Document:

Exhibit 10.3

Exhibit 10.3

EXECUTION COPY

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Security Agreement”), is entered into as of February
11, 2011, among Impax Laboratories, Inc., a Delaware corporation (the “Borrower”), each of
the Domestic Subsidiaries of the Borrower from time to time party hereto (individually a
“Guarantor” and collectively the “Guarantors”; the Guarantors, together with the
Borrower, individually an “Obligor” and collectively the “Obligors”) and WELLS
FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Administrative Agent under the Credit
Agreement referred to below (in such capacity, the “Administrative Agent”) for the several
banks and other financial institutions as may from time to time become parties to such Credit
Agreement (individually a “Lender” and collectively the “Lenders”).

RECITALS

WHEREAS, pursuant to that certain Credit Agreement dated as of the date hereof (as amended,
modified, extended, restated, replaced, or supplemented from time to time, the “Credit
Agreement”), among the Borrower, the Guarantors, the Lenders party thereto and the
Administrative Agent, the Lenders have agreed to make Loans and to issue and/or acquire
participation interests in Letters of Credit upon the terms and subject to the conditions set forth
therein; and

WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement and the
obligations of the Lenders to make their respective Loans and to issue and/or acquire participation
interests in Letters of Credit under the Credit Agreement that the Obligors shall have executed and
delivered this Security Agreement to the Administrative Agent for the ratable benefit of the
Lenders and the other Secured Parties.

NOW, THEREFORE, in consideration of these premises and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Definitions.

(a) Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to such terms in the Credit Agreement, and the following terms which are
defined in the Uniform Commercial Code from time to time in effect in the State of New York
(the “UCC”) are used herein as so defined: Accession, Account, As-Extracted
Collateral, Chattel Paper, Commercial Tort Claim, Consumer Good, Deposit Account, Document,
Electronic Chattel Paper, Equipment, Farm Product, Fixture, General Intangible, Good,
Instrument, Inventory, Investment Property, Letter-of-Credit Right, Manufactured Home,
Payment Intangible, Proceeds, Securities Account, Securities Intermediary, Software,
Supporting Obligation and Tangible Chattel Paper.

 

 

 

(b) In addition, the following term shall have the following meaning:

“Excluded Property” means (i) Equity Interests of any Foreign Subsidiary owned directly
by any Credit Party in excess of sixty-five percent (65%) of such Equity Interests and one
hundred percent (100%) of the Equity Interests of any Foreign Subsidiary not owned directly
by any Obligor to the extent the inclusion of such Equity Interests would cause any amount
to be includable in the taxable income of any Obligor under Section 951 of the Internal
Revenue Code, (ii) all real property interests, (iii) any property to the extent that such
grant of a security interest is prohibited by any Requirements of Law of a Governmental
Authority, requires a consent not obtained of any Governmental Authority pursuant to such
Requirement of Law, except to the extent that such Requirement of Law providing for such
prohibition, breach, default or termination or requiring such consent is ineffective under
applicable law (including, without limitation, Sections 9-406, 9- 407, 9-408 or 9-409 of the
UCC (or any successor provision or provisions) of any relevant jurisdiction or any other
applicable law or principles of equity); provided, that for purposes of the
foregoing, it is understood and agreed that, to the extent reasonably requested by the
Administrative Agent, the applicable Obligor will use its commercially reasonable efforts to
obtain a consent if permissible by the applicable Requirement of Law, (iv) any lease,
license or other agreement to the extent the grant of a security interest therein would
result in an invalidation thereof or constitute a breach or violation of such agreement
(other than any non-assignment of payment intangibles provisions that is unenforceable under
the UCC) or to the extent that such security interests would result in adverse tax or
accounting consequences, as reasonably determined by the Borrower; provided, that
for purposes of the foregoing, it is understood and agreed that, to the extent reasonably
requested by the Administrative Agent, the applicable Obligor will use its reasonable
efforts to obtain any necessary consents to permit the grant of a security interest
hereunder if permissible by the applicable lease, license or other agreement, (v) any
property subject to a Permitted Lien (other than Liens in favor of the Administrative Agent)
to the extent that the grant of a Lien to the Administrative Agent hereunder on such asset
(A) would result in a breach or violation of, or constitute a default under, the agreement
or instrument governing such Permitted Lien, (B) would result in the loss of use of such
asset, (C) would permit the holder of such Permitted Lien to terminate such Obligor’s use of
such asset or (D) would otherwise result in a loss of rights of such Obligor in such asset,
provided however that the Collateral shall include and such security interest shall attach
immediately at such time as the condition causing such breach, violation, loss of use,
termination or loss of rights shall be remedied and to the extent severable, shall attach
immediately to any portion of such asset that does not result in any of the consequences
specified in (A), (B), (C) or (D) above, (vi) Accounts, Instruments, Chattel Paper or other
obligation or property of any kind due from, owed by, or belonging to, a Sanctioned Person
or Sanctioned Entity, or (vii) any lease in which the lessee is a Sanctioned Person or
Sanctioned Entity shall be Collateral.

 

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2. Grant of Security Interest in the Collateral.

(a) To secure the prompt payment and performance in full when due, whether by lapse of
time, acceleration, mandatory prepayment or otherwise, of the Credit Party Obligations, each
Obligor hereby grants to the Administrative Agent, for the ratable
benefit of the Secured Parties, a continuing security interest in, and a right to set
off against, any and all right, title and interest of such Obligor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter (collectively, the
“Collateral”):

(i) all Accounts;

(ii) all cash and Cash Equivalents;

(iii) all Chattel Paper (including Electronic Chattel Paper);

(iv) all Commercial Tort Claims as set forth on Schedule 3.16(d) to the
Credit Agreement (as updated from time to time in accordance with the Credit
Agreement);

(v) all Copyright Licenses;

(vi) all Copyrights;

(vii) all Deposit Accounts;

(viii) all Documents;

(ix) all Equipment;

(x) all Fixtures;

(xi) all General Intangibles;

(xii) all Goods;

(xiii) all Instruments;

(xiv) all Inventory;

(xv) all Investment Property;

(xvi) all Letter-of-Credit Rights;

(xvii) all Material Contracts and all such other agreements, contracts, leases,
licenses, tax sharing agreements or hedging arrangements now or hereafter entered
into by an Obligor, as such agreements may be amended or otherwise modified from
time to time (collectively, the “Assigned Agreements”), including without
limitation, (A) all rights of an Obligor to receive moneys due and to become due
under or pursuant to the Assigned Agreements, (B) all rights of an Obligor to
receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Assigned Agreements, (C) claims of an Obligor for damages
arising out of or for breach of or default under the Assigned Agreements and (D) the
right of an Obligor to terminate the Assigned Agreements, to perform thereunder and
to compel performance and otherwise exercise all remedies thereunder;

 

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(xviii) all Patent Licenses;

(xix) all Patents;

(xx) all Payment Intangibles;

(xxi) all Securities Accounts;

(xxii) all Software;

(xxiii) all Supporting Obligations;

(xxiv) all Trademark Licenses;

(xxv) all Trademarks;

(xxvi) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks, and related data processing software (owned by such Obligor
or in which it has an interest) that at any time evidence or contain information
relating to any Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon;

(xxvii) all other personal property of any kind or type whatsoever owned by
such Obligor; and

(xxviii) to the extent not otherwise included, all Accessions, Proceeds and
products of any and all of the foregoing.

Notwithstanding the foregoing, the Collateral shall not include the Excluded Property.

(b) The Obligors and the Administrative Agent, on behalf of the Secured Parties, hereby
acknowledge and agree that the security interest created hereby in the Collateral (i)
constitutes continuing collateral security for all of the Credit Party Obligations, whether
now existing or hereafter arising and (ii) is not to be construed as a present assignment of
any Intellectual Property.

(c) The term “Collateral” shall include any Bank Products and any rights of the
Obligors thereunder only for purposes of this Section 2.

 

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3. Provisions Relating to Accounts, Contracts and Agreements.

(a) Anything herein to the contrary notwithstanding, each of the Obligors shall remain
liable under each of its Accounts, contracts and agreements to observe and perform all of
the conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each such Account or the terms of
such contract or agreement. Neither the Administrative Agent nor any Secured Party shall
have any obligation or liability under any Account (or any agreement giving rise thereto),
contract or agreement by reason of or arising out of this Security Agreement or the receipt
by the Administrative Agent or any Secured Party of any payment relating to such Account,
contract or agreement pursuant hereto, nor shall the Administrative Agent or any Secured
Party be obligated in any manner to perform any of the obligations of an Obligor under or
pursuant to any Account (or any agreement giving rise thereto), contract or agreement, to
make any payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party under any Account
(or any agreement giving rise thereto), contract or agreement, to present or file any claim,
to take any action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or times.

(b) The Administrative Agent hereby authorizes the Obligors to collect the Accounts;
provided, that the Administrative Agent may curtail or terminate such authority at
any time after the occurrence and during the continuance of an Event of Default. If
required by the Administrative Agent at any time after the occurrence and during the
continuation of an Event of Default, any payments of Accounts, when collected by the
Obligors (i) shall be forthwith (and in any event within two (2) Business Days) deposited by
the Obligors in a collateral account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the account of
the Secured Parties only as provided in Section 12 hereof, and (ii) until so turned over,
shall be held by the Obligors in trust for the Administrative Agent and the Secured Parties,
segregated from other funds of the Obligors.

(c) At any time and from time to time, the Administrative Agent shall have the right,
but not the obligation, to make test verifications of the Accounts in any manner and through
any medium that it reasonably considers advisable, and the Obligors shall use commercially
reasonable efforts to furnish all such assistance and information as the Administrative
Agent may reasonably require in connection with such test verifications. Upon the
Administrative Agent’s reasonable request and at the expense of the Obligors, the Obligors
shall cause independent public accountants or others satisfactory to the Administrative
Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Accounts. The Administrative Agent in its own
name or in the name of others may communicate with account debtors on the Accounts to verify
with them to the Administrative Agent’s satisfaction the existence, amount and terms of any
Accounts.

 

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4. Representations and Warranties. Each Obligor hereby represents and warrants to the
Administrative Agent, for the benefit of the Secured Parties, that so long as any of the Credit
Party Obligations (other than contingent indemnity obligations that survive termination of the
Credit Documents pursuant to the stated terms thereof) remain outstanding or any Credit Document is
in effect, and until all of the Commitments shall have been terminated:

(a) Chief Executive Office; Books & Records; Legal Name; State of Formation.
No Obligor has in the four (4) months preceding the Closing Date changed its name, been
party to a merger, consolidation or other change in structure or used any tradename not
disclosed on Schedule 4(a) attached hereto (as updated from time to time).

(b) Location of Tangible Collateral. As of the Closing Date, the location of
all tangible Collateral owned by each Obligor is as shown on Schedule 3.16(f)(i) to
the Credit Agreement.

(c) Ownership. Each Obligor is the legal and beneficial owner of its
Collateral and, subject to Section 2(e), has the right to pledge, sell, assign or transfer
the same.

(d) Security Interest/Priority. This Security Agreement creates a valid
security interest in favor of the Administrative Agent, for the benefit of the Secured
Parties, in the Collateral of such Obligor and, when properly perfected by filing, obtaining
possession, the granting of control to the Administrative Agent or otherwise, shall
constitute a valid first priority, perfected security interest in such Collateral, to the
extent such security interest can be perfected by (i) filing, obtaining possession, the
granting of control or otherwise under the UCC, (ii) by filing an appropriate notice with
the United States Patent and Trademark Office or the United States Copyright Office, or
(iii) such other action as may be required pursuant to any applicable jurisdictions’
certificate of title statute, free and clear of all Liens except for Permitted Liens.

(e) Consents. Except for (i) the filing or recording of UCC financing
statements, (ii) the filing of appropriate notices with the United States Patent and
Trademark Office, the United States Copyright Office and the Canadian Intellectual Property
Office, (iii) obtaining control to perfect the Liens created by this Security Agreement,
(iv) compliance with the Federal Assignment of Claims Act or comparable state law, and/or
(v) the filing, registration or other action required pursuant to any applicable certificate
of title statute, no consent or authorization of, filing with, or other act by or in respect
of, any arbitrator or Governmental Authority and no consent of any stockholder, member or
creditor of such Obligor is required (A) for the grant by such Obligor of the security
interest in the Collateral granted hereby or for the execution, delivery or performance of
this Security Agreement by such Obligor or (B) for the perfection of such security interest
or the exercise by the Administrative Agent of the rights and remedies provided for in this
Security Agreement.

 

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(f) Types of Collateral. None of the Collateral consists of, or is the
Proceeds of, As-Extracted Collateral, Consumer Goods, Farm Products, Manufactured Homes or
standing timber (as such term is used in the UCC).

(g) Accounts. With respect to the Accounts of the Obligors: (i) the goods
sold and/or services furnished giving rise to each Account are not subject to any security
interest or Lien except the first priority, perfected security interest granted to the
Administrative Agent herein and except for Permitted Liens; (ii) each Account and the papers
and documents of the applicable Obligor relating thereto are genuine and in all material
respects what they purport to be; (iii) each Account arises out of a bona fide transaction
for goods sold and delivered (or in the process of being delivered) by an Obligor or for
services actually rendered by an Obligor, which transaction was conducted in the ordinary
course of the Obligor’s business and was completed in accordance with the terms of any
documents pertaining thereto; (iv) no Account of an Obligor is evidenced by any Instrument
or Chattel Paper unless such Instrument or Chattel Paper has been theretofore endorsed over
and delivered to, or submitted to the control of, the Administrative Agent; (v) the amount
of each Account as shown on the applicable Obligor’s books and records, and on all invoices
and statements which may be delivered to the Administrative Agent with respect thereto, is
due and payable to the applicable Obligor and is not in any way contingent; (vi) to each of
the Obligor’s knowledge, the account debtor with respect to each Account has the capacity to
contract; (vii) no surety bond was required or given in connection with any Account of an
Obligor or the contracts or purchase orders out of which they arose; (viii) no Account is
evidenced by a judgment, there are no set-offs, counterclaims or disputes existing or
asserted with respect to any material Account, and no Obligor has made any agreement with
any account debtor for any deduction from any Account except for deductions made in the
ordinary course of its business; (ix) there are no facts, events or occurrences which in any
material respect impair the validity or enforcement of any Account or tend to materially
reduce the amount payable thereunder as shown on the applicable Obligor’s books and records;
and (x) the right to receive payment under each Account is assignable except where the
account debtor with respect to such Account is a Governmental Authority, to the extent
assignment of any such right to payment is prohibited or limited by applicable law,
regulations, administrative guidelines or contract.

(h) Inventory. No Inventory of an Obligor is held by a third party (other than
an Obligor) pursuant to consignment, sale or return, sale on approval or similar
arrangement.

(i) Intellectual Property.

(i) Each of the Obligors and its Subsidiaries owns, or has the legal right to
use, all Intellectual Property, tradenames, technology, know-how and processes
necessary for each of them to conduct its business as currently conducted.

 

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(ii) Except as disclosed in Schedule 3.16(a) to the Credit Agreement,
(A) each Obligor has the right to use its owned Intellectual Property in perpetuity
and without payment of royalties, (B) all registrations with and applications to
Governmental Authorities in respect of such Intellectual Property are valid and in
full force and effect and are not subject to the payment of any taxes or maintenance
fees or the taking of any interest therein, held by any of the Obligors to maintain
their validity or effectiveness, and (C) there are no restrictions on the direct or
indirect transfer of any Contractual Obligation, or any interest therein, held by
any of the Obligors in respect of such Intellectual Property which has not been
waived or satisfied, except where the failure to waive or satisfy could not
reasonably be expected to have a Material Adverse Effect.

(iii) None of the Obligors is in default (or with the giving of notice or lapse
of time or both, would be in default) under any license to use its Intellectual
Property; no claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor do the Obligors or any of their
Subsidiaries know of any such claim; and, to the knowledge of the Obligors or any of
their Subsidiaries, the use of such Intellectual Property by any of the Obligors or
any of its Subsidiaries does not infringe on the rights of any Person.

(iv) The Obligors have recorded or deposited with and paid to the United
States Copyright Office, the Register of Copyrights, the Copyrights Royalty Tribunal
or other Governmental Authority, all notices, statements of account, royalty fees
and other documents and instruments required under the terms and conditions of any
Contractual Obligation of the Obligors and/or under Title 17 of the United States
Code and the rules and regulations issued thereunder (collectively, the
“Copyright Act”), and are not liable to any Person for copyright
infringement under the Copyright Act or any other law, rule, regulation, contract or
license as a result of their business operations.

(v) All material Intellectual Property of each Obligor is valid, subsisting,
unexpired, enforceable and has not been abandoned, and each Obligor is legally
entitled to use each of its tradenames.

(vi) Except as set forth in Schedule 3.16(a) to the Credit Agreement,
none of the material Intellectual Property of the Obligors is the subject of any
licensing or franchise agreement.

(vii) No holding, decision or judgment has been rendered by any Governmental
Authority which would limit, cancel or question the validity of any Intellectual
Property of the Obligors.

(viii) No action or proceeding is pending seeking to limit, cancel or question
the validity of any Intellectual Property of the Obligors, or which, if
adversely determined, would have a Material Adverse Effect except as otherwise
disclosed in the Credit Agreement.

 

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(ix) All applications pertaining to the material Intellectual Property of each
Obligor have been duly and properly filed, and all registrations or letters
pertaining to such Intellectual Property have been duly and properly filed and
issued, and all of such Intellectual Property is valid and enforceable.

(x) No Obligor has made any assignment or entered into any agreement in
conflict with the security interest of the Administrative Agent in the Intellectual
Property of each Obligor hereunder.

(j) Documents, Instruments and Chattel Paper. All Documents, Instruments and
Chattel Paper describing, evidencing or constituting Collateral are, to the Obligors’
knowledge, complete, valid, and genuine.

(k) Equipment. With respect to each Obligor’s Equipment: (i) such Obligor has
good and marketable title thereto and (ii) all such Equipment is in normal operating
condition and repair, ordinary wear and tear alone excepted (subject to casualty events),
and is suitable for the uses to which it is customarily put in the conduct of such Obligor’s
business.

(l) Restrictions on Security Interest. None of the Obligors is party to any
material lease that contains legally enforceable restrictions on the granting of a security
interest therein other than those which have been waived or satisfied.

Notwithstanding anything to the contrary contained herein, no representation or warranty is
provided with respect to the Liens purported to be created with respect to any Equity Interests of
a Foreign Subsidiary as it pertains to the laws and regulations of jurisdictions outside of the
United States of America.

5. Covenants. Each Obligor covenants that, so long as any of the Credit Party
Obligations (other than contingent indemnity obligations that survive termination of the Credit
Documents pursuant to the stated terms thereof) remain outstanding or any Credit Document is in
effect, and until all of the Commitments shall have been terminated, such Obligor shall:

(a) Perfection of Security Interest by Filing, Etc. Execute and deliver to the
Administrative Agent and/or file such agreements, assignments or instruments (including
affidavits, notices, reaffirmations, amendments and restatements of existing documents, and
any document as may be necessary if the law of any jurisdiction other than New York becomes
or is applicable to the Collateral or any portion thereof, in each case, as the
Administrative Agent may reasonably request) and do all such other things as the
Administrative Agent may reasonably deem necessary or appropriate (i) to assure to the
Administrative Agent its security interests hereunder are perfected, including (A) such
financing statements (including continuation statements) or

 

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amendments thereof or
supplements thereto or other instruments as the Administrative Agent may from time to
time reasonably request in order to perfect and maintain the security interests granted
hereunder in accordance with the UCC and any other personal property security legislation in
the appropriate state(s) or province(s), (B) with regard to Copyrights, a Notice of Grant of
Security Interest in Copyrights for filing with the United States Copyright Office and the
Canadian Intellectual Property Office, as applicable in the form of Exhibit A
attached hereto, (C) with regard to Patents, a Notice of Grant of Security Interest in
Patents for filing with the United States Patent and Trademark Office and the Canadian
Intellectual Property Office, as applicable in the form of Exhibit B attached hereto
and (D) with regard to Trademarks, a Notice of Grant of Security Interest in Trademarks for
filing with the United States Patent and Trademark Office and the Canadian Intellectual
Property Office, as applicable in the form of Exhibit C attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise protect and assure
the Administrative Agent of its rights and interests hereunder. Each Obligor hereby
authorizes the Administrative Agent to prepare and file such financing statements (including
continuation statements) or amendments thereof or supplements thereto or other instruments
as the Administrative Agent may from time to time deem necessary or appropriate in order to
perfect and maintain the security interests granted hereunder in accordance with the UCC,
including, without limitation, any financing statement that describes the Collateral as “all
personal property” or “all assets” of such Obligor or that describes the Collateral in some
other manner as the Administrative Agent deems necessary or advisable. Each Obligor agrees
to mark its books and records to reflect the security interest of the Administrative Agent
in the Collateral.

(b) Perfection of Security Interest by Possession. If (i) any amount payable
under or in connection with any of the Collateral shall be or become evidenced by any
Document, Instrument, Tangible Chattel Paper or Supporting Obligation or (ii) any Collateral
shall be stored or shipped subject to a Document or (iii) any Collateral shall consist of
Investment Property in the form of certificated securities, promptly notify the
Administrative Agent of the existence of such Collateral and deliver such Instrument,
Chattel Paper, Supporting Obligation, Document or Investment Property to the Administrative
Agent, duly endorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Security Agreement.

(c) Perfection of Security Interest Through Control. If any Collateral shall
consist of Deposit Accounts, Electronic Chattel Paper, Letter-of-Credit Rights, Securities
Accounts or uncertificated Investment Property, execute and deliver (and, with respect to
any Collateral consisting of a Securities Account or uncertificated Investment Property,
cause the Securities Intermediary or the issuer, as applicable, with respect to such
Investment Property to execute and deliver) to the Administrative Agent all control
agreements, assignments, instruments or other documents as reasonably requested by the
Administrative Agent for the purposes of obtaining and maintaining control of such
Collateral.

(d) Other Liens. Defend its interests in the Collateral against the claims and
demands of all other parties claiming an interest therein and keep the Collateral free from
all Liens, except for Permitted Liens. Neither the Administrative Agent nor any Secured
Party authorizes any Obligor to, and no Obligor shall, sell, exchange, transfer,
assign, lease or otherwise dispose of the Collateral or any interest therein, except as
permitted under the Credit Agreement.

 

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(e) Preservation of Collateral. Keep the Collateral in good order, condition
and repair in all material respects, ordinary wear and tear excepted; not use the Collateral
in violation of the provisions of this Security Agreement or any other agreement relating to
the Collateral or any policy insuring the Collateral or any applicable Requirement of Law;
not permit any Collateral to be or become a fixture to real property or an accession to
other personal property unless the Administrative Agent has a valid, perfected and first
priority security interest for the benefit of the Secured Parties in such real or personal
property; and not, without the prior written consent of the Administrative Agent, alter or
remove any identifying symbol or number on its Equipment.

(f) [Reserved.]

(g) [Reserved.]

(h) Collateral Held by Warehouseman, Bailee, etc. If any Collateral with a
value in excess of $1,000,000 is at any time in the possession or control of a warehouseman,
bailee or any agent or processor of such Obligor, (i) notify the Administrative Agent of
such possession, (ii) upon the request of the Administrative Agent, notify such Person of
the Administrative Agent’s security interest for the benefit of the Secured Parties in such
Collateral, (iii) upon the request of the Administrative Agent, instruct such Person to hold
all such Collateral for the Administrative Agent’s account subject to the Administrative
Agent’s instructions and (iv) upon the request of the Administrative Agent, obtain an
acknowledgment from such Person that it is holding such Collateral for the benefit of the
Administrative Agent.

(i) Treatment of Accounts. (i) Not grant or extend the time for payment of any
Account, or compromise or settle any Account for less than the full amount thereof, or
release any person or property, in whole or in part, from payment thereof, or allow any
credit or discount thereon, other than as normal and customary in the ordinary course of an
Obligor’s business and (ii) maintain at its principal place of business a record of Accounts
consistent with customary business practices.

(j) Covenants Relating to Inventory.

(i) Maintain, keep and preserve its Inventory in good salable condition at its
own cost and expense.

(ii) [Reserved.]

(iii) If any of the Inventory is at any time evidenced by a document of title,
promptly notify the Administrative Agent thereof and, upon the request of
the Administrative Agent, deliver such document of title to the Administrative
Agent.

 

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(k) Covenants Relating to Copyrights.

(i) Employ the Copyright for each material Work with such notice of copyright
as may be required by law to secure copyright protection.

(ii) Not do any act or knowingly omit to do any act whereby any Copyright may
become invalidated unless such Obligor determines that such Copyright is no longer
useful or necessary in its business and (A) not do any act, or knowingly omit to do
any act, whereby any material Copyright may become injected into the public domain;
(B) notify the Administrative Agent immediately if it knows, or has reason to know,
that any material Copyright could reasonably be expected to become injected into the
public domain or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in any court or tribunal in the United States, Canada or any other
country) regarding an Obligor’s ownership of any such Copyright or its validity; (C)
take all necessary steps as it shall deem appropriate under the circumstances to
maintain and pursue each material application (and to obtain the relevant
registration) and to maintain each registration of each material Copyright owned by
an Obligor including, without limitation, filing of applications for renewal where
necessary; and (D) promptly notify the Administrative Agent of any material
infringement of any material Copyright of an Obligor of which it becomes aware and
take such actions as it shall reasonably deem appropriate under the circumstances to
protect such Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any and all damages
for such infringement.

(iii) Not make any assignment or agreement in conflict with the security
interest in the Copyrights of each Obligor hereunder.

(l) Covenants Relating to Patents and Trademarks.

(i) (A) Continue to use each material Trademark in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (B) maintain
as in the past the quality of products and services offered under such Trademark,
(C) employ such Trademark with the appropriate notice of registration and (D) not
(and not permit any licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby any material Trademark may become invalidated unless such
Obligor determines that such Trademark is no longer useful or necessary in its
business.

 

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(ii) Not do any act, or omit to do any act, whereby any material Patent may
become abandoned or dedicated unless such Obligor determines that such Patent is no
longer useful or necessary in its business.

(iii) Promptly notify the Administrative Agent if it knows, or has reason to
know, that any application or registration relating to any material Patent or
material Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of, or
any such determination or development in, any proceeding in the United States Patent
and Trademark Office, the Canadian Intellectual Property Office or any court or
tribunal in any country) regarding an Obligor’s ownership of any such Patent or
Trademark or its right to register the same or to keep, maintain and use the same.

(iv) Take all reasonable and necessary steps, including, without limitation, in
any proceeding before the United States Patent and Trademark Office, or any similar
office or agency in any other country or any political subdivision thereof, to
maintain and pursue each material application, to obtain the relevant registration
and to maintain each registration of the material Patents and material Trademarks,
including, without limitation, filing of applications for renewal, affidavits of use
and affidavits of incontestability.

(v) Promptly notify the Administrative Agent after it learns that any material
Patent or material Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and take such actions as it shall
reasonably deem appropriate under the circumstances to protect such Patent or
Trademark in a material manner.

(vi) Not make any assignment or agreement in conflict with the security
interest in the Patents or Trademarks of any Obligor hereunder.

(m) [Reserved].

(n) Intellectual Property Generally. Upon request of the Administrative Agent,
execute and deliver any and all agreements, instruments, documents, and papers as the
Administrative Agent may reasonably request to evidence the Administrative Agent’s security
interest in the Intellectual Property and the general intangibles relating thereto
including, without limitation, the goodwill of the Obligors and their Subsidiaries relating
thereto or represented thereby (or such other Intellectual Property or the general
intangibles relating thereto or represented thereby as the Administrative Agent may
reasonably request).

(o) Commercial Tort Claims; Notice of Litigation. Promptly (i) forward to the
Administrative Agent written notification of any and all Commercial Tort Claims of the
Obligors in excess of $1,000,000, including, but not limited to, any and all actions, suits,
and proceedings before any court or Governmental Authority by or affecting such
Obligor or any of its Subsidiaries and (ii) execute and deliver such statements,
documents and notices and do and cause to be done all such things as may be reasonably
required by the Administrative Agent, or required by law, including all things which may
from time to time be necessary under the UCC to fully create, preserve, perfect and protect
the priority of the Administrative Agent’s security interest in any Commercial Tort Claims.

 

13

 

(p) Status of Collateral as Personal Property. At all times maintain the
Collateral as personal property and not affix any of the Collateral to any real property in
a manner which would change its nature from personal property to real property or a Fixture,
unless the Administrative Agent has a first priority, perfected Lien on such real property
or Fixture.

(q) Regulatory Approvals. Promptly, and at its expense, execute and deliver,
or cause to be executed and delivered, all applications, certificates, instruments,
registration statements, and all other documents and papers the Administrative Agent may
reasonably request and as may be required by law to acquire the consent, approval,
registration, qualification or authorization of any Governmental Authority deemed necessary
or appropriate for the effective exercise of any of the rights under this Security Agreement
(each a “Governmental Approval”). Without limiting the generality of the foregoing,
if an Event of Default shall have occurred and be continuing, each Obligor shall take any
action which the Administrative Agent may reasonably request in order to transfer and assign
to the Administrative Agent, or to such one or more third parties as the Administrative
Agent may designate, or to a combination of the foregoing, each Governmental Approval of
such Obligor. To enforce the provisions of this subsection, upon the occurrence and during
the continuance of an Event of Default, the Administrative Agent is empowered to request the
appointment of a receiver from any court of competent jurisdiction. Such receiver shall be
instructed to seek from the Governmental Authority an involuntary transfer of control of
each such Governmental Approval for the purpose of seeking a bona fide purchaser to whom
control will ultimately be transferred. Each Obligor hereby agrees to authorize such an
involuntary transfer of control upon the request of the receiver so appointed, and, if such
Obligor shall refuse to authorize the transfer, its approval may be required by the court.
Upon the occurrence and continuance of an Event of Default, such Obligor shall further use
its reasonable best efforts to assist in obtaining Governmental Approvals, if required, for
any action or transaction contemplated by this Security Agreement, including, without
limitation, the preparation, execution and filing with the Governmental Authority of such
Obligor’s portion of any necessary or appropriate application for the approval of the
transfer or assignment of any portion of the assets (including any Governmental Approval) of
such Obligor. Because each Obligor agrees that the Administrative Agent’s remedy at law for
failure of such Obligor to comply with the provisions of this subsection would be inadequate
and that such failure would not be adequately compensable in damages, such Obligor agrees
that the covenants contained in this subsection may be specifically enforced, and such
Obligor hereby waives and agrees not to assert any defenses against an action for specific
performance of such covenants.

 

14

 

(r) Insurance. All proceeds derived from insurance on the Collateral shall be
subject to the security interest of the Administrative Agent hereunder.

(s) Covenants Relating to the Assigned Agreements.

(i) [Reserved].

(ii) Unless the applicable Obligor believes it is necessary in the prudent
conduct of its business, no Obligor shall (A) cancel or terminate any Assigned
Agreement of such Obligor or consent to or accept any cancellation or termination
thereof; (B) amend or otherwise modify any Assigned Agreement of such Obligor or
give any consent, waiver or approval thereunder; (C) waive any default under or
breach of any Assigned Agreement of such Obligor; or (D) take any other action in
connection with any Assigned Agreement of such Obligor which would impair the value
of the interest or rights of such Obligor thereunder or which would impair the
interests or rights of the Administrative Agent.

(t) Material Contracts. Upon the request of the Administrative Agent, with
respect to any Material Contract, each Obligor will (i) execute and deliver (or cause to be
executed and delivered) to the Administrative Agent a collateral assignment of such Material
Contract and a consent to such collateral assignment, in each case in a form acceptable to
the Administrative Agent, (ii) use commercially reasonable efforts to cause the other
parties to such Material Contract to execute such consent and (iii) do any act or execute
any additional documents required by the Administrative Agent to ensure to the
Administrative Agent the effectiveness and first priority of its security interest in such
Material Contract.

6. License of Intellectual Property. The Obligors hereby assign, transfer and convey
to the Administrative Agent, effective upon the occurrence and during the continuance of any Event
of Default, the nonexclusive right and license to use all Intellectual Property owned or used by
any Obligor that relate to the Collateral and any other collateral granted by the Obligors as
security for the Credit Party Obligations, together with any goodwill associated therewith, all to
the extent necessary to enable the Administrative Agent to use, possess and realize on the
Collateral and to enable any successor or assign to enjoy the benefits of the Collateral. This
right and license shall inure to the benefit of all successors, assigns and transferees of the
Administrative Agent and its successors, assigns and transferees, whether by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license is granted free of charge, without requirement that any monetary payment
whatsoever be made to the Obligors.

7. Special Provisions Regarding Inventory. Notwithstanding anything to the contrary
contained in this Security Agreement, each Obligor may, unless and until an Event of Default occurs
and is continuing and the Administrative Agent instructs such Obligor otherwise, without further
consent or approval of the Administrative Agent, use, consume, sell, lease and exchange its
Inventory in the ordinary course of its business as presently conducted, whereupon, in the case of
such a sale or exchange, the security interest created hereby in the Inventory so
sold or exchanged (but not in any Proceeds arising from such sale or exchange) shall cease
immediately without any further action on the part of the Administrative Agent.

 

15

 

8. Performance of Obligations; Advances by Administrative Agent. On failure of any
Obligor to perform any of the covenants and agreements contained herein, the Administrative Agent
may, at its sole option and in its sole discretion, perform or cause to be performed the same and
in so doing may expend such sums as the Administrative Agent may reasonably deem advisable in the
performance thereof, including, without limitation, the payment of any insurance premiums, the
payment of any taxes, a payment to obtain a release of a Lien or potential Lien, expenditures made
in defending against any adverse claim and all other expenditures which the Administrative Agent
may make for the protection of the security interest hereof or may be compelled to make by
operation of law. All such sums and amounts so expended shall be repayable by the Obligors on a
joint and several basis promptly upon timely notice thereof and demand therefor, shall constitute
additional Credit Party Obligations and shall bear interest from the date said amounts are expended
at the Default Rate. No such performance of any covenant or agreement by the Administrative Agent
on behalf of any Obligor, and no such advance or expenditure therefor, shall relieve the Obligors
of any default under the terms of this Security Agreement or the other Credit Documents. The
Administrative Agent may make any payment hereby authorized in accordance with any bill, statement
or estimate procured from the appropriate public office or holder of the claim to be discharged
without inquiry into the accuracy of such bill, statement or estimate or into the validity of any
tax assessment, sale, forfeiture, tax lien, title or claim except to the extent such payment is
being contested in good faith by an Obligor in appropriate proceedings and against which adequate
reserves are being maintained in accordance with GAAP.

9. Events of Default.

The occurrence of an event which under the Credit Agreement would constitute an Event of
Default shall be an event of default hereunder (an “Event of Default”).

10. Remedies.

(a) General Remedies. Upon the occurrence of an Event of Default and during
continuation thereof, the Administrative Agent and the Secured Parties shall have, in
addition to the rights and remedies provided herein, in the Credit Documents or by law
(including, but not limited to, levy of attachment, garnishment and the rights and remedies
set forth in the UCC of the jurisdiction applicable to the affected Collateral), the rights
and remedies of a secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights and remedies are asserted and regardless of whether the
UCC applies to the affected Collateral), and further, the Administrative Agent may, with or
without judicial process or the aid and assistance of others, (i) enter on any premises on
which any of the Collateral may be located and, without resistance or interference by the
Obligors, take possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Obligors to assemble and make available to the Administrative
Agent at the expense of the Obligors any Collateral at any

 

16

 

place and time designated by the
Administrative Agent which is reasonably convenient to both
parties, (iv) remove any Collateral from any such premises for the purpose of effecting
the sale or other disposition thereof, and/or (v) without demand and without advertisement,
notice, hearing or process of law, all of which each of the Obligors hereby waives to the
fullest extent permitted by law, at any place and time or times, sell and deliver any or all
Collateral held by or for it at public or private sale, by one or more contracts, in one or
more parcels, for cash, upon credit or otherwise, at such prices and upon such terms as the
Administrative Agent deems advisable, in its sole discretion (subject to any and all
mandatory legal requirements). Neither the Administrative Agent’s compliance with any
applicable state or federal law in the conduct of such sale, nor its disclaimer of any
warranties relating to the Collateral, shall be considered to adversely affect the
commercial reasonableness of such sale. To the extent the rights of notice cannot be
legally waived hereunder, each Obligor agrees that any requirement of reasonable notice
shall be met if such notice is personally served on or mailed, postage prepaid, to the
Borrower in accordance with the notice provisions of Section 9.2 of the Credit Agreement at
least ten (10) days before the time of sale or other event giving rise to the requirement of
such notice. The Administrative Agent and the Secured Parties shall not be obligated to
make any sale or other disposition of the Collateral regardless of notice having been given.
To the extent permitted by law, any Secured Party may be a purchaser at any such public
sale. To the extent permitted by applicable law, each of the Obligors hereby waives all of
its rights of redemption with respect to any such sale. Subject to the provisions of
applicable law, the Administrative Agent and the Secured Parties may postpone or cause the
postponement of the sale of all or any portion of the Collateral by announcement at the time
and place of such sale, and such sale may, without further notice, to the extent permitted
by law, be made at the time and place to which the sale was postponed, or the Administrative
Agent and the Secured Parties may further postpone such sale by announcement made at such
time and place.

(b) Remedies Relating to Accounts. Upon the occurrence of an Event of Default
and during the continuation thereof, whether or not the Administrative Agent has exercised
any or all of its rights and remedies hereunder, the Administrative Agent shall have the
right to enforce any Obligor’s rights against any account debtors and obligors on such
Obligor’s Accounts. Each Obligor acknowledges and agrees that the Proceeds of its Accounts
remitted to or on behalf of the Administrative Agent in accordance with the provisions of
this Section shall be solely for the Administrative Agent’s own convenience and that such
Obligor shall not have any right, title or interest in such Proceeds or in any such other
amounts except as expressly provided herein. After the occurrence and during the
continuance of an Event of Default, to the extent required by the Administrative Agent, each
Obligor agrees to execute any document or instrument, and to take any action, necessary
under applicable law (including the Federal Assignment of Claims Act) in order for the
Administrative Agent to exercise its rights and remedies (or be able to exercise its rights
and remedies at some future date) with respect to any Accounts of such Obligor where the
account debtor is a Governmental Authority. The Administrative Agent and the Secured
Parties shall have no liability or responsibility to any Obligor for acceptance of a check,
draft or other order for payment of money bearing the legend “payment in full” or words of
similar import or any other restrictive legend or endorsement or be responsible for
determining the correctness of any

 

17

 

remittance. Each
Obligor hereby agrees to indemnify the Administrative Agent and the Secured Parties and
their respective officers, directors, employees, partners, members, counsel, agents,
representatives, advisors and affiliates from and against all liabilities, damages, losses,
actions, claims, judgments, costs, expenses, charges and reasonable attorneys’ fees suffered
or incurred by the Administrative Agent or the Secured Parties (each, an “Indemnified
Party”) because of the maintenance of the foregoing arrangements except, with respect to
any Indemnified Party, as relating to or arising out of the gross negligence or willful
misconduct of such Indemnified Party or its officers, employees or agents. In the case of
any investigation, litigation or other proceeding, the foregoing indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought by an
Obligor, its directors, shareholders or creditors or an Indemnified Party or any other
Person or any other Indemnified Party is otherwise a party thereto.

(c) Access. In addition to the rights and remedies hereunder, upon the
occurrence of an Event of Default and during the continuation thereof, the Administrative
Agent shall have the right to enter and remain upon the various premises of the Obligors
without cost or charge to the Administrative Agent, and use the same, together with
materials, supplies, books and records of the Obligors for the purpose of collecting and
liquidating the Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition, the Administrative
Agent may remove Collateral, or any part thereof, from such premises and/or any records with
respect thereto, in order to effectively collect or liquidate such Collateral. If the
Administrative Agent exercises its right to take possession of the Collateral, each Obligor
shall also at its expense perform any and all other steps reasonably requested by the
Administrative Agent to preserve and protect the security interest hereby granted in the
Collateral, such as placing and maintaining signs indicating the security interest of the
Administrative Agent, appointing overseers for the Collateral and maintaining inventory
records.

(d) Nonexclusive Nature of Remedies. Failure by the Administrative Agent or
the Secured Parties to exercise any right, remedy or option under this Security Agreement,
any other Credit Document or as provided by law, or any delay by the Administrative Agent or
the Secured Parties in exercising the same, shall not operate as a waiver of any such right,
remedy or option. No waiver hereunder shall be effective unless it is in writing, signed by
the party against whom such waiver is sought to be enforced and then only to the extent
specifically stated, which in the case of the Administrative Agent or the Secured Parties
shall only be granted as provided herein. To the extent permitted by law, neither the
Administrative Agent, the Secured Parties, nor any party acting as attorney for the
Administrative Agent or the Secured Parties, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or law other than their gross
negligence or willful misconduct hereunder. The rights and remedies of the Administrative
Agent and the Secured Parties under this Security Agreement shall be cumulative and not
exclusive of any other right or remedy which the Administrative Agent or the Secured Parties
may have.

 

18

 

(e) Retention of Collateral. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuation thereof, the
Administrative Agent may, after providing the notices required by Sections 9-620 and 9-621
of the UCC (or any successor sections of the UCC) or otherwise complying with the notice
requirements of applicable law of the relevant jurisdiction, accept or retain all or any
portion of the Collateral in satisfaction of the Credit Party Obligations. Unless and until
the Administrative Agent shall have provided such notices, however, the Administrative Agent
shall not be deemed to have retained any Collateral in satisfaction of any Credit Party
Obligations for any reason.

(f) Deficiency. In the event that the proceeds of any sale, collection or
realization are insufficient to pay all amounts to which the Administrative Agent or the
Secured Parties are legally entitled, the Obligors shall be jointly and severally liable for
the deficiency, together with interest thereon at the Default Rate, together with the costs
of collection and the reasonable fees of any attorneys employed by the Administrative Agent
to collect such deficiency. Any surplus remaining after the full payment and satisfaction
of the Credit Party Obligations shall be returned to the Obligors or to whomsoever a court
of competent jurisdiction shall determine to be entitled thereto.

(g) Other Security. To the extent that any of the Credit Party Obligations are
now or hereafter secured by property other than the Collateral (including, without
limitation, real and other personal property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Administrative Agent shall
have the right to proceed against such other property, guarantee or endorsement upon the
occurrence and during the continuation of any Event of Default, and the Administrative Agent
shall have the right, in its sole discretion, to determine which rights, security, Liens,
security interests or remedies the Administrative Agent shall at any time pursue,
relinquish, subordinate, modify or take with respect thereto, without in any way modifying
or affecting any of them or any of the Administrative Agent’s and the Secured Parties’
rights or the Credit Party Obligations under this Security Agreement or under any other of
the Credit Documents.

11. Rights of the Administrative Agent.

(a) Power of Attorney. Each Obligor hereby designates and appoints the
Administrative Agent, on behalf of the Secured Parties, and each of its designees or agents,
as attorney-in-fact of such Obligor, irrevocably and with power of substitution, with
authority to take any or all of the following actions upon the occurrence and during the
continuation of an Event of Default:

(i) to demand, collect, settle, compromise, adjust and give discharges and
releases concerning the Collateral of such Obligor, all as the Administrative Agent
may reasonably determine in respect of such Collateral;

 

19

 

(ii) to commence and prosecute any actions at any court for the purposes of
collecting any Collateral and enforcing any other right in respect thereof;

(iii) to defend, settle, adjust or compromise any action, suit or proceeding
brought with respect to the Collateral and, in connection therewith, give such
discharge or release as the Administrative Agent may deem reasonably appropriate;

(iv) to receive, open and dispose of mail addressed to an Obligor and endorse
checks, notes, drafts, acceptances, money orders, bills of lading, warehouse
receipts or other instruments or documents evidencing payment, shipment or storage
of the goods giving rise to the Collateral of such Obligor, or securing or relating
to such Collateral, on behalf of and in the name of such Obligor;

(v) to sell, assign, transfer, make any agreement in respect of, or otherwise
deal with or exercise rights in respect of, any Collateral or the goods or services
which have given rise thereto, as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes;

(vi) to adjust and settle claims under any insurance policy relating to the
Collateral;

(vii) to execute and deliver and/or file all assignments, conveyances,
statements, financing statements, continuation financing statements, security
agreements, affidavits, notices and other agreements, instruments and documents that
the Administrative Agent may determine necessary in order to perfect and maintain
the security interests and Liens granted in this Security Agreement and in order to
fully consummate all of the transactions contemplated herein;

(viii) to institute any foreclosure proceedings that the Administrative Agent
may deem appropriate;

(ix) to execute any document or instrument, and to take any action, necessary
under applicable law (including the Federal Assignment of Claims Act) in order for
the Administrative Agent to exercise its rights and remedies (or to be able to
exercise its rights and remedies at some future date) with respect to any Account of
an Obligor where the account debtor is a Governmental Authority; and

(x) to do and perform all such other acts and things as the Administrative
Agent may reasonably deem to be necessary, proper or convenient in connection with
the Collateral.

 

20

 

This power of attorney is a power coupled with an interest and shall be irrevocable for so
long as any of the Credit Party Obligations (other than contingent indemnity obligations
that survive termination of the Credit Documents pursuant to the stated terms thereof)
remain outstanding or any Credit Document is in effect, and until all of the Commitments
shall have been terminated. The Administrative Agent shall be under no duty to exercise or
withhold the exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Administrative Agent in this Security Agreement, and shall not be
liable for any failure to do so or any delay in doing so. The Administrative Agent shall
not be liable for any act or omission or for any error of judgment or any mistake of fact or
law in its individual capacity or its capacity as attorney-in-fact except acts or omissions
resulting from its gross negligence or willful misconduct. This power of attorney is
conferred on the Administrative Agent solely to perfect, protect, preserve and realize upon
its security interest in the Collateral.

(b) Assignment by the Administrative Agent. Subject to the terms and
conditions of the Credit Agreement, the Administrative Agent may from time to time assign
the Credit Party Obligations or any portion thereof and/or the Collateral or any portion
thereof to a successor Administrative Agent, and the assignee shall be entitled to all of
the rights and remedies of the Administrative Agent under this Security Agreement in
relation thereto.

(c) The Administrative Agent’s Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while being held by the
Administrative Agent hereunder, the Administrative Agent shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that the Obligors shall
be responsible for preservation of all rights in the Collateral, and the Administrative
Agent shall be relieved of all responsibility for the Collateral upon surrendering it or
tendering the surrender of it to the Obligors. The Administrative Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that which the
Administrative Agent accords its own property, which shall be no less than the treatment
employed by a reasonable and prudent agent in the industry, it being understood that the
Administrative Agent shall not have responsibility for taking any necessary steps to
preserve rights against any parties with respect to any of the Collateral. In the event of
a public or private sale of Collateral pursuant to Section 10 hereof, the Administrative
Agent shall have no obligation to clean-up, repair or otherwise prepare the Collateral for
sale.

12. [Reserved].

13. [Reserved].

 

21

 

14. Continuing Agreement.

(a) This Security Agreement shall be a continuing agreement in every respect and shall
remain in full force and effect so long as any of the Credit Party Obligations
(other than contingent indemnity obligations that survive termination of the Credit
Documents pursuant to the stated terms thereof) remain outstanding or any Credit Document is
in effect, and until all of the Commitments shall have been terminated. Upon such payment
and termination, this Security Agreement shall be automatically terminated and the
Administrative Agent and the Secured Parties shall, upon the request and at the expense of
the Obligors, forthwith release all of the Liens and security interests granted hereunder
and shall execute and/or deliver all UCC termination statements and/or other documents
reasonably requested by the Obligors evidencing such termination. Notwithstanding the
foregoing all releases and indemnities provided hereunder shall survive termination of this
Security Agreement.

(b) This Security Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time payment, in whole or in part, of any of the
Credit Party Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Secured Party as a preference, fraudulent conveyance or
otherwise under any bankruptcy, insolvency or similar law, all as though such payment had
not been made; provided that in the event that payment of all or any part of the
Credit Party Obligations is rescinded or must be restored or returned, all reasonable costs
and expenses (including without limitation any reasonable legal fees and disbursements)
incurred by the Administrative Agent or any Secured Party in defending and enforcing such
reinstatement shall be deemed to be included as a part of the Credit Party Obligations.

15. Amendments; Waivers; Modifications. This Security Agreement and the provisions
hereof may not be amended, waived, modified, changed, discharged or terminated except as set forth
in Section 9.1 of the Credit Agreement.

16. Successors in Interest. This Security Agreement shall create a continuing
security interest in the Collateral and shall be binding upon each Obligor, its successors and
assigns and shall inure, together with the rights and remedies of the Administrative Agent and the
Secured Parties hereunder, to the benefit of the Administrative Agent and the Secured Parties and
their successors and permitted assigns; provided, however, that none of the
Obligors may assign its rights or delegate its duties hereunder except as permitted by the Credit
Agreement. To the fullest extent permitted by law, each Obligor hereby releases the Administrative
Agent and each Secured Party, each of their respective officers, employees and agents and each of
their respective successors and assigns, from any liability for any act or omission relating to
this Security Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Administrative Agent or such Secured Party or their
respective officers, employees and agents, in each case as determined by a court of competent
jurisdiction pursuant to a final non-appealable judgment.

17. Notices. All notices required or permitted to be given under this Security
Agreement shall be in conformance with Section 9.2 of the Credit Agreement.

 

22

 

18. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in making proof
of this Security Agreement to produce or account for more than one such counterpart. Delivery of
executed counterparts of the Security Agreement by telecopy or other electronic means shall be
effective as an original and shall constitute a representation that an original shall be delivered
upon the request of the Administrative Agent.

19. Headings. The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning, construction or interpretation of any
provision of this Security Agreement.

20. Governing Law; Submission to Jurisdiction and Service of Process; Waiver of Jury
Trial; Venue. THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. The terms of Sections 9.13 and 9.16 of the Credit Agreement are incorporated herein by
reference, mutatis mutandis, and the parties hereto agree to such terms.

21. Severability. If any provision of this Security Agreement is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and the remaining
provisions shall remain in full force and effect and shall be construed without giving effect to
the illegal, invalid or unenforceable provisions.

22. Entirety. This Security Agreement and the other Credit Documents represent the
entire agreement of the parties hereto and thereto, and supersede all prior agreements and
understandings, oral or written, if any, including any commitment letters or correspondence
relating to this Security Agreement, the other Credit Documents or the transactions contemplated
herein and therein.

23. Survival. All representations and warranties of the Obligors hereunder shall
survive the execution and delivery of this Security Agreement and the other Credit Documents, the
delivery of the Notes and the making of the Loans and the issuance of the Letters of Credit under
the Credit Agreement.

24. Joint and Several Obligations of Obligors.

(a) Each of the Obligors is accepting joint and several liability hereunder in
consideration of the financial accommodations to be provided by the Lenders under the Credit
Agreement, for the mutual benefit, directly and indirectly, of each of the Obligors and in
consideration of the undertakings of each of the Obligors to accept joint and several
liability for the obligations of each of them.

 

23

 

(b) Each of the Obligors jointly and severally hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several liability with
the other Obligors with respect to the payment and performance of all of the Credit Party
Obligations, it being the intention of the parties hereto that all the Credit
Party Obligations shall be the joint and several obligations of each of the Obligors
without preferences or distinction among them.

(c) Notwithstanding any provision to the contrary contained herein, in any other of the
Credit Documents, to the extent the obligations of an Obligor shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or transfers) then the
obligations of such Obligor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).

25. Rights of Required Lenders. All rights of the Administrative Agent hereunder, if
not exercised by the Administrative Agent, may be exercised by the Required Lenders.

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24

 

Each of the parties hereto has caused a counterpart of this Security Agreement to be duly executed and delivered as of the date first above written.

	 	 	 	 	 	 	 	 	 
	BORROWER:	 	IMPAX LABORATORIES, INC., 

a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Arthur A. Koch, Jr.	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Arthur A. Koch, Jr.	 	 
	 

	 	 	 	Title:
	 	CFO	 	 

 

 

 

Accepted and agreed to as of the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, 

as Administrative Agent	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Samuel Thompson	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Samuel Thompson	 	 
	 

	 	 	 	Title:
	 	Vice President/Relationship Manager	 	 

 

 

 

Schedule 4(a) to Credit Agreement

Tradenames in use:

Impax Pharma

Global Pharma

Impax Pharmaceuticals

Global Pharmaceuticals

 

 

 

EXHIBIT A

[FORM OF]

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

COPYRIGHTS

[United States Copyright Office][Canadian Intellectual Property Office]

Ladies and Gentlemen:

Please be advised
that (a) pursuant to the Security Agreement dated as of February 11, 2011 (as
amended, modified, extended, restated, replaced, or supplemented from time to time, the “Security
Agreement”), by and among the Obligors party thereto (each an “Obligor” and
collectively, the “Obligors”) and Wells Fargo Bank,
National Association, as Administrative Agent (the “Administrative Agent”) for the secured parties referenced therein (the “Secured
Parties”), the undersigned Obligor has granted a continuing security interest in and continuing lien upon [the copyrights, copyright
licenses and copyright applications] shown on Schedule 1 attached hereto (the “Copyrights”)
 to the Administrative Agent for the ratable benefit of the Secured Parties and (b) the undersigned hereby grants to the Administrative
Agent, for the ratable benefit of
 the Secured Parties, a continuing security interest in, and a right to set off against, any
and all right, title and interest of such Obligor in and to the Copyrights.

The Obligors and the Administrative Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interest in the Copyrights (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any Copyright.

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	 	 	Very truly yours,

[OBLIGOR]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 

Acknowledged and Accepted:

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent

	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

 

 

 

Schedule 1

 

 

 

EXHIBIT B

[FORM OF]

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

PATENTS

[United States Patent and Trademark Office][Canadian Intellectual Property Office]

Ladies and Gentlemen:

Please be advised
that (a) pursuant to the Security Agreement dated as of February 11, 2011 (as
amended, modified, extended, restated, replaced, or supplemented from time to time, the
“Security Agreement”), by and among the Obligors party thereto (each an
“Obligor” and collectively, the “Obligors”) and Wells Fargo Bank, National
Association, as Administrative Agent (the “Administrative Agent”) for the secured
parties referenced therein (the “Secured Parties”), the undersigned Obligor has
granted a continuing security interest in and continuing lien upon [the patents, patent
licenses and patent applications] shown on Schedule 1 attached hereto (the
“Patents”) to the Administrative Agent for the ratable benefit of the Secured Parties
and (b) the undersigned hereby grants to the Administrative Agent, for the ratable benefit of
the Secured
 Parties, a continuing security interest in, and a right to set off against, any and all right,
title and interest of such Obligor in and to the Patents.

The Obligors and the Administrative Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interest in the Patents (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any Patent.

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	 	 	Very truly yours,

[OBLIGOR]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 

Acknowledged and Accepted:

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent

	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

 

 

 

Schedule 1

  

 

 

EXHIBIT C

[FORM OF]

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

TRADEMARKS

[United States Patent and Trademark Office][Canadian Intellectual Property Office]

Ladies and Gentlemen:

Please be advised
that (a) pursuant to the Security Agreement dated as of February 11, 2011 (as
amended, modified, extended, restated, replaced, or supplemented from time to time, the
“Security Agreement”), by and among the Obligors party thereto (each an
“Obligor” and collectively, the “Obligors”) and Wells Fargo Bank,
National Association, as Administrative Agent (the “Administrative Agent”)
for the secured parties referenced therein (the “Secured
Parties”), the undersigned Obligor has granted a continuing security interest in and
continuing lien upon [the trademarks, trademark licenses and trademark applications]
shown on Schedule 1 attached hereto (the “Trademarks”) to the Administrative
Agent for the ratable benefit of the Secured Parties and (b) the undersigned hereby grants
to the Administrative Agent, for the ratable benefit of
 the Secured Parties, a continuing security interest in, and a right to set off against, any and
all right, title and interest of such Obligor in and to the Trademarks.

The Obligors and the Administrative Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interest in the Trademarks (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any Trademark.

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	 	 	Very truly yours,

[OBLIGOR]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 

Acknowledged and Accepted:

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent

	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

 

 

 

Schedule 1

 

 

 

[INDUSTRIAL DESIGN]

NOTICE

OF

GRANT OF SECURITY INTEREST

IN

INDUSTRIAL DESIGNS

Canadian Intellectual Property Office

Ladies and Gentlemen:

Please be advised
that pursuant to the Security Agreement dated as of February 11, 2011 (as amended,
modified, extended, restated, replaced, or supplemented from time to time, the “Security
Agreement”), by and among the Obligors party thereto (each an “Obligor” and
collectively, the “Obligors”) and Wells Fargo Bank, National Association, as
Administrative Agent (the “Administrative
Agent”) for the secured parties referenced therein (the “Secured Parties”), the
undersigned Obligor has granted a continuing security interest in and continuing lien upon the
industrial designs shown on Schedule 1 attached hereto (the “Industrial Designs”)
to the Administrative Agent for the ratable benefit of the Secured Parties.

The Obligors and the Administrative Agent, on behalf of the Secured Parties, hereby acknowledge and agree that the security interest in the Industrial Designs (i) may only be terminated in accordance with the terms of the Security Agreement and (ii) is not to be construed as an assignment of any Industrial Design.

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	 	 	Very truly yours,

[OBLIGOR]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	Title:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 

Acknowledged and Accepted:

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent

	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

 

 

 

Schedule 1Exhibit 10.4

EXHIBIT 10.4

     XXXXX INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH
CONFIDENTIAL TREATMENT WAS GRANTED. ALL SUCH OMITTED
MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

JOINT DEVELOPMENT AGREEMENT

     THIS JOINT DEVELOPMENT AGREEMENT (this “Agreement”) dated as of November 26, 2008 (the
“Effective Date”) is entered into between Medicis Pharmaceutical Corporation, a Delaware
corporation with offices located at 7720 North Dobson Road, Scottsdale, Arizona 85256 on behalf of
itself and its Affiliates (collectively, “Medicis”), and Impax Laboratories, Inc., a Delaware
corporation with offices located at 30831 Huntwood Avenue, Hayward, California 94544 on behalf of
itself and its Affiliates (collectively, “Impax”).

     WHEREAS, Medicis is the owner or otherwise has rights to certain patents, formulations and
know-how related to its minocycline products marketed as of the Effective Date under the trademark
Solodyn® (the “Original Products”);

     WHEREAS, Impax has the expertise and know-how to conduct a joint development program with
Medicis to create a next generation derivative of the Original Products and to research, develop
and commercialize certain generic drugs, and Impax has certain proprietary intellectual property
that will be useful to Medicis with respect to such next generation derivative of the Original
Products; and

     WHEREAS, Medicis desires to collaborate with Impax regarding the research and development of
(a) the next generation derivative of the Original Products, and (b) certain generic drugs in
exchange for a share of the Gross Profit (as defined below), all on the terms and conditions of
this Agreement.

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

     1. DEFINITIONS.

          1.1 “XXXXX NDA” means the following NDA, which was approved prior to the Effective Date: NDA
#XXXXX.

          1.2 “XXXXX NDC” means the following NDCs: XXXXX.

          1.3 “XXXXX Products” means one or more products that are generic equivalents of the products
that are (a) marketed under the trademark XXXXX and (b) approved pursuant the XXXXX NDA or a
supplement thereto and/or sold under an XXXXX NDC, in each case at any strength, dosage or form;
provided that with respect to any obligations on Impax under Section 5.1.1 or Medicis’ milestone
payment obligations under Sections 6.2(e) or (f), “XXXXX Product” shall mean only the XXXXX mg
strength.

 

 

          1.4 “Affiliate” means, with respect to any entity, any other entity that directly or
indirectly controls, is controlled by, or is under common control with, such entity. An entity
shall be regarded as in control of another entity if it owns, or directly or indirectly controls,
at least fifty percent (50%) of the voting stock or other ownership interest of the other entity,
or if it directly or indirectly possesses the power to direct or cause the direction of the
management and policies of the other entity by any means whatsoever.

          1.5 “ANDA” means an Abbreviated New Drug Application and any supplements thereto.

          1.6 “ANDA Product” means each of the following products (including any future packaging
changes or pack sizes): (a) the XXXXX Products; (b) the XXXXX Products; (c) the XXXXX Products;
and (d) the XXXXX Products.

          1.7 “Authorized Product” means any product that is in the same form as a New Product approved
under a NDA held by Medicis or its sublicensee but is relabeled and marketed as a generic product.

          1.8 “Confidential Information” means all non-public materials, information and data concerning
the disclosing party and its operations that is disclosed the disclosing party to the receiving
party pursuant to the Confidentiality Agreement, this Agreement, the License Agreement or the
Distribution Agreement (as defined in the License Agreement), orally or in written, electronic or
tangible form, or otherwise obtained by the receiving party through observation or examination of
the disclosing party’s operations. Confidential Information includes, but is not limited to,
information about the disclosing party’s financial condition and projections; business, marketing
or strategic plans; sales information, customer lists; price lists; databases; trade secrets;
product prototypes and designs; techniques, formulae, algorithms and other non-public process
information. Notwithstanding the foregoing, Confidential Information of a party shall not include
that portion of such materials, information and data that, and only to the extent, the recipient
can establish by written documentation: (a) is known to the recipient as evidenced by its written
records before receipt thereof from the disclosing party, (b) is disclosed to the recipient free of
confidentiality obligations by a Third Party who has the right to make such disclosure without
obligations of confidentiality, (c) is or becomes part of the public domain through no fault of the
recipient, or (d) the recipient can reasonably establish is independently developed by persons on
behalf of recipient without the use of the information disclosed by the disclosing party.

          1.9 “Confidentiality Agreement” means the letter agreement dated February 24, 2008 from David
Greenbaum, counsel for Medicis Pharmaceutical Corporation, to Roger Chin, counsel for Impax
Laboratories, Inc.

          1.10 “Control” means with respect to any material, information, or intellectual property
right, that a party (a) owns such material, information, or intellectual property right, or (b) has
a license or right to use such material, information, or intellectual property right, in each case
with the ability to grant to the other party access, a right to use, a license, or a sublicense (as
applicable) to such material, information, or intellectual property right on the terms and

2

 

conditions set forth herein, without violating the terms of any agreement or other arrangement
with any Third Party.

          1.11 “Cost of Sales” means, on a per ANDA Product basis and for a given calendar quarter, the
sum of the Manufacturing Costs, Distribution and Sales Costs, and Third Party IP Costs for such
ANDA Product sold during such calendar quarter.

          1.12 “Development Plan” means the plan for the research and development of the New Product,
which plan shall be consistent with Section 2.1, prepared by the parties and periodically updated
upon mutual written agreement of the parties.

          1.13 “Development Program” means the development program described in Section 2.1.

          1.14 “Diligent Efforts” means with respect to the research, development or commercialization
of a product, as applicable, efforts and resources commonly used in the pharmaceutical industry for
a product at a similar stage of research, development or commercialization, and having similar
market potential. Diligent Efforts shall be determined by taking into account the characteristics
of the product, the technical risk and stage of research, development, or commercialization of the
product, the cost-effectiveness of efforts or resources applied towards such product, the
competitiveness of alternative Third Party products that are or are expected to be in the relevant
marketplace, the regulatory and business environment, the likelihood of achieving the goal of such
research or of obtaining regulatory approval and product reimbursement (as applicable), the
profitability of the product (without taking into account any payments to be made to other party
pursuant to this Agreement) and the relative potential for product liability exposure. Diligent
Efforts shall be determined on a product and market basis, and it is anticipated that the level of
efforts and resources will change over time reflecting changes in the status of the product or the
market involved.

          1.15 “Distribution and Sales Costs” means, on a per ANDA Product basis and for a given
calendar quarter, (a) an amount equal to XXXXX% of Net Sales of such ANDA Product during such
quarter, which amount shall serve as an estimate of the costs for the distribution of such ANDA
Product by Impax for use or sale in the Territory, including freight, insurance and other costs of
shipping such ANDA Product, (b) an amount equal to XXXXX% of Net Sales of such ANDA Product in the
Territory during such quarter, which amount shall serve as an estimate of the costs of marketing,
selling and promoting such ANDA Product, and (c) the actual direct cost incurred with respect to
XXXXX.

          1.16 “XXXXX NDA” means the following NDA, which was approved prior to the Effective Date: NDA
#XXXXX.

          1.17 “XXXXX NDC” means the following NDCs: XXXXX.

          1.18 “XXXXX Products” means one or more products that are generic equivalents of the products
that are (a) marketed under the trademark XXXXX and (b) approved pursuant the XXXXX NDA or a
supplement thereto and/or sold under a XXXXX NDC, in each case at any strength, dosage or form;
provided that with respect to any obligations on Impax

3

 

under Section 5.1.1, “XXXXX Product” shall mean only the XXXXX strengths and further provided
that Impax’s obligations under Section 5.1.2 and XXXXX Product, as defined below.

          1.19 “XXXXX Product” means the XXXXX Product.

          1.20 “Exclusion Lists” mean: (a) the HHS/OIG List of Excluded Individuals/Entities (available
through the Internet at http://www.oig.hhs.gov); and (b) the General Services
Administration’s List of Parties Excluded from Federal Programs (available through the Internet at
http://www.epls.gov).

          1.21 “FDA” means the United States Food and Drug Administration or any successor entity
thereto.

          1.22 “FD&C Act” means the United States Federal Food, Drug and Cosmetic Act, as may be amended
from time to time.

          1.23 “Gross Profit” means, on a per ANDA Product basis and for a given calendar quarter, the
remainder, if any, that results from Net Sales of such ANDA Product in the Territory minus the Cost
of Sales of such ANDA Product. XXXXX.

          1.24 “Impax Know-How Rights” means all trade secret and other know-how rights in and to all
data, information, compositions and other technology (including, but not limited to, formulae,
procedures, protocols, techniques and results of experimentation and testing) which are necessary
or useful to make, use, develop or sell the New Product and which Impax Controls as of the
Effective Date or during the term of this Agreement; provided, however, that the foregoing shall
not apply to any trade secret or other know-how rights in and to all data, information,
compositions or other technology that that (a) is Controlled by an entity that becomes an Affiliate
of Impax as a result of such entity’s or its Affiliate’s acquisition of Impax and (b) was
Controlled by such entity prior to such acquisition.

          1.25 “Impax IP Rights” means the Impax Patent Rights and Impax Know-How Rights.

          1.26 “Impax Patent Rights” means all patents and patent applications (including utility, model
and design patents and certificates of invention) in any country of the world that claim or cover
the New Product or the manufacture or use thereof and that Impax (but not including any entity that
first becomes an Affiliate of Impax after the Effective Date) Controls as of the Effective Date or
during the term of this Agreement; provided, however, that the foregoing shall not apply to any
patent or patent application that (a) is Controlled by an entity that becomes an Affiliate of Impax
as a result of such entity’s or its Affiliate’s acquisition of Impax and (b) was Controlled by such
entity prior to such acquisition.

          1.27 “Ineligible Person” means a person who: (a) is currently excluded, debarred, suspended,
or otherwise ineligible to participate in the Federal health care programs or in Federal
procurement or non-procurement programs; or (b) has been convicted of a criminal offense that falls
within the ambit of 42 U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended, or
otherwise declared ineligible.

4

 

          1.28 “License Agreement” means the License and Settlement Agreement between Medicis and Impax
dated as of the Effective Date.

          1.29 “Manufacturing Costs” means (a) the delivered cost to Impax of an ANDA Product for use or
sale in the Territory if a Third Party is the manufacturer of such ANDA Product, or (b) where Impax
is itself the manufacturer, the sum of Materials Costs, labor costs, Overhead and Freight And Taxes
incurred by Impax to produce such ANDA Product for use or sale in the Territory, including the
costs of rejected or failed batches of such ANDA Product. As used herein, “Materials Cost” means
Impax’s procurement costs for (i) raw materials (both active and inactive ingredients), and (ii)
packaging, labeling and storing materials, incurred in connection with the manufacture, testing,
labeling, purchasing and distribution of such ANDA Product; “Overhead” means all indirect costs of
manufacturing such ANDA Product including, without limitation, insurance, inspection, testing,
quality control and quality assurance, depreciation, maintenance and repair costs, all as
determined in accordance with the U.S. GAAP, and “Freight And Taxes” means all insurance, freight
and shipping charges, import taxes and duties and similar taxes and duties levied by the United
States or other government entity with jurisdiction, and port and loading charges, all to the
extent not already deducted under Distribution and Sales Costs.

          1.30 “NDA” means a New Drug Application as defined in the FD&C Act or FDA Regulations (21
CFR).

          1.31 “Net Sales” means, with respect to a given ANDA Product or New Product, the aggregate
gross price of such ANDA Product or New Product received, in the case of an ANDA Product, by Impax
or its sublicensees or, in the case of a New Product, by Medicis or its sublicensees (except with
respect to a sublicensee’s sales of Authorized Products), in each case from unaffiliated retailers,
distributors or other customers, less the sum of the following items, all of which must directly
relate to the sale and distribution of such ANDA Product or New Product and be determined in
accordance with GAAP applied in a manner consistent with past practices of the applicable party:
(a) returns, credits, rebates, discounts, allowances, promotional payments, free goods, chargebacks
and other price reduction programs customary to the trade or required by law, (b) actual packaging,
freight and insurance costs incurred in transporting such New Product in final form to customers
(this clause (b) shall not apply to ANDA Products, for which an allowance has already been
incorporated into Distribution and Sales Costs), (c) sales, valued-added and other taxes, (d)
customs duties, surcharges and other governmental charges, (e) administrative fees, marketing fees
and other similar fees, payments or credits paid to unaffiliated third parties customary to the
trade or required by law, and (f) commercially reasonable write-offs for doubtful accounts. Sales
between or among a party and its Affiliates shall not be included in Net Sales unless such party or
its Affiliates are the end user of such ANDA Product or New Product, as applicable.

          1.32 “New Product” means (a) a product that (i) contains XXXXX and (ii) is to be developed by
the parties under this Agreement with the goal of achieving the Target Product Profile, or (b) any
other product agreed to in writing by the parties to serve as a substitute for the product
described in subsection (a) above (in which case the product descried in subsection (a) shall cease
to be a “New Product”), in each case including any XXXXX.

5

 

          1.33 “New Product Technology” means all discoveries, inventions, improvements and other
technology that is developed by Impax, Medicis or both in the conduct of the Development Program.

          1.34 “Non-Specific Technology” means any of the New Product Technology (including without
limitation manufacturing processes) that is not specific to the New Product.

          1.35 “XXXXX NDA” means the following NDA, which was approved prior to the Effective Date: NDA
#XXXXX.

          1.36 “XXXXX NDC” means the following NDCs: XXXXX.

          1.37 “XXXXX Products” means one or more products that are generic equivalents of the products
that are (a) marketed under the trademark XXXXX and (b) approved pursuant the XXXXX NDA or a
supplement thereto and/or sold under an XXXXX NDC, in each case at any strength, dosage or form;
provided that with respect to any obligations on Impax under Sections 5.1.1 and 5.1.2 and XXXXX
strength.

          1.38
“Oral Acne Field” means the treatment or palliation
of acne (including acne rosacea) through an oral administration.

          1.39 “Regulatory Approval” means, with respect to a particular regulatory jurisdiction, the
approval of a NDA or its equivalent in such regulatory jurisdiction by the applicable regulatory
authority in such regulatory jurisdiction and such other regulatory approvals as are required in
order to market the New Product in such regulatory jurisdiction.

          1.40 “XXXXX NDA” means the following NDA, which was approved prior to the Effective Date: NDA
#XXXXX.

          1.41 “XXXXX NDC” means the following NDCs: XXXXX.

          1.42 “XXXXX Products” means one or more products that are generic equivalents to the products
that are (a) marketed under the trademark XXXXX and (b) approved pursuant the XXXXX NDA or a
supplement thereto and/or sold under a XXXXX NDC, in each case at any strength, dosage or form;
provided that with respect to any obligations on Impax under Section 5.1.1 and XXXXX strength.

          1.43 “Steering Committee” means the committee composed of representatives of Impax and Medicis
described in Section 2.3 below.

          1.44 “Target Product Profile” means the product criteria set forth in Exhibit A.

          1.45 “Territory” means the United States of America including its territories and possessions.

          1.46 “Third Party” means any person or entity other than Medicis or Impax.

6

 

          1.47 “Third Party IP Costs” means, on a per ANDA Product basis and for a given calendar
quarter, the royalties and other payments (including upfront fees and milestone payments) paid by
Impax to a Third Party in consideration for a license or other rights to intellectual property
necessary or useful for the manufacture, development, commercialization, use, or sale of such ANDA
Product in the Territory.

          1.48 “Valid Claim” means a claim in an issued patent, whether such patent issues before, on or
after the Effective Date, in the Impax Patent Rights or any issued patent owned by Medicis pursuant
to Section 3.3, in each case that has not: (a) expired or been canceled; (b) been declared invalid
by a decision of a court or other appropriate body of competent jurisdiction from which no appeal
has been timely taken or may be taken (e.g., as a result of denial of a petition for writ of
certiorari); (c) been admitted to be invalid or unenforceable through reissue or disclaimer,
provided that actions taken during reexamination shall not, prior to the issuance of a final
certificate of reexamination, be construed as admissions of invalidity or unenforceability of the
claims contained in such patent prior to the initiation of such reexamination; or (d) been
abandoned.

     2. DEVELOPMENT PROGRAM; STEERING COMMITTEE.

          2.1 Overview. The goal of the Development Program is to develop the New Product.
Each party’s obligations under the Development Program shall be as set forth in this Section 2.1 or
as agreed in writing by the parties after the Effective Date. Each party shall use commercially
reasonable efforts to timely conduct its obligations under the Development Programs in accordance
with the Development Plan. Subject to Medicis’ payment of the amount set forth in Section 6.1,
each party shall bear its own costs to conduct its obligations under the Development Program.
Impax shall use commercially reasonable efforts to use its proprietary technology in existence as
of the Effective Date to formulate a product that meets or approaches the Target Product Profile
and to perform standard in vitro analytic testing upon such resulting New Product to determine
whether it meets the Target Product Profile criteria. Without limiting the generality of the
foregoing, Impax shall perform no more than three (3) in vivo
pharmacokinetic studies upon such New Product to determine whether it
meets the Target Product Profile criteria. Impax shall also provide a reasonable amount of technical
advice to Medicis with respect to pre-clinical manufacturing scale up work for the New Product.
For clarity, Impax shall not have any obligation to (i) perform more
than three (3) in vivo pharmacokinetic studies in the course of
performing the Development Program, (ii) perform any manufacturing
scale up work for the New Product, (iii) manufacture the New
Product for clinical (except for the 3 pharmacokinetic studies
described above) or commercial use, (iv) make any filings with the FDA or any other regulatory agency with respect to
the New Product, (v) conduct any clinical trials for the New
Product (except for the 3 pharmacokinetic studies described above) or (vi) conduct any
commercialization-related activities with respect to the New Product. Impax shall not incorporate
any know-how, patented technology or other intellectual property Controlled by Impax into the New
Product, the New Product Technology or the manufacturing process therefor without notifying Medicis
in writing. If Medicis notifies Impax in writing, within thirty (30) days of Impax’s notice, that
Medicis, based on its freedom to operate analysis, has a good faith concern that the use of such
know-how, technology or intellectual property with respect to the New Product may infringe the
intellectual property of a Third Party, then the parties will discuss such matter and, if such
discussion does not reasonably resolve Medicis’ concern, then Medicis will notify Impax in writing
within thirty (30) days of such discussion and Impax, following receipt of such notice, will not
incorporate such know-how, technology or intellectual property into the New Product.

7

 

          2.2 Amendment of Development Plan. The Development Plan may be amended from time to
time by mutual written agreement of the parties or by the Steering Committee pursuant to Section
2.3.1.

          2.3 Steering Committee.

               2.3.1 Composition of the Steering Committee. The Steering Committee shall foster the
collaborative relationship between the parties and shall in particular monitor the progress of the
Development Program and Impax’s progress with respect to the ANDA Products. The Steering Committee
shall be comprised of two (2) named representatives of Impax and two (2) named representatives of
Medicis. Each party shall appoint its respective representatives to the Steering Committee from
time to time, and may substitute one or more of its representatives, in its sole discretion,
effective upon notice to the other party of such change but shall use commercially reasonable
efforts to maintain stability of Steering Committee representation. The Steering Committee shall
not have the power to amend the terms of this Agreement but shall have the power to change the
Development Plan upon agreement of at least one (1) representative of the Steering Committee from
each party.

               2.3.2 Meetings. The Steering Committee shall meet not less than four (4) times each
calendar year, on such dates and at such times and places as agreed to by Impax and Medicis,
alternating between Scottsdale, Arizona and Hayward, California or such other locations as the
parties shall agree, including without limitation via teleconference. At such meetings, the
Steering Committee shall discuss the progress of the Development Program and set priorities
therefor.

               2.3.3 Committee Actions. Any approval, determination or other action agreed to by all
of the members of the Steering Committee present at the relevant Steering Committee meeting shall
be the approval, determination or other action of the Steering Committee; provided, however, that
at least one (1) representative of each party is present at such meeting, and that such approval,
determination or other action is documented in (a) a writing signed by a representative of each
party at such meeting or (b) the approved minutes for such meeting. The Steering Committee also
may act by unanimous written consent without a meeting or between meetings.

               2.3.4 Steering Committee Minutes and Reports. One representative of each party shall
be designated to take minutes of each Steering Committee meeting. Within fifteen (15) days
following each Steering Committee meeting during the term of the Agreement, the Steering Committee
shall prepare and provide to each party a reasonably detailed written report which shall summarize
the outcome of the meeting.

               2.3.5 Term. The term of the Steering Committee shall commence on the Effective Date
and continue until Impax has completed its obligations under the Development Plan.

          2.4 Records. Impax shall maintain complete and accurate records of all work it
conducts under the Development Program and all results, data and developments made in connection
therewith. Such records shall be complete and accurate and shall fully and properly

8

 

reflect all work done and results achieved in the performance of the Development Program in
sufficient detail and in good scientific manner appropriate for patent and regulatory purposes.
Medicis shall have the right to review and copy such records (including raw data and scientific
notebooks) at reasonable times to the extent necessary for Medicis to exercise its rights under
this Agreement with respect to New Product Technology and the development and commercialization of
the New Product.

          2.5 Reports. Within thirty (30) days following the end of each calendar quarter
during the term of the Development Program, Impax shall prepare and deliver to Medicis a written
summary report which shall describe the research performed to date under the Development Program
and all results, analysis and conclusions thereof.

     3. INTELLECTUAL PROPERTY.

          3.1 Research License. During the term of the Development Program, Medicis hereby
grants to Impax a fully paid, non-exclusive, non-transferable (except as permitted in Section 11.6)
license (without the right to grant sublicenses), under all patents, know-how and other
intellectual property rights Controlled by Medicis, for the sole purpose of conducting the
Development Program. Prior to engaging any subcontractors to perform work under the Development
Program, Impax shall notify Medicis in writing of the names and addresses of the subcontractors so
that Medicis may screen such subcontractors against the Exclusion Lists and any other legal
requirements. If, within fourteen (14) days following submission of the list to Medicis, Medicis
does not object to the use of such subcontractors on the basis that such subcontractors fail to
comply with the foregoing requirements or the representations under Section 9.2, Impax may proceed
with use of such subcontractors. The foregoing shall not relieve Impax of its requirements under
Section 9.2.

          3.2 License Grants.

               3.2.1 Subject to the terms and conditions of this Agreement, Impax hereby grants to Medicis an
exclusive, royalty-bearing, irrevocable, non-transferable (except as permitted in Section 11.6),
worldwide license (with the right to grant sublicenses through multiple tiers) under the Impax IP
Rights, to make, have made, use, offer for sale, sell and import the New Product.

               3.2.2 Subject to the terms and conditions of this Agreement, Medicis hereby grants to Impax a
perpetual, royalty-free, fully paid, irrevocable, non-transferable (except as permitted in Section
11.6), worldwide exclusive license (with the right to grant sublicenses through multiple tiers)
under the patent and other intellectual property rights owned by Medicis pursuant to Section 3.3,
to make, have made, use, offer for sale and import the Non-Specific
Technology for all uses outside the Oral Acne Field.

          3.3 New Product Technology. Impax shall promptly disclose to Medicis all New Product
Technology. Medicis shall solely own all right, title and interest in and to the New Product
Technology and all patent and other intellectual property rights therein. Impax hereby assigns to
Medicis all of its right, title and interest in and to the New Product Technology and all patent
and other intellectual property rights therein. Impax shall perform, during and after the

9

 

term of this Agreement, all acts that Medicis reasonably deems necessary or desirable to
permit and assist Medicis, at Medicis’ expense, in obtaining, perfecting and enforcing the full
benefits, enjoyment, rights and title throughout the world in the New Product Technology and all
patent and other intellectual property rights therein. If Medicis is unable for any reason, after
commercially reasonable efforts, to secure Impax’s signature to any document required to file,
prosecute, register or memorialize the assignment of any rights to the New Product Technology as
provided under this Agreement, Impax hereby irrevocably designates and appoints Medicis and
Medicis’ duly authorized officers and agents as Impax’s agents and attorneys-in-fact to act for and
on Impax’s behalf and instead of Impax to take all lawfully permitted acts to further the filing,
prosecution, registration, memorialization of assignment, issuance and enforcement of such rights,
all with the same legal force and effect as if executed by Impax. The foregoing is deemed a power
coupled with an interest and is irrevocable. Medicis shall have the world-wide right to control
the drafting, filing, prosecution, maintenance and enforcement of patents covering the New Product
Technology.

          3.4 No Implied Licenses. Except as explicitly set forth in this Agreement, neither
party grants to the other party any license, express or implied, under its patents or other
intellectual property.

     4. DEVELOPMENT AND COMMERCIALIZATION OF NEW PRODUCT

          4.1 Marketing of the New Product. Medicis shall have the sole right to make, use,
sell, distribute, market, exploit or otherwise commercialize the New Product. Medicis shall use
Diligent Efforts to obtain Regulatory Approval for the New Product in the Territory. Medicis’
efforts with respect to the commercialization of the New Product shall be in the sole discretion of
Medicis. Impax acknowledges and agrees that it shall have no right under this Agreement to make,
have made, use, sell, distribute, market, exploit or otherwise commercialize the New Product except
in the course of performing its obligations under the Development Program.

          4.2 Exclusive Relationship. The parties acknowledge and agree that Impax will obtain
access to Confidential Information of Medicis with respect to the Original Products and any
development work relating to the New Product, all of which may provide Impax with a competitive
advantage. Accordingly, during the term of this Agreement and for XXXXX thereafter
(unless this Agreement is terminated on account of Medicis’ uncured material breach of its payment
obligations under this Agreement), Impax shall not, and nor shall Impax directly or indirectly
encourage or assist any Third Party to, develop and/or commercialize any product that contains
XXXXX; provided, however, that such restriction shall not apply to XXXXX.

     5. DEVELOPMENT AND COMMERCIALIZATION OF ANDA PRODUCTS

          5.1 Development.

               5.1.1 General Obligation. Impax shall use Diligent Efforts to obtain Regulatory
Approval in the Territory for each ANDA Product.

10

 

               5.1.2
Specific Obligations. In addition to the obligations set forth
in Section 5.1.1, Impax shall have the obligations set forth in this
Section 5.1.2 solely with respect to the XXXXX Product
and the XXXXX Product. Impax shall, to the extent it has not
already done so prior to the Effective Date, conduct an in vivo
bioequivalence study for each such ANDA Product. If such study
demonstrates bioequivalence, then Impax shall file an ANDA for such
ANDA Product. If such study does not demonstrate bioequivalence,
Impax shall conduct a second in vivo bioequivalence study for such
ANDA Product. If such second study demonstrates bioequivalence, then
Impax shall file an ANDA for such ANDA Product.

          5.2
Commercialization. Following the FDA’s approval of
Impax’s ANDA for an ANDA Product, Impax shall use Diligent
Efforts to commercialize such ANDA Product in the Territory;
provided, however, that Impax shall not have any obligation to launch
or continue commercialization in the Territory of any ANDA Product at
any time when Impax does not have either (a) a license to all patents
and patent applications in the Territory that may claim such ANDA
Product or its manufacture or use, unless Impax is able to obtain
such license on commercially reasonable terms as determined by Impax,
or (b) a final, unappealable resolution in Impax’s favor of all
claims that such ANDA Product or its manufacture or use infringes a
patent in the Territory. Impax shall comply with all applicable laws
and regulations in connection with its research, development and
commercialization activities for each ANDA Product in the Territory.

          5.3 Reports. Within thirty (30) days following the end of each calendar quarter
during the term of this Agreement, Impax shall prepare and deliver to Medicis a written summary
report which shall describe its regulatory and commercialization efforts with respect to the ANDA
Products.

          5.4 Right of Negotiation. If Impax decides to develop a product that is a generic
equivalent of a product that is marketed under the XXXXX, XXXXX, XXXXX or XXXXX trademark but is
not an XXXXX Product, XXXXX Product, XXXXX Product or XXXXX Product, then Impax shall promptly
notify Medicis in writing. If Medicis is interested in co-developing such product with Impax, then
Medicis shall provide Impax, within thirty (30) days after Impax’s notice, with a written proposal
of the terms under which the parties would co-develop such product. Impax shall notify Medicis
within thirty (30) days of receipt of Medicis’ proposal whether, based on such proposal, it is
interested in engaging in negotiations with Medicis regarding the terms under which the parties
would co-develop such product. Medicis’ right of negotiation pursuant to this Section 5.4 shall
expire with respect to a particular product at the earliest of: (1) thirty (30) days after Impax’s
first notice pursuant to this Section 5.4, if Medicis has already not provided Impax with the
proposal specified above; (2) Medicis’ receipt of notice from Impax that it is not interested in
engaging in negotiations with Medicis regarding the terms under which the parties would co-develop
such product; (3) sixty (60) days after Medicis’ receipt of notice from Impax that it is interested
in engaging in negotiations with Medicis regarding the terms under which the parties would
co-develop such product, if the parties have not entered into a written agreement for such
co-development (such agreement, a “Co-Development Agreement”) and (4) the date of the parties’
entry into a Co-Development Agreement.

     6. FINANCIAL CONSIDERATIONS.

          6.1 Upfront Payment. Within five (5) business days after the Effective Date, Medicis
shall pay to Impax a non-creditable, non-refundable payment of Forty Million United States Dollars
($40,000,000 USD).

          6.2 Milestone Payments. Medicis shall pay to Impax the following non-creditable,
non-refundable milestone payments set forth in the following table after the first achievement of
the corresponding milestone:

11

 

	 	 	 
	Milestone Event	 	Milestone Payment
	(a) XXXXX

	 	XXXXX
	 
	 	 
	(b) XXXXX

	 	XXXXX
	 
	 	 
	(c) XXXXX

	 	Five Million United States
Dollars
($5,000,000 USD)
	 
	 	 
	(d) XXXXX

	 	Five Million United States
Dollars
($5,000,000 USD)
	 
	 	 
	(e) XXXXX

	 	Two Million United States
Dollars
($2,000,000 USD)
	 
	 	 
	(f) XXXXX

	 	Three Million United States Dollars ($3,000,000 USD)

Each such milestone payment shall be payable only once pursuant to this Section 6.2. Such payment
shall be made within thirty (30) days after the initial achievement of such milestone; provided,
however, that Medicis shall not be obligated to make the milestone payment described in subsection
(c) above before January 1, 2009, Medicis shall not be obligated to make the milestone payment described in
subsection (d) above before October 1, 2009, and Medicis shall not be obligated to make either of the
milestone payments described in subsections (e) and (f) above before January 1, 2010.

          6.3 Revenue Sharing for ANDA Products. Subject to the terms and conditions of this
Agreement, within sixty (60) days following the end of each calendar quarter, Impax shall pay to
Medicis fifty percent (50%) of all Gross Profit accrued during such calendar quarter. Medicis’
right to receive a share of the Gross Profit under this Section 6.3 with respect to an ANDA Product
shall expire, on an ANDA Product-by-ANDA Product basis, ten (10) years after the first commercial
sale by Impax of such ANDA Product in the Territory after the applicable ANDA has been approved by
the FDA. Each payment made under this Section 6.3 shall be accompanied by a written report stating
the number and description of all ANDA Products sold in the Territory during the relevant calendar
quarter; a detailed breakdown of the Cost of Sales associated therewith; the gross sales associated
therewith; the calculation of Net Sales thereon, including without limitation the amount of any
deduction provided for in the definition of Net Sales; and the calculation of Gross Profits
therefrom.

          6.4 Royalty Payments for New Product. Subject to the terms and conditions of this
Agreement, Medicis shall pay to Impax (a) XXXXX, and (b) XXXXX. Impax’s right to receive royalties
under this Section 6.4 shall expire, on a New Product-by-New
Product basis, eight (8) years after
the first commercial sale of such New Product in the Territory. All royalties due under this
Section 6.4 shall be paid quarterly within sixty (60) days after the end of the relevant calendar
quarter for which royalties are due. Each royalty payment shall be accompanied by a written report
stating the number and description of all New Products sold during the relevant calendar quarter;
the gross sales associated therewith; and the calculation of Net Sales thereon, including without
limitation the amount of any deduction provided for in the definition of Net Sales.
Notwithstanding the foregoing, any sales of New Product by Medicis to a distributor or sublicensee
for the purpose of creating an Authorized Product and sold by Medicis shall not be subject to the
foregoing royalty, but any revenues Medicis receives from the sale of such Authorized Product by
such distributor or sublicensee shall be subject to the revenue share in Section 6.5 below.

12

 

          6.5 Revenue Sharing for Authorized Products. Subject to the terms and conditions of
this Agreement, Medicis shall pay to Impax XXXXX percent (XXXXX%) of all amounts received by
Medicis on account of the sale of Authorized Products. Impax’s right to receive a share of such
amounts shall expire, on an Authorized Product-by-Authorized Product basis, eight (8) years after
the first commercial sale of such Authorized Product in the Territory. All payments due under this
Section 6.5 shall be paid quarterly within sixty (60) days after the end of the relevant calendar
quarter for which royalties are due. Each royalty payment shall be accompanied by a written report
stating the number and description of all Authorized Products sold during the relevant calendar
quarter; the gross sales associated therewith; and the amounts received by Medicis on account of
such gross sales.

          6.6 Taxes. A party responsible for a payment under Sections 6.1, 6.2, 6.3, 6.4 or 6.5
(the “Payor”) shall be responsible for and may withhold from payments made to the other party (the
"Payee”) under this Agreement any taxes required to be withheld by the Payor under applicable law.
Accordingly, if any such taxes are levied on such payments due hereunder (“Withholding Taxes”), the
Payor shall (i) deduct the Withholding Taxes from the payment amount, (ii) pay all applicable
Withholding Taxes to the proper taxing authority, and (iii) send evidence of the obligation
together with proof of tax payment to the Payee within sixty (60) days following that tax payment.

          6.7 Audit Rights. On no less than five (5) business days notice from the Payee, the
Payor shall make all such records, books of account, information and data concerning the applicable
payments owing under Section 6.3, 6.4 or 6.5 (which in the case of payments made pursuant to
Section 6.3 shall include records of Impax’s manufacture of ANDA Products or to the extent in
Impax’s possession, the manufacture of ANDA Products on behalf of Impax by its Third Party contract
manufacturer), available for inspection during normal business hours, by an independent auditor
selected by the Payee and reasonably acceptable to the Payer, for the purpose of an audit to
determine the accuracy of the reports delivered and amounts paid by the Payor pursuant to Section
6.3, 6.4 or 6.5; provided that the Payee may not request such inspection more than once in any
calendar year unless a discrepancy has been identified by the Payee and such audit shall be limited
to records, books of account, information and data pertaining to payments made pursuant to Section
6.3, 6.4 or 6.5 during the preceding three calendar years. Upon reasonable belief of discrepancy
or dispute, the Payee’s external auditors shall be entitled to take copies or extracts from such
records, books of account, information and data (but only to the extent related to the contractual
obligations set out in this Agreement) during any review or audit. Prior to the initiation of any
audit pursuant to this Section 6.7, the external auditor shall sign a confidentiality agreement
with the Payor providing that, as between the external auditor and the Payor, such records, books
of account, information and data shall be treated as Confidential Information of the Payor but may
be disclosed to the Payee solely to the extent necessary to document a discrepancy in any reports
delivered and amounts paid by the Payor pursuant to Section 6.3, 6.4 or 6.5. The Payee shall be
solely responsible for its costs in making any such audit, unless the Payee identifies a
discrepancy in favor of the Payor in the calculation of the share of Gross Profit or royalty or
other payment owed, as applicable, under this Agreement in any calendar year from those properly
payable for that calendar year of five percent (5%) or greater, in which event the Payor shall be
solely responsible for the reasonable cost of such audit and pay the Payee any underpayment. All
information disclosed by the Payor pursuant to this Section shall be deemed Confidential
Information of the Payor.

13

 

     7. TERM AND TERMINATION.

          7.1 Term. Subject to Section 7.2 below, this Agreement shall expire on the latest of
(a) expiration of Medicis’ obligation to pay royalties to Impax under Section 6.4, (b) expiration
of Medicis’ obligation to pay make Authorized Product-based payments to Impax under Section 6.5,
and (c) expiration of Impax’s obligation to pay royalties to Medicis under Section 6.3. The
license grants under Section 3.2 shall survive any such expiration in accordance with the terms of
Section 3.2.

          7.2 Termination for Cause. Either party may terminate this Agreement upon or after
the material breach of any material provision of this Agreement by the other party if the other
party has not cured such breach within thirty (30) days after receipt of express written notice
thereof by the non-breaching party.

          7.3 Effect of Expiration or Termination.

               7.3.1 Expiration or termination of this Agreement shall not relieve the parties of any
obligation accruing prior to such expiration or termination.

               7.3.2 The provisions of Sections 3.2, 3.3, 4.2 (for the term described therein), 6.7 (for
three years after expiration), 7.3.1, 7.3.2, 8, 10 and 11 shall survive the expiration of this
Agreement.

               7.3.3 The provisions of Sections 3.2, 3.3, 4.2 (for the term described therein), 6.2, 6.3 (for
the term described therein), 6.4 (for the term described therein), 6.5 (for the term described
therein), 6.6 (for the term of the payment obligations pursuant to Sections 6.1 through 6.5), 6.7
(for three years after termination), 7.3.1, 7.3.3, 8, 10 and 11 shall survive the termination of
this Agreement for any reason.

     8. CONFIDENTIALITY.

          8.1 Confidentiality. Until the last to expire of this Agreement, the License
Agreement or the Distribution Agreement (as defined in the License Agreement), and for a period of
five (5) years following the expiration or earlier termination hereof or thereof, except with
respect to any Confidential Information constituting a trade secret in which case the receiving
party’s obligation continues in perpetuity, provided such receiving party has been informed as to
the status of such Confidential Information as a trade secret, each party shall maintain in
confidence all Confidential Information disclosed by the other party, and shall not use, grant the
use of or disclose to any Third Party the Confidential Information of the other party other than as
expressly permitted hereby. Each party shall notify the other promptly upon discovery of any
unauthorized use or disclosure of the other party’s Confidential Information.

          8.2 Permitted Disclosures. Either party may disclose Confidential Information of the
disclosing party (a) on a need-to-know basis, to such party’s directors, officers and employees to
the extent such disclosure is reasonably necessary in connection with such party’s activities as
expressly authorized by this Agreement, and (b) to those agents and consultants, permitted
subcontractors and contract manufacturers who need to know such information to accomplish the
purposes of this Agreement (collectively, “Permitted

14

 

Recipients”); provided such Permitted Recipients are bound to maintain such Confidential
Information in confidence at least to the same extent as set forth in Section 8.1.

          8.3 Litigation and Governmental Disclosure. Each party may disclose Confidential
Information of the other party to the extent such disclosure is reasonably necessary (a) for
prosecuting or defending litigation or complying with a court order, or applicable law,
governmental regulations or investigation, and (b) in the case of Medicis as the receiving party to
conduct pre-clinical or clinical trials of the New Product, provided that if a party is required by
court order, law or regulation to make any such disclosure of the other party’s Confidential
Information it will give reasonable advance notice to the other party of such disclosure
requirement and will use good faith efforts to assist such other party to secure a protective order
or confidential treatment of such Confidential Information required to be disclosed.

          8.4 Limitation of Disclosure. The parties agree that, except as otherwise may be
required by applicable laws, regulations, rules or orders, including without limitation the rules
and regulations promulgated by the United States Securities and Exchange Commission, or any
regulations of any national securities exchange, and except as may be authorized in Section 8.5, no
information concerning this Agreement and the transactions contemplated herein shall be made public
by either party without the prior written consent of the other.

          8.5 Publicity. Neither party shall make any publicity releases, interviews or other
non-confidential dissemination of information concerning this Agreement or its terms, or either
party’s performance hereunder, to communication media, financial analysts or others without the
prior written approval of the other party, which approval shall not be unreasonably withheld,
delayed or conditioned. Notwithstanding anything to the contrary in this Agreement, the parties
understand and agree that either party, may, if so required, disclose some or all of the
information included in this Agreement or other Confidential Information of the other party (a) in
order to comply with its obligations under the law, including the United States Securities Act of
1933 and the United States Securities Exchange Act of 1934; (b) in order to comply with the listing
standards or agreements of any national or international securities exchange or the NASDAQ Stock
Market or New York Stock Exchange or other similar laws of a governmental authority; (c) to respond
to an inquiry of a governmental authority or regulatory authority as required by law; or (d) in a
judicial, administrative or arbitration proceeding. In any such event the party making such
disclosure shall (i) provide the other party with as much advance notice as reasonably practicable
of the required disclosure, (ii) cooperate with the other party in any attempt to prevent or limit
the disclosure, and (iii) limit any disclosure to the specific purpose at issue. In connection
with any filing of a copy of this Agreement with the Securities and Exchange Commission, the filing
party shall endeavor to obtain confidential treatment of economic and trade secret information, and
shall keep the other party informed as the planned filing (including, but not limited to providing
the other party with the proposed filing reasonably in advance of making the planned filing) and
consider the requests of the other party regarding such confidential treatment.

     9. REPRESENTATIONS AND WARRANTIES.

          9.1 Mutual Representations. Each party hereby represents and warrants to the other
party that:

15

 

               (a) the person executing this Agreement is authorized to execute this Agreement;

               (b) this Agreement is legal and valid and the obligations binding upon such party are
enforceable by their terms; and

               (c) the execution, delivery and performance of this Agreement does not conflict with any
agreement, instrument or understanding, oral or written, to which such party may be bound, nor
violate any law or regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.

          9.2 Compliance. Impax hereby represents, warrants and covenants to Medicis that:

               (a) neither it nor its subcontractors, nor any of its or its subcontractors’ personnel have
been nor are disqualified or debarred under Section 306 of the Federal Food, Drug and Cosmetic Act
(as amended by the Generic Drug Enforcement Act of 1992), 21 U.S.C. § 336;

               (b) neither it nor its subcontractors shall use in any capacity the services of any person
debarred, disqualified or under investigation under the provisions of the Section 306 of the
Federal Food, Drug and Cosmetic Act (as amended by the Generic Drug Enforcement Act of 1992), 21
U.S.C. § 336, and will notify Medicis immediately in the event Impax is made aware of any
investigation or proceeding for debarment;

               (c) neither its nor its subcontractors’ personnel within five (5) years preceding the
Effective Date have been convicted of any offense required to be listed under FDA regulations;

               (d) it and its subcontractors shall comply with all applicable laws and regulations in the
performance of its obligations under the Agreement;

               (e) neither it nor its subcontractors shall use any Ineligible Person or a person on an
Exclusion List in connection with the performance of any of its obligations or activities under the
Agreement; and

               (f) it has filed with the FDA the ANDA listed on Exhibit B.

          9.3 Disclaimer of Warranties. Except for those warranties set forth in Sections 9.1
and 9.2, neither party makes any warranty, written, oral, express or implied, with respect to
Development Program, the New Product, the ANDA Products or the Authorized Products. ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT HEREBY ARE DISCLAIMED BY
BOTH PARTIES.

          9.4 Limitation of Liability. WITH THE EXCEPTION OF DAMAGES RESULTING FROM A PARTY’S
BREACH OF ITS CONFIDENTIALITY OBLIGATIONS

16

 

UNDER THE AGREEMENT OR A PARTY’S OBLIGATIONS UNDER SECTION 10 (INDEMNIFICATION) OR A BREACH BY
IMPAX OF SECTION 4.2, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR LOSS OF USE OR
PROFITS OR OTHER COLLATERAL, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES IN CONNECTION
WITH THIS AGREEMENT, WHETHER SUCH CLAIMS ARE FOUNDED IN TORT OR CONTRACT.

          9.5 Equitable Relief.

               9.5.1 Each party acknowledges and agrees that the covenants contained in this Agreement
regarding the confidentiality and use of the Confidential Information of the disclosing party are
reasonable and necessary to protect the legitimate interests of the disclosing party, that the
disclosing party would not have entered into this Agreement in the absence of such covenants, and
that the receiving party’s breach or threatened breach of such covenants shall cause the disclosing
party significant and irreparable harm, the amount of which shall be extremely difficult to
estimate and ascertain, and for which money damages shall not be adequate. Each party further
acknowledges and agrees that the disclosing party shall have the right to apply to any court of
competent jurisdiction for an injunction order restraining any breach or threatened breach of the
covenants contained in this Agreement regarding confidentiality and use of the Confidential
Information and specifically enforcing such covenants, without the necessity of posting any bond or
security or giving the receiving party an opportunity to cure, in addition to seeking any other
remedy available to the disclosing party in law or equity. Each party agrees that it shall not
challenge any of the foregoing acknowledgements and agreements concerning injunctive relief in any
proceeding brought by a disclosing party.

               9.5.2 Impax acknowledges and agrees that the obligations and undertakings of Impax pursuant to
Section 4.2 of this Agreement are reasonable and necessary to protect the legitimate interests of
Medicis, that Medicis would not have entered into this Agreement in the absence of such provision,
and that Impax’s breach or threatened breach or failure to comply with Section 4.2 of this
Agreement shall cause Medicis significant and irreparable harm, the amount of which shall be
extremely difficult to estimate and ascertain, and for which money damages shall not be adequate.
Impax further acknowledges and agrees that Medicis shall have the right to apply to any court of
competent jurisdiction for an injunction order restraining any breach or threatened breach of
Section 4.2 of this Agreement and specifically enforcing the terms and provisions of such Sections
of this Agreement, without the necessity of posting any bond or security or giving Impax an
opportunity to cure, in addition to seeking any other remedy available to Medicis in law or equity.
Impax agrees that it shall not challenge any of the foregoing acknowledgements and agreements
concerning injunctive relief in any proceeding brought by Medicis.

     10. INDEMNIFICATION. 

          10.1 Medicis Indemnification. Medicis shall indemnify, defend and hold harmless Impax
and its directors, managers, members, officers, employees, authorized subcontractors and agents
(collectively the “Impax Parties”) from and against any and all liabilities, obligations,
penalties, judgments, disbursements of any kind and nature, losses,

17

 

damages, costs and expenses (including, without limitation, reasonable attorney’s fees and
costs) (collectively, “Losses”) incurred as a result of any claims, demands, actions or other
proceedings by Third Parties against any of the Impax Parties to the extent arising out of (a) a
breach by Medicis of any representation, warranty or covenant under this Agreement, (b) any failure
of Medicis to comply with applicable laws and regulations in the performance of its obligations
under this Agreement, or (c) the research, development, regulatory approval or commercialization of
the New Product by or on behalf of Medicis, except to the extent that such Losses arise out of
Impax’s breach of any representation, warranty or covenant under this Agreement.

          10.2 Impax Indemnification. Impax shall indemnify, defend and hold harmless Medicis
and its directors, managers, members, officers, employees, authorized subcontractors and agents
(collectively the “Medicis Parties”) from and against any and all Losses incurred as a result of
any claims, demands, actions or other proceedings by Third Parties against any of the Medicis
Parties to the extent arising out of (a) a breach by Impax of any representation, warranty or
covenant under this Agreement, (b) any failure of Impax to comply with applicable laws and
regulations in the performance of its obligations under this Agreement, or (b) the research,
development, regulatory approval or commercialization of the ANDA Products by or on behalf of
Impax, except to the extent that such Losses arise out of Medicis’ breach of any representation,
warranty or covenant under this Agreement.

          10.3 Obligations. A party which intends to claim indemnification under this Section
10 (the “Indemnified Party”) shall promptly notify the other party (the “Indemnifying Party”) in
writing of any claim, demand, action, or other proceeding in respect of which the Indemnified Party
intends to claim such indemnification; provided, however, that failure to provide such notice
within a reasonable period of time shall not relieve the Indemnifying Party of any of its
obligations hereunder except to the extent the Indemnifying Party is prejudiced by such failure.
The Indemnified Party shall permit the Indemnifying Party, at its discretion, to settle any such
action, claim or other matter. Notwithstanding the foregoing, the Indemnifying Party shall not
enter into any settlement that would adversely affect the Indemnified Party’s rights hereunder, or
impose any obligations on the Indemnified Party in addition to those set forth herein, in order for
it to exercise such rights, without the Indemnified Party’s prior written consent, which shall not
be unreasonably withheld or delayed. No such action, claim or other matter shall be settled
without the prior written consent of the Indemnifying Party, which shall not be unreasonably
withheld or delayed. The Indemnified Party shall reasonably cooperate with the Indemnifying Party
and its legal representatives in the investigation and defense of any claim, demand, action, or
other proceeding covered by the indemnification obligations of this Section 10. The Indemnified
Party shall have the right, but not the obligation, to be represented in such defense by counsel of
its own selection and at its own expense.

          10.4 Responsible Party. With respect to the prosecution or defense of any litigation
or proceeding asserted by or against Impax with respect to any of the ANDA Products, Impax shall be
solely responsible for all costs, expenses, damages and other liabilities with respect to such
litigation or proceeding, except to the extent subject to Section 10.1. With respect to the
prosecution or defense of any litigation or proceeding asserted by or against Medicis with respect
to the New Product, Medicis shall be solely responsible for all costs,

18

 

expenses, damages and other liabilities with respect to such litigation or proceeding, except
to the extent subject to Section 10.2.

     11. GENERAL PROVISIONS.

          11.1 Notices. All notices hereunder shall be delivered by facsimile (confirmed by
overnight delivery), or by overnight delivery with a reputable overnight delivery service, to the
following address of the respective parties:

	 	 	 	 	 
	 

	 	If to Medicis:
	 	Medicis Pharmaceutical Corporation
	 

	 	 	 	7720 North Dobson Road
	 

	 	 	 	Scottsdale, Arizona 85256
	 

	 	 	 	Attn: Chief Executive Officer
	 

	 	 	 	Facsimile: 480-291-5163
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Medicis Pharmaceutical Corporation

7720 North Dobson Road

Scottsdale, Arizona 85256

Attn: General Counsel
	 

	 	 	 	Facsimile: 480-291-5163
	 
	 	 	 	 
	 

	 	If to Impax:
	 	Impax Laboratories, Inc.
	 

	 	 	 	30831 Huntwood Avenue
	 

	 	 	 	Hayward, California 94544
	 

	 	 	 	Attn: President, Generics Division
	 

	 	 	 	Facsimile: 510-471-1595
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Impax Laboratories, Inc.
	 

	 	 	 	30831 Huntwood Avenue
	 

	 	 	 	Hayward, California 94544
	 

	 	 	 	Attn: Legal Department
	 

	 	 	 	Facsimile: 510-476-2092

     Notices shall be effective on the day of receipt. A party may change its address listed above
by notice to the other party given in accordance with this Section 11.1.

          11.2 Entire Agreement. The parties hereto acknowledge that this Agreement sets forth
the entire agreement and understanding of the parties and supersedes all prior written or oral
agreements or understandings with respect to the subject matter hereof. No modification of any of
the terms of this Agreement, or any amendments thereto, shall be deemed to be valid unless in
writing and signed by an authorized agent or representative of both parties hereto. No course of
dealing or usage of trade shall be used to modify the terms and conditions herein. This Agreement
shall be binding on each of Impax and Medicis and their respective permitted successors and
assigns.

          11.3 Bankruptcy. All rights granted under this Agreement by Impax to Medicis are and
shall be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code,

19

 

licenses of rights to “intellectual property” as defined under Section 101(52) of the US.
Bankruptcy Code. The parties agree that Medicis, as a 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, subject to performance by Medicis of its pre-existing obligations under this
Agreement. The parties further agree that, if a bankruptcy proceeding is commenced by or against
Impax, Medicis shall be entitled to a complete duplicate of (or complete access to, as appropriate)
any such intellectual property and all embodiments of such intellectual property, and the same, if
not already in Medicis’ possession, shall be promptly delivered to Medicis (a) after any such
commencement of a bankruptcy proceeding upon request of Medicis, unless Impax elects to continue to
perform all of its obligations under this Agreement, or (b) if not delivered under subsection (a)
above, upon the rejection of this Agreement by or on behalf of Impax upon written request therefore
by Medicis.

          11.4 Waiver. None of the provisions of this Agreement (including the Exhibits hereto)
shall be considered waived by any party hereto unless such waiver is agreed to, in writing, by
authorized agents of such party. The failure of a party to insist upon strict conformance to any
of the terms and conditions hereof, or failure or delay to exercise any rights provided herein or
by law shall not be deemed a waiver of any rights of any party hereto.

          11.5 Obligations to Third Parties. Each party warrants and represents that this
Agreement does not conflict with any contractual obligations, expressed or implied, undertaken with
any Third Party.

          11.6 Assignment. Neither party shall assign this Agreement or any part hereof or any
interest herein (whether by operation of law or otherwise) to any Third Party without the written
approval of the other party; provided, however, that either party may assign this Agreement without
such consent (i) to any Affiliate; and (ii) in the case of a merger, consolidation, change in
control or sale of all or substantially all of the assets of the Relevant Business Unit of the
party seeking such assignment or transfer and such transaction relates to the business or assets
covered by this Agreement and the resulting entity assumes all of the obligations under this
Agreement. For the purposes of this Section 11.6, the “Relevant Business Unit” shall mean, with
respect to Impax, the generics division of Impax, and with respect to Medicis, the medical
dermatology division of Medicis. No assignment shall be valid unless the permitted assignee(s)
assumes all obligations of its assignor under this Agreement. No assignment shall relieve any
party of responsibility for the performance of its obligations hereunder. Any purported assignment
in violation of this Section 11.6 shall be void.

          11.7 Independent Contractor. Impax and Medicis are acting under this Agreement as
independent contractors and neither shall be considered an agent of, or joint venturer with, the
other. Unless otherwise provided herein to the contrary, each party shall furnish all expertise,
labor, supervision, machining and equipment necessary for the performance of its obligations
hereunder and shall obtain and maintain all building and other permits and licenses required by
public authorities.

          11.8 Governing Law. In any action brought regarding the validity, construction and
enforcement of this Agreement, it shall be governed in all respects by the laws of the State of
Arizona, without regard to the principles of conflicts of laws. The federal and state courts in
the

20

 

State of Arizona shall have jurisdiction over the parties hereto in all matters arising
hereunder and the parties hereto agree that the venue will be a state or federal court in the State
of Arizona.

          11.9 Severability. If any term or provision of this Agreement shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and this Agreement shall be
interpreted and construed as if such term or provision, to the extent the same shall have been held
to be invalid, illegal or unenforceable, had never been contained herein.

          11.10 Headings, Interpretation; Construction. The headings used in this Agreement are
for convenience only and are not part of this Agreement. In the event that Medicis makes a claim
for damages based on rescission or breach of this Agreement, nothing in this Agreement shall be
construed as precluding Medicis from seeking recovery of those amounts paid by Medicis under this
Agreement to the extent such amounts are recoverable under applicable law and Impax’s liability is
not limited by Section 9.4.

          11.11 Counterparts. The Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

[Remainder of this page intentionally blank]

21

 

IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their
duly-authorized representatives effective as of the Effective Date.

	 	 	 	 	 	 	 	 	 
	IMPAX LABORATORIES, INC. 	 	MEDICIS PHARMACEUTICAL CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Arthur A. Koch, Jr.
	 	By:
	 	/s/ Mark Prygocki
	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	Arthur A. Koch, Jr.
	 	Name:
	 	Mark Prygocki	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	SVP — CFO
	 	Title:
	 	COO	 	 
	 

	 	 
	 	 	 	 	 	 

22

 

EXHIBIT A

Target Product Profile

XXXXX.

23

 

EXHIBIT B

ANDA

ANDA No. XXXXX; for XXXXX

24

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