DISCOVERY LABORATORIES INC /DE/
TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>d57178_ex10-1.txt
<DESCRIPTION>TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT
<TEXT>

                                                                    EXHIBIT 10.1

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [***], have been
separately filed with the Securities and Exchange Commission.

                 TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

This TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT, effective as of this 3rd
day of October 2003 (the "Effective Date"), between DISCOVERY LABORATORIES,
INC., a Delaware corporation ("Discovery"), having its principal place of
business at 350 South Main Street, Suite 307, Doylestown, PA 18901, and LAUREATE
PHARMA, L.P., a Delaware limited partnership ("Laureate"), having a principal
place of business at 201 College Road East, Princeton, NJ 08540, (each a
"Party", collectively the "Parties").

                              W I T N E S S E T H:

      WHEREAS, Laureate possesses capabilities relating to the manufacture of
sterile pharmaceutical products.

      WHEREAS, Laureate provides a full range of processing services to the
pharmaceutical industry, including process development, bioanalytical chemistry,
microparticle production, formulation, aseptic filling and Quality Control
testing.

      WHEREAS, Discovery desires Laureate to perform services in accordance with
the terms of this Agreement and the Scope (as hereinafter defined) related to
the scale up, validation and manufacture of SurfaxinTM clinical and commercial
supplies, and Laureate desires to perform such services.

      NOW, THEREFORE, in consideration of the above statements and other good
and valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the Parties hereto agree as follows:

Section 1. Definitions. Terms defined elsewhere in this Agreement shall have the
meanings set forth therein for all purposes of this Agreement unless otherwise
specified to the contrary. The following terms shall have the meaning set forth
below in this Section 1:

1.1 "Affiliate(s)" for purposes of this Agreement shall mean any Person, firm,
trust, partnership, corporation, company or other entity or combination thereof
which directly or indirectly: (i) controls a party; (ii) is controlled by a
Party; or (iii) is under common control with a Party. As used in this
definition, the terms "control" and "controlled" shall mean ownership of fifty
percent (50%) or more (including ownership by trusts with substantially the same
beneficial interests) of the voting and equity rights of such person, firm,
trust, partnership, corporation, company or other entity or combination thereof
or the power to direct the management of such person, firm, trust, corporation
or other entity or combination thereof.

1.2 "Agreement" means this document as signed by the Parties including the Scope
and any referenced attachments and any amendments and additions to this document
or such attachments.

1.3 "Assumptions" shall have the meaning as set forth in Section 9.


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

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1.4 "Batch" means formulated Drug Product yielding a quantity of bulk volume
and/or vials manufactured at the same time and identified by a unique lot
number.

1.5 "Batch Record" means all associated documentation utilized for manufacturing
a Batch generated by Laureate and approved by Discovery made concurrently with
the performance of each step of the manufacturing process for the Drug Product,
such that successive steps in such processes may be traced.

1.6 "Claim" shall have the meaning set forth in Section 19(a).

1.7 "Contaminants" shall have the meaning set forth in Section 19(c).

1.8 "Discovery Confidential Information" means any and all Discovery proprietary
information concerning the Drug Substance or Drug Product previously not known
to Laureate and supplied by Discovery to Laureate, and related processes,
technologies, compounds, inventions, Discovery Know-How show-how, designs,
specifications, formulas, methods, samples, biological, chemical or other
materials, medical or other devices, developmental or experimental work,
improvements, discoveries, research and clinical or other data, databases,
software, manuals, internal policies and procedures, patent applications,
licenses, term sheets, prices, costs, financial information, budgets,
projections, marketing, and selling and business plans, provided that such
information is not developed jointly with Laureate or its employees or other
personnel.

1.9 "Discovery Know How" means all scientific, technical and other information
relating to the Drug Substance or Drug Product known to Discovery from
time-to-time other than Laureate Confidential Information.

1.10 "Drug Product" means the final formulated dosage form pharmaceutical
medicine containing Drug Substance and Other Active Ingredients, manufactured in
accordance with cGMP and conforming to Specifications, that Discovery or its
Affiliates will use for clinical trials and commercialization requirements.

1.11 "Drug Substance" means the Surfaxin peptide otherwise known as KL4 or
sinapultide) in unformulated bulk form, to be supplied by Discovery's
Third-Party raw material suppliers, manufactured in accordance with cGMP and
conforming to Specifications.

1.12 "Excipients" means those inactive ingredients presently used in the Process
that are not intended to exert therapeutic effects (i.e., [***]."

1.13 "Facility" or "Facilities" means either or both, as the case may be, of
Laureate's manufacturing facilities located at 201 College Road East, Princeton,
NJ 08540 or 710 Union Boulevard, Totowa, NJ 07512.

1.14 "FDA" shall mean the United States Food and Drug Administration.

1.15 "Filling Components" means vials, stoppers and crimps (overseals) used for
an aseptic fill of the Drug Product.

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


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1.16 "Filled Product" means vials filled with Drug Product from an identified
Lot or Lots that are in a form ready for release and shipment from the Facility.

1.17 "Good Manufacturing Practices" or "GMP" or "cGMP" means current good
manufacturing practices, as specified in regulations promulgated from time to
time by the FDA for the manufacture and testing of pharmaceutical products.
Laureate's operational quality standards are defined in internal cGMP policy
documents and are based on Laureate's current interpretation of cGMP.

1.18 "Laureate Confidential Information" means any information, business,
technical or financial data concerning Laureate's manufacturing processes and
techniques including without limitation, Laureate Know How, previously not known
to Discovery and related processes, technologies, compounds, inventions,
Laureate Know-How, show-how, designs, specifications, formulas, methods,
samples, biological, chemical or other materials, medical or other devices,
developmental or experimental work, improvements, discoveries, research and
clinical or other data, databases, software, manuals, internal policies and
procedures, patent applications, licenses, term sheets, prices, costs, financial
information, budgets, projections, marketing, and selling and business plans
provided that such information is not developed jointly with Discovery or its
employees.

1.19 "Laureate Group" shall have the meaning set forth in Section 19(b).

1.20 "Laureate Know How" means all scientific, technical and other information
relating to the Process known to Laureate from time-to-time, other than
Discovery Confidential Information, and including any such information generated
as a result of performing the Program provided that such information is not
developed jointly with Discovery or its employees.

1.21 "Laureate Process Inventions" means any patentable or otherwise protectable
invention relating to the Process that is discovered by Laureate and results
from Laureate's day-to-day contract manufacturing or other activities that are
not directly related to the manufacture of Drug Product and/or the conduct of
the Program; provided that such inventions are not developed jointly with
Discovery.

1.22 "Laureate SOP" means the written standard operating procedures and methods
of Laureate and any procedures provided by Discovery (once such procedures are
accepted into the Laureate SOP system) that are specific to the Process as the
same may be amended from time to time; provided, however, that any such
amendments shall be promptly provided to Discovery.

1.23 "Loss" shall have the meaning set forth in Section 19.

1.24 "Lot" means the Drug Product produced in a single production, which may be
delineated as a sublot if contained in one or more containers thereof.

1.25 "Materials" means raw materials, Drug Substance, Other Active Ingredients
and excipients, Drug Product, reference standards and/or any other substances to
be provided by Discovery to Laureate in order to undertake the Program as
specified in the Scope and Appendix 1 to this Agreement.

1.26 "Modification" shall have the meaning set forth in Section 9.


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1.27 "Other Active Ingredients" means [***], to be supplied by Discovery's
Third-Party suppliers, manufactured in accordance with cGMP and conforming to
Specifications.

1.28 "Person" means an individual, partnership, corporation, limited liability
company, joint stock company, unincorporated organization or association, trust
or joint venture, or a governmental agency or political subdivision thereof.

1.29 "Process" means the manufacturing procedures used in connection with the
manufacture of Drug Product including any improvements that may be made thereto
from time-to-time.

1.30 "Process Consumables" means, filters, membranes, disposable analytical test
kits, tubing, filling needles, disposable bags, disposable glass/plasticware,
cleaning supplies and other changeover parts consumed during the manufacture of
Drug Product.

1.31 "Process Equipment" means non-dedicated equipment that will be used by
Laureate for the manufacture of Drug Substance or Drug Products pursuant to this
Agreement as well as for other products for other customers.

1.32 "Product-Dedicated Equipment" means equipment such as vessels and
formulation apparatus that will be used by Laureate solely for the manufacture
of Drug Product pursuant to this Agreement.

1.33 "Product Invention" means any and all improvements, inventions (patentable
or not), designs, ideas, works of authorship, copyrightable works, discoveries,
trademarks, trade dresses, service marks, copyrights, trade secrets, formulas,
processes, structures, product concepts, data, know-how, show-how, improvements,
techniques, information or statistics contained in, or relating to, marketing
plans, strategies, forecasts, blueprints, sketches, records, notes, devices,
drawings, customer lists, patent applications, continuation applications,
continuation-in-part applications, file wrapper continuation applications and
divisional applications, all to the extent that they are exclusively related to
Drug Product, discovered, made, conceived or reduced to practice by Laureate
employees or its other personnel either solely or jointly with Discovery
employees or its other personnel exclusively as a result of performing the
Program pursuant to this Agreement.

1.34 "Program" means the services to be performed by Laureate for Discovery in
connection with the manufacture of Drug Product as described in the Scope or
otherwise in connection with the performance of this Agreement, as such services
may be modified from time-to-time by mutual agreement of the Parties.

1.35 "Quality Agreement" shall have the meaning set forth in Section 3(c).

1.36 "Scope" means the various development and manufacturing activities intended
to provide for certain clinical and commercial supplies of Surfaxin to be
manufactured by Laureate for Discovery as described in Section 2 of this
Agreement and as otherwise, based on Laureate SOP.

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


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1.37 "Specifications" means the requirements as agreed between the Parties, for
tests, analysis, test procedures and acceptable test results with which Drug
Product, raw materials (including Drug Substance, Process Consumables, Other
Active Ingredients and Excipients) shall conform as set forth in the Quality
Agreement entered into by the Parties, as such agreement may be amended from
time-to-time.

1.38 "Third Party" shall mean any party other than Discovery, Laureate and their
respective Affiliates.

Section 2. Scope of the Program.

(a) A detailed Scope shall be jointly prepared promptly upon the execution of
this Agreement by Laureate and Discovery and agreed upon by both Parties and
will become an attachment and integral part of this Agreement upon approval and
consent to the Scope by the Parties. Upon such agreement and approval, Laureate
shall perform the Program for Discovery in accordance with the Scope. The Scope
will specify the Program design, information desired, estimated duration of the
Program, and all other matters pertinent to completion of the Program; provided,
however, that Laureate hereby acknowledges and agrees that the manufacturing
relationship set forth in this Agreement shall be non-exclusive and that this
Agreement shall not constitute an agreement between the Parties that Laureate
shall be Discovery's sole or primary manufacturing facility; and further
provided that Discovery hereby acknowledges and agrees that the manufacturing
relationship set forth in this Agreement shall be nonexclusive and that this
Agreement shall not constitute an Agreement between the parties that Discovery
shall be Laureate's sole or primary customer in the Facility.

(b) The Parties acknowledge and agree that the overall objectives of the Program
are to provide as quickly as reasonably practicable for the clinical and
commercial production capability to manufacture Drug Product including, without
limitation, by achieving the following Program milestones within the timeframes
set forth below, unless otherwise mutually agreed to in good faith by the
Parties:

(i) the successful installation, validation and start-up at Laureate's Facility
of the Drug Product manufacturing line located previously at the manufacturing
facility of Akorn, Inc. The Parties currently contemplate that the installation
and setup of such manufacturing line at the Facility will be completed by
September 30, 2003, in order to allow the production of stability Batches by
November 30, 2003. As soon as practicable thereafter, sterility assurance of all
support, utility, Facility and processing equipment will be qualified
(contemplated to entail certain media Batches). A primary objective of this
milestone shall be to enable production of a minimum of three clinical Lots by
December 31, 2003; provided, however, that after production of the Initial Phase
Batches (as such term is hereinafter defined), the Parties agree to conduct a
good faith assessment of the conduct of the Program to date with the objective
of determining a mutually agreeable basis for moving forward, with the
production of such clinical Lots. Collectively, the stability Batches and media
Batches referred to in this Section 2(b)(i) shall hereinafter be referred to as
the "Initial Phase Batches"; and

(ii) the installation and qualification at Laureate's Facility, of a new filling
line and new process equipment train capable of producing clinical and
commercial Drug Product at an increased scale together with the filing of
appropriate documentation for regulatory approvals, and scale-up to anticipated
commercial requirements. The Parties currently contemplate that in accordance
with the Program, as it may be modified from time-to-time, that such optimized
Drug Product filling line and the manufacturing line will be qualified for use
by March 31, 2004. In connection with the achievement of this milestone, the
Parties contemplate the production of a number of stability, media and
development Batches that collectively shall hereinafter be referred to as the
"Development Phase Batches."


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

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(c) Laureate consulted and shall continue to consult with Discovery in
developing the Program design in a manner consistent with Laureate's current
reasonable understanding of United States (the "US") regulatory guidelines.
Except as set forth herein, Laureate does not warrant that the Program and/or
the Program results will satisfy the requirements of any regulatory agencies at
the time of submission of Program results to such agencies and, further, it is
acknowledged and agreed to by the Parties that should the Initial Phase Batches
and or Development Phase Batches not be in compliance with the Specifications
that such event shall not be subject to rejection pursuant to Section 16(d) or
relieve Discovery of its payment obligations in accordance with Section 8 for
such Batches.

(d) Laureate's performance of the Program will be based on technical information
provided by or on behalf of Discovery. Such information will be incorporated by
Laureate into Program documents (scale up plans, Batch Records, Specifications,
etc.) that will be reviewed and approved by Discovery prior to use by Laureate.
These documents will form the sole basis upon which the Program will be
performed. Except as may be provided herein, Laureate makes no warranties that
the execution of the Program according to the approved documents will result in
any specific quantity or quality of Drug Product.

(e) In addition to routine Program meetings, senior representatives of the
Parties shall meet on an occasional basis or as necessary, the first meeting
being no later than one (1) month from the Effective Date, to review progress of
the Program relative to the Scope and to agree on any necessary changes to the
Scope. Any disagreement between the Parties concerning the Scope (including,
without limitation, the failure of the Parties to agree upon any necessary
changes to the Scope) shall be resolved in accordance with the
dispute-resolution procedures set forth in Section 17 hereof.

Section 3. Program Performance.

(a) Discovery and Laureate are entering into a manufacturing and process
development relationship with the purpose of manufacturing clinical and
commercial supplies of Drug Product. Laureate shall use its commercially
reasonable efforts to provide the Facility, supplies, staff and other resources
necessary to complete the Program as provided in the Scope, as it may be
modified as provided herein, in accordance with the terms of this Agreement.
Discovery shall use its commercially reasonable efforts to provide the Drug
Substance, Product Dedicated Equipment, Other Active Ingredient supplies, staff
and other resources necessary to complete the Program as provided in the Scope,
as it may be modified as provided herein, in accordance with the terms of this
Agreement. In the event of any conflict between the terms and conditions of this
Agreement and the Scope, the terms of this Agreement shall control.

(b) Laureate shall appoint a Laureate representative who shall be an employee of
Laureate or its Affiliates (the "Program Manager"), to be responsible for the
completion of the Program by Laureate. The Program Manager will coordinate
performance of the Program with a representative designated by Discovery (the
"Discovery Representative"), which representative shall have responsibility over
all matters relating to the performance of the Program on behalf of Discovery.
Unless otherwise agreed in the Scope, or mutually agreed to by the Parties in
writing, all communications between Laureate and Discovery regarding the conduct
of the Program pursuant to the Scope shall be addressed to or routed through the
Program Manager and the Discovery Representative. Laureate may, at its option,
substitute the Program Manager during the course of the Program. Discovery may,
at its option, substitute the Discovery Representative during the course of the
Program; provided, however that each Party hereby agrees to commit to the
Program appropriate personnel (including, those with reasonably sufficient
expertise in technical development, manufacturing, operations, quality control,
quality assurance and regulatory affairs.)


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

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(c) As promptly as practicable following the Effective Date, the Parties will
execute a detailed document ("Quality Agreement") specifying the quality and
regulatory procedures and responsibilities of the Parties hereunder with respect
to the manufacture of Drug Product.

Section 4. Program Equipment and Materials.

(a) The Parties acknowledge that (i) the initial phase of the Program (as
described in Section 2(b)(i)) provides that Discovery, at its sole expense,
shall arrange for the transfer to Laureate, installation and validation of its
current manufacturing line now maintained at the facilities of Akorn; (ii)
during the development phase of the Program(as described in Section 2(b)(ii),
certain equipment related to the scaled-up Drug Product manufacturing line, some
of which is already specified and some of which may be specified in the future,
must be obtained and installed and set-up and validated at the Facility at
Discovery's sole expense, and (iii) upon mutual agreement, Laureate may make
certain modifications to its Facility to provide for an expanded scale-up of
production capacity for Drug Product; provided, that the costs of such
modifications shall be allocated between the Parties as they may mutually agree
in writing, with the final determination of any such allocation to be at the
sole discretion of Laureate.

(b) Discovery will provide Laureate with [***] as required by Laureate to
perform the Program as specified in the Scope and this Agreement, as well as all
documentation and such other data as may be necessary to apprise Laureate of the
stability of the Drug Substance, Other Active Ingredients and Drug Product and
related process characteristics, proper storage, and manufacturing and safety
requirements including, without limitation, Certificates of Analysis relating to
the Drug Substance, Drug Product, Other Active Ingredients and reference
standards as specified in Appendix 3; provided that all [***] shall be in
compliance with the Specifications previously approved by Discovery. Any
Product-Dedicated Equipment provided to Laureate by Discovery shall be clean, in
good operating condition and free from all material defects.

(c) Laureate shall use commercially reasonable efforts to procure and maintain
an adequate inventory of [***] for use in the Program and each manufacturing run
based on Discovery's Purchase Orders; provided that all such materials shall be
in compliance with the Specifications previously approved by Discovery. [***]

(d) Unless otherwise agreed to by the Parties, it is understood that Discovery
shall procure the Product-Dedicated Equipment as set forth in the Scope, at
Discovery's sole expense. Discovery shall have the right to label such equipment
with plates or other appropriate markings.

(e) Upon completion of the Program: (i) the [***] will be returned to Discovery
"as is" and "where is" in accordance with Discovery's written instruction
related thereto, and at Discovery's expense; and (ii) any remaining [***]
provided to Laureate will be returned to Discovery or retained by Laureate in
compliance with applicable regulatory requirements or destroyed/disposed of by
Laureate under written authorization from Discovery; provided, however that such
instructions and authorizations shall be communicated by Discovery within thirty
(30) of completion of the Program.

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


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Section 5. Use of Subcontractors.

(a) Laureate shall have the right to employ subcontractors to undertake certain
activities related to the Program; provided, however, that all such
subcontractors shall be pre-approved by Discovery in writing; and further,
provided, that Laureate at its sole discretion may utilize: (i) temporary and
contract employees in connection with the Program; (ii) contractors and vendors
for general maintenance, repair and operation of the Facility; and (iii)
contractors for regulatory and quality issues. A list of known and approved
subcontractors is provided in Appendix 4 to this Agreement. Except as set forth
in the immediately preceding sentence, Laureate shall not employ, engage or
contract with a Third Party in connection with or any part of the Program
unless: (i) Laureate provides Discovery with prior written notice of such
subcontracting arrangement; (ii) Discovery has given its prior written consent,
which consent shall not be unreasonably withheld or delayed (except that no such
approval shall be required for the subcontractors listed on Appendix 4); and
(iii) Discovery at it's sole expense may audit Laureate's subcontractors'
qualification criteria and review Laureate's subcontractor audits upon
reasonable notice during regular business hours and no more frequently than once
per annum. Laureate shall cause any and all subcontractors engaged by Laureate
to carry out any aspect of the Program to be held under obligation of
confidentiality substantially similar to the terms, conditions and limitations
set forth in Section 10.

(b) Except for (i) Discovery's rejection remedies provided for pursuant to
Section 16(d) and (ii) the acts of subcontractors who are employees or
consultants of Affiliates of Laureate and perform services under this Agreement
at the Facilities, Laureate will not be held responsible or liable for the
performance of any pre-approved subcontractor used for the Program or for any
costs, expenses, damage or loss of any nature, whether direct or consequential
occasioned by such contractor's performance or failure to perform.

Section 6. Compliance with Government Regulations.

(a) Laureate shall perform the Program in accordance with the Scope. Laureate
will also comply in all material respects with applicable government regulatory
requirements concerning cGMP appropriate to the Program; provided, however, that
in the event of a conflict in government regulations, Discovery will designate,
in writing, which regulations shall be followed by Laureate in its performance
of the Program and otherwise in a manner consistent with the terms of this
Agreement and shall hold Laureate harmless for following such written
designation.

(b) Should any applicable government regulatory requirements concerning cGMP and
appropriate to the Program be changed, the Parties shall promptly notify each
other of any material revision or amendments of or additions to cGMP and will
confer with each other with respect to the best means to comply with such
requirements. Laureate shall use its commercially reasonable efforts to comply
in all material respects with the new requirements. The Parties will allocate
any costs of implementing any such agreed changes on an equitable basis, with
Laureate being responsible for costs of implementation of changes required
generally for cGMP manufacture at the Facility that are not directly related to
the manufacture of Drug Product and Discovery being responsible for all other
costs. Should Laureate, at its sole discretion, decide not to comply with such
new requirements, after using commercially reasonable efforts to so agree,
Laureate will not be obligated to continue to perform the then existing Program
and Discovery or Laureate shall be entitled to immediately terminate this
Agreement, (notwithstanding Section 23(b)).


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Section 7. Facility Visits and Audits. With reasonable advance notice,
Discovery's representatives (including its employees, directors, consultants and
other subcontractors) may visit the Facility at appropriate times consistent
with the Program to observe the progress of the Program or to audit the Program
subject to the access limitations set forth in Appendix 5 to this Agreement.
Laureate will not be held responsible or liable for the performance of any Third
Party retained by Discovery to perform services related to the Program,
including, without limitation, distributors, consultants and testing entities.

(a) Laureate shall have the right at reasonable business hours and to the
greatest reasonable extent that may be provided by Discovery to audit any sites
or laboratories used by Discovery (except for Discovery's contract
manufacturers) or any Third Party engaged by Discovery directly in connection
with the manufacture of any Materials, the Drug Product, Drug Substance and
other materials provided by or on behalf of Discovery to Laureate.

Section 8. Compensation.

(a) Laureate shall be paid the development and service fees listed on Appendix 6
(the "Service Fees") to perform the services set forth on Appendix 6, which
Service Fees shall be subject to modification in accordance with the provisions
of Section 9 and as otherwise set forth in Sections 8(b) and 8(c).

(b) The Parties hereby acknowledge and agree to, upon completion of the Initial
Phase and Development Phase of the Program, negotiate in best faith a mutually
agreeable monthly facility access fee and commercial pricing in connection with
the manufacture of the commercial Drug Product product by Laureate. It is
currently contemplated that an increase in Discovery's requirements may occur,
if at all, upon the attainment of certain development and commercialization
milestones including, but not limited to, regulatory approval of Surfaxin for
the treatment of Respiratory Distress Syndrome in infants and the successful
completion of Discovery's ongoing Phase 2 clinical trial for the treatment of
Acute Respiratory distress syndrome in adults.

(c) Discovery shall pay Laureate the Service Fees in accordance with the payment
schedule set forth on Appendix 6. Laureate shall invoice Discovery for [***]
purchased by Laureate in accordance with Section 4 with an administrative fee
equal to [***] of Laureate's actual cost of such Process Equipment and Materials
(limited to an aggregate of $[***] of Process Equipment costs subject to such
administrative fee) purchased for the Program added to such invoices. Payments
are due thirty (30) days from the date of invoice, except that the payments of
the Service Fees shall be due at the times indicated in accordance with the
terms and conditions set forth in Appendix 6. Late payments are subject to an
interest charge of one percent (1%) per month computed on a daily basis.

Section 9. Change Orders.

(a) The Program is subject to a number of specific and general Assumptions. The
specific assumptions include but are not limited to the Scope and Program design
and objectives, timing, budgetary requirements, Laureate's Facility utilization
schedule, labor and facility usage, availability of equipment and Materials,
capital expenditure requirements, if any, and other matters relating to the
completion of the Program as set forth in the Scope (the "Program Assumptions").
Laureate also

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


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assumes that Discovery will cooperate and meet its obligations under this
Agreement and Scope in a timely manner, that no event outside the control of
Laureate will occur, including, without limitation, the events described in
Section 21, and that there are no changes to any applicable laws, rules or
regulations that affect the Program (the foregoing assumptions together with the
Program Assumptions, collectively, the "Assumptions"). In the event that any of
the Assumptions require modification or the Program objectives cannot be
achieved based on the Assumptions (each being, a "Modification") then the Scope
may be amended as provided in Section 9b.

(b) In the event the need for a reasonable Modification is identified by the
Discovery or by Laureate, the identifying Party shall notify the other Party in
writing as soon as is reasonably possible. Laureate shall use reasonable efforts
to provide the Discovery with a written change order containing an estimate of
the required adjustments to the Service Fees, when practicable, within ten (10)
business days of receiving or delivering such notice (the "Change Order").
Discovery shall use its best efforts to respond in writing to such Change Order
promptly. If Discovery does not approve such Change Order and has not terminated
this Agreement and the Program in accordance with Section 23 but desires the
Program to be modified to take into account the Modification, then Discovery and
Laureate shall use good faith commercially reasonable efforts to agree on a
Change Order that is mutually acceptable. If practicable, Laureate may, in its
discretion, continue to work on the Program but Laureate shall not be obligated
to work on the Program during any such negotiations. Laureate shall not commence
work with respect to a Change Order unless authorized by Discovery in writing.
Any disagreement between the Parties concerning a Change Order (including,
without limitation, the failure of the Parties to agree upon a mutually
acceptable Change Order) shall be resolved in accordance with the
dispute-resolution procedures set forth in Section 17.

Section 10. Confidential Information/Legal Proceedings.

(a) Laureate shall not disclose, without Discovery's prior written permission,
Discovery Confidential Information unless such disclosure: (i) is to an
Affiliate of Laureate that is under a similar obligation to keep such
information confidential; (ii) is to a subcontractor that has been pre-approved
by Discovery in accordance with the terms and conditions set forth in Section 5
and that is under a similar obligation to keep such information confidential;
(iii) is or becomes publicly available other than as a result of a breach of
this Agreement by Laureate; (iv) is disclosed by a Third Party which Laureate
reasonably believes is entitled to disclose it without restriction; (v) is
already known to Laureate as shown by its prior written records; (vi) can be
established by competent evidence as independently developed by Laureate without
the use of Discovery Confidential Information; or (vii) is required by any law,
rule, regulation, order decision, decree, subpoena or other legal process to be
disclosed. If such disclosure is requested by legal process, Laureate will make
all reasonable efforts to notify Discovery of this request promptly prior to any
disclosure to permit Discovery to oppose such disclosure by appropriate legal
action.

(b) Discovery shall not disclose, without Laureate's prior written permission,
Laureate Confidential Information unless such disclosure: (i) is to an Affiliate
of Discovery that is under a similar obligation to keep such information
confidential; (ii) is or becomes publicly available other than as a result of a
breach of this Agreement by Discovery; (iii) is disclosed by a Third Party which
Discovery reasonably believes is entitled to disclose it without restriction;
(iv) is already known to Discovery as shown by its prior written records; (v)
can be established by competent evidence as is independently developed by
Discovery without the use of Laureate Confidential Information (including
Laureate Know-How); or (vi) is required by any law, rule, regulation, order
decision, decree, subpoena or other legal process to be disclosed. If such
disclosure is requested by legal process, Discovery will make all reasonable


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       10
<PAGE>

efforts to notify Laureate of this request promptly prior to any disclosure to
permit Laureate to oppose such disclosure by appropriate legal action.

(c) Laureate will not transfer any Materials without Discovery's prior written
permission to any Third Party other than a subcontractor that has been approved
by Discovery in accordance with the terms and conditions set forth in Section 5.

(d) In the event that a recipient Party of any confidential information
hereunder is requested or required (by oral questions, deposition,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or other process) to disclose all or any part of any
confidential information, such receiving Party shall provide the disclosing
Party with prompt notice of such request or requirement so that the disclosing
Party may seek an appropriate protective order or waive compliance with the
provisions of this Agreement, as well as notice of the terms and circumstances
surrounding such request or requirement. In such case, the Parties will consult
with each other on the advisability of pursuing any such order or other legal
action or available steps to resist or narrow such request or requirement and
shall provide reasonable assistance to the disclosing Party in connection
therewith. If, failing the entry of a protective order or the receipt of a
waiver hereunder, the receiving Party is, in the opinion of counsel acceptable
to the disclosing Party, legally compelled to disclose such confidential
information, the receiving Party may disclose that portion of the confidential
information which counsel advises the receiving Party that it is legally
compelled to disclose. In any event, the receiving Party will not oppose action
by the disclosing Party to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the disclosure
of such information. The receiving Party shall cause its representatives and
agents to comply with this Section 10(d).

(e) If Laureate shall be obliged to provide testimony or records regarding the
Program in any legal or administrative proceeding, then Discovery shall
reimburse Laureate for its reasonable out-of-pocket costs plus a reasonable
hourly fee for its employees or representatives at Laureate's standard
commercial rates.

Section 11. Work Product. All work outputs (e.g., reports) will be prepared on
Laureate's standard format unless otherwise specified in the Scope.

Section 12. Inventions and Patents.

(a) With respect to Product Inventions which may arise hereunder, the following
shall apply:

(i) Product Inventions made jointly by employees and other personnel of
Discovery, and employees of Laureate and other personnel, or other parties under
obligation to assign their inventions to Discovery or Laureate, shall be the
joint property of Discovery and Laureate; provided, however, that each Party
shall grant to the other Party a non-exclusive, paid-up worldwide perpetual
license in a form satisfying to the other Party and its counsel to use such
Product Invention solely with respect to such Party's (and its respective
Affiliates) business activities and provided, further, that any such license of
Product Inventions to Laureate shall absolutely restrict Laureate from using
such Product Invention, directly or indirectly, in connection with the
development or manufacture or production of any pulmonary surfactant competitive
with that of Discovery and any such licensed invention shall not be sublicensed
by either Party;

(ii) Product Inventions made solely by employees or other personnel of Discovery
or other parties under obligation to assign their inventions to Discovery shall
be the exclusive property of Discovery;


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       11
<PAGE>

provided, however, that Laureate shall have a non-exclusive, paid-up perpetual
worldwide license to such Product Invention solely with respect to Laureate's
(or its Affiliates) manufacturing activities and, provided, further, that any
such license to Laureate (or its Affiliates) shall absolutely restrict Laureate
(or its Affiliates) from using such Product Invention, directly or indirectly in
connection with the development, manufacture or production of any pulmonary
surfactant competitive with that of Discovery and such licensed invention shall
not be sublicensed; and

(iii) Product Inventions or Laureate Process Inventions made solely by employees
or other personnel of Laureate or other parties under obligation to assign their
inventions to Laureate shall be the exclusive property of Laureate; provided,
however, that Laureate shall grant to Discovery a non-exclusive, paid-up
perpetual worldwide license to such Product Invention solely with respect to the
use of such invention by Discovery with respect to Discovery's (or its
Affiliates) business activities; and provided, further, that that any such
license to Discovery (or its Affiliates) shall absolutely restrict Discovery (or
its Affiliates) from using such Product Invention, directly or indirectly in
connection with the development , manufacture or production of any product other
than pulmonary surfactant products, and such licensed Product Invention shall
not be sublicensed.

(b) At either Party's request and at such Party's expense, the other Party will
execute or cause its personnel to execute, any and all applications, assignments
or other instruments and give testimony which shall be necessary to apply for
and obtain Letters of Patent of the U.S. or of any foreign country with respect
to any Product Invention. In the event of such request, the parties agree and
acknowledge that the requesting party shall compensate the other party at its
standard commercial rate for the time devoted to such activities and reimburse
it for all reasonable expenses incurred.

(c) Laureate shall (i) retain all rights to any inventions relating to
manufacturing methods and processes including any production, purification and
formulation, processing and aseptic filling process previously discovered or
developed by Laureate and (ii) own all rights in and to any Laureate Process
Inventions and all Laureate Know How.

(d) Discovery agrees and acknowledges that Laureate Process Inventions and
Laureate Know How are vested in Laureate and that Discovery shall not at any
time have any right, title, license or interest in or to Laureate Know How or
Process Inventions or any other intellectual property rights relating to the
Process for which Laureate shall have the legal right therefor.

(e) Subject to Sections 10 and 12(a), each Party shall have the right to utilize
data generated during the course of the Program to support applications,
assignments or other instruments necessary to apply for and obtain Letters of
Patent of the U.S. or of any foreign country with respect to Product Inventions
or Laureate Process Inventions. Each Party agrees to promptly notify the other
of any such Product Invention and shall notify the other Party at least ninety
(90) days in advance of such application.

Section 13. Independent Contractor. Laureate shall perform the Program as an
independent contractor of Discovery and shall have complete and exclusive
control over its Facility, equipment, employees and agents. Nothing in this
Agreement or other arrangements for which it is made shall constitute Laureate,
or anyone furnished or used by Laureate in the performance of the Program, as an
agent, employee, joint venture, partner, or servant of Discovery. Laureate also
agrees that it neither it nor its Affiliates or any of their employees have any
rights to receive any employee benefits such as health insurance and accident
insurance, sick leave or vacation as are in effect generally for employees of
Discovery. Laureate shall not enter into any agreements or incur any obligations
on behalf of Discovery nor commit Discovery in any other manner without prior
written consent from a duly authorized officer or representative of Discovery.


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       12
<PAGE>

Section 14. Insurance. Laureate agrees to maintain a standard property insurance
policy covering the Materials, Process Equipment, Process Consumables and
Filling Components while under control and care of Laureate, during the
performance of the Program. Discovery agrees to maintain a standard property
insurance policy covering the Product Dedicated Equipment. Discovery shall also
maintain general liability insurance including bodily injury, death and property
damage in the amount of Two Million Dollars (US $2,000,000) per occurrence and
Ten Million Dollars (US $10,000,000) in the aggregate including product
liability coverage during all times when the Drug Product is being used
clinically, and thereafter, covering the Drug Product and Materials or any harms
caused by the Drug Product and Materials, and to name Laureate as an additional
insured under such policy at no cost to Laureate. Discovery further agrees to
provide Laureate with a Certificate(s) of Insurance issued to Discovery for an
insurance policy or policies directed to the aforementioned insurance coverage,
in which Laureate is named as an additional insured.

Section 15. Shipping. Laureate shall package for shipment Drug Product, samples
or other Materials in accordance with Discovery's written instructions and at
Discovery's expense. All shipments will be F.O.B the Facility and Discovery
shall bear all packaging, shipping and insurance charges as set forth in
Appendix 7. Delivery of Drug Product, samples or other materials by Laureate
shall be deemed to have taken place upon delivery to carrier at the Facility.
Title and risk of loss shall transfer to Discovery on transfer of Drug Product
to carrier at the Facility. Laureate shall accept no liability or responsibility
and risk associated with failure of Drug Product to meet Specifications once
this transfer has occurred. Laureate shall retain representative samples of Drug
Product for record keeping, testing and regulatory purposes.

Section 16. Forecasts/ Purchase Orders/ Rejection

(a) Forecasts. Discovery shall provide Laureate with a good faith written
estimate of its expected requirements, on an annual and per quarter basis, for
Drug Product, in accordance with the terms and conditions set forth below:

(i) Annual Forecasts. On April 1, 2004 with respect to the 6 month period
beginning July 1, 2004, Discovery shall provide Laureate with a 6 month minimum
forecast of the Batches of Drug Product required by Discovery, delineated to the
greatest reasonable extent possible by month, for the following 6 months
("Initial Forecast"). Commencing October 1, 2004 with respect to the 12 month
period beginning January 1, 2005 (and on the successive one year anniversaries
of October 1, 2004, and with respect to succeeding 12 month periods), Discovery
shall provide Laureate with a 12 month minimum forecast of the Batches of Drug
Product required by Discovery, delineated to the greatest reasonable extent
possible by quarter, for the following 12 months (collectively, the "Annual
Period"). The Initial Forecast and all succeeding forecasts shall hereinafter be
herein referred to the "Annual Commitment." Upon the expiration of each and
every Annual Period, if Discovery shall have failed to purchase, in the
aggregate, that number of Batches specified in the Annual Commitment, Discovery
shall pay to Laureate, in accordance with the terms and conditions set forth in
Section 8, an amount equal to 65% of the total Service Fees that would have been
due with respect to that number of Batches that Discovery so failed to purchase
during the applicable Annual Period. Laureate hereby acknowledges and agrees
that the Annual Commitment amount shall be decreased by that amount of Batches,
if any, that Laureate has failed to supply in accordance with Section 16(d) or
that Discovery has obtained from a back-up supplier, solely in accordance with
Section 16(e).

(ii) Quarterly Forecasts: Within seven (7) days following the Effective Date and
not less than 10 days before the beginning of each calendar quarter thereafter,
Discovery shall submit to Laureate, in writing, a non-binding forecast of the
number of Batches the Customer reasonably believes it will


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       13
<PAGE>

require for each Drug Product during the next 12 month period and the estimated
timing for delivery of such Filled Product.

(b) Order Placement Procedure. Discovery shall submit binding Purchase Orders
(each, a "Purchase Order" and collectively "Purchase Orders") in accordance with
the terms and conditions set forth below. Such orders shall be set forth on
Discovery's standard Purchase Order form, which, unless previously agreed upon
in writing by Laureate, shall not be submitted to Laureate any less than thirty
(30) days from the date such Batch is to be produced, specifying the quantity,
concentration and container size of Drug Product ordered and the requested
delivery date. Within seven (7) days following the Effective Date, Discovery
shall submit to Laureate a written Purchase Order for Drug Product for the
calendar quarter ending on December 31, 2003, such Purchase Order to specify the
number of Batches of Drug Product and the requested delivery date of such (which
shall in no event be less than thirty (30) days from receipt of such firm and
binding Purchase Order). At least ten (10) days prior to the beginning of each
future calendar quarter during the term of this Agreement, Discovery shall
submit to Laureate a written Purchase Order for Drug Product for the upcoming
calendar quarter, such purchase order to specify the number of Batches of Drug
Product and the requested delivery date of each Batch. Laureate shall accept all
Purchase Orders it is able to meet on commercially reasonable terms. Upon
accepting each purchase order, Laureate shall use commercially reasonable
efforts to assign a production time for the batch according to its customary
procedures and based on the availability of Materials, Process Consumables and
Filling Components.

(c) Amendments. The Parties further agree that if the foregoing forecasting,
and/or ordering or inventory mechanisms set forth in Section 16 are determined
by the Parties, in good faith cooperation and giving reasonable consideration to
each Party's economic and business needs, to be inappropriate given the
experience of the Parties and the then-existing manufacturing and supply
circumstances regarding Drug Product hereunder, the Parties shall negotiate in
good faith appropriate amendments to the applicable mechanisms in the supply
procedures.

(d) Rejection. Except with respect to [***], Discovery may reject Drug Product
delivered by Laureate for failure to comply with the Specifications by giving
Laureate written notice, upon which the Parties will cooperate to determine
whether rejection was necessary or justified as set forth in the Quality
Agreement; provided, however that Laureate shall not be responsible if such
rejection is due directly or indirectly to Materials provided by Discovery not
meeting Specifications and Discovery shall provide notice of any such rejection
to Laureate within 15 business days of delivery of the Batch Record for any such
Batch. Laureate will notify Discovery promptly as to whether it accepts
Discovery's basis for any rejection. If the Parties disagree in good faith
whether the Batch did not comply with the Specifications, they will promptly
submit a sample of such Batch and applicable documentation to a mutually
acceptable independent Third Party laboratory. Such Third Party laboratory shall
determine whether such Batch conforms with the Specifications, and such
determination shall be final, binding and determinative as to whether
Discovery's rejection of such Product batch was justified. The costs of all
Third Party testing shall be shared equally by the Parties. If Discovery has
given notice of rejection, at Discovery's request, Laureate shall use
commercially reasonable efforts to replace such rejected Drug Product. If the
Third Party tester rules that a rejected Batch meets the Specifications,
Discovery shall be obligated to purchase such Batch, irrespective of whether
Laureate has already replaced it at Discovery's sole cost and expense. If
Laureate accepts

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


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       14
<PAGE>

Discovery's basis for rejection or the Third Party tester rules that a rejected
Batch did not meet the Specifications, Laureate will not charge Discovery for
such Batch or for shipping, insurance or freight costs therefor; provided,
should the reasons for the noncompliance of such Batch be due solely to
Laureate's failure to materially comply with the Process or cGMP, Laureate shall
grant to Discovery an offset against future Service Fees equal to the aggregate
cost of Drug Substance and Other Active Ingredients, that were provided by
Discovery at its sole cost and expense with respect to such rejected Batch.

(e) Resolution of Supply Problems. If Laureate determines that it will not be
able to supply to Discovery a material amount of the most recent Purchase Orders
and/or forecasts of orders for Drug Product submitted by Discovery in accordance
with this Section 16, Laureate shall immediately notify Discovery in writing of
such determination, which notice shall provide Discovery with the details on the
extent of the expected shortfall of supply, the causes of such inability to
supply and Laureate's proposed solution to the supply problem. Upon such notice
of a supply problem, or in any event upon Laureate's failure to satisfy, within
the delivery time frame specified by Discovery consistent with this Section, a
portion of the Drug Product ordered by Discovery in compliance with this
Agreement (provided that such supply problem or failure cannot be satisfied or
addressed by Discovery's and Laureate's existing inventories for the Drug
Product and will cause an interruption in the commercial or clinical supply of
the Drug Product for more than thirty (30) days), Discovery and Laureate will
immediately meet and work together, in good faith, to identify an appropriate
resolution to the supply problem.

Section 17. Default. Except as otherwise provided herein, if Laureate is in
default of its material obligations under this Agreement, then Discovery shall
promptly notify Laureate in writing of any such default. Laureate shall have a
period of forty-five (45) days from the date of receipt of such notice within
which to cure such default; provided, that, if such default renders an aspect of
the Program invalid, then Laureate shall, at Discovery's option, either; (i)
repeat that aspect of the Program at Laureate's cost within a time period
mutually agreed to by Laureate and Discovery or (ii) refund the Service Fees
paid by Discovery for that aspect of the Program. If Laureate shall fail to cure
such default within the specified cure period or repeat the Program, as the case
may be, then this Agreement shall, at Discovery's option, immediately terminate.
In the event of such termination, Laureate shall not in any way be liable to
Discovery in an amount that, in the aggregate, exceeds the related Service Fees
paid by Discovery for that specific aspect of the Program.

(a) If Discovery is in default of its material obligations under this Agreement,
Laureate shall promptly notify Discovery in writing of any such default.
Discovery shall have a period of forty-five (45) days from the date of receipt
of such notice within which to cure such default; provided, that, if Discovery
fails to cure such breach within the specified cure period, this Agreement
shall, at Laureate's option, immediately terminate. Notwithstanding the cure
period specified in the preceding sentence, if Discovery fails to make any
payment to Laureate within the time period specified in Section 8 and/or
Appendix 6 attached hereto, Laureate may, in its discretion, suspend performance
of the Program until Laureate receives such outstanding payment; provided,
however, that if Discovery fails to make any payment by sixty (60) days from
when such payment was due, Laureate may immediately terminate this Agreement.

(b) EXCEPT AS OTHERWISE SET FORTH IN SECTION 19(C), UNDER NO CIRCUMSTANCES SHALL
EITHER PARTY BE ENTITLED TO INCIDENTAL, INDIRECT, CONSEQUENTIAL OR SPECIAL
DAMAGES ARISING IN CONNECTION WITH THE DEFAULT


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       15
<PAGE>

OR BREACH OF ANY OBLIGATION OF THE OTHER PARTY UNDER THIS AGREEMENT, THE SCOPE
OR ANY DOCUMENTS OR APPENDICES RELATED THERETO.

Section 18. Dispute Resolution.

(a) In the event any dispute shall arise between the Discovery and Laureate with
respect to any of the terms and conditions of this Agreement or the Program,
then senior executives of the Discovery and Laureate shall meet as promptly as
practicable after notice of such dispute to resolve in good faith such dispute.

(b) If Discovery and Laureate are unable to satisfactorily resolve the dispute,
then such dispute shall be finally settled by arbitration in accordance with
this Section 18. The arbitration will be held in the State of New York, and
except as noted below, shall be conducted in accordance with the rules of the
American Arbitration Association (or such successor organization) by two (2)
arbitrators appointed, one by each Party (the "Panel". If the Panel appointed
cannot agree on the resolution of the dispute within sixty (60) days after the
dispute is submitted to them, the Panel shall thereupon appoint a third
arbitrator, and if the Panel fails to agree upon a third arbitrator within
thirty (30) days after a deadlock is declared by either arbitrator, a third
arbitrator will be appointed by the American Arbitration Association (or such
successor organization) upon the request of either arbitrator. The Panel shall
have no authority to vary from or ignore the terms of this Agreement and shall
be bound by controlling law. Not withstanding the foregoing, the Parties may
seek judicial intervention for emergency relief, such as restraining orders and
injunctions where appropriate.

(c) Any decision by the Panel shall be binding upon the Parties and may be
entered as final judgment in any court having jurisdiction. The cost of any
arbitration proceeding shall be borne by the Parties, as the Panel shall
determine if the Parties have not otherwise agreed. The Panel shall render their
final decision in writing to the Parties.

Section 19. Indemnification. (a) Laureate shall indemnify Discovery and its
Affiliates and their respective officers, directors, consultants, contractors,
employees and agents from any loss, cost, damage or expense (a "Loss") from any
lawsuit, action, claim, demand, assessment or proceeding (a "Claim") for: (i)
personal injury to Program participants or to any employee or other personnel of
Discovery or its Affiliates occurring directly or indirectly during the conduct
of the Program as a result of Laureate's gross negligence or intentional
misconduct; (ii) Laureate's breach of any of the representations, warranties or
covenants contained in this Agreement; (iii) Laureate's transportation, storage,
use, handling or disposal of hazardous materials used in or generated by
Laureate's activities under this Agreement, (iv) Laureate's use of the Process
Dedicated Equipment other than in connection with the Program; and (v) any
willful misconduct by any Laureate employee or other personnel with respect to
Laureate's activities under this Agreement; provided, that if any if such Loss
or Claim arises in whole or in part from Discovery's gross negligence or
intentional misconduct, then the amount of such loss shall be reduced by an
amount in proportion to the percentage of Discovery's responsibilities for such
Loss as determined in pursuant to Section 18 or in a binding settlement between
the Parties.

(b) Discovery shall indemnify Laureate and its Affiliates and their respective
officers, directors, consultants, contractors, employees and agents (the
"Laureate Group") from any Claim or Loss arising from or related to (i) personal
injury or property damage to a participant in the Program, any employee of the
Laureate Group or any Third Party directly or indirectly caused by the
Materials, Product-Dedicated Equipment, Process Consumables, Drug Product, Drug
Substance or the Program; (ii) the harmful or otherwise unsafe effect of the
Materials, Process Consumables, Drug Product or Drug Substance including,
without limitation, a Claim based upon Discovery's or any other person's use,


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       16
<PAGE>

consumption, sale, distribution or marketing of any substance, including the
Materials, Process Consumables, the Drug Substance or the Drug Product; (iii)
the negligence, gross negligence or intentional misconduct or inaction of
Discovery in the performance of its obligations under this Agreement or Scope
related to the Program; (iv) the infringement of any patents or other
intellectual property rights vested in any Third Party, or (v) Discovery's
breach of any of the representations, warranties or covenants contained in this
Agreement; provided, that, if such Loss or Claim arises in whole or in part from
Laureate's gross negligence or intentional misconduct, then the amount of such
Loss that Discovery shall indemnify the Laureate Group for pursuant to this
Section 19 shall be reduced by an amount in proportion to the percentage of
Laureate's responsibilities for such Loss as determined pursuant to Section 18
or in a binding settlement between the Parties.

(c) Discovery agrees and acknowledges that Discovery shall:

(i) bear (i.a.) risk of loss, destabilization, alteration or contamination of
the Drug Product or Materials due to any and all causes or hazards unless
Laureate is found to be in material non-compliance with cGMP, the Process or
Laureate SOP, grossly negligent or have engaged in intentional misconduct, and
(i.b.) risk of injury to persons or property alleged to have been caused by the
design, manufacture, testing, instructions or warnings accompanying the Drug
Product or Materials or the use or unavailability of the Drug Product or
Materials, including without limitation, patent or other intellectual property
rights of Third Parties alleged to have been infringed by the manufacture, use,
importation, or sale of the Drug Product or Materials, unless any such injury
was caused by the material non-compliance by Laureate with cGMP, the Process or
Laureate SOP, Laureate's gross negligence or Laureate's engaging in intentional
misconduct.

(ii) Assume full responsibility and liability for any and all direct damages to
Laureate in the event that the handling of Materials, Process Consumables, Drug
Product or Drug Substance on its premises, or the installation or use of the
Product-Dedicated Equipment, in accordance with Laureate SOP, the Scope and the
terms of this Agreement results in contamination of equipment, facilities,
personnel or Third Parties by noxious, toxic, infectious, and/or corrosive
agents (collectively, "Contaminants") in the Materials, Process Consumables,
Drug Product, Drug Substance or associated materials [***] and to the extent
that said contamination can be conclusively determined to have arisen from such
materials, wherein infectious agents refers to any microbiological or viral
agents of infection, including but not limited to bacteria, fungae, mycoplasmas,
prions, and viruses. For purposes of the preceding sentence, Laureate's direct
damages shall be deemed to include all Third Party damages, including
consequential or incidental damages, that the arbitrators in accordance with
Section 18 or a court of law or other governing tribunal or agency determines
Laureate to be responsible and/or liable for by virtue of its handling of
Materials, Process Consumables, Drug Product or Drug Substance on its premises,
or the use of the Product-Dedicated Equipment, in accordance with Laureate SOP,
the Scope and the terms of this Agreement. To the extent that any contamination
of equipment, facilities, personnel or Third Parties results from Laureate's
negligence or failure to follow its SOP or the terms of this Agreement, then
Laureate will assume full responsibility and liability for any such direct
damages, provided, however, that Laureate's conduct in this regard had an effect
that contributed materially to the contamination or its consequences.

Laureate agrees to use reasonable commercial efforts to mitigate any direct
damages in the event of a contamination incident caused by Materials, Process
Consumables, Drug Products, Drug Substance or associated materials.

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


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT


                                       17
<PAGE>

(d) Upon receipt of notice of any Claim that may give rise to a right of
indemnity from the other Party hereto, the Party seeking indemnification (the
"Indemnified Party") shall give written notice thereof to the other Party, (the
"Indemnifying Party") of such claim. Such notice shall indicate the nature of
the Claim and the basis therefor. Promptly after a Claim is made for which the
Indemnified Party seeks indemnity, the Indemnified Party shall permit the
Indemnifying Party, at its option and expense, to assume the complete defense of
such Claim; provided, that: (i) the Indemnified Party will have the right to
participate in the defense of any such Claim at its own cost and expense; (ii)
the Indemnified Party may assume the complete defense of such claim at the
Indemnifying Party's cost and expense if the Indemnified Party shall have
reasonably concluded upon the advice of outside counsel satisfactory to the
Indemnifying Parties and its counsel, that there is a conflict of interest
between the Indemnified Party and the Indemnifying Party; (iii) the Indemnifying
Party will conduct the defense of any such Claim with due regard for the
business interests and potential related liabilities of the Indemnified Party;
and (iv) the Indemnifying Party shall, prior to making any settlement, consult
with the Indemnified Party as to the terms of such settlement. The Indemnifying
Party will not, in defense of any such Claim, except with the consent of the
Indemnified Party, consent to the entry of any judgment or enter into any
settlement which does not include, as an unconditional term thereof, the giving
by the claimant or plaintiff to the Indemnified Party of a release from all
liability in respect thereof. After notice to the Indemnified Party of the
Indemnifying Party's election to assume the defense of such Claim, the
Indemnifying Party shall only be liable to the Indemnified Party for such
reasonable legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof at the request of the Indemnifying
Party. As to those Claims with respect to which the Indemnifying Party does not
elect to assume control of the defense, the Indemnifying Party shall be liable
for all reasonable legal or other expenses incurred by the Indemnified Party in
connection with the defense thereof and the Indemnified Party will afford the
Indemnifying Party an opportunity to participate in such defense at the
Indemnifying Party's own cost and expense, and will not settle or otherwise
dispose of any of the same without the consent of the Indemnifying Party.

(e) Notwithstanding anything in this Agreement to the contrary, Laureate's
liability to Discovery under this Agreement shall be limited as follows:

(i) Laureate's aggregate liability resulting from the loss, destabilization,
alteration or contamination of Drug Product of a particular Batch in crude or
purified form as a result of Laureate's breach of this Agreement, failure to
comply with Master Batch Record or negligence, wherein such Drug Product is
lost, destabilized, altered or contaminated such that it cannot be used in
clinical trials or cannot be placed into commerce, shall not exceed the Service
Fees received by Laureate with respect to the Batch in question; and

(ii) Laureate's aggregate liability in respect of any Claim by Discovery shall
not exceed the amount of the Service Fees received by Laureate with respect to
the Batch that is alleged to have caused the injury giving rise to such Claim.

Section 20. Warranties, Representations and Covenants

(a) Discovery hereby represents and warrants to Laureate that it or its Third
Party suppliers, as applicable, have legal title and/or a valid license to the
Materials, process patents, Drug Product and Drug Substance and that Laureate's
performance of the Program will not violate or infringe on the patents,
industrial property rights, trade secrets, trademarks, tradenames, servicemarks,
copyrights or any other intellectual property rights of any Third Party.
Discovery further represents and warrants that it is, and shall at all times
throughout the term of this Agreement remain, entitled to supply Materials, Drug
Product, Drug Substance and Discovery Confidential Information to Laureate.


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

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<PAGE>

(b) Discovery shall notify Laureate immediately if Discovery knows or should
know that it is no longer entitled to supply the Materials, product and process
patents, Drug Products, Drug Substance, any other materials and/or Discovery
Confidential Information to Laureate or that the use by Laureate of such
materials and/or information infringes or is alleged to infringe any rights
(including any intellectual or industrial property rights) vested in any Third
Party.

(c) Discovery hereby represents and warrants to Laureate that Discovery has
performed all required testing to assure that the Materials, Drug Substance and
Drug Product are safe, stable and effective and are and will be in compliance
with all federal, state and local laws and regulations required for use and
distribution and testing of such materials in connection with the clinical
trials and the commercialization of the Drug Product, and that such materials
pose no safety or environmental risk and that such Materials meet the
Specifications.

(d) Discovery hereby represents to Laureate that any technical or regulatory
information or documentation supplied by Discovery or on its behalf to Laureate
(including, but not limited to, process details, analytical methods,
Specifications, development reports, technology transfer documents, plans,
engineering documents and other documents) and required for execution of the
Program is accurate and suitable for its intended use.

(e) Each Party hereby represents and warrants to the other Party that it has
full power and authority to enter into, deliver and perform its obligations
under this Agreement, and it has taken all action required to authorize the
execution and delivery of this Agreement and to consummate the transactions
contemplated hereby, and the person signing this Agreement on behalf of such
Party has been duly authorized to act on behalf of and to bind such Party.

(f) Laureate warrants and represents that (i) the Program will be performed
diligently, (ii) it will use all commercially reasonable efforts to achieve the
estimated deadlines for the Program, and (iii) the Drug Product will meet in all
material respects the Specifications set forth in the Program at the time of
delivery to Discovery. Laureate makes no warranties that the Program will result
in any specific quantity of Drug Product.

(g) THE EXPRESS WARRANTIES OF LAUREATE SET FORTH IN SECTION 20 ARE IN LIEU OF
ALL CONDITIONS, WARRANTIES AND STATEMENTS IN RESPECT OF THE PROGRAM AND/OR THE
DRUG PRODUCT, WHETHER EXPRESS OR IMPLIED BY STATUTE, CUSTOM OF THE TRADE OR
OTHERWISE, INCLUDING ANY SUCH CONDITION, WARRANTY OR STATEMENT RELATING TO THE
DESCRIPTION OR QUALITY OF THE DRUG PRODUCT UPON COMPLETION OF LAUREATE'S
SERVICES, ITS FITNESS FOR A PARTICULAR PURPOSE OR USE UNDER ANY CONDITIONS,
WHETHER OR NOT KNOWN TO LAUREATE, AND THAT ANY SUCH CONDITION, WARRANTY OR
STATEMENT IS EXCLUDED FROM THIS AGREEMENT.

Section 21. Force Majeure. Either Party shall be excused from performing its
respective obligations under this Agreement if its performance is delayed or
prevented by any event beyond such Party's reasonable control, including, but
not limited to, acts of God, fire, explosion, weather, government proclaimed
states of emergency, disease, war, terrorism, insurrection, civil strife, riots,
union strikes, labor stoppages, government action, or power failure (each, a
"Disability") provided that such performance shall be excused only to the extent
of and during such Disability; provided, further, that Laureate shall use
commercially reasonable efforts to remedy any disability within its reasonable
control. Any time specified for completion of performance in the Scope falling
due during or subsequent to the occurrence of any Disability shall be
automatically extended for a period of time


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       19
<PAGE>

reasonably necessary to recover from such Disability. Laureate will promptly
notify Discovery if, by reason of any of the events referred to herein, Laureate
is unable to meet any such time for performance specified in the Scope. If any
part of the Program is invalid or Materials, Process Consumables, Drug Product,
Drug Substance or Other Active Ingredients are rendered unusable as a result of
such Disability, Laureate will, upon written request from Discovery, but at
Discovery's sole cost and expense, repeat that part of the Program affected by
the Disability.

Section 22. Use of Names and Logos.

(a) Each Party shall be permitted to use the name of the other Party in the
promotion of its business; provided, that such usage shall be permitted solely
for: (i) product labeling and promotional purposes, (ii) sales and marketing
materials; (iii) web sites; and (iv) other customary business uses agreed to by
the Parties. Without the consent of the other Party, such usage shall be limited
to general factual statements concerning the relationship between Laureate and
Discovery, including, without limitation, that Laureate and Discovery have
entered into this Agreement but shall not include any financial terms, Discovery
Confidential Information or Laureate Confidential Information.

(b) Except for internal purposes, the Parties shall not be permitted to use the
logo of the other Party for any purposes whatsoever without such Party's prior
written consent, to be granted at the sole discretion of such Party.

Section 23. Term; Termination; Cancellation.

(a) This Agreement shall commence on the Effective Date and shall continue in
full force and effect for a period of [***] years, unless (i) extended upon
mutual agreement of the Parties; or (ii) terminated earlier in accordance with
the other provisions of this Agreement;

(b) Except as set forth in Section 6, Discovery may for any reason and at any
time terminate the Program prior to completion of the Program by giving 180 days
written notice to Laureate. In such event Laureate shall comply with such notice
to terminate work on the Program by the expiration of such 180 day notice period
and use its commercially reasonable efforts to reduce cost to Discovery and,
provided, however, that upon such termination, Discovery shall pay Laureate all
of Laureate's costs incurred up to and through the expiration of such ninety
(90) notice period (for each Service Fee for which the final installment payment
is not due and owing prior to the expiration of such 180 day period, Laureate
shall be compensated for the services performed with respect to such Service Fee
on an hourly basis based on Laureate's then current hourly rates).

(c) Laureate may for any reason terminate the program by giving one year written
notice to Discovery, unless Discovery consents to such shorter termination
period (which consent shall not be unreasonably withheld by Discovery after
giving effect to the following factors: the existence of fully-operational,
alternative manufacturing facilities; regulatory review requirement; Discovery's
then existing contractual obligations with respect to manufacturing facilities;
and the degree of inventory buildup that may have been or is to be provided by
Laureate prior to such termination).

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


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       20
<PAGE>

(d) The termination of this Agreement for any reason shall not relieve either
Party of its obligation to the other Party for obligations in respect of (i)
compensation for services performed (Sections 8, 9 and 9 and Appendix 6); (ii)
confidentiality of information (Section 10); (iii) work product (Section 11),
(iv) inventions and patents (Section 12); (v) insurance (Section 14); (vi)
indemnification (Section 19); and (vii) consents for advertising purposes and
publications (Section 22).

Section 24. Assignment. This Agreement may not be assigned, relocated or
otherwise transferred by either Party without the prior written consent of the
other Party; provided, however, either Party may, without such consent, assign
this Agreement (i) in connection with the transfer or sale of all or
substantially all of the assets of such Party or, in the case of Discovery, the
Drug Product; (ii) in the event of the merger or consolidation of a Party hereto
with another company; or (iii) to any Affiliate of the assigning Party so long
as the assignor remains responsible for the performance of its Affiliate
hereunder; provided, however, that (i.a.) in the case of any such assignment by
Laureate, such assignment may not be to any direct competitor of Discovery or
involve the relocation of the Program greater than thirty (30) miles from where
it is then being conducted without Discovery's consent which may not be
unreasonably withheld or delayed; and (i.b.) in the case of any such assignment
by Discovery, the assignee shall be reasonably credit worthy. Any purported
assignment in violation of the preceding sentence shall be void. Any permitted
assignee shall be required to assume in writing all obligations of its assignor
under this Agreement.

Section 25. Notice. (a) All notices to be given as required in the Agreement
shall be in writing and may be delivered personally, or mailed either by a
reputable overnight carrier with required receipt signature or certified mail,
postage prepaid, to the Parties at the addresses set forth above or at such
other address as either Party may provide by written notice to the other Party
in accordance with the provisions of this Section 25. Such notice shall be
effective: (i) on the date sent, if delivered personally or by facsimile
(receipt of which is confirmed); (ii) the date after delivery if sent by
overnight carrier; or (iii) on the date received if sent by certified mail.

         If to Discovery

                  Discovery Laboratories, Inc.
                  350 S. Main St., Suite 307
                  Doylestown, PA 18901
                  Attn:   Legal Department
                  Telefax:  (215) 340-3940

                  With a copy to:

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


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       21
<PAGE>

         If to Laureate:

                  Laureate Pharma L.P.
                  201 College Road East
                  Princeton, NJ 08540
                  Attn:  Robert J. Broeze, Ph.D., President
                  Telefax:  (609) 520-3963

                  With a copy to:

                  Lowenstein Sandler PC
                  65 Livingston Avenue
                  Roseland, NJ  07068-1791
                  Attn: John D. Hogoboom
                  Telefax:  (973) 597-2400

Section 26. Choice of Law. This Agreement, and all matters arising directly or
indirectly hereunder, shall be governed by, and construed in accordance with the
laws of the State of New York.

Section 27. Headings. The heading of each Section of this Agreement is for
descriptive purposes only and shall not be deemed to modify or qualify any of
the provisions, rights, or obligations set forth in this Agreement.

Section 28. Waiver/Severability. No waiver of any provision of this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed to
be or be construed as a further or continuing waiver of any such provision, or
of any other provision or condition of this Agreement. The invalidity of any
portion of this Agreement shall not affect the validity, force or effect of the
remaining portions of this Agreement. If it is ever held that any provision
hereunder is too broad to permit enforcement of such provision to its fullest
extent, such provision shall be enforced to the maximum extent permitted by law.

Section 29. Entire Agreement; Modification/Counterparts. This document (and the
Scope and Appendices attached hereto) sets forth the entire Agreement between
the Parties hereto with respect to the performance of the Program by Laureate
for Discovery and as such, supersedes all prior and contemporaneous
negotiations, agreements, representations, understandings, and commitments with
respect thereto and shall take precedence over all terms, conditions and
provisions on any Purchase Order form or form of order acknowledgment or other
document purporting to address the same subject matter. This Agreement shall not
be waived, released, discharged, changed or modified in any manner except by an
instrument signed by the duly authorized officers of each of the Parties hereto,
which instrument shall make specific reference to this Agreement and shall
express the plan or intention to modify same. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. In the event of any
conflict between this Agreement and the Quality Agreement, as it may be modified
as provided herein, the terms of this Agreement shall control. For purposes of
execution, facsimile signatures shall be deemed originals.

      This Agreement becomes effective and binding on both Parties as of the
Effective Date. Should terms contained herein be at variance with the terms and
conditions specified in Discovery's prior written acceptances, then the terms
and conditions contained herein take precedence.


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       22
<PAGE>

                               LAUREATE PHARMA, L.P.


                               By:    Laureate Pharma, Inc., its general partner
                                      ------------------------------------------
                               By:    Robert J. Broeze
                               Name:  Robert J. Broeze, Ph.D.
                               Title: President


                               DISCOVERY LABORATORIES, INC.


                               By:    Robert J. Capetola
                                      ------------------------------------------
                               Name:  Robert J. Capetola, Ph.D.
                               Title: President and Chief Executive Officer


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                       23
<PAGE>

                                   APPENDIX 1

              Materials and Information to be Provided by Discovery

Discovery shall provide the following information and materials to Laureate:

      1.    A Technology Transfer Information Package that includes:

            a.    Information and procedures pertaining to the manufacture,
                  impurities, testing, stability and use of the Drug Product,
                  including Laureate's Product Information Questionnaires for
                  "Contract Purification Services" and "Aseptic Filling
                  Services" for Drug Product.

            b.    A complete copy of a representative executed Batch Record for
                  Drug Product previously manufactured by Akorn including
                  without limitation, all Process information, Specifications
                  for Drug Product and all Materials, test methods and results.

            c.    A copy of the sections of the Chemistry and Manufacturing
                  Controls section of the Investigational New Drug Application
                  related to the above as submitted by Discovery or its
                  Affiliates to FDA.

            d.    A Material Safety Data Sheet (MSDS) for Drug Product, Drug
                  Substance, Other Active Ingredients and excipients.

      2.    Reference standards.

      3.    Proposed specifications for the Drug Product and intermediates and
            results of testing carried out by Discovery by its agents. Final
            specifications to be agreed upon by Laureate and communicated by
            Discovery

      4.    Product-Dedicated Equipment and Process Equipment to be provided by
            Discovery or Laureate and paid for by Discovery.

Product-Dedicated Equipment and Process Equipment

                                      [***]

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


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 1-Page 1
<PAGE>


                                   APPENDIX 2

                                  Scope of Work

                Outline of Activities To Be Performed By Laureate

o     Develop the Quality Agreement to be agreed upon by Laureate and Discovery
      defining the responsibilities of each company with respect the
      manufacture, testing and release of Drug Product.

o     Other than that which is supplied by Discovery, acquire equipment and
      other supplies necessary to make Drug Product.

o     Clean, install, calibrate and validate (in accordance with Discovery's
      written instructions) Discovery's existing Product-Dedicated Equipment
      (relocated from Discovery's Third Party manufacturer) in Laureate's
      manufacturing facility in Totowa for manufacture of Initial Phase Batches.
      Thereafter, Laureate will assess the feasibility of manufacturing batches
      of clinical and potential commercial supplies of Drug Product that will
      consistently meet Specifications.

o     At a time to be determined, remove existing Product-Dedicated Equipment
      and install, calibrate and validate new Product-Dedicated Equipment for
      manufacture of development phase, clinical trial and / or commercial
      batches. Thereafter, Laureate will assess the feasibility of manufacturing
      batches of clinical and potential commercial supplies of Drug Product that
      will consistently meet Specifications.

o     Perform media fills using the same vial configuration(s) as will be used
      in the aseptic filling of the Drug Product.

o     Create the cGMP documentation required for manufacturing and filling of
      Drug Product.

o     Purchase and receive production materials and supplies, if applicable;
      perform QC inspection and QA release for production. Receipt and
      inspection of materials and supplies will take place at Laureate's
      Princeton Facility, and materials and supplies will be transported to
      Laureate's Totowa Facility for manufacturing.

o     Manufacture Drug Product in accordance with cGMP requirements, as detailed
      in the Project Scope and Discovery's written instructions. Aseptically
      fill and inspect each Lot into vials at the specified product
      concentration in accordance with cGMP requirements. All filled vials will
      be transported to Laureate's Princeton Facility and inspected by
      Laureate's manufacturing personnel.

o     Perform Quality Control in-process testing, as required to support product
      manufacturing and as requested by Discovery.

o     Perform Quality Control/Quality Assurance review and manage documentation
      throughout the manufacturing process.

o     Provide Discovery with copies of all Batch Records used in the
      manufacturing process. Note: Laureate will archive the original documents
      on file in its Quality Assurance department.


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 2-Page 1
<PAGE>

The Parties acknowledge and agree that the Scope shall be subject to amendment,
revision and other modification throughout the term and in accordance with the
Agreement


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 2-Page 2

<PAGE>

                                   APPENDIX 3

                       Testing to be Provided by Laureate

Raw materials

      Review of information or Certificate of Analysis provided by Discovery or
      its testing vendor

      Process Consumables

      Identity testing as appropriate

Bulk Surfaxin product

      In-process as defined by the batch record and/or protocols, where
      appropriate.

Filled Vials:  As defined by the final product specification


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 3-Page 1
<PAGE>

                                   APPENDIX 4

                      Approved Subcontractors and Services

                                      [***]

                                Appendix 4-Page 1

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


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 4-Page 1
<PAGE>

                                   APPENDIX 5

                                Access and Audits

1.    Access to the Facilities :

      During production runs Discovery employees will be granted reasonable
      access to the manufacturing floor, if space allows. Laureate escort will
      be assigned and will accompany the at all times while in controlled areas
      of the plant. During this time it is critical that such persons:

            Follow Laureate's procedures for access to its Facilities and
            service areas.

            Follow all GMP / access / gowning / safety procedures as directed by
            Laureate personnel.

            Do not touch or operate any equipment in the production area.

            Do not direct manufacturing personnel. Suggestions or
            recommendations may be made to an area Manager or Director.

            Do not remove any documentation or in-process data. Requests for
            documentation must be made in writing to an area Manager or
            Director. Any documentation provided in this fashion will be tracked
            by the area Director.

            Make all requests for additional immediate in-process sampling, in
            writing to the area Manager or Director with full justification,
            prior to sampling.

            Do not enter areas where production is ongoing for another Laureate
            client.

            Do not take any photos inside any Laureate facility; provided,
            however, that Laureate shall reasonably provide digital photos to
            Discovery of Discovery's Program-related equipment, upon Discovery's
            written request.

            Lack of adherence to these very basic guidelines will result in
            immediate loss of access to production areas.

2.    Audits - Discovery:

            Laureate will, at no cost to Discovery, support one (1) audit during
            each twelve (12) month period of the Program, unless a for-cause
            inspection by the FDA necessitates that Discovery confirm that the
            appropriate remedial action has been taken. If a quality issue is
            identified, Discovery will have the right to conduct a follow-up
            audit. All such follow-up audits shall be to be billed by Laureate
            on a time and materials basis or as specified in the Appendix 6.
            Thereafter any additional audits, FDA inspections or follow-up
            audits will be at the sole expense of Discovery.

            The audit may be performed by Discovery or by an external Third
            Party, with Third Party costs being at the sole expense of
            Discovery. A maximum of three (3) auditors /


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 5-Page 1
<PAGE>

            Discovery participants will be allowed to take part in the actual
            audit, due to space limitations and dedicated Laureate personnel
            availability.

            Dates for the annual audit must be arranged and agreed with Laureate
            a minimum of one month prior to the audit. Dates for other audits
            will be scheduled as promptly as commercially practicable following
            Discovery's written request for such audit. Laureate reserves the
            right to make final approval of audit dates, based on availability
            of the facility and appropriate Laureate personnel.

            Confidentiality agreements must be in place with all parties
            participating in the audit, prior to scheduling the audit.

            Three (3) weeks before the annual audit occurs, a list of areas /
            topics to be covered in the audit will need to be received by
            Laureate. This will allow Laureate to ensure appropriate Laureate
            personnel availability during the audit, while also ensuring minimal
            impact to programs in production for other customers.

            No access will be allowed into areas where production is underway
            for another customer.

            Any audit observations being sent to Laureate for review or response
            must be provided by the Discovery, not directly from a Third Party
            auditor. Laureate will formally respond to audit findings within
            forty-five (45) days.

            All audit observations are confidential, covered in the
            confidentiality agreement between Laureate and the Discovery, and
            may not be shared with any other party without express written
            permission. All Third Party auditors must also sign confidentiality
            agreements with Laureate confirming adherence to this condition and
            may not share their findings beyond the Discovery who contracts the
            audit, without express written permission from Laureate.


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT


                                Appendix 5-Page 2
<PAGE>

                                   APPENDIX 6

                                Payment Schedule

The Service Fees shall be payable as follows:

                                      [***]

Note: All prices subject to change based on the provisions of Section 8(a).

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


TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 6-Page 1
<PAGE>

                                   APPENDIX 7

                                    Shipping

The shipment and timely arrival of samples, Drug Product, Drug Substance and
other materials that Laureate produces and stores for Discovery is critical to
keep the Program on schedule.

Laureate requires a minimum of one week notice prior to shipping (not prior to
receipt at a remote location). One week notice is reasonable for the vast
majority of the shipments. Laureate recognizes that there will be instances that
will necessitate shipping materials where a one-week notice is not possible.
Laureate will continue to meet those requirements, however, there will be an
additional charge for shipments that need to occur with less than the one week
notice. The charges for the shipping are summarized in the table below.
Discovery will be responsible for the cost of shipping and insurance. Discovery
will provide contact and account information for approved shipping agent.
Discovery will review and authorize shipping configuration.

Prior to shipment Drug Product will be stored at Laureate under cGMP conditions
that will include but not be limited to the following:

      Temperature controlled (2 to 8 (Degree)C) and monitored

      Controlled access

      Back-up power supply

      Call out service for alarms generated outside of normal business hours

Shipping Policy:

--------------------------------------------------------------------------------
       Notice Period                                          Additional Fee
     Prior To Shipping           Shipping Charge         For Expedited Shipments
--------------------------------------------------------------------------------
7 calendar days or longer             [***]                       [***]
--------------------------------------------------------------------------------
4 days to 6 days                      [***]                       [***]
--------------------------------------------------------------------------------
2 days to 3 days                      [***]                       [***]
--------------------------------------------------------------------------------
Same day shipping                     [***]                       [***]
--------------------------------------------------------------------------------

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

TECHNOLOGY TRANSFER AND MANUFACTURING AGREEMENT

                                Appendix 7-Page 1

</TEXT>
</DOCUMENT>
