Document:

exv10w3

 

EXHIBIT 10.3

FORM OF

EMPLOYEE MATTERS AGREEMENT

by and between

BENTLEY PHARMACEUTICALS, INC.

and

CPEX PHARMACEUTICALS, INC.

Dated as of [                    ], 2008

 

 

INDEX OF DEFINED TERMS

	 	 	 
	TERM	 	SECTION IN WHICH DEFINED
	Agreement

	 	Preamble
	Bentley

	 	Preamble
	Bentley Welfare Plans

	 	4.1(a) 
	CPEX

	 	Preamble
	CPEX 401(k) Plan

	 	3.1(a) 
	CPEX Ratio

	 	5.1(a)(ii) 
	CPEX Stock Plan

	 	2.4 
	CPEX Welfare Plans

	 	4.1(a) 
	Delaware Courts

	 	9.11 
	Parties

	 	Preamble
	Post-Distribution Bentley Option

	 	5.1(a)(i) 
	Post-Distribution Spanish Employee Option

	 	5.1(b)(i) 
	Post-Distribution Spanish Employee Restricted  

    Stock Unit

	 	
5.2(b)(i) 
	Pre-Distribution Bentley Option Price

	 	5.1(a)(ii) 
	Separation Agreement

	 	Recitals
	Service Crediting Date

	 	2.3(b)(i) 
	Spanish Employee Option

	 	5.1(a) 
	Spanish Employee Restricted Stock Unit

	 	5.2(a) 

EMPLOYEE MATTERS AGREEMENT

     EMPLOYEE MATTERS AGREEMENT (this “Agreement”), dated as of [                    ], 2008, by and
between Bentley Pharmaceuticals, Inc., a Delaware corporation (“Bentley”), and CPEX
Pharmaceuticals, Inc., a Delaware corporation (“CPEX”). Each of Bentley and CPEX is herein
referred to as a “Party” and collectively, as the “Parties”.

RECITALS:

     WHEREAS, Bentley, acting through its direct and indirect Subsidiaries, currently conducts a
number of businesses, including (i) the Bentley Business and (ii) the CPEX Business;

     WHEREAS, the Board of Directors of Bentley has determined that it is appropriate, desirable
and in the best interests of Bentley and its stockholders to separate Bentley into two independent
companies (the “Separation”), one for each of: (i) the Bentley Business, which shall
continue to be owned and conducted, directly or indirectly, by Bentley, and (ii) the CPEX Business,
which shall be owned and conducted, directly or indirectly, by CPEX;

     WHEREAS, to effect the Separation the Parties entered into that certain Separation and
Distribution Agreement dated as of even date hereof (as amended or otherwise modified from time to
time, the “Separation Agreement”); and

 

 

     WHEREAS, pursuant to the Separation Agreement, Bentley and CPEX have agreed to enter into this
Agreement for the purpose of allocating Assets, Liabilities and responsibilities with respect to
certain employee compensation and benefit plans and programs between them.

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual promises and covenants
hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

          Section 1.1 Definitions. Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Separation Agreement and the following terms shall have the
following meanings:

     “Benefit Plan” shall mean, with respect to an entity, each plan, program, arrangement,
agreement or commitment that is an employment, change in control/severance, consulting,
non-competition or deferred compensation agreement, or an executive compensation, incentive bonus
or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement,
stock option, stock purchase, stock appreciation rights, restricted stock, other equity-based
compensation, severance pay, salary continuation, life, health, hospitalization, sick leave,
vacation pay, disability or accident insurance plan, corporate-owned or key-man life insurance or
other employee benefit plan, program, arrangement, agreement or commitment, including any “employee
benefit plan” (as defined in Section 3(3) of ERISA), sponsored or maintained by such entity (or to
which such entity contributes or is required to contribute).

     “Bentley Benefit Plan” shall mean any Benefit Plan sponsored, maintained or
contributed to by any member of the Bentley Group or any ERISA Affiliate thereof immediately
following the Distribution Date.

     “Bentley Employee” shall mean an active employee or an employee on vacation or on
approved leave of absence (including maternity, paternity, family, sick leave, salary continuation,
qualified military service under the Uniformed Services Employment and Reemployment Rights Act of
1994, and leave under the Family Medical Leave Act and other approved leaves) who, on the
Distribution Date, is employed by or will be employed by Bentley or any member of the Bentley
Group.

     “Bentley 401(k) Plan” shall mean the Bentley 401(k) Plan.

     “Bentley Liabilities” shall mean all liabilities of Bentley other than the CPEX
Liabilities.

     “Bentley Option” shall mean an option to purchase shares of Bentley Common Stock
granted pursuant to one of the Bentley Stock Plans.

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     “Bentley Participant” shall mean any individual who, immediately following the
Distribution Date, is a Bentley Employee, a Former Bentley Employee or a beneficiary, dependent or
alternate payee of any of the foregoing.

     “Bentley Restricted Stock Unit” shall mean a unit granted by Bentley or one of its
Affiliates pursuant to one of the Bentley Stock Plans representing a general unsecured promise by
Bentley or one of its Affiliates to deliver a share of Bentley Common Stock or dividend
equivalents, if applicable (or the cash equivalent of either), upon the satisfaction of a vesting
requirement (other than performance based vesting requirements).

     “Bentley Service Plans” shall mean, collectively, the Bentley 401(k) Plan and the
severance and health and welfare benefit plans maintained by a member of the Bentley Group to the
extent eligibility for or level of benefits thereunder is dependent upon length of service,
including the Bentley vacation, health and welfare, sick leave, salary continuation and retiree
medical, dental and life programs, if any.

     “Bentley Stock Plan” shall mean, collectively, the Bentley Pharmaceuticals, Inc. 1991
Stock Option Plan, Bentley Pharmaceuticals, Inc. 2001 Employee Stock Option Plan, Bentley
Pharmaceuticals, Inc. 2001 Directors’ Stock Option Plan, and Bentley Pharmaceuticals, Inc. 2005
Equity and Incentive Plan.

     “COBRA” shall mean the continuation coverage requirements for “group health plans”
under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as
codified in Code Section 4980B and Sections 601 through 608 of ERISA, together with all regulations
and proposed regulations promulgated thereunder.

     “CPEX Benefit Plan” shall mean any Benefit Plan sponsored, maintained or contributed
to by any member of the CPEX Group or any ERISA Affiliate thereof immediately following the
Distribution Date, including the CPEX 401(k) Plan and the CPEX Welfare Plans.

     “CPEX Employee” shall mean a person listed on Exhibit A to the Separation Agreement.

     “CPEX Option” shall mean an option to purchase shares of CPEX Common Stock as of the
Distribution Date, which shall be issued pursuant to the CPEX Stock Plan as part of the adjustment
to Bentley Options in connection with the Distribution.

     “CPEX Participant” shall mean any individual who, immediately following the
Distribution Date, is a CPEX Employee, a Former CPEX Employee or a beneficiary, dependent or
alternate payee of any of the foregoing.

     “CPEX Restricted Stock Unit” shall mean a unit issued by CPEX or one of its Affiliates
representing a general unsecured promise by CPEX or one of its Affiliates to deliver a share of
CPEX Common Stock or dividend equivalents, if applicable (or the cash equivalent of either), upon
the satisfaction of a service based vesting requirement, which unit is issued pursuant to the CPEX
Stock Plan as part of the adjustment to Bentley Restricted Stock Units in connection with the
Distribution.

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     “CPEX Service Plans” shall mean, collectively, the CPEX 401(k) Plan and the severance
and health and welfare plans maintained by a member of the CPEX Group to the extent eligibility for
or level of benefits thereunder is dependent upon length of service, including the CPEX vacation,
health and welfare, sick leave, salary continuation and retiree medical, dental and life programs,
if any.

     “CPEX Stock Plan” shall mean the CPEX 2008 Equity and Incentive Plan.

     “ERISA Affiliate” shall mean with respect to any Person, each business or entity which
is a member of a “controlled group of corporations,” under “common control” or a member of an
“affiliated service group” with such Person within the meaning of Sections 414(b), (c) or (m) of
the Code, or required to be aggregated with such Person under Section 414(o) of the Code, or under
“common control” with such Person within the meaning of Section 4001(a)(14) of ERISA.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     “Former Bentley Employee” shall mean, as of the Distribution Date, any individual who,
before the Distribution Date, terminated employment with Bentley or its predecessors or any member
of the Bentley Group and is not listed on Exhibit A to the Separation Agreement, other than any
Former CPEX Employee.

     “Former CPEX Employee” shall mean, as of the Distribution Date, any individual who,
before the Distribution Date, terminated employment with Bentley or its predecessors or any member
of the Bentley Group and whose principal services to the Bentley Group related to the CPEX
Business.

     “HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as
amended.

     “Initial CPEX Stock Price” shall mean, unless otherwise determined by the Compensation
Committee of the Bentley Board of Directors in its sole discretion in order to effect an equitable
adjustment of a Bentley Option in connection with the Distribution, the closing per share trading
price of CPEX Common Stock on a when issued basis on the Distribution Date or, if none, the opening
per share trading price of CPEX Common Stock on the first date following the Distribution Date on
which there is trading.

     “Participating Company” shall mean Bentley or any Person (other than an individual)
participating in a Bentley Benefit Plan.

     “Pre-Distribution Bentley Stock Price” shall mean the closing per share trading price
of Bentley Common Stock on the day immediately preceding the Distribution Date.

     “Post-Distribution Bentley Stock Price” shall mean, unless otherwise determined by the
Compensation Committee of the Bentley Board of Directors in its sole discretion in order to effect
an equitable adjustment of a Bentley Option in connection with the Distribution, the closing per
share trading price of Bentley Common Stock on an ex-distribution basis on the Distribution Date
or, if none, the closing per share trading price of Bentley Common Stock on the Distribution Date

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(or, if there is no trading on the Distribution Date, on the first following date on which
there is trading).

     “Spanish Employee” shall mean an active employee or an employee on vacation or on
approved leave of absence (including maternity, paternity, family, sick leave, salary continuation,
qualified military service under the Uniformed Services Employment and Reemployment Rights Act of
1994, and leave under the Family Medical Leave Act and other approved leaves) who, on the
Distribution Date, is employed by or will be employed by Laboratorios Belmac, S.A., Laboratorios
Rimafor, S.L., Laboratorios Davur, S.L. or Bentley A.P.I., S.L. or any former employee who
immediately prior to his or her termination of employment was employed by such entities.

          Section 1.2 References; Interpretation. References in this Agreement to any gender include
references to all genders, and references to the singular include references to the plural and vice
versa. Unless the context otherwise requires, the words “include”, “includes” and “including” when
used in this Agreement shall be deemed to be followed by the phrase “without limitation”. Unless
the context otherwise requires, references in this Agreement to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement. Unless the context otherwise requires, the words “hereof”, “hereby” and “herein”
and words of similar meaning when used in this Agreement refer to this Agreement in its entirety
and not to any particular Article, Section or provision of this Agreement.

ARTICLE II

GENERAL PRINCIPLES

          Section 2.1 Assumption and Retention of Liabilities; Related Assets.

               (a) As of the Distribution Date, except as otherwise expressly provided in this Agreement,
Bentley shall, or shall cause one or more members of the Bentley Group to, assume or retain, as
applicable, and pay, perform, fulfill and discharge, in due course in full (i) all Liabilities
under all Bentley Benefit Plans, (ii) all Liabilities (excluding Liabilities incurred under a
Benefit Plan except as otherwise provided in this Agreement) with respect to the employment,
service, termination of employment or termination of service of all Bentley Employees, Former
Bentley Employees and their dependents and beneficiaries (and any alternate payees in respect
thereof) and other service providers (including any individual who is, or was, an independent
contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee,
leased employee, on-call worker, incidental worker, or non-payroll worker or in any other
employment, non-employment, or retainer arrangement, or relationship with any member of the Bentley
Group), in each case to the extent arising in connection with or as a result of employment with or
the performance of services for any member of the Bentley Group, and (iii) any other Liabilities or
obligations expressly assigned to Bentley or any of its Affiliates (other than any member of the
CPEX Group) under this Agreement. For purposes of clarification, the Liabilities assumed or
retained by the Bentley Group as provided for in this Section 2.1(a) or elsewhere in this Agreement
are intended to be Bentley Liabilities.

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               (b) As of the Distribution Date, except as otherwise expressly provided in this Agreement,
CPEX shall, or shall cause one or more members of the CPEX Group to, assume or retain, as
applicable, and pay, perform, fulfill and discharge, in due course in full (i) all Liabilities
under all CPEX Benefit Plans, (ii) all Liabilities (excluding Liabilities incurred under a Benefit
Plan except as otherwise provided in this Agreement) with respect to the employment, service,
termination of employment or termination of service of all CPEX Employees, Former CPEX Employees
and their dependents and beneficiaries (and any alternate payees in respect thereof) and other
service providers (including any individual who is, or was, an independent contractor, temporary
employee, temporary service worker, consultant, freelancer, agency employee, leased employee,
on-call worker, incidental worker, or non-payroll worker or in any other employment,
non-employment, or retainer arrangement, or relationship with any member of the Bentley Group or
CPEX Group), in each case to the extent arising in connection with or as a result of employment
with or the performance of services for any member of the CPEX Group, or in the case of Former CPEX
Employees, the Bentley Group and (iii) any other Liabilities or obligations expressly assigned to
CPEX or any of its Affiliates (other than any member of the Bentley Group) under this Agreement.
For purposes of clarification, the Liabilities assumed or retained by the CPEX Group as provided
for in this Section 2.1(b) or elsewhere in this Agreement are intended to be CPEX Liabilities as
such term is defined in the Separation Agreement.

               (c) From time to time after the Distribution Date, the Parties shall promptly reimburse one
another, upon reasonable request of the Party requesting reimbursement and the presentation by such
Party of such substantiating documentation as the other Party shall reasonably request, for the
cost of any obligations or Liabilities satisfied or assumed by the Party requesting reimbursement
or its Affiliates that are, or that have been made pursuant to this Agreement, the responsibility
of the other Party or any of its Affiliates. Any such request for reimbursement must be made not
later than the first anniversary of the Distribution Date.

               (d) Bentley shall retain responsibility for all employee-related regulatory filings for
reporting periods ending at or prior to the Distribution Date except for Equal Employment
Opportunity Commission EEO-1 reports and affirmative action program (AAP) reports and responses to
Office of Federal Contract Compliance Programs (OFCCP) submissions, for which Bentley will provide
data and information (to the extent permitted by applicable Laws and consistent with Section 8.1)
to CPEX, who will be responsible for making such filings in respect of CPEX Employees.

          Section 2.2 Participation in Bentley Benefit Plans. Except as otherwise expressly provided
for in this Agreement or as otherwise expressly agreed to in writing between or among the affected
Parties, (i) effective as of the Distribution Date, CPEX and each member of the CPEX Group shall
cease to be a Participating Company in any Bentley Benefit Plan, and (ii) each CPEX Participant and
any other service providers (including any individual who is, or was, an independent contractor,
temporary employee, temporary service worker, consultant, freelancer, agency employee, leased
employee, on-call worker, incidental worker, or nonpayroll worker of any member of the CPEX Group
or in any other employment, non-employment, or retainer arrangement, or relationship with any
member of the CPEX Group), effective as of the Distribution Date, shall cease to participate in, be
covered by, accrue benefits under, be eligible to contribute to or have any rights under any
Bentley Benefit Plan (except to the extent of obligations

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that accrued before the Distribution Date, including benefits that are not otherwise addressed
herein), and CPEX and Bentley shall take all necessary action to effectuate each such cessation.

          Section 2.3 Service Recognition. CPEX shall give each CPEX Participant full credit for
purposes of eligibility, vesting, determination of level of benefits, and, to the extent
applicable, benefit accruals under any CPEX Benefit Plan, respectively, for such CPEX Participant’s
service with any member of the Bentley Group prior to the Distribution Date to the same extent such
service was recognized by the applicable Bentley Benefit Plans immediately prior to the
Distribution Date; provided, that, such service shall not be recognized to the
extent that such recognition would result in the duplication of benefits.

          Section 2.4 Approval by Bentley As Sole Stockholder. Effective as of the Distribution
Date, CPEX shall have adopted the CPEX Pharmaceuticals, Inc. 2008 Equity and Incentive Plan (the
“CPEX Stock Plan”), which shall permit the issuance of long-term incentive awards that have
material terms and conditions substantially similar to those long-term incentive awards issued
under the relevant Bentley Stock Plans in respect of which CPEX long-term incentive awards will be
issued in connection with the Distribution. The CPEX Stock Plan shall be approved prior to the
Distribution Date by Bentley as the sole stockholder of CPEX.

ARTICLE III

QUALIFIED DEFINED CONTRIBUTION PLAN

          Section 3.1 CPEX 401(k) Plan.

               (a) Establishment of the CPEX 401(k) Plan. Effective as of the Distribution Date, CPEX
shall, or shall have caused one of its Affiliates to, establish a defined contribution plan and
trust for the benefit of CPEX Participants (the “CPEX 401(k) Plan”). CPEX shall be
responsible for taking all necessary, reasonable and appropriate action to establish, maintain and
administer the CPEX 401(k) Plan so that it is qualified under Section 401(a) of the Code and that
the related trust thereunder is exempt from Federal income tax under Section 501(a) of the Code.
CPEX (acting directly or through its Affiliates) shall be responsible for any and all Liabilities
and other obligations with respect to the CPEX 401(k) Plan.

               (b) Transfer of Savings Plan Assets. Not later than ninety (90) days following the
Distribution Date (or such later time as mutually agreed by Bentley and CPEX), Bentley shall cause
the accounts (including any outstanding loan balances) in the Bentley 401(k) Plan attributable to
CPEX Participants and all of the Assets in the Bentley 401(k) Plan related thereto, to be
transferred to the CPEX 401(k) Plan and CPEX shall cause the CPEX 401(k) Plan to accept such
transfer of accounts and underlying Assets and, effective as of the date of such transfer, to
assume and to fully perform, pay and discharge, all obligations of the Bentley 401(k) Plan relating
to the accounts of CPEX Participants (to the extent the Assets related to those accounts are
actually transferred from the Bentley 401(k) Plan to the CPEX 401(k) Plan). Any transfer of Assets
pursuant to this Section 3.1(b) shall be conducted in accordance with Section 414(l) of the Code,
Treasury
Regulation Section 1.414(1)-1, and Section 208 of ERISA.

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               (c) Continuation of Elections. As of the Distribution Date, CPEX (acting directly or
through its Affiliates) shall cause the CPEX 401(k) Plan to recognize and maintain all Bentley
401(k) Plan and CPEX 401(k) Plan elections, including, but not limited to, deferral, investment,
and payment form elections, dividend elections, beneficiary designations, and the rights of
alternate payees under qualified domestic relations orders with respect to CPEX Participants, to
the extent such election or designation is available under the CPEX 401(k) Plan.

               (d) Form 5310-A. No later than thirty (30) days prior to the date of any transfer of
Assets and Liabilities pursuant to Section 3.1(b), Bentley and CPEX (each acting directly or
through their respective Affiliates) shall, to the extent necessary, file Internal Revenue Service
Form 5310-A regarding the transfer of Assets and Liabilities from the Bentley 401(k) Plan to the
CPEX 401(k) Plan as described in this Section 3.1.

               (e) Contributions as of the Distribution Date. All contributions payable to the
Bentley 401(k) Plan with respect to employee deferrals and contributions, matching contributions
and other contributions for CPEX Participants through the Distribution Date, determined in
accordance with the terms and provisions of the Bentley 401(k) Plan, ERISA and the Code, shall be
paid by Bentley to the Bentley 401(k) Plan prior to the date of the Asset transfer described in
subsection (b), above.

ARTICLE IV

HEALTH AND WELFARE PLANS

          Section 4.1 Health And Welfare Plans Maintained By Bentley Prior To The Distribution Date.

               (a) Establishment of Welfare Plans. Bentley or one or more of its Affiliates maintain
health and welfare plans (the “Bentley Welfare Plans”) for the benefit of eligible Bentley
Participants and CPEX Participants. Effective as of the Distribution Date, CPEX shall, or shall
cause a CPEX Affiliate to, adopt, for the benefit of eligible CPEX Participants, health and welfare
plans (collectively, the “CPEX Welfare Plans”).

               (b) Terms of Participation in CPEX Welfare Plans. CPEX (acting directly or through
its Affiliates) shall use reasonable best efforts to cause all CPEX Welfare Plans, respectively, to
(i) waive all limitations as to preexisting conditions, exclusions, and service conditions with
respect to participation and coverage requirements applicable to CPEX Participants, respectively,
other than limitations that were in effect with respect to CPEX Participants as of the Distribution
Date under the Bentley Welfare Plans, and (ii) waive any waiting period limitation or evidence of
insurability requirement that would otherwise be applicable to a CPEX Participant, respectively,
following the Distribution Date to the extent such CPEX Participant had satisfied any similar
limitation under the analogous Bentley Welfare Plan.

               (c) Employees on Leave. Notwithstanding any other provision of this Agreement to the
contrary, CPEX shall assume Liability for payment of any salary continuation, short term disability
or health and welfare coverage with respect to CPEX Employees and Bentley

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shall have no further responsibility for such disabled employees or employees on approved
leave after the Distribution Date.

               (d) COBRA and HIPAA. Effective as of the Distribution Date, Bentley shall retain
responsibility for compliance with the health care continuation coverage requirements of COBRA with
respect to CPEX Participants who, as of the day prior to the Distribution Date, were covered under
a Bentley Welfare Plan pursuant to COBRA. Bentley (acting directly or through its Affiliates)
shall be responsible for administering compliance with any certificate of creditable coverage
requirements of HIPAA or Medicare applicable to the Bentley Welfare Plans with respect to CPEX
Participants. The Parties hereto agree that neither the Distribution nor any transfers of
employment that occur as of the Distribution Date shall constitute a COBRA qualifying event for
purposes of COBRA; provided, that, in all events, CPEX (acting directly or through
its Affiliates) shall assume, or shall have caused the CPEX Welfare Plans to assume, responsibility
for compliance with the health care continuation coverage requirements of COBRA with respect to
those individuals whose employment is transferred directly from the Bentley Group to the CPEX
Group, as of the Distribution Date, to the extent such individual was, as of the day prior to such
transfer of employment, covered under a Bentley Welfare Plan.

               (e) Liabilities.

               (i) Insured Benefits. With respect to employee welfare and fringe
benefits that are provided through the purchase of insurance (including, without
limitation, health, disability and workers’ compensation benefits), Bentley shall
timely pay all premiums in respect of coverage of CPEX Participants in respect of
the period before the Distribution Date and shall retain all claims incurred by the
CPEX Participants prior to the Distribution Date, and CPEX shall cause Bentley not
to have any liability in respect of any and all claims of CPEX Participants that are
incurred under the CPEX Welfare Plans.

               (ii) Incurred Claim Definition. For purposes of this Section 4.1(e), a
claim or Liability is deemed to be incurred (A) with respect to medical, dental,
vision and/or prescription drug benefits, upon the rendering of health services
giving rise to such claim or Liability; (B) with respect to life insurance,
accidental death and dismemberment and business travel accident insurance, upon the
occurrence of the event giving rise to such claim or Liability; and (C) with respect
to disability benefits, upon the date of an individual’s disability, as determined
by the disability benefit insurance carrier or claim administrator, giving rise to
such claim or Liability.

               (iii) Claim Experience. Notwithstanding the foregoing, the Parties
(acting directly or through their Affiliates) shall take any action necessary to
ensure that any claims experience under the Bentley Welfare Plans attributable to
CPEX Participants shall be available to the CPEX Welfare Plans.

          Section 4.2 Time-Off Benefits. CPEX shall credit each CPEX Participant with the amount of
accrued but unused vacation time, sick time and other time-off benefits as such CPEX Participant
had with the Bentley Group as of the Distribution Date. Notwithstanding the

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above, CPEX shall not be required to credit any CPEX Participant with any accrual to the extent
that a benefit attributable to such accrual is provided by the Bentley Group.

ARTICLE V

LONG-TERM INCENTIVE AWARDS

          Section 5.1 Treatment of Outstanding Bentley Options.

               (a) Treatment of Outstanding Bentley Option held by Bentley Employees Other than Spanish
Employees.

               (i) Except with respect to Bentley Options held by Spanish Employees (each, a
“Spanish Employee Option”), each Bentley Option that is outstanding
immediately prior to the Distribution Date shall, as of the Distribution Date, be
converted into a CPEX Option and an adjusted Bentley Option (a
“Post-Distribution Bentley Option”) in accordance with the succeeding
paragraphs of this Section 5.1(a).

               (ii) The number of shares subject to the CPEX Option shall be equal to the
number of shares of CPEX Common Stock to which the option holder would be entitled
in the Distribution had the shares subject to the Bentley Option represented
outstanding shares of Bentley Common Stock as of the Record Date, the resulting
number of shares subject to the CPEX Option being rounded down to the nearest whole
share. The per share exercise price of the CPEX Option shall be equal to the
product of (1) the Pre-Distribution Bentley Option Price multiplied by (2) a
fraction, the numerator of which shall be the Initial CPEX Stock Price and the
denominator of which shall be the Pre-Distribution Bentley Stock Price. The number
of shares subject to the Post-Distribution Bentley Option shall be equal to the
number of shares subject to the Bentley Option immediately prior to the Distribution
Date. The per share exercise price of the Post-Distribution Bentley Option shall be
equal to the product of (1) the per share exercise price of the Bentley Option
immediately prior to the Distribution Date (the “Pre-Distribution Bentley Option
Price”) multiplied by (2) a fraction, the numerator of which shall be the
Post-Distribution Bentley Stock Price and the denominator of which shall be the
Pre-Distribution Bentley Stock Price.

               (iii) Prior to the Distribution Date, Bentley shall take all actions necessary
to provide that, effective as of the Distribution Date, for purposes of the
Post-Distribution Bentley Options (including in determining exercisability and the
post-termination exercise period), a CPEX Employee’s continuous service with the
CPEX Group (including applicable successors) following the Distribution Date shall
be deemed continued service with Bentley. CPEX shall issue each CPEX Option under
the CPEX Stock Plan with terms such that, except as otherwise provided herein, the
terms and conditions applicable to the CPEX Options shall be substantially similar
to the terms and conditions applicable to the corresponding
Bentley Option, including the terms and conditions relating to vesting and the

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post-termination exercise period and including a provision to the effect that, for
purposes of the CPEX Options, continuous service with the Bentley Group or CPEX
Group (in each case, including applicable successors) from and after the
Distribution Date shall be deemed to constitute service with CPEX.

               (iv) Except as otherwise provided herein, the CPEX Options and the
Post-Distribution Bentley Options shall remain subject to the terms and conditions
of the underlying Bentley Option as in effect immediately prior to the Distribution
Date (taking into account changes in the identity of the employer, including for
purposes of determining whether a change in control has occurred).

               (v) Upon the exercise of a CPEX Option, regardless of the holder thereof, the
exercise price shall be paid to (or otherwise satisfied to the satisfaction of) CPEX
in accordance with the terms of the CPEX Option, and CPEX shall be solely
responsible for the issuance of CPEX Common Stock, for ensuring the collection of
the employee portion of all applicable withholding tax on behalf of the employing
entity of such holder, and for ensuring the remittance of such withholding taxes to
the employing entity of such holder. Upon the exercise of a Post-Distribution
Bentley Option, regardless of the holder thereof, the exercise price shall be paid
to (or otherwise satisfied to the satisfaction of) Bentley in accordance with the
terms of the Post-Distribution Bentley Option, and Bentley shall be solely
responsible for the issuance of Bentley Common Stock, for ensuring the collection of
the employee portion of all applicable withholding tax on behalf of the employing
entity of such holder and for ensuring the remittance of such withholding taxes to
the employing entity of such holder.

               (b) Treatment of Outstanding Bentley Options held by Spanish Employees.

               (i) Each Spanish Employee Option that is outstanding immediately prior to the
Distribution Date shall, as of the Distribution Date, be converted into an adjusted
Spanish Employee Option (a “Post-Distribution Spanish Employee Option”) in
accordance with the succeeding paragraphs of this Section 5.1(b).

               (ii) The number of shares subject to the Post-Distribution Spanish Employee
Option shall be equal to the product of (1) the number of shares subject to the
Spanish Employee Option multiplied by (2) a fraction, the numerator of which shall
be the Pre-Distribution Bentley Stock Price and the denominator of which shall be
the Post-Distribution Bentley Stock Price. The per share exercise price of the
Post-Distribution Spanish Employee Option shall be equal to the product of (1) the
exercise price of the Spanish Employee Option multiplied by (2) a fraction, the
numerator of which shall be the Post-Distribution Bentley Stock Price and the
denominator of which shall be the Pre-Distribution Bentley Stock Price.

11

 

               (iii) Except as otherwise provided herein, the Post-Distribution Spanish
Employee Options shall remain subject to the terms and conditions of the underlying
Spanish Employee Option as in effect prior to the Distribution Date.

               (iv) Upon the exercise of a Post-Distribution Spanish Employee Option,
regardless of the holder thereof, the exercise shall be paid to (or otherwise
satisfied to the satisfaction of) Bentley in accordance with the terms of the
Post-Distribution Spanish Employee Option, and Bentley shall be solely responsible
for the issuance of Bentley Common Stock, for ensuring the collection of the
employee portion of all applicable withholding tax, for the satisfaction of all tax
reporting requirements in respect of such exercise, for remitting the appropriate
withholding amounts to the appropriate taxing authorities and shall be entitled to
the benefit of any tax deduction in respect of the exercise of all such
Post-Distribution Spanish Employee Options.

          Section 5.2 Treatment of Outstanding Bentley Restricted Stock Units.

               (a) Treatment of Outstanding Bentley Restricted Stock Units held by Bentley Employees
other than Spanish Employees.

               (i) Except with respect to Bentley Restricted Stock Units held by Spanish
Employees (each, a “Spanish Employee Restricted Stock Unit”) each Bentley
Restricted Stock Unit that is outstanding immediately prior to the Distribution Date
shall be converted, as of the Distribution Date, into a CPEX Restricted Stock Unit
and an adjusted Bentley Restricted Stock Unit in accordance with the succeeding
paragraphs of this Section 5.2.

               (ii) The number of CPEX Restricted Stock Units shall be equal to the number of shares of CPEX Common Stock to which the holder of Bentley Restricted Stock Units
would be entitled in the Distribution had the Bentley Restricted Stock Units
represented actual shares of Bentley Common Stock as of the Distribution Record
Date, the resulting number of CPEX Restricted Stock Units being rounded down to the
nearest whole unit. The number of adjusted Bentley Restricted Stock Units shall
equal the number of Bentley Restricted Stock Units. All CPEX Restricted Stock Units
and adjusted Bentley Restricted Stock Units shall become vested upon the date the
Bentley Restricted Stock Units would have otherwise vested in accordance with the
existing vesting schedule.

               (iii) Prior to the Distribution Date, Bentley shall take all actions necessary
to provide that, effective as of the Distribution Date, for purposes of continued
vesting of the adjusted Bentley Restricted Stock Units, a CPEX Employee’s continuous
service with the CPEX Group following the Distribution Date shall be deemed
continued service with Bentley. Except as otherwise provided herein, the terms and
conditions applicable to the CPEX Restricted Stock Units shall be substantially
similar to the terms and conditions applicable to the corresponding Bentley
Restricted Stock Unit (taking into account changes in the

12

 

identity of the employer, including for purposes of determining whether a
change in control has occurred), including a provision to the effect that, for
purposes of the CPEX Restricted Stock Units, continuous service of a Bentley
Employee or CPEX Employee with any member of the Bentley Group or CPEX Group shall
be deemed to constitute service with CPEX; provided, that, nothing
in this Section 5.2(a) shall require the payment or crediting of dividends to
holders of Bentley Common Stock or CPEX Common Stock.

               (iv) Upon the vesting of the Bentley Restricted Stock Units that are settled in shares of Bentley Common Stock, Bentley shall be solely responsible for the
settlement of all Bentley Restricted Stock Units, regardless of the holder thereof,
and for ensuring the satisfaction of the employee portion of all applicable tax
withholding requirements on behalf of the employing entity of such holder and for
ensuring the remittance of such withholding taxes to the employing entity of such
holder. Upon the vesting of the CPEX Restricted Stock Units that are settled in
shares of CPEX Common Stock, CPEX shall be solely responsible for the settlement of
all CPEX Restricted Stock Units, regardless of the holder thereof, and for ensuring
the satisfaction of the employee portion of all applicable tax withholding
requirements on behalf of the employing entity of such holder and for ensuring the
remittance of such withholding taxes to the employing entity of such holder.

               (b) Treatment of Outstanding Bentley Restricted Stock Units held by Spanish Employees.

               (i) Each Spanish Restricted Stock Unit that is outstanding immediately prior to
the Distribution Date shall, as of the Distribution Date, be converted into an
adjusted Spanish Employee Restricted Stock Unit (a “Post-Distribution Spanish
Employee Restricted Stock Unit”) in accordance with the succeeding paragraphs of
this Section 5.2(b)

               (ii) The number of Post-Distribution Spanish Employee Restricted Stock Units
shall be equal to the product of (1) the number of Spanish Employee Restricted Stock
Units multiplied by (2) a fraction, the numerator of which shall be the
Pre-Distribution Bentley Stock Price and the denominator of which shall be
Post-Distribution Bentley Stock Price. All Post-Distribution Spanish Employee
Restricted Stock Units shall become vested upon the date the Spanish Employee
Restricted Stock Units would have otherwise vested in accordance with the existing
vesting schedule.

               (iii) Upon the vesting of the Post-Distribution Spanish Employee Restricted
Stock Units, whether settled in cash or in shares of Bentley Common Stock, Bentley
shall be solely responsible for the settlement of the unit (including any
attributable dividend equivalents) and for ensuring the satisfaction of all tax
reporting and withholding requirements in respect of such settlement, for ensuring
the remittance of such withholding taxes and shall be entitled to the

13

 

benefit of any tax deduction in respect of the settlement of all such
Post-Distribution Spanish Employee Restricted Stock Units.

          Section 5.3 Cooperation and Special Award Terms. Each of the Parties shall establish an
appropriate administration system in order to handle in an orderly manner exercises of Bentley
Options, CPEX Options and Post-Distribution Spanish Employee Options and the settlement of Bentley
Stock Units, CPEX Restricted Stock Units and Post-Distribution Spanish Employee Restricted Stock
Units. Each of the Parties will work together to unify and consolidate all indicative data and
payroll and employment information on regular timetables and make certain that each applicable
entity’s data and records in respect of such awards are correct and updated on a timely basis. The
foregoing shall include employment status and information required for tax withholding/remittance,
compliance with trading windows and compliance with the requirements of the Exchange Act and other
applicable Laws. Each of the parties shall honor the terms of any agreement entered into before
the Distribution Date with any employee of another party insofar as such agreement provides for
accelerated vesting or the extension of the term of any Bentley Options, CPEX Options,
Post-Distribution Spanish Employee Options, Bentley Restricted Stock Units, CPEX Restricted Stock
Units or Post-Distribution Spanish Employee Restricted Stock Units.

          Section 5.4 SEC Registration. The Parties mutually agree to use reasonable best efforts to
maintain effective registration statements with the SEC with respect to the long-term incentive
awards described in this Article V, to the extent any such registration statement is required by
applicable Law.

          Section 5.5 Savings Clause. The Parties hereby acknowledge that the provisions of this
Article V are intended to achieve certain tax, legal and accounting objectives as set forth in the
Separation Agreement and, in the event such objectives are not achieved, the Parties agree to
negotiate in good faith regarding such other actions that may be necessary or appropriate to
achieve such objectives.

ARTICLE VI

ADDITIONAL COMPENSATION MATTERS

          Section 6.1 Workers’ Compensation Liabilities. Except as provided in Section 4.1(e)(i),
all workers’ compensation Liabilities relating to, arising out of, or resulting from any claim that
results from an accident, incident or event occurring, or from an occupational disease which
becomes manifest, at, before or after the Distribution Date by (i) any Bentley Employee or Former
Bentley Employee shall be retained by Bentley, and (ii) by a CPEX Employee or Former CPEX Employee
shall be assumed by CPEX.

          Section 6.2 Sections 162(m)/409A. Notwithstanding anything in this Agreement to the
contrary (including the treatment of outstanding long-term incentive awards and annual incentive
awards as described herein), the Parties agree to negotiate in good faith regarding the need for
any treatment different from that otherwise provided herein to ensure that (i) a federal income Tax
deduction for the payment of such long-term incentive award, annual incentive award or other compensation is not limited by reason of Section 162(m) of the Code, and (ii) the

14

 

treatment of such long-term incentive award, annual incentive award or other compensation does not
cause the imposition of a tax under Section 409A of the Code.

          Section 6.3 Director Programs.

               (a) Director Fees. Bentley shall retain responsibility for the payment of any fees
payable in respect of service on the Bentley Board of Directors that are payable but not yet paid
as of the Distribution Date, and CPEX shall not have any responsibility for any such payments (to
an individual who is a member of the CPEX Board of Directors as of the Distribution Date or
otherwise).

          Section 6.4 Certain Payroll, Bonus and Supplemental Plan Matters.

               (a) Payroll of Transferring Employees. In the case of an individual who transfers
employment at the Distribution Date from Bentley to CPEX, CPEX shall be responsible for paying the
entire payroll amount due to such individual for the first payroll cycle ending after the
Distribution Date and for satisfying all applicable tax reporting and withholding requirements in
respect of such payment; provided, that, Bentley shall reimburse CPEX for the gross
amount of the payroll payment (i.e., including any applicable deductions) and for all tax
withholdings remitted in respect of such portion of the payroll period ending before the
Distribution Date. Bentley shall be entitled to the benefit of any tax deduction in respect of its
payment for the portion of the payroll period ending before the Distribution Date.

ARTICLE VII

INDEMNIFICATION

          Section 7.1 General Indemnification. Any claim for indemnification under this Agreement
shall be governed by, and be subject to, the provisions of Article V of the Separation Agreement,
which provisions are hereby incorporated by reference into this Agreement and any references to
“Agreement” in such Article V as incorporated herein shall be deemed to be references to this
Agreement.

ARTICLE VIII

GENERAL AND ADMINISTRATIVE

          Section 8.1 Sharing Of Information. Bentley and CPEX (acting directly or through their
respective Affiliates) shall provide to each other and their respective agents and vendors all
Information as the other may reasonably request to enable the requesting Party to administer
efficiently and accurately each of its Benefit Plans, to timely and accurately comply with and
report under Section 14 of the Exchange Act, and to determine the scope of, as well as fulfill, its
obligations under this Agreement. Such information shall, to the extent reasonably practicable, be
provided in the format and at the times and places requested, but in no event shall the Party
providing such information be obligated to incur any out-of-pocket expenses not reimbursed by the Party making such request or make such information available outside of its

15

 

normal business hours and premises. Any information shared or exchanged pursuant to this Agreement
shall be subject to the confidentiality requirements set forth in the Separation Agreement. The
Parties also hereby agree to enter into any business associate agreements that may be required for
the sharing of any Information pursuant to this Agreement to comply with the requirements of HIPAA.

          Section 8.2 Reasonable Efforts/Cooperation. Each of the Parties hereto will use its
reasonable best efforts to promptly take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under applicable Laws and regulations to
consummate the transactions contemplated by this Agreement, including adopting plans or plan
amendments. Each of the Parties hereto shall cooperate fully on any issue relating to the
transactions contemplated by this Agreement for which the other Party seeks a determination letter
or private letter ruling from the Internal Revenue Service, an advisory opinion from the
Department of Labor or any other filing, Consent or Governmental Approval.

          Section 8.3 Employer Rights. Nothing in this Agreement shall prohibit any Party or
any of their respective Affiliates from amending, modifying or terminating any of their respective
Benefit Plans at any time within their sole discretion.

          Section 8.4 Effect on Employment. Except as expressly provided in this Agreement,
the occurrence of the Distribution alone shall not cause any employee to be deemed to have
incurred a termination of employment which entitles such individual to the commencement of
benefits under any of the Bentley Benefit Plans. Furthermore, nothing in this Agreement is
intended to confer upon any employee or former employee of Bentley, CPEX or any of their
respective Affiliates any right to continued employment, or any recall or similar rights to an
individual on layoff or any type of approved leave.

          Section 8.5 Consent Of Third Parties. If any provision of this Agreement is
dependent on the consent of any Third Party and such consent is withheld, the Parties hereto shall
use their reasonable best efforts to implement the applicable provisions of this Agreement to the
fullest extent practicable. If any provision of this Agreement cannot be implemented due to the
failure of such Third Party to consent, the Parties hereto shall negotiate in good faith to
implement the provision (as applicable) in a mutually satisfactory manner.

          Section 8.6 Access To Employees. Following the Distribution Date, Bentley and CPEX
shall, or shall cause each of their respective Affiliates to, make available to each other those
of their employees who may reasonably be needed in order to defend or prosecute any legal or
administrative action (other than a legal action between or among any of the Parties) to which any
employee, director or Benefit Plan of the Bentley Group or CPEX Group is a party and which relates
to their respective Benefit Plans prior to the Distribution Date. The Party to whom an employee is
made available in accordance with this Section 8.6 shall pay or reimburse the other Party for all
reasonable expenses which may be incurred by such employee in connection therewith, including all
reasonable travel, lodging, and meal expenses, but excluding any amount for such employee’s time
spent in connection herewith.

          Section 8.7 Beneficiary Designation/Release Of Information/Right To Reimbursement.
To the extent permitted by applicable Law and except as otherwise provided

16

 

for in this Agreement,
all beneficiary designations, authorizations for the release of Information and rights to
reimbursement made by or relating to CPEX Participants under Bentley Benefit Plans shall be
transferred to and be in full force and effect under the corresponding CPEX Benefit Plans and
Bentley Benefit Plans until such beneficiary designations, authorizations or rights are replaced
or revoked by, or no longer apply, to the relevant CPEX Participant.

ARTICLE IX

MISCELLANEOUS

          Section 9.1 Effect If Certain Events Do Not Occur. Notwithstanding anything in this
Agreement to the contrary, if the Separation Agreement is terminated prior to the Distribution
Date, then all actions and events that are, under this Agreement, to be taken or occur effective
prior to, as of or following the Effective Time, or otherwise in connection with the Separation,
shall not be taken or occur except to the extent specifically agreed to in writing by Bentley on
the one hand and CPEX on the other hand and no Party shall have any Liability or further
obligation to any other Party under this Agreement.

          Section 9.2 Relationship Of Parties. Nothing in this Agreement shall be deemed or
construed by the Parties or any Third Party as creating the relationship of principal and agent,
partnership or joint venture between or among the Parties, it being understood and agreed that no
provision contained herein, and no act of the Parties, shall be deemed to create any relationship
between or among the Parties other than the relationship set forth herein.

          Section 9.3 Subsidiaries. Each of the Parties shall cause to be performed all
actions, agreements and obligations set forth herein to be performed by any Subsidiary or
Affiliate of such Party or by any entity that becomes a Subsidiary or Affiliate of such Party on
and after the Distribution Date. The Parties acknowledge that certain actions, agreements and
obligations that certain of their Affiliates and Subsidiaries may be required to perform in
connection with the performance of the Parties obligations under this Agreement may require
Governmental Approval under applicable Law, and therefore agree that performance of such actions,
agreements and obligations is subject to the receipt of all such necessary Governmental Approvals,
which approvals each Party shall, and shall cause the members of its respective Group to, use its
reasonable best efforts to obtain.

          Section 9.4 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed to be duly given when
(a) delivered in person or (b) deposited in the United States mail or private express mail,
postage prepaid, addressed as follows:

To Bentley:

Bentley Pharmaceuticals, Inc.

Bentley Park, 2 Holland Way

Exeter, NH 03833

17

 

Attn: President

Facsimile: 603-658-6101

To CPEX:

CPEX Pharmaceuticals, Inc.

Bentley Park, 2 Holland Way

Exeter, NH 03833

Attn: President

Facsimile: 603-658-6101

          Either Party may, by notice to the other Party, change the address to which such notices are
to be given.

          Section 9.5 Entire Agreement. This Agreement, the Separation Agreement, and each other
Ancillary Agreement, including the Exhibits and Schedules thereto contain the entire agreement
between the Parties with respect to the subject matter hereof and shall supersede all previous
agreements, negotiations, discussions, writings, understandings, commitments and conversations with
respect to such subject matter and there are no agreements or understandings between the Parties
other than those set forth or referred to herein or therein. In the event of any conflict between
the terms and conditions of this Agreement and the terms and conditions of the Separation
Agreement, the terms and conditions of the Separation Agreement (including amendments thereto)
shall control.

          Section 9.6 Waivers. The failure of any Party to require strict performance by the other
Party of any provision in this Agreement will not waive or diminish that Party’s right to demand
strict performance thereafter of that or any other provision hereof.

          Section 9.7 Amendments. Subject to the terms of Section 9.8 of this Agreement, this
Agreement may not be modified or amended except by an agreement in writing signed by each of the
Parties.

          Section 9.8 Termination. This Agreement (including Article VII (Indemnification) hereof)
may be terminated and the Distribution may be amended, modified or abandoned at any time prior to
the Distribution Date by and in the sole discretion of Bentley without the approval of CPEX or the
stockholders of Bentley and it shall be deemed terminated if and when the Separation Agreement is
terminated. In the event of such termination, no Party shall have any Liability of any kind to any
other Party or any other Person. After the Distribution Date, this Agreement may not be terminated
except by an agreement in writing signed by Bentley and CPEX. Notwithstanding the foregoing, this
Agreement may be terminated or amended as among any Parties that remain Affiliates, so long as such
amendment does not adversely affect any Party that is no longer an Affiliate, in which case, only
with the consent of such Party.

          Section 9.9 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Delaware, irrespective of the
choice of laws principles of the State of Delaware as to all matters, including matters of
validity, construction, effect, enforceability, performance and remedies. Except as provided in
Article IX

18

 

of the Separation Agreement, the Parties hereto irrevocably accept generally and
unconditionally the exclusive jurisdiction and venue of the United States District Court for the
District of Delaware.

          Section 9.10 Dispute Resolution. Any controversy, dispute or claim arising out of, in
connection with, or in relation to the interpretation, performance, nonperformance, validity,
termination or breach of this Agreement or otherwise arising out of, or in any way related to this
Agreement or the transactions contemplated hereby, including any claim based on contract, tort,
statute or constitution (but excluding any controversy, dispute or claim arising out of any
Contract relating to the use or lease of real property if any Third Party is a necessary party to
such controversy, dispute or claim), shall be governed by, and be subject to, the provisions of
Article IX of the Separation Agreement, which provisions (and related defined terms) are hereby
incorporated by reference into this Agreement and any references to “Agreement” in such Article IX
as incorporated herein shall be deemed to be references to this Agreement; provided, however, any
references to “Agreement” in such Article IX as incorporated herein shall be deemed to be
references to this Agreement as defined in this Agreement.

          Section 9.11 Consent to Jurisdiction. Subject to the provisions of Article IX of the
Separation Agreement, each of the Parties irrevocably submits to the exclusive jurisdiction of the
United States District Court for the District of Delaware (the “Delaware Court”), for the
purposes of any suit, action or other proceeding to compel arbitration or for provisional relief in
aid of arbitration in accordance with Article IX of the Separation Agreement or for provisional
relief to prevent irreparable harm, and to the non-exclusive jurisdiction of the Delaware Court for
the enforcement of any award issued thereunder. Each of the Parties further agrees that service of
any process, summons, notice or document by United States registered mail or receipted courier
service to such Party’s respective address set forth in Section 9.4 of this Agreement shall be
effective service of process for any action, suit or proceeding in the Delaware Court with respect
to any matters to which it has submitted to jurisdiction in this Section 9.11. Each of the Parties
irrevocably and unconditionally waives any objection to the laying of venue of any such action,
suit or proceeding in the Delaware Court, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or proceeding brought
in any such court has been brought in an inconvenient forum.

          Section 9.12 Titles and Headings. Titles and headings to Sections and Articles herein are
inserted for the convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.

          Section 9.13 Counterparts. This Agreement may be executed in more than one counterparts,
each of which shall be considered one and the same agreement, and shall become effective when each
counterpart has been signed by each of the Parties and delivered to the other Parties. Execution
of this Agreement or any other documents pursuant to this Agreement by facsimile or other
electronic copy of a signature shall be deemed to be, and shall have the same effect as, executed
by an original signature.

          Section 9.14 Assignment. Except as otherwise expressly provided for in this Agreement,
this Agreement and rights hereunder shall be binding upon, inure to the benefit of and be
enforceable by (and against) the Parties and their respective successors and permitted

19

 

transferees
and assigns. Notwithstanding the foregoing, this Agreement shall not be assignable, in whole or in
part, by any Party without the prior written consent of the other Party, and any attempt to assign
any rights or obligations arising under this Agreement without such consent shall be null and void;
provided, that (i) a Party may assign this Agreement in connection with a merger transaction in
which such Party is not the surviving entity or the sale by such Party of all or substantially all
of its Assets, and upon the effectiveness of such assignment the assigning Party shall be released
from all of its obligations under this Agreement if the surviving entity of such merger or the
transferee of such Assets shall agree in writing, in form and substance reasonably satisfactory to
the other Party, to be bound by all terms of this Agreement as if named as a “Party” hereto.

          Section 9.15 Severability. If any provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or
the application of such provision to Persons or circumstances or in jurisdictions other than those
as to which it has been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby or thereby, as the case may be, is not affected
in any manner adverse to any Party. Upon such determination, the Parties shall negotiate in good
faith in an effort to agree upon such a suitable and equitable provision to affect the original
intent of the Parties.

          Section 9.16 Successors and Assigns. The provisions of this Agreement and the obligations
and rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and
against) the Parties and their respective successors and permitted transferees and assigns.

          Section 9.17 Specific Performance. The Parties agree that irreparable damage would occur
in the event that the provisions of this Agreement were not performed in accordance with their
specific terms. Accordingly, it is hereby agreed that the Parties shall be entitled to (i) an
injunction or injunctions to enforce specifically the terms and provisions hereof in any
arbitration in accordance with Section 9.10 of this Agreement, (ii) provisional or temporary
injunctive relief in accordance therewith in any Delaware Court, and (iii) enforcement of any such
award of an arbitral tribunal or a Delaware Court in any court of the United States, or any other
any court or tribunal sitting in any state of the United States or in any foreign country that has
jurisdiction, this being in addition to any other remedy or relief to which they may be entitled.

          Section 9.18 Waiver of Jury Trial. SUBJECT TO SECTIONS 9.9, 9.10 AND 9.11 OF THIS
AGREEMENT, EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING CONTEMPLATED BY SECTION
9.11 OF THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY

20

 

THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.18.

          Section 9.19 Force Majeure. No Party (or any Person acting on its behalf) shall have any
liability or responsibility for failure to fulfill any obligation (other than a payment obligation)
under this Agreement so long as and to the extent to which the fulfillment of such obligation is
prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A
Party claiming the benefit of this provision shall, as soon as reasonably practicable after the
occurrence of any such event: (a) notify the other Party of the nature and extent of any such Force
Majeure condition and (b) use due diligence to remove any such causes and resume performance under
this Agreement as soon as reasonably practicable.

          Section 9.20 Authorization. Each of the Parties hereby represents and warrants that it has
the power and authority to execute, deliver and perform this Agreement, that this Agreement has
been duly authorized by all necessary corporate action on the part of such Party, that this
Agreement constitutes a legal, valid and binding obligation of each such Party and that the
execution, delivery and performance of this Agreement by such Party does not contravene or conflict
with any provision of law or of its charter or bylaws or any material agreement, instrument or
order binding on such Party.

          Section 9.21 No Third-Party Beneficiaries. The provisions of this Agreement are solely for
the benefit of the Parties and are not intended to confer upon any Person except the Parties any
rights or remedies hereunder. There are no Third Party beneficiaries of this Agreement and this
Agreement shall not provide any Third Party with any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without reference to this Agreement.

          Section 9.22 Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or causing any instrument
to be drafted.

[Remainder of this page intentionally left blank.]

21

 

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day
and year first above written.

	 	 	 	 	 
	 	BENTLEY PHARMACEUTICALS, INC.

 	 
	 	By:  	 	 
	 	Name: Richard P. Lindsay 	 
	 	Title:   Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	CPEX PHARMACEUTICALS, INC.

 	 
	 	By:  	 	 
	 	Name: Robert Hebert 	 
	 	Title:   Chief Financial Officerexv10w4

 

EXHIBIT 10.4

Asset Purchase Agreement

Between

BENTLEY PHARMACEUTICALS, INC.

And

YUNGTAI HSU

DATED FEBRUARY 1, 1999 EFFECTIVE AS OF DECEMBER 31, 1998

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I

	 	 	 
	 	 	 	 
	DEFINITIONS

	 	 	 
	 	 	 	 
	1.01	 	Definitions
	 	 	1	 
	 	 	 
	 	 	 	 
	ARTICLE II

	 	 	 
	 	 	 	 
	SALE OF ASSETS AND CLOSING

	 	 	 
	 	 	 	 
	2.01	 	Purchase And Sale of Assets
	 	 	5	 
	2.02	 	Assumption of Obligations And Liabilities
	 	 	5	 
	2.03	 	Retained Liabilities
	 	 	5	 
	2.04	 	Purchase Price; Allocation; Adjustment
	 	 	6	 
	2.05	 	Closing
	 	 	6	 
	2.06	 	Third-Party Consents
	 	 	8	 
	2.07	 	Assignment
	 	 	8	 
	 	 	 
	 	 	 	 
	ARTICLE III

	 	 	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF SELLER

	 	 	 
	 	 	 	 
	3.01	 	Intentionally Omitted
	 	 	8	 
	3.02	 	Legal Capacity
	 	 	8	 
	3.03	 	Execution and Binding Effect
	 	 	8	 
	3.04	 	Title
	 	 	9	 
	3.05	 	Registrations
	 	 	9	 
	3.06	 	Intellectual Property
	 	 	9	 
	3.07	 	Absence of Certain Changes or Events
	 	 	10	 
	3.08	 	Contracts
	 	 	10	 
	3.09	 	Negotiations
	 	 	11	 
	3.10	 	Litigation
	 	 	11	 
	3.11	 	Compliance with Law
	 	 	12	 
	3.12	 	Licenses and Regulatory Reports
	 	 	12	 
	3.13	 	Inspections and Agreements with Governmental or Regulatory Authorities
	 	 	13	 
	3.14	 	Affiliate Interests
	 	 	13	 
	3.15	 	Absence of Undisclosed Liabilities
	 	 	13	 
	3.16	 	Customers, Licensees and Suppliers
	 	 	13	 
	3.17	 	Commitments
	 	 	13	 
	3.18	 	Other Contracts
	 	 	14	 
	3.19	 	Brokers and Finders
	 	 	14	 
	3.20	 	Tax Matters
	 	 	14	 
	3.21	 	Disclosure
	 	 	15	 

i 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	3.22	 	Purchase of Assets
	 	 	15	 
	 	 	 
	 	 	 	 
	ARTICLE IV

	 	 	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF PURCHASER

	 	 	 
	 	 	 	 
	4.01	 	Organization and Good Standing
	 	 	15	 
	4.02	 	Authority
	 	 	15	 
	4.03	 	Execution and Binding Effect
	 	 	16	 
	4.04	 	Brokers and Finders
	 	 	16	 
	4.05	 	Disclosure
	 	 	16	 
	 	 	 
	 	 	 	 
	ARTICLE V

	 	 	 
	 	 	 	 
	COVENANTS OF SELLER

	 	 	 
	 	 	 	 
	5.01	 	Regulatory and Other Approvals
	 	 	16	 
	5.02	 	No Solicitations
	 	 	17	 
	5.03	 	Conduct Relating to the Assets
	 	 	17	 
	5.04	 	Licenses; Filings
	 	 	18	 
	5.05	 	Certain Restrictions
	 	 	18	 
	5.06	 	Delivery of Business Information
	 	 	18	 
	5.07	 	Non-competition
	 	 	19	 
	5.08	 	Notice and Cure
	 	 	19	 
	5.09	 	Fulfillment of Conditions
	 	 	20	 
	 	 	 
	 	 	 	 
	ARTICLE VI

	 	 	 
	 	 	 	 
	COVENANTS OF PURCHASER

	 	 	 
	 	 	 	 
	6.01	 	Regulatory and Other Approvals
	 	 	20	 
	6.02	 	Notice and Cure
	 	 	20	 
	6.03	 	Delivery of Documents
	 	 	21	 
	6.04	 	Fulfillment of Conditions
	 	 	21	 
	 	 	 
	 	 	 	 
	ARTICLE VII

	 	 	 
	 	 	 	 
	CONDITIONS TO OBLIGATIONS OF SELLER

	 	 	 
	 	 	 	 
	7.01	 	Representations, Warranties and Covenants
	 	 	21	 
	7.02	 	Performance
	 	 	21	 
	7.03	 	Laws
	 	 	21	 
	7.04	 	Officer’s Certificate
	 	 	21	 
	7.05	 	Regulatory Consents and Approvals
	 	 	22	 
	7.06	 	Opinion of Counsel
	 	 	22	 
	7.07	 	Delivery of Documents
	 	 	22	 
	7.08	 	Proceedings
	 	 	22	 

ii 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE VIII

	 	 	 
	 	 	 	 
	CONDITIONS TO OBLIGATIONS OF PURCHASER

	 	 	 
	 	 	 	 
	8.01	 	Representations, Warranties and Covenants
	 	 	22	 
	8.02	 	Performance
	 	 	22	 
	8.03	 	Laws
	 	 	23	 
	8.04	 	Regulatory Consents and Approvals
	 	 	23	 
	8.05	 	Third Party Consents
	 	 	23	 
	8.06	 	Delivery of Assets and Documents
	 	 	23	 
	8.07	 	Opinion of Counsel
	 	 	23	 
	8.08	 	Tax Status
	 	 	23	 
	8.09	 	Proceedings
	 	 	23	 
	 	 	 
	 	 	 	 
	ARTICLE IX

	 	 	 
	 	 	 	 
	ADDITIONAL POST-CLOSING COVENANTS

	 	 	 
	 	 	 	 
	9.01	 	Further Assurances, Post-Closing Cooperation
	 	 	24	 
	9.02	 	FDA Approvals
	 	 	25	 
	9.03	 	Adverse Drug Experience; Recalls
	 	 	25	 
	9.04	 	Delivery of Shares
	 	 	25	 
	9.05	 	Non-Assertion of Patent
	 	 	25	 
	 	 	 
	 	 	 	 
	ARTICLE X

	 	 	 
	 	 	 	 
	INDEMNIFICATION

	 	 	 
	 	 	 	 
	10.01	 	Survival of Representations, Warranties, Covenants and Agreements
	 	 	26	 
	10.02	 	Purchaser’s Indemnified Liabilities
	 	 	26	 
	10.03	 	Seller’s Indemnified Liabilities
	 	 	26	 
	10.04	 	Notice and Defense of a Claim
	 	 	27	 
	 	 	 
	 	 	 	 
	ARTICLE XI

	 	 	 
	 	 	 	 
	TERMINATION

	 	 	 
	 	 	 	 
	11.01	 	Termination
	 	 	28	 
	11.02	 	Effect of Termination
	 	 	28	 
	 	 	 
	 	 	 	 
	ARTICLE XII

	 	 	 
	 	 	 	 
	MISCELLANEOUS

	 	 	 
	 	 	 	 
	12.01	 	Notices
	 	 	29	 
	12.02	 	Amendments
	 	 	30	 
	12.03	 	Binding Effect; Assignment
	 	 	30	 
	12.04	 	Announcements
	 	 	30	 

iii 

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	12.05	 	Expenses
	 	 	30	 
	12.06	 	Entire Agreement
	 	 	30	 
	12.07	 	Descriptive Headings
	 	 	30	 
	12.08	 	Counterparts
	 	 	30	 
	12.09	 	Governing Law; Jurisdiction
	 	 	30	 
	12.10	 	Arbitration of Disputes
	 	 	31	 
	12.11	 	Severability
	 	 	31	 
	12.12	 	Confidentiality
	 	 	32	 

	 	 	 
	EXHIBITS

	 	 	 

	Exhibit A
	 	Disclosure Schedule

	Exhibit B
	 	Subscription Agreement

	Exhibit C
	 	Registration Rights Agreement

	Exhibit D
	 	Warrant Agreement

	Exhibit E
	 	Assumption Agreement

	Exhibit F
	 	General Assignment and Bill of Sale

	Exhibit G
	 	Form of Assignment of Intellectual Property

	Exhibit H
	 	Form of Opinion of Counsel of Purchaser

	Exhibit I
	 	Form of Opinion of Counsel of Seller

	Exhibit J
	 	Power of Attorney

	Exhibit K
	 	Letter to Drug Master File Staff

	 	 	 

	INDEX TO EXHIBITS — DISCLOSURE SCHEDULE

	 	 	 

	Schedule 1.01(b)
	 	Contracts

	Schedule 1.01(c)
	 	Suppliers and Supply Agreements

	Schedule 1.01(g)
	 	Licenses

	Schedule 1.01(h)
	 	Patents

	Schedule 2.04(a)
	 	Collaborative Parties

	Schedule 2.04(c)
	 	Allocation of Purchase Price

	Schedule 3.03
	 	Seller’s Required Filings

	Schedule 3.05
	 	Registrations

	Schedule 3.06
	 	License Agreements

	Schedule 3.07
	 	Changes or Events

	Schedule 3.10
	 	Litigation

	Schedule 3.16(a)
	 	Suppliers

	Schedule 3.16(b)
	 	Customers and Licensees

	Schedule 3.19
	 	Seller’s Brokers and Finders

	Schedule 4.03
	 	Purchaser’s Required Filings

iv 

 

ASSET PURCHASE AGREEMENT

          THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is dated February 1, 1999 made and entered
into effective as of December 31, 1998 between YUNGTAI HSU, in his personal capacity (“Seller”) and
BENTLEY PHARMACEUTICAL, INC., a Florida corporation (“Purchaser”).

          WHEREAS, Seller purchased the Assets (as defined below) from Conrex Pharmaceutical
Corporation, a New Jersey corporation (“Conrex”);

          WHEREAS, simultaneously herewith the Seller and Purchaser have entered into a voting agreement
relating to the purchase of the Assets from Conrex;

          WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser
the Assets (as defined below) which Seller purchased from Conrex, all on the terms and subject to
the conditions set forth herein; and

          NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein
contained, and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

          1.01 Definitions. As used in this Agreement, the following defined terms have the
meanings indicated below:

          “Action or Proceeding” means any action, claim, suit, proceeding, inquiry, arbitration or
Governmental or Regulatory Authority investigation or audit.

          “Affiliate” means any Person that directly, or indirectly through one of more intermediaries,
controls or is controlled by or is under common control with the Person specified. For purposes of
this definition, control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning ten percent or more of
the voting securities of another Person shall be deemed to control that Person.

          “Assets” means:

               (a) the Technology;

               (b) the Business Information;

               (c) the Patents;

1

 

               (d) all Contracts relating to the Patents and Technology that are listed or described on
Schedule 1.01(b) of the Disclosure Schedule, including without limitation, Seller’s rights to
receive goods and services, to assert claims and to take other action with respect to breaches,
defaults and other violations pursuant to all of the Contracts;

               (e) all Licenses;

               (f) lists of suppliers and supply agreements, if any, listed on Schedule 1.01(c) of the
Disclosure Schedule; and

               (g) all batch records in existence as of the date hereof and as of the Closing Date.

          “Assigned Contracts” means the Contracts to be assigned by Seller to Purchaser as set forth on
Schedule 1.01(b) of the Disclosure Schedule.

          “Assigned Licenses” means the Licenses to be assigned by Seller to Purchaser as set forth on
Schedule 1.01(g) of the Disclosure Schedule.

          “Associate” means, with respect to any Person, any corporation or other business organization
of which such Person is an officer or partner or is the beneficial owner, directly or indirectly,
of ten percent or more of any class of equity securities, any trust or estate in which such Person
has a substantial beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of such spouse, who has
the same home as such Person.

          “Assumed Liabilities” has the meaning ascribed to it in Section 2.02.

          “Business Day” means a day other than Saturday, Sunday or any day on which banks located in
the State of New York are authorized or obligated to close.

          “Business Information” means lists of, and all records, in written, electronic, or other
formats, and other data, regarding:

               (a) pharmaceutical research relating to the Patents and Technology,

               (b) suppliers, strategies, formulae, training manuals and customers relating to the
development of the Patents and Technology, performance statistics and all other correspondence,
records, reports, computer disks and programs (including source codes), tapes and other files,
information and records, including, but not limited to, all regulatory files, records and other
correspondence, including the DMF and all original (laboratory) notebooks in a complete and
unabridged or altered form, and the records, reports and data relating thereto;

               (c) Seller’s files relating to potential applications of the Patents and Technology,

2

 

               (d) interest expressed by any Person in collaborating with Seller for researching, developing,
licensing, manufacturing or marketing the Patents and/or the Technology for pharmaceutical industry
applications (as defined by its intended indication);

               (e) Seller’s ownership and operation of the Assets; and

               (f) the Intellectual Property.

          “Closing” means the closing of the transactions contemplated by Section 2.01.

          “Closing Date” means February 11, 1999, effective as of December 31, 1998, or such other date
as Purchaser and Seller mutually agree upon in writing.

          “Contract” means any agreement, understanding, lease, license, evidence of indebtedness,
mortgage, indenture, security agreement or other contract, whether written or oral.

          “Disclosure Schedule” means the record delivered to Purchaser by Seller and initialed by
Seller and Purchaser, dated as of the date hereof and attached hereto as Exhibit A, containing all
schedules as are required to be included pursuant to this Agreement.

          “DMF” means the Drug Master file as compiled by Seller.

          “Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city, municipality or other political subdivision.

          “Indemnified Party” has the meaning ascribed to it in Section 10.04.

          “Indemnifying Party” has the meaning ascribed to it in Section 10.04.

          “Intellectual Property” means the Patents and all trade computer programs (including all
source codes) and related documentation, technical information, analytical methods, manufacturing,
engineering and technical drawings and know-how relating to the Technology.

          “Laws” means all laws, statutes, rules, regulations, ordinances, permits, orders, writs,
judgments, awards, injunctions or decrees or other pronouncements having the effect of law of the
United States, any foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.

          “Licenses” means all licenses, permits, certificates of authority, authorizations, approvals,
registrations, franchises, concessions, grants, and similar consents granted or issued by any
Governmental or Regulatory Authority required in connection with researching, developing,
licensing, manufacturing and marketing the Technology and Patents, including those Licenses that
are currently being negotiated; and including without limitation, those listed on Schedule 1.01(g)
of the Disclosure Schedule.

3

 

          “Liens” means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim,
levy, charge, restriction or other encumbrance or restriction of any kind, or any conditional sale
Contract, title retention Contract or other Contract to give any of the foregoing.

          “Loss” means any and all damages, fines, fees, penalties, deficiencies, losses and expenses
(including, without limitation, interest, court costs, fees of attorneys, accountants and other
experts or other expenses of litigation or other proceedings or of any claim, default or
assessment).

          “Order” means any writ, judgment, decree, injunction or similar order of any Governmental or
Regulatory Authority, in each such case whether preliminary or final.

          “Patents” means (i) United States Patent No. 5,023,252 (the “U.S. Patent”) and any reissue
thereof, any reexamination thereof, and any extension thereof and any patent application or patent
in any other country which discloses and claims subject matter which is disclosed in the U.S.
Patent, including the patents which are listed in Schedule 1.01(h) of the Disclosure Schedule, and
(ii) any patent application which is hereafter filed and which is entitled to the benefit of the
filing date of U.S. Application No. 08/954,869 (the “869 Application”), filed October 21, 1997, and
which claims pharmaceutical subject matter that is disclosed in the 869 Application and any patent
which may issue thereon and any reissue thereof, any reexamination thereof, and any extension
thereof.

          “Patents” does not mean U.S. patent No. 5,731,303 (hereafter the “303 Patent”) or any patent
or patent application which discloses and claims subject matter which relates to a composition that
contains a cosmetic skin-treating compound or a cosmetic hair-treating compound, as described in
the 303 Patent, or to the use of such cosmetic composition.

          “Person” means any natural person, corporation, general partnership, limited partnership,
proprietorship, other business organization, trust, union, association or Governmental or
Regulatory Authority.

          “Purchase Price” has the meaning ascribed to it in Section 2.04.

          “Purchaser’s Indemnified Liabilities” has the meaning ascribed to it in Section 10.02.

          “Purchaser” means Bentley Pharmaceuticals, Inc., a Florida corporation.

          “Seller” means Yungtai Hsu, in his personal capacity, or any lawful successor in interest to
Yungtai Hsu.

          “Seller Documents” means the arrangements, documents, instruments and certificates required to
be executed and delivered by Seller in connection with this Agreement.

          “Seller’s Indemnified Liabilities” has the meaning ascribed to it in Section 10.03.

          “Taxes” means all Tax Returns of or relating to any foreign, federal, state or local tax,
assessment, levy, impost, duty, withholding or other similar governmental charge, all,

4

 

together with any penalties, additions to tax, fines, interest and similar charges thereon or
related thereto.

          “Tax Returns” means all returns, including, without limitation, income, franchise, sales and
use, unemployment compensation, excise, severance, property, gross receipts, profits, payroll and
withholding tax returns and information returns, and reports. “Technology” means any and all
information relating to a composition containing a drug and a compound (hereafter “Enhancer”) which
increase the rate of passage of the drug across the skin or other body membrane, for example,
mucous membranes, or the blood brain barrier and to the administration of such composition to treat
humans (hereafter “pharmaceutical subject matter”), such information including information related
to all developmental and commercially practiced processes and methodologies (including, but not
limited to, methods of using, storing, identifying, measuring, and analyzing the composition),
formulations, trade secrets, know how, formulae and manufacturing, processing and other technical
information and underlying data as it applies to pharmaceutical industry application (as defined by
the FDA), prescription and over-the-counter application.

          “Technology” does not mean information which relates to a cosmetic composition which contains
a cosmetic skin-treating compound or a cosmetic hair-treating compound and an Enhancer or to the
use of such cosmetic composition.

ARTICLE II

SALE OF ASSETS AND CLOSING

          2.01 Purchase And Sale of Assets. On the terms and subject to the conditions set forth
in this Agreement, at the Closing Purchaser shall purchase from Seller, and Seller shall sell,
transfer, assign, convey and deliver to Purchaser all of Seller’s right, title and interest in and
to the Assets, free and clear of any and all Liens. As a result of this transaction, Seller shall
retain no interest whatsoever in the Assets.

          2.02 Assumption of Obligations And Liabilities. On the terms and subject to the
conditions set forth in this Agreement, from and after the Closing, Purchaser will assume and pay,
perform, discharge and be responsible only for those obligations and liabilities of Seller under
the Assigned Contracts and Assigned Licenses which accrue after the Closing Date (the “Assumed
Liabilities”); provided that Purchaser shall have the right, in its sole discretion, and without
effect on the Purchase Price, to add or delete Assigned Contracts or Assigned Licenses by written
notice delivered to Seller two Business Days prior to the Closing Date, or such earlier date as
Seller’s right to add or delete such Assigned Contracts or Assigned Licenses by written notice
delivered to Conrex terminates.

          2.03 Retained Liabilities. Notwithstanding anything herein or in the Seller Documents
to the contrary, Purchaser shall not assume or pay, perform, discharge or be responsible for any of
the obligations or liabilities of Seller, including but not limited to Seller’s liabilities to
Virna Pharmaceuticals, Inc. or with respect to and arising out of an agreement between Seller and
Virna Pharmaceuticals, Inc., effective as of December 1, 1990, as further amended (the “Retained
Liabilities”) other than the Assumed Liabilities. Seller shall discharge

5

 

in a timely manner or shall make adequate provision for the Retained Liabilities. Purchaser is
not a successor to Seller for any purpose and shall not be liable for any claim that may exist
against Seller, including but not limited to any products liability claims.

          2.04 Purchase Price; Allocation; Adjustment.

               (a) Purchase Price. The aggregate purchase price for the Assets and for the covenant
of Seller contained in Section 5.07 shall be (i) U.S.
$1,074,000 (the “Cash Portion of the Purchase Price”), subject to the adjustments as provided in paragraph (b) below; (ii) an aggregate of
$350,000 of shares of common stock (the “Shares”) of Purchaser according to the terms and
conditions of the Subscription Agreement and the Registration Rights Agreement, dated as of the
Closing Date, substantially in the forms of Exhibit B and C, respectively, hereto, (iii) a warrant
to purchase 450,000 shares of common stock of Purchaser according to the terms and conditions of
the Warrant Agreement, dated as of the Closing Date, substantially in the form of Exhibit D hereto,
(iv) 5% of the net profits received by Purchaser or its successors for fifteen years from the
Closing Date from the commercialization of any products developed by Purchaser or its successors
from the Assets and (v) the aggregate amount of the Assumed Liabilities ((i)-(v) collectively, the
“Purchase Price”).

               (b) Adjustment of Cash Portion of Purchase Price. The Cash Portion of the Purchase
Price shall be adjusted downward to an amount of $1,024,000 (the “Adjusted Cash Portion of the
Purchase Price”) to reflect a payment by Purchaser to Seller on December 3, 1998 of a $50,000
due-diligence deposit.

               (c) Allocation of Purchase Price. Purchaser and Seller hereby agree that for tax
purposes the Purchase Price will be allocated in accordance with Schedule 2.04(c) of the Disclosure
Schedule, which allocation shall be binding upon the Purchaser and the Seller, each of which agrees
to report the effect of the transactions contemplated hereby on all applicable Tax Returns or
filings in a manner consistent with such schedule. The Seller hereby assumes liability for and
shall pay all sales, transfer and similar Taxes incurred as a result of the sale of the Assets to
Purchaser.

          2.05 Closing.

               (a) The Closing will take place at the offices of Synnestvedt & Lechner LLP, 2600 Aramak
Tower, 1101 Market Street, Philadelphia, Pennsylvania 19107, or at such other place as Purchaser
and Seller mutually agree, at 10:00 A.M. Eastern Standard Time, on the Closing Date.

               (b) Deliveries by Purchaser to Seller. At the Closing, Purchaser will:

               (i) deliver to Seller an executed copy of this Agreement;

               (ii) pay the Adjusted Cash Portion of the Purchase Price by wire transfer of
immediately available funds to such account as Seller may reasonably direct by written
notice delivered to Purchaser by Seller at least two Business Days before the Closing Date;

6

 

               (iii) deliver to Seller the Subscription Agreement, Registration Rights Agreement and
Warrant Agreement, duly executed by Purchaser;

               (iv) deliver to Seller an assumption agreement, dated as of the Closing Date,
substantially in the form of Exhibit E hereto, duly executed by Purchaser, pursuant to which
Purchaser assumes all of the Assumed Liabilities;

               (v) deliver to Seller the certificate referred to in Section 7.04; and

               (vi) deliver to Seller the opinion referred to in Section 7.06.

               (c) Deliveries by Seller to Purchaser. Simultaneously with the deliveries by
Purchaser, Seller will:

               (i) deliver to Seller an executed copy of this Agreement;

               (ii) assign and transfer to Purchaser good and valid title in and to the Assets (free
and clear of all Liens) by delivery of (A) a General Assignment and Bill of Sale
substantially in the form of Exhibit F hereto, duly executed by Seller, (B) an assignment of
the Intellectual Property in form and substance reasonably satisfactory to Purchaser to vest
in Purchaser all of Seller’s right, title and interest in, to and under the Patents ,
including but not limited to instruments of assignment in a form suitable for filing with
the U.S. Patent and Trademark Office (including, but not limited to, United States Patent
and Trademark Office Form No. SB/41) to reflect the transfer of the Patents included in the
Assets and, upon filing such instrument with the U.S. Patent and Trademark Office, to record
the sale of all of Seller’s right, title and interest in, to and under the Patents to the
Purchaser, and (C) such other good and sufficient instruments of conveyance, assignment and
transfer, in form and substance reasonably acceptable to Purchaser’s counsel, as shall be
effective to vest in Purchaser good and marketable title to the Assets, free of all Liens,
including, but not limited to, written notices from Seller to all parties under any Contract
relating to the Assets, addressed to such parties, in the form prepared by Seller and
reasonably acceptable to Purchaser, for the release of such Contracts;

               (iii) deliver to Purchaser a receipt for the Purchase Price;

               (iv) deliver to Purchaser regulatory consents and approvals and third-party consents
referred to in Sections 8.04 and 8.05;

               (v) deliver to Purchaser the opinion referred to in Section 8.07;

               (vi) make available to Purchaser, at the location of the Assets, all Assets; and

               (vii) Seller shall deliver to Purchaser, such further instruments of transfer as
Purchaser shall reasonably request, to vest in Purchaser all of Sellers’ right, title and
interest in and to the Assets, including, but not limited to, any documents

7

 

evidencing the assignment to Purchaser of the Intellectual Property (which documents
are attached hereto as Exhibit G), and take such other actions as Purchaser shall reasonably
request to enable Purchaser to use such Assets, as contemplated herein and in the Seller
Documents.

          2.06 Third-Party Consents. To the extent that any Contract or License is not
assignable without the consent of another party, this Agreement shall not constitute an assignment
or an attempted assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. Seller and Purchaser shall use their best efforts to obtain the consent of such
other party to the assignment of any such Contract or License to Purchaser in all cases in which
such consent is or may be required for such assignment. If any such consent shall not be obtained,
Seller shall cooperate with Purchaser in any reasonable arrangement designed to provide for
Purchaser the benefits intended to be assigned to Purchaser under the relevant Contract or License,
including enforcement at the cost and for the account of Seller of any and all rights of Seller
against the other party thereto arising out of the breach or cancellation thereof by such other
party or otherwise. If and to the extent that such arrangement cannot be made, Purchaser shall have
no obligation pursuant to Section 2.02 or otherwise with respect to any such Contract or License.
The provisions of this Section 2.06 shall not affect the right of Purchaser not to consummate the
transactions contemplated by this Agreement if the condition to its obligations hereunder contained
in Section 8.05 has not been fulfilled.

          2.07 Assignment. Seller hereby assigns to Purchaser all of his rights under that
certain Asset Purchase Agreement dated February 1, 1999 effective as of December 31, 1998 between
Conrex and Seller (the “Conrex Agreement”).

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

          Seller understands that each of the following representations and warranties are material and
have been relied on by Purchaser. Seller represents, warrants and covenants to Purchaser that the
statements contained in this Article III are correct and complete as of the date of this Agreement,
and will be correct and complete as of the Closing Date (as though made on the Closing Date),
except as set forth in the Disclosure Schedule delivered to Purchaser on the date of this Agreement
and initialed by Seller and Purchaser.

          3.01 Intentionally Omitted.

          3.02 Legal Capacity. Seller has full power and legal capacity to execute, deliver and
perform this Agreement and the Seller Documents to which he is a party and to consummate the
transactions contemplated hereby and thereby.

          3.03 Execution and Binding Effect. This Agreement has been, and each of the Seller
Documents will be, at or prior to the Closing, duly executed and delivered by Seller and this
Agreement constitutes, and the Seller Documents when so executed and delivered, will constitute
legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their
respective terms except as such enforceability may be limited by bankruptcy,

8

 

insolvency or similar laws and by equitable principles. None of the execution and delivery by
Seller of this Agreement and the Seller Documents, or the consummation of the transactions
contemplated hereby or thereby, or compliance by Seller with any of the provisions hereof or
thereof will (a) conflict with, violate, result in the breach or termination of, or constitute a
default under (i) any Laws or (ii) any requirement of any Governmental or Regulatory Authority
applicable to Seller or by which the Assets may be bound, or (c) except as set forth on Schedule
3.03 of the Disclosure Schedule, require any filing, declaration or registration with, or permit,
consent, approval, waiver, clearance, order or authorization of, or the giving of any notice to,
any Governmental or Regulatory Authority or other Person or (d) result in the creation of any Lien
(other than any lien in favor of Purchaser) upon any of the Assets.

          3.04 Title. Seller has good and marketable title to all of the Assets and will convey
good and marketable title at the Closing, free and clear of any and all Liens. None of the Assets
is licensed or otherwise not owned by Seller. In transferring the Assets to Purchaser, Seller has
no intent to hinder, delay or defraud any entity to which Seller owes or will owe any debt, on or
after the Closing Date.

          3.05 Registrations. The registrations listed on Schedule 3.05 of the Disclosure
Schedule are the only registrations, as of the Closing Date, required by any Governmental or
Regulatory Authority to develop, manufacture, market and sell the Technology and Patents and any
products resulting from the Technology and the Patents. Such Registrations are and will be valid,
current and held exclusively by Seller as of the Closing Date.

          3.06 Intellectual Property. The Intellectual Property constitutes all intellectual
property which is necessary or used by Seller, to develop, manufacture, market and sell products
developed from the Patents or the Technology. All of the Intellectual Property that is owned by
Seller is owned free and clear of all Liens and all Intellectual Property that is licensed or
otherwise used by Seller is licensed pursuant to valid and existing license agreements and such
interests are not subject to any Liens other than the applicable license agreement, if any. All
such license agreements are set forth on Schedule 3.06 of the Disclosure Schedule. Seller has not
granted to any Person any License, interest or other right in respect of the Intellectual Property
which does, or which will, as of the Closing or subsequent to the Closing, permit any other Person,
other than Purchaser, to use any of the Intellectual Property. All Intellectual Property, including
without limitation, the Patents, is valid, effective and enforceable. Seller is unaware of any
reason that the Intellectual Property, is or could be, invalid or unenforceable, including, but not
limited to, the failure of Seller to timely pay any fees or dues associated with the Intellectual
Property. To the best knowledge of Seller, no Actions or Proceedings are pending or threatened,
questioning the validity or effectiveness of any Intellectual Property or asserting that Seller is
infringing or otherwise adversely affecting the rights of any Person with regard to any
intellectual property of such Person. The Intellectual Property is not being infringed by any
Person and Seller, to the best of his knowledge, is unaware of any potential infringement of the
Intellectual Property. No third party intellectual property will be infringed as a result of the
use of the Assets. There are no royalties, fees or other amounts payable by or to Seller with
respect to any of the Intellectual Property. The consummation of the transactions contemplated by
this Agreement and the Seller Documents will not result in the loss of any Intellectual Property or
rights therein.

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          3.07 Absence of Certain Changes or Events.

               (a) Except as set forth in Schedule 3.07 of the Disclosure Schedule, Seller has used the
Assets only in the ordinary and usual course of his business consistent with past practice, and has
not:

               (i) placed Liens or allowed Liens to be placed on the Assets;

               (ii) canceled or compromised any material claims, or waived any other material rights,
or sold, transferred or otherwise disposed of any of the Assets;

               (iii) sold, transferred, licensed, assigned or otherwise disposed of, or permitted to
lapse or disclosed to any Person (other than disclosure to his employees or agents, as
reasonably necessary in the ordinary and usual course of his business), any of the
Intellectual Property or Business Information;

               (iv) suffered any material adverse change in the manufacturing and development of the
Patents or Technology; or

               (v) agreed in writing or otherwise to take any action described in this Section 3.07.

               (b) Except as set forth in Schedule 3.07 of the Disclosure Schedule, Seller is not aware of
any event, fact or condition that has occurred or could reasonably be expected to occur that has or
has resulted in, or is reasonably likely to result, in a material adverse change in research,
development, licensing, manufacture, marketing or sale of the Assets.

          3.08 Contracts.

               (a) Except as set forth in Schedule 1.01(b) of the Disclosure Schedule, none of the Assets is
subject to, and except as set forth in Schedule 1.01(b) of the Disclosure Schedule, Seller is not a
party to or bound by:

               (i) any Contract relating to the Assets;

               (ii) any Contract limiting the freedom of Purchaser or any affiliate thereof following
the Closing to engage in any line of business, to own, operate, sell, transfer, pledge or
otherwise dispose of or encumber the Assets or to compete with any Person or to engage in
any business or activity in any geographic area, within the United States or outside of the
United States, relating to the Assets;

               (iii) any Contract with any partnership, joint venture or other entity;

               (iv) any sale, loan, charge, Contract or other transaction between Seller and any of
his shareholders, affiliates, directors or officers; or

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               (v) any Contract that is or might otherwise reasonably be expected to be material to
the Assets (for purposes of this clause (v), a Contract involving payments to or by Seller
shall be deemed to be material if such payments are in an aggregate amount of $1,000 or
more).

               (b) Seller is not in breach of any provision of, or in default (and knows of no event or
circumstance that with notice, or lapse of time or both, would constitute an event of default)
under the terms of any Contract described in Schedule 1.01(b) of the Disclosure Schedule nor is
there any Action or Proceeding or grievance alleging such a breach or default. Seller is not aware,
or could not be reasonably aware, of any breach by any other party to any Contract described in
Schedule 1.01(b) of the Disclosure Schedule. All Contracts described in Schedule 1.01(b) of the
Disclosure Schedule are in full force and effect, will continue to be in full force and effect
after the Closing and Seller is not aware, or could not be reasonably aware, of any pending or
threatened disputes with respect to such Contracts. Seller is not engaged in any disputes with
customers or suppliers, and to Seller’s knowledge (i) no customer or supplier is considering
termination, non-renewal or any adverse modification of its arrangements with Seller, and (ii) the
transactions contemplated by this Agreement will not have an adverse affect on the business
relationship with any of its suppliers or customers.

               (c) All of the Contracts (i) have been entered into on an arm’s-length basis, (ii) are within
the scope of their corporate purpose and ordinary business, (iii) do not violate applicable Laws,
(iv) are not of a loss-making nature, that is known to be likely to result in a loss on completion
or performance and (v) contain termination provisions which are reasonable and customary for the
type of transactions and activities to which they relate. Seller has not entered into any Contract
which cannot be readily fulfilled or performed on time without undue or unusual expenditure of
money or effort.

          3.09 Negotiations. Schedule 2.04 (a) of the Disclosure Schedule sets forth, in a
complete and exhaustive manner, any and all negotiations and discussions between Seller and any
other Person relating to any of the Assets. Schedule 2.04(a) of the Disclosure Schedule sets forth
details regarding the status of negotiations for each party listed on such schedule.

          3.10 Litigation. Except as set forth on Schedule 3.10 of the Disclosure Schedule,
there is not currently, and there has not been at any time, any Actions or Proceedings pending or
threatened by or against Seller or any affiliate or employee of Seller, or with respect to the
Assets (including, without limitation, products liability claims) or the transactions contemplated
hereby, at law or in equity or before or by any Governmental Entity or arbitrator, which has had or
could have a material adverse affect on Purchaser or the Assets, and, to the best knowledge of
Seller, there is no valid basis for any such Action or Proceeding. Except as set forth on Schedule
3.10 of the Disclosure Schedule, there is no pending or threatened Action or Proceeding that seeks
to enjoin or obtain damages in respect of the consummation of the transactions contemplated by this
Agreement or that questions the validity of this Agreement, any of the Seller Documents or any
action to be taken by Seller in connection with the consummation of the transactions contemplated
hereby or thereby. Seller is not subject to any Laws or, to the best of Seller’s knowledge, any
proposed Laws, which has had or could have a material adverse affect on the Assets or on
Purchaser’s ability to manufacture any products from the Patents or Technology.

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          3.11 Compliance with Law. Seller has operated and is currently conducting all
research, development, manufacture, and sales relating to the Assets, and all products resulting
from the Patents or Technology have been provided, developed, marketed and sold in compliance with
all applicable Laws of Governmental or Regulatory Authority. Seller has not received notice of, and
does not have knowledge of any such violation or alleged violation with respect to the Assets.
Seller has not received notice of (and does not have knowledge of) (a) any finding of any lack of
efficacy with respect to any products resulting from the Assets or (b) any findings,
determinations, studies, reports, analyses, investigations, inquiries or Legal Proceedings by or
for any Governmental or Regulatory Authority with respect to the efficacy of any products resulting
from the Assets. As of the date hereof and as of the Closing Date, all reports relating to the
Assets required to be filed by Seller with any Governmental or Regulatory Authority have been or
will have been filed and are and will be accurate and complete in all material respects when filed.

          3.12 Licenses and Regulatory Reports.

               (a) Seller possesses all Licenses required to be possessed by it pursuant to all applicable
Laws and all such Licenses, as set forth on Schedule 1.01(g) of the Disclosure Schedule, are in
full force and effect. All Licenses that Seller has been negotiating, or are being negotiated, are
set forth on Schedule 1.01(g) of the Disclosure Schedule and include the name of the contact person
of the potential licensee, the name of the attorney representing the potential licensee and the
status of license being negotiated. Seller is in compliance with all of his Licenses and there is
no reasonable basis for the revocation or suspension of any thereof. The Licenses constitute all
the Licenses required for Seller’s ownership of the Assets and the research, development,
manufacture and marketing of products from the Assets, all of which are transferable and will be
transferred to Purchaser at the Closing, and none of which will expire within the twelve-month
period following the Closing Date. Seller has furnished to Purchaser copies of all reports of
inspections relating to the Assets by Governmental or Regulatory Authorities;

               (b) Seller has paid all fees, dues or assessments, due and payable in connection with any of
the Assets, including, but not limited to, fees related to the Patents. There is no unresolved
violation, criticism or exception by any entity with respect to any report or statement relating to
an examination of the Assets;

               (c) Seller has not prepared for filing, or has not filed with the FDA or any foreign
equivalent, any filings, reports, registrations or statements (including, but not limited to INDs,
NDAs, and ANDAs) pertaining to the Assets and anything related to Seller’s business.

               (d) Seller has delivered to Purchaser complete and correct copies of any and all
correspondence between the Company and any Governmental or Regulatory Authority, including, but not
limited to, warning letters, notices of adverse findings and recall notifications.

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          3.13 Inspections and Agreements with Governmental or Regulatory Authorities.

               (a) Seller has never received a notice of inspection, nor has ever been inspected by any
Governmental or Regulatory Authority, including, but not limited to, the FDA, OSHA or the Consumer
Product Safety Commission.

               (b) Seller is not subject to any cease-and-desist or other order issued by, or a party to any
agreement or memorandum of understanding with, any Governmental or Regulatory Authority relating to
or affecting, or which may affect the Assets.

          3.14 Affiliate Interests. Neither Seller nor any employee, debt-holder or affiliate of
Seller:

               (a) owns any interest (other than through the ownership of five percent or less of any class
of securities registered under the Securities Exchange Act of 1934, as amended) in any Person which
is a competitor, supplier or customer of any business relating to the Assets;

               (b) owns, in whole or in part, any property, asset or right used in connection with the
research, development, manufacture, marketing and sales relating to the Assets, or products
resulting from the Assets;

               (c) has an interest in any Contract pertaining to the Assets; or

               (d) owes any money to, or is owed any money by, the Seller.

          3.15 Absence of Undisclosed Liabilities. The Seller has no liabilities or obligations
of any nature, whether absolute, accrued, contingent or otherwise, which individually or in the
aggregate are material to the Assets except for liabilities for performance obligations arising in
the ordinary course of the business relating to the Assets (and not as a result of a breach or
default by the Seller) under the Contracts listed on Schedule 1.01(b) of the Disclosure Schedule or
Contracts not required to be disclosed on that schedule.

          3.16 Customers, Licensees and Suppliers. Schedule 3.16(a) of the Disclosure Schedule
sets forth a list of the suppliers (on the basis of revenues for goods purchased) for any products
relating to the Assets for the year ended December 31, 1998. Since January 1, 1998, no such
supplier has ceased or materially reduced its sales to the Seller, or has threatened to cease or
materially reduce such sales and the Seller has not been engaged in and is not engaged in any
dispute with any of its suppliers. Schedule 3.16(b) of the Disclosure Schedule sets forth all
customers or licensees that the Seller is negotiating with, or has ever negotiated with, in
connection with any products relating to the Assets.

          3.17 Commitments. Seller is not bound under any Contracts to any purchase commitments,
blanket purchase orders, minimum research and development expenditure obligations or other minimum
expenditure obligations.

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          3.18 Other Contracts. There are no other Contracts between the Seller and any other
Person, to acquire any of the Assets, and no other Person has any right or option to acquire any of
the Assets.

          3.19 Brokers and Finders. Except as set forth on Schedule 3.19 of the Disclosure
Schedule, neither the Seller nor any of his employees or Affiliates have employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection
with the transactions contemplated by this Agreement or the Seller Documents. Except as set forth
on Schedule 3.19 of the Disclosure Schedule, no Person is entitled to any fee, commission or like
payment in respect thereof based in any manner on any agreement, arrangement or understanding made
by or on behalf of the Seller.

          3.20 Tax Matters.

               (a) All Tax Returns for any Taxes that are required to be filed on or before the Closing Date,
by or on behalf of or with respect to the Seller or the Assets have been, or will be, timely filed
with the appropriate foreign, federal, state and local authorities. All Taxes required to be paid
by the Seller on or before the date hereof have been paid in full on or before the date hereof, and
all Taxes required to be paid by the Seller on or before the Closing Date will be paid on or before
such date. Seller additionally warrants that it shall be solely responsible for the payment of any
sales or use taxes arising from this transaction.

               (b) All Tax Returns and the information and data contained therein have been properly and
accurately compiled and completed, fairly present the information purported to be shown therein,
and reflect all liabilities for Taxes for the periods covered by such Tax Returns. Neither the
Internal Revenue Service nor any other taxing authority is now asserting against the Seller, with
respect to any Tax, any adjustment, deficiency or claim for additional Taxes, nor are there or have
there been any such discussions with or without notice from any such taxing authorities with
respect thereto nor, to the best knowledge of the Seller, is there any basis therefor. There are no
outstanding contracts or waivers extending the statutory period of limitation applicable to any
assessment or audit or any Tax or Tax Return of the Seller.

               (c) No Tax Liens exist on any of the Assets.

               (d) No written claim has been made by any taxing authority in a jurisdiction where the Seller
does not file Tax Returns that the Seller is or may be subject to taxation by that jurisdiction.

               (e) The Seller is not a party to any joint venture, partnership, or other arrangement which is
treated as a partnership for federal income tax purposes.

               (f) There is no Contract or consent made under Section 341(f) of the Internal Revenue Code of
1986, as amended (the “Code”), affecting the Seller.

               (g) The Seller is not a party to any tax sharing Contract, whether formal or informal.

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               (h) Seller is not a “Foreign Person” within the meaning of Section 1445(f)(3) of the Code.

          3.21 Disclosure. Seller has disclosed in writing all information which is necessary
for an accurate appraisal of the Assets and to research, develop, market and manufacture products
resulting from the Assets; all information given by Seller relating to the Assets was, when given
accurate, complete and not misleading. The representations and warranties of Seller contained in
this Agreement do not contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this Agreement and in
the Seller Documents not misleading. The representations and warranties of Seller contained in this
Agreement are subject only to the exceptions expressly made therein which apply only to the
specific representation or warranty with respect in which they are made; (b) are not limited or
conditioned in any way by the fact that Purchaser, its officers, employees, advisors, consultants
and auditors have known or could have known by any means or as a result of the due diligence review
of Seller and the Assets pursued or to be pursued by Purchaser, its officers, employees, advisors,
consultants and auditors that any of the representations and warranties made by Seller are not
true, correct, exact, accurate and complete; and (c) the liability of Seller with respect to
Purchaser is not limited in any way by the fact that Purchaser, its officers, employees, advisors,
consultants and auditors have known or could have known by any means or as a result of the due
diligence review of Seller and the Assets pursued or to be pursued by Purchaser, its officers,
employees, advisors, consultants and auditors, that any of the representations and warranties made
by Seller are not true, correct, exact, accurate and complete.

          3.22 Purchase of Assets. Seller acquired the Assets from Conrex in an arms-length
transaction. Conrex has no rights to reacquire the Assets or challenge or affect in any way
detrimental to Purchaser the validity of its sale of the Assets to Seller or Seller’s sale of the
Assets to Purchaser. On the Closing Date, the Purchaser shall have all of the rights of Seller
under the Conrex Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

          Purchaser understands that each of the following representations and warranties are material
and have been relied on by Seller. Purchaser represents, warrants and covenants to Seller that the
statements contained in this Article IV are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made on the Closing Date).

          4.01 Organization and Good Standing. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida, and has all requisite
power and authority to carry on its business as it is as of the date hereof being conducted, and to
execute, deliver and perform this Agreement.

          4.02 Authority. The execution and delivery to Seller of this Agreement by Purchaser,
the performance by Purchaser of its obligations hereunder and the consummation by

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Purchaser of the transactions contemplated
hereby have been duly authorized by the board of directors of Purchaser, and no other corporate act
or proceeding on the part of Purchaser is necessary to approve the execution and delivery of this
Agreement, the performance of Purchaser’s obligations hereunder, or the consummation of the
transactions contemplated hereby.

          4.03 Execution and Binding Effect. This Agreement has been duly executed and delivered by Purchaser and this Agreement constitutes
legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with
its terms except as such enforceability may be limited by bankruptcy, insolvency or similar laws
and by equitable principles. Neither the execution and delivery by Purchaser of this Agreement, nor
the consummation of the transactions contemplated hereby, nor the compliance by Purchaser with any
of the provisions hereof will (a) conflict with, or result in the breach of, any provision of
Purchaser’s Certificate of Incorporation and Bylaws, as of the Closing Date, (b) conflict with,
violate, result in the breach or termination of, or constitute a default under (i) any Contract, to
which Purchaser is a party or by which Purchaser is bound or subject, (ii) any Laws or (iii) any
requirement of any Governmental or Regulatory Authority applicable to Purchaser, or (c) except as
set forth on Schedule 4.03 of the Disclosure Schedule, require any filing, declaration or
registration with, or permit, consent, approval, waiver, clearance, order or authorization of, or
the giving of any notice to, any Governmental or Regulatory Authority or other Person.

          4.04 Brokers and Finders. Purchaser has not employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders’ fees in connection with the transactions contemplated by this Agreement or
the Seller Documents. No Person is entitled to any fee, commission or like payment in respect
thereof based in any manner on any agreement, arrangement or understanding made by or on behalf of
Purchaser.

          4.05 Disclosure. The representations and warranties of Purchaser contained in this Agreement do not contain any
untrue statement of a material fact or omit to state any material fact necessary in order to make
the statements and information contained in this Agreement and in the Seller Documents not
misleading.

ARTICLE V

COVENANTS OF SELLER

          Seller covenants and agrees with Purchaser that, at all times from and after the date hereof
until the Closing and, with respect to any covenant or agreement by its terms to be performed in
whole or in part after the Closing, for the period specified herein or, if no period is specified
herein, indefinitely, Seller will comply with all covenants and provisions of this Article V,
except to the extent Purchaser may otherwise consent in writing.

          5.01 Regulatory and Other Approvals. Seller will (a) take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings with and to give
all notices to Governmental or Regulatory Authorities or any other Person required of Seller to
consummate the transactions contemplated hereby and by the Seller Documents, (b) provide such other
information and communications to

16

 

such Governmental or Regulatory Authorities or other Persons as
Purchaser or such Governmental or Regulatory Authorities or other Persons may reasonably request in
connection therewith and (c) cooperate with Purchaser as promptly as practicable in obtaining all
consents, approvals or actions of, making all filings with and giving all notices to Governmental
or Regulatory Authorities or other Persons required of Purchaser to consummate the transactions
contemplated hereby and by the Seller Documents. Seller will provide prompt notification to
Purchaser when any such consent, approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law, provide copies of any such communications that are in writing) with
any Governmental or Regulatory Authority or other Person regarding any of the transactions
contemplated by this Agreement or any of the Seller Documents.

          5.02 No Solicitations. Seller will not take, nor will it permit any Affiliate of Seller (or authorize or permit any
investment banker, financial advisor, attorney, accountant or other Person retained by or acting
for or on behalf of Seller or any such Affiliate) to take, directly or indirectly, any action to
initiate, assist, solicit, receive, negotiate, encourage or accept any offer or inquiry from any
Person (a) to reach any agreement or understanding (whether or not such agreement or understanding
is absolute, revocable, contingent or conditional) for, or otherwise attempt to consummate, the
sale of the Assets to any Person other than Purchaser or its Affiliates or (b) to furnish or cause
to be furnished any information with respect to the Assets to any Person who Seller or such
Affiliate (or any such Person acting for or on their behalf) knows or has reason to believe is in
the process of considering any acquisition of the Assets. If Seller or any such Affiliate (or any
such Person acting for or on their behalf) receives from any Person any offer, inquiry or
informational request referred to above, Seller will promptly advise such Person, by written
notice, of the terms of this Section 5.02 and will promptly, orally and in writing, advise
Purchaser of such offer, inquiry or request and deliver a copy of such notice to Purchaser.

          5.03 Conduct Relating to the Assets. Seller will operate and conduct his business relating to the Assets only in the ordinary course
consistent with past practice such that, at the Closing, no representation, warranty, covenant,
obligation or agreement will be breached and no condition in this Agreement will remain unfulfilled
by reason of the actions or omissions of Seller. Without limiting the generality of the foregoing,
Seller will:

               (a) use commercially reasonable efforts to (i) preserve intact the present business
organization and reputation of the business relating to the Assets, (ii) maintain
the Assets in good order and condition, and (iii) maintain the goodwill of customers,
suppliers, lenders and other Persons to whom Seller sells goods or provides services or with whom
Seller otherwise has significant business relationships in connection with the Assets;

               (b) except to the extent required by applicable Law, cause all the Business Information to be
maintained in the usual, regular and ordinary manner;

               (c) not sell, assign, license, transfer or permit to lapse any right or obligation with
respect to the Intellectual Property, including but not limited to making all filings required to
be made with respect to and to preserve all rights to the Intellectual Property; and

17

 

               (d) comply, in all material respects, with all Laws applicable to the Assets and promptly
following receipt thereof to give Purchaser copies of any notice received from any Governmental or
Regulatory Authority or other Person alleging any violation of any such Laws.

          5.04 Licenses; Filings. As promptly as practicable, Seller will deliver copies of all License applications and other
filings made by Seller in connection with the operation of the Assets after the date hereof and
before the Closing Date with any Governmental or Regulatory Authority.

          5.05 Certain Restrictions. Seller will refrain from:

               (a) acquiring or disposing of any of the Assets;

               (b) entering into, amending, modifying, terminating (partially or completely), granting any
waiver under or giving any consent with respect to any Contract or any License relating to the
Assets;

               (c) violating, breaching or defaulting under in any material respect, or taking or failing to
take any action that (with or without notice or lapse of time or both) would constitute a material
violation or breach of, or default under, any term or provision of any Contract or License relating
to the Assets;

               (d) incurring, purchasing, canceling, prepaying or otherwise providing for a complete or
partial discharge in advance of a scheduled payment date with respect to, or waiving any right of
Seller under, any liability of or owing to Seller in connection with any of the Assets, other than
in the ordinary course of business consistent with past practice;

               (e) entering into a mortgage, pledge or otherwise subjecting to Lien any of the Assets;

               (f) engaging with any Person in any merger, consolidation or combination to which such Person
is a party, any sale, dividend, split or other disposition of
capital stock or other equity interests of such Person or any sale, dividend or other
disposition of all or substantially all of the assets and properties of such Person.

               (g) engaging in any transaction with respect to the Assets with any employee, debt-holder,
officer, director, Affiliate or Associate of Seller, or any Associate of any such employee,
debt-holder, officer, director or Affiliate, either outside the ordinary course of business
consistent with past practice or other than on an arm’s-length basis;

               (h) entering into a contract which is deemed to be an Assigned Contract; and

               (i) entering into any Contract to do or engage in any of the foregoing.

          5.06 Delivery of Business Information. On the Closing Date, Seller will deliver or make available to Purchaser at the location at which
the Assets are held all of the Business

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Information relating to the Assets which are or should be
in Seller’s possession, and if at any time after the Closing Seller discovers in his possession or
under his control any other Business Information or other Assets, it will forthwith deliver such
Business Information or other Assets to Purchaser.

          5.07 Non-competition.

               (a) Seller will, for a period of ten years from the Closing Date, refrain from, either alone
or in conjunction with any other Person, or directly or indirectly through his present or future
Affiliates:

                    (i) causing or attempting to cause any client, customer or supplier of Purchaser to
terminate or materially reduce its business with Purchaser or any of its Affiliates relating
to the Assets; or

                    (ii) participating or engaging in (other than through the ownership of five percent or
less of any class of securities registered under the Securities Exchange Act of 1934, as
amended), or otherwise lending assistance (financial or otherwise) to any Person
participating or engaged in, any business relating to the Assets.

               (b) The parties hereto recognize that the Laws and public policies of the various states of
the United States may differ as to the validity and enforceability of covenants similar to those
set forth in this Section. It is the intention of the parties that the provisions of this Section
be enforced to the fullest extent permissible under the Laws and policies of each jurisdiction in
which enforcement may be sought, and that the unenforceability (or the modification to conform to
such Laws or policies) of any provisions of this Section shall not render unenforceable, or impair,
the remainder of the provisions of this Section. Accordingly, if any provision of this Section
shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall be
deemed to apply only with respect to the operation of such
provision in the particular jurisdiction in which such determination is made and not with
respect to any other provision or jurisdiction.

               (c) The parties hereto acknowledge and agree that any remedy at Law for any breach of the
provisions of this Section would be inadequate, and Seller hereby consents to the granting by any
court of an injunction or other equitable relief, without the necessity of actual monetary loss
being proved, in order that the breach or threatened breach of such provisions may be effectively
restrained.

          5.08 Notice and Cure. Seller will notify Purchaser in writing (where appropriate, through updates to the Disclosure
Schedule) of, and contemporaneously will provide Purchaser with true and complete copies of any and
all information or documents relating to, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction or circumstance, as soon as practicable after it becomes
known, or reasonably should have become known, to Seller, occurring after the date of this
Agreement, that causes or will cause any covenant or agreement of Seller under this Agreement to be
breached or that renders or will render untrue any representation or warranty of Seller contained
in this Agreement as if the same were made on or as of the date of such event, transaction or
circumstance. Seller also will notify

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Purchaser in writing (where appropriate, through updates to
the Disclosure Schedule) of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach, as soon as practicable after it becomes known, or reasonably
should have become known, to Seller, of any representation, warranty, covenant or agreement made by
Seller in this Agreement, whether occurring or arising before, on or after the date of this
Agreement. No notice given pursuant to this Section shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein or shall in any way limit Purchaser’s right to seek
indemnity under Article X.

          5.09 Fulfillment of Conditions. Seller will execute and deliver at the Closing each of the Seller Documents that Seller is
required hereby to execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each
other condition to the obligations of Purchaser contained in this Agreement and will not take or
fail to take any action that could reasonably be expected to result in the nonfulfillment of any
such condition.

ARTICLE VI

COVENANTS OF PURCHASER

          Purchaser covenants and agrees with Seller that, at all times from and after the date hereof
until the Closing, and, with respect to any covenant or agreement by its terms to be performed in
whole or in part after the Closing, for the period specified herein or, if no period is specified
herein, indefinitely, Purchaser will comply with all covenants and provisions of this Article VI,
except to the extent Seller may otherwise consent in writing.

          6.01 Regulatory and Other Approvals. Purchaser will (a) take commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith and use commercially reasonable efforts, as promptly as practicable to
obtain all consents, approvals or actions of, to make all filings with and to give all notices to
Governmental or Regulatory Authorities or any other Person required of Purchaser to consummate the
transactions contemplated hereby and by the Seller Documents, (b) provide such other information
and communications to such Governmental or Regulatory Authorities or other Persons as Seller or
such Governmental or Regulatory Authorities or other Persons may reasonably request in connection
therewith and (c) cooperate with Seller as promptly as practicable in obtaining all consents,
approvals or actions of, making all filings with and giving all notices to Governmental or
Regulatory Authorities or other Persons required of Seller to consummate the transactions
contemplated hereby and by the Seller Documents. Purchaser will provide prompt notification to
Seller when any such consent, approval, action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable, and will advise Seller of any communications (and,
unless precluded by Law, provide copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated
by this Agreement or any of the Seller Documents.

          6.02 Notice and Cure. Purchaser will notify Seller in writing of, and contemporaneously will provide Seller with true
and complete copies of any and all information

20

 

or documents relating to, and will use all
commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance,
as soon as practicable after it becomes known, or reasonably should have become known, to
Purchaser, occurring after the date of this Agreement, that causes or will cause any covenant or
agreement of Purchaser under this Agreement to be breached or that renders or will render untrue
any representation or warranty of Purchaser contained in this Agreement as if the same were made on
or as of the date of such event, transaction or circumstance. Purchaser also will notify Seller in
writing of, and will use all commercially reasonable efforts to cure, before the Closing, any
violation or breach, as soon as practicable after it becomes known, or reasonably should have
become known, to Purchaser, of any representation, warranty, covenant or agreement made by
Purchaser in this Agreement, whether occurring or arising before, on or after the date of this
Agreement. No notice given pursuant to this Section shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein or shall in any way limit Seller’s right to seek
indemnity under Article X.

          6.03 Delivery of Documents. Purchaser will execute and deliver to Seller the Subscription Agreement, the Registration Rights
Agreement and the Warrant.

          6.04 Fulfillment of Conditions. Purchaser will take all commercially reasonable actions necessary or desirable and proceed
diligently and in good faith to satisfy each other condition to the obligations of Seller contained
in this Agreement and will not take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition.

ARTICLE VII

CONDITIONS TO OBLIGATIONS OF SELLER

          The obligations of Seller hereunder are subject to the fulfillment, at or before the Closing,
of each of the following conditions (all or any of which may be waived in whole or in part by
Seller in his sole discretion):

          7.01 Representations, Warranties and Covenants. Each of the representations and warranties made by Purchaser in this Agreement shall be true and
correct in all material respects on the date hereof and on the Closing Date as though such
representation or warranty was made on and as of the Closing Date.

          7.02 Performance. Purchaser shall have performed and complied with each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by Purchaser at or before the Closing.

          7.03 Laws. There shall not be in effect on the Closing Date any Law that became effective after the date of
this Agreement restraining, enjoining or otherwise prohibiting or making illegal the consummation
of any of the transactions contemplated by this Agreement or any of the Seller Documents.

          7.04 Officer’s Certificate. Purchaser shall have delivered to Seller a certificate, dated the Closing Date and executed by an
officer of Purchaser, certifying resolutions of

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Purchaser’s Board of Directors authorizing the
execution, delivery and performance of this Agreement, together with incumbency and a signature
certificate regarding the officer signing on Purchaser’s behalf.

          7.05 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Seller and Purchaser to perform their obligations under
this Agreement and the Operative Agreements and to consummate the transactions contemplated hereby
and thereby (a) shall have been duly obtained, made or given, (b) shall be in form and substance
reasonably satisfactory to Seller (c) shall not be subject to the satisfaction of any condition
that has not been satisfied or waived and (d) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions contemplated by this Agreement and the
Seller Documents, shall have occurred.

          7.06 Opinion of Counsel. Seller shall have received the opinion of Parker Chapin Flattau & Klimpl, LLP, counsel to
Purchaser, dated the Closing Date, substantially in the form and to the effect of Exhibit H hereto.

          7.07 Delivery of Documents. At the Closing, Purchaser shall execute and deliver to Seller the documents described in Section
2.05(b).

          7.08 Proceedings. All proceedings to be taken on the part of Purchaser in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory
in form and substance to Seller, and Seller shall have received copies of all such documents and
other evidences as Seller may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.

ARTICLE VIII

CONDITIONS TO OBLIGATIONS OF PURCHASER

          The obligations of Purchaser hereunder are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of which may be waived in whole or in part
by Purchaser in its sole discretion):

          8.01 Representations, Warranties and Covenants. Each of the representations and warranties made by Seller in this Agreement (other than those
made as of a specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or warranty was made
on the date hereof and on the Closing Date, and any representation or warranty made as of a
specified date earlier than the Closing Date shall have been true and correct in all material
respects on and as of such specified date.

          8.02 Performance. Seller shall have performed and complied with each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by Purchaser at or before the Closing.

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          8.03 Laws. There shall not be in effect on the Closing Date any Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Seller Documents, or which could reasonably be expected to otherwise result
in a material diminution of the benefits of the transactions contemplated by this Agreement or any
of the Seller Documents to Purchaser, and there shall not be pending or threatened on the Closing
Date any Action or Proceeding or any other action in, before or by any Governmental or Regulatory
Authority which could reasonably be expected to result in the issuance of any such Order or the
enactment, promulgation or deemed applicability to Purchaser or the transactions contemplated by
this Agreement or any of the Seller Documents of any such Law.

          8.04 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority necessary to permit Purchaser and Seller to perform their obligations under
this Agreement and any of the Seller Documents and to consummate the transactions contemplated
hereby and thereby (a) shall have been duly obtained, made or given, (b) shall be in form and
substance reasonably satisfactory to Purchaser, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority
necessary for the consummation of the transactions contemplated by this Agreement and the Seller
Documents shall have occurred.

          8.05 Third Party Consents. All consents (or in lieu thereof waivers) to the performance by Seller of his obligations under
this Agreement and the Seller Documents or to the consummation of the transactions contemplated
hereby and thereby as are required under any Contract to which Seller is a party or by which any of
the Assets are bound (a) shall have been obtained, (b) shall be in form and substance reasonably
satisfactory to Purchaser, (c) shall not be subject to the satisfaction of any condition that has
not been satisfied or waived and (d) shall be in full force and effect.

          8.06 Delivery of Assets and Documents. At the Closing, Seller shall deliver all the Assets to Purchaser and execute and deliver to
Purchaser all the documents required to be delivered by Seller as set forth in Section 2.05(c) and
such additional documents as may be necessary in order to consummate the transactions contemplated
by this Agreement and the Seller Documents.

          8.07 Opinion of Counsel. Purchaser shall have received the opinion of Lagerlof, Senecal, Bradley, Gosney & Kruse, LLP,
counsel to Seller, dated the Closing Date, substantially in the form and to the effect of Exhibit I
hereto.

          8.08 Tax Status. Purchaser shall have received evidence of payment, including tax clearance certificates, of all
sales, use, transfer, value-added or other Taxes that are to be paid by Seller on or before the
Closing in Pennsylvania and any other applicable jurisdictions.

          8.09 Proceedings. All proceedings to be taken on the part of Seller in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory
in form and substance to Purchaser, and Purchaser shall

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have received copies of all such documents
and other evidences as Purchaser may reasonably request in order to establish the consummation of
such transactions and the taking of all proceedings in connection therewith.

ARTICLE IX

ADDITIONAL POST-CLOSING COVENANTS

          9.01 Further Assurances, Post-Closing Cooperation.

               (a) At any time or from time to time after the Closing, at Purchaser’s request and without
further consideration, Seller shall execute and deliver to Purchaser such other instruments of
sale, transfer, conveyance, assignment and confirmation, provide such materials and information and
take such other actions as Purchaser may reasonably deem necessary or desirable in order more
effectively to transfer, convey and assign to Purchaser, and to confirm Purchaser’s title to, all
of the Assets, and, to the fullest extent permitted by Law, to put Purchaser in actual possession
and operating control of the Assets and to assist Purchaser in exercising all rights with respect
thereto, and otherwise to cause Seller to fulfill his obligations under this Agreement, including
but not limited to, filings with any regulatory agencies to be made by Seller alone, or by Seller
and Purchaser jointly.

               (b) At any time or from time to time after the Closing, at Seller’s request and without
further consideration, Purchaser shall execute and deliver to Seller such other instruments,
provide such materials and information and take such other actions as Purchaser may reasonably deem
necessary or desirable in order to give effect to Purchaser’s assumption of the Assumed
Liabilities.

               (c) Effective on the Closing Date, Seller hereby constitutes and appoints Purchaser the true
and lawful attorney of Seller, with full power of substitution, in the name of Seller or Purchaser,
but on behalf of and for the benefit of Purchaser; (i) to demand and receive from time to time any
and all the Assets and to make endorsements and give receipts and releases for and in respect of
the same and any part thereof; (ii) to institute, prosecute, compromise and settle any and all
Actions or Proceedings that Purchaser may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Assets, (iii) to defend or compromise any or all
Actions or Proceedings in respect of any of the Assets; and (iv) to do all such acts and things in
relation to the matters set forth in the preceding clauses (i) through (iii) as Purchaser shall
deem desirable. Seller hereby acknowledges that the appointment hereby made and the powers hereby
granted are coupled with an interest and are not and shall not be revocable by it at any time, in
any manner or for any reason. Seller shall deliver to Purchaser at Closing an acknowledged power of
attorney to the foregoing effect executed by Seller substantially in the form and to the effect of
Exhibit J hereto. Purchaser shall indemnify
and hold harmless Seller and his agents and Affiliates from any and all Losses caused by or
arising out of any breach of Law by Purchaser in its exercise of such power of attorney.

               (d) For a period of six (6) years following the Closing, each party will afford the other
party, its counsel and its accountants, during normal business hours, reasonable access to the
books, records and other data relating to the Assets in its possession with respect to

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periods prior to the Closing and the right to make copies and extracts therefrom, to the extent that such
access may be reasonably required by the requesting party in connection with (i) the preparation of
Tax returns, (ii) the determination or enforcement of rights and obligations under this Agreement,
(iii) compliance with the requirements of any Governmental or Regulatory Authority, (iv) the
determination or enforcement of the rights and obligations of any Indemnified Party or (v) in
connection with any actual or threatened Action or Proceeding. Further each party agrees for a
period extending six years after the Closing Date not to destroy or otherwise dispose of any such
books, records and other data relating to the Assets unless such party shall first offer in writing
to surrender such books, records and other data to the other party and such other party shall not
agree in writing to take possession thereof during the ten day period after such offer is made.

               (e) If, in order properly to prepare its Tax returns, other documents or reports required to
be filed with Governmental or Regulatory Authorities or its financial statements or to fulfill its
obligations hereunder, it is necessary that a party be furnished with additional information,
documents or records relating to the Assets not referred to in paragraph (c) above, and such
information, documents or records are in the possession or control of the other party, such other
party shall use its best efforts to furnish or make available such information, documents or
records (or copies thereof) at the recipient’s request, cost and expense. Any information obtained
by either party in accordance with this paragraph shall be held confidential by such party in
accordance with Section 12.12.

               (f) Notwithstanding anything to the contrary contained in this section, if the parties are in
an adversarial relationship in litigation or arbitration, the furnishing of information, documents
or records in accordance with this section shall be subject to applicable rules relating to
discovery.

          9.02 FDA Approvals. Within seven days after the Closing Date, both Purchaser and Seller will inform FDA of the
ownership transfer of the Assets if required by Law.

          9.03 Adverse Drug Experience; Recalls. Seller shall notify Purchaser of all material information of which Seller becomes aware
concerning side effects, injury, toxicity or sensitivity reactions including incidence and severity
thereof associated with commercial or clinical uses, studies, investigations or tests of any
products relating to the Assets, whether or not determined to be attributable to such products,
which may constitute an adverse drug experience with respect to such products under any Laws.
Seller shall notify Purchaser of any complaints of which Seller becomes aware concerning any of the
Technology or products relating to the Assets.

          9.04 Delivery of Shares. As soon as practicable after the Closing Date, upon Seller entering into the Subscription
Agreement and the Registration Rights Agreement and upon receipt of all authorizations, Purchaser
will deliver the Shares to Seller.

          9.05 Non-Assertion of Patent. Seller agrees to not assert the 303 Patent or any other patent which has one or more claims that
are directed to subject matter which is disclosed in the 303 Patent and that refer to a composition
which contains a skin-treating compound (as defined in the 303 Patent) against the Purchaser of the
U.S. Patent, or assignee or licensee thereof, or any customer of the Purchaser, assignee or
licensee (hereafter collectively referred to

25

 

as “Section 9.05 Person”) in connection with the
manufacture, use or sale by a Section 9.05 Person of a composition which is within the scope of any
claim of the U.S. Patent and which is sold only for a pharmaceutical industry application,
notwithstanding that such composition may also enhance one or more properties of skin as described
in the 303 Patent, beginning at column 22, line 11.

ARTICLE X

INDEMNIFICATION

          10.01 Survival of Representations, Warranties, Covenants and Agreements. Notwithstanding any right of Purchaser fully to investigate the affairs of Seller or any other
party and notwithstanding any knowledge of the facts determined or determinable by Purchaser
pursuant to such investigation or right of investigation, Purchaser has the right to rely fully
upon the representations, warranties, covenants and agreements of Seller contained in this
Agreement and the Seller Documents. All such representations warranties, covenants and agreements
of Seller made in this Agreement and the Seller Documents delivered pursuant hereto shall survive
the execution and delivery hereof and the Closing.

          10.02 Purchaser’s Indemnified Liabilities. Seller hereby agrees to indemnify Purchaser, its directors, officers, employees, agents and
Affiliates against any liability and will hold each of them harmless from, against and with respect
to, and will reimburse, any Loss which Purchaser, its directors, officers, employees, agents and
Affiliates incur, sustain or suffer (“Purchaser’s Indemnified Liabilities”) arising out of or in
connection with:

               (a) Seller’s misrepresentation, breach of any representation, warranty, agreement or covenant
or nonfulfillment of or failure to perform any covenant or agreement on the part of Seller
contained in this Agreement or in the Seller Documents;

               (b) the Retained Liabilities;

               (c) any liability for Taxes arising out of operations of Seller relating to the Assets on or
prior to the Closing or arising from the sale consummated hereunder;

               (d) any actual or alleged liability or obligation of Seller arising out of the ownership or
operation of the Assets on or prior to the Closing;

               (e) any litigation matter to which Seller, in connection with the Assets, or the Assets were
subject to on or prior to the Closing; or

               (f) any liability, loss of any of the Assets or other recovery resulting from or relating to
any litigation or other proceeding commenced by or involving Conrex, its officers, directors,
shareholders or Affiliates, which relates to the validity of the sale of the Assets from Conrex to
Seller.

          10.03 Seller’s Indemnified Liabilities. Purchaser hereby agrees to indemnify Seller, his
employees, agents and Affiliates against any liability and will hold each of them harmless from, against and with respect to, and will
reimburse, any Loss which Seller, his

26

 

employees, agents and Affiliates incur, sustain or suffer
(“Seller’s Indemnified Liabilities”) arising out of or in connection with:

               (a) Purchaser’s misrepresentation, breach of any representation, warranty, agreement or
covenant or nonfulfillment of or failure to perform any covenant or agreement on the part of
Purchaser contained in this Agreement;

               (b) the Assumed Liabilities; or

               (c) any actual or alleged liability or obligation of Purchaser arising out of the ownership or
operation of the Assets after the Closing.

          10.04 Notice and Defense of a Claim. If either party shall be presented with or have actual notice of a claim against it which gives
or may give rise to an Indemnified Liability, then the party entitled to indemnification (the
“Indemnified Party”) shall notify the other (the “Indemnifying Party”) in writing thereof (in
accordance with Section 12.01) within thirty days of notice of a claim, otherwise the Indemnified
Party shall waive its right to seek indemnification hereunder. The Indemnifying Party may, at its
expense, vigorously and diligently prosecute, defend and settle any such claim; and if the
Indemnifying Party assumes such defense it will notify the Indemnified Party thereof, and
thereafter the Indemnifying Party will not, except as provided below, be obligated to pay any
expenses of the Indemnified Party (including but not limited to, legal fees and disbursements,
court costs and the cost of appellate proceedings) in connection with such claim, provided,
however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at
any time prior to the Indemnifying Party’s delivery of the notice referred to above, file any
motion, answer or other pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate to protect its interests. The Indemnified Party will
cooperate in the defense of any such claim, and the Indemnifying Party will pay any costs incurred
by the Indemnified Party in connection therewith. The Indemnified Party will not settle any claims
for which the Indemnifying Party may be liable without the prior written consent of the
Indemnifying Party unless (i) the Indemnified Party releases the Indemnifying Party from all of the
Indemnifying Party’s obligations to the Indemnified Party with respect to the claim, or (ii)
the Indemnifying Party is in default in its obligations under this Section. In the case of a
settlement pursuant to item (ii), the Indemnifying Party will promptly pay to or in accordance with
the instructions of the Indemnified Party any amount payable pursuant to such settlement.
Notwithstanding the foregoing, if both the Indemnifying Party and the Indemnified Party are named
as parties or subject to any claim and either such party determines with advice of counsel and in
its reasonable discretion that there may be one or more legal defenses available to it that are
different from or additional to those available to the other party or that a conflict of interest
between such parties may exist in respect of such claim, then the Indemnifying Party may decline to
assume the defense on behalf of the Indemnified Party or the Indemnified Party may retain the
defense on its own behalf, and, in either such case, after notice to such effect is duly given to
the other party (in accordance with Section 12.01), the Indemnifying Party shall be relieved of its
obligation to assume the defense on behalf of the Indemnified Party, but shall be required to pay
any legal or other expenses, including without limitation, reasonable attorneys’ fees and
disbursements, incurred by the Indemnified Party in its defense.

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ARTICLE XI

TERMINATION

          11.01 Termination. This Agreement and the Seller Documents may be terminated, and the transactions contemplated
hereby and thereby may be abandoned:

               (a) at any time before the Closing, by written agreement of Seller and Purchaser;

               (b) at any time before the Closing, by Seller or Purchaser, in the event (i) of a material
breach hereof by the non-terminating party if such non-terminating party fails to cure such breach
within five Business Days following written notification thereof by the terminating party or (ii)
upon written notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party’s obligations under this Agreement or the
Seller Documents becomes impossible or impracticable with the use of commercially reasonable
efforts if the failure of such condition to be satisfied is not caused by a breach hereof by the
terminating party; or

               (c) at any time after March 15, 1999 by Seller or Purchaser upon written notification to the
non-terminating party by the terminating party if the Closing shall not have occurred on or before
such date and such failure to consummate is not caused by a breach of this Agreement or the Seller
Documents by the terminating party.

          11.02 Effect of Termination.

               (a) If this Agreement and the Seller Documents are validly terminated pursuant to Section
11.01, this Agreement and the Seller Documents will immediately become null and void, and there
will be no liability or obligation on the part of Seller or Purchaser (or
any of their respective officers, directors, employees, agents or other representatives or
Affiliates); provided, however, that if this Agreement is terminated for any reason other than
Seller’s material breach or failure to satisfy a condition, Seller shall refund the $50,000 due
diligence deposit paid by Purchaser pursuant to the letter agreement between the parties dated
November 23, 1998. In the event of any termination, the provisions with respect to “Expenses” in
Section 12.05, “Entire Agreement” in Section 12.06 and “Confidentiality” in Section 12.12 will
continue to apply following any such termination.

               (b) Notwithstanding any other provision in this Agreement to the contrary, upon termination of
this Agreement pursuant to Section 11.01(b) or (c), Seller will remain liable to Purchaser for any
breach of this Agreement by Seller existing at the time of such termination, and Purchaser will
remain liable to Seller for any breach of this Agreement by Purchaser existing at the time of such
termination, and Seller or Purchaser may seek such remedies, including damages and fees of
attorneys, against the other with respect to any such breach as are provided in this Agreement or
as are otherwise available at Law or in equity.

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ARTICLE XII

MISCELLANEOUS

          12.01 Notices. All notices, demands or other communications to be given or delivered under or by reason of the
provisions of this Agreement shall be in writing and shall be deemed to have been given (a) when
delivered personally to the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender’s telecopy machine) if during normal business hours of the
recipient, otherwise on the next Business Day, (c) one Business Day after the date when sent to the
recipient by reputable express courier service (charges prepaid) or (d) seven Business Days after
the date when mailed to the recipient by certified or registered mail, return receipt requested and
postage prepaid. Such notices, demands and other communications will be sent to Seller and to
Purchaser at the addresses indicated below:

If to Purchaser:

Bentley Pharmaceuticals, Inc.

Two Urban Centre

Suite 400

4830 West Kennedy Blvd.

Tampa, Florida 33609

Attention: James R. Murphy

Facsimile No.: (813) 282-8941

With a copy (which shall not constitute notice) to:

Parker, Chapin, Flattau & Klimpl, LLP

1211 Avenue of the Americas

New York, New York 10036

Attention: Jordan A. Horvath and Mark S. Hirsch

Facsimile No.: (212) 704-6288

If to Seller:

Yungtai Hsu

Facsimile No.:

With a copy (which shall not constitute notice) to:

Lagerlof, Senecal, Bradley, Gosney & Kruse, LLP

301 North Lake Avenue, 10th Floor

Pasadena, CA 91101

Attention: Timothy J. Gosney

Facsimile No.: (626) 793-5900

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or to such other address as any party hereto may, from time to time, designate in writing delivered
pursuant to the terms of this Section.

          12.02 Amendments. The terms, provisions and conditions of this Agreement may not be changed, modified or amended in
any manner except by an instrument in writing duly executed by both parties hereto.

          12.03 Binding Effect; Assignment. This Agreement and the rights and obligations hereunder are assignable by Purchaser and any such
assignment shall be binding in all respects on Seller, as if Seller had sold all or part of the
Assets directly to the assignee. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted assigns.

          12.04 Announcements. All press releases, notices to customers and suppliers and other announcements prior to the
Closing Date with respect to this Agreement and the Seller Documents and the transactions
contemplated by this Agreement and the Seller Documents shall be approved by both Purchaser and
Seller prior to the issuance thereof, which approval shall not be unreasonably withheld or delayed;
provided that any party may make any public disclosure it believes in good faith is required by law
or regulation (in which case the disclosing party shall advise the other party prior to making such
disclosure and provide such other party an opportunity to review the proposed disclosure).

          12.05 Expenses. Except as otherwise set forth in this Agreement, each party to this Agreement shall bear all of
its legal, accounting and other expenses incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement, whether or not such transactions are consummated.

          12.06 Entire Agreement. This Agreement and the Seller Documents constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede and are in full substitution for any
and all prior agreements, commitments, discussions, negotiations, arrangements or understandings
between the parties relating to such subject matter, including, but not limited to, any letters of
intent between the parties prior to the date hereof. The Seller Documents, including but not
limited to the Exhibits and Schedules to this Agreement, are hereby incorporated and made a part
hereof and are an integral part of this Agreement.

          12.07 Descriptive Headings. The descriptive headings of the several sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the provisions hereof.

          12.08 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 one and the same instrument.

          12.09 Governing Law; Jurisdiction. This agreement shall be governed by, and interpreted and enforced in accordance with, the laws of
the State of New York without regard to principles of choice of law or conflict of laws.

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          12.10 Arbitration of Disputes.

               (a) If any controversy or dispute arises under, out of or in relation to any of the provisions
hereof, such controversy or dispute shall be submitted for arbitration in New York, New York before
a panel of three arbitrators, one of which shall be selected by the party initiating such
arbitration, one of which shall be selected by the other party and the third of which (the “Third
Arbitrator”) shall be selected by the two arbitrators so selected; provided, however, that in the
event that such other arbitrators shall not agree on the selection of the Third Arbitrator, the
Third Arbitrator shall be selected by the American Arbitration Association located in New York, New
York. Any dispute or controversy submitted to arbitration in accordance with the provisions of this
Section 12.10 shall be determined by such arbitrators in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then existing.

               (b) The arbitrators may award any relief which they shall deem proper in the circumstances,
without regard to the relief which would otherwise be available to any party in a court of law or
equity including, without limitation, an award of money damages, specific performance, injunctive
relief and/or declaratory relief, however, such an award may not include punitive damages. The
award and findings of the arbitrators shall be conclusive and binding upon all of the parties
hereto, whether or not all parties hereto participate in the arbitration proceeding, and judgment
upon the award may be entered in any court of competent jurisdiction upon the application of any
party. The parties hereby agree that such courts of competent jurisdiction shall include, but not
be limited to, the courts located in any jurisdiction in which the party against whom such judgment
is being enforced maintains any assets.

               (c) The prevailing party in the arbitration proceeding shall be entitled to recover from the
other party its reasonable attorneys’ fees, costs and expenses incurred in the proceeding and in
any subsequent action to enforce or collect upon the decision rendered in the arbitration
proceeding.

               (d) Notwithstanding the foregoing, the parties reserve the right to seek and obtain injunctive
relief, whether in the form of a temporary restraining order, preliminary injunction, injunction to
enforce an arbitration award, or other order of similar import, from the federal and state courts
located in New York, New York prior to, during, or after commencement or prosecution or arbitration
proceedings of the final decision and award of the arbitrators; provided, however, that such
preliminary injunctive relief shall be subject to final arbitral decisions.

               (e) Each party hereby consents and agrees that the federal and state courts located in New
York, New York each shall have exclusive personal jurisdiction and proper venue with respect to any
such action seeking injunctive or similar relief hereunder. In any dispute between the parties,
neither party will raise, and each party hereby expressly waives, any objection or defense to any
such court as an inconvenient forum. Each party hereby waives personal service of any summons,
complaint or other process, which may be delivered by any of the means permitted for notices under
Section 12.01 hereof.

          12.11 Severability. In the event that any one or more of the provisions contained in this Agreement or in any other
instrument referred to herein shall, for any reason, be held to be

31

 

invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this Agreement or any other
such instrument. Furthermore, in lieu of any such invalid or unenforceable term or provision, the
parties hereto intend that there shall be added as a part of this Agreement a provision as similar
in terms to such invalid or unenforceable provision as may be possible and be valid and
enforceable.

          12.12 Confidentiality. Seller and Purchaser agree to keep, and to cause each of their Affiliates, directors, officers
and employees to keep, confidential any and all confidential information of the other party that
either
receives in the course of performing its obligations hereunder (unless compelled by judicial or
administrative process and except that such information may be shared, on a confidential basis,
with the party’s attorneys and auditors) and will not, without the other party’s written consent,
use any of such confidential information except as reasonably necessary to perform its duties under
this or another of its agreements with the other party (for purposes of this Agreement,
“confidential information” includes any and all trade secrets (including information relating to
the Technology, the Patents and the Business Information), financial information not disclosed to
the general public and other proprietary information disclosed in the course of the negotiation of
this Agreement and Purchaser’s due diligence investigation). Furthermore, Seller agrees to refrain
from, either alone or in conjunction with any other Person, directly or indirectly through his
present or future Affiliates, and agrees to cause his Affiliates and employees to refrain from
disclosing or using any Business Information relating to the Assets or the Technology or any
client, customer or supplier of the Assets or the Technology. Upon termination of this Agreement,
each party will return, and will cause its Affiliates, directors, officers and employees to return,
to the other party, all original documents and copies of the confidential information which are in
its possession.

32

 

          IN WITNESS WHEREOF, Seller and Purchaser have executed and delivered this Agreement as of the
day and year first written above.

	 	 	 	 	 
	 	 	 
	 	                                                        /s/ Yungtai Hsu
 	 
	 	Yungtai Hsu, in his personal capacity 	 
	 	 	 
	 
	 	BENTLEY PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ James R. Murphy
 	 
	 	 	James R. Murphy, Chairman and Chief 	 
	 	 	Executive Officer 	 
	 

33

 

SUBSCRIPTION AGREEMENT

BENTLEY PHARMACEUTICALS, INC.

Bentley Pharmaceuticals, Inc.

Two Urban Centre, Suite 400

4890 West Kennedy Blvd.

Tampa, Florida 33609

February 11, 1999

Dear Sir or Madam:

          Upon the terms and subject to the conditions of an Asset Purchase Agreement, dated February 1,
1999 effective as of December 31, 1998 (the “Asset Purchase Agreement”), between Bentley
Pharmaceuticals, Inc. (the “Company”) and Yungtai Hsu (“Hsu”), in which Hsu agreed to sell certain
of his assets to the Company, Hsu has agreed to accept as part of the Purchase Price (as defined in
the Asset Purchase Agreement) (a) 225,807 shares (the “Shares”) of common stock, $0.02 par value
per share (the “Common Stock”) of the Company, and (b) a warrant to purchase 450,000 shares of
Common Stock (the “Warrant”, collectively the Shares and the Warrant, the “Securities”). Therefore,
in consideration of the premises and the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Hsu hereby
agrees to:

          1. Subscription. Hsu hereby applies to subscribe for the Securities. Once this Agreement is
executed by both Hsu and the Company, it is intended to create a binding agreement between Hsu and
the Company with respect to the terms and conditions described below.

          2. Representations and Warranties of Hsu. Hsu acknowledges, represents, warrants and agrees
as follows:

               (a) Authorization. Hsu has full power and legal capacity to execute and deliver this
Agreement. This Agreement has been duly executed and delivered by Hsu and, assuming the execution
and delivery hereof and thereof by the Company, will constitute the legal, valid and binding
obligations of Hsu, enforceable against Hsu in accordance with its terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and the availability of equitable remedies.

               (b) Accredited Investor. Hsu is an accredited investor (as defined in Rule 501 of
Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Act”).
Hsu has such knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in
the Company and of protecting his interests in connection with this transaction. Hsu recognizes
that his investment in the Company involves certain risks which are set forth in the Company’s
Registration Statement on Form S-3 (SEC File No. 333-28593, the “Registration

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Statement” ) declared effective by the Securities and Exchange Commission on June 10, 1997 and
any amendments thereto.

               (c) Due Diligence. Hsu has received a copy of such documents as requested by him, has
carefully reviewed such documents, has had the opportunity to obtain any additional information
necessary to verify the accuracy of the information contained in such documents and has been given
the opportunity to meet with representatives of the Company and to have them answer any questions
and provide any additional information regarding the terms and conditions of this particular
investment deemed relevant by Hsu, and all such questions have been answered and requested
information provided to Hsu’s full satisfaction. Among the documents received and reviewed by Hsu
are: (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 1997; (ii) the
Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998 (such documents are collectively referred to in this Agreement as the “Exchange
Act Reports”); (iii) the Registration Statement and (iv) a Registration Rights Agreement between
the Company and Hsu with respect to the Shares, dated as of the date hereof (the “Registration
Rights Agreement.”) In making his decision to accept the Securities as part of the Purchase Price,
Hsu has relied solely upon his review of the documents referred to above and this Agreement and
independent investigations made by him or his representatives.

               (d) No Legal Advice from the Company. Hsu acknowledges that he has had the opportunity
to review this Agreement and the transactions contemplated by this Agreement with his own legal
counsel and tax advisors. Except for any statements or representations of the Company made in this
Agreement, in the Exchange Act Reports and in the Registration Rights Agreement, Hsu is relying
solely on such counsel and advisors and not on any statements or representations of the Company or
any of its representative or agents for legal, tax or investment advice with respect to this
investment, the transactions contemplated by this Agreement or the securities laws of any
jurisdiction.

               (e) Not an Affiliate. Hsu is not an officer, director or “affiliate” (as that term is
defined in Rule 405 of the Act) of the Company.

               (f) Reliance on Representations and Warranties. Hsu understands that the Securities
are being offered and sold to him in reliance on specific provisions of United States federal and
state securities laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of Hsu set forth in
this Agreement in order to determine the applicability of such provisions.

               (g) No Registration. Hsu understands that the sale of the Securities has not been
registered under the Act, in reliance upon an exemption therefrom by virtue of Section 4(2) and
Regulation D promulgated under the Act. Hsu understands that the Securities must be held
indefinitely and may not be offered, transferred, resold, pledged, hypothecated or other wise
disposed of until the sale or other transfer thereof is registered under the Act, pursuant to the
terms and conditions of the Registration Rights Agreement or unless an exemption from such
registration is available at that time. Hsu is aware that he will be required to bear the financial
risks of this investment for an indefinite period of time unless transferred in accordance with the
above. Hsu covenants that he will not knowingly make any sale, transfer or other disposition of

B-2

 

the Securities or any interest therein in violation of the Act, the Exchange Act of 1934, as
amended, or the rules and regulations promulgated under either of said Acts.

               (h) Investment Intent. Hsu is acquiring the Securities solely for his own account as
principal and not with a view to the distribution thereof to or for the benefit or account of any
other person, in whole or in part, and no other person has a direct or indirect beneficial interest
in such Securities. Hsu understands and agrees that he must bear the economic risk of his
investment in the Securities for an indefinite period of time. Hsu will not take any short position
in the Securities and not otherwise engage in any hedging transactions such as option writing,
equity swaps or other types of derivative transactions with respect to the Securities.

               (i) Additional Transfer Restrictions. Hsu understands and agrees that, in addition to
the restrictions set forth in this Agreement, the following restrictions and limitations are
applicable to his purchase and any resales, pledges, hypothecations or other transfers of the
Securities:

                    (i) The following legend reflecting all applicable restrictions will be placed on any
certificate(s) or other document(s) evidencing the Securities and Hsu must comply with the terms
and conditions set forth in such legends prior to any resales, pledges, hypothecations or other
transfers of the Securities:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR
SALE, SOLD, HYPOTHECATED, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE
SECURITIES UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION IS
NOT REQUIRED UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

                    (ii) Stop transfer instructions have been or will be placed on any certificates or other
documents evidencing the Securities so as to restrict the resale, pledge, hypothecation or other
transfer thereof in accordance with the provisions hereof.

               (j) Termination of Restrictions. The restrictions described in Section 2 hereof upon
the transferability of the Securities shall cease and terminate as to any particular Securities (i)
when, in the opinion of Parker Chapin Flattau & Klimpl, LLP or other counsel reasonably acceptable
to the Company, such restrictions are no longer required in order to assure compliance with the Act
or (ii) when, in the opinion of Parker Chapin Flattau & Klimpl, LLP or other counsel reasonably
acceptable to the Company, such Securities shall have been registered

B-3

 

under the Act or transferred in reliance upon the exemption afforded by Section 4(1) of the
Act by virtue of Rule 144.

               (k) Indemnification. Hsu shall indemnify and hold harmless the Company and each
officer, director or control person of any such entity, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of or arising from (i) any
actual or alleged misrepresentation or misstatement of facts or omission to represent or state
facts made or alleged to have been made by Hsu to the Company, (or its officers, directors,
employees, agents or representatives), or omitted or alleged to have been omitted by Hsu,
concerning Hsu, or Hsu’s authority to invest or financial position in connection with the offering
or sale of the Securities, or (ii) any breach of warranty or failure to comply with any covenant
contained in this Agreement, including, without limitation, any such misrepresentation,
misstatement or omission, or breach of any warranty or covenant, contained herein or any other
document submitted by Hsu, against losses, liabilities and expenses for which the Company, or its
officers, directors or control persons has not otherwise been reimbursed (including attorneys’
fees, judgments, fines and amounts paid in settlement in matters settled in accordance with the
provision of the following paragraph) incurred by the Company, or such officer, director or control
person in connection with such action, suit or proceeding; provided, however, that Hsu will not be
liable in any such case for losses, claims, damages, liabilities or expenses that a court of
competent jurisdiction shall have found in a final judgment to have arisen primarily from the gross
negligence or willful misconduct of the Company or the party claiming a right to indemnification.

          In case any proceeding shall be instituted involving any person with respect to whom indemnity
may be sought, such person (the “Indemnified Party”) shall promptly notify Hsu, and Hsu, upon the
request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified
Party to represent the Indemnified Party and any others Hsu may designate in such proceedings and
shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own counsel at its own
expense, except that Hsu shall pay as incurred the fees and expenses of counsel retained by the
Indemnified Party in the event that (i) Hsu and the Indemnified Party shall have mutually agreed to
the retention of such counsel or, (ii) the named parties to any such proceeding (including any
impleaded parties) include both Hsu and the Indemnified Party and representation of both parties by
the same counsel would be inappropriate, in the reasonable opinion of the Indemnified Party, due to
actual or potential differing interests between them. Hsu shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such consent or if there
be a final judgment for the plaintiff, Hsu agrees to indemnify the Indemnified Party to the extent
set forth in this Agreement.

          In the event a claim for indemnification as described herein is determined to be unenforceable
by a final judgment of a court of competent jurisdiction, then Hsu shall contribute to the
aggregate losses, claims, damages or liabilities to which the Company or its officers, directors,
agents, employees or controlling persons may be subject in such amount as is appropriate to reflect
the relative benefits received by each of the undersigned and the party seeking contribution on the
one hand and the relative faults of Hsu and the party seeking contribution on the other, as well as
any relevant equitable considerations.

B-4

 

          The provisions of this Agreement relating to indemnification and contribution shall survive
termination of this Agreement and shall be binding upon any successors or assigns of Hsu.

          3. Representations and Warranties of the Company. The Company acknowledges, represents,
warrants and agrees as follows:

               (a) Organization and Authorization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Florida and has all req uisite
corporate power and authority to own and operate its properties and assets and to carry on its
business as currently conducted. The Company is not in default or violation of any material term or
provision of its Articles of Incorporation or Bylaws nor will the consummation of the transactions
contemplated by this Agreement cause any such default or violation. The Company has all requisite
corporate power and authority to enter into this Agreement, to sell the Securities hereunder and to
carry out and perform its obligations under the terms of this Agreement subject to the above. This
Agreement is a valid and binding obligation of the Company, enforceable in accordance with its
terms.

               (b) Capitalization. The authorized capital stock of the Company consists of 35,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock, par value $.02 per share. Upon
issuance of the Securities pursuant to the terms of this Agreement and payment therefor pursuant to
the terms of an Asset Purchase Agreement between Hsu and the Company, the Shares will be duly
authorized, validly issued, fully paid and nonassessable and the Warrant will be duly authorized
and validly issued. Upon issuance, the Shares will not be subject to any preemptive or other
preferential rights or similar statutory or contractual rights.

          The Closing shall take place as soon as practicable after (i) due execution by Hsu and
acceptance by the Company of this Subscription Agreement and (ii) the closings as contemplated by
the Asset Purchase Agreement and the Asset Purchase Agreement between Hsu and Conrex Pharmaceutical
Corporation.

          4. Miscellaneous.

               (a) Notices. All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to
have been given (a) when delivered personally to the recipient, (b) when sent to the recipient by
telecopy (receipt electronically confirmed by sender’s telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day (“Business Day” means a day other than
Saturday, Sunday or any day on which banks located in the State of New York are authorized or
obligated to close), (c) one Business Day after the date when sent to the recipient by reputable
express courier service (charges prepaid) or (d) seven Business Days after the date when mailed to
the recipient by certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications will be sent to Hsu and to the Company at the addresses
indicated below.

B-5

 

If to Hsu, to:

Yungtai Hsu

Facsimile No.:

With a copy (which shall not constitute notice) to:

Lagerlof, Senecal, Bradley, Gosney & Kruse, LLP

301 North Lake Avenue, 10th Floor

Pasadena, CA 91101

Attention: Timothy J. Gosney

Facsimile No.: (626) 793-5900

If to the Company, to:

Bentley Pharmaceuticals, Inc.

Two Urban Centre, Suite 400

4890 West Kennedy Blvd.

Tampa, Florida 33609

Attention: James R. Murphy

Facsimile No.: (813) 282-8941

With a copy (which shall not constitute notice) to:

Parker Chapin Flattau & Klimpl, LLP

1211 Avenue of the Americas

New York, New York 10036

Attention: Mark S. Hirsch Jordan A. Horvath

Facsimile No.: (212) 704-6288

               (b) Assignment; Benefit. This Agreement may not be assigned by Hsu without the prior
written consent of the Company and any assignment without such consent shall be void. This
Agreement may be assigned by the Company to any person or entity which purchases all or
substantially all of the stock or assets of the Company or is the successor to the Company by
merger or consolidation. This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the Company and of Hsu.

               (c) Severability. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.

               (d) Amendments. This Agreement may be amended, supplemented or modified, and any
provision hereof may be waived, only pursuant to a written instrument making specific reference to
this Agreement signed by each of the parties hereto.

B-6

 

               (e) 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 one and the same
instrument.

               (f) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and performed in such
State without giving effect to the conflicts of laws principles thereof, except that if it is
necessary in any other jurisdiction to have the law of such other jurisdiction govern this
Agreement in order for this Agreement to be effective in any respect, then the laws of such other
jurisdiction shall govern this Agreement to such extent.

               (g) Arbitration of Disputes.

                    (i) If any controversy or dispute arises under, out of or in relation to any of the provisions
hereof, such controversy or dispute shall be submitted for arbitration in New York, New York before
a panel of three arbitrators, one of which shall be selected by the party initiating such
arbitration, one of which shall be selected by the other party and the third of which (the “Third
Arbitrator”) shall be selected by the two arbitrators so selected; provided, however, that in the
event that such other arbitrators shall not agree on the selection of the Third Arbitrator, the
Third Arbitrator shall be selected by the American Arbitration Association located in New York, New
York. Any dispute or controversy submitted to arbitration in accordance with the provisions of this
Section shall be determined by such arbitrators in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then existing.

                    (ii) The arbitrators may award any relief which they shall deem proper in the circumstances,
without regard to the relief which would otherwise be available to any party in a court of law or
equity including, without limitation, an award of money damages, specific performance, injunctive
relief and/or declaratory relief, however, such an award may not include punitive damages. The
award and findings of the arbitrators shall be conclusive and binding upon all of the parties
hereto, whether or not all parties hereto participate in the arbitration proceeding, and judgment
upon the award may be entered in any court of competent jurisdiction upon the application of any
party. The parties hereby agree that such courts of competent jurisdiction shall include, but not
be limited to, the courts located in any jurisdiction in which the party against whom such judgment
is being enforced maintains any assets.

                    (iii) The prevailing party in the arbitration proceeding shall be entitled to recover from the
other party its reasonable attorneys’ fees, costs and expenses incurred in the proceeding and in
any subsequent action to enforce or collect upon the decision rendered in the arbitration
proceeding.

                    (iv) Notwithstanding the foregoing, the parties reserve the right to seek and obtain
injunctive relief, whether in the form of a temporary restraining order, preliminary injunction,
injunction to enforce an arbitration award, or other order of similar import, from the federal and
state courts located in New York, New York prior to, during, or after commencement or prosecution
or arbitration proceedings of the final decision and award of

B-7

 

the arbitrators; provided, however, that such preliminary injunctive relief shall be subject
to final arbitral decisions.

                    (v) Each party hereby consents and agrees that the federal and state courts located in New
York, New York each shall have exclusive personal jurisdiction and proper venue with respect to any
such action seeking injunctive or similar relief hereunder. In any dispute between the parties,
neither party will raise, and each party hereby expressly waives, any objection or defense to any
such court as an inconvenient forum. Each party hereby waives personal service of any summons,
complaint or other process, which may be delivered by any of the means permitted for notices under
Section 6(a) hereof.

               (h) Entire Agreement. This Agreement constitutes the entire agreement between Hsu and
the Company with respect to the subject matter hereof.

	 	 	 	 	 
	 

	 	/s/ Yungtai Hsu
 

Yungtai Hsu, in his personal capacity
	 	 

ACCEPTED AND AGREED:

BENTLEY PHARMACEUTICALS, INC.

	 	 	 	 	 
	By:

	 	/s/ James R. Murphy
 

James R. Murphy, Chairman, President
	 	 
	 

	 	and Chief Executive Officer	 	 

B-8

 

REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT, is made and entered into as of February 11, 1999 between
BENTLEY PHARMACEUTICALS, INC., a Florida corporation (the “Company”) and Yungtai Hsu (“Hsu”).

          WHEREAS, upon the terms and subject to the conditions of an Asset Purchase Agreement, dated
February 1, 1999, effective as of December 31, 1998 (the “Asset Purchase Agreement”), between the
Company and Hsu, in which Hsu agreed to sell certain of his assets to the Company, Hsu has agreed
to accept 225,807 shares (the “Shares”) of common stock, $0.02 par value per share (the “Common
Stock”) of the Company as part of the Purchase Price (as defined in the Asset Purchase Agreement);

          WHEREAS, to induce Hsu to accept the Shares as part of the Purchase Price, the Company has
agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute (collectively, the “Act”), with
respect to the Shares;

          WHEREAS, as of the date hereof, Hsu and the Company entered into a Subscription Agreement with
respect to the Shares (the “Subscription Agreement”);

          NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Hsu hereby agree as follows:

          1. Definitions.

               (a) As used in this Agreement, the following terms shall have the following meanings:

                    (i) “Register,” “Registered,” and “Registration” refer to a registration effected by preparing
and filing a Registration Statement in compliance with the Act and the declaration or ordering of
effectiveness of such Registration Statement by the United States Securities and Exchange
Commission (the “SEC”).

                    (ii) “Registrable Securities” means the Shares.

                    (iii) “Registration Statement” means a registration statement of the Company under the Act,
including any amendments or supplements thereto and prospectuses contained therein.

                    (iv) “Stockholder” means Hsu and any permitted transferee or assignee who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 hereof.

               (b) Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Asset Purchase Agreement.

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          2. Restrictions on Transfer.

               (a) The Stockholder acknowledges and understands that prior to the registration of the Shares
as provided herein, the Shares are “restricted securities” as defined in Rule 144 promulgated under
the Act (“Rule 144”). The Stockholder understands that the Shares may not be offered, transferred,
resold, pledged, hypothecated or otherwise disposed of in the absence of (i) an opinion of Parker
Chapin Flattau & Klimpl, LLP or other counsel reasonably acceptable to the Company that such
transfer may be made without registration under the Act or (ii) an opinion of Parker Chapin Flattau
& Klimpl, LLP or other counsel reasonably acceptable to the Company that the Shares have been
Registered.

               (b) The Stockholder acknowledges that the Company has issued the Shares to the Stockholder
pursuant to an exemption from registration under the Act. Stockholder represents that (i) he has
acquired the Shares for investment and without any view toward distribution of any of Registrable
Securities to any other person, (ii) he will not sell or otherwise dispose of the Shares except in
compliance with the registration requirements or exemption provisions under the Act and (iii)
before any sale or other disposition of any of the Shares other than in a sale registered under the
Act or pursuant to Rule 144 or 144A (or any similar provisions then in force) under the Act (unless
the Company shall have been advised by counsel that the sale does not meet the requirements of Rule
144 or Rule 144A, as the case may be, for such sale), he will deliver to the Company an opinion of
counsel, in form and substance reasonably satisfactory to the Company, to the effect that such
registration is unnecessary.

               (c) Each instrument or certificate evidencing or representing the Shares, and any certificate
issued in exchange therefor or transfer thereof, shall bear legends substantially in the following
form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
OFFERED FOR SALE, SOLD, HYPOTHECATED, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE SECURITIES UNDER THE
ACT OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.

          3. Registration.

               (a) If at any time or from time to time following the date hereof, the Company shall determine
to register any distribution of its securities with the SEC, either for its own account or the
account of a security holder or holders, in a registration statement covering the sale of shares of
Common Stock to the general public pursuant to a public offering in compliance with the Act (except
with respect to any registration filed on Form S-4 or such other

C-2

 

form which does not include substantially the same information as would be included in a
registration statement covering the sale of shares of Common Stock to the general public), the
Company will: (i) give to Stockholder written notice thereof at least 30 days before the initial
filing of such registration statement; and (ii) include in such registration (and any related
qualification under blue sky laws) and in any underwriting involved therein, all the Shares,
specified in a written request, made within 30 days after receipt of such written notice from the
Company, by the Stockholder, except as set forth in subparagraphs (b) or below. Notwithstanding the
foregoing, the Stockholder shall not have registration rights with respect to a particular
registration statement in the event that any investor or lender for whom the registration statement
is filed objects to the inclusion of other shares of Common Stock, including the Shares, in such
registration statement.

               (b) If the distribution is to be underwritten, the right of the Stockholder to registration
pursuant to this Section shall be conditioned upon Stockholder’s participation in the underwriting
and the inclusion of the Shares and securities underlying the Shares, as the case may be, in the
underwriting to the extent provided herein. Notwithstanding any other provision of this Section, if
the underwriter determines that marketing factors require a limitation of the number of shares to
be underwritten, and such determination is made by such underwriter in writing, then the
underwriter may limit the number of the Stockholder’s Shares to be included in the registration and
underwriting, or may exclude the Shares from such underwriting.

          4. Obligations of the Company. In connection with a registration of the Registrable
Securities under Section 3 hereof, the Company shall do each of the following:

               (a) Prepare and file with the SEC, a Registration Statement with respect to the Registrable
Securities, and thereafter use its best efforts to cause each Registration Statement relating to
the Registrable Securities to become effective on or before 120 days from the filing of such
Registration Statement with the SEC, and keep the Registration Statement effective at all times
until the earliest (the “Registration Period”) of (i) the date that is three years after the
Closing Date; (ii) the date when the Stockholder may sell all Registrable Securities under Rule 144
or (iii) the date the Stockholder no longer owns any of the Registrable Securities, which
Registration Statement shall not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading;

               (b) Prepare and file with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement effective at all
times during the Registration Period, and, during the Registration Period, comply with the
provisions of the Act with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable Securities have
been disposed of in accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;

               (c) The Company shall permit a single firm of counsel designated by the Stockholder to review
the Registration Statement a reasonable period of time prior to the Company’s filing of the
Registration Statement with the SEC;

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               (d) Furnish to the Stockholder (i) promptly after the Registration Statement is prepared and
publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration
Statement, each prospectus, and each amendment or supplement thereto, and (ii) such number of
copies of a prospectus, and all amendments and supplements thereto and such other documents, as the
Stockholder may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Stockholder;

               (e) As promptly as practicable after becoming aware of such event, the Company shall notify
the Stockholder of (i) the issuance by the SEC of a stop order suspending the effectiveness of the
Registration Statement, (ii) the happening of any event of which the Company has knowledge as a
result of which the prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) the occurrence or existence of any pending corporate
development that, in the reasonable discretion of the Company, makes it appropriate to suspend the
availability of the Registration Statement, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement to correct such untrue statement or omission,
and deliver such number of copies of such supplement or amendment to the Stockholder as he may
reasonably request; provided that, for not more than twenty days (or a total of not more than forty
days in any twelve month period, the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration Statement updating) the
disclosure of which at the time is not, in the good faith opinion of the Company, the best
interests of the Company and in the opinion of counsel to the Company (an “Allowed Delay”);
provided, further, that the Company shall promptly (i) notify the Stockholder in writing of the
existence of material non-public information giving rise to an Allowed Delay and (ii) advise the
Stockholder in writing to cease all sales under the Registration Statement until the end of the
Allowed Delay. Upon expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 4(e) with respect to the information giving rise thereto;

               (f) As promptly as practicable after becoming aware of such event, notify the Stockholder who
holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the SEC of any notice declaring the effectiveness of the
Registration Statement or any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time; and

               (g) Take all other reasonable actions necessary to expedite and facilitate disposition by the
Stockholder of the Registrable Securities pursuant to the Registration Statement.

          5. Obligations of the Stockholder. In connection with the registration of the Registrable
Securities, the Stockholder shall have the following obligations:

               (a) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of the
Stockholder that the Stockholder shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of the

C-4

 

Registrable Securities held by it, as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify the Stockholder of
the information the Company requires from the Stockholder (the “Requested Information”) if the
Stockholder elects to have any of the Stockholder’s Registrable Securities included in the
Registration Statement. If at least three Business Days (as defined below) prior to the filing date
the Company has not received the Requested Information from the Stockholder, then the Company may
file the Registration Statement without including Registrable Securities of the Stockholder;

               (b) The Stockholder by acceptance of the Registrable Securities agrees to cooperate with the
Company as reasonably requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless the Stockholder has notified the Company in writing of the
Stockholder’s election to exclude all of its Registrable Securities from the Registration
Statement; and

               (c) The Stockholder agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 4(e) or 4(f), above, the Stockholder will immediately
discontinue disposition of Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until the Stockholder’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4(e) or 4(f) and, if so directed by the Company, the
Stockholder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to
the Company a certificate of destruction) all copies in the Stockholder’s possession, of the
prospectus covering such Registrable Securities current at the time of receipt of such notice.

          6. Expenses of Registration.

               (a) All reasonable expenses, other than as set forth in Section 6(b) hereof, filings or
qualifications pursuant to Section 4, including, without limitation, all registration, listing, and
qualifications fees, printers and accounting fees, the fees and disbursements of counsel for the
Company, shall be borne by the Company.

               (b) All underwriting discounts and commissions incurred in connection with registrations shall
be paid by the Stockholder.

          7. Indemnification. Hsu shall indemnify and hold harmless the Company and each officer,
director or control person of any such entity, who is or may be a party or is or may be threatened
to be made a party to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of or arising from (i) any actual or
alleged misrepresentation or misstatement of facts or omission to represent or state facts made or
alleged to have been made by Hsu to the Company, (or its officers, directors, employees, agents or
representatives), or omitted or alleged to have been omitted by Hsu, concerning Hsu, or Hsu’s
authority to invest or financial position in connection with the offering or sale of the Shares, or
(ii) any breach of warranty or failure to comply with any covenant contained in this Agreement,
including, without limitation, any such misrepresentation, misstatement or omission, or breach of
any warranty or covenant, contained herein or any other

C-5

 

document submitted by Hsu, against losses, liabilities and expenses for which the Company, or its
officers, directors or control persons has not otherwise been reimbursed (including attorneys’
fees, judgments, fines and amounts paid in settlement in matters settled in accordance with the
provision of the following paragraph) incurred by the Company, or such officer, director or control
person in connection with such action, suit or proceeding; provided, however, that Hsu will not be
liable in any such case for losses, claims, damages, liabilities or expenses that a court of
competent jurisdiction shall have found in a final judgment to have arisen primarily from the gross
negligence or willful misconduct of the Company or the party claiming a right to indemnification.

          In case any proceeding shall be instituted involving any person with respect to whom indemnity
may be sought, such person (the “Indemnified Party”) shall promptly notify Hsu, and Hsu, upon the
request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified
Party to represent the Indemnified Party and any others Hsu may designate in such proceedings and
shall pay as incurred the fees and expenses of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own counsel at its own
expense, except that Hsu shall pay as incurred the fees and expenses of counsel retained by the
Indemnified Party in the event that (i) Hsu and the Indemnified Party shall have mutually agreed to
the retention of such counsel or, (ii) the named parties to any such proceeding (including any
impleaded parties) include both Hsu and the Indemnified Party and representation of both parties by
the same counsel would be inappropriate, in the reasonable opinion of the Indemnified Party, due to
actual or potential differing interests between them. Hsu shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such consent or if there
be a final judgment for the plaintiff, Hsu agrees to indemnify the Indemnified Party to the extent
set forth in this Agreement.

          In the event a claim for indemnification as described herein is determined to be unenforceable
by a final judgment of a court of competent jurisdiction, then Hsu shall contribute to the
aggregate losses, claims, damages or liabilities to which the Company or its officers, directors,
agents, employees or controlling persons may be subject in such amount as is appropriate to reflect
the relative benefits received by each of the undersigned and the party seeking contribution on the
one hand and the relative faults of Hsu and the party seeking contribution on the other, as well as
any relevant equitable considerations.

          The provisions of this Agreement relating to indemnification and contribution shall survive
termination of this Agreement and shall be binding upon any successors or assigns of Hsu.

          8. Termination of Registration Rights. The rights granted pursuant to this Agreement shall
terminate as to the Stockholder upon the occurrence of any of the following:

               (a) all of the Registrable Securities have been registered; or

               (b) all of the Registrable Securities may be sold without such registration pursuant to Rule
144.

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          9. Miscellaneous.

               (a) A person or entity is deemed to be a holder of Registrable Securities whenever such person
or entity owns of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions, notice or election
received from the registered owner of such Registrable Securities.

               (b) Notices. All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to
have been given (a) when delivered personally to the recipient, (b) when sent to the recipient by
telecopy (receipt electronically confirmed by sender’s telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day (“Business Day” means a day other than
Saturday, Sunday or any day on which banks located in the State of New York are authorized or
obligated to close), (c) one Business Day after the date when sent to the recipient by reputable
express courier service (charges prepaid) or (d) seven Business Days after the date when mailed to
the recipient by certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications will be sent to Hsu and to the Company at the addresses
indicated below.

If to Hsu, to:

Yungtai Hsu

Facsimile No.:

With a copy (which shall not constitute notice) to:

Lagerlof, Senecal, Bradley, Gosney & Kruse, LLP

301 North Lake Avenue, 10th Floor

Pasadena, CA 91101

Attention: Timothy J. Gosney

Facsimile No.: (626) 793-5900

If to the Company, to:

Bentley Pharmaceuticals, Inc.

Two Urban Centre, Suite 400

4890 West Kennedy Blvd.

Tampa, Florida 33609

Attention: James R. Murphy

Facsimile No.: (813) 282-8941

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With a copy (which shall not constitute notice) to:

Parker Chapin Flattau & Klimpl, LLP

1211 Avenue of the Americas

New York, New York 10036

Attention: Mark S. Hirsch Jordan A. Horvath

Facsimile No.: (212) 704-6288

          (c) Assignment; Benefit. This Agreement may not be assigned by Hsu without the prior
written consent of the Company and any assignment without such consent shall be void. This
Agreement may be assigned by the Company to any person or entity which purchases all or
substantially all of the stock or assets of the Company or is the successor to the Company by
merger or consolidation. This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the Company and of Hsu.

          (d) Severability. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.

          (e) Amendments. This Agreement may be amended, supplemented or modified, and any
provision hereof may be waived, only pursuant to a written instrument making specific reference to
this Agreement signed by each of the parties hereto.

          (f) 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 one and the same
instrument.

          (g) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and performed in such
State without giving effect to the conflicts of laws principles thereof, except that if it is
necessary in any other jurisdiction to have the law of such other jurisdiction govern this
Agreement in order for this Agreement to be effective in any respect, then the laws of such other
jurisdiction shall govern this Agreement to such extent.

          (h) Arbitration of Disputes.

                    (i) If any controversy or dispute arises under, out of or in relation to any of the provisions
hereof, such controversy or dispute shall be submitted for arbitration in New York, New York before
a panel of three arbitrators, one of which shall be selected by the party initiating such
arbitration, one of which shall be selected by the other party and the third of which (the “Third
Arbitrator”) shall be selected by the two arbitrators so selected; provided, however, that in the
event that such other arbitrators shall not agree on the selection of the Third Arbitrator, the
Third Arbitrator shall be selected by the American Arbitration Association located in New York, New
York. Any dispute or controversy submitted to arbitration in accordance with the provisions of this
Section shall be determined by such arbitrators in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then existing.

C-8

 

                    (ii) The arbitrators may award any relief which they shall deem proper in the circumstances,
without regard to the relief which would otherwise be available to any party in a court of law or
equity including, without limitation, an award of money damages, specific performance, injunctive
relief and/or declaratory relief, however, such an award may not include punitive damages. The
award and findings of the arbitrators shall be conclusive and binding upon all of the parties
hereto, whether or not all parties hereto participate in the arbitration proceeding, and judgment
upon the award may be entered in any court of competent jurisdiction upon the application of any
party. The parties hereby agree that such courts of competent jurisdiction shall include, but not
be limited to, the courts located in any jurisdiction in which the party against whom such judgment
is being enforced maintains any assets.

                    (iii) The prevailing party in the arbitration proceeding shall be entitled to recover from the
other party its reasonable attorneys’ fees, costs and expenses incurred in the proceeding and in
any subsequent action to enforce or collect upon the decision rendered in the arbitration
proceeding.

                    (iv) Notwithstanding the foregoing, the parties reserve the right to seek and obtain
injunctive relief, whether in the form of a temporary restraining order, preliminary injunction,
injunction to enforce an arbitration award, or other order of similar import, from the federal and
state courts located in New York, New York prior to, during, or after commencement or prosecution
or arbitration proceedings of the final decision and award of the arbitrators; provided, however,
that such preliminary injunctive relief shall be subject to final arbitral decisions.

                    (v) Each party hereby consents and agrees that the federal and state courts located in New
York, New York each shall have exclusive personal jurisdiction and proper venue with respect to any
such action seeking injunctive or similar relief hereunder. In any dispute between the parties,
neither party will raise, and each party hereby expressly waives, any objection or defense to any
such court as an inconvenient forum. Each party hereby waives personal service of any summons,
complaint or other process, which may be delivered by any of the means permitted for notices under
Section 9(b) hereof.

          IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and
year first written above.

	 	 	 	 	 
	 	BENTLEY PHARMACEUTICALS, INC.

 	 
	 	By:  	                                                            /s/ James R. Murphy
 	 
	 	 	James R. Murphy, Chairman, President 	 
	 	 	and Chief Executive Officer 	 
	 

	 	 	 	 	 
	 

	 	          /s/ Yungtai Hsu
 

Yungtai Hsu, in his personal capacity
	 	 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED AND MAY NOT BE TRANSFERRED
UNLESS (A) THE STOCKHOLDER WISHING TO TRANSFER SUCH SECURITIES PROVIDES AN OPINION OF COUNSEL
REASONABLY CONCURRED IN BY COUNSEL FOR BENTLEY PHARMACEUTICALS, INC. (THE “COMPANY”) STATING THAT
THE PROPOSED TRANSFER OF THE COMPANY’S SECURITIES IS EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION
PROVISIONS OF ALL APPLICABLE FEDERAL AND STATE LAWS; OR (B) SAID SECURITIES HAVE BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED.

February 11, 1999

BENTLEY PHARMACEUTICALS, INC.

The Transferability of this Warrant is

Restricted as Provided in Article 3

          In partial consideration of the purchase of certain assets under an Asset Purchase Agreement
dated February 1, 1999 effective as of December 31, 1998 between Bentley Pharmaceuticals, Inc. and
Yungtai Hsu and other good and valuable consideration, the receipt of which is hereby acknowledged
by BENTLEY PHARMACEUTICALS, INC., Two Urban Centre, Suite 400, 4890 West Kennedy Boulevard, Tampa,
Florida 33609, a Florida corporation (the “Company”), YUNGTAI HSU (the “Holder”) is hereby granted
the right to purchase, at the initial exercise price of $ 1.50 per share, at any time until 5:00
P.M., New York time, on December 31, 2008, Four Hundred Fifty Thousand (450,000) shares of the
Company’s common stock, $.02 par value per share (the “Shares”).

          This Warrant initially is exercisable at a price of $1.50 per Share payable in cash or by
certified or official bank check in New York Clearing House funds, subject to adjustment as
provided in Article 6 hereof. Upon surrender of this Warrant, with the annexed Subscription Form
duly executed, together with payment of the Purchase Price (as hereinafter defined) for the Shares
purchased, at the offices of the Company, the registered holder of this Warrant (the “Holder”)
shall be entitled to receive a certificate or certificates for the Shares so purchased.

          THIS WARRANT MAY NOT BE EXERCISED AND THE SHARES MAY NOT BE ISSUED UNTIL A LISTING APPLICATION
RELATING TO THE SHARES HAS BEEN APPROVED BY ALL SECURITIES EXCHANGES ON WHICH THE SHARES OF THE
COMPANY’S COMMON STOCK MAY THEN BE LISTED AND/OR QUOTED.

          1. Exercise of Warrant.

          The purchase rights represented by this Warrant are exercisable at the option of the Holder
hereof, in whole or in part (but not as to fractional Shares underlying this Warrant), during any
period in which this Warrant may be exercised as set forth above. In the case of the purchase of
less than all the Shares purchasable under this Warrant, the Company shall cancel

D-1

 

this Warrant upon the surrender hereof and shall execute and deliver a new Warrant of like
tenor for the balance of the Shares purchasable hereunder.

          2. Issuance of Certificates.

          Upon the exercise of this Warrant, the issuance of certificates for Shares underlying this
Warrant shall be made forthwith (and in any event within five business days thereafter) without
charge to the Holder hereof including, without limitation, any tax which may be payable in respect
of the issuance thereof, and such certificates shall (subject to the provisions of Articles 3
hereof) be issued in the name of, or in such names as may be directed by, the Holder hereof;
provided, however, that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any such certificates in a name
other than that of the Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid. The certificates representing the Shares underlying this Warrant shall
be executed on behalf of the Company by the manual or facsimile signature of one of the present or
any future Chairman or President of the Company and any present or future Vice President or
Secretary of the Company.

          3. Restriction on Transfer of Warrant.

          The Holder of this Warrant, by its acceptance hereof, covenants and agrees that this Warrant
is being acquired as an investment and not with a view to the distribution hereof, and that it may
not be exercised, sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or
in part except as provided in Section 13 below or unless in the opinion of counsel concurred in by
the Company’s counsel such transfer is in compliance with all applicable securities laws.

          4. Price.

               (a) Initial and Adjusted Purchase Price. The initial purchase price shall be $1.50 per
Share. The adjusted purchase price shall be the price which shall result from time to time from any
and all adjustments of the initial purchase price in accordance with the provisions of Article 5
hereof.

               (b) Purchase Price. The term “Purchase Price” herein shall mean the initial purchase
price or the adjusted purchase price, depending upon the context.

          5. Adjustments of Purchase Price and Number of Shares.

               (a) Subdivision and Combination. In case the Company shall at any time subdivide or
combine the outstanding Shares, the Purchase Price shall forthwith be proportionately decreased in
the case of subdivision or increased in the case of combination.

               (b) Adjustment in Number of Shares. Upon each adjustment of the Purchase Price
pursuant to the provisions of this Article 5, the number of Shares issuable upon the exercise of
this Warrant shall be adjusted to the nearest full Share by multiplying a number

D-2

 

equal to the Purchase Price in effect immediately prior to such adjustment by the number of
Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Purchase Price.

               (c) Reclassification, Consolidation, Merger, etc. In case of any reclassification or
change of the outstanding Shares (other than a change in par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another corporation (other than a
consolidation or merger in which the Company is the surviving corporation and which does not result
in any reclassification or change of the outstanding Shares, except a change as a result of a
subdivision or combination of such shares or a change in par value, as aforesaid), or in the case
of a sale or conveyance to another corporation of the property of the Company as an entirety, the
Holder of this Warrant shall thereafter have the right to purchase upon the exercise of this
Warrant the kind and number of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance as if the Holder were the
owner of the Shares underlying this Warrant immediately prior to any such events at the Purchase
Price in effect immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Holder had exercised this Warrant.

          6. Exchange and Replacement of Warrant.

          This Warrant is exchangeable without expense, upon the surrender hereof by the registered
Holder at the principal executive office of the Company for a new Warrant of like tenor and date
representing in the aggregate the right to purchase the same number of Shares as are purchasable
hereunder in such denominations as shall be designated by the Holder hereof at the time of such
surrender.

          Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant.

          7. Elimination of Fractional Interests.

          The Company shall not be required to issue certificates representing fractions of Shares on
the exercise of this Warrant, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the parties that all fractional interests shall be
eliminated pursuant to Section 5(b).

          8. Reservation and Listing of Securities.

          The Company shall at all times reserve and keep available out of its authorized Shares, solely
for the purpose of issuance upon the exercise of this Warrant, such number of Shares as shall be
issuable upon the exercise hereof and thereof. The Company covenants and agrees that, upon exercise
of this Warrant and payment of the Purchase Price therefor, all Shares

D-3

 

issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable.
As long as this Warrant shall be outstanding, the Company shall use its reasonable best efforts to
cause all Shares issuable upon the exercise of this Warrant to be listed (subject to official
notice of issuance) on all securities exchanges on which the Shares of the Company’s Common Stock
may then be listed and/or quoted.

          9. Repurchase at Option of Holder.

               (a) If on December 31, 2000 (the “Repurchase Date”), the Market Price (as defined herein) does
not equal or exceed 150 % of the Purchase Price, the Holder shall have the right (the “Put Right”)
to require the Company to purchase all or a portion of this Warrant relating to that number of
Shares which the Holder is relinquishing its right to purchase (the “Relinquished Shares”), for a
price equal to $0.50 (fifty cents) multiplied by the number of Relinquished Shares. The Put Right
must be exercised by a written notice from the Holder to the Company within ten (10) days of the
Repurchase Date and the Company shall pay to the Holder the amounts owing hereunder within ten (10)
days of receipt of such notice, this Warrant and such other documentation as the Company may
reasonably require.

               (b) The Put Right shall not be exercisable by the Holder if, during any twenty consecutive
trading days between the issuance of this Warrant and the Repurchase Date, the Market Price shall
be equal to or greater than $3.00 per share.

               (c) The “Market Price” per share on any date shall be deemed to be the daily closing price per
share. The closing price per Share for each day shall be the last reported sales price regular way
or, in case no such sale takes place on such day, the average of the closing bid and asked prices
regular way, in either case on the American Stock Exchange, or, if the Common Stock is not listed
or admitted to trading on the American Stock Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or if it is not listed or
admitted to trading on any national securities exchange or no such quotations are available, the
last reported sale price, or if not so reported, the average of the closing bid and asked prices as
furnished by any New York Stock Exchange member firm selected from time to time by the Company for
that purpose, or, if no such quotations are available, the fair market value as determined in good
faith in the exercise of their reasonable business judgment by the Board of Directors of the
Company.

          10. Repurchase at Option of the Company.

          This Warrant may be redeemed at the option of the Company at any time, at a redemption price
of $0.05 per Share for which the Warrant is exercisable, provided the Market Price for the Shares
for any twenty (20) consecutive trading days after the issuance of this Warrant shall be equal to
or greater than $5.00 per share. Notice of redemption shall be given in writing to the Holder not
less than ten days before the date fixed for redemption. On and after the date fixed for
redemption, the Holder shall have no rights with respect to this Warrant except to receive the
$0.05 per Share upon surrender of the Warrant.

D-4

 

          11. Notices.

          All notices, demands or other communications to be given or delivered under or by reason of
the provisions of this Warrant shall be in writing and shall be deemed to have been given (a) when
delivered personally to the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender’s telecopy machine) if during normal business hours of the
recipient, otherwise on the next Business Day, (c) one Business Day after the date when sent to the
recipient by reputable express courier service (charges prepaid) or (d) seven Business Days after
the date when mailed to the recipient by certified or registered mail, return receipt requested and
postage prepaid. Such notices, demands and other communications will be sent:

               (a) if to the registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company; or

               (b) if to the Company, to the address set forth on the first page of this Warrant or to such
other address as the Company may designate by notice to the Holder.

          12. Amendments.

          The terms, provisions and conditions of this Warrant may not be changed, modified or amended
in any manner except by an instrument in writing duly executed by both parties hereto.

          13. Binding Effect; Assignment.

               (a) This Warrant is not assignable or transferable without the written consent of the Company,
except by operation of law or as provided in (b) below.

               (b) This Warrant shall not be transferable by Holder other than to a “Permitted Transferee”
(as defined below); provided, that any Permitted Transferee shall be absolutely prohibited from
transferring all or any portion of this Warrant other than to Holder or another Permitted
Transferee of Holder; and provided further, that if Holder dies or becomes incapacitated, this
Warrant may be exercised by Holder’s estate, legal representative or beneficiary, as the case may
be, subject to all other terms and conditions contained in this Warrant.

               (c) For purposes of this Warrant, Permitted Transferees shall include only the members of the
Holder’s “immediate family” (which shall be limited to Holder’s spouse, children, and parents), and
to trusts for such person’s own benefit and/or for the benefit of members of Holder’s immediate
family; provided, that such Permitted Transferees must agree in writing to be bound by all of the
terms of this Warrant to the same extent as Holder hereunder, in form acceptable to counsel to the
Company, including but not limited to restrictions on the exercise of this Warrant and on transfers
of the Shares, as the case may be, following exercise of this Warrant, such that any Shares so
acquired shall be held subject to the terms of this Warrant.

D-5

 

          14. Governing Law.

          This Warrant shall be governed by, and interpreted and enforced in accordance with, the laws
of the State of New York without regard to principles of choice of law or conflict of laws.

          15. Arbitration of Disputes.

               (a) If any controversy or dispute arises under, out of or in relation to any of the provisions
hereof, such controversy or dispute shall be submitted for arbitration in New York, New York before
a panel of three arbitrators, one of which shall be selected by the party initiating such
arbitration, one of which shall be selected by the other party and the third of which (the “Third
Arbitrator”) shall be selected by the two arbitrators so selected; provided, however, that in the
event that such other arbitrators shall not agree on the selection of the Third Arbitrator, the
Third Arbitrator shall be selected by the American Arbitration Association located in New York, New
York. Any dispute or controversy submitted to arbitration in accordance with the provisions of this
Section 12.10 shall be determined by such arbitrators in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then existing.

               (b) The arbitrators may award any relief which they shall deem proper in the circumstances,
without regard to the relief which would otherwise be available to any party in a court of law or
equity including, without limitation, an award of money damages, specific performance, injunctive
relief and/or declaratory relief, however, such an award may not include punitive damages. The
award and findings of the arbitrators shall be conclusive and binding upon all of the parties
hereto, whether or not all parties hereto participate in the arbitration proceeding, and judgment
upon the award may be entered in any court of competent jurisdiction upon the application of any
party. The parties hereby agree that such courts of competent jurisdiction shall include, but not
be limited to, the courts located in any jurisdiction in which the party against whom such judgment
is being enforced maintains any assets.

               (c) The prevailing party in the arbitration proceeding shall be entitled to recover from the
other party its reasonable attorneys’ fees, costs and expenses incurred in the proceeding and in
any subsequent action to enforce or collect upon the decision rendered in the arbitration
proceeding.

               (d) Notwithstanding the foregoing, the parties reserve the right to seek and obtain injunctive
relief, whether in the form of a temporary restraining order, preliminary injunction, injunction to
enforce an arbitration award, or other order of similar import, from the federal and state courts
located in New York, New York prior to, during, or after commencement or prosecution or arbitration
proceedings of the final decision and award of the arbitrators; provided, however, that such
preliminary injunctive relief shall be subject to final arbitral decisions.

               (e) Each party hereby consents and agrees that the federal and state courts located in New
York, New York each shall have exclusive personal jurisdiction and proper venue with respect to any
such action seeking injunctive or similar relief hereunder. In any dispute between the parties,
neither party will raise, and each party hereby expressly waives,

D-6

 

any objection or defense to any such court as an inconvenient forum. Each party hereby waives
personal service of any summons, complaint or other process, which may be delivered by any of the
means permitted for notices under Section 11 hereof.

          16. Descriptive Headings.

          The descriptive headings of the several sections of this Warrant are inserted for convenience
only and shall not control or affect the meaning or construction of any of the provisions hereof.

          WITNESS the seal of the Company and the signature of its duly authorized officers.

	 	 	 	 	 
	 	BENTLEY PHARMACEUTICALS, INC.
 	 
	[SEAL]

 	 	 
	 	By:  	/s/ James R. Murphy
 	 
	 	 	James R. Murphy 	 
	 	 	Chairman and Chief Executive Officer 	 
	 

	 	 	 
	Attest:
	 	 
	 
	     /s/ Michael D. Price
 

Michael D. Price, Secretary

	 	 

D-7

 

SUBSCRIPTION FORM

(To be Executed by the Registered Holder in order to Exercise the Warrant)

          The undersigned hereby irrevocably elects to exercise the right to purchase ___Shares by
this Warrant according to the conditions hereof and herewith makes payment of the Purchase Price of
such Shares in full.

	 	 	 	 	 
	 

	 	 

Signature
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Address	 	 
	 
	 	 	 	 
	Dated:                     ,                    .
	 	 	 	 
	 

	 	 	 	 
	 

	 	Social Security Number or

Taxpayer’s Identification Number	 	 

D-8

 

SUBSCRIPTION AGREEMENT

BENTLEY PHARMACEUTICALS, INC.

Bentley Pharmaceuticals, Inc.

Two Urban Centre, Suite 400

4890 West Kennedy Blvd.

Tampa, Florida 33609

February 11, 1999

Dear Sir or Madam:

     Upon the terms and subject to the conditions of an Asset Purchase Agreement, dated February 1,
1999 effective as of December 31, 1998 (the “Asset Purchase Agreement”), between Conrex
Pharmaceutical Corporation (“Conrex”) and Yungtai Hsu (“Hsu”), in which Conrex agreed to sell
certain of its assets to Hsu, Conrex has agreed to accept 359,282 shares (the “Shares”) of common
stock, $0.02 par value per share (the “Common Stock”) of Bentley Pharmaceuticals, Inc. (the
“Company”) as part of the Purchase Price (as defined in the Asset Purchase Agreement). Therefore,
in consideration of the premises and the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Conrex hereby
agrees to:

     1. Subscription. Conrex hereby applies to subscribe for the Shares. Once this Subscription Agreement (this
“Agreement”) is executed by both Conrex and the Company, it is intended to create a binding
agreement between Conrex and the Company with respect to the terms and conditions described below.

     2. Representations and Warranties of Conrex. Conrex acknowledges, represents, warrants and agrees as follows:

          (a) Organization and Authorization. Conrex is a corporation duly organized, validly
existing and in good standing under the laws of the state of New Jersey and is qualified to do
business as a foreign corporation in the State of Pennsylvania and has all requisite corporate
power and authority to purchase and hold the Shares. Conrex has all requisite corporate power and
authority to enter into this Agreement, to purchase the Shares hereunder and to carry out and
perform its obligations under the terms of this Agreement and the consummation by Conrex of the
transactions contemplated hereby requires no other proceedings on the part of Conrex. The
undersigned signatory has all right, power and authority to execute and deliver this Agreement on
behalf of Conrex. This Agreement has been duly executed and delivered by Conrex and, assuming the
execution and delivery hereof and thereof by the Company, will constitute the legal, valid and
binding obligations of Conrex, enforceable against Conrex in accordance with its terms, except as
the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally and the availability of equitable
remedies.

          (b) Due Diligence. Conrex has received a copy of such documents as requested by it,
has carefully reviewed such documents, has had the opportunity to obtain any additional information
necessary to verify the accuracy of the information contained in such

1

 

documents and has been given
the opportunity to meet with representatives of the Company and to have them answer any questions
and provide any additional information regarding the terms and conditions of this particular
investment deemed relevant by Conrex, and all such questions have been answered and requested
information provided to Conrex’s full satisfaction. Among the documents received and reviewed by
Conrex are: (i) the Company’s Annual Report on Form 10-K for the year ended December 31, 1997; (ii)
the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June 30, 1998
and September 30, 1998 (such documents are collectively referred to in this Agreement as the
“Exchange Act Reports”); (iii) the Registration Statement and (iv) a Registration Rights Agreement
between the Company and Conrex with respect to the Shares, dated as of the date hereof (the
“Registration Rights Agreement.”) In making its decision to accept the Shares as part of the
Purchase Price, Conrex has relied solely upon its review of the documents referred to above and
this Agreement and independent investigations made by it or its representatives.

          (c) No Legal Advice from the Company. Conrex acknowledges that it has had the
opportunity to review this Agreement and the transactions contemplated by this Agreement with its
own legal counsel and tax advisors. Except for any statements or representations of the Company
made in this Agreement, in the Exchange Act Reports and in the Registration Rights Agreement,
Conrex is relying solely on such counsel and advisors and not on any statements or representations
of the Company or any of its representative or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement or the securities laws
of any jurisdiction.

          (d) Not an Affiliate. Conrex is not an officer, director or “affiliate” (as that term
is defined in Rule 405 of the Act) of the Company.

          (e) Reliance on Representations and Warranties. Conrex understands that the Shares are
being offered and sold to it in reliance on specific provisions of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of Conrex set forth in this Agreement in
order to determine the applicability of such provisions.

          (f) No Registration. Conrex understands that the sale of the Shares has not been
registered under the Act, in reliance upon an exemption therefrom by virtue of Section 4(2) and
Regulation D promulgated under the Act. Conrex understands that the Shares must be held
indefinitely and may not be offered, transferred, resold, pledged, hypothecated or otherwise
disposed of until the sale or other transfer thereof is registered under the Act, pursuant to the
terms and conditions of the Registration Rights Agreement or unless an exemption from such
registration is available at that time. Conrex is aware that it will be required to bear the
financial risks of this investment for an indefinite period of time unless transferred in
accordance with the above. Conrex covenants that it will not knowingly make any sale, transfer or
other disposition of the Shares or any interest therein in violation of the Act, the Exchange Act
of 1934, as amended, or the rules and regulations promulgated under either of said Acts.

          (g) Investment Intent. Conrex is acquiring the Shares solely for its own account as
principal and not with a view to the distribution thereof to or for the benefit or account of any
other person, in whole or in part, and no other person has a direct or indirect

2

 

beneficial interest
in such Shares. Conrex understands and agrees that it must bear the
economic risk of its investment in the Shares for an indefinite period of time. Conrex will not take any short position in the
Shares and not otherwise engage in any hedging transactions such as option writing, equity swaps or
other types of derivative transactions with respect to the Shares.

          (h) Additional Transfer Restrictions. Conrex understands and agrees that, in addition
to the restrictions set forth in this Agreement, the following restrictions and limitations are
applicable to its purchase and any resales, pledges, hypothecations or other transfers of the
Shares:

               (i) The following legend reflecting all applicable restrictions will be placed on any
certificate(s) or other document(s) evidencing the Shares and Conrex must comply with the terms and
conditions set forth in such legends prior to any resales, pledges, hypothecations or other
transfers of the Shares:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
OFFERED FOR SALE, SOLD, HYPOTHECATED, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE SECURITIES UNDER THE
ACT OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.”

               (ii) Stop transfer instructions have been or will be placed on any certificates or other
documents evidencing the Shares so as to restrict the resale, pledge, hypothecation or other
transfer thereof in accordance with the provisions hereof.

          (i) Termination of Restrictions. The restrictions upon the transferability of the
Shares shall cease and terminate as to any particular Shares (i) when, in the opinion of Parker
Chapin Flattau & Klimpl, LLP or other counsel reasonably acceptable to the Company, such
restrictions are no longer required in order to assure compliance with the Act or (ii) when, in the
opinion of Parker Chapin Flattau & Klimpl, LLP or other counsel reasonably acceptable to the
Company, such Shares shall have been registered under the Act or transferred in reliance upon the
exemption afforded by Section 4(1) of the Act by virtue of Rule 144.

          (j) Indemnification. Conrex shall indemnify and hold harmless the Company and each
officer, director or control person of any such entity, who is or may be a party or is or may be
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of or arising from (i) any actual or alleged misrepresentation or misstatement of facts or omission
to represent or state facts made or alleged to have been made by Conrex to the Company, (or its
agents or representatives), or omitted or alleged to have been omitted by Conrex, concerning

3

 

Conrex, or Conrex’s authority to invest or financial position in connection with the offering or
sale of the Shares, or (ii) any breach of warranty or failure to comply with any covenant contained
in this Agreement, including, without limitation, any such misrepresentation, misstatement or
omission, or breach of any warranty or covenant, contained herein or any other document submitted
by Conrex, against losses, liabilities and expenses for which the Company, or its officers,
directors or control persons has not otherwise been reimbursed (including attorneys’ fees,
judgments, fines and amounts paid in settlement in matters settled in accordance with the provision
of the following paragraph) incurred by the Company, or such officer, director or control person in
connection with such action, suit or proceeding; provided, however, that Conrex will not be liable
in any such case for losses, claims, damages, liabilities or expenses that a court of competent
jurisdiction shall have found in a final judgment to have arisen primarily from the gross
negligence or willful misconduct of the Company or the party claiming a right to indemnification.

     In case any proceeding shall be instituted involving any person with respect to whom indemnity
may be sought, such person (the “Indemnified Party”) shall promptly notify Conrex, and Conrex, upon
the request of the Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others Conrex may designate in such
proceedings and shall pay as incurred the fees and expenses of such counsel related to such
proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own
counsel at its own expense, except that Conrex shall pay as incurred the fees and expenses of
counsel retained by the Indemnified Party in the event that (i) Conrex and the Indemnified Party
shall have mutually agreed to the retention of such counsel or, (ii) the named parties to any such
proceeding (including any impleaded parties) include both Conrex and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate, in the reasonable
opinion of the Indemnified Party, due to actual or potential differing interests between them.
Conrex shall not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for the plaintiff, Conrex
agrees to indemnify the Indemnified Party to the extent set forth in this Agreement.

     In the event a claim for indemnification as described herein is determined to be unenforceable
by a final judgment of a court of competent jurisdiction, then Conrex shall contribute to the
aggregate losses, claims, damages or liabilities to which the Company or its officers, directors,
agents, employees or controlling persons may be subject in such amount as is appropriate to reflect
the relative benefits received by each of the undersigned and the party seeking contribution on the
one hand and the relative faults of Conrex and the party seeking contribution on the other, as well
as any relevant equitable considerations.

     The provisions of this Agreement relating to indemnification and contribution shall survive
termination of this Agreement and shall be binding upon any successors or assigns of Conrex.

          (k) Opportunity to Ask Questions. Conrex has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the Company and the transactions
contemplated by this Agreement, and all such questions, if any, have been answered to the full
satisfaction of Conrex.

4

 

     3. Representations and Warranties of the Company The Company acknowledges, represents, warrants and agrees as follows:

          (a) Organization and Authorization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Florida and has all requisite
corporate power and authority to own and operate its properties and assets and to carry on its
business as currently conducted. The Company is not in default or violation of any material term or
provision of its Articles of Incorporation or Bylaws nor will the consummation of the transactions
contemplated by this Agreement cause any such default or violation. The Company has all requisite
corporate power and authority to enter into this Agreement, to sell the Shares hereunder and to
carry out and perform its obligations under the terms of this Agreement subject to the above. This
Agreement is a valid and binding obligation of the Company, enforceable in accordance with its
terms.

          (b) Capitalization. The authorized capital stock of the Company consists of 35,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock, par value $.02 per share. Upon
issuance of the Shares pursuant to the terms of this Agreement and payment therefor pursuant to the
terms of an Asset Purchase Agreement between Hsu and the Company, the Shares will be duly
authorized, validly issued, fully paid and nonassessable. Upon issuance, the Shares will not be
subject to any preemptive or other preferential rights or similar statutory or contractual rights.

     The Closing shall take place as soon as practicable after (i) due execution by Conrex and
acceptance by the Company of this Subscription Agreement and (ii) the closings as contemplated by
the Asset Purchase Agreement and the Asset Purchase Agreement between Hsu and the Company.

     4. Indemnity by the Company The Company shall indemnify and hold harmless Conrex and each officer, director or control person
of Conrex from any claims or demands, including without limitation reasonable attorneys fees and
expenses, relating to any liability to ETR and Associates, Robert S. Cohen, Creative Technologies,
Inc., a Delaware corporation with offices in Jersey City, New Jersey, and/or each of their
respective affiliates, for commissions related to the transactions arising under this Agreement
and/or the Asset Purchase Agreement.

     5. Miscellaneous.

          (a) Notices. All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to
have been given (a) when delivered personally to the recipient, (b) when sent to the recipient by
telecopy (receipt electronically confirmed by sender’s telecopy machine) if during normal business hours of the recipient, otherwise on the next Business Day (“Business Day”
means a day other than Saturday, Sunday or any day on which banks located in the State of New York
are authorized or obligated to close), (c) one Business Day after the date when sent to the
recipient by reputable express courier service (charges prepaid) or (d) seven Business Days after
the date when mailed to the recipient by certified or registered mail, return receipt requested and

5

 

postage prepaid. Such notices, demands and other communications will be sent to Conrex and to the
Company at the addresses indicated below.

     If to Conrex, to:

Conrex Pharmaceutical Corporation

5217 West Chester Pike

Newtown Square, Pennsylvania 19073

Attention: Phyllis Hsieh

Facsimile No.: (610) 355-2453

     with a copy to:

Synnestvedt & Lechner LLP

Suite 2600 Aramark Tower

1101 Market Street

Philadelphia, PA 19107

Attention: John T. Synnestvedt

Facsimile No.: (215) 923-2189

     If to the Company, to:

Bentley Pharmaceuticals, Inc.

Two Urban Centre, Suite 400

4890 West Kennedy Blvd.

Tampa, Florida 33609

Attention: James R. Murphy

Facsimile: (813) 282-8941

     With a copy to:

Parker Chapin Flattau & Klimpl, LLP

1211 Avenue of the Americas

New York, New York 10036

Attention: Mark S. Hirsch Jordan A. Horvath

Facsimile: (212) 704-6288

          (b) Assignment; Benefit. This Agreement may not be assigned by Conrex without the
prior written consent of the Company and any assignment without such consent shall be void. This
Agreement may be assigned by the Company to any person or entity which purchases all or
substantially all of the stock or assets of the Company or is the successor to the Company by merger or consolidation. This Agreement shall be binding upon and inure to
the benefit of the respective successors and permitted assigns of the Company and of Conrex.

          (c) Severability. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.

6

 

          (d) Amendments. This Agreement may be amended, supplemented or modified, and any
provision hereof may be waived, only pursuant to a written instrument making specific reference to
this Agreement signed by each of the parties hereto.

          (e) 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 one and the same
instrument.

          (f) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and performed in such
State without giving effect to the conflicts of laws principles thereof, except that if it is
necessary in any other jurisdiction to have the law of such other jurisdiction govern this
Agreement in order for this Agreement to be effective in any respect, then the laws of such other
jurisdiction shall govern this Agreement to such extent.

          (g) Arbitration of Disputes.

               (i) If any controversy or dispute arises under, out of or in relation to any of the provisions
hereof, such controversy or dispute shall be submitted for arbitration in New York, New York before
a panel of three arbitrators, one of which shall be selected by the party initiating such
arbitration, one of which shall be selected by the other party and the third of which (the “Third
Arbitrator”) shall be selected by the two arbitrators so selected; provided, however, that in the
event that such other arbitrators shall not agree on the selection of the Third Arbitrator, the
Third Arbitrator shall be selected by the American Arbitration Association located in New York, New
York. Any dispute or controversy submitted to arbitration in accordance with the provisions of this
Section shall be determined by such arbitrators in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then existing.

               (ii) The arbitrators may award any relief which they shall deem proper in the circumstances,
without regard to the relief which would otherwise be available to any party in a court of law or
equity including, without limitation, an award of money damages, specific performance, injunctive
relief and/or declaratory relief, however, such an award may not include punitive damages. The
award and findings of the arbitrators shall be conclusive and binding upon all of the parties
hereto, whether or not all parties hereto participate in the arbitration proceeding, and judgment
upon the award may be entered in any court of competent jurisdiction upon the application of any
party. The parties hereby agree that such courts of competent jurisdiction shall include, but not
be limited to, the courts located in any jurisdiction in which the party against whom such judgment
is being enforced maintains any assets.

               (iii) The costs of the arbitration and each party’s associated costs shall be borne by the
losing party. Notwithstanding the foregoing, if the parties reach a compromise, the costs of the
arbitration shall be borne equally by the parties and each party shall bear its own associated
costs.

               (iv) Notwithstanding the foregoing, the parties reserve the right to seek and obtain
injunctive relief, whether in the form of a temporary restraining order,

7

 

preliminary injunction,
injunction to enforce an arbitration award, or other order of similar import, from the federal and
state courts located in New York, New York prior to, during, or after commencement or prosecution
or arbitration proceedings of the final decision and award of the arbitrators; provided, however,
that such preliminary injunctive relief shall be subject to final arbitral decisions.

               (v) Each party hereby consents and agrees that the federal and state courts located in New
York, New York each shall have exclusive personal jurisdiction and proper venue with respect to any
such action seeking injunctive or similar relief hereunder. In any dispute between the parties,
neither party will raise, and each party hereby expressly waives, any objection or defense to any
such court as an inconvenient forum. Each party hereby waives personal service of any summons,
complaint or other process, which may be delivered by any of the means permitted for notices under
Section 5(a) hereof.

          (h) Entire Agreement. This Agreement constitutes the entire agreement between Conrex
and the Company with respect to the subject matter hereof.

	 	 	 	 	 
	 	CONREX PHARMACEUTICAL CORPORATION

 	 
	 	By:  	         /s/ Phyllis Hsieh
 	 
	 	 	Phyllis Hsieh, President 	 
	 	 	 	 
	 

	 	 	 	 	 
	ACCEPTED AND AGREED:	 	 
	 
	 	 	 	 
	BENTLEY PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 
	By:

	 	      /s/ James R. Murphy
 

James R. Murphy, Chairman, President 

and Chief Executive Officer
	 	 

8

 

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT, is made and entered into as of February 11, 1999 between
BENTLEY PHARMACEUTICALS, INC., a Florida corporation (the “Company”) and CONREX PHARMACEUTICAL
CORPORATION, a New Jersey corporation (“Conrex”).

     WHEREAS, upon the terms and subject to the conditions of the Asset Purchase Agreement, dated
February 1, 1999 effective as of December 31, 1998, between Conrex and Yungtai Hsu (the “Asset
Purchase Agreement”), in which Conrex agreed to sell certain of its assets to Mr. Hsu, Conrex has
agreed to accept 359,282 shares (the “Shares”) of common stock, $0.02 par value per share (the
“Common Stock”) of Bentley Pharmaceuticals, Inc. (the “Company”) as part of the Purchase Price (as
defined in the Asset Purchase Agreement);

     WHEREAS, to induce Conrex to accept the Shares as part of the Purchase Price, the Company has
agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the
rules and regulations thereunder, or any similar successor statute (collectively, the “Act”), with
respect to the Shares;

     WHEREAS, as of the date hereof, Conrex and the Company entered into a Subscription Agreement
with respect to the Shares (the “Subscription Agreement”);

     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Conrex hereby agree as follows:

     1. Definitions.

          (a) As used in this Agreement, the following terms shall have the following meanings:

               (i) “Register,” “Registered,” and “Registration” refer to a registration effected by preparing
and filing a Registration Statement in compliance with the Act and the declaration or ordering of
effectiveness of such Registration Statement by the United States Securities and Exchange
Commission (the “SEC”).

               (ii) “Registrable Securities” means the Shares.

               (iii) “Registration Statement” means a registration statement of the Company under the Act,
including any amendments or supplements thereto and prospectuses contained therein.

               (iv) “Stockholder” means Conrex and any permitted transferee or assignee who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 hereof.

1

 

          (b) Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Asset Purchase Agreement.

     2. Restrictions on Transfer.

          (a) The Stockholder acknowledges and understands that prior to the registration of the Shares
as provided herein, the Shares are “restricted securities” as defined in Rule 144 promulgated under
the Act (“Rule 144”). The Stockholder understands that the Shares may not be offered, transferred,
resold, pledged, hypothecated or otherwise disposed of in the absence of (i) an opinion of Parker
Chapin Flattau & Klimpl, LLP or other counsel reasonably acceptable to the Company that such
transfer may be made without registration under the Act or (ii) an opinion of Parker Chapin Flattau
& Klimpl, LLP or other counsel reasonably acceptable to the Company that the Shares have been
Registered.

          (b) The Stockholder acknowledges that the Company has issued the Shares to the Stockholder
pursuant to an exemption from registration under the Act. Stockholder represents that (i) it has
acquired the Shares for investment and without any view toward distribution of any of Registrable
Securities to any other person, (ii) it will not sell or otherwise dispose of the Shares except in
compliance with the registration requirements or exemption provisions under the Act and (iii)
before any sale or other disposition of any of the Shares other than in a sale registered under the
Act or pursuant to Rule 144 or 144A (or any similar provisions then in force) under the Act (unless
the Company shall have been advised by counsel that the sale does not meet the requirements of Rule
144 or Rule 144A, as the case may be, for such sale), it will deliver to the Company an opinion of
counsel, in form and substance reasonably satisfactory to the Company, to the effect that such
registration is unnecessary.

          (c) Each instrument or certificate evidencing or representing the Shares, and any certificate
issued in exchange therefor or transfer thereof, shall bear legends substantially in the following
form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
OFFERED FOR SALE, SOLD, HYPOTHECATED, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE SECURITIES UNDER THE
ACT OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.”

     3. Registration. The Company shall prepare and file with the SEC a Registration Statement on April 1, 1999 or as
soon as practicable thereafter on an appropriate form for registering for resale by the the Registrable Securities (or such lesser number as may be required by the SEC), and
the Company shall use its best efforts to cause the

2

 

Registration Statement to be declared effective
as soon as practicable after filing (the “Effective Date”). The rights under this paragraph may
only be exercised one time.

     4. Obligations of the Company. In connection with a registration of the Registrable Securities under Section 3 hereof, the
Company shall do each of the following:

          (a) Prepare and file with the SEC, a Registration Statement with respect to the Registrable
Securities, and thereafter use its best efforts to cause each Registration Statement relating to
the Registrable Securities to become effective on the Effective Date, and keep the Registration
Statement effective at all times until the earliest (the “Registration Period”) of (i) the date
that is two years after the Closing Date; (ii) the date when the Stockholder may sell all
Registrable Securities under Rule 144 or (iii) the date the Stockholder no longer owns any of the
Registrable Securities, which Registration Statement shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made, not misleading;

          (b) Prepare and file with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement effective at all
times during the Registration Period, and, during the Registration Period, comply with the
provisions of the Act with respect to the disposition of all Registrable Securities of the Company
covered by the Registration Statement until such time as all of such Registrable Securities have
been disposed of in accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;

          (c) The Company shall permit a single firm of counsel designated by the Stockholder to review
the Registration Statement a reasonable period of time prior to the Company’s filing of the
Registration Statement with the SEC;

          (d) Furnish to the Stockholder (i) promptly after the Registration Statement is prepared and
publicly distributed, filed with the SEC, or received by the Company, one copy of the Registration
Statement, each prospectus, and each amendment or supplement thereto, and (ii) such number of
copies of a prospectus, and all amendments and supplements thereto and such other documents, as the
Stockholder may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by the Stockholder;

          (e) As promptly as practicable after becoming aware of such event, the Company shall notify
the Stockholder of (i) the issuance by the SEC of a stop order suspending the effectiveness of the
Registration Statement, (ii) the happening of any event of which the Company has knowledge as a
result of which the prospectus included in the Registration
Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or (iii) the occurrence or
existence of any pending corporate development that, in the reasonable discretion of the Company,
makes it appropriate to suspend the availability of the Registration Statement, and use its best
efforts promptly to prepare a supplement or amendment to the Registration Statement to

3

 

correct such
untrue statement or omission, and deliver such number of copies of such supplement or amendment to
the Stockholder as it may reasonably request; provided that, for not more than twenty days (or a
total of not more than forty days in any twelve month period, the Company may delay the disclosure
of material non-public information concerning the Company (as well as prospectus or Registration
Statement updating) the disclosure of which at the time is not, in the good faith opinion of the
Company, in the best interests of the Company and in the opinion of counsel to the Company (an
“Allowed Delay”); provided, further, that the Company shall promptly (i) notify the Stockholder in
writing of the existence of material non-public information giving rise to an Allowed Delay and
(ii) advise the Stockholder in writing to cease all sales under the Registration Statement until
the end of the Allowed Delay. Upon expiration of the Allowed Delay, the Company shall again be
bound by the first sentence of this Section 4(e) with respect to the information giving rise
thereto;

          (f) As promptly as practicable after becoming aware of such event, notify the Stockholder who
holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the SEC of any notice declaring the effectiveness of the
Registration Statement or any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time; and

          (g) Take all other reasonable actions necessary to expedite and facilitate disposition by the
Stockholder of the Registrable Securities pursuant to the Registration Statement.

          5. Obligations of the Stockholder. In connection with the registration of the Registrable Securities, the Stockholder shall have the
following obligations:

          (a) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of the
Stockholder that the Stockholder shall furnish to the Company such information regarding itself,
the Registrable Securities held by it, and the intended method of disposition of the Registrable
Securities held by it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such registration as the
Company may reasonably request. At least five days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify the Stockholder of the information the Company
requires from the Stockholder (the “Requested Information”) if the Stockholder elects to have any
of the Stockholder’s Registrable Securities included in the Registration Statement. If at least
three Business Days (as defined below) prior to the filing date the Company has not received the
Requested Information from the Stockholder, then the Company may file the Registration Statement
without including Registrable Securities of the Stockholder;

          (b) The Stockholder by acceptance of the Registrable Securities agrees to cooperate with the
Company as reasonably requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless the Stockholder has notified the Company in writing of the
Stockholder’s election to exclude all of its Registrable Securities from the Registration
Statement; and

4

 

          (c) The Stockholder agrees that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 4(e) or 4(f), above, the Stockholder will immediately
discontinue disposition of Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until the Stockholder’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4(e) or 4(f) and, if so directed by the Company, the
Stockholder shall deliver to the Company (at the expense of the Company) or destroy (and deliver to
the Company a certificate of destruction) all copies in the Stockholder’s possession, of the
prospectus covering such Registrable Securities current at the time of receipt of such notice.

     6. Expenses of Registration.

          (a) All reasonable expenses, other than as set forth in Section 6(b) hereof, filings or
qualifications pursuant to Section 4, but including, without limitation, all registration, listing,
and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for
the Company, shall be borne by the Company.

          (b) All underwriting discounts and commissions incurred in connection with registrations shall
be paid by the Stockholder.

     7. Indemnification. Conrex shall indemnify and hold harmless the Company and each officer, director or control person
of any such entity, who is or may be a party or is or may be threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from (i) any actual or alleged
misrepresentation or misstatement of facts or omission to represent or state facts made or alleged
to have been made by Conrex to the Company, (or its agents or representatives), or omitted or
alleged to have been omitted by Conrex, concerning Conrex, or Conrex’s authority to invest or
financial position in connection with the offering or sale of the Shares in this Agreement, in the
Subscription Agreement or elsewhere, or (ii) any breach of warranty or failure to comply with any
covenant contained in this Agreement or in the Subscription Agreement, including, without
limitation, any such misrepresentation, misstatement or omission, or breach of any warranty or
covenant, contained herein or any other document submitted by Conrex, against losses, liabilities
and expenses for which the Company, or its officers, directors or control persons has not otherwise
been reimbursed (including attorneys’ fees, judgments, fines and amounts paid in settlement in
matters settled in accordance with the provision of the following paragraph) incurred by the
Company, or such officer, director or control person in connection with such action, suit or
proceeding; provided, however, that Conrex will not be liable in any such case for losses, claims,
damages, liabilities or expenses that a court of competent jurisdiction shall have
found in a final judgment to have arisen primarily from the gross negligence or willful misconduct
of the Company or the party claiming a right to indemnification.

     In case any proceeding shall be instituted involving any person with respect to whom indemnity
may be sought, such person (the “Indemnified Party”) shall promptly notify Conrex, and Conrex, upon
the request of the Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others Conrex may designate in such
proceedings and shall pay as incurred the fees and expenses of such

5

 

counsel related to such
proceeding. In any such proceeding, any Indemnified Party shall have the right to retain its own
counsel at its own expense, except that Conrex shall pay as incurred the fees and expenses of
counsel retained by the Indemnified Party in the event that (i) Conrex and the Indemnified Party
shall have mutually agreed to the retention of such counsel or, (ii) the named parties to any such
proceeding (including any impleaded parties) include both Conrex and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate, in the reasonable
opinion of the Indemnified Party, due to actual or potential differing interests between them.
Conrex shall not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for the plaintiff, Conrex
agrees to indemnify the Indemnified Party to the extent set forth in this Agreement.

     In the event a claim for indemnification as described herein is determined to be unenforceable
by a final judgment of a court of competent jurisdiction, then Conrex shall contribute to the
aggregate losses, claims, damages or liabilities to which the Company or its officers, directors,
agents, employees or controlling persons may be subject in such amount as is appropriate to reflect
the relative benefits received by each of the undersigned and the party seeking contribution on the
one hand and the relative faults of Conrex and the party seeking contribution on the other, as well
as any relevant equitable considerations.

     The provisions of this Agreement relating to indemnification and contribution shall survive
termination of this Agreement and shall be binding upon any successors or assigns of Conrex.

     8. Termination of Registration Rights. The rights granted pursuant to this Agreement shall terminate as to the Stockholder upon the
occurrence of any of the following:

          (a) all of the Registrable Securities have been registered; or

          (b) all of the Registrable Securities may be sold without such registration pursuant to Rule
144.

     9. Miscellaneous.

          (a) A person or entity is deemed to be a holder of Registrable Securities whenever such person
or entity owns of record such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such Registrable
Securities.

          (b) Notices. All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to
have been given (a) when delivered personally to the recipient, (b) when sent to the recipient by
telecopy (receipt electronically confirmed by sender’s telecopy machine) if during normal business
hours of the recipient, otherwise on the next Business Day (“Business Day” means a day other than
Saturday, Sunday or any day on which banks located in the State of New York are authorized or
obligated to close), (c) one Business Day after the date when sent to the recipient by reputable
express courier service (charges prepaid) or (d) seven Business Days after

6

 

the date when mailed to
the recipient by certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications will be sent to Conrex and to the Company at the
addresses indicated below.

     If to Conrex, to:

Conrex Pharmaceutical Corporation

5127 West Chester Pike

Newtown Square, Pennsylvania 19073

Attention: Phyllis Hsieh

Facsimile No.: (610) 355-2453

     with a copy to:

Synnestvedt & Lechner LLP

Suite 2600 Aramark Tower

1101 Market Street

Philadelphia, PA 19107

Attention: John T. Synnestvedt

Facsimile No.: (215) 923-2189

     If to the Company, to:

Bentley Pharmaceuticals, Inc.

Two Urban Centre, Suite 400

4890 West Kennedy Blvd.

Tampa, Florida 33609

Attention: James R. Murphy

Facsimile No.: (813) 282-8941

     With a copy to:

Parker Chapin Flattau & Klimpl, LLP

1211 Avenue of the Americas

New York, New York 10036

Attention: Mark S. Hirsch Jordan A. Horvath

Facsimile: (212) 704-6288

              (c) Assignment; Benefit. This Agreement may not be assigned by Conrex without the
prior written consent of the Company and any assignment without such consent shall be void. The
rights under this Agreement may be assigned by Conrex to its Stockholders if Conrex distributes the
Shares to its Stockholders as a dividend to the extent the Shares are distributed to each
Stockholder, provided that such Stockholders agree to be bound by all provisions of this Agreement
and all such transfers are in accordance with all applicable laws. Upon such assignment Conrex and
its Stockholders will have the various rights under this Agreement which pertain to the Shares then
owned by each of them. This Agreement may be assigned by the Company to any person or entity which
purchases all or substantially all of the

7

 

stock or assets of the Company or is the successor to the
Company by merger or consolidation. This Agreement shall be binding upon and inure to the benefit
of the respective successors and permitted assigns of the Company and of Conrex.

          (d) Severability. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
each of which shall remain in full force and effect.

          (e) Amendments. This Agreement may be amended, supplemented or modified, and any
provision hereof may be waived, only pursuant to a written instrument making specific reference to
this Agreement signed by each of the parties hereto.

          (f) 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 one and the same
instrument.

          (g) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and performed in such
State without giving effect to the conflicts of laws principles thereof, except that if it is
necessary in any other jurisdiction to have the law of such other jurisdiction govern this
Agreement in order for this Agreement to be effective in any respect, then the laws of such other
jurisdiction shall govern this Agreement to such extent.

          (h) Arbitration of Disputes.

               (i) If any controversy or dispute arises under, out of or in relation to any of the provisions
hereof, such controversy or dispute shall be submitted for arbitration in New York, New York before
a panel of three arbitrators, one of which shall be selected by the party initiating such
arbitration, one of which shall be selected by the other party and the third of which (the “Third
Arbitrator”) shall be selected by the two arbitrators so selected; provided, however, that in the event that such other arbitrators shall not agree on
the selection of the Third Arbitrator, the Third Arbitrator shall be selected by the American
Arbitration Association located in New York, New York. Any dispute or controversy submitted to
arbitration in accordance with the provisions of this Section shall be determined by such
arbitrators in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then existing.

               (ii) The arbitrators may award any relief which they shall deem proper in the circumstances,
without regard to the relief which would otherwise be available to any party in a court of law or
equity including, without limitation, an award of money damages, specific performance, injunctive
relief and/or declaratory relief, however, such an award may not include punitive damages. The
award and findings of the arbitrators shall be conclusive and binding upon all of the parties
hereto, whether or not all parties hereto participate in the arbitration proceeding, and judgment
upon the award may be entered in any court of competent jurisdiction upon the application of any
party. The parties hereby agree that such courts of competent jurisdiction shall include, but not
be limited to, the courts located in any jurisdiction in which the party against whom such judgment
is being enforced maintains any assets.

8

 

               (iii) The costs of the arbitration and each party’s associated costs shall be borne by the
losing party. Notwithstanding the foregoing, if the parties reach a compromise, the costs of the
arbitration shall be borne equally by the parties and each party shall bear its own associated
costs.

               (iv) Notwithstanding the foregoing, the parties reserve the right to seek and obtain
injunctive relief, whether in the form of a temporary restraining order, preliminary injunction,
injunction to enforce an arbitration award, or other order of similar import, from the federal and
state courts located in New York, New York prior to, during, or after commencement or prosecution
or arbitration proceedings of the final decision and award of the arbitrators; provided, however,
that such preliminary injunctive relief shall be subject to final arbitral decisions.

               (v) Each party hereby consents and agrees that the federal and state courts located in New
York, New York each shall have exclusive personal jurisdiction and proper venue with respect to any
such action seeking injunctive or similar relief hereunder. In any dispute between the parties,
neither party will raise, and each party hereby expressly waives, any objection or defense to any
such court as an inconvenient forum. Each party hereby waives personal service of any summons,
complaint or other process, which may be delivered by any of the means permitted for notices under
Section 10(b) hereof.

          IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and
year first written above.

	 	 	 	 	 
	 	BENTLEY PHARMACEUTICALS, INC.

 	 
	 	By:  	      /s/ James R. Murphy
 	 
	 	 	James R. Murphy, Chairman, President	 
	 	 	and Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	CONREX PHARMACEUTICAL CORPORATION

 	 
	 	By:  	       /s/ Phyllis Hsieh
 	 
	 	 	Phyllis Hsieh, President 	 
	 	 	 	 

9

 

	 	 	 	 	 

As of December 31, 2007

Attn: Yungtai Hsu

Dear Mr. Hsu:

This letter amendment (“Amendment”) is made as of the last date set forth below between Yungtai Hsu
and Bentley Pharmaceuticals, Inc. and shall amend the Asset Purchase Agreement between Yungtai Hsu
and Bentley Pharmaceuticals, Inc., dated February 1, 1999, effective as of December 31, 1998 (the
“Agreement”). Unless otherwise defined, all capitalized terms used herein shall have the meaning
ascribed to them in the Agreement.

In consideration of the mutual covenants and obligations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Yungtai Hsu
and Bentley Pharmaceuticals, Inc. hereby amend the Agreement as follows:

1.    Section 2.04(a) of the Agreement is deleted in its entirety and replaced with the following
paragraph:

2.04 Purchase Price: Allocation: Adjustment.

     (a) Purchase Price. The aggregate purchase price for Assets and for the covenant of
Seller contained in Section 5.07 shall be (i) U.S. $1,074,000 (the “Cash Portion of the
Purchase Price”), subject to the adjustments as provided on paragraph (b) below; (ii) an
aggregate of $350,000 of shares of common stock (the “Shares”) of Purchaser according to the
terms and conditions of the Subscription Agreement and the Registration Rights Agreement,
dated as of the Closing Date, substantially in the forms of Exhibit B and C, respectively,
hereto, (iii) a warrant to purchase 450,000 shares of common stock of Purchaser according to
the terms and conditions of the Warrant Agreement, dated as of the Closing Date,
substantially in the form of Exhibit D hereto, (iv) royalties payable by Purchaser to
Seller, through February 11th 2014, in the amount of (x) 5% of the difference
between any cash received by Bentley Pharmaceuticals, Inc., a Delaware corporation
(“Bentley”), by any of the parties listed on Schedule 2.04(a) prior to the commercialization
of any product arising out of a collaboration between Bentley and any such party and any
research and development for such product funded by Bentley without reimbursement by a third
party, or such fees received relating to a collaboration between another company authorized
by Purchaser and Purchaser and (y) 5% of the “net sales” (as defined below) received by
Bentley from the products developed under Section 2.04(a)(iv)(x) following commercialization
of such products; and (v) the aggregate amount of the Assumed Liabilities ((i)-(v)
collectively, the “Purchase Price”). “Net Sales” referred to in paragraph (iv)(y) above
shall mean gross sales minus: discounts, returns, and customer allowances actually extended
to customers.

2.    The parties agree that no royalties are owed to Yungtai Hsu as of the date of this Amendment.

1

 

3.    Except as modified by this Amendment, the Agreement will remain in full force and in effect in
accordance with its terms.

4.    This Amendment may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed effective as of the
date first above written.

ACCEPTED AND AGREED TO:

	 	 	 	 	 	 	 	 	 	 	 
	YUNGTAI HSU	 	BENTLEY PHARMACEUTICALS, INC.
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Yungtai Hsu
 

	 	By:
	 	/s/ James R. Murphy
 
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Yungtai Hsu
	 	Name:
	 	James R. Murphy	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	Mr.
	 	Title:
	 	Chairman & CEO	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date:

	 	February 8, 2008
	 	Date:
	 	February 8, 2008	 	 	 	 

2

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