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Exhibit 10.8    
    

SECURITY AGREEMENT  

BETWEEN 

AMPHASTAR PHARMACEUTICALS, INC.  

AND 

DRUG ROYALTY USA, INC.  

 DATED as of the 5th day of August 2003  

 
TABLE OF CONTENTS  

	 
	 
	 	 
	 	Page

	1.	GRANT OF SECURITY	 	1
	

2.	

OBLIGATIONS SECURED	
 	

1
	

3.	

REPRESENTATIONS, WARRANTIES AND COVENANTS	
 	

2
	

4.	

INDEMNITY	
 	

4
	

5.	

EVENTS OF DEFAULT	
 	

4
	

6.	

RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT	
 	

5
	

7.	

GENERAL PROVISIONS	
 	

7
	

SCHEDULE A	
 	

LIST OF EXISTING SECURITY ON THE COLLATERAL	
 	

12
	

SCHEDULE B	
 	

INTELLECTUAL PROPERTY	
 	

13
	

ANNEX 1	
 	

DEFINITIONS	
 	

14
	

EXHIBIT A	
 	

SPECIAL POWER OF ATTORNEY	
 	

17

i

   SECURITY AGREEMENT  

        THIS SECURITY AGREEMENT is made and entered into as of the 5th day of August, 2003 (this "Agreement"), between  AMPHASTAR PHARMACEUTICALS, INC., a California corporation ("Amphastar" or the
"Grantor"), with and in favor of DRUG ROYALTY USA, INC., a Nevada corporation
("DRC"). 

        WHEREAS, the Grantor is entering into a Royalty Purchase Agreement dated as of even date herewith (as amended, supplemented or otherwise
modified from time to time, the "RP Agreement") with DRC, pursuant to which DRC has agreed to provide funds to the Grantor in return for a royalty
interest in the Net Sales of Cortrosyn, subject to the terms and conditions set forth in the RP Agreement and this Agreement; 

        AND WHEREAS, unless as otherwise defined herein, capitalized terms shall have the meaning ascribed to them in Annex 1 attached hereto; 

        AND WHEREAS, under the RP Agreement, the Grantor has agreed to grant to DRC a security interest in and lien on the Product Rights,
Intellectual Property, the Grantor's interest in and rights under the Acquisition Agreements, the accounts relating to the Sales of Cortrosyn and associated contracts and inventory and proceeds; 

        AND WHEREAS, it is a condition precedent to the closing under the RP Agreement that the Grantor shall have executed and delivered this
Agreement and granted a security interest in all of the Grantor's right, title and interest in and to all of the Collateral (as hereinafter defined) in favor of DRC, as contemplated hereby. 

        NOW, THEREFORE, in consideration of the premises hereof and to induce DRC to enter into the RP Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

1.    GRANT OF SECURITY    

        To
secure the full and prompt payment and performance when due of all of the Obligations (as defined below) of the Grantor pursuant to the RP Agreement, the Grantor hereby grants and
conveys to DRC a valid security interest in all of the Grantor's now existing or hereafter acquired right, title and interest in and to (being hereinafter collectively referred to as the
"Collateral"): (a) the Product Rights, including but not limited to the NDA, all reissues, extensions, continuations, renewals, supplements or amendments to the NDA, and all copies of all FDA
files, regulatory files and formulae for Cortrosyn and the master batch records for Cortrosyn; (b) the Intellectual Property, including but not limited to the Trade Mark and all Intellectual
Property set forth on Schedule B, and all reissues, extensions, continuations, renewals, supplements or amendments to the Trade Mark and such Intellectual Property; (c) the rights,
benefits and entitlements under the Acquisition Agreements; (d) all income, royalties, damages and payments now or hereafter due or payable with respect to any of the foregoing, including all
Accounts relating to the Sales of Cortrosyn; (e) all Inventory of Cortrosyn in any form, including but not limited to all packaging for Cortrosyn and all other Inventory relating to Cortrosyn;
(f) all General Intangibles with respect to any of the foregoing, including but not limited to all contracts, books, records and customer lists with respect to any of the foregoing;
(g) all Commercial Tort Claims relating to Cortrosyn or any of the Product Rights or Intellectual Property, including but not limited to any and all claims for infringement of the Trade Mark or
any other misuse or misappropriation of the Intellectual Property or the Product Rights; and (h) all Proceeds and Supporting Obligations of any of the foregoing. 

2.    OBLIGATIONS SECURED    

        The
security interest, lien and other interests granted to DRC pursuant to this Agreement shall secure the prompt performance, observance and payment in full of any and all obligations,
liabilities 

1

 

and
indebtedness of every kind, nature and description owing by the Grantor to DRC arising under this Agreement, the RP Agreement, or any applicable Closing Documents, whether now existing or
hereafter arising, whether arising after the commencement of any case with respect to the Grantor under the United States Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for the commencement of such case), including without limitation the amounts described in Section 7(i), all of the
foregoing being collectively referred to herein as the "Obligations". 

3.    REPRESENTATIONS, WARRANTIES AND COVENANTS    

        The
Grantor hereby represents, warrants and covenants with and to DRC the following: 

        (a)   The
Grantor shall pay and perform all of the Obligations according to their terms. 

        (b)   The
Grantor is and will continue to be the owner of all of the Collateral, free from any adverse claim, security interest, lien, mortgage, assignment or encumbrance of
any nature whatsoever in favor of any Person except the security interests granted to DRC, the security granted under the security agreement dated June 26, 2003 (the "Organon Security
Agreement") executed by the Grantor in favor of Organon USA Inc. and the security described in Schedule "A" hereto, all of the holders of such security listed in Schedule "A" have released
their security to the security granted to DRC hereunder. 

        (c)   The
Grantor has the right and power to grant the security interest granted hereunder. The Grantor shall, at the Grantor's expense, perform all acts and execute all
documents necessary to maintain the existence of the Trade Mark as a registered trademark and to maintain the existence of all of the Collateral as valid and subsisting, including, without limitation,
the filing of any renewal affidavits and applications. The Grantor shall take all actions necessary to create and maintain the security interest granted hereunder as a valid and perfected security
interest, subject to no Encumbrances other than as permitted pursuant to Section 4.1(m) of the RP Agreement. 

        (d)   The
Grantor shall not assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security interest in or lien upon, encumber, grant an exclusive or
nonexclusive license relating to the Collateral, or otherwise dispose of any of the Collateral, in each case without the prior written consent of DRC. 

        (e)   The
Grantor's chief executive office is located at 11570 6th Street, Rancho Cucamonga, California 91730. Except as listed on Schedule A hereto, the Grantor has
not maintained its chief executive office at any other location during the last five (5) years. The Grantor is organized solely in the State of California, and its (i) California
organizational identification number is C1779272 and (ii) federal tax identification number is 33-0702205. There is no financing statement or other document or instrument now signed
or on file in any public of1ice granting a security interest in or otherwise encumbering any part of the Collateral, except those showing DRC as secured party and those listed on Schedule A
hereto. So long as any Obligations remain outstanding, the Grantor will not execute, and there will not be on file in any public office, any such financing statement or other document or instruments,
except financing statements filed or to be filed in favor of DRC. 

        (f)    The
Grantor hereby authorizes DRC to authenticate in the name of the Grantor and file one or more financing statements (or similar documents) with respect to the
Collateral. The Grantor further authorizes DRC to have this Agreement or any other similar security agreement filed with the United States Patent and Trademark Office (the "USPTO") or any other
appropriate federal, state or government office. 

        (g)   The
Grantor shall not do any act, nor omit to do any act, whereby the Intellectual Property (including the Trade Mark) may become abandoned, invalidated, unenforceable,
avoided, or avoidable, except for any such act or omission that, individually or in the aggregate, shall not 

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have
resulted in, and could not reasonably be expected to result in, a material adverse effect on the Collateral. The Grantor shall notify DRC immediately if it knows or has reason to know of any
reason why any application, registration, or recording with respect to the Intellectual Property (including the Trade Mark) may become abandoned, canceled, invalidated, avoided or avoidable. 

        (h)   The
Grantor shall render any assistance, as DRC shall determine is necessary or advisable, to DRC in any proceeding before the USPTO, any federal or state court, or any
similar office or agency in the United States, any State thereof or any political subdivision thereof, to maintain the application and registration of the Intellectual Property (including the Trade
Mark) as the Grantor's exclusive property and to protect DRC's interest therein, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition,
and cancellation proceedings. 

        (i)    The
Grantor shall promptly notify DRC if the Grantor learns of any infringement of the Intellectual Property, including any use by any Person of any word, term or design
which infringes on the Trade Mark or is likely to cause confusion with the Trade Mark. If requested by DRC, the Grantor, at DRC's expense, shall (i) join with DRC in such action as DRC, in
DRC's discretion, may deem advisable for the protection of DRC's interest in and to such Intellectual Property and (ii) execute such documents or take such other actions as DRC may reasonably
request to perfect and protect DRC's security interest in such claim. 

        (j)    The
Grantor shall maintain the validity of the NDA, shall file all reports required in connection with the NDA, and shall comply with the requirements in or relating to
the NDA. 

        (k)   The
Grantor shall promptly notify DRC, in writing, of any suit, action, proceeding, claim or counterclaim brought against the Grantor or against any other Person that
could reasonably be expected to affect adversely the Collateral, and shall, on request, deliver to DRC a copy of all pleadings, papers, orders or decrees theretofore and thereafter filed in any such
suit, action or proceeding, and shall keep DRC duly advised in writing of the progress of any such suit. 

        (l)    To
the best knowledge and belief of the Grantor after due inquiry, no infringement or unauthorized use presently is being made of any Collateral. In the event of any
material infringement of the Collateral by others or in the event of any other conduct detrimental to the Collateral by others known or brought to the attention of the Grantor, the Grantor shall
promptly notify DRC in writing of such infringement or other conduct and the full nature, extent, evidence and facts of such infringement or other conduct known to the Grantor. 

        (m)  In
the event the Grantor files a patent application in respect of Cortrosyn with the USPTO (such patent application shall be included in the Collateral), then upon the
receipt of an official filing receipt indicating that a patent application included in the Collateral has been received by the USPTO and upon the issuance of any patent registration included in the
Collateral, the Grantor shall notify DRC promptly in writing, which notice shall identify such patent application or patent registration, and the Grantor shall execute all documents necessary or
reasonably requested by ORC to perfect a security interest in such patent application or such patent registration, and the Grantor shall annually, or more frequently as DRC shall request, cause an
instrument sufficient to perfect, protect or establish any Encumbrance hereunder to be recorded in the USPTO with respect to all United States patent applications filed by it or patents issued to it
during the prior calendar year. 

        (n)   If
requested by ORC, the Grantor shall provide to DRC with a complete status report of all Collateral; provided that the Grantor shall not be required to provide such a
status report more frequently than once a year during the term of this Agreement, unless DRC, in its sole discretion, reasonably believes that a Material Adverse Financial Change has occurred or is
reasonably likely to occur or that the Collateral has been or is reasonably likely to be impaired or otherwise 

3

 

adversely
effected, in which case the Grantor shall provide DRC a complete status report of all Collateral at DRC's request (which request may be made more than annually). Upon request by DRC, the
Grantor shall deliver to counsel for DRC copies of any documents concerning or related to the prosecution, protection, maintenance, enforcement and issuance of the Collateral. All information
furnished to DRC concerning the Collateral and proceeds thereof is and will be accurate and correct in all material respects. 

        (o)   The
Grantor agrees, upon the reasonable request by DRC, during the term of this Agreement: 

          (i)  to
execute, acknowledge and deliver all additional instruments and documents necessary or desirable to effect the purposes and intents of this Agreement, in a form
reasonably acceptable to counsel for DRC; and 

         (ii)  to
do all such other acts as may be necessary or appropriate to carry out the purposes and intents of this Agreement, and to create, evidence, perfect and continue the
security interests of DRC in the Collateral. 

        (p)   The
Grantor shall notify DRC in writing at least sixty days prior to any proposed voluntary abandonment of any Intellectual Property and obtain the prior written consent
of DRC to such abandonment. 

        (q)   The
Grantor shall, concurrently with the execution and delivery of this Agreement, execute and deliver to DRC five (5) originals of a Special Power of Attorney in
the form of Exhibit A annexed hereto for the implementation of the sale or other disposition of the Collateral pursuant to DRC's exercise of the
rights and remedies granted to DRC hereunder; provided, however, DRC hereby agrees that it will not
exercise its rights under such Special Power of Attorney unless an Event of Default (defined below) has occurred and is continuing. 

        (r)   If
at any time the Grantor acquires a Letter-of-Credit Right relating to the Accounts included in the Collateral, the Grantor shall
(i) promptly notify DRC thereof and (ii) take such actions as DRC may reasonably request to perfect DRC's security interest in such Letter-of-Credit Right. 

4.    INDEMNITY    

        The
Grantor agrees to indemnify DRC from and against any and all claims, losses and liabilities arising out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement and any actions taken pursuant to Section 6 or any failure to act thereunder). 

5.    EVENTS OF DEFAULT    

        Each
of the following constitutes an Event of Default (each an "Event of Default"): 

        (a)   forthwith
in the event of a failure by the Grantor to make any payment of the balance of the purchase price under Section 4.1(b) or 4.1(c) of the Sale Agreement
or in the event of a breach of any of the covenants in Section 4.1(m) of the RP Agreement; 

        (b)   upon
ten (10) days written notice in the event of a failure to make any payment of the Royalty Interest to DRC when due under the RP Agreement if the Grantor
fails to cure such failure to pay within the ten (10) day period; 

        (c)   upon
thirty (30) days written notice in the event of any material breach by the Grantor of any covenant in this Agreement, the RP Agreement, in any applicable
Closing Document, or in the Acquisition Agreements, as the case may be (other than the covenants described in Sections 5(a) and (b) herein), if the Grantor fails to cure the material breach
within the thirty (30) day period; 

4

 

        (d)   forthwith
upon notice in the event of a material breach by the Grantor of any representation and warranty provided for in this Agreement, the RP Agreement, or in any
applicable Closing Documents; 

        (e)   in
the event of the entry of an order for relief with respect to the Grantor under the U.S. Bankruptcy Code, and rejection of any Acquisition Agreement by or on behalf
of the Grantor under Section 365 of the U.S. Bankruptcy Code; 

        (f)    forthwith
upon notice if the Grantor makes an assignment for the benefit of creditors or if a voluntary or involuntary petition in bankruptcy or insolvency shall be
filed by or against the Grantor or for any of the Collateral or any of its other material property or if a receiver, receiver and manager, liquidator, or trustee or person with similar powers is
appointed for the Grantor or if any proceeding, voluntary or involuntary, is commenced respecting the Grantor pursuant to any statute relating to bankruptcy, insolvency, reorganization of debts,
liquidation, winding-up or dissolution; 

        (g)   the
Grantor passes any resolution for its liquidation, winding-up or dissolution or ceases to carryon its business; 

        (h)   any
seizure, execution, sequestration, distress, attachment or other equivalent process is issued or levied against any of the Collateral or any other material property
of the Grantor; and 

        (i)    upon
the occurrence of an Event of Default under the terms and conditions of the Organon Security Agreement or under any security agreement encumbering all or any
portion of the Collateral. 

6.    RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT    

        (a)   If
any Event of Default shall have occurred and be continuing, then and in every such case, subject to any mandatory requirements of law, DRC, in addition to other
rights and remedies provided for herein and any rights now or hereafter existing under applicable law, shall have all rights and remedies as a secured creditor under the Uniform Commercial Code in all
relevant jurisdictions and may: 

          (i)  personally,
or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from the Grantor or any other Person who then has possession
of any part thereof, with or without notice or process of law, and for that purpose may enter upon the Grantor's premises where any of the Collateral is located and remove the same and use in
connection with such removal any and all services, supplies, aids and other facilities of the Grantor; and 

         (ii)  sell,
assign or otherwise liquidate, or direct the Grantor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession
of the proceeds of any such sale or liquidation; 

        (b)   Any
collateral repossessed by DRC under or pursuant to Section 6(a) and any other Collateral whether or not so repossessed by DRC, may be sold, assigned, leased
or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time
or times, at such place or places and on such terms as DRC may, in compliance with any requirements of law, determine to be commercially reasonable. Any such disposition which shall be a private sale
or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to the Grantor specifying the time at which such disposition is to be made
and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the Grantor or any nominee of the Grantor to
acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public
sale permitted by such requirements shall be made upon not less 

5

 

than
10 days' written notice to the Grantor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the
option of DRC, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers of general circulation in the jurisdiction in which such
auction is to be held. To the extent permitted by any such requirements of law, DRC may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this
Section without accountability to the Grantor (except to the extent of surplus money received). It: under mandatory requirements of law, DRC shall be required to make disposition of the Collateral
within a period of time which does not permit the giving of notice to the Grantor as hereinabove specified, DRC need give the Grantor only such notice of disposition as shall be reasonably practicable
in view of such mandatory requirements of law. DRC shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. DRC may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 

        (c)   Without
limiting DRC's rights pursuant to Section 7(i), upon the occurrence and continuance of an Event of Default, DRC shall have the right at any time to make
any payments and do any other acts DRC may deem necessary to protect its security interests in the Collateral, including, without limitation, the rights to pay, purchase, contest or compromise any
Encumbrance which, in the reasonable judgment of DRC, appears to be prior to or superior to the security interests granted hereunder, and appear in and defend any action or proceeding purporting to
affect its security interests in, or the value of, the Collateral. The Grantor hereby agrees to reimburse DRC for all payments made and expenses incurred under this Agreement including reasonable
fees, expenses and disbursements of attorneys and paralegals acting for DRC, including any of the foregoing payments under, or acts taken to protect its security interests in, the Collateral,
including payment of the balance of the purchase price for the Product Rights and all other rights acquired under or pursuant to the Sale Agreement, which amounts shall be secured under this
Agreement, and agrees it shall be bound by any payment made or act taken by DRC hereunder absent DRC's gross negligence or willful misconduct. DRC shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts. 

        (d)   The
Grantor hereby irrevocably authorizes and appoints DRC, or any Person or agent DRC may designate, as the Grantor's attorney-in-fact, with
full authority in the place and stead of the Grantor and in the name of the Grantor or otherwise, at the Grantor's cost and expense, in DRC's good faith business judgment, to take any action and to
execute any instrument that DRC may deem necessary or advisable to accomplish the purposes and intents of this Agreement and to exercise all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default, which powers, being coupled with an interest, shall be irrevocable until all of the Obligations shall have been paid and satisfied in
full: 

          (i)  ask
for, demand, collect, bring suit, recover, compromise, administer, accelerate or extend the time of payment, issue credits, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of the Collateral; 

         (ii)  receive,
take, endorse, negotiate, sign, assign and deliver and collect any checks, notes, drafts or other instruments, documents and chattel paper, in connection with
clause (i) above; 

        (iii)  receive,
open and dispose of all mail addressed to the Grantor in connection with clause (i) above, and notify postal authorities to change the address for
delivery thereof to such address as DRC may designate; 

        (iv)  give
customers indebted on the Collateral notice of DRC's interest therein, or to instruct such customers to make payment directly to DRC for the Grantor's account or
to request, at any time from customers indebted on the Collateral, verification of information concerning the Collateral and the amounts owing thereon; 

6

  

         (v)  convey
any item of Collateral to any purchaser thereof; 

        (vi)  make
any payments or take any acts under Sections 6(c) and 7(i) hereof; and 

       (vii)  file
any claims or take any action or institute any proceedings that DRC may reasonably deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of DRC with respect to any of the Collateral. 

DRC's
authority under this Section 6(d) shall include, without limitation, the authority to execute and give receipt for any certificate of ownership or any document, transfer title to any item
of Collateral, sign the Grantor's name on all financing statements or any other documents deemed necessary or appropriate to preserve, protect or perfect the security interest in the Collateral and to
file the same, prepare, file and sign the Grantor's name on any notice of lien, assignment or satisfaction of lien or similar document in connection with any Collateral and prepare, file and sign the
Grantor's name on a proof of claim in bankruptcy or similar document against any customer of the Grantor, and to take any other actions arising from or incident to the rights, powers and remedies
granted to DRC in this Agreement. This power of attorney is coupled with an interest and is irrevocable by the Grantor until all of the Obligations shall have been paid and satisfied in full. 

        (e)   All
cash proceeds received by DRC in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied by ORC against
the Obligations in such order as DRC may determine. 

        (t)    Upon
the occurrence and during the continuance of an Event of Default, all income, royalties, payments and damages under or in respect of the Collateral, if any,
received thereafter shall be held by the Grantor in trust for the benefit of DRC, separate from the Grantor's own property or funds and immediately turned over to DRC with proper assignments or
endorsements. Upon the occurrence and during the continuance of an Event of Default, DRC shall have the right to notify payors of income, royalties, payments and damages under or in respect of the
Collateral to make payment directly to DRC. 

        (g)   Each
and every right, power and remedy hereby specifically given to DRC shall be in addition to every other right, power and remedy specifically given under this
Agreement or now or hereafter existing at law or in equity, or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time
to time or simultaneously and as often and in such order as may be deemed expedient by DRC. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of
one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of DRC in the exercise of any such right, power or remedy and no renewal or extension of any of
the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Event of Default or any acquiescence therein. 

7.    GENERAL PROVISIONS    

        (a)    Notices.    All notices, approvals, consents or other communications required or desired to be given hereunder
shall be in writing and sent by certified or registered mail, return receipt requested, by 

7

 

overnight
delivery service, with all charges prepaid, or by telecopier followed by a hard copy sent by overnight mail: 

in
the case of a notice to the Grantor at: 

Amphastar
Pharmaceuticals, Inc.

11570 6th Street

Rancho Cucamonga

California 91730 

Attention:
Chief Financial Officer

Fax No.: (909) 980-6139

Email: DavidN@Amphastar.com 

and
in the case of a notice to DRC at: 

Drug
Royalty USA, Inc.

Bank of America Center

101 Convention Center Drive

Suite 850, P.O. Box 50401

Las Vegas, Nevada 89109 

Attention:
Behzad Khosrowshahi

Fax No.: (702) 598-3651

Email: bk@drugroyalty.com 

with
a copy to Fasken Martineau DuMoulin LLP at: 

66
Wellington Street West

Suite 4200, Toronto Dominion Bank

Tower Box 20, Toronto-Dominion Centre

Toronto, Ontario

M5K lN6 

Attention:
Scott Conover

Fax No.: (416) 364-7813

Email: sconover@tor.fasken.com 

All
such notices and correspondence shall be deemed given (i) if sent by certified or registered mail, three Business Days after being postmarked, (ii) if sent by overnight delivery
service, when received at the above stated addresses or when delivery is refused and (iii) if sent by telecopier transmission, when receipt of such transmission is acknowledged. 

        (b)    Headings.    The headings in this Agreement are for purposes of reference only and shall not affect the meaning
or construction of any provision of this Agreement. 

        (c)    Severability.    The provisions of this Agreement are severable, and if any clause or provision shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect, in that jurisdiction only, such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. 

        (d)    Amendments—Waivers and Consents.    Any amendment or waiver of any provision of this Agreement and
any consent to any departure by the Grantor from any provision of this Agreement shall not be effective unless the same shall be in writing and signed by the Grantor and DRC and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which given. 

8

 

        (e)    Interpretation.    Time is of the essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in the RP Agreement shall have the meaning set forth in the Uniform Commercial Code, except where the context otherwise requires. To the extent a term or provision of this
Agreement conflicts with the Agreement and is not dealt with herein with more specificity, the Agreement shall control with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not be relevant in determining the meaning of this Agreement even though the accepting or acquiescing party had knowledge of
the nature of the performance and opportunity for objection. "Including" when used herein means "including without limitation" and shall not be construed to limit any general statement which it
follows to the specific or similar items or matters immediately following it. 

        (1)    Continuing Security Interest.    This Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until the payment in full in cash of the Obligations and the termination of the RP Agreement, (ii) be binding upon the Grantor and its
successors and assigns and (iii) inure, together with the rights and remedies of DRC, to DRC's successors, transferees and assigns. Without limiting the generality of the foregoing
clause (iii), DRC may, in accordance with the terms of the RP Agreement, assign or otherwise transfer all or any portion of its rights and obligations under the RP Agreement to any other
Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to DRC herein or otherwise, in each case as provided in the Agreement. 

        (g)    Reinstatement.    To the extent permitted by law, this Agreement shall continue to be effective or be
reinstated if at any time any amount received by DRC in respect of the Obligations is rescinded or must otherwise be restored or returned by DRC because the Grantor is the subject of an Event of
Default, all as though such payments had not been made. 

        (h)    Survival of Provisions.    All representations, warranties and covenants of the Grantor contained herein shall
survive the execution and delivery of this Agreement, and shall terminate only upon the full and final payment and performance by the Grantor of the Obligations secured hereby and termination of the
RP Agreement. 

        (i)    DRC May Perform: Acquisition Agreements Cure Rights.    If the Grantor fails to perform any agreement contained
herein, or upon the occurrence of an Event of Default under the Acquisition Agreements, DRC may (but shall have no obligation to) itself perform, or cause performance of, such agreement, and the
expenses of ORC incurred in connection therewith and the full amount paid by ORC to Organon USA Inc. under Sections 4.1(b) and (c) of the Sale Agreement, if any, shall be payable by the
Grantor together with interest in accordance with the RP Agreement, and shall constitute Obligations secured by this Agreement. 

        (j)    No Duty on DRC.    The powers conferred on ORC hereunder are solely to protect the interest of ORC in the
Collateral and shall not impose any duty upon DRC to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for money actually received by it
hereunder, ORC shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters related to any
Collateral, whether or not ORC has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any Person or any other rights pertaining to
any Collateral. DRC shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal
to that which ORC accords its own property. To the extent the Collateral is held by a custodian, ORC shall be deemed to have exercised reasonable care if it has selected the custodian with reasonable
care. 

        (k)    Delays: Partial Exercise of Remedies.    No delay or omission of DRC to exercise any right or remedy hereunder,
whether before or after the occurrence of any Event of Default, shall impair any such right or shall operate as a waiver thereof or as a waiver of any such Event of Default. No single 

9

 

or
partial exercise by DRC of any right or remedy shall preclude any other or further exercise thereof, or preclude any other right or remedy. 

        (1)    Release: Termination of Agreement.    Subject to the provisions of Section 7(g) hereof, upon the payment
in full of the Obligations and the termination of the RP Agreement, this Agreement shall terminate and all rights in the Collateral shall revert to the Grantor. At such time, DRC shall, upon the
request of the Grantor and at the expense of DRC, (A) execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination, (B) reassign
and redeliver to the Grantor all of the Collateral hereunder which has not been sold, disposed of, retained or applied by DRC in accordance with the terms hereof and (C) return to the Grantor
the originals of the Special Power of Attorney to the extent same are then in DRC's possession. Such reassignment and redelivery shall be without warranty by or recourse to DRC, except as to the
absence of any prior assignments by DRC of its interest in the Collateral. 

        (m)    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original but both of which shall together constitute one and the same agreement. 

        (n)    Facsimile Execution.    To evidence the fact that it has executed this Agreement, a party may send a copy of
its executed counterpart to the other party by facsimile transmission. That party shall be deemed to have executed this Agreement on the date it sent such facsimile transmission. In such event, such
party shall forthwith deliver to the other party the counterpart of this Agreement executed by such party. 

        (o)    GOVERNING LAW.    THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES. 

        (p)    SUBMISSION TO JURISDICTION.    ALL DISPUTES BETWEEN THE GRANTOR AND DRC, WHETHER SOUNDING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY COURTS LOCATED IN THE STATE OF NEW YORK AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT DRC SHALL HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY DRC IN GOOD FAITH TO ENABLE DRC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF DRC. THE GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY DRC. THE GRANTOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH DRC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS. 

        (q)    JURY TRIAL.    THE GRANTOR AND DRC EACH HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A
TRIAL BY JURY. 

[THIS SPACE INTENTIONALLY LEFT BLANK]

10

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement by causing this Agreement to be signed by their respective duly authorized officers on the date first above written. 

	 	 	 	 	AMPHASTAR PHARMACEUTICALS, INC.
	

 	

 	
 	

By:	

/s/  DAVID W. NASSIF      
 Name: David W. Nassif

Title: Chief Financial Officer
	

 	

Accepted and Agreed as of the date first above written:	
 	

 	

 
	

 	
DRUG ROYALTY USA, INC.	
 	

 	

 
	

By:	

  
 Name:

Title:	
 	

 	

 

11

 
SCHEDULE A

LIST OF EXISTING SECURITY ON THE COLLATERAL  

        Security Agreement dated February 8, 2001 executed by Amphastar Pharmaceuticals, Inc. in favour of Cathay Bank, a California banking corporation. 

12

 
SCHEDULE B

INTELLECTUAL PROPERTY  

Cortrosyn
United States Trade Mark Registration No. 779366 

U.S.
NDA Number 16-750 

	Domain Names:	cortrosyn.com

cortrosyn.us

13

   ANNEX 1

DEFINITIONS  

        "Accounts" shall have the meaning set forth in the UCC. 

        "Acquisition Agreements" means collectively the asset sale agreement between Amphastar and Organon USA Inc. (the
"Sale Agreement"), the security agreement between Amphastar and Organon USA Inc., the toll manufacturing agreement between Amphastar and Organon
USA Inc. pertaining to Cortrosyn and the quality agreement between Amphastar and Organon USA Inc., each dated June 26,2003, as such agreements may be amended, restated,
supplemented or otherwise modified from time to time. 

        "Active Pharmaceutical Ingredient" or "API" means the drug substance cosyntropin and any
analog, derivative, improvement or variation of such active pharmaceutical ingredient. 

        "Affiliate" means a Person which, directly or indirectly, controls, is controlled by or is under common control with another. 

        "Closing Document" means any document, instrument, undertaking or agreement made or delivered pursuant to or in connection with the RP
Agreement. 

        "Collateral" has the meaning provided for in Section 1 of this Agreement. 

        "Commercial Tort Claims" shall have the meaning set forth in the UCC. 

        "Cortrosyn" means a pharmaceutical preparation containing the Active Pharmaceutical Ingredient, in all doses, for all indications and
diseases, whether approved by a Governmental Agency or not, using any delivery mechanism and including any improvement, variation, any minor chemical alteration, new generation or product line
extensions, and any product or combination of products with a chemical or biological formulation that contains the Active Pharmaceutical Ingredient, manufactured and/or sold by
or on behalf of Amphastar, its Affiliates, licensees, distributors or agents under the Trade Mark or any other name. 

        "Encumbrance" means any encumbrance of any kind whatsoever, actual or contingent, fixed or floating, including any security interest,
mortgage, lien, pledge, assignment, charge, trust or deemed trust (whether contractual, statutory or otherwise arising). 

        "Event of Default" has the meaning provided for in Section 5 of this Agreement. 

        "FDA" means the U.S. Food and Drug Administration. 

        "General Intangibles" shall have the meaning set forth in the UCC. 

        "Governmental Agency" means any domestic or foreign government whether federal, state, provincial or municipal and any governmental
agency, governmental authority, regulatory authority, governmental tribunal or governmental commission of any kind whatever including the FDA. 

        "Intellectual Property" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory in and to the
Patent Rights, Trade Marks, Trade Secrets, domain names and internet addresses, know-how and other intellectual property relating to, associated with, covering or embodying Cortrosyn or
the Active Pharmaceutical Ingredient. 

        "Inventory" shall have the meaning set forth in the UCC. 

        "Letter-of-Credit Right" shall have the meaning set forth in the UCC. 

        "Material Adverse Financial Change" means any change, event, occurrence or change in the state of facts that has or could be expected to
have a material adverse effect on the financial condition of Amphastar. 

14

 

        "NDA" means the application (U.S. NDA Number 16-750) for Cortrosyn prepared pursuant to applicable FDA regulations and filed
by Organon USA Inc. with the FDA for authorization to market Cortrosyn within the United States, including all additions, supplements, extensions and modifications thereto made prior to or
during the Term as defined in and under the RP Agreement; and transferred by Organon USA Inc. to Amphastar pursuant to the Sale Agreement. 

        "Obligations" has the meaning provided for in Section 2 of this Agreement. 

        "Patent Rights" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory to the patents and
patent applications claiming, relating to or associated with Cortrosyn or the Active Pharmaceutical Ingredient and all improvements thereto made by Amphastar or its Affiliates, including all
divisions, continuations, partial continuations, extensions, substitutions, confirmations, registrations, revalidations, additions or reissues of or to any of the patents or patent applications. 

        "Person" includes an individual, body corporate, partnership, joint venture, co-operative, trust or unincorporated
organization, Governmental Agency or any agency or instrumentality thereof, or any other entity recognized by law. 

        "Proceeds" shall have the meaning set forth in the UCC. 

        "Product Rights" means all of the rights to Cortrosyn acquired by Amphastar under the Acquisition Agreements including the NDA, copies of
all FDA files, regulatory files and formulae for Cortrosyn and the most recent master batch record for Cortrosyn. 

        "Sales of Cortrosyn" means (a) gross revenues from sales of Cortrosyn in the Territory by Grantor, its Affiliates, licensees,
distributors and agents to a purchaser (including, a wholesaler or group purchasing organization and any licensee under Bankruptcy Code Section 365(n)(2)); and (b) all amounts recovered
by or paid to Grantor pursuant to a settlement, order or judgment in respect of any claim or legal proceeding relating to Cortrosyn or any of the Product Rights or Intellectual Property or any right
of Grantor to manufacture, market, sell or distribute Cortrosyn or the ownership or rights of Grantor to any of the Product Rights or Intellectual Property. 

        "Supporting Obligations" shall have the meaning set forth in the UCC. 

        "Territory" means the United States of America and its respective territories and possessions. 

        "Trade Mark" means the United States trade mark Cortrosyn®, registration number 779366, any and all United States trade marks,
service marks or symbols, trade devices, certification marks, trade names and applications therefor in respect of, associated with or relating to Cortrosyn now or hereafter filed by or issued,
licensed or assigned to or under the control of or owned under common law by Amphastar or its Affiliates in the Territory and including all reissues, extensions, continuations, renewals, supplements
or amendments thereto. 

        "Trade Secrets" means all information, technical data, experimental procedure, scientific and medical information invented, developed,
controlled or acquired prior to or during the term of the RP Agreement by or on behalf of Amphastar or its Affiliates in the Territory relating to the development, manufacturing, distributing,
marketing, promoting, offering for sale or sale of Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all information contained in health and marketing registration
applications filed by or on behalf of Amphastar or its Affiliates or Organon USA Inc. or its Affiliates relating to Cortrosyn, and all pre-clinical and clinical data, product forms,
specifications and manufacturing data relating to Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all Technical Information (as such term is defined in the Sale
Agreement). 

15

 

        "UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided, however, that if by
reason of mandatory provisions of law, any or all of the attachment, perfection or priority of DRC's security interest in any item or portion of the Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of New York, the tern "UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions relating to such provisions. 

16

 
EXHIBIT A

TO

SECURITY AGREEMENT  

 SPECIAL POWER OF ATTORNEY  

	STATE OF CALIFORNIA	 	)	 	 
	 	 	 	)	 	ss.:
	COUNTY OF SAN BERNARDINO	 	)	 	 

        KNOW
ALL MEN BY THESE PRESENTS, that AMPHASTAR PHARMACEUTICALS, INC., a California corporation
("Grantor"), hereby appoints and constitutes DRUG ROYALTY USA, INC., a Nevada corporation
("DRC"), and each of its officers, its true and lawful attorney, with full power of substitution and with full power and authority to perform the
following acts on behalf of Grantor: 

        1.     Execution
and delivery of any and all agreements, documents, instrument of assignment or other papers which DRC, in its discretion, deems necessary or advisable for the
purpose of assigning, selling, or otherwise disposing of all right, title, and interest of Grantor in and to the "Collateral" (as such term is defined in the Security Agreement referred to below) and
all registrations, recordings, reissues, extensions, and renewals thereof, or for the purpose of recording, registering and filing of, or accomplishing any other formality with respect to the
foregoing. 

        2.     Execution
and delivery of any and all documents, statements, certificates or other papers which DRC, in its discretion, deems necessary or advisable to further the
purposes described in paragraph 1 hereof. 

        This
Power of Attorney is made pursuant to a Security Agreement, dated of even date herewith, between Grantor and DRC (the "Security
Agreement") and is subject to the terms and provisions
thereof. This Power of Attorney, being coupled with an interest, is irrevocable until all "Obligations", as such term is defined in the Security
Agreement, are indefeasibly paid in full and the Security Agreement is terminated in writing by DRC. 

Dated:
August 6, 2003 

	 	 	AMPHASTAR PHARMACEUTICALS, INC.
	

 	
 	

By:	

/s/  DAVID W. NASSIF      
 Name: David W. Nassif

Title: Chief Financial Officer

17

 

	STATE OF CALIFORNIA	 	)	 	 
	 	 	 	)	 	ss.:
	COUNTY OF SAN BERNARDINO	 	)	 	 

        On
this 20th day of August, 2003, before me personally came David W. Nassif, to me known, who being duly sworn, did depose and say, that he is the CEO of  AMPHASTAR PHAMACEUTICALS, INC., the
corporation described in and which executed the foregoing instrument. 

	 	 	/s/  DEAN L. COLLINS      
 Notary Public
	DEAN L. COLLINS

Commission #1323982

Notary Public—California

San Bernardino County

My Comm. Expires Nov 3, 2005

[SEAL]	 	 

18

QuickLinks

Exhibit 10.8QuickLinks
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Exhibit 10.9    
    

SUBORDINATION AGREEMENT  

        THIS SUBORDINATION AGREEMENT (hereafter, this "AGREEMENT") is made as of the date last set forth below, by and between ORGANON USA INC., a New Jersey
corporation ("SENIOR CREDITOR"), DRUG ROYALTY USA, INC., a Nevada corporation ("SUBORDINATING PARTY") and AMPHASTAR PHARMACEUTICALS, INC., a California corporation ("Amphastar"). 

        For
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 

        Section 1.    Certain Definitions.    The following terms shall have the following meanings for the purposes of
this AGREEMENT: 

        (a)    Collateral.    The term "COLLATERAL" shall mean (i) all of Amphastar's now existing or
hereafter acquired right, title and interest in the TRADEMARK and the NDA; (ii) all income, fees, royalties and other payments at any time due or payable with respect thereto, including,
without limitation, payments under all licenses at any time entered into in connection therewith; (iii) all reissues, extensions, continuations, renewals, supplements or amendments to the
Trademark or the NDA; (iv) the right to sue for past, present and future infringements of the Trademark; and (v) all proceeds of any of the foregoing. 

        (b)    Collection Action.    The term "COLLECTION ACTION" shall mean any of the following actions by SUBORDINATING
PARTY: (i) ask, demand, sue for, take or receive from or on behalf of any of Amphastar, by set-off or in any other manner, the whole or any part of any monies which may now or
hereafter be owing by Amphastar to SUBORDINATING PARTY on the whole or any part of the SUBORDINATED OBLIGATIONS, (ii) initiate or participate with others in any suit, action or proceeding
against Amphastar to enforce payment of or to collect the whole or any part of
the SUBORDINATED OBLIGATIONS, (iii) ask, demand, take or receive any additional security for the whole or any part of the SUBORDINATED OBLIGATIONS, (iv) initiate or participate with
others in any action to realize upon the COLLATERAL or any of the assets of Amphastar, or (v) accelerate payment of the SUBORDINATED OBLIGATIONS. 

        (c)    NDA.    The term "NDA" shall mean the New Drug Application, U.S. NDA No. 16-750. 

        (d)    Proceeding.    The term "PROCEEDING" shall mean any voluntary or involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or
any other proceeding for the liquidation, dissolution or other winding up of a person or entity. 

        (e)    Royalty Purchase Agreement.    The term "ROYALTY PURCHASE AGREEMENT" means the agreement between Amphastar and
SUBORDINATING PARTY dated August 5, 2003 pursuant to which SUBORDINATING PARTY will acquire from Amphastar a royalty interest in all U.S. sales of Cortrosyn by Amphastar, its affiliates,
licensees, distributors and agents as more particularly described in the ROYALTY PURCHASE AGREEMENT for a purchase price of $8,000,000 and Amphastar has agreed to grant to DRC a Security Interest in
the Collateral and certain other now existing or hereafter acquired assets of Amphastar. 

        (f)    Security Interests.    The term "SECURITY INTERESTS" shall mean the security interests of the SENIOR CREDITOR
and SUBORDINATING PARTY in the COLLATERAL. 

1

 

        (g)    Senior Debt.    The term "SENIOR DEBT" shall mean the payment obligations of Amphastar to SENIOR CREDITOR
arising under Sections 4.1(b) and 4.1(c) of the Asset Sale Agreement between Amphastar and SENIOR CREDITOR dated June 26, 2003, whether now existing or hereafter arising (including interest
occurring on or after the filing of any petition in bankruptcy or for reorganization relating to Amphastar, whether or not such post-petition interest is allowed as a claim in such
proceeding). 

        (h)    Subordinated Obligations.    The term "SUBORDINATED OBLIGATIONS" shall mean the obligations of Amphastar to
SUBORDINATING PARTY under the ROYALTY PURCHASE AGREEMENT and the security agreement between Amphastar and SUBORDINATING PARTY dated as of August 5, 2003. 

        (i)    Trademark.    The term "TRADEMARK" shall mean the U. S. Trademark CORTROSYN, U. S. Trademark Registration
No. 779366. 

        Section 2.    Priority of Liens and Security Interests.    SUBORDINATING PARTY and SENIOR CREDITOR hereby agree
and declare that at all times, whether before, after or during the pendency of any PROCEEDING, and notwithstanding the priorities which would ordinarily result from the order of the granting of a
SECURITY INTEREST, or the order, sequence or date of the filing of any financing statements or obtaining of possession, and whether or not perfected or unavoidable, SENIOR CREDITOR'S SECURITY INTEREST
shall constitute and be a senior and superior security interest, pledge, assignment, lien and charge in and upon the COLLATERAL and prior in right to any interest of SUBORDINATING PARTY in the
COLLATERAL howsoever arising, and that the SUBORDINATING PARTY'S SECURITY INTEREST shall be subject and subordinate to the SENIOR CREDITOR'S SECURITY INTEREST. SENIOR CREDITOR and SUBORDINATING PARTY
hereby agree to take any reasonable actions necessary to cause the public records to reflect the respective priorities of their SECURITY INTERESTS. SUBORDINATING PARTY agrees to file financing
statements perfecting the SUBORDINATING PARTY'S SECURITY INTEREST after the filing of financing statements perfecting SENIOR CREDITOR'S security agreement. 

        Section 3.    Permitted Payments and Payment Blockage.    

        (a)   Except
as provided in Section 3(b) and Section 4 of this AGREEMENT, Amphastar may make all payments to the SUBORDINATING PARTY required under and in
accordance with the ROYALTY PURCHASE AGREEMENT and such payments shall not constitute an Event of Default of the SENIOR DEBT. SUBORDINATING PARTY has furnished a copy of the ROYALTY PURCHASE AGREEMENT
and the related security agreement to SENIOR CREDITOR. 

        (b)   No
payment shall be made by or on behalf of Amphastar on account of the principal of, premium, if any, or interest on the SUBORDINATED OBLIGATIONS or to defease or
acquire any of the SUBORDINATED OBLIGATIONS for cash or property, or on account of the redemption provisions of the SUBORDINATED OBLIGATIONS or on account of any fees, indemnities, expenses and any
other obligation relating to the SUBORDINATED OBLIGATIONS, during the period of any default in the payment of any obligation on the SENIOR DEBT when due (a "DEFAULT") beginning on the date that the
SUBORDINATING PARTY receives written notice of such DEFAULT from SENIOR CREDITOR, and ending on the earlier of (i) the date that all SENIOR DEBT is indefeasibly paid in full in cash, or
(ii) the date on which such DEFAULT is cured. 

        Section 4.    Subordination Standby.    

        (a)   SUBORDINATING
PARTY agrees that payment of the SUBORDINATED OBLIGATIONS is expressly subordinated to the prior payment in full in cash of all SENIOR DEBT. Except as
provided in Section 3(a) and clause (b) of this Section 4, the SUBORDINATING PARTY shall not accept any payment with respect to the SUBORDINATED OBLIGATIONS or take any COLLECTION
ACTION, unless and until the SENIOR DEBT shall have been indefeasibly paid in full in cash. If 

2

 

SUBORDINATING
PARTY in violation of this AGREEMENT shall attempt any COLLECTION ACTION, SENIOR CREDITOR may interpose as a defense or plea the making of this AGREEMENT and may intervene and interpose
such defense or plea in its name or in the name of Amphastar and SENIOR CREDITOR may by virtue of this AGREEMENT restrain the enforcement thereof. 

        (b)   So
long as no DEFAULT with respect to the SENIOR DEBT has occurred and is continuing, SUBORDINATING PARTY may take COLLECTION ACTION against Amphastar and realize upon
the SUBORDINATING PARTY'S SECURITY INTEREST, upon the occurrence of both of the following: 

        (i)    any
event of default under the documents evidencing the SUBORDINATED OBLIGATIONS that is not cured by Amphastar within the period, if any, provided in such documents;
and 

        (ii)   SENIOR
CREDITOR shall not have commenced any action to realize upon its SECURITY INTEREST in the COLLATERAL. Upon the request of SENIOR CREDITOR, SUBORDINATING PARTY
shall immediately cease any such COLLECTION ACTION then being pursued by SUBORDINATING PARTY if SENIOR CREDITOR at any time elects, in its sole discretion, after a Default on the SENIOR DEBT has
occurred and is continuing, to commence any COLLECTION ACTION. 

        Section 5.    Priority on Distribution.    In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all or a substantial part of the assets of any of Amphastar, or the proceeds of the COLLATERAL, or of any readjustment of
the obligations and indebtedness of Amphastar or of the sale of the COLLATERAL, then, and in any such event, all SENIOR DEBT shall be paid in full in cash before any payment or distribution is made in
respect of SUBORDINATED OBLIGATIONS. 

        Section 6.    Payments or Distributions Received by SUBORDINATING PARTY.    Should any payment or distribution
which is not permitted by this AGREEMENT be received by SUBORDINATING PARTY upon or with respect to SUBORDINATED OBLIGATIONS prior to the satisfaction of all SENIOR DEBT, SUBORDINATING PARTY shall
receive and hold the same in trust as trustee, for the benefit of SENIOR CREDITOR and shall forthwith deliver the same to SENIOR CREDITOR in precisely the same form received (except for the
endorsement or assignment of SUBORDINATING PARTY
where necessary) for application to the SENIOR DEBT, due or not due, and until so delivered, the same shall be held in trust by SUBORDINATING PARTY as the property of SENIOR CREDITOR. 

        Section 7.    Proceedings.    SUBORDINATING PARTY may not commence or join with any other creditor in
commencing any PROCEEDING with respect to Amphastar unless the SENIOR DEBT has been indefeasibly paid in full in cash. In the event that the SENIOR DEBT has not been indefeasibly paid in full in cash,
and any PROCEEDING is instituted by or against Amphastar or against any property of Amphastar or any in any state or Federal court, then: 

        (a)   all
SENIOR DEBT shall be indefeasibly paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be
made on account of the SUBORDINATED OBLIGATIONS arising from the Collateral; 

        (b)   any
payment or distribution of any character, whether in cash, securities or other property, which would otherwise (but for the terms hereof) be payable or deliverable
on account of the SUBORDINATED OBLIGATIONS arising from the Collateral shall be paid or delivered directly to SENIOR CREDITOR until all of the SENIOR DEBT shall have been indefeasibly paid in full in
cash, and SUBORDINATING P ARTY hereby irrevocably authorizes, empowers and 

3

 

directs
all receivers, trustees, liquidators, conservators and others having authority to effect all such payments and deliveries; and 

        (c)   nothing
in this Section 7 shall limit, alter or affect the SUBORDINATING PARTY'S entitlement to payments or distributions on SUBORDINATED OBLIGATIONS under any
PROCEEDING to the extent such payments or distributions arise from assets or property of Amphastar other than the Collateral. 

        SUBORDINATING
PARTY irrevocably authorizes, empowers and directs SENIOR CREDITOR to demand, sue for, collect and receive every payment or distribution described in clause (b) of
this Section 7, and SUBORDINATING PARTY agrees to execute and deliver to SENIOR CREDITOR or its representative all such further instruments confirming such authorization, empowerment and
direction. 

        Section 8.    Disposition of Assets of Amphastar.    No right of SENIOR CREDITOR to enforce the subordination
provisions contained in this AGREEMENT shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of SENIOR CREDITOR in connection with sale of the COLLATERAL or
otherwise. SENIOR CREDITOR may use such means of collection and
exercise such diligence and remedies with respect to the SENIOR DEBT and the COLLATERAL as SENIOR CREDITOR, in its sole and absolute discretion, deems appropriate under the circumstances. 

        Section 9.    Release of Liens by SUBORDINATING PARTY.    SUBORDINATING PARTY agrees that in the event of any
sale or other disposition of any of the assets of Amphastar constituting Collateral by SENIOR CREDITOR, (a) SUBORDINATING PARTY shall not have any right to object to the sale or other
disposition of such assets or withhold or delay its consent, if such consent is reasonably required for the sale or other disposition of such assets; and (b) upon the request of SENIOR
CREDITOR, SUBORDINATING PARTY shall provide all necessary releases of security interests, assignments, pledges and liens held by SUBORDINATING PARTY necessary to accomplish such sale or other
disposition free and clear of all security interests, assignments, pledges and liens of SUBORDINATING PARTY, all without any consideration or payment to SUBORDINATING PARTY, unless the proceeds from
such sale are applied to indefeasibly pay the SENIOR DEBT in full, in which event any proceeds in excess of the amount used to pay the SENIOR DEBT in full shall be paid to SUBORDINATING PARTY. 

        Section 10.    SUBORDINATING PARTY.    

        (a)   In
the event that Amphastar defaults on its obligation to make the payments under Sections 4.1 (b) or 4.1 (c) of the Asset Sale Agreement, referred to in
Section 1 (g) of this AGREEMENT, the SUBORDINATING PARTY shall have the right and opportunity (but not the obligation) to cure such breach within ten (10) days of the
SUBORDINATING PARTY receiving written notice from SENIOR CREDITOR of Amphastar's breach. In the event that SUBORDINATING PARTY cures such a breach within ten (10) days of receiving written
notice from SENIOR CREDITOR of Amphastar's breach, SENIOR CREDITOR agrees that such a breach by Amphastar will not constitute an Event of Default (as such term is defined in the SENIOR CREDITOR
Security Agreement dated June 26, 2003 between SENIOR CREDITOR and Amphastar pertaining to the SENIOR DEBT). SENIOR CREDITOR agrees not to exercise any of its rights and remedies (including
commencing any collection action or proceeding) until such time as it has given written notice to SUBORDINATING PARTY of default by Amphastar in making the required payment of SENIOR DEBT when due and
SUBORDINATING PARTY has failed to remedy such default within the ten-day cure period. 

        (b)   Forthwith
upon payment in full, by either Amphastar or SUBORDINATING PARTY, to SENIOR CREDITOR of the SENIOR DEBT, SENIOR CREDITOR agrees to release and discharge all of
its Security Interests held by SENIOR CREDITOR relating to the SENIOR DEBT and shall 

4

 

ensure
that all registrations and filings necessary or desirable to affect or record the release and discharge are made including a UCC-3 termination statement. 

        (c)   In
the event of payment in full by SUBORDINATING PARTY to SENIOR CREDITOR of the SENIOR DEBT, SENIOR CREDITOR agrees that it shall continue to perform its obligations in
accordance with the terms and conditions of the Toll Agreement and the Quality Agreement, both between SENIOR CREDITOR and Amphastar and dated June 26, 2003. 

        Section 11.    Default.    SUBORDINATING PARTY and SENIOR CREDITOR shall each provide to the other a copy of
any notice of the occurrence of any default or event of default by Amphastar with respect to the SUBORDINATED OBLIGATIONS or the SENIOR DEBT, respectively, at the time any such notice is delivered to
Amphastar. 

        Section 12.    Instrument Legend.    Any document evidencing SUBORDINATED OBLIGATIONS and any renewals or
replacements thereof shall be inscribed with a legend, satisfactory to SENIOR CREDITOR, conspicuously indicating that payment thereof is subordinated to the claims of SENIOR CREDITOR pursuant to the
terms of this AGREEMENT. 

        Section 13.    Subrogation.    After all of the SENIOR DEBT has been indefeasibly paid in full in cash and
until the SUBORDINATED OBLIGATIONS has been paid in full, SUBORDINATING PARTY shall be subrogated to the rights of SENIOR CREDITOR to receive distributions with respect to the SENIOR DEBT, to the
extent that distributions otherwise payable to the SUBORDINATING PARTY have been applied to the payment of the SENIOR DEBT in accordance with the provisions of this AGREEMENT. As between Amphastar and
SUBORDINATING PARTY, a distribution applied to the payment of the SENIOR DEBT in accordance with the provisions of this AGREEMENT which otherwise would have been made to SUBORDINATING PARTY shall not
be deemed a payment by Amphastar on the SUBORDINATED OBLIGATIONS, it being understood that the subordination provisions of this AGREEMENT are intended solely for the purpose of defining the relative
rights of the SENIOR CREDITOR, on the one hand, and the SUBORDINATING PARTY, on the other hand, and nothing contained in this AGREEMENT shall impair the obligations of Amphastar, which are absolute
and unconditional, to pay to SUBORDINATING PARTY the SUBORDINATED OBLIGATIONS as and when the same shall become due and payable in accordance with its terms, except as such obligation is modified by
the rights confirmed hereunder in favor of the SENIOR CREDITOR, or affect the relative rights of SUBORDINATING PARTY and the creditors of Amphastar other than SENIOR CREDITOR. 

        Section 14.    Assignment of SUBORDINATED OBLIGATIONS.    SUBORDINATING PARTY agrees that, until the SENIOR
DEBT has been indefeasibly paid in full in cash, it will not assign, transfer, recast, permit a refinancing of, or grant a participating interest in, all or any portion of the SUBORDINATED
OBLIGATIONS, other than by way of security to the SUBORDINATING PARTY'S secured creditors pursuant to an agreement between Canadian Imperial Bank of Commerce, Drug Royalty Corporation Inc. and
Drug Royalty USA, Inc. dated January 29, 2003 without the prior written consent of SENIOR CREDITOR not to be unreasonably withheld. 

        Section 15.    Term.    This AGREEMENT shall constitute a continuing agreement between SUBORDINATING PARTY and
SENIOR CREDITOR for the benefit of SENIOR CREDITOR, and
shall remain in full force and effect until all of the SENIOR DEBT shall have been indefeasibly paid in full in cash. 

        Section 16.    Notices.    Any notice, demand or other communication required or permitted under the terms of
this AGREEMENT shall be in writing with return receipt or other acknowledgment requested, and shall be made by facsimile, Federal Express or other similar overnight delivery service 

5

 

or
certified or registered mail, return receipt requested, and shall be effective upon receipt. Notices shall be addressed as provided below: 

        (a)   If
to SENIOR CREDITOR: 

375
Mt. Pleasant Avenue

West Orange, NJ 07052

Attn: Michael Novinski, President 

With
a copy addressed to:

Patrick J. Osinski, Vice President and General Counsel 

        (b)   If
to SUBORDINATING PARTY: 

Bank
of America Center

101 Convention Center Drive

Suite 850, P.O. Box 50401

Las Vegas, Nevada 89109

Attn: President

Fax No.: (702) 598-3651 

        (c)   If
to Amphastar: 

11570
Sixth Street

Rancho Cucamonga, California 91730

Attn: Chief Financial Officer

Fax No.: (909) 980-6139 

or
at such other address as any party may designate by notice to the other parties in accordance with the provisions hereof. 

        Section 17.    Governing Law.    This AGREEMENT shall be interpreted, and the rights and liabilities of the
parties hereto determined, in accordance with the laws of New Jersey, without regard to its principles of conflicts of law. 

        Section 18.    Parties.    This AGREEMENT shall be binding upon, and inure to the benefit of, SUBORDINATING
PARTY, SENIOR CREDITOR and their respective successors and assigns. SENIOR CREDITOR will not assign the documents pertaining to the SENIOR DEBT without the assignee agreeing in writing in favor of the
SUBORDINATING PARTY to be bound by this Agreement. 

        Section 19.    Entire Agreement.    This AGREEMENT constitutes and expresses the entire understanding between
the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, whether express or implied, oral or
written with respect to the subject matter hereof. Neither this AGREEMENT nor any portion or provision hereof may be changed, waived or amended orally or in any manner other than by an agreement in
writing signed by the parties. 

        Section 20.    Additional Documentation.    Each party shall execute and deliver to the other such further
instruments and shall take such further action as the other party may at any time or times reasonably request in order to carry out the provisions and intent of this AGREEMENT. 

        Section 21.    Severability.    The provisions of this AGREEMENT are independent of and separable from each
other. If any provision hereof shall for any reason be held invalid or unenforceable, it is the intent of the parties that such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof, and that this AGREEMENT shall be construed as if such invalid or unenforceable provision had never been contained herein. 

6

 

        Section 22.    Counterparts.    This AGREEMENT may be executed in as many counterpart copies as may be
required. It shall not be necessary that the signature of, or on behalf of, each party appear on each counterpart, but it shall be sufficient that the signature of, or on behalf of, each party appear
on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. Facsimile signatures shall be effective as originals. 

7

 

        IN
WITNESS WHEREOF, this AGREEMENT has been duly executed by the parties hereto as of the 5th day of August, 2003. 

	

ORGANON USA, INC.	
 	

 
	

By:	
 	

/s/  H. COSTERMANS      
	
 	

/s/  P.J. OSINSKI      

	Name:	 	H. Costermans;
	 	P.J. Osinski

	Its:	 	Vice President;
	 	Vice President

	

AMPHASTAR PHARMACEUTICALS, INC.	
 	

 
	

By:	
 	

/s/  DAVID W. NASSIF      
 David W. Nassif

Chief Financial Officer	
 	

 
	

DRUG ROYALTY USA, INC.	
 	

 
	

By:	
 	

/s/  BEHZAD KHOSROWSHAHI      
 Behzad Khosrowshahi

President & CEO	
 	

 

8

ROYALTY PURCHASE AGREEMENT  

 BETWEEN  

 AMPHASTAR PHARMACEUTICALS, INC.  

 and  

 DRUG ROYALTY USA, INC.  

 
TABLE OF CONTENTS  

	 
	 	 
	 	Page

	ARTICLE 1	 	INTERPRETATION	 	1
	1.1	 	Definitions	 	1
	1.2	 	Headings	 	1
	1.3	 	Number and Gender	 	1
	1.4	 	Entire Agreement	 	1
	1.5	 	Applicable Law and Attornment	 	1
	1.6	 	Currency	 	2
	1.7	 	Schedules	 	2
	1.8	 	Interpretation	 	2
	
ARTICLE 2	
 	

INVESTMENT AND ROYALTY INTEREST	
 	

2
	2.1	 	DRC Investment	 	2
	2.2	 	Payment of Royalty Interest.	 	2
	2.3	 	Term	 	3
	2.4	 	Additional DRC Default Rights	 	3
	
ARTICLE 3	
 	

REPRESENTATIONS AND WARRANTIES	
 	

4
	3.1	 	Representations and Warranties of Amphastar	 	4
	 	 	3.1.1 Corporate Matters	 	4
	 	 	3.1.2 The Financial Statements	 	5
	 	 	3.1.3 Undisclosed Liabilities	 	5
	 	 	3.1.4 Absence of Changes	 	6
	 	 	3.1.5 Material Contracts	 	6
	 	 	3.1.6 Absence of Conflicting Agreements	 	6
	 	 	3.1.7 Consents and Approvals	 	7
	 	 	3.1.8 Compliance with Applicable Law	 	7
	 	 	3.1.9 Litigation	 	7
	 	 	3.1.10 Purchased Assets	 	7
	 	 	3.1.11 Royalty Interest	 	8
	 	 	3.1.12 No Options	 	8
	 	 	3.1.13 Marketing	 	8
	 	 	3.1.14 Intellectual Property	 	8
	 	 	3.1.15 Supply and Manufacture of API	 	9
	 	 	3.1.16 Disclosure	 	9
	3.2	 	Representations and Warranties of DRC	 	9
	 	 	3.2.1 Corporate Matters	 	9
	 	 	3.2.2 Absence of Conflicting Agreements	 	9
	 	 	3.2.3 Consents, Approvals, Etc	 	10
	3.3	 	Commission	 	10
	3.4	 	Non-Waiver	 	10
	3.5	 	Survival of Representations and Warranties	 	10
	3.6	 	Meaning of Knowledge Qualification	 	10
	
ARTICLE 4	
 	

COVENANTS	
 	

11
	4.1	 	Covenants During the Term	 	11
	
ARTICLE 5	
 	

CLOSING	
 	

14
	5.1	 	Closing	 	14
	5.2	 	Deliveries by DRC	 	14
	 	 	 	 	 

i

 

	5.3	 	Deliveries by Amphastar	 	15
	5.4	 	DRC's Conditions	 	15
	5.5	 	Amphastar's Conditions	 	16
	5.6	 	Waiver	 	16
	5.7	 	Failure to Satisfy Conditions	 	16
	
ARTICLE 6	
 	

INDEMNIFICATION	
 	

16
	6.1	 	Mutual Indemnifications for Breaches of Warranty, etc	 	16
	6.2	 	Third Party Claims	 	17
	6.3	 	Agency for Representatives	 	17
	
ARTICLE 7	
 	

GENERAL	
 	

17
	7.1	 	Amendment	 	17
	7.2	 	Remedies Cumulative and Waivers	 	18
	7.3	 	Performance on Holidays	 	18
	7.4	 	Financial Reporting Standards	 	18
	7.5	 	Expenses	 	18
	7.6	 	Time	 	18
	7.7	 	Notices	 	18
	7.8	 	Assignment	 	19
	7.9	 	Further Assurances	 	19
	7.10	 	Independent Parties	 	20
	7.11	 	Public Announcements	 	20
	7.12	 	Severability	 	20
	7.13	 	Specific Performance	 	20
	7.14	 	Third Party Beneficiary	 	20
	7.15	 	Counterparts	 	20
	7.16	 	Facsimile Execution	 	20
	7.17	 	Confidentiality	 	21
	7.18	 	Waiver of Jury	 	21
	7.19	 	Service of Process	 	21

ii

   
        THIS AGREEMENT is made and entered into as of the 5th day of August, 2003 by and between AMPHASTAR
PHARMACEUTICALS, INC., a subsisting California corporation ("Amphastar"), andDRUG ROYALTY
USA, INC., a subsisting Nevada corporation ("DRC"). 

RECITALS: 

	A.
	Amphastar
is a pharmaceutical company that is in the business of discovering, developing, manufacturing, marketing, distributing and selling generic and specialty pharmaceutical
products.

	B.
	Pursuant
to an asset sale agreement (the "Sale Agreement") dated June 26, 2003 between Amphastar and Organon USA Inc.
("Organon") Amphastar acquired from Organon the Purchased Rights (as such term is defined therein) (the
"Acquisition").

	C.
	DRC
has agreed to provide funds to Amphastar in return for a royalty interest in the Net Sales of Cortrosyn, all on the terms and conditions provided in this Agreement. 

        NOW, THEREFORE, in consideration of the premises, the mutual covenants in this Agreement and of other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the Parties agree as follows: 

ARTICLE 1

INTERPRETATION  

1.1    Definitions    

        All
defined terms denoted by a capital letter have the meanings ascribed to them as set forth in Schedule A hereto. 

1.2    Headings    

        The
division of this Agreement into Articles, Sections, Subsections and Schedules and the insertion of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The Article, Section, Subsection and Schedule headings in this Agreement are not intended to be full or precise descriptions of the text to which they
refer and are not to be considered part of this Agreement. 

1.3    Number and Gender    

        In
this Agreement, words in the singular include the plural and vice-versa and words in one gender include all genders. 

1.4    Entire Agreement    

        This
Agreement, together with the Closing Documents, constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersede all prior agreements,
negotiations, discussions and understandings, written or oral including the Confidentiality Agreement. There are no representations, warranties, conditions, other agreements or acknowledgements,
whether direct or collateral, or express or implied, that form part of or affect this Agreement, or which induce any Party to enter into this Agreement or on which reliance is placed by any Party,
except as specifically set forth in this Agreement or in the Closing Documents. 

1.5    Applicable Law and Attornment    

        The
validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of New York without giving effect to conflict of law principles. The Parties
irrevocably attorn and submit to the non-exclusive jurisdiction of the courts of the State of New York with respect to any matter arising hereunder or related hereto. 

1

 

        Each
Party irrevocably waives: 

        (i)    any
objection which it may have at any time to the laying of venue of any litigation arising out of or relating to this Agreement brought in any court of the State of
New York; 

        (ii)   any
claim that any such litigation brought in any court of the State of New York has been brought in an inconvenient forum; and 

        (iii)  the
right to object, with respect to such litigation brought in any court of the State of New York, that such court does not have jurisdiction over such Party. 

        Each
Party agrees that a final judgment in any litigation commenced in any court of the State of New York shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. 

1.6    Currency    

        Unless
specified otherwise, all statements of or references to monetary amounts in this Agreement are to US Dollars. 

1.7    Schedules    

        The
following Schedules form part of this Agreement: 

	Schedule
 
	 	Description of Schedule
 

	
A	
 	

Definitions
	B	 	Intellectual Property
	C	 	Representations and Warranties—Disclosure
	D	 	Form of Security Agreement

1.8    Interpretation    

        Neither
Party shall be or be deemed to be the drafter of this Agreement for the purposes of construing this Agreement against one Part or the other. 

ARTICLE 2

INVESTMENT AND ROYALTY INTEREST  

2.1    DRC Investment    

        Subject
to the provisions of this Agreement and to Closing, Amphastar agrees to pay to DRC the Royalty Interest in accordance with the terms hereof and such other amounts as provided
herein in consideration of the payment of $8 million by DRC to Amphastar on Closing (the "Invested Amount"). 

2.2    Payment of Royalty Interest    

        (a)   Subject
to Section 2.2(g) and Section 2.4, in consideration of the Invested Amount, Amphastar shall pay to DRC a royalty of: 

        (i)    23%
of Net Sales of Cortrosyn up to and including $2.5 million per Quarter; 

        (ii)   3%
of Net Sales of Cortrosyn in excess of $2.5 million but not more than $5 million per Quarter; and 

        (iii)  1%
of Net Sales of Cortrosyn in excess of $5 million but not more than $7.5 million per Quarter, 

2

 

(collectively,
the "Royalty Interest"). Subject to Section 2.2(g) and Section 2.4, for avoidance of doubt, no royalty shall be paid to DRC
in respect of any Net Sales of Cortrosyn in excess of $7.5 million per Quarter. 

        (b)   Calculation
and payment of the Royalty Interest shall be based on all Net Sales of Cortrosyn commencing the first Business Day after the Closing Date to and including
the last day of the Term. 

        (c)   Amphastar
shall pay the Royalty Interest to DRC within 30 days of the end of each Quarter during the Term based on the Net Sales of Cortrosyn in the immediately
preceding Quarter. 

        (d)   Any
payment of the Royalty Interest shall, if overdue, bear interest from the due date at a per annum rate of five percent (5%) above the Prime Rate in effect on the due
date until the Royalty Interest and such interest is paid in full. The payment of such interest shall not foreclose DRC from exercising any other rights it may have as a consequence of the lateness of
any payment of the Royalty Interest. 

        (e)   Amphastar
agrees to pay the Royalty Interest to DRC without set-off, counterclaim, withholding or deduction. For avoidance of doubt, this clause shall not be
construed to alter the deductions permitted in connection with the sales of Cortrosyn as set forth in the definition of Net Sales of Cortrosyn. 

        (f)    Amphastar
agrees that the Royalty Interest shall be paid to DRC throughout the Term until and unless DRC otherwise directs in writing. 

        (g)   In
the event that Amphastar receives orders for Cortrosyn from its customers during a period of time for which Amphastar has insufficient inventory of Cortrosyn to meet
all of its outstanding orders (the "Backorders"), any Backorders that are subsequently filled by the sale of Cortrosyn shall be credited to Net Sales of
Cortrosyn in the Quarter in which the inventory shortage giving rise to such Backorders commenced up to the maximum dollar entitlement of Royalty Interest under Sections 2.2(a)(i),
2.2(a)(ii) and 2.2(a)(iii) in respect of that Quarter. The royalty in respect of such Backorders for such Quarter shall be included in the calculation of the Royalty Interest and shall
be paid by Amphastar to DRC in accordance with this Section 2.2. If the Royalty Interest for such Quarter has been previously calculated and paid by Amphastar to DRC, the Royalty Interest shall
be recalculated to take into account the filled Backorders and Amphastar shall pay to DRC the amount of the Royalty Interest for such Quarter less any amount previously paid in respect of such
Quarter. Schedule B sets forth an illustration of the calculation of the Royalty Interest under this Section 2.2(g). 

2.3    Term    

        (a)   Subject
to Section 2.3(b), the term of this Agreement shall commence on the Closing Date and continue for a period of 5 years ending on August 4,
2008 (the "Term"). 

        (b)The Term
shall automatically be extended, without any further act or formality, if the Toll Agreement (as defined below) and the Quality Agreement (as defined below) are
terminated prior to the expiration of the 3 year and 5 year term, respectively, or if Organon ceases to supply the API or manufacture the Product for any reason for more than 90
consecutive days (the "Trigger Event"). This extension shall apply successively upon the occurrence of each Trigger Event and shall continue in each
instance for the period of time commencing on the date of the Trigger Event and ending when Amphastar or a third party for and on behalf of Amphastar begins to supply the API and/or manufacture the
Product under a valid Registration (including a supplemental NDA) and all regulatory approvals required by Applicable Law having been obtained. 

2.4    Additional DRC Default Rights    

        In
the event that Amphastar fails to pay Organon the balance of the purchase price of $12,000,000 when due in accordance with Section 4.1(b) and (c) of the Sale Agreement
and DRC pays to Organon 

3

 

the
amount of purchase price not paid by Amphastar (the "Additional Invested Amount") then in addition to and not in substitution for any rights and
remedies of DRC under this Agreement, the Security Agreement, at law or in equity: 

	(a)
	Amphastar
shall pay to DRC the Additional Invested Amount together with interest on the unpaid balance of the Additional Invested Amount at the rate of 20% per annum calculated and
payable monthly, without setoff, counterclaim, withholding or deduction. Until such time as the Additional Invested Amount together with such interest is paid in full, Amphastar shall pay all Excess
Cash Flow to DRC on the first business day of each month.

	(b)
	Amphastar
shall carryon its business in the ordinary course with a view to maximizing Excess Cash Flow.

	(c)
	Amphastar
shall not create, incur, assume or otherwise become liable for any indebtedness for borrowed money, bank debt or other debt other than trade payables incurred in the
ordinary course of its business, grant or permit any Encumbrance, make or provide any loan or other financial assistance, make any capital expenditure, investment, distribution or return of capital,
declare or pay any dividends, redeem or purchase any of its shares or take or fail to take any other action if such action or inaction would or is reasonably likely to materially reduce Excess Cash
Flow, except in accordance with an annual budget prepared by Amphastar and agreed to in writing by DRC or otherwise with the prior written consent of DRC.

	(d)
	Amphastar
shall have the right to pay the Additional Invested Amount together with the interest thereon contemplated in Section 2.4(a) at any time provided an Event of Default
has not occurred under the Security Agreement.

	(e)
	The
Term shall automatically be extended without any further act or formality by a period equal to the period commencing on the date of payment by DRC of the Additional Invested
Amount and ending on the date of payment by Amphastar to DRC of the Additional Invested Amount together with interest thereon in full. This extension of the Term shall be in addition to any extension
contemplated in Section 2.3(b).

	(f)
	Notwithstanding
the provisions of Section 2.2, the provisions of this Section 2.4 shall apply until and unless the Additional Invested Amount together with interest
thereon contemplated in Section 2.4(a) has been paid to DRC in full, whereupon the provisions of Section 2.2 shall apply.

	(g)
	For
avoidance of doubt, (i) DRC may, but has no obligation to, pay the Additional Invested Amount; (ii) nothing herein shall affect the rights of any third party secured
creditor of Amphastar; and (iii) until and unless the Additional Invested Amount together with interest contemplated in Section 2.4(a) has been paid in full, Amphastar shall have no
obligation to accrue or pay the Royalty Interest pursuant to Section 2.2. 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES  

3.1    Representations and Warranties of Amphastar    

        Amphastar
represents and warrants to DRC as of the date of this Agreement as follows and acknowledges that DRC is relying on such representations and warranties in entering into this
Agreement: 

        3.1.1    Corporate Matters    

        (a)   Amphastar
is a corporation duly incorporated, organized and validly existing under the laws of its jurisdiction of incorporation. No proceedings have been taken or
authorized by either Amphastar or, 

4

 

to
the best of its knowledge, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding up of Amphastar. A true and correct copy of the articles of
incorporation as amended of Amphastar and the by-laws as amended of Amphastar have been previously provided to DRC. 

        (b)   The
authorized capital of Amphastar consists of 50,000,000 -shares of voting common stock and 10,000,000 shares of preferred stock of which 33,804,100 common stock and
no preference stock have been validly issued and are outstanding. 

        (c)   Amphastar
has all necessary power and capacity to execute and deliver and to observe and perform its covenants and obligations under this Agreement and the Closing
Documents to which it is a party. Amphastar has taken all corporate action necessary to authorize the execution and delivery of, and the observance and performance of its covenants and obligations
under this Agreement and the Closing Documents to which it is a party. A true and correct copy of the resolution of the board of directors of Amphastar approving the within transaction has been
previously provided to DRC. 

        (d)   This
Agreement and each Closing Document to which it is a party have been or will be duly executed and delivered by Amphastar, and this Agreement and each such Closing
Document constitute a valid and binding obligation of Amphastar enforceable against it in accordance with its terms; provided that enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws generally affecting enforceability of creditors' rights and that equitable remedies such as specific performance and injunction are in the
discretion of the Court from which they are sought. 

        (e)   Amphastar
has all necessary corporate power and capacity to carryon its business as is presently carried on by it and to manufacture, market, sell and distribute
Cortrosyn. 

        (1)   Amphastar
is a private company and is not a registrant in the United States. Amphastar is up-to-date in all filings required under, and is not
otherwise in default of, any requirement of any applicable securities laws or regulations. . 

        3.1.2    The Financial Statements    

        The
Financial Statements: 

        (a)   have
been prepared in accordance with GAAP, applied on a basis consistent with that of the preceding periods; 

        (b)   are
true and fair in all material respects; 

        (c)   accurately
disclose the material assets, liabilities and financial position of Amphastar and its Affiliates and the results of the operations of Amphastar and its
Affiliates as at the dates thereof and for the periods covered thereby; and 

        (d)   contain
or reflect adequate provision for all liabilities and obligations of Amphastar and its Affiliates, as at the date thereof. 

        As
at the date hereof, Amphastar is not aware of any information that would render the Financial Statements incomplete or inaccurate in any material respect. 

        3.1.3    Undisclosed Liabilities    

        Amphastar
and its Affiliates have no material liabilities of any kind except: 

        (a)   liabilities
disclosed or provided for in the Financial Statements and liabilities created by the Acquisition Agreements (as defined below); and 

5

 

        (b)   liabilities
incurred in the ordinary course of business since December 31, 2002, which are consistent with past practice and are not, in the aggregate, material
and adverse to the financial condition or results of operations of Amphastar and its Affiliates taken as a whole. 

        3.1.4    Absence of Changes    

        Since
December 31, 2002: 

        (a)   there
has not been any change in the financial condition or results of operations of Amphastar and its Affiliates, other than changes in the ordinary course of business,
and such changes and those resulting from the Acquisition Agreements (i) have not, either individually or in the aggregate, been materially adverse and (ii) have not had or are not
reasonably expected to have, either before or after the date hereof, a material adverse effect on the financial condition of Amphastar and its Affiliates, or Amphastar's or its Affiliates' future
prospects taken as a whole; and 

        (b)   there
has not been any termination, amendment or revocation of any contract, lease, license, patent or other agreement or any damage, destruction, loss, labor dispute or
other event, development or condition of any character (whether or not covered by insurance) which has had, or could have, a material adverse effect on Amphastar, its Affiliates or their future
prospects taken as a whole. 

        3.1.5    Material Contracts    

        (a)   Except
for the Sale Agreement, the security agreement between Amphastar and Organon (the "Organon Security Agreement"),
the toll manufacturing agreement between Amphastar and Organon pertaining to Cortrosyn (the "Toll Agreement") and the quality agreement between
Amphastar and Organon (the "Quality Agreement"), each dated June 26, 2003 and as each such agreement may be amended, restated, supplemented or
otherwise modified from time to time (collectively, the "Acquisition Agreements"), neither Amphastar nor any of its Affiliates is a party to or bound by
any material instrument, contract, lease, license, patent, commitment or other agreement whatsoever, whether oral or written, which relate to the ownership of Cortrosyn, the Product Rights or the
Intellectual Property or the right to make, use, license, market, distribute, promote, offer to sell or sell the Intellectual Property or Cortrosyn. A true correct and complete copy of each of the
Acquisition Agreements has been delivered to DRC or its solicitors. 

        (b)   Each
of the Acquisition Agreements is in good standing in full force and effect with no amendment, and constitutes valid and binding obligations of the parties thereto
enforceable in accordance with their respective terms. Each of the parties thereto has complied with all material terms thereof, has paid all amounts due thereunder, has not waived any rights or
defaults thereunder and no default or breach exists in respect thereof on the part of any of the parties thereto and no event has occurred which, after the giving of notice or the lapse of time or
both, would constitute such a default or breach and neither party has given or received a notice of termination, waiver, force majeure, suspension or delay under or in respect of any of the
Acquisition Agreements. 

        3.1.6    Absence of Conflicting Agreements    

        None
of the execution and delivery of, or the observance and performance by Amphastar of, any covenant or obligation under this Agreement or any Closing Document to which it is a party
or the consummation of any of the transactions contemplated thereby: 

        (a)   contravenes
or results in, or will contravene or result in, a violation of or a default under (with or without the giving of notice or lapse of time, or both) or in the
acceleration of any obligation under: 

        (i)    any
Applicable Law; 

        (ii)   the
articles of incorporation, by-laws, directors' or shareholders' resolutions of Amphastar or any shareholders agreement or voting trust pertaining to
Amphastar; or 

6

 

        (iii)  any
instrument, contract, lease, license, patent or other agreement to which Amphastar or any of the Affiliates of either of them is a party, or by which it or its
Business or property is bound or affected; 

        (b)   relieves
any party to any instrument, contract, lease, license, patent or other agreement described in clause (iii) above of any of its obligations or enables it
to terminate, suspend or to amend any of its obligations thereunder; or 

        (c)   results
in the creation or imposition of any Encumbrance on Amphastar, any of its Affiliates, Cortrosyn, the Product Rights or the Intellectual Property other than the
Security Agreement (as defined below) in favor of DRC. 

        3.1.7    Consents and Approvals    

        No
consent, approval, license, order or authorization, registration, declaration or filing with or of any Governmental Agency or other Person is required by Amphastar or its Affiliates,
in connection with: 

        (a)   the
execution and delivery by Amphastar of this Agreement and the Closing Documents to which it is party; 

        (b)   the
observance and performance by it of its obligations under this Agreement and the Closing Documents to which it is party except as contemplated herein; 

        (c)   the
consummation of any of the transactions contemplated thereby; or 

        (d)   the
completion of the Acquisition. 

        3.1.8    Compliance with Applicable Law    

        Each
of Amphastar and each of its Affiliates has conducted and is conducting its business in compliance with all Applicable Laws, and not in breach of any Applicable Laws. Each of
Amphastar and each of its Affiliates is in good standing in all jurisdictions where it is required to be registered, licensed or otherwise qualified due to the nature, location or character of its
business and assets (including the Purchased Assets), including in each state, district, commonwealth and territory of the United States of America. 

        3.1.9    Litigation    

        Except
as disclosed in the Financial Statements, there is no claim, demand, suit, action, cause of action, dispute, proceeding, litigation, investigation, grievance, arbitration,
governmental proceeding or other proceeding including appeals and applications for review, in progress against or affecting Amphastar or any of its Affiliates which could reasonably be expected to
result in any Material Adverse Financial Change of Amphastar and its Affiliates taken as a whole or relating to Cortrosyn or any of the Product Rights or Intellectual Property, nor are any of the same
pending or, to the best of Amphastar's knowledge, threatened. There is not presently outstanding against Amphastar or any of its Affiliates any judgment, decree, injunction, rule, order or award of
any court, Governmental Agency or arbitrator that may adversely affect Amphastar or any of its Affiliates or Amphastar's right or ability to manufacture, market, sell or distribute Cortrosyn or the
ownership or rights of Amphastar to any of the Product Rights or Intellectual Property. 

        3.1.10    Purchased Assets    

        Amphastar
is the owner of the Purchased Assets including the Product Rights and Intellectual Property, with good and marketable title thereto, free and clear of 

        all
Encumbrances other than the security granted to Organon under the Organon Security Agreement and to DRC under the Security Agreement. 

7

 

        3.1.11    Royalty Interest    

        Amphastar
is entitled to grant and pay the Royalty Interest to DRC as herein contemplated. There has been no sale, conveyance, assignment or granting of any license or any royalties or
similar rights to or the creation of any Encumbrance on or in respect of the Royalty Interest, the Product Rights, Intellectual Property, the Acquisition Agreements or the Collateral as defined in and
under the Security Agreement in favor of any other Person except for the Royalty Interest to DRC contemplated by this Agreement; the security granted to Organon under the Organon Security Agreement
and as set forth in Schedule C. 

        3.1.12    No Options    

        No
Person other than Organon, by virtue of the Organon Security Agreement and DRC has any agreement, option, warrant or right, or any right capable of becoming any of the foregoing, for
the purchase of all or any of Amphastar's right, title or interest in Cortrosyn or any of the Acquisition Agreements, the Product Rights or Intellectual Property. 

        3.1.13    Marketing    

        Amphastar
has no current proposal or intention to abandon or delay the marketing, sales and distribution of Cortrosyn nor is it aware of any existing circumstance, event or condition
which could have a material adverse effect on the marketing, sales and distribution of Cortrosyn. 

        3.1.14    Intellectual Property    

        (a)   The
Intellectual Property consists on the date hereof of the Trade Mark, the NDA and the "cortrosyn.com" and "cortrosyn.us" domain names and is sufficient to carryon the
business of the production, manufacture, marketing, distribution and sale of Cortrosyn. To the best of Amphastar's knowledge and belief, the Trade Mark ownership has been validly transferred from
Organon Inc. to Organon on June 19,2003 by recordation of a change of name document within the records of the United States Patent and Trade Mark Office. The Trade Mark ownership has
been validly assigned by Organon to Amphastar on June 26, 2003 and such assignment has been duly recorded by the United States Patent and Trade Mark Office. Amphastar is the registered owner of
the Trade Mark free and clear of all Encumbrances. Amphastar has not, and to its knowledge, Organon has not allowed or acquiesced in the use of the Trade Mark by any other Person in the Territory. To
the best of Amphastar's knowledge and belief, the Trade Mark is distinctive and is not confusing with any other trade mark or trade name. The United States trade mark registration of the Trade Mark in
the name of Amphastar as the owner thereof is valid in good standing and is not the subject of any expungement or cancellation proceedings. To the best of Amphastar's knowledge, use of the Trade Mark
does not constitute infringement of any Person's common law or statutory trade mark rights within the Territory. Amphastar is not aware of any infringement or passing off relating to the Trade Mark
within the Territory. 

        (b)   The
NDA is in full force and effect and, to Amphastar's knowledge, has been duly and validly issued. To Amphastar's knowledge, there is no proceeding by any Governmental
Agency pending, nor is any Governmental Agency threatening with respect to Cortrosyn a product recall or market withdrawal, or the revocation or suspension of the NDA. To Amphastar's knowledge all
required notices, supplemental applications and annual or other reports, including adverse experience reports, with respect to the NDA which are required to maintain the NDA in good standing have been
filed with the FDA and true and correct copies of such documents have been provided to DRC prior to the Closing Date. 

        (c)   To
Amphastar's knowledge, as of the Closing Date, the production, manufacture, marketing, distribution and sale of Cortrosyn in the Territory does not infringe any third
party's intellectual property rights, and neither Amphastar nor Organon has received any notice, 

8

 

complaint,
threat or claim concerning alleging infringement of any patent, trademark or other intellectual property right of any other Person. 

        3.1.15    Supply and Manufacture of API    

        Organon
has agreed to cause Diosynth Inc. or its affiliates to supply to Amphastar and its affiliates or any other party designated by Amphastar the API for the manufacture and
sale of the Product (as such term is defined in the Acquisition Agreements) at a price of $180.00 per gram for a period of five (5) years beginning on June 26,2003 in accordance with the
terms of the Acquisition Agreements. Organon has agreed to manufacture the Product for Amphastar at a price of $2.70 per vial (subject to adjustment) for a period of three (3) years beginning
on June 26, 2003 in accordance with the terms of the Acquisition Agreements. Pursuant to the Acquisition Agreements, Organon has agreed not to sell any Product to any party (other than
Amphastar, its affiliates and designates) in the Territory or to any party outside the Territory for sale, distribution or delivery into the Territory. 

        3.1.16    Disclosure    

        No
representation or warranty made by Amphastar in this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make any such
representation or warranty not misleading to a prospective investor seeking full information as to Amphastar, Cortrosyn and the Intellectual Property. 

3.2    Representations and Warranties of DRC    

        DRC
represents and warrants to Amphastar as of the date of this Agreement as follows and acknowledges that Amphastar is relying on such representations and warranties in entering into
this Agreement: 

        3.2.1    Corporate Matters    

        (a)   DRC
is a corporation duly incorporated, organized and validly existing under the laws of its jurisdiction of incorporation. No proceedings have been taken or authorized
by DRC or, to the best of DRC's knowledge, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding up of DRC. 

        (b)   DRC
has all necessary power and capacity to execute and deliver, and to observe and perform its covenants and obligations under, this Agreement and the Closing Documents
to which it is a party. DRC will have on or before Closing taken all action necessary to authorize the execution and delivery of, and the observance and performance of its covenants and obligations
under, this Agreement and the Closing Documents to which it is a party. 

        (c)   This
Agreement and each Closing Document to which it is a party has been or will be duly executed and delivered by DRC, and this Agreement and each such Closing Document
constitute a valid and binding obligation of DRC enforceable against it, in accordance with its terms; provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws generally affecting enforceability of creditors' rights and that equitable remedies such as specific performance and injunction are in the discretion of the court
from which they are sought. . 

        (d)   DRC
has all necessary corporate power and capacity to carryon its business as is presently carried on by it. 

        3.2.2    Absence of Conflicting Agreements    

        None
of the execution and delivery of, or the observance and performance by DRC of, any covenant or obligation under this Agreement or any Closing Document to which it is a party or the
consummation of the transactions contemplated thereby contravenes or results in, or will contravene or 

9

 

result
in, a violation of or a default under (with or without the giving of notice or lapse of time, or both) or in the acceleration of any obligation under: 

        (a)   any
Applicable Law; 

        (b)   the
constating documents, articles, by-laws, directors' or shareholders' resolutions of DRC or any shareholders agreement or voting trust pertaining to DRC;
or 

        (c)   any
instrument, contract, lease, license, patent or other agreement to which DRC is a party, or by which it or its business or property is bound or affected. 

        3.2.3    Consents, Approvals, Etc.    

        No
consent, approval, license, order or authorization, registration, declaration or filing with or of any Governmental Agency or other Person is required by DRC, in connection with: 

        (a)   the
execution and delivery by DRC of this Agreement or any Closing Document to which it is a party; 

        (b)   the
observance and performance by DRC of its obligations under this Agreement and the Closing Documents to which it is a party; or 

        (c)   the
consummation of any of the transactions contemplated thereby. 

3.3    Commission    

        Each
Party represents and warrants to the other that the other Party will not be liable for any brokerage commission, finder's fee or other like payment in connection with the
transactions contemplated hereby because of any action taken by, or agreement or understanding reached by, that Party. 

3.4    Non-Waiver    

        No
investigations made by or on behalf of DRC at any time shall waive, diminish the scope of or otherwise affect any representation or warranty made by Amphastar herein or pursuant
hereto. The acceptance by DRC of any payment in respect of the Royalty Interest shall be deemed not to be a waiver of any of its rights hereunder. 

3.5    Survival of Representations and Warranties    

        All
representations and warranties, made by any Party in this Agreement or in any Closing Document shall survive the Closing, until the expiration of the Term. After such period, neither
Party shall have any further liability hereunder with respect to such representations and warranties except with respect to Claims properly made within such period. 

3.6    Meaning of Knowledge Qualification    

        Where
any representation or warranty contained in this Agreement is expressly qualified by reference to the "knowledge of Amphastar" or to the "best of the knowledge and belief of
Amphastar", it shall be deemed to refer to the knowledge of any director or responsible senior officer of Amphastar and the knowledge which Amphastar would have had if it had conducted a diligent
inquiry into the relevant subject matter. Amphastar confirms to DRC that at least one responsible senior officer of Amphastar has made due and diligent inquiry of such Persons as he or she reasonably
considers necessary as to the matters that are the subject of such representations and warranties. 

10

 

 ARTICLE 4 COVENANTS  

4.1    Covenants During the Term    

        Amphastar
covenants and agrees with DRC that, subject to Closing, during the Term, Amphastar shall, at its own expense, act as follows: 

        (a)   Meetings

If
so requested by DRC, senior officers of Amphastar shall, up to four times annually (but not more than once in any Quarter) meet with representatives of DRC at a mutually convenient time and place.
At such meetings, Amphastar shall be prepared to discuss matters relating to Cortrosyn and the Intellectual Property (and if requested by DRC provide copies of the relevant documentation), including,
if any, product development plans, business plans, budget, expansion activities, comparison to forecast, financial results and projections, patent filings, licensing agreements,
co-promotion agreements, distribution agreements, sales agreements, purchase orders, sales and marketing activities pertaining to Cortrosyn and the Intellectual Property. Amphastar shall
also provide DRC with timely information pertaining to Cortrosyn with respect to all correspondence with or from the FDA. 

        (b)   Financial
Information 

Amphastar
shall provide to DRC: 

        (i)    quarterly
unaudited financial statements for Amphastar within 45 days of the end of each of the first three Quarters in each year and within 60 days of the
end of the fourth Quarter in each year; 

        (ii)   a
written report of the Chief Financial Officer of Amphastar as to the financial basis for the calculation of the Royalty Interest including the Net Sales of Cortrosyn
for each Quarter within 30 days of the end of each Quarter and in the event of a Backorder, the calculation of the adjusted Royalty Interest in accordance with Section 2.2(g). Such
report shall be delivered to DRC simultaneously with the payment of the Royalty Interest by Amphastar to DRC; 

        (iii)  annual
audited consolidated financial statements of Amphastar and its Affiliates and all other annual financial information provided at the same time and in the same
form provided to the shareholders of Amphastar; and 

        (iv)  sales
projections and marketing plan, if any, with respect to Cortrosyn within 60 days of Amphastar's fiscal year end. 

Amphastar
acknowledges and agrees that all financial statements shall be prepared in accordance with GAAP and that the information and materials provided to DRC under clause (i), (ii),
(iii) and (iv) may be disclosed or provided to DRC's secured lenders and investors provided such secured lenders and investors enter into a confidentiality agreement pertaining to such
information and materials. 

        (c)   Audit
Right 

If
so requested by DRC, DRC shall annually have the right, but not the obligation, to audit Amphastar's books and records and other supporting documentation pertaining to Net Sales of Cortrosyn for
any calendar year not previously audited by DRC. Such audit shall be conducted by a recognized accounting firm of DRC's choice. DRC shall give Amphastar reasonable notice prior to having such an audit
performed and such audit shall be conducted during regular working hours at Amphastar. Such audit shall be for DRC's account unless the Royalty Interest paid in such period is less than 97% of the
royalties due to DRC as 

11

 

calculated
pursuant to the audit, in which case Amphastar shall pay for the out-of-pocket cost of the audit. Any shortfall in royalties payable to DRC that is discovered as a
result of such audit shall be included in the Royalty Interest, and shall be payable to DRC within 3 Business Days of such audit. 

        (d)   Security
Agreement 

Amphastar
shall on or before Closing execute and deliver a security agreement, substantially in the form of security agreement attached at Schedule D hereto, in favor of DRC as general
continuing collateral security for all present and future obligations of Amphastar under this Agreement (the "Security Agreement"), all on the terms set
forth in the Security Agreement. Amphastar shall on or before Closing register on behalf of DRC a financing statement in respect of the Security Agreement under the Uniform Commercial Code. 

        (e)   Compliance
with Law 

Amphastar
shall and shall cause its Affiliates to comply with all Applicable Law in connection with the ownership and rights in and the use of the Intellectual Property and with respect to carrying on
its business including in particular the manufacture, marketing, sale and distribution of Cortrosyn. Amphastar shall and shall cause its Affiliates to make all filings, renewals, extensions and take
all necessary or desirable actions to maintain in good standing ownership and all rights to the Intellectual Property and Product Rights, including the timely filing of all required notices,
supplemental applications and annual and other reports with the FDA which are required to maintain the NDA in good standing. 

        (f)    Product
Liability and Infringement 

Amphastar
shall maintain comprehensive product liability insurance in respect of Cortrosyn and in respect of any product liability claims in an amount per claim of not less than $5 million.
Maintenance of such insurance coverage will not relieve Amphastar of any responsibility under this Agreement for damage in excess of insurance limits or otherwise. Amphastar shall indemnify, defend
and save harmless DRC and its Representatives and from and against any and all Claims which may be made or brought against any such indemnified party as a result of, in respect of or arising out of
Cortrosyn or the use of Cortrosyn or any of the Intellectual Property infringing a patent, trade mark, copyright or other intellectual property right or any other right of a third party. Amphastar
shall provide DRC with a certificate evidencing such insurance coverage and the insurer's agreement to notify DRC at least sixty (60) days in advance of any cancellation or modification of such
insurance. 

        (g)   Material
Agreements 

Amphastar
shall perform, fulfill, comply and discharge all of its obligations under and in accordance with the terms of the Acquisition Agreements and all sales agreements for Cortrosyn. 

        (h)   Books
and Records 

Amphastar
shall maintain at its usual place of business in Rancho Cucamonga, California, up-to-date records, reports, accounts, books and files which shall accurately reflect
all particulars known to or under the control of Amphastar which pertain to Cortrosyn and the operation of its business generally. 

        (i)    Notification 

Amphastar
shall promptly notify DRC in writing of any material adverse change in its business (including, any material adverse event in respect of any contract with respect to Cortrosyn (including any
notice of default, suspension, waiver, termination or claim under any of the 

12

 

Acquisition
Agreements, any notice of a recall of Cortrosyn, or notice with respect to the NDA including any notice of market withdrawal, suspension or revocation) and any Material Adverse Financial
Change (including any material adverse change in a budget or sales projections most recently provided to DRC» or the commencement of any litigation against Amphastar, any of its Affiliates
or in respect of Cortrosyn or any of the Product Rights or Intellectual Property claiming in excess of $500,000 and each such notification shall contain full particulars of the event or events
described therein. 

        (j)    DRC's
Right to Defend 

Amphastar
will not allow any Intellectual Property to lapse or become abandoned nor settle any claim by a third party in respect of Amphastar's or its Affiliates' rights in Cortrosyn, any Intellectual
Property or Product Rights or the Acquisition Agreements without 60 days' prior written notification to DRC and in the case of such a settlement proposal, without the prior written approval of
DRC. If Amphastar or an Affiliate decides not to defend, enforce or pursue any of its rights with respect to Cortrosyn, the Acquisition Agreements, the Product Rights or the Intellectual Property, DRC
shall have the right but not the obligation, at its sole expense, to defend, enforce or pursue such rights for and in the name of Amphastar or the applicable Affiliate and any money or
non-monetary consideration received or recovered by Amphastar as a result thereof or in connection or non-monetary consideration therewith shall be held in trust for the sole
benefit of DRC and paid by Amphastar in full to DRC (and in the case of any non-monetary consideration, assigned to DRC free and clear of any and all Encumbrances) forthwith after receipt
thereof by Amphastar or such Affiliate without deduction, set-off or counterclaim. The amount of such proceeds paid to (and any non-monetary consideration received by) DRC
shall be in addition to and not included in the Royalty Interest. Amphastar shall (and shall cause its applicable Affiliate(s) to) co-operate in all reasonable respects with DRC's defense,
enforcement or pursuit of such rights but at the expense of DRC (including, if required to obtain standing in any such action, appearing in the pleadings or legal proceedings at the direction of DRC
and its counsel, at the cost of ORC). Amphastar shall provide to DRC, in confidence, all files, books, records and other information in its possession or control which may be relevant to assist DRC in
the defense, enforcement or pursuit of such rights. 

        (k)   Power
of Attorney 

Amphastar
hereby appoints DRC as its attorney-in-fact, with full authority in the place and stead of Amphastar and in the name of Amphastar, or otherwise, from time
to time in DRC's discretion to take any action and to execute any instrument consistent with the terms of this Agreement, which DRC may deem necessary or advisable for the purpose of exercising any
rights granted to DRC pursuant to Section 4.1 (j) hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable.
Amphastar hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. 

        (l)    Maximize
Returns 

Amphastar
shall use all commercially reasonable efforts to maximize the Royalty Interest in the Territory, including through selling, manufacturing, marketing, promoting, producing and obtaining
regulatory approvals for Cortrosyn, obtaining and maintaining all Registrations for Cortrosyn and maintaining, protecting, pursuing and defending its rights under the Intellectual Property. Amphastar
agrees to act in good faith and to avoid structuring its business and affairs in a manner which would allow it to avoid having to fulfill the spirit of this Agreement. 

        (m)  Negative
Covenant 

13

 

Without
the prior written consent of DRC, Amphastar shall not and shall cause its Affiliates not to (i) sell, assign, transfer, license, deliver or otherwise dispose (each a
"disposition"), other than the assignment by way of security of certain collateral granted to Organon under the Organon Security Agreement, of any of
the Intellectual Property or Product Rights, its ownership or rights in Cortrosyn or any of its rights in and benefits under the Acquisition Agreements; (ii) waive expressly or by course of
conduct, amend, cancel or terminate, or exercise any of Amphastar's rights under the Acquisition Agreements; (iii) create or permit to exist any Encumbrance on the Collateral as defined in and
under the Security Agreement other than the Organon Security Agreement; (iv) fail to f1l1fill its obligations under the Acquisition Agreements; (v) consent to any assignment of any of
the Acquisition Agreements by Organon; (vi) agree to do any of the foregoing; or (vii) take such other action, if such action would or is reasonably likely to reduce or otherwise
adversely affect the Royalty Interest or cause any representation or warranty set forth in Section 3.1 or Section 3 of the Security Agreement to become untrue as of the date of such
action. For avoidance of doubt, any disposition referred to in clause (i) above shall be subject to DRC's rights under this Agreement and the Security Agreement and shall only be made by
Amphastar or its Affiliates with the prior written consent of DRC. 

        (n)   Non-Monetary
Consideration 

Amphastar
shall not, without the prior written consent of DRC, accept or solicit any non-monetary consideration in respect of the sale of Cortrosyn. 

        (o)   Discharge
of Organon Security 

Forthwith
upon payment in full to Organon of the balance of the purchase price as set forth in the Sale Agreement; Amphastar shall obtain a release and discharge from Organon of all Encumbrances held
by Organon and shall ensure that all registrations and filings necessary or desirable to 

        effect
or record the release and discharge are made including a UCC-3 financing statement. 

ARTICLE 5

CLOSING  

5.1    Closing    

        Subject
to this Article 5, the payment of the Invested Amount shall be completed (the "Closing") at 4:00 PM, on August 5,
2003 or at such other time or date as the parties may agree (such date being herein referred to as the "Closing Date"). 

5.2    Deliveries by DRC    

        DRC
hereby agrees to deliver to Amphastar at the Closing a wire transfer to an account designated by Amphastar in writing prior to Closing in the sum of $8 million, representing
payment of the Invested Amount in full by wire transfer to the following account: 

	Beneficiary Bank Name:	 	Cathay Bank
	Beneficiary Bank ABA No.:	 	122203950
	Beneficiary Bank Address:	 	777 North Broadway, Los Angeles, CA 90012
	Beneficiary Name:	 	Amphastar Pharmaceuticals, Inc.
	Beneficiary Account No.:	 	14012529
	Beneficiary Address:	 	11570 6th Street, Rancho Cucamonga, CA 91730

14

 

5.3    Deliveries by Amphastar    

        Amphastar
covenants and agrees to deliver to DRC, each in fonn satisfactory to DRC: 

        (a)   at
the Closing, such other documents and instruments as DRC may reasonably require to give effect to and carry out the transactions contemplated herein, including a
receipt from Amphastar for the Invested Amount, and the Security Agreement. 

        (b)   at
the Closing, a subordination agreement among Organon, Amphastar and DRC granting to DRC the right to cure a default by Amphastar in any payments of the purchase price
pursuant to the Sale Agreement. 

        (c)   on
a best-efforts basis, within 15 Business Days of the Closing Date, a release agreement executed by Cathay Bank, UCC-3 financing statement and
other documentation satisfactory to DRC to affect the release and discharge of the Encumbrance of Cathay Bank on the Collateral as defined in and under the Security Agreement. A failure by Amphastar
to deliver to DRC, within 60 days of the Closing Date, a release agreement executed by Cathay Bank, UCC-3 financing statement and other documentation satisfactory to DRC to affect
the release and discharge of the Encumbrance of Cathay Bank on the Collateral as defined in and under the Security Agreement shall constitute an Event of Default under the Security Agreement. 

5.4    DRC's Conditions    

        The
obligation of DRC to pay the Invested Amount and to consummate the transactions otherwise contemplated by this Agreement shall be subject to the satisfaction of, or compliance with,
at or before the Closing Date, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of DRC and may be waived by it in whole or in
part): 

        (a)   Performance
of Covenants 

Amphastar
shall have observed or performed in all respects, all of its obligations, covenants and agreements and fulfilled all of its conditions hereunder to be observed, performed or fulfilled at or
before the time of Closing. 

        (b)   Receipt
of Closing Documentation 

Amphastar
shall have executed and delivered all of the Closing Documents and made such other deliveries as contemplated in Section 5.3. 

        (c)   DRC
Board Approval 

The
board of directors of DRC shall have authorized the execution and delivery of this Agreement by DRC, the completion of the transactions contemplated in this Agreement and the performance of its
obligations hereunder. 

        (d)   Due
Diligence 

DRC
shall be satisfied in all material respects, in its sole discretion, with the results of its due diligence with respect to Cortrosyn, Amphastar, including its capability to manufacture, sell and
distribute Cortrosyn, the Intellectual Property, the Acquisition and all financial and technical information with respect thereto. 

        (e)   Consents
and Approvals 

Amphastar
shall have obtained all requisite third-party consents and approvals to enable Amphastar to complete the transactions contemplated by this Agreement, to perform its obligations hereunder and
to perfect its security interest in the Collateral as defined in and under the Security Agreement including the consent of Organon to the cure right as contemplated in Section 5.3(d). 

15

   5.5    Amphastar's Conditions    

        The
obligation of Amphastar to complete the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, at or before the Closing Date, each
of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of Amphastar and may be waived by it in whole or in part): 

        (a)   Performance
of Covenants 

DRC
shall have observed or performed in all respects, all of its obligations, covenants and agreements and fulfilled all of its conditions hereunder to be observed, performed or fulfilled by it at or
before the time of Closing. 

        (b)   Receipt
of Closing Documentation 

DRC
shall have executed and delivered all of the Closing Documents and paid the Invested Amount as contemplated in Section 2.1. 

5.6    Waiver    

        Any
Party may waive, by notice to the other Parties, any condition set forth in this Article 5 which is for its benefit. No waiver by a Party of any condition, in whole or in
part, shall operate as a waiver of any other condition. 

5.7    Failure to Satisfy Conditions    

        If
any condition set forth in Section 5.4 or 5.5 is not satisfied on or before the time of Closing, the Party entitled to the benefit of such condition (the
"First Party") may terminate this Agreement by notice in
writing to the other Party. Upon such notice being given, the First Party shall be released from all obligations hereunder. If the First Party can show that the condition or conditions which have not
been satisfied and for which the First Party has terminated this Agreement (a) are, or were during the period between the date hereof and the Closing Date, reasonably capable of being performed
or caused to be performed by the other Party or (b) have not been satisfied by reason of a default by the other Party hereunder, the other Party shall be in breach of its obligations hereunder;
otherwise the other Party shall also be released from all obligations hereunder. 

ARTICLE 6

INDEMNIFICATION  

6.1    Mutual Indemnifications for Breaches of Warranty, etc.    

        Amphastar
agrees with DRC and DRC agrees with Amphastar (the Party agreeing to indemnify another Party, its Representatives and their respective heirs, legal representatives, successors
and assigns being called the "Indemnifying Party" and the Party including its Representatives and their respective heirs, legal representatives,
successors and assigns to be indemnified being called collectively, the "Indemnified Party") to indemnify and save harmless the Indemnified Party,
effective as and from the date hereof, from and against any claims, demands, actions, causes of action, damage, loss, cost, liability or expense (excluding those of an indirect or consequential
nature) (the "Claims") which may be made or brought against the Indemnified Party or which it may suffer or incur as a result of, in respect of, or arising out of any non-fulfillment of
any covenant or agreement on the part of the Indemnifying Party under this Agreement or any incorrectness in or breach of any representation or warranty of the Indemnifying Party contained herein. Any
amount which an Indemnifying Party is liable to pay to an Indemnified Party pursuant to this Section shall bear interest at a rate per annum equal to the Prime Rate plus 5% per annum, calculated and
payable monthly, both before and after judgment, with interest on overdue interest at the same rate, from the date the Indemnified Party disbursed funds, suffered damages or losses or incurred a loss,
liability or expense in respect of a Claim, to the date of 

16

 

payment
by the Indemnifying Party to the Indemnified Party. Any amount which an Indemnifying Party is required to pay to an Indemnified Party pursuant to this Section or pursuant to Section 6.2
(including interest thereon) is called an "Indemnified Loss". The foregoing obligation of indemnification in respect of such Claims shall be subject to the limitation set forth in Section 3.5
hereof respecting the survival of the representations and warranties of the Parties. The Indemnified Party shall use reasonable commercial efforts to minimize the amount of the Indemnified Loss. 

6.2    Third Party Claims    

        If
a Claim is made against an Indemnified Party by a third party for which the Indemnified Party may be entitled to indemnification under Section 6.1, the Indemnified Party shall
give notice (the "Indemnity Notice") to the Indemnifying Party specifying the particulars of such claim within 30 days after it receives
notification of the Claim. Failure to give such notice within such time period shall not prejudice the rights of an Indemnified Party except to the extent that the failure to give such notice
materially adversely affects the ability of the Indemnifying Party to defend the Claim or to cure the breach or incorrectness of the representation, warranty, covenant or agreement giving rise to the
Claim. The Indemnifying Party shall have the right to participate in any negotiations or proceedings with respect to such Claim at its own expense. The Indemnified Party shall not settle or compromise
any such Claim without the prior written consent of the Indemnifying Party, unless the Indemnifying Party has not, within 15 Business Days after the giving of the Indemnity Notice, given notice to the
Indemnified Party that it wishes to dispute such Claim. If the Indemnifying Party does give such a notice, 

        (a)   it
shall have the right at its own cost and expense to assume the defense of such Claim and to defend such Claim in the name of the Indemnified Party; 

        (b)   the
Indemnified Party shall be entitled to participate in such defense at its own expense; and 

        (c)   the
Indemnifying Party shall not settle or compromise such Claim, without the prior written consent of the Indemnified Party unless such settlement or compromise
involves no admission of liability by or on behalf of the Indemnified Party and includes a full and final comprehensive release of the Indemnified Party. 

        The
Indemnified Party shall provide to the Indemnifying Party, in confidence, all files, books, records and other information in its possession or control which may be relevant to the
defense of such Claim. The Indemnified Party shall co-operate in all reasonable respects in the defense of such Claim but at the expense of the Indemnifying Party. If the Indemnifying
party fails, after the giving of such notice, diligently and reasonably to defend such Claim throughout the period that such Claim exists, its right to defend the Claim shall terminate and the
Indemnified Party may assume the defense of such Claim at the sole expense of the Indemnifying Party. In such event, the Indemnified Party may compromise or settle such Claim, without the consent of
the Indemnifying Party. 

6.3    Agency for Representatives    

        Each
Party agrees that it accepts the indemnity under this Agreement in favor of any of its Representatives as agent and trustee of that Representative. Each Party agrees that the
Indemnified Party may enforce an indemnity in favor of any of its Representatives on behalf of that Representative. 

ARTICLE 7

GENERAL  

7.1    Amendment    

        This
Agreement may be amended or supplemented only by a written agreement signed by each Party. 

17

 

7.2    Remedies Cumulative and Waivers    

        The
rights and remedies of DRC under this Agreement and the Security Agreement and under any other document or instrument executed pursuant hereto or thereto are cumulative and are in
addition to and not in substitution for any rights or remedies provided by law or by equity. Any waiver of, or consent to depart from, the requirements of any provision of this Agreement shall be
effective only if it is in writing and signed by the Party giving it, and only in the specific instance and for the specific purp0se for which it has been given. No failure on the part of any Party to
exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right. No single or partial exercise of any such right shall preclude any other or further
exercise of such right or the exercise of any other right. 

7.3    Performance on Holidays    

        If
any action is required to be taken pursuant to this Agreement on or by a specified date which is not a Business Day, then such action shall be valid if taken on or by the next
succeeding Business Day. 

7.4    Financial Reporting Standards    

        All
accounting and financial terms used herein and the treatment of any accounting matter contemplated herein, unless specifically provided to the contrary, shall be interpreted and
applied in accordance with GAAP. 

7.5    Expenses    

        Each
Party shall pay all expenses it incurs in authorizing, preparing, executing and performing this Agreement and the transactions contemplated hereunder, whether or not the Closing
occurs, including all fees and expenses of its legal counsel, bankers, investment bankers, brokers, accountants or other representatives or consultants. Notwithstanding the foregoing, Amphastar shall
pay DRC forthwith on demand by DRC for all expenses it incurs in connection with maintaining, protecting, realizing, disposing or enforcing its security under the Security Agreement including all
reasonable fees and expenses of its legal counsel, other representatives or consultants. 

7.6    Time    

        Time
is of the essence of this Agreement and each of its provisions. 

7.7    Notices    

        Any
notice, demand or other communication (in this Section, a "notice") required or permitted to be given or made hereunder shall be in
writing and shall be sufficiently given or made if: 

        (a)   delivered
in person during normal business hours of the recipient on a Business Day and left with a receptionist or other responsible employee of the recipient at the
relevant address set forth below; 

        (b)   except
during any period of actual or imminent interruption of postal services due to strike, lockout or other cause, sent by registered mail or by courier for next
Business Day delivery; or 

        (c)   sent
by Transmission, charges prepaid and confirmed by registered mail or courier as provided in Subsection (b); 

in
the case of a notice to Amphastar at: 

Amphastar
Pharmaceuticals, Inc.

11570 6th Street

Rancho Cucamonga

California 91730 

18

 

Attention:
Chief Financial Officer

Fax No.: (909) 980-6139

Email: DavidN@Amphastar.com 

and
in the case of a notice to DRC at: 

Drug
Royalty USA, Inc.

Bank of America Center

101 Convention Center Drive

Suite 850, P.O. Box 50401

Las Vegas, Nevada 89109 

Attention:
Behzad Khosrowshahi

Fax No.: (702) 58-36519

Email: bk@drugroyalty.com 

with
a copy to Fasken Martineau DuMoulin LLP at: 

66
Wellington Street West

Suite 4200, Toronto Dominion Bank

Tower Box 20, Toronto-Dominion Centre

Toronto; Ontario

M5K lN6 

Attention:
Scott Conover

Fax No.: (416) 364-7813

Emai1: sconover@tor.fasken.com 

        Any
notice so given shall be deemed to have been given and to have been received on the day of delivery, if so delivered, on the fifth Business Day (excluding each day during which there
exists any interruption of postal services due to strike, lockout or other cause) following the mailing thereof, if so mailed, and on the day following the day notice was sent by Federal Express
courier or by Transmission, provided such day is a Business Day and if not, on the first Business Day thereafter. Addresses for notice may be changed by giving notice in accordance with this Section. 

7.8    Assignment    

        This
Agreement or any or all of the rights or obligations hereunder may not be assigned by either Amphastar or DRC without the prior written consent of the other, provided that
(i) Amphastar, without such consent, may assign the entire Agreement and its rights and obligations hereunder to an arm's length bona fide third party in connection with the transfer or sale of
all or substantially all of its assets or business, or in the event of its merger or consolidation or change in control or similar transaction and provided that such assignment includes the Security
Agreement and the Acquisition Agreements and the assignee assumes the obligations of Amphastar hereunder and thereunder, and (ii) DRC may assign this Agreement in whole or in part by way of
security to a financial institution or other lender and/or to an Affiliate of DRC and/or as part of a sale of a material part of DRC whether by way of a reorganization or otherwise, without the
consent of Amphastar, provided DRC gives written notice of such assignment to Amphastar. This Agreement shall enure to the benefit of and be binding upon the Parties and their respective successors
(including any successor by reason of amalgamation or statutory arrangement of any Party) and permitted assigns. 

7.9    Further Assurances    

        Each
Party shall do such acts and shall execute such further documents, conveyances, deeds, assignments, transfers and the like, and will cause the doing of such acts and will cause the
execution of such further documents as are within its power as any other Party may in writing at any time and 

19

 

from
time to time reasonably request be done and/or executed, in order to give full effect to the provisions of this Agreement and the Closing Documents. Without limiting the generality of the
foregoing, DRC and Amphastar agree to co-operate on any applicable accounting or tax issues arising from the transaction contemplated hereby. 

7.10    Independent Parties    

        Nothing
contained in this Agreement shall in any way or for any purpose constitute any Party a partner of any other Party in the conduct of any business or otherwise or a member of a
joint venture or joint
enterprise or create any fiduciary relationship among them. Except as set forth in Sections 4.1 G) and 4.1 (k), neither of Amphastar on the one hand or DRC on the other shall have any authority
to act for or to assume any obligation or responsibility on behalf of the other and neither of Amphastar on the one hand or DRC on the other shall have any authority to bind the other to act or to
undertake any obligation or responsibility whatsoever. 

7.11    Public Announcements    

        The
Parties agree to discuss and co-ordinate all public announcements concerning the transactions contemplated herein except as may be necessary, in the opinion of counsel to
the Party making such disclosure, to comply with the requirements of any Applicable Law. If any such public statement or release is so required, the Party making such disclosure shall, where
practicable, consult with the other Party prior to making such statement or release and shall use reasonable efforts acting in good faith, to agree upon a text for such statement or release which is
satisfactory to both Parties. Subject to the Closing, Amphastar and DRC will discuss and agree on the appropriate method for making a joint announcement about such Closing. 

7.12    Severability    

        If
any covenant, obligation or provision of this Agreement or the application thereof to any Person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement or the application of such covenant, obligation or agreement to Persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby
and each covenant, obligation and provision of this Agreement shall be separately valid and enforceable to the fullest extent permitted by Applicable Law. 

7.13    Specific Performance    

        Each
of the Parties hereto acknowledges that the other Party may have no adequate remedy at law if it fails to perform any of its obligations under this Agreement. In such event, each of
the Parties agrees that the other Party shall have the right, in addition to any other rights it may have (whether at law or in equity), to equitable remedies such as injunction and specific
performance of this Agreement. 

7.14    Third Party Beneficiary    

        Nothing
in this Agreement or in any agreement entered into pursuant hereto or in connection herewith is intended expressly or by implication to, or shall, confer upon any person other
than the Parties and their respective Representatives, any rights or remedies of any kind. 

7.15    Counterparts    

        This
Agreement may be executed in any number of counterparts and by facsimile transmission. Each executed counterpart shall be deemed to be an original. All executed counterparts taken
together shall constitute one agreement. 

7.16    Facsimile Execution    

        To
evidence the fact that it has executed this Agreement, a Party may send a copy of its executed counterpart to the other Party by facsimile transmission. That Party shall be deemed to
have executed 

20

 

this
Agreement on the date it sent such facsimile transmission. In such event, such Party shall forthwith deliver to the other Party the counterpart of this Agreement executed by such Party. 

7.17    Confidentiality    

        All
information furnished by DRC to Amphastar or by Amphastar to DRC in connection with this Agreement and the transactions contemplated hereby, as well as the terms, conditions and
provisions of this Agreement, shall be kept confidential by Amphastar and DRC and shall be used by Amphastar and DRC only in connection with this Agreement and the transactions contemplated hereby,
except in connection with the enforcement of rights or exercise of remedies under this Agreement and the Security Agreement and except to the extent that such information (i) is already known
by the party to whom the information is disclosed or in the public domain at the time the information is disclosed, (ii) thereafter becomes lawfully obtainable from other sources,
(iii) is required to be disclosed in any document to be filed with any federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign or (iv) is required to be disclosed under securities laws or regulations applicable to DRC or its affiliates, or by court order. Notwithstanding the
foregoing, either Party may disclose such information to its Affiliates, directors, officers, investors, bankers, advisors, trustees and representatives, provided that such Persons shall be informed
of the confidential nature of such information and shall be obligated to keep such information confidential pursuant to the terms of this Section 7.17. 

7.18    WAIVER OF JURY    

        FOR
THE PURPOSES OF ANY LITIGATION COMMENCED IN THE UNITED STATES, EACH PARTY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION (A) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT; OR (B) ARISING FROM OR RELATING TO ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT; AND AGREES THAT ANY SUCH LITIGATION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH PARTY HEREBY ACKNOWLEDGES THAT THE OTHER PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS IN THIS SECTION 7.18. 

7.19    Service of Process    

        Each
Party irrevocably consents to the service of process out of the courts of the State of New York in accordance with the local rules of civil procedure or by mailing a copy thereof,
by registered mail, postage prepaid to such Party at the address of such Party, or by sending a copy thereof by facsimile or by email in pdf format to such Party at the facsimile number or email
address of such Party determined under Section 7.7. 

        [signature page to follow]

21

 

        TO WITNESS THEIR AGREEMENT, the Parties have duly executed this Agreement as of the date first above written. 

	
 	
 	

AMPHASTAR PHARMACEUTICALS, INC.
	

 	
 	

By:	
 	

/s/  DAVID W. NASSIF      

	 	 	Name:	 	David W. Nassif
	 	 	Title:	 	Chief Financial Officer
	

 	
 	
DRUG ROYALTY USA, INC.
	

 	
 	

By:	
 	

	 	 	Name:	 	Behzad Khosrowshahi
	 	 	Title:	 	President and CEO

22

 

        TO WITNESS THEIR AGREEMENT, the Parties have duly executed this Agreement as of the date first above written. 

	
 	
 	

AMPHASTAR PHARMACEUTICALS,. INC.
	

 	
 	

By:	
 	

	 	 	Name:	 	David Nassif
	 	 	Title:	 	Chief Financial Officer
	

 	
 	
 DRUG ROYALTY USA, INC.
	

 	
 	

By:	
 	

/s/  BEHZAD KHOSROWSHAHI      

	 	 	Name:	 	Behzad Khosrowshahi
	 	 	Title:	 	President and CEO

23

   SCHEDULE A

DEFINITIONS  

        "Acquisition" has the meaning ascribed thereto in recital B to this Agreement. 

        "Acquisition Agreements" has the meaning ascribed thereto in subsection 3.1.5(a). 

        "Active Pharmaceutical Ingredient" or "API" means the drug substance cosyntropin, and any
analog, derivative, improvement or variation of such active pharmaceutical ingredient. 

        "Affiliate" means a Person which, directly or indirectly, controls, is controlled by or is under common control with another. 

        "Agreement" means this agreement, all attached schedules and any agreement, or schedule supplementing or amending this agreement. All uses
of the words "hereto", "herein," "hereof," "hereby" and "hereunder" and similar expressions refer to this Agreement and not to any particular section or portion of it. References to an Article,
Section, Subsection, or Schedule refer to the applicable article, section, subsection, or schedule of this Agreement. 

        "Applicable Law" means, in respect of any Person, property, transaction or event, any statute, law, ordinance, rule, regulation,
regulatory policy, by-law, order, judgment, decree or restriction of any kind whatever applicable to that Person, property, transaction or event. 

        "Business Day" means any day of the week other than a Saturday, Sunday or statutory or civic holiday observed in each of Toronto, Ontario
and Rancho Cucamonga, California. 

        "Claim" has the meaning ascribed thereto in Article 6. 

        "Closing" and "Closing Date" have the respective meanings ascribed thereto in
Section 5.1. 

        "Closing Document" means any document, instrument, undertaking or agreement made or delivered pursuant to or in connection with this
Agreement. 

        "Confidentiality Agreement" means that certain confidentiality agreement entered into by and between Amphastar and DRC dated
November 7, 2002. 

        "Control" (including, with correlative meanings, the terms "controlled by" and
"under common control with") means the possession of the power, in law or in fact, to direct or cause the direction of the management and policies of a
Person, whether through legal and beneficial ownership of a majority of voting securities or other equity interests, by agreement or otherwise. 

        "Cortrosyn" means a pharmaceutical preparation containing the Active Pharmaceutical Ingredient, in all doses, for all indications and
diseases, whether approved by a Governmental Agency or not, using any delivery mechanism and including any improvement, variation, any minor chemical alteration, new generation or product line
extensions, and any product or combination of products with a chemical or biological formulation that contains the Active Pharmaceutical Ingredient, manufactured and/or sold by or on behalf of
Amphastar, its Affiliates, licensees, distributors or agents under the Trade Mark or any other name. 

        "Encumbrance" means any encumbrance of any kind whatsoever, actual or contingent, fixed or floating, including any security interest,
mortgage, lien, pledge, assignment, charge, trust or deemed trust (whether contractual, statutory or otherwise arising). 

        "Excess Cash Flow" for any month means the sum (without duplication) of the gross receipts of Amphastar from all sources minus
(i) all cash operating costs of Amphastar actually incurred in the ordinary course of business including all interest expense and scheduled repayments of bank indebtedness, capital lease
obligations and other liabilities which in accordance with GAAP would be classified upon the balance sheet of Amphastar as long term debt that was either existing at the time of payment by DRC of the
Additional Invested Amount (and the scheduled repayments thereof have not, without the prior written consent of DRC, been amended or otherwise modified or altered) or was 

A-1

 

actually
incurred subsequently by Amphastar in accordance with an annual budget prepared by Amphastar and approved in writing by DRC or otherwise with the prior written consent of DRC; minus
(ii) any cash expenditure that, in conformity with GAAP, would be required to be classified as a capital expenditure and was actually incurred by Amphastar in accordance with an annual budget
prepared by Amphastar and approved in writing by DRC or otherwise with the prior written consent of DRC. 

        "FDA" means the U.S. Food and Drug Administration. 

        "Financial Statements" means the audited consolidated financial statements of Amphastar for the twelve-month period ending as at
December 31,2001 and 2002 and the unaudited consolidated financial statements for the 3 month period ended March 31, 2003. 

        "GAAP" means U.S. generally accepted accounting principles, unless specifically provided to the contrary herein, from time to time
approved by the Financial Accounting Standards Board, or any successor institute, applicable as at the date on which any calculation or determination is required to be made in accordance with
generally accepted accounting principles. 

        "Governmental Agency" means any domestic or foreign government whether federal, state, provincial or municipal and any governmental
agency, governmental authority, regulatory authority, governmental tribunal or governmental commission of any kind whatever including the FDA. 

        "Including", when used herein or in any Closing Document, means "including without limitation" and shall not be construed to limit any
general statement which it follows to the specific or similar items or matters immediately following it. 

        "Indemnified Party" has the meaning ascribed thereto in Article 7. 

        "Indemnifying Party" has the meaning ascribed thereto in Article 7. 

        "Indemnity Notice" has the meaning ascribed thereto in Article 7. 

        "Invested Amount" has the meaning ascribed thereto in Section 2.1. 

        "Intellectual Property" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory in and to the
Patent Rights, Trade Marks, Trade Secrets, domain names and internet addresses, know-how and other intellectual property relating to, associated with, covering or embodying Cortrosyn or
the Active Pharmaceutical Ingredient. 

        "Material Adverse Financial Change" means any change, event, occurrence or change in the state of facts that has or could be expected to
have a material adverse effect on the financial condition of Amphastar. 

        "NDA" means the application (U.S. NDA Number 16-750) for Cortrosyn prepared pursuant to applicable FDA regulations and filed
by Organon with the FDA for authorization to market Cortrosyn within the United States, including all additions, supplements, extensions and modifications thereto made prior to or during the Term; and
transferred by Organon to Amphastar pursuant to the Sale Agreement. 

        "Net Sales of Cortrosyn" means (a) gross revenues from sales of Cortrosyn in the Territory by Amphastar, its Affiliates, licensees,
distributors and agents to a purchaser (including, a wholesaler or group purchasing organization and any licensee under Bankruptcy Code Section 365(n)(2)) less deductions actually allowed or
specifically allocated to Cortrosyn by such vendor in accordance with GAAP for: 

        (i)    trade,
quantity and cash discounts allowed on Cortrosyn; 

        (ii)   allowances
or credits to customers on account of rejection or return of Cortrosyn; and 

        (iii)  rebates
to customers; 

        (iv)  charge
backs to wholesalers; and 

A-2

 

        (v)   group
purchasing organization administration fees 

but
without any other deduction, including for withholding taxes, other taxes, bad debts, allowance for doubtful accounts, co-management fees, development expenses, educational and
promotional expenses or any other expenses, but in no event shall such deductions in aggregate exceed 17.4% of gross revenues from sales of Cortrosyn in the Territory; and (b) all amounts
recovered by or paid to Amphastar pursuant to a settlement, order or judgment in respect of any claim or legal proceeding relating to Cortrosyn or any of the Product Rights or Intellectual Property or
any right of Amphastar to manufacture, market, sell or distribute Cortrosyn or the ownership or rights of
Amphastar to any of the Product Rights or Intellectual Property. For the purposes hereof, "gross revenues" shall mean units shipped times (a) the purchase price in the case of indirect sales
through wholesalers and (b) the contract price in the case of direct sales to customers and shall be determined in accordance with GAAP, consistently applied. 

        "Parties" means Amphastar and DRC, collectively, and "Party" means each of them. 

        "Patent Rights" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory to the patents and
patent applications claiming, relating to or associated with Cortrosyn or the Active Pharmaceutical Ingredient and all improvements thereto made by Amphastar or its Affiliates, including, all
divisions, continuations, partial continuations, extensions, substitutions, confirmations, registrations, revalidations, additions or reissues of or to any of the patents or patent applications. 

        "Person" includes an individual, body corporate, partnership, joint venture, co-operative, trust or unincorporated
organization, Governmental Agency or any agency or instrumentality thereof, or any other entity recognized by law. 

        "Prime Rate" for any day means the rate of interest expressed as a rate per annum that JP Morgan Chase establishes at its head office in
the city of New York, as a reference rate of interest that it will charge on that day for US Dollar demand loans to its corporate customers in the United States and which it at present refers to as
its prime rate. 

        "Product Rights" means all of the rights to Cortrosyn acquired by Amphastar under the Acquisition Agreements including the NDA, copies of
all FDA files, regulatory files and formulae for Cortrosyn and the most recent master batch record for Cortrosyn. 

        "Purchased Assets" has the meaning ascribed thereto in the Sale Agreement and includes the Product Rights and Intellectual Property. 

        "Quarter" means a calendar quarter ending on March 31, June 30, September 30 and December 31 in each calendar
year. 

        "Registration" means the obtaining of all approvals and authorizations under Applicable Law to legally manufacture, package, market,
distribute, promote, offer for sale and sell Cortrosyn to end users in the Territory. 

        "Representative" means each Affiliate of a Party and the respective directors, officers, employees and agents of such Party and its
Affiliates. 

        "Royalty Interest" has the meaning assigned thereto in subsection 2.2(a). 

        "Security Agreement" has the meaning assigned thereto in subsection 4.1(d). 

        "Tax Returns" means all reports, returns and other documents filed or required to be filed by Amphastar and its Affiliates in respect of
Taxes or in respect of or pursuant to any Applicable Law. 

        "Taxes" means all national, federal, provincial, state, municipal, local, foreign or other taxes, imposts, levies, assessments and
government fees, charges or dues, lawfully levied, assessed or imposed and all interest and penalties thereon. 

A-3

 

        "Term" has the meaning assigned thereto in Section 2.3. 

        "Territory" means the United States of America and its respective territories and possessions. 

        "Trade Mark" means the United States trade mark Cortrosyn® registration number 779366 any and all United States trade marks,
service marks or symbols, trade devices, certification maries, trade names and applications therefor in respect of, associated with or relating to Cortrosyn now or hereafter filed by or issued,
licensed or assigned to or under the control of or owned under common law by Amphastar or its Affiliates in the Territory and including all reissues, extensions, continuations, renewals, supplements
or amendments thereto. 

        "Trade Secrets" means all information, technical data, experimental procedure, scientific and medical information invented, developed,
controlled or acquired prior to or during the Term by or on behalf of Amphastar or its Affiliates in the Territory relating to the development, manufacturing, distributing, marketing, promoting,
offering for sale or sale of Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all information contained in health and marketing registration applications filed by or on
behalf of Amphastar or its Affiliates or Organon or its Affiliates relating to Cortrosyn, and all pre-clinical and clinical data, product forms, specifications and
manufacturing data relating to Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all Technical Information (as such term is defined in the Sale Agreement). 

        "Transmission" means any electronic means of sending messages, including facsimile transmission and email which produces a paper record. 

SCHEDULE B

ILLUSTRATION OF CALCULATION

OF ROYALTY INTEREST UNDER SECTION 2.2(g)  

	1.
	If
the inventory shortage giving rise to the Backorder commences in the third month of Quarter 1, Net Sales of Cortrosyn in Quarter 1 (before the Section 2.2(g) adjustment) are
$3 million, the Backorder is $2 million and is filled by the sale of Cortrosyn in Quarter 2:

	(a)
	Royalty
Interest under Section 2.2(a) = (23% X 2,500,000) + (3% X 500,000) = $590,000 (calculated and paid in first 30 days of Quarter 2).

	(b)
	Section 2.2(g)
adjustment (calculated and paid in first 30 days of Quarter 3) is the difference between the Net Sales of Cortrosyn of $3 million plus the
$2 million of Backorders calculated pursuant to Section 2.2(a) and the Royalty Interest calculated under subparagraph (a) above. DRC's entitlement under
Section 2.2(g) = [(23% X 2,500,000) + (3% X 2,500,000)] - $590,000 = $60,000.

	2.
	If
the inventory shortage giving rise to the Backorder commences in the third month of Quarter 1, Net Sales of Cortrosyn in Quarter 1 (before the Section 2.2(g) adjustment) are
$5 million, the Backorder is $3 million and is filled by the sale of Cortrosyn in Quarter 2:

	(a)
	Royalty
Interest under Section 2.2(a) = (23% X 2,500,000) + (3% X 2,500,000) = $650,000 (calculated and paid in first 30 days of
Quarter 2).

	(b)
	Section 2.2(g)
adjustment (calculated and paid in first 30 days of Quarter 3) is the difference between the Net Sales of Cortrosyn of $5 million plus the
$3 million of Backorders calculated pursuant to Section 2.2(a) and the Royalty Interest calculated under subparagraph (a) above. DRC's entitlement under
Section 2.2(g) = [(23% X 2,500,000) + (3% X 2,500,000) + (1% X 2,500,000)] - $650,000 = $25,000. 

A-4

   SCHEDULE C

REPRESENTATIONS AND WARRANTIES—DISCLOSURE  

C-1

   SCHEDULE D

FORM OF SECURITY AGREEMENT  

D-1

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Exhibit 10.9

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