Document:

<PAGE>

                                                                    EXHIBIT 10.7

                                                                JANUARY 22, 2004

CONFIDENTIAL TREATMENT REQUESTED:

INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND

IS NOTED WITH "[CONFIDENTIAL TREATMENT]."

AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE

SECURITIES AND EXCHANGE COMMISSION.

                            ASSET PURCHASE AGREEMENT

                                   RETIGABINE

                                     BETWEEN

                              VIATRIS GMBH & CO. KG

                                     - AND -

                           XCEL PHARMACEUTICALS, INC.

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                      Asset Purchase Agreement - Retigabine

                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                <C>
ASSET PURCHASE AGREEMENT........................................................    1
RETIGABINE......................................................................    1
   TABLE OF CONTENTS............................................................    2
   RECITAL .....................................................................    6
1.    DEFINITIONS...............................................................    6
   1.1     "ABANDONMENT DECISION"...............................................    6
   1.2     "ABANDONMENT REVIEW EXTENSION".......................................    6
   1.3     "ACTION OR PROCEEDING"...............................................    6
   1.4     "AFFILIATE"..........................................................    7
   1.5     "ANCILLARY AGREEMENTS"...............................................    7
   1.6     "API"................................................................    7
   1.7     "ASSETS".............................................................    7
   1.8     "ASSUMED LIABILITIES"................................................    7
   1.9     "AUDIT RECORDS"......................................................    7
   1.10    "BACK-END MILESTONE DATE"............................................    7
   1.11    "BEST OF SELLER'S KNOWLEDGE".........................................    8
   1.12    "CARCINOGENICITY STUDY REPORT".......................................    8
   1.13    "CHARGE".............................................................    8
   1.14    "CHARGED RIGHTS".....................................................    8
   1.15    "CLOSING"............................................................    8
   1.16    "CLOSING DATE".......................................................    8
   1.17    "COMBINATION PRODUCT"................................................    8
   1.18    "COMMERCIALLY REASONABLE EFFORTS"....................................    8
   1.19    "COMPETITIVE PRODUCT"................................................    8
   1.20    "COMPOUND"...........................................................    9
   1.21    "CONSENT"............................................................    9
   1.22    "CONTRACTS"..........................................................    9
   1.23    "DAMAGES"............................................................    9
   1.24    "DATA ROOM DOCUMENTS"................................................    9
   1.25    "DISCLOSING PARTY"...................................................    9
   1.26    "DOMAIN NAME"........................................................    9
   1.27    "EARN-OUT ON SALES"..................................................    9
   1.28    "ENFORCEMENT EVENT"..................................................   10
   1.29    "EXCLUDED LIABILITIES"...............................................   11
   1.30    "FDA"................................................................   11
   1.31    "FDA APPROVAL".......................................................   11
   1.32    "FIRST BACK-END MILESTONE DATE"......................................   11
   1.33    "FIRST COMMERCIAL SALE"..............................................   11
   1.34    "FIRST PHASE III TRIAL"..............................................   12
   1.35    "FORCE MAJEURE EVENT"................................................   12
   1.36    "FORCE MAJEURE EXTENSION"............................................   12
   1.37    "GOVERNMENTAL OR REGULATORY AUTHORITY"...............................   12
   1.38    "IND"................................................................   12
   1.39    "INDEMNIFICATION CLAIM NOTICE".......................................   12
   1.40    "INDEMNIFIED PARTY"..................................................   12
   1.41    "INDEMNIFYING PARTY".................................................   13
   1.42    "INDEMNITEE".........................................................   13
   1.43    "INDEMNITEES"........................................................   13
   1.44    "INDICATION".........................................................   13
   1.45    "KNOW-HOW"...........................................................   13
</TABLE>

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<TABLE>
<S>                                                                                <C>
   1.46    "LAW"................................................................   13
   1.47    "LIABILITY"..........................................................   13
   1.48    "LICENSE AGREEMENT"..................................................   13
   1.49    "LICENSEE"...........................................................   13
   1.50    "MANUFACTURER".......................................................   14
   1.51    "MILESTONE PAYMENTS".................................................   14
   1.52    "NDA"................................................................   14
   1.53    "NET SALES"..........................................................   14
   1.54    "[CONFIDENTIAL TREATMENT] RIGHT OF FIRST OFFER"......................   15
   1.55    "NON-DISCLOSING PARTY"...............................................   15
   1.56    "ORDER"..............................................................   15
   1.57    "PATENT ASSIGNMENT AGREEMENT"........................................   15
   1.58    "PATENTED INDICATIONS"...............................................   15
   1.59    "PATENTS"............................................................   15
   1.60    "PERSON".............................................................   16
   1.61    "POTENTIAL ADDITIONAL CONSIDERATION".................................   16
   1.62    "PRODUCT"............................................................   16
   1.63    "PURCHASE PRICE".....................................................   16
   1.64    "PURCHASER'S REQUIRED CONSENTS"......................................   17
   1.65    "RECORDS"............................................................   17
   1.66    "REGULATORY FILINGS".................................................   18
   1.67    "RELATED COMPOUND"...................................................   18
   1.68    "REST-OF-WORLD" OR "ROW".............................................   18
   1.69    "SECOND BACK-END MILESTONE DATE".....................................   18
   1.70    "SECOND PHASE III TRIAL".............................................   18
   1.71    "SECURED SUMS".......................................................   18
   1.72    "SELLER LICENSE".....................................................   18
   1.73    "SELLER'S REQUIRED CONSENTS".........................................   18
   1.74    "SELLER SUPPLY AGREEMENT"............................................   18
   1.75    "STOCK"..............................................................   19
   1.76    "SUCCESSOR"..........................................................   19
   1.77    "TAX"................................................................   19
   1.78    "TRANSITION, DATA TRANSFER AND SERVICES PLAN"........................   19
   1.79    "UPFRONT PAYMENTS"...................................................   19
   1.80    "VALID CLAIM"........................................................   19
   1.81    "VAT"................................................................   19
   1.82    "WESTERN EUROPE".....................................................   19
   1.83    "WYETH"..............................................................   20
2.    CLOSING CONDITIONS........................................................   20
   2.1     CLOSING..............................................................   20
   2.2     DELIVERIES BY PURCHASER..............................................   20
   2.3     DELIVERIES BY SELLER.................................................   21
   2.4     OBLIGATIONS OF THE PARTIES...........................................   22
   2.5     TERMINATION..........................................................   22
3.    SALE AND PURCHASE OF ASSETS AND RELATED TRANSACTIONS......................   23
   3.1     SALE AND PURCHASE OF ASSETS..........................................   23
   3.2     PURCHASE PRICE PAYMENTS..............................................   23
      3.2.1  Upfront Payments...................................................   24
      3.2.2  Milestone Payments.................................................   24
      3.2.3  Earn-Out on Sales..................................................   25
   3.3     POTENTIAL ADDITIONAL CONSIDERATION...................................   25
      3.3.1  United States......................................................   25
      3.3.2  Western Europe.....................................................   26
      3.3.3  Rest-of-World......................................................   26
</TABLE>

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<TABLE>
<S>                                                                                <C>
   3.4     POTENTIAL [CONFIDENTIAL TREATMENT] RIGHT.............................   26
   3.5     INTEREST.............................................................   27
   3.6     ASSUMPTION OF LIABILITIES............................................   27
   3.7     TAXES................................................................   27
   3.8     ALLOCATION OF PURCHASE PRICE.........................................   28
   3.9     OPTION TO ACQUIRE ASSETS.............................................   28
   3.10    CHARGE...............................................................   29
4.    TRANSITION ARRANGEMENTS AND PURCHASER'S DEVELOPMENT AND REPORTING
      OBLIGATIONS...............................................................   31
   4.1     TRANSITION OF ASSETS.................................................   31
   4.2     PURCHASER'S EFFORTS..................................................   31
   4.3     DEVELOPMENT REPORTS..................................................   31
   4.4     EARN-OUT ON SALES REPORTS, RECORDS AND AUDIT.........................   31
   4.5     REGULATORY MATTERS...................................................   32
   4.6     INSURANCE............................................................   32
   4.7     ACCESS...............................................................   33
5.    POST-CLOSING COVENANTS OF THE PARTIES.....................................   33
   5.1     COOPERATION..........................................................   33
   5.2     NON-ASSERTION OF INTELLECTUAL PROPERTY RIGHTS........................   34
   5.3     PUBLIC ANNOUNCEMENTS.................................................   34
   5.4     FURTHER ASSURANCES...................................................   34
6.    REPRESENTATIONS AND WARRANTIES OF SELLER..................................   35
   6.1     TITLE TO, AND CONDITION OF, ASSETS...................................   35
   6.2     COMPLIANCE WITH LAWS.................................................   38
   6.3     REGULATORY MATTERS AND LEGAL PROCEEDINGS.............................   38
   6.4     AUTHORITY; BINDING NATURE OF AGREEMENT...............................   39
   6.5     NON-CONTRAVENTION....................................................   40
   6.6     CONSENT..............................................................   40
   6.7     BROKERS..............................................................   40
   6.8     DISCLOSURE...........................................................   40
7.    REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................   40
   7.1     AUTHORITY; BINDING NATURE OF AGREEMENT...............................   40
   7.2     NON-CONTRAVENTION....................................................   41
   7.3     CONSENT..............................................................   41
   7.4     LEGAL PROCEEDINGS....................................................   41
   7.5     BROKERS..............................................................   41
   7.6     DISCLOSURE...........................................................   42
8.    SURVIVAL..................................................................   42
9.    INDEMNIFICATION...........................................................   42
   9.1     INDEMNIFICATION......................................................   42
      9.1.1  By Seller..........................................................   42
      9.1.2  By Purchaser.......................................................   42
      9.1.3  Procedures.........................................................   43
      9.1.4  Third Party Claims.................................................   43
      9.1.5  Expenses...........................................................   45
   9.2     INSURANCE............................................................   45
   9.3     LIMIT ON RECOVERY....................................................   45
   9.4     CURE.................................................................   45
10.      MISCELLANEOUS..........................................................   46
</TABLE>

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<TABLE>
<S>                                                                                <C>
   10.1    TERMINATION, RESCISSION, REPUDIATION.................................   46
   10.2    CONFIDENTIALITY......................................................   46
   10.3    DISPUTE RESOLUTION...................................................   47
   10.4    FORCE MAJEURE........................................................   48
   10.5    HARDSHIP.............................................................   49
   10.6    NOTICES..............................................................   49
   10.7    ENTIRE AGREEMENT.....................................................   50
   10.8    WAIVER...............................................................   50
   10.9    AMENDMENT............................................................   50
   10.10   THIRD PARTY BENEFICIARIES............................................   50
   10.11   ASSIGNMENT AND BINDING EFFECT........................................   51
   10.12   HEADINGS.............................................................   51
   10.13   SEVERABILITY.........................................................   51
   10.14   GOVERNING LAW........................................................   51
   10.15   DOLLAR DENOMINATION AND FOREIGN SALES................................   51
   10.16   EXPENSES.............................................................   52
   10.17   COUNTERPARTS.........................................................   52
   10.18   INTERPRETATION OF AGREEMENT..........................................   52
   SCHEDULES TO THE ASSET PURCHASE AGREEMENT....................................   54
   SCHEDULE 1: ASSUMED CONTRACTS................................................   55
   SCHEDULE 2: PURCHASER'S CREDITORS............................................   58
   SCHEDULE 3: REGULATORY FILINGS...............................................   59
   SCHEDULE 4: PURCHASER'S REQUIRED CONSENTS....................................   60
   SCHEDULE 5: SELLER'S REQUIRED CONSENTS.......................................   61
</TABLE>

<TABLE>
<CAPTION>
EXHIBITS:
---------
<S>         <C>
Exhibit A:  Patent Assignment Agreement  (including Schedule PAA)
Exhibit B:  Seller Supply Agreement  (including Schedules 1-6 SSA)
Exhibit C:  Transition, Data Transfer and Services Plan (including Schedules 1-6 TDTS)
Exhibit D:  Patent Release Agreement (UBS)
</TABLE>

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                            ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is entered into as of January 22, 2004 (the
"EFFECTIVE DATE"), by and between VIATRIS GMBH & CO. KG, a limited partnership
(Kommanditgesellschaft) organized under the laws of the Federal Republic of
Germany ("SELLER"), and XCEL PHARMACEUTICALS, INC., a Delaware corporation
("PURCHASER"). Seller and Purchaser are referred to collectively in this
Agreement as the "PARTIES." Certain capitalized terms used in this Agreement are
defined in Section 1 below.

                                     RECITAL

The Parties wish to provide for the purchase by Purchaser of the Assets from
Seller, and to provide for certain related transactions, all on the terms and
subject to the conditions and other provisions set forth in this Agreement and
in the Ancillary Agreements.

                                    AGREEMENT

The Parties, intending to be legally bound, agree as follows:

1.    DEFINITIONS

      As used herein, the following terms shall have their respective meanings:

1.1   "ABANDONMENT DECISION"

      means a determination by Purchaser (evidenced by Purchaser's written
      notice to Seller) to abandon Purchaser's efforts with respect to the
      entire development of the Product (including the activities contemplated
      by Section 4.2 below), which determination Purchaser shall have the right
      to make at any time and for any reason (in Purchaser's sole discretion).

1.2   "ABANDONMENT REVIEW EXTENSION"

      means an extension of the next to occur of the Back-End Milestone Dates by
      one day for each day after Purchaser has provided written notice to Seller
      that Purchaser is evaluating information with respect to the development
      of the Product that Purchaser believes in its reasonable estimation could
      lead Purchaser to make an Abandonment Decision; provided, however, that no
      Abandonment Review Extension shall extend the respective Back-End
      Milestone Date by more than three (3) months without Seller's written
      consent (which shall not be unreasonably withheld). For the avoidance of
      doubt, subsequent Back-End Milestone Dates shall remain unaffected by any
      Abandonment Review Extension (i.e., any Abandonment Review Extension shall
      affect only the next to occur of the Back-End Milestone Dates).

1.3   "ACTION OR PROCEEDING"

      means any action, suit, proceeding, arbitration, Order, inquiry, hearing,
      assessment with respect to fines or penalties or litigation (whether
      civil, criminal, administrative,

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      investigative or informal) commenced, brought, conducted or heard by or
      before, or otherwise involving, any Governmental or Regulatory Authority.

1.4   "AFFILIATE"

      means, with respect to any Person, any other Person which controls, is
      controlled by or is under common control with such Person or entity.
      Without limitation, a Person shall be regarded as in control of another
      Person if it owns or controls, directly or indirectly, (i) in the case of
      corporate entities at least fifty percent (50%) (or the maximum ownership
      interest permitted by applicable Law) of the equity securities in the
      subject entity entitled to vote in the election of directors and, (ii) in
      the case of an entity that is not a corporation, at least fifty percent
      (50%) (or the maximum ownership interest permitted by applicable Law) of
      the equity securities or other ownership interests with the power to
      direct the management and policies of such subject entity or entitled to
      elect the corresponding management authority.

1.5   "ANCILLARY AGREEMENTS"

      mean the following agreements: (i) the Seller Supply Agreement; and (ii)
      the Patent Assignment Agreement.

1.6   "API"

      means the Compound in bulk form which, if appropriately formulated and
      finished, would constitute finished bulk drug substance formulated into a
      final dosage form of a Product.

1.7   "ASSETS"

      has the meaning set forth in Section 3.1 below.

1.8   "ASSUMED LIABILITIES"

      mean the obligations and other liabilities of Seller and its Affiliates
      under or relating to the Contracts, but only insofar as such obligations
      or liabilities arise, and relate to events or conduct occurring, after the
      Closing.

1.9   "AUDIT RECORDS"

      has the meaning set forth in Section 4.4(b) below.

1.10  "BACK-END MILESTONE DATE"

      means each of the First Back-End Milestone Date and the Second Back-End
      Milestone Date.

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1.11  "BEST OF SELLER'S KNOWLEDGE"

      means the knowledge of Seller assuming Seller has made all reasonable and
      diligent enquiries before the Closing Date in respect of the subject
      matter of the relevant statement.

1.12  "CARCINOGENICITY STUDY REPORT"

      means the final, completed report from a two (2)-year carcinogenicity
      study in rats with respect to the Compound (which is required for FDA
      Approval).

1.13  "CHARGE"

      has the meaning set forth in Section 3.10(a) below.

1.14  "CHARGED RIGHTS"

      has the meaning set forth in Section 3.10(a) below.

1.15  "CLOSING"

      has the meaning set forth in Section 2.1 below.

1.16  "CLOSING DATE"

      means the date upon which the Closing occurs.

1.17  "COMBINATION PRODUCT"

      means Product when sold in combination with one or more other components
      or active ingredients contributing substantially to the overall efficacy
      of the combination product.

1.18  "COMMERCIALLY REASONABLE EFFORTS"

      mean, with respect to a Party, those efforts consistent with the exercise
      of such Party's prudent scientific and business judgment as applied to
      other research, development and commercialization efforts for products of
      similar scientific and commercial potential within the programs and
      relevant product lines of such Party, and as are common and customary in
      the pharmaceutical industry for companies of like size and resources to
      such Party.

1.19  "COMPETITIVE PRODUCT"

      means a pharmaceutical preparation (i) containing the Compound at
      therapeutically active dosages and (ii) that is owned by, or licensed
      from, any Person other than (x) Purchaser, (y) any Affiliate of Purchaser
      or (z) any Person acquiring its ownership or license rights, directly or
      indirectly, from Purchaser or any Affiliate of Purchaser.

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1.20  "COMPOUND"

      means [CONFIDENTIAL TREATMENT].

1.21  "CONSENT"

      means any consent, approval or waiver.

1.22  "CONTRACTS"

      mean the contracts and other instruments identified on Schedule 1 hereto.

1.23  "DAMAGES"

      mean costs, Liabilities, damages, lawsuits, deficiencies, claims and
      expenses (including interest, penalties and reasonable fees and
      disbursements of attorneys paid in connection with the investigation,
      defense or settlement of any of the foregoing).

1.24  "DATA ROOM DOCUMENTS"

      mean the documents, data, records and other materials furnished or made
      available by Seller to Purchaser as part of the data room established by
      Seller at Seller's premises, as well as the file history documents related
      to the US and European Patents and provided by Seller to Purchaser, for
      use by Purchaser in conducting due diligence with respect to the Assets
      prior to the Closing Date. A list of the Data Room Documents is attached
      as Schedule TDTS to the Transition, Data Transfer and Services Plan.

1.25  "DISCLOSING PARTY"

      has the meaning set forth in Section 10.2(a) below.

1.26  "DOMAIN NAME"

      means the Internet domain name "www.retigabine.com," as well as all
      registrations, goodwill and rights thereto.

1.27  "EARN-OUT ON SALES"

      mean the amounts payable by Purchaser to Seller calculated in the manner
      set out below:

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<TABLE>
<CAPTION>
                                        DOES ANY
              DOES ANY VALID CLAIM    COMPETITIVE
               COVER THE PRODUCT?    PRODUCT EXIST?    AMOUNT PAYABLE TO
REGION(*)             (**)               (***)              SELLER        END OF PAYMENT DUTY
---------     --------------------   --------------    -----------------  -------------------
<S>           <C>                    <C>               <C>                <C>
[CONFIDENTIAL TREATMENT]
</TABLE>

(*) Earn-Out on Sales shall be determined [CONFIDENTIAL TREATMENT], as
applicable.

(**) A Valid Claim will be deemed to cover a Product [CONFIDENTIAL TREATMENT]
if the sale or import of such Product [CONFIDENTIAL TREATMENT] would infringe
one or more Valid Claims (ignoring, for this purpose, any exhaustion of rights
defense to infringement). Thus, for example, if no Valid Claim covers the sale
or import of a Product [CONFIDENTIAL TREATMENT], no Earn-Out on Sales shall be
due and owing as the result of any related Net Sales [CONFIDENTIAL TREATMENT].

(***) A Competitive Product will be deemed to exist [CONFIDENTIAL TREATMENT] if
a Competitive Product is being commercially sold [CONFIDENTIAL TREATMENT].

1.28  "ENFORCEMENT EVENT"

      means any of the following events:

      (i)   Purchaser being in default of an obligation to pay one or more of
            the Upfront Payments or Milestone Payments (on the terms provided in
            this Agreement)

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            where any such default persists following thirty (30) days' written
            notice by Seller to Purchaser and each of Purchaser's creditors
            identified on the list which is Schedule 2 hereto (which list may be
            amended from time to time and kept update, accurate and complete by
            Purchaser upon notice to Seller);

      (ii)  Purchaser being unable or admits inability to pay its debts
            generally as they fall due, suspends making payments on its debts
            generally or, by reason of actual or anticipated financial
            difficulties, commences negotiations with one or more of its
            creditors with a view to rescheduling its indebtedness generally;

      (iii) Purchaser files any petition or action for relief under any
            bankruptcy, reorganization, insolvency or moratorium law or any
            other law for the relief of, or relating to, debtors, now or
            hereafter in effect, or makes any assignment for the benefit of
            creditors or takes any corporate action in furtherance of any of the
            foregoing; or

      (iv)  An involuntary petition is filed against Purchaser (unless such
            petition is dismissed or discharged within ninety (90) days) under
            any bankruptcy statute now or hereafter in effect, or a custodian,
            receiver, trustee or assignee for the benefit of creditors (or other
            similar official) is appointed to take possession, custody or
            control of any property of Purchaser which includes any Assets.

1.29  "EXCLUDED LIABILITIES"

      mean all Liabilities of Seller and its Affiliates except the Assumed
      Liabilities.

1.30  "FDA"

      means the United States Food and Drug Administration (or any successor
      organization).

1.31  "FDA APPROVAL"

      means the date upon which Purchaser first receives final approval of the
      labeling letter in the United States with respect to a Product with any
      form of epilepsy as part of the Indication (e.g., following which
      Purchaser may immediately commence marketing and sale of such Product in
      the United States).

1.32  "FIRST BACK-END MILESTONE DATE"

      has the meaning set forth in Section 3.2.2(a) below.

1.33  "FIRST COMMERCIAL SALE"

      means the first sale for use by the general public of a Product in the
      United States after FDA Approval.

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1.34  "FIRST PHASE III TRIAL"

      means the first large-scale human clinical trial initiated after the
      Closing with a protocol that is designed to provide pivotal safety and
      efficacy data regarding a Product with any Indication sufficient to
      support registration of such Product by the FDA.

1.35  "FORCE MAJEURE EVENT"

      means any event or cause beyond the reasonable control of the affected
      Party (including acts of war, acts of God, earthquake, flood, embargo,
      riot, sabotage, labor shortage or dispute or the act or threatened action
      of any Governmental or Regulatory Authority), including, for either Party
      as the affected Party, any material failure or material breach of the
      other Party under the Transition, Data Transfer and Services Plan (or any
      obligations of such other Party under this Agreement with respect thereto)
      and, for Purchaser as the affected Party, any failure or breach by Seller
      to supply "Contractual Products" (as such term is defined, for this
      purpose, in the Seller Supply Agreement) under the Seller Supply
      Agreement.

1.36 "FORCE MAJEURE EXTENSION"

      means, with respect to the obligations of either Party to be performed
      under this Agreement or any of the Ancillary Agreements, an extension of
      any date for the performance of any such obligation by one day for each
      day that such Party's Commercially Reasonable Efforts to perform such
      obligation are affected by any Force Majeure Event.

1.37  "GOVERNMENTAL OR REGULATORY AUTHORITY"

      means any court, tribunal, arbitrator, authority, agency, commission,
      official or other instrumentality of any country, or any supra-national
      organization, state, county, city or other political subdivision thereof,
      as well as any securities exchange or similar regulatory authority.

1.38  "IND"

      means the investigational new drug application No. 53,950 filed with the
      FDA for "Retigabine (GKE-941, D-23129) Capsules."

1.39  "INDEMNIFICATION CLAIM NOTICE"

      has the meaning set forth in Section 9.1.3 below.

1.40  "INDEMNIFIED PARTY"

      has the meaning set forth in Section 9.1.3 below.

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1.41  "INDEMNIFYING PARTY"

      has the meaning set forth in Section 9.1.3 below.

1.42  "INDEMNITEE"

      has the meaning set forth in Section 9.1.3 below.

1.43  "INDEMNITEES"

      has the meaning set forth in Section 9.1.3 below.

1.44  "INDICATION"

      means any human therapeutic indication for which a pharmaceutical
      preparation containing the Compound at therapeutically active dosages is
      or may be developed.

1.45  "KNOW-HOW"

      means all technology, inventions, copyrights, database rights, trade
      secrets, know-how, data, processes, procedures and other information, in
      each case that relate to the API, the Compound, any Related Compound or
      any Product as far as the same are within the possession or control of
      Seller or any of Seller's Affiliates at the Closing Date.

1.46  "LAW"

      means any law, statute or ordinance, or any rule, regulation, or published
      guidelines promulgated by any Governmental or Regulatory Authority.

1.47  "LIABILITY"

      means any liability (whether known or unknown, asserted or unasserted,
      absolute or contingent, accrued or unaccrued, liquidated or unliquidated,
      and due or to become due), excluding any liability for any Taxes.

1.48  "LICENSE AGREEMENT"

      means an agreement whereby a Licensee receives a license from Purchaser or
      any Affiliate of Purchaser to manufacture, distribute, promote, use, sell,
      offer for sale or import any Product.

1.49  "LICENSEE"

      means any Person, other than any Affiliate of Purchaser, who, pursuant to
      a License Agreement, receives a license from Purchaser or any Affiliate of
      Purchaser to manufacture, distribute, promote, use, sell, offer for sale
      or import the Compound or any Product.

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1.50  "MANUFACTURER"

      means Degussa AG.

1.51  "MILESTONE PAYMENTS"

      have the meaning set forth in Section 3.2.2 below.

1.52  "NDA"

      means a New Drug Application in respect of a Product (for any Indication).

1.53  "NET SALES"

      mean the amount of gross sales of Products in a specified territory for a
      specified period by Purchaser, any Licensee or any Affiliate of Purchaser
      less the following amounts actually and reasonably incurred by Purchaser:

      (i)   customer directed commissions and quantity, trade and cash discounts
            actually allowed or given;

      (ii)  discounts, replacements, credits or refunds actually allowed for the
            return of rejected, outdated, damaged or returned Products;

      (iii) rebates, chargebacks and price adjustments actually allowed or
            given;

      (iv)  sales or similar taxes (including duties or other governmental
            charges or assessments) levied, absorbed or otherwise imposed on the
            sale of Products (including VAT or other governmental charges
            measured by the billing amount, when included in such billing); and

      (v)   charges for freight, handling, postage, transportation, insurance
            and other shipping charges;

      provided, however, that:

      (a)   sales or transfers of Products between or among Purchaser, any
            Licensee or any Affiliate of Purchaser, as well as sales or
            transfers resulting directly or indirectly from any Seller License,
            shall be excluded from Net Sales calculations for all purposes;

      (b)   Products that are made, sold or used in connection with any
            pre-clinical or clinical trials, or for any testing, quality
            control, evaluation or other development purposes, or distributed as
            samples, shall be excluded from Net Sales calculations for all
            purposes;

      (c)   for Combination Products, the computation of Net Sales shall be
            based on the relative average net selling price of the applicable
            Product in the country at issue as compared with the net selling
            prices of the other components or active ingredients contributing
            substantially to the overall efficacy of the Combination

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            Product (as determined by identical methods, to the extent
            practical) during the applicable calendar quarter (although, if the
            Product or such other components or active ingredients were not
            separately invoiced or priced during the applicable quarterly
            period, the Net Sales computation shall be based on the relative
            fair market prices which the selling party would have charged for
            the Product and such other components or ingredients to a third
            party in an arm's length transaction, as determined by Purchaser in
            its reasonable discretion); provided, however, that in the instance
            of any Combination Product where the Product is sold in combination
            with a diagnostic device, the computation of Net Sales for such
            Product shall be based solely on the average net selling price of
            the applicable Product in the country at issue when sold as a
            stand-alone product; and

      (d)   amounts relevant to the determination of Net Sales, and the timing
            of sales, shall be determined from the books and records of
            Purchaser (or, as applicable, any Licensee or any Affiliate of
            Purchaser) which shall be maintained in accordance with generally
            accepted accounting principles (GAAP) in the United States (or, as
            applicable, such other standard accounting principles as may be in
            effect in any other relevant jurisdiction).

1.54  "[CONFIDENTIAL TREATMENT] RIGHT OF FIRST OFFER"

      has the meaning set forth in Section 3.4 below.

1.55  "NON-DISCLOSING PARTY"

      has the meaning set forth in Section 10.2(a) below.

1.56  "ORDER"

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

1.57  "PATENT ASSIGNMENT AGREEMENT"

      means the Patent Assignment Agreement substantially in the form of Exhibit
      A hereto.

1.58  "PATENTED INDICATIONS"

      mean all Indications covered by any of the Patents.

1.59  "PATENTS"

      mean the following:

      (i)   those certain patents and patent applications identified on Schedule
            PAA of Exhibit A;

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      (ii)  any other patents and patent applications owned or controlled by
            Seller or any of its Affiliates and covering the Compound, any
            Related Compound or any Product or the manufacture, distribution,
            promotion, use, sale, offer for sale or import of the Compound, any
            Related Compound or any Product;

      (iii) any patents that are or may be granted from any of the patents or
            patent applications referred to in this definition, including any
            extensions (including supplementary protection certificates),
            continuations, continuations-in-part, divisionals, reissues,
            reexaminations, renewals, additions, registrations and confirmations
            thereof;

      (iv)  any foreign counterparts or equivalents of any of the patents or
            patent applications referred to in this definition; and

      (v)   any patents or patent applications claiming priority of any of the
            patents or patent applications referred to in this definition.

1.60  "PERSON"

      means any individual, corporation, general partnership, limited
      partnership, limited liability company, trust, association, firm,
      organization, company, business, entity, union, society or governmental
      body.

1.61  "POTENTIAL ADDITIONAL CONSIDERATION"

      has the meaning set forth in Section 3.3 below.

1.62  "PRODUCT"

      means a pharmaceutical preparation containing the Compound at
      therapeutically active dosages (whether alone or in combination with one
      or more other pharmacologically active ingredients) and suitable for human
      administration for any Indication.

1.63  "PURCHASE PRICE"

      means the following:

      (a)   the Upfront Payments;

      (b)   the Milestone Payments;

      (c)   the Earn-Out on Sales;

      (d)   the Potential Additional Consideration; and

      (e)   the [CONFIDENTIAL TREATMENT] Right Of First Offer.

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1.64  "PURCHASER'S REQUIRED CONSENTS"

      has the meaning set forth in Section 7.3 below.

1.65  "RECORDS"

      mean originals (or copies where originals are unavailable to Seller or its
      Affiliates) of the following:

      (i)   all documents material to any of the Patents (including all files,
            file histories and material correspondence with relevant patent
            authorities as well as all docketing information), the Regulatory
            Filings (including all material correspondence with relevant
            regulatory authorities) or the Know-How;

      (ii)  all material documents provided by Wyeth to Seller or any of its
            Affiliates up to the time of Closing that relate to the API, the
            Compound, any Product or any Asset (and any such documents provided
            by Wyeth to the Seller or any of its Affiliates following the
            Closing (such documents to be promptly delivered to Purchaser
            following receipt by Seller or any of its Affiliates));

      (iii) all stock and other records, all database information relating to
            suppliers and manufacturers and all price, technical, promotional
            and advertising literature, in each case which (x) relate to the
            API, the Compound, any Product or any Asset and (y) are in the
            possession or control of Seller or any of Seller's Affiliates at the
            Closing Date;

      (iv)  all toxicology data and information, all pre-clinical and clinical
            data and information and all other data and information which relate
            to the Compound, any Product or any Asset, in each case which are in
            the possession or control of Seller or any of Seller's Affiliates at
            the Closing Date;

      (v)   all Data Room Documents;

      (vi)  all documents, data and records referenced in the Transition, Data
            Transfer and Services Plan or any exhibits or schedules attached
            thereto; and

      (vii) one or more schedules and related analyses of all costs of the
            development project in relation to the Compound (including costs
            incurred by Seller and Seller's Affiliates) and as prepared by
            Seller or its Affiliates and covering the period commencing on
            January 1, 2000 and continuing through the Closing Date insofar as
            such schedules or analyses are in the possession or control of
            Seller or Seller's Affiliates as at the Closing Date.

      In addition to such originals (or copies, as applicable), the Records will
      include electronic copies of the foregoing items where such electronic
      copies are in the possession of Seller or any of Seller's Affiliates at
      the Closing Date.

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1.66  "REGULATORY FILINGS"

      mean all applications and registrations submitted to any Governmental or
      Regulatory Authority, or owned by Seller or its Affiliates, with respect
      to the Compound or any Product. The Regulatory Filings include the IND and
      those filings specified on Schedule 3 hereto.

1.67  "RELATED COMPOUND"

      means each chemical entity other than the Compound claimed by any of the
      patents or patent applications referenced in Section 1.59 (i) above (i.e.,
      those certain patents or patent applications identified on Schedule PAA of
      Exhibit A).

1.68  "REST-OF-WORLD" OR "ROW"

      means the territory represented by all countries in the World other than
      the United States and the countries in Western Europe.

1.69  "SECOND BACK-END MILESTONE DATE"

      has the meaning set forth in Section 3.2.2(c) below.

1.70  "SECOND PHASE III TRIAL"

      means the second large-scale human clinical trial initiated after the
      Closing with a protocol that is designed to provide pivotal safety and
      efficacy data regarding a Product with any Indication sufficient to
      support registration of such Product by the FDA.

1.71  "SECURED SUMS"

      has the meaning set forth in Section 3.10(a) below.

1.72  "SELLER LICENSE"

      means (i) any License Agreement in which Seller or any of its Affiliates
      is a Licensee or (ii) any other agreement in which Seller or any of its
      Affiliates receives, directly or indirectly (from Purchaser or any
      Licensee or otherwise), rights to manufacture, market, distribute,
      promote, use, sell, offer for sale or import the Compound or any Product.

1.73  "SELLER'S REQUIRED CONSENTS"

      has the meaning set forth in Section 6.6 below.

1.74  "SELLER SUPPLY AGREEMENT"

      means that certain Supply Agreement in the form attached as Exhibit B
      hereto.

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1.75  "STOCK"

      means the stock of batches of bulk tablets of Compound, the final blend
      (tabletting mixture) and the Metabolite (as defined in Exhibit B)
      identified on Schedule 1SSA of Exhibit B.

1.76  "SUCCESSOR"

      means any successor-in-interest to all or substantially all of Purchaser's
      assets or to any business or product to which the Assets relate.

1.77  "TAX"

      means, where relating to or payable in respect of the Assets or the
      transactions contemplated pursuant to this Agreement or the Ancillary
      Agreements, any and all forms of taxes (irrespective of whether these
      taxes are originally owed by one Party or based on a joint and several
      liability assessment of one or both Parties), levies, imposts,
      contributions, duties and charges in the nature of taxation and all
      withholdings or deductions in respect thereof of whatever nature whenever
      imposed by any Governmental or Regulatory Authority of competent
      jurisdiction (including, for the avoidance of doubt, applicable
      unemployment and social security contribution liabilities) and whether
      directly or primarily chargeable against, recoverable from or attributable
      to either Party or any other person (including all fines, penalties,
      charges and interest relating to the same).

1.78  "TRANSITION, DATA TRANSFER AND SERVICES PLAN"

      means the Transition, Data Transfer and Services Plan attached as Exhibit
      C hereto.

1.79  "UPFRONT PAYMENTS"

      have the meaning set forth in Section 3.2.1 below.

1.80  "VALID CLAIM"

      means a claim of an issued and unexpired Patent which has not been (i)
      revoked or held unenforceable or invalid by a Governmental or Regulatory
      Authority with the legal authority to revoke or hold unenforceable or
      invalid a patent or (ii) disclaimed, denied or admitted to be invalid or
      unenforceable through reissue, disclaimer or otherwise.

1.81  "VAT"

      means value added tax or taxes similar thereto.

1.82  "WESTERN EUROPE"

      means the territory represented by the following countries: Andorra,
      Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece,
      Iceland, Ireland, Italy,

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                      Asset Purchase Agreement - Retigabine

      Liechtenstein, Luxemburg, Malta, Monaco, Netherlands, Norway, Portugal,
      San Marino, Spain, Sweden, Switzerland, United Kingdom and Vatican.

1.83  "WYETH"

      means Wyeth Pharmaceuticals, formerly Wyeth Ayerst Research Division of
      American Home Products Corporation.

2.    CLOSING CONDITIONS

2.1   CLOSING

      The closing of the purchase of the Assets by Purchaser (the "Closing")
      will take place on January 26, 2004, or, if later, one (1) business day
      following the first date upon which all of the Purchaser's Closing
      Conditions (as defined below) and all of the Seller's Closing Conditions
      (as defined below) are met; provided, however, that (x) the obligation of
      Purchaser to participate in any Closing is conditional upon Purchaser's
      receipt of the deliveries by Seller set out in Section 2.3 below (the
      "Purchaser Closing Conditions") or waiver by Purchaser (in Purchaser's
      sole discretion) of the same as provided in Section 2.4 below and (y) the
      obligation of Seller to participate in any Closing is conditional upon
      Seller's receipt of the deliveries by Purchaser set out in Section 2.2
      below (the "Seller Closing Conditions") or waiver by Seller (in Seller's
      sole discretion) of the same as provided in Section 2.4 below.

2.2   DELIVERIES BY PURCHASER

      At the Closing, Purchaser will make the following deliveries to Seller:

      (a)   The first of the Upfront Payments (in the amount of [CONFIDENTIAL
            TREATMENT], as referred to in Section 3.2.1(a) below.

      (b)   A copy of an executed Consent from each Person from whom such a
            Consent is required in order for Purchaser to consummate the
            transactions contemplated hereby or by any of the Ancillary
            Agreements (including (i) the Consents set forth on Schedule 4
            hereto and (ii) Purchaser's Required Consents).

      (c)   The Seller Supply Agreement executed by Purchaser.

      (d)   An opinion letter of Pillsbury Winthrop LLP, counsel to Purchaser,
            to the effect that: (i) Purchaser is a corporation duly organized,
            validly existing and in good standing under the Laws of the State of
            Delaware; (ii) Purchaser has full corporate power and authority to
            execute, deliver and perform this Agreement and to consummate the
            transactions contemplated hereby; and (iii) the execution, delivery
            and performance of this Agreement by Purchaser does not conflict
            with, or constitute a default under any organizational documents of
            Purchaser.

      (e)   A copy of resolutions adopted by the board of directors of Purchaser
            authorizing the execution, delivery and performance by Purchaser of
            this Agreement and the Ancillary Agreements and the consummation of
            the transactions contemplated

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            hereby and thereby (including the purchase of the Assets from Seller
            by Purchaser).

      (f)   A compliance certificate, executed by Purchaser's Chief Executive
            Officer and President on behalf of Purchaser and dated as of the
            Closing, to the effect that (i) the representations and warranties
            made by Purchaser herein are true and correct in all respects as of
            the Closing with the same force and effect as if they had been made
            as of the Closing and (ii) Purchaser has performed all obligations
            and conditions herein required to be performed or observed by
            Purchaser on or prior to the Closing.

2.3   DELIVERIES BY SELLER

      At the Closing, Seller will make the following deliveries to Purchaser:

      (a)   A copy of an executed Consent from each Person from whom such a
            Consent is required in order for Seller to consummate the
            transactions contemplated hereby or by any of the Ancillary
            Agreements (including (i) the Consents set forth on Schedule 5
            hereto and (ii) Seller's Required Consents).

      (b)   The Seller Supply Agreement executed by Seller.

      (c)   A patent release agreement (in the form attached as Exhibit D
            hereto) fully executed, to become effective upon the Closing to
            assign any and all Patents previously owned by UBS AG to Seller.

      (d)   The Patent Assignment Agreement executed by Seller.

      (e)   Evidence reasonably satisfactory to Purchaser that any and all
            liens, mortgages, charges or other encumbrances against any of the
            Assets have been released prior to Closing (and, if requested by
            Purchaser, that Seller has, and will transfer to Purchaser, title of
            record to all Assets (including all Patents)).

      (f)   Such bills of sale, assignments and other instruments as Seller may
            be required to execute (in Purchaser's reasonable discretion) in
            order to evidence and effectuate the transfer of the Assets to
            Purchaser.

      (g)   An opinion letter prepared by counsel selected by Purchaser (and
            reasonably satisfactory to Seller), the fees of such counsel to be
            paid by Purchaser, to the effect that: (i) Seller is a limited
            partnership duly organized and validly existing under the Laws of
            Germany; (ii) Seller has full power and authority to execute,
            deliver and perform this Agreement and to consummate the
            transactions contemplated hereby; and (iii) the execution, delivery
            and performance of this Agreement by Seller does not conflict with,
            or constitute a default under any organizational documents of
            Seller.

            If the contents of such opinion letter do not include all of the
            matters set out in this Section 2.3(g), all the requirements set out
            in this Section 2.3(g) will be deemed to have been satisfied if
            Purchaser accepts such opinion letter.

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      (h)   A compliance certificate, executed by Seller's Managing Director and
            Chief Executive Officer on behalf of Seller and dated as of the
            Closing, to the effect that (i) the representations and warranties
            made by Seller herein are true and correct in all respects as of the
            Closing with the same force and effect as if they had been made as
            of the Closing, (ii) Seller has performed all obligations and
            conditions herein required to be performed or observed by Seller on
            or prior to the Closing and (iii) no event or circumstance shall
            have occurred following the Effective Date which could reasonably be
            expected to represent a material and adverse change in the
            condition, status or value of any of the Assets.

2.4   OBLIGATIONS OF THE PARTIES.

      (a)   Purchaser (i) shall use its best endeavors to ensure that the
            Seller's Closing Conditions are satisfied as soon as practicable and
            in any event not later than January 30, 2004, (ii) may waive all or
            any of the Purchaser's Closing Conditions at any time (in
            Purchaser's sole discretion), provided that such waiver is express
            and is in writing, and (iii) may terminate this Agreement at any
            time following January 30, 2004, if (x) Purchaser is able at such
            time to satisfy all of the Seller's Closing Conditions (or such
            unsatisfied Seller's Closing Conditions have been waived by Seller
            as provided in this Section 2.4) and (y) Seller is not then able to
            satisfy all of the Purchaser's Closing Conditions (and such
            unsatisfied Purchaser's Closing Conditions have not been waived by
            Purchaser as provided in this Section 2.4).

      (b)   Seller (i) shall use its best endeavors to ensure that the
            Purchaser's Closing Conditions are satisfied as soon as practicable
            and in any event not later than January 30, 2004, (ii) may waive all
            or any of the Seller's Closing Conditions at any time (in Seller's
            sole discretion), provided that such waiver is express and is in
            writing, and (iii) may terminate this Agreement at any time
            following January 30, 2004, if (x) Seller is able at such time to
            satisfy all of the Purchaser's Closing Conditions (or such
            unsatisfied Purchaser's Closing Conditions have been waived by
            Purchaser as provided in this Section 2.4) and (y) Purchaser is not
            then able to satisfy all of the Seller's Closing Conditions (and
            such unsatisfied Seller's Closing Conditions have not been waived by
            Seller as provided in this Section 2.4).

2.5   TERMINATION

      In the event of any termination of this Agreement as contemplated by
      Section 2.4 above, this Agreement shall be deemed terminated and shall
      have no further effect, except that (i) Sections 10.3 (Dispute
      Resolution), 10.2 (Confidentiality), 10.14 (Governing Law) and 10.16
      (Expenses) shall survive any such termination and (ii) each Party shall
      remain liable to the other Party for any breach of any of such Party's
      obligations contained in this Agreement (including as set forth in Section
      2.4 above). Except as provided in the immediately preceding clause (ii),
      upon such a termination the Parties shall be released from all liabilities
      and obligations hereunder.

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3.    SALE AND PURCHASE OF ASSETS AND RELATED TRANSACTIONS

3.1   SALE AND PURCHASE OF ASSETS

      On the terms and subject to the conditions and other provisions set forth
      in this Agreement and in the Ancillary Agreements, at the Closing Seller
      will sell and transfer to Purchaser, and Purchaser will purchase from
      Seller, all right, title and interest throughout the World in and to the
      following (collectively, the "ASSETS"):

      (a)   The Patents (including the right, if any, to sue or bring actions
            (including collection of Damages) for past, present and future
            infringement of any of the Patents, together with all claims and
            rights to payment in respect thereof);

      (b)   The Know-How;

      (c)   The Regulatory Filings;

      (d)   All of Seller's rights as of the Closing Date under the Contracts

      (e)   The Stock;

      (f)   The Records; and

      (g)   The Domain Name.

3.2   PURCHASE PRICE PAYMENTS

      As consideration for the sale of the Assets to Purchaser, Purchaser shall,
      subject to the terms and conditions of this Agreement, make the various
      payments constituting the Purchase Price (including as set forth in this
      Section 3.2 and in Sections 3.3 and 3.4 below) to Seller; provided,
      however, that:

      (i)   for the avoidance of doubt, the payments referenced in Sections
            3.2.1 and 3.2.2 below (x) are one-time payments only, such that
            achievement of the noted events or milestones by successive Products
            will not trigger additional payment obligations for Purchaser, (y)
            once paid shall be non-refundable and non-deductible and (z) except
            for the Upfront Payments, shall not be payable (and any obligation
            of Purchaser with respect thereto shall terminate) in the event of
            an Abandonment Decision (provided that if an Abandonment Decision is
            made after the occurrence of an event triggering a Milestone Payment
            as set out in Section 3.2.2 but before the end of the ten (10)
            business day period thereafter, Purchaser shall remain obligated to
            pay the applicable Milestone Payment to Seller notwithstanding the
            Abandonment Decision); and

      (ii)  any payments required to be paid by this Section 3.2 will be made by
            wire transfer of immediately available funds to the following
            beneficiary (with any bank levies or charges, other than levies and
            charges of Seller's bank, payable by Purchaser): VIATRIS GmbH & Co.
            KG, Degussa Bank GmbH Account: 590 032; Swift: DEGUDEFF.

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                      Asset Purchase Agreement - Retigabine

3.2.1 Upfront Payments The payments referenced in Sections 3.2.1(a) and 3.2.1(b)
      below are referred to herein as the "UPFRONT PAYMENTS." For the avoidance
      of doubt, Purchaser's obligation to make the Upfront Payments is not
      subject to any Abandonment Review Extension or Abandonment Decision.

      (a)   Purchaser shall pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT] on the Closing as contemplated by Section
            2.2(a) above.

      (b)   Purchaser shall pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT].

3.2.2 Milestone Payments

            The payments referenced in Sections 3.2.2(a) through 3.2.2(f) below
            are referred to herein as the "MILESTONE PAYMENTS."

      (a)   Purchaser will pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT] within ten (10) business days after the
            first dosing (with either Product or placebo) of the first patient
            in the First Phase III Trial; provided, however, that such payment
            shall be made to Seller in any event not later than [CONFIDENTIAL
            TREATMENT] (the "FIRST BACK-END MILESTONE Date"); and provided,
            further, that for the avoidance of doubt, the First Back-End
            Milestone Date is subject to any Abandonment Review Extension or
            Force Majeure Extension.

      (b)   Purchaser will pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT] within ten (10) business days after the
            first dosing (with either Product or placebo) of the first patient
            in the Second Phase III Trial; provided, however, that such payment
            shall be made to Seller in any event not later than the First
            Back-End Milestone Date; and provided, further, that for the
            avoidance of doubt, the First Back-End Milestone Date is subject to
            any Abandonment Review Extension or Force Majeure Extension.

      (c)   Purchaser will pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT] within ten (10) business days after the
            last dosing (with either Product or placebo) of the last patient in
            the Second Phase III Trial; provided, however, that such payment
            shall be made to Seller in any event not later than [CONFIDENTIAL
            TREATMENT] (the "SECOND BACK-END MILESTONE Date"); and provided,
            further, that for the avoidance of doubt, the Second Back-End
            Milestone Date is subject to any Abandonment Review Extension or
            Force Majeure Extension.

      (d)   Purchaser will pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT] within ten (10) business days after the
            issuance of the Carcinogenicity Study Report; provided, however,
            that such payment shall be made to Seller in any event not later
            than the Second Back-End Milestone Date; and provided, further, that
            for the avoidance of doubt, the Second Back-End Milestone Date is
            subject to any Abandonment Review Extension or Force Majeure
            Extension.

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      (e)   Purchaser will pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT] upon acceptance for filing by the FDA of
            the first NDA for the Product for the first Indication.

      (f)   Purchaser will pay to Seller a payment in the amount of
            [CONFIDENTIAL TREATMENT] upon FDA Approval.

3.2.3 Earn-Out on Sales

      (a)   Purchaser will pay to Seller, within forty-five (45) days after the
            end of each calendar quarter (until Earn-Out on Sales in the United
            States is no longer applicable), the amount of Earn-Out on Sales in
            respect of the United States for such calendar quarter.

      (b)   Purchaser will pay to Seller, within forty-five (45) days after the
            end of each calendar quarter (until Earn-Out on Sales in Western
            Europe is no longer applicable), the amount of Earn-Out on Sales in
            respect of Western Europe for such calendar quarter.

      (c)   Purchaser will pay to Seller, within forty-five (45) days after the
            end of each calendar quarter (until Earn-Out on Sales in the
            Rest-of-World is no longer applicable), the amount of Earn-Out on
            Sales in respect of the Rest-of-World for such calendar quarter.

3.3   POTENTIAL ADDITIONAL CONSIDERATION

      In addition to the payments set forth in Section 3.2 above, Seller shall
      be entitled to receive the following additional payments as noted in this
      Section 3.3 as applicable (collectively the "POTENTIAL ADDITIONAL
      CONSIDERATION"); provided, however, that:

      (i)   in no event shall Purchaser be liable to Seller for any payments
            under this Section 3.3 to the extent that amounts received by
            Purchaser (x) are for reimbursement of expenses incurred in
            connection with any development activity (including pre-clinical or
            clinical trials or any testing, quality control, evaluation or other
            development activities) or any manufacturing activity or (y) result,
            directly or indirectly, from any Seller License; and

      (ii)  any payments required to be paid by Purchaser to Seller pursuant to
            this Section 3.3 will be paid within ten (10) business days of
            Purchaser's actual receipt of the related payments from the Licensee
            at issue and by wire transfer of immediately available funds to an
            account of Seller designated to Purchaser in writing.

3.3.1 United States

      In the event that Purchaser enters into a License Agreement with respect
      to rights to one or more Products in the United States, then Seller shall
      be entitled to receive [CONFIDENTIAL TREATMENT] of the amount (net of any
      Tax required to be paid or withheld under any Laws), to the extent
      attributable to rights to any Product in the United States, of the
      following: (i) any upfront or milestone payments received by Purchaser
      from the applicable Licensee; and, (ii) where royalty payments received by
      Purchaser from the applicable Licensee are in excess of the applicable
      Earn-Out on Sales payable to Seller

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      pursuant to Section 3.2.3(a) above, any such "excess" in such royalty
      payments; provided, however, that Seller's entitlement to receive amounts
      under this Section 3.3.1 shall be limited to an aggregate of no more than
      [CONFIDENTIAL TREATMENT]

3.3.2 Western Europe

      In the event that Purchaser enters into a License Agreement with respect
      to rights in Western Europe to a Product with an Indication for
      [CONFIDENTIAL TREATMENT], then Seller shall be entitled to receive
      [CONFIDENTIAL TREATMENT] of the amount (net of any Tax required to be paid
      or withheld under any Laws), to the extent attributable to rights to such
      Product in Western Europe, of the following: (i) any upfront or milestone
      payments received by Purchaser from the applicable Licensee; and, (ii)
      where royalty payments received by Purchaser from the applicable Licensee
      are in excess of the applicable Earn-Out on Sales payable to Seller
      pursuant to Section 3.2.3(b) above, any such "excess" in such royalty
      payments; provided, however, that Seller's entitlement to receive amounts
      under this Section 3.3.2 shall only apply (x) if Seller does not have any
      rights to market and sell in Western Europe any Product with an Indication
      for [CONFIDENTIAL TREATMENT] and (y) if (and then only to the extent that)
      the aggregate amount of the upfront, milestone and excess royalty payments
      referred to in the foregoing clauses (i) and (ii) is in excess of
      [CONFIDENTIAL TREATMENT] (i.e., Seller's payments shall be calculated only
      with respect to the amount of any such payments received by Purchaser
      aggregating in excess of [CONFIDENTIAL TREATMENT]); and provided, further,
      that Seller's entitlement to receive amounts under this Section 3.3.2
      shall be limited to an aggregate of no more than [CONFIDENTIAL TREATMENT]

3.3.3 Rest-of-World

      In the event that Purchaser enters into a License Agreement with respect
      to rights to one or more Products in the Rest-of World, then Seller shall
      be entitled to receive [CONFIDENTIAL TREATMENT] of the amount (net of any
      Tax required to be paid or withheld under any Laws), to the extent
      attributable to rights to any Product in the Rest-of-World, of the
      following: (i) any upfront or milestone payments received by Purchaser
      from the applicable Licensee; and, (ii) where royalty payments received by
      Purchaser from the applicable Licensee are in excess of the applicable
      Earn-Out on Sales payable to Seller pursuant to Section 3.2.3(c) above,
      any such "excess" in such royalty payments; provided, however, that
      Seller's entitlement to receive amounts under this Section 3.3.3 shall be
      limited to an aggregate of no more than [CONFIDENTIAL TREATMENT].

3.4   POTENTIAL [CONFIDENTIAL TREATMENT] RIGHT

      [CONFIDENTIAL TREATMENT]

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3.5   INTEREST

      Subject always to any Abandonment Review Extension or Force Majeure
      Extension that may apply, if any amount required to be paid under this
      Agreement is not paid when it is due, then such amount shall bear interest
      at the rate of [CONFIDENTIAL TREATMENT] from time to time calculated on a
      daily basis for the period from the due date to the date of actual
      payment.

3.6   ASSUMPTION OF LIABILITIES

      Seller shall remain solely responsible for all debts and liabilities
      relating to the Contracts arising in or relating to the period ending on
      or before Closing and Purchaser shall be solely responsible for all
      Assumed Liabilities; provided, however, that (i) Purchaser will not be
      assuming any Liabilities of Seller (or any of its Affiliates) other than
      the Assumed Liabilities and (ii) Seller will remain responsible for all
      Liabilities of Seller (and Seller's Affiliates shall each remain
      responsible for their respective Liabilities) other than the Assumed
      Liabilities.

3.7   TAXES

      (a)   Subject to the further provisions of this Section 3.7, (i) Seller
            shall remain solely responsible for all corporation, income or trade
            Taxes (as imposed by any Governmental or Regulatory Authority)
            relating to or payable in respect of the transactions contemplated
            pursuant to this Agreement or the Ancillary Agreements, (ii) Seller
            shall be solely responsible for all other Taxes payable in respect
            of the Assets relating to the period on or before the Closing and
            (iii) Purchaser shall be solely responsible for all other Taxes
            payable in respect of the Assets relating to the period after the
            Closing.

      (b)   If any deduction or withholding is required by applicable Law with
            respect to any payment to be made between the Parties pursuant to
            this Agreement or any Ancillary Agreement, then the Parties shall
            act in good faith, shall afford to each other such assistance and
            shall do all such things as are reasonably necessary, to enable
            either Seller or Purchaser to obtain the benefit of any applicable
            exemption from withholding or deduction or to claim any applicable
            refund or tax credit in respect of any such withholding or deduction
            in relation to any such payment. Without limiting the foregoing, (i)
            any Tax required to be withheld by Purchaser under any applicable
            Law for the account of Seller with respect to the remittance of any
            amounts from Purchaser to Seller shall be paid by Purchaser for and
            on behalf of Seller to the appropriate Governmental or Regulatory
            Authority, and Purchaser shall use its Commercially Reasonable
            Efforts to furnish Seller with proof of payment of such Tax together
            with official or other appropriate evidence issued by the applicable
            Government or Regulatory Authority, (ii) any such Tax so paid on
            Seller's behalf shall be deducted from any

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            payments otherwise due Seller from Purchaser and (iii) the Parties
            shall exercise Commercially Reasonable Efforts, where appropriate,
            to recuperate any withheld Tax (for example, so as to avoid any
            double taxation to any Party).

      (c)   The Purchase Price is exclusive of VAT; provided, however, that with
            respect to the transfer of the Assets and the other transactions
            contemplated pursuant to this Agreement and the Ancillary
            Agreements, and notwithstanding any other provision herein or in any
            Ancillary Agreement to the contrary, (i) each Party has been advised
            by its independent counsel and accountants that, as of the Effective
            Date, no VAT is payable, (ii) should any Governmental or Regulatory
            Authority with appropriate jurisdiction take the view that VAT is
            payable, then (x) the Parties shall cooperate with each other and
            shall afford each other such assistance and shall do all such things
            as are reasonably necessary to enable Seller to determine the
            correct liability to VAT in respect of the sale of the Assets
            hereunder (which shall include, without limitation, the provision by
            Purchaser of valid documentation relating to the transportation of
            Assets to a place outside of Germany) and (y) Purchaser shall, upon
            submission by Seller to Purchaser of a valid VAT invoice, pay such
            VAT (in addition to the Purchase Price), and (iii) Seller shall act
            in good faith, shall afford to Purchaser such assistance and shall
            do all such things as are reasonably necessary to enable Purchaser
            to obtain the benefit of any exemption from any VAT or to claim any
            refund or tax credit in respect of any VAT.

3.8   ALLOCATION OF PURCHASE PRICE

      The consideration for the Assets will be allocated among the Assets as of
      the Closing Date in accordance with applicable Law as follows:

       [CONFIDENTIAL TREATMENT]

      Each of the Parties agrees (a) to report (and to cause its Affiliates to
      report) the transactions contemplated by this Agreement in a manner
      consistent with applicable Law and with the terms of this Agreement,
      including the foregoing allocation, and (b) not to take any position
      inconsistent therewith in any Tax return, in any Tax refund claim, in any
      litigation or otherwise.

3.9   OPTION TO ACQUIRE ASSETS

      For a period of one hundred twenty (120) days following Purchaser's notice
      to Seller regarding an Abandonment Decision (the "REACQUISITION OPTION
      PERIOD"), Seller shall have the option to acquire Purchaser's interest in
      the Assets (the "REACQUISITION OPTION").

      (a)   Purchaser shall make appropriate representatives available to meet
            with appropriate representatives of Seller at a mutually convenient
            time to provide an update to Seller (such update to include as much
            information about the

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            development program(s) then being conducted for any Product as
            reasonably requested by Seller and to include specifically, without
            limitation, (i) details of all adverse events or adverse reactions
            arising at any time during the trials and/or studies, (ii) all
            financial commitments and expenses outstanding with regard to the
            Product and (iii) the current status of, and ongoing activities with
            respect to, the development program(s) then being conducted for the
            Product), such meeting to occur at Purchaser's facility not later
            than thirty (30) days after the date the notice of an Abandonment
            Decision was delivered to Seller.

      (b)   Until the earlier of (x) the expiration of the Reacquisition Option
            Period and (y) the date Purchaser receives notice from Seller that
            it has elected not to exercise the Reacquisition Option, Purchaser
            shall (i) to the extent permitted by Governmental or Regulatory
            Authorities and to the extent consistent with good clinical and
            laboratory practices, (A) continue any ongoing human clinical trials
            (but Purchaser shall not be obligated to enroll any new patients in
            any such ongoing human clinical trials during this period) and (B)
            continue any ongoing pre-clinical studies (but Purchaser shall not
            be obligated to dose any additional animals or conduct any
            histopathology work in any such ongoing pre-clinical studies during
            this period), and (ii) bear all costs and expenses associated with
            continuing all such ongoing clinical trials and/or ongoing
            pre-clinical studies. Other than continuing any such ongoing
            clinical trials and/or ongoing pre-clinical studies as provided
            above, Purchaser shall not be obligated to continue any portion of
            its activities or other efforts with respect to the Compound or any
            Product, including the manufacture of any additional clinical trial
            materials (except Purchaser shall remain obligated to purchase all
            orders placed and accepted by Seller under the Seller Supply
            Agreement) or other chemistry, manufacturing and controls activities
            and/or the initiation of any additional pre-clinical studies or
            human clinical trials.

      (c)   In the event of an exercise of the Reacquisition Option, Seller
            shall not be required to pay any consideration to Purchaser for
            Purchaser's interest in the Assets (and Purchaser's interest in any
            improvements related exclusively thereto, if any) and Purchaser
            shall cooperate with Seller's reasonable requests regarding the
            transfer of Purchaser's interest in the Assets (and Purchaser's
            interest in any improvements related exclusively thereto, if any) to
            Seller; provided, however, that Seller shall be required to bear all
            reasonable costs and expenses associated with the activity of
            transferring Purchaser's interest in the Assets back to Seller (such
            costs and expenses to exclude any internal costs and expenses of the
            Purchaser).

      (d)   In the event that Seller does not exercise the Reacquisition Option
            prior to the expiration of the Reacquisition Option Period, the
            Reacquisition Option shall lapse and be without further force or
            effect.

3.10     CHARGE

      (a)   Purchaser hereby charges to Seller by way of first fixed charge (the
            "CHARGE"), as security for the payment or discharge of all
            Purchaser's obligations for payment (subject to the terms and
            conditions of this Agreement) of the Upfront Payments and the
            Milestone Payments and any interest due under Section 3.5 of this
            Agreement with respect to any of the Upfront Payments and the
            Milestone

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            Payments (the "SECURED SUMS"), the following (collectively, the
            "CHARGED RIGHTS"):

            (i)   Purchaser's interest in the Patents and any renewals or
                  extensions thereof;

            (ii)  Purchaser's interest in any licenses granted by Purchaser with
                  respect to any of the rights referenced in the foregoing
                  clause (i); and

            (iii) As at the date of any Enforcement Event, all present and
                  future rights and causes of action whenever and wherever
                  accruing to Purchaser in respect of infringement of any of the
                  rights referenced in the foregoing clauses (i) and (ii).

      (b)   If any Enforcement Event occurs, then Seller may appoint any person
            or persons to be a receiver and manager of all or any part of the
            Charged Rights and thereafter exercise in respect of the Charged
            Rights all of the rights and remedies of a chargee under applicable
            Law.

      (c)   Following the earlier of (i) payment by Purchaser of the last to
            occur of the Upfront Payments and the Milestone Payments or (ii)
            Seller's failure to exercise the Reacquisition Option within one
            hundred twenty (120) days following Purchaser's notice to Seller
            regarding an Abandonment Decision, the following shall occur: (x)
            Seller shall release Purchaser and all of the Charged Rights from
            any obligations under the Charge and the Charge shall be considered
            fully satisfied by Seller; and (y) Seller shall execute and deliver
            such instruments and documents, and take such actions, as may be
            reasonably necessary in order to extinguish the Charge (as well as
            any related filings or notices).

      (d)   Purchaser represents and warrants that, assuming Seller takes all
            action as and when necessary or appropriate to perfect and maintain
            the Charge, then from and after the Closing and during the
            subsistence of the Charge (as contemplated by this Section 3.10),
            the Charge shall, as to the Charged Rights, rank ahead of any other
            fixed or floating charge or security interest of any kind that is or
            may be granted by Purchaser with respect to any of the Charged
            Rights.

      (e)   Purchaser covenants with Seller that, during the subsistence of the
            Charge (as contemplated by this Section 3.10), Purchaser shall not
            sell, assign or transfer any of the Charged Rights except in
            compliance (as applicable) with Section 10.11 below.

      (f)   Purchaser covenants with Seller that, during the subsistence of the
            Charge (as contemplated by this Section 3.10), Purchaser shall (i)
            use Commercially Reasonable Efforts with respect to those patents
            and patent applications identified on Schedule PAA of the Patent
            Assignment Agreement to (A) prosecute such patent applications; (B)
            pay all maintenance fees for all such patents and patent
            applications; and (C) defend all challenges to the validity of any
            such patents; and (ii) execute all further documents, instruments
            and deeds prepared by Seller and give to Seller all assistance, in
            each case as reasonably requested by Seller, to register the Charge
            with such authorities as may be available for the purpose (in the
            United Kingdom or elsewhere) or to enable

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            Seller to exercise and enforce its rights and remedies with respect
            to the Charge. (this includes perfection and registration of the
            charges created or purported to be created by this Charge in any
            foreign jurisdiction and where the efficacy of such charges in any
            jurisdiction is dependent on the execution of a different document
            (provided that such document shall be on terms no more onerous than
            the terms of this Charge, except where necessary to establish a
            valid security interest in the United States, Western Europe, Japan
            or the People's Republic of China)).

4.    TRANSITION ARRANGEMENTS AND PURCHASER'S DEVELOPMENT AND REPORTING
      OBLIGATIONS

4.1   TRANSITION OF ASSETS

      Seller hereby agrees, contingent upon the absence of any Abandonment
      Decision, that Seller will (a) timely and sufficiently perform its
      obligations under the Transition, Data Transfer and Services Plan and (b)
      otherwise exercise its Commercially Reasonable Efforts to utilize and
      bring to bear such resources as are available to Seller to transition all
      Assets, including all facets of any development programs relating to the
      Compound, to Purchaser as promptly as reasonably possible.

4.2   PURCHASER'S EFFORTS

      Purchaser hereby agrees, contingent upon Seller's performance of its
      obligations under Section 4.1 above (including with respect to the
      Transition, Data Transfer and Services Plan) as well as the absence of any
      Abandonment Decision, that Purchaser will exercise its Commercially
      Reasonable Efforts to seek (a) promptly to initiate efforts with respect
      to development of a Product in its first indication, (b) FDA Approval of
      such Product, (c) following FDA Approval, to market such Product in the
      United States, (d) appropriate regulatory approval for, and following such
      approval to market, such Product in those jurisdictions outside of the
      United States which are determined by Purchaser (in its sole discretion)
      to offer commercially attractive opportunities for such Product and (e) to
      initiate development efforts in the United States with respect to a
      Product with [CONFIDENTIAL TREATMENT] as the Indication no later than
      [CONFIDENTIAL TREATMENT] following the Effective Date, although these
      obligations shall be subject to Abandonment Review Extension (without
      reference, for this purpose, to any specific Back-End Milestone Date) and,
      for the avoidance of any doubt, any Force Majeure Extension.

4.3   DEVELOPMENT REPORTS

      Prior to FDA Approval, Purchaser shall, upon the reasonable request of
      Seller (which shall be made no more frequently than once per calendar
      quarter), furnish Seller with an update as to the progress of Purchaser's
      efforts as contemplated by Section 4.2 above. In addition, Purchaser shall
      provide Seller with an update, promptly following occurrence of the same,
      as to the achievement of any of the events that are intended to result in
      a Milestone Payment. Any update contemplated by this Section 4.3 shall be
      deemed to be Confidential Information for purposes of Section 10.2 below.

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4.4   EARN-OUT ON SALES REPORTS, RECORDS AND AUDIT.

      (a)   Purchaser shall furnish to Seller, at the same time as any payment
            of Earn-Out on Sales is made by Purchaser to Seller (i.e., as
            contemplated pursuant to Section 3.2.3 above), a written report
            detailing the Net Sales for the calendar quarter at issue and the
            payment due with respect thereto. Where applicable, such reports
            shall include information on a country-by-country basis. Purchaser
            shall also furnish to Seller, at the same time as any payment is
            made by Purchaser to Seller as contemplated by Sections 3.3.1, 3.3.2
            or 3.3.3 above in respect of any payments made by any Licensee to
            Purchaser, a written report detailing such payment and the terms of
            the applicable License Agreement.

      (b)   Purchaser shall keep, and shall cause its Affiliates and Licensees
            to keep, full, complete and proper records and accounts of all sales
            of Products in sufficient detail to enable payments of Earn-Out on
            Sales, as well as payments contemplated by Sections 3.3.1, 3.3.2 or
            3.3.3 above in respect of any payments made by any Licensee to
            Purchaser, to be determined (the "AUDIT RECORDS").

      (c)   Seller shall have the right to appoint an independent certified
            public accounting firm approved by Purchaser (which approval shall
            not be unreasonably withheld) to audit the Audit Records as
            necessary to verify the amount of any payments of Earn-Out on Sales
            as well as payments contemplated by Sections 3.3.1, 3.3.2 or 3.3.3
            above in respect of any payments made by any Licensee to Purchaser.
            Purchaser shall pay to Seller an amount equal to any additional
            payments to which Seller is entitled as disclosed by any such audit
            (plus interest at the rate of [CONFIDENTIAL TREATMENT] from time to
            time calculated on a daily basis for the period from the due date to
            the date of actual payment). Any such audit shall be at Seller's
            expense; provided, however, that if the audit discloses that Seller
            was underpaid for any calendar quarter by at least [CONFIDENTIAL
            TREATMENT] of the amount of any payment otherwise owed to Seller for
            such calendar quarter, then Purchaser shall reimburse Seller for any
            reasonable audit costs. Seller may exercise its right to audit under
            this Section 4.4(c) not more frequently than once in any calendar
            year and not more than once in respect of any calendar year or any
            calendar quarter therein, and any such exercise must take place no
            more than two (2) years following the end of any calendar year at
            issue. The accounting firm chosen by Seller to perform any audit may
            disclose to Seller only information relating to the accuracy of the
            payments at issue. Purchaser and its Affiliates and Licensees shall
            preserve and maintain all Audit Records for a period of at least
            three (3) years after the calendar year to which the Audit Records
            apply.

4.5   REGULATORY MATTERS

      From and after the transfer by Seller to Purchaser of the Regulatory
      Filings pursuant to the terms hereof, Purchaser, at its cost, shall be
      solely responsible and liable for taking all actions, paying all fees and
      conducting all communication with the appropriate Governmental or
      Regulatory Authority required by applicable Law in respect of each such
      Regulatory Filings, including preparing and filing all reports (including
      adverse drug experience reports) with the appropriate Governmental or
      Regulatory Authority. To the extent that Seller shall, after the Closing,
      retain any personnel or resources with knowledge of, or relevancy to, the
      Compound or the prior development work conducted

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      with the Compound that may be necessary or useful to Purchaser in
      completing such Regulatory Filings, Seller shall cooperate with
      Purchaser's reasonable requests and make such personnel and resources
      available to assist Purchaser in connection with such Regulatory Filings
      (with Purchaser to bear any external costs associated therewith).

4.6   INSURANCE

      At such time as any Product is being commercially distributed or sold
      (other than for the purpose of obtaining regulatory approvals) by
      Purchaser or its Affiliates, Purchaser shall (at its sole cost and
      expense) procure and maintain comprehensive general liability insurance in
      amounts not less than [CONFIDENTIAL TREATMENT] per incident. Such
      comprehensive general liability insurance shall provide product liability
      coverage as to Products.

4.7   ACCESS

      Without limiting the provisions of Section 10.2 below, Purchaser shall,
      upon the request of Seller and to the extent permitted by applicable Law,
      grant to Seller and its representatives the right, during normal business
      hours and upon reasonable advance notice, to inspect and copy the Records
      in Purchaser's possession to the extent pertaining to the Assets prior to
      the Closing Date (e.g., for tax purposes or in connection with any Actions
      or Proceedings of a Governmental or Regulatory Authority).

5.    POST-CLOSING COVENANTS OF THE PARTIES

5.1   COOPERATION

      (a)   Each Party shall cooperate fully with the other in executing and
            delivering all notices, applications, submissions, reports and other
            instruments and documents that are necessary, proper or advisable
            under applicable Laws to consummate and make effective the
            transactions contemplated by this Agreement and the Ancillary
            Agreements (the forms of which shall be provided by Purchaser to
            Seller for execution and delivery), including Seller's cooperation
            in (i) executing and delivering to Purchaser any such documents
            required to obtain any Consents of any Governmental or Regulatory
            Authority required for Purchaser to be able to own the Assets and
            (ii) furnishing to Purchaser physical possession of all tangible
            personal property included in the Assets.

      (b)   To the extent that Seller shall, after the Closing, retain any
            personnel or resources with knowledge of, or relevancy to, financial
            information or reports related to any of the Assets that shall be
            required to be included in any filings made by Purchaser with any
            Governmental or Regulatory Authority (including any filings with the
            United States Securities Exchange Commission), Seller shall
            cooperate with Purchaser's reasonable requests and make such
            personnel and resources available to assist Purchaser in connection
            with such financial information or reports (with Purchaser to bear
            any external costs associated therewith). Without limiting the
            foregoing, Seller will give permission to its

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            auditors to meet with Purchaser to discuss such financial
            information and reports (at Purchaser's expense).

      (c)   Seller will use Commercially Reasonable Efforts to make workbooks
            (including laboratory notebooks) in the possession of Seller or its
            Affiliates, if any, available to Purchaser in connection with any
            matters relating to the Patents or the Know-How (including
            prosecution or enforcement of any right with respect to the Patents
            or the Know-How). Seller will, at Purchaser's request, provide
            Purchaser with a list of any contact information Seller or its
            Affiliates may have for any inventors with respect to any of the
            Patents or Know-How.

5.2   NON-ASSERTION OF INTELLECTUAL PROPERTY RIGHTS

      Seller agrees that neither it nor any of its Affiliates will assert
      against Purchaser or any of its Affiliates or Licensees, under any patent,
      trade secret, copyright or other proprietary right owned or controlled by
      Seller or any of its Affiliates (whether at the Closing Date or at any
      time thereafter), a claim that the Compound or any Product infringes
      rights owned or controlled by Seller or any of its Affiliates (excluding,
      for this purpose, any trademark right).

5.3   PUBLIC ANNOUNCEMENTS

      Neither Seller nor Purchaser shall issue any press release or make any
      public announcement with respect to this Agreement and the transactions
      contemplated hereby without obtaining the prior written consent of the
      other Party (such consent not to be unreasonably withheld), except as may
      be required by applicable Law upon the advice of counsel and only if the
      disclosing Party provides the non-disclosing Party with an opportunity to
      first review the release or other public announcement; provided, however,
      that (i) Seller acknowledges and agrees that Purchaser may file this
      Agreement (and any of the Ancillary Agreements) as an exhibit to one or
      more registration statements or periodic filings under the federal
      securities laws of the United States solely with advance notice to Seller
      and (ii) promptly following the Closing the Parties will each have the
      option to issue a press release in a form consented to by the other Party
      (such consent not to be unreasonably withheld).

5.4   FURTHER ASSURANCES

      (a)   On and after the Closing, Seller will from time to time, at the
            request of Purchaser, (i) execute and deliver, or cause to be
            executed and delivered, such other reasonable instruments of
            conveyance and transfer (the forms of which shall be provided by
            Purchaser to Seller for execution and delivery) and take such other
            actions as Purchaser may reasonably request, in order to more
            effectively consummate the transactions contemplated hereby and by
            the Ancillary Agreements (including (x) to vest in Purchaser full
            title guarantee to the Assets and (y) assistance, as applicable, in
            the collection or reduction to possession of any of the Assets), and
            (ii) obtain all Consents and to resolve any and all impracticalities
            of assignment or transfer necessary to convey the Assets to
            Purchaser.

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      (b)   On and after the Closing, Purchaser shall from time to time, at the
            request of Seller, take such actions as Seller may reasonably
            request in order to more effectively consummate the transactions
            contemplated hereby and by the Ancillary Agreements (including
            Purchaser's assumption of the Assumed Liabilities).

6.    REPRESENTATIONS AND WARRANTIES OF SELLER

      Seller represents and warrants to Purchaser as follows:

6.1   TITLE TO, AND CONDITION OF, ASSETS

      (a)   Seller has good and valid title to the Assets, free and clear of any
            encumbrance, lien, mortgage, charge, restriction or liability of any
            kind whatsoever, whether equitable or legal (except for (i) those
            created by this Agreement, (ii) in the instance of the Contracts,
            the post-Closing performance obligations referred to in the
            Contracts which represent Assumed Liabilities, and (iii) an implied
            license granted under the Patents and Know-How to the Manufacturer
            as the manufacturer of the Compound (which license is terminable on
            reasonable notice at any time in the sole discretion of Seller)). As
            the result of the transactions contemplated hereby, Purchaser will,
            as of the Closing, be the sole and exclusive owner of all right,
            title and interest in and to all of the Assets, free and clear of
            any encumbrance, lien, mortgage, charge, restriction or liability of
            any kind whatsoever, whether equitable or legal (except for (x)
            those created by this Agreement, (y) in the instance of the
            Contracts, the post-Closing performance obligations referred to in
            the Contracts which represent Assumed Liabilities, and (z) an
            implied license granted under the Patents and Know-How to the
            Manufacturer as the manufacturer of the Compound (which license is
            terminable on reasonable notice at any time in the sole discretion
            of Purchaser)).

      (b)   Without limiting the provisions of Section 6.1(a) above, all right,
            title and interest to each of the Patents is owned solely by Seller
            and will, as of the Closing, be transferred to Purchaser. Seller has
            delivered to Purchaser complete and accurate copies of (i) all US
            and European Patents (including the patent applications included in
            the Patents as listed in the Patent Assignment Agreement) and (ii)
            all US and European file histories with respect to US and European
            Patents (including the US and European patent applications included
            in the Patents).

      (c)   To the Best of Seller's Knowledge, (i) there are no rights or assets
            (including intellectual property rights) owned or controlled by any
            party necessary to develop, make (assuming for this purpose that an
            experienced third party chemical manufacturer performs the set-up
            and scale-up of the API), use, sell, offer for sale, distribute,
            promote or import (anywhere in the World) the Compound or any
            Product for a Patented Indication or for Purchaser to perform its
            obligations under this Agreement, other than the Assets (all of
            which are being transferred to Purchaser pursuant to this Agreement
            as of the Closing), (ii) the use of the Assets by Purchaser or any
            Licensee to develop, make, use, sell, offer for sale, distribute,
            promote or import (anywhere in the World) the Compound or

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            any Product for a Patented Indication following the Closing will not
            infringe the intellectual property rights of any Person and (iii) no
            party is, or has prior to the Closing Date been, infringing the
            intellectual property rights represented by any of the Assets.

      (d)   Neither Seller nor, to the Best of Seller's Knowledge, any Person
            having had any interest at any time in any of the Assets has
            received any claim of infringement (actual or potential) of any
            intellectual property rights of any Person, or any request or demand
            from any Person for the licensing of any intellectual property
            rights of any such Person, arising out of the manufacture, use,
            sale, offer for sale, distribution, promotion or import of the
            Compound or any Product for a Patented Indication, and no basis
            exists for any such claim, request or demand. Seller and, to the
            Best of Seller's Knowledge, each Person having had any interest at
            any time in any of the Assets (or associated with invention, filing
            or prosecution of any Patent) has complied with any and all
            obligations with respect thereto to disclose to the relevant patent
            authorities, where required, any information known to any such
            Person to be material to the patentability of any claims in any
            pending or issued patent (including the obligation under United
            States federal regulations to disclose to the United States Patent
            and Trademark Office, during the pendency of any United States
            patent application included in the Patents, information known by any
            such Person to be material to the patentability of the pending
            claims in such application).

      (e)   Neither Seller nor, to the Best of Seller's Knowledge, any Person
            having had any interest at any time in any of the Assets has (i)
            assigned, transferred, licensed, pledged or otherwise encumbered any
            interest in any of the Assets (including the Patents) for any
            purpose, or agreed to do so (other than (x) for assignments,
            transfers, licenses, pledges or other encumbrances of rights prior
            to the Effective Date, so long as Seller holds all such rights (and
            transfers such rights to Purchaser) as of the Closing, and (y) as
            contemplated by this Agreement), and (ii) entered into any covenant
            not to compete or contract or agreement restricting the right to use
            or practice any of the Assets in any market or geographic area or
            with or without any Person.

      (f)   None of the Patents is involved in any interference or opposition
            proceeding, and no such proceeding is being (or has been) threatened
            with respect to any of the Patents. To the Best of Seller's
            Knowledge, as of the day prior to the Closing Date, any action
            required to be taken with respect to any of the Patents (including
            with respect to any correspondence from, or action by, the United
            States Patent and Trademark Office) for the three (3) months
            following the Closing Date is set forth in the Transition, Data
            Transfer and Services Plan. All docketing information with respect
            to the Patents (all of which will be transferred to Purchaser as of
            the Closing as part of the Records) is accurate and complete. To the
            Best of Seller's Knowledge (Seller not having conducted any searches
            or other enquiries other than those disclosed in the Data Room
            Documents), (i) other than, with respect to each Patent, the prior
            art that is of record in the file history for such Patent, no prior
            art exists that could reasonably form the basis for invalidating any
            claim in any of the Patents (in the instance of any patent
            application included within the Patents, this representation is made
            in respect of the claims as drafted at the Closing Date), and (ii)
            all priority claims have been properly made as to each Patent within
            the deadlines for making such claims as

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            set forth in the rules and procedures of the applicable patent
            authorities. As to matters other than prior art, to the Best of
            Seller's Knowledge and excepting as to any Patent the information
            disclosed in the file history for such Patent, no information exists
            within Seller or its Affiliates which could reasonably form the
            basis for invalidating or rendering unenforceable any claim in any
            Patent (in the instance of any patent application included within
            the Patents, this representation is made in respect of the claims as
            drafted at the Closing Date). No statement or assertion has been
            made to Seller (or, to the Best of Seller's Knowledge, to any Person
            having had any interest at any time in (or associated with
            invention, filing or prosecution of) any of the Patents) that (x)
            any claim in any of the Patents (as granted) is (or may be or become
            rendered) invalid or unenforceable or (y) any Person is aware of any
            basis as to the future potential invalidity or unenforceability of
            any claim of any of the Patents. In the instance of each patent
            application included within the Patents, and excepting as to any
            patent application the information disclosed in the file history for
            such patent application, (A) such patent application has been
            properly prepared and filed and has been diligently pursued through
            the Closing Date and, (B) to the Best of Seller's Knowledge, there
            are no material defects, relative to the filing and prosecution
            rules and procedures of the applicable patent authority, in the
            filing or prosecution of such patent application that could cause
            either (1) the invalidity or unenforceability of any patent that may
            issue from such patent application (this representation is made in
            respect of the claims as drafted at the Closing Date) or (2) a
            patent containing substantially the same claims as are set forth in
            such patent application as of the Closing Date not to issue from
            such application. All registration, maintenance and renewal fees in
            connection with each Patent have been paid.

      (g)   Seller and, to the Best of Seller's Knowledge, each Person having
            had any interest at any time in any of the Assets has (i) exercised
            Commercially Reasonable Efforts to protect all trade secrets
            included in the Know-How and (ii) disclosed such trade secrets only
            to Persons that have executed written confidentiality agreements
            governing the use or disclosure of such trade secrets (except to the
            extent such information has been disclosed in connection with making
            filings related to any Assets, the Compound or any Product for a
            Patented Indication with Governmental or Regulatory Authorities).

      (h)   Seller and, to the Best of Seller's Knowledge, each Person having
            had any interest at any time in any of the Assets has required all
            employees and consultants who have provided services in connection
            with the Compound, any Product for a Patented Indication, any of the
            Patents or the Know-How to execute agreements under which such
            employees and consultants have conveyed to Seller, directly or
            indirectly (i.e., through one or more Persons having had any
            interest at any time in any of the Assets), ownership of all
            inventions and developments conceived or created by them in the
            course of their employment with Seller or any Person having had any
            interest at any time in any of the Assets, to the extent that any
            such inventions or developments relate to the Compound, any Product
            for a Patented Indication, any of the Patents or the Know-How, and
            no obligation is owed to any such employee or consultant with
            respect thereto (including any royalty payment obligation). None of
            the activities of any such employee or consultant, in providing
            services to Seller or, to the Best of Seller's Knowledge, any Person
            having had any interest at any time in any of

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            the Assets and to the extent that any such services relate to the
            Compound, any Product for a Patented Indication, any of the Patents
            or the Know-How, violated any agreement between any such employee or
            consultant and any of their former employers.

      (i)   Seller has made available to Purchaser as part of the Data Room
            Documents true and correct copies of each Contract. Each Contract is
            valid and in full force and effect. Neither Seller nor any other
            party to any Contract is in breach of any Contract.

      (j)   All of the Regulatory Filings are in full force and effect and have
            been duly and validly issued. With respect to the Assets (including
            the Regulatory Filings) and the Compound or any Product for a
            Patented Indication, (i) all required reports have been made to
            appropriate Governmental or Regulatory Authorities, all appropriate
            actions have been taken and communications with third parties have
            been made and all required investigations of adverse drug
            experiences, contamination, tampering and product defects have been
            made and appropriate follow-up actions have been taken and (ii)
            there is no Action or Proceeding by any Governmental or Regulatory
            Authority pending or threatened. Seller has made available to
            Purchaser as part of the Data Room Documents complete and correct
            copies of all Regulatory Filings.

      (k)   Other than the Assets, there are no assets owned or controlled by
            Seller or its Affiliates that are necessary for Purchaser to (i)
            manufacture, distribute, promote, use, sell, offer for sale or
            import any Product for a Patented Indication or (ii) perform
            Purchaser's obligations under this Agreement.

6.2   COMPLIANCE WITH LAWS

      Seller and, to the Best of Seller's Knowledge, each Person having had any
      interest at any time in any of the Assets is, and at all times has been,
      in compliance with all applicable Laws relating to the Assets. Neither
      Seller nor any Person having had any interest at any time in any of the
      Assets has received any notice from any Governmental or Regulatory
      Authority alleging any failure to comply with any applicable Law relating
      to any of the Assets.

6.3   REGULATORY MATTERS AND LEGAL PROCEEDINGS.

      (a)   The Regulatory Filings are current and in full force and effect and
            include all regulatory filings and governmental registrations (i)
            made by or issued to Seller or to the Best of Seller's Knowledge any
            Person having had any interest at any time in any of the Assets or
            (ii) that relate to the Compound or any Product for a Patented
            Indication. Seller has made available to Purchaser as part of the
            Data Room Documents copies of all governmental correspondence in its
            possession (including copies of official notices, citations or
            decisions) relating to the Regulatory Filings. In the course of the
            development of the Compound or any Product for a Patented
            Indication, neither Seller nor, to the Best of Seller's Knowledge,
            any Person having had any interest at any time in any of the Assets
            has used any employee or consultant who (at the time such employee
            or consultant provided services with respect to the Compound or any
            Product for a

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            Patented Indication) was debarred by the FDA (or any other
            Governmental or Regulatory Authority) or the subject of pending
            disbarment proceedings by the FDA (or any other Governmental or
            Regulatory Authority).

      (b)   Without limiting the provisions of Section 6.2 above, Seller and, to
            the Best of Seller's Knowledge, the Manufacturer are (and have been)
            in compliance with all Laws applicable to the development,
            manufacture, labeling, testing and inspection of the Compound, any
            Product for a Patented Indication and the operation of manufacturing
            facilities used to manufacture the Compound or any Product for a
            Patented Indication, and with all applicable regulations, policies
            and procedures promulgated by the FDA (and any other Governmental or
            Regulatory Authority) with respect thereto. Neither Seller nor the
            Manufacturer has received (i) a notice that any recalls, field
            notifications or seizures have been ordered or threatened by any
            Governmental or Regulatory Authority with respect to the Compound or
            any Product for a Patented Indication or (ii) a warning letter or
            other similar written notice from the FDA (or any other Governmental
            or Regulatory Authority) regarding the Compound, any Product for a
            Patented Indication or the manufacturing facilities used to
            manufacture the Compound or any Product for a Patented Indication.

      (c)   There is no Action or Proceeding pending or, to the Best of Seller's
            Knowledge, threatened that relates to, affects or arises in
            connection with (i) any of the Assets, (ii) the Compound or any
            Product for a Patented Indication or (iii) Seller's performance
            under this Agreement or any of the Ancillary Agreements (including
            performance of any of the transactions contemplated hereby and
            thereby). Seller is not subject to any Order of any Governmental or
            Regulatory Authority that could reasonably be expected to impair or
            delay the ability of Seller to perform its obligations under this
            Agreement or any of the Ancillary Agreements.

      (d)   Seller has made available to Purchaser all Records (including all
            toxicology data, clinical studies, manufacturing process data and
            other information) regarding the Compound or any Product for a
            Patented Indication that either (i) are or could be material to
            Purchaser's decision to purchase the Assets or (ii) would be
            reportable to the FDA under any applicable Law. All such Records
            (including all toxicology data, clinical studies, manufacturing
            process data and other information) are accurate and complete and
            are what they purport to be.

6.4   AUTHORITY; BINDING NATURE OF AGREEMENT

      Seller has all necessary power and authority to execute and deliver this
      Agreement and the Ancillary Agreements and to perform its obligations
      under this Agreement and the Ancillary Agreements; and the execution,
      delivery and performance by Seller of this Agreement and the Ancillary
      Agreements have been duly authorized by all necessary action on the part
      of Seller and of its partners. This Agreement constitutes, and, upon
      execution thereof, each of the Ancillary Agreements will constitute, the
      valid and binding obligation of Seller, enforceable against Seller in
      accordance with its terms, subject to (i) laws of general application
      relating to bankruptcy, insolvency and the relief of debtors and (ii)
      rules of law governing specific performance, injunctive relief and other
      equitable remedies.

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                      Asset Purchase Agreement - Retigabine

6.5   NON-CONTRAVENTION

      The execution and delivery by Seller of this Agreement and the Ancillary
      Agreements and the consummation of the transactions contemplated hereby
      and thereby (including the transfer of the Assets from Seller to
      Purchaser) will not: (i) contravene or result in a violation or breach of
      any Law applicable to Seller, the Assets, the Compound or any Product for
      a Patented Indication; or (ii) result in the imposition of any lien,
      mortgage, charge or encumbrance upon any of the Assets, the Compound or
      any Product for a Patented Indication.

6.6   CONSENT

      Seller is not required to obtain any Consents from any Person (whether
      under a Contract or otherwise) at or prior to the Closing in connection
      with the execution and delivery of this Agreement or any of the Ancillary
      Agreements or the consummation of the transactions contemplated hereby and
      thereby (including the transfer of the Assets from Seller to Purchaser),
      except for Consents that Seller shall have obtained prior to the Closing
      ("SELLER'S REQUIRED CONSENTS") which are set forth on Schedule 5 hereto.

6.7   BROKERS

      Seller has not retained any broker in connection with the transactions
      contemplated hereunder or under any of the Ancillary Agreements. Purchaser
      has (and will have) no obligation to pay any brokers, finders, investment
      bankers, financial advisors or similar fees in connection with this
      Agreement or any of the Ancillary Agreements, or the consummation of the
      transactions contemplated hereby and thereby, by reason of any action
      taken by or on behalf of Seller.

6.8   DISCLOSURE

      None of the representations or warranties made by Seller in this Agreement
      or in any Ancillary Agreement, and none of the statements contained in any
      of the Data Room Documents, contains any untrue statement of a material
      fact or omits any material fact required to be stated therein or necessary
      to make the statements made therein, in light of the circumstances under
      which they were made, not misleading.

7.    REPRESENTATIONS AND WARRANTIES OF PURCHASER.

      Purchaser represents and warrants to Seller as follows:

7.1   AUTHORITY; BINDING NATURE OF AGREEMENT

      Purchaser has all necessary corporate power and authority to execute and
      deliver this Agreement and the Ancillary Agreements and to perform its
      obligations under this Agreement and the Ancillary Agreements; and the
      execution, delivery and performance by Purchaser of this Agreement and the
      Ancillary Agreements have been duly authorized by all necessary action on
      the part of Purchaser and its board of directors and

                                                                  Page: 40 of 61
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                      Asset Purchase Agreement - Retigabine

      stockholders. Purchaser, prior to the Closing, will have provided to
      Seller a copy of the resolutions adopted by the board of directors of
      Purchaser authorizing the execution, delivery and performance by Purchaser
      of this Agreement and the Ancillary Agreements and the consummation of the
      transactions contemplated hereby and thereby (including the purchase of
      the Assets from Seller by Purchaser). This Agreement constitutes, and,
      upon execution thereof, each of the Ancillary Agreements will constitute,
      the valid and binding obligation of Purchaser, enforceable against
      Purchaser in accordance with its terms, subject to (i) laws of general
      application relating to bankruptcy, insolvency and the relief of debtors
      and (ii) rules of law governing specific performance, injunctive relief
      and other equitable remedies.

7.2   NON-CONTRAVENTION

      The execution and delivery by Purchaser of this Agreement and the
      Ancillary Agreements and the consummation of the transactions contemplated
      hereby and thereby (including the transfer of the Assets from Seller to
      Purchaser) will not contravene or result in a violation or breach of any
      Law applicable to Purchaser, the Assets, the Compound or any Product.

7.3   CONSENT

      Purchaser is not required to obtain any Consent from any Person (whether
      under a Contract or otherwise) at or prior to the Closing in connection
      with the execution and delivery of this Agreement or any of the Ancillary
      Agreements or the consummation of the transactions contemplated hereby and
      thereby (including the transfer of the Assets from Seller to Purchaser),
      except for Consents that Purchaser shall have obtained prior to the
      Closing ("PURCHASER'S REQUIRED CONSENTS") which are set forth on Schedule
      4 hereto.

7.4   LEGAL PROCEEDINGS

      There is no Action or Proceeding pending or threatened that relates to,
      affects or arises in connection with Purchaser's performance under this
      Agreement or any of the Ancillary Agreements (including performance of any
      of the transactions contemplated hereby and thereby). Purchaser is not
      subject to any Order of any Governmental or Regulatory Authority that
      could reasonably be expected to impair or delay the ability of Purchaser
      to perform its obligations under this Agreement or any of the Ancillary
      Agreements.

7.5   BROKERS

      Purchaser has not retained any broker in connection with the transactions
      contemplated hereunder or under any of the Ancillary Agreements. Seller
      has (and will have) no obligation to pay any brokers, finders, investment
      bankers, financial advisors or similar fees in connection with this
      Agreement or any of the Ancillary Agreements, or the consummation of the
      transactions contemplated hereby and thereby, by reason of any action
      taken by or on behalf of Purchaser.

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7.6   DISCLOSURE

      None of the representations or warranties made by Purchaser in this
      Agreement or in any Ancillary Agreement, and none of the statements
      contained in any other materials with respect to the Assets furnished by
      Purchaser to Seller, contains any untrue statement of a material fact or
      omits any material fact required to be stated therein or necessary to make
      the statements made therein, in light of the circumstances under which
      they were made, not misleading.

8.    SURVIVAL

      The representations, warranties and covenants of Seller and Purchaser
      contained in this Agreement and in any Ancillary Agreement shall survive
      the Closing and remain in full force and effect indefinitely (including
      through the date which is five (5) years from the date of FDA Approval so
      as to afford the Parties the rights, if applicable, throughout the period
      contemplated by Section 9.3(b) below).

9.    INDEMNIFICATION

9.1   INDEMNIFICATION

9.1.1 By Seller

      From and after the Closing, Seller shall indemnify, reimburse, defend and
      hold harmless Purchaser and its Affiliates, and their respective officers,
      directors, employees, agents, successors and assigns, from and against any
      and all Damages to the extent incurred in connection with, arising out of,
      resulting from or incident to any of the following: (i) any inaccuracy or
      breach of any covenant, representation, warranty or other agreement of
      Seller herein or in any Ancillary Agreement; (ii) any use of any of the
      Assets, or any activities with respect to the Compound (including the
      development, manufacturing or testing of the Compound or any Product for
      the treatment of epilepsy), prior to the Closing; or (iii) the failure of
      Seller to pay, perform or discharge any Excluded Liabilities.

9.1.2 By Purchaser

      From and after the Closing, Purchaser shall indemnify, reimburse, defend
      and hold harmless Seller and its Affiliates, and their respective
      officers, directors, employees, agents, successors and assigns, from and
      against any and all Damages to the extent incurred in connection with,
      arising out of, resulting from or incident to any of the following: (i)
      any inaccuracy or breach of any covenant, representation, warranty or
      other agreement of Purchaser herein or in any Ancillary Agreement; (ii)
      any use of any of the Assets, or any activities with respect to the
      Compound (including the development, manufacture, testing, marketing,
      distribution or sale of the Compound or any Product), following the
      Closing; (iii) the failure of Purchaser to pay, perform or discharge any
      Assumed Liabilities; or (iv) enforcement of the Charge following an
      Enforcement Event.

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                      Asset Purchase Agreement - Retigabine

9.1.3 Procedures

      The indemnified Party (the "INDEMNIFIED PARTY") shall give the
      indemnifying Party (the "INDEMNIFYING PARTY") prompt written notice (an
      "INDEMNIFICATION CLAIM NOTICE") of any Damages or discovery of fact upon
      which such Indemnified Party intends to base a request for indemnification
      under this Section 9.1, but in no event shall the Indemnifying Party be
      liable for any Damages that result from any delay in providing such
      notice. Each Indemnification Claim Notice must contain a reasonable
      description of the claim and the nature and amount of such Damages (to the
      extent that the nature and amount of such Damages are known at such time).
      The Indemnified Party shall furnish promptly to the Indemnifying Party
      copies of all papers and official documents received in respect of any
      Damages. All indemnification claims in respect of a Party or its
      Affiliates, or their respective directors, officers, employees and agents
      (collectively, the "INDEMNITEES" and each an "INDEMNITEE"), shall be made
      solely by such Party to this Agreement.

9.1.4 Third Party Claims

      The obligations of an Indemnifying Party with respect to Damages arising
      from claims of any third party that are subject to indemnification as
      provided for in this Section 9.1 (a "THIRD PARTY CLAIM") shall be governed
      by and be contingent upon the following additional terms and conditions:

      (i)   At its option, the Indemnifying Party may assume the defense of any
            Third Party Claim by giving written notice to the Indemnified Party
            within thirty (30) days after the Indemnifying Party's receipt of an
            Indemnification Claim Notice. The assumption of the defense of a
            Third Party Claim by the Indemnifying Party shall not be construed
            as an acknowledgment that the Indemnifying Party is liable to
            indemnify any Indemnitee in respect of the Third Party Claim, nor
            shall it constitute a waiver by the Indemnifying Party of any
            defenses it may assert against any Indemnitee's claim for
            indemnification. Upon assuming the defense of a Third Party Claim,
            the Indemnifying Party may appoint as lead counsel in the defense of
            the Third Party Claim any legal counsel selected by the Indemnifying
            Party that is reasonably acceptable to the Indemnified Party. In the
            event the Indemnifying Party assumes the defense of a Third Party
            Claim, the Indemnified Party shall promptly deliver to the
            Indemnifying Party all original notices and documents (including
            court papers) received by any Indemnitee in connection with the
            Third Party Claim. Should the Indemnifying Party assume the defense
            of a Third Party Claim, except as provided in Section 9.1.4(ii)
            below, the Indemnifying Party shall not be liable to the Indemnified
            Party or any other Indemnitee for any legal expenses subsequently
            incurred by such Indemnified Party or other Indemnitee in connection
            with the analysis, defense or settlement of the Third Party Claim.
            In the event that it is ultimately determined that the Indemnifying
            Party is not obligated to indemnify, defend or hold harmless an
            Indemnitee from and against the Third Party Claim, the Indemnified
            Party shall reimburse the Indemnifying Party for any and all costs
            and expenses (including attorneys' fees and costs of suit) and any
            Damages incurred by the Indemnifying Party in its defense of the
            Third Party Claim with respect to such Indemnitee.

      (ii)  Without limiting Section 9.1.4(i) above, any Indemnitee shall be
            entitled to participate in, but not control, the defense of such
            Third Party Claim and to employ counsel of its choice for such
            purpose; provided, however, that such

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                      Asset Purchase Agreement - Retigabine

            employment shall be at the Indemnitee's own expense unless (x) the
            employment thereof has been specifically authorized by the
            Indemnifying Party in writing, (y) the Indemnifying Party has failed
            to assume the defense and employ counsel in accordance with Section
            9.1.4(i) above (in which case the Indemnified Party shall control
            the defense) or (z) if the Indemnified Party and the Indemnifying
            Party are both named parties to the proceeding and the Indemnified
            Party has reasonably concluded that there may be one or more legal
            defenses that are different from or in addition to those available
            to the Indemnifying Party (in which case the Indemnifying Party
            shall not have the right to assume the defense of such action on
            behalf of the Indemnified Party and the Indemnifying Party shall be
            liable for all legal expenses incurred by the Indemnified Party in
            furtherance thereof).

      (iii) With respect to any Damages relating solely to the payment of money
            damages in connection with a Third Party Claim and that will not
            result in the Indemnitee's becoming subject to injunctive or other
            relief or otherwise adversely affect the business of the Indemnitee
            in any manner, and as to which the Indemnifying Party shall have
            acknowledged in writing the obligation to indemnify the Indemnitee
            hereunder, the Indemnifying Party shall have the sole right to
            consent to the entry of any judgment, enter into any settlement or
            otherwise dispose of such Damages, on such terms as the Indemnifying
            Party, in its sole discretion, shall deem appropriate. With respect
            to all other Damages in connection with Third Party Claims, where
            the Indemnifying Party has assumed the defense of the Third Party
            Claim in accordance with Section 9.1.4(i) above, the Indemnifying
            Party shall have authority to consent to the entry of any judgment,
            enter into any settlement or otherwise dispose of such Damages;
            provided, however, that it obtains the prior written consent of the
            Indemnified Party (which consent shall not be unreasonably withheld
            or delayed). The Indemnifying Party shall not be liable for any
            settlement or other disposition of Damages by an Indemnitee that is
            reached without the written consent of the Indemnifying Party (which
            consent shall not be unreasonably withheld or delayed). Regardless
            of whether the Indemnifying Party chooses to defend or prosecute any
            Third Party Claim, no Indemnitee shall admit any liability with
            respect to, or settle, compromise or discharge, any Third Party
            Claim without the prior written consent of the Indemnifying Party.

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

                                                                  Page: 44 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

9.1.5 Expenses

      Where required as provided in this Section 9.1, the costs and expenses,
      including fees and disbursements of counsel, incurred by the Indemnified
      Party in connection with any claim shall be reimbursed on a quarterly
      basis by the Indemnifying Party, without prejudice to the Indemnifying
      Party's right to contest the Indemnified Party's right to indemnification
      and subject to refund in the event the Indemnifying Party is ultimately
      held not to be obligated to indemnity the Indemnified Party.

9.2   INSURANCE

      The amount of any Damages under Section 9.1 above shall be reduced by the
      amount of any insurance proceeds paid to the Indemnified Party relating to
      the claim at issue.

9.3   LIMIT ON RECOVERY

      It is agreed between the Parties that:

      (a)   the total amount of each Party's liability to the other in respect
            of the provisions of Sections 9.1.1 and 9.1.2 above, or otherwise in
            respect of a Party's breaches or non-fulfillment of any of the
            covenants, representations, warranties or other agreements of such
            Party herein or in any Ancillary Agreement, shall be limited to and
            in no event exceed (in the aggregate) the aggregate amount received
            by Seller from Purchaser as payment of the Purchase Price as of the
            date the related liability is determined or admitted in writing to
            be owing; and

      (b)   no claim may be initiated by either Party, whether in respect of the
            provisions of Sections 9.1.1 and 9.1.2 above or otherwise in respect
            of the other Party's breach or non-fulfillment of any of the
            covenants, representations, warranties or other agreements of the
            other Party herein or in any Ancillary Agreement, following the date
            which is five (5) years from the date of FDA Approval; provided,
            however, that this limitation shall not apply to any potential claim
            which arises from circumstances identified by either Party to the
            other Party in reasonable detail in a written notice delivered on or
            prior to the fifth (5th) anniversary of FDA Approval.

9.4   CURE

      To the extent that a Party's breach or non-fulfillment of any of the
      covenants, representations, warranties or other agreements of such Party
      herein or in any Ancillary Agreement is capable of cure within a ninety
      (90) day period (and where (i) it is within the breaching Party's power to
      cure within such period, (ii) the breaching Party promptly commences and
      pursues Commercially Reasonable Efforts to cure within such period and
      (iii) the non-breaching Party will not be harmed by a ninety (90) day
      delay in pursuing its remedies against the breaching Party), the
      non-breaching Party shall afford the breaching Party a reasonable
      opportunity to cure the breach or non-fulfillment at issue during such
      ninety (90) day period.

                                                                  Page: 45 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

10.   MISCELLANEOUS

10.1  TERMINATION, RESCISSION, REPUDIATION

      Following the execution of this Agreement by the Parties, and excepting
      (i) Purchaser's rights as contemplated by Section 2.4(a) above (i.e., to
      terminate this Agreement in certain circumstances prior to a Closing) and
      (ii) any instance involving a fraudulent act of Seller, Purchaser shall
      not be entitled to terminate, rescind or repudiate this Agreement at any
      time prior to the payment to Seller of the Upfront Payments.

10.2  CONFIDENTIALITY

      (a)   In addition to the restrictions contained in Section 5.3 above,
            after the Closing, no Party (a "DISCLOSING PARTY") shall, without
            the prior written consent of the other Party (the "NON-DISCLOSING
            PARTY"), disclose to any Person Confidential Information (as defined
            below) of the Non-disclosing Party, except to a Disclosing Party's
            employees or representatives who need to know such information for
            any reason contemplated by this Agreement (and then only to the
            extent that such persons are under an obligation to maintain the
            confidentiality of the Confidential Information), or use any
            Confidential Information of the Non-disclosing Party for any reason
            other than contemplated by this Agreement unless (i) such Disclosing
            Party has exercised its Commercially Reasonable Efforts to consult
            with the Non-disclosing Party and obtain the Non-disclosing Party's
            prior written consent in a timely manner and (ii) the Disclosing
            Party has been advised by counsel that disclosure is required to be
            made under applicable Law or the requirements of a Governmental or
            Regulatory Authority. In the event that the Disclosing Party is
            requested or required by documents subpoena, civil investigative
            demand, interrogatories, requests for information or other similar
            process to disclose any Confidential Information of the
            Non-disclosing Party, the Disclosing Party shall provide the
            Non-disclosing Party with prompt written notice of such request,
            demand or other similar process so that the Non-disclosing Party may
            seek an appropriate protective order or, if such request, demand or
            other similar process is mandatory, waive the Disclosing Party's
            compliance with the provisions of this Section 10.2 as appropriate.

      (b)   The term "CONFIDENTIAL INFORMATION" as used in this Section 10.2
            means the following, whether disclosed prior to or after the
            Effective Date: (i) as to Purchaser, all confidential information
            relating to the business and operations of Purchaser and its
            Affiliates (including the Assets, the Compound, any Product and the
            Assumed Liabilities), and (ii) as to Seller, all confidential
            information relating to the business and operations of Seller and
            its Affiliates (including the Excluded Liabilities or other
            obligations other than the Assumed Liabilities, but excluding the
            Assets, the Compound, any Product and the Assumed Liabilities);
            provided, however, that the term "Confidential Information" does not
            include information which (x) becomes generally available to the
            public other than as a result of disclosure by the Disclosing Party
            or (y) becomes available to the Disclosing Party after the Closing
            on a non-confidential basis from a source other than the
            Non-disclosing Party (provided that such source is not bound by a
            confidentiality agreement with the Non-disclosing Party).

                                                                  Page: 46 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

      (c)   This Section 10.2 supercedes and replaces in its entirety that
            certain agreement relating to confidentiality dated October 21, 2002
            and between Seller and Purchaser.

      (d)   The Parties acknowledge that Seller may, subject to the provisions
            regarding confidentiality set forth in this Section 10.2, retain
            copies of the Records.

10.3  DISPUTE RESOLUTION

      (a)   Any dispute, difference or claim arising out of or in connection
            with this Agreement, including any question regarding its existence,
            validity or termination, shall be referred to and settled by
            arbitration.

      (b)   The seat of arbitration shall be England, to be conducted in London
            and in the English language.

      (c)   The substantive issues between the parties shall be settled in
            accordance with the laws of England.

      (d)   The arbitral tribunal shall comprise three arbitrators who shall be
            appointed in the following manner:

            (i)   Each Party shall appoint one of the two Party-appointed
                  arbitrators. The third arbitrator, who shall act as the
                  Chairman of the arbitral tribunal, shall be appointed by the
                  Party-appointed arbitrators, and written notice of such
                  appointment shall be given to both Parties.

            (ii)  If a Party fails to make an appointment of an arbitrator
                  within 14 days of receipt of notification of the appointment
                  of an arbitrator by the other Party, and/or if the two
                  Party-appointed arbitrators fail, within 14 days of the
                  appointment of the second arbitrator, to agree upon the
                  appointment of the Chairman of the arbitral tribunal, then any
                  such vacancy shall, on the written request of either of the
                  Parties, be made by the President of the Association of
                  British Pharmaceutical Industry (ABPI) and both Parties shall
                  be notified in writing of such appointment.

            (iii) Save as provided for in sub-clause (l) below, if an arbitrator
                  refuses to act, resigns, is incapable of acting, or dies, the
                  vacancy arising shall be supplied in the same manner as that
                  by which such arbitrator was originally appointed.

      (e)   Within 14 days of receipt of notice of the appointment of the
            Chairman of the arbitral tribunal, the initiating Party shall
            deliver to the responding Party a Statement of Case, setting out the
            initiating Party's claims and submissions in support of such claims,
            together with a copy of any documents the initiating Party intends
            to rely on.

      (f)   Within 28 days of receipt of the initiating Party's Statement of
            Case, the responding Party shall serve on the initiating Party an
            Answer, which shall include any counterclaims, together with a copy
            of any documents the responding Party intends to rely on.

                                                                  Page: 47 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

      (g)   If the Answer includes any counterclaims, the initiating Party
            shall, within 28 days of receipt of the Answer, serve on the
            responding Party a Reply, together with a copy of any further
            documents which the initiating Party intends to rely on.

      (h)   A copy of any document served by one Party on the other shall be
            sent, at the time of such service, to each of the arbitrators. All
            communications passing between one Party and the arbitral tribunal
            shall be copied immediately to the other Party.

      (i)   The arbitral tribunal shall, as soon as possible after it has been
            constituted, direct the holding of a preliminary meeting in order to
            establish the procedure for the arbitration. Subject to any
            mandatory provisions of the laws of England, such procedure shall be
            that which is agreed by the Parties or, failing such agreement, that
            directed by the arbitral tribunal.

      (j)   Unless the Parties agree otherwise in writing, the arbitral tribunal
            shall hold a hearing at which each Party may make oral submissions
            with regard to the substantive issues.

      (k)   If either Party shall fail to comply with a procedural direction
            made by the arbitral tribunal, the arbitral tribunal may
            nevertheless continue with the arbitration and make its award.

      (l)   Any decision or award of the arbitral tribunal shall, if necessary,
            be made by a majority. If no majority can be obtained, the Chairman
            shall proceed as if the Chairman were a sole arbitrator. If an
            arbitrator fails or refuses to take part in the arbitration at any
            time after the hearing referred to in sub-clause (j) above has
            commenced, the remaining arbitrators may, if they consider such
            failure or refusal to be unreasonable, continue with the arbitration
            and make an award. In such event, the provisions of sub-clause
            (d)(iii) above shall not apply.

      (m)   The award of the arbitral tribunal shall be final and binding upon
            the Parties.

      (n)   The tribunal shall have such power to order any relief on a
            provisional basis which it would have power to grant on a final
            award.

      (o)   Nothing in this Section 10.3 shall be deemed to preclude a Party
            from bringing suit against the other Party in a court of competent
            jurisdiction to (i) enforce, or enjoin infringement of, such Party's
            intellectual property rights or (ii) pursue a claim in respect of
            any breach of the provisions of Sections 5.3 or 10.2 above.

10.4  FORCE MAJEURE

      Notwithstanding any other provision of this Agreement or any Ancillary
      Agreement to the contrary, neither Party will be liable for any failure to
      perform its obligations under this Agreement or any Ancillary Agreement to
      the extent that such performance is reasonably prevented by any Force
      Majeure Event. In the event that either Party believes a Force Majeure
      Event has occurred which has affected the performance of its obligations
      hereunder or under any Ancillary Agreement, such Party shall promptly
      provide written notice thereof to the other Party.

                                                                  Page: 48 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

10.5  HARDSHIP

      If, after the Closing, either Party shall provide notice to the other
      Party that any provision of this Agreement has, based upon facts or
      circumstances which arise after (or were otherwise unknown to such Party
      as of) the Closing Date, come to represent a commercially unreasonable or
      impractical hardship, then (i) the Parties agree to negotiate, in good
      faith, regarding a possible amendment to this Agreement which will be
      intended to address or overcome such hardship and, to the maximum extent
      possible, preserve the intended benefits of this Agreement for the
      non-affected Party and, (ii) only if the Parties are able to negotiate an
      amendment to this Agreement which is acceptable to both Parties
      (including, as to the non-affected Party, preserving the intended benefits
      of this Agreement), the Parties agree to execute, and thereafter to abide
      by, the provisions of such amendment.

10.6  NOTICES

      All notices, requests and other communications hereunder must be in
      writing and will be deemed to have been duly given only if delivered
      personally against written receipt or by facsimile transmission with
      answer back confirmation or mailed (postage prepaid by certified or
      registered mail, return receipt requested) or by internationally
      recognized courier that maintains records of delivery to the Parties at
      the following addresses or facsimile numbers:

      If to Purchaser to:      Xcel Pharmaceuticals, Inc.
                               6363 Greenwich Drive, Suite 100
                               San Diego, California 92122
                               United States
                               Attention: Corporate Secretary
                               Facsimile: (858) 202-2799

      With copies to:          Pillsbury Winthrop LLP
                               11682 El Camino Real, Suite 200
                               San Diego, California 92130
                               United States
                               Attention: Mike Hird
                               Facsimile: (858) 509-4010

      If to Seller to:         VIATRIS GmbH & Co. KG
                               Weismullerstra(beta)e 45
                               60314 Frankfurt
                               Germany
                               Attention: Business Development
                               Facsimile: +49-69-4001-2914

      With copies to:          Lovells
                               Atlantic House, Holborn Viaduct
                               London EC1A 2FG
                               England
                               Attention: Nicola Dagg
                               Facsimile: +44 (0) 20 7296 2001

                                                                  Page: 49 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

      All such notices, requests and other communications will (i) if delivered
      personally to the address as provided in this Section 10.6, be deemed
      given upon receipt, (ii) if delivered by facsimile to the facsimile number
      as provided in this Section 10.6, be deemed given upon receipt by the
      sender of the answer back confirmation, and (iii) if delivered by mail in
      the manner described above or by overnight courier to the address as
      provided in this Section 10.6, be deemed given upon receipt (in each case
      regardless of whether such notice, request or other communication is
      received by any other Person to whom a copy of such notice, request or
      other communication is to be delivered pursuant to this Section 10.6). Any
      Party from time to time may change its address, facsimile number or other
      information for the purpose of notices to that Party by giving notice
      specifying such change to the other Parties hereto in accordance with the
      terms of this Section 10.6.

10.7  ENTIRE AGREEMENT

      This Agreement, together with all Exhibits and Schedules hereto and all
      other documents and instruments referenced herein or delivered in
      connection herewith (including the Ancillary Agreements), constitute the
      whole and only agreement between the Parties relating to the subject
      matter hereof and supersede and extinguish any prior drafts, previous
      agreements, undertakings, representations, warranties and arrangements of
      any nature whatsoever, whether or not in writing between the Parties, in
      connection with the subject matter hereof.

10.8  WAIVER

      Any term or condition of this Agreement may be waived at any time by the
      Party that is entitled to the benefit thereof, but no such waiver shall be
      effective unless set forth in a written instrument duly executed by or on
      behalf of the Party waiving such term or condition. No waiver by any Party
      hereto of any term or condition of this Agreement, in any one or more
      instances, shall be deemed to be or construed as a waiver of the same or
      any other term or condition of this Agreement on any future occasion. All
      remedies available to a Party under this Agreement will be independent,
      cumulative and not alternative, and without prejudice to all other rights
      available to such Party, whether as a matter of common law, statute,
      custom or otherwise. Nothing in this Agreement or in any other document
      referred to herein (including the Ancillary Agreements) shall be read or
      construed as excluding any Liability or remedy as a result of fraud.

10.9  AMENDMENT

      This Agreement may be amended, supplemented or modified only by a written
      instrument duly executed by each Party hereto.

10.10 THIRD PARTY BENEFICIARIES

      The terms and provisions of this Agreement are intended solely for the
      benefit of each Party hereto and their respective successors or permitted
      assigns and it is not the intention of the Parties to confer third-party
      beneficiary rights upon any other Person. Except as otherwise expressly
      stated herein, nothing in this Agreement confers any rights on any Person
      (other than the Parties) pursuant to the Contracts (Rights of Third
      Parties) Act 1999 (English Law).

                                                                  Page: 50 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

10.11 ASSIGNMENT AND BINDING EFFECT

      Neither Party may assign any of its rights or delegate any of its
      obligations under this Agreement to any other Person without the prior
      written consent of the other Party; provided, however, that (i) Seller may
      assign to any Person its right to receive all or any portion of any of the
      cash payments to be made by Purchaser pursuant to Sections 3.2 or 3.3
      above, (ii) Purchaser may assign any or all of its rights and obligations
      under this Agreement to (x) any Successor or (y) any other Person,
      provided that any such Successor or other Person agrees to be bound by the
      provisions of this Agreement (including the provisions of Section 3.10
      above) and (A) Seller consents to such assignment (such consent not to be
      unreasonably withheld), (B) Purchaser remains liable for the performance
      of its obligations under this Agreement, (C) the book value of such
      Successor or other Person's net assets are in excess of the book value of
      Purchaser's net assets as at (or immediately following) the date of the
      assignment or (D) the Upfront Payments and all Milestone Payments have
      been made, and (iii) Purchaser may license any or all of its rights under
      this Agreement to one or more Licensees.

10.12 HEADINGS

      The headings used in this Agreement have been inserted for convenience of
      reference only and do not define or limit the provisions hereof.

10.13 SEVERABILITY

      If any provision of this Agreement is held to be illegal, invalid or
      unenforceable under any present or future applicable Law, and if the
      rights or obligations of any Party under this Agreement will not be
      materially and adversely affected thereby, (a) such provision will be
      fully severable, (b) this Agreement will be construed and enforced as if
      such illegal, invalid or unenforceable provision had never comprised a
      part hereof, (c) the remaining provisions of this Agreement will remain in
      full force and effect and will not be affected by the illegal, invalid or
      unenforceable provision or by its severance herefrom, and (d) in lieu of
      such illegal, invalid or unenforceable provision, there will be added
      automatically as a part of this Agreement a legal, valid and enforceable
      provision as similar to terms of such illegal, invalid or unenforceable
      provision as may be possible and reasonably acceptable to the Parties.

10.14 GOVERNING LAW

      This Agreement (together with all documents to be entered into pursuant to
      it which are not expressed to be governed by another law) shall be
      governed by, construed and take effect in accordance with English Law.

10.15 DOLLAR DENOMINATION AND FOREIGN SALES

      Notwithstanding any provision herein to the contrary:

      (a)   All amounts referenced herein as "Dollars" or with a "$" symbol
            shall mean, and be deemed expressed in terms of, United States
            Dollars.

                                                                  Page: 51 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

      (b)   The remittance of any amounts from Purchaser to Seller with respect
            to amounts received by Purchaser in a currency other than United
            States Dollars (for example, as may be the case with Earn-Out on
            Sales from Western Europe or the Rest-of-World) shall be payable to
            Seller in United States Dollar equivalents at the official rate of
            exchange of such currency as quoted in the Wall Street Journal for
            the last business day of the calendar quarter as to which any such
            payment relates.

      (c)   If the transfer, or the conversion into a United States Dollar
            equivalent, of any remittance referred to in Section 10.15(b) above
            is not lawful or possible, the payment of such remittance by
            Purchaser to Seller shall be made by the deposit thereof, in the
            currency of the country at issue, to the credit and account of
            Seller or its nominee in any commercial bank or trust company of
            Seller's choice located in that country, prompt written notice of
            which shall be given by Purchaser to Seller.

10.16 EXPENSES

      Except as otherwise expressly provided in this Agreement, each Party shall
      pay its own expenses and costs incidental to the preparation of this
      Agreement and to the consummation of the transactions contemplated hereby.

10.17 COUNTERPARTS

      This Agreement may be executed in any number of counterparts and by
      facsimile, each of which will be deemed an original, but all of which
      together will constitute one and the same instrument.

10.18 INTERPRETATION OF AGREEMENT.

      (a)   Each Party acknowledges that it has participated in the drafting of
            this Agreement, and any applicable rule of construction to the
            effect that ambiguities are to be resolved against the drafting
            party will not be applied in connection with the construction or
            interpretation of this Agreement.

      (b)   Whenever required by the context hereof, the singular number will
            include the plural, and vice versa; the masculine gender will
            include the feminine and neuter genders; and the neuter gender will
            include the masculine and feminine genders.

      (c)   As used in this Agreement, the words "include" and "including," and
            variations thereof (including "for example"), will not be deemed to
            be terms of limitation, and will be deemed to be followed by the
            words "without limitation."

                                                                  Page: 52 of 61
<PAGE>

                      Asset Purchase Agreement - Retigabine

      (d)   Unless the context otherwise requires, references in this Agreement
            to "Sections," "Schedules" and "Exhibits" are intended to refer to
            Sections of, and Schedules and Exhibits to, this Agreement.

IN WITNESS THEREOF the Parties have executed this Agreement on the day and year
first above mentioned.

Frankfurt, January 22, 2004          Frankfurt, January 22, 2004

VIATRIS GMBH & CO. KG                XCEL PHARMACEUTICALS, INC.
Signed on behalf of                  Signed on behalf of

/s/ DR. HEINZ KIPPER                 /s/ MICHAEL T. BORER
----------------------------         ------------------------------------------
By: DR. HEINZ KIPPER                 By: MICHAEL T. BORER
Its: Chief Executive Officer         Its: President and Chief Executive Officer

                                                                  Page: 53 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

                                    SCHEDULES

                                       TO

                          THE ASSET PURCHASE AGREEMENT

                                                                  Page: 54 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

                                   SCHEDULE 1

                                ASSUMED CONTRACTS

CONTRACT RESEARCH ORGANISATION (CRO) / CLINICAL STUDY SERVICES:

<TABLE>
<CAPTION>
YEAR OF AGREEMENT                 NAME & ADDRESS
-----------------            ------------------------
<S>                          <C>
                             [CONFIDENTIAL TREATMENT]
</TABLE>

CONSULTANTS:

<TABLE>
<CAPTION>
YEAR OF AGREEMENT                 NAME & ADDRESS
-----------------            ------------------------
<S>                          <C>
                             [CONFIDENTIAL TREATMENT]
</TABLE>

                                                                  Page: 55 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

INVESTIGATOR'S STATEMENTS:

<TABLE>
<CAPTION>
YEAR OF AGREEMENT                 NAME & ADDRESS
-----------------            ------------------------
<S>                          <C>
                             [CONFIDENTIAL TREATMENT]
-----------------            ------------------------
-----------------            ------------------------
-----------------            ------------------------
-----------------            ------------------------
-----------------            ------------------------
</TABLE>

                                                                  Page: 56 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

<TABLE>
<CAPTION>
YEAR OF AGREEMENT                 NAME & ADDRESS
-----------------            ------------------------
<S>                          <C>
                             [CONFIDENTIAL TREATMENT]
-----------------            ------------------------
-----------------            ------------------------
-----------------            ------------------------
-----------------            ------------------------
</TABLE>

                                                                  Page: 57 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

                                   SCHEDULE 2

                              PURCHASER'S CREDITORS

1.    REGIMENT CAPITAL III, L.P.
      70 Federal Street, 7th Floor
      Boston, Massachusetts 02110
      USA
      Attention: Richard Miller
      Telephone: (617) 488-1600
      Facsimile: (617) 488-1660

      with a copy to:

2.    PAUL, HASTINGS, JANOFSKY & WALKER LLP
      515 South Flower Street, 25th Floor
      Los Angeles, California 90071
      USA
      Attention: John Hilson, Esq.
      Telephone: (213) 683-6000
      Facsimile: (213) 627-0705

                                                                  Page: 58 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

                                   SCHEDULE 3

                               REGULATORY FILINGS

1.    IND No. 53,950 ("Retigabine (GKE-941, D-23129) Capsules") - ongoing

2.    CTX No. 08336 / 0103 / A, ASTA Medica AG - expired

3.    CTX No. 0011 / 0246/ A, Wyeth - expired

                                                                  Page: 59 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

                                   SCHEDULE 4

                          PURCHASER'S REQUIRED CONSENTS

1.    Regiment Capital III, L.P.

2.    Purchaser's Board of Directors

                                                                  Page: 60 of 61
<PAGE>

Asset Purchase Agreement-Retigabine                                    SCHEDULES

                                   SCHEDULE 5

                           SELLER'S REQUIRED CONSENTS

                                 Not applicable

                                                                  Page: 61 of 61<PAGE>

                                                                    EXHIBIT 10.8

================================================================================

              AMENDED AND RESTATED DIASTAT ASSET PURCHASE AGREEMENT

                                  by and among

          ELAN PHARMACEUTICALS, INC., ELAN PHARMA INTERNATIONAL LIMITED

                                       and

                           XCEL PHARMACEUTICALS, INC.

                           dated as of March 31, 2001

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
<S>                                                                                                             <C>
ARTICLE I. Definitions........................................................................................    1

   Section 1.01   Defined Terms...............................................................................    1

   Section 1.02   Construction of Certain Terms and Phrases...................................................    9

ARTICLE II. Purchase and Sale of Assets.......................................................................    9

   Section 2.01   Purchase and Sale of Assets.................................................................    9

   Section 2.02   Assignability and Consents..................................................................    9

ARTICLE III. Assumption of Liabilities........................................................................   10

   Section 3.01   Assumption of Assumed Liabilities...........................................................   10

ARTICLE IV. Purchase Price and Payment........................................................................   10

   Section 4.01   Purchase Price..............................................................................   10

   Section 4.02   Purchase Price Adjustment...................................................................   12

   Section 4.03   Purchase of Product Inventory...............................................................   13

   Section 4.04   Payment of Sales, Use and Other Taxes.......................................................   14

   Section 4.05   Impact of Failure to Make Payments..........................................................   14

ARTICLE V. Closing............................................................................................   14

   Section 5.01   Time and Place..............................................................................   14

   Section 5.02   Deliveries at Closing.......................................................................   14

ARTICLE VI. Representations and Warranties of Seller..........................................................   15

   Section 6.01   Books and Records...........................................................................   15

   Section 6.02   Corporate Organization......................................................................   16

   Section 6.03   Authority of Seller.........................................................................   16

   Section 6.04   Consents and Approvals......................................................................   16

   Section 6.05   Non-Contravention...........................................................................   17

   Section 6.06   Assumed Contracts...........................................................................   17

   Section 6.07   Purchased Assets Generally..................................................................   17

   Section 6.08   Intellectual Property Rights................................................................   18

   Section 6.09   Litigation..................................................................................   18

   Section 6.10   Compliance with Law.........................................................................   18
</TABLE>

                                       -i-
<PAGE>

<TABLE>
<S>                                                                                                              <C>
   Section 6.11   Regulatory Matters..........................................................................   19

   Section 6.12   Brokers.....................................................................................   19

   Section 6.13   Disclosure..................................................................................   19

   Section 6.14   No Other Warranties.........................................................................   19

ARTICLE VII. Representations and Warranties of Buyer..........................................................   19

   Section 7.01   Corporate Organization......................................................................   20

   Section 7.02   Authority of Buyer..........................................................................   20

   Section 7.03   Consents and Approvals......................................................................   20

   Section 7.04   Non-Contravention...........................................................................   21

   Section 7.05   Litigation..................................................................................   21

   Section 7.06   Brokers.....................................................................................   21

ARTICLE VIII. Covenants of the Parties........................................................................   21

   Section 8.01   Non-Assertion of Intellectual Property Rights...............................................   21

   Section 8.02   Cooperation.................................................................................   22

   Section 8.03   Access......................................................................................   22

   Section 8.04   Public Announcements........................................................................   22

   Section 8.05   Non-Solicitation............................................................................   22

   Section 8.06   Corporate Names.............................................................................   23

   Section 8.07   Handling of Product Inventory...............................................................   23

   Section 8.08   Differentiation of Products.................................................................   23

   Section 8.09   Regulatory Matters..........................................................................   24

   Section 8.10   Product Returns, Chargebacks and Rebates....................................................   24

   Section 8.11   Adverse Experience Reports..................................................................   27

   Section 8.12   Multi-Product Contracts.....................................................................   27

   Section 8.13   Manner of Business..........................................................................   27

   Section 8.14   Assumption of Ongoing Clinical Trials.......................................................   27

   Section 8.15   Compliance Audits...........................................................................   28

   Section 8.16   Labeling Requirements.......................................................................   28

   Section 8.17   Further Assurances..........................................................................   28

ARTICLE IX. Conditions to the Obligations of Seller...........................................................   28

   Section 9.01   Representations, Warranties and Covenants...................................................   28

   Section 9.02   No Actions or Proceedings...................................................................   29
</TABLE>

                                      -ii-
<PAGE>

<TABLE>
<S>                                                                                                              <C>
   Section 9.03   Consents....................................................................................   29

   Section 9.04   Other Closing Deliveries....................................................................   29

   Section 9.05   Product Acquisition Financing Agreement.....................................................   29

   Section 9.06   Completion of Equity Financing..............................................................   29

ARTICLE X. Conditions to the Obligations of Buyer.............................................................   29

   Section 10.01  Representations, Warranties and Covenants...................................................   29

   Section 10.02  No Actions or Proceedings...................................................................   30

   Section 10.03  Consents....................................................................................   30

   Section 10.04  Other Closing Deliveries....................................................................   30

   Section 10.05  Product Acquisition Financing Agreement.....................................................   30

ARTICLE XI. Indemnification...................................................................................   30

   Section 11.01  Survival of Representations, Warranties, Etc................................................   30

   Section 11.02  Indemnification.............................................................................   30

   Section 11.03  Limitations.................................................................................   33

   Section 11.04  Limitation of Liability.....................................................................   34

ARTICLE XII. Miscellaneous....................................................................................   34

   Section 12.01  Confidentiality.............................................................................   34

   Section 12.02  Notices.....................................................................................   35

   Section 12.03  Entire Agreement............................................................................   36

   Section 12.04  Waiver......................................................................................   36

   Section 12.05  Amendment...................................................................................   36

   Section 12.06  Third Party Beneficiaries...................................................................   36

   Section 12.07  Assignment; Binding Effect..................................................................   36

   Section 12.08  Headings....................................................................................   37

   Section 12.09  Severability................................................................................   37

   Section 12.10  Governing Law...............................................................................   37

   Section 12.11  Expenses....................................................................................   37

   Section 12.12  Counterparts................................................................................   37

   Section 12.13  Schedules, Exhibits and Other Agreements....................................................   37
</TABLE>

                                     -iii-
<PAGE>

              AMENDED AND RESTATED DIASTAT ASSET PURCHASE AGREEMENT

      This Amended and Restated Diastat Asset Purchase Agreement (this
"Agreement") is made and entered into as of March 31, 2001, by and among Xcel
Pharmaceuticals, Inc., a Delaware corporation ("Buyer"), Elan Pharmaceuticals,
Inc., a Delaware corporation ("EPI"), and Elan Pharma International Limited, a
corporation organized under the laws of the Republic of Ireland ("EPIL") (EPI
and EPIL are hereinafter sometimes collectively referred to as "Seller").

                                    RECITALS

      WHEREAS, subject to the terms and conditions of this Agreement, Seller
sold to Buyer, and Buyer purchased from Seller, the Purchased Assets (as defined
below) pursuant to the terms of that certain Diastat Asset Purchase Agreement
(the "Prior Agreement") dated as of March 31, 2001, by and among Buyer, EPI and
EPIL; and

      WHEREAS, the Parties desire to amend and restate the Prior Agreement as
set forth herein effective as of March 31, 2001.

                                    AGREEMENT

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the Parties agree
to amend and restate the Prior Agreement as follows:

                             ARTICLE I. DEFINITIONS

      SECTION 1.01 DEFINED TERMS.

      As used in this Agreement, the following defined terms have the meanings
described below:

      (a) "Action or Proceeding" means any action, suit, proceeding,
arbitration, Order, inquiry, hearing, assessment with respect to fines or
penalties or litigation (whether civil, criminal, administrative, investigative
or informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental or Regulatory Authority.

      (b) "Activity Date" has the meaning set forth in Section 8.10(d).

      (c) "Adverse Effect" means an effect or condition that individually or in
the aggregate or together with all other events, or changes, or occurrences is,
or reasonably could be expected to be, (i) materially adverse to the Purchased
Assets, the business, results of operations, or financial condition of the
Business, or the Product or (ii) materially adverse to the ability of the Seller
to consummate the transactions contemplated by this Agreement.

      (d) "Affiliate" means, with respect to any Person, any other Person which
controls, is controlled by or is under common control with such person or
entity. A person or entity shall be

<PAGE>

regarded as in control of another entity if it owns or controls, directly or
indirectly, (i) in the case of corporate entities at least fifty percent (50%)
(or the maximum ownership interest permitted by law) of the equity securities in
the subject entity entitled to vote in the election of directors and, (ii) in
the case of an entity that is not a corporation, at least fifty percent (50%)
(or the maximum ownership interest permitted by law) of the equity securities or
other ownership interests with the power to direct the management and policies
of such subject entity or entitled to elect the corresponding management
authority, provided, however, that the term "Affiliate" shall not include
subsidiaries or other entities in which a Party or its Affiliates owns a
majority of the ordinary voting power necessary to elect a majority of the board
of directors or other governing board, but is restricted from electing such
majority by contract or otherwise, until such time as such restrictions are no
longer in effect.

      (e) "Agreement" has the meaning set forth in the Preamble hereto.

      (f) "Assets and Properties" of any Person means all assets and properties
of any kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person, including cash, cash equivalents,
accounts and notes receivable, chattel paper, documents, instruments, general
intangibles, regulatory approvals, equipment, inventory, goods and intellectual
property.

      (g) "Assumed Contract" means any Contract or portion of a Contract to
which Seller or any of its Affiliates is a party that relates exclusively to the
manufacture, marketing, sale or distribution of the Product, including those
Contracts listed on Section 6.06 of the Seller Disclosure Schedule, but
excluding any Multi-Product Contracts.

      (h) "Assumed Liabilities" means (i) all accounts payable incurred by Buyer
or an Affiliate of Buyer with respect to the Business subsequent to the Closing,
(ii) all Liabilities and obligations that Buyer has expressly assumed or agreed
to assume under this Agreement, (iii) all Liabilities and obligations under or
pursuant to the Assumed Contracts to be performed following the Closing, but
only to the extent that the obligations to pay or perform under such
Liabilities, obligations or Assumed Contracts arise following the Closing and
relate to goods or services or other benefit received by Buyer after the
Closing, (iv) except as otherwise provided herein, all state and federal
Medicaid/Medicare rebates related to Product sold after Closing, (v) except as
otherwise provided herein, all credits, chargeback rebates, utilization based
rebates, reimbursements and similar payments to wholesalers and other
distributors, buying groups, insurers and other institutions related to Product
that is sold after Closing, (vi) all Liabilities and obligations relating to
product liability claims or threatened claims or injuries caused by Product sold
by Buyer after the Closing, and (vii) except as otherwise provided herein, all
other Liabilities and obligations that arise out of or are related to the
ownership of the Purchased Assets (including the Regulatory Approvals) or the
Product Inventory, or operation of the Business from and after the Closing.

      (i) "Books and Records" means all files, documents, instruments, papers,
books and records (scientific or financial), excluding Marketing Materials,
owned by Seller or an Affiliate of Seller relating exclusively to the Business,
including any pricing lists, training materials, customer lists, vendor lists,
financial data and all documentation relating to the Intellectual

                                      -2-
<PAGE>

Property or the Registered Intellectual Property, but excluding any such items
to the extent that (i) any applicable Law prohibits their transfer or (ii) any
transfer thereof would subject Seller or any of its Affiliates to any
contractual or other Liability or obligation.

      (j) "Business" means the activities of manufacturing, marketing, selling
and distributing the Product in the Territory.

      (k) "Business Day" means a day other than Saturday, Sunday or any day on
which banks located in New York are authorized or obligated to close.

      (l) "Buyer" has the meaning set forth in the Preamble to this Agreement.

      (m) "Buyer Disclosure Schedule" has the meaning set forth in Article VII
hereof.

      (n) "Buyer Governmental Consent" has the meaning set forth in Section
7.03(a).

      (o) "Buyer Indemnified Parties" has the meaning set forth in Section
11.02(a).

      (p) "Buyer Labeling" means the printed labels, labeling and packaging
materials, including printed carton, container label and package inserts, used
by Buyer and bearing Buyer's name for the Product.

      (q) "Buyer Third Party Consent" has the meaning set forth in Section
7.03(b).

      (r) "Closing" has the meaning set forth in Section 5.01.

      (s) "Closing Date" means the date that the Closing actually occurs as
provided in Section 5.01.

      (t) "Closing Payment" has the meaning set forth in Section 4.01(a)(i).

      (u) "Confidential Information" has the meaning set forth in Section 12.01.

      (v) "Contract" means any and all commitments, contracts, purchase orders,
leases, or other agreements, whether written or oral.

      (w) "Corporate Names" has the meaning set forth in Section 8.06(a).

      (x) "Damages" has the meaning set forth in Section 11.02(a).

      (y) "Diastat Credit" has the meaning set forth in Section 4.02(b).

      (z) "Diastat Payment" has the meaning set forth in Section 4.02(c).

      (aa) "Diastat Rx Demand Net Sales" means, for a given period, the total
number (i.e. from both new and refill prescriptions) of equivalent two (2)
syringe twin pack kits of Product dispensed, determined based on data reported
by Scott Levin SPA (Source Prescription Audit) national level audit increased by
thirty-one percent (31%) (i.e. multiplied by 1.31) to account for channels of
distribution not fully captured by Scott Levin, multiplied by $125.00.

                                      -3-
<PAGE>

      (bb) "Disclosing Party" has the meaning set forth in Section 12.01.

      (cc) "Dollars" and the sign "$" each means lawful money of the United
States.

      (dd) "Encumbrance" means any mortgage, pledge, assessment, security
interest, deed of trust, lease, lien, adverse claim, levy, charge or other
encumbrance of any kind, or any conditional sale or title retention agreement or
other agreement to give any of the foregoing in the future.

      (ee) "Equipment" means the equipment set forth on Schedule A hereto.

      (ff) "Excluded Assets" means all Assets and Properties of Seller and its
Affiliates except the Purchased Assets and the Product Inventory.

      (gg) "Excluded Liabilities" means all Liabilities of Seller and its
Affiliates except the Assumed Liabilities.

      (hh) "Expiration Date" means the date twelve (12) months after the Closing
Date.

      (ii) "Fourth Quarter" has the meaning set forth in Section 4.01.

      (jj) "Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or other country, or any supra-national organization, state,
county, city or other political subdivision thereof.

      (kk) "Indemnification Claim Notice" has the meaning set forth in Section
11.02(c).

      (ll) "Indemnified Party" has the meaning set forth in Section 11.02(c).

      (mm) "Indemnifying Party" has the meaning set forth in Section 11.02(c).

      (nn) "Indemnitee" and "Indemnitees" have the respective meanings set forth
in Section 11.02(c).

      (oo) "Intellectual Property" means any and all of the following
intellectual property rights owned by or licensed to Seller and its Affiliates
and used exclusively in connection with the Business: (i) Patents, (ii)
Know-how; (iii) copyrights, copyright registrations and applications therefor,
and all other rights corresponding thereto; (iv) internet domain names; (v)
brand names, trade names, trade dress, logos, common law trademarks and service
marks, and trademark and service mark registrations, renewals and applications
therefor, including all good will of the Business symbolized thereby or
associated therewith (excluding the Elan tradename and Elan trademark and logo);
(vi) any similar or equivalent rights to any of the foregoing in the Territory;
and (vii) rights to sue and recover damages or obtain injunctive relief for
infringement, dilution or misappropriation of the items set forth in clauses (i)
- (vi) above.

      (pp) "Know-how" means all information and materials owned or licensed by
Seller and its Affiliates and used exclusively in connection with the Business,
including any Product

                                      -4-
<PAGE>

specifications, technical knowledge, expertise, skill, practice, inventions,
procedures, formulae, trade secrets, confidential information, analytical
methodology, processes, preclinical, clinical, stability, toxicology and other
data, market studies and all other experience and know-how, in tangible or
intangible form, whether or not patented or patentable; provided, however, that
Know-how shall not include (i) any plant, property, equipment or employees, and
(ii) any items to the extent that any applicable Law prohibits their transfer or
any transfer thereof would subject Seller or any of its Affiliates to any
material Liability or other obligation.

      (qq) "Knowledge" with respect to any Party, means the actual knowledge of
the senior management (or persons performing similar functions) of such Person.

      (rr) "Law" means any federal, state or local law, statute or ordinance, or
any rule, regulation, or published guidelines promulgated by any Governmental or
Regulatory Authority.

      (ss) "Liability" means any liability (whether known or unknown, asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due), including any liability for Taxes.

      (tt) "Marketing Materials" means all market research, marketing plans,
media plans, advertising, promotional and marketing books and records owned by
Seller and its Affiliates as of the Closing and used exclusively in connection
with the marketing or promotion of the Product, other than any such items to the
extent that (i) any applicable Law prohibits their transfer or (ii) any transfer
thereof would subject Seller or any of its Affiliates to any contractual or
other Liability or obligation.

      (uu) "Maximum Returns Credit Amount" has the meaning set forth in Section
8.10(a).

      (vv) "Multi-Product Contracts" has the meaning set forth in Section 8.12.

      (ww) "Net Sales" means the gross amount invoiced for the Product for an
applicable period by Buyer or its Affiliates to third parties less:

            (i) quantity, trade and/or cash discounts allowed or given;

            (ii) credits or refunds allowed for the return of rejected,
      outdated, damaged or returned Product;

            (iii) rebates, chargebacks and price adjustments allowed or given;
      and

            (iv) sales and other excise taxes and duties directly related to the
      sale, transportation or delivery, to the extent that such items are
      included in the gross invoice price (but not including taxes assessed
      against the income derived from such sale).

      Each of the items set forth in clauses (i)-(iv) above shall be deducted
from the gross amount invoiced only to the extent charged against Buyer or its
Affiliates and evidenced in Buyer's or its Affiliates' books and records of
account. Deductions shall be determined in accordance with U.S. Generally
Accepted Accounting Principles consistently applied. If a

                                      -5-
<PAGE>

Product is sold for compensation other than cash, Net Sales shall be calculated
based on the gross list price of the Product on the date of sale.

      Sales of Product by and between a Party and its Affiliates are not sales
to a third party and shall be excluded from Net Sales calculations for all
purposes.

      (xx) "Non-disclosing Party" has the meaning set forth in Section 12.01.

      (yy) "Non-Soliciting Party" has the meaning set forth in Section 8.05.

      (zz) "Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).

      (aaa) "Ordinary Course of Business" means such action that is consistent
with the past practices of the Business.

      (bbb) "Parties" means Buyer and Seller.

      (ccc) "Party" means each of Buyer and Seller.

      (ddd) "Patent" means any patents, provisional patent applications and
similar instruments (including any divisions, continuations,
continuations-in-part, reissues, renewals, extensions or the like of any such
patent, application or instrument) as well as any foreign equivalents thereof
(including certificates of invention and any applications therefor).

      (eee) "Permitted Encumbrance" means (i) any Encumbrance for Taxes not yet
due or delinquent or for those Taxes being contested in good faith by
appropriate proceedings for which adequate reserves have been established and
(ii) any minor imperfection of title or similar Encumbrance that individually or
in the aggregate would not have an Adverse Effect.

      (fff) "Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.

      (ggg) "Prior Agreement" has the meaning set forth in the Recitals hereto.

      (hhh) "Product" means (x) a viscous, aqueous-based composition of diazepam
formulated by or on behalf of Seller for rectal administration, including any
formulation covered by a Patent, and (y) any device licensed, sublicensed,
developed or owned by the Seller, as of the Closing, for use in conjunction with
the foregoing, together, as sold by or on behalf of Seller under the registered
trademark "Diastat." Without limiting the foregoing, Product includes each of
the formulations set forth under the term "Diastat" on Exhibit A.

      (iii) "Product Acquisition Financing Agreement" means that certain Product
Acquisition Financing Agreement between EPIL and Buyer in substantially the form
attached hereto at Exhibit B.

                                      -6-
<PAGE>

      (jjj) "Product Inventory" means all inventory owned as of the Closing by
Seller or any Affiliate thereof of finished Product or works in progress or
materials used in the manufacture of finished Product, whether held at a
location or facility of Seller or any Affiliate (or of any other Person on
behalf of Seller or any Affiliate) or in transit to or from Seller or any
Affiliate (or any such other Person).

      (kkk) "Purchase Price" has the meaning set forth in Section 4.01.

      (lll) "Purchase Price Payment" and "Purchase Price Payments" have the
respective meanings set forth in Section 4.01.

      (mmm) "Purchased Assets" means, subject to Section 2.02 and except as
otherwise provided on the Seller Disclosure Schedule: (i) the Intellectual
Property; (ii) the Registered Intellectual Property; (iii) the Assumed
Contracts; (iv) the Books and Records; (v) the Regulatory Approvals; (vi) the
Marketing Materials; and (vii) the Equipment.

      (nnn) "Q2 Diastat Credit" has the meaning set forth in Section 4.02(a).

      (ooo) "Q3 Diastat Credit" has the meaning set forth in Section 4.02(b).

      (ppp) "Q2 Diastat Payment" has the meaning set forth in Section 4.02(a).

      (qqq) "Q3 Diastat Payment" has the meaning set forth in Section 4.02(b).

      (rrr) "Q4 Diastat Payment" has the meaning set forth in Section 4.02(c).

      (sss) "Q2 Payment" has the meaning set forth in Section 4.01.

      (ttt) "Q3 Payment" has the meaning set forth in Section 4.01.

      (uuu) "Q4 Payment" has the meaning set forth in Section 4.01.

      (vvv) "Quarter" means the Second Quarter, Third Quarter or Fourth Quarter.

      (www) "Registered Intellectual Property" means, as they relate exclusively
to the Product, all of the following Intellectual Property registered in the
Territory: (i) the Patents identified in Section 6.08(a) of the Seller
Disclosure Schedule; (ii) the registered trademarks and applications to register
trademarks identified in Section 6.08(a) of the Seller Disclosure Schedule; and
(iii) the internet domain names registered with registrars accredited by the
Internet Corporation for Assigned Names and Numbers identified in Section
6.08(a) of the Seller Disclosure Schedule.

      (xxx) "Regulatory Approvals" means, as they relate exclusively to the
Product and to the extent owned or licensed by Seller, the new drug applications
and new drug submissions for the Product identified in Section 6.11 of the
Seller Disclosure Schedule, all supplements thereto and all regulatory files
relating thereto, including any and all (i) regulatory filings and supporting
documents, clinical studies and tests (excluding DEA licenses, and wholesale,
distributor and pharmacy licenses); and (ii) records maintained under Good
Manufacturing Practices ("GMPs")

                                      -7-
<PAGE>

or other record keeping or reporting requirements of the FDA, the Environmental
Protection Agency, the Occupational Health and Safety Administration or any
other Governmental or Regulatory Authorities, including all investigational new
drug applications, abbreviated new drug applications, drug master files, FDA
approvals for export, FDA warning letters, FDA Notices of Adverse Finding
Letters, FDA audit reports (including any responses to such reports), all other
correspondence and communications with Governmental or Regulatory Authorities in
connection with the Product, adverse event files, IND safety reports and
complaint files (as well as any foreign equivalents of the foregoing) with
respect to the Product.

      (yyy) "Second Quarter" has the meaning set forth in Section 4.01.

      (zzz) "Seller" has the meaning set forth in the Preamble to this
Agreement.

      (aaaa) "Seller Disclosure Schedule" has the meaning set forth in the
preamble to Article VI of this Agreement.

      (bbbb) "Seller Governmental Consent" has the meaning set forth in Section
6.04(a).

      (cccc) "Seller Third Party Consent" has the meaning set forth in Section
6.04(b).

      (dddd) "Soliciting Party" has the meaning set forth in Section 8.05.

      (eeee) "Tax" means all of the following tax in connection with the
operations of the Business or the transactions contemplated hereby: (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment imposed by
an governmental, regulatory or administrative entity or agency responsible for
the imposition of any such tax (domestic or foreign); (ii) any Liability for the
payment of any amounts of the type described in (i) as a result of being a
member of any affiliated, consolidated, combined, unitary or other group for any
Taxable period; and (iii) any Liability for the payment of any amounts of the
type described in (i) or (ii) as a result of any express or implied obligation
to indemnify any other person.

      (ffff) "Territory" means Territory A and Territory B.

      (gggg) "Territory A" means the United States of America.

      (hhhh) "Territory B" means the entire world other than the United States
of America.

      (iiii) "Third Party Claim" has the meaning set forth in Section 11.02(d).

      (jjjj) "Third Quarter" has the meaning set forth in Section 4.01.

      (kkkk) "Transition Chargebacks" has the meaning set forth in Section
8.10(d).

                                      -8-
<PAGE>

      SECTION 1.02 CONSTRUCTION OF CERTAIN TERMS AND PHRASES.

      Unless the context of this Agreement otherwise requires: (a) words of any
gender include each other gender; (b) words using the singular or plural number
also include the plural or singular number, respectively; (c) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (d) the terms "Article," "Section" or "Exhibit" refer to the
specified Article, Section or Exhibit of this Agreement; (e) the term "or" has,
except where otherwise indicated, the inclusive meaning represented by the
phrase, "and/or"; and (f) the term "including" means "including without
limitation." Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified. All accounting
terms used but not defined herein shall have the meaning ascribed to such terms
under U.S. Generally Accepted Accounting Principles, consistently applied.

                     ARTICLE II. PURCHASE AND SALE OF ASSETS

      SECTION 2.01 PURCHASE AND SALE OF ASSETS.

      (a) Subject to the terms and conditions of this Agreement, at the Closing,
EPIL shall, or shall cause its relevant Affiliates to, sell, transfer, convey,
assign and deliver to Buyer, and Buyer shall purchase, acquire and accept from
EPIL and such Affiliates of EPIL (other than EPI), all of EPIL's and each such
Affiliate's right, title and interest, as of the Closing, in and to the
Purchased Assets relating to Territory A.

      (b) Subject to the terms and conditions of this Agreement, at the Closing,
EPI shall sell, transfer, convey, assign and deliver to Buyer, and Buyer shall
purchase, acquire and accept from EPI all of EPI's right, title and interest, as
of the Closing, in and to the Purchased Assets relating to Territory B and any
Purchased Assets as may be owned by it relating to Territory A.

      (c) Notwithstanding anything contained in this Agreement to the contrary,
(i) from and after the Closing, Seller and its Affiliates shall retain all of
their right, title and interest in and to the Excluded Assets and (ii) Seller
may retain an archival copy of all Assumed Contracts, Books and Records,
Marketing Materials and other documents or materials conveyed hereunder.

      SECTION 2.02 ASSIGNABILITY AND CONSENTS.

      Notwithstanding anything to the contrary contained in this Agreement, if
the sale, assignment, transfer, conveyance or delivery or attempted sale,
assignment, transfer, conveyance or delivery to Buyer of any asset that would be
a Purchased Asset is (a) prohibited by any applicable Law or (b) would require
any authorizations, approvals, consents or waivers from a third Person or
Governmental or Regulatory Authority and such authorizations, approvals,
consents or waivers shall not have been obtained prior to the Closing, then in
either case the Closing shall proceed without the sale, assignment, transfer,
conveyance or delivery of such asset and this Agreement shall not constitute an
agreement for the sale, assignment, transfer, conveyance or delivery of such
asset; provided that nothing in this Section 2.02 shall be deemed to waive the
rights of Buyer not to consummate the transactions contemplated by this
Agreement if the conditions to its obligations set forth in Article X have not
been satisfied. In the event that the Closing proceeds without the sale,
assignment, transfer, conveyance or delivery of any such asset, then following
the Closing, the Parties shall use their reasonable best efforts, and cooperate

                                      -9-
<PAGE>

with each other, to obtain promptly such authorizations, approvals, consents or
waivers; provided, however, that Seller shall not be required to pay any
consideration to obtain any such authorization, approval, consent or waiver.
Pending such authorization, approval, consent or waiver, the Parties shall
cooperate with each other in any mutually agreeable, reasonable and lawful
arrangements designed to provide to Buyer the benefits of use of such asset and
to Seller the benefits, including any indemnities, that, in each case, it would
have obtained had the asset been conveyed to Buyer at the Closing. To the extent
that Buyer is provided the benefits pursuant to this Section 2.02 of any
Contract, Buyer shall (x) perform for the benefit of the other parties thereto
the obligations of Seller or any Affiliate of Seller thereunder and (y) shall
satisfy any related Liabilities with respect to such Contract that, but for the
lack of an authorization, approval, consent or waiver to assign such obligations
or Liabilities to Buyer, would be Assumed Liabilities. Once authorization,
approval, consent or waiver for the sale, assignment, transfer, conveyance or
delivery of any such asset not sold, assigned, transferred, conveyed or
delivered at the Closing is obtained, Seller shall assign, transfer, convey and
deliver such asset to Buyer at no additional cost to Buyer.

                     ARTICLE III. ASSUMPTION OF LIABILITIES

      SECTION 3.01 ASSUMPTION OF ASSUMED LIABILITIES.

      (a) Subject to the terms and conditions of this Agreement, as of the
Closing Date, Buyer agrees to assume, satisfy, perform, pay, discharge and
otherwise be responsible for the Assumed Liabilities.

      (b) Other than the Assumed Liabilities, Buyer shall not assume or be
deemed to have assumed or guaranteed, or otherwise be responsible for, any other
Liability or obligation of any nature, whether direct or indirect, of Seller or
any of its Affiliates relating to the Purchased Assets or otherwise, without
regard to whether such Liability or obligation is known, knowable, or unknown,
matured or unmatured, liquidated or unliquidated, fixed or contingent, arising
out of acts, omissions or occurrences prior to the Closing Date or any
conditions existing prior to the Closing Date.

                     ARTICLE IV. PURCHASE PRICE AND PAYMENT

      SECTION 4.01 PURCHASE PRICE.

      (a) Closing Consideration. As consideration for the Purchased Assets,
Buyer shall:

            (i) pay to Seller the following amounts at Closing (collectively,
      the "Closing Payment"):

                (A) Sixty Million Dollars ($60,000,000) to EPIL; and

                (B) Ten million Dollars ($10,000,000) to EPI.

            (ii) assume the Assumed Liabilities as of the Closing.

                                      -10-
<PAGE>

      The Closing Payment shall be paid by Buyer to each of EPIL and EPI in the
amounts set forth above by wire transfer of immediately available funds to the
accounts designated by each of EPIL and EPI prior to the date on which such
payment is due; provided, however, that Buyer shall be entitled to finance up to
Forty-Two Million Dollars ($42,000,000) of the Closing Payment payable to EPIL,
subject to and in accordance with the terms of the Product Acquisition Financing
Agreement. The Closing Payment is non-refundable and not subject to any future
performance obligations upon EPIL or EPI nor creditable to any future service by
EPIL or EPI.

      (b) Additional Consideration. In addition to the Closing Payment, Buyer
shall pay to EPIL the following amounts as additional consideration for the
Purchased Assets:

            (i) Q2 Payment. On June 29, 2001, Buyer shall pay to EPIL an amount
      (the "Q2 Payment") equal to five (5) times the Diastat Rx Demand Net Sales
      for the three months ending June 30, 2001 (the "Second Quarter"). However,
      this Q2 Payment shall not exceed Twenty Million Dollars ($20,000,000).

            (ii) Q3 Payment. On September 28, 2001, Buyer shall pay to EPIL an
      amount (the "Q3 Payment") equal to five (5) times the Diastat Rx Demand
      Net Sales for the three months ending September 30, 2001 (the "Third
      Quarter"). However, under no circumstances shall the sum of this Q3
      Payment plus the Q2 Payment exceed Thirty-Five Million Dollars
      ($35,000,000) on an aggregate basis.

            (iii) Q4 Payment. On December 31, 2001, Buyer shall pay to EPIL an
      amount (the "Q4 Payment") equal to five (5) times the Diastat Rx Demand
      Net Sales for the three months ending December 31, 2001 (the "Fourth
      Quarter"). However, under no circumstances shall the sum of this Q4
      Payment plus the Q3 Payment plus the Q2 Payment exceed Thirty-Five Million
      Dollars ($35,000,000) on an aggregate basis.

      (c) Payment. The Q2 Payment, the Q3 Payment and the Q4 Payment are each
referred to herein as a "Purchase Price Payment" and are collectively referred
to herein as the "Purchase Price Payments". Each Purchase Price Payment shall be
paid by Buyer to EPIL by wire transfer of immediately available funds to an
account or accounts designated by EPIL prior to the date which such payment is
due; provided, however, that Buyer shall be entitled to finance up to sixty
percent (60%) of each Purchase Price Payment subject to and in accordance with
the terms of the Product Acquisition Financing Agreement.

      (d) Determination of Diastat Rx Demand Net Sales. Buyer and EPIL recognize
that the amount of Diastat Rx Demand Net Sales for each period may not be known
as of the respective due dates of the Q2 Payment, Q3 Payment, and Q4 Payment.
Accordingly, Buyer shall pay to EPIL the maximum amount due for each period as
of the due date. As soon as practical, but under no circumstances more than
sixty (60) days from the due date of the payments, Buyer shall provide EPIL with
a calculation, in reasonable detail, of the Diastat Rx Demand Net Sales for the
applicable period. If the actual amount due EPIL based on the Diastat Rx Demand
Net Sales and the formulas set forth herein is less than the amount paid by
Buyer to EPIL, then EPIL shall refund to Buyer the excess of the amount
originally paid over the actual amount owed. The portion of any refund payment
to be paid in cash by EPIL shall be equal to the percentage of the original
Purchase Price Payment paid in cash by the Buyer. The remaining

                                      -11-
<PAGE>

portion of any refund shall be deducted from the amount of the Purchase Price
Payment financed by the Buyer pursuant to the Product Acquisition Financing
Agreement, with such adjustment to be made retroactively to the due date of the
Purchase Price Payment.

      SECTION 4.02 PURCHASE PRICE ADJUSTMENT.

      The Purchase Price shall be subject to adjustment as follows:

      (a) Second Quarter Adjustment. In the event that total Net Sales in the
United States are less than Five Million Dollars ($5,000,000) during the Second
Quarter, EPIL shall pay to Buyer an amount equal to eighty percent (80%) of the
difference between (y) the lesser of Five Million Dollars ($5,000,000) and the
Diastat Rx Demand Net Sales for the Second Quarter and (z) the total Net Sales
in the United States for the Second Quarter (the "Q2 Diastat Payment"). In the
event that the total Net Sales in the United States for the Second Quarter are
greater than Five Million Dollars ($5,000,000), EPIL shall be entitled to
receive a credit from Buyer in an amount equal to eighty percent (80%) of the
difference between (1) Five Million Dollars ($5,000,000) and (2) the total Net
Sales in the United States for the Second Quarter (the "Q2 Diastat Credit").

      (b) Third Quarter Adjustment. In the event that total Net Sales in the
United States are less than Six Million Dollars ($6,000,000) during the Third
Quarter, EPIL shall pay to Buyer an amount equal to eighty percent (80%) of the
difference between (y) the lesser of Six Million Dollars ($6,000,000) and the
Diastat Rx Demand Net Sales for the Third Quarter and (z) the total Net Sales in
the United States for the Third Quarter (the "Q3 Diastat Payment"). In the event
that the total Net Sales in the United States for the Third Quarter are greater
than Six Million Dollars ($6,000,000), EPIL shall be entitled to receive a
credit from Buyer in an amount equal to eighty percent (80%) of the difference
between (1) Six Million Dollars ($6,000,000) and (2) the total Net Sales in the
United States for the Third Quarter (the "Q3 Diastat Credit"). The Q2 Diastat
Credit and the Q3 Diastat Credit are sometimes referred to herein as a "Diastat
Credit."

      (c) Fourth Quarter Adjustment. In the event that total Net Sales in the
United States are less than Six Million Five Hundred Thousand Dollars
($6,500,000) during the Fourth Quarter, EPIL shall pay to Buyer an amount equal
to eighty percent (80%) of the difference between (y) the lesser of Six Million
Five Hundred Thousand Dollars ($6,500,000) and the Diastat Rx Demand Net Sales
for the Fourth Quarter and (z) the total Net Sales in the United States for the
Fourth Quarter (the "Q4 Diastat Payment"). The Q2 Diastat Payment, the Q3
Diastat Payment and the Q4 Diastat Payment are sometimes referred to herein as a
"Diastat Payment."

      (d) Reports; Payments; Application of Credits. In connection with the
adjustments set forth in Sections 4.02(a), (b) and (c) hereof, Buyer shall
provide a report to Seller no later than sixty (60) days after the end of each
Quarter setting forth the calculation of Net Sales in the United States and
Diastat Rx Demand Net Sales for the Product for such Quarter and the amount of
the applicable credit or payment due, each in sufficient detail to permit EPIL
to determine whether the calculation of Net Sales in the United States, Diastat
Rx Demand Net Sales and applicable payment or credit due is accurate. Buyer
shall cause its representatives and employees to be available to EPIL to discuss
any questions or comments of EPIL concerning

                                      -12-
<PAGE>

such report. If at the end of the Second Quarter and/or the Third Quarter a
Diastat Payment is due, Seller shall pay to Buyer within thirty (30) days after
receipt of Buyer's report for such Quarter an amount equal to such Diastat
Payment less the amount of any Diastat Credits accrued for the Second Quarter
and/or the Third Quarter. If at the end of the Third Quarter a Diastat Credit is
due, Buyer shall pay to Seller the amount of such Diastat Credit accrued up to
the amount of any Diastat Payments previously made. Any Diastat Credit
outstanding at the end of the Third Quarter that has not been applied against a
Diastat Payment shall be cancelled. If at the end of the Fourth Quarter a
Diastat Payment is due, Seller shall pay to Buyer within thirty (30) days after
receipt of Buyer's report for such Quarter an amount equal to such Diastat
Payment. Each payment to be made pursuant to this Section 4.02 shall be paid by
wire transfer of immediately available funds to an account or accounts
designated by Buyer or EPIL, as the case may be, prior to the date on which such
payment is due.

      (e) Records; Access; Audit. Buyer shall keep for a period of four (4)
years from the date hereof complete and accurate records of sales and all other
information necessary to accurately calculate Net Sales and Diastat Rx Demand
Net Sales as required pursuant to Sections 4.01 and 4.02(a), (b) and (c) hereof.
EPIL shall have the right through its representatives or an independent,
certified public accountant to audit such records at the place or places of
business where such records are customarily kept in order to verify the accuracy
of the reports of Net Sales and Diastat Rx Demand Net Sales made hereunder. Such
audits may be exercised during normal business hours upon reasonable prior
written notice to Buyer. EPIL shall bear the full cost of such audit unless such
audit discloses a variance of more than five percent (5%) from the amount of any
payment or credit calculated with respect to Net Sales or Diastat Rx Demand Net
Sales under this Agreement, in which case Buyer shall bear the full cost of such
audit. In the event that Buyer disputes the results of EPIL's audit, Buyer and
EPIL shall attempt to resolve such dispute in good faith. Any amounts that are
determined or agreed to be due and owing by Buyer to EPIL or by EPIL to Buyer
following such audit shall be paid within ten (10) days thereafter, together
with any interest due thereon (at a rate equal to seven percent (7%) per annum).

      SECTION 4.03 PURCHASE OF PRODUCT INVENTORY.

      At a mutually agreed upon time, but no later than sixty (60) days after
the Closing, Buyer shall purchase from EPI all Product Inventory of EPI with
acceptable dating at a price equal to EPI's cost therefor, which amount shall be
payable to EPI on or before March 29, 2002. All of the finished Product included
in Product Inventory (a) shall be saleable in the Ordinary Course of Business,
except for normal and customary amounts of below-standard quality Product, and
(b) shall have been produced or manufactured in accordance with the
specifications for such Product as set forth in the applicable Regulatory
Approvals and substantially in compliance with applicable Law. All raw materials
and works in progress included in Product Inventory shall be useable in the
Ordinary Course of Business except for normal and customary amounts of
below-standard quality raw materials and works in progress. The payment to be
made pursuant to this Section 4.03 shall be paid by wire transfer of immediately
available funds to an account or accounts designated by EPI prior to the date on
which such payment is due. Until the time that such Product Inventory is
transferred to Buyer, EPI shall hold, store and ship such Product Inventory
substantially in accordance with (i) all applicable Laws, (ii) current GMPs,
(iii) the applicable Regulatory Approvals, and (iv) applicable analytical
methods and procedures,

                                      -13-
<PAGE>

material specifications, master batch records and stability protocols. EPI
represents that it has acted in accordance with clauses (i) through (iv) above
with respect to Product Inventory prior to the Closing.

      SECTION 4.04 PAYMENT OF SALES, USE AND OTHER TAXES.

      Each Party shall be responsible for its own sales, use, transfer and value
added and other related taxes, if any, pursuant to this Agreement. Buyer shall
provide resale certificates and exemption forms as reasonably requested by
Seller.

      SECTION 4.05 IMPACT OF FAILURE TO MAKE PAYMENTS.

      The failure by Buyer to make any payments due to EPIL pursuant to Sections
4.01, 4.02 and 4.03 shall constitute an "Event of Default" under the Product
Acquisition Financing Agreement.

                               ARTICLE V. CLOSING

      SECTION 5.01 TIME AND PLACE.

      The closing of the transactions contemplated by this Agreement, including
the purchase and sale of the Purchased Assets and the assumption of the Assumed
Liabilities (the "Closing"), shall take place as promptly as practicable, but no
later than five (5) Business Days, following satisfaction or waiver of the
conditions set forth in Articles IX and X, at the offices of Brobeck, Phleger &
Harrison LLP, 12390 El Camino Real, San Diego, CA 92130, unless another time or
place shall be agreed to by the Parties.

      SECTION 5.02 DELIVERIES AT CLOSING.

      (a) Closing Deliveries by Seller.

      At the Closing, Seller shall deliver or cause to be delivered to Buyer:

            (i) each of the Patent assignment, trademark assignment and other
      intellectual property assignment documents necessary to transfer the
      Intellectual Property and the Registered Intellectual Property to Buyer in
      form and substance reasonably acceptable to Seller and Buyer;

            (ii) assignment and assumption agreements, in form and substance
      reasonably acceptable to Seller and Buyer, assigning to Buyer all rights
      and obligations of Seller and its Affiliates in and to the Assumed
      Contracts;

            (iii) copies of all Seller Governmental Consents and Seller Third
      Party Consents;

            (iv) an executed copy of the Product Acquisition Financing
      Agreement;

                                      -14-
<PAGE>

            (v) an opinion of Seller's counsel in form and substance reasonably
      satisfactory to Buyer;

            (vi) a bill of sale in form and substance reasonably acceptable to
      Seller and Buyer to transfer the Books and Records, Equipment and
      Marketing Materials to Buyer; and

            (vii) the certificates and other documents to be delivered pursuant
      to Article X hereof.

      (b) Closing Deliveries by Buyer.

      At the Closing, Buyer shall deliver or cause to be delivered to Seller:

            (i) the Closing Payment in accordance with Section 4.01 hereof;

            (ii) assignment and assumption agreements, in form and substance
      reasonably acceptable to Seller and Buyer, assigning to Buyer all rights
      and obligations of Seller and its Affiliates in and to the Assumed
      Contracts;

            (iii) such instruments of assumption and other instruments or
      documents, in form and substance reasonable acceptable to Seller and
      Buyer, as may be necessary to effect Buyer's assumption of the Assumed
      Liabilities;

            (iv) copies of all Buyer Governmental Consents and Buyer Third Party
      Consents;

            (v) an opinion of Buyer's counsel in form and substance reasonably
      acceptable to Seller;

            (vi) an executed copy of the Product Acquisition Financing
      Agreement; and

            (vii) the certificates and other documents to be delivered pursuant
      to Article IX hereof.

              ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF SELLER

      Seller represents and warrants to Buyer as of the date hereof, subject to
such exceptions as are specifically disclosed in the disclosure schedule
(referencing the appropriate Sections hereof) supplied by Seller to Buyer and
dated as of the date hereof (the "Seller Disclosure Schedule"), which Seller
Disclosure Schedule shall be deemed to be representations and warranties of
Seller as if made herein, as follows:

      SECTION 6.01 BOOKS AND RECORDS.

      To Seller's Knowledge, the Books and Records of the Business as made
available by Seller to Buyer are true and correct.

                                      -15-
<PAGE>

      SECTION 6.02 CORPORATE ORGANIZATION.

      EPI is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite power and
authority to own its assets and carry on the Business as currently conducted by
it. EPIL is a corporation duly organized and validly existing under the laws of
the Republic of Ireland and has all requisite power and authority to own its
assets and carry on the Business as currently conducted by it. Each Affiliate of
Seller selling, transferring, conveying, assigning or delivering any Purchased
Assets is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization and has all requisite power and authority to
own its assets and carry on the Business as currently conducted by it. Each of
Seller and each Affiliate selling, transferring, conveying, assigning or
delivering any Purchased Assets is duly authorized to conduct the Business and
is in good standing in each jurisdiction where such qualification is required,
except for any jurisdiction where failure to so qualify could not reasonably be
expected to have an Adverse Effect or materially impair or delay Seller's
ability to perform its obligations hereunder.

      SECTION 6.03 AUTHORITY OF SELLER.

      Seller has all necessary power and authority and has taken all actions
necessary to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors or Executive Committee of the Board
of Directors of Seller has taken all action required by Law, its Certificate of
Incorporation, Bylaws or other organizational documents and agreements, to be
taken by it to authorize the execution and delivery of this Agreement by the
Seller and the consummation of the transactions (including the performance by
the Seller of its obligations) contemplated hereunder. This Agreement has been
duly and validly executed and delivered by Seller and, when executed and
delivered by Buyer, will constitute a legal, valid and binding obligation of
Seller enforceable against it in accordance with its terms except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors rights generally, and
(b) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

      SECTION 6.04 CONSENTS AND APPROVALS.

      (a) All consents, waivers, approvals, Orders, authorizations of,
declarations or filings with any Governmental or Regulatory Authority (each a
"Seller Governmental Consent") that are required by or with respect to Seller or
its Affiliates in connection with the execution and delivery of this Agreement
by the Seller, and its performance of its obligations hereunder are set forth on
Schedule 6.04(a). Each Seller Governmental Consent has been obtained, except to
the extent that the failure to obtain such Seller Governmental Consent would not
have an Adverse Effect.

      (b) All consents, waivers, approvals, authorizations of, or notices to,
any third party (other than a Governmental or Regulatory Authority) (each a
"Seller Third Party Consent") that are required by or with respect to Seller or
its Affiliates in connection with the execution and delivery of this Agreement
by the Seller, and its performance of its obligations hereunder are set forth on
Schedule 6.04(b). Each Seller Third Party Consent has been obtained, except to
the

                                      -16-
<PAGE>

extent that the failure to obtain such Seller Third Party Consent would not have
an Adverse Effect.

      SECTION 6.05 NON-CONTRAVENTION.

      The execution and delivery by Seller of this Agreement does not, and the
performance by it of its obligations under this Agreement and the consummation
of the transactions contemplated hereby will not:

      (a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Certificate of Incorporation, Bylaws or other
applicable organizational documents of Seller;

      (b) conflict with or result in a violation or breach of any term or
provision of any Law applicable to Seller, the Business or the Purchased Assets,
other than such conflicts, violations or breaches as would not have an Adverse
Effect; or

      (c) conflict with or result in a breach or default (or an event which,
with notice or lapse of time or both, would constitute a breach or default)
under, or result in the termination or cancellation of, or accelerate the
performance required by, or result in the creation or imposition of any security
interest, lien or any other Encumbrance (other than a Permitted Encumbrance)
upon any Assumed Contract, other than such conflicts, breaches or defaults as
would not have an Adverse Effect.

      SECTION 6.06 ASSUMED CONTRACTS.

      Section 6.06 of the Seller Disclosure Schedule sets forth a complete and
correct list of each Assumed Contract where the payment obligations after the
Closing exceed Twenty-Five Thousand Dollars ($25,000). Each of the Assumed
Contracts is in effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of Seller or an Affiliate of Seller;
and Seller has performed all of its required material obligations under, and is
not in material violation or breach of or default under, any such Assumed
Contract. To the Knowledge of Seller, the other parties to the Assumed Contracts
are not in material violation or breach of or default under any such Assumed
Contract. Seller has made available to Buyer complete and correct copies of all
Assumed Contracts identified in Section 6.06 of the Seller Disclosure Schedule.

      SECTION 6.07 PURCHASED ASSETS GENERALLY.

      Seller has good and marketable title to the Books and Records, Equipment
and Marketing Materials, free and clear of all Encumbrances (other than
Permitted Encumbrances). The Purchased Assets and the Product Inventory include
all material assets and properties that are owned, licensed or controlled by
Seller with respect to the Product and that are reasonably required for Buyer to
operate the Business after the Closing in substantially the manner and
substantially to the extent operated by Seller prior to the Closing; provided,
however, that Buyer acknowledges and agrees that (a) the Purchased Assets
exclude any items to the extent that (i) any applicable Law prohibits their
transfer or (ii) any transfer thereof would subject Seller or any

                                      -17-
<PAGE>

of its Affiliates to any contractual or other Liability or obligation and (b)
certain items have been expressly excluded from the definition of Purchased
Assets and the components thereof.

      SECTION 6.08 INTELLECTUAL PROPERTY RIGHTS.

      (a) Section 6.08(a) of the Seller Disclosure Schedule sets forth a
complete and correct list of all Intellectual Property that is registered in the
Territory, is owned or licensed by Seller and is related exclusively to the
Product. Seller or its Affiliates own all right, title and interest in and to,
or have a license, sublicense or other permission to use, all of the Registered
Intellectual Property, free and clear of all Encumbrances except Permitted
Encumbrances. All necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been paid and all
necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant copyright, trademark or
other Governmental or Regulatory Authorities for the purposes of maintaining
such Registered Intellectual Property, except to the extent that failure to take
any such action would not have an Adverse Effect.

      (b) Without limiting Section 6.08(a) above, to the Knowledge of Seller,
Seller or its Affiliates own all right, title and interest in and to, or have a
license, sublicense or other permission to use, all of the Intellectual
Property, free and clear of all Encumbrances except Permitted Encumbrances.

      (c) Neither Seller nor any of its Affiliates has received any written
notice from any person, or has Knowledge, (i) that the operation of the Business
as currently conducted infringes or misappropriates the intellectual property
rights of any third party, or (ii) that any third party has infringed or
misappropriated or is infringing or misappropriating any of the Intellectual
Property, except where such infringement or misappropriation would not have an
Adverse Effect.

      SECTION 6.09 LITIGATION.

      There are no Actions or Proceedings pending or, to the Knowledge of
Seller, threatened, or reasonably anticipated, against, relating to, affecting
or arising in connection with (a) the Purchased Assets or the Business, (b) this
Agreement, or (c) the transactions contemplated by this Agreement. Seller is not
subject to any Order that could reasonably be expected to materially impair or
delay the ability of Seller to perform its obligations hereunder.

      SECTION 6.10 COMPLIANCE WITH LAW.

      Since January 1, 2001, Seller and its Affiliates have operated the
Business substantially in compliance with all applicable Laws, except where
failure to so comply could not reasonably be expected to result in an Adverse
Effect and neither Seller nor any of its Affiliates has received any written
notice alleging any violation of such Laws except for violations which could not
reasonably be expected to result in an Adverse Effect.

                                      -18-
<PAGE>

      SECTION 6.11 REGULATORY MATTERS.

      Section 6.11 of the Seller Disclosure Schedule sets forth a complete and
correct list of all new drug applications and supplements thereto, new drug
submissions and investigational new drug applications for the Product in the
Territory. Seller or its Affiliates own all right, title and interest in and to
each of the new drug applications and supplements thereto, new drug submissions
and investigational new drug applications listed in Section 6.11 of the Seller
Disclosure Schedule. All of the Regulatory Approvals are in full force and
effect and have been duly and validly issued. All required reports have been
made to appropriate Governmental or Regulatory Authorities, all appropriate
actions have been taken and communications with third parties have been made and
all required investigations of adverse drug experiences, contamination,
tampering and/or product defects have been made and appropriate follow-up
actions have been taken, except where the failure to do so would not have an
Adverse Effect. There is no Action or Proceeding by any Governmental or
Regulatory Authority pending or, to the Knowledge of Seller, threatened with
respect to any Product or any Regulatory Approval, which could reasonably be
expected to have an Adverse Effect. Seller has made available to Buyer complete
and correct copies of all Regulatory Approvals.

      SECTION 6.12 BROKERS.

      Seller has not retained any broker in connection with the transactions
contemplated hereunder. Buyer has no, and will have no, obligation to pay any
brokers, finders, investment bankers, financial advisors or similar fees in
connection with this Agreement or the transactions contemplated hereby by reason
of any action taken by or on behalf of Seller.

      SECTION 6.13 DISCLOSURE.

      None of the representations or warranties made by the Seller herein as of
the date of such representations and warranties, and none of the statements
contained in any other written materials with respect to the Purchased Assets
furnished by Seller to Buyer in connection with this Agreement, contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.

      SECTION 6.14 NO OTHER WARRANTIES.

      EXCEPT AS SET FORTH IN THIS ARTICLE VI, SELLER IS SELLING THE PURCHASED
ASSETS AND PRODUCT INVENTORY HEREUNDER ON AN "AS IS" BASIS WITHOUT
REPRESENTATION OR WARRANTY AS TO THE PRODUCT, THE PRODUCT INVENTORY, THE
PURCHASED ASSETS OR THE BUSINESS WHETHER EXPRESS OR IMPLIED INCLUDING WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR INFRINGEMENT OF THIRD
PARTY RIGHTS, AND ALL SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.

              ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF BUYER

      Buyer represents and warrants to Seller as of the date hereof, subject to
such exceptions as are specifically disclosed in the disclosure schedule
(referencing the appropriate Sections

                                      -19-
<PAGE>

hereof) supplied by Buyer to Seller and dated as of the date hereof (the "Buyer
Disclosure Schedule"), which Buyer Disclosure Schedule shall be deemed to be
representations and warranties of Buyer as if made herein, as follows:

      SECTION 7.01 CORPORATE ORGANIZATION.

      Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite power and
authority to own its assets and carry on its business as currently conducted by
it. Buyer is duly authorized to conduct its business and is in good standing in
each jurisdiction where such qualification is required, except for any
jurisdiction where failure to so qualify could not reasonably be expected,
individually or in the aggregate, to have a material adverse effect on Buyer or
materially impair or delay Buyer's ability to perform its obligations hereunder.

      SECTION 7.02 AUTHORITY OF BUYER.

      Buyer has all necessary power and authority and has taken all actions
necessary to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of Buyer has taken all action
required by Law, its Certificate of Incorporation, Bylaws or otherwise to be
taken by it to authorize the execution and delivery of this Agreement by Buyer
and the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Buyer and, when executed and
delivered by Seller, will constitute a legal, valid and binding obligation of
Buyer enforceable against it in accordance with its terms except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors rights generally, and
(b) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.

      SECTION 7.03 CONSENTS AND APPROVALS.

      (a) All consents, waivers, approvals, Orders, authorizations of,
declarations or filings with any Governmental or Regulatory Authority (each a
"Buyer Governmental Consent") that are required by or with respect to Buyer in
connection with the execution and delivery of this Agreement by Buyer, and its
performance of its obligations hereunder are set forth on Schedule 7.03(a). Each
Buyer Governmental Consent has been obtained, except to the extent that the
failure to obtain such Buyer Governmental Consent would not have an Adverse
Effect.

      (b) All consents, waivers, approvals, authorizations of, or notices to,
any third party (other than a Governmental or Regulatory Authority) (each a
"Buyer Third Party Consent") that are required by or with respect to Buyer in
connection with the execution and delivery of this Agreement by Buyer, and its
performance of its obligations hereunder are set forth on Schedule 7.03(b). Each
Buyer Third Party Consent has been obtained, except to the extent that the
failure to obtain such Buyer Third Party Consent would not have an Adverse
Effect.

                                      -20-
<PAGE>

      SECTION 7.04 NON-CONTRAVENTION.

      The execution and delivery by Buyer of this Agreement does not, and the
performance by it of its obligations under this Agreement and the consummation
of the transactions contemplated hereby will not:

      (a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Certificate of Incorporation, Bylaws or other
organizational documents of Buyer;

      (b) conflict with or result in a violation or breach of any term or
provision of any Law applicable to Buyer other than such conflicts, violations
or breaches as would not have an Adverse Effect; or

      (c) conflict with or result in a breach or default (or an event which,
with notice or lapse of time or both, would constitute a breach or default)
under, or result in the termination or cancellation of, or accelerate the
performance required by, or result in the creation or imposition of any security
interest, lien or any other Encumbrance (other than a Permitted Encumbrance)
upon any Contract to which Buyer is a party or by which Buyer or any of its
assets is bound, other than such conflicts, breaches or defaults as would not
have an Adverse Effect.

      SECTION 7.05 LITIGATION.

      There are no Actions or Proceedings pending, or to the Knowledge of Buyer
threatened or reasonably anticipated, against, relating to, affecting or arising
in connection with (i) this Agreement or (ii) the transactions contemplated by
this Agreement. Buyer is not subject to any Order that could reasonably be
expected to materially impair or delay the ability of Buyer to perform its
obligations hereunder.

      SECTION 7.06 BROKERS.

      Buyer has not retained any broker in connection with the transactions
contemplated hereunder. Seller has no, and will have no, obligation to pay any
brokers, finders, investment bankers, financial advisors or similar fees in
connection with this Agreement or the transactions contemplated hereby by reason
of any action taken by or on behalf of Buyer.

                     ARTICLE VIII. COVENANTS OF THE PARTIES

      SECTION 8.01 NON-ASSERTION OF INTELLECTUAL PROPERTY RIGHTS.

      (a) Seller agrees that neither it nor any Affiliate will assert against
Buyer, under any patent, trade secret, copyright, trademark or other proprietary
right owned or controlled by Seller and used by Seller in the operation of the
Business as of the Closing, a claim that the Product or the operation of the
Business, infringes such rights owned or controlled by Seller or its Affiliates,
excluding, however, the Elan tradename and the Elan trademark and logo upon the
exhaustion of the Product Inventory.

                                      -21-
<PAGE>

      (b) Buyer agrees that it will not alter or deface the Elan tradename or
the Elan trademark and logo in operation of the Business while exhausting the
Product Inventory.

      (c) Buyer further agrees that it will maintain the same quality of the
Product as used by Seller in the operation of the Business as of the Closing for
any Product sold under the Elan tradename and Elan trademark and logo and will
do nothing to diminish the value of the Elan tradename and Elan trademark and
logo.

      SECTION 8.02 COOPERATION.

      Each Party shall cooperate fully with the other in preparing and filing
all notices, applications, submissions, reports and other instruments and
documents that are necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by this Agreement,
including Seller's cooperation in the efforts of Buyer to obtain any consents
and approvals of any Governmental or Regulatory Authority required for Buyer to
be able to own the Purchased Assets. Each Party shall cooperate fully with the
other in connection with the delivery to Buyer of physical possession of all
tangible personal property included in the Purchased Assets.

      SECTION 8.03 ACCESS.

      (a) Upon the request of Seller, Buyer shall at all times following the
Closing, to the extent permitted by Law, grant to Seller and its representatives
the right, during normal business hours, to inspect and copy the Books and
Records and other documents in Buyer's possession to the extent pertaining to
the operation of the Business prior to the Closing Date for Tax purposes and in
connection with Actions or Proceedings.

      (b) For a period of five (5) years following the Closing, Buyer agrees to
keep and maintain all Books and Records and other documents in existence on the
Closing Date and make personnel of Buyer or its Affiliates available to Seller
or its representatives to the extent such access is reasonably related to any
Excluded Assets or otherwise necessary for Seller to comply with or enforce the
terms of this Agreement or comply with any applicable Law; it being understood
that Seller shall reimburse Buyer promptly for its reasonable and necessary out
of pocket expenses incurred in complying with any such request by or on behalf
of Seller.

      SECTION 8.04 PUBLIC ANNOUNCEMENTS.

      Neither Seller nor Buyer shall issue any press release or make any public
announcement with respect to this Agreement and the transactions contemplated
hereby without obtaining the prior written consent of the other Party, except as
may be required by applicable Law upon the advice of counsel and only if the
disclosing Party provides the non-disclosing Party with an opportunity to first
review the release or other public announcement.

      SECTION 8.05 NON-SOLICITATION.

      Each Party (the "Soliciting Party") agrees that, without the prior written
consent of the other Party (the "Non-soliciting Party"), for a period commencing
on the date hereof and expiring on the second (2nd) anniversary of the Closing
Date, the Soliciting Party will not

                                      -22-
<PAGE>

directly or indirectly (a) induce, encourage or solicit any officer or employee
of the Non-soliciting Party or any of its Affiliates to leave such employment or
to accept any other position or employment with the Soliciting Party or (b)
assist any Affiliate or representative of the Soliciting Party in hiring such
employee. However, nothing in this Section 8.05 shall prohibit the Soliciting
Party from indirectly inducing, encouraging or soliciting such officers or
employees to leave the Non-soliciting Party through the use of general
advertisements in trade journals and the like; provided, that in the event that
an officer or employee of the Non-soliciting Party responds to such
advertisement, the Soliciting Party shall not further induce, encourage or
solicit such person to leave such employment or to accept any other position or
employment with the Soliciting Party, without the prior written consent of the
Non-soliciting Party.

      SECTION 8.06 CORPORATE NAMES.

      (a) Except as set forth in this Section 8.06, following the Closing, Buyer
shall not have any rights by virtue of this Agreement or any of the transactions
or agreements contemplated hereby to any names, trademarks, trade names, trade
dress or logos relating to Seller or any of the Affiliates of Seller or any of
their products other than those included in the Intellectual Property (the
"Corporate Names").

      (b) Buyer may use in connection with its operation of the Business
following the Closing (until such time, if any, as any Governmental or
Regulatory Authority shall otherwise not permit Buyer to do so), items of
Product Inventory that bear any of the Corporate Names, it being understood that
Buyer will use its reasonable best efforts to use or sell such items of Product
Inventory prior to selling any other product under the trademark or trade name
of the Product.

      (c) Buyer may use Marketing Materials that were transferred to Buyer as
Purchased Assets that bear any of the Corporate Names in connection with its
operation of the Business following the Closing and for up to thirty (30) days
thereafter; and thereafter Buyer may use such Marketing Materials only if Buyer
completely removes all Corporate Names from, or completely covers all Corporate
Names on, such materials. Buyer acknowledges and agrees that Seller shall have
no Liability or other obligation arising out of or in connection with Buyer's or
it Affiliate's use of the Marketing Materials.

      SECTION 8.07 HANDLING OF PRODUCT INVENTORY.

      From and after the Closing, Buyer shall hold, store, and ship any Product
Inventory substantially in accordance with (i) all applicable Laws, (ii) current
GMPs, (iii) the applicable Regulatory Approvals, and (iv) applicable analytical
methods and procedures, material specifications, master batch records, and
stability protocols.

      SECTION 8.08 DIFFERENTIATION OF PRODUCTS.

      From and after the Closing, Buyer shall use commercially reasonable
efforts to promptly institute appropriate procedures to ensure that products and
goods of the Business manufactured, finished or sold by, or on behalf of, Buyer
can be distinguished from products and goods manufactured, finished or sold by,
or on behalf of, Seller and its Affiliates.

                                      -23-
<PAGE>

      SECTION 8.09 REGULATORY MATTERS.

      (a) From and after the transfer by Seller to Buyer of each Regulatory
Approval pursuant to the terms hereof, Buyer, at its cost, shall be solely
responsible and liable for (i) taking all actions, paying all fees and
conducting all communication with the appropriate Governmental or Regulatory
Authority required by Law in respect of such Regulatory Approval, including
preparing and filing all reports (including adverse drug experience reports)
with the appropriate Governmental or Regulatory Authority, and (ii) taking all
actions and conducting all communication with third parties in respect of
Product sold pursuant to such Regulatory Approval (whether sold before or after
transfer of such Regulatory Approval), including responding to all complaints in
respect thereof, including complaints related to tampering or contamination, and
(iii) investigating all complaints and adverse drug experiences in respect of
Product sold pursuant to such Regulatory Approval (whether sold before or after
transfer of such Regulatory Approval). Seller shall cooperate with Buyer's
reasonable requests and use commercially reasonable efforts to assist Buyer in
connection with any of the foregoing.

      (b) From and after the transfer by Seller to Buyer of each Regulatory
Approval pursuant to the terms hereof, Seller promptly (and in any event within
the time periods required by law) shall notify Buyer if Seller receives a
complaint or a report of an adverse drug experience in respect of a Product sold
pursuant to such Regulatory Approval. In addition, Seller shall cooperate with
Buyer's reasonable requests and use commercially reasonable efforts to assist
Buyer in connection with the investigation of and response to any complaint or
adverse drug experience related to a Product sold by Seller or its Affiliates.

      (c) From and after the transfer by Seller to Buyer of each Regulatory
Approval pursuant to the terms hereof, Buyer, at its cost, shall be solely
responsible and liable for conducting all voluntary and involuntary recalls of
units of Product sold pursuant to such Regulatory Approval (whether sold before
or after transfer of such Regulatory Approval), including recalls required by
any Governmental or Regulatory Authority and recalls of units of Product sold by
Seller or its Affiliates deemed necessary by Buyer in its reasonable discretion;
provided, however, that in the event that any such recall is attributable to
Product sold by Seller or its Affiliates prior to the Closing, then Seller shall
reimburse Buyer for all reasonable expenses in connection with the recall of
such Product. Each Party promptly (and in any event within the time periods
required by law) shall notify the other Party in the event that a recall of
Product sold by Seller or its Affiliates is necessary.

      SECTION 8.10 PRODUCT RETURNS, CHARGEBACKS AND REBATES.

      (a) Product Returns. For the period from the Closing through September 30,
2002, Seller will, at its sole cost and expense, process and issue credits (or
render payment in such other form as Seller may determine) for all returned
Product bearing Seller's NDC numbers and evidenced as being sold by Seller. Such
handling of returned Products by Seller, and the issuance of any credits or
other form of reimbursement in connection therewith, shall be in accordance with
Seller's then current returned goods policy. Buyer will process, and be solely
responsible for reimbursements with respect to Product returns arising with
respect to, or resulting from, shipping errors, damage in transit and shortages
relating to Buyer's sales of Products after the Closing and Product with Buyer's
NDC number.

                                      -24-
<PAGE>

            (i) Buyer agrees and acknowledges that Seller's maximum liability
      for credits or other reimbursement for returned Product under this Section
      shall be $750,000 (the "Maximum Returns Credit Amount"), and further
      agrees that Seller's obligation to issue credits or other reimbursement
      for returned Products bearing Seller's NDC numbers shall terminate upon
      the date on which Seller has issued credits or otherwise reimbursed the
      Maximum Returns Credit Amount or September 30, 2002, whichever shall be
      the first to occur. For purposes of this Section, the dollar value of
      returned Products processed by Seller, shall be determined in accordance
      with Seller's then current returned goods policy.

            (ii) Upon Seller's issuance of credits or other reimbursement for
      returned Products bearing Seller's NDC's in an aggregate dollar amount
      equal to the Maximum Returns Credit Amount, any such credits or other
      reimbursement issued thereafter by Seller shall be the sole and exclusive
      liability and obligation of Buyer, for which Buyer will be invoiced by
      Seller on a monthly basis. Each such invoice shall set forth the number of
      units processed for each Product's NDC, together with such information as
      shall be necessary to support the invoice. Buyer shall, within thirty (30)
      days of its receipt of invoice, pay to Buyer the full invoiced amount.

            (iii) All Products returned to Buyer through September 30, 2002,
      bearing Seller's NDC numbers and evidenced as sold by Seller shall be the
      financial responsibility of Seller, subject to the Maximum Returns Credit
      Amount set forth in this Section.

            (iv) Effective as of October 1, 2002, Buyer shall be solely and
      exclusively responsible for processing any and all returned Products
      (including all returned Products bearing Seller's NDC's) and for the
      issuance of any and all credits or other reimbursement therefor. Any and
      all returned Products received by Seller after September 30, 2002 will be
      destroyed by Seller, and Seller will, after such destruction, forward to
      Buyer any necessary accompanying documentation to determine the
      appropriate credit. Except as otherwise provided herein, Buyer and Seller
      will not bill one another for costs incurred strictly for the processing
      of claims for returned Products. Seller and Buyer will use reasonable
      efforts in requesting that customers direct all Product returns after
      September 30, 2002 to Buyer.

            (v) Buyer and Seller shall be responsible for handling the
      destruction of any Product returned to their respective returns handling
      facility. If Buyer or Seller destroys Product for which the other was
      financially responsible as set forth in this Section, that party shall
      bill the other party for the cost of the destruction. Each such invoice
      shall set forth the number of units processed, together with such other
      information as shall be necessary to support the invoice. Each party
      shall, within thirty (30) days of its receipt of invoice, pay the other
      party for the full invoiced amount.

      (b) Government Rebates. Except as limited in Section 8.10(e) below, Seller
shall be responsible for all rebates pursuant to any government rebate programs
with respect to government claims for the Products indicating Seller's NDC
numbers and dispensed prior to December 31, 2001. Buyer shall reimburse Seller
for all rebates that Seller is obligated to pay

                                      -25-
<PAGE>

with respect to government claims for the Product dispensed after December 31,
2001 (it being understood and agreed that the dispense date contained in any
report from a state rebate program shall be used for purposes of determining the
date of such claim). All payments due Seller under this Section shall be made
within thirty (30) days of submission to Buyer of invoices that describe the
requested payments in reasonable detail.

      (c) Commercial Rebates. Except as limited in Section 8.10(e) below, Seller
shall be responsible for all commercial rebates with respect to the Product
dispensed prior to December 31, 2001. Notwithstanding the foregoing, Buyer and
Seller agree that (a) Seller's financial liability for the commercial rebates
during the period from Closing through December 31, 2001 shall be limited to
those commercial customers with which Seller has a rebate obligation as of the
Closing and (b) any such payments by Seller shall be made on the terms and
conditions comparable to Seller's rebate obligations as of the Closing with
respect to each commercial customer and shall be based on Seller's terms of
agreement with the respective contract. Any rebates for Product dispensed
subsequent to December 31, 2001 will be the liability of Buyer. To the extent
that Seller processes such claims, Buyer shall reimburse Seller within thirty
(30) days of receipt of invoices that describe the requested payments in
reasonable detail.

      (d) Chargeback Claims. Except as limited in Section 8.10(e) below, Seller
shall be financially responsible for all chargeback claims for the Products with
a chargeback invoice dated (i.e. date of sale from the wholesaler to the
wholesaler customer, subsequently referred to as the "Activity Date") prior to
September 30, 2001 (the "Transition Chargebacks"). Buyer shall process and be
financially liable for all chargeback claims with an Activity Date subsequent to
September 30, 2001. Notwithstanding the foregoing, the parties acknowledge that
the VA National Acquisition Center must approve the removal of the Products from
Seller's Federal Supply Schedule ("FSS") before the responsibility of processing
such rebates is transferred from Seller to Buyer. Accordingly, in the event such
approval is not obtained prior to September 30, 2001, Seller shall continue to
be responsible for processing the FSS chargebacks on Buyer's behalf, and Buyer
shall reimburse Seller for same. Buyer and Seller agree that (a) Seller's
financial liability for the Transition Chargebacks shall be limited to those
commercial customers with which Seller has chargeback obligations as of the
Closing, and (b) any such chargebacks issued by Seller shall be made on terms
and conditions comparable to Seller's obligations as of the Closing with respect
to each customer and shall be based on Seller's terms of respective agreements
as of the Closing.

      (e) Maximum Rebate and Chargeback Amount. Notwithstanding the requirements
of Sections 8.10(b), (c) and (d), Buyer and Seller agree that Seller's financial
liability for government rebates, commercial rebates and chargeback claims shall
under no circumstances exceed One Million Two Hundred Thousand Dollars
($1,200,000) in the aggregate. Seller shall provide Buyer monthly reports in
reasonable detail setting forth the amount of rebates and chargeback claims for
which it was financially responsible for the current month and on a cumulative
basis. Seller shall cause its representatives and employees to be available to
Buyer, during normal business hours and upon reasonable prior written notice to
Seller, to discuss any questions or comments of Buyer concerning such report.

                                      -26-
<PAGE>

      SECTION 8.11 ADVERSE EXPERIENCE REPORTS.

      At a mutually agreed upon time after the Closing, Seller shall provide
Buyer with information relating to the investigation and reporting of adverse
experiences regarding the Product since the Product launch and all information
which is materially relevant to the safe use of the Product in Seller's
possession as of the Closing. After the Closing, Seller shall promptly submit to
Buyer all adverse drug experience information or customer complaints brought to
the attention of Seller in respect of the Product, as well as any material
events and matters concerning or affecting the safety or efficacy of the
Product. After the Closing, Buyer shall have all responsibility for required
reporting of adverse experiences for the Product.

      SECTION 8.12 MULTI-PRODUCT CONTRACTS.

      Section 8.12 of the Seller Disclosure Schedule sets forth a complete and
correct list of each Contract to which Seller or any of its Affiliates is a
party and pursuant to which Seller or its Affiliates sells Product, together
with other pharmaceutical products of Seller and its Affiliates, to a third
party (the "Multi-Product Contracts"). Seller has made available to Buyer copies
of all Multi-Product Contracts; provided that such copies have been redacted to
prevent disclosure of information not related to the Product. From and after the
transfer by Seller to Buyer of each Regulatory Approval pursuant to the terms
hereof, Buyer shall honor and perform all obligations and Liabilities of Seller
and its Affiliates under and pursuant to each Multi-Product Contract with
respect to supplying Product to the applicable third party pursuant to such
Regulatory Approval. Seller agrees that after the transfer of such Regulatory
Approval it will not take any action with respect to any Multi-Product Contract
that would extend the term of such Multi-Product Contract with respect to any
Product, create or agree to any additional obligations with respect to the
Product, or otherwise adversely affect Buyer or the Business (other than to
terminate any such Multi-Product Contract), without the prior written consent of
Buyer. Seller further agrees that, at the direction of Buyer (to be given
promptly following the Closing), Seller shall either terminate or assign to
Buyer the rights and obligations with respect to the Product under each such
Multi-Product Contract, to the extent permitted by the terms thereof, as soon as
practicable after obtaining Buyer's direction.

      SECTION 8.13 MANNER OF BUSINESS.

      From and after the Closing Date, Buyer shall not, by any action or
omission cause sales of the Product to occur later than they would otherwise
have occurred during the ordinary course of business or cause returns of the
Product to occur earlier than they would otherwise have occurred.

      SECTION 8.14 ASSUMPTION OF ONGOING CLINICAL TRIALS.

      From and after the Closing Date, Buyer shall assume control of, and
responsibility for all costs, obligations and Liabilities arising after the
Closing from or related to, the ongoing clinical trials involving the Products
identified on Section 8.14 of the Seller Disclosure Schedule; provided, however,
that Seller shall reimburse Buyer for all such costs, obligations and
Liabilities in connection with Study AN094-502 (DART).

                                      -27-
<PAGE>

      SECTION 8.15 COMPLIANCE AUDITS.

      From time to time as either Party may elect during the period commencing
with the Closing Date and ending on December 31, 2004, during normal business
hours and upon reasonable prior written notice to the other Party, each Party
shall permit duly authorized representatives of the other Party to review and
inspect the premises, facilities, inventory, records and documentation
maintained by the other Party for the purpose of determining compliance with the
obligations under this Agreement.

      SECTION 8.16 LABELING REQUIREMENTS.

      Following the Closing, Buyer shall at its own expense and as expeditiously
as possible use all reasonable efforts to obtain such FDA approvals necessary
for Buyer Labeling for the Product to be manufactured after the Closing.

      SECTION 8.17 FURTHER ASSURANCES.

      (a) On and after the Closing, Seller shall from time to time, at the
request of Buyer, (i) execute and deliver, or cause to be executed and
delivered, such other instruments of conveyance and transfer and take such other
actions as Buyer may reasonably request, in order to more effectively consummate
the transactions contemplated hereby and to vest in Buyer good and marketable
title to the Purchased Assets (including assistance in the collection or
reduction to possession of any of the Purchased Assets) and (ii) use its
commercially reasonable efforts to obtain all consents and waivers and to
resolve all material impracticalities of assignment or transfer necessary to
convey the Purchased Assets to Buyer.

      (b) On and after the Closing, Buyer shall from time to time, at the
request of Seller, take such actions as Seller may reasonably request, in order
to more effectively consummate the transactions contemplated hereby, including
Buyer's assumption of the Assumed Liabilities.

              ARTICLE IX. CONDITIONS TO THE OBLIGATIONS OF SELLER

      The obligation of Seller to effect the transactions contemplated hereby is
subject to the satisfaction (or waiver by Seller), at or before the Closing, of
each of the following conditions:

      SECTION 9.01 REPRESENTATIONS, WARRANTIES AND COVENANTS.

      All representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date, as though given on such date, excluding for such purpose any
representations and warranties that are by their terms given only as of a
specific date, and Buyer shall have performed all agreements and covenants
required by this Agreement to be performed by it prior to or on the Closing
Date, and Seller shall have received a certificate to such effect dated the
Closing Date and executed by a duly authorized officer of Buyer.

                                      -28-
<PAGE>

      SECTION 9.02 NO ACTIONS OR PROCEEDINGS.

      No Actions or Proceedings that question the validity or legality of the
transactions contemplated hereby shall have been instituted or threatened and
not settled or otherwise terminated.

      SECTION 9.03 CONSENTS.

      All Seller Governmental Consents, Seller Third Party Consents, Buyer
Governmental Consents and Buyer Third Party Consents shall have been obtained or
made, as the case may be.

      SECTION 9.04 OTHER CLOSING DELIVERIES.

      Buyer shall have delivered to Seller such other certificates and documents
customary in transactions similar to those contemplated hereby that are
reasonably requested by Seller.

      SECTION 9.05 PRODUCT ACQUISITION FINANCING AGREEMENT.

      Buyer shall have executed and delivered to Seller the Product Acquisition
Financing Agreement.

      SECTION 9.06 COMPLETION OF EQUITY FINANCING.

      Buyer shall have completed the sale of shares of its Series A-1 Preferred
Stock with an aggregate purchase price of no less than Sixty-Seven Million Five
Hundred Thousand Dollars ($67,500,000), including the sale to Seller or its
Affiliate of shares of its Series A-1 Preferred Stock with an aggregate purchase
price of no less than Fifteen Million Dollars ($15,000,000), on terms and
conditions satisfactory to Seller.

               ARTICLE X. CONDITIONS TO THE OBLIGATIONS OF BUYER

      The obligation of Buyer to effect the transactions contemplated hereby is
subject to the satisfaction (or waiver by Buyer), at or before the Closing, of
each of the following conditions:

      SECTION 10.01 REPRESENTATIONS, WARRANTIES AND COVENANTS.

      All representations and warranties of Seller contained in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date, as though given on and as of such date, excluding for such purpose any
representations and warranties that are by their terms given only as of a
specific date, and Seller shall have performed all agreements and covenants
required by this Agreement to be performed by it prior to or on the Closing
Date, and Buyer shall have received a certificate to such effect dated the
Closing Date and executed by a duly authorized officer of Seller.

                                      -29-
<PAGE>

      SECTION 10.02 NO ACTIONS OR PROCEEDINGS.

      No Actions or Proceedings that question the validity or legality of the
transactions contemplated hereby shall have been instituted or threatened and
not settled or otherwise terminated.

      SECTION 10.03 CONSENTS.

      All Seller Governmental Consents, Seller Third Party Consents, Buyer
Governmental Consents and Buyer Third Party Consents shall have been obtained or
made, as the case may be.

      SECTION 10.04 OTHER CLOSING DELIVERIES.

      Seller shall have delivered to Buyer such other certificates and documents
customary in transactions similar to those contemplated hereby that are
reasonably requested by Buyer.

      SECTION 10.05 PRODUCT ACQUISITION FINANCING AGREEMENT.

      Seller shall have executed and delivered to Buyer the Product Acquisition
Financing Agreement, and Seller shall have made all loans requested by Buyer, in
accordance with and subject to the terms thereof, to be made at the time of
Closing.

                          ARTICLE XI. INDEMNIFICATION

      SECTION 11.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC.

      The representations, warranties and covenants of Seller and Buyer
contained in this Agreement shall survive the Closing and remain in full force
and effect indefinitely; provided, however, that the representations and
warranties of Seller and Buyer set forth in Article VI and Article VII hereof
shall survive the Closing and remain in full force and effect until the
Expiration Date. All representations and warranties contained in Article VI and
Article VII of this Agreement and all claims with respect thereto shall
terminate on the Expiration Date; provided that if notice of any claim for
indemnification pursuant to Section 11.02(a) or 11.02(b) shall have been given
prior to the Expiration Date and such notice describes with specificity the
circumstances with respect to which such indemnification claim relates, such
indemnification claim shall survive until such time as such claim is finally
resolved.

      SECTION 11.02 INDEMNIFICATION.

      (a) By Seller. Subject to Sections 11.03 and 11.04, from and after the
Closing, Seller shall indemnify, reimburse, defend and hold harmless Buyer, its
Affiliates, and their respective officers, directors, employees, agents,
successors and assigns (collectively, the "Buyer Indemnified Parties") from and
against any and all costs, losses, Liabilities, damages, lawsuits, deficiencies,
claims and expenses (including interest, penalties and reasonable fees and
disbursements of attorneys paid in connection with the investigation, defense or
settlement of any of the foregoing) (collectively, the "Damages"), to the extent
incurred in connection with, arising out of, resulting from or incident to (i)
any inaccuracy or breach of any covenant, representation, warranty or other
agreement of Seller herein, (ii) Seller's conduct of the Business

                                      -30-
<PAGE>

prior to the Closing, including the development, manufacturing, marketing, sale
or distribution of the Product prior to the Closing; (iii) the failure of Seller
to pay, perform or discharge any Excluded Liabilities; or (iv) the failure of
Seller or the transactions contemplated herein to comply with the Bulk Sales
laws.

      (b) By Buyer. Subject to Sections 11.03 and 11.04, from and after the
Closing, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates
and their respective officers, directors, employees, agents, successors and
assigns from and against any and all Damages incurred in connection with,
arising out of, resulting from or incident to (i) any inaccuracy or breach of
any covenant, representation, warranty or other agreement of Buyer herein, (ii)
Buyer's conduct of the Business from and after the Closing, including the
development, manufacturing, marketing, sale or distribution of the Product from
and after the Closing; and (iii) the failure of Buyer to pay, perform or
discharge any Assumed Liabilities.

      (c) Procedures. The indemnified Party (the "Indemnified Party") shall give
the indemnifying Party (the "Indemnifying Party") prompt written notice (an
"Indemnification Claim Notice") of any Damages or discovery of fact upon which
such Indemnified Party intends to base a request for indemnification under
Section 11.02(a) or Section 11.02(b), but in no event shall the Indemnifying
Party be liable for any Damages that result from any delay in providing such
notice. Each Indemnification Claim Notice must contain a reasonable description
of the claim and the nature and amount of such Damages (to the extent that the
nature and amount of such Damages are known at such time). The Indemnified Party
shall furnish promptly to the Indemnifying Party copies of all papers and
official documents received in respect of any Damages. All indemnification
claims in respect of a Party, its Affiliates or their respective directors,
officers, employees and agents (collectively, the "Indemnitees" and each an
"Indemnitee") shall be made solely by such Party to this Agreement.

      (d) Third Party Claims. The obligations of an Indemnifying Party under
this Section 11.02 with respect to Damages arising from claims of any third
party that are subject to indemnification as provided for in Section 11.02(a) or
Section 11.02(b) (a "Third Party Claim") shall be governed by and be contingent
upon the following additional terms and conditions:

            (i) At its option, the Indemnifying Party may assume the defense of
      any Third Party Claim by giving written notice to the Indemnified Party
      within thirty (30) days after the Indemnifying Party's receipt of an
      Indemnification Claim Notice. The assumption of the defense of a Third
      Party Claim by the Indemnifying Party shall not be construed as an
      acknowledgment that the Indemnifying Party is liable to indemnify any
      Indemnitee in respect of the Third Party Claim, nor shall it constitute a
      waiver by the Indemnifying Party of any defenses it may assert against any
      Indemnitee's claim for indemnification. Upon assuming the defense of a
      Third Party Claim, the Indemnifying Party may appoint as lead counsel in
      the defense of the Third Party Claim any legal counsel selected by the
      Indemnifying Party that is reasonably acceptable to the Indemnified Party.
      In the event the Indemnifying Party assumes the defense of a Third Party
      Claim, the Indemnified Party shall promptly deliver to the Indemnifying
      Party all original notices and documents (including court papers) received
      by any Indemnitee in connection with the Third Party Claim. Should the
      Indemnifying Party assume the defense of a Third Party Claim, except as
      provided in subsection (ii) below, the Indemnifying Party shall not be
      liable to the

                                      -31-
<PAGE>

      Indemnified Party or any other Indemnitee for any legal expenses
      subsequently incurred by such Indemnified Party or other Indemnitee in
      connection with the analysis, defense or settlement of the Third Party
      Claim. In the event that it is ultimately determined that the Indemnifying
      Party is not obligated to indemnify, defend or hold harmless an Indemnitee
      from and against the Third Party Claim, the Indemnified Party shall
      reimburse the Indemnifying Party for any and all costs and expenses
      (including attorneys' fees and costs of suit) and any Damages incurred by
      the Indemnifying Party in its defense of the Third Party Claim with
      respect to such Indemnitee.

            (ii) Without limiting Section 11.02(d)(i), any Indemnitee shall be
      entitled to participate in, but not control, the defense of such Third
      Party Claim and to employ counsel of its choice for such purpose;
      provided, however, that such employment shall be at the Indemnitee's own
      expense unless (A) the employment thereof has been specifically authorized
      by the Indemnifying Party in writing, (B) the Indemnifying Party has
      failed to assume the defense and employ counsel in accordance with Section
      11.02(d)(i) (in which case the Indemnified Party shall control the
      defense) or (C) if the Indemnified Party and the Indemnifying Party are
      both named parties to the proceeding and the Indemnified Party has
      reasonably concluded that there may be one or more legal defenses that are
      different from or in addition to those available to the Indemnifying Party
      (in which case the Indemnifying Party shall not have the right to assume
      the defense of such action on behalf of the Indemnified Party and the
      Indemnifying Party shall be liable for all legal expenses incurred by the
      Indemnified Party in furtherance thereof).

            (iii) With respect to any Damages relating solely to the payment of
      money damages in connection with a Third Party Claim and that will not
      result in the Indemnitee's becoming subject to injunctive or other relief
      or otherwise adversely affect the business of the Indemnitee in any
      manner, and as to which the Indemnifying Party shall have acknowledged in
      writing the obligation to indemnify the Indemnitee hereunder, the
      Indemnifying Party shall have the sole right to consent to the entry of
      any judgment, enter into any settlement or otherwise dispose of such
      Damages, on such terms as the Indemnifying Party, in its sole discretion,
      shall deem appropriate. With respect to all other Damages in connection
      with Third Party Claims, where the Indemnifying Party has assumed the
      defense of the Third Party Claim in accordance with Section 11.02(d)(i),
      the Indemnifying Party shall have authority to consent to the entry of any
      judgment, enter into any settlement or otherwise dispose of such Damages;
      provided that it obtains the prior written consent of the Indemnified
      Party (which consent shall not be unreasonably withheld or delayed). The
      Indemnifying Party shall not be liable for any settlement or other
      disposition of Damages by an Indemnitee that is reached without the
      written consent of the Indemnifying Party (which consent shall not be
      unreasonably withheld or delayed). Regardless of whether the Indemnifying
      Party chooses to defend or prosecute any Third Party Claim, no Indemnitee
      shall admit any liability with respect to, or settle, compromise or
      discharge, any Third Party Claim without the prior written consent of the
      Indemnifying Party.

            (iv) Regardless of whether the Indemnifying Party chooses to defend
      or prosecute any Third Party Claim, the Indemnified Party shall, and shall
      cause each other Indemnitee to, cooperate in the defense or prosecution
      thereof and shall furnish such

                                      -32-
<PAGE>

      records, information and testimony, provide such witnesses and attend such
      conferences, discovery proceedings, hearings, trials and appeals as may be
      reasonably requested in connection therewith. Such cooperation shall
      include access during normal business hours afforded to the Indemnifying
      Party to, and reasonable retention by the Indemnified Party of, records
      and information that are reasonably relevant to such Third Party Claim,
      and making Indemnitees and other employees and agents available on a
      mutually convenient basis to provide additional information and
      explanation of any material provided hereunder, and the Indemnifying Party
      shall reimburse the Indemnified Party for all its reasonable out-of-pocket
      expenses in connection therewith.

      (e) Expenses. Except as provided above, the costs and expenses, including
fees and disbursements of counsel, incurred by the Indemnified Party in
connection with any claim shall be reimbursed on a quarterly basis by the
Indemnifying Party, without prejudice to the Indemnifying Party's right to
contest the Indemnified Party's right to indemnification and subject to refund
in the event the Indemnifying Party is ultimately held not to be obligated to
indemnity the Indemnified Party.

      SECTION 11.03 LIMITATIONS.

      (a) In no event shall Seller be liable for any Damages pursuant to Section
11.02(a) unless and until the aggregate amount of all such Damages exceeds Three
Hundred Thousand Dollars ($300,000), in which case Seller shall be liable for
all such Damages in excess of Three Hundred Thousand Dollars ($300,000);
provided that Damages shall not be subject to the limitations set forth in this
Section 11.03(a) to the extent that such Damages are payable in connection with
(i) Seller's breach of Section 8.01; (ii) Seller's failure to pay Buyer amounts
due under Sections 4.02, 8.09, 8.10 and 8.14; and (iii) Seller's failure to pay
or otherwise satisfy any Excluded Liabilities.

      (b) In no event shall the aggregate liability of Seller for any Damages
pursuant to Section 11.02(a) (other than Damages due to Seller's failure to pay
or otherwise satisfy any Excluded Liabilities) exceed the aggregate amount of
cash consideration received from Buyer pursuant to Section 4.01(a) hereof.

      (c) The amount of any Damages under Sections 11.02(a) and 11.02(b) shall
be reduced by the amount of any insurance proceeds paid to the Indemnified Party
relating to such claim.

      (d) Except with respect to claims based on fraud, after the Closing, the
right of the Buyer Indemnified Parties to indemnification under this Article XI
shall be the exclusive remedy of the Buyer Indemnified Parties with respect to
claims incurred in connection with, arising out of, resulting from or incident
to (i) any inaccuracy or breach of any covenant, representation, warranty or
other agreement of Seller herein, (ii) Seller's conduct of the Business prior to
the Closing, including Seller's development, manufacturing, marketing, sale or
distribution of the Product prior to the Closing; (iii) the failure of Seller to
pay, perform or discharge any Excluded Liabilities; or (iv) the failure of
Seller or the transactions contemplated herein to comply with the Bulk Sales
laws.

                                      -33-
<PAGE>

      SECTION 11.04 LIMITATION OF LIABILITY.

      NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY
NOR ANY OF THEIR RESPECTIVE AFFILIATES SHALL BE LIABLE TO THE OTHER PARTY BY
REASON OF ANY REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF
COMMON LAW, OR UNDER THE EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL,
SPECIAL OR INCIDENTAL OR PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF CURRENT OR
FUTURE PROFITS, LOSS OF ENTERPRISE VALUE OR OTHERWISE) AND WHETHER OCCASIONED BY
THE NEGLIGENCE OF SUCH PARTY OR ITS AFFILIATES OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES.

                           ARTICLE XII. MISCELLANEOUS

      SECTION 12.01 CONFIDENTIALITY.

      (a) In addition to the restrictions contained in Section 8.04, after the
Closing, no Party (a "Disclosing Party") shall, without the prior written
consent of the other Party (the "Non-disclosing Party"), disclose to any Person
Confidential Information (as defined below) of the Non-disclosing Party, except
to a Disclosing Party's employees or representatives who need to know such
information for any reason contemplated by this Agreement (and then only to the
extent that such persons are under an obligation to maintain the confidentiality
of the Confidential Information), or use any Confidential Information of the
Non-disclosing Party for any reason other than contemplated by this Agreement
unless such Disclosing Party has used its best efforts to (i) consult with the
Non-disclosing Party and obtain the Non-disclosing Party's prior written consent
in a timely manner, and (ii) the Disclosing Party has been advised by counsel
that disclosure is required to be made under applicable Law or the requirements
of a national securities exchange or another similar regulatory body. In the
event that the Disclosing Party is requested or required by documents subpoena,
civil investigative demand, interrogatories, requests for information, or other
similar process to disclose any Confidential Information, the Disclosing Party
shall provide the Non-disclosing Party with prompt written notice of such
request or demands or other similar process so that the Non-disclosing Party may
seek an appropriate protective order or, if such request, demand or other
similar process is mandatory, waive the Disclosing Party's compliance with the
provisions of this Section 12.01(a) as appropriate.

      (b) The term "Confidential Information" as used in this Section 12.01
means (i) as to Buyer, all confidential information relating to Buyer's
business, the Purchased Assets and the Assumed Liabilities, and (ii) as to
Seller, all confidential information relating to the Business (other than the
Purchased Assets) and the business and operations of the Seller and its
Affiliates, including the Excluded Assets and the Excluded Liabilities or other
obligations other than the Assumed Liabilities, in each of (i) and (ii) whether
disclosed prior to or after the date hereof. The term "Confidential Information"
does not include information which becomes generally available to the public
other than as a result of disclosure by the Disclosing Party, or becomes
available to the Disclosing Party on a non-confidential basis from a source
other than the Non-

                                      -34-
<PAGE>

disclosing Party, provided that such source is not bound by a confidentiality
agreement with the Non-disclosing Party.

      (c) This Section 12.01 supercedes and replaces in its entirety that
certain letter agreement relating to confidentiality dated March 28, 2001
between Seller or its Affiliate and Buyer.

      SECTION 12.02 NOTICES.

      All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered personally
against written receipt or by facsimile transmission with answer back
confirmation or mailed (postage prepaid by certified or registered mail, return
receipt requested) or by nationally recognized overnight courier that maintains
records of delivery to the Parties at the following addresses or facsimile
numbers:

      If to Buyer to:  Xcel Pharmaceuticals, Inc.
                       6363 Greenwich Drive, Suite 100
                       San Diego, CA 92122
                       Attention:  Corporate Secretary
                       Facsimile:  (858) 202-2799

      With copies to:  Pillsbury Winthrop LLP
                       101 W. Broadway, Suite 1800
                       San Diego, CA 92101
                       Attention:  David R. Snyder, Esq.
                       Facsimile:  (619) 236-1995

      If to Seller to: Elan Pharmaceuticals, Inc.
                       800 Gateway Boulevard
                       South San Francisco, CA 94080
                       Attention:  Vice President and Secretary
                       Facsimile:  (650) 553-7165

      and              Elan Pharma International Limited
                       WIL House
                       Shannon Business Park
                       Shannon
                       Co Clare, Ireland
                       Attention:  Company Secretary
                       Facsimile:  +353 61 362 097

      With copies to:  Brobeck, Phleger & Harrison LLP
                       12390 El Camino Real
                       San Diego, CA 92130
                       Attention:  Faye H. Russell, Esq.
                       Facsimile:  (858) 720-2555

                                      -35-
<PAGE>

      All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
receipt, (ii) if delivered by facsimile to the facsimile number as provided in
this Section, be deemed given upon receipt by the sender of the answer back
confirmation and (ii) if delivered by mail in the manner described above or by
overnight courier to the address as provided in this Section, be deemed given
upon receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice,
request or other communication is to be delivered pursuant to this Section). Any
Party from time to time may change its address, facsimile number or other
information for the purpose of notices to that Party by giving notice specifying
such change to the other Parties hereto in accordance with the terms of this
Section.

      SECTION 12.03 ENTIRE AGREEMENT.

      This Agreement, together with the Product Acquisition Financing Agreement
(and all Exhibits and Schedules attached hereto and thereto and all other
documents delivered in connection herewith and therewith) supersedes all prior
discussions and agreements among the Parties with respect to the subject matter
hereof and thereof and contains the sole and entire agreement among the Parties
hereto and thereto with respect to the subject matter hereof and thereof.

      SECTION 12.04 WAIVER.

      Any term or condition of this Agreement may be waived at any time by the
Party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the Party waiving such term or condition. No waiver by any Party hereto of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by law or otherwise afforded, will be cumulative and not
alternative.

      SECTION 12.05 AMENDMENT.

      This Agreement may be amended, supplemented or modified only by a written
instrument duly executed by each Party hereto.

      SECTION 12.06 THIRD PARTY BENEFICIARIES.

      The terms and provisions of this Agreement are intended solely for the
benefit of each Party hereto (including, in the case of Seller, Seller's
Affiliates) and their respective successors or permitted assigns and it is not
the intention of the Parties to confer third-party beneficiary rights upon any
other Person.

      SECTION 12.07 ASSIGNMENT; BINDING EFFECT.

      Neither this Agreement nor any right, interest or obligation hereunder may
be assigned by any Party hereto without the prior written consent of the other
Party hereto (which consent shall not be unreasonably withheld) and any attempt
to do so will be void. This Agreement is binding

                                      -36-
<PAGE>

upon, inures to the benefit of and is enforceable by the Parties hereto and
their respective successors and permitted assigns.

      SECTION 12.08 HEADINGS.

      The headings used in this Agreement have been inserted for convenience of
reference only and do not define or limit the provisions hereof

      SECTION 12.09 SEVERABILITY.

      If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or obligations
of any Party hereto under this Agreement will not be materially and adversely
affected thereby, (a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or unenforceable
provision had never compromised a part hereof, (c) the remaining provisions of
this Agreement will remain in full force and effect and will not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom,
and (d) in lieu of such illegal, invalid or unenforceable provision, there will
be added automatically as a part of this Agreement a legal, valid and
enforceable provision as similar to terms to such illegal, invalid or
unenforceable provision as may be possible and reasonably acceptable to the
Parties herein.

      SECTION 12.10 GOVERNING LAW.

      THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS EXECUTED AND PERFORMED
IN SUCH STATE, WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES.

      SECTION 12.11 EXPENSES.

      Except as otherwise provided in this Agreement, each Party hereto shall
pay its own expenses and costs incidental to the preparation of this Agreement
and to the consummation of the transactions contemplated hereby.

      SECTION 12.12 COUNTERPARTS.

      This Agreement may be executed in any number of counterparts and by
facsimile, each of which will be deemed an original, but all of which together
will constitute one and the same instrument.

      SECTION 12.13 SCHEDULES, EXHIBITS AND OTHER AGREEMENTS.

      The Exhibits, Schedules, other agreements, certificates and notices
specifically referred to herein, and delivered pursuant hereto, are an integral
part of this Agreement. Any disclosure that is made in any of the Schedules or
certificates delivered pursuant to this Agreement shall be deemed responsive to
any other applicable disclosure obligation hereunder.

                            [Signature Page Follows]

                                      -37-
<PAGE>

            IN WITNESS WHEREOF, this Agreement has been executed by the Parties
      hereto all as of the date first above written.

                                     ELAN PHARMACEUTICALS, INC.

                                     By: /s/ Erle Mast
                                          -------------------------------------
                                     Title: V.P. Treasurer

                                     ELAN PHARMA INTERNATIONAL LIMITED

                                     By:   /s/ Kevin Insley
                                           ------------------------------------
                                     Title: Authorised Signatory

                                     XCEL PHARMACEUTICALS, INC.

                                     By: /s/ Michael Borer
                                         --------------------------------------
                                     Title: President and CEO

    [Signature Page to Amended and Restated Diastat Asset Purchase Agreement]

<PAGE>

                             EXHIBITS AND SCHEDULES

<TABLE>
<CAPTION>
 Exhibit                   Document
---------                  --------
<S>                        <C>
Exhibit A                  Product

Exhibit B                  Product Acquisition Financing Agreement
</TABLE>

Schedule

Seller Disclosure Schedule

Buyer Disclosure Schedule

Schedule A - Equipment

<PAGE>

                                    EXHIBIT A

                             DESCRIPTION OF PRODUCT

<TABLE>
<CAPTION>
DIASTAT
-------
<S>         <C>                      <C>                 <C>
  USA       59075-650-20              2.5 mg             1 delivery system kit
  USA       59075-651-20              5.0 mg             1 delivery system kit
  USA       59075-652-20             10.0 mg             1 delivery system kit
  USA       59075-653-20             10.0 mg             1 delivery system kit (no longer marketed)
  USA       59075-654-20             15.0 mg             1 delivery system kit
  USA       59075-655-20             20.0 mg             1 delivery system kit
</TABLE>

                                      A-1

<PAGE>

                                   SCHEDULE A

                                    Equipment

-     Pressure/Vacuum Tank

-     Cozzoli Hypak Syringe Filler

-     Becton-Dickinson Hypak Stopper Placement Unit with Edwards Vacuum Pump (2)

-     Accraply 350T Labeler

-     MGS RCS-150 Rotary Cartoner

-     MGS IPP-1780V Pick-n-Place Outserter

-     HI-Speed Topline VS2 series Check Weigher

-     4-cavity free standing hardened steel injection mold - 3cc (pediatric &
      universal) Shroud

-     4-cavity free standing hardened steel injection mold - 5 cc (adult) Shroud

-     4-cavity free standing hardened steel injection mold - 3 cc (pediatric &
      universal) Protective Cover

-     4-cavity free standing hardened steel injection mold - 3 cc (pediatric &
      universal) Seal Pin

-     4-cavity free standing hardened steel injection mold - 5 cc (adult) Seal
      Pin

-     4-cavity free standing hardened steel injection mold - 3 cc (pediatric &
      universal) Plunger Rod

-     4-cavity free standing hardened steel injection mold - 5 cc (adult)
      Plunger Rod

-     Corona-type treatment of Shroud for better label adherence - Lectro
      Engineering Lectro-Treater

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