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Development and Supply Agreement - Hollister-Stier Laboratories LLC and Acusphere Inc.

Confidential

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

DEVELOPMENT AND SUPPLY AGREEMENT

This AGREEMENT is made and entered into this 30th day of November, 2001 (the "Effective Date") by and between HOLLISTER-STIER LABORATORIES LLC, having a principal place of business at 3525 North Regal Street, Spokane, Washington 99207-5788 ("Hollister-Stier") and ACUSPHERE, INC., having a principal place of business at University Park at M.I.T., 38 Sidney Street, Cambridge, Massachusetts 02139 ("Client"). Each of Hollister-Stier and Client are referred herein individually as "Party" and collectively as the "Parties"


WITNESSETH THAT

WHEREAS, Hollister-Stier has expertise, personnel, and experience in formulation and/or finishing of pharmaceutical products and has the facilities to manufacture such products and is willing to provide such manufacturing services to client companies in the pharmaceutical area; and

WHEREAS, Client has a commercial interest in the manufacture of the Products (as hereafter defined and identified from time to time upon mutual agreement by the Parties) and requests the services of Hollister-Stier in manufacturing of such Products for clinical trials pursuant to the Product Development Programs identified from time to time upon mutual agreement by the Parties and Hollister-Stier desires to manufacture such Products on behalf of Client pursuant to such Product Development Programs and in accordance with the terms and conditions contained herein. NOW THEREFORE, the Parties agree as follows:



ARTICLE 1

DEFINITIONS

1. As used in this Agreement, the following definitions shall apply:

1.1 "AAA" shall have the meaning provided such term in Section
13.3.

1.2 "All Applicable Laws and Regulations" shall mean all Federal,
State, and Local laws and regulations and, where applicable,
guidance documents promulgated by the FDA and being currently
utilized within the pharmaceutical industry to manufacture the
applicable type of Intermediate(s) and Product(s) that apply
to the services being provided hereunder by Hollister-Stier,
including but not limited to , the Federal Food Drug, and
Cosmetic Act (the "Act") as amended, and the regulations
promulgated thereunder, and the requirements of other domestic
or foreign governmental authorities made known to
Hollister-Stier by Client, as all of such laws, regulations or
requirements may be amended or reenacted from time to time.

1.3 "Affiliate" shall mean any corporation or non-corporate
entity, which directly or indirectly controls, is controlled
by, or is under common control with a Party. A corporation or
non-corporate entity shall be regarded as in control of
another corporation if it owns or directly or indirectly
controls at least fifty percent (50%) of the voting stock of
the other corporation or (a) in the absence of the ownership
of at least fifty percent (50%) of the voting stock of a
corporation or

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(b) in the case of a non-corporate entity, the power to direct
or cause the direction of the management and policies of such
corporation or non-corporate entity, as applicable.

1.4 "Agreement" means this agreement, as it may from time to time
be supplemented or modified by written amendment(s) signed by
the Parties.

1.5 "Active Pharmaceutical Ingredient (API)" shall mean the active
ingredient of the Intermediate(s) and/or Product(s).

1.6 "Batch" or "Lot" shall mean, with respect to Products or
Intermediates each separate and distinct quantity of Product
or Intermediate, as the case may be, processed under
continuous conditions and designated by a batch or lot number.

1.7 "cGMP Regulations" means Current Good Manufacturing Practices
as defined from time to time under the Act, as codified in 21
CFR parts 200 and 211 and any guidelines or guidances
promulgated by the FDA and being currently utilized within the
pharmaceutical industry to manufacture the applicable type of
product(s).

1.8 "Certificate of Analysis (COA)" shall mean a document
certifying a Batch or Lot of Product meets all established and
mutually agreed upon Specifications as referenced, signed and
dated by a duly authorized representative of the Quality
Control or Quality Assurance Department of Client or
Hollister-Stier as the case may be.

1.9 "Certificate of Testing (COT)" shall mean a document
certifying that certain tests mutually agreed upon in writing
by the Parties and conducted by Hollister-Stier on a Batch or
Lot of Intermediate and/or Product meet all established and
mutually agreed upon Specifications as referenced, signed and
dated by a duly authorized representative of the Quality
Control or Quality Assurance Department of Hollister-Stier.

1.10 "Chemicals and Materials" shall mean the chemicals (other than
the intermediate), and other materials such as vials required
to manufacture and bulk package the Intermediate(s) and
Product(s) in accordance with the Intermediate(s) and
Product(s) Specifications.

1.11 "Client" shall have the meaning provided such term in the
introductory paragraph to this Agreement.

1.12 "Client Property" shall have the meaning provided such term in
Section 2.10.

1.13 "Client's Technology Package" shall mean such technical
information to be supplied by Client to Hollister-Stier to
permit Hollister-Stier to carry out its obligations hereunder,
including but not limited to, Client's raw material and
manufacturing component specifications, Intermediate and
Product Specifications; manufacturing and analytical testing
equipment provided to Hollister-Stier by Client, manufacturing
equipment Installation Qualification (IQ) and Operational
Qualification (OQ) protocols, manufacturing and analytical
testing Standard Operating Procedures (SOP's), including
cleaning procedures; analytical method validation reports and
analytical testing method transfer protocols developed in
conjunction with Hollister-Stier which detail the specific
analytical testing methods to be used and the acceptance
criteria Hollister-Stier must satisfy to be qualified to
perform such analytical testing methods; manufacturing filter
validation reports (as applicable); Process Simulation
(Intermediate)/Media Fill (Product) Manufacturing Batch
Production Records, Intermediate and Product Manufacturing
Batch Production Records; Intermediate and Product Storage
specifications, and Product bulk shipping and label
specifications.

1.14 "Confidential Information" shall mean any confidential
information of Hollister-Stier or which Hollister-Stier is
required to keep confidential that has been or will be
communicated by Hollister-Stier to Client or otherwise learned
by Client in connection with its performance of this

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Agreement, and any such information of Client or which Client
is required to keep confidential from time to time
communicated by Client to Hollister-Stier or otherwise learned
by Hollister-Stier in connection with its performance under
this Agreement, including, without limitation, Client's
Technology Package trade secrets, business methods, operating
procedures, manufacturing methods and processes, results of
clinical trials, financial information (including projections)
and processes, pricing, cost, supplier, manufacturing,
marketing and customer information, whether of a written, oral
or visual nature.

1.15 "Conformance Verification Testing" shall have the meaning
provided such term in Section 7.11.

1.16 "Costs" shall have the meaning provided such term in Section
4.

1.17 "CTM" shall mean Clinical Trial Material (Product) to be used
for clinical trials, as opposed to product to be used for
commercial sale.

1.18 "Effective Date" shall have the meaning provided such term in
the introductory paragraph of this Agreement.

1.19 "FDA" means the United States Food and Drug Administration or
any successor organization and all agencies under their direct
control.

1.20 "Hollister-Stier" shall have the meaning provided such term in
the introductory paragraph to this Agreement.

1.21 "Hollister-Stier Property" shall have the meaning provided
such term in Section 2.8.

1.22 "Indemnified Party" and "Indemnifying Party" shall have the
meanings provided such terms in Section 11.3.1.

1.23 "Information" shall have the meaning set forth in Article 8 of
this Agreement.

1.24 "Intermediate" shall mean a chemical compound formed as an
intermediate step in the Manufacturing Process between the
starting material(s) and the final Product.

1.25 "Manufacturing Process" shall mean the process for
manufacturing the Intermediate(s) and/or the Product(s) as
precisely defined in Manufacturing Procedures.

1.26 "Manufacturing Procedures" shall mean the precise, written
records of the Manufacturing Process for the Intermediate(s)
and Product(s), mutually developed and agreed to by the
Parties and which may be modified from time to time as agreed
to in writing by the Parties.

1.27 "Party" and "Parties" shall have the meanings provided such
terms in the introductory paragraph to this Agreement.

1.28 "Specifications" shall mean (1) the Intermediate and Product
performance parameters for which an Intermediate Product must
comply to be considered acceptable and (2) the written record
of the Intermediate and Product requirements annexed hereto
within the applicable Product Development Program Documents,
which specifications maybe amended from time to time by
written agreement of the Parties.

1.29 "Product(s)" shall mean those products as set forth from time
to time within the appropriate Product Development Program
Documents annexed hereto.

1.30 "Product Development Programs" shall mean the development
programs for the Intermediate(s) and Product(s) as agreed to
by the Parties and as described in the Product Development
Program Documents appended hereto from time to time as
Exhibits. The documents for each Product


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Development Program will be consolidated within a single
Exhibit (e.g., Exhibit A will contain documents relating to
the AI-850 Product Development Program).

1.31 "Program Technology" shall have the meaning provided such term
in Section 2.10.

1.32 "Third Party" shall mean any party other than Client,
Hollister-Stier and their respective Affiliates.

1.33 "Third Party Claim" shall have the meaning provided such term
in Section 11.3.1



ARTICLE 2

PRODUCT DEVELOPMENT

2. Client shall provide and/or transfer to Hollister-Stier Client's
Technology Package, solely for the purpose of Hollister-Stier carrying
out its obligations under this Agreement.

2.1 Client and Hollister-Stier shall jointly prepare and agree to
in writing Product Development Program Documents for each
Product, which shall incorporate the following:

2.1.1 A Product Development Schedule;

2.1.2 the stages in which the Product Development Program
is to be carried out (if any) and whether the
commencement of each stage is dependent on successful
completion of the previous stage;

2.1.3 identify the facilities, staffing, supplies and
equipment required for the Product Development
Program;

2.1.4 which Party is responsible for performing the various
tasks or stages of the Product Development Program;

2.1.5 set of objective criteria whereby it can be assessed
whether the Product Development Program (and any
stages thereof) have achieved its objectives;

2.1.6 identify all documentation (including regulatory
documentation) and other deliverables to be provided
by Hollister-Stier to Client;

2.1.7 a good faith estimate of the number of Batches or
Lots required to complete the Product Development
Program;

2.1.8 identify equipment provided by Client to
Hollister-Stier;

2.1.9 define Product Development Program costs; and

2.1.10 define Product Development Program payment schedule
in accordance with applicable milestones.

2.2 Hollister-Stier shall provide written monthly reports to
Client, the content and format of said reports to be mutually
agreed on in writing by the Parties, detailing the status of
each Product Development Program.


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2.3 Hollister-Stier shall respond in a timely manner to Client's
inquiries regarding the status of any Product Development
Program and keep Client reasonable informed of interim results
on an informal basis, including if requested, periodic
meetings at Hollister-Stier's facility to discuss Product
Development Program progress.

2.4 Upon completion of a Product Development Program,
Hollister-Stier will provide Client with a written report of
the results, which have been developed, compiled or learned
during the course of the Product Development Program,
including other relevant manufacturing documentation such as
stability data, all as more particularly described in Exhibit
within the applicable Product Development Program Documents.

2.5 Hollister-Stier and Client may from time to time negotiate in
good faith changes to any Product Development Program in the
event that:

2.5.1 Client's requirements change and, as a result, Client
determines that requirements stated in the Product
Development Program are no longer valid or needed.

2.5.2 Client requires additional services.

2.5.3 The standards or requirements with respect to the
Product Development Program need to be changed.

2.5.4 Either Party determines that a modification is
desirable.

2.5.5 Any modification shall be effective only when
approved in writing by the Parties.

2.6 Each Party shall provide the other Party, in a timely fashion,
with all relevant information, documentation and data
necessary or appropriate for the Parties performance
hereunder. If requested by a Party to provide support or
information the other Party shall provide the support or
information within five (5) business days of the request,
unless additional time is requested based on a reasonable
explanation provided within five (5) business days of the
request. In the event a Party is to review or approve any
information, documentation, data or other materials supplied
by the other Party, such review or approval shall be completed
within five(5) business days, unless additional time is
requested based on a reasonable explanation provided within
five (5) business days of the request. Hollister-Stier and
Client shall cooperate in the performance of this Agreement
and each Party shall deal honestly and in good faith with the
other Party.

2.7 Hollister-Stier shall ensure that all Chemicals and Materials
supplied by Hollister-Stier on behalf of the Product
Development Program(s) are suitable for use under this
Agreement, comply with Applicable Laws and Regulations
(including without limitation those relating to the import of
such materials) and receive all required governmental and
regulatory approvals, including without limitation customs and
FDA approvals.

2.8 Ownership of Tangible Materials: Subject to Sections 2.9, 2.10
and 2.11, Client shall retain ownership of all information,
documents and materials (whether in electronic or written
form) which Client provides to Hollister-Stier in connection
with the performance of Product Development Programs
hereunder, and Client shall have full possession of, and all
rights to use, all reports, documents and other tangible
materials which Hollister-Stier provides to Client as part of
the results of such Product Development Programs. Information,
documents and materials provided by Client, and any copies
thereof, shall be returned to the Client by Hollister-Stier at
the conclusion of Product Development Programs.

2.9 Hollister-Stier Property: Client acknowledges that
Hollister-Stier possesses certain inventions, processes,
know-how, trade secrets, improvements, other intellectual
properties and other assets, including but not limited to
procedures and techniques, computer technical expertise,
software, and certain technical expertise and conceptual
expertise in the area of drug processing and

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manufacturing which have been independently developed by
Hollister-Stier or its Affiliates without the benefit of any
information provided by Client (collectively "Hollister-Stier
Property"). Client and Hollister-Stier agree that any
Hollister-Stier Property or improvements thereto which are
used, improved, modified or developed by Hollister-Stier under
or during the term of this Agreement are the product of
Hollister-Stier's technical expertise possessed and developed
by Hollister-Stier or it Affiliates prior to or during the
performance of this Agreement and are the sole and exclusive
property of Hollister-Stier or its Affiliates, as the case may
be.

2.10 Client Property: Hollister-Stier acknowledges that Client
possesses certain inventions, processes, know-how, trade
secrets, improvements, other intellectual properties and other
assets, including but not limited to procedures and
techniques, computer technical expertise, software, and
certain technical expertise and conceptual expertise relating
to the Intermediate(s) and Product(s), which have been
independently developed by Client or its Affiliates without
the benefit of any information provided by Hollister-Stier
(collectively "Client Property"). Client and Hollister-Stier
agree that any Client Property or improvements thereto which
are used, improved, modified or developed by Client under or
during the term of this Agreement are the product of Client's
technical expertise possessed and developed by Client or its
Affiliates prior to or during the performance of this
Agreement and are the sole and exclusive property of Client or
its Affiliates, as the case may be.

2.11 Ownership and Rights to Inventions and Technology: All
inventions, technology and information, whether patentable or
not (other than those described in Section 2.9, which shall be
owned by Hollister-Stier pursuant to Section 2.9), conceived,
reduced to practice or created by either Party and/or its
agents during the performance of this Agreement ("Program
Technology"), shall be owned by the Client; provided, however,
to the extent that any such inventions relates to the
production processes not related to manufacture of the
Intermediate(s) and Product(s), the Client shall grant and
hereby grants to Hollister-Stier a royalty free,
non-exclusive, world-wide, irrevocable license to practice
such Program Technology in facilities owned, operated,
licensed, rented or otherwise controlled by Hollister-Stier.
Client shall be responsible for the costs of filing,
prosecution and maintenance for patents and patent
applications on Program Technology and shall have full control
over such filing, provided that the decision to proceed with
any such filing shall be solely at the discretion of the
Client.



ARTICLE 3

FACILITIES, STAFFING, SUPPLIES & EQUIPMENT

3. Renovations to Hollister-Stier facilities are required to perform the
Product Development Program(s). Such renovations will provide Client
with CTM and early commercial scale-up capability for manufacturing
Intermediates and Products. The renovations will create a manufacturing
area dedicated to Client. Excess capacity of this dedicated area not
utilized by Client may be used by Hollister-Stier upon written approval
from Client. Such approval will not be unreasonably withheld. Client's
equipment as defined herein may not be used by Hollister-Stier or
Hollister-Stier clients.

3.1 Hollister-Stier shall maintain at all times sufficient
staffing, supplies and equipment necessary for it to perform
Product Development Program(s) in accordance with the terms of
this Agreement. Client, in accordance with this Agreement,
shall provide and/or disclose to Hollister-Stier certain
materials, equipment and know-how, defined as the Client's
Technology Package.

3.2 Client shall provide Hollister-Stier with the use of certain
analytical and manufacturing equipment as defined in Product
Development Program Documents.


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3.2.1 During the term of this Agreement, Client shall, at its sole
expense and in a timely manner, deliver the equipment to
Hollister-Stier for installation and use solely in performing
the Product Development Program(s). The Parties shall
cooperate in the installation, calibration, confirmation,
qualification, validation, maintenance, cleaning and handling
of the equipment. As and to the extent reflected within the
applicable Product Development Program Documents annexed to
this Agreement, the calibration of the equipment will be at
Hollister-Stier's cost, but Client shall have the right to
review and approve all installation, calibration,
confirmation, qualification, validation, maintenance,
operation and cleaning procedures and data for the equipment
as stated within the applicable Product Development Program
Documents annexed to this Agreement. Cost for maintenance and
any requalification/revalidation of the equipment during the
term of this Agreement shall be borne by Hollister-Stier
except for such costs which are associated with the condition
of the equipment when it was delivered to Hollister-Stier,
which costs shall be borne by Client. During the term of this
Agreement, the equipment shall be exclusively dedicated to the
production of the Intermediate(s) and Product(s).

3.2.2 At all times Client shall retain all legal and equitable title
to the equipment. While the equipment is located on
Hollister-Stier's premises, Hollister-Stier shall promptly
notify Client of any damages to the equipment. Any cost to
repair equipment that is damaged while in the custody of
Hollister-Stier, except to the extent caused by Client, will
be at Hollister-Stier's sole cost and expense. Hollister-Stier
must receive oral approval from Client, which will not be
unreasonably withheld, conditioned or delayed, before any
repairs to the equipment are performed. Hollister-Stier will
provide timely, written documentation to Client detailing the
repairs made to the equipment. Upon Client's written request,
or any termination or expiration of this Agreement, the
equipment and equipment related documentation (including all
calibration certificates and reports, use and cleaning logs,
confirmation, qualification, validation and maintenance
documents) shall be promptly returned to Client in good
condition, usual wear and tear excepted. Hollister-Stier shall
make its premises and personnel available during normal
business hours to assist with the removal and return of the
equipment, along with all equipment related documentation.
Client shall be responsible for all cost and expenses for the
removal of the equipment. The Parties shall reasonably
cooperate with regard to the restoration of the Product
Development Program facilities. While the equipment is located
on their premises, Hollister-Stier shall (1) at its sole
expense, safeguard and care for the equipment, subject to
normal wear and tear, (2) not grant any person a security
interest, lien or any other rights or interest in or to the
equipment; and (3) not remove, deface, alter, obscure or
obliterate any mark, tag or other information or
identification or statement of ownership placed on the
equipment by Client.

ARTICLE 4

PRODUCT DEVELOPMENT PROGRAM COSTS

4. The costs that are to be incurred for a Product Development Program
(the "Costs") shall be defined in Exhibits as part of Product
Development Program Documents. Such Costs shall be estimated based on
anticipated manpower and overhead requirements for the tasks set forth
in the Product Development Program and the anticipated costs of
Chemicals and Materials, but shall exclude the cost of API's which
shall be procured by Client and provided by Client to Hollister-Stier
at Client's sole expense. Client shall pay or reimburse Hollister-Stier
for the Costs described in the Product Development Program in the
amounts set forth in the Product Development Program Documents and in
accordance with the procedures set forth in Section 4.1 below. In
addition, Client shall, for such expenses and costs that are expressly
authorized in writing in advance by Client, separately pay
Hollister-Stier, on an as-costs-are-incurred basis in accordance with
Section 4.1, (1) for all reasonable and necessary travel and lodging
expenses reasonably incurred in the performance of this Agreement which
have been

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requested and approved by Client, (2) for Hollister-Stier's cost of
auditing any supplier of Chemicals or Materials not currently on
Hollister-Stier's list of approved suppliers, and (3) Hollister-Stier's
cost for any specialized equipment or tooling associated with equipment
changes required at the facility to manufacture the Intermediate(s) and
Product(s). In the event Client and Hollister-Stier agree that
additional manufacturing activities are necessary to complete a Product
Development Program, the costs shall be negotiated in good faith by the
Parties.


4.1 Invoices and Payment: Hollister-Stier will submit invoices to
Client reflecting the work completed in accordance with the
applicable milestones described in the applicable Product
Development Program Documents. Client shall pay all
uncontested Hollister-Stier invoices issued pursuant to this
Agreement within thirty (30) days of the date thereof. Client
shall, within the thirty (30) day period notify
Hollister-Stier regarding any contested amounts or questions
regarding an invoice or invoice item. Hollister-Stier agrees
to respond to requests by Client to clarify questions on any
invoice or invoice item, and Client agrees it will use its
commercially reasonable best efforts to resolve contested
invoice items in a timely fashion. Hollister-Stier
acknowledges and agrees that Client is not obligated to pay
such contested amounts otherwise due and payable within the
thirty (30) day period until such time as the contested issues
are resolved to the satisfaction of both Parties, and that
Client will not be subject to any penalty or finance charge
for such withheld payments. All payments due hereunder to
Hollister-Stier shall be sent to Hollister-Stier at the times
set forth herein by wire transfer of funds via the Federal
Reserve Wire Transfer System to US Bank, ABA #125000105,
Spokane, Washington. Beneficiary: Hollister-Stier Laboratories
LLC, Account # 153590920671, Swift Code USBKUS44JMT.

All amounts not paid when due, with the exception of contested
invoices as described herein, shall bear interest from the due
date at the rate of one and one-half percent (1.5%) per month
(or such other percentage, if lower, as shall not exceed the
maximum rate permitted by law).

The Costs shall not include sales, use, consumption, or excise
taxes of any taxing authority. Hollister-Stier shall notify
Client of any such tax at the execution of this Agreement or
upon learning that such taxes are applicable to any of the
Product(s) contemplated by this Agreement. The amount of such
taxes, if any, will be added to the Costs and shall be
reflected in the invoices submitted to Client by
Hollister-Stier pursuant to this Agreement. Client shall pay
the amount of such taxes to Hollister-Stier in accordance with
the payment provisions of this Agreement.



ARTICLE 5

MANUFACTURING

5. The Parties agree to the following provisions regarding the
manufacturing of CTM batches within a Product Development Program:

5.1 Prior to initiating any aseptic process validation and Batch
or Lot manufacturing, the Parties shall prepare and agree upon
Manufacturing Procedures for the Intermediate(s) and
Product(s), which when prepared and agreed to by the Parties
shall be annexed to this Agreement.

5.2 Prior to initiating any aseptic process validation and Batch
or Lot manufacturing, the Parties shall prepare and agree upon
Master Quality Control analytical testing methods and
procedures for testing the Chemicals and Materials,
Intermediate(s) and Product(s) for conformance to the
Specifications, which when prepared and agreed to by the
Parties shall be annexed to this Agreement. In addition, the
Parties shall prepare and agree upon Master Quality Control
analytical testing method transfer protocols (as applicable)
that detail the specific analytical

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testing methods to be transferred and the acceptance criteria
Hollister-Stier must satisfy to be qualified to perform such
analytical testing methods, which when prepared and agreed to
by the Parties shall be annexed to this Agreement.

5.3 Prior to initiating any aseptic process validation and Batch
or Lot manufacturing, Hollister-Stier will provide Client with
a list of all applicable Standard Operating Procedures
(SOP's), including revision numbers, for the equipment,
utilities, facilities, and other systems related to the
manufacturing, inspection, testing, bulk packaging and storage
of the Intermediate(s) and Product(s). Client will review all
applicable SOP's and any revisions thereto related to the
equipment, utilities, facilities, and other systems relating
to the manufacturing, inspection, testing, bulk packaging, and
storage of the Intermediate(s) and Product(s).



ARTICLE 6

DELIVERY OF PRODUCT(S)

6. The Parties agree to the following provisions regarding delivery of
Product(s):

6.1 In accordance with the manufacturing milestones established by
the Parties and detailed within the applicable Product
Development Program Documents annexed to this Agreement,
Hollister-Stier shall produce and deliver the Product(s) to
the Client in single shipments at the option and request of
Client using a carrier expressly approved in writing by the
Parties, and pursuant to the Client's shipping requirements
defined within the applicable Product Development Program
Documents annexed to this Agreement and using
Hollister-Stier's or Client's bulk shipping container(s) as
mutually agreed upon by the Parties. Product delivered to
Client shall be shipped F.O.B. Hollister-Stier, Spokane, WA,
either freight collect or freight prepaid to a location
designated by Client.

6.2 Hollister-Stier shall retain appropriate representative
samples at controlled storage temperatures, as agreed upon in
writing by the Parties and detailed in applicable Product
Development Program Documents, from each batch of Intermediate
and Product for record keeping, testing and regulatory
purposes. As applicable, the amount of samples retained will
be twice the quantity required to carry out all of the tests
required by the Intermediate and Product Specifications, with
the exception of sterility and LAL testing. Documented
accountability of all samples must be maintained.



ARTICLE 7

QUALITY CONTROL

7. Hollister-Stier and Client agree to the following Quality Control
Procedures:

7.1 Before authorizing shipment of any Batch or Lot of Product,
Hollister-Stier shall conduct and complete quality control
testing of the Intermediate and Batch or Lot of Product (as
applicable) according to Product Development Program Documents
and confirm in writing that the Intermediate and Batch or Lot
of Product (1) were manufactured according to Manufacturing
Procedures and All Applicable laws and Regulations and (2)
meet the applicable Specifications.

7.1.1 Client and Hollister-Stier agree that for certain
Product Development Programs to be mutually agreed
upon in writing between the Parties, the Client shall
conduct and complete testing of the Intermediate and
Batch or Lot of Product (as applicable)

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according to Specifications. The extent and
responsibility of such testing will be mutually
agreed upon in writing by the Parties. For such
testing that may be performed by Hollister-Stier
under such a Product Development Program,
Hollister-Stier shall conduct such testing according
to the Specifications. Regardless of the
aforementioned, Hollister-Stier remains responsible
for confirming in writing that the Intermediate and
Product (1) were manufactured according to
Manufacturing Procedures and All Applicable Laws and
Regulations and (2) meet the applicable
Specifications.

7.2 As per Section 7.1.1, each Intermediate and Batch or Lot of
Product shall be accompanied by a Certificate of Analysis
(COA).

7.3 Each Batch or Lot shall be accompanied by a copy of the
Manufacturing Procedures for the delivered Batch or Lot of
Product and Batch or Lot of Intermediate used to manufacture
the delivered Batch or Lot of Product, including all test data
for the Batches and including all documents and test data
pertinent to Hollister-Stier's facilities, systems and
utilities involved in the manufacture of the Batches, all of
which are to be certified, stamped and signed by authorized
Hollister-Stier Quality Assurance personnel as being accurate
and complete and in accordance with this Agreement.

7.4 Hollister-Stier may, at its sole discretion, transmit the
information specified in Sections 7.2 and 7.3 of this
Agreement separately from the applicable Batch or Lot of
Product, but Hollister-Stier acknowledges that such separate
transmission shall be made at or about the time of the
shipment of the Batch or Lot of Product.

7.5 Hollister-Stier shall immediately notify Client and provide
complete documentation regarding any known deviations and or
errors by Hollister-Stier personnel from procedures set forth
in:

7.5.1 Manufacturing Procedures
7.5.2 Equipment procedures
7.5.3 Analytical test methods
7.5.4 Utilities, facility or other systems

7.6 Hollister-Stier shall immediately notify Client and provide
complete documentation regarding of any out-of-specification
test data or results pertaining to any testing carried out in
relation to the manufacture of the Intermediate(s) and/or
Product(s) or operation of the facilities involved in the
manufacturing of the Intermediate(s) and/or Product(s).

7.7 Hollister-Stier shall obtain Client's written approval prior
to implementing any further manufacturing, retesting or
resampling in connection with a deviation, error or out-of
specification test data or result for the Intermediate(s)
and/or Product(s), except for further manufacturing, retesting
or resampling procedures specifically authorized under Client
approved procedures in effect prior to the occurrence of the
deviation, error or the out-of-specification test data or
result.

7.8 Except as provided in a procedure approved in writing by
Client, Hollister-Stier acknowledges and agrees that it shall
not rework or reprocess any non-conforming raw materials,
in-process materials, Intermediate(s) or Product(s).
Deviations undertaken by Hollister-Stier, unless expressly
approved in advance by Client, remain the responsibility of
Hollister-Stier.

7.9 Any failure of any aseptic validation batch (media fill) or
Batches of Intermediate(s) or Product(s) resulting from such
deviations or errors by Hollister-Stier personnel shall be the
responsibility of Hollister-Stier. Hollister-Stier, at its
total expense, will be responsible for replacing a Batch of
Intermediate or Product that is rejected because of such
deviations or errors by Hollister-Stier personnel.


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7.10 Hollister-Stier is responsible for formally investigating and
documenting any failures to follow or deviations from
Manufacturing Procedures or analytical testing procedures, any
test or in-process test which fails to meet Specifications or
any failure of the equipment, utilities, facility or other
systems used to manufacture the Intermediate(s) and
Product(s), in accordance with Hollister-Stier's procedures
and cGMP Regulations. Such investigation shall be completed,
documented and provided to Client in a timely manner.

7.11 Non-Conforming Intermediate or Product: Client from time to
time may conduct verification testing of Batches or Lots of
Intermediate(s) or Product(s) in accordance with the
Specifications ("Conformance Verification Testing"). Such
Conformance Verification Testing shall be initiated promptly
upon receipt of any Batches or Lots and shall be completed
within thirty (30) days. Client shall have the right to
reject, and to revoke any acceptances for, any Batches or Lots
of Intermediate(s) and all Batches or Lots of Product(s) made
from such Batches or Lots of Intermediate(s) that fail to meet
Specifications (including stability where a stability
specification is established and failure is due to a
manufacturing deficiency) and other material requirements
under this Agreement (including Intermediate or Product
determined not to have been manufactured in accordance with
this Agreement).

7.11.1 All claims of non-conformance arising from the
Conformance Verification Testing, except for good
cause, shall be deemed waived unless made by the
Client in writing and received by Hollister-Stier
within forty-five (45) days of Client's receipt of
the documentation specified in Sections 7.2 and 7.3.

7.11.2 If, after its own analysis of the Intermediate or
Product Batch(es) or Lot(s), or other information,
Hollister-Stier confirms the non-conformity,
Hollister-Stier shall manufacture and ship a
replacement Batch(es) or Lot(s) for the
non-conforming Batch(es) or Lot(s) or shipment at its
expense.

7.11.3 If, after its own analysis of the Intermediate or
Product Batch(es) or Lot(s), Hollister-Stier does not
confirm the non-conformity, the Parties shall in good
faith agree to retest the Batch(es) or Lot(s) or
otherwise in good faith attempt to agree on a
resolution of the issue. In the event that the
Parties cannot resolve the issue, the Parties shall
submit the disputed Batch(es) or Lot(s) to a mutually
agreed independent testing laboratory or other expert
for testing and review. That laboratory's or expert's
finding shall be binding on the Parties, absent
manifest error.

7.11.4 Hollister-Stier shall bear such expense of the
independent laboratory testing or other expert review
if testing or expert review confirms the
non-conformity of the Batch(es) or Lot(s) with
applicable Specifications, and Client shall bear such
expenses otherwise.

7.11.5 In the event that any Batch(es) or Lot(s) is
ultimately agreed or determined to not meet the
Specifications, Hollister-Stier shall at Client's
election use its commercially reasonable best efforts
to promptly (but no longer than within sixty (60)
days from the date of such agreement or
determination) manufacture and ship a replacement
Batch(es) or Lot(s) for the non-conforming Batch(es)
or Lot(s) at its expense.

7.11.6 Client shall return, or cause its designee to return,
any rejected or revoked Batch(es) or Lot(s) to
Hollister-Stier if so instructed by Hollister-Stier,
at Hollister-Stier's expense.

7.11.7 In the event that any Batch(es) or Lot(s) are
ultimately agreed or found to meet the Specifications
and other applicable requirements, Client shall
accept and pay for the Batch(es) or Lot(s).



ARTICLE 8




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CONFIDENTIALITY

8. In carrying out Product Development Program(s) it is recognized by
Hollister-Stier and Client that each may have to disclose to the other
Confidential Information. Since both parties wish to assume that
Confidential Information is properly protected they hereby agree as
follows:

8.1 Form of Disclosure: Confidential Information may be disclosed
in either oral, written or electronic form.

8.2 Obligations: The receiving Party agrees to hold Confidential
Information in strict confidence and to use it only for the
purposes under this Agreement. The receiving Party agrees not
to disclose the Confidential Information to any Third Party
unless prior written authorization has been obtained from the
disclosing Party. These obligations shall not apply to:

8.2.1 Information which, at the time of disclosure, is in
the public domain.

8.2.2 Information which, after disclosure, becomes part of
the public domain by publication or otherwise, except
by breach of this Agreement by the receiving Party.

8.2.3 Information which the receiving Party can demonstrate
by its written records was in the receiving Party's
possession at the time of the disclosure, and which
was not acquired directly or indirectly, from the
disclosing party.

8.2.4 Information which is lawfully disclosed to the
receiving Party on a non-confidential basis by a
Third Party who is not obligated to the Disclosing
Party or any other Third Party to retain such
information in confidence.

8.2.5 Information which results from research and
development by the receiving Party independent of
such disclosure as shown by competent evidence.

8.2.6 Information which is required to be disclosed by
legal process; provided, in each case the Party so
disclosing such Information timely informs the other
Party and used its best efforts to limit the
disclosure and maintain confidentiality to the extent
possible and permits the other Party to attempt by
appropriate legal means to limit such disclosure.



ARTICLE 9

HOLLISTER-STIER'S
REPRESENTATIONS, WARRANTIES AND COVENANTS

9. Hollister-Stier represents, warrants and covenants to Client as
follows:

9.1 Commercially Reasonable Best Efforts: Hollister-Stier shall
use its commercially reasonable best efforts to perform the
services contemplated hereunder in accordance with the Product
Development Programs, it being recognized, however, that since
the services are of a development nature, there can be no
guarantee that the Product Development Programs will be
successfully completed, or successfully completed within the
contemplated time frame, despite Hollister-Stier's
commercially reasonable best efforts to do so. However,
following the successful completion of the required media fill
Batches, Hollister-Stier will be responsible for manufacturing
the Intermediate(s) and Product(s) to Specifications agreed
upon by the Parties in writing. If Hollister-Stier is, for any
reason, unable to meet any contemplated time frame in a
Product Development Program, it shall immediately notify
Client of same, as provided in Article

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2. Hollister-Stier shall negotiate with Client a mutually
acceptable date of completion for the respective stage of the
Product Development Program, and Hollister-Stier shall use its
commercially reasonable best efforts to complete the Product
Development Program within such newly agreed upon time.


9.2 Adherence to Specifications: Hollister-Stier shall, subject to
Section 9.1 hereof, produce the Intermediate(s) and Product(s)
in accordance with the Specifications for the Intermediates(s)
and Product(s).

9.3 Qualified Personnel: Hollister-Stier shall engage and employ,
train and supervise professionally qualified personnel to
safely and lawfully perform the services contemplated
hereunder.

9.4 Access: Client at its discretion may have its representatives
observe the performance of the Product Development Programs
under this Agreement, including any equipment, facility or
analytical qualification; manufacturing, inspection and bulk
packaging activities to provide appropriate technical support
and to ensure compliance with All Applicable Laws and
Regulations. Hollister-Stier, at its cost, will provide
Client's representatives carrying out such observations with
reasonable office space and telephone access. This access
shall not be used to conduct general GMP compliance audits
which are subject to the restrictions of Section 9.5.

9.5 Audit and Inspection by Client: Hollister-Stier shall allow
Client or its authorized representatives access, during normal
business hours, to Hollister-Stier facilities for the purpose
of performing quality audits. Hollister-Stier shall provide
Client with all necessary assistance, including access to
relevant documents and reports, during such audits. Client may
audit Hollister-Stier's facilities and quality programs for
the Intermediate(s) and Product(s) one time per year. Client
shall limit the number of auditors to a maximum of three (3)
individuals and the duration of the audit to three (3) days.

9.6 General: Hollister-Stier shall exercise all due and reasonable
care with regard to all raw materials, components, equipment,
Intermediate(s) and Product(s) in its custody relating to the
Product Development Program(s). Hollister-Stier warrants that
it has the capacity, cGMP facilities, equipment, personnel,
skill, know-how, permits, approvals, and licenses to perform
the Product Development Program(s).

9.7 Debarment: Hollister-Stier represents and warrants to Client
that it has neither been debarred nor subject to debarment and
that it does not and will not use in any capacity in
connection with any Product Development Program any person who
has been debarred pursuant to Section 306 of the Act or who is
the subject of a conviction (or an investigation or
prosecution for an offense) described in this section.
Hollister-Stier agrees to inform Client immediately in writing
if it or any person who is performing a Product Development
Program hereunder on behalf of Hollister-Stier is debarred or
is the subject of a conviction described in Section 306 of the
Act or if any action, suit, claim, investigation or proceeding
is pending or, to the knowledge of Hollister-Stier, threatened
relating to debarment of Hollister-Stier or any person
performing the Product Development Program on behalf of
Hollister-Stier hereunder.

9.8 Disclaimer: THE FOREGOING EXPRESS WARRANTIES, TOGETHER WITH
THOSE SETFORTH IN ARTICLE 10, ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION,
ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR AGAINST INFRINGEMENTS, AND ALL OTHER WARRANTIES
ARE HEREBY DISCLAIMED AND EXCLUDED BY HOLLISTER-STIER.



ARTICLE 10


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GENERAL REPRESENTATIONS AND WARRANTIES

10. Each Party represents, warrants and covenants to the other as follows:

10.1. Power and Authorization: It has all requisite power and
authority (corporate and otherwise) to enter into this
Agreement and has duly authorized by all necessary action the
execution and delivery hereof by the officer or individual
whose name is signed on its behalf below.

10.2. No Conflict: Its execution and delivery of this Agreement and
the performance of its obligations hereunder do not and will
not conflict with or result in a breach of or a default under
its organizational instruments or any other agreement,
instrument, order, law or regulation applicable to it or by
which it may be bound.

10.3. Enforceability: This Agreement has been duly and validly
executed and delivered by it and constitutes its valid and
legally binding obligation, enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy,
insolvency or other laws of general application relating to or
affecting the enforcement of creditor's rights and except as
enforcement is subject to general equitable principles.

10.4. Compliance with Applicable Laws: Each Party shall comply with
All Applicable Laws and Regulations in connection with the
performance of this Agreement. Hollister-Stier acknowledges
and agrees that, upon the written request of Client, it shall
comply with the laws and regulations of any foreign
governmental authorities as set forth in the written request.

10.5. Financial Condition: It has delivered to the other Party
financial statements containing a balance sheet as of June 30,
2001 and related statements of operation and cash flows for
the six-month period then ended. Such financial statements
have been prepared in accordance with generally accepted
accounting principals (except that such statements do not
contain footnotes and are subject to year end adjustments on
audit which shall not in the aggregate be material) and fairly
present the financial condition of such Party as of such date.
In addition, it has disclosed to the other Party all facts
relating to its financial conditions and prospects that are
material to an understanding of its financial condition and
prospects.

10.6. Notice of Potential Liability: Each Party shall notify the
other in writing as soon as reasonably possible following any
event, including the receipt of any notice, warning, citation,
finding, report or service of process or the occurrence of any
release, spill, upset or discharge of hazardous wastes or
substances, related to a Product Development Program that
could reasonably be expected to give rise to liability on the
part of the other Party under any law, rule or regulation
prescribed by a public authority or otherwise which could
reasonably be expected to have a material adverse effect on
the Party's business or financial condition.

10.7. Intellectual Property: Each Party represents and warrants to
the other that it owns/or has full legal rights to use its
respective intellectual property as described herein in
conjunction with and to the extent required to perform all
work required under this Agreement.



ARTICLE 11

INDEMNIFICATION

11. The Parties agree to the following Indemnification clauses:


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11.1. Indemnification by Client: Client shall indemnify, defend and
hold Hollister-Stier, its Affiliates and their respective
directors, officers, employees, agents, successors and assigns
harmless from and against any damages, judgements, claims,
suits, actions, liabilities, costs and expenses (including but
not limited to, reasonable attorneys' fees) resulting from any
Third Party claims or suits arising solely out of (1) the use,
handling, distribution, marketing or sale of the Product(s)
(except to the extent caused by Hollister-Stier's negligent
acts or omissions or willful misconduct in its performance of
the Product Development Program(s) or the manufacture or bulk
packaging of the Intermediate(s) and Product(s), (2) Client's
uncured material breach of any of its warranties or
representations hereunder, or (3) Client's grossly negligent
acts or omissions or willful misconduct.

11.2. Indemnification by Hollister-Stier: Except as otherwise
provided in Section 11.1 above, Hollister-Stier shall
indemnify, defend and hold Client, its Affiliates and their
respective directors, officers, employees, agents, successors
and assigns harmless from and against any damages, judgements,
claims, suits, actions, liabilities, costs and expenses
(including but not limited to, reasonable attorneys' fees)
resulting from any Third Party claims arising solely out of
(1) Hollister-Stier's material breach of any of its warranties
or representations hereunder or (2) Hollister-Stier's grossly
negligent acts or omissions or willful misconduct in its
performance of the Product Development Program(s) or the
manufacture or bulk packaging of the Intermediate(s) and
Product(s).




11.3. Indemnification Procedures:

11.3.1. Any Party hereto seeking indemnification hereunder
(in this context the "Indemnified Party") shall
notify the other Party (in this context the
"Indemnifying Party") in writing reasonably promptly
after the assertion against the Indemnified Party any
Claim by a Third Party (a "Third Party Claim") in
respect of which the Indemnified Party intends to
base a Claim for indemnification hereunder.

11.3.2. (1) The Indemnifying Party shall have the right, upon
written notice given to the Indemnified Party within
thirty (30) days after receipt of the notice from the
Indemnified Party of any Third Party Claim, to assume
the defense and handling of such Third Party Claim,
at the Indemnifying Party's sole expense, in which
case the provisions of Section 11.3.2 (2) below shall
govern. (2) The Indemnifying Party shall select
counsel reasonably acceptable to the Indemnified
Party in connection with conducting the defense and
handling of such Third Party Claim, and the
Indemnifying Party shall defend or handle the same in
consultation with the Indemnified Party, and shall
keep the Indemnified Party appraised of the status of
the Third Party Claim. The Indemnifying Party shall
not, without the prior written consent of the
Indemnified Party, which consent will not be
unreasonably withheld, agree to a settlement of any
Third Party Claim that could directly or indirectly
lead to liability or create any financial or other
obligation on the part of the Indemnified Party for
which the Indemnified Party is not entitled to
indemnification hereunder. The Indemnified Party
shall cooperate with the Indemnifying Party and shall
be entitled to participate in the defense or handling
of such Third Party Claim with its own counsel at its
own expense.

11.3.3. (1) If the Indemnifying Party does not give written
notice to the Indemnified Party, within thirty (30)
days after receipt of the notice from the Indemnified
Party of any Third Party Claim, of the Indemnifying
Party's election to assume the defense or handling of
such Third Party Claim, the provisions of Section
11.3.3 (2) below shall govern. (2) The Indemnified
Party may, at the Indemnifying Party's expense,
select counsel in connection with conducting the
defense or handling of such Third Party Claim and
defend or handle such Third Party Claim in such
manner as it may deem appropriate, provided, however,
that the Indemnified Party shall keep the
Indemnifying Party timely appraised of the status of


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such Third Party Claim and shall not settle such
Third Party Claim without the prior written consent
of the Indemnifying Party, which consent shall not be
unreasonably withheld. If the Indemnified Party
defends or handles such Third Party Claim, the
Indemnifying Party shall cooperate with the
Indemnified Party and shall be entitled to
participate in the defense or handling of such Third
Party Claim with its own counsel and at its own
expense.

11.3.4. If the Indemnified Party intends to seek
indemnification hereunder, other than for a Third
Party Claim, then it shall notify the Indemnifying
Party in writing within three months after its
discovery of facts upon which it intends to base its
Claim for indemnification hereunder; provided,
however, the failure to timely give such notice shall
limit the Indemnifying Party's liability for
indemnification only to the extent the Indemnifying
Party's defense of such matter has been prejudiced.

11.3.5. Except with regard to fraud, the indemnification
remedies in this Article 11, enforced in accordance
with Section 13.3, shall constitute the sole and
exclusive remedies of the Parties with respect to any
matters arising under or relating to this Agreement.

11.4. Survival of Indemnification Obligations: The provisions of
this Article 11 shall survive the expiration or termination of
this Agreement for a period of five (5) years.

11.5. Limitation of Liability and Claims: Hollister-Stier shall not
be liable to Client for indirect, special, punitive, or
consequential damages of any kind, including without
limitation lost profits or loss of good will or otherwise.
Neither Party's liability to the other under this Agreement
shall exceed five million dollars ($5,000,000.00).

11.6. Insurance: Both Client and Hollister-Stier shall obtain and
maintain, either itself or through one or more of its
affiliates, with reputable carriers, product liability
insurance with limits of not less than $10,000,000 per
claim/annual aggregate by no later than the scheduled
manufacturing date for the first CTM Batch of Product(s)
delivered as part of the first Product Development Program(s)
conducted under this Agreement. Each Party hereto shall have
its insurance carrier(s) furnish the other Party hereto with a
certificate that such insurance is in force. In the event of
any proposed cancellation, non-renewal, or material adverse
change in such coverage, the other Party hereto shall be given
at least thirty (30) days advance written notice thereof.



ARTICLE 12

TERM AND TERMINATION

12. The Parties agree to the following Term and Termination clauses:

12.1. Term: This Agreement shall remain in full force and effect to
and including November 30, 2005 unless and until terminated in
accordance with the provisions of this Article or both Parties
to this Agreement agree in writing to extend the Term.

12.2. Termination by Mutual Agreement: This Agreement may be
terminated, on a Product Development Program by Product
Development Program basis or in its entirety, at any time upon
mutual written agreement between the Parties.

12.3. Termination for Default: This Agreement may be terminated by
either Party in the event of material breach or default by the
other Party of the terms and conditions hereof; provided,
however, the other Party shall first give to the defaulting
Party written notice of the proposed termination or
cancellation of this Agreement, specifying the grounds
therefor. Upon receipt of such notice, with respect to such
defaults as are capable of being cured, the defaulting Party
shall

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have sixty (60) days to respond by curing such default (or ten
(10) days with respect to a failure by Client to pay any
amounts hereunder when due, with the exception of contested
amounts for which the Client has provided notice to
Hollister-Stier as provided in Article 4 hereof. If the
breaching Party does not respond or fails to work diligently
and to cure such breach within the additional time set forth
above, then the other Party may either suspend the Agreement
indefinitely or terminate the Agreement. Termination of this
Agreement pursuant to this Section 12.3 shall not affect any
other rights or remedies which may be available to the
nondefaulting Party.

12.4. Bankruptcy; Insolvency:

12.4.1. Either Party may terminate this Agreement upon the
occurrence of any of the following with respect to
the other Party:

12.4.1.1. The entry of a decree or order for relief
by a court having jurisdiction in the
premises in respect of such other Party in
an Involuntary case under the Federal
Bankruptcy Code, as now constituted or
hereafter amended, or any other applicable
federal or state insolvency or other similar
law and the continuance of any such decree
or order unstayed and in effect for a period
of sixty (60) consecutive days;

12.4.1.2. The filing by such other Party of a
petition for relief under the Federal
Bankruptcy Code, as now constituted or
hereafter amended, or by any other
applicable federal or state insolvency or
other similar law, or;

12.4.1.3. The failure of such other Party to pay its
debts when due.

12.4.2. Hollister-Stier shall notify Client of its intent to
file for protection under the Federal Bankruptcy Code
as soon as such a determination is made.
Hollister-Stier will segregate all Client-related
documents, including, but not limited to,
manufacturing and analytical equipment protocols,
qualifications, procedures, methods, calibrations
reports and/or certificates, Specifications,
Manufacturing Procedures, Intermediate and Product
analytical data, Hollister-Stier facility
documentation in support of Product Development
Programs; all Client provided manufacturing and
analytical testing equipment, including any equipment
purchased by Client for Hollister-Stier in
conjunction with Product Development Programs; all
unconsumed raw materials provided by Client to
Hollister-Stier in conjunction with Product
Development Programs; and all Intermediate and
Product Batches, including stability samples, that
were produced in accordance with Product Development
Programs. Hollister-Stier will provide Client
complete and total access to these materials at
Client's request.

12.5. Termination Without Cause: Client may terminate this Agreement
without cause on ninety (90) days prior written notice to
Hollister-Stier.

12.6. Rights and Duties Upon Termination

12.6.1. Upon termination of this Agreement Hollister-Stier
shall, promptly as practicable, cease work on Product
Development Programs and turn over to Client all
results, documentation and information obtained
during Product Development Programs (whether in
written or electronic form) which are then in
Hollister-Stier's possession and which are the
property of Client in accordance with this Agreement.

12.6.2. Upon termination of this Agreement Client shall
remain liable for all fees, expenses and
uncancellable obligations incurred hereunder through
the date of such termination, less any cost or
expenses incurred by the termination to move the
Product Development Programs to another facility.


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12.6.3. If this Agreement is terminated during the
construction phase of the facility renovations,
Client will be responsible for costs associated with
completing the facility renovations (i.e. Capital
equipment and facility renovation costs) in
accordance with Product Development Program Documents
annexed to this Agreement.

12.6.4. Upon expiration or termination of this Agreement,
which ever is sooner, the Parties shall promptly
agree on a procedure which allows Client to possess
any equipment located at Hollister-Stier's facility
that is owned by Client (with Client paying all
reasonable costs to access and remove such equipment,
including the cost of removing special plumbing or
electrical connections added in connection with the
installation of such equipment).

12.6.5. Upon termination, all ownership and rights to
inventions, and technology shall be as set forth in
Section 2.11 hereto. The provisions of Article1,
Article 2 (Sections 2.7, 2.8, 2.9 and 2.10 only)
Article 3 (Section 3.2.2 only), Article 8, Article 9
(Section 9.5 only) and Articles 11-15 hereof shall
survive any expiration or terminations of this
Agreement for any reason.



ARTICLE 13

FORCE MAJEURE/DISPUTE RESOLUTION

13. The Parties agree to the following Force Majeure/Dispute resolution
clauses:

13.1. Effect of Force Majeure: Neither Party shall be held liable or
responsible for any loss or damages resulting from any failure
or delay in its performance due hereunder (other than payment
of money) caused by force majeure. As used herein, force
majeure shall be deemed to include any condition beyond the
reasonable control of the affected Party including, without
limitation, Acts of God, strikes or other labor disputes, war,
riot, earthquake, tornado, hurricane, fire, civil disorder,
explosion, accident, flood, sabotage, lack of or inability to
obtain adequate fuel, power, materials, labor, containers,
transportation, supplies or equipment, compliance with
governmental requests, laws, rules, regulations, orders or
actions; inability despite good faith efforts to renew
operating permits or licenses from local, state or federal
governmental authorities; breakage or failure of machinery or
apparatus; national defense requirements; or supplier strike,
lockout or injunction. Hollister-Stier shall notify Client of
any foreseeable force majeure events, including, but not
limited to foreseeable strikes and other labor disputes,
shipping interruptions or problems, and inability to procure
supplies necessary for Hollister-Stier to perform any of its
obligations under this Agreement.

13.2. Notice of Force Majeure: In the event either Party is delayed
or rendered unable to perform due to force majeure, the
affected Party shall give notice of the same and its expected
duration to the other Party promptly after the occurrence of
the cause relied upon, and upon the giving of such notice the
obligations of the Party giving the notice will be suspended
during the continuance of the force majeure; provided,
however, such Party shall take commercially reasonable steps
to remedy or mitigate the force majeure with all reasonable
dispatch. The requirement that force majeure be remedied with
all reasonable dispatch shall not require the settlement of
strikes or labor controversies by acceding to the demands of
the opposing party.

13.3. Dispute Resolution: The Parties hereto agree to perform the
terms of this Agreement in good faith, and to attempt to
resolve any controversy, dispute or claim arising hereunder in
good faith. Any dispute regarding the validity, construction,
interpretation, or performance of this Agreement (other than
provisions, hereof relating to any intellectual property,
rights, or the confidentiality obligations contained in
Article 8 hereof) shall be (1) first attempted to be resolved
between the CEO/President of each Party and failing that (2)
submitted to binding arbitration in Boston, Massachusetts,
U.S.A. to be conducted in accordance with the Arbitration
Rules of the American

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Arbitration Association ("AAA"); provided, however, that
nothing in this Section 13.3 shall be construed to preclude
either Party from seeking provisional remedies, including, but
not limited to, temporary restraining orders and preliminary
injunctions, from any court of competent jurisdiction, in
order to protect its rights pending arbitration, but such
preliminary relief shall not be sought as a means of avoiding
arbitration. Any arbitration hereunder shall be submitted to
an arbitration tribunal made up of three (3) members, one of
whom shall be selected by Client, one of whom shall be
selected by Hollister-Stier, and one of whom shall be selected
by the other two arbitrators. All arbitration proceedings
shall be conducted in English. The order or award of the
arbitrators shall be final and may be enforced in any court of
competent jurisdiction. The prevailing Party in any legal or
arbitration action brought by one Party against the other
shall be entitled, in addition to any other rights and
remedies it may have, to reimbursement for its expenses
incurred thereby, including court cost and reasonable
attorney's fees. The Parties shall have the right of limited
prehearing discovery, including:

13.3.1. exchange of witness lists,
13.3.2. exchange of documentary evidence and reasonably
related documents,
13.3.3. written interrogations, and
13.3.4. subject to reasonable discretion of the arbitrators
and upon good cause shown depositions under oath of
any witnesses who are to be called to testify at the
arbitration hearing.

13.4. As soon as the discovery is concluded, the arbitrators shall
hold a hearing in accordance with the aforesaid AAA rules.



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ARTICLE 14

NOTICES

14. All notices provided herein shall be in writing and shall be deemed to be
delivered when deposited in the United States mail, postage prepaid, or
hand-delivered to an authorized representative of the Party to whom notice
is directed, or sent by telex, facsimile, telegram or cable, charges
prepaid, to the address of the other Party designated below:


Client Hollister-Stier
------ ---------------
Acusphere, Inc. Hollister-Stier Laboratories LLC
31 Sidney Street 3525 North Regal Street
Cambridge, MA 02139 Spokane, WA 99207
Attention: Thomas M. Hanlon III Attention: Anthony D. Bonanzino
FAX: (617) 577-0233 FAX: (509) 482-3543




The addresses and person provided above may be changed by either Party
by providing the other Party with written notice of such change.




ARTICLE 15

MISCELLANEOUS

15. The Parties agree to the following miscellaneous clauses:

15.1. Entire Agreement: This Agreement and attachments contain the
entire understanding between the Parties with respect to the
subject matter hereof, and may be modified, only by a written
instrument duly executed by each Party's authorized
representative.

15.2. Independent Contractor: Client will not have the right to
direct or control the activities of Hollister-Stier performing
the service provided herein, and Hollister-Stier shall perform
services hereunder only as an independent contractor, and
nothing herein shall be construed to be inconsistent with
relationship or status. Under no circumstances shall
Hollister-Stier be considered to be an employee or agent of
Client, nor shall Client be liable in any way for employment
activities or employees of Hollister-Stier.

15.3. Publicity: Except as explicitly set forth below in Section
15.4, any press release, publicity or other form of public
written disclosure related to this Agreement prepared by one
Party shall be submitted to the other party prior to release
for written approval, which approval shall not be unreasonably
withheld or delayed by such other Party.

15.4. Use of Party's Name: Except as expressly provided or
contemplated hereunder and except as otherwise required by
applicable law, no right is granted pursuant to this Agreement
to either Party to use in any manner the trademarks or name of
the other Party, or any other trade name, service mark, or
trademark owned by or licensed to the other Party in
connection with the performance of the Agreement.
Notwithstanding the above, the Parties shall be permitted to
use the other Party's name and marks in connection with
general advertising and promotional activities and, to the
extent required by applicable law, the Parties shall be
permitted to use the other Party's name and disclose the
existence and terms of this Agreement in connection with


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Confidential


required public regulatory filings, public securities filings
and private placement memoranda and documentation, using
reasonable commercial efforts to protect the confidentiality
of the terms of this Agreement.

15.5. Severability: Each Party hereby expressly agrees that it has
no intention to violate any public policy, statutory or common
laws, rules, regulations, treaty or decision of any government
agency or executive body of any country or community or
association of countries; that if any word, sentence,
paragraph, clause or combination thereof in this Agreement is
found by a court or executive body with judicial powers having
jurisdiction other this Agreement or either Party hereto, in a
final unappealed order, to be in violation of any such
provisions in any country or community or association of
countries, such words, sentences, paragraphs, clauses or
combination shall be inoperative in such country or community
or association of countries and the remainder of this
Agreement shall remain binding upon the Parties, so long as
enforcement of the remainder does not violate the Parties'
overall intentions in this transaction.

15.6. Assignment; Subcontractors: This Agreement may not be assigned
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

15.6.1. in connection with the transfer or sale of all or
substantially all of the assets of such Party or the
line of business of which this Agreement forms a
part,

15.6.2. in the event of a merger or consolidation of a Party
hereto with another company or to any Affiliate of
the assigning Party fully capable of performing
hereunder.

Any purported assignment in violation of the preceding shall
be void. Any permitted assignee shall assume all obligations
of its assignor under this Agreement. No assignment shall
relieve either Party of responsibility for the performance of
any obligation which accrued prior to the effective date of
such assignment.

15.7. Governing Law: This Agreement shall be governed by and
construed in accordance with the laws of the state of
Washington, irrespective of any conflicts of law rule which
may direct or refer such determination of applicable law to
any other state; and if this Agreement were performed wholly
within the state of Washington.

15.8. Headings: Paragraph headings and captions used herein are for
convenience of reference only and shall not be used in the
construction or interpretation of this Agreement.

15.9. Continuing Obligations: Termination, assignment or expiration
of this Agreement shall not relieve either Party from full
performance of any obligations incurred prior thereto.

15.10. Waiver: Neither Party's waiver of any breach or failure to
enforce any of the terms and conditions of this Agreement, at
any time, shall in any way affect, limit or wave such Party's
right thereafter to enforce and compel strict compliance with
every term and condition of this Agreement.

15.11. Construction: This Agreement has been jointly prepared on the
basis of the mutual understanding of the Parties and shall not
be construed against either Party by reason of such Party's
being the drafter hereof or thereof.

15.12. Exhibits, Schedules and Attachments: Any and all exhibits,
schedules and attachments referred to herein form an integral
part of this Agreement and are incorporated into this
Agreement by such reference.

15.13. Non-Competition: During the term of this Agreement and for two
(2) years thereafter, Hollister-Stier agrees that it shall not
manufacture or agree to manufacture any material using


21

Confidential


microparticle technology for use as or in connection with any
products that competes with the Product(s) that are the
subject of the Product Development Programs under this
Agreement. Further, Hollister-Stier shall not use any
inventions, processes, know-how, trade secrets, improvements,
other intellectual properties and other assets, including but
not limited to procedures and techniques, computer technical
expertise, software, and certain technical expertise and
conceptual expertise relating to the Intermediate(s) and
Product(s) which have been independently developed by Client
or its Affiliates to assist any Third Party in connection with
products that competes with the Product(s) that are the
subject of the Product Development Programs under this
Agreement.







IN WITNESS WHEREOF, this Agreement has been executed by the
Parties as of the day and year first written above.


ACUSPHERE, INC. HOLLISTER-STIER LABORATORIES LLC

/s/ Howard Bernstein /s/ A. Bonanzino
------------------------- -------------------------
Signature Signature


Howard Bernstein A. Bonanzino
------------------------- -------------------------
Name Name


Sr. VP President and CEO
------------------------- -------------------------
Title Title



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EXHIBIT A
AI-850 PRODUCT DEVELOPMENT PROGRAM - PHASE 1 CTM

The initial Product Development Program for AI-850 is based on the assumptions noted in Hollister-Stier's AI-850 quotation dated November 9, 2001 and appended hereto as Exhibit A(1).

Hollister-Stier and Client have identified in this Exhibit A certain manufacturing activities to be provided by Hollister-Stier in support of this initial Product Development Program for AI-850 and various assumptions associated with this initial program.


PROGRAM ACTIVITIES

1. Analytical

o Draft release Specifications for API, raw materials, and bulk
packaging components for Client approval.

o Conduct API, raw material, and bulk packaging component
release testing; execute API ID test method (HPLC) transfer
protocol from Client.

o Draft equipment procedure documents using Client supplied
analytical method and equipment protocols and procedures for
Client approval.

o Conduct Sterility and Endotoxin (LAL) testing of the Product.

o Supply Certificate of Testing for Sterility and Endotoxin
testing of Product to Client.

o Qualify Endotoxin (LAL) method on one (1) batch of AI-850.

2. Batch Precursor Work

o Conduct evaluation/verification of Client's vial and stopper.

o Calibrate Client supplied equipment.

o Draft equipment procedure documents using Client supplied
protocols and procedures for Client approval.

o Execute appropriate qualification or validation protocols on
Hollister-Stier production equipment (i.e., autoclave load
patterns) for use with Client supplied equipment and
components.

o Draft Steam-In-Place (SIP) protocols for Client supplied
equipment for Client approval.

o Execute Steam-In-Place (SIP) protocols for Client supplied
equipment.

o Draft Steam-In-Place (SIP) reports for Client approval.

o Review Client supplied equipment cleaning procedures.

o Execute minimum number of development batches prior to aseptic
process validation batches.

o Execute Process Simulation (Intermediate) and Media Fill
(Product) batches (aseptic process validation).




A-1

Confidential


o Create/Update environmental monitoring procedures for
Intermediate and Product manufacturing.

o Bulk ship Product samples to Client for Product release
testing and Product to Client designated locations, using
Hollister-Stier or Client's bulk shipping container(s) as
mutually agreed upon by the Parties using Client approved
temperature monitoring devices.

3. Batch Activities

Draft Master Manufacturing Procedures including Aseptic Process
Validation Manufacturing Procedures using Client supplied manufacturing
and aseptic process validation manufacturing batch records for Client
approval. (Labor associated with the manufacturing, inspection, and
packing of the (Intermediate) and Product is included in the per batch
cost.)

4. Post-Manufacturing Activities

Preparation of Product Development Program Summary Report following
completion of each manufacturing campaign. The content of the Product
Development Program Summary Report will be mutually agreed upon in
writing by the Parties before execution.

5. The anticipated number of batches and batch costs are stated below:


NUMBER BATCH TYPE BATCH DESCRIPTION PURPOSE PRICE/BATCH TOTAL PRICE
-------------- ----------------------------------- ---------------------------------- --------------- ------------
1* Development Simulation $[***] $[***]
-------------- ----------------------------------- ---------------------------------- --------------- ------------
3* Process Simulation/Media Fills Aseptic Process Validation $[***] [***]
-------------- ----------------------------------- ---------------------------------- --------------- ------------
6** CTM Clinical Trial Material Batches $[***] [***]
-------------- ----------------------------------- ---------------------------------- --------------- ------------
TOTAL BATCH COST $500,000
-------------- ----------------------------------- ---------------------------------- --------------- ------------



* Includes costs for all raw materials and components.

** Includes costs for all raw materials and components, with the
exception of the API which will be supplied by Client. The
batch cost also includes inspection and bulk packaging.

All Development (Simulation), Process Simulation/Media Fill and CTM
batches are comprised of one (1) Intermediate batch and one (1)
Product batch.


PROGRAM AND FACILITY COSTS

Hollister-Stier anticipates that the following program and capital
costs will be incurred in connection with this program:


DESCRIPTION PRICE
----------- ------


Various Validation and Documentation Cost $ [***]
Project Management One-Time Cost $ [***]
Utility Installation/Facility Modification Cost $ [***]
----------------------------------------------- --------
TOTAL ONE-TIME PROGRAM COST $462,500





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Hollister-Stier will invoice Client for such program and facility costs in
accordance with Section 2 of the Hollister-Stier quotation dated November
9, 2001 and Section 4.1 of this Agreement. Client will review and approve
the layout and installation of its equipment within Hollister-Stier's
facilities.



TECHNOLOGY TRANSFER ACTIVITIES

[***]


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