Exhibit 10.180

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION

**** DENOTES CONFIDENTIAL TREATMENT REQUESTED

COLLABORATION AND DEVELOPMENT AGREEMENT

Collaboration and Development Agreement (this “AGREEMENT”) made as of April 6,
2005, by and between VALERA PHARMACEUTICALS, INC., a Delaware corporation, with
its principal offices at 8 Clarke Drive, Cranbury, New Jersey 08512 (“Valera”)
and ALPEX PHARMA S.A., a Switzerland Societe Anonyme with its principal offices
at via Cantonale, Mezzovico-Vira, Switzerland (“Alpex”). Valera and Alpex are
sometimes referred to herein individually as a “Party” and collectively as the
“Parties”).

BACKGROUND

The following sets forth the background for this Agreement:

Alpex conducts pharmaceutical research and development and develops, acquires,
and licenses proprietary drug delivery technologies that have application to a
variety of pharmaceutical products, including fast-melt drug formulation
processes and techniques applicable to pharmaceutical compounds including the
Product (as hereinafter defined).

Valera, among other things, conducts marketing, sales, and distribution of
pharmaceutical products for the treatment of a variety of disorders.

Valera and Alpex share a mutual interest in a collaboration aimed at the further
development and commercialization of the Product incorporating Alpex
Intellectual Property (as hereinafter defined).

Valera and Alpex intend to utilize their capabilities, capitalize on each
other’s expertise, and put forth commercially reasonable efforts to achieve the
objectives of this collaboration.

NOW, THEREFORE, in consideration of the mutual promises, covenants, agreements,
representations and warranties hereinafter set forth, and intending to be
legally bound, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

“AB RATED EQUIVALENT” means a product which has been approved by the FDA with an
approved drug application that contains adequate scientific evidence
establishing the bioequivalence of the Product to be developed pursuant to this
Agreement to the applicable referenced brand product.

“AFFILIATE” means any entity that directly or indirectly Owns, is Owned by, or
is under common Ownership with a Party to this Agreement. “Owns” or “Ownership”
means direct or indirect possession of more than fifty percent (50%) of the
votes of holders of a corporation’s voting securities or a comparable equity
interest in any other type of entity.

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“AGENCY” means the FDA or any successor governmental regulatory authority
responsible for granting approvals for the sale of the Product in the Territory.

“AGREEMENT” means this Agreement, together with all exhibits and attachments.

“ALPEX IMPROVEMENTS” means any improvements to the Alpex Platform Patents and
Alpex Know-How, in each case owned by Alpex as of the date hereof, that are
conceived, created, developed, and/or otherwise invented by Alpex, by Valera, or
jointly by Alpex and Valera, under the Research and Development Plans pursuant
to this Agreement.

“ALPEX INTELLECTUAL PROPERTY” means the Alpex Patents, Alpex Improvements, and
the Alpex Know-how.

“ALPEX KNOW-HOW” means Technical Information owned, developed, or Controlled by
Alpex as of the date of this Agreement or during the Term of this Agreement,
including, without limitation, the Platform Technology, concerning the
development, manufacture, production, quality control, storage, distribution,
and sale of the Product.

“ALPEX PATENTS” means any valid claim of any Alpex Platform Patent or any
Patents and patent applications based on Alpex Improvements as set forth in
Annex C.

“ALPEX PLATFORM PATENTS” means Patents and applications therefor relating to the
Platform Technology issued based on a patent application previously or hereafter
filed by or on behalf of Alpex or subsequently assigned, licensed, or granted
to, or acquired by Alpex relating to the Platform Technology as set forth in
Annex C.

“ANDA” means an “abbreviated new drug application,” as defined in the United
States Food, Drug, and Cosmetic Act, as amended, and applicable FDA rules and
regulations.

“ARTICLE” means any article of this Agreement.

“BANKRUPTCY EVENT” has the meaning set forth in Section 13.5(b).

“BUSINESS DAY” means a day other than a Saturday, Sunday or day on which banking
institutions are not required to be open in New Jersey.

“CLINICAL STUDIES” means all the studies of the intake of the Product on humans
such as pivotal and non-pivotal bioequivalence or clinical studies performed by
Valera for any purpose including without limitation for purposes of obtaining
Regulatory Approval in the Territory, taste, and marketing of the Product.

“COMPETING PRODUCT” means in relation to a compound a bona fide ongoing project
being conducted or to be conducted by or on behalf of Alpex to apply the Alpex
Know-How to such compound: (a) pursuant to a written agreement between Alpex and
a Third Party, (b) which project has commenced

 

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and is in circumstances where Alpex is engaged in bona fide discussions with a
Third Party with a view to entering into such an agreement or an agreement for
further development or commercialization of such compound, or (c) which is being
conducted by Alpex or an Affiliate of Alpex with a bona fide view to
commercialization of such product by Alpex, its Affiliates, or other licensees.

“CONFIDENTIAL INFORMATION” has the meaning set forth in Section 10.1.

“CONTROL” means, with respect to an item of information or intellectual property
right, the possession of the ability to grant a license or sublicense as
provided for herein under such item or right without violating the terms of any
agreement or other arrangement, express or implied, with any Third Party.

“DEFAULT” means the material breach of a material term of this Agreement.

“DISCONTINUED PRODUCT” has the meaning set forth in Section 4.5(a).

“DISPUTE” has the meaning set forth in Section 14.3(b).

“FDA” means the United States Food and Drug Administration, or any successor
thereto.

“FISCAL QUARTER” means each period of three (3) months ending on
March 31, June 30, September 30, or December 31.

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, with respect to Valera, and in Switzerland, with
respect to Alpex.

“IMPROVEMENT” means, as to the Product, any improvement, line extension, or
modification (including in any such case whether to the same active ingredient
molecule comprising the Product or to the same active ingredient molecule in
conjunction with other active ingredient molecules comprising the Product in
such combination), superior development of the Product, and/or delivery
technologies (for example, faster onset of action), and other enhancements to
the Product or any non-AB Rated Equivalent of the Product.

“INDEMNIFIED PARTY” and “INDEMNIFYING PARTY” have the meanings set forth in
Section 12.2.

“LAUNCH” means the date of first commercial shipment of the Product by Valera,
its Affiliates, distributors, or sublicensees to Third Party customers in the
Territory after receipt of Regulatory Approval for the Product from the FDA or
other relevant Agency, as may be necessary in the Territory.

“LOSS” has the meaning set forth in Section 12.1.

“MANUFACTURING AND SUPPLY AGREEMENT” means an agreement to be entered into
between Valera and Alpex to set forth the circumstances, terms, and conditions
under which Alpex shall manufacture the Products for sale by Valera in the
Territory.

 

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“NDA” means a “new drug application,” as defined in the United States Food,
Drug, and Cosmetic Act, as amended (the “Act”), and applicable FDA rules and
regulations, including an application of the type described in Section 505(b)(2)
of the Act.

“NET SALES” means the total gross proceeds to Valera on sales to Third Parties
representing sales actually collected by Valera and its Affiliates of the
Product in the Territory, less deductions for the following to the extent
actually paid or allowed with respect to the Product sales:

(a) sales and excise taxes and duties (including import duties) paid or allowed
by a selling party and any other governmental charges imposed upon the
manufacture or sale of the Product, after giving effect to any rebates or
refunds relating to such taxes or duties received by Valera;

(b) rebates and chargebacks (including rebates to social and welfare systems)
actually paid;

(c) allowances, chargebacks, and credits to Third Parties on account of
rejected, damaged, outdated, returned, withdrawn, or recalled Product or on
account of retroactive price reductions affecting the Product; and

(d) amounts paid to Third Parties on account of rebate payments, including
Medicaid rebates.

Taxes, the legal incidence of which is on the purchaser and separately shown on
Valera’s or its Affiliates’ invoices, and transportation, insurance and postage
charges, if prepaid by Valera or its Affiliates and billed on Valera’s or its
Affiliates’ invoices as a separate item, shall not be considered a component of
Net Sales. Components of Net Sales shall be determined in the ordinary course of
business in accordance with Valera’s historical practice and using the accrual
method of accounting in accordance with GAAP.

The supply of the Product as commercial samples or for use in Clinical Studies
shall not be included within the computation of Net Sales. Where (i) the Product
is sold by Valera or an Affiliate as one of a number of items without a separate
price; or (ii) the consideration for the Product shall include any non-cash
element; or (iii) the Product is transferred by Valera or an Affiliate in any
manner other than an invoiced sale, the Net Sales price applicable to any such
transaction shall be deemed to be Valera’s average Net Sales price for the
applicable quantity of Products to the relevant class of customers at that time
in the Territory.

For purposes of Sections 4.5(d) and 6.5, Net Sales shall refer to sales by Alpex
to Third Parties.

“PATENTS” means all valid claims in all patent applications, and all continuing
and divisional patent applications, continuations-in-part and reissue
applications claiming priority to such applications and all patents issuing
therefrom in the Territory together with all re-examinations and foreign
equivalents of any of the foregoing.

“PLATFORM TECHNOLOGY” means the technology developed and owned by Alpex as of
the date hereof relating to fast-melt drug formulation processes and techniques.

 

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“PRODUCT” means the finished pharmaceutical form of Desmopressin Acetate
manufactured by Alpex for Valera.

“PRODUCT PATENT” means Patents and applications therefore issued based on a
patent application previously or hereafter filed relating to the Product,
including finished dosage form and its manufacture, or improvements thereof.

“PRODUCT SUCCESS CRITERIA” means, with respect to the Product, those criteria
agreed between the Parties and set forth in the Research and Development Plan.

“PRODUCT TERMINATION NOTICE” has the meaning set forth in Section 4.5(a).

“REGULATORY APPROVAL” means the Product license or marketing approval necessary
as a prerequisite for marketing the Product in a country of the Territory.

“RESEARCH AND DEVELOPMENT PLAN” means the development program for the Product as
provided in Section 4.1 hereof.

“SECTION” means any section of this Agreement.

“TECHNICAL INFORMATION” means all techniques and data and other know-how and
technical information, including inventions (including patentable inventions),
practices, methods, concepts, know-how, trade secrets, documents, computer data,
source code, apparatus, clinical and regulatory strategies and data, test data,
analytical and quality control data, manufacturing data or descriptions,
development information, drawings, specifications, designs, plans, proposals and
technical data and manuals and all other proprietary information concerning the
development, manufacture, production, quality control, storage, distribution and
sale of the Product.

“TERM” means the period of time specified in Section 2.3.

“TERRITORY” means the United States, Canada, Mexico, and all of their states,
territories and possessions.

“THIRD PARTY” means any entity other than Alpex or Valera.

ARTICLE II

OWNERSHIP OF INTELLECTUAL PROPERTY; LICENSE GRANTS

2.1. OWNERSHIP OF INVENTIONS.

(A) Except as provided in Sections 2.2 and 2.3 below Alpex shall own all right,
title, and interest in and to the Alpex Intellectual Property.

(B) To the extent Valera obtains any right, title, or interest in any
intellectual property or Technical Information with respect to the Platform
Technology, Valera hereby assigns, and, to the extent such assignment cannot be
made at present, agrees promptly to assign, to Alpex all of Valera’s right,
title, and interest in and to the same. Without limiting the foregoing, with
respect to any patent applications included in Alpex

 

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Patents and in which Valera employees or consultants are named as inventors,
Valera shall, and shall use reasonable efforts to cause such employees and
consultants to, at Alpex’s expense, cooperate in the filing, prosecution, and
maintenance of such Alpex Patents, including making any assignments as Alpex may
reasonably deem necessary, joining in any applications for letters patent on any
invention deemed patentable included in such Alpex Patents, taking all steps as
reasonably requested by Alpex to prosecute all pending and new patent
applications included within such Alpex Patents, and responding to oppositions,
nullity actions, re-examinations, revocation actions, and similar proceedings
filed by Third Parties against the grant of letters patent for such
applications.

(C) Valera shall own all right, title, and interest in and to the Product and
Product Patents in the Territory. Alpex shall own all right, title, and interest
in and to the Product Patents outside of the Territory.

(D) To the extent Alpex obtains any right, title, or interest in any
intellectual property or Technical Information with respect to the Product or
Product Patents in the Territory, Alpex hereby assigns, and, to the extent such
assignment cannot be made at present, agrees promptly to assign, to Valera all
of Alpex’s right, title, and interest in and to the same. Without limiting the
foregoing, with respect to any patent applications included in Product Patents
and in which Alpex employees or consultants are named as inventors, Alpex shall,
and shall use reasonable efforts to cause such employees and consultants to, at
Valera’s expense, cooperate in the filing, prosecution, and maintenance of such
Product Patents in the Territory, including making any assignments as Valera may
reasonably deem necessary, joining in any applications for letters patent on any
invention deemed patentable included in such Product Patents, taking all steps
as reasonably requested by Valera to prosecute all pending and new patent
applications included within such Product Patents, and responding to
oppositions, nullity actions, re-examinations, revocation actions, and similar
proceedings filed by Third Parties against the grant of letters patent for such
applications.

2.2. LICENSE GRANT

(A) Subject to the terms and conditions of this Agreement, Alpex hereby grants
to Valera, and Valera hereby accepts from Alpex, a sole and exclusive,
royalty-bearing right and license, including the right to sublicense, under and
to Alpex Intellectual Property to use, import, export, sell, offer to sell and
otherwise commercialize the Product in the Territory.

(B) In the event Alpex is not able to provide Valera with the requested amounts
of the Product pursuant to the terms and conditions of the Manufacturing
Agreement (including without limitation the price, forecast and ordering terms)
Valera will have the right to have Product made for Valera by a Third Party.
This have made right shall extend to the amounts and time periods as to which
Alpex is not able to supply Product to Valera and shall not constitute a license
to any Third Party to make or sell Products to a party other than Valera;
provided, however, that Alpex shall not bring any action against such a Third
Party for making Product for Valera for amounts and time periods for which Alpex
is not able to supply Product to Valera.

 

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(C) Upon the expiration of the Agreement, Valera shall have a fully paid-up,
perpetual, royalty-free, non-exclusive, irrevocable license, including the right
to sublicense, under and to Alpex Intellectual Property to make, have made, use,
import, export, sell, offer to sell and otherwise commercialize the Product in
the Territory;

(D) Subject to the terms and conditions of this Agreement, Valera hereby grants
to Alpex, and Alpex hereby accepts from Valera, a non- exclusive, royalty-free
right and license, under and to the Valera Product Patents to make, use and sell
the Product to Valera in the Territory as provided for herein, and for its own
account as provided for in Sections 4.5 and 6.5 hereof.

2.3. MAINTENANCE OF RECORDS. Each Party shall maintain full and accurate records
concerning their activities under this Agreement for the purpose of documenting
any intellectual property developed hereunder. Such records shall be maintained
for the later of either three (3) years after the end of the Term or for the
pendency of any patent application covering any such Intellectual Property.

2.4. CERTAIN RIGHTS; NO IMPLIED LICENSES

(A) The Parties acknowledge and agree that the licenses granted by Alpex to
Valera pursuant to Section 2.2 are limited solely to enable Valera to use,
import, export, sell, offer to sell and otherwise commercialize the Product in
the Territory and Alpex does not hereby grant to Valera a license to any Alpex
Intellectual Property outside the Territory or for any other purpose in the
Territory.

(B) Except as otherwise provided in this Agreement, under no circumstances shall
a Party as a result of this Agreement obtain any ownership interest or other
right in any technology, know-how, trade secrets, patents, pending patent
applications, products, or other Technical Information of the other Party,
including items owned, Controlled, developed by the other, or transferred by the
other to such Party at any time pursuant to this Agreement.

ARTICLE III

OVERVIEW OF COLLABORATION

3.1. SCOPE OF COLLABORATION. The Parties shall work together to research and
develop the Product pursuant to this Agreement. All such research and
development work shall be conducted under Alpex’s direction and shall be
allocated between the Parties according to the Research and Development Plan (as
further described in Article IV hereof) included as Exhibit A to this Agreement.

3.2. RECORDKEEPING. Each Party shall record, to the extent practical, all
Technical Information relating to its research and development activities under
the Research and Development Plan in written form, which writing shall be
consistent with standard practices of each Party and what is normal and
customary in the pharmaceutical industry in the United States or as may be
required by applicable law or regulation. All such written records of the
Parties shall be maintained in a form sufficient to satisfy all Agencies.

 

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ARTICLE IV

RESEARCH AND DEVELOPMENT

4.1. RESEARCH AND DEVELOPMENT PLAN. The Research and Development Plan for the
Product (including tasks, allocation of responsibilities, estimated development
timelines, and estimated development budgets) is set forth on Exhibit A. The
Parties may periodically modify the Research and Development Plan, within the
scope of and in a manner consistent with this Agreement, further detail the
responsibilities of each Party within the general scope of responsibilities set
forth herein, and revise the Research and Development Plan accordingly. The
Parties acknowledge that the timelines, dates and budgeted costs set forth in
the Research and Development Plan are good faith estimates. However, in the
event that an estimated development timeline will not be met, the Party with
responsibility for meeting that timeline shall notify the other Party and the
Parties shall work together in good faith to bring the project back on schedule.
Each Party shall be responsible for its own cost overruns, if any.

4.2. JOINT OBLIGATIONS.

(A) Each Party will fund its own costs and expenses in the performance of its
research and development obligations provided pursuant to this Agreement and the
Research and Development Plan.

(B) Parties shall keep each other fully informed of the status of the
development of the Product including, without limitation, providing written
reports as requested throughout the performance of the Research and Development
Plan, stating in reasonable detail all efforts made and in process, and all
significant progress achieved.

(C) The Parties will each designate a primary project contact with respect to
the Product throughout the performance of the Research and Development Plan.

4.3. ALPEX OBLIGATIONS.

(A) Alpex shall use commercially reasonable efforts to diligently perform its
obligations under this Agreement, including, without limitation, those set forth
in the Research and Development Plan, all in accordance with all applicable
laws, ordinances, rules, regulations, orders, licenses and other requirements
now or hereafter in effect.

(B) Alpex shall make available to Valera all Alpex Intellectual Property and
Technical Information and assistance as may reasonably be necessary for Valera’s
development, submission for applicable Regulatory Approval, and
commercialization of the Product, including formulation and process development,
development of stability indicating methods (including methods for dissolution,
assay and stability), and achievement of stability under accelerated stability
conditions for two months or under ambient conditions for six months, stability
data, methods validation, formulation trials, in-process and finished Products
specifications, Product development reports for the Product, and identification
and sourcing of any excipients used in the formulation of the Product, all as
more particularly described herein and in the Research and Development Plan.

 

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(C) Alpex shall maintain records in sufficient detail and otherwise in
accordance with good laboratory practices or current good manufacturing
practices, as the case may be, and as are required to properly reflect, and will
document in a manner appropriate for purposes of supporting any Agency filings,
and pre-approval inspections, all work done and results achieved by Alpex in the
performance of the Research and Development Plan (including all data in a form
required under any applicable governmental regulations). Subject to the
confidentiality provisions of Article X hereof, Alpex shall provide Valera with
copies of all such records relating to the Product.

4.4. VALERA OBLIGATIONS.

(A) Valera shall use commercially reasonable efforts to diligently perform its
obligations under this Agreement, including, without limitation, those set forth
in the Research and Development Plan, all in accordance with all applicable
laws, ordinances, rules, regulations, orders, licenses and other requirements
now or hereafter in effect.

(B) Valera shall maintain records in sufficient detail and otherwise in
accordance with good laboratory practices, good clinical practices, or current
good manufacturing practices, as the case may be, and as are required to
properly reflect, and will document all work done and results achieved in the
performance of the Research and Development Plan including all records of any
Clinical Studies. Subject to the confidentiality provisions of Article X hereof,
Valera shall provide Alpex with the right to inspect such records relating to
the Product.

(C) Valera shall keep Alpex fully informed as to the continuing status of its
Clinical Studies and development efforts for the Product pursuant to the
Research and Development Plan, including the status of the preparation and
filing of any Regulatory Approvals with applicable Agencies as well as the
anticipated Launch of the Product and the status of the conduct and completion
of Clinical Studies. In connection therewith, Valera shall provide to Alpex
quarterly reports during the Term, stating in reasonable detail all efforts made
and in process, and significant progress achieved. In addition, Valera shall
promptly communicate to Alpex any material issues or problems. Valera shall
include in such reports information concerning the status of the regulatory
filings for the Product in the Territory and shall notify Alpex of the substance
of all material written communications with any Agencies relating to the
Product.

(D) Valera will provide Alpex, at no cost other than routine costs of photocopy
and shipping, all Valera documentation with respect to the Product and Clinical
Studies as may be requested by Alpex including without limitation all
documentation necessary for the purpose of Alpex obtaining marketing approval
for the Product outside of the Territory. Such documentation will be provided to
Alpex at Valera’s facility or an Alpex facility as designated by Alpex.

 

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4.5. DISCONTINUATION OF THE PRODUCT.

(A) Valera may terminate the continuation of the obligations of Alpex and Valera
relating to the Product if Valera in its sole discretion should it determine
that the development and/or commercialization of the Product has been impaired
due to (i) difficulties in the development and/or formulation of the Product,
(ii) unfavorable action by the FDA relating to the Product, (iii) the likelihood
of failing to obtain applicable Agency approvals for the Product (regardless of
further steps or submissions that could be made), (iv) concerns with possible
infringement claims of Third Parties relating to the Product, and
(v) unfavorable market conditions for the Product, including, without
limitation, the entry of other competing products and/or price erosion. Upon
making such a determination, Valera shall provide written notice to Alpex (a
“Product Termination Notice”), which shall provide in reasonable detail the
basis on which Valera has elected to discontinue and terminate any further
continued efforts relating to the Product (a “Discontinued Product”).

(B) Upon provision of a Product Termination Notice, (i) the licenses granted to
Valera pursuant to Section 2.2 hereof with respect to the Discontinued Product
shall terminate and (ii) Valera shall pay to Alpex all accrued license and
milestone payments earned by Alpex up to the date of such termination but not
previously paid that relate to the Discontinued Product. Other than as provided
in Section 4.5(c) and Section 13.6 hereof, Valera shall have no further
obligations to Alpex under this Agreement relating to the Discontinued Product
including, without limitation, any milestone or royalty payment obligations.

(C) In the event that Alpex elects to continue or resume the development,
commercialization or sale, alone or with others, of a Discontinued Product, then
(i) it shall reimburse Valera for all development costs and raw material costs
associated therewith that were previously incurred by Valera, including any
license or milestone payments received from Valera pursuant to Article VIII
hereof (“Development Reimbursement”), and (ii) Valera shall (A) deliver and
assign to Alpex all Technical Information, test data, bioequivalence study
results, regulatory filings, Regulatory Approvals, pending patent applications,
reports, records, and materials in Valera’s possession or control that relate to
the Discontinued Product, and (B) return to Alpex all relevant records and
materials in Valera’s possession or control containing Confidential Information
of Alpex that relate to the Discontinued Product.

(D) If Alpex elects to pursue development of the Discontinued Product (i) in the
Territory, then Alpex’s payment of the Development Reimbursement to Valera shall
be made in monthly installments over a period of time equivalent to the period
from the date of Valera’s first milestone payment in respect of the Discontinued
Product to the date of the Product Termination Notice, (ii) outside the
Territory, then Alpex’s payment of the Development Reimbursement shall be
limited to payment by Alpex of 6% of the Net Sales of the Product made by Alpex
anywhere in the world. The payments provided for in (i) and (ii) of the
preceding sentence shall both be made, as applicable, until such time as Valera
has received the entire reimbursement amount.

 

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ARTICLE V

MANUFACTURING OF THE PRODUCT

5.1. MANUFACTURING OF THE PRODUCT. Alpex shall manufacture and supply sufficient
quantities of the Product for the Clinical Trials and commercial sale in the
Territory to meet Valera’s needs during the Term in accordance with current good
manufacturing practices (cGMP). Prior to Launch of the Product, Alpex and Valera
shall use their best efforts to enter into a Manufacturing and Supply Agreement
on terms agreed in good faith on the basis of the principles set forth in
Exhibit B hereto.

ARTICLE VI

HEALTH REGISTRATION OBLIGATION

6.1. REGULATORY APPROVALS. Valera shall use its commercially reasonable efforts
to prepare, file, and prosecute all Agency filings and applications to obtain
all Regulatory Approvals for the Product in each country of the Territory which
are required to sell, use, and market the Product in the Territory, all at
Valera’s sole expense. Valera shall own all right, title, and interest in any
FDA or other Regulatory Approvals which are obtained for the Product, including
all data generated in the course of Clinical Trials and all applications and
data submitted to the FDA or other Agency.

6.2. MAINTENANCE OF REGULATORY APPROVALS. Valera shall use commercially
reasonable efforts to maintain the Regulatory Approvals for use, sale and
marketing of the Product in each country of the Territory at Valera’s sole
expense.

6.3. ALPEX ASSISTANCE. Alpex shall provide such assistance to Valera in
obtaining and maintaining Regulatory Approvals in the Territory as reasonably
requested by Valera.

6.4. TIMING OF AGENCY FILINGS. Valera shall use commercially reasonable efforts
to file an NDA or ANDA, as determined in the sole discretion of Valera, to seek
Regulatory Approval to use and sell the Product in the Territory upon
satisfaction of the Product Success Criteria within six (6) months after such
satisfaction; provided, however, that if in Valera’s reasonable determination
there shall exist in the Territory a patent or other intellectual property of a
Third Party that would prevent or substantially impair the manufacture, use,
sale, offer for sale, or importation by or on behalf of Valera of the Product,
then Valera may in its discretion elect not to file for Regulatory Approval
until the date that is six (6) months after the expiry of such patent or other
right.

6.5. FAILURE TO FILE NDA OR ANDA. In the event Valera fails to file an NDA or
ANDA within six (6) months after satisfaction of the Product Success Criteria,
the license granted by Alpex to Valera pursuant to Section 2.2 relating to the
Product shall, at the election of Alpex by 60 days written notice to Valera,
during which time Valera shall be entitled to cure such failure, become a
non-exclusive, perpetual, royalty-free license in the Territory upon Alpex’s
election and Alpex’s reimbursing Valera all milestone payments received for the
Product up to the date of such election (“Milestone Reimbursement”), provided
that if Alpex elects to pursue commercialization of the Product (i) in the
Territory then Alpex’s payment of the Milestone Reimbursment shall be made in
monthly installments over a period of time

 

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equivalent to the period from the date of Valera’s first milestone payment in
respect of the Product in question to the effective date of the conversion of
Valera’s license into a royalty-free non-exclusive license and (ii) outside the
Territory, then Alpex’s payment of the Milestone Reimbursment shall be limited
to 6% of the Net Sales of the Product by Alpex anywhere in the world. The
payments provided for in (i) and (ii) of the preceding sentence shall both be
made, as applicable, until such time as Valera has received the Milestone
Reimbursement.

ARTICLE VII

MARKETING AND SALE OF THE PRODUCT

7.1. MARKETING AND SALE OF THE PRODUCT.

(A) Upon the Launch of the Product, Valera, either itself or through its
Affiliates, or distributors, shall use its commercially reasonable efforts to
market, distribute, and sell the Product in the Territory and shall exercise
such diligence in this regard as shall be reasonable in light of the size of the
market and potential market for the Product and in a manner consistent with
which it markets other Valera products of comparable market size in the
particular country of the Territory.

(B) Valera shall control and make all decisions regarding the strategy and
tactics of marketing, selling, and otherwise commercializing the Product,
including, without limitation, the method of sales and distribution,
organization and management of sales and marketing, packaging and labeling,
appointment of distributors pursuant to Section 7.2, and other terms and
conditions for such sales and marketing, and shall exercise commercially
reasonable efforts in such regard to maximize the economic opportunity for the
Product.

7.2. DISTRIBUTORS; SUBLICENSEES. Valera may designate and appoint one or more
Third Parties to act as its agent(s) or sublicensees in connection with the
marketing, sale and distribution of the Product in the Territory.

7.3. REGULATORY COMPLIANCE. Valera shall use commercially reasonable efforts to
comply with applicable regulations regarding procedures for reporting to
appropriate Agencies in the Territory, and to report, investigate, issue
responses and execute any corrective action plan to post-marketing Product
complaints/field reports in a timely manner in accordance with applicable
regulations.

7.4. SALES WITHIN THE TERRITORY. Alpex shall not, and Alpex shall use
commercially reasonable efforts to cause its Affiliates or licensees not to,
directly or indirectly, without the prior written consent of Valera, sell the
Product inside the Territory, or knowingly manufacture, supply or sell the
Product to any Person outside the Territory for resale or use inside of the
Territory.

7.5. NO COMPETING PRODUCTS. Alpex shall not, and shall cause its Affiliates or
licensees not to, directly or indirectly, jointly or in conjunction with any
other Person, whether as principal, agent, shareholder, employee, independent
contractor, or in any other manner whatsoever, develop, market, distribute or
sell in the Territory any products that contain the same active ingredient as
that which is contained in the Product, during the Term.

 

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7.6. NO RESTRICTIONS ON BUSINESS. Alpex agrees that Valera is in the business of
developing, and selling pharmaceutical products and that nothing in this
Agreement shall be construed as restricting such business or imposing on Valera
the duty to develop, register, market, and/or to sell the Product hereunder to
the exclusion of or in preference to any other product or otherwise preclude
Valera from developing or practicing any Valera Intellectual Property or
developing pharmaceutical products which are independent of the Alpex
Intellectual Property. Correspondingly, except as expressly set forth herein,
nothing herein shall be construed as restricting the business of Alpex.

ARTICLE VIII

MILESTONES, FEES, AND ROYALTY PAYMENTS; ACCOUNTING

8.1. MILESTONES.

(A) In consideration of Alpex’s commitment to provide its research and
development obligations as provided herein, including, without limitation, under
the Research and Development Plan, Valera agrees to pay to Alpex, for the
Product developed hereunder, the following one-time milestone payments:

(I) **** upon execution of this Agreement, such payment being intended to cover
in advance feasibility studies and analytical work by Alpex for the Product;

(II) **** within thirty (30) days of completion of Phase II of the Research and
Development Plan for the Product;

(III) **** within thirty (30) days of completion of Phase IV of the Research and
Development Plan for the Product; and

(IV) **** within thirty (30) days of completion of Phase VI of the Research and
Development Plan for the Product.

(B) Notwithstanding anything to the contrary contained herein, in the event
Valera exercises its right to terminate the continued development and
commercialization of the Product pursuant to Sections 13.2 or 13.3 hereof prior
to the achievement of any or all of the applicable milestones provided in
Section 8.1 relating to the Product, Valera shall be required to make payment to
Alpex only with respect to the milestones which were achieved prior to the
Termination Date and no further milestone payments relating to the Product shall
accrue after the Termination Date.

8.2. LICENSE FEE. In consideration for the license granted to Valera under
Section 2.1 of this Agreement, Valera agrees to pay to Alpex, the following:

(A) **** within thirty (30) days of the NDA or ANDA for the Product, as the case
may be, being filed with the FDA; and

**** CONFIDENTIAL TREATMENT REQUESTED

 

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(B) **** within thirty (30) days of the receipt of final approval by the FDA of
the NDA or ANDA, as the case may be, relating to the Product.

8.3. ROYALTY PAYMENTS.

(A) In addition to the foregoing milestone payments, during the Term, Valera
will pay to Alpex a royalty equal to the percentage set forth below on all Net
Sales of the Product sold by Valera and its Affiliates in the Territory, as
follows:

 

NET SALES

  

ROYALTY PERCENTAGE

****    **** of Net Sales ****    **** of Net Sales **** and above    **** of
Net Sales

(B) Unless terminated by mutual agreement or pursuant to Article XIII hereof,
Valera’s royalty payment obligations for the Product shall expire on the date
that is twenty (20) years following Launch of the Product in the Territory,
whereupon the license shall become a royalty-free, non-exclusive, perpetual,
worldwide license pursuant to the terms of Section 2.2(b).

(C) In the event Valera is required to pay patent royalties to a Third Party
with respect to the sale of the Product, and the claims of such Third Party
patents cover either a process used by Alpex in making the Product or an aspect
of the Product other than the active ingredient, then Valera may reduce the
amount of royalty paid to Alpex pursuant to this Section by the amount of
royalties paid to such Third Party; provided, however, that the amount of such
reduction shall in no event exceed fifty percent (50%).

(D) If no valid claim of an issued Alpex Patent covers the Product (including
the process used by Alpex in manufacturing the Product) in a country of the
Territory or all such claims covering the Product expire or are held invalid in
a country of the Territory, then the royalties shall be reduced by fifty percent
(50%) for Net Sales in such country of the Territory.

(E) The Parties acknowledge and agree that other than the royalty payments
provided in this Section 8.3, the license payments provided in Section 8.2
hereof and the milestone payments provided in Section 8.1 hereof, and all other
payment, indemnity and reimbursement obligations set forth in this Agreement,
Alpex shall not be entitled to any amounts received by Valera or its Affiliates
and sublicensees from the use, commercialization, license or sale of its rights
under this Agreement, regardless of the form or manner of payment (including
milestones, royalties or other amounts).

8.4. SUBLICENSE PAYMENTS.

(A) In the event Valera elects to sublicense its rights to use or sell the
Products, Valera will pay to Alpex **** of all payments received by Valera from
such sublicensees. Any sublicense will be on commercially reasonable terms with
the intent of creating the greatest overall return to Valera and Alpex. In the
event the royalties to be paid by a sublicensee will result in Alpex receiving
an amount less than 50% of the

**** CONFIDENTIAL TREATMENT REQUESTED

 

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royalties it would receive pursuant to Section 8.3 (a), Valera will provide
Alpex notice of such sublicense no later than thirty (30) days following its
execution. Alpex shall have right, exercisable within thirty (30) days of its
receipt of notice from Valera to reject such sublicense, in which event Valera
will terminate the sublicense. By way of example, if Valera sublicenses sales of
Products in exchange for a **** royalty, Alpex’s **** share of such royalty
would be **** or **** of the 8.3(a) royalty for sales up to ****, in which event
Alpex would not have the right to reject the sublicense. If Valera sublicenses
sales of Products in exchange for a **** royalty, Alpex’s **** share of such
royalty would be **** or **** of the 8.3(a) royalty for sales up to ****, in
which event Alpex would have the right to reject the sublicense. In no event
will sublicensees have the right to have Product made for such sublicensees by
Third Parties.

8.5. PAYMENTS.

(A) The license and milestone payments payable under Section 8.1 will be paid
within the time period specified for such payment.

(B) The Party having primary responsibility for the completion of the applicable
milestone shall provide written notice to the other Party not later than fifteen
(15) days following the satisfaction of such milestone trigger.

(C) Royalties payable under Section 8.3 will be paid not later than forty-five
(45) days following the end of each Fiscal Quarter, or not later than forty-five
(45) days from the date that is as soon thereafter as may be practicable in
order for Valera to determine the royalty payable. All payments shall be
accompanied by a report in writing showing for the quarter for which such
royalty payment applies: (i) the Net Sales (along with a reasonably detailed
description of the calculation thereof); (ii) the royalties payable pursuant to
Section 8.3 in United States dollars; and (iii) the withholding taxes, if any,
required by law to be deducted with respect to such royalties and the amounts
paid to the appropriate governmental authority with respect to such royalties.

8.6. WITHHOLDING TAXES. Valera shall be entitled to deduct from its payments to
Alpex the amount of any withholding taxes, value-added taxes or other taxes,
levies or charges with respect to such amounts payable by Valera, or any taxes
in each case required to be withheld by Valera to the extent Valera pays the
appropriate governmental authority on behalf of Alpex such taxes, levies or
charges. Valera shall deliver to Alpex, upon reasonable request, proof of
payment of all such taxes, levies and other charges and appropriate
documentation which is necessary to obtain a tax credit, to the extent such tax
credit can be obtained.

8.7. AUDIT. Valera shall maintain and shall require its Affiliates and
sublicensees to maintain, at their respective offices accurate and complete
books and records of the Net Sales of the Product, consistent with sound
business and accounting practices. Upon the written request Alpex, but not more
than once in any calendar year, Valera shall permit an independent certified
public accounting firm of nationally recognized standing, selected by Alpex and
acceptable to Valera, to have access during normal business hours to such
records of Valera as shall be necessary to verify the accuracy of the royalty
reports provided hereunder for any year ending not more than thirty-six
(36) months prior to the date of such request. The accounting firm shall
disclose to Alpex only whether the records

**** CONFIDENTIAL TREATMENT REQUESTED

 

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are accurate or not and the specific details concerning any discrepancies, and
shall provide a copy of its report to Valera. No other information shall be
shared. If the audit of royalties shows an underpayment of royalty payments by
Valera of more than the greater of (i) $25,000 or (ii) five percent (5%), then
the expenses of the audit of royalties shall be borne by Valera; otherwise the
expenses of the audit of royalties shall be borne by Alpex. If such accounting
firm concludes that additional royalties were owed or that royalties were
overpaid during such period, then Valera shall pay the additional royalties or
Alpex shall credit or pay Valera such overpayment within thirty (30) days of the
date that such accounting firm’s written report is delivered to the Parties.

8.8. CONFIDENTIAL FINANCIAL INFORMATION. Each Party shall treat all financial
information of the other Party as Confidential Information of the other Party,
and shall retain and shall cause its employees and agents to retain, all such
financial information in confidence.

ARTICLE IX

CERTAIN PROVISIONS REGARDING PATENTS

9.1. PATENT FILINGS, PROSECUTION AND MAINTENANCE IN THE TERRITORY

(A) Each of Alpex and Valera shall use commercially reasonable efforts in the
filing, prosecution and maintenance of any Alpex Patents as provided in this
Section 9.1.

(B) Alpex shall have the first right, using in-house or outside legal counsel
selected at Alpex’s sole discretion, to prepare, file, prosecute, maintain and
extend patent applications and patents concerning all such Alpex Patents in each
country of the Territory, for which Alpex shall bear the costs relating to such
activities. Alpex shall solicit Valera’s advice and review of the nature and
text of any such patent applications in reasonably sufficient time prior to
filing thereof, and Alpex shall take into account Valera’s reasonable comments
related thereto. Alpex and Valera shall treat all information disclosed to it
under this Section 9.1 as Confidential Information (as herein defined).

(C) If Alpex or a customer of Alpex to whom Alpex has granted the rights
described in this Section prior to the date hereof elect not to file, prosecute
or maintain any Alpex Patents or any ensuing Patents or claims encompassed by
any Alpex Patents in any country of the Territory, Alpex shall give Valera
notice thereof within a reasonable period prior to allowing such patent
applications or Patents or such claims encompassed by such patent applications
or Patents to lapse or become abandoned or unenforceable, and Valera shall
thereafter have the right, at its sole expense and in the name of Alpex, to
prepare, file, prosecute and maintain patent applications and patents or
divisional applications related to such claims encompassed by such patent
applications or patents concerning all such inventions and discoveries in
countries of its choice throughout the world. In such case, all costs incurred
by Valera pursuant to this Section 9.1(c) may be deducted by Valera against
milestones and/or royalty payments (but not to exceed 50% of any single
milestone or royalty payment) payable to Alpex under this Agreement, until such
time as Alpex has fully reimbursed Valera and its Affiliates, or Valera has
fully recovered such amounts from milestone and/or royalty payment deduction.

 

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9.2. ENFORCEMENT OF ALPEX PLATFORM PATENTS.

(A) In the event that Valera becomes aware of actual or threatened infringement
of any of the Alpex Platform Patents, the Valera shall promptly notify Alpex in
writing of such infringement or action and supply Alpex with all evidence
possessed by Valera pertaining to and establishing said infringement or other
action.

(B) All monies recovered upon the final judgment or settlement of any action to
enforce Alpex Platform Patents shall be the sole property of Alpex.

9.3. INJUNCTION AND/OR FAILURE TO OBTAIN THIRD PARTY License. Without limiting
any other remedy that may be available to Valera under this Agreement, Valera
shall have the right to terminate this Agreement in its entirety or only as to
the affected country, immediately upon written notice to Alpex if at any time
during the Term: (i) a permanent injunction is issued by a court of competent
jurisdiction enjoining Valera’s sale of the Product in a country of the
Territory, or (ii) Valera ceases the sale of the Product in a country of the
Territory as a result of a failure of either Party to obtain, upon commercially
reasonable terms, a license (or immunity from suit) from a Third Party alleging
infringement in such country.

ARTICLE X

CONFIDENTIALITY

10.1. CONFIDENTIALITY AND NON-USE OBLIGATIONS. (a) During the Term of this
Agreement and for five (5) years thereafter without regard to the means of
termination, neither Valera nor Alpex shall use, for any purpose other than the
purposes of this Agreement, reveal or disclose to any Third Party information
and materials disclosed by the other Party (whether prior to or during the Term
of this Agreement), and marked as confidential or for which the receiving Party
knows or has reason to know are or contain trade secrets or other proprietary
information of the other Party (the “Confidential Information”) without first
obtaining the written consent of the other Party.

(B) The Parties shall take all reasonable precautions to prevent the use or
disclosure of such Confidential Information without first obtaining the written
consent of the other Party, except (i) as may be required for securing
Regulatory Approval, including pricing approval in the Territory, or as may
otherwise be required to be disclosed to an Agency in the Territory; or (ii) as
required in connection with any filings made by the Securities and Exchange
Commission or similar non-U.S. regulatory authorities or by the disclosure
policies of a major stock exchange. Each Party agrees that prior to the release
or dissemination of the other Party’s Confidential Information to any Affiliate
or sublicensee, such Party shall cause the person to whom such Confidential
Information is to be released to be bound by a confidentiality agreement
providing for a level of protection of such Confidential Information at least
equivalent to the terms of this Article X.

(C) These restrictions upon disclosure and use of Confidential Information shall
not apply to any specific portion of Confidential Information which:

(I) is Confidential Information that can be demonstrated by the written records
of the recipient to have already been in the possession of the recipient free of
any restrictions as to its use or disclosure at the time of disclosure by the
other Party;

 

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(II) is or later becomes available to the public, as evidenced by documents
which were generally published, other than by fault of the recipient;

(III) is received from a Third Party having legitimate possession thereof and
the independent legal right to make such disclosure and such Third Party does
not place any restriction as to the use or disclosure on the recipient; or

(IV) is information developed by the Party entirely without reference to or use
of Confidential Information, as established by the written records of such
Party.

(D) Any patent applications and information therein filed or to be filed by
either Party shall be deemed (i) to be Confidential Information of that Party
subject to the provisions of this Article X and (ii) to have been disclosed in
confidence to the other Party.

(E) Notwithstanding the foregoing, the recipient may disclose any Confidential
Information to the extent required by an order of any court or other
governmental authority having competent jurisdiction, but only after the other
Party is (i) notified in writing and provided with a copy of such order; and
(ii) given an opportunity to prevent such disclosure or obtain reasonable
protection for such Confidential Information. In any such event, the recipient
shall cooperate fully with other Party in connection with obtaining any
protective order or other appropriate remedy to prevent disclosure of
Confidential Information.

10.2. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither Party to this Agreement
shall issue any press release or other publicity materials, or make any public
presentation with respect to the terms or conditions of this Agreement without
the prior written consent of the other Party (such consent not to be
unreasonably withheld or delayed). The restrictions provided in this
Section 10.2 shall not apply to disclosures deemed by Valera in its discretion
to be required by law or regulation, including as may be required in connection
with any filings made with the Securities and Exchange Commission or any similar
non-U.S. regulatory authority, or by the disclosure policies of the Nasdaq Stock
Market, Inc.

ARTICLE XI

REPRESENTATIONS AND WARRANTIES

11.1. LEGAL AND GOVERNMENTAL COMPLIANCE. Each Party shall comply with all laws,
rules and regulations applicable to the activities undertaken by such Party
hereunder.

11.2. ALPEX REPRESENTATIONS AND WARRANTIES. Alpex represents and warrants to
Valera that the following are true and correct as of the date hereof:

(A) Alpex is a Societe Anonyme duly organized, validly existing, and in good
standing under the laws of Switzerland and has full corporate power to own its
properties and conduct the business presently being conducted by it, and is duly
qualified to do business in, and is in good standing under, the laws of all
jurisdictions in which its activities or assets require such status, except in
any case where the failure to be so qualified and in good standing would not be
material.

 

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(B) Alpex has full corporate right, power and authority to perform its
obligations pursuant to this Agreement, and this Agreement and the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Alpex. This Agreement has been duly and validly
executed by Alpex. Upon execution and delivery of this Agreement, it will be the
valid and binding obligation of Alpex, enforceable in accordance with its terms,
subject to equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditor’s right and
remedies generally.

(C) The execution, delivery and performance of this Agreement does not, and the
consummation of the transactions herein contemplated will not violate any law,
rule, regulation, order, judgment or decree binding on Alpex, or result in a
breach of any term of the certificate of incorporation or by-laws of Alpex or
any contract, agreement or other instrument to which Alpex is a party, except in
each case to an extent not material.

(D) Alpex is the sole owner of the entire right, title and interest in and to
the Alpex Platform Patents and the Alpex Know-how and no other Person (including
any government) has any license, claim or other right or interest in or to the
Alpex Platform Patents or the Alpex Know-how.

(E) To Alpex’s knowledge, the use of the Alpex Intellectual Property in the
development, manufacture and sale of the Product will not infringe,
misappropriate or otherwise conflict with any intellectual property or other
rights of any Third Party.

(F) Alpex is not aware of any infringement of the Alpex Platform Patents or any
misappropriation of the Alpex Know-How by any Third Party.

(G) There are no judicial, arbitral, regulatory or administrative proceedings or
investigations, claims, actions or suits relating to the Alpex Platform Patents,
or the Alpex Know-how pending against or, to Alpex’s knowledge, threatened
against Alpex or its Affiliates in any court or by or before any governmental
body or agency in the Territory.

11.3. REPRESENTATIONS AND WARRANTIES OF VALERA. Valera represents and warrants
to Alpex that the following are true and correct as of the date hereof:

(A) Valera is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power to
own its properties and conduct the business presently being conducted by it, and
is duly qualified to do business in, and is in good standing under, the laws of
all states in which its activities or assets require such status, except in any
case where the failure to be so qualified and in good standing would not be
material.

 

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(B) Valera has full corporate right, power and authority to perform its
obligations pursuant to this Agreement, and this Agreement and the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Valera. This Agreement has been duly and validly
executed by Valera. Upon execution and delivery of this Agreement, it will be
the valid and binding obligation of Valera enforceable in accordance with its
terms, subject to equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditor’s rights and
remedies generally.

(C) The execution, delivery and performance of this Agreement does not, and the
consummation of the transactions therein contemplated will not violate any law,
rule, regulation, order, judgment or decree binding on Valera or result in a
breach of any term of the certificate of incorporation or by-laws of Valera or
any contract, agreement or other instrument to which Valera is a party, except
in each case to an extent not material. No authorization is required by Valera
for the execution, delivery, or performance of this Agreement by Valera, except
in each case to an extent not material.

11.4. LIMITATION ON WARRANTIES. Except as expressly provided in this Agreement,
neither Party makes any representation or warranty to the other, whether express
or implied, either in fact or by operation of law, by statute or otherwise, and
both Parties specifically disclaim any and all implied or statutory warranties,
including, without limitation, any warranty of merchantability or warranty of
fitness for a particular purpose. In addition, each Party understands and agrees
that neither Party warrants or commits that the Product will be successfully
developed, be submitted for applicable Regulatory Approval (except as expressly
required under this Agreement), receive applicable Regulatory Approval or be
successfully marketed or commercialized. Without limiting the indemnity
obligations set forth in Article XII for the items described therein, neither
Party shall have liability or responsibility to the other Party for any such
failure in the research and development, Agency approval, manufacturing,
marketing or sales efforts, except to the extent such failure results from the
Party’s willful misconduct or gross negligence.

ARTICLE XII

INDEMNIFICATION; INSURANCE

12.1. INDEMNIFICATION.

(A) Valera Indemnification. Valera agrees to indemnify and hold forever harmless
Alpex and its Affiliates and each of their agents, directors, officers and
employees from and against any loss, damage, action, proceeding, expense,
liability, physical or emotional injury or death, or loss of service or
consortium, including reasonable attorney’s fees (“Loss”) arising from or in
connection with (i) the offer for sale, sale or importation by Valera or its
Affiliates in the Territory of the Product developed under this Agreement,
except for any Loss for which Alpex has agreed to indemnify Valera pursuant to
Section 12.1(b) below or pursuant to a manufacturing agreement referred to in
Section 5.1; (ii) the breach or inaccuracy of any representations, warranties or
covenants made by Valera in this Agreement; and (iii) the gross negligence or
willful misconduct of Valera or its Affiliates or any of their agents, directors
officers or employees.

 

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(B) Alpex Indemnification. Alpex agrees to indemnify and hold forever harmless
Valera and its Affiliates and each of their agents, directors, officers, and
employees from and against any Loss arising from or in connection with:
(i) Alpex’s or its Affiliates’ research and development activities in connection
with the Product or the activities of any Alpex personnel in connection with the
development, manufacture, use, sale, storage or handling of the Products; ,
except for any Loss for which Valera has agreed to indemnify Alpex pursuant to
Section 12.1(a) above; (ii) the breach or inaccuracy of any representations,
warranties or covenants made by Alpex in this Agreement, (iii) any allegation by
a Third Party that that use of the Alpex Intellectual Property in the
development, manufacture or sale of the Product in the Territory infringes a
Third Party’s intellectual property (an “Infringement Claim”); (iv) the gross
negligence or willful misconduct of Alpex or its Affiliates or any of their
agents, directors, officers or employees; and (v) the development, manufacture,
use, offer for sale, sale or importation of the Product outside the Territory by
Alpex or any of its Affiliates or any of their distributors, sublicensees or
agents, or the pharmacological use of the Product outside the Territory, in each
case.

12.2. PROCEDURE. A Party seeking indemnity hereunder (an “Indemnified Party”)
shall promptly notify the other Party (the “Indemnifying Party”) upon being
notified or otherwise made aware of a suit, action or claim; provided that
failure to provide such notice shall not affect the obligation of the
Indemnifying Party to indemnify except to the extent that the Indemnifying Party
is materially prejudiced thereby. The Indemnifying Party shall defend and
control any proceedings, and the Indemnified Party shall be permitted to
participate at its own expense, unless there shall be a conflict of interest
which would prevent representation by joint counsel, in which event the
Indemnifying Party shall pay for the Indemnified Party’s separate counsel
pursuant to Section 12.1 above. The Indemnifying Party may not settle the suit
or otherwise consent to any judgment in such suit without the written consent of
the Indemnified Party (such consent not to be unreasonably withheld or delayed).
The Parties shall cooperate in the defense of any Third Party claim.

12.3. LIMITATION OF LIABILITY. In no event shall Alpex be liable to Valera under
Section 12.1(b)(iii) for any amount greater than the sum of (a) royalties paid
or payable under Section 8.3 above and (b) CHF 350,000. NEITHER PARTY SHALL BE
LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES OR
EXPENSES, INCLUDING DAMAGES FOR LOST PROFITS, LOSS OF OPPORTUNITY OR USE OF ANY
KIND, SUFFERED BY THE OTHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE.

12.4. INSURANCE.

(A) During the Term and for a period of five (5) years after its expiration or
earlier termination, each Party shall obtain, at its sole cost and expense,
liability insurance applicable to its performance under this Agreement that
meets the following requirements:

(I) the insurance shall insure such Party against all liability related to its
activities relating to the development, manufacture, use or sale of Products
(whether such Party’s liability arises from its own conduct or by virtue of its
participation in this Agreement), including liability for bodily injury,
property damage, wrongful death, and any contractual indemnity obligations
imposed by this Agreement; and

 

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(II) the insurance shall be in amounts that are reasonable and customary in the
United States in the pharmaceutical industry, but in no event shall liability
insurance relating to manufacture, use, sale or distribution of a marketed
Product maintained by such Party cover less than five million U.S. dollars (U.S.
$5,000,000) per occurrence (or claim) and an annual aggregate of five million
U.S. dollars (U.S. $5,000,000). All such policies shall include a contractual
endorsement naming the other Party to this Agreement as an additional insured
and require the insurance carriers to provide such other Party with no less than
thirty (30) days’ written notice of any change in the terms or coverage of the
policies or their cancellation; provided, however, that Alpex shall not be
obligated to obtain insurance with respect to its own manufacture, sale, or
distribution of Product outside the Territory unless and until it elects to
manufacture and sell Product outside of the Territory.

ARTICLE XIII

TERM; TERMINATION

13.1. TERM. This Agreement shall take effect as of the date hereof and shall
continue in effect as to the Product until the expiration of all Alpex Platform
Patents covering the Product, unless earlier terminated in accordance with the
provisions of this Article XIII (such date being referred to as the “Termination
Date”).

13.2. VALERA PRODUCT SPECIFIC TERMINATION. Valera may terminate this Agreement,
in whole or on a country-by-country basis upon the occurrence of any of the
following:

(A) Alpex shall have failed to comply with its research and development
obligations for the Product in accordance with the terms of this Agreement and
the Research and Development Plan; or

(B) The Product fails to meet the Product Success Criteria for the Product
following the completion of the pilot bioequivalence studies provided in the
Research and Development Plan; or

(C) Valera shall have determined to terminate or discontinue the Research and
Development Plan for the Product in accordance with Section 4.5 or

(D) Valera shall have reasonably determined to terminate or discontinue the
development and/or commercialization of the Product as a result of an
Infringement Claim having been filed, or threatened, against Valera or Alpex
relating to Alpex or Valera’s development of the Product, Alpex or Valera’s
manufacturing of the Product or Valera’s marketing and/or sale of the Product in
the Territory in accordance with Section 4.5

(E) Upon 60 days prior written notice in the event Valera determines that the
Product is not commercially viable.

13.3. NOTIFICATION OF TERMINATION BY VALERA. Valera shall exercise its right of
termination by the provision of written notice to Alpex within sixty (60) days
of the occurrence of any of the events set forth in Section 13.2, such notice to
contain the details supporting such termination. Upon the provision of such
notice, the Parties’ rights and obligations under this Agreement (exclusive of
the confidentiality obligations of Article X and indemnity obligations of
Article XII hereof, each of which shall survive the

 

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termination) shall terminate as to the countries so terminated and be of no
further force or effect as to the countries so terminated and the license grant
made by Alpex to Valera pursuant to Section 2.2 of this Agreement shall
terminate as to the countries so terminated, subject to the provisions of
Section 4.5.

13.4. VALERA TERMINATION RIGHT. Valera may terminate this Agreement in
accordance with the provisions of Section 9.2 hereof.

13.5. TERMINATION OF AGREEMENT BY THE PARTIES. This Agreement may be terminated:

(A) By mutual written consent of each of Alpex and Valera; or

(B) Upon written notice by a Party if (i) the other Party shall have been
dissolved, ceased active business operations or liquidated, unless such
dissolution, cessation or liquidation results from reorganization, acquisition,
merger or similar event, or (ii) bankruptcy or insolvency proceedings, including
any proceeding under Title 11 of the U.S. Code, have been brought by or against
the other Party and, in the event such a proceeding has been brought against the
other Party, remains undismissed for a period of sixty (60) days, or an
assignment has been made for the benefit of such Party’s creditors or a receiver
of such Party’s assets has been appointed (a “Bankruptcy Event”); or

(C) By Alpex if Valera fails to pay Alpex amounts due and payable to Alpex
hereunder and fails to cure such breach within sixty (60) days after written
notice by Alpex of its intention to terminate, unless any such amount is being
contested by Valera in good faith; or

(D) By either Valera or Alpex, upon sixty (60) days prior written notice, if the
other Party is in Default, and fails to cure such breach within sixty (60) days
following receipt of written notice from the non-breaching Party specifying the
breach to be cured.

13.6. CONSEQUENCES OF TERMINATION.

(A) At the time of any termination of this Agreement as to the Product in whole
or as to a country of the Territory, the provisions of Section 4.5 shall apply
to the Product as a Discontinued Product in whole or only as to such country
terminated, as the case may be.

(B) At the time of any termination of this Agreement under Section 13.5 other
than termination by Alpex under 13.5(c) or (d), if the Product has been launched
in the affected country prior to such termination, then Valera shall have the
option to maintain in effect the license granted hereunder respecting the
Product, subject to Valera’s obligation to pay royalties under Section 8.3
above.

(C) Except as otherwise provided in Section 4.5 or in this Section 13.6, upon
termination of this Agreement in whole each Party shall return to the other all
relevant records and materials in its possession or control containing
Confidential Information of the other Party.

 

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13.7. SURVIVING RIGHTS. Termination of this Agreement for any reason shall be
without prejudice to:

(A) The rights and obligations of the Parties provided in Sections 8.7 and
Articles X and XII hereof, all of which shall survive such termination;

(B) Any other rights, obligations or liabilities which shall have accrued to the
benefit of either Party prior to such termination (including without limitation
Valera’s rights under Sections 4.5 and 13.6 and Valera’s obligation to pay all
milestone and royalty payments which shall have accrued hereunder up to and
including the effective date of such termination), all of which shall survive
such termination; and

(C) Any other rights of remedies provided at law or in equity which either party
may otherwise have against the other.

ARTICLE XIV

MISCELLANEOUS

14.1. FORCE MAJEURE. Neither Party shall lose any rights hereunder or be liable
to the other Party for damages or loss on account of failure of performance by
the defaulting Party if the failure is occasioned by government action, war,
fire, explosion, flood, strike, lockout, embargo, act of God, or any other
similar cause beyond the reasonable control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure and given prompt notice to the other Party.

14.2. NOTICES. All notices, requests, consents, and other communications under
this Agreement shall be in writing and shall be delivered by hand, sent via
overnight courier, sent by facsimile, or mailed by first class certified or
registered mail, return receipt requested, postage prepaid:

Notices for Alpex shall be sent to:

Alpex Pharma S.A.

Via Cantonale

CH-6805

Mezzovico-Vira, Switzerland

Attn: Managing Director

Telephone: ++ 41 91 935 51 11

Telecopier: ++ 41 91 935 51 20

Notices for Valera shall be sent to:

Valera Pharmaceuticals, Inc.

8 Clarke Drive

Cranbury, New Jersey 08512

Attn: President

Telephone: (609) 409-9010

Telecopier: (609) 409-1650

or to such other person or entity or at such other address as any party shall
designate by notice to the other in accordance herewith.

 

24

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Notices provided in accordance with this Section 14.2 shall be deemed delivered
(i) upon personal delivery with signature required, (ii) one Business Day after
they have been sent to the recipient by reputable overnight courier service
(charges prepaid and signature required) (iii) upon confirmation, answer back
received, of successful transmission of a facsimile message containing such
notice if sent between 9 a.m. and 5 p.m., local time of the recipient, on any
Business Day, and as of 9 a.m. local time of the recipient on the next Business
Day if sent at any other time, or (iv) three Business Days after deposit in the
mail.

14.3. GOVERNING LAW; DISPUTE RESOLUTION

(A) This Agreement shall be governed by the laws of the State of New York, as
such laws are applied to contracts entered into and to be performed within such
state, as though made and to be fully performed therein without regard to
conflicts of law principles thereof. The United Nations Convention on Contracts
for the International Sale of Goods will not apply to this Agreement. The
Parties agree to submit to the personal jurisdiction in any Federal or State
court of competent jurisdiction seated in the State of New York, and waive any
objection as to venue or inconvenience of forum.

(B) The Parties shall initially attempt in good faith to resolve any significant
controversy, claim, allegation of a Default or dispute arising out of or
relating to this Agreement (hereinafter collectively referred to as a “Dispute”)
through negotiations between senior executives of Valera and Alpex. If the
Dispute is not resolved within thirty (30) days (or such other period of time
mutually agreed upon by the Parties) of notice of the Dispute, then the Parties
agree to submit the Dispute to non-binding mediation on terms and procedures to
be mutually agreed to for a period of sixty (60) days. Any mediation proceedings
shall be treated as settlement discussions and therefore shall be confidential,
and no mediator may testify for either Party in any later proceeding relating to
the dispute. No recording or transcript shall be made of the mediation
proceedings. Each Party shall bear its own costs and expenses of mediation, and
the Parties shall share equally the fees and expenses of the mediator.

(C) If the Dispute is not resolved through negotiations or mediation as set
forth above, then either Party may commence litigation; provided, that this
Section 14.3 shall not be construed to prevent a Party from seeking injunctive
relief without observing the requirements of Section 14.3(b).

14.4. NON-WAIVER OF RIGHTS. Except as specifically provided for herein, the
waiver from time to time by any of the Parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of same or of any other of such Party’s rights or remedies provided in
this Agreement.

14.5. NO AGENCY. Neither Party shall by virtue of this Agreement have any power
to bind the other to any obligation nor shall this Agreement create any
relationship of agency, partnership or joint venture.

14.6. SEVERABILITY. If any term, covenant, or condition of this Agreement or the
application thereof to any Party or circumstance shall, to any extent, be held
to be invalid or unenforceable, then (i) subject to clause (ii) of this
Section 14.6 the remainder of this Agreement, or the

 

25

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application of such term, covenant or condition other than those as to which it
is held invalid or unenforceable, shall not be affected thereby and each term,
covenant, or condition of this Agreement shall be valid and be enforced to the
fullest extent permitted by law and (ii) the Parties hereto covenant and agree
to renegotiate any such term, covenant, or application thereof in good faith in
order to provide a reasonably acceptable alternative to the term, covenant, or
condition of this Agreement or the application thereof that is invalid or
unenforceable.

14.7. ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules
hereto as in effect from time to time pursuant to the terms hereof, sets forth
all the covenants, promises, agreements, warranties, representations,
conditions, and understandings between the Parties hereto in the scope of the
collaboration, and supersedes and terminates all prior agreements and
understanding between the Parties under this Agreement. No subsequent
alteration, amendment, change, or addition to this Agreement shall be binding
upon the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.

14.8. ASSIGNMENT. No Party shall, without the prior written consent (not to be
unreasonably withheld or delayed) of the other Party having been obtained,
assign or transfer this Agreement to any Third Party, provided, however, that
any Party may assign or transfer this Agreement to any Affiliate, provided that
the assigning Party shall guarantee the performance of that Affiliate, or to any
successor by merger of such Party of its pharmaceutical business, or to the
Purchaser of all or substantially all of such assets of its pharmaceutical
business, without the prior written consent of the other Party hereto. This
Agreement shall be binding upon and shall inure to the benefit of the Parties
and their successors and permitted assigns.

14.9. FACSIMILE EXECUTION. This Agreement may be executed in facsimile
counterparts each of which is hereby agreed to have the legal binding effect of
an original signature. The Parties hereto agree to forward the original
signatures by overnight mail to the other Party upon execution.

14.10. LICENSE SURVIVAL DURING BANKRUPTCY. All rights and licenses granted under
or pursuant to this Agreement to the Alpex Intellectual Property are, and shall
otherwise be deemed to be, for purposes of Paragraph 365(n) of the U.S.
Bankruptcy Code, licenses of rights to “Intellectual Property” as defined under
Paragraph 101(35A) of the U.S. Bankruptcy Code. The Parties agree that Valera,
as a licensee of such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the U.S. Bankruptcy Code, subject
to performance by Valera of its obligations under this Agreement. The Parties
further agree that, in the event Alpex elects to terminate this Agreement
because of a Bankruptcy Event and Valera elects to continue the licenses under
this Agreement as contemplated by the preceding sentence, then Valera shall be
entitled, upon reasonable request, to have access, in confidence, to such of
Alpex Intellectual Property not already in Valera’s possession, as shall be
reasonably necessary to make use of the license rights under this Agreement
without participation by Alpex.

 

26

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives as of the day and year first indicated
above.

 

VALERA PHARMACEUTICALS, INC. By:   /s/ DAVID S. TIERNEY   Name:   David S.
Tierney   Title:   President and CEO ALPEX PHARMA S.A. By:   /s/ SHAHBAZ ARDALAN
  Name:   Shahbaz Ardalan   Title:   Managing Director ALPEX PHARMA S.A. By:  
/s/ FEDERICO STRUPPOLO   Name:   Federico Struppolo   Title:   Technical
Director

 

27

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EXHIBIT A

PRODUCT SUCCESS CRITERIA/RESEARCH AND DEVELOPMENT PLAN

PROTOTYPE DEVELOPMENT PROGRAM

ALPEX FMT PROJECT

Each of the Parties recognize the need to be flexible in the development
schedule for the Product, and agrees to cooperate in good faith as to any
extensions as may reasonably be required in the development timelines set forth
above.

The Parties shall pursue completion of the milestones set forth in Section 8.1
of the Agreement by following the plan set forth below with respect to the
Product, with the cost not to exceed the amounts set forth in said Section 8.1.

 

PHASE

  

TASKS

  

DURATION

  

RESPONSIBILITY

IA

   Preliminary prototype development    4 weeks       Preliminary prototype
evaluation.          Sample preparation.         

•         Physical characterization of the sample including drug loading, tablet
hardness, friability and disintegration time, in vitro and in vivo.

     

•         Report on results.

        

•         Samples will be provided to Client for preliminary evaluation (20-30
tablets).

  

IB

   Compatibility studies    6 weeks      

•         Development of an analytical method suitable for compatibility studies
API/Excipient (linearity, accuracy, recovery, specificity, system suitability,
sensitivity) for API and related substances.

     

•         Accelerated stability test in stressed condition of API/most important
excipients (i.e. poly-alcohols, citric acid, PEB, -binary combination and in
presence and in absence of water-tertiary combination -up to 50(degree) or
60(degree)C degrees) will be conducted up to 30 days.

  

 

28

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PHASE

  

TASKS

   DURATION    RESPONSIBILITY

Ic

   Prototype development    2 weeks       The study will be carry out on 1
prototype which will meet the following specifications:         

•         Dosage form                        FMT tablet

        

•         Active ingredient to be defined

        

•         Strength to be defined

        

•         Aspect/shape round tablet, with toroidal shape

        

•         Diameterto be defined

        

•         Hardnessto be defined

        

•         Weight to be defined

        

•         Disintegration time in vitro to be defined

        

•         Disintegration time in vivo to be defined

        

•         Flavor to be defined (grapefruit, orange, cherry, etc.)

         Taste Evaluation          3 (or more) different FMT prototype
formulations will be evaluated, on a laboratory scale, and, based on results
obtained with an internal panel test, will present the best 2 prototypes to
Client      

•         In vitro characterization

         The characteristics of the finished product including drug loading,
tablet hardness, friability, disintegration time and dissolution will be
evaluated.   

Id

   Analytical Method development    5 weeks      

•         Developed of an analytical method stability indicating for the FMT
formulation (linearity, accuracy, recovery, specificity, system suitability,
sensitivity) for API and related substances.

     

•         Development of the dissolution method (if required)

     

 

29

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PHASE

  

TASKS

  

DURATION

  

RESPONSIBILITY

Ie

   Cleaning Analytical Method development    2 weeks      

•         Developed of an analytical method cleaning (recovery, specificity,
system suitability, stability of the swabbed solution and limit of detection)
for API.

  

If

   Preliminary stability studies in accelerated ICH conditions    24 weeks      

•         Preliminary Stability studies will be conducted on 1 batch of the
selected formula at ICH conditions for 6 months at the following conditions.

     

40(degree)C / 75% RH         1,2,3,6 Months

        

(30(degree)C / 65% RH        1,2,3,6 Months as

        

back-up in case of failure on the stability at 40(degree)C / 75% RH)

     

25(degree)C / 60% RH         3,6 Months

     

Ig

   Reporting    N/A      

•         All the activities described in the document will be described into a
protocol subject to preliminary approval by the Client.

     

•         All the activities performed will be summarized into a report that
will be approved by the Client.

     

•         All protocols and reports will be in English, when internal
documentation is in Italian.

  

II

   GMP batches    12 weeks       Technical activities         

•         Preparation of the protocol for regulatory batches.

        

•         Preparation of the master batch record.

        

•         Manufacturing of regulatory batches

        

•        Packaging of the finished product.

        

•         Reporting on performed activities.

        

•         Release of the clinical supply and stability purposes

     

 

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   Analytical activities         

•         Development and validation of the analytical method, including content
uniformity of API, dissolution, etc.

     

•         Tentative specifications sheet.

        

•         ICH pivotal stability study on pilot batches (36 months regulatory
submission)

     

•         Preparation of the protocol analytical and cleaning validation.

        

•         Cleaning method validation.

        

•         Reporting on performed activities

     

PHASE

  

TASKS

  

DURATION

  

RESPONSIBILITY

III

   Validation of manufacturing activities    4 weeks       Technical activities
        

•         Preparation of the validation manufacturing protocol for one
commercial batch.

     

•         Preparation of the master batch record.

        

•         Manufacturing of commercial batch (one batch at full production scale
- about 700 Kg).

     

•         Packaging of the finished product.

        

•         Reporting on performed activities.

         Analytical activities         

•         Specifications sheet for the finished product.

        

•         Internal release of the clinical supply.

        

•         ICH pivotal stability studies on commercial batches (36 months
regulatory submission).

     

•         Reporting on performed activities.

     

IV

   Regulation activity support    4 weeks      

•         Collection of documentation

   (technical documentation)   

 

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PHASE

  

TASKS

  

DURATION

  

RESPONSIBILITY

V

   Validation of commercial batches    4 weeks       Technical activities      
  

•         Preparation of the validation manufacturing protocol for two
commercial batches

        

•         Manufacturing of additional commercial batches (two batches at full
production scale — about 700 Kg).

        

•         Packaging of the finished product.

        

•         Reporting on performed activities.

         Analytical activities         

•         Internal release

        

•         ICH pivotal stability studies on commercial batches (36 months
regulatory submission).

        

•         Reporting on performed activities.

     

PHASE

  

TASKS

       

RESPONSIBILITY

VI

   Regulation activity support    2 weeks      

•         Collection of documentation

   (technical documentation)   

 

PRODUCT SUCCESS CRITERIA

ITEM #

  

PARAMETER

  

DESCRIPTION

1

   Taste    Taste should be evaluated and agreed mutually by Valera and Alpex

2

   Diameter of tablets    Maximum 16mm in diameter

3

   Weight of tablets    Maximum 1,6 g per tablet

4

   Disintegration of tablets    Less than 1 minute in-vivo

5

   Stability    Desmopressine in the FMT should be stable at least 2 years at
RT, in the market packaging stored in correct conditions.

6

   Bioavailability    Desmopressine FMT should be bioequivalent to regular
tablets at the same strength

 

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EXHIBIT B

PRINCIPLES OF MANUFACTURING AND SUPPLY AGREEMENT

1. Product will be supplied by Alpex in bulk tablets or packed in finished form
to be mutually agreed during the Development Program.

2. Valera will be responsible for marketing and the sale of the Product in the
Territory.

3. The transfer price will be no less than 140% of Alpex’s direct cost of
manufacturing the Product (as more specifically defined in Annex B-1), but
specifically excluding Indirect Costs, all calculated in accordance with the
Swiss generally accepted accounting principles and consistent with Alpex’s
accounting practices for other products manufactured by Alpex.

4. Indirect Costs means those costs described in Annex B-1, provided that such
Indirect Costs shall only include such costs which are directly attributable or
allocable to the manufacture or production of the Product, based solely on the
ratio that the number of units of the Product produced during a given period of
time bears to (i.e., as divided by) the aggregate unit production of the
Facility for such period of, all calculated in accordance with the Swiss
generally accepted accounting principles and consistent with Alpex’s accounting
practices for other products manufactured by Alpex.

5. Valera shall provide to Alpex a rolling forecast consisting of (i) a good
faith estimate of the quantity of the Product to be purchased by Valera during
the upcoming twelve (12) months, and (ii) a binding purchase order for Valera’s
requirements of the Product over the upcoming three (3) months.

6. Alpex shall maintain an adequate supply of the Product based upon Valera’s
rolling forecast of its anticipated purchase requirements with respect to the
Product.

7. Alpex may engage any Third Party to satisfy its manufacture, packaging, and
supply obligations hereunder as and to the extent provided in the License
Agreement; provided that subcontracting shall not relieve Alpex of its
obligations under the Manufacturing Agreement.

 

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ANNEX B-1

MANUFACTURING COSTS

The following expenses are included in Direct Costs:

1. Direct Materials . Materials used in the manufacturing process that are used
directly in the production of the Product and include:

 

  •  

Inert raw materials or excipients

 

  •  

Active substances/ingredients

 

  •  

Packaging components such as bottles, caps, labels, master shippers, cotton,
preservatives, outserts, inserts, etc.

 

  •  

Yield loss

8. Direct Labor . The cost of employees engaged in production activities, which
are directly identifiable with the Product. Direct Labor costs include:

 

  •  

Base pay, overtime, vacation and holidays, illness, personal leave with pay and
shift differential. - Cost of employee fringe benefits such as health and life
insurance, payroll taxes, welfare, pension and profit sharing.

 

  •  

Cost of direct labor employees not utilized for the manufacturing of a Product
such as training, downtime and general duties.

9. Third Party Testing Costs. Costs associated with Third Party testing (such as
microbial, etc) and the preparation and filing of an annual report for the FDA
(including stability testing, sample retentions, etc) in connection with, or
relating to, a Product.

10. Miscellaneous Costs, including all other costs and expenses incurred by
Valera in direct satisfaction of its obligations hereunder (e.g., all freight,
insurance charges, taxes, import and export duties, inspection fees and other
charges applicable to the manufacture, storage, sale and transport of the
Product purchased by Alpex).

The following expenses are included in Indirect Costs (provided that only the
allocable portion of Indirect Costs which is directly related or attributable to
the manufacture or production of the Covered Products, based solely on the
actual utilization and time of utilization of the Facility, shall be included in
Indirect Costs):

1. Indirect Manufacturing Costs

Costs which are ultimately allocated to a Product based on standard direct labor
hours of the manufacturing teams and/or operating departments. These costs
include:

 

  •  

Indirect Production Labor—salaries of employees engaged in production activities
who are not classified as direct labor including supervision, clerical, etc.

 

34

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  •  

Indirect Materials — supplies and chemicals which are used in the manufacturing
process and are not assigned to specific products but are included in
manufacturing overhead costs. Includes supplies which are either common to
several products or for which direct assignment to products is not practical.

 

  •  

Rent expense — allocated based on the square footage of area used for
manufacturing and packaging operations as well as support serviced.

 

  •  

Utilities — expenses incurred for fuel, electricity and water in providing power
for production and other plant equipment including IT expenses, telephone and
communications expenses.

 

  •  

Maintenance and repairs — amount of expense incurred in-house or purchased to
provide services for plant maintenance and repairs of facilities and equipment
including machine and other parts, waste disposal and pest control.

 

  •  

Other Services — purchased outside services, rentals and leases, such as the
cost of security, ground maintenance, uniforms, equipment, etc. – Depreciation
of plant and equipment utilizing the straight-line method of calculation.

 

  •  

Insurance — cost of comprehensive and other insurance necessary for the
safeguard of manufacturing plant and equipment.

 

  •  

Taxes — expenses incurred for taxes on real and personal property (manufacturing
site, buildings and the fixed assets of equipment, furniture and fixtures,
etc.). If manufacturing site includes other operations (marketing, research,
etc.), taxes shall be allocated on the basis of total real and personal
property.

 

  •  

Other expenses relating to production, including licenses and permits,
professional fees, dues and subscriptions

 

  •  

Cost of manufacturing service departments, such as:

 

  •  

Packaging Engineering

 

  •  

Manufacturing Maintenance and Supplies

 

  •  

Industrial Engineering

 

  •  

Receiving and Warehousing

 

  •  

Purchasing and Accounting

 

  •  

Production Scheduling

 

  •  

Inventory Management

 

  •  

Plant Materials Management

 

  •  

Central Weigh

 

  •  

Manufacturing Administration

 

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  •  

Allocated costs of services provided to manufacturing, including:

 

  •  

Cafeteria

 

  •  

Personnel Operations

 

  •  

Health and Safety Services

 

  •  

Division Engineering and Operations Services

 

  •  

Plant Services (housekeeping)

 

  •  

Manufacturing Information Systems

 

  •  

Plant Power

 

  •  

Office of V.P. Manufacturing

Depending on the facts and circumstances, various bases may be used for
allocating these costs to manufacturing operating departments including
headcount, square feet, metered utilities use, estimated services rendered, EDP
computer hours, etc. The method or methods of allocation shall be commercially
reasonable in view of the nature and amount of allocated costs and the total
manufacturing operations conducted by Valera.

11. Quality Assurance/Quality Control Costs, means direct labor and indirect
costs for Quality Assurance and Quality Control departments’ testing and
approving materials used in manufacturing and completed manufacturing Covered
Products (including in-coming, in-processing and finished product testing and
release). Includes QA samples, outside assay costs, supplies, service contracts,
artwork and label design and other related costs.

 

36

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ANNEX C

ALPEX PATENTS

 

US Patent No. 6,149,338    Process for the preparation of a granulate suitable
to the preparation of rapidly disintegrable mouth soluble tablets and
compositions obtained thereby. PCT WO 03/053410    Particulate compositions
PCT/GB 01/05212    Oral Pharmaceutical compositions containing Cyclodextrins as
taste masking agent PCT WO 2004/031050    Improved blister packaging PCT WO
03/053415    Pharmaceutical composition comprising skim milk powder

 

37