Exhibit 10.20

 

CONFIDENTIAL TREATMENT REQUESTED:

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.  Such redacted portions
have been replaced with “{***}” in this Exhibit.  An unredacted version of this
document has been filed separately with the Securities and Exchange Commission
along with the request for confidential treatment.

 

2008

 

 

 

PRESTWICK PHARMACEUTICALS, INC.

 

 

- and -

 

 

OVATION PHARMACEUTICALS, INC.

 

 

 

Marketing, Distribution and Supply Agreement

 

 

for

 

 

Xenazine

 

 

 

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ARTICLE 1

DEFINITIONS

1

 

 

 

ARTICLE 2

GRANT OF RIGHTS

10

 

 

 

2.1

Exclusive Distribution Right

10

2.2

Development Right

10

2.3

Trademark and Trade Dress License

11

2.4

Option to Galenical Product

11

2.5

Option to Isomeric Product

13

2.6

Sub-Distributor or Subcontractor

14

2.7

Limitations of Use

15

2.8

Retained Rights

15

2.9

Exclusivity

15

 

 

 

ARTICLE 3

REGULATORY MATTERS

16

 

 

 

3.1

Filing & Maintenance of Regulatory Approvals

16

3.2

Regulatory Communication

16

3.3

Adverse Event Reporting

17

3.4

Recalls and Withdrawals

17

3.5

Assistance for Product

18

 

 

 

ARTICLE 4

COMMERCIALIZATION OF PRODUCT

18

 

 

 

4.1

Commercialization

18

4.2

Commercialization Plan

19

4.3

Commercialization

20

4.4

Promotional Materials

22

4.5

Co-Promotion

23

4.6

Sales Representatives

23

4.7

Compliance with Laws

23

4.8

Use of Marks and Approval of Promotional Materials

23

 

 

 

ARTICLE 5

SUPPLY OF PRODUCT

24

 

 

 

5.1

Principles of Supply

24

5.2

Forecasting and Ordering

25

5.3

Shipping and Delivery

27

5.4

Safety Stock

27

5.5

Liability for Affiliates & Permitted Subcontractors

27

5.6

Quality and Pharmacovigilance Agreement

27

 

 

 

ARTICLE 6

FINANCIAL TERMS

28

 

 

 

6.1

Consideration

28

6.2

Development Expenses

28

6.3

Supply Price and Payment

28

6.4

Payment Method

29

6.5

Reconciliations

29

6.6

Taxes

29

6.7

Records Retention; Financial Audit

30

 

 

 

ARTICLE 7

CONFIDENTIALITY

31

 

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7.1

Confidential Information

31

7.2

Publicity; Filing of this Agreement

32

7.3

Use of Names

33

7.4

Confidentiality of this Agreement

33

7.5

Disclosures Under Existing CDA

33

 

 

 

ARTICLE 8

INTELLECTUAL PROPERTY

33

 

 

 

8.1

Patent Prosecution and Maintenance

33

8.2

Defense of Third Party Infringement Claims

33

8.3

Enforcement

34

8.4

Trademarks

35

 

 

 

ARTICLE 9

REPRESENTATIONS AND WARRANTIES

36

 

 

 

9.1

Representations and Warranties

36

9.2

Investigation

37

9.3

Disclaimer of Warranty

37

9.4

Essential Basis

37

 

 

 

ARTICLE 10

COVENANTS

37

 

 

 

10.1

Phase 4 Studies

37

10.2

Debarment

38

10.3

Territory Compliance

38

10.4

FIFO Policy

38

10.5

No Amendment of the Cambridge Agreement

38

10.6

Maintenance of Cambridge Agreement

38

10.7

Breach of Cambridge Agreement by Licensor

39

10.8

Termination of Cambridge Agreement by Prestwick

39

10.9

Breach of Cambridge Agreement due to Distributor

40

10.10

Marketing Plan

40

 

 

 

ARTICLE 11

TERM AND TERMINATION

40

 

 

 

11.1

Term

40

11.2

Termination for Certain Breaches

40

11.3

Termination for Insolvency

41

11.4

Other Termination By Distributor

41

11.5

Termination for Failure to Agree Post Exclusivity Requirements

41

 

 

 

ARTICLE 12

EFFECTS OF TERMINATION

42

 

 

 

12.1

Effect of Termination by Prestwick Pursuant to Sections 11.2.1(a) or (b) or 11.3

42

12.2

Effect of Termination by Distributor Pursuant to Section 11.2.3 or 11.3

43

12.3

Effect of Termination by Prestwick Pursuant to Section 11.2.1, 11.3 or 15.6.2 or
by Distributor in accordance with Section 11.4 or 15.6.2, or under Section 11.5

44

12.4

Rights in Bankruptcy

45

12.5

Survival

46

 

 

 

ARTICLE 13

INDEMNIFICATION; INSURANCE

46

 

 

 

13.1

Indemnification

46

13.2

Notice of Claim

46

13.3

Control of Defense

47

 

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13.4

Right to Participate in Defense

47

13.5

Settlement

47

13.6

Cooperation

48

13.7

Expenses of the Indemnified Party

48

13.8

Insurance

48

 

 

 

ARTICLE 14

GOVERNING LAW; DISPUTE RESOLUTION

49

 

 

 

14.1

Governing Law

49

14.2

Jurisdiction; Venue; Service of Process

49

14.3

Arbitration

49

 

 

 

ARTICLE 15

MISCELLANEOUS

50

 

 

 

15.1

Notices

50

15.2

Independent Status

51

15.3

Force Majeure

51

15.4

Entire Agreement; Amendment and Waiver

51

15.5

Headings; Construction; Certain Conventions

51

15.6

Assignment

52

15.7

Severability

52

15.8

Further Assurances

53

15.9

Counterparts

53

15.10

Limitation of Liability

53

 

 

 

EXHIBITS

 

 

A        Press Releases

 

 

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MARKETING, DISTRIBUTION AND SUPPLY AGREEMENT

 

This MARKETING, DISTRIBUTION AND SUPPLY AGREEMENT (this “Agreement”) is dated as
of September 16, 2008 (the “Effective Date”) by and between Prestwick
Pharmaceuticals, Inc., a company incorporated under the laws of the State of
Delaware and having a principal place of business at 1825 K Street NW,
Suite 1475, Washington, D.C.  20006 (“Prestwick”), and Ovation
Pharmaceuticals, Inc., a company incorporated under the laws of the State of
Illinois and having a principal place of business at Four Parkway North,
Deerfield, Illinois 60015 (“Distributor”). Prestwick and Distributor are
sometimes referred to herein individually as a “Party” and collectively as the
“Parties”.

 

RECITALS

 

WHEREAS, Prestwick has developed and received regulatory approval for a
tetrabenazine product for treatment of chorea associated with Huntington’s
disease in the Territory;

 

WHEREAS, Prestwick desires to appoint an exclusive distributor to Commercialize
such product in the Territory;

 

WHEREAS, Distributor has the commercial capabilities to Commercialize
pharmaceutical products in the Territory and particularly such tetrabenazine
product for chorea associated with Huntington’s disease in the Territory;

 

WHEREAS, Distributor desires to be appointed the exclusive distributor for such
product to Commercialize such product in the Territory to maximize the
commercial value of such product.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the Parties, intending to be legally bound, agree as
follows:

 

ARTICLE 1
DEFINITIONS

 

The following terms shall have the following meanings as used in this Agreement:

 

1.1                                 “Active Substance” means tetrabenazine.

 

1.2                                 “A&P” means activities exclusively and
directly related to the marketing and promotion of Product in the Territory to
the relevant specialist audience, including promotional materials, and branded
items for detailing activities, marketing publications, market research studies,
non personal promotion and advertisements, public and professional relations
(including activities at local and national congresses in the Territory and
satellite symposia), medical education programs and promotional meetings.  For
purposes of clarity, A&P shall not include Detailing.

 

1.3                                 “Affiliate” means any individual,
corporation, company, partnership, trust, limited liability company, association
or other business entity (“Person”) which directly or indirectly controls, is
controlled by or is under common control with the Party in question.  As used in
this

 

1

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definition of “Affiliate,” the term “control” shall mean, as to any Person,
(a) direct or indirect ownership of fifty percent (50%) or more of the voting
interests or other ownership interests in the Person in question; (b) direct or
indirect ownership of fifty percent (50%) or more of the interest in the income
of the Person in question; or (c) possession, directly or indirectly, of the
power to direct or cause the direction of management or policies of the Person
in question (whether through ownership of securities or other ownership
interests, by contract or otherwise).  Notwithstanding the foregoing, the direct
or indirect owners of equity securities of a Party such as financial
institutions, venture capital funds and private equity investors (and other
direct or indirect portfolio companies or investments of such financial
institutions, venture capital funds and private equity investors) will not be
its “Affiliates” for purposes of this Agreement.

 

1.4                                 “Business Day” means any Monday, Tuesday,
Wednesday, Thursday or Friday that is not a day on which banking institutions in
the State of New York are authorized by Law to close.

 

1.5                                 “Calendar Quarter” means that three
(3) month period during the Term of each Calendar Year ending March 31, June 30,
September 30 and December 31; provided, however, that the calendar quarter in
which this Agreement expires or is terminated shall extend from the first day of
such calendar quarter until the effective date of such expiration or termination
of this Agreement.

 

1.6                                 “Calendar Year” means (a) for the calendar
year this Agreement is entered into, the period commencing on the Effective Date
and ending on December 31 of the same year, (b) for each successive period
beginning on January 1 and ending twelve consecutive calendar months later on
December 31, and (c) for the calendar year in which this Agreement expires or is
terminated, the period beginning on January 1 of such calendar year and ending
on the effective date of the expiration or termination of this Agreement.

 

1.7                                 “Cambridge Agreement” means the Second
Amended and Restated Agreement between Prestwick and Cambridge Laboratories
(Ireland) Limited (“Licensor”) dated November 18, 2005 and any amendments
thereto or modifications thereto.

 

1.8                                 “Cambridge Amendment” means that certain
amendment to the Cambridge Agreement, dated September 12, 2008, by and among
Licensor, Prestwick Holdings, Inc., Prestwick, Biovail Americas Corp. and
Distributor.

 

1.9                                 “Change of Control” means, with respect to a
Party, (a) the acquisition (directly or indirectly, whether by merger,
consolidation, purchase and sale, share exchange or otherwise) by a Third Party
of a beneficial interest in the securities of such Party representing more than
fifty percent (50%) of the combined voting power of such Party’s then
outstanding securities; or (b) the transfer, sale or assignment of more than
fifty percent (50%) of the assets of such Party to a Third Party.

 

1.10                           “Commercialization” means activities directed to
the marketing, promotion, selling, or offering for sale of a product for an
indication, including pre-marketing, advertising, educating, planning, obtaining
pricing approvals, marketing, promoting, detailing, distributing and
post-marketing safety surveillance and preparation of filings for reporting to
the FDA.  When used as a verb, “Commercialize” means to engage in such
activities.

 

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1.11                           “Commercialization Plan” means the plan pursuant
to which Product shall be Commercialized in a Calendar Year in the Territory and
at a minimum shall include the following: (a) market research, including market
size, dynamics, growth, customer segmentation, competitive analysis, and Product
positioning, (b) annual sales forecasts broken down by Calendar Quarter, (c)
advertising and promotion programs and strategies, (d) sales plans and
activities, including sales force allocations, both in number of representatives
and the deployment of such representatives, (e) Phase 4 Studies to be conducted,
(f) number of and position of Details to be performed in a Calendar Year
(“Detail Requirements”) and (g) budget for performing the above noted activities
in a Calendar Year (“Commercialization Budget”).  Notwithstanding the foregoing,
the Commercialization Plan for the current Calendar Year and following Calendar
Year shall be the initial Marketing Plan.

 

1.12                           “Commercially Reasonable Efforts” means carrying
out of obligations or tasks consistent with the reasonable practices of the
pharmaceutical industry for the development or commercialization of a
pharmaceutical product having similar market potential or profit potential as
Product, based on conditions then prevailing.

 

1.13                           “Competing Product” means any product for
treating the symptoms of hyperkinetic movement disorders that respond to the
Active Substance where such product contains the Active Substance or any similar
active substance.  “Similar active substance” shall have the same definition as
is provided for in EC Commission Regulation 847/2000 of 27 April 2000.

 

1.14                           “Control” means, with respect to any intellectual
property right or other intangible property, that a Party or one of its
Affiliates owns or has a license or sublicense to such item or right, and has
the ability to grant access, license or sublicense in or to such right without
violating the terms of any agreement or other arrangement with any Third Party.

 

1.15                           “Co-Promotion” means those detailing and other
activities undertaken by a pharmaceutical company’s sales force in concert with
at least one other pharmaceutical company’s sales force to implement an agreed
to commercialization plan and strategies with respect to a particular
prescription pharmaceutical product under a single trademark.  When used as a
verb, “Co-Promote” means to engage in such activities.

 

1.16                           “Deductions” means (a) the fees and discounts
provided to wholesalers to the extent they relate to any program pertaining to
Product, including, without limitation, trade and cash discounts and “returns”,
as evidenced in the form of receipted invoices or other reasonable evidence
thereof, to distribute Product to patients or hospitals, (b) rebates charged by
state authorities for the scripts relating to Product purchased for their
Medicaid patients as evidenced in the form of written acknowledgement from
Medicaid of such rebate and payment of such and supported by Prestwick’s
Medicaid reconciliation, (c) discounts given to the federal government for their
purchases of Product evidenced in the form of receipted invoices, (d) fees and
discounts provided to specialty pharmacy distributors to the extent they relate
to any program pertaining to Product, including, without limitation, trade and
cash discounts and “returns”, as evidenced in the form of receipted invoices or
other reasonable evidence thereof, to distribute Product to patients or
hospitals, (e) the fees associated with any patient assistance program
pertaining to Product that have been agreed to with Licensor in the Cambridge
Amendment, including, without limitation, agreed cost of goods and agreed
administrative fees associated with such programs and (f) the fees associated
with any co-pay assistance programs pertaining to Product that have been agreed
to by

 

3

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Licensor in the Cambridge Amendment, including without limitation, agreed
administrative fees associated with such program, provided, the above shall be
subject to modification as provided in the Marketing Plan attached hereto as
Schedule 1.39.  The term “returns” means any returns of units of Product to
Distributor for any reason other than the fault of Distributor.  In respect of
returns of any units of Product, (1) Distributor will provide to Prestwick a
full accounting of such returns, (2) Distributor shall not be entitled to more
than one deduction for the return of any unit of Product (for the sake of
clarity, Distributor shall only be entitled to one deduction for a return of a
unit of Product where such unit of Product is returned to Distributor by a
wholesale distributor or special pharmacy, shipped to another wholesale
distributor or special pharmacy, and then returned to Distributor by that other
wholesale distributor or special pharmacy), (3) Distributor shall not be
entitled to any deduction for a unit of Product that is returned to Distributor
by one wholesale distributor or special pharmacy, shipped to another wholesale
distributor or special pharmacy, and then sold by that other wholesale
distributor or special pharmacy, and (4) any shipment by Distributor of any unit
of Product to a wholesale distributor or special pharmacy that is subsequently
returned to Distributor, shipped by Distributor to another wholesale distributor
or special pharmacy and sold by that other wholesale distributor or special
pharmacy shall only constitute one sale of such unit of Product by Distributor
for purposes of calculating Net Sales Revenue.  Distributor agrees that the
provisions for deducting returns for purposes of computing Net Sales Revenue
shall not be used by Distributor in such circumstances where (1) Distributor
shipped units of Product to a wholesale distributor or specialty pharmacy at a
time when such units of Product would be considered old or not used by such
wholesale distributor or special pharmacy and thereafter returned by such
wholesale distributor or special pharmacy to Distributor, and (2) Distributor
knowingly sold excessive units of Product to a wholesaler or specialty pharmacy
in light of the previous ordering patterns of that wholesaler or specialty
pharmacy.  In the event that the Distributor consents to any agreed to amendment
of Schedule 10 to the Cambridge Agreement by Prestwick and Licensor, the
definition of “Deductions” shall automatically be amended to conform to such
amendment of Schedule 10, mutatis mutandis, without any consent or further
action of the Parties.

 

1.17                           “Detail” means, with respect to Product, the
communication by a sales representative during a sales call (a) involving
face-to-face contact, (b) describing the indicated uses which have been approved
by the applicable Regulatory Authorities, (c) using the Promotional Materials in
an effort to increase the familiarity of prescribing and/or hospital ordering
agents with Product for the indicated uses which have been approved by the
applicable Regulatory Authorities, and (d) made at such medical professional’s
office, in a hospital or at a marketing meeting sponsored by Distributor
primarily for Product where the principal objective is to place an emphasis on
Product and not simply to discuss Product with such medical professional.  For
the avoidance of doubt, discussions at conventions or other meetings not
specifically sponsored by a Party for Product shall not constitute “Details” or
“Detailing”.

 

1.18                           “Development” means non-clinical and clinical
research and drug development activities, including without limitation
toxicology, test method development and stability testing, process development,
formulation development, delivery system development, quality assurance and
quality control development, statistical analysis, clinical studies (including
pre- and post-approval studies), regulatory affairs, and product approval and
clinical study regulatory activities.

 

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1.19                           “Development Expenses” means, with respect to a
product, the direct out of pocket costs incurred by a Party that are
specifically attributable to the Development of such product.

 

1.20                           “Dollar” or “$” means United States dollars
(i.e., the legal currency authorized by the United States of America).

 

1.21                           “Dossier Development” means the development of
the dossier to enable the First NDA to be granted for Product.

 

1.22                           “Escrow Agent” means JP Morgan Chase, N.A.

 

1.23                           “Escrow Agreement” means the escrow agreement
dated as of the Effective Date and entered into by Prestwick, Distributor and
the Escrow Agent.

 

1.24                           “Exclusivity Period” means the period from the
Effective Date through the expiry of the last to expire regulatory exclusivity
in the Territory for any Product.

 

1.25                           “FDA” means the United States Food and Drug
Administration and any successor agency thereto.

 

1.26                           “First Commercial Sale” means the first
commercial arm’s length sale by Distributor or its Affiliates of Product to a
Third Party in the Territory.

 

1.27                           “First NDA” means NDA # 21-894 letter dated
August 15, 2008.

 

1.28                           “GAAP” means Generally Accepted Accounting
Principles in the United States.

 

1.29                           “Galenical Development” means developments of the
initial Product, any Product that subsequently becomes Product, or the Active
Substance or any metabolite thereof (other than the Dossier Development, any
Regulatory Developments and any Isomeric Developments) and shall include, among
others, developments of new delivery mechanisms for or formulations of the
Active Substance.

 

1.30                           “Galenical Product” means the product that
results from Galenical Development.

 

1.31                           “Generic Equivalent” means, with respect to a
particular product, a product that receives Regulatory Approval on the basis
that it is bioequivalent to such particular product and that it is not
manufactured or marketed with the license or authorization of Prestwick,
Distributor or any of their respective Affiliates.

 

1.32                           “Governmental Authority” means any court,
tribunal, arbitrator, agency, legislative body, commission, official or other
instrumentality of (a) any government of any country, (b) a federal, state,
province, county, city or other political subdivision thereof or (c) any
supranational body.

 

1.33                           “Invention” means, whether patentable or not, any
improvement, enhancement or modification of Product by Distributor, Prestwick,
their respective Affiliates or their permitted subcontractors.

 

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1.34                           “Isomeric Development” means any development of
any of the isomers of the Active Substance or Product or any metabolite of the
Active Substance or Product or any other development of any isomers associated
with the Active Substance or Product.

 

1.35                           “Isomeric Product” means the product that results
from Isomeric Development.

 

1.36                           “Know-How” means any information, results and
data of any type whatsoever, in any tangible or intangible form whatsoever,
including without limitation, databases, ideas, discoveries, inventions, trade
secrets, practices, methods, tests, assays, techniques, specifications,
processes, formulations, formulae, knowledge, know-how, skill, experience,
materials, including pharmaceutical, chemical and biological materials, products
and compositions, scientific, technical or test data (including pharmacological,
biological, chemical, biochemical, toxicological and clinical test data),
analytical and quality control data, stability data, studies and procedures,
drawings, plans, designs, diagrams, sketches, technology, documentation, and
patent-related and other legal information or descriptions.

 

1.37                           “Law” or “Laws” means the laws, statutes, rules,
codes, regulations, orders, judgments and/or ordinances of a Governmental
Authority.

 

1.38                           “Losses” means any and all amounts paid or
payable to Third Parties with respect to a Third Party Claim, including without
limitation, damages (including all incidental and consequential damages),
deficiencies, defaults, awards, settlement amounts, assessments, fines, dues,
penalties, costs, liabilities, obligations, taxes, liens, losses, lost profits,
fees and expenses (including, without limitation, court costs, interest and
reasonable fees of attorneys, accountants and other experts).

 

1.39                           “Marketing Plan” means the plan for the marketing
of Product in the Territory set forth on Schedule 1.39 as such plan may be
updated (subject to Section 10.10) as provided therein.

 

1.40                           “Minimum Order Quantities” means the quantities
of Product to be ordered by Distributor in the Territory as set forth in
Schedule 1.40 for the first two (2) years after the date of the First Commercial
Sale, and thereafter as such quantities may be updated as provided in the
Cambridge Agreement.

 

1.41                           “Minimum Sales Quantities” means the quantities
of Product to be sold by Distributor in the Territory as set forth in Schedule
1.41 for the first five (5) years after the date of the First Commercial Sale,
and thereafter as such quantities may be updated as provided in the Cambridge
Agreement.

 

1.42                           “NDA” means a New Drug Application for any
product, as appropriate, requesting permission to place a drug on the market in
accordance with 21 C.F.R. Part 314, and all supplements or amendments filed
pursuant to the requirements of the FDA, including all documents, data and other
information concerning a product which are reasonably necessary for FDA approval
to market a product in the Territory.

 

1.43                           “Net Sales Revenue” means invoiced gross sales of
Product in the Territory by Distributor, its Affiliates or permitted
subcontractors less Deductions, provided, that (a) the Parties agree that no
deductions for bad debts is permissible and (b) Deductions from invoiced gross
sales

 

6

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shall not, in any given monthly calculation of Net Sales Revenue, cause the sum
of the estimated accrual of such Deductions for the applicable month (or the
actual accrual thereof at such time that such estimated accrual can be adjusted
to reflect such final accrual), in each case, measured on a trailing twelve (12)
month average basis (or shorter period if applicable) (such amount, the
“Deduction Cap”), to exceed {***}† of the sum of the invoiced gross sales for
such applicable month.  If a Product is sold for consideration other than cash,
the Net Sales Revenue from such sale or transfer shall be deemed the then fair
market value of such consideration.  If Distributor, its Affiliates or permitted
subcontractor chooses to sell a Product together with another product with
composite pricing, Net Sales Revenue for such Product will be recalculated based
on the then average price of such Product to the applicable customer category
when such Product is sold independently of any other product.  In the event that
the Distributor consents to any agreed to amendment to the definition of “Net
Sales Revenue” contained in the Cambridge Agreement by Prestwick and Licensor,
the definition of “Net Sales Revenue” contained herein shall automatically be
amended to conform to such amendment of the definition of “Net Sales Revenue”,
contained in the Cambridge Agreement, mutatis mutandis, without any consent or
further action of the Parties.

 

1.44                           “Patent” means (a) any patent, re-examination,
reissue, renewal, extension, supplementary protection certificate and term
restoration, any confirmation patent or registration patent or patent of
addition based on any such patent, (b) any pending application for patents,
including without limitation continuations, continuations-in-part, divisional,
provisional and substitute applications, and inventors’ certificates, (c) all
foreign counterparts of any of the foregoing, and (d) all applications to the
extent based on the priority dates of any of the foregoing.

 

1.45                           “Phase 4 Study(ies)” means the studies required
to fulfill commitments made as a condition of the Regulatory Approval of Product
in the Territory as described in the First NDA.

 

1.46                           “Prestwick Know-How” means any Know-How that is
necessary or useful for the Commercialization or use of Product in the
Territory, conducting Phase 4 Studies or exercise of Distributor’s others rights
or performance of Distributor’s obligations under this Agreement that either is
Controlled by Prestwick on the Effective Date or comes within Prestwick’s
Control during the Term in connection with activities performed under this
Agreement or the Cambridge Agreement.

 

1.47                           “Prestwick Patents and Intellectual Property”
means any Patent, Invention or other intellectual property or proprietary right
that is necessary or useful for the Commercialization or use of Product in the
Territory, conducting Phase 4 Studies or exercise of Distributor’s other rights
or performance of Distributor’s obligations under this Agreement that is either
Controlled by Prestwick on the Effective Date or comes within Prestwick’s
Control during the Term in connection with activities performed under this
Agreement or the Cambridge Agreement.

 

1.48                           “Product” means (a) the fully labeled and
packaged product containing the Active Substance as described in the First NDA
and any supplements to the foregoing, including, but not

 

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† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

7

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limited, to any Regulatory Product, or (b) any Galenical Product or Isomeric
Product deemed a “Product” pursuant to Sections 2.4.2 or 2.5.2, respectively.

 

1.49                           “Product Trade Dress” means any trade dress
(a) Controlled by Prestwick on the Effective Date or (b) comes within
Prestwick’s Control during the Term, in each case that is used or registered for
Product.

 

1.50                           “Product Trade Mark” means any trade mark or
trade name (a) Controlled by Prestwick on the Effective Date or (b) comes within
Prestwick’s Control during the Term, in each case that is used or registered for
Product.

 

1.51                           “Promotional Materials” means all written,
printed, video or graphic advertising, promotional, educational and
communication materials (other than Product labels and package inserts) for
marketing, advertising and promotion of Product in the Territory, including,
without limitation, copyrights in any such materials and all designs, industrial
designs, design patents, design registrations, and design patent applications
developed in connection with such materials, for use (a) by a sales
representative or (b) in advertisements, web sites or direct mail pieces.

 

1.52                           “Prosecution and Maintenance” means, with respect
to a Patent, the preparing, filing, prosecuting and maintenance of such Patent,
as well as re-examinations, reissues, requests for Patent term extensions and
the like with respect to such Patent, together with the conduct of
interferences, the defense of oppositions and other similar proceedings with
respect to the particular Patent.

 

1.53                           “Regulatory Approval” means all approvals
(including, without limitation, where applicable, orphan drug designation,
product and/or establishment licenses, registrations or authorizations of any
Governmental Authority) necessary for the Development, use or Commercialization
of Product in the Territory, including any label expansions of any of the above
and, in the event of a Technology transfer, manufacture and packaging of the
Product.

 

1.54                           “Regulatory Development” means development of
Product involving seeking regulatory approval for new indications for Product,
such new indications being those other than the indications set forth in the
First NDA.

 

1.55                           “Regulatory Filings” means all material documents
filed with a Governmental Authority in the Territory relating to Product,
including Investigational New Drug Applications and, in the event of a
Technology transfer, drug master files and NDAs.

 

1.56                           “Regulatory Product” means the product that
results from Regulatory Development.

 

1.57                           “SKU” means a specific packaged presentation of a
defined quantity of a specific dosage strength of Product, identified by
Distributor’s N.D.C. number.

 

1.58                           “Sub-Distributor” shall mean a Third Party to
whom Distributor has granted, directly or indirectly, a right or license to
sell, market, distribute and/or promote Product (“Distribution Rights”) in the
Territory pursuant to Section 2.6; and “Sub-Distribution Agreement” shall mean
an agreement or arrangement granting such rights or licenses.

 

8

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1.59                           “Support Center” means the Specialty Pharmacy Hub
as further described in Schedule 1.59 or any other hub distributor designated by
Distributor in accordance with the terms hereof.

 

1.60                           “Territory” means the United States of America,
including, without limitation, all of its territories, possessions and
protectorates.

 

1.61                           “Third Party” means any Person or Governmental
Authority other than Prestwick or Distributor or any of their respective
Affiliates.

 

1.62                           Additional Definitions.  Each of the following
definitions is set forth in the Section of this Agreement indicated below

 

Definition

 

Section

AAA

 

14.3

Agreement

 

Preamble

Binding Portion

 

5.2.2

Commercialization Report

 

4.3.3(a)

Confidential Information

 

7.1.1

Controlling Party

 

8.3.3

Designated Senior Officer

 

4.2.2

Disbursing Party

 

6.6

Disclosing Party

 

7.1.1

Distribution Rights

 

1.56

Distributor

 

Preamble

Effective Date

 

Preamble

Enforcement Action

 

8.3

Existing CDA

 

7.5

FIFO

 

10.4

First Installment

 

6.3.3

Forecast

 

5.2.1

Force Majeure Event

 

15.3

Galenical Notice

 

2.4.2

Galenical Option

 

2.4.1

Handling Deductions

 

6.3.5

Indemnification Claim Notice

 

13.2

Indemnified Party

 

13.2

Indemnifying Party

 

13.2

Indemnitee

 

13.2

Indemnitees

 

13.2

Infringing Product

 

8.3

Initial Forecast

 

5.2.1

Invoice

 

6.3.2

Isomeric Option

 

2.5.1

Licensor

 

1.7

Licensor Galenical Development

 

2.4.2

 

9

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Definition

 

Section

Licensor Notice

 

2.5.1(a)

Key Patents

 

8.1

Party

 

Preamble

Parties

 

Preamble

Period 1

 

4.3.2(b)

Period 2

 

4.3.2(b)

Person

 

1.3

Prestwick

 

Preamble

Prestwick Galenical Development

 

2.4.2

Pharmacovigilance Agreement

 

3.3.2

Press Releases

 

7.2

Purchase Order

 

5.2.3

Receiving Party

 

6.6

Recipient

 

7.1.1

Sales Representative

 

4.3.2(a)

Specialists

 

4.3.2(a)

Specifications

 

3.4.2(b)

Sub-Distribution Agreement

 

1.56

Statement Date

 

6.3.3

Supply Price

 

6.3.1

Technology

 

5.1.3

Term

 

11.1

Third Party Claim

 

13.1.1

Trademark Enforcement Action

 

8.4.2

TSX

 

7.2

Upfront Payment

 

6.1

Withholding Taxes

 

6.6

 

ARTICLE 2
GRANT OF RIGHTS

 

2.1                                 Exclusive Distribution Right.  Subject to
the terms and conditions of this Agreement, Prestwick hereby (a) appoints
Distributor as its exclusive distributor (even as to Prestwick and its
Affiliates) of Product in the Territory and Distributor hereby agrees to act in
that capacity, (b) grants Distributor an exclusive (even as to Prestwick and its
Affiliates), royalty-free license to use Prestwick Know-How and under Prestwick
Patents and Intellectual Property to distribute and sell Product in the
Territory, and (c) grants Distributor a co-exclusive (with Prestwick),
royalty-free license (1) under Prestwick Patents and Intellectual Property and
(2) to use Prestwick Know-How, to market and promote Product in the Territory.

 

2.2                                 Development Right.  Subject to the terms and
conditions of this Agreement, Prestwick hereby grants to Distributor a
non-exclusive, royalty free license to conduct Phase 4 Studies in accordance
with this Agreement.

 

10

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2.3                                 Trademark and Trade Dress License.  Subject
to terms and conditions of this Agreement, Prestwick hereby (a) grants to
Distributor an exclusive (even as to Prestwick and its Affiliates), royalty-free
license, to use Product Trademarks and Product Trade Dress exclusively for the
purposes of distributing and selling Product in the Territory Product in the
Territory pursuant to this Agreement and (b) grants Distributor a co-exclusive
(with Prestwick), royalty-free license, to use Product Trademarks and Product
Trade Dress exclusively for the purposes of marketing and promoting Product in
the Territory pursuant to this Agreement.

 

2.4                                 Option to Galenical Product.

 

2.4.1                        Grant.  Prestwick hereby grants to Distributor an
irrevocable option to participate in the Commercialization of any Galenical
Product in the Territory that Prestwick has rights to Commercialize through the
Cambridge Agreement irrespective of whether Prestwick wishes to participate in
the Commercialization of such Galenical Product itself (the “Galenical Option”).

 

2.4.2                        Exercise of Galenical Option.  Promptly upon
Prestwick receiving (a) consent from Licensor allowing it to conduct Galenical
Development (“Prestwick Galenical Development”) or (b) notice from Licensor
allowing Prestwick to co-invest in Galenical Development to be conducted by
Licensor (“Licensor Galenical Development”), Prestwick shall provide written
notice to Distributor providing the following information: (i) all the
information provided by Licensor to Prestwick, if applicable, (ii) name and
active ingredient(s) of the Galenical Product to be developed from such
Galenical Development, (iii) indication for which the NDA for such Galenical
Product shall be filed, (iv) the amount of Development Expenses spent or
budgeted for such Galenical Development, (v) if known by Prestwick, whether
Licensor has agreed to or intends to co-invest in such Galenical Development and
any other material information regarding such proposed Galenical Development
(“Galenical Notice”).  Prestwick shall promptly provide to Distributor such
additional information in Prestwick’s control, and shall promptly request from
Licensor and deliver to Distributor such additional information provided by
Licensor in response thereto, as Distributor may reasonably request. 
Distributor shall have sixty (60) days from receipt of the Galenical Notice to
exercise the Galenical Option by providing written notice to Prestwick of such
exercise.

 

(a)                                  Prestwick Galenical Development.  Upon the
exercise of the Galenical Option with respect to Prestwick Galenical Development
by Distributor, (i) Prestwick shall (1) within thirty (30) days of such exercise
notify Distributor if Licensor is co-investing in such Prestwick Galenical
Development and (2) promptly notify Distributor if Licensor subsequently
withdraws from co-investing in such Galenical Development and
(ii) (1) Distributor shall pay for {***}† of the Development Expenses from such
Galenical Development, provided, if Licensor is co-investing, then Distributor
shall pay {***}† of the Development Expenses not reimbursed by Licensor and
(2) any such Galenical Product resulting from such Prestwick Galenical
Development shall be deemed included in the definition of “Product” herein,
provided, that in such case the Supply Price with respect to such Product (which
will be expressed as a percentage of Distributor’s Net Sales Revenue (provided
that the Deduction Cap with respect to

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

11

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such Galenical Product shall be adjusted as the Parties may reasonably agree in
good faith) of such Product) shall be mutually agreed upon by the Parties such
that (x) the forecast values of the operating cash flows of each of the Parties
from the incremental distribution arrangement for such Product are expected to
be equal to each other, (y) the Supply Price will not be adjusted for any
differences between actual and forecast cash flows and (z) the arrangement for
determining Supply Price will not make the distribution arrangement be deemed a
joint venture or partnership.  If the Parties are unable to agree to the Supply
Price with respect to any such Product within three (3) months of the initial
submission of a proposal by one Party with respect thereto, either Party may
submit the matter to Arbitration for final resolution in accordance with
Section 14.3.

 

(b)                                 Licensor Galenical Development.  Upon the
exercise of the Galenical Option with respect to Licensor Galenical Development
by Distributor, Prestwick shall within thirty (30) days of such exercise notify
(i) Licensor of Prestwick’s exercise of the right to co-invest in such Licensor
Galenical Development and (ii) Distributor if Prestwick is exercising for the
benefit of Distributor or for both Distributor and Prestwick.  In the event
(1) Prestwick is exercising for the benefit of both Distributor and itself, then
(A) such Galenical Product resulting from such Licensor Galenical Development
shall be deemed included in the definition of “Product” herein, provided, that
in such case the Supply Price with respect to such Product (which will be
expressed as a percentage of Distributor’s Net Sales Revenue (provided that the
Deduction Cap with respect to such Galenical Product shall be adjusted as the
Parties may reasonably agree in good faith) of such Product) shall be agreed to
by the Parties such that (x) the forecast values of the operating cash flows of
each of the Parties from the incremental distribution arrangement for such
Product, are expected to be equal to each other, (y) the Supply Price will not
be adjusted for any differences between actual and forecast cash flows and
(z) the arrangement for determining Supply Price will not make the distribution
arrangement be deemed a joint venture or partnership and (B) Distributor shall
reimburse {***}† of the Development Expenses paid by Prestwick to Licensor for
the right to Commercialize the resulting Galenical Product in the Territory or
(2) Prestwick is exercising solely for the benefit of Distributor, then
(A) Prestwick (x) hereby appoints Distributor as its exclusive distributor (even
as to Prestwick and its Affiliates) for the Commercialization of such Galenical
Product in the Territory and Distributor hereby agrees to act in that capacity
and (y) grants Distributor an exclusive (even as to Prestwick and its
Affiliates), royalty-free license to use Prestwick Know-How and under Prestwick
Patents and Intellectual Property to Commercialize such Galenical Product in the
Territory, all on the same terms and conditions that such right is granted to
Prestwick by Licensor (including the price for supply), (B) Distributor shall
reimburse {***}† of the Development Expenses due and payable by Prestwick to
Licensor for such right and (C) for the avoidance of doubt, Prestwick shall not
be entitled to any portion of the supply price or net sales or any other payment
with respect to such Galenical Product in excess of the amount to be paid by
Prestwick to Licensor with respect to such Galenical Product pursuant to the
Cambridge Agreement.  If the Parties are unable to agree to the Supply Price
with respect to any such Product within three (3) months of the initial
submission of a proposal by one Party with respect thereto, either Party may
submit the matter to Arbitration for final resolution in accordance with
Section 14.3.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

12

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(c)                                  If Licensor elects not to continue
Galenical Development pursuant to Section 4.7 of the Cambridge Agreement and
reimburses Development Expenses for such Galenical Development paid by
Prestwick, Prestwick shall promptly reimburse to Distributor {***}† (if
Prestwick did co-invest) or {***}† (if Prestwick did not co-invest) of such
amounts reimbursed to Prestwick by Licensor to the extent Distributor exercised
its rights to co-invest under Section 2.4.2(a) or (b) and paid {***}† (if
Prestwick did co-invest) or {***}† (if Prestwick did not co-invest) of the
Development Expenses paid by Prestwick to Licensor.  If Licensor exercises its
option under Section 4.8 of the Cambridge Agreement to subsequently co-invest in
Galenical Development, Prestwick shall promptly reimburse to Distributor {***}†
(if Prestwick did co-invest) or {***}† (if Prestwick did not co-invest) of any
amounts reimbursed to Prestwick by Licensor to the extent Distributor exercised
its rights to co-invest under Section 2.4.2(a) or (b) and paid {***}† (if
Prestwick did co-invest) or {***}† (if Prestwick did not co-invest) of the
Development Expenses for such Galenical Development.

 

2.4.3                        Subsequent Buy-In.  In the event Distributor does
not exercise a Galenical Option pursuant to Section 2.4.2, Distributor shall
have a second right (i) prior to the filing of an applicable NDA or (ii) to the
extent Prestwick elects to exercise its right under Section 4.8 of the Cambridge
Agreement to co-invest in a Galenical Product after the filing of an applicable
NDA, concurrently with Prestwick’s election, to receive rights to Commercialize
the resulting Galenical Product as it would have if it had exercised the
Galenical Option if it reimburses two times the amount of Development Expenses
that would have been paid by Distributor under Section 2.4.2 for such Galenical
Product if it had exercised thereof and thereafter pays its share of any
additional Development Expenses incurred in accordance with Section 2.4.2.

 

2.5                                 Option to Isomeric Product.

 

2.5.1                        Grant.  Prestwick hereby grants to Distributor an
irrevocable option to participate in the Commercialization of any Isomeric
Product in the Territory that Prestwick has rights to Commercialize through the
Cambridge Agreement irrespective of whether Prestwick wishes to participate in
the Commercialization of such Isomeric Product itself (the “Isomeric Option”).

 

(a)                                  Exercise of Isomeric Option.  Promptly upon
Prestwick receiving notice from Licensor allowing it to co-invest on any
Isomeric Product, Prestwick shall provide written notice to Distributor
providing the following information: (i) all the information provided by
Licensor to Prestwick, (ii) name and active ingredient(s) of the Isomeric
Product, (iii) indication for which the NDA for such Isomeric Product shall or
will be filed, (iv) the amount of Development Expenses spent or budgeted for
Development of such Isomeric Product and (v) any other material information
regarding such Isomeric Product (“Licensor Notice”).  Prestwick shall promptly
provide to Distributor such additional information in Prestwick’s control, and
shall promptly request from Licensor and deliver to Distributor such additional
information provided by Licensor in response thereto, as Distributor may
reasonably request.  Distributor shall have ninety (90) days from receipt of the
Licensor Notice to exercise the Licensor Option by providing written notice to
Prestwick of such exercise.  Upon the exercise of the Licensor Option by
Distributor,

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

13

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Prestwick shall within thirty (30) days of such exercise notify (x) Licensor of
Prestwick’s exercise of the right to co-invest and (y) Distributor if Prestwick
is exercising solely for the benefit of Distributor or for both Distributor and
Prestwick.  In the event (1) Prestwick is exercising for the benefit of both
Distributor and itself, then (A) such Isomeric Product shall be deemed included
in the definition of “Product” herein, provided, that in such case the Supply
Price with respect to such Product (which will be expressed as a percentage of
Distributor’s Net Sales Revenue (provided that the Deduction Cap with respect to
such Isomeric Product shall be adjusted as the Parties may reasonably agree in
good faith) of such Product) shall be agreed to by the Parties such that (x) the
forecast values of the operating cash flows of each of the Parties from the
incremental distribution arrangement for such Product, are expected to be equal
to each other, (y) the Supply Price will not be adjusted for any differences
between actual and forecast cash flows and (z) the arrangement for determining
Supply Price will not make the distribution arrangement be deemed a joint
venture or partnership and (B) Distributor shall reimburse {***}† of the
Development Expenses paid by Prestwick to Licensor for the right to
Commercialize the Isomeric Product in the Territory or (2) Prestwick is
exercising solely for the benefit of Distributor, then (A) Prestwick (x) hereby
appoints Distributor as its exclusive distributor (even as to Prestwick and its
Affiliates) for the commercialization of such Isomeric Product in the Territory
and Distributor hereby agrees to act in that capacity and (y) grants Distributor
an exclusive (even as to Prestwick and its Affiliates), royalty-free license to
use Prestwick Know-How and under Prestwick Patents and Intellectual Property, to
Commercialize such Isomeric Product in the Territory, all on the same terms and
conditions that such right is granted to Prestwick by Licensor (including the
price for supply), (B) Distributor shall reimburse {***}† of the Development
Expenses due to Licensor for such right and (C) for the avoidance of doubt,
Prestwick shall not be entitled to any portion of the supply price or net sales
or any other payment with respect to such Isomeric Product in excess of the
amount to be paid to by Prestwick to Licensor with respect to such Isomeric
Product pursuant to the Cambridge Agreement.  If the Parties are unable to agree
to the Supply Price with respect to any such Product within three months of the
initial submission of a proposal by one Party with respect thereto, either Party
may submit the matter to Arbitration for final resolution in accordance with
Section 14.3.

 

2.5.2                        Subsequent Buy-In.  In the event Distributor does
not exercise an Isomeric Option pursuant to Section 2.5.1 and Prestwick chooses
to exercise its rights to co-invest in such Isomeric Product, Distributor shall
have a second right prior to the filing of an applicable NDA to receive rights
to Commercialize the resulting Isomeric Product as it would have if it had
exercised its Isomeric Option if it reimburses two times the amount of
Development Expenses that would have been paid by it under Section 2.5.1 for
such Isomeric Product if it had exercised thereof and thereafter pays its share
of any additional Development Expenses incurred in accordance with
Section 2.5.1.

 

2.6                                 Sub-Distributor or Subcontractor.

 

2.6.1                        Performance.  Distributor shall have the right to
grant any right to Commercialize Product or subcontract any Commercialization
activities for Product to its

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

14

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Affiliates or other Third Parties in its sole discretion; provided, however,
that Distributor shall not (a) subcontract the performance of Detailing, Sales
Representatives, Specialists or their supervisors without the prior written
consent of Prestwick, which consent may be withheld in Prestwick’s sole
discretion, or (b) subcontract the Support Center hub distribution function to a
party other than TheraCom, Inc. without the prior written consent of Prestwick,
such consent not to be unreasonably withheld, delayed or conditioned.  For the
avoidance of doubt, sales by Distributor to wholesalers for further resale shall
not be deemed to be a grant of a right to Commercialize Product or a subcontract
of any Commercialization activity for Product.

 

2.6.2                        Liability for Affiliates & Permitted
Subcontractors.  The Parties recognize that Distributor may perform some or all
of its obligations under this Agreement through Affiliates or permitted
subcontractors; provided, however, that Distributor shall remain responsible for
and be guarantor of the performance by its Affiliates or permitted
subcontractors and shall cause its Affiliates and permitted subcontractors to
comply with the provisions of this Agreement in connection with such
performance.  Distributor hereby expressly waives any requirement that Prestwick
exhaust any right, power or remedy, or proceed against an Affiliate or permitted
subcontractor, for any obligation or performance hereunder prior to proceeding
directly against Distributor.  Wherever in this Agreement Distributor delegates
responsibility to its Affiliate or permitted subcontractor, Distributor agrees
that such entities may not make decisions inconsistent with this Agreement,
amend the terms of this Agreement or act contrary to its terms in any way.

 

2.7                                 Limitations of Use.  Distributor hereby
covenants and agrees not to use or sublicense any of its rights under the
licenses set forth in this Article 2 except as expressly permitted in this
Agreement.

 

2.8                                 Retained Rights.  Any rights of a Party not
expressly granted to the other Party under the provisions of this Agreement
shall be retained by the first Party.  No implied right or license in any
intellectual property right, whether by implication, estoppel or otherwise is
granted under this Agreement by either Party to the other.

 

2.9                                 Exclusivity.  Except for circumstances
covered under Section 15.6.2, during the Term and for period of {***}†
thereafter, neither Prestwick or Distributor, nor any of their respective
Affiliates shall directly or indirectly Develop, manufacture or Commercialize or
have any interest in the Commercialization of, either itself or with, or
through, a Third Party, any Competing Product in the Territory, except any
product as authorized under this Agreement.  Notwithstanding the foregoing, the
above shall not apply with respect to (a) Prestwick with respect to any
Galenical Product and Isomeric Product that Distributor chooses not to co-invest
in pursuant to Sections 2.4 and 2.5, respectively, and (b) Distributor with
respect to any Galenical Product and Isomeric Product that it chooses to
co-invest in and Prestwick does not pursuant to Sections 2.4 and 2.5,
respectively.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

15

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ARTICLE 3
REGULATORY MATTERS

 

3.1                                 Filing & Maintenance of Regulatory
Approvals.  As the NDA holder, Prestwick shall be ultimately responsible for
filing for Regulatory Approval of Product for additional indications and
maintenance of all Regulatory Approvals for Product, including filing all
required reports (including but not limited to Annual Reports, Expedited Safety
Reports, Field Alert Reports, Periodic Reports, REMS reports), post-approval
supplements, advertising and promotional material submissions, and all study
protocols, study reports and other submissions related to the Phase 4 Studies
identified in the First NDA, with the applicable Regulatory Authorities,
provided, that Distributor shall be responsible for preparing all such filings,
reports and other submissions for Product in the Territory in a timely manner
that allows a reasonable period in the circumstances for review of such filings
and reports and subsequent submission by Prestwick in accordance with required
submission dates.  Notwithstanding anything to the contrary contained herein,
(a) Distributor will pay all costs and expenses (i) incurred by Distributor
preparing all filings, reports and other submissions with respect to the Phase 4
Studies identified in the First NDA and (ii) for maintenance filings, reports
and submissions for the initial Product and any Regulatory Product;
(b) Prestwick, with respect to any Galenical Product and Isomeric Product that
Distributor chooses not to co-invest in pursuant to Sections 2.4 and 2.5,
respectively, will pay all costs and expenses incurred by Distributor preparing
all filings, reports and other submissions with respect to maintenance filings,
reports and submissions for any such Galenical Product or Isomeric Product;
(c) Distributor, with respect to any Galenical Product and Isomeric Product that
it chooses to co-invest in and Prestwick does not pursuant to Sections 2.4 and
2.5, respectively, will pay all costs and expenses incurred by Distributor in
preparing all filings, reports and other submissions with respect to maintenance
filings, reports and submissions for any such Galenical Product or Isomeric
Product; (d) Prestwick and Distributor, with respect to any Galenical Product
and Isomeric Product that both choose to co-invest in, will share equally all
costs and expenses incurred by Distributor preparing all filings, reports and
other submissions with respect to maintenance filings, reports and submissions
for any such Galenical Product or Isomeric Product; and (e) all costs and
expenses incurred preparing all filings, reports and other submissions with
respect to Development shall be Development Expenses.

 

3.2                                 Regulatory Communication.  Except as may
otherwise be provided in any pharmacovigilance agreement or quality agreement
entered into between the Parties or any of their Affiliates in connection with
this Agreement, Distributor shall not communicate with any Governmental
Authority regarding Product or this Agreement without the prior written consent
of Prestwick (such consent not to be unreasonably withheld, delayed, or
conditioned) unless such communication is required by a Governmental Authority
or by applicable Law, subpoena or other legal process.  In the event that
Prestwick consents and/or Distributor is required by a Governmental Authority or
by applicable Law, subpoena or other legal process to communicate with such
Governmental Authority, then Distributor shall, to the extent practicable,
provide Prestwick with reasonable advance notice of any meeting or other
communication with any Governmental Authority relating to Product, and Prestwick
shall have the right, if legally permissible, to participate in any such meeting
or other communications as well as have the right to participate in all
preparations, internal caucuses, and debriefing sessions related to such
meetings or other communications, in each case solely to the extent related to
Product.  Distributor shall promptly, but in no event more than two (2) Business
Days after receipt, furnish Prestwick with copies of all documents or
correspondence Distributor has had with or receives from any Governmental
Authority, and contact reports conversations or meetings with any Governmental

 

16

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Authority, in each case relating to Product (including without limitation any
minutes from a meeting with respect thereto).

 

3.3                                 Adverse Event Reporting.

 

3.3.1                        Reporting to Prestwick.  Distributor shall timely
report to Prestwick any information concerning any side effect, injury, toxicity
or sensitivity reaction associated with use of Product in the Territory, whether
or not determined to be attributable to Product of which Distributor becomes
aware.  In the event that Distributor receives notice of any adverse or
unexpected event associated with use of Product in the Territory from a Third
Party, Distributor shall forward such notice to Prestwick by fax within
twenty-four (24) hours and shall confirm such fax by registered mail as soon as
practicable.  After reporting such incidents, within ten (10) days thereafter,
Distributor will further report to Prestwick whether, in its judgment, any of
them are unexpected or unusual in type, incidence or severity.

 

3.3.2                        Pharmacovigilance.  Distributor shall be
responsible for all processing of information related to any adverse events
associated with use of Product in the Territory, including, without limitation,
any information regarding such adverse events that is forwarded to Distributor
by Prestwick from a Third Party related to Product.  Distributor shall prepare
all expedited and periodic filings of such adverse events to the applicable
Governmental Authority in the Territory in accordance with applicable Laws and
provide such filings to Prestwick in a timely manner such that Prestwick may
have a reasonable period in the circumstances to review such filings and
subsequently file them in compliance with all applicable Laws.  As soon as
reasonably practicable following the Effective Date, the Parties shall enter
into a pharmacovigilance agreement (“Pharmacovigilance Agreement”), which shall
govern the collection, review, assessment, tracking and filing of information
related to adverse events associated with Product.

 

3.3.3                        Field Alerts.  Distributor shall be responsible for
all processing of information related to any field alert report related to
Product in the Territory, except for any Product quality or manufacturing
defects not in the purview of the Distributor.  Distributor shall be responsible
for preparing all such applicable field alert reports and submit such reports to
Prestwick for its review and subsequent filing with the applicable Governmental
Authority in accordance with all applicable Laws.

 

3.3.4                        Medical Inquiries for Product.  Distributor shall
be responsible for handling all medical questions or inquiries with regard to
Product in the Territory.  Prestwick shall forward any and all medical questions
or inquiries with regard to Product which it receives from the Territory to
Distributor in accordance with all applicable Laws.

 

3.4                                 Recalls and Withdrawals.

 

3.4.1                        Notification and Determination.  In the event that
any Governmental Authority threatens, initiates or recommends any voluntary or
involuntary action to remove Product from the market in the Territory (in whole
or in part), the Party receiving notice thereof shall notify the other Party of
such communication immediately, but in no event later than one (1) Business Day,
after receipt thereof.  In all cases, Prestwick shall make the final
determination regarding whether or not to initiate any recall or withdrawal of
Product in the Territory, including the scope of such recall or withdrawal
(e.g., a full or partial recall, or a temporary or permanent

 

17

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recall); provided, however, that before Prestwick determines whether or not to
initiate a recall or withdrawal, the Parties shall promptly meet and discuss in
good faith the reasons therefor, provided further that such discussions shall
not delay any action that Prestwick reasonably believes has to be taken in
relation to any recall.  In the event of any such recall or withdrawal, whether
voluntary or involuntary, Distributor shall implement any necessary action, with
assistance from Prestwick as reasonably requested by Distributor, to conduct
such recall or withdrawal.  Distributor shall utilize a batch tracing and recall
system which will enable Distributor to identify, on a prompt basis, customers
within the Territory who have been supplied with Product of any particular
batch, and to recall such Product from such customers in accordance with
Prestwick’s instructions.

 

3.4.2                        Cost Allocation.  All direct costs and expenses
associated with implementing a recall (whether voluntary or involuntary) or
withdrawal of Product in the Territory shall be allocated between Prestwick and
Distributor as follows:

 

(a)                                  in the event, and to the extent, that the
recall or withdrawal arises as a result of a material breach of this Agreement
by a Party, then the breaching Party shall bear {***}† of the costs and expenses
for implementing the recall or market withdrawal;

 

(b)                                 to the extent not recovered from Licensor or
any other Third Party supplier, in the event, and to the extent, that the recall
or withdrawal arises as a result of Product supplied not meeting specifications
for such Product as provided in the Regulatory Approval (“Specifications”) when
title is transferred to Distributor, then Distributor shall bear {***}† and
Prestwick shall bear {***}† of the costs and expenses for implementing the
recall or market withdrawal;

 

(c)                                  in the event, and to the extent, that the
recall or withdrawal arises out of any event other than a material breach by
Distributor of this Agreement or Product to meet Specifications when received by
Distributor, then Distributor shall bear {***}† and Prestwick shall bear {***}†
of the costs and expenses for implementing the recall or market withdrawal.

 

3.5                                 Assistance for Product.  Each Party shall
promptly inform the other Party of any notification of any action by, or
notification or other information which it receives (directly or indirectly)
from, any Governmental Authority (together with copies of correspondence related
thereto), which (a) raises any material concerns regarding the safety or
efficacy of Product, (b) indicates or suggests a potential material liability
for either Party to Third Parties arising in connection with Product or
(c) which indicates a reasonable potential for a recall or market withdrawal of
Product in the Territory.

 

ARTICLE 4
COMMERCIALIZATION OF PRODUCT

 

4.1                                 Commercialization.  Distributor will be
solely responsible for Commercializing and have the sole right to Commercialize,
Product in the Territory during the Term in accordance with

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

18

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the this Agreement, subject only to Prestwick’s option to Co-Promote Product
pursuant to Section 4.5.  Except as specifically provided in this Agreement,
Prestwick shall not be responsible for any expenses (including pre-marketing and
Detailing expenses) incurred in connection with the Commercialization of Product
in the Territory, except for costs it incurs for Co-Promoting Product (other
than as set forth in Section 4.5.1).

 

4.2                                 Commercialization Plan.

 

4.2.1                        Submission.  Beginning with September 1, 2009,
Distributor shall submit to Prestwick an annual update to the Commercialization
Plan by September 1st for the following Calendar Year for review and approval. 
In the event that Prestwick wishes to Co-Promote Product in the Territory in the
following Calendar Year, it shall within thirty (30) days of Distributor’s
submission of the annual update to the Commercialization Plan propose which
territories or medical professional offices and hospitals it wishes to be
designated in the Commercialization Plan for Detailing.

 

4.2.2                        Approval.  The Parties shall finalize and
unanimously approve the annual update to the Commercialization Plan by
November 15 of each Calendar Year, provided, that in the event the Parties are
unable to agree, then the Designated Senior Officers of each of the Parties will
meet at least once in person or by means of telecommunication (telephone, video,
or web conferences) to discuss such disagreement and use their good faith
efforts to finalize and approve an update to the Commercialization Plan.  If the
Designated Senior Officers within thirty (30) days after submission of such
disagreement to such officers fail to finalize and approve an update to the
Commercialization Plan, then the determination of the update to the
Commercialization Plan shall be made by (a) Distributor in its sole discretion,
if Distributor has not provided a notice of termination pursuant to
Section 11.4; provided, however, that (i) the amount to be spent during each
Calendar Year of the Exclusivity Period on (1) A&P activities shall not be less
than {***}†, (2) Support Center activities shall be approximately {***}† and
(3) Distributor’s co-pay assistance program shall be approximately {***}† of
gross sales of Product in the Territory in a Calendar Year and (ii) the number
of Sales Representatives and Specialists shall not be less than those required
under Section 4.3.2 below, or (b) Prestwick in its sole discretion, if
Distributor has provided notice of termination pursuant to Section 11.4;
provided, however, that (i) the amount to be spent during each Calendar Year of
the Exclusivity Period on (1) A&P activities shall not be required to be greater
than {***}†, (2) Support Center activities shall be approximately {***}† and
(3) Distributor’s co-pay assistance program shall be approximately {***}† of
gross sales of Product in the Territory in a Calendar Year; (ii) the number of
Sales Representatives and Specialists shall not be more than those required
under Section 4.3.2 below ; and (iii) in no event shall Distributor be obligated
to expend any resources, other than with respect to the items described in
clauses (i) and (ii) of this proviso, in excess of the amounts or levels set
forth in the Commercialization Plan in effect at the time Distributor provides
notice of termination pursuant to Section 11.4.  As used herein, the “Designated
Senior Officer” shall mean the Chief Executive Officer of Distributor and the
Chief Executive Officer of Prestwick, respectively, or such other senior
official of such Party as such Party may designate in writing to the other Party
from time to

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

19

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time.  In the event Distributor or Prestwick wishes to make any material change
to, materially deviate from, or otherwise update the Commercialization Plan
other than the annual update, such change, deviation or update shall be subject
to approval as if such update was an annual update pursuant to this
Section 4.2.2.

 

4.3                                 Commercialization.  During the Exclusivity
Period, Distributor shall Commercialize the Product in the Territory as set
forth in this Section 4.3.

 

4.3.1                        Diligence in Commercialization.

 

(a)                                  During the Exclusivity Period, Distributor
shall conduct in the Territory no fewer Details in a Calendar Year than that
provided for in the Commercialization Plan.

 

(b)                                 During the Exclusivity Period, Distributor
shall spend no less than {***}† in a Calendar Year in conducting A&P activities
in the Territory in accordance with the Commercialization Plan.  For purpose of
clarity, no Deductions used to calculate Net Sales Revenue shall be used to
calculate the amount spent on A&P activities.  In the event of a labeling change
or other safety risk with respect to Product that would reasonably be expected
to have a material adverse effect on sales of Product, the Parties shall
negotiate in good faith to determine commercially reasonable reductions to the
amount required to be spent on A&P activities.

 

(c)                                  During the Exclusivity Period, Distributor
shall spend approximately {***}† in a Calendar Year in conducting Support Center
activities in the Territory in accordance with the Commercialization Plan.  For
purpose of clarity, no Deductions used to calculate Net Sales Revenue shall be
used to calculate the amount spent on Support Center activities.  In the event
of a labeling change or other safety risk with respect to Product that would
reasonably be expected to have a material adverse effect on sales of Product,
the Parties shall negotiate in good faith to determine commercially reasonable
reductions to the amount required to be spent on Support Center activities.

 

(d)                                 During the Exclusivity Period, Distributor
shall spend approximately {***}† of gross sales of Product in the Territory in a
Calendar Year in its co-pay assistance program.  In the event of a labeling
change or other safety risk with respect to Product that would reasonably be
expected to have a material adverse effect on sales of Product, the Parties
shall negotiate in good faith to determine commercially reasonable reductions to
the amount required to be spent in the co-pay assistance program.

 

(e)                                  Distributor shall launch the Product in the
Territory within the later of: (i) four months after the date that Distributor
is authorized under applicable Law to market and sell the Product in the
Territory; or (ii) one (1) week after finished, packaged and labeled Product
ready for release to consumers in the Territory and meeting Specifications is
delivered to Distributor in the Territory.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

20

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(f)                                    During each Calendar Year, Distributor
shall, except as may otherwise be required by applicable Law, conduct
Commercialization of Product in accordance with the Marketing Plan in all
material respects and order {***}† of the Minimum Order Quantities.

 

(g)                                 The amounts set forth in Sections
4.3.1(a) though (f) shall be proportionately reduced for any period less than a
full calendar year.

 

(h)                                 If sixty (60) days prior to the expiry of
the Exclusivity Period there is no FDA approved Generic Equivalent for Product
in the Territory, the Parties shall meet to discuss whether or not expenditures
for A&P activities, Support Center activities or co-pay assistance program
activities with respect to the Product in the Territory are thereafter
beneficial or appropriate.

 

4.3.2                        Detailing.

 

(a)                                  Sales Representatives.  During the
Exclusivity Period, Distributor shall assign (1) at least {***}† sales
representatives to perform Detailing in the first or second position (“Sales
Representatives”), in the Territory and (2) at least {***}† dedicated regional
sales representatives who shall (x) Detail only Product in the first position
and (y) be targeted to reach high value (A and B) Product targets as a priority
to low value (C) Product targets, including, but not limited to, top decile
targets and perform Detailing in the first position with such targets
(“Specialists”), in each case who have been adequately trained; provided,
however, that in the event the number of Sales Representatives or Specialists is
less than the specified number as a result of the termination of employment of
one or more Sales Representatives or Specialists, Distributor shall not be in
breach of this Section 4.3.2 if it replaces each such Sales Representative or
Specialist within ninety (90) days of such termination.  Distributor shall also
ensure that it assigns a sufficient number of qualified supervisors to oversee
the conduct of the Sales Representatives and Specialists.  No Sales
Representative or Specialist shall be eligible for Distributor’s “All Star
Program” or similar program (e.g. their annual sales, budget and activity plan)
unless such Sales Representative meets their target for Product.

 

(b)                                 National Incentive.  From the First
Commercial Sale and until the launch of Sabril by Distributor (“Period 1”),
national incentives for Sales Representatives shall be calculated based solely
on Product sales or prescriptions.  Following Period 1 and until the end of the
period that is equal in duration to Period 1, provided, such period shall not
exceed {***}† (“Period 2”), at least {***}† of national incentives for Sales
Representatives shall be calculated based on Product sales or prescriptions. 
Following Period 2, at least {***}† of national incentives for Sales
Representative shall be calculated based on Product sales or prescriptions. 
Notwithstanding anything to the contrary contained in this Section 4.3.2(b),
after the date that is {***}† after the First Commercial Sale and during the
Exclusivity Period, at least {***}† of national incentives for Sales
Representative shall be based on Product sales or prescriptions.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

21

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

 

4.3.3                        Reports & Audits.

 

(a)                                  Distributor shall maintain an adequate
internal system (and necessary records) for the reporting within thirty (30)
days following the end of each Calendar Year during the Term of (i) the number
of Details performed by its Sales Representatives and Specialists in the
Territory, by decile and target medical professional office or hospital and
(ii) the amounts spent for (x) A&P Activities and (y) Support Center activities,
each against the requirements under the Commercialization Plan (each, a
“Commercialization Report”).

 

(b)                                 Distributor shall keep accurate and complete
records of Details carried out by each Sales Representative and Specialists,
payroll and bonus programs for Sales Representatives and payments made thereof,
and the amounts spent for A&P activities and Support Center activities as
required under this Agreement.  If within two (2) years of receipt of a
Commercialization Report Prestwick wishes to verify the number of Details,
payroll and bonus programs for Sales Representatives and payments made thereof,
or the amounts spent on A&P activities or Support Center activities provided in
such report, Distributor shall make its records available for inspection and
review by an independent accountant with advance notice during business hours,
reasonably acceptable to Distributor, for the purpose of so verifying the number
of Details performed by Distributor, payroll and bonus programs for Sales
Representatives and payments made thereof, or amounts spent on A&P activities or
Support Center activities.  All costs and expenses incurred in connection with
any such verification shall be paid by Prestwick, provided that Distributor
shall pay such costs and expenses if the number of Details, payroll and bonus
programs for Sales Representatives and payments made thereof, or amounts spent
on A&P activities or Support Center activities determined by the independent
accounts is lower than the number of Details, payroll and bonus programs for
Sales Representatives and payments made thereof, or amounts spent on A&P
activities or Support Center activities, in each case, required under this
Agreement.

 

(c)                                  Each Party will treat all information
subject to review under this Section 4.3.3 in accordance with the provisions of
Article 7.  Prior to conducting any audit hereunder, Prestwick will cause its
accounting firm to enter into a reasonably acceptable confidentiality agreement
with Distributor obligating such accounting firm to maintain all information in
confidence with standards no less stringent that the terms of Article 7 of this
Agreement.

 

4.4                                 Promotional Materials.

 

4.4.1                        Creation of Promotional Materials.  Distributor
will create and develop Promotional Materials for Commercialization of Product
in the Territory in accordance with the Regulatory Approvals and applicable
Laws, and will forward such Promotional Materials to Prestwick for regulatory
submission.  Distributor will also assist Prestwick, at Distributor’s sole cost,
in obtaining any required approval of all Promotional Materials for
Commercialization of Product in the Territory by Governmental Authorities
including the FDA’s Division of Drug Marketing Advertising and Communications.

 

4.4.2                        Ownership of Promotional Materials.  During the
Term, Distributor shall own all right, title and interest in and to any
Promotional Materials relating to Product, including without limitation
applicable copyrights and trademarks, but excluding trademarks owned by
Prestwick.

 

22

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4.5                                 Co-Promotion.

 

4.5.1                        Right.  Prestwick shall have the right, at its sole
cost and discretion, to Co-Promote Product in the Territory to certain medical
professional offices and hospitals as may be reasonably agreed to by the Parties
from time to time.  Distributor shall provide Prestwick with (a) a reasonable
quantity of existing Promotional Materials reasonably requested for conducting
such Co-Promotion activities and (b) reasonable access and use of Distributor’s
existing infrastructure and training and other educational materials to assist
in the recruitment, training and operational management of Prestwick’s sales
force.

 

4.5.2                        Joint Steering Committee.  Upon Prestwick’s
election to Co-Promote Product in the Territory, the Parties shall establish a
specialized committee to facilitate communications between the Parties with
respect to the Co-Promotion of Product within the Territory.

 

4.6                                 Sales Representatives.  No sales
representative of a Party shall be treated as an employee of the other Party,
and such an individual is not, and is not intended to be, eligible to
participate in any benefits programs or in any employee benefit plans that are
sponsored by the other Party or that are offered from time to time by the other
Party to its own employees.  Each Party shall not be responsible to the other
Party, or to the other Party’s sales representatives for any compensation,
expense reimbursements or benefits, payroll-related taxes or withholdings, or
any governmental charges or benefits that may be imposed upon or be related to
the performance by the other Party and its sales representatives, all of which
shall be the sole responsibility of the other Party, even if it is subsequently
determined by any court or governmental agency that any such sales
representative may be an employee or a common law employee of the Party or is
otherwise entitled to such payments and benefits.  Further, each Party shall be
solely responsible and liable for all probationary and termination actions taken
by it, as well as for the formulation, content and dissemination (including
content) of all employment policies and rules (including written probationary
and termination policies) applicable to its employees and contractors.

 

4.7                                 Compliance with Laws.  Each Party and its
permitted Third Party contractors shall perform its responsibilities under this
Article 4 in accordance with all applicable Laws, including, but not limited to,
applicable Laws in the hiring, employment, and discharge of all sales
representatives.

 

4.8                                 Use of Marks and Approval of Promotional
Materials.  Distributor shall in relation to the marketing, distribution and
sale of Product only use Promotional Materials which contain the trade mark
XENAZINE and which comply with applicable Laws and requirements of the FDA in
the Territory and which have been approved in writing by Licensor prior to use. 
Distributor shall submit to Licensor for approval any promotional materials
Distributor proposes using and Distributor shall use Commercially Reasonable
Efforts to cause Licensor to provide approvals or details of required
alterations within fourteen (14) days of Licensor’s receipt.  Promotional
materials used by Distributor in connection with Commercialization of Product
shall contain an acknowledgement of Licensor’s ownership of the trade mark
XENAZINE in such form as agreed to by Distributor and Licensor.

 

23

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ARTICLE 5
SUPPLY OF PRODUCT

 

5.1                                 Principles of Supply.

 

5.1.1                        Exclusive Supply.  For purposes of clarity, subject
to the terms of this Agreement, Distributor shall obtain Product exclusively
from Prestwick or its designee (provided that Distributor shall only be required
to pay Prestwick for Product obtained from any such designee in accordance with
the terms of this Agreement).

 

5.1.2                        Obligation to Supply.

 

(a)                                  Prestwick shall supply Product in
accordance with the terms hereof; provided, however, Prestwick’s obligation to
supply Product shall be subject to its ability to source Product from Licensor
(or any successor supplier) in accordance with the Cambridge Agreement or
Licensor’s then existing contract manufacturers in accordance with Licensor’s
then existing contract manufacturing supply agreements for Product or Active
Substance.

 

(b)                                 Prestwick shall promptly deliver to Licensor
(or any successor supplier) all Forecasts, alterations to Forecasts, Purchaser
Orders and other related correspondence received from Distributor in accordance
with the terms of the Cambridge Agreement (or successor agreement) and otherwise
comply in all material respects with any similar procedural requirements under
the Cambridge Agreement (or successor agreement) as may be necessary to obtain
supply of Product.

 

5.1.3                        Assignment or Transfer of Supply Contracts or
Rights.  In the event that Licensor exercises its right to terminate supply of
the Product pursuant to Clause 8.7 of the Cambridge Agreement, within ten
(10) Business Days after Prestwick’s receipt of the notice thereof, Prestwick
hereby covenants, and shall notify Licensor and Distributor of Prestwick’s
decision, to request Licensor to take, and use Commercially Reasonable Efforts
to effect such request, one of the following actions within thirty (30) Business
Days thereof: (i) transfer the manufacturing technology and Know-How necessary
to manufacture Product (“Technology”) to Prestwick or its designee; or (ii) to
the extent Licensor’s existing contract manufacturing supply arrangements are
assignable without Third Party consent, assign to Prestwick, and to the extent
such Third Party consent requires Third Party consent, request assignment of,
Licensor’s existing contract manufacturing supply agreements and all rights to
Technology, whether such Technology is located at the contract manufacturing
organizations’ site or otherwise.  In the event that Prestwick elects the option
in subsection (i) of this paragraph to have the Technology transferred to
Distributor as its designee, Prestwick shall also grant to Distributor an
exclusive and royalty-free license to the Prestwick Know-How, the Prestwick
Patents and Intellectual Property, the Product Trade Dress and the Product Trade
Mark to manufacture Product.

 

5.1.4                        Secondary Assignment or Transfer.  In the event
that Prestwick has previously effected a transfer or assignment under subsection
(i) or subsection (ii) of Section 5.1.3 above, and subsequent to such transfer
or assignment, Distributor has the right to terminate this Agreement pursuant to
Section 11.2.3, Prestwick shall then, at Distributor’s option: (i) transfer the
Technology to Distributor; or (ii) to the extent Prestwick’s existing contract
manufacturing supply arrangements are assignable without Third Party consent,
assign to Distributor, and to the extent such Third Party consent requires Third
Party consent, request assignment of, Prestwick’s existing contract
manufacturing supply agreements and all rights to Technology, whether such
Technology is located at the contract manufacturing organizations’ site or
otherwise.  In the event that

 

24

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Distributor elects the option in subsection (ii) of this Section 5.1.4,
Prestwick shall also grant to Distributor an exclusive and royalty-free license
to the Prestwick Know-How, the Prestwick Patents and Intellectual Property, the
Product Trade Dress, and the Product Trade Mark to manufacture Product.

 

5.1.5                        Assignment or Transfer upon Insolvency.  In the
event that Distributor has the right to terminate this Agreement pursuant to
Section 11.3, within five (5) days after Distributor’s receipt of the notice
thereof, Prestwick hereby covenants to take all actions necessary to request
Licensor to take, and use Commercially Reasonable Efforts to effect such
request, one of the following actions (or Prestwick itself shall take the
following actions if its rights under Section 5.1.3 have been previously
exercised), at Distributor’s option: (i) transfer the Technology to Distributor;
or (ii) to the extent Licensor’s existing contract manufacturing supply
arrangements are assignable without Third Party consent, assign to Distributor,
and to the extent such Third Party consent requires Third Party consent, request
assignment of, Licensor’s existing contract manufacturing supply agreements and
all rights to Technology, whether such Technology is located at the contract
manufacturing organizations’ site or otherwise.  In the event that Distributor
elects the option in subsection (ii) of this Section 5.1.5, Prestwick shall also
grant to Distributor an exclusive and royalty-free license to the Prestwick
Know-How, the Prestwick Patents and Intellectual Property, the Product Trade
Dress, and the Product Trade Mark.

 

5.1.6                        Allocation of Cost of Transfer.  Any out-of-pocket
costs and expenses incurred by Distributor and Prestwick in connection with any
transfer or assignment contemplated in Sections 5.1.3 through 5.1.5 that are not
paid or reimbursed by Licensor shall be borne {***}† by Distributor and {***}†
by Prestwick.  Any change in the “Cost of Goods” for Product resulting from any
transfer or assignment contemplated in Sections 5.1.3 through 5.1.5 shall be
borne or shared, as the case may be, {***}† by Distributor and {***}† by
Prestwick, including any amounts owed as a result of any pay or take elements in
a supply contract.

 

5.2                                 Forecasting and Ordering.

 

5.2.1                        Forecast.  On the Effective Date, Distributor shall
deliver to Prestwick, a fifteen (15) month forecast (the “Initial Forecast”),
and thereafter on the first Business Day of each month, Distributor shall
deliver a rolling twelve (12) month forecast updating the prior forecast
(together with the Initial Forecast, the “Forecast”).

 

5.2.2                        Binding Forecast.  The quantity of Product
forecasted for the first three months of each Forecast shall be firm and binding
(“Binding Portion”) and Distributor shall be obligated to purchase the
quantities of Product in the Binding Portion of each Forecast; provided,
however, that the quantity set forth in each Binding Portion may be altered once
by Distributor, to the extent Licensor is obligated to accept such alteration
under the Cambridge Agreement, within a range of {***}† of the relevant quantity
no later than {***}† before the desired delivery date and may not otherwise be
altered in subsequent updated forecasts.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

25

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

 

5.2.3                        Binding Forecast Purchase Orders.  During the Term,
Distributor shall deliver to Prestwick, a firm purchase order (“Purchase Order”)
for the quantities of Product for the Binding Portion of each Forecast required
by Distributor no later than six (6) months before the desired delivery date. 
Each Purchase Order shall be ordered based on whole batches of Product
manufactured; provided, that prior to December 31, 2009, Prestwick shall
reimburse Distributor the cost of any expired Product ordered in excess of the
amounts forecasted by Distributor to the extent that such expired Product does
not constitute a Deduction or is otherwise deducted in connection with payment
of net sales on Product to Licensor in a manner that reduces Distributor’s
payment obligations to Prestwick on a dollar for dollar basis.  If Distributor
wishes to alter any Purchase Order because it has altered any quantity in the
Binding Portion in accordance with Section 5.2.2, Distributor must submit an
amended Purchase Order to reflect that.  In the event a Purchase Order for
quantities in the Binding Portion of a Forecast is not received six (6) months
before the end of the month for which such quantities were forecasted, the
forecast for such month in the Binding Portion of a Forecast shall be deemed a
Purchase Order.

 

5.2.4                        Supply Shortages.  In the event that there is a
shortage of Product supplied to Prestwick by Licensor that leads to Prestwick
being unable to provide the Binding Portion of the Forecast, Prestwick shall use
Commercially Reasonable Efforts to cause Licensor (or any successor supplier) to
cause supplier of Product to allocate supply of Product between the Territory
and Canada based upon net sales of Product in the Territory during the previous
twelve (12) month period immediately prior to such shortage as compared to the
total sales for Product in the Territory and Canada in such 12-month period.

 

5.2.5                        Receipt and Acceptance.  Prestwick shall deliver
Product against each Purchase Order in accordance with this Section 5.2. 
Distributor shall purchase all Product ordered and specified in a Purchase
Order.  Purchase Orders may be delivered electronically or by other means to
such location as Prestwick shall designate and shall be in a form reasonably
acceptable to Prestwick, provided, however that a Purchase Order shall be
binding on Prestwick provided that the Purchase Order contains orders for
Product that are in compliance with Distributor’s forecasting obligations set
out above.  Prestwick shall provide written confirmation of such Purchase Order
to Distributor within fifteen (15) Business Days of receipt of such Purchase
Order.  Other than terms respecting quantity and delivery date(s) (provided,
such delivery dates are in accordance with the terms of this Agreement), the
terms and conditions of any Purchase Order submitted by Distributor or written
confirmation thereof by Prestwick shall be of no force and effect, whether or
not objected to by Prestwick, and nothing in any such Purchase Order or written
acceptance shall supersede the terms and conditions of this Agreement.  All
Purchase Orders, written acceptances of Purchase Orders and other notices
contemplated under this Section 5.2 shall be sent to the attention of such
persons as each Party may identify to the other in writing from time to time.

 

5.2.6                        Rejection of Product.  In the event Product does
not meet Specifications when title is transferred to Distributor for such
Product, the Parties shall use Commercially Reasonable Efforts (including
exercising its rights under the Cambridge Agreement) to return such Product to
Licensor and either obtain replacement Product or a refund.

 

26

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5.3                                 Shipping and Delivery.

 

5.3.1                        Outside Territory and Canada.  With respect to
Product shipped from outside the Territory and Canada, Prestwick shall arrange
for the shipment of Product to Distributor’s designated warehouse in the
Territory.  Delivery of Product so shipped, shall be FCA (Incoterms 2000), and
title to, ownership of, and risk of loss of Product shall pass from Prestwick to
Distributor at the location that is immediately after Product enters
international waters (including the airspace above international waters) while
in transit from the shipment point to the U.S. Customs port designated by
Distributor.

 

5.3.2                        U.S.  To the extent that Product is packaged in the
continental U.S., then, at the option of Prestwick, Product may be delivered to
Distributor EXW (Incoterms 2000) immediately after completion of the packaging. 
In the case of such Product, title to, ownership of, and risk of loss of Product
shall pass from Prestwick to Distributor at the time of delivery.

 

5.3.3                        Canada.  In the case of delivery of Product from
Canada, Product shall be delivered DDP (Incoterms 2000), and title to, ownership
of, and risk of loss of Product shall pass from Prestwick to at the U.S. Customs
port designated by Distributor, immediately after the Product has cleared US
Customs.

 

Notwithstanding the above, in all cases Product shall be shipped at
Distributor’s expense via a carrier identified by Distributor in the applicable
Purchase Order.  Distributor shall be responsible for freight and insurance
charges.

 

5.4                                 Safety Stock.  During the Term, Distributor
shall at all times hold {***}† stock of Product, which shall be calculated as
{***}† of the then current Forecast, provided, in the event Prestwick does not
supply Product in such quantity having shelf life equal to or greater than
twenty-four (24) months, then such requirement shall be reduced to {***}† stock
of Product until such quantity is supplied.

 

5.5                                 Liability for Affiliates & Permitted
Subcontractors.  The Parties recognize that Prestwick may perform some or all of
its obligations under this Agreement through Affiliates or permitted
subcontractors; provided, however, that Prestwick shall remain responsible for
and be guarantor of the performance by its Affiliates or permitted
subcontractors and shall cause its Affiliates and permitted subcontractors to
comply with the provisions of this Agreement in connection with such
performance.  Prestwick hereby expressly waives any requirement that Distributor
exhaust any right, power or remedy, or proceed against an Affiliate or permitted
subcontractor, for any obligation or performance hereunder prior to proceeding
directly against Prestwick.  Wherever in this Agreement Prestwick delegates
responsibility to its Affiliate or permitted subcontractor, Prestwick agrees
that such entities may not make decisions inconsistent with this Agreement,
amend the terms of this Agreement or act contrary to its terms in any way.

 

5.6                                 Quality and Pharmacovigilance Agreement. 
Prior to the earlier of (x) sixty (60) days after the Effective Date or (y) five
(5) days prior to the date of the first shipment of Product, the Parties shall
negotiate in good faith to enter into (i) a Quality Agreement that addresses
(a) label copy approval, (b) batch release documentation, (c) change
notification, (d) product

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

27

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complaint investigations (Distributor initiated), (e) manufacturing
investigations (Prestwick initiated), (f) annual product review and
(g) regulatory inspection notification and response and (ii) a Pharmacovigilance
Agreement.

 

ARTICLE 6
FINANCIAL TERMS

 

6.1                                 Consideration.  In partial consideration of
the rights granted to it herein, Distributor shall pay Escrow Agent {***}† on
the Effective Date (the “Upfront Payment”).  Escrow Agent shall release the
Upfront Payment to Prestwick or Distributor in accordance with the terms and
conditions of the Escrow Agreement.

 

6.2                                 Development Expenses.  Distributor shall
reimburse Prestwick for {***}† of all Development Expenses incurred by it after
the Effective Date and due to Licensor pursuant to the Cambridge Agreement with
respect to Regulatory Development.  Any amounts of Development Expenses owed to
Prestwick by Distributor under this Agreement shall be paid within thirty (30)
days of Distributor’s receipt of an invoice for such Development Expense. 
Invoices for Development Expenses owed shall be delivered by Prestwick to
Distributor upon the earlier of (a) such amounts being due to Licensor or
(b) Prestwick incurring such Development Expense.

 

6.3                                 Supply Price and Payment.

 

6.3.1                        Supply Price.  The supply price for Product shall
be (a) seventy-two percent (72%) of Net Sales Revenue in a Calendar Year up to
$125,000,000 of Net Sales Revenue in such Calendar Year, (b) sixty-five percent
(65%) of Net Sales Revenue in a Calendar Year from and in excess of $125,000,000
of Net Sales Revenue in such Calendar Year, and (c) the relevant percentage of
any collections, recoveries, damages, awards, settlements and any other payments
made or paid to Distributor as compensation for or in lieu of Net Sales Revenue
net of any out of pocket costs incurred by Distributor to obtain such amounts
(the “Supply Price”).

 

6.3.2                        Invoice.  Each delivery of Product hereunder shall
be accompanied by an invoice setting forth the estimated Supply Price
(calculated using estimated Net Sales Revenue) for Product supplied (“Invoice”).

 

6.3.3                        Payment.  Within (a) thirty (30) days of receipt of
an Invoice, Distributor shall pay a portion of the Invoice (“First
Installment”), which shall be equal to {***}† supplied, (b) ten (10) days after
the end of each calendar month (“Statement Date”), Distributor shall provide a
statement of the quantity of Product sold by Distributor and a calculation,
including all information relevant to that calculation, of total Net Sales
Revenue for the prior calendar month and the calculation of the actual Supply
Price for Product supplied against the Invoice and (c) the later of (x) nine
(9) days of notice from Prestwick of its agreement with the Statement or
(y) fourteen (14) days of the Statement Date pay the Supply Price with respect
to Product sold in such month reduced by any First Installment payments made for
Product sold in such month and not previously credited to the Supply Price.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

28

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6.3.4                        Deferred Payment.  Notwithstanding
Section 6.3.3(c), Distributor may defer for a period of six (6) calendar months
after the First Commercial Sale date (a) {***}† of the Supply Price where such
Supply Price is determined based upon Net Sales Revenue less than {***}† and
(b) {***}† of the Supply Price where such Supply Price is determined based upon
Net Sales Revenue equaling or exceeding {***}†, without penalty or interest. 
For clarity, such amounts deferred shall be owed within thirty (30) days of the
end of the sixth calendar month after the date of the First Commercial Sale.

 

6.3.5                        Handling Deductions.  Distributor shall be entitled
to deduct from payment of the First Installment of each Invoice, an amount equal
to any increase of its Third Party costs for customs and handling on the
importation of Product solely attributable to any excess of the amount invoiced
by Licensor to the Distributor for the Supply Price over the First Installment
for Product (“Handling Deductions”), provided, that Distributor provides an
itemized statement of such reduction with the payment of the First Installment.

 

6.4                                 Payment Method.  All amounts due to either
Party hereunder will be paid in Dollars by wire transfer in immediately
available funds to an account designated by such Party.  Any amounts (other than
amounts being contested in good faith) that are overdue and payable under this
Agreement shall bear interest at a rate of {***}† per month from the due date
until the date of payment.  For clarity, upon resolution of any amounts disputed
such amounts determined to be due shall bear interest at the rate provided above
from the time such amounts were originally due.

 

6.5                                 Reconciliations.  The Parties acknowledge
that any amounts paid or shared in any way under this Agreement may be based
upon estimates, which estimates will be GAAP-compliant; provided, however, that
when the actual results become known relative to any estimated amount, any
difference between the actual results and the estimate is reported and the next
payment due hereunder related to such estimated item is appropriately adjusted
for such difference.  The Parties acknowledge and agree that any reports and
payments relating to any cost, expense, or other financial amount shared
pursuant to this Agreement for the final quarter of any Calendar Year shall
reflect year-end reconciliations and adjustments, if any, applicable to the
previous three (3) quarters’ reported results.

 

6.6                                 Taxes.  Each Party will be responsible for
any and all income or other taxes owed by it (“Receiving Party”) and required by
applicable Law to be withheld or deducted from any of the payments made by or on
behalf of the other Party (“Disbursing Party”) to it hereunder (“Withholding
Taxes”) and the Disbursing Party may deduct from any amounts that the Disbursing
Party is required to pay hereunder an amount equal to such Withholding Taxes. 
Any amounts withheld shall be deemed as paid to the Receiving Party for all
purposes under this Agreement.  Each Party will provide the other Party with
(a) reasonable advance notice of tax withholding obligations to which it
reasonably believes that it is subject and (b) any reasonable information
available to it that is necessary to determine the Withholding Taxes.  Such
Withholding Taxes will be paid to the proper taxing authority for the Receiving
Party’s account and evidence of such payment will be secured and sent to the
Receiving Party within one (1) month of such payment.  The Parties will do all
such lawful acts and things and sign all such

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

29

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lawful deeds and documents as either Party may reasonably request from the other
Party to enable each Party or its Affiliates to (i) take advantage of any
applicable legal provision or any treaty provisions with the object of paying
the sums due to such Party hereunder with the lowest legal amount of Withholding
Taxes and (ii) comply with its tax withholding obligations.

 

6.7                                 Records Retention; Financial Audit.

 

6.7.1                        Record Retention.  Each Party and their Affiliates
will maintain complete and accurate books, records and accounts for the
calculation of Development Expenses, Net Sales Revenue and Handling Deductions,
in sufficient detail to confirm the accuracy of any payments required under this
Agreement, which books, records and accounts will be retained by such Party for
two (2) years after the end of the period to which such books, records and
accounts pertain, or longer as is required by applicable Law.

 

6.7.2                        Financial Audit.  Each Party will have the right to
have an independent certified public accounting firm, reasonably acceptable to
the other Party, access during normal business hours, and upon reasonable prior
written notice, such of the records of such Party, its Affiliates or permitted
subcontractors as may be reasonably necessary to verify the accuracy of
Development Expenses, Net Sales Revenue and Handling Deductions and the Supply
Price paid based thereof for any Calendar Year during the Term ending not more
than two (2) years prior to the date of such request; provided, however, that,
(a) a Party will not have the right to conduct more than one (1) such audit in
any twelve (12) month period and that (b) it shall not be permitted to audit the
same period of time more than once, unless evidence of fraud in a subsequent
audit and such Party reasonably believes that such evidence indicates the
reasonable possibility of fraud in any such prior period.  The Party having such
audit conducted will bear all costs of such audit, unless the audit reveals a
discrepancy in such Party’s favor of more than ten percent (10%), in which case
the other Party will bear the cost of the audit.  The result of the audit shall,
in the absence of manifest error, be final and binding on the Parties.  For
purposes of clarity, each Party shall obtain from each Affiliate or permitted
subcontractors involved in the Commercialization of Product in the Territory or
development of Product audit rights for the other as set forth in this
Section 6.7.2.

 

6.7.3                        Payment of Additional Amounts.  If, based on the
results of any audit, additional payments are owed to a Party under this
Agreement, then the other Party will make such additional payments within thirty
(30) Business Days (provided that the other Party has received an invoice in
respect of the same) after the accounting firm’s written report is delivered to
the Parties, except in the case that a Party is seeking an appeal based upon
manifest error.

 

6.7.4                        Confidentiality.  Each Party will treat all
information subject to review under this Section 6.7 in accordance with the
provisions of Article 7.  Prior to conducting any audit hereunder, each Party
will cause its accounting firm to enter into a reasonably acceptable
confidentiality agreement with the audited party obligating such accounting firm
to maintain all such financial information in confidence with standards no less
stringent that the terms of Article 7 of this Agreement.

 

30

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ARTICLE 7
CONFIDENTIALITY

 

7.1                                 Confidential Information.

 

7.1.1                        Confidential Information.  As used in this
Agreement, the term “Confidential Information” means all information or data,
whether provided in written, oral, graphic, video, computer, electronic or other
form, provided pursuant to this Agreement by one (1) Party (the “Disclosing
Party”) to the other Party (the “Recipient”), including but not limited to,
information relating to the Disclosing Party’s existing or proposed research,
Development efforts, patent applications, business or products, and any other
materials that have not been made available by the Disclosing Party to the
general public.  Notwithstanding the foregoing sentence, Confidential
Information shall not include any information or materials that:

 

(a)                                  were already known to the Recipient (other
than under an obligation of confidentiality) at the time of disclosure by the
Disclosing Party, to the extent such Recipient has documentary evidence to that
effect;

 

(b)                                 were generally available to the public or
otherwise part of the public domain at the time of disclosure thereof to the
Recipient;

 

(c)                                  became generally available to the public or
otherwise part of the public domain after disclosure or development thereof, as
the case may be, and other than through any act or omission of a Party in breach
of such Party’s confidentiality obligations under this Agreement;

 

(d)                                 were disclosed to a Party, other than under
an obligation of confidentiality, by a Third Party who had no obligation to the
Disclosing Party not to disclose such information to others; or

 

(e)                                  were independently discovered or developed
by or on behalf of the Recipient without the use of the Confidential Information
belonging to the other Party, to the extent such Recipient has documentary
evidence to that effect.

 

7.1.2                        Confidentiality Obligations.  Each of Distributor
and Prestwick shall keep all Confidential Information received from the other
Party with the same degree of care it maintains the confidentiality of its own
Confidential Information, but in no event less than a reasonable degree of
care.  Neither Party shall use such Confidential Information for any purpose
other than in performance of this Agreement or disclose the same to any other
Person other than to such of its and its Affiliates’ directors, officers,
managers, employees, independent contractors, agents or consultants who have a
need to know such Confidential Information to implement the terms of this
Agreement or enforce its rights under this Agreement; provided, however, that a
Recipient shall advise any of its and its Affiliates’ directors, officers,
managers, employees, independent contractors, agents or consultants who receive
such Confidential Information of the confidential nature thereof and of the
obligations contained in this Agreement relating thereto, and the Recipient
shall ensure (including, in the case of a Third Party, by means of a written
agreement with such Third Party having terms at least as protective as those
contained in this Article 7) that all such directors, officers, managers,
employees, independent contractors, agents or consultants comply with such
obligations as if they had been a Party hereto.  Each Party agrees that it shall
be responsible for any breaches of this Section 7.1.2 by its Affiliates or its
or any of its Affiliates’ directors, officers, managers, employees, independent
contractors, agents or consultants.  Upon

 

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termination of this Agreement, the Recipient shall return or destroy all
documents, tapes or other media containing or embodying Confidential Information
of the Disclosing Party that remain in the possession of the Recipient or its
directors, managers, employees, independent contractors, agents or consultants,
except that the Recipient may keep one (1) copy of the Confidential Information
in the legal department files of the Recipient, solely for archival purposes. 
Such archival copy shall be deemed to be the property of the Disclosing Party,
and shall continue to be subject to the provisions of this Article 7.  It is
understood that receipt of Confidential Information under this Agreement will
not limit the Recipient from assigning its employees to any particular job or
task in any way it may choose, subject to the terms and conditions of this
Agreement.

 

7.1.3                        Permitted Disclosure and Use.  Notwithstanding
Section 7.1.2, a Party may disclose Confidential Information belonging to the
other Party to the extent such disclosure is reasonably necessary to: (a) comply
with or enforce any of the provisions of this Agreement; (b) for communication
with investors, lenders, consultants, advisors or others on a need to know
basis, in each case under appropriate confidentiality provisions substantially
equivalent to those of this Agreement, or (c) comply with applicable Laws,
subpoenas or similar legal process.  If a Party deems it necessary to disclose
Confidential Information of the other Party pursuant to Section 7.1.3(c), such
Party shall (i), if reasonably possible, give reasonable advance notice of such
disclosure to the other Party to permit such other Party sufficient opportunity
to object to such disclosure or to take measures to ensure confidential
treatment of such information and (ii) furnish only that portion of the
Confidential Information that it is advised by counsel is legally required.

 

7.1.4                        Notification.  The Recipient shall notify the
Disclosing Party promptly upon discovery of any unauthorized use or disclosure
of the Disclosing Party’s Confidential Information, and will cooperate with the
Disclosing Party (at the Recipient’s expense if such use or disclosure results
from a breach of Recipient’s obligations hereunder) in any reasonably requested
fashion to assist the Disclosing Party to regain possession of such Confidential
Information and to prevent its further unauthorized use or disclosure.

 

7.2                                 Publicity; Filing of this Agreement.  The
Parties agree that the public announcement of the execution of this Agreement
shall be substantially in the forms of the press releases attached hereto as
Exhibit A, and each Party shall approve of the other Party’s Press Release prior
to its publishing (the “Press Releases”).  Any other publication, news release
or other public announcement relating to this Agreement or to the performance
hereunder, shall first be reviewed and approved by both Parties; provided,
however, that any disclosure which is required by applicable Law as advised by
the disclosing Party’s counsel may be made without the prior consent of the
other Party.  To the extent practicable, the disclosing Party shall be given at
least three (3) Business Days advance notice of any such legally required
disclosure, and the other Party shall provide any comments on the proposed
disclosure during such period.  To the extent that either Party determines that
it or the other Party is required to file or register this Agreement or a
notification thereof to comply with the requirements of an applicable stock
exchange (including without limitation the Toronto Stock Exchange (“TSX”)) or
NASDAQ regulation or any Governmental Authority, including without limitation
the Canadian Securities Administrators, U.S. Securities and Exchange Commission
or the U.S. Federal Trade Commission, such Party shall promptly inform the other
Party thereof.  Prior to making any such filing, registration or notification,
the Parties shall agree on the provisions of this Agreement for which the
Parties shall seek confidential treatment, it being understood that if one
(1) Party determines to seek

 

32

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confidential treatment for a provision for which the other Party does not, then
the Parties will use reasonable efforts in connection with such filing to seek
the confidential treatment of any such provision.  The Parties shall cooperate,
each at the requesting Party’s expense, in such filing, registration or
notification, including, without limitation, such confidential treatment
request, and shall execute all documents reasonably required in connection
therewith.

 

7.3                                 Use of Names.  Subject to Section 7.2,
neither Party shall use the name of the other Party in relation to this
transaction in any public announcement, press release or other public document
without the prior written consent of such other Party, which consent shall not
be unreasonably withheld, delayed, or conditioned; provided, however, that
either Party may use the name of the other Party in any document filed with any
Governmental Authority, including the FDA, the U.S. Securities and Exchange
Commission, and the TSX.

 

7.4                                 Confidentiality of this Agreement.  The
terms of this Agreement shall be Confidential Information of each Party and, as
such, shall be subject to the provisions of this Article 7.

 

7.5                                 Disclosures Under Existing CDA.  The Parties
agree and acknowledge that Distributor and Prestwick entered into that certain
Confidentiality and Non-Use Agreement dated February 15, 2008 and as amended to
date (“Existing CDA”).  The Parties agree that “Confidential Information” (as
such term is used in the Existing CDA) disclosed to the Parties or their
Affiliates under the Existing CDA prior to the Effective Date shall be deemed to
have been disclosed under this Agreement and, from and after the Effective Date,
shall be held in confidence by such the Parties and their Affiliates in
accordance with the terms of this Article 7.

 

ARTICLE 8
INTELLECTUAL PROPERTY

 

8.1                                 Patent Prosecution and Maintenance.  During
the Term, Prestwick shall Prosecute and Maintain the Prestwick Patents and
Intellectual Property for which it or its Affiliate is an owner or assignee
(“Key Patents”).  Prestwick shall keep Distributor informed of the status of
each Key Patent and shall give reasonable consideration to any suggestions or
recommendations of Distributor concerning the Prosecution and Maintenance
thereof.  Before taking any steps regarding the filing, prosecution or
maintenance of any Key Patent, Prestwick will allow Distributor to comment on
the action proposed to be taken and Prestwick will take into account any
comments and suggestions made by Distributor.  If, during the Term, Prestwick
intends to allow any Key Patent to expire or otherwise be abandoned, Prestwick
shall notify Distributor of such intention at least sixty (60) days prior to the
date upon which such Key Patent shall expire or be abandoned, and Distributor
shall thereupon have the right, but not the obligation, to assume responsibility
for the Prosecution and Maintenance thereof.  Any such Patent will, at
Distributor’s request, be assigned to Distributor or at its direction to one
(1) of Distributor’s Affiliates for nil consideration.  Prestwick shall not
during the Term assign any Key Patents for which it is the registered proprietor
to any Third Party.

 

8.2                                 Defense of Third Party Infringement Claims. 
If Product becomes the subject of a Third Party’s claim or assertion of
infringement, the Party first having notice of the claim or assertion shall
promptly notify the other Party, and the Parties shall promptly confer to
consider the claim or assertion and the appropriate course of action.  Unless
the Parties otherwise agree in

 

33

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writing, each Party shall have the right to defend itself against a suit that
names it as a defendant.  Neither Party shall enter into any settlement of any
claim described in this Section 8.2 that adversely affects the other Party’s
rights or interests without such other Party’s prior written consent, such
consent not to be unreasonably withheld, delayed, or conditioned.  In any event,
the Parties shall reasonably assist one another and cooperate in any such
litigation at the other Party’s request and expense.

 

8.3                                 Enforcement.  Subject to the provisions of
this Section 8.3, in the event that either Party reasonably believes that the
filing of an NDA or ANDA or Commercialization by a Third Party of a product (an
“Infringing Product”) constitutes infringement of a Key Patent, such Party shall
promptly notify the other Party of such infringement.  In such event, Prestwick
shall have the initial right (but not the obligation) to enforce such Key
Patents with respect to such Infringing Product, or to defend any declaratory
judgment action with respect thereto at its sole expense (an “Enforcement
Action”).

 

8.3.1                        Initiating Enforcement Actions.  In the event that
Prestwick fails to initiate an Enforcement Action under Section 8.3 to enforce
such Key Patent against an infringement by a Third Party in the Territory,
within thirty (30) days of a request by Distributor to initiate such Enforcement
Action, Distributor may initiate an Enforcement Action against such infringement
at Distributor’s sole expense.  In such case, Prestwick shall cooperate with
Distributor in such Enforcement Action.  The Party initiating or defending any
such Enforcement Action shall keep the other Party reasonably informed of the
progress of any such Enforcement Action, and such other Party shall have the
right to participate with counsel of its own choice.

 

8.3.2                        Recoveries.  Any recovery received as a result of
any Enforcement Action under Section 8.3 shall be used first to reimburse the
Parties for the costs and expenses (including attorneys’ and professional fees)
incurred in connection with such Enforcement Action, and the remainder of the
recovery shall be shared {***}† to Distributor and {***}† to Prestwick.

 

8.3.3                        Consultation.  The Party assuming the lead role in
the Enforcement Action (the “Controlling Party”) shall consult with the
non-Controlling Party on all material aspects of the enforcement.  The
non-Controlling Party shall have a reasonable opportunity for meaningful
participation in decision-making and formulation of strategy.  The Parties shall
reasonably cooperate with each other in all such actions or proceedings.  Each
Party agrees to be joined as a party plaintiff if necessary and shall provide
all reasonable cooperation (including any necessary use of its name) required to
prosecute such litigation, provided that the Controlling Party shall indemnify
the non-Controlling Party in relation to any costs awards made against it.  The
non-Controlling Party shall be entitled to be represented by an independent
counsel of its own choice at its own expense.

 

8.3.4                        Appeal.  In the event that a judgment is entered
against the Controlling Party and an appeal is available, the Controlling Party
shall have the first right, but not the obligation, to file such appeal.  In the
event the Controlling Party does not desire to file such an appeal, it will
promptly, in a reasonable time period (i.e., with sufficient time for the non-

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

34

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Controlling Party to take whatever action may be necessary) prior to the date on
which such right to appeal will lapse or otherwise diminish, permit the
non-Controlling Party to pursue such appeal at such non-Controlling Party’s own
cost.  If the Law requires the Controlling Party’s involvement in such appeal,
the Controlling Party shall be a nominal party of the appeal and shall provide
reasonable cooperation with the other Party at the other Party’s expense.

 

8.4                                 Trademarks.

 

8.4.1                        Maintenance of Trademarks.  Prestwick will maintain
and enforce Product Trade Marks and Product Trade Dress, at its sole costs and
expense.  If during the Term, Prestwick intends to allow any Product Trade Mark
or Product Trade Dress to expire or otherwise be abandoned, Prestwick shall
notify Distributor of such intention at least sixty (60) days prior to the date
upon which such Product Trade Mark or Product Trade Dress shall expire or be
abandoned and Distributor shall thereupon have the right, but not the
obligation, to assume responsibility for the Prosecution and Maintenance
thereof.  Any such Product Trade Mark or Product Trade Dress will, at
Distributor’s request, be assigned to Distributor or at its discretion, one
(1) of Distributor’s Affiliates for nil consideration.  Prestwick shall not
during the Term assign any Product Trade Marks or Product Trade Dress to any
Third Party.

 

8.4.2                        Infringement and Enforcement.  In the event either
Party becomes aware of any infringement of a Product Trade Mark or Product Trade
Dress by a Third Party in the Territory, such Party shall promptly notify the
other Party.  In such event of a Third Party infringement of a Product Trade
Mark or Product Trade Dress, Prestwick shall have the initial right (but not the
obligation) to take legal action with respect to such infringement of such
Product Trade Mark or Product Trade Dress at its own expense (a “Trademark
Enforcement Action”).  In the event that Prestwick fails to initiate a Trademark
Enforcement Action to prevent infringement of such Product Trade Mark or Product
Trade Dress by a Third Party in the Territory, as applicable, within forty five
(45) days of a request by Distributor to initiate such Trademark Enforcement
Action, Distributor may initiate a Trademark Enforcement Action against such
Third Party at Distributor’s sole expense.  In each case, the other Party shall
cooperate (which cooperation shall include being named a party plaintiff, if
necessary) with such Party pursuing a Trademark Enforcement Action at such
Party’s expense.  The Party initiating or defending any such Trademark
Enforcement Action shall keep the other Party reasonably informed of the
progress of any such Trademark Enforcement Action, and such other Party shall
have the right to participate with counsel of its own choice.  Any recovery
received as a result of any Trademark Enforcement Action under this
Section 8.4.2 shall be used first to reimburse the Parties for the costs and
expenses (including attorneys’ and professional fees) incurred in connection
with such Trademark Enforcement Action, and the remainder of the recovery shall
be shared {***}† to Distributor and {***}† to Prestwick.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

35

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ARTICLE 9
REPRESENTATIONS AND WARRANTIES

 

9.1                                 Representations and Warranties.

 

9.1.1                        Mutual Representations.  Each of the Parties hereby
represents and warrants to the other Party that, as of the Effective Date:

 

(a)                                  Such Party has full corporate right, power
and authority to enter into this Agreement and to perform its respective
obligations under this Agreement and that it has the right to grant the rights
granted pursuant to this Agreement.

 

(b)                                 Such Party is not insolvent and no
proceedings have been taken or authorized by such Party, or to the knowledge of
such Party been taken or threatened by any other Person, with respect to
bankruptcy, insolvency, liquidation, dissolution or winding up of such Party.

 

(c)                                  This Agreement is a legal and valid
obligation binding upon such Party and enforceable in accordance with its terms,
subject to (i) the effect of any applicable Law of general application relating
to bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting
creditors’ rights and relief of debtors generally and (ii) the effect of general
principles of equity, including general principles of equity governing specific
performance, injunctive relief and other equitable remedies (regardless of
whether such enforceability is considered in a proceeding in equity or at law). 
The execution, delivery and performance of the Agreement by such Party does not
conflict with any agreement, instrument or understanding, oral or written, to
which it is a Party or by which it is bound, nor violate any applicable Law of
any Governmental Authority having jurisdiction over it.

 

(d)                                 Such Party has not granted any right to any
Third Party that would conflict with the rights granted to the other Party
hereunder.

 

(e)                                  Except for Regulatory Approvals,
manufacturing approvals and/or similar approvals necessary for the manufacture
or Commercialization of Product (and the components thereof), such Party has
obtained all necessary consents, approvals and authorizations of all
Governmental Authorities and other Persons required to be obtained by it as of
the Effective Date in connection with the execution, delivery and performance of
this Agreement.

 

(f)                                    There is no action or proceeding pending
against such Party or, to such Party’s knowledge, threatened against such Party
that questions the validity of this Agreement or any action taken by such Party
in connection with the execution of this Agreement.

 

(g)                                 Except as set forth in Schedule
9.1.1(g) attached hereto, there is no investment banker, broker, finder,
financial advisor or other intermediary who has been retained by or is
authorized to act on behalf of such Party (or any of its Affiliates) who might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.

 

(h)                                 Neither such Party nor its Affiliates has
been debarred or is subject to debarment and neither it not any of its
Affiliates will use in any capacity, in connection with the

 

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Commercialization of Product, any Person who has been debarred pursuant to
Section 306 of the United States Federal Food, Drug and Cosmetic Act, or who is
subject of a conviction described in such section.

 

9.2                                 Investigation.  A Party’s remedies based on
any representation or warranty of another Party contained in or made pursuant to
this Agreement shall not be affected by any investigation conducted by such
Party or any of its representatives or any knowledge acquired (or capable of
being acquired) by any such Party or its representatives, in each case, at any
time, whether before or after the execution and delivery of this Agreement.

 

9.3                                 Disclaimer of Warranty.  EXCEPT FOR THE
EXPRESS WARRANTIES SET FORTH IN SECTION 9.1 OF THIS AGREEMENT, NEITHER PARTY
MAKES ANY REPRESENTATIONS AND GRANTS NO WARRANTIES, EXPRESS OR IMPLIED, EITHER
IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND PRESTWICK AND
DISTRIBUTOR EACH SPECIFICALLY DISCLAIM ANY OTHER REPRESENTATIONS AND WARRANTIES,
WHETHER WRITTEN OR ORAL, EXPRESS, STATUTORY OR IMPLIED, INCLUDING ANY WARRANTY
OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY
WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

9.4                                 Essential Basis.  The Parties acknowledge
and agree that the disclaimers, exclusions and limitations of liability set
forth in this Article 9 form an essential basis of this Agreement, and that,
absent any of such disclaimers, exclusions or limitations of liability, the
terms of this Agreement, including, without limitation, the economic terms,
would be substantially different.

 

ARTICLE 10
COVENANTS

 

From the Effective Time and through the Term, the following covenants shall
apply:

 

10.1                           Phase 4 Studies.  Distributor shall be
responsible for, at its sole cost and expense, in conducting and completing
Phase 4 Studies (including any such Phase 4 Study that is required to be
repeated as a result of a failure by Distributor to meet FDA standards for
reviewability or are otherwise aborted by Distributor) in accordance with
(a) professional standards and practices, (b) all applicable Laws and (c) the
timeline provided in the First NDA or any extensions agreed to by the FDA and
the development plan.  Prestwick shall promptly provide Distributor any
information in its possession or control related to the Phase 4 Studies and all
other regulatory and safety matters related to the Product, including any
information or correspondence received from the FDA.  Furthermore, in the event
that Prestwick is delayed in providing such materials to Distributor or has not
made adequate progress in achieving milestones for any of the Phase 4 Studies,
Distributor shall not be liable for such delays in completing the Phase 4
Studies to the extent such delay is related to Prestwick’s failure to provide
such materials or make adequate progress in achieving milestones. Distributor
shall provide Prestwick with monthly reports regarding the status of such Phase
4 Studies and promptly provide any other information regarding the Phase 4
Studies requested by Prestwick.  Distributor shall not be required to reimburse

 

37

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Prestwick for any expenditures made by, or accrued on the balance sheet of,
Prestwick prior to the Effective Date in connection with performing the Phase 4
Studies.

 

10.2                           Debarment.  Each Party agrees to promptly inform
the other Party in writing as if it or any Person who is performing services
hereunder on its behalf is debarred or is the subject of a conviction described
in Section 306 of the United States Federal Food, Drug and Cosmetic Act, or if
any action, suit, claim, investigation or legal administrative proceeding is
pending or, to the best of such Party’s knowledge, is threatened, relating to
the debarment of such Party, its Affiliates or any Person used in any capacity
by such Party or its Affiliates in connection with the Commercialization of
Product.

 

10.3                           Territory Compliance.  Distributor shall not
import or sell Product outside the Territory and shall use Commercially
Reasonable Efforts to prevent importation or resale of Product outside the
Territory by a Third Party that purchased such Product in the Territory from
Distributor.  Prestwick and its Affiliates shall not sell Product in the
Territory and Prestwick shall use Commercially Reasonable Efforts to prevent
importation or resale of a Product in the Territory by a Third Party that
purchased such Product outside the Territory from Prestwick or its Affiliates.

 

10.4                           FIFO Policy.  For the sake of clarity,
Distributor agrees to use first in-first out (“FIFO”) inventory control for
Product as a means of controlling the amount of returns to Distributor.

 

10.5                           No Amendment of the Cambridge Agreement.  During
the Term, Prestwick shall not, without the prior written consent of Distributor,
in its sole discretion, amend, supplement, modify or waive any provision of the
Cambridge Agreement, provided, however that notwithstanding the foregoing, to
the extent such amendment, supplement or modification could not reasonably be
expected to interfere with or adversely affect the rights or obligations of
Distributor hereunder, Prestwick may, without the prior written consent of
Distributor (but with good faith consultation with Distributor) amend,
supplement or modify the Cambridge Agreement.  Promptly, and in any event no
later than five (5) Business Days, following receipt by Prestwick of a fully
executed amendment, supplement, modification or waiver of the Cambridge
Agreement, as applicable, Prestwick shall furnish a copy of such amendment,
supplement, modification or waiver to Distributor.

 

10.6                           Maintenance of Cambridge Agreement.  Subject to
Distributor’s obligations hereunder, Prestwick (including its Affiliates or
permitted subcontractors) shall comply fully in all respects with its
obligations under the Cambridge Agreement and shall not take any action or
forego any action that shall constitute a material or uncured breach of the
Cambridge Agreement.  In furtherance of the foregoing, as and when reasonably
requested by Distributor, Prestwick shall use its Commercially Reasonable
Efforts to exercise in all material respects all of its rights under the
Cambridge Agreement; provided, however, that Prestwick or its Affiliates shall
not be required to pursue any claim or adversarial proceeding (including without
limitation, filing or continuing any law suit, mediation, arbitration or other
proceeding) unless (i) the failure to do so would result in Distributor
incurring any material loss or damages relating to a breach by Cambridge under
the Cambridge Agreement and Distributor would not otherwise have standing or
other rights to pursue such claim directly against Cambridge, (ii) (other than
matters related to the failure to supply of Product as a result of actions or
omissions by Cambridge or its subcontractors) the prosecution of any such claim
or adversarial proceeding would not reasonably be expected to be adverse to or

 

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otherwise contrary to the best interests of Prestwick or any of its Affiliates
in any material respect and (iii) Distributor delivers a written notice
(A) acknowledging that Prestwick and its Affiliates have declined to pursue any
such claim or adversarial proceeding, (B) requesting that Prestwick or its
applicable Affiliates pursue any such claim or adversarial proceeding, and
(C) agreeing that to the extent such costs are not reimbursed by Cambridge,
Distributor shall reimburse Prestwick or its Affiliates, within thirty (30) days
of presentment of invoices or other documentation reflecting such expenses,
{***}† of the reasonable out of pocket costs and expenses incurred by Prestwick
or its Affiliates associated with such claim or proceeding.  Promptly upon the
receipt of any written notice from Licensor of Prestwick’s breach under the
Cambridge Agreement, Prestwick shall give written notice of the breach to
Distributor setting forth in reasonable detail the nature of the breach. 
Prestwick shall promptly cure any and all such breaches (to the extent such
breach is not due to Distributor’s failure to perform its obligations hereunder)
and give written notice to Distributor (and to Licensor, if applicable) that
such alleged breach has been cured.  However, any cure or failure to cure by
Prestwick of such breaches shall not avoid or mitigate its obligations under
this Agreement.  Prestwick shall take all actions necessary to exercise its
rights under the Cambridge Agreement so that the options under Sections 2.4 and
2.5 may be given effect.

 

10.7                           Breach of Cambridge Agreement by Licensor.

 

10.7.1                  Upon the occurrence of any breach by Licensor of the
Cambridge Agreement which is not cured as provided in the Cambridge Agreement,
as applicable, Prestwick shall give prompt written notice thereof to
Distributor, and, at Distributor’s request, subject to Sections 10.6 and 10.7,
the Parties shall meet and confer in good faith to determine a course of action
with respect to such breach.

 

10.7.2                  Nothing in this Section 10.7 shall obligate either Party
to take any action, or omit to take any action, that would conflict with,
violate or cause a violation of, any applicable Law binding upon such Party.

 

10.7.3                  Any collections, recoveries, damages, awards,
settlements and other payments received from Licensor for losses related to Net
Sales Revenue in the Territory from Licensor (including for failure to supply
Product or any failure of Product to meet the Specifications) shall be used
first to reimburse the Parties for any Losses paid or payable to Third Parties
by the Parties (in proportion to the aggregate amount of Losses incurred by each
Party with respect to the applicable action, if any), second to reimburse the
Parties for the costs and expenses (including attorneys’ and professional fees)
incurred in connection with such action, and the remainder of such amounts shall
be divided {***}† to Distributor and {***}† to Prestwick.

 

10.8                           Termination of Cambridge Agreement by Prestwick. 
Upon the occurrence of any event which could reasonably be expected to give rise
to Prestwick’s right to terminate all or any part of the Cambridge Agreement,
Prestwick shall consult with Distributor in determining whether or not to
exercise such termination right.  In any event and notwithstanding anything to
the contrary contained herein, Prestwick shall not exercise any such right to
terminate without the prior written consent of Distributor, which consent may be
withheld in its sole discretion.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

39

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10.9                           Breach of Cambridge Agreement due to
Distributor.  Distributor (including its Affiliates or permitted subcontractors)
shall not take any action or omit to take any action required, to the extent
under its control, under this Agreement that shall constitute a material breach
of the Cambridge Agreement.

 

10.10                     Marketing Plan.  Prestwick shall promptly provide to
Distributor any proposed updates, amendments, modifications or waivers of the
Marketing Plan, and shall not agree to any such update, amendment, modification
or waiver without the prior written consent of Distributor, which consent, for
the avoidance of doubt, may be withheld, conditioned or delayed for any or no
reason whatsoever if such amendment would result in Distributor being required
to make expenditures or incur obligations during the Exclusivity Period such
that (i) the amount to be spent during each Calendar Year of the Exclusivity
Period on (1) A&P activities would be greater than {***}†, (2) Support Center
activities would be greater than approximately {***}† and (3) Distributor’s
co-pay assistance program would be greater than approximately {***}† of gross
sales of Product in the Territory in a Calendar Year; (ii) the number of Sales
Representatives and Specialists would be greater than those required under
Section 4.3.2.

 

ARTICLE 11
TERM AND TERMINATION

 

11.1                           Term.  This Agreement shall commence as of the
Effective Date and, unless sooner terminated as provided herein, shall continue
in effect until the later of fifteen (15) years from the date of approval of the
last NDA (a) for Product or (b) resulting from Regulatory Development, or
Galenical Development or Isomeric Development that Distributor co-invests in
pursuant to the terms of Sections 2.4 or 2.5, respectively (the “Term”).

 

11.2                           Termination for Certain Breaches.

 

11.2.1                  Prestwick.  Prestwick may, without prejudice to any
other remedies available to it at law or in equity, terminate this Agreement:

 

(a)                                  upon six (6) months notice in the event of
the first breach of Sections 4.3.1(b), (c) or (d) or 4.3.2 and Distributor fails
to cure such breach prior to the expiration of such 6-month notice;

 

(b)                                 (x) upon two (2) months notice if
Distributor breaches (i) Sections 4.3.1(b), (c) or (d) or 4.3.2 after the first
such breach of such Section(s) and Distributor fails to cure such breach prior
to the expiration of such two (2) month notice period, or (y) immediately upon
notice if Distributor breaches Section 2.9;

 

(c)                                  immediately upon notice if Distributor
breaches Sections 4.3.1(e) or (f), 10.1 or 10.9, in each case where such breach
is not due to Prestwick or Licensor’s failure to supply Product in accordance
with the terms hereof;

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

40

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(d)                                 upon fifteen (15) days notice in the event
of non-payment of amounts (other than amounts disputed in good faith, provided
that upon final resolution of such dispute such amounts shall be due no later
than 5 days after such resolution) due to it by Distributor and Distributor
fails to cure such default prior to the expiration of such 15-day notice; and

 

(e)                                  upon six (6) months notice in the event of
any material breach of applicable Laws by Distributor in performing its
obligations hereunder and Distributor fails to cure such breach prior to the
expiration of such 6-month notice.

 

11.2.2                  For purposes of Section 11.2.1(a) and 11.2.1(b), a
breach of Sections 4.3.1(b), (c) or (d) shall be deemed to be cured for
all purposes under this Agreement if Distributor spends, in addition to the
amount budgeted under the applicable year set forth in the Commercialization
Plan, an amount equal to {***}† of the amount of the shortfall in expenditure
that resulted in such breach over the course of the applicable cure period.

 

11.2.3                  Distributor.  Distributor may, without prejudice to any
other remedies available to it at law or in equity, terminate this Agreement
(a) immediately upon notice if Prestwick breaches Section 2.9, or (b) upon
thirty (30) days notice if Prestwick fails to supply Product in accordance with
the Binding Portion of the Forecast and where such failure is not due to
Licensor or other Third Party suppliers failure to supply Product to Prestwick.

 

11.3                           Termination for Insolvency.  Either Party may
terminate this Agreement upon written notice to other Party at any time, to the
extent permitted by applicable Law, if the other Party shall become insolvent,
or shall make or seek to make or arrange an assignment for the benefit of
creditors, or if proceedings in voluntary or involuntary bankruptcy shall be
initiated by, on behalf of or against such Party (and, in the case of any such
involuntary proceeding, not dismissed within ninety (90) days), or if a receiver
or trustee of such Party’s property shall be appointed and not discharged within
ninety (90) days.

 

11.4                           Other Termination By Distributor.  After three
(3) years from the Effective Date, Distributor shall have the right to terminate
this Agreement upon twelve (12) months advance written notice, provided, that
(a) when it gives notice of such termination that it is not in material breach
of this Agreement and (b) it does not materially breach this Agreement at any
time during the notice period and up to and including the effective date of such
termination.

 

11.5                           Termination for Failure to Agree Post Exclusivity
Requirements.  If the Parties are unable to agree by the expiry of the
Exclusivity Period on the expenditures as described in Section 4.3.1(j), either
Party may terminate this Agreement upon ninety (90) days written notice.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

41

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ARTICLE 12
EFFECTS OF TERMINATION

 

12.1                           Effect of Termination by Prestwick Pursuant to
Sections 11.2.1(a) or (b) or 11.3.  Without limiting any other legal or
equitable remedies that Prestwick may have, if this Agreement is terminated by
Prestwick in accordance with Sections 11.2.1(a) or (b) or 11.3, then the
following provisions shall apply:

 

12.1.1                  Assignments.  Distributor will promptly, in each case
within ten (10) days after receipt of Prestwick’s request, and at no cost to
Prestwick:

 

(a)                                  assign (or cause to be assigned) to
Prestwick all of Distributor’s right, title and interest in and to any
(i) Promotional Materials and (ii) copyrights and trademarks and trade dress
(including any goodwill associated therewith) to the extent that such are
included in Product packaging or Promotional Materials, any registrations and
design patents for the foregoing and any Internet domain name registrations for
such trademarks and slogans, all to the extent solely related to Product;
provided, however, in the event Prestwick exercises such right to have assigned
such Promotional Materials, Distributor shall grant, and hereby does grant, a
royalty-free right and license to any housemarks, trademarks, names and logos of
Distributor (not otherwise transferred pursuant to this clause (a)) contained
therein for a period of eighteen (18) months in order for Prestwick to use such
Promotional Materials in connection with the Commercialization of Product in the
Territory;

 

(b)                                 assign (or cause to be assigned) to
Prestwick, the management and continued performance of any Phase 4 Studies for
Product ongoing hereunder as of the effective date of such termination;

 

(c)                                  transfer (or cause to be transferred) to
Prestwick all of Distributor’s right, title and interest in and to any and all
Commercialization data Controlled by Distributor for Product in the Territory;
and

 

(d)                                 provide copies of any other books, records,
documents and instruments Controlled by Distributor to the extent related to
Product;

 

provided, however, that to the extent that any agreement or other asset
described in this Section 12.1.1 is not assignable by Distributor, then such
agreement or other asset will not be assigned, and upon the request of
Prestwick, Distributor will take such reasonable steps as may be necessary to
allow Prestwick to obtain and to enjoy the benefits of such agreement or other
asset, without additional payment therefor, in the form of a license or other
right to the extent Distributor has the right and ability to do so.  For
purposes of clarity, Prestwick shall have the right to request that Distributor
take any or all of the foregoing reasonable actions in whole or in part, or with
respect to all or any portion of the assets set forth in the foregoing
provisions.

 

12.1.2                  Disposition of Inventory.  Prestwick shall have the
option, exercisable within thirty (30) days following the effective date of such
termination, to purchase any inventory of Product affected by such termination
at the price such Product was obtained by Distributor.  If Prestwick does not
exercise such option during such thirty (30) - day period, or if Prestwick
provides Distributor with written notice of its intention not to exercise such
option, then

 

42

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Distributor and its Affiliates will be entitled, during the period ending on the
last day of the eighteenth (18th) full month following the effective date of
such termination, to sell any inventory of Product affected by such termination
that remains on hand as of the effective date of the termination, so long as
Distributor pays to Prestwick the Supply Price payable hereunder applicable to
said subsequent sales, in accordance with the terms and conditions set forth in
this Agreement, and Distributor shall retain all rights hereunder necessary for
Distributor to sell such inventory during such period in accordance with the
terms hereof.

 

12.1.3                  Disposition of Commercialization Related Materials. 
Distributor will promptly deliver to Prestwick in electronic, sortable form
(a) a list identifying all wholesalers and other distributors involved in the
Commercialization of Product in the Territory as well as any customer lists
related to the Commercialization of Product in the Territory and (b) all
Promotional Materials as well as any items bearing Product Trademark and/or any
trademarks or housemarks solely related to Product.

 

12.2                           Effect of Termination by Distributor Pursuant to
Section 11.2.3 or 11.3.  Without limiting any other legal or equitable remedies
that Distributor may have, if this Agreement is terminated by Distributor in
accordance with Sections 11.2.3 or 11.3, then the following provisions shall
apply:

 

12.2.1                  Grant of Licenses; Termination of Rights.  Prestwick
shall, and hereby does, grant to Distributor an exclusive (even as to Prestwick
and its Affiliates), royalty free, perpetual, license or sublicense, as
applicable, to use Prestwick Know-How and under Prestwick Patents and
Intellectual Property to Commercialize Product in the Territory.

 

12.2.2                  Assignments.  Prestwick will promptly, in each case
within ten (10) days after receipt of Distributor’s request, and at no cost to
Distributor:

 

(a)                                  assign (or cause to be assigned) to
Distributor all of Prestwick’s and its Affiliates’ right, title and interest in
and to the Cambridge Agreement and any other agreements (or portions thereof)
between Prestwick and its Affiliates and Third Parties that relate to the
Development or Commercialization of Product in the Territory;

 

(b)                                 assign (or cause to be assigned) to
Distributor all of Prestwick’s and its Affiliates’ right, title and interest in
and to any (i) Promotional Materials and (ii) copyrights and Product Trade Marks
and Product Trade Dress (including any goodwill associated therewith as well as
any trademarks of Prestwick’s and its Affiliates’ to the extent that such are
included in Product packaging or Promotional Materials), any registrations and
design patents for the foregoing and any Internet domain name registrations for
such trademarks and slogans, all to the extent solely related to Product;
provided, however, in the event Distributor exercises such right to have
assigned such Promotional Materials, Prestwick shall grant (or cause to be
granted), and hereby does grant, a royalty-free right and license to any
housemarks, trademarks, names and logos of Prestwick and its Affiliates (not
otherwise transferred pursuant to this clause (b)) contained therein for a
period of eighteen (18) months in order for Distributor to use such Promotional
Materials in connection with the Commercialization of Product in the Territory;

 

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(c)                                  assign (or cause to be assigned) to
Distributor, the management and continued performance of any clinical trials for
Product ongoing hereunder as of the effective date of such termination;

 

(d)                                 transfer (or cause to be transferred) to
Distributor all of, if any, Prestwick’s and its Affiliates’ right, title and
interest in and to any and all Regulatory Filings, Regulatory Approvals and
other regulatory materials for Product in the Territory;

 

(e)                                  transfer (or cause to be transferred) to
Distributor all of Prestwick’s and its Affiliates’ right, title and interest in
and to any and all Commercialization data Controlled by Prestwick or its
Affiliates for Product in the Territory;

 

(f)                                    provide copies of any other books,
records, documents and instruments Controlled by Prestwick or its Affiliates to
the extent related to Product in the Territory;

 

provided, however, that to the extent that any agreement or other asset
described in this Section 12.2.2 is not assignable by Prestwick or its
Affiliates, then such agreement or other asset will not be assigned, and upon
the request of Distributor, Prestwick will take such reasonable steps as may be
necessary to allow Distributor to obtain and to enjoy the benefits of such
agreement or other asset, without additional payment therefor, in the form of a
license or other right to the extent Prestwick or its Affiliates have the right
and ability to do so.  For purposes of clarity, Distributor shall have the right
to request that Prestwick take any or all of the foregoing reasonable actions in
whole or in part, or with respect to all or any portion of the assets set forth
in the foregoing provisions.

 

12.2.3                  Disclosure and Delivery.  Prestwick will promptly
transfer (or cause to be transferred) to Distributor, at its cost, copies of any
physical embodiment of any Prestwick Know-How or Prestwick Patents and
Intellectual Property, to the extent then used in connection with the
Development or Commercialization of Product in the Territory; such transfer
shall be effected by the delivery of documents, to the extent such Prestwick
Know-How or Prestwick Patents and Intellectual Property are embodied in
documents, and to the extent that Prestwick Know-How or Prestwick Patents and
Intellectual Property are not fully embodied in documents, Prestwick shall make,
at its cost, its employees and agents who have knowledge of such Prestwick
Know-How or Prestwick Patents and Intellectual Property in addition to that
embodied in documents reasonably available to Distributor for interviews,
demonstrations and training to effect such transfer in a manner sufficient to
enable Distributor to practice such Prestwick Know-How or Prestwick Patents and
Intellectual Property.

 

12.2.4                  Disposition of Inventory.  Distributor shall have the
option, exercisable within thirty (30) days following the effective date of such
termination, to purchase any inventory of Product affected by such termination
at the price such Product was obtained by Prestwick.

 

12.3                           Effect of Termination by Prestwick Pursuant to
Section 11.2.1, 11.3 or 15.6.2 or by Distributor in accordance with Section 11.4
or 15.6.2, or under Section 11.5.  If this Agreement is terminated by:

 

44

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12.3.1                  Prestwick in accordance with Section 11.2.1 (other than
11.2.1(a) and (b)), 11.3 or 11.5 or by Distributor in accordance with
Section 11.5, then (i) Sections 12.1.1, 12.1.2 and 12.1.3 shall apply, (ii) with
respect to any sales of Product in the Territory, Prestwick shall pay to
Distributor on a monthly basis within twenty (20) days after the last day of any
month an amount equal to the difference between (A) {***}† of Net Sales Revenue
(or {***}† in the event Net Sales Revenue for such Calendar Year exceeds {***}†
in a Calendar Year after the effective date of such termination and (B) all
annual Commercialization costs expended by Prestwick with respect to Product in
the Territory in such Calendar Year, including, but not limited to, all
reasonable internal FTE and external costs expended for buildup and maintenance
of an infrastructure to support sales of Product, Detailing, A&P activities,
Support Center Activities and patient assistance program, and (iii) Section 2.9,
together with any definitions referenced therein, will survive such termination
of this Agreement.

 

12.3.2                  Distributor in accordance with Section 11.4, then
(i) with respect to any sales of Product in the Territory, Prestwick shall pay
to Distributor on a monthly basis within twenty (20) days after the last day of
any month an amount equal to the difference between (A) {***}† of Net Sales
Revenue (or {***}† in the event Net Sales Revenue for such Calendar Year exceeds
{***}† in a Calendar Year after the effective date of such termination and
(B) all annual Commercialization costs expended by Prestwick with respect to
Product in the Territory in such Calendar Year, including, but not limited to,
all reasonable internal FTE and external costs expended for buildup and
maintenance of an infrastructure to support sales of Product, Detailing, A&P
activities, Support Center Activities and patient assistance program, and
(ii) Section 2.9, together with any definitions referenced therein, will survive
such termination of this Agreement.

 

12.3.3                  Prestwick in accordance with Section 15.6.2 then
(i) Sections 12.2.1, 12.2.2, 12.2.3 and 12.2.4 shall apply, and (ii) with
respect to any sales of Product in the Territory, Distributor shall pay to
Prestwick on a monthly basis within twenty (20) days after the last day of any
month an amount equal to (A) {***}† of Net Sales Revenue (or {***}† in the event
Net Sales Revenue for such Calendar Year exceeds {***}† in a Calendar Year after
the effective date of such termination.

 

12.3.4                  Distributor in accordance with Section 15.6.2, then
(i) Sections 12.1.1, 12.1.2 and 12.1.3 shall apply, and (ii) with respect to any
sales of Product in the Territory, Prestwick shall pay to Distributor on a
monthly basis within twenty (20) days after the last day of any month an amount
equal to the difference between (A) {***}† of Net Sales Revenue (or {***}† in
the event Net Sales Revenue for such Calendar Year exceeds {***}† in a Calendar
Year after the effective date of such termination and (B) all annual
Commercialization costs expended by Prestwick with respect to Product in the
Territory in such Calendar Year, including, but not limited to, all reasonable
internal FTE and external costs expended for buildup and maintenance of an
infrastructure to support sales of Product, Detailing, A&P activities, Support
Center Activities and patient assistance program.

 

12.4                           Rights in Bankruptcy.  All rights and licenses
granted under or pursuant to this Agreement by Prestwick are, and shall
otherwise be deemed to be, for purposes of Section 365(n) 

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

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of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as
defined under Section 101 of the U.S. Bankruptcy Code.  The Parties agree that
Distributor, as licensee of such rights under this Agreement, shall retain and
may fully exercise all of its rights and elections under the U.S. Bankruptcy
Code.  The Parties further agree that, in the event of the commencement of a
bankruptcy case by or against Prestwick under the U.S. Bankruptcy Code, upon
written request by the Distributor to the Debtor in Possession, Trustee, or
Proposed Debtor (in the case an involuntary petition is filled against
Prestwick), the Distributor shall be entitled to the immediate delivery of a
complete duplicate of (or complete access to, as appropriate) any such
intellectual property and all embodiments of such intellectual property.

 

12.5                           Survival.  The following Articles and Sections,
together with any definitions used or exhibits referenced therein, will survive
any expiration or termination of this Agreement: Sections 2.9, 3.4, 5.1.3,
5.1.4, 5.1.5, 5.1.6, 6.6 and 6.7, and Articles 7, 9, 12-15, inclusive.

 

ARTICLE 13
INDEMNIFICATION; INSURANCE

 

13.1                           Indemnification.

 

13.1.1                  Indemnification by Prestwick.  Prestwick hereby agrees
to save, defend and hold Distributor, its Affiliates, and their respective
directors, agents and employees harmless from and against any and all Losses
arising in connection with any and all charges, complaints, actions, suits,
proceedings, hearings, investigations, claims, demands, judgments, orders,
decrees, stipulations or injunctions by a Third Party (each a “Third Party
Claim”) resulting from (a) any material breach by Prestwick or its Affiliates of
any of its representations, warranties or covenants pursuant to this Agreement,
(b) any Withholding Taxes with respect to amounts paid or payable by Distributor
to Prestwick under this Agreement or (c) the gross negligence or willful
misconduct by Prestwick or its Affiliates or their respective officers,
directors, employees, agents, consultants or sublicensees in performing any of
its obligations under this Agreement; in each case except to the extent that
such Losses are subject to indemnification by Prestwick pursuant to
Section 13.1.2.

 

13.1.2                  Indemnification by Distributor.  Distributor hereby
agrees to save, defend and hold Prestwick, its Affiliates, and their respective
directors, agents and employees harmless from and against any and all Losses
arising in connection with any and all Third Party Claims resulting from (a) any
material breach by Distributor or its Affiliates of any of its representations,
warranties or covenants pursuant to this Agreement, (b) failure of Prestwick to
meet its obligation to Licensor to meet the Minimum Sales Quantities, provided
in such case indemnification of Licensor shall be limited to fifty-six percent
(56%) of such Losses paid to Licensor with respect to such failure or (c) the
gross negligence or willful misconduct by Distributor or its Affiliates or their
respective officers, directors, employees, agents or consultants in performing
any of its obligations under this Agreement; in each case except to the extent
that such Losses are subject to indemnification by Prestwick pursuant to
Section 13.1.1.

 

13.1.3                  Other Provisions.  The rights of indemnification under
this Section 13.1 shall be subject to the provisions of Sections 13.2 through
13.8.

 

13.2                           Notice of Claim.  All indemnification claims in
respect of any indemnitee seeking indemnity under Section 13.1 (collectively,
the “Indemnitees” and each an “Indemnitee”) will be

 

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made solely by the corresponding Party (the “Indemnified Party”).  The
Indemnified Party will give the indemnifying Party (the “Indemnifying Party”)
prompt written notice (an “Indemnification Claim Notice”) of any Losses or the
discovery of any fact upon which such Indemnified Party intends to base a
request for indemnification under Section 13.1, but in no event will the
Indemnifying Party be liable for any Losses that result from any delay in
providing such notice which materially prejudices the defense of such Third
Party Claim.  Each Indemnification Claim Notice must contain a reasonably
detailed description of the Third Party Claim and the nature and amount of such
Loss (to the extent that the nature and amount of such Loss are known at such
time).  Together with the Indemnification Claim Notice, the Indemnified Party
will furnish promptly to the Indemnifying Party copies of all notices and
documents (including court papers) received by any Indemnitee in connection with
the Third Party Claim.  The Indemnifying Party shall not be obligated to
indemnify the Indemnified Party to the extent any admission or statement made by
the Indemnified Party materially prejudices the defense of such Third Party
Claim.

 

13.3                           Control of Defense.  At its option, the
Indemnifying Party shall have the right to assume the defense of any Third Party
Claim subject to indemnification as provided for in Section 13.1.1 and 13.1.2 by
giving written notice to the Indemnified Party within thirty (30) days after the
Indemnifying Party’s receipt of an Indemnification Claim Notice.  Upon assuming
the defense of a Third Party Claim, the Indemnifying Party may appoint as lead
counsel in the defense of the Third Party Claim any legal counsel it selects. 
Should the Indemnifying Party assume the defense of a Third Party Claim, the
Indemnifying Party will not, except as provided in Sections 13.4 and 13.7 below,
be liable to the Indemnified Party or any other Indemnitee for any legal
expenses incurred by such Indemnified Party or other Indemnitee in connection
with the analysis, defense or settlement of the Third Party Claim.

 

13.4                           Right to Participate in Defense.  Without
limiting Section 13.3, any Indemnitee will be entitled to participate in, but
not control, the defense of a Third Party Claim for which it has sought
indemnification hereunder and to employ counsel of its choice for such purpose;
provided, however, that such employment will be at the Indemnitee’s own expense
(and shall not be Losses) unless (a) the employment thereof has been
specifically authorized by the Indemnifying Party in writing, or (b) the
Indemnifying Party has failed to assume the defense and employ counsel in
accordance with Section 13.3 (in which case the Indemnified Party will control
the defense and reasonable fees and expenses representing the Indemnified Party
shall be reimbursed by the Indemnifying Party).

 

13.5                           Settlement.  With respect to any Losses relating
solely to the payment of money damages in connection with a Third Party Claim
and that will not result in the Indemnitee’s becoming subject to injunctive or
other relief or otherwise materially adversely affect the business (other than
payment of money) of the Indemnitee, and as to which the Indemnifying Party will
have acknowledged in writing the obligation to indemnify the Indemnitee
hereunder, the Indemnifying Party will have the sole right to consent to the
entry of any judgment, enter into any settlement or otherwise dispose of such
Loss, on such terms as the Indemnifying Party will deem appropriate (provided,
however that such terms shall include a complete and unconditional release of
the Indemnified Party from all liability with respect thereto), and will
transfer to the Indemnified Party all amounts which said Indemnified Party will
be liable to pay prior to the time of the entry of judgment.  With respect to
all other Losses in connection with Third Party Claims, where the Indemnifying
Party has assumed the defense of the Third Party Claim in accordance

 

47

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with Section 13.3, the Indemnifying Party will have authority to consent to the
entry of any judgment, enter into any settlement or otherwise dispose of such
Loss; provided, however, it obtains the prior written consent of the Indemnified
Party (which consent will be at the Indemnified Party’s reasonable discretion). 
The Indemnifying Party that has assumed the defense of the Third Party Claim in
accordance with Section 13.3 will not be liable for any settlement or other
disposition of a Loss by an Indemnitee that is reached without the prior written
consent of such Indemnifying Party.  Regardless of whether the Indemnifying
Party chooses to defend or prosecute any Third Party Claim, no Indemnitee will
admit any liability with respect to, or settle, compromise or discharge, any
Third Party Claim without first offering to the Indemnifying Party the
opportunity to assume the defense of the Third Party Claim in accordance with
Section 13.3, within thirty (30) days of such offer.

 

13.6                           Cooperation.  If the Indemnifying Party chooses
to defend or prosecute any Third Party Claim, the Indemnified Party will, and
will cause each other Indemnitee to, cooperate in the defense or prosecution
thereof and will furnish such records, information and testimony, provide such
witnesses and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested in connection with such Third Party
Claim.  Such cooperation will include access during normal business hours
afforded to the Indemnifying Party to, and reasonable retention by the
Indemnified Party of, records and information that are reasonably relevant to
such Third Party Claim, and making Indemnitees and other employees and agents
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder, and the Indemnifying Party will
reimburse the Indemnified Party for all its reasonable out-of-pocket expenses
incurred in connection with such cooperation.

 

13.7                           Expenses of the Indemnified Party.  Except as
provided above, the reasonable and verifiable costs and expenses, including fees
and disbursements of counsel, incurred by the Indemnified Party in connection
with any Third Party Claim will be reimbursed on a Calendar Quarter basis by the
Indemnifying Party, without prejudice to the Indemnifying Party’s right to
contest the Indemnified Party’s right to indemnification and subject to refund
in the event the Indemnifying Party is ultimately held not to be obligated to
indemnify the Indemnified Party.

 

13.8                           Insurance.  Each Party will obtain and keep in
force, through self insurance or otherwise, in a form reasonably acceptable to
the other Party hereto, insurance in scope and amount as required by Law
applicable to a Party’s activities hereunder and such additional amounts as may
be reasonably necessary to cover such Party’s indemnity obligations under this
Agreement with scope and coverage as is normal and customary in the
biotechnology/pharmaceutical industry generally for parties similarly situated. 
It is understood that such insurance will not be construed to limit a Party’s
liability with respect to its indemnification obligations under this
Article 13.  Each Party will, except to the extent self insured, provide to the
other Party upon request a certificate evidencing the insurance such Party is
required to obtain and keep in force under this Article 13.  Such certificate
will provide that such insurance will not expire or be cancelled or modified
without at least thirty (30) days’ prior notice to the other Party.

 

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ARTICLE 14
GOVERNING LAW; DISPUTE RESOLUTION

 

14.1         Governing Law.  This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without giving effect to
any conflict of laws provisions, except matters of intellectual property that
will be determined in accordance the intellectual property laws relevant to the
intellectual property in question.  The UNICITRAL Convention for the
International Sale of Goods, as well as any other unified laws relating to the
conclusion and implementation of contracts for the international sale of goods,
will not apply.

 

14.2         Jurisdiction; Venue; Service of Process.

 

14.2.1      Prestwick and its successors and assigns irrevocably and
unconditionally:

 

(a)           agree that any and all disputes between any of them and
Distributor arising out of, connected with, related to, or incidental to this
Agreement shall be resolved only by the in the courts of the State of New York
located in the City of New York, Borough of Manhattan, or of the United States
of America for the Southern District of New York;

 

(b)           waive any objection which they may have now or hereafter to the
laying of venue in the City of New York, Borough of Manhattan of any such suit,
action or proceeding in any such court, or claim that any such suit, action or
proceeding has been brought in an inconvenient forum; and

 

(c)           acknowledge the competence of any such court, submits to the
jurisdiction of any such court in any such suit, action or proceeding and agree
that the final judgment in any such suit, action or proceeding brought in any
such court or in any arbitration conducted in accordance with Section 14.3 shall
be conclusive and binding upon them and may be enforced in the courts of
Barbados once a further judgment has been obtained in the courts of Barbados,
which further judgment may as a matter of practice be obtained without
re-litigation or re-arbitration of the merits of the matter adjudicated by such
State or Federal court in the State of New York or the arbitrators in accordance
with Section 14.3, a certified or exemplified copy of which shall be conclusive
evidence of the fact and of the amount of its obligation; provided that service
of process is effected upon Prestwick in the manner specified below or as
otherwise permitted by law.

 

14.2.2      Prestwick irrevocably consents to service of process upon it out of
said courts in any such arbitration, suit, action or proceeding by mailing
copies thereof by registered or certified air mail, postage prepaid, to
Prestwick at the address referred to in Section 15.1 hereof.  The foregoing
shall not, however, limit the rights of the Parties to serve process in any
other country or any other manner permitted by law or to bring any legal action
or proceeding or to obtain an attachment or execution of judgment in any
competent jurisdiction, including in the courts of Barbados.

 

14.3         Arbitration.  Other than a claim made for indemnification under
Section 13.1, any dispute, controversy or claim arising out of or relating to
this Agreement, including, without limitation, disputes relating to (a) the
validity, inducement or breach of or the interpretation of any provision of this
Agreement or (b) the interpretation or application of Law, shall be decided by
arbitration in accordance with the Rules of the American Arbitration Association
(“AAA”) in effect at the time the dispute arises, unless the Parties hereto
mutually agree otherwise.  To the extent such rules are inconsistent with this
provision, this provision will control.

 

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14.3.1      Any demand for arbitration must be made in writing to the other
Party.

 

14.3.2      There will be a panel of three arbitrators, one selected by each
Party and one selected by mutual agreement of the arbitrators selected by each
Party.  If the arbitrators selected by the Parties cannot agree on a third
arbitrator within thirty (30) days, then the AAA shall select the third
arbitrator.  Any arbitration involving intellectual property shall be heard by
arbitrators who are experts in such areas.

 

14.3.3      The arbitration shall be held in New York, New York, U.S.A., or such
other place as the Parties agree.  The arbitrators shall apply the substantive
law of New York in accordance with Section 13.1, without regard to conflicts of
laws and except that the interpretation and enforcement of this arbitration
provision shall be governed by the Federal Arbitration Act.

 

14.3.4      Except for claims for indemnification as provided in Section 13.2,
neither Party shall have the right independently to seek recourse from a court
of law or other authorities in lieu of arbitration, but each Party has the right
before or during the arbitration to seek and obtain from the appropriate court
provisional remedies to avoid irreparable harm, maintain the status quo or
preserve the subject matter of the arbitration.  There shall be a stenographic
record of the proceedings.  The decision of the arbitrators shall be made by
majority vote and shall be final and binding upon both Parties.  The arbitrators
shall render a written opinion setting forth findings of fact and conclusions of
law.

 

14.3.5      The expenses of the arbitration shall be borne by the Parties in
proportion as to which each Party prevails or is defeated in arbitration.  Each
Party shall bear the expenses of its counsel and other experts.

 

ARTICLE 15
MISCELLANEOUS

 

15.1         Notices.  All notices or other communications that are required or
permitted under this Agreement will be in writing and delivered personally, sent
by facsimile (and promptly confirmed by personal delivery or overnight courier
as provided in this Agreement), or sent by internationally-recognized overnight
courier to the addresses below.  Any such communication will be deemed to have
been given (a) when delivered, if personally delivered or sent by facsimile on a
Business Day (so long as promptly confirmed by personal delivery or overnight
courier as provided in this Agreement), and (b) on the second Business Day after
dispatch, if sent by internationally-recognized overnight courier.  Unless
otherwise specified in writing, the mailing addresses of the Parties shall be as
described below.

 

For Prestwick:

 

with a copy to:

 

 

 

Prestwick Pharmaceuticals, Inc.

 

Morgan, Lewis & Bockius, LLP

 

 

502 Carnegie Center

 

 

Princeton, NJ 08540

Fax:

 

Fax: (609) 919-6701

 

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Attention:

 

Attention: Denis Segota, Esq.

 

 

 

For Distributor:

 

with a copy to:

 

 

 

Ovation Pharmaceuticals, Inc.

 

Katten Muchin Rosenman LLP

Four Parkway North

 

525 West Monroe Street

Deerfield, IL 60015

 

Chicago, IL 60661

Fax: (847) 282-1059

 

Fax: (312) 577-8747

Attention: Patrick J. Morris

 

Attention: Kenneth W. Miller

 

15.2         Independent Status.  Neither Party is an agent, employee or
representative of the other.  Neither Party shall have the authority to make any
statements, representations or commitments of any kind, nor to take any action,
which shall be binding on the other Party, except as may be explicitly
authorized by the other Party in writing.  This Agreement shall not constitute,
create or in any way be interpreted as a joint venture, partnership or formal
business organization of any kind.

 

15.3         Force Majeure.  Neither Party shall be liable to the other for any
failure or delay in the fulfillment of its obligations under this Agreement,
when any such failure or delay is caused by fire, flood, earthquakes, wars,
peril of the sea, acts of God, or any similar cause beyond the reasonable
control of the performing Party (each, a “Force Majeure Event”).  In the event
that either Party is prevented from discharging its obligations under this
Agreement on account of a Force Majeure Event, the performing Party will notify
the other Party forthwith, and will nevertheless make every endeavor, in the
utmost good faith, to discharge its obligations, even if in a partial or
compromised manner.

 

15.4         Entire Agreement; Amendment and Waiver.  This Agreement, including
the Exhibits and Schedules attached hereto (each of which is hereby and thereby
incorporated herein and therein by reference) between the Parties shall
constitute the entire agreement and understanding of the Parties relating to the
subject matter of this Agreement and supersedes all prior oral or written
agreements, representations, understandings or arrangements between the Parties
relating to the subject matter of this Agreement.  No amendment, supplement or
other modification to any provision of this Agreement shall be binding unless in
writing and signed by both Parties.  No waiver of any rights under this
Agreement shall be effective unless in writing signed by the Party to be
charged.  A waiver of a breach or violation of any provision of this Agreement
will not constitute or be construed as a waiver of any subsequent breach or
violation of that provision or as a waiver of any breach or violation of any
other provision of this Agreement.

 

15.5         Headings; Construction; Certain Conventions.  The headings used in
this Agreement have been inserted for convenience of reference only and do not
define or limit the provisions hereof.  The Exhibits and Schedules to this
Agreement are incorporated herein by reference and will be deemed a part of this
Agreement.  Unless otherwise expressly provided herein or the context of this
Agreement otherwise requires, (a) words of any gender include each

 

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other gender, (b) words such as “herein”, “hereof”, and “hereunder” refer to
this Agreement as a whole and not merely to the particular provision in which
such words appear, (c) words using the singular will include the plural, and
vice versa, (d) the words “include,” “includes” and “including” will be deemed
to be followed by the phrase “but not limited to”, “without limitation”, “inter
alia” or words of similar import, (e) the word “or” will be deemed to include
the word “and” (e.g., “and/or”) and (f) references to “ARTICLE,” “Section,”
“subsection”, “clause” or other subdivision, or to a Schedule or Exhibit,
without reference to a document are to the specified provision, Schedule or
Exhibit of this Agreement.  This Agreement will be construed as if it were
drafted jointly by the Parties and shall not be strictly construed against
either Party.

 

15.6         Assignment.

 

15.6.1      Limitations on Assignment.  Subject to Section 2.6, neither Party
shall assign or transfer any of its rights nor obligations under this Agreement
without the prior written consent of the other Party, provided, that a Party
shall be entitled (without the consent of the other Party) to assign this
Agreement (or any of its rights or obligations under this Agreement, including
in or to the Regulatory Approval for Product) to (a) its Affiliate (as long as
such entity remains an Affiliate of such Party) provided that such Party shall
be responsible for the performance of this Agreement by such Affiliate; (b) to
any Person to which it has sold all or substantially all of its assets relating
to this Agreement whether in writing or by operation of law (e.g. merger, asset
sale or otherwise), provided that the acquiring Person agrees to be bound by the
terms of this Agreement or (c) pursuant to that certain Assignment Option
Agreement, dated as of September 15, 2008, by and between Distributor and
Biovail Americas Corp.  Any assignment, or attempted assignment, in
contravention of this Section 15.6.1 shall be null and void and of no force or
effect.

 

15.6.2      Change of Control.  Notwithstanding Section 15.6.1 above, in the
event that a Party is subject to a Change of Control with a Third Party, which,
at the date of such Change of Control was (or an Affiliate of such Third Party
was) Developing, or Commercializing a Competing Product in the Territory, then
within thirty (30) days of the completion of such Change of Control, such Party
shall provide written notification to the other Party specifying election of one
of the following two (2) alternatives:

 

(a)           Such Party agrees to dispose of such Competing Product within a
period of twelve (12) months following the completion date of such Change of
Control; or

 

(b)           Such Party elects to terminate this Agreement which shall become
effective thirty (30) days from such notification of such Party’s election to
terminate the Agreement in its entirety, and in such event, Section 2.9 shall
not survive such termination, provided, that in the event of a Change of Control
of Distributor where Distributor elects such termination, upon the request of
Prestwick such termination shall not become effective for a period up to twelve
(12) months, as determined by Prestwick, after such notice and Distributor shall
be obligated to perform its obligations hereunder and shall have all of its
rights hereunder during such period.

 

15.7         Severability.  If any provision of this Agreement or application
thereof to anyone is adjudicated to be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect any provision
or application of this Agreement which can be given effect without the invalid
or unenforceable provision or application and shall not invalidate or render

 

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unenforceable such provision or application in any other jurisdiction.  Further,
the judicial or other competent authority making such determination shall have
the power to limit, construe or reduce the duration, scope, activity and/or area
of such provision, and/or delete specific words or phrases as necessary to
render, such provision enforceable in such jurisdiction.

 

15.8         Further Assurances.  Each Party shall, as and when requested by the
other Party, do all acts and execute all documents as may be reasonably
necessary to give effect to the provisions of this Agreement.

 

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

 

15.10       Limitation of Liability.  IN NO EVENT SHALL EITHER PARTY BE LIABLE
FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, INDIRECT, EXEMPLARY, OR PUNITIVE
DAMAGES, DIMINUTION IN VALUE, MULTIPLE OF EARNINGS DAMAGES, OR LOSS OF PROFITS,
REVENUE OR INCOME, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT
SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING UNDER
ANY CAUSE OF ACTION AND ARISING IN ANY WAY OUT OF THIS AGREEMENT.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the Effective Date.

 

OVATION PHARMACEUTICALS, INC.

 

PRESTWICK PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

 

 

 

By:

/s/ Jeffrey S. Aronin

 

By:

/s/ G.F. Horner III

 

Name:

Jeffrey S. Aronin

 

 

Name:

G.F. Horner III

 

Title:

 President & CEO

 

 

Title:

President & CEO

 

54

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EXHIBIT A

 

Press Releases

 

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

 

[g19452mb13i001.jpg]

 

CONTACT: Nelson F. Isabel

Vice-President, Investor Relations

& Corporate Communications

(905) 286-3000

 

Draft for review only:

 

BIOVAIL ACQUIRES PRESTWICK PHARMACEUTICALS

 

Represents Ongoing Implementation of Company’s New Strategic Focus

 

Provides Company’s First Commercial Product in Specialty CNS Markets

 

TORONTO, Canada, September XX, 2008 - Biovail Corporation (NYSE, TSX: BVF) today
announced it has acquired Prestwick Pharmaceuticals, Inc., a privately held,
U.S.-based pharmaceutical company that holds the Canadian and U.S. licensing
rights to Xenazine® (tetrabenazine tablets).  Xenazine® was recently approved by
the United States Food and Drug Administration (FDA) for the treatment of chorea
associated with Huntington’s disease.  Xenazine® was granted Orphan Drug
designation by the FDA, which provides the product with seven years of market
exclusivity in the United States.

 

Prestwick recently entered into an exclusive agreement with Ovation
Pharmaceuticals, Inc., a leading U.S.-based specialty biopharmaceutical company,
to commercialize Xenazine® in the U.S.  The product’s commercial launch is
anticipated late-2008.

 

“We are delighted to have acquired Prestwick, and with it, an interest in
Xenazine® - the first and only FDA-approved treatment for any symptom of
Huntington’s disease,” said Biovail Chief Executive Officer Bill Wells.  “The
transaction meets all of our acquisition criteria, and represents Biovail’s
first commercial exposure to specialty markets in central nervous system, or CNS
disorders.  The acquisition is another important step in the implementation of
our New Strategic Focus.”

 

Under the terms of the agreement, Biovail will pay $100 million to acquire 100%
of Prestwick Pharmaceuticals and related license rights.  Beyond Xenazine®, the
acquisition also provides Biovail with other early-stage products, including
Lisuride Sub Q (advanced Parkinson’s disease), Lisuride Patch (Parkinson’s
disease) and D-Serine (Schizophrenia).

 

Biovail will commercialize tetrabenazine tablets in Canada (marketed under the
Nitoman® brand name) through the Biovail Pharmaceuticals Canada sales force. 
Biovail will

 

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pay a variable supply price that ranges from 50% to 67% of net sales to
Cambridge Laboratories (Ireland) Ltd., the worldwide license holder of
tetrabenazine.

 

In addition, Biovail holds an option to develop future related products with
Ovation for the U.S. market in conjunction with Cambridge.

 

The transaction is expected to be accretive to both earnings per share and cash
flows in 2009.

 

Transfer of U.S. Commercialization Rights to Ovation Pharmaceuticals, Inc.

 

Prestwick Pharmaceuticals recently entered into an exclusive supply and
marketing agreement with Ovation Pharmaceuticals, Inc. for Xenazine® in the U.S.
Following Biovail’s acquisition of Prestwick, Biovail will supply the product to
Ovation for a variable percentage of the product’s annual net sales.  For net
sales up to $125 million, Biovail’s supply price will be 72% of net sales. 
Beyond $125 million, Biovail’s supply price will be 65% of net sales.  At both
tiers, Biovail will pay a supply price of 50% of net sales to Cambridge.

 

Ovation will market Xenazine® to U.S. specialists through a 48-person sales
force, which already markets a number of other products targeting CNS disorders,
including epilepsy and Attention Deficit Disorder.  As part of the agreement,
Biovail holds an option to co-promote Xenazine® in the United States.  Should
this option be exercised, Biovail has the right to utilize Ovation’s existing
infrastructure to assist in the recruitment, training and operational management
of a sales force.

 

Approval of Xenazine®

 

Xenazine® was approved by the FDA on August 15, 2008 for the treatment of chorea
associated with Huntington’s disease, based on the results of a double-blind,
placebo-controlled, Phase 3 study that found that Xenazine® significantly
reduced patients’ chorea burden, improved global outcome scores, and was
generally safe and well tolerated.  Additional post-marketing preclinical
studies further elucidating the safety profile of the product will be
conducted.  Xenazine® has been available in Europe for more than 30 years and in
Canada since 1996.

 

About Huntington’s Disease

 

Affecting an estimated 25,000 Americans, Huntington’s disease is a devastating
neurodegenerative disease that causes progressive movement disorders, cognitive
dysfunction and behavioral changes and is ultimately a fatal condition.  Chorea
is the most common symptom, affecting approximately 90% of Huntington’s disease
patients, and is characterized by excessive, involuntary and repetitive
movements, which are the most visible and dangerous manifestations of
Huntington’s disease and interfere with patients’ abilities to perform
activities of daily living, including dressing, bathing and caring for
themselves.  For more information about Huntington’s disease, please visit
http://www.hdfoundation.org or http://www.hdsa.org.

 

2

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

 

About Xenazine® (tetrabenazine)

 

Xenazine® is indicated for the treatment of chorea associated with Huntington’s
disease.  Xenazine® is a highly selective and reversible centrally-acting
dopamine depleting drug that works by inhibiting a molecule known as vesicular
monoamine transporter 2 (VMAT2).  Full prescribing information is available on
the Investor Relations page of Biovail’s website at www.biovail.com.

 

Important Safety Information

 

The most frequent adverse events reported with Xenazine® include
sedation/somnolence, fatigue, insomnia, depression, akathisia and nausea. 
Xenazine® can increase the risk of depression and suicidal thoughts and behavior
(suicidality) in patients with Huntington’s disease and the drug is therefore
contraindicated in patients who are actively suicidal, and in patients with
untreated or inadequately treated depression.  Xenazine® is also contraindicated
in patients with impaired hepatic function and in patients taking monoamine
oxidase inhibitors or reserpine.  Xenazine® was approved with a required Risk
Evaluation and Mitigation Strategy (REMS) to ensure that the benefits of the
drug outweigh its risks, particularly the risks of depression and suicidal
thoughts and actions. REMS is a strategy to manage a known or potential serious
risk associated with a drug or biological product.

 

Caution Regarding Forward-Looking Information and “Safe Harbor” Statement

 

To the extent any statements made in this release contain information that is
not historical, these statements are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and may be
forward-looking information under applicable Canadian provincial securities
legislation (collectively, “forward-looking statements”).  These forward-looking
statements relate to, among other things, our objectives, goals, targets,
strategies, intentions, plans, beliefs, estimates and outlook, including,
without limitation, statements concerning the terms of the transaction,
including the Company’s proposed plans for the supply and promotion of Xenazine®
in the U.S. and Canada and the terms for such supply and promotion, the
anticipated launch of Xenazine® and the anticipated impact of the transaction on
Biovail, and rights associated with future development or products, and can
generally be identified by the use of words such as “believe,” “anticipate,”
“expect,” “intend,” “plan,” “will,” “may” and other similar expressions.  In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements.

 

Although Biovail believes that the expectations reflected in such
forward-looking statements are reasonable, such statements involve risks and
uncertainties, and undue reliance should not be placed on such statements. 
Certain material factors or assumptions are applied in making forward-looking
statements, and actual results may differ materially from those expressed or
implied in such statements.  Important factors that could cause actual results
to differ materially from these expectations include, among other things: the
difficulty of predicting U.S. Food and Drug Administration approvals or the
impact of post-marketing studies on such approvals, acceptance and demand for
new pharmaceutical products, the impact of competitive products and pricing,
uncertainties associated with the development, acquisition and launch of

 

3

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

 

new products, reliance on key strategic alliances, contractual disagreements
with third parties, availability of raw materials and finished products, the
regulatory environment, consolidated tax rate assumptions, fluctuations in
operating results and other risks detailed from time to time in the Company’s
filings with the Securities and Exchange Commission and the Canadian Securities
Administrators, as well as the Company’s ability to anticipate and manage the
risks associated with the foregoing.  Additional information about these factors
and about the material factors or assumptions underlying such forward-looking
statements may be found in the body of this news release, as well as under the
heading “Risk Factors” contained in Item 3(D) of Biovail’s most recent Annual
Report on Form 20-F.

 

The Company cautions that the foregoing list of important factors that may
affect future results is not exhaustive.  When relying on Biovail’s
forward-looking statements to make decisions with respect to the Company,
investors and others should carefully consider the foregoing factors and other
uncertainties and potential events.  Biovail undertakes no obligation to update
or revise any forward-looking statement.

 

About Biovail Corporation

 

Biovail Corporation is a specialty pharmaceutical company engaged in the
formulation, clinical testing, registration, manufacture, and commercialization
of pharmaceutical products.  The Company is focused on the development and
commercialization of medicines that address unmet medical needs in niche
specialty central nervous system (CNS) markets.  For more information about
Biovail, visit the Company’s web site at www.biovail.com.

 

For further information, please contact Nelson F. Isabel at 905-286-3000 or send
inquiries to ir@biovail.com.

 

4

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

 

 

 

[g19452mb13i002.jpg]

 

CONTACT:

Sally Benjamin Young

(847) 282-5770

 

OVATION PHARMACEUTICALS ACQUIRES RIGHTS TO COMMERCIALIZE
XENAZINE® (Tetrabenazine) IN U.S. FOR CHOREA ASSOCIATED WITH
HUNTINGTON’S DISEASE

 

— U.S. Product Launch Expected By Year End —

 

DEERFIELD, Ill., [DATE] — OVATION Pharmaceuticals, Inc. announced today that it
has acquired from Prestwick Pharmaceuticals the exclusive license in the United
States to commercialize Xenazine® (tetrabenazine), an orphan drug recently
approved by the U.S. Food and Drug Administration (FDA) for the treatment of
chorea associated with Huntington’s Disease (HD).  Financial terms of the deal
were not disclosed.  Subsequently, Biovail Corporation, Canada’s largest
publicly traded pharmaceutical company, acquired Prestwick.

 

Under the terms of the agreement, Biovail and OVATION will jointly develop
additional follow-on indications for Xenazine and related products in the U.S.
in conjunction with Cambridge Laboratories Limited, the worldwide license holder
of the drug.  Xenazine is the first and only FDA-approved treatment for any
HD-related disorders.  OVATION expects to launch the product in the U.S. by the
end of this year.

 

“Obtaining the rights to Xenazine in the U.S. adds another important growth
driver to our series of multiple specialty product launches expected over the
next several years,” said Jeffrey S. Aronin, President and Chief Executive
Officer of OVATION.  “This drug represents a strong strategic fit and
complements our existing portfolio of central nervous system products, in
addition to continuing our business strategy of pursuing opportunities to bring
important new medicines to severely ill patients with unmet medical needs.”

 

Noting OVATION’s strong commercial capabilities to support the launch of
Xenazine, Aronin added, “We will be able to efficiently and effectively reach
patients suffering from this devastating neurodegenerative and ultimately fatal
disease.  We are pleased that we can bring to these patients the first approved
therapy to treat this disorder.”

 

Chorea affects approximately 25,000 Americans, interfering with their ability to
perform activities of daily living, including dressing, bathing and caring for
themselves.  Currently there are no treatments to stop or reverse the onset or
progression of HD.  Chorea is a debilitating movement disorder characterized by
excessive, involuntary and repetitive movements which are the most visible and
dangerous manifestations of Huntington disease.

 

The precise mechanism by which Xenazine exerts its anti-chorea effects is
unknown, but it is believed to be related to its effects as a reversible
depletor of monoamines by inhibiting a

 

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

 

molecule known as vesicular monoamine transporter 2 (VMAT2).  Xenazine has been
designated an orphan drug by the FDA.

 

The most frequent adverse events reported with Xenazine in a randomized,
12-week, placebo controlled clinical trial of HD subjects include
sedation/somnolence, fatigue, insomnia, depression, akathisia and nausea. 
Xenazine can increase the risk of depression and suicidal thoughts and behavior
(suicidality) in patients with Huntington’s disease and the drug is therefore
contraindicated in patients who are actively suicidal, and in patients with
untreated or inadequately treated depression.  Xenazine is also contraindicated
in patients with impaired hepatic function and in patients taking monoamine
oxidase inhibitors or reserpine.  Although Xenazine has been shown to decrease
the chorea of HD, it was also shown to cause slight worsening in mood,
cognition, rigidity and functional capacity and prescribers should periodically
re-evaluate the need for therapy.

 

About OVATION Pharmaceuticals

 

OVATION is a fast-growing biopharmaceutical company that develops, manufactures
and markets medically necessary therapies to satisfy unmet medical needs for
patients with severe illnesses.  Headquartered in Deerfield, Ill., with products
available in more than 85 countries, OVATION is committed to having a
significant impact on patients’ lives through its focus on central nervous
system, hematology/oncology, and hospital-based therapies.  The four new
launches the company expects over the next three years will largely be fueled by
its late-stage CNS pipeline, which is one of the most robust in the industry. 
OVATION has been recognized for excellence in the global pharmaceutical and
biotechnology industries with the 2006 and 2007 “Pharma Company of the Year”
award from Scrip magazine for small to mid-sized enterprises.  More information
about the company, its products and full prescribing information may be found at
www.ovationpharma.com.

 

2

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

 

SCHEDULE 1.39

 

Marketing Plan

 

The Marketing Plan means the Ovation Second U.S. Marketing Plan Letter, dated as
of 11 September 2008 as attached below, (in conjunction with the original
March 2007 Xenazine U.S. Marketing Plan prepared by Prestwick, as modified by
the first U.S. Marketing Plan Letter, dated as of 30 July 2008, each as attached
below) and as amended thereafter, subject to Section 10.10 of this Agreement,
under the Cambridge Agreement.

 

See attached.

 

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

 

[g19452mb15i001.gif]

 

Mr. Mark Evans

Thursday. September 11. 2008

Chief Executive Officer

 

Cambridge Laboratories (Ireland) Limited

 

 

Dear Mark,

 

This letter and attachments are an update to the March 2007 Xenazine® U.S.
Marketing Plan prepared by Prestwick Pharmaceuticals. Inc. (“Prestwick”) and the
Ovation Pharmaceuticals, Inc. (‘Ovation’) U.S. Marketing Plan Letter, dated as
of 30 July 2008 (in the event the details of the original marketing plan and the
two subsequent update letters conflict the terms of this update letter shall
prevail).  This update to the Marketing Plan incorporates the topics we
discussed in our meeting held this week in Chicago including our pricing
strategy for Xenazine and our plan for reimbursement and patient assistance. 
Per your request, we are providing you with detail regarding our pricing
assumptions and associated sales and quantity projections as well as detailed
projections and estimates of gross to net adjustments associated with specialty
pharmacy fees, patient assistance and co-pay assistance programs.

 

As we discussed in our meeting, we are fully confident that the market will
support a yearly cost of therapy for Xenazine of {***}†.  Also addressed in our
discussion is the requirement to support this type of price point with a
comprehensive patient assistance and co-pay assistance program.  As detailed
below, we are projecting significantly higher sales as compared with the
previous Prestwick strategy.

 

Marketing Plan Target Sales Projection

 

 

 

2008

 

2009

 

2010

 

2011

 

2012

 

2013

 

2014

 

2015

 

Gross $ Sales ($MM):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Inventory

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Factory

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Total mgs (000s):

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Demand

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Inventory

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Factory

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

WAC ASP/mg

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

 

NOTE: The above target forecast assumes a Nov-2008 launch as well as the
conditions and program elements discussed in the Marketing Plan.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

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

 

Launch Price/Year

 

{***}†

 

Days

 

{***}†

 

Avg. Maint. Dose

 

{***}†

 

Total mg/year

 

{***}†

 

ASP/mg

 

{***}†

 

 

NOTE: The average selling price/mg calculated al left assumes average dally dose
of 50mg and full compliance. It is likely that compliance will be less than 100%
while average daily dose will likely exceed 50mg/day.

 

We are also providing you with order estimates for bottles of 12.5mg and 25mg
product that are consistent with the total market estimates referenced in the
above forecast.  These forecasts, which are attached hereto as Exhibit A and
Exhibit B shall be incorporated by reference and attached as Schedule 6 and
Schedule 7, respectively. to that certain Second Amended and Restated Agreement
between Cambridge Laboratories (Ireland) Limited and Prestwick, dated 18
November 2005 (the “Development Agreement”).

 

Reimbursement Assistance, Patient Assistance Program Support and Distribution

 

As we discussed, reimbursement and patient assistance is a critical area of
support for Xenazine. We are very pleased that you acknowledge our general
philosophy to charge a fair premium for differentiated and medically necessary
products and support that market position with comprehensive reimbursement and
patient assistance program.  In the attached Exhibit C, we provide a summary of
the gross to net estimates for patient assistance and co-pay assistance {***}†
that we discussed with you in our meeting.  Additionally, we are providing our
estimates of other gross to net adjustments to provide you with a full picture
of expected adjustments.  Exhibit C presents the gross to net adjustments as a
percentage of sales and actual expenses will vary with actual sales performance.

 

Very Best Regards,

 

/s/ Jeffery S. Aronin

 

Jeffrey S. Aronin

 

President & Chief Executive Officer

 

Ovation Pharmaceuticals, Inc.

 

 

 

Read and Acknowledged:

 

/s/ Mark Evans

 

Mr. Mark Evans

 

Chief Executive Officer

 

Cambridge Laboratories (Ireland) Limited

 

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

2

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

 

EXHIBIT A

 

SCHEDULE 6

 

MINIMUM ORDER QUANTITIES (Bottles)

 

First 12 Month Binding Forecast, per Clause 10.9

 

Year

 

Strength

 

Bottles

 

mgs

 

Year 1

 

12.6mg

 

{***}†

 

{***}†

 

 

 

25mg

 

{***}†

 

{***}†

 

 

 

Combined

 

 

 

{***}†

 

 

 

 

 

mgs

 

 

 

 

For long-term planning purposes, additional non-binding quantities for year 2
are provided below.

 

Year

 

Strength

 

Bottles

 

mgs

 

 

 

12.6mg

 

{***}†

 

{***}†

 

 

 

25mg

 

{***}†

 

{***}†

 

 

 

Combined

 

 

 

{***}†

 

 

NOTE: These Minimum Order Quantities assume inventories at month 12 are at
approximately 6 months (based on next 12 month demand) and at month 24 are just
above 3 months supply per Forecast & Orders Clause 10.9.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

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

 

EXHIBIT B
SCHEDULE 7

 

MINIMUM SALES QUANTITIES (mgs)

 

NOTE: Schedule 6 contains the bottle quantity of binding purchases for year 1. 
Additionally, conversion to mgs is also provided.  These amounts represent both
demand and inventory build in the trade and at Ovation.  For Minimum Sales
Quantities, the unit of measure provided below is mgs per year.  The exact
strength mix of 12.5mg and 25mg will be determined by initial market uptake and
titration.  In subsequent years, when firm forecast are established per mutual
agreement of the parties, strength detail can be provided.

 

First 12 Month Binding Forecast

 

Year

 

mgs

 

Year 1

 

{***}†

 

 

For long-term planning purposes, additional non-binding quantities for years 2-5
are provided below.

 

Year

 

mgs

 

Year 2

 

{***}†

 

Year 3

 

{***}†

 

Year 4

 

{***}†

 

Year 5

 

{***}†

 

 

The mg sales levels presented above are consistent with the mg projections
provided in the Ovation Pharmaceuticals, Inc. (“Ovation”) U.S. Marketing Plan
Letter, dated as of 5 September 2008.  Note that the Marketing Plan letter is on
a calendar basis while the above quantities are on a 12 month basis.  Thus, some
variance will exist.

 

The parties agree that in the event they cannot reach mutual agreement on the
Minimum Sales Quantities for any of years 2 through 5 in accordance with
Section 9.11 of the Agreement and the establishment of the Minimum Sales
Quantities for any such year is ultimately referred to binding arbitration under
Clause 22 of the Agreement, the arbitrator shall not have authority to set the
Minimum Sales Quantity for tie year in question at greater than {***}† of the
non-binding quantities set forth above for such year.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

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

 

EXHIBIT C

 

Ovation’s Current Estimate of Ordinary or Customary Charges or Deductions from
Net Sales

 

The gross to net reduction for calculating royalty payments with Cambridge is
detailed as follows:

 

 

 

 

 

Year l

 

Year 2

 

Year 3

 

Year 4

 

Year 5

 

Year 6

 

Year 7

 

Variable Components

 

% Total

 

Component

 

Component

 

Component

 

Component

 

Component

 

Component

 

Component

 

Discounts to Payors

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Cash Discounts

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Medicaid CPI

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Returns

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Specialty Pharmacy

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Co-Pay (Out of Pocket) Program

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

Federal Supply Schedule (FSS)

 

 

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

{***}†

 

 

NOTE: The assumptions above are to be applied relative to the month of product
launch; thus, calendar year calculations will differ somewhat if the product is
not launched in January.

 

Variable Costs (stated as % of Gross Sales):

 

Discount to Payers:

 

Payer mix is assumed as Medicare {***}†, Commercial {***}† and Medicaid {***}†
(based on marketing research study).  There are no plans to offer rebate
contracts with Medicare/Commercial.  Medicaid will be subject to the required
{***}† discount, which nets out to a {***}† ({***}† x {***}† payer mix) overall
figure for this component.

 

Cash Discounts:

 

Normal cash discounts for timely payment are assumed at {***}†.

 

Medicaid CPI:

 

In year 1, there would be no incremental CPI rebates, However, as an {***}†
annual inflation rate is assumed (vs. assumed {***}† for CPI), there would be
incremental CPI rebates required to be paid to Medicaid, This increases
approximately {***}† percentage points each year.

 

Returns:

 

The returns reserve is low, at {***}†, as the product will be distributed via a
limited number of specialty pharmacies (likely 3 at launch).  Relative to
traditional retail trade pharmacy stocking which can cover over 50,000
pharmacies and lead to product returns, specialty

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

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

 

pharmacy affords a significantly more efficient management of trade inventory
levels.  Thus, we expect returns to be minimal.

 

Specialty Pharmacy:

 

This is the fee-for-service portion of the specialty pharmacy program.  Contract
negotiations have not been finalized yet, however.  Ovation is targeting
achieving a low {***}† for this component.  By comparison. traditional
fee-for-service arrangements are typically in the {***}† range.

 

Co-Pay Program:

 

The co-pay program is based on a detailed estimate of the level of out of pocket
costs associated with Xenazine.  This analysis was based on the payer mix
detailed, along with expected benefit design elements from our research with
pharmacy directors (sec MME report).  The co-pay program will seeks to reduce
economic hardship of the patient.  The model assumes an overall level of {***}†
for this component.  The final rate will be dependent on finalizing negotiations
with 3rd party administrators of these programs.  Over time, the exact rate
assumed for co-pay assistance will be dependent on both federal and state
regulations.  There is potential for these regulations to change which may
result in future variability to this rate.

 

FSS (Federal Supply Schedule):

 

A 24% statutory discount is assumed for the portion of the business administered
through organizations such as the Department of Defense and Veteran’s Affairs. 
This mix is estimated to be approximately {***}†, which when applied to a {***}†
figure yields the {***}† assumption.

 

Fixed Costs:

 

Specialty pharmacy HUB services fees will also be incurred as part of the
specialty pharmacy management and distribution of Xenazine.  Ovation is
estimating these expenses to be approximately {***}† in 2008, {***}† in 2009 and
{***}† annually in 2010 and thereafter.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

2

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

 

SCHEDULE 1.40

 

Minimum Order Quantities

 

See attached.

 

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

 

EXHIBIT A

 

SCHEDULE 6

 

MINIMUM ORDER QUANTITIES (Bottles)

 

First 12 Month Binding Forecast, per Clause 10.9

 

Year

 

Strength

 

Bottles

 

mgs

 

Year 1

 

12.6mg

 

{***}†

 

{***}†

 

 

 

25mg

 

{***}†

 

{***}†

 

 

 

Combined

 

 

 

{***}†

 

 

 

 

 

mgs

 

 

 

 

For long-term planning purposes, additional non-binding quantities for year 2
are provided below.

 

Year

 

Strength

 

Bottles

 

mgs

 

 

 

12.6mg

 

{***}†

 

{***}†

 

 

 

25mg

 

{***}†

 

{***}†

 

 

 

Combined

 

{***}†

 

{***}†

 

 

NOTE: These Minimum Order Quantities assume inventories at month 12 are at
approximately 6 months (based on next 12 month demand) and at month 24 are just
above 3 months supply per Forecast & Orders Clause 10.9.

 

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

† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

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

 

SCHEDULE 1.41

 

Minimum Sales Quantities

 

See attached.

 

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

 

EXHIBIT B
SCHEDULE 7

 

MINIMUM SALES QUANTITIES (mgs)

 

NOTE: Schedule 6 contains the bottle quantity of binding purchases for year 1. 
Additionally, conversion to mgs is also provided.  These amounts represent both
demand and inventory build in the trade and at Ovation.  For Minimum Sales
Quantities, the unit of measure provided below is mgs per year.  The exact
strength mix of 12.5mg and 25mg will be determined by initial market uptake and
titration.  In subsequent years, when firm forecast are established per mutual
agreement of the parties, strength detail can be provided.

 

 

First 12 Month Binding Forecast

 

Year

 

mgs

 

Year 1

 

{***}†

 

 

For long-term planning purposes, additional non-binding quantities for years 2-5
are provided below.

 

Year

 

mgs

 

Year 2

 

{***}†

 

Year 3

 

{***}†

 

Year 4

 

{***}†

 

Year 5

 

{***}†

 

 

The mg sales levels presented above are consistent with the mg projections
provided in the Ovation Pharmaceuticals, Inc. (“Ovation”) U.S. Marketing Plan
Letter, dated as of 5 September 2008.  Note that the Marketing Plan letter is on
a calendar basis while the above quantities are on a 12 month basis.  Thus, some
variance will exist.

 

The parties agree that in the event they cannot reach mutual agreement on the
Minimum Sales Quantities for any of years 2 through 5 in accordance with
Section 9.11 of the Agreement and the establishment of the Minimum Sales
Quantities for any such year is ultimately referred to binding arbitration under
Clause 22 of the Agreement, the arbitrator shall not have authority to set the
Minimum Sales Quantity for tie year in question at greater than {***}† of the
non-binding quantities set forth above for such year.

 

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† Represents material which has been redacted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULE 1.59

 

Specialty Pharmacy Hub Description

 

“TheraCom, Inc. offers comprehensive reimbursement, clinical and data collection
and reporting solutions customized for the biotechnology and pharmaceutical
manufacturer.”

 

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SCHEDULE 9.1.1(g)

 

Brokers; Investment Banker

 

None.

 

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