Document:

ex_212588.htm

 

Exhibit 10.1

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***]

HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

 

 

 

COLLABORATION AGREEMENT

 

BETWEEN

 

DISCOVERY LABORATORIES, INC.,

 

AND

 

BATTELLE MEMORIAL INSTITUTE

 

REGARDING

 

DEVELOPMENT OF AEROSURF®

 

Dated as of October 10, 2014

 

 

 

 

 

 

 

 

 CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***]

HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

 

 

TABLE OF CONTENTS

 

	
			1.

				
			DEFINITIONS

				
			1

			
	
			 

				
			 

				
			 

			
	
			2.

				
			IMPLEMENTATION OF THE PROJECT

				
			5

			
	
			 

				
			 

				
			 

			
	
			3.

				
			COMPENSATION TO BATTELLE

				
			9

			
	
			 

				
			 

				
			 

			
	
			4.

				
			SALES REPORTS, RECORD KEEPING AND AUDITS

				
			12

			
	
			 

				
			 

				
			 

			
	
			5.

				
			TERM AND TERMINATION

				
			12

			
	
			 

				
			 

				
			 

			
	
			6.

				
			TERMS AND CONDITIONS INCORPORATED BY REFERENCE.

				
			15

			
	
			 

				
			 

				
			 

			
	
			7.

				
			REPRESENTATIONS AND WARRANTIES OF THE PARTIES

				
			17

			
	
			 

				
			 

				
			 

			
	
			8.

				
			MISCELLANEOUS

				
			19

			

 

 

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HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

 

COLLABORATION AGREEMENT

 

THIS COLLABORATION AGREEMENT (the "Agreement") is made and entered into by and between DISCOVERY LABORATORIES, INC., a corporation organized and existing under the laws of the state of Delaware having its principal place of business at 2600 Kelly Road, Suite 100, Warrington, PA 18976 USA ("Discovery Labs”), and BATTELLE MEMORIAL INSTITUTE, through its Corporate Operations, a corporation organized and existing under the laws of the state of Ohio having its principal place of business at 505 King Avenue, Columbus, Ohio 43201-2693, USA ("Battelle”) as of October 10, 2014 (the "Effective Date"). Discovery Labs and Battelle may be referred to herein individually as a "Party" or collectively as "Parties".

 

RECITALS:

 

WHEREAS, Discovery Labs is developing AEROSURF® as a therapy for premature infants with respiratory distress syndrome (“RDS”). AEROSURF is an investigational combination drug/device product that combines Discovery Labs’ proprietary technologies: lyophilized synthetic KL4 surfactant for inhalation and its capillary aerosol generator (CAG). By enabling delivery of aerosolized lyophilized KL4 surfactant using less invasive procedures, Discovery Labs believes that AEROSURF will address a serious unmet medical need and enable the treatment of a significantly greater number of premature infants with RDS; and

 

WHEREAS, over the past two years, Discovery Labs has engaged Battelle to assist in developing the CAG aerosol technology and to manufacture aerosol devices and accompanying disposables that meet the requirements for the AEROSURF phase 2 clinical program. To date, the developmental device and disposables have been deployed in a clinical trial setting in several neonatal intensive care units (NICU’s) in the US. The current developmental device and disposable units are expected to be utilized in a planned phase 2b study; and

 

WHEREAS, further investment in development of the developmental device and disposable units will be required to continue the AEROSURF clinical program into phase 3 and potential commercialization, and the Parties are interested in collaborating to further develop Discovery Labs’ CAG technology into a product that will meet the requirements for a phase 3 clinical trial and commercialization of AEROSURF (the “Collaboration”);

 

NOW THEREFORE, IN CONSIDERATION OF THE COVENANTS AND PROMISES CONTAINED IN THIS AGREEMENT, THE PARTIES AGREE AS FOLLOWS WITH THE INTENT TO BE LEGALLY BOUND HEREBY:

 

	
			1.

				
			DEFINITIONS.

			

 

Except as otherwise defined herein, the following terms shall have the meanings described below:

 

- 1 -

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COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

 

	 	
			A.

				
			“AEROSURF” means Discovery Labs’ investigational combination drug/device product that combines Discovery Labs’ proprietary technologies: lyophilized synthetic KL4 surfactant for inhalation and its capillary aerosol generator (CAG).  For the purposes of this Agreement, “AEROSURF” means AEROSURF for the treatment of respiratory distress syndrome (RDS) in premature infants.

			
	 	
			B.

				
			“AEROSURF System” means that particular system described in the Product Requirements Document, being developed for use in the treatment of respiratory distress syndrome (RDS) in premature infants.

			
	 	
			C.

				
			"Affiliates" means with respect to any Party, any entity who directly or indirectly Controls, or is Controlled by, or is under common Control with such Party.  Affiliates include subsidiaries.  The term Affiliate or Affiliates, as to Battelle, does not include any person or business operation which manages or operates national laboratories, other laboratories of a third party, or facilities for any of the United States of America, foreign governments or entities, or a third party.

			
	 	
			D.

				
			“Commercially Reasonable Efforts” means the level of efforts and resources, and the application of the requisite level of skills and experience, commonly used in the medical device industry by a company of similar size and with similar capital resources to the Party with respect to the development and commercialization of a product of similar commercial potential at a similar stage in its development or product life, taking into consideration its safety and efficacy, its cost to develop, manufacture and bring to market, the prevalence of the therapeutic purpose for which it is intended, the competitiveness of alternative devices or systems, the patent and other proprietary position of such device or system, the likelihood of regulatory approval, market size and geographic dispersion, product sales cycle, and its profitability.

			
	 	
			E.

				
			"Consumables" means disposable dose packet, including a capillary element and other materials that may be included as part of the AEROSURF System as to be detailed in the PRD.

			
	 	
			F.

				
			“Control” means (a) with respect to any item of Confidential Information (as such term is further defined in the CDA), patent, know how or other intellectual property right, the right to grant a license or sublicense as provided for herein without violating the terms of any agreement or other arrangement with, or any legal rights of, any third party, or (b) with respect to any specified party, the possession, directly or indirectly, of the power to direct the management or policies of such party, whether through the ownership of voting equity or by contract relating to voting rights or corporate governance, or otherwise.

			
	 	
			G.

				
			“Cost Overruns” means any expenses incurred by Battelle that exceed the sum of the Project Plan Fixed Cost and the planned costs set forth in all associated Scope Change Orders.

			
	 	
			H.

				
			“Device Development Milestone” means successful completion by Battelle of Stage 3 activities as set forth in the Project Plan.

			

 

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COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

 

	 	
			I.

				
			“Discovery Labs Fixed Fee” means the fixed fee payable by Discovery Labs to Battelle for Battelle’s performance and completion of Stages 2 and 3 of the Project Plan, which amount may be subject to amendment following completion of Stage 1 Work, as provided in Section 3.B(i).

			
	 	
			J.

				
			“Discovery Labs Default Percent” means, at any time, that portion of the Project Plan performed by Battelle up to the date of termination for material breach by Discovery Labs, expressed as a percent equal to the percentage of the aggregate Discovery Labs Fixed Fee invoiced by Battelle to Discovery Labs up to the date of such  termination, plus any amount not yet invoiced by Battelle for the period from the date of the last invoice through the date of such termination [***].

			
	 	
			K.

				
			“First Commercial Sale” occurs on the date following Registration of AEROSURF in the Territory on which (i) Discovery Labs, an Affiliate or a sublicensee sells AEROSURF (whether based on the AEROSURF System or any Next Generation System(s)), to a non-Affiliate and (ii) Discovery Labs or an Affiliate records Net Sales or Net License Revenues in accordance with U.S. (or other applicable) generally accepted accounting principles (“GAAP”), consistently applied.

			
	 	
			L.

				
			“Net License Revenues” means royalties actually received by Discovery Labs or an Affiliate from third-party licensees or sublicensees on account of commercial sales of AEROSURF (whether based on the AEROSURF System or any Next Generation System(s)), including sales of related AEROSURF Consumables, in the Territory in accordance with terms and conditions of the applicable licensing or sublicensing agreement. For monies received by Discovery Labs or an Affiliate in a currency other than U.S. dollars, the monies shall be converted to U.S. dollars based on a commercially reasonable method in the industry then used by Discovery Labs in the preparation of its audited financial statements, consistently applied.

			
	 	
			M.

				
			“Net Sales” means the amount recognized by Discovery Labs or an Affiliate, in accordance with U.S. GAAP (or by an Affiliate in accordance with applicable GAAP), representing the gross amount invoiced by Discovery Labs or an Affiliate as a result of arms-length, commercial transactions in the Territory on account of the sale of AEROSURF (whether based on the AEROSURF System or any Next Generation System(s)), including the sale of related AEROSURF Consumables [***], less all amounts customarily excluded from the calculation of net sales by Discovery Labs or its Affiliate, including by way of example, [***]. For sales denominated in a currency other than U.S. dollars, the sales shall be converted to U.S. dollars based on a commercially reasonable method in the industry then used by Discovery Labs in the preparation of its audited financial statements, consistently applied.

			
	 	
			N.

				
			“Next Generation System” means any drug-device combination product or medical device, which (i) essentially and in all material respects utilizes, incorporates, derives from, are made using or based on the AEROSURF System for the treatment of RDS in premature infants developed by Battelle under this Agreement, or (ii) [***].

			

 

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	 	O.	
			“Product Requirements Document” or “PRD” shall mean the detailed device requirements for the AEROSURF System and assumptions and data supplied by Discovery Labs to Battelle, and which is included in the Project Plan.

			
	 	P.	
			“Project” means the project as more particularly identified in the Project Plan.

			
	 	Q.	
			“Project Managers” refers to the individuals designated by each of Discovery Labs and Battelle from time to time to manage the overall coordination of the Project.

			
	 	R.	
			“Project Plan” means the confidential plan attached to this Agreement as Schedule 1, which includes the PRD and identifies appropriate steps contemplated for both Parties and key milestones contemplated to complete development of a device for use in Discovery Labs’ planned phase 3 AEROSURF clinical program and, if AEROSURF is Registered, initial commercialization of AEROSURF, and the related timeline, costs and expenses to complete Stages 1 through 3 of the Project, together.

			
	 	S.	
			“Project Plan Fixed Cost” means the fixed investment amount established by the Parties to fund Stages 2 and 3 of the Project Plan, which may be adjusted after completion of Stage 1 Work.  Project Plan Fixed Cost will be used solely to determine the Discovery Labs Fixed Fee, as more particularly set forth in Section 3.B(i).

			
	 	T.	
			“Registration” or “Register” means obtaining permissions, authorizations, registrations or approvals from the U.S. Food and Drug Administration (“FDA”), the European Commission (“EU”) or other applicable regulatory authorities, as necessary to manufacture, use, commercialize and/or sell AEROSURF (or other combination drug/device product comprised of a Next Generation System and Discovery Labs’ lyophilized KL4 surfactant for inhalation for the treatment of RDS in premature infants) in the Territory.

			
	 	U.	
			“Royalty Cap” means the aggregate maximum royalties to be paid by Discovery Labs to Battelle for performance of its obligations under the Project Plan during the Term of this Agreement.  The amount of the Royalty Cap is set forth in Section 3.D(ii).

			
	 	V.	
			“Scope Change” means a change in the scope of the Product Requirements Document, including any assumptions and intentions of the Parties contained therein.

			
	 	W.	
			“Scope Change Order” means a written modification to this Project Plan agreed to and signed by both Parties reflecting the terms of a Scope Change.

			
	 	X.	
			“Services Agreement” means the Research and Development Services Agreement entered into between the Parties on June 22, 2012, as amended from time to time.

			
	 	Y.	
			“Stage 1 Work” means the initial work performed hereunder as agreed by the Parties, which is expected to result in a final, agreed Project Plan and which will be funded according to the terms of Section 3.A of this Agreement.

			
	 	Z.	
			“Territory” means all countries worldwide.

			

 

Unless otherwise defined, all references in this Agreement to sections and clauses refer to sections and clauses in this Agreement.

 

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			2.

				
			IMPLEMENTATION OF THE PROJECT.

			

 

	 	
			A.

				
			General Scope.

			

 

This Agreement is in addition to, and not in substitution of, the Services Agreement, which covered work on aspects of the AEROSURF program.  Any activities that are ongoing under the Services Agreement and any future proposals included under the Services Agreement by amendment shall be performed in accordance with the terms of the Services Agreement.  The activities as defined in the Project Plan of this Agreement are required to further the AEROSURF program and will be performed under the terms of this Agreement.

 

The general scope of activities under this Agreement will include a three-stage Project Plan which, at a high level, shall consist of an initial stage to define the requirements of the AEROSURF System (Stage 1 Work), Stage 2, which will be devoted to Phase 3 device and disposables development (“Device Development”) and Stage 3, which will complete all testing and verification to be in a position to manufacture AEROSURF System(s) for use in Discovery Labs’ phase 3 clinical program and, if approved, initial commercial supply.  The Parties also may agree from time to time to amend this Agreement to expand the scope or include other projects under this Agreement and will also enter into such other agreements as they deem necessary or appropriate to meet the objectives of this Agreement, including but not limited to a Quality Agreement.  Upon completion of the Project Plan, the Parties intend to negotiate in good faith to enter into an agreement covering the manufacture of AEROSURF Systems, including AEROSURF Consumables, for use in the AEROSURF phase 3 clinical program.  The Parties contemplate that, if AEROSURF is approved, they will negotiate in good faith to enter into a supply agreement providing for initial commercial supply.

 

	 	
			B.

				
			Battelle’s Contribution to the Project.

			

 

	 	
			i.

				
			Battelle will use Commercially Reasonable Efforts to:

			

	 	
			a.

				
			perform research and development services according to the Project Plan, and to meet the milestones according to the Project Plan and to otherwise perform its obligations pursuant to the Project Plan and under this Agreement. Battelle further agrees to exercise Commercially Reasonable Efforts to meet objectives and comply with directions and guidance with respect to the Project Plan, the PRD, and any Scope Change Order, that may be established from time to time by the Steering Committee or Discovery Labs, as appropriate, and to promptly and thoroughly inform the Steering Committee of the status of development efforts under this Agreement and the Project Plan; and

			

 

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			b.

				
			contribute, in accordance with the terms of this Agreement, its labor costs and expenses necessary to complete the work under the Project Plan, in exchange for the payments and other compensation provided by Discovery Labs in accordance with Section 3 herein.

			

 

	 	
			C.

				
			Discovery Lab's Contribution to the Project.

			

 

	 	i. 	
			Discovery Labs will use Commercially Reasonable Efforts to:

			

	 	
			a.

				
			perform its obligations set forth in the Project Plan;

			
	 	
			b.

				
			adhere to all provisions of this Agreement; and

			
	 	
			c.

				
			if Discovery Labs’ clinical program achieves the desired results and if Discovery Labs successfully Registers AEROSURF in the U.S. for the treatment of RDS in premature infants, provide for the U.S. commercial launch of AEROSURF (based on the AEROSURF System or a Next-Generation System) following Registration in the U.S.; and perform or provide for all necessary marketing and sales activities to support the distribution of AEROSURF in the U.S. for the duration of the Agreement. Such activities may include, but shall not be limited to, adhering to Registration requirements in the U.S., conducting or providing for the manufacture of devices and drug product, and conducting or providing for marketing, selling, distribution and warranty of AEROSURF.

			

 

	 	ii. 	
			Discovery Labs shall compensate Battelle according to the terms of Section 3.

			

 

	 	
			D.

				
			Scope Change Orders.

			

 

	 	
			i.

				
			Following agreement on a final Project Plan at the completion of Stage 1 Work, the Parties may enter into a Scope Change Order for the purpose of (a) incorporating the final Project Plan in this Agreement, (b) adjusting the Project Plan Fixed Cost and the associated Discovery Labs Fixed Fee based on the results of Stage 1 Work, and (c) incorporating such other changes that the Parties agree are necessary and appropriate.

			

 

	 	
			ii.

				
			In addition, it may be necessary during the performance of the Project Plan, to enter into one or more additional Scope Change Orders to implement changes determined by Discovery Labs as being necessary or appropriate under the circumstances to meet its objectives.  In that event, the Parties will negotiate in good faith to agree upon an appropriate cost and implementation plan for such Scope Change and enter into a Scope Change Order.  To the extent that implementation of a Scope Change, as set forth in the related Scope Change Order, causes the date for completion of the Project Plan to be extended beyond the then current Milestone Date (as defined in Section 3.E(ii), below), then such Milestone Date shall be delayed for the period of such extension.  By way of example, if implementation of a Scope Change Order would cause the Project Plan to be extended by one month, then the Milestone Date would be similarly extended to June 30, 2016.

			

 

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			E. 

				
			Establishing Project Managers.

			

 

	 	
			i.

				
			Each Party shall appoint an individual to serve as such Party’s Project Manager, who shall be responsible for the day to day management of the Project and communications with the other Party and the Steering Committee, as may be appropriate to advance the purposes of this Agreement.

			

 

	 	
			ii.

				
			Project Managers and their respective teams will be in frequent communications and contact as required to perform the Project Plan.

			

 

	 	
			iii.

				
			Project Managers shall keep up to date, and otherwise maintain, the Project Plan, including, if appropriate, forecasts for Project spending, and will provide periodic updates, in such form as is acceptable to the Steering Committee.

			

 

	 	
			iv.

				
			Each Project Manager will immediately notify the other of any event which is likely to substantially affect the Project or the timely completion of the Device Development Milestone.

			

 

	 	
			v.

				
			The Parties will appoint initial Project Managers within 72 hours of the Effective Date. Each Party shall appoint and replace its Project Manager as it deems appropriate during the term of this Agreement. When possible, a Party will allow for a minimum of a week’s transition if it elects to appoint a new Project Manager.

			

 

	 	
			F.

				
			Establishing the Steering Committee.

			

 

	 	
			i.

				
			Membership. The Steering Committee shall initially consist of a maximum of six members, with an even number of members from each Party, with all initial members to be appointed within fourteen calendar days after the Effective Date. A Discovery Labs member will serve as Chairman of the Steering Committee. The Chairman shall be responsible for scheduling special meetings, circulating the agenda and presiding as chair at each meeting. The size of the Steering Committee can be amended upon mutual agreement of the Parties. Each Party shall appoint and replace its representatives to the Steering Committee as it deems appropriate during the term of this Agreement.

			

 

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			ii.

				
			Meetings. During the period beginning with the Effective Date through the completion of Stage 3, the Steering Committee will meet in-person at a minimum of once each calendar quarter according to a schedule agreed by the Parties. After that period of time, in-person meetings shall be held as requested by a Party on no less than three (3) business days’ advance notice (unless such notice is waived by all members). A majority of members must be present or otherwise available for a meeting to be constituted. Each Party may appoint a replacement or delegate for any member who is unable to attend a meeting of the Steering Committee. The location for each in-person meeting will alternate between Columbus, Ohio and Warrington, Pennsylvania. Each Party will bear its own expenses to prepare for and attend in-person Steering Committee meetings and these shall not be considered Project-related expenses for any purpose. The Steering Committee may conduct meetings (other than in-person meetings) by telephone or video conference and may act without a meeting by written consent signed by both Parties. Both Parties may contribute to the agenda for any upcoming Steering Committee meeting and meeting minutes must be taken during every meeting, however held. All such minutes and other records of the Steering Committee shall be available at all times to either Party. Employees of each Party who are not on the Steering Committee or delegates of a Party may attend meetings of the Steering Committee, as required to further the Project.  Neither Party shall be entitled to instruct its representatives to refuse to attend or to convene any properly noticed and scheduled meeting as a means of avoiding the establishment of a quorum, and a deemed quorum shall exist if a Party shall fail for any reason to have its representatives in attendance (in person or by telephone or video conference) more than twice at any properly noticed and scheduled (or adjourned) meeting. The Steering Committee will establish such standing rules as it deems appropriate to conduct its work, to the extent that such rules are not inconsistent with this Agreement.

			
	 	
			iii.

				
			At each quarterly meeting, and otherwise as needed, the Steering Committee will:

			

	 	a.	
			Require members to indicate whether their respective Parties are pursuing the Project Plan in compliance with this Agreement;

			
	 	b.	
			Hear updates on the Project Plan from the Project Managers;

			
	 	c.	
			Evaluate the progress made since the date of the prior meeting and approve the results of the Project to date, in writing;

			
	 	d.	
			Discuss and decide any issues brought to its attention by the Project Managers including without limitation those brought under Section 3 and Section 9.E or which a member of the Steering Committee wishes to raise; and

			
	 	e.	
			Discuss and decide how to proceed with the Project if the Steering Committee does not approve the results to date.

			

 

	 	
			G.

				
			Decision Making Generally.

			

 

	 	
			i.

				
			For the duration of the Project, the Project Managers may resolve issues that arise in day-to-day operations under the Project Plan unless otherwise stated in this Section.

			

 

	 	
			ii.

				
			The Steering Committee shall be responsible for resolving outstanding issues regarding the following:

			

	 	
			a.

				
			Any day-to-day issue or other matter that Project Managers cannot decide;

			
	 	
			b.

				
			Any and all changes in Project Plan dates and the Product Requirements Document and any updates or amendments thereto; and

			
	 	
			c.

				
			All other matters of any kind brought to its attention by a Party.

			

 

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			iii.

				
			The Steering Committee will use Commercially Reasonable Efforts to reach consensus on all matters before it.  The Steering Committee will duly consider the input of the Project Managers in reaching its decisions. If the Steering Committee is unable to reach consensus on any matter within a reasonable time under the circumstances, either Party may escalate the matter in accordance with the terms of Section 6(A)(viii) (Dispute Resolution).

			

 

	 	
			iv.

				
			Notwithstanding the foregoing, Discovery Labs shall have final decision-making authority and the final say on all matters relating to the design, Registration, manufacture, packaging, marketing, distribution and sale of the AEROSURF System, and any final decision made by Discovery Labs on such matters shall not be subject to any further review under the dispute resolution provisions of Section 6.A(ix) of this Agreement or in any court or other forum either at law or in equity.

			

 

	
			3.

				
			COMPENSATION TO BATTELLE. 

			

 

	 	
			A.

				
			Stage 1 Work.

			

 

With respect solely to Stage 1 Work, Discovery Labs will pay Battelle fifty percent (50%) of Battelle’s costs and expenses incurred, including Cost Overruns and Scope Changes, according to [***] invoices prepared by Battelle for all Stage 1 Work performed by Battelle under the Project Plan.  Based on an estimated cost for Stage 1 Work of approximately [***], Discovery Labs expects that its share of Stage 1 Work will be approximately [***].  Battelle Invoices will indicate all costs incurred by Battelle for Stage 1 Work performed, and Battelle will provide further detail [***], through [***] detailed project plan reports.  Discovery Labs shall pay all Battelle invoices in accordance with Section 3.C.

 

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			B.

				
			Stages 2 – 3 Work.

			

 

	 	
			i.

				
			Discovery Labs Fixed Fee.  The estimated Project Plan Fixed Cost as of the Effective Date is [***].  The estimated Discovery Labs Fixed Fee as of the Effective date is 50% of the Project Plan Fixed Cost, or [***].  The Project Plan Fixed Cost may be revised once by mutual agreement of the Parties following completion of the Stage 1 Work, to take into account any increase or decrease in anticipated costs of the Project Plan based on the results of the Stage 1 Work.  If the Project Plan Fixed Cost is revised, the Discovery Labs Fixed Fee will be similarly revised to equal 50% of the revised Project Plan Fixed Cost.  [***]. Battelle shall be solely responsible for any and all Cost Overruns related to its performance of its obligations under the Project Plan.

			

 

	 	
			ii.

				
			Scope Changes.  Discovery Labs shall be responsible for any increase in the Project Plan costs that result from Scope Changes detailed in Scope Change Orders approved under Section 2.D(ii).  The Parties shall agree to [***].  In addition, [***], the Parties shall agree to [***].  Battelle shall be responsible for any Cost Overruns associated with any Scope Changes affecting Stages 2 and 3.

			

 

	 	
			iii.

				
			Stages 2 – 3 Work Invoices.  Discovery Labs Fixed Fee shall be payable in [***] over the period of performance set forth in the final Project Plan established following the Stage 1 Work.  Battelle shall prepare [***] invoices, each of which shall reflect the Discovery Labs Fixed Fee [***] amount due, [***].  The [***] detailed project plan report shall also include such other information as may be agreed by the Parties.

			

 

	 	
			iv.

				
			Detailed Project Plan Report.  In addition, invoices shall be accompanied by a detailed report of actual work performed by Battelle in performing its obligations under the Project Plan, and, for Stage 1 Work, shall include [***].

			

 

	 	
			v.

				
			Taxes.  For all payments hereunder, [***] shall pay any [***], or similar taxes arising out of or in connection with the performance of this Agreement (other than those [***]), imposed by any authority, government or governmental agency, unless a valid exemption certificate, if applicable, is received.  [***] shall be responsible for taxes based on [***].

			

 

	 	
			C.

				
			Payment of Invoices; Financial Covenant.

			

 

	 	
			i.

				
			Under no circumstances shall the amount payable by Discovery Labs for Battelle’s performance under the Project Plan exceed the sum of the Discovery Labs Fixed Fee plus, [***] Scope Change Orders approved under Section 2.D(ii).

			

 

	 	
			ii.

				
			[***] invoiced amounts shall be payable on a date no later than [***].

			

 

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	 	iii.	
			All payments made to Battelle under this Agreement shall be in U.S. dollars and shall be made without reduction for, or withholding of, any tax assessment, fee, levy, or similar charge in lieu of tax of any nature, by bank wire transfer in immediately available funds to an account designated by Battelle.

			

 

	 	iv.	
			Discovery Labs shall maintain at all times aggregate available cash and cash equivalents (as reflected in its financial statements) sufficient to satisfy the amounts that would be due Battelle if invoices were [***]. If as of the last business day of a calendar quarter, any Battelle invoices to Discovery Labs are outstanding [***].

			

   

	 	
			D.

				
			Royalties.

			

 

	 	
			i.

				
			As consideration for Battelle’s achievement of the Device Development Milestone, Discovery Labs will pay royalties to Battelle in an amount equal to [***] of Net Sales and Net License Revenues in the Territory.  Royalty payments based on Net Sales or Net License Revenues in the U.S. shall be made [***].  Royalty payments based on Net Sales or Net License Revenues outside the U.S. shall be made [***].

			

 

	 	
			ii.

				
			The payment of royalties by Discovery Labs to Battelle shall be subject to a Royalty Cap of Twenty Five Million dollars ($25,000,000). Upon payment of aggregate royalties equal to the Royalty Cap, Discovery Labs obligations to pay royalties under this Section 3.D shall terminate.

			

 

	 	
			E.

				
			Warrants.

			

 

	 	
			i.

				
			As consideration for Battelle’s investment in the Project under this Agreement, on the Effective Date, Discovery Labs shall execute and deliver to Battelle a warrant, in the form of Exhibit A (the “Initial Warrant”), granting Battelle the right to purchase One Million (1.00M) shares of Discovery Labs common stock, par value $0.001 per share (“Common Stock”), at an exercise price per share equal to Five Dollars ($5.00), exercisable upon achievement of the Device Development Milestone, and expiring on the tenth anniversary date of the Effective Date.

			

 

	 	
			ii.

				
			As consideration for the achievement of the Device Development Milestone on or before May 31, 2016 (“Milestone Date”), or such later date as may be determined under Section 2.D(ii), on the Effective Date, Discovery Labs will execute and deliver to Battelle a second Warrant, in the form of Exhibit B, granting Battelle the right to purchase 500,000 shares of Common Stock, at an exercise price per share equal to Five Dollars ($5.00), exercisable upon achievement of the Device Development Milestone, provided such event occurs no later than the Milestone Date, and expiring on the tenth anniversary date of the Effective Date.

			

 

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			4.

				
			SALES REPORTS, RECORD KEEPING AND AUDITS.

			

 

	 	
			A.

				
			Battelle Records.  Battelle shall keep complete, true and accurate books of account and records for the purpose of determining Stage 1 Work [***] invoices to be delivered by Battelle to Discovery Labs under this Agreement.  Such books and records relating to all costs billed to Discovery Labs shall be kept at the principal place of business of Battelle or at such reasonably accessible location acceptable to Discovery Labs, as the case may be, [***] following the end of the [***] period to which they pertain.  Such records, excluding Battelle’s proprietary indirect rates and their associated calculations, will be open for inspection during such [***] period by a public accounting firm to whom Battelle has no reasonable objection. Such inspections may be made no more than [***], at reasonable times, on reasonable notice and at Discovery Labs’ expense which shall include Battelle’s direct costs, including labor costs, in providing for such an audit. Any under- or over-payment that is discovered shall be promptly reconciled.

			

 

	 	
			B.

				
			Discovery Labs Reports.  Beginning [***] with respect to which the first royalty payment to Battelle is made, Discovery Labs shall provide written reports [***] with respect to Net Sales and Net License Revenues in the U.S., and [***] with respect to Net Sales and Net License Revenues from outside the U.S., and shall state in each such report, separately for Discovery Labs, Affiliates and each sublicensee, the number, description, and aggregate Net Sales and Net License Revenues, by region, sold during [***].

			

 

	 	
			C.

				
			Discovery Labs Records.  Discovery Labs and its agents shall keep complete, true and accurate books of account and records for the purpose of determining the payments to be made to Battelle under this Agreement. Such books and records shall be kept at Discovery Labs’ principal place of business for [***] following the end of [***] to which they pertain. Such records will be open for inspection during such [***] period by a public accounting firm to whom Discovery Labs has no reasonable objection, solely for the purpose of verifying payment obligations hereunder. Such inspections may be made no more than [***], at reasonable times, on reasonable notice and at Battelle’s expense. Any under- or over-payment that is discovered shall be promptly reconciled.

			

 

	
			5.

				
			TERM AND TERMINATION.

			

 

	 	
			A.

				
			Term.  This Agreement shall have a term (“Term”) that shall begin as of the Effective Date and expire upon the fulfillment of all payment obligations of Discovery Labs to Battelle under this Agreement, unless sooner terminated as provided in this Section 5.

			

 

	 	
			B.

				
			Bankruptcy.

			

 

With respect to bankruptcy or insolvency, if a Party shall:

 

	 	
			i.

				
			admit in writing its inability to pay its debts generally as they become due;

			

	 	
			ii.

				
			file a petition in bankruptcy or a petition to take advantage of any insolvency act which are not be dismissed within [***] after the filing thereof;

			

	 	
			iii.

				
			make an assignment for the benefit of creditors;

			

 

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			iv.

				
			consent to the appointment of a receiver of the whole or any substantial part of its property;

			

	 	
			v.

				
			on a petition in bankruptcy filed against it, be adjudicated a bankrupt, which is not dismissed within [***] after the filing thereof;

			

	 	
			vi.

				
			file a petition or answer seeking reorganization or similar arrangement under applicable law;

			

	 	
			vii.

				
			if a court of competent jurisdiction shall enter an order, judgment, or decree appointing, without the consent of the Party, a receiver of the whole or any substantial part of the Party's property, and such order, judgment or decree shall not be vacated or set aside or stayed within [***] from the date of entry thereof; or

			

	 	
			viii.

				
			if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the whole or any substantial part of a Party's property and such custody or control shall not be terminated or stayed within [***] from the date of assumption of such custody or control,

			

 

then, for any of the foregoing scenarios, the other Party shall have the right to terminate this Agreement upon [***] written notice to the Party subject to such circumstances.

 

	 	
			C.

				
			‘Failure of Purpose’ Termination Rights.

			

 

Either Party may terminate this Agreement on thirty (30) calendar days’ written notice to the other Party upon the occurrence of one or more of the following events (each, a “Failure of Purpose”):

 

	 	
			i.

				
			After a good faith negotiation, the Parties fail to agree on a final Project Plan within [***] of the Stage 1 Work;

			

	 	
			ii.

				
			Discovery Labs determines in good faith that (a) the AEROSURF clinical program (including with respect thereto, related preclinical studies) has failed or will fail to demonstrate the results needed to proceed with the AEROSURF development program based on the AEROSURF System, or (b) Discovery Labs is unable to achieve Registration of AEROSURF in the U.S.;

			

	 	
			iii.

				
			After consultation, the Parties determine in good faith that, for reasons other than a material breach by a Party, the Project Plan cannot be completed for the reason of technical infeasibility;

			

	 	
			iv.

				
			After consultation with Battelle, Discovery Labs determines in good faith that, for reasons other than a material breach by a Party, the Parties will be unable to complete the Project Plan within [***] after the then-current Milestone Date; or

			

	 	
			v.

				
			Extended Force Majeure exceeding six months.

			

 

Other than as specifically set forth in this Agreement, including Discovery Labs’ obligation to pay Battelle invoices, [***]; provided that, if Discovery Labs terminates this Agreement pursuant to Clause (ii) of this Section 5.C after Battelle has successfully completed Stage 3, and if Discovery Labs or an Affiliate subsequently Registers AEROSURF based on the AEROSURF System developed by Battelle in the Territory [***], then Discovery Labs or an Affiliate [***] provided in Section 3.D(ii).

 

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			D.

				
			Termination for Breach.

			

If either Party believes the other is in material breach of its obligations under this Agreement, including failure to pay an undisputed amount due under this Agreement, it may give notice of such breach or payment failure to the other Party, which Party shall have thirty (30) calendar days after receipt of such notice in which to remedy such breach.  If such alleged breach is not remedied in the time period set forth above, the non-breaching Party may terminate this Agreement and receive the liquidated damages set forth below, as their respective sole and exclusive monetary remedy, which liquidated damages are agreed in light of the difficulty in forecasting damages as of the Effective Date.  Nothing in the foregoing shall preclude equitable remedies in addition to monetary remedies.

 

	 	
			i.

				
			In the event Discovery Labs terminates this Agreement because of an uncured material breach by Battelle:

			

	 	
			a.

				
			Discovery Labs’ obligation to pay royalties to Battelle shall cease;

			

	 	
			b.

				
			any outstanding warrants delivered to Battelle pursuant to this Agreement shall expire immediately and be of no further effect;

			

	 	
			c.

				
			At its expense, Battelle shall cooperate with Discovery Labs to complete the activities provided in Section 5.F; and

			

	 	
			d.

				
			Battelle shall pay to Discovery Labs within [***] (after receipt of an invoice from Discovery Labs) [***] of the amount paid by Discovery Labs to Battelle under Section 3 of this Agreement up to the effective date of termination, plus reasonable costs to cover transition to a successor.

			

 

	 	
			ii.

				
			In the event Battelle terminates this Agreement because of an uncured material breach by Discovery Labs:

			

	 	
			a.

				
			Discovery Labs shall pay to Battelle all outstanding amounts then due from Discovery Labs under this Agreement, including unpaid invoiced amounts, and reasonable transition costs [***];

			

	 	
			b.

				
			Discovery Labs shall pay to Battelle within [***] (after receipt of an invoice from Battelle) [***] of the amount of the Project Plan Fixed Cost actually contributed by Battelle under the Project Plan up to the effective date of termination;

			

	 	
			c.

				
			if Discovery Labs or an Affiliate (i) completes the Project Plan without the assistance of Battelle, and (ii) [***]; and

			

	 	
			d.

				
			that percent of the Initial Warrant issued to Battelle on the Effective Date that equals the Discovery Labs Default Percent shall immediately become exercisable and remain outstanding for the period therein provided.

			

 

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			E.

				
			Section 365(n) of the Bankruptcy Code.

			

All grants, rights and licenses granted or created under or pursuant to this Agreement by Discovery Labs or Battelle are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, licenses of rights to “intellectual property” as defined under Section 101 of the United States Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights under this Agreement, shall retain and may fully exercise all of their rights and elections under the United States Bankruptcy Code. The Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against either Party under the United States Bankruptcy Code, the Party hereto that is not a party to such proceeding shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, which, if not already in the non- subject Party’s possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s written request therefor, unless the Party subject to such proceeding elects to continue to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written request therefor by the non-subject Party.

 

	 	
			F.

				
			Post-Termination Activities.

			

In the event that either Party issues a notice of termination of this Agreement, the Parties will exercise Commercially Reasonable Efforts during the [***] period following issuance by a Party of such notice of termination to reach agreement regarding an appropriate wind-down plan, taking into account ethical responsibilities to patients in clinical trials (if any), control of any trailing project costs, and the stewardship of intellectual property and other assets created by the Parties hereunder.  Battelle shall promptly transfer or return to Discovery Labs all data, reports, materials, Discovery Labs Inventions, designs, models, working embodiments, prototypes etc. of the device, and must take continuing action to disclose and transfer the know-how and technical information relating to the Project to Discovery Labs and to cooperate and take measures to assign to Discovery Labs and execute such documents as Discovery Labs may reasonably request to perfect Discovery Labs’ title as sole owner of all Discovery Labs’ Inventions.  Except as provided in Section 5.D(i), Discovery Labs shall pay Battelle’s reasonable expenses in complying with this Section 5.F.  Battelle shall issue to Discovery Labs detailed invoices in a manner consistent with those prepared for Stage 1 Work described in Section 3.A.

 

	
			6.

				
			TERMS AND CONDITIONS INCORPORATED BY REFERENCE.

			

 

	 	
			A.

				
			The following provisions of the Services Agreement are incorporated herein by reference, provided that references in the Services Agreement to “Agreement”, “Project”, “Services” and other defined terms shall be construed to refer to such terms as defined in this Agreement or, if not so defined, in a manner to be consistent with the terms and conditions of this Agreement:

			

 

	
			i.

				 	
			Section 3

				
			Intellectual Property

			
	
			ii.

				 	
			Section 4

				
			No Endorsement: Public Announcement

			
	
			iii.

				 	
			Section 5

				
			Confidentiality (excluding Section 5.3)

			
	
			iv.

				 	
			Section 7

				
			Warranties; Limitation of Liability (excluding Section 7.2)

			
	
			v.

				 	
			Section 8

				
			Indemnities

			
	
			vi.

				 	
			Section 13

				
			U.S. Export Control

			
	
			vii.

				 	
			Section 14

				
			Client Furnished Materials

			
	
			viii.

				 	
			Section 16

				
			Dispute Resolution

			

 

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			B.

				
			[***].

			

 

	 	
			C.

				
			Discovery Labs assumes responsibility for its use, misuse, or inability to use the Project results, except to the extent of liabilities resulting from the gross negligence or willful misconduct of Battelle.  Except as necessary to satisfy Third Party Claims (as defined in Section 8.1 of the Services Agreement) indemnified hereunder, [***], Battelle's total liability to Discovery Labs arising out of or related to this Agreement [***].  Except for a breach of Section 6.B or its confidentiality obligations hereunder and as set forth in the CDA, neither Party shall be liable to the other Party for any indirect, incidental, consequential, special, punitive or exemplary damages in connection with this Agreement or the Project, however caused, under any theory of liability.  [***].

			

 

	
			7.

				
			INSURANCE

			

 

Discovery Labs shall purchase and maintain, at its own expense, insurance in amounts reasonable and customary for the industry in which they operate.  Discovery Labs shall maintain all insurance which is required by any law, statute, ordinance or regulation of any jurisdiction having authority in whole or in part over their operations.  Nevertheless, the following minimum insurance coverage shall be maintained:

 

	 	
			a.

				
			Clinical Trials Insurance: If any AEROSURF System or Next Generation System developed under this Agreement is used by Discovery Labs in clinical trial(s), prior to the first activity involving human subjects, Discovery Labs shall maintain no less than [***] of clinical trials liability insurance related to the AEROSURF System or Next Generation System in all territories (on a country-by-country basis) in which the Device is used in clinical trials involving human subjects.

			

	 	
			b.

				
			Product Liability Insurance: Prior to the commercial sale of any AEROSURF System or Next Generation System, Discovery Labs shall maintain no less than [***] of product liability insurance related to the AEROSURF System or Next Generation System in all territories (on a country-by-country basis) in which the Device is commercially available. Such insurance shall cover any Discovery Labs products that may be developed in whole or in part based on Battelle's work under this Agreement and shall name Battelle Memorial Institute as an additional insured.

			

 

Discovery Labs shall maintain coverage with insurance companies that [***].  Should any of the insurance policies agreed to herein provide coverage on a claims-made basis, such insurance shall be kept in force for a period of [***].  Discovery Labs shall provide a certificate of insurance to Battelle evidencing such coverage prior to the first administration to a human subject of such product and prior to the sale of such product.  Such certificate shall provide that, if a policy is cancelled, notice will be delivered as provided in the policy provisions.  Discovery Labs shall use commercially reasonable efforts to provide at least thirty (30) days prior notice to Battelle of any cancellation, non-renewal, or relevant reduction in coverage.

 

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			8.

				
			REPRESENTATIONS AND WARRANTIES OF THE PARTIES.

			

 

Battelle and Discovery Labs each hereby represent and warrant to each other, as of the Effective Date, as set forth below:

 

	 	
			i.

				
			It is duly organized and validly existing and in good standing under the laws of its jurisdiction of incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof.

			

 

	 	
			ii.

				
			It is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder.

			

 

	 	
			iii.

				
			Its legal team (i) is not aware of any pending or threatened litigation involving the AEROSURF System and (ii) has not received any communications alleging that it has violated or would violate any rights (including intellectual property rights) of any third party; in each case, which if decided adversely, would reasonably be expected to have a material adverse effect upon such Party, its condition, financial or otherwise, or its business affairs or business prospects, or its ability to perform its obligations under this Agreement.

			

 

	 	
			iv.

				
			To its knowledge, there is no material unauthorized use, infringement or misappropriation of any of its patents, copyrights, trademarks, trade secret rights or know-how necessary or useful to make, use or sell the AEROSURF System.

			

 

	 	
			v.

				
			All of its employees, officers, contractors and consultants performing research and development services related to this Agreement have executed agreements requiring assignment to the Party of all inventions made during the course of and as a result of their association with such Party and obligating the individual to maintain as confidential the Confidential Information of such Party.

			

 

	 	
			vi.

				
			It has the power, authority and legal right, and is free to enter into this Agreement and, in so doing, will not violate any other agreement to which it is a party as of the Effective Date.

			

 

	 	
			vii.

				
			Battelle represents and warrants that, after due inquiry, it has not and will not knowingly employ, contract with or retain any person directly or indirectly to perform services under this Agreement, if such person is debarred by the FDA under 21 USC 335a(k) of the FDA Act or a regulator in the EU under similar laws. Upon written request from Discovery Labs, Battelle shall within five (5) business days confirm in writing that it has complied with the foregoing obligation.

			

 

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			viii.

				
			The execution and delivery of this Agreement and the performance of such Party's obligations hereunder (a) do not and will not, whether with the giving of notice or passage of time or both, conflict with or violate any requirement of any obligation, agreement, covenant or condition contained in any contract, indenture, credit agreement, or other agreement or instrument to which it is a party (“Agreements/Instruments”), (b) nor will such actions result in any violation of any provision of the articles of incorporation, bylaws, limited partnership agreement or any similar instrument of such Party, as applicable, (c) nor will such actions result in any violation of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any Affiliate or any of their assets, properties or operations; do not conflict with, violate, or breach or constitute a default or require any consent under, any applicable law or any Agreements/Instruments or court or administrative order by which such Party is bound; except, with respect to each of the foregoing clauses viii(a)-(c), for those or under those circumstances that would not reasonably be expected to have a material adverse effect upon such Party, its condition, financial or otherwise, or its business affairs or business prospects, or its ability to perform its obligations under this Agreement.

			

 

	 	
			ix.

				
			Battelle acknowledges that the success of the Project Plan, and the efforts by Discovery Labs to secure Registration, and execute a commercial launch for, AEROSURF in the U.S. are subject to a variety of risks and uncertainties that could cause results to differ materially from those set forth in the Project Plan or otherwise anticipated by the Parties.  Examples of such risks and uncertainties are set forth in Discovery Labs’ Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (“SEC”) on March 15, 2014 and in Discovery Labs’ periodic and other reports filed with the SEC from time to time.

			

 

	 	
			x.

				
			Discovery Labs acknowledges that its business strategy includes seeking to enter into a significant strategic alliance that potentially could provide development, regulatory and commercial market expertise as well as financial resources for the AEROSURF development program, and, if AEROSURF is approved, support the commercial introduction of AEROSURF and/or AEROSURF System(s) in the EU and other selected markets outside the U.S.  However, there can be no assurance that Discovery Labs will succeed, if at all, during the performance of this Agreement.

			

 

With respect to the foregoing, the term “knowledge” shall be deemed to refer to the personal knowledge of the respective Parties management and the legal team

 

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			9.

				
			MISCELLANEOUS.

			

 

	 	
			A.

				
			Assignment. Except as otherwise provided for herein, neither Party may assign this Agreement without the written consent of the other Party, which consent may be granted or withheld in the other Party's sole discretion. Notwithstanding the foregoing, [***]. In any event, this Agreement shall be binding upon and inure to the successors and permitted assignees of the Parties and the name of a Party appearing herein shall be deemed to include the names of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this Agreement.  Any assignment not in accordance with this Section 8(A) shall be void.

			

 

	 	
			B.

				
			Compliance with Law. The Parties shall comply with appropriate legal, ethical and professional standards of behavior and conduct, and will exercise diligence in complying with all laws applicable to their relationship and to each Party’s performance as described herein, including, but not limited to, the following U.S. laws: Foreign Corrupt Practices Act, the Export Administration Act, the Export Administration Regulations including the Anti-boycott Regulations and Guidelines, and any other applicable export regulations.

			

 

	 	
			C.

				
			Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement and shall be effective on receipt, when sent via Internet email, hand-delivered, transmitted by facsimile, or sent by registered airmail or overnight courier and addressed to the Parties as noted below (or to such other address as may be provided in writing by a Party to the other Party in accordance with this Section).

			

 

For Battelle: Battelle Memorial Institute

Attn: General Counsel 505 King Avenue

Columbus, Ohio 43201

 

For Discovery Labs: Discovery Laboratories, Inc.

Attn: General Counsel

2600 Kelly Road, Suite 100

Warrington, PA 18976

 

	 	
			D.

				
			Severability. If any part of this Agreement is found to be invalid or unenforceable by any court of competent jurisdiction, or if any government or other agency having jurisdiction over either Battelle or Discovery Labs deems any part thereof to be contrary to any antitrust or competition law, then such declaration shall not affect the remainder of the Agreement, which shall remain in full force and effect. To the extent possible, the Parties shall revise such invalidated part in a manner that will render it valid without impairing the Parties' original business purpose.

			

 

	 	
			E.

				
			Force Majeure. Except as otherwise provided herein, no Party shall be in breach of this Agreement, or liable to the other Party, for any loss, damages, delay or failure of performance to the extent such loss, damages, delay or failure is caused by circumstances beyond its reasonable control. Circumstances beyond the reasonable control of a Party include, but are not limited to, fire, strikes, riots, wars, terroristic acts, martial law, extreme natural disaster, or threat of terroristic acts, embargoes, shortages, delays in transportation, environmental contamination by nuclear fuel or nuclear waste, inability to obtain supplies of raw materials or requirements or regulations of any government or any other civil or military authority. In the event of a force majeure situation, the obligations of the Parties under this Agreement shall be suspended as long as the force majeure situation continues. Should the force majeure situation continue for more than four (4) weeks, then the Steering Committee will make appropriate determinations of the effect of the force majeure on the contractual relationship between the Parties.

			

 

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			F.

				
			Non-Waiver. The failure of a Party in any one or more instances to insist upon strict performance of any of the terms and conditions of this Agreement shall not be construed as a waiver or relinquishment, to any extent, of the right to assert or rely upon any such terms or conditions on any future occasion.

			

 

	 	
			G.

				
			Disclaimer of Agency. Battelle's relationship with Discovery Labs is that of an independent Contractor and not as an agent, representative, or employee of Discovery Labs. This Agreement shall not constitute, create or give effect to, or otherwise imply a joint venture, corporation, partnership, or any other form of business entity of any kind. Each Party to this Agreement shall act as an independent contractor with respect to the other Party. Neither Party to this Agreement shall have any authority or control over the other Party or the other Party's employees, nor shall either Party have the power to bind the other Party, nor shall this Agreement be construed as creating any actual or implied authority or any type of agency relationship.

			

 

In addition, Discovery Labs specifically acknowledges that Battelle is a service provider and contract manufacturer and not a distributor or supplier and Discovery Labs retains all final decision making authority and all responsibility for the design, manufacture, packaging, marketing, distribution and sale of the AEROSURF System, including, without limitation, product labeling, warnings, and instructions to users.

 

	 	
			H.

				
			Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts as may be necessary or appropriate in order to carry out the purposes and intent of the Agreement.

			

 

	 	
			I.

				
			Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall constitute together the same document.

			

 

	 	
			J.

				
			Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of and enforced within the jurisdiction of the State of Delaware without regard to the principles of conflict of laws.

			

 

	 	
			K.

				
			Entire Agreement; Amendment. This Agreement, the Exhibits attached hereto, and together with the Services Agreement, the CDA, and any Quality Agreement between the Parties, sets forth the terms of the agreement regarding AEROSURF System between the Parties hereto and, except for the CDA incorporated therein, the Quality Agreement and as otherwise set forth herein, supersedes and terminates all prior representations, term sheets, agreements and understandings between the Parties regarding the subject matter hereof. No alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

			

 

	 	
			L.

				
			Survival. The following provisions shall survive the termination or expiration of this Agreement: 3, 4, 5, 6(A)(i), 6(A)(iii)-(v), 6(A)(viii), 6(B), 6(C), 7, and 9(J).

			

 

[Signatures appear on the next page]

 

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In Witness Whereof, the Parties have duly executed this Collaboration Agreement as of the Effective Date.

 

	
			DISCOVERY LABORATORIES, INC.

				
			BATTELLE MEMORIAL INSTITUTE

			Corporate Operations

			
	
			 

				
			 

			
	
			By:

				
			By:

			
	
			 

				
			 

			
	
			Name:  John G. Cooper

				
			Name:

			
	
			 

				
			 

			
	
			Title:  President and Chief Executive Officer

				
			Title:

			

 

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EXHIBIT A: Initial Warrant

 

 

 

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EXHIBIT B: Second Warrant

 

 

 

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SCHEDULE 1: PROJECT PLAN

 

 

 

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COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

 

Proposal No. [***]

 

Next-Generation Aerosurf®

Delivery System, Stage 1

 

Prepared by

 

Battelle

505 King Avenue

Columbus, Ohio 43201

 

Prepared for

 

 

Lawrence Weinstein

Vice President, Medical Device Development

Discovery Laboratories, Inc.

2600 Kelly Road, Suite 100

Warrington, PA 18976-3622

October 9, 2014

 

- 25 -ex_212589.htm

 

 

Exhibit 10.2

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***]

HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

 

AMENDED AND RESTATED SUPPLY AGREEMENT

 

AMENDED AND RESTATED SUPPLY AGREEMENT dated as of December 3, 2004, by and between DISCOVERY LABORATORIES, INC. (“Seller”) and LABORATORIOS DEL DR. ESTEVE, S.A., a company organized and existing under the laws of Spain (“Buyer”).

 

WHEREAS, Seller and Buyer are parties to a Amended and Restated Sublicense and Collaboration Agreement (the “Revised Collaboration Agreement”) dated as of the date hereof pursuant to which Buyer and Seller have agreed to collaborate in a product development, commercialization and marketing effort for the Licensed Products (such term and other capitalized terms used and not otherwise defined herein having the meanings assigned to them in the Revised Collaboration Agreement); and

 

WHEREAS, Buyer hereby agrees to purchase one hundred percent (100%) of its requirements of Licensed Products from Seller, and Seller hereby agrees to supply one hundred percent (100%) of Buyer’s requirements of Licensed Products, pursuant to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants set forth below, Seller and Buyer mutually agree as follows:

 

ARTICLE I

DEFINITIONS

 

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

 

“Current Good Manufacturing Practices” or “cGMP” shall mean (i) with respect to the United States, the good manufacturing practices required by the FDA and set forth in the Federal Food, Drugs and Cosmetics Act or FDA regulations, policies or guidelines in effect at a particular time for the manufacture, testing and quality control of pharmaceutical materials and (ii) with respect to any other country of the Licensed Territory, the standards for the manufacture and testing of pharmaceutical materials that are imposed by any regulatory authority having jurisdiction.

 

-1-

 

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***]

HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

“Cost of Goods” means the costs incurred (including, without limitation, costs incurred with respect to Unrelated Third parties) for the Manufacture of Licensed Product (including, for the avoidance of doubt, the Manufacture of any device and related apparatus for administration thereof) for the Licensed Territory, all direct costs, and a reasonable fully-absorbed allocation of indirect and overhead expenses directly attributable to the Manufacture of the Licensed Product for the Licensed Territory. Direct costs shall include, without limitation, raw materials, equipment and labor and costs of plant operations, and plant support services. Indirect and overhead expenses shall include, without limitation, indirect charges incurred by or on behalf of Seller in connection with Manufacturing process improvements, spoilage, waste, storage, manufacturing scale up, Manufacturing site qualification, RA, QA and QC (including testing), supply chain management, capital equipment, customs duties or excise taxes, costs for plant operations and support services (including utilities, maintenance, engineering, designing, redesigning, safety, human resources, finance, and plant management) and similar activities to the extent reasonably allocated to the Licensed Product in the Licensed Territory including depreciation and amortization of capitalized costs of any of the foregoing; provided, that the royalties, if any, payable by Seller to its licensor(s) shall be deemed to not be a component of Cost of Goods. All components of Cost of Goods shall be allocated on a basis consistent with United States GAAP and consistent with the cost accounting policy applied by Seller to other products that it produces and, if it does not Manufacture any other products, consistent with the industry standard. The parties will endeavor in good faith to establish a “standard cost” per unit for purposes of ongoing cost accounting and invoicing purposes, which “standard cost” shall be reviewed and updated periodically as appropriate. The parties shall reconcile the standard cost charges against the standard cost per unit actually paid by Buyer and appropriate credit or payment shall be made to effect such reconciliation as directed by the Steering Committee not less than annually.

 

“Facility” means an Owned Facility or a Contract Facility (in each case as defined in Section 3.1).

 

“First Commercial Sale” shall mean the first commercial sale by Buyer, its Affiliates or sublicensees of any Licensed Product following final EMEA or other regulatory approval required to market such Licensed Product commercially in the Licensed Territory for use in humans.

 

“Licensed Product Purchase Price” shall mean, on a Licensed Product-by-Licensed Product basis, the sum of (i) Cost of Goods together with any markup as set forth in Section 2.2; and (ii) appropriate insurance, freight charges and, where applicable, custom duties.

 

“Manufacture” or “Manufacturing” shall mean manufacturing, filling, processing, testing, engineering, designing, redesigning, packaging, storing, quality control, quality assurance, releasing, disposing, handling, shipping, and all other activities undertaken or required to be undertaken in order to manufacture and supply Licensed Product in its final packaging (including, without limitation, package inserts and components reasonably necessary for sale of the finished Licensed Product to the ultimate consumer) and related devices and apparatus for administration thereof.

 

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COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

“Net Sales” shall mean that sum determined by deducting from the gross amount billed for Licensed Products by the Buyer or any of its Affiliates or sublicensees in an arms length transaction to customers, that are Unrelated Third Parties of the Buyer or of any of its sublicensees;

 

	 	
			(i)

				
			transportation charges or allowances, including freight pickup allowances, and packaging cost, if any;

			
	
			 

				
			 

				
			 

			
	 	
			(ii)

				
			trade, quantity or cash discounts, services allowances and independent broker’s or agent’s commissions, if any, allowed or paid;

			
	
			 

				
			 

				
			 

			
	 	
			(iii)

				
			credits or allowances for the Licensed Products, if any, given or made on account of price, adjustments, returns, bad debts, off-invoice promotional discounts, rebates, chargebacks, any and all federal, state or local, government rebates or discounts whether in existence now or enacted at any time during the term of this Agreement, volume reimbursements, the gross amount billed and collected for rejected Licensed Products or Licensed Products subject to recall or destruction (voluntarily made or requested or made by an appropriate government agency, sub-division or department); and

			
	
			 

				
			 

				
			 

			
	 	
			(iv)

				
			any tax, excise or other governmental charge upon or measured by the production, sale, transportation, delivery or use of the Licensed Product;

			
	
			 

				
			 

				
			 

			
	 	
			(v)

				
			in each case determined in accordance with generally accepted accounting practices.

			

 

“Specifications” shall mean the Licensed Product specifications contained in the registration dossier of the Licensed Product as approved by the EMEA and the other regulatory authorities having jurisdiction in the Licensed Territory, as the same may be amended from time to time in accordance with applicable regulatory procedures.

 

“Transfer Price” shall mean as defined in Section 2.2.

 

“Unrelated Third Parties” shall mean Persons other than Buyer and Seller and Affiliates and sublicensees of Buyer and Seller or any other related Persons and shall include hospital formularies and other similar critical and therapeutic care providers who typically purchase and administer products and therapies such as the Licensed Products.

 

ARTICLE II

PURCHASE AND SALE OF PRODUCTS

 

Section 2.1.         Purchase and Sale; Delivery; Acceptance or Rejection.

 

(a)             Seller agrees to sell to Buyer such quantities of Licensed Products, manufactured in conformity with cGMP and meeting the Specifications, as Buyer may order in accordance with the terms and conditions of this Agreement. Subject to the provisions of Section 7.2 hereof, so long as this Agreement shall remain in effect, Buyer agrees, for itself and its Affiliates and sublicensees, to satisfy solely through the purchase of Licensed Products from Seller under this Agreement one hundred percent (100%) of Buyer’s and its Affiliates’ and sublicensees’ requirements for Licensed Products.

 

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(b)             Purchase orders issued by Buyer to Seller with respect to purchases of Licensed Products shall be subject to, and governed exclusively by, the terms of this Agreement. Buyer agrees not to issue to Seller any purchase order containing terms different from those set forth herein and further agrees that no shipment of Licensed Product by Seller in accordance with a nonconforming purchase order shall be deemed to be acceptance of any terms of such purchase order conflicting with the terms of this Agreement except to the extent such conflicting terms are initialed by Seller with the words “change accepted” written thereon by Seller. Except as aforesaid, this Agreement shall override all other conflicting terms of purchase and/or sale contained in any purchase and/or sale document generated by Seller or Buyer.

 

(c)             Subject to paragraphs (d) and (e) below, all Licensed Product sold to Buyer hereunder shall be delivered FCA Seller’s Facility or distribution warehouse (Incoterms 2000). Seller shall assist Buyer in arranging transportation in the manner specified by Buyer, in accordance with applicable regulatory requirements, to any destinations specified in writing from time to time by Buyer.

 

(d)             Buyer shall bear all costs and expenses relating to transportation and delivery to Buyer’s designated distribution sites in the Licensed Territory (including without limitation all freight charges, customs, duties, taxes, insurance premiums and all expenses relating to validation of temperature-controlled shipment conditions), regardless of whether Seller delivers the Licensed Products to Buyer from Seller’s Facility or distribution site/ warehouse whether in Europe or the United States; provided, however, that in the event that Seller transports Licensed Products from its United States Facility and/ or its United States distribution site/ warehouse to a European distribution site/ warehouse or Facility, if any, then delivers such Licensed Products to Buyer’s designated distribution sites in the Licensed Territory, the Steering Committee shall promptly meet to establish in good faith a system whereby Buyer does not bear any such costs in excess of those that would have been incurred if Seller had delivered such Licensed Products directly from its United States Facility or distribution site/ warehouse to Buyer’s designated distribution sites in the Licensed Territory.

 

(e)             Seller shall maintain a cGMP quality control program, as required by governmental regulations in the Licensed Territory, with respect to the Manufacture of Licensed Products. Seller will perform appropriate testing programs, and provide Buyer with documentation arising from such testing programs, as may be agreed to by the parties or required by any applicable regulatory authority. Finished Licensed Product testing for release in the Licensed Territory or required by the EMEA for Licensed Product received by Buyer shall be performed by Seller at its designated approved testing site and paid for by Seller for Licensed Product shipped to Buyer. Seller shall provide Buyer with each Licensed Product shipment with the corresponding certificate of analysis conducted in a country of the European Union, certifying that each delivery of Licensed Product was produced and tested in compliance with (i) the Specifications, (ii) cGMP requirements and (iii) all applicable regulatory documents. The parties will discuss in good faith the possibility that the quality control for Licensed Product in the European Union (“EU-QC”) shall be conducted by Buyer for an agreed upon fee to be paid by Seller. Should, ultimately, Buyer not be the agreed upon party to conduct EU-QC, Seller shall use its best commercial efforts to provide that certain equipment acquired, as of the date hereof, by Buyer for the purposes of conducting such EU-QC shall be purchased by such agreed upon Unrelated Third Party that shall conduct the EU-QC.

 

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***]

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COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

(f)             Buyer may reject any portion of any shipment of Licensed Product which does not conform with the Specifications. In order to reject a shipment, Buyer must (i) give notice to Seller of Buyer’s intent to reject the shipment within thirty (30) days of receipt together with a detailed written indication of the reasons for such possible rejection, and (ii) as promptly as reasonably possible thereafter, but in any event within an additional thirty (30) days, provide Seller with notice of final rejection and the full basis therefor. After notice of intent to reject is given, Buyer shall cooperate with Seller in determining whether rejection is necessary or justified. If such notices of intent to reject and final rejection are not timely received, Buyer shall be deemed to have accepted such delivery of Licensed Product and to have waived all claims for non-conformity with the Specifications, damage, defect or shortage, other than claims for latent defects not capable of discovery by Buyer upon physical examination. In the event of latent defects not capable of discovery by Buyer upon physical examination, Buyer shall inform Seller within fifteen (15) days of discovering any such defect. Buyer shall be entitled to an offset of the Licensed Product Purchase Price (reduced, however, by any customs or other charges related thereto that are recoverable or avoidable by Buyer) of properly rejected Licensed Products at the time they are ultimately rejected, provided that if Seller disputes the rejection, refund shall be made, if at all, at the time the dispute is finally resolved. Seller shall notify Buyer as promptly as reasonably possible (but in any event no later than thirty (30) days after receipt of Buyer’s final rejection notice) whether it accepts Buyer’s basis for any rejection. In the event Seller disputes Buyer’s rejection, the parties will select a mutually agreeable independent third party laboratory which shall determine whether the rejected Licensed Products meet the applicable Specifications and shall confirm or dissent from Buyer’s rejection of Licensed Products. If the parties are unable to agree on a laboratory firm within thirty (30) days after receipt of Buyer’s final rejection notice, the laboratory shall be appointed by computer generation of a random number, with an even number signifying Seller’s right to designate the laboratory and an odd number designating Buyer’s right to designate the laboratory. If the independent tester confirms Buyer’s rejection, Seller will pay the fees of the tester, and if the tester dissents from Buyer’s rejection, Buyer will pay the fees.

 

(g)             Whether or not Seller accepts Buyer’s basis for rejection, promptly on receipt of a notice of rejection, Seller shall use its commercially reasonable efforts, at Buyer’s request, to provide replacement Licensed Product, which shall be purchased by Buyer as provided in this Agreement as soon as reasonably practicable.

 

(h)             Unless Seller requests the return to it of a rejected batch within sixty (60) days of receipt of Buyer’s final notice of rejection, Buyer shall, at Seller’s cost, destroy such batch promptly and provide Seller with certification of such destruction. Buyer shall, upon receipt of Seller’s request for return, promptly dispatch said batch to Seller, at Seller’s cost.

 

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(i)              No change to the Specifications shall be effective unless the same shall be required or permitted by any regulatory agency having jurisdiction over (i) any country in the Licensed Territory, (ii) Buyer or (iii) the Licensed Products (and if not required, shall be agreed to in writing by Buyer and Seller). Seller shall give Buyer advance notice of any change to the Specifications required by a regulatory agency.

 

2.2             Transfer Pricing. Buyer shall purchase Licensed Products from Seller at a “Transfer Price” that is determined on a Licensed Product-by-Licensed Product basis and otherwise as follows:

 

(a)              With respect to Surfaxin® for RDS and/ or BPD, the Transfer Price to be paid by Buyer to Seller will be the sum of the following:

 

 

	
			(i)  

				
			[***]% of Seller’s Cost of Goods for the subject Licensed Product supplied for the Licensed Territory;

			

 

 

	
			(ii)  

				
			Seller’s royalty obligations due with respect to the subject Licensed Product sold by Buyer in the Territory; and,

			

 

 

	
			(iii)  

				
			X% of Net Sales of the subject Licensed Product in the Territory (to be determined on a country-by-country basis).

			

 

 

	 	
			Provided, however, that the Transfer Price determined in accordance with this Section 2.2(a) shall be equal to [***]% of Net Sales of the subject Licensed Product in the Territory (to be determined on a country-by-country basis).

			

 

 

(b)             With respect to the Licensed Product for the treatment of ARDS, the Transfer Price to be paid by Buyer to Seller will be the sum of the following:

 

 

	
			(i)  

				
			[***]% of Seller’s Cost of Goods for the subject Licensed Product supplied for the Licensed Territory;

			

 

 

	
			(ii)  

				
			[***]% of Seller’s royalty obligations due with respect to the subject Licensed Product sold by Buyer in the Territory; and,

			

 

 

	
			(iii)  

				
			X% of Net Sales of the subject Licensed Product in the Territory (to be determined on a country-by-country basis).

			

 

 

Provided, however, that the percentage to be determined pursuant to Section 2.2(b)(iii), above, shall be mutually determined in good faith by

 

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the parties (X) within 6 months of the date of completion of a Phase 3 clinical trial for the subject Licensed Product (defined as the date when all substantive data shall be available to the parties) and (Y) based upon a methodology that is intended to ensure that both Buyer and Seller achieve reasonable profits with respect to the Licensed Product; provided, however, that in no case shall the Transfer Price be lower than [***]% or higher than [***]% of Net Sales of the subject Licensed Product in the Territory (to be determined on a country-by-country basis).

 

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HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

 

(c)             With respect to all other Licensed Products, the Transfer Price (determined on a Licensed Product-by-Licensed Product basis) to be paid by Buyer to Seller will be the sum of the following (provided, however, that this Section 2.2(c) shall specifically exclude any New Products, as such term is defined in Section 2.5 of the Revised Collaboration Agreement):

 

 

	
			(i)  

				
			[***]% of Seller’s Cost of Goods for the subject Licensed Product supplied for the Licensed Territory;

			

 

 

	
			(ii)  

				
			[***]% of Seller’s royalty obligations due with respect to the subject Licensed Product sold by Buyer in the Territory; and,

			

 

 

	
			(iii)  

				
			X% of Net Sales of the subject Licensed Product in the Territory (to be determined on a country-by-country basis).

			

 

 

	 	
			Provided, however, that the percentage to be determined pursuant to Section 2.2(c)(iii), above, shall be mutually determined in good faith by the parties (X) within 6 months of the date of completion of a Phase 3 clinical trial for the subject Licensed Product (defined as the date when all substantive data shall be available to the parties) and (Y) based upon a methodology that is intended to ensure that both Buyer and Seller achieve reasonable profits with respect to the Licensed Product; provided, however, that the parties acknowledge that it is their mutual intent that the target Transfer Price determined pursuant to this Section 2.2(c) shall be [***]% and, further, that in no case shall the Transfer Price be lower than [***]% or higher than [***]% of Net Sales of the subject Licensed Product in the Territory (to be determined on a country-by-country basis).

			

 

	 	
			For the avoidance of doubt, the parties hereby acknowledge and agree that the Transfer Price for each Licensed Product determined in accordance with this Section 2.2 shall be determined by the parties in good faith and shall be based upon a mutually agreeable methodology that is intended to ensure that both Buyer and Seller achieve reasonable profits with respect to sales thereof.

			

 

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2.3             Reports, Reconciliation and Audit, Transfer Price Payments.

 

(a)             Seller shall invoice Buyer on the date of each shipment of Licensed Products delivered by Seller to Buyer, its Affiliates or sublicensees at the Licensed Product Purchase Price. Buyer shall pay Seller’s invoices no later than thirty (30) days following the date of the applicable invoice by electronic funds transfer in immediately available funds to such bank account(s) as Seller shall designate. Notification as to the date and amount of any such electronic funds transfer shall be provided to Seller at least two (2) Business Days prior to such transfer.

 

(b)             Reports. Buyer, within 30 days after the first day of January, April, July, and October of each contract year, shall deliver to Seller a true and accurate report giving such particulars on a monthly basis of each of the Licensed Products: (i) shipped and invoiced by Seller to Buyer; (ii) invoiced by Buyer and its Affiliates and sublicensees to Unrelated Third Parties; (iii) the gross sales of such Licensed Products (disclosing the quantity of each of the Licensed Products) and the calculation of Net Sales thereon; (iv) the calculation, in accordance with Section 2.2 of this Agreement, of the Transfer Prices thereon, in each case during the preceding 3 months under this Agreement (each a “Contract Quarter”) as are pertinent to perform an accounting of amounts due under this Agreement and (v) the difference between the Transfer Price and the Licensed Product Purchase Price invoiced by Seller in the Contract Quarter (the “Balance”). The reports referred to herein (each a “Report”) shall be separately delineated not only with respect to the Licensed Products but also with respect to the different countries of the Licensed Territory and shall be in a standard format agreed by Buyer and Seller prior to the first Report delivery. Transfer Price amounts owed by Buyer to Seller shall be calculated on a product-by-product and country-by-country basis taking into account, in each instance, the average of the Euro/ U.S. Dollar exchange rate for the first and last business day of each month of the Contract Quarter as quoted in the New York version of the Wall Street Journal.

 

(c)             Balance Payments. Balance amounts owed by Buyer to Seller under this Section 2.3 shall be paid in U.S. Dollars and shall be free of all withholdings of any nature whatsoever (including, without limitation, withholding taxes, monetary transfer fees, or similar taxes and charges), and in the event any withholding is required, Buyer shall pay the same together with such additional amount as is required so that each such payment shall be, under any circumstances and in any event, in the amount as set forth or referred to herein. Balance amounts shall be payable within five (5) Business Days of receipt by Buyer of the relevant invoice issued by Seller that shall be in accordance with the applicable Report (as set forth in Section 2.3(b)) by electronic funds transfer in immediately available funds to such bank account(s) as Seller shall designate. Notification as to the date and amount of any such electronic funds transfer shall be provided to Seller at least two (2) Business Days prior to such transfer.

 

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(d)    Reconciliation and Audit. 

 

	
			(i)  

				
			Reconciliation. Within 15 days of Seller’s receipt of a Report provided by Buyer to Seller in accordance with Section 2.3(b), Seller shall inform Buyer in writing of Seller’s assent or non-assent with respect to the calculations contained therein. In the event that Seller does not agree with such calculations, it shall notify Buyer of the reasons therefor and the parties hereby agree to promptly discuss and reconcile any material differences in the calculation of Transfer Price amounts owed by Buyer to Seller and make appropriate adjustment with respect thereto.

			
	
			(ii)  

				
			Audit. Each party shall keep such records as are necessary to determine accurately the sums due under this Agreement. Such records shall be retained by the party (in such capacity, the “Recording Party”) and, at any time during the applicable contract year and for 3 contract years thereafter, at the prior written request and expense of the other party, shall be made available for inspection, review, and audit during normal business hours, by an internationally recognized independent certified public accounting firm appointed by such other party and reasonably acceptable to the Recording Party for the sole purpose of verifying the Recording Party’s accounting reports and payments made or to be made pursuant to this Agreement; provided, however, that such audits may not be performed by either party more than once per contract year.  The results of each inspection, if any, shall be binding on both parties except in the event of fraud. The auditing party shall pay for such inspections, except that in the event where the adjustment shown by such inspection is greater than 10% of the amount incurred, then the Recording Party shall pay for such inspection.

			

 

ARTICLE III

PRODUCTION OF PRODUCTS

 

Section 3.1.             Manufacturing of Licensed Products.

 

(a)             Until such time, if any, as a Seller-owned manufacturing facility (an “Owned Facility”) is qualified for the manufacture of Licensed Products sold to Buyer hereunder, Seller shall manufacture or have manufactured the Licensed Products sold to Buyer hereunder at a contract manufacturing facility (a “Contract Facility”) selected by Seller and reasonably acceptable to Buyer. The parties hereby acknowledge and agree that it is the intent of the Seller that as soon as it may be practicable Seller shall maintain at least one alternate production site for Licensed Products sold to Buyer hereunder, which alternate production site, if a Contract Facility, shall also be selected by Seller and reasonably acceptable to Buyer. Seller may also satisfy its obligation for an alternate manufacturing facility through a sublicensing arrangement complying with Section 3.2.

 

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(b)             Seller shall be responsible for obtaining and maintaining all necessary licenses, registrations, authorizations and approvals (other than such licenses, registrations, authorizations and approvals that are required to be obtained or made by an owner or operator of a Contract Facility) which are necessary to manufacture, handle, store, label, package, transport and ship Licensed Products under cGMP conditions and in accordance with other regulatory requirements.

 

(c)             Seller shall provide Buyer with copies of any correspondence sent from Seller to governmental entities relating to the manufacturing, handling, storage, labeling, packaging, transportation or shipment of Licensed Products at the time such correspondence is sent by Seller, purged of Seller proprietary and/or confidential information and trade secrets. Seller shall provide Buyer with copies of any comments, responses, notices or other correspondence received by Seller from any governmental entity relating to the foregoing matters within five (5) Business Days of receipt of such correspondence by Seller, purged of any Seller proprietary information and/or trade secrets.

 

(d)             Seller shall furnish to Buyer (i) a summary of any report or correspondence issued by a governmental entity (or a third party authorized by a governmental entity) in connection with a visit or inquiry relating to any Owned Facility or, to the extent Seller is provided with such information, any Contract Facility, including but not limited to, any FDA Form 483 or warning letter and (ii) not later than ten (10) Business Days after the time Seller provides such to a governmental entity, summaries of any and all proposed responses or explanations relating thereto, in each case purged of trade secrets or other confidential or proprietary information of Seller. After the filing of a response with the appropriate governmental entity, Seller will notify Buyer of any further oral and/or written contacts with a governmental entity (or a third party authorized by a governmental entity) relating to the manufacturing, handling, storage, labeling, packaging, transportation or shipment of Licensed Products.

 

(e)             If requested in writing by Buyer, Seller shall permit Buyer to inspect, once per year, during normal business hours, Seller’s Facilities and manufacturing records to the extent Buyer deems it reasonably necessary to enable Buyer to verify compliance with any statutory or regulatory requirements to which Buyer is subject and which are applicable to the manufacture and/or packaging of Licensed Products. Notwithstanding the foregoing, Buyer shall have the right to inspect Seller’s Facilities and manufacturing records at any time, in the event that there is a quality or regulatory problem with any Licensed Product. If, as a result of any such inspection, Buyer reasonably and in good faith concludes that Seller is not in compliance with any regulatory obligations or requirements applicable to Buyer, Buyer shall so notify Seller in writing, specifying such areas of noncompliance in reasonable detail and Seller shall remedy the problems identified.

 

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(f)             Seller agrees to use all reasonable efforts to promptly rectify or resolve any deficiencies noted by a governmental entity (or third party authorized by a governmental entity) in a report or correspondence issued to Seller with respect to an Owned Facility or a Contract Facility.

 

Section 3.2.             Subcontracting. It is understood and agreed that Seller shall have the right in connection with its performance hereunder to contract with such third parties as Seller deems advisable to manufacture Licensed Products, provided that (i) manufacture and/or quality control by any such third party has been authorized by the competent regulatory authorities in the Licensed Territory, (ii) Seller shall provide Buyer with not less than fifteen (15) Business Days’ advance notice of its intent to contract with any third party and shall identify such third party to Buyer, (iii) Buyer may audit Seller’s contractor’s qualifications and (iv) Seller shall remain fully liable for its performance hereunder to the same extent as if such contractor had not been engaged.

 

Section 3.3.             Exclusivity. On a country-by country basis, for so long as the Revised Collaboration Agreement remains in effect with respect to any such country in the Licensed Territory, until such time as Buyer has a fully paid-up license in such country in accordance with the terms of the Revised Collaboration Agreement, Seller shall supply Licensed Products only to Buyer intended for distribution within such country.

 

Section 3.4.             Allocation of Supplied Licensed Products. In the event of shortage or inability to timely supply the required Licensed Product, Seller undertakes and agrees that the amounts of Licensed Products available shall be allocated on an equitable basis according to forecasts received and that Buyer shall not be treated less favorably than Seller, its Affiliates and other distributors and/or sublicensees.

 

ARTICLE IV

QUANTITY FORECASTS; ORDERS

 

Section 4.1.             Forecasts. (a) In order to assist Seller in planning its production, commencing sixty (60) days prior to the calendar month in which the First Commercial Sale of Licensed Products takes place in any country in the Licensed Territory, Buyer shall provide Seller with a twelve (12) month rolling forecast of the quantities of such Licensed Product required by Buyer, by month, for the following twelve (12) months. The first three (3) months of such projections shall constitute a binding commitment to order the quantity of such Licensed Product forecast for such period, provided that with respect to the first twelve (12) months following such First Commercial Sale of Licensed Products in any country in the Licensed Territory, only the first month’s forecast with respect to such country shall be binding provided that the portion of such forecast relating to such country is separately stated and is so indicated. Projections for months four (4) through twelve (12) (or, as provided above with respect to product launches in the Licensed Territory, months two (2) through twelve (12)) shall be made in good faith and shall constitute Buyer’s best estimates of future orders, but shall not be binding on Buyer. Updated twelve (12) month forecasts will be provided at the beginning of each succeeding calendar month for the twelve (12) month period commencing sixty (60) days thereafter. Buyer’s forecast shall also describe anticipated regulatory modifications to any English language version of Licensed Product labeling proposed by Seller. Seller shall, no later than fifteen (15) Business Days after receipt of each such forecast, notify Buyer in writing of any prospective problems of which Seller is aware of that might prevent Seller from meeting Buyer’s forecast order quantities or estimated delivery dates.

 

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(b)             Notwithstanding Buyer’s obligation to provide forecasts as set forth in Section 4.1(a), Buyer hereby agrees that it shall provide Seller with its firm purchase orders for Licensed Product in accordance with the lead-times and batch size increments to be specified by Seller in writing as soon as reasonably practicable but in any event before Buyer places its first order for Licensed Products, such lead-times and batch sizes to be applicable during the term of this Agreement unless otherwise agreed in writing by the parties; provided, however, that Buyer shall have the right, up to the date of manufacture, to issue binding change orders to increase or decrease such purchase orders with the consent of Seller, which shall not be unreasonably withheld so long as Buyer agrees to compensate Seller for any damages suffered by Seller as a consequence of such change order (including damages attributable to loss of allocable overhead recoupment, but excluding loss of profit), provided that Seller shall advise Buyer before carrying out any change order of Seller’s estimated increased cost of doing so. Buyer agrees to accept partial shipments of Licensed Products should, for any reason, it become necessary to ship in advance of order completion, provided that Seller shall (i) give advance written notice to Buyer of such shipment and (ii) bear any additional cost to Buyer of receiving Licensed Products in partial shipments. Seller shall make all commercially reasonable efforts to comply with any revisions to purchase order requirements consistent with the provisions of Section 4.1(a) and this Section 4.1(b). Seller, within ten (10) Business Days after the date that a purchase order is issued to it, shall acknowledge receipt of Buyer’s order and confirm in writing that the order can be supplied. For purposes hereof, a purchase order will be deemed issued on the earlier of (i) the date that Seller receives the purchase order via mail and (ii) the date of receipt of the telecopied purchase order.

 

Section 4.2.             Purchase Order Contents. (a) Each purchase order shall specify the quantity, concentration and container size of Licensed Product ordered within the Specifications, and the required delivery schedule. Seller shall use reasonable commercial efforts to deliver each shipment of Licensed Product within five (5) days of the delivery dates specified in the delivery schedule set forth in Buyer’s purchase order relating thereto (provided that in no event shall any such delivery dates be less than the lead time established pursuant to Section 4.1(b), unless otherwise consented to by Seller) using carriers mutually agreeable to Buyer and Seller. Seller shall use commercially reasonable efforts to accommodate “Rush” orders from Buyer.

 

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(b)             When all appropriate validation and quality control release criteria for a particular shipment of Licensed Product have been met (the “Release Date”), Seller shall notify Buyer in writing of the expected delivery dates (including details of destination, date and time) to enable delivery and receipt to be coordinated. Title and risk of loss to Licensed Products shall pass to Buyer upon delivery of Licensed Products by Seller to the carrier.

 

Section 4.3.             Packaging. (a) Licensed Products shall be delivered to Buyer as finished goods in final packaged and labeled form, quality controlled in accordance with Section 2.1(e) and ready for resale to the ultimate customer and in accordance with the packaging requirements set forth in the Marketing Regulatory Approvals.

 

(b)             Buyer shall distribute all Licensed Products as packaged by Seller in accordance with Section 4.3(a). In no event shall any Licensed Products be repackaged or reconfigured by Buyer without Seller’s prior written consent.

 

Section 4.4.             Labeling. With respect to each country in the Licensed Territory, prior to distribution of a Licensed Product, Buyer shall provide Seller with evidence of the regulatory approval of labeling specifications for such Licensed Product in such country and any variations required by the applicable regulatory agency. All such materials shall be provided to Seller together with a proper English translation. Seller shall distribute Licensed Products bearing only labeling supplied or approved by Buyer and in accordance with such regulatory requirements.

 

ARTICLE V

CERTAIN OBLIGATIONS OF BUYER

 

Buyer agrees to ascertain and comply with all applicable laws and regulations and standards of industry or professional conduct in connection with the use, distribution or promotion of the Licensed Products, including without limitation, those applicable to product claims, labeling, approvals, registrations and notifications, and also to obtain Seller’s prior written consent to all claims, labels, instructions, packaging or the like, which consent shall not be unreasonably withheld.

 

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ARTICLE VI

REGULATORY MATTERS

Section 6.1.              Information Regarding Regulatory Approvals. Seller shall promptly advise Buyer in matters pertaining to U.S. regulatory requirements relating to Seller’s activities hereunder. Seller shall also provide to Buyer reasonable advance notice of any regulatory submission containing information or data provided by Buyer to Seller which Seller intends to disclose to regulatory agencies under this Agreement.

 

Section 6.2.              Quality Control Program; Additional Testing Programs. Seller shall maintain a quality control program consistent with cGMP, as required by the FDA and/or any other governmental entity in the Licensed Territory, with respect to Seller’s manufacture of Licensed Products hereunder. In addition, Seller will perform such additional testing programs, and provide Buyer with documentation arising from such testing programs, as may be agreed to by Buyer and Seller or required by any applicable regulatory authority.

 

Section 6.3.              Retention of Samples. Seller shall retain as samples such quantities of Licensed Products from each batch of Licensed Product as Buyer shall reasonably request. Retained samples shall be maintained in a suitable storage facility for one (1) year past the product’s expiration date. All such samples shall be available for inspection and testing by Buyer at reasonable times and upon reasonable notice.

 

Section 6.4.             Recalls. Buyer shall notify Seller promptly if any Licensed Product is the subject of a recall, market withdrawal or correction within the Licensed Territory (a “Recall”), and Buyer and/or its designee shall have sole responsibility for the handling and disposition of such Recall. Buyer and/or its designee shall bear the costs of all Recalls of Licensed Products except to the extent that such Recall shall have been the result of Seller’s breach of any of the warranties set forth in this Agreement and/or the Revised Collaboration Agreement, in which case Seller will promptly reimburse Buyer to such extent for actual, direct costs sustained as a result of the Recall. In the event that Seller disputes Buyer’s determination that the fault is due to Seller and/or to its agent, the parties will select a mutually agreeable outside consulting firm which will be instructed to review the applicable information and data and to confirm or dissent from Buyer’s determination. If the consulting firm confirms Buyer’s determination, Seller will pay the fees of such consulting firm. Buyer and/or its designee shall maintain records of all sales of Licensed Products and customers sufficient to adequately administer a Recall, market withdrawal or correction for a period of three (3) years after termination or expiration of this Agreement. Except as required by law, Buyer and/or its designee shall serve as the sole point of contact with the applicable governmental entity concerning any Recall within the Licensed Territory with respect to Licensed Products and Seller shall serve as the sole point of contact with the FDA with respect to any Recall. In the event that Seller is required to communicate with the FDA with respect to Recall of Licensed Products, Seller shall within one (1) Business Day notify Buyer of such communication.

 

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ARTICLE VII

TERMINATION; RIGHTS AND OBLIGATIONS UPON

TERMINATION

 

Section 7.1.             Term.             This Agreement shall commence on the date hereof and shall continue in effect with respect to each Licensed Product in each country in the Licensed Territory, unless the parties mutually agree to extend such term, for so long as the Revised Collaboration Agreement remains in effect with respect to such Licensed Product in such country(ies).

 

Section 7.2.             Termination for Default. If either party materially defaults in the performance of any material agreement, condition or covenant of this Agreement and such default or noncompliance shall not have been remedied, or steps initiated to remedy the same to the other party’s reasonable satisfaction, within ninety (90) days (or thirty (30) days in the case of non-payment) after receipt by the defaulting party of a notice thereof from the other party, the party not in default may terminate this Agreement. A material breach or default of this Agreement shall be considered as a material breach or default under the Revised Collaboration Agreement, and Section 8.2 of the Revised Collaboration Agreement shall apply.

 

Section 7.3             Rights and Obligations on Expiration or Termination. Except to the extent expressly provided to the contrary, the following provisions shall survive the termination of this Agreement: Sections 6.3 and 6.4 and Articles I and VIII through X. Any rights of Seller to payments accrued through termination as well as obligations of the parties under firm orders for purchase and delivery of Licensed Products at the time of such termination shall remain in effect, except that in the case of termination under Section 7.2, the terminating party may elect whether obligations under firm orders will remain in effect and except that Seller will have no obligation with respect to delivery dates more than three (3) months after termination.

 

ARTICLE VIII

WARRANTIES; REPLACEMENT OF PRODUCTS; INSURANCE

 

Section 8.1.             Warranties. Seller warrants to Buyer for itself and on behalf of its subcontractors and agents who assume any of Seller’s obligations hereunder that (i) when shipped to Buyer by Seller, the Licensed Products will conform to the Specifications, as then in effect, and will not be (A) adulterated or misbranded within the meaning of the Food, Drugs & Cosmetic Act or (B) be an article which may not, under the provisions of the Food, Drugs & Cosmetic Act, be introduced into interstate commerce, and (ii) any Facility used by Seller will remain in compliance with cGMP at all times during the term of this Agreement and (iii) Seller shall obtain and maintain all necessary permits, registrations and licenses necessary to carry out its obligations pursuant to this Agreement. The foregoing warranties are the only warranties made by Seller with respect to the Licensed Products delivered hereunder, and may only be modified or amended by a written instrument signed by a duly authorized officer of Seller and duly authorized officer of Buyer. THE EXPRESS WARRANTIES CONTAINED IN THIS ARTICLE 8 ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR USE.

 

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Section 8.2.             Replacement of Licensed Products. Any Licensed Products delivered to Buyer by Seller which do not conform to the Specifications and are properly rejected as set forth in Article 2, or which are otherwise not in compliance with the warranties made in Section 8.1, shall be replaced, or Buyer’s account may be credited, at Buyer’s election. The remedy of replacement or credit shall not be available if and to the extent that such nonconformance was caused by Buyer’s misuse, unauthorized modification, neglect, improper testing or improper storage, including without limitation storage at inappropriate temperatures, transportation, use beyond any dating provided, by accident, fire or other hazard. THE EXPRESS OBLIGATIONS STATED IN THIS SECTION 8.2 AND IN SECTIONS 2.1 AND 8.3 ARE IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF SELLER FOR DAMAGES, INCLUDING BUT NOT LIMITED TO DIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF THE PRODUCTS.

 

Section 8.3.             Insurance. Buyer and Seller shall maintain during the term of this Agreement products liability insurance policies, covering their respective obligations under this Agreement, issued by reputable insurance companies under ordinary terms and conditions in the pharmaceutical industry and will prove the existence thereof to the other party if so requested.

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1.             Entire Agreement This Agreement constitutes the entire agreement and understanding between the parties as to the subject matter hereof. All prior negotiations, representations, agreements, contracts, offers and earlier understandings of whatsoever kind, whether written or oral between Seller and Buyer in respect of the subject matter of this Agreement, are superseded by, merged into, extinguished by and completely expressed by this Agreement (including, without limitation, the Supply Agreement dated March 6, 2002, and the Supply Agreement dated October 26, 1999, in each case between Buyer and Seller). No aspect, part or wording of this Agreement may be modified except by mutual agreement between the Seller and Buyer taking the form of an instrument in writing signed and dated by duly authorized representatives of both Seller and Buyer. The representation and warranties made by Licensor (i.e. Seller) and Licensee (i.e. Buyer) in the Revised Collaboration Agreement are incorporated herein by reference, provided that no breach of such representations and warranties shall be the basis for the termination of this Agreement unless the Revised Collaboration Agreement is terminated simultaneously.

 

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Section 9.2.             Notices Any notice or communication or permitted to be given by this Agreement shall be given by post-paid, first class, registered or certified mail or reputable courier service addressed to:

 

	 	In the case of Seller:	Discovery Laboratories, Inc.
	 	 	2600 Kelly Drive
	 	 	Warrington, Pennsylvania 18976
	 	 	Attention:     David L. Lopez, Esq., CPA
	 	 	                      Senior Vice President and General
	 	 	                      Counsel
	 	 	 
	 	With a copy to:	Dickstein Shapiro Morin & Oshinsky, LLP
	 	 	1177 Avenue of the Americas,
	 	 	New York, NY 10036-2714
	 	 	Attn: Ira L. Kotel, Esq.
	 	 	Facsimile: (212) 997-9880
	 	 	 
	 	In the case of Buyer:	Laboratorios del Dr. Esteve, S.A.
	 	 	Av. Mare de Déu de Montserrat, 221
	 	 	08041 Barcelona (Spain)
	 	 	Attention: Development Director
	 	 	Facsimile: (34) 93 433 00 72
	 	 	 
	 	With a copy to: 	JAUSAS
	 	 	Av. Diagonal 407 bis, 10th Floor
	 	 	08008 Barcelona (Spain)
	 	 	Attention: Hector Jausas
	 	 	Facsimile: (34) 93 415 20 51

          

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

 

Section 9.3.             Governing Law. This Agreement and its effect are subject and shall be construed and enforced in accordance with the laws of the State of New York, United States (without giving effect to the principles of conflict of laws), except as to any issue which depends upon the validity, scope or enforceability of any patent within the Patent Rights, which issue shall be determined in accordance with the applicable patent laws of the country of such patent.

 

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Section 9.4.             Representations regarding Authorization; Organization; Corporate Action; No Conflicts. Each party hereto severally represents and warrants that it is a duly organized and validly existing corporation and/or partnership under the laws of its jurisdiction of incorporation, and has taken all required corporate action to authorize the execution, delivery and performance of this Agreement and the Revised Collaboration Agreement and perform all of its obligations hereunder and thereunder; the execution and delivery of this Agreement and the Revised Collaboration Agreement and the consummation of the transactions contemplated herein and therein do not violate, conflict with, or constitute a default under its charter or similar organization document, its by-laws or the terms or provisions of any material agreement or other instrument to which it is a party or by which it is bound, or any order, award, judgment or decree to which it is a party or by which it is bound; and upon execution and delivery, this Agreement and the Revised Collaboration Agreement will constitute the legal, valid and binding obligation of it. The persons signing on behalf of each of the parties hereby warrant and represent that they have the authority to execute this Agreement and the Revised Collaboration Agreement on behalf of the party for whom they have signed.

 

Section 9.5.             Registration. Buyer shall take all reasonable and necessary steps to register this Agreement in any country where such is required to permit the transfer of funds and/or payment of amounts due to Seller hereunder or is otherwise required by the government or law of such country to effectuate or carry out this Agreement. Notwithstanding anything contained herein but subject to Section 9.4 hereof, Buyer shall not be relieved of any of its obligations under this Agreement by any failure to register this Agreement in any country, and, specifically, Buyer shall not be relieved of its obligation to make any payment due to Seller hereunder at Seller’s address specified in Section 9.2 hereof, where such payment is blocked due to any failure to register this Agreement.

 

Section 9.6.             Headings. As used in this Agreement, singular includes the plural and plural includes the singular, wherever so required by the context. The headings appearing at the beginning of the numbered Articles and Sections hereof have been inserted for convenience only and do not constitute a part of this Agreement.

 

Section 9.7.             Agency. Nothing herein shall be deemed to create an agency, joint venture or partnership between the parties hereto.

 

Section 9.8             Dispute Resolution. (a) Internal Review. In the event that a dispute, difference, claim, action, demand, request, investigation, controversy, threat, discovery request or request for testimony or information or other question arises pertaining to any matters which arise under, out of, in connection with, or in relation to this Agreement (a “Dispute”) and either party so requests in writing, prior to the initiation of any formal legal action, the Dispute will be submitted to the Steering Committee, which will use its good faith efforts to resolve the Dispute within ten (10) Business Days. If the Steering Committee is unable to resolve the Dispute in such period, the Steering Committee will refer the Dispute to the Chief Executive Officers (or equivalent position) of Buyer and Seller. For all Disputes referred to the Chief Executive Officers (or equivalent position), the Chief Executive Officers (or equivalent position) shall use their good faith efforts to meet in person and to resolve the Dispute within ten (10) Business Days after such referral.

 

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(b) Arbitration. If, pursuant to Section 9.8(a), within such ten (10) Business Days or such other period as may be agreed upon between the parties, the dispute remains unresolved, it shall be settled on application by either party by arbitration conducted in the English language, in Stockholm (Sweden) in accordance with the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said rules. The parties expressly agree to abide the award rendered. This provision shall not prevent either party from addressing any competent court or tribunal in order to seek interim measures.

 

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

 

Section 9.9.              Force Majeure. Notwithstanding any other provisions of this Agreement, neither of the parties hereto shall be liable in damages for any delay or default in performing hereunder if such delay or default is caused by conditions beyond its control including but not limited to acts of God, governmental restrictions, wars, or insurrections, strikes, floods, work stoppages and/or lack of materials; provided, however, that the party suffering such delay or default shall notify the other party in writing of the reasons for the delay or default. If such reasons for delay or default continuous exist for six (6) months, this Agreement may be terminated by either party.

 

Section 9.10.             Assignment. Except as otherwise set forth in Sections 2.1 and 2.3 of the Revised Collaboration Agreement with respect to Buyer’s right to grant sublicenses and appoint co-marketers and/or co-promoters, neither party hereto may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other, except that a party may make such an assignment without the other party’s consent to Affiliates or to a successor to substantially all of the business of such party, whether in a merger, sale of stock, sale of assets or other transaction. Any permitted successor or assignee of rights and/or obligations hereunder shall, in a writing to the other party, expressly assume performance of such rights and/or obligations. Any permitted assignment shall be binding on the successors of the assigning party. Any assignment or attempted assignment by either party in violation of the terms of this Section 9.10 shall be null and void and of no legal effect.

 

Section 9.11.             Successors and Assigns. Subject to Section 9.10, this Agreement shall be binding upon and inure to the benefit of the permitted successors or permitted assigns of Seller and Buyer respectively.

 

Section 9.12.             Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

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ARTICLE X

BASIS OF BARGAIN

 

 

EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED FOR BASES OF THIS AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.

 

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

 

 

	
			 

				
			DISCOVERY LABORATORIES, INC.

			
	
			 

				
			 

			
	
			 By:   

				
			/s/ Robert J. Capetola  

			
	
			 

				
			 

			
	
			 

				
			Name: Robert J. Capetola, Ph.D.

			Title: President and Chief Executive Officer

			

 

 

	
			 

				
			LABORATORIOS DEL DR. ESTEVE, S.A.

			
	
			 

				
			 

			
	
			  By:   

				
			/s/ Antonio Esteve

			
	
			 

				
			 

			
	
			 

				
			Name:

			Title:

			

 

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