Document:

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EXHIBIT 10.4

NEITHER THIS SENIOR NOTE (THIS “NOTE”) NOR THE SHARES OF STOCK THAT MAY BE ISSUABLE UPON REPAYMENT
OF ANY PORTION OF THIS NOTE, IF APPLICABLE, HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE HOLDER MAY NOT TRANSFER THIS NOTE OR THE SHARES OF STOCK THAT MAY BE ISSUABLE UPON
REPAYMENT OF ANY PORTION OF THIS NOTE UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION COVERING THIS
NOTE OR THE SHARES OF STOCK THAT MAY BE ISSUABLE UPON REPAYMENT OF ANY PORTION OF THIS NOTE UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR (B) IF REQUESTED BY
AVANIR PHARMACEUTICALS, IT FIRST RECEIVES A LETTER FROM AN ATTORNEY REASONABLY ACCEPTABLE TO IT
STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER ALL APPLICABLE STATE SECURITIES LAWS.

SENIOR NOTE

			
	$4,000,000.00
	 	May 24, 2006 (the “Execution Date”)

Costa Mesa, California

          For value received Avanir Pharmaceuticals, a California corporation (“Payor”), promises to pay
to Neal R. Cutler (“Holder”) the principal sum of Four Million dollars ($4,000,000.00) in lawful
money of the United States in immediately available funds, subject to adjustment as provided
herein, and to pay interest on the outstanding principal amount of this Senior Note (this “Note”)
as provided herein, until this Note is repaid in full.

          This Note is issued pursuant to and subject to the terms of the Unit Purchase Agreement dated
as of May 22, 2006 (the “Purchase Agreement”) by and among Payor, the parties listed on
Schedule A to the Purchase Agreement and Alamo Pharmaceuticals, LLC, a California limited
liability company, and is issued concurrently with that certain Senior Note in the principal sum of
$14,400,000 by and between Payor and Holder (the “Buyer Note 1”) and that certain Senior Note in
the principal sum of $6,675,000 by and between Payor and Holder (the “Buyer Note 2”, together with
Buyer Note 1, the “Additional Notes”).

          For the purposes of this Note, the following terms shall have the meanings set forth below:

          “Average Price” means the average of the per share Closing Prices of the Payor Common Stock
for the 5 consecutive Trading Days ending on the Trading Day immediately preceding the date of the
applicable calculation, provided that in calculating the Average Price, each Closing Price during
the period commencing on the first Trading Day of such 5 consecutive Trading Day period and ending
on the date of an event that would require an adjustment of the Threshold Price pursuant to Section
3 hereof, shall be appropriately adjusted to take into account the occurrence of the event that
would result in an adjustment of the Threshold Price.

 

 

          “Business Day” means any day that is not a Saturday, Sunday or other day on which banks in the
State of California are authorized or required to close.

          “Closing Price” of the Payor Common Stock on any date means the closing per share sale price
(or, if no closing sale price is reported, the average of the bid and ask prices or, if more than
one in either case, the average of the average bid and average ask prices) on such date as reported
on the NASDAQ National Market (at such time that the NASDAQ National Market is not a national
securities exchange), or if such bid and ask prices are not reported by the NASDAQ National Market,
in a manner to be determined by the Payor on the basis of such quotation as the Payor’s Board of
Directors considers appropriate in its reasonable discretion or if the Payor Common Stock is traded
on a U.S. national securities exchange, the closing per share sale price of the Payor Common Stock
as is reported in composite transactions for the principal U.S. securities exchange on which the
Payor Common Stock is so traded.

          “Events of Default” has the meaning set forth in Section 9.1.

          “Financing Prepayment Date” means three Business Days following the consummation of the
applicable Financing Transaction; provided, however that if any Financing Transaction shall occur
before the Pledge Expiration Date, the Financing Prepayment Date for any such Financing Transaction
shall be the 10th Business Day after the Pledge Expiration Date.

          “Financing Transaction” means each (a) sale by Payor or any of its subsidiaries of any of its
debt, equity or convertible securities when such securities have been registered for public sale
pursuant to the Securities Act and (b) sale by Payor or any of its subsidiaries to investors of any
of its debt, equity or converstible securities in a transaction exempt from the registration
requirements of the Securities Act (but, in each case, excluding the issuance of (i) options or
stock issued to employees, consultants, advisors, officers or directors pursuant to a plan or
arrangement approved in advance by Payor’s Board of Directors, (ii) securities issued to lessors in
connection with lease financings and the like, (iii) securities issued on conversion of any
outstanding convertible securities of Payor, (iv) securities issued by a subsidiary of Payor to
Payor or another subsidiary of Payor and (v) and securities issued as consideration for mergers,
acquisitions or to strategic partners). In no event shall a Financing Transaction include the
proceeds of bank loans or credit facilities or revenues from the licensing or sale of any of
Payor’s products, services or technologies.

          “Initial Threshold Price” means $15.00.

          “Interest Determination Date” has the meaning set forth in Section 1.1(b).

          “Interest Payment Date” means the last day of each month, or if such date is not a Business
Day, the next succeeding Business Day.

          “Interest Period” means the period from May 24, 2006 to but excluding the first Interest
Payment Date and each successive period from and including each Interest Payment Date to but
excluding the following Interest Payment Date.

          “Interest Rate” has the meaning set forth in Section 1.1(a)

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          “LIBOR” means the London interbank offered rates.

          “London Business Day” is a day on which dealings in deposits in U.S. dollars are transacted in
the London interbank market.

          “Market Disruption Event” means the occurrence or existence for more than one half hour period
in the aggregate on any scheduled Trading Day of any suspension or limitation imposed on trading in
the Payor Common Stock or in any options, contracts or future contracts relating to the Payor
Common Stock, and such suspension or limitation occurs or exists at any time before 1:00 p.m.
(Eastern Time) on such day.

          “Maturity Date” means the earlier of (a) the third anniversary of the Execution Date, or if
such third anniversary is not a Business Day, the next succeeding Business Day and (b) the date of
the consummation of any sale of all or substantially all of the assets of Payor.

          “Payor Common Stock” means the Class A common stock, no par value, of Payor, or any successor
security into which Class A common stock shall have been reclassified, exchanged or converted
(including as a result of a merger, reorganization, consolidation, share exchange or similar
business combination).

          “Pledge Expiration Date” means the later of (i) the first anniversary following the Execution
Date, or if such first anniversary is not a Business Day, the next succeeding Business Day, or (ii)
if a written notice of a claim for Damages (as defined in the Purchase Agreement) has been given
prior to the first anniversary following the Execution Date, the earlier of (a) the date that such
claim has been resolved pursuant to Article X of the Purchase Agreement or (b) the Maturity Date.

          “Prepayment Election Date” means the date for prepayment specified in the Prepayment Election
Notice, which date shall be not greater than three Trading Days following the date on which the
Prepayment Election Notice is delivered to Payor and shall in all events be prior to the Maturity
Date.

          “Prepayment Election Notice” means a written notice delivered by Payor to Holder stating
Payor’s election to prepay all or any portion of the outstanding principal amount of this Note in
shares of Repayment Stock, the Prepayment Election Date, the number of shares of Repayment Stock to
be issued and the amount of cash to be paid in lieu of any fractional share of Repayment Stock.

          “Repayment Amount” means, as of any date of determination, the outstanding principal amount of
this Note, plus any accrued and unpaid interest thereon to such date.

          “Repayment Stock” means a number of shares of Payor Common Stock that is calculated by
dividing (x) the portion of the outstanding principal amount of and accrued and unpaid interest on
this Note specified in the Prepayment Election Notice to be prepaid in Payor Common Stock, by (y)
95% of the Average Price calculated as of the date on which the Prepayment Election Notice is
delivered to Holder.

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          “Registration Rights Agreement” means the Registration Rights Agreement between Payor and
Holder, dated as of the Execution Date.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Stock Equivalents” has the meaning set forth in Section 3.1.

          “Threshold Price” means the Initial Threshold Price as the same may be adjusted pursuant to
Section 3 herein.

          “Trading Day” means any day on which (i) there is no Market Disruption Event and (ii) the
NASDAQ National Market (at such time that the NASDAQ National Market is not a national securities
exchange) or the U.S. national securities exchange on which the Payor Common Stock is listed,
admitted for trading or quoted, is open for trading or, if the Payor Common Stock is not so listed,
admitted for trading or quoted, any Business Day. A “Trading Day” only includes those days that
have a scheduled closing time of 4:00 p.m. (Eastern Time) or the then standard closing time for
regular trading on the relevant trading system.

          “Trigger Event” means if the Closing Price of the Payor Common Stock is equal to or greater
than the Threshold Price for 20 Trading Days during any 30 consecutive Trading Day period prior to
the Maturity Date.

     1. Interest; Repayment Prior to Maturity.

          1.1 Interest.

               (a) Interest on this Note shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months and shall be payable to Holder, in cash, by check or by wire transfer at an
address or to an account designated by Holder in advance, on each Interest Payment Date until this
Note is either converted or repaid in full as provided herein.

               (b) The outstanding principal amount of this Note will bear interest for each Interest Period
at a per annum rate equal to LIBOR as determined on the second London Business Day preceding the
commencement of such Interest Period (the “Interest Determination Date”) plus 1.33% (133 basis
points) (the “Interest Rate”). The Interest Determination Date for this Note for the first
Interest Period is May 22, 2006. Promptly upon determination of the rate by Payor, Payor will
inform Holder of the interest rate for the next Interest Period. On any Interest Determination
Date, LIBOR will be equal to the offered rate for deposits in U.S. dollars having an index maturity
of one month, in amounts of at least $1.0 million, as such rate appears on Telerate Page 3750 at
approximately 11:00 a.m., London time, on such Interest Determination Date. If Telerate Page 3750
is replaced by another service or ceases to exist, Payor will use the replacing service or such
other service that may be nominated by the British Bankers’ Association for the purpose of
displaying LIBOR for U.S. dollar deposits. If no offered rate appears on Telerate Page 3750 on an
Interest Determination Date at approximately 11:00 a.m., London time, then Payor will select four
major banks in the London interbank market and shall request each of their principal London offices
to provide a quotation of the rate at which one-month deposits in U.S. dollars in amounts of at
least $1.0 million are offered by it to prime banks

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in the London interbank market, on that date and at that time, that is representative of
single transactions at that time. If at least two quotations are provided, LIBOR will be the
arithmetic average of the quotations provided. Otherwise, Payor will select three major banks in
New York City and shall request each of them to provide a quotation of the rate offered by them at
approximately 11:00 a.m., New York City time, on the Interest Determination Date for loans in U.S.
dollars to leading European banks having an index maturity of one month for the applicable Interest
Period in an amount of at least $1.0 million that is representative of single transactions at that
time. If three quotations are provided, LIBOR will be the arithmetic average of the quotations
provided. Otherwise, the rate of LIBOR for the next Interest Period will be set equal to the rate
of LIBOR for the then-current Interest Period.

               (c) If Payor defaults in a payment of interest on the Notes, it shall pay the defaulted
interest plus, to the extent permitted by law, interest payable on the defaulted interest at a rate
equal to 2.76% over the Interest Rate.

          1.2 Cash Prepayment at Payor’s Option. Payor may, at its option and without penalty,
prepay all or any portion of the outstanding principal amount of and accrued and unpaid interest on
this Note at any time prior to the Maturity Date by payment to Holder at an address or to an
account designated by Holder in advance by wire transfer of immediately available funds.

          1.3 Stock Prepayment at Payor’s Option.

               (a) Subject to paragraph (c) below, Payor may, at its sole option and without penalty, elect
to prepay all or any portion of the outstanding principal amount of and accrued and unpaid interest
on this Note at any time prior to the Maturity Date in Repayment Stock in the event that:

                    (i) a Trigger Event has occurred within the preceding 180 calendar days; and

                    (ii) the Average Price exceeds $[THE CLOSING PRICE ON THE TRADING DAY PRIOR TO THE CLOSING
DATE] (subject to adjustment on the same basis as the Initial Threshold Price shall be adjusted in
accordance with Section 3) per share (calculated as of the date on which the Prepayment Election
Notice is delivered to Holder),

by delivering to Holder, a Prepayment Election Notice pursuant to the notice provisions set forth
in Section 11.05 of the Purchase Agreement.

               (b) Delivery of Prepayment Stock. On the Prepayment Election Date specified in the
applicable Prepayment Election Notice, Payor shall, at its expense, issue and deliver to Holder at
Payor’s principal office, a certificate or certificates for any shares of the Repayment Stock to
which Holder is entitled (bearing such legends as are required by Section 4 and applicable state
and federal securities laws), together with cash in lieu of any fractional share (determined by
multiplying such fractional share by the Average Price as of the date on which the Prepayment
Election Notice is delivered to Holder). Any repayment of this Note or any portion thereof in
shares of Repayment Stock pursuant to this Section 1.3 will be deemed to have

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been made on the applicable Prepayment Election Date and such shares of Repayment Stock shall
be dated as of the applicable Prepayment Election Date.

               (c) Registration. Payor shall not be permitted to prepay this Note with Repayment
Stock pursuant to this Section 1.3, unless, at the time of such prepayment (i) the Securities
Exchange Commission shall have declared effective a shelf registration statement under the
Securities Act covering the resale of the Repayment Stock or (ii) the Repayment Stock shall no
longer be Registerable Securities (as defined in the Registration Rights Agreement), each in
accordance with the Registration Rights Agreement.

          1.4 Financing Prepayments.

               (a) Upon the consummation of a Financing Transaction that results in net proceeds to Payor
and/or any of its subsidiaries of $100,000,000 or more from such Financing Transaction prior to the
termination of this Note upon payment in full, Payor shall pay to Holder the Repayment Amount as of
the Financing Prepayment Date at an address or to an account designated by Holder in advance by
wire transfer of immediately available funds on or before the Financing Prepayment Date.

               (b) Upon the consummation of any Financing Transaction that results in net proceeds to Payor
and/or any of its subsidiaries of less than $100,000,000 from such Financing Transaction prior to
the termination of this Note upon payment in full, Payor shall pay, on the applicable Financing
Prepayment Date, the outstanding principal amount of and accrued and unpaid interest on this Note
in an aggregate amount equal to the lesser of (x) the Repayment Amount and (y) 20% of the net
proceeds of such Financing Transaction, which prepayment shall be made at an address or to an
account designated by Holder in advance by wire transfer of immediately available funds on or prior
to such Financing Prepayment Date; provided, however that no payment on this Note shall be made
pursuant to this Section 1.4(b) until the outstanding principal amount of and accrued and unpaid
interest on the Buyer Note 1 has been paid in full.

     2. Repayment at Maturity.

          2.1 Repayment. The Repayment Amount shall be due and payable by Payor on the Maturity
Date by wire transfer of immediately available funds to an account designated by Holder prior to
the second Business Day preceding the Maturity Date.

          2.2 Delivery of Note. Upon repayment of this Note to Holder in full by payment of
cash and/or delivery of certificates representing the Repayment Stock in accordance with the terms
of this Note (a) this Note shall become fully paid and satisfied, (b) all rights with respect to
this Note shall immediately cease and terminate, except only the right to receive such repayment
and/or shares of Repayment Stock in exchange therefor, and (c) Holder shall surrender this Note,
duly endorsed for cancellation, to Payor.

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     3. Threshold Price Adjustments.

          3.1 Stock Splits, Dividends, Etc. In the event Payor should at any time or from time
to time after the Execution Date effectuate a split or subdivision of the outstanding shares of
Payor Common Stock or fix a record date for the determination of holders of Payor Common Stock
entitled to receive a dividend or other distribution payable in additional shares of Payor Common
Stock or other securities or rights convertible into, or entitling the holder thereof to receive
directly or indirectly, additional shares of Payor Common Stock (hereinafter referred to as “Stock
Equivalents”) without payment of any consideration by such holder for the additional shares of
Payor Common Stock or the Stock Equivalents, then, as of such record date (or the date of such
dividend distribution, split or subdivision if no record date is fixed), the Threshold Price then
in effect shall be reduced to the number obtained by multiplying the Threshold Price in effect at
such date by a fraction, the numerator of which is the number of shares of Payor Common Stock
outstanding immediately prior to such action, and the denominator of which shall be the number of
shares of Payor Common Stock outstanding immediately following such action assuming the full
conversion or exercise, as applicable, of such Stock Equivalents.

          3.2 Reverse Stock Split, Combination. If the number of shares of Payor Common Stock
outstanding at any time after the Execution Date is decreased by a reverse stock split or
combination of the outstanding shares of Payor Common Stock, then, following the effective date of
such combination, the Threshold Price then in effect shall be increased to the number obtained by
multiplying the Threshold Price in effect at such date by a fraction, the numerator of which is the
number of shares of Payor Common Stock outstanding immediately prior to such action, and the
denominator of which shall be the number of shares of Payor Common Stock outstanding immediately
following such action.

          3.3 Successive Adjustments. Successive adjustments in the Threshold Price shall be
made, without duplication, whenever any event specified in Section 3.1 or 3.2 shall occur.

          3.4 Minimal Adjustments. All calculations under this Section 3 shall be made to the
nearest cent. No adjustment in the Threshold Price need be made if such adjustment would result in
a change in the Threshold Price of less than $0.01. Any adjustment of less than $0.01 that is not
made shall be carried forward and shall be made at the time of and together with any subsequent
adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Threshold
Price.

          3.5 Adjustment Notice. In the event the Threshold Price is adjusted pursuant to
Section 3.1 or 3.2, Payor will promptly mail to Holder a statement setting forth in reasonable
detail the event requiring the adjustment, the amount of the adjustment, and the method by which
such adjustment was calculated, and the date on which such adjustment became effective.

     4. Transfer, Legend and Stop Transfer Orders.

          4.1 Holder acknowledges that this Note and the Repayment Stock have not been registered under
the Securities Act and agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Note or any Repayment Stock unless (a) there is an effective

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registration covering such Note or such shares of Repayment Stock, as the case may be, under
the Securities Act and applicable states securities laws or (b) if requested by Payor, Payor first
receives a letter from an attorney reasonably acceptable to Payor (it being understood that
Milbank, Tweed, Hadley & McCloy LLP shall be deemed acceptable to Payor), stating that in the
opinion of the attorney the proposed transfer is exempt from registration under the Securities Act
and under all applicable state securities laws. Unless the shares of Repayment Stock have been
registered under the Securities Act, upon the issuance of any shares of Repayment Stock, Payor
shall instruct its transfer agent or registrar to enter stop transfer orders with respect to such
shares, and all certificates representing shares of Repayment Stock shall bear on the face thereof
substantially the following legend:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE HOLDER MAY NOT TRANSFER THE SECURITIES EVIDENCED HEREBY UNLESS
(A) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SECURITIES EVIDENCED BY THIS
CERTIFICATE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR (B) IF REQUESTED BY AVANIR PHARMACEUTICALS, IT FIRST RECEIVES A
LETTER FROM AN ATTORNEY REASONABLY ACCEPTABLE TO IT STATING THAT IN THE OPINION OF
THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND UNDER ALL APPLICABLE STATE SECURITIES LAWS.

          4.2 Prior to any such proposed transfer, and as a condition thereto, if such transfer is not
made pursuant to an effective registration statement under the Securities Act, Holder will, if
requested by Payor, deliver to Payor a certificate of the proposed transferee in the form attached
to this Note as Exhibit A.

     5. Security Interest.

          5.1 Holder agrees that pursuant to the terms of the Purchase Agreement, this Note is subject
to the Pledge Agreement of even date herewith by and between Payor and Holder, which provides for
the pledge of this Note by Holder to Payor as a security for the performance of Holder’s
obligations under Article IX of the Purchase Agreement until the Pledge Expiration Date. Holder
acknowledges that this Note shall be retained by Payor until the Pledge Expiration Date, although
deemed to have been received by Holder at the time of its issuance pursuant to the Purchase
Agreement.

          5.2 Pursuant to Section 9.07 of the Purchase Agreement, in the event that Holder is obligated
to indemnify a Buyer Indemnified Party (as defined in the Purchase Agreement) under Article IX of
the Purchase Agreement, prior to the Maturity Date, Payor shall first reduce the outstanding
principal amount of this Note, and if the outstanding principal amount of this Note shall have been
reduced to zero, shall then reduce any accrued and unpaid interest, by the amount that Holder is
obligated to pay to such Buyer Indemnified Party in lieu of

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receiving a cash payment for such amount. Payor shall provide Holder prompt written notice of
any such reduction in the outstanding principal amount of this Note or interest payable on this
Note pursuant to this Section 5.2. Interest shall accrue only on the outstanding principal amount
of this Note after any such reduction pursuant to this Section 5.2. If prior to the Maturity Date
the aggregate amount that Holder is obligated to pay all Buyer Indemnified Parties equals or exceed
$4,000,000, (a) this Note shall be deemed to have been fully paid and satisfied and all rights with
respect to this Note shall immediately cease and terminate, except for only the right of Holder to
receive any accrued and unpaid interest, and (b) Holder shall surrender this Note, duly endorsed
for cancellation, to Payor.

     6. Rights of Holder.

          Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in Payor,
either at law or in equity, and the rights of Holder are limited to those expressed in this Note.

     7. Representation and Warranties.

          7.1 Holder. Holder has delivered to Payor an Accredited Investor Certificate (as
defined in the Purchase Agreement).

          7.2 Payor.

               (a) All shares of Payor Common Stock to be issued to Holder as Repayment Stock, when issued
pursuant to and in accordance with this Note and the Purchase Agreement, will be duly authorized,
validly issued, fully paid and non-assessable.

               (b) Payor has duly reserved a sufficient number of shares of Payor Common Stock for the
issuance of the Repayment Stock.

     8. Covenants of Payor. For so long as this Note shall remain outstanding, Payor shall keep a
sufficient number of shares of Payor Common Stock reserved for the issuance of the Repayment Stock.

     9. Events of Default.

          9.1 The following events will be considered “Events of Default” with respect to this Note:

               (a) Payor defaults in the payment of any part of the Repayment Amount at the Maturity Date;

               (b) Payor defaults in the payment the amount to be paid pursuant to Section 1.4 on any
Financing Prepayment Date and such default continues for a period of three Business Days;

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               (c) Payor defaults in the delivery of any Repayment Stock as of the Prepayment Election Date
and such default continues for a period of three Trading Days;

               (d) Payor defaults in the payment of any interest due on the Note, which default continues for
30 days;

               (e) the occurrence of an event of default under any of the Additional Notes, and any of the
Contingent Note or the Alternate Contingent Notes (each as defined in the Purchase Agreement) if
issued in accordance with Section 1.04(c) of the Purchase Agreement);

               (f) Payor defaults in the payment of any Contingent Payment, any Non-US Licensing Earn-Out
Payment or any Run Rate Contingent Payment (each as defined in the Purchase Agreement) that the
parties or the Independent Accounting Firm (as defined in the Purchase Agreement) have determined
is due and payable in accordance with the terms of the Purchase Agreement and such default
continues for three Business Days;

               (g) Payor makes an assignment for the benefit of creditors, or admits in writing its inability
to pay its debts as they become due, or files a voluntary petition for bankruptcy, or files any
petition or answer seeking for itself any reorganization, arrangement, composition, readjustment,
dissolution or similar relief under any present or future statute, law or regulation, or files any
answer admitting the material allegations of a petition filed against Payor in any such proceeding,
or seeks or consents to, or acquiesces in, the appointment of any trustee, receiver or liquidator
of Payor, or of all or any substantial part of the properties of Payor, or Payor or its respective
directors or majority shareholders takes any action looking to the dissolution or liquidation of
Payor; or

               (h) Within 30 days after the commencement of any proceeding against Payor seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, such proceeding has not been dismissed or,
within 30 days after the appointment without the consent or acquiescence of Payor of any trustee,
receiver or liquidator of Payor or of all or any substantial part of the properties of Payor, such
appointment will not have been vacated.

          9.2 Upon the occurrence of an Event of Default, at the option and upon the declaration of
Holder, the Repayment Amount will, without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived, be forthwith due and payable, and Holder may, immediately and
without expiration of any additional period of grace, enforce payment of all amounts due and owing
under this Note and exercise any and all other remedies granted to it at law, in equity or
otherwise. No right or remedy herein conferred upon Holder is intended to be exclusive of any other
right or remedy contained in the Purchase Agreement, the Registration Rights Agreement, this Note
or in any instrument or document delivered in connection with or pursuant to the Purchase
Agreement, the Registration Rights Agreement or this Note and every such right or remedy contained
herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise may
be exercised separately or in any combination. No course of dealing between Payor and the Holder
or any failure or delay on the

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Holder’s part in exercising any rights or remedies hereunder shall operate as a waiver or
preclude the exercise of any other rights or remedies hereunder.

     10. Governing Law.

          The terms of this Note and disputes arising hereunder will be construed in accordance with and
governed by the laws of the State of California, as applied to contracts entered into by California
residents within the State of California, which contracts are to be performed entirely within the
State of California, without reference to principles of conflicts of laws.

     11. Waiver.

          A delay in exercising rights any hereunder will not constitute a waiver of any such rights.

     12. Loss, Theft, Destruction or Mutilation.

          Upon receipt by Payor of evidence and indemnity reasonably satisfactory to it of the loss,
theft, destruction or mutilation of, and upon surrender and cancellation of this Note, if
mutilated, Payor will make and deliver in lieu of this Note a new note of like tenor and unpaid
principal amount and dated as of the date to which interest, if any, has been paid on the unpaid
principal amount of this Note.

     13. Assignment.

          This Note, and the obligations and rights of Payor hereunder, will be binding upon and inure
to the benefit of Payor, Holder, and their respective heirs, personal representatives, successors
and assigns, except that (a) Holder may only assign or transfer any of its rights or obligations
under this Note in accordance with Section 4, and (b) Payor may not assign or transfer any of its
rights or obligations under this Note without the prior written consent of Holder; provided,
however that Payor may assign its rights or obligations under this Note without obtaining such
consent to any successor or purchaser in connection with a merger of Payor; provided, further that
Payor shall provide Holder with written notice of the proposed assignment at least ten Business
Days prior to such merger.

     14. Amendments and Waivers.

          Changes in or amendments or additions to this Note may only be made, and compliance with any
term, covenant, agreement, condition or provision set forth herein may only be omitted or waived
(either generally or in a particular instance and either retroactively or prospectively), upon
written consent of each of Payor and Holder.

          15. Notices.

          Any and all notices or other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the earliest

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of (i) the
date of transmission, if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section prior to 5:00 p.m. (California time) on a Business Day, (ii) the
Business Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Note later than 5:00 p.m. (California
time) on any date and earlier than 11:59 p.m. (California time) on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be given. The address for
such notices and communications shall be as follows:

	 	 	 
	If to Payor:

	 	Avanir Pharmaceuticals
	 

	 	11388 Sorrento Valley Rd.
	 

	 	San Diego, CA 92121
	 

	 	Attention: Michael Puntoriero
	 

	 	Telephone: (858) 622-5200
	 

	 	Fax: (858) 658-7447
	 
	 	 
	With a copy to:

	 	Latham & Watkins LLP
	 

	 	650 Town Center Drive, 20th Floor
	 

	 	Costa Mesa, CA 92626
	 

	 	Attention: Cary K. Hyden and Jonn R. Beeson
	 

	 	Telephone: (714) 540-1235
	 

	 	Fax: (714) 755-8290
	 
	 	 
	If to Cutler:

	 	Neal R. Cutler
	 

	 	[Address}
	 
	 	 
	With a copy to:

	 	Milbank, Tweed, Hadley & McCloy LLP
	 

	 	601 South Figueroa Street, 30th Floor
	 

	 	Los Angeles, California 90017
	 

	 	Attn: Brett Goldblatt
	 

	 	Telephone: (213) 892-4000
	 

	 	Fax: (213) 629-5063
	 
	 	 
	If to any other
Person who is then
the Holder:

	 	To the address of such Holder as it appears in the certificate
provided to Payor in accordance with Section 5.2

or such other address as may be designated in writing hereafter, in the same manner, by such
Person.

[SIGNATURE PAGE FOLLOWS]

12

 

          IN WITNESS WHEREOF, Payor has caused this Note to be duly executed and delivered as of the
date first written above.

	 	 	 	 	 
	 

	 	AVANIR
	 	PHARMACEUTICALS
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Michael J. Puntoriero
	 

	 	 	 	 
	 

	 	Name:
	 	Michael J. Puntoriero
	 

	 	Title:
	 	Senior Vice President and Chief Financial Officer

Signature Page to Fourth Amended and Restated Operating Agreement

 

 

          IN WITNESS WHEREOF, Holder acknowledges the terms and conditions of this Note and received
delivery of this Note as of the date first written above.

	 	 	 	 	 
	 	NEAL R. CUTLER

 	 
	 	By:  	/s/ Neal R. Cutler
 	 
	 	 	      Neal R. Cutler 	 

Signature Page to Fourth Amended and Restated Operating Agreement

 

 

	 	 	 	 	 

EXHIBIT A

CERTIFICATE OF PROPOSED TRANSFER

 

 

CERTIFICATE OF PROPOSED TRANSFER

          The undersigned holder (the “Holder”) of the senior note of Avanir Pharmaceuticals, a
California Corporation (the “Company”) in the amount of $4,000,000 dated May 24, 2006 to which this
Certificate is attached (the “Note”) and which may be prepaid in cash or, under certain
circumstances as set forth in the Note, in shares of Class A common stock, no par value of the
Company (the “Common Stock”), proposes to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Note to the transferee identified below (the “Transferee”):

PLEASE NAME, ADDRESS AND SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF TRANSFEREE:

	 	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

          The Holder and the Transferee acknowledge that the Holder received the Note pursuant to that
certain Unit Purchase Agreement dated as of May 22, 2006 (the “Purchase Agreement”), between
Company, the parties listed on Schedule A to the Purchase Agreement and Alamo Pharmaceuticals, LLC,
a California limited liability company, and that in issuing the Note to the Holder, the Company
relied upon a certificate executed by the Holder for purposes of demonstrating that the Holder is
an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended (the “Act”). Pursuant to Section 5 of the Note, the Transferee
does hereby certify as follows:

	1.	 	The Transferee falls within one or more of the following categories (please initial one or
more, as applicable):

               
(a) a private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;

               
(b) an organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, corporation, or similar business trust, or partnership, not formed for the specific
purpose of acquiring the Note or the Common Stock, with total assets in excess of
$5,000,000;

               
(c) a natural person whose individual net worth, or joint net worth with that person’s
spouse, as of the date hereof, exceeds $1,000,000;

2

 

               
(d) a natural person who had an individual income in excess of $200,000 in each of the
two most recent years or joint income with that person’s spouse in excess of $300,000 in
each of those years and has a reasonable expectation of reaching the same income level in
the current year;

               
(e) a trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the Note or the Common Stock, whose acquisition is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D; and

               
(f) an entity in which all of the equity owners are accredited The Transferees (as
defined in 2(a) – 2(e) above).

	2.	 	The Transferee is a sophisticated investor, knowledgeable, sophisticated and experienced in
business and financial matters. The Transferee is able to bear the economic risk of holding
the Note and the Common Stock for an indefinite period and is able to afford the complete loss
of his investment in the Note and the Common Stock.

	3.	 	The Transferee has had the opportunity to consult and has been advised or has elected to
proceed without advise from his legal counsel and tax advisor in connection with his
acquisition of the Note and the Common Stock, and acknowledges that no representations as to
potential profit and tax consequences of any sort have been made by the Company, any officer
or any employee or representative or affiliate of the Company, and that projections and any
other information, including, without limitation, financial and descriptive information and
documentation, that may have been in any manner submitted to the Transferee shall not
constitute any representation or warranty of any kind or nature, express or implied.

	4.	 	The Transferee has had access to certain financial and other information, including without
limitation the Company’s most current Form 10-K and proxy statement and other filings with the
Securities and Exchange Commission available on the Company’s website at
www.avanir.com and has been afforded the opportunity to ask questions of
representatives of the Company relating thereto, and to receive answers to those questions, as
the Transferee deemed necessary in connection with the acquisition of the Note and the Common
Stock. The Transferee has carefully considered potential risks relating to the Company and
the acquisition of the Note and the Common Stock.

	5.	 	The Transferee acknowledges that it will acquire the Note and the Common Stock in
transactions not involving any public offering within the meaning of the Act and that the Note
and the shares of the Common Stock have not been registered under the Act (unless the sale of
the Common Stock shall have been registered under the Act, pursuant to the terms of that
certain Registration Rights Agreement dated May 24, 2006, by and between the Company and the
Holder (the “Registration Rights Agreement”).

3

 

	6.	 	The Transferee agrees not to offer, sell, transfer or otherwise dispose of the Note or the
Common Stock in the absence of registration under the Act unless, if requested by the Company,
the Transferee delivers to the Company an opinion of a lawyer experienced in securities law
matters and reasonably acceptable to the Company (it being understood that Milbank, Tweed,
Hadley & McCloy LLP shall be deemed acceptable to Payor) stating that in the opinion of the
attorney the proposed sale, transfer or other disposition is exempt from registration under
the Act and under all applicable state securities or blue sky laws.

	7.	 	The Transferee acknowledges that the Note will bear a legend to the following effect:

NEITHER THIS SENIOR NOTE (THIS “NOTE”) NOR THE SHARES OF STOCK THAT MAY BE ISSUABLE
UPON REPAYMENT OF ANY PORTION OF THIS NOTE, IF APPLICABLE, HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE HOLDER MAY NOT TRANSFER THIS NOTE
OR THE SHARES OF STOCK THAT MAY BE ISSUABLE UPON REPAYMENT OF ANY PORTION OF THIS
NOTE UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION COVERING THIS NOTE OR THE SHARES
OF STOCK THAT MAY BE ISSUABLE UPON REPAYMENT OF ANY PORTION OF THIS NOTE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR (B) IF
REQUESTED BY AVANIR PHARMACEUTICALS, IT FIRST RECEIVES A LETTER FROM AN ATTORNEY
REASONABLY ACCEPTABLE TO IT STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND UNDER ALL APPLICABLE STATE SECURITIES LAWS.

	8.	 	The Transferee acknowledges that the Common Stock will be in the form of physical
certificates and that the certificates will bear a legend to the following effect (unless the
sale of the Common Stock shall have been registered under the Act pursuant to the terms of the
Registration Rights Agreement):

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THE HOLDER MAY NOT TRANSFER THE SECURITIES EVIDENCED HEREBY UNLESS
(A) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SECURITIES EVIDENCED BY THIS
CERTIFICATE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR (B) IF REQUESTED BY AVANIR PHARMACEUTICALS, IT FIRST RECEIVES A
LETTER FROM AN ATTORNEY REASONABLY ACCEPTABLE TO IT STATING THAT IN THE OPINION OF
THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND UNDER ALL APPLICABLE STATE SECURITIES LAWS.

4

 

	9.	 	The Transferee acknowledges that the Company may place a stop transfer order with its
transfer agent or registrar to enforce the provisions of Section 5 of the Note.

	10.	 	The Transferee represents that it will acquire the Note and the Common Stock solely for his
own account for the purpose of investment only and not as a nominee or agent for any other
person and not with a view to, or for offer or sale in connection with, any distribution or
resale thereof, in whole or in part, in violation of the Act or state securities or “blue sky”
laws, without prejudice, however, to his right to sell or otherwise dispose of all or any part
of the Common Stock pursuant to an effective registration statement under the Act or under an
exemption from registration available under the Act.

	11.	 	The Company is entitled to rely on this Certificate in connection with its obligations
pursuant to the Purchase Agreement and the Note.

[SIGNATURE PAGE FOLLOWS]

5

 

          IN WITNESS WHEREOF, the Holder and the Transferee have executed this Certificate of Proposed
Transfer as of the date first written above.

	 	 	 	 	 
	 	Holder

 	 
	 	By:  	 	 
	 	 	Neal R. Cutler 	 
	 	 	 	 
	 
	 	Transferee 

 	 
	 	By:exv10w5

 

Exhibit 10.5

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “***”. A
COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2
OF THE EXCHANGE ACT OF 1934.

AMENDED AND RESTATED

DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

by and between

CIMA LABS INC.

and

ALAMO PHARMACEUTICALS, LLC

dated as of August 22, 2005

 

 

AMENDED AND RESTATED

DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

     This AMENDED AND RESTATED DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (this “Agreement”), dated
and effective as of August 22, 2005 (the “Effective Date”), is by and between CIMA LABS INC., a
Delaware corporation (“CIMA”), and ALAMO PHARMACEUTICALS, LLC, a California Limited Liability
Company (“Alamo”).

WITNESSETH

     WHEREAS, CIMA is engaged, among other things, in the business of research, development,
manufacturing and commercialization of pharmaceutical products through its proprietary drug
delivery technologies;

     WHEREAS, Alamo is engaged, among other things, in the business of developing, marketing and
selling of pharmaceutical products;

     WHEREAS, Alamo and CIMA have previously entered into a Development, License and Supply
Agreement, dated as of March 2, 2001, as amended (the “Original Agreement”), and now desire to
amend and restate such agreement herein;

     WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA and Alamo wish
to collaborate in the development, registration, marketing and sale of certain prescription
products; and

     WHEREAS, subject to the terms and conditions set forth in this Agreement, CIMA wishes to
license to Alamo and Alamo wishes to license from CIMA rights to CIMA’s DuraSolv®, OraSolv® and
PakSolv® technologies for use with such prescription products.

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

SECTION 1

DEFINITIONS

     For purposes of this Agreement, the following terms shall have the meanings set forth below:

     “Activities” shall mean the development, manufacturing, marketing, selling and
distributing of the Product in the Territory as contemplated by this Agreement.

     “Affiliates” shall mean, with respect to any Person, any Persons directly or
indirectly controlling, controlled by, or under common control with, such other Person. For
purposes

Page 2 of 44

 

hereof, the term “controlled” (including the terms “controlled by” and “under common control
with”), as used with respect to any Person, shall mean the direct or indirect ability or power to
direct or cause the direction of management policies of such Person or otherwise direct the affairs
of such Person, whether through ownership of voting securities or otherwise.

     “Alamo” shall have the meaning given in the preamble and shall include its Affiliates.

     “Alamo Trademarks” shall have the meaning given in Section 9.11(d).

     “Annual Net Sales” shall mean, for any Calendar Year, the Net Sales for such Year.

     “Active Pharmaceutical Ingredient” or “API” shall mean the active ingredient
clozapine.

     “cGMP” shall mean the then-current standards for the manufacture of pharmaceuticals,
as set forth in the United States Federal Food, Drug and Cosmetics Act and applicable regulations
promulgated thereunder, as amended from time to time, and such standards of good manufacturing
practice as are required by the European Union and other organizations and governmental agencies in
countries in which Product is intended to be sold, to the extent such standards are not
inconsistent with United States cGMP.

     “CIMA” shall have the meaning given in the preamble and shall include its Affiliates.

     “CIMA Intellectual Property” shall mean, collectively, 1) the CIMA Patents, 2) the
CIMA Technology and 3) the CIMA Trademarks.

     “CIMA Patents” shall mean United States Patent Nos. 6,024,981 (entitled “Rapidly
Dissolving Robust Dosage Form”); 6,221,392 (entitled “Rapidly Dissolving Robust Dosage Form”);
5,178,878 (entitled “Effervescent Dosage Form With Microparticles”); and 6,155,423 (entitled
“Blister Package and Packaged Tablet”) and any patents, patent applications, and foreign
counterparts or equivalents relating thereto, including any extension, reissue, renewal,
reexamination, divisional, continuation or continuation-in-part of such patents or patent
applications.

     “CIMA Technology” shall mean all of CIMA’s Patents, trade secrets, technology,
know-how and all other information necessary for the manufacture of the Product including, without
limitation, that related to CIMA’s DuraSolvÒ, OraSolvÒ and
PakSolvÒ technologies.

     “CIMA Trademarks” shall mean the CIMAsm (logo), CIMA LABS
INC.Ò, DuraSolvÒ, OraSolvÒ, PakSolvÒ,
and CIMAÒ trademarks.

     “Damages” shall mean any and all actions, costs, losses, claims, liabilities, fines,
penalties, demands, damages and expenses, court costs, and reasonable fees and disbursements of
counsel, consultants and expert witnesses incurred by a party hereto (including interest which may
be imposed in connection therewith).

Page 3 of 44

 

     “Defective” shall mean, as to the Product, Product samples or Product placebos, as the
case may be, the failure of such to strictly conform to the Specifications, this Agreement and all
applicable law, including, without limitation, all FDA regulatory filings and regulations.

     “Development Schedule” shall mean the schedule of development activities set forth on
Schedule B hereto.

     “DuraSolvÒ” shall mean CIMA’s orally disintegrating tablet
formulations as described in the CIMA Patents.

     “FDA” shall mean the United States Food and Drug Administration.

     “Force Majeure” shall mean acts of God, explosion, fire, flood, tornadoes,
thunderstorms, earthquake or tremor, war whether declared or not, civil strife, riots or embargo,
or changes in applicable laws, regulations or orders by any government, governmental agency or
instrumentality, or other similar circumstances beyond the control of each party, in each case
having the effect of preventing or prohibiting a party from performing its obligations hereunder.

     “GAAP” shall mean generally accepted accounting principles in the United States as in
effect from time to time.

     “Indemnified Party” shall have the meaning set forth in Section 10.2 hereof.

     “Indemnifying Party” shall have the meaning set forth in Section 10.2 hereof.

     “Launch” shall mean the date of first commercial shipment of the Product by Alamo or
its sublicensees to any unaffiliated third party.

     “Licensed Assets” shall have the meaning set forth in Section 2.1 hereof.

     “Marketing Authorization Application” shall mean the principal regulatory application
required to be approved in order to market the Product in the applicable jurisdiction.

     “Minimum Annual Royalty Targets” shall have the meaning given such term in Schedule A
hereof.

     “Net Sales” means the gross invoice price for Product sold by Alamo or its
sublicensees or subcontractors to a third party customer less the reasonable and customary
accrual-basis deductions from such gross amounts for: (i) normal and customary trade, cash and
other discounts, allowances and credits actually allowed and taken directly with respect to sales
of Product, (ii) credits of allowances actually granted for damaged goods, returns or rejections of
Product; (iii) sales or similar taxes (including duties or other governmental charges levied on,
absorbed or otherwise imposed directly on the sales of Product, including, without limitation,

Page 4 of 44

 

value added taxes or other governmental charges otherwise measured by the billing amount)
which are included in any billing amount, and excluding any taxes imposed on or measured by the net
income or profits of the selling party; (iv) charge back payments and rebates granted to managed
health care organizations or to federal, state and local governments, their agencies, and
purchasers and reimbursers or to trade customers, including but not limited to, wholesalers and
chain and pharmacy buying groups; and (v) rebates (or equivalents thereof) that are granted to or
charged by national, state, provincial or local governmental authorities in countries other than
the United States. Such amounts shall be determined from the books and records of Alamo and its
sublicensees and subdistributors maintained in accordance with U.S. GAAP consistently applied, and
such amounts shall be calculated using the same accounting principles used for other Alamo
products. Sales between or among Alamo, its Affiliates and its sublicensees and subdistributors
shall be excluded from the computation of Net Sales if such Affiliates or sublicensees and
subdistributors are not end-users, but Net Sales shall include the subsequent final sales to third
parties by any such Affiliates or sublicensees and subdistributors. Where (i) Product is sold by
Alamo, its Affiliates or their respective sublicensees and subdistributors other than in an
arms-length sale or as one of a number of items without a separate invoiced price; or (ii)
consideration for Product shall include any non-cash element, the Net Sales applicable to any such
transaction shall be deemed to be Alamo’s average Net Sales price for the applicable quantity of to
the Product at that time.

     “Notice of Rejection” shall have the meaning given such term in Section 5.5(a) hereof.

     “OraSolvÒ” shall mean CIMA’s orally disintegrating tablet
formulations as described in the CIMA Patents.

     “PakSolvÒ” shall mean CIMA’s blister package for tablets as described
in the CIMA Patents.

     “PDMA” shall mean the Prescription Drug Marketing Act of 1987, as amended from time to
time, together with any rules or regulations promulgated thereunder.

     “Person” shall mean a natural person, a corporation, a partnership, a trust, a joint
venture, a limited liability company, any governmental authority or any other entity or
organization.

     “Product” shall mean a pharmaceutical product containing 25 mg, 50 mg, 100 mg, or such
other amounts as may be agreed to by the Parties, as the case may be, of API formulated in
DuraSolvÒ or OraSolvÒ, as the case may be. The Product
definition may be expanded to include a 12.5 mg DuraSolvÒ dose should the Parties
reasonably agree that such product is necessary for commercialization in the United States and such
agreement is accompanied by a mutually agreeable development agreement outlining the activities and
fees associated with such dose. The Parties intend to explore regulatory strategies that do not
require such development.

     “Quarter” shall mean, as the case may be, the three months ending on March 31, June
30, September 30 or December 31 in any Year.

Page 5 of 44

 

     “Specifications” shall mean, at any time, the specifications for the Product that are
included in the Technical Agreement Addendum set forth on Schedule E.

     “Territory” shall mean the Regions of the world.

     “Region” shall mean each of the following four geographical areas as outlined on
Schedule G (MAP of world): (i) Asia; (ii) Americas (includes, the United States,Mexico and Canada);
(iii) Europe; and (iv) the rest of the world

     “Year” shall mean a calendar year during the term of this Agreement.

SECTION 2

GRANT OF LICENSES; LICENSE OPTION

     2.1 Grant of Licenses.

     (a) CIMA hereby grants to Alamo an exclusive license for the term of this Agreement
under the following assets to market, distribute and sell the Product in the Territory (such
assets are referred to herein collectively as the “Licensed Assets”):

               (i) all current and future regulatory filings, approvals, registrations and governmental
authorizations that relate to the Product in the Territory; and

               (ii) the CIMA Intellectual Property.

          (b) The license granted under Section 2.1(a) to Alamo will be exclusive in that during the
term of this Agreement, CIMA will not grant any licenses of the Licensed Assets to any other Person
with respect to the Product or otherwise market, distribute or sell (or grant any other Person the
right to market, distribute or sell) any pharmaceutical product containing API formulated in either
DuraSolv® or OraSolv® in the Territory, except as provided in Section 2.1(c).

(c) In the event that Product is not commercially available in at least *** countries of
a Region of the Territory within *** years from the Effective Date (or such longer time as may be
required to obtain regulatory approval to make Product commercially available in such ***
countries, provided that during such longer time Alamo is actively involved in pursuing such
regulatory approval to the reasonable satisfaction of CIMA), CIMA and Alamo agree as follows:

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

Page 6 of 44

 

               (i) Alamo’s license under 2.1(a) shall terminate in each such Region (other than the Americas
Region unless product is not commercialized in the US) and CIMA shall be entitled to solicit
interest of third parties in making the Product commercially available in any such Region.

               (ii) In the event that CIMA licenses the Product to a third party under this Section 2.1(c)
within *** months from termination under Section 2.1(c)(i) , Alamo shall be entitled to
receive *** of any royalties or license fee (not related to any development fees) received by CIMA
from sales of the Product under such license to a third party for a period of *** years in each
country in which the Product is launched, provided that Alamo cooperates with CIMA and such third
party in obtaining regulatory approval for the Product, including providing access to any clinical
data available to Alamo and any patent or other licenses necessary to commercialize the Product in
any country or countries covered under the license from CIMA.

               (iii) Termination of Alamo’s license pursuant to this Section 2.1(c) in any Region shall not
affect Alamo’s license or rights under this Agreement in any other Region in the Territory.

     2.2 Sublicenses. Alamo shall have the right to extend the licenses granted pursuant
to this Section 2 in whole or in part to any Affiliate of Alamo, provided that Alamo is not then in
material default with respect to any of its obligations to CIMA under this Agreement. All the
terms and provisions of this Agreement shall apply to the Affiliate to which this license has been
extended to the same extent as they apply to Alamo, and the operations of the Affiliate shall be
deemed to be the operations of Alamo. In addition, Alamo shall have the right to extend the
licenses granted pursuant to this Section 2 in whole or in part to Persons who are not Affiliates
of Alamo with the prior written consent of CIMA, such consent not to be unreasonably withheld or
delayed.

     2.3 Developments, Marketing, Distribution and Sale. Alamo shall use its commercially
reasonable efforts to market, distribute and sell the Product in the Territory. Such efforts shall
be consistent with industry norms, given the product profile, product potential and the state of
the market, in each case, as existing from time to time.

     2.4 Minimum Annual Royalties. Alamo shall meet or exceed the Minimum Annual Royalty
Targets set forth on Schedule A hereto or the provisions of this Section 2.4 shall apply. In the
event that Alamo does not meet or expect to achieve the Minimum Annual Royalty Targets set forth on
Schedule A hereto for any Year following the Year in which the Product is Launched, Alamo may elect
either to terminate, upon written notification to CIMA, its license or to retain the license and
pay the minimum royalty amount specified in Schedule A for such Year. If Alamo elects not to
continue the license, then the license granted hereunder to Alamo will

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

Page 7 of 44

 

terminate, and an amount equal to the Minimum Annual Royalty Target will be due for the Year
during which such Minimum Annual Royalty Targets was not satisfied.

SECTION 3

PRODUCT DEVELOPMENT

     3.1 Obligations of CIMA. To the extent that such obligations have not been previously
fulfilled, CIMA agrees as follows: CIMA shall be responsible for the successful performance of
each of the development activities set forth on Schedule B within the respective time
periods set forth on Schedule B.

     3.2 Obligations of Alamo. To the extent that such obligations (including, but not
limited to payments) have not been previously made, Alamo agrees as follows: Alamo shall be
responsible for the obligations and the payment obligations specified in Schedule B upon the
successful performance of each of the development activities set forth on Schedule B within
the respective time periods set forth on Schedule B.

     3.3 Regulatory Matters. CIMA represents and warrants that all Product supplied to
Alamo shall be produced under cGMP and in accordance with the Specifications. CIMA shall furnish
Alamo with a Certificate of Analysis with a cGMP statement to demonstrate that each shipment of
Product has been manufactured under cGMP and other FDA guidelines and that the Specifications have
been met. In addition, not more than once per Year unless unless otherwise agreed Alamo or its
third party designee as approved by CIMA, such approval not to be unreasonably withheld, may, at
its own expense, audit the facilities of CIMA, including its processes, records and other facets of
the operation as may be necessary to assure that all applicable regulations have been complied
with, and the Specifications have been met. CIMA shall permit duly authorized representatives of
Alamo to audit all manufacturing and processing operations related to this Agreement at mutually
agreeable reasonable times with a prior appointment. The right to audit shall commence with the
Effective Date. These audits will be conducted to assure compliance with all pertinent acts,
regulations, and guidelines promulgated by the FDA and other regulatory authorities, as well as
standards then in effect in the regulatory environment. Such audits will be permitted during
normal business hours and will be performed with a minimum of disruption. Alamo’s exercise or
failure to exercise any of its rights to audit CIMA’s facilities and/or records pursuant to this
Section 3.3 shall in no way alter or affect CIMA’s obligations under this Agreement.

Page 8 of 44

 

SECTION 4

ROYALTY PAYMENTS

     4.1 Royalty Payments.

     (a) Subject to CIMA’s supply of Product in accordance with Section 5 hereof, Alamo shall make
royalty payments to CIMA in the amounts set forth on Schedule C.

     (b) Alamo and CIMA acknowledge and agree that as of the Effective Date all payments set forth
on Schedule D of the Original Agreement have been satisfied in full.

     (c) [Reserved]

     4.2 Records and Audit. Alamo and its Affiliates shall keep full, true and accurate
books of account containing all particulars that may be necessary for the purpose of showing the
amounts payable to CIMA hereunder. Such books of account shall be kept at Alamo’s principal place
of business or the principal place of business of the appropriate Affiliate of Alamo to which this
Agreement relates. Such books and the supporting data shall be open, at all reasonable times and
upon reasonable notice during the term of this Agreement and for *** years after its
termination, to the inspection by a firm of certified public accountants selected by CIMA and
reasonably acceptable to Alamo, for the limited purpose of verifying Alamo’s royalty statements;
provided, however, that such examination shall not take place more often than once each Year, shall
not cover more than the preceding *** Years, with no right to audit any period previously audited
and shall not occur during the 90-day period following the end of Alamo’s fiscal Year without the
mutual agreement by Alamo. Except as otherwise provided in this Section, the cost of any such
examination shall be paid by CIMA. In the event that any such inspection reveals a deficiency in
excess of ***% of the reported royalty for the period covered by the inspection, Alamo shall
promptly pay CIMA the deficiency, plus interest at the rate of ***% per annum (which interest shall
accrue from the date any such deficiency payment was due), and shall reimburse CIMA for the
reasonable fees and expenses paid to such accountants in connection with their inspection for such
period. In the event that any such inspection reveals a deficiency that is less than ***% of the
reported royalty for the period covered by the inspection, Alamo shall promptly pay CIMA the
deficiency, plus interest at the rate of ***% per annum (which interest shall accrue from the date
any such deficiency payment is due). In the event that any such inspection reveals an overpayment,
CIMA shall promptly pay Alamo the overpayment. The parties agree that neither party shall be
required to retain books and records with respect to the above other than books and records
relating to the current Year and the immediately preceding *** Years.

 

			
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     4.3 Quarterly Reports and Payment of Royalties. In any Year following Launch of the
Product, Alamo shall, within *** days after the end of the first, second and third
Quarter, deliver to CIMA reports, certified by an authorized official of Alamo, setting forth the
Net Sales and total royalties due under Section 4.1(a) for such Quarter. Alamo shall pay such
royalties within *** days after the end of each Quarter by wire transfer, at CIMA’s cost, or such
other method as CIMA may designate. In any Year following Launch of the Product, Alamo shall,
within *** days after the end of the fourth (4th) Quarter, deliver to CIMA reports,
certified by an authorized official of Alamo, setting forth the Net Sales and total royalties due
under Section 4.1 (a). Alamo shall pay such royalties within *** days after the end of the fourth
(4th) Quarter by wire transfer, or such other method as CIMA may designate. If no
royalties are due, Alamo shall so report.

SECTION 5

SUPPLY OF PRODUCT

     5.1 Supply of Product.

     (a) Subject to Section 5.7, for the term of this Agreement, Alamo agrees to purchase from CIMA
and CIMA agrees to supply Alamo with all of Alamo’s requirements for the Product, Product samples
and Product placebos for their subsequent use, sale, offer for sale, lease or transfer by Alamo.
Alamo shall be responsible for procurement of API or require, upon reasonable notice, CIMA to
procure all API necessary for the satisfaction of its obligations under this Agreement. If Alamo
procures the API necessary for CIMA to perform the supply activities described in this Section 5.1,
then Alamo shall pay CIMA ***% of the API cost (net of any rebates, credits or refunds) for CIMA’s
costs and expenses for handling the API. If CIMA, at Alamo’s request, procures the API necessary
for CIMA to perform the supply activities described in this Section 5.1, then Alamo shall reimburse
CIMA for CIMA’s certified direct out-of-pocket costs plus *** percent (***%) (net of any rebates,
credits or refunds) for the acquisition of the API

     (b) Alamo agrees to initiate purchases of the Product, Product samples and Product placebos
hereunder by issuing CIMA binding purchase orders not less than *** days prior to the required
shipping date set forth therein. In addition, after the *** month period following Launch in any
Region, Alamo will also provide a *** day forecast that is ***% binding for the next *** day period
(i.e., if the forecast shows *** units in each quarter, then the first *** is ***% binding, second
quarter is ***% binding or Alamo can reduce to *** units). CIMA agrees to accept any order issued
in accordance with this Section 5.1(b) and to meet the delivery dates specified therein so long as
at the time of receiving the purchase order, all artwork, API and

 

			
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other responsibilities of Alamo are delivered in fine form to CIMA. All purchase orders
hereunder shall be on Alamo’s standard purchase order form (a copy of which is attached as Schedule
D hereto and which shall not, for purposes of this Agreement only, be modified in any material
respect without CIMA’s prior written consent, such consent not to be unreasonably withheld or
delayed) and shall be directed to CIMA at the address set forth below. The terms and conditions of
purchase enumerated on the reverse side of such standard purchase order form shall prevail over any
inconsistent or conflicting language as may exist on invoices, confirmation or order acknowledgment
forms of CIMA, provided, however, that in the event any terms thereof are in conflict, or are
inconsistent with any terms of this Agreement, the terms and conditions hereof shall prevail. No
Product delivered by CIMA shall have a shelf life that is more than *** months less than
the maximum shelf life of such product; and, in any case, all Product delivered by CIMA shall have
no more than *** months into the regulatory approved expiry date of shelf life remaining upon
delivery to Alamo. CIMA will use reasonable efforts to deliver to Alamo Product with more than ***
months of shelf life if possible.

     (c) Purchase order quantities shall be equivalent to the batch size of the Product, Product
samples or Product placebos which shall be determined during the development activities,
approximately *** tablets for the 25 mg dose, and *** tablets for the 100 mg dose, in the aggregate
for any single purchase order, unless otherwise mutually agreed by the parties. The delivery
quantity of tablets for trade shall not exceed a total of *** batches in any one calendar month,
unless otherwise agreed to by the Parties.

     (d) Purchase orders shall clearly state that the order is for tablets for sale, tablets for
samples or placebos, as well as the shipping destination and address. Alamo and CIMA will work
together to agree on reasonable quantities of tablets for samples if needed.

     5.2 Identification. Alamo may market the Product under its name, with its packaging
and logo; Alamo will, however, identify CIMA as the supplier in a fair manner, reasonably
acceptable to CIMA. Alamo may use CIMA’s name and derivations thereof in promoting, marketing and
selling the Product in the Territory; provided, however, that the particular formulation of any
reference to CIMA’s name in any promotional material shall be subject to CIMA’s review and consent;
and provided further, that once the formulation of any such reference has been reviewed and
consented to by CIMA, any subsequent reference to CIMA’s name using such formulation shall not be
subject to the further review or consent of CIMA. All samples shall be clearly marked “for sample
use only” or some similar phrasing suggested by Alamo. CIMA shall design and develop labels for
the bulk tablet containers and Alamo shall review and approve such labels. Such approval shall not
be unreasonably withheld.

     5.3 Trade and Sample Product Price. CIMA shall supply Product, Product samples and
Product placebos to Alamo at the price set forth on Schedule F, subject to adjustment as set forth
therein.

 

			
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     5.4 Forecasts, Delivery and Quality. 

     (a) Alamo shall provide CIMA with ***-months non-binding forecasts within *** days
after the end of each Quarter. Such forecasts shall be revised and extended in each succeeding
Quarter. The first *** days of such forecast will be binding and a purchase order will be issued
by Alamo for this amount. After *** post Launch in each Region, Alamo will also provide a ***%
binding forecast for the subsequent *** day period (i.e., months *** will be ***% binding).

     (b) Delivery of the Product, Product samples and Product placebos shall be in accordance with
the means of transportation, destination and dates set forth in Alamo’s purchase order, and shipped
in full batch sized quantities. Delivery of the Product shall be EXW (Incoterms 2000) CIMA’s
manufacturing facility in Minneapolis, Minnesota.

     (c) All deliveries of the Product hereunder shall include a Certificate of Analysis provided
by the quality assurance manager of CIMA attesting to the fact that the Product (i) has been
manufactured by a process which complies with cGMP and (ii) are of quality which is in accordance
with criteria established in the Specifications and all FDA requirements.

     (d) The Product, Product samples and Product placebos supplied hereunder shall have been
manufactured by a process which complies with GMP Quality Specifications.

     5.5 Rejection and Replacement.

     (a) In the event that Alamo determines that any Product, Product samples or Product placebos
as manufactured and/or packaged by CIMA is Defective, then: (i) *** days from receipt of Product,
Product samples or Product placebos to Alamo or to Alamo’s designated agent for final packaging; or
(ii) in the event that such Product, Product samples or Product placebos is Defective as a result
of a latent defect, within *** days of the discovery of such latent defect, Alamo shall provide to
CIMA a written notice of rejection, specifying in reasonable detail the manner in which the Product
is Defective (the “Notice of Rejection”). If no written Notice of Rejection is given to CIMA by
Alamo within the period specified in clauses (i) and (ii), such Product, Product samples or Product
placebos shall be deemed to have been accepted by Alamo, provided, however, that nothing contained
in this Section 5.5(a) shall be deemed to relieve CIMA of its obligations under this Agreement.

     (b) Upon receipt of a Notice of Rejection from Alamo and in order to minimize any hardship to
Alamo’s customers, CIMA shall use reasonable commercial efforts to promptly supply to Alamo a
quantity of replacement Product, Product samples or Product placebos meeting the Specifications
equal to the size of the lot which Alamo claims was Defective. In the

 

			
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event that such Defective Product, Defective Product samples or Defective Product placebos are
due to: (i) faulty manufacture; faulty release; faulty primary packaging or labeling of the
relevant batch(es) of the Product; or (ii) improper shipping to Alamo’s designated agent for final
packaging (which fact shall be established on the basis of the corresponding sealed samples
retained by CIMA and/or Alamo’s designated agent for final packaging, utilizing an outside
independent laboratory if necessary, the cost of which is borne by both parties and whose findings
shall be binding), CIMA shall replace such batches free of charge, otherwise Alamo shall promptly
pay CIMA for all such Product, Product samples or Product placebos, including any Defective
Product, in accordance with Section 5.6. If CIMA is responsible for any Product deemed to be
defective pursuant to this Section 5.5(b), then such Product will be destroyed by Alamo or returned
to CIMA, at CIMA’s option and expense.

     5.6 Invoices and Payment. Upon CIMA’s shipment to Alamo or its designated agent of any
Product, Product samples, or Product placebos CIMA shall be entitled to submit an invoice to Alamo,
and Alamo agrees to remit payment with respect to such invoice within *** days from
receipt of both such invoice and the shipment to which such invoice relates, unless within *** days
from receipt of such shipment of Product Alamo sends a Notice of Rejection to CIMA under Section
5.5(a); provided, that payment of any invoice pursuant to this Section 5.6 shall not constitute or
be deemed to constitute acceptance of any Product, Product samples or Product placebos, or in any
way limit Alamo’s rights to inspect and/or reject any of the foregoing pursuant to Section 5.5
hereof. Within *** business days of delivery of the Product, Product samples, or Product placebos
Alamo or its designated agent shall acknowledge the delivery of Product, Product samples, or
Product placebos and shall notify CIMA’s shipping department of any obvious shipping damage;
provided, that failure to provided any such notice shall not constitute a waiver or in any way
limit Alamo’s rights under Section 5.5 with respect to such shipment. There will be a ***%, of
invoice price, penalty per month, for each month a payment is past due. Such penalty shall not
exceed ***% per annum.

     5.7 Supply Disruption; Alternate Manufacturing Site.

     (a) CIMA shall supply Alamo with the Product, Product samples and Product placebos in a timely
manner in accordance with the complete orders and forecasts received by CIMA pursuant to Sections
5.1(b) and 5.4(a), respectively. In any consecutive *** month period, should CIMA fail to supply
Alamo with substantially all of the Product, Product samples or Product placebos ordered for such
period pursuant to Section 5.1(b), Alamo shall have the right to require CIMA to transfer the
manufacture of the Product to another manufacturing facility designated by Alamo and approved by
CIMA, such approval not to be unreasonably withheld, which manufacturing facility agrees to be
bound by Section 9.4 hereof. CIMA will assume all costs of, take all actions and grant all rights
with respect to CIMA Technology as shall be necessary to effect such transfer. No additional
royalties shall be imposed on Alamo or any manufacturer as a result of any transfer under this
Section 5.7. Should CIMA cure its failure

 

			
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to supply, CIMA shall have the right to resume the manufacture of the Product and Alamo and
CIMA shall, at CIMA’s expense, transfer the manufacture of the Product back to CIMA, if needed,
within a commercially reasonable amount of time and all rights granted under the sublicense shall
terminate.

     (b) If at any time following the Launch, if a second manufacturing facility is needed and
Alamo wishes to qualify such a second manufacturing facility, capable of supplying the Product in
accordance with the terms of this Agreement, CIMA and Alamo shall, as soon as practicable following
the date of Launch, qualify a manufacturing plant designated by Alamo as an alternate FDA approved
manufacturing and packaging site for the Product. The costs of obtaining such approval shall be
borne by Alamo.

     5.8 CIMA’s Obligation to Continue Manufacture. If this Agreement terminates or
expires through a material breach of CIMA, CIMA shall reasonably cooperate with Alamo in
transferring the manufacture of the Product, including all necessary CIMA Technology related to the
Product without the right to sublicense other than provided for in this Section 5.8, to Alamo, its
Affiliate or a third-party appointed by Alamo (which manufacturing facility agrees to be bound by
Section 9.4 hereof), and CIMA shall, if requested by Alamo, continue to supply the Product to Alamo
pursuant to the terms of this Agreement until *** months from the date this Agreement is
terminated or expires pursuant to Section 11.1 or until such manufacturing has been successfully
transferred, whichever is sooner. Such a transfer will be at Alamo’s expense. Should Alamo desire
to have CIMA continue the manufacture of Product beyond the ***-month period provided for in this
Section 5.8, CIMA agrees to enter into good faith negotiations with Alamo to discuss terms of
manufacture.

     5.9 EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THE PRODUCT WILL BE SUPPLIED BY CIMA WITH NO
WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

SECTION 6

[RESERVED]

 

			
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SECTION 7

REPRESENTATIONS AND WARRANTIES OF CIMA

     CIMA hereby represents and warrants to Alamo that:

     7.1 Organization, Power and Authority. CIMA is a corporation duly organized and
validly existing under the laws of the State of Delaware. CIMA has all necessary corporate power
and authority to enter into, and be bound by the terms and conditions of, this Agreement, and to
license the Licensed Assets to Alamo pursuant hereto.

     7.2 Due Authority; No Breach. The execution, delivery and performance by CIMA of this
Agreement and each agreement or instrument contemplated by this Agreement, and the performance of
the transactions contemplated hereby and thereby, have been duly authorized by all necessary
corporate action by CIMA. This Agreement is, and each agreement or instrument contemplated by this
Agreement, when executed and delivered by CIMA in accordance with the provisions hereof, will be
(assuming the due execution and delivery hereof and thereof by Alamo) the legal, valid and binding
obligation of CIMA, in each case enforceable against CIMA in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization, or similar laws from time to time in effect which affect the enforcement of
creditors’ rights generally and by legal and equitable limitations on the availability of specific
performance and other equitable remedies against CIMA. All persons who have executed this
Agreement on behalf of CIMA, or who will execute on behalf of CIMA any agreement or instrument
contemplated by this Agreement, have been duly authorized to do so by all necessary corporate
action. Neither the execution and delivery of this Agreement or any such other agreement or
instrument by CIMA, nor the performance of the obligations contemplated hereby and thereby, will
(i) conflict with or result in any violation of or constitute a breach of any of the terms or
provisions of, or result in the acceleration of any obligation under, or constitute a default under
any provision of the articles of incorporation or by-laws of CIMA or any material contract or any
other material obligation to which CIMA is a party or to which it is subject or bound, or (ii)
violate any judgment, order, injunction, decree or award of any court, administrative agency,
arbitrator or governmental body against, or affecting or binding upon, CIMA or upon the securities,
property or business of CIMA, or (iii) constitute a violation by CIMA of any applicable law or
regulation of any jurisdiction as such law or regulation relates to CIMA, or to the property or
business of CIMA except for such conflict, acceleration, default, breach or violation that is not
reasonably likely to have a material adverse effect on CIMA’s ability to perform its obligations
under this Agreement or under any agreement or instrument contemplated hereby.

     7.3 Intellectual Property. CIMA is the lawful owner of the Licensed Assets, CIMA can
license the Licensed Assets without the consent of any third party, there is no pending or overtly
threatened claim against CIMA asserting that any of the Licensed Assets infringes or violates the
rights of third parties or that Alamo, by practicing under the Licensed Assets in performing the
Activities, would violate any of the intellectual property rights of any third party, and nothing
has come to the attention of CIMA which has, or reasonably should have, led CIMA

Page 15 of 44

 

to believe that any of the Licensed Assets infringes or violates the right of third parties.
CIMA has not given any notice to any third parties asserting infringement by such third parties
upon any of the Licensed Assets. CIMA is not aware of and has not received any communications
challenging the ownership, validity, enforceability or effectiveness of any of the Licensed Assets.
CIMA has not granted any right to any third party relating to the Activities which would violate
the terms of or conflict with the rights granted to Alamo pursuant to this Agreement.

     7.4 [RESERVED]

     7.5 Litigation. There are no pending or, to the best of CIMA’s knowledge, threatened
judicial, administrative or arbitral actions, claims, suits or proceedings pending as of the date
hereof against CIMA relating to the Activities, or the Licensed Assets which, either individually
or together with any other, would have a material adverse effect on the Activities, the Licensed
Assets, or the ability of CIMA to perform its obligations under this Agreement or any agreement or
instrument contemplated hereby. There are no pending, and CIMA does not presently contemplate
bringing, any actions or suits relating to the Activities, or the Licensed Assets against others.

     7.6 Governmental Approval. No consent, approval, waiver, order or authorization of, or
registration, declaration or filing with, any governmental authority is required in connection with
the execution, delivery and performance of this Agreement, or any agreement or instrument
contemplated by this Agreement, by CIMA or the performance by CIMA of its obligations contemplated
hereby and thereby.

     7.7 Brokerage. No broker, finder or similar agent has been employed by or on behalf of
CIMA, and no Person with which CIMA has had any dealings or communications of any kind is entitled
to any brokerage commission, finder’s fee or any similar compensation, in connection with this
Agreement or the transactions contemplated hereby.

SECTION 8

REPRESENTATIONS AND WARRANTIES OF ALAMO

     Alamo represents and warrants to CIMA that:

     8.1 Organization, Power and Authority. Alamo is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of California . Alamo
has all necessary power and authority to enter into, and be bound by the terms and conditions of,
this Agreement and to license the Licensed Assets.

     8.2 Due Authority; No Breach. The execution, delivery and performance by Alamo of
this Agreement, and each agreement or instrument contemplated by this Agreement, and the
performance of the transactions contemplated hereby and thereby, have been duly authorized by all
necessary action by Alamo. This Agreement is, and each agreement or instrument

Page 16 of 44

 

contemplated by this Agreement, when executed and delivered by Alamo in accordance with the
provisions hereof, will be (assuming due execution and delivery hereof and thereof by CIMA) the
legal, valid and binding obligation of Alamo, in each case enforceable against Alamo in accordance
with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization, or similar laws from time to time in effect which affect the
enforcement of creditor’s rights generally and by legal and equitable limitations on the
availability of specific performance and other equitable remedies against Alamo. All persons who
have executed this Agreement on behalf of Alamo, or who will execute on behalf of Alamo any
agreement or instrument contemplated by this Agreement, have been duly authorized to do so by all
necessary action. Neither the execution and delivery of this Agreement by Alamo, or any such other
agreement or instrument by Alamo, nor the performance of the obligations contemplated hereby and
thereby, will (i) conflict with or result in any violation of or constitute a breach of any of the
terms or provisions of, or result in the acceleration of any obligation under, or constitute a
default under any provision of its articles of organization or other governing documents or any
material contract or any other material obligation to which Alamo is a party or to which it is
subject or bound, or (ii) violate any judgment, order, injunction, decree or award of any court,
administrative agency, arbitrator or government body against, or affecting or binding upon, Alamo
or upon the securities, property or business of Alamo, or (iii) constitute a violation by Alamo of
any applicable law or regulation of any jurisdiction as such law or regulation relates to Alamo or
to the property or business of Alamo, except for such conflict, acceleration, default, breach or
violation that is not reasonably likely to have a material adverse effect on Alamo’s ability to
perform its obligations under this Agreement or any agreement or instrument contemplated hereby.

     8.3 Brokerage. No broker, finder or similar agent has been employed by or on behalf
of Alamo and no Person with which Alamo has had any dealings or communications of any kind is
entitled to any brokerage commission, finder’s fee or any similar compensation, in connection with
this Agreement or the transactions contemplated hereby.

     8.4 Litigation. There are no pending or, to the best of Alamo’s knowledge, threatened
judicial, administrative or arbitral actions, claims, suits or proceedings pending as of the date
hereof against Alamo which, either individually or together with any other, will have a material
adverse effect on the ability of Alamo to perform its obligations under this Agreement or any
agreement or instrument contemplated hereby.

     8.5 Governmental Approval. No consent, approval, waiver, order or authorization of,
or registration, declaration or filing with, any governmental authority is required in connection
with the execution, delivery and performance of this Agreement, or any agreement or instrument
contemplated by this Agreement, by Alamo or the performance by Alamo of its obligations
contemplated hereby and thereby.

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SECTION 9

ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES

     9.1 Governmental Filings. CIMA and Alamo each agree to prepare and file whatever
filings, listings, requests or applications are required to be filed with any governmental
authority in connection with this Agreement or the Product and to cooperate with one another as
reasonably necessary to accomplish the foregoing.

     9.2 Compliance with Law. Alamo and CIMA shall each use commercially reasonable
efforts to comply with federal, state and local laws and regulations applicable to the performance
of their respective rights and obligations hereunder. CIMA and Alamo each shall keep all records
and reports required to be kept by applicable laws and regulations, and each shall make its
facilities available at reasonable times during business hours for inspection by representatives of
governmental agencies. CIMA and Alamo each shall notify the other within forty-eight (48) hours of
receipt of any notice or any other indication what so ever of any FDA or other governmental agency
inspection, investigation or other inquiry, or other material notice or communication of any type,
involving the Product. Alamo and CIMA shall cooperate with each other during any such inspection,
investigation or other inquiry including, but not limited to, allowing upon request a
representative of the other to be present during the applicable portions of any such inspection,
investigation or other inquiry and providing copies of all relevant documents. Alamo and CIMA
shall discuss any written response to material observations or notifications received in connection
with any such inspection, investigation or other inquiry and each shall give the other an
opportunity to comment upon any proposed response before it is made. In the event of disagreement
concerning the form or content of such response, however, CIMA shall be responsible for deciding
the appropriate form and content of any response with respect to any of its cited activities and
Alamo shall be responsible for deciding the appropriate form and content of any response with
respect to any of its cited activities.

     9.3 Recall. Alamo and CIMA shall consult with one another as to all decisions
concerning recall or withdrawal of the Product from the market, including, but not limited to,
determining whether or not to make any such recall or withdrawal, the timing and scope thereof, and
the means of conducting any recall or withdrawal. The party requesting any recall or withdrawal
must receive the prior written consent of the other party, such consent not to be unreasonably
withheld, prior to initiating such recall or withdrawal. No consent shall be necessary if the
recall or withdrawal is requested by the FDA or other governmental authority. CIMA shall bear the
costs (including but not limited to, shipping and product credits) for any recall or withdrawal due
to CIMA’s failure to comply with this Agreement, including Product failure relating to CIMA’s cGMP
or CIMA’s failure to meet the Specifications . The costs for any other recall or withdrawal shall
be the responsibility of Alamo.

     9.4 Confidentiality. Alamo shall treat as confidential the Licensed Assets and all
other information of CIMA of which Alamo becomes aware in connection with this Agreement
(collectively, “CIMA Proprietary Information”). Alamo shall neither disclose CIMA Proprietary
Information to any third party nor use CIMA Proprietary Information for any purpose other than

Page 18 of 44

 

as set forth in this Agreement. CIMA shall treat as confidential all other information of
Alamo of which CIMA became aware of prior to the Effective Date or becomes aware in connection with
this Agreement (collectively, “Alamo Proprietary Information”). CIMA shall neither disclose Alamo
Proprietary Information to any third party nor use Alamo Proprietary Information for any purpose
other than as set forth in this Agreement.

     Nothing contained herein will in any way restrict or impair either party’s (the “Using
Party’s”) right to use, disclose or otherwise deal with any Proprietary Information of the other
party which:

          (a) at the time of disclosure is known to the public or thereafter becomes known to the public
by publication or otherwise through no fault of the Using Party;

          (b) the Using Party can establish was in its possession prior to the time of the disclosure
and was not obtained directly or indirectly from the other party;

          (c) is independently made available to the Using Party by a third party who is not thereby in
violation of a confidential relationship with the other party known to the Using Party;

          (d) is developed by the Using Party independently of the Proprietary Information received from
the other party and the Using Party can establish such development; or

          (e) is information required to be disclosed by legal or regulatory process; provided, in each
case the Using Party timely informs the other party and uses reasonable efforts to limit the
disclosure and maintain confidentiality to the extent possible and permits the other party to
intervene and contest or attempt to limit the disclosure.

Alamo shall obtain no right or license of any kind under the CIMA Proprietary Information except as
set forth in this Agreement. CIMA shall obtain no right or license of any kind under the Alamo
Proprietary Information except as set forth in this Agreement.

     9.5 Expenses. CIMA and Alamo shall each bear their own direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement and, except as set
forth in this Agreement, the performance of the obligations contemplated hereby.

     9.6 Reasonable Efforts. CIMA and Alamo each hereby agrees to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be done all things
necessary or proper to make effective the transactions contemplated by this Agreement, including
such actions as may be reasonably necessary to obtain approvals and consents of governmental
Persons and other Persons.

     9.7 Publicity. Except as expressly contemplated hereby, the parties agree that no
publicity release or announcement concerning the transactions contemplated hereby shall be

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issued without the advance written consent of the other, which consent shall not be
unreasonably withheld or delayed, except as such release or announcement may be required by law,
including but not limited to the Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended, in which case the party making the release or announcement shall, before
making any such release or announcement, afford the other party a reasonable opportunity to review
and comment upon such release or announcement; provided, that the party making the release or
announcement or otherwise disclosing this Agreement to any governmental agency in accordance with
the foregoing exception shall use its best efforts to obtain confidential treatment of the terms
hereof to the fullest extent permitted by applicable law.

     9.8 Cooperation. If either party shall become engaged in or participate in any
investigation, claim, litigation or other proceeding with any third party, including the FDA,
relating in any way to the Product or any of the Licensed Assets the other party shall cooperate in
all reasonable respects with such party in connection therewith, including, without limitation,
using its reasonable efforts to make available to the other such employees who may be helpful with
respect to such investigation, claim, litigation or other proceeding, provided that, for purposes
of this provision, reasonable efforts to make available any employee shall be deemed to mean
providing a party with reasonable access to any such employee at no cost for a period of time not
to exceed 24 hours (e.g., three 8-hour business days). Thereafter, any such employee shall be made
available for such time and upon such terms and conditions (including, but not limited to,
compensation) as the parties may mutually agree.

     9.9 Competition; No Sale for Resale. Neither Alamo nor any sub-licensee of Alamo
shall knowingly sell any Product to anyone in the Territory for subsequent distribution or resale
outside the Territory and each shall take all reasonable precautions to prevent such distribution
or resale outside the Territory. Except as provided in 2.1 (c), CIMA shall not knowingly sell any
Product to anyone in the Territory or outside the Territory for subsequent distribution or resale
in the Territory and CIMA shall take all reasonable precautions to prevent such distribution or
resale in the Territory.

     9.10 Conflicting Rights. CIMA shall not grant any right to any third party relating
to the Activities which would violate the terms of or conflict with the rights granted to Alamo
pursuant to this Agreement.

     9.11 Patent and Trademark Maintenance.

          (a) CIMA hereby represents and warrants that, to the best of its knowledge, the CIMA
Technology, when used with the API, includes all the technology, patents, know-how, trade secrets
and other intellectual property necessary to manufacture the Product. Any improvement (whether or
not patentable) in the technology used in manufacturing the Product shall be owned by CIMA.

          (b) CIMA shall be solely responsible for filing, prosecuting, and maintaining all of the CIMA
Patents, and CIMA shall pay the costs associated therewith. CIMA shall file, prosecute, and
maintain all CIMA Patents so as to fully continue the benefits under the licenses

Page 20 of 44

 

granted to Alamo hereunder. CIMA may, however, discontinue prosecuting or maintaining any
CIMA Patent if (i) CIMA has a valid business reason to do so, and (ii) CIMA notifies Alamo of this
decision in which event, Alamo shall have the right, but not the obligation, to prosecute or
maintain any such patent, with the full cooperation of CIMA, in Alamo’s name and at Alamo’s
expense.

          (c) CIMA shall be solely responsible for filing, prosecuting, and maintaining all CIMA
Trademarks, and CIMA shall pay the costs associated therewith. All registrations, variations,
logos, goodwill and other rights under or acquired through use of the CIMA Trademarks shall accrue
and belong to CIMA. Except as provided herein, Alamo shall have no rights to use the CIMA
Trademarks. Alamo will not use in its business, in or outside of the Territory, any other mark or
name which is similar to or nearly resembles any of the CIMA Trademarks in use by CIMA to indicate
the source and origin of the CIMA Technology as to be likely to cause deception or confusion.
Alamo recognizes that CIMA is the owner of all CIMA Trademarks used in commerce to indicate the
source of the CIMA Technology and agrees that the CIMA Trademarks shall remain vested in CIMA both
during the term of this Agreement and thereafter. Alamo shall not contest the validity of the CIMA
Trademarks or CIMA’s ownership of the CIMA Trademarks. Use of the CIMA Trademarks by Alamo in
conjunction with the manufacture, use, and sale of the Product and all goodwill related thereto
shall inure to the benefit of CIMA for purposes of building the longevity and extent of use of the
CIMA Trademarks.

          (d) Alamo shall be solely responsible for filing, prosecuting, and maintaining all trademarks
it develops or owns for the Product (the “Alamo Trademarks”), and Alamo shall pay the costs
associated therewith. All registrations, variations, logos, goodwill and other rights under or
acquired through use of the Alamo Trademarks shall accrue and belong to Alamo. CIMA shall have no
rights to use the Alamo Trademarks. CIMA will not use in its business, in or outside of the
Territory, any other mark or name which is similar to or nearly resembles the Alamo Trademarks in
use by Alamo in a manner that is likely to cause deception or confusion. CIMA recognizes that
Alamo is the owner of all of the Alamo Trademarks used in commerce to indicate the source of the
Product and agrees that the Alamo Trademarks shall remain vested in Alamo both during the term of
this Agreement and thereafter. CIMA shall not contest the validity of the Alamo Trademarks or
Alamo’s ownership of the Alamo Trademarks. Use of the Alamo Trademarks by Alamo in conjunction
with the manufacture, use, and sale of the Product and all goodwill related thereto shall inure to
the benefit of Alamo for purposes of building the longevity and extent of use of the Alamo
Trademarks.

          (e) Alamo and CIMA agree that, where applicable and appropriate, all packaging of the Product
shall identify (i) the number of the CIMA Patents and CIMA as the owner thereof and (ii) Alamo as
the owner of the Alamo Trademarks.

          (f) Any provisions in this Agreement to the contrary notwithstanding, Alamo acknowledges that,
for all purposes, CIMA is the owner of the CIMA Technology.

Page 21 of 44

 

     9.12 Infringement; Enforcement of Proprietary Rights. 

          (a) Infringement of Patent Rights. Each party shall promptly notify the other of any
alleged infringement by third parties of any CIMA Patent and provide any information available to
that party relating to such alleged infringement.

          (i) Within a reasonable time (not to exceed 30 days) following such notification, the parties
shall meet to discuss a desirable response to such infringement and enter into good faith
negotiations to determine an agreed upon course of action to end such infringement and the
appropriate allocation of any costs or recoveries associated therewith.

          (ii) If the parties are unable to agree upon the course of action or the appropriate
allocation of any costs associated therewith, CIMA shall have the responsibility to investigate
such alleged infringement and shall have the first right, at its own expense, to end any
infringement of such rights that materially affect Alamo’s rights pursuant to this Agreement,
including, but not limited to, bringing suit against such third party infringer. In the event that
CIMA does not bring suit against such third party infringer, Alamo may bring suit against such
third party infringer on CIMA’s behalf.

          (b) Procedures. No settlement, consent judgment or other voluntary final disposition
of any suit contemplated by Section 9.12(a) may be entered into without the consent of each party,
which consent shall not be unreasonably withheld or delayed. Unless otherwise agreed by the
parties, to the extent that any suit contemplated by Section 9.12 (a) is directly related to the
Product, any recovery of Damages to the extent related to the Product (net of the respective
out-of-pocket legal fees and associated costs) in any such suit shall be allocated among the
parties hereto assuming that such Damages constitute Net Sales by Alamo hereunder and then
*** split between the parties thereafter. In the event of any infringement suit against
a third party brought by either party pursuant to this Section 9.12, the party not bringing
such suit shall cooperate in all respects, execute any documents reasonably necessary to permit the
other party to prosecute such suit, and to the extent reasonable, shall make available its
employees and relevant records to provide evidence for such suit.

     9.13 Referral of Orders and Inquiries. Except as provided in 2.1 (c), CIMA shall
refer all Persons sending orders or making inquiries regarding the Product within the Territory to
Alamo and shall promptly notify Alamo of the name of each such Person and the nature of the inquiry
of such Person.

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

Page 22 of 44

 

SECTION 10

INDEMNIFICATION

     10.1 Indemnification.

     (a) CIMA shall indemnify, defend and hold Alamo (and its directors, officers, employees, and
Affiliates) harmless from and against any and all Damages incurred or suffered by Alamo (and its
directors, officers, employees, and Affiliates) as a consequence of:

          (i) any breach of any representation, warranty or covenant made by CIMA in this Agreement or
any agreement, instrument or document delivered by CIMA pursuant to the terms of this Agreement;

          (ii) any failure to perform duly and punctually any covenant, agreement or undertaking on the
part of CIMA contained in this Agreement; or

          (iii) any act or omission of CIMA with respect to the operation of CIMA’s business, or the
handling, manufacturing, or use of the Product by CIMA; or

          (iv) any claim or demand that the manufacture, use, sale or offer for sale of the Product by
reason of CIMA Technology infringes any United States or foreign patent.

     (b) Alamo shall indemnify, defend and hold CIMA (and its directors, officers, employees, and
Affiliates) harmless from and against any and all Damages incurred or suffered by CIMA (and its
directors, officers, employees, and Affiliates) as a consequence of:

          (i) any breach of any representation, warranty or covenant made by Alamo in this Agreement or
any agreement, instrument or document delivered by Alamo pursuant to the terms of this Agreement;

          (ii) any failure to perform duly and punctually any covenant, agreement or undertaking on the
part of Alamo contained in this Agreement; or

          (iii) any act or omission of Alamo with respect to the operation of Alamo’s business or the
handling, manufacturing, sale, consumption or use of the Product by Alamo.

     10.2 Notice and Opportunity To Defend. Promptly after receipt by a party hereto of
notice of any claim which could give rise to a right to indemnification pursuant to Section 10.1.
such party (the “Indemnified Party”) shall give the other party (the “Indemnifying Party”) written
notice describing the claim in reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein shall not relieve the Indemnifying Party of its obligations
under this Section, except to the extent that such failure to give notice materially prejudices the
Indemnifying Party’s ability to defend such claim. The Indemnifying Party shall

Page 23 of 44

 

have the
right, at its option, to compromise or defend, at its own expense and by counsel mutually agreed by
the Parties, any such matter involving the asserted liability of the party seeking such
indemnification. If the Indemnifying Party shall undertake to compromise or defend any such
asserted liability, it shall promptly (and in any event not less than 10 days after receipt of the
Indemnified Party’s original notice) notify the Indemnified Party in writing of its intention to do
so, provided such compromise in no way imputes guilt or fault upon, or imposes any obligations on,
Indemnified Party. The Indemnified Party agrees to cooperate fully with the Indemnifying Party and
its counsel in the compromise or defense against any such asserted liability. All reasonable costs
and expenses incurred in connection with such cooperation shall be borne by the Indemnifying Party,
as incurred by the Indemnified Party. If the Indemnifying Party elects not to compromise or defend
the asserted liability, fails to notify the Indemnified Party of its election to compromise or
defend as herein provided, fails to admit its obligation to indemnify under this Agreement with
respect to the claim, or, if in the reasonable opinion of the Indemnified Party, the claim could
result in the Indemnified Party becoming subject to injunctive relief or relief other than the
payment of money damages that could materially adversely affect the ongoing business of the
Indemnified Party in any manner, the Indemnified Party shall have the right, at its option, to pay,
compromise or defend such asserted liability by its own counsel and its reasonable costs and
expenses shall be included as part of the indemnification obligation of the Indemnifying Party
hereunder and shall be due and payable within thirty (30) days of receipt of the invoice therefor.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnified Party may settle
or compromise any claim over the reasonable objection of the other. In any event, the Indemnified
Party and the Indemnifying Party may participate, at their own expense, in the defense of such
asserted liability. If the Indemnifying Party chooses to defend any claim, the Indemnified Party
shall make available to the Indemnifying Party any books, records or other documents within its
control that are necessary for such defense. Notwithstanding anything to the contrary in this
Section 10.2, (i) the party conducting the defense of a claim shall (A) keep the other
party informed on a reasonable and timely basis as to the status of the defense of such claim (but
only to the extent such other party is not participating jointly in the defense of such claim), and
(B) conduct the defense of such claim in a prudent manner, and (ii) the Indemnifying Party shall
not cease to defend, settle or otherwise dispose of any claim without the prior written consent of
the Indemnified Party (which consent shall not be unreasonably withheld). Upon the final
determination of liability and the amount of the indemnification payment under this Section
10, the appropriate party shall pay to the other, as the case may be, within 10 business days
after such determination, the amount of any claim for indemnification made hereunder.

     10.3 Survival. The provisions of Section 10 shall survive any termination of
this Agreement. Each Indemnified Party’s rights under Section 10 shall not be deemed to
have been waived or otherwise affected by such Indemnified Party’s waiver of the breach of any
representation, warranty, agreement or covenant contained in or made pursuant this Agreement,
unless such waiver expressly and in writing also waives any or all of the Indemnified Party’s right
under Section 10.

Page 24 of 44

 

     10.4 Insurance. Alamo shall maintain throughout the term of this Agreement
comprehensive general liability insurance, including product liability insurance underwritten by an
insurance company reasonably acceptable to CIMA. This insurance coverage shall provide protection
of not less than ten ($10) million, combined single limit for personal injury and property damage
(on a per occurrence basis) with CIMA named as an additional insured. Such liability insurance
shall be maintained on an occurrence basis to provide such protection after expiration or
termination of the policy itself and/or this Agreement. Alamo shall furnish to CIMA certificates
issued by the insurance company setting forth the amount of the liability insurance and a provision
that CIMA shall receive thirty (30) days written notice prior to termination, reduction or
modification of coverage.

SECTION 11

TERMINATION

     11.1 Termination. The term of this Agreement shall begin upon the Effective Date and,
unless sooner terminated as hereinafter provided, shall end upon the later of expiration of the
last CIMA Patent to expire on a Region-by-Region and Product-by-Product basis or ***
years from Launch in the particular Region, or, if later, the expiration of any other patent
resulting from the development process contemplated hereby. Should Alamo desire to have CIMA
continue the manufacture of Product beyond the date of Termination, CIMA agrees to enter into good
faith negotiations with Alamo to discuss terms of manufacture up to an additional *** months.
Notwithstanding the foregoing, this Agreement may be terminated as follows:

          (a) Termination for Insolvency. If either Alamo or CIMA (i) makes a general
assignment for the benefit of creditors or becomes insolvent; (ii) files an insolvency petition in
bankruptcy; (iii) petitions for or acquiesces in the appointment of any receiver, trustee or
similar officer to liquidate or conserve its business or any substantial part of its assets; (iv)
commences under the laws of any jurisdiction any proceeding involving its insolvency, bankruptcy,
reorganization, adjustment of debt, dissolution, liquidation or any other similar proceeding for
the release of financially distressed debtors; or (v) becomes a party to any proceeding or action
of the type described above in (iii) or (iv) and such proceeding or action remains undismissed or
unstayed for a period of more than 60 days, then the other party may by written notice terminate
this Agreement in its entirety with immediate effect.

          (b) Termination for Default. Alamo and CIMA each shall have the right to terminate
this Agreement for default upon the other’s failure to comply in any material respect with the
terms and conditions of this Agreement. At least 60 days prior to any such termination for
default, the party seeking to so terminate shall give the other written notice of its intention to
terminate this Agreement in accordance with the provisions of this Section 11.1(b), which notice
shall set forth the default(s) which form the basis for such termination. If the defaulting party
fails to correct such default(s) within 60 days after receipt of notification, then such party

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

Page 25 of 44

 

immediately may terminate this Agreement. This Section 11.1(b) shall not be exclusive and
shall not be in lieu of any other remedies available to a party hereto for any default hereunder on
the part of the other party.

          (c)
Termination for Failure to Pay Minimum Royalties. Subject to Section 2.4, CIMA
may terminate this Agreement in accordance with the procedure provided for in Section 11.1(b) in
the event Alamo fails to pay CIMA an amount equal to the Minimum Annual Royalty Target in
accordance with Exhibit A of this Agreement during or within *** days after the end of
each Year during the term.

          (d)
Termination for Failure to Commercialize. CIMA may terminate this
Agreement on a Region-by-Region basis for Alamo’s failure to commercialize the Product in that
Region in accordance with Section 2.1(c) of this Agreement.

          (e) Continuing Obligations. Termination of this Agreement for any reason
shall not relieve the parties of any obligation accruing prior thereto with respect to the Product
and any ongoing obligations hereunder with respect to the remaining Product and shall be without
prejudice to the rights and remedies of either party with respect to any antecedent breach of the
provisions of this Agreement. Without limiting the generality of the foregoing, no termination of
this Agreement, whether by lapse of time or otherwise, shall serve to terminate the obligations of
the parties hereto under Sections 7, 8, 9.3, 9.4, 9.6, 9.8, 10, 11.1(c) and 12 hereof, and such
obligations shall survive any such termination.

SECTION 12

MISCELLANEOUS

     12.1 Successors and Assigns. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and permitted assigns; provided,
however, that neither CIMA nor Alamo may assign any of its rights, duties or obligations hereunder
without the prior written consent of the other, except that no prior written consent shall be
required in the event that a third party acquires substantially all of the assets or outstanding
shares of, or merges with, Alamo or CIMA, as the case may be.

     12.2 Notices. All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or
facsimile and confirmed in writing, or mailed first class, postage prepaid, by registered or
certified mail, return receipt requested (mailed notices and notices sent by facsimile shall be
deemed to have been given on the date received) as follows:

 

	
	***     Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

Page 26 of 44

 

 

     If to CIMA, as follows:

CIMA LABS INC.

10000 Valley View Road

Eden Prairie, MN 55344

Facsimile: (952)947-8770

Attention: General Manager

     with a copy to:

CIMA LABS INC.

7325 Aspen Lane

Brooklyn Park, MN 55428

Facsimile: (763) 488-4770

Attention: Sr. Counsel/Dir. of Legal Services

     If to Alamo, as follows:

Alamo Pharmaceuticals, LLC

8501 Wilshire Blvd.,

Suite 318

Beverly Hills, CA 90211

Facsimile: (310) 854-0739

Attention: Chief Financial Officer

     with a copy to:

Milbank, Tweed, Hadley & McCloy LLP

601 S. Figueroa Street

Los Angeles, CA 90017

Facsimile: (213) 629-5063

Attention: Kenneth J. Baronsky

or in any case to such other address or addresses as hereafter shall be furnished as provided in
this Section 12.2 by any party hereto to the other party.

     12.3 Waiver; Remedies. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument executed by such party.
No delay on the part of CIMA or Alamo in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of either CIMA or Alamo of any right,
power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder
nor shall any single or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or privilege hereunder.

Page 27 of 44

 

 

     12.4 Survival of Representations. Each of the representations and warranties made in
this Agreement shall survive the term of this Agreement.

     12.5 Independent Contractors. The parties hereto are independent contractors and
nothing contained in this Agreement shall be deemed to create the relationship of partners, joint
venturers, or of principal and agent, franchiser and franchisee, or of any association or
relationship between the parties other than as expressly provided in this Agreement. Alamo
acknowledges that it does not have, and Alamo shall not make representations to any third party,
either directly or indirectly, indicating that Alamo has any authority to act for or on behalf of
CIMA or to obligate CIMA in any way whatsoever. CIMA acknowledges that it does not have, and it
shall not make any representations to any third party, either directly or indirectly, indicating
that it has any authority to act for or on behalf of Alamo or to obligate Alamo in any way
whatsoever.

     12.6 Entire Agreement. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior agreements or
understandings of the parties relating thereto.

     12.7 Amendment. This Agreement may be modified or amended only by written agreement
of the parties hereto.

     12.8 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original but all of which together shall constitute a single
instrument.

     12.9 Governing Law. This Agreement shall be governed and construed in accordance with
the laws of the State of New York excluding any choice of law rules which may direct the
application of the law of another state.

     12.10 Dispute Resolution. To the extent a dispute arises with respect to a term or
provision of this Agreement which is not subject to a specific time period or remedy, the Parties
will use all reasonable efforts to resolve in an amicable fashion any dispute, claim or controversy
that may arise relating to the terms or performance of this Agreement. If the Parties are unable
to resolve such dispute within thirty (30) days after initial notice, either party, by notice to
the other, have such dispute referred to a senior officer of each company. Such officers shall
attempt to resolve the dispute by good faith negotiation within thirty (30) days after receipt of
such notice.

     12.11 Captions. All section titles or captions contained in this Agreement, in any
Schedule referred to herein or in any Exhibit annexed hereto, and the table of contents, if any, to
this Agreement are for convenience only, shall not be deemed a part of this Agreement and shall not
affect the meaning or interpretation of this Agreement.

Page 28 of 44

 

 

     12.12 No Third-Party Rights. No provision of this Agreement shall be deemed or
construed in any way to result in the creation of any rights or obligation in any Person not a
party or not affiliated with a party to this Agreement.

     12.13 Severability. If any provision of this Agreement is found or declared to be
invalid or unenforceable by any court or other competent authority having jurisdiction, such
finding or declaration shall not invalidate any other provision hereof, and this Agreement shall
thereafter continue in full force and effect.

     12.14 Attachments. All Schedules, Exhibits and other attachments to this Agreement
are by this reference incorporated herein and made a part of this Agreement.

     12.15 Force Majeure. In the event that a party is prevented from carrying out its
obligations under this Agreement by an event of Force Majeure, then such party’s performance of its
obligations under this Agreement shall be excused during the period of such event and for a
subsequent reasonable period of recovery.

     12.16 Effect on Original Agreement. This Agreement replaces and supersedes the
Original Agreement in its entirety and constitutes the entire understanding of the parties with
respect to the subject matter contained herein.

Page 29 of 44

 

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
on the day and year first above written.

	 	 	 	 	 
	 	CIMA LABS INC.

 	 
	 	By:  	/s/ Todd MacLaughlan
 	 
	 	 	Name:  	Todd MacLaughlan 	 
	 	 	Title:  	General Manager 	 
	 

	 	 	 	 	 
	 	ALAMO PHARMACEUTICALS, LLC

 	 
	 	By:  	/s/ Neal R. Cutler
 	 
	 	 	Name:  	Neal R. Cutler, M.D. 	 
	 	 	Title:  	President and C.E.O. 	 
	 

Page 30 of 44

 

 

Amended and Restated Development, License and Supply Agreement

Schedule A

Minimum Annual Royalty Targets

     Pursuant to Section 2.4, in each Year during the term, Alamo shall meet or exceed the minimum
annual royalty targets set forth below (“Minimum Annual Royalty Targets”), or pay such amounts to
CIMA within *** days after the end of each Year. Any royalties paid by Alamo with
respect to Net Sales of the Products for such Year shall be credited toward achievement of the
Minimum Annual Royalty Targets.

     Minimum Annual Royalty Targets

	 	 	 	 	 
	 	 	Minimum Annual
	Year	 	Royalty Targets
	***
	 	$	*	**
	 
	 	 	 	 
	***
	 	$	*	**
	 
	 	 	 	 
	***
	 	$	*	**
	 
	 	 	 	 
	***
	 	$	*	**

 

			
	***	 	Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

Page 31 of 44

 

 

Amended and Restated Development, License and Supply Agreement

Schedule B

Development Schedule

	 	 	 	 	 	 	 
	***

	 	                                        ***
	 	***
	 	***
	 
	 	 	 	 	 	 
	***

	 	***
	 	***	 	 
	 
	 	 	 	 	 	 
	***

	 	     ***
	 	***
	 	***
	 
	 	 	 	 	 	 
	***

	 	          ***
	 	***
	 	***
	 
	 	 	 	 	 	 
	***

	 	     ***
	 	***
	 	***
	 
	 	 	 	 	 	 
	 

	 	     ***
	 	***	 	 
	 
	 	 	 	 	 	 
	 

	 	     ***
	 	***
	 	***
	 
	 	 	 	 	 	 
	***

	 	          ***
	 	***
	 	***
	 
	 	 	 	 	 	 
	***

	 	     ***
	 	***
	 	***
	 
	 	 	 	 	 	 
	***

	 	     ***
	 	***	 	 
	 
	 	 	 	 	 	 
	 

	 	          ***
	 	***
	 	***

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	***
	 
	 	 	 	 	 	 
	 

	 	***   	 		 	 
	 
	 	 	 	 	 	 
	 

	 	     ***	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	***	 	 	 	 
	 
	 	 	 	 	 	 
	***
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	***
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	***	 	 	 	 
	 
	 	 	 	 	 	 
	***
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	          ***	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	***	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	***	 	 
	 
	 	 	 	 	 	 
	 

	 	***	 	 	 	 

 

	
	***     Portions of this page have been omitted
pursuant to a request for Confidential Treatment and filed separately with the
Commission.

Page 32 of 44

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 			 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	*	**	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	*	**	 	 			 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     ***
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     ***
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     ***
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     ***
	 	 	 	 	 	 	 	 	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	*	**	 	 			 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	***
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	***
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	*	**	 	 			 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

******Any additional work beyond this proposal will be charged per activity.******

     Below please find the cost schedule for the commercial stability program for Fazaclo
tablets. A commercial lot includes process validation lots, annual maintenance lots, and any lot
set on stability for any other reason as agreed upon between Alamo and CIMA.

Table 1. Cost Schedule

	 	 	 	 	 
	Activity	 	Cost
	 
	Per lot set up fee
	 	$	*	**
	 
	 	 	 	 
	Cost for time zero (included in release
testing)
	 	$	*	**
	 
	 	 	 	 
	Cost per sample pull
	 	$	*	**

The set up fee includes protocol generation, sampling, labeling, inventory, and storage at all
specified conditions. Cost per sample pull includes testing, data review, data entry into
database, and reporting. A single lot pulled from two conditions and subsequently tested
constitutes two sample pulls. Detail of total sample pulls and costs are shown in Tables 2 and 3.

 

	
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***

***

     ***

 

	
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Amended and Restated Development, License and Supply Agreement

Schedule B (continued)

Table 2. Detail of Expected Study Starts and Sample Pulls

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2004	 	2005	 	2006	 	2007
	Set ups
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**
	Val batch pulls
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**
	Annual batch pulls
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**

Table 3. Detail of Expected Costs per Year

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	2004	 	2005	 	2006	 	2007
	Set ups
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**
	Val batch pulls
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**
	Annual batch pulls
	 	 	*	**	 	 	*	**	 	 	*	**	 	 	*	**
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	$	*	**	 	$	*	**	 	$	*	**	 	$	*	**

Invoicing will occur as stability pulls are tested.

 

	
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Amended and Restated Development, License and Supply Agreement

Schedule C

Royalty Rates

     Pursuant to Sections 4.1(a) and 4.3, if Alamo exceeds the Minimum Annual Royalty Targets
specified in Schedule A, Alamo shall pay to CIMA a percentage of annual Net Sales actually recorded
during such Year, as indicated on the following schedule under Tier 1. Should Alamo not achieve
the Annual Royalty Targets specified in Schedule A, Alamo shall pay to CIMA the higher amount of
(a) Minimum Annual Royalty Targets or (b) a percentage of annual Net Sales actually recorded during
such Year, as indicated on the following schedule under Tier 2.

	 	 	 
	Tier	 	Royalty Rate
	Tier 1
	 	*** % of Net Sales
	Tier 2
	 	***% of Net Sales

 

	
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Amended and Restated Development, License and Supply Agreement

Schedule D

Alamo Purchase Order

[See Attached]

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Amended and Restated Development, License and Supply Agreement

Schedule E

Technical Agreement Addendum

     CIMA will be accountable for all aspects of the Product research and development and
manufacturing other than (i) the design and conduct of clinical trials, (ii) the assembly and
filing of the regulatory documents and (iii) the final packaging artwork and sales of Product.
Specifications will be mutually agreed by both parties on or prior to the final regulatory filing.

Clozapine OraSolvÒ

Anticipated Product Attributes:

***

 

			
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Amended and Restated Development, License and Supply Agreement

Schedule E (continued)

Clozapine DuraSolvÒ

Anticipated Product Attributes:

***

 

	
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Amended and Restated Development, License and Supply Agreement

Schedule F

Cost of Goods

     Pursuant to Sections 5.1, 5.3 and 5.6, Alamo shall pay to CIMA the amounts indicated on the
following schedule in respect of CIMA’s manufacturing obligations hereunder.

          TRADE and SAMPLES (cost per tablet) — 2004

	 	 	 	 	 
	Potency	 	Total Cost(1) (2)	 	Packaging
	25 mg

	 	$ ***
	 	Bulk, in fiber drums
	 
	 	 	 	 
	50 mg

	 	$***
	 	Bulk, in fiber drums
	 
	 	 	 	 
	100 mg

	 	$***
	 	Bulk, in fiber drums

 

			
	1)	 	The cost per tablet does not include the cost of API.

	 
	2)	 	Per tablet costs will be adjusted annually on January 1st, but increases shall not exceed
the PPI (Pharmaceutical) increase for that year.

          PLACEBOS (cost per tablet)

	 	 	 	 	 
	Placebo	 	 	 	 
	Type	 	Total Cost	 	Packaging
	25 mg

	 	$***
	 	Bulk, in fiber drums
	 
	 	 	 	 
	50 mg

	 	$***
	 	Bulk, in fiber drums
	 
	 	 	 	 
	100 mg

	 	$***
	 	Bulk, in fiber drums

 

	
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Amended and Restated Development, License and Supply Agreement

Schedule G

Begins on Next Page

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TABLE OF CONTENTS

	 	 	 
	SCHEDULES	 	 
	Schedule A

	 	Minimum Annual Royalty Targets
	Schedule B

	 	Development Schedule
	Schedule C

	 	Royalty Rates
	Schedule D

	 	Alamo Purchase Order
	Schedule E

	 	Technical Agreement Addendum
	Schedule F

	 	Cost Of Goods
	Schedule G

	 	Map of Regions

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