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


 




 





 

















 


	
  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

  



 


i

















 


	
  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

  



 


ii

















 


	
  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

  	
   

  



 


iii

















 


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

















 


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.


 


2

















 


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

















 


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.


 


4

















 


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.


 


5

















 


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

















 


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


 






† 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

















 


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














 


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

















 


	
  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

















 


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

















 


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

















 


(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

















 


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

















 


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

















 


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

















 


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

















 


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

















 


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














 


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

















 


(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

















 


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

















 


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

















 


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

















 


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

















 


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

















 


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

















 


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














 


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 


 


31

















 


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

















 


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

















 


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

















 


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





















 


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 


 


36





















 


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





















 


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


 


38


















 


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

















 


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

















 


(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

















 


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

















 


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;


 


43

















 


(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

















 


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.


 


45

















 


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 


 


46

















 


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

















 


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.


 


48














 


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.


 


49

















 


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

  



 


50

















 


	
  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 


 


51

















 


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 


 


52

















 


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]


 


53

















 


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

















 


EXHIBIT
A


 


Press
Releases


 














 





 


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


 

















 


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

















 


 


 





 


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.


 














 





 


	
  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.


 






† 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
1.59


 


Specialty
Pharmacy Hub Description


 


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


 

















 


SCHEDULE
9.1.1(g)


 


Brokers;
Investment Banker


 


None.