DEVELOPMENT AND SUPPLY AGREEMENT

Exhibit 10.21

DEVELOPMENT AND SUPPLY AGREEMENT

THIS DEVELOPMENT AND SUPPLY AGREEMENT (“Agreement”) is made as of this 27 ^th day of March 2009 (the “Effective Date”) by and between Oxygen Biotherapeutics, Inc., having its principal place of business at 3189 Airway Avenue, Building C, Costa Mesa, California 92626 USA ( “Oxygen Biotherapeutics” or “OBI” ) and Hospira Worldwide, Inc. having a principal place of business at 275 North Field Drive, Lake Forest, Illinois, 60045, U.S.A. (“Hospira”).

WITNESSETH:

WHEREAS, OBI owns rights to the therapeutic perfluorocarbon oxygen carrying compound, Oxycyte, ^® currently under phase IIb clinical trials for use in the treatment of traumatic brain injury;

WHEREAS, OBI desires to enter into an agreement with Hospira to perform development, formulation, fill and finish services with respect to the Oxycyte ^® compound for use in such clinical trials and thereafter, for commercial sale and use in the market; and

WHEREAS, Hospira is willing to perform such services for OBI with respect to the Oxycyte ^® compound.

NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, OBI and Hospira agree as follows:

Article 1. Definitions

The following words and phrases when used herein with capital letters shall have the meanings set forth or referenced below:

1.1 “Act” shall mean the current good manufacturing practices as set forth in the Federal Food, API and Cosmetic Act (21 U.S.C. 301), as amended.

1.2 “Active Pharmaceutical Ingredient” or “API” shall mean the active pharmaceutical ingredient of the Oxycyte ^® compound in bulk form that OBI shall deliver to Hospira for incorporation into Product (as hereinafter defined) and meeting the applicable Active Pharmaceutical Ingredient Specifications (as hereinafter defined).

1.3 “Active Pharmaceutical Ingredient Specifications” shall mean the detailed description and parameters of the API set forth on Exhibit 1.3.

1.4 “Affiliate” shall mean any corporation or non-corporate business entity which controls, is controlled by, or is under common control with a party to this Agreement. A corporation or non-corporate business entity shall be regarded as in control of another corporation or non-corporate business entity if it owns, or directly or indirectly controls, in excess of fifty percent (50%) of the voting stock of the other corporation, or: (a) in the absence of the ownership of in excess of fifty percent (50%) of the voting stock of a

corporation; or (b) in the case of a non-corporate business entity, if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation or non-corporate business entity, as applicable.

1.5 “Applicable Laws” means all applicable, federal, state and local laws, ordinances, rules and regulations including, without limitation, the Act (as defined herein), cGMP, the Canadian Food and Drug Act and Regulations, the Swiss Law on Therapeutic Products and the corresponding laws, ordinances, rules and regulations of any other applicable jurisdiction.

1.6 “Batch Records” means Product batch-specific manufacturing, packaging and test records and documentation relating to manufacturing, packaging and release of each batch, exception documentation, deviations/discrepancies and additional documentation generated and/or processed as part of the production record of the relevant batch.

1.7 “Certificate of Analysis” means, for each Product batch produced, the form of Hospira’s document setting forth the measured and observable characteristics of Product from the batch, and confirming that such batch meets the Product Specifications. Each Certificate of Analysis shall include: (a) a listing of tests performed by or on behalf of Hospira, test date(s), and test results; and (b) a reference to or inclusion of the related Certificate of Compliance. The Parties shall from time to time agree upon a format or formats for the Certificate of Analysis to be used under this Agreement.

1.8 “Certificate of Compliance” means, for each Product batch, the form of Hospira’s document: (a) listing the manufacturing date, the unique batch number, and the quantity of Product in such batch, and (b) certifying that such batch was manufactured in accordance with Applicable Laws, including, without limitation, cGMP. The Certificate of Compliance may be included within the Certificate of Analysis, or separately, if required by OBI for regulatory purposes or Applicable Law.

1.9 “cGMP” shall mean the current good manufacturing practices as set forth in 21 C.F.R. Part 210 and Part 211, as applicable and the current International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use, Guidance for Industry Q7A Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients, as amended and revised.

1.10 “Confidential Information” shall mean all information disclosed hereunder in writing and identified as being confidential or, if disclosed orally, visually or through some other media, is identified as confidential at the time of disclosure and is summarized in writing within thirty (30) days of such disclosure and identified as being confidential, except any portion thereof which:

(a) is lawfully known to the recipient at the time of the disclosure, as evidenced by its written records or other competent evidence;

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 2 of 41

(b) is disclosed to the recipient by a third person lawfully in possession of such information and not under an obligation of nondisclosure;

(c) is or becomes patented, published or otherwise part of the public domain through no fault of the recipient;

(d) is developed by or for the recipient independently of Confidential Information disclosed hereunder as evidenced by the recipient’s written records or other competent evidence; or

(e) is required by law to be disclosed by the recipient, provided that the recipient gives the other party hereto prompt notice of such legal requirement such that such other party shall have the opportunity to apply for confidential treatment of such Confidential Information.

1.11 “Contract Year” shall mean a period of twelve (12) consecutive months which, for the first Contract Year of this Agreement, shall commence on the first day of the month after the month that OBI (acting by itself or through any commercial partner) makes its first bona fide sale of Product manufactured by Hospira to a non-Affiliate customer after Product has received an approved regulatory filing from any of the FDA, Health Canada or Swissmedic and/or a corresponding government marketing approval in an international market from an appropriate Regulatory Authority (as hereinafter defined), and each Contract Year thereafter shall consist of twelve (12) consecutive months following the end of the preceding Contract Year.

1.12 “Development Fee” shall mean all monies due and payable to Hospira in respect of development activities and services rendered as defined in Section 3.1 and further detailed in Exhibit 2.1 .

1.13 “Development Supplies” shall mean Products to be manufactured in engineering runs and for process validation purposes as set forth in Section 3.4 .

1.14 “DMFs” shall mean API Master Files as set forth in Section 4.3 .

1.15 “FDA” shall mean the U.S. Food and Drug Administration and any successor agency.

1.16 “Health Canada” shall mean the Inspectorate of the Health Product and Food Branch of Canada.

1.17 “Initial Term” shall have the meaning set forth in Section 10.1 .

1.18 “Letters of Authorization” shall mean documentation which shall be prepared and delivered by Hospira to the appropriate Regulatory Authorities permitting such Regulatory Authorities to consult Hospira’s DMFs in their review of OBI’s Product marketing applications as set forth in Section 4.3 .

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 3 of 41

1.19 “MSDS” shall mean Material Data Safety Sheets, as set forth in Section 5.6 .

1.20 “Product” or “Products” shall mean the drug, Oxycyte ^® in a final dosage form, filled and finished in accordance with the Product Specifications (as defined herein).

1.21 “Product Data” means the information, documents, and records relating to the Product created in connection with the Project or the manufacture of the Product. The term “Product Data” may include, without limitation, documents and records pertaining to manufacture of Product, Batch Records (including without limitation the master Batch Records), Certificates of Analysis, Certificates of Compliance, an identification of the analytical test methods employed and analytical test results achieved, and all other relevant documents, reports and data prepared, developed or generated by Hospira in connection with performance of the Project and the manufacturing of Product hereunder. The term “Product Data” shall expressly exclude raw data developed and other information that is Hospira’s Confidential Information that is not specific to OBI or the Product and is related to Hospira’s manufacturing processes that are generally applicable to its manufacturing operations.

1.22 “Product Placebo” shall mean a form of the Product intended for human use and manufactured fully in accordance with the Product Specifications (as defined herein), but without the inclusion of the Oxycyte ^® compound. For purposes of this Agreement, the term Product shall include Drug Product Placebo unless the context specifically requires otherwise.

1.23 “Product Specifications” shall mean those product, labeling and performance specifications for Products filed with the FDA or other appropriate Regulatory Authorities, including Product formulae, labeling, and materials required for the manufacture of the Products that are to be purchased and supplied under this Agreement, as such are set forth on Exhibit 1.23 , which may be amended in accordance with Section 5.1 .

1.24 “Project” shall mean development activities undertaken by OBI and Hospira, (as further detailed in Section 2.1 and Exhibit 2.1 ) necessary for regulatory approval and commercial manufacture of the Products.

1.25 “Project Inventions” shall have the meaning set forth in Section 9.1 .

1.26 “Regulatory Authority” shall mean any federal, state or local or international regulatory agency, department, bureau or other governmental entity (including the FDA, Health Canada and Swissmedic) which is responsible for issuing approvals, licenses, registrations or authorizations necessary for the manufacture, use, storage, import, transport or sale of the Products in a regulatory jurisdiction.

1.27 “Specially Regulated Waste” shall mean any hazardous waste, toxic waste, medical waste, nuclear waste, mixed waste, or other waste materials, which may be subject to or require special handling, treatment, storage, or disposal under any federal, state or local laws or regulations intended to address such types of waste materials that arise from the manufacture of the Products.

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 4 of 41

1.28 “Swissmedic” shall mean the Swiss Agency for Therapeutic Products.

1.29 “Third Party” shall mean a party other than Hospira or OBI and its respective Affiliates.

1.30 “Waste” shall mean all rejects, improper goods, garbage, refuse, remainder, residue, waste water or other discarded material, including solid, liquid, semisolid, or contained gaseous material that arises from the manufacture of the Products, including but not limited to, rejected, excess or unsuitable materials, API and Products. The term Waste shall not include any Specially Regulated Waste.

Article 2. Development Project

2.1 General. Promptly following the Effective Date, the parties shall undertake a product development project (“Project”) consisting of the development activities set forth in Exhibit 2.1 . The objective of the Project shall be for Hospira to assist in the development of the Products and to assist OBI in obtaining an approved regulatory filing with the FDA (and/or foreign Regulatory Authority equivalents) covering the Products. Hospira then shall manufacture and deliver Products to OBI for sale by OBI as human pharmaceutical products, as herein provided.

2.2 Commercially Reasonable Efforts. Each party shall use its commercially reasonable efforts to successfully complete the Project. However, the parties agree and understand that neither party hereto guarantees that the Project will be successful, nor warrants or guarantees that a marketable product will result from the Project.

Article 3. Payment for Hospira’s Development Efforts

3.1 Development Fee. To reimburse Hospira for its participation in the Project, OBI shall pay to Hospira a development fee of Eight Hundred Seventy-Six Thousand United States Dollars ($US 876,000) (“Development Fee”). The Development Fee shall be paid to Hospira in accordance with the payment schedule set forth in Exhibit 3.1

3.2 Changes in Project Scope. If OBI requests changes in the Project or the Product Specifications, or if reasonably unforeseeable technical difficulties beyond the control of Hospira require that Hospira perform either additional work or repeat work, and such additional work or repeat work is not required due to Hospira’s fault or negligence, Hospira shall provide OBI with cost estimates for such work. If OBI approves such costs, Hospira shall perform such work and OBI shall pay Hospira’s costs for such work within thirty (30) days of completion of such work. Reimbursement for such additional work or repeat work shall be at the rate of Two Hundred Eighty U.S. Dollars ($US 280.00) per hour per person, plus out-of-pocket costs for reasonable travel and sustenance, materials and supplies.

3.3 Project Managers. Promptly after the Effective Date, each party shall designate one of its employees to act as its project manager (each, a “Project Manager”), who will be primarily responsible for communicating all instructions and information concerning the various development activities undertaken in the Project. The Project Managers shall consult periodically during the

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 5 of 41

course of the Project, through face-to-face meetings, telephone conferences and/or videoconferences, at times to be mutually agreed upon between them. Each party shall appoint a substitute or replacement Project Manager in the absence of its original Project Manager and shall notify the other party in writing of such substitution or replacement. The Project Managers shall not have the right to modify, amend or waive any provision of this Agreement, including, without limitation, any provisions of the Project’s statement of work.

3.4 Development Supplies. Based on OBI’s final Product formulations, concentration and fill volume and the parties’ agreement to the final Product Specifications, Hospira will manufacture the Products in engineering runs and for process validation purposes (“Development Supplies”) at the prices set forth in the Batch Pricing Table in Exhibit 2.1 . Smaller batches may be quoted individually based on batch size. OBI shall issue a purchase order for any such Development Supplies at least one-hundred and twenty (120) days before the requested delivery date. OBI and Hospira shall agree mutually to the formulation, concentration, fill volume and the components for each lot of Development Supplies.

Article 4. OBI’s Regulatory Submissions

4.1 Hospira’s Right to Review.

(a) Hospira shall have the right to review and consult on those portions of OBI’s proposed regulatory submissions relating to Hospira’s packaging or manufacturing procedures before the submissions are filed with appropriate Regulatory Authorities. Hospira shall complete its review of any English-language submissions within sixty (60) days after receipt. The parties will agree on the time required for Hospira’s review of submissions in other than English language without translation, which will extend Hospira’s review period for the purpose of providing a reasonable period for document translation.

(b) Hospira shall consult with and advise OBI in responding to questions from Regulatory Authorities regarding OBI’s submission(s) for the Products, provided that OBI shall have the final control over such submissions. Hospira shall provide OBI with cost estimates for any required additional review and consultation. If OBI approves such costs in writing, OBI shall reimburse Hospira for such additional activities at the rate of One Hundred Eighty-Five United States Dollars ($US 185.00) per hour per person. OBI shall be the sole owner of any regulatory submission filed pursuant to this Agreement. OBI shall provide to Hospira for its files a final copy of the CMC section of any such regulatory submission(s).

4.2 Supplemental International Regulatory Filings. Hospira shall quote a price for supplemental international regulatory, packaging and development work to support international filings (excluding the United States, Canada and Switzerland) separately and on a country-by-country basis.

4.3 Access to Drug Master Files. Hospira shall grant OBI reference rights to all Drug Master Files (“DMFs”) necessary to support OBI’s applications for marketing authorizations of the Products. To affect this, Hospira shall promptly execute certain documentation (“Letters of Authorization”) which shall be delivered to the appropriate Regulatory Authorities permitting such Regulatory Authorities to consult Hospira’s DMFs in their review of OBI’s Product marketing applications. Hospira shall promptly

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 6 of 41

send copies of such Authorization Letters to OBI. Hospira shall update its DMFs annually and shall inform OBI prior to any modifications thereto in order to permit OBI to amend or supplement any affected regulatory applications and filings for Product.

4.4 User Fees. OBI shall pay any FDA (or foreign equivalent) user fees which may become payable for Product.

Article 5. Manufacture and Supply of Products

5.1 Purchase and Sale of Products.

(a) Requirements. Subject to any exceptions contained herein, for the duration of this Agreement, Hospira shall manufacture, sell and deliver to OBI, and OBI shall purchase and take delivery from Hospira the entirety of its requirements of clinical and commercial Products from Hospira on the terms and conditions provided herein.

(b) Clinical Supply and Other Products. Subject to the terms and conditions of this Agreement, during the Term, Hospira agrees to Manufacture and sell, and OBI agrees to buy, its requirements of the Products and Placebo Products for Phase IIb clinical batches, media runs and engineering batches (“Initial Runs”), as specified on purchase orders to be placed by OBI in accordance with the provisions of Article 6 . If OBI requests Hospira to manufacture additional clinical batches of the Products and Placebo Products, Hospira shall do so on substantially similar terms and conditions applicable to the Initial Runs.

(c) Commercial Supply. Upon successful completion of OBI’s clinical trials, Hospira will manufacture commercial Products for OBI’ marketing, promotion, sale and use in the market, in accordance with the terms of this Agreement and at the commercial prices to be negotiated by the parties in good faith.

5.2 Manufacturing Standards. Hospira shall manufacture the Products in accordance with the Product Specifications. The parties may alter from time to time the Product Specifications by written agreement without amending this Agreement.

5.3 Government Approvals. Hospira agrees to manufacture and supply those quantities of Products requested in firm purchase orders by OBI that are necessary to validate Hospira’s manufacturing facilities, obtain regulatory approval(s) and build OBI’s inventory in anticipation of commercial launch of the Products and OBI shall be required to pay for such Products irrespective of whether the Products ultimately receive all necessary Regulatory Authorities’ approvals.

5.4 Active Pharmaceutical Ingredient.

(a) Supply. Hospira shall manufacture the Products for OBI from the API that OBI shall supply to Hospira at no cost. OBI shall supply API to Hospira in quantities sufficient to satisfy Hospira’s gross manufacturing requirements of Product. Hospira’s use of API received from OBI shall be limited to development contemplated by this Agreement and the manufacture of Product for OBI .

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 7 of 41

OBI shall ship all required quantities of API DDP (Incoterms 2000) to Hospira’s manufacturing plant in Clayton North Carolina, pursuant to no-cost purchase orders that Hospira issues to OBI. OBI shall be responsible for all costs of transport and carriage insurance. Within thirty (30) days of Hospira’s receipt of any API supplied by OBI hereunder, Hospira shall: (i) perform an identification test on the API and confirm the shipment quantity; and (ii) notify OBI of any inaccuracies with respect to quantity or of any claim that any portion of the shipment fails the identification test. In the event Hospira notifies OBI of any deficiency in the quantity of API received, OBI shall promptly ship to Hospira, at OBI’s own expense, the quantity of API necessary to complete the API shipment. In the event Hospira notifies OBI that the API shipment does not conform to the API Specifications, OBI shall have the right to confirm such findings at Hospira’s manufacturing location. If OBI determines that such shipment of API conformed to the API Specifications, the parties shall submit samples of such shipment to a mutually acceptable independent laboratory for testing. If such independent laboratory determines that the shipment conformed to the API Specifications, Hospira shall bear all expenses of shipping and testing such shipment samples. If OBI or such independent laboratory confirms that such shipment did not meet the API Specifications, OBI shall replace, at no cost to Hospira, the portion of the API shipment which does not conform to the API Specifications and bear all expenses of shipping and testing the shipment samples.

(b) Title. Notwithstanding the DDP shipping terms set forth in Section 5.4(a) , OBI shall at all times retain title to and risk of loss of the API; provided, however, that subject to the limitation in Section 5.4(c) , Hospira shall assume full responsibility and risk for the safekeeping, storage and handling for all API in its possession and all shipments of API delivered hereunder and accepted by Hospira.

(c) Replacement. In the event of loss or damage of any API delivered hereunder or the failure of Product to meet Product Specifications, OBI shall supply to Hospira replacement API according to the terms set forth in Sections 5.4(d & e) , except as otherwise provided herein. If the replacement of such API results from a negligent act or omission or breach of this Agreement by Hospira in the manufacture, handling or storage of Product or API, OBI shall supply to Hospira replacement API and Hospira shall be responsible for the cost of the replacement API equal to OBI’s purchase cost/kg (as evidenced by OBI’s invoices).

(d) API Consumption. After Hospira has completed its initial validation runs of Product and during the initial stages of Hospira’s clinical manufacture of Product, the parties shall consult with a view to develop a strategy for maximizing Hospira’s production yield of Product from the API supplied by OBI. Based upon such consultations, the parties shall establish a maximum consumption factor target for Product to be manufactured in accordance with OBI’s purchase orders. When Hospira has achieved production of consistent batch quantities of Product in accordance with the maximum consumption factor target, the parties shall meet to set out in writing binding terms and conditions for production criteria, such as an API yield minimum, permitted variances of quantities of Product to be delivered according to OBI’s purchase orders and consequences of out-of-variance performance. Notwithstanding the foregoing, once the maximum consumption factor has been established, if, during any twelve (12) month period, Hospira’s consumption of API to produce a given quantity of Product exceeds the maximum agreed upon consumption factor for such

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 8 of 41

quantity of Product, Hospira shall promptly reimburse OBI for any API consumed in excess of that which would have been consumed if Hospira had performed within such maximum consumption factor at OBI’s total cost, as evidenced by OBI’s invoices, for such excess amount of API consumed.

(e) Maximum Liability. Notwithstanding any of the foregoing, in no event shall Hospira’s aggregate liability for such replacement costs of API exceed: (i) where Hospira manufactures three (3) batches or less in a Contract Year – $50,000 per such year; (ii) where Hospira manufactures four to six (4-6) batches in a Contract Year – $100,000 per such year; and where Hospira manufactures six (6) batches or more in a Contract Year – $200,000 per such year. Subject to Section 8.3 , this Section 5.4(e) states OBI’s sole remedy, and Hospira’s sole liability, with respect to any claim arising hereunder for any such loss, damage, excessive consumption or misuse of API by Hospira.

5.5 Dedicated Equipment Costs. If non-standard, specialized equipment is required to manufacture Product for OBI, Hospira shall pay the cost of such equipment, subject to OBI’s prior approval of such costs, which approval shall not be unreasonably withheld. Hospira shall advise OBI of specialized equipment required and the estimated costs associated with the purchase, installation and validation of such equipment. After OBI approves such costs, Hospira shall install and validate the equipment and bill OBI for the associated costs. OBI shall make payment to Hospira no later than thirty (30) days after OBI receives an invoice from Hospira. Title to the equipment shall be in OBI’s name. If Hospira wishes to use the specialized equipment for manufacture of a product other than Product for OBI, Hospira and OBI shall meet and discuss the technical and practical ramifications of such use and appropriate compensation to OBI.

5.6 Choice of Suppliers. The parties shall collaborate to select Third Parties to be qualified by Hospira as suppliers of excipients, primary containers, packaging and components (“Raw Materials”) for the manufacture of the Product. Such suppliers shall be selected and approved by Hospira in accordance with Hospira’s quality systems and based on demonstrable quality and reliability criteria. As a safeguard against any potential short-term interruption in its manufacturing operations, Hospira will agree, based upon forecast information supplied by OBI: (a) to qualify a secondary Third Party supplier of Raw Materials; and (b) to maintain rotating safety stock of Raw Materials in an amount of no less than a quantity sufficient to manufacture two complete lots of Products. Hospira shall not unreasonably object to any Third Party supplier chosen by OBI.

5.7 Product Labeling.

(a) Hospira shall label the Product in accordance with the Product Specifications using content provided by OBI. OBI shall control the content and type of all labeling and packaging (and any changes or supplements thereto) for the Product and shall have the responsibility, at OBI’s expense, for: (i) ensuring such content is compliant with regulatory approvals and all Applicable Laws; and (ii) any changes or supplements to such content, including the expense of securing any approvals required any applicable Regulatory Authority for any such changes or supplements. Hospira shall be responsible for obtaining such labels (and any changes or supplements thereto) in accordance with the content specified by OBI .

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 9 of 41

(b) Any changes to the labeling and packaging shall be communicated to Hospira in writing at least seventy-five (75) days prior to the desired implementation date together with the required documentation specifying the content to be included in the labeling and packaging, including all necessary photo-ready art (or its substantial equivalent). OBI shall reimburse Hospira for Hospira’s actual costs of making any changes under this Section 5.7(b) and for the cost of any labeling that Hospira is unable to use due to such changes.

5.8 Off-Site Waste. If necessary, Hospira shall hire, direct and pay all costs for a waste contractor to remove all Waste from Hospira’s manufacturing facility for Product, consistent with the Product’s Material Safety Data Sheets (“MSDS”). The costs associated with the removal of Specially Regulated Waste shall be borne by OBI. Hospira shall only dispose of Specially Regulated Waste at sites and through waste management vendors that have been approved in writing by OBI, whose approval shall not be withheld unreasonably. Hospira shall document the destruction of any Specially Regulated Waste in writing and provide copies of such written documentation to an authorized representative of OBI. OBI maintains the right, but not the obligation, to witness the actual disposal of Specially Regulated Waste. OBI shall, upon request by Hospira, provide the MSDS for the API and the MSDS for the Product to Hospira.

5.9 Delivery. Hospira shall ship the Products to OBI, EXW (Incoterms 2000), Hospira’s manufacturing plant at Clayton, North Carolina. Title to and risk of loss over the Products shall pass to OBI at the time the Product is made available to a carrier designated by OBI at the loading dock of Hospira’s Clayton, North Carolina plant. Hospira shall not ship any Product until both Hospira and OBI have released such Product pursuant to the Product Specifications and/or the Technical & Quality Agreement. OBI will be responsible for procuring carriage and insurance in an amount sufficient to cover the value of the contents, for all shipments. All freight, handling, insurance, duties, taxes and shipping expense will be borne by OBI. For any shipments outside the United States, OBI shall be the exporter of record; provided, however, that Hospira shall assist OBI in the preparation of any documentation necessary for export of the Products.

5.10 Price and Payment.

(a) Price. Hospira shall invoice OBI for the Products delivered by Hospira at the prices set forth on Exhibit 5.10 . Prices are firm through December 31 ^st of 2009. Beginning January 1 ^st of 2010 and thereafter and on each succeeding January 1 ^st during the Term hereof, prices may be increased by Hospira. Price increases shall be effective for deliveries beginning January 1 ^st of each calendar year. Such increases shall not exceed the annual percentage increase for the most recent twelve (12) month period for which figures are available in the Product Price Index, Pharmaceutical Preparations, Ethical (Prescription), Commodity Code PCU325412, issued by the Bureau of Labor Statistics, U.S. Department of Labor (http://www.bls.gov/ppi/ppi_dr.pdf) .

(b) Payment. Hospira shall invoice OBI upon shipment of Product. OBI shall make payment net thirty (30) days from the date of receipt of Hospira’s invoice.

(c) Taxes. Any federal, state, county or municipal sales or use tax, excise, customs charges, duties or similar charge, or any other tax assessment (other than that assessed against income), license, fee or other charge lawfully assessed or charged on the manufacture, sale or transportation of Product sold pursuant to this Agreement, and all government license filing fees and Prescription API User (PDUFA) annual establishment fees with respect to all Product shall be paid by OBI.

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 10 of 41

(d) Process Rework. Process rework created as a result of OBI’s changes shall be billed separately at a reasonable fee mutually agreed upon in writing.

(e) Sub-Lots. Should OBI desire Hospira to split a manufacturing lot of Product into several sub-lots during packaging, there will be a split fee of Eight Thousand U.S. Dollars ($US 8,000) for each sub-lot packaged.

(f) Storage Fee. A storage fee shall be due and payable to Hospira if OBI stores Product at Hospira’s plant greater than thirty (30) days after Product’s release by Hospira. The fee shall be One Thousand U.S. Dollars ($US 1,000) per pallet (each pallet containing approximately 2,592 bottles/units of Product) per month or any part thereof. OBI will use its commercially reasonable efforts to take delivery of all Products from Hospira’s Clayton, North Carolina facility no later than ninety (90) days after Hospira’s Product release.

5.11 Nonconforming Shipment. All Product manufactured pursuant to this Agreement shall be received by OBI subject to OBI’ right to conduct inspections and performance testing of such Product. OBI or its designee shall examine Product delivered hereunder promptly after actual receipt thereof by OBI or its designee utilizing such methodology as OBI shall implement from time to time in its sole discretion. OBI shall have a period of thirty (30) days from the date of its receipt of a shipment of the Products to inspect each such shipment. OBI shall be entitled to reject any shipment of Product that: (i) does not conform to the Product Specifications; or (ii) that was not manufactured in accordance with Applicable Laws, including without limitation, cGMP. If OBI rejects such shipment, it shall promptly so notify Hospira and provide to Hospira samples of such shipment for testing. If Hospira tests such shipment and determines that it did conform to the Product Specifications, the parties shall submit samples of such shipment to a mutually acceptable independent laboratory for testing. If such independent laboratory determines that the shipment conformed to the Product Specifications, OBI shall bear all expenses of shipping and testing such shipment samples. If Hospira or such independent laboratory confirms that such shipment did not meet the Product Specifications, Hospira shall replace, at no cost to OBI, that portion of the Product shipment which does not conform to the Product Specifications, and shall bear all expenses of shipping and testing the shipment samples. Any nonconforming portion of any shipment shall be disposed of as directed by Hospira, at Hospira’s expense. Any Products that OBI does not reject pursuant to this Section 5.11 shall be deemed accepted, and any right to reject the Product for nonconformance hereunder shall be deemed waived by OBI , except OBI shall retain the right to revoke acceptance of Product for a latent defect which is not reasonably discoverable, which renders the Products not conforming to Product Specifications, and are solely caused by Hospira. For purposes of clarity, a latent defect shall be considered as any defect not discoverable even by the exercise of ordinary diligence and reasonable care. OBI shall not be required to pay Hospira for any Products which have been finally rejected pursuant to this Section 5.11 . Hospira shall replace all finally rejected Products at no additional cost to OBI as soon as reasonably possible after receipt of test results confirming non-conformance with the Product Specifications.

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 11 of 41

Article 6. Orders and Forecasts

6.1 Two-Year Planning Estimate. For capacity planning purposes, by December 1, 2009, OBI shall provide Hospira with an initial, non-binding, written estimate of OBI’s annual requirements of Product for the first two (2) calendar years of this Agreement. Thereafter, by September 1st of each calendar year OBI shall update such rolling forecast of its requirements of the Product for the period commencing on January 1st of the next calendar year.

6.2 First Firm Order. OBI shall place its first Firm Order (as defined below) approximately six (6) months in advance of the anticipated date of Product approval by Regulatory Authorities or the desired Product availability date.

6.3 Rolling Forecast. Concurrent with the placing of its first Firm Order, and thereafter on the first day of each calendar quarter thereafter, OBI shall provide to Hospira a six (6) -quarter forecast of its requirements of the Products (each, a “Rolling Forecast”) for the eighteen (18) -month period beginning as of the date of the applicable Firm Order. The first two (2) quarters of each Rolling Forecast shall be considered a binding commitment upon OBI to purchase quantities described therein and a binding commitment upon Hospira to produce and deliver such quantities on the delivery dates described therein (“Firm Order”). The last four (4) quarters of each Rolling Forecast shall be non-binding upon the parties.

6.4 Firm Order Acceptance. Within thirty (30) days after receipt of a Film Order issued in accordance with Section 6.3 , Hospira shall confirm to OBI its acceptance of the purchase order, delivery date(s) and quantity of Products ordered by OBI. Hospira may reject, in whole or in part, a Firm Order only if it: (a) calls for the delivery of Products for which sufficient quantities of API have not been delivered by OBI or its designee in accordance with Section 5.4 ; or (b) is provided less than ninety (90) days before the first requested delivery date of Products. Notwithstanding the foregoing, Hospira shall at all times use commercially reasonable efforts to meet the delivery dates set forth in each Firm Order.

6.5 Additional Quantities. Should OBI, in any Firm Order, order additional quantities of Product in excess of twenty-five percent (25%) over the latest Rolling Forecast, Hospira shall not be obligated to supply said additional quantities; provided, however, that Hospira shall use reasonable commercial efforts to produce and deliver to OBI said additional quantities within ninety (90) days of issuance of the Firm Order for such additional quantities.

6.6 Firm Order Changes or Cancellations. If, due to unforeseen circumstances, OBI requests changes to Firm Orders of Products within the two (2) quarter Firm Order period, Hospira shall use reasonable commercial efforts to accommodate the changes within reasonable manufacturing capabilities and efficiencies. If Hospira can accommodate such change, Hospira shall advise OBI of the costs, if any, associated with making any such change and OBI shall be deemed to have accepted the obligation to pay Hospira for such costs if OBI indicates in writing to Hospira that Hospira should proceed to make the change. If Hospira cannot accommodate such change, OBI shall be bound to the original Firm Order. If OBI cancels a Firm Order, Hospira shall be relieved of its obligation relating to such order but OBI will not be relieved of its obligation of payment unless Hospira agrees to such cancellation as set forth in this Section 6.6 .

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 12 of 41

6.7 Purchase Order Terms. Each purchase order or any acknowledgment thereof, whether printed, stamped, typed, or written shall be governed by the terms of this Agreement and none of the provisions of such purchase order or acknowledgment shall be applicable except those specifying Product and quantity ordered, delivery dates, special shipping instructions and invoice information.

6.8 Supply Shortfall. Hospira shall promptly notify upon becoming aware of Force Majeure Event under Section 12.1 or any other event that would render Hospira unable to supply the quantities of Product to OBI pursuant to its Firm Orders.

6.9 Inability to Supply and Allocation of Resources.

(a) Shortage. To the extent that Hospira fails to deliver the Product in accordance with any Firm Order, Hospira shall use its commercially reasonable efforts to make up such Firm Order as soon as possible unless such failure is a result of OBI’s failure to supply API, any shortage in raw materials resulting from the failure of a supplier selected by OBI pursuant to Section 12.1(c) to supply raw materials (with the exception of any such failures resulting from any actions taken by Hospira), or as a result of OBI’s fault, negligence or breach of this Agreement.

(b) Inability to Supply. In the event of an Inability to Supply, Hospira agrees to meet with OBI to discuss options to resolve the Inability to Supply and to minimize the impact of the Inability to Supply to OBI. Hospira agrees to cooperate with OBI in taking all actions that OBI deems reasonable to remedy such Inability to Supply. Upon any event of Inability to Supply at OBI’s option, OBI shall have the right: (i) to cancel, without penalty, all Firm Orders accepted by Hospira and all outstanding Firm Orders affected by such Inability to Supply; and (ii) have a Third Party manufacture all or any portion of OBI’s requirements for the Product until such time as Hospira provides OBI with ninety (90) days’ written notice of Hospira’s ability to resume manufacturing the Product.

(c) Third Party Manufacture. OBI’s rights to Third Party manufacture shall continue for any remaining non-cancellable period of any contract that OBI shall have entered into with any Third Party for the supply of Product as a result of such Inability to Supply (“New Supply Contract”). OBI shall use all commercially reasonable efforts when entering into any such New Supply Contract to tailor the term of such New Supply Contract to be consistent with the expected period of the Inability to Supply. Notwithstanding anything to the contrary set forth in this Section 6.9 , if, following any period of Inability to Supply hereunder, Hospira fails to provide OBI with notice and reasonable proof of ability to adequately supply OBI within twelve (12) months or Hospira notifies OBI that it will not be able to alleviate such Inability to Supply hereunder within such twelve (12) month period, OBI may terminate this Agreement without penalty upon notice of such termination.

(d) Definition. For purposes of this Section 6.9 , “Inability to Supply” means (i) Hospira’s failure to supply at least eighty percent (80%) of OBI’s requirements for Product meeting Product Specifications for any two (2) consecutive calendar quarters due to

 

Hospira – Oxygen Biotherapeutics Agreement

 

Page 13 of 41

a Force Majeure Event, or for any other reason, or (ii) OBI reasonably concludes that Hospira, due to a Force Majeure Event, any unresolved manufacturing issue due to technical uncertainty or for any other reason, will be unable to supply at least eighty percent (80%) of OBI’s requirements for Product meeting Product Specifications for a period which is expected to continue in excess of sixty (60) days. Inability to Supply shall not include any inability to supply resulting from OBI’s failure to supply API; or as a result of OBI’s fault, negligence or material breach of this Agreement.

(e) Allocation of Resources. In the event that Hospira is unable to manufacture Product under this Agreement and such inability is due solely to a failure by OBI to deliver API hereunder, to the extent that such failure by OBI to deliver API is expected to last longer than sixty (60) days, then Hospira may reallocate resources being held for manufacture of the Product for a period equal to the period of the expected continuance of such failure to provide API by OBI plus ninety (90) days, or as otherwise as mutually agreed in writing by the parties (“Allocation Period”). Upon notice from OBI of its ability to resume supply of API, Hospira shall use all commercially reasonable efforts to resume the manufacture of the Product upon the expiration of the Allocation Period.

Article 7. Quality

7.1 Quality Control. Hospira shall apply its quality control procedures and in-plant quality control checks on the manufacture of the Products for OBI in the same manner as Hospira applies such procedures and checks to products of similar nature manufactured for sale by Hospira. In addition, Hospira will test and release Products in accordance with the test methods described in Exhibit 7.1 to ensure that Product conforms to the Product Specifications. The parties may change the test methods from time to time by mutual written agreement; provided, however, that Hospira provides OBI with reasonable prior notice thereof, and any changes to test methods are made pursuant to Hospira’s quality systems and according to all applicable Regulatory requirements.

7.2 Quality Agreement. The parties shall enter into a Technical & Quality Agreement substantially in the form of the agreement attached hereto as Exhibit 7.2 within one-hundred and twenty (120)&nb