Document:

Development Agreement dated April 3, 2003

 Exhibit 10.16 
  

	*	Certain confidential information contained in this document, marked by brackets, has been omitted and filed with the Securities and Exchange Commission pursuant to Rule 406 of
the Securities Act of 1933, as amended. 

  
 DEVELOPMENT AGREEMENT 
  
 BETWEEN

  
 ABARIS PHARMA, INC. 
  
 AND 
  
 PARI GMBH 

 TABLE OF CONTENTS 
  

									
	 	 	 	  	 	  	 	  	Page

	 Article 1 – Definitions
	  	1
		
	 Article 2 – Program A
	  	13
				
	 	 	2.1	  	Existing Formulation	  	13
					
	 	 	 	  	2.1.1	  	Development of Existing Formulation Prior to Effective Date	  	13
					
	 	 	 	  	2.1.2	  	Clinical Studies Conducted Prior to Effective Date	  	13
					
	 	 	 	  	2.1.3	  	Analysis of Existing Formulation After Effective Date	  	14
				
	 	 	 2.2
	  	Test Inhaler Development Prior to Effective Date	  	14
				
	 	 	 2.3
	  	Test Inhaler Development After Effective Date for Phase II Clinical Study	  	14
				
	 	 	 2.4
	  	Initial Regulatory Filing for eFlow IMP Device	  	14
				
	 	 	 2.5
	  	Test Inhaler Delivery for Phase II Clinical Study	  	15
					
	 	 	 	  	2.5.1	  	Schedule	  	15
				
	 	 	 2.6
	  	Test Inhaler Quality and Acceptance Prior to 510(k) Notification	  	15
					
	 	 	 	  	2.6.1	  	Inspection	  	15
					
	 	 	 	  	2.6.2	  	Certificate of Verification	  	15
					
	 	 	 	  	2.6.3	  	Acceptance	  	16
				
	 	 	 2.7
	  	Payment for Test Inhalers for Phase II Clinical Study	  	16
				
	 	 	 2.8
	  	Approved Delays for Test Inhaler Delivery Schedule	  	16
				
	 	 	 2.9
	  	Failure to Supply Test Inhalers According to Schedule	  	17
					
	 	 	 	  	2.9.1	  	Continuation of Inhaler Development with Reduction in Milestone Payments	  	17
					
	 	 	 	  	2.9.2	  	Cancellation or Suspension of Inhaler Development	  	17
				
	 	 	 2.10
	  	Phase III Clinical Study	  	17
					
	 	 	 	  	2.10.1	  	Option to Use Test Inhaler or Modify Test Inhaler for Phase III Clinical Study	  	17

  

 i 

							
				
	 	 	2.10.2	  	Use of Test Inhaler for Phase III Clinical Study	  	17
				
	 	 	2.10.3	  	Modification of Test Inhaler for Phase III Clinical Study	  	17
				
	 	 	2.10.4	  	Delivery of Inhalers for Phase III Clinical Study	  	18
			
	 2.11
	 	Additional Regulatory Filings for Inhaler	  	18
			
	 2.12
	 	Quality Manufacture of Inhalers After 510(k) Approval	  	18
			
	 2.12.1
	 	Validation	  	18
				
	 	 	2.12.2	  	Certificate of Analysis	  	18
			
	 2.13
	 	Inhaler Delivery for Phase III Clinical Study	  	19
			
	 2.14
	 	Acceptance	  	19
			
	 2.15
	 	Payment for Inhalers for Phase III Clinical Study	  	19
			
	 2.16
	 	Regulatory Activities for Existing Formulation	  	19
			
	 2.17
	 	Upfront License Payment and Milestone Payments for Inhaler	  	19
				
	 	 	2.17.1	  	Upfront License Payment	  	19
				
	 	 	2.17.2	  	Milestone Payments	  	19
			
	 2.18
	 	Royalty Payments	  	20
				
	 	 	2.18.1	  	Patent Protection	  	20
				
	 	 	2.18.2	  	No Patent Protection	  	20
				
	 	 	2.18.3	  	Discount on Inhaler Price if No Patent Protection	  	21
				
	 	 	2.18.4	  	Drug Products Produced by Novel Formulation	  	21
			
	 2.19
	 	ABARIS’ Option to Proceed with Existing Formulation or Novel Formulation	  	21
			
	 2.20
	 	Payment for Test Inhaler Development Activities	  	21
			
	 2.21
	 	Reimbursement for Costs of Existing Formulation Analysis and Inhaler Development Activities	  	21
				
	 	 	2.21.1	  	Budget Procedures for Existing Formulation Analysis and Inhaler Development Activities	  	22

  

 ii 

							
	 	  	2.21.2	  	Reimbursement Limit for Existing Formulation Analysis and Inhaler Development Activities	  	22
			
	 2.22
	  	Intellectual Property Ownership	  	22
				
	 	  	2.22.1	  	ABARIS Ownership of Existing Formulation Intellectual Property	  	22
				
	 	  	2.22.2	  	PARI Ownership of Inhaler Intellectual Property and Certain Formulation Intellectual Property	  	22
				
	 	  	2.22.3	  	Ownership of Inhaler-Drug Product Intellectual Property	  	23
			
	2.23	  	License to ABARIS	  	23
			
	 2.24
	  	[*]	  	23
		
	 Article 3 – Program B
	  	24
			
	 3.1  
	  	Initiation of Novel Formulation Development	  	24
			
	 3.2  
	  	Feasibility Assessment	  	24
			
	 3.3  
	  	Feasibility Assessment Report	  	24
			
	 3.4  
	  	[*] Continuation or Suspension of Novel Formulation Development	  	24
				
	 	  	3.4.1	  	Continuation	  	24
				
	 	  	3.4.2	  	Suspension	  	24
			
	 3.5  
	  	Development of Novel Formulation	  	25
			
	 3.6  
	  	Supply of Novel Formulation and Studies on Novel Formulation	  	25
			
	 3.7  
	  	Phase III Clinical Study and Commercial Supply	  	26
				
	 	  	3.7.1	  	Final Novel Formulation	  	26
				
	 	  	3.7.2	  	Delivery of Drug Product Made Using Novel Formulation	  	26
				
	 	  	3.7.3	  	Acceptance	  	26
			
	 3.8  
	  	Regulatory Filing for Novel Formulation	  	26
			
	 3.9  
	  	Activities Outside the Scope of Novel Formulation Development Plan	  	26
			
	 3.10
	  	Upfront License and Feasibility Assessment Payments and Milestone Payments	  	27

  

			
	iii	 	*Confidential Treatment Requested

  

									
					
	 	 	 	  	3.10.1	  	 Upfront License Payment
	  	27
					
	 	 	 	  	3.10.2	  	 Upfront Feasibility Assessment Payment
	  	27
					
	 	 	 	  	3.10.3	  	 Milestone Payments
	  	27
				
	 	 	 3.11
	  	Royalty Payments for Novel Formulation	  	28
					
	 	 	 	  	3.11.1	  	 Patent Protection
	  	28
					
	 	 	 	  	3.11.2	  	 No Patent Protection
	  	28
					
	 	 	 	  	3.11.3	  	 Intentionally Omitted
	  	28
					
	 	 	 	  	3.11.4	  	 Drug Products Produced by Existing Formulation
	  	28
					
	 	 	 	  	3.11.5	  	 ABARIS’ Option to Sell Existing Formulation or Novel Formulation
	  	28
				
	 	 	 3.12
	  	Reimbursement for Novel Formulation Development Expenses	  	29
				
	 	 	 3.13
	  	Limits on Reimbursement for Novel Formulation Development Expenses	  	29
					
	 	 	 	  	3.13.1	  	 Budget Procedures
	  	29
					
	 	 	 	  	3.13.2	  	 Reimbursement Limit for Novel Formulation Development Activities
	  	29
				
	 	 	 3.14
	  	[*] Ownership of Novel Formulation Intellectual Property	  	29
				
	 	 	 3.15
	  	License to [*] of Novel Formulation Intellectual Property Outside Field	  	29
					
	 	 	 	  	3.15.1	  	 License
	  	29
					
	 	 	 	  	3.15.2	  	 Right of [*]
	  	30
				
	 	 	 3.16
	  	PARI’s Reversionary Interest	  	30
					
	 	 	 	  	3.16.1	  	 Payment Default
	  	30
					
	 	 	 	  	3.16.2	  	 ABARIS Changes
	  	31
		
	 Article 4 – Commercially Reasonable Efforts
	  	31
				
	 	 	 4.1
	  	Commercially Reasonable Efforts	  	31
				
	 	 	 4.2
	  	ABARIS’ Relationship with BattellePharma	  	31

  

			
	iv	 	*Confidential Treatment Requested

  

									
		
	 Article 5 – Quality Standards
	  	31
				
	 	 	 5.1
	  	 Internal Quality Control
	  	31
				
	 	 	 5.2
	  	 Substantial Compliance with cGMP and ECGMP
	  	32
				
	 	 	 5.3
	  	 Full Compliance with cGMP and ECGMP
	  	32
		
	 Article 6 – Adverse Information and Event Reporting
	  	32
				
	 	 	 6.1
	  	 Adverse Information and Event Reporting
	  	32
		
	 Article 7 – Project Management
	  	32
				
	 	 	 7.1
	  	 Formation and Purpose of Project Team
	  	32
				
	 	 	 7.2
	  	 Control
	  	33
					
	 	 	 	  	 7.2.1
	 	 General Control of ABARIS
	  	33
					
	 	 	 	  	 7.2.2
	 	 Control of PARI
	  	33
				
	 	 	 7.3
	  	 Membership
	  	33
				
	 	 	 7.4
	  	 Meetings and Travel Reimbursement
	  	34
				
	 	 	 7.5
	  	 Access to Facilities to View Development Activities
	  	34
				
	 	 	 7.6
	  	 Limitation of Powers
	  	34
				
	 	 	 7.7
	  	 Liaisons
	  	34
				
	 	 	 7.8
	  	 Reports
	  	35
					
	 	 	 	  	 7.8.1
	 	 Progress Reports
	  	35
					
	 	 	 	  	 7.8.2
	 	 Other Reports
	  	35
		
	 Article 8 – Subcontracting
	  	35
				
	 	 	 8.1
	  	 New Subcontracts
	  	35
				
	 	 	 8.2
	  	 Existing Subcontractors
	  	36
				
	 	 	 8.3
	  	 Payment of Subcontractors
	  	36
				
	 	 	 8.4
	  	 Enforcement of Subcontracts
	  	36
		
	 Article 9 – Data
	  	36

  

 v 

									
	 	 	 9.1
	 	Ownership	  	36
					
	 	 	 	 	9.1.1	 	ABARIS Ownership	  	36
					
	 	 	 	 	9.1.2	 	PARI Ownership	  	36
				
	 	 	9.2	 	ABARIS’ Use of PARI Data for Development and Regulatory Activities	  	36
					
	 	 	 	 	9.2.1	 	PARI Post-Effective Date Data	  	36
					
	 	 	 	 	9.2.2	 	PARI Pre-Effective Date Data	  	37
				
	 	 	9.3	 	PARI’s Use of ABARIS Data for Purposes of Agreement	  	37
				
	 	 	9.4	 	Return of PARI Data Upon Termination of Agreement	  	37
					
	 	 	 	 	9.4.1	 	ABARIS’ Return of Data	  	37
					
	 	 	 	 	9.4.2	 	PARI’s Return of Data	  	37
					
	 	 	9.5	 	Exception	 	 	  	37
		
	Article 10 – Regulatory Activities	  	38
				
	 	 	10.1	 	No Guarantee of Approval from ABARIS	  	38
				
	 	 	10.2	 	No Guarantee of Approval from PARI	  	38
				
	 	 	10.3	 	No Liability for Lack of Regulatory Approval	  	38
				
	 	 	10.4	 	Cooperation	  	38
				
	 	 	10.5	 	Reimbursement for Cooperation	  	38
				
	 	 	10.6	 	Foreign Device Filings In Regulatory Pursuit Countries	  	38
					
	 	 	 	 	10.6.1	 	Test Inhaler	  	38
					
	 	 	 	 	10.6.2	 	Inhaler If Different From Test Inhaler	  	39
				
	 	 	10.7	 	Filing of European Dossier for Device	  	39
					
	 	 	 	 	10.7.1	 	Test Inhaler	  	39
					
	 	 	 	 	10.7.2	 	Inhaler If Different From Test Inhaler	  	39
		
	Article 11 – Support Development Activities	  	39
				
	 	 	11.1	 	Support Development Activities	  	39

  

 vi 

									
	Article 12 – Expense Computation, Expense Reporting and Method of Payment	  	40
				
	 	 	12.1	 	Changes In Labor Rates	  	40
					
	 	 	 	 	12.1.1	 	Scientific Labor Rate	  	40
					
	 	 	 	 	12.1.2	 	Clerical Labor Rate	  	40
				
	 	 	12.3	 	Invoicing	  	40
				
	 	 	12.4	 	Method of Payment to PARI	  	41
					
	 	 	 	 	12.4.1	 	Wire Transfer	  	41
					
	 	 	 	 	12.4.2	 	Fluctuations in Currency Exchange Rates	  	41
				
	 	 	12.5	 	Interest for Late Payments to PARI	  	41
				
	 	 	12.6	 	Royalty Reports	  	42
				
	 	 	12.7	 	Payment of Royalty	  	42
					
	 	 	 	 	12.7.1	 	Quarterly Payments	  	42
					
	 	 	 	 	12.7.2	 	Patent Exhaustion	  	42
					
	 	 	 	 	12.7.3	 	No Multiple Payment for Multiple Patent Claims	  	42
					
	 	 	 	 	12.7.4	 	Single Payment Upon Resale	  	42
				
	 	 	12.8	 	Reduction of Royalties	  	43
					
	 	 	 	 	12.8.1	 	Blocking Patents	  	43
					
	 	 	 	 	12.8.2	 	Compulsory License	  	43
					
	 	 	 	 	12.8.3	 	Discount on Inhaler Price	  	43
				
	 	 	12.9	 	ABARIS’ Books and Records and Inspection	  	43
				
	 	 	12.10	 	PARI’s Books and Records and Inspection	  	44
				
	 	 	12.11	 	Work Outside Scope of Agreement	  	44
		
	Article 13 – Commercialization	  	44
				
	 	 	13.1	 	Program A Commercialization Strategy	  	44
					
	 	 	 	 	13.1.1	 	Existing Formulation and Related Inhaler	  	44

  

 vii 

									
	 	 	 	 	13.1.2	 	Options of Program A Commercialization Strategy	  	45
					
	 	 	 	 	13.1.3	 	Program A Supply Agreement – Minimum Terms	  	45
					
	 	 	 	 	13.1.4	 	Program A Independent Arrangement – Minimum Terms	  	45
				
	 	 	13.2	 	Program B Commercialization Strategy	  	45
					
	 	 	 	 	13.2.1	 	Novel Formulation and Related Inhaler	  	45
					
	 	 	 	 	13.2.2	 	Options of Program B Commercialization Strategy	  	46
					
	 	 	 	 	13.2.3	 	Program B Supply Agreement – Minimum Terms	  	46
					
	 	 	 	 	13.2.4	 	Program B Independent Arrangement – Minimum Terms	  	46
				
	 	 	13.3	 	Volume of Inhaler Orders for Program A and Program B	  	46
					
	 	 	 	 	13.3.1	 	ABARIS’ Obligation	  	47
		
	Article 14 – Alternative Supply of Inhalers	  	48
				
	 	 	14.1	 	PARI Changes	  	48
					
	 	 	 	 	14.1.1	 	Changes	  	48
					
	 	 	 	 	14.1.2	 	Notice	  	48
				
	 	 	14.2	 	PARI Circumstances	  	48
					
	 	 	 	 	14.2.1	 	Circumstances	  	49
					
	 	 	 	 	14.2.2	 	Cure Period	  	49
				
	 	 	14.3	 	Sole License	  	49
					
	 	 	 	 	14.3.1	 	Grant	  	49
					
	 	 	 	 	14.3.2	 	Sole License Event	  	50
				
	 	 	14.4	 	Agreement with ABARIS’ Contractor	  	50
		
	Article 15 – Vesting of Intellectual Property and Data In Owner	  	50
				
	 	 	15.1	 	Vesting of Intellectual Property and Data In Owner	  	50
		
	Article 16 – Pursuit of Patent Protection	  	51
				
	 	 	16.1	 	PARI Licensed Intellectual Property	  	51

  

 viii 

							
			
	         16.2
	  	ABARIS’ Option to Prosecute the PARI Licensed Intellectual Property	  	51
			
	 16.3
	  	ABARIS Intellectual Property	  	51
			
	 16.4
	  	Extension of Licensed Patent Term	  	51
			
	 16.5
	  	Patent Marking	  	52
			
	 	  	16.5.1 Marking by ABARIS	  	52
			
	 	  	16.5.2 Marking by PARI	  	52
		
	Article 17 – Enforcement of Intellectual Property	  	52
			
	 17.1
	  	Notice of Infringement	  	52
			
	 17.2
	  	ABARIS’ Right to Prosecute Infringements – Drug Product	  	52
			
	 17.3
	  	PARI’s Right to Prosecute Infringements – Inhaler	  	53
			
	 17.4
	  	ABARIS’ Option to Prosecute Infringements – Inhaler	  	53
			
	 17.5
	  	PARI’s Option to Prosecute Infringements – Novel Formulation	  	53
		
	Article 18 –-Defense of Drug Product and Inhaler	  	54
			
	 18.1
	  	Defense Against Third Party Action Against ABARIS – Drug Product	  	54
			
	 18.2
	  	Defense Against Third Party Action Against PARI – Inhaler	  	54
		
	 Article 19 – Confidentiality
	  	55
			
	 19.1
	  	Nondisclosure	  	55
			
	 19.2
	  	Exceptions for PARI’s Disclosure	  	55
			
	 19.3
	  	Exceptions for ABARIS’ Disclosure	  	55
			
	 19.4
	  	Publicity – Press Releases	  	55
			
	 	  	19.4.1 Press Release	  	55
			
	 19.5
	  	Terms of Agreement	  	56
			
	 19.6
	  	Publicity – Use of Parties’ Names	  	56
			
	 19.7
	  	Mayo – No Use of Name or Logo	  	56
			
	 19.8
	  	Confidentiality Agreements	  	56

  

 ix 

									
				
	 	 	 19.9
	  	Return of Confidential Information	  	57
		
	 Article 20 – Representations and Warranties
	  	57
				
	 	 	 20.1
	  	PARI Representations and Warranties	  	57
				
	 	 	 20.2
	  	ABARIS’ Representations and Warranties	  	58
		
	 Article 21 – Indemnification
	  	59
				
	 	 	 21.1
	  	Indemnification of ABARIS	  	59
				
	 	 	 21.2
	  	Indemnification of PARI	  	60
		
	 Article 22 – Insurance
	  	60
				
	 	 	 22.1
	  	Insurance	  	60
		
	 Article 23 – Limitation of Damages
	  	61
		
	 Article 24 – Dispute Resolution
	  	61
				
	 	 	 24.1
	  	Negotiation	  	61
				
	 	 	 24.2
	  	Mediation	  	62
				
	 	 	 24.3
	  	Injunctive Relief	  	62
		
	 Article 25 – Term and Termination
	  	62
				
	 	 	 25.1
	  	Term	  	62
				
	 	 	 25.2
	  	Each Party’s Right to Terminate for Breach	  	62
				
	 	 	 25.3
	  	ABARIS’ Rights to Terminate Program A Obligations	  	62
					
	 	 	 	  	25.3.1	  	With Cause – PARI’s Delay of Test Inhaler Delivery	  	62
					
	 	 	 	  	25.3.2	  	With Cause – Results	  	63
					
	 	 	 	  	25.3.3	  	Without Cause	  	64
					
	 	 	 	  	25.3.4	  	Wind-Down Costs	  	64
				
	 	 	 25.4
	  	ABARIS’ Rights to Terminate Program B Obligations	  	65
					
	 	 	 	  	25.4.1	  	Decision After Feasibility Assessment	  	65
					
	 	 	 	  	25.4.2	  	With Cause – Results	  	65

  

 x 

									
	 	 	 	  	25.4.3	  	Without Cause	  	67
					
	 	 	 	  	25.4.4	  	Wind-Down Costs	  	67
				
	 	 	 25.5
	  	Termination of Program A Obligations and Program B Obligations	  	67
				
	 	 	 25.6
	  	Effect of Termination on Licenses	  	67
					
	 	 	 	  	25.6.1	  	Survival of Termination of Program A or Program B Obligations	  	67
					
	 	 	 	  	25.6.2	  	Termination of Licenses	  	67
					
	 	 	 	  	25.6.3	  	Paid-Up License to Know-How	  	67
				
	 	 	 25.7
	  	Survival	  	68
				
	 	 	 25.8
	  	Rights in Bankruptcy – United States	  	68
		
	 Article 26 – Miscellaneous
	  	68
				
	 	 	 26.1
	  	Entire Agreement	  	68
				
	 	 	 26.2
	  	Notices	  	69
				
	 	 	 26.3
	  	Choice of Law	  	69
				
	 	 	 26.4
	  	Assignability	  	69
				
	 	 	 26.5
	  	Waivers and Amendments	  	69
				
	 	 	 26.6
	  	Severability	  	70
				
	 	 	 26.7
	  	Article and Section Headings	  	70
				
	 	 	 26.8
	  	Counterparts	  	70
				
	 	 	 26.9
	  	Further Assurances	  	70
				
	 	 	 26.10
	  	Force Majeure	  	70
				
	 	 	 26.11
	  	Compliance of Law	  	70
				
	 	 	 26.12
	  	Relationship of the Parties	  	71
				
	 	 	 26.13
	  	Choice of Language	  	71
				
	 	 	 26.14
	  	Choice of Currency	  	71
				
	 	 	 26.15
	  	Recordation of Licenses	  	71

  

 xi 

			
	 Inhaler Development Plan
	  	Exhibit A
		
	 Inhaler Specifications
	  	Exhibit B
		
	 Project Team Membership and Liaison List
	  	Exhibit C
		
	 License Recordation Form
	  	Exhibit D
		
	 Novel Formulation Development Plan
	  	Exhibit E
		
	 Novel Formulation Specifications
	  	Exhibit F
		
	 Patent Pursuit Countries and Regulatory Pursuit Countries
	  	Exhibit G
		
	 Program A Supply Terms
	  	Exhibit H
		
	 Program B Supply Terms
	  	Exhibit I
		
	 Test Inhaler Development Plan
	  	Exhibit J

  

 xii 

 DEVELOPMENT AGREEMENT 
  
 This Development Agreement (“Agreement”) effective as of April 3, 2003 (the “Effective Date”), is
between PARI GmbH, a German corporation with a principal place of business at Moosstrasse 3, D-82319 Starnberg, Germany (“PARI”) and Abaris Pharma, Inc., a Delaware corporation with a principal place of business at 2025 1st Avenue, Suite 800, Seattle, Washington 98121, United States (“ABARIS”), a wholly owned subsidiary of Corus Pharma,
Inc., a Delaware corporation (“Corus”). 
  
 RECITALS

  
 WHEREAS, ABARIS is in the business of developing and
commercializing drugs for the treatment of respiratory tract diseases, and ABARIS has an existing formulation for the inhalation delivery of liquid lidocaine; 
  

WHEREAS, PARI is in the business of developing and commercializing drug inhalation devices and PARI has developed a drug inhalation device which PARI
desires to finalize for aerosolizing liquid lidocaine for inhalation delivery; 
  
 WHEREAS, PARI also has certain expertise and experience in developing drug formulations and drug products which are made for inhalation delivery by inhalation devices; 
  
 WHEREAS, ABARIS also desires PARI to evaluate and, depending upon the outcome
of the evaluation, develop a novel formulation of liquid lidocaine for the inhalation delivery; and 
  
 WHEREAS, PARI is willing to provide such development activities, and ABARIS is willing to pay PARI for such services on the terms and conditions set forth
herein. 
  
 AGREEMENT 
  
 In consideration of the recitals set forth above, the mutual covenants, terms
and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, PARI and ABARIS agree as follows: 
  
 Article 1 – Definitions 
  

As used in this Agreement, the following terms shall have the following meanings while other terms may be defined parenthetically throughout this
Agreement: 
  
 1.1 “510(k) Submission” means a
premarket notification for a medical device under Section 510(k) of the Federal Food, Drug Product and Cosmetic Act of the United States which includes information to establish that the medical device is substantially equivalent to a legally
marketed device. Depending upon the circumstance, the 510(k) Submission can include: (a) a traditional 510(k) submission; (b) a special 510(k) device modification submission; or (c) an abbreviated 510(k) submission. 
  
 1.2 “510(k) Notification” means an order from the FDA
declaring a medical device substantially equivalent to a legally marketed device. 

 1.3 “ABARIS Data” means the ABARIS Pre-Effective Date Data and the ABARIS Post-Effective
Date Data. 
  
 1.4 “ABARIS Intellectual Property”
means all Intellectual Property owned, controlled or licensable by ABARIS during the term of this Agreement which relate to the Drug Product, the Existing Formulation of the Drug Product or the Novel Formulation of the Drug Product, including,
without limitation: 
  
 (a) all Intellectual Property which shall
be owned by ABARIS pursuant to Section 2.22.1 of this Agreement; 
  
 (b) any and all Intellectual Property which shall be owned by ABARIS in accordance with any ownership agreement the Parties may establish pursuant to Section 2.22.3 of this Agreement; and 
  
 (c) the Novel Formulation Intellectual Property. 
  
 1.5 “ABARIS Post-Effective Date Data” shall have the meaning
provided parenthetically in Section 9.1.1 of this Agreement. 
  
 1.6 “ABARIS Pre-Effective Date Data” means all Data owned or licensable by ABARIS prior to the Effective Date. 
  
 1.7 “Active Ingredient” means a material or substance, which includes lidocaine.  
  
 1.8 “Adverse Event” shall have the meaning provided
parenthetically in Section 6.1 of this Agreement. 
  
 1.9
“Affiliate(s)” of a party means any person or entity that directly or indirectly owns or Controls, is owned or Controlled by or is under common ownership or Control with such party.  
  
 1.10 “Approved Budget” means the budgets for the selected
Development Activities set forth in the Test Inhaler Development Plan, Inhaler Development Plan or the Novel Formulation Development Plan as may be increased in writing pursuant to Section 2.21 or Section 3.13 of this Agreement. The Parties
acknowledge that the Approved Budget figures consist of good faith estimates by PARI of the number of labor hours required to perform the tasks specified in the corresponding Development Plan, multiplied by the initial Scientific Labor Rate of [*]
and the initial Clerical Labor Rate of [*]. Notwithstanding anything in this Agreement to the contrary, both the Scientific Labor Rate and the Clerical Labor Rate shall increase annually by [*], the first such increase to become effective no sooner
than January 1, 2004 and continuing during the term of this Agreement, and any Approved Budget shall deemed automatically amended to reflect such increases. 
  
 1.11 “cGMP” means current Good Manufacturing Practices regulations and Quality System regulations, as promulgated by the FDA (21 CFR Part
820 - Quality System Regulation (cGMP); 21 CFR Part 801 – Labeling; 21 CFR Part 803 - Medical Device Reporting; 21 CFR Part 806 - Medical Devices Report of Corrections and Removals; 21 CFR Part 807 - Establishment Registration and Device
Listing for Manufacturers and Initial Importers of Devices; and 21 CFR Part 812 - Investigational Device Exemptions). 
  
 *Confidential Treatment Requested 
  

					
	 	 	2	 	 

 1.12 “Change in Control of PARI” means a change in Control of PARI, including, without
limitation: (a) a merger (other than a merger in which the holders of stock of PARI immediately prior to the merger have the same proportionate ownership of stock in the surviving entity immediately after the merger); (b) a consolidation, separation
or reorganization (other than a mere reincorporation or the creation of a holding company); or (c) an acquisition of property or stock of PARI by a third party resulting in such third party’s Control of PARI, a result of which the stockholders
of PARI receive cash, stock or other property in exchange for or in connection with their PARI stock. 
  
 1.13 “Clerical Labor Rate” shall have the meaning provided parenthetically in Section 12.1.2 of this Agreement. 
  
 1.13.1 “Comparable Inhalation Device” means the inhalation
device sold by PARI to third parties, as of the Effective Date, under the product name, eFlow. 
  
 1.14 “Confidential Information” means the confidential or proprietary information of a Party, including, without limitation, Intellectual Property, Data, proprietary materials, proprietary
technologies, material embodiments of the foregoing, financial records and reports, economic information, business or research strategies, business plans and information exchanged prior to the Effective Date in negotiation of terms for this
Agreement or otherwise in communications related to or arising out of this Agreement or the other work hereunder. Confidential Information shall exclude any portion of such information which: (a) is known to the receiving Party before receipt
thereof as evidenced by the receiving Party’s written records existing prior to such receipt; (b) is independently developed by the receiving Party, as evidenced by documentation contemporaneous with such independent development; (c) is
disclosed to the receiving Party by a third party who has a legal right to make such disclosure; or (d) becomes part of the public domain through no fault of the receiving Party. 
  
 1.15 “Control” of a party means beneficial ownership, directly or indirectly, of fifty percent (50%) or
more of the outstanding voting shares or securities or the ability otherwise to elect or appoint a majority of the board of directors or other managing authority of such party. 
  
 1.16 “Data” means all data, data sets, test data, pre-clinical and clinical study data, Master Files,
reports, adverse event information, complaint files, Medical Device Reporting (MDR) files and information, including, but not limited to, all data, reports and information created for or arising out of any regulatory filing therefor, any regulatory
approval thereof or any corresponding application or approval therefor in any country in the Territory. 
  
 1.17 “Development Activity(ies)” means the Test Inhaler Development Activities, Inhaler Development Activities and the Novel Formulation
Development Activities. 
  
 1.18 “Development
Decision(s)” means a material decision involving a Development Activity. 
  

 3 

 1.19 “Drug Product” means a liquid which includes: (a) the Active Ingredient alone or in
addition to one or more other substances, chemicals or ingredients; or (b) a modification, re-synthesis, reformulation or derivative of the Active Ingredient alone or in addition to one or more other substances, chemicals or ingredients. 

 
 1.20 “ECGMP” means European Community Good Pharmaceutical
Manufacturing Practices and any amendments to such practices. 
  
 1.21 “eFlowTM Device”
means the electronic inhalation device or inhaler developed by PARI which includes an actuator which vibrates a membrane to generate liquid aerosol droplets, including, but not limited to, such an inhaler which: (a) generates the aerosol droplets at
relatively low shear stresses; and (b) is adaptable for distinct drug formulations, distinct aerosol droplet sizes and the needs of home or hospital use. PARI’s currently existing electronic inhalation device or inhaler is known as the
eFlowTM Device. 
  
 1.21.1 “eFlow IMP Device” means PARI’s currently
existing eFlowTM Device that PARI shall submit in
connection with the 510(K) Submission pursuant to Section 2.24. 
  
 1.22 “EMEA” means the European Agency for the Evaluation of Medicinal Drug Products or any successor to that agency. 
  
 1.23 “European Dossier” means the necessary documentation for a medical device manufacturer to obtain a CE marking for its product
according to the European Medical Device Directory. 
  
 1.24
“European Regulatory Approval” means a marketing authorization issued by the EMEA applying to one or more or all European Union Members. 
  
 1.25 “European Union Member” means any country, which is or becomes a member to the Treaty on European Union. 
  
 1.26 “Existing Formulation” means the one or more
formulations for the Drug Product which are known or otherwise exist as of the Effective Date, including, without limitation, compositions, chemical structures, molecules, compounds, ingredients, formulas, recipes, chemical reactions, mixtures,
technical information and know-how of the Drug Product which are necessary for producing, manufacturing or packaging the Drug Product. 
  
 1.27 “Existing Formulation Analysis” means the research, testing, analysis and development activities related to the use of the Existing
Formulation in the eFlow IMP Device, Test Inhaler or Inhaler which are performed by PARI, individually or jointly with ABARIS or third parties, under this Agreement. 
  
 1.28 “FDA” means the United States Food and Drug Administration or any successor to that agency.

  
 1.29 “Feasibility Assessment” shall have the
meaning provided parenthetically in Section 3.2 of this Agreement. 
  
 1.30 “Field” means the inhalation treatment or prophylaxis of respiratory tract diseases and the treatment of cough incidental to the inhalation treatment or prophylaxis of 
  

 4 

 respiratory tract diseases. For clarity, the Field shall not include the intended local delivery of anesthetics to the
mouth, nose, sinus and throat with the exception of deposition that occurs through the administration to the respiratory tract. 
  
 1.31 “Force Majeure” shall have the meaning provided parenthetically in Section 26.10 of this Agreement.  
  
 1.32 “IND” means an investigational new drug application
filed with the FDA. 
  
 1.33 “Inhaler” means an
inhalation delivery device based on PARI’s eFlowTM Device which meets the Inhaler Specifications and is adapted to aerosolize and deliver the Drug Product, including, without limitation, any Test Inhaler or modified Test Inhaler which meets the Inhaler Specifications.

  
 1.34 “Inhaler Data” means all data, data
sets, pre-clinical and clinical study data, Master Files, reports, applications, approvals and information related to the eFlow IMP Device, Test Inhaler or Inhaler, including, but not limited to, all data, reports and information created for or
arising out of any regulatory filing therefor, any regulatory approval thereof or any corresponding application or approval therefor in any country in the Territory. 
  
 1.35 “Inhaler Development Activities” means the research, design, development, construction, testing,
studies, reporting, prototype and clinical supply, delivery, regulatory and other activities which PARI, individually or jointly with ABARIS or third parties, performs under this Agreement relating to the eFlow IMP Device, Test Inhaler or Inhaler.
 
  
 1.36 “Inhaler Development Plan” means
the plan and time schedule for performing the Inhaler Development Activities, including, without limitation, the development options and the Approved Budget corresponding to each such option, as set forth in Exhibit A as amended in writing
from time to time in accordance with this Agreement. 
  
 1.37 “Inhaler Part(s)” means one or more replaceable components of the Inhaler, including, without limitation, the membrane adapted to co-act with the Drug Product stored in the Inhaler.  
  
 1.38 “Inhaler Specifications” means the specifications,
parameters and requirements for an inhalation device which are set forth in Exhibit B attached hereto. 
  
 1.39 “Intellectual Property” means all right, title and interest in all: (a) patent applications, patents and all other patent rights
including, without limitation: (i) divisions, continuations, continuations-in-part, renewals, re-examination certificates, reissues, continued prosecution applications, extensions, substitutions, nationalizations and foreign counterparts of such
patent applications and patents; and (ii) all patents which issue from the foregoing; (b) know-how and technical information, including, without limitation, concepts, inventions (whether or not patentable), trade secrets, discoveries, formulas,
systems, methods, techniques, designs, drawings, sketches, theories, descriptions, instructional materials, computer programs, computer files, images, videos and works of authorship (collectively, “Know-How”); and (c) all other
intellectual property. 
  

 5 

 1.40 “Know-How” shall have the meaning provided parenthetically in Section 1.39(b) of
this Article 1. 
  
 1.41 “Liaison List” means the
list of liaisons for the Parties which is set forth on Exhibit C attached hereto. 
  
 1.42 “License Recordation Form” means the license recordation form attached hereto as Exhibit D.  
  

1.43 “Master File” means information related to the Inhaler, commonly referred to as a Device Master File (DMF) or European Device
Master File (EDMF), including but not limited to, confidential or proprietary information, knowledge, data, trade secrets, inventions, discoveries, product designs, models, prototypes, engineering drawings, and schematics, in all forms. 

 
 1.44 “Material Inhaler Modification” means any
modification to the design or function of the Inhaler as approved by the FDA, where such modification requires a new regulatory approval of the modified Inhaler by the FDA prior to the marketing or sale of such modified Inhaler. 
  
 1.45 “Mayo Agreement” means that certain Mayo Foundation for
Medical Education and Research Technology License Contract entered into between ABARIS and the Mayo Foundation for Medical Education and Research, a Minnesota charitable corporation (“Mayo”) on January 4, 2002. 
  
 1.46 “Mayo Rights” means all of the rights reserved by Mayo
under the Mayo Agreement including: (a) the rights of the United States government, if any, in any and all intellectual property owned or controlled by Mayo; (b) Mayo’s and its affiliates’ reserved, irrevocable and royalty free right under
any and all intellectual property owned or controlled by Mayo to manufacture, have manufactured, or use (but not commercially distribute) any products or methods solely in conjunction with Mayo’s and its affiliates’ non-profit educational,
research and clinical programs; (c) all of Mayo’s rights in and to all of the patents, know-how and other intellectual property owned or controlled by Mayo or its affiliates which Mayo did not expressly grant to ABARIS in the Mayo Agreement;
(d) the right to solely own all right, title and interest in all of the intellectual property owned by Mayo; (e) Mayo’s right to restrain infringement of the patent rights which Mayo licensed to ABARIS under the Mayo Agreement if ABARIS does
not file an action to restrain infringement of such patents within one year after becoming aware of such infringement; and (f) Mayo’s right to have sole control over the prosecution, maintenance, defense and litigation related to certain patent
rights which Mayo and the University of Minnesota co-own and have licensed to ABARIS in the Mayo Agreement. 
  
 1.47 “NDA” means a New Drug Product Application filed with the FDA. 
  
 1.48 “Net Sales” means the amounts received by ABARIS, its Affiliates and its Sublicensees for Sales of the
Drug Product for inhalation delivery by the Inhaler under this Agreement less the following deductions: (a) discounts, returns, allowances, commissions and wholesaler chargebacks allowed and taken; (b) import, export, excise, sales or use taxes,
value added taxes, and other taxes, tariffs and duties imposed on such Sales; 
  

 6 

 (c) packaging, handling, transportation, freight, freight insurance, and other insurance relating to such Sales; and (d)
amounts allowed or credited on such Sales for retroactive price reductions or rebates including, but not limited to, Medicaid rebates. For purposes of clarity, in the event the Inhalers are sold to customers in combination or in conjunction with the
Drug Product or supplied to customers at no charge in combination or in conjunction with the Drug Product, Net Sales shall not include the Inhaler purchase price paid by ABARIS, its Affiliates or its Sublicensees to PARI, PARI’s Affiliates or a
third party authorized by PARI or PARI’s Affiliates to distribute the Inhalers. 
  
 1.49 “Novel Formulation” means any new, novel or proposed formulation which: (a) is different than the Existing Formulation; and (b) results from the activities conducted under this Agreement by PARI
or ABARIS, individually or jointly with one another or third parties. 
  
 1.50 “Novel Formulation Development Activities” means: (a) a first stage of activities which consists of the Feasibility Assessment (“First Stage”); and (b) a second stage of activities including the research,
design, development, testing, studies, reporting, prototype and clinical supply, delivery, regulatory and other activities (“Second Stage”) which PARI, individually or jointly with ABARIS or third parties, performs under this Agreement
relating to the Novel Formulation. 
  
 1.51 “Novel
Formulation Intellectual Property” means all Intellectual Property related to the Novel Formulation, excluding, without limitation, all Intellectual Property owned by PARI pursuant to Section 2.22.2. 
  
 1.52 “Novel Formulation Development Plan” means the plan and
time schedule for performing the Novel Formulation Development Activities, including, without limitation: (a) a description of the First Stage of the Novel Formulation Development Activities (consisting of the Feasibility Assessment); (b) the
Approved Budget corresponding to the portion of the Feasibility Assessment set forth in Section 3.2(a) below; (c) a description of the Second Stage of Novel Formulation Development Activities; and (d) the Approved Budget corresponding to such Second
Stage of Novel Formulation Development Activities, as set forth in Exhibit E as amended in writing from time to time in accordance with this Agreement. 
  
 1.53 “Novel Formulation Specifications” means: (a) the performance requirement that a drug formulation
shall cause a masking or lessening of undesired effects (including, without limitation, a masking or lessening of anesthetic effects) of the Drug Product through the respiratory tract prior to receipt at the lungs; and (b) the formulation
specifications, characteristics and properties adapted for aerosolizing and delivering the Drug Product through the Inhaler, certain of which are set forth in Exhibit F, including, without limitation, any Drug Product characteristics or
parameters which specify the percentage of pulmonary deposition, particle/droplet size for the Drug Product, absorption, the stability of the Drug Product or aerosol characteristics. The Novel Formulation Specifications may be modified by the
Parties from time to time by mutual written agreement. 
  
 1.54
“PARI Data” means, the PARI Pre-Effective Date Data and the PARI Post-Effective Date Data. 
  

 7 

 1.55 “PARI Licensed Intellectual Property” means all Intellectual Property owned,
controlled or licensable by PARI during the term of this Agreement which is necessary or useful to ABARIS, it Affiliates or Sub-licensees: (a) in the use, testing, importation, exportation, offering for sale, sale, and/or distribution of eFlowTM Devices including without limitation the Test Inhalers
which substantially meet the Inhaler Specifications and the Inhalers which meet the Inhaler Specifications, and components of the foregoing for use with Drug Products in the Field; (b) in making, having made, using, testing, developing, importing,
exporting, offering for sale, selling and/or distributing in the Field the Existing Formulation of the Drug Product, the Novel Formulation of the Drug Product, and Drug Products made using the Existing Formulation or the Novel Formulation, in each
case, in combination with the eFlowTM Devices
including without limitation the Test Inhalers which substantially meet the Inhaler Specifications and the Inhalers which meet the Inhaler Specifications; or (c) under which ABARIS, it Affiliates or Sub-licensees would need a license from PARI to
perform such activities. ABARIS shall not use the PARI Licensed Intellectual Property for any purpose other than the purposes set forth above in this Section 1.55 and the purposes of exercising the licenses granted to ABARIS in this Agreement. PARI
Licensed Intellectual Property at least includes the following identified patents and patent applications along with all divisions, continuations, continuations-in-part, renewals, re-examination certificates, reissues, continued prosecution
applications, extensions, substitutions, nationalizations and foreign counterparts of such patent applications and patents, and all patent and patent applications that claim the benefit thereof or priority thereto: 
  

	 	(a)	[*]; 

  

	 	(b)	[*]; 

  

	 	(c)	[*]; 

  

	 	(d)	[*]; 

  

	 	(e)	[*]; 

  

	 	(f)	[*]; 

  

	 	(g)	[*]; 

  

	 	(h)	[*]; 

  

	 	(i)	[*]; 

  

	 	(j)	[*]; 

  

	 	(k)	[*]; 

  

	 	(l)	[*]; 

  

	 	(m)	[*]; 

  

	 	(n)	[*]; 

  
 *Confidential Treatment Requested 
  

					
	 	 	8	 	 

	 	(o)	[*]; 

  

	 	(p)	[*]; 

  

	 	(q)	[*]; 

  

	 	(r)	[*]; 

  

	 	(s)	[*]; 

  

	 	(t)	[*]; 

  

	 	(u)	[*]; 

  

	 	(v)	[*]; 

  
 (w) all Intellectual Property which shall be owned by PARI pursuant to Section 2.22.2 of this Agreement; 
  
 (x) any and all Intellectual Property which shall be owned by PARI in accordance with the ownership provisions provided in Section 2.22.3 of this
Agreement; and 
  
 (y) any and all Novel Formulation Intellectual
Property which shall be owned by PARI pursuant to Section 3.16 or 3.17 of this Agreement. 
  
 1.56 “PARI Post-Effective Date Data” shall have the meaning provided parenthetically in Section 9.1.2 of this Agreement. 
  
 1.57 “PARI Pre-Effective Date Data” means all Data, which is owned or licensable by PARI prior to the
Effective Date. 
  
 1.58 “Party(ies)”
means ABARIS and/or PARI.  
  
 1.59 “Patent
Pursuit Countries” means the countries set forth in the attached Exhibit G. 
  
 1.60 “Phase I Clinical Study means a clinical study which involves performing tests on a relatively small number of healthy humans for the
purpose of evaluating safety.  
  
 1.61 “Phase II
Clinical Study” means a clinical study which involves performing tests on a moderate number of humans inflicted with a disease or condition for the purpose of evaluating efficacy.  
  
 1.62 “Phase III Clinical Study” means a clinical study which
involves performing tests on a relatively high number of humans who are randomly assigned to be treated either with a tested product or a control substance, such as a placebo. 
  
 1.63 “Program A Commercialization Strategy” means a written commercialization strategy agreed to by the
Parties pursuant to Section 13.1 of this Agreement, which is related to the Existing Formulation of the Drug Product and the Inhaler adapted to deliver such Drug Product. 
  

					
	 	 	9	 	*Confidential Treatment Requested

 1.64 “Program A Development Term” means the period of time beginning on the Effective
Date and ending upon ABARIS’ acceptance of the Inhaler pursuant to Section 2.14 of this Agreement. 
  
 1.65 “Program A Independent Arrangement shall have the meaning provided parenthetically in Section 13.1.2(b) of this Agreement. 
  
 1.65.1 “Program A Invoice Price” means: (a) the lower of the
then current patient list price for Comparable Inhalation Devices (which in no event shall [*]) less [*] of such patient list price OR the price at which PARI sells such Comparable Inhalation Devices to wholesalers; plus (b) PARI’s costs of
labor and materials directly related to any differences between such Comparable Inhalation Device and the Program A or Program B Inhaler (as the case may be), including any costs of administration, depreciation or other overhead costs directly
allocable to such differences. 
  
 1.66 “Program A
Obligations” means the obligations and duties of the Parties provided in Sections 2.1 through 2.24 of this Agreement. 
  
 1.67 “Program A Royalty Period” means the period which begins on the date which ABARIS, its Affiliates or Sublicensees makes a first
commercial sale of the Drug Product made using the Existing Formulation for inhalation delivery by the Inhaler, and expires the later of: 
  
 (a) the date on which there are no longer any issued patents having Valid Claims in the Territory which claim such Drug Product alone, such Inhaler alone
or such Drug Product in combination with such Inhaler which are included within 
  
 (i) the PARI Licensed Intellectual Property; 
  
 (i) all patents claiming priority thereto; or 
  
 (ii) all patents owned, controlled or licensable by PARI or its Affiliates prior to the end of the Program A Development Term which claim the Drug Product alone made using the Existing Formulation (or methods of
manufacture or use thereof), the Inhaler alone adapted to deliver such Drug Product (or methods of manufacture or use thereof ) or the combination of such Drug Product and such Inhaler (or methods of manufacture or use thereof); 
  
 and 
  
 (b) the date of [*] after the first commercial sale of the Drug Product made using the Existing Formulation. 
  
 1.68 “Program A Supply Agreement” means the supply
agreement, if any, entered into between the Parties for the supply, from PARI to ABARIS, of Inhalers for use with the Drug Product made using the Existing Formulation which shall include, at a minimum, the Program A Supply Terms. 
  
 *Confidential Treatment Requested 
  

					
	 	 	10	 	 

 1.69 “Program A Supply Terms” means the terms set forth in Exhibit H.

  
 1.70 “Program B Commercialization Strategy”
means a written commercialization strategy agreed to by the Parties pursuant to Section 13.2 of this Agreement, which is related to the Novel Formulation of the Drug Product and the Inhaler adapted to deliver such Drug Product. 
  
 1.71 “Program B Development Term” means the period of time
beginning on the written request of ABARIS pursuant to Section 3.1 of this Agreement and ending upon ABARIS’ acceptance of the Novel Formulation pursuant to Section 3.7.3 of this Agreement. 
  
 1.72 “Program B Obligations” means the obligations and
duties of the Parties provided in Sections 3.1 through 3.16 of this Agreement. 
  
 1.73 “Program B Royalty Period” means the period which begins on the date which ABARIS, its Affiliates or Sublicenses makes a first commercial sale of the Drug Product made using the Novel Formulation
for inhalation delivery by the Inhaler, and expires the later of: 
  
 (a) the date on which there are no longer any issued patents having Valid Claims in the Territory which claim such Drug Product alone, such Inhaler alone or such Drug Product in combination with such Inhaler which are included within:

  
 (i) the PARI Licensed Intellectual Property; 
  
 (ii) all patents claiming priority thereto; or 
  
 (iii) all patents owned, controlled or licensable by PARI or its Affiliates
prior to the end of the Program B Development Term which claim the Drug Product alone made using the Novel Formulation (or methods of manufacture or use thereof), the Inhaler alone adapted to deliver such Drug Product (or methods of manufacture or
use thereof ) or the combination of such Drug Product and such Inhaler (or methods of manufacture or use thereof); 
  
 and 
  
 (b) the date of [*] after the first commercial sale of the Drug Product made using the Novel Formulation. 
  
 1.74 “Program B Supply Agreement” means the supply
agreement, if any, entered into between the Parties for the supply, from PARI to ABARIS, of Inhalers for use with the Drug Product made using the Novel Formulation which shall include, at a minimum, the Program B Supply Terms. 
  
 1.75 “Program B Supply Terms” means the terms set forth in
Exhibit I. 
  
 1.76 “Project Team” means
the project team described in Article 7 of this Agreement. 
  

			
	11	 	*Confidential Treatment Requested

  

 1.77 “Project Team Membership” means the individuals set forth on Exhibit C
attached hereto. 
  
 1.78 “Quality Standards”
means the obligations of PARI provided in Article 5 of this Agreement. 
  
 1.79 “Regulatory Pursuit Countries” means the countries set forth in the attached Exhibit G.  
  
 1.80 “Royalty(ies)” means the royalty payments due by ABARIS to PARI pursuant to Section 2.18 and/or Section 3.11 of this Agreement.

  
 1.81 “Sale(s)” means the sale or sales,
whether by ABARIS or an Affiliate or Sublicensee of ABARIS of the Drug Product to a third party that is not an Affiliate or Sublicensee of the seller.  
  

1.82 “Scientific Labor Rate” shall have the meaning provided parenthetically in Section 12.1.1 of this Agreement. 
  
 1.83 “Sole License Event” shall have the meaning provided in
Section 14.3.2 of this Agreement. 
  
 1.84
“Studies” means the Phase I Clinical Study, Phase II Clinical Study and Phase III Clinical Study. 
  
 1.85 “Sublicensee” means any person or entity, other than an Affiliate of ABARIS, which receives a sublicense from ABARIS under this
Agreement, directly or indirectly from ABARIS or an Affiliate of ABARIS.  
  
 1.86 “Support Service Order” means a written order from ABARIS to PARI for services which: (a) describes the ordered services; (b) the payment to PARI; and (c) is executed by both Parties. 

 
 1.87 “Synthesis” means the compositions, chemical
structures, molecules, compounds, ingredients, formulas, recipes, methods, processes, chemical reactions, mixtures, technical information and know-how which are used in or result in the production of the Active Ingredient. 
  
 1.88 “Territory” means the entire world. 
  
 1.89 “Test Inhaler” means the PARI inhalation delivery
device based on the eFlowTM Device which is: (a)
modified, as necessary, to substantially meet the Inhaler Specifications; and (b) adapted to aerosolize and deliver the Drug Product. 
  
 1.90 “Test Inhaler Delivery Schedule” means the delivery schedule provided in Section 2.5.1 of this Agreement. 
  
 1.91 “Test Inhaler Development Activities” means the
research, design, development, construction, testing, studies, reporting, prototype and clinical supply, delivery, regulatory and other activities which PARI, individually or jointly with ABARIS, performs under this Agreement relating to the eFlow
IMP Device or Test Inhaler. 
  

 12 

 1.92 “Test Inhaler Development Plan” means: (a) the plan and time schedule for
performing the Test Inhaler Development Activities; (b) the plan and time schedule for performing the Existing Formulation Analysis; and (c) the Approved Budget corresponding to the Existing Formulation Analysis, as set forth in Exhibit K as
amended in writing from time to time in accordance with this Agreement.  
  
 1.93 “Third Party License Agreement” means that agreement entered into between The Technology Partnership plc (“TTP”) and PARI dated March 23, 1999 which, based upon PARI’s
representations, includes a license from TTP to PARI under certain rights of Bespak Europe Limited (“Bespak Rights”). ABARIS and PARI acknowledge that ABARIS has not been provided with a copy of the Third Party License Agreement.

  
 1.94 “Valid Claim” means a claim in an issued
patent which has not expired, lapsed, been canceled or become abandoned and has not been finally found to be invalid (or not valid) or unenforceable by an unreversed or unappealable final decision or judgment of a court or other authority or agency
of competent jurisdiction. 
  
 Article 2 – Program A

 Inhaler Development, Inhaler Supply 
 and Analysis of Function of Existing Formulation in Inhaler 
  
 2.1 Existing Formulation 
  
 2.1.1 Development of Existing Formulation Prior to Effective Date 
  
 PARI acknowledges that prior to the Effective Date, ABARIS possessed the Existing Formulation and ABARIS has used the
Existing Formulation to produce the Drug Product. Nothing in this Agreement shall prevent, restrict or limit ABARIS from developing and commercializing the Existing Formulation or such Drug Product apart from PARI, and PARI shall not acquire any
interest or have any claim to the Existing Formulation or such Drug Product by virtue of this Agreement. Prior to the Effective Date, ABARIS has provided PARI with particular quantities of the Drug Product, which PARI has used to study the aerosol
characteristics of the Existing Formulation. Such studies of PARI shall be deemed to have been conducted under this Agreement as Existing Formulation Analysis. Within twenty (20) business days after the Effective Date, PARI shall provide ABARIS with
a written report which describes the analytics and aerosol characterizations of the Existing Formulation in the eFlow IMP Device or Test Inhaler and includes the data and conclusions of the Existing Formulation Analysis. 
  
 2.1.2 Clinical Studies Conducted Prior to Effective
Date 
  
 PARI acknowledges that prior to the Effective Date
of this Agreement: (a) ABARIS has received a license of certain rights to the Existing Formulation of the Drug Product from Mayo; (b) Mayo has performed multiple clinical studies relating to the Existing Formulation, including a placebo-controlled
Phase II Clinical Study relating to the Existing Formulation of the Drug Product used with inhalation devices; and (c) ABARIS is planning to begin a Phase II Clinical Study for the Existing Formulation of the Drug Product on or about April 1, 2003.
ABARIS shall use commercially reasonable efforts to begin such study. 
  

 13 

 2.1.3 Analysis of Existing Formulation After Effective Date 
  
 PARI shall perform the Existing Formulation Analysis as set forth in the
Test Inhaler Development Plan and in compliance with the Quality Standards. Specifically, PARI shall analyze and test the performance and characteristics of the Existing Formulation of the Drug Product when delivered by the Test Inhaler and Inhaler.
PARI shall provide a written report to ABARIS regarding the Inhaler by the completion of the Inhaler Development Activities in accordance with the Inhaler Development Plan. 
  
 2.2 Test Inhaler Development Prior to Effective Date 
  
 Prior to the Effective Date, at the request of ABARIS, PARI initiated
certain activities related to the development of the Test Inhaler. Such activities shall be considered Test Inhaler Development Activities conducted under and pursuant to this Agreement. Subject to the terms and conditions of this Agreement, within
twenty (20) business days after the Effective Date, PARI shall provide ABARIS with a written report on PARI’s direct labor and direct out-of-pocket expenses related to such activities. Subject to the terms and conditions of this Agreement,
ABARIS shall reimburse PARI for such expenses in accordance with Section 2.21 below.  
  
 2.3 Test Inhaler Development After Effective Date for Phase II Clinical Study 
  
 PARI shall continue with the Test Inhaler Development Activities pursuant to
the terms and conditions of this Agreement. Specifically, PARI shall develop and verify the Test Inhaler for use in conjunction with the Existing Formulation so as to meet all or substantially all of the Inhaler Specifications in compliance with the
Test Inhaler Development Plan and the Quality Standards. As of the Effective Date, the Parties anticipate that PARI’s development of the Test Inhaler will most likely involve customizing the device, which PARI refers to, as of the Effective
Date, as the eFlowTM Device. 
  
 2.4 Initial Regulatory Filing for eFlow IMP Device

  
 PARI shall file a 510(k) Submission with the FDA for the
eFlow IMP Device by no later than May 31, 2003. PARI shall notify ABARIS in writing promptly of such filing and promptly after PARI receives a 510(k) Notification or other response to such 510(k) Submission from the FDA. PARI shall bear all expenses
related to filing such 510(k) Submission and pursuing regulatory approval of such 510(k) Notification therefor. At ABARIS’ request, the Parties shall discuss the possibility of PARI filing a 510(K) Submission for a modified version of the eFlow
IMP Device and pursuing a 510(k) Notification in response to such submission, all at ABARIS’ expense. In the event PARI is unwilling or unable to do so, ABARIS shall have the right, at its expense, to file a 510(K) Submission for a modified
version of the eFlow IMP Device and to pursue a 510(k) Notification in response to such submission. In such event, PARI shall cooperate with such regulatory efforts of ABARIS at ABARIS’ expense. 
  

 14 

 2.5 Test Inhaler Delivery for Phase II Clinical Study 
  
 2.5.1 Schedule. 
  
 PARI shall deliver two hundred fifty (250) Test Inhalers to ABARIS in
accordance with the following schedule: 
  

					
	 Batch

	  	 Quantity of Test Inhalers

	 	 Delivery Date

	 1st
	  	Nine to Twenty (9-20)	 	On or before [*]
	 2nd
	  	One Hundred (100)	 	On or before [*]
	 3rd
	  	One Hundred (100)	 	On or before [*]
	 4th
	  	Balance required to total two-hundred fifty (250)	 	On or before [*]

  
 PARI shall be
obligated to make such delivery pursuant to this Agreement as well as the purchase order (“PO”) provided by ABARIS to PARI on December 13, 2002, having PO No. 1000041. In the event of any conflict between the PO and this Agreement, the
terms of this Agreement shall control. 
  
 Any additional order of
Test Inhalers must be made in writing by ABARIS at a minimum of four months prior to delivery. 
  
 2.6 Test Inhaler Quality and Acceptance Prior to 510(k) Notification 
  
 2.6.1 Inspection 
  
 Prior to delivering the Test Inhalers to ABARIS, PARI shall inspect the Test
Inhalers for substantial compliance with the Inhaler Specifications and full compliance with the applicable Quality Standards. ABARIS shall have the right to participate in such inspection at its own expense. 
  
 2.6.2 Certificate of Verification 
  
 PARI shall only deliver Test Inhalers to ABARIS which substantially comply
with the Inhaler Specifications and which fully comply with the applicable Quality Standards. PARI shall include a written certificate of verification with each shipment of Test Inhalers. Such certificate shall include a statement, signed by:
(a) the quality manager; and (b) a person who performs regulatory activities for PARI or PARI’s site manager, or PARI’s project manager, verifying that all of the Test Inhalers shipped to ABARIS substantially conform with the Inhaler
Specifications, fully conform with the applicable Quality Standards and are free of any material defects. 
  

			
	 	 	*Confidential Treatment Requested

  

 15 

 2.6.3 Acceptance 
  
 PARI shall manufacture the Test Inhalers to substantially meet the Inhaler Specifications and to fully meet the applicable
Quality Standards. ABARIS shall have a period of twenty (20) business days from the date of receipt of any shipment of the Test Inhalers to test for quality and quantity of the shipment and to accept or reject such shipment. Such date of receipt
shall be deemed to be the earlier of PARI’s delivery of such shipment to: (a) a facility designated by ABARIS; and (b) a PARI facility in the United States including PARI’s facilities in California, provided that such PARI facility allows
for the prompt pick-up of such shipment by ABARIS and the prompt forwarding of such shipment to a facility designated by ABARIS. If ABARIS determines that any portion of shipment of the Test Inhalers is defective, ABARIS shall notify PARI in writing
within such twenty (20) business days, indicating the particular lot, date of delivery and the defective nature of the Test Inhalers. In such event, ABARIS shall promptly return the defective portion of such shipment to PARI, and ABARIS shall have
no obligation to pay for such defective portion of such shipment. Upon receipt, PARI shall undertake commercially reasonable efforts to repair or replace defective Test Inhalers and supply ABARIS with a replacement shipment of Test Inhalers
acceptable to ABARIS, within a commercially reasonable time in view of the time frames set forth in the Test Inhaler Delivery Schedule. In the event ABARIS does not so notify PARI of defective Test Inhalers within twenty (20) business days of
receipt hereunder of any shipment of Test Inhalers, ABARIS shall be deemed to have accepted such shipment. 
  
 2.7 Payment for Test Inhalers for Phase II Clinical Study 
  
 This Section, not Section 2.14 below, shall apply to ABARIS’ reimbursement of PARI’s manufacturing, verification
(according to PARI’s standard operating procedure), packaging and shipping costs for the Test Inhalers. For clarity, such costs of PARI, including costs of labor and materials, shall not be reimbursable by ABARIS pursuant to Section 2.21.
ABARIS shall compensate PARI for such costs by making payment to PARI under this Section 2.7. Subject to the terms and conditions of this Agreement, ABARIS shall pay PARI [*] per Test Inhaler which ABARIS accepts pursuant to Section 2.6.3 above.
ABARIS shall make such payment within five (5) business days after such acceptance. In the event ABARIS terminates the Program A Obligations or terminates this Agreement while PARI is in the process of manufacturing Test Inhalers to meet its
obligations under Section 2.5, ABARIS shall pay PARI for such completed and partially completed Test Inhalers upon their delivery to ABARIS within ten (10) business days of such termination. 
  
 2.8 Approved Delays for Test Inhaler Delivery
Schedule 
  
 PARI acknowledges that: (a) the development,
manufacture, verification and delivery of the Test Inhalers according to the Test Inhaler Delivery Schedule is critical to the Phase II Clinical Study for the Existing Formulation; and (b) in setting the Test Inhaler Delivery Schedule, ABARIS has
taken into account certain risks, some of which cannot be fully foreseen as of the Effective Date. ABARIS acknowledges that this schedule is demanding on PARI. In the event that PARI foresees that it will not be able to meet the Test Inhaler
Delivery Schedule, PARI shall notify ABARIS in writing as soon as practicable. In response to a written notice from PARI, ABARIS, at its sole discretion, may delay the Test Inhaler Delivery Schedule (“Approved Delay”). ABARIS shall notify
PARI in writing as soon as practicable of any delay to the Test Inhaler Delivery Schedule (including, without limitation, Approved Delays) in order to provide PARI with as much time as possible to deliver the Test Inhalers. 
  

					
	 	 	16	 	*Confidential Treatment Requested

 2.9 Failure to Supply Test Inhalers According to Schedule 
  
 2.9.1 Continuation of Inhaler Development with Reduction
in Milestone Payments 
  
 In the event that PARI does not
deliver the Test Inhalers (in the condition required by Section 2.3 above) according to the Test Inhaler Delivery Schedule or any Approved Delay, then ABARIS, at its option, may delay the Phase II Clinical Study for a period of time. 
  
 2.9.2 Cancellation or Suspension of Inhaler
Development 
  
 In the event that ABARIS does not elect to
delay the Phase II Clinical Study under Section 2.9.1, ABARIS may suspend the Program A Obligations or terminate the Program A Obligations in accordance with Section 25.3.1 of this Agreement. In either such case, ABARIS may proceed with the Phase II
Clinical Study with an inhalation delivery device of any party chosen by ABARIS. PARI acknowledges that it may be prudent for ABARIS to conduct the Phase II Clinical Study without using the Test Inhalers in order to avoid putting ABARIS’
clinical program at risk or causing financial risk or penalty to ABARIS. In such event, upon the request of either Party, the Parties shall negotiate in good faith an amendment to this Agreement to allow PARI to continue certain development
activities for ABARIS’ Phase III Clinical Study related to the Existing Formulation. Any such amendment shall not take effect until it is in written form signed by the Parties.  
  
 2.10 Phase III Clinical Study 
  
 2.10.1 Option to Use Test Inhaler or Modify Test Inhaler
for Phase III Clinical Study 
  
 After evaluating the results
from the Phase II Clinical Study, ABARIS shall notify PARI in writing as to whether: (a) ABARIS finds the Test Inhaler acceptable for its Phase III Clinical Study related to the Existing Formulation; or (b) ABARIS requires that PARI make certain
modifications to the Test Inhaler for ABARIS’ use in the Phase III Clinical Study related to the Existing Formulation. 
  
 2.10.2 Use of Test Inhaler for Phase III Clinical Study 
  
 In the event ABARIS notifies PARI, under Section 2.10.1, that ABARIS determines that the Test Inhaler is acceptable for its
Phase III Clinical Study, at such point, the Test Inhaler shall be deemed the Inhaler for purposes of, and for the duration of, the term of this Agreement. 
  
 2.10.3 Modification of Test Inhaler for Phase III Clinical Study 
  
 In the event that ABARIS notifies PARI, under Section 2.10.1, that ABARIS requires that PARI make certain modifications to
the Test Inhaler for ABARIS’ use in the Phase III Clinical Study, ABARIS shall select a development option in the Inhaler Development Plan. ABARIS shall then provide PARI with written notice of the selected option. Upon receipt of such notice,
PARI shall modify Test Inhaler for use in conjunction with the Existing 
  

					
	 	 	17	 	 

 Formulation so as to meet all of the Inhaler Specifications in compliance with the Inhaler Development Plan and the
Quality Standards. When PARI completes such modifications to the Test Inhaler, such modified Test Inhaler shall be deemed the Inhaler for purposes of, and for the duration of, the term of this Agreement. 
  
 2.10.4 Delivery of Inhalers for Phase III Clinical
Study 
  
 Any order of Inhalers for Phase III Clinical Study
must be made in writing by ABARIS sufficiently in advance of, and in no event less than three (3) months prior to, the delivery date specified in such order. As of the Effective Date, ABARIS expects that the Phase III Clinical Study related to the
Existing Formulation will begin during the third quarter of the year 2004. 
  
 2.11 Additional Regulatory Filings for Inhaler 
  
 In the event that PARI modifies the Test Inhaler so as to develop the Inhaler pursuant to Section 2.10.1, upon ABARIS’ request, PARI shall file a 510(k) Submission with the FDA for the Inhaler before ABARIS
begins its Phase III Clinical Study. Subject to the terms and conditions of this Agreement, ABARIS shall reimburse PARI for its costs directly related to the preparation and filing of such 510(k) Submission. Such reimbursement shall not be subject
to the limits provided in Section 2.21 below, and such reimbursement shall not be deemed as reimbursement payments from ABARIS under Section 2.21 below. Once such 510(k) Submission is filed, the design and specifications for the Inhalers shall be
fixed. In no event shall PARI deviate from the Inhaler Specifications without obtaining ABARIS’ prior written consent and providing ABARIS with a commercially reasonable opportunity to secure access to the Inhalers in their unchanged state.

  
 2.12 Quality Manufacture of Inhalers After
510(k) Approval 
  
 2.12.1 Validation

  
 After obtaining 510(k) Approval for the Inhalers, PARI shall
manufacture the Inhalers in compliance with the Quality Standards. The manufactured Inhalers shall conform to the Inhaler Specifications. PARI shall use statistical quality control methods, conforming to the Quality Standards, in order to determine
quality levels for the Inhalers. ABARIS shall have the right to participate in such activities at its own expense. PARI shall manufacture Inhalers in a designated lot, which has an acceptable quality level (AQL), of no more than [*] non-conforming
units. 
  
 2.12.2 Certificate of Analysis

  
 In each shipment of Inhalers to ABARIS, pursuant to Section
2.14 below, PARI shall include a certificate of analysis which includes a statement, signed by: (a) the person who inspected the Inhalers; (b) the quality manager; and (c) a person who performs regulatory activities for PARI or PARI’s site
manager, verifying that the shipment has an acceptable quality level (AQL) of no more than [*] of non-conforming units. 
  
 *Confidential Treatment Requested 
  

					
	 	 	18	 	 

 2.13 Inhaler Delivery for Phase III Clinical Study 
  
 Upon the written request of ABARIS, and in accordance with a reasonable delivery schedule to be agreed upon by ABARIS and
PARI, PARI shall deliver the required validated Inhalers to ABARIS for conducting the Phase III Clinical Study for the Existing Formulation. 
  
 2.14 Acceptance 
  
 PARI shall manufacture the Inhalers to fully meet the Inhaler Specifications and to fully meet the applicable Quality Standards in order to achieve an
acceptable quality level (AQL) of no more than [*] of non-conforming units. ABARIS shall have a period of twenty (20) business days from the date of receipt of any shipment of the Inhalers to test for quality and quantity of the shipment and to
accept or reject such shipment. If ABARIS determines that any portion of shipment of the Inhalers is defective, ABARIS shall notify PARI in writing within such twenty (20) business days, indicating the particular lot, date of delivery and the
defective nature of the Inhalers. In such event, ABARIS shall promptly return the defective portion of such shipment to PARI, and ABARIS shall have no obligation to pay for such defective portion of such shipment. Upon receipt, PARI shall undertake
commercially reasonable efforts to repair or replace defective Inhalers and supply ABARIS with a replacement shipment of Inhalers acceptable to ABARIS within a commercially reasonable time. In the event ABARIS does not so notify PARI of defective
Inhalers within twenty (20) business days of receipt of any shipment of Inhalers, ABARIS shall be deemed to have accepted such shipment. 
  
 2.15 Payment for Inhalers for Phase III Clinical Study 
  
 Subject to the terms and conditions of this Agreement, ABARIS shall pay PARI in U.S. Dollars Program A Invoice Price per accepted Inhaler. ABARIS shall
make such payment within five (5) business days after ABARIS’ acceptance of the Inhalers pursuant to Section 2.14 above. 
  
 2.16 Regulatory Activities for Existing Formulation 
  
 ABARIS shall be responsible for pursuing regulatory approval for the Existing Formulation. PARI shall reasonably cooperate with ABARIS in such efforts at
ABARIS’ expense pursuant to Section 10.4 of this Agreement. 
  
 2.17
Upfront License Payment and Milestone Payments for Inhaler 
  
 2.17.1
Upfront License Payment 
  
 Subject to the terms and
conditions of this Agreement, ABARIS shall pay PARI a one-time license fee in the amount of [*] within five (5) business days after the Effective Date of this Agreement. 
  
 2.17.2 Milestone Payments 
  
 Each of the milestone payments due by ABARIS under this Section 2.17.2 shall be paid only once, regardless of the number of times the milestones have been
achieved. Subject to the Milestone Payment Reduction Schedule and the other terms and conditions of this Agreement, ABARIS shall make the following milestone payments to PARI within five (5) business days of the following milestone completion dates:

  

					
	 	 	19	 	*Confidential Treatment Requested

					
	 	 	 Milestone Payments

	 	 Milestone Completion Date

			
	 (a)
	 	[*]	 	The date on which ABARIS accepts (according to Section 2.6.3) the first batch of the Test Inhalers (as set forth in the Test Inhaler Delivery Schedule) for the Phase II Clinical Study which
meet the requirements of Section 2.3 of this Agreement.
			
	 (b)
	 	[*]	 	The date on which ABARIS has accepted (according to Section 2.6.3) the fourth batch (after accepting the second and third batches) of the Test Inhalers (as set forth in the Test Inhaler
Delivery Schedule) for the Phase II Clinical Study which meet the requirements of Section 2.3 of this Agreement.
			
	 (c)
	 	[*]	 	The date on which PARI receives a 510(k) Notification for the eFlow IMP Device.
			
	 (d)
	 	[*]	 	The date on which ABARIS makes a first commercial sale of the Existing Formulation of the Drug Product for inhalation delivery by the Inhaler.

  
 2.18
Royalty Payments 
  
 2.18.1 Patent
Protection 
  
 During the Program A Royalty Period and
subject to the terms and conditions of this Agreement, ABARIS shall pay PARI a royalty payment of [*] of the Net Sales of the Drug Product produced with the Existing Formulation and sold together with the Inhaler or for inhalation delivery by the
Inhaler in a country in the Territory where: 
  
 (a) the sale of
such Drug Product alone would, but for the license granted herein, infringe a Valid Claim of an issued patent owned by PARI in such country; or 
  
 (b) the sale of the Inhaler alone would, but for the license granted herein, infringe a Valid Claim of an issued patent owned by PARI in such country;
or 
  
 (c) the sale of such Drug Product in combination
with the Inhaler would, but for the license granted herein, infringe a Valid Claim of an issued patent owned by PARI in such country. 
  
 2.18.2 No Patent Protection 
  
 In the event that ABARIS does not owe PARI royalty payments pursuant to Section 2.18.1 above, during the Program A Royalty Period and subject to the terms
and conditions 
  

					
	 	 	20	 	*Confidential Treatment Requested

 of this Agreement, ABARIS shall pay PARI a step-down royalty payment of [*] of the Net Sales of the Drug Product produced
with the Existing Formulation and sold together with the Inhaler or for inhalation delivery by the Inhaler in a country in the Territory where: 
  
 (a) the sale of such Drug Product alone would not infringe a Valid Claim of an issued patent owned by PARI in such country; and 
  
 (b) the sale of the Inhaler alone would not infringe a Valid Claim of an
issued patent owned by PARI in such country; and 
  
 (c)
the sale of such Drug Product in combination with the Inhaler would not infringe a Valid Claim of an issued patent owned by PARI in such country. 
  
 2.18.3 Discount on Inhaler Price if No Patent Protection 
  
 In the event that ABARIS owes PARI step down royalties pursuant to Section 2.18.2 above instead of royalties pursuant to
Section 2.18.1, PARI shall reduce by [*] the [*] charged to ABARIS, it Affiliates or Sublicensees for the supply of the Inhalers pursuant to Section 13.3 of this Agreement. 
  
 2.18.4 Drug Products Produced by Novel Formulation 
  
 For the purposes of clarity, [*] for any sales of Drug Products for use with
the Inhaler, where the Novel Formulation is used to produce such Drug Products [*]. 
  
 2.19 ABARIS’ Option to Proceed with Existing Formulation or Novel Formulation 
  
 PARI acknowledges that ABARIS has the right to proceed with the development
and commercialization of the Novel Formulation instead of the Existing Formulation, and that in such case, ABARIS shall not be in breach of the Agreement for its failure to develop, test, pursue regulatory approval for or make any commercial sales
of the Drug Product produced with the Existing Formulation. 
  
 2.20 Payment for Test Inhaler Development Activities 
  
 Subject to Section 2.2 with respect to Test Inhaler Development Activities which occurred prior to the Effective Date, ABARIS shall not be required to pay, reimburse or otherwise compensate PARI for its performance of
the Test Inhaler Development Activities other than the Test Inhaler payment set forth in Section 2.7 above. 
  
 2.21 Reimbursement for Costs of Existing Formulation Analysis and Inhaler Development Activities 
  
 Subject to the terms and conditions of this Agreement, subject to the limits
set forth in this Section, and in accordance with Article 12, PARI shall report its direct costs to ABARIS, and ABARIS shall reimburse PARI for PARI’s direct labor and direct out-of-pocket costs incurred in conducting the Existing Formulation
Analysis and the Inhaler Development Activities. 
  
 *Confidential Treatment Requested 
  

					
	 	 	21	 	 

 2.21.1 Budget Procedures for Existing Formulation Analysis and Inhaler Development
Activities 
  
 The Parties acknowledge that the Test Inhaler
Development Plan in Exhibit K sets forth an Approved Budget for the Existing Formulation Analysis, and the Inhaler Development Plan in Exhibit A sets forth an Approved Budget for each of the Inhaler development options. In no event shall PARI exceed
either such Approved Budget without ABARIS’ prior written consent. If PARI finds it necessary to exceed either such Approved Budget, the Parties may agree in writing to an increased budget, in which case such increased budget shall be deemed an
Approved Budget. Subject to Section 2.21.2 below: (a) PARI shall use commercially reasonable efforts not to exceed the Approved Budget for the Existing Formulation Analysis or the Approved Budget for the Inhaler development option selected by
ABARIS; and (b) PARI shall not be obligated to perform any Existing Formulation Analysis or Inhaler Development Activities which would cause PARI to exceed the applicable Approved Budget. 
  
 2.21.2 Reimbursement Limit for Existing Formulation Analysis and Inhaler Development Activities

  
 In the event that ABARIS has reimbursed PARI for any Existing
Formulation Analysis and Inhaler Development Activities an aggregate amount equal to [*], PARI shall complete the Existing Formulation Analysis and the Inhaler Development Activities required by this Article 2 [*]. 
  
 2.22 Intellectual Property Ownership 
  
 2.22.1 ABARIS Ownership of Existing Formulation
Intellectual Property 
  
 Except as agreed upon by the
Parties under Section 2.22.3, ABARIS shall own all Intellectual Property whether or not developed pursuant to this Agreement relating to: 
  
 (a) the Existing Formulation (including, but not limited to, analytical methods, characterizations, minor improvements, minor modifications and minor
variations to the Existing Formulation or processes related thereto); and 
  
 (b) the underlying formulation technologies and processes related to the foregoing which are solely applicable to the Drug Product. 
  
 For clarity, except as provided in Section 2.22.2(d) below, PARI shall not acquire or claim any right, title or interest in
the Intellectual Property relating to the Existing Formulation. 
  
 2.22.2 PARI Ownership of Inhaler Intellectual Property and Certain Formulation Intellectual Property  
  
 [*] PARI shall own all Intellectual Property whether or not developed pursuant to this Agreement relating to: 
  

	 	(a)	the eFlow Device, the eFlow IMP Device, the Test Inhaler and the Inhaler; 

  
 *Confidential Treatment Requested 
  

					
	 	 	22	 	 

 (b) all processes relating to the eFlow Device, the eFlow IMP Device, the Test Inhaler and the Inhaler;

  
 (c) PARI’s underlying formulation technologies and
related processes which exist as of the Effective Date; and 
  
 (d) any new underlying formulation technologies and related processes developed by PARI after the Effective Date (excluding any Novel Formulation technologies and related processes developed under this Agreement). 
  
 2.22.3 [*] Inhaler-Drug Product Intellectual Property

  
 In the event that either of the Parties desires to pursue
patent rights covering or relating to: (a) [*]; or (b) [*], such Party shall notify the other Party in writing. After the recipient Party receives such notice, the Parties shall [*]. Any such [*] agreement shall not take effect until it is in
written form signed by the Parties and attached to this Agreement as an addendum. Neither Party [*] without the prior written consent of the other Party, such consent shall not be unreasonably withheld or denied. 
  
 2.23 License to ABARIS 
  
 (a) Subject to the terms and conditions of this Agreement, PARI hereby
grants to ABARIS a transferable, sub-licensable, worldwide, exclusive license, under the PARI Licensed Intellectual Property, to: 
  
 (i) use, test, import, export, offer for sale, sell and distribute eFlowTM Devices including without limitation the Test Inhalers or Inhalers and components of the foregoing for use with Drug
Products in the Field; and 
  
 (ii) make, have made, use, test,
develop, import, export, offer for sale, sell and distribute Existing Formulations of the Drug Product, Novel Formulations of the Drug Product and Drug Products made using Existing Formulations or Novel Formulations (in conjunction or combination
with the eFlowTM Devices including without
limitation the Test Inhalers or Inhalers) for use with the eFlowTM Devices including without limitation the Test Inhalers or Inhalers in the Field, the foregoing rights expressly excluding the right to make or have made the eFlow IMP Device, eFlowTM Device, Test Inhalers or Inhalers. 
  
 (b) ABARIS acknowledges that a portion of the PARI Licensed Intellectual
Property includes PARI’s right under the Third Party License Agreement. In the event ABARIS transfers or sub-licenses the license granted in this Section to a third party, such rights shall be excluded from such transfer or sub-license.

  
 (c) Subject to sub-section (b) above, in the event that ABARIS
transfers or sublicenses the license granted in this Section to a third party, PARI shall directly grant a sub-license to the transferee or sub-licensee for no additional consideration other than that due to PARI under this Agreement. Such transfer
or sub-license shall be subject to the terms and conditions of this Agreement. 
  

	2.24	[*] 

  
 [*]. 
  
 *Confidential Treatment Requested 
  

					
	 	 	23	 	 

 Article 3 – Program B 
 Novel Formulation Development 
  
 3.1 Initiation of Novel Formulation Development 
  
 Upon the written request of ABARIS during the term of this Agreement, PARI shall initiate the Novel Formulation Development
Activities. As of the Effective Date, ABARIS estimates that ABARIS will request PARI to begin such activities no later than in the [*]. ABARIS will provide PARI with a two-month written notice prior to initiation of the Novel Formulation Development
Activities. 
  

	3.2	Feasibility Assessment 

  
 In the First Stage of the Novel Formulation Development Activities: (a) PARI shall conduct a feasibility assessment which shall include preliminary
experimentation, testing, research, analysis and reporting related to the development of a Novel Formulation to meet the Novel Formulation Specifications, in accordance with the Novel Formulation Development Plan and in full compliance with the
applicable Quality Standards; and (b) ABARIS, at its option and expense, may have a preliminary patentability study conducted by a patent attorney registered with the United States Patent and Trademark Office which includes an opinion on the
likelihood that the Novel Formulation proposed by PARI is patentable (“Feasibility Assessment”). For clarity, ABARIS shall pay the fees external attorney services in connection with Section 3.2(b), and such fees shall not be applied to the
Approved Budget. PARI shall complete the portion of the Feasibility Assessment set forth in Section 3.2(a) above within [*] after ABARIS’ written notice under Section 3.1 to begin the Novel Formulation Development Activities. 
  

	3.3	Feasibility Assessment Report 

  
 Within twenty (20) business days of the completion of the portion of the Feasibility Assessment set forth in Section 3.2(a) above, PARI shall provide
ABARIS with a written Feasibility Assessment report which shall include a description of the experiments undertaken, results of the experiments and PARI’s conclusions. 
  
 3.4 Continuation or Suspension of Novel Formulation Development 
  
 Within [*] after receiving the Feasibility Assessment report, ABARIS shall
notify PARI in writing of ABARIS’ decision for PARI to proceed with the Novel Formulation Development Activities or suspend the Novel Formulation Development Activities. ABARIS shall have the right to make such decision [*], taking into account
[*]. 
  
 3.4.1 Continuation 
  
 If ABARIS provides PARI with a written request to proceed with the Novel
Formulation Development Activities, the Project Team shall convene to update the Novel Formulation Specifications and update the Novel Formulation Development Plan with a description of activities and a [*] to the Parties. 
  
 3.4.2 Suspension 
  
 If ABARIS notifies PARI of ABARIS’ decision to suspend the Novel
Formulation Development Activities, ABARIS shall have and PARI hereby grants ABARIS an option for exclusive development related to the Novel Formulation for an option period of [*] following such notice. ABARIS shall have the right to extend such
option period for the duration of the following option extension periods by making the following payments to PARI by the date corresponding to such payments: 
  

							
	 	  	 Option Extension Period

	 	Payment

	 	 Payment Date

	 1st
	  	a period of [*] following the expiration of the five year period provided in this Section 3.4.2	 	[*]	 	the expiration of the five year period provided in this Section 3.4.2
				
	 2nd
	  	a period of [*] following the expiration of such 1st
extension period	 	[*]	 	the expiration of the 1st extension period provided in this
Section 3.4.2

  
 *Confidential Treatment Requested 
  

					
	 	 	24	 	 

 PARI shall not undertake any development activities related to the Novel Formulation (for itself or any other party)
which would in any way, directly or indirectly, conflict with ABARIS’ exclusive option under this Section. If, at any time during any period of suspension in this Section, ABARIS requests PARI to proceed with the Novel Formulation Development
Activities, the Project Team shall convene to review (and possibly revise) the Novel Formulation Specifications and update the Novel Formulation Development Plan with a description of activities and a time schedule mutually acceptable to the
Parties. PARI shall proceed with the Novel Formulation Development Activities accordingly. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement for ABARIS to not proceed with the Novel Formulation
Development Activities. 
  
 3.5 Development of
Novel Formulation 
  
 Upon ABARIS’ request, in
accordance with Section 3.4, PARI shall continue with the Novel Formulation Development Activities pursuant to the terms and conditions of this Agreement. Specifically, PARI shall develop a test version of the Novel Formulation for producing the
Drug Product for inhalation delivery by the Inhaler so as to meet all or substantially all of the Novel Formulation Specifications in compliance with the Quality Standards. 
  
 3.6 Supply of Novel Formulation and Studies on Novel Formulation 
  
 At ABARIS’ request, PARI shall supply ABARIS with quantities of Drug
Product made to the specifications of the Novel Formulation for ABARIS’ further non-clinical and Phase I studies. PARI shall provide written documentation relating to the details of the Novel Formulation, its development and selection, methods,
assays, and other pertinent documentation for ABARIS’ use in furtherance of the development of the program. If after testing, modifications are required to the Novel Formulation, the Parties shall agree upon changes to the development plan and
budget whereby PARI modifies the Novel Formulation to meet revised objectives. ABARIS may elect to have clinical supplies (including the Phase I supply) of the Novel Formulation manufactured by PARI or another third party of ABARIS’ choice.
ABARIS will provide PARI a reasonable opportunity to negotiate reasonable terms, conditions and timelines for such supply to ABARIS, providing PARI has the appropriate capabilities and regulatory approvals to provide such materials. If PARI is
chosen to supply the Novel formulation, PARI shall supply ABARIS with quantities of Drug Product made using the Novel Formulation in accordance with the Novel Formulation Development Plan and according to the appropriate regulatory standards.

  

					
	 	 	25	 	 

 3.7 Phase III Clinical Study and Commercial Supply 
  
 3.7.1 Final Novel Formulation 
  
 At ABARIS’ request, PARI shall develop a final, commercial-ready
version of the Novel Formulation for inhalation delivery by the Inhaler, in full compliance with the Novel Formulation Specifications (as ABARIS may amend for the Phase III Clinical Study) and in full compliance with the applicable Quality
Standards. The Parties will negotiate a supply agreement delineating the responsibilities and deliverables by the Parties prior to engaging in any activities for Phase III or commercial supply. PARI shall provide to ABARIS all necessary
documentation (including, but not limited to documents describing the methods, assays and manufacturing information for the commercial-ready version of the Novel Formulation) to enable ABARIS to have a third party supply ABARIS with quantities of
Drug Product made using the commercial-ready version of the Novel Formulation. 
  
 3.7.2 Delivery of Drug Product Made Using Novel Formulation 
  
 Upon the written request of ABARIS, and in accordance with a reasonable delivery schedule to be agreed upon by ABARIS and
PARI, PARI shall deliver to ABARIS a requested quantity of Drug Product made using the Novel Formulation for ABARIS’ Phase III Clinical Study for the Novel Formulation. 
  
 3.7.3 Acceptance 
  
 Subject to agreement between PARI and ABARIS on the supply of the Drug Product for such Phase III Study and Commercial
supply under Section 3.7.2, PARI shall use the Novel Formulation to produce a commercially reasonable quantity of samples of the Drug Product in order to fully meet the Novel Formulation Specifications and the applicable Quality Standards. As part
of such agreement specified in Section 3.7.2, the Parties shall determine respective responsibilities relating to testing, release, stability and other Novel Formulation release criteria. In the event that PARI releases the Novel Formulation to
ABARIS, ABARIS shall have a commercially reasonable period of time to inspect, accept and release such Novel Formulation. The Parties acknowledge that long term stability may be an ongoing release criteria and that an appropriate statistical plan
for storage and sampling will be required. 
  
 3.8 Regulatory Filing for Novel Formulation 
  
 ABARIS shall be responsible for deciding upon regulatory approval activities for the Novel Formulation and pursuing regulatory approval for the Novel Formulation. PARI shall cooperate with ABARIS in such efforts, pursuant to Section 10.4 of
this Agreement. 
  
 3.9 Activities Outside the
Scope of Novel Formulation Development Plan 
  
 For the Novel
Formulation development, PARI shall only conduct the development activities, which are set forth in the Novel Formulation Development Plan. PARI shall only conduct additional Novel Formulation development activities upon a mutual written agreement
between the Parties, including a description of such development activities and payment terms. 
  

 26 

 3.10 Upfront License and Feasibility Assessment Payments and Milestone Payments

  
 3.10.1 Upfront License Payment

  
 Subject to the terms and conditions of this Agreement, ABARIS
shall pay PARI a license fee in the amount of [*] within five (5) business days after the Effective Date of this Agreement. 
  
 3.10.2 Upfront Feasibility Assessment Payment 
  
 Subject to the terms and conditions of this Agreement, ABARIS shall pay PARI a one-time feasibility study upfront payment in
the amount of [*] within five (5) business days after ABARIS requests PARI in writing to begin the Novel Formulation Development Activities in accordance with Section 3.2 above. 
  
 3.10.3 Milestone Payments 
  
 Each of the milestone payments due by ABARIS under this Section 3.10.3 shall be paid only once, regardless of the number of
times the milestones have been achieved. Subject to the terms and conditions of this Agreement, ABARIS shall make the following milestone payments to PARI within five (5) business days of the following milestone completion dates: 
  

					
	 	 	 Milestone Payments

	 	 Milestone Completion Date

	(a)	 	[*]	 	The date on which ABARIS enters the Novel Formulation into a Phase I Study
			
	(b)	 	[*]	 	The date on which any U.S. patent issues that claims the Novel Formulation
			
	(c)	 	[*]	 	The date on which ABARIS enters the Novel Formulation into a Phase II Clinical Study or Phase III Study, whichever comes first
			
	(d)	 	[*]	 	The date on which an United States NDA is filed with the FDA for the Novel Formulation
			
	(d)	 	[*]	 	The date on which ABARIS makes a first commercial sale of a Drug Product produced through the Novel Formulation.

  
 *Confidential Treatment Requested 
  

					
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 3.11 Royalty Payments for Novel Formulation 
  
 3.11.1 Patent Protection 
  
 During the Program B Royalty Period and subject to the terms and conditions
of this Agreement, ABARIS shall pay PARI a royalty payment of [*] of the Net Sales of the Drug Product produced with the Novel Formulation and sold together with the Inhaler or for inhalation delivery by the Inhaler in a country in the Territory
where: 
  
 (a) the sale of such Drug Product alone would, but for
the license granted herein, infringe a Valid Claim of an issued patent owned by PARI in such country; or 
  
 (b) the sale of the Inhaler alone would, but for the license granted herein, infringe a Valid Claim of an issued patent owned by PARI in such country; or

  
 (c) the sale of such Drug Product in combination with the
Inhaler would, but for the license granted herein, infringe a Valid Claim of an issued patent owned by PARI in such country. 
  
 3.11.2 No Patent Protection 
  
 In the event that ABARIS does not owe PARI royalty payments pursuant to sub-section 3.11.1 above, during the Program B Royalty Period and subject to the
terms and conditions of this Agreement, ABARIS shall pay PARI [*] of the Net Sales of the Drug Product produced with the Novel Formulation and sold together with the Inhaler or for inhalation delivery by the Inhaler in a country in the Territory
where: 
  
 (a) the sale of such Drug Product alone would not
infringe a Valid Claim of an issued patent owned by PARI in such country; and 
  
 (b) the sale of the Inhaler alone would not infringe a Valid Claim of an issued patent owned by PARI in such country; and 
  

(c) the sale of such Drug Product in combination with the Inhaler would not infringe a Valid Claim of an issued patent owned by PARI in such country.

  
 3.11.3 Intentionally Omitted.

  
 3.11.4 Drug Products Produced by Existing
Formulation 
  
 For the purposes of clarity, ABARIS shall not
owe any royalty payments due under Section 3.11 for any sales of Drug Products for use with the Inhaler, where the Existing Formulation is used to produce such Drug Products, which shall instead be governed by Section 2.18. 
  
 3.11.5 ABARIS’ Option to Sell Existing Formulation
or Novel Formulation 
  
 PARI acknowledges that ABARIS has
the right to proceed with the development and commercialization of the Existing Formulation instead of the Novel Formulation, and that in 
  
 *Confidential Treatment Requested 
  

					
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 such case, ABARIS shall not be in breach of the Agreement for its failure to develop, test, pursue regulatory approval
for or make any commercial sales of the Drug Product produced with the Novel Formulation. 
  
 3.12 Reimbursement for Novel Formulation Development Expenses 
  
 Subject to the terms and conditions of this Agreement, subject to the limits set forth in Section 3.13 of this Agreement,
and in accordance with Article 12, PARI shall report its direct costs to ABARIS, and ABARIS shall reimburse PARI for PARI’s direct labor and direct out-of-pocket costs incurred in conducting the Novel Formulation Development Activities.

  
 3.13 Limits on Reimbursement for Novel
Formulation Development Expenses 
  
 3.13.1
Budget Procedures 
  
 The Parties acknowledge that the
Novel Formulation Development Plan sets forth: (a) an Approved Budget for the First Stage of the Novel Formulation Development Activities, which consists of the portion of the Feasibility Assessment set forth in Section 3.2(a) above; and (b) an
Approved Budget for the Second Stage of the Novel Formulation Development Activities. In no event shall PARI exceed either such Approved Budget without ABARIS’ prior written consent. If PARI finds it necessary to exceed either such Approved
Budget, the Parties may agree in writing to an increased budget, in which case such increased budget shall be deemed an Approved Budget. Subject to Section 3.13.2(b) below: (a) PARI shall use commercially reasonable efforts not to exceed such
Approved Budgets; and (b) PARI shall not be obligated to perform any Novel Formulation Development Activities which would cause PARI to exceed the applicable Approved Budget. 
  
 3.13.2 Reimbursement Limit for Novel Formulation Development Activities 
  
 In the event that ABARIS has reimbursed PARI for the Novel Formulation
Development Activities an aggregate amount equal to twice the sum of: (a) the Approved Budget for the First Stage of the Novel Formulation Development Activities (consisting of the portion of the Feasibility Assessment set forth In Section 3.2(a)
above); and (b) the Approved Budget for the Second Stage of the Novel Formulation Development Activities, PARI shall complete the Novel Formulation Development Activities required by this Article 3 without any additional reimbursement or other
payment from ABARIS. 
  

	3.14	[*] Ownership of Novel Formulation Intellectual Property 

  
 Subject to Section 3.16 below, [*] shall own all of the Novel Formulation Intellectual Property, and [*] any and all right, title and interest [*]
acquires in the Novel Formulation Intellectual Property. 
  
 3.15 License to [*] of Novel Formulation Intellectual Property Outside Field 
  

	3.15.1	License 

  
 Subject to the terms and conditions of this Agreement, [*] hereby grants to [*] a transferable, sub-licensable, worldwide, exclusive license, under the
Novel Formulation Intellectual Property for purposes outside the Field which do not compete, directly or indirectly, with [*] worldwide commercialization of any drug in the Field which includes an anesthetic within the same pharmacological family or
category as lidocaine. For clarity, this license specifically excludes any licenses or rights to other [*] Intellectual Property and any other Intellectual Property owned or controlled by [*] and its Affiliates. 
  
 *Confidential Treatment Requested 
  

					
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 3.15.2 Right of [*] 
  
 Before PARI begins to communicate with a third party regarding a possible
sub-license or other development activities under Section 3.15.1 including the possible development, manufacture or supply related to topical anesthetics within the same pharmacological family or category as lidocaine and delivered by the eFlowTM Device outside the Field, PARI shall provide ABARIS
with at least ten (10) business days’ prior written notice. Upon ABARIS’ written request within such period of time, PARI shall [*] with ABARIS, in good faith, mutually acceptable terms for an agreement regarding the foregoing. In the
event the Parties do not sign a letter of intent regarding such agreement within thirty (30) calendar days of negotiation, PARI shall have the right to [*] of such agreement. 
  
 3.16 PARI’s Reversionary Interest in Novel Formulation Intellectual Property 

 
 3.16.1 Payment Default 
  
 In the event that PARI believes that ABARIS is in default of any material
payment obligation of ABARIS to PARI under this Agreement (“Payment Default”), PARI may provide ABARIS with a written notice of such Payment Default. To be effective, such notice shall: (a) state that “PARI hereby notifies ABARIS of a
Payment Default pursuant to Section 3.16 of the Development Agreement”; (b) specify in detail the specific basis for the Payment Default; and (c) be accompanied by all relevant supporting documentation evidencing such Payment Default.

  

	 	(a)	If, within ninety (90) days after ABARIS’ receipt of such an effective Payment Default notice, ABARIS remedies the condition forming the basis for the Payment Default set forth
in such notice, such notice shall cease to be effective. 

  

	 	(b)	Within sixty (60) days after ABARIS’ receipt of an effective Payment Default notice, ABARIS may provide PARI with a written notice disputing part or all of such alleged Payment
Default. In such event, the Parties shall resolve such dispute in the following manner. First, the Chief Executive Officer(s) of each of the Parties shall meet within thirty (30) days of such dispute notice to try to resolve the dispute. If the
Chief Executive Officers resolve the dispute, PARI’s Payment Default notice shall cease to be effective upon the payments, if any, required by such resolution. If the Chief Executive Officers are unable to resolve the dispute, the dispute shall
be resolved by an independent arbitrator having the accounting and/or legal experience necessary to resolve such dispute depending on the nature of such dispute. The decision from the arbitrator shall be rendered within one-hundred twenty (120) days
of the dispute notice. If the dispute is resolved in ABARIS’ favor, PARI’s Payment Default notice shall cease to be effective and PARI shall pay for the arbitration costs and the expenses (including reasonable attorney fees) incurred by
ABARIS regarding such dispute. If the dispute is resolved in PARI’s favor, PARI’s Payment Default notice shall remain effective and ABARIS shall pay for the arbitration costs and the expenses (including reasonable attorney fees) incurred
by PARI regarding such dispute. If the 

  
 *Confidential Treatment Requested 
  

					
	 	 	30	 	 

 dispute is resolved in PARI’s favor, within thirty (30) days after the decision from the arbitrator,
ABARIS may remedy the condition forming the basis for the Payment Default, and PARI’s notice of Payment Default shall cease to be effective. 
  

	 	(c)	If PARI’s Payment Default notice remains effective pursuant to section (a) and (b) above (after the respective time frames set forth therein), [*] shall assign to [*] the
ownership of the Novel Formulation Intellectual Property transferred from [*] under the Agreement. 

  
 3.16.2 ABARIS Changes 
  
 The Parties acknowledge the possibility that, during the term of this Agreement: (a) ABARIS undergoes a voluntary or involuntary dissolution; or (b)
ABARIS ceases to conduct business in the normal course, becomes insolvent, files for bankruptcy, is subject to a bankruptcy proceeding or otherwise becomes bankrupt, makes a general assignment for the benefit of creditors, admits in writing its
inability to pay its debts as they are due, permits the appointment of a receiver for its business or assets, or avails itself of or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the
protection of rights of creditors. ABARIS shall promptly notify PARI in writing upon the occurrence of any such event. Following the expiration of [*] after such event, PARI may notify ABARIS [*] under this Agreement. Within [*] after ABARIS’
receipt of such notice, ABARIS shall provide PARI [*]. Upon PARI’s payment to ABARIS of an amount equal to such costs, [*]. 
  
 Article 4 – Commercially Reasonable Efforts 
  
 4.1 Commercially Reasonable Efforts 
  
 PARI and ABARIS shall each use commercially reasonable efforts to perform all of their obligations under this Agreement
including, but not limited to, the Development Activities. 
  
 4.2 ABARIS’ Relationship with BattellePharma 
  
 PARI acknowledges that, prior to the Effective Date, ABARIS entered in an agreement with BattellePharma, Inc. regarding the development of inhalation devices for use with drug products, which include lidocaine.
ABARIS’ pursuit of the development, testing and/or commercialization of such inhalation devices and drug products which include lidocaine (excluding drug products made using the Novel Formulation) for such inhalation devices during the term of
this Agreement shall not be a breach of ABARIS’ duty to use commercially reasonable efforts under this Agreement.  
  
 Article 5 – Quality Standards 
  
 5.1 Internal Quality Control 
  
 PARI shall perform all of the Development Activities and manufacturing activities under this Agreement substantially in accordance with PARI’s
internal quality control standards and product specification standards or as otherwise agreed upon by PARI and ABARIS. 
  
 *Confidential Treatment Requested 
  

					
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 5.2 Substantial Compliance with cGMP and ECGMP 
  
 With respect to the Test Inhalers, PARI shall perform all of the Inhaler
Development Activities and manufacturing activities under this Agreement at least in substantial compliance with cGMP or ECGMP, whichever is applicable. 
  
 5.3 Full Compliance with cGMP and ECGMP 
  

With respect to the Inhalers and any Novel Formulation supplied to ABARIS for its Phase III Clinical Study, PARI shall perform all of the Development
Activities and manufacturing activities under this Agreement in full compliance with: (a) the current Good Manufacturing Practices regulations and Quality System regulations, as promulgated by the FDA, the cGMP or the ECGMP, whichever is applicable;
(b) all applicable industry and trade standards, including the applicable standards of the International Organization for Standardization (ISO), including at least the ISO 9001/9002 quality standards; and (c) all applicable laws and regulations.

  
 Article 6 – Adverse Information and Event Reporting

  
 6.1 Adverse Information and Event
Reporting 
  
 Beginning on the Effective Date and ending upon
the termination of this Agreement unless otherwise required by law, regulation or agency, each Party shall report to the other Party, in as much detail as reasonably possible, within forty-eight (48) hours from receipt of the information (or less,
where required so as to comply with EMEA, FDA or other applicable regulatory authorities or regulations) any experience coincident with the use of the Test Inhalers, Inhalers, Existing Formulation, Novel Formulation or Drug Products at any dose,
whether or not considered drug related, that suggests a significant hazard, contraindication, side effect or precaution. This includes, but is not limited to, any serious adverse experience or expectation regarding the use of the Test Inhalers,
Inhalers, Existing Formulation, Novel Formulation or Drug Products. Such a serious adverse experience or expectation includes, at minimum, any possible event coincident with the use of the Test Inhalers, Inhalers, Existing Formulation, Novel
Formulation or Drug Products that results in any of the following outcomes: death, a life-threatening experience, inpatient hospitalization, prolongation of an existing hospitalization, a persistent or significant disability or incapacity, or a
congenital anomaly or birth defect (“Adverse Event”). 
  
 Article 7 – Project Management 
  
 7.1 Formation and Purpose of Project Team 
  
 ABARIS and PARI shall establish a Project Team, which shall, among other activities, finalize the Test Inhaler Development Plan, Inhaler Development Plan and Novel Formulation Development Plan under the direction of ABARIS. The Project Team
shall also: (a) oversee the Development Activities; (b) report to ABARIS and PARI on all 
  

 32 

 proposed Development Decisions; (c) propose the overall technical strategy for any modification of the Test Inhaler,
Inhaler, Existing Formulation and Novel Formulation; (d) oversee and coordinate the Parties’ activities in such development pursuant to the specifications and the timeframes set forth in the Test Inhaler Development Plan, Inhaler Development
Plan and Novel Formulation Development Plan; (e) propose modifications to the Inhaler Specifications and Novel Formulation Specifications, as appropriate; (f) develop and propose for the Parties’ approval the final specifications for the
Inhaler and Novel Formulation, all based on the principles of prompt and diligent development, consistent with the Quality Standards; and (g) review all development records relating to the Development Activities. The Project Team shall perform such
other functions as appropriate to further the purposes of this Agreement, including the periodic evaluation of performance against goals. 
  
 7.2 Control 
  
 7.2.1 General Control of ABARIS 
  
 Subject to Section 7.2.2 below, ABARIS shall control the decisions of the Project Team on the basis of the Project Team’s proposals, taking into
account PARI’s expertise, input and advice. In the event ABARIS does not approve of such a proposal, the Parties shall negotiate in good faith a mutually acceptable decision regarding such proposal. Notwithstanding any disputes or disagreements
within the Project Team or between the Parties, ABARIS shall have the sole right to make decisions related to clinical strategies, clinical development, clinical testing, regulatory filings for drug products and commercialization of drug products.
To the extent such decisions affect the Approved Budgets, the Parties shall negotiate in good faith a mutually acceptable amendment to such Approved Budgets and to affected timelines. 
  
 7.2.2 Control of PARI 
  
 In the event that PARI determines that a decision of ABARIS to be implemented by the Project Team will result in a hazardous
or unsafe Inhaler or infringement of a third party’s patent covering an inhalation device or method of inhalation, PARI shall provide the Project Team with a written report which establishes a reasonable technical basis for such determination.
Upon PARI’s delivery of such report to the Project Team, PARI shall have the right to refrain from implementing such decision of ABARIS in the Development Activities. PARI’s exercise of such right shall not constitute a breach of this
Agreement.  
  
 7.3 Membership

  
 The Project Team shall have representatives of each Party
with the requisite levels of skill and experience in product development, engineering or such other matters as the Parties may agree. The Project Team’s initial members shall be those set forth in the Project Team Membership. The Project Team
may change its size from time to time by written agreement of the Parties. Each Party may replace its Project Team representatives at any time upon written notice to the other Party; provided, however, that each Party’s representatives shall at
all times be persons possessing the appropriate level of skill, experience and familiarity with the Development Activities.  
  

 33 

 7.4 Meetings and Travel Reimbursement 
  
 The Project Team shall hold meetings at such times and places as the Project
Team elects to do so, but the Project Team shall meet at least once every month. Meetings of the Project Team may be held by audio, video teleconference or in person. Meetings of the Project Team shall be effective only if a representative of each
Party is present or participating. ABARIS shall be responsible for its own travel expenses incurred as a result of meetings of the Project Team. In addition, upon receipt of an invoice from PARI, ABARIS shall reimburse PARI for PARI’s
reasonable travel expenses incurred as a result of meetings of the Project Team or incurred otherwise to meet the development objectives of this Agreement. PARI shall exercise efforts to minimize any such travel expenses, and such efforts shall be
no less stringent than those exercised by PARI in minimizing its own business travel expenses or otherwise required by PARI’s internal policies. Such reimbursements shall not count towards any Development Activity reimbursement provisions set
forth in Article 2 or 3 of this Agreement. 
  
 7.5 Access to Facilities to View Development Activities 
  
 The Project Team shall facilitate ABARIS’ access to facilities to view and inspect the on-going Development Activities. Upon reasonable prior notice from ABARIS, PARI shall provide ABARIS and its employees and
agents with access to PARI’s and its subcontractors’ facilities to inspect, audit and view the Development Activities. In the form of an existing confidentiality agreement between ABARIS and such employees and agents, ABARIS shall require
each employee and agent granted access to PARI’s or its subcontractors’ facilities to maintain in confidence and not use any and all Confidential Information learned or viewed during such employee’s visit except to the extent
disclosure or use is related to the purposes of this Agreement. 
  
 7.6 Limitation of Powers 
  
 The powers of the Project Team are limited to those expressly set forth in this Agreement. Without limiting the generality of the foregoing, the Project Team shall not have the right to amend this Agreement. The actions of the Project Team
shall not substitute for either Party’s ability to exercise any right, nor excuse the performance of any obligation, set forth herein.  
  
 7.7 Liaisons 
  
 Each Party will designate an individual to serve as the liaison between the Parties to undertake and coordinate any day-to-day communications as may be
required between the Parties relating to their activities under this Agreement. Each Party may change such liaison from time to time during the term of this Agreement upon written notice thereof to the other Party. The initial liaisons for the
Parties shall be those set forth in the Liaison List.  
  

 34 

 7.8 Reports 
  
 7.8.1 Progress Reports 
  
 PARI shall regularly provide the Project Team with written reports, at least on a calendar quarterly basis, regarding the
Development Activities in order to keep ABARIS up-to-date on the progress of all Development Activities. 
  
 7.8.2 Other Reports 
  
 From time to time during the term of this Agreement, ABARIS may provide PARI with a reasonable request for a written report on or related to: (a) any
portion of the Development Activities, including PARI’s methods, assays, formulation work or experiments; (b) any results of the Development Activities including results in support of ABARIS’ regulatory efforts or Drug Product
commercialization efforts; or (c) any other information reasonably related to or arising out of this Agreement. Within thirty (30) calendar days of any such request, PARI shall use commercially reasonable efforts to provide ABARIS with such report.

  
 Article 8 – Subcontracting 
  
 8.1 New Subcontracts 
  
 PARI may subcontract portions of the Development Activities to
subcontractors, provided that, prior to subcontracting the development of part or all of the Development Activities, PARI shall: 
  
 (a) provide ABARIS with prior written notice of any such subcontractor and the development to be performed by the subcontractor; 
  
 (b) make such subcontract consistent with the applicable terms of this
Agreement; 
  
 (c) contractually require any such subcontractor,
in writing, to perform such development in accordance with the Quality Standards; 
  
 (d) to the extent possible after the use of commercially reasonable efforts, contractually require any such subcontractor, in writing, to assign all Intellectual Property rights arising from the subcontractor’s
Development Activities to PARI; 
  
 (e) contractually bind any
such subcontractor, in writing, to the confidentiality obligations provided in Article 19 of this Agreement; 
  
 (f) contractually require any such subcontractor, in writing, to authorize ABARIS to inspect, audit and view the subcontractor’s facilities in
accordance with Section 7.5 above; and 
  
 (g) obtain ABARIS’
prior written approval of such subcontractor. 
  

 35 

 8.2 Existing Subcontractors 
  
 Notwithstanding the foregoing, ABARIS shall not have the right to approve or
reject subcontractors that PARI uses as of the Effective Date as a part of its development of the Test Inhaler or in PARI’s normal course of business. 
  
 8.3 Payment of Subcontractors 
  
 PARI shall be solely responsible for paying any subcontractors hired by PARI in accordance with this Article 8. Such expense of PARI shall be reimbursable
by ABARIS in accordance with the terms and conditions of Articles 2 and 3 of this Agreement. 
  
 8.4 Enforcement of Subcontracts 
  
 PARI shall be responsible for enforcing its rights against any subcontractor hired by PARI in accordance with this Article 8. 
  
 Article 9 – Data 
  
 9.1 Ownership 
  
 9.1.1 ABARIS Ownership 
  
 Subject to Section 9.1.2 below, ABARIS shall own all Data which is generated
by ABARIS and which results from the Development Activities (“ABARIS Post-Effective Date Data”). 
  
 9.1.2 PARI Ownership 
  
 PARI shall own all Data which is generated by PARI and which results from the Development Activities (“PARI Post-Effective Date Data”). PARI
shall not use PARI Post-Effective Date Data that relates to the Drug Product, the specified Test Inhaler or the Inhaler which meets the Specifications or allow a third party to use such PARI Post Effective Date Data in a manner which competes,
directly or indirectly, with ABARIS’ worldwide commercialization of any drug in the Field which includes an anesthetic within the same pharmacological family or category as lidocaine. 
  
 9.2 ABARIS’ Use of PARI Data for Development and
Regulatory Activities 
  
 9.2.1 PARI
Post-Effective Date Data 
  
 PARI hereby grants ABARIS the
sublicensable and transferable right to possess, use, copy and modify the PARI Post-Effective Date Data that relates to the Drug Product, the Test Inhaler or the Inhaler for purposes of: (a) fulfilling ABARIS’ obligations and rights in the
Field under this Agreement during the term of this Agreement; (b) pursuing regulatory approval of the Existing Formulation, Novel Formulation and Drug Products; and (c) generally commercializing drug products. PARI shall not grant such right to any
third party for such purposes during the term of this Agreement, except that PARI may grant such right to third parties for purposes of fulfilling its obligations under this Agreement.  
  

 36 

 9.2.2 PARI Pre-Effective Date Data 
  
 PARI hereby grants ABARIS the right to possess, use, copy and modify the
PARI Pre-Effective Date Data that relates to the Drug Product, the specified Test Inhaler or the Inhaler which meets the Specifications for purposes of: (a) fulfilling ABARIS’ obligations and rights in the Field under this Agreement during the
term of this Agreement; (b) pursuing regulatory approval of the Existing Formulation, Novel Formulation and Drug Products; and (c) generally commercializing the Drug Products. Such right shall not be sublicensable or transferable without PARI’s
prior written consent. PARI shall not grant such right to any third party for such purposes during the term of this Agreement, except that PARI may grant such right to third parties for purposes of fulfilling its obligations under this Agreement.

  
 9.3 PARI’s Use of ABARIS Data for
Purposes of Agreement 
  
 ABARIS hereby grants PARI the right
to possess, use, copy and modify the ABARIS Post-Effective Date Data and ABARIS Pre-Effective Date Data solely for purposes of fulfilling PARI’s obligations under this Agreement during the term of this Agreement. ABARIS Pre-Effective Date Data
shall mean all Data which is owned or licensable by ABARIS prior to the Effective Date. PARI shall not have the right to transfer such right or grant such right to any third party without ABARIS’ prior written consent. 
  
 9.4 Return of PARI Data Upon Termination of Agreement
 
  
 9.4.1 ABARIS’ Return of
Data 
  
 Upon the termination of this Agreement: (a)
ABARIS’ rights under this Article 9 to use the PARI Data shall automatically terminate; and (b) ABARIS shall return all of such PARI Data to PARI, provided that ABARIS may retain one copy of such PARI Data for legal archival purposes or for the
purpose of supporting any of ABARIS’ Regulatory Applications or Regulatory Approvals. 
  
 9.4.2 PARI’s Return of Data 
  
 Upon the termination of this Agreement: (a) PARI’s rights under this Article 9 to use the ABARIS Data shall automatically terminate; and (b) PARI
shall return all of such ABARIS Data to ABARIS, provided that PARI may retain one copy of such ABARIS Data for legal archival purposes or for the purpose of supporting any of PARI’s Regulatory Applications or Regulatory Approvals. 

 
 9.5 Exception 
  
 Notwithstanding Section 9.4.1 above, in the event the Sole License provided
in Section 14.3 below becomes effective, ABARIS shall have a [*]. Any such manufacture or use of the Inhalers shall be subject to the terms and conditions of Section 14.3 below. 
  
 *Confidential Treatment Requested 
  

					
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 Article 10 – Regulatory Activities 
  
 10.1 No Guarantee of Approval from ABARIS 

 
 ABARIS makes no representation or warranty that it or any of its
Affiliates or Sublicensees will obtain regulatory approval for the Existing Formulation, Novel Formulation or Drug Products in any country in the Territory. 
  
 10.2 No Guarantee of Approval from PARI 
  

PARI makes no representation or warranty that it or any of its Affiliates or Sublicensees will obtain regulatory approval for the Test Inhaler or
Inhaler in any country in the Territory. 
  
 10.3
No Liability for Lack of Regulatory Approval 
  
 Neither
Party shall be liable to the other Party for any damages or other compensation if such Party does not obtain regulatory approvals, provided that such failure is not the result of a material breach of under this Agreement. 
  
 10.4 Cooperation 
  
 PARI shall cooperate with ABARIS in ABARIS’ efforts to pursue
regulatory approval of the Existing Formulation, Novel Formulation and Drug Products. ABARIS shall cooperate with PARI in PARI’s efforts to pursue regulatory approval of the Test Inhaler and Inhaler. In each case, such cooperation shall
include, without limitation, allowing a Party, at no charge, to reference the cooperating Party’s own regulatory filings or incorporate sections of the cooperating Party’s regulatory filings with such Party’s regulatory filings.

  
 10.5 Reimbursement for Cooperation

  
 In each case, the Party requesting cooperation under Section
10.4 shall reimburse the cooperating Party for such work at the then applicable Scientific Labor Rate or Clerical Labor Rate for direct costs incurred by the cooperating Party. Such reimbursement shall not count towards any Development Activity
reimbursement payments provided in Article 2 or 3 of this Agreement. 
  
 10.6 Foreign Device Filings In Regulatory Pursuit Countries 
  
 10.6.1 Test Inhaler 
  
 In accordance with a schedule reasonably agreed upon by the Parties, PARI shall prepare and make submissions as are necessary to complete a 510(k)
Submission foreign equivalent in each of the Regulatory Pursuit Countries for the general use of the Test Inhaler, and specifically for the delivery of liquids containing drug molecules. PARI shall notify ABARIS in writing promptly after PARI
receives an approval or other response to such applications. PARI shall bear all expenses related to filing such applications and pursuing regulatory approval of such applications. PARI shall use commercially reasonable efforts to pursue regulatory
approval of such applications. 
  

 38 

 10.6.2 Inhaler If Different From Test Inhaler 
  
 In the event that PARI modifies the Test Inhaler so as to develop the
Inhaler pursuant to Section 2.10.1, upon ABARIS’ request, PARI shall prepare and make submissions as are necessary to complete a 510(k) Submission foreign equivalent in each of the Regulatory Pursuit Countries for the general use of such
Inhaler, and specifically for the delivery of liquids containing drug molecules. PARI shall make such submissions in accordance with a schedule reasonably agreed upon by the Parties. ABARIS shall reimburse PARI for its costs directly related to the
preparation and filing of such submissions. Such reimbursement shall not be subject to the limits provided in Section 2.21 above, and such reimbursement shall not be deemed as reimbursement payments from ABARIS under Section 2.21 above. PARI shall
use commercially reasonable efforts to pursue regulatory approval of such submissions.  
  
 10.7 Filing of European Dossier for Device 
  
 10.7.1 Test Inhaler 
  
 In accordance with a schedule reasonably agreed upon by the Parties, PARI shall prepare and make submissions as are
necessary to complete and file a European Dossier which meets the requirements for validation under the EMEA’s validation process for the general use of the Test Inhaler, and specifically for the delivery of liquids containing drug molecules.
PARI shall notify ABARIS in writing promptly after PARI receives an approval or other response to the European Dossier. PARI shall bear all expenses related to filing the European Dossier and pursuing regulatory approval of the European Dossier.
PARI shall use commercially reasonable efforts to pursue regulatory approval of the European Dossier. 
  
 10.7.2 Inhaler If Different From Test Inhaler 
  
 In the event that PARI modifies the Test Inhaler so as to develop the Inhaler pursuant to Section 2.10.1, upon ABARIS’
request and in accordance with a schedule reasonably agreed upon by the Parties, PARI shall file a European Dossier for such Inhaler which meets the requirements for validation under the EMEA’s validation process. ABARIS shall reimburse PARI
for its costs directly related to the preparation and filing of the European Dossier. Such reimbursement shall not be subject to the limits provided in Section 2.21 above, and such reimbursement shall not be deemed as reimbursement payments from
ABARIS under Section 2.21 above. PARI shall use commercially reasonable efforts to pursue regulatory approval of the European Dossier.  
  
 Article 11 – Support Development Activities 
  
 11.1 Support Development Activities 
  
 During the term of this Agreement, ABARIS may request that PARI conduct certain services in support of ABARIS’ development and commercial endeavors,
including, without limitation, drug product packaging development, product testing, and such other services as ABARIS may reasonably request. Upon such request, the Parties shall negotiate in good faith mutually acceptable terms on PARI’s
service obligations and ABARIS’ payment obligations, all as set forth in a Support Service Order, executed by the Parties. The Parties 
  

 39 

 shall perform pursuant to their obligations in the Support Service Order. PARI’s expenses in performing services
under the Support Service Order shall not be included in any Approved Budget. For clarity, ABARIS’ payment or reimbursement of PARI for its service expenses under this Article 11 shall be governed by the Support Service Order, and not any
payment term or condition of Article 2 or 3 of this Agreement. 
  
 Article 12 – Expense Computation, Expense Reporting and Method of Payment 
  
 12.1 Changes In Labor Rates 
  
 12.1.1 Scientific Labor Rate 
  
 The Parties acknowledge that, in their performance of their activities under this Agreement, certain activities will involve scientific labor, including,
without limitation, patent research, management of patent work, project management, project supervisory work and business development work. To the extent that the costs of such scientific labor are reimbursable under this Agreement, such costs shall
be reimbursable at a rate of [*] from the Effective Date through the end of the 2003 calendar year and for any Development Activities conducted prior to the Effective Date (“Scientific Labor Rate”). The Scientific Labor Rate shall be
increased by [*] each calendar year following such time period as set forth in Section 1.10. 
  
 12.1.2 Clerical Labor Rate 
  
 The Parties acknowledge that, in their performance of their activities under this Agreement, certain activities will involve clerical labor, which is not
performed by a scientist, including, without limitation, administrative services. To the extent that the costs of such clerical labor are reimbursable under this Agreement, such costs shall be reimbursable at a rate of [*] from the Effective Date
through the end of the 2003 calendar year and for any Development Activities conducted prior to the Effective Date (“Clerical Labor Rate”). The Clerical Labor Rate shall be increased by [*] each calendar year following such time period as
set forth in Section 1.10. 
  
 12.2.
Adjustment of Approved Budgets for Labor Rate Increases 
  
 Each time the Scientific Labor Rate and the Clerical Labor Rate increases pursuant to Section 12.1.1 or 12.1.2 above, PARI shall have the right to allocate such increases to its Development Activity expenses to determine an increase
adjustment for each of the Approved Budgets at which time such adjustments shall amend the Approved Budgets. 
  
 12.3 Invoicing 
  
 PARI shall submit monthly invoices to ABARIS for the amounts owed by ABARIS for the Development Activities performed by PARI rendered in the preceding
month. Subject to the reimbursement limits and conditions of Articles 2 and 3 and the other terms and conditions of this Agreement, ABARIS shall make payments to PARI against each invoice within thirty (30) calendar days of receipt of such invoice,
and ABARIS shall make such payments by wire transfer in accordance with Section 12.4 below. The Parties shall attempt to resolve all disputes regarding invoices through the procedures set forth in Article 24 of this Agreement. Each invoice shall at
a minimum contain the following information: 
  
 (a) a
description of the Development Activities conducted during such month;  
  
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 (b) an itemized hourly breakdown of the time devoted on such itemized Development Activities; 

  
 (c) upon ABARIS’ reasonable request, the invoice shall
include identification of each individual who performed part of such Development Activities, the particular Development Activities which each such individual performed and an hourly breakdown of the time devoted by each such individual in conducting
such Development Activities;  
  
 (d) a statement of any
charges for Inhalers in accordance with Section 2.21 or Section 3.12, as applicable; and  
  
 (e) any other information reasonably requested by ABARIS. 
  

12.4 Method of Payment to PARI 
  
 12.4.1 Wire Transfer 
  
 All payments due to PARI under this Agreement shall be made in United States dollars by wire transfer to the bank, [*]. 
  
 12.4.2 Fluctuations in Currency Exchange Rates

  
 The Parties acknowledge that this Agreement expressly sets forth specific
monetary amounts in U.S. Dollars for: (a) milestone payments provided in Section 2.17 above; and (b) feasibility assessment payments and milestone payments provided in Section 3.10 above. The Parties further acknowledge that such payments may be due
in different months during the term of this Agreement. For the month during which each such payment is due, the Parties shall calculate the monthly average equivalent of the U.S. Dollar to the Euro by summing the U.S. Dollar equivalent for all of
the days in such month and dividing such sum by the total number of days in such month. If such monthly average U.S. equivalent is less than [*], the Parties shall negotiate in good faith a mutually acceptable adjustment to such payment to reflect
the difference in exchange rates between the U.S. Dollar and the Euro. ABARIS shall make such adjusted payment to PARI subject to the terms and conditions of this Agreement. The Parties shall use the exchange rates published in the New York Times to
perform such calculation. 
  
 12.5 Interest
for Late Payments to PARI 
  
 Subject to the terms and
conditions of this Agreement, ABARIS shall pay interest on all undisputed amounts which are more than thirty (30) calendar days past due to PARI under this Agreement at a rate of interest equal to the lesser of [*] per month or the maximum
permissible legal rate. 
  
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 12.6 Royalty Reports 
  
 Beginning with the first royalty payment due to PARI under Article 2 or
Article 3 of this Agreement, ABARIS shall provide PARI with quarterly written royalty reports applicable to such royalty payments, within sixty (60) business days from the last day of each calendar quarter during the term of the Agreement. Each
report shall include a summary of the Net Sales of the Drug Product during the previous calendar quarter on which a Royalty is payable and such other financial information as PARI may reasonably request. Sales made in currencies other than United
States Dollars shall be converted to United States Dollars on the basis of the average exchange rate for the calendar quarter in which such Sales were made. Such calendar average exchange rate shall be calculated by averaging the average monthly
exchange rates for the months in such calendar, based on the average monthly exchange rates published by the United States Federal Reserve Board, available as of the Effective Date at www.federalreserve.gov/releases/.  
  
 12.7 Payment of Royalty 
  
 12.7.1 Quarterly Payments 
  
 Subject to the terms and conditions of this Agreement, ABARIS shall pay to
PARI the Royalty owed by ABARIS under Articles 2 and 3 during each calendar quarter of the Royalty Period within sixty (60) business days from the last day of such calendar quarter. 
  
 12.7.2 Patent Exhaustion 
  
 Upon payment of a Royalty for any Net Sale of a Drug Product, the royalty obligation under this Agreement with respect to
that Drug Product shall be deemed exhausted. 
  
 12.7.3 No Multiple Payment for Multiple Patent Claims 
  
 ABARIS’ obligation to pay Royalties to PARI under this Agreement is imposed only once with respect to any Sale of the Drug Product, regardless of the number of claims or patents PARI owns, controls, licenses or obtains covering the
Drug Product or the manufacture or use of the Drug Product. 
  
 12.7.4 Single Payment Upon Resale 
  
 ABARIS shall not owe any Royalty to PARI under this Agreement on Net Sales of the Drug Product among ABARIS, its Affiliates and Sublicensees, so long as such Drug Product is then resold to third parties within one (1)
year and, in such instances, the obligation to pay such Royalties arises only upon the sooner to occur of: (i) the expiration of such period of time; or (b) the resale of such Drug Product by ABARIS, its Affiliates or Sublicensees, as applicable to
the third parties, including third-party distributors that are not Sublicensees as defined in this Agreement. 
  

 42 

 12.8 Reduction of Royalties 
  
 12.8.1 Blocking Patents 
  
 In the event that: (a) changes to the design or function of the Inhaler are
Necessary (defined below); or (b) due to any design or function of the Inhaler, it is Necessary for ABARIS, its Affiliates or Sublicensees to obtain a license and pay a royalty under such license to a third party under any patent or other
proprietary interest of such third party in order to fully exercise the licenses granted to ABARIS and its Affiliates in this Agreement, ABARIS’ obligations to pay Royalties to PARI on Net Sales in that country shall be reduced by [*] of the
amount of the cost to ABARIS, its Affiliates and Sublicensees of such changes or the royalties paid or payable to such third party, only to the extent PARI has not already paid ABARIS pursuant to PARI’s indemnification obligations under Section
21.1 of this Agreement. Notwithstanding the foregoing, ABARIS’ obligation to pay the Royalty shall not be reduced by more than [*]. It shall be considered “Necessary” to make changes or obtain a license if so ordered in a
non-appealable decision by a court of competent jurisdiction in such country or if ABARIS, any Affiliate of ABARIS or any Sublicensee obtains a written opinion from two qualified mutually agreed upon independent patent counsels in such country that
the Inhaler or use thereof for delivery of the Drug Product infringes upon such third party’s patent rights. 
  
 12.8.2 Compulsory License 
  
 If a third party obtains, by non-appealable order, decree or grant from a court or other regulatory authority of competent jurisdiction in any country in
the Territory, a compulsory license under the PARI Licensed Intellectual Property which includes subject matter related to the Test Inhaler or the Inhaler, authorizing such third party to make, have made, use, import, export, offer for sale or sell
the Inhaler alone or in combination with the Drug Product in such country, PARI shall give prompt written notice to ABARIS. During the effective period of such compulsory license, ABARIS’ obligations to pay Royalties with respect to Net Sales
of the Drug Product in such country under this Agreement shall be reduced by [*] If, for any other reason or under any other circumstances, the exclusive license granted to ABARIS under Section 2.23 of this Agreement becomes or is deemed a
nonexclusive license in a country in the Territory, the Royalty owed by ABARIS to PARI for Net Sales of the Drug Product in such country shall be reduced by [*]. 
  
 12.8.3 Discount on Inhaler Price 
  
 In the event that the royalty owed to PARI by ABARIS is reduced pursuant to Section 12.8.1 or 12.8.3, [*] of the [*] charged
to ABARIS, its Affiliates or Sublicensees for the supply of the Inhalers pursuant to Section 13.3 of this Agreement. 
  
 12.9 ABARIS’ Books and Records and Inspection 
  
 ABARIS shall keep full, true and accurate books and records, which account for ABARIS’ Net Sales of the Drug Product in
the Territory and the related Royalties due to PARI. PARI, at its own expense, shall have the right during normal business hours on thirty (30) calendar days’ prior written notice to ABARIS and not more than once in any calendar year to have a
nationally recognized independent public accounting firm selected by PARI 
  
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	 	 	43	 	 

 examine the relevant books and records of ABARIS for the purpose of verifying the Royalty payments due to PARI under this
Agreement. Such accounting firm shall not work on a contingency fee basis, shall execute and deliver to ABARIS a standard confidentiality agreement and shall not disclose to PARI any information relating to ABARIS’ business, except whether
ABARIS’ Royalty reports are correct or incorrect, and if incorrect, the specific details concerning any discrepancies and the amounts of the Royalty due to PARI under this Agreement. If such examination reveals a discrepancy, ABARIS shall pay
to PARI any additional Royalty owed to PARI, along with audit fees if the discrepancy is greater than [*] or PARI shall refund to ABARIS any excess Royalty payments made by ABARIS, as appropriate. 
  
 12.10 PARI’s Books and Records and Inspection 

  
 PARI shall keep full, true and accurate books and records
which account for the Development Activities rendered by PARI and which account for the payments due to PARI for the Development Activities pursuant to Articles 2 and 3 of this Agreement. ABARIS, at its own expense, shall have the right during
normal business hours on thirty (30) calendar days’ prior written notice to PARI and not more than once in any calendar year to have a nationally recognized independent public accounting firm selected by ABARIS and acceptable to PARI examine
the relevant books and records of PARI for the purpose of verifying the payments under Articles 2 and 3 of this Agreement. Such accounting firm shall not work on a contingency fee basis, shall execute and deliver to PARI a standard confidentiality
agreement and shall not disclose to ABARIS any information relating to PARI’s business, except whether PARI’s invoices are correct or incorrect, and if incorrect, the specific details concerning any discrepancies and the amounts of the
payment due under Articles 2 and 3 of this Agreement. If such examination reveals a discrepancy, ABARIS shall pay to PARI any additional amount owed to PARI, along with audit fees if the discrepancy is greater than [*] or PARI shall refund to ABARIS
any excess payments made by ABARIS, as appropriate. 
  
 12.11 Work Outside Scope of Agreement 
  
 Notwithstanding anything in this Agreement to the contrary, the Parties agree that any additional work demanded by ABARIS in the course of the Agreement not mutually agreed upon in this Agreement shall not be deemed limited by any Approved
Budget and shall be invoiced to ABARIS on an hourly basis at the Clerical Labor Rate or the Scientific Labor Rate, as may be appropriate. 
  
 Article 13 – Commercialization 
  
 13.1 Program A Commercialization Strategy 
  
 13.1.1 Existing Formulation and Related Inhaler 
  
 In the event that ABARIS conducts a Phase III Clinical Study related to the
Existing Formulation of the Drug Product, the Parties shall discuss and develop a written Program A Commercialization Strategy for the commercialization of the Drug Product made using the Existing Formulation and the Inhaler adapted to deliver such
Drug Product. 
  
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 13.1.2 Options of Program A Commercialization Strategy 
  
 The Parties shall not implement the Program A Commercialization Strategy
until ABARIS determines that the results of the Phase III Clinical Study related to the Existing Formulation are positive. Upon initiation of the Phase III Clinical Study, the Parties shall meet to discuss the Program A Commercialization Strategy
and to begin negotiating the terms of the Program A Commercial Supply Agreement. As part of each such discussions and negotiations, ABARIS and PARI shall determine whether the Program A Commercialization Strategy will include: 
  
 (a) an agreement wherein PARI supplies to ABARIS a supply of Inhalers
adapted to deliver Drug Product made using the Existing Formulation, and ABARIS: (ii) independently sells such Inhalers, in combination with such Drug Products or apart from such Drug Products; or (ii) provides such Inhalers to patients at a reduced
price in combination with such Drug Products; (“Program A Supply Agreement”); or 
  
 (b) PARI independently sells such Inhalers apart from such Drug Products, and ABARIS independently sells such Drug Products apart from such Inhalers
(“Program A Independent Arrangement”); or 
  
 (c)
another arrangement agreed upon by the Parties related to such Inhalers and such Drug Products. 
  
 13.1.3 Program A Supply Agreement – Minimum Terms 
  
 Unless the Parties agree in writing otherwise, the Program A Supply Agreement, if any, will include, at a minimum, the
Program A Supply Terms. 
  
 13.1.4 Program A
Independent Arrangement – Minimum Terms 
  
 Unless the
Parties agree in writing otherwise, the Program A Independent Arrangement, if any, will include, at a minimum, the terms provided in this Section 13.1.4. The Parties shall use commercially reasonable efforts to work together to maximize the sales of
the Drug Products made using the Existing Formulation and the Inhalers adapted to deliver such Drug Products. In the event that a Party desires to continue the Program A Independent Arrangement while promoting such Drug Product and such Inhaler
together, such Party may so notify the other Party in writing. The Parties will then negotiate in good faith an agreement involving the creation, authorization or license of certain trademarks and trade dress consistent with mutually acceptable
marketing themes, slogans, product use directions, coloring themes and advertising campaigns. 
  
 13.2 Program B Commercialization Strategy 
  
 13.2.1 Novel Formulation and Related Inhaler 
  
 In the event that ABARIS conducts a Phase III Clinical Study related to the
Novel Formulation of the Drug Product, the Parties shall discuss and develop a written Program B Commercialization Strategy for the commercialization of the Drug Product made using the Novel Formulation and the Inhaler adapted to deliver such Drug
Product. 
  

 45 

 13.2.2 Options of Program B Commercialization Strategy 
  
 The Parties shall not implement the Program B Commercialization Strategy
until ABARIS determines that the results of the Phase III Clinical Study related to the Novel Formulation are positive. Upon initiation of the Phase III Clinical Study, the Parties shall meet to discuss the Program B Commercialization Strategy and
to begin negotiating the terms of the Program B Commercial Supply Agreement. As part of each such discussions and negotiations, ABARIS and PARI shall determine whether the Program B Commercialization Strategy will include: 
  
 (a) an agreement wherein PARI supplies to ABARIS a supply of Inhalers
adapted to deliver Drug Product made using the Novel Formulation, and ABARIS: (ii) independently sells such Inhalers, in combination with such Drug Products or apart from such Drug Products; or (ii) provides such Inhalers to patients at a reduced
price in combination with such Drug Products; (“Program B Supply Agreement”); or 
  
 (b) PARI independently sells such Inhalers apart from such Drug Products, and ABARIS independently sells such Drug Products apart from such Inhalers
(“Program B Independent Arrangement”); or 
  
 (c)
another arrangement agreed upon by the Parties related to such Inhalers and such Drug Products. 
  
 13.2.3 Program B Supply Agreement – Minimum Terms 
  
 Unless the Parties agree in writing otherwise, the Program B Supply Agreement, if any, will include, at a minimum, the
Program B Supply Terms. 
  
 13.2.4 Program B
Independent Arrangement – Minimum Terms 
  
 Unless the
Parties agree in writing otherwise, the Program B Independent Arrangement, if any, will include, at a minimum, the terms provided in this Section 13.2.4. The Parties shall use commercially reasonable efforts to maximize the sale of the Drug Products
made using the Novel Formulation and the Inhalers adapted to deliver such Drug Products. In the event that a Party desires to continue the Program B Independent Arrangement while promoting such Drug Product and such Inhaler together, such Party may
so notify the other Party in writing. The Parties will then negotiate in good faith an agreement involving the creation, authorization or license of certain trademarks and trade dress consistent with mutually acceptable marketing themes, slogans,
product use directions, coloring themes and advertising campaigns. 
  
 13.3 Volume of Inhaler Orders for Program A and Program B 
  
 Subject to the Program A Commercialization Strategy and the Program B Commercialization Strategy, PARI will sell to ABARIS, its Affiliates, its
Sublicensees, its designees or other parties: (a) Inhalers adapted to deliver Drug Product made using the Existing Formulation; and/or (b) Inhalers adapted to deliver Drug Product made using the Novel Formulation. PARI shall sell such Inhalers to
ABARIS, its Affiliates, its Sublicensees, its designees or other parties at the Program A Invoice Price per Inhaler. 
  

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 13.3.1 ABARIS’ Obligation 
  
 The Parties acknowledge the possibility that PARI might receive less than
[*] orders for Inhalers from ABARIS, its Affiliates, its Sublicensees, its designees or other parties during each of the time periods set forth below in this Section 13.3.1 (“Time Period(s)”). The term “Unordered Inhalers” shall
mean the quantity of Inhalers less than [*] for which PARI did not receive an order during each such Time Period. For the Unordered Inhalers, if any, ABARIS shall: (i) make the payments to PARI set forth below in this Section 13.3.1; or, at its
option, (ii) make the purchases set forth below in this Section 13.3.1. ABARIS shall have the right to make such payments for a portion of the Unordered Inhalers while making such purchases for the remaining portion of the Unordered Inhalers.

  

							
	 	 	 Time Period

	 	 Payment

	 	 Purchase

				
	1st	 	The time period: (a) beginning on the earlier of: (i) the first anniversary of the beginning of the Program A Royalty Period; or (ii) the first anniversary of the beginning of the Program B
Royalty Period; and (b) ending one year after such date.	 	An amount calculated by multiplying [*] by the quantity of Unordered Inhalers corresponding to the 1st Time Period, provided that such amount shall not exceed [*]	 	A purchase of the Unordered Inhalers corresponding to the 1st
Time Period at the Program A Invoice Price
				
	2nd	 	The time period beginning on the expiration of the 1st Time
Period and ending one year thereafter.	 	An amount calculated by multiplying [*] by the quantity of Unordered Inhalers corresponding to the 2nd Time Period, provided that such amount shall not exceed [*]	 	A purchase of the Program A Unordered Inhalers corresponding to the 2nd Time Period at the Program A Invoice Price.
				
	3rd	 	The time period beginning on the expiration of the 2nd Time
Period and ending one year thereafter.	 	An amount calculated by multiplying [*] by the quantity of Unordered Inhalers corresponding to the 3rd Time Period, provided that such amount shall not exceed [*]	 	A purchase of the Unordered Inhalers corresponding to the 3rd
Time Period at the Program A Invoice Price.
				
	4th	 	The time period beginning on the expiration of the 3rd Time
Period and ending one year thereafter.	 	An amount calculated by multiplying [*] by the quantity of Unordered Inhalers corresponding to the 4th Time Period, provided that such amount shall not exceed [*]	 	A purchase of the Unordered Inhalers corresponding to the 4th
Time Period at the Program A Invoice Price.
				
	5th	 	The time period beginning on the expiration of the 4th Time
Period and ending one year thereafter.	 	An amount calculated by multiplying [*] by the quantity of Unordered Inhalers corresponding to the 5th Time Period, provided that such amount shall not exceed [*]	 	A purchase of the Unordered Inhalers corresponding to the 5th
Time Period at the Program A Invoice Price.

  

					
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 13.3.2 Limitations on ABARIS’ Obligation 
  
 The obligation of ABARIS under Section 13.3 shall: (i) be subject to PARI’s ability to fill the orders for the Inhalers
placed under Section 13.3; and (ii) terminate on the expiration of the 5th Time Period. 
  
 13.4 PARI’s Manufacturing Facilities 
  
 PARI represents that, prior to the date that the Drug Product is
commercialized, PARI shall own or operate a backup manufacturing facility in Germany or has an exclusive arrangement with a third party for manufacturing: (a) critical components of PARI’s inhalation devices, or (b) PARI’s inhalation
devices. At the time that the Parties meet to discuss and negotiation the Program A Commercialization Strategy and the Program B Commercialization Strategy as set forth in Sections 13.1.2 and 13.2.2, the Parties will also discuss and agree upon
backup manufacturing contingency plans. 
  
 Article 14 –
Alternative Supply of Inhalers 
  
 14.1 PARI Changes 
  
 14.1.1 Changes 
  
 Whether during a Program A Independent Arrangement or Program B Independent Arrangement or under a Program A Supply
Agreement or Program B Supply Agreement, the Parties acknowledge the possibility that one or more of the following events may occur: 
  
 (a) PARI undergoes a [*]; 
  
 (b) PARI [*]; or 
  
 (c) as a result of a [*] after the delivery date specified in ABARIS’, its Affiliates or Sublicensees’ purchase order. 
  
 14.1.2 Notice 
  
 PARI shall promptly notify ABARIS in writing upon the occurrence of any of the events set forth in Section 14.1.1.

  
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 48 

 14.2 PARI Circumstances 
  
 14.2.1 Circumstances 
  
 Whether during a Program A Independent Arrangement or Program B Independent
Arrangement or under a Program A Supply Agreement or Program B Supply Agreement, the Parties acknowledge the possibility that one or more of the following events may occur: 
  
 (a) as a result of [*], PARI fails to supply the Inhalers ordered by ABARIS, its Affiliates or Sublicensees or third parties
for a period of more than [*] after the delivery date specified in ABARIS’, its Affiliates’ or Sublicensees’ or third parties purchase order; 
  
 (b) PARI becomes [*], its Affiliates or Sublicensees for a period of more than [*] after the delivery date specified in ABARIS’, its Affiliates or
Sublicensees or third parties purchase order through no fault of ABARIS and where no Adverse Event has been reported; 
  
 (c) as the result of a [*] made by PARI and [*], PARI fails to supply the Inhalers ordered by ABARIS, its Affiliates or Sublicensees or third parties for
a period of more than [*] after the delivery date specified in ABARIS’, its Affiliates’ or Sublicensees’ or third parties purchase order; 
  
 (d) as the result of a [*], PARI fails to supply the Inhalers ordered by ABARIS, its Affiliates or Sublicensees for a period of more than [*] after the
delivery date specified in ABARIS’, its Affiliates’ or Sublicensees’ or third parties purchase order; or 
  
 (e) after the Program A Royalty Period or Program B Royalty Period begins, whichever occurs first, PARI fails to [*] where: (i) the Inhalers are
separately manufactured; or (ii) different critical components of the Inhalers are manufactured. 
  
 14.2.2 Cure Period 
  
 PARI shall promptly notify ABARIS in writing upon the occurrence of any of the events set forth in Section 14.2.1 above. Upon the occurrence of any such events, ABARIS may notify PARI in writing of such occurrence (“ABARIS’
Notice”). Within thirty (30) calendar days after PARI’s receipt of ABARIS’ Notice, PARI shall submit to ABARIS a written response (“PARI’s Response”). ABARIS’ Notice and PARI’s Response shall each include a
statement regarding the lack of Inhaler supply, each Party’s position and any proposed solutions. Within sixty (60) days after ABARIS’ Notice, the designated senior executives, officers or management of PARI and ABARIS shall meet at a
mutually acceptable time and place and thereafter as often as they reasonably deem necessary to attempt to resolve the lack of Inhaler supply problem. During such meetings, the Parties shall, in good faith, negotiate any Inhaler price reductions or
discounts to compensate ABARIS, its Affiliates or Sublicensees for PARI’s temporary failure to supply Inhalers. The rights of PARI under this Section 14.2.2 shall not in any way affect, limit or waive ABARIS’ right to terminate this
Agreement under Section 25.2 for PARI’s breach. 
  
 14.3 Sole License

  
 14.3.1 Grant 
  
 Effective upon the Sole License Event (defined below), subject to the terms
and conditions of this Agreement, PARI hereby grants (and agrees to further grant) 
  
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 ABARIS a sole license, under the PARI Licensed Intellectual Property, to make, use, import, export, offer
for sale and sell the Inhalers in the Field in the Territory. Except to the extent not permitted by the Third Party License Agreement, such sole license shall be sublicensable and shall include the right to have Inhalers made in the Field in the
Territory. PARI shall not grant such license to any third party. PARI and its Affiliates shall retain the right to make, have made, use, import, export, offer for sale and sell the Inhalers. Such sole license shall survive the termination of this
Agreement. Such sole license shall include a reasonable royalty obligation on ABARIS, subject to good faith negotiation between PARI and ABARIS. If, after the Sole License Event, PARI regains its ability to supply Inhalers to ABARIS, upon
PARI’s request, the Parties shall negotiate in good faith an arrangement in which PARI supplies Inhalers to ABARIS. 
  
 14.3.2 Sole License Event 
  
 The term, “Sole License Event” means the earlier of: (a) the occurrence of any of the events set forth in Section 14.1.1. above; or (b)
PARI’s [*] ordered by ABARIS despite [*] above after the expiration of [*] after [*].  
  

	14.4	Agreement with ABARIS’ Contractor 

  
 Upon ABARIS’ request following the occurrence of the Sole License Event, subject to the terms and conditions of this Agreement, PARI shall negotiate
in good faith a written agreement with a contractor designated by ABARIS (“Designee”). ABARIS shall have the right to participate in such negotiation. Such agreement shall include: (i) a grant of a sole license from PARI to the Designee,
under PARI’s rights under the Third Party License Agreement, to make, repair and develop the Inhalers in the Field in the Territory for delivery to ABARIS; and (ii) a provision which provides that such sole license to such Designee shall
survive the termination of such agreement. PARI shall not grant such license to any party other than the Designee. PARI and its Affiliates shall retain the right to make, repair and develop the Inhalers.  
  
 Article 15 – Vesting of Intellectual Property and Data In Owner

  

	15.1	Vesting of Intellectual Property and Data In Owner 

  
 Each Party hereby assigns to the other Party (and agrees to further assign to the other Party) any and all right, title and interest in the Intellectual
Property and/or Data in order to fully vest ownership of such Intellectual Property and/or Data in the appropriate owner where a transfer of ownership is required by Sections 2.21, [*] or 9.1 of this Agreement. The Parties shall each cooperate with
one another in the other Party’s efforts to perfect, protect and fully enjoy such Intellectual Property owned by such other Party pursuant to this Article, including, but limited to, executing assignment documents, inventor’s oaths,
declarations and affidavits. 
  
 *Confidential Treatment Requested 
  

					
	 	 	50	 	 

 Article 16 – Pursuit of Patent Protection 
  

	16.1	PARI Licensed Intellectual Property 

  
 During the term of this Agreement, PARI shall use commercially reasonable efforts to pursue patent protection for the PARI Licensed Intellectual Property,
which includes subject matter related to the Test Inhaler or the Inhaler at its own expense at least in the Patent Pursuit Countries, including, without limitation, undertaking the preparation, filing, prosecution and maintenance of patent
applications and patents and paying all prosecution costs, issue fees, maintenance fees and annuities in countries where the applications and patents are filed. PARI may select the legal counsel to represent it in these matters. PARI shall promptly
notify ABARIS in writing of the filing or issuance of any applications or patents within the PARI Licensed Intellectual Property, which includes subject matter related to the Test Inhaler or the Inhaler. 
  

	16.2	ABARIS’ Option to Prosecute the PARI Licensed Intellectual Property 

  
 PARI shall keep ABARIS reasonably informed regarding the preparation, filing and prosecution of all patent applications and
patents in the PARI Licensed Intellectual Property, which includes subject matter related to the Test Inhaler or the Inhaler. If PARI elects not to prepare, file, prosecute or maintain certain of such patent applications or patents within the PARI
Licensed Intellectual Property, which includes subject matter related to the Test Inhaler or the Inhaler, in one or more countries in the Territory not included in the Patent Pursuit Countries, PARI shall give ABARIS written notice thereof within a
reasonable period, not less than thirty (30) calendar days, prior to allowing such patent applications or patents to lapse or become abandoned or unenforceable, and ABARIS shall thereafter have the right, at ABARIS’ sole expense and discretion,
to prepare, file, prosecute, and maintain such patent applications or patents in the name of PARI in such countries. 
  

	16.3	ABARIS Intellectual Property 

  
 During the term of this Agreement, ABARIS shall use commercially reasonable efforts to pursue patent protection for the ABARIS Intellectual Property which
include subject matter related to the Novel Formulation at its own expense at least in the Patent Pursuit Countries, including, without limitation, undertaking the preparation, filing, prosecution and maintenance of patent applications and patents
and paying all prosecution costs, issue fees, maintenance fees and annuities in countries where the applications and patents are filed. ABARIS may select the legal counsel to represent it in these matters subject to PARI’s approval, which will
not be unreasonably withheld or delayed. ABARIS shall promptly notify PARI in writing of the filing or issuance of any applications or patents within the ABARIS Intellectual Property which include subject matter related to the Novel Formulation.

  

	16.4	Extension of Licensed Patent Term 

  
 Upon the reasonable request of either Party, the other Party shall execute and file: (a) any appropriate application to extend the term of: (i) any patent
within the PARI Licensed Intellectual Property, which includes subject matter related to the Test Inhaler or the Inhaler; or (ii) any patent within the ABARIS Intellectual Property which includes subject matter related to the Novel Formulation; and
(b) any other document related to such application for extension. 
  

 51 

 16.5 Patent Marking 
  
 16.5.1 Marking by ABARIS 
  
 PARI shall use reasonable commercial efforts to provide ABARIS with written
notice of the patent number and country of each of the patents in the PARI Licensed Intellectual Property which include subject matter related to the Test Inhaler or the Inhaler, when issued, by providing suitable written notice. ABARIS shall use
commercially reasonable efforts to place, in a conspicuous location on the Inhaler, Drug Product or its packaging distributed by ABARIS, its Affiliates or Sublicensees, a patent notice in accordance with and when required by the applicable laws of
the country in which such Inhaler or Drug Product is sold and in which there is a Valid Claim of a patent in the PARI Licensed Intellectual Property covering such Inhaler or use of the Inhaler with the Drug Product. 
  
 16.5.2 Marking by PARI 
  
 ABARIS shall use commercially reasonable efforts to provide PARI with
written notice of the patent number and country of each of the patents in the ABARIS Intellectual Property which include subject matter related to the Novel Formulation, when issued, by providing suitable written notice. PARI shall use commercially
reasonable efforts to place, in a conspicuous location on the Inhaler or its packaging distributed by PARI or its Affiliates, a patent notice in accordance with and when required by the applicable laws of the country in which such Inhaler is sold
and in which there is a Valid Claim of a patent in the ABARIS Intellectual Property covering the use of the Drug Product in the Inhaler. 
  
 Article 17 – Enforcement of Intellectual Property 
  
 17.1 Notice of Infringement 
  
 If, during the term of this Agreement, either Party becomes aware of any third party infringement, misappropriation, threatened infringement or suspected
infringement of any patent within the PARI Licensed Intellectual Property or the ABARIS Intellectual Property in the Territory in the Field, the Party having such knowledge shall promptly give written notice to the other Party thereof, with all
reasonably available details.  
  
 17.2
ABARIS’ Right to Prosecute Infringements – Drug Product 
  
 ABARIS, at ABARIS’ expense and discretion, shall have the first right, but not the obligation, to take action in its own name, in the name of its Affiliates and its Sublicensees, and in the name of PARI, if
necessary, to restrain any infringement, threatened infringement or suspected infringement in the Field of: (a) any of the ABARIS Intellectual Property, and (b) any of the PARI Licensed Intellectual Property which includes subject matter related to
the Test Inhaler or Inhaler, where such infringement is related to the use or sale of the Existing Formulation, the Novel Formulation or the Drug Product made using either such formulation. Each Party at the other’s expense, shall reasonably
cooperate with the requesting Party in any such action. PARI, at PARI’s option and expense, may actively 
  

 52 

 participate as a party in any such action brought by ABARIS. Prior to the initiation of any such action, the Parties
shall negotiate in good faith a written agreement regarding the allocation of any monetary recovery in connection with any such action or settlement. Any such recovery shall be distributed to the Parties in accordance with such agreement.

  

	17.3	PARI’s Right to Prosecute Infringements – Inhaler 

  
 PARI, at PARI’s expense and discretion, shall have the first right, but not the obligation, to take action in its own name, in the name of its
Affiliates and its Sublicensees, and in the name of ABARIS, if necessary, to restrain any infringement, threatened infringement or suspected infringement in the Field of: (a) any of the PARI Licensed Intellectual Property, and (b) any of the ABARIS
Intellectual Property (excluding any Intellectual Property licensed by ABARIS from Mayo), where such infringement is related to the use, sale or manufacture of the Inhaler. Each Party at the other’s expense, shall reasonably cooperate with the
requesting Party in any such action. ABARIS, at ABARIS’ option and expense, may actively participate as a party in any such action brought by PARI. Prior to the initiation of any such action, the Parties shall negotiate in good faith a written
agreement regarding the allocation of any monetary recovery in connection with any such action or settlement. Any such recovery shall be distributed to the Parties in accordance with such agreement. 
  

	17.4	ABARIS’ Option to Prosecute Infringements – Inhaler 

  
 If PARI does not file any such action to restrain any infringement, threatened infringement or suspected infringement described in Section 17.3 which
relates to the Inhaler, within nine (9) months after the latter to occur of (a) PARI becoming aware of such infringement, threatened infringement or suspected infringement, or (b) receipt of ABARIS’ written request to PARI to do so, then
ABARIS, at ABARIS’ expense, shall have the right, but not the obligation, to take action in its name, to restrain such infringement, threatened infringement or suspected infringement where such infringement relates to the sale or use of the
combination of the Inhaler and the Existing Formulation, the Novel Formulation or the Drug Product made using either such formulation. PARI, at ABARIS’ expense shall reasonably cooperate with ABARIS in such action. PARI, at PARI’s option
and expense, may actively participate as a party in such action. ABARIS shall have the sole and exclusive right to control prosecution of such action, and the right to settle and compromise such action or dispute without the consent of PARI. In the
event any monetary recovery in connection with such infringement action is obtained, such recovery shall be applied in the following priority: first, to reimburse ABARIS for its expenses incurred in prosecuting such action; second, if PARI
participates as a party in such action, to reimburse PARI for its expenses incurred in prosecution of such action not already reimbursed by ABARIS; third, to be shared by the proportion and up to the extent of any damages established in such action,
including, but not limited to, lost profits or royalties; and fourth, the balance, if any, to be retained by ABARIS. 
  

	17.5	PARI’s Option to Prosecute Infringements – Novel Formulation 

  

If ABARIS does not file any action to restrain any infringement, threatened infringement or suspected infringement described in Section 17.2 which
relates to the Novel Formulation, within nine (9) months after the latter to occur of (a) ABARIS becoming aware 
  

 53 

 of such infringement, threatened infringement or suspected infringement, or (b) receipt of PARI’s written request to
ABARIS to do so, then PARI, at PARI’s expense, shall have the right, but not the obligation, to take action in its name, to restrain such infringement, threatened infringement or suspected infringement. ABARIS, at PARI’s expense shall
reasonably cooperate with PARI in such action. ABARIS, at ABARIS’ option and expense, may actively participate as a party in such action. PARI shall have the sole and exclusive right to control prosecution of such action, and the right to
settle and compromise such action or dispute without the consent of ABARIS. In the event any monetary recovery in connection with such infringement action is obtained, such recovery shall be applied in the following priority: first, to reimburse
PARI for its expenses incurred in prosecuting such action; second, if ABARIS participates as a party in such action, to reimburse ABARIS for its expenses incurred in prosecution of such action not already reimbursed by PARI; third, to be shared by
the proportion and up to the extent of any damages established in such action, including, but not limited to, lost profits or royalties; and fourth, the balance, if any, to be retained by PARI. 
  
 Article 18 – Defense of Drug Product and Inhaler 
  

	18.1	Defense Against Third Party Action Against ABARIS – Drug Product 

  

If any patent infringement action is brought in a country in the Territory against ABARIS or Affiliates of ABARIS because of the actual or anticipated
manufacture, use or sale of the Existing Formulation, Novel Formulation or Drug Product made using either or such formulations, ABARIS or Affiliates of ABARIS shall have the obligation to promptly defend against, negotiate and otherwise settle such
infringement action. PARI shall, at ABARIS’ expense, cooperate with ABARIS and its Affiliates in all respects in the defense or settlement of such action and shall cause any of PARI’s employees and agents to give depositions and testify
when requested by ABARIS or its Affiliates and make available to ABARIS or its Affiliates copies of any and all relevant records, papers, documents, information and specimens, if necessary under an appropriate protective order. ABARIS shall have the
sole right to control the defense of such action, and the right to settle and compromise such action or dispute. ABARIS shall retain all recovery received pursuant to such action. 
  

	18.2	Defense Against Third Party Action Against PARI – Inhaler 

  
 If any patent infringement action is brought in a country in the Territory against PARI or Affiliates of PARI because of the actual or anticipated
manufacture, use or sale of the Inhaler, PARI or Affiliates of PARI shall have the obligation to promptly defend against, negotiate and otherwise settle such infringement action. ABARIS shall, at PARI’s expense, cooperate with PARI or its
Affiliates in all respects in the defense or settlement of such action and shall cause any of ABARIS’ employees and agents to give depositions and testify when requested by PARI, its Affiliates or Sublicensees and make available to PARI or its
Affiliates copies of any and all relevant records, papers, documents, information and specimens, if necessary under an appropriate protective order. PARI shall have the sole right to control the defense of such action, and the right to settle and
compromise such action or dispute. PARI shall retain all recovery received pursuant to such action. 
  

 54 

 Article 19 – Confidentiality 
  
 19.1 Nondisclosure 
  
 During the term of this Agreement, PARI and ABARIS may each provide their Confidential Information to one another. Each Party shall maintain the other
Party’s Confidential Information in strict confidence. 
  
 19.2 Exceptions for PARI’s Disclosure 
  
 PARI may disclose ABARIS’ Confidential Information to the extent that: 
  
 (a) such disclosure is necessary in order for the purposes: (i) expressly specified in this Agreement or reasonably contemplated for carrying out the
purposes of the Agreement; (ii) issuing a press release in accordance with Section 19.4 below; or (iii) disclosing certain terms of this Agreement in accordance with Section 19.5 below; 
  
 (b) such disclosure is required by applicable law or court order and provided that ABARIS has received written notice
reasonably in advance of the required disclosure; or 
  
 (c) PARI
received prior written consent from ABARIS to disclose a particular portion of the Confidential Information. 
  
 19.3 Exceptions for ABARIS’ Disclosure 
  
 ABARIS may disclose PARI’s Confidential Information to the extent that: 
  
 (a) such disclosure is necessary in order for the purposes: (i) expressly
specified in this Agreement or reasonably contemplated for carrying out the purposes of the Agreement; (ii) issuing a press release in accordance with Section 19.4 below; or (iii) disclosing certain terms of this Agreement in accordance with Section
19.5 below; 
  
 (b) such disclosure is required by applicable law
or court order and provided that PARI has received written notice reasonably in advance of the required disclosure; or 
  
 (c) ABARIS received prior written consent from PARI to disclose a particular portion of the Confidential Information. 
  
 19.4 Publicity – Press Releases 
  
 19.4.1 Press Release 
  
 From time to time during the term of this Agreement, each Party might desire
to issue a public announcement or press release concerning the existence of this Agreement or the Development Activities or results thereof. In no event shall any such announcement or release disclose any description of the novel, proprietary or
technical aspects of this Agreement, the Development Activities, the results thereof, or the functional design, elements or components of the Existing Formulation, Novel Formulation, Drug Product, Test Inhaler or Inhaler without the prior written
consent of the other Party. Each Party shall use commercially reasonable efforts to name the other Party in any such announcement or release where such Party’s best judgment indicates such mention is reasonable. 
  

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	19.5	Terms of Agreement 

  
 Neither Party shall disclose the terms of this Agreement to any third party, whether in writing or orally, without the prior written consent of the other
Party, except for terms or subject matter which has been the subject of public disclosure or has been mutually approved for such disclosure in writing by the Parties prior to such disclosure. Notwithstanding the foregoing, each Party shall have the
right to disclose the material terms of this Agreement in confidence to any bona fide potential or actual investor, investment banker, counsel, acquirer, merger target, and where reasonably practicable, shall obtain a binder of confidentiality
consistent with the terms of this Agreement. In addition, either Party may disclose the terms of this Agreement if, but only to the extent such disclosure is, on advice of legal counsel, required by applicable law. The disclosing Party shall use
commercially reasonable efforts to preserve the confidentiality of the terms of this Agreement notwithstanding any such disclosure required by law, and will give the other Party written notice of such required disclosure in advance thereof, to the
extent practicable. In the event either Party is required to file this Agreement with the Securities and Exchange Commission or any other regulatory agency, such Party shall apply for confidential treatment of this Agreement to the fullest extent
permitted by law, shall provide the other Party a copy of the confidential treatment request far enough in advance of its filing to give the other Party a meaningful opportunity to comment thereon, and shall incorporate in such confidential
treatment request any reasonable comments of the other Party. 
  

	19.6	Publicity – Use of Parties’ Names 

  
 Except as part of a press release or announcement pursuant to Section 19.4.1, neither Party shall use the name of the other Party or any of the other
Party’s affiliates, employees or subsidiaries, or reference any of the other Party’s products in any promotions, public statements or public disclosures without the prior written consent of an authorized representative of the other Party,
except where required by law. 
  

	19.7	Mayo – No Use of Name or Logo 

  
 Notwithstanding anything in this Agreement to the contrary, PARI and its Affiliates shall not use publicly for publicity, promotion, or otherwise, any
logo, name, trade name, service mark, or trademark of Mayo or its affiliates, including, but not limited to, the terms “Mayo®,” “Mayo Clinic®,” or any simulation, abbreviation, or adaptation of the same, or the name of any Mayo employee or agent. 
  

	19.8	Confidentiality Agreements 

  
 Each of ABARIS and PARI shall use commercially reasonable efforts to obtain, if not already in place, confidentiality agreements from its relevant
employees, agents, investigators, subcontractors and consultants to protect the Confidential Information as herein provided. 
  

 56 

	19.9	Return of Confidential Information 

  
 Within sixty (60) days after the termination of this Agreement or after the request of the providing Party during the term of this Agreement, whichever
comes first, the recipient Party shall return all tangible materials comprising Confidential Information of the providing Party and return or destroy any notes, copies, summaries or extracts of the providing Party’s Confidential Information,
provided that each Party shall be permitted to retain one copy of such embodiments of the other Party’s Confidential Information for archiving or legal purposes only. 
  
 Article 20 – Representations and Warranties 
  

	20.1	PARI Representations and Warranties 

  
 PARI represents, warrants and covenants that: 
  
 (a) PARI is a corporation duly organized, existing and in good standing under the laws of Germany, with full right, power and authority to enter into and
perform this Agreement; 
  
 (b) the execution, delivery and
performance of this Agreement does not conflict with, violate or breach any agreement to which PARI is a party, any court order to which PARI is a party or subject to or PARI’s certificate of incorporation or bylaws; 
  
 (c) this Agreement has been duly executed and delivered by PARI and is a
legal, valid and binding obligation enforceable against PARI in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws relating to or affecting creditors’ rights generally
and equitable principles; 
  
 (d) as of the Effective Date: (i)
PARI owns or controls the PARI Licensed Intellectual Property; (ii) PARI has the right to grant the licenses and rights set forth in this Agreement; (iii) no patents within the PARI Licensed Intellectual Property have been involved in any reissue,
reexamination, interference, opposition or equivalent or similar proceeding or in any litigation; (iv) to the best of PARI’s knowledge, any patents within the PARI Licensed Intellectual Property are valid and enforceable, and are not known to
be infringed by any third party in the Territory; and (v) PARI is unaware of any information that would adversely affect the validity or enforceability of any of the patent rights within the PARI Licensed Intellectual Property. [*]. 
  
 (e) to the best of PARI’s knowledge as of the Effective Date, the
development, manufacture, use, importation, exportation and sale of the Inhaler as specified by the Inhaler Development Plan and Inhaler Specifications, in the Territory will not infringe any patent or other intellectual property rights of any third
party; 
  
 (f) PARI has not knowingly withheld from ABARIS any
material information in PARI’s possession relating to the functionality, manufacture, safety or efficacy of the eFlow IMP Device, Test Inhaler or Inhaler or the use thereof with the Drug Product, and to the best knowledge of PARI, the
information relating to the functionality, manufacture, safety or efficacy of the eFlow IMP Device, Test Inhaler or Inhaler and the use thereof with the Drug Product provided to ABARIS does not contain any misstatement of a material fact nor omit to
state any material fact required to make such information not misleading; 
  
 *Confidential Treatment Requested 
  

					
	 	 	57	 	 

 (g) the execution and delivery by PARI of this Agreement and the performance by PARI of the obligations
under this Agreement require no regulatory approvals, other than approvals by FDA, EMEA or other similar agencies in the Territory, to be obtained on the part of PARI, or, if required, PARI has obtained such approvals; 
  
 (h) the eFlow IMP Device, Test Inhalers, Inhalers, Novel Formulation of the
Drug Products (if any) which PARI supplies to ABARIS hereunder shall, upon shipment to ABARIS, be free and clear of all security interests, liens and other encumbrances of any kind or character; 
  
 (i) under the terms of a written agreement, PARI has bound its employees and
agents assigned to perform tasks related to or involving the Development Activities to maintain in confidence the Confidential Information arising from or received as a result of such Development Activities; 
  
 (j) the definition of Third Party License Agreement in Section 1.92 is
accurate; and PARI has obtained the approval of Bespak required under the Third Party License Agreement in order to grant ABARIS the licenses herein without violating the Third Party License Agreement; and 
  
 (k) the licenses and rights granted by PARI in this Agreement and the
exercise thereof shall not violate, breach or conflict with the terms and conditions of the Third Party License Agreement or the rights of Bespak under the Third Party License Agreement. 
  

	20.2	ABARIS’ Representations and Warranties 

  
 ABARIS represents, warrants and covenants that: 
  
 (a) ABARIS is a corporation duly organized, existing and in good standing under the laws of the State of Delaware, with full right, power and authority to
enter into and perform this Agreement; 
  
 (b) the execution,
delivery and performance of this Agreement does not conflict with, violate or breach any agreement to which ABARIS is a party, any court order to which ABARIS is a party or subject to, or ABARIS’ certificate of incorporation or bylaws;

  
 (c) this Agreement has been duly executed and delivered by
ABARIS and is a binding obligation enforceable against ABARIS in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws relating to or affecting creditors’ rights generally
and equitable principles; 
  
 (d) ABARIS has not knowingly
withheld from PARI any material information in ABARIS’ possession relating to the functionality, manufacture, safety or efficacy of the Existing Formulation, Novel Formulation or Drug Product or its use with the Inhaler, and to the best
knowledge of ABARIS, the information relating to the functionality, manufacture, safety or efficacy of the Existing Formulation, Novel Formulation or Drug Product provided to PARI does not contain any misstatement of a material fact nor omit to
state any material fact required to make such information not misleading; 
  

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 (e) the execution and delivery by ABARIS of this Agreement and the performance by ABARIS of the
obligations under this Agreement require no regulatory approvals, other than approvals by FDA, EMEA or other similar agencies in the Territory, to be obtained on the part of ABARIS, or, if required, ABARIS has obtained such approvals; 
  
 (f) under the terms of a written agreement, ABARIS has bound its employees
and agents assigned to perform tasks related to or involving the Development Activities to maintain in confidence the Confidential Information arising from or received as a result of such Development Activities; 
  
 (g) to the best of ABARIS’ knowledge, the development, manufacture, use,
importation, exportation and sale of the Drug Product by ABARIS as contemplated as of the Effective Date in the Territory will not infringe any patent or other Intellectual Property rights of any third party; 
  
 (h) subject to the Mayo Rights, ABARIS has the right to grant to PARI the
licenses and rights set forth in this Agreement; subject to the Mayo Rights, no patent owned by ABARIS and part of the ABARIS Intellectual Property has been involved in any reissue, reexamination, interference, opposition or equivalent or similar
proceeding or in any litigation; subject to the Mayo Rights, to the best of ABARIS’ knowledge, any issued patents licensed from Mayo and any ABARIS patents relating to the Existing Formulation or Novel Formulation are valid and enforceable, and
are not known to be infringed by any third party in the Territory; and subject to the Mayo Rights, ABARIS is unaware of any information that would adversely affect the validity or enforceability of any of the foregoing; and 
  
 (i) to the best of ABARIS’ knowledge, PARI’s activities hereunder,
including, without limitation, such activities that are contemplated by the Test Inhaler Development Plan, the Inhaler Development Plan, and the Novel Formulation Development Plan do not infringe any of Mayo’s Rights. 
  
 Article 21 – Indemnification 
  

	21.1	Indemnification of ABARIS 

  
 PARI shall at all times during and after the term of this Agreement be responsible for, and shall defend, indemnify and hold ABARIS, its Affiliates,
Sublicensees, directors, officers, employees, agents and representatives harmless from and against any and all losses, claims, lawsuits, proceedings, expenses, recoveries and damages, including reasonable legal expenses, costs and attorneys fees,
arising out of: (i) any product liability or lawsuit by a third party directly arising from the design, manufacture or function of the Test Inhaler or Inhaler; (ii) any claim of infringement of any patent rights, trade secrets rights or other
intellectual property rights of a third party arising from the design or function of the Test Inhaler or Inhaler; (iii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a third party
arising from the combination of the Test Inhaler or Inhaler and Drug Product (made using the Existing Formulation or Novel Formulation) wherein such infringement arises proximately from the design, manufacture or 
  

 59 

 function of the Test Inhaler or Inhaler or from announcements or statements made by PARI regarding patent rights in the
Test Inhaler or Inhaler; (iv) any material breach of any representation or warranty given in this Agreement by PARI; and (v) any negligent conduct or willful misconduct by PARI in performing the Development Activities under this Agreement, or any
negligent conduct or willful misconduct otherwise in performance under this Agreement; provided however, that (a) ABARIS gives PARI prompt notice of any such claim or lawsuit; (b) PARI has the right to compromise, settle or defend such claim or
lawsuit; and (c) ABARIS, at the expense of PARI, cooperates with PARI in the defense of such claim or lawsuit. ABARIS, at its expense, may participate in the defense of any such claim or lawsuit.  
  

	21.2	Indemnification of PARI 

  
 ABARIS shall at all times during and after the term of this Agreement be responsible for, and shall defend, indemnify and hold PARI, its Affiliates,
sublicensees, directors, officers, employees, agents and representatives harmless from and against any and all losses, claims, lawsuits, proceedings, expenses, recoveries and damages, including reasonable legal expenses, costs and attorneys fees,
arising out of: (i) any product liability claim or lawsuit by a third party directly arising from the design, manufacture or function of the Drug Products (made using the Existing Formulation or Novel Formulation) made, used, sold or distributed by
ABARIS, its Affiliates or Sublicensees; (ii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a third party arising from such Drug Product, or combination of such Drug Product and the Test
Inhaler or Inhaler, wherein the infringement arises proximately from such Drug Product or from announcements or statements made by ABARIS regarding patent rights in the Drug Product; (iii) any material breach of any representation or warranty given
in this Agreement by ABARIS; (iv) any negligent conduct or willful misconduct by ABARIS in performance under this Agreement; and (v) any claim for personal injury or property damage arising from the negligent or willful misconduct of ABARIS’
employees or agents during any visit to PARI’s or its subcontractor’s facilities; provided however, that: (a) PARI gives ABARIS prompt notice of any such claim or lawsuit; (b) ABARIS has the right to compromise, settle or defend such claim
or lawsuit; and (c) PARI, at the expense of ABARIS, cooperates with ABARIS in the defense of such claim or lawsuit. PARI, at its expense, may participate in the defense of any such claim or lawsuit. 
  
 Article 22 – Insurance 
  

	22.1	Insurance 

  
 Each Party or its Affiliates, shall maintain appropriate product liability insurance with respect to any clinical trials, manufacturing, development,
sales, marketing, distribution and promotion activities performed by it hereunder, in each case in the amount of Five Million U.S. Dollars (US $5,000,000) per occurrence and in total. Each Party shall maintain such insurance until the Inhaler and
Drug Product are no longer sold (or, in the case of clinical trial insurance, for a reasonable period of time following completion of clinical trials). After the Inhaler and Drug Product are no longer sold, each Party shall obtain tail end product
liability coverage for a five-year term in such amounts and subject to such deductibles as the Parties may mutually agree based upon standards prevailing in the industry at the time. Each Party shall name the other Party as an additional insured on
any policy required by 
  

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 this Section, and shall deliver certificates of insurance to the other Party to document compliance with this Section.
The Parties may, in their sole discretion, obtain insurance in countries other than the United States. Prior to commercialization of the Drug Product, the Parties shall negotiate in good faith the appropriate amount of insurance for such
commercialization. 
  
 Article 23 – Limitation of
Damages 
  
 23.1 FOR THE PERIOD OF TIME FROM THE EFFECTIVE DATE THROUGH THE
BEGINNING OF THE PROGRAM A ROYALTY PERIOD OR THE PROGRAM B ROYALTY PERIOD, WHICHEVER COMES FIRST, EACH PARTY’S CUMULATIVE LIABILITY FOR ANY ACTUAL LOSS OR ACTUAL DAMAGES RESULTING FROM ANY CLAIMS, DEMANDS OR ACTIONS ARISING OUT OF OR RELATING
TO THIS AGREEMENT SHALL NOT EXCEED THE SUM OF [*]. THE LIMITATION OF THIS SECTION 23.1 SHALL NOT APPLY, HOWEVER, TO: (A) PARI’S INDEMNIFICATION OBLIGATIONS ARISING FROM THIRD PARTY CLAIMS UNDER SECTION 21.1(I), 21.1(II) OR 21.1(III) ABOVE; AND
(B) ABARIS’ INDEMNIFICATION OBLIGATIONS ARISING FROM THIRD PARTY CLAIMS UNDER SECTION 21.2(I) OR 21.2(II) ABOVE. PRIOR TO THE EXPIRATION OF SUCH PERIOD OF TIME, THE PARTIES SHALL NEGOTIATE IN GOOD FAITH ANY DIFFERENT LIMITATION TO TAKE EFFECT
AFTER SUCH PERIOD OF TIME. 
  
 23.2 IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS LIMITATION WILL APPLY EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED WARRANTY PROVIDED HEREIN. THE LIMITATION OF THIS SECTION 23.2 SHALL NOT APPLY, HOWEVER, TO A PARTY’S INDEMNIFICATION OBLIGATIONS FOR THIRD PARTY
CLAIMS PURSUANT TO SECTION 21 OF THIS AGREEMENT.  
  
 Article 24 – Dispute Resolution 
  
 24.1 Negotiation 
  
 PARI and ABARIS shall
endeavor to resolve any claim or controversy arising out of or relating to this Agreement or arising from the threatened breach, breach, termination or validity of this Agreement informally by good faith negotiation between the senior executives,
officers or management of PARI and ABARIS. Either Party may give the other Party written notice of any claim or controversy not resolved in the normal course of business (the “Disputing Party Notice”). Within thirty (30) calendar days
after the delivery of the Disputing Party Notice, the receiving Party shall submit to the other Party a written response (the “Response”). The Disputing Party Notice and Response shall include a statement of each Party’s position and
a summary of the arguments supporting that position. Within sixty (60) days after the Disputing Party Notice, such designated senior executives, officers or management of PARI and ABARIS shall meet at a mutually acceptable time and place and
thereafter as often as they reasonably deem necessary to attempt to resolve the claim or controversy. All negotiations pursuant to this Section are confidential and without prejudice and shall be treated as compromise and settlement negotiations for
purposes of applicable rules of evidence. 
  
 *Confidential Treatment Requested 
  

					
	 	 	61	 	 

 24.2 Mediation 
  
 If the claim or controversy has not been resolved by negotiation pursuant to Section 24.1 of this Agreement within ninety
(90) days of the Disputing Party Notice, or if the Parties fail to meet within the time periods specified in Section 24.1 of this Agreement, the Parties shall endeavor to settle the dispute by mediation under the then current Model Mediation
Procedure for Business Disputes of the Center for Public Resources (“CPR”). Unless otherwise agreed, the Parties shall select a mediator from the CPR panel of neutrals and shall notify CPR to initiate the selection process. Either Party
may initiate this procedure ninety (90) days after the Disputing Party Notice whether or not the Parties have met. 
  
 24.3 Injunctive Relief 
  
 Notwithstanding the foregoing, each Party shall have the right to immediately apply to a court of competent jurisdiction to seek temporary, or permanent
injunctive relief to restrain any conduct or any threatened conduct in violation of or otherwise with respect to such Party’s Intellectual Property or Confidential Information of this Agreement, or that could threaten either Party’s rights
in or to, or protect or enforce, any of the Parties’ intellectual property.  
  
 Article 25 – Term and Termination 
  
 25.1 Term 
  
 The term of
this Agreement is effective as of the Effective Date as first written above, and except as otherwise provided in this Article 25, shall terminate upon the expiration of the Program A Royalty Period or the Program B Royalty Period, whichever expires
last. 
  
 25.2 Each Party’s Right to
Terminate for Breach 
  
 If either Party shall be in default
of, or fail to comply with any material obligation or condition of this Agreement, the non-defaulting Party may terminate this Agreement by giving sixty (60) days’ notice to the defaulting Party, specifying in reasonable detail the basis for
termination. If within sixty (60) days after the receipt of such notice, the Party who received such notice remedies the condition forming the basis for termination, such notice shall cease to be operative, and this Agreement shall continue in full
force and effect. If sixty (60) days after the receipt of such notice, the Party who received such notice fails to remedy the condition forming the basis for termination, this Agreement shall be terminated. 
  
 25.3 ABARIS’ Rights to Terminate Program A
Obligations 
  
 25.3.1 With Cause –
PARI’s Delay of Test Inhaler Delivery 
  
 In the event
that ABARIS does not elect to delay the Phase II Clinical Study under Section 2.9.1, ABARIS may terminate the Program A Obligations by providing written notice of such termination to PARI. 
  

 62 

 25.3.2 With Cause – Results 
  

	 	(a)	Events 

  
 Subject to Sections 25.3.2(a) through 25.3.2(d) below, ABARIS may terminate the Program A Obligations of this Agreement with cause in the event that:

  
 (i) ABARIS receives a toxicity profile for the Drug Product
made using the Existing Formulation derived from a Phase II Clinical Study or Phase III Clinical Study which would require ABARIS to terminate further pre-clinical or clinical studies in order to avoid: (w) violating a reasonable standard of patient
care; (x) endangering or potentially endangering patients; (y) a diminished commercial potential for such Drug Product which renders such Drug Product not commercially viable; or (z) a restrictive regulatory labeling for such Drug Product;

  
 (ii) ABARIS receives an efficacy profile for the Drug Product
made using the Existing Formulation derived from a Phase II Clinical Study or Phase III Clinical Study which, in accordance with ABARIS’ reasonable business judgment, removes the commercial merit from any further testing or development of such
Drug Product; 
  
 (iii) the Development Activities reveal
significant technical difficulties relating to the Existing Formulation or the Drug Product made using the Existing Formulation which are not contemplated or expected by ABARIS as of the Effective Date; 
  
 (iv) the development of the Test Inhaler or Inhaler has significant delays
beyond that which is contemplated or expected in the Inhaler Development Plan; 
  
 (v) the Test Inhaler is unable to substantially meet the Inhaler Specifications or the Inhaler is unable to substantially meet the Inhaler Specifications, or the Test Inhaler or Inhaler is otherwise incompatible with
the Existing Formulation or the Drug Product made using the Existing Formulation; 
  
 (vi) ABARIS receives a negative review or negative comments from the FDA, EMEA or another regulatory body which indicates that ABARIS will not likely be able to obtain regulatory approval of an NDA or European Dossier
for the Drug Product made using the Existing Formulation; or 
  
 (vii) the cost to develop the Drug Product made using the Existing Formulation exceeds what ABARIS deems to be commercially reasonable for the development of a drug product in the Field. 
  
 (b) Termination Notice 
  
 Upon the occurrence of any of the events set forth in Section 25.3.2(a)
above, ABARIS may notify PARI in writing of such occurrence (“Program A Termination Notice”). Within thirty (30) calendar days after PARI’s receipt of the Program A Termination Notice, PARI shall submit to ABARIS a written response
(“Program A Termination Response”). The Program A Termination Notice and the Program Termination Response shall each include a statement regarding the situation at issue, each Party’s position and any proposed solutions. 

 

 63 

	 	(c)	Agreement That Cause Exists 

  
 If the Parties agree that one or more of the events outlined in the Program A Termination Notice qualify for termination of the Program A Obligations
under this Section 25.3.2, within sixty (60) days after the Program A Termination Notice, the designated senior executives, officers or management of PARI and ABARIS shall meet at a mutually acceptable time and place and thereafter as often as they
reasonably deem necessary to attempt to resolve the situation at issue. In the event that, within ninety (90) days after the Program A Termination Notice, ABARIS and PARI do not agree in writing to continue the Program A Obligations with their
original terms or amended terms, this Agreement shall terminate, subject to ABARIS paying the wind-down costs pursuant to Section 25.3.4 below. In the event the Parties do agree in writing to continue the Program A Obligations with their original
terms or amended terms, the Program A Obligations shall continue in full force and effect, in accordance with any amendment thereto. 
  

	 	(d)	Disagreement That Cause Exists 

  
 In the event the Parties disagree that the events outlined in the Program A Termination Notice provide for termination of the Program A Obligations
pursuant to Section 25.3.2(a) above, the Parties shall retain the services of one or more mutually acceptable independent consultants, having sufficient technical, scientific, statistical, regulatory and/or business expertise, to provide a written
opinion as to the accuracy or inaccuracy of the Parties conclusions. If the opinion states that the conditions in Section 25.3.2(a) exists, the Parties shall meet at a mutually acceptable time and place and thereafter as often as they reasonably
deem necessary to attempt to resolve the situation at issue. In the event that, within ninety (90) days after such opinion, ABARIS and PARI do not agree in writing to continue the Program A Obligations with their original terms or amended terms, the
Program A Obligations shall terminate, subject to ABARIS paying the wind-down costs in Section 25.3.4. If the opinion states that the conditions in Section 25.3.2(a) do not exist, ABARIS may, at its option, terminate the Program A Obligations in
accordance with Section 25.3.3 (not this Section 25.3.2), otherwise the Program A Obligations shall remain in full force and effect.  
  
 25.3.3 Without Cause 
  
 ABARIS may terminate the Program A Obligations for any reason whatsoever pursuant to this Section 25.3.3. Termination of the Program A Obligations under
this Section 25.3.3 shall be effective upon ABARIS providing at least thirty (30) calendar days’ prior written notice to PARI and ABARIS paying PARI an amount of [*]. 
  
 25.3.4 Wind-Down Costs 
  
 Within ninety (90) days of any Program A Termination Notice under Section 25.3.2 or any termination notice under Section
25.3.3, PARI may notify ABARIS in writing of the reasonable wind-down cost PARI expects to incur as a result of any termination described in such Program A Termination Notice, including reasonable fees owed to third party subcontractors. In the
event the Program A Obligations are terminated pursuant to Section 25.3.2 or 25.3.3, subject to the terms and conditions of this Agreement, ABARIS shall pay PARI such reasonable wind-down cost within thirty (30) calendar days after such termination.
In the event PARI fails to notify ABARIS of the reasonable wind-down cost under this Section 25.3.4, ABARIS shall not be liable to PARI for such wind-down cost. 
  

					
	 	 	64	 	*Confidential Treatment Requested

 25.4 ABARIS’ Rights to Terminate Program B Obligations 
  
 25.4.1 Decision After Feasibility Assessment

  
 In the event that ABARIS notified PARI of ABARIS’
decision not to proceed with the Novel Formulation Development Activities in accordance with Section 3.4 of this Agreement, ABARIS shall have the right to terminate the Program B Obligations by providing written notice of such termination to PARI.

  
 25.4.2 With Cause – Results

  
 (a) Events 
  
 If ABARIS terminates the Program A Obligations of this Agreement with cause
pursuant to Section 25.3.2(i), 25.3.2(a)(ii), 25.3.2(a)(vi), or 25.3.2(a)(vii), such termination, at ABARIS’ option, shall be deemed a termination of the Program B Obligations of this Agreement with cause under this Section 25.4.2.
Additionally, subject to Sections 25.4.2(a) through 25.4.2(d) below, ABARIS may terminate the Program B Obligations of this Agreement with cause in the event that: 
  
 (i) ABARIS receives a toxicity profile for the Drug Product made using the Novel Formulation derived from a pre-clinical
study, Phase I Clinical Study, Phase II Clinical Study or Phase III Clinical Study which would require ABARIS to terminate further pre-clinical or clinical studies in order to avoid: (w) violating a reasonable standard of patient care; (x)
endangering or potentially endangering patients; (y) a diminished commercial potential for such Drug Product which renders such Drug Product not commercially viable; or (z) a restrictive regulatory labeling for such Drug Product; 
  
 (ii) ABARIS receives an efficacy profile for the Drug Product made using the
Novel Formulation derived from a pre-clinical study, Phase I Clinical Study, Phase II Clinical Study or Phase III Clinical Study which, in accordance with ABARIS’ reasonable business judgment, removes the commercial merit from any further
testing or development of such Drug Product; 
  
 (iii) the
Development Activities reveal significant technical difficulties relating to the Novel Formulation or the Drug Product made using the Novel Formulation which are not contemplated or expected by ABARIS as of the Effective Date; 
  
 (iv) the development of the Test Inhaler or Inhaler has significant delays
beyond that which is contemplated or expected in the Inhaler Development Plan; 
  
 (v) the Test Inhaler is unable to substantially meet the Inhaler Specifications or the Inhaler is unable to substantially meet the Inhaler Specifications, or the Test Inhaler or Inhaler is otherwise incompatible with
the Novel Formulation or the Drug Product made using the Novel Formulation; 
  

 65 

 (vi) ABARIS receives a negative review or negative comments from the FDA, EMEA or another regulatory body
which indicates that ABARIS will not likely be able to obtain regulatory approval of an NDA or European Dossier for the Drug Product made using the Novel Formulation; or 
  
 (vii) the cost to develop the Drug Product made using the Novel Formulation exceeds what ABARIS deems to be commercially
reasonable for the development of a drug product in the Field.  
  
 (b) Termination Notice 
  
 Upon the occurrence of
any of the events set forth in Section 25.4.2(a) above, ABARIS may notify PARI in writing of such occurrence (“Program B Termination Notice”). Within thirty (30) calendar days after PARI’s receipt of the Program B Termination Notice,
PARI shall submit to ABARIS a written response (“Program B Termination Response”). The Program B Termination Notice and the Program Termination Response shall each include a statement regarding the situation at issue, each Party’s
position and any proposed solutions. 
  
 (c) Agreement That
Cause Exists 
  
 If the Parties agree that one or more of the
events outlined in the Program B Termination Notice qualify for termination of the Program B Obligations under this Section 25.4.2, within sixty (60) days after the Program B Termination Notice, the designated senior executives, officers or
management of PARI and ABARIS shall meet at a mutually acceptable time and place and thereafter as often as they reasonably deem necessary to attempt to resolve the situation at issue. In the event that, within ninety (90) days after the Program B
Termination Notice, ABARIS and PARI do not agree in writing to continue the Program B Obligations with their original terms or amended terms, this Agreement shall terminate, subject to ABARIS paying the wind-down costs pursuant to Section 25.4.4
below. In the event the Parties do agree in writing to continue the Program B Obligations with their original terms or amended terms, the Program B Obligations shall continue in full force and effect, in accordance with any amendment thereto.

  
 (d) Disagreement That Cause Exists 
  
 In the event the Parties disagree that the events outlined in the Program B
Termination Notice provide for termination of the Program B Obligations pursuant to Section 25.4.2(a) above, the Parties shall retain the services of one or more mutually acceptable independent consultants, having sufficient technical, scientific,
statistical, regulatory and/or business expertise, to provide a written opinion as to the accuracy or inaccuracy of the Parties conclusions. If the opinion states that the conditions in Section 25.4.2(a) exists, the Parties shall meet at a mutually
acceptable time and place and thereafter as often as they reasonably deem necessary to attempt to resolve the situation at issue. In the event that, within ninety (90) days after such opinion, ABARIS and PARI do not agree in writing to continue the
Program B Obligations with their original terms or amended terms, the Program B Obligations shall terminate, subject to ABARIS paying the wind-down costs in Section 25.4.4. If the opinion states that the conditions in Section 25.4.2(a) do not exist,
ABARIS may, at its option, terminate the Program B Obligations in accordance with Section 
  

 66 

 25.4.3 (not this Section 25.4.2), otherwise the Program B Obligations shall remain in full force and effect. 

  
 25.4.3 Without Cause 
  
 ABARIS may terminate the Program B Obligations for any reason whatsoever
pursuant to this Section 25.4.3. Termination of the Program B Obligations under this Section 25.4.3 shall be effective upon ABARIS providing at least thirty (30) calendar days’ prior written notice to PARI and ABARIS paying PARI an amount of
[*]. 
  
 25.4.4 Wind-Down Costs

  
 Within ninety (90) days of any Program B Termination Notice
under Section 25.4.2 or any termination notice under Section 25.4.3, PARI may notify ABARIS in writing of the reasonable wind-down cost PARI expects to incur as a result of any termination described in such Program B Termination Notice, including
reasonable fees owed to third party subcontractors. In the event the Program B Obligations are terminated pursuant to Section 25.4.2 or 25.4.3, subject to the terms and conditions of this Agreement, ABARIS shall pay PARI such reasonable wind-down
cost within thirty (30) calendar days after such termination. In the event PARI fails to notify ABARIS of the reasonable wind-down cost under this Section 25.4.4, ABARIS shall not be liable to PARI for such wind-down cost. 
  
 25.5 Termination of Program A Obligations and Program B
Obligations 
  
 In the event that the Program A Obligations
and the Program B Obligations are both terminated under this Article 25, this Agreement shall automatically terminate.  
  
 25.6 Effect of Termination on Licenses 
  

25.6.1 Survival of Termination of Program A or Program B Obligations 
  
 The licenses granted in this Agreement shall remain in effect until this
Agreement is terminated under this Article 25. For clarity, in the event that the Program A Obligations or the Program B Obligations are terminated under this Article 25 and this Agreement remains in effect, all of the licenses granted in this
Agreement shall remain in effect. 
  
 25.6.2
Termination of Licenses 
  
 Subject to Section 25.6.3
below, unless expressly provided in this Agreement otherwise, all of the licenses granted in this Agreement shall terminate upon the termination of this Agreement. 
  
 25.6.3 Paid-Up License to Know-How 
  
 Notwithstanding anything in this Agreement to the contrary, in the event this Agreement remains in effect for the duration
of the entire Program A Royalty Period or Program B Royalty Period, the licenses granted from PARI to ABARIS hereunder shall be fully paid-up nonexclusive irrevocable licenses under the Know-How of PARI and the PARI Data, all subject to the terms
and conditions of this Agreement. 
  
 *Confidential Treatment Requested 
  

					
	 	 	67	 	 

 25.7 Survival 
  
 The following shall survive the expiration or termination of this Agreement: the rights and obligations provided in Article
1, Section 2.22, Section 2.24, Section 3.14, Section 3.15.1, Section 3.16, Section 6.1, Section 9.1, Section 9.4.1, Section 9.4.2, Sections 10.1 through 10.3, Section 12.4.1, Section 12.4.2, Section 12.5, Articles 14 and 15 of this Agreement,
Articles 19, 20 and 21 of this Agreement, the tail-end insurance obligation under Article 22 of this Agreement, the rights and obligations under Articles 23, and 24 of this Agreement, Section 25.3.3, Section 25.3.4, Section 25.4.3, Section 25.4.4,
Section 25.6.3, and Article 26 of this Agreement. 
  
 25.8 Rights in Bankruptcy – United States 
  
 All licenses granted under this Agreement by each Party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, licenses of a right to “intellectual property” as defined under
Section 101 of the United States Bankruptcy Code. Each Party, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the United States Bankruptcy Code in the event of the
commencement of a bankruptcy proceeding by or against the licensor Party under the United States Bankruptcy Code including, but not limited to, the right to treat this Agreement or any agreement supplementary to this Agreement as terminated or to
retain its rights under this Agreement or any Agreement supplementary to this Agreement. In the event that the licensee Party elects to retain its rights under this Agreement or any agreement supplementary to this Agreement, the licensor Party shall
provide to the licensee Party, within seven (7) calendar days of written notice by the licensee Party to the licensor Party in accordance with Section 26.2 of this Agreement, all intellectual property and all embodiments of such intellectual
property within the possession or control of the licensor Party. 
  
 Article 26 – Miscellaneous 
  
 26.1 Entire Agreement 
  
 This Agreement, which
includes the Exhibits attached hereto, contains the entire agreement between PARI and ABARIS with respect to the transactions contemplated by this Agreement and supersedes all prior arrangements or understandings with respect thereto. 
  

 68 

 26.2 Notices 
  
 All notices or other communications that are required or permitted under this Agreement shall be in writing and shall be
sent by Federal Express or other reliable overnight courier, or hand delivered or mailed by registered or certified mail, postage prepaid and return receipt requested, to the appropriate party addressed as follows: 
  

							
	If to ABARIS:	 	 ABARIS Pharma, Inc.
 2025 1st Avenue
 Suite 800
 Seattle, Washington 98121
 Fax: 206-728-5095
 Attn: A. Bruce Montgomery, MD
 Title: CEO
	 	 with
 a
 copy to:
	 	 Bell, Boyd & Lloyd LLC
 70 West Madison
Street
 Chicago, Illinois 60602 U.S.A.
 Fax:
312-372-2098
 Attn: Adam H. Masia, Esq.

				
	 If to
 PARI:
	 	 PARI GmbH
 Moosstrasse 3, D-82319
 Starnberg, Germany
 Fax: 011 +49 (89) 742 846-50
 Attn: Dr. Martin Knoch
 Title: Managing Director
	 	 with
 a
 copy to:
	 	 Reed Smith LLP
 901 East Byrd Street
 Suite 1700
 Richmond, Virginia 23219
 Fax: 804-344-3410
 Attn: Pamela C. Gavin, Esq.

  
 Any Party may by such notice change
the address to which notice or other communications to it are to be delivered or mailed. 
  
 26.3 Choice of Law 
  
 The rights and obligations of ABARIS and PARI under this Agreement shall not be governed by the provisions of the 1980 U.N. Convention on Contracts
for the International Sale of Goods or the United Nations Convention on the Limitation Period in the International Sale of Goods, as amended; rather, such rights and obligations shall be governed by and construed in accordance with the Uniform
Commercial Code and other applicable laws of the State of Delaware, excluding its conflict-of-law rules. This provision shall not preclude application of the United States Arbitration Act. 
  
 26.4 Assignability 
  
 This Agreement shall not be assignable other than by operation of law by
either Party without the prior written consent of the other Party, and any purported assignment by either Party without the prior written consent of the other Party shall be void, except that either Party may assign its rights under this Agreement
to any other corporation or other entity that succeeds to all or substantially all of that portion of its business to which this Agreement relates pursuant to any reorganization or sale or disposition of substantially all of its assets related to
that portion of its business, provided that the assignee agrees to assume the assignor’s obligations hereunder, in which case the assignor shall have no further rights or obligations under this Agreement. Nothing in this Agreement or such
assignment shall eliminate such assignor’s obligations under this Agreement which arise prior to the time of such assignment. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors
and permitted assigns. 
  
 26.5 Waivers and
Amendments 
  
 Any waiver of any term or condition of this
Agreement, or any amendment or supplementation of this Agreement, shall be effective only if in writing signed by the Parties. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect,
limit or waive a Party’s rights hereunder at any time to enforce strict compliance thereafter with every term or condition of this Agreement. 
  

 69 

 26.6 Severability 
  
 In the event that any provision contained in this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and the remaining provisions of this Agreement shall not, at the election of the Party for whose benefit the provision exists, be in
any way impaired. 
  
 26.7 Article and Section
Headings 
  
 The article and section headings contained in
this Agreement are for the purpose of convenience and are not intended to define or limit the contents of such sections. 
  
 26.8 Counterparts 
  
 This Agreement may be signed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and
the same instrument. 
  
 26.9 Further
Assurances 
  
 Upon the reasonable request of either Party,
the other Party shall execute any additional certificates or other documents that may be reasonably necessary to fully implement this Agreement. 
  
 26.10 Force Majeure 
  
 Except pursuant to existing laws, regulations and orders, no failure or omission by either Party in the performance of any obligation of this Agreement
shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the Parties including, but not limited to the following which, for the purposes of this Agreement, shall be
regarded as beyond the control of the Party in question: (a) any act or omission of any government; (b) any future rule, regulation or order issued by any governmental authority or by any officer, department, agency, or instrumentality thereof which
makes such performance impossible or commercially unreasonable; or (c) any Act of God; fire; storm; flood; earthquake; accident; war; terrorism; rebellion; insurrection; riot; invasion; strike; and lockout (such cause or causes collectively,
“Force Majeure”). 
  
 26.11
Compliance of Law 
  
 In conducting any activity under
this Agreement or in connection with the development, manufacture, use or sale of the Drug Product, Inhaler and Novel Formulation, PARI and ABARIS shall comply with all applicable laws and regulations including, but not limited to, all import and
export regulations of the applicable authorities in the Territory. 
  

 70 

 26.12 Relationship of the Parties 
  
 The relationship of the Parties under this Agreement is that of independent
contractors. Neither Party shall be deemed to be the agent of the other, nor shall the Parties be deemed to be partners or joint venturers. Neither Party hereto shall have any express or implied right or authority to assume or create any obligations
on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement or undertaking. 
  
 26.13 Choice of Language 
  
 This Agreement, originally written in the English language, shall be governed by the English language. In the event any dispute arises with respect to
this Agreement, the meanings of all terms and provisions of this Agreement shall be interpreted in their original English form. The governing language of all correspondence related to reporting, negotiation, disputes, arbitration and notice
requirements shall be the English language. The Parties shall bear their own expenses for having text or other communications translated into the English language. 
  
 26.14 Choice of Currency 
  
 The form of currency used for all purposes of this Agreement shall be the United States dollar. 
  
 26.15 Recordation of Licenses 
  
 At the request of ABARIS, PARI shall cooperate with ABARIS in its efforts to
record its licenses to patents hereunder, including, but not limited to, executing a license recordation form, from time to time, for United States patents similar to that set forth in the attached License Recordation Form and signing documents
necessary for ABARIS to record its licenses to patents hereunder in countries other than the United States. 
  
 IN WITNESS WHEREOF, the Parties hereby have executed this Agreement, as of the date first above written. 
  

							
	 ABARIS:
	 	PARI:
		
	ABARIS PHARMA, INC.	 	PARI GMBH
				
	 Print Name:
	 	 A. Bruce Montgomery
	 	 Print Name:
	 	 Martin Knoch

				
	 Signature:
	 	 /s/ A. Bruce Montgomery

	 	 Signature:
	 	 /s/ Martin Knoch

				
	 Title:
	 	 CEO
	 	 Title:
	 	 Managing Director

  

 71 

 EXHIBIT A 
  
 INHALER DEVELOPMENT PLAN 
  
 [*] 
  

					
	 	 	72	 	*Confidential Treatment Requested

 EXHIBIT B 
  
 Inhaler Product Requirements 
  

[*] 
  

					
	 	 	73	 	*Confidential Treatment Requested

 EXHIBIT C 
  
 PROJECT TEAM MEMBERSHIP AND LIAISON LIST 
  

			
	 Members

	 	 Liaisons

	 [*]        
	 	 

  

					
	 	 	74	 	*Confidential Treatment Requested

 EXHIBIT D 
  
 LICENSE RECORDATION FORM 
  
 [*] 
  

					
	 	 	75	 	*Confidential Treatment Requested

 EXHIBIT E 
  
 NOVEL FORMULATION DEVELOPMENT PLAN 
  
 [*] 
  

					
	 	 	76	 	*Confidential Treatment Requested

 EXHIBIT F 
  
 NOVEL FORMULATION REQUIREMENTS 
  
 [*] 
  

					
	 	 	77	 	*Confidential Treatment Requested

 EXHIBIT G 
  
 PATENT PURSUIT COUNTRIES AND REGULATORY PURSUIT COUNTRIES 
  
 [*] 
  

					
	 	 	78	 	*Confidential Treatment Requested

 EXHIBIT H 
  
 PROGRAM A SUPPLY TERMS 
  
 [*] 
  

					
	 	 	79	 	*Confidential Treatment Requested

 EXHIBIT I 
  
 PROGRAM B SUPPLY TERMS 
  
 [*] 
  

					
	 	 	80	 	*Confidential Treatment Requested

 EXHIBIT J 
  
 TEST INHALER DEVELOPMENT PLAN 
  

[*] 
  

					
	 	 	81	 	*Confidential Treatment RequestedDevelopment Agreement dated February 20, 2002

 Exhibit 10.17 
  

			
	 	 	 *  Certain confidential information contained in this document, marked by brackets, has been omitted and filed with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

  
 DEVELOPMENT
AGREEMENT 
  
 BETWEEN 
  
 SALUS PHARMA, INC. 
  
 AND 
  
 PARI GMBH 

 TABLE OF CONTENTS 
  

							
	 	 	 	 	 	  	Page

	1.0.	 	Definitions	  	1
				
	 	 	1.1.	 	Active Ingredient	  	1
				
	 	 	1.2.	 	Adverse Event	  	1
				
	 	 	1.3.	 	Affiliate(s)	  	2
				
	 	 	1.4.	 	Change in Control of PARI	  	2
				
	 	 	1.5.	 	cGMP	  	2
				
	 	 	1.6.	 	Commercialization Strategy	  	2
				
	 	 	1.7.	 	Confidential Information	  	2
				
	 	 	1.8.	 	Control	  	2
				
	 	 	1.9.	 	Designee	  	2
				
	 	 	1.10.	 	Development Activity(ies)	  	2
				
	 	 	1.11.	 	Development Decision(s)	  	3
				
	 	 	1.12.	 	Development Plan	  	3
				
	 	 	1.13.	 	Development Term	  	3
				
	 	 	1.14.	 	Drug Product	  	3
				
	 	 	1.15.	 	Drug Product Specifications	  	3
				
	 	 	1.16.	 	ECGMP	  	3
				
	 	 	1.17.	 	EMEA	  	3
				
	 	 	1.18.	 	European Dossier	  	3
				
	 	 	1.19.	 	European Regulatory Approval	  	3
				
	 	 	1.20.	 	European Union Member	  	3
				
	 	 	1.21.	 	FDA	  	3
				
	 	 	1.22.	 	Field	  	4

							
	 	 	1.23.	 	Force Majeure	  	4
				
	 	 	1.24.	 	Formulation	  	4
				
	 	 	1.25.	 	IND	  	4
				
	 	 	1.26.	 	Improvements	  	4
				
	 	 	1.27.	 	Independent Arrangement	  	4
				
	 	 	1.28.	 	Inhaler	  	4
				
	 	 	1.29.	 	Inhaler Charge	  	4
				
	 	 	1.30.	 	Inhaler Data	  	4
				
	 	 	1.31.	 	Inhaler Part(s)	  	4
				
	 	 	1.32.	 	Inhaler Specifications	  	4
				
	 	 	1.33.	 	Joint Inventions	  	4
				
	 	 	1.34.	 	Know-How	  	4
				
	 	 	1.36.	 	Master File	  	5
				
	 	 	1.37.	 	Material Inhaler Modification	  	5
				
	 	 	1.38.	 	Material Transfer Agreement	  	5
				
	 	 	1.39.	 	Milestones	  	5
				
	 	 	1.40.	 	NDA	  	5
				
	 	 	1.41.	 	Net Sales	  	5
				
	 	 	1.42.	 	Non-Scientific Services	  	5
				
	 	 	1.43.	 	“PMA”	  	5
				
	 	 	1.44.	 	Package	  	5
				
	 	 	1.45.	 	PARI’s Drug Product Data	  	6
				
	 	 	1.46.	 	PARI’s Intellectual Property	  	6
				
	 	 	 	 	 (a)         “PARI’s Inhaler Intellectual Property
	  	6
				
	 	 	 	 	 (b)        “PARI’s Drug Product Intellectual Property
	  	6

  

 ii 

							
	 	 	1.47.	 	PARI’s Inventions	  	6
				
	 	 	1.48.	 	Party(ies)	  	6
				
	 	 	1.49.	 	Patents	  	6
				
	 	 	1.50.	 	Post-Phase II Services	  	6
				
	 	 	1.51.	 	Pre-Phase II Services	  	6
				
	 	 	1.52.	 	Project Team	  	7
				
	 	 	1.53.	 	Royalty Period	  	7
				
	 	 	1.54.	 	Sale(s)	  	7
				
	 	 	1.55.	 	SALUS’ Aztreonam Patent	  	7
				
	 	 	1.56.	 	SALUS’ Drug Product Data	  	7
				
	 	 	1.57.	 	SALUS’ Intellectual Property	  	7
				
	 	 	1.58.	 	SALUS’ Inventions	  	8
				
	 	 	1.59.	 	Services	  	8
				
	 	 	1.60.	 	Sole License Event	  	8
				
	 	 	1.61.	 	Standard Inhaler	  	8
				
	 	 	1.62.	 	Studies	  	8
				
	 	 	 	 	 (a)         \Pre-Clinical Study
	  	8
				
	 	 	 	 	 (b)        \Phase I Clinical Study
	  	8
				
	 	 	 	 	 (c)         Phase II Clinical Study
	  	8
				
	 	 	 	 	 (d)        Phase III Clinical Study
	  	8
				
	 	 	1.62.	 	Sublicensee	  	8
				
	 	 	1.63.	 	Supply Agreement	  	8
				
	 	 	1.64.	 	Supply Terms	  	8
				
	 	 	1.65.	 	Synthesis	  	9
				
	 	 	1.66.	 	Territory	  	9

  

 iii 

							
	 	 	1.67.	 	Test Drug Product	  	9
				
	 	 	1.68.	 	Test Formulation	  	9
				
	 	 	1.69.	 	Test Inhaler	  	9
				
	 	 	1.70.	 	Third Party License Agreement	  	9
				
	 	 	1.71.	 	Undesired Formulation(s)	  	9
				
	 	 	1.72.	 	Valid Claim	  	9
			
	2.0.	 	Project Team	  	9
				
	 	 	2.1.	 	Formation and Purpose	  	9
				
	 	 	2.2.	 	Control	  	10
				
	 	 	 	 	 (a)         Development
	  	10
				
	 	 	 	 	 (b)        Milestone Changes
	  	10
				
	 	 	2.3.	 	Membership	  	10
				
	 	 	2.4.	 	Meetings and Travel Reimbursement	  	10
				
	 	 	2.5.	 	Limitation of Powers	  	10
				
	 	 	2.6.	 	Liaisons	  	10
			
	3.0.	 	Development and Delivery	  	11
				
	 	 	3.1.	 	Test Formulation and Test Drug Product	  	11
				
	 	 	 	 	 3.1.1.   SALUS
	  	11
				
	 	 	 	 	 3.1.2.   PARI
	  	11
				
	 	 	3.2.	 	Test Inhaler	  	11
				
	 	 	3.3.	 	Final Formulation and Drug Product	  	12
				
	 	 	 	 	 3.3.1.   PARI and SALUS
	  	12
				
	 	 	3.4.	 	Final Inhaler	  	12
				
	 	 	3.5.	 	Package	  	12
				
	 	 	3.6.	 	Shipment Quality	  	13

  

 iv 

							
	 	 	3.7.	  	Progress Reports	  	13
				
	 	 	3.8.	  	Subcontracting	  	13
				
	 	 	3.9.	  	Facilities Access	  	14
				
	 	 	3.10.	  	cGMP and ECGMP Standards	  	14
				
	 	 	 	  	 3.10.1.  Pre-Clinical
	  	14
				
	 	 	 	  	 3.10.2.  Phase I and Phase II
	  	14
				
	 	 	 	  	 3.10.3.  Phase III and Commercial Supply
	  	14
				
	 	 	 	  	 3.10.4.  Package
	  	14
				
	 	 	 	  	 3.10.5.  Subcontractors
	  	14
			
	4.0.	 	Testing and Acceptance	  	15
				
	 	 	 	  	 4.1.      SALUS
	  	15
				
	 	 	 	  	 4.2.      PARI
	  	15
				
	 	 	4.3.	  	Acceptance	  	15
			
	5.0.	 	Regulatory Filings	  	15
				
	 	 	5.1.	  	Drug Product	  	15
				
	 	 	 	  	 5.1.1.   United States IND or European Equivalent
	  	15
				
	 	 	 	  	 5.1.2.   United States NDA or European Dossier
	  	15
				
	 	 	5.2.	  	Inhaler	  	16
				
	 	 	 	  	 5.2.1.   North America
	  	16
				
	 	 	 	  	 (a)       United States
	  	16
				
	 	 	 	  	 (b)      Other North American Countries
	  	16
				
	 	 	 	  	 5.2.2.   Europe
	  	17
				
	 	 	 	  	 5.2.3.   Rest of the World
	  	17
				
	 	 	 	  	 5.2.4.   Master Files
	  	17
				
	 	 	5.3.	  	No Guarantee of Approval	  	18

  

 v 

							
	 	 	5.4.	 	Ownership and Restricted Use of SALUS’ Drug Product Data	  	18
				
	 	 	 	 	 5.4.1.   PARI’s Use for Purposes of Agreement
	  	18
				
	 	 	 	 	 5.4.2.   PARI’s Use [*]
	  	18
				
	 	 	 	 	 5.4.3.   PARI’s Use [*]
	  	18
				
	 	 	 	 	 5.4.4.   Further Restrictions
	  	18
				
	 	 	5.5.	 	Ownership and Restricted Use of Inhaler Data and PARI’s Drug Product Data	  	19
				
	 	 	 	 	 5.5.1.   Purposes of Agreement
	  	19
				
	 	 	 	 	 5.5.2.   Further Restrictions
	  	19
			
	6.0.	 	Payment	  	19
				
	 	 	6.1.	 	Upfront Payment to PARI	  	19
				
	 	 	6.2.	 	Scientific Services	  	19
				
	 	 	 	 	 6.2.1.   Payment for PARI’s Pre-Phase II Services
	  	19
				
	 	 	 	 	 6.2.2.   Payment for PARI’s Post-Phase II Services
	  	20
				
	 	 	 	 	 6.2.3.   Payment for SALUS’ Scientific Services
	  	20
				
	 	 	 	 	 6.2.4.   Review of [*]
	  	20
				
	 	 	6.3.	 	Payment for Non-Scientific Services	  	20
				
	 	 	 	 	 6.3.1.   PARI’s Necessary Non-Scientific Services
	  	20
				
	 	 	 	 	 6.3.2.   PARI’s Special Non-Scientific Services
	  	20
				
	 	 	 	 	 6.3.3.   SALUS’ Non-Scientific Services
	  	20
				
	 	 	 	 	 6.3.4.   Review of Hourly Rates
	  	20
				
	 	 	6.4.	 	Payment for Test Inhalers and Inhalers	  	21
				
	 	 	 	 	 6.4.1.   Charge
	  	21
				
	 	 	 	 	 6.4.2.   Inspection and Acceptance
	  	21
				
	 	 	6.5.	 	Reimbursement for Approved Costs	  	21
				
	 	 	6.6.	 	Invoicing and Method of Payment	  	22

  
 *Confidential
Treatment Requested. 
  

 vi 

							
	 	  	6.7.	  	Milestone Payments	  	22
				
	 	  	6.8.	  	Milestone Completion	  	23
				
	 	  	6.9.	  	Corus Equity	  	23
				
	 	  	6.10.	  	Royalty Payments	  	23
				
	 	  	 	  	 6.10.1.  Royalty
	  	23
				
	 	  	 	  	 6.10.2.  Minimum Royalty
	  	24
				
	 	  	 	  	 (a)       Amount
	  	24
				
	 	  	 	  	 (b)      Acceleration of Royalty Payments
	  	25
				
	 	  	6.11.	  	Royalty Reports	  	25
				
	 	  	6.12.	  	Payment of Royalty	  	25
				
	 	  	6.13.	  	Royalty Buydown	  	26
				
	 	  	6.14.	  	Reduction of Royalties	  	26
				
	 	  	 	  	 6.14.1.  Blocking Patents.
	  	26
				
	 	  	 	  	 6.14.2.  Compulsory License
	  	27
				
	 	  	6.15.	  	SALUS’ Books and Records and Inspection	  	27
				
	 	  	6.16.	  	PARI’s Books and Records and Inspection	  	27
			
	7.0.	  	Commercialization	  	28
				
	 	  	7.1.	  	Commercialization Strategy	  	28
				
	 	  	7.2.	  	Independent Arrangement — Minimum Terms	  	28
				
	 	  	7.3.	  	Supply Agreement	  	28
				
	 	  	7.4.	  	Alternative Supply of Inhalers	  	29
				
	 	  	 	  	 7.4.1.   PARI Changes
	  	29
				
	 	  	 	  	 (a)       Changes
	  	29
				
	 	  	 	  	 (b)      Cure Period
	  	29

  

 vii 

							
	 	  	 	  	 7.4.2.   PARI Circumstances
	  	29
				
	 	  	 	  	 (a)       Circumstances
	  	29
				
	 	  	 	  	 (b)      Cure Period
	  	29
				
	 	  	 	  	7.4.3.   Sole License	  	30
				
	 	  	 	  	 (a)       Grant
	  	30
				
	 	  	 	  	 (b)      Sole License Event
	  	30
				
	 	  	 	  	 (c)       Agreement with SALUS’ Contractor
	  	30
				
	 	  	7.5.	  	Adverse Information and Event Reporting	  	30
				
	 	  	7.6.	  	Patent Marking	  	31
				
	 	  	 	  	 (a)       Marking by SALUS
	  	31
				
	 	  	 	  	 (b)      Marking by PARI
	  	31
			
	8.0.	  	Intellectual Property	  	31
				
	 	  	8.1.	  	Licenses to SALUS	  	31
				
	 	  	 	  	 8.1.1.   Drug Product License
	  	31
				
	 	  	 	  	 (a)       Termination by SALUS With Cause
	  	31
				
	 	  	 	  	 (b)      Termination by SALUS Without Cause
	  	32
				
	 	  	 	  	 (c)       Termination for Breach by PARI or SALUS
	  	32
				
	 	  	 	  	 (i)       Assignment
	  	32
				
	 	  	 	  	 (ii)      Cooperation and Power of Attorney
	  	32
				
	 	  	 	  	 8.1.2.   Inhaler License
	  	32
				
	 	  	 	  	 8.1.3.   Background License
	  	33
				
	 	  	8.2.	  	Licenses to PARI.	  	33
				
	 	  	 	  	 8.2.1.   Purposes of Agreement
	  	33
				
	 	  	 	  	 8.2.2.   Sale for Use with Drug Product
	  	33
				
	 	  	8.3.	  	Ownership of Intellectual Property	  	34
				
	 	  	 	  	 8.3.1.   Inventions
	  	34

  

 viii 

							
	 	  	 	  	 (a)       PARI’s Inventions
	  	34
				
	 	  	 	  	 (b)      SALUS’ Inventions
	  	34
				
	 	  	 	  	 8.3.2.   Improvements
	  	34
				
	 	  	 	  	 (a)       PARI’s Improvements
	  	34
				
	 	  	 	  	 (b)      SALUS’ Improvements
	  	35
				
	 	  	 	  	 8.3.3.   Joint Inventions
	  	35
				
	 	  	 	  	 (a)       PARI’s Ownership
	  	35
				
	 	  	 	  	 (b)      Compensation to SALUS for Commercialization Outside of Field
	  	36
				
	 	  	8.3.4.	  	Cooperation for Joint Inventions.	  	36
				
	 	  	8.4.	  	Joint Inventions Based On SALUS’ Aztreonam Patent	  	36
				
	 	  	8.5.	  	Pursuit of Patent Protection	  	36
				
	 	  	 	  	 8.5.1.   PARI’s Obligation
	  	36
				
	 	  	 	  	 8.5.2.   SALUS’ Option
	  	37
				
	 	  	 	  	 8.5.3.   SALUS’ Obligation
	  	37
				
	 	  	8.6.	  	Extension of Licensed Patent Term	  	37
			
	9.0.	  	Enforcement of Intellectual Property	  	37
				
	 	  	9.1.	  	Notice of Infringement	  	37
				
	 	  	9.2.	  	SALUS’ Right to Prosecute Infringements	  	37
				
	 	  	9.3.	  	PARI’s Option to Prosecute Infringements	  	38
			
	10.0.	  	Defense of Inhaler	  	38
				
	 	  	10.1.	  	Defense Against Third Party Action	  	38
				
	 	  	10.2.	  	Result of Litigation	  	39
			
	11.0.	  	Confidentiality	  	39
				
	 	  	11.1.	  	Use of Confidential Information	  	39
				
	 	  	11.2.	  	Confidentiality Agreements	  	39

  

 ix 

							
				
	 	  	11.3.	  	Publication and Delay	  	39
				
	 	  	11.4.	  	Restricted Disclosure – Terms of Agreement	  	40
				
	 	  	11.5.	  	Publicity – Press Releases	  	40
				
	 	  	11.6.	  	Publicity – Use of Parties’ Names	  	40
			
	 12.0.
	  	Representations and Warranties	  	41
				
	 	  	12.1.	  	PARI Representations and Warranties	  	41
				
	 	  	12.2.	  	SALUS Representations and Warranties	  	42
			
	13.0.	  	Indemnification	  	43
				
	 	  	13.1.	  	Indemnification of SALUS	  	43
				
	 	  	13.2.	  	Indemnification of PARI	  	44
			
	14.0.	  	Insurance	  	44
			
	15.0.	  	Limitation of Damages	  	45
			
	16.0.	  	Dispute Resolution	  	45
				
	 	  	16.1.	  	Negotiation	  	45
				
	 	  	16.2.	  	Mediation	  	45
				
	 	  	16.3.	  	Arbitration	  	46
				
	 	  	 	  	 16.3.1.  Procedural Rules of Arbitration
	  	46
				
	 	  	 	  	 16.3.2.  Tribunal
	  	46
				
	 	  	 	  	 16.3.3.  Governing Substantive Law for Arbitration
	  	46
				
	 	  	 	  	 16.3.4.  Serving of Notice for Arbitration
	  	46
				
	 	  	 	  	 16.3.5.  Forum, Language, Trade Usage Standard and Currency
	  	47
				
	 	  	16.4.	  	Injunctive Relief	  	47
				
	 	  	16.5.	  	Attorneys’ Fees	  	47
			
	17.0.	  	Term and Termination	  	47
				
	 	  	17.1.	  	Term	  	47
				
	 	  	 	  	 	  	 

  

 x 

							
	 	  	17.2.	  	Termination for Breach	  	47
				
	 	  	17.3.	  	Termination by SALUS	  	48
				
	 	  	 	  	 17.3.1.  SALUS Termination With Cause
	  	48
				
	 	  	 	  	 (a)       Causes
	  	48
				
	 	  	 	  	 (b)      Termination Notice
	  	48
				
	 	  	 	  	 (c)       Agreement That Cause Exists
	  	49
				
	 	  	 	  	 (d)      Disagreement That Cause Exists
	  	49
				
	 	  	 	  	 17.3.2.  SALUS’ Termination Without Cause
	  	49
				
	 	  	 	  	 (a)       Pre-Phase II Termination
	  	49
				
	 	  	 	  	 (b)      Post-Phase II Termination
	  	49
				
	 	  	 	  	 17.3.3.  Wind-Down Costs
	  	50
				
	 	  	17.4.	  	Survival	  	50
				
	 	  	17.5.	  	Rights in Bankruptcy	  	50
			
	18.0.	  	Miscellaneous	  	51
				
	 	  	18.1.	  	Entire Agreement	  	51
				
	 	  	18.2.	  	Notices	  	51
				
	 	  	18.3.	  	Choice of Law	  	51
				
	 	  	18.4.	  	Assignability	  	52
				
	 	  	18.5.	  	Waivers and Amendments	  	52
				
	 	  	18.6.	  	Severability	  	52
				
	 	  	18.7.	  	Section Headings	  	52
				
	 	  	18.8.	  	Counterparts	  	52
				
	 	  	18.9.	  	Further Assurances	  	52
				
	 	  	18.10.	  	Force Majeure	  	52
				
	 	  	18.11.	  	Compliance of Law	  	53

  

 xi 

							
	 	  	18.12.	 	Relationship of the Parties	  	53
				
	 	  	18.13.	 	Choice of Language	  	53
				
	 	  	18.14.	 	Choice of Currency	  	53
				
	 	  	18.15.	 	Changes in Borders	  	53
				
	 	  	18.16.	 	Recordation of Licenses	  	53
		
	 EXHIBIT A
	  	A1
		
	 EXHIBIT B
	  	B1
		
	 EXHIBIT C
	  	C1
		
	 EXHIBIT D
	  	D1
		
	 EXHIBIT E
	  	E1
		
	 EXHIBIT F
	  	F1
		
	 EXHIBIT G
	  	G1
		
	 EXHIBIT H
	  	H1

  

 xii 

 DEVELOPMENT AGREEMENT 
  
 This Development Agreement (“Agreement”) effective as of February 20, 2002 (the “Effective Date”), is
between PARI GmbH, a German corporation with a principal place of business at Moosstrasse 9, D-82319 Starnberg, Germany (“PARI”) and Salus Pharma, Inc., a Delaware corporation with a principal place of business at 2025 1st Avenue, Suite 800, Seattle, Washington 98121, United States (“SALUS”), a wholly owned subsidiary of Corus Pharma,
Inc., a Delaware corporation (“Corus”). 
  
 RECITALS

  
 WHEREAS, SALUS is in the business of developing and
commercializing drugs for the treatment of respiratory tract and infectious diseases, and SALUS has developed an early stage drug formulation for the inhalation delivery of liquid aztreonam; 
  
 WHEREAS, PARI is in the business of developing and commercializing drug
inhalation devices and PARI has begun development of a drug inhalation device which PARI desires to further develop for aerosolizing liquid aztreonam for inhalation delivery; 
  
 WHEREAS, PARI also has certain expertise and experience in developing drug formulations and drug products which are made for
use in inhalation devices; 
  
 WHEREAS, SALUS desires PARI to
fully develop a drug formulation for aztreonam and a drug product made from such formulation, and SALUS also desires PARI to complete the development of the drug inhalation delivery device for the inhalation delivery of such drug product; and

  
 WHEREAS, PARI is willing to provide such development services,
and SALUS is willing to pay PARI for such services on the terms and conditions set forth herein. 
  
 AGREEMENT 
  
 In consideration of the recitals set forth above, the mutual covenants, terms and conditions set forth below, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, PARI and SALUS agree as
follows: 
  
 1.0. Definitions. 
  
 As used in this Agreement, the following terms shall have the following
meanings while other terms may be defined parenthetically throughout this Agreement: 
  
 1.1. “Active Ingredient” means a material or substance which includes aztreonam.  
  
 1.2. “Adverse Event” shall have the meaning provided parenthetically in Section 7.5 of this Agreement. 

 1.3. “Affiliate(s)” of a party means any person or entity that directly or indirectly owns or
Controls, is owned or Controlled by or is under common ownership or Control with such party. 
  
 1.4. “Change in Control of PARI” means a change in Control of PARI, including, without limitation: (a) a merger (other than a merger in which the holders of stock of PARI immediately prior to
the merger have the same proportionate ownership of stock in the surviving entity immediately after the merger); (b) a consolidation, separation or reorganization (other than a mere reincorporation or the creation of a holding company); or (c) an
acquisition of property or stock of PARI by a third party resulting in such third party’s Control of PARI, a result of which the stockholders of PARI receive cash, stock or other property in exchange for or in connection with their PARI stock.

  
 1.5. “cGMP” means current Good Manufacturing Practices
regulations and Quality System regulations, as promulgated by the FDA. 
  
 1.6. “Commercialization Strategy” means the written commercialization strategy which the Parties will agree to pursuant to Section 7.1 which includes an election of an Independent Arrangement or a Supply Agreement
and if a Supply Agreement is elected, an election of one or more of the supply options and the retail sales options set forth in the Supply Terms. 
  
 1.7. “Confidential Information” means the confidential or proprietary information of a Party, including, without limitation, proposed inventions,
inventions, know-how, Inhaler Data, PARI’s Drug Product Data, SALUS’ Drug Product Data, business plans and other information exchanged prior to the Effective Date in negotiation of terms for this Agreement, in connection with the Material
Transfer Agreement or otherwise in communications related to or arising out of this Agreement. Confidential Information shall exclude any portion of such information which: (a) is known to the receiving Party before receipt thereof as evidenced by
the receiving Party’s written records existing prior to such receipt; (b) is independently developed by the receiving Party, as evidenced by documentation contemporaneous with such independent development; (c) is disclosed to the receiving
Party by a third party who has a legal right to make such disclosure; or (d) becomes part of the public domain through no fault of the receiving Party. 
  
 1.8. “Control” of a party means beneficial ownership, directly or indirectly, of fifty percent (50%) or more of the outstanding voting shares or
securities or the ability otherwise to elect or appoint a majority of the board of directors or other managing authority of such party. 
  
 1.9. “Designee” shall have the meaning provided parenthetically in Section 7.4.3(b) of this Agreement. 
  
 1.10. “Development Activity(ies)” means the research, design,
development, construction, testing, studies, reporting, prototype and clinical supply, delivery, regulatory and other activities which SALUS and PARI individually or jointly perform under this Agreement. 
  

 2 

 1.11. “Development Decision(s)” means a material decision involving a Development Activity. 

 
 1.12. “Development Plan” means the plan for performing the
Development Activities and the time schedule for performing the Development Activities, as set forth in Exhibit A, as amended in writing from time to time in accordance with this Agreement. 
  
 1.13. “Development Term” means the period of time beginning on the
Effective Date and ending upon SALUS’ acceptance of the Formulation, Drug Product and Inhaler in accordance with Section 4.3 of this Agreement. 
  
 1.14. “Drug Product” means a liquid which includes: (a) the Active Ingredient alone or in addition to one or more other substances, chemicals or
ingredients; or (b) a modification, re-synthesis or derivative of the Active Ingredient alone or in addition to one or more other substances, chemicals or ingredients.  
  
 1.15. “Drug Product Specifications” means the specifications, characteristics, properties and performance requirements of
the Drug Product, adapted for aerosolization and delivery by the Inhaler, which are set forth in Exhibit B, including, without limitation, any characteristics or parameters which specify: (a) the Formulation; or (b) the percentage of
pulmonary deposition, particle/droplet size for the Drug Product, absorption, the stability of the Drug Product or aerosol characteristics. 
  
 1.16. “ECGMP” means European Community Good Pharmaceutical Manufacturing Practices and any amendments to such practices. 
  
 1.17. “EMEA” means the European Agency for the Evaluation of
Medicinal Drug Products or any successor to that agency. 
  
 1.18.
“European Dossier” means a European drug marketing authorization application or the European equivalent to a PMA or ISO 9001/9002, submitted to the EMEA, an alternate body accepting such an application, or any European Union
Member. 
  
 1.19. “European Regulatory Approval” means a
marketing authorization issued by the EMEA applying to one or more or all European Union Members. 
  
 1.20. “European Union Member” means any country which is or becomes a member to the Treaty on European Union. 
  
 1.21. “FDA” means the United States Food and Drug Administration or any successor to that agency. 
  

 3 

 1.22. “Field” means medical treatment with any drug in the [*] pharmacologic
classification, including, without limitation, aztreonam in any form or any chemical modification, re-synthesis or derivation of aztreonam. 
  
 1.23. “Force Majeure” shall have the meaning provided parenthetically in Section 18.10 of this Agreement.  
  
 1.24. “Formulation” means the compositions, chemical structures, molecules,
compounds, ingredients, formulas, recipes, chemical reactions, mixtures, technical information and know-how which are developed for and/or necessary for producing, manufacturing or packaging the Drug Product.  
  
 1.25. “IND” means an investigational drug application filed with the
FDA. 
  
 1.26. “Improvements” means any and all
improvements, modifications, variations, re-designs and optimizations of the Inhaler, Standard Inhaler, Formulation, Drug Product or Package or methods of manufacture or use thereof.  
  
 1.27. “Independent Arrangement” shall have the meaning provided
parenthetically in Section 7.1 of this Agreement. 
  
 1.28.
“Inhaler” means an inhalation delivery device which meets the Inhaler Specifications and is adapted to aerosolize the Drug Product for inhalation delivery to the human respiratory tract via nasal or oral passages. 
  
 1.29. “Inhaler Charge” shall have the meaning provided in Section 6.4.1 of
this Agreement. 
  
 1.30. “Inhaler Data” means all data,
data sets, pre-clinical and clinical study data, Master Files, reports, applications, approvals and information related to the Standard Inhaler, and, if different, the Inhaler, including, but not limited to, all data, reports and information created
for or arising out of any regulatory filing therefor, any regulatory approval thereof or any corresponding application or approval therefor in any country in the Territory.  
  
 1.31. “Inhaler Part(s)” means one or more replaceable components of the Inhaler, including, without limitation, the
vibrating plate or diaphragm adapted to co-act with the Drug Product stored in the Inhaler.  
  
 1.32. “Inhaler Specifications” means the specifications, parameters and requirements for the Inhaler which are set forth in Exhibit C. 
  
 1.33. “Joint Inventions” shall have the meaning provided parenthetically in
Section 8.3.3(a) of this Agreement. 
  
 1.34. “Know-How” means
all rights in all know-how and technical information, including, without limitation, concepts, inventions (whether or not patentable), trade secrets, discoveries, formulas, systems, methods, techniques, designs, drawings, sketches, theories,
descriptions, instructional materials, computer programs, computer files, images, videos and works of authorship. 
  
 *Confidential Treatment Requested. 
  

 4 

 1.36. “Master File” means information related to the Inhaler, commonly referred to as a Device
Master File (DMF) or European Device Master File (EDMF), including but not limited to, confidential or proprietary information, knowledge, data, trade secrets, inventions, discoveries, product designs, models, prototypes, engineering drawings, and
schematics, in all forms. 
  
 1.37. “Material Inhaler
Modification” means any modification to the design or function of the Inhaler as approved by the FDA or EMEA, whichever is applicable, where such modification requires a new regulatory approval of the modified Inhaler by the FDA or
EMEA prior to the marketing or sale of such modified Inhaler.  
  
 1.38.
“Material Transfer Agreement” means that Material Transfer Agreement entered into by SALUS and PARI dated November 7, 2001. 
  
 1.39. “Milestones” means the four milestones set forth in Section 6.7 of this Agreement. 
  
 1.40. “NDA” means a New Drug Product Application filed with the FDA.

  
 1.41. “Net Sales” means the amounts received by SALUS, its
Affiliates or its Sublicensees for Sales of the Drug Product under this Agreement less the following deductions: (a) discounts, returns, allowances, commissions and wholesaler chargebacks allowed and taken; (b) import, export, excise, sales or use
taxes, value added taxes, and other taxes, tariffs and duties imposed on such Sales; (c) packaging, handling, transportation, freight, freight insurance, and other insurance relating to such Sales; and (d) amounts allowed or credited on such Sales
for retroactive price reductions or rebates including, but not limited to, Medicaid rebates. For purposes of clarity, in the event the Inhalers are sold to customers in combination or in conjunction with the Drug Product or supplied to customers at
no charge in combination or in conjunction with the Drug Product, Net Sales shall exclude the Inhaler purchase price paid by SALUS, its Affiliates or its Sublicensees to PARI, PARI’s Affiliates or a third party authorized by PARI or PARI’s
Affiliates to distribute the Inhalers. 
  
 1.42. “Non-Scientific
Services” means clerical or administrative services, which are not performed by a scientist (for clarification: patent research, management of patent work, project management, project supervisory work and business development work are to be
deemed as Scientific Services). 
  
 1.43. “PMA” means a premarket
approval application for medical devices under Section 510(k) of the Federal Food, Drug Product, and Cosmetic Act of the United States. 
  
 1.44. “Package” means a package having one or more components adapted for the Drug Product which stores and preserves specified quantities of the Drug
Product and which facilitates the distribution, shelving and handling of the Drug Product, including, but not limited to, a container which holds or retains the Drug Product, a holder for the Inhaler and a carton, box or other materials which
surround such container. 
  

 5 

 1.45. “PARI’s Drug Product Data” means all data, data sets, reports and information related
to the Drug Product which: (a) is owned or controlled by PARI as of the Effective Date; or (b) results from the Development Activities of PARI, conducted alone or in conjunction with SALUS, including, but not limited to, data related to the
Synthesis, Active Ingredient, Formulation and Drug Product. PARI’s Drug Product Data shall exclude SALUS’ Drug Product Data.  
  
 1.46. “PARI’s Intellectual Property” means PARI’s Inhaler Intellectual Property and PARI’s Drug Product Intellectual Property, where such
terms have the following meanings: 
  
 (a) “PARI’s Inhaler
Intellectual Property” means: [*]. 
  
 (b)
“PARI’s Drug Product Intellectual Property“ means: (i) all Patents owned, controlled or licensable by PARI or its Affiliates prior to the end of the Development Term which claim or relate to the Formulation, Drug Product or
Package or methods of manufacture or use thereof or any of PARI’s Inventions related thereto or any of the Joint Inventions related thereto; (ii) all Know-How owned, controlled or licensable by PARI or its Affiliates prior to the end of the
Development Term which relate to the practice of the Patents provided in subsection (b)(i) above, any of PARI’s Inventions related to the Formulation, Drug Product or Package or methods of manufacture or use thereof or any of the Joint
Inventions related thereto; and (iii) PARI’s Drug Product Data, all derivatives thereof and all copyrights therein. 
  
 1.47. “PARI’s Inventions” shall have the meaning provided parenthetically in Section 8.3.1(a) of this Agreement. 
  
 1.48. “Party(ies)” means SALUS and/or PARI.  
  
 1.49. “Patents” means all patent applications, patents and all other patent
rights including, without limitation, divisions, continuations, continuations-in-part, renewals, re-examination certificates, reissues, continued prosecution applications, extensions, substitutions, nationalizations and foreign counterparts of such
patent applications and patents.  
  
 1.50. “Post-Phase II
Services” means the scientific and engineering development services which PARI renders between the date on which PARI delivers the Test Drug Products and Test Inhalers to SALUS for the Phase II Clinical Study and the date on which
SALUS obtains regulatory approval of the NDA or European Dossier for the Drug Product.  
  
 1.51. “Pre-Phase II Services” means the scientific and engineering development services which PARI renders between the Effective Date and the date on which PARI delivers the Test Drug Products
and Test Inhalers to SALUS for the Phase II Clinical Study. 
  
 *Confidential Treatment Requested. 
  

 6 

 1.52. “Project Team” means the project team described in Section 2.0 of this Agreement. 
  
 1.53. “Royalty Period” means the period which begins on the date of the
first commercial sale of the Drug Product by SALUS, its Affiliates or Sublicenses and expires the later of: 
  
 (a) the date on which there are no longer any issued patents having Valid Claims in the Territory which claim the Drug Product alone, the Inhaler alone or
the Drug Product in combination with the Inhaler which are included within: (i) German Patent Application [*]; (ii) all Patents claiming priority thereto; or (iii) all Patents owned, controlled or licensable by PARI or its Affiliates prior to
the end of the Development Term which claim the Drug Product alone (or methods of manufacture or use thereof), the Inhaler alone (or methods of manufacture or use thereof ) or the Drug Product in combination with the Inhaler (or methods of
manufacture or use thereof); 
  
 and 
  
 (b) the date of [*] years after the first commercial sale of the Drug
Product.  
  
 1.54. “Sale(s)” means the sale or
sales, whether by SALUS or an Affiliate or Sublicensee of SALUS of the Drug Product to a third party that is not an Affiliate or Sublicensee of the seller.  
  
 1.55. “SALUS’ Aztreonam Patent” shall have the meaning provided parenthetically in Section 1.57 of this Agreement.

  
 1.56. “SALUS’ Drug Product Data” means all data,
data sets, pre-clinical and clinical study data, reports, applications, approvals and information related to the Drug Product which: (a) is owned or controlled by SALUS or its Affiliates as of the Effective Date; or (b) results from the Development
Activities of SALUS, conducted alone or in conjunction with PARI, including, but not limited to, data arising from the Studies conducted by SALUS, data related to the Synthesis, Active Ingredient, Formulation and Drug Product, all data, reports and
information created for or arising out of any regulatory filing therefor, any regulatory approval thereof or any corresponding application or approval therefor in any country in the Territory and all data otherwise applicable to regulatory efforts.
 
  
 1.57. “SALUS’ Intellectual Property” means: (a)
United States Patent Application No. 10/027,113, entitled “Inhalable Aztreonam for Treatment and Prevention of Pulmonary Bacterial Infections,” filed December 20, 2001 (“SALUS’ Aztreonam Patent”); (b) all Patents related
thereto or claiming priority thereto; (c) all other Patents owned, controlled or licensable by SALUS or its Affiliates prior to the end of the Development Term which claim or relate to the Synthesis, Formulation, Drug Product or Package or methods
of manufacture or use thereof or any of SALUS’ Inventions related thereto; and (d) all Know-How owned, controlled or licensable by SALUS or its Affiliates prior to the end of the Development Term which relates to the practice of the patents and
patent applications provided in subsections (a), (b) or (c) above, or which otherwise relates to 
  
 *Confidential Treatment Requested. 
  

 7 

 the Synthesis, Formulation, Drug Product or Package or methods of manufacture or use thereof or any of SALUS’
Inventions related thereto; and (e) SALUS’ Drug Product Data, all derivatives thereof and all copyrights therein. 
  
 1.58. “SALUS’ Inventions” shall have the meaning provided parenthetically in Section 8.3.1(b) of this Agreement. 
  
 1.59. “Services” means the Pre-Phase II Services, Post-Phase II
Services and Non-Scientific Services rendered by PARI in its performance of Development Activities which PARI is authorized and bound to perform during the Development Term of this Agreement. The term “Services” expressly excludes all of
PARI’s activities, labor and work relating, solely and directly to the research, design, and development of PARI’s Standard Inhaler alone or PARI’s Standard Inhaler in combination with a drug product other than the Drug Product.

  
 1.60. “Sole License Event” shall have the meaning provided
parenthetically in Section 7.4.3(a) of this Agreement. 
  
 1.61. “Standard
Inhaler” means PARI’s inhalation device, identified by PARI as of the Effective Date as the “PARI e-Flow Aerosol Device,” which, when fully developed according to PARI’s current plans, will function as a standard
off-the-shelf product capable of aerosolizing and delivering various types of drug products. 
  
 1.62. “Studies” means the Pre-Clinical Study, Phase I Clinical Study, Phase II Clinical Study and Phase III Clinical Study, where such terms have the following meanings:  
  
 (a) “Pre-Clinical Study” means a pre-clinical study
which involves testing a relatively low number of Test Drug Products and Test Inhalers on animals. 
  
 (b) “Phase I Clinical Study” means a clinical study which involves testing a relatively low number of Test Drug Products and Test Inhalers on humans.  
  
 (c) “Phase II Clinical Study” means a clinical study which involves
testing a moderate number of Test Drug Products and Test Inhalers on humans.  
  
 (d) “Phase III Clinical Study” means a clinical study which involves testing a relatively high number of Drug Products and Inhalers on humans. 
  
 1.62. “Sublicensee” means any person or entity, other than an Affiliate of SALUS, which receives a sublicense from
SALUS under this Agreement, directly or indirectly from SALUS or an Affiliate of SALUS.  
  
 1.63. “Supply Agreement” means the supply agreement, if any, entered into between SALUS and PARI for the supply of Inhalers from PARI to SALUS which shall include, at a minimum, the Supply Terms set
forth in Exhibit D. 
  
 1.64. “Supply Terms” means
the terms set forth in Exhibit D. 
  

 8 

 1.65. “Synthesis” means the compositions, chemical structures, molecules, compounds, ingredients,
formulas, recipes, methods, processes, chemical reactions, mixtures, technical information and know-how which are used in or result in the production of the Active Ingredient. 
  
 1.66. “Territory” means the entire world. 
  
 1.67. “Test Drug Product” means a test or prototype Drug Product. 
  
 1.68. “Test Formulation” means a test or prototype Formulation.

  
 1.69. “Test Inhaler” means a test or prototype
Inhaler. 
  
 1.70. “Third Party License Agreement” means that
agreement entered into between The Technology Partnership plc (“TTP”) and PARI dated March 23, 1999 which, based upon PARI’s representations, includes a license from TTP to PARI under certain rights of Bespak Europe Limited
(“Bespak”). SALUS and PARI acknowledge that SALUS has not been provided with a copy of the Third Party License Agreement. 
  
 1.71. “Undesired Formulation(s)” means the compositions, chemical structures, crystal formations and molecules set forth in Exhibit E.

  
 1.72. “Valid Claim” means a claim in an issued patent
which has not expired, lapsed, been canceled or become abandoned and has not been finally found to be invalid (or not valid) or unenforceable by an unreversed or unappealable final decision or judgment of a court or other authority or agency of
competent jurisdiction. 
  
 2.0. Project Team. 
  
 2.1. Formation and Purpose. As of the Effective Date, SALUS and PARI shall establish
a Project Team which shall, among other activities, finalize the Development Plan within sixty (60) business days after the Effective Date under the direction of SALUS. The finalized Development Plan shall be attached hereto as Exhibit A and
incorporated herein by reference. The Project Team shall also: (a) oversee the Development Activities; (b) report to SALUS and PARI on all proposed Development Decisions; (c) propose the overall technical strategy for the development of the Test
Formulation, Formulation, Test Drug Product, Drug Product, Test Inhaler and Inhaler; (d) oversee and coordinate the Parties’ activities in such development pursuant to the specifications and the timeframes set forth in Exhibits A, B and
C; (e) propose modifications to the Drug Product Specifications and Inhaler Specifications, as appropriate; (f) develop and propose for the Parties’ approval the final specifications for the Formulation, Drug Product, Package and Inhaler,
all based on the principles of prompt and diligent development, consistent with good pharmaceutical and medical device practices; and (g) review all development records relating to the Development Activities. The Project Team shall perform such
other functions as appropriate to further the purposes of this Agreement, including the periodic evaluation of performance against goals. 
  

 9 

 2.2. Control. 
  
 (a) Development. SALUS shall control the Development Decisions of the Project Team, taking into account PARI’s expertise, input and advice. Notwithstanding
any disputes or disagreements within the Project Team or between the Parties, SALUS shall have the sole right to make all Development Decisions and to change the Development Plan or the Development Activities.  
  
 (b) Milestone Changes. The Milestones, set forth in Section 6.7 of this Agreement, may
be changed only in writing upon mutual agreement of the Parties. If there is a mutual delay and the Milestones are not met, then both Parties shall mutually determine revised Milestones, and the time schedule for the Milestone payments provided in
Section 6.7 shall be adjusted accordingly.  
  
 2.3.
Membership. The Project Team shall have representatives of each Party with the requisite levels of skill and experience in product development, engineering or such other matters as the Parties may agree. The Project Team’s initial
members shall be those set forth in Exhibit F of this Agreement. The Project Team may change its size from time to time by written agreement of the Parties. Each Party may replace its Project Team representatives at any time upon written
notice to the other Party; provided, however, that each Party’s representatives shall at all times be persons possessing the appropriate level of skill, experience and familiarity with the Development Activities. 
  
 2.4. Meetings and Travel Reimbursement. The Project Team shall hold meetings at such
times and places as the Project Team elects to do so, but the Project Team shall meet at least once every month. Meetings of the Project Team may be held by audio or video teleconference. Meetings of the Project Team shall be effective only if a
representative of each Party is present or participating. SALUS shall be responsible for its own travel expenses incurred as a result of meetings of the Project Team. In addition, upon receipt of an invoice from PARI, SALUS shall reimburse PARI for
PARI’s reasonable travel expenses incurred as a result of meetings of the Project Team or incurred otherwise to meet the development objectives of this Agreement. PARI shall exercise efforts to minimize any such travel expenses, and such
efforts shall be no less stringent than those exercised by PARI in minimizing its own business travel expenses or otherwise required by PARI’s internal policies. Such reimbursements shall not count towards the Service fee caps provided in
Section 6.0. 
  
 2.5. Limitation of Powers. The powers of the Project Team
are limited to those expressly set forth in this Agreement. Without limiting the generality of the foregoing, the Project Team shall not have the right to amend this Agreement. The actions of the Project Team shall not substitute for either
Party’s ability to exercise any right, nor excuse the performance of any obligation, set forth herein. 
  
 2.6. Liaisons. Each Party will designate an individual to serve as the liaison between the Parties to undertake and coordinate any day-to-day communications as may be required between the Parties relating to
their activities under this Agreement. Each 
  

 10 

 Party may change such liaison from time to time during the term of this Agreement upon written notice thereof to the
other Party. The initial liaison for each Party is set forth in Exhibit F of this Agreement. 
  
 3.0. Development and Delivery. 
  
 3.1.
Test Formulation and Test Drug Product. 
  
 3.1.1. SALUS. PARI
acknowledges that prior to the Effective Date, SALUS has developed a particular Synthesis for aztreonam and a formulation and method for producing a prototype Drug Product (the “Existing Drug Product”). SALUS shall retain ownership of all
of SALUS’ Intellectual Property, including that which is embodied in the Existing Drug Product. Prior to the Effective Date, pursuant to the Material Transfer Agreement, SALUS has provided PARI with particular quantities of aztreonam which
SALUS produced through such Synthesis. SALUS shall supply PARI with quantities of the Active Ingredient in accordance with the terms and conditions of Section 3.10 below for PARI’s development of the Test Formulation and Test Drug Product.
SALUS shall make such supply in accordance with the timeframes and aztreonam quantities specified in the Development Plan. 
  
 3.1.2. PARI. PARI shall develop a Test Formulation and Test Drug Product: (a) in accordance with the Development Plan; (b) substantially in accordance with the
Drug Product Specifications; and (c) in accordance with the terms and conditions of Section 3.10 below. PARI shall use commercially reasonable efforts to develop the Test Formulation in such a manner that it does not consist of or comprise the
Undesired Formulations. As part of such Development Activities, PARI shall perform research and development with respect to SALUS’ early stage drug formulation for aztreonam. Concurrently or thereafter and subject to the written approval of
SALUS, PARI may perform research and development with respect to reasonable alternative drug formulations for aztreonam. PARI shall use commercially reasonable efforts to perform its Development Activities under this Section. PARI shall develop the
Test Formulation and Test Drug Product substantially in compliance with its internal quality control and product specification standards or as otherwise agreed upon by PARI and SALUS. PARI shall develop the Test Formulation for the Pre-Clinical,
Phase I Clinical and Phase II Clinical Studies. The Project Team shall propose the appropriate strategy to manufacture the Test Drug Product and Test Inhaler for use in such Studies. In accordance with the strategy approved by SALUS, PARI shall
manufacture for and deliver to SALUS the Test Formulation and Test Drug Product for examination, testing and comment in the quantities and according to the timeframes set forth in the Development Plan for such Studies. 
  
 3.2. Test Inhaler. SALUS acknowledges that prior to the Effective Date, PARI has begun
development of PARI’s Standard Inhaler which PARI expects to further develop into the Test Inhaler. PARI shall retain ownership of all intellectual property rights embodied in PARI’s Standard Inhaler. Whether the Test Inhaler is the same
as PARI’s Standard Inhaler or a variation of PARI’s Standard Inhaler, PARI shall develop the Test Inhaler: (a) in accordance with the Development Plan; (b) substantially in accordance 
  

 11 

 with the Inhaler Specifications; (c) in accordance with the terms and conditions of Section 3.10 below; and (d)
substantially in accordance with PARI’s internal quality control and product specification standards or as otherwise agreed upon by PARI and SALUS. PARI shall use commercially reasonable efforts to perform its Development Activities under this
Section. PARI shall develop the Test Inhaler for the Pre-Clinical, Phase I Clinical and Phase II Clinical Studies. PARI shall deliver to SALUS the Test Inhaler for examination, testing and comment in the quantities and according to the timeframes
set forth in the Development Plan for such Studies. 
  
 3.3. Final Formulation
and Drug Product. 
  
 3.3.1. PARI and SALUS. SALUS shall supply PARI
with quantities of the Active Ingredient in accordance with the terms and conditions of Section 3.10 below for PARI’s development of the Formulation, Drug Product and Inhaler. SALUS shall make such supply in accordance with the timeframes and
Active Ingredient quantities specified in the Development Plan. PARI shall develop the Formulation and the Drug Product: (a) in accordance with the Development Plan; (b) in accordance with the Drug Product Specifications; (c) in accordance with the
terms and conditions of Section 3.10 below; and (d) substantially in accordance with PARI’s internal quality control and product specification standards or as otherwise agreed upon by PARI and SALUS. PARI shall use commercially reasonable
efforts to develop the Formulation in such a manner that it does not consist of or comprise the Undesired Formulations. PARI shall use commercially reasonable efforts to perform its Development Activities under this Section. PARI shall deliver to
SALUS the Formulation and Drug Product for examination, testing and comment in the quantities according to the timeframes set forth in the Development Plan for the Phase III Clinical Study. If PARI or its Affiliates or subcontractors develops the
Package pursuant to Section 3.5 below, PARI shall deliver to SALUS the Package for examination, testing and comment in the quantities according to the timeframes set forth in the Development Plan for the Phase III Clinical Study. 
  
 3.4. Final Inhaler. PARI shall develop the Inhaler: (a) in accordance with the
Development Plan; (b) in accordance with the Inhaler Specifications; (c) in accordance with the terms and conditions of Section 3.10 below; and (d) in accordance with PARI’s internal quality control and product specification standards or as
otherwise agreed upon by PARI and SALUS. PARI shall use commercially reasonable efforts to perform its Development Activities under this Section. PARI shall deliver to SALUS the Inhaler for examination, testing and comment in the quantities
according to the timeframes set forth in the Development Plan for the Phase III Clinical Study. 
  
 3.5. Package. Through the use of a subcontractor, unless SALUS objects to the subcontractors proposed by PARI, PARI shall develop the Package in accordance with the Development Plan and the terms and conditions
of Section 3.10 below. PARI and SALUS shall use commercially reasonable efforts to perform their Development Activities under this Section. PARI may subcontract such Package development only to a subcontractor pre-approved in writing by SALUS. In
the event SALUS approves of a proposed subcontractor, PARI shall develop the Package using such subcontractor, and 
  

 12 

 PARI shall contractually require such subcontractor, in writing, to: (i) provide SALUS with access to such
subcontractor’s facilities for purposes of inspecting, auditing and viewing the Package development after receiving reasonable prior written notice from SALUS; (ii) provide SALUS with as much notice as possible, and, where possible, at least
fourteen (14) calendar days’ prior written notice of an inspection or audit of the Package development by the FDA, EMEA or another government agency and provide SALUS with access to such subcontractor’s facilities to attend such inspection
or audit; (iii) to the extent possible after the use of commercially reasonable efforts, assign all intellectual property rights arising from the subcontractor’s Package development to PARI; and (iv) abide by the confidentiality obligations
provided in Section 11.0 of this Agreement. Furthermore, PARI shall require the approved subcontractor to develop the Package in accordance with any input or decision of SALUS, including, without limitation, input related to Package design,
lock-and-key mechanisms for the Package, Package material, Package color, Package shape and other Package characteristics. In the event SALUS disapproves of all proposed contractors, in writing, SALUS shall be responsible for the development of the
Package at SALUS’ expense, and PARI shall no longer have such responsibility. 
  
 3.6. Shipment Quality. SALUS shall have a period of sixty (60) days from the date of receipt of the shipment of Test Drug Products, Test Inhalers, Drug Products or Inhalers to test for quality of the shipment and to accept or reject
such shipment. If SALUS determines that any such shipment or portions thereof do not substantially meet the specifications set forth in this Agreement, SALUS shall notify PARI in writing within such sixty (60) day period, indicating the date of
delivery and the defective nature of the shipment. PARI shall undertake commercially reasonable efforts to correct such defect and supply SALUS with a replacement shipment acceptable to SALUS, within a reasonable time and in view of the timeframes
set forth in the Development Plan. 
  
 3.7. Progress Reports. PARI shall
regularly provide the Project Team with written reports regarding the development of the Test Formulation, Test Drug Product, Test Inhaler, Formulation, Drug Product and Inhaler. Through the Project Team, PARI shall keep SALUS up-to-date on the
progress of all Development Activities. 
  
 3.8. Subcontracting. PARI may
subcontract portions of the Development Activities to subcontractors, provided that, prior to subcontracting the development of part or all of the Formulation or the Drug Product, PARI shall: (a) provide SALUS with prior written notice of any such
subcontractor, including the terms and conditions of the subcontract and the development to be performed by the subcontractor; (b) make such subcontract consistent with the applicable terms of this Agreement; (c) contractually require any such
subcontractor, in writing, to perform such development in compliance with the terms and conditions of Section 3.10 below; (d) contractually require any such subcontractor, in writing, to perform such development in accordance with PARI’s
internal quality control and product specification standards or as otherwise agreed upon by PARI and SALUS; (e) to the extent possible after the use of commercially reasonable efforts, contractually require any such subcontractor, in writing, to
assign all intellectual property rights arising from the subcontractor’s Development Activities to PARI; (f) contractually bind any such subcontractor, in writing, to the confidentiality obligations 
  

 13 

 provided in Section 11.0 of this Agreement; (g) contractually require any such subcontractor, in writing, to authorize
SALUS to inspect, audit and view the subcontractor’s facilities in accordance with Section 3.9 below; and (h) obtain SALUS’ written approval of such subcontractor. PARI shall be responsible for enforcing its rights against any such
subcontractor. Notwithstanding the foregoing, SALUS shall not have the right to approve or reject subcontractors that PARI uses as of the Effective Date as a part of its development of the Standard Inhaler or in PARI’s normal course of
business. The terms and conditions of Section 3.5, and not this Section 3.8, shall apply to Package subcontractors. 
  
 3.9. Facilities Access. Upon reasonable prior notice from SALUS, PARI shall provide SALUS and its employees and agents with access to PARI’s and its
subcontractors’ facilities to inspect, audit and view the Development Activities. In the form of an existing confidentiality agreement between SALUS and such employees and agents, SALUS shall require each employee and agent granted access to
PARI’s or its subcontractors’ facilities to maintain in confidence and not use any and all Confidential Information learned or viewed during such employee’s visit except to the extent disclosure or use is related to the purposes of
this Agreement.  
  
 3.10. cGMP and ECGMP Standards. 
  
 3.10.1. Pre-Clinical. For purposes of research involving non-human subjects and for
Pre-Clinical Study purposes, SALUS and PARI shall comply with the standards required by the laws and regulations applicable to the materials and devices used for such purposes. For example, if permitted by the applicable laws and regulations, the
standard may be Good Laboratory Practices (GLP), non-GLP or Good Clinical Practices (GCP). 
  
 3.10.2. Phase I and Phase II. For the Phase I Clinical Study and Phase II Clinical Study: (a) SALUS shall supply PARI with the Active Ingredient at least in substantial compliance with cGMP or ECGMP, whichever
is applicable; and (b) PARI shall develop and manufacture the Test Formulation, Test Drug Product and Test Inhaler at least in substantial compliance with cGMP or ECGMP, whichever is applicable. 
  
 3.10.3. Phase III and Commercial Supply. For the Phase III Clinical Study and for
PARI’s commercial supply of the Inhalers to SALUS: (a) SALUS shall supply PARI with the Active Ingredient in full compliance with cGMP or ECGMP, whichever is applicable; and (b) PARI shall develop and manufacture the Formulation, Drug Product
and Inhaler in full compliance with cGMP or ECGMP, whichever is applicable. 
  
 3.10.4. Package. PARI shall develop and manufacture (or have developed and manufactured) the Package in full compliance with cGMP or ECGMP, whichever is applicable. 
  
 3.10.5. Subcontractors. PARI may satisfy the manufacturing standards of this Section 3.10 by bringing PARI’s manufacturing
resources to such standards or by hiring a subcontractor in accordance with Section 3.8 above.  
  

 14 

 4.0. Testing and Acceptance. 
  
 4.1. SALUS. Subject to the terms and conditions of this Agreement and provided that each of the previous Studies conducted by SALUS
produces positive results, SALUS shall use commercially reasonable efforts to conduct the Pre-Clinical, Phase I Clinical, Phase II Clinical and Phase III Clinical Studies on the Test Formulation, Test Drug Product, Formulation and Drug Product
delivered through a prototype of PARI’s Standard Inhaler or the Test Inhaler and through PARI’s Standard Inhaler or the Inhaler, all as set forth in the Development Plan. PARI shall reasonably assist and cooperate with SALUS in such
activities including, without limitation, providing SALUS with information reasonably related to or necessary to conduct such activities. 
  
 4.2. PARI. Subject to the terms and conditions of this Agreement and provided that each of the previous Studies conducted by SALUS produces positive results, PARI
shall conduct its own studies, in compliance with the relevant regulations, using a prototype of PARI’s Standard Inhaler and PARI’s Standard Inhaler as part of its normal course of development for the Test Inhaler and Inhaler and which are
necessary to gather data to obtain an approved PMA or 510(k) foreign equivalent and a European CE mark for PARI’s Standard Inhaler. SALUS shall not pay for activities related to such studies. 
  
 4.3. Acceptance. If and when the results obtained by SALUS from the Phase III Clinical
Study satisfy the Drug Product Specifications, Inhaler Specifications and parameters set forth in the Development Plan or other specifications agreed upon by SALUS and PARI, subject to the other terms and conditions of this Agreement SALUS shall
promptly provide PARI with written notice of acceptance of the Formulation, Drug Product and Inhaler, at which point the Development Term of this Agreement shall end. 
  
 5.0. Regulatory Filings. 
  
 5.1. Drug Product. 
  
 5.1.1. United States IND or European Equivalent. Following positive Pre-Clinical Study results, at SALUS’ expense, SALUS will use commercially reasonable efforts to: (a) file an IND with the FDA for the
Drug Product in accordance with the Development Plan; or (b) file the European equivalent of an IND with the EMEA for the Drug Product. At SALUS’ request and expense, PARI will cooperate with SALUS by providing SALUS with the Inhaler Data as
reasonably necessary for such IND or European equivalent or otherwise reasonably desirable by SALUS for its preparation of such IND or European equivalent. Such cooperation shall be considered Pre-Phase II Services or Non-Scientific Services, as the
case may be, chargeable to SALUS pursuant to Section 6.0 of this Agreement; however payment for such services shall not count towards any Services fee caps in Section 6.0. SALUS’ possession and use of the Inhaler Data shall be subject to the
confidentiality restrictions and other limitations provided in Section 5.5 of this Agreement. 
  
 5.1.2. United States NDA or European Dossier. Within [*] years after the completion of a positive Phase III Clinical Study, at SALUS’ expense SALUS will use commercially 
  
 *Confidential Treatment Requested. 
  

 15 

 reasonable efforts to: (a) file an NDA with the FDA for the Drug Product in accordance with the Development Plan; or (b)
file a European Dossier for the Drug Product in accordance with the Development Plan. At SALUS’ request and expense, PARI will cooperate with SALUS by providing SALUS with the Inhaler Data as reasonably necessary for the NDA or European Dossier
or otherwise reasonably desirable by SALUS for its preparation of the NDA or European Dossier. Such cooperation shall be considered Post-Phase II Services or Non-Scientific Services, as the case may be, chargeable to SALUS pursuant to Section 6.0 of
this Agreement; however payment for such services shall not count towards any Services fee caps in Section 6.0. SALUS’ possession and use of the Inhaler Data shall be subject to the confidentiality restrictions and other limitations provided in
Section 5.5 of this Agreement. 
  
 5.2. Inhaler. 
  
 5.2.1. North America. 
  
 (a) United States. Subject to PARI obtaining positive results from PARI’s studies on PARI’s Standard Inhaler, at
PARI’s expense, PARI shall prepare and make submissions as are necessary to complete a 510 (k) filing in the United States for the general use of PARI’s Standard Inhaler (and, if requested by SALUS, the Inhaler PARI developed specifically
for SALUS), and specifically for the delivery of liquids containing drug molecules. PARI shall use commercially reasonable efforts to obtain approval of such 510 (k) by no later than December 31, 2003. PARI’s failure to obtain such approval by
such date, in and of itself, shall not be deemed a material breach of this Agreement. SALUS will reasonably cooperate with PARI by providing PARI with SALUS’ Drug Product Data as reasonably necessary to support such approval. SALUS shall not
charge PARI for such cooperation except that PARI shall pay SALUS for the reasonable costs and expenses incurred by SALUS relating to the services of creating, customizing, collecting and analyzing SALUS’ Drug Product Data pursuant to a
specific request of PARI, transferring SALUS’ Drug Product Data to PARI and providing PARI with assistance or consultation in using SALUS’ Drug Product Data. Such services shall be charged to PARI and payable by PARI in accordance with
Section 6.2.3 or 6.3.3 of this Agreement, whichever is applicable. PARI’s possession and use of SALUS’ Drug Product Data shall be subject to the confidentiality restrictions and other limitations provided in Section 5.4 of this Agreement.

  
 (b) Other North American Countries. At SALUS’ request, PARI shall
confer with SALUS regarding regulatory filings for the Standard Inhaler or Inhaler in North American countries other than the United States. In PARI’s business judgment, PARI may accept or decline to make such filings at its expense. In the
event PARI so declines, at SALUS’ request the Parties shall negotiate in good faith an agreement to share the expenses related to such filings. Upon execution of such agreement, PARI shall prepare and make submissions as are necessary to
complete a 510(k) foreign equivalent in the agreed upon North American country or countries for the general use of PARI’s Standard Inhaler (and, if requested by SALUS, the Inhaler PARI developed specifically for SALUS), and specifically for the
delivery of liquids containing drug molecules. In the event the Parties fail to execute such agreement after ninety (90) days of good faith negotiation, PARI shall prepare and make such submissions at SALUS’ request and at SALUS’ expense
for the benefit of SALUS.  
  

 16 

 5.2.2. Europe. Subject to PARI obtaining positive results from PARI’s studies on PARI’s Standard
Inhaler, at PARI’s expense, PARI shall prepare and make regulatory submissions as are necessary to complete a CE marking, declaration of conformity for the general use of PARI’s Standard Inhaler (and, if requested by SALUS, the Inhaler
PARI developed specifically for SALUS), and specifically for the delivery of liquids containing drug molecules. In such an event, PARI shall file such European Dossier which meets the requirements for validation under the EMEA’s validation
process. PARI shall use commercially reasonable efforts to obtain approval of such a European Dossier by no later than December 31, 2004, and PARI shall use commercially reasonable efforts to obtain the European CE mark for any such regulatory
approval. PARI’s failure to obtain such approval by such date, in and of itself, shall not be deemed a material breach of this Agreement. SALUS will reasonably cooperate with PARI by providing PARI with SALUS’ Drug Product Data as
reasonably necessary to support such approval. SALUS shall not charge PARI for such cooperation except that PARI shall pay SALUS for the expenses incurred by SALUS relating to the services of creating, customizing, collecting and analyzing
SALUS’ Drug Product Data pursuant to a specific request of PARI, transferring SALUS’ Drug Product Data to PARI and providing PARI with assistance or consultation in using SALUS’ Drug Product Data. Such services shall be charged to
PARI and payable by PARI in accordance with Section 6.2.3 or 6.3.3 of this Agreement, whichever is applicable. PARI’s possession and use of SALUS’ Drug Product Data shall be subject to the confidentiality restrictions and other limitations
provided in Section 5.4 of this Agreement. 
  
 5.2.3. Rest of the World. If
requested by SALUS, SALUS and PARI shall discuss seeking regulatory approval for PARI’s Standard Inhaler or, if different, the Inhaler in the other countries in the Territory. In the event SALUS and PARI decide to seek such approval in any of
the other countries in the Territory, SALUS will cooperate with PARI by providing PARI with SALUS’ Drug Product Data as reasonably necessary to support such approval. SALUS shall not charge PARI for such cooperation except that PARI shall pay
SALUS for the expenses incurred by SALUS relating to the services of creating, customizing, collecting and analyzing SALUS’ Drug Product Data pursuant to a specific request of PARI, transferring SALUS’ Drug Product Data to PARI and
providing PARI with assistance or consultation in using SALUS’ Drug Product Data. Such services shall be charged to PARI and payable by PARI in accordance with Section 6.2.3 or 6.3.3 of this Agreement, whichever is appropriate. PARI’s
possession and use of SALUS’ Drug Product Data shall be subject to the confidentiality restrictions and other limitations provided in Section 5.4 of this Agreement. 
  
 5.2.4. Master Files. If requested by SALUS, after positive completion of SALUS’ Phase III Clinical Study, PARI shall promptly:
(i) compile a Master File which complies with the documentation requirements of the EMEA or any other applicable European regulatory body; (ii) file the Master File in Europe in the EMEA to facilitate any filings under this Section 5.2; and (iii)
provide SALUS with access thereto or the ability to reference such Master File as necessary for SALUS to obtain regulatory approval of the 
  

 17 

 Drug Product as provided in Section 5.1 above. Any such activities shall be considered Post-Phase II Services or
Non-Scientific Services, as the case may be, chargeable to SALUS pursuant to Section 6.0 of this Agreement. 
  
 5.3. No Guarantee of Approval. SALUS makes no representation or warranty that it or any of its Affiliates or Sublicensees will obtain regulatory approval for the Drug Product in any country in the Territory.
PARI makes no representation or warranty that it or any of its Affiliates or Sublicensees will obtain regulatory approval for PARI’s Standard Inhaler, or if different, the Inhaler, in any country in the Territory. Neither Party shall be liable
to the other Party for any damages or other compensation if such Party does not obtain regulatory approvals after making the commercially reasonable efforts required herein. 
  
 5.4. Ownership and Restricted Use of SALUS’ Drug Product Data. Subject to the terms and conditions of this Agreement, SALUS
shall be the sole owner of SALUS’ Drug Product Data and all of SALUS’ Intellectual Property therein. Notwithstanding any license grant in Section 8.0 to the contrary, PARI shall have no license or right to use SALUS’ Drug Product
Data, except in accordance with the rights provided in Sections 5.2, 5.4.1, 5.4.2 and 5.4.3. 
  
 5.4.1. PARI’s Use for Purposes of Agreement. SALUS hereby grants PARI and its Affiliates the right to possess, use, copy and modify SALUS’ Drug Product Data for purposes of fulfilling PARI’s
obligations and rights in the Field under this Agreement during the term of this Agreement. PARI and its Affiliates shall not have the right to transfer or sublicense such right. Upon termination of this Agreement: (a) PARI’s right to use
SALUS’ Drug Product Data for such purposes shall automatically terminate; and (b) PARI may retain a copy of SALUS’ Drug Product Data for archival purposes only. 
  
 5.4.2. PARI’s Use [*]. SALUS hereby grants PARI and its Affiliates the right to possess, use, copy and modify SALUS’ Drug
Product Data outside of the field of [*]. PARI and its Affiliates shall not have the right to transfer or sublicense such right. The right granted in this Section 5.4.2 shall survive the termination of this Agreement. 
  
 5.4.3. PARI’s Use [*]. In the event PARI desires to use SALUS’ Drug Product
Data within the field of [*], PARI shall notify SALUS in writing. Upon the receipt of such notice, the Parties shall negotiate in good faith an agreement for such use. Such agreement shall include commercially reasonable royalties payable to
SALUS and other commercially reasonable terms and conditions. 
  
  
 5.4.4. Further Restrictions. To the extent SALUS’ Drug Product Data remains SALUS’ Confidential Information: (a) PARI shall use commercially reasonable
efforts to maintain in strict confidence SALUS’ Drug Product Data which PARI possesses or uses pursuant to Section 5.2 or 5.4; (b) PARI shall not publish or publicly distribute SALUS’ Drug Product Data; and (c) with the exception of
providing SALUS’ Drug Product Data to the FDA, EMEA, another regulatory agency, PARI’s legal counsel or to another party for purposes herein, PARI shall not disclose SALUS’ Drug Product Data to any third party without SALUS’
prior written consent.  
  
 *Confidential Treatment
Requested. 
  

 18 

 5.5. Ownership and Restricted Use of Inhaler Data and PARI’s Drug Product Data. Subject to the terms and
conditions of this Agreement, PARI shall be the sole owner of the Inhaler Data and PARI’s Drug Product Data and all of PARI’s Intellectual Property therein. Notwithstanding any license grant in Section 8.0 to the contrary, SALUS shall have
no license or right to use PARI’s Inhaler Data or PARI’s Drug Product Data, except in accordance with the rights provided in Sections 5.1, 5.5.1 and 5.5.2. 
  
 5.5.1. Purposes of Agreement. PARI hereby grants SALUS the right to possess and use the Inhaler Data and PARI’s Drug Product
Data for purposes of fulfilling SALUS’ obligations and rights in the Field under this Agreement during the term of this Agreement. SALUS shall not have the right to transfer or sublicense such right except that SALUS may sublicense such right
to SALUS’ Affiliates. Upon termination of this Agreement: (a) SALUS’ right to use the Inhaler Data and PARI’s Drug Product Data for such purposes shall automatically terminate; and (b) SALUS may retain a copy of the Inhaler Data and
PARI’s Drug Product Data for archival purposes only. Notwithstanding the foregoing, in the event the sole license provided Section 7.4.3 becomes effective, SALUS shall have a sublicensable right to possess, use, copy and modify the Inhaler Data
and PARI’s Drug Product Data for the manufacture or use of the Inhalers in the Field, and such right shall survive the termination of this Agreement. Any such manufacture or use of the Inhalers shall be subject to the terms and conditions of
Section 7.4.3. 
  
 5.5.2. Further Restrictions. To the extent the Inhaler
Data and PARI’s Drug Product Data remains PARI’s Confidential Information: (a) SALUS shall use commercially reasonable efforts to maintain in strict confidence the Inhaler Data and PARI’s Drug Product Data which SALUS possesses or
uses pursuant to Section 5.1 or 5.5.1; (b) SALUS shall not publish or publicly distribute the Inhaler Data or PARI’s Drug Product Data; and (c) with the exception of providing Inhaler Data or PARI’s Drug Product Data to the FDA, EMEA,
another regulatory agency, SALUS’ legal counsel or to another party for purposes herein, SALUS shall not disclose the Inhaler Data or PARI’s Drug Product Data to any third party without PARI’s prior written consent. 
  
 6.0. Payment. Notwithstanding anything in this Agreement to the contrary, all payments
due to PARI hereunder shall be made in U.S. dollars by wire transfer to the bank, [*]. SALUS shall pay interest on all undisputed amounts which are more than [*] past due at a rate of interest equal to the lesser of [*] per
month or [*]. [*] 
  
 6.1. Upfront Payment to PARI. Subject
to the terms and conditions of this Agreement, SALUS shall pay PARI [*] by March 22, 2002. 
  
 6.2. Scientific Services 
  
 6.2.1.
Payment for PARI’s Pre-Phase II Services. Subject to the terms and conditions of this Agreement, SALUS shall make payments to PARI against PARI’s invoices for the Pre-Phase II Services at a rate of [*] per hour up to a maximum
aggregate amount of [*]. 
  
 *Confidential Treatment
Requested. 
  

 19 

 6.2.2. Payment for PARI’s Post-Phase II Services. Subject to the terms and conditions of this Agreement,
SALUS shall make payments to PARI against PARI’s invoices for the Post-Phase II Services at a rate of [*] per hour up to a maximum aggregate amount of [*].  
  
 6.2.3. Payment for SALUS’ Scientific Services. Subject to the terms and conditions of this Agreement, PARI shall make payments
to SALUS for SALUS’ scientific and professional services requested by PARI under Section 5.2 of this Agreement at a rate of [*]. PARI shall make such payments within thirty (30) calendar days after receiving SALUS’ invoice for such
services.  
  
 6.2.4. Review of [*]. One year after the Effective
Date, and each year thereafter, the Parties shall review and discuss revising the [*] provided in Section 6.2 through good faith negotiation. Any revised [*] shall apply for an entire calendar year. The Parties acknowledge that such
negotiation may result in the same [*], lower [*] or higher [*]. 
  
 6.3. Payment for Non-Scientific Services. 
  
 6.3.1.
PARI’s Necessary Non-Scientific Services. For the Non-Scientific Services which are necessary to perform PARI’s Development Activities in any month, subject to the terms and conditions of this Agreement, SALUS shall pay PARI at the
rate of [*] for such Non-Scientific Services rendered during that month. Payments for such Non-Scientific Services shall be counted towards the maximum aggregate amounts set forth in Sections 6.2 and 6.3 of this Agreement. 
  
 6.3.2. PARI’s Special Non-Scientific Services. For Non-Scientific Services
requested by SALUS which are not necessary for the performance of PARI’s Development Activities in any month, subject to the terms and conditions of this Agreement, SALUS shall pay PARI: (a) at the rate of [*] in the event that, during
any single month of the term of this Agreement, such Non-Scientific Services are or exceed [*]; and (b) at the rate of [*] in the event that during any single month of the term of this Agreement, such Non-Scientific Services are less
than [*]. Payments for such Non-Scientific Services shall not be counted towards the maximum aggregate amounts set forth in Sections 6.2 and 6.3 of this Agreement. 
  
 6.3.3. SALUS’ Non-Scientific Services. For Non-Scientific Services requested by PARI under Section 5.2 of this Agreement,
subject to the terms and conditions of this Agreement, PARI shall pay SALUS: (a) at the rate of [*] in the event that, during any single month of the term of this Agreement, such Non-Scientific Services are or exceed [*]; and (b) at
the rate of [*] in the event that during any single month of the term of this Agreement, such Non-Scientific Services are less than [*]. PARI shall make such payments within thirty (30) calendar days after receiving SALUS’ invoice
for such Non-Scientific Services.  
  
 6.3.4. Review of [*]. One
year after the Effective Date, and each year thereafter, the Parties shall review and discuss revising the [*] payment rates provided in Section 6.3 
  
 *Confidential Treatment Requested. 
  

 20 

 through good faith negotiation. Any revised [*] shall apply for an entire calendar year. The Parties acknowledge
that such negotiation may result in the same [*], [*] rates or higher [*].  
  
 6.4. Payment for Test Inhalers and Inhalers. 
  
 6.4.1. Charge. Subject to the terms and conditions of this Agreement, SALUS shall make payments to PARI against PARI’s invoices for the Inhaler Charge (defined below). Inhaler Charge for Test Inhalers provided to SALUS for the
Pre-Clinical, Phase I Clinical and Phase II Clinical Studies means [*] (a) [*] and (b) [*] to SALUS. Such manufacturing costs and shipment costs shall be tracked and accessible to SALUS on an open book approach. Inhaler Charge
for Inhalers provided to SALUS for the Phase III Clinical Study means the sum of: (a) PARI’s [*] and (b) [*]. Payments for Inhaler Charges shall not be counted towards the maximum aggregate amounts set forth in Sections 6.2 and
6.3 of this Agreement.  
  
 6.4.2. Inspection and Acceptance. SALUS
shall have a period of thirty (30) days from the date of receipt of any shipment of the Test Inhalers or Inhalers to test for quality and quantity of the shipment and to accept or reject such shipment. If SALUS determines that any portion of
shipment of the Test Inhaler or Inhalers is defective, SALUS shall notify PARI in writing within such thirty (30) days, indicating the particular lot, date of delivery and the defective nature of the Inhalers. In such event, SALUS shall promptly
return the defective portion of such shipment to PARI, and SALUS shall have no obligation to pay the Inhaler Charge for such defective portion of such shipment. Upon receipt, PARI shall undertake commercially reasonable efforts to repair or replace
defective Test Inhaler or Inhalers and to supply SALUS with a replacement shipment of Test Inhaler or Inhalers acceptable to SALUS, within a commercially reasonable time. In the event SALUS does not so notify PARI of defective Test Inhalers or
Inhalers within thirty (30) days of receipt of any shipment of Test Inhalers or Inhalers, SALUS shall be deemed to have accepted such shipment and shall be obligated to pay PARI the Inhaler Charge for such shipment.  
  
 6.5. Reimbursement for Approved Costs. Before PARI makes any payment to a third party
which is directly related to PARI’s Development Activities and which is equal to or greater than [*], PARI shall obtain SALUS’ written approval. In order to obtain such approval, PARI shall provide a written request to SALUS. Such
request shall include: (a) an identification of the third party; (b) a description of the services, products or materials to be provided by such third party; (c) the payment to be made to such third party; and (d) any other information which SALUS
deems reasonably necessary in deciding whether to approve the cost. In the event that SALUS approves such cost (“Approved Cost”), SALUS shall so notify PARI in writing. Subject to the terms and conditions of this Agreement, SALUS shall pay
PARI the amount of the Approved Costs which PARI invoices to SALUS. PARI shall not be required to obtain SALUS’ approval for third party payments which are less than [*] and which are directly related to PARI’s Development
Activities, including, but not limited to, payments made for reasonable travel expenses. PARI shall keep SALUS informed of such payments, using reasonable efforts to do so prior to disbursement. For all payments contemplated by PARI under

  
 *Confidential Treatment Requested. 
  

 21 

 this Section, PARI shall exercise efforts to minimize the amount of such payments, and such efforts shall be no less
stringent than those exercised by PARI in minimizing its own business expenses or otherwise required by PARI’s internal policies. Payments for Approved Costs shall not be counted towards the maximum aggregate amounts set forth in Sections 6.2
and 6.3 of this Agreement. 
  
 6.6. Invoicing and Method of Payment. PARI
shall submit monthly invoices to SALUS for the amounts owed by SALUS for the Services PARI rendered in the preceding month and any Inhaler Costs and Approved Costs incurred by PARI during such month. Unless otherwise stated in this Agreement, SALUS
shall make payments to PARI against each invoice within thirty (30) calendar days of receipt of such invoice, and SALUS shall make such payments by wire transfer in accordance with Section 6.0 above. The Parties shall resolve all disputes regarding
invoices through the procedures set forth in Section 16 of this Agreement. Each invoice shall at a minimum contain the following information: 
  
 (a) a description of the Services performed during such month, itemized by Pre-Phase II Services, Post-Phase II Services and Non-Scientific Services;
 
  
 (b) an itemized hourly breakdown of the time devoted
on such itemized Services;  
  
 (c) upon SALUS’
reasonable request, the invoice shall include identification of each individual who performed part of such Services, the particular Services which each such individual performed and an hourly breakdown of the time devoted by each such individual in
conducting such Services;  
  
 (d) a statement of any
Inhaler Charges incurred by PARI;  
  
 (e) a statement of
any Approved Costs incurred by PARI; and 
  
 (f) any other
information reasonably requested by SALUS. 
  
 6.7. Milestone Payments.
Subject to the terms and conditions of this Agreement specifically including Section 6.9 below, within ten (10) business days after each of the following Milestones is completed, SALUS shall pay PARI the amount set forth opposite such Milestone.

  

					
	 Milestone

	 	 Description

	 	 Payment

	 1st
	 	PARI delivers Test Drug Products and Test Inhalers for the Phase II Clinical Study Pursuant to the Development Plan	 	 Pursuant to Section 6.9 below, [*]

			
	 2nd
	 	PARI delivers Drug Products and Inhalers for the Phase III Clinical Study Pursuant to the Development Plan	 	[*]
			
	 3rd
	 	SALUS Files NDA or European Equivalent for the Drug Product	 	[*]
			
	 4th
	 	SALUS Obtains Approval of NDA or European Dossier for the Drug Product	 	[*]

  
 *Confidential
Treatment Requested. 
  

 22 

 6.8. Milestone Completion. After SALUS completes a Milestone set forth in Section 6.7 above, SALUS shall promptly
notify PARI in writing of such event. After PARI completes a Milestone set forth in Section 6.7 above, PARI shall submit promptly notify SALUS in writing of such event. In the event the Parties disagree as to the completion of any Milestone, such
disagreement shall be subject to dispute resolution as set forth in Section 16.0. 
  
 6.9. Corus Equity. Following PARI’s completion of and in consideration for PARI’s achievement of the first Milestone provided in Section 6.7 above, SALUS shall either: (a) pay PARI [*] in cash as set forth above; or
in lieu of such cash payment, (b) transfer to PARI, or cause Corus to issue to PARI, that number of shares of Corus common stock, $0.001 par value per share, with a fair market value, as determined in the sole discretion of the Corus Board of
Directors, of [*]. Unless the Parties mutually agree upon an amount of Corus Equity instead of such cash payment within ten (10) business days after PARI’s completion of the first Milestone, SALUS shall make such cash payment. 

  
 6.10. Royalty Payments. 
  
 6.10.1. Royalty. Subject to the terms and conditions of this Agreement, SALUS shall
pay to PARI the following royalty payments beginning after the first commercial sale of the Drug Product by SALUS, its Affiliates or Sub-licensees: 
  
 (a) a royalty payment (“Royalty”) of [*] of the Net Sales of the Drug Product during the Royalty Period in a country in the Territory
where: 
  
 (i) the sale of the Drug Product alone would, but for
the license granted herein, infringe a Valid Claim of an issued patent included in PARI’s Intellectual Property in such country; or 
  
 (ii) the sale of the Inhaler alone would, but for the license granted herein, infringe a Valid Claim of an issued patent included in PARI’s
Intellectual Property in such country; or 
  
 *Confidential
Treatment Requested. 
  

 23 

 (iii) the sale of the Drug Product in combination with the Inhaler would, but for the license granted
herein, infringe a Valid Claim of an issued patent included in PARI’s Intellectual Property in such country; 
  
 or 
  
 (b) a step-down royalty payment (“Step-Down Royalty”) of [*] of the Net Sales of the Drug Product during the Royalty Period in a country
in the Territory where: 
  
 (i) the sale of the Drug Product
alone would not infringe a Valid Claim of an issued patent included in PARI’s Intellectual Property in such country; and 
  
 (ii) the sale of the Inhaler alone would not infringe a Valid Claim of an issued patent included in PARI’s Intellectual Property in such country; and

  
 (iii) the sale of the Drug Product in combination with the
Inhaler would not infringe a Valid Claim of an issued patent included in PARI’s Intellectual Property in such country 
  
 6.10.2. Minimum Royalty. 
  
 (a) Amount. Subject to the terms and conditions of this Agreement, beginning in the calendar year of the first commercial sale of the Drug Product, SALUS shall pay
PARI the following annual minimum royalty amount during the Royalty Period within sixty (60) business days after the end of the calendar year set forth in the following schedule: 
  

			
	 Calendar Year of Royalty Period

	  	 Amount

	 1st
Calendar Year
	  	[*]
	 2nd
Calendar Year
	  	[*]
	 3rd
Calendar Year
	  	[*]
	 4th
Calendar Year
	  	[*]
	 5th Calendar Year and
 Each Anniversary Thereafter
	  	[*]

  
 Any and all Royalty and/or Step-Down
Royalty payments actually made with respect to Net Sales pursuant to Sections 6.10.1(a) or 6.10.1(b) for such calendar year shall be credited against such minimum royalty amount. SALUS shall have the right to pay up any or all of such minimum
royalty amount from revenues or funds derived from any source, including, but not limited to, Net Sales of the Drug Product. In the event SALUS fails to make the annual minimum royalty payment in accordance with this Section 6.10.2(a), PARI may
terminate this Agreement pursuant to Section 17.2 of this Agreement. 
  
 *Confidential Treatment Requested. 
  

 24 

 (b) Acceleration of Royalty Payments. 
  
 (i) In the event SALUS has failed to enroll its first patient in the Phase III Clinical Study within nine (9) months after
PARI’s completion of the second Milestone set forth in Section 6.7, subject to subsection (iii) below and the other terms and conditions of this Agreement, SALUS shall pay PARI [*] within ten (10) business days after such failure. Such
payment shall be credited toward any and all minimum royalty amounts due to PARI under Section 6.10.2(a). 
  
 (ii) In the event SALUS has failed to file the NDA or European Dossier for the Drug Product within two (2) years after the date of SALUS’ enrollment
of its first patient in the Phase III Clinical Study, subject to the subsection (iii) below and the other terms and conditions of this Agreement, SALUS shall pay PARI [*] within ten (10) business days after such failure. Such payment shall be
credited toward any and all minimum royalty amounts due to PARI under this Section 6.10.2(a). 
  
 (iii) In the event a failure by SALUS under Section 6.10.2(b)(i) and/or 6.11.2(b)(ii) above is caused solely by delays by the FDA or EMEA or the action or inaction of any other regulatory or governmental body or
agency, the payment requirements provided in the applicable Section 6.10.2(b)(i) and/or 6.10.2(b)(ii) shall not apply to SALUS. 
  
 6.11. Royalty Reports. After SALUS’, its Affiliates’ or Sublicensees’ first commercial Sale of the Drug Product in the Territory, SALUS shall
provide PARI with quarterly written royalty reports, within sixty (60) business days from the last day of each calendar quarter during the term of the Agreement. Each report shall include a summary of the Net Sales of the Drug Product during the
previous calendar quarter on which a Royalty or Step-Down Royalty is payable. Sales made in currencies other than United States Dollars shall be converted to United States Dollars on the basis of the average exchange rate for the calendar quarter in
which such Sales were made. Such calendar average exchange rate shall be calculated by averaging the average monthly exchange rates for the months in such calendar, based on the average monthly exchange rates published by the United States Federal
Reserve Board, available as of the Effective Date at www.federalreserve.gov/releases/. PARI reserves the right to audit the books and records of SALUS for the purpose of verifying the accuracy of payments pursuant to Section 6.15. 

  
 6.12. Payment of Royalty. Subject to the terms and conditions of this
Agreement, SALUS shall pay to PARI the Royalty or the Step-Down Royalty owed by SALUS on Net Sales of the Drug Product during each calendar quarter of the Royalty Period within sixty (60) business days from the last day of such calendar quarter. At
the end of each calendar year of the Royalty Period, SALUS will determine whether the total Royalty payments and Step-Down Royalty payments made during such calendar year amount to less than the minimum annual royalty amount due for such calendar
year. In such event, SALUS shall pay PARI the difference between such minimum annual royalty amount and such total Royalty payments and Step-Down Royalty payments. Upon payment of a Royalty or Step-Down Royalty for any Net Sale of a Drug Product,
the 
  
 *Confidential Treatment Requested. 
  

 25 

 royalty obligation under this Agreement with respect to that Drug Product shall be deemed exhausted. SALUS’
obligation to pay Royalties or Step-Down Royalties to PARI under this Agreement is imposed only once with respect to any Sale of the Drug Product, regardless of the number of claims or patents PARI owns, controls, licenses or obtains covering the
Drug Product or the manufacture or use of the Drug Product. SALUS shall not owe any Royalty or Step-Down Royalty to PARI under this Agreement on Net Sales of the Drug Product among SALUS, its Affiliates and Sublicensees, so long as such Drug Product
is then resold to third parties within one (1) year and, in such instances, the obligation to pay such Royalties or Step-Down Royalties arises only upon the sooner to occur of: (i) the expiration of such period of time; or (b) the resale of such
Drug Product by SALUS, its Affiliates or Sublicensees, as applicable to the third parties, including third-party distributors that are not Sublicensees as defined in this Agreement. 
  
 6.13. Royalty Buydown. SALUS, in its sole discretion, shall have the right, on one or more occasions, to decrease the Royalty rate by
paying PARI [*] for each decrease in the Royalty rate by [*]. SALUS shall make such payment to PARI in a lump sum payment. SALUS shall not have the right to decrease the Royalty rate below [*]. The minimum royalty amounts due by
SALUS shall automatically decrease in proportion to the percentage of decrease in the Royalty rate. The decreased minimum royalty amounts shall be calculated by multiplying the percentage of decrease in the Royalty rate by the minimum annual royalty
amounts provided in Section 6.10.2(a). The product of such calculation shall be the decreased minimum royalty amounts due by SALUS. The decreased Royalty rate and decreased minimum annual royalty amounts shall be effective upon SALUS’ payment
to PARI of the lump sum payment provided in this Section. 
  
 [*]

  
 6.14. Reduction of Royalties. 
  
 6.14.1. Blocking Patents. In the event that: (a) changes to the design or function of
the Inhaler are Necessary (defined below) and such design or function is embodied within the Standard Inhaler; (b) it is Necessary for SALUS, its Affiliates or Sublicensees to make changes to the Package where PARI was responsible for the Package;
or (c) due to any design or function of the Inhaler, where such design or function is embodied within the Standard Inhaler, it is Necessary for SALUS, its Affiliates or Sublicensees to obtain a license and pay a royalty under such license to a third
party under any patent or other proprietary interest of such third party in order to fully exercise the licenses granted to SALUS and its Affiliates in this Agreement, SALUS’ obligations to pay Royalties or Step-Down Royalties to PARI on Net
Sales in that country shall be reduced by [*] of the amount of the cost to SALUS, its Affiliates and Sublicensees of such changes or the royalties paid or payable to such third party, only to the extent PARI has not already paid SALUS
pursuant to PARI’s indemnification obligations under Section 13.1 of this Agreement. Notwithstanding the foregoing, SALUS’ obligation to pay the Royalty or Step-Down Royalty shall not be reduced by more than [*]. This Section shall
have no effect on SALUS’ obligation to pay PARI the minimum annual royalty. It shall be considered “Necessary” to make changes or obtain a license if so ordered in a non- 
  
 *Confidential Treatment Requested. 
  

 26 

 appealable decision by a court of competent jurisdiction in such country or if SALUS, any Affiliate of SALUS or any
Sublicensee obtains a written opinion from two qualified mutually agreed upon independent patent counsels in such country that the Inhaler, Formulation for the Drug Product or Package for the Drug Product, whichever the case may be, infringes upon
such third party’s patent rights. 
  
 6.14.2. Compulsory License. If a
third party obtains, by non-appealable order, decree or grant from a court or other regulatory authority of competent jurisdiction in any country in the Territory, a compulsory license under PARI’s Intellectual Property authorizing such third
party to make, have made, use, import, export, offer for sale or sell the Drug Product alone or in combination with the Inhaler in such country, PARI shall give prompt written notice to SALUS. During the effective period of such compulsory license,
SALUS’ obligations to pay Royalties or Step-Down Royalties with respect to Net Sales of the Drug Product in such country under this Agreement shall be reduced by [*]. If, for any other reason or under any other circumstances, the
exclusive license granted to SALUS under Section 8.1.1, 8.1.2 or 8.1.3 of this Agreement becomes or is deemed a nonexclusive license in a country in the Territory, the Royalty or Step-Down Royalty owed by SALUS to PARI for Net Sales of the Drug
Product in such country shall be reduced by [*]. This Section shall have no effect on SALUS’ obligation to pay PARI the minimum annual royalty. 
  
 6.15. SALUS’ Books and Records and Inspection. SALUS shall keep full, true and accurate books and records which account for SALUS’ Net Sales of the Drug
Product in the Territory and the related Royalties and Step-Down Royalties due to PARI. PARI, at its own expense, shall have the right during normal business hours on thirty (30) days’ prior written notice to SALUS and not more than once in any
calendar year to have a nationally recognized independent public accounting firm selected by PARI examine the relevant books and records of SALUS for the purpose of verifying the Royalty and Step-Down Royalty payments under Section 6.10.1 of this
Agreement. Such accounting firm shall not work on a contingency fee basis, shall execute and deliver to SALUS a standard confidentiality agreement and shall not disclose to PARI any information relating to SALUS’ business, except whether SALUS
Royalty and Step- Down Royalty reports are correct or incorrect, and if incorrect, the specific details concerning any discrepancies and the amounts of the Royalty or Step-Down Royalty due under Section 6.10.1 of this Agreement. If such examination
reveals a discrepancy, SALUS shall pay to PARI any additional Royalty or Step-Down Royalty owed to PARI, along with audit fees if the discrepancy is greater than [*], or PARI shall refund to SALUS any excess Royalty or Step-Down Royalty
payments made by SALUS, as appropriate.  
  
 6.16. PARI’s Books and
Records and Inspection. PARI shall keep full, true and accurate books and records which account for the Services rendered by PARI, distinctly excluding services relating to the development of PARI’s Standard Inhaler, and which account for
the payments due to PARI for the Services pursuant to Section 6.0 of this Agreement. SALUS, at its own expense, shall have the right during normal business hours on thirty (30) days’ prior written notice to PARI and not more than once in any
calendar year to have a nationally recognized independent public accounting firm selected by SALUS and acceptable to PARI examine the relevant books and records of 
  
 *Confidential Treatment Requested. 
  

 27 

 PARI for the purpose of verifying the payments under Section 6.0 of this Agreement. Such accounting firm shall not work
on a contingency fee basis, shall execute and deliver to PARI a standard confidentiality agreement and shall not disclose to SALUS any information relating to PARI’s business, except whether PARI’s invoices are correct or incorrect, and if
incorrect, the specific details concerning any discrepancies and the amounts of the payment due under Section 6.0 of this Agreement. If such examination reveals a discrepancy, SALUS shall pay to PARI any additional amount owed to PARI, along with
audit fees if the discrepancy is greater than [*] or PARI shall refund to SALUS any excess payments made by SALUS, as appropriate. 
  
 7.0. Commercialization. 
  
 7.1. Commercialization Strategy. During the Phase III Clinical Study, SALUS and PARI shall discuss and develop a written Commercialization Strategy for the commercialization of the Drug Product and Inhaler. In
the event the results of the Phase III Clinical Study are positive, SALUS and PARI shall jointly determine and agree upon a mutually acceptable written Commercialization Strategy for the Inhaler before SALUS files an NDA or European Dossier for the
Drug Product. As part of such joint determination, SALUS and PARI shall determine whether the Commercialization Strategy will include: (a) an arrangement wherein SALUS independently sells the Inhaler, in combination with the Drug Product or apart
from the Drug Product, or PARI independently sells the Inhaler apart from the Drug Product (“Independent Arrangement”); or (b) an arrangement wherein SALUS provides the Inhaler to patients at a reduced price in combination with the Drug
Product and purchases the Inhaler from PARI under the Supply Agreement; or (c) another arrangement agreed upon by the Parties. 
  
 7.2. Independent Arrangement — Minimum Terms. Unless the Parties agree in writing otherwise, the Independent Arrangement, if any, will include, at a minimum,
the terms provided in this Section 7.2. Each Party will use commercially reasonable efforts to maximize their revenue achieved through the sale of the Drug Products or Inhalers. In the event that a Party desires to continue the Independent
Arrangement while using the Drug Product and Inhaler to promote one another, such Party may so notify the other Party in writing. The Parties will then negotiate in good faith an agreement involving the creation, authorization or license of certain
trademarks and trade dress consistent with mutually acceptable marketing themes, slogans, product use directions, coloring themes or advertising campaigns. 
  
 7.3. Supply Agreement. Unless the Parties agree in writing otherwise, the Supply Agreement, if any, will include, at a minimum, the Supply Terms set forth in
Exhibit D of this Agreement. 
  
 *Confidential Treatment
Requested. 
  

 28 

 7.4. Alternative Supply of Inhalers. 
  
 7.4.1. PARI Changes. 
  
 (a) Changes. Whether during an Independent Arrangement or under a Supply Agreement, the Parties acknowledge the possibility that one or more of the following
events may occur: 
  
 (i) PARI undergoes [*]; 

 
 (ii) PARI [*]; or 
  
 (iii) as a result of a [*] after the delivery date specified in
SALUS’, its Affiliates or Sublicensees’ purchase order. 
  
 (b) Cure
Period. PARI shall promptly notify SALUS in writing upon the occurrence of any of the events set forth in Section 7.4.1(a). If any such event occurs and is known to SALUS before receiving PARI’s notice, SALUS may notify PARI in writing.

  
 7.4.2. PARI Circumstances. 
  
 (a) Circumstances. Whether during an Independent Arrangement or under a Supply
Agreement, the Parties acknowledge the possibility that one or more of the following events may occur: 
  
 (i) as a result of [*], PARI fails to supply the Inhalers ordered by SALUS, its Affiliates or Sublicensees for a period of more than [*]
after the delivery date specified in SALUS’, its Affiliates’ or Sublicensees’ purchase order; 
  
 (ii) PARI becomes [*], its Affiliates or Sublicensees for a period of more than [*] after the delivery date specified in SALUS’, its
Affiliates or Sublicensees purchase order through no fault of SALUS and where no Adverse Event has been reported; 
  
 (iii) as the result of [*] made by PARI and [*], PARI fails to supply the Inhalers ordered by SALUS, its Affiliates or Sublicensees for a
period of more than [*] after the delivery date specified in SALUS’, its Affiliates’ or Sublicensees’ purchase order; or 
  
 (iv) as the result of [*], PARI fails to supply the Inhalers ordered by SALUS, its Affiliates or Sublicensees for a period of more than [*]
after the delivery date specified in SALUS’, its Affiliates’ or Sublicensees’ purchase order. 
  
 (b) Cure Period. PARI shall promptly notify SALUS in writing upon the occurrence of any of the events set forth in Section 7.4.2(a) above. Upon the occurrence of any such events, SALUS may notify PARI in
writing of such occurrence (“SALUS’ Notice”). Within thirty (30) days after PARI’s receipt of SALUS’ Notice, PARI shall submit to SALUS a written response (“PARI’s Response”). SALUS’ Notice and
PARI’s Response shall each include a statement regarding the lack of Inhaler supply, each Party’s position and any proposed solutions. Within sixty (60) days after SALUS’ Notice, the 
  
 *Confidential Treatment Requested. 
  

 29 

 designated senior executives, officers or management of PARI and SALUS shall meet at a mutually acceptable time and place
and thereafter as often as they reasonably deem necessary to attempt to resolve the lack of Inhaler supply problem. During such meetings, the Parties shall, in good faith, negotiate any Inhaler price reductions or discounts to compensate SALUS, its
Affiliates or Sublicensees for PARI’s temporary failure to supply Inhalers. The rights of PARI under this Section 7.4.2(b) shall not in any way affect, limit or waive SALUS’ right to terminate this Agreement under Section 17.2 for
PARI’s breach. 
  
 7.4.3. Sole License. 
  
 (a) Grant. Effective upon the Sole License Event (defined below), subject to the
terms and conditions of this Agreement, PARI hereby grants (and agrees to further grant) SALUS a sole license, under PARI’s Intellectual Property, to make, use, import, export, offer for sale and sell the Inhalers in the Field in the Territory.
Except to the extent not permitted by the Third Party License Agreement, such sole license shall be sublicensable and shall include the right to have Inhalers made in the Field in the Territory. PARI shall not grant such license to any third party.
PARI and its Affiliates shall retain the right to make, have made, use, import, export, offer for sale and sell the Inhalers. Such sole license shall survive the termination of this Agreement. Such sole license shall include a reasonable royalty
obligation on SALUS, subject to good faith negotiation between PARI and SALUS. 
  
 (b) Sole License Event. The term, “Sole License Event” means: (i) the expiration of [*] business days after [*] (whichever comes first) pursuant to [*]; or (ii) PARI’s [*] by SALUS despite
[*] after the expiration of [*] after [*].  
  
 (c)
Agreement with SALUS’ Contractor. Upon SALUS’ request following the occurrence of the Sole License Event, subject to the terms and conditions of this Agreement, PARI shall negotiate in good faith a written agreement with a contractor
designated by SALUS (“Designee”). SALUS shall have the right to participate in such negotiation. Such agreement shall include: (i) a grant of a sole license from PARI to the Designee, under PARI’s rights under the Third Party License
Agreement, to make, repair and develop the Inhalers in the Field in the Territory; and (ii) a provision which provides that such sole license to such Designee shall survive the termination of such agreement. PARI shall not grant such license to any
party other than the Designee. PARI and its Affiliates shall retain the right to make, repair and develop the Inhalers.  
  
 7.5. Adverse Information and Event Reporting. Each Party shall report to the other Party, in as much detail as reasonably possible, within 48 hours from receipt of
the information (or less, where required so as to comply with EMEA, FDA or other applicable regulations) any experience coincident with the use of the Inhalers, Standard Inhalers or Drug Products at any dose, whether or not considered drug related,
that suggests a significant hazard, contraindication, side effect or precaution. This includes, but is not limited to, any serious adverse experience or expectation regarding the use of the Inhalers, Standard Inhalers or Drug Products. Such a
serious adverse experience or expectation includes, at minimum, any possible event coincident with the use of the 
  
 *Confidential Treatment Requested. 
  

 30 

 Inhalers, Standard Inhalers or Drug Products that results in any of the following outcomes: death, a life-threatening
experience, inpatient hospitalization, prolongation of an existing hospitalization, a persistent or significant disability or incapacity, or a congenital anomaly or birth defect (“Adverse Event”). 
  
 7.6. Patent Marking. 
  
 (a) Marking by SALUS. PARI shall provide SALUS with written notice of the patent number and country of each of the patents in
PARI’s Intellectual Property, when issued, by providing suitable written notice. SALUS shall use commercially reasonable efforts to place, in a conspicuous location on the Inhaler, Drug Product or its packaging distributed by SALUS, its
Affiliates or Sublicensees, a patent notice in accordance with and when required by the applicable laws of the country in which such Inhaler or Drug Product is sold and in which there is a Valid Claim of a patent in PARI’s Intellectual Property
covering such Inhaler or Drug Product. 
  
 (b) Marking by PARI. SALUS shall
provide PARI with written notice of the patent number and country of each of the patents in SALUS’ Intellectual Property, when issued, by providing suitable written notice. PARI shall use commercially reasonable efforts to place, in a
conspicuous location on the Inhaler or its packaging distributed by PARI or its Affiliates, a patent notice in accordance with and when required by the applicable laws of the country in which such Inhaler is sold and in which there is a Valid Claim
of a patent in SALUS’ Intellectual Property covering the use of the Drug Product in the Inhaler.  
  
 8.0. Intellectual Property. 
  
 8.1.
Licenses to SALUS. 
  
 8.1.1. Drug Product License. Subject to the
terms and conditions of this Agreement, PARI hereby grants to SALUS a sublicensable, exclusive license under PARI’s Drug Product Intellectual Property to make, have made, use, develop, test, import, export, offer for sale, sell and distribute
the Drug Products, the Packages, and the Drug Products in combination with the Packages in any field in the Territory. Notwithstanding the foregoing, SALUS shall not exercise such license outside of the Field without executing an agreement with PARI
which includes mutually acceptable terms for paying commercially reasonable royalties or other payments to PARI. Upon SALUS’ request, PARI shall negotiate such agreement in good faith with SALUS. 
  
 (a) Termination by SALUS With Cause. The license granted in Section 8.1.1 shall
terminate in the event SALUS terminates this Agreement with cause pursuant to Section 17.3.1 of this Agreement. Following any such termination, PARI shall not offer any license, sale, assignment or transfer of any right, title or interest in
PARI’s Drug Product Intellectual Property to any third party without providing SALUS with at least ninety (90) days’ prior written notice. During such period, SALUS shall have a right of first refusal to acquire the license, right, title
and/or interest offered to such third party on commercial terms which are the same or more favorable than offered to such third 
  

 31 

 party. SALUS may exercise such right of first refusal by notifying PARI in writing during such period. In the event SALUS
does not exercise such right of first refusal and PARI enters into such transaction with such third party, PARI shall pay SALUS a commercially reasonable payment or percentage of the revenues PARI receives as a result of such transaction. PARI and
SALUS shall negotiate in good faith such commercially reasonable payment or percentage. 
  
 (b) Termination by SALUS Without Cause. The license granted in Section 8.1.1 shall terminate in the event SALUS terminates this Agreement without cause pursuant to Section 17.4 of this Agreement.  
  
 (c) Termination for Breach by PARI or SALUS. The license granted in Section 8.1.1
shall terminate in the event this Agreement is terminated as a result of a breach by PARI or by SALUS pursuant to Section 17.2 of this Agreement. 
  
 (i) Assignment. Effective upon the termination of this Agreement as a result of a breach by PARI pursuant to Section 17.2, PARI hereby assigns, conveys and
transfers to SALUS (and agrees to further assign, convey and transfer to SALUS) all right, title and interest in PARI’s Drug Product Intellectual Property, including all causes of actions, past and future, for infringement of PARI’s Drug
Product Intellectual Property or other violations of the rights assigned under this Section 8.1.1(c)(i) and all rights to damages and recoveries arising therefrom. 
  
 (ii) Cooperation and Power of Attorney. To effectuate the intent of 8.1.1(c)(i), PARI shall execute and deliver all documents,
applications and oaths necessary or desirable, as determined by SALUS, to obtain patent, copyright or other protection for PARI’s Drug Product Intellectual Property and to vest title therein in SALUS of each such patent and copyright. PARI
shall cooperate with SALUS and do all things reasonably necessary to enable SALUS to secure and enforce patent, copyright or other proprietary protection thereon in the United States and in foreign countries at any time during or after the
termination of this Agreement. At SALUS’ request, PARI shall also cooperate with SALUS in its efforts to complete the development of the Test Formulation or Formulation by providing SALUS with technical information related to PARI’s
development of the Test Formulation, Formulation, Test Inhaler and Inhaler. PARI hereby appoints SALUS and SALUS’ attorneys as PARI’s true and lawful attorney, with full power of substitution, in the name and stead of PARI, but on behalf
and for the benefit of SALUS, only for the purposes of allowing SALUS to obtain, perfect and exercise all rights, title and interest due to SALUS under Section 8.1.1(c)(i) of this Agreement. 
  
 8.1.2. Inhaler License. Subject to the terms and conditions of this Agreement, PARI
hereby grants to SALUS a sublicensable exclusive license under PARI’s Inhaler Intellectual Property, to make, have made, use, develop, test, import, export, offer for sale, sell and distribute Drug Products, Packages, Drug Products and Packages
(in conjunction or combination with the Inhalers) and Drug Products for use with the Inhalers in the Field in the Territory. For avoidance of doubt, such license shall not include the right to make or have made the Inhalers. Such license shall
terminate upon the termination of this Agreement. 
  

 32 

 8.1.3. Background License. The Parties acknowledge that during the term of this Agreement, the development of the
Drug Products and the commercialization of the Drug Products alone and in conjunction with or for use with the Inhalers in the Field in the Territory may require a license to patents or patent applications owned, controlled or licensable by PARI,
other than the patents and patent applications included in PARI’s Intellectual Property. To the extent PARI owns, controls or has a license to patent applications or patents filed or issued prior to the Effective Date not included in
PARI’s Intellectual Property that claim the Inhaler, Formulation, Drug Product, Package or any methods of manufacture or use thereof (“PARI’s Background Patents”), subject to the terms and conditions of this Agreement, PARI
hereby grants SALUS a nonexclusive, royalty-free license to practice PARI’s Background Patents in the Field in the Territory during the term of this Agreement solely for the purpose of fully exercising the licenses granted to SALUS under
Sections 7.4.3, 8.1.1 and 8.1.2 of this Agreement. Except to the extent not permitted by the Third Party License Agreement, such nonexclusive license shall be sublicensable. The license granted in this Section 8.1.3 shall automatically terminate
upon the termination of this Agreement unless the license in Section 7.4.3 becomes effective in which case the license granted in this Section 8.1.3 shall survive the termination of this Agreement for the purposes of fully exercising the license
granted under Section 7.4.3.  
  
 8.2. Licenses to PARI. 

 
 8.2.1. Purposes of Agreement. Subject to the terms and conditions of this
Agreement SALUS hereby grants to PARI a nonexclusive, royalty-free license under SALUS’ Intellectual Property, to develop and test the Formulation, the Drug Product and the Inhaler for use with the Drug Product in the Field in the Territory,
solely for the purposes of fulfilling PARI’s Development Activity obligations under this Agreement. Such license shall automatically terminate upon the termination of the Development Term or the termination of this Agreement, whichever comes
first. 
  
 8.2.2. Sale for Use with Drug Product. Subject to the terms and
conditions of this Agreement and to the extent a license from SALUS is necessary for PARI to sell the Inhaler for use with the Drug Product without contributorily infringing upon SALUS’ Intellectual Property, SALUS hereby grants to PARI a
nonexclusive, royalty-free license under SALUS’ Intellectual Property, to make, use, develop, test, import, export, offer for sale and sell the Inhalers for use with the Drug Products by SALUS, its Affiliates or its Sublicensees in the Field in
the Territory. Such license shall automatically terminate upon the termination of this Agreement. 
  

 33 

 8.3. Ownership of Intellectual Property. 
  
 8.3.1. Inventions. 
  
 (a) PARI’s Inventions. Subject to the licenses and rights granted in this Agreement, in the event PARI, its Affiliates or Sublicensees conceives of any
concepts, inventions (whether or not patentable) or trade secrets as a result of PARI’s Development Activities during the Development Term of this Agreement (“PARI’s Inventions”), PARI shall own all right, title and interest in
PARI’s Inventions, including, without limitation, all patent rights, trade secret rights, copyrights and all other intellectual property rights in PARI’s Inventions. 
  
 (b) SALUS’ Inventions. 
  
 (i) Subject to the licenses and rights granted in this Agreement, in the event SALUS, its Affiliates or Sublicensees conceives of any concepts,
inventions (whether or not patentable) or trade secrets as a result of SALUS’ Development Activities during the Development Term of this Agreement (“SALUS’ Inventions”), SALUS shall own all right, title and interest in
SALUS’ Inventions, including, without limitation, all patent rights, trade secret rights, copyrights and all other intellectual property rights in SALUS’ Inventions; provided, however, that SALUS’ Inventions shall not include any
inventions related to the Inhaler that are based upon or are derived from PARI’s Inhaler Intellectual Property. 
  
 (ii) Notwithstanding the foregoing or anything else in this Agreement to the contrary, SALUS shall solely own all right, title and interest in SALUS’
Aztreonam Patent, and PARI shall not acquire any of such right, title or interest by virtue of this Agreement, except for the licenses granted to PARI in Section 8.2. In the event SALUS reasonably desires any data or information owned, possessed or
controlled by PARI to support SALUS’ efforts to obtain issuance of SALUS’ Aztreonam Patent or any patent application claiming priority thereto, PARI shall provide such data or information to SALUS; provided, that, in no event shall PARI be
required to violate the provisions of any agreement with any third party or to directly or indirectly make publicly available its Confidential Information. PARI shall do so without requiring any additional payment from SALUS, except as reasonably
necessary to reimburse PARI for its reasonable expenses incurred as a result of transferring such data or information to SALUS. 
  
 8.3.2. Improvements. 
  
 (a) PARI’s Improvements. 
  
 (i) Subject to the licenses and rights granted in this Agreement, in the event PARI, its Affiliates or Sublicensees conceives of any Improvements, whether alone or working with third parties, after the Development Term of this Agreement
(“PARI’s Improvement Inventions”), PARI shall own all right, title and interest in PARI’s Improvement Inventions, including, without limitation, all patent rights, trade secret rights, copyrights and all other intellectual
property rights in PARI’s Improvement Inventions. 
  

 34 

 (ii) PARI shall promptly inform SALUS in writing when PARI’s Improvement Inventions are conceived to
the extent that such Improvement Inventions relate to the Inhaler or the Drug Product. In the event PARI’s Improvement Inventions are Minor (as defined below), PARI shall grant SALUS a sublicensable, exclusive license in the Field and Territory
under such PARI’s Improvement Inventions. Such license shall not include the right to make or have made the Inhalers. SALUS’ sole obligation to pay royalties for such license shall be included within the Royalty or Step-Down Royalty
provided in Section 6.10.1 of this Agreement. In the event PARI’s Improvement Inventions are Major (defined below), at SALUS’ request during the term of this Agreement, PARI shall negotiate in good faith an agreement with SALUS which
includes mutually acceptable terms for paying commercially reasonable royalties or other payments to PARI in exchange for PARI granting SALUS a license to part or all of such PARI’s Improvement Inventions. The term “Minor” means a
modification relating to industrial design, look or another characteristic which, if implemented in a medical device or drug product having FDA or EMEA regulatory approval, would not require additional clinical studies or additional regulatory
approval before such modified medical device or drug product could be lawfully marketed or sold. The term, “Major” means a modification relating to function or performance which, if implemented in a medical device or drug product having
FDA or EMEA regulatory approval, would require additional clinical studies or additional regulatory approval before such modified medical device or drug product could be lawfully marketed or sold. 
  
 (b) SALUS’ Improvements. 
  
 (i) Subject to the licenses and rights granted in this Agreement, in the
event SALUS, its Affiliates or Sublicensees conceives of any Improvements after the Development Term of this Agreement that are not related to the Inhaler and not based upon or derived from PARI’s Inhaler Intellectual Property
(“SALUS’ Improvement Inventions”), SALUS shall own all right, title and interest in SALUS’ Improvement Inventions, including, without limitation, all patent rights, trade secret rights, copyrights and all other intellectual
property rights in SALUS’ Improvement Inventions.  
  
 (ii) SALUS shall promptly inform PARI in writing when SALUS’ Improvement Inventions are conceived. At PARI’s request during the term of this Agreement, SALUS shall negotiate in good faith an agreement with PARI which includes
mutually acceptable terms for paying commercially reasonable royalties or other payments to SALUS in exchange for SALUS granting PARI a license to part or all of SALUS’ Improvement Inventions. 
  
 8.3.3. Joint Inventions. 
  
 (a) PARI’s Ownership. Subject to Section 8.4 and the licenses and rights granted
in this Agreement, in the event PARI and SALUS jointly conceive of any concepts, inventions (whether or not patentable) or trade secrets as a result of PARI’s and SALUS’ Development Activities (collectively, “Joint Inventions”),
subject to the terms and conditions of this Agreement, PARI shall own all right, title and interest in the Joint Inventions, including, without limitation, all patent rights, trade secret rights, copyrights 
  

 35 

 and all other intellectual property rights in the Joint Inventions. Subject to the terms and conditions of this Agreement
and to the extent that title to any of the Joint Inventions is deemed to vest in SALUS, SALUS agrees to assign and does hereby assign all of SALUS’ right, title and interest in and to such Joint Inventions to PARI and agrees to execute and
deliver to PARI such documents as PARI may reasonably request to vest or perfect the rights granted in this Section 8.3.3. SALUS’ obligations to execute and deliver shall survive the termination of this Agreement. 
  
 (b) Compensation to SALUS for Commercialization Outside of Field. In the event PARI
enters into a transaction involving a license, sale, assignment or transfer of any right, title or interest in any Joint Invention outside of the Field to any third party, PARI shall pay SALUS a commercially reasonable payment or royalty which both
Parties shall negotiate in good faith, taking into account each Party’s contributions to the Joint Invention which is the subject of such transaction.  
  
 8.3.4. Cooperation for Joint Inventions. SALUS shall cooperate with PARI in its efforts to obtain, perfect, prosecute, maintain and
enforce all intellectual property rights in all Joint Inventions. Such cooperation shall include, without limitation: (i) requiring relevant employees, agents, subcontractors and consultants to execute written assignments; and (ii) providing
information regarding inventions, maintaining inventions in confidence and executing oaths, declarations of inventorship and all other instruments as PARI may reasonably deem necessary to pursue and maximize the commercial value of such intellectual
property rights. 
  
 8.4. Joint Inventions Based On SALUS’ Aztreonam
Patent. 
  
 Notwithstanding Section 8.3.3 or anything else in
this Agreement to the contrary, in the event any of the Joint Inventions are based upon or derived from the subject matter included in SALUS’ Aztreonam Patent (including, without limitation, Joint Inventions claimed, in whole or in part, in
continuation-in-part or in other patent applications claiming priority to SALUS’ Aztreonam Patent), the Party first learning of such Joint Invention shall notify the other Party. At either Party’s request, the Parties shall discuss and
determine patent protection strategies, patent-related expenses, patent ownership and other arrangements with respect to such Joint Invention, and the Parties shall pursue a course of action to maximize such patent protection. The Parties shall
conduct such discussion, determination and negotiation in good faith, taking into account each Party’s contributions to such Joint Invention. 
  
 8.5. Pursuit of Patent Protection. 
  
 8.5.1. PARI’s Obligation. PARI shall use commercially reasonable efforts to pursue patent protection for PARI’s Intellectual Property at its own expense
at least in the countries set forth in the attached Exhibit G, including, without limitation, undertaking the preparation, filing, prosecution and maintenance of patent applications and patents and paying all prosecution costs, issue fees,
maintenance fees and annuities in countries where the applications and patents are filed. PARI may select the legal counsel to represent it in these matters. PARI shall promptly notify SALUS in writing of the filing or issuance of any applications
or patents within PARI’s Intellectual Property. 
  

 36 

 8.5.2. SALUS’ Option. PARI shall solicit SALUS’ advice and review of such patent applications and
patents, and PARI shall take into consideration SALUS’ advice thereon. PARI shall keep SALUS reasonably informed regarding the preparation, filing and prosecution of all patent applications and patents in PARI’s Intellectual Property. If
PARI elects not to prepare, file, prosecute or maintain certain of such patent applications or patents, in one or more countries in the Territory not listed in Exhibit G, PARI shall give SALUS written notice thereof within a reasonable
period, not less than thirty (30) days, prior to allowing such patent applications or patents to lapse or become abandoned or unenforceable, and SALUS shall thereafter have the right, at SALUS’ sole expense and discretion, to prepare, file,
prosecute, and maintain such patent applications or patents in the name of PARI in such countries.  
  
 8.5.3. SALUS’ Obligation. SALUS shall use commercially reasonable efforts to pursue patent protection for SALUS’ Intellectual Property at its own expense at least in the countries set forth in the
attached Exhibit G, including, without limitation, undertaking the preparation, filing, prosecution and maintenance of patent applications and patents and paying all prosecution costs, issue fees, maintenance fees and annuities in countries
where the applications and patents are filed. SALUS may select the legal counsel to represent it in these matters subject to PARI’s approval which will not be unreasonably withheld or delayed. SALUS shall promptly notify PARI in writing of the
filing or issuance of any applications or patents within SALUS’ Intellectual Property.  
  
 8.6. Extension of Licensed Patent Term. Upon the reasonable request of either Party, the other Party shall execute and file any appropriate application to extend the term of any patent within PARI’s
Intellectual Property or SALUS’ Intellectual Property and any other document related to such application for extension. 
  
 9.0. Enforcement of Intellectual Property. 
  
 9.1. Notice of Infringement. If, during the term of this Agreement, either Party becomes aware of any third party infringement, misappropriation, threatened
infringement or suspected infringement of any patent within PARI’s Intellectual Property or SALUS’ Intellectual Property in the Territory, the Party having such knowledge shall promptly give written notice to the other Party thereof, with
all reasonably available details.  
  
 9.2. SALUS’ Right to
Prosecute Infringements. SALUS, at SALUS’ expense and discretion, shall have the first right, but not the obligation, to take action in its own name, in the name of its Affiliates and its Sublicensees, and in the name of PARI, if necessary,
to restrain any infringement, threatened infringement or suspected infringement in the Field of any of PARI’s Intellectual Property, where such infringement is related to the use or sale of the Formulation, the Package, the Drug Product alone
or the Drug 
  

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 Product in combination with the Inhaler. PARI shall have the sole right to take action to restrain any infringement of
any of PARI’s Intellectual Property where such infringement is not related to the use or sale of the Formulation, the Package, the Drug Product alone or the Drug Product in combination with the Inhaler. Each Party at the other’s expense,
shall reasonably cooperate with the requesting Party in any such action. PARI, at PARI’s option and expense, may actively participate as a party in any such action brought by SALUS. Subject to the terms and conditions of this Agreement, each
Party shall have the sole and exclusive right to control prosecution of such actions and the right to settle and compromise any such action or dispute without the consent of the other Party. In the event any monetary recovery in connection with any
such action or settlement is obtained, such recovery shall be applied in the following priority: first, to reimburse the Party bringing such action for its expenses incurred in prosecuting such action; second, if the other Party participates as a
party in such action, to reimburse such Party for its expenses incurred in prosecuting such action not already reimbursed by the other Party; third, to be shared by the proportion and up to the extent of any damages established in such action,
including, but not limited to, lost profits or royalties; and fourth, the balance, if any, to be retained by the Party bringing suit. 
  
 9.3. PARI’s Option to Prosecute Infringements. If SALUS does not file any such action to restrain any such infringement, threatened infringement or suspected
infringement of PARI’s Intellectual Property within nine (9) months after the latter to occur of (a) SALUS becoming aware of such infringement, threatened infringement or suspected infringement, or (b) receipt of PARI’s written request to
SALUS to do so, then PARI, at PARI’s expense, shall have the right, but not the obligation, to take action in its name, to restrain such infringement, threatened infringement or suspected infringement. SALUS, at PARI’s expense shall
reasonably cooperate with PARI in such action. SALUS, at SALUS’ option and expense, may actively participate as a party in such action. PARI shall have the sole and exclusive right to control prosecution of such action, and the right to settle
and compromise such action or dispute without the consent of SALUS. In the event any monetary recovery in connection with such infringement action is obtained, such recovery shall be applied in the following priority: first, to reimburse PARI for
its expenses incurred in prosecuting such action; second, if SALUS participates as a party in such action, to reimburse SALUS for its expenses incurred in prosecution of such action not already reimbursed by PARI; third, to be shared by the
proportion and up to the extent of any damages established in such action, including, but not limited to, lost profits or royalties; and fourth, the balance, if any, to be retained by PARI. 
  
 10.0. Defense of Inhaler. 
  
 10.1. Defense Against Third Party Action. If any patent infringement action is
brought in a country in the Territory against SALUS, Affiliates of SALUS or Sublicensees because of the actual or anticipated manufacture, use or sale of the Drug Product alone or the Drug Product in combination with the Inhaler, SALUS, Affiliates
of SALUS or its Sublicensees shall have the right, but not the obligation, to promptly defend against such infringement action. PARI shall, at SALUS’ expense, cooperate with SALUS, its Affiliates and Sublicensees in all respects in the defense
of such action 
  

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 and shall cause any of PARI’s employees and agents to give depositions and testify when requested by SALUS, its
Affiliates or Sublicensees and make available to SALUS, its Affiliates or Sublicensees copies of any and all relevant records, papers, documents, information and specimens, if necessary under an appropriate protective order. SALUS shall have the
sole right to control the defense of such action, and the right to settle and compromise such action or dispute. SALUS shall retain all recovery received pursuant to such action. 
  
 10.2. Result of Litigation. If as a result of such action, SALUS, its Affiliates or Sublicensees are required to make changes in the
Drug Product or make payments to any third parties, any reasonable costs incurred by SALUS, its Affiliates or Sublicensees related to such an action which PARI has not already paid to SALUS pursuant to PARI’s indemnification obligations under
Section 13.1 of this Agreement, including reasonable attorneys’ fees, settlement costs or damages, shall be offset against any Royalty or Step-Down Royalty payments otherwise due to PARI pursuant to Section 6.10.1 of this Agreement. SALUS shall
not be relieved of its obligation to pay to PARI the minimum annual royalty. 
  
 11.0. Confidentiality. 
  
 11.1. Use of Confidential
Information. During the term of this Agreement, PARI and SALUS may each provide their Confidential Information to one another, including but not limited to each Party’s proprietary materials and/or technologies, economic information,
business or research strategies, trade secrets and material embodiments thereof. The Parties shall use the Confidential Information of the other Party only for those purposes specified in this Agreement or reasonably contemplated for carrying out
the purposes of the Agreement. Otherwise, the recipient Party shall maintain the providing party’s Confidential Information in strict confidence, except if and to the extent that such disclosure is required by applicable law and provided that
the providing Party has received written notice reasonably in advance of the required disclosure. Within sixty (60) days after the termination of this Agreement or after the request of the providing Party during the term of this Agreement, the
recipient Party shall return all tangible materials comprising Confidential Information of the providing Party and return or destroy any notes, copies, summaries or extracts of the providing Party’s Confidential Information, provided that each
Party shall be permitted to retain one copy of such embodiments of the other Party’s Confidential Information for archiving or legal purposes only. 
  
 11.2. Confidentiality Agreements. Each of SALUS and PARI shall use commercially reasonable efforts to obtain, if not already in place, confidentiality agreements
from its relevant employees, agents, investigators, subcontractors and consultants to protect the Confidential Information as herein provided. 
  
 11.3. Publication and Delay. Either Party, its employees or consultants wishing to make a publication or other disclosure (oral, written or electronic) relating to
the Development Activities performed by such Party under this Agreement (the “Publishing Party”) shall transmit to the other Party (the “Reviewing Party”) a copy of the proposed 
  

 39 

 publication or disclosure or an outline of any such oral disclosure at least thirty (30) days prior to submission for
publication or disclosure. In the event the Reviewing Party decides to file a patent application related to such disclosure, the Reviewing Party shall provide a written notice to the Publishing Party within such thirty (30) day period. Such notice
shall be certified by an authorized officer of the Reviewing Party and may include a request by the Reviewing Party of a delay in disclosure of up to thirty (30) days after the date of the Reviewing Party’s notice. The Publishing Party shall
delay disclosure in accordance with any such request. 
  
 11.4. Restricted
Disclosure – Terms of Agreement. Except as provided in this Section or Section 11.5 below, neither Party shall disclose the terms of this Agreement to any third party, whether in writing or orally, without the prior written consent of the
other Party, except for terms or subject matter which has been the subject of public disclosure or has been mutually approved for such disclosure pursuant to Section 11.3 above. Notwithstanding the foregoing, each Party shall have the right to
disclose the material terms of this Agreement in confidence to any bona fide potential or actual investor, investment banker, counsel, acquirer, merger target, and where reasonably practicable, shall obtain a binder of confidentiality consistent
with the terms of this Agreement. In addition, either Party may disclose the terms of this Agreement if, but only to the extent such disclosure is, on advice of legal counsel, required by applicable law. The disclosing Party shall use commercially
reasonable efforts to preserve the confidentiality of the terms of this Agreement notwithstanding any such disclosure required by law, and will give the other Party written notice of such required disclosure in advance thereof, to the extent
practicable. In the event either Party is required to file this Agreement with the Securities and Exchange Commission or any other regulatory agency, such Party shall apply for confidential treatment of this Agreement to the fullest extent permitted
by law, shall provide the other Party a copy of the confidential treatment request far enough in advance of its filing to give the other Party a meaningful opportunity to comment thereon, and shall incorporate in such confidential treatment request
any reasonable comments of the other Party.  
  
 11.5. Publicity
– Press Releases. The Parties may issue press releases with one another’s approval which disclose features of the Drug Product, Standard Inhaler or Inhaler or which disclose the fact that the Parties are developing the Drug Product,
Standard Inhaler or Inhaler, provided that such press releases do not include a description of the technical aspects of such development or the functional design, elements or components which result in such features. The Parties may issue all other
press releases, either jointly or independently, following the execution of this Agreement, the form and substance of which must be approved in advance by both Parties, provided such approval shall not be unreasonably withheld or delayed.
 
  
 11.6. Publicity – Use of Parties’ Names.
Neither Party shall use the name of the other Party or any of the other Party’s affiliates, employees or subsidiaries, or reference any of the other Party’s products in any promotions, public statements or public disclosures without the
prior written consent of an authorized representative of the other Party, except where required by law. 
  

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 12.0. Representations and Warranties. 
  
 12.1. PARI Representations and Warranties. PARI represents, warrants and covenants that: 
  
 (a) PARI is a corporation duly organized, existing and in good standing
under the laws of Germany, with full right, power and authority to enter into and perform this Agreement; 
  
 (b) the execution, delivery and performance of this Agreement does not conflict with, violate or breach any agreement to which PARI is a party, any court
order to which PARI is a party or subject to or PARI’s certificate of incorporation or bylaws; 
  
 (c) this Agreement has been duly executed and delivered by PARI and is a legal, valid and binding obligation enforceable against PARI in accordance with
its terms subject to applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws relating to or affecting creditors’ rights generally and equitable principles; 
  
 (d) as of the Effective Date, PARI owns or controls PARI’s Intellectual
Property; PARI has the right to grant the licenses and rights set forth in this Agreement; no patents within PARI’s Intellectual Property have been involved in any reissue, reexamination, interference, opposition or equivalent or similar
proceeding or in any litigation; to the best of PARI’s knowledge, any patents within PARI’s Intellectual Property are valid and enforceable, and are not known to be infringed by any third party in the Territory; and PARI is unaware of any
information that would adversely affect the validity or enforceability of any of the patent rights within PARI’s Intellectual Property; 
  
 (e) to the best of PARI’s knowledge as of the Effective Date, the development, manufacture, use, importation, exportation and sale of the Standard
Inhaler and Inhaler as specified in the Development Plan, in the Territory will not infringe any patent or other intellectual property rights of any third party; 
  
 (f) PARI has not knowingly withheld from SALUS any material information in PARI’s possession relating to the
functionality, manufacture, safety or efficacy of the Inhaler or the use thereof with the Drug Product, and to the best knowledge of PARI, the information relating to the functionality, manufacture, safety or efficacy of the Standard Inhaler or
Inhaler and the use thereof with the Drug Product provided to SALUS does not contain any misstatement of a material fact nor omit to state any material fact required to make such information not misleading; 
  
 (g) the execution and delivery by PARI of this Agreement and the performance
by PARI of the obligations under this Agreement require no regulatory approvals, other than approvals by FDA, EMEA or other similar agencies in the Territory, to be obtained on the part of PARI, or, if required, PARI has obtained such approvals;

  

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 (h) the Test Inhalers, Test Drug Products, Inhalers and the Drug Products which PARI supplies to SALUS
hereunder shall, upon shipment to SALUS, be free and clear of all security interests, liens and other encumbrances of any kind or character; 
  
 (i) under the terms of a written agreement, PARI has bound its employees and agents assigned to perform tasks related to or involving the Development
Activities to maintain in confidence the Confidential Information arising from or received as a result of such Development Activities; 
  
 (j) the definition of Third Party License Agreement in Section 1.70 is accurate; and PARI has obtained the approval of Bespak required under the Third
Party License Agreement in order to grant SALUS the licenses herein without violating the Third Party License Agreement; and 
  
 (k) the licenses and rights granted by PARI in this Agreement and the exercise thereof shall not violate, breach or conflict with the terms and conditions
of the Third Party License Agreement or the rights of Bespak under the Third Party License Agreement. 
  
 12.2. SALUS Representations and Warranties. SALUS represents, warrants and covenants that: 
  
 (a) SALUS is a corporation duly organized, existing and in good standing under the laws of the State of Delaware, with full right, power and authority to
enter into and perform this Agreement; 
  
 (b) the execution,
delivery and performance of this Agreement does not conflict with, violate or breach any agreement to which SALUS is a party, any court order to which SALUS is a party or subject to, or SALUS’ certificate of incorporation or bylaws; 

 
 (c) this Agreement has been duly executed and delivered by SALUS and is a
binding obligation enforceable against SALUS in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, arrangement, moratorium and other laws relating to or affecting creditors’ rights generally and equitable
principles; 
  
 (d) as of the Effective Date, SALUS owns or
controls SALUS’ Intellectual Property; SALUS has the right to grant the licenses and rights set forth in this Agreement; no patents within SALUS’ Intellectual Property have been involved in any reissue, reexamination, interference,
opposition or equivalent or similar proceeding or in any litigation; to the best of SALUS’ knowledge, any patents within SALUS’ Intellectual Property are valid and enforceable, and are not known to be infringed by any third party in the
Territory; and SALUS is unaware of any information that would adversely affect the validity or enforceability of any of the patent rights within SALUS’ Intellectual Property; 
  
 (e) to the best of SALUS’ knowledge as of the Effective Date: (i) the development, manufacture, use, importation,
exportation or sale of the Inhaler only to 
  

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 the extent the Inhaler differs from the Standard Inhaler as of the Effective Date or the development or use of the
Formulation without the Undesired Formulations, as specified in the Development Plan, will not infringe any patent or other intellectual property rights of any third party; and (ii) after the Development Term, the manufacture, use, importation,
exportation and sale of the Drug Products not made with the Undesired Formulations in the Territory, as specified in the Development Plan, will not infringe any patent or other intellectual property rights of any third party; 
  
 (f) SALUS has not knowingly withheld from PARI any material information in
SALUS’ possession relating to the functionality, manufacture, safety or efficacy of the Drug Product or its use with the Inhaler, and to the best knowledge of SALUS, the information relating to the functionality, manufacture, safety or efficacy
of the Drug Product provided to PARI does not contain any misstatement of a material fact nor omit to state any material fact required to make such information not misleading; 
  
 (g) the execution and delivery by SALUS of this Agreement and the performance by SALUS of the obligations under this
Agreement require no regulatory approvals, other than approvals by FDA, EMEA or other similar agencies in the Territory, to be obtained on the part of SALUS, or, if required, SALUS has obtained such approvals; 
  
 (h) under the terms of a written agreement, SALUS has bound its employees and
agents assigned to perform tasks related to or involving the Development Activities to maintain in confidence the Confidential Information arising from or received as a result of such Development Activities; and 
  
 (i) as of the Effective Date, SALUS has not received any notice from any
third party that the use of the aztreonam material SALUS has provided to PARI under the Material Transfer Agreement infringes upon such third party’s patent or other proprietary rights. 
  
 13.0. Indemnification. 
  
 13.1. Indemnification of SALUS. PARI shall at all times during and after the term of this Agreement be responsible for, and shall
defend, indemnify and hold SALUS, its Affiliates, Sublicensees, directors, officers, employees, agents and representatives harmless from and against any and all losses, claims, lawsuits, proceedings, expenses, recoveries and damages, including
reasonable legal expenses, costs and attorneys fees, arising out of: (i) any product liability or lawsuit by a third party directly arising from the design or function of the Inhaler which is embodied within the Standard Inhaler, except to the
extent attributable to SALUS’ breach of any representation or warranty provided in Section 12.2; (ii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a third party arising from the
design or function of the Inhaler which is embodied within the Standard Inhaler; (iii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a third party arising from the combination of the
Inhaler and Drug Product, wherein the infringement arises proximately from the design or function of the Inhaler which is 
  

 43 

 embodied within the Standard Inhaler; (iv) any breach of any representation or warranty given in this Agreement by PARI;
and (v) any negligent conduct or willful misconduct by PARI in the development of the Inhaler, Formulation, Drug Product or any negligent conduct or willful misconduct otherwise in performance under this Agreement; provided however, that (a) SALUS
gives PARI prompt notice of any such claim or lawsuit; (b) PARI has the right to compromise, settle or defend such claim or lawsuit; and (c) SALUS, at the expense of PARI, cooperates with PARI in the defense of such claim or lawsuit. SALUS, at its
expense, may participate in the defense of any such claim or lawsuit.  
  
 13.2. Indemnification of PARI. SALUS shall at all times during and after the term of this Agreement be responsible for, and shall defend, indemnify and hold PARI, its Affiliates, sublicensees, directors, officers, employees, agents
and representatives harmless from and against any and all losses, claims, lawsuits, proceedings, expenses, recoveries and damages, including reasonable legal expenses, costs and attorneys fees, arising out of: (i) any product liability claim or
lawsuit by a third party directly arising from the Drug Products made, used, sold or distributed by SALUS, its Affiliates or Sublicensees, except to the extent attributable to PARI’s breach of any representation or warranty provided in Section
12.1; (ii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a third party arising from any Package made or distributed by SALUS unless PARI developed, had developed or supplied or had
supplied the Package to SALUS; (iii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a third party arising from the Drug Product, or combination of the Drug Product and the Inhaler,
wherein the infringement arises proximately from the Drug Product; (iv) any breach of any representation or warranty given in this Agreement by SALUS; (v) any negligent conduct or willful misconduct by SALUS in the development of the Drug Products
or the Package or any negligent conduct or willful misconduct otherwise in performance under this Agreement; and (vi) any claim for personal injury or property damage arising from the negligent or willful misconduct of SALUS’ employees or
agents during any visit to PARI’s or its subcontractor’s facilities; provided however, that: (a) PARI gives SALUS prompt notice of any such claim or lawsuit; (b) SALUS has the right to compromise, settle or defend such claim or lawsuit;
and (c) PARI, at the expense of SALUS, cooperates with SALUS in the defense of such claim or lawsuit. PARI, at its expense, may participate in the defense of any such claim or lawsuit. 
  
 14.0. Insurance. Each Party or its Affiliates, shall maintain appropriate product liability insurance with respect to any clinical
trials, manufacturing, development, sales, marketing, distribution and promotion activities performed by it hereunder, in each case in the amount of Five Million U.S. Dollars (US $5,000,000) per occurrence and in total. Each Party shall maintain
such insurance until the Inhaler and Drug Product are no longer sold (or, in the case of clinical trial insurance, for a reasonable period of time following completion of clinical trials). Upon the termination of such insurance during the Royalty
Period, each Party shall obtain tail end product liability coverage for a five-year term in such amounts and subject to such deductibles as the Parties may mutually agree based upon standards prevailing in the industry at the time. Each Party shall
name the other Party as an additional insured on any policy required by this Section, 
  

 44 

 and shall deliver certificates of insurance to the other Party to document compliance with this Section. The Parties may,
in their sole discretion, obtain insurance in countries other than the United States. 
  
 15.0. Limitation of Damages. 
  
 (A) EACH PARTY’S CUMULATIVE
LIABILITY FOR ANY ACTUAL LOSS OR ACTUAL DAMAGES RESULTING FROM ANY CLAIMS, DEMANDS, OR ACTIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL NOT EXCEED THE SUM OF [*]. THE LIMITATION OF THIS SECTION 15(A) SHALL NOT APPLY, HOWEVER, TO A
PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTION 13.1(I), (II) AND (III), AND 13.2(I), (II) AND (III), AS THE CASE MAY BE. 
  
 (B) IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT,
HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS LIMITATION WILL APPLY EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED WARRANTY PROVIDED HEREIN. THE
LIMITATION OF THIS SECTION 15(B) SHALL NOT APPLY, HOWEVER, TO A PARTY’S INDEMNIFICATION OBLIGATIONS FOR THIRD PARTY CLAIMS PURSUANT TO SECTION 13.0 OF THIS AGREEMENT. 
  
 16.0. Dispute Resolution. 
  
 16.1. Negotiation. PARI and SALUS shall endeavor to resolve any claim or controversy arising out of or relating to this Agreement or arising from the threatened
breach, breach, termination or validity of this Agreement informally by negotiation between the senior executives, officers or management of PARI and SALUS. Either Party may give the other Party written notice of any claim or controversy not
resolved in the normal course of business (the “Disputing Party Notice”). Within thirty (30) days after the delivery of the Disputing Party Notice, the receiving Party shall submit to the other Party a written response (the
“Response”). The Disputing Party Notice and Response shall include a statement of each Party’s position and a summary of the arguments supporting that position. Within sixty (60) days after the Disputing Party Notice, such designated
senior executives, officers or management of PARI and SALUS shall meet at a mutually acceptable time and place and thereafter as often as they reasonably deem necessary to attempt to resolve the claim or controversy. All negotiations pursuant to
this Section are confidential and without prejudice and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. 
  

 
 16.2. Mediation. If the claim or controversy has not been resolved by negotiation
pursuant to Section 16.1 of this Agreement within ninety (90) days of the Disputing Party Notice, or if the Parties fail to meet within the time periods specified in Section 16.1 of this Agreement, the Parties shall endeavor to settle the dispute by
mediation under the then current Model Mediation Procedure for Business Disputes of the Center 
  
 *Confidential Treatment Requested. 
  

 45 

 for Public Resources (“CPR”). Unless otherwise agreed, the Parties shall select a mediator from the CPR panel
of neutrals and shall notify CPR to initiate the selection process. Either Party may initiate this procedure ninety (90) days after the Disputing Party Notice whether or not the Parties have met. 
  
 16.3. Arbitration. 
  
 16.3.1. Procedural Rules of Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the threatened
breach, breach, termination or validity thereof, which remains unresolved for forty-five (45) days after the appointment of a mediator pursuant to Section 16.2 of this Agreement shall be finally settled by arbitration in accordance with the CPR
Non-Administered International Arbitration Rules and Commentary. 
  
 16.3.2.
Tribunal. The tribunal shall consist of a sole arbitrator unless in the initial notice of arbitration or notice of defense, either Party requests a panel of three arbitrators in which event the panel will consist of three arbitrators, none of
whom shall be appointed by a Party. In selecting the arbitrator(s), either Party may, but need not, strike any candidate who does not have a background in the field of pharmaceuticals with related scientific, legal or business experience. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. § 1 et seq., and judgment upon the award rendered by the arbitrator(s) may be entered by any court or authority having jurisdiction thereof. Insofar as the proceeding
relates to patents, it shall also be governed by 35 U.S.C. § 294, to the extent applicable. THE ARBITRATORS ARE NOT EMPOWERED TO AWARD TREBLE, PUNITIVE OR ANY OTHER DAMAGES IN EXCESS OF COMPENSATORY DAMAGES, AND EACH PARTY IRREVOCABLY WAIVES
ANY CLAIM TO RECOVER ANY SUCH DAMAGES. 
  
 16.3.3. Governing Substantive Law
for Arbitration. In all arbitration proceedings, the governing, substantive law applied by the arbitrator(s) shall be the Uniform Commercial Code and other applicable laws of the State of Delaware, excluding its conflict-of-law rules. The
governing, substantive law for arbitration proceedings shall not be the provisions of the 1980 U.N. Convention on Contracts for the International Sale of Goods or the United Nations Convention on the Limitation Period in the International Sale of
Goods, as amended. 
  
 16.3.4. Serving of Notice for Arbitration. SALUS and
PARI shall be deemed to have consented that any papers, notices or process may be served on either party by Federal Express or other reliable overnight courier, or hand delivered or mailed by registered or certified mail, postage prepaid and return
receipt requested, addressed to the Party or its representative at the addresses set forth in Section 18.0 or by personal service where the arbitration is to be held, where such papers, notices or process is necessary or proper for: (i) the
initiation or continuation of an arbitration; (ii) any court action in connection therewith; or (iii) the entry of judgment on any award made by the arbitrator(s). 
  

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 16.3.5. Forum, Language, Trade Usage Standard and Currency. The place of the arbitration shall be in Washington,
D.C. whether the arbitration is initiated by SALUS or PARI. The arbitration and all related communications and correspondence shall be conducted in the English language. All arbitration monetary awards shall be in the currency form of the United
States dollar. 
  
 16.4. Injunctive Relief. Notwithstanding the foregoing,
each Party shall have the right to immediately apply to a court of competent jurisdiction to seek temporary, or permanent injunctive relief to restrain any conduct or any threatened conduct in violation of or otherwise with respect to Sections 5.4,
5.5, 6.15, 6.16 and 11.0 of this Agreement, or that could threaten either Party’s rights in or to, or protect or enforce, any of the Parties’ intellectual property.  
  
 16.5. Attorneys’ Fees. The Party which is found to be in breach of this Agreement in any arbitration or legal action for amounts
past due hereunder, failure to perform hereunder or any other reason arising out of this Agreement, shall reimburse the other Party for its reasonable attorneys’ fees and expenses and reasonable collection costs incurred as a result of such
arbitration or legal action. The Party found to be in breach shall make such reimbursement payment within thirty (30) calendar days after the settlement of such arbitration or the final, unappealable judgment of the legal action, whichever is
applicable.  
  
 17.0. Term and Termination. 
  
 17.1. Term. The term of this Agreement is effective as of the Effective Date as first
written above, and except as otherwise provided in Section 17.0 of this Agreement, shall terminate upon the expiration of the Royalty Period. Notwithstanding anything in this Agreement to the contrary, in the event this Agreement remains in effect
for the duration of the entire Royalty Period, the licenses granted from PARI to SALUS hereunder shall be fully paid-up nonexclusive irrevocable licenses under the Know-How included within PARI’s Drug Product Intellectual Property and under
PARI’s Drug Product Data included within PARI’s Drug Product Intellectual Property. 
  
 17.2. Termination for Breach. If either Party shall be in default of, or fail to comply with any material obligation or condition of this Agreement, the non-defaulting Party may terminate this Agreement by
giving sixty (60) days’ notice to the defaulting Party, specifying in reasonable detail the basis for termination. If within sixty (60) days after the receipt of such notice, the Party who received such notice remedies the condition forming the
basis for termination, such notice shall cease to be operative, and this Agreement shall continue in full force and effect. If sixty (60) days after the receipt of such notice, the Party who received such notice fails to remedy the condition forming
the basis for termination, this Agreement shall be terminated. 
  

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 17.3. Termination by SALUS. 
  
 17.3.1. SALUS Termination With Cause. 
  
 (a) Causes. Subject to Section 17.3.1(b) below, SALUS may terminate this Agreement with cause in the event that: 
  
 (i) SALUS receives a toxicity profile for the Test Drug Product or Drug
Product derived from a Pre-Clinical Study, Phase I Clinical Study, Phase II Clinical Study or Phase III Clinical Study which would require SALUS to terminate further pre-clinical or clinical studies in order to avoid: (w) violating a reasonable
standard of patient care; (x) endangering or potentially endangering patients; (y) a diminished commercial potential for the Drug Product which renders the Drug Product not commercially viable; or (z) a restrictive regulatory labeling for the Drug
Product; 
  
 (ii) SALUS receives an efficacy profile for the Test
Drug Product or Drug Product derived from a Pre-Clinical Study, Phase I Clinical Study, Phase II Clinical Study or Phase III Clinical Study which, in accordance with SALUS’ reasonable business judgment, removes the commercial merit from any
further testing or development of the Drug Product; 
  
 (iii) the
Development Activities reveal significant technical difficulties relating to the Formulation or Package of the Test Drug Product or Drug Product which are not contemplated or expected in the Development Plan; 
  
 (iv) the development of the Test Inhaler or Inhaler has significant delays
beyond that which is contemplated or expected in the Development Plan, provided that the delay is not caused by changes in the Test Formulation, Formulation, Test Drug Product, Drug Product, Test Inhaler, or Inhaler required by Salus; 
  
 (v) the Test Inhaler or Inhaler is unable to perform to the Inhaler
Specifications or is otherwise incompatible with the Test Formulation, Formulation, Test Drug Product or Drug Product, provided that the incompatibility is not due to changes in the Test Formulation, Formulation, Test Drug Product, Drug Product,
Test Inhaler, or Inhaler required by Salus; or 
  
 (vi) SALUS
receives a negative review or negative comments from the FDA, EMEA or another regulatory body which indicates that SALUS will not likely be able to obtain regulatory approval of an NDA or European Dossier for the Drug Product. 
  
 (b) Termination Notice. Upon the occurrence of any of the events set forth in Section
17.3.1(a) above, SALUS may notify PARI in writing of such occurrence (“Termination Notice”). Within thirty (30) days after PARI’s receipt of the Termination Notice, PARI shall submit to SALUS a written response (“Termination
Response”). The Termination Notice and the Termination Response shall each include a statement regarding the situation at issue, each Party’s position and any proposed solutions. 
  

 48 

 (c) Agreement That Cause Exists. If the Parties agree that events outlined in the Termination Notice qualify for
termination under this Section 17.3.1, within sixty (60) days after the Termination Notice, the designated senior executives, officers or management of PARI and SALUS shall meet at a mutually acceptable time and place and thereafter as often as they
reasonably deem necessary to attempt to resolve the situation at issue. In the event that, within ninety (90) days after the Termination Notice, SALUS and PARI do not agree in writing to continue this Agreement with its original terms or amended
terms, this Agreement shall terminate, subject to Salus paying the wind-down costs in Section 17.3.3. In the event the Parties do agree in writing to continue this Agreement with its original terms or amended terms, this Agreement shall continue in
full force and effect, in accordance with any amendment thereto. 
  
 (d)
Disagreement That Cause Exists. In the event the Parties disagree that the events outlined in the Termination Notice provide for termination under this section 17.3.1, the Parties shall retain the services of one or more mutually acceptable
independent consultants, having sufficient technical, scientific, statistical, regulatory and/or business expertise, to provide a written opinion as to the accuracy or inaccuracy of the Parties conclusions. If the opinion states that the conditions
in Section 17.3.1 exists, the Parties shall meet at a mutually acceptable time and place and thereafter as often as they reasonably deem necessary to attempt to resolve the situation at issue. In the event that, within ninety (90) days after such
opinion, SALUS and PARI do not agree in writing to continue this Agreement with its original terms or amended terms, this Agreement shall terminate, subject to Salus paying the wind-down costs in Section 17.3.3. If the opinion states that the
conditions in Section 17.3.1 do not exist, SALUS may, at its option, terminate this Agreement in accordance with Section 17.3.2 (not this Section 17.3.1), otherwise this Agreement shall remain in full force and effect.  
  
 17.3.2. SALUS’ Termination Without Cause. SALUS may terminate this Agreement for
any reason whatsoever pursuant to this Section 17.3.2. Termination of this Agreement under this Section 17.3.2, shall be effective upon SALUS providing at least thirty (30) days’ prior written notice to PARI and SALUS making the applicable
payment provided below in this Section 17.3.2. 
  
 (a) Pre-Phase II
Termination. In the event SALUS provides termination notice under this Section 17.3.2 before PARI delivers the Test Drug Products and Test Inhalers to SALUS for the Phase II Clinical Study, such termination penalty shall be the sum of: (x)
[*] percent [*] of: [*] less all payments made to PARI for Pre-Phase II Services up to the date of such notice; and (y) the 1st Milestone payment set forth in Section 6.7 of this Agreement. 
  
 (b) Post-Phase II Termination. 
  
 (i) In the event SALUS provides termination notice under this Section 17.3.2 after PARI delivers the Test Drug Products and Test Inhalers to SALUS for the Phase II Clinical Study but before PARI delivers the Drug Products and Inhalers to
SALUS for the Phase III Clinical Study, such termination penalty shall be the sum of: (x) [*] percent [*] of: [*] less all payments made to PARI for Post-Phase II Services up to the date of such notice; and (y) the 2nd Milestone payment set forth in Section 6.7 of this Agreement. 
  
 *Confidential Treatment Requested. 
  

 49 

 (ii) In the event SALUS provides termination notice under this Section 17.3.2 after PARI delivers the
Drug Products and Inhalers to SALUS for the Phase III Clinical Study but before SALUS files an NDA or European Dossier for the Drug Product, such termination penalty shall be the sum of: (x) [*] percent [*] of: [*] less all
payments made to PARI for Post-Phase II Services up to the date of such notice; and (y) the 3rd Milestone payment
set forth in Section 6.7 of this Agreement.  
  
 (iii) In
the event SALUS provides termination notice under this Section 17.3.2 after SALUS files an NDA or European Dossier for the Drug Product but before SALUS obtain regulatory approval of such NDA or EMEA, such termination penalty shall be the sum of:
(x) [*] percent [*] of: [*] less all payments made to PARI for Post-Phase II Services up to the date of such notice; and (y) the 4th Milestone payment set forth in Section 6.7 of this Agreement.  
  
 17.3.3. Wind-Down Costs. Within sixty (60) days of any Termination Notice under Section 17.3.1 or 17.3.2, PARI may notify SALUS in writing of the reasonable
wind-down cost PARI expects to incur as a result of any termination described in such Termination Notice, including reasonable fees owed to third party subcontractors. In the event this Agreement is terminated pursuant to Section 17.3.1 or 17.3.2,
subject to the terms and conditions of this Agreement, SALUS shall pay PARI such reasonable wind-down cost within thirty (30) days after such termination. In the event PARI fails to notify SALUS of the reasonable wind-down cost under this Section
17.3.3, SALUS shall not be liable to PARI for such wind-down cost.  
  
 17.4. Survival. The rights and obligations described in Sections 1.0, 5.3, 5.4, 5.4.2, 5.4.3, 5.4.4, 5.5, 5.5.1, 5.5.2, the rights and obligations for payments accrued under Section 6.0 upon or prior to the termination of this
Agreement, the rights and obligations described in Sections 7.4, 8.1.1(a), 8.1.1(c)(i) and (ii), the rights and obligations described in Section 8.1.3 to the extent the license granted in Section 7.4.3 becomes effective, the rights and obligations
described in Sections 8.3.1, 8.3.2 and 8.3.3, the ownership determinations made under Section 8.4, the rights and obligations described in Sections 11.1, 11.4, 12.1, 12.2, 13.1 and 13.2, any tail-end insurance coverage obtained under Section 14.0
and the rights and obligations described in Sections 15.0, 16.0, 17.0 and 18.0, in addition to all other provisions, which by their terms contemplate survival, shall survive the expiration or termination of this Agreement. 
  
 17.5. Rights in Bankruptcy. All rights and licenses granted under Section 8 of this
Agreement by each Party are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, licenses of a right to “intellectual property” as defined under Section 101 of the United States
Bankruptcy Code. Each Party, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the United States Bankruptcy Code in the event of the commencement of a bankruptcy proceeding by
or against the licensor Party under the United States Bankruptcy Code including, but not limited to, the right to treat 
  
 *Confidential Treatment Requested. 
  

 50 

 this Agreement or any agreement supplementary to this Agreement as terminated or to retain its rights under this
Agreement or any Agreement supplementary to this Agreement. In the event that the licensee Party elects to retain its rights under this Agreement or any agreement supplementary to this Agreement, the licensor Party shall provide to the licensee
Party, within seven (7) calendar days of written notice by the licensee Party to the licensor Party in accordance with Section 18 of this Agreement, all intellectual property and all embodiments of such intellectual property within the possession or
control of the licensor Party. 
  
 18.0. Miscellaneous. 
  
 18.1. Entire Agreement. This Agreement, which includes the Exhibits attached hereto,
contains the entire agreement between PARI and SALUS with respect to the transactions contemplated by this Agreement and supersedes all prior arrangements or understandings with respect thereto. 
  
 18.2. Notices. All notices or other communications that are required or permitted
under this Agreement shall be in writing and shall be sent by Federal Express or other reliable overnight courier, or hand delivered or mailed by registered or certified mail, postage prepaid and return receipt requested, to the appropriate party
addressed as follows: 
  

							
	If to SALUS:	  	 SALUS Pharma, Inc.
 2025 1st Avenue
 Suite 800
 Seattle, Washington 98121
 Fax: 206-728-5095
 Attn: A. Bruce Montgomery, MD
 Title: CEO
	  	 with a
 copy to:
	  	 Bell, Boyd & Lloyd LLC
 70 West Madison
Street
 Chicago, Illinois 60602 U.S.A.
 Fax:
312-372-2098
 Attn: Cameron S. Avery, Esq.

				
	If to PARI:	  	 PARI GmbH
 Moosstrasse 9, D-82319
 Starnberg, Germany
 Fax: 011 +49 (89) 742 846-50
 Attn: Dr. Martin Knoch
 Title: Managing Director
	  	 with a
 copy to:
	  	 McGuire Woods LLP
 One James Center
 Richmond, Virginia 23219 U.S.A.
 Fax: 703-712-5050
 Attn: Pamela C. Gavin, Esq.

  
 Any Party may by such notice change
the address to which notice or other communications to it are to be delivered or mailed. 
  
 18.3. Choice of Law. The rights and obligations of SALUS and PARI under this Agreement shall not be governed by the provisions of the 1980 U.N. Convention on Contracts for the International Sale of Goods or the
United Nations Convention on the Limitation Period in the International Sale of Goods, as amended; rather, such rights and obligations shall be governed by and construed in accordance with the Uniform Commercial Code and other applicable laws of the
State of Delaware, excluding its conflict-of-law rules. This provision shall not preclude application of the United States Arbitration Act. 
  

 51 

 18.4. Assignability. This Agreement shall not be assignable other than by operation of law by either Party without
the prior written consent of the other Party, and any purported assignment by either Party without the prior written consent of the other Party shall be void, except that either Party may assign its rights under this Agreement to any other
corporation or other entity that succeeds to all or substantially all of that portion of its business to which this Agreement relates pursuant to any reorganization or sale or disposition of substantially all of its assets related to that portion of
its business, provided that the assignee agrees to assume the assignor’s obligations hereunder, in which case the assignor shall have no further rights or obligations under this Agreement. Nothing in this Agreement or such assignment shall
eliminate such assignor’s obligations under this Agreement which arise prior to the time of such assignment. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted
assigns.  
  
 18.5. Waivers and Amendments. Any waiver of any term
or condition of this Agreement, or any amendment or supplementation of this Agreement, shall be effective only if in writing signed by the Parties. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall
not in any way affect, limit or waive a Party’s rights hereunder at any time to enforce strict compliance thereafter with every term or condition of this Agreement. 
  
 18.6. Severability. In the event that any provision contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and the remaining provisions of this Agreement shall not, at the election of the Party for whose benefit the
provision exists, be in any way impaired. 
  
 18.7. Section Headings. The
section headings contained in this Agreement are for the purpose of convenience and are not intended to define or limit the contents of such sections. 
  
 18.8. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. 
  
 18.9. Further Assurances. Upon the
reasonable request of either Party, the other Party shall execute any additional certificates or other documents that may be reasonably necessary to fully implement this Agreement. 
  
 18.10. Force Majeure. Except pursuant to existing laws, regulations and orders, no failure or omission by either Party in the
performance of any obligation of this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the Parties including, but not limited to the following which,
for the purposes of this Agreement, shall be 
  

 52 

 regarded as beyond the control of the Party in question: (i) any act or omission of any government; (ii) any future rule,
regulation or order issued by any governmental authority or by any officer, department, agency, or instrumentality thereof which makes such performance impossible or commercially unreasonable; or (iii) any Act of God; fire; storm; flood; earthquake;
accident; war; terrorism; rebellion; insurrection; riot; invasion; strike; and lockout (such cause or causes collectively, “Force Majeure”). 
  
 18.11. Compliance of Law. In conducting any activity under this Agreement or in connection with the development, manufacture, use or sale of the Drug Product and
Inhaler, PARI and SALUS shall comply with all applicable laws and regulations including, but not limited to, all import and export regulations of the applicable authorities in the Territory. 
  
 18.12. Relationship of the Parties. The relationship of the Parties under this
Agreement is that of independent contractors. Neither Party shall be deemed to be the agent of the other, nor shall the Parties be deemed to be partners or joint venturers. Neither Party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement or undertaking. 
  
 18.13. Choice of Language. This Agreement, originally written in the English language, shall be governed by the English language. In the event any dispute arises
with respect to this Agreement, the meanings of all terms and provisions of this Agreement shall be interpreted in their original English form. The governing language of all correspondence related to reporting, negotiation, disputes, arbitration and
notice requirements shall be the English language. The Parties shall bear their own expenses for having text or other communications translated into the English language. 
  
 18.14. Choice of Currency. The form of currency used for all purposes of this Agreement shall be the United States dollar.

  
 18.15. Changes in Borders. In the event an area separates from a
country during the term of this Agreement, the country shall nonetheless be deemed to be the combination of each separating area which initially formed the single political entity as of the Effective Date. If during the term of this Agreement, an
area is annexed by a country, the country nonetheless shall be deemed to be the original area, excluding the annexed country. 
  
 18.16. Recordation of Licenses. At the request of SALUS, PARI shall cooperate with SALUS in its efforts to record its licenses to patents hereunder, including, but
not limited to, executing a license recordation form, from time to time, for United States patents similar to that set forth in the attached Exhibit H and signing documents necessary for SALUS to record its licenses to patents hereunder in
countries other than the United States. 
  

 53 

 IN WITNESS WHEREOF, the Parties hereby have executed this Agreement, as of the date first above written. 
  

							
	 SALUS:
	 	 PARI:

		
	SALUS PHARMA, INC.	 	PARI GMBH
				
	 Print Name:
	 	 A. Bruce Montgomery
	 	 Print Name:
	 	 Dr. M. Keller

	 Signature:
	 	 /s/ Alan Bruce Montgomery

	 	 Signature:
	 	 /s/ M. Keller

	 Title:
	 	 CEO
	 	 Title:
	 	 VP, Head of Pharma

  

 54 

 EXHIBIT A 
  
 DEVELOPMENT PLAN 
  
 [*] 
  
 *Confidential Treatment Requested. 
  

 A-1 

 EXHIBIT B 
  
 DRUG PRODUCT SPECIFICATIONS 
  

[*] 
  
 *Confidential Treatment Requested. 
  

 B-1 

 EXHIBIT C 
  
 INHALER SPECIFICATIONS 
  
 [*] 
  
 *Confidential Treatment Requested. 
  

 C-1 

 EXHIBIT D 
  
 MINIMUM TERMS FOR SUPPLY AGREEMENT 
  
 [*] 
  
 *Confidential Treatment Requested. 
  

 D-1 

 EXHIBIT E 
  
 [*] 
  
 *Confidential Treatment Requested. 
  

 E-1 

 EXHIBIT F 
  
 PROJECT TEAM 
  

					
	 	  	 Members

	  	 Liaisons

	 [*]
	  	 	  	 

  
 *Confidential
Treatment Requested. 
  

 F-1 

 EXHIBIT G 
  
 COUNTRIES FOR PURSUIT OF PATENT PROTECTION 
  
 [*] 
  
 *Confidential Treatment Requested. 
  

 G-1 

 EXHIBIT H 
  
 LICENSE RECORDATION FORM 
  
 [*] 
  
 *Confidential Treatment Requested. 
  

 H-1

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