Exhibit 10.3

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (this “Agreement”) is dated as of September 19,
2005 by and between Neurobiological Technologies, Inc., a Delaware corporation
(“Seller”), Neutron ROW Ltd., a Bermuda limited company (“Neutron ROW”) and
Neutron Ltd., a Bermuda limited company (“Neutron” and, together with Neutron
ROW, the “Buyers”). Buyers and Seller are referred to collectively herein as the
“Parties.”

 

WHEREAS, Buyers desire to acquire the Acquired Assets (as defined herein) from
Seller; and

 

WHEREAS, Seller desires to sell to Buyers such Acquired Assets, all as more
particularly set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
Parties hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS; INTERPRETATION

 

1.1 Definitions. Capitalized terms used in this Agreement, unless otherwise
defined, shall have the meanings set forth below:

 

“Acquired Assets” shall mean all of Seller’s or any of its Subsidiaries’ right,
title, and interest in and to the following (i) the Product, (ii) the
Development Tools, (iii) the Acquired Intellectual Property, (iv) Seller’s
rights under the Assigned Contracts, (v) all Permits held by Seller or any of
its Subsidiaries that relate to the Acquired Intellectual Property or the
Product, (vi) all Books and Records, and (vii) all causes of action, judgments,
and claims or demands of whatever kind or description arising out of or relating
solely to the foregoing. Notwithstanding any of the foregoing, the Acquired
Assets shall not include the Excluded Assets.

 

“Acquired Intellectual Property” shall mean all Intellectual Property Rights
necessary in the development, manufacture, importation, sale, marketing,
distribution or use of, or otherwise relating or pertaining to the Product that
is owned by Seller or any of its Subsidiaries, solely or jointly with any other
Person, is licensed to Seller or any of its Subsidiaries or to which Seller or
any of its Subsidiaries otherwise has rights, including the Intellectual
Property Rights set forth on Schedule 4.9(a).

 

“Affiliate” shall mean, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term “control”
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise, and the terms
“controlled” and “controlling” have meanings correlative thereto.

 

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“Applicable Laws” shall mean all laws, statutes, regulations and ordinances of
any Governmental Entity having jurisdiction over the Acquired Assets as may be
in effect from time to time.

 

“Assigned Contracts” shall mean the Contracts set forth on Schedule B hereto.

 

“Assumed Liabilities” shall mean, subject to the terms and conditions of this
Agreement, solely the following liabilities and obligations of Seller: (i) all
liabilities and obligations of Seller under the Assigned Contracts to the extent
related solely to the period following the close of business on the Closing Date
and which do not constitute a liability or obligation relating to a breach under
the Assigned Contracts on or prior to the Closing Date; (ii) all liabilities and
obligations of Seller under or in respect of the Permits included among the
Acquired Assets, to the extent related solely to the period following the close
of business on the Closing Date and which do not constitute a liability or
obligation relating to a breach or violation under or in respect of such Permits
on or prior to the Closing Date; (iii) any liability or obligation in respect of
clinical trials involving the Product or prototypes of the Product, to the
extent such liability arises in connection with the conduct of any clinical
trial after the Closing Date; and (iv) personal injury, death or property
damages that result at any time after the Closing Date from any attribute of the
Product or from its use, handling, storage or disposal.

 

“Books and Records” shall mean (i) any and all books, records, documentation
(or, in each case, portion thereof), data, or other information in the
possession of Seller or its Affiliates relating solely to the Acquired Assets or
the Product and (ii) pleadings and other documentation relating to lawsuits
filed in the ten years preceding the Closing Date directly relating to the
Acquired Assets or the Product.

 

“Business Day” shall mean any day on which banking institutions are not required
or authorized to close in New York, New York or Hamilton, Bermuda.

 

“Change of Control” with respect to any Person, shall mean an event in which:

 

(i) any other Person or group of Persons not then beneficially owning more than
fifty percent (50%) of the voting power of the outstanding securities of such
Person acquires beneficial ownership of securities of such first Person
representing more than fifty percent (50%) of the voting power of the then
outstanding securities of such first Person with respect to the election of
directors of such first Person; or

 

(ii) such Person enters into a merger, consolidation or similar transaction with
another Person and the holders of such first Person do not hold a majority in
interest of the voting securities of such surviving entity immediately following
such transaction.

 

“C.F.R.” shall mean the United States Code of Federal Regulation.

 

“cGMP” shall mean current Good Manufacturing Practices, as promulgated by the
FDA under the United States Federal Food, Drug and Cosmetic Act, as amended, 21
C.F.R. § 210 et seq. 21 C.F.R. § 600-610, and any successor legislation and/or
regulations, as applicable.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

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“COGS” shall mean cost of goods sold and shall be calculated based on the
Product’s fully absorbed standard cost, as determined in accordance with GAAP,
consistently applied; provided, that COGS shall also include, without
duplication, any and all Third Party Technology Payments.

 

“Commercially Launch” shall mean the first sale of the Product for the First
Indication in commercial quantities in a given jurisdiction.

 

“Commercially Reasonable Efforts” shall mean, as to a Party’s obligation to
expend efforts to accomplish a particular objective pursuant to any provision
hereunder, that such Party is required to expend commercially reasonable, good
faith efforts to accomplish the particular objective. Such obligation does not
require a Party to act in any manner that would be contrary to Applicable Law or
prudent commercial practices in the pharmaceutical industry. That a particular
objective is not actually accomplished is no indication that a Party did not in
fact expend Commercially Reasonable Efforts in attempting to accomplish the
objective.

 

“Contracts” shall mean any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, license, franchise,
insurance policy, commitment or other arrangement or agreement, whether written
or oral.

 

“Development Tools” shall mean any drug substance, drug product or other
materials used by Seller or its Affiliates as of the Closing Date for the
production of XERECEPT® or for quality control or other analytical purpose
related to production or use of XERECEPT®.

 

“EMEA” shall mean the European Medicines Agency, or any successor entity
thereto.

 

“Encumbrances” shall mean any claim, lien, pledge, option, charge, deed of
trust, security interest, mortgage, encumbrance, restriction on transfer (such
as a right of first refusal or other similar rights but not including any
restrictions on transfer arising under federal or state securities laws), defect
of title or other similar right of any Third Party whether voluntarily incurred
or arising by operation of law, and includes any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.

 

“Excluded Assets” shall mean all assets of Seller other than the Acquired
Assets.

 

“Excluded Liabilities” shall mean all debts, obligations, and other liabilities
of Seller and its Affiliates (all of which are expressly excluded from the
purchase and sale of the Assets contemplated hereby), other than the Assumed
Liabilities. For the sake of clarity, Excluded Liabilities shall include (i) any
liability or obligation of Seller under this Agreement or the other Transaction
Documents, (ii) any liability or obligation of Seller, including all product
liability claims, in respect of Product tested, manufactured, distributed, or
sold prior to the Closing Date, (iii) any liability or obligation of Seller in
respect of clinical trials involving the Product or prototypes of the Product to
the extent such liability arises in connection with the conduct of any clinical
trial before or on the Closing Date and (iv) all other liabilities of Seller
other than as expressly contemplated by the definition of “Assumed Liabilities.”

 

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“FDA” shall mean the U.S. Food and Drug Administration, or any successor entity
thereto.

 

“FDCA” shall mean the Federal Food, Drug and Cosmetic Act of 1938, as amended.

 

“GAAP” shall mean United States generally accepted accounting principles,
applied on a consistent basis.

 

“Governmental Entity” shall mean any federal, state, local or foreign
governmental, regulatory or administrative body, agency, department, board,
commission or governmental entity, any court or judicial governmental entity,
any public, private or industry regulatory governmental entity, whether federal,
state, local, foreign or otherwise, or any Person lawfully empowered by any of
the foregoing to enforce or seek compliance with any Applicable Law.

 

“Gross Margin” shall mean Net Sales less the following: (a) COGS; (b) sales and
marketing expenses (to the extent not included in COGS); and (c) continued
clinical development costs specifically related to the Product. Each calculation
of Gross Margin under Article 7 shall be made in accordance with GAAP,
consistently applied.

 

“Hurdle Amount” means Seven Million Five Hundred Thousand Dollars ($7,500,000);
provided that the Hurdle Amount shall be reduced to Three Million Seven Hundred
Fifty Thousand Dollars ($3,750,000) in the event that (i) a Sale Transaction is
consummated on or prior to the first anniversary of the Closing Date and
(ii) the aggregate Net Proceeds received by Buyers in such Sale Transaction
exceed 150% of the aggregate amount invested or otherwise paid by Buyers in
respect of the Acquired Assets or the Product, including the Purchase Price, any
Milestone Payments, any U.S. Profit Sharing Payments, any ROW Royalty Payments,
any fees and expenses relating to the negotiation, consummation or enforcement
of the Transaction Documents, any litigation or dispute resolution awards or
settlements, and any fees, charges and expenses relating to the development,
testing, manufacture, registration or otherwise in connection with the Acquired
Assets or the Product.

 

“IND” means an investigational new drug application with the FDA.

 

“Intellectual Property Rights” means the rights associated with or arising out
of any of the following: (a) domestic and foreign patents and patent
applications, together with all reissuances, divisionals, continuations,
continuations-in-part, revisions, renewals, extensions, and reexaminations
thereof; (b) trade secret rights and corresponding rights in confidential
information and other non-public information (whether or not patentable),
including ideas, formulas, compositions, inventor’s notes, discoveries and
improvements, know-how, manufacturing and production processes and techniques,
testing information, research and development information, inventions, invention
disclosures, unpatented blueprints, drawings, specifications, designs, plans,
proposals and technical data, business and marketing plans, market surveys,
market know-how and customer lists and information; (c) copyrights,
copyrightable works, rights in databases, data collections, “moral” rights, mask
works, copyright registrations and applications therefor and corresponding
rights in works of authorship; (d) all trademarks, service marks, logos, trade
dress and trade names, and other indicia of commercial source or origin (whether
registered, common law, statutory or otherwise), all registrations and

 

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applications to register the foregoing anywhere in the world and all goodwill
associated therewith; and (e) any similar, corresponding or equivalent rights to
any of the foregoing anywhere in the world.

 

“Japanese NDA” means a New Drug Application to the MHLW for approval to market
the Product in Japan.

 

“Law” shall mean any federal, state, local or foreign law, statute,
constitution, ordinance, decree, requirement, code, order, judgment, settlement
agreement, injunction, restriction, rule or regulation, including the terms of
any license or Permit issued by any Governmental Entity.

 

“Licensed IP” shall mean all Intellectual Property Rights, other than Acquired
Intellectual Property, owned or licensed by Seller or any of its Subsidiaries
(to the extent that Seller or one of its Subsidiaries has the right to grant
sublicenses thereunder) as of the Closing Date, which are useful for the
development, manufacture, importation, sale, marketing, distribution or use of
the Product.

 

“Loss” or “Losses” shall mean any and all losses (including losses in value),
liabilities, costs, deficiencies, fines, damages, penalties and expenses
(including reasonable professionals’ fees and expenses and litigation,
settlement, judgment and enforcement costs), and any legal or other reasonable
expenses incurred in connection with investigating or defending any Proceeding,
whether or not resulting in damages; provided, however, that indirect,
incidental, consequential and punitive damages shall not be included in any
calculation of “Losses” except to the extent awarded in a Third Party claim.

 

“Marketing Approval” shall mean, in respect of any jurisdiction, the receipt by
either of Buyers of all authorizations by the appropriate Governmental Entities
necessary for the commercial sale of the Product (including exports) in such
jurisdiction, including approval of labeling, price, reimbursement and
manufacturing, where required as a legal prerequisite to commercial sale of the
Product.

 

“Material Adverse Effect” shall mean any change, circumstance or effect that,
individually or in the aggregate, has, or would reasonably be expected to have,
a material and adverse effect on the Acquired Assets or the Assumed Liabilities
or which would reasonably be expected to materially impair or materially delay
the ability of Seller to consummate the transactions contemplated by this
Agreement or the other Transaction Documents.

 

“MHLW” shall mean the Japanese Ministry of Health, Labor and Welfare, or any
successor entity thereto.

 

“NDA” means a New Drug Application submitted to the FDA for approval to market
the Product in the United States of America.

 

“Net Proceeds” shall mean with respect to any Sale Transaction, the cash or
non-cash proceeds received by the holders of Buyers’ common equity (including
cash or non-cash proceeds subsequently received, as and when received), net of
(i) reasonable expenses (including reasonable legal fees, investment banker’s
fees, broker’s fees or costs and other out of pocket expenses incurred in
connection therewith), (ii) amounts provided as a reserve, in accordance

 

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with GAAP, against any liabilities under any indemnification obligations or
purchase price adjustment associated with such Sale Transaction (provided that,
to the extent and at the time any such amounts are released from such reserve,
such released amounts shall (net of reasonable expenses) constitute Net
Proceeds).

 

“Net Sales” shall mean the annual gross amount invoiced by Buyers to Third
Parties for sales of the Product, less provisions for the following:

 

  (i) trade and reasonable and customary cash discounts allowed and actually
taken;

 

  (ii) returns, credits, refunds, rebates, chargebacks, retroactive price
adjustments, and any other substantially similar allowances which effectively
reduce the net selling price;

 

  (iii) transportation and distribution charges or allowances actually invoiced
by an unrelated Third Party, including freight pickup allowances; and

 

  (iv) any tax (excluding income tax), excise, or other governmental charges
upon or measured by the production, sale, transportation, delivery or use of the
Product.

 

If Buyers or any of their respective Affiliates sells the Product in combination
with any other product at a single price or rate or at a discount for
collectively buying such products, to the extent permitted by Applicable Law,
then Net Sales with respect to the Product shall equal the number of units of
the Product sold together with other products multiplied by the lowest net
selling price at which Buyers sold the Product individually to similar customers
for similarly sized orders, less any applicable provisions above described. Each
calculation of Net Sales under Article 7 shall be made in accordance with GAAP.

 

“Permits” shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any Governmental Entity,
including all authorizations under the FDCA, and the regulations of the FDA
promulgated thereunder and all applications for any of the foregoing.

 

“Permitted Encumbrances” shall mean (a) Encumbrances for current Taxes not yet
due and payable or for Taxes the validity of which is being contested in good
faith and (b) purchase money security interests, mechanic’s, materialmen’s and
similar Encumbrances for amounts not yet due which have arisen in the ordinary
course of business.

 

“Person” shall mean an individual, partnership, corporation, limited liability
company, joint stock company, unincorporated organization or association, trust,
joint venture, association or other organization, whether or not a legal entity,
or any Governmental Entity.

 

“Product” shall mean the pharmaceutical product XERECEPT® for all therapeutic
indications, as described on Schedule A hereto, and any other pharmaceutical or
therapeutic product the making, distributing, using, offering to sell, or sale
of which would infringe the

 

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Acquired Intellectual Property but for the transfer of such Acquired
Intellectual Property from Seller to Buyer hereunder.

 

“Profit Discount” shall mean the aggregate reduction in payments made to Seller
by Buyers, if any, pursuant to the provisos in Sections 7.2(a)(i) and 7.3(a) of
this Agreement, up to and including the Hurdle Amount.

 

“Promissory Note” shall mean the promissory note substantially in the form
attached hereto as Exhibit D.

 

“Registered IP” means any Intellectual Property Rights that are the subject of
an application, certificate, filing, registration or other document issued,
filed with, or recorded by any Governmental Entity, including any of the
following: (a) issued patents and patent applications; (b) trademark
registrations and applications; and (c) copyright registrations and
applications.

 

“Sale Transaction” shall mean (a) the bona fide merger of either Buyer or both
Buyers with and into a Third Party or the bona fide sale to, or other
acquisition by, a Third Party of all or substantially all of the Acquired Assets
or all or substantially all of the equity interests in either Buyer or both
Buyers or (b) the bona fide license to a Third Party of all or substantially all
of the Acquired Assets, provided that, no such license shall be considered a
Sale Transaction without the prior consent of Seller, such consent not to be
unreasonably withheld.

 

“Seller’s Knowledge” means the actual knowledge of any of Seller’s officers or
senior managers.

 

“Subsidiary” shall mean with respect to any party, any Person of which (or a
Subsidiary thereof) such party owns a majority of the capital stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors or similar governing body of such Person.

 

“Tax Return” shall mean any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto and including any amendment thereof.

 

“Taxes” shall mean all taxes, charges, fees, duties, levies, or other
assessments of any kind whatsoever, including (without limitation) income, gross
receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, and employees’ income withholding, unemployment and Social
Security taxes, which are imposed by the United States, or any state, local or
foreign government or subdivision or agency thereof, including any interest,
penalties or additions to tax related thereto.

 

“Third Party” shall mean any Person other than Buyers, Seller and their
respective Affiliates.

 

“Third Party Technology Payments” means license fees, development or other
milestone payments, royalties or any other payments, required to be paid to any
Third Party in respect of

 

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Intellectual Property Rights pursuant to any Contract to which Seller is a party
and in existence as of the Closing Date, including under any Assigned Contract.

 

“Treas. Reg.” shall mean United States Treasury Regulations.

 

“ROW Territory” shall mean all nations, states, possessions and territories that
are not a part of the U.S. Territory.

 

“Transaction Documents” shall mean this Agreement, the Collaboration and
Services Agreement, the Bill of Sale, the IP Assignments, and the other
documents, instruments, exhibits, annexes, schedules, or certificates
contemplated hereby and thereby.

 

“U.S.C.” shall mean the United States Code.

 

“U.S. Territory” shall mean the United States, its territories and possessions,
including the Commonwealth of Puerto Rico.

 

1.2 Other Defined Terms. The following terms are defined in the sections
indicated.

 

Agreement

   preamble

Allocation Schedule

   2.5

Buyers

   preamble

Closing Date

   3.1

Collaboration and Services Agreement

   3.2(ii)

Confidential Information

   6.4

Disputes

   4.9(b)

Indemnified Party

   10.2

IP Assignments

   3.3(iii)

Material Contracts

   4.5(a)

Milestone Payments

   7.1

Neutron

   preamble

Neutron ROW

   preamble

Parties

   preamble

Purchase Price

   2.4(a)

Regents

   3.3(f)

Regents License

   3.2(f)

ROW Royalty Payments

   7.2(a)(ii)

Required Consents

   6.1

Salk

   3.3(g)

Salk License

   3.3(g)

Seller

   preamble

Transfer Taxes

   6.7

U.S. Profit Sharing Payments

   7.2(a)(i)

 

1.3 Accounting Conventions. Each accounting term used herein, including within
the defined terms herein, shall have the meaning that is applied thereto in
accordance with GAAP,

 

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consistently applied, and shall be consistent in all material respects with the
books and records of Seller.

 

1.4 Business Days. Whenever the last day for the exercise of any privilege or
the discharge of any duty hereunder shall fall upon any day which is not a
Business Day, the party having such privilege or duty may exercise such
privilege or discharge such duty on the next succeeding Business Day.

 

1.5 Terminology. Unless otherwise indicated to the contrary herein by the
context or use thereof: (i) the words, “herein,” “hereto,” “hereof” and words of
similar import refer to this Agreement as a whole and not to any particular
Section or paragraph hereof; (ii) the word “including” shall mean “including,
but not limited to”; (iii) masculine gender shall also include the feminine and
neutral genders, and vice versa; (iv) words importing the singular shall also
include the plural, and vice versa; and (v) references to statutes shall include
all regulations promulgated thereunder and references to statutes or regulations
shall be construed as including any and all further statutory and regulatory
provisions consolidating, amending, expanding, implementing, or replacing the
statute or regulation.

 

ARTICLE 2

 

PURCHASE AND SALE OF ASSETS;

ASSIGNMENT AND ASSUMPTION

 

2.1 Purchase and Sale of Assets. On and subject to the terms and conditions of
this Agreement, Buyers agree to purchase from Seller, and Seller agrees to sell,
transfer, convey, assign and deliver to Buyers, all of the Acquired Assets on
the Closing Date for the consideration specified below in Section 2.4.

 

2.2 Assignment of Contracts and Permits.

 

(a) Subject to the terms and conditions of this Agreement, Seller will assign
and transfer to Buyers, and Buyers will jointly accept and assume from Seller,
effective as of the Closing Date, Seller’s right, title and interest in and to,
the Assigned Contracts and all of the Permits included among the Acquired
Assets, in each case to the extent (and only to the extent) such rights and
obligations comprise Assumed Liabilities or Acquired Assets, provided that, in
the event that any Required Consent has not been obtained as of the Closing
Date, Seller will, in accordance with Section 6.1 of the Agreement, use its
Commercially Reasonable Efforts to obtain such Required Consents as soon as
possible after the Closing Date.

 

(b) Anything in this Agreement to the contrary notwithstanding, this Agreement
shall not constitute an agreement to assign or transfer any Contract or Permit
or any claim or right or any benefit or obligation thereunder or resulting
therefrom if an assignment or transfer thereof, without the consent of a Third
Party thereto, would constitute a breach or violation thereof or is otherwise
prohibited. If such consent is required or if an attempted assignment or
transfer is ineffective, Seller shall use its Commercially Reasonable Efforts to
cooperate with Buyers to provide for Buyer the benefits under any such Assigned
Contract or Permit, with the expense of any such cooperation to be borne by
Buyers.

 

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2.3 Assumption of Liabilities. On and subject to the terms and conditions of
this Agreement (including Section 7.2(c)), Buyers agree to jointly and severally
assume and become responsible for all of the Assumed Liabilities from and after
the Closing Date. Buyers will not assume or have any responsibility, however,
with respect to any Excluded Liabilities.

 

2.4 Purchase Price; Contingent Payments.

 

(a) On the Closing Date, Buyers shall pay to Seller, as consideration for the
Acquired Assets, an amount (the “Purchase Price”) equal to Thirty-Three Million
Dollars ($33,000,000.00). Of said Purchase Price, Twenty Million Dollars
($20,000,000.00) shall be paid on the Closing Date by wire transfer of
immediately available funds to an account designated by Seller in writing at
least two (2) Business Days prior to the Closing Date. The remaining Thirteen
Million Dollars ($13,000,000.00) of such Purchase Price shall be paid in
accordance with the terms of the Promissory Note.

 

(b) Following the Closing Date, Buyers shall make Milestone Payments, U.S.
Profit Sharing Payments, and ROW Royalty Payments to Seller in accordance with
Article 7 hereto.

 

2.5 Allocation of Consideration. The Purchase Price (plus Assumed Liabilities,
to the extent properly taken into account under Section 1060 of the Code) shall
be allocated among the Acquired Assets, in accordance with Section 1060 of the
Code and any applicable provision of non-U.S. Law, as set forth on an asset
allocation statement (the “Asset Allocation Statement”), which Asset Allocation
Statement shall be mutually agreed upon by Seller and the Buyers within 120 days
after the Closing Date to the extent reasonably possible. Within thirty
(30) days following a Milestone Payment, U.S. Profit Sharing Payment or ROW
Royalty Payment, or an indemnification payment made pursuant to Article 10, the
Parties shall amend the Asset Allocation Statement to the extent necessary to
reflect such payment in accordance with the nature thereof. Each of the Parties
agrees to (a) prepare and timely file all Tax Returns, in respect of all
affected taxable periods (or portions thereof), in a manner consistent with the
Asset Allocation Statement, and (b) act in accordance with the Asset Allocation
Statement for all Tax purposes, unless otherwise required by Law. Any unresolved
disputes regarding the Asset Allocation Statement, including any amendments
thereto, shall be promptly submitted to a jointly-retained third-party
independent accounting firm for determination, which shall be final and binding
on the Parties. The cost and expenses of such third-party independent accounting
firm shall be borne equally by Buyers and Seller.

 

ARTICLE 3

 

CLOSING; DELIVERIES

 

3.1 The Closing. The closing of the sale and purchase of the Acquired Assets
(the “Closing”) shall take place at the offices of Celtic Pharma Management
L.P., Wessex House, 45 Reid Street, 4th Floor, Hamilton HM 12, Bermuda, at 10:00
a.m., local time, on such date that the Parties mutually agree upon (the
“Closing Date”). At the Closing, the Parties to this Agreement will exchange
funds, certificates and other documents specified in this Agreement.

 

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3.2 Deliveries by Buyers. At the Closing, Buyers shall deliver to Seller the
following:

 

(a) cash in the amount of Twenty Million Dollars ($20,000,000), to be paid in
accordance with Section 2.4;

 

(b) the Promissory Note, duly executed on behalf of Buyers and Celtic
Pharmaceutical Holdings, L.P.;

 

(c) a counterpart to a Collaboration and Services Agreement substantially in the
form of Exhibit A hereto (the “Collaboration and Services Agreement”), duly
executed on behalf of Buyers;

 

(d) a counterpart to a Bill of Sale and Assignment and Assumption Agreement in
substance consistent with this Agreement and in customary form (the “Bill of
Sale”), duly executed on behalf of Buyers;

 

(e) certificates from the Bermuda Registrar of Companies, dated a recent date
prior to the Closing Date, certifying as to Buyers’ good standing; and

 

(f) certificates from the Secretaries of Buyers certifying as to Buyers’ charter
documents and actions taken by Buyers’ Board of Directors approving the
transactions contemplated by this Agreement.

 

3.3 Deliveries by Seller. At the Closing, Seller shall deliver to Buyers the
following:

 

(a) a counterpart to the Collaboration and Services Agreement, duly executed on
behalf of Seller;

 

(b) a counterpart to the Bill of Sale, duly executed on behalf of Seller;

 

(c) assignments (the “IP Assignments”) of all Registered IP, in customary form
and suitable for recording in the United States Patent and Trademark Office or
United States Copyright Office, or any equivalent non-United States Governmental
Entity, as applicable;

 

(d) a certificate from the Secretary of State of the State of Delaware, dated a
recent date prior to the Closing Date, certifying as to Seller’s good standing;

 

(e) a certificate from the Secretary of Seller, certifying as to Seller’s
Certificate of Incorporation and Bylaws, and actions taken by the Board of
Directors of Seller approving the transactions contemplated by this Agreement;

 

(f) the written consent of the Regents of the University of California
(“Regents”) to the assignment of the license agreement between Seller and the
Regents relating to certain Intellectual Property Rights (the “Regents
License”), in form and substance reasonably satisfactory to Buyers;

 

(g) the written consent of The Salk Institute for Biological Studies (“Salk”) to
the assignment of the license agreement between Seller and Salk relating to
certain Intellectual Property Rights (the “Salk License”), in form and substance
reasonably satisfactory to Buyers; and

 

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(h) a certificate pursuant to Treas. Reg. §§1.897-2(h) and 1.1445-2(c)(3) (in
the form satisfactory to the Sellers) to the effect that Seller is not, and has
not been at any time during the previous five years, a United States real
property holding corporation within the meaning of Section 897 of the Code. Such
certificate shall be signed by a duly authorized officer of Seller under
penalties of perjury and dated as of the Closing Date. In connection with such
certification, Seller shall comply with the notification requirements of Treas.
Reg. §1.897-2 (h)(2).

 

ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyers as of the date hereof and as of the
Closing Date:

 

4.1 Corporate Organization; Authority. Seller is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware
and has all requisite corporate power and authority to conduct its business as
it is now being conducted and to own, lease and operate its properties and
assets. Seller is qualified to do business as a foreign corporation in each
jurisdiction where the failure to be so qualified would have a material and
adverse effect on Seller. True and complete copies of the Certificate of
Incorporation and Bylaws of Seller, in each case as presently in effect, have
previously been delivered to Buyers. Seller has complied with and is in
compliance with its Certificate of Incorporation and Bylaws.

 

4.2 Authority Relative to this Agreement. Seller has all requisite power and
authority (including corporate power or authority) to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
consummate the transactions provided for herein and therein. The execution and
delivery by Seller of this Agreement and the other Transaction Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by the Board of Directors, and
no other corporate proceedings on the part of Seller are necessary to authorize
this Agreement or the other Transaction Documents to which it is a party or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been duly and validly executed and delivered by Seller, and, assuming this
Agreement has been duly authorized, executed and delivered by Buyers, this
Agreement constitutes a valid and binding agreement of Seller, enforceable
against Seller in accordance with its terms, except that such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium (whether general
or specific) or other similar Laws now or hereafter in effect relating to
creditors’ rights generally.

 

4.3 No Violations; Consents and Approvals. Except as set forth in Schedule 4.3,
neither the execution and delivery by Seller of this Agreement or the other
Transaction Documents to which it is a party, nor the consummation of the
transactions contemplated hereby or thereby, will (a) violate any Law, ruling or
other restriction of any Governmental Entity to which Seller is subject,
(b) breach or violate any provision of the Certificate of Incorporation or
Bylaws of Seller or any of its Subsidiaries, (c) conflict with, result in a
material breach of, constitute a material default or a “change of control” event
under, result in the acceleration of, result in a notice obligation under,
create in any party a right to accelerate, terminate or modify or cancel, any
Contract to which Seller or any of its Subsidiaries is a party or by which
Seller or any of its

 

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Subsidiaries is bound, (d) result in the creation of any Encumbrance upon the
Acquired Assets, or (e) except as contemplated by Section 6.1, require any
consent, waiver, approval, authorization of, Permit from, filing with, or
notification to any Governmental Entity or any other Person in connection with
the execution, delivery and performance of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby; provided, however, that this Section 4.3(e) shall not extend
to any consent, waiver, approval, authorization, Permit, filing or notification
that may be required due to each Buyer’s status as a foreign entity.

 

4.4 Compliance with Law. Seller and its Subsidiaries have complied with all Laws
applicable to the Acquired Assets or the Assumed Liabilities or Seller’s or its
Subsidiaries’ operations in connection therewith and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand or notice
has been filed or commenced against Seller of any of its Subsidiaries alleging
any failure to so comply.

 

4.5 Material Contracts.

 

(a) Schedule 4.5(a) sets forth an accurate, correct and complete list of each
Contract (collectively, the “Material Contracts”) in respect of or relating to
the Acquired Assets or the Assumed Liabilities or Seller’s or its Subsidiaries’
operations in connection therewith which:

 

(i) relates to material rights, interests or obligations in connection with the
research, development, clinical trial, supply, manufacture, marketing or
co-promotion of, or collaboration with respect to the Product;

 

(ii) restricts or purports to restrict Seller or any of its Subsidiaries from
competing in any manner, or soliciting employees or consultants;

 

(iii) is a joint venture, partnership, cooperative arrangement or any other
Contract involving a sharing of profits;

 

(iv) is a license, royalty or other Contract relating to any continuing material
obligations, rights or interests of Seller or any other party thereto;

 

(v) vests in any Third Party any rights in any of the Acquired Assets;

 

(vi) is with a Governmental Entity;

 

(vii) if breached, could reasonably be expected to have a Material Adverse
Effect;

 

(viii) individually, or together with one or more related Contracts, involves
revenues received or expenditures to be made related to the Product in excess of
$20,000;

 

(ix) relates to the sale, lease, assignment or other disposition of any of the
Acquired Assets or Assigned Contracts or creates or could give rise to any
Encumbrance in any of the Acquired Assets;

 

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(x) will or could give rise to any material liability or obligation of Buyers
after the date hereof; or

 

(xi) includes a commitment to enter into any of the foregoing described in
clauses (i) through (x).

 

(b) Except as set forth in Schedule 4.5(b), accurate, correct and complete
copies of each written Material Contract or summaries of each oral Material
Contract, together with any amendments thereto, have been delivered by Seller to
Buyers.

 

(c) With respect to each Assigned Contract, except as set forth in
Schedule 4.5(c): (i) such Contract is legal, valid, binding and enforceable
against Seller and/or one or more of its Subsidiaries, as the case may be, and,
to Seller’s Knowledge, the other parties thereto, and is in full force and
effect; (ii) neither Seller nor any of its Subsidiaries is in material breach or
default thereunder, and, to Seller’s Knowledge, no other party to any such
Contract is in material breach or default thereunder and no event has occurred
which with notice or lapse of time would reasonably be expected to constitute
such a material breach or default, or permit termination, modification, or
acceleration, under such Contract; (iii) neither Seller nor, to Seller’s
Knowledge, any other party to such Contract has repudiated any material
provision thereof; (iv) Seller and, if applicable, its Subsidiaries have
performed, in all material respects, all requirements to be performed by it
under each of such Contract; and (v) neither Seller nor any of its Subsidiaries
has received any notice that it has violated, defaulted under or breached such
Contract.

 

4.6 Litigation. There is no action, suit or proceeding pending or, to Seller’s
Knowledge, threatened, against Seller or any of its Subsidiaries, relating in
any way to the Acquired Assets or the Assumed Liabilities or Seller’s or its
Subsidiaries’ operations in connection therewith, before any court or
Governmental Entity or arbitral body and, to Seller’s Knowledge, there is no
basis therefor. There is no investigation or inquiry being conducted or, to
Seller’s Knowledge, threatened, by any Governmental Entity involving Seller or
any of its Subsidiaries, or relating to Seller’s research, development or
commercialization of the Product. Except as set forth in Schedule 4.6, neither
Seller nor any of its Subsidiaries has received notice that it is subject to any
outstanding judgment, order, injunction or decree of any Governmental Entity.

 

4.7 Taxes.

 

(a) Seller has timely paid all Taxes that shall have been required to be paid
prior to or as of the Closing Date, the non-payment of which would result in an
Encumbrance on any Acquired Asset. No deficiency or adjustment for any such
Taxes has been threatened, proposed, asserted, or assessed against Seller.

 

(b) Seller has timely filed (or has had timely filed on its behalf) or will file
or cause to be timely filed, all Tax Returns with respect to the Acquired Assets
required by Law to be filed by Seller prior to or as of the Closing Date.

 

(c) Seller is not a foreign person within the meaning of section 1445(f)(3) of
the Code.

 

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(d) None of the Acquired Assets is subject to a lease, safe harbor lease, or
other arrangement as a result of which the Seller is not treated as the owner
for federal income tax purposes.

 

4.8 Rights in Acquired Assets; Sufficiency. Seller has good title to or a valid
right to use all of the Acquired Assets. To the extent that the Acquired Assets
are owned by and not licensed to Seller, the Acquired Assets are owned by Seller
free and clear of all Encumbrances, other than Permitted Encumbrances. Following
consummation of the transactions contemplated by this Agreement, Buyers will
have the same rights, titles, and interests in and to the Acquired Assets from
and after the Closing Date as Seller has on the date hereof, subject to any
required Third Party consents. The Acquired Assets include all of Sellers’
rights and interests in and to the Product.

 

4.9 Intellectual Property.

 

(a) Schedule 4.9(a) sets forth, as of the date hereof, a complete and accurate
list of all Registered IP included among the Acquired Intellectual Property. For
each listed item, Schedule 4.9(a) shall indicate, as applicable, the owner of
such Registered IP, the country(ies) in which such Registered IP is patented or
registered or for which an application for patent or registration is pending,
the application number, the registration or patent number, and the expiration
date thereof.

 

(b) Except as expressly stated in Schedule 4.9(b), all of the Acquired
Intellectual Property is either (i) wholly and exclusively owned by Seller free
and clear of all options, rights, licenses, restrictions, interests of any kind,
and Encumbrances or (ii) duly, validly, wholly, and exclusively licensed to
Seller. With respect to any Acquired Intellectual Property which Seller is a
joint owner or co-owner, there are no restrictions (by agreement with a Third
Party joint owner or co-owner of the Acquired Intellectual Property or
otherwise) on Seller’s exercise of the full scope of rights afforded a joint
owner or co-owner of that type of Intellectual Property Right under the laws of
the jurisdiction in which the Intellectual Property Right exists.

 

(c) There are no claims pending or, to Seller’s Knowledge, threatened, with
regard to the ownership or licensing to or by Seller of any of the Acquired
Intellectual Property. Subject to any required Third Party consents, Seller has
the legal power to convey to Buyers all of its ownership and license interests
in the Acquired Intellectual Property.

 

(d) To Seller’s Knowledge, no circumstances or grounds exist, that would
invalidate, reduce or eliminate, in whole or in part, the enforceability or
scope of any of the Acquired Intellectual Property, or, in the case of any
Acquired Intellectual Property owned or licensed on an exclusive basis by Seller
or its Subsidiaries, Seller’s or its Subsidiaries’ entitlement to exclusively
exploit such Acquired Intellectual Property.

 

(e) To Seller’s Knowledge, there is, and has been, no pending, decided or
settled opposition, interference, reexamination, injunction, claim, lawsuit,
proceeding, hearing investigation, complaint, arbitration, mediation, demand,
ITC investigation, decree, or any other dispute, disagreement, or claim related
to the Acquired Intellectual Property (collectively referred to hereinafter as
“Disputes”), nor, to Seller’s Knowledge, has any such Dispute been

 

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threatened, challenging the legality, validity, enforceability or ownership of
any Acquired Intellectual Property. To Seller’s Knowledge, no circumstances or
grounds exist that would give rise to such a Dispute. Neither Seller nor any of
its Subsidiaries has sent any notice of any such Dispute, and to Seller’s
Knowledge, there exists no circumstances or grounds upon which Seller or its
Subsidiaries could assert any such claim. To Seller’s Knowledge, no Acquired
Intellectual Property is subject to any outstanding injunction, judgment, order,
decree, ruling charge, settlement or other disposition of any Dispute.

 

(f) To Seller’s Knowledge, none of the Acquired Intellectual Property has been
infringed, is being infringed, has been misappropriated, or has been the subject
of any unauthorized use or disclosure. To Seller’s Knowledge, there is no
threatened or imminent infringement, misappropriation, or unauthorized use or
disclosure of any of the Acquired Intellectual Property.

 

(g) There are no pending or, to Seller’s Knowledge, threatened, claims that the
Acquired Intellectual Property or Seller, by virtue of its practice thereof, has
infringed, is infringing, or will infringe any Intellectual Property Rights of
any Third Party. To Seller’s Knowledge, there is no contractual, legal, or other
restriction on the use of any of the Acquired Intellectual Property. Seller has
used commercially reasonable efforts to avoid the infringement,
misappropriation, or unauthorized use or disclosure by Seller of any
Intellectual Property Rights of any Third Party. Other than the Acquired
Intellectual Property, to Seller’s Knowledge, no Intellectual Property Right is
necessary to develop, manufacture, import, sell, market, distribute or use the
Product for the First Indication in the U.S. Territory. Notwithstanding the
foregoing or anything to the contrary herein, Buyers acknowledge that Seller has
not sought or procured a “freedom to operate” opinion from patent counsel with
respect to the development, manufacture, importation, sale marketing,
distribution or other use the Product, and no duty on the part of Seller to seek
or procure such an opinion shall be implied from this Section 4.8(g) or any
other provision hereof.

 

(h) The patent applications included among the Acquired Intellectual Property
and that are owned (in whole or in part) by Seller or any of its Subsidiaries
are (and applications that are licensed to Seller or any of its Subsidiaries
are, to Seller’s Knowledge) pending and have not been abandoned, and have been
and continue to be timely prosecuted. All Registered IP included among the
Acquired Intellectual Property and all patents, registered trademarks and
service marks, and applications for registration of trademarks and service marks
owned (in whole or in part) by Seller or any of its Subsidiaries have been (and
all of the foregoing that are licensed to Seller or any of its Subsidiaries have
been, to Seller’s Knowledge) duly registered and/or filed with or issued by each
appropriate Governmental Entity and all necessary affidavits of continuing use
have been (and with respect to licensed rights, have been, to Seller’s
Knowledge) timely filed, and all necessary maintenance fees have been (or, with
respect to licensed rights have been, to Seller’s Knowledge) timely paid to
continue all such rights in effect. None of the patents included among the
Acquired Intellectual Property that are owned (in whole or in part) by Seller or
any of its Subsidiaries has (and no such patents that are licensed to Seller or
any of its Subsidiaries have, to Seller’s Knowledge) expired, lapsed or been
declared invalid (in whole or in part) or unenforceable by any Governmental
Entity.

 

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(i) To Seller’s Knowledge, there are no patents, patent applications, patent
publications, articles or other prior art references, public use or disclosure,
sales or offers to sell, prior invention, other prior art, or any other material
information, that could adversely affect the validity or enforceability of any
patent or patent application included among the Acquired Intellectual Property.
Seller and each of its Subsidiaries (to the extent Seller or such Subsidiary is
or was an applicant in respect of any patent or patent application included
within the Acquired Intellectual Property) and, to Seller’s Knowledge, each
inventor of the inventions claimed in the patents and patent applications
included in the Acquired Intellectual Property, has complied in all material
respects with all applicable duties of candor and good faith in dealing with the
U.S. Patent and Trademark Office and any foreign patent offices, including,
without limitation, the duty to disclose to any such patent office all
information known to be material to the patentability of each such invention.

 

(j) Each of the patents and patent applications included among the Acquired
Intellectual Property that is owned (in whole or in part) by Seller or any of
its Subsidiaries properly identifies each and every inventor of the inventions
claimed therein and does not identify any person as an inventor who is not
correctly identified as an inventor, as determined in accordance with the Laws
of the United States. Each inventor named on the patents and patent applications
included among the Acquired Intellectual Property that are owned (in whole or in
part) by Seller or any of its Subsidiaries has executed an assignment of his or
her entire right, title, and interest in and to such patent or patent
application, and in and to each and every invention described, embodied, or
claimed therein, to Seller or one of its Subsidiaries (exclusively or together
with any joint owners, as appropriate), or in the case of licensed patents, to
the appropriate owners from whom Seller’s license rights have been duly
conveyed. To Seller’s Knowledge, no such inventor has any contractual or other
obligation that would preclude or otherwise interfere with any such assignment
or otherwise conflict with the obligations of such inventor to Seller or
appropriate owners under such agreement with Seller or such appropriate owners,
as the case may be.

 

(k) Neither the entering into of this Agreement nor the Closing will cause, as a
result of any agreements or obligations of Seller or any of its Subsidiaries,
(i) Seller, any Subsidiary of Seller, or Buyers or any Affiliate of Buyers to
grant to any Third Party any right to or with respect to any Acquired
Intellectual Property, (ii) Seller, any Subsidiary of Seller, or Buyers or any
Affiliate of Buyers to be bound by, or subject to, any non-competition or other
material restriction on the operation or scope of its business, (iii) Buyers or
any Affiliate of Buyers to be obligated to pay any royalties or other material
amounts to any Third Party in excess of those payable by Seller or its
Affiliates prior to the Closing Date, except as set forth on Schedule 4.9(k), or
(iv) the forfeiture or termination or give rise to a right of forfeiture or
termination of any of the Acquired Intellectual Property or any Material
Contract related thereto.

 

(l) Except as set forth in Schedule 4.9(l), to the extent that any Acquired
Intellectual Property owned by Seller or any of its Subsidiaries has been
developed or created independently or jointly by any Person other than Seller or
one of its Subsidiaries, Seller or one of its Subsidiaries has a written
agreement with such Person with respect thereto, and Seller or such Subsidiaries
has obtained ownership of, and is the exclusive owner of, all Intellectual
Property Rights therein by operation of law or by valid assignment. Except as
set forth in Schedule 4.9(l), Seller and each of its Subsidiaries has secured
from all of its consultants and employees who

 

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contributed to the creation or development of any Registered IP owned by Seller
and included among the Acquired Intellectual Property valid written assignments
of such employees’ and consultants’ rights to their contributions and to the
corresponding Acquired Intellectual Property to the extent that Seller does not
own those rights by operation of Law. Except as set forth in Schedule 4.9(l),
Seller has duly recorded all such assignments of Registered IP owned by Seller
or any of its Subsidiaries to the fullest extent permitted by Law in each
jurisdiction in which those rights exist.

 

(m) Except as set forth in Schedule 4.9(m), no Person who has licensed any
Acquired Intellectual Property to Seller or any of its Subsidiaries has
ownership or license rights to improvements thereto made by Seller or any of its
Subsidiaries.

 

(n) Seller and each of its Subsidiaries have taken commercially reasonable
measures and precautions to safeguard and maintain the confidentiality of all
Acquired Intellectual Property (except such Acquired Intellectual Property whose
value would be unimpaired by public disclosure). Seller and each of its
Subsidiaries has and enforces a policy requiring each employee and consultant to
execute proprietary information, confidentiality and assignment agreements
substantially in Seller’s standard form, which form is attached as Schedule
4.9(n), and all current and former employees and consultants of Seller and each
of its Subsidiaries have executed such an agreement.

 

(o) Except as expressly stated in Schedule 4.9(o), to Seller’s Knowledge,
neither the Product nor any Acquired Intellectual Property owned by Seller or
any of its Subsidiaries was developed by or on behalf of, or using grants or any
other subsidies of, any Governmental Entity or any university, and no government
funding, facilities, then-faculty or then-students of a university, college,
other educational institution or research center was used in the development of
the Product or Acquired Intellectual Property owned by Seller or any of its
Subsidiaries.

 

(p) All fees, annuities, royalties, honoraria and other payments that are or
were due from Seller or any of its Subsidiaries on or before the Closing Date
for any of the Acquired Intellectual Property or the Material Contracts related
thereto have been paid. Except as set forth in Schedule 4.9(p), there are no
actions that must be taken within sixty (60) days of the Closing Date, including
the payment of any fees or royalties under any Material Contracts related to the
Acquired Intellectual Property or the payment of any registration, maintenance
or renewal fees or the filing of any documents, applications or certificates for
the purposes of maintaining, perfecting, preserving or renewing any Registered
IP included among the Acquired Intellectual Property owned by Seller or any of
its Subsidiaries.

 

(q) Except as set forth in Schedule 4.9(q), Seller or one of its Subsidiaries
has the right to sublicense all of the Licensed IP to Buyers.

 

4.10 Permits. Schedule 4.10 sets forth a complete and accurate list of all
material Permits pertaining to the Acquired Assets and the Product that Seller
or any of its Subsidiaries have obtained. No violations are or have been
recorded in respect of any such Permit by the entity that issued the Permit, and
no proceeding is pending or threatened, to suspend, revoke or limit any such
Permit. No consent of any Governmental Entity or other Person is required to
transfer any of such Permits to Buyers.

 

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4.11 Regulatory Compliance.

 

(a) The Product has been and is being developed, labeled, stored, tested and
distributed in compliance with all applicable requirements under the FDCA and
all applicable similar state and foreign regulatory requirements of non-United
States Governmental Entities, including those relating to investigational use.

 

(b) To Seller’s Knowledge, all preclinical trials conducted by or on behalf of
Seller in connection with the Product have been, and are being, conducted in
compliance with the requirements of Good Laboratory Practice as contained in 21
C.F.R. Part 58.

 

(c) To Seller’s Knowledge, all manufacturing operations conducted in respect of
the production of clinical quantities of the Product have been and are being
conducted in material compliance with cGMP.

 

(d) Seller has obtained an IND for the Product and has conducted its clinical
trial activities in connection with the Product in accordance with such IND.

 

(e) Seller has not and will not use in any capacity the services of any person
debarred under section 306 of the FDCA in connection with any work performed or
to be performed on the Product.

 

4.12 Product Registration Files. The product registration files and dossiers of
Seller in respect of the Product have been maintained in accordance with all
Applicable Laws and guidance documents in all material respects. Seller has in
its possession copies of any material documentation, if any, filed in connection
with filings made by Seller for regulatory approval or registration of the
Product. The filings made by Seller for regulatory approval or registration of
the Product, if any, did not, at the time of filing, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading.

 

4.13 Transaction Related Obligations. Neither Seller nor any of its officers,
directors or employees has entered into an agreement with any investment banker,
broker, finder or other Third Party that would impose any liability on Buyers
for any investment banking fees, brokerage fees, commissions or finders’ fees or
other payments to Third Parties in connection with the transactions contemplated
by this Agreement.

 

4.14 Full Disclosure. Seller has not withheld from Buyers any material facts of
which Seller is aware relating to the Acquired Assets or Product.

 

ARTICLE 5

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyers each represent and warrant to Seller as of the date hereof and as of the
Closing Date:

 

5.1 Corporate Organization; Authority. Each Buyer is a corporation, duly
organized, validly existing and in good standing under the Laws of Bermuda and
has all requisite corporate

 

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power and authority to conduct its business as it is now being conducted and to
own, lease and operate its properties and assets. Each Buyer is qualified to do
business as a foreign corporation in each jurisdiction where the failure to be
so qualified would have a material and adverse effect on it. Each Buyer has
complied with and is in compliance with its Certificate of Incorporation and
Bylaws.

 

5.2 Authority Relative to this Agreement. Each Buyer has full corporate power
and authority to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by each Buyer of this Agreement
and the other Transaction Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by its Board of Directors, and no other corporate proceedings on the
part of Buyer are necessary to authorize the execution and delivery of this
Agreement and the other Transaction Documents to which it is a party or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each Buyer and, assuming this Agreement
has been duly authorized, executed and delivered by Seller, constitutes the
valid and binding agreement of each Buyer, enforceable against each Buyer in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium (whether general or specific)
or other similar laws now or hereafter in effect relating to creditors’ rights
generally.

 

5.3 No Violations; Consents and Approvals. Neither the execution and delivery by
either Buyer of this Agreement or the other Transaction Documents to which it is
a party, nor the consummation of the transactions contemplated hereby or
thereby, will (a) violate any Law, ruling or other restriction of any
Governmental Entity to which it is subject, (b) breach or violate any provision
of its organizational documents, (c) conflict with, result in a material breach
of, constitute a material default or a “change of control” event under, result
in the acceleration of, create in any party a right to accelerate, terminate or
modify or cancel, any Contract to which it is a party or by which it is bound,
(d) result in the creation of any Encumbrance upon any of its assets, or
(e) require any material consent, waiver, approval, authorization of, permit
from, filing with, or notification to any Governmental Entity or any other
Person in connection with its execution delivery and performance of this
Agreement and or the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, except as contemplated by
Section 6.1.

 

5.4 Litigation. There is no action, suit or proceeding pending, or, to the
knowledge of each Buyer, action, suit or proceeding threatened, against either
Buyer before any Governmental Entity or arbitral body which is reasonably likely
to materially impair or delay either Buyer’s ability to consummate the
transactions contemplates by this Agreement, and to either Buyer’s knowledge,
there is no basis therefor. Neither Buyer has received notice that it is subject
to any outstanding judgment, order or decree of any Governmental Entity or
arbitral body which is reasonably likely to materially impair or delay such
Buyer’s ability to consummate the transactions contemplated by this Agreement.

 

5.5 Brokers and Finders. Neither Buyer nor any of the officers, directors or
employees of either Buyer has employed any investment banker, broker or finder
that would impose any

 

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liability on Seller for any investment banking fees, brokerage fees, commissions
or finders’ fees in connection with the transactions contemplated by this
Agreement.

 

5.6 Sufficient Funds. On the Closing Date and at all applicable times during the
Term, Each Buyer will have sufficient funds on hand or available to it to make
all payments contemplated hereunder.

 

ARTICLE 6

 

FURTHER ASSURANCES

 

6.1 Efforts; Further Assurances. Subject to the terms and conditions herein
provided, each of the Parties agrees to use Commercially Reasonable Efforts and
act in good faith to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the assignments contemplated by this
Agreement and to cooperate in connection with the foregoing. Without limiting
the generality of the foregoing, (i) Seller shall use its Commercially
Reasonable Efforts to obtain all necessary waivers, consents and approvals from
other parties to applicable Assigned Contracts (the “Required Consents”),
(ii) each of Seller and Buyers shall use its respective Commercially Reasonable
Efforts to obtain all consents, approvals and authorizations that are required
to be obtained under any Law, (iii) each of Seller and Buyers shall use its
respective Commercially Reasonable Efforts to lift or rescind any injunction or
restraining order or other order adversely affecting its ability to consummate
the assignments contemplated hereby, (iv) each of Seller and Buyers shall use
its respective Commercially Reasonable Efforts to effect all necessary
registrations and filings and submissions of information requested or required
by Governmental Entities, (v) Seller shall use its Commercially Reasonable
Efforts to fulfill all of the conditions to Buyers’ obligations to consummate
the assignments contemplated hereby and (vi) each Buyer shall use its
Commercially Reasonable Efforts to fulfill all of the conditions to Seller’s
obligations to consummate the assignments contemplated hereby. Each of Seller
and Buyers further covenants and agrees, with respect to a threatened or pending
preliminary or permanent injunction or other order, decree or ruling or statute,
rule, regulation or executive order that would adversely affect the ability of
the Parties to consummate the assignments contemplated hereby, to use their
respective Commercially Reasonable Efforts to prevent the entry, enactment or
promulgation thereof, as the case may be.

 

6.2 Public Announcements. Buyers and Seller shall issue the joint press releases
attached hereto as Exhibit B at a time on or after the date hereof that is
mutually agreed upon by Buyers and Seller, recognizing the status of Seller as a
public company. Neither Party shall, and they shall ensure that their respective
Affiliates do not, otherwise make any public statements with respect to this
Agreement and the assignments contemplated hereby or issue any press release or
make any such public statement without the consent of the other Party, except
that such approval shall not be required for a public statement to the extent
either Party is advised by its legal counsel that such disclosure is required by
Applicable Law.

 

6.3 Fees and Expenses. Except as expressly contemplated hereby, each Party
agrees to bear its own expenses in connection with the assignments contemplated
hereby, including fees and expenses of accountants, attorneys, investment
advisors, and other professionals.

 

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6.4 Confidentiality.

 

(a) Following the Closing, Seller shall not, directly or indirectly, disclose,
divulge or make any unauthorized use of any Buyer Confidential Information. As
used herein, the term “Buyer Confidential Information” shall include any and all
non-public information relating to the Acquired Assets, the Assumed Liabilities,
the Product, Buyers’ business or the transactions contemplated by this Agreement
or the other Transaction Documents, whether or not in written form and whether
or not expressly designated as confidential, including any such information
relating to or comprising the Acquired Intellectual Property.

 

(b) Following the Closing, Buyers shall not, directly or indirectly, disclose,
divulge or make any unauthorized use of any Seller Confidential Information. As
used herein, the term “Seller Confidential Information” shall include any and
all non-public information relating to the Seller’s business, products (other
than the Product) or the transactions contemplated by this Agreement or the
other Transaction Documents, whether or not in written form and whether or not
expressly designated as confidential, excluding however any such information
relating to or comprising the Acquired Intellectual Property, the Acquired
Assets, the Assumed Liabilities or the Product.

 

(c) Notwithstanding the foregoing, nothing herein shall restrict Seller, Buyers
or any of their respective Affiliates (as applicable, the “Using Party”) from
using or disclosing any Buyer Confidential Information or Seller Confidential
Information (as applicable, the “Confidential Information”) to the extent
(i) such Confidential Information is or becomes (through no improper action or
inaction by the Using Party or any of its Affiliates) generally available to the
public, (ii) such Confidential Information was rightfully disclosed to the Using
Party or any of its Affiliates by a Third Party not under an obligation of
confidentiality with respect to such information, or (iii) disclosure of such
Confidential Information is required by law, provided that the disclosing Party
informs the other Party without delay of any such requirement, in order to allow
such other Party to object to such disclosure and to seek an appropriate
protective order or similar protection prior to disclosure.

 

(d) Each of Seller and Buyers, on behalf of itself and its respective
Affiliates, acknowledges that in view of the nature of the Confidential
Information and the objectives of the Parties in entering into this Agreement,
the restrictions contained in this Section 6.4 are reasonable and necessary to
protect the legitimate business interests of Buyers or Seller, as applicable,
after the Closing, and that any breach or threatened breach of the provisions of
this Section 6.4 will cause irreparable injury to Buyers or Seller, as
applicable, for which an adequate monetary remedy does not exist. Accordingly,
in the event of any such breach or threatened breach of this Section 6.4, Buyers
or Seller, as applicable, shall be entitled, in addition to the exercise of
other remedies, to seek and obtain injunctive relief, without necessity of
posting a bond, restraining the Using Party from committing such breach or
threatened breach.

 

(e) Except as required by law, neither Seller nor Buyers shall release to any
Third Party or publish in any way any non-public information with respect to the
terms of this Agreement or concerning their cooperation without the prior
written consent of the other, which consent will not be unreasonably withheld or
delayed, provided, however, that either Party may disclose the terms of this
Agreement to the extent required to comply with Applicable Laws,

 

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including the rules and regulations promulgated by the U.S. Securities and
Exchange Commission. If such a public disclosure is required by law, the Party
being required to make disclosure shall inform the other Party of the nature and
content of such disclosure and shall afford the other Party the right to have
reasonable input into such disclosure. Notwithstanding any other provision of
this Agreement, each Party may disclose the terms of this Agreement to lenders,
investment bankers, financial advisors, and other financial institutions of its
choice solely for purposes of financing the business operations of such Party,
or to potential investors in or acquirers of such Party (a) upon the written
consent of the other Party; and (b) if the disclosing Party obtains a signed
confidentiality agreement with such intended recipient with respect to such
Confidential Information, upon terms substantially similar to those contained in
this Section 6.4.

 

(f) The obligations of confidentiality and non-use under this Section 6.4 shall
survive expiration or termination of this Agreement for a period of ten
(10) years, provided, however, that such obligations shall continue in full
force and effect with respect to each item of Confidential Information that
constitutes a trade secret under Applicable Law until such time as such item of
Confidential Information is no longer susceptible to being kept a trade secret
other than as a result of any breach of this Section 6.4.

 

6.5 Noncompetition.

 

(a) For a period of eight (8) years after the Closing Date, Seller shall not and
shall cause its Affiliates not to, directly or indirectly, enter into or engage
in the development, manufacture, sale, or marketing of any treatment of
inflammation or edema of the brain utilizing a synthetic preparation of the
natural human peptide hormone corticorelin acetate or human
Corticotropin-Releasing Factor (“hCRF”) (the “Competing Activity”) or assist,
provide services, or consultation to, or acquire any ownership interest in or
assets of any entity engaged in any Competing Activity without the written
consent of Buyers; provided that upon any Change of Control of Seller, the
definition of Competing Activity set forth in this Section 6.5(a) shall be
deemed to be amended to apply only to the molecule identified in Exhibit C
hereto, without altering or affecting the enforceability of any other provision
hereof.

 

(b) Until the earlier of: (i) FDA approval of the First Indication, or
(ii) three (3) years after the Closing Date, each Buyer shall not and shall
cause its Affiliates not to, directly or indirectly, enter into or engage in the
development, manufacture, sale, or marketing of any treatment for of
inflammation or edema of the brain other than XERECEPT®, or provide services, or
consultation to, or acquire any ownership interest in or assets of any entity
engaged in such activity without the written consent of Seller; provided that
these provisions shall terminate with respect to the U.S. Territory upon any
Change of Control of Neutron and with respect to the ROW Territory upon any
Change of Control of Neutron ROW.

 

(c) Each of Seller and Buyers, on behalf of itself and its respective
Affiliates, acknowledges that in view of the nature of the transactions
contemplated hereby and the objectives of the Parties in entering into this
Agreement, the restrictions contained in this Section 6.5 are reasonable and
necessary to protect the legitimate business interests of the Parties and their
respective successors after the Closing, and that any breach or threatened
breach of the provisions of this Section 6.5 will cause irreparable injury to
the other Party and its successors

 

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for which an adequate monetary remedy does not exist. Accordingly, in the event
of any such breach or threatened breach of this Section 6.5, each Party shall be
entitled, in addition to the exercise of other remedies, to seek and obtain
injunctive relief, without necessity of posting a bond, restraining the other
Party or its Affiliates or successors from committing such breach or threatened
breach.

 

6.6 Exclusive License. Seller hereby grants to Buyers, effective as of the
Closing Date, an exclusive, perpetual, fully-paid, royalty-free license, with
the right to sublicense, to use the Licensed IP solely for the purposes of
developing, making, offering for sale, selling, importing, distributing, and
otherwise exploiting the Products.

 

6.7 Transfer Taxes. All sales, use and transfer taxes, including but not limited
to any value added, stock transfer, gross receipts, stamp duty and real,
personal, or intangible property transfer taxes, due by reason of the transfer
of the Acquired Assets, including any interest or penalties in respect thereof
(the “Transfer Taxes”) shall be paid by Buyers. Seller and Buyers shall
cooperate with each other and use their Commercially Reasonable Efforts to
minimize the Transfer Taxes attributable to the transfer of the Acquired Assets.

 

6.8 Cooperation on Tax Matters.

 

(a) Each of Buyers and Seller agree to furnish or cause to be furnished to the
other, upon request, as promptly as practicable, such information (including
access to books and records) and assistance relating to the Acquired Assets as
is reasonably necessary for the filing of any Tax Return, the preparation for,
or conduct of, any tax audit, or the prosecution or defense of any claim, suit
or proceeding relating to any proposed tax adjustment relating to the Acquired
Assets. Buyers and Seller shall keep all such information and documents received
by them confidential unless otherwise required by Law. Buyers and Seller shall
each execute and deliver such powers of attorney and other documents related to
taxes as are reasonably necessary to carry out the intent of this Agreement.

 

(b) Buyers and Seller agree to retain or cause to be retained all books and
records pertinent to the Acquired Assets until the applicable period for
assessment of Taxes under Applicable Laws (giving effect to any and all
extensions or waivers) has expired, and such additional period as necessary for
any administrative or judicial proceedings relating to any proposed assessment,
and to abide by all record retention agreements entered into with any taxing
authority. Buyers and Seller agree to give the other reasonable notice prior to
transferring, discarding or destroying any such books and records relating to
Tax matters and, if so requested, Buyers and Seller shall allow the requesting
Party to take possession of such books and records.

 

6.9 Litigation Support. After the Closing Date, in the event and for so long as
any Party actively is contesting or defending against any third-party action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement, or
(ii) any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Seller, the Acquired Assets or the
Assumed Liabilities, the other Party agrees to (a) reasonably cooperate with the
contesting or defending Party and its

 

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counsel in the defense or contest, (b) as applicable, make reasonably available
its personnel and use Commercially Reasonable Efforts to provide testimony and
to assist counsel in the defense or contest, and (c) provide reasonable access
to its books and records as shall be necessary in connection with the defense or
contest; all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under this Agreement).

 

ARTICLE 7

 

MILESTONES; PROFIT SHARING PAYMENTS

 

7.1 Milestone Payments. Buyers shall make milestone payments (“Milestone
Payments”) to Seller up to a maximum aggregate amount of Fifteen Million Dollars
($15,000,000.00) in respect of the U.S. Territory and the ROW Territory, payable
as follows:

 

(a) U.S. Territory. Neutron shall pay Seller a Milestone Payment in the amount
of Eight Million Dollars ($8,000,000.00) within sixty (60) days of Marketing
Approval of the Product in the U.S. if such approval occurs before the three
(3) year anniversary of the Closing Date. Neutron shall pay Seller a Milestone
Payment in the amount of Four Million Dollars ($4,000,000.00) within sixty
(60) days of Marketing Approval of the Product in the U.S. if such approval
occurs after the three (3) year anniversary of the Closing Date.

 

(b) ROW Territory. Neutron ROW will pay Seller (i) a Milestone Payment in the
amount of Four Million Dollars ($4,000,000.00) within sixty (60) days of
Marketing Approval of the Product by the EMEA or in any of the United Kingdom,
France, Germany, or Italy, whichever to first occur, if such approval occurs
before the four (4) year anniversary of the Closing Date, and (ii) a Milestone
Payment in the amount of Three Million Dollars ($3,000,000.00) within sixty
(60) days of Marketing Approval of the Product in Japan if such approval occurs
before the five (5) year anniversary of the Closing Date. Neutron ROW will pay
Seller (x) a Milestone Payment in the amount of Two Million Dollars
($2,000,000.00) within sixty (60) days of Marketing Approval of the Product by
the EMEA or in the United Kingdom, France, Germany, or Italy, whichever to first
occur, if such approval occurs after the four (4) year anniversary of the
Closing Date, and (y) a Milestone Payment in the amount of One Million Five
Hundred Thousand Dollars ($1,500,000.00) within sixty (60) days of Marketing
Approval of the Product in Japan if such approval occurs after the five (5) year
anniversary of the Closing Date.

 

(c) Anything to the contrary herein notwithstanding, neither Buyer shall be
obligated to make the Milestone Payments set forth in paragraphs (a) and
(b) above if at such time the sale of the Product in the country where such
Marketing Approval is obtained would be illegal due to a legal or regulatory
constraint, provided that such Milestone Payments shall become due upon the date
that such material legal or regulatory constraint is removed.

 

(d) In no event shall Seller be entitled to aggregate Milestone Payments of more
than Fifteen Million Dollars ($15,000,000.00). It is understood and agreed by
the Parties that each of the Milestone Payments set forth in paragraphs (a) and
(b) above shall be due and payable one (1) time, upon the satisfaction of the
applicable conditions set forth therein.

 

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7.2 Profit Sharing and Royalty Payments.

 

(a) Following the Marketing Approval and commercial sale of the Product in a
territory, Buyers shall make profit sharing and royalty payments to Seller in
accordance with the following:

 

(i) U.S. Territory. Neutron shall pay Seller twenty-two percent (22.0%) of its
Gross Margin in the U.S. Territory (the “U.S. Profit Sharing Payments”). The
U.S. Profit Sharing Payments shall be payable on a quarterly basis and each such
payment shall be made in arrears by Neutron to Seller within forty-five
(45) days following the applicable fiscal quarter end of Neutron, subject to
fiscal year end adjustments based on actual Gross Margin; provided that, Neutron
will reduce each such U.S. Profit Sharing Payment by Forty percent (40%) until
such time as the Profit Discount equals the Hurdle Amount in aggregate.

 

(ii) ROW Territory. Neutron ROW shall pay Seller the following percentages of
its Net Sales in the ROW Territory (the “ROW Royalty Payments”):

 

  (A) Fifteen percent (15%) for Net Sales in the ROW Territory below One Hundred
Million Dollars ($100,000,000.00);

 

  (B) Seventeen and one half percent (17.5%) for Net Sales in the ROW Territory
from One Hundred Million Dollars ($100,000,000.00) to Two Hundred and Fifty
Million Dollars ($250,000,000.00); and

 

  (C) Twenty percent (20%) for Net Sales in the ROW Territory above Two Hundred
and Fifty Million Dollars ($250,000,000.00).

 

  (D) The ROW Royalty Payments shall be payable on a quarterly basis and each
such payment shall be made in arrears by Neutron ROW to Seller within forty-five
(45) days following the applicable fiscal quarter end of Neutron ROW.

 

Notwithstanding the foregoing Section 7.2(a)(ii), if Neutron ROW is required to
pay any Third Party Technology Payment in respect of its Net Sales in the ROW
Territory, any ROW Royalty Payment associated with such Net Sales shall be,
without duplication, reduced by twenty-two percent (22%) of such Third Party
Technology Payment.

 

(b) All U.S. Profit Sharing Payments shall be accompanied by a report setting
forth the Gross Margins of the Product and their calculations during the
applicable fiscal quarter of Neutron forming the basis of such U.S. Profit
Sharing Payment. All ROW Royalty Payments shall be accompanied by a report
setting forth the Net Sales of the Product and their calculations during the
applicable fiscal quarter of Neutron ROW forming the basis of such ROW Royalty
Payment.

 

(c) All U.S. Profit Sharing Payments and all ROW Royalty Payments paid under
this Agreement shall be paid in Dollars by wire transfer in immediately
available funds to an account designated by Seller. If any currency conversion
shall be required in connection with any

 

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payment or accounting of costs and expenses under this Agreement, such
conversion shall be made by using the exchange rate for the purchase of Dollars
as published in The Wall Street Journal, Eastern Edition, on the last business
day during the applicable fiscal quarter of either Neutron or Neutron ROW, as
applicable forming the basis of such U.S. Profit Sharing Payment or ROW Royalty
Payment.

 

7.3 Sale of Rights to the Product.

 

(a) Seller shall be entitled to a payment equal to Twenty-two percent (22%) of
the Net Proceeds of any Sale Transaction; provided that, Buyers will reduce each
such payment by Forty percent (40%) until such time as the Profit Discount
equals the Hurdle Amount in aggregate.

 

(b) Buyers shall pay any payments due to Seller pursuant to Section 7.3(a)
within ten (10) Business Days following the consummation of a Sale Transaction.
Seller shall thereafter have no right to receive any payments under this Article
7 in respect of any part of the Product sold by Buyers.

 

7.4 Development and Sale of the Product.

 

(a) Buyers and Seller shall each use its Commercially Reasonable Efforts (i) to
perform its development obligations as set forth in the Collaboration and
Services Agreement, dated as of the Closing Date, between Seller and Buyers, and
(ii) to cooperate in developing the Product and obtaining Marketing Approvals
therefor, taking into account the normal times required to conduct such
development and clinical work and any delays in such processes caused by
Governmental Entities and other matters outside of such Party’s reasonable
control. In furtherance of the foregoing, Buyers shall use their Commercially
Reasonable Efforts to obtain regulatory approval for the Product in each of the
United States, Europe (meaning the EMEA, United Kingdom, Germany, France or
Italy) and Japan (each a “Major Market Country”) no less rapidly than would be
reasonably expected of a typical research-based pharmaceutical company for a
comparable product.

 

(b) Buyers shall use their Commercially Reasonable Efforts to market, distribute
and sell the Product in each Major Market Country where it has obtained
Marketing Approval for the Product.

 

(c) If the Steering Committee (as defined in the Collaboration Agreement)
resolves to suspend further development activities with respect to the Product
prior to the receipt of any Marketing Approval by Buyers, or such suspension
occurs in fact for a period exceeding twelve (12) continuous months, the
provisions of Section 9.4 shall apply.

 

7.5 Blocked Currency. With respect to any country where local currency is
blocked and cannot be removed from the country, Seller shall have the right to
elect for Neutron ROW to pay ROW Royalty Payments under Section 7.2 in such
country in local currency, into a bank account designated by Seller. If Seller
does not so elect, then Neutron ROW’s obligation to pay ROW Royalty Payments
under Section 7.2 shall be limited to the extent that Neutron ROW’s does not
receive convertible currency in consideration of Net Sales in respect of such
country. Neutron ROW shall use its commercially reasonable efforts to receive
convertible currency or to utilize

 

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blocked currency in its own operations in such country. If and when such
convertible currency is received or such utilization is effected, Neutron ROW
shall pay to Seller, against the balance of any ROW Royalty Payments owing in
respect of Net Sales in such country, Dollars up to an amount equal to ROW
Royalty Payments due in respect of such received convertible currency or such
utilization plus any accrued interest for such delayed payment determined at the
rate determined in accordance with Section 7.8.

 

7.6 Records and Audit.

 

(a) Each Buyer and its Affiliates shall keep full, true and accurate books of
account containing all particulars that may be necessary for the purpose of
showing the amounts payable to Seller pursuant to this Article 7. Such books of
account shall be kept at each Buyer’s principal place of business or the
principal place of business of the appropriate Affiliate of Buyers to which this
Agreement relates. Such books and the supporting data in respect of the Product
shall be open, at all reasonable times and upon reasonable notice, so long as
Seller is entitled to payments under Section 7.2 and for one (1) year after the
termination of Seller’s rights under Section 7.2, to the inspection by a firm of
certified public accountants selected by Seller and reasonably acceptable to
Buyers, for the limited purpose of verifying each Buyer’s reports pursuant to
Section 7.2; provided, however, that such examination shall not take place more
often than once each calendar year and shall not cover more than the preceding
three (3) calendar years, with no right to audit any period previously audited.
Any pending audit or dispute shall toll the running of such examination periods
until the resolution of the matter in issue.

 

(b) Except as otherwise provided in this Section 7.6, the cost of any such
examination shall be paid by Seller. In the event that any such inspection
reveals a deficiency in excess of five percent (5%) of the reported U.S. Profit
Sharing Payments and ROW Royalty Payments for the period covered by the
inspection, Buyers shall promptly pay Seller the deficiency, plus interest at
the rate determined in accordance with Section 7.7, and shall reimburse Seller
for the fees and expenses paid to such accountants in connection with their
inspection. The Parties agree that neither Party shall be required to retain
books and records with respect to this Section 7.6 other than books and records
relating to the preceding three (3) calendar years.

 

7.7 Withholding of Taxes. All payments made by Buyers under this Agreement shall
be made free and clear of and without deduction for or on account of any
withholding tax or similar tax. If Buyers are required to make a payment subject
to a deduction of tax or withholding tax, the sum payable by Buyers (in respect
of which such deduction or withholding is required to be made) shall be
increased to the extent necessary to ensure that Seller receives a sum net of
any deduction or withholding equal to the sum which it would have received had
no such deduction or withholding been made or required to be made.

 

7.8 Interest. If either Party fails to make any payment due under this Article 7
when it is due, then such late payment shall bear interest at a rate equal to
four percent (4%) above the then-applicable prime commercial lending rate of
Citibank, N.A. San Francisco, California (or the maximum amount permitted by
law, if less) from the date first due until the date paid.

 

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ARTICLE 8

 

CLOSING CONDITIONS

 

8.1 Conditions to the Obligations of Seller. The obligations of Seller to effect
the transactions contemplated hereby shall be subject to the fulfillment on or
prior to the Closing Date of the following conditions, any one or more of which
may be waived by Seller:

 

(a) The representations and warranties of Buyers contained herein shall be true
and correct in all material respects as of the date hereof and at and as of the
Closing Date as though such representations and warranties were made at and as
of such date, except to the extent that such representations and warranties are
qualified by terms such as “material,” in which case such representations and
warranties shall be true and correct in all respects at and as of the Closing
Date.

 

(b) Each Buyer shall have performed and complied with all agreements,
obligations and covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing Date.

 

(c) Seller shall have received all of the agreements, documents and other items
specified in Section 3.2.

 

(d) No Law, preliminary or permanent injunction or restraining order shall have
been enacted, entered, promulgated, or enforced by any Governmental Entity which
prohibits or restricts the consummation of the transactions contemplated hereby.
No action or proceeding by any Governmental Entity or other third party,
including any shareholder of Seller, shall have been commenced (and be pending)
against either Party, their Affiliates, or any of their officers or directors
seeking to prevent or delay the transactions contemplated hereby or challenging
any of the terms or provisions of this Agreement or seeking material damages in
connection therewith.

 

(e) All consents and approvals of Governmental Entities necessary for
consummation of the transactions contemplated hereby shall have been obtained,
other than those which, if not obtained, would not have a Material Adverse
Effect or a material and adverse effect on Buyers’ ability to consummate the
transactions contemplated hereby.

 

8.2 Conditions to the Obligations of Buyers. The obligations of Buyers to effect
the transactions contemplated hereby shall be subject to the fulfillment, on or
prior to the Closing Date of the following conditions, any one or more of which
may be waived by Buyers:

 

(a) The representations and warranties of Seller contained herein shall be true
and correct in all material respects as of the date hereof and at and as of the
Closing Date as though such representations and warranties were made at and as
of such date, except to the extent that such representations and warranties are
qualified by terms such as “material” and “Material Adverse Effect,” in which
case such representations and warranties shall be true and correct in all
respects at and as of the Closing Date.

 

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(b) Seller shall have performed and complied with all agreements, obligations,
covenants and conditions required by this Agreement to be performed or complied
with by it on or prior to the Closing Date.

 

(c) Buyers shall have received all of the agreements, documents and other items
specified in Section 3.3.

 

(d) No Law, preliminary or permanent injunction or restraining order shall have
been enacted, entered, promulgated, or enforced by any Governmental Entity which
prohibits or restricts the consummation of the transactions contemplated hereby.
No action or proceeding by any Governmental Entity or other third party,
including any shareholder of Seller, shall have been commenced (and be pending)
against either Party, their Affiliates, or any of their officers or directors
seeking to prevent or delay the transactions contemplated hereby or challenging
any of the terms or provisions of this Agreement or seeking material damages in
connection therewith.

 

(e) All consents and approvals of Governmental Entities necessary for
consummation of the transactions contemplated hereby shall have been obtained,
other than those which, if not obtained, would not have a Material Adverse
Effect.

 

(f) During the period from the date hereof to the Closing Date, no event shall
have occurred or be continuing (including any litigation or change in the
financial or business condition of Seller or Buyers) which has had or could
reasonably be expected to have a Material Adverse Effect.

 

(g) Seller shall have provided Buyers with a certificate pursuant to Treas. Reg.
§§1.897-2(h) and 1.1445-2(c)(3) (in the form satisfactory to the Sellers) to the
effect that Seller is not, and has not been at any time during the previous five
years, a United States real property holding corporation within the meaning of
Section 897 of the Code. Such certificate shall be signed by a duly authorized
officer of Seller under penalties of perjury and dated as of the Closing Date.
In connection with such certification, Seller shall comply with the notification
requirements of Treas. Reg. §1.897-2(h)(2).

 

(h) Seller shall have provided an executed side letter in form and substance
reasonably satisfactory to Buyers releasing any liens on the Acquired Assets
arising under the loan and security agreement dated August 16, 2005 between
Seller and Comerica Bank.

 

(i) Seller shall have provided a letter in a form reasonably satisfactory to
Buyers from the FDA confirming that a Special Protocol Assessment has been
granted with respect to Seller’s ongoing Phase III clinical trial for XERECEPT®.

 

(j) All documents, certificates and other instruments to be delivered to Buyers
hereunder shall be reasonably satisfactory, in form and substance, to Buyers.

 

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ARTICLE 9

 

TERM AND TERMINATION

 

9.1 Term. Subject to Article 8, this Agreement shall take effect on the date
hereof and, unless terminated earlier pursuant to Sections 9.2 or 9.3, shall
terminate when all claims of all patents included in the Acquired Intellectual
Property have expired or have been abandoned or invalidated with no further
right of appeal (the “Term”).

 

9.2 Termination for Material Breach. If either Party commits a material breach
of this Agreement, including any failure to make a payment when due, and such
breach is not cured within thirty (30) days in the case of any failure to make a
payment when due, or ninety (90) days in all other cases, after written notice
thereof by the non-breaching Party (the “Notice Period”), or if such breach is
incapable of cure during the Notice Period, the breaching Party fails to make
good faith efforts to cure such breach during the Notice Period, then, in each
such case the non-breaching Party may terminate this Agreement upon expiration
of the Notice Period.

 

9.3 Termination for Buyer Insolvency. If either Buyer:

 

(a) makes a general assignment for the benefit of its creditors or becomes
insolvent;

 

(b) files an insolvency petition in bankruptcy;

 

(c) petitions for or acquiesces in the appointment of any receiver, trustee, or
similar officer to liquidate or conserve its business or any substantial part of
its assets;

 

(d) commences under the laws of any jurisdiction any proceeding involving its
insolvency, bankruptcy, reorganization, adjustment of debt, dissolution,
liquidation, or any other similar proceeding for the release of financially
distressed debtors; or

 

(e) becomes a party to any proceeding or action of the type described above in
(c) or (d), and such proceeding or action remains undismissed or unstayed for a
period of more than sixty (60) days, then, in each case, Seller may by written
notice terminate this Agreement in its entirety with immediate effect.

 

9.4 Reversion of Rights. If (i) Seller validly terminates this Agreement
pursuant to Sections 9.2 or 9.3, or (ii) the Steering Committee resolves to
suspend further development of the Product, or such suspension occurs in fact
for a period exceeding twelve (12) continuous months, as contemplated by
Section 7.4(c), then, subject to Section 9.6, Seller may, by written notice to
Buyers within sixty (60) days, require the following:

 

(a) all of Buyers’ rights to the (i) Acquired Intellectual Property, any
improvements thereto, and all other Acquired Assets, (ii) the Collaboration
Inventions (as defined in the Collaboration Agreement), and (iii) all books,
records, notes, filings, materials, Marketing Approvals and other
authorizations, licenses and permits relating to the Products, shall promptly be
transferred to Seller;

 

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(b) Buyers shall act in good faith to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transfers
contemplated by Section 9.4(a) and to cooperate with Seller or its designee in
connection with the foregoing;

 

(c) Seller shall have the right to develop, make, offer for sale, sell,
distribute and otherwise deal in and exploit the Product anywhere in the
Territory, subject only to the payment to Buyers of a royalty of nine percent
(9%) of Net Sales of the Product by Seller or its designees, Affiliates,
transferees or sub-licensees. From and after any assignment contemplated by
Section 9.4(a), Seller shall, mutatis mutandis, be subject to obligations
corresponding to Buyers’ obligations pursuant to Sections 7.2(c), 7.6, 7.7, 7.8
and 10.3(a)(iii), provided, however, that Seller shall not be liable for any
Assumed Liabilities arising prior to the date of such assignment. The royalty
payments contemplated by this Section 9.4(c) shall be payable on a quarterly
basis to such account or accounts as are designated by Buyer and each such
payment shall be made in arrears by Seller to Buyers within forty-five (45) days
following the applicable fiscal quarter end of Seller; and

 

(d) Anything to the contrary herein notwithstanding, this Section 9.4 shall
terminate and have no further force or effect from and after a Sale Transaction.

 

9.5 Specific Performance. Each Party acknowledges that its failure to comply
with its obligations under Section 9.4 would damage the other Party irreparably
and that the other Party could not be made whole by monetary damages in the
event any of such Party’s breach of Section 9.4. Therefore, each Party agrees to
the granting of specific performance of Section 9.4 and injunctive or other
equitable relief in favor of the other Party as a remedy for any such breach, in
addition to any other remedy to which Seller may be entitled, at law or in
equity.

 

9.6 Surviving Obligations. Upon the expiration or early termination of this
Agreement and except as expressly provided to the contrary herein, all rights
and obligations of the Parties shall cease, except for the following
obligations, which shall continue (subject to the applicable statute of
limitations):

 

(a) any cause of action or claim of Seller or Buyers, whether accrued or to
accrue because of any breach or default by the other Party prior to the
expiration or early termination of this Agreement;

 

(b) the provisions of Articles and Sections 1, 6.4, 6.5, 6.6, 7.6, 9.4, 9.5,
9.6, 10, and 11; and

 

(c) the provisions of Sections 7.2 and 7.3, provided, and to the extent, that,
Buyers have a continuing right to sell Products in any jurisdiction in the
Territory where there exists at least one (1) claim of a patent included in the
Acquired Intellectual Property that has not expired or been abandoned or
invalidated with no further right of appeal.

 

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ARTICLE 10

 

INDEMNIFICATION

 

10.1 Survival. All of the terms and conditions of this Agreement, together with
the warranties, representations, agreements, and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing Date,
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that unless otherwise stated, the
agreements and covenants set forth in this Agreement shall survive and continue
in full force and effect indefinitely or until all obligations set forth therein
shall have been performed and satisfied. Notwithstanding the foregoing, (a) the
representations and warranties contained in Sections 4.1, 4.2, 5.1 and 5.2 of
this Agreement shall survive the Closing and continue in full force and effect
indefinitely; (b) the representations and warranties of Seller contained in
Sections 4.7 and 4.13 of this Agreement shall survive the Closing and continue
in full force and effect until the expiration of the applicable statute of
limitations (including any extensions or waivers thereof); and (c) all other
representations and warranties contained herein shall survive the Closing and
continue in full force and effect until January 15, 2007; provided, however,
that in all cases, representations and warranties in respect of which an
indemnification claim shall be pending as of the end of the applicable period
referred to above shall survive with respect to such indemnification claim until
the final disposition thereof.

 

10.2 Indemnification Obligation of Seller.

 

(a) Seller shall indemnify each Buyer, its Affiliates and their respective
stockholders, officers, directors, employees, agents, representatives and
successors and assigns (each a “Buyer Indemnitee” and, collectively the “Buyer
Indemnitees”) in respect of, and save and hold each Buyer Indemnitee harmless
against and pay on behalf of or reimburse each Buyer Indemnitee as and when
incurred, any Losses which any Buyer Indemnitee suffers, sustains or becomes
subject to as a result of or by virtue of, without duplication:

 

(i) any facts or circumstances which constitute a misrepresentation or breach of
any representation or warranty made by Seller set forth in this Agreement
(including the Schedules hereto) or any certificate, document or instrument to
be delivered by Seller pursuant to this Agreement;

 

(ii) any non-fulfillment or breach of any covenant of Seller set forth in this
Agreement; or

 

(iii) any Excluded Liabilities.

 

(b) Notwithstanding the foregoing, (i) Seller shall not be required to indemnify
Buyer Indemnitees in respect of any Losses any Buyer Indemnitee suffers,
sustains or becomes subject to as a result of or by virtue of any of the
occurrences referred to in Section 10.2(a)(i) above unless and until the
aggregate of all such Losses exceeds $100,000 (the “Minimum Threshold”), at
which point Seller will be obligated to indemnify Buyer Indemnitee for all such
Losses, from and including the first Dollar thereof and (ii) in no event shall
Seller be obligated to indemnify

 

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Buyer Indemnitees in respect of any Losses any Buyer Indemnitee suffers,
sustains, or becomes subject to, as a result of or by virtue of any of the
occurrences referred to in Section 10.2(a)(i) in excess of an amount equal to
the Purchase Price, the aggregate (the “Indemnification Cap”). Notwithstanding
any other provision of this Section 10.2, the Minimum Threshold and the
Indemnification Cap shall not apply with respect to any Loss any Buyer
Indemnitee suffers, sustains or becomes subject to as a result of or by virtue
of (x) any breach of Sections 4.1, 4.2 or 4.13 or (y) the fraud or the willful
misconduct on the part of Seller. For the purpose of determining the existence
of any breach of a representation or warranty and for measuring Losses or for
satisfying the Minimum Threshold, to the extent that such representation or
warranty is qualified by reference to “materiality” or Material Adverse Effect,
such representation or warranty shall be deemed not to contain such qualifier.

 

(c) Seller acknowledges that the agreement contained in this Article 10 is an
integral part of the transactions contemplated by this Agreement and that,
without such agreement, Buyers would not enter into this Agreement; accordingly,
if Seller fails to pay promptly any amounts due from Seller pursuant to this
Section 10.2 and in order to obtain such amounts, Buyers commence a suit against
Seller to collect the amounts provided for herein, if Buyers succeed in such
action or proceeding, Seller shall pay to Buyers its reasonable costs and
expenses (including reasonable fees of attorneys and other professionals) in
connection with such suit.

 

10.3 Indemnification Obligation of Buyers.

 

(a) Buyers will indemnify Seller and its affiliates, stockholders, officers,
managers, directors, employees, agents, representatives and successors and
assigns (collectively, the “Seller Indemnitees”) in respect of, and save and
hold each Seller Indemnitee harmless against any Losses which such Seller
Indemnitee suffers, sustains or becomes subject to as a result of or by virtue
of, without duplication:

 

(i) any facts or circumstances which constitute a misrepresentation or breach of
any representation or warranty by Buyers set forth in this Agreement or any
certificate document, or instrument to be delivered by Buyers pursuant to this
Agreement;

 

(ii) any non-fulfillment or breach of any covenant or agreement of Buyers set
forth in this Agreement; or

 

(iii) the Assumed Liabilities.

 

(b) Notwithstanding the foregoing, (i) Buyers shall not be required to indemnify
Seller Indemnitees in respect of any Losses any Seller Indemnitee suffers,
sustains or becomes subject to as a result of or by virtue of any of the
occurrences referred to in Section 10.3(a)(i) above unless and until the
aggregate of all such Losses exceeds $100,000, at which point Buyers will be
obligated to indemnify Seller Indemnitees for all such Losses, from and
including the first Dollar thereof, (ii) in no event shall Buyers be obligated
to indemnify Seller Indemnitees in respect of any Losses any Seller Indemnitee
suffers, sustains, or becomes subject to, as a result of or by virtue of any of
the occurrences referred to in Section 10.3(a)(i) in excess of the Purchase
Price and (iii) in no event shall Buyer be obligated to indemnify Seller
Indemnitees in

 

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respect of any Losses any Seller Indemnitee suffers, sustains, or becomes
subject to, as a result of or by virtue of any of the occurrences referred to in
Section 10.3(a) to the extent that such occurrence constitutes a
misrepresentation or breach by Seller of any obligation, covenant,
representation or warranty contained in this Agreement or any other Transaction
Document, it being understood that, solely for purposes of this clause (iii),
the survival period of Seller’s representations and warranties shall be
indefinite and not limited pursuant to Section 10.1 or otherwise.
Notwithstanding any other provision of this Section 10.3, the threshold and the
limitation set forth in this Section 10.3(b) shall not apply with respect to any
Loss any Seller Indemnitee suffers, sustains or becomes subject to as a result
of or by virtue of (x) any breach of Sections 5.1 or 5.2 or (y) the fraud or the
willful misconduct on the part of Buyers.

 

10.4 Indemnification Procedures.

 

(a) Any Person making a claim for indemnification pursuant to Section 10.2 or
10.3 above (each, an “Indemnified Party”) must give the party from whom
indemnification is sought (an “Indemnifying Party”) written notice of such claim
promptly after the Indemnified Party receives any written notice of any action,
lawsuit, proceeding, investigation or other claim (a “Proceeding”) against or
involving the Indemnified Party by any Person or otherwise discovers the
liability, obligation or facts giving rise to such claim for indemnification;
provided, that the failure to notify or delay in notifying an Indemnifying Party
will not relieve the Indemnifying Party of its obligations pursuant to
Section 10.2 or 10.3 above, as applicable, except to the extent that such
failure or delay actually harms the Indemnifying Party.

 

(b) With respect to the defense of any Proceeding against or involving an
Indemnified Party in which any Person in question seeks only the recovery of a
sum of money (and not for injunctive or equitable relief) for which
indemnification is provided in Section 10.2 or 10.3 above, at its option an
Indemnifying Party may appoint as lead counsel of such defense any legal counsel
approved by the Indemnified Party, such approval not to be unreasonably withheld
or delayed.

 

(c) Notwithstanding Section 10.4(b) above: (i) the Indemnified Party will be
entitled to participate in the defense of such claim and to employ counsel of
its choice for such purpose at its own expense (provided that the Indemnifying
Party will bear the fees and expenses of such separate counsel incurred prior to
the date upon which the Indemnifying Party effectively assumes control of such
defense) and (ii) the Indemnifying Party will not be entitled to assume control
of the defense of such claim, and will pay the reasonable fees and expenses of
legal counsel retained by the Indemnified Party, if:

 

(i) an adverse determination of such Proceeding would be reasonably likely to
have a material and adverse effect upon the Indemnified Party’s business;

 

(ii) the Indemnified Party reasonably believes that there exists a conflict of
interest which, under applicable principles of legal ethics, could prohibit a
single legal counsel from representing both the Indemnified Party and the
Indemnifying Party in such Proceeding; or

 

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(iii) the Indemnified Party reasonably believes that the Indemnifying Party has
failed or is failing to prosecute or defend vigorously such claim following
written notice and a thirty (30) day opportunity to cure.

 

(d) the Indemnifying Party must obtain the prior written consent of the
Indemnified Party (which the Indemnified Party will not unreasonably withhold,
delay or condition) prior to entering into any settlement of such claim or
Proceeding or ceasing to defend such claim or Proceeding; provided that any such
settlement shall provide for the full release of all claims against each
Indemnified Party.

 

10.5 Payment. Upon the determination of the liability under this Article 10 or
otherwise between the parties or by judicial proceeding, the appropriate party
shall pay to the other, as the case may be, within ten (10) Business Days after
such determination, the amount of any claim for indemnification made hereunder.
All amounts not paid when due under this Article 10 will accrue interest,
payable on demand, at a rate equal to the lesser of (i) eighteen percent
(18%) per annum and (ii) the maximum rate allowable under applicable Law, from
the date due until paid in full and each paying party will pay the other party’s
reasonable and documented out-of-pocket costs and expenses (including without
limitation, reasonable attorneys’ fees and expenses) incurred in attempting to
collect any such amounts.

 

10.6 Adjustment for Insurance. The amount of indemnity payable under
Section 10.2 or Section 10.3 shall be calculated after giving effect to any net
proceeds actually received from insurance policies covering the Loss that is the
subject of the claim for indemnity, net of any increase in premium as a result
of such claim and reasonable expenses incurred in pursuing such claim.

 

ARTICLE 11

 

GENERAL PROVISIONS

 

11.1 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by written agreement of the Parties hereto.

 

11.2 Waiver of Compliance; Consents. Any failure of any of the Parties to comply
with any obligation, covenant, agreement or condition contained herein may be
waived by the Party entitled to the benefits thereof, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.

 

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11.3 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered in person, by confirmed facsimile transmission, confirmed courier
service, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective Parties as follows:

 

If to Buyers:

 

c/o Celtic Pharma Management L.P.

Wessex House

45 Reid Street, 4th Floor

Hamilton HM 12

Bermuda

Attention: General Counsel

Facsimile No.: +441-299-7441

 

with copies to:

 

Celtic Pharma

110 East 59th Street

Suite 3303

New York, NY 10022

Attention: General Counsel

Facsimile No.: 212-668-3370

 

and

 

Mayer, Brown, Rowe & Maw LLP

1675 Broadway

New York, NY 10019

Attention: Philip O. Brandes

Facsimile No.: 212-262-1910

 

If to Seller:

 

Neurobiological Technologies, Inc.

2000 Powell St.

Suite 800

Emeryville, CA 94608

Attention: President and CEO

Facsimile No.: 510-595-6006

 

with a copy to:

 

Heller Ehrman LLP

4350 La Jolla Village Drive, 7th Floor

San Diego, CA 92122

Attention: Stephen C. Ferruolo

Facsimile No.: 858-587-5930

 

or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).

 

11.4 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted

 

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assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any Party hereto without the prior
written consent of the other Party, nor is this Agreement intended to confer
upon any other person except the Parties hereto any rights or remedies
hereunder; provided, however, that (a) each Buyer may assign any or all of its
rights, interests and obligations hereunder to any of its Affiliates (provided
that no such assignment to an Affiliate shall relieve assignor of its
obligations hereunder); and provided further, that each Buyer may assign its
rights and delegate its obligations hereunder to (i) any Person in connection
with a sale of all or substantially all of the Acquired Assets, or a merger or
similar transaction (ii) any Person who acquires all of the capital stock of
either Buyer, or (iii) any Person providing financing to either Buyer or its
Affiliates; and (b) Seller may (i) assign or delegate any or all of its rights,
interests and obligations hereunder to any of its Affiliates (provided that no
such assignment to an Affiliate shall relieve assignor of its obligations
hereunder) or to a successor by way of a sale of all or substantially all of the
assets of Seller, or a merger or similar transaction and (ii) assign any of its
rights to payment hereunder to any Third Party. This Agreement shall inure to
the benefit of, and be binding upon, the Parties hereto and their successors and
permitted assigns.

 

11.5 Specific Performance. Each of the Parties acknowledge and agree that the
other Party would be damaged irreparably and could not be made whole by monetary
damages in the event any of the provisions of this Agreement are not performed
in accordance with their specific terms or otherwise are breached. Therefore,
each Party agrees to the granting of specific performance of this Agreement and
injunctive or other equitable relief in favor of the other Party as a remedy for
any such breach, in addition to any other remedy to which it may be entitled, at
law or in equity.

 

11.6 JURISDICTION OF DISPUTES; WAIVER OF JURY TRIAL. IN THE EVENT ANY PARTY TO
THIS AGREEMENT COMMENCES ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, WITH RESPECT TO ANY OF THE
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS
AGREEMENT HEREBY (A) AGREE THAT ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION
SHALL BE INSTITUTED IN A COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE CITY
OF NEW YORK, NEW YORK, WHETHER A STATE OR FEDERAL COURT; (B) AGREE THAT IN THE
EVENT OF ANY SUCH LITIGATION, PROCEEDING OR ACTION, SUCH PARTIES WILL CONSENT
AND SUBMIT TO PERSONAL JURISDICTION IN ANY SUCH COURT DESCRIBED IN CLAUSE (A) OF
THIS SECTION 11.6 AND TO SERVICE OF PROCESS UPON THEM IN ACCORDANCE WITH THE
RULES AND STATUTES GOVERNING SERVICE OF PROCESS (IT BEING UNDERSTOOD THAT
NOTHING IN THIS SECTION SHALL BE DEEMED TO PREVENT ANY PARTY FROM SEEKING TO
REMOVE ANY ACTION TO A FEDERAL COURT IN NEW YORK, NEW YORK; (C) AGREE TO WAIVE
TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING OR ACTION IN ANY SUCH COURT
OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION WAS BROUGHT IN AN INCONVENIENT
FORUM; (D) DESIGNATE, APPOINT AND DIRECT CT CORPORATION SYSTEM AS ITS AUTHORIZED
AGENT TO RECEIVE

 

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ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS AND DOCUMENTS IN ANY LEGAL
PROCEEDING IN THE STATE OF NEW YORK; (E) AGREE TO NOTIFY THE OTHER PARTIES TO
THIS AGREEMENT IMMEDIATELY IF SUCH AGENT SHALL REFUSE TO ACT, OR BE PREVENTED
FROM ACTING, AS AGENT AND, IN SUCH EVENT, PROMPTLY TO DESIGNATE ANOTHER AGENT IN
THE CITY OF NEW YORK, SATISFACTORY TO SELLER AND BUYERS, TO SERVE IN PLACE OF
SUCH AGENT AND DELIVER TO THE OTHER PARTY WRITTEN EVIDENCE OF SUCH SUBSTITUTE
AGENT’S ACCEPTANCE OF SUCH DESIGNATION; (F) AGREE AS AN ALTERNATIVE METHOD OF
SERVICE TO SERVICE OF PROCESS IN ANY LEGAL PROCEEDING BY MAILING OF COPIES
THEREOF TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 11.3 FOR
COMMUNICATIONS TO SUCH PARTY; (G) AGREE THAT ANY SERVICE MADE AS PROVIDED HEREIN
SHALL BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (H) AGREE THAT
NOTHING HEREIN SHALL AFFECT THE RIGHTS OF ANY PARTY TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY DISPUTE IN CONNECTION WITH OR RELATING TO THIS AGREEMENT,
ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR
THEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT
SUCH WAIVER.

 

11.7 Governing Law. This Agreement shall be governed by the laws of the State of
New York (regardless of the laws that might otherwise govern under applicable
New York principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.

 

11.8 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

11.9 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity
of enforceability of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any other situation or
in any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.

 

11.10 Captions. The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement.

 

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11.11 Construction. The language used in this Agreement will be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise.

 

11.12 Entire Agreement. This Agreement, including the documents, schedules,
certificates and instruments referred to herein, embody the entire agreement and
understanding of the Parties hereto in respect of the transactions contemplated
by this Agreement. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein or therein. This Agreement supersedes all prior agreements
and understandings between the Parties with respect to such transactions.

 

11.13 Independent Contractors. It is understood and agreed that the Parties are
independent contractors and nothing contained in this Agreement is intended to
make either Party a general or special agent, legal representative, joint
venturer, partner or employee of the other or otherwise as participants in a
joint or common undertaking for any purpose. Personnel supplied by a Party shall
work for that Party and shall not, for any purpose, be considered as partners,
joint venturers, employees or agents of the other Party. Each Party assumes full
responsibility for the acts of its personnel while performing services hereunder
and shall be responsible solely for their supervision, direction and control,
compensation, benefits and taxes. Neither party has, expressly or by
implication, or may represent itself as having, directly or indirectly, any
authority to act for or on behalf of the other Party or to make contracts or
enter into any agreements in the name of the other party, or to obligate or bind
the other party in any manner whatsoever.

 

[signature pages follow]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the date first written above.

 

NEUROBIOLOGICAL TECHNOLOGIES, INC. By:  

/s/ Paul E. Freiman

   

Name:

 

Paul E. Freiman

   

Title:

 

President & Chief Executive Officer

NEUTRON LTD.

By:  

/s/ Stephen Evans-Freke

   

Name:

 

Stephen Evans-Freke

   

Title:

 

Managing Director

NEUTRON ROW LTD. By:  

/s/ Stephen Evans-Freke

   

Name:

 

Stephen Evans-Freke

   

Title:

 

Managing Director

 

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