
has obtained all necessary consents that are required with respect to the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby; and

 

(g)                                 there is no broker, finder or other intermediary that has
been retained by or authorized to act for such Party who would be entitled to any
fee or commission upon entry into the Agreement.

 

9.2                               Additional
Representations and Warranties of Aerogen. 
Except as otherwise provided in the disclosure schedule attached as
Schedule 9.2 (the “Disclosure Schedule”), Aerogen represents and warrants that
as of the Effective Date:

 

(a)                                  no insolvency proceeding of any kind, whether voluntary or
involuntary, is pending, or to Aerogen’s knowledge threatened, against Aerogen,
and Aerogen has not taken any action to initiate any insolvency proceeding,
whether voluntary or involuntary;

 

(b)                                  Aerogen
believes that, based on its existing agreements with its suppliers, it has
sufficient access to raw materials of the quality, quantity and condition
needed to manufacture the OnQ Aerosol Generator to be supplied under this
Agreement;

 

(c)                                  no
unsatisfied judgment is presently pending against Aerogen that relates to the
Product or the Equipment, and there are no actions, suits or proceedings before
any court, agency or other governmental body pending or, to Aerogen’s knowledge,
threatened against Aerogen relating to the Product or the Equipment;

 

(d)                                  since
the last public disclosure by Aerogen (the 10-Q filed on August 14, 2003,
which contains financial statements as of June 30, 2003), Aerogen has
conducted its operations in the normal course consistent with past practices
and there has been no material adverse change in Aerogen’s business, assets, or
liabilities relating to the Product or Equipment;

 

22

 

(e)                                  Aerogen
does not have any reason to believe that any loss of an employee,
or supplier will result because of the consummation of the transactions
contemplated under this Agreement;

 

(f)                                    Aerogen
has not received notice of alleged material violations of any law, statute,
order, rule or regulation that relates to the Product or the Equipment;

 

(g)                                 Aerogen,
with respect to the Equipment, the OnQ Aerosol Generator or the Product, as
applicable, is not a party to or subject to: 
(i) any lease with respect to any portion of the Equipment, whether as
lessor or lessee; (ii) any contract for the purchase of materials, supplies,
goods, services, or equipment in excess of the requirements of the manufacture
of OnQ Aerosol Generators for normal operating procedures; (iii) any agreement,
contract, or commitment to sell or supply OnQ Aerosol Generators in excess of [ * ]; and (iv) any license agreement, franchise agreement
or agreement in respect to similar rights granted to or held by MIA with
respect to the Product.

 

(h)                                 (i)
the Equipment constitutes all of the equipment used or held for use by Aerogen
primarily for manufacturing OnQ Aerosol Generators; (ii) upon the completion of
the transaction contemplated by Section 3.8(c),
MIA will have acquired good and marketable title to the Equipment, free and
clear of all liens, claims, and encumbrances; (iii) Exhibit
E contains a correct and complete list of all the Equipment; and
(iv) the Equipment is in good operating condition and repair, subject to normal
wear and maintenance, and is useable in the ordinary course of manufacturing
OnQ Aerosol Generators;

 

(i)                                    (i)
to Aerogen’s knowledge, it Controls all rights it purports to grant to MIA to
the Aerogen Licensed Rights pursuant to this Agreement; and (ii) it has not
received any notice or claim that the Aerogen Licensed Rights infringe upon the
intellectual property rights of a third party;

 

(j)                                    to Aerogen’s knowledge, it is in material compliance with
all laws, rules and regulations relating to the environment with respect to the
Equipment and the OnQ Aerosol Generator Manufacturing Facility at its location
as of the Effective Date;

 

(k)                                to
Aerogen’s knowledge, no schedule, certificate, document or written statement
furnished to MIA by or on behalf of Aerogen in connection with this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make such statements not materially misleading; and

 

(l)                                    Aerogen
has taken all reasonable actions legally appropriate, including requiring the
execution of confidentiality agreements, to protect Aerogen’s Confidential
Information and the confidential portions of the Aerogen Technology from
disclosure to unauthorized third parties by any of its personnel, agents,
subcontractors or vendors who have had significant involvement with the design,
engineering, manufacturing, sales, or marketing of the Product; and

 

23

 

(m)                              Aerogen
will perform the OnQ Aerosol Generator manufacturing services to be provided
pursuant to Section 3.8(d) during the OnQ
Manufacturing Period in accordance with generally accepted professional design,
engineering, and manufacturing standards in effect at the time of such
performance.

 

9.3                               Additional
Representations and Warranties of MIA.  MIA
represents and warrants to Aerogen that:

 

(a)                                  it
has, or will acquire, and will maintain during the Term all government permits
and licenses including, without limitation, health, safety, and environmental
permits, necessary for MIA’s Product manufacturing, distribution and sales
activities contemplated by this Agreement;

 

(b)                                  a Product manufactured by MIA in the exercise of its rights
under this Agreement will be manufactured in accordance with the Product
Specifications; and

 

(c)                                  as
of the Effective Date, Neither MIA nor its Affiliates have an existing or
in-negotiation financial interest (including, but not limited to, equity
ownership, credit facilities, or other economic rights) in any sub-distributor
in the Territory; and (ii) no sub-distributor in the Territory has an existing
or in-negotiation financial interest in MIA.

 

9.4                               Limited
Warranty.  Aerogen warrants to MIA
that each OnQ Aerosol Generator supplied under this Agreement, shall at the
time of shipment and for a period of seventeen (17) months thereafter, conform
in all material respects to the OnQ Aerosol Generator Specifications listed on Exhibit A.

 

9.5                               Exclusive
Remedies.  Aerogen will, at its
option, repair, replace or otherwise correct any OnQ Aerosol Generator that
does not conform to the warranty set forth in Section 9.4
above, provided that:

 

(a)                                  For
OnQ Aerosol Generators that have not been incorporated into Product that has
been sold by MIA, MIA has notified Aerogen of such nonconformity pursuant to Section 4.5(a), with respect to apparent defects,
within ten (10) days after Aerogen’s delivery of a nonconforming OnQ Aerosol
Generator; and, with respect to hidden defects which could not reasonably be
discovered within such ten (10) day visual inspection period, before the
expiration of three (3) months from Aerogen’s delivery of the nonconforming OnQ
Aerosol Generator;

 

(b)                                  For
OnQ Aerosol Generators that have been incorporated into Product that has been
sold to an end-customer by MIA or MIA’s sub-distributors, MIA has notified
Aerogen of such nonconformity within fifteen (15) months from Aerogen’s
delivery of the nonconforming OnQ Aerosol Generator;

 

(c)                                  MIA,
at Aerogen’s request and MIA’s expense, returns the nonconforming OnQ Aerosol
Generator to Aerogen’s facility; and

 

(d)                                  such nonconformity is not the result of any mishandling,
abuse, damage, or use of the OnQ Aerosol Generator other than in strict
accordance with Aerogen’s instructions.

 

24

 

9.6                               Disclaimer.  EXCEPT AS SET FORTH IN SECTION 9.4
ABOVE, THE ONQ AEROSOL GENERATORS ARE DELIVERED TO MIA “AS IS” AND AEROGEN
MAKES NO WARRANTIES WITH RESPECT TO THE ONQ AEROSOL GENERATORS, EXPRESS OR
IMPLIED, AND SPECIFICALLY, WITHOUT LIMITATION, DISCLAIMS ANY IMPLIED WARRANTY
OR MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF
NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.  The warranties shall apply only if the final
analysis and report from Aerogen’s failure investigation process, in which MIA
may participate at its reasonable request, with a copy of such report to be
provided to MIA upon its reasonable request, discloses that alleged defects
actually exist and were not caused by misuse, unauthorized modifications,
neglect, improper use or storage, attempts to repair, or the like, or by
accident, fire, or other hazard.

 

9.7                               No
Warranty Pass-Through.  MIA shall not
pass through to customers or any other third party the warranties made by
Aerogen under this Article 9,
shall make no representations to sub-distributors or customers other than that
they must look solely to MIA in connection with any problems, warranty, claim
or other matters concerning the Product. 
No warranty, representation or agreement herein shall be deemed to be
made for the benefit of any sub-distributor or customer of MIA or any other
third party.

 

9.8                               Limitation
of Liability.  IN NO EVENT SHALL
AEROGEN BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES, INCLUDING LOSS OF PROFITS, REVENUE, OR USE, INCURRED BY MIA OR ANY THIRD
PARTY, WHETHER IN AN ACTION IN CONTRACT OR TORT OR BASED ON A WARRANTY, EVEN IF
AEROGEN HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  EXCLUDING AEROGEN’S INDEMNIFICATION
OBLIGATION SET FORTH IN SECTION 11.1
BELOW, AEROGEN’S LIABILITY FOR ANY DAMAGES UNDER THIS AGREEMENT SHALL IN NO
EVENT EXCEED THE AMOUNTS ACTUALLY PAID BY MIA TO AEROGEN UNDER THIS AGREEMENT.

 

10.                               INTELLECTUAL
PROPERTY.

 

10.1                        Ownership
of Intellectual Property Rights.  Aerogen
shall retain all of its right, title and interest in and to and ownership of
the Product, the OnQ Aerosol Generator and the Aerogen Licensed Rights, subject
only to the manufacturing and distribution rights granted to MIA pursuant to
this Agreement.  Aerogen will own all
Product Improvements, Manufacturing Improvements and any other improvements,
modifications or enhancements to the Product or the OnQ Aerosol Generator made
by either Party (collectively, the “Developed IP”).  Except as otherwise expressly provided in
this Agreement, MIA has no right, title or interest in the Product, the Aerogen
Technology or any Aerogen Licensed Rights and shall not reproduce or otherwise
use or practice, in whole or in part, the Product, the Aerogen Technology or
the Aerogen Licensed Rights except as permitted by this Agreement.

 

10.2                        Cooperation
and Assistance.  At Aerogen’s
request, MIA shall execute and deliver to Aerogen all descriptions,
applications, assignments and other documents and instruments necessary or
proper to perfect and assert ownership of the Developed IP as contemplated by Section 10.1. 
MIA shall cooperate with and assist Aerogen, at Aerogen’s expense, in
Aerogen’s efforts in obtaining, maintaining, defending and enforcing its
intellectual property rights in the United States and elsewhere.

 

25

 

10.3                        Enforcement
of Intellectual Property Rights.  MIA
agrees that only Aerogen has the right to enjoin any infringement or
registration by a third party of the Trademarks or the Aerogen Licensed Rights
relating to the Product.  In the event
that any unlawful infringement of Aerogen’s rights in the Product, or
infringement or registration by a third party of the Trademarks or other
intellectual property rights of Aerogen in the Territory comes to the attention
of MIA, MIA shall immediately inform Aerogen in writing, stating the full facts
of the infringement or registration known to it, including the identity of the
suspected infringer or registrant, the place of the asserted infringement or
registration and evidence thereof.  MIA
agrees to cooperate fully with Aerogen, at Aerogen’s expense for MIA’s
reasonable out-of-pocket costs, if Aerogen sues to enjoin such infringements or
to oppose or invalidate any such registration.

 

10.4                        Infringement
of Third Party Intellectual Property Rights.  In the event that the manufacture, use or
sale of the Product infringes or misappropriates third party Intellectual
Property Rights, Aerogen may, in its sole discretion, (a) obtain for MIA the
right to continue to market, sell and distribute the Product in the Territory,
(b) replace or modify the Product so as to make the Product non-infringing, or
(c) terminate MIA’s rights to distribute the Product in the Territory by
written notice effective upon receipt pursuant to Section 14.9,  but subject to Section 13.6(b).  Aerogen may, in its sole discretion, enter
into a settlement with the third party, including but not limited to, obtaining
the rights described in subsection (a) above.  If Aerogen terminates pursuant to
subsection (c) above, MIA will remove all Product
from the market and will cease distributing the Product.  Aerogen shall not be obligated to indemnify
MIA for third party claims arising out of the Product’s infringement of any
intellectual property right of a third party resulting from MIA’s (x)
modification of the Product by MIA other than Product Improvements or
Manufacturing Improvements made pursuant to Section 3.4(a),
(y) the combination of the Product with other technology or devices or (z) the
modification, misuse or mishandling of OnQ Aerosol Generators after delivery
thereof pursuant to Section 4.4.

 

11.                               INDEMNITY.

 

11.1                        Indemnification
by Aerogen.  Aerogen shall indemnify,
defend and hold harmless MIA and its directors, officers, employees and agents
from and against any and all third party suits, claims, actions, demands,
liabilities, expenses, or losses (including legal expenses and reasonable
attorneys’ fees) (collectively, “Claims”)
arising out of or resulting from:  (a) a
defect in the design or manufacture of the OnQ Aerosol Generator; (b) any
defect in the design of the Product as of the Effective Date; (c) any negligent
actions or willful misconduct by Aerogen; or (d) any infringement of third
party Intellectual Property Rights directly resulting from the manufacture, use
or sale of the Product up to the date of receipt of notice given pursuant to Section 10.4. 
Such indemnity shall not apply to the extent that MIA has an indemnity
obligation for such Claim pursuant to Section 11.2.  The foregoing indemnity does not apply to any
Claim to the extent such Claim is based on manufacturing defects in any portion
or component of the Product or Product Improvement not manufactured by Aerogen,
or the use, combination or inclusion of any such Product or Product Improvement,
component or portion thereof, with any other product.

 

11.2                        Indemnification
by MIA.  MIA shall indemnify, defend
and hold harmless Aerogen and its directors, officers, employees and agents
from and against any and all Claims

 

26

 

arising out of or
resulting from:  (a) MIA’s failure to
adhere to the terms of this Agreement; (b) any damage to the OnQ Aerosol
Generators occurring after shipment from Aerogen to MIA; (c) the sale or other
distribution of Product by MIA or its sub-distributors or use by any customer,
(d) any representation made or warranty given by MIA with respect to the
Product, (e) the manufacture, sale or use of any product that is not supplied
by Aerogen and that is sold or combined with the Product, (f) any negligent
actions or willful misconduct by MIA, or (g) any failure by MIA or its agents
to comply with all regulatory and/or legal requirements in the Territory,
including, but not limited to, promotion of off-label use.  Such indemnity shall not apply to the extent
that Aerogen has an indemnity obligation for such Claim pursuant to Section 11.1.

 

11.3                        Conditions
of Indemnification.  If either Party
is entitled to indemnification under this Article 11
(the “Indemnified Party”), it shall give
prompt written notice to the Party providing indemnification (the “Indemnifying Party”) of any Claims that may be subject to
indemnification promptly after learning of such Claim.  The Indemnifying Party shall assume, manage
and control (by way of intervention or otherwise) the defense and/or settlement
of any such Claim.  The Indemnified Party
will cooperate in the defense or settlement negotiations as reasonably required
by the Indemnifying Party.  The
Indemnifying Party shall not agree to any settlement that may adversely affect
the Indemnified Party’s rights or interest without the Indemnified Party’s
prior written approval (which approval shall not be unreasonably withheld).

 

11.4                        Insurance.  During the Term, each Party shall obtain
and maintain at its own cost and expense, comprehensive general liability
insurance, including products liability insurance, through reputable and
financially secure insurance carriers, adequate to cover its obligations under
this Agreement.  Such insurance,
(a) shall be in an amount which is customarily carried by companies introducing
new medical devices, and (b) shall cover claims incurred, discovered,
manifested, or made during or after expiration of this Agreement.  Each Party agrees to furnish the other Party
with a certificate of insurance evidencing the same within thirty (30) days
after the Effective Date, and thereafter upon any material change in its
coverage described above.

 

12.                               CONFIDENTIALITY.

 

12.1                        Disclosure
of Confidential Information.  During
and in furtherance of this Agreement, each Party may disclose certain of its
Confidential Information to the other Party. 
During the term of this Agreement, and for a period of [ * ]
after its termination or expiration, each Party agrees (a) to use the other
Party’s Confidential Information solely as necessary to perform its obligations
or exercise its rights under this Agreement, (b) to hold in strict confidence
all Confidential Information of the other Party, and (c) to not disclose the
other Party’s Confidential Information to any third party without the prior
written consent of the other Party. 
Notwithstanding the foregoing, each Party may disclose the other Party’s
Confidential Information to its directors, officers, employees, contractors and
agents as necessary for the purposes contemplated under this Agreement; provided that such directors, officers, employees,
contractors and agents are bound by obligations of confidentiality and non-use
with respect to such Confidential Information that are at least as restrictive
as those set forth in this Agreement.

 

27

 

12.2                        Exceptions.  The obligations of non-disclosure and non-use
set forth in Section 12.1 shall not apply
to any Confidential Information or portion thereof to the extent that the Party
receiving such information can demonstrate, by competent proof, that such
information (a) was already known by the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure, (b) was generally available
to the public or otherwise part of the public domain at the time of disclosure,
(c) later became part of the public domain through no act or omission of the
receiving Party, (d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a third party who had no obligation to the
disclosing Party not to disclose such information to others, or (e) was
independently developed by employees of either Party who were unaware of and
did not have access to the Confidential Information.

 

12.3                        Authorized
Disclosure.  Subject to any
applicable legal requirements, each Party may disclose Confidential Information
belonging to the other Party to the extent such disclosure is reasonably
necessary in the following:  (a) filing
or prosecuting patents relating to Product; (b) regulatory filings; (c)
prosecuting or defending litigation; (d) complying with applicable governmental
regulations; and (e) disclosure to Affiliates, sub-distributors and potential
future investors who agree to be bound by similar terms of
confidentiality.  Notwithstanding the
foregoing, in the event a Party is required to make a disclosure of the other
Party’s Confidential Information pursuant to this Section 12.3,
it will, except where impracticable, give reasonable advance notice to the
other Party of such disclosure and use best efforts to secure confidential
treatment of such information.  In any
event, the Parties agree to take all reasonable action to avoid disclosure of Confidential
Information hereunder.

 

13.                               TERM
AND TERMINATION.

 

13.1                        Term.  The term of this Agreement shall commence as
of the Effective Date and continue for a period of five (5) years from the
Effective Date, unless terminated earlier as provided in this Article 13 (the “Term”).  Unless the Agreement is earlier terminated,
the Term shall be extended on the fifth (5th) anniversary of the Effective Date
for a period of one (1) year; provided that
MIA is not then in material breach of the Agreement (subject to the cure
periods set forth in Section 13.5)
and MIA has met the Minimum Purchase Requirements, subject to agreement by the
Parties as to appropriate pricing and minimums for such additional time period.

 

13.2                        Termination
for Failure to Make Payments.  Aerogen
shall have an immediate right of termination if MIA fails to make any of the
initial payments set forth in Section 5.1
on the dates specified in Section 5.1 or
fails to honor the initial purchase order provided to Aerogen pursuant to Section 4.1. 
Such termination shall be immediately effective upon the receipt by MIA
of written notice of termination for any such failure.  On the effective date of such termination,
all of the rights and licenses granted by Aerogen to MIA pursuant to this
Agreement shall immediately terminate.

 

13.3                        Termination
by MIA for Convenience.  MIA may
terminate this Agreement on a country-by-country basis, except as otherwise
provided below, or in its entirety, at any time upon ninety (90) days prior
written notice to Aerogen. 
Notwithstanding the foregoing, any termination by MIA with respect to
one or more countries in Europe (as defined in Exhibit
J) shall not change the obligations of MIA under Sections 6.3 and 6.4 with
respect to minimum

 

28

 

royalties
and sales for Europe, which minimums will remain the same regardless of
termination as to particularly countries in Europe as provided in Section 2.2, unless MIA terminates the Agreement for
all countries in Europe in its entirety. 
Further, any termination by MIA with respect to the United States will
be deemed to be a termination of the Agreement in its entirety.

 

13.4                        Termination
by Aerogen.  Aerogen may terminate
the Agreement immediately by providing written notice to MIA:  (a) if Aerogen receives a notice from the
FDA; or (b) if Aerogen, in its reasonable judgment, determines that medical or
safety reasons dictate that the Product should no longer be marketed.  If Aerogen receives a notice from a
regulatory authority of competent jurisdiction in any country of the Territory
(other than the United States) prohibiting the sale of the Product in such
country, Aerogen may terminate the Agreement with respect to such country
immediately by providing written notice to MIA.

 

13.5                        Termination
for Breach.  Either Party may
terminate this Agreement at any time by giving not less than ninety (90) days
prior written notice in the event of a material breach of this Agreement by either Party and failure to cure such material breach within
ninety (90) days from receipt of a written notice from the non-breaching Party
specifying such breach.  Notwithstanding
the foregoing, Aerogen shall only have the right to terminate the Agreement
with respect to a particular country or group of countries for breaches by MIA
arising under Section 6.4.

 

13.6                        Effect of
Termination.

 

(a)           Early Termination by MIA.  If MIA terminates the entire Agreement for
its convenience pursuant to Section 13.3 after the first (1st) anniversary of
the Effective Date, then MIA will pay Aerogen five hundred thousand U.S.
dollars ($500,000), for the resulting interruption in market supply of the
Product.  

 

(b)                                  Early
Termination by Aerogen.  If Aerogen
terminates this Agreement pursuant to Section 13.4 or
Section 10.4(c), the following
provisions of this subsection 13.6(b) shall apply:

 

(i)                                    The
Parties shall meet promptly after such termination to discuss in good faith and
seek to find an appropriate resolution to the problem that resulted in the
termination, which may include discussing how to modify the Product so that the
problem is addressed.  If the Parties
reach an agreement on how to proceed to try to resolve the problem, they shall
set forth such agreement in an amendment to this Agreement, and effective upon
entering into such amendment the earlier termination shall be deemed void and
the Agreement shall remain in full force, as modified by such amendment.

 

(ii)                                If
the Parties do not reach an agreement to resolve the problem, as provided in
subclause (i) above, within sixty (60) days of such termination by Aerogen,
Aerogen shall covenant that it shall not sell or distribute the Product in the
Territory for use in the home-based, open-cup, continuous-flow, general
nebulizer market or in alternate care facilities, for a period of one year
after such termination.  In addition, if
such termination occurs prior to the date two (2) years after the Effective
Date, then (unless the Parties otherwise agree) Aerogen shall 

 

29

 

reimburse MIA for the payments made to Aerogen by MIA under Sections 5.1(a) of the Agreement on a pro-rata basis
(determined by multiplying the sum of such payments by a fraction having a
numerator equal to the number of months from the date of such termination until
the fifth (5th) anniversary of the Effective Date, and a denominator equal to
sixty (60) months), plus the sum of any amounts received by Aerogen from MIA
pursuant to Sections 5.1(b) and 5.4(a) reduced by twenty U.S. dollars ($20) per
OnQ Aerosol Generator unit supplied by Aerogen to MIA during the Term up to a
maximum of one hundred fifty five thousand (155,000) units.

 

(iii)                            If
Aerogen elects after the one (1) year period set forth in subclause (ii) above
to re-introduce the Product for use in the home-based, open-cup,
continuous-flow, general nebulizer market or in alternate care facilities, it
shall so notify MIA, and MIA shall have a right of first negotiation,
exercisable by written notice to Aerogen within thirty (30) days of Aerogen’s
notice, to obtain the rights to distribute the Product upon terms to be
mutually agreed upon by the Parties.  If
the Parties are unable to reach a definitive agreement regarding such rights
after ninety (90) days of good faith negotiations, or if MIA fails to exercise
its right of negotiation within the specified thirty (30) day period, Aerogen
shall have no further obligation to MIA with respect to distribution rights for
the Product for use in the home-based, open-cup, continuous-flow, general
nebulizer market or in alternate care facilities.

 

(iv)                               If
Aerogen elects after the one (1) year period set forth in subclause (ii) above
to re-introduce the Product for use in the home-based, open-cup,
continuous-flow, general nebulizer market or in alternate care facilities, and
MIA subsequently exercises its negotiation right as provided in subclause (iii)
above, provided that the termination by Aerogen occurs after the second (2nd)
anniversary of the Effective Date, then (1) MIA shall receive a pro-rata credit
of the payment made under Section 5.1(a)
towards the financial terms of the negotiated definitive agreement (i.e., the credit shall equal a percentage amount (such
amount, the “Pro-Rata Amount”) of such payment
where the percentage is equivalent to the fraction of (x) the amount of time
from the date of such termination until the fifth (5th) anniversary of the
Effective Date, to (y) five (5) years), or (2) if the Parties do not enter into
such negotiated definitive agreement, and Aerogen subsequently either (A) signs
an agreement with a third party for distribution of the Product within the
United States or (B) itself sells the Product directly within the United
States, then Aerogen shall pay to MIA an amount equal to the Pro-Rata Amount
within thirty (30) days of the execution of such third party agreement, or if
Aerogen sells the Product directly, Aerogen will pay to MIA, on a quarterly
basis, ten percent (10%) of Aerogen’s gross sales of Product until the Pro-Rata
Amount is paid in full.

 

(c)                                  General.  Upon termination of the Agreement for any
reason, MIA’s obligation to pay Aerogen sales-based royalties pursuant to Section 5.3 shall also terminate upon the effective
date of such termination; provided, however,
that unpaid minimum royalties for the Sales Quarter in which termination
becomes effective and any unpaid or accrued royalties, which shall be
calculated on Product sales made through the effective date of the termination,
shall be due and payable to Aerogen within thirty (30) days of such termination
effective date.  In addition, should
Product sales continue after the effective date of termination pursuant to Section 13.7 or by mutual agreement, royalties on such
sales, calculated as provided in Section 5.3,  shall also be payable to Aerogen on a monthly basis, in
arrears.

 

30

 

13.7                        Transfer or Sell-Out of Inventory.  On
the effective date of expiration or termination of this Agreement, Aerogen
shall have the right to require that MIA cease its manufacturing of the
Product, provided that MIA may sell its remaining inventory of Product for a
period not to exceed ninety (90) days after such date, for so long as such
Product is saleable (unless termination is under Section 13.4).  Any
inventory remaining after such period shall be, at Aerogen’s election, (a) sold
by MIA or (b) transferred to Aerogen against payment of a purchase price
representing MIA’s Cost of Goods for the Product and the costs incurred for the
shipping of the Product to Aerogen. 
Notwithstanding the foregoing, if Aerogen terminates this Agreement
under Section 13.4 Aerogen shall
have the right to prohibit MIA from selling any remaining inventory, and shall
at Aerogen’s election, destroy or return to Aerogen all remaining Product, in
which case, Aerogen shall reimburse MIA for its cost of OnQ Aerosol Generators
assembled into such Product.

 

13.8                        Cooperation and Return of Materials.  Upon
termination of the Agreement for any reason, including the end of the Term, MIA
will cooperate fully with Aerogen to transfer all sales, marketing, manufacture
and customer support activities in an orderly fashion to Aerogen or to its
designees.  Aerogen shall have the
right, at its discretion, to obtain from MIA at MIA’s documented cost, any
tooling, designs for improvements, and other manufacturing-related materials
generated by MIA for the manufacture and assembly of Product.  On the effective date of termination or no
later than ninety (90) days thereafter if MIA elects under Section 13.7 to sell out its remaining
inventory, MIA shall return to Aerogen or its nominee all price lists,
catalogs, sales literature, operating and service manuals, advertising
literature and other materials relating to the Product.  Upon the termination or expiration of this
Agreement, each Party shall use diligent efforts (including, without
limitation, performing a diligent search of files and computer storage devices)
to return all Confidential Information received by it from the other Party
within sixty (60) days after the effective date of such termination.

 

13.9                        Survival.  Expiration or termination of
this Agreement shall not release, or be construed as releasing, any Party from
any liability to the other arising out of or in connection with a Party’s
breach of, or failure to perform any obligation contained in this Agreement.  Neither Party shall be relieved from any
obligations vested prior to the date of termination of this Agreement.  The following provisions shall survive any
expiration or termination of this Agreement: 
Sections 3.6, 5.6, 5.7, 7.3, 7.4, 9.6, 9.8, 10.1, 13.6, 13.7, 13.8, and
13.9 and Articles 1, 11, 12 and 14.

 

14.                               MISCELLANEOUS.

 

14.1                        Export Law Compliance.  MIA
understands and recognizes that the Product and other materials made available
to it hereunder may be subject to the export administration regulations of the
United States Department of Commerce and other United States government
regulations related to the export of medical products.  MIA represents that it is familiar with and
agrees to comply with all such regulations, including any future modifications
thereof, in connection with the manufacture and distribution of the
Product.  MIA agrees that it will not
manufacture, sell or distribute the Product or clinical data relating to the
Product without complying with all applicable regulations.

 

31

 

14.2                        Non-Solicit.  Each Party agrees it will not knowingly hire
or solicit any of the other Party’s employees or sales representatives during
the Term and for a period of one (1) year following termination; provided that (a) the employee or sales
representative was employed or retained by the other Party on the date of
termination of the Agreement, and (b) each Party provides the other with a list
of employees and sales representatives as of the effective date of termination
of the Agreement.  This foregoing shall
not apply to Aerogen employees directly involved in the manufacture of OnQ
Aerosol Generators if Aerogen files for Chapter 7 bankruptcy during the OnQ
Manufacturing Period.

 

14.3                        Force Majeure.  Neither Party shall be liable
to the other for any failure or delay in performance hereunder where such
failure or delay is due, in whole or in part, to any cause beyond its
reasonable control, including but not limited to acts of God, fire, earthquake,
flood, warfare, acts of terrorism, labor disputes, government regulations or
other similar events.  The Party
affected by force majeure shall inform the other Party promptly of the event,
an estimate of the period during which performance of its obligations is
compromised, and shall undertake all reasonable efforts to overcome the event
and resume the performance of its obligations as quickly as possible.

 

14.4                        Severability.  In case one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any applicable statute or rule of law, then
such provision shall be considered inoperable to the extent of such invalidity,
illegality or non-enforceability and the remainder of this Agreement shall
continue in full force and effect. The Parties hereto agree to replace any such
illegal or unenforceable provision with a new provision which has the most
nearly similar permissible economic effect.

 

14.5                        Entire Agreement.  This Agreement and any
exhibits referred to herein state the complete and final agreement of the
Parties with respect to the subject matter hereof, and shall supercede all
previous communications, understandings and agreements between the Parties with
respect to the subject matter of this Agreement, including without limitation,
the Letter Agreement regarding confidentiality between the Parties dated
February 25, 2003.

 

14.6                        No Third Party Beneficiaries.  Except as expressly provided to the contrary, provisions of this
Agreement are solely for the benefit of the Parties to this Agreement, and not
for the benefit of any other person or legal entity.

 

14.7                        Amendments.  No waiver, alteration, amendment, or
modification of any of the provisions of this Agreement shall be binding unless
made in writing with express reference to this Agreement, and signed by a duly
authorized representative of each Party.

 

14.8                        Assignment; Successors.  Neither Party may assign any of its rights and obligations
hereunder without the prior written consent of the other Party, and any such
assignment or purported assignment shall be void, except that Aerogen may
assign its rights and obligations pursuant to merger, acquisition or sale of
all or substantially all of the assets of Aerogen relating to the Product.  This Agreement shall be binding upon and inure
to the benefit of the successors and permitted assigns of the Parties.

 

32

 

14.9                        Notices. Any notice required or permitted to be given under this Agreement shall
be in writing, shall specifically refer to this Agreement and shall be deemed
to have been sufficiently given for all purposes (a) five (5) days after
mailing by registered first class mail, (b) two (2) days after sending by
international express delivery service, (c) the same day if sent by facsimile
transmission, with transmission confirmed or (d) immediately if personally
delivered. Unless otherwise specified in writing, the mailing addresses and
facsimile numbers of the Parties shall be as described below.

 

	
  To MIA:

  	
  Medical Industries
  America, Inc.

  
	
   

  	
  2636 289th
  Place

  
	
   

  	
  Adel, IA  50003

  
	
   

  	
  Attn:  Chief Executive Officer

  
	
   

  	
  Fax:  (515) 993 4172

  
	
   

  	
   

  
	
  To Aerogen:

  	
  Aerogen, Inc.

  
	
   

  	
  2071 Stierlin Court,

  
	
   

  	
  Mountain View, CA  94043

  
	
   

  	
  Attn:  Chief Financial Officer

  
	
   

  	
  Fax:  (650) 864 7433

  

 

For notices relating to
Product complaints, and reportable events pursuant to Section 7.2, such notices shall be directed
to the Vice President of Regulatory Affairs and Quality at Aerogen.

 

14.10                 Construction.  The
section headings are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.  As used in this Agreement,
the word “including” means “including but not limited to”.  All references to Aerogen mean Aerogen, Inc.
and its Affiliates.  In constructing the
terms of this Agreement, no presumption will operate in favor of or against any
Party as a result of its counsel’s role in drafting the terms and provisions
hereof.

 

14.11                 Independent Contractors.  In
making and performing this Agreement, Aerogen and MIA shall act at all times as
independent contractors and nothing contained in this Agreement shall be
construed as to create an agency, partnership or employer and employee
relationship between Aerogen and MIA.

 

14.12                 Waiver.  No
waiver of any right under this Agreement shall be deemed effective unless
contained in a writing signed by the Party charged with such waiver, and no
waiver of any right arising from any breach or failure to perform shall be
deemed to be a waiver of any future such right or of any other right arising
under this Agreement.

 

<< SIGNATURE PAGE FOLLOWS >>

 

33

 

IN WITNESS WHEREOF, both Aerogen and MIA have executed this Agreement by their duly
authorized officers as of the Effective Date.

 

 

	
  AEROGEN,
  INC.

  	
  MEDICAL
  INDUSTRIES AMERICA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Robert S. Breuil

  	
   

  	
  /s/ Russell Bird

  	
   

  
	
   

  	
   

  
	
  Name:  Robert Breuil

  	
  Name:  Russell Bird

  
	
  Title:  Chief Financial Officer

  	
  Title:  President

  
				

 

 

[ * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

 

EXHIBIT A

 

OnQ® AEROSOL GENERATOR

 

DESCRIPTION AND SPECIFICATIONS

 

The OnQ Aerosol Generator consists of the
following parts and components, with the Specifications for each as listed
below (all dimensions in inches unless specified):

 

I.                                         APERTURE PLATE

 

[ * ]

 

II.                                     OSCILLATOR WASHER

 

	
  Stainless Steel:

  	
  [ * ]

  
	
  Outer Diameter:

  	
  [ * ]

  
	
  Inner Diameter:

  	
  [ * ]

  
	
  Thickness:

  	
  [ * ]

  
	
  Flatness:

  	
  [ * ] max

  
	
  Concentricity:

  	
  [ * ] max

  

 

III.                                 PIEZOELECTRIC CERAMIC
ELEMENT

 

	
  Piezo Ceramic:

  	
  [ * ]

  
	
  Outer Diameter:

  	
  [ * ]

  
	
  Inner Diameter:

  	
  [ * ]

  
	
  Thickness:

  	
  [ * ]

  
	
  Concentricity

  	
  [ * ] max

  

 

IV.                                ADHESIVE

 

	
  [ * ]
  Part #:

  	
  [ * ]

  
	
  Outer Diameter

  	
  [ * ]

  
	
  Inner Diameter:

  	
  [ * ]

  

 

A-1

 

V.                                    BRAZING RING

 

	
  Chemical Composition:

  	
  [ * ]

  
	
  Outer Diameter:

  	
  [ * ]

  
	
  Inner Diameter:

  	
  [ * ]

  
	
  Thickness:

  	
  [ * ]

  

 

VI.                                ELECTRICAL CONNECTOR

 

	
  [ * ] Connector Part #:

  	
  [ * ]

  

 

VII.                            POWER SUPPLY REQUIREMENTS

 

	
  Drive Voltage:

  	
  [ * ] minimum [
  * ]

  
	
  Fixed Frequency:

  	
  [ * ]

  

 

A-2

 

VIII.                        OVERMOLD

 

Stereo Jack Connector (See diagram below):

 

[ * ]

 

	
  Overmold of Jack Plug:

  	
  [ * ]

  
	
  Overmold of Aerosol
  Generator:

  	
  [ * ]

  

 

A-3

 

	
  OnQ
  Aerosol Generator Final Assembly

  	
  Drawing #
  041166

  

 

[ * ]

 

A-4

 

Overmold OnQ Aerosol Generator Assembly:

 

[ * ]

 

[ * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.

 

A-5

 

EXHIBIT B

 

AERONEB® GO DESCRIPTION AND SPECIFICATIONS

 

The
Aeroneb Go, a proprietary product of Aerogen, is an open-cup nebulizer intended
for use by pediatric and adult patients, for continuous aerosolization of
physician-prescribed solutions for inhalation that are approved for use with a
general-purpose nebulizer.

 

PRODUCT COMPONENTS & ACCESSORIES

 

The
Aeroneb Go consists of the following parts and components, as shown in Figure
1.0:

 

Figure 1.0

 

 

Nebulizer handset

 

Mouthpiece

Nebulizer Body

Medication cup with integrated OnQTM Aerosol
Generator

Medication Cup Cap

 

AC Powered Controller with attached connector cable

 

Battery Powered Controller

 

Battery Powered Controller with detachable
cable

 

B-1

 

Accessories (not pictured in Figure 1.0)

 

Mask Adapter (U.S.)

Mask Adapter (International)

Carrying Case

Instruction Manual

Interchangeable Faceplates For Battery
Controller

 

Systems (not pictured in Figure 1.0)

 

“Systems” are complete configurations of the Product as defined
below:

 

Base
System: Nebulizer
handset with AC powered controller

 

Convenience
System: Nebulizer
handset with Battery powered controller

 

Premium
System: Nebulizer
handset with AC powered controller and Battery powered controller

 

PRODUCT
SPECIFICATIONS

 

POWER SOURCES:

AC Powered Controller: 100-240 VAC, 28-15 mA,
50-60 Hz

Battery Powered Controller: 4.5 VDC (3 “AA”
disposable batteries), 350 mA

 

POWER CONSUMPTION:

Less than [
* ] watts

 

ELECTROMAGNETIC SUSCEPTIBILITY

Meets the requirements of IEC 60601-1-2

 

APPROXIMATE WEIGHT:

Aeroneb® Go Nebulizer Unit: 60 g (2 ounces)

AC Powered Controller: 180 g (6.5 ounces)

Battery Powered Controller with batteries:
260 g (9.3 ounces)

 

SOUND LEVEL:

<35 dBA at 1 meter

 

B-2

 

APPROXIMATE DIMENSIONS:

Aeroneb Go Nebulizer Handset (assembled):

40.0 x 105.0 x 95.0 mm (1.6 x 4.1 x 3.2
inches)

AC Powered Controller:

52.0 x 43.0 x 81.0 mm (2.0 x 1.7 x 2.2
inches)

Battery Powered Controller:

70.0 x 110.0 x 32.0 mm (2.8 x 4.3 x 1.3
inches)

 

RECOMMENDED OPERATING ENVIRONMENT:

Temperature range: +5°C to +45°C (+41°F to
+113°F)

Atmospheric pressure: Greater than 697 mbar

Humidity: up to 95% relative humidity

 

RECOMMENDED TRANSPORT AND STORAGE
ENVIRONMENT:

Temperature range: -20°C to +60°C (-4°F to
+140°F)

Atmospheric pressure: 450 to 1100 mbar

Humidity: up to 95% relative humidity

 

PRODUCT
PERFORMANCE

 

	
  Aerosol flow rate:

  	
  Greater than 0.3 mL per
  minute*

  
	
  Average particle size:

  	
  3.6 microns mass median
  aerodynamic diameter

  
	
  Medication Cup capacity:

  	
  Maximum of 6 mL.

  
	
  Medication Temperature:

  	
  May rise 10°C (18°F) above
  ambient temperature during normal use.

  

 

*Performance may vary
depending on the type of drug used and may not apply to drugs not approved for
general-purpose nebulizers such as drug suspensions or drugs solutions of high
viscosity.

 

B-3

 

GENERAL-PURPOSE
NEBULIZER SOLUTIONS

 

The
list of approved general-purpose nebulizer solutions varies by country. As of the
agreement Effective date, the following chart summarizes those nebulizer
solutions approved for use with a general-purpose nebulizer in the United
States:

 

	
  Nebulized Drug

  	
   

  	
  Label
  Restrictions for

  Nebulizer Use

  
	
  Albuterol

  	
   

  	
  None

  
	
  Levalbuterol (Xopenex®)

  	
   

  	
  None

  
	
  Metproteronol sulfate

  	
   

  	
  None

  
	
  Bitolterol (Tornalate)

  	
   

  	
  None

  
	
  Ipratropium bromide

  	
   

  	
  None

  
	
  Albuterol/Ipratropium
  bromide combination

  	
   

  	
  None

  
	
  Cromolyn sodium

  	
   

  	
  None

  
	
  N-acetylcysteine

  	
   

  	
  None

  
	
  Tobramycin (TOBI®)

  	
   

  	
  PARI LC®  Plus with PulmoAide® compressor

  
	
  Pulmozyme

  	
   

  	
  Three specified jet
  nebulizers

  
	
  Budesonide (PulmiCort®
  Respules)

  	
   

  	
  PARI LC®  Plus Nebulizer

  

 

 

[ * ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

B-4

 

EXHIBIT C

 

TERRITORY

 

United States of America

Mexico**

Canada**

 

United Kingdom**

France**

Germany**

Spain**

Poland**

Greece**

Italy**

 

Japan**

 

Argentina**

Australia**

 

**Expansion Country

 

 

[ ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

C-1

 

EXHIBIT D

 

TRADEMARKS

 

Aerogen®

 

Aeroneb®
Go

 

OnQTM
Aerosol Generator

 

 

[ ] =
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

D-1

 

EXHIBIT E

 

EQUIPMENT

 

	
  TOOL NAME

  	
   

  	
  LOCATION

  	
   

  	
  S/N or A/N

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
   

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
   

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
   

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
   

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  Core Manufacturing

  	
   

  	
   

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
   

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
   

  
	
  [*]

  	
   

  	
  AP Clean Room

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  QC Laboratory

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  QC Laboratory

  	
   

  	
  [*]

  

 

[ ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

E-1

 

AEROGEN CONFIDENTIAL

 

EXHIBIT F

 

INITIAL FORECAST
OF ONQ AEROSOL GENERATOR PROCUREMENTS BY MIA*

 

	
  Contract Month

  (from Effective Date):

  	
   

  	
  MIA’s OnQ Procurement

  Requirements*

  
	
  Month 1

  	
   

  	
  [ * ]

  
	
  Month 2

  	
   

  	
  [ * ]

  
	
  Month 3

  	
   

  	
  [ * ]

  
	
  Month 4

  	
   

  	
  [ * ]

  
	
  Month 5

  	
   

  	
  [ * ]

  
	
  Month 6

  	
   

  	
  [ * ]

  
	
  Month 7

  	
   

  	
  [ * ]

  
	
  Month 8

  	
   

  	
  [ * ]

  
	
  Month 9

  	
   

  	
  [ * ]

  
	
  Month 10

  	
   

  	
  [ * ]

  
	
  Month 11

  	
   

  	
  [ * ]

  
	
  Month 12

  	
   

  	
  [ * ]

  
	
  Total

  	
   

  	
  [ * ]

  

 

 

Note:  Pursuant to the provisions of Section 5.4, MIA [ * ], but MIA is obligated to take delivery of these minimum
quantities, whether or not [ * ].

 

AEROGEN’S
ESTIMATED OnQ AEROSOL GENERATOR REQUIREMENTS

 

	
  Calendar Month

  (from Effective Date):

  	
   

  	
  Aerogen’s OnQ Procurement 

  Requirements*

  
	
  Month 1

  	
   

  	
  [ * ]

  
	
  Month 2

  	
   

  	
  [ * ]

  
	
  Month 3

  	
   

  	
  [ * ]

  
	
  Month 4

  	
   

  	
  [ * ]

  
	
  Month 5

  	
   

  	
  [ * ]

  
	
  Month 6

  	
   

  	
  [ * ]

  
	
  Month 7**

  	
   

  	
  [ * ]**

  
	
  Month 8**

  	
   

  	
  [ * ]**

  
	
  Month 9**

  	
   

  	
  [ * ]**

  
	
  Month 10**

  	
   

  	
  [ * ]**

  
	
  Month 11**

  	
   

  	
  [ * ]**

  
	
  Month 12**

  	
   

  	
  [ * ]**

  
	
  Total

  	
   

  	
  [ * ]**

  

 

*Note:
Pursuant to the provisions of Section 3.8(e).  

 

**Note: Could increase to [ * ] per month in event of new product
launch

 

 

[  ] = CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

F-1

 

AEROGEN CONFIDENTIAL

 

EXHIBIT G

 

ROYALTIES

 

 

[ * ]
of Gross Selling Price

 

[ ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

G-1

 

AEROGEN CONFIDENTIAL

 

EXHIBIT H

 

QUARTERLY ONQ
AEROSOL GENERATOR MINIMUM PURCHASES

 

 

The minimum quantity commitments
for any period beyond the fifth (5th) anniversary of the Effective
Date will be agreed upon in good faith by the Parties no later than three (3)
months prior to the end of the fifth (5th) year during the Term.

 

	
  Supply Quarter

  	
   

  	
  Quarterly

  Minimum

  	
   

  	
  Annual

  Total

  	
   

  
	
  Q1

  	
   

  	
  *

  	
   

  	
   

  	
   

  
	
  Q2

  	
   

  	
  *

  	
   

  	
   

  	
   

  
	
  Q3

  	
   

  	
  *

  	
   

  	
   

  	
   

  
	
  Q4

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
	
  Q5

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q6

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q7

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q8

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Q9**

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q10

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q11

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q12

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Q13

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q14

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q15

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q16

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  Q17

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q18

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q19

  	
   

  	
  [ * ]

  	
   

  	
   

  	
   

  
	
  Q20

  	
   

  	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

*Quarterly
minimums, and payment therefore, for the first (1st) year of the
Term are governed by Sections 4.1, 5.4 and
5.5.  The initial order and delivery schedule for the first (4) months
specified in Exhibit F can be modified only by mutual agreement of the parties,
with subsequent modifications governed by Sections
4.2 and 4.3. 

 

**OnQ Aerosol Generator minimum purchases
for Supply Quarters 9 through 20  shall
be subject to re-assessment as described in Section
6.6(c).

 

This
Exhibit H
is subject to adjustment as set forth in Section
6.6(a).

 

 

[ ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

H-1

 

AEROGEN CONFIDENTIAL

 

Exhibit I

 

INITIAL* MINIMUM
QUARTERLY ROYALTIES

 

 

	
  Country

  	
   

  	
  Minimum

  Quarterly Royalty

  
	
  United States of America

  	
   

  	
  [ * ]

  
	
  Japan

  	
   

  	
  [ * ]

  
	
  Each of Mexico, Canada, United Kingdom, France, Germany,
  Spain, Poland, Greece and Italy

  	
   

  	
  [ * ]
  each

  
	
  Each of Argentina and Australia

  	
   

  	
  [ * ]
  each

  

 

Minimum
royalties for a given Sales Quarter are due within thirty (30) days following
the end of such quarter.  

 

*After
the first two quarterly payments, future minimum royalties will be determined
on Sales Quarterly basis, by country, by selecting the greater of (a) [ * ] and (b) [ * ].

 

This
Exhibit I
is subject to adjustment as set forth in Section
2.2 and Section 6.6(b).

 

 

[ ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

I-1

 

AEROGEN CONFIDENTIAL

 

Exhibit J

 

MINIMUM QUARTERLY
PRODUCT SYSTEM* SALES

 

[ * ]

 

*”System”
as defined on Exhibit B

 

**Minimum
Sales Quarterly Product System Sales for the United States as stated in Q9-Q20
shall be subject to re-assessment as described in Section 6.6(c)

 

***As
described in Sections
6.4 and 6.5(b)

 

This
Exhibit J
is subject to adjustment as set forth in Section
2.2 and Section 6.6.

 

[ ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

J-1

 

AEROGEN CONFIDENTIAL

 

EXHIBIT K

 

AEROGEN PATENTS

 

U.S. Patent No. 5,164,740

High
frequency printing mechanism

 

Filed:  April 24,
1991                                                                                                                                                                                                     Issued:  November
17, 1992

 

U.S. Patent No. 5,586,550

Apparatus
and methods for the delivery of therapeutic liquids to the respiratory system

 

Filed:  August 31,
1995                                                                                                                                                                                          Issued:  December 24,
1996

 

U.S. Patent No. 5,758,637

Liquid
dispensing apparatus and methods

 

Filed:
February 21, 1996                                                                                                                                                                                   Issued:  June 2, 1998

 

U.S. Patent No. 5,938,117

Methods
and apparatus for dispensing liquids as an atomized spray 

 

Filed:  April 5,
1995                                                                                                                                                                                                            Issued:  August 17,
1999

 

U.S. Patent No. 6,014,970

Methods
& Apparatus for Storing Chemical Compounds in Portable Inhaler

 

Filed:  June 11,
1998                                                                                                                                                                                                       Issued:  January 18,
2000

 

U.S. Patent No. 6,085,740

Liquid
dispensing apparatus and methods

 

Filed:  April 10,
1998                                                                                                                                                                                                     Issued:  July 11, 2000

 

U.S. Patent No. 6,205,999

Methods
& Apparatus for Storing Chemical Compounds in Portable Inhaler

 

Filed:  September
8, 1998                                                                                                                                                                               Issued:  March 27,
2001

 

U.S. Patent No. 6,235,177

Method
for the construction of an aperture plate for dispensing liquid droplets

 

Filed:  September
9, 1999                                                                                                                                                                               Issued:  May 22, 2001

 

K-1

 

A.                                    U.S. Patents Issued

 

U.S. Patent No. 6,427,682

Improved
methods and apparatus for aerosolizing a substance

 

Filed:  January
14, 2000                                                                                                                                                                                     Issued:  August 6,
2002

 

U.S. Patent No. 6,467,476

Liquid
Dispensing Apparatus and Methods

 

Filed:  May 18,
2000                                                                                                                                                                                                           Issued:  October 22,
2002

 

U.S. Patent No. D469,866

Inhaler
For Dispensing Medications

 

Filed:  January 7,
2002                                                                                                                                                                                            Issued:  February 4,
2003

 

U.S. Patent No. D471,273

Inhaler
For Dispensing Medications

 

Filed:  January 7,
2002                                                                                                                                                                                            Issued:  March 4, 2003

 

U.S. Patent No. 6,540,153

Methods
& Apparatus for Dispensing Liquids as an Atomized Spray

 

Filed:  May 27,
1999                                                                                                                                                                                                           Issued:  April 1, 2003

 

U.S. Patent No. 6,540,154

Systems
& Methods for Controlling Fluid Feed to an Aerosol Generator

 

Filed:  October 2,
2000                                                                                                                                                                                             Issued:  April 1, 2003

 

U.S. Patent No. 6,543,443

Methods
& Devices for Nebulizing Fluids

 

Filed:  July 12,
2000                                                                                                                                                                                                          Issued:  April 8, 2003

 

K-2

 

U.S. Patent No. 6,546,927

Methods
& Apparatus for Controlling Piezoelectric Vibrations

 

Filed:  March 13,
2001                                                                                                                                                                                              Issued:  April 15,
2003

 

U.S. Patent No. 6,550,472

Devices
& Methods for Nebulizing Fluids Using Flow Directors 

 

Filed:  March 16,
2001                                                                                                                                                                                              Issued:  April 22,
2003

 

U.S. Patent No. 6,554,201

Insert
Molded Aerosol Generator and Methods 

 

Filed:  May 2, 2001                                                                                                                                                                                                                  Issued:  April 29,
2003

 

U.S. Patent No. D474,536 S

Inhaler
For Dispensing Medications

 

Filed:  January 7,
2002                                                                                                                                                                                            Issued:  May 13, 2003

 

K-3

 

B.                                    Foreign Patents Issued

 

Argentina Patent No. 
547686

High
frequency printing mechanism

 

Filed:  April 27,
1992                                                                                                                                                                                                     Issued:  March 31,
1995

 

Mexico Patent No, 179906

High
frequency printing mechanism

 

Filed:  April 23,
1992                                                                                                                                                                                                     Issued:  October
25, 1995

 

France Patent No. FR 0510648

High
frequency printing mechanism

 

Filed:  April 23,
1992                                                                                                                                                                                                     Issued:  July 16,
1996

 

Great Britain Patent No. 
GB 0510648

High
frequency printing mechanism

 

Filed:  April 23,
1992                                                                                                                                                                                                     Issued:  July 16,
1996

 

Denmark Patent No. 
69212688

High
frequency printing mechanism

 

Filed:  April 23,
1992                                                                                                                                                                                                     Issued:  July 16,
1996

 

European Patent No. 510648

High
frequency printing mechanism

 

Filed:  April 23,
1992                                                                                                                                                                                                     Issued:  8/14/96

 

Canada Patent No. 
2066838

High
frequency printing mechanism

 

Filed:  April 22,
1992                                                                                                                                                                                                     Issued:  February
4, 1997

 

K-4

 

Brazil Patent No.  PI
9201487-9

High
frequency printing mechanism

 

Filed:  April 23,
1992                                                                                                                                                                                                     Issued:  April 29,
1997

 

Australia Patent No. 
711059

Liquid
Dispensing Apparatus and Methods

 

Filed:  August 22,
1996                                                                                                                                                                                          Issued:  January
20, 2000

 

Denmark Patent No. 
402 05 656.6

Inhaler
For Dispensing Medication

 

Filed:   July 4, 2002                                                                                                                                                                                                              Issued:  August 21,
2002

 

Ireland Patent No. 
20028

Inhaler
For Dispensing Medication

 

Filed:  July 5,
2002                                                                                                                                                                                                                 Issued:  April 2,
2003

 

Ireland Patent No. 
20029

Inhaler
For Dispensing Medication

 

Filed:  July 5,
2002                                                                                                                                                                                                                 Issued:  April 2,
2003

 

 

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

 

K-5

 

AEROGEN CONFIDENTIAL

 

SCHEDULE 9.2

 

DISCLOSURE
SCHEDULE

 

9.2(a):  We have retained the law firm of Murray & Murray to advise us
on matters relating to possible bankruptcy and reorganization options and
procedures, and they have advised us in connection with this Agreement; we have
completed a prudent amount of background work and research, but have made no
bankruptcy filings.

 

9.2(c) and 9.2(i):  In April 2003, we received notice that a German patent
infringement suit had been filed by PARI GmbH in the regional court in Munich,
Germany alleging that Aerogen’s Aeroneb Pro product infringes the patent in question.  While the suit has not yet been formally
initiated by the German regional court, we believe that it is without merit and
intend to vigorously defend against all allegations in the suit.  In May, we filed an action in the German
patent office requesting that the patent in question be rendered null and void,
and also filed a declaratory judgment action in the District Court for the
Northern District of California requesting that the U.S. counterpart of such
patent be held invalid, unenforceable or otherwise null and void.

 

 

[ ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.

 

9.2-1

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