Respirics Product Development Agreement

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

Exhibit 10.11


PRODUCT DEVELOPMENT AGREEMENT


THIS PRODUCT DEVELOPMENT AGREEMENT is made and entered into this 24 th day of January, 2003 (the " Effective Date" ) between Respirics, Inc., a Delaware corporation having an address at 6008 Triangle Drive, Suite 101, Raleigh, NC 27617 (hereinafter referred to as " Respirics" ), and TEAMM Pharmaceuticals, a Delaware corporation and a wholly owned subsidiary of Accentia, Inc., a Florida corporation, having a primary address at 3000 Aerial Center Parkway, Suite 110, Morrisville, North Carolina 27560 (" TEAMM" ).


WITNESSETH

WHEREAS, Respirics has exclusive rights to, and is currently developing, the MD-Turbo99 inhaled drug delivery device, as described in the patents and patent applications listed on Exhibit A attached hereto and incorporated herein by reference (the " Product" );


WHEREAS, TEAMM wishes to fund the further development of the Product in order to enable its approval by the U.S. Food and Drug Administration (" FDA" ), in exchange for Respirics entering into an exclusive distribution arrangement with TEAMM for the sale of Products in the United States; and


WHEREAS, Respirics wishes to accept such funding on the terms described herein and enter into such an arrangement with TEAMM.


NOW, THEREFORE, for and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the parries as fellows:

1. Definitions

For purposes of this Agreement, and in addition to those terms defined elsewhere in this Agreement, the following terms shall have the meanings set forth below unless the context dictates otherwise.


1.1 " Confidential Information" means all proprietary or confidential information of Respirics, including all information concerning the Product, Product Improvements (as defined below), or Product Know-How (as defined below), any data derived there from, or any other trade secrets, information, technical data, know-how, and other confidential and proprietary information, including, but not limited to, that which relates to research, products, services, customers, markets, software, product plans, protocols, methods, developments, inventions (whether patentable or not), chemical compounds, mixtures, formulas, formulations, manufacturing processes, strategies, processes, designs, drawings, engineering information, marketing or finances. Specifically excluded from " Confidential Information" shall be information which: (a) is or becomes part of the public domain, through no fault of either party; (b) is lawfully disclosed without limitation to TEAMM by a third party who is not obligated to retain such information in confidence; or (c) is required to be disclosed by law, regulation, or order of a court or other tribunal of


competent jurisdiction, provided that TEAMM provides Respirics with (i) prior written notice of such proposed disclosure, in order to allow Respirics to take reasonable and lawful actions to avoid and/or minimize the extent of such disclosure and (ii) reasonable assistance in minimizing the extent of such disclosures, as requested by Respirics.

1 .2 " Product Improvements" shall mean any inventions, discoveries, information, knowledge, improvements or modifications related to the practice of the Product which come into the possession of Respirics during the term of this Agreement.

1.3 " Product Know-How" shall mean any research and development information, un-patented inventions, preclinical and/or clinical data, technical data, or knowledge related to the practice of the Product or Product Improvements in the possession of or which comes into the possession of Respirics.


1.4 For the purposes of this agreement, " TEAMM" shall mean Teamm Pharmaceuticals, Inc., a wholly-owned subsidiary of Accentia, Inc., a Florida corporation, Biotech Specialty Partners, IXC, or other subsidiaries or affiliates of Accentia, Inc.

2. Development Program .

2.1 Conduct of Research . Research shall use commercially reasonable efforts to perform the Development Program as set forth in Exhibit B, attached hereto and incorporated herein by reference (the " Development Program" ), according to the specifications and schedule set forth therein.


2.2 Compliance . The Development Program shall be performed by Respirics in accordance with all applicable laws, rules, and regulations.

2.3 Funding . TEAMM shall pay Respirics a total of $1,070,000, in accordance with the budget and payment schedule attached hereto as Exhibit C, attached hereto and incorporated herein by reference, for the conduct of the Development Program, provided that, in the event TEAMM fails to provide funding on the terms required by this Agreement, TEAMM shall, in addition to any other remedies available to Respirics, be liable to Respirics for any unpaid amounts. Payments are to be made within ten (10) days of receipt of an invoice for the initiation of each Phase of the Development Program (each, a " Phase" ) prior to the beginning of such Phase. Respirics shall not commence work on a particular Phase until the funding for such Phase has been received by Respirics, and Respirics shall not be responsible or liable for any delays in performing the Development Program caused by delays in payment by TEAMM.


2.4 Development Reporting . During the term of this Agreement, Respirics shall (i) provide monthly status reports via teleconference with TEAMM regarding Respirics'


progress with respect to the Development Program and (ii) furnish written reports regarding the progress of the Development Program within thirty (30) days of the completion of each Phase of the Development Program. A final written report setting forth the results of the Development Program shall be prepared by Respirics and submitted to TEAMM within thirty (30) days following the sooner of (i) completion of the Development Program or (ii) the effective date of any early termination pursuant to Section 5. In addition, during Phases TV and V of the Development Program, Respirics shall keep TEAMM periodically informed as to the progress of the regulatory approval process with respect to the Product, and, to the extent reasonably possible, shall provide TEAMM with advance notice of any pending approval in order to provide sufficient time to prepare for the initiation of TEAMM' s marketing and sales efforts pursuant to the Distribution Agreement (as defined below).

2.5 Intellectual Property Rights . All Products, Product Improvements, Product Know-How, all intellectual property rights related to Products, Product Improvements, and Product Know-How, regulatory approvals, and related rights and/or documentation shall be the property of Respirics. TEAMM shall not acquire any rights of any kind whatsoever with respect to the Product, Product Improvements, or Product Know- How. Respirics shall have complete, sole, and unfettered discretion regarding all matters related to the development, regulatory approval, and protection of all technology and rights thereto with respect to the Product and Product Improvements.


2.6 Warrants . If TEAMM provides all funding to Respirics required by this Agreement on or before the required due dates, but Respirics does not obtain final EDA clearance and approval of a 510(k) submission made with respect to the Product by January 24, 2005, Respirics shall issue TEAMM a warrant to purchase 164,249 shares of Common Stock of Respirics, exercisable at $1.00 per share, in the form set forth at Exhibit D hereof, provided that Respirics shall have no such obligation if (i) it has submitted a 510(k) application to FDA by July 24, 2004, (ii) such failure to obtain regulatory approval results from circumstances beyond Respirics' reasonable control, or (iii) TEAMM has not provided funding on or before each specified funding date.


If, prior to Respirics receiving all funding from TEAMM, as required by this Agreement, (i) the parties mutually agree to terminate this Agreement due to a reasonable expectation that final FDA clearance and approval of a 510(k) submission made with respect to the Product will not be obtained by January 24, 2005 or (ii) TEAMM terminates this Agreement pursuant to Section 5.2(c) in conjunction with a reasonable expectation that final FDA clearance and approval of a 510(k) submission made with respect to the Product will not be obtained by January 24, 2005, Respirics shall issue TEAMM a warrant to purchase shares of Common Stock of Respirics, exercisable at $1.00 per share, in the form set forth at Exhibit C hereof, in the amounts described in the table below, provided that Respirics shall have no such obligation if (i) such expectation results from circumstances beyond Respirics' reasonable control or (ii) TEAMM has not provided funding on or before each specified funding date.


Total Funding Provided to Respirics by TEAMM/Hopkins

Number of Shares For W ...