Exhibit 10.3

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY
ASTERISKS) HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

SETTLEMENT AND LICENSE AGREEMENT

This SETTLEMENT AND LICENSE AGREEMENT (this “Agreement”) is hereby entered into
on July 17, 2012 (the “Execution Date”) by and among Somaxon Pharmaceuticals,
Inc., a corporation organized and existing under the laws of the State of
Delaware (“Somaxon”), ProCom One, Inc., a corporation organized and existing
under the laws of the State of Texas (“ProCom”), (Somaxon and ProCom are
collectively “Plaintiffs”), Par Pharmaceutical, Inc. a corporation organized and
existing under the laws of the State of Delaware, and Par Pharmaceutical
Companies, Inc. a corporation organized and existing under the laws of the State
of Delaware (Par Pharmaceutical, Inc. and Par Pharmaceutical Companies, Inc. are
collectively “Par” or “Defendants”; each Plaintiff and each Defendant is a
“Party”).

RECITALS

WHEREAS, Somaxon is the holder of New Drug Application (“NDA”) No. 22-036 (the
“Somaxon NDA”), which was approved by the United States Food and Drug
Administration (“FDA”) for the manufacture and sale of (a) a 3 mg doxepin
hydrochloride product, and (b) a 6 mg doxepin hydrochloride product, in each of
cases (a)-(b), that is marketed and sold by Somaxon in the Licensed Territory
(as defined below), under the trade name SILENOR® (the “Silenor Products”);

WHEREAS, the formulation and dosing of the Silenor Products are covered by
certain claims of the Licensed Patents (as defined below);

WHEREAS, ProCom owns one of the Licensed Patents and Somaxon is the exclusive
licensee of that Licensed Patent in the Licensed Territory;

WHEREAS, the Licensed Patents are listed in the Orange Book (as defined below)
for each of the strengths of the Silenor Products approved by the FDA under the
Somaxon NDA;

WHEREAS, pursuant to 21 USC § 355(j) Par filed Abbreviated New Drug Application
(“ANDA”) No. 202-510 (the “Par ANDA”) with respect to a 3 mg doxepin
hydrochloride product and a 6 mg doxepin hydrochloride product, and such ANDA is
currently pending before the FDA;

WHEREAS, Plaintiffs initiated an action against Par in the United States
District Court for the District of Delaware (the “District Court”) under 35 USC
§ 271(e) alleging infringement of the Licensed Patents, in a case captioned
Somaxon Pharmaceuticals, Inc. and ProCom One, Inc. v. Par Pharmaceutical, Inc.
et al., Civil Action No. 1:11-cv-00107-RGA/MPT (D. Del.) (the “Litigation”);

 

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WHEREAS, Par has asserted certain affirmative defenses and counterclaims in the
Litigation;

WHEREAS, the Parties have agreed to resolve their disputes relating to the
Litigation through this Agreement, in order to avoid further litigation and the
attendant risk, associated fees, costs and expenses thereof; and

WHEREAS, as a result of this Agreement there will be an opportunity for
pro-competitive generic competition for doxepin hydrochloride products for human
use, which competition otherwise may not have existed until the expiration of
the Licensed Patents and any applicable period of exclusivity;

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound hereby, agree as follows:

1. DEFINITIONS

1.1 “Affiliate” means, with respect to an entity, any other entity that
controls, is controlled by, or is under common control with such first entity,
where “control” means (a) in the case of corporate entities, direct or indirect
ownership of more than fifty percent (50%) of the stock or shares having the
right to vote for the election of directors, and (b) in the case of
non-corporate entities, direct or indirect ownership of more than fifty percent
(50%) of the equity interest with the power to direct the management and
policies of such non-corporate entities.

1.2 “Authorized Generic Product” means a Generic Product that is manufactured,
used, sold, offered for sale or distributed pursuant to the Somaxon NDA, but
that is not marketed under the Trademark.

1.3 “Business Day” means a day on which the banks in the State of Delaware are
permitted to be open.

1.4 “Covenant Patents” means any patent, other than the Licensed Patents, owned
by or licensed to Plaintiffs as of the Effective Date, that, but for a license,
would be infringed by the use, manufacture, sale, offer for sale, or importation
of the Par Generic Product in the Licensed Territory.

1.5 “Effective Date” means the date on which the Consent Judgment and Dismissal
is entered by the District Court.

 

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1.6 “Entry Date” means, on a dosage strength by dosage strength basis, the
earlier of:

(a) 180 days after the date of a Final Decision which adjudges as not infringed,
invalid, or unenforceable all adjudicated claims of the Licensed Patents
asserted against a Third Party’s ANDA referencing the Somaxon NDA;

(b) 180 days after an Authorized Generic Product or a Licensed Third Party
Generic Product is first sold in the Licensed Territory; or

(c) In the event that, (i) Somaxon has, at the date of the events described in
subclause (ii) below, the ability to grant a license to Par under the Licensed
Patents during the period of 180 days immediately following the first commercial
sale of a Licensed Third Party Generic Product pursuant to an ANDA (and Par
acknowledges and agrees that nothing herein shall restrict the ability of
Somaxon to grant to any Third Party an exclusive or semi-exclusive license under
the Licensed Patents where the exclusive or semi-exclusive nature of the license
extends for a period of 180 days after first commercial sale by such Third
Party); and (ii) under 21 U.S.C. § 355 (j)(5)(D)(iii), all first applicants who
have filed ANDAs referencing the Somaxon NDA forfeit the 180-day exclusivity
periods, then the Entry Date shall be the date upon which Par receives final
approval from FDA of the Par ANDA; provided, however, that this clause (c) shall
not apply in the event of an occurrence under 21 U.S.C. § 355 (j)(5)(D)(i)(III).

Notwithstanding the foregoing, should Somaxon provide a license under the
Licensed Patents to a Third Party seeking to commercialize a Generic Product,
which Third Party first served a Paragraph IV Notice Letter to Somaxon with
respect to an ANDA referencing the Somaxon NDA on or after December 21, 2010,
the terms of this Agreement shall be amended so that the Entry Date would be no
later than the comparable date granted to such Third Party by Somaxon.

1.7 “Ex-US Manufacturing Patents” means any patents (other than the Licensed
Patents) in the country in which the Named Affiliate will manufacture Par
Generic Products pursuant to Section 5.1(b), in each case to the extent
controlled by Somaxon as of the Entry Date and necessary for the Named Affiliate
to manufacture Par Generic Products solely for import into the Licensed
Territory for purposes of sale by Par pursuant to this Agreement. For purposes
of this definition, “control” means the right to grant a license or sublicense
without violating the rights of any other Person.

1.8 “Field” means the field of products AB rated to the Silenor Products in
tablet form.

1.9 “Final Decision” means a decision of a court from which no further appeal
has been or can be taken, excluding any petition for a writ of certiorari or
other proceedings before the United States Supreme Court.

1.10 “Generic Product” means each of the following: (a) a 3 mg doxepin
hydrochloride product, and (b) a 6 mg doxepin hydrochloride product, in each of
cases (a)-(b), that is an A/B rated generic version of the corresponding Silenor
Product.

 

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1.11 “Licensed Patents” means:

(a) U.S. Patent No. 6,211,229 (together with all reissues, reexaminations and
patent and regulatory extensions thereof, “the ‘229 patent”) together with all
continuations, continuations-in-part or divisionals; and

(b) U.S. Patent No. 7,915,307 (together with all reissues, reexaminations and
patent and regulatory extensions thereof, “the ‘307 patent”); together with all
continuations, continuations-in-part or divisionals.

1.12 “Licensed Territory” means the United States of America, and its
territories, districts and possessions, including the Commonwealth of Puerto
Rico.

1.13 “Licensed Third Party Generic Product” means a Generic Product that is
manufactured, used, sold, offered for sale or distributed by a Third Party under
license, other agreement or pursuant to a covenant not to sue from Somaxon
pursuant to an ANDA referencing the Somaxon NDA.

1.14 “Net Sales” means, with respect to the Par Generic Products for any period,
the total gross sales (i.e., the number of units shipped times the invoiced
price per unit) invoiced by Par and its Affiliates for the sale of the Par
Generic Products in the Licensed Territory during such period (“Gross Sales”),
less all applicable deductions, to the extent actually accrued, paid or allowed
in the ordinary course of business, and to the extent they are in accordance
with generally accepted accounting principles consistently applied. By way of
example only, such deductions include, where applicable, but are not limited to:

(a) Cash discounts, quantity discounts, promotional discounts, stocking or other
promotional allowances;

(b) Chargebacks, rebates, administrative fees, and other customary credits and
allowances;

(c) Discounts, rebates or other payments required by law to be made under
Medicaid, Medicare, or other governmental special medical assistance programs;

(d) Retroactive price adjustments;

(e) Allowances or credits to customers by reason of rejection, damages or return
of goods, withdrawal, recall, or because of retroactive price adjustments
justified by trade practices;

(f) Redistribution center (FDC) fees, information service agreement (ISA) fees,
and other administrative fees that are standard and customary in the industry
and related to the sale of the Par Generic Products to customers;

 

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(g) Sales and excise taxes, customs and any other taxes, all to the extent added
to the sale price and paid by Par or its Affiliates and not refundable in
accordance with applicable law (but not including taxes assessed against the
income derived from such sale); and

(h) Freight, insurance and other transportation charges to the extent added to
the sale price and set forth separately as such in the total amount invoiced.

The foregoing deductions from Gross Sales shall only be deducted once and only
to the extent not otherwise deducted from Gross Sales. For the avoidance of
doubt, sales of Par Generic Products between or among Par and its Affiliates for
resale shall not be included within Net Sales for such product; provided,
however, that any subsequent sale of such Par Generic Products by Par or such
Affiliates to a Third Party, or any other payment received by Par or its
Affiliates from such Third Parties relating to, as applicable, the Par Generic
Products shall be included within Net Sales. For the avoidance of doubt, Net
Sales as calculated for the purposes of this Agreement shall be consistent with
Net Sales as calculated for and included in Par’s financial statements contained
in its periodic reports with the U.S. Securities and Exchange Commission.

1.15 “Orange Book” means the publication titled “Approved Drug Products with
Therapeutic Equivalence Evaluations,” in electronic or hard copy form,
maintained by the FDA, including all supplements thereto.

1.16 “Par Generic Product” means a Generic Product that is manufactured or
marketed under the Par ANDA.

1.17 “Paragraph IV Notice Letter” means a written notice including any “patent
certification” filed in the United States under 21 U.S.C.
§355(j)(2)(A)(vii)(IV).

1.18 “Person” means any individual, partnership, association, corporation,
limited liability company, trust, governmental authority or other legal person
or entity.

1.19 “Royalty Period” means, on a dosage strength-by-dosage strength basis, the
period beginning on the applicable Entry Date and ending when every claim in the
Licensed Patents and the Covenant Patents, if any, has expired or been held
unenforceable or invalid pursuant to a Final Decision.

1.20 “Third Party” means a Person other than the Parties or any of their
Affiliates.

1.21 “Trademark” means the trademark SILENOR®

 

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2. DISMISSAL AND RELATED FILINGS

2.1 Termination of Litigation.

(a) On or before the third (3rd) Business Day after the Execution Date,
Plaintiffs and Defendants shall file with the District Court a stipulated
consent judgment and joint motion to dismiss the Litigation, substantially in
the form attached as Exhibit A (the “Consent Judgment and Dismissal”), with each
Party to bear its own fees and costs.

(b) The provisions of Sections 1 (to the extent necessary to interpret the other
sections listed in this Section 2.1(b)), 2, 8, 9, and 12 of this Agreement shall
become effective upon the Execution Date, while the remaining provisions of this
Agreement shall become effective upon the Effective Date.

2.2 FTC/DOJ Filings.

(a) Within ten (10) days following the Execution Date, the Parties shall file
with the U.S. Federal Trade Commission, Bureau of Competition (“FTC”) and the
Antitrust Division of the U.S. Department of Justice (“DOJ”) this Agreement and
any notifications to be filed pursuant to Title XI of the Medicare Prescription
Drug Improvement and Modernization Act (Subtitle B — Federal Trade Commission
Review) and any other applicable law. The Parties shall make additional timely
filings as required by law.

(b) The Parties shall use all commercially reasonable efforts to coordinate the
foregoing filings and any responses thereto, to make such filings promptly and
in good faith and to respond promptly and in good faith to any requests for
additional information made by either of such agencies, and to coordinate any
necessary or desirable joint presentations. Each Party reserves the right to
communicate with the FTC or DOJ regarding such filings as it believes
appropriate. Each Party shall keep the other Party reasonably informed of such
communications and unless required by applicable law shall not disclose any
confidential information of the other Party without such other Party’s consent,
which will not be unreasonably withheld or delayed.

3. RELEASE OF CLAIMS

3.1 In settlement of the Litigation, and in consideration of the releases,
representations, warranties and covenants contained in this Agreement, as of the
Effective Date, each Party and its respective parents, subsidiaries and
Affiliates, on behalf of themselves and their respective predecessors,
successors, administrators, attorneys, assigns, agents, officers, employees,
shareholders, directors, representatives and all other Persons claiming by,
through and under them, do fully, finally and forever release, relinquish,
acquit and discharge the other Party and each of its respective parents,
subsidiaries and Affiliates, on behalf of themselves and their respective
predecessors, successors, administrators, attorneys, assigns, agents, officers,
employees, shareholders, directors and representatives (collectively, the
“Releasees”), from any and all claims, demands, damages, liabilities,
obligations, and causes of action accruing prior to the Effective Date
(including costs, expenses and attorneys’ fees), that were or could have been
filed in the Litigation, whether known or unknown, to the extent arising out of,
related to, or in connection with: (a) the Litigation, (b) the Par ANDA or its
filing, or (c) the Par Generic Products.

 

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3.2 Each Party hereby expressly waives any and all provisions, rights and
benefits conferred by §1542 of the California Civil Code, or by any law of the
United States or principle of common law that is similar, comparable or
equivalent to §1542 of the California Civil Code, with respect to the matters
released in this Section 3. §1542 of the California Civil Code provides as
follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN TO HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

3.3 Each Party represents, warrants and covenants that it has not, prior to the
Effective Date, assigned or transferred, and will not assign or otherwise
transfer, to any Person any matters released by such Party as set forth in this
Section 3 (except that the foregoing shall not prohibit an assignment of this
Agreement pursuant to Section 12.3), and such Party agrees to indemnify and hold
harmless the other Party and its Releasees from and against all such released
matters arising from any such alleged or actual assignment or transfer.

3.4 For the sake of clarity, this Section 3 shall not prevent or impair the
right of a Party to bring a proceeding in court or any other forum for a breach
of this Agreement or any representation, warranty or covenant herein.

4. ADMISSIONS

4.1 Solely as related to the Par Generic Products subject to this Agreement and
for no other purpose, Par, on behalf of itself and its Affiliates, acknowledges
and agrees that all asserted claims of the Licensed Patents: (a) would be
infringed by the making, having made, use, offer for sale or sale in, or
importation into, the Licensed Territory of Par Generic Products other than as
permitted by this Agreement; and (b) are valid and enforceable.

4.2 Par, on behalf of itself and its Affiliates, agrees not to, and to cause
each of its Affiliates not to (i) oppose or challenge the validity or
enforceability of the Licensed Patents or the Covenant Patents, or aid or assist
any third party in challenging, opposing or causing to be challenged, directly
or indirectly, the validity or enforceability of the Licensed Patents or the
Covenant Patents in the United States Patent and Trademark Office; (ii) oppose
or challenge the validity or enforceability of the Ex-US Manufacturing Patents
in the patent office of the relevant country or in any litigation pertaining to
a 3 mg doxepin hydrochloride prescription product or a 6 mg doxepin
hydrochloride prescription product, or aid or assist any third party in
challenging, opposing or causing to be challenged, directly or indirectly, the
validity or enforceability of the Ex-US Manufacturing Patents in the patent
office of the relevant country or in any litigation pertaining to a 3 mg doxepin
hydrochloride prescription product or a 6 mg doxepin hydrochloride prescription
product; (iii) oppose or challenge the validity or enforceability of, or assert
any other claim or defense in patent litigation concerning, the Licensed Patents
or

 

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Covenant Patents in any litigation pertaining to a 3 mg doxepin hydrochloride
prescription product or a 6 mg doxepin hydrochloride prescription product, or
(iv) aid or assist any third party in challenging, opposing or causing to be
challenged, directly or indirectly, the validity or enforceability of, or
asserting any other claim or defense against the enforcement of, the Licensed
Patents or Covenant Patents in any litigation pertaining to a 3 mg doxepin
hydrochloride prescription product or a 6 mg doxepin hydrochloride prescription
product. For the avoidance of doubt, nothing in this Section 4.2 applies to any
patent litigation pertaining to a doxepin hydrochloride prescription product at
a strength other than 3 mg and 6 mg, or an over-the-counter (“OTC”) version of a
doxepin hydrochloride product.

4.3 Par hereby waives, on behalf of itself and its Affiliates, any and all
invalidity and unenforceability defenses in any future litigation, arbitration
or other proceeding with respect to the Licensed Patents insofar as the defenses
pertain to a 3 mg doxepin hydrochloride prescription product and a 6 mg doxepin
hydrochloride prescription product. For the avoidance of doubt, nothing in this
Section 4.3 applies to any litigation, arbitration or other proceeding with
respect to the Licensed Patents pertaining to a doxepin hydrochloride
prescription product at a strength other than 3 mg and 6 mg, or an OTC version
of a doxepin hydrochloride product, and nothing herein will prevent Par and its
Affiliates from responding to subpoenas from courts or administrative agencies.

5. LICENSE AND RELATED RIGHTS

5.1 Par Commercialization Licenses.

(a) Effective as of the Entry Date, Somaxon grants to Par a royalty bearing,
non-exclusive, non-transferable license under the Licensed Patents to make, have
made, use, sell, offer for sale and import Par Generic Products solely in the
Field to its distributors and customers for ultimate resale by such distributors
and customers to consumers solely for use in the Licensed Territory. Par shall
include in its agreements with distributors or customers language indicating
that Par Generic Products are being provided to them solely for use in the
Licensed Territory in the Field. However, Par shall have no duty to police the
conduct of its customers.

(b) Par shall have the right to grant a single sublicense to a single Par
Affiliate (the “Named Affiliate”), solely for the purposes of manufacturing Par
Generic Products solely for import into the Licensed Territory, but shall have
no other right to grant sublicenses. Par shall identify to Somaxon in writing
the Named Affiliate to which it will grant a sublicense, and the granting of
such sublicense shall be subject to Somaxon’s approval, not to be unreasonably
withheld, conditioned or delayed. Par may, upon six (6) months’ prior written
notice, substitute a different Par Affiliate for the Named Affiliate, subject to
Somaxon’s approval, not to be unreasonably withheld, conditioned or delayed. It
is the intention of the Parties that there is only a single Named Affiliate at
one time.

(c) Upon written request from Par delivered to Somaxon no more than one hundred
and twenty (120) days before the Entry Date, Somaxon shall provide to Par no
more than sixty (60) days before the Entry Date (or within fifteen (15) days of
delivery of Par’s request, whichever is later) written documentation that Par
can file with the FDA to inform the FDA of the license and Entry Date to
facilitate final approval from the FDA of the Par ANDA.

 

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5.2 Covenants to Par. Solely in connection with making, using, selling, offering
to sell or importing the Par Generic Products in the Licensed Territory in the
Field in accordance with this Agreement, Plaintiffs (and their respective
Affiliates) will not sue, nor authorize, consent, join, support or encourage any
Third Party to sue, Par or the Named Affiliate, or its (or their) customers,
suppliers, and distributors for infringement of the Covenant Patents.

 

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5.3 Covenant to Plaintiffs.

(a) In return for Plaintiff’s grant of the license and other rights and
covenants in Sections 5.1 and 5.2, Par, on behalf of itself and its Affiliates,
agrees not to make, have made, offer for sale, sell, market or import a Generic
Product in or for the Licensed Territory prior to the Entry Date, except that
Par may engage in the limited activity permitted under Section 5.3(c).

(b) Par shall maintain the Par ANDA throughout the term of this Agreement.
Except in accordance with Section 12.3, Par shall not transfer or assign, or
otherwise grant any Affiliate or Third Party any rights in, to or under the Par
ANDA, and Par shall not assist any Affiliate or Third Party, directly or
indirectly, to file or obtain an ANDA for a Generic Product.

(c) Notwithstanding the foregoing, Par may engage in only the following
pre-marketing activities: (i) Par and the Named Affiliate may import and
manufacture the Par Generic Products no more than *** in advance of the Entry
Date; and (ii) Par and its Affiliates may engage in outreach to potential
purchasers to inform them of the Par Products in the Licensed Territory no more
than *** in advance of Entry Date. In no event may Par and its Affiliates enter
into binding contracts for purchases of the Par Generic Products in advance of
the Entry Date.

5.4 Acknowledgement. Par acknowledges that, notwithstanding the definition of
the Entry Date, Par may not be able to legally exploit the license and other
rights granted pursuant to Sections 5.1 and 5.2 with respect to the Par Generic
Products for various reasons outside of Plaintiffs’ control, including lack of
regulatory approval for the Par ANDA by the FDA. Par agrees that the Citizen
Petition filed by Somaxon with the FDA on October 20, 2011 is deemed to be
“outside of Plaintiff’s control” for purposes of this Section 5.4; however, any
other petition, request, demand or similar filing by or on behalf of Plaintiffs
with any court, agency or administrative body relating to the Silenor Products
insofar as such a filing affects FDA approval of Par Generic Products is not
“outside of Plaintiff’s control” for purposes of this Section 5.4.

5.5 Retained Rights. Except for the license and other rights granted pursuant to
this Agreement, all other rights to any intellectual property or regulatory
exclusivities or approvals held by Plaintiffs or any of their Affiliates are
hereby retained by Plaintiffs and their Affiliates. For the sake of clarity,
this Agreement does not grant to Par or its Affiliates any right to use any
corporate names, logos or trademarks (including the Trademark) of any Plaintiff
or any of their Affiliates inside or outside the Licensed Territory.

6. ROYALTY PAYMENTS

6.1 With respect to each calendar quarter (or part thereof) during the Royalty
Period, on a dosage strength-by-dosage strength basis, Par shall pay Somaxon a
royalty of *** of Net Sales with respect to sales of Par Generic Products made
during such calendar quarter. Such payments shall be made within forty-five
(45) days after the end of each calendar quarter of the Royalty Period.

 

*** Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

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6.2 Payments; True-Up.

(a) Within thirty (30) days after the end of each calendar quarter for which
royalties are payable by Par under Section 6.1, Par shall submit to Somaxon a
report (the “Quarterly Report”), providing in reasonable detail an accounting of
all Net Sales by Par and its Affiliates, including in each case, an accounting
of all unit sales of the Par Generic Products, a calculation of the deductions
from gross invoice price to Net Sales made during such calendar quarter, the
calculation of the applicable royalties under Section 6.1 and a detailed
explanation and calculation of any Withholding Taxes levied pursuant to
Section 7.3.

(b) The Parties acknowledge that any deductions made in the calculation of Net
Sales under Section 1.13 of this Agreement may be based on accruals, which
accruals will be compliant with Par’s or its Affiliate’s standard practices for
all its pharmaceutical products, consistently applied for all its pharmaceutical
products, and in accordance with GAAP consistently applied; provided that such
accruals shall be reconciled to actual amounts on a rolling basis as and when
known relative to any accrued amount, and any difference between the actual
results and the accrual shall be reported and accounted for in the following
calendar quarter(s).

(c) Within (1) year after the earlier of the last Royalty Period or the
termination or expiration of this Agreement, a final reconciliation shall be
performed by Par (and a written report of such reconciliation shall be provided
by Par to Somaxon) of the deductions made, pursuant to the definition of Net
Sales, and of the amounts payable; provided that such amounts must (a) be based
upon reasonable assumptions and (b) be consistent with past accounting practices
and in accordance with GAAP consistently applied. The reconciliation shall be
based on all actual amounts known as of that date versus prior accruals. Subject
to Section 7.4, no further reconciliations shall be made. If any reconciliation
between accruals and the actual results shows either an underpayment or an
overpayment, the Party having made the underpayment or received the overpayment
shall pay the undisputed amount of the difference to the other within thirty
(30) days after the date of delivery of the report of such reconciliation.

7. PAYMENT TERMS

7.1 Any payments due pursuant to Sections 6.1 or 6.2(c) shall be made by wire
transfer to an account specified by Plaintiffs in writing.

7.2 Any amounts not paid when due under this Agreement shall be subject to
interest at the rate of the lesser of one and one-half percent (1.5%) per month
or the highest rate permitted under law.

7.3 Par shall be responsible for, and may withhold from payments made to
Plaintiffs under this Agreement, any taxes required to be withheld by Par under
applicable law. Accordingly, if any such taxes are levied on such payments due
hereunder (“Withholding Taxes”), Par shall (a) deduct the Withholding Taxes from
the payment amount, (b) pay all applicable Withholding Taxes to the proper
taxing authority, and (c) send evidence of the obligation together with proof of
tax payment to Plaintiffs within sixty (60) days following such tax payment.

 

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7.4 Par shall maintain its, and its Affiliates’, distributors’, marketing
partners’ and agents’ books and records with respect to the Net Revenues for a
period of three (3) calendar years after the calendar year to which they relate.
Plaintiffs shall have the right to audit such books and records on reasonable
advance notice to Par, no more than once per calendar year. If Par has underpaid
any amounts hereunder, Par shall pay the relevant amount within thirty (30) days
after receipt of the auditor’s report, along with interest as described in
Section 7.2. The audit shall be at Plaintiffs’ cost and expense, unless the
underpayment exceeds five percent (5%) of the amount owed with respect to any
calendar year, in which case Par shall promptly reimburse such costs and
expenses.

8. CONFIDENTIALITY

8.1 Each of the Parties shall keep the terms of the Agreement and the underlying
settlement confidential, using at least the level of care it uses for its own
proprietary information (but no less than reasonable care), and shall not
disclose to any Third Party (other than (a) such Party’s financial advisors,
legal advisors, and insurers, and (b) parties and their counsel in litigation or
anticipated litigation with Plaintiffs over any of the Licensed Patents solely
for purposes of disclosing, in connection with settlement negotiations, those
provisions herein addressing the relevant Entry Date and/or royalty rate, in
each such case subject to appropriate confidentiality protections), except as
provided below or as required by law (including disclosures required by the FTC
and/or the DOJ).

8.2 No Party shall issue or make any public announcement, press release, or
other public disclosure regarding this Agreement or the subject matter or terms
of the settlement, except as required by law or the rules of a stock exchange on
which the securities of the disclosing Party are listed. In the event a Party
is, in the opinion of its counsel, required to make a public disclosure by law
or the rules of a stock exchange on which its securities are listed, such Party
shall, if permitted by law, submit the proposed disclosure in writing to the
other Party a reasonable period prior to disclosure, and such Party shall
provide any such comments promptly, but in any case within two (2) Business Days
of its receipt of such disclosure.

8.3 Notwithstanding Sections 8.1 and 8.2, Par may communicate with the FDA on a
confidential basis prior to the applicable Entry Date concerning the approval of
the Par ANDA, and the licenses and waivers provided for herein.

8.4 Par acknowledges that (a) Plaintiffs are currently engaged in ANDA-related
patent litigations with various Third Parties concerning the Licensed Patents
and may become engaged in future patent litigation concerning infringement of
the Licensed Patents and (b) such parties may request a copy of this Agreement
in connection with discovery. Notwithstanding Sections 8.1 and 8.2, Par agrees
to Plaintiff’s production of this Agreement under the highest level of
confidentiality and protection offered in the applicable protective order;
provided that Plaintiffs give Par notice of any such discovery request no less
than one (1) week in advance of making a disclosure under this Section.

 

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9. REPRESENTATIONS AND WARRANTIES

9.1 Mutual Representations and Warranties. Each Party represents and warrants to
the other Party that, as of the Execution Date:

(a) it has the corporate power and authority to enter into this Agreement and to
perform its obligations and bind its Affiliates to perform their obligations
hereunder, and that the person(s) executing this Agreement on behalf of such
Party are authorized to do so;

(b) the execution and delivery of this Agreement and the performance of the
transactions contemplated hereunder have been duly authorized by all necessary
corporate actions of such Party and its Affiliates;

(c) this Agreement has been duly executed and delivered by it and is a binding
obligation of it, enforceable against it and its Affiliates in accordance with
its terms; and

(d) the execution and delivery of this Agreement and the performance by such
Party or its Affiliates of any of its obligations hereunder do not and will not
conflict with (i) any judgment of any court or governmental body applicable to
such Party or its Affiliates or its respective properties, (ii) any other
agreements to which it or its Affiliates may be a party, or (iii) to such
Party’s knowledge, any statute, decree, order, rule or regulation of any court
or governmental agency or body applicable to such Party, its Affiliates or their
respective properties.

9.2 Additional Plaintiff Representations and Warranties. Plaintiffs represent
and warrant to Par that they have the authority to grant rights under the
Licensed Patents upon the terms set forth in this Agreement.

9.3 Disclaimer of Warranties. Except for those warranties set forth in Sections
3.3, 9.1 and 9.2, no Party makes any warranty, written, oral, express or
implied, with respect to this Agreement. ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT HEREBY ARE DISCLAIMED BY BOTH PARTIES.

10. INDEMNITIES.

10.1 Indemnity by Defendants. Defendants will, jointly and severally, indemnify
and hold harmless Plaintiffs, their respective Affiliates and their or their
respective Affiliates’ officers, directors, employees and agents from and
against any loss, damage, liability or expense in connection with any and all
actions, suits, claims, demands or prosecutions that may be brought or
instituted against Plaintiffs or such other indemnitees by Third Parties
(including governmental authorities) to the extent based on or relating to
(a) any breach by a Defendant of this Agreement; or (b) the manufacture, sale or
offering to sell of any Par Generic Product, including any claim for personal
injury, property damage, compensatory damages or punitive damages.

 

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10.2 Indemnity by Plaintiffs. Plaintiffs will, jointly and severally, indemnify
and hold harmless Defendants, their respective Affiliates and their or their
respective Affiliates’ officers, directors, employees and agents from and
against any loss, damage, liability or expense in connection with any and all
actions, suits, claims, demands, or prosecutions that may be brought or
instituted against Defendants or such other indemnitees by Third Parties
(including governmental authorities) to the extent based on or relating to
(a) any breach by a Plaintiff of this Agreement, or (b) the manufacture, sale or
offering to sell of any Silenor Product, including any claim for personal
injury, property damage, compensatory damages or punitive damages.

10.3 Indemnification Procedures. A Person seeking indemnification under this
Agreement shall provide prompt written notice to the indemnifying Party (and, in
any event, within five (5) Business Days) of the assertion of any claim against
such Party as to which indemnity is to be requested hereunder; provided,
however, that any delay or failure to provide such notice shall not relieve the
indemnifying Party of its indemnity obligations unless, and solely to the extent
that, such delay or failure to notify materially prejudices the indemnifying
Party’s ability to defend such claims. The indemnifying Party shall have sole
control over, and shall assume all expenses with respect to, the defense,
settlement, adjustment or compromise of any claim as to which this Section 10
requires it to indemnify the other, provided that: (a) the indemnified Person
may, if it so desires, employ counsel at its own expense to participate and
assist in the handling of such claim; and (b) the indemnifying Party shall
obtain the prior written approval of the indemnified Person, which shall not be
unreasonably withheld, before entering into any settlement, adjustment or
compromise of such claim or ceasing to defend against such claim if doing so
would: (i) impose an injunction and/or any financial obligations upon the
indemnified Person; or (ii) result in an admission of wrongdoing by the
indemnified Person.

11. BREACH OF THE AGREEMENT

11.1 Each Party acknowledges and agrees that the restrictions and other terms
and conditions set forth in this Agreement regarding the manufacture, having
manufactured, use, sale, offer for sale or importation of Par Generic Products
by Par are reasonable and necessary to protect the respective legitimate
interests of Plaintiffs, and that, in the event of a material breach or
threatened material breach of those restrictions or other terms or conditions of
this Agreement by any Defendant, any Plaintiff shall have the right to seek from
any court of competent jurisdiction injunctive relief, whether temporary,
preliminary, or permanent, or specific performance, which rights shall be
cumulative and in addition to any other rights or remedies to which such
Plaintiff may be entitled in law or equity.

11.2 Either Party (which, for this purpose, means Plaintiffs or Defendants, as
applicable, acting jointly) may terminate this Agreement in the event of a
material breach by another Party (which, for this purpose, means any Defendant,
if Plaintiffs were to terminate, or any Plaintiff, if Defendants were to
terminate), which breach remains uncured for a period of sixty (60) days after
notice thereof is given to such other Party; provided, however, that Plaintiffs
may terminate this Agreement immediately on written notice if Par breaches
Sections 4.2, 5.1(b), 5.3(a), 5.3(b) or 5.3(c).

 

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11.3 Nothing in this Agreement is intended, or shall be construed, to limit the
Parties’ rights to equitable relief or any other remedy for a breach of any
provision of this Agreement.

12. GENERAL PROVISIONS

12.1 Entire Agreement. This Agreement (which includes Exhibit A attached hereto)
constitute the final, complete and exclusive statement of the terms of the
agreement among the Parties pertaining to the subject matter covered herein and
therein and the settlement of the Litigation between the Parties and supersedes
all prior and contemporaneous understandings or agreements of the Parties. No
Party has been induced to enter into this Agreement by, nor is any Party relying
on, any representation or warranty outside those expressly set forth in this
Agreement

12.2 Governing Law and Dispute Resolution. This Agreement shall be governed,
interpreted and construed in accordance with the laws of the State of Delaware,
without giving effect to choice of law principles. Any judicial proceedings
related to disputes arising from or in connection with this Agreement shall be
initiated exclusively in the District Court (or should there be no subject
matter jurisdiction, then in another court of competent jurisdiction in
Delaware), which shall be deemed to be the appropriate forum to hear the
dispute.

12.3 Assignment. No Party will assign this Agreement or any part hereof or any
interest herein (whether by operation of law or otherwise) to any Person without
the written approval of the other Party; provided, however, that any Party may
assign this Agreement without such consent (and, if Par so assigns this
Agreement, it must assign the Par ANDA to the assignee of this Agreement) (a) to
any Affiliate of such assigning Party (for as long as such assignee remains an
Affiliate of such Party); or (b) to any successor entity in the case of its
merger, consolidation or change in control, or a sale of all or substantially
all of its assets related to this Agreement. No assignment will be valid unless
the permitted assignee assumes all obligations of its assignor under this
Agreement. No assignment will relieve any assigning Party of responsibility for
the performance of its obligations hereunder. Any purported assignment in
violation of this Section 12.3 will be void.

12.4 Severability. Except as otherwise expressly provided herein, if any
provision of this Agreement or the application thereof will, to any extent, be
held to be invalid or unenforceable, then (a) the remainder of this Agreement,
or the application of such provision to provision of this Agreement or the
application thereof will, to any extent, be held to be invalid or unenforceable,
then (a) the remainder of this Agreement, or the application of such provision
to circumstances other than those as to which it is held invalid or
unenforceable, will not be affected thereby and each provision of this Agreement
will be valid and enforceable to the fullest extent permitted by applicable law,
and (b) the Parties covenant and agree to renegotiate any such provision in good
faith in order to provide a reasonably acceptable alternative to such provision,
it being the intent of the Parties that the basic purposes of this Agreement are
to be effectuated.

12.5 Independent Contractors. No Party shall be deemed to be an agent, joint
venturer or partner of the other.

 

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12.6 Amendments. No amendment, modification or supplement of any provisions of
this Agreement shall be valid or effective unless made in writing and signed by
a duly authorized officer of each Party.

12.7 Waiver. None of the provisions of this Agreement will be considered waived
by any Party unless such waiver is agreed to, in writing, by authorized agents
of such Party. The failure of a Party to insist upon strict conformance to any
of the terms and conditions hereof, or failure or delay to exercise any rights
provided herein or by law will not be deemed a waiver of any rights of any
Party.

12.8 Counterparts and Facsimile Signatures. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Signatures provided by facsimile transmission or in Adobe™ Portable
Document Format (PDF) sent by electronic mail shall be deemed to be original
signatures.

12.9 Construction.

(a) This Agreement has been jointly negotiated and drafted by the Parties
through their respective counsel and no provision shall be construed or
interpreted for or against any of the Parties on the basis that such provision,
or any other provision, or the Agreement as a whole, was purportedly drafted by
a particular Party.

(b) The word “including” or any variation thereof means “including without
limitation” or any variation thereof and shall not be construed to limit any
general statement which it follows to the specific or similar items or matters
immediately following it.

(c) The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.

12.10 Inurement. This Agreement shall be binding upon and inure solely to the
benefit of the Parties, their successors and permitted assigns, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other Person(s) (other than the Releasees under Section 3.1 and the indemnitees
under Sections 10.1 and 10.2) any rights, benefits, or remedies of any nature
whatsoever under or by reason of this Agreement.

12.11 Notices. Any notice required or permitted to be given or sent under this
Agreement shall be in writing and hand delivered or sent by express delivery
service or certified or registered mail, postage prepaid, to the receiving Party
at the addresses indicated below.

 

If to Plaintiffs, to:    Somaxon Pharmaceuticals, Inc.    10935 Vista Sorrento
Parkway, Suite 250    San Diego, CA 92130    Attn: General Counsel

 

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   And    ProCom One, Inc.    100 E. San Antonio, Ste 201    San Marcos TX 78666
   Attn: President with copies to:    Wilmer Cutler Pickering Hale and Dorr LLP
   60 State Street    Boston, MA 02109    Attn: David Manspeizer If to Par, to:
   Par Pharmaceutical Companies, Inc.    300 Tice Boulevard    Woodcliff Lake,
NJ 07677    Attn: General Counsel with copies to:    Arent Fox LLP    1050
Connecticut Avenue NW    Suite 600    Washington, DC 20036    Attn: Richard
Berman

Any such notice shall be deemed to be effective on delivery, if delivery is
confirmed by the delivery service. A Party may change its address by giving the
other Parties written notice, delivered in accordance with this Section 12.11.

SIGNATURES FOLLOW ON NEXT PAGE

 

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
by its duly authorized representative as of the day and year first above
written.

 

SOMAXON PHARMACEUTICALS, INC.     PAR PHARMACEUTICAL, INC. By: /s/ Richard W.
Pascoe     By: /s/ Thomas J. Haughey Name: Richard W. Pascoe     Name: Thomas J.
Haughey Title: President and CEO     Title: President PROCOM ONE, INC.     PAR
PHARMACEUTICAL COMPANIES, INC. By: /s/ Terrell A. Cobb     By: /s/ Thomas J.
Haughey Name: Terrell A. Cobb     Name: Thomas J. Haughey Title: President    
Title: President

 

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EXHIBIT A

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

 

    )   

SOMAXON PHARMACEUTICALS, INC.

and PROCOM ONE, INC.,

  )      )      )   

Plaintiffs,

  )    No. 10-cv-1100 (RGA) (MPT)   )    (Consolidated)

v.

  )      )    ACTAVIS ELIZABETH LLC, et al.,   )      )   

Defendants and

Counterclaim-Plaintiffs.

  )      )        )   

CONSENT JUDGMENT

The Court, upon the consent and request of Plaintiffs Somaxon Pharmaceuticals,
Inc. and ProCom One, Inc. (collectively, “Plaintiffs”) and Defendants Par
Pharmaceutical, Inc. and Par Pharmaceutical Companies, Inc. (collectively
“Par”), hereby Finds:

(1) Plaintiffs have charged Par with infringement of U.S. Patent Nos. 6,211,229
(the “’229 patent”) and 7,915,307 (the “’307 patent”) in connection with Par’s
submission to the U.S. Food and Drug Administration (“FDA”) of Abbreviated New
Drug Application (“ANDA”) No. 202-510 seeking approval to engage in the
commercial manufacture, use, and/or sale of a 3 mg doxepin hydrochloride product
and a 6 mg doxepin hydrochloride product (collectively, the “Par ANDA
Products”).

(2) Par has asserted certain affirmative defenses and counterclaims in the
Litigation;

(3) The Parties have agreed to resolve their disputes relating to the Litigation
through a Settlement and License Agreement entered into between the parties,
dated June     , 2012 (the “Agreement”), in order to avoid further litigation
and the attendant risk, associated fees, costs and expenses thereof; and

(4) As a result of the Agreement there will be an opportunity for
pro-competitive generic competition for doxepin hydrochloride products for human
use, which competition otherwise may not have existed until the expiration of
the Licensed Patents and any applicable period of exclusivity;

 

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ORDER

Accordingly, upon the consent and request of the Parties, IT IS HEREBY ORDERED,
ADJUDGED AND DECREED THAT:

a) The parties’ claims, counterclaims, and defenses with respect to the ’229 and
’307 patents are hereby dismissed without prejudice;

b) Par, its officers, agents, servants, employees and attorneys, and those
persons in active concert or participation with them who receive actual notice
of this Order by personal service or otherwise, are hereby enjoined from
manufacturing, using, offering to sell and selling within the United States, and
importing into the United States, the Par ANDA Products during the life of the
’229 and ’307 patents, including any extensions and pediatric exclusivities,
except to the extent permitted by the Settlement and License Agreement dated
July     , 2012, and any subsidiary agreements entered into between the parties.

c) This Order shall finally resolve the Action between the Parties, and the
Parties each expressly waive any right to appeal or otherwise move for relief
from this Order;

d) This Court retains jurisdiction over the Parties for purposes of enforcing
this Order;

e) Each Party shall bear its own fees and costs in connection with the Action,
including attorney fees;

 

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[        ]    [        ] Attorneys for Plaintiffs Somaxon Pharmaceuticals, Inc.
and ProCom One, Inc.    Attorneys for Defendants Par Pharmaceutical, Inc. and
Par Pharmaceutical Companies, Inc.

Dated: July     , 2012

SO ORDERED:

This      day of             , 2012.

 

 

HON. [        ]

UNITED STATES DISTRICT JUDGE

 

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