Document:

Exhibit
10.27

EXECUTION
COPY

 

EMPLOYMENT
AGREEMENT

 

This
Employment Agreement (the “Agreement”) is
made as of this 1st day of January, 2004, by and between DISCOVERY LABORATORIES,
INC., a Delaware corporation (the “Company”), and
DENI M.
ZODDA, PH.D. (the
“Executive”).

 

WHEREAS,
the Executive is currently employed by the Company as its Senior Vice President,
Business Development pursuant to that certain employment agreement dated as of
August 14, 2000, by and between the Company and the Executive (the “Employment
Agreement”);
and

 

WHEREAS,
the Company and the Executive desire to amend and restate the Employment
Agreement as set forth herein.

 

NOW,
THEREFORE, in consideration of the covenants contained herein, and for other
valuable consideration, the Company and the Executive hereby agree to amend and
restate the Employment Agreement in its entirety to read as
follows:

 

1.  Certain
Definitions. Certain
definitions used herein shall have the meanings set forth on Exhibit A attached
hereto. 

 

2.  Term
of the Agreement. The
term (“Term”) of
this Agreement shall commence on the date first above written and shall continue
through December 31, 2005; provided, however, that commencing on January 1,
2006, and on each January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year, unless at least 90 days prior
to such January 1st date, the Company or the Executive shall have given notice
that it does not wish to extend this Agreement. Upon the occurrence of a Change
of Control during the term of this Agreement, including any extensions thereof,
this Agreement shall automatically be extended until the end of the Effective
Period if the end of the Effective Period is after the then current expiration
date of the Term. Notwithstanding the foregoing, this Agreement shall terminate
prior to the scheduled expiration date of the Term on the Date of Termination.

 

3.  Executive’s
Duties and Obligations.

 

(a)  Duties. The
Executive shall continue to serve as the Company’s Senior Vice President,
Business Development. The Executive shall continue to be responsible for all
duties customarily associated with this title. The Executive shall at all times
report directly to the Company’s Chief Executive Officer.

 

(b)  Location
of Employment. The
Executive’s principal place of business shall continue to be at the Company’s
headquarters to be located within thirty (30) miles of Doylestown, Pennsylvania;
provided, that the Executive acknowledges and agrees that the performance by the
Executive of his duties shall require frequent travel including, without
limitation, overseas travel from time to time.

 

 

 

(c)  Proprietary
Information and Inventions Agreement. The
Executive has executed the Company’s standard form of Intellectual Property and
Confidential Information Agreement (the “Confidentiality
Agreement. The
Executive shall comply at all times with the terms and conditions of the
Confidentiality Agreement and all other reasonable policies of the Company
governing its confidential and proprietary information.

 

4.  Devotion
of Time to Company’s Business.

 

(a)  Full-Time
Efforts. During
his employment with the Company, the Executive shall devote substantially all of
his time, attention and efforts to the proper performance of his implicit and
explicit duties and obligations hereunder to the reasonable satisfaction of the
Company.

 

(b)  No
Other Employment. During
his employment with the Company, the Executive shall not, except as otherwise
provided herein, directly or indirectly, render any services of a commercial or
professional nature to any other person or organization, whether for
compensation or otherwise, without the prior written consent of the Executive
Committee or the Board.

 

(c)  Non-Competition
During and After Employment. During
the Term and for 12 months from the Date of Termination, the Executive shall
not, directly or indirectly, without the prior written consent of the Company,
either as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director, or in any other individual or
representative capacity (X) compete with the Company in the business of
developing or commercializing pulmonary surfactants or any other category of
compounds which forms the basis of the Company’s material products or any
material products under development on the Date of Termination, or (Y) solicit,
encourage, induce or endeavor to entice away from the Company, or otherwise
interfere with the relationship of the Company with, any person who is employed
or engaged by the Company as an employee, consultant or independent contractor
or who was so employed or engaged at any time during the preceding six (6)
months; provided, that
nothing herein shall prevent the Executive from engaging in discussions
regarding employment, or employing, any such employee, consultant or independent
contractor (i) if such person shall voluntarily initiate such discussions
without any such solicitation, encouragement, enticement or inducement prior
thereto on the part of the Executive or (ii) if such discussions shall be held
as a result of or employment be the result of the response by any such person to
a written employment advertisement placed in a publication of general
circulation, general solicitation conducted by executive search firms,
employment agencies or other general employment services, not directed
specifically at any such employee, consultant or independent contractor.
Notwithstanding the foregoing, the 12 month period described in the preceding
sentence shall be extended to 24 months in the event of any termination of the
Executive’s employment described in Section 7(c). 

 

(d)  Injunctive
Relief. In the
event that the Executive breaches any provisions of Section 4(c) or of the
Confidentiality Agreement or there is a threatened breach thereof, then, in
addition to any other rights which the Company may have, the Company shall be
entitled, without the posting of a bond or other security, to injunctive relief
to enforce the restrictions contained therein. In the event that an actual
proceeding is brought in equity to enforce the provisions of Section 4(c) or the
Confidentiality Agreement, the Executive shall not urge as a defense that there
is an adequate remedy at law nor shall the Company be prevented from seeking any
other remedies which may be available.

 

 

2

 

(e)  Reformation. To the
extent that the restrictions imposed by Section 4(c) are interpreted by any
court to be unreasonable in geographic and/or temporal scope, such restrictions
shall be deemed automatically reduced to the extent necessary to coincide with
the maximum geographic and/or temporal restrictions deemed by such court not to
be unreasonable.

 

5.  Compensation
and Benefits.

 

(a)  Base
Compensation. During
the Term, the Company shall pay to the Executive (i) base annual compensation
(“Base
Salary”) of at
least $220,000, payable in accordance with the Company’s regular payroll
practices and less all required withholdings and (ii) additional compensation,
if any, and benefits as hereinafter set forth in this Section 5. The Base Salary
shall be reviewed at least annually at the start of each calendar year for the
purposes of determining increases, if any, based on the Executive’s performance,
the performance of the Company, inflation, the then prevailing salary scales for
comparable positions and other relevant factors. 

 

(b)  Bonuses. During
the Term, the Executive shall be eligible for such year-end bonus, which may be
paid in either cash or equity, or both, as is awarded solely at the discretion
of the Compensation Committee of the Board after consultation with the Company’s
Chief Executive Officer, provided, that
the Company shall be under no obligation whatsoever to pay such discretionary
year-end bonus for any year. Any such equity bonus shall contain such rights and
features as are typically afforded to other Company employees of similar level
in connection with comparable equity bonuses awarded by the Company.

 

(c)  Benefits. During
the Term, the Executive shall be entitled to participate in all employee benefit
plans, programs and arrangements made available generally to the Company’s
senior executives or to its employees on substantially the same basis that such
benefits are provided to such executives or employees (including, without
limitation profit-sharing, savings and other retirement plans (e.g., a 401(k)
plan) or programs, medical, dental, hospitalization, vision, short-term and
long-term disability and life insurance plans or programs, accidental death and
dismemberment protection, travel accident insurance, and any other employee
welfare benefit plans or programs that may be sponsored by the Company from time
to time, including any plans or programs that supplement the above-listed types
of plans or programs, whether funded or unfunded); provided,
however, that
nothing in this Agreement shall be construed to require the Company to establish
or maintain any such plans, programs or arrangements. Anything contained herein
to the contrary notwithstanding, throughout the Term, Executive shall be
entitled to receive life insurance on behalf of Executive’s named beneficiaries
in the amount of Executive’s then current annual salary for the Term of this
Agreement at no cost to the Executive, except the Company shall have no
liability whatsoever for any taxes (whether based on income or otherwise)
imposed upon or incurred by Executive in connection with any such
insurance.

 

(d)  Vacations. During
the Term, the Executive shall be entitled to 15 days paid vacation per year, to
be earned ratably throughout the year, 5 days of which may be carried over from
year to year (provided, that in
no event shall the aggregate number of such vacation days carried over to any
succeeding year exceed 10 days).

 

 

3

 

(e)  Reimbursement
of Business Expenses. The
Executive is authorized to incur reasonable expenses in carrying out his duties
and responsibilities under this Agreement and the Company shall reimburse him
for all such expenses, in accordance with reasonable policies of the
Company.

 

6.  Change
of Control Benefits.

 

(a)  Bonus. The
Executive shall be awarded an annual cash bonus for each fiscal year of the
Company ending during the Effective Period at least equal to the Highest Annual
Bonus.

 

(b)  Options.
Notwithstanding any provision to the contrary in the Company’s Amended and
Restated 1998 Stock Incentive Plan or any stock option agreement between the
Company and the Executive, all options to acquire Company stock held by the
Executive shall accelerate and become fully vested upon the Change of Control
Date and, in the case of any Change of Control in which the Company’s common
stockholders receive cash, securities or other consideration in exchange for, or
in respect of, their Company common stock, (i) the Executive shall be permitted
to exercise his options at a time and in a fashion that will entitle him to
receive, in exchange for any shares acquired pursuant to any such exercise, the
same per share consideration as is received by the other holders of the
Company’s common stock, and (ii) if the Executive shall elect not to exercise
all or any portion of such options, any such unexercised options shall terminate
and cease to be outstanding following such Change of Control, except to the
extent assumed by a successor corporation (or its parent) or otherwise expressly
continued in full force and effect pursuant to the terms of such Change of
Control.

 

7.  Termination
of Employment.

 

(a)  Termination
by the Company for Cause or Termination by the Executive without Good Reason,
Death or Disability.

 

(i)
  In the
event of a termination of the Executive’s employment by the Company for Cause, a
termination by the Executive without Good Reason, or in the event this Agreement
terminates by reason of the death or Disability of the Executive, the Executive
shall be entitled to any unpaid compensation accrued through the last day of the
Executive’s employment, a lump sum payment in respect of all accrued but unused
vacation days (provided, that in
no event shall the aggregate number of such accrued vacation days exceed 10
days) at his Base Salary in effect on the date such vacation was earned, and
payment of any other amounts owing to the Executive but not yet paid. The
Executive shall not be entitled to receive any other compensation or benefits
from the Company whatsoever (except as and to the extent the continuation of
certain benefits is required by law). 

 

(ii)
  In the
case of a termination due to death or disability, notwithstanding any provision
to the contrary in any stock option agreement between the Company and the
Executive, all options to acquire Company stock held by the Executive shall
accelerate and become fully vested upon the Date of Termination (and all options
shall thereupon become fully exercisable), and all stock options shall continue
to be exercisable for one year from the Date of Termination (or, if shorter,
until the expiration of their stated terms).

 

 

4

 

(b)  Termination
by the Company without Cause or by the Executive for Good Reason. If (x)
the Executive’s employment is terminated by the Company other than for Cause,
death or Disability (i.e., without Cause) or (y) the Executive terminates
employment with Good Reason, then the Executive shall be entitled to receive the
following from the Company:

 

(i)
  The
amounts set forth in Section 7(a)(i); 

 

(ii)
  Within 10
days after the Date of Termination, a lump sum cash payment equal to the Highest
Annual Bonus multiplied by the fraction obtained by dividing the number of days
in the year through the Date of Termination by 365; 

 

(iii)
  Within 10
days after the Date of Termination, a lump sum cash payment in an amount equal
to the sum of (A) the Executive’s Base Salary then in effect (determined without
regard to any reduction in such Base Salary constituting Good Reason) and (B)
the Highest Annual Bonus;

 

(iv)
  For one
year from the Date of Termination, the Company shall either (A) arrange to
provide the Executive and his dependents, at the Company’s cost (except to the
extent such cost was borne by the Executive prior to the Date of Termination),
with life, disability, medical and dental coverage, whether insured or not
insured, providing substantially similar benefits to those which the Executive
and his dependents were receiving immediately prior to the Date of Termination,
or (B) in lieu of providing such coverage, pay to the Executive no less
frequently than quarterly in advance an amount which, after taxes, is sufficient
for the Executive to purchase equivalent benefits coverage referred to in clause
(A); provided,
however, that
the Company’s obligation under this Section 7(b)(iv) shall be reduced to the
extent that substantially similar coverages (determined on a benefit-by-benefit
basis) are provided by a subsequent employer; 

 

(v)
  Any other
additional benefits then due or earned in accordance with applicable plans and
programs of the Company; and

 

(vi)
  The
Company will provide out-placement counseling assistance in the form of
reimbursement of the reasonable expenses incurred for such assistance within the
12-month period following the Date of Termination. Such reimbursement amount
shall not exceed $40,000.

 

(c)  Termination
in connection with a Change of Control. If the
Executive’s employment is terminated by the Company other than for Cause or by
the Executive for Good Reason during the Effective Period, then the Executive
shall be entitled to receive the following from the Company:

 

(i)
  All
amounts and benefits described in Section 7(a)(i) above;

 

(ii)
  Within 10
days after the Date of Termination, a lump sum cash payment equal to the Highest
Annual Bonus multiplied by the fraction obtained by dividing the number of days
in the year through the Date of Termination by 365;

 

(iii)
  Within 10
days after the Date of Termination, a lump sum cash payment in an amount equal
to the product of two (2) times the sum of (A) the Executive’s Base Salary then
in effect (determined without regard to any reduction in such Base Salary
constituting Good Reason) and (B) the Highest Annual Bonus;

 

 

5

 

(iv)
  For two
years from the Date of Termination, the Company shall either (A) arrange to
provide the Executive and his dependents, at the Company’s cost (except to the
extent such cost was borne by the Executive prior to the Date of Termination),
with life, disability, medical and dental coverage, whether insured or not
insured, providing substantially similar benefits to those which the Executive
and his dependents were receiving immediately prior to the Date of Termination,
or (B) in lieu of providing such coverage, pay to the Executive no less
frequently than quarterly in advance an amount which, after taxes, is sufficient
for the Executive to purchase equivalent benefits coverage referred to in clause
(A); provided,
however, that
the Company’s obligation under this Section 7(c)(iv) shall be reduced to the
extent that substantially similar coverages (determined on a benefit-by-benefit
basis) are provided by a subsequent employer;

 

(v)
  Notwithstanding
any provision to the contrary in any stock option agreement between the Company
and the Executive, all options to acquire Company stock held by the Executive
shall accelerate and become fully vested upon the Date of Termination (and all
options shall thereupon become fully exercisable), and all stock options shall
continue to be exercisable for the remainder of their stated terms;

 

(vi)
  Any other
additional benefits then due or earned in accordance with applicable plans and
programs of the Company; and

 

(vii)
  The
Company will provide out-placement counseling assistance in the form of
reimbursement of the reasonable expenses incurred for such assistance within the
12-month period following the Date of Termination. Such reimbursement amount
shall not exceed $40,000.

 

8.  Notice
of Termination.

 

(a)  Any
termination of the Executive’s employment by the Company for Cause, or by the
Executive for Good Reason shall be communicated by a Notice of Termination to
the other party hereto given in accordance with Section 12. For purposes of this
Agreement, a “Notice of Termination” means a written notice which: (i) is given
at least 10 days prior to the Date of Termination, (ii) indicates the specific
termination provision in this Agreement relied upon, (iii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (iv) specifies the employment termination date. The
failure to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause will not waive any right of the
party giving the Notice of Termination hereunder or preclude such party from
asserting such fact or circumstance in enforcing its rights
hereunder.

 

(b)  A
Termination of Employment of the Executive will not be deemed to be for Good
Reason unless the Executive gives the Notice of Termination provided for herein
within 12 months after the Executive has actual knowledge of the act or omission
of the Company constituting such Good Reason.

 

 

6

 

9.  Mitigation
of Damages. The
Executive will not be required to mitigate damages or the amount of any payment
or benefit provided for under this Agreement by seeking other employment or
otherwise. Except as otherwise provided in Sections 7(b)(iv) and 7(c)(iv), the
amount of any payment or benefit provided for under this Agreement will not be
reduced by any compensation or benefits earned by the Executive as the result of
self-employment or employment by another employer or otherwise.

 

10.  Excise
Tax Gross-Up.

 

(a)  Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment, award, benefit or distribution (including any
acceleration) by the Company or any entity which effectuates a transaction
described in Section 280G(b)(2)(A)(i) of the Code to or for the benefit of the
Executive (whether pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
10) (a “Payment”) would
be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred with respect to such excise tax by the
Executive (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise
Tax”), then
the Executive shall be entitled to receive an additional payment (a
“Gross-Up
Payment”) in an
amount such that after payment by the Executive of all taxes, including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Taxes imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. For purposes of this Section 10, the Executive shall
be deemed to pay federal, state and local income taxes at the highest marginal
rate of taxation for the calendar year in which the Gross Up Payment is to be
made, taking into account the maximum reduction in federal income taxes which
could be obtained from the deduction of state and local income
taxes.

 

(b)  All
determinations required to be made under this Section 10, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company’s independent auditors or such other certified public accounting
firm of national standing reasonably acceptable to the Executive as may be
designated by the Company (the “Accounting
Firm”) which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested by
the Company. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 10,
shall be paid by the Company to the Executive within five days of the later of
(i) the due date for the payment of any Excise Tax, and (ii) the
receipt of the Accounting Firm’s determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion to such effect, and to the effect that failure
to report the Excise Tax, if any, on the Executive’s applicable federal income
tax return will not result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (“Underpayment”) or
Gross-up Payments are made by the Company which should not have been made
(“Overpayments”),
consistent with the calculations required to be made hereunder. In the event the
Executive is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive. In the event the amount of Gross-up Payment exceeds the amount
necessary to reimburse the Executive for his Excise Tax, the Accounting Firm
shall determine the amount of the Overpayment that has been made and any such
Overpayment shall be promptly paid by the Executive (to the extent he has
received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. The Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise
Tax.

 

 

7

 

11.  Legal
Fees. All
reasonable legal fees and related expenses (including costs of experts, evidence
and counsel) paid or incurred by the Executive pursuant to any claim, dispute or
question of interpretation relating to this Agreement shall be paid or
reimbursed by the Company if the Executive is successful on the merits pursuant
to a legal judgment or arbitration. Except as provided in this Section 11, each
party shall be responsible for its own legal fees and expenses in connection
with any claim or dispute relating to this Agreement.

 

12.  Notices.
All
notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or
mailed within the continental United States by first class certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

(a)  if to the
Board or the Company:

 

Discovery
Laboratories, Inc. 
350 South
Main Street, Suite 307 
Doylestown,
PA 18901 
Attn:
David Lopez, Esq.

 

(b)  if to the
Executive:

 

Deni M.
Zodda, Ph.D. 
The
address on file with the records of the Company

 

Addresses
may be changed by written notice sent to the other party at the last recorded
address of that party.

 

13.  Withholding.
The
Company shall be entitled to withhold from payments due hereunder any required
federal, state or local withholding or other taxes.

 

14.  Entire
Agreement. This Agreement contains the entire agreement between the parties
with respect to the subject matter hereof and supercedes the Employment
Agreement and all other prior agreements, written or oral, with respect
thereto.

 

15.  Arbitration.

 

(a)  If the
parties are unable to resolve any dispute or claim relating directly or
indirectly to this agreement (a “Dispute”), then
either party may require the matter to be settled by final and binding
arbitration by sending written notice of such election to the other party
clearly marked “Arbitration Demand”. Thereupon such Dispute shall be arbitrated
in accordance with the terms and conditions of this Section 15. Notwithstanding
the foregoing, either party may apply to a court of competent jurisdiction for a
temporary restraining order, a preliminary injunction, or other equitable relief
to preserve the status quo or prevent irreparable harm.

 

 

8

 

(b)  The
arbitration panel will be composed of three arbitrators, one of whom will be
chosen by the Company, one by the Executive, and the third by the two so chosen.
If both or either of the Company or the Executive fails to choose an arbitrator
or arbitrators within 14 days after receiving notice of commencement of
arbitration, or if the two arbitrators fail to choose a third arbitrator within
14 days after their appointment, the American Arbitration Association shall,
upon the request of both or either of the parties to the arbitration, appoint
the arbitrator or arbitrators required to complete the panel. The arbitrators
shall have reasonable experience in the matter under dispute. The decision of
the arbitrators shall be final and binding on the parties, and specific
performance giving effect to the decision of the arbitrators may be ordered by
any court of competent jurisdiction.

 

(c)  Nothing
contained herein shall operate to prevent either party from asserting
counterclaim(s) in any arbitration commenced in accordance with this Agreement,
and any such party need not comply with the procedural provisions of this
Section 15 in order to assert such counterclaim(s).

 

(d)  The
arbitration shall be filed with the office of the American Arbitration
Association (“AAA”)
located in New York, New York or such other AAA office as the parties may agree
upon (without any obligation to so agree). The arbitration shall be conducted
pursuant to the Commercial Arbitration Rules of AAA as in effect at the time of
the arbitration hearing, such arbitration to be completed in a 60-day period. In
addition, the following rules and procedures shall apply to the
arbitration:

 

(i)
  The
arbitrators shall have the sole authority to decide whether or not any Dispute
between the parties is arbitrable and whether the party presenting the issues to
be arbitrated has satisfied the conditions precedent to such party’s right to
commence arbitration as required by this Section 15. 

 

(ii)
  The
decision of the arbitrators, which shall be in writing and state the findings,
the facts and conclusions of law upon which the decision is based, shall be
final and binding upon the parties, who shall forthwith comply after receipt
thereof. Judgment upon the award rendered by the arbitrator may be entered by
any competent court. Each party submits itself to the jurisdiction of any such
court, but only for the entry and enforcement to judgment with respect to the
decision of the arbitrators hereunder.

 

(iii)
  The
arbitrators shall have the power to grant all legal and equitable remedies
(including, without limitation, specific performance) and award compensatory
damages provided by applicable law, but shall not have the power or authority to
award punitive damages. No party shall seek punitive damages in relation to any
matter under, arising out of, or in connection with or relating to this
Agreement in any other forum.

 

 

9

 

(iv)
  Except as
provided in Section 11, the parties shall bear their own costs in preparing for
and participating in the resolution of any Dispute pursuant to this Section 15,
and the costs of the arbitrator(s) shall be equally divided between the
parties.

 

(v)
  Except as
provided in the last sentence of Section 15(a), the provisions of this Section
15 shall be a complete defense to any suit, action or proceeding instituted in
any federal, state or local court or before any administrative tribunal with
respect to any Dispute arising in connection with this Agreement. Any party
commencing a lawsuit in violation of this Section 15 shall pay the costs of the
other party, including, without limitation, reasonable attorney’s fees and
defense costs.

 

16.  Miscellaneous.

 

(a)  Governing
Law. This
Agreement shall be interpreted, construed, governed and enforced according to
the laws of the State of New York without regard to the application of choice of
law rules.

 

(b)  Amendments. No
amendment or modification of the terms or conditions of this Agreement shall be
valid unless in writing and signed by the parties hereto.

 

(c)  Severability. If one
or more provisions of this Agreement are held to be invalid or unenforceable
under applicable law, such provisions shall be construed, if possible, so as to
be enforceable under applicable law, or such provisions shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

 

(d)  Binding
Effect. This
Agreement shall be binding upon and inure to the benefit of the beneficiaries,
heirs and representatives of the Executive (including the Beneficiary) and the
successors and assigns of the Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or
substantially all of its assets, by agreement in form and substance satisfactory
to the Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
this Agreement if no such succession had taken place. Regardless whether such
agreement is executed, this Agreement shall be binding upon any successor of the
Company in accordance with the operation of law and such successor shall be
deemed the Company for purposes of this Agreement.

 

(e)  Successors
and Assigns. Except
as provided in Section16(d) in the case of the Company, or to the Beneficiary in
the case of the death of the Executive, this Agreement is not assignable by any
party and no payment to be made hereunder shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or other
charge.

 

(f)  Remedies
Cumulative; No Waiver. No
remedy conferred upon either party by this Agreement is intended to be exclusive
of any other remedy, and each and every such remedy shall be cumulative and
shall be in addition to any other remedy given hereunder or now or hereafter
existing at law or in equity. No delay or omission by either party in exercising
any right, remedy or power hereunder or existing at law or in equity shall be
construed as a waiver thereof, and any such right, remedy or power may be
exercised by such party from time to time and as often as may be deemed
expedient or necessary by such party in such party’s sole
discretion.

 

 

10

 

(g)  Survivorship.
Notwithstanding anything in this Agreement to the contrary, all terms and
provisions of this Agreement that by their nature extend beyond the termination
of this Agreement shall survive such termination.

 

(h)  Entire
Agreement. This
Agreement sets forth the entire agreement of the parties hereto with respect to
the subject matter contained herein and supersedes all prior agreements,
promises, covenants or arrangements, whether oral or written, with respect
thereto. 

 

(i)  Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
one document.

 

17.  No
Contract of Employment. Nothing
contained in this Agreement will be construed as a right of the Executive to be
continued in the employment of the Company, or as a limitation of the right of
the Company to discharge the Executive with or without Cause.

 

18.  Executive
Acknowledgement. The
Executive hereby acknowledges that he has read and understands the provisions of
this Agreement, that he has been given the opportunity for his legal counsel to
review this Agreement, that the provisions of this Agreement are reasonable and
that he has received a copy of this Agreement.

 

11

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to be
executed as of the date first above written.

 

DISCOVERY
LABORATORIES, INC. 

 

	 	 
	
       By:   
	/s/ Robert J.
  Capetola  
	 	
      

    
	 	
      Name: Robert J. Capetola, Ph.D.

      Title:
      President and Chief Executive
Officer

 

 

	 	 
	
            
	/s/ Deni M.
  Zodda   
	 	
      

    
	 	Deni M. Zodda,
Ph.D.

 

 

12

 

EXHIBIT
A

 

(a)  “Beneficiary” means
any individual, trust or other entity named by the Executive to receive the
payments and benefits payable hereunder in the event of the death of the
Executive. The Executive may designate a Beneficiary to receive such payments
and benefits by completing a form provided by the Company and delivering it to
the General Counsel of the Company. The Executive may change his designated
Beneficiary at any time (without the consent of any prior Beneficiary) by
completing and delivering to the Company a new beneficiary designation form. If
a Beneficiary has not been designated by the Executive, or if no designated
Beneficiary survives the Executive, then the payment and benefits provided under
this Agreement, if any, will be paid to the Executive’s estate, which shall be
deemed to be the Executive’s Beneficiary.

 

(b)  “Cause” means:
(i) the Executive’s willful and continued neglect of the Executive’s duties with
the Company (other than as a result of the Executive’s incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Company which specifically identifies the
manner in which the Company believes that the Executive has neglected his
duties; (ii) the final conviction of the Executive of, or an entering of a
guilty plea or a plea of no contest by the Executive to, a felony; or (iii) the
Executive’s willful engagement in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. 

 

For
purposes of this definition, no act or failure to act on the part of the
Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without a reasonable belief that the
action or omission was in the best interests of the Company. Any act, or failure
to act, based on authority given pursuant to a resolution duly adopted by the
Board of Directors of the Company (the “Board”), or
the advice of counsel to the Company, will be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and in the best interests
of the Company.

 

(c)  “Change
of Control” means
the occurrence of any one of the following events: 

 

(i)
  any
“person” (as defined in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the “Exchange
Act”)),
other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, an underwriter temporarily holding
securities pursuant to an offering of such securities or any corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, directly or
indirectly acquires “beneficial ownership” (as defined in Rule 13d-3 under the
Exchange Act) of securities representing 35% of the combined voting power of the
Company’s then outstanding securities;

 

(ii)
  persons
who, as of the date of this Agreement constitute the Board (the “Incumbent
Directors”) cease
for any reason, including without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a majority
thereof; provided, that
any person becoming a director of the Company subsequent to the date of this
Agreement shall be considered an Incumbent Director if such person’s election or
nomination for election was approved by a vote of at least two-thirds (2/3) of
the Incumbent Directors in an action taken by the Board or a Committee thereof;
provided,
further, that
any such person whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of members of the
Board or other actual or threatened solicitation of proxies or consents by or on
behalf of a “person” (as defined in Section 13(d) and 14(d) of the Exchange
Act) other than the Board, including by reason of agreement intended to avoid or
settle any such actual or threatened contest or solicitation, shall not be
considered an Incumbent Director;

 

 

13

 

(iii)
  the
consummation of a reorganization, merger, statutory share exchange,
consolidation or similar corporate transaction (each, a “Business
Combination”) other
than a Business Combination in which all or substantially all of the individuals
and entities who were the beneficial owners of the Company’s voting securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the voting securities
of the entity resulting from such Business Combination (including, without
limitation, an entity which as a result of the Business Combination owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership of the Company’s voting securities immediately prior to such Business
Combination; or

 

(iv)
  the
Company consummates a sale of all or substantially all of the assets of the
Company or the stockholders of the Company approve a plan of complete
liquidation of the Company.

 

(d)  “Change
of Control Date” means
any date after the date hereof on which a Change of Control occurs; provided,
however, that if a Change of Control occurs and if the Executive’s employment
with the Company is terminated or an event constituting Good Reason (as defined
below) occurs prior to the Change of Control, and if it is reasonably
demonstrated by the Executive that such termination or event (i) was at the
request of a third party who has taken steps reasonably calculated to effect the
Change of Control, or (ii) otherwise arose in connection with or in anticipation
of the Change of Control then, for all purposes of this Agreement, the Change of
Control Date shall mean the date immediately prior to the date of such
termination or event. 

 

(e)  “Code” means
the Internal Revenue Code of 1986, as amended and the regulations promulgated
thereunder.

 

(f)  “Date
of Termination” means
the date specified in a Notice of Termination pursuant to Section 8 hereof, or
the Executive’s last date as an active employee of the Company before a
termination of employment due to death, Disability or other reason, as the case
may be.

 

(g)  “Disability” means a
mental or physical condition that renders the Executive substantially incapable
of performing his duties and obligations under this Agreement, after taking into
account provisions for reasonable accommodation, as determined by a medical
doctor (such doctor to be mutually determined in good faith by the parties) for
three or more consecutive months or for a total of six months during any 12
consecutive months; provided, that
during such period the Company shall give the Executive at least 30 days’
written notice that it considers the time period for disability to be running.

 

 

14

 

(h)  “Effective
Period” means
the period beginning on the Change of Control Date and ending 24 months after
the date of the related Change of Control.

 

(i)  “Good
Reason” means,
unless the Executive has consented in writing thereto, the occurrence of any of
the following: (i) the assignment to the Executive of any duties inconsistent
with the Executive’s position, including any change in status, title, authority,
duties or responsibilities or any other action which results in a material
diminution in such status, title, authority, duties or responsibilities; (ii) a
reduction in the Executive’s Base Salary by the Company; (iii) the relocation of
the Executive’s office to a location more than 30 miles from Doylestown,
Pennsylvania; (iv) the failure of the Company to comply with the provisions of
Section 6(a); (v) following a Change of Control, unless a plan providing a
substantially similar compensation or benefit is substituted, (A) the failure by
the Company to continue in effect any material fringe benefit or compensation
plan, retirement plan, life insurance plan, health and accident plan or
disability plan in which the Executive was participating prior to the Change of
Control, or (B) the taking of any action by the Company which would adversely
affect the Executive’s participation in or materially reduce his benefits under
any of such plans or deprive him of any material fringe benefit; or (vi) the
failure of the Company to obtain the assumption in writing of the Company’s
obligation to perform this Agreement by any successor to all or substantially
all of the assets of the Company within 15 days after a Business Combination or
a sale or other disposition of all or substantially all of the assets of the
Company.

 

(j)  “Highest
Annual Bonus” means
the largest annual cash bonus paid to the Executive by the Company with respect
to the three fiscal years of the Company immediately preceding the year
containing the Change of Control Date or the Date of Termination, as applicable
(annualized for any fiscal year consisting of less than 12 full
months).

 

 

15Exhibit
10.28

EXECUTION
COPY

	 

AMENDED
AND RESTATED 

SUBLICENSE
AND COLLABORATION AGREEMENT

between

DISCOVERY
LABORATORIES, INC.

and

LABORATORIOS
DEL DR. ESTEVE, S.A.

 

Concerning
Sinapultide

December
3, 2004

	 

                                 
                     

AMENDED
AND RESTATED

SUBLICENSE
AND COLLABORATION AGREEMENT

 

THIS
AMENDED AND RESTATED SUBLICENSE AND COLLABORATION AGREEMENT (this “Agreement” or
“Revised
Collaboration Agreement”) is
made as of December 3, 2004 (the “Effective
Date”),
between DISCOVERY LABORATORIES, INC. (“Licensor”), a
Delaware corporation, and LABORATORIOS
DEL DR. ESTEVE, S.A., a
corporation organized and existing under the laws of Spain (“Licensee”).

 

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

 

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

 

WHEREAS,
Licensor and Licensee have entered into a Sublicense Agreement and a Supply
Agreement, in each case dated March 6, 2002, for the commercialization of
Licensed Products (as such term is defined therein);

 

WHEREAS,
Licensor and Licensee desire to replace the aforementioned agreements by an
Amended and Restated Sublicense and Collaboration Agreement and an Amended and
Restated Supply Agreement, in order to modify the collaborative relationship
between the parties and the territories where Licensee shall be entitled to
commercialize the Licensed Products (as such term is hereinafter defined).

 

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

 

ARTICLE
1

DEFINITIONS

 

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

 

“Affiliate(s)” of a
Person shall mean any Person which directly or indirectly Controls, is
Controlled by or is under common Control with such Person.

 

“Business
Day” shall
mean any day on which banking institutions are open or authorized to be open in
the Commonwealth of Pennsylvania and in Barcelona, Spain.

 

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

 

 

1

 

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

 

“EMEA” shall
mean the European Medicines Evaluation Agency or any successor entity
thereof.

 

“FDA” shall
mean the United States Food and Drug Administration or any successor entity
thereof.

 

“Initial
Period” shall
mean, on a country by country and Licensed Product-by-Licensed Product basis,
the period beginning on the Effective Date and ending on that date that is the
latest of the following dates:

 

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

 

	(ii)  	
      the
      first commercial sale of the first to appear generic formulation of the
      subject Licensed Product in such country;
or

 

	(iii)  	
      the
      tenth (10th)
      anniversary of the first commercial sale of the subject Licensed Product
      in such country.

 

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

 

“Licensed
Methods” shall
mean the methods for the Licensed Products arising before or during the course
of this Agreement which are proprietary to the Licensor and/or with respect to
which Licensor has the power and right to grant the licenses provided for herein
and which relate to the development or therapeutic use of Licensed Products.

 

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

 

“Licensed
Products” shall
mean surfactant pharmaceutical compositions which are formulations of lipids and
solely the polypeptide sinapultide and, in no manner whatsoever in any
composition including any other pharmacological agents, that have been developed
by Licensor or that may be developed by Licensor during the term of this
Agreement limited to the following:

 

 

2

 

	 (i)	In
      suspension for pulmonary instillation or in aerosol formulation, for the
      prophylaxis and/or treatment of Respiratory Distress Syndrome (RDS),
      Meconium Aspiration Syndrome (MAS), Acute Lung Injury (ALI), Acute
      Respiratory Distress Syndrome (ARDS), and/or Bronchopulmonary Dysplasia
      (BPD), in each case in the hospital setting;
	 	 
	 (ii)	In
      any formulations (including, without limitation, any associated devices/
      apparatus) for use in conjunction with nasal continuous positive airway
      pressure for neonatal pulmonary disorders solely treated in the Neonatal
      Intensive Care Unit (NICU) (collectively, nCPAP Licensed Product(s));
      and
	 	 
	 (iii)	In any formulations which may be developed
      for the treatment of asthma and/or chronic obstructive pulmonary disease
      (COPD) diagnosed and treated in the hospital setting.
	 	 

 

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

 

“Licensed
Territory” shall
mean Andorra, Greece, Italy (including the Republic of San Marino and the
Vatican City), Portugal, and Spain.

 

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

 

“MAA” means a
Marketing Authorisation Application submitted to the EMEA or with any regulatory
authority of any country within the Licensed Territory.

 

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

 

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

 

“Original
Licensor” shall
mean Johnson & Johnson, Inc.

 

“Patent
Rights” shall
mean any patents and/or patent applications which contain one or more Valid
Claims covering the Licensed Products whether owned by Licensor or to which
Licensor may have rights during the term of this Agreement, including (i) the
patents and patent applications set forth on Schedule I hereto; (ii) any other
patents or patent applications covering the surfactant pharmaceutical
compositions referenced in the patents and patent applications in Schedule I or
their use or administration owned by Licensor or under which Licensor has the
right, at any time while this Agreement is in effect, to license to Licensee;
and (iii) with respect to the foregoing letters patent and patent applications,
all corresponding national patents and patent applications, Patent Cooperation
Treaty and European Patent Convention filings and applications and filings and
applications under similar administrative international conventions, together
with any divisional, continuation, continuation-in-part, substitution, reissue,
extension, supplementary protection certificate or other application based
thereon. Notwithstanding the foregoing, “Patent Rights” shall not include any
patents or patent applications, filings, or applications under any treaty, or
any divisional, continuation, continuation-in-part, substitution, reissue,
extension, supplementary protection certificate or other application that do not
relate in whole or in part to any of the Licensed Products.

 

 

3

 

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

 

“Phase
2” shall
mean that portion of clinical trials of a candidate drug in the target patient
population of a sufficient number and sufficient length of time whereby adequate
safety data is provided and there is a clear indication of dosage effects with
respect to efficacy as defined in the study protocol for such drug
candidate.

 

“Phase
3 Development” means
those clinical trials intended to generate safety and efficacy data to support
regulatory approval in the proposed therapeutic indication.

 

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

 

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

 

“Trademark” shall
mean Surfaxin® and such
other trademarks owned by Licensor that are selected by the Development
Committee (as defined in Section 5.6) for use within the Licensed Territory in
connection with one or more Licensed Products.

 

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

 

ARTICLE
2
GRANT

 

Section
2.1. Grant
of License.
Licensor hereby grants to Licensee, and Licensee hereby accepts from Licensor,
upon the terms and conditions herein specified, an exclusive license under the
Patent Rights, the Licensed Know-how and the Trademark, and the right to
practice Licensed Methods, solely in connection with the importation, promotion,
distribution, use and sale of Licensed Products under the Trademark in the
Licensed Territory. Licensor hereby agrees that it shall not grant any other
licenses to exploit the Licensed Rights or the Licensed Products in the Licensed
Territory to any third party (including, without limitation, its Affiliates)
during the term of this Agreement. The license granted hereunder does not
include any right or license of Licensee to make or have made Licensed Products,
all such right and license being hereby retained by Licensor. The license
granted under this Article 2 shall be subject to the terms and conditions of
this Agreement and the following terms:

 

 

4

 

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

 

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

 

(c)  The
reserved right of Licensor, to use the Licensed Rights for research and
development purposes and, to the extent permitted by Section 7.2, for
publication purposes subject to approval by Licensee, which approval shall not
be unreasonable withheld; and

 

(d)  The
Standard of Diligence (as such term is set forth in Section 5.6).

 

Licensee
shall have no right to sublicense or otherwise share its rights hereunder with
any other Person other than (i) Affiliates of Licensee (provided that Licensee
shall not be relieved of any of its obligations under this Agreement), as
provided for in Section 15.9, and (ii) third parties pursuant to a sublicense or
distribution agreement complying with Section 2.3. 

 

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

 

Section
2.3. Sublicense
Agreements. Subject
to prior determination by the Steering Committee (in accordance with Section
6.1) on a Licensed Product-by-Licensed Product and country-by-country basis that
any sublicensing, co-marketing or co-promotion, as applicable, is consistent
with maximizing the value of the subject Licensed Product, Licensee shall be
entitled to (X) sublicense its rights and obligations under the Agreement in any
country of the Licensed Territory, with the exception of the country of Spain or
(Y) co-market or co-promote in any country of the Licensed Territory, provided
that for each of (X) and (Y), above, (i) any such sublicense or co-marketing/
promotion agreement shall be under terms no less stringent than the ones
contained in this Agreement including, without limitation, Licensee’s
performance requirements set forth in Section 5.6; (ii) any such sublicense or
co-marketing/ promotion agreement shall not be an effective assignment of all of
Licensee’s rights and a delegation of all of its obligations under this
Agreement, (iii) Licensee shall have obtained the approval of the Steering
Committee (in accordance with Section 6.1) for the sublicense, co-marketing or
co-promotion partner, which approval shall not be unreasonably withheld or
delayed and (iv) Licensee hereby warrants and represents that any such
sublicensee or co-promotion/ co-marketing partner of Licensee will comply with
all applicable terms of this Agreement and, further, Licensee guarantees
performance of this Agreement by any such party.

 

 

5

 

The
parties hereto agree and acknowledge that the performance of the obligations
hereunder shall take into account the following: (A) that solely with respect to
the Licensed Product that is Surfaxin® for RDS
and/or BPD, it is the prior mutual strategic determination of Licensor and
Licensee that sublicensing shall be allowed for Italy and Greece, without any
further approval from the Steering Committee, except as may be provided for with
respect to the selection and approval of actual sublicensees in accordance with
this Section 2.3, and (B) in the event of co-promotion or co-marketing of
Licensed Products in Spain, Licensee shall be primarily responsible for the
promotional and marketing activities for any such Licensed Products through its
own marketing and sales forces.

 

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

 

Section
2.5. Right
of First Negotiation on New Products. For a
period of [***] years from the Effective Date (“New Product Negotiation Term”),
subject, however, to prior termination as hereinafter provided in Article
8,
Licensor shall grant to Licensee an exclusive right of first negotiation to a
maximum of [***] future
products developed by Licensor (each a “New
Product”),
solely to the extent to which Licensor is not legally restricted or prevented
from licensing any such rights within the Licensed Territory, in accordance with
the following terms and conditions:

 

(a) Within
sixty (60) days of completion of Licensor’s written clinical study report(s) for
all Phase 2 clinical trials with respect to any such product opportunity,
Licensor shall present in
writing, including a copy of the relevant Phase II clinical study final
report(s), such product opportunity to Licensee together with any additional
information which, at Licensor’s judgment, is reasonably necessary for Licensee
to evaluate its possible interest in the New Product in a manner that is
reasonably intended to provide a basis for Licensee’s decision as to whether to
exercise its option hereunder (a “New
Product Presentation”). At
Licensee’s request, Licensor shall provide Licensee with any additional
information solely to the extent that such additional information is reasonably
necessary for Licensee to evaluate its possible interest in the New
Product.

 

(b) Within
sixty (60) days from the date of any such New Product Presentation, Licensee
shall notify Licensor in writing of Licensee’s intention to enter into
negotiations to license the rights to any such product. Should Licensee fail to
notify Licensor of Licensee’s intention to license such rights or should
Licensee notify Licensor of Licensee’s lack of intent to license such rights,
Licensor
shall have the immediate right to offer the New Product opportunity to any other
third party offeree(s) without any further obligation hereunder. In the

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

 

6

 

event
that Licensee has notified Licensor of its intent to license any such rights,
Licensee and Licensor hereby expressly agree that such license or any other
similar grant of rights in respect thereto shall contain, among other customary
terms and conditions, the following:

 

	 	
      (i)
	
      up-front
      cash payment(s) to be paid by Licensee to Licensor in amounts that are
      consistent with customary pharmaceutical industry practices and
      appropriate with reference to the technology value and potential product
      value of such New Product;

 

	 	
      (ii)
	
      Licensor,
      Licensee and other sublicensees of the Licensor shall share all future
      clinical development work and or expenses with respect to any such New
      Product opportunity, in relation with Phase 3 clinical trials necessary to
      obtain and/or maintain the Marketing Regulatory Approvals in the Licensed
      Territory, on a [***]
      basis using the relevant IMS annual global pharmaceutical data relative to
      the aggregate pharmaceutical market size of the proposed licensed
      territory for all pharmaceutical products as the basis of determining the
      amount of such costs to be borne by each of the parties at the
      time.
      Licensee and its sublicensees shall be responsible for the work and costs
      associated with any and all clinical development activities that is
      conducted in the Licensed Territory for the New Product that are not
      necessary to obtain or maintain Marketing Regulatory Approval for any such
      New Product;

 

	 	
      (iii)
	
      payment
      to Licensor of cash milestones in amounts that are consistent with
      customary pharmaceutical industry practices and are reflective of the
      value of such New Product created during the development process and which
      amounts take into account Licensee’s contribution to development of any
      such value;

 

	 	
      (iv)
	
      Licensee
      shall be responsible for customary commercialization costs associated with
      the New Product including, without limitation, sales, marketing,
      distribution, and safety and medical affairs expenses, in a manner similar
      to that set forth in this Agreement with respect to Licensed Products;
      and

 

	 	
      (v)
	
      Licensor
      shall be responsible for the manufacture of any such New Product. The
      economic terms for the New Product, which shall duly take into account the
      development expenses and cash milestones paid by Licensee for any such New
      Product, shall ensure a reasonable profit for the parties in the light of
      the prevailing and expected market conditions at that
  time.

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

7

(c) In cases
where Licensee has indicated its intention to enter into negotiations to license
rights to a New Product as provided hereunder and the parties fail to enter into
definitive agreements within hundred and twenty (120) days of the date of
Licensee’s notice, delivered to Licensor in accordance with Section 2.5(b)
(hereinafter, such event being defined as an “Unrealized New Product”),
Licensor
shall have the right to offer the Unrealized New Product opportunity to any
other third party offeree(s) at terms and conditions that are in substance no
more favorable for such other third party offeree(s) than those last offered to
Licensee in writing, provided, however, that Licensor shall not execute any
agreement on the New Product with any such third party offeree(s) without
previously offering Licensee the right to enter into an agreement on
substantially similar terms than those contained in the final agreement with the
relevant third party offeree.

 

(d)  Should
senior executive officers of Licensor become aware of the possible interest of
any third party to enter into an agreement in relation with any New Product
prior to completion of all Phase 2
clinical trials, then Licensor shall promptly notify Licensee of such possible
interest of a third party. In such event, and notwithstanding
Section 2.5(a) herein, Licensor
and Licensee agree to initiate good faith negotiations with respect of such New
Product with a
view to enter into an agreement for the development and commercialization of
such New Product prior to the completion of the Phase 2 development for that New
Product; provided,
however, that in
any such event the parties agree that any negotiations hereunder shall be
performed within timeframes similar to those as set forth in Section 2.5 and
shall encompass terms and conditions similar to those set forth in Sections
2.5(b) and (c).

 

(e)  Prior to
the expiration of the New Product Negotiation Term, Licensee’s rights hereunder
to New Products shall be terminated upon the occurrence of any two of the
following events, in any combination thereof: (i) a New Product license is
entered into by the parties; and (ii) An Unrealized New Product event
occurs.

 

 

8

 

ARTICLE
3
GRANT
BACK

 

In
consideration for Licensor (i) making the Licensed Know-how (including any
improvements thereto and solely to the extent provided for in Section 2.1)
available to Licensee on a continuing basis for the duration of this Agreement
and (ii) procuring, and making available to Licensee the benefit of, equivalent
grants from Licensor’s other licensees for the Licensed Products outside the
Licensed Territory Licensee hereby grants to Licensor and such other licensees
as Licensor may designate a royalty-free, nonexclusive license outside the
Licensed Territory, with the right to grant sublicenses, under any and all
inventions and Licensee Proprietary Information (whether patentable or not)
hereafter during the term of this Agreement, developed, possessed or acquired by
Licensee related to the Licensed Products, Patent Rights, Licensed Know-how or
Licensed Methods; provided that Licensee is not legally restricted or prevented
from granting such rights in connection with the relevant invention. Licensee
shall provide Licensor with a written enabling disclosure of each invention
(such as a patent application or internal docket reference) unambiguously
identifying it as an invention governed by this Article 3 prior to filing a
patent application or taking any other action disclosing or potentially
disclosing the same to third parties.

 

Licensee
shall promptly disclose all Licensee Proprietary Information to Licensor and,
subject to the execution of confidentiality undertakings comparable to those set
forth in Article 7, to Licensor’s other licensees (and or Affiliates and
permitted sublicensees) of Patent Rights outside the Licensed Territory on a
continuing basis during the term of this Agreement. Licensee hereby grants to
Licensor and such licensees a royalty-free nonexclusive license, with the right
to grant sublicenses, to use the Licensee Proprietary Information outside the
Licensed Territory. Licensee shall not disclose any such invention and or
Licensee Proprietary Information under circumstances that would reasonably be
expected to result in the loss of the protectible status of any such invention
and or Licensee Proprietary Information without the prior written consent of
Licensor, which consent shall not be unreasonably withheld or
delayed.

 

ARTICLE
4
CONSIDERATION

 

Section
4.1. Common
Stock Grant.
Contemporaneously with the execution of this Agreement, Licensor shall issue
500,000 shares of Licensor’s common stock, par value $.001 per share to Licensee
for no additional consideration. Licensee shall be entitled to the registration
rights for such shares of common stock that are provided for in the Common Stock
Letter Agreement between Licensor and Licensee dated as of December 3,
2004.

 

Section
4.2. Supply
Agreement.
Concurrently with the execution of this Agreement, Licensor and Licensee shall
enter into an amended and restated supply agreement for Licensed Products (the
“Revised
Supply Agreement”).

 

 

9

 

Section
4.3 Sharing
of Fees. With
respect to cash amounts
as provided for herein that are received by Licensor from third parties
regarding
any partnerships or alliances entered into in connection with the Development
and/or commercialization of the Licensed
Products (as such term is defined in this Revised Collaboration Agreement)
anywhere in the Licensed Territory (provided, however, that solely for the
purposes of this Section 4.3 that Licensed Territory shall be as defined in the
Collaboration Agreement dated March 6, 2002, between the parties), Licensor and
Licensee shall share in any such cash amounts according to the following ratio:
Licensor [***]%; Licensee [***]% (provided,
however, that
the aggregate of any amounts received by Licensee pursuant to this Section 4.3
shall not exceed $20 million (USD)). 

 

Cash
amounts received by Licensor from third parties that shall be subject to sharing
under this Section 4.3 shall expressly be limited to
license fees, technology access fees and performance-based milestones (i.e.,
such milestones solely intended to reward the Licensor upon the occurrence of
events characteristic of the product development process and of the process of
application for and grant of regulatory approval to market the subject Licensed
Products and price approval therefor) for
licenses granted by Licensor and shall
exclude, without limitation, amounts received by Licensor: in return for
supplying or royalties and other revenues associated with the sale of Licensed
Products; as funding for product development, commercialization, manufacturing,
and regulatory activities; and with respect to any bona fide equity or loan
transactions). Licensor shall conduct negotiations with third parties with
respect to potential licenses in the greatest commercially practicable manner so
as the entering into of any such relationship would provide for cash license
fees, technology access fees and performance-based milestones that are
appropriate with reference to the technology and potential value of the Licensed
Products and the value created during the Development process.

 

For the
purposes of this Section, upon execution of any such agreement with a third
party, Licensor shall immediately notify Licensee as to the agreed upon
commercial terms with such party in order to enable Licensee to assess the cash
amounts to which it is entitled. Licensee may verify the information provided by
Licensor by means of the audit of an external consultant, acceptable to
Licensor, which, at reasonable business hours, may inspect Licensor’s premises
by giving prior reasonable notice. Any such inspections shall be at the sole
cost of Licensee, except in the event where the adjustment shown by such
inspection is greater than 10% of the amount incurred, then the Licensor shall
bear such costs.

 

Section
4.4 Cash
Payments to Licensor for Milestones.
Licensee shall pay to Licensor the following cash amounts upon the attainment of
the following:

	 	
      1.
	
      $
      [***] upon EMEA Marketing Regulatory Approval for RDS.

	 	
      2.
	
      $
      [***] upon EMEA Marketing Regulatory Approval for BPD.

	 	
      3.
	
      $
      [***] upon price approval in the Territory for ARDS provided,
      however,
      that the parties have reached a mutually satisfactory Transfer Price in
      accordance with the Amended and Restated Supply
  Agreement.

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

10

 

	 	
      4.
	
      $
      [***] upon EMEA Marketing Regulatory Approval for ALI
      prophylaxis.

	 	
      5.
	
      $
      [***] upon filing for EMEA Marketing Regulatory Approval of the nCPAP
      Licensed Product.

	 	
      6.
	
      $
      [***] upon EMEA Marketing Regulatory Approval of the nCPAP Licensed
      Product.

	 	
      7.
	
      $
      [***] upon filing for EMEA Marketing Regulatory Approval for asthma in the
      hospital setting.

	 	
      8.
	
      $
      [***] upon EMEA Marketing Regulatory Approval for asthma in the hospital
      setting. 

	 	
      9.
	
      $
      [***] upon filing for EMEA Marketing Regulatory Approval for COPD in the
      hospital setting.

	 	
      10.
	
      $
      [***] upon EMEA Marketing Regulatory Approval for COPD in the hospital
      setting.

 

Section
4.5 Manner
of Payment. The
amounts provided for in Section 4.3 and Section 4.4 shall be paid in United
States Dollars. Any and
all taxes that are levied on payments accruing under this Article 4 of the
Agreement in a country in which provision is made in the law or by regulation
for withholding may be deducted by the payor from such amounts and paid to the
proper taxing authority and evidence of such payment shall be secured and sent
to the payee as promptly as possible. The parties shall do all such lawful acts
and things and sign all such lawful deeds and documents as either party may
reasonably request from the other party to enable Licensee or Licensor, or their
respective Affiliates and/or sublicensees to take advantage of any applicable
legal provision or any double taxation treaties with the object of paying the
sums due to any payee hereunder without withholding any tax or as promptly as
practicable recovering any such withheld tax. Amounts
to be paid hereunder shall be paid: (i) with respect to amounts due to Licensee
pursuant to Section 4.3, as soon
as practicable following Licensor’s receipt of any such shareable amounts
received thereunder but in no event later than ten (10)
Business Days after such receipt; and
(ii) with respect to amounts due to Licensor pursuant to Section 4.4, as
promptly as practicable upon Licensee’s receipt of Licensor’s invoice issued
upon occurrence of any such event, but in no event later than ten (10)
Business Days after receipt of Licensor’s invoice.

 

ARTICLE
5
SCOPE
OF THE COLLABORATION

 

Section
5.1. Goals of
the Collaboration. Subject
to Section 8.6(b) hereinbelow, the parties hereto desire to collaborate in a
strategic relationship with regard to product Development and commercialization
programs for the Licensed Products with the following goals and in the following
manner:

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

11

(a) the
Development and clinical testing of Licensed Products; 

 

(b) Marketing
Regulatory Approval of Licensed Products in the Licensed Territory; and

 

(c) the
manufacturing by Licensor and the marketing, sale, and distribution by Licensee
of Licensed Products in the Licensed Territory.

 

In
performance of the foregoing, Licensor and Licensee agree to collaborate
diligently in the overall strategic relationship and in the Development and
commercialization of Licensed Products in the Licensed Territory in accordance
with the terms and conditions contained in this Agreement including, without
limitation, the respective roles and responsibilities of the parties as set
forth in this Article 5. 

 

Section
5.2. Roles
and Responsibilities. The
principal mechanism by which the parties contemplate coordinating their
respective clinical Development and sales and marketing activities will be
through consensus-based decision-making through: (i) a joint Development
Committee (established and governed pursuant to Section 6.2 of this Agreement)
and (ii) a joint Commercialization Committee (established and governed pursuant
to Section 6.3 of this Agreement); in each case, under the oversight of a joint
Steering Committee (established and governed pursuant to Section 6.1 of this
Agreement), provided, that the parties expressly acknowledge and agree that the
following shall apply: 

 

(a) Conduct
of Clinical Investigations. The
Development Committee (as such term is defined in Section 6.2) shall be
responsible for the Development of Licensed Products in the Licensed Territory;
provided,
however, that

 

 

	(i)  	
      Licensor,
      at its cost, shall be responsible for planning and managing the research
      and development work related to Licensed Products that is necessary to
      obtain EMEA approval, regardless of where conducted, subject to Section
      5.2(a)(ii), below;

 

	(ii)  	
      Subject
      to Section 8.6(b) hereinbelow, Licensee
      shall contribute for Phase 3 Development of Licensed Products in the
      Licensed Territory by conducting, sponsoring, and funding the cost (up to
      the amounts specified below for each category of Licensed Products) of
      Phase 3 clinical trials that are conducted in the Licensed Territory (it
      being acknowledged by the parties that any such trials are intended to be
      a part of a global European development program for the Licensed
      Products), as discussed and agreed to by the Development Committee.
      Licensee’s contribution under this Section 5.2(a)(ii) shall be solely
      limited to those costs that may be incurred with respect to Phase 3
      Development conducted with respect to clinical sites located in the
      Licensed Territory and shall solely include (x) shipping costs for
      investigational product and other materials supplied to clinical sites;
      and (y) external costs and payments for the subject Phase 3 clinical trial
      including, without limitation, consultants, contract research
      organizations, payments to clinical investigators and support staff,
      insurance companies, clinical sites, and regulatory fees (“Phase 3
      Costs”); provided,
      however,
      that with regards to each of (x) and (y), above, Licensee’s obligation for
      contribution shall apply whether such costs are contracted for and/ or
      initially paid by Licensor or Licensee. The Development Committee shall
      (A) be responsible for developing and approving the budgets for Phase 3
      Costs taking into account the nature of the Phase 3 Costs, and (B) approve
      the selection, without limitation, of clinical sites and specific
      consultants, contractors and clinical investigators to be used in the
      performance of Phase 3 Development. Such approval by the Development
      Committee shall constitute the parties’ commitment to undertake the
      relevant Phase 3 Development and Licensee’s agreement to contribute to any
      such Phase 3 Costs up to a maximum of the following amounts in U.S.
      Dollars (“Licensee’s Maximum
Contribution”):

 

12

 

	 	
      1.
	
      For
      Licensed Products for the ARDS and/ or ALI indications, up to
      $[***];

	 	
      2.
	
      For
      Licensed Products for the BPD indication, up to $[***];

	 	
      3.
	
      For
      nCPAP Licensed Product(s), up to $[***];

	 	
      4.
	
      For
      Licensed Products for the asthma and COPD indication in the hospital
      setting, up to $[***]; and 

	 	
      5.
	
      For
      Licensed Products for the COPD indication in the hospital setting, up to
      $[***], only if a separate Phase 3 pivotal trial is conducted for this
      indication (i.e. independent from the Phase 3 pivotal trial for
      asthma).

 

Provided,
however, that the determination of whether separate Phase 3 Development has
occurred for the purposes of this Section 5.2(a)(ii) shall not be based upon the
existence of separate formulations of Licensed Product.

 

	(iii)  	
      Promptly
      upon the completion of the experimental phase of the subject
      Phase 3 clinical trial in the
      Licensed Territory (i.e. when the last visit of the last patient has
      occurred), a reconciliation of Licensee’s Phase 3 Cost contributions
      determined hereunder (including, without limitation, those costs
      previously invoiced, paid or still to be invoiced and paid) shall be made
      with reference to Licensee’s Maximum Contribution for such trial. Both
      parties shall keep such records as are necessary to determine accurately
      the sums due under this Section 5.2(a). Such records shall be retained by
      each party and, at any time during the Term of the Agreement, at the prior
      written request and expense of the other party, shall be made available
      for inspection, review, and audit during normal business hours, by an
      internationally recognized independent certified public accounting firm
      selected by the auditing Party and reasonably acceptable to the other
      Party for the sole purpose of verifying the accounting reports
      and

       

 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

13

 

 

		
      payments
      made or to be made pursuant to this Section 5.2(a); provided,
      however,
      that such audits may not be performed more than once per contract year.
      The auditing Party shall pay for such inspections, except that in the
      event where the adjustment shown by such inspection is greater than 10% of
      the amount incurred, then the audited Party shall pay for such
      inspection.

 

 

	(iv)  	
      Licensee
      shall be the sponsor in the Licensed Territory of all Phase 3 clinical
      trials to which it contributes in accordance with this Section 5.2 and,
      subject to the prior approval of the Development Committee, Licensee shall
      be entitled to conduct monitoring and auditing of the sites at its own
      cost and expense. With respect to Licensee’s sponsorship, monitoring and
      auditing, as applicable, Licensor, through the operation of the
      Development Committee or directly, shall (i) have the sole authority to
      approve the clinical site agreement that may be entered into by Licensee
      and a clinical site prior to its signature and, to the greatest extent
      possible with reference to then or future applicable law, be named as a
      co-sponsor thereto; and (ii) be entitled to oversee and audit clinical
      site operations including, without limitation, site interactions, site
      initiation, and monitoring and auditing conducted by Licensee, all at
      Licensor’s expense.

 

 

	(v)  	
      Licensor
      and Licensee shall keep each other fully informed on the progress of all
      clinical trials of Licensed Products and shall promptly provide the other
      with copies of all submissions to regulatory authorities in connection
      therewith, all significant communications received from such regulatory
      authorities and reasonably detailed descriptions (in English) of all
      meetings with and verbal communications with such regulatory authorities
      which are of significance.

 

 

	(vi)  	
      Each
      of Licensor and Licensee shall use its best commercial efforts to complete
      all clinical trials for which it is responsible within the parameters
      established by (and as such parameters may be modified by) the Development
      Committee.

 

 

(b) Commercialization
Activities. Through
the governance mechanism of the Commercialization Committee (as such term is
defined in Section 6.3), Licensor and Licensee shall actively participate in the
strategic marketing activities for Licensed Products in the Licensed Territory.
Without prejudice to Section 2.1 and 2.3, Licensee shall be responsible for
activities and associated costs and expenses involved in the pre-launch, launch
and post-launch marketing, sales, and distribution of Licensed Products in the
Licensed Territory including, without limitation, (i) providing country-specific
marketing resources including, but not limited to, personnel, marketing
materials and other customary marketing tools and methods; (ii) furnishing
sufficient sales personnel to adequately detail Licensed Products in the
Licensed Territory and achieve insertion of Licensed Products into hospital
formularies; (iii) managing and conducting order taking, storage and
distribution of Licensed Product in the Licensed Territory; (iv) performing
country-specific regulatory affairs activities and price and reimbursement
negotiations during the Regulatory Marketing Approval process; (v) managing
local medical affairs and reporting of drug safety issues to Licensor and
appropriate regulatory authorities; and (vi) periodically report to the
Commercialization Committee and Steering Committee on Licensee’s marketing and
sales activities related to pre-launch, launch and post-launch periods for all
Licensed Products.

 

 

14

 

(c) Licensee,
shall develop a sales and marketing plan, which shall be subject to the periodic
review and approval (no less frequently than every 12 months) of the Steering
Committee as provided hereunder, comprised of individual sales and marketing
(pre-launch, launch and post-launch) plans for each Licensed Product on a
country-by-country basis in the Licensed Territory in a form and content
consistent with general pharmaceutical industry practices (the “Marketing
Plan”).

 

Section
5.3 Regulatory
Approvals. (a)
Subject to the completion of requisite clinical investigations by the Licensor,
Licensor shall prepare and submit to the EMEA a MAA within 6 months of the date
of acceptance of filing of the applicable NDA by the FDA and shall use its
diligent efforts to obtain and maintain all EMEA Marketing Regulatory Approvals
for the term of this Agreement, all at the cost and expense of Licensor, except
as may otherwise be provided for in Section 5.2. When filing for MAA, Licensor
shall designate, as appropriate, Licensee or such Licensee’s Affiliates or
permitted sublicensees and/or partners designated by Licensee as its
distributors or local representatives for the Licensed Products in the Licensed
Territory. Licensor shall, upon the granting of each Marketing Regulatory
Approval obtained by Licensor, promptly supply Licensee with a copy of such
approval. 

 

(b) Subject
to receipt of MAA Marketing Regulatory Approval by Licensor, Licensee, where
appropriate, shall prepare and submit to the regulatory authorities in the
Licensed Territory country-specific and Licensed Product specific applications
for Pricing Approvals as soon as practicable and shall use its diligent efforts
to obtain and maintain all Pricing Approvals that are obtained by Licensee for
the term of this Agreement, all at the cost and expense of Licensee. Licensee
shall, upon the granting of each Pricing Approval obtained by Licensee, promptly
supply Licensor with a copy of such approvals. The parties contemplate that
country-specific applications for Marketing Regulatory Approvals shall not be
necessary for any of the Licensed Products in the Licensed Territory, however,
should any such country-specific applications be required, Licensee shall be
responsible for all associated costs for filing and maintaining such Marketing
Regulatory Approvals.

 

(c) Each
party shall, in connection with any Marketing Regulatory Approvals and Pricing
Approvals obtained by such party in the Licensed Territory, grant to the other
party an irrevocable right of access and reference thereto and shall effect such
notifications to regulatory authorities as shall be reasonably necessary to
accomplish the foregoing. Each party shall assist the other party in maintaining
any such Marketing Regulatory Approvals and Pricing Approvals including
supplying to the other party any information in connection
therewith.

 

(d) In the
event of termination of this Agreement pursuant to Section 8.2 (only in the
event of termination by Licensor) and Sections 8.3, 8.4, and 8.6(a), Licensee
shall promptly transfer to Licensor or Licensor’s designee, possession, and
ownership of all governmental or regulatory correspondence, conversation logs,
filings, and approvals (including all country-specific Marketing Regulatory
Approvals, if any, and Pricing Approvals) relating to the Licensed Products and,
to the extent not already done, Licensee shall appoint Licensor as Licensee’s
agent for all Licensed Product-related regulatory matters in the Licensed
Territory. Licensee shall execute all documents and take all such further
actions as may be reasonably requested by Licensor in order to give effect to
the foregoing. Licensor shall reimburse Licensee for all reasonable costs
incurred in performance hereunder.

 

 

15

 

Section
5.4 Commencement
of Marketing.
Licensee shall consummate its first commercial sale of each Licensed Product in
each country of the Licensed Territory within six (6) months after official
publication of the obtaining of Pricing Approval (or if Pricing Approval is not
applicable, within six (6) months of Marketing Regulatory Approval in such
country); provided, however, that if Licensee has failed to meet such deadlines
in any country because of reasons beyond the control of Licensee, Licensor and
Licensee shall discuss in good faith a new deadline for such country. In the
event Licensee does not consummate a sale within such period, Licensor may
notify Licensee of a default under this Section 5.4 and, in the event such
default is not cured within thirty (30) days from such notice of default,
Licensor shall have the right to terminate the license granted to Licensee
hereunder with respect to such Licensed Product in such country.

 

Section
5.5. Post-Authorization
Studies. [***]
shall be responsible for conducting, at its own cost and expense such
post-authorization studies activities as may be useful or necessary for the
better knowledge and use of the Licensed Products in the Licensed Territory
provided that the protocol shall be approved in accordance with Section 5.2(a)
in advance of its commencement. The Development Committee shall monitor and
supervise the conduct thereof. Licensee shall purchase Licensed Product for any
such clinical trials at Licensor’s Cost of Goods (as set forth in the Revised
Supply Agreement). Licensor
shall be entitled, with reasonable prior notice and at reasonable times and
intervals, to (i) audit the clinical activities of Licensee; (ii) establish a
pharmacovigilance committee jointly with Licensee to monitor and assess the
safety outcomes of such clinical activities; and (iii) utilize the resulting
data for Licensor’s own purposes, subject, however to Licensee’s prior consent,
which consent shall not be unreasonably withheld.

 

Section
5.6. Standard
of Diligence. (a)
Should Licensee (or any sublicensees or co-promotion/ co-marketing partners of
Licensee) fail to satisfy [***]% of the annual sales targets (as such sales
targets are established in the Marketing Plan in accordance with Section 5.2(c))
with respect to the subject Licensed Product in a country of the Licensed
Territory for two (2) consecutive years, Licensor shall have the right to
terminate the exclusivity character of the rights granted hereunder with respect
to the relevant country(ies) and subject Licensed Product where such failure has
occurred with a prior notice of ninety (90) days addressed to Licensee;
provided, however, that such notice shall need to be sent, in order to be valid
and enforceable, within sixty (60) days after Licensor becoming aware of any
such failure. Should Licensee (or any sublicensees or co-promotion/ co-marketing
partners of Licensee) fail to satisfy 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

16

[***]% of
the annual sales targets (as such sales targets are established in the Marketing
Plan in accordance with Section 5.2(c)) with respect to the subject Licensed
Product in a country of the Licensed Territory for two (2) consecutive years,
Licensor shall have the right to terminate this Agreement with respect to the
relevant country(ies) and subject Licensed Product where such failure has
occurred with a prior notice of ninety (90) days addressed to Licensee;
provided, however, that such notice shall need to be sent, in order to be valid
and enforceable, within sixty (60) days after Licensor becoming aware of any
such failure. 

 

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

 

Section
5.7. Marketing
Plan.
Licensee, shall submit to the Steering Committee the Marketing Plan (as such
term is defined in Section 5.2(b) hereinabove) for:

	 	
      (i)
	
      The
      Surfaxin® Licensed Product for RDS, the first action of the
      Commercialization Committee shall be to establish the schedule for
      submission of the applicable pre-launch market development plan by
      Licensee.

	 	
      (ii)
	
      Except
      for as set forth in Section 5.7(i), for all Licensed Products Licensee
      shall submit pre-launch market development plans as directed by the
      Commercialization Committee.

	 	
      (iii)
	
      For
      all Licensed Products, Licensee shall submit within ninety (90) days prior
      to the planned launch date for a subject Licensed Product for each country
      of the Licensed Territory a Marketing Plan (i.e., a launch
      plan).

	 	
      (iv)
	
      For
      all marketed Licensed Products, Licensee shall submit an updated Marketing
      Plan for each country of the Licensed Territory before the end of each
      calendar year.

Section
5.8. Record-keeping.
Licensor shall maintain complete and accurate records for such periods as may be
required by applicable law, but in no event less than three (3) years, of all
Licensed Products sold by it, including distribution
data.

 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

17

 

Section
5.9. Promotional
Material. (a)
Licensor shall supply free of charge to Licensee samples of all training aids
and literature used by Licensor and its Affiliates and distributors and
sublicensees thereof for training their sales representatives and samples of all
promotional and sales material used by Licensor or its Affiliates and
distributors and sublicensees thereof for the Licensed Products.

 

(b) Licensee
shall submit to Licensor, for Licensor’s prior review and written approval
(which approval is intended to ensure consistency with global strategic
marketing initiatives and regulatory requirements and which shall not be
unreasonably withheld or delayed), all training aids, promotional and sales
materials, literature, and other relevant media proposed to be used by Licensee
and its Affiliates and distributors and sublicensees thereof for training sales
representatives for the Licensed Products. In the event Licensor has not
provided its approval to the materials submitted for its review within a term of
ten (10) Business Days, such materials shall be deemed approved.

 

Section
5.10. Promotional
Claims. All
technical and scientific information and therapeutic claims referred to by
Licensee in promotional advertisements, promotional literature, sales aids,
training aids and literature and the like with respect to each Licensed Product
shall be consistent with any Marketing Regulatory Approval and the information
and claims made by Licensor with respect thereto insofar as the latter are
consistent with Marketing Regulatory Approvals or permitted practices in the
Licensed Territory. Licensee shall not employ any sales practice or display any
advertisement which the Commercialization Committee determines is detrimental to
Licensor’s interests and Licensor shall be entitled to require licensee to
promptly cease any such practice or withdraw any such
advertisement.

 

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

 

Section
5.12. Adverse
Event Reporting. The
parties shall establish a procedure for the handling of adverse events as soon
as is practicable after the Effective Date, which procedure shall be in
conformance with all applicable laws, rules and regulations; provided,
however, that
(i) Licensee shall be responsible at its expense for collecting local safety
data on the Licensed Product in the Licensed Territory and the timely submission
thereof to Licensor, and (ii) Licensor shall be responsible for maintaining a
global adverse event reporting system and appropriate database at its sole cost
and expense and for the timely submission of required safety reports to
appropriate authorities. Each party shall advise the other, by telephone or
facsimile, within twenty-four (24) hours after it becomes aware of any serious
adverse event arising in connection with the use of any Licensed Products and
shall include the following information: a description of the patient (which
shall be made in compliance with any applicable data protection regulations),
the Licensed Product, the reporting source and a description of the event and/or
such other information as may be required by the relevant regulatory authorities
in the Licensed Territory at the time the serious adverse event occurs. No later
than five (5) days after its initial report, the party informing of a serious
adverse event shall provide the other with a written report delivered by
confirmed facsimile of any reported serious adverse event stating 

 

 

18

 

 

the full
facts known to it, including but not limited to such information as may be
required by the relevant regulatory authorities in the Licensed Territory at the
time the serious adverse event occurs. The Adverse Event Reporting to the EMEA
and other regulatory agencies shall be made by Licensor at its sole cost and
expense. In any event, Licensor and Licensee shall promptly provide each other
with a copy of any Adverse Event notice that they may address to any regulatory
agency (including, without limitation, the FDA) in connection with the Licensed
Products. 

 

Section
5.13. Licensed
Product Distribution. For the
Licensed Products, Licensee shall provide customary distribution services,
including, without limitation, storage, order taking, shipping, billing,
accounts receivable, returns/allowances in the Licensed Territory at its cost
and expense.

 

ARTICLE
6
GOVERNANCE
AND COMMITTEE STRUCTURE

 

Section
6.1 Steering
Committee. (a)
Licensee and Licensor shall jointly form an oversight committee (the
“Steering
Committee”) that
shall (i) manage the overall strategic relationship and the strategic marketing
and sales activities for Licensed Products in the Licensed Territory, (ii) to
review and approve the pre- and post-launch Marketing Plans as well as any other
matters required for the sales and promotion of Licensed Products in the
Licensed Territory (including, without limitation, the strategic decision-making
authority to authorize sublicensing, co-promotion or co-marketing and the
tactical decision to approve a recommended sublicensing, co-promotion or
co-marketing partner in the Licensed Territory), except to the extent that
certain matters are solely the responsibility of a single party under this
Agreement; (iii) to advise, provide input and determine strategy for future
clinical and/or marketing studies; (iv) have overall responsibility for the
success of such matters as established by this Agreement, and (v) be charged
with promptly resolving disputes of the parties, if any, subject to Section
15.4. 

 

(b) The
Steering Committee will be comprised of [***] (unless otherwise mutually agreed)
that shall have the overall functional responsibility for corporate
operations/business development, commercial operations and product development
within their respective organizations. The Steering Committee shall be chaired
[***]. The initial members of the Steering Committee shall be designated by the
parties hereto not later than thirty (30) days after the Effective Date and the
first Chairperson shall be a designee of Licensor. [***] The Steering Committee
shall to the extent practicable seek to operate by consensus. In the event of
any deadlock or other inability of the Steering Committee to reach a
determination with respect to any matter within the authority of the Steering
Committee, the issue shall be referred to the respective Chief Executive
Officers (or equivalent position) of each party who shall use their best
endeavors to agree in good faith to a resolution of the dispute within thirty
(30) days of their receipt of notice as to such dispute. If they are unable to
resolve the dispute within such thirty

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

19

(30)-day
period, it shall be referred to the decision of an external expert suitably
qualified to resolve such dispute which is mutually acceptable to both parties,
whose decision shall be final. In resolving the dispute, the appointed expert
shall take into account development and marketing practices and procedures
common in the pharmaceutical industry and appropriate with reference to the
subject Licensed Products. Either party may appoint, substitute or replace
members of the Steering Committee to serve as their representatives upon notice
to the other party. 

 

(c) The
Steering Committee shall meet within 60 days after the Effective Date and
thereafter at least every 6 months. The location of such meetings shall
alternate between Discovery’s Pennsylvania headquarters, United States and
Barcelona, Spain, unless otherwise agreed to by Licensor and Licensee. The
Steering Committee may also meet by means of a telephone or video conference
call with the consent of each of Licensor and Licensee. Licensee and Licensor
shall use reasonable efforts to cause their representatives to attend the
meetings of the Steering Committee. If a representative of either of the parties
hereto is unable to attend a meeting, such party may designate an alternate to
attend such meeting in place of the absent representative.

 

Section
6.2 Development
Committee. (a)
Licensee and Licensor shall jointly form a development committee (the
“Development Committee”) to oversee the Development of Licensed Products within
the Licensed Territory. The Development Committee shall have functional
responsibility for the success of the matters related to the Development of the
Licensed Products in the Licensed Territory and related medical and regulatory
activities as established by this Agreement, including without limitation: (i)
to determine and oversee the overall strategy for all such activities for
Licensed Products in the Licensed Territory; (ii) to plan and coordinate the
parties’ efforts hereunder related to all such activities for Licensed Products
in the Licensed Territory; and (iii) to facilitate the flow of information among
the parties, including coordinating all such activities with manufacturing
schedules and distribution.

 

(b) The
Development Committee will be comprised of [***] (unless otherwise mutually
agreed) that shall have the overall functional responsibility for Licensed
Product clinical Development and medical and regulatory operations. The
Development Committee shall be chaired [***]. The initial members of the
Development Committee shall be designated by the parties hereto not later than
thirty (30) days after the Effective Date. Upon resignation by or removal of any
member of the Development Committee, Licensee or Licensor, as appropriate, shall
have the sole right to appoint a successor. [***] The Development Committee
shall to the extent practicable seek to operate by consensus. In the event of
any deadlock or other inability of the Development Committee to reach a
determination with respect to any matter within the authority of the Development
Committee, the issue shall be submitted to the Steering Committee. 

 

(c) The
Development Committee shall meet within 60 days after the Effective Date and
thereafter at least every 6 months. The location of such meetings shall
alternate between Discovery’s Pennsylvania headquarters, United States and
Barcelona, Spain, unless 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

20

otherwise
agreed to by Licensor and Licensee. The Development Committee may also meet by
means of a telephone or video conference call with the consent of each of
Licensor and Licensee. Licensee and Licensor shall use reasonable efforts to
cause their representatives to attend the meetings of the Development
Committee.

 

(d) The
Development Committee will report to the Steering Committee semi-annually in an
appropriately detailed manner and shall provide the Steering Committee annually
with a written comprehensive report on the execution of the clinical development
programs contemplated hereunder. 

 

Section
6.3 Commercialization
Committee. (a)
Licensee and Licensor shall jointly form a commercialization committee (the
“Commercialization Committee”) to oversee the commercialization of Licensed
Products within the Licensed Territory. The Commercialization Committee shall
have functional responsibility for the success of the matters related to
commercialization of the Licensed Products in the Licensed Territory as
established by this Agreement, including without limitation: (i) the
overall Commercialization strategy to assure consistency with Licensor’s global
branding strategy; (ii) planning and coordinating commercialization activities;
(iii) submitting Marketing Plans to the Steering Committee for its review and
approval, (iv) facilitating the flow of appropriate commercial information among
the parties, including coordinating commercialization activities with
manufacturing schedules and distribution and (v) recommending to the Steering
Committee sublicensees, co-promoters and/or co-marketers for the Licensed
Products as set forth under Section 2.3 hereinabove. 

 

(b) The
Commercialization Committee will number [***]. The initial members of the
Commercialization Committee shall be designated by the parties hereto not later
than (thirty) 30 days after the Effective Date. Upon resignation by or removal
of any member of the Commercialization Committee, Licensee or Licensor, as
appropriate, shall have the sole right to appoint a successor. The
representatives of Licensor shall collectively be entitled to one (1) vote and
the representatives of Licensee shall collectively be entitled to one (1) vote.
The Commercialization Committee shall to the extent practicable seek to operate
by consensus. In the event of any deadlock or other inability of the
Commercialization Committee to reach a determination with respect to any matter
within the authority of the Commercialization Committee, the issue shall be
submitted to the Steering Committee.

 

(c) The
Commercialization Committee shall meet within 60 days after the Effective Date
and thereafter at least every 6 months. The location of such meetings shall
alternate between Discovery’s Pennsylvania headquarters, United States and
Barcelona, Spain, unless otherwise agreed to by Licensor and Licensee. The
Commercialization Committee may also meet by means of a telephone or video
conference call with the consent of each of Licensor and Licensee. Licensee and
Licensor shall use reasonable efforts to cause their representatives to attend
the meetings of the Commercialization Committee.

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

21

(d) The
Commercialization Committee will report to the Steering Committee semi-annually
in an appropriately detailed manner and shall provide the Steering Committee
annually with a written comprehensive report on the execution of the
commercialization programs contemplated hereunder. 

 

Section
6.4 General
Committee Procedures. (a)
Each party shall be responsible for all of its own expenses of participating in
any committee or any working group. If a representative of either of the parties
hereto is unable to attend a meeting, such party may designate an alternate to
attend such meeting in place of the absent representative.

 

(b) Meeting
Agendas and Minutes. Each
Party will disclose to the other proposed agenda items along with appropriate
information at least 10 Business Days in advance of each meeting of the
applicable Committee; provided that under exigent circumstances requiring
Committee input, a party may provide its agenda items to the other party within
a lesser period of time in advance of the meeting, or may propose that there not
be a specific agenda for a particular meeting, so long as such other party
consents to such later addition of such agenda items or the absence of a
specific agenda for such Committee meeting. The chairperson(s) of each Committee
shall be responsible for calling meetings, preparing, and circulating an agenda
in advance of each meeting of such Committee and preparing and issuing minutes
of each meeting within 15 days thereafter; provided that such minutes will not
be finalized until both parties review and confirm the accuracy of such minutes
in writing.

 

(c) Other
employees of each party involved in the Development, manufacture, or
commercialization of the Licensed Products may attend meetings of any of such
Committees as nonvoting participants, and, with the consent of each party,
consultants, representatives, or advisors involved in the Development,
manufacture, or commercialization of Licensed Products may attend meetings of
any of such Committees as nonvoting observers; provided that such third-party
representatives are under obligations of confidentiality and non-use applicable
to information of each party and that are at least as stringent as those set
forth in Article 7. 

 

Section
6.5. Cost
Sharing of Global Marketing Activities. Each of
Licensor and Licensee hereby agree that the Commercialization Committee shall
discuss in good faith the
possibility for the parties to share in the cost and expense of any global
marketing activities which may beneficially effect Licensor’s commercialization
of Licensed Products. Any such agreement as to sharing of costs and expenses
shall take into account the value of the Licensed Territory relative to the
global value of the Licensed Product.

 

Section
6.6. Coordination
of Committee Activities with Licensor’s other Collaborators.
Licensee hereby acknowledges that Licensor intends to establish collaborative
arrangements substantially similar to those provided for by this Agreement with
third parties for Licensed Products outside of the Licensed Territory and agrees
that it shall be to the mutual benefit of each of Licensee, Licensor, and
potential other collaborators of Licensor to coordinate Development and
commercialization activities for Licensed Products on a global basis. Licensee
acknowledges that Licensor intends to establish global committees with
functional responsibilities similar to those committees outlined herein and that
Licensee shall participate on any such global committee.

 

22

 

Section
6.7. Global
Project Management.
Licensor shall have overall responsibility for management of global product
development and commercialization activities. Licensee hereby acknowledges and
agrees that Licensor shall be entitled to maintain oversight on all development
and commercialization activities conducted in connection with the Licensed
Products and the Licensed Territory in order to ensure consistency of all such
activities with Licensor’s global product and commercialization
plans.

 

 

ARTICLE
7
TRANSFER
OF LICENSED KNOW-HOW; CONFIDENTIALITY; PUBLICATION

 

Section
7.1. Transfer
of Licensed Know-How.
Promptly after the Effective Date and from time to time as it becomes available
during the term of this Agreement, Licensor shall provide Licensee with the
Licensed Know-How, subject, however, to the terms and conditions contained
herein including, without limitation, those set forth in Article 2 of this
Agreement. 

 

Section
7.2. Confidentiality. Any
information disclosed by either party, its Affiliates or permitted licensees to
the other party hereunder shall be safeguarded by the recipient, shall not be
disclosed to third parties and shall be made available only to recipient’s
employees, Affiliates, licensees for the Licensed Products, independent
contractors or external counsels who agree to or are bound by equivalent
conditions and who have a need to know the information for the purposes
specified under this Agreement. Subject to the license granted under Article 2,
all confidential information shall remain the property of and shall be
immediately returned to the disclosing party, upon request, after any
termination of this Agreement. These mutual obligations of confidentiality shall
apply during and for a period of ten (10) years after the term of this
Agreement, but such obligations shall not apply to any information that can be
established by competent evidence:

 

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

 

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

 

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

 

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

 

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

 

23

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

 

(g) has been
approved in writing for publication by each of the parties; or

 

(h) is
required to be disclosed in compliance with applicable laws or regulations in
connection with the manufacture or sale of Licensed Products; or

 

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

 

(j) is
product-related information which is reasonably required to be disclosed in
connection with marketing of Licensed Products.

 

Section
7.3. Procedures
for Obtaining Permission for Disclosure. In the
event that either party (the “Disclosing
Party”)
desires to publish or disclose, by written, oral or other presentation, any
confidential information or other information regarding the Licensed Rights, the
Disclosing Party shall notify the other party (the “Nondisclosing
Party”) in
accordance with Section 15.2 at least sixty (60) days before any written or
other publication or disclosure. The Disclosing Party shall include with such
notice a description of any proposed oral presentation or, in any proposed
written or other disclosure, a current draft of such proposed disclosure or
abstract. The Nondisclosing Party may, no later than thirty (30) days following
the receipt of such notice, notify the Disclosing Party that the Nondisclosing
Party will not consent to such disclosure of confidential information. If the
Disclosing Party does not receive any such objection to the proposed disclosure
of confidential information or other information regarding the Licensed Rights
within such 30-day period, the Disclosing Party shall be free to make such
disclosure in substantially the manner and form proposed at the time notice was
given to the Nondisclosing Party.

 

ARTICLE
8
TERMINATION

 

Section
8.1. Term. Unless
otherwise terminated by operation of law or by acts of the parties in accordance
with the provisions of this Agreement, this Agreement shall be in force from the
Effective Date and shall remain in effect with respect to each Licensed Product
in each country of the Licensed Territory for the duration of the Initial
Period. Upon expiry of the Initial Period with respect to each country in the
Licensed Territory, the license granted under Section 2.1 shall become fully
paid up in such country.

 

In such
case and in relation with each of such countries, the following shall
apply:

 

(a) Licensee
shall be entitled to continue to market the Licensed Products in the relevant
country under the Trademark and the Marketing Regulatory Approval;

 

 

24

 

(b) Should
Licensee decide not to purchase a Licensed Product from Licensor, Licensee shall
pay a running royalty of [***] percent
([***]%) of Net
Sales (as such term is defined in the Revised Supply Agreement) of such Licensed
Product so purchased and sold under the Trademark in consideration of the use of
the Trademark;

 

(c) Should
Licensee decide not to purchase a Licensed Product from Licensor, Licensor shall
promptly transfer free of charge the Marketing Regulatory Approval of the
relevant country for such Licensed Product to Licensee or to the third party
that may be indicated by Licensee, the transfer expenses being borne by
Licensee; provided, however, that the EMEA Marketing Regulatory Approval shall
only be transferred to Licensee upon expiry of the Initial Period in all the
countries of the European Union; 

 

(d) Should
Licensee decide not to purchase the Licensed Products from Licensor, Licensor
shall transfer free of charge to Licensee all such know-how that is necessary to
enable Licensee to manufacture and/or have manufactured the Licensed Products,
and Licensee shall pay a running royalty of [***] percent
([***]%) of Net
Sales (as such term is defined in the Revised Supply Agreement) of such Licensed
Product so manufactured under such know-how, it being understood that Section
7.2 hereof shall continue to apply with respect to the use of such know-how by
Licensee or its subcontractors.

 

(e) Should
Licensee decide to continue purchasing the Licensed Products from Licensor,
Licensor shall maintain the Marketing Regulatory Approvals in force;

 

(f) Licensor
shall take all appropriate steps and shall timely and diligently cooperate with
Licensee so as to avoid any possible discontinuation in the commercialization of
the Licensed Products in each country of the Licensed Territory upon the expiry
of the Initial Period; and 

 

(g) Should
Licensee decide not to purchase the Licensed Products from Licensor, Licensee
shall ensure that such purchased products conform with the Specifications (as
such term is defined in the Revised Supply Agreement) and all relevant
regulatory authority requirements.

 

Section
8.2. Termination
by Breach. Upon
any material breach of or default under this Agreement (including, without
limitation, as provided for in Section 7.2 of the 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

25

Revised
Supply Agreement) by either party, the non-infringing party may terminate this
Agreement upon ninety (90) days written notice to the infringing party. Said
notice shall become effective at the end of said period, unless during said
period the infringing party shall cure such breach or default.

 

In the
event that this Agreement is terminated by Licensee pursuant to Section 8.2 of
this Agreement, subsections (a) to (f) of Section 8.1 shall apply and, in
addition, (i) Licensor shall transfer free of charge to Licensee all such
know-how that is necessary to enable Licensee to manufacture and/or have
manufactured the Licensed Products, and (ii) Licensor shall promptly return and
cease to use any Licensee Proprietary Information and any other information
provided by Licensee to Licensor under Article 3 hereinabove.

 

Section
8.3. Termination
by Licensee.
Licensee may terminate this Agreement hereunder as follows:

 

(a) Prior to
the date of receipt of first Marketing Regulatory Approval, Licensee may
terminate this Agreement on sixty (60) days advance written notice to Licensor
for any reason, whereupon Licensee shall not be obligated to make any further
payments to Licensor other than those payments accruing prior to such
termination; 

 

(b) After and
including the date of receipt of first Marketing Regulatory Approval, Licensee
may terminate this Agreement upon written notice to Licensor of such intention
to terminate, provided that (i) Licensee hereby agrees that in any such event,
in order to minimize disruption of the availability of Licensed Product in the
Licensed Territory, Licensee shall negotiate with Licensor and or Licensor’s
designee mutually agreeable terms and conditions providing for the transfer of
Licensee’s rights and obligations hereunder to Licensor and or appropriate third
parties and a mutually determined date of termination in accordance therewith
provided, however, that failing an agreement on the date of termination, this
Agreement will terminate six (6) months after the date of Licensee’s termination
notice sent under this Section 8.3.(b) and (ii) Licensee shall not be obligated
to make any further payments to Licensor other than those payments accruing
prior to such termination. 

 

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

 

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

 

(a) Immediately
terminate this Agreement; or

 

(b) Continue
to market the Licensed Products under the Licensed Know-How, Patent Rights,
Marketing Regulatory Approvals and the Trademark, in which case the license
granted hereunder to Licensee pursuant to Section 2.1 shall become a license to
“make, have 

 

 

26

 

made,
import, use, offer to sell and sell Licensed Products”, provided that such
license to make or have made Licensed Products shall be nonexclusive and that
Licensor shall be entitled to a royalty in an amount equal to the sum of (i) any
and all royalties owed by Licensor to third parties (including without
limitation, Original Licensor) with respect to Net Sales of Licensed Products
and (ii) [***] percent ([***]%) of such Licensed Product Net Sales. Licensee
shall be solely responsible for payment of the third party royalty obligations
under such circumstances; provided, however, that any royalties to be paid under
this Section 8.5 (b) shall be due only to the extent that Licensee’s cost of the
Licensed Product in finished, packaged and labeled form, quality controlled and
ready for resale to the ultimate customer plus the royalties hereinabove
established shall not exceed the applicable Transfer Price established in
Section 2.2 of the Revised Supply Agreement. In addition the parties agree that
in such event the intellectual property delivered to Licensee shall include all
know-how necessary or useful to give Licensee the capability of manufacturing
the Licensed Products and such know-how shall be delivered to Licensee in such a
way as to communicate it to Licensee promptly, effectively and
economically.

 

 

Section
8.6. Termination
by Licensor. During
the term of this Agreement, Licensor shall be entitled to terminate this
Agreement as follows:

 

(a)  With
Respect to Competitive Activities. In the
event Licensee acquires marketing rights in the Licensed Territory for a
surfactant product suitable for use in any of the indications or applications
included in the definition of Licensed Products pursuant to Article 1 (including
off-label use) (a “Competitive
Product”), or in
the event Licensee becomes an Affiliate of a Person whose product line includes
a Competitive Product (an “Affiliation”),
Licensee shall notify Licensor within thirty (30) days of such acquisition or
Affiliation and of its intention to either (a) divest such Competitive Product
or Affiliation or (b) terminate this Agreement and the Revised Supply Agreement.
Any such termination shall be effective sixty (60) days after such notice
becomes effective in accordance with Section 14.2. Alternatively, Licensee may
notify Licensor that it intends to retain such Competitive Product in its
portfolio but does not wish to terminate this Agreement, in which event Licensor
can in its sole discretion, within ninety (90) days after receipt of such
notice, advise Licensee of its intent to terminate this Agreement, provided that
(i) Licensee hereby agrees that in any such event, in order to minimize
disruption of the availability of Licensed Product in the Licensed Territory,
Licensee shall negotiate with Licensor and or Licensor’s designee mutually
agreeable terms and conditions providing for the transfer of Licensee’s rights
and obligations hereunder to Licensor and or appropriate third parties and (ii)
Licensee shall not be obligated to make any further payments to 

 

 

 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

27

Licensor
other than those payments accruing prior to such termination (including, without
limitation, any payments owed by Licensee pursuant to Sections 4.4 and 5.2(a),
or pursuant to Section 8.8;

 

(b)  Termination
for Lack of Development Support.
Licensee shall be entitled to choose not to provide Development support pursuant
to Section 5.2(a)(ii) at any time prior to approval of Phase 3 Development for
the subject Licensed Product by the Development Committee, provided,
however, that in
such event Licensee shall promptly provide Licensor with written notification
thereof and, further, solely with respect to the subject Licensed Product,
Licensee’s rights under this Agreement and the Revised Supply Agreement shall
immediately terminate without any compensation or indemnification being due to
Licensor from Licensee with respect thereto.

 

(c)  As
provided for in Section 5.6 of this Agreement.

 

Section
8.7. Reversion
upon certain Early Termination Cases. Upon
termination of this Agreement for any reason, other than expiry of the Initial
Period (which shall be governed by Section 8.1 hereinabove) or the breach of
this Agreement by Licensor (which shall be governed by Section 8.2 hereinabove),
all rights granted to Licensee hereunder shall revert to Licensor and Licensee
undertakes:

 

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

 

(b) not to
use the Licensed Know-how as long as it has to be kept confidential under
Article 7 hereof;

 

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

 

(d) to the
extent requested by Licensor, to transfer to Licensor or its designee
responsibility for and control of ongoing Licensed Products Development work,
including control over contracts with third parties for such work, where
permissible in accordance with such contracts, in an expeditious and orderly
manner with the costs for such work to be assumed by Licensor or its designee as
of the date of such transfer; and 

 

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

 

Section
8.8. Survival. Upon
any termination of this Agreement, Articles 3, 7, 10, 11 and 12 and Sections
8.1, 8.2, 8.7 and 8.9, shall survive such termination and continue in force and
effect to the extent necessary to effectuate such provisions.

 

Section
8.9. Disposition. Upon
termination of this Agreement (other than by expiration of the Initial Period),
subject to Sections 8.4 and 8.6, Licensee shall have no right under the Patent
Rights to import, use or sell Licensed Products, except that Licensee shall have
the right for one hundred twenty (120) days following termination to dispose of
Licensed Products on hand and complete any existing contracts requiring rights
under the Patent Rights which can be completed within the one hundred twenty
(120) days. 

 

 

 

28

 

ARTICLE
9
INFRINGEMENT

 

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

 

(b) Licensor
shall have the right, at Licensor’s sole expense (subject to Section 9.5(a)), to
bring suit against the infringer for infringement of the Licensed Rights.
However, if after six (6) months from the date of receipt of evidence of
infringement from Licensee, Licensor has not initiated suit against the
infringer, Licensee shall have the right, at Licensee’s sole expense (subject to
Section 9.5(b)), to bring such suit provided that the Original Licensor has
consented to Licensee bringing such suit. Licensor shall make its best efforts
to obtain the Original Licensor’s consent in favor of Licensee.

 

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

 

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

 

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

 

Section
9.5. Recoveries. All
damages, settlements and awards made or obtained in connection with any suit or
other legal proceeding under this Article 9 shall be distributed as
follows:

 

(a) If
Licensor initiated the suit and prosecuted it to its conclusion, Licensor shall
be entitled to retain the balance of any damages, settlements and awards,
provided that Licensee may elect (within thirty (30) days of initiation of such
suit) to fund up to [***] percent ([***]%) of Licensor’s litigation costs and to
share in the same proportion of net recoveries.

 

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

 

29

 

ARTICLE
10
NON-USE
OF NAMES

 

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

 

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

 

 

ARTICLE
11
REPRESENTATIONS
AND WARRANTIES

 

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

 

(a) it has
the right to grant the license granted and the Right of First Negotiation of New
Products granted under Sections 2.1. and 2.5, respectively, of this Agreement
and that it has full power and authority to execute, deliver and perform this
Agreement and the Revised Supply Agreement and the obligations hereunder and
thereunder.

 

 

 

 

 

Information
marked by [***] has been omitted pursuant to a request for confidential
treatment. The omitted portion has been separately filed with the Securities and
Exchange Commission.

 

30

(b) to
Licensor’s knowledge, there are no claims or potential claims by any third
parties (other than the Original Licensor and Scripps) to an ownership interest
in the Licensed Rights licensed to Licensee under this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section
11.3. Validity. Subject
to the foregoing provisions of this Article 11, nothing in this Agreement shall
be construed as a representation or a warranty by Licensor that any process
practiced or anything imported, used or sold under any license granted under
this Agreement is or will be free from infringement of patents of third
parties.

 

31

 

Section
11.4. No
Consequential Damages. IN NO
EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM THE PERFORMANCE OF THIS
AGREEMENT.

 

ARTICLE
12
INDEMNIFICATION

 

Section
12.1. Indemnification
by Licensee. Subject
to Section 11.4 and to the extent not covered by Licensor’s indemnity under
Section 12.2, Licensee agrees to indemnify and hold harmless Licensor and its
Affiliates and their respective officers, directors, employees and agents from
and against any and all claims, damages and liabilities, including reasonable
attorneys fees and expenses, asserted by third parties, both government and
private (collectively, “Claims”),
arising from Licensee’s or its Affiliates’ or sublicensees’ import, use, offer
to sell or sale of Licensed Products pursuant to this Agreement, including
without limitation any claim for breach of warranty, negligence or strict
liability with respect to any Licensed Product. This Section shall apply to the
Revised Supply Agreement. In the event of any contradiction between the Revised
Supply Agreement and any of the terms contained in this Agreement, the terms of
this Agreement shall prevail. 

 

Section
12.2. Indemnification
by Licensor. Subject
to Section 11.4, Licensor agrees to indemnify and hold harmless Licensee, its
Affiliates and sublicensees and their respective officers, directors, employees
and agents from and against any and all Claims arising from (a) any infringement
of any patent or other intellectual property interest in the Licensed Territory
by any Person other than the parties to this Agreement relating to the Licensed
Products; (b) any breach by Licensor of its representations and warranties set
forth in this Agreement; (c) any negligent act or omission of Licensor and (d)
any intrinsic or manufacturing defect of the Licensed Products existing when the
Licensed Products are placed by Licensor in the custody of the carrier for
transport to Licensee. This Section shall apply to the Revised Supply Agreement.
In the event of any contradiction between the Revised Supply Agreement and any
of the terms contained in this Agreement, the terms of this Agreement shall
prevail. 

 

Section
12.3. Insurance.
Licensor and Licensee shall maintain during the term of this Agreement insurance
policies covering their respective obligations under this Article 12, issued by
reputable insurance companies under ordinary terms and conditions in the
pharmaceutical industry and will prove the existence thereof to the other party
if so requested.

 

 

32

 

ARTICLE
13
TRADEMARK
MATTERS; PATENT MARKING

 

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

 

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

 

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

 

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

 

ARTICLE
14
PATENT
PROSECUTION AND MAINTENANCE

 

Section
14.1. Maintenance
of Patent Rights.
Licensor has obtained certain commitments from the Original Licensor of the
Scripps Patent Rights and the patent rights listed in Section (b) of Schedule I
(collectively, the “Third
Party Patent Rights”) that
the Original Licensor will maintain the Third Party Patent Rights or, in the
event that the Original Licensor does not do so, that Licensor shall be given
the right to do so. Licensor undertakes to enforce its rights with respect to
maintenance of the Third Party Patent Rights against the Original Licensor and,
to the extent Licensor succeeds to the maintenance of the Third Party Patent
Rights, to use all commercially reasonable efforts to do so. Licensor further
undertakes to maintain the Patent Rights owned by Licensor as well as to carry
out any and all necessary steps in order to enable such Patent Rights be
enforced and applicable in each country of the Licensed Territory. Licensor
shall provide Licensee with copies of all written materials received by Licensor
from the Original Licensor, the Original Licensor’s or Licensor’s counsel, or
any governmental agency or instrumentality relating to prosecution and/or
maintenance of Patent Rights and shall afford Licensee the opportunity to review
and comment upon any filings to be made with respect to the Patent Rights (in
the case of the Third Party Patent Rights, to the same extent Licensor is
entitled to do so).

 

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

 

 

33

 

 

ARTICLE
15
GENERAL

 

Section
15.1. Entire
Agreement. This
Agreement, including the Schedules, Annexes and Exhibits hereto, constitutes the
entire agreement and understanding between the parties as to the subject matter
hereof. All prior negotiations, representations, agreements, contracts, offers
and earlier understandings of whatsoever kind, whether written or oral between
Licensor and Licensee in respect of the subject matter of this Agreement
including, without limitation, the Sublicense and Collaboration Agreement dated
March 6, 2002, and the Sublicense and Collaboration Agreement dated October 26,
1999, in each case between Licensee and Licensor, are superseded by, merged
into, extinguished by and completely expressed by this Agreement. No aspect,
part or wording of this Agreement may be modified except by mutual agreement
between the Licensor and Licensee taking the form of an instrument in writing
signed and dated by duly authorized representatives of both Licensor and
Licensee.

 

 

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

 

In the
case of Licensor:       Discovery
Laboratories, Inc.
2600
Kelly Road
Warrington,
Pennsylvania 18976
Attention:
Robert J. Capetola, Ph.D,
Chief
Executive Officer

 

With a
copy
to:                   
Dickstein
Shapiro Morin & Oshinsky
1177
Avenue of the Americas, 41st Floor
New York,
NY 10036-2714
Attn: Ira
L. Kotel
Facsimile:
(212) 997-9880

 

34

In the
case of Licensee:      Laboratorios
del Dr. Esteve, S.A.
Av. Mare
de Déu de Montserrat, 221
08041
Barcelona (Spain)
Attention:
Development Director
Facsimile:
(34) 93 433 00 72

 

With a
copy
to:                   
JAUSAS
Av.
Diagonal 407 bis, 10th Floor
08008
Barcelona (Spain)
Attention:
Hector Jausas
Facsimile:
(34) 93 415 20 51

 

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

 

Section
15.3. Governing
Law. This
Agreement and its effect are subject and shall be construed and enforced in
accordance with the laws of the State of New York, United States (without giving
effect to the principles of conflict of laws), except as to any issue which
depends upon the validity, scope or enforceability of any patent within the
Patent Rights, which issue shall be determined in accordance with the applicable
patent laws of the country of such patent.

 

Section
15.4 Dispute
Resolution.

 

(a)
Internal
Review. In the
event that a dispute, difference, claim, action, demand, request, investigation,
controversy, threat, discovery request or request for testimony or information
or other question arises pertaining to any matters which arise under, out of, in
connection with, or in relation to this Agreement (a “Dispute”) and
either party so requests in writing, prior to the initiation of any formal legal
action, the Dispute will be submitted to the Chief Executive Officers (or
equivalent position) of Licensee and Licensor. For all Disputes referred to the
Chief Executive Officers (or equivalent position), the Chief Executive Officers
(or equivalent position) shall use their good faith efforts to meet in person
and to resolve the Dispute within two weeks after such referral.

 

(b)
Arbitration. If,
pursuant to Section 15.4(a), within two weeks or such other period as may be
agreed upon between the parties following such reference, the dispute remains
unresolved, it shall be settled on application by either party by arbitration
conducted in the English language, in Stockholm (Sweden) in accordance with the
Rules of Arbitration of the International Chamber of Commerce by one or more
arbitrators appointed in accordance with the said rules. The parties expressly
agree to abide the award rendered. This provision shall not prevent either party
from addressing any competent court or tribunal in order to seek for interim
measures. 

 

35

(c)
Costs. The
parties shall bear their own costs in preparing for and participating in the
resolution of any Dispute, and the costs of mediator(s) and arbitrator(s) shall
be equally divided between the parties.

 

Section
15.5. Conflicts. Nothing
in this Agreement shall be construed so as to require the commission of any act
contrary to law, and whenever there is any conflict between any provision of
this Agreement or concerning the legal right of the parties to contract and any
statute, law, ordinance or treaty, the latter shall prevail, but in such event
the affected provisions of this Agreement shall be curtailed and limited only to
the extent necessary to bring it within the applicable legal
requirements.

 

Section
15.6. Registration.
Licensee shall take all reasonable and necessary steps to register this
Agreement in any country where such is required to permit the transfer of funds
and/or payment of royalties to Licensor hereunder or is otherwise required by
the government or law of such country to effectuate or carry out this Agreement.
Notwithstanding anything contained herein, Licensee shall not be relieved of any
of its obligations under this Agreement by any failure to register this
Agreement in any country, and, specifically, Licensee shall not be relieved of
its obligation to make any payment due to Licensor hereunder at Licensor’s
address specified in Article 15.2 hereof, where such payment is blocked due to
any failure to register this Agreement.

 

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

 

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

 

Section
15.9. Assignment. Except
as otherwise set forth in Sections 2.1 and 2.3 of this Agreement with respect to
Licensee’s right to grant sublicenses and appoint co-marketers and/or
co-promoters, neither party hereto may assign or transfer this Agreement or any
rights or obligations hereunder without the prior written consent of the other,
except that a party may make such an assignment without the other party’s
consent to Affiliates or to a successor to substantially all of the business of
such party, whether in a merger, sale of stock, sale of assets or other
transaction. Any permitted successor or assignee of rights and/or obligations
hereunder shall, in a writing to the other party, expressly assume performance
of such rights and/or obligations. Any permitted assignment shall be binding on
the successors of the assigning party. Any assignment or attempted assignment by
either party in violation of the terms of this Section 15.9 shall be null and
void and of no legal effect.

 

 

36

 

Section
15.10. Successors
and Assigns. Subject
to Section 15.9, this Agreement shall be binding upon and inure to the benefit
of the permitted successors or permitted assigns of Licensor and Licensee
respectively.

 

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

 

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

 

 

 

 

REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK

 

37

 

 

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

 

 

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

    
	 	
      Name: Robert J. Capetola, Ph.D.

      Title:
      President and Chief Executive
Officer

 

 

	 	LABORATORIOS DEL DR. ESTEVE,
      S.A.
	 	 
	
        By:   
	/s/ Antonio Esteve
	 	
      

    
	 	
      Name:

      Title:

 

 

 

38

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