Document:

EXHIBIT 10.1

                         COMMON STOCK PURCHASE AGREEMENT

     This  AGREEMENT,  entered into as of the 20th day of  September,  2006 (the
"Agreement"),  by and between SENK, LLC, an Illinois limited liability  company,
with  an  address  at  1372  Shermer  Road,  Northbrook,   Illinois  60062  (the
"Purchaser"),  and R&R  ACQUISITION  II, INC., a Delaware  corporation,  with an
address c/o Kirk M. Warshaw,  47 School Avenue,  Chatham,  New Jersey 07928 (the
"Seller" or the "Company").

     WHEREAS, the Seller has authorized the sale and issuance of an aggregate of
10,000,000  shares (the  "Shares") of the  Seller's  common  stock,  $0.0001 par
value,  ("Common  Stock") to the  Purchaser  representing  80% of the issued and
outstanding Common Stock as of the Closing (as defined below); and

     WHEREAS,  Purchaser  desires  to  purchase  the  Shares  on the  terms  and
conditions set forth herein.

     NOW, THEREFORE,  in consideration of the premises, and the mutual covenants
and agreements  herein  contained,  the Purchaser and the Seller hereby agree as
follows:

                                    ARTICLE 1
                         SALE AND PURCHASE OF THE SHARES

     Section 1.1 AUTHORIZATION OF SHARES. The Seller has authorized the sale and
issuance to Purchaser of the Shares.

     Section 1.2 SALE AND PURCHASE.  Subject to the terms and conditions hereof,
at the Closing (as  hereinafter  defined) the Seller  hereby agrees to issue and
sell to Purchaser  and  Purchaser  agrees to purchase from the Seller the Shares
for an  aggregate  purchase  price  of sixty  thousand  ($60,000)  dollars  (the
"Purchase Price") according to the terms set forth in Section 2.2 below.

                                    ARTICLE 2
                              CLOSING AND DELIVERY

     Section 2.1 CLOSING DATE.  Upon the terms and subject to the conditions set
forth  herein,  the  consummation  of the  purchase  and sale of the Shares (the
"Closing") shall be held on September 30, 2006 (the "Closing Date") at such time
as may be determined in the mutual  discretion of the Seller and the  Purchaser.
The Closing shall take place at the offices of Seller's  Counsel,  Morse Zelnick
Rose & Lander, LLP, 405 Park Avenue, Suite 1401, New York, New York 10022, or by
the exchange of documents and  instruments by mail,  courier,  telecopy and wire
transfer to the extent mutually acceptable to the parties hereto.

     Section 2.2 DELIVERY AT CLOSING.  At the Closing,  subject to the terms and
conditions   hereof,   the  Seller  will  deliver  to   Purchaser   certificates
representing  the Shares to be  purchased at the Closing by  Purchaser,  against
payment of the Purchase Price by wire transfer at the time of Closing.

     Section 2.3 PAYMENTS AT CLOSING. On or before the Closing Date, the Company
shall pay and discharge all outstanding  liabilities,  including any outstanding
loans   payable  to  Current   Record   Stockholders   (collectively,   "Company
Liabilities"). Such payments shall be made utilizing cash on hand on the Closing
Date and the Purchase Price. Giving effect to these payments,  it is the parties
intent that the Company shall,  on the Closing Date have no  liabilities  and no
assets, other than $10,000.00 in cash.

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                                    ARTICLE 3
                    REPRESENTATIONS AND WARRANTIES OF SELLER

     Except  as set forth  under the  corresponding  section  of the  disclosure
schedules  (the  "DISCLOSURE  SCHEDULES")  attached  hereto as  EXHIBIT A, which
Disclosure Schedules shall be deemed a part hereof, the Seller hereby represents
and warrants to the Purchaser as of the Closing Date that:

     Section  3.1  EXISTENCE  AND  POWER.  The  Seller  is  a  corporation  duly
incorporated,  validly existing and in good standing under the laws of the State
of  Delaware  and has  all  corporate  powers  and  all  governmental  licenses,
authorizations,  permits,  consents  and  approvals  required  to  carry  on its
business as now conducted, except where a failure to so possess would not result
in a  Material  Adverse  Effect  upon the  Seller.  The  Seller  has  heretofore
delivered  to the  Purchaser  true and  complete  copies of its  Certificate  of
Incorporation, as amended, and By-laws, each as currently in effect.

     Section 3.2  AUTHORIZATION;  NO AGREEMENTS.  Subject to the satisfaction of
the  terms  and  conditions  set  forth  herein,  the  execution,  delivery  and
performance by the Seller of this Agreement,  the performance of its obligations
hereunder,  and the  consummation of the  transactions  contemplated  hereby are
within the Seller's  powers.  This Agreement has been duly and validly  executed
and delivered by the Seller and is a legal,  valid and binding obligation of the
Seller,  enforceable  against it in accordance  with its terms.  The  execution,
delivery and  performance  by the Seller of this  Agreement does not violate any
contractual  restriction  contained in any  agreement  which binds or affects or
purports  to bind  or  affect  the  Seller.  The  Seller  is not a party  to any
agreement,  written or oral, creating rights in respect of any of such Shares in
any third party or relating to the voting of its Common  Stock.  Seller is not a
party  to any  outstanding  or  authorized  options,  warrants,  rights,  calls,
commitments,  conversion  rights,  rights of exchange or other agreements of any
character, contingent or otherwise, providing for the purchase, issuance or sale
of any of the Shares,  and there are no restrictions of any kind on the transfer
of any of the Shares  other than (a)  restrictions  on  transfer  imposed by the
Securities Act of 1933, as amended (the  "Securities  Act") and (b) restrictions
on transfer imposed by applicable state securities or "blue sky" laws.

     Section 3.3 CAPITALIZATION.

     (a) The Company is authorized by its Certificate of  Incorporation to issue
an aggregate of 85,000,000  shares of capital  stock,  of which  75,000,000  are
shares of common  stock,  par value  $.0001 per share (the  "Common  Stock") and
10,000,000  are  shares of  preferred  stock,  par value  $.0001  per share (the
"Preferred Stock"). As of the date hereof, and as of the Closing Date, 2,500,000
shares of Common Stock and no shares of Preferred Stock are, and will be, issued
and outstanding,  and there will be three (3) stockholders of record holding the
Common Stock.  All of the issued and outstanding  shares of capital stock of the
Company  have been duly  authorized  and  validly  issued and are fully paid and
nonassessable.  All of the issued and outstanding shares of capital stock of the
Company have been offered, issued and sold by the Company in compliance with all
applicable  federal and state  securities laws. No securities of the Company are
entitled to preemptive or similar  rights,  and no Person has any right of first
refusal,  preemptive  right,  right of  participation,  or any similar  right to
participate in the transactions  contemplated hereby.  Except as a result of the
purchase and sale of the Shares,  there are no  outstanding  options,  warrants,
script rights to subscribe to, calls or commitments of any character  whatsoever
relating  to,  or  securities,   rights  or  obligations   convertible  into  or
exchangeable  for, or giving any Person any right to  subscribe  for or acquire,
any  shares  of Common  Stock,  or  contracts,  commitments,  understandings  or
arrangements  by which the  Company is or may become  bound to issue  additional
shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common  Stock.  The  issuance and sale of the Shares will not obligate
the Company to issue  shares of Common Stock or other  securities  to any Person
(other  than the  Purchaser)  and shall not  result in a right of any  holder of
securities of the Company to adjust the exercise, conversion,  exchange or reset
price under such securities.

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     (b)  Subject  to the  satisfaction  of the terms and  conditions  set forth
herein,  the Shares shall be duly  authorized  for issuance,  when  delivered in
accordance with the terms of this Agreement,  and shall be validly issued, fully
paid and  non-assessable  and the  sale  thereof  shall  not be  subject  to any
preemptive or other similar right.

     Section 3.4 SEC  REPORTS;  FINANCIAL  STATEMENTS.  The Seller has filed all
reports  required to be filed by it under the  Securities Act and the Securities
Exchange Act of 1934, as amended (the  "Exchange  Act"),  including  pursuant to
Section 13(a) or 15(d) thereof,  since January 19, 2006 (the foregoing materials
being collectively referred to herein as the "SEC Reports") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. The Seller has identified
and made  available to the  Purchaser a copy of all filed SEC Reports  including
the Exchange Act Registration Statement on Form 10-SB filed by it on January 19,
2006. As of their  respective  dates,  the SEC Reports  complied in all material
respects with the  requirements  of the  Securities Act and the Exchange Act and
the rules  and  regulations  of the  Securities  and  Exchange  Commission  (the
"Commission")  promulgated thereunder,  and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated  therein or necessary in order to make the statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.  The financial  statements of the Seller included in the SEC Reports
comply in all material respects with applicable accounting  requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial  statements have been prepared in accordance with
generally  accepted  accounting  principles applied on a consistent basis during
the periods  involved  ("GAAP"),  except as may be  otherwise  specified in such
financial  statements or the notes  thereto,  and fairly present in all material
respects the financial position of the Seller and its consolidated  subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments.

     Section  3.5 NO  CONFLICTS.  Subject to the  satisfaction  of the terms and
conditions  set forth herein,  the execution,  delivery and  performance of this
Agreement  and the  transactions  contemplated  hereby do not and will not:  (i)
conflict  with  or  violate  any  provision  of  the  Company's  Certificate  of
Incorporation,  By-laws or other  organizational or charter  documents,  or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both  would  become a  default)  under,  or give to others any rights of
termination,  amendment,  acceleration or cancellation  (with or without notice,
lapse  of time  or  both)  of any  agreement,  credit  facility,  debt or  other
instrument  (evidencing a Company debt or otherwise) or other  understanding  to
which the Company is a party or by which any property or asset of the Company is
bound or affected or (iii) result in a violation of any law,  rule,  regulation,
order,  judgment,  injunction,  decree  or  other  restriction  of any  court or
governmental  authority to which the Company is subject  (including  federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected.

     Section 3.6 FILINGS,  CONSENTS  AND  APPROVALS.  Other than any  applicable
Current  Report on Form 8-K under the Exchange Act of 1934, as amended,  and the
Information  Statement  contemplated by Section 5.3(b) hereof, the Seller is not
required  to obtain any  consent,  waiver,  authorization  or order of, give any
notice to, or make any filing or registration  with, any court or other federal,
state, local or other governmental  authority or other Person in connection with
the execution, delivery and performance of this Agreement.

     Section 3.7 COMPLIANCE.  To the knowledge of the Seller, the Seller: (i) is
not in default  under or in violation of (and no event has occurred that has not
been  waived  that,  with  notice  or lapse of time or both,  would  result in a
default by the Seller under), nor has the Seller received notice of a claim

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that it is in default under or that it is in violation of, any  indenture,  loan
or credit  agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound (whether or not such default or
violation has been waived),  (ii) is not in violation of any order of any court,
arbitrator or  governmental  body and (iii) is not and has not been in violation
of any statute, rule or regulation of any governmental authority.

                                    ARTICLE 4
                        REPRESENTATIONS OF THE PURCHASERS

     The Purchaser represents and warrants to the Seller, as follows:

     Section 4.1 EXECUTION AND DELIVERY. The execution, delivery and performance
by the Purchaser of this Agreement is within the Purchaser's powers and does not
violate any  contractual  restriction  contained in any agreement which binds or
affects or purports to bind or affect the Purchaser.  The Purchaser's  financial
resources  are  sufficient  to  enable  it  to  purchase  the  Shares  upon  the
satisfaction of the terms and conditions set forth herein, and the Purchaser has
provided the Seller with such evidence  thereof as was  reasonably  requested by
the Seller.

     Section 4.2 BINDING EFFECT. This Agreement,  when executed and delivered by
the Purchaser  shall be irrevocable  and will  constitute  the legal,  valid and
binding  obligations  of the  Purchaser  enforceable  against the  Purchaser  in
accordance  with its terms,  except as may be limited by applicable  bankruptcy,
insolvency,   moratorium  and  other  laws  of  general  application   affecting
enforcement  of  creditors'  rights  generally or general  principles  of equity
(regardless  of whether such  enforceability  is  considered  in a proceeding in
equity or at law).

     Section 4.3 INVESTMENT PURPOSE.  The Purchaser hereby represents that it is
purchasing  the Shares for its own  account,  with the  intention of holding the
Shares,  with no present intention of dividing or allowing others to participate
in this  investment  or of  reselling or  otherwise  participating,  directly or
indirectly,  in a  distribution  of the  Shares,  and  shall  not make any sale,
transfer,  or pledge thereof without  registration  under the Securities Act and
any  applicable   securities   laws  of  any  state  unless  an  exemption  from
registration  is  available  under  those  laws.  The  Shares  delivered  to the
Purchaser  shall bear a restrictive  legend  indicating  that they have not been
registered  under the Securities Act of 1933 and are "restricted  securities" as
that term is defined in Rule 144 under the Act.

     Section 4.4 INVESTMENT REPRESENTATION. The Purchaser represents that it has
adequate  means of providing for its current needs and has no need for liquidity
in  this  investment  in the  Shares.  The  Purchaser  represents  that it is an
"accredited  investor"  as defined in Rule 501(a) of  Regulation  D  promulgated
under the Securities Act. The Purchaser has no reason to anticipate any material
change in its financial  condition for the foreseeable  future. The Purchaser is
financially  able to bear the economic  risk of this  investment,  including the
ability to hold the  Shares  indefinitely  or to afford a  complete  loss of its
investment in the Shares.

     Section 4.5  INVESTMENT  EXPERIENCE.  The Purchaser has such  knowledge and
experience in financial and business  matters as to be capable of evaluating the
merits and risks of an investment in the Shares.

     Section 4.6 OPPORTUNITY TO ASK QUESTIONS.  The Purchaser has had a full and
fair  opportunity  to make  inquiries  about the terms  and  conditions  of this
Agreement,  to discuss the same and all related matters with its own independent
counsel,  accountants  and tax  advisers.  The  Purchaser  has  been  given  the
opportunity to ask questions of, and receive answers from the Seller  concerning
the terms and

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conditions of this Agreement and to obtain such additional  written  information
about the  Seller to the extent the Seller  possesses  such  information  or can
acquire  it  without   unreasonable  effort  or  expense.   Notwithstanding  the
foregoing,  the Purchaser has had the opportunity to conduct its own independent
investigation. The Purchaser acknowledges and agrees that the Seller has (i) has
identified  and made  available to the Purchaser a copy of all filed SEC Reports
including the Exchange Act  Registration  Statement on Form 10-SB filed by it on
January  19,  2006;  and  (ii)  not  made,   nor  is  the  Seller  making,   any
representations  or  warranties  with respect to the  transactions  contemplated
hereby other than those specifically set forth herein.

     Section 4.7 BROKERS. The Purchaser has not retained any broker or finder in
connection with any of the transactions  contemplated by this Agreement, and the
Purchaser  has not  incurred  or agreed to pay,  or taken any other  action that
would entitle any Person to receive,  any brokerage  fee,  finder's fee or other
similar fee or commission with respect to any of the  transactions  contemplated
by this Agreement.

                                    ARTICLE 5
                            COVENANTS OF THE COMPANY

     Section 5.1 REGISTRATION RIGHTS. If at any time following the Closing Date,
the  Company  shall  determine  to  prepare  and  file  with  the  Commission  a
registration  statement  relating  to an  offering  for its own  account  or the
account of others under the  Securities  Act of any of its equity  securities (a
"Registration  Statement"),  other  than  on  Form  S-4 or  Form  S-8  (each  as
promulgated  under the Securities  Act),  then the Company shall include in such
Registration  Statement the shares of the Current Record  Stockholders set forth
on Schedule 5.1 hereto. If the Registration Statement is being filed pursuant to
a  third-party  written  agreement  obligating  the  Company to file the same (a
"Registration Agreement"),  the Current Record Stockholders shall be entitled to
receive all notices and documents sent by the Company to the  third-party  whose
securities are being registered  pursuant to such  Registration  Agreement.  The
Shares  purchased   hereunder  shall  also  be  included  in  such  Registration
Statement. In addition, the Purchaser shall have two demand registration rights,
at the  Company's  expense,  after a  Corporate  Event  and the  Current  Record
Stockholders shall be entitled to piggyback on any such demand registration.

     Section 5.2 ISSUANCE OF ADDITIONAL  SECURITIES AFTER CLOSING.  Prior to any
Corporate  Event,  the  Company  shall not  either  (a) issue or sell any of its
securities (including, but not limited to, derivative securities and options and
warrants to acquire  securities),  or (b) effect an corporate action,  including
but not limited to an amendment  to any of its  organizational  documents,  that
would in any way have a  dilutive  effect on the  Current  Record  Stockholders'
ownership interest in the Company;  in each instance,  without the prior written
consent of the Current  Record  Stockholders  holding at least a majority of the
issued and outstanding shares of Common Stock on the date hereof.

     Section 5.3  RESIGNATION  AND  APPOINTMENT  OF THE  COMPANY'S  OFFICERS AND
DIRECTORS.

     (a)  Effective  as of the  Closing  Date,  or such  later date as agreed to
between the Company and its current officers,  (i) the Company's  officers shall
resign and be duly replaced by the Purchaser's  designees;  and (ii) the Company
will cause the Purchaser's director designee to be duly appointed.

     (b) The  Seller  will use its best  efforts  to ensure  that the  Company's
current  director will remain a director of the Company until the  expiration of
the  10-day  period  beginning  on the  date of the  filing  of the  Information
Statement  relating to a change in majority of directors of the Company with the
Commission   pursuant  to  Rule  14f-1   promulgated   under  the  Exchange  Act
("Information Statement").

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     Section 5.4 RESPONDING TO CURRENT RECORD STOCKHOLDERS'  REQUEST. So long as
the Current  Record  Stockholders  continue to own at least 50% of the shares of
Common  Stock  collectively  owned by them on the Closing  Date (as adjusted for
stock splits,  stock dividends and other  recapitalizations),  the Company shall
reasonably  and timely  respond to any all  requests  for  information  from the
Current Record Stockholders relating to any prospective business combination and
financing   activities  by  the  Company;   provided  that  the  Current  Record
Stockholders  shall keep such information  confidential to the extent that it is
not  otherwise  available  in the public  domain.  Further,  in the event that a
Current  Record  Stockholder  requests  and  receives  any  material  non-public
information  with  respect to the Company  pursuant to this  provision,  it will
refrain from engaging in market  transactions  of the Company's  securities that
would violate Federal Securities laws.

     Section 5.5  EXCHANGE  ACT  FILINGS.  The Company  shall file,  in a timely
manner, all required SEC Reports.

     Section 5.6 DUTY TO NOTIFY CURRENT RECORD STOCKHOLDERS.  Upon the Company's
receipt of any  correspondence  or inquiry  from any State,  Federal,  or Local,
governmental  or  regulatory,  agency or  authority,  the Company  shall provide
copies of any such  correspondence to Arnold Kling, R&R Investment,  II, LLC and
its counsel.

                                    ARTICLE 6
                            COVENANTS OF THE PARTIES

     The parties hereto agree that:

     Section 6.1 PUBLIC ANNOUNCEMENTS. Except as required by applicable law, the
Seller and the Purchaser  shall consult with each other before issuing any press
release or making any public  statement  with  respect to this  Agreement or the
transactions  contemplated  hereby and will not issue any such press  release or
make any such  public  statement  prior to such  consultation  and  without  the
consent of the other parties.

     Section 6.2  NOTICES OF CERTAIN  EVENTS.  In  addition to any other  notice
required to be given by the terms of this  Agreement,  each of the parties shall
promptly notify the other party hereto of:

     (a) any notice or other  communication  from any Person  alleging  that the
     consent of such Person is or may be required in connection  with any of the
     transactions contemplated by this Agreement;

     (b) any notice or other  communication  from any governmental or regulatory
     agency or authority in connection  with the  transactions  contemplated  by
     this Agreement; and

     (c) any actions, suits, claims, investigations or proceedings commenced or,
     to its knowledge threatened against,  relating to or involving or otherwise
     affecting such party that, if pending on the date of this Agreement,  would
     have been required to have been disclosed  pursuant to Section 3 or Section
     4 (as  the  case  may  be)  or  that  relate  to  the  consummation  of the
     transactions contemplated by this Agreement.

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     Section  6.3  ACCESS  TO  INFORMATION.  Following  the date  hereof,  until
consummation of all transactions  contemplated  hereby, the Seller shall give to
the Purchaser, their counsel, financial advisers,  auditors and other authorized
representatives reasonable access to the offices, properties, books and records,
financial   and  other  data  and   information   as  the   Purchaser   and  its
representatives may reasonably request.

                                    ARTICLE 7
                              CONDITIONS PRECEDENT

     Section 7.1 CONDITIONS OF OBLIGATIONS OF THE PURCHASER.  The obligations of
the Purchaser are subject to the satisfaction of the following  conditions,  any
or all of which may be waived in whole or in part by the Purchaser:

     (a)  REPRESENTATIONS  AND  WARRANTIES.  Each  of  the  representations  and
warranties of the Seller set forth in this  Agreement  shall be true and correct
in all  material  respects as of the Closing  Date,  as though made on and as of
such date.

     (b)  COMPLIANCE  CERTIFICATE.  The President of the Seller shall deliver to
the Purchaser at the Closing a certificate  certifying:  (i) that there has been
no material  adverse  change in the business,  affairs,  prospects,  operations,
properties, assets or conditions of the Seller since the date of this Agreement;
(ii)  that  attached  thereto  is a true  and  complete  copy  of  the  Seller's
Certificate of  Incorporation,  as amended,  as in effect at the Closing;  (iii)
that attached thereto is a true and complete copy of its By-laws as in effect at
the Closing;  and (iv) each of the  representations and warranties of the Seller
set forth in this Agreement are true and correct in all material  respects as of
the Closing Date as though made on and as of the Closing Date.

     (c)  GOOD  STANDING  CERTIFICATE.  The  Seller  shall  have  furnished  the
Purchaser with good standing and existence  certificates for the Seller from the
State of Delaware.

     (d) BOARD OF  DIRECTORS  RESOLUTIONS.  The  Purchaser  shall have  received
executed  resolutions  of the Board of  Directors of the Seller  approving  this
Agreement and the transactions contemplated herein.

     (e) PERFORMANCE.  The Seller shall have materially performed and materially
complied  with all  agreements,  obligations  and  conditions  contained in this
Agreement  that are required to be performed or complied with by it on or before
the Closing.

     (f) RESIGNATION OF OFFICERS AND DIRECTORS. The officers and director of the
Seller shall have resigned from their  positions as of the Closing Date with the
resignation  of the  director  to take  effect on the  expiration  of the 10-day
period beginning on the date of the filing of the Information Statement;

     (g) APPOINTMENT OF THE PURCHASER'S DESIGNEES. The Purchaser's designees for
the  officers  and  director  positions  of the  Company  shall  have  been duly
appointed.

     (h) NO INJUNCTION.  There shall not be in effect,  at the Closing Date, any
injunction  or other  binding  order  of any  court  or  other  tribunal  having
jurisdiction  over the  Seller  that  prohibits  the sale of the  Shares  to the
Purchaser.

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     (i) NO  LIABILITIES.  The Company shall have no material  liabilities as of
the Closing  Date,  including  accrued or  contingent  liabilities  and at least
$10,000 in cash.

     Section 7.2 CONDITIONS OF OBLIGATIONS OF THE SELLER. The obligations of the
Seller to effect the sale of the Shares are subject to the following conditions,
any or all of which may be waived in whole or in part by the Seller:

     (a)  REPRESENTATIONS  AND  WARRANTIES.  Each  of  the  representations  and
warranties  of the  Purchaser  set  forth  in this  Agreement  shall be true and
correct in all material respects as of the Closing Date.

     (b) COMPLIANCE  CERTIFICATE.  An authorized  officer of the Purchaser shall
deliver  to the  Seller at the  Closing  a  certificate  certifying  each of the
representations and warranties of such the Purchaser set forth in this Agreement
are true and correct in all  material  respects as of the Closing Date as though
made on and as of the Closing Date.

     (c)  PERFORMANCE.   The  Purchaser  shall  have  materially  performed  and
materially complied with all agreements, obligations and conditions contained in
this  Agreement  that are required to be performed or complied with by it or him
on or before the Closing.

     (d) NO INJUNCTION.  There shall not be in effect,  at the Closing Date, any
injunction  or other  binding  order  of any  court  or  other  tribunal  having
jurisdiction  over the  Seller  that  prohibits  the sale of the  Shares  to the
Purchaser.

     (e) PAYMENT OF COMPANY LIABILITIES. All Company Liabilities shall have been
paid or discharged.

                                    ARTICLE 8
                                   TERMINATION

     Section 8.1 TERMINATION.  This Agreement may be terminated and the purchase
and sale of the Shares may be abandoned at any time prior to the Closing:

     (a) by mutual written consent of the parties hereto;

     (b) by either the Seller or the  Purchaser  if the  Closing  shall not have
occurred on or before  October 1, 2006  (unless the  failure to  consummate  the
transactions  by such date  shall be due to the  action or failure to act of the
party seeking to terminate this Agreement);

     (c) by the  Purchaser if (i) the Seller shall have failed to timely  comply
in any  material  respect  with  any  of the  covenants,  conditions,  terms  or
agreements  contained in this  Agreement to be complied  with or performed by it
prior to the Closing  Date,  which  breach is not cured  within ten (10) days if
capable  of cure;  or (ii) any  representations  and  warranties  of the  Seller
contained in this Agreement shall have been materially false when made or on and
as of the  Closing  Date as if made on and as of  Closing  Date  (except  to the
extent it relates to a particular date); or

     (d) by the Seller if (i) the  Purchaser  shall have failed to timely comply
in any  material  respect  with  any  of the  covenants,  conditions,  terms  or
agreements  contained in this  Agreement to be complied  with or performed by it
prior to the Closing  Date,  which  breach is not cured  within ten (10)

                                       8
<PAGE>

days if capable  of cure;  or (ii) any  representations  and  warranties  of the
Purchaser contained in this Agreement shall have been materially false when made
or on and as of the Closing Date.

     Section 8.2 EFFECT OF TERMINATION.  In the event of the termination of this
Agreement  pursuant to this  Article 8, all further  obligations  of the parties
under this Agreement shall forthwith be terminated without any further liability
of any party to the other parties; provided,  however, that nothing contained in
this Section 8.2 shall  relieve any party from  liability for any breach of this
Agreement.  Upon  termination  of this  Agreement for any reason,  the Purchaser
shall  promptly  cause to be returned to Seller all  documents  and  information
obtained in connection with this Agreement and the transactions  contemplated by
this Agreement and all documents and information obtained in connection with the
Purchaser's  investigation  of  the  Seller's  business,  operations  and  legal
affairs,  including  any copies made by the  Purchaser of any such  documents or
information.

                                    ARTICLE 9
                                  MISCELLANEOUS

     Section  9.1  NOTICES.  All  notices,  requests  and  other  communications
hereunder  shall be in writing and either  delivered  personally,  telecopied or
sent by certified or registered mail, postage prepaid,

IF TO PURCHASERS:
                  SENK, LLC
                  1372 Shermer Road
                  Northbrook, Illinois 60062
                  Attn.:  Steven Edelson, Managing Member
                  Fax: (847) 509-3699

                  WITH A COPY TO:
                  Mintz Levin Cohn Ferris Glovsky & Popeo, LLC
                  666 Third Avenue
                  New York, NY 10017
                  Attn.:  Kenneth Koch, Esq.
                  Fax:  212-983-3115
IF TO SELLER:
                  R&R Acquisition II, Inc.
                  47 School Avenue
                  Chatham, New Jersey 07928
                  Attn.: Kirk M. Warshaw
                  Fax: (973) 833-0281

                  WITH A COPY TO:
                  Morse, Zelnick, Rose and Lander, LLP
                  405 Park Ave. Suite 1401
                  New York, New York, 10022
                  Attn.:  Kenneth S. Rose, Esq.
                  Fax: 212-838-9190

                                       9
<PAGE>

IF TO CURRENT RECORD STOCKHOLDER:

                  to each Current Record Stockholder's  addresses  set  forth on
                  Schedule 5.1 to this Agreement

                  WITH A COPY TO:
                  Morse, Zelnick, Rose and Lander, LLP
                  405 Park Ave. Suite 1401
                  New York, New York, 10022
                  Attn.:  Kenneth Rose, Esq.
                  Fax: 212-838-9190

or  such  other  address  or fax  number  as any of the  foregoing  Persons  may
hereafter  specify  for the  purpose  by notice to the  parties  hereto  and the
Current Record Stockholders. All such notices, requests and other communications
shall be  deemed  received  on the date  delivered  personally  or by  overnight
delivery service or telecopied or, if mailed,  five business days after the date
of mailing if received prior to 5 p.m. in the place of receipt and such day is a
business day in the place of receipt.  Otherwise,  any such  notice,  request or
communication  shall  be  deemed  not to  have  been  received  until  the  next
succeeding business day in the place of receipt.

     Section 9.2 AMENDMENTS; NO WAIVERS.

     (a)  Any  provision  of  this  Agreement   with  respect  to   transactions
contemplated  hereby may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed,  in the case of an amendment,  by the Seller
and the  Purchaser;  or in the case of a waiver,  by the party  against whom the
waiver is to be effective.

     (b) No failure  or delay by any party in  exercising  any  right,  power or
privilege  hereunder  shall operate as a waiver  thereof nor shall any single or
partial  exercise  thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights and remedies herein
provided  shall be  cumulative  and not  exclusive  of any  rights  or  remedies
provided by law.

     Section  9.3  FEES  AND  EXPENSES.  All  costs  and  expenses  incurred  in
connection with this Agreement shall be paid by the party incurring such cost or
expense.

     Section 9.4 SUCCESSORS AND ASSIGNS.  The provisions of this Agreement shall
be  binding  upon and  inure to the  benefit  of the  parties  hereto  and their
respective  successors and assigns;  provided that the Purchaser  shall have the
right to assign this  Agreement  to an  affiliate  or assignee of the  Purchaser
reasonably  acceptable  to the Seller  and no other  party  hereto  may  assign,
delegate  or  otherwise  transfer  any of its rights or  obligations  under this
Agreement without the consent of each other party hereto,  but any such transfer
or  assignment  will  not  relieve  the  appropriate  party  of its  obligations
hereunder.

     Section  9.5  GOVERNING  LAW.  This  Agreement  shall  be  governed  by and
construed in accordance  with the laws of the State of New York,  without giving
effect to the principles of conflicts of law thereof.

     Section 9.6 JURISDICTION. Any suit, action or proceeding seeking to enforce
any provision of, or based on any matter  arising out of or in connection  with,
this  Agreement or the  transactions  contemplated  hereby may be brought in any
federal or state court  located in New York,  New York,  and each of the parties
hereby  consents to the  jurisdiction  of such  courts  (and of the  appropriate

                                       10
<PAGE>

appellate  courts  therefrom)  in  any  such  suit,  action  or  proceeding  and
irrevocably  waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such suit, action
or  proceeding  in any such  court or that any such suit,  action or  proceeding
which is brought in any such court has been  brought in an  inconvenient  forum.
Process  in any such  suit,  action  or  proceeding  may be  served on any party
anywhere in the world,  whether within or without the  jurisdiction  of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section  9.1 shall be deemed  effective  service of
process on such party.  Each party hereto  (including  its  affiliates,  agents,
officers,  directors and employees)  hereby  irrevocably  waives, to the fullest
extent  permitted by  applicable  law, any and all right to trial by jury in any
legal  proceeding   arising  out  of  or  relating  to  this  Agreement  or  the
transactions contemplated hereby.

     Section 9.7  COUNTERPARTS;  EFFECTIVENESS.  This Agreement may be signed in
any number of  counterparts,  each of which shall be an original,  with the same
effect as if the  signatures  thereto and hereto were upon the same  instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts  hereof signed by all of the other parties hereto.  No provision of
this  Agreement  is intended  to confer  upon any Person  other than the parties
hereto any rights or remedies hereunder.

     Section 9.8 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
hereto  constitute the entire agreement  between the parties with respect to the
subject  matter  of this  Agreement  and  supersedes  all prior  agreements  and
understandings,  both oral and written,  between the parties with respect to the
subject matter hereof.

     Section 9.9 CAPTIONS.  The captions  herein are included for convenience of
reference  only and  shall be  ignored  in the  construction  or  interpretation
hereof.

     Section 9.10 SEVERABILITY.  If any term, provision, covenant or restriction
of this  Agreement  is  held  by a court  of  competent  jurisdiction  or  other
authority  to be invalid,  void or  unenforceable,  the  remainder of the terms,
provisions,  covenants and  restrictions  of this Agreement shall remain in full
force and effect and shall in no way be  affected,  impaired or  invalidated  so
long as the economic or legal substance of the transactions  contemplated hereby
is not affected in any manner  materially  adverse to any  parties.  Upon such a
determination,  the  parties  shall  negotiate  in good  faith  to  modify  this
Agreement  so as to effect  the  original  intent of the  parties  as closely as
possible in an  acceptable  manner in order that the  transactions  contemplated
hereby be consummated as originally contemplated to the fullest extent possible.

     Section 9.11 DEFINITION AND USAGE.

     For purposes of this Agreement:

     "Affiliate" means, with respect to any Person,  any other Person,  directly
or  indirectly  controlling,  controlled  by, or under common  control with such
Person.

     "Corporate  Event"  means  the  acquisition  of an  operating  business  or
material  assets by the Company  coupled with a financing  transaction  yielding
gross proceeds of at least $10 million.

     "Current Record  Stockholders" means the stockholders of record on the date
hereof, as set forth on Schedule 5.1 hereto, and their respective successors and
assigns.

                                       11
<PAGE>

     "Material  Adverse  Effect"  means any effect or change that is or would be
materially adverse to the business,  operations,  assets,  prospects,  condition
(financial  or otherwise) or results of operations of the Company and any of its
subsidiaries, taken as a whole.

     "Person" means an individual,  corporation,  partnership, limited liability
company,  association,  trust or  other  entity  or  organization,  including  a
government or political subdivision or an agency or instrumentality thereof.

     IN WITNESS  WHEREOF,  the  Purchaser  and the Seller have caused this Stock
Purchase  Agreement  to be  executed  as of as of the day and year  first  above
written.

SELLER:

R&R ACQUISITION II, INC.

By: /s/ ARNOLD P. KLING
    -----------------------
Name:   Arnold P. Kling
Title:  President

PURCHASER:

SENK, LLC

By: /s/ STEVEN EDELSON
    -----------------------
Name:   Steven Edelson
Title:  Managing Member

                                       12
<PAGE>

                                    EXHIBIT A

                           SELLER DISCLOSURE SCHEDULES

None.

                                       13
<PAGE>

Schedule 5.1

                           CURRENT RECORD STOCKHOLDERS

Arnold P. Kling                                       400,000
712 Fifth Avenue, 11th Floor
New York, New York 10019

Kirk Warshaw                                          100,000
47 School Avenue
Chatham, New Jersey 07928

R&R Investments II, LLC                               2,000,000
1270 Avenue of Americas, 16th Floor
New York, New York 10020

                                       14Exhibit 10.10

 

Exhibit 10.10

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

COLLABORATION AND LICENSE AGREEMENT

between

MICROLOGIX BIOTECH INC.

and

STRATA PHARMACEUTICALS INC.

Dated: July 30, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	Article 1 DEFINITIONS	 	 	1	 
	 	 	Section 1.1
	 	“Acceptance for Filing”	 	 	1	 
	 	 	Section 1.2
	 	“Act”	 	 	1	 
	 	 	Section 1.3
	 	“Affiliate”	 	 	2	 
	 	 	Section 1.4
	 	“Applicable Law(s)”	 	 	2	 
	 	 	Section 1.5
	 	“Approval Letter”	 	 	2	 
	 	 	Section 1.6
	 	“Books and Records”	 	 	2	 
	 	 	Section 1.7
	 	“CFR”	 	 	2	 
	 	 	Section 1.8
	 	“cGMP”	 	 	2	 
	 	 	Section 1.9
	 	“Collaboration”	 	 	2	 
	 	 	Section 1.10
	 	“Commercially Reasonable Efforts”	 	 	1	 
	 	 	Section 1.11
	 	“Common Shares”	 	 	1	 
	 	 	Section 1.12
	 	“Competent Authority(ies)”	 	 	1	 
	 	 	Section 1.13
	 	“Compound”	 	 	1	 
	 	 	Section 1.14
	 	“Confidential Information”	 	 	1	 
	 	 	Section 1.15
	 	“Control”	 	 	2	 
	 	 	Section 1.16
	 	“Costs”	 	 	2	 
	 	 	Section 1.17
	 	“CRBSI”	 	 	2	 
	 	 	Section 1.18
	 	“Development”	 	 	2	 
	 	 	Section 1.19
	 	“Development Plan(s)”	 	 	2	 
	 	 	Section 1.20
	 	“Development Subcontract”	 	 	2	 
	 	 	Section 1.21
	 	“DMF”	 	 	3	 
	 	 	Section 1.22
	 	“Europe”	 	 	3	 
	 	 	Section 1.23
	 	“Exclusivity Fee”	 	 	3	 
	 	 	Section 1.24
	 	“Exclusivity Period”	 	 	3	 
	 	 	Section 1.25
	 	“Extended Field”	 	 	3	 
	 	 	Section 1.26
	 	“FDA”	 	 	3	 
	 	 	Section 1.27
	 	“Field”	 	 	3	 
	 	 	Section 1.28
	 	“First Commercial Sale”	 	 	3	 
	 	 	Section 1.29
	 	“First Phase III Study”	 	 	4	 
	 	 	Section 1.30
	 	“GAAP”	 	 	4	 
	 	 	Section 1.31
	 	“Good Clinical Practices” or “GCP”	 	 	4	 
	 	 	Section 1.32
	 	“Governmental Approval(s)”	 	 	4	 
	 	 	Section 1.33
	 	“IMS Data”	 	 	4	 
	 	 	Section 1.34
	 	“Improvements”	 	 	4	 
	 	 	Section 1.35
	 	“IND(s)”	 	 	4	 
	 	 	Section 1.36
	 	“Know-How”	 	 	4	 
	 	 	Section 1.37
	 	“knowledge” or “best of its knowledge”	 	 	5	 
	 	 	Section 1.38
	 	“Labelled” or “Labelling”	 	 	5	 
	 	 	Section 1.39
	 	“LCSI”	 	 	5	 
	 	 	Section 1.40
	 	“Major European Market Country”	 	 	5	 
	 	 	Section 1.41
	 	“manufacture(d)” or “manufacturing”	 	 	5	 
	 	 	Section 1.42
	 	“Manufacturing Development Costs”	 	 	5	 
	 	 	Section 1.43
	 	“Market Price”	 	 	5	 

 

- 2 -

	 	 	 	 	 	 	 	 	 
	 	 	Section 1.44
	 	“Marketing Authorization”	 	 	5	 
	 	 	Section 1.45
	 	“MBI 594AN”	 	 	5	 
	 	 	Section 1.46
	 	“Micrologix Know-How”	 	 	6	 
	 	 	Section 1.47
	 	“Micrologix Patent Rights” or “Micrologix Patent”	 	 	6	 
	 	 	Section 1.48
	 	“Micrologix Technology”	 	 	6	 
	 	 	Section 1.49
	 	“NDA”	 	 	6	 
	 	 	Section 1.50
	 	“Negotiation Period”	 	 	6	 
	 	 	Section 1.51
	 	“Net Sales”	 	 	6	 
	 	 	Section 1.52
	 	“Notification Period”	 	 	1	 
	 	 	Section 1.53
	 	“packaging”	 	 	2	 
	 	 	Section 1.54
	 	“Patent Rights”	 	 	2	 
	 	 	Section 1.55
	 	“Phase III Study”	 	 	2	 
	 	 	Section 1.56
	 	“Phase IV Study”	 	 	2	 
	 	 	Section 1.57
	 	“Post Marketing Commitments”	 	 	2	 
	 	 	Section 1.58
	 	“Pricing and Reimbursement Approvals”	 	 	2	 
	 	 	Section 1.59
	 	“Prime Rate of Interest”	 	 	2	 
	 	 	Section 1.60
	 	“Product”	 	 	3	 
	 	 	Section 1.61
	 	“Promotional Material(s)”	 	 	3	 
	 	 	Section 1.62
	 	“raw materials and components”	 	 	3	 
	 	 	Section 1.63
	 	“Regulations”	 	 	3	 
	 	 	Section 1.64
	 	“Reimbursable Costs”	 	 	3	 
	 	 	Section 1.65
	 	“Representatives”	 	 	3	 
	 	 	Section 1.66
	 	“Royalty Term”	 	 	3	 
	 	 	Section 1.67
	 	“Second Phase III Study”	 	 	4	 
	 	 	Section 1.68
	 	“Subcontractors”	 	 	4	 
	 	 	Section 1.69
	 	“Territory”	 	 	4	 
	 	 	Section 1.70
	 	“Third Party”	 	 	4	 
	 	 	Section 1.71
	 	“Trading Day”	 	 	4	 
	 	 	Section 1.72
	 	“U.S.” or the “United States”	 	 	4	 
	 	 	Section 1.73
	 	“U.S. Dollar Equivalent”	 	 	4	 
	 	 	Section 1.74
	 	“U.S. PTO”	 	 	4	 
	 	 	Section 1.75
	 	“Valid Claim”	 	 	4	 
	 	 	 
	 	 	 	 	 	 
	Article 2 PRODUCT DEVELOPMENT	 	 	5	 
	 	 	Section 2.1
	 	Objectives	 	 	5	 
	 	 	Section 2.2
	 	Collaboration Guidelines; Amendments to the Development Plan(s)	 	 	5	 
	 	 	Section 2.3
	 	Development	 	 	6	 
	 	 	Section 2.4
	 	Joint Development Management Committee	 	 	7	 
	 	 	Section 2.5
	 	Technology Transfer	 	 	8	 
	 	 	 
	 	 	 	 	 	 
	Article 3 LICENSE	 	 	10	 
	 	 	Section 3.1
	 	License Terms	 	 	10	 
	 	 	Section 3.2
	 	Micrologix’s Reservation of Rights	 	 	10	 
	 	 	Section 3.3
	 	Third Party Licensees of Micrologix	 	 	10	 
	 	 	Section 3.4
	 	Work Product and Intellectual Property	 	 	10	 
	 	 	Section 3.5
	 	Sublicenses	 	 	11	 

 

- 3 -

	 	 	 	 	 	 	 	 	 
	 	 	Section 3.6
	 	Certain Improvements	 	 	12	 
	 	 	Section 3.7
	 	Exclusive Option to Extend Field	 	 	13	 
	 	 	 
	 	 	 	 	 	 
	Article 4 ADDITIONAL PAYMENTS	 	 	14	 
	 	 	Section 4.1
	 	License Fee	 	 	14	 
	 	 	Section 4.2
	 	Product Milestone Payments	 	 	14	 
	 	 	Section 4.3
	 	Milestones for a Second Phase III	 	 	15	 
	 	 	Section 4.4
	 	Milestones for the First Phase III	 	 	15	 
	 	 	Section 4.5
	 	Burns or Surgical Infections milestones	 	 	15	 
	 	 	Section 4.6
	 	Commercial Milestone Payments	 	 	16	 
	 	 	Section 4.7
	 	Royalties	 	 	16	 
	 	 	 
	 	 	 	 	 	 
	Article 5 COMMERCIALIZATION OF THE PRODUCT	 	 	18	 
	 	 	Section 5.1
	 	Marketing Efforts	 	 	18	 
	 	 	Section 5.2
	 	Marketing Update	 	 	19	 
	 	 	Section 5.3
	 	Manufacturing	 	 	19	 
	 	 	Section 5.4
	 	Patent Marking	 	 	23	 
	 	 	 
	 	 	 	 	 	 
	Article 6 REGULATORY COMPLIANCE	 	 	23	 
	 	 	Section 6.1
	 	Ownership and Maintenance of Governmental Approvals	 	 	23	 
	 	 	Section 6.2
	 	Rights of Reference	 	 	23	 
	 	 	Section 6.3
	 	Adverse Drug Event Reporting and Post Marketing Surveillance	 	 	24	 
	 	 	Section 6.4
	 	Post Marketing Commitments	 	 	26	 
	 	 	Section 6.5
	 	Assistance	 	 	26	 
	 	 	Section 6.6
	 	Compliance	 	 	26	 
	 	 	Section 6.7
	 	General Regulatory Matters	 	 	27	 
	 	 	 
	 	 	 	 	 	 
	Article 7 PATENTS	 	 	28	 
	 	 	Section 7.1
	 	Maintenance of Patents or Marks	 	 	28	 
	 	 	Section 7.2
	 	Cooperation and Procedures Relative
to Actions Brought Under Section 7.3 and Section 7.4	 	 	29	 
	 	 	Section 7.3
	 	Prosecution of Infringement	 	 	30	 
	 	 	Section 7.4
	 	Infringement Claimed by Third Parties	 	 	32	 
	 	 	Section 7.5
	 	Co-operation with Other Licensees	 	 	32	 
	 	 	 
	 	 	 	 	 	 
	Article 8 CONFIDENTIALITY	 	 	33	 
	 	 	Section 8.1
	 	Confidentiality	 	 	33	 
	 	 	Section 8.2
	 	Publicity Review	 	 	34	 
	 	 	 
	 	 	 	 	 	 
	Article 9 REPRESENTATIONS, WARRANTIES AND COVENANTS	 	 	35	 
	 	 	Section 9.1
	 	Corporate Power	 	 	35	 
	 	 	Section 9.2
	 	Due Authorization	 	 	35	 
	 	 	Section 9.3
	 	Binding Obligation/No Conflict	 	 	35	 
	 	 	Section 9.4
	 	Ownership of Micrologix Technology	 	 	35	 

 

- 4 -

	 	 	 	 	 	 	 	 	 
	 	 	Section 9.5
	 	Patent and Other Intellectual Property Rights Proceedings	 	 	36	 
	 	 	Section 9.6
	 	Micrologix’s Additional Warranties	 	 	37	 
	 	 	Section 9.7
	 	Strata’s Additional Warranties	 	 	37	 
	 	 	Section 9.8
	 	Pre-Clinical and Clinical Studies Prior to Effective Date	 	 	37	 
	 	 	Section 9.9
	 	Debarment	 	 	37	 
	 	 	Section 9.10
	 	Limitation on Warranties	 	 	38	 
	 	 	 
	 	 	 	 	 	 
	Article 10 INDEMNIFICATION AND INSURANCE	 	 	38	 
	 	 	Section 10.1
	 	Strata Indemnified by Micrologix	 	 	38	 
	 	 	Section 10.2
	 	Micrologix Indemnified by Strata	 	 	39	 
	 	 	Section 10.3
	 	Prompt Notice Required	 	 	39	 
	 	 	Section 10.4
	 	Indemnitor May Settle	 	 	40	 
	 	 	Section 10.5
	 	Insurance	 	 	40	 
	 	 	 
	 	 	 	 	 	 
	Article 11 ADDITIONAL COVENANTS OF THE PARTIES	 	 	41	 
	 	 	Section 11.1
	 	Micrologix Covenant Not To Compete	 	 	41	 
	 	 	Section 11.2
	 	Launch of Competitive Product by Strata	 	 	41	 
	 	 	Section 11.3
	 	Limitation To The Territory	 	 	42	 
	 	 	Section 11.4
	 	Records and Audits	 	 	42	 
	 	 	Section 11.5
	 	Marketing Expenses	 	 	44	 
	 	 	Section 11.6
	 	Further Actions	 	 	44	 
	 	 	 
	 	 	 	 	 	 
	Article 12 PRODUCT RECALL	 	 	44	 
	 	 	Section 12.1
	 	Product Recalls or Withdrawal	 	 	44	 
	 	 	Section 12.2
	 	Recall Costs	 	 	44	 
	 	 	Section 12.3
	 	Notification Of Complaints	 	 	45	 
	 	 	Section 12.4
	 	Notification Of Threatened Action	 	 	45	 
	 	 	 
	 	 	 	 	 	 
	Article 13 TERM AND TERMINATION	 	 	45	 
	 	 	Section 13.1
	 	Term.	 	 	45	 
	 	 	Section 13.2
	 	Termination by Either Party	 	 	46	 
	 	 	Section 13.3
	 	Termination by Strata	 	 	46	 
	 	 	Section 13.4
	 	Termination by Micrologix	 	 	47	 
	 	 	Section 13.5
	 	Effect of Termination	 	 	47	 
	 	 	Section 13.6
	 	Remedies	 	 	51	 
	 	 	Section 13.7
	 	License Following Expiration	 	 	51	 
	 	 	 
	 	 	 	 	 	 
	Article 14 DISPUTE RESOLUTION/DAMAGES	 	 	51	 
	 	 	Section 14.1
	 	Disputes	 	 	51	 
	 	 	Section 14.2
	 	Performance to Continue	 	 	52	 
	 	 	Section 14.3
	 	Determination of Patents and Other Intellectual Property	 	 	52	 
	 	 	Section 14.4
	 	Injunctive Relief	 	 	52	 
	 	 	Section 14.5
	 	No Consequential Damages	 	 	53	 
	 	 	Section 14.6
	 	Attorney’s Fees	 	 	53	 

 

- 5 -

	 	 	 	 	 	 	 	 	 
	Article 15 MISCELLANEOUS	 	 	53	 
	 	 	Section 15.1
	 	No Solicitation	 	 	53	 
	 	 	Section 15.2
	 	Assignment; Binding Effect	 	 	53	 
	 	 	Section 15.3
	 	Force Majeure	 	 	54	 
	 	 	Section 15.4
	 	Governing Law	 	 	54	 
	 	 	Section 15.5
	 	Waiver	 	 	54	 
	 	 	Section 15.6
	 	Severability	 	 	54	 
	 	 	Section 15.7
	 	No Right to Use Names	 	 	54	 
	 	 	Section 15.8
	 	Notices	 	 	55	 
	 	 	Section 15.9
	 	Independent Contractors	 	 	55	 
	 	 	Section 15.10
	 	Rules of Construction	 	 	55	 
	 	 	Section 15.11
	 	Entire Agreement; Amendment	 	 	56	 
	 	 	Section 15.12
	 	Counterparts; Facsimile	 	 	56	 
	 	 	Section 15.13
	 	Interpretation	 	 	56	 
	 	 	 
	 	 	 	 	 	 
	Exhibit A      Development Plan	 	 	 	 
	Exhibit B      Patents	 	 	 	 
	Exhibit C      Inventory	 	 	 	 
	Exhibit D      Governmental Approvals	 	 	 	 

 

 

COLLABORATION AND LICENSE AGREEMENT

This Collaboration and License Agreement (this “Agreement”) is made as of July 30, 2004 (the
“Effective Date”) by and between Micrologix Biotech Inc., a British Columbia corporation having its
offices at BC Research Complex, 3650 Wesbrook Mall, Vancouver, BC, Canada V6S 2L2 (“Micrologix”)
and Strata Pharmaceuticals Inc., a corporation having its offices at 10923 Coverhurst Way, San
Diego, California 92130, USA (“Strata”). Micrologix and Strata are sometimes referred to
collectively herein as the “Parties” or singly as a “Party”.

R E C I T A L S

WHEREAS, Micrologix has developed and owns or controls certain proprietary technology, patents,
patent applications, and know-how relating to Micrologix’s proprietary Compound (as defined below);

WHEREAS, on June 2, 2004, the Parties signed a term sheet (the “Term Sheet”), whereby Strata paid
Micrologix the Exclusivity Fee, in exchange for, among other things, Micrologix’s agreement to
negotiate solely and exclusively with Strata with respect to any license to the Compound and the
Micrologix Technology for development and commercialization in the Field in the Territory (as such
terms are defined herein); and

WHEREAS, Micrologix wishes to grant to Strata, and Strata wishes to obtain from Micrologix, an
exclusive license under the Micrologix Technology to use, market, advertise, promote, distribute,
offer for sale, sell, manufacture, have manufactured, export and import, and co-develop with and/or
in addition to Micrologix, the Compound in the Field in the Territory, or have the foregoing done
on its behalf, subject to the terms and conditions set forth herein.

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

ARTICLE 1

DEFINITIONS

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

     Section 1.1 “Acceptance for Filing”

means notification from the FDA indicating receipt of an NDA submission in the United States or
equivalent marketing application pursuant to Applicable Laws in each country in the Territory.

     Section 1.2 “Act”

means the Federal Food Drug and Cosmetic Act (21 U.S.C. Section 301 et seq.) in the United States
and any other comparable, applicable legislation in any other country in the Territory.

 

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     Section 1.3 “Affiliate”

means any company or entity controlled by, controlling or under common control with a Party. As
used in this Section 1.3, “control” means (a) that an entity or company owns, directly or
indirectly, fifty percent (50%) or more of the voting stock of another entity, or (b) that an
entity, person or group has the actual ability to control and direct the management of the entity,
whether by contract or otherwise.

     Section 1.4 “Applicable Law(s)”

means the Act, Regulations and all other applicable laws, rules, regulations and guidelines within
the Territory that apply to the import, export, research and development, manufacture, marketing,
distribution or sale of the Product in the Field in the Territory or the performance of either
Party’s obligations under this Agreement (including disclosure obligations as required by the
United States Securities and Exchange Commission or other comparable exchange or securities
commission having authority over a Party) to the extent applicable and relevant to such Party.

     Section 1.5 “Approval Letter”

means a letter issued by the FDA indicating approval of a product for commercialization, as defined
in 21 CFR § 314.105 in the United States, or equivalent letter issued by the applicable Competent
Authority in any other country in the Territory, pursuant to Applicable Laws in each country in the
Territory.

     Section 1.6 “Books and Records”

means, in whatever media, any and all books and records, documents, reports and accounts in
connection with or relative to: any Reimbursable Costs, any costs Strata or Micrologix is obligated
to reimburse or pay to the other Party under this Agreement; the Development; the Development Plan;
as well as any other books and records as may be required from time to time by Applicable Laws or
this Agreement. Books and Records shall not include any market research and competitive reports,
marketing reports and data.

     Section 1.7 “CFR”

means the United States Code of Federal Regulations in the United States and any other comparable,
applicable code of regulations in any other country in the Territory.

     Section 1.8 “cGMP”

means the current good manufacturing protocols as defined in 21 CFR § 210 and § 211 in the United
States or other comparable, applicable regulations in other countries in the Territory.

     Section 1.9 “Collaboration”

means the activities of the Parties carried out in performance of, and the relationship
between the Parties established by this Agreement.

 

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     Section 1.10 “Commercially Reasonable Efforts”

means, except as otherwise explicitly set forth in this Agreement, those diligent efforts
consistent with the exercise of prudent scientific and business judgment, as applied to products
having comparable market potential and comparable developmental and regulatory risks and challenges
and otherwise in accordance with generally accepted practices in the pharmaceutical industry.
“Comparable market potential” shall be fairly determined based upon relevant factors, including
market size, price, competition, patent rights, product liability issues and general marketing
parameters. Except as expressly set out in this Agreement, “Commercially Reasonable Efforts”, as
applied to development and commercialization efforts, shall be as applied to, and assessed upon,
the Territory taken as a whole, and therefore, Strata shall not be required to:

	 	(a)	 	manufacture, develop, pursue regulatory approval or commercialize the Product
in any particular country or countries in the Territory; or
	 
	 	(b)	 	obtain regulatory approval for all uses of the Product in any particular
country or countries in the Territory;

except as may be required in respect of the Product and uses of the Product when using Commercially
Reasonable Efforts in respect of the Territory taken as a whole. In addition to the foregoing,
during the first [***] immediately following the Effective Date, when assessing whether
Commercially Reasonable Efforts have been applied by a Party to an obligation under this Agreement
other than the obligations set out in Section 2.1(b), in addition to the foregoing considerations,
the Parties shall take into account the efforts that ought to be made by companies of similar size,
financial strength, and stage of corporate development to the Party whose efforts are being
assessed.

     Section 1.11 “Common Shares”

means common shares in the capital of Micrologix.

     Section 1.12 “Competent Authority(ies)”

means collectively the entities in each country in the Territory responsible for: (i) the
regulation of medicinal products intended for human use, including the FDA; or (ii) the
establishment, maintenance and/or protection of rights related to the Micrologix Patent Rights, or
any other successor entities thereto.

     Section 1.13 “Compound”

means omiganan pentahydrochloride.

     Section 1.14 “Confidential Information”

means any and all information (including the Micrologix Technology) of a Party relating to any
trade secret, Reimbursable Costs, Books and Records, process, method, compound, research project,
work in process, future development, scientific, engineering, manufacturing, marketing, sales,
business plan, financial or personnel matter relating to the disclosing Party, its present or
future products, sales, suppliers, customers, employees, investors or business, whether in oral,

 

			
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written, graphic or electronic form. Confidential Information shall not include any information
which the receiving Party can prove by competent evidence:

	 	(a)	 	is now, or hereafter becomes, through no act or failure to act on the part of
the receiving Party, generally known or available;
	 
	 	(b)	 	is known by the receiving Party at the time of receiving such information, as
evidenced by its written records maintained in the ordinary course of business;
	 
	 	(c)	 	is hereafter furnished to the receiving Party by a Third Party, as a matter of
right and without restriction on disclosure;
	 
	 	(d)	 	is independently developed by the receiving Party, as evidenced by its written
records, without knowledge of, and without the aid, application or use of, the
disclosing Party’s Confidential Information; or
	 
	 	(e)	 	is the subject of a written permission to disclose provided by the disclosing
Party.

     Section 1.15 “Control”

means the possession of the ability to grant a license or sublicense as provided for herein without
violating the terms of any agreement or other arrangement with any Third Party, licensee or
sublicensee or the payment of any material licensing fees or royalties to any Third Party, licensee
or sublicensee.

     Section 1.16 “Costs”

means any and all costs, expenses, fees (including attorneys’ fees and costs), charges, monies,
license fees, upfront fees and royalties paid in connection with any proceeding, action, suit or
claim and/or paid to any Third Party.

     Section 1.17 “CRBSI”

means catheter related blood stream infection.

     Section 1.18 “Development”

means work conducted under the Development Plan(s) and as set out in Section 2.3.

     Section 1.19 “Development Plan(s)”

means the detailed plan(s) related to the research and the development (including work to obtain
Governmental Approvals, including Marketing Authorizations), and the budget therefor as amended
from time to time pursuant to which the Parties shall conduct the Development under the terms of
this Agreement. The initial Development Plan is attached hereto as Exhibit “A”.

     Section 1.20 “Development Subcontract”

has the meaning set out in Section 2.1.

 

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     Section 1.21 “DMF”

means drug master file.

     Section 1.22 “Europe”

means the European Union as of the Effective Date, European Union Candidate Countries (namely,
Bulgaria, Croatia, Romania and Turkey), and the following European Countries: Albania, Andorra,
Belarus, Bosnia-Herzegovina, Former Yugoslav Republic of Macedonia, Iceland, Liechtenstein,
Moldova, Monaco, Norway, Russia, San Marino, Serbia & Montenegro, Switzerland, Ukraine, and Vatican
City.

     Section 1.23 “Exclusivity Fee”

means the $200,000 payment made by Strata to Micrologix under the Term Sheet which Micrologix
acknowledges it received in two $100,000 payments, the first on June 3, 2004 and the second on July
6, 2004.

     Section 1.24 “Exclusivity Period”

has the meaning set out in Section 3.7(b).

     Section 1.25 “Extended Field”

has the meaning set out in Section 3.7(a).

     Section 1.26 “FDA”

means the United States Food and Drug Administration in the United States and any other comparable,
applicable administrative agency in any other country in the Territory, or any successor entity
thereto.

     Section 1.27 “Field”

means any or all of the following: (i) the topical administration to a burn site or a surgical
wound site for the treatment or prevention in humans of burn-related or surgery-related infections;
and (ii) the topical administration to a device or the site around the device for the treatment or
prevention in humans of device-related infections, including LCSI and CRBSI. For the avoidance of
doubt, the Field specifically excludes the treatment or prevention of dermatological diseases or
disorders, including acne, psoriasis, rosacea and atopic dermatitis.

     Section 1.28 “First Commercial Sale”

means (a) with respect to a country in the Territory, the first sale for use, consumption or resale
of the Product by Strata, its sublicensees or its Affiliates in such country (excluding any sales
for clinical trials or other non-commercial purposes) and (b) with respect to the Territory, the
First Commercial Sale in any country within the Territory. A sale to a sublicensee or an Affiliate
shall not constitute a First Commercial Sale unless the sublicensee or Affiliate is the end user of
the Product.

 

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     Section 1.29
“First Phase III Study” means the Phase III Study for the Product completed prior to the Effective
Date, namely #226-98-002.

     Section 1.30 “GAAP”

means United States generally accepted accounting principles, as consistently applied in the
Territory.

     Section 1.31 “Good Clinical Practices” or “GCP”

means good clinical practices as defined in 21 CFR § 50 et seq., § 56 et seq., and § 312 et seq. in
the United States or other comparable, applicable regulations in other countries in the Territory.

     Section 1.32 “Governmental Approval(s)”

means any and all permits, licenses and authorizations, including Marketing Authorizations required
by any Competent Authority as a prerequisite to the development, manufacturing, packaging,
marketing and selling of the Product in the Field in the Territory; excluding however import
permits.

     Section 1.33 “IMS Data”

means the data reported from IMS Health Incorporated of Plymouth Meeting, PA, or any successor to
IMS Health Incorporated or any other independent reporting service used by Strata to provide
information related to the marketing of the Product and other pharmaceutical products.

     Section 1.34 “Improvements”

means, subject to Section 3.6, any and all developments, derivative works, enhancements,
modifications, inventions or discoveries relating to the Compound, the Product, for use in the
Field and under the Control of Micrologix or developed, created or acquired by Micrologix at any
time during the Term, whether patentable or not, and shall include, but not be limited to,
developments, inventions or discoveries intended to enhance the safety or efficacy of the Product
and all intellectual property rights related thereto.

     Section 1.35 “IND(s)”

means an investigational new drug application as defined in 21 C.F.R. Section 312 et seq for the
FDA in the United States or equivalent application to the Competent Authorities of other countries
in the Territory, to commence clinical testing of a drug in humans, as defined by the FDA in the
United States, or other applicable Competent Authority, as the same may be amended, supplemented or
replaced from time to time.

     Section 1.36 “Know-How”

means any and all know-how, trade secrets, inventions, data, processes, techniques, procedures,
compositions, devices, methods, formulas, protocols, any and all pre-clinical and clinical data,
and information, whether or not patentable, which are not generally publicly known, including

 

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but
not limited to any and all chemical, biochemical, toxicological, and scientific research
information, whether in written, electronic, graphic or video form or any other form or format.

     Section 1.37 “knowledge” or “best of its knowledge”

means, with respect to each Party, the actual knowledge of the senior officers of such Party,
without the duty of inquiry.

     Section 1.38 “Labelled” or “Labelling”

means any and all labels and other written, printed or graphic matter, including artwork, upon (a)
the Product or any container utilized with the Product; (b) packaging; or (c) the package inserts.

     Section 1.39 “LCSI”

means local catheter site infection.

     Section 1.40 “Major European Market Country”

means France, Germany and United Kingdom.

     Section 1.41 “manufacture(d)” or “manufacturing”

means the storage, handling, assembly, production, processing, Labelling, testing, disposition,
packaging and quality control of raw materials and components and the Product.

     Section 1.42 “Manufacturing Development Costs”

has the meaning set out in Section 5.3(f).

     Section 1.43 “Market Price”

of the Common Shares means the U.S. Dollar Equivalent of the weighted average of the trading prices
of the Common Shares on The Toronto Stock Exchange, for the five consecutive Trading Days ending on
the last Trading Day prior to the Effective Date.

     Section 1.44 “Marketing Authorization”

means all necessary and appropriate regulatory approvals, including NDAs and Pricing and
Reimbursement Approvals, where applicable, to allow the Product to be marketed and sold in the
Field in a particular country in the Territory.

     Section 1.45 “MBI 594AN”

means [***].

 

			
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     Section 1.46 “Micrologix Know-How”

means any and all Know-How related to the Compound or the Product, including research and
development and clinical studies hereunder and other obligations of Micrologix hereunder, and which
is under the Control of Micrologix as of the Effective Date and any and all Improvements thereto,
which is not covered by the Micrologix Patent Rights, but is necessary or useful to the use,
development, manufacture, marketing, promotion, distribution, sale and/or commercialization of the
Product in the Territory for use in the Field.

     Section 1.47 “Micrologix Patent Rights” or “Micrologix Patent”

means any and all Patent Rights that claim Micrologix’s proprietary technology for the Product or
the Compound which is under the Control of Micrologix as of the Effective Date and any and all
Patent Rights covering Improvements thereto, which are necessary or useful to the use, development,
manufacture, marketing, promotion, distribution, sale and/or commercialization of the Product in
the Territory for use in the Field. The Micrologix Patent Rights as of the Effective Date are set
forth on Exhibit “B”. Any Micrologix Patent Rights issued after the Effective Date shall be added
to Exhibit “B”.

     Section 1.48 “Micrologix Technology”

means the Micrologix Patent Rights and the Micrologix Know-How.

     Section 1.49 “NDA”

means a New Drug Application, and all amendments and supplements thereto, for regulatory approval
by the FDA as defined in 21 CFR § 314.50 et seq., as such act or regulations may be amended,
supplemented or replaced from time to time, to commence commercial sale of the Product in the
United States and any other comparable term and act as applicable with regard to a new drug
application and all amendments, supplements or replacements to such act or regulations in any other
country in the Territory.

     Section 1.50 “Negotiation Period”

has the meaning set out in Section 3.7(c).

     Section 1.51 “Net Sales”

means collectively, the gross amount invoiced by Strata, its sublicensees, or its
Affiliates for sales of the Product to a Third Party (excluding sales among Strata and
a sublicensee or Affiliate of Strata for resale, but including the subsequent final
sales to Third Parties by such sublicensees or Affiliates), less the following as they
pertain to the Product:

 

 

(a) any and all normal and customary trade and quantity discounts and customary
allowances actually granted to purchasers of the Product for returns or credits,
recalls (whether in the form of a credit or free replacement actually given in place
of a returned or recalled Product), allowances to end users, which are reasonable
and customary in accordance with generally accepted practices in the pharmaceutical
industry (whether in the form of a credit or free Product), taxes (the legal
incidence of which is on the purchaser and is shown separately on a Party’s
invoices) and transportation, insurance and postage charges (if billed on a Party’s
invoices as a separate item), and payments and rebates (including Medicaid rebates
given pursuant to an agreement with U.S. Department of Health and Human Services and
other rebates given pursuant to a government based rebate program, including local
and state rebate programs), accrued, paid or deducted pursuant to agreements
(including managed care agreements and group purchasing agreements) or Applicable
Laws, chargebacks and reporting rebates paid to wholesalers and other distributors.

(b) Excise and value added taxes applicable to sales of the Product in finished
package from which a Party has to pay or absorb on such sales.

The Product shall be considered “sold” when billed out or invoiced.

No deductions shall be made from Net Sales for items (a) and (b) above except to the extent of
amounts for such items actually granted or paid with respect to the Product; provided that a Party
may reconcile all such amounts within a given calendar quarter regardless of when such amounts were
actually granted or paid.

No deductions shall be made from Net Sales for commissions paid to individuals whether they are
with independent sales agencies or are regularly employed by a Party or its Affiliates or
sublicensees and are on its or their payroll, or for the cost of collections.

Components of Net Sales shall be determined in the ordinary course of business using the accrual
method of accounting in accordance with GAAP, provided that a Party may reconcile all such amounts
within a given calendar quarter regardless of when such amounts were actually granted or paid.

In the event a Party transfers Product to a Third Party in a bona fide arm’s length transaction,
for consideration, in whole or in part, other than cash or to a Third Party in other than a bona
fide arm’s length transaction, the Net Sales price for such Product shall be deemed to be the
standard invoice price then being invoiced by a Party in an arm’s length transaction with similar
customers.

Notwithstanding anything herein to the contrary, the transfer of a Product to a Third Party without
consideration to Strata in connection with the development or testing of a Product shall not be
considered a sale of a Product under this Agreement.

     Section 1.52 “Notification Period”

has the meaning set out in Section 3.7(c).

 

- 2 -

     Section 1.53 “packaging”

means any and all containers, cartons, shipping cases, inserts, package inserts or other similar
material used in packaging or accompanying the Product.

     Section 1.54 “Patent Rights”

means any and all rights under patents and patent applications, and any and all patents issuing
therefrom (including utility, model and design patents and certificates of invention), together
with any and all substitutions, extensions (including supplemental protection certificates),
registrations, confirmations, reissues, divisionals, continuations, continuations-in-part,
re-examinations, renewals, and foreign counterparts of the foregoing and all supplements and
modifications thereto.

     Section 1.55 “Phase III Study”

means that portion of the clinical development program that provides for human clinical trials,
performed after preliminary evidence suggesting dose and effectiveness of a Product has been
obtained, which is intended to gather the additional information about the effectiveness and safety
that is needed to evaluate the overall benefit-risk relationship of the Product and to provide
adequate basis for labelling, performed in accordance with the U.S.A. Federal Food, Drug and
Cosmetic Act and applicable regulations promulgated thereunder (including 21 CFR Part 312), as
amended from time to time.

     Section 1.56 “Phase IV Study”

means, as applicable, a study or program, designed to: (a) obtain additional safety or efficacy
data in support of the Product; or (b) determine effectiveness for additional labelled indications,
in either case commenced after Governmental Approval of the Product in the subject country in the
Territory.

     Section 1.57 “Post Marketing Commitments”

means any post-approval commitments required by the FDA in the United States or any other Competent
Authority in any other country in the Territory.

     Section 1.58 “Pricing and Reimbursement Approvals”

means any pricing and reimbursement approvals which must be obtained before placing the Product on
the market in the Field in any country in the Territory in which such approval is required.

     Section 1.59 “Prime Rate of Interest”

means the prime rate of interest published from time to time in The Wall Street Journal as the
prime rate; provided, however that if The Wall Street Journal does not publish the Prime Rate of
Interest, then the term “Prime Rate of Interest” shall mean the rate of interest publicly announced
by Bank of America, N.A., as its prime rate, base rate, reference rate or the equivalent of such
rate, whether or not such bank makes loans to customers at, above, or below said rate.

 

- 3 -

     Section 1.60 “Product”

means any and all pharmaceutical formulations containing any and all concentrations, sizes of
volume, configurations and combinations of the Compound.

     Section 1.61 “Promotional Material(s)”

has the meaning set out in Section 6.6(a).

     Section 1.62 “raw materials and components”

means any and all raw materials and components (such as bulk drug, chemicals, containers, closures,
packaging, Labelling, etc.) needed to manufacture the Product.

     Section 1.63 “Regulations”

means regulations, statutes, rules, guidelines and procedures promulgated by the FDA or other
Competent Authority pursuant to the Act or other Applicable Laws, including current Good Clinical
Practices, current Good Manufacturing Practices, as well as those regulations currently contained
in Title 21 of the CFR.

     Section 1.64 “Reimbursable Costs” means the fees and costs owed by Strata pursuant to Section 2.5. Reimbursable
Costs do not include [***]. Marketing Authorizations will be paid for by Strata in accordance with
Section 2.3(c).

     Section 1.65 “Representatives”

means, in respect of a Party, its Affiliates, licensees, sublicensees, and their respective
employees, agents, consultants, Subcontractors, and other representatives.

     Section 1.66 “Royalty Term”

means the period of time commencing on the First Commercial Sale of the Product in a particular
country in the Territory and ending on the expiration of the last to expire of the Micrologix
Patent Rights containing Valid Claims covering such Product in such country in the Territory;
provided, however, that with respect to a country in the Territory in which a Micrologix Patent has
not been issued at the time of the First Commercial Sale in that country, the Royalty Term shall
commence on the First Commercial Sale in such country and continue for the greater of (i) the
period in which a Valid Claim covering such Product exists in the United States; or (ii) if a
Micrologix Patent is subsequently issued in such country, for the period of time in which a Valid
Claim covering such Product exists in such country. The Royalty Term shall apply on a
country-by-country basis. Notwithstanding anything to the contrary provided in this Section 1.66,
if no Valid Claim covering such Product exists in a given country in the Territory,
then the Royalty Term in such country shall be for a period of ten (10) years from the date of the
First Commercial Sale in that country.

 

			
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     Section 1.67 “Second Phase III Study”

means a Phase III Study to support a Marketing Authorization for a LCSI, and if reasonably prudent
to pursue same, for CRBSI.

     Section 1.68 “Subcontractors”

means Third Parties engaged to perform obligations of the Parties as permitted by this Agreement.

     Section 1.69 “Territory”

means North America (including the United States, Canada and Mexico) and Europe, and as may be
expanded or reduced pursuant to the terms of this Agreement.

     Section 1.70 “Third Party”

means any entity, other than Micrologix or Strata.

     Section 1.71 “Trading Day”

means any day on which the Toronto Stock Exchange is open for business.

     Section 1.72 “U.S.” or the “United States”

means the 50 states of the United States of America, its territories or possessions, and the
District of Columbia and Puerto Rico.

     Section 1.73 “U.S. Dollar Equivalent”

means the equivalent amount of U.S. dollars calculated from Canadian currency using the Bank of
Canada noon rate for such conversion as reported on the Bank of Canada’s website on the business
day prior to the applicable date.

     Section 1.74 “U.S. PTO”

means the Unites States Patent and Trademark Office or any successor entity thereto.

     Section 1.75 “Valid Claim”

means a claim of an issued and unexpired Micrologix Patent that, with respect to a specific country
in the Territory: (i) has not been revoked, declared unenforceable or unpatentable, or held invalid
by a court or other governmental agency of competent jurisdiction that is unappealable or
unappealed within the time allowed for appeal, (ii) has not been admitted to be rendered invalid or
unenforceable through reissue, disclaimer or otherwise, and (iii) has not been finally cancelled,
withdrawn, abandoned, allowed to lapse, or rejected by any governmental agency of competent
jurisdiction.

 

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ARTICLE 2

PRODUCT DEVELOPMENT

     Section 2.1 Objectives.

	 	(a)	 	Pursuant to the Development Plan(s) and under the oversight of the JDMC,
Strata, (along with the collaboration and assistance of Micrologix as described in any
applicable development subcontract (“Development Subcontract”)), shall use Commercially
Reasonable Efforts to obtain Marketing Authorizations for the Product in the Field in
the Territory.
	 
	 	(b)	 	Strata shall use Commercially Reasonable Efforts:

	 	(i)	 	to submit a protocol and request a special protocol assessment
for the Second Phase III Study in the US, in sufficient time to obtain feedback
from the FDA, on or before the end of the [***]; and
	 
	 	(ii)	 	within [***] after receiving satisfactory feedback from the FDA
on such protocol, provided that Strata has secured an adequate supply of
Product ready for use in human trials, enrol a patient in the Second Phase III
Study;
	 
	 	(iii)	 	within [***] after filing an NDA in the US, provided that no
Competent Authority in Europe requires an additional phase III clinical study
in order to file a common technical document in Europe, file a common technical
document in Europe.

	 	(c)	 	After receiving satisfactory feedback from the FDA on the protocol referred to
in Section 2.1(b)(ii), Strata shall use Commercially Reasonable Efforts to conduct a
financing with proceeds to Strata sufficient to obtain, at a minimum, data from the
LCSI endpoint from the Second Phase III Study.
	 
	 	(d)	 	In addition, in its absolute discretion, Strata may file an NDA and seek
Marketing Authorization for CRBSI based on [***].
	 
	 	(e)	 	Strata shall use Commercially Reasonable Efforts to market and sell the Product
as contemplated hereunder.

     Section 2.2 Collaboration Guidelines; Amendments to the Development Plan(s).

	 	(a)	 	In all matters related to the Collaboration, the Parties shall strive to
balance as best they can the legitimate interests and concerns of the Parties and to
realize the economic potential of the Product.
	 
	 	(b)	 	Any Development Plan may only be modified by the JDMC. The Development Plan(s)
and any modifications thereto, as each may be approved by the JDMC in

 

			
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	 	 	 	accordance with this Section 2.2(b), shall be incorporated into this Agreement as
though fully set forth herein and without requiring formal or additional amendment
to this Agreement.

     Section 2.3 Development.

	 	(a)	 	Strata shall have responsibility for the Development under the oversight and
based on the Development Plan, including a timeline, as approved by the JDMC. In
addition to any other responsibilities as may be provided in the Development Plan(s),
Strata shall:

	 	(i)	 	use Commercially Reasonable Efforts to develop the Product in
accordance with the Development Plan(s) and as otherwise in accordance with the
terms and conditions of this Agreement;
	 
	 	(ii)	 	use Commercially Reasonable Efforts to secure the Marketing
Authorizations, in accordance with the Development Plan(s) and/or otherwise in
accordance with Article 6;
	 
	 	(iii)	 	promptly advise Micrologix of any issues of which Strata
becomes aware that materially and adversely affect Strata’s ability to develop
the Product or meet the timelines on the critical path set out in the
Development Plan(s);
	 
	 	(iv)	 	use Commercially Reasonable Efforts to manufacture or have
manufactured the Compound and the Product to supply the Product to carry out
the Development Plan(s).

	 	(b)	 	Strata may from time to time and where appropriate, engage Micrologix to
perform regulatory, clinical and other development work pursuant to a Development
Subcontract consistent with the provisions of this Article 2.
	 
	 	(c)	 	Strata shall pay one hundred percent (100%) of the Reimbursable Costs incurred
by Micrologix, including those arising under Section 2.5. Micrologix shall invoice
Strata for such Reimbursable Costs on a quarterly basis within forty-five (45) days
after the end of each calendar quarter and such invoices shall be accompanied by the
appropriate documentation, including a listing of expenditures, in reasonably specific
detail. Strata shall pay such invoices within thirty (30) days after receipt of the
invoice. Micrologix shall keep Books and Records as necessary to document the inclusion
of the out-of-pocket and internal costs within the Reimbursable Costs including time
sheets, invoices, etc. Pursuant to Section 11.4, Strata has the right to inspect such
Books and Records upon request and during normal business hours, and Micrologix shall
provide copies of such Books and Records to Strata.
	 
	 	(d)	 	Notwithstanding anything to the contrary contained in this Agreement, if the
Second Phase III Study is commenced, Strata shall not terminate such study except on
notice to Micrologix:

 

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	 	(i)	 	at any time within [***] after
Strata’s receipt of any interim results or the executive summary following
database lock of the LCSI endpoint;
	 
	 	(ii)	 	if Strata elects to continue such study by enrolling patients
thereafter, at any time within [***] after Strata’s receipt of any subsequent
interim results or the executive summary following database lock of the CRBSI
endpoint;

	 	 	 	unless Strata terminates this Agreement for Micrologix’s breach pursuant to Section
13.2.

     Section 2.4 Joint Development Management Committee.

	 	(a)	 	Creation of JDMC; Scope. Within ten (10) days after the Effective Date, the
Parties will form a Joint Development Management Committee (“JDMC”), which shall
oversee, review and coordinate the Development under the Development Plan(s) and
otherwise under the terms and conditions of this Agreement. The JDMC may delegate
certain responsibilities to the Parties. The JDMC shall be responsible for (i)
coordinating the Parties’ respective duties and efforts under this Article 2; (ii)
overseeing the Development, including responsibility for all regulatory strategies
involving Marketing Authorizations, meetings with the FDA and other Competent
Authorities, review of draft submissions to the FDA and other Competent Authorities, as
well as shelf-life and other manufacturing issues; (iii) making all decisions related
to development, clinical trials and budgets in connection with the Development and the
Development Plan(s); (iv) managing the Development conducted under the Development
Plan(s); (v) coordinating the Parties’ respective obligations under Section 2.3(a) and
Section 2.3(b); (vi) managing the manufacturing development for the Compound referred
to in Section 5.3(a)(i)(C); (vii) monitoring the progress and results of such work, all
based on the principles of prompt, diligent and commercially reasonable development of
the Product consistent with generally accepted practices in the pharmaceutical
industry; and (viii) performing any Post Marketing Commitments. Any changes to any
Development Plan shall be approved in advance by the JDMC. Notwithstanding the
foregoing and anything to the contrary in this Agreement, the JDMC shall have a
consulting role only in regard to, and no right to vote upon, any matters relating to
burns and surgical infections indications for the Product. The JDMC shall not have any
responsibilities in connection with: (i) any Phase IV Study; (ii) any commercialization
or marketing activities in connection with the Product; or (iii) subject to Section
2.4(a)(vi), any manufacturing of commercial supplies of the Compound or the Product.
Subject to the obligations to make Commercially Reasonable Efforts set out in Section
2.1 and Section 2.3 of this Agreement: (i) any such commercialization, marketing and
manufacturing activities shall be the sole right and responsibility of Strata; and (ii)
any Phase IV Study(ies) shall be the sole right and responsibility, but not obligation,
of Strata.

 

			
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	 	(b)	 	Membership. The JDMC shall be comprised of three (3) voting representatives of
each of Micrologix and Strata. Each Party may change its representatives on the JDMC
at any time upon written notice to the other Party. Strata shall select one (1) member
of the JDMC to act as the chairperson of the JDMC and Micrologix shall select one
member of the JDMC to act as the secretary of the JDMC.
	 
	 	(c)	 	Meetings of the JDMC. The JDMC shall meet on a quarterly basis or at such
other frequency and at such time (and place, as applicable) as agreed to by the members
of the JDMC or upon the reasonable request of either Party. Such meetings may be
conducted in person or via teleconference. The JDMC Secretary will be responsible for
calling meetings, preparing and circulating an agenda in advance of each meeting, and
preparing and issuing minutes of each meeting within thirty (30) days thereafter. Any
such agenda or minutes shall be approved by the other Party in advance of any issuance.
A reasonable number of additional representatives of a Party may attend meetings of
the JDMC in a non-voting observer capacity.
	 
	 	(d)	 	Decisions of the JDMC. A quorum of the JDMC shall be deemed to be present at
any meeting of the JDMC if at least two (2) JDMC members or their designees of each
Party are present at such meeting in person or by telephone. If a quorum exists at any
meeting, a majority vote of the members of the JDMC present at such meeting is required
to take any action on behalf of the JDMC. In the event that any vote within the JDMC
results in a tie, Strata shall have the tie-breaking vote, which shall be exercised in
good faith, and make the final determination. Such final determination shall be
binding upon the Parties.
	 
	 	(e)	 	Limitation of Powers. The JDMC shall not have the right to amend or interpret
this Agreement. Issues regarding the interpretation of this Agreement shall be
referred to the respective Chief Executive Officers of each Party, or their designees
(who must be members of a Party’s senior management), as provided in Section 14.1. The
actions or decisions of the JDMC shall not substitute for either Party’s ability to
exercise any right set forth herein or excuse the performance of any obligation set
forth herein.
	 
	 	(f)	 	Liaisons. Each Party will designate an individual to serve as the liaison
between the Parties to undertake and coordinate any day-to-day communications as may be
required between the Parties relating to their respective activities under this
Agreement. Each Party may change such liaison from time to time during the Term upon
written notice thereof to the other Party.

     Section 2.5 Technology Transfer.

	 	(a)	 	Micrologix shall, upon Strata’s request, transfer to or make available to
Strata the then most-current version of all relevant Micrologix Know-How to enable
Strata’s reasonably capable personnel to understand such Micrologix Know-How as
reasonably necessary to undertake the manufacture, development and commercialization of
the Compound and generally any Product in the Field under this Agreement. Such transfer
shall include:

 

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	 	(i)	 	transfer of the results of the clinical trials conducted prior
to and as of the Effective Date relating to the Product to Strata (including
all regulatory information, clinical data, hard-copy CRFs and reports together
with any patient samples (such as blood samples, microbiology samples, and
tissue samples), if available, without regard to the condition of such
samples);
	 
	 	(ii)	 	transfer of any communications with the FDA and the minutes of
any meetings with the FDA relating to the Product to Strata;
	 
	 	(iii)	 	transfer of the data and results of any CMC related activities
incident to Section 2.5(a)(i) and Section 2.5(a)(ii);
	 
	 	(iv)	 	coordination of communication between Strata and the clinical
trial groups that conducted the clinical trials referred to in Section
2.5(a)(i) prior to and as of the Effective Date; and
	 
	 	(v)	 	providing Strata reasonable access to Micrologix personnel with
relevant clinical and regulatory expertise to explain the information
transferred pursuant to Section 2.5(a)(i), Section 2.5(a)(ii) and Section
2.5(a)(iii).

	 	(b)	 	Micrologix shall update the Micrologix Know-How related to the Compound and
Products previously transferred to Strata regularly at JDMC meetings.
	 
	 	(c)	 	Micrologix shall work cooperatively with and provide reasonable assistance to
Strata upon Strata’s request, under the oversight of the JDMC, to prepare the first NDA
filing in the United States pursuant to a Development Subcontract.
	 
	 	(d)	 	Strata shall pay for the maintenance by Micrologix of the certain Governmental
Approvals in connection with the research and development of the Product pursuant to
Section 6.7(b) and the services of Micrologix personnel provided pursuant to this
Section 2.5, as follows:

	 	(i)	 	For the first three months from the Effective Date, Strata
shall pay to Micrologix Micrologix’s documented out-of-pocket costs of
providing such services.
	 
	 	(ii)	 	Commencing after the expiry of three months from the Effective
Date, Strata shall pay to Micrologix the hourly rate of [***] ($[***]) per hour, plus the documented out-of-pocket costs of
providing such services.
	 
	 	(iii)	 	Strata is responsible for, and will pay all reasonable,
documented, actual travel and associated accommodation expenses of Micrologix
personnel who, at Strata’s request, travels to provide transition support under
this Section.

 

			
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ARTICLE 3

LICENSE

     Section 3.1 License Terms.

Subject to the terms and conditions of this Agreement, Micrologix hereby grants to Strata an
exclusive, royalty-bearing license under the Micrologix Technology to use, market, advertise,
promote, distribute, offer for sale, sell, make, manufacture, have manufactured, export and import,
and develop the Product in the Territory for use in the Field with the right to sublicense (as
provided in Section 3.5), and/or assign (as provided Section 15.2) the foregoing.

     Section 3.2 Micrologix’s Reservation of Rights.

Except as otherwise licensed to Strata hereunder and subject to Section 11.1, Micrologix may
exploit the Micrologix Technology for any purpose, including to use, develop, market, advertise,
promote, distribute, offer for sale, make, manufacture, sell, export and import the Product:

	 	(a)	 	outside the Territory; and
	 
	 	(b)	 	inside the Territory but outside the Field.

     Section 3.3 Third Party Licensees of Micrologix.

In the event that Micrologix or a licensee of Micrologix develops and/or markets a Product outside
the Territory but inside the Field, Micrologix shall use Commercially Reasonable Efforts to work
cooperatively with Strata to coordinate the development and marketing activities of Micrologix or
such licensee of Micrologix with the development and marketing activities hereunder.

     Section 3.4 Work Product and Intellectual Property.

	 	(a)	 	Strata acknowledges that it shall have no right, title or interest in or to the
Micrologix Technology except as set forth in this Agreement. Nothing in this Agreement
shall be construed to grant Strata any rights or license to any intellectual property
of Micrologix other than as expressly set forth in this Agreement.
	 
	 	(b)	 	Except as set forth in Section 5.2 and the termination Sections of this
Agreement

	 	(i)	 	Micrologix acknowledges that it shall have no right, title or
interest in or to any data, inventions, discoveries, improvements, derivative
works, and/or any other work product, whether patentable or not, developed
hereunder by Strata or on behalf of Strata by its Representatives (“Strata Work
Product”).
	 
	 	(ii)	 	Nothing herein shall be construed to grant Micrologix any
rights or license to the Strata Work Product or any other intellectual property
of Strata (collectively, “Strata Intellectual Property”). Strata reserves all
rights in and to any such Strata Work Product and the Strata Intellectual
Property.

 

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     Section 3.5 Sublicenses.

	 	(a)	 	Strata shall have the right to sublicense rights granted in Section 3.1 to its
Affiliates. Strata shall cause its Affiliates to comply with and be bound by those
terms and conditions of Strata under this Agreement that by their terms are intended to
obligate Strata or its Affiliates commercializing the Product as permitted hereunder,
including Section 3.4, Section 3.5, Article 5, Article 6, Article 7, Article 8, Article
9, Article 10, Article 11 (excluding however Section 11.1), Article 12 and Section
14.5. Notwithstanding the foregoing, Strata shall remain primarily responsible for
complying with such applicable terms and conditions. A breach by any such Affiliate of
any such obligation shall constitute a breach by Strata of this Agreement and shall
entitle Micrologix to exercise its rights hereunder, in addition to any other rights
and remedies to which Micrologix may be entitled.
	 
	 	(b)	 	Strata shall also have the right to sublicense rights granted in Section 3.1 to
Third Parties, subject to the following: Strata shall give Micrologix prompt notice of
the execution of any sublicense. Within ten (10) calendar days after execution of a
sublicensing agreement, Strata shall provide Micrologix with a copy thereof (provided
that Strata shall be permitted to redact the financial terms and other confidential
information in such agreement). Each sublicense shall contain covenants by the
sublicensee for such sublicensee to observe and perform materially the same terms and
conditions as those set out for Strata in this Agreement to the extent applicable. In
the event Strata grants sublicenses to others to sell Product, such sublicenses shall
include an obligation for the sublicensee to account for and report its Net Sales on
the same basis as if such sales were Net Sales by Strata, and Micrologix shall receive
royalties from Strata in the same amounts as if the Net Sales of the sublicensee were
Net Sales of Strata. In the event that Strata becomes aware of a material breach of
any such sublicense by the sublicensee, Strata shall promptly notify Micrologix of the
particulars of same and use its Commercially Reasonable Efforts to enforce the terms of
such sublicense. Upon the request of Micrologix, Strata shall act reasonably in
considering any request of Micrologix for Strata to terminate such sublicense for
cause, but Strata shall have the final and sole right and responsibility and decision
making authority with respect to any such sublicense (provided that Strata acts
reasonably in such regard).
	 
	 	(c)	 	The terms of this Section 3.5 shall apply to each subsequent sublicensee or
sub-sublicensee, as if same were Strata’s original sublicensee.
	 
	 	(d)	 	Micrologix will, upon request by any sublicensee of Strata, provide such
sublicensee with a letter whereby Micrologix agrees that if Micrologix gives notice of
default to Strata pursuant to Section 13.2 or Section 13.4, then, prior to any
termination of this Agreement, Micrologix will give such sublicensee written notice of
such default or intention to terminate this Agreement, and in the event of any breach
or default by Strata, which may be cured pursuant to Section 13.2 or Section 13.4, will
for 60 days from the date of such notice to the sublicensee, give the sublicensee the
opportunity to cure such default or breach on the terms provided in Section 13.2 or
Section 13.4, mutatis mutandis. Further, such letter

 

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	 	 	 	shall evidence Micrologix’s agreement that if this Agreement is terminated, and
provided that the sublicense between Strata and the sublicensee is in good standing
at such time, Micrologix will then grant to the sublicensee a license of the same
rights conferred on the sublicensee by the sublicense agreement on substantially
those same terms and conditions as are contained in this Agreement as would
correspond to the sublicense rights granted in the sublicense agreement, on the
financial terms set out in the relevant sublicense agreement.

     Section 3.6 Certain Improvements.

	 	(a)	 	When Micrologix enters into any agreement or other arrangement with a Third
Party or licensee or sublicensee that may result in the development, creation or
acquisition by Micrologix of any developments, derivative works, enhancements,
modifications, inventions or discoveries relating to the Compound or the Product for
use in the Field (collectively, “Certain Improvements”), Micrologix will use
Commercially Reasonable Efforts not to limit or otherwise restrict Micrologix’s ability
to grant a license or sublicense to any such Certain Improvements as provided for
herein without violating the terms of any such agreement or other arrangement.
	 
	 	(b)	 	If Micrologix develops, creates or acquires any developments, derivative works,
enhancements, modifications, inventions or discoveries relating to the Compound or the
Product for use in the Field, where the grant of a license or sublicense to same as
provided for herein requires the payment of material licensing fees or royalties to any
Third Party, licensee or sublicensee, then Micrologix shall in a timely fashion offer
to Strata in writing a license or sublicense to the rights to such developments,
derivative works, enhancements, modifications, inventions or discoveries. Within a
reasonable period of time (but not to exceed [***] after receipt of
Micrologix’s offer), Strata shall either accept the license or sublicense of same and
pay to Micrologix the amount of such material licensing fees or royalties owed by
Micrologix to such Third Party due to Strata’s activities under such license or
sublicense, or advise Micrologix that Strata does not wish to obtain such rights.

     (c) In the event that:

	 	(i)	 	Micrologix, using Commercially Reasonable Efforts, fails to
obtain the ability to grant a license or sublicense as provided for in Section
3.6(a) without violating the terms of any such agreement or other arrangement,
then the rights to any such Certain Improvements shall be excluded from the
definition of Improvements under this Agreement; or
	 
	 	(ii)	 	Strata advises Micrologix that Strata does not wish to obtain
the rights referred to in Section 3.6(b), or if Strata fails to notify
Micrologix within a reasonable period of time (not to exceed [***] as noted
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	 	 	 	accepts such license or sublicense, then such rights shall be excluded from
the definition of Improvements under this Agreement; or
	 
	 	(iii)	 	Strata advises Micrologix that Strata does wish to obtain the
rights referred to in Section 3.6(b) within a reasonable period of time (not to
exceed [***] as noted above) and pays such licensing fees or royalties, then
such rights shall be included in the definition of Improvements under this
Agreement without further formality.

     Section 3.7
Exclusive Option to Extend Field.

	 	(a)	 	Subject to the terms and conditions of this Section, Micrologix hereby grants
to Strata the right of first negotiation to obtain an exclusive license under the
Micrologix Technology to use, market, advertise, promote, distribute, offer for sale,
sell, make, manufacture, have manufactured, export and import, and develop the Product
to reduce or eliminate the nasal carriage of infectious organisms (the “Extended
Field”) in the Territory.
	 
	 	(b)	 	From the Effective Date and for a period of [***] thereafter (the “Exclusivity
Period”), Micrologix shall notify Strata in writing prior to any:

	 	(i)	 	use, marketing, advertising, promotion, distribution, offer for
sale, sale, making, manufacturing, having manufactured, exporting, importing or
developing the Product or the Compound for the Extended Field in all or any
part of the Territory for itself or through its Affiliates, or
	 
	 	(ii)	 	grant to any Third Party any rights to do any of the foregoing.

	 	(c)	 	Strata shall have a period of [***] from its receipt of a notice
described in Section 3.7(b) (the “Notification Period”) to notify Micrologix in writing
if Strata is interested in obtaining such license for the Extended Field for such
territory. If, by the end of the Notification Period, Micrologix receives written
notice from Strata that it desires to obtain such a license, then Micrologix and Strata
for a period of [***] or such longer period of time as mutually agreed to by the
Parties in writing (the “Negotiation Period”) shall negotiate in good faith, on an
exclusive basis, a definitive license agreement(s) for an exclusive license to the
Extended Field upon such terms and conditions as are mutually agreeable to the Parties.
	 
	 	(d)	 	If the Parties fail to execute such definitive license agreement(s) as
described in Section 3.7(c), by the end of the Negotiation Period or if Strata fails to
give notice of its interest in obtaining a license to the Extended Field before the
expiry of the Notification Period, then Strata’s right of first negotiation with
respect to the Extended Field shall terminate; provided, however, that if Micrologix
disposes of rights to the Micrologix Technology for the Extended Field to a Third Party
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to the end of the Exclusivity Period, then the financial terms of such transaction
shall not be substantially less favorable to Micrologix in the aggregate than the
best terms offered to Strata by Micrologix in writing during the Negotiation Period.
If, prior to the end of the Exclusivity Period, Micrologix desires to offer a Third
Party rights to the Extended Field on financial terms substantially less favorable
to Micrologix in the aggregate than the best terms offered to Strata by Micrologix
in writing during the Negotiation Period, then Micrologix shall first offer such
terms to Strata, and if within [***] of such offer, Strata informs Micrologix that
it is prepared to enter into an agreement with Micrologix in accordance with such
terms, Micrologix shall conclude such agreement with Strata upon such terms. If no
such statement is made by Strata within said [***], Micrologix shall be free to
enter into an agreement in accordance with such terms with a Third Party.

ARTICLE 4

ADDITIONAL PAYMENTS

     Section 4.1 License Fee.

	 	(a)	 	Upfront Payment to Micrologix. In partial consideration for the licenses
granted under Section 3.1, Strata shall pay to Micrologix a one-time, non-refundable
license fee equal to One and One Half Million Dollars ($1,500,000) one business day
after the Effective Date by wire transfer of immediately available funds to an account
designated in writing by Micrologix to Strata prior to the Effective Date (the “Upfront
Fee”). Strata may deduct the Exclusivity Fee from the Upfront Fee.
	 
	 	(b)	 	Upfront Equity Investment in Micrologix. Strata shall purchase from Micrologix
on the Effective Date such number of Common Shares as equals Five Hundred Thousand
Dollars ($500,000), based on the Market Price plus a [***] ([***])
premium, and as issued pursuant to a separate stock purchase agreement.

     Section 4.2 Product Milestone Payments.

Strata shall pay to Micrologix, as licensing fees, the following non-refundable milestone payments
as follows:

	 	(a)	 	for milestones referred to in Section 4.3 and Section 4.4,

	 	(i)	 	if Strata can make the payment respecting such milestone within
45 days of the date on which Strata receives a copy of the applicable letter or
notice from the FDA in the U.S. or from a foreign equivalent in the Territory,
Strata shall pay to Micrologix such milestone within [***] of achieving such
milestone;

 

			
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	 	(ii)	 	if Strata cannot make the payment respecting such milestone
within [***] of the date on which Strata receives a copy of the applicable
letter or notice from the FDA in the U.S. or from a foreign equivalent in the
Territory, Strata shall:

	 	(A)	 	within [***] of achieving such milestone,
notify Micrologix in writing that it cannot make the payment respecting
such milestone; and
	 
	 	(B)	 	provided that Micrologix receives such notice
within the period for the receipt of same, Strata shall pay to
Micrologix such milestone within [***] of achieving such milestone,
[***].

	 	(b)	 	for milestones referred to in Section 4.5, [***] after Strata receives a copy
of the applicable letter or notice from the FDA in the U.S. or from a foreign
equivalent in the Territory.

     Section 4.3 Milestones for a Second Phase III.

For NDA Filings and Marketing Authorizations for either LCSI or CRBSI based upon a second Phase III
trial, the following milestones shall apply:

[***]

     Section 4.4 Milestones for the First Phase III.

For an NDA Filing and Marketing Authorization for CRBSI based upon the First Phase III Study, the
following milestones shall apply; provided however that notwithstanding anything in this Agreement
to the contrary, the milestone for receipt of [***] in the United States in this Section 4.4 shall
only be payable when the milestone for [***] in the United States in this Section 4.4 becomes
payable:

[***]

The CRBSI milestones set forth in Section 4.3 and Section 4.4 regarding the CRBSI indication in the
United States are alternative milestones and as such only one milestone shall be due and payable
for [***] and [***], as applicable, under Section 4.3 and Section 4.4, but not both.

     Section 4.5 Burns or Surgical Infections milestones.

For Marketing Authorizations for burns or surgical infection indications, the following milestones
shall apply:

[***]

 

			
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     Section 4.6 Commercial Milestone Payments.

Strata shall pay to Micrologix, as additional licensing fees, the following one-time,
non-refundable milestone payments within [***] following the end of the calendar quarter in which the
relevant commercial milestone is achieved.

[***]

     Section 4.7 Royalties.

	 	(a)	 	Royalty Payment. During the Royalty Term, Strata shall owe and pay to
Micrologix the following royalties on Net Sales:

	 	(i)	 	[***]% of Net Sales, on aggregate Net Sales in each calendar
year which does not exceed [***] ($[***]);
	 
	 	(ii)	 	[***]% of Net Sales, on aggregate Net Sales in each calendar
year which is greater than [***] ($[***]) but does not exceed [***] ($[***]);
and
	 
	 	(iii)	 	[***]% of Net Sales, on aggregate Net Sales in each calendar
year which is greater than [***]($[***]).

	 	(b)	 	Reductions in Royalty Rates. Strata’s royalty obligation under Section 4.7(a)
shall be [***] in the manner herein described:

	 	(i)	 	In the event (and for the period that) a non-proprietary
version or versions of the Product enters the market in a country in the
Territory in any calendar quarter during the Term, [***]. For the purposes of
this Section, “non-proprietary” means a product containing the amino acid
sequence [***] for use in the Field which does not infringe a Valid Claim. The
[***] shall be effective beginning on the first calendar quarter of the launch
of such generic product. The royalty rate shall be adjusted quarterly and
shall be reconciled quarterly at such time as the applicable IMS Data has been
made available to Strata.
	 
	 	(ii)	 	Any such [***] in Section 4.7(b)(i) shall be credited against
the next payment(s) owed Micrologix. [***].

	 	(c)	 	Certain Recoveries. If Micrologix owes Strata Micrologix’s share of the Costs
pursuant to Section 7.3, Section 7.4 or Section 10.4, Strata shall recover such amounts
[***]. The Parties acknowledge and agree that the maximum amount of
any such [***] in accordance with Section 7.3, Section 7.4 and Section 10.4 from any
royalty payments due Micrologix hereunder in a given quarter shall not exceed [***] of
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	 	 	 	amounts in excess of [***] for any quarter(s) shall be [***] against subsequent
quarterly royalty payments owed to Micrologix, subject to the [***] limitation for
any such subsequent quarter, [***].
	 
	 	(d)	 	After Royalty Term. After the expiration of the Royalty Term in any relevant
country, Strata shall have no further obligation to pay royalties to Micrologix in such
country.
	 
	 	(e)	 	Payment of Royalties and Reports. Within [***] of the end of each calendar
quarter following the First Commercial Sale, Strata shall provide Micrologix with a
written report, in a form to be agreed between the parties, acting reasonably,
accompanied by full payment of all royalties accrued and owing to Micrologix during
such quarter, of: (i) Net Sales during such quarter and cumulative Net Sales for the
current calendar year; (ii) deductions from Net Sales; (iii) withholding taxes, if any,
required by Applicable Laws to be deducted with respect to such sales; (iv) the dates
of the First Commercial Sale of the Product in any country in the Territory during the
reporting period; (v) the exchange rates, if any used to determine the amount of United
States dollars; and (vi) the calculation of the royalties owed (collectively, the
“Royalty Statement”). The Royalty Statement shall be in reasonably specific detail, on
a country-by-country basis, and segmented according to sales by Strata, each Affiliate
and each sublicensee.
	 
	 	(f)	 	Exchange Rate; Manner and Place of Payment. All payments hereunder shall be
payable in United States dollars. With respect to each month in each calendar quarter,
whenever conversion of payments from any foreign currency shall be required, such
conversion shall be made at the rate of exchange reported in The Wall Street Journal on
the last business day of such month within the applicable calendar quarter. All
payments owed under this Agreement shall be made by wire transfer to a bank account
designated in writing by the receiving Party.
	 
	 	(g)	 	Late Payments. In the event that any payments due hereunder are not made when
due, each such payment shall accrue interest from the date due until paid at the Prime
Rate of Interest. The payment of such interest shall not limit or otherwise be deemed
to be in satisfaction of a Party exercising any other rights it may have under this
Agreement arising from the other Party’s failure to make such payment when due.
	 
	 	(h)	 	Taxes. All taxes levied on account of the payments accruing to either Party
(the “Receiving Party”) under this Agreement shall be paid by the Receiving Party for
its own account, including taxes levied thereon as income to the Receiving Party. If
provision is made under Applicable Laws for withholding, such tax shall be deducted
from the payment made by the other Party paid to the proper taxing authority and a
receipt of payment of the tax secured and promptly delivered to the Receiving Party,
provided that it is understood that if this Agreement is assigned by Strata, Micrologix
should be no worse off than if this Agreement was made and remained with a United
States company and the payments to Micrologix were made from the United States to
Canada. Each Party agrees to assist the other Party in claiming exemption from such
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	 	 	 	under any double taxation or similar agreement or treaty from time to time in force.
	 
	 	(i)	 	Prohibited Payments. Notwithstanding any other provision of this Agreement, if
either Party is prevented from paying any payments by virtue of the Applicable Laws of
the country from which the payment is to be made, then such payment may be paid by
depositing funds in the currency in which it accrued to the Receiving Party’s account
in a bank acceptable to the Receiving Party in the country whose currency is involved.
	 
	 	(j)	 	Non-Monetary Consideration. In the event Strata, its sublicensee(s) or its
Affiliate(s) receive any non-monetary consideration in connection with the sale of the
Product, the Net Sales of such Product shall be calculated based on the fair market
value of such other consideration. Strata shall disclose the terms of such arrangement
to Micrologix and the Parties shall endeavour in good faith to agree on such fair
market value as promptly as possible.
	 
	 	(k)	 	Manufacturing Development Costs. Strata shall recover Manufacturing
Development Costs owed by Micrologix pursuant to Section 5.3(f) [***].

ARTICLE 5

COMMERCIALIZATION OF THE PRODUCT

     Section 5.1 Marketing Efforts.

	 	(a)	 	Subject to Section 2.4(a) and Section 5.3(f), Strata shall: (i) have the
exclusive right, at its cost, to make, manufacture, market, advertise, promote, sell,
distribute, and commercialize the Product in the Field in the Territory; (ii) be solely
responsible using Commercially Reasonable Efforts, for the making, manufacture,
marketing, advertising promotion, sale, distribution and commercialization of the
Product in the Field in the Territory; and (iii) have the sole responsibility and
decision making authority using Commercially Reasonable Efforts with regard to any and
all aspects of the making, manufacturing, marketing, advertising, promotion, sale,
distribution and commercialization of the Product in the Field in the Territory,
including all Labelling, marketing plans, marketing strategy, pricing decisions, and
the nature and type of advertising and marketing materials, including all Promotional
Materials.
	 
	 	(b)	 	Subject to the terms of this Agreement, Strata agrees to: (i) use Commercially
Reasonable Efforts to market, advertise, promote, sell, distribute, and commercialize
the Product in the Field in the Territory; and (ii) commence commercial sales of the
Product in each country in the Territory within six (6) months after receiving a copy
of each of the relevant Marketing Authorization.

 

			
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	 	(c)	 	Strata shall promptly advise Micrologix of any issues of which Strata becomes
aware that materially and adversely affect Strata’s ability to market or sell the
Product in the Territory. In such event, senior executives of Strata and Micrologix
shall meet and in good faith discuss what actions should be taken in light of such
issues. If the Parties cannot resolve any such issue, either Party may invoke the
dispute resolution procedure in Article 14.
	 
	 	(d)	 	Strata shall provide Micrologix prompt notice of the following events during
the Term: (i) the First Commercial Sale of Product in each country in the Territory,
if and when such occurrence takes place; and (ii) when any milestone referred to in
Section 4.3, Section 4.4, Section 4.5, or Section 4.6 has occurred.

     Section 5.2 Marketing Update.

	 	(a)	 	Following receipt of an Approval Letter from the FDA for the Product or an
equivalent letter from a Competent Authority, Strata shall provide Micrologix on an
annual basis during the Term, through the JDMC or otherwise, with reports in reasonable
detail describing Strata’s material marketing efforts with respect to the Product in
the Territory during the preceding year and forecasts and plans for such efforts for
the following year.
	 
	 	(b)	 	Strata agrees to consider Micrologix’s input and comments that Micrologix may
provide related to any such report for any applicable period; provided, however, Strata
shall have the right to either accept or reject such input and/or comments in whole or
in part in Strata’s sole discretion for any reason whatsoever, and Strata shall have
the final and sole right and responsibility and decision-making authority for all
matters related to any such report(s).

     Section 5.3 Manufacturing.

	 	(a)	 	Unless Strata is prevented, restricted, interfered with or delayed in making
such sales by reason of: (i) Force Majeure; or (ii) otherwise due to any breach of this
Agreement by Micrologix; Strata shall use Commercially Reasonable Efforts to:

	 	(i)	 	identify, select, qualify, and enter into definitive
agreement(s) with Third Party(ies) to:

	 	(A)	 	manufacture commercial supplies of the Product
for use in the Field in the Territory; and
	 
	 	(B)	 	supply raw materials and components for such
commercial supply, including the Compound; and
	 
	 	(C)	 	conduct manufacturing and process development
activities, including manufacturing scale up and start up process
development, and analytical and quality assurance and control method
development, and activities related to the foregoing, for the Compound;
and

 

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	 	(D)	 	conduct manufacturing and process development
activities, including manufacturing scale up and start up process
development, and analytical and quality assurance and control method
development, and activities related to the foregoing, for the Product
(excluding the Compound) for use in the Field in the Territory; and

	 	(ii)	 	manufacture or have manufactured adequate supplies of the
Product for use in the Field in the Territory.

	 	(b)	 	Strata shall use its Commercially Reasonable Efforts to resolve any shelf-life,
regulatory and other manufacturing issues respecting the Product.
	 
	 	(c)	 	Strata agrees that: (i) Micrologix and its Representatives shall be entitled to
contract directly with any Third Party with whom Strata has entered into such
definitive agreement(s) under Section 5.3(a) and (ii) such definitive agreement(s)
shall not contain any contractual provision that would prohibit Micrologix and its
Representatives from contracting directly or otherwise having access to any such Third
Party(ies) as part of either manufacturing any product for use outside the Territory or
any product for use inside the Territory, but outside the Field. Strata further agrees
that, if there is any Strata Intellectual Property developed by Strata or such Third
Party(ies) in the course of the activities described in Section 5.3(a), Micrologix
shall have a non-exclusive, royalty free license to use such Strata Intellectual
Property as part of either manufacturing any product for use outside the Territory or
any product for use inside the Territory, but outside the Field. Strata will use
Commercially Reasonable Efforts not to limit or restrict Strata’s ability to grant
Micrologix such license as provided for herein without violating the terms of any
agreement or other arrangement with any such Third Party. The Parties acknowledge that
if Strata is required to pay material license fees or royalties to any such Third
Party(ies) in order to grant Micrologix such license to use the Strata Intellectual
Property, then Strata shall in a timely fashion offer to Micrologix in writing a
license or sublicense to such Strata Intellectual Property. Within a reasonable period
of time (but not to exceed [***] after receipt of Strata’s offer),
Micrologix shall either accept the license or sublicense of same and pay to Strata the
amount of such material licensing fees or royalties, or advise Strata that Micrologix
does not wish to obtain such rights.
	 
	 	(d)	 	In the event that:

	 	(i)	 	Strata, using Commercially Reasonable Efforts, fails to obtain
the ability to grant a license or sublicense as provided for in Section 5.3(c)
without violating the terms of any such agreement or other arrangement, then
Strata shall have no obligation to grant such license to Micrologix under
Section 5.3(c); or

 

			
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	 	(ii)	 	Micrologix advises Strata that Micrologix does not wish to
obtain the rights referred to in Section 5.3(c), or if Micrologix fails to
notify Strata within a reasonable period of time (not to exceed [***] as noted
above) that it accepts such license or sublicense, then Strata shall have no
obligation to grant such license or sublicense to Micrologix under Section
5.3(c); or
	 
	 	(iii)	 	Micrologix advises Strata that Micrologix does wish to obtain
the rights referred to in Section 5.3(c) within a reasonable period of time
(not to exceed [***] as noted above) and pays such licensing fees or royalties
then Strata shall be deemed to have granted such license or sublicense to
Micrologix under Section 5.3(c) without further formality.

	 	(e)	 	If Strata manufactures the Product itself, rather than through Third Part(ies),
Strata will provide reasonable technical assistance, at Micrologix’s cost and expense
to provide Micrologix and its Representatives the technology and Know How necessary to
permit Micrologix or its Representatives to manufacture or have manufactured any
product for use outside the Territory or any product for use inside the Territory, but
outside the Field.
	 
	 	(f)	 	Strata and Micrologix shall share in the manufacturing development costs for
the Compound. Strata shall recover such costs from Micrologix as set forth in Section
4.7(k) for [***] of Strata’s documented out-of-pocket costs of conducting the
activities set out in Section 5.3(a)(i)(C) up to a maximum of [***] (the “Manufacturing
Development Costs”).
	 
	 	(g)	 	Transfer of Micrologix Compound and Product Inventory.

	 	(i)	 	Subject to Section 5.3(g)(vi), at the request of Strata, such
request to be made within six (6) months after the Effective Date, Micrologix
shall make available to Strata at Micrologix’s documented out-of-pocket cost,
all or any part of Micrologix’s inventory of “MBI 226 – GMP Inventory” as set
out in Exhibit “C” conforming to the specifications mutually agreed upon by the
Parties to the extent such inventory has not been used or dedicated for use by
Micrologix for other purposes.
	 
	 	(ii)	 	Subject to Section 5.3(g)(vi), at the request of Strata, such
request to be made within six (6) months after the Effective Date, Micrologix
shall make available to Strata at [***] of
Micrologix’s documented out-of-pocket cost, all or any part of Micrologix’s
inventory of “MBI 266 Reference Standard” as set out in Exhibit “C” to the
extent such inventory has not been used or dedicated for use by Micrologix for
other purposes.
	 
	 	(iii)	 	At the request(s) of Strata, such request(s) to be made within
twelve (12) months after the Effective Date, Micrologix shall make available to
Strata

 

			
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	 	 	 	at [***] of Micrologix’s documented out-of-pocket cost, all or any part of
Micrologix’s inventory of “MBI 226 non-GMP Inventory”, all for use as
contemplated hereunder, as set out in Exhibit “C”.
	 
	 	(iv)	 	As soon as practical, and in any event before the expiry of
three (3) months from after the Effective Date, Micrologix shall transfer to
Strata at [***], all of Micrologix’s inventory of “MBI 266 1.0% Gel Inventory”,
on an “as is” basis, all for use as contemplated hereunder, as set out in
Exhibit “C”.
	 
	 	(v)	 	Pursuant to Micrologix making Compound available to Strata in
Section 5.3(g)(i), Micrologix shall cause its Representative to release or
re-release such Compound to Strata with all release documentation including all
certificates of analyses confirming the identity, strength, quality and purity
of the lots of Compound, certificates of compliance confirming that the same
lots of Compound were manufactured, tested, stored and supplied in compliance
with cGMPs and all Applicable Laws, each such certificate signed by an
authorized signatory of Micrologix’s Representative, any deviation or
discrepancy reports pertaining to Compound relating to deviations that may
require reporting to the FDA, and all such other documentation and information
as is reasonably required by Strata.
	 
	 	(vi)	 	With respect to the inventories that are made available by
Micrologix pursuant to Section 5.3(g)(i) and Section 5.3(g)(ii), until the
expiry of three (3) months from the Effective Date, Micrologix will not use or
dedicate for use any of such inventory. Thereafter, until the expiry of six (6)
months from the Effective Date, Micrologix will not use or dedicate for use any
of such inventory without first giving Strata ten (10) days prior written
notice of same. If Strata gives notice in writing within such period of its
intention to purchase such inventory, Micrologix shall sell such inventory to
Strata and same shall not be used or dedicated for use by Micrologix. If Strata
gives notice in writing within such period that it does not intend to purchase
such inventory, or if Strata fails to give notice within such period,
Micrologix may use or dedicate such inventory, and same shall not be sold to
Strata.

	 	(h)	 	Co-negotiation for Commercial Supply of the Compound. In the event that both
Parties require commercial supplies of the Compound and it is in the best interests of
each Party to obtain a single source of supply for both Parties, the Parties
acknowledge that they intend to approach jointly and co-negotiate with Third Party
suppliers for the manufacture of commercial supplies of the Compound. Any such
co-negotiation shall be under the oversight of the JDMC. The Parties acknowledge and
agree that any benefits from any economies of scale recognized from such co-negotiation
for commercial supplies of the Compound shall be shared by the Parties. Nothing in this
Section will oblige either Party to enter into any agreement with any Third Party, or
restrict either Party’s ability to enter into any agreement with a Third Party without
the other Party.

 

			
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     Section 5.4 Patent Marking.

Each Party shall use Commercially Reasonable Efforts to ensure that where permissible under
Applicable Law(s) and provided there is adequate space available on any such packaging, such Party
shall identify by number any applicable Micrologix Patent Rights and applicable patent rights
within the Strata Intellectual Property with any reasonable patent marking notification(s).

ARTICLE 6

REGULATORY COMPLIANCE

     Section 6.1 Ownership and Maintenance of Governmental Approvals.

	 	(a)	 	Strata will own all Marketing Authorizations for each country in the Territory
for use in the Field. Without limiting the generality of the foregoing, Strata shall
prepare and submit in its own name and at its expense the NDA with the FDA in the U.S.
and any other equivalent application with the Competent Authorities in other countries
in the Territory. Without acting as a limitation to any other provision under this
Agreement, Strata shall maintain a current and valid DMF on the Compound and the
Product, whether as an independent document or as part of the NDA, which it shall keep
up to date at all times during the Term and shall cause any Subcontractor to similarly
maintain the same or grant the Subcontractor reference rights to Strata’s DMF for the
Product.
	 
	 	(b)	 	Other than those required to be maintained by Micrologix under Section 6.7(b),
Strata shall secure and maintain in good standing, at its sole cost and expense, any
and all Governmental Approvals (including, Marketing Authorizations, licenses, permits
and consents, facility licenses and permits required by Applicable Laws or by the
applicable Competent Authorities) necessary and/or required for Strata to perform its
obligations under this Agreement and use Commercially Reasonable Efforts at its cost
and expense to secure and maintain any variations and renewals thereof.
	 
	 	(c)	 	Excluding Marketing Authorizations and subject to Section 6.7(b), Micrologix
shall secure and maintain, at its sole cost and expense, any and all Governmental
Approvals (including, licenses, permits and consents, facility licenses and permits
required by Applicable Laws or by the applicable Competent Authorities) necessary
and/or required for Micrologix to perform its obligations under this Agreement and any
Development Subcontract and use Commercially Reasonable Efforts, at its cost and
expense to secure and maintain any variations or renewals thereof.

     Section 6.2 Rights of Reference.

	 	(a)	 	For the Products in the Field in the Territory, Micrologix shall grant and
hereby grants to Strata and its Representatives (subject to the terms of Section 3.5),
a free-of-charge right to reference and use and have full access to all Governmental
Approvals and all other regulatory documents owned or Controlled by Micrologix to the
extent relating to the Compound, the Product, and MBI 594AN, including any IND, any NDA
and any DMF (whether as an independent document or as

 

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	 	 	 	part of any NDA, and all chemistry, manufacturing and controls information), and any
supplements, amendments or updates to the foregoing.
	 
	 	(b)	 	For use outside the Territory, or for any Product for use inside the Territory
but outside the Field, Strata shall grant and hereby grants to Micrologix and its
Representatives a free-of-charge right to reference and use and have full access to all
Governmental Approvals and all regulatory documents owned or Controlled by Strata to
the extent relating to the Compound or the Product, including any NDA and DMF (whether
as an independent document or as part of any NDA, and all chemistry, manufacturing and
controls information), and any supplements, amendments or updates to the foregoing.
	 
	 	(c)	 	For the Products in the Field in the Territory, Micrologix shall make
Commercially Reasonable Efforts to grant or have granted to Strata (subject to the
terms of Section 3.5), a free-of-charge right of reference and use and have full access
to all Governmental Approvals and all other regulatory documents owned or Controlled by
Fujisawa Healthcare, Inc. or by any Third Party licensee of Micrologix to the extent
related to the Compound, the Product, and MBI 594AN, including any IND, any NDA and any
DMF (whether as an independent document or as part of any NDA, and all chemistry,
manufacturing and controls information), and any supplements, amendments or updates to
the foregoing.
	 
	 	(d)	 	For use outside the Territory, or for any Product for use inside the Territory
but outside the Field, Strata shall make Commercially Reasonable Efforts to grant or
have granted to Micrologix and its Representatives a free-of-charge right of reference
and use and have full access to all Governmental Approvals and all other regulatory
documents owned or Controlled by any Third Party licensee of Strata to the extent
related to the Compound or the Product, including any IND, any NDA and any DMF (whether
as an independent document or as part of any NDA, and all chemistry, manufacturing and
controls information), and any supplements, amendments or updates to the foregoing.
Such rights of reference, use and access shall survive termination of this Agreement.
	 
	 	(e)	 	For avoidance of doubt, no transfer by a Party of Control in respect of any
Governmental Approvals or other regulatory documents referred to in this Section shall
limit the rights of the other Party to the most current version of same up to the time
of such transfer.

     Section 6.3 Adverse Drug Event Reporting and Post Marketing Surveillance.

	 	(a)	 	Each Party, on behalf of itself, its Affiliates and any permitted sublicensees,
shall advise the other Party, by telephone or facsimile, promptly but in no event later
than seventy-two (72) hours or such shorter time period as may be required by a
Competent Authority after a Party, its Affiliates and/or sublicensees becomes aware of
any serious adverse drug event (as defined in 21 CFR Section 312.32(a) or its
equivalent under Applicable Law(s) as the same may be amended, supplemented or replaced
from time to time) (a “SADE”) involving the Product or the Compound. Such advising
Party shall provide the other Party with a written report delivered by confirmed
facsimile of any SADE, stating the full

 

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	 	 	 	facts known to such Party, including customer name, address, telephone number,
batch, lot and serial numbers, and other information as required by Applicable Laws.
After receipt by the Parties of an Approval Letter in any country, Strata shall
have full responsibility in such country for: (i) monitoring such SADEs; (ii) data
collection activities that occur between Strata and the patient or medical
professional, as appropriate, including any follow-up inquiries which Strata deems
necessary or appropriate; and (iii) meeting the requirements of the Competent
Authorities, including the submission of SADE individual reports and periodic
reports as necessary. As the holder of the Marketing Authorizations, any reporting
(and follow-up thereto) to the Competent Authorities relating to the Compound and
the Product in the Field in the Territory shall remain the responsibility of Strata.
	 
	 	(b)	 	In the event either Party requires information regarding SADEs with respect to
reports required to be filed by it in order to comply with Applicable Laws, including
obligations to report SADEs to the Competent Authorities, each Party agrees to provide
such information to the other in sufficient time to enable each Party to report such
SADEs to the Competent Authorities in accordance with Applicable Laws.
	 
	 	(c)	 	If the report of an SADE causes a Competent Authority to request a Labelling
revision and/or any other corrective action, or if Strata believes it is necessary to
have a Labelling revision or conduct a post marketing surveillance program as a result
of an SADE, then Strata shall determine all of the material terms and conditions of
such Labelling revision, corrective action or post marketing surveillance program in
consultation with the applicable Competent Authority. Upon Strata’s request, Micrologix
will cooperate with Strata with respect to any of the foregoing. The costs of such
Labelling revision, corrective action or post marketing surveillance program shall be
borne one hundred percent (100%) by Strata. Notwithstanding the foregoing, however,
the Parties agree that if any such Labelling revision or corrective action or post
marketing surveillance program is due to the negligence or willful misconduct in the
conduct by Micrologix and/or its Representatives of the pre-clinical and clinical
research and development activities in connection with the Product prior to and after
the Effective Date, then, in such event, the costs of any such Labelling revision,
corrective action, or post marketing surveillance program, as the case may be, shall be
borne one hundred percent (100%) by Micrologix. Subject to Section 5.3 and Section 6.2,
the Parties agree that Strata shall own the results and underlying data from any Phase
IV Study.
	 
	 	(d)	 	Within thirty (30) days of the filing of each report with the FDA on drug
related adverse events associated with the Compound as may be required under Applicable
Laws, each Party will provide to the other Party particulars of such adverse events.

 

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     Section 6.4
Post Marketing Commitments. If the FDA or other Competent Authority requires a Post Marketing
Commitment for the Product, then Strata shall use Commercially Reasonable Efforts to implement such
Post Marketing Commitment at Strata’s expense.

     Section 6.5 Assistance.

Each Party shall provide reasonable assistance to the other at the other’s request, in connection
with their obligations pursuant to this Article 6, the requesting Party shall reimburse all of the
other Party’s reasonable documented out-of-pocket costs of such assistance, subject to the
allocation of costs determined pursuant to this Article 6.

     Section 6.6 Compliance.

Subject to the other terms and conditions of this Agreement, the Parties agree to the following
general compliance provisions:

	 	(a)	 	Strata shall be responsible for compliance in all material respects with
Applicable Laws and the Governmental Approvals relating to its activities under the
Development, the making, manufacturing, marketing, advertising, promoting, selling,
distributing, and commercializing the Product, including the maintenance of the
Marketing Authorizations and other requirements of a Competent Authority applicable
thereto, obtaining and holding all necessary permits and any other requirements
relating to its activities under the Development, the making, manufacture, import,
export, storage, sale and distribution of the Product. Any and all Labelling, packaging
and artwork and any and all proposed change to any such Labelling, packaging and/or
artwork shall be determined by Strata, which shall have the sole right and
decision-making authority with respect thereto. Strata shall have the sole right and
decision making authority with respect to any and all advertising, sales and marketing
materials (collectively the “Promotional Material(s)”) and shall be responsible for all
interactions with the Competent Authorities in connection with such Promotional
Materials. Strata shall submit any required changes to the Labelling, packaging and/or
artwork to the Competent Authorities in a timely fashion at Strata’s expense.
	 
	 	(b)	 	Micrologix shall be responsible for compliance in all material respects with
Applicable Laws and Governmental Approvals relating to Development to be conducted by
Micrologix pursuant to any Development Subcontract. Strata shall be responsible for
compliance in all material respects with Applicable Laws and Governmental Approvals
relating to the Development to be conducted by Strata. Each Party shall cause their
respective Subcontractors to comply with this Section 6.6(b).
	 
	 	(c)	 	As provided in this Agreement with regard to each Party’s obligations
hereunder, Strata and Micrologix (as the case may be) shall each comply in all material
respects with all Applicable Laws within the Territory, including the provision of
information by Strata and Micrologix to each other necessary for Micrologix and Strata,
as the case may be, to comply with any applicable reporting
requirements and Governmental Approvals required; and maintaining any and all licenses, permits
and consents necessary and/or required for complying with such Party’s

 

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	 	 	 	obligations under this Agreement. During the Term, each Party agrees to execute and deliver to
the other Party any certifications that may be required by Applicable Laws,
including any debarment certification.
	 
	 	(d)	 	Each Party shall promptly notify the other Party of any written or oral notices
received from, or inspections by, the FDA, or other Competent Authority, which
materially impact the Product, the Development and/or the Marketing Authorizations, and
shall promptly inform the other Party of any responses to such written notices or
inspections and the resolution of any issue raised by the FDA or other Competent
Authority.

     Section 6.7 General Regulatory Matters.

	 	(a)	 	Subject to Micrologix’s obligations under Section 6.7(b) and Applicable Laws
during the period in which it is the IND holder, Strata shall have all regulatory
responsibility with respect to and relative to the Product and has the sole right and
decision making authority with respect to all such regulatory matters, including
without limitation reaching agreement on all regulatory matters with the FDA and/or any
other Competent Authority.
	 
	 	(b)	 	The Parties acknowledge that Micrologix, as of the Effective Date, owns and
holds certain Governmental Approvals in connection with the research and development of
the Product, including without limitation the IND listed in Exhibit “D”. Micrologix
shall be responsible for the filing and maintenance in good standing of all such
Governmental Approvals, with costs and expenses associated therewith to be included in
Reimbursable Costs. During the time that Micrologix is the holder of the IND,
Micrologix shall comply with all Applicable Laws applicable to the holder of the IND,
including, without limitation, process, track and report all IND Safety Reports (as
defined by the FDA). Upon Strata’s request, such request to be made as soon as
reasonably possible, Micrologix shall transfer to Strata, without any additional
consideration, those Governmental Approvals (including without limitation the IND)
requested by Strata.
	 
	 	(c)	 	During the time that Micrologix is the holder of such Governmental Approvals,
Strata shall be entitled to attend any and all meetings and participate in telephone
calls with the Competent Authorities, including without limitation any meeting
preparation, meeting co-ordination, preparation of minutes and pre-NDA meeting with the
FDA. During such time as Micrologix is the holder of such Governmental Approvals,
subject to Micrologix’s obligations under Section 6.7(b) and Applicable Laws during the
period of time in which it is the IND holder:

	 	(i)	 	Strata has the sole right and decision making authority for all
regulatory matters with respect to or relative to the Product.
	 
	 	(ii)	 	While it is still the holder of the IND in the United States,
Micrologix shall give Strata no less than three (3) business days notice
following the
scheduling of any such meeting and/or telephone call with the FDA and/or
other Competent Authority (or such shorter period of time, if the meeting

 

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	 	 	 	and/or telephone call is scheduled within such three (3) business days and
in such event such notice shall be in sufficient time so that Strata shall
be able to attend and/or participate in such meeting and/or telephone call).
	 
	 	(iii)	 	Micrologix shall provide Strata copies of any materials
relating to any regulatory matter prior to their presentation to the FDA or
other Competent Authority during the Development, so that Strata shall have an
opportunity to review and comment thereon.
	 
	 	(iv)	 	The JDMC shall approve all such materials prior to
presentation.

ARTICLE 7

PATENTS

     Section 7.1 Maintenance of Patents or Marks.

	 	(a)	 	Micrologix shall, at Micrologix’s expense and on a timely basis in each country
in the Territory: (i) use Commercially Reasonable Efforts to obtain Micrologix Patent
Rights in all countries in the Territory; (ii) pay all fees and file all documentation
and other materials required by any Competent Authority in each applicable country to
maintain and/or renew Micrologix Patent Rights; and (iii) shall use Commercially
Reasonable Efforts to otherwise maintain the Micrologix Patent Rights in all countries
in which Strata has the right and elects to exercise any or all of its rights hereunder
related to the Product; provided however, that upon written request by Micrologix,
Strata shall, at no cost or expense to Strata, provide such reasonable assistance as
may be necessary to enable Micrologix to comply with the administrative formalities
necessary to register or maintain any Micrologix Patent Rights.
	 
	 	(b)	 	In the event Micrologix intends to abandon the prosecution or maintenance of
all or any part of Micrologix Patent Rights claiming the Product or the Compound (which
it shall only be permitted to do in the event it has a bona fide belief that obtaining
or maintaining rights are not possible using Commercially Reasonable Efforts),
Micrologix shall notify Strata no less than [***] (or such shorter period
of time if there is a shorter period of time required by a Competent Authority) prior
to the date it intends to abandon the prosecution or maintenance, as applicable, of any
such Micrologix Patent Rights.
	 
	 	(c)	 	In the event Micrologix notifies Strata within the period provided in Section
7.1(b), Strata has the right but not the obligation to assume such prosecution and/or
maintenance and shall notify Micrologix if, and when, Strata wishes to assume the
responsibility for prosecuting and maintaining such Micrologix Patent Rights, as
applicable, whereupon Micrologix shall permit Strata, at Strata’s expense, to take over such prosecution and/or maintenance, as applicable, and
Micrologix shall cooperate in any such transfer of responsibilities and rights as

 

			
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	 	 	 	necessary or prudent for the benefit of Strata to prosecute and/or maintain the
foregoing rights. Thereafter, Strata shall have the right but not the obligation to
prosecute or maintain any such Micrologix Patent Right, as the case may be, at its
expense; provided that Strata keep Micrologix reasonably informed of the progress of
any such prosecution. Micrologix shall have the right to review all such pending
applications and other proceedings and make recommendations to Strata concerning
them and their conduct, but the final decision with respect thereto shall rest with
Strata, provided that Strata acts reasonably.
	 
	 	(d)	 	Each Party shall make available to the other Party or its authorized attorneys,
agents or representatives, its employees, agents or consultants necessary or
appropriate to enable the other Party to file, prosecute and maintain its patent
applications covering the Product for a reasonable period of time sufficient for the
other Party to obtain the assistance it needs from such personnel. Micrologix shall
provide Strata with copies of all material correspondence, documentation and/or
submissions provided to, and received from, U.S. PTO and comparable Competent
Authorities that may materially affect Strata’s rights under this Agreement.

Section 7.2 Cooperation and Procedures Relative to Actions Brought Under Section 7.3 and
Section 7.4.

	 	(a)	 	The Parties shall reasonably cooperate with each other with respect to any
litigation, action, suit, claim or other proceeding under Section 7.3 or Section 7.4
(an “Article 7 Proceeding”). Without limiting the generality of the foregoing, the
“Non-Litigating Party” (as hereinafter defined) agrees to cooperate reasonably in any
Article 7 Proceeding, as may be requested by or necessary to the “Litigating Party” (as
hereinafter defined) including, joining any Article 7 Proceeding as a party, executing
all necessary documents, supplying essential documentary evidence and making available
essential witnesses then in its employment or engaged as a consultant.
	 
	 	(b)	 	The Party prosecuting any Article 7 Proceeding under Section 7.3 or controlling
the defence of any Article 7 Proceeding under Section 7.4 shall be referred to in this
context, as the “Litigating Party”). The other Party in this context shall be referred
to as the “Non-Litigating Party”. Except as provided in Section 7.2(e) or Section
7.4(b), the Litigating Party shall have the right to control any Article 7 Proceeding.
In addition, the Litigating Party shall have the right to control the settlement or
compromise of any Article 7 Proceeding and may so settle or compromise without the
Non-Litigating Party’s prior written consent, provided that the terms of any such
settlement or compromise: (i) does not materially impair the Non-Litigating Party’s
rights hereunder (including each Party’s rights in the Micrologix Technology or the
validity or enforceability thereof); (ii) would not require the Non-Litigating Party to
be subject to an injunction or to make a monetary payment or would restrict the claims
in or admit any invalidity or unenforceability of the Micrologix Patent Rights; (iii)
provide for the unconditional release of the Non-Litigating Party; and (iv) expressly
state that
neither the fact of settlement, nor the settlement agreement shall constitute or be
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	 	 	 	issue, fact, allegation or any other aspect of the claim being settled. In all other cases,
the Litigating Party may not settle any Article 7 Proceeding without the prior
written consent of the Non-Litigating Party, which consent shall not be unreasonably
withheld or delayed. The Non-Litigating Party may not pay or voluntarily permit the
determination of any liability which is subject to any such Article 7 Proceeding
while the Litigating Party is negotiating the settlement thereof or contesting the
matter, except with the prior written consent of the Non-Litigating Party, which
consent shall not be unreasonably withheld or delayed.
	 
	 	(c)	 	Upon learning of any actual, contemplated or threatened Article 7 Proceeding
involving any of the Micrologix Patent Rights that claims the Product or the Compound,
each Party shall promptly notify the other Party of such and shall, upon request,
provide to the other Party an assessment of the status of any such proceeding.
	 
	 	(d)	 	To the extent any cooperation provided by Micrologix hereunder requires
Micrologix to disclose information that would be deemed Micrologix Confidential
Information (other than any information which shall become the property and right of
Strata under Section 3.4), Strata shall treat such information in accordance with
Section 8.1.
	 
	 	(e)	 	The Parties acknowledge and agree that circumstances may arise in which a Party
hereto may desire to protect its interests by joining or intervening in litigation or
other proceeding involving the Micrologix Patent Rights, which proceeding has neither
been brought by that Party nor levied against that Party. Accordingly, neither Party
shall object or oppose any effort by the other Party, at its own expense, to join or
intervene in such litigation or other proceedings involving the Micrologix patent
Rights. In the event the Non-Litigating Party seeks to join or intervene in any
litigation or other proceeding where such joining or intervention is neither requested
by nor necessary to the Litigating Party, then (i) the Litigating Party’s right to
control the litigation under Section 7.3 or Section 7.4 (as the case may be) shall not
be extended to the conduct of the Non-Litigating Party after intervention or joining;
and (ii) notwithstanding anything to the contrary contained in Section 7.3 and Section
7.4, the Non-Litigating Party shall bear its own costs associated with its involvement
in any such litigation or other proceeding after intervening or joining.

     Section 7.3 Prosecution of Infringement.

	 	(a)	 	During the Term, each Party shall give prompt notice to the other of any Third
Party act which may infringe one or more claims of the Micrologix Patent Rights that
claims the Product or the Compound.
	 
	 	(b)	 	Infringement within the Field.

	 	(i)	 	Strata may (but shall have no obligation to do so) prosecute
any Article 7 Proceeding under this Section 7.3 against such Third Party
infringement of
any claims of Micrologix Patent Rights where such infringement primarily
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	 	 	 	accordance with the terms of Section 7.2 and this Section 7.3 and in such
event Strata shall become the Litigating Party.
	 
	 	(ii)	 	In the event Strata fails to institute any Article 7 Proceeding
and terminate any Third Party infringement of the claims of Micrologix Patent
Rights that the claim the Product or the Compound within thirty (30) days of
the later of: (i) receiving notification from Micrologix of any such
infringement or (ii) sending notice to Micrologix of such action, Micrologix
may take (but shall have no obligation to do so) such action as it deems
appropriate, including the filing of a lawsuit against such Third Party. In
such event Micrologix shall promptly notify Strata of any such Article 7
Proceeding and shall become the Litigating Party.

	 	(c)	 	Infringement outside the Field.

	 	(i)	 	Micrologix may (but shall have no obligation to do so)
prosecute any Article 7 Proceeding under this Section 7.3 against such Third
Party infringement of any claims of Micrologix Patent Rights where such
infringement does not primarily relate to such Third Party activities in the
Field in the Territory in accordance with the terms of Section 7.2 and this
Section 7.3 and in such event Micrologix shall become the Litigating Party.
	 
	 	(ii)	 	In the event Micrologix fails to institute any Article 7
Proceeding and terminate any Third Party infringement of the claims of
Micrologix Patent Rights that claim the Product or the Compound within thirty
(30) days of the later of: (i) receiving notification from Strata of any such
infringement or (ii) sending notice to Strata of such action, Strata may take
(but shall have no obligation to do so) such action as it deems appropriate,
including the filing of a lawsuit against such Third Party. In such event
Strata shall promptly notify Micrologix of any such Article 7 Proceeding and
shall become the Litigating Party.

	 	(d)	 	Micrologix and Strata shall share all Costs in connection with any Article 7
Proceeding under this Section 7.3, on the basis of [***]% paid by the
Litigating Party and [***]% paid by the Non-Litigating Party, provided that Micrologix
and Strata shall first recover their respective actual documented out-of-pocket Costs,
or equitable proportions thereof, associated with any Article 7 Proceeding under this
Section 7.3, or settlement thereof from any recovery made by the Litigating Party. Any
excess amount recovered by the Litigating Party shall be shared between Strata and
Micrologix on the basis of [***]% to the Litigating Party and [***]% to the
Non-Litigating Party. In the event there is no recovery from a Third Party or if any
such recovery does not cover all of the Costs of the Litigating and/or Non-Litigating Party, as the case may be, then the Parties agree to share any
such unrecovered Costs on the basis of [***]% to the Litigating Party and

 

			
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[***]% to the Non-Litigating Party. If Strata is the Litigating Party, Strata shall recover
such amounts by [***].

     Section 7.4 Infringement Claimed by Third Parties.

	 	(a)	 	In the event a Third Party commences, or threatens to commence, any Article 7
Proceeding against a Party to this Agreement alleging infringement of a Third Party’s
intellectual property rights by the making, manufacture, use, sale, offer for sale,
export and/or import by Strata, its Affiliates or sublicensees of the Product, the
Party against whom such proceeding is threatened or commenced shall give prompt notice
to the other Party (“Infringement Notice”).
	 
	 	(b)	 	Strata shall control the defense and settlement of any such Article 7
Proceeding under this Section 7.4 in accordance with the terms of Section 7.2 and this
Section 7.4 and shall become the Litigating Party; provided that, in the event that the
validity and enforceability of the claims of Micrologix Patent Rights are in issue in
any such Article 7 Proceeding under this Section 7.4, Micrologix may (but shall have no
obligation to do so) control the defense and settlement of any such Article 7
Proceeding under this Section 7.4 in accordance with the terms of Section 7.2 and this
Section 7.4 solely to the extent that such defense and settlement relates to validity
and enforceability of the claims of the Micrologix Patent Rights.
	 
	 	(c)	 	Micrologix shall be liable for its own Costs in connection with any Article 7
Proceeding under this Section 7.4.

     Section 7.5 Co-operation with Other Licensees.

Strata acknowledges that Micrologix may grant to licensees rights in the Micrologix Technology in
the Territory in respect of fields outside the Field, and may grant to other licensees rights
outside the Territory. If Micrologix grants such rights to other licensees, in the event of any
litigation in respect of:

	 	(a)	 	fields outside of the Field that may reasonably affect Strata’s use of the
Micrologix Technology in the Field or the use or sale of Products by Strata; or
	 
	 	(b)	 	the Field that may reasonably affect Micrologix or one or more of Micrologix’s
licensee’s use of the Micrologix Technology outside the Field or the making,
manufacture, use or sale of products outside the Field by Micrologix or one or more
other such licensee(s);

then Micrologix, Strata and such other licensee(s) will use good faith efforts to determine jointly
the course of action, if any, necessary or appropriate to prosecute or defend the litigation.
Micrologix will use Commercially Reasonable Efforts to include in its other license agreements,
provisions that allow the participation of Strata as contemplated herein. If Micrologix is unable
to include in any such other license agreement such provisions, then with respect to the licensee
under such other license agreement, Strata shall not be bound by the terms and conditions of this
Section 7.5.

 

			
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ARTICLE 8

CONFIDENTIALITY

     Section 8.1 Confidentiality.

	 	(a)	 	During the Term and for a period of five (5) years thereafter, each Party shall
maintain all Confidential Information of the other Party as confidential and shall not
disclose any such Confidential Information to any Third Party or use any such
Confidential Information for any purpose, except (i) as expressly authorized by this
Agreement or with the prior written consent of the other Party, which consent shall not
be unreasonably withheld or delayed, (ii) as required by Applicable Laws or court order
of a court of competent jurisdiction (provided that the disclosing Party shall first
notify the other Party to afford the other Party, for a period of ten (10) business
days or such lesser period as may be provided by Applicable Law, an opportunity to seek
whatever protective relief it deems appropriate, and the disclosing Party shall use
Commercially Reasonable Efforts to obtain confidential treatment of any such
information required to be disclosed), (iii) to its Representatives to accomplish the
purposes of this Agreement, so long as such Representatives are under an obligation of
confidentiality no less stringent than as set forth herein, (iv) to bona fide potential
investors and their respective advisors during financing or an acquisition, merger or
other like reorganization, so long as such investors and advisors are under an
obligation of confidentiality no less stringent than as set forth herein, except as
otherwise provided herein, and (v) as is required to exercise its rights and perform
its obligations under this Agreement, so long as the recipients of such information are
under an obligation of confidentiality no less stringent than as set forth herein.
Each Party may use such Confidential Information only to the extent required to
accomplish the purposes of this Agreement.
	 
	 	(b)	 	Notwithstanding any provision to the contrary herein or in any confidentiality
or nondisclosure agreement between the Parties, from time to time, either Party may
disclose to bona fide potential investors and their respective advisors during
financing or an acquisition, merger or other like reorganization the following
Confidential Information:

	 	(i)	 	[***];
	 
	 	(ii)	 	[***];
	 
	 	(iii)	 	[***];
	 
	 	(iv)	 	[***];

 

			
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	 	(v)	 	[***];
	 
	 	(vi)	 	[***];
	 
	 	(vii)	 	[***];
	 
	 	(viii)	 	this Agreement, in the form as redacted and filed with the SEC and available
for disclosure, as may be modified by SEC filings, press releases or other
public disclosures, or if not filed with the SEC, as executed with the
financial particulars in Article 4 redacted to the extent not publicly
disclosed; and
	 
	 	(ix)	 	such additional information and materials as may be agreed-to
by the Parties;

	 	 	 	all without obtaining written agreement of confidence and non-use from the
recipient. The disclosing Party remains liable to the other Party for any use or
disclosure made of such information by such investors and advisors, as if such
investors and advisors were bound by the terms of this Article 8. No information
disclosed pursuant to this Section 8.1(b) that becomes generally known or available,
directly or indirectly as a result of a disclosure permitted by this Section, shall
be excluded from the definition of Confidential Information pursuant to the
exclusion set out in Section 1.14(a).
	 
	 	(c)	 	Each Party shall use at least the same standard of care as it uses to protect
its own Confidential Information to ensure that it and its Affiliates and
Representatives do not disclose or make any unauthorized use of the other Party’s
Confidential Information. Each Party shall be responsible for any breach of this
Agreement by its Representatives. Each Party shall promptly notify the other Party
upon discovery of any unauthorized use or disclosure of the other Party’s Confidential
Information.
	 
	 	(d)	 	Micrologix acknowledges and agrees that the Micrologix Know-How licensed to
Strata has value to Strata in being maintained as confidential. Therefore, Micrologix
shall keep the Micrologix Know-How confidential as if it were Confidential Information
of Strata as set forth in this Article 8.

     Section 8.2 Publicity Review.

The Parties agree that the public announcement of the execution of this Agreement shall be in the
form of a press release to be mutually agreed upon by the Parties on or before the Effective Date
and thereafter each Party shall be entitled to make or publish any public statement consistent with
the contents thereof. Thereafter, except as allowed in the preceding sentence, the Parties will
jointly discuss and agree, based on the principles of this Section 8.2, on any statement to the
public regarding this Agreement or any aspect of this Agreement, and the results of clinical
studies conducted as part of the Development, subject in each case to disclosure otherwise required
by Applicable Laws. When a Party elects to make any such statement or disclosure required under
Applicable Law, it will give the other Party at least five (5) business days notice to review and
comment on such statement, unless the applicable Competent Authority requires
disclosure such that a Party is prohibited by Applicable Law to provide such advance review by the
other Party (in which case it shall be disclosed according to such requirement and notice will

 

			
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be
provided as soon as possible). The terms of this Agreement may also be disclosed to Competent
Authorities, including the United States Securities and Exchange Commission or any other exchange
or securities commission having authority over a Party, where required by Applicable Law, with
redaction of financial information not otherwise required to be disclosed under Applicable Laws in
which event the disclosing Party shall provide in advance of submission to the other Party for
review and comment a copy of such redactions made to this Agreement.

ARTICLE 9

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 9.1 Corporate Power.

Each Party hereby represents, warrants and covenants that such Party is, and will remain through
the Term, 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.

     Section 9.2 Due Authorization.

Each Party hereby represents and warrants that such Party is duly authorized to execute and deliver
this Agreement and covenants to perform its obligations hereunder.

     Section 9.3 Binding Obligation/No Conflict.

Each Party hereby represents, warrants and covenants that: (i) this Agreement is a legal and valid
obligation binding upon it and is enforceable in accordance with its terms; and (ii) the execution,
delivery and performance of this Agreement by such Party does not, and will not during the Term,
conflict with any agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor to the best knowledge of each Party as of the Effective Date,
violate any Applicable Laws.

     Section 9.4 Ownership of Micrologix Technology.

Micrologix represents, warrants, and covenants, as the case may be, that:

	 	(a)	 	as of the Effective Date and during the Term, it is and shall remain the sole
owner of all right, title and interest in and to the Micrologix Technology, subject to
Micrologix’s ability to license and assign as permitted hereunder; and, to the best of
the knowledge of Micrologix as of the Effective Date, no Representative of Micrologix
or any Third Party has any rights to the Micrologix Technology;
	 
	 	(b)	 	as of the Effective Date, it has not granted and will not grant after the
Effective Date any license under the Micrologix Technology for any product in the
Territory for use in the Field to any Third Party, and is under no obligation to grant
any such license, except to Strata, and there are, and will be, no rights granted to
any Third Party and/or no agreements, either written or oral, regarding
either the Micrologix Technology which are inconsistent or in conflict with this
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	 	(c)	 	as of the Effective Date, there are no outstanding liens, judgments,
injunctions, decrees, rulings, security interests, or other encumbrances on the
Micrologix Technology, and through the Term, there shall be no liens, judgments,
injunctions, decrees, rulings, security interests, or any other encumbrances (other
than security interests filed by Micrologix’s lender(s) and licensee(s) in the ordinary
course of business) on the Micrologix Technology which could materially affect Strata’s
interests in the Micrologix Technology;
	 
	 	(d)	 	as of the Effective Date and during the Term, it has taken and will take
Commercially Reasonable Efforts to ensure that all Micrologix Know-How has been and
will continue to be fully protected and maintained in accordance with appropriate
procedures for its protection;
	 
	 	(e)	 	(i) as of the Effective Date, Micrologix has made available to Strata all
material information in its possession or Control relating to the Product in the Field;
and (ii) as of the Effective Date, to the best of Micrologix’s knowledge, all art that
Micrologix believes to be material to the patentability of any claims within the
Micrologix Patent Rights claiming the Product or the Compound has been cited by
Micrologix to the U.S. PTO for U.S. patent rights or to the comparable Competent
Authority in such other jurisdictions in the Territory that require disclosure of
material information in possession or Control of the patentee; and
	 
	 	(f)	 	Exhibit “B” is a true, complete and current listing of the Micrologix Patents
as of the Effective Date.

     Section 9.5 Patent and Other Intellectual Property Rights Proceedings.

As of the Effective Date, Micrologix represents and warrants that:

	 	(a)	 	to the best of its knowledge, no patent within the Micrologix Patent Rights, or
patent application with regard to the Micrologix Patent Rights, as the case may be, is
the subject of any pending interference, opposition, cancellation or other protest
proceeding, or judicial proceeding;
	 
	 	(b)	 	to the best of its knowledge, the Micrologix Technology and any process,
procedure or method used to manufacture the Compound and the Product do not infringe,
interfere with, or misappropriate the intellectual property rights of any Third Party;
	 
	 	(c)	 	to the best of its knowledge, the practice of the Micrologix Patent Rights and
any process, procedure or method used to manufacture the Compound and the Product in
the Territory do not and will not infringe, interfere with, or misappropriate any
intellectual property rights of any Third Party;
	 
	 	(d)	 	there has been no lapse of any claims within the Micrologix Patents in the
Territory;
	 
	 	(e)	 	Micrologix has not received any: (i) notices or communications that the
development, making, manufacture, use, marketing, advertising, promoting,

 

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	 	 	 	distributing,
offer for sale, selling, importation or exportation of the Compound or the Product or
use of the Micrologix Technology would infringe or misappropriate any intellectual
property rights of any Third Party; or (ii) allegation regarding the legality,
enforceability, or validity of the Micrologix Technology, other than those made by the
U.S. PTO or other comparable Competent Authorities in other countries in the
prosecution of the Micrologix Patent Rights and previously disclosed to Strata;
	 
	 	(f)	 	Micrologix is not aware of any Third Party having infringed or misappropriated
the Micrologix Technology and has not sent any notices or communications to any Third
Party that the activities of such Third Party infringe or misappropriate the Micrologix
Technology.

     Section 9.6 Micrologix’s Additional Warranties.

As of the Effective Date, Micrologix represents and warrants that:

	 	(a)	 	Exhibit “D” is a true, complete and current listing of the regulatory filings
relating to Product or Compound owned or Controlled by Micrologix as of the Effective
Date, including, all INDs; and
	 
	 	(b)	 	Micrologix has not deliberately withheld any material information or data known
to Micrologix relating to:

	 	(i)	 	the results of preclinical and clinical studies of the Compound
and the Product conducted by or on behalf of Micrologix;
	 
	 	(ii)	 	Micrologix’s ongoing clinical development activities in the
United States for the Product, including the status of all such studies; and
	 
	 	(iii)	 	the manufacturing, testing and release of the Compound and
Product, including CMC information therefor.

     Section 9.7 Strata’s Additional Warranties.

As of the Effective Date, Strata represents and warrants that upon completion of transactions
related to this Agreement, which transactions are conditional only upon the execution and delivery
of this Agreement, Strata shall be entitled to receive proceeds of a financing of not less than $5
million.

     Section 9.8 Pre-Clinical and Clinical Studies Prior to Effective Date.

Micrologix represents and warrants that all of the pre-clinical and clinical trials related to the
Product prior to the Effective Date have been conducted in accordance with Applicable Laws.

     Section 9.9 Debarment.

During the Term, neither of the Parties shall knowingly utilize any employee, representative,
agent, assistant or associate who has been debarred by the FDA pursuant to 21 U.S.C. Section 335a
(a) or (b) of the Act in connection with any of the activities to be carried out under this

 

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Agreement. Micrologix further represents and warrants that, as of the Effective Date, to the best
of its knowledge, none of the entities, laboratories or clinical sites participating in the
clinical studies prior to the Effective Date had been debarred at the relevant time.

     Section 9.10 Limitation on Warranties.

	 	(a)	 	EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT:

	 	(i)	 	NOTHING HEREIN SHALL BE CONSTRUED AS A REPRESENTATION OR
WARRANTY BY MICROLOGIX TO STRATA THAT THE MICROLOGIX TECHNOLOGY IS NOT
INFRINGED BY ANY THIRD PARTY, OR THAT THE PRACTICE OF SUCH RIGHTS DOES NOT
INFRINGE ANY PUBLISHED INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
	 
	 	(ii)	 	NEITHER PARTY MAKES ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRODUCT.

	 	(b)	 	NEITHER PARTY MAKES ANY OTHER WARRANTIES HEREUNDER, EXPRESS OR IMPLIED,
INCLUDING WARRANTIES CONCERNING THE SUCCESS OF THE DEVELOPMENT PROGRAM, THE SUCCESS OF
THE MARKETING AND COMMERCIALIZATION OF THE PRODUCT OR THE COMMERCIAL UTILITY OF THE
PRODUCT.

ARTICLE 10

INDEMNIFICATION AND INSURANCE

     Section 10.1 Strata Indemnified by Micrologix.

	 	(a)	 	Micrologix shall indemnify, defend and hold Strata, and its Representatives (in
respect of each Party, its “Indemnitees”), harmless from and against any Third Party
liabilities, obligations, damages, losses, claims, encumbrances, costs or expenses
(including attorneys’ fees) (any or all of the foregoing herein referred to as “Loss”)
insofar as a Loss or actions in respect thereof, occurred subsequent to the Effective
Date (except as provided in Section 10.1(a)(iii) below), and arises out of or is based
upon:

	 	(i)	 	any breach by Micrologix of its representations, warranties,
covenants, obligations or agreements under this Agreement; or
	 
	 	(ii)	 	the negligence or willful misconduct of Micrologix and/or any
of Micrologix’s Indemnitees, including violation of Applicable Laws in their
performance under this Agreement; or
	 
	 	(iii)	 	Micrologix’s (or any Subcontractor’s) conduct of the
pre-clinical and clinical research and development activities in connection
with the Product prior to and after the Effective Date; provided however,
Micrologix’s duty to indemnify under this Section 10.1(a)(iii) shall not

 

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	 	 	 	include product liability claims unless Micrologix’s liability for same arises
pursuant to Section 10.1(a)(i) or Section 10.1(a)(ii).

	 	(b)	 	Micrologix’s obligations to indemnify Strata hereunder shall not apply to the
extent any such Loss arises out of or is based on the:

	 	(i)	 	inactions or actions of Strata or its Indemnitees for which
Strata is obligated to indemnify Micrologix under Section 10.2; or
	 
	 	(ii)	 	negligence or willful misconduct of Strata and/or its Indemnitees.

     Section 10.2 Micrologix Indemnified by Strata.

	 	(a)	 	Strata shall indemnify, defend and hold harmless Micrologix and its Indemnitees
from and against any Loss insofar as such Loss or actions in respect thereof occurred
subsequent to the Effective Date, and arises out of or is based upon:

	 	(i)	 	any breach by Strata of its representations, warranties,
covenants, obligations or agreements under this Agreement; or
	 
	 	(ii)	 	the negligence or willful misconduct of Strata and/or any of
Strata’s Indemnitees, including any violation of Applicable Law in their
performance under this Agreement; or
	 
	 	(iii)	 	Strata’s or its Indemnitees’ making, manufacture, marketing,
sale, distribution, storage or promotion of the Product, including any injury
or death to any person or damage to any property caused by any Product provided
by Strata or its Indemnitees, whether by reason of breach of warranty,
negligence, product defect or otherwise, and regardless of the form in which
any such claim is made.

	 	(b)	 	Strata’s obligations to indemnify Micrologix hereunder shall not apply to the
extent any such Loss arises out of or is based on the:

	 	(i)	 	inactions or actions of Micrologix or its Indemnitees for which
Micrologix is obligated to indemnify Strata under Section 10.1; or
	 
	 	(ii)	 	the negligence or willful misconduct of Micrologix and/or its
Indemnitees.

     Section 10.3 Prompt Notice Required.

No claim for indemnification hereunder shall be valid unless notice of the matter which may give
rise to such claim is given in writing by the Party seeking indemnification (the “Indemnified
Party”) to the persons against whom indemnification may be sought (the “Indemnitor”) as soon as
reasonably practicable after such Indemnified Party becomes aware of such claim. Such notice shall
state that the Indemnitor is required to indemnify the Indemnified Party and its
Indemnitees for a Loss and shall specify the amount of Loss, if available, and relevant details
thereof. The Indemnitor shall notify Indemnified Party no later than thirty (30) days from such
notice of its intention to assume the defense of any such claim. Failure of the Indemnified Party
to notify Indemnitor within such notice period shall not relieve Indemnitor of any liability

 

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hereunder, except to the extent the Indemnitor reasonably demonstrates that the defense of such
Third Party claim is prejudiced by such failure.

     Section 10.4 Indemnitor May Settle.

The Indemnitor shall, at its expense, have the right to settle and defend any action which may be
brought in connection with all matters for which indemnification is available. In such event the
Indemnified Party shall cooperate with the Indemnitor as reasonably requested by the Indemnitor in
connection with such action; provided that the Indemnified Party shall have the right to fully
participate in such defence at its own expense. The defence by the Indemnitor of any such actions
shall not be deemed a waiver by the Indemnitor of its right to assert a claim with respect to the
responsibility of the Indemnified Party with respect to the Loss in question. The Indemnitor shall
have the right to settle or compromise any claim against the Indemnified Party without the consent
of the Indemnified Party provided that the terms of any settlement or compromise: (a) does not
materially impair the Indemnified Party’s rights hereunder (including each Party’s rights in the
Micrologix Technology); (b) would not require the Indemnified Party to be subject to an injunction
or to make a monetary payment or would restrict the claims in or admit any invalidity or
unenforceability of the Micrologix Patent Rights; (c) provide for the unconditional release of the
Indemnified Party; and (d) expressly state that neither the fact of settlement nor the settlement
agreement shall constitute, or be construed or interpreted as, an admission by the Indemnified
Party of any issue, fact, allegation or any other aspect of the claim being settled. In all other
cases, the Indemnitor may not settle any such action without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld or delayed. No Indemnified
Party shall pay or voluntarily permit the determination of any liability which is subject to any
such action while the Indemnitor is negotiating the settlement thereof or contesting the matter,
except with the prior written consent of the Indemnitor, which consent shall not be unreasonably
withheld or delayed. If the Indemnitor fails to give Indemnified Party notice of its intention to
defend any such action as provided herein, the Indemnified Party involved shall have the right to
assume the defence thereof with counsel of its choice and defend, settle or otherwise dispose of
such action. If Strata is the Indemnified Party in such case, Strata shall recover its Costs by
deducting its Costs from any royalty payments or any other amounts payable to Micrologix hereunder
in accordance with Section 4.7(c).

     Section 10.5 Insurance.

Each Party shall, at its sole cost and expense, obtain and keep in force during the Term and for a
period of not less than three (3) years after termination, cancellation or expiration of this
Agreement the following insurance: (a) general liability insurance, including blanket contractual
liability coverage with bodily injury, death and property damage with limits of $[***] per
occurrence and $[***] in the aggregate within six months after the Effective Date; and (b) clinical
studies and product liability insurance with bodily injury death and property damage
limits of not less than $[***] per occurrence and $[***] in the aggregate; provided, however, each Party’s
obligation to maintain such product liability insurance shall not commence until

 

			
	***	 	Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

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immediately prior
to the First Commercial Sale of the Product in the first country in the Territory and each Party’s
obligation to maintain such clinical studies insurance shall not commence until immediately prior
to the first human dosing by such Party. Upon execution of this Agreement, and upon the other
Party’s request thereafter, each Party shall furnish the other with a certificate of insurance
signed by an authorized representative of such Party’s insurance underwriter evidencing the
insurance coverage required by this Agreement and providing for at least thirty (30) days prior
written notice to the other Party of any cancellation, termination or reduction of such insurance
coverage. Each Party shall use its Commercially Reasonable Efforts to cause Third Parties engaged
by a Party to perform its obligations under this Agreement to maintain such types of insurance
coverages and for such period of time as are customary for such Third Parties given the nature of
the services to be provided.

ARTICLE 11

ADDITIONAL COVENANTS OF THE PARTIES

     Section 11.1 Micrologix Covenant Not To Compete.

Micrologix hereby covenants and agrees, and shall cause its Affiliates to agree, not to, in whole
or in part, develop, in-license, market, make, manufacture or have manufactured, sell, promote,
distribute or have marketed, have sold or have distributed any product in the Territory in the
Field (in this Section, a “Section 11.1 Competitive Product”) during the Term and for a period of
[***] thereafter. Notwithstanding the foregoing, if Micrologix acquires an entity or all or
substantially all of the assets of an entity during such period of time and such entity distributes
or such assets include a Section 11.1 Competitive Product, Micrologix or its Affiliate shall have
[***] in which to divest itself of such Section 11.1 Competitive Product or to otherwise cease
distribution of such Section 11.1 Competitive Product, and Micrologix shall not be in breach of
this Section 11.1 if it so divests or ceases distribution within such [***] period. Strata and
Micrologix hereby agree that the covenants set forth in this Section 11.1 are a material and
substantial part of the transactions contemplated by this Agreement.

     Section 11.2 Launch of Competitive Product by Strata.

Strata hereby agrees that in the event Strata and/or its Affiliates develop, in-license, market,
sell, promote, distribute or have marketed, or have sold any product in the Field in a particular
country in the Territory that is not a Product hereunder (in this Section, a “Competitive Product”)
during the Term, directly for themselves or by a Third Party, licensee or sublicensee on behalf of
Strata and/or its Affiliates, then pursuant to Section 13.4, Strata’s rights with respect to such
country under this Agreement shall terminate and revert to Micrologix. No termination pursuant to
this Section shall terminate this Agreement with respect to any other country in the Territory.
Notwithstanding the foregoing, if Strata or an Affiliate acquires an entity or all or substantially
all of the assets of an entity during such period of time and such entity distributes or
such assets include a Competitive Product, Strata, or its Affiliate(s), shall have [***] in which to
divest itself of such Competitive Product or to otherwise cease distribution of such Competitive
Product, and Strata shall not be in violation of this Section 11.2 if it so divests or ceases
distribution within such [***] period. The Parties mutually agree that Strata’s (or Affiliates’)

 

			
	***	 	Certain information on this page has been omitted and filed separately with the Commission.
Confidential treatment has been requested with respect to the omitted portions.

 

 

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commercialization, as described above, of any Competitive Product shall not be deemed a breach of
this Agreement, and Micrologix sole recourse for such an event shall be that as described in this
Section 11.2 only.

     Section 11.3 Limitation To The Territory.

Strata hereby covenants that it will not directly or indirectly, without the prior written
authorization of Micrologix: (i) promote or actively solicit the sale of the Product or advertise
the Product, outside of the Territory; (ii) purchase or cause to be purchased Product which Strata
has represented, directly or indirectly, as being for the purpose of sale in a specific country in
the Territory for sale in any other country outside the Territory; (iii) contact any of
Micrologix’s suppliers or vendors of the Product or element thereof for the purpose of causing the
Product to be sold outside the Territory; (iv) knowingly sell or distribute for resale the Product
purchased hereunder to a Third Party who intends to sell the Product outside of the Territory; and
(vi) knowingly sell or distribute for resale Product purchased from a Third Party outside the
Territory for resale in the Territory.

     Section 11.4 Records and Audits.

	 	(a)	 	Each Party shall keep or cause to be kept true, accurate and complete Books and
Records as are required to determine, in a manner consistent with accrual method of
accounting in accordance with GAAP, any sums or credits due under this Agreement during
the Term and for a period of three years thereafter or as otherwise required to comply
with Applicable Laws. Without limiting the generality of the foregoing, the Parties
agree that such Books and Records shall include the following:

	 	(i)	 	Strata shall keep such Books and Records to permit Micrologix
to confirm the completeness and accuracy of (A) the information presented in
each Royalty Statement and all payments due hereunder; (B) the calculation of
Net Sales; (C) any payments due Micrologix under this Agreement; and (D) any
other payment obligations of Strata hereunder.
	 
	 	(ii)	 	Micrologix shall keep such Books and Records to permit Strata
to confirm the completeness and accuracy of (A) Reimbursable Costs; (B) any
payments due Strata under this Agreement; and (C) any other obligations of
Micrologix hereunder.

	 	(b)	 	With regard to sums or credits due or related reports, at the request (and
expense) of the requesting Party, the other Party shall permit the requesting Party
and/or such requesting Party’s independent certified public accountant selected by such
Party and reasonably acceptable to the other Party to audit and/or inspect only
those Books and Records of the other Party as may be necessary to determine, with
respect to any calendar year ending no more than three years prior to such Party’s
request, the completeness and accuracy of any reports made and/or any sums or
credits due under this Agreement. Any such independent accounting firm shall be
subject to the confidentiality provisions of this Agreement. Such inspection shall
be conducted during the Party’s normal business hours, no more than once in any
twelve (12) month period and upon at least thirty (30) days prior 

 

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	 	 	 	written notice by
the requesting Party. If such requesting Party concludes that such payments were
underpaid during the periods reviewed by such requesting Party and/or its
accountants, the other Party shall pay the requesting Party the amount of any such
underpayments, plus interest at a rate equal to the Prime Rate of Interest, within
thirty (30) days of the date the requesting Party delivers to the other Party the
report so concluding that such payments were underpaid. If such requesting Party
and/or its accounting firm concludes that such payments were overpaid during such
period, the Party shall pay to the other Party the amount of any such overpayments,
without interest, within thirty (30) days of the date the requesting Party delivers
to the other Party the report so concluding that such payments were overpaid. The
requesting Party shall bear the full cost of such audit unless such audit discloses
an underpayment by more than [***] *** Certain information on this page has been
omitted and filed separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions. of the amount due during such
period. In such case, the other Party shall bear the full cost of such audit.
	 
	 	(c)	 	In the event the non-requesting Party does not agree with the conclusions of
such report under Section 11.4(b), (whether such payments were underpaid or overpaid),
then such Party shall notify the other Party within thirty (30) days after receipt of
such report. Thereafter, the Parties shall in good faith try and resolve such
differences. If the Parties are unable to reach a mutual agreement within fifteen (15)
days after the date of notice then independent auditors of each Party shall meet and
select an independent accounting firm (being an accounting firm not used by either
Party) to make the final determination within fifteen (15) days thereafter. The
determination of such independent accounting firm shall be binding and conclusive on
the Parties, and the cost of such firm shall be borne by the Party against whom the
determination by such firm is made.
	 
	 	(d)	 	Micrologix shall, upon prior, reasonable notice by Strata and during normal
business hours, allow Strata or its Representative to inspect and audit Micrologix’s
facilities, equipment, personnel and operating procedures (and of any Subcontractor, as
applicable) used to develop the Product and any Books and Records related thereto to
confirm compliance with the terms and conditions of this Agreement, including
compliance with Applicable Laws and Governmental Approvals; provided that Strata shall
use Commercially Reasonable Efforts to ensure that such inspection and audit shall not
interfere with Micrologix’s (or its Subcontractor’s, as applicable) normal operations.
However, notwithstanding the foregoing, Strata shall be permitted to inspect and audit
as provided above
immediately on notice in the event of a bona fide belief that (i) an
Applicable Law is being, or may be, violated or (ii) there is, or may be, an SADE or
imminent and otherwise material harm to the public due to the Product. Without
limiting anything else under this Agreement, if any of the obligations of Micrologix
is performed by a Subcontractor, then Micrologix shall cause any such Subcontractor
to comply with the terms and conditions of this Section 11.4(d). If any inspection
or audit hereunder reveals that Micrologix (or its Subcontractor(s) or other
Representatives) is not in compliance in all material respects with the 

 

	***   	 Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

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	 	 	 	terms and conditions of this Agreement, Applicable Laws, or/and applicable Governmental
Approvals, Micrologix, at its sole cost, shall use Commercially Reasonable Efforts
to promptly correct (and, as applicable, cause its Subcontractor(s) to use
Commercially Reasonable Efforts to promptly correct) any such deficiencies to ensure
compliance as required hereunder. Micrologix shall keep Strata informed on a
regular, on-going and periodic basis as to the status of any such deficiencies and
such corrections.

     Section 11.5 Marketing Expenses.

Strata covenants and agrees that, except as otherwise specified in this Agreement, Strata shall be
solely responsible for the cost and implementation of any and all marketing, sales, promotional and
related activities concerning or related to the marketing, sale, distribution and promotion of the
Product under this Agreement.

     Section 11.6 Further Actions.

Upon the terms and subject to the conditions hereof, each of the Parties shall use its Commercially
Reasonable Efforts to take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary or advisable under Applicable Laws or otherwise to consummate and make
effective the transactions contemplated by this Agreement.

ARTICLE 12

PRODUCT RECALL

     Section 12.1
Product Recalls or Withdrawal.

If at any time or from time to time during the Term: (a) any Competent Authority of any country in
the Territory requests Strata to recall or withdraw the Product; (b) a court of competent
jurisdiction issues an order or directive for the Product to be recalled or withdrawn; or (c) if a
voluntary recall or withdrawal of the Product is contemplated by Strata (individually or
collectively, a “Recall”), then Strata shall carry out any Recall in the Territory in as
expeditious a manner as reasonably possible to preserve the goodwill and reputation of the Product
and the goodwill and reputation of the Parties. Strata shall in all events be responsible for
conducting any Recall in the Territory, market withdrawals or corrections with respect to the
Product in the Territory. Strata shall maintain records of all sales and distribution of Product
and customers sufficient to adequately administer a Recall for the period required by Applicable
Law. Micrologix shall cooperate as reasonably requested by Strata in connection with any such
Recall. Strata will be responsible for complying with all Applicable Laws and Governmental
Approvals during the Recall and will be responsible for all interactions with appropriate Competent
Authorities, including, the FDA Office of Compliance in the U.S. and the appropriate FDA local
district office(s) in the U.S. Strata shall be responsible for preparing and timely submitting any
reports any other documentation required by the Competent Authorities in connection with any such
Recall.

     Section 12.2
Recall Costs.

Strata shall be responsible for conducting any Recall of the Product in the Territory and the cost
and expense therefor shall be paid by Strata, unless such Recall is due to, prior to or during the

 

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Development: (i) any breach by Micrologix of its representations, warranties, covenants,
obligations or agreements under this Agreement; or (ii) the negligence or willful misconduct of
Micrologix and/or any of Micrologix’s Representatives under this Agreement, including violation of
Applicable Laws in their performance under this Agreement; in which case all such costs and
expenses, to the extent same are reasonable, shall be borne and paid solely by Micrologix. In such
event, Micrologix will reimburse Strata for any such costs and expenses paid by Strata within
thirty (30) days of its receipt of a reasonably detailed invoice(s) for such costs and expenses
from Strata.

     Section 12.3
Notification Of Complaints.

During the Term and for a period of four (4) years after the termination, expiration or
cancellation of this Agreement or for such longer period as may be required by Applicable Law(s),
each Party agrees to (a) notify the other Party immediately of all available material information
concerning any complaint, product defect reports, and similar notices received by either Party with
respect to the Product, whether or not determined to be attributable to the Product and (b) with
respect to an SADE, comply with the provisions of Section 6.6. Strata shall define and implement
appropriate and necessary regulatory compliance procedures for product defect reporting, including
action plans and an SOP and will handle all product complaints in the Territory. In connection
with any such product complaint Micrologix shall cooperate as reasonably requested by Strata.
Strata, at its sole cost and expense, will have the responsibility for preparing and submitting any
reports to the Competent Authorities, including FDA field alerts.

     Section 12.4
Notification Of Threatened Action.

During the Term and, for a period of four years after the termination, expiration or cancellation
of this Agreement or for such longer period as may be required by Applicable Law(s), each Party
agrees to immediately notify the other Party of any information it receives regarding any
threatened or pending action, inspection or communication by or from a concerned Competent
Authority which may affect the safety or efficacy claims of the Product or the continued marketing
or distribution of the Product. Upon receipt of such information, the Parties shall consult with
each other in an effort to arrive at a mutually acceptable procedure for taking appropriate action,
provided that, subject to Micrologix’s obligation under Section 6.1 and Applicable Laws during the
Period Micrologix is the IND holder, Strata shall have the final decision making authority with
respect thereto.

ARTICLE 13

TERM AND TERMINATION

     Section 13.1
Term.

This Agreement shall become effective on the Effective Date and shall expire on the date of the
expiration of the last to expire Royalty Term in any country in the Territory (the “Term”), unless
earlier terminated as provided in Section 13.2, Section 13.3 or Section 13.4.

 

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     Section 13.2
Termination by Either Party.

Either Party may terminate this Agreement (in its entirety or on a country by country basis as
hereinafter provided) prior to the expiration of the Term upon the occurrence of any of the
following:

	 	(a)	 	upon or after the cessation of operations of the other Party or the bankruptcy,
dissolution or winding up of the other Party (other than dissolution or winding up for
the purposes or reconstruction or amalgamation which includes an assignment permitted
by this Agreement) or the filing of any involuntary petition for bankruptcy,
dissolution, liquidation or winding up of the affairs of the other Party which is not
dismissed within ninety (90) days after the date on which it is filed or commenced, and
in the case of any of the foregoing events, the non-defaulting Party may terminate the
Agreement in its entirety; or
	 
	 	(b)	 	upon or after the breach of any material provision of this Agreement by the
allegedly breaching Party if the allegedly breaching Party has not cured such breach
within sixty (60) days after written notice thereof by the non-breaching Party, the
non-breaching Party may, at its sole option, terminate this Agreement with respect to
the particular country in the Territory that is the subject of such breach, and this
Agreement shall remain in effect as it applies to all other countries; provided,
however, that if such breach and failure to cure occurred in the United States, the
non-breaching Party may terminate this Agreement in its entirety, and if such breach
and failure to cure occurred in a Major European Market Country, the non-breaching
Party may terminate this Agreement in respect of the whole of Europe. For the
avoidance of doubt, performance of the development and commercialization obligations
required to be performed in accordance with Commercially Reasonable Efforts hereunder
are evaluated based upon the Territory as a whole as set out in Section 1.10.

     Section 13.3
Termination by Strata.

Strata may terminate this Agreement in its entirety, or on a country-by-country basis prior to the
expiration of the Term as follows:

	 	(a)	 	subject to Section 2.3(d), prior to issuance of a Marketing Authorization in
the US, at any time on written notice to Micrologix if it is determined by Strata in
good faith, acting reasonably and in accordance with prudent scientific and business
judgment and otherwise in accordance with generally accepted practices
in the pharmaceutical industry, that the Product is not reasonably expected to
demonstrate safety or efficacy; or
	 
	 	(b)	 	if the Second Phase III Study is commenced, at any time on written notice to
Micrologix if Strata exercises its right to terminate such study pursuant to Section
2.3(d); or
	 
	 	(c)	 	if the Second Phase III Study is not commenced, or after the completion of the
Second Phase III Study, at any time upon one hundred twenty (120) days prior written
notice to Micrologix.

 

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     Section 13.4
Termination by Micrologix.

Micrologix may terminate this Agreement in its entirety or on a country by country basis prior to
the expiration of the Term upon thirty (30) days prior written notice if Strata conducts any of the
activities respecting a Competitive Product in a particular country as set forth in Section 11.2.

     Section 13.5
Effect of Termination.

	 	(a)	 	Payment Obligations. If this Agreement is terminated by either Party pursuant
to Section 13.2, Section 13.3 or Section 13.4, subject to the rights and obligations of
Strata related to selling off Product inventory as provided in Section 13.5(b)(ii) and
Section 13.5(b)(iii) and to pay Reimbursable Costs and certain wind down costs as set
forth in Sections Section 13.5(b)(iv)(A), Strata shall not be obligated to pay any
other wind down costs, milestone payments and/or other monies to Micrologix under this
Agreement, other than payments due and owing prior to the effective date of
termination.
	 
	 	(b)	 	Termination by Either Party. Upon the early termination of this Agreement by
either Party pursuant to Section 13.2, Section 13.3 or Section 13.4, the following
shall occur:

	 	(i)	 	Subject to Section 13.7, Strata, its sublicensees and
Affiliates (as the case may be) shall have no right to practice within the
Micrologix Patent Rights or use any of the Micrologix Technology, and all
rights, title or interest in, or other incidents of ownership under, the
Micrologix Technology shall revert to and become the sole property of
Micrologix, and the licenses granted to Strata under Section 3.1 shall
automatically terminate.
	 
	 	(ii)	 	Notwithstanding Section 13.5(b)(i), provided that this
Agreement is terminated other than: (A) by Micrologix due to the breach of
Strata pursuant to Section 13.2 or Section 13.4; or (B) by Strata pursuant to
Section 13.3; Strata may, in its sole discretion, elect to sell-off or
distribute, as applicable, its existing inventory of Product to which the
termination pertains in accordance with the terms set forth in Section
13.5(b)(iii), after the effective date of termination, by notifying Micrologix
of its decision within thirty (30) days after the date it receives a notice of
termination by Micrologix or the date it provides a notice of termination to
Micrologix, as the case may be.
	 
	 	(iii)	 	If Strata elects pursuant to Section 13.5(b)(ii) to sell-off
or distribute, as applicable, its existing inventory, it shall not, either
directly or indirectly, use or permit the use of the Product except as set
forth under this Section 13.5(b)(iii) and shall proceed as follows:

	 	(A)	 	continue to comply with its royalty obligations
for the Product to Micrologix under Article 4;
	 
	 	(B)	 	continue to sell off or distribute, as
applicable, existing inventory of Product until such time as the
inventory is depleted but in no 

 

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	 	 	 	event more than six (6) months after
the applicable notice of termination. At the expiration of such
period, Strata shall sell all existing inventory of Product to
Micrologix. In such case, Micrologix shall pay to Strata the full
amount of the actual cost paid by Strata, or Strata’s documented
out-of-pocket costs, as applicable, for such remaining inventory of
Product;
	 
	 	(C)	 	if Strata does not elect pursuant to Section
13.5(b)(ii) to sell-off or distribute, as applicable, any existing
inventory of Product, or if this Agreement is terminated by Micrologix
under Section 13.2 or Section 13.4 for Strata’s breach, or by Strata
pursuant to Section 13.3, Strata shall, at Micrologix’s election,
either:

	 	(1)	 	sell all existing inventory of
Product to Micrologix at Strata’s actual cost of acquisition, or
Strata’s documented out-of-pocket costs, as applicable; or
	 
	 	(2)	 	destroy all remaining inventory
of Product in accordance with Applicable Laws and provide
Micrologix with written proof of destruction sufficient to
comply with Applicable Laws.

	 	 	 	In either case, Micrologix shall pay to Strata the actual cost paid
by Strata for such remaining inventory of Product;

	 	(D)	 	if Strata sells any inventory of Product to
Micrologix pursuant to this Section 13.5(b)(iii), it shall warrant that
such inventory of Product has been stored in material compliance with
the applicable specifications therefor, Governmental Approvals and all
Applicable Laws, has not been adulterated within the meaning of
Applicable Laws and has otherwise been maintained by Strata according
to such specifications, Governmental Approvals and Applicable Laws; and
	 
	 	(E)	 	any sales of Product made by Strata to
Micrologix pursuant to this Section 13.5(b)(iii) shall be made by
Strata within thirty (30) days after the date it becomes obligated to
do so and shall be shipped to Micrologix appropriately packaged and
stored. All transportation costs in connection with such sale,
including insurance, freight and
duties, and all reasonable costs of re-working the Product so that
such Product is in saleable form, shall be shared equally by Strata
and Micrologix. Amounts owed by either Party to the other pursuant
to this Section 13.5(b)(iii) for the Product shall be paid by such
Party within ten (10) days after receipt by a Party of a reasonably
detailed invoice from the other Party for the amount so owing to it
by the other Party under this Section 13.5(b)(iii).

	 	(iv)	 	if this Agreement is terminated prior to the completion of the
Development and the payment therefor:

 

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	 	(A)	 	by Micrologix pursuant to Section 13.2 for
Strata’s breach or pursuant to Section 13.4, or by Strata pursuant to
Section 13.3(a) or Section 13.3(b), Strata shall, at Micrologix’s
election, pay Micrologix’s reasonable, wind-down costs under any
Development Subcontract provided that Micrologix uses Commercially
Reasonable Efforts to minimize, or if possible eliminate, such costs.
	 
	 	(B)	 	by Strata pursuant to Section 13.2 due to the
breach of Micrologix, Strata shall have no obligation to pay for any
wind-down costs, milestone payments and/or any other monies due and
owing from and after the effective date of such termination under this
Agreement.

	 	(v)	 	if this Agreement is terminated by Micrologix pursuant to
Section 13.2 for Strata’s breach or pursuant to Section 13.4, or by Strata
pursuant to Section 13.3(a) or Section 13.3(b), to the extent of its legal
right to do so, Strata shall immediately assign or transfer to Micrologix any
Governmental Approvals and trademarks for the Product held in the name of or
Controlled by Strata, if any, in any country in the Territory.
	 
	 	(vi)	 	to the extent of its legal right to do so, Strata shall, at
Micrologix’s request, grant Micrologix a worldwide royalty-bearing, license
under any Strata Work Product necessary to use, market, advertise, promote,
distribute, offer for sale, sell, make, manufacture, have manufactured, export
and import, and develop Products with the right to sublicense and assign the
foregoing, in consideration of such reasonable royalties on net sales by
Micrologix or Product to be negotiated in good faith between Micrologix and
Strata at such time, and if the Parties cannot agree on such license and
royalties, either Party may refer the matter to arbitration pursuant to Article
14. Nothing in this Section shall cause a royalty to be payable in respect of
rights obtained by Micrologix pursuant to Section 5.3 or Section 6.2.
	 
	 	(vii)	 	if this Agreement is terminated by Strata pursuant to Section
13.2 due to the breach of Micrologix, to the extent of its legal right to do
so, Strata shall immediately assign or transfer to Micrologix any Governmental
Approvals and trademarks for the Product held in the name of or
Controlled by Strata, if any, in any country in the Territory, in
consideration of such reasonable royalties on net sales by Micrologix of
Product to be negotiated in good faith between Micrologix and Strata at such
time, and if the Parties cannot agree on such license and royalties, either
Party may refer the matter to arbitration pursuant to Article 14. Nothing in
this Section shall cause a royalty to be payable in respect of rights
obtained by Micrologix pursuant to Section 6.2.
	 
	 	(viii)	 	at the sole option and request of Micrologix, which request shall be made no
more than sixty (60) days after the effective date of termination, if
Micrologix chooses to permit Third Party sublicenses related to the 

 

- 50 -

	 	 	 	Product to survive termination of this Agreement, Strata will cooperate reasonably to
facilitate the transfer of Third Party sublicenses from Strata to Micrologix or
its designee.
	 
	 	(ix)	 	except as otherwise provided in this Agreement, expiration or
termination of this Agreement shall not relieve the Parties of any obligation
accruing prior to such expiration or termination. Except as set forth below or
elsewhere in this Agreement, the obligations and rights of the Parties under
Article 1 (as needed), Section 3.4, Section 4.7(b)(ii), Section 4.7(c), Section
5.3(c), Section 5.3(e) (for a one year period after expiration or termination
of this Agreement, in respect of the manufacture of Product for use in the
Field in the Territory), Section 6.2(b), Section 7.2, Section 7.4, Article 8,
Article 9, Article 10, Article 12, Article 13, Article 14 and Article 15, and
any other that by its terms is intended to survive, shall survive expiration or
termination of this Agreement.
	 
	 	(x)	 	subject to the provision of Section 13.7, within thirty (30)
days following the expiration or termination of this Agreement, each Party
shall return to the other Party, or destroy, upon the written request of the
other Party, any and all Confidential Information of the other Party in its
possession and upon a Party’s request, such destruction (or delivery) shall be
confirmed in writing to such Party by a responsible officer of the other Party,
except for such Confidential Information which the receiving Party is required
to keep under Applicable Laws, in which event such Confidential Information
shall be held subject to the terms and conditions of Article VIII.

	 	(c)	 	Termination on a Country-by-Country Basis. In the event any termination under
this Agreement relates solely to one or more countries in the Territory as permitted
herein, then this Agreement and the license contained in Section 3.1 shall only be
terminated to the extent it applies to such country or countries in the Territory and
this Agreement shall remain in effect as it applies to all other countries in the
Territory.
	 
	 	(d)	 	Bankruptcy Rights. In the event this Agreement is terminated or rejected by a
Party or its receiver or trustee under applicable bankruptcy laws due to such Party’s
bankruptcy, then all rights and licenses granted under or pursuant to this Agreement by
such Party to the other Party are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the Bankruptcy Code in the United States and
other comparable Applicable Law in any other country in the Territory (collectively
“Other Bankruptcy Laws”), licenses of rights to “intellectual property” as defined
under Section 101(52) of the United State Bankruptcy Code. The Parties agree that
all intellectual property rights licensed hereunder, including any patents or patent
applications of a Party in any country covered by the license grants under this
Agreement, are part of the “intellectual property” as defined in Section 101(52) of
the United States Bankruptcy Code, subject to protections afforded the
non-terminating Party under Section 365(n) of United States Bankruptcy Code or Other
Bankruptcy Laws.

 

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     Section 13.6
Remedies.

All of the non-breaching Party’s remedies shall be cumulative, and the exercise of one remedy
hereunder by the non-defaulting Party shall not be deemed to be an election of remedies. These
remedies shall include the non-breaching Party’s other rights of recovery for such breach with or
without terminating this Agreement.

     Section 13.7
License Following Expiration.

Upon expiration of each of the applicable Royalty Terms in each country in the Territory, Strata
shall thereafter have an irrevocable, non-exclusive, royalty-free license in such country, with the
right to sublicense, to use, develop, market, advertise, promote, distribute, make, manufacture,
have manufactured, offer for sale, sell, export and import the Product for use in the Field in the
Territory. Upon request by Strata, Micrologix shall continue to allow Strata to manufacture and
sell the Product under the Micrologix Technology pursuant to a separate agreement to be negotiated
in good faith between the Parties.

ARTICLE 14

DISPUTE RESOLUTION/DAMAGES

     Section 14.1 Disputes.

The Parties recognize that disputes as to certain matters may from time to time arise during the
Term which relate to either Party’s rights and/or obligations hereunder or to the interpretation,
performance, breach, or termination of this Agreement, (a “Dispute”). It is the objective of the
Parties to establish procedures to facilitate the resolution of a Dispute in an expedient manner by
mutual cooperation and without resort to litigation. To accomplish this objective, the Parties
agree to follow the procedures set forth in this Article 14 if and when a Dispute arises under this
Agreement. The Parties acknowledge and agree that nothing under this Article 14 shall in any way
affect, alter, negate or modify Strata’s tie-breaking vote in the JDMC under Section 2.4(d).

Subject to Section 11.4(c), a Dispute among the Parties will be resolved as recited in this Article
14. Any Disputes relating to this Agreement shall be promptly presented to the Chief Executive
Officers of Micrologix and Strata, or their respective designees (who must be members of a Party’s
senior management) for resolution. From the date of referral of a Dispute to the Chief Executive
Officers or their designees of the Parties and until such time as any matter has been resolved by
the Parties or has been finally settled by arbitration hereunder, the running of the cure periods
(if any) as to which a Party must cure a breach that is part of the subject matter of
any Dispute shall be suspended. In the event that the Chief Executive Officers of Micrologix and
Strata, or their respective designees, cannot after good faith negotiations resolve the Dispute
within 10 days (or such other period of time as mutually agreed to by the Parties in writing) of
being requested by a Party to resolve a Dispute, the Parties agree that such Dispute shall be
resolved by binding arbitration in accordance with this Section 14.1.

If a Party intends to begin arbitration to resolve such Dispute, such Party shall provide written
notice (the “Arbitration Notice”) to the other Party informing such other Party of such intention
and the issues to be resolved. Any arbitration hereunder shall be conducted pursuant to the
Commercial Arbitration Rules of the American Arbitration Association (“AAA”), including the
Supplementary Procedures for Large Complex Disputes (the “AAA Rule”) except as modified

 

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herein. The arbitration shall be conducted by a panel of three (3) arbitrators (the “Panel”) to be mutually
agreed upon by the Parties and appointed by the AAA. The arbitrators shall be industry experts
experienced in the issues comprising the Dispute and shall have no past, present or anticipated
future affiliation with either Party. If the Parties are unable to agree upon all or any number of
the three (3) mutually acceptable arbitrators within thirty (30) days after the filing of the
Arbitration Notice, the AAA shall promptly appoint the arbitrator(s) to complete the Panel in
accordance with the criteria set forth in this Section 14.1. The arbitration shall take place in
Denver, Colorado. The Panel shall apply the laws of the State of Delaware, without regard to its
conflicts of laws provisions. The Panel shall issue appropriate protective orders to protect each
Party’s Confidential Information. If a Party can demonstrate to the Panel that the complexity of
the issue or other reasons warrant the extension of one or more timetables in the AAA Rules, the
Panel may extend such timetables but in no event shall the proceeding extend more than twelve (12)
months from the date of filing of the Arbitration Notice with the AAA. The Panel’s decision shall
be in writing. The Panel shall have the authority to award any remedy allowed by law or in equity,
including compensatory damages, pre-judgment interest and to grant final, complete, interim, or
interlocutory relief, including specific performance, injunctions and other equitable relief, but
not punitive or other damages set forth in Section 14.5 and each Party shall be deemed to have
waived any right to such excluded damages. Each Party shall bear its own costs, fees and expenses
in the arbitration and shall share equally the Panel’s fees, unless the Panel determines that its
fees are to be paid by the non-prevailing Party.

     Section 14.2
Performance to Continue.

Each Party shall continue to perform its obligations under this Agreement pending final resolution
of any Dispute arising out of or related to this Agreement; including continuing the Development,
provided, however, that a Party may suspend performance of its obligations during any period in
which the other Party fails or refuses to perform its obligations.

     Section 14.3
Determination of Patents and Other Intellectual Property.

Notwithstanding the foregoing, any dispute relating to the determination of validity of claims,
infringement or claim interpretation relating to Micrologix’s Patents shall be submitted
exclusively to the federal courts.

     Section 14.4 Injunctive Relief.

Nothing in this Agreement shall prevent either Party from seeking a temporary restraining order or
injunction against the other Party as required to prevent such other Party’s misuse of the
intellectual property or Confidential Information of the other Party seeking such temporary
restraining order or injunction. In addition nothing in this Agreement shall prevent Strata from
seeking a temporary restraining order or injunction against Micrologix to prevent any breach by
Micrologix under Section 11.1. The Parties understand and agree that because of the difficulty in
measuring economic losses to the non breaching Party as a result of a breach of the covenants set
forth in this Agreement respecting intellectual property and Confidential Information and because
of the immediate and irreparable damage that may be caused to the non breaching Party for which
monetary damages would not be a sufficient remedy, the Parties agree that the non breaching Party
will be entitled to seek specific performance, temporary and permanent injunctive relief, and such
other equitable remedies to which it may then be entitled against the

 

- 53 -

breaching Party. This Section 14.4 shall not limit any other legal or equitable remedies that the non breaching Party may
have against the breaching Party.

     Section 14.5 No Consequential Damages.

EXCEPT WITH REGARD TO DAMAGES ARISING UNDER SECTION 8.1(B) AND EACH PARTY’S DUTY TO INDEMNIFY THE
OTHER FOR INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES RECOVERED BY A THIRD
PARTY AS PROVIDED UNDER ARTICLE 10, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES INCURRED BY EITHER PARTY UNDER
THIS AGREEMENT OR OTHERWISE.

     Section 14.6
Attorney’s Fees.

In the event of any claim hereunder related to either Party’s infringement of the intellectual
property rights of the other Party or the misuse of Confidential Information of the other Party,
the prevailing party in any such dispute shall pay the reasonable legal fees and costs related
thereto.

ARTICLE 15

MISCELLANEOUS

     Section 15.1
No Solicitation.

Neither Party nor its Affiliates (collectively, the “Initiating Group”) shall, directly or through
its representatives, solicit for employment any officer, director, employee or consultant of the
other Party or its subsidiaries or Affiliates (collectively, the “Other Group”) with whom the
Initiating Group has contact in connection with, or who otherwise is known by the Initiating Group
to participate in, the transactions contemplated by this Agreement for a period of [***]. The
Initiating Group shall not be precluded from hiring any such person who has been terminated by the
Other Group prior to commencement of employment discussions between such person and the Initiating
Group or its representatives. “Solicitation” shall not include any generalized public advertisement
or any other solicitation by the Initiating Group or its
representatives that is not specifically directed toward any such employee of the Other Group or
toward any group of such employees of the Other Group.

     Section 15.2

Assignment; Binding Effect.

Except as otherwise provided in this Agreement, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the Parties hereto (whether by
operation of Applicable Laws or otherwise) without the prior written consent of the other Party,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, either
Party may sell, transfer or assign its rights under this Agreement to any Third Party, as part of a
sale or transfer of substantially all of a Party’s assets; provided that such Third Party agrees

 

			
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in writing to be bound by the terms and conditions of this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto
and their respective permitted successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing herein, expressed or implied, is intended to confer on any
person other than the Parties hereto or their Representatives, respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement. Any purported assignment, sale, transfer, delegation or other
disposition by a Party, except as permitted herein, shall be null and void.

     Section 15.3 Force Majeure.

Neither Party shall be held liable or responsible to the other Party nor be deemed to have
defaulted under or breached this Agreement for failure or delay in fulfilling or performing any
term of this Agreement when such failure or delay is caused by or results from causes beyond the
reasonable control of the affected Party, including fire, flood, embargo, war, act of war (whether
war be declared or not), act of terrorism, failure of supplier, insurrection, riot, civil
commotion, strike, lockout or other labour disturbance, act of God (a “Force Majeure”); provided
that the Party whose performance is delayed or prevented shall provide prompt notice of the Force
Majeure to the other Party. Performance shall be excused so long as the condition constituting
Force Majeure continues and the non-performing Party uses good faith diligent efforts to mitigate,
avoid or end such delay of failure in performance as soon as practicable.

     Section 15.4 Governing Law.

This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, except that no conflict of laws provision shall be applied to make the laws of
any other jurisdiction applicable to this Agreement.

     Section 15.5
Waiver.

Except as specifically provided for herein, the waiver from time to time by either of the Parties
of any of their rights or their failure to exercise any remedy shall not operate or be construed as
a continuing waiver of same or of any other of such Party’s rights or remedies provided in this
Agreement.

     Section 15.6
Severability.

In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

     Section 15.7
No Right to Use Names.

Except as otherwise provided herein, no right, express or implied, is granted by the Agreement to
use in any manner the name “Micrologix,” “Strata” or any other trade name or trademark of the other
Party or its Affiliates in connection with the performance of the Agreement.

 

- 55 -

     Section 15.8 Notices.

All notices and other communications provided for hereunder shall be in writing and shall be mailed
by first-class, registered or certified mail, postage paid, or delivered personally, by overnight
delivery service or by facsimile, computer mail or other electronic means, with confirmation of
receipt, addressed as follows:

	 	 	 	 	 
	 

	 	If to Micrologix:
	 	Micrologix Biotech Inc.
	 

	 	 	 	BC Research Complex
	 

	 	 	 	3650 Wesbrook Mall
	 

	 	 	 	Vancouver, BC Canada V6S 2L2
	 

	 	 	 	Attention: President
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Farris, Vaughan, Wills & Murphy
	 

	 	 	 	2600 — 700 West Georgia Street
	 

	 	 	 	Vancouver, BC Canada V7Y 1B3
	 

	 	 	 	Attention: James Hatton
	 
	 	 	 	 
	 

	 	If to Strata:
	 	Strata Pharmaceuticals, Inc.
	 

	 	 	 	10923 Cloverhurst Way
	 

	 	 	 	San Diego, California 92130
	 

	 	 	 	Attention: CEO
	 
	 	 	 	 
	 

	 	With copies to:
	 	Morrison & Foerster LLP
	 

	 	 	 	3811 Valley Centre Drive, Suite 500
	 

	 	 	 	San Diego, California 92130-2332
	 

	 	 	 	Attention: Jay de Groot

Notice so given shall be deemed given and received (a) if by mail on the fourth day after posting;
(b) by cable, telegram, telex or personal delivery on the date of actual transmission, with
evidence of transmission acceptance, or (as the case may be) personal or other delivery; and (c) if
by overnight delivery courier, on the next business day following the day such notice is delivered
to the overnight delivery courier service.

     Section 15.9 Independent Contractors.

The activities and resources of each Party shall be managed by such Party, acting independently and
in its individual capacity. It is expressly agreed that Micrologix and Strata shall be independent
contractors and that the relationship between the two Parties shall not constitute a partnership or
agency of any kind. Neither Micrologix nor Strata shall have the authority to make any statements,
representations or commitments of any kind, or to take any action, which shall be binding on the
other Party, without the prior written consent of the other Party.

     Section 15.10 Rules of Construction.

The Parties hereto agree that they have been represented by counsel during the negotiation and
execution of this Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other document will be
construed against the Party drafting such agreement or document.

 

- 56 -

     Section 15.11
Entire Agreement; Amendment.

This Agreement (including the Exhibits attached hereto) sets forth all of the covenants, promises,
agreements, warranties, representations, conditions and understandings between the Parties hereto
with respect to the subject matter hereof and supersedes and terminates all prior agreements and
understandings between the Parties, including the Letter Agreement. There are no covenants,
promises, agreements, warranties, representations conditions or understandings, either oral or
written, between the Parties other than as set forth herein. No subsequent alteration, amendment,
change or addition to this Agreement shall be binding upon the Parties hereto unless reduced to
writing and signed by the respective authorized officers of the Parties. Purchase orders, purchase
order releases, confirmations, acceptances and similar documents submitted by a Party in conducting
the activities contemplated under this Agreement are for administrative purposes only and shall not
add to or modify the terms of the Agreement. To the extent of any conflict or inconsistency
between this Agreement and any such document, the terms of this Agreement shall govern.

     Section 15.12
Counterparts; Facsimile.

This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. This Agreement
may be signed and delivered to the other Party by facsimile signature; such transmission will be
deemed a valid signature.

     Section 15.13
Interpretation.

The Section headings contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement. Except where the context clearly requires
to the contrary: (i) each reference in this Agreement to a designated “Section” or “Exhibit” is to
the corresponding Section or Exhibit of or to this Agreement; (ii) instances of gender or
entity-specific usage (e.g., “his” “her” “its” “person” or “individual”) shall not be interpreted
to preclude the application of any provision of this Agreement to any individual or entity; (iii)
“including” shall mean “including, without limitation”; (iv) references to Applicable Laws shall
mean such Applicable Laws in effect during the Term (taking into account any amendments
thereto effective at such time without regard to whether such amendments were enacted or adopted
after the Effective Date); (v) references to “$” or “dollars” shall mean the lawful currency of the
United States; (vi) references to “Federal” or “federal” shall be to laws, agencies or other
attributes of the United States (and not to any State or locality thereof); (vii) references to
“days” shall mean calendar days, unless it is expressly stated as “business days”; and (viii) the
English language version of this Agreement shall govern all questions of interpretation relating to
this Agreement, notwithstanding that this Agreement may have been translated into, and executed in,
other languages.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly
authorized officers as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 
	Micrologix Biotech Inc.	 	 	 	Strata Pharmaceuticals, Inc.	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ James DeMesa	 	 	 	By:	 	/s/ Theodore R. Schroeder	 	 
	Name:

	 	 

James DeMesa
	 	 	 	Name:
	 	 

Theodore R. Schroeder
	 	 
	Title:

	 	President and CEO
	 	 	 	Title:
	 	President and Chief Executive Officer	 	 

 

- 57 -

EXHIBIT A

DEVELOPMENT PLANS

Please refer to the following documents:

	 	•	 	Strata Pharmaceuticals Inc. Development Plan, Timeline and Budget for NDA for LCSI Based
on Second Phase III Study, dated July___, 2004; and
	 
	 	•	 	Strata Pharmaceuticals Inc. Development Plan, Timeline and budget for NDA for CRBSI
Based on First Phase III Study, dated July ___, 2004.

 

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EXHIBIT B

PATENTS

	 	 	 
	Country	 	Application or Patent No.
	USA
	 	[***]
	USA
	 	[***]
	USA
	 	[***]
	USA
	 	[***]
	USA
	 	[***]
	PCT
	 	[***]
	Canada
	 	[***]
	Europe
	 	[***]
	Belgium
	 	[***]
	Switzerland
	 	[***]
	Germany
	 	[***]
	Spain
	 	[***]
	France
	 	[***]
	Great Britain
	 	[***]
	Hong Kong
	 	[***]
	Ireland
	 	[***]
	Italy
	 	[***]
	Europe
	 	[***]
	Hong Kong
	 	[***]

 

			
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	Country	 	Application or Patent No.
	USA
	 	[***]
	USA
	 	[***]
	USA
	 	[***]
	USA
	 	[***]
	PCT
	 	[***]
	Canada
	 	[***]
	Europe
	 	[***]
	Hong Kong
	 	[***]
	USA
	 	[***]
	USA
	 	[***]
	PCT
	 	[***]
	CA
	 	[***]
	Europe
	 	[***]

 

			
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EXHIBIT C

INVENTORY

[***]

 

			
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EXHIBIT D

REGULATORY FILINGS

[***]

 

			
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