Exhibit 10.19
ASSET PURCHASE AGREEMENT
     This Asset Purchase Agreement (this “Agreement”) is made and entered into
as of July 20, 2004, by and between Cornerstone Pharmaceuticals Ltd., an
Anguilla company with offices located at 8000 Regency parkway, Suite 430, Cary,
North Carolina 27511 (“Cornerstone”) and Vintage Pharmaceuticals, LLC, a
Delaware limited liability company with offices located at 130 Vintage Drive,
Huntsville, Alabama 35811 (“Vintage”).
RECITALS
     Vintage has received FDA approval for two (2) products, one containing
Propoxyphene Napsylate/Acetaminophen 100/325mg Tab, ANDA #76-743, and one
containing Propoxyphene Napsylate/Acetaminophen 100/500mg Tab ANDA #76-750 (the
“Product(s)” as defined below).
     Subject to the terms and conditions of this Agreement, Vintage desires to
sell to Cornerstone, and Cornerstone desires to purchase from Vintage, the
Purchased Assets (as defined below).
AGREEMENT
     Now, therefore, in consideration of the premises and the mutual covenants
and promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the parties agree
as follows:
ARTICLE I
DEFINITIONS
     Section 1.01 Defined Terms.
     As used in this Agreement, the following defined terms have the meanings
described below:
     “Cornerstone’s Transfer Letter to the FDA” means the letter attached hereto
as Exhibit A-l and incorporated herein by reference notifying the FDA of the
change in ownership of the Product(s) ANDA(S), which shall be sent to the FDA
upon Cornerstone’s payment in full of the Deferred Purchase Price (as defined
below).
     “Action or Proceeding” means any action, suit, proceeding, arbitration,
inquiry, hearing, assessment with respect to fines or penalties, or litigation
(whether civil, criminal, administrative, investigative or informal) commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.
 
[***] Confidential portions of the exhibit have been omitted and filed
separately with the Securities and Exchange Commission.

 

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     “Affiliate” means, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person. “Control” and, with
correlative meanings, the terms “controlled by” and “under common control with,”
means the power to direct or cause the direction of the management or policies
of a Person, whether through the ownership of voting securities, by contract,
resolution, regulation or otherwise.
     “ANDA(S)” means Abbreviated New Drug Application for the Products.
     “Bill of Sale and Assignment” means a Bill of Sale and Assignment in the
form attached hereto as Exhibit B.
     “Books and Records” means all files, documents, papers, and records in the
possession of Vintage and/or Cornerstone pertaining to the Product(s), the
Product(s) Intellectual Property and/or the Marketing Materials.
     “Calendar Quarter” means the three month periods beginning on each
January 1, April 1, July 1 and October 1.
     “Contract” means any and all legally binding commitments, contracts,
leases, indentures, purchase orders, leases, or other agreements, whether
written or oral, including all amendments thereto.
     “DEA” means the United States Drug Enforcement Agency, and any successor
agency or entity thereto that may be established hereafter.
     “Encumbrance” means any mortgage, pledge, security interest, deed of trust,
lease, lien, Liability, adverse claim, levy, charge, easement, right of way,
covenant, restriction, or other encumbrance, third-party right or retained right
of any kind whatsoever, or any conditional sale agreement.
     “FDA” means the United States Food and Drug Administration.
     “Governmental or Regulatory Authority” means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision
thereof.
     “Know-How” means all Product(s) specifications; manufacturing, physical
chemistry and formulation know-how; analytical testing methods and validations;
technical knowledge; practices and procedures; formulae; confidential
information; analytical methodology; processes; methods; preclinical, clinical,
stability and other data and results; market studies; and all other experience
and know-how, in each case in tangible form, whether or not patentable, with
respect to the Product(s).

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     “Law” means any federal, state or local law, statute or ordinance or any
rule, regulation, or published guidelines promulgated by any Governmental or
Regulatory Authority, including all regulations and guidances of the FDA or the
DEA.
     “Liability” means any obligations, debts or liability (whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, matured or unmatured, determinable or
undeterminable, and due or to become due).
     “Manufacturing Agreement” means the Manufacturing Agreement attached hereto
as Exhibit C between the Parties containing terms mutually acceptable to both
Parties involving the exclusive right of Vintage to manufacture and supply the
Product(s) to Cornerstone for a five (5) year period.
     “Marketing Materials” means all marketing and promotional materials useable
with respect to the marketing and sale of the Product(s) to the extent such
materials are within the possession of Vintage.
     “Net Sales of the Product(s)” means the gross amount invoiced by
Cornerstone or its Affiliates for sales of the Product(s) to third persons (not
including an Affiliate of Cornerstone), less (i) trade, quantity and/or cash
discounts actually allowed; (ii) discounts, refunds, rebates, chargebacks,
retroactive price adjustments and any other allowances, credits or payments
which effectively reduce the net selling price; (iii) accruals for Product(s)
returns and allowances, up to an annual maximum of [***] percent ([***]%); and
(iv) the Product Price, as defined in the Manufacturing Agreement. Inter-company
accruals will not be considered in the calculation of “Net Sales.” With respect
to accruals for Product(s) returns and allowances, within sixty (60) after the
end of each calendar year, the parties shall reconcile such actual Product
returns and allowances with the estimated accruals. In the event such accruals
are greater than the actual returns and allowances, Cornerstone shall pay such
additional Royalty Payments as may be due Vintage pursuant to Section 3.03. All
such amounts and calculations will be determined from books and records
maintained in accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”).
     “Order” means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
     “Party” means each of Cornerstone and Vintage and “Parties” mean
Cornerstone and Vintage collectively.
     “Patents” means all U.S. patents, patent applications, and statutory
invention registrations (including any provisional applications and invention
disclosures) with respect to the Product(s).
     “Person” means any natural person, corporation, general partnership,
limited partnership, limited liability company, joint venture, proprietorship,
other business organization, trust, association, or other entity, or any
Governmental or Regulatory Authority.
 
[***] Confidential portions of the exhibit have been omitted and filed
separately with the Securities and Exchange Commission.

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     “Product(s)” means Propoxyphene Napsylate and APAP 100/325mg Tablets and
Propoxyphene Napsylate and APAP 100/500mg Tablets, and Product(s) means either
of them.
     “Product(s) Intellectual Property” means any and all of the following,
intellectual property rights owned or licensed by Vintage that are used or
useful in the manufacture, sale, use, promotion, marketing and/or distribution
of the Product(s): (i) Patents; (ii) Know-How; (iii) copyrights in any
copyrightable Marketing Material; (iv) the Product(s) Trademarks; and (v) any
trade dress related to the Product(s).
     “Purchased Assets” means the following: (i) all rights, title and interest
in and to the Product(s), including all rights to the promotion, marketing,
sale, distribution and manufacturing thereof; (ii) the Product(s) Intellectual
Property, (iii) the Marketing Materials; and (iv) the Books and Records. For
purposes of clarification, the Purchased Assets do not include equipment.
     “Trademarks” means all United States trademarks, trade names, brand names,
logotypes, symbols, service marks, designs, and trade names related to the
Product(s).
     “Vintage’s Transfer Letter to the FDA” means the letter attached hereto as
Exhibit A-2 and incorporated herein by reference notifying the FDA of the change
in ownership of the Product(s) ANDA(S), which shall be sent to the FDA upon
Cornerstone’s payment in full of the Deferred Purchase Price.
     Section 1.02 Construction of Certain Terms and Phrases.
     Unless the context of this Agreement otherwise requires, when used in this
Agreement: (a) words of any gender include each other gender; (b) the terms
“hereof,” “herein,” “hereto,” “hereby” and derivative or similar words refer to
this entire Agreement; (c) the term “including,” “include” or “includes” shall
be deemed to be followed by “without limitation”; and (d) references to currency
means U.S. Dollars. Whenever this Agreement refers to a number of days, such
number shall refer to calendar days unless business days are specified. This
Agreement shall be deemed to be drafted jointly by all the Parties and shall not
be specifically construed against any Party hereto based on any claim that such
Party or its counsel drafted this Agreement.
ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
     Section 2.01 Purchase and Sale of Purchased Assets.
     Subject to the terms and conditions of this Agreement, at the Closing,
Vintage shall sell, transfer, convey, assign and deliver to Cornerstone, free
and clear from all Encumbrances (except with respect to Vintage), and
Cornerstone shall purchase, acquire and accept from Vintage, all right, title
and interest, as of the Closing, in and to the Purchased Assets in existence as
of the Closing Date.

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ARTICLE III
CONSIDERATION
     Section 3.01 Purchase Price.
     Subject to the provisions of 3.02 below, the purchase price payable by
Cornerstone to Vintage for the Purchased Assets shall be the total sum of Eight
Million Dollars ($8,000,000.00) (the “Purchase Price”).
     Section 3.02 Payment of Purchase Price.
     Cornerstone shall pay Vintage the Purchase Price as follows:
          (i) Cornerstone shall pay Vintage $5,000,000.00 (U.S.) at the Closing
in immediately available funds by wire transfer into a bank account designated
by Vintage (the “Closing Payment”), (ii) $1,500,000.00 (U.S.) shall be payable
by Cornerstone to Vintage on or before January 15, 2005, and (iii) $1,500,000
(U.S.) shall be payable by Cornerstone to Vintage on or before July 15, 2005
(subsections (ii) and (iii) collectively, the “Deferred Purchase Price”), also
payable in immediately available funds by wire transfer into a bank account
designated by Vintage. At the Closing, Cornerstone shall execute and deliver to
Vintage an executed promissory note evidencing its obligation to pay Vintage the
Deferred Purchase Price, which promissory note shall be substantially in the
form and content attached hereto as Exhibit D (the “Secured Promissory Note”).
The Secured Promissory Note shall be guaranteed by Cornerstone Pharmaceuticals
Holdings, Ltd. as provided in the Guaranty Agreement attached hereto as
Exhibit E. In addition, Cornerstone’s obligations under the Secured Promissory
Note shall be secured by a first priority security lien on the Purchased Assets
in favor of Vintage.
     Section 3.03 Royalty Payments.
     (a) Cornerstone shall accrue and owe a royalty to Vintage equal to [***]
percent ([***]%) of Net Sales of Product(s) in each Calendar Quarter by
Cornerstone or its Affiliate[s] (collectively referred to as the “Royalty
Payment”).
     (b) Cornerstone shall pay to Vintage the Royalty Payment attributable to
Net Sales of Product(s) made during a Calendar Quarter within sixty (60) days of
the end of such Calendar Quarter. For purposes of this Agreement, a Net Sale of
Product(s) will be deemed to have been made as of the recorded sale date
according to GAAP. Within sixty (60) days of the end of such Calendar Quarter,
Cornerstone shall provide Vintage with a written report detailing the Net Sales
of Product(s) made during the previous Calendar Quarter (each, a “Royalty
Statement”). Cornerstone will pay Royalty Payments (i) in immediately available
funds by wire transfer into a bank account designated by Vintage or (ii) by
check no later than two (2) business days prior to
 
[***] Confidential portions of the exhibit have been omitted and filed
separately with the Securities and Exchange Commission.

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the due date for such Royalty Payment. In the event that the actual Net Sale of
Product(s) cannot be determined by the date a Royalty Payment is due (for
example because final rebate or chargeback numbers have not been confirmed),
Cornerstone shall in good faith estimate such Net Sale, with any true up (either
by credit or additional payment, as applicable) based on the actual Net Sale
amount being made in the Royalty Payment immediately following such
determination. The quarterly report described above shall detail any such true
up described in the preceding sentence.
     Section 3.04 Audit.
     (a) Cornerstone shall maintain appropriate books of account and records, in
accordance with GAAP, which shall include inventory records, and shall make
accurate entries concerning all transactions relevant to this Agreement.
     (b) Vintage shall have the right for two (2) years after any Royalty
Payment (or, in the event of a dispute involving in any way those books of
account and records with respect to a Royalty Payment, for two (2) years after
the dispute is resolved), on reasonable notice to Cornerstone, to inspect and
examine Cornerstone’s books of account and records and other documents
(including, without limitation, vouchers, records, purchase orders, sales orders
and re-orders) relating to the Net Sales of Products to the extent necessary to
verify the accuracy of the Royalty Payments made under this Agreement.
     (c) Cornerstone shall keep the books of account and records referenced in
Section 3.03(a) available during the period of Vintage’s inspection rights set
forth in Section 3.03(b).
     (d) If, upon inspection of the books of account and records of Cornerstone,
Vintage discovers that it did not receive the correct Royalty Payment, Vintage
shall notify Cornerstone in writing of such discovery. In the event Cornerstone
disagrees with such discovery, the Parties shall negotiate in good faith to
resolve such dispute. Within thirty (30) days of receipt of Vintage’s notice or,
in the case of dispute, within thirty (30) days of resolution of such dispute,
Cornerstone shall pay to Vintage the difference between what was paid and what
should have been paid. If the difference of the underpayment exceeds five per
cent (5%) of the Royalty Payment owed, then Cornerstone shall bear Vintage’s
reasonable costs in connection with such inspection, including all reasonable
legal and auditors fees. If Vintage’s inspection of the books of account and
records reveals that Cornerstone overpaid a Royalty Payment, Vintage shall pay
to Cornerstone such overpayment within thirty (30) days of the discovery of such
overpayment.
     Section 3.05 Authorized Generic.
     (a) The parties agree Vintage (or one of its affiliates) has the exclusive
right to manufacture and market an authorized generic version of the Product(s)
from time to time after a competing product with identical active ingredients
and concentrations has been approved by FDA and has been commercially offered
and/or marketed by a competing company. Vintage (or its affiliate) may market an
authorized generic sooner if mutually agreed upon in writing. If and when
Vintage manufactures and markets an authorized generic version of the
Product(s),

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Vintage and Cornerstone agree to divide the net profits derived from such
marketing efforts [***]% due Vintage and [***]% due Cornerstone (the “Profit
Split”). Net profits shall be defined as the number of pieces invoiced (and
shipped), multiplied by the net dollar amount for which each piece was sold,
which shall equal gross dollars, from which shall be deducted: cash discounts,
contractual rebates, CMS rebates, returns, chargebacks, and the Product Price
(as defined in the Manufacturing Agreement).
     (b) Cornerstone shall have the right for two (2) years after any payment
from the Profit Split resulting from the genericization of products (or, in the
event of a dispute involving in any way those books of account and records with
respect to a Profit Split, for two (2) years after the dispute is resolved), on
reasonable notice to Vintage, to inspect and examine the appropriate Vintage
affiliate’s books of account and records and other documents (including, without
limitation, vouchers, records, purchase orders, sales orders and re-orders)
relating to the Net Profit Payments to the extent necessary to verify the
accuracy of the Profit Split made under this Agreement.
ARTICLE IV
CLOSING
     Section 4.01 Time and Place.
     The closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place on the third (3rd) business day after the
satisfaction of the conditions set forth in Section 4.02 hereof, (the “Closing
Date”) but no later than July 20, 2004.
     Section 4.02 Conditions Precedent.
     (a) Conditions Precedent to Cornerstone’s Obligations. All obligations of
Cornerstone to close the transactions contemplated under this Agreement are
subject to the fulfillment or satisfaction of each of the following conditions
precedent:
     (i) Representations and Warranties True as of the Closing Date. The
representations and warranties of Vintage contained in this Agreement, the
Manufacturing Agreement and in any schedule, certificate or document delivered
by Vintage to Cornerstone pursuant to the provisions hereof or thereof will have
been true on the date hereof and will be true on the Closing Date with the same
effect as though such representations and warranties were made as of the Closing
Date.
     (ii) Compliance with this Agreement. Vintage will have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or by the Closing Date.
     (iii) Manufacturing Agreement. The Parties will have entered into the
Manufacturing Agreement.
 
[***] Confidential portions of the exhibit have been omitted and filed
separately with the Securities and Exchange Commission.

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     (b) Conditions Precedent to Vintage’s Obligations. All obligations of
Vintage to close the transactions contemplated under this Agreement are subject
to the fulfillment or satisfaction of each of the following conditions
precedent:
     (i) Representations and Warranties True as of the Closing Date. The
representations and warranties of Cornerstone contained in this Agreement, the
Manufacturing Agreement, and in any schedule, certificate or document delivered
by Cornerstone to Vintage pursuant to the provisions hereof will have been true
on the date hereof and will be true on the Closing Date with the same effect as
though such representations and warranties were made as of the Closing Date.
     (ii) Compliance with this Agreement. Cornerstone will have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or by the Closing Date.
     (iii) Manufacturing Agreement. The Parties will have entered into the
Manufacturing Agreement.
     Section 4.03 Closing Date.
     Each Party hereby agrees to use commercially reasonable efforts to
consummate the transactions contemplated herein as soon as practicable but in no
event later than July 15, 2004. Termination of this Agreement shall not relieve
the Parties of any obligation accruing prior to such termination or any breach
of any term of this Agreement prior to such termination. The rights and
obligations of the Parties under Sections 7.05 and this 4.03 and Articles V, VI
and VIII of this Agreement shall survive the expiration or termination of this
Agreement.
     Section 4.04 Deliveries at Closing.
     (a) Closing Deliveries by Vintage. At or as part of the Closing, Vintage
shall deliver or cause to be delivered to Cornerstone:
     (i) To the extent not previously delivered to Cornerstone, physical
possession (or implement arrangements satisfactory to Cornerstone of transfer
and delivery of physical possession) of all tangible personal property included
in the Purchased Assets;
     (ii) The Manufacturing Agreement duly executed by an authorized
representative of Vintage;
     (iii) a Bill of Sale and Assignment duly executed by an authorized
representative of Vintage with respect to the Purchased Assets in existence as
of the Closing;

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     (iv) a certificate executed by an officer of Vintage, certifying in such
detail as Cornerstone may reasonably request that the conditions specified in
Sections 4.02(b)(i) and (ii), above, have been fulfilled; and
     (v) such other documents, instruments and certificates as Cornerstone and
Vintage may mutually agree upon.
     (b) Closing Deliveries by Cornerstone. At the Closing, Cornerstone shall
deliver or cause to be delivered to Vintage:
     (i) the Closing Payment;
     (ii) the Secured Promissory Note and Security Agreement, duly executed by
an authorized representative of Cornerstone;
     (iii) the Guaranty Agreement duly executed by an authorized representative
of Cornerstone Pharmaceutical Holdings, Ltd.;
     (iv) the Loan Documents (as defined in the Secured Promissory Note) duly
executed by an authorized representative of Cornerstone;
     (v) the Manufacturing Agreement duly executed by an authorized
representative of Cornerstone;
     (vi) a certificate executed by an officer of Cornerstone, certifying in
such detail as Vintage may reasonably request that the conditions specified in
Sections 4.02(a)(i) and (v), above, have been fulfilled;
     (vii) such UCC filings as may be necessary for Vintage to hold a valid,
first priority security interest in and to the Purchased Assets as collateral
for Cornerstone’s obligation to pay the Deferred Purchase Price; and
     (viii) such other documents, instruments and certificates as Cornerstone
and Vintage may mutually agree upon.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF VINTAGE
     Vintage represents and warrants to Cornerstone, as follows:
     Section 5.01 Organization.
     Vintage is a limited liability company duly organized, validly existing and
in good standing under the laws of the state of its organization and has all
requisite power and authority to own the Purchased Assets. Vintage is duly
qualified to conduct its business and is in good standing in each jurisdiction
where the nature of such business requires such qualification, except

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for any jurisdiction where failure to so qualify would not have a material
adverse effect or materially impair or delay Vintage’s ability to perform its
obligations hereunder.
     Section 5.02 Authority of Vintage.
     Vintage has all necessary power and authority to enter into this Agreement
and to carry out the transactions contemplated hereby. Vintage has taken all
action required by Law, its certificate of organization, operating agreement or
otherwise to be taken by it to authorize the execution and delivery of this
Agreement by Vintage and the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Vintage and, when duly authorized, executed and delivered by Cornerstone, will
constitute a legal, valid and binding obligation of Vintage enforceable against
it in accordance with its terms except as limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally.
     Section 5.03 Consents and Approvals.
     Except for Vintage’s Transfer Letter to the FDA, no consents, waivers,
approvals, Orders or authorizations of, or registrations, declarations or
filings with, any Governmental or Regulatory Authority, or by any customer,
supplier or other third party, are required by or with respect to Vintage in
connection with the execution and delivery of this Agreement by Vintage or the
performance of its obligations hereunder, except for such consents, waivers,
approvals, Orders or authorizations the failure to obtain which, and such
registrations, declarations or filings the failure to make which, would not have
a material adverse effect or materially impair or delay Vintage’s ability to
perform its obligations hereunder.
     Section 5.04 Non-Contravention.
     The execution and delivery by Vintage of this Agreement does not, and the
performance by it of its obligations under this Agreement and the consummation
of the transactions contemplated hereby will not: (a) conflict with or result in
a violation or breach of any of the terms, conditions or provisions of the
certificate of organization, operating agreement, or other organizational
documents of Vintage; or (b) conflict with or result in a violation or breach of
any term or provision of any Law applicable to Vintage, the Product(s) or the
Purchased Assets.
     Section 5.05 Material Contracts.
     Except as set forth on Schedule 5.05, Vintage is not a party to any
Contracts that relate to (i) the manufacture, marketing, sale or distribution of
the Product(s); (ii) the sale, licensing out, or assignment of the Purchased
Assets; or (iii) sales of Product(s) to any Governmental or Regulatory
Authority.

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     Section 5.06 Intellectual Property Rights.
     Neither the Product(s) Intellectual Property, the use of Product(s)
Intellectual Property nor the Product(s), infringe or misappropriate the
intellectual property rights of any third party, and Vintage has not received
any written notice from any Person of any claims of infringement or
misappropriation with respect thereto. In addition, all Trademarks included in
the Produces) Intellectual Property, if any, are the subject of current
registrations. There are no third-party rights in Vintage’s current
registrations relating to the Product(s) Trademarks. There is not any prior use,
infringement, piracy or counterfeiting of such Product(s) Trademarks, any
superior rights by any third party in such Product(s) Trademarks, or any adverse
claims pertaining to such Product(s) Trademarks.
     Section 5.07 Litigation.
     There are no Actions or Proceedings pending, threatened or reasonably
anticipated against Vintage that relate to (a) the Purchased Assets; (b) this
Agreement; (c) the transactions contemplated by this Agreement; or (d) the
Product(s). Vintage is not subject to any Order that could reasonably be
expected to materially impair or delay the ability of Vintage to perform its
obligations hereunder.
     Section 5.08 Compliance with Law.
     Vintage has been in compliance with all applicable Laws with respect to the
Product(s), and Vintage has not received any written notice alleging any
violation of such Laws with respect to the Product(s).
     Section 5.09 Purchased Assets.
     Vintage is the sole and exclusive legal, and equitable owner of the
Purchased Assets and has good and marketable title to the Purchased Assets free
and clear of any Encumbrances. Vintage has the legal right and ability to
transfer the Purchased Assets to Cornerstone, and, upon the Closing, shall
transfer to good and marketable title to the Purchased Assets free and clear of
any Encumbrances.
     Section 5.10 Regulatory Matters.
     The Product(s) ANDA(S) contains no material error or omission. Vintage has
made available to Cornerstone complete and correct copies of the Product(s)
ANDA(S). Except as set forth in Schedule 5.10, Vintage has not received or been
subject to: (i) any FDA Form 483s relating to the Product(s); (ii) any FDA
Notices of Adverse Findings relating to the Product(s); or (iii) any warning
letters or other written correspondence from the FDA or any other Governmental
or Regulatory Authority concerning the Product(s). Furthermore, Vintage
represents that its manufacturing facilities used to manufacture the Product(s)
will be considered in substantial compliance with FDA GMP’s at time of Closing.
Vintage will manage and maintain the ANDA(S) up until the transfer letter is
sent to the FDA. Following the actual

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transfer of the ANDA(S), Cornerstone and Vintage may agree to have the ANDA(S)
managed and maintained by Vintage at such terms and price as mutually agreed to
by the parties.
     Section 5.11 Brokers.
     Vintage has not retained any broker in connection with the transactions
contemplated hereunder.
     Section 5.12 No Non-Competition Agreements or Preferential Obligations.
     The Purchased Assets are not subject to any non-competition agreements
with, or other agreements granting preferential rights to purchase or license
the Purchased Assets to, any third Persons.
     Section 5.13 Exclusive Representations and Warranties.
     EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE MANUFACTURING
AGREEMENT, VINTAGE MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND VINTAGE
SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES, INCLUDING
ANY IMPLIED WARRANTY OF MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE AND WARRANTY OF NON-INFRINGEMENT.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF CORNERSTONE
     Cornerstone represents and warrants to Vintage as follows:
     Section 6.01 Corporate Organization.
     Cornerstone is a corporation duly organized, validly existing and in good
standing, under the laws of the jurisdiction of its incorporation and has all
requisite power and authority to own its assets and carry on its business as
currently conducted by it. Cornerstone is duly qualified to conduct its business
and is in good standing in each jurisdiction where the nature of the business
conducted by it requires such qualification, except where failure to so qualify
could not reasonably be expected, individually or in the aggregate, to have a
material adverse effect on or materially impair or delay Cornerstone’s ability
to perform its obligations hereunder.
     Section 6.02 Authority of Cornerstone.
     Cornerstone has all necessary power and authority to enter into this
Agreement and to carry out the transactions contemplated hereby. Cornerstone has
taken all action required by Law, its by-laws, or otherwise to be taken by it to
authorize the execution and delivery of this Agreement by Cornerstone and the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Cornerstone and, when duly

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authorized, executed and delivered by Vintage, will constitute a legal, valid
and binding obligation of Cornerstone enforceable against it in accordance with
its terms except as limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally.
     Section 6.03 Consents and Approvals.
     Except for Cornerstone’s Transfer Letter to the FDA, no consents, waivers,
approvals, Orders or authorizations of, or registrations, declarations or
filings with, any Governmental or Regulatory Authority are required by
Cornerstone in connection with the execution and delivery of this Agreement by
Cornerstone or the performance of its obligations hereunder.
     Section 6.04 Non-Contravention.
     The execution and delivery by Cornerstone of this Agreement does not, and
the performance by it of its obligations under this Agreement and the
consummation of the transactions contemplated hereby will not: (a) conflict with
or result in a violation or breach of any of the terms, conditions or provisions
of the certificate of organization, operating agreement or other organizational
documents of Cornerstone; (b) conflict with or result in a violation or breach
of any terra or provision of any Law applicable to Cornerstone; or (c) conflict
with or result in a breach or default (or an event which, with notice or lapse
of time or both, would constitute a breach or default) under, or result in the
termination or cancellation of, or accelerate the performance required by, or
result in the creation or imposition of any security interest, lien or any other
Encumbrance upon any Contract to which Cornerstone is a party or by which
Cornerstone or any of its assets is bound.
     Section 6.05 Litigation.
     There are no Actions or Proceedings pending or, to the knowledge of
Cornerstone threatened or reasonably anticipated against Cornerstone which if
adversely determined would delay the ability of Cornerstone to perform its
obligations hereunder.
     Section 6.06 Brokers.
     Cornerstone has not retained any broker in connection with the transactions
contemplated hereunder.
     Section 6.07 Exclusive Representations and Warranties.
     EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE MANUFACTURING
AGREEMENT, CORNERSTONE MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND CORNERSTONE
SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES, INCLUDING
ANY IMPLIED WARRANTY OF MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR.
PURPOSE AND WARRANTY OF NON-INFRINGEMENT.

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ARTICLE VII
COVENANTS OF THE PARTIES
     Section 7.01 Cooperation.
     Each Party shall reasonably cooperate with the other in preparing and
filing all notices, applications, submissions, reports and other instruments and
documents that are necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by this Agreement,
including Vintage’s reasonable cooperation in the efforts of Cornerstone to
obtain any consents and approvals of any Governmental or Regulatory Authority
required for Cornerstone to be able to sell the Product(s).
     Section 7.02 Bulk Sales.
     Cornerstone and Vintage waive compliance with all bulk sales Law applicable
to the transactions contemplated by this Agreement.
     Section 7.03 Regulatory Matters.
     From and after the transfer by Vintage to Cornerstone of the Product(s)
ANDA(S) pursuant to the terms hereof, Cornerstone, at its cost, shall be solely
responsible for (i) taking all actions, paying all fees (except to the extent
such fee accrued prior to the Closing Date) and conducting all communication
with the appropriate Governmental or Regulatory Authority in respect of the
Product(s) ANDA(S) and the Product(s), including preparing and filing all
reports (including adverse drug experience reports) with the appropriate
Governmental or Regulatory Authority; (ii) taking all actions and conducting all
communication with third parties in respect of Product(s) sold pursuant to the
Product(s) ANDA(S), including responding to all complaints and medical inquiries
in respect thereof, including complaints related to tampering or contamination;
(iii) investigating all complaints and adverse drag experiences in respect of
Product(s) sold pursuant to the Product(s) ANDA(S); and (iv) filing all annual
reports, field alerts, and any and all other reports as may be required from
time to time by the FDA. Without limiting the foregoing, prior to the Closing
Date, Vintage shall regularly consult with Cornerstone about all regulatory
matters and decisions related to the Product(s) and the Product(s) ANDA(S).
     Vintage will manufacture the Product(s) according to the approved
formulations and specifications in accordance with the terms of the
Manufacturing Agreement. Any changes to the formulations and/or specifications
submitted and/or approved by FDA will be communicated by Cornerstone to Vintage
in writing. Furthermore, Cornerstone will not request any supplemental changes
to the approved ANDAs without first consulting with Vintage, and obtaining
approval from Vintage, which will not be unreasonably withheld.
     Section 7.04 Further Assurances.
     On and after the Closing, Vintage shall from time to time, at the request
of Cornerstone, execute and deliver, or cause to be executed and delivered, such
other instruments of conveyance

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and transfer and take such other actions as Cornerstone may reasonably request,
in order to more effectively consummate the transactions contemplated hereby and
to vest in Cornerstone good and marketable title to the Purchased Assets
(including assistance in the collection or reduction to possession of any of the
Purchased Assets).
     Section 7.05 Indemnification.
     (a) By Vintage. Vintage shall indemnify, reimburse, and hold harmless
Cornerstone, its Affiliates, and their respective employees, agents, and
contractors from and against any and all costs, losses, Liabilities, damages,
pending, threatened or concluded lawsuits, deficiencies, claims and expenses
(including reasonable fees and disbursements of attorneys) (collectively, the
“Damages”) to the extent such Damages are incurred in connection with or arise
out of (i) any material breach of any representation, warranty, covenant or
agreement of Vintage herein; (ii) the gross negligence or willful misconduct of
Vintage, its employees, agents or contractors; and (iii) liabilities related to
the Product(s)s or Purchased Assets incurred prior to the Closing Date.
     (b) By Cornerstone. Cornerstone shall indemnify, reimburse, and hold
harmless Vintage, its Affiliates and their respective employees, agents, and
contractors from and against any and all Damages to the extent such Damages are
incurred in connection with or arise out of (i) any material breach of any
representation, warranty, covenant or agreement of Cornerstone herein; (ii) the
gross negligence or willful misconduct of Cornerstone, its employees, agents or
contractors (other than Vintage); and (iii) Cornerstone’s manufacturing,
storage, marketing, promotion, sale or distribution of the Product(s) after the
Closing Date.
     (c) Damages Net of Insurance; Limitations on Liability. The amount of any
Damages for which indemnification is provided under this Article VII shall be
net of any amounts recovered by the Person receiving such indemnification under
insurance policies with respect to such Damages except to the extent such
recovered amounts are from indemnified Person’s or its Affiliates’ self
insurance programs. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR INCIDENTAL,
INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), NO MATTER HOW SUCH DAMAGES OR LOST PROFITS ARE INCURRED INCLUDING A
PARTY’S, OR ITS EMPLOYEES’, AGENTS’ OR CONTRACTORS’ NEGLIGENCE.
     Section 7.06 Manufacturing Agreement
     The Parties shall enter into the Manufacturing Agreement on or before the
Closing Date.
     Section 7.07 Governmental Filings.
     Each Party will prepare and file whatever filings, requests or applications
that are required to be filed with any Governmental or Regulatory Authority in
connection with the consummation of the transactions contemplated by this
Agreement.

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     Section 7.08 Marketing of the Products.
     Cornerstone agrees to use commercially reasonable efforts to market,
promote and sell the Products. “Commercially reasonable efforts” shall include
but not be limited to Cornerstone’s continued employment of a minimum of fifty
(50) detail field representatives dedicated to the sale, promotion and marketing
of the Products, Cornerstone’s use of the Marketing Materials and development
and distribution of other promotional materials, and such other marketing and
sales methods commonly utilized in the industry to actively market, promote and
sell pharmaceutical products similar to the Products. Cornerstone shall have
until, but no later than, January 1, 2005 to have a sales force in place.
     Section 7.09 Transfer Letters.
     Provided that no Event of Default (as defined in the Secured Promissory
Note) has occurred or is occurring, upon Cornerstone’s payment in full of the
Deferred Purchase Price to Vintage, Cornerstone shall be entitled to send
Cornerstone’s Transfer Letter to the FDA and Vintage shall send Vintage’s
Transfer Letter to the FDA. Cornerstone shall not send Cornerstone’s Transfer
Letter to the FDA unless and until (a) no Event of Default is occurring under
the Secured Promissory Note, and (b) the Deferred Purchase Price has been paid
in full by Cornerstone to Vintage.
ARTICLE VIII
MISCELLANEOUS
     Section 8.01 Notices.
     All notices, requests and other communications hereunder must be in writing
and will be deemed to have been duly given only if delivered personally against
written receipt or by facsimile transmission with answer back confirmation or
mailed (postage prepaid by certified or registered mail, return receipt
requested) or by nationally recognized overnight courier that maintains records
of delivery to the Parties at the following addresses or facsimile numbers:
If to Cornerstone to:
Cornerstone Pharmaceuticals, Ltd.
8000 Regency Parkway, Suite 430
Cary, North Carolina 27511
Attn: Craig Collard
Telephone: (919) 462-0565
Facsimile: (919)462-0566

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With a copy to:
Pesin & Associates, P.C.
27368 Via Industria, Suite 113
Temecula, CA 92590
Attn.: Philip Pesin
Telephone: 951-719-1104
Facsimile: 951-719-1139
If to Vintage to:
Vintage Pharmaceuticals, LLC
130 Vintage Drive
Huntsville, Alabama 35811
Attn: William S. Propst, Jr.
Telephone: (256) 859-4011
Facsimile: (256) 859-2903
With a copy to:
Seyfarth Shaw LLP
55 E. Monroe Street
Suite 4200
Chicago, IL 60603
Attn: Michel J. Feldman
Telephone: (312) 781-8613
Facsimile: (312) 269-8869
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section, be deemed given upon
receipt, (b) if delivered by facsimile to the facsimile number as provided in
this Section, be deemed given upon receipt by the sender of the answer back
confirmation and (c) if delivered by mail in the manner described above or by
overnight courier to the address as provided in this Section, be deemed given
upon receipt. Any Party from time to time may change its address, facsimile
number or other information for the purpose of notices to that Party by giving
notice specifying such change to the other Party hereto in accordance with the
terms of this Section.
     Section 8.02 Entire Agreement.
     This Agreement and the Manufacturing Agreement supersede all prior
discussions and agreement both written and oral, among the Parties with respect
to the subject matter hereof and contain the sole and entire agreement among the
Parties with respect to the subject matter hereof.

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     Section 8.03 Waiver.
     Any term or condition of this Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the Party waiving such term or condition. No waiver by any Party of any term
or condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.
     Section 8.04 Amendment
     This Agreement may be amended, supplemented or modified only by a written
instrument duly executed by each Party.
     Section 8.05 Third Party Beneficiaries.
     Except as expressly set forth in this Agreement, the terms and provisions
of this Agreement (and all Exhibits and Schedules attached hereto and all other
documents delivered in connection herewith) are intended solely for the benefit
of each Party and their respective successors or permitted assigns and it is not
the intention of the Parties to confer third-party beneficiary rights or
remedies hereunder or thereunder upon any other Person.
     Section 8.06 Assignment; Binding Effect.
     Neither this Agreement nor any right, interest or obligation hereunder may
be assigned by any Party without the prior written consent of the other Party,
which consent shall not be unreasonably withheld or delayed.
     Section 8.07 Headings.
     The headings used in this Agreement have been inserted for convenience of
reference only and do not define or limit the provisions hereof.
     Section 8.08 Severability.
     If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective while this Agreement
remains in effect, the legality, validity and enforceability of the remaining
provisions will not be affected thereby.
     Section 8.09 Governing Law.
     This Agreement shall be governed by and construed in accordance with the
laws of the State of Alabama applicable to contracts executed and performed in
such state, without giving effect to the conflicts of laws principles.

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     Section 8.10 Expenses.
     Except as otherwise provided in this Agreement, each Party shall pay its
own expenses and costs incidental to the preparation of this Agreement and to
the consummation of the transactions contemplated hereby.
     Section 8.11 Counterparts.
     This Agreement may be executed in any number of counterparts and by
facsimile, each of which will be deemed an original, but all of whim together
will constitute one and the same instrument.
     Section 8.12 Publicity.
     Neither Party shall issue a press release or make any public announcement
with respect to this Agreement and the transactions contemplated hereby without
the other Party’s prior written consent.
[Signature Page Follows]

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     IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto
all as of the date first above written,

            VINTAGE PHARMACEUTICALS, LLC
      By:   /s/ William S. Propst, Jr.         Name:   William S. Propst, Jr.   
    Title:   President     

            CORNERSTONE PHARMACEUTICALS, LTD.
      By:   /s/ Craig Collard         Name:   Craig Collard        Title:  
President and CEO     

[Signature Page to Asset Purchase Agreement]

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Exhibit A-l
[CORNERSTONE LETTERHEAD]
[Date]
Mr. Gary J. Buehler, Director
Office of Generic Drugs
Center for Drug Evaluation and Research
Food and Drug Administration
Metro Park North II, Room 150
7500 Standish Place
Rockville, Maryland 20855

Re:   ANDA 76-743, Propoxyphene napsylate and acetaminophen (100mg/325mg); ANDA
76-750, Propoxyphene napsylate and acetaminophen (100mg/500mg); Transfer of
Ownership of ANDAs

Dear Mr. Buehler:
Reference is made to the Vintage Pharmaceuticals, LLC (“Vintage”) letter dated
                    , 200_, which transferred ownership of ANDA 76-743 and ANDA
76-750 to Cornerstone Pharmaceuticals, Ltd., 8000 Regency Parkway, Suite 430,
Cary, North Carolina 27511 effective                     , 200_. A copy of that
letter is included herein as reference. In accordance with the provisions of 21
CFR §314.72, notification of a change in ownership of the above-identified
Abbreviated New Drug Application is hereby given. The transfer of ownership of
the approved application from Vintage Pharmaceuticals, LLC (“Vintage”) to
Cornerstone Pharmaceuticals, Ltd. is effective                     , 200_.
Accompanying this letter is a completed Form FDA 356h for these ANDAs. As
further required by the regulations as codified under 21 CFR §314.72,
Cornerstone Pharmaceuticals, Ltd. wishes to inform the Agency that it fully
intends to abide by all agreements, promises, and conditions made by the former
owners, Vintage, as stated in the application. Vintage will be providing a
complete copy of the application, supplements and associated records as required
under 21 CFR §314.81, to Cornerstone Pharmaceuticals, Ltd. No imminent changes
to the application are anticipated; however, should changes to the application
become appropriate, Cornerstone Pharmaceuticals, Ltd. agrees to notify the
Agency of said changes in accordance with the regulations set forth in 21 CFR
§314.70.

 

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All future communication and correspondence related to the subject ANDAs should
be directed to the attention of:

         
 
 
 
   
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
       
 
  Sincerely,    
 
         
 
       
 
       
 
       
 
       
Enclosure
       

2

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Exhibit A-2
[VINTAGE LETTER]
[Date]
Mr. Gary J. Buehler, Director
Office of Generic Drugs
Center for Drug Evaluation and Research
Food and Drug Administration
Metro Park North II, Room 150
7500 Standish Place
Rockville, Maryland 20855

Re:   ANDA 76-743, Propoxyphene napsylate and acetaminophen (100mg/325mg); ANDA
76-750, Propoxyphene napsylate and acetaminophen (100mg/500mg) Transfer of
Ownership of ANDAs

Dear Mr. Buehler:
As required by 21 CFR §314.72(a)(l), Vintage Pharmaceuticals, LLC is providing
notification that all rights to the above-referenced ANDA were transferred to:
Cornerstone Pharmaceuticals, Ltd.
8000 Regency Parkway, Suite 430
Cary, North Carolina 27511
The change in ownership of the application is effective                     ,
200_.
Vintage Pharmaceuticals, LLC will deliver to Cornerstone Pharmaceuticals, Ltd. a
complete copy of the application, including supplements and records that are
required to be kept under 21 CFR §413.81.
We have been advised by Cornerstone Pharmaceuticals, Ltd. That they will send
the necessary correspondence to FDA as required in 21 CFR §314.72(a)(2) and
314.72(b).

 

--------------------------------------------------------------------------------

 

Further questions, comments, or correspondence may be directed to:
Craig A. Collard                                             
Cornerstone Pharmaceuticals, Ltd.
8000 Regency Parkway, Suite 430
Cary, North Carolina 27511

     
 
  Sincerely,
 
   
 
  William S. Propst
 
  President, Vintage Pharmaceuticals, LLC

Cc: Craig Collard

2

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Exhibit B
Vintage Bill of Sale
BILL OF SALE
     KNOW ALL BY THESE PRESENTS, that for good and valuable consideration
described in the Asset Purchase Agreement (hereafter defined), the receipt and
sufficiency of which are hereby acknowledged, Vintage Pharmaceuticals, LLC, a
Delaware limited liability company with offices located at 130 Vintage Drive,
Huntsville, Alabama (“Vintage”), does hereby assign, sell, convey, transfer and
deliver to Cornerstone Pharmaceuticals, Ltd., a corporation organized and
existing under the laws of Anguilla with offices located at 8000 Regency
Parkway, Suite 430, Cary, NC 27511 (“Cornerstone”), free and clear of
Encumbrances other than Permitted Encumbrances, all of Vintage’s right, title
and interest in and to the Purchased Assets.
     This Bill of Sale is being delivered to Cornerstone pursuant to that
certain Asset Purchase Agreement between Vintage and Cornerstone dated the 20th
day of July, 2004 (the “Asset Purchase Agreement”), and nothing herein shall be
construed as modifying or superseding the terms of the Asset Purchase Agreement
or the Manufacturing Agreement between Vintage and Cornerstone dated the 20th
day of July, 2004, or any document or agreement contemplated by the Asset
Purchase Agreement or Manufacturing Agreement. Capitalized terms not otherwise
defined herein will have the meaning given to them in the Assignment Agreement.
     IN WITNESS WHEREOF, the undersigned duly authorized representative of
Vintage has executed this Bill of Sale effective as of this 20th day of July,
2004.

                  VINTAGE PHARMACEUTICALS, LLC
 
           
 
  By: /s/ William S. Propst, Jr. 
 
     
 
                Printed Name:   William S. Propst, Jr.
 
           
 
  Title:   President

 

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Exhibit C
Manufacturing Agreement

 

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Exhibit D
SECURED PROMISSORY NOTE

      $3,000,000.00 (U.S.)   July 15, 2004

     FOR VALUE RECEIVED, the undersigned, CORNERSTONE PHARMACEUTICALS LTD., an
Anguilla Company company (hereinafter “Borrower”), promises to pay to the order
of VINTAGE PHARMACEUTICALS, LLC, a limited liability company (hereinafter,
“Lender”), at its main office located at 130 Vintage Drive, Huntsville, Alabama
35811, or at such other address as the holder of this Note may from time to time
designate in writing, the principal sum of THREE MILLION AND NO/100 DOLLARS
(U.S.) ($3,000,000.00), together with interest thereon and other agreed charges
as provided herein.
     1. Defined Terms. As used herein, the following terms shall have the
meanings thereafter ascribed:
     “Asset Purchase Agreement” shall mean that certain Asset Purchase Agreement
between Borrower and Lender dated July 15, 2004.
     “Collateral” shall mean the “Purchased Assets,” as defined in the Asset
Purchase Agreement.
     “Deferred Purchase Price” shall have the meaning ascribed to such term in
the Asset Purchase Agreement.
     “Default” shall mean the occurrence of any event which would constitute an
Event of Default but for the giving of any required notice by Borrower or Lender
or the expiration of any stated grace or cure period with respect to such event.
     “Default Rate” shall mean a variable per annum rate of interest equal to
the lesser of (i) two percent (2%) in excess of the Interest Rate, or (ii) the
maximum rate allowed by applicable law.
     “Event of Default” shall have the meaning set forth in Section 7 hereof. An
Event of Default shall “exist” if an Event of Default shall have occurred and is
continuing.
     “Guaranty” shall mean each Guaranty Agreement delivered by a Guarantor in
favor of Lender of even date herewith.
     “Guarantor” shall mean each of Cornerstone Pharmaceuticals Holdings, Ltd.,
an Anquilla limited company, and Carolina Pharmaceuticals Holdings, Ltd., a
Bermuda limited company.
     “Interest Rate” shall mean a fixed per annum rate of interest equal to two
and 50/100 percent (2.5%)

 

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     “Loan” shall mean the loan from Lender to Borrower evidenced by this Note
in the principal amount of $3,000,000.00 (U.S.).
     “Loan Documents” shall mean this Note, the Security Agreement, the Guaranty
and any other documents now or hereafter executed by the Borrower or others
evidencing, securing, or relating to the Loan including, without limitation, the
Asset Purchase Agreement.
     “Maturity Date” shall mean with respect to $1,500,000, January 15, 2005,
and with respect to all remaining amounts due, July 15, 2005.
     “Obligations” shall collectively mean the aggregate of all principal and
interest owing from time to time under this Note and all expenses, fees,
charges, and other amounts from time to time owing under this Note or the other
Loan Documents, and all covenants, agreements, and other obligations from time
to time owing to, or for the benefit of, Lender pursuant to the Loan Documents.
     “Security Agreement” shall mean that certain Security Agreement of even
date herewith by Borrower in favor of Lender, which provides Lender a first
priority security interest in the Collateral.
     2. Interest Rate.
     (a) Except for any period during which the Default Rate is in effect, the
outstanding principal balance hereof will bear interest at the Interest Rate
until paid in full.
     (b) All interest on the outstanding principal amount hereunder, whether
accruing at the Interest Rate or the Default Rate, shall be calculated on a
simple interest basis for a 360-day year by multiplying the outstanding
principal amount by the applicable per annum rate, multiplying the product
thereof by the actual number of days elapsed, and dividing the product so
obtained by 360.
     3. Payments. On the Maturity Date, Borrower shall pay to Lender without
notice or demand, the sum of (i) the entire outstanding principal balance
hereof, plus (ii) all accrued and unpaid interest.
     4. Prepayment. The Loan will be prepayable in whole or in part without
premium. Prepayments will be applied to installments coming due in their inverse
order of maturity. Amounts prepaid may not be reborrowed.
     5. Default Interest; Collection Costs.
     (a) If an Event of Default shall exist hereunder, Borrower agrees to pay
interest to Lender at the Default Rate on the aggregate outstanding Obligations
(excluding accrued interest) until such Obligations are paid in full.
     (b) Lender shall be entitled to recover from Borrower all costs of
collecting, securing or attempting to collect or secure the Obligations,
including, without limitation, court costs and

2

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reasonable attorneys’ fees, including attorneys’ fees for preparation of
litigation and in any appellate or bankruptcy proceedings provided Borrower is
in default of this Agreement.
     6. Security. All Obligations of Borrower are secured and guaranteed by the
Loan Documents and by all collateral described therein.
     7. Events of Default.
     (a) The principal sum evidenced by this Note, together with all accrued but
unpaid interest thereon, shall become immediately due and payable at the option
of Lender upon the occurrence of any of the following events, each of which
shall constitute an “Event of Default” hereunder:
     (1) Nonpayment of Indebtedness. Failure by Borrower to make any scheduled
payment hereunder when due, time being of the essence.
     (2) Voluntary Insolvency Proceedings. The filing by Borrower or Guarantor
of a voluntary petition in bankruptcy or such Borrower’s or Guarantor’s
adjudication as a bankrupt or insolvent, or the filing by Borrower or Guarantor
of any petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief for itself under any present or future federal, state or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, or such Borrower’s or Guarantor’s seeking or consenting to or
acquiescence in the appointment of any trustee, receiver or liquidator of
Borrower or Guarantor, or the making of any general assignment for the benefit
of creditors, or the admission in writing of any inability to pay its debts
generally as they become due.
     (3) Involuntary Insolvency Proceedings. The entry by a court of competent
jurisdiction of an order, judgment, or decree approving a petition filed against
Borrower or Guarantor seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency, or other relief for debtors, which order, judgment or
decree remains unvacated and unstayed for an aggregate of sixty (60) days
(whether or not consecutive) from the date of entry thereof, or the appointment
of any trustee, receiver or liquidator of Borrower or Guarantor, or of a
substantial part of its property, or of any or all of the rents, revenues,
issues, earnings, profits or income thereof, without the consent or acquiescence
of Borrower or Guarantor, which appointment shall remain unvacated and unstayed
for an aggregate of sixty (60) days (whether or not consecutive).
     (4) Misrepresentation. If any certificate, statement, representation,
warranty or audit heretofore or hereafter furnished by or on behalf of Borrower
or Guarantor pursuant to or in connection with the Loan Documents or the Asset
Purchase Agreement (including, without limitation, representations and
warranties contained therein), or as an inducement to Lender to extend any
credit to Borrower or Guarantor or to enter into this or any other agreement
with Borrower or Guarantor, proves to have been false in any material respect at
the time as of which the facts therein set forth were stated or certified,

3

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or if on the date of execution of this Note there shall have been any materially
adverse change in any of the facts previously disclosed by any such certificate,
statement, representation, warranty or audit, which change shall not have been
disclosed to Lender at or prior to the time of such execution.
     (5) Transfer. Except as otherwise contemplated by the Loan Documents, any
sale, conveyance or other transfer by Borrower of any portion of or interest in
the Collateral, which consent may be granted or refused by Lender in its sole
discretion.
     (6) Liens. The creation of or suffering to exist by Borrower of any lien or
encumbrance upon any of the Collateral, other than the lien of the Loan
Documents and other permitted encumbrances thereunder, without the prior written
consent of Lender, which consent may be granted or refused by Lender in its sole
discretion.
     (7) Cross-Default. The occurrence of any “Event of Default” as defined in
any other Loan Document or any breach of the Asset Purchase Agreement by
Borrower.
     (b) Notwithstanding the foregoing, no notice of default shall be required
if Lender is prevented from giving notice by bankruptcy or other applicable law,
and the cure period, if any, specified with respect to such default shall
commence on the date thereof rather than from the date of notice. Nothing herein
shall require any notice to Borrower except as expressly set forth above or in
the other Loan Documents referred to herein.
     8. Usury. In no event shall the amount of interest due or payable hereunder
(including interest calculated at the Default Rate) exceed the maximum rate of
interest allowed by applicable law, and in the event any such payment is
inadvertently paid by Borrower or inadvertently received by Lender, then such
excess sum shall be credited as a payment of principal, unless Lender elects to
have such excess sum refunded to Borrower forthwith, which refund Borrower
hereby agrees to accept. It is the express intent hereof that Borrower not pay
and Lender not receive, directly or indirectly, interest in excess of that which
may be legally paid by Borrower under applicable law.
     9. Relationship of Parties. Borrower and Lender agree that the relationship
between them shall be solely that of debtor and creditor. Nothing contained in
this Note or in any other Loan Document shall be deemed to create a partnership,
tenancy-in-common, joint tenancy, joint venture or co-ownership by or between
Borrower and Lender. Lender shall not be in any way responsible or liable for
debts, losses, obligations or duties of Borrower with respect to the Loan or
otherwise. Borrower, at all times consistent with the terms and provisions of
this Note and the Loan Documents, shall be free to determine and follow their
own policies and practices in the conduct of their business.
     10. Notices. Any notice required herein or by applicable law shall be given
in the manner set forth in the Asset Purchase Agreement.
     11. Miscellaneous.
     (a) All amounts due hereunder shall be payable in lawful money of the
United States of America.

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     (b) With respect to the amounts due under this Note, Borrower waives the
following to the fullest extent permitted by law:
     (1) All rights of exemption of property from levy or sale under execution
or other process for the collection of debts under the Constitution or laws of
the United States or any state thereof;
     (2) Demand, presentment, protest, notice of dishonor, notice of
non-payment, diligence in collection, and all other requirements necessary to
charge or hold the Borrower liable on any obligations hereunder; and
     (3) Any further receipt for or acknowledgment of any collateral now or
hereafter deposited as security for the obligations hereunder.
     (c) Lender shall not by any act, delay, omission, or otherwise be deemed to
have waived any of its rights or remedies under the Loan Documents, and no
waiver of any kind shall be valid unless in writing and signed by Lender. All
rights and remedies of Lender under the terms of this Note and the other Loan
Documents and applicable statutes or rules of law shall be cumulative and may be
exercised successively or concurrently. Any provision in this Note which may be
unenforceable or invalid under any law shall be ineffective to the extent of
such unenforceability or invalidity without affecting the enforceability or
validity of any other provision hereof.
     (d) Borrower agrees that as of the date hereof there are no defenses,
equities, or setoffs with respect to the Obligations.
     (e) This Note and the Obligations of Borrower hereunder shall be binding
upon and enforceable against Borrower and its successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns, including any
subsequent holder of this Note.
     (f) Section headings are inserted for convenience of reference only and
shall be disregarded in the interpretation of this Note. The provisions of this
Note shall be construed without regard to the party responsible for the drafting
and preparation hereof.
     (g) Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.
     12. Jurisdiction; Waiver of Jury Trial.
     (a) The validity, interpretation, enforcement and effect of this Note shall
be governed by, and construed according to the laws of, the State of Alabama.
     (b) THE VALIDITY, INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS NOTE SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ALABAMA. LENDER’S PRINCIPAL PLACE OF BUSINESS IS LOCATED IN MADISON COUNTY IN
THE STATE OF ALABAMA, AND THE BORROWER AGREES THAT THIS NOTE SHALL BE DELIVERED
TO AND HELD BY LENDER AT SUCH PRINCIPAL PLACE OF BUSINESS, AND THE HOLDING OF

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THIS NOTE BY LENDER THEREAT SHALL CONSTITUTE SUFFICIENT MINIMUM CONTACTS OF
BORROWER WITH MADISON COUNTY AND THE STATE OF ALABAMA FOR THE PURPOSE OF
CONFERRING JURISDICTION UPON THE FEDERAL AND STATE COURTS PRESIDING IN SUCH
COUNTY AND STATE. BORROWER CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING ARISING
HEREUNDER MAY BE BROUGHT IN THE CIRCUIT COURT OF THE STATE OF ALABAMA, MADISON
COUNTY, ALABAMA OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ALABAMA AND ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY SUCH COURT
IN ANY ACTION OR PROCEEDING INVOLVING THIS INSTRUMENT. NOTHING HEREIN SHALL
LIMIT THE JURISDICTION OF ANY OTHER COURT.
     (c) BORROWER WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM,
COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN
ANY WAY PERTAINING OR RELATING TO THIS NOTE, ANY OTHER LOAN DOCUMENT, OR ANY
OTHER INSTRUMENT DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH OR THEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR
RELATING TO OR INCIDENTAL TO ANY DEALINGS OF THE PARTIES HERETO WITH RESPECT TO
THIS NOTE, ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR IN
CONNECTION WITH ANY TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREBY OR THE
EXERCISE OF EITHER PARTY’S RIGHTS AND REMEDIES THEREUNDER, IN ALL OF THE
FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE. BORROWER AGREES THAT LENDER MAY FILE A COPY OF
THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND
BARGAINED AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT ANY
DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN BORROWER AND LENDER SHALL INSTEAD BE
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
[The remainder of this page intentionally left blank]

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     IN WITNESS WHEREOF, Borrower has caused this instrument to be properly
executed and delivered as of the day and year first above written.

                  BORROWER:    
 
                CORNERSTONE PHARMACEUTICALS,         LTD., an Anguilla company  
 
 
           
 
  By.   /s/ Craig A. Collard
 
        Craig Collard         President and CEO    

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Exhibit E
GUARANTY AGREEMENT
     THIS GUARANTY AGREEMENT (this “Guaranty”) is made as of the 15th day of
July, 2004, by CORNERSTONE PHARMACEUTICALS HOLDINGS, LTD., an Anguilla limited
company (the “Guarantor”), in favor of VINTAGE PHARMACEUTICALS, LLC, a limited
liability company (the “Lender”).
R E C I T A L S:
     CORNERSTONE PHARMACEUTICALS LTD., an Anguilla company (the “Borrower”), and
Guarantor have requested that Lender make a loan to Borrower in the principal
sum of THREE MILLION AND NO/100 DOLLARS (U.S.) ($3,000,000.00) (the “Loan”)
which will be evidenced by a Secured Promissory Note of even date herewith (as
the same may hereafter be extended, renewed, modified or amended, the “Note”)
payable by Borrower to Lender, and such other documents and instruments as are
more particularly set forth in the Note. As a condition to making the Loan,
Lender has required that Guarantor guarantee payment of all amounts due under
the Loan and any other obligations of Borrower to Lender, whether now existing
or hereafter incurred, pursuant to the Note, the other “Loan Documents,” or the
“Asset Purchase Agreement” (as such terms are defined in the Note), as any of
the same may hereafter be amended. Guarantor will directly and indirectly
benefit from Lender making the Loan to Borrower; consequently, it has agreed to
guarantee the Loan on the terms and conditions stated herein.
AGREEMENT
     NOW, THEREFORE, in consideration of the foregoing recitals, as an
inducement to Lender to make the Loan, and as security for the payment of the
Loan and all obligations in connection therewith, including, but not limited to,
(a) the payment of the principal, interest and other charges pursuant to the
Note, (b) the payment of all expenses, charges and other amounts from time to
time owing to Lender pursuant to the Note and the other Loan Documents, and
(c) the performance of all covenants, agreements and other obligations from time
to time owing to, or for the benefit of, Lender pursuant to the Loan Documents
or the Asset Purchase Agreement (the Loan, interest thereon and all indemnities,
obligations, charges, expenses and other indebtedness and liabilities secured
hereby being hereinafter called the “Obligations”), Guarantor agrees and
covenants with Lender, and represents and warrants to Lender, as follows:
     1. Guarantee of Obligations. Guarantor hereby unconditionally guarantees to
Lender (a) the due, regular, and punctual payment and performance of the
Obligations, including, but not limited to, the indemnity obligations of
Borrower to Lender set forth in the Loan Documents (which guaranty shall survive
concurrently with survival of such indemnities); (b) upon the failure of the
Borrower timely to pay or perform any of the Obligations, the payment of all
costs and expenses incurred by Lender in paying or performing such Obligations
(but Lender shall not be required to pay or perform such Obligations); and
(c) the payment of all costs, reasonable attorneys’ fees, and expenses that may
be incurred by Lender by reason of an Event of Default

 

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pursuant to the Loan Documents or the failure of the Borrower to pay or perform
any of the Obligations, including fees and expenses in any appellate or
bankruptcy proceedings.
     Upon any Event of Default pursuant to any of the Loan Documents, Guarantor
unconditionally promises to pay to Lender such amounts as are necessary to cure
the Event of Default, or at the option of Lender, Guarantor agrees to pay the
outstanding Obligations in full.
     This Guaranty is unconditional except as expressly set forth herein, and
Guarantor agrees that Lender, upon the occurrence of an Event of Default
pursuant to any of the Loan Documents or the failure of the Borrower to pay or
perform any of the Obligations, shall not be required to assert any claim or
cause of action against the Borrower before asserting any claim or cause of
action against Guarantor under this Guaranty. Guarantor further agrees that
Lender shall not be required to pursue or foreclose on any collateral that it
may receive from the Borrower, Guarantor, or others as security for any of the
Obligations before making a claim or asserting a cause of action against
Guarantor under this Guaranty.
     The failure of Lender to perfect its security interest in any of the
collateral as set forth in any of the Loan Documents or any other collateral now
or hereafter securing all or any part of the Obligations shall not release
Guarantor from its liabilities and obligations hereunder.
     Notice of acceptance of this Guaranty and of any default or Event of
Default is hereby waived by Guarantor, except for copies of notices sent to
Borrower as otherwise set form herein or in the Note or Loan Documents.
Presentment, protest, demand, and notice of protest and demand, and notice of
receipt of any and all collateral, and of the exercise of possessory remedies or
foreclosure on any and all collateral received by Lender from the Borrower or
Guarantor are hereby waived. All settlements, compromises, compositions,
accounts stated, and agreed balances in good faith between any primary or
secondary obligors on any accounts received as collateral shall be binding upon
Guarantor.
     This Guaranty shall not be affected, modified, or impaired by the voluntary
or involuntary liquidation, dissolution, sale, or other disposition of all or
substantially all of the assets, marshalling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangements, composition with creditors or readjustment of, or
other similar proceedings affecting, the Borrower or Guarantor, or any of the
assets belonging to either of them, nor shall this Guaranty be affected,
modified, or impaired by the invalidity of any of the Note or any of the other
Loan Documents.
     Without notice to Guarantor, without the consent of Guarantor, and without
affecting or limiting Guarantor’s liability hereunder, Lender may:
     (a) grant the Borrower extensions of time for payment of the Obligations or
any part hereof;
     (b) renew any of the Obligations;
     (c) grant the Borrower extensions of time for performance of agreements or
other indulgences;

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     (d) at any time release any or all of the collateral that now or hereafter
secures any of the Obligations;
     (e) compromise, settle, release, or terminate any or all of the
obligations, covenants, or agreements of the Borrower under, the Note, other
Loan Documents, or the Stock Redemption Agreement;
     (f) with the Borrower’s written consent, modify or amend any obligation,
covenant, or agreement of Borrower as set forth in the Note, any of the other
Loan Documents, or the Stock Redemption Agreement (and such amendments shall
nevertheless be binding upon Guarantor) so long as the Obligations are not
increased thereby.
     This Guaranty shall continue to be effective, or be reinstated, as the case
may be, if at any time any whole or partial payment or performance of any
Obligations is or is sought to be rescinded or must otherwise be restored or
returned by Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Borrower or Guarantor upon or as a result of the appointment
of a receiver, intervenor, or conservator of, or trustee or similar officer for,
Borrower or Guarantor of, or for, any substantial part of its property, or
otherwise, all as though such payments and performance had not been made. This
Guaranty shall not be affected in any way by the transfer or other disposition
of any of the collateral described in and granted to Lender pursuant to the Loan
Documents, whether by deed, operation of law, or otherwise.
     2. Representations and Warranties of Guarantor. To induce Lender to make
the Loan to Borrower, Guarantor represents and warrants to Lender as follows:
     (a) Existence, Power and Qualification. Guarantor is a corporation
organized under the laws of the country of its formation as set forth in the
heading of this Agreement, has the power to own its properties and to carry on
its business as is now being conducted, and is duly qualified to do business,
and is in good standing in every jurisdiction in which the character of the
properties owned by it or in which the transaction of its business makes its
qualification necessary.
     (b) Power to Incur Obligations. Guarantor has full power and unrestricted
right to enter into this Guaranty and to incur the obligations provided for
herein, all of which have been authorized by all requisite corporate action.
     (c) Conflicts. This Guaranty does not violate, conflict with, or constitute
any default under any decree, judgment, or any other agreement or instrument
binding upon any Guarantor and does not violate or conflict with Guarantor’s
organizational documents.
     (d) No Defaults or Restrictions. There is no default under any agreement or
instrument that causes or would cause a material adverse effect on the business,
properties, or financial operations or condition of Guarantor.
     (e) Disclosure. Neither this Guaranty nor any other document, financial
statement, credit information, certificate or statement required herein to be
furnished to

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Lender by Guarantor in connection with this Guaranty contains any untrue,
incorrect or misleading statement of material fact. All representations and
warranties made herein or in any certificate or other document delivered to
Lender by or on behalf of Guarantor pursuant to or in connection with this
Guaranty shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf, and shall
survive the making of the Loan.
     3. Affirmative Covenants of Guarantor. Guarantor covenants and agrees that
so long as any of the Obligations are outstanding, Guarantor shall:
     (a) Payment of Loan/Performance of Obligations. Following the occurrence of
an Event of Default with respect to the Obligations and upon Lender’s demand
thereof, duly and punctually pay or cause to be paid the principal and interest
then due pursuant to the Note and duly and punctually pay or perform or cause to
be paid or performed all other Obligations then due.
     (b) Reporting Requirements. From time to time upon request, furnish to
Lender such information regarding the business affairs, finances, and conditions
of Guarantor and its properties and related companies in such detail as Lender
may reasonably request
     (c) Payment of Indebtedness. Pay duly and punctually or cause to be paid
all principal and interest of any indebtedness of Guarantor to its creditors,
and comply with and perform all conditions, terms, and obligations of the notes
or other instruments evidencing such indebtedness and any security agreements,
and other instruments evidencing security for such indebtedness.
     (d) Maintenance of Existence. Maintain its existence as a corporation.
     4. Events of Default. If Guarantor violates any covenant set forth in the
immediately preceding Section, or if Guarantor fails to properly and timely
perform or observe any covenant or condition set forth in this Guaranty (other
than those in the immediately preceding Section) which is not cured with any
applicable cure period as set forth herein or, if no cure period is specified
therefor, is not cured within thirty (30) days of Lender’s notice to Guarantor
of such default, or if any representation or warranty herein or in any financial
statement, certificate or other information heretofore or hereafter provided by
Guarantor to Lender proves to be false or materially misleading, the same shall
constitute an “Event of Default” hereunder and under each of the Loan Documents.
The foregoing provision or any other provision requiring or providing for notice
or demand from Lender is deemed eliminated if Lender is prevented from giving
such notice or demand by bankruptcy or other applicable law, and the Event of
Default shall occur on the occurrence of such event or condition if not cured
within any applicable period measured from the occurrence of such event or
condition rather than from notice or demand.
     5. Subordination. Guarantor subordinates its right to payments of any
indebtedness owing from Borrower to Guarantor, whether now existing or arising
at any time in the future (including, but not limited to, rights to payment
arising by virtue of any subrogation or

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indemnification upon payment by Guarantor of amounts due from Borrower to
Lender), to the prior right of Lender to receive or require payment in full of
the Obligations, until such time as the Obligations are fully paid (and
including interest accruing on the Note after any petition under the Bankruptcy
Code, which post-petition interest Guarantor agrees shall remain a claim that is
prior and superior to any claim of Guarantor notwithstanding any contrary
practice, custom or ruling in proceedings under the Bankruptcy Code generally)
and such payments are final and not subject to refund or recision under
bankruptcy or other applicable law. Furthermore, upon the occurrence of an Event
of Default under the Loan Documents, Guarantor agrees not to accept any payment
or satisfaction of any kind of indebtedness of Borrower to Guarantor or any
security for such indebtedness. If Guarantor should receive any such payment,
satisfaction or security for any indebtedness of Borrower to Guarantor,
Guarantor agrees to deliver the same promptly to Lender in the form received,
endorsed, or assigned as may be appropriate for application on account of, or as
security for, the Obligations and until so delivered, agrees to hold the same in
trust for Lender.
     6. Successors and Assigns. This Guaranty shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors and
assigns.
     7. Severability. In the event that any provision hereof is deemed to be
invalid by reason of the operation of any law or by reason of the interpretation
placed thereon by any court, this Guaranty shall be construed as not containing
such provisions, and the invalidity of such provisions shall not affect other
provisions hereof which are otherwise lawful and valid and shall remain in full
force and effect.
     8. Notices. Any notice required herein or by applicable law shall be deemed
properly given (a) when personally delivered (to the person or department if one
is designated below), (b) three (3) days following the date sent by United
States Mail, certified or registered, postage prepaid, return receipt requested,
or (c) one (1) day after the date sent by Federal Express or overnight United
States Mail or other national overnight carrier, and addressed in each such case
to the parties at their respective addresses set forth below or such other
single address as either party may designate in a written notice given as herein
provided (except that a change of address notice shall not be effective until
actual receipt).
If to Guarantor, then to:
Cornerstone Pharmaceuticals Holdings, LTD
8000 Regency Parkway, Suite 430
Cary, NC 27511
Fax: 919-462-0566
Attn: Craig Collard
With a copy to:
Pesin & Associates, P.C.
27368 Via Industrial, Suite 113
Temecula, CA 92590
Fax: 951-719-1139

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Attention: Philip Pesin
If to Lender, then to:
Vintage Pharmaceuticals, LLC
Attention: William S. Propst, Jr., President
422 McClung Avenue, S.E.
Huntsville, Alabama 35801
Fax: 256-859-2903
With a copy to:
Seyfarth Shaw
55 East Monroe Street
Suite 4200
Chicago, Illinois
Attention: Mike Feldman
Fax: 312-269-8869
     9. Waivers. The failure by Lender at any time or times hereafter to require
strict performance by Guarantor of any of the provisions, warranties, terms, and
conditions contained herein or in any other agreement, document, or instrument
now or hereafter executed by Guarantor and delivered to Lender shall not waive,
affect, or diminish any right of Lender hereafter to demand strict compliance or
performance therewith and with respect to any other provisions, warranties,
terms, and conditions contained in such agreements, documents, and instruments,
and any waiver of any default or Event of Default shall not waive or affect any
other default or Event of Default, whether prior or subsequent thereto and
whether of the same or a different type. None of the warranties, conditions,
provisions, and terms contained in this Guaranty or in any agreement, document,
or instrument now or hereafter executed by Guarantor and delivered to Lender
shall be deemed to have been waived by any act or knowledge of Lender, its
agents, officers, or employees, but only by an instrument in writing, signed by
an officer of Lender, and directed to Guarantor specifying such waiver.
     10. Expenses. If, at any time or times hereafter, Guarantor is in material
breach of this or other related agreements, and Lender is reasonable required to
employ counsel to advise or provide other representation with respect to this
Guaranty or any other agreement, document, or instrument heretofore, now, or
hereafter executed by Guarantor and delivered to Lender with respect to the
Borrower or the Obligations, or to commence, defend, or intervene, file a
petition, complaint, answer, motion, or any other pleading or to take any other
action in or with respect to any suit or proceeding relating to this Guaranty or
any other agreement, instrument, or document heretofore, now, or hereafter
executed by Guarantor and delivered to Lender with respect to the Borrower or
the Obligations, or to represent Lender in any litigation with respect to the
affairs of Guarantor or to enforce any rights of Lender or obligations of
Guarantor or any other person, firm, or corporation that may be obligated to
Lender by virtue of this Guaranty, or any other agreement, document, or
instrument heretofore or hereafter delivered to Lender by or for the benefit of
Guarantor with respect to the Borrower or the Obligations, then in any such
events, all of the reasonable attorneys’ fees actually incurred arising from
such services, including fees in

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any appellate or bankruptcy proceedings, and any other expenses, costs, and
charges relating to this Guaranty, the Borrower or the Obligations, shall
constitute additional obligations of Guarantor payable on demand.
     11. Singular and Plural. Singular terms shall include the plural forms, and
vice versa.
     12. Entire Agreement. This Guaranty constitutes the entire agreement and
supersedes all prior agreements and understandings both oral and written,
between the parties with respect to the subject matter hereof. This Agreement
may be executed in counterparts, each of which may be deemed an original, but
such counterparts together shall constitute one and the same instrument.
     13. THE VALIDITY, INTERPRETATION, ENFORCEMENT AND EFFECT OF THIS GUARANTY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
ALABAMA. LENDER’S PRINCIPAL PLACE OF BUSINESS IS LOCATED IN MADISON COUNTY IN
THE STATE OF ALABAMA, AND THE GUARANTOR AGREES THAT THIS GUARANTY SHALL BE
DELIVERED TO AND HELD BY LENDER AT SUCH PRINCIPAL PLACE OF BUSINESS, AND THE
HOLDING OF THIS GUARANTY BY LENDER THEREAT SHALL CONSTITUTE SUFFICIENT MINIMUM
CONTACTS OF GUARANTOR WITH MADISON COUNTY AND THE STATE OF ALABAMA FOR THE
PURPOSE OF CONFERRING JURISDICTION UPON THE FEDERAL AND STATE COURTS PRESIDING
IN SUCH COUNTY AND STATE. GUARANTOR CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
ARISING HEREUNDER MAY BE BROUGHT IN THE CIRCUIT COURT OF THE STATE OF ALABAMA,
MADISON COUNTY, ALABAMA OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ALABAMA AND ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY
SUCH COURT IN ANY ACTION OR PROCEEDING INVOLVING THIS INSTRUMENT. NOTHING HEREIN
SHALL LIMIT THE JURISDICTION OF ANY OTHER COURT.
     14. GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAM,
COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN
ANY WAY PERTAINING OR RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, OR
(B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY
DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS GUARANTY OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR IN CONNECTION WITH THE TRANSACTIONS RELATED THERETO OR CONTEMPLATED THEREBY
OR THE EXERCISE OF ANY PARTY’S RIGHTS AND REMEDIES THEREUNDER, IN ALL OF THE
FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE. GUARANTOR AGREES THAT LENDER MAY FILE A COPY OF
THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND
BARGAINED AGREEMENT OF GUARANTOR IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT
ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN GUARANTOR AND LENDER SHALL

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INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT
A JURY.
     15. Termination of Rights. All rights granted to Lender herein shall
automatically and immediately terminate upon payment of deferred purchase price
as contemplated in the Asset Purchase Agreement related hereto.
     IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty as
of the day and year first above written.

                  CORNERSTONE PHARMACEUTICALS         HOLDINGS, LTD.; an
Anguilla limited company    
 
           
 
  By
Name   /s/ Craig A. Collard
 
Craig Collard    
 
  Title   President and CEO    

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CORNERSTONE BIOPHARMA, INC.
2000 Regency Parkway
Cary, North Carolina 27511
MARCH 23,2006
Vintage Pharmaceuticals, LLC
130 Vintage Drive
Huntsville, Alabama 35811
Attn: William S. Propst, Jr.
Dear Mr. Propst:
          As you may know, the Cornerstone family of companies formed
Cornerstone BioPharma, Ltd., an Anguilla international business company
(“Cornerstone Anguilla”), with the intent that it would hold certain
intellectual property related to Cornerstone’s pharmaceutical business. After
the formation of Cornerstone Anguilla, we determined that the intellectual
property should instead be held by Cornerstone BioPharma, Inc., a Nevada
corporation (“Cornerstone Nevada”). At all relevant times, we have conducted our
business on the basis that Cornerstone Nevada, rather than Cornerstone Anguilla,
is the owner of the intellectual property. Cornerstone Anguilla has been a shell
company with no operations.
          Unfortunately, certain documents have not accurately reflected our
intent that the intellectual property be owned by Cornerstone Nevada. Instead,
Cornerstone Anguilla has been identified as the owner of this intellectual
property and, as a result, has been listed as a party to various contracts
including the following contracts with you:

  •   Asset Purchase Agreement, dated July 20, 2004, as amended     •   Secured
Promissory Note in the original principal amount of $3,000,000, dated July 20,
2004     •   Security Agreement, dated July 20, 2004     •   Consent to
Sublicense Agreement, dated February 4, 2005

          Please sign this notice to confirm that you agree that all references
in the listed contracts and any related documents to Cornerstone Anguilla will
be replaced with Cornerstone Nevada. As a result, Cornerstone Nevada, not
Cornerstone Anguilla, shall have all of the relevant rights and obligations
under the Contracts. Please sign and return this notice to me at your earliest
convenience.
Sincerely,
/s/ Craig A. Collard
Craig A. Collard
President and Chief Executive Officer
Cornerstone BioPharma, Ltd.
Cornerstone BioPharma, Inc.

          ACCEPTED AND AGREED:    
 
        VINTAGE PHARMACEUTICALS, LLC    
 
       
By:
Name:
  /s/ William S. Propst, Jr.
 
William S. Propst, Jr.    
Title:
  President