Document:

Exhibit 10.1

Exhibit 10.1

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.

LICENSE AGREEMENT

DATED AS OF JUNE 7, 2011

BY AND BETWEEN

SOMAXON PHARMACEUTICALS, INC.

AND

PALADIN LABS INC.

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE 1 DEFINITIONS
	 	 	1	 
	1.1 “Act”
	 	 	1	 
	1.2 “Adverse Drug Reaction”
	 	 	1	 
	1.3 “Adverse Event”
	 	 	1	 
	1.4 “Affiliate”
	 	 	1	 
	1.5 “Agreement”
	 	 	2	 
	1.6 “Bulk Product”
	 	 	2	 
	1.7 “Business Day”
	 	 	2	 
	1.8 “Calendar Quarter”
	 	 	2	 
	1.9 “Calendar Year”
	 	 	2	 
	1.10 “Canada”
	 	 	2	 
	1.11 “cGMP”
	 	 	2	 
	1.12 “Change of Control”
	 	 	2	 
	1.13 “Commercialization”
	 	 	2	 
	1.14 “Commercialization Plan”
	 	 	2	 
	1.15 “Commercially Reasonable Efforts”
	 	 	3	 
	1.16 “Commercial Sale”
	 	 	3	 
	1.17 “Competing Product”
	 	 	3	 
	1.18 “Confidential Information”
	 	 	3	 
	1.19 “Controlled”
	 	 	3	 
	1.20 “Cost of Goods Sold”
	 	 	4	 
	1.21 “Cover”, “Covering” or “Covered”
	 	 	4	 
	1.22 “Effective Date”
	 	 	4	 
	1.23 “Ex-Canada Territory”
	 	 	4	 
	1.24 “Executive Officers”
	 	 	4	 
	1.25 “Field”
	 	 	4	 
	1.26 “First Commercial Sale”
	 	 	4	 
	1.27 “FTE”
	 	 	4	 
	1.28 “Governmental Body”
	 	 	5	 
	1.29 “Health Canada”
	 	 	5	 
	1.30 “Improvements”
	 	 	5	 
	1.31 “Indemnitees”
	 	 	5	 
	1.32 “Key Territories”
	 	 	5	 
	1.33 “Know-How”
	 	 	5	 
	1.34 “Law” or “Laws”
	 	 	5	 
	1.35 “Licensed Product”
	 	 	5	 
	1.36 “Licensed Technology”
	 	 	5	 
	1.37 “Losses”
	 	 	5	 
	1.38 “Manufacture” or “Manufacturing”
	 	 	5	 
	1.39 “Manufacturing Know-How”
	 	 	5	 
	1.40 “Marketing Approval”
	 	 	5	 
	1.41 “Marks”
	 	 	5	 
	1.42 “Milestone”
	 	 	6	 
	1.43 “Milestone Payment”
	 	 	6	 
	1.44 “NDS”
	 	 	6	 
	1.45 “Net Sales”
	 	 	6	 

 

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	1.46 “New Technology”
	 	 	6	 
	1.47 “Non-Competition Period”
	 	 	6	 
	1.48 “OTC Product”
	 	 	6	 
	1.49 “Paladin”
	 	 	6	 
	1.50 “Paladin Indemnitees”
	 	 	6	 
	1.51 “Paladin Trademarks”
	 	 	7	 
	1.52 “Party” or “Parties”
	 	 	7	 
	1.53 “Patent Rights”
	 	 	7	 
	1.54 “Person”
	 	 	7	 
	1.55 “Pharmacovigilance Agreement”
	 	 	7	 
	1.56 “Phase IV Trial”
	 	 	7	 
	1.57 “ProCom Net Sales”
	 	 	7	 
	1.58 “ProCom Payment(s)”
	 	 	7	 
	1.60 “Product Marks”
	 	 	7	 
	1.61 “Promotional Materials”
	 	 	7	 
	1.62 “Purchase Agreement”
	 	 	7	 
	1.63 “Quality Agreement”
	 	 	7	 
	1.64 “Regulatory Activities”
	 	 	7	 
	1.65 “Regulatory Approval”
	 	 	7	 
	1.66 “Regulatory Filings”
	 	 	8	 
	1.67 “Net Transfer Fee Term”
	 	 	8	 
	1.68 “Sales Representative”
	 	 	8	 
	1.69 “Sell-Off Period”
	 	 	8	 
	1.70 “Serious Adverse Event or Drug Reaction”
	 	 	8	 
	1.71 “Shares”
	 	 	8	 
	1.72 “Somaxon”
	 	 	8	 
	1.73 “Somaxon Indemnitees”
	 	 	8	 
	1.74 “Somaxon Know-How”
	 	 	8	 
	1.75 “Somaxon Patents”
	 	 	8	 
	1.76 “Supply Agreement”
	 	 	8	 
	1.77 “Termination Date”
	 	 	8	 
	1.78 “Territory”
	 	 	8	 
	1.79 “Third Party”
	 	 	8	 
	1.80 “Third Party Action”
	 	 	8	 
	1.81 “Trademark”
	 	 	9	 
	1.83 “Transfer Price”
	 	 	9	 
	1.84 “Unexpected Adverse Drug Reaction”
	 	 	9	 
	1.85 “Unit”
	 	 	9	 
	1.86 “Valid Claim”
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 2 LICENSES AND TECHNOLOGY TRANSFER
	 	 	9	 
	2.1 License Grants
	 	 	9	 
	2.2 Technology Transfer
	 	 	10	 
	2.3 Trademarks
	 	 	11	 
	2.4 No Implied Licenses; Reservation of Rights
	 	 	14	 
	2.5 Competing Products
	 	 	14	 
	2.6 Rights of First Negotiation
	 	 	15	 

 

- 3 -

 

	 	 	 	 	 
	ARTICLE 3 REGULATORY MATTERS
	 	 	17	 
	3.1 Regulatory Activities
	 	 	17	 
	3.2 Communications with Governmental Bodies in the Territory
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 4 COMMERCIALIZATION
	 	 	18	 
	4.1 Cooperation Committee
	 	 	18	 
	4.2 Paladin Commercialization Responsibilities
	 	 	21	 
	4.3 Product Labels and Inserts
	 	 	22	 
	4.4 Promotional Materials
	 	 	22	 
	4.5 Inventory Monitoring
	 	 	22	 
	 
	 	 	 	 
	ARTICLE 5 MANUFACTURING AND SUPPLY
	 	 	22	 
	5.1 Somaxon Supply Obligations;
	 	 	22	 
	5.2 Price and Payment
	 	 	23	 
	 
	 	 	 	 
	ARTICLE 6 PHARMACOVIGILANCE AND QUALITY ASSURANCE
	 	 	23	 
	6.1 Pharmacovigilance Agreement
	 	 	23	 
	6.2 Notification
	 	 	23	 
	6.3 Reporting
	 	 	24	 
	6.4 Literature Reports
	 	 	24	 
	6.5 Medical Information
	 	 	24	 
	 
	 	 	 	 
	ARTICLE 7 FINANCIAL CONSIDERATION
	 	 	24	 
	7.1 Up-Front Payment
	 	 	24	 
	7.2 Issuance of Common Stock
	 	 	24	 
	7.3 Milestone Payments
	 	 	25	 
	7.4 Additional Payments for Licensed Product
	 	 	25	 
	7.5 Consideration
	 	 	25	 
	 
	 	 	 	 
	ARTICLE 8 PAYMENT; REPORTING; AUDITING
	 	 	26	 
	8.1 Mode of Payment and Conversion
	 	 	26	 
	8.2 Reports
	 	 	26	 
	8.3 Records Retention
	 	 	27	 
	8.4 Interest
	 	 	27	 
	8.5 Rights of Inspection
	 	 	27	 
	8.6 Taxes
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 9 INVENTIONS AND PATENTS
	 	 	29	 
	9.1 Patented Medicines (Notice of Compliance) Regulations
	 	 	29	 
	9.2 New Technology
	 	 	30	 
	9.3 Cooperation
	 	 	30	 
	9.4 Required Third Party Patent Rights or Know-How
	 	 	30	 
	9.5 Patent Filing, Prosecution and Maintenance
	 	 	30	 
	9.6 Enforcement and Defense of Patents and Trademarks
	 	 	30	 
	9.7 Third Party Actions Claiming Infringement
	 	 	31	 
	9.8 Actions Against Third Parties
	 	 	31	 
	9.9 Patent Marking
	 	 	32	 
	9.10 Paladin Negative Covenant Regarding Somaxon Patent Rights
	 	 	32	 
	 
	 	 	 	 
	ARTICLE 10 CONFIDENTIALITY
	 	 	32	 
	10.1 Confidentiality Obligations
	 	 	32	 
	10.2 Permitted Exceptions
	 	 	32	 
	10.3 Return of Confidential Information
	 	 	33	 
	10.4 Press Releases and Disclosure
	 	 	34	 

 

- 4 -

 

	 	 	 	 	 
	ARTICLE 11 REPRESENTATIONS AND WARRANTIES
	 	 	34	 
	11.1 Representations and Warranties of Somaxon
	 	 	34	 
	11.2 Representations and Warranties of Paladin
	 	 	36	 
	11.3 DISCLAIMER OF WARRANTY
	 	 	36	 
	 
	 	 	 	 
	ARTICLE 12 INDEMNIFICATION AND INSURANCE
	 	 	37	 
	12.1 Indemnification by Paladin
	 	 	37	 
	12.2 Indemnification by Somaxon
	 	 	37	 
	12.3 NO CONSEQUENTIAL DAMAGES
	 	 	38	 
	12.4 Notification of Claims; Conditions to Indemnification Obligations
	 	 	38	 
	12.5 Insurance
	 	 	39	 
	 
	 	 	 	 
	ARTICLE 13 TERM AND TERMINATION
	 	 	39	 
	13.1 Term and Expiration
	 	 	39	 
	13.2 Termination of the Agreement by Somaxon
	 	 	39	 
	13.3 Termination upon Material Breach or an Event of Insolvency
	 	 	40	 
	13.4 Effects of Termination
	 	 	41	 
	13.5 Survival of Licenses in the Event of Somaxon Bankruptcy or Insolvency
	 	 	43	 
	13.6 No Public Statements
	 	 	44	 
	 
	 	 	 	 
	ARTICLE 14 DISPUTE RESOLUTION
	 	 	44	 
	14.1 Disputes
	 	 	44	 
	14.2 Escalation
	 	 	45	 
	 
	 	 	 	 
	ARTICLE 15 MISCELLANEOUS PROVISIONS
	 	 	45	 
	15.1 Relationship of the Parties
	 	 	45	 
	15.2 Assignment
	 	 	45	 
	15.3 Compliance with Laws
	 	 	46	 
	15.4 Further Actions
	 	 	46	 
	15.5 Force Majeure
	 	 	46	 
	15.6 Entire Agreement of the Parties; Amendments
	 	 	47	 
	15.7 Construction
	 	 	47	 
	15.8 Governing Law
	 	 	47	 
	15.9 Notices and Deliveries
	 	 	48	 
	15.10 Waiver
	 	 	49	 
	15.11 Severability
	 	 	49	 
	15.12 No Third-Party Beneficiaries
	 	 	49	 
	15.13 Expenses
	 	 	49	 
	15.14 Injunctive Relief
	 	 	49	 
	15.15 Counterparts
	 	 	49	 

 

- 5 -

 

LICENSE AGREEMENT

This License Agreement (this “Agreement”) is made as of June 7, 2011 (the “Effective
Date”), by and between Somaxon Pharmaceuticals, Inc. (“Somaxon”), and Paladin Labs Inc.
(“Paladin”). Somaxon and Paladin may hereinafter be referred to individually as a “Party” or
collectively as the “Parties.”

WHEREAS, Paladin desires to license from Somaxon and Somaxon desires to license to Paladin, on an
exclusive basis, certain intellectual property rights with respect to the Licensed Product in the
Territory (as hereinafter defined) and the Parties desire to collaborate on certain aspects of
regulatory approval and commercialization of the Licensed Product in the Territory, subject to and
in accordance with the terms and conditions of this Agreement; and

WHEREAS, the Parties will enter into a Supply Agreement (the “Supply Agreement”) concurrently with
the execution of this Agreement which will set forth the terms and conditions under which Somaxon
(or its Third Party manufacturers) will manufacture and supply to Paladin, and Paladin will
purchase from Somaxon (or its Affiliates), all of Paladin’s and its Affiliates’ requirements for
bulk Licensed Product; and

WHEREAS, the Parties will enter into a Purchase Agreement (the “Purchase Agreement”) concurrently
with the execution of this Agreement which will set forth the terms and conditions under which
Somaxon will issue and sell to Paladin and Paladin will purchase shares of Somaxon common stock,
$0.0001 par value per share (the “Shares”).

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

ARTICLE 1

DEFINITIONS

Unless otherwise specifically provided herein, the following terms shall have the following
meanings:

	 	1.1	 	“Act”
means the Food and Drugs Act (Canada), as amended from time to time, and the rules,
regulations, and requirements of Health Canada as may be in effect from time to time in
Canada, and any comparable act, rules, regulations and requirements of a jurisdiction
within the Ex-Canada Territory.

	 
	 	1.2	 	“Adverse Drug Reaction”
means a response to a drug which is noxious and unintended and which occurs at doses
normally used in man for prophylaxis, diagnosis or therapy of disease or for
modification of physiological function.

	 
	 	1.3	 	“Adverse Event”
means any untoward medical occurrence in a patient or clinical investigation subject
administered a pharmaceutical product and which does not necessarily have to have a
causal relationship with this treatment.

	 
	 	1.4	 	“Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
controls, is controlled by or is under common control with, such first Person. For the
purposes of this definition, “control” (including with correlative meanings, the terms
“controlling,” “controlled by” and “under common control with”), as applied to any
Person, means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.

 

 

 

	 	1.5	 	“Agreement”
has the meaning set forth in the Preamble of this Agreement.

	 
	 	1.6	 	“Bulk Product”
means Licensed Product, released as a finished good, unlabeled and packaged in bulk
bottles.

	 
	 	1.7	 	“Business Day”
means a day other than a Saturday, Sunday, or bank or other public holiday in
California, USA or Quebec, Canada.

	 
	 	1.8	 	“Calendar Quarter”
means each three (3) month period beginning on the 1st of January, the 1st of April, the
1st of July or the 1st of October (including any partial calendar quarter in the case of
the first or last calendar quarter during the Term).

	 
	 	1.9	 	“Calendar Year”
means each twelve (12) month period beginning on the 1st of January and ending on the
31st of December of the same year (including any partial calendar year in the
case of the first or last calendar year of the Term).

	 
	 	1.10	 	“Canada”
means Canada, including each of its provinces and territories as of the Effective Date.

	 
	 	1.11	 	“cGCP” means the rules concerning current good clinical practices specified by
the EU/PIC guidelines (and the corresponding national laws and regulations), the FDA
regulations codified in the U.S. Code of Federal Regulations, or any other comparable
regulatory criteria or guidelines as applicable, all as amended from time to time.

	 
	 	1.12	 	“cGLP” means the rules concerning current good laboratory practices specified
by the EU/PIC guidelines (and the corresponding national laws and regulations), the FDA
regulations codified in the U.S. Code of Federal Regulations, or any other comparable
regulatory criteria or guidelines as applicable, all as amended from
time to time.

	 
	 	1.13	 	“cGMP” means the rules concerning current good manufacturing practices
requirements specified by the EU/PIC guidelines (and the corresponding national laws
and regulations), the US Food and Drug Administration (or any successor entity thereto)
regulations, including those set forth in 21 C.F.R. Parts 210, 211 and 606, and all
similar regulatory requirements of foreign Governmental Bodies applicable to the
Manufacture of the Licensed Product for Commercialization.

	 
	 	1.14	 	“Change of Control”
means:

	 	(a)	 	the acquisition by any person or group of beneficial ownership of any
capital stock of a Party or any direct or indirect parent of a Party, if after such
acquisition, such person or group would be the beneficial owner, directly or
indirectly, of securities of a Party or any direct or indirect parent of a Party
representing more than fifty percent (50%) of the combined voting power of a
Party’s or such direct or indirect parent’s then outstanding securities entitled to
vote generally in the election of directors;

 

- 2 -

 

	 	(b)	 	the consummation by a Party or any direct or indirect parent of a Party
of a consolidation, amalgamation, merger, reorganization or arrangement with any
Person or group, if the Persons who were not shareholders of such Party or such
direct or indirect parent of such Party immediately prior to such consolidation,
amalgamation, merger, reorganization or arrangement own immediately after such
consolidation, amalgamation, merger, reorganization or arrangement more than fifty
percent (50%) of (i) the continuing or surviving entity or (ii) any direct or
indirect parent of such continuing or surviving entity; or

	 
	 	(c)	 	sale, assignment, spin-off, divestiture or other transfer by a Party or
any of its Affiliates to any Person other than to an Affiliate in a single or
series of related transactions of all or substantially all of the assets or
business of a Party or any of its Affiliates involved in performing all or
substantially all of the obligations of such Party under this Agreement.

	 	1.15	 	“Commercialization” or “Commercialize”
means any and all activities directed to the commercial exploitation of the Licensed
Product in the Territory in the Field in accordance with applicable Laws before and
after Marketing Approval has been obtained, including advertising, marketing, promoting,
consumer and physician education, market and consumer research, customer services,
detailing, distributing, labelling, offering to sell and selling the Licensed Product in
the Territory, final packaging for commercial use and importing the Licensed Product for
sale in the Territory, but specifically excluding Manufacturing. When used as a verb,
“to Commercialize” and “Commercializing”
means to engage in Commercialization and “Commercialized” has a corresponding meaning.

	 
	 	1.16	 	“Commercialization Plan”
has the meaning set forth in Section 4.2.4.

	 
	 	1.17	 	“Commercially Reasonable Efforts”
means (a) with respect to the efforts to be expended by a Party with respect to any
objective, such reasonable, diligent and good faith efforts and resources, consistent
with applicable Laws, as such Party would normally use to accomplish a similar objective
under similar circumstances, and (b) with respect to any objective relating to
Regulatory Approval or Commercialization by a Party, the application by such Party,
consistent with the exercise of its prudent scientific and business judgment, of
diligent efforts and resources to fulfill the obligation in issue, consistent with the
level of efforts such Party would normally devote to its own branded product in that
particular country and at a similar stage in its product life as the Licensed Product
taking into account, without limitation, scientific, development, technical, commercial
and regulatory factors, target product profiles, product labelling, past performance,
present and future market potential, present and future regulatory environment and
competitive market conditions in the therapeutic area, the safety and efficacy of the
Licensed Product and the strength of its proprietary position.

	 
	 	1.18	 	“Commercial Sale”
means any sale or other transfer of the Licensed Product by Paladin to a Third Party.

	 
	 	1.19	 	“Competing Product”
means (other than the Licensed Product or any products Paladin is promoting or selling
as of the Effective Date) any branded prescription oral dosage product or drug treatment
for use in the treatment of insomnia in the Territory.

 

- 3 -

 

	 	1.20	 	“Confidential Information”
means any and all information, technical and nontechnical, written and oral, regardless
of media or format, which is not published or otherwise in the public domain, relating
to a Party’s business, operations, assets and products (including the Licensed Product)
and information of Third Parties that a Party is obligated to keep confidential.

	 
	 	1.21	 	“Controlled”
means, with respect to Patent Rights or Know-How, that the Party or one of its
Affiliates owns in whole or in part, or has a license or sublicense to such Patent
Rights or Know-How, subject to any restrictions expressly set forth in those agreements
set forth on Schedule 1.21 as of the Effective Date, and with respect to Patent
Rights or Know-How that Somaxon or one of its Affiliates acquires or obtains from a
Third Party at any time after the Effective Date, (i) to the extent that Somaxon or an
Affiliate has the right to grant a license or sublicense to Paladin hereunder
pursuant to Section 2.1 and (ii) subject to any restrictions to which Somaxon or its
Affiliates is subject under any applicable agreement such as field of use restrictions.

	 
	 	1.22	 	“Cost of Goods Sold”
means actual costs to produce commercial supplies of Bulk Product calculated on a per
Unit basis, to the extent that such costs would be included in accordance with U.S.
generally accepted accounting principles, including: (a) the amounts paid by Somaxon or
its Affiliates for (i) Manufacturing Bulk Product, (ii) transporting, storing and
insuring Licensed Product, and (iii) testing Bulk Product, including with respect to the
foregoing subsections (i) — (iii), all taxes (other than income taxes) and customs duty
charges imposed by governmental authorities with respect thereto; (b) to the extent not
included in subsection (a), the direct costs and charges incurred by Somaxon or its
Affiliates in connection with the Manufacture, testing, storing, insuring and
transportation of the Bulk Product, including direct internal costs with respect
thereto; (c) to the extent not included in subsection (a), Somaxon’s or its Affiliate’s
intellectual property acquisition and licensing costs (including royalties) paid to
Third Parties (i) directly allocable to the Licensed Product to the extent that such
intellectual property is required for the Manufacture of such Licensed Product in the
country of manufacture and (ii) actually incurred by Somaxon or its Affiliates and not
otherwise reimbursed by or paid for by any Third Parties, but excluding the ProCom
Payments, and, generally, any costs and charges allocable to overhead or other indirect
costs.

	 
	 	1.23	 	“Cover”, “Covering” or “Covered”
means, with respect to the Licensed Product, that the using, making, having made,
selling, offering for sale or importing of such Licensed Product would, but for
ownership of, or the rights and license granted under this Agreement to, the relevant
Patent Rights, infringe a Valid Claim of the relevant Patent Rights in the country in
which the activity occurs.

	 
	 	1.24	 	“Effective Date”
has the meaning set forth in the Preamble of this Agreement.

	 
	 	1.25	 	“Ex-Canada Territory”
means all those countries in Latin America listed on Schedule 1.25, and all
those countries in Africa listed on Schedule 1.25).

	 
	 	1.26	 	“Executive Officers”
has the meaning set forth in Section 14.2.

	 
	 	1.27	 	“Field”
means insomnia characterized by difficulty with sleep maintenance or such other
indication(s) as provided in a Marketing Approval.

 

- 4 -

 

	 	1.28	 	“First Commercial Sale”
means, with respect to the Licensed Product in the Territory, the first Commercial Sale
of the Licensed Product in the Territory, after Marketing Approval has been obtained in
the Territory.

	 
	 	1.29	 	“FTE”
means the equivalent of a full-time individual’s work, at one thousand eight hundred
(1,800) hours per year for a twelve (12)-month period.

	 
	 	1.30	 	“Governmental Body”
means any: (a) nation, principality, state, commonwealth, province, territory, county,
municipality, district or other jurisdiction of any nature; (b) federal, state,
provincial, local, municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental division,
subdivision, department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body or entity
and any court or other tribunal); (d) multi-national or supranational organization or
body; or (e) individual, entity, or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military or taxing
authority.

	 
	 	1.31	 	“Health Canada”
means Health Canada or any successor national agency performing comparable functions in
the Territory.

	 
	 	1.32	 	“Improvements”
means any modifications, advances or improvements to the Licensed Product that do not
require the filing of an NDS or an sNDS with Health Canada.

	 
	 	1.33	 	“Indemnitees”
has the meaning set forth in Section 12.2.

	 
	 	1.34	 	“Key Territories”
means Canada, Brazil and South Africa.

	 
	 	1.35	 	“Know-How”
means any scientific or technical knowledge, information and expertise to make or do
something in any tangible or intangible form whatsoever including discoveries,
inventions, trade secrets, databases, practices, protocols, Regulatory Filings, methods,
processes, techniques, specifications, formulations, formulae, data and results
(including pharmacological, biological, chemical, toxicological and clinical
information, analytical, quality control, and stability data, studies and procedures),
and manufacturing process and development information, whether or not patentable, all to
the extent not Covered by a Patent Right.

	 
	 	1.36	 	“Law” or “Laws”
means all laws, statutes, rules, regulations, ordinances and other pronouncements having
the binding effect of law of any applicable Governmental Body, including without
limitation, the Act.

	 
	 	1.37	 	“Licensed Product”
means Silenor® (doxepin), and all other formulations or dosage strengths of doxepin or
other Improvements Controlled by Somaxon during the Term, but specifically excluding any
doxepin isomers or OTC Products.

	 
	 	1.38	 	“Licensed Technology”
means Somaxon Patents, Somaxon Know-How and New Technology.

	 
	 	1.39	 	“Losses”
has the meaning set forth in Section 12.1.

	 
	 	1.40	 	“Manufacture” or “Manufacturing”
means any and all activities directed to the formulation, manufacture, fill/finish,
testing or packaging of the Bulk Product for Commercialization in accordance with
applicable Laws before and after Marketing Approval has been obtained but excluding, for
greater certainty, final packaging.

	 
	 	1.41	 	“Manufacturing Know-How”
means Know-How related to Manufacturing.

 

- 5 -

 

	 	1.42	 	“Marketing Approval”
means (a) with respect to Canada, approval by Health Canada of an NDS necessary to
Commercialize the Licensed Product in the Field, as evidenced by the issuance of a
Notice of Compliance (“NOC”); or (b) with respect to an Ex-Canada Territory, final
approval of a new drug application, health registration, marketing authorization
application, common technical document, regulatory submission, notice of compliance or
equivalent application (excluding local and general business licenses and permits)
necessary to Commercialize the Licensed Product in the Field in such Ex-Canada
Territory.

	 
	 	1.43	 	“Marks”
means all trademarks, service marks, trade names, trade dress, logos, brand names and
other indicia of origin, including all common law rights with respect thereto, and all
applications for registration and registrations of any such marks and renewals for any
of the foregoing, and all goodwill associated therewith.

	 
	 	1.44	 	“Milestone”
has the meaning set forth in Section 7.3.

	 
	 	1.45	 	“Milestone Payment”
has the meaning set forth in Section 7.3.

	 
	 	1.46	 	“NDS”
means a New Drug Submission for the Licensed Product filed pursuant to the requirements of
Health Canada, as more fully defined in the Canadian Food and Drug Regulations, as the same
may be amended from time to time, and any equivalent application filed in other countries in
the Territory, together, in each case, with all additions, deletions or supplements thereto.

	 
	 	1.47	 	“Net Sales”
means with respect to a Licensed Product, the gross amount invoiced for sales of any
Licensed Product in the Territory in arm’s length sales by Paladin (and its Affiliates
and permitted sublicensees) to Third Parties, less the following deductions from such
gross amounts which are actually incurred, allowed, accrued or specifically allocated to
such Licensed Product: (i) credits, price adjustments or allowances for damaged
products, returns or rejections of Licensed Product; (ii) normal and customary trade,
cash and quantity discounts, allowances and credits (other than price discounts granted
at the time of invoicing which have already been included in the gross amount invoiced);
(iii) chargeback payments and rebates (or the equivalent thereof) granted to or imposed
by group purchasing organizations, managed health care organizations or federal,
state/provincial, local and other governments, including any or all of their agencies,
review boards or tribunals, or trade customers; (iv) sales, value-added (to the extent
not refundable in accordance with applicable law), and excise taxes, tariffs and duties,
and other taxes directly related to the sale (but not including taxes assessed against
the income derived from such sale); (vi) stocking allowances; and (vii) any other
payment which reduces gross revenue and is permitted to be deducted in calculating net
sales in accordance with Canadian GAAP.

	 
	 	1.48	 	“Net Transfer Fee Term”
shall be determined on a country-by-country basis and means the longer of (a) the period
from the First Commercial Sale of the Licensed Product in that country in the Territory
until the last date on which the Licensed Product is Covered by a Valid Claim of a
Somaxon Patent within Canada or (b) 15 years following First Commercial Sale.

	 
	 	1.49	 	“New Technology” has the meaning set forth in Section 9.2.

	 
	 	1.50	 	“Non-Competition Period” means for each of the Key Territories, five years after
Regulatory Approval in such country.

 

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	 	1.51	 	“OTC Product” has the meaning set forth in Section 2.6.2.

	 
	 	1.52	 	“Paladin” has the meaning set forth in the Preamble of this Agreement.

	 
	 	1.53	 	“Paladin Indemnitees” has the meaning set forth in Section 12.2.

	 
	 	1.54	 	“Paladin Trademarks” has the meaning set forth in Section 2.3.2(c).

	 	1.55	 	“Party” or “Parties” has the meaning set forth in the Preamble of this
Agreement.

	 
	 	1.56	 	“Patent Rights” means any: (a) unexpired issued or granted patent or registration
covering one or more inventions, including any correction, supplemental protection
certificate, registration, confirmation, reissue, reexamination, extension or renewal
thereof; (b) pending patent application, including any continuation, divisional,
continuation-in-part, substitute or provisional application thereof; and (c) all
counterparts or foreign equivalents of any of the foregoing issued by or filed in any
country or other jurisdiction; and all inventions disclosed or claimed therein, and all
associated rights granted therein or thereby.

	 
	 	1.57	 	“Person”
means any natural person, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, firm, business, trust, joint venture,
association, organization, or other business entity, or any Governmental Body.

	 
	 	1.58	 	“Pharmacovigilance Agreement”
has the meaning set forth in Section 6.1.

	 
	 	1.59	 	“Phase IV Trial” means any research study or data collection effort for the Licensed
Product in the Field in the Territory that is initiated after receipt of Marketing Approval
to obtain additional information, including risks, benefits and optimal use.

	 
	 	1.60	 	“ProCom Net Sales” means “Net Sales” as defined in that certain Amended and Restated
License Agreement dated September 15, 2010 by and between Somaxon and ProCom One, Inc. (the
“ProCom Agreement”)

	 	1.61	 	“ProCom Payment(s)” shall have the meaning set forth in Section 7.4.2.

	 
	 	1.62	 	“Product Labels and Inserts” means (a) all labels and other written, printed or graphic
matter affixed to any container, packaging or wrapper, or (b) package inserts, in each case
to be utilized in connection with the Commercialization in the Field by Paladin.

	 
	 	1.63	 	“Product Marks” means the Marks under which the Licensed Product is Commercialized, as
designated by Somaxon pursuant to Section 2.3.1.

	 
	 	1.64	 	“Promotional Materials” means all written, printed, electronic and graphic materials
(other than Product Labels and Inserts) provided by or on behalf of Paladin or its
Affiliates in accordance with this Agreement for use by Sales Representatives in connection
with the Commercialization in the Field.

	 
	 	1.65	 	“Purchase Agreement” has the meaning set forth in the Preamble to this Agreement.

 

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	 	1.66	 	“Quality Agreement” has the meaning set forth in Section 5.1.2.

	 
	 	1.67	 	“Regulatory Activities” means with respect to the Licensed Product in the
Territory: (a) the preparation, review, filing and maintenance of any and all Regulatory
Filings; (b) maintaining contact and communication with Health Canada or other applicable
Governmental Body; and (c) otherwise complying with all requirements of a holder of any
Regulatory Approval and applicable Law.

	 
	 	1.68	 	“Regulatory Approval” means any and all approvals, authorizations, designations,
licenses, or registrations, of Health Canada or other applicable Governmental Body,
necessary for the manufacture, Commercialization, use, handling, storage, import, or
transport of the Licensed Product in the Field in the Territory, including Marketing
Approval and any related pricing or reimbursement approvals.

	 
	 	1.69	 	“Regulatory Filings” means any applications, communications, data, documents,
regardless of format or media, filed with or submitted to Health Canada or other applicable
Governmental Body for purposes of obtaining Marketing Approval or as a post-obtainment
commitment or requirement relating to such Marketing Approval, including any NDS.

	 
	 	1.70	 	“Sales Representative”
means a sales representative (a) employed by Paladin in the Territory, or (b) employed
or contracted by a Third Party contracted by Paladin in the Territory. For the
avoidance of doubt, “Sales Representative” shall not include any medical scientific
personnel.

	 
	 	1.71	 	“Sell-Off Period”
has the meaning set forth in Section 13.4.3(b)(C).

	 
	 	1.72	 	“Serious Adverse Event or Drug Reaction”
means any untoward medical occurrence that at any dose results in death; is life
threatening; requires inpatient hospitalization or prolongation or existing
hospitalization; results in persistent or significant disability/incapacity; or is a
congenital anomaly/birth defect.

	 
	 	1.73	 	“Shares” has the meaning set forth in the recitals.

	 
	 	1.74	 	“Somaxon”
has the meaning set forth in the Preamble of this Agreement.

	 
	 	1.75	 	“Somaxon Indemnitees”
has the meaning set forth in Section 12.1.

	 
	 	1.76	 	“Somaxon Know-How”
means all Know-How Controlled by Somaxon as of the Effective Date and/or thereafter
during the Term, in each case, necessary for seeking Regulatory Approval in the Field or
Commercialization in the Field, and specifically excluding the Manufacturing Know-How.

	 
	 	1.77	 	“Somaxon Patents”
means (a) the Patent Rights set forth on Schedule 1.77 hereto, and (b) all
Patent Rights in the Territory Controlled by Somaxon following the Effective Date during
the Term Covering the Licensed Product or Commercialization thereof.

	 
	 	1.78	 	“Supply Agreement”
has the meaning set forth in the Preamble to this Agreement.

	 
	 	1.79	 	“Termination Date”
has the meaning set forth in Section 13.1.

	 
	 	1.80	 	“Territory”
means Canada and the Ex-Canada Territory.

 

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	 	1.81	 	“Third Party”
means any Person other than Somaxon, Paladin or Affiliates of either of them.

	 
	 	1.82	 	“Third Party Action”
has the meaning set forth in Section 9.7.

	 
	 	1.83	 	“Trademark”
means each of the following Marks: (a) the Product Marks, and (b) the Somaxon name and
logo designated by Somaxon pursuant to Section 2.3.1.

	 
	 	1.84	 	“Transfer Price”
means Cost of Goods Sold per Unit plus ten percent (10%); provided however, that the
Transfer Price for samples of Licensed Product in quantities consistent with the
then-most-recent binding forecast or otherwise as agreed upon by the Parties through the
Cooperation Committee shall be the Cost of Goods Sold per Unit.

	 
	 	1.85	 	“Unexpected Adverse Drug Reaction”
means an adverse reaction, the nature or severity of which is not consistent with the
applicable product information.

	 
	 	1.86	 	“Unit”
means a single dose of Licensed Product.

	 
	 	1.87	 	“Valid Claim”
means a claim within the Somaxon Patents which has not lapsed or been revoked, abandoned
or held unenforceable or invalid by a final decision of a court or governmental or
supra-governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and which has not been disclaimed, denied or admitted to be
invalid or unenforceable through reissue, reexamination or disclaimer or otherwise.

ARTICLE 2

LICENSES AND TECHNOLOGY TRANSFER

	 	2.1	 	License Grants.

	 	2.1.1	 	Commercialization.
Subject to the terms and conditions of this Agreement, Somaxon hereby grants to Paladin
an exclusive payment-bearing right and license, with the right to sublicense solely upon
the prior written consent of Somaxon, not to be unreasonably withheld, delayed or
conditioned, under the Licensed Technology (a) to Commercialize the Licensed Product in
the Field in the Territory and (b) in order to obtain and maintain Regulatory Approvals
or as otherwise approved by Somaxon in writing, to conduct Regulatory Activities in the
Field. Notwithstanding the foregoing, Paladin shall be permitted to sublicense to its
Affiliates upon notice to (but without requiring the consent of) Somaxon the rights
granted to Paladin pursuant to this Section 2.1.1.

	 	 	 	The foregoing license does not include the right to, and Paladin agrees that it shall
not, (i) market, detail, promote, or advertise the Licensed Product for use outside the
Field or (ii) commercialize in any manner the Licensed Product outside the Territory.
For the avoidance of doubt, subject to the above referenced obligations of Paladin and
its other obligations hereunder including its obligation to comply with all applicable
Laws, the writing of a prescription in the Territory for the Licensed Product for an
unapproved use shall not, in and of itself, constitute a breach of this Agreement.

 

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	 	2.1.2	 	Manufacturing.
Subject to the terms and conditions of this Agreement, Somaxon hereby grants to Paladin
a non-exclusive right and license, with the right to sublicense solely upon the prior
written consent of Somaxon, not to be unreasonably withheld, delayed or conditioned,
under the Licensed Technology and the Manufacturing Know-How to Manufacture Licensed
Product solely for Commercialization in the Field; provided that Paladin shall
not have the right to Manufacture or have Manufactured Licensed Product until such time
as (i) Somaxon provides written notice of its intent to terminate the Supply Agreement
pursuant to Section 6.2(b) of the Supply Agreement or (ii) the Supply Agreement is
otherwise terminated. Notwithstanding the foregoing, so long as Paladin has the right to
Manufacture or have Manufactured the Licensed Product, Paladin shall be permitted to
sublicense to its Affiliates upon notice to (but without requiring the consent of)
Somaxon the rights granted to Paladin pursuant to this Section 2.1.2.

	 
	 	2.1.3	 	Subcontractors and Affiliates.
Either party will be permitted to subcontract certain of its business functions or other
obligations thereunder associated with the Commercialization and/or obtaining or
maintaining Regulatory Approvals, such as utilizing a contract sales force, ad agency or
contract safety service; provided however, that such party will remain fully
liable and responsible to the other for all actions and/or omissions of its
subcontractors
under this Agreement as though such actions and/or omissions of its subcontractors under
this Agreement were made by such party itself.

	 
	 	2.1.4	 	Sublicensing and Subcontracting.
Without limiting Sections 2.1.2 and 2.1.3, Somaxon acknowledges and agrees that Paladin may
sublicense and/or subcontract its rights and obligations hereunder with respect to
Commercialization and obtaining or maintaining Regulatory Approvals in Africa to Pharmaplan
(Proprietary) Limited.

	 	2.2	 	Technology Transfer. Transfer of Somaxon Know-How.
Within a reasonable period of time after the Effective Date, Somaxon and Paladin
will consult with each other in good faith to identify in writing those items of Somaxon
Know-How that the Parties identify as necessary in connection with Paladin’s exercise of
its rights and obligations under this Agreement and to which Somaxon has access without
undue effort. As promptly as reasonably practicable after the Effective Date and the
identification in writing by Paladin of items from the list prepared by the Parties
pursuant to the foregoing sentence (but in no event more than 30 days after such items
are identified by Paladin to Somaxon in writing), Somaxon will provide to Paladin, at
Somaxon’s cost and expense, a copy of all such items of Somaxon Know-How identified by
Paladin. The foregoing shall in no event require Somaxon to provide copies of laboratory
notebooks or manufacturing run records required to be maintained by Somaxon under
applicable Law. In addition, throughout the term of the Supply Agreement, Somaxon shall
provide to Paladin, at Somaxon’s cost and expense, a copy of items of Somaxon Know-How
reasonably necessary to permit Paladin to continue to Manufacture Bulk Product so long
as such items are reasonably accessible to Somaxon. Somaxon shall reasonably assist
Paladin in the implementation of any Manufacturing arrangement in substitution of the
Supply Agreement. If Somaxon maintains any such Somaxon Know-How in electronic form,
Somaxon shall provide such Somaxon Know-How to Paladin in electronic form. Otherwise,
Somaxon may provide such Somaxon Know-How in paper form. All Somaxon Know-How shall be
in the English language, with any required authenticated translation to be provided by
Paladin at no cost to Somaxon.

 

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	 	2.2.2	 	Additional FTE Support. In addition, Somaxon shall, at Somaxon’s cost and expense,
make certain of its employees who are knowledgeable about the Licensed Product or the
Licensed Technology reasonably available to Paladin for scientific and technical
explanations, advice and related on-site support, if and to the extent reasonably requested
by Paladin and required to seek Regulatory Approval in the Field, or up to a maximum of 180
hours during the first 12 months following the Effective Date, and up to 7.5 hours per
month thereafter during the Term (the “FTE Support”). Paladin shall reimburse Somaxon for
any documented out-of-pocket costs associated with providing the FTE Support under this
Section 2.2.2, including transportation costs associated with any on-site support requested
by Paladin. Somaxon shall have no obligation to provide
support in excess of the FTE Support limit for the applicable time period without
reimbursement by Paladin for all costs associated with such excess support.

	 
	 	2.2.3	 	Somaxon Confidential Information. All such Somaxon Know-How provided to Paladin and
all information and materials (in whatever form or medium) disclosed by or on behalf of
Somaxon under this Agreement, including during any on-site support, shall be and remain
Somaxon’s Confidential Information, subject to the terms and conditions of ARTICLE 10.

	 	2.3	 	Trademarks.

	 	2.3.1	 	Trademarks Ownership
Paladin hereby acknowledges and agrees that, subject to the license granted to Paladin pursuant
to Section 2.3.1(b), as between the Parties, Somaxon shall own all right, title and
interest in and to, and shall otherwise Control, all Trademarks and that the ownership and
all goodwill arising from the use of such Trademarks in the Territory shall vest in and
inure to the sole benefit of Somaxon.

	 	(a)	 	Designation of Product Marks. Somaxon shall, after consultation with
Paladin, have the sole right to designate the Product Marks to be used in
connection with the Commercialization; provided that Somaxon shall make
such designation no later than the date the first application for Marketing
Approval is filed; provided further that, without Paladin’s written
consent, Somaxon shall not designate any Product Mark for the Licensed Product if a
URL and Web-address for a website containing such Product Mark (or a derivative
thereof that is acceptable to Paladin) is not available in the applicable
jurisdiction in the Territory.

	 
	 	(b)	 	Grant of Trademark License. Subject to the terms and conditions of this
Agreement, Somaxon hereby grants to Paladin, and Paladin hereby accepts, an
exclusive license, (a) to use the Trademarks to Commercialize the Licensed Product
in the Field in the Territory, including the use of the Trademarks in any Paladin
website, and (b) to use the Trademarks to perform the obligations and exercise the
rights of Paladin in the Field in the Territory under this Agreement.
Notwithstanding anything contained herein, Somaxon shall not be deemed to have
violated the rights and licenses granted to Paladin pursuant to this Section 2.3.1
or Section 2.1 to the extent that commercialization activities conducted by or on
behalf of Somaxon or its Affiliates via the Internet or other global electronic
means or methods targeted to Persons outside of the Field and/or outside the
Territory may reach Persons within the Field or within the Territory.

 

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	 	(c)	 	Trademark Use Guidelines. Paladin shall use any Trademark hereunder
only in connection with the Licensed Products and in compliance with reasonable
quality standards and specifications, and shall use any trademark symbols
specified under applicable Law for the purpose of identifying the Trademarks as
protected under applicable trademark or similar Laws.

	 
	 	(d)	 	No Rights in Trademarks. Paladin acknowledges and agrees that it shall
not have any rights in respect of the Trademarks except to the extent expressly
granted in this Agreement, and that all use of the Trademarks in the Territory and
all goodwill in the Trademarks shall inure to the benefit of Somaxon.

	 
	 	(e)	 	Non-Exclusive License to Paladin Trademarks. Paladin hereby grants to
Somaxon a non-exclusive license to use and apply any of the Paladin Trademarks
solely in relation to the Licensed Products in the Territory and in the Field and
then solely to support Manufacture and Commercialization. Somaxon acknowledges and
agrees that it shall not have any rights in respect of the Paladin Trademarks
except to the extent expressly granted in this Agreement, and that all use of the
Paladin Trademarks in the Territory and all goodwill in the Paladin Trademarks
shall inure to the benefit of Paladin.

	 	2.3.2	 	Certain Obligations of Paladin.
Paladin shall not use any Mark other than the Trademarks to identify the Licensed
Product in connection with Commercialization. Paladin shall not, without Somaxon’s
prior written consent, directly or indirectly, make any use of the Trademarks, or any
Mark which is confusingly similar thereto, as part of a corporate or trade name or in
connection with any product or service, other than as permitted under this Agreement.

	 	(a)	 	As between the Parties, Somaxon shall have the sole right and
obligation, at its cost and expense, to obtain and maintain any registration, or
other form of protection, for the Trademarks for use in connection with
Commercialization.

	 
	 	(b)	 	Paladin, at Somaxon’s cost and expense, shall take such actions and
provide such assistance as Somaxon may reasonably request from time to time, in
connection with Somaxon filing, prosecuting or otherwise in connection with seeking
any registration for any of the Trademarks for the Licensed Product in the
Territory, and as may be reasonably necessary for Somaxon to renew, maintain,
protect or enforce, any such Trademark or any pending application for registration
or any registration therefor (including the filing of any applications for
registration of any Trademark for use in connection with the Licensed Product in
the Territory).

 

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	 	(c)	 	Paladin shall be permitted to use its names, trade dress and other
Marks (“Paladin Trademarks”) together with the Trademarks in connection with
Commercialization in the Field so long as such use is in compliance with Section
2.3.1(c).

	 	2.3.3	 	Quality Control.
Somaxon or its authorized representatives shall have the right to inspect at any time
during normal business hours and after reasonable notice, the business premises of
Paladin and its Affiliates to ensure that the character and supply of the goods used or
services offered in association with the Trademarks are in compliance with the terms of
this Agreement. If and as may be reasonably requested by Somaxon and necessary for it
to maintain and exercise quality control over the use of any Trademarks and to protect
the goodwill associated therewith, Paladin shall, at Somaxon’s cost and expense, provide
representative specimens to Somaxon of materials that include any Trademark (including
Product Labels and Inserts and Promotional Materials). If after reviewing such
representative specimens, Somaxon has a reasonable concern regarding the quality of such
materials, Somaxon will notify Paladin in writing and Paladin shall take reasonable
steps to address such concern.

	 
	 	2.3.4	 	Inclusion of Name on Product, Labels and Inserts.
All Product Labels and Inserts (including all packaging) for the Licensed Product shall,
if and to the extent permitted by applicable Law, (a) display the name of (i) Somaxon as
owner and licensor of the applicable Somaxon Patents, (ii) the applicable manufacturer,
(iii) Paladin as exclusive distributor and licensee in the Territory, and (iv) the
Licensed Product and Trademarks, and (b) provide that the applicable Somaxon Patents
are under license to Paladin by Somaxon, in a form and manner approved by Somaxon in
advance (such approval not to be unreasonably withheld, delayed or conditioned). For
the avoidance of doubt, the foregoing shall not limit Paladin’s obligation to include on
any materials bearing the Trademarks (in whatever form or medium), a notice in the form
of a brief statement or legend providing that the Trademarks are under license to
Paladin by Somaxon, in a form and manner approved by Somaxon in advance (such approval
not to be unreasonably withheld, delayed or conditioned) and in compliance with Section
2.3.1(c). In all instances where Paladin requires Somaxon consent under Section 2.3.4,
Paladin shall submit the relevant materials to Somaxon for its approval and Somaxon
shall have a period of 10 Business Days following its receipt of such materials to
reply, failing which such approval shall be deemed to have been given.

	 
	 	2.3.5	 	Survival of Trademark License.
Except as required during the Sell-Off Period, the license to the Trademarks granted
pursuant to Section 2.3.1 shall automatically terminate upon termination of this
Agreement pursuant to ARTICLE 13 and, thereafter, Paladin shall have no right to use any
Trademark or any Mark that is confusingly similar to any Trademark as determined by
applicable trademark Law.

 

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	 	2.4	 	No Implied Licenses; Reservation of Rights.

	 	2.4.1	 	Paladin shall have no licenses or other rights other than those expressly granted in
this Agreement, and, in particular and without limiting the foregoing, nothing in this
Agreement shall be construed to grant Paladin any licenses or other rights in any
intellectual property rights, know-how or data owned or Controlled by Somaxon or any of
its Affiliates except as provided in Sections 2.1 or 2.3.1(b).

	 
	 	2.4.2	 	Somaxon shall have no licenses or other rights other than those expressly granted in
this Agreement, and, in particular and without limiting the foregoing, nothing in this
Agreement shall be construed to grant Somaxon any licenses or other rights in any
intellectual property rights, know-how or data owned or Controlled by Paladin or any of its
Affiliates except as provided in Section 13.4.3.

	 
	 	2.4.3	 	Notwithstanding the exclusivity of any rights granted under Section 2.1, Somaxon
hereby reserves the exclusive, sublicensable right under the Licensed Technology (i) to
make and have made the Bulk Product in the Territory for supply to Paladin or its
Affiliates, or to the extent otherwise necessary or appropriate for Somaxon or any of its
Affiliates or sublicensees to perform its obligations, under this Agreement or the Supply
Agreement, (ii) to make and have made the Licensed Product anywhere in the world for
import, use, sale and offer for sale outside the Territory and (iii) to import, make, have
made and use Licensed Product, and to use and practice the Licensed Technology to make,
have made and use Licensed Product, in the Territory for any non clinical or clinical
research purpose of Somaxon or its Affiliates, or in support of any regulatory filings or
other activities outside the Territory.

	 	2.5	 	Competing Products.
During the Non-Competition Period and except as expressly permitted under this Agreement, (a)
neither Paladin nor any of its Affiliates shall, directly or indirectly, promote, distribute,
offer for sale, sell or otherwise commercialize any Competing Product in the Key Territories,
and (b) if Paladin is selling a generic prescription pharmaceutical product or drug treatment
for use in the treatment of insomnia (a “Generic Competing Product”) in any country in the
Key Territories, Paladin shall not advertise, market, promote or detail such Generic
Competing Product in such country (other than for the sole purpose of providing information
on the name, indication and price of such Generic Competing Product to the extent necessary
to facilitate distribution and formulary coverage for such Generic Competing Product in such
country); provided, however, that if Paladin (1) is the subject of any
acquisition, merger, consolidation, or similar transaction with or by a Third Party
(including any Change of Control or acquisition of all or substantially all of Paladin’s
business or assets relating to the Product by a Third Party or the acquisition by Paladin of
the business or any assets of a Third Party) or acquires any Third Party (by way of
acquisition, merger, consolidation or similar transaction) and that Third Party is promoting,
distributing, offering for sale, selling or otherwise commercializing a Competing Product or
has a commercial license, commercial ownership interest or other commercial rights in one or
more Competing Products in such country in the Key Territories, or (2) is selling a Generic
Competing Product in any country in the Key Territories, 

 

- 14 -

 

	 	 	 	then the continuation of
promotion, distribution, offering for sale, selling or other commercialization with respect to any such
Competing Product by Paladin (or its successor, acquiror, or assignee) in such country, with
respect to subclause (1), or the
selling of such Generic Competing Product, with respect to subclause (2), shall be deemed not
to be a breach of this Section 2.5 so long as (i) (A) no Somaxon Patents and (B) no Somaxon
Know-How, Manufacturing Know-How or New Technology that is Confidential Information is, in
either (A) or (B), used in any such activities associated with the Competing Product or
Generic Competing Product, as applicable, in such country and (ii) Paladin commences or
continues, as applicable, the Commercialization in such country within the Key Territories
using Commercially Reasonable Efforts which shall be measured assuming that the Competing
Product or Generic Competing Product, as applicable, is not being marketed or sold in such
country by any Person (including Paladin).

	 	2.6	 	Rights of First Negotiation.

	 	2.6.1	 	If Somaxon initiates a Phase III clinical trial in the US (or its equivalent in a
country within the Territory) during the Initial Term or any Extension Term involving any
drug product or drug treatment containing (a) doxepin (other than the Licensed Product) in
any field of use outside the Field in the Territory or (b) any doxepin isomers (other than
the Licensed Product) in any field of use in the Territory (each, an “Other Doxepin
Product”), Somaxon shall provide written notice to Paladin of such initiation. If
Paladin notifies Somaxon in writing within 45 days after receipt of such notice (each, a
“Doxepin Evaluation Period”) that Paladin is not interested in obtaining rights in
and to the applicable Other Doxepin Product in the Territory (such rights, “Other
Doxepin Product Rights”), or if Paladin fails to notify Somaxon of Paladin’s interest
in obtaining the Other Doxepin Product Rights prior to the expiration of the Doxepin
Evaluation Period, then Somaxon shall have no further obligation to Paladin with respect to
the applicable Other Doxepin Product Rights. If Paladin is interested in obtaining the
Other Doxepin Product Rights, it shall so notify Somaxon in writing prior to the expiration
of the Doxepin Evaluation Period, and upon Somaxon’s receipt of such notice, Paladin and
Somaxon shall promptly commence good-faith negotiations, for a period of 60 days and such
longer period as may be mutually agreed upon by the parties in writing in the event the
parties have made material progress in the negotiations (the “Doxepin Negotiation
Period”), regarding the commercially reasonable terms of an agreement pursuant to which
Paladin shall obtain such Other Doxepin Product Rights. If Somaxon and Paladin have failed
to enter into an agreement for the Other Doxepin Product Rights upon the expiration of the
Doxepin Negotiation Period, then Somaxon shall thereafter have the right to negotiate and
enter into an agreement with a Third Party following the Doxepin Negotiation Period
granting the Other Doxepin Product Rights to a Third Party on terms that are no less
favourable to Somaxon than those that were contained in the last offer by Paladin to
Somaxon.

 

- 15 -

 

	 	2.6.2	 	During the Initial Term and any Extension Term, subject to the primary rights of
Procter & Gamble with respect to an OTC Product (as defined herein), Somaxon shall, after
compliance with the obligations to Procter & Gamble under Section 13.1 of the Co-Promotion
Agreement dated August 24, 2010, as amended from time to time, provide written notice to
Paladin if Somaxon desires, either alone or with a
Third Party, to develop or commercialize in any country in the Territory a
pharmaceutical product containing doxepin as the sole active pharmaceutical ingredient
and for which a prescription from a physician or other professional who is permitted by
law to prescribe pharmaceutical products is not required in order to dispense, purchase
or use such product (an “OTC Product”). If Paladin notifies Somaxon in writing
within 45 days after receipt of such notice (the “OTC Evaluation Period”) that
Paladin is not interested in obtaining rights in and to the OTC Product (such rights,
“OTC Product Rights”), or if Paladin fails to notify Somaxon of Paladin’s
interest in obtaining the OTC Product Rights prior to the expiration of the OTC
Evaluation Period, then Somaxon shall have no further obligation to Paladin with
respect to the applicable OTC Product Rights. If Paladin is interested in obtaining the
OTC Product Rights, it shall so notify Somaxon in writing prior to the expiration of
the OTC Evaluation Period, and upon Somaxon’s receipt of such notice, Paladin and
Somaxon shall promptly commence good-faith negotiations, for a period of 60 days and
such longer period as may be mutually agreed upon by the parties in writing in the
event the parties have made material progress in the negotiations (the “OTC
Negotiation Period”), regarding the commercially reasonable terms of an agreement
pursuant to which Paladin shall obtain such OTC Product Rights. If Somaxon and Paladin
have failed to enter into an agreement for the OTC Product Rights upon the expiration
of the OTC Negotiation Period, then Somaxon shall thereafter have the right to
negotiate and enter into an agreement with a Third Party following the OTC Negotiation
Period granting the OTC Product Rights to a Third Party on terms that are no less
favourable to Somaxon than those that were contained in the last offer by Paladin to
Somaxon.

	 
	 	2.6.3	 	During the Initial Term and any Extension Term, Somaxon shall provide written notice
to Paladin if Somaxon desires, either alone or with a Third Party, to commercialize the
Licensed Product in Mexico. If Paladin notifies Somaxon in writing within 45 days after
receipt of such notice (the “Mexico Evaluation Period”) that Paladin is not
interested in obtaining rights in and to the Licensed Product in Mexico (such rights, the
“Mexico Rights”), or if Paladin fails to notify Somaxon of Paladin’s interest in obtaining
the Mexico Rights prior to the expiration of the Mexico Evaluation Period, then Somaxon
shall have no further obligation to Paladin with respect to the Mexico Rights. If Paladin
is interested in obtaining the Mexico Rights, it shall so notify Somaxon in writing prior
to the expiration of the Mexico Evaluation Period, and upon Somaxon’s receipt of such
notice, Mexico shall thereafter be included as a “Key Territory” and as a country within
the “Territory.”

 

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ARTICLE 3

REGULATORY MATTERS

	 	3.1	 	Regulatory Activities.

	 	3.1.1	 	Paladin Regulatory Obligations.
Paladin shall, at its sole cost, subject to the applicable terms and conditions of this
Agreement, (i) use Commercially Reasonable Efforts to obtain Marketing Approvals in each
of the Key Territories, (ii) use Commercially Reasonable Efforts to obtain all required
Regulatory Approvals to market the Licensed Product in the Field in each of the Key
Territories, (iii) conduct all Regulatory Activities related to the Licensed Product in
each of the Key Territories following Marketing Approval thereof, (iv) keep Somaxon
informed regarding the status of regulatory submissions for the Licensed Product in the
Territory to the extent that any issues arise which would reasonably be expected to
adversely affect Somaxon’s Manufacturing or regulatory activities outside the Territory,
and (v) notify Somaxon of any actions by Health Canada or any other Governmental Body in
the Territory that relate to the safety or effectiveness of the Licensed Product.

	 
	 	3.1.2	 	Somaxon Regulatory Obligations.
Subject to Section 2.2.2, Somaxon shall provide reasonably requested assistance to
Paladin in the development of the materials required for Regulatory Activities in the
Territory. Without limiting the generality of the foregoing, Somaxon, at its cost, will
(i) provide Paladin with all reasonably required access to Licensed Technology, (ii)
reasonably assist Paladin in resolving material issues which may arise after discussions
with Health Canada, (iii) keep Paladin informed regarding the status of regulatory
submissions for the Licensed Product in jurisdictions outside of the Territory to the
extent that any issues arise which would reasonably be expected to materially and
adversely affect Paladin’s Regulatory Activities in the Territory, (iv) notify Paladin
of any changes to chemistry, manufacturing or controls (CMC) that are permitted by the
Supply Agreement following receipt of a Marketing Approval for the Licensed Product, and
(v) notify Paladin of any actions in jurisdictions outside of the Territory that relate
to the safety or effectiveness of the Licensed Product.

	 	3.2	 	Communications with Governmental Bodies in the Territory.

	 	3.2.1	 	Except as may otherwise be set forth in this Agreement or required by applicable Law,
Paladin shall be responsible for and act as the sole point of contact for communications
with Health Canada and any other Governmental Body in connection with the Licensed Product
in the Field in the Territory, except to the extent Somaxon is required under applicable
Law to make any such communications; provided that Paladin shall include one or
more representatives of Somaxon in any in-person or other key meetings (whether in-person
or telephonic) with any such Governmental Body in any of the Key Territories. Paladin
shall keep Somaxon reasonably informed of its material contacts and communications
(including written and material oral communications) with any Governmental Body in
connection with the Licensed Product in the Territory. Paladin shall promptly provide
copies to Somaxon of all such material contacts and communications (or, if applicable,
minutes of any such oral communication).

 

- 17 -

 

	 	3.2.2	 	Except as may otherwise be set forth in this Agreement, the Quality Agreement or the
Pharmacovigilance Agreement or required by applicable Law, Paladin shall be responsible for
preparing and making all reports, submissions and responses to Governmental Bodies in the
Territory concerning the Licensed Product in the Field after receipt of Marketing Approval,
including price reporting with respect to any of the foregoing required by applicable Law
in the Territory, each in conformance with applicable Law. Paladin will prepare the
initial NDS for the Licensed Product, using the Somaxon Know-How, and will not file such
NDS with any Governmental Body in the Territory without first consulting with Somaxon and
incorporating all reasonable suggestions made by Somaxon. In addition, following the first
filing of the initial NDS for the Licensed Product, any amendment, supplement or other
changes to the NDS (including any such amendments, supplements or other changes made
following receipt of the applicable Marketing Approval) or any other Regulatory Filing
shall be prepared by Paladin but no material Regulatory Filing in any Key Territories will
be filed with any Governmental Body in the applicable Territory without first consulting
with Somaxon and incorporating all reasonable suggestions made by Somaxon. Paladin shall
submit the relevant materials to Somaxon and Somaxon shall have the following periods of
time following its receipt of such materials to reply, failing which Paladin shall be
deemed to have fulfilled its consultation obligation: 10 days in the case of the initial
NDS for the Licensed Product and five days in all other instances where Paladin need
consult with Somaxon under this Section 3.2.2.

	 
	 	3.2.3	 	Each Party shall immediately inform the other Party in the event that such Party or
any of its Affiliates receives any notice from any Governmental Body relating to any
finding of deficiency, finding of non-compliance, investigation, penalty for corrective or
remedial action or of any other compliance or enforcement action to the extent any of the
foregoing could reasonably be expected to have a material adverse effect on the
Commercialization, Manufacturing or supply of any Licensed Product in the Field in the
Territory.

	 
	 	3.2.4	 	All Regulatory Filings and Regulatory Approvals, including any NDS or DIN issued by
Health Canada shall be in the name of Paladin and shall be the property of Paladin.

ARTICLE 4

COMMERCIALIZATION

	 	4.1	 	Cooperation Committee.
A Cooperation Committee (the “CC”) will be formed and remain in existence throughout the
term of this Agreement in order to manage and oversee the seeking, obtaining and maintaining
of Regulatory Approvals, and Commercialization, in the Field.

 

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	 	4.1.1	 	Membership.
The CC shall be composed of four members, two members appointed by each Party. The CC
will consist of at least one senior officer from each Party authorized to make decisions
with respect to matters before the CC including Commercialization. Promptly following
the Effective Date, each Party shall appoint its initial representatives to the CC.
Each Party may replace its CC representatives at any time upon written notice to the
other Party. Paladin will designate one of its representatives as the Chairperson of
the CC. The Chairperson shall be responsible for scheduling meetings, preparing and
circulating an agenda in advance of each meeting, preparing and issuing minutes of each
meeting within 15 days thereafter, revising such minutes to reflect timely comments
thereon, and overseeing the ratification of such revised minutes; provided, that
the Chairperson shall call a meeting promptly or include items on any meeting agenda
upon the written request of Somaxon and such minutes will not be formalized until the
Chairperson and a representative of Somaxon review and confirm the accuracy of such
minutes in writing.

	 
	 	4.1.2	 	Meetings.
For the first three years following the Effective Date, the CC shall meet a minimum of
three times per year. Thereafter, the CC shall meet a minimum of two times per year.
The Parties shall endeavour to schedule meetings of the CC at least three months in
advance. Meetings for the CC shall be held in person at the primary offices of each
Party on an alternating basis, by teleconference or by video conference, or as otherwise
agreed by the Parties. If an in-person meeting of the CC is required in order to
maintain progress with the Commercialization Plan, an ad hoc CC meeting may be called by
either Party, to be held within 10 days of such request at a location specified by the
non-requesting Party. In no event shall the CC be required to meet more than six times
per year.

	 
	 	4.1.3	 	Responsibilities.
The CC shall:

	 	(a)	 	Ensure the complete mutual exchange of all Know-How necessary for the
commercialization of the Licensed Product within and outside the Territory, whether
such Know-How is derived by Paladin or Somaxon;

	 
	 	(b)	 	Review and discuss the status and plan relating to all Regulatory
Approvals, including any clinical or non-clinical studies conducted or planned in
connection therewith;

	 
	 	(c)	 	Oversee the preparation and implementation of the Regulatory Filings
and the Commercialization Plan;

	 
	 	(d)	 	Discuss the state of the markets for the Licensed Product in the
Territory and opportunities and issues concerning the Commercialization in the
Field, including on a country-by-country basis consideration of marketing and
promotional strategy, marketing research plans, labelling, Licensed Product
positioning and Licensed Product profile issues;

	 
	 	(e)	 	Review and approve post-Regulatory Approval activities in the Field
that are proposed by Paladin pursuant to Section 4.1.4, including any trial design
and implementation for Phase IV Trials, and thereafter monitor any such approved
post-Regulatory Approval activities;

 

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	 	(f)	 	Agree on a mechanism to monitor and prevent re-importation of Licensed
Product into the U.S. and review the operation of such mechanism (including any
needed adjustments) at each meeting of the CC;

	 
	 	(g)	 	Review and approve any investigator research grants with respect to the
Licensed Product in the Field in the Territory that are proposed by Paladin
pursuant to Section 4.1.4, and thereafter monitor any such investigator research
grant activities;

	 
	 	(h)	 	Discuss optimal Product Marks in the Territory in connection with
Somaxon’s global branding campaign for the Licensed Product;

	 
	 	(i)	 	Discuss any Third Party Patent Rights or Know-How that may be necessary
for Commercialization in the Field, as provided in Section 9.4;

	 
	 	(j)	 	Have authority to establish one or more other committees that report to
the CC and assist the CC in carrying out its responsibilities, which other
committees shall be subordinate to the CC, shall have such membership and
responsibilities as the CC shall determine, and may be disbanded by the CC at any
time;

	 
	 	(k)	 	Resolve, or attempt to resolve, any disputes not resolved by any
subordinate committee created by the CC; and

	 
	 	(l)	 	Perform such other functions as allocated to it in writing by the
Parties.

	 	4.1.4	 	Paladin Proposals Regarding post-Regulatory Approval Activities or Investigator
Research Grants.
Paladin may make a written proposal to the CC regarding post-Regulatory Approval
activities (including a Phase IV Trial) or investigator research grants for the
Licensed Product in the Field in the Territory. Such proposal shall include (a) any
Know-How in its possession which may be relevant to the proposed activities, (b) a
reasonably detailed outline of the activities including a timeline for performing such
activities, (c) an estimated budget for the anticipated costs for such proposed
activities, and (d) preliminary information about the expanded Commercialization risks
and opportunities for the Licensed Product in connection with such proposed activities.
Paladin shall not implement any activities included in such proposal(s) without the
prior approval of the CC as provided in Section 4.1.3.

	 
	 	4.1.5	 	Decision Making; Authority.
The CC shall make its decisions by consensus, with each Party’s representatives
collectively having one vote. If the CC is unable to reach consensus regarding a
matter before it within 15 days, then:

	 	(a)	 	Somaxon shall have authority to make the final decision with respect to
all issues relating to (i) Manufacturing, (ii) licensing of Third Party Patent
Rights or Know-How, and (iii) matters set forth in Sections 4.1.3(e), (f), (g) and
(h) above; provided that such decision does not, without Paladin’s consent,
which consent shall not be unreasonably withheld, delayed or conditioned,
materially increase Paladin’s obligations (including its monetary/budget
obligations) under this Agreement; and

 

- 20 -

 

	 	(b)	 	Paladin shall have authority to make the final decision with respect to
all issues relating to Regulatory Activities (other than matters set forth in
Sections 4.1.3(e), (f), (g) and (h) above) and Commercialization in the Field,
subject to Somaxon’s prior review and consent as set forth in Article 3;
provided that in all events Somaxon shall be consulted regarding pricing
decisions for the Licensed Product in the Territory.

	 	4.2	 	Paladin Commercialization Responsibilities.

	 	4.2.1	 	General Commercialization Obligations.
Paladin shall, at its sole cost, use Commercially Reasonably Efforts to Commercialize
in each of the Key Territories in compliance with applicable Law.

	 
	 	4.2.3	 	Commercial Diligence.
In addition to, and without limiting the foregoing general obligations of Paladin,
Paladin shall (a) file a Regulatory Filing in Canada by June 7, 2012; provided
that the Parties shall discuss the extension of such date in the event that Health
Canada requires data in addition to that included in the Regulatory Filing made by
Somaxon in the United States for the Licensed Product in the Field; and (b) cause the
First Commercial Sale to occur in the applicable country in each of the Key Territories
within twelve (12) months of the date on which Marketing Approval is obtained in such
country.

	 
	 	4.2.4	 	Commercialization.
Paladin shall keep the CC informed with respect to its activities in support of
Commercialization. Paladin shall provide the CC with a copy of its annual marketing
plan with respect to the Licensed Product (“Commercialization Plan”) at least 60 days in
advance of its implementation and shall update the CC with respect to any material
developments thereto on a no less than quarterly basis. Paladin will consider Somaxon’s
comments on the Commercialization Plan, but, except as set forth in this Agreement, all
decisions with respect to the Commercialization in the Field shall rest solely with
Paladin.

	 
	 	4.2.5	 	No Marketing of Products Without Marketing Approval.
Except as may be agreed in writing between the Parties, Paladin shall not market,
promote, offer for sale or sell the Licensed Product unless and until Paladin obtains
the appropriate Marketing Approval.

	 
	 	4.2.6	 	Costs.
Paladin will be responsible for all costs associated with obtaining and maintaining
Regulatory Approvals and for all costs associated with Commercialization (other than
Somaxon’s assistance pursuant to Section 3.1.2 above, or as otherwise expressly set
forth in this Agreement).

 

- 21 -

 

	 	4.3	 	Product Labels and Inserts.
Paladin shall be responsible, at its cost and expense, for all aspects of content,
design and delivery of all Product Labels and Inserts, as set forth in Section 2.4 of
the Supply Agreement, and the Regulatory Approvals required in connection with their use
in the Territory

	 
	 	4.4	 	Promotional Materials.
Paladin shall be responsible, at its cost and expense, for developing and producing the
Promotional Materials in compliance with all applicable Laws and Section 2.3.1(c);
provided, however, that Paladin shall provide copies of all Promotional
Materials to Somaxon prior to their use; provided further that Somaxon
may object to any aspect
of the Promotional Materials based on its inconsistency with Somaxon’s global branding
for the Licensed Product within 15 calendar days and Paladin shall thereafter use
Commercially Reasonable Efforts to promptly resolve the objection prior to use of such
Promotional Materials. Subject to the foregoing, Paladin shall use the Promotional
Materials in connection with its Commercialization in Paladin’s sole discretion. All
Promotional Materials shall be the property of Paladin.

	 
	 	4.5	 	Inventory Monitoring. Paladin shall regularly monitor the purchases of Licensed Product
by its distributors and sublicensees and data relating to the inventory levels and sales of
Licensed Product by such distributors and sublicensees, and Paladin shall cease sales to any
such distributor or sublicensee that Paladin reasonably believes, based on such data or
other factors, is diverting Licensed Product for sale outside the Territory. Paladin shall
notify Somaxon in writing if it becomes aware of any diversion of Licensed Product for sale
outside the Territory so that the Parties may discuss actions to be taken in connection with
such diversion, including without limitation, the cessation of sales contemplated under this
Section 4.5.

ARTICLE 5

MANUFACTURING AND SUPPLY

	 	5.1	 	Somaxon Supply Obligations;
Supply Agreement.
The Parties will enter into a Supply Agreement concurrently with the execution of this
Agreement. The Supply Agreement sets forth the terms and conditions under which Somaxon
(or its Third Party manufacturers) will manufacture and supply to Paladin, and Paladin
will purchase from Somaxon (or its Affiliates), all of Paladin’s or its Affiliates’
requirements for Bulk Product

	 	5.1.2	 	Quality Agreement.
Within 90 days after the Effective Date, the Parties shall begin to negotiate in good
faith a mutually acceptable quality agreement with respect to the Licensed Product (the
“Quality Agreement”). Each Party shall assign a dedicated representative to ensure that
the Quality Agreement is signed and adopted by both Parties within 180 days after the
Effective Date. Pending execution of the Quality Agreement, the provisions of the
Supply Agreement shall prevail. Upon execution of the Quality Agreement, the terms and
conditions of such Quality Agreement shall be incorporated into the Supply Agreement and
the terms and conditions of the Supply Agreement with respect to quality shall be
superseded by such Quality Agreement.

 

- 22 -

 

	 	5.2	 	Price and Payment.
Transfer Price.
Paladin shall purchase Licensed Product from Somaxon as Bulk Product, at the Transfer
Price for each Unit, as set forth in the Supply Agreement.

	 	5.2.2	 	Invoicing and
Payment. Somaxon shall submit invoices to Paladin for purchased Bulk Product promptly after
delivery of such Bulk Product in accordance with the Supply Agreement. Paladin shall
pay Somaxon for each shipment of Bulk Product in the amount invoiced within 30 days
after receipt of the applicable invoice, unless such shipment is rejected by Paladin
pursuant to the applicable provisions of the Supply Agreement.

ARTICLE 6

PHARMACOVIGILANCE AND QUALITY ASSURANCE

	 	6.1	 	Pharmacovigilance Agreement.
Within 90 days after the Effective Date, the Parties shall begin to negotiate in good faith
a process and procedures for sharing Adverse Drug Reaction and Serious Adverse Drug Reaction
information which shall be documented in a pharmacovigilance agreement with respect to the
Licensed Product (the “Pharmacovigilance Agreement”). Each Party shall assign a dedicated
representative to ensure that the Pharmacovigilance Agreement is signed and adopted by both
Parties within 180 days after the Effective Date. Pending adoption of such agreement, the
provisions of the Supply Agreement shall prevail. Upon execution of the Pharmacovigilance
Agreement, the terms and conditions of such Pharmacovigilance Agreement shall be
incorporated in the Supply Agreement and the terms and conditions of this Article 6 shall be
superseded by such Pharmacovigilance Agreement.

	 
	 	6.2	 	Notification.
After receipt of the applicable Marketing Approval, Paladin shall notify Health Canada and
other appropriate Governmental Bodies in the Territory in accordance with applicable Laws,
and shall notify Somaxon promptly (but in all events within two (2) Business Days), in each
case after receipt of information with respect to any Adverse Drug Reactions and Adverse
Events (including Unexpected Adverse Drug Reactions and Serious Adverse Events or Adverse
Drug Reactions) attributable to the use or application of such Licensed Product in the
Territory. With respect to the use or application of the Licensed Product outside of the
Territory, Somaxon shall notify appropriate Governmental Bodies outside the Territory in
accordance with applicable Laws, and shall notify Paladin, promptly after receipt of
information with respect to any Adverse Drug Reactions and Adverse Events (including
Unexpected Adverse Drug Reactions and Serious Adverse Events or Adverse Drug Reactions)
attributable to the use or application of the Licensed Product outside the Territory.

 

- 23 -

 

	 	6.3	 	Reporting.
Paladin shall be responsible for preparing, processing, assessing, and submitting aggregate
and periodic reports and expedited reports pertaining to Adverse Drug Reactions and Adverse
Events (including Unexpected Adverse Drug Reactions and Serious Adverse Events or Adverse
Drug Reactions) attributable to the use or application of the Licensed Product in the
Territory as required by Governmental Bodies in the Territory. Somaxon shall be responsible
for preparing, processing, assessing, and submitting aggregate and periodic reports and
expedited reports pertaining to Adverse Drug Reactions and Adverse Events (including
Unexpected Adverse Drug Reactions and Serious Adverse Events or Adverse Drug Reactions)
attributable to the use or application of such Licensed Product outside the Territory as
required by Governmental Bodies outside the Territory. At each Party’s request and expense,
the other Party shall reasonably cooperate with the requesting Party in connection with the
requesting Party’s reporting responsibilities under this Section 4.6.

	 
	 	6.4	 	Literature Reports.
Somaxon shall be responsible for screening published scientific and medical literature for
individual case safety reports related to the Licensed Product within and outside the
Territory.

	 
	 	6.5	 	Medical Information.
Paladin shall be responsible for responding to all medical information requests in
connection with the Licensed Product originating in the Territory. Somaxon shall be
responsible for responding to all medical information requests in connection with the
Licensed Product originating outside the Territory. In the event Paladin receives a medical
information request originating outside the Territory, Paladin shall forward the medical
information request to Somaxon. In the event Somaxon receives a medical information request
originating in the Territory, Somaxon shall forward the medical information request to
Paladin. Somaxon shall be responsible for maintaining an electronic database for use in
responding to medical information requests in connection with the License Product; Somaxon
shall permit Paladin to have access to and use of such database at no cost.

ARTICLE 7

FINANCIAL CONSIDERATION

	 	7.1	 	Up-Front Payment.
Upon the Effective Date, Paladin shall pay or cause to be paid to Somaxon a fee of Five
Hundred Thousand US Dollars (US $500,000), of which (a) *** shall be in
consideration of Somaxon’s grant to Paladin hereunder of the exclusive rights in the
Trademarks in the Territory and (b) *** shall be in consideration of
Somaxon’s grant to Paladin hereunder of the exclusive distribution rights in the
Territory.

	 
	 	7.2	 	Issuance of Shares.
Pursuant to the Purchase Agreement, Somaxon shall issue and sell to Paladin the Shares.

 

	 	 	 
	***	 	Certain information on this page has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions

 

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	 	7.3	 	Milestone Payments.
As consideration of Somaxon’s grant of the rights and licenses to Paladin in the Somaxon
Know-How and Somaxon Patents in the Territory hereunder, Paladin shall pay or cause to
be paid to Somaxon the following one-time payments upon the first occurrence of each of
the following milestones (each, a “Milestone”, and each such amount, a “Milestone
Payment”): ***

	 	7.3.1	 	Notice.
Paladin shall provide Somaxon written notice of achievement of the Milestones set forth
above within 15 days of the last day of the Calendar Quarter in which any such Milestone
is achieved.

	 
	 	7.3.2	 	Payment.
The Milestone Payments to be made under this Section 7.3 shall be due and payable within
five Business Days after notice that the applicable Milestone has been achieved.
Milestone Payments shall be made according to Section 8.1. Each Milestone Payment to be
made under this Section 7.3 shall be due and payable only once, if at all.

	 	7.4	 	Additional Payments for Licensed Product.
In addition to the payments due under Sections 5.2, 7.1, 7.2 and 7.3, as further
consideration of Somaxon’s grant of the rights and licenses to Paladin in the Somaxon
Know-How and Somaxon Patents in the Territory hereunder, Paladin shall, during the Net
Transfer Fee Term, pay or cause to be paid:

	 
	 	7.4.1	 	Net Transfer Fees.
To Somaxon an additional transfer fee (“Net Transfer Fees”) equal to the following
percentages of the aggregate annual Net Sales in the Territory: ***

	 
	 	 	 	Provided, however, that if Paladin is successful in obtaining approval from the Patented
Medicine Prices Review Board (Canada) for an introductory list price for
the Licensed Product that is equal to or greater than *** times the published
price of any zopiclone drug then published by the Association québécoise des pharmaciens
propriétaires, then such Net Transfer Fees Percentages shall be as follows:
***

	 	7.4.2	 	ProCom Payment. To Somaxon an additional payment equal to five percent of ProCom Net Sales (“ProCom
Payment”).

	 
	 	7.4.3	 	Payments. The payments of Net Transfer Fees and ProCom Payment to be made under this Section 7.4
shall be due and payable within 30 days after the last day of each Calendar Quarter
according to Section 8.1.

	 	7.5	 	Consideration.
The payment provisions under this Agreement have been negotiated for the convenience
of the Parties as a way of estimating the fair value of the rights granted hereunder
to Paladin with respect to the Licensed Product.

 

	 	 	 
	***	 	Certain information on this page has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

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ARTICLE 8

PAYMENT; REPORTING; AUDITING

	 	8.1	 	Mode of Payment and Conversion.

	 	8.1.1	 	Mode of Payment. Any payments made by one Party to the other Party under this
Agreement shall be made by electronic transfer in immediately available funds via either a
bank wire transfer, an ACH (automated clearing house) mechanism, or any other means of
electronic funds transfer, at the paying Party’s election, of immediately available funds
in the requisite amount to such bank account as the receiving Party may from time to time
designate by written notice to the paying Party at least 10 days before the payment is due.
The Parties may vary the method of payment set forth herein at any time upon mutual
agreement, and any change shall be consistent with the local Law at the place of payment or
remittance.

	 
	 	8.1.2	 	Conversion. Any payments relating to transactions in a foreign currency shall be
converted into United States dollars in accordance with applicable accounting standards
using a methodology which is consistently applied by Paladin with respect to external
reporting (including any annual, regular or periodic reports and registration statements
that Paladin may file or be required to file with the SEC pursuant to applicable Laws), or,
if Paladin does not report externally, then in a manner consistent with the methodology
used by Paladin to present its financials to institutional lenders in the context of
financing transactions, applicable to transactions under exchange regulations for the
particular currency during the accounting period for which such payment is due.

	 	8.2	 	Reports.

	 	8.2.1	 	Within 30 days after the last day of each Calendar Quarter following the First
Commercial Sale, Paladin shall deliver to Somaxon a detailed written report of gross sales
of the Licensed Product in the Territory, including the number of Units sold, Net Sales of
the Licensed Product, including all permitted deductions from gross sales or reductions to
gross sales taken by Paladin in accordance with this Agreement, and the calculation of the
Net Transfer Fees thereof. Such report shall be accompanied by the payments due pursuant
to Section 7.4.

	 	8.2.2	 	Within 30 days after the end of each Calendar Quarter, Paladin shall deliver to
Somaxon quarterly operation reports of Paladin’s activities to register, develop and market
the Licensed Product in the Territory, and shall provide to Somaxon copies of all such
reports received by Paladin from its licensees. Each such report shall be due within 30
days after the Calendar Quarter to which it relates. Each report shall include:

	 	(a)	 	a monthly compilation of all Licensed Product distributed by Paladin,
including the revenues derived therefrom and a breakdown of the prices charged to
each customer in respect of the Licensed Product; and

	 
	 	(b)	 	a monthly list of the amount of inventory on hand and, from and after
any termination of the Supply Agreement, a monthly list of all Bulk Product ordered
by Paladin; and

	 
	 	(c)	 	monthly gross and net sales on a per country basis in local currency
and U.S. dollars, using the average exchange rate set forth in the Bank of Canada’s
Web Site for the month.

 

- 26 -

 

	 	8.2.3	 	Within 30 days after the end of each calendar year, Paladin shall deliver to Somaxon
annual statements showing annual sales figures and the amount of inventory on hand as at
December 31 of each year, and shall provide to Somaxon copies of all such annual statements
received by Paladin from its licensees. Such annual statements shall also contain (i) a
summary of all promotional activities undertaken by Paladin with respect to the Product
during the preceding calendar year, and (ii) a certification that “to Paladin’s knowledge
no exportation of the Licensed Product outside the Territory has taken place” in the
Calendar Year then ended.

	 	8.3	 	Records Retention.
For three (3) Calendar Years from the end of the year to which the Milestone Payment or
other payments pertains after each sale of each Licensed Product or such longer period
as may be required by applicable Laws, Paladin shall (and shall cause its Affiliates to)
keep and maintain complete and accurate books and records of such sales of the Licensed
Product, Net Sales of the Licensed Product including all deductions, and all amounts
payable by Paladin to Somaxon hereunder in sufficient
detail to confirm the accuracy of the payment calculations or Milestone Payments
required hereunder.

	 
	 	8.4	 	Interest.
All late payments under this Agreement shall bear interest from the date due until paid
at a rate equal to twelve-month LIBOR plus two percent (2%) as set by the British
Bankers Association as of the date that such payment was due, or, if lower, the highest
rate permitted under applicable Law, calculated on the number of days such payment is
delinquent.

	 
	 	8.5	 	Rights of Inspection.

	 	8.5.1	 	Without limiting either Party’s other inspection and audit rights set forth in this
Agreement or the Supply Agreement, during the Term and for three Calendar Years after
receiving any report or statement with respect to payments or Milestone Payments, Somaxon
shall have the right to appoint an internationally-recognized independent Third Party
accounting firm to audit the books and records of Paladin and its Affiliates solely so as
to verify the accuracy of the reports, statements, books of accounts and payments made
hereunder, as applicable. Such audit shall be conducted upon at least 30 days advanced
written notice to Paladin and shall commence on a date reasonably acceptable to both
Parties. Such audit shall only be during Paladin’s normal business hours. Such audit
shall not be more frequent than once per calendar year unless a prior audit has revealed
deficiencies, in which case, an additional audit may be conducted within the same calendar
year if elected by Somaxon. The auditing party shall be required to sign a confidentiality
agreement for the benefit of, and in a form reasonably acceptable to, Paladin. Paladin
shall be provided 

 

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	 	 	 	the opportunity to discuss
any discrepancies of greater than five percent found during such audit with the auditors
prior to such auditor issuing its final report.
In addition, the auditors shall redact any Confidential Information disclosed in the
proposed final report identified by Paladin as confidential and, which the auditors agree
is not necessary for purposes of calculating the payment(s) owed. The final report shall
be shared with both of the Parties. If any audit discloses any underpayments by Paladin to
Somaxon, then unless contested by Paladin within 30 days after receipt of the necessary
documentation of the amount owed, any underpayment shall be paid by Paladin to Somaxon
within 30 days of it being so disclosed. If any audit discloses any overpayments by
Paladin to Somaxon, then unless contested by Somaxon within 30 days after receipt of the
necessary documentation of the amount owed, Paladin shall have the right to credit the
amount of the overpayment against each subsequent quarterly payment due to Somaxon until
the overpayment has been fully applied. If the overpayment is not fully applied prior to
the final quarterly payment of payments due hereunder, Somaxon shall promptly refund an
amount equal to any such remaining overpayment. If Somaxon’s audit demonstrates an
underpayment of more than five percent for the payment due to Somaxon during the audited
period, Paladin shall be liable for Somaxon’s reasonable
cost of the audit that discovered such underpayment. Otherwise, Somaxon shall bear the
costs of such audits.

	 	8.6	 	Taxes.

	 	8.6.1	 	Based on discussions between the Parties prior to the Effective Date, as of the
Effective Date it is agreed that based on current applicable Law and save for the payment
of *** contemplated by Section 7.1(a), Paladin shall pay any payments under this
Agreement free and clear of any deduction or withholding. If Paladin believes that any
change in applicable Law requires a different conclusion, it will discuss such change with
Somaxon promptly and in good faith before undertaking any such deduction or withholding.

	 
	 	8.6.2	 	It is understood and agreed between the Parties that any payments made by Paladin
under this Agreement are exclusive of any value added or similar tax and that any value
added or similar tax shall be paid by Paladin in addition to and at the same time as the
relevant payment (as applicable).

	 
	 	8.6.3	 	The Parties agree to cooperate and produce on a timely basis any tax forms or reports
reasonably requested by the other Party in connection with any payment made by Paladin to
Somaxon under this Agreement, all at the cost and expense of the requesting Party. Each
Party further agrees to provide reasonable cooperation to the other Party, at the other
Party’s cost and expense, in connection with any official or unofficial tax audit or
contest relating to payments made by Paladin to Somaxon under this Agreement.

 

	 	 	 
	***	 	Certain information on this page has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

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ARTICLE 9

INVENTIONS AND PATENTS

	 	9.1	 	Patented Medicines (Notice of Compliance) Regulations.

	 	9.1.1	 	Each Party shall immediately give written notice to the other Party of any Notice of
Allegation pursuant to section 5 of the Canadian Patented Medicines (Notice of Compliance)
Regulations or Claim of which they become aware filed pursuant to the Canadian Patent Act
or the Patented Medicines (Notice of Compliance) Regulations enacted thereunder (or any
amendment or successor statute thereto) claiming that any Somaxon Patents in Canada are
invalid or will not be infringed by the Manufacture, use, sale or commercialization of a
product by a Third Party in Canada or are not properly listed on the Patent Register.

	 
	 	9.1.2	 	Each Party shall immediately give written notice to the other Party of any Third Party
claim that any Somaxon Patents in the Ex-Canada Territories are invalid or
will not be infringed by the Manufacture, use, sale or commercialization of a product
by a Third Party in the Ex-Canada Territories.

	 
	 	9.1.3	 	Listing of Patents.
Paladin, as holder of the Marketing Approval for the Licensed Product, shall have the
sole right to select which of Somaxon Patents shall be listed for inclusion on the
Canadian Patent Register pursuant to the Canadian Patent Act or the Patented Medicines
(Notice of Compliance) Regulations enacted thereunder, or any similar or successor Law
with respect to the Licensed Product in the Territory; provided that Paladin
shall consult with Somaxon prior to such selection of Somaxon Patents and take Somaxon’s
comments into consideration in good faith and shall keep Somaxon informed of any changes
to such listing for such Licensed Product and shall promptly notify Somaxon of all
correspondence with the Office of Patented Medicines Liaison (OPML) and Health Canada
including any determination by OPML or any other Governmental Body that a Somaxon Patent
is not eligible for inclusion on the Canadian Patent Register or comparable registry;
and provided further that Paladin shall act in the ordinary course of business
and consistent with practices within the pharmaceutical industry and applicable Law in
making such listings. Notwithstanding the foregoing, Paladin agrees that Somaxon Patents
listed in Schedule 1.77 that contain a claim for (1) an approved medicinal
ingredient; (2) an approved formulation or dosage form containing that medicinal
ingredient; (3) an approved use of the medicinal ingredient; or (4) any other aspect of
invention that is permitted to be listed on the Canadian Patent Register shall be listed
for inclusion, to the extent permitted by Law, on the Canadian Patent Register, or any
successor Law with respect to the Licensed Product and that such Somaxon Patents shall
not be removed by Paladin from such list without Somaxon’s prior written consent, such
consent not to be unreasonably withheld, delayed or conditioned.

 

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	 	9.2	 	New Technology.
All Patent Rights and Know-How (including all associated intellectual property rights):
(i) arising directly from or out of the performance of this Agreement (including the
exercise of any rights and the performance of any obligations) by either Party, (ii)
authored, invented, reduced to practice, developed or otherwise created by one or more
employees or independent contractors of either Party, and (iii) required in order to
Manufacture or Commercialize the Licensed Product (“New Technology”) shall, as between
the Parties, be the sole property of Somaxon. For the avoidance of doubt, New Technology
in the Territory shall be included in the Licensed Technology licensed to Paladin
pursuant to Section 2.1. Paladin shall cause each of its employees, consultants,
contractors and any Third Parties working on its behalf or their behalf in fulfilling
Paladin’s obligations under this Agreement and who may create New Technology to assign
to Paladin all of such Person’s right, title and interest in and to any New Technology,
and to waive, for the benefit of Paladin and
its successors, assigns and licensees (including Somaxon), their respective moral rights
in and to any New Technology.

	 	9.3	 	Cooperation.
Each Party shall, and shall cause any Third Parties working on its or their behalf
to cooperate with and assist the other Party, if and as may be requested by such other
Party, to effect the intent of this ARTICLE 9, including by executing such documents and
taking such actions, and making its employees and independent contractors available to
execute documents and provide information to such other Party or to such other Party’s
authorized lawyers, agents or representatives, as necessary to achieve the foregoing
allocation of ownership rights.

	 
	 	9.4	 	Required Third Party Patent Rights or Know-How.
In the event either Party becomes aware of additional Third Party Patent Rights or
Know-How that may be necessary for the Commercialization in the Field, such technology
shall be discussed by the CC and the CC shall determine whether a license shall be
taken. In the event the CC determines that a license in such technology shall be taken,
Somaxon shall, at its sole cost and expense, use Commercially Reasonable Efforts to
negotiate, enter into and comply with such license including the right to sublicense to
Paladin.

	 
	 	9.5	 	Patent Filing, Prosecution and Maintenance.
Somaxon shall use Commercially Reasonable Efforts to: (a) file, prosecute and maintain
Somaxon Patents in the Territory; (b) defend the Licensed Technology against claims of
infringement; and (c) enforce the Licensed Technology against infringing Third Parties
in the Territory. Somaxon shall promptly inform Paladin of all material correspondence
received in connection with such activities in the Territory.

	 
	 	9.6	 	Enforcement and Defense of Patents and Trademarks.
If either Party becomes aware or reasonably believes that any Licensed Technology or
Trademark is being infringed in the Territory by a Third Party or if a Third Party
claims that any Somaxon Patent is invalid or unenforceable, or challenges the validity,
enforceability, ownership or use of any Trademark, the Party possessing such knowledge
or reasonable belief shall promptly, but in all events within fifteen (15) days thereof,
notify the other Party in writing and provide it with details of such infringement or
claim that are known by such Party.

 

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	 	9.7	 	Third Party Actions Claiming Infringement.
If a Party becomes aware of any claim or action by a Third Party against either Party
that claims that the development, Manufacture, advertising, marketing, promotion,
distribution, labelling, storage, handling, use, sale, offer for sale or importation of
or any other Commercialization activity or the use of any Trademark or Licensed
Technology in the Territory infringes such Third Party’s intellectual property rights
(each, a “Third Party Action”), such Party shall promptly, but in all events within
fifteen (15) days thereof, notify the other Party in writing and provide it with details
of such claim or action that are known by such Party.

	 
	 	9.8	 	Actions Against Third Parties.
In the event of any infringement of Somaxon Patent Rights or the Trademarks in the
Territory, which infringement involves a product that could or does compete with the
Licensed Product or could adversely affect the Parties’ interests in the Licensed
Product in the Territory under this Agreement (an “Infringement”), Somaxon shall, in its
sole discretion, after considering the advice and comments of Paladin, determine to take
legal action in the Territory (an “Enforcement Action”), if any. In the event such an
Enforcement Action is initiated, Somaxon shall use Commercially Reasonable Efforts to
prosecute such Enforcement Action. At Somaxon’s reasonable request, Paladin shall
cooperate fully with Somaxon with respect to any such Enforcement Action, and Somaxon
shall reimburse Paladin for its reasonable out-of-pocket costs and expenses (including
attorneys’ and professionals’ fees) incurred in providing such cooperation. Paladin may
be represented by counsel of its own selection at its own expense in any such
Enforcement Action, but Somaxon shall have the right to control the suit or proceeding
and such expenses will not be reimbursed by Somaxon. Any recovery received as a result
of any Enforcement Action shall be used first to reimburse Somaxon for its costs and
expenses (including attorneys’ and professional fees and amounts reimbursed to Paladin)
incurred in connection with such Enforcement Action. Of any remaining amounts, the
amount (if any) which is required to be paid to any licensors of the applicable Patent
Rights or Trademarks under the terms of the respective in-license agreement, if any,
shall then be paid to such licensor, if any, and any amounts remaining thereafter shall
be paid to Somaxon. If Somaxon elects not to bring an Enforcement Action with respect
to an Infringement, it will promptly notify Paladin of such decision, and Paladin shall
have the exclusive right to bring such Enforcement Action (a “Paladin Enforcement
Action”). Costs, recovery thereof, and payments to licensors, if any, under any Paladin
Enforcement Action shall be allocated, mutatis mutandis, as set forth above with respect
to an Enforcement Action brought by Somaxon. Any amounts remaining thereafter shall be
solely for the account of Paladin.

 

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	 	9.9	 	Patent Marking.
All Licensed Product marketed and sold by Paladin under this Agreement shall be marked
with appropriate patent numbers or indicia of Somaxon Patents, to the extent required by
applicable Laws in the Territory.

	 
	 	9.10	 	Paladin Negative Covenant Regarding Somaxon Patent Rights.
Throughout the Initial Term and any Extension Term, neither Paladin, any of its
Affiliates nor any permitted sublicensees shall commence or otherwise pursue (or
voluntarily provide any material assistance to any Third Party to do so, other than as
required by law or legal process), any proceeding seeking to have any of the Somaxon
Patent Rights revoked or declared invalid, unpatentable or unenforceable.

ARTICLE 10

CONFIDENTIALITY

	 	10.1	 	Confidentiality Obligations.
Each Party shall, and shall ensure that its officers, directors, employees and
agents shall, keep and maintain completely confidential and not publish or otherwise
disclose and not use for any purpose except as expressly permitted hereunder any
Confidential Information disclosed to it by the other Party pursuant to this Agreement
or the Supply Agreement. Information disclosed by a Party hereunder shall not
constitute Confidential Information for any purpose under this Agreement or the Supply
Agreement to the extent that the receiving Party can demonstrate that such Confidential
Information:

	 	(a)	 	Was already known to the receiving Party or its Affiliates, other than
under an obligation of confidentiality, at the time of disclosure;

	 
	 	(b)	 	Was generally available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving Party;

	 
	 	(c)	 	Became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any direct or indirect
act or omission of the receiving Party in breach of this Agreement;

	 
	 	(d)	 	Was subsequently lawfully disclosed to the receiving Party or its
Affiliates by a Third Party without an obligation of confidentiality other than in
contravention of a confidentiality obligation of such Third Party known to the
receiving Party; or

	 
	 	(e)	 	Was developed or discovered by employees, consultants, contractors or
agents of the receiving Party or its Affiliates who had no access to the
Confidential Information of the disclosing Party.

	 	10.2	 	Permitted Exceptions.
Notwithstanding the above obligations of confidentiality and non-use, a Party may
disclose information to the extent that such disclosure is reasonably necessary in
connection with:

	 	(a)	 	prosecuting or defending litigation subject to the terms of ARTICLE 12;

 

- 32 -

 

	 	(b)	 	conducting Phase IV Trials as permitted hereunder;

	 
	 	(c)	 	seeking Regulatory Approval hereunder; or

	 
	 	(d)	 	complying with a judicial order, or applicable Law, including
securities Law and the rules or requirements of any securities exchange or market
on which a Party’s securities are listed or traded and the requirements of any
regulatory authority.

	 
	 	 	 	In making any disclosures set forth in the foregoing clauses of this Section
10.2, the disclosing Party shall, where reasonably practicable, give such
advance notice to the other Party of such disclosure requirement as is
reasonable under the circumstances, disclose no more of the other Party’s
Confidential Information than reasonably necessary and will use its reasonable
efforts to cooperate with the other Party in order to secure confidential
treatment of such Confidential Information required to be disclosed. In
addition, in connection with any permitted filing by either Party of this
Agreement or the Supply Agreement with any Governmental Body, the filing Party
shall endeavor to obtain confidential treatment of economic, trade secret
information and such other information as may be requested by the other Party,
subject to applicable Law, and shall provide the other Party with the proposed
confidential treatment request with reasonable time for such other Party to
provide comments, and shall include in such confidential treatment request all
reasonable comments of the other Party. With respect to financial and sales
information, either Party may also disclose such information, subject to
reasonable obligations of confidentiality, at least as stringent as those set
forth herein, to actual and prospective acquirers, investors and other sources
of finance (and to their respective advisors, agents and representatives) and
actual and prospective permitted assignees.

	 	10.3	 	Return of Confidential Information.
Upon the request of either Party, upon termination or expiration of this Agreement, each
Party shall promptly return to the other Party or destroy and certify destruction of all
of the other Party’s Confidential Information, including all copies, excerpts or
summaries thereof, in whatever form or medium, and thereafter shall not make any use of
any such Confidential Information of the other Party, in each case except as expressly
permitted hereunder; provided that neither Party shall be obligated to return or
destroy Confidential Information that has become integrated with other business records
of such Party; provided, further that such Party shall continue to be
bound by the confidentiality obligations under this Agreement and the Supply Agreement
with respect to any such Confidential Information that is not so returned or destroyed.

 

- 33 -

 

	 	10.4	 	Press Releases and Disclosure.
The Parties hereby acknowledge and agree that either Party may issue the press release
attached as Schedule 10.4. Neither Party shall make any other press release or
public announcement regarding the terms of this Agreement, the Supply Agreement or
relating to the Licensed Product in the Field in the Territory (including the
Commercialization thereof) without the prior written consent of the other Party;
provided that (a) Somaxon shall be permitted to make press releases and public
announcements about the development, manufacture or commercialization of a Licensed
Product outside the Territory or outside the Field in the Territory (provided that
Somaxon shall provide Paladin with reasonable advance notice of any press release or
public announcement concerning any adverse publicity or other negative news concerning
any Licensed Product outside the Territory), (b) each Party shall be permitted to
disclose the execution, terms and conditions of this Agreement or the Supply Agreement
if and to the extent required by (i) judicial order, or (ii) applicable Laws, including
securities Laws and the rules or requirements of any securities exchange or market on
which such Party’s securities are listed or traded and the requirements of any
regulatory authority, provided that, with respect to subsections (i) and (ii), the Party
seeking disclosure shall provide each other Party with reasonable advance notice of such
disclosure (including the text thereof), disclose no more information relating to the
terms of this Agreement or the Supply Agreement or any Licensed Product than reasonably
necessary and shall, to the extent practical, use its reasonable efforts to cooperate
with such other Party in seeking confidential treatment of such information, (c) each
Party shall have the right to disclose the execution, terms and conditions of this
Agreement, the Supply Agreement and information relating to any Licensed Product to the
extent already disclosed by either Party pursuant to and in accordance with this ARTICLE
10 in connection with any investor calls or presentations (or other similar types of
disclosures) in connection with disclosures about such Party’s business and (d) each
Party shall have the right to disclose information to its attorneys, accountants and
other professional advisors who are under an obligation to keep such information
confidential.

ARTICLE 11

REPRESENTATIONS AND WARRANTIES

	 	11.1	 	Representations and Warranties of Somaxon.
Somaxon hereby represents and warrants to Paladin as of the date hereof as follows:

	 	11.1.1	 	Organization.
Somaxon (i) is a corporation duly organized, validly existing and in good standing under
the laws of the state of Delaware, and (ii) has all necessary corporate power and
corporate authority to own its properties and to conduct its business, as currently
conducted.

	 
	 	11.1.2	 	Authorization.
The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby are within the corporate power of Somaxon, have been duly authorized
by all necessary corporate proceedings of Somaxon, and this Agreement has been duly
executed and delivered by Somaxon.

 

- 34 -

 

	 	11.1.3	 	No Conflict.
The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby do not: (i) conflict with or result in a breach of any provision of
Somaxon’s organizational documents; (ii) result in a material breach of any material
agreement to which Somaxon is party; (iii) result in a violation of any Law to which
Somaxon is subject in any material respect; or (iv) require Somaxon to obtain any
material approval or consent from any Governmental Body or Third Party other than those
consents and approvals which have been obtained prior to the date hereof.

	 
	 	11.1.4	 	Enforceability.
This Agreement constitutes the valid and binding obligation of Somaxon (assuming the due
execution and delivery hereby by Paladin), enforceable against Somaxon in accordance
with its terms, subject to bankruptcy, reorganization, insolvency and other similar laws
affecting the enforcement of creditors’ rights in general and to general principles of
equity (regardless of whether considered in a proceeding in equity or an action at law).

	 
	 	11.1.5	 	Somaxon Intellectual Property.
Except as set forth in Somaxon’s public filings made since December 31, 2010 with the
United States Securities and Exchange Commission (the “SEC Filings”), Somaxon has not
received any written claim or demand from any Third Party alleging that any
infringement, violation, or misappropriation of such Third Party’s intellectual property
rights has occurred as a result of or in connection with the manufacture, use, offer for
sale, sale or importation of the Licensed Product. Except as set forth in the SEC
Filings, Somaxon is not aware of any actual, alleged, or threatened infringement,
violation, or misappropriation by a Third Party of any Somaxon intellectual property
rights, including the Licensed Technology, covering Silenor® (doxepin) in the Field or
its manufacture, use, or sale. Except as set forth in the SEC Filings, Somaxon has not
received any written claim or demand from any Third Party alleging invalidity or
unenforceability of any Licensed Technology.

	 
	 	11.1.6	 	Litigation.
Except as set forth in the SEC Filings, there is no litigation, arbitration proceeding,
governmental investigation, action, or claims of any kind, pending or, to the knowledge
of Somaxon, threatened, by or against Somaxon or any of its Affiliates relating to the
Licensed Product.

	 
	 	11.1.7	 	Right to Grant Licenses. Somaxon has the right to grant to Paladin the rights that
Somaxon purports to grant hereunder, including the right to grant exclusive licenses to the
Licensed Product in the Territory.

	 
	 	11.1.8	 	Somaxon U.S. Regulatory Filings. All of the clinical data generated by or on behalf of
Somaxon and contained in Somaxon’s Regulatory Filings made in the United States in support
of Regulatory Approval of Silenor in the United States were generated in compliance in all
respects with cGCP. All of the non-clinical data generated by or on behalf of Somaxon and
contained in such Regulatory Filings were generated in compliance in all respects with
cGLP. All of the conclusions made by Somaxon relating to such data, and all other
information, contained in such Regulatory Filings were submitted by Somaxon in good faith,
and Somaxon knows of no inaccuracies in such information. All of such Regulatory Filings
complied with all applicable Law.

 

- 35 -

 

	 	11.2	 	Representations and Warranties of Paladin.
Paladin hereby represents and warrants to Somaxon as of the date hereof as follows:

	 	11.2.1	 	Organization.
Paladin (i) is a corporation duly organized and validly existing under the laws of
Canada, and (ii) has all necessary corporate power and corporate authority to own its
properties and to conduct its business as currently conducted.

	 
	 	11.2.2	 	Authorization.
The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby are within the corporate power of Paladin, have been duly authorized
by all necessary corporate proceedings of Paladin, and this Agreement has been duly
executed and delivered by Paladin.

	 
	 	11.2.3	 	No Conflict.
The execution and delivery of this Agreement and the consummation of the transactions
contemplated hereby do not: (i) conflict with or result in a breach of any provision of
Paladin’s organizational documents; (ii) result in a material breach of any material
agreement to which Paladin is party; (iii) result in a violation of any Law to which
Paladin is subject in any material respect; or (iv) require Paladin to obtain any
material approval or consent from any Governmental Body or Third Party other than those
consents and approvals which have been obtained prior to the date hereof.

	 
	 	11.2.4	 	Enforceability.
This Agreement constitutes the valid and binding obligation of Paladin (assuming the due
execution and delivery hereby by Somaxon), enforceable against Paladin in accordance
with its terms, subject to bankruptcy reorganization, insolvency, and other similar laws
affecting the enforcement of creditors’ rights in general and to general principles of
equity (regardless of whether considered in a proceeding in equity or an action at law).

	 
	 	11.2.5	 	Litigation.
There is no litigation, arbitration proceeding, governmental investigation, action, or
claims of any kind, pending or, to the knowledge of Paladin, threatened, by or against
Paladin that would reasonably be expected to materially affect Paladin’s ability to
perform its obligations hereunder.

	 
	 	11.2.6	 	Diligence.
As of the Effective Date, there is no information known to Paladin that would reasonably
be expected to materially and adversely affect Commercialization.

	 	11.3	 	DISCLAIMER OF WARRANTY.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, EACH PARTY EXPRESSLY DISCLAIMS
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.

 

- 36 -

 

ARTICLE 12

INDEMNIFICATION AND INSURANCE

	 	12.1	 	Indemnification by Paladin.
Paladin shall indemnify, defend and hold Somaxon and its Affiliates and each of their
respective employees, officers, directors and agents (the “Somaxon Indemnitees”)
harmless from and against any and all liabilities, obligations, claims, demands,
judgments, losses, costs, damages, expenses, fines, royalties, governmental penalties or
punitive damages, interest, settlement amounts, awards and judgments (including
reasonable legal fees and expenses) (collectively, “Losses”) arising out of any Third
Party claim, suit or proceeding arising out of or related to: (a) the negligence,
reckless or wilful misconduct of any Paladin Indemnitee in performing Paladin’s
obligations under this Agreement or otherwise in the seeking, obtaining or maintaining
any Regulatory Approval or in Commercialization; (b) any breach or violation by any
Paladin Indemnitee of, or failure to perform by any Paladin Indemnitee of, any
representation, warranty, covenant, or other obligation in this Agreement, unless waived
in writing by Somaxon; (c) any violation of applicable Law by any Paladin Indemnitee in
connection with performing its obligations under this Agreement or otherwise in the
seeking, obtaining or maintenance of any
Regulatory Approval or Commercialization; (d) any claim or liability arising from
Paladin’s exploitation of the licenses granted under the License Agreement; (e) any
actions of any Paladin Indemnitee, including a Sales Representative or scientific
liaison, including any false or misleading representations to professionals, customers,
or others regarding any Somaxon Indemnitee or the Licensed Product; (f) any decision
taken hereunder as to which Paladin has final decision-making authority; or (g) the
content of the Promotional Materials; excluding, in each case, any Loss for which
Somaxon has an obligation to indemnify an Paladin Indemnitee pursuant to Section 12.2 or
pursuant to the Supply Agreement, as to which Loss each Party shall indemnify the other
to the extent of their respective liability for such Loss.

	 
	 	12.2	 	Indemnification by Somaxon.
Somaxon shall indemnify, defend and hold Paladin and its Affiliates and each of their
respective employees, officers, directors and agents (the “Paladin Indemnitees”, and
together with Somaxon Indemnitees, the “Indemnitees”) harmless from and against any and
all Losses arising out of any Third Party claim, suit or proceeding, or notice of
assessment or reassessment related to Section 8.6.1 arising out of or related to: (a)
the negligence, reckless or wilful misconduct of any Somaxon Indemnitee in performing
Somaxon’s obligations under this Agreement; (b) any breach or violation by any Somaxon
Indemnitee of, or failure to perform by any Somaxon Indemnitee of, any representation,
warranty, covenant, or other obligation in this Agreement, unless waived in writing by
Paladin; (c) any violation of applicable Law by any Somaxon Indemnitee in connection
with performing its obligations under this Agreement: (d) any decision taken hereunder
as to which Somaxon has final decision-making authority; (e) the failure by Paladin to
deduct or withhold from Milestones or other payments hereunder such amounts as are to be
withheld or deducted under applicable Law; (f) any claim that the use in Canada of the
Somaxon Patents, Somaxon Know-How or Trademarks owned or controlled by Somaxon in
accordance with this Agreement and the Supply Agreement infringes upon or
misappropriates the intellectual property or proprietary rights in Canada of any Third
Party; excluding, in each case, any Loss for which Paladin has an obligation to
indemnify a Somaxon Indemnitee pursuant to Section 12.1 or pursuant to the Supply
Agreement, as to which Loss each Party shall indemnify the other to the extent of their
respective liability for such Loss.

 

- 37 -

 

	 	12.3	 	NO CONSEQUENTIAL DAMAGES.
IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS AFFILIATES, EMPLOYEES, OFFICERS, DIRECTORS
OR AGENTS BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES, EMPLOYEES, OFFICERS,
DIRECTORS OR AGENTS FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUPPLY
AGREEMENT, EVEN IF SUCH DAMAGES MAY HAVE BEEN FORESEEABLE; PROVIDED THAT SUCH LIMITATION
SHALL NOT APPLY (A) IN THE CASE OF EITHER PARTY’S INDEMNIFICATION OBLIGATIONS UNDER
SECTION 12 OR (B) IF DAMAGES ARISE OUT OF OR RELATE TO A BREACH BY EITHER PARTY OF ITS
CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE 10 OF THIS AGREEMENT.

	 
	 	12.4	 	Notification of Claims; Conditions to Indemnification Obligations.
As a condition to an Indemnitee’s right to receive indemnification under this ARTICLE
12, it shall: (a) promptly notify the indemnifying Party as soon as it becomes aware of
a claim, suit or proceeding for which indemnification may be sought pursuant hereto,
provided, that any failure to so notify the indemnifying Party will not relieve the
indemnifying Party from any liability that it may have to the indemnified Party under
this ARTICLE 12 with respect to such claim or suit, except to the extent that the
ability of the indemnifying Party to defend such claim or suit is materially prejudiced
by the indemnified Party’s failure to give such notice; (b) reasonably cooperate, and
cause the individual Indemnitees to reasonably cooperate, with the indemnifying Party in
the defense, settlement or compromise of such claim or suit; and (c) permit the
indemnifying Party to control the defense, settlement or compromise of such claim or
suit, including the right to select defense counsel, other than a claim or suit for
indemnification pursuant to Section 12.2(e) as to which Paladin shall in all
circumstances be the controlling Party. The Party controlling any claim or suit pursuant
to this Section 12.4 shall consult with the other Party on all material aspects of such
claim or suit. The non-controlling Party shall have a reasonable opportunity for
meaningful participation in decision-making and formulation of defense strategy. The
Parties shall reasonably cooperate with each other in all such claims and suits. In no
event, however, may a Party settle or otherwise compromise any claim or suit (A) in a
manner that imposes any obligation on the other Party or its Affiliate or that adversely
affects or would reasonably be expected to adversely affect the other Party (including
by admitting that any Somaxon Patent or New Technology is invalid or unenforceable or in
a manner that admits fault or negligence on the part of any Indemnitee) without the
prior written consent of the Indemnitee, which consent shall not be unreasonably
withheld, delayed or conditioned, or (B) for which indemnification may be sought
pursuant hereto without the other Party’s prior written consent (such consent not to be
unreasonably withheld, delayed or conditioned).

 

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	 	12.5	 	Insurance.
During the Term, each Party shall obtain and maintain, at its sole cost and expense,
comprehensive general liability insurance (written on an occurrence basis and including
any self-insured arrangements) covering bodily injury (including death) and property
damage, and including coverage for product liability in amounts that are reasonable and
customary in the Territory or, with respect to Somaxon, the United
States, in the pharmaceutical and biotechnology industry for companies engaged in
comparable activities. It is understood and agreed that this insurance shall not be
construed to limit either Party’s liability with respect to its indemnification
obligations hereunder. Each Party will provide to the other Party upon request a
certificate evidencing the insurance such Party is required to obtain and keep in force
under this Section 12.5. Such certificate will provide that such insurance will not
expire or be cancelled or modified without at least 30 days’ prior written notice to the
other Party. Upon expiration or termination of this Agreement following
Commercialization, each Party shall maintain the insurance such Party is required to
obtain and keep in force under this Section 12.5 in full force and effect for a period
of three years.

ARTICLE 13

TERM AND TERMINATION

	 	13.1	 	Term and Expiration.
The term of this Agreement shall commence on and as of the Effective Date, and, unless
earlier terminated as provided in this ARTICLE 13 (the date of any such termination, the
“Termination Date”), shall continue in full force and effect for a period ending on the
later of (i) fifteen (15) years following First Commercial Sale and (ii) the date on
which Paladin is no longer Commercializing any Licensed Product in any country in the
Territory (the “Term”).

	 
	 	13.2	 	Termination of the Agreement by Somaxon.
With respect to the Key Territories only, Somaxon may terminate this Agreement on a
country-by-country basis upon 60 days’ prior written notice if a First Commercial Sale has
not occurred in the applicable country in the Key Territory within 12 months of the date on
which Marketing Approval is obtained in such country.

	 	13.2.2	 	Somaxon may terminate this Agreement in its entirety upon 60 days’ prior written notice
if a Marketing Approval in Canada has not been received by December 7, 2013.

 

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	 	13.2.3	 	Somaxon may terminate this Agreement on a country-by-country basis upon 60 days’ prior
written notice if, (a) following good faith discussions with a Third Party, Somaxon is
unable to license rights to such Third Party’s intellectual property or other proprietary
rights in such country on terms which are commercially reasonable and (b) the failure of
Somaxon to procure such license would reasonably be expected to result in claim(s) from
such Third Party alleging infringement or misappropriation in such country. Prior to
such termination, Somaxon will use Commercially Reasonable Efforts to inform Paladin of
all material aspects of discussions with such Third Party relating to the negotiation of
such license of rights from such Third Party, including (subject to the approval of such
Third Party) having Paladin participate in such discussions. In the event that this
Agreement is terminated by Somaxon in any country pursuant to this Section 13.2.3, then
for a period of seven years after the effective date of such termination none of Somaxon
nor any of its Affiliates will, directly or indirectly, Commercialize Licensed Products
in such country, nor shall Somaxon grant any license or other right to any Third Party
that would permit the Commercialization of the Licensed Product in such country.

	 	13.3	 	Termination upon Material Breach or an Event of Insolvency.

	 	13.3.1	 	If a Party breaches any of its material obligations under the Agreement (including its
obligations under Section 9.10), the Party not in default may deliver to the breaching
Party a written notice specifying the nature of the default, requiring it to cure such
breach, and stating its intention to terminate this Agreement if such breach is not
curable, or if not cured within 60 days (or 15 days in the event of a breach of its
obligations under Section 9.10). If such breach is not curable, or is not cured within 60
(or 15) days after the receipt of such notice, the Party not in default shall be entitled
to terminate this Agreement, effective immediately upon written notice to the other Party.
Any dispute regarding an alleged breach of this Agreement shall be resolved in accordance
with ARTICLE 14 hereof.

	 
	 	13.3.2	 	Either Party may terminate this Agreement for cause by providing notice to the other
Party of such termination in each of the circumstances set out below:

	 	(a)	 	the other Party admits its inability to pay its debts generally as they
become due or otherwise acknowledges its insolvency;

	 
	 	(b)	 	the other Party ceases or threatens to cease to carry on business in
the ordinary course;

	 
	 	(c)	 	the other Party institutes any proceeding, takes any corporate action,
or executes any agreement to authorize its participation in or the commencement of
any proceeding seeking: (i) to adjudicate it a bankrupt or insolvent; (ii)
liquidation, dissolution, winding-up, reorganization, arrangement, protection,
relief or composition of it or any of its property or debts or making a proposal
with respect to it under any law relating to bankruptcy, insolvency, reorganization
or compromise of debts or other similar laws; or (iii) appointment of a receiver,
trustee, agent, custodian or other similar official for it or for any substantial
part of its properties and assets; or

 

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	 	(d)	 	a creditor or any other Person privately commences any proceeding
against or affecting the other Party (except during any period up to a maximum of
30 days during which such proceeding is being contested in good faith by
appropriate proceedings by the other Party) seeking: (i) to adjudicate it a
bankrupt or insolvent; (ii) liquidation, dissolution, winding-up, reorganization,
arrangement, protection, relief or composition of it or any of its property or
debts or making a proposal with respect to it under any law relating to bankruptcy,
insolvency, reorganization or compromise of debts or other similar laws; or (iii)
appointment of a receiver, trustee, agent, custodian or
other similar official for it or for any substantial part of its properties and assets.

	 	13.4	 	Effects of Termination. Survival.
The following Articles and Sections of this Agreement shall survive the expiration or
termination of this Agreement for any reason: this Section 13.4, Sections 2.2.3,
2.3.1(d), 2.3.5, 6.2, 6.3, 11.3, 13.5, 13.6, Articles 8, 9, 10, 12 14 and 15, and
ARTICLE 1 to the extent that any defined terms in ARTICLE 1 are used in the foregoing
Sections and Articles.

	 	13.4.2	 	Accrued Liabilities.
Termination of this Agreement shall not relieve the Parties of any liability that
accrued hereunder or under the Supply Agreement prior to the Termination Date. In
addition, termination of this Agreement shall not preclude either Party from pursuing
all rights and remedies it may have hereunder or under the Supply Agreement or at Law or
in equity with respect to any breach of this Agreement or the Supply Agreement nor
prejudice either Party’s right to obtain performance of any obligation.

	 
	 	13.4.3	 	Licenses.

	 	(a)	 	Upon termination of this Agreement with respect to a country by
Somaxon,

	 	(A)	 	all licenses granted to Paladin under Sections 2.1 and
2.3.1 shall immediately and automatically terminate with respect to such
country;

	 
	 	(B)	 	Paladin shall, at Somaxon’s cost and expense, promptly
after such termination, but in no event later than 10 Business Days
thereafter, (i) assign, convey and transfer to Somaxon (or its designee)
ownership of all Regulatory Filings and Regulatory Approvals prepared or
obtained by or on behalf of Paladin or its Affiliates prior to the
Termination Date in such country and execute all documents reasonably
necessary to enable Somaxon to have access to and rely on the same, (ii)
assign, convey and transfer to Somaxon all of Paladin’s and its Affiliates’
right, title and interest in and to all regulatory correspondence
controlled by 

 

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	 	 	 	Paladin in such country, and
if applicable, to transfer and transition to Somaxon (or its designee), if and as may be reasonably
requested by Somaxon, the conduct of any ongoing Phase IV Trials in such
country in a manner and within such timing as mutually agreed upon by the
Parties so as to not disrupt such Phase IV Trials, except that, with
respect to each of the foregoing subsections (i) and (ii), Paladin may
retain copies of such information, data, reports, records, regulatory
correspondence and other materials as may be necessary for
Paladin to comply with applicable Law, (iii) cooperate and assist
Somaxon at Somaxon’s cost and expense in taking such actions and making
such filings with the relevant Governmental Bodies as necessary to
effect such assignments and transfers, (iv) assign, convey and transfer
to Somaxon all of Paladin’s and its Affiliates’ right, title and
interest in and to all Trademarks used by Paladin in Commercializing the
Licensed Product in such country (other than Marks owned by Paladin or
its Affiliates); and (v) assign, convey and transfer to Somaxon (or its
designee) Paladin’s and its Affiliates’ right, title and interest in and
to the Internet domain name registrations for the Licensed Product
website in such country, if any, at Somaxon’s cost and expense, and
shall cease operation of such website in such country;

	 
	 	(C)	 	If terminated by Somaxon pursuant to Section 13.2.3,
Somaxon shall make a termination payment to Paladin as follows (the
“Termination Fee”): (i) if aggregate Net Sales of Licensed Product have
not yet achieved CAD $5 million in any Calendar Year (in the Territory as a
whole), Five Hundred Thousand US Dollars (US $500,000); or (ii) if
aggregate Net Sales of Licensed Product have been in excess of CAD $5
million in any Calendar Year (in the Territory as a whole), One Million
Five Hundred Thousand US Dollars (US $1,500,000).

	 	(b)	 	Upon termination of this Agreement in its entirety by either Party,

	 	(A)	 	all licenses granted to Paladin under Sections 2.1 and
2.3.1 shall immediately and automatically terminate;

	 
	 	(B)	 	Paladin shall, at Somaxon’s cost and expense, promptly
after such termination, but in no event later than 10 Business Days
thereafter, (i) assign, convey and transfer to Somaxon (or its designee)
ownership of all Regulatory Filings and Regulatory Approvals prepared or
obtained by or on behalf of Paladin or its Affiliates prior to the
Termination Date and execute all documents reasonably necessary to enable
Somaxon to have access to and rely on the same, (ii) assign, convey and
transfer to Somaxon all of Paladin’s and its Affiliates’ right, title and
interest in and to all regulatory correspondence controlled by Paladin, and
if applicable, to transfer and transition to Somaxon (or its designee), if
and as may be 

 

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	 	 	 	reasonably requested by
Somaxon, the conduct of any ongoing
Phase IV Trials in a manner and within such timing as mutually agreed upon
by the Parties so as to not disrupt such Phase IV Trials, except that, with
respect to each of the foregoing subsections (i) and (ii), Paladin may
retain copies of such information, data, reports, records, regulatory
correspondence and other materials as may be necessary for Paladin to
comply with applicable Law, (iii) assign, convey and transfer to Somaxon
(or its designee) ownership of
all Promotional Materials (or sufficient rights to permit Somaxon to use
the Promotional Materials until Somaxon is able to print its own
promotional materials for use with the Licensed Product in the
Territory), (iv) cooperate and assist Somaxon at Somaxon’s cost and
expense in taking such actions and making such filings with the relevant
Governmental Bodies as necessary to effect such assignments and
transfers, (v) assign, convey and transfer to Somaxon all of Paladin’s
and its Affiliates’ right, title and interest in and to all Trademarks
used by Paladin in Commercializing the Licensed Product in the Territory
(other than Marks owned by Paladin or its Affiliates); and (vi) assign,
convey and transfer to Somaxon (or its designee) Paladin’s and its
Affiliates’ right, title and interest in and to the Internet domain name
registrations for the Licensed Product website, if any, at Somaxon’s
cost and expense, and shall cease operation of such website;

	 
	 	(C)	 	The Supply Agreement shall terminate; and

	 
	 	(D)	 	Paladin shall have one year (the “Sell-Off Period”) to
sell off any of Paladin remaining unsold inventory of Licensed Product,
including any inventory that it is obliged to purchase under the Supply
Agreement or the then applicable supply arrangement for the Licensed
Product; and shall continue to pay Somaxon Net Transfer Fees and ProCom
Payments with respect to all sales during the Sell-Off Period in accordance
with the provisions of Section 7.4 and to comply with all other applicable
terms and conditions of this Agreement.

	 	13.5	 	Survival of Licenses in the Event of Somaxon Bankruptcy or Insolvency.
All rights and licenses granted under or pursuant to this Agreement by Somaxon are,
and shall otherwise be deemed to be: (i) for purposes of Section 365(n) of the U.S.
Bankruptcy Code, licenses of right to “intellectual property” as defined under Section
101 of the U.S. Bankruptcy Code; and (ii) for the purposes of section 32 of the
Companies’ Creditors Arrangement Act (Canada) and section 65.11 of the Bankruptcy and
Insolvency Act, licenses or rights to use intellectual property granted to a party to an
agreement. The Parties agree that Paladin, as licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections under the
U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement
of a bankruptcy or insolvency proceeding by or against Somaxon under the U.S. Bankruptcy
Code, the Bankruptcy and 

 

- 43 -

 

	 	 	 	Insolvency Act, as amended,
or the Companies’ Creditors
Arrangement Act, as amended, Paladin shall retain its right to the intellectual
property, including its rights to enforce an exclusive license. For greater certainty,
in furtherance of Paladin’s rights to use of the intellectual property, Paladin shall be
entitled to a duplicate of (or access to, as determined appropriate by Somaxon)
embodiments of such intellectual property, which, if not already in Paladin’s possession
and requested by Paladin, shall be promptly delivered to it (if
and to the extent in Somaxon’s Control and not already provided to Paladin): (a) upon
any such commencement of a bankruptcy or insolvency proceeding upon Paladin written
request therefor, unless Somaxon elects to continue to perform all of its obligations
under this Agreement; or (b) if not delivered under clause (i), following the rejection,
disclaimer or resiliation of this Agreement by Somaxon upon written request therefor by
Paladin.

	 	13.6	 	No Public Statements.
The Parties agree that if this Agreement is terminated, neither Party shall disclose to
any Third Party any reason for not proceeding without the express written consent of the
other Party, and the Parties shall agree on statements for public disclosure, such
agreement not to be unreasonably withheld, delayed or conditioned. Notwithstanding the
foregoing, each Party shall be permitted to make such disclosures if and to the extent
required by (a) judicial order, or (b) applicable Laws, including any rules or
requirements under any stock exchange on which such Party is listed or may be listed or
by any regulatory authorities, provided that, with respect to subsections (a) and (b),
the Party seeking disclosure shall provide the other Party with advance notice and shall
to the extent practical and requested by the other Party, cooperate with such other
Party in seeking confidential treatment of such information.

ARTICLE 14

DISPUTE RESOLUTION

	 	14.1	 	Disputes. The Parties recognize that disputes
 as to certain matters may from time to time arise
during the Term which relate to either Party’s rights and/or obligations under this
Agreement or the Supply Agreement. It is the objective of the Parties to establish
procedures to facilitate the resolution of disputes arising under this Agreement or
under the Supply Agreement in an expedient manner by mutual cooperation and without
resort to litigation. To accomplish this objective, the Parties agree to follow the
procedures set forth in this ARTICLE 14 if and when a dispute arises under this
Agreement or the Supply Agreement, including any dispute regarding an alleged breach of
this Agreement; provided that such procedures shall not apply where this Agreement or
the Supply Agreement expressly allocates decision-making authority on an issue to either
Party.

 

- 44 -

 

	 	14.2	 	Escalation.
Disputes between the Parties relating to any matter relating to the subject matter of
this Agreement or the Supply Agreement, including in connection with the Manufacture,
Regulatory Activities or Commercialization, shall be referred to the CC for resolution.
In the event that the CC is, after a period of 10 Business Days, unable to make a
decision due to a lack of required unanimity, either Party may, by written notice to the
other Party, request that a dispute arising between the Parties under this
Agreement or under the Supply Agreement, including in connection with the Manufacture,
Regulatory Activities or Commercialization, be referred to the President of Paladin (or
an executive of Paladin designated by the President) and the Chief Executive Officer of
Somaxon (or an executive of Somaxon designated by the Chief Executive Officer) (the
“Executive Officers”) for resolution. The Executive Officers shall meet in person or
telephonically within 10 Business Days of such other Party’s receipt of written notice
of such dispute. If the Executive Officers cannot resolve such dispute within 30 days of
written notice of such dispute, then, at any time after such 30-day period, either Party
may bring an action in a court of competent jurisdiction in New York. Either Party may
proceed to enforce any and all of its rights with respect to such dispute.
Notwithstanding the foregoing, nothing in this Section 14.2 shall be construed as
precluding a Party from bringing an action for injunctive relief or other equitable
relief prior to the initiation or completion of the above procedure.

ARTICLE 15

MISCELLANEOUS PROVISIONS

	 	15.1	 	Relationship of the Parties.
Nothing in this Agreement or the Supply Agreement is intended or shall be deemed to
constitute a partnership, agency, joint venture or employer-employee relationship
between the Parties.

	 
	 	15.2	 	Assignment.

	 	15.2.1	 	Neither this Agreement, the Supply Agreement nor the Purchase Agreement nor any interest
hereunder or thereunder may be assigned, sold, transferred or otherwise disposed of by
either Party without the prior written consent of the other Party, provided,
however, that Somaxon may (a) assign all or any part of its rights or obligations under
this Agreement, the Supply Agreement or the Purchase Agreement to any Third Party in
connection with a Change of Control or sale of all or substantially all of the business or
division of which the Licensed Product is a part, or (b) assign all or any part of its
rights or obligations under this Agreement, the Supply Agreement or the Purchase Agreement
to any Affiliate, in each case without obtaining the consent of Paladin; provided
further, Paladin may assign this Agreement and the Supply Agreement (or all of its
interests hereunder or thereunder) to any Affiliate, in each case without obtaining the
consent of Somaxon. For clarity, either Party may assign its right to receive proceeds
under this Agreement or the Supply Agreement or grant a security interest in such right to
receive proceeds to one or more financial institutions providing financing to such Party
pursuant to the terms of a security or other agreement related to such financing.
Notwithstanding the foregoing, neither Party shall have the right to assign, delegate or
sublicense this Agreement or the Supply Agreement, in whole or in part, to any Person
identified as an “excluded person” on the United States Health and Human Services Office of
Inspector General and Government Services Administration Websites for excluded persons.

 

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	 	15.2.2	 	Each of this Agreement, the Supply Agreement and the Purchase Agreement shall be binding
upon the successors and permitted assigns of the Parties.

	 
	 	15.2.3	 	Any assignment not in accordance with Section 15.2.1 shall be null and void ab initio.

	 	15.3	 	Compliance with Laws.
Each of Somaxon and Paladin shall conduct all activities contemplated under this
Agreement and the Supply Agreement in accordance with all applicable Laws and cGMP.

	 
	 	15.4	 	Further Actions.
Each Party agrees to execute, acknowledge and deliver such further instruments and to do
all such other acts as may be necessary or appropriate in order to carry out the
purposes and intent of this Agreement, the Supply Agreement and the Purchase Agreement.

	 
	 	15.5	 	Force Majeure.
In the event of any failure or delay in the performance by a Party of any obligation
under this Agreement or the Supply Agreement due to events beyond the reasonable control of
such Party (such as, for example, fire, explosion, strike, inability to obtain
transportation, fuel, or power, accident, act of God, declared or undeclared wars, or acts
of terrorism) (a “Force Majeure Event”), then such Party shall have such additional time to
perform as shall be reasonably necessary under the circumstances. For clarity, a Force
Majeure Event shall not include a failure to commit sufficient resources, financial or
otherwise, to the performance of obligations under such agreement or general market or
economic conditions not accompanied by circumstances described in the first sentence of
this Section 15.5. In the event of such failure or delay, the affected Party will use its
diligent efforts, consistent with sound business judgment and to the extent permitted by
applicable Law, to correct and mitigate such failure or delay as expeditiously as possible.
In the event that a Party is unable to perform by a reason described in this Section 15.5,
its obligation to perform under the affected provision of such agreement, as the case may
be, shall be suspended during such time of non-performance.

	 	15.5.2	 	Neither Party shall be liable hereunder to the other Party nor shall be in breach for
failure to perform its obligations under this Agreement, the Supply Agreement or the
Purchase Agreement caused by a Force Majeure Event except as otherwise set forth in such
agreement. In the case of any such Force Majeure Event, the affected Party
shall promptly, but in no event later than 10 days after its occurrence, notify the
other Party stating the nature of the condition, its anticipated duration, and any
action being taken to avoid or minimize its effect. Furthermore, the affected Party
shall keep the other Party informed of the efforts to resume performance. After 60
days of such inability to perform, the Parties shall meet and discuss in good faith how
to proceed. In the event that the affected Party is prevented from performing its
obligations pursuant to this Section 15.5 for a period of 120 days (which period of
time shall include the 60 days following which the Parties are to meet pursuant to the
previous sentence), the other Party shall have the right to terminate this Agreement
(pursuant to the provisions of Section 13.3.1).

 

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	 	15.6	 	Entire Agreement of the Parties; Amendments.
This Agreement, the Supply Agreement and the Purchase Agreement and the schedules and
exhibits hereto and thereto (including the Quality Agreement and the Pharmacovigilance
Agreement), constitute and contain the entire understanding and agreement of the Parties
respecting the subject matter hereof and cancel and supersede any and all prior
negotiations, correspondence, understandings and agreements between the Parties, whether
oral or written, regarding such subject matter. No waiver, modification or amendment of
any provision of this Agreement, the Supply Agreement or the Purchase Agreement shall be
valid or effective unless made in a writing referencing such agreement and signed by a
duly authorized officer of each Party.

	 
	 	15.7	 	Construction.
Except where expressly stated otherwise in this Agreement or the Supply Agreement, the
following rules of interpretation apply to this Agreement and the Supply Agreement: (a)
“include,” “includes” and “including” are not limiting and shall be deemed to be
followed by “without limitation”; (b) definitions contained in this Agreement and the
Supply Agreement are applicable to the singular as well as the plural forms of such
terms; (c) references to an agreement, statute or instrument mean such agreement,
statute or instrument as from time to time amended, modified or supplemented; (d)
references to a Person are also to its permitted successors and assigns; (e) captions;
the plain meaning of defined terms, and other headings to this Agreement or the Supply
Agreement are for convenience only, and shall have no force or effect in construing or
interpreting any of the provisions of this Agreement or the Supply Agreement or any
other legal effect; (f) references to “Parties”, “Article”, “Section”, “Exhibit” or
“Schedule” refer to the Parties to, an Article or Section of, or any Exhibit or Schedule
to, this Agreement or the Supply Agreement, as the case may be, unless otherwise
indicated; (g) the word “will” shall be construed to have the same meaning and effect as
the word “shall” and vice versa; and (h) the word “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or”.

	 
	 	15.8	 	Governing Law.
This Agreement and the Supply Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, excluding application of any conflict
of laws principles that would permit or require application of the Law of a jurisdiction
outside of the State of New York and will be subject to the exclusive jurisdiction of
the courts of competent jurisdiction located in New York. The United Nations Convention
on Contracts for the International Sale of Goods is specifically excluded from
application to this Agreement.

 

- 47 -

 

	 	15.9	 	Notices and Deliveries.
All notices required or permitted hereunder or under the Supply Agreement or the
Purchase Agreement shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the Party to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient, and if not during normal business
hours of the recipient, then on the next Business Day, or (c) one Business Day after
deposit with a internationally recognized overnight courier, with written verification
of receipt. All communications shall be sent to the Parties at the following addresses:

	 	(a)	 	if to Somaxon, to:

	 
	 	 	 	Somaxon Pharmaceuticals, Inc.

3570 Carmel Mountain Road

San Diego, CA 92130

Attention: General Counsel

Fax No: +1 (858) 509-1761

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

	 
	 	 	 	Latham & Watkins LLP

12636 High Bluff Drive, Suite 400

San Diego, California 92130

Attention: Faye H. Russell, Esq.

Fax No: +1.858.523.5450

	 
	 	(b)	 	if to Paladin, to:

	 
	 	 	 	Paladin Labs Inc

6111 Royalmount Ave.

Suite 102

Montreal, Quebec H4P 2T4

Attention: Vice President, Business Development

Facsimile: +1.514. 344.4675

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

	 
	 	 	 	Davies Ward Phillips & Vineberg LLP

1501 McGill College Avenue

Suite 2600

Montreal, Quebec H3A 3N9

Attention: Hillel W. Rosen

Facsimile: +1.514. 841.6499

or to such other address as the addressee shall have last furnished in writing in accordance
with this provision to the addressor.

 

- 48 -

 

	 	15.10	 	Waiver.
A waiver by either Party of any of the terms and conditions of this Agreement, the
Supply Agreement or the Purchase Agreement in any instance shall not be deemed or
construed to be a waiver of such term or condition for the future, or of any other term
or condition hereof or thereof. All rights, remedies, undertakings, obligations and
agreements contained in this Agreement, the Supply Agreement and the Purchase Agreement
shall be cumulative and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement of either Party.

	 
	 	15.11	 	Severability.
Whenever possible, each provision of this Agreement, the Supply Agreement and the
Purchase Agreement shall be interpreted in such manner as to be effective and valid to
the fullest extent permitted under applicable Law, but if one or more provisions of any
agreement are held to be unenforceable or invalid under or in contravention of
applicable Law by any court of competent jurisdiction, such provision shall be
interpreted to the fullest extent permitted by applicable Law, and the Parties shall
negotiate in good faith to replace such provision with a provision which effects to the
fullest extent possible the original intent of such provision.

	 
	 	15.12	 	No Third-Party Beneficiaries.
Except as provided in Article 12 of this Agreement or Article VII of the Supply
Agreement, this Agreement, the Supply Agreement and the Purchase Agreement are for the
sole benefit of the Parties hereto and thereto and their permitted assigns, and nothing
herein or therein expressed or implied shall give or be construed to give to any Person,
other than the Parties hereto or thereto and such assigns, any legal or equitable rights
hereunder.

	 
	 	15.13	 	Expenses.
Each Party will bear its own costs and expenses in connection with the preparation,
negotiation and execution of this Agreement, the Supply Agreement, the Purchase
Agreement and the other documents related hereto or thereto.

	 
	 	15.14	 	Injunctive Relief.
The Parties agree that if any of the provisions of this Agreement, the Supply Agreement
or the Purchase Agreement were not performed in accordance with their specific terms or
were otherwise breached, irreparable damage would occur, no adequate remedy at law would
exist and damages would be difficult to determine, and that the Parties shall be
entitled to specific performance of the terms of such agreement and immediate injunctive
relief, without the necessity of proving the inadequacy of money damages as a remedy, in
addition to any other remedy at law or in equity.

	 
	 	15.15	 	Counterparts.
This Agreement, the Supply Agreement and the Purchase Agreement may be executed in one
or more counterparts, each of which will be deemed an original, and all of which
together will be deemed to be one and the same instrument. A facsimile or other
electronic copy of this Agreement, the Supply Agreement and the Purchase Agreement,
including the signature pages, will be deemed an original.

[Remainder of this page intentionally left blank; signature page follows]

 

- 49 -

 

[Signature Page to License Agreement]

IN WITNESS WHEREOF, the Parties have caused this License Agreement to be executed and delivered by
their respective duly authorized officers as of the day and year first above written, each copy of
which shall for all purposes be deemed to be an original.

	 	 	 	 	 
	 	SOMAXON PHARMACEUTICALS, INC.

 	 
	 	Per:  	/s/ Richard W. Pascoe
 	 
	 	 	Name:  	Richard W. Pascoe 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	PALADIN LABS INC.

 	 
	 	Per:  	/s/ Mark Nawacki
 	 
	 	 	Name:  	Mark Nawacki 	 
	 	 	Title:  	VP Business & Corporate Development 	 

 

- 50 -

 

Schedule 1.21

Restrictions Under Existing Agreements

The ProCom Agreement

 

 

 

Schedule 1.25

Territory

Latin American countries: Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica,
Ecuador, El Salvador, French Guiana, Guatemala, Guyana, Honduras, Nicaragua, Panama, Paraguay,
Peru, Suriname, Uruguay, Venezuela, Dominican Republic, Jamaica, Trinidad & Tobago, Guadeloupe,
Martinique, Bahamas, Barbados, Saint Lucia, Curacao, Saint Vincent and the Grenadines, Grenada,
Aruba, Bermuda

Africa: All countries on the African continent and Madagascar

 

 

 

Schedule 1.77

Somaxon Patents

(as of the Effective Date)

	 	 	 	 	 	 	 	 	 
	Country	 	Serial No.	 	Patent No.	 	Title
	CA

	 	 	2721133	 	 	 	 	Low-Dose Doxepin Formulations
and Methods of Making and
Using the Same
	 
	 	 	 	 	 	 	 	 
	PCT

	 	WO 2008/128115
	 	 	 	Low-Dose Doxepin Formulations
and Methods of Making and
Using the Same
	 
	 	 	 	 	 	 	 	 
	CA

	 	 	2687124	 	 	 	 	Low-Dose Doxepin Formulations,
Including Buccal, Sublingual
and Fastmelt Formulations, and
Uses of the Same to Treat
Insomnia
	 
	 	 	 	 	 	 	 	 
	PCT

	 	WO 2007/142811
	 	 	 	Low-Dose Doxepin Formulations,
Including Buccal, Sublingual
and Fastmelt Formulations, and
Uses of the Same to Treat
Insomnia
	 
	 	 	 	 	 	 	 	 
	CA

	 	 	2687118	 	 	 	 	Methods of Using Low-Dose
Doxepin for the Improvement of
Sleep
	 
	 	 	 	 	 	 	 	 
	PCT

	 	WO 2007/142810
	 	 	 	Methods of Using Low-Dose
Doxepin for the Improvement of
Sleep
	 
	 	 	 	 	 	 	 	 
	CA

	 	 	2693992	 	 	 	 	Methods of Improving the
Pharmacokinetics of Doxepin
	 
	 	 	 	 	 	 	 	 
	PCT

	 	WO 2008/011150
	 	 	 	Methods of Improving the
Pharmacokinetics of Doxepin

 

 

 

Schedule 10.4

Press ReleaseExhibit 10.2

Exhibit 10.2

SUPPLY AGREEMENT

This Supply Agreement (this “Agreement”) made as of June 7, 2011 (the “Effective
Date”), by and between Somaxon Pharmaceuticals, Inc. (“Somaxon”), and Paladin Labs Inc.
(“Paladin”). Somaxon and Paladin may hereinafter be referred to individually as a “Party” or
collectively as the “Parties.”

Whereas, Somaxon and Paladin have entered into a License Agreement (Canada) effective
as of the Effective Date (as amended from time to time) (the “License Agreement”), under which
Somaxon grants Paladin an exclusive right to Commercialize the Licensed Product in the Field in the
Territory (all terms as defined in the License Agreement).

Whereas, in connection with the License Agreement, Somaxon and Paladin desire to
enter into this Agreement in order to set forth the terms and conditions under which Somaxon shall
manufacture (or cause to be manufactured), supply and sell and Paladin will purchase Bulk Product
(as hereinafter defined).

Now, Therefore, in consideration of the promises and mutual covenants contained
herein and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Unless otherwise specifically provided herein, the following terms shall have the following
meanings. Any capitalized terms used in this Agreement which are not defined in this Article I
shall have the meanings ascribed to them pursuant to the License Agreement.

“Agreement” has the meaning set forth in the Preamble of this Agreement.

“Bulk Product” means the Licensed Products listed on Schedule A, released as a
finished good, unlabeled and packaged as set forth on Schedule A.

“cGMP” means the rules concerning current good manufacturing practices specified by the EU/PIC
guidelines (and the corresponding national laws and regulations), the FDA regulations codified in
the U.S. Code of Federal Regulations, or any other comparable regulatory criteria or guidelines as
applicable, all as amended from time to time.

“Discretionary Change” has the meaning set forth in Section 4.3(b).

“Deficiency Notice” has the meaning set forth in Section 4.2(c).

“Effective Date” has the meaning set forth in the Preamble of this Agreement.

“Encumbrances” means any lien, pledge, security interest, right of first refusal, option,
title defect, license, restriction, or other adverse claim or interest or encumbrance of any
kind or nature whatsoever, whether or not perfected, including any restriction on use,
transfer, receipt of income or exercise of any other attribute of ownership.

 

 

 

“Forms” has the meaning set forth in Section 3.7.

“Global Supply Chain” has the meaning set forth in Section 4.3(a).

“Inability to Supply” shall mean, over a 4-month period, the inability of Somaxon to supply to
Paladin at least 70% of the volumes of Bulk Product indicated in the then applicable binding
Purchase Orders for Bulk Product to be delivered within such period.

“Licensed Product” means Silenor® (doxepin), and all other formulations or dosage strengths of
doxepin or other Improvements Controlled by Somaxon during the Term, but specifically excluding any
doxepin isomers or OTC Products.

“Minimum Run Quantities” means the minimum number of batches, bottles or blisters of a
Licensed Product to be produced during the same cycle of manufacturing as set forth in Schedule
3.1.

“Non-Conformity” or “Non-Conforming” means the failure of Bulk Product to conform to the
Specifications, the Product Labels and Inserts, cGMP, the Quality Agreement and/or applicable Law.

“Paladin” has the meaning set forth in the Preamble of this Agreement.

“Patheon Agreement” means that certain Manufacturing Services Agreement between Somaxon and
Patheon Pharmaceuticals Inc. dated February 1, 2006, as amended by that certain Amendment to
Manufacturing Services Agreement dated June 19, 2008 and that certain Amendment No. 2 to
Manufacturing Services Agreement dated October 1, 2008, as the same may be further amended from
time to time.

“Permits” has the meaning set forth in Section 2.2(a)(iv).

“Purchase Order” has the meaning set forth in Section 3.3(a).

“Purchase Order Default Supplies” has the meaning set forth in Section 3.5(b).

“Purchase Order Failure” has the meaning set forth in Section 3.5(b).

“Purchase Order Failure Notice” has the meaning set forth in Section 3.5(b).

“Recall” has the meaning set forth in Section 4.5(a).

“Rejected Bulk Product” has the meaning set forth in Section 4.2(a).

“Required Changes” has the meaning set forth in Section 4.3(a).

 

2

 

“Shelf Life” means the length of time that a Licensed Product remains stable, as required by
applicable Law, without degrading to unacceptable levels (as such unacceptable levels are set forth
in the applicable Specifications).

“Somaxon” has the meaning set forth in the Preamble of this Agreement.

“Somaxon Manufacturing Responsibilities” has the meaning set forth in Section 4.5(c).

“Specifications” means all applicable specifications for the Bulk Product in the Marketing
Approval in the United States.

“Subcontractor” means any Third Party contracted by Somaxon or its Affiliates to perform any
of Somaxon Manufacturing Responsibilities.

“Term” has the meaning set forth in Section 6.1.

“Trading Services Procedure” has the meaning set forth in Section 3.3(b).

“Unit” means a single dose of Bulk Product.

“United States” or “U.S.” means the United States of America, its territories and possessions.

ARTICLE II

MANUFACTURE AND SUPPLY OF PRODUCT

2.1 Engagement.

(a) Subject to the terms and conditions set forth herein, Paladin hereby agrees to exclusively
purchase, and Somaxon hereby agrees to exclusively manufacture or have manufactured, supply and
sell to Paladin, during the Term, for the Territory, Bulk Product ordered by Paladin pursuant to
the terms of this Agreement. Subject to the remaining terms of this Section, Somaxon may delegate
all or any portion of its obligations hereunder to a Subcontractor, provided that Somaxon
shall remain fully liable to Paladin pursuant to this Agreement despite any such delegation to a
Subcontractor.

(b) Paladin shall be obligated to purchase all requirements of it, its Affiliates and
sublicensees for Bulk Product in the Territory from Somaxon under this Agreement.

(c) Paladin acknowledges that, as of the Effective Date, Bulk Product is being manufactured by
a Subcontractor at the assigned manufacturing facility on the terms and subject to the conditions
set forth in the Patheon Agreement, which shall be fully applicable to the manufacturing services
provided by Somaxon pursuant to this Agreement.

(d) Somaxon shall have the right to extend the rights granted to Somaxon in this Agreement or
transfer its obligations under this Agreement to, or have its obligations or responsibilities under
this Agreement performed by, one or more of its Affiliates. All applicable
terms and conditions of this Agreement shall apply to any such Affiliate to which this
Agreement has been extended or transferred to the same extent as such terms and conditions apply to
Somaxon, provided that Somaxon shall remain fully liable to Paladin pursuant to this
Agreement despite any such extension or transfer.

 

3

 

(e) Notwithstanding anything herein to the contrary, the Parties agree that Somaxon may
manufacture or have manufactured Licensed Product (i) for sale and distribution outside the
Territory by Somaxon, its Affiliates and/or Third Parties, (ii) for sale and distribution within
the Territory by Somaxon or its Affiliates solely in order to satisfy any Somaxon obligations
pursuant to this Agreement and the License Agreement, or (iii) for any non clinical or clinical
research purpose of Somaxon and its Affiliates or in support of any Regulatory Filings or other
activities outside the Territory.

2.2 Representations and Warranties.

(a) Representations and Warranties of Somaxon. Somaxon warrants that:

(i) All Bulk Product supplied by Somaxon to Paladin hereunder, and the manufacturing,
packaging, processing, storage, disposal and other handling of such Bulk Product by Somaxon
and/or its Subcontractors, as applicable, shall (i) comply in all respects with all of the
Specifications and the Quality Agreement, (ii) be consistent, as applicable, with the
Marketing Approval, and (iii) be manufactured in a manner compliant in all respects with
cGMP and all applicable Law;

(ii) All Bulk Product supplied by Somaxon to Paladin hereunder shall, as of the time
that such Bulk Product is delivered to Paladin pursuant to Section 3.4, have a minimum Shelf
Life (at the time of delivery to the carrier’s vehicle by Somaxon for shipment at the
shipping point pursuant to Section 3.4) of the greater of (A) 32 months, and (B)
four months less than the Shelf Life set forth in the Marketing Approval; provided
that upon the previous written agreement of the Parties (e.g.: e-mail and/or facsimile),
Somaxon may supply Bulk Product to Paladin with Shelf Life lower than that set forth above;

(iii) All Bulk Product supplied by Somaxon to Paladin hereunder shall not, as of the
time that such Bulk Product is delivered to Paladin pursuant to Section 3.4, be adulterated
or misbranded within the meaning set forth under the Act;

(iv) As of the Effective Date, Somaxon and/or its Subcontractors, as applicable, have
all material permits, licenses, approvals, consents and authorities from any Governmental
Bodies as necessary to lawfully and properly perform the manufacturing services contemplated
by this Agreement (the “Permits”);

(v) Throughout the Term, Somaxon and/or its Subcontractors, as applicable, will
maintain all material Permits; and

(vi) Upon transfer of the risk of loss related to Bulk Product, as provided in Section
3.4, good and valid title to such Bulk Product sold hereunder will be conveyed by
Somaxon to Paladin free and clear of any Encumbrances created by Somaxon or its
predecessors.

 

4

 

(b) No Implied Representations or Warranties. OTHER THAN AS EXPRESSLY SET FORTH IN
THIS SECTION 2.2, NEITHER PARTY MAKES OR GIVES ANY OTHER REPRESENTATIONS OR WARRANTIES UNDER OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY WHATSOEVER, AND EXPRESSLY
DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES ARISING
FROM COURSE OF DEALING OR USAGE OF TRADE.

2.3 Production and Final Packaging. Somaxon shall be responsible for producing Bulk
Product in accordance with the Specifications, applicable Law and the Quality Agreement. Paladin
shall be responsible for final packaging of the Licensed Product for sale in the Territory in
accordance with applicable Law, the Quality Agreement and the Product Labels and Inserts.

2.4 Product Labels and Inserts. Paladin shall be responsible for the content, design
and delivery of all Product Labels and Inserts and shall ensure that the Product Labels and Inserts
are consistent with applicable Law and the Marketing Approval. All Product Labels and Inserts
which contain the name of Somaxon or its Affiliates (other than solely identifying Somaxon or its
Affiliates or their Subcontractors as the licensor, manufacturer or supplier of the Licensed
Product) or any Product Mark shall be subject to the prior written approval of Somaxon, not to be
unreasonably withheld.

2.5 Subcontractors. Following the Effective Date, Somaxon shall not implement any
Subcontractor arrangements (other than those that are in effect as of the Effective Date) so as to
subcontract or outsource, in whole or in part, any of its obligations under this Agreement without
providing at least 30 days’ prior written notification to Paladin, unless such event requires
approval of Health Canada or any other Governmental Body the approval of which is required to
Commercialize Licensed Product in the Territory, in which case Paladin will be notified by Somaxon
with sufficient time to receive such approval without a material and adverse impact on timely
supply under this Agreement.

2.6 Limitations. Notwithstanding any other provision of this Agreement, all Bulk
Product is supplied by Somaxon to Paladin hereunder solely and exclusively for sale in accordance
with applicable Law in the Territory.

ARTICLE III

FORECASTING AND ORDERING

3.1 Order Quantities. Paladin shall place Purchase Orders which are multiples of the
Minimum Run Quantities set forth in Schedule 3.1.

 

5

 

3.2 Forecasts.

(a) Rolling Forecasts. Six months prior to the launch date reasonably expected by
Paladin in the Territory and prior to the first day of each Calendar Month thereafter, Paladin
shall provide to Somaxon a good faith rolling forecast setting forth amounts of Bulk Product that
Paladin expects in good faith to order for the first 12 Calendar Months following the expected
launch date with respect to the first such forecast and for the 12-Calendar Month period
following the delivery of the forecast thereafter. The Parties agree that the first four
Calendar Months of such initial forecast and the fourth month of each such subsequent forecast
shall be considered binding on Paladin; provided that Paladin shall have no obligation to
make any purchases of, and Somaxon shall have no obligation to supply, Bulk Product hereunder
until Marketing Approval has been obtained. Bulk Product amounts specified for the fifth through
twelfth Calendar Month of each forecast shall be non-binding estimates of future Bulk Product
requirements. Bulk Products specified in any such forecast shall be understood by the Parties to
be non-film-coated Products.

(b) Three-Year Forecast. On or before the 1st day of October of each
Calendar Year commencing not later than six months prior to the launch date reasonably expected
by Paladin in the Territory, Paladin shall provide Somaxon with a written non-binding
three-Calendar Year forecast (broken down by Calendar Month in the first Calendar Year and by
Calendar Quarters for the second and third Calendar Years of the forecast) of the volume of each
Bulk Product Paladin then anticipates will be required to be produced and delivered to Paladin
during the three-Calendar Year period. Such three-Calendar Year forecast shall be updated on or
before the 1st day of April in each Calendar Year. Bulk Products specified in any such
forecast shall be understood by the Parties to be non-film-coated Products.

(c) Additional Obligation. When preparing any forecast, Paladin shall use
Commercially Reasonable Efforts to apportion its requirements of Bulk Product in a reasonable
manner in order to minimize untoward fluctuation in Somaxon’s or its Subcontractors’ production.

3.3 Orders.

(a) During the Term, Paladin shall place written purchase orders (each a “Purchase Order”) for
Bulk Product on behalf of itself or any of its Affiliates in the Territory, not less than 120 days
prior to the Paladin specified delivery date, in accordance with the applicable binding forecast
mentioned in Section 3.2 above. Each Purchase Order shall specify quantities by Licensed Product
type, monthly delivery schedule, any jurisdiction-specific Specifications and any other elements
necessary to ensure the timely production and shipment of the Licensed Products. The quantities of
Licensed Products ordered in such Purchase Orders shall be firm and binding on Paladin and shall
not be subject to reduction by Paladin.

(b) Within 60 days from the Effective Date, the Parties shall mutually agree upon any
additional logistics of the forecasting, ordering and delivery process (including the form of a
certificate of analysis to be delivered with each Bulk Product shipment) (“Trading Services
Procedure”), including names of contact persons for each Party and addresses. A
sample form of Purchase Order is attached hereto as Exhibit 1. The Trading Services
Procedure cannot be amended without the written agreement of the Parties.

 

6

 

(c) Somaxon will accept all Purchase Orders that comply with this Section 3.3 if they are not
more than 115% of the amount most recently forecasted for the delivery period specified in the
Purchase Order. Purchase Orders will be accepted or rejected via written notice of acceptance or
rejection by Somaxon to Paladin. Somaxon shall use Commercially Reasonable Efforts to send notice
of rejection or acceptance to Paladin as soon as reasonably practicable, provided that such notice
must be given no later than 10 days after receipt of the Purchase Order. In the event Paladin does
not receive a notice of rejection within such period, the applicable Purchase Order shall be deemed
to have been accepted by Somaxon.

(d) Somaxon shall use Commercially Reasonable Efforts to supply Bulk Product pursuant to each
accepted Purchase Order in a timely manner; provided, that each order will be deemed to
have been fully satisfied, as to quantity, if the quantity of Bulk Product actually delivered to
Paladin is at least 90% of the quantity of Bulk Product set forth in the relevant Purchase Order,
and in such event, Paladin shall be required to pay for the amount of conforming Bulk Product
actually received in accordance with Article 5; provided, further, that Somaxon
will use Commercially Reasonable Efforts to supply 100% of the quantity of Bulk Product ordered.
In addition, Somaxon will use Commercially Reasonably Efforts to supply Bulk Product in excess of
100% of the amount most recently forecast for the delivery period specified in the Purchase Order.

(e) From time to time, due to significant unforeseen circumstances, and upon previous written
agreement of the Parties (e.g.: e-mail and/or facsimile), Paladin may request, and Somaxon may
deliver Bulk Product volumes in excess of those specified in any binding forecast or with delivery
dates shorter than the periods specified in subsection (a) above. Prior to such written agreement,
Somaxon shall notify Paladin whether, using Commercially Reasonable Efforts, it can provide Paladin
with such excess Bulk Product volumes or by such expedited delivery date, provided that if
compliance with such request would result in Somaxon incurring additional incremental costs,
Somaxon shall so notify Paladin of such estimated costs, whereupon Paladin shall, at its option
either: (i) agree to reimburse Somaxon for such additional incremental costs (including for any
expedited means of shipping), or (ii) promptly amend its Purchase Order to reduce its order
quantity to the forecast amount or adjust its delivery dates to comply with subsection (a), as
applicable.

(f) Without limitation of any other remedy available to Paladin, in the event that Somaxon has
insufficient inventory of a Bulk Product to satisfy trade demand in the Territory and trade demand
outside of the Territory during any applicable period: (i) Somaxon shall notify Paladin of the
shortage as soon as possible; and (ii) Somaxon shall allocate for sale in the Territory, an amount
of Bulk Product no less than (A) the aggregate amount of such Bulk Product available for
distribution worldwide during such period, multiplied by (B) the quotient of (x) the aggregate
trade demand for the Territory during the 12 months (or, if there is less than 12 months of
historical data, such shorter period) immediately preceding such period, divided by (y) the
aggregate amount of Bulk Product purchased by all customers worldwide during the 12 months (or such
shorter period) immediately preceding such period.

 

7

 

3.4 Shipment. Bulk Product to be delivered pursuant to the accepted Purchase Orders
shall be delivered CPT (Incoterms 2000) port of entry into Canada. All Bulk Product shall be
shipped in accordance with the Specifications and applicable Law. Risk of loss or of damage to Bulk
Products shall remain with Somaxon until Bulk Products are loaded on the carrier’s vehicle by
Somaxon for shipment at the shipping point at which time risk of loss or damage shall transfer to
the Client. Paladin shall be responsible for all import/export, transportation and distribution
charges from this delivery site. Paladin shall arrange for insurance and shall select the freight
carrier used by Somaxon to ship Bulk Products. Somaxon shall notify Paladin in writing at the time
of shipment as to the quantity of Bulk Product shipped, the anticipated delivery date and
confirmation of the carrier.

3.5 Late Delivery.

(a) Somaxon shall use Commercially Reasonable Efforts to meet the delivery dates and order
quantities indicated in the Purchase Orders accepted pursuant to Section 3.3. If any circumstances
occur that could reasonably be expected to result in any delivery delay or variation in quantity
exceeding that set forth in Section 3.3(c), Somaxon shall, as soon as reasonably practicable,
inform Paladin thereof in sufficient detail for Paladin to assess the likelihood that such delivery
delay or variation in quantity will adversely affect its inventory situation. Any shipment
delivered that is within 10% of the quantity ordered and/or 20 Business Days of the delivery date
specified on the relevant accepted Purchase Order will be considered as delivered on time.

(b) In the event that Somaxon is unable or otherwise fails to deliver Bulk Product pursuant to
the applicable Purchase Order on time (as provided in the last sentence of subsection (a) of this
Section 3.5), Somaxon shall be deemed to have committed a “Purchase Order Failure”. In the event
of a Purchase Order Failure, Somaxon shall, as soon as reasonably possible (and in any event not
later than 25 Business Days from the stated delivery date in the confirmed Purchase Order), notify
Paladin in writing of such Purchase Order Failure, which notice (a “Purchase Order Failure Notice”)
shall inform Paladin of the date on which Somaxon reasonably expects to be able to deliver Bulk
Product subject to the Purchase Order Failure Notice (the “Purchase Order Default Supplies”) to
Paladin. Somaxon shall use Commercially Reasonable Efforts to deliver the delayed Purchase Order
Default Supplies promptly after the date of the Purchase Order Failure. Where and to the extent
that any Purchase Order Failure is due to any Non-Conformity, and regardless of whether such
Non-Conformity is detected by Somaxon prior to release or shipment of the applicable Bulk Product
or by Paladin following delivery in accordance with the rejection procedure set forth in Section
4.2, following a determination of such Non-Conformity Somaxon shall be required to manufacture and
deliver new Bulk Product to Paladin in accordance with Paladin’s ordered requirements as soon as
reasonably practicable (and in any event shall commence manufacture not later than 40 days after
such final determination). Paladin shall have a duty to use Commercially Reasonable Efforts to
mitigate any damages which it may suffer as a result of any Purchase Order Failure.

 

8

 

3.6 Inability to Supply.

(a) In the event of any inability to supply the Bulk Product (including an Inability to
Supply), the Parties agree to act in good faith and make all Commercially
Reasonable Efforts to find a solution to the inability to supply. Somaxon will use its
Commercially Reasonable Efforts to facilitate direct communication with its Third Party contract
manufacturer, including facilitating a direct contractual relationship between such Third Party
contract manufacturer and Paladin.

(b) Following an Inability to Supply, Paladin shall have the right (but not the obligation) on
ten Business Days notice to terminate this Agreement.

(c) Without limiting Section 3.6(a) above, at any time following a request made by Paladin,
Somaxon will use its Commercially Reasonable Efforts to facilitate direct communication with its
Third Party contract manufacturer, including facilitating a direct contractual relationship between
such Third Party contract manufacturer and Paladin.

3.7 Forms. The Parties recognize that, during the Term, a Purchase Order,
acknowledgement form or similar routine document (collectively “Forms”) may be used to implement or
administer provisions of this Agreement. Therefore, the Parties agree that the terms of this
Agreement will prevail in the event of any conflict between this Agreement and the printed
provision of such Forms, or typed provisions of Forms that add to, vary, modify or are at conflict
with the provisions of this Agreement with respect to Bulk Product sold hereunder during the Term.

3.8 Relationship Manager. Each Party shall promptly following the execution of this
Agreement appoint one of its employees to be a relationship manager responsible for liaison between
the Parties with respect to Manufacture of Bulk Product hereunder. The relationship managers shall
meet by teleconference or videoconference whenever necessary and appropriate to review the current
status of the Manufacture relationship and manage any issues that have arisen.

ARTICLE IV

QUALITY ASSURANCE AND CHANGE MANAGEMENT 

4.1 Quality Agreement. Within 180 days after the Effective Date, the Parties shall
execute a Quality Agreement in connection with this Agreement (the “Quality Agreement”) which
addresses the management of the quality elements related to Bulk Product. In the event of any
conflict between the terms of this Agreement and the Quality Agreement, this Agreement shall
prevail.

4.2 Rejected Bulk Product. Paladin shall use Commercially Reasonable Efforts to
visually inspect each shipment of Bulk Product delivered to it hereunder for visible damage. In the
event Somaxon supplies any Bulk Product to Paladin and it is established that such Bulk Product is
Non-Conforming, the following shall apply:

(a) Paladin shall promptly notify Somaxon in writing within 20 days after receipt of such
Non-Conforming Bulk Product, or in the case of any concealed or latent Non-Conformity, promptly in
writing within 20 days upon discovery of such Non-Conformity but in no event after the expiration
date of the Bulk Product (the “Rejected Bulk Product”);

 

9

 

(b) If no notification is made as stated in subsection (a) above, Paladin will be deemed to
have accepted any delivered Bulk Product;

(c) Upon receipt of a notification under subsection (i) above (“Deficiency Notice”), Somaxon
shall have 15 days to advise Paladin by notice in writing that it disagrees with the contents of
such Deficiency Notice. If Paladin and Somaxon fail to agree within 15 days after Somaxon’s notice
to Paladin as to whether any Rejected Bulk Product deviates from the Specifications or cGMP, then
the Parties shall mutually select an independent laboratory within five days of the Parties’
failure to agree, which independent laboratory shall evaluate if the Rejected Bulk Products deviate
from the Specifications or cGMP. The Parties shall cause the independent laboratory to conduct its
evaluation as promptly as practicable, and in any event within 20 days from the date of selection
of the laboratory. Such evaluation shall be binding on the Parties, and if such evaluation
certifies that any Rejected Bulk Product is Non-Conforming, Paladin may reject those Non-Conforming
Bulk Products in the manner contemplated in this Section 4.2. If such evaluation does not so
certify in respect of any such Rejected Bulk Product, then Paladin shall be deemed to have accepted
delivery of such Rejected Bulk Product on the date the evaluation is delivered by the independent
laboratory to the Parties. The expenses of such testing shall be borne by Somaxon if the Rejected
Bulk Product is determined to be Non-Conforming Bulk Product, and otherwise by Paladin

(d) Paladin shall return the Non-Conforming Bulk Product to Somaxon or destroy it, as per
Somaxon’ written request and instructions and at Somaxon’ sole cost and expense;

(e) Subject to subsection (f) below, provided that Paladin returns or destroys Rejected Bulk
Product to Somaxon in accordance with subsection (d) and, upon Somaxon’s written request, delivers
to Somaxon a certified destruction report of the Non-Conforming Bulk Product (if applicable),
Somaxon shall promptly credit Paladin an amount equal to the price paid by Paladin for such
Non-Conforming Bulk Product, including all freight, duties, taxes and insurance charges incurred by
Paladin in connection with the delivery of the Non-Conforming Bulk Product; and

(f) In the event that any concealed or latent defect causing the Non-Conformity is
attributable to the actions, omissions or breach of this Agreement by Paladin, Somaxon shall not
have any responsibility for the purchase price credit for such Non-Conforming Bulk Product nor bear
any other costs, including freight, duties, taxes and insurance charges in connection with the
delivery of new conforming Bulk Product, and Paladin shall, irrespective of such latent defect or
Non-Conformity, pay the price for such Bulk Product supplied by Somaxon which is covered by this
subsection (f).

 

10

 

4.3 Change Management.

(a) For changes that are required by applicable Law including any requirement of Health Canada
or other Governmental Body, or for safety considerations exclusively applicable to the Manufacture
of the Bulk Product (“Required Changes”), the Parties shall promptly meet to discuss such Required
Changes and the impact of any such Required Changes on the global supply chain for the Licensed
Product (the “Global Supply
Chain”). In the event that the Required Change would reasonably be expected to have a
material adverse effect on the Global Supply Chain, Somaxon shall have the right to terminate this
Agreement pursuant to Section 6.2. In all other circumstances, subject to the Patheon Agreement,
the Parties shall cooperate in making such Required Changes promptly. If the Required Change is
required only for the Bulk Product in the Territory, the reasonable and documented out-of-pocket
direct costs of implementing such Required Change shall be borne by Paladin. If the Required
Change is required for the Bulk Product both in and outside the Territory, then the costs and
expenses are to be shared pro-rata between Somaxon and Paladin based on the then-binding volume
forecasts for Licensed Product outside the Territory as compared to within the Territory. In all
other cases, the costs and expenses of Required Changes shall be borne by Somaxon.

(b) If Somaxon wishes to make a change that is not a Required Change (a “Discretionary
Change”), including a change related to any manufacturing facility where the Bulk Product (or any
of its components) is currently manufactured, the Parties shall discuss such Discretionary Change
and, unless Paladin can demonstrate that the Discretionary Change will have a material adverse
impact on the Licensed Product in the Territory (including as to Paladin’s financial returns in
Commercializing same), Somaxon shall be entitled to make such Discretionary Change and shall bear
all the reasonable and documented out-of-pocket direct costs of implementing such Discretionary
Change. Any Discretionary Changes desired by Paladin shall be discussed by the Parties and subject
to the prior written consent of Somaxon, which may be withheld in its sole discretion.

(c) In the case of either a Required Change or a Discretionary Change, Somaxon will continue
to supply the Licensed Product to Paladin according to the Specifications as are then in place
until the variations contemplated by the Required Change or the Discretionary Change are approved
pursuant to an applicable Marketing Approvals.

4.4 Inspections. Upon reasonable notice to Somaxon and subject at all times to the
Somaxon agreement with the applicable Subcontractor, including, without limitation, the Patheon
Agreement, Paladin shall have the right to make site visits to all manufacturing facilities at
which Bulk Product is or will be Manufactured, provided that (a) any such site visits shall be
conducted only during reasonable times during normal business hours and shall be reasonable in
duration and shall not unreasonably interfere with the day-to-day operations of such facility; and
(b) all information obtained in connection with such visit (regardless of the form or medium) shall
be Somaxon’s Confidential Information and subject to obligations of confidentiality set forth in
Section 8.1. Paladin shall bear all costs and expenses associated with such inspections.

4.5 Recalls.

(a) Paladin shall administer all recalls or market withdrawals of the Licensed Product in the
Territory (“Recall”) in accordance with applicable Laws and Paladin’s standard operating procedures
used in connection with any recalls or withdrawals of Paladin products in the Territory. Paladin
shall promptly consult with Somaxon with respect to any Recall proposed to be taken by Paladin (and
in all events reasonably in advance of the taking of such Recall), including all Recalls that are
reasonably likely to result in a material adverse effect on the
marketability of the Licensed Product in or outside the Territory. At Paladin’s request,
Somaxon shall provide reasonable assistance to Paladin in conducting such Recall.

 

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(b) Each Party shall promptly notify the other in writing of any order, request or directive
of a court or other Governmental Body to Recall the Licensed Product of which such Party has notice
of or is otherwise aware (but in any case, not later than 24 hours following such event (or earlier
if required under applicable Law)).

(c) Somaxon shall bear the full and reasonable expenses of both Parties incurred in any Recall
to the extent resulting from a failure of Somaxon (or its Subcontractors) to Manufacture Bulk
Product in accordance with the warranties set forth in Section 2.2(a) (the “Somaxon Manufacturing
Responsibilities”), and in all other circumstances Paladin shall bear the full and reasonable
expenses of both Parties incurred in any Recall. If any Recall results in part from the failure of
Somaxon (or its Subcontractor(s)) to Manufacture Bulk Product in accordance with Somaxon
Manufacturing Responsibilities, Somaxon shall bear a pro rata portion of the full and reasonably
expenses of both Parties incurred in any Recall based on its contribution to the particular facts
of the Recall. Such expenses of Recall shall include the expenses of notification and destruction
or return of the recalled Licensed Product, distribution of replacement Licensed Product and all
sums paid by Third Parties for the recalled Licensed Product. Without limiting the foregoing, to
the extent any Recall is caused by the failure of Somaxon (or Subcontractor) to Manufacture Bulk
Product in accordance with the Somaxon Manufacturing Responsibilities, Somaxon shall further
reimburse Paladin for any and all transportation and storage charges incurred by Paladin in
connection with such recalled Licensed Product.

ARTICLE V

PRICE AND PAYMENT

5.1 Purchase Price. The purchase price for Bulk Product supplied by Somaxon to
Paladin under this Agreement is set forth in Section 5.2 of the License Agreement and shall be
incorporated by reference herein.

5.2 Invoicing and Payment. Invoicing and payment for Bulk Product supplied by Somaxon
to Paladin under this Agreement is set forth in Section 5.2.2 of the License Agreement and shall be
incorporated by reference herein.

5.3 Audit rights. Somaxon shall have the right to audit the books and records of
Paladin to verify the accuracy of reports and payments made by Paladin hereunder solely in
conjunction with any audit conducted by Somaxon pursuant to the License Agreement, and solely
subject to and in accordance with the applicable terms set forth in the License Agreement which
shall be incorporated by reference herein.

ARTICLE VI

TERM AND TERMINATION

6.1 Term. This Agreement shall become effective as of the Effective Date and shall
continue until the date of expiration or termination of the License Agreement unless sooner
terminated by pursuant to this Article VI.

 

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6.2 Termination.

(a) Somaxon may terminate this Agreement in the event that a Required Change would reasonably
be expected to have a material adverse effect on the Global Supply Chain, upon 180 days’ prior
written notice to Paladin; provided that following delivery of such written notice to
Paladin, Paladin shall not submit any Purchase Orders or otherwise require Somaxon to abide by any
Required Change with respect to Bulk Product delivered thereafter. Upon termination of this
Agreement pursuant to this Section 6.2(a), the License Agreement shall not terminate.

(b) Somaxon may terminate this Agreement at any time after April 30, 2013, upon not less than
six months’ prior written notice to Paladin. For clarity, upon termination of this Agreement
pursuant to this Section 6.2(b), the License Agreement shall not terminate.

(c) Paladin may terminate this Agreement (i) following an Inability to Supply or (ii) in the
event that it enters into a direct contract with Somaxon’s Third Party contract manufacturer for
supply of the Bulk Product. For clarity, upon termination of this Agreement pursuant to this
Section 6.2(c), the License Agreement shall not terminate.

6.3 Effect of Expiration and Termination.

(a) Where this Agreement is terminated (i) due to the termination of the License Agreement for
any reason other than termination by Paladin pursuant to Section 6.2(c)(i) or (ii) pursuant to
Section 6.2(a), Somaxon will be entitled, at its option, to fill or cancel any Purchase Orders that
were submitted by Paladin or its Affiliates prior to such termination. If Somaxon elects to fill
any such Purchase Orders, Somaxon shall use Commercially Reasonable Efforts to fill any such
Purchase Orders. If Somaxon elects not to fill any such Purchase Orders, Paladin shall reimburse
Somaxon for the costs (including raw material costs) incurred in connection with Purchase Orders
that Somaxon had started to manufacture prior to the expiration or termination of this Agreement
and that are canceled by Somaxon pursuant to this Section 6.3(a).

(b) Where this Agreement is terminated due to the termination of the License Agreement by
Paladin pursuant to Section 6.2(c)(i), Somaxon will be entitled, at its option, to fill or cancel
any Purchase Orders that were submitted by Paladin or its Affiliates prior to such termination;
provided that if Somaxon elects not to fill any such Purchase Orders, Somaxon shall be
liable for the costs (including raw material costs) incurred in connection with Purchase Orders
that Somaxon had started to manufacture prior to the expiration or termination of this Agreement
and that are canceled by Somaxon pursuant to this Section 6.3(b).

(c) Where this Agreement is terminated due to the termination of the License Agreement by
Somaxon pursuant to Section 6.2(a), Somaxon will fill any Purchase Orders that were submitted by
Paladin or its Affiliates prior to such termination and have a delivery date that occurs prior to
the effective date of termination (and are otherwise in compliance with the requirements of this
Agreement).

 

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(d) Where this Agreement is terminated pursuant to Section 6.2(b) or Section 6.2(c)(ii),
within 180 days of delivery of the termination notice, Somaxon shall provide to
Paladin, at Somaxon’s cost and expense, a copy of all items of Somaxon Know-How reasonably
necessary to permit Paladin to continue to Manufacture Bulk Product so long as such items are
reasonably accessible to Somaxon.

(e) Termination of this Agreement shall not relieve the Parties of any liability that accrued
hereunder prior to the effective date of termination hereunder. In addition, termination of this
Agreement shall not preclude either Party from pursuing all rights and remedies it may have
hereunder or at Law or in equity with respect to any breach of this Agreement nor prejudice either
Party’s right to obtain performance of any obligation.

(f) The following Articles and Sections of this Agreement shall survive the expiration or
termination of this Agreement for any reason: this Section 6.3, Section 4.5, Articles VII, VIII
and IX and ARTICLE I to the extent that any defined terms in ARTICLE 1 are used in the foregoing
Sections and Articles.

ARTICLE VII

INDEMNIFICATION; INSURANCE

7.1 Indemnification by Paladin. Paladin shall indemnify, defend and hold each Somaxon
Indemnitee harmless from and against any and all Losses arising out of any Third Party claim, suit
or proceeding arising out of or related to: (a) the negligence, reckless or wilful misconduct of
any Paladin Indemnitee in performing Paladin’s obligations under this Agreement; (b) any breach or
violation by any Paladin Indemnitee of, or failure to perform by any Paladin Indemnitee of, any
representation, warranty, covenant, or other obligation in this Agreement, unless waived in writing
by Somaxon; (c) any violation of applicable Law by any Paladin Indemnitee in connection with
performing its obligations under this Agreement; and (d) any claim or liability arising from
Paladin’s exploitation of the licenses granted under the License Agreement; excluding, in each
case, any Loss for which Somaxon has an obligation to indemnify an Paladin Indemnitee pursuant to
Section 7.2 or pursuant to the License Agreement, as to which Loss each Party shall indemnify the
other to the extent of their respective liability for such Loss.

7.2 Indemnification by Somaxon. Somaxon shall indemnify, defend and hold each Paladin
Indemnitee harmless from and against any and all Losses arising out of any Third Party claim, suit
or proceeding arising out of or related to: (a) the negligence, reckless or wilful misconduct of
any Somaxon Indemnitee in performing Somaxon’s obligations under this Agreement; (b) any breach or
violation by any Somaxon Indemnitee of, or failure to perform by any Somaxon Indemnitee of, any
representation, warranty, covenant, or other obligation in this Agreement, unless waived in writing
by Paladin; (c) any violation of applicable Law by any Somaxon Indemnitee in connection with
performing its obligations under this Agreement; (d) Non-Conformity of Bulk Product supplied by
Somaxon under this Agreement; (e) any liability arising from Somaxon’ agreements with its
Subcontractor(s); and (f) any claim that any intellectual property utilized in the Manufacturing
(including any Manufacturing Know-How) by Somaxon, its Affiliates and/or its Subcontractors (but
excluding any Know-How or other intellectual property rights owned or Controlled by Paladin or its
Affiliates which is utilized in connection with the Product Labels and Inserts or Promotional
Materials) infringes upon or misappropriates the intellectual property or proprietary rights of any
Third Party; excluding, in
each case, any Loss for which Paladin has an obligation to indemnify a Somaxon Indemnitee
pursuant to Section 7.1 or pursuant to the License Agreement, as to which Loss each Party shall
indemnify the other to the extent of their respective liability for such Loss.

 

14

 

7.3 Notification of Claims; Conditions to Indemnification Obligations. The procedures
that apply to a claim for indemnification pursuant to this Article 7 are set forth in Section 12.4
of the License Agreement (substituting references to “Article 12” therein with “Article 7”) and
shall be incorporated by reference herein.

7.4 No Consequential Damages. IN NO EVENT SHALL EITHER PARTY OR ANY OF ITS
AFFILIATES, EMPLOYEES, OFFICERS, DIRECTORS OR AGENTS BE LIABLE TO THE OTHER PARTY OR ANY OF ITS
AFFILIATES, EMPLOYEES, OFFICERS, DIRECTORS OR AGENTS FOR SPECIAL, INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUPPLY AGREEMENT, EVEN
IF SUCH DAMAGES MAY HAVE BEEN FORESEEABLE; PROVIDED THAT SUCH LIMITATION SHALL NOT APPLY (A) IN THE
CASE OF EITHER PARTY’S INDEMNIFICATION OBLIGATIONS UNDER ARTICLE VII OF THIS AGREEMENT OR ARTICLE
12 OF THE LICENSE AGREEMENT OR (B) IF DAMAGES ARISE OUT OF OR RELATE TO A BREACH BY EITHER PARTY OF
ITS CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE VIII OF THIS AGREEMENT.

7.5 Insurance. The terms and provisions of Section 12.5 of the License Agreement
shall be incorporated by reference herein.

ARTICLE VIII

CONFIDENTIALITY; DISPUTE RESOLUTION

8.1 Confidentiality. Each Party hereto acknowledges that the information being
provided to it in connection with this Agreement and transactions contemplated hereby is subject to
Section 9 (Confidentiality) of the License Agreement, the terms of which are incorporated herein by
reference.

8.2 Dispute Resolution. The terms and provisions of Article 14 of the License
Agreement shall be incorporated by reference herein.

ARTICLE IX

MISCELLANEOUS

The terms and provisions of Article 15 of the License Agreement shall be incorporated by
reference herein.

[Remainder of this page intentionally left blank; signature page follows]

 

15

 

[Signature Page to Supply Agreement]

IN WITNESS WHEREOF, the Parties have caused this Supply Agreement to be executed and delivered by
their respective duly authorized officers as of the day and year first above written, each copy of
which shall for all purposes be deemed to be an original.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SOMAXON PHARMACEUTICALS, INC.	 	 	 	PALADIN LABS INC.
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Richard W. Pascoe	 	 	 	By:	 	/s/ Mark Nawacki	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Name:	 	Richard W. Pascoe	 	 	 	 	 	Name:	 	Mark Nawacki	 	 
	 
	 	Title:	 	President and Chief Executive Officer	 	 	 	 	 	Title:	 	VP of Business & Corporate Development	 	 

 

16

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