Document:

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                                                                   Exhibit 10.11

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.

                  ASSIGNMENT, TRANSFER AND ASSUMPTION AGREEMENT

     This ASSIGNMENT, TRANSFER AND ASSUMPTION AGREEMENT (the "Agreement") is
entered into as of February 18, 2002 (the "Effective Date"), by and between
NEOSAN PHARMACEUTICALS INC. ("NeoSan"), a corporation organized and existing
under the laws of the State of Delaware with offices located at 2320 Scientific
Park Drive, Wilmington, NC 28409, and ELI LILLY AND COMPANY ("Lilly"), a
corporation organized and existing under the laws of the State of Indiana with
offices located at Lilly Corporate Center, Indianapolis, Indiana 46285. NeoSan
and Lilly are sometimes referred to herein individually as a "Party" and
collectively as "Parties".

                                    RECITALS

     WHEREAS, subject to the terms and conditions set forth in this Agreement,
Lilly and NeoSan desire to enter into an agreement pursuant to which: (i) Lilly
will sell or license to NeoSan, and NeoSan will purchase or license from Lilly,
certain promotional materials, new drug applications, copyrights, trade dress,
technology and trademarks owned by Lilly or its Affiliates, as set forth below,
(ii) NeoSan will license to Lilly (or Lilly will reserve) certain rights under
the new drug applications, technology, copyrights, trade dress, trademarks and
other assets purchased by or licensed to NeoSan to be used by Lilly to
manufacture Product for NeoSan under the Manufacturing Agreement, and (iii)
NeoSan will assume certain liabilities associated with the rights transferred
herein, each in accordance with the terms and conditions set forth herein; and

     WHEREAS, Lilly and NeoSan desire to enter into a separate manufacturing
agreement of even date herewith (the "Manufacturing Agreement") whereby Lilly
will manufacture certain presentations of Product on behalf of NeoSan.

     NOW, THEREFORE, in consideration of the foregoing, the covenants and
promises contained in this Agreement, and other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, Lilly and NeoSan
agree as follows:

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                                    ARTICLE 1
                                   DEFINITIONS

     For purposes of this Agreement, the following terms will have the meanings
     set forth below:

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

1.2  "ACTIVITIES" means the manufacturing, packaging, marketing, distribution,
     promoting, co-marketing, co-promoting and selling of the Product as
     conducted by Lilly in the United States on or before the Closing Date.

1.3  "AFFILIATES" means, with respect to a Party, any Persons directly or
     indirectly controlling, controlled by, or under common control with, such
     Party. For purposes of this definition, a Person has control of another
     Person if it has the direct or indirect ability or power to direct or cause
     the direction of management policies of such other Person or otherwise
     direct the affairs of such other Person, whether through ownership of at
     least fifty percent (50%) of the voting securities of such other Person, by
     contract or otherwise.

1.4  "APPLICABLE LAWS" means all applicable laws, ordinances, rules,
     regulations, writs, judgments, decrees, injunctions (whether preliminary or
     final), orders and other requirements of any kind whatsoever of any
     Governmental or Regulatory Authority, including all laws, ordinances, rules
     and regulations promulgated by the World Health Organization and the FDA,
     including cGMP (as defined in the Manufacturing Agreement).

1.5  "ASSIGNED TRADE DRESS" means any unique appearance, look, shape, size or
     color of the Product marketed by Lilly or its Affiliates as of the
     Effective Date other than the Licensed Trademark and Trade Dress.

1.6  "ASSIGNED TRADEMARKS" means the trademarks listed in SCHEDULE 1.6 attached
     hereto, and all amendments thereto. For avoidance of doubt, the Assigned
     Trademarks do not include the Assigned Trade Dress or Licensed Trademarks
     and Trade Dress.

1.7  "ASSUMED LIABILITIES" will have the meaning set forth in Article 10.

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1.8  "BASE YEAR'S AVERAGE QUARTERLY NET SALES" means fifteen million eight
     hundred thousand US dollars ($15,800,000). For any partial Calendar Quarter
     in which a NeoSan New Product is sold, the Base Year's Average Quarterly
     Net Sales for such Calendar Quarter with respect to such NeoSan New Product
     means the product of (a) fifteen million eight hundred thousand U.S.
     dollars ($15,800,000) multiplied by (b) the quotient of the number of days
     in such partial Calendar Quarter divided by ninety (90) days.

1.9  "B OF A" will have the meaning set forth in Section 6.25.

1.10 "BOND OFFERING" will have the meaning set forth in Section 6.25.

1.11 "BOND FINANCING HIGHLY-CONFIDENT LETTER" will have the meaning set forth in
     Section 6.25.

1.12 "BOOKS AND RECORDS" means all files, documents, instruments, papers, books
     and records (including scientific, regulatory and financial) owned by Lilly
     or an Affiliate of Lilly to the extent, and only to the extent, they are
     significantly related to the Purchased Assets (including the Products or
     the manufacture, marketing, promotion, sale or distribution thereof),
     including any sales records, pricing lists, customer lists (to the extent
     owned by Lilly or its Affiliates), vendor lists, financial data, regulatory
     information or files (including adverse event reports and annual regulatory
     reports), litigation files, patent prosecution files, adverse claims or
     demands, investigation information or files, trademark registration
     certificates, trademark renewal certificates.

1.13 "CALENDAR QUARTER" means the three month period ending on March 31, June
     30, September 30, or December 31. The initial Calendar Quarter will be
     deemed to begin on the Closing Date and end on the first to occur of March
     31, June 30, September 30 or December31.

1.14 "CALENDAR YEAR" means the twelve (12) month period ending on December 31st.
     The initial Calendar Year will be deemed to begin on the Closing Date and
     end on December 31, 2002.

1.15 "CLOSING DATE" will have the meaning set forth in Section 7.3(a).

1.16 "COMBINATION PATENTS" will have the meaning set forth in Section 3.7.

1.17 "COMMON LAW LICENSED TRADE DRESS" means the rights to the appearance, look,
     shape or size (but not color) of the parabaloidal capsule as it relates to
     the Product in the United States.

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1.18 "CONFIDENTIAL INFORMATION" means information received (whether disclosed in
     writing, machine readable form, orally or by observation) by one Party (the
     "Receiving Party") from the other Party (the "Disclosing Party") that the
     Receiving Party has a reasonable basis to believe is confidential to the
     Disclosing Party or is treated by the Disclosing Party as confidential,
     unless such information:

          (a) was known to the Receiving Party or its Affiliates prior to
     receipt from the Disclosing Party, as documented in written records or
     publications, that lawfully are in the possession of the Receiving Party or
     its Affiliates;

          (b) was lawfully available to the trade or to the public prior to
     receipt from the Disclosing Party;

          (c) becomes lawfully available to the trade or to the public after
     receipt from the Disclosing Party through no act on the part of the
     Receiving Party or its Affiliates;

          (d) is obtained by the Receiving Party or its Affiliates from any
     Third Person without an obligation of confidentiality; or

          (e) is independently developed by an employee, contractor or agent of
     the Receiving Party or its Affiliates, subsequent to and without access or
     reference to the information received from the Disclosing Party, as
     demonstrated by contemporaneous written records.

          Notwithstanding the foregoing, (i) where a Disclosing Party discloses
     Confidential Information relating to an asset of such Disclosing Party to
     the Receiving Party, and the Receiving Party is or later becomes the owner
     of the asset, the Confidential Information then will be deemed to be
     Confidential Information of the Receiving Party, and the Disclosing Party
     may disclose and use such Confidential Information only in accordance with
     Article 8, below, provided, however, that where such Confidential
     Information was originally owned by Lilly, Lilly may use such Confidential
     Information for, and disclose such Confidential Information in connection
     with, the Permitted Uses without the prior written consent of NeoSan, and
     (ii) with respect to Confidential Information related to the Licensed
     Technology and Licensed Trademark and Trade Dress, NeoSan may use and
     disclose such Confidential Information without the prior written consent of
     Lilly.

1.19 "CONTRACT" means any and all legally binding commitments, contracts,
     purchase orders, leases, or other agreements, whether written or oral.

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1.20 "COPYRIGHTS" means all of Lilly's copyright rights listed in SCHEDULE 1.20
     attached hereto, and any and all package inserts (excluding any Lilly-owned
     trademarks, logos or designs or trademarks, logos or designs licensed by
     Lilly other than those trademarks, logos or designs expressly assigned or
     licensed to NeoSan pursuant to the terms hereof), which are or were used or
     exercised by Lilly or its Affiliates in connection with the Activities or
     the Product.

1.21 "DAMAGES" means any and all costs, losses, claims, demands for payment,
     threatened government enforcement actions, liabilities, fines, penalties,
     expenses, court costs, and reasonable fees and disbursements of counsel,
     consultants and expert witnesses incurred by a Party hereto or its
     Affiliates (including interest which may be imposed in connection
     therewith).

1.22 "DEA" means the United States Drug Enforcement Agency, and any successor
     agency or entity thereto that may be established hereafter.

1.23 "DEDUCTIBLE AMOUNT" will have the meaning set forth in Section 11.4.

1.24 "EFFECTIVE DATE" will have the meaning set forth in the first paragraph of
     this Agreement.

1.25 "ENCUMBRANCE" means any mortgage, pledge, assessment, security interest,
     deed of trust, lease, lien, adverse claim, levy, charge or other
     encumbrance, third-party right or retained right of any kind, or any
     conditional sale or title retention agreement or other agreement to give
     any of the foregoing in the future.

1.26 "EXCLUDED LIABILITIES" means all Obligations of Lilly and its Affiliates
     other than Assumed Liabilities, including:

          (a) any Obligations arising out of any claims by the FDA, DEA or any
     other government entity or regulatory body that Lilly has failed to fulfill
     Lilly's regulatory obligations in connection with the NDAs prior to the
     Closing Date (except to the extent that such Damages arise out of any
     action or inaction on the part of NeoSan);

          (b) any Obligations arising out of the manufacture, marketing or sale
     of the Product prior to the Closing Date; and

          (c) any Obligations that Lilly expressly covenants and agrees to
     perform pursuant to the provisions of this Agreement or the Manufacturing
     Agreement.

1.27 "EXPIRED TRADEMARKS" will have the meaning set forth in Section 4.1.

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1.28 "FDA" means the United States Food and Drug Administration, and any
     successor agency or entity thereto that may be established hereafter.

1.29 "GOVERNMENTAL OR REGULATORY AUTHORITY" means any United States federal,
     state or local governmental or regulatory authority, agency, commission,
     court or instrumentality, including the FDA.

1.30 "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
     Section 7A of the Clayton Act, 15 U.S.C. Section 18a, as amended.

1.31 "IMPLEMENTATION TEAM" will have the meaning set forth in Section 6.1.

1.32 "INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" will have the meanings set
     forth in Section 11.3.

1.33 "INTELLECTUAL PROPERTY" will have the meaning set forth in Section 4.1.

1.34 "KNOW-HOW" means all of the following to the extent pertaining to Product
     as of the Closing Date and any pending or terminated analogs, derivatives,
     improvements or variations thereon as of the Closing Date and the
     manufacture, promotion, marketing, sale, use or importation of the
     foregoing (except to the extent specifically and exclusively related to the
     Combination Patents) as of the Closing Date: specifications; tangible or
     intangible manufacturing, physical chemistry and formulation know-how;
     analytical testing methods and validations; technical knowledge; expertise;
     skill; practices and procedures; formulae; tangible or intangible trade
     secrets; inventions (whether or not patentable); ideas; conceptions;
     reductions-to-practice; confidential and/or proprietary information;
     analytical methodology; processes (including any portion, step and
     component of such processes); methods; preclinical, clinical, stability and
     other data and results; chemical samples or substances; market studies; and
     all other experience and know-how, whether or not patentable, provided that
     nothing in this Agreement will require Lilly to locate or review the files
     or records specifically pertaining to the Combination Patents or the
     combination products covered thereby for potential Know-How and provided
     further that, subject to the limitations set forth in Section 3.2, the
     foregoing exclusion with respect to the Combination Patents will not
     preclude NeoSan or its Affiliates or permitted sublicensees or assignees
     from utilizing the Know-How licensed or transferred hereunder with respect
     to their own combination pharmaceutical products that do not infringe the
     Combination Patents.

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1.35 "LICENSED TECHNOLOGY" means all Know-How which have been issued, filed,
     developed, created, made, used or acquired on or before the Closing Date by
     Lilly or its Affiliates, to the extent such Know-How are used by Lilly in
     connection with the development, manufacture, use or sale of the Products
     in the United States as of the Closing Date; provided that "Licensed
     Technology" does not include the Combination Patents.

1.36 "LICENSED TRADEMARK AND TRADE DRESS" means (i) the United States
     Pulvules(R) Trademark, (ii) the Common Law Licensed Trade Dress, and (iii)
     the United States Parabaloidal Capsule Trade Dress.

1.37 "LOAN FACILITY" will have the meaning set forth in Section 6.25.

1.38 "LOAN FACILITY HIGHLY-CONFIDENT LETTER" will have the meaning set forth in
     Section 6.25.

1.39 "MANUFACTURING AGREEMENT" will have the meaning set forth in the second
     WHEREAS clause of this Agreement.

1.40 "MARKETING MATERIALS" means (i) all market research, marketing plans, media
     plans, advertising, marketing-related clinical study results, form letters
     and medical queries, sale straining materials, customer information solely
     with respect to sales of Products in the United States (including doctors,
     general purchasing organizations (GPOs) and pharmacists), promotional and
     marketing books and records owned by Lilly and its Affiliates solely
     pertaining to the marketing and promotion of the Products in the United
     States; and (ii) the Promotional Materials, provided that "Marketing
     Materials" will exclude the labeling of the Products, which will be deemed
     part of the Regulatory Approvals.

1.41 "MATERIAL ADVERSE EFFECT" means an effect or condition that individually or
     in the aggregate is materially adverse to (i) the Purchased Assets taken as
     a whole; (ii) any material Product or its Regulatory Approval in the United
     States, each taken individually; or (iii) the business of manufacturing,
     marketing or selling Products, taken as a whole, as conducted by Lilly and
     its Affiliates in the ordinary course of business in the United States
     prior to the Closing Date.

1.42 "MYLAN" means Mylan Pharmaceuticals, Inc.

1.43 "MYLAN AGREEMENT" means the propoxyphene Supply Agreement between Lilly and
     Mylan entered into as of the 18th of April 1994, as thereafter amended.

1.44 "NDAS" mean the United States New Drug Applications and Investigational New
     Drug applications ("IND") listed in SCHEDULE 1.44 attached hereto and all
     other submissions, sup-

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     plements or amendments pertaining thereto, and the official and working
     regulatory and clinical files and data pertaining to any of the foregoing
     in the possession or control of Lilly or its Affiliates as of the Closing
     Date. For avoidance of doubt, the NDAs do not include any marketing
     authorizations in any jurisdiction outside of the United States or any
     other submissions, supplements or amendments pertaining thereto filed
     outside of the United States.

1.45 "NEOSAN IMPROVEMENTS" means any inventions, ideas, conceptions, or
     reductions-to-practice, patentable or not, information, works, and/or data
     pertaining to Products or analogs, derivatives, improvements or variations
     thereof that are generated, identified, discovered, created and/or made by
     NeoSan, its Affiliates, or its or its Affiliates' employees or a Third
     Person contracted by or otherwise controlled by NeoSan based on the use or
     practice of the Licensed Technology.

1.46 "NEOSAN NEW PRODUCT" means (i) any pharmaceutical product that is an
     analog, derivative, improvement or variation of a Product arising out of
     NeoSan Improvements, (ii) any pharmaceutical product which includes
     propoxyphene or any analog, derivative, improvement, or variation of
     propoxyphene as an active ingredient arising out of an invention related to
     the Product conceived and reduced to practice by a NeoSan or a NeoSan
     Affiliate employee(s) or a Third Person contracted by or otherwise
     controlled by NeoSan, (iii) any other pharmaceutical product developed by
     NeoSan and/or a Third Person contracted by or otherwise controlled by
     NeoSan which includes propoxyphene or any analog, derivative, improvement,
     or variation of propoxyphene as an intended active ingredient, or (iv) any
     pharmaceutical product marketed under a name which includes "Darvon,"
     "Darvocet," "Distalgesic," "Digesic"or "Doloxene." Notwithstanding the
     foregoing, a pharmaceutical product which includes propoxyphene or any
     analog, derivative, improvement or variation thereof will not constitute an
     NeoSan New Product to the extent such product is acquired by NeoSan or its
     Affiliates as a result of any (a)(i) merger or (ii) acquisition by NeoSan
     or its Affiliates of substantially all of the assets of a Third Person
     (each, an "NeoSan Relationship"), in which the other party or parties
     involved in such NeoSan Relationship at that time already conducts or
     engages in the manufacturing, marketing, selling, promoting, distributing,
     co-marketing, co-promoting, importing, exporting or active developing of a
     pharmaceutical product which includes propoxyphene or any analog,
     derivative, improvement or variation thereof, or (b) acquisition by NeoSan
     or its Affiliates of any pharmaceutical product (whether or not containing
     propoxyphene as an active ingredient), either before or after the
     acquisitions contemplated by this Agreement, and any analogs, derivatives,
     improvements or variations of or for such acquired pharmaceutical product,
     that are not marketed under a name which includes "Darvon," "Darvocet,"
     "Distalgesic," "Digesic" or "Doloxene".

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1.47 "NET SALES" means, with respect to the Product or any NeoSan New Product,
     as the context requires, the gross amount invoiced by Lilly or a Permitted
     Seller of the Product or such NeoSan New Product, as the context requires,
     for sales of the Product or such NeoSan New Product, as the context
     requires, to Third Persons (other than Permitted Sellers), less

          (a) trade, quantity and/or cash discounts actually allowed;

          (b) discounts, refunds, rebates, chargebacks, retroactive price
     adjustments and any other allowances, credits or payments which effectively
     reduce the net selling price;

          (c) actual Product or NeoSan New Product returns and allowances, as
     the context requires; and

          (d) any costs of insurance, freight or sales Tax or governmental
     levies, and import duties, provided that they are included in such gross
     invoice amount and are itemized or readily identifiable on such invoice or
     other readily accessible documentation.

     Such amounts will be determined from books and records maintained in
     accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). No
     deductions will be made for commissions.

1.48 "NET SALES VOLUME ADJUSTMENT" will have the meaning set forth in Section
     2.2.

1.49 "OBLIGATIONS" will have the meaning set forth in Article 10.

1.50 "PATENTS" means U.S. patents, patent applications, and statutory invention
     registrations (which, for the purpose of this Agreement, will be deemed to
     include provisional applications and invention disclosures), including
     reissues, divisions, continuations, continuations-in-part, extensions and
     reexaminations thereof, all inventions disclosed therein, all rights
     provided by international treaties and conventions, and all rights to
     obtain and file for patents and registrations thereto.

1.51 "PERMITTED ENCUMBRANCE" means (i) any Encumbrance for Taxes, assessments
     and other governmental charges not yet due and payable or that may
     thereafter be paid without penalty, or that are being contested in good
     faith by appropriate proceedings for which adequate reserves have been
     established, (ii) any imperfection of title or other Encumbrance that,
     individually or in the aggregate with other such imperfections and
     Encumbrances, would not have a material adverse effect on any material
     Purchased Asset, and (iii) any rights expressly reserved or retained by
     Lilly pursuant to the terms of this Agreement.

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1.52 "PERMITTED SELLER" means NeoSan and its Affiliates and any assignee,
     licensee or sublicensee having the right to sell Product or a NeoSan New
     Product.

1.53 "PERMITTED USES" means, with respect to Lilly or its Affiliates, (a)
     manufacturing the Product, or having the Product manufactured, for NeoSan
     under the Manufacturing Agreement and otherwise fulfilling its obligations
     thereunder, (b) making or having the Product made in the United States for
     purposes of Lilly or its Affiliates distributing, using, selling, offering
     to sell, importing (except importing into the United States), exporting
     (except exporting to the United States), marketing, promoting, co-marketing
     and co-promoting the Product outside the United States, or (c) making,
     having made, distributing, using, selling, offering to sell, importing
     (except importing into the United States), exporting (except exporting to
     the United States), marketing, promoting, co-marketing and co-promoting the
     Product outside of the United States.

1.54 "PERSON" means a natural person, a corporation, a partnership, a trust, a
     joint venture, a limited liability company, any Governmental or Regulatory
     Authority or any other organization or entity.

1.55 "PRODUCT" means propoxyphene or propoxyphene-based pharmaceutical products
     (including such products wherein propoxyphene is at least one of the active
     ingredients) in all forms marketed or marketable in the United States under
     the NDAs, as existing as of the Closing Date, under whatever name sold.
     Notwithstanding the foregoing, "Product" will not mean or include any new
     formulations (including any NeoSan New Product).

1.56 "PRODUCT INTELLECTUAL PROPERTY" means (a) the Copyrights, (b) Assigned
     Trade Dress, and (c) the Assigned Trademark. NeoSan acknowledges and agrees
     that "Product Intellectual Property" does not include the Combination
     Patents or any rights thereto.

1.57 "PROMOTIONAL MATERIALS" means all existing advertising and promotional
     materials, including flyers, brochures, pamphlets, video cassettes,
     computer disks, CD-ROMs, non- licensed software, tradeshow materials and
     booths, literature, journal articles or reprints, or any similar materials
     or items, which are owned by Lilly and are readily available and pertain
     solely to the promotion of the Product in the United States or the
     Activities.

1.58 "PURCHASED ASSETS" means: (i) all rights, title and interest in and to the
     Products; (ii) all rights, title and interest in and to the Regulatory
     Approvals; (iii) the Product Intellectual, Property; (iv), the Marketing
     Materials; or (v) the Books and Records. The Purchased Assets do not
     include any fixed assets or inventory.

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1.59 "QUALITY AGREEMENT" will have the meaning set forth in the Manufacturing
     Agreement.

1.60 "REGULATORY APPROVALS" means the NDAs.

1.61 "REMEDIES" will have the meaning set forth in Section 6.17.

1.62 "REQUIRED LILLY THIRD PARTY CONSENTS" has the meaning set forth in Section
     4.14.

1.63 "REPRESENTATIVES" of a Party means that Party's agents, contractors,
     employees, officers, directors, consultants, and advisors; its Affiliates;
     and the agents, contractors, employees, officers, directors, consultants
     and advisors of its Affiliates, agents, contractors, consultants and
     advisors.

1.64 "SUBSEQUENT EXCHANGE OFFER" will have the meaning set forth in Section
     8.2(g).

1.65 "TAX" means all of the following tax by any Governmental or Regulatory
     Authority in connection with the operations of either Party or its
     Affiliates or the transactions contemplated hereby: (i) any net income,
     alternative or add-on minimum tax, gross income, gross receipts, sales,
     use, ad valorem, transfer, franchise, profits, license, excise, severance,
     stamp, occupation, premium, property, environmental or windfall profit tax,
     custom, duty or other tax, governmental fee or other like assessment; (ii)
     any Obligation for the payment of any amounts of the type described in (i)
     above as a result of being a member of any affiliated, consolidated,
     combined, unitary or other group for any taxable period; and (iii) any
     Obligation for the payment of any amounts of the type described in (i) or
     (ii) above as a result of any express or implied obligation to indemnify
     any other person.

1.66 "THIRD PERSON" means a Person that is not a Party to this Agreement or an
     Affiliate of a Party to this Agreement.

1.67 "TRANSACTION FINANCING" will have the meaning set forth in Section 6.25.

1.68 "UNITED STATES" or "U.S." means the fifty (50) states and the District of
     Columbia constituting the United States of America and any territory or
     commonwealth owned or controlled by the United States of America, including
     Puerto Rico.

1.69 "UNITED STATES PARABOLOIDAL CAPSULE TRADEMARK" means the United States
     registered trademark design for a paraboloidal capsule, registration number
     732,292, registration date 06/05/1962.

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1.70 "UNITED STATES PULVULES(R) TRADEMARK" means the United States registered
     trademark Pulvules(R), registration number 144210, registration date
     06/28/1921.

                                    ARTICLE 2
                                  CONSIDERATION

          In consideration of (i) Lilly's sale of Purchased Assets to NeoSan as
     set forth in this Agreement and (ii) the licenses granted by Lilly to
     NeoSan under the Licensed Technology and Licensed Trademark and Trade
     Dress, as set forth in this Agreement, NeoSan will pay the following
     amounts, as set forth in Sections 2.1 and 2.4:

2.1  NEOSAN'S PAYMENT UPON THE CLOSING DATE. On the Closing Date, NeoSan will
     pay to Lilly the sum of Two Hundred Eleven Million Four Hundred Thousand
     United States Dollars (US$211,400,000) by Federal Reserve electronic wire
     transfer in immediately available funds to an account designated by Lilly.

2.2  NET SALES VOLUME ADJUSTMENT. In the event that, during any consecutive
     twelve (12) calendar month period occurring between (and including) January
     1,2002 and the last day of the calendar month that contains the first year
     anniversary of the Closing Date, the aggregate of the (i) Net Sales of
     Product by Lilly and (ii) the Net Sales of Product by NeoSan or other
     Permitted Sellers equals or exceeds fifty million United States dollars
     ($50,000,000), Lilly will not owe NeoSan any purchase price adjustment
     ("Net Sales Volume Adjustment") pursuant to this Section 2.2; otherwise,
     Lilly will pay to NeoSan a Net Sales Volume Adjustment calculated as set
     forth in SCHEDULE 2.2 attached hereto. For purposes of this Agreement, a
     Net Sale of Product will be deemed to have been made by Lilly, NeoSan or a
     Permitted Seller, as applicable, as of the recorded sale date according to
     GAAP, without regard to whether its customer has actually paid Lilly,
     NeoSan or a Permitted Seller, as applicable. NeoSan will deliver to Lilly
     within fifteen (15) days of the end of each calendar month, a report
     detailing the Net Sales made by NeoSan or another Permitted Seller during
     the previous Calendar Month. Lilly will pay any Net Sales Volume Adjustment
     owed by Lilly pursuant to this Section 2.1 within thirty days after the
     last day of the calendar month that contains the one (1) year anniversary
     of the Closing Date.

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2.3  PURCHASE PRICE ADJUSTMENT. For any Net Sales of Product by Lilly during any
     calendar month during the period beginning February 1, 2002 and ending the
     day before the Closing Date in excess of (i) four million one hundred
     sixty-seven thousand United States dollars ($4,167,000) for each full
     calendar month during such period, and (ii) the product of four million one
     hundred sixty-seven thousand United States dollars ($4,167,000) multiplied
     by the quotient of the number of days prior to the Closing Date in the
     calendar month that the Closing Date occurs divided by thirty (30) (the
     "Excess Net Sales"), Lilly will pay to NeoSan within thirty (30) days after
     the Closing Date a purchase price adjustment equal to ninety percent (90%)
     of such Excess Net Sales.

2.4  ROYALTY PAYMENT.

          (a) NeoSan will accrue and owe a royalty to Lilly equal to [**]
     percent ([**]%) of Net Sales of a NeoSan New Product in a Calendar Quarter
     in the United States by a Permitted Seller (collectively referred to as the
     "Royalty Payment"), to the extent, and only to the extent, that such Net
     Sales of all NeoSan New Products plus all Net Sales of Products by
     Permitted Sellers in such Calendar Quarter in the United States exceed, in
     the aggregate, the Base Year's Average Quarterly Net Sales. For any partial
     Calendar Quarter in which a NeoSan New Product is sold in the United
     States, for purposes of determining if and to what extent a Royalty Payment
     is due and owing with respect to such NeoSan New Product, the Net Sales of
     all NeoSan New Products in the United States plus all Net Sales of Products
     by Permitted Sellers in the United States in such Calendar Quarter will be
     deemed to be equal to the product of (a) the total of such Net Sales
     multiplied by (b) the quotient of the number of days in such partial
     Calendar Quarter divided by ninety (90) days. For purposes of clarity and
     not in limitation thereof, no royalties will be owed by NeoSan or its
     Affiliates with respect to any Net Sales of Products or any pharmaceutical
     product not coming within the definition of "NeoSan New Product". This
     Section 2.3(a) will be in force with respect to each NeoSan New Product in
     the United States until ten (10) years from the commercial launch of such
     NeoSan New Product in the United States.

          (b) NeoSan will pay to Lilly the Royalty Payment attributable to Net
     Sales of NeoSan New Products made during a Calendar Quarter within sixty
     (60) days of the end of such Calendar Quarter, without regard to whether
     the Permitted Seller's customer has actually paid NeoSan. For purposes of
     this Agreement, a Net Sale of a NeoSan New Product will be deemed to have
     been made as of the recorded sale date according to GAAP, without regard to
     whether its customer has actually paid NeoSan. Within sixty (60) days of
     the end of such Calendar Quarter, NeoSan will provide Lilly with a written
     report detailing the Net

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     Sales of NeoSan New Products made during the previous Calendar Quarter. All
     payments to Lilly pursuant to this Section 2.2 will be made by NeoSan by
     wire transfer on its due date to an account designated by Lilly no less
     than two business days prior to the date of payment, unless otherwise
     instructed by Lilly.

2.5  AUDITS. NeoSan will keep full and accurate books and records relating to
     the performance required of it of its Royalty Payment obligations under
     this Agreement and its Net Sales of Product. For any period in which NeoSan
     is obligated to pay a Royalty Payment with respect to Net Sales of NeoSan
     New Products, plus two (2) years thereafter, and the period beginning on
     the Closing Date and ending the last day of the calendar month that
     contains the one (1) year anniversary of the Closing Date with respect to
     Net Sales of Product, plus two (2) years thereafter, Lilly will have the
     right, during regular business hours and upon reasonable advance notice, to
     have such books and records of NeoSan audited no more frequently than once
     per Calendar Year so as to verify the accuracy of the information
     previously reported to Lilly. Lilly will, for purposes of such audit,
     utilize only the services of an independent CPA firm selected by Lilly and
     approved by NeoSan, such approval not to be unreasonably withheld.

          Such audit may cover the two (2) Calendar Years preceding the date of
     the request for such audit. Notwithstanding the foregoing, no audit of
     NeoSan pursuant to this Section 2.3 will cover any period of time preceding
     the Closing Date. As a condition for their access to conduct such audit,
     such accountants will agree with NeoSan to keep confidential any in
     formation obtained during such audit and will report to Lilly only their
     conclusions, with a copy or full summary of their oral or written reports
     being provided to NeoSan. The cost of such audit will be borne by Lilly;
     however, in the event such audit reveals that the Royalty Payments or Net
     Sales of Product previously reported to Lilly are less than the properly
     calculated amount of Royalty Payments hereunder or Net Sales of Product, as
     applicable, by five percent (5%) or more, the cost of the audit will be
     borne by NeoSan. NeoSan will include in all sublicenses granted in
     accordance herewith, and any other agreements enabling a Third Person to be
     a Permitted Seller, an audit provision substantially similar to the
     foregoing requiring such Permitted Seller to keep full and accurate books
     and records relating to sales of Products and NeoSan New Products thereby
     and granting Lilly the right to have an independent public accounting firm
     audit the accuracy of the information reported by the sublicensee in
     connection therewith.

2.6  LATE PAYMENTS. Any amounts not paid by either Party when due under this
     Agreement or the Manufacturing Agreement will be subject to interest from
     and including the date payment

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<PAGE>

     is due through and including the date upon which the other Party has
     collected the funds in accordance herewith at a rate equal to the lesser of
     (i) the sum of three percent (3%) plus the prime rate of interest quoted in
     the Money Rates section of the Wall Street Journal, calculated daily on the
     basis of a three hundred sixty-five (365) day year, or (ii) the maximum
     interest rate allowed by law.

                                    ARTICLE 3
                    ASSIGNMENT AND LICENSE OF RIGHTS; CLOSING

3.1  ASSIGNMENT OF PURCHASED ASSETS TO NEOSAN. Subject to the terms and
     conditions set forth herein and in the bill of sale, a form of which is
     attached hereto as Exhibit A ("Lilly Bill of Sale"), on the Closing Date,
     Lilly agrees to assign, sell, convey, transfer and deliver to Neo San and
     to cause its Affiliates to assign, sell, convey, transfer and deliver to
     NeoSan, and NeoSan agrees to buy and accept, Lilly's and its Affiliates'
     entire right, title and interest in and to the Purchased Assets, free and
     clear from all Encumbrances other than Permitted Encumbrances. NeoSan
     hereby acknowledges receipt of copies of certain Books and Records during
     the due diligence process. Lilly will deliver to NeoSan any additional
     Books and Re cords requested by NeoSan on or after the Closing Date within
     a commercially reasonable time after such request. Notwithstanding the
     foregoing, Lilly will be entitled to retain a copy of all or any portion of
     the Books and Records for archive purposes. In the event, following the
     Closing Date, that Lilly or NeoSan discover that any of the Purchased
     Assets were held at the time of Closing by any Affiliate of Lilly and not
     transferred to NeoSan at the Closing, Lilly will cause the transfer thereof
     to NeoSan or NeoSan's designee as soon as is commercially practicable after
     such discovery. Notwithstanding the foregoing, Lilly and its Affiliates'
     assignment, sale, conveyance, transfer and delivery of the Assigned Trade
     Dress is restricted to the use of such trade dress with the Product and any
     NeoSan New Product, and neither this Section 3.1 nor any other part of this
     Agreement will be construed to restrict Lilly, its Affiliates or its
     licensees, assignees or successors from utilizing the Assigned Trade Dress
     in connection with any product or use other than the Product and any NeoSan
     New Product.

3.2  GRANT OF LICENSE TO NEOSAN UNDER LICENSED TECHNOLOGY. Subject to the terms
     and conditions set forth herein, as of the Closing Date, Lilly hereby
     grants to NeoSan, on behalf of Lilly and its Affiliates, and NeoSan
     accepts, under the Licensed Technology, an irrevocable (subject to
     suspension to the extent expressly set forth herein), fully-paid,
     royalty-free, exclusive license, with a right to sublicense or assign such
     license rights in

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<PAGE>

     accordance with the terms of this Agreement, solely to make, have made,
     distribute, use, sell, offer to sell, have sold, market, co-market, import,
     export, promote and co-promote the Products, any analogs, derivatives,
     improvements or variations thereon, the NeoSan Improvements, NeoSan New
     Products, or other pharmaceutical products which utilize propoxyphene as an
     active ingredient thereof, in the United States (and to make or have made
     any of the foregoing outside the United States solely for importation into,
     and distribution, use, sale, market, co-market, promote and co-promote any
     of the foregoing in, the United States); provided, however, that the
     foregoing license with respect to making or having made any of the
     foregoing outside the United States will be non-exclusive; provided
     further, however, that the foregoing license will not be deemed to be a
     representation, warranty or covenant by Lilly that NeoSan will be able to
     practice the Licensed Technology to make and have made anywhere in the
     world any pharmaceutical product other than the Product or to make or have
     made the Product or any other pharmaceutical product outside of the United
     States. Notwithstanding anything in this Section 3.2 to the contrary, the
     license under the Licensed Technology granted to NeoSan pursuant to this
     Section 3.2 will not preclude Lilly from utilizing the Licensed Technology
     for any Permitted Uses during the term thereof. Further notwithstanding
     anything in this Agreement to the contrary, nothing in this Agreement will
     be deemed to preclude Lilly from granting a license under the Licensed
     Technology to a Third Person solely for purposes of making or having made
     the Product in the United States for distribution, exportation (outside of
     the United States), use, sale, marketing, co-marketing, promoting and
     co-promoting the Product outside of the United States, and Lilly will have
     no liability for granting such license. The licenses granted to NeoSan
     pursuant to this Section 3.2 will be subject to the rights reserved by
     Lilly in the preceding two sentences.

3.3  GRANT OF LICENSE TO LICENSED TRADEMARK AND TRADE DRESS TO NEOSAN.

          (a) Subject to the terms and conditions set forth herein, as of the
     Closing Date, Lilly hereby grants to NeoSan, and NeoSan accepts, under the
     Common Law Licensed Trade Dress, a fully paid, royalty-free, exclusive
     license solely to make, have made, distribute, use, sell, offer to sell,
     have sold, market, co-market, promote and co-promote the Product or NeoSan
     New Product in the United States.

          (b) Subject to the terms and conditions set forth herein, as of the
     Closing Date, Lilly hereby grants to NeoSan, and NeoSan accepts, under the
     United States Pulvules(R) Trademark and United States Paraboloidal Capsule
     Trademark, a fully-paid, royalty-free, exclusive license solely to make,
     have made, distribute, use, sell, offer to sell, have sold,

                                       16

<PAGE>

     market, co-market, promote and co-promote the Product or NeoSan New
     Products in the United States.

          (c) All uses by NeoSan of the Licensed Trademark and Trade Dress will
     be in an appropriate manner, without jeopardizing the significance,
     distinctiveness or validity of the Licensed Trademark and Trade Dress; will
     use the designation "R" with the Licensed Trademark and Trade Dress which
     are registered trademarks and trade dress; will indicate that Pulvules(R)
     and the appearance of the paraboloidal capsule are registered trademarks of
     Lilly; and will only be in such form and manner as approved in writing by
     Lilly. All trademark and trade dress rights from NeoSan's use of the
     Licensed Trademark and Trade Dress will inure to the benefit of Lilly.
     NeoSan will not contest or challenge the validity of, or Lilly's ownership
     of, the Licensed Trademark and Trade Dress.

          (d) All Product featuring any of the Licensed Trademark and Trade
     Dress must be manufactured, labeled, sold, distributed and advertised in
     accordance with the Specifications (as defined in the Manufacturing
     Agreement) and all Applicable Laws, including cGMP and FDCA (as those terms
     are defined in the Manufacturing Agreement). Once each Calendar Year, in
     order that Lilly can assure itself of the maintenance of the
     above-described quality standards, NeoSan will: (i) provide to Lilly free
     of charge two (2) then-current production samples of each Product and
     NeoSan New Product featuring any of the Licensed Trademark and Trade Dress
     (with then-current packaging) not manufactured by Lilly, and (ii) permit
     Lilly to inspect the manufacturing process for each Product and NeoSan New
     Product not manufactured by Lilly featuring any of the Licensed Trademark
     and Trade Dress upon five (5) days prior notice.

          (e) Notwithstanding anything in this Section 3.3 to the contrary, the
     licenses under the Licensed Trademark and Trade Dress granted to NeoSan
     pursuant to this Section 3.3 will not preclude Lilly or its Affiliates from
     carrying out activities within the scope of the Permitted Uses. Further
     notwithstanding anything in this Agreement to the contrary, nothing in this
     Agreement will be deemed to preclude Lilly from granting a license under
     the Licensed Trademark and Trade Dress to a Third Person solely for
     purposes of making or having made the Product in the United States for
     distribution, exportation (outside of the United States), use, sale,
     marketing, co-marketing, promoting and co-promoting the Product outside of
     the United States, and Lilly will have no liability hereunder for granting
     such license. The licenses granted to NeoSan pursuant to this Section 3.3
     will be subject to the rights reserved by Lilly in the preceding two
     sentences.

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<PAGE>

          (f) Notwithstanding anything in this Section 3.3 to the contrary, any
     license granted to NeoSan under a Licensed Trademark and Trade Dress will
     terminate in the United States upon the date that NeoSan ceases to make,
     have made, sell, have sold, use, market, promote, co-market and co-promote
     all Products and NeoSan New Products that use such Licensed Trademark and
     Trade Dress in the United States.

3.4  SUBLICENSES. The licenses granted herein by Lilly to NeoSan pursuant to
     Sections 3.2 and 3.3 may be freely sublicensed by NeoSan after payment of
     the $211,400,000 pursuant to Section 2.1, subject to the sublicensee's
     compliance with the relevant obligations hereof with respect to such
     licensed rights, without any consent by Lilly, provided that (a) NeoSan
     provides written notice of such sublicense or assignment to Lilly prior to
     granting such sublicense, (b) NeoSan and aaiPharma Inc. ("aaiPharma") will
     guarantee the performance of any sublicensee permitted pursuant to this
     Section 3.4 in a form comparable to aaiPharma's guaranty appended hereto
     with respect to NeoSan's obligations hereunder, and (c) NeoSan will remain
     liable for Royalty Payments as a result of Net Sales made by a Third Person
     pursuant to a sublicense or license permitted pursuant to this Section 3.4.
     The licenses granted herein by Lilly to NeoSan pursuant to Sections 3.2 and
     3.3 may be sublicensed by NeoSan without continuing liability or guaranty
     to Lilly therefore only with the prior written consent of Lilly, which will
     not unreasonably be withheld.

3.5  GRANT OF LICENSE TO LILLY.

          (a) Subject to the terms and conditions set forth herein, as of the
     Closing Date, NeoSan hereby grants to Lilly and its Affiliates, for no
     additional consideration, and Lilly and its Affiliates accept, a
     royalty-free, non-exclusive license, with a right to sublicense, except as
     limited below, in the United States under the Product Intellectual
     Property, the NDAs and the Marketing Materials solely to manufacture, or to
     have manufactured, the Products for NeoSan under the Manufacturing
     Agreement and otherwise fulfill its obligations thereunder; provided,
     however, that the non-exclusive license granted by NeoSan above will
     terminate effective upon the termination of the Manufacturing Agreement.

          (b) Subject to the terms and conditions set forth herein, as of the
     Closing Date, NeoSan hereby grants to Lilly and its Affiliates, for no
     additional consideration, and Lilly and its Affiliates accept, an
     exclusive, royalty-free license, with the right to sublicense, under the
     Marketing Materials, Copyrights and Assigned Trade Dress to sell,
     distribute, use, offer to sell, import, market and promote the Product
     outside the United States or to make or have made the Product inside the
     United States for selling, distributing, using, offering to sell,
     importing, marketing and promoting the Product outside of the United
     States. The license

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<PAGE>

     granted pursuant to this Section 3.5(b) will terminate with respect to the
     Copyrights, the Marketing Materials or the Assigned Trade Dress on NeoSan's
     receipt of written notification from Lilly that it is abandoning its
     license with respect to the Copyrights, the Marketing Materials and the
     Assigned Trade Dress.

3.6  RETAINED RIGHTS. Notwithstanding anything in this Agreement to the
     contrary, the rights granted to NeoSan pursuant to this Agreement will not
     be deemed to preclude Lilly or its Affiliates from (i) delivering any
     remaining Product to Mylan that Lilly is required to deliver pursuant to
     the Mylan Agreement, and (ii) manufacturing in the United States and
     supplying propoxyphene to Lilly's or its Affiliates' customers outside the
     United States within the scope of Permitted Uses or otherwise conducting
     the Permitted Uses. The assets assigned or licensed to NeoSan pursuant to
     this Agreement are subject to the rights and obligations of Lilly, its
     Affiliates and Third Persons under the foregoing sentence.

3.7  EXCLUDED ASSETS. Anything herein to the contrary notwithstanding, except as
     set forth in the Manufacturing Agreement, NeoSan will have no right, title
     or interest in or to: (i) the trademarks "ELI LILLY AND COMPANY" and
     "LILLY" and any variation thereof, and any other rights in or to such
     names; and (ii) the patents and patent applications listed in SCHEDULE 3.7
     attached hereto (the "Combination Patents"); and (iii) the Mylan Agreement.

3.8  LILLY EMPLOYEE HEALTH SERVICES. Lilly reserves the right, and the rights
     granted or licensed to NeoSan are subject to Lilly's right, to utilize all
     supplies of finished Product held by Lilly's employee health services on
     the Closing Date for purpose of dispensing Product to its employees and
     relatives of employees until such supply is exhausted.

                                    ARTICLE 4
                     REPRESENTATIONS AND WARRANTIES OF LILLY

4.1  INTELLECTUAL PROPERTY. Lilly represents and warrants that the Product
     Intellectual Property (other than the Assigned Trade Dress), Marketing
     Materials, the Licensed Trademark and Trade Dress (other than the Common
     Law Licensed Trade Dress), and the Licensed Technology (collectively, the
     "Intellectual Property") and the Assigned Trade Dress and Common Law
     Licensed Trade Dress contain all the Patents, Know-How, technology, trade
     secrets, trademarks, and trade dress necessary to conduct the Activities or
     to make, have made, distribute, use, sell, offer to sell, have sold,
     market, co-market, import (into the United States), promote and co-promote
     Products in the United States. However, should Lilly or NeoSan

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<PAGE>

     after the Closing Date discover or learn that Lilly has inadvertently
     omitted any Intellectual Property or any Patents (other than the
     Combination Patents) that contain claims that directly relate to the
     manufacture, use or sale of Product and are used by Lilly to conduct the
     Activities, the Parties will discuss in good faith how to amend this
     Agreement to include (whether by assignment or license) such inadvertently
     omitted intellectual property or Patents, such omission will not be deemed
     to be a breach of this Agreement by Lilly, and Lilly will have no liability
     whatsoever with respect to such omission. Lilly makes no representation or
     warranty that NeoSan will be able to conduct the Activities after the
     Closing Date without acquiring the consents, approvals and permits and
     taking other procedural or substantive steps that are required by
     Applicable Law. For avoidance of doubt, "Intellectual Property does not
     mean or include the Assigned Trade Dress or Common Law Licensed Trade
     Dress. Notwithstanding the foregoing, NeoSan acknowledges and agrees that
     Lilly is not and will not be assigning or licensing to NeoSan the expired
     trademarks listed in SCHEDULE 4.1 attached hereto or any other expired
     trademarks directly and exclusively related to Lilly's propoxyphene
     business (collectively referred to herein as the "Expired Trademarks"), and
     Lilly will have no liability for failing to do so. Lilly acknowledges and
     agrees that NeoSan will have no liability to Lilly in the event that
     NeoSan, following the Closing Date, acts to register or otherwise obtain
     new trademarks substantially similar to, or the same as, the Expired
     Trademarks or uses such new trademarks on its products. The Expired
     Trademarks do not include any of the trademarks listed on Schedule 1.6
     hereto.

4.2  OWNERSHIP OF INTELLECTUAL PROPERTY. Lilly represents and warrants that: (i)
     either Lilly or an Affiliate of Lilly is the owner of the Intellectual
     Property, and (ii) Lilly or its Affiliates can, and have the right to,
     assign or license, as applicable, the Intellectual Property to NeoSan
     without the consent of any Third Person. However, should Lilly or NeoSan
     after the Closing Date discover or learn that the consent of additional
     Third Persons is necessary with respect to the Intellectual Property, if
     the omitted consent does not result in material harm to a material Product
     being sold, or to be sold, by NeoSan in the United States, then such
     inadvertent omission will not be deemed to be a breach of this Agreement by
     Lilly and Lilly will have no liability whatsoever with respect to such
     omission; provided, however, that Lilly diligently pursues such consent
     from such Third Persons.

4.3  CLAIMS RELATED TO USE OF INTELLECTUAL PROPERTY. Lilly represents and
     warrants that there are no pending, or to Lilly's knowledge as of the
     Effective Date, threatened claims against Lilly or its Affiliates asserting
     that any of the Intellectual Property infringes or violates the rights of
     Third Persons or that NeoSan, by practicing under the Intellectual Property
     in conducting

                                       20

<PAGE>

     the Activities in the United States as of the Closing Date, would violate
     any of the intellectual property rights of any Third Person.

4.4  NOTICE TO THIRD PERSONS. Lilly represents and warrants that Lilly has not
     given any notice within the two (2) years prior to the Effective Date to
     any Third Persons, asserting infringement by such Third Persons upon any of
     the Intellectual Property.

4.5  VALIDITY OF TRADEMARKS, TRADE DRESS, COPYRIGHTS AND TECHNOLOGY. Lilly
     represents and warrants that, to its knowledge as of the Effective Date,
     the Product Intellectual Property (other than the Assigned Trade Dress) and
     the Licensed Trademark and Trade Dress (other than the Common Law Licensed
     Trade Dress), are valid and enforceable, and, to Lilly's knowledge as of
     the Effective Date, the Licensed Trademark and Trade Dress (other than the
     Common Law Licensed Trade Dress) are free of all Encumbrances except
     Permitted Encumbrances. Notwithstanding the foregoing, NeoSan acknowledges
     that the status of the Assigned Trademarks will change in the ordinary
     course of business prior to the Closing Date. Lilly will not be in breach
     of this representation or warranty with respect to, and NeoSan will have no
     right to refuse to close the transactions contemplated by this Agreement
     because of, changes in the status of the Assigned Trademarks so long as
     Lilly maintains the Assigned Trademarks in the ordinary course of business
     prior to the Closing Date. Lilly is assigning, selling, conveying,
     transferring and delivering the Assigned Trade Dress to NeoSan "AS IS", and
     is licensing the Common Law Licensed Trade Dress to NeoSan "AS IS."

4.6  RIGHTS GRANTED TO THIRD PERSONS. Except with respect to the remaining
     deliveries required pursuant to Mylan Agreement, rights granted to its
     Affiliates that, following the Closing Date, will not extend past the
     Permitted Uses, rights granted to its wholesalers and government
     purchasers, Lilly represents and warrants that Lilly and its Affiliates
     have not executed or granted to any Third Person, directly or indirectly,
     or entered into any agreement for, or retained, any license or other right
     to develop, manufacture, market, distribute, sell or offer for sale the
     Product or generic substitutes therefor in the United States or to import
     the Product or any other rights in or with respect to the Products, generic
     substitutes therefor, or other propoxyphene-based pharmaceutical products
     into the United States.

4.7  MAINTENANCE. Lilly represents and warrants that, as of the Closing Date,
     all necessary papers and fees concerning the Assigned Trademarks (which are
     registered as of the Closing Date and are unexpired), and the Licensed
     Trademark and Trade Dress (other than the Common Law Licensed Trade Dress)
     have been timely paid and filed with the appropriate governmental agencies
     or authority.

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<PAGE>

4.8  NDAS; REGULATORY MATTERS. Lilly represents and warrants that Lilly has
     furnished NeoSan with access to a complete copy of the NDAs, including all
     amendments and supplements thereto and that Lilly has no new drug
     applications or INDs pertaining to propoxyphene-based pharmaceutical
     products, whether issued, pending, abandoned, withdrawn, or in draft form,
     other than those pertaining to the NDAS. Although the NDAs are not "state
     of the art" (which NeoSan hereby acknowledges), Lilly further represents
     and warrants that (i) Lilly has complied in all material respects with all
     Applicable Laws in connection with the preparation and submission to the
     FDA of each of the NDAs, (ii) each of the NDAs has been approved by FDA,
     and, except with respect to those of the NDAs listed in SCHEDULE 4.8
     attached hereto, nothing has come to the attention of Lilly which has led
     Lilly to believe that any of the NDAs are not in good standing with the
     FDA, and (iii) Lilly has filed with the FDA all required notices,
     supplemental applications and annual or other reports, including adverse
     experience reports, with respect to each NDA which are material to the
     ability of Lilly to conduct the Activities. All of the Regulatory Approvals
     are owned exclusively by Lilly or its Affiliates. All Products being sold
     by Lilly in the United States are covered by a Regulatory Approval therein
     that permits such sale in the United States. There is no Action or
     Proceeding by any Governmental or Regulatory Authority pending or, to the
     knowledge of Lilly as of the Effective Date, threatened seeking the
     revocation or suspension of any Regulatory Approval. Except as set forth in
     SCHEDULE 4.8 attached hereto, during the three years prior to the date of
     this Agreement, Lilly and its Affiliates have not received or been subject
     to: (i) any FDA Form 483's directly relating to any Product or directly
     relating to any facility in which such Product is manufactured; (ii) any
     FDA Notices of Adverse Findings directly relating to any Product or
     directly relating to any facility in which such Product is manufactured; or
     (iii) any warning letters or other written correspondence from the FDA or
     any other Governmental or Regulatory Authority directly relating to the
     Product or directly relating to any facility in which such Product is
     manufactured, in which the FDA or such other Governmental or Regulatory
     Authority asserted that the operations of Seller were not in compliance
     with Applicable Law with respect to any Product or the facilities in which
     any Product is manufactured, tested or stored. Except for the
     representation and warranty contained in this Section 4.8, NeoSan has had
     full and adequate opportunity to review and evaluate the NDAs, NeoSan is
     relying upon its own judgment and experience in connection with the NDAs,
     and Lilly is assigning, selling, conveying, transferring and delivering the
     NDAs to NeoSan "AS IS."

4.9  ORGANIZATION AND STANDING. Lilly represents and warrants that Lilly is a
     corporation duly organized, validly existing, and in good standing under
     the laws of the State of Indiana. Lilly and its relevant Affiliates
     hereunder are duly qualified to conduct its business and is in good

                                       22

<PAGE>

     standing in the United States wherein the nature of such business requires
     such qualification, except for any failure to be so qualified could not
     reasonably be expected to have a Material Adverse Effect or materially
     impair or delay Lilly's ability to perform its obligations hereunder.

4.10 POWER AND AUTHORITY. Lilly represents and warrants that (i) Lilly has all
     requisite corporate power and authority to execute, deliver, and perform
     this Agreement and the other agreements and instruments to be executed and
     delivered by it pursuant hereto and thereto and to consummate the
     transactions contemplated herein and therein; and (ii) the execution,
     delivery and performance of this Agreement by Lilly does not, and the
     consummation of the transactions contemplated hereby will not, violate any
     provisions of Lilly's organizational documents, bylaws, or any Applicable
     Law applicable to Lilly, or any agreement, mortgage, lease, instrument,
     order, judgment, or decree to which Lilly is a party or by which Lilly or
     any of the Purchased Assets is bound.

4.11 CORPORATE ACTION; BINDING EFFECT. Lilly represents and warrants that (i)
     Lilly has duly and properly taken all action required by law, its
     organizational documents, or otherwise, to authorize the execution,
     delivery, and performance of this Agreement and the other instruments to be
     executed and delivered by it pursuant hereto and thereto and the
     consummation of the transactions contemplated hereby and thereby; and (ii)
     this Agreement has been duly executed and delivered by Lilly and
     constitutes, and the other instruments contemplated hereby when duly
     executed and delivered by Lilly will constitute, legal, valid, and binding
     obligations of Lilly enforceable against it in accordance with its
     respective terms, except as enforcement may be affected by bankruptcy,
     insolvency, or other similar laws.

4.12 REGULATORY STATUS OF NDAS. Except as set forth in SCHEDULE 4.12, Lilly
     represents and warrants that, to Lilly's knowledge, there have been no
     recalls, withdrawals, or market replacements of the Product in the United
     States in the past two (2) years and that, to Lilly's knowledge as of the
     Effective Date, there exists no set of facts or circumstances that would
     cause Lilly to believe or suspect that a recall, withdrawal or market
     replacement for the Product in the United States is pending, likely or
     necessary.

4.13 LAWS AND REGULATIONS. Lilly represents and warrants that it and its
     Affiliates have conducted all the Activities in material compliance with
     Applicable Laws.

4.14 CONSENTS AND APPROVALS. Lilly represents and warrants that no consent,
     approval, waiver, order or authorization of, or registration, declaration
     or filing with, any Governmental or Regulatory Authority or any other Third
     Person is required in connection with the execution,

                                       23

<PAGE>

     delivery and performance of this Agreement, or any agreement or instrument
     contemplated by this Agreement, by Lilly or the performance by Lilly of its
     obligations contemplated hereby and thereby other than (a) the filings
     required of both Parties pursuant to the HSR Act, (b) the information
     submissions required of a former owner of the NDAs pursuant to 21 C.F.R.
     Section 314.72, (c) any filings reasonably requested by NeoSan as may be
     necessary to change the records of ownership in the U.S. Trademark or
     Copyright Office, and (d) as set forth in SCHEDULE 4.14 attached hereto.
     SCHEDULE 4.14 sets forth a complete and accurate list of all consents,
     waivers, approvals, or authorizations of, or notices to, any third party
     (other than a Governmental or Regulatory Authority) that are required by or
     with respect to Lilly or its Affiliates in connection with the execution
     and delivery of this Agreement by Lilly as it relates to the United States
     or the performance of its obligations hereunder as it relates to the United
     States, except for such consents, waivers, approvals, or authorizations the
     failure to obtain which, and such notices the failure to give which, would
     not have a Material Adverse Effect or materially impair or delay Lilly's
     ability to perform its obligations hereunder (the "Required Lilly Third
     Party Consents").

4.15 BROKERAGE. Lilly represents and warrants that no broker, finder or similar
     agent has been employed by or on behalf of Lilly, and no Person with which
     Lilly has had any dealings or communications of any kind is entitled to any
     brokerage commission, finder's fee or any similar compensation, in
     connection with this Agreement or the transactions contemplated hereby.

4.16 NOT DEBARRED. Lilly represents and warrants that Lilly is not debarred and
     has not and will not use in any capacity the services of any Person
     debarred under subsections 306(a) or (b) of the Generic Drug Enforcement
     Act of 1992. If at any time this representation and warranty is no longer
     accurate, Lilly will immediately notify NeoSan of such fact.

4.17 LITIGATION. Lilly represents and warrants that there are no pending or, to
     Lilly's knowledge as of the Effective Date, threatened judicial,
     administrative or arbitral Actions or Proceedings pending as of the date
     hereof against Lilly or its Affiliates in the United States which, either
     individually or together with any other, will have a material adverse
     effect on the ability of Lilly to perform its obligations under this
     Agreement or any agreement or instrument contemplated hereby or otherwise
     have a Material Adverse Effect.

4.18 MATERIAL CONTRACTS. SCHEDULE 4.18 sets forth a complete and correct list of
     each Contract (other than wholesaler agreements) to be performed in the
     United States to which Lilly or any of its Affiliates is a party with a
     value in excess of $50,000 and that relates to (i) the manufacture,
     marketing, sale or distribution of any of the Products in the United
     States; (ii)

                                       24

<PAGE>

     the acquisition, sale, licensing in or out, or assignment of Product
     Intellectual Property; or (iii) sales of Products to any Governmental or
     Regulatory Authority (collectively, the "Material Contracts"). Lilly has
     made available to NeoSan complete and correct copies of Material Contracts.
     The Material Contracts are the only Contracts material to the Activities in
     the United States other than wholesaler agreements. Each of the Material
     Contracts is in effect and constitutes a legal, valid and binding
     agreement, enforceable in accordance with its terms, of Lilly; and Lilly
     has performed all of its required material obligations under, and is not in
     material violation or breach of or default under, any such Material
     Contract; and no other party to the Material Contracts is in material
     violation or breach of or default under any such Contract.

4.19 TITLE TO PURCHASED ASSETS. Lilly, on the Closing Date, will have good and
     marketable title to the Purchased Assets, free and clear of any
     Encumbrances other than Permitted Encumbrances, and will have the legal
     right and ability to transfer the Purchased Assets to NeoSan.

4.20 SURVIVAL PERIOD. The representations and warranties contained in this
     Article 4 and any indemnification obligation of Lilly set forth in Article
     11 associated with such representations and warranties will terminate on
     the one (1) year anniversary date of the date of expiration or termination
     of the Manufacturing Agreement, provided that any claims with respect
     thereto that are timely brought prior to such termination will survive and
     continue until their final resolution.

4.21 IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 4 AND
     ARTICLE 6 OF THE MANUFACTURING AGREEMENT, LILLY MAKES NO REPRESENTATION OR
     WARRANTY AS TO THE PRODUCT, COPYRIGHTS, THE LICENSED TECHNOLOGY, THE
     ASSIGNED TRADEMARKS, ASSIGNED TRADE DRESS, THE MARKETING MATERIALS, THE
     EXPIRED TRADEMARKS, BOOKS AND RECORDS, THE LICENSED TRADEMARKS AND TRADE
     DRESS, NDAs OR THE ACTIVITIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY
     OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND LILLY SPECIFICALLY DISCLAIMS
     ANY AND ALL IMPLIED OR STATUTORY WARRANTIES, INCLUDING ANY IMPLIED WARRANTY
     OF MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND
     WARRANTY OF NON-ENFRINGEMENT. Without limiting the foregoing, NeoSan
     acknowledges that it has not and is not relying upon any implied warranty
     of merchantability, fitness for a particular purpose, noninfringement, or
     upon any representation or warranty whatsoever as to the future prospects
     (financial, regulatory or otherwise), or the likelihood of commercial
     success of the Activities after the date of this Agreement.

                                       25

<PAGE>

                                    ARTICLE 5
                    REPRESENTATIONS AND WARRANTIES OF NEOSAN

5.1  ORGANIZATION AND STANDING. NeoSan represents and warrants that NeoSan is a
     corporation duly organized, validly existing, and in good standing under
     the laws of the State of Delaware.

5.2  POWER AND AUTHORITY. NeoSan represents and warrants that (i) NeoSan has all
     requisite corporate power and authority to execute, deliver, and perform
     this Agreement and the other agreements and instruments to be executed and
     delivered by it pursuant hereto and thereto and to consummate the
     transactions contemplated herein and therein; (ii) the execution, delivery,
     and performance of this Agreement by NeoSan does not, and the consummation
     of the transactions contemplated hereby will not, violate any provisions of
     NeoSan's organizational documents, bylaws, any Applicable Law applicable to
     NeoSan, or any agreement, mortgage, lease, instrument, order, judgment, or
     decree to which NeoSan is a party or by which NeoSan is bound.

5.3  CORPORATE ACTION; BINDING EFFECT. NeoSan represents and warrants that (i)
     NeoSan has duly and properly taken all action required by law, its
     organizational documents, or otherwise, to authorize the execution,
     delivery, and performance of this Agreement and the other instruments to be
     executed and delivered by it pursuant hereto and thereto and the
     consummation of the transactions contemplated hereby and thereby; and (ii)
     this Agreement has been duly executed and delivered by NeoSan and
     constitutes, and the other instruments contemplated hereby when duly
     executed and delivered by NeoSan will constitute legal, valid, and binding
     obligations of NeoSan enforceable against it in accordance with its
     respective terms, except as enforcement may be affected by bankruptcy,
     insolvency, or other similar laws.

5.4  GOVERNMENTAL APPROVAL. NeoSan represents and warrants that no consent,
     approval, waiver, order or authorization of, or registration, declaration
     or filing with, any Governmental or Regulatory Authority or any other Third
     Person is required in connection with the execution, delivery and
     performance of this Agreement, or any agreement or instrument contemplated
     by this Agreement, by NeoSan or the performance by NeoSan of its
     obligations contemplated hereby and thereby other than (a) the filings
     required of both Parties pursuant to the HSR Act, and (b) the information
     submissions required by the FDA with respect to the NDAs.

                                       26

<PAGE>

5.5  BROKERAGE. NeoSan represents and warrants that no broker, finder or similar
     agent has been employed by or on behalf of NeoSan, and no Person with which
     NeoSan has had any dealings or communications of any kind is entitled to
     any brokerage commission, finder's fee or any similar compensation, in
     connection with this Agreement or the transactions contemplated hereby.

5.6  NOT DEBARRED. NeoSan represents and warrants that NeoSan is not debarred
     and has not and will not use in any capacity the services of any Person
     debarred under subsections 306(a) or (b) of the Generic Drug Enforcement
     Act of 1992. If at any time this representation and warranty is no longer
     accurate, NeoSan will immediately notify Lilly of such fact.

5.7  LITIGATION. NeoSan represents and warrants that there are no pending or, to
     NeoSan's knowledge as of the Effective Date, threatened judicial,
     administrative or arbitral Actions or Proceedings pending as of the date
     hereof against NeoSan which, either individually or together with any
     other, will have a material adverse effect on the ability of NeoSan to
     perform its obligations under this Agreement or any agreement or instrument
     contemplated hereby.

5.8  NO OTHER OR IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS
     ARTICLE 5 AND ARTICLE 7 OF THE MANUFACTURING AGREEMENT, NEOSAN MAKES NO
     OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY
     OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND NEOSAN SPECIFICALLY
     DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES.

                                    ARTICLE 6
                       ADDITIONAL COVENANTS AND AGREEMENTS
                                 OF THE PARTIES

6.1  IMPLEMENTATION TEAM. The Parties will form a team (the "Implementation
     Team") to oversee the activities contemplated by this Agreement. The
     Implementation Team will be comprised of three (3) members from each Party.
     Each Party will appoint a member representing each of manufacturing,
     marketing/sales and regulatory. Either Party may change its
     representative(s) on the Implementation Team at any time by providing prior
     written notice to the other Party. Unless otherwise agreed to by the
     Parties, after the Closing Date, the Implementation Team will meet (in
     person or by telephone or video conference) at least one (1) time each
     Calendar Quarter upon no less than thirty (30) days prior written notice
     from one Party to the other to discuss any matters arising out of a Party's
     performance (or non-

                                       27

<PAGE>

     performance) of its obligations under this Agreement. The Implementation
     Team will initially be responsible for creating detailed operational plans
     for the transition contemplated by this Agreement; provided, however, that
     the activities contemplated by the foregoing will not take place until
     after the Closing Date to the extent doing so would be in violation of
     Applicable Law. The detailed operational plans will include a time line and
     clear understanding of roles and responsibilities contemplated by this
     Agreement. The Implementation Team will also have responsibility for
     coordinating effective communication of progress and issues that arise
     between the Parties. Special meetings of the Implementation Team may be
     called by either Party upon no less than thirty (30) days' prior written
     notice to the other Party, which notice must be accompanied by a written
     agenda of items to be discussed at such special meeting.

6.2  GOVERNMENTAL FILINGS. Lilly and NeoSan each agree to prepare and file
     whatever filings, requests or applications are required to be filed with
     any Governmental or Regulatory Authority in connection with the transfer of
     rights in Article 3 of this Agreement and to cooperate with one another as
     reasonably necessary to accomplish the foregoing, including (i) the filings
     required of both Parties pursuant to the HSR Act, (ii) the information
     submissions to the FDA provided for pursuant to 21 C.F.R. Section 314.72,
     and (iii) any necessary submissions to the DEA that will facilitate the
     transfer of manufacturing capabilities from Lilly to NeoSan or a contract
     manufacturer of NeoSan during the term of the Manufacturing Agreement.
     NeoSan will deliver to Lilly the information submission described in (ii),
     above, on the Closing Date.

6.3  COMPLIANCE WITH LAW. NeoSan agrees and acknowledges that as owner of the
     NDAs, it will have sole responsibility for, among other things, adverse
     event reporting, product quality complaints, label maintenance, other
     regulatory reporting obligations, payment of any and all product
     establishment fees, and medical and technical inquiries. Lilly and NeoSan
     each will keep all records and reports required to be kept by Applicable
     Laws, and each will make its facilities available at reasonable times
     during regular business hours for inspection by representatives of
     governmental agencies. Lilly and NeoSan each will notify the other within
     twenty-four (24) hours of receipt of any notice or any other indication
     whatsoever of any FDA, DEA or other governmental agency inspection,
     investigation or other inquiry, or other notice or communication of any
     type from a governmental agency, involving the manufacturing, selling,
     marketing, promoting, co-promoting and co-marketing of the Product in the
     United States. NeoSan and Lilly will cooperate with each other during any
     such inspection, investigation or other inquiry including allowing upon
     reasonable request a representative of the other to be present during the
     applicable portions of any such inspection, investigation or

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<PAGE>

     other inquiry and providing copies of all relevant documents. NeoSan and
     Lilly will discuss any response to observations or notifications received
     in connection with any such inspection, investigation or other inquiry and
     each will give the other an opportunity to comment upon any proposed
     response before it is made. In the event of disagreement concerning the
     form or content of such response, however, Lilly will be responsible for
     deciding the appropriate form and content of any response with respect to
     any of its cited activities and NeoSan will be responsible for deciding the
     appropriate form and content of any response with respect to any of its
     cited activities.

6.4  EXPENSES. Lilly and NeoSan will each bear their own direct and indirect
     expenses incurred in connection with the negotiation and preparation of
     this Agreement and, except as set forth in this Agreement, the performance
     of the obligations contemplated hereby.

6.5  REASONABLE EFFORTS. Lilly and NeoSan each hereby agrees to use all
     reasonable efforts to take, or cause to be taken, all actions and to do, or
     cause to be done, all things reasonably necessary or proper to make
     effective the transactions contemplated by this Agreement, including such
     actions as may be reasonably necessary to obtain approvals and consents of
     Governmental or Regulatory Authorities and other Persons (including all
     applicable drug listing and NDA notifications to the FDA and DEA
     identifying NeoSan as a distributor of the Product); provided, however,
     that no Party will be required to (i) pay money (other than as expressly
     required pursuant to this Agreement or as implicitly required in order for
     a Party to carry out its obligations hereunder), or (ii) assume any other
     material obligation not otherwise required to be assumed by this Agreement.

6.6  PUBLICITY. The Parties agree that no publicity release or announcement
     concerning the transactions contemplated hereby and under the Manufacturing
     Agreement or, with respect to a NeoSan publicity release or announcement,
     that includes the name of Lilly with respect to such transaction, will be
     issued without the advance written consent of the other, which will not be
     unreasonably withheld, except to the extent such publicity release or
     announcement is after the later of the date of (i) the last to be delivered
     to Lilly of the Loan Facility Highly-Confident Letter and the Bond
     Financing Highly-Confident Letter executed by B of A or (ii) the date that
     both Parties have made the filings required by both Parties pursuant to the
     HSR Act, and is substantially similar to, or whose relevant statements are
     consistent with the statements in, the press release set forth in SCHEDULES
     6.6 attached hereto. Notwithstanding the above, upon the later of the date
     of (i) the last to be delivered to Lilly of the Loan Facility
     Highly-Confident Letter and the Bond Financing Highly-Confident Letter
     executed by B of A or (ii) the date that both Parties have made the filings
     required by both Parties pursuant to

                                       29

<PAGE>

     the HSR Act (or such later date as agreed to by the Parties), NeoSan may
     issue the press release set forth at SCHEDULE 6.6. Notwithstanding anything
     in this Section 6.6 and Article 8 to the contrary, each Party may make
     filings or disclosures that are required by Applicable Laws (as determined
     to be so required by outside counsel for the disclosing Party) including
     filings or disclosures required by or to the Securities and Exchange
     Commission (and any other applicable securities exchanges) that discuss the
     subject matter of this Agreement or the Manufacturing Agreement or
     otherwise make reference to the other Party in any way whatsoever;
     provided, however, that such Party provides the other Party with no less
     than three (3) business days to review and comment on such filings, or the
     relevant portions thereof, pertaining to the transactions contemplated
     hereby or by the Manufacturing Agreement, and such Party does not
     unreasonably reject the incorporation of such comments into such filings;
     provided further, however, that such Party will redact any Confidential
     Information of the other Party that, in the opinion of such disclosing
     Party's outside counsel, is not required by Applicable Laws from such
     filings or disclosures; provided further, however, that, such Party will
     use commercially reasonable efforts to obtain confidential treatment by
     such security exchanges with respect thereto.

6.7  COOPERATION. If either Party becomes engaged in or participates in any
     investigation, claim, litigation or other proceeding with any Third Person,
     including the FDA and DEA, relating in any way to the manufacturing,
     selling, marketing, promoting, co-marketing or co-promoting the Product in
     the United States, the other Party will cooperate in all reasonable
     respects with such Party in connection therewith, including using its
     reasonable efforts to make available to the other such employees who may be
     helpful with respect to such investigation, claim, litigation or other
     proceeding, provided that, for purposes of this provision, reasonable
     efforts to make available any employee will be deemed to mean providing a
     Party with reasonable access to any such employee at no cost for a period
     of time not to exceed twenty-four (24) hours (e.g., three (3) eight (8)
     -hour business days), and provided further that neither Party is required
     to disclose any legally privileged documents or information to the other
     Party. Thereafter, any such employee will be made available for such time
     and upon such terms and conditions (including compensation) as the Parties
     may mutually agree.

6.8  CONFLICTING RIGHTS. Neither Party will grant any right to any Third Person
     which would violate the terms of or conflict with the rights granted by
     such Party to the other Party pursuant to this Agreement.

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<PAGE>

6.9  DEEMED BREACH OF COVENANT. Neither Lilly nor NeoSan will be deemed to be in
     breach of this Agreement to the extent such Party's breach is the result of
     any action or inaction on the part of the other Party.

6.10 CUSTOMER ORDERS. Lilly will take such steps as may be reasonably required
     to insure that all customer orders for Product received after the Closing
     Date from customers in the United States are forwarded to NeoSan in writing
     within forty-eight (48) hours after receipt by Lilly. Lilly agrees that any
     customer in the United States ordering or requesting any information with
     respect to the Product after the Closing Date will be informed that NeoSan
     is now supplying the Product.

6.11 EXISTING CONTRACTS. NeoSan will fulfill all contractual pricing offered by
     Lilly on Product only for a period of time sufficient to ensure that Lilly
     is in compliance with its contractual obligation to a Third Person for sale
     of Products in the United States ("Customer Contracts"). Other than
     complying with these preexisting contractual obligations, NeoSan will be
     free in its sole and absolute discretion and without consultation with
     Lilly, to set its prices on Product offered by NeoSan. Lilly and NeoSan
     agree to prorate as of the Closing Date any amounts under the Customer
     Contracts in favor of Lilly with respect to amounts which become due and
     payable after the Closing Date to the extent the benefit is attributable to
     the period prior to the Closing Date, and any amounts under the Customer
     Contracts in favor of NeoSan with respect to amounts which are paid prior
     to the Closing Date to the extent the benefit is attributable to the period
     subsequent to the Closing Date.

6.12 NO ASSIGNMENT OR LICENSES OUTSIDE THE UNITED STATES. Notwithstanding
     anything in this Agreement to the contrary, NeoSan acknowledges and agrees
     that Lilly is not assigning or licensing to NeoSan the rights to make, have
     made, distribute, use, sell, offer to sell, have sold, import, market,
     co-market, promote or co-promote the Product outside the United States,
     except for the non-exclusive rights to make or have made Product outside of
     the United States solely for importation and sale in the United States. The
     rights granted to NeoSan in the United States will in no way limit Lilly's
     rights outside the United States.

6.13 NEOSAN NEW PRODUCTS. During the three-year period beginning on the date of
     receipt by Lilly of written notice from NeoSan that NeoSan has initiated
     development activities related to NeoSan New Products (which NeoSan must do
     within a reasonable time after initiating such development activities),
     NeoSan will, at its sole cost and expense, work diligently and using
     commercially reasonable efforts, consistent with prudent business judgment
     and a balancing of important priorities of NeoSan, based upon the existing
     business situation, to develop at least two NeoSan New Products where in
     NeoSan's good faith opinion, such devel-

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<PAGE>

     opment is technically feasible and commercially justifiable ("Commercially
     Attractive Neo San New Products"), devoting the same degree of attention
     and diligence to such efforts that it devotes to such activities for its
     other products at a comparable stage in development and of comparable
     commercial and development potential, with the objective of developing such
     Commercially Attractive NeoSan New Products for the United States as soon
     as commercially practicable, provided that NeoSan may terminate such
     development activities at any time in the event that it determines in good
     faith that such candidates are unlikely to succeed in becoming Commercially
     Attractive NeoSan New Products.

6.14 MEDICAID AND OTHER REBATES. The Parties will administer and pay all
     rebates, chargebacks and other similar programs as follows:

          (a) Lilly Sales Prior to Closing Date. Lilly will process and be
     responsible for the administration and payment of all federal, state and
     local managed care and other rebate programs, including Medicaid/Medicare
     rebates and Obligations, as well as chargebacks for the Product, in each
     case, related to Product that was sold by Lilly prior to the Closing Date;

          (b) Sales After the Closing Date. NeoSan will process and be
     responsible for the administration and payment of all federal, state and
     local managed care and other rebate programs in the United States,
     including Medicaid/Medicare rebates and Obligations, as well as chargebacks
     for the Product and NeoSan New Products, in each case, related to Product
     and NeoSan New Product that is sold by NeoSan on or after the Closing Date.
     If the Parties are unable to determine whether a Product was sold by Lilly
     prior to the Closing Date or by NeoSan on or after the Closing Date, then
     Lilly will be responsible for any and all such rebates and chargebacks
     received during the sixty (60) day period following the Closing Date, and
     NeoSan will be responsible thereafter.

          (c) Product Returns. NeoSan will be responsible for all returns of
     Product sold on or after the Closing Date in the United States, and Lilly
     will be responsible for returns of Product sold before the Closing Date. If
     the Parties are unable to determine whether a Product was sold by Lilly
     prior to the Closing Date or by NeoSan on or after the Closing Date, in
     each case in the United States, then Lilly will be responsible for all
     returns of such Product received during the sixty (60) day period following
     the Closing Date, and NeoSan will be responsible thereafter with respect to
     the United States.

6.15 RESPONSIBILITY FOR THE NDAS. On the Closing Date, Lilly will transfer the
     NDAs to NeoSan. Following the Closing Date, NeoSan will be responsible for
     and will fulfill all regulatory requirements with respect to the Product
     that are imposed upon NeoSan as the owner of

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<PAGE>

     the NDAs under Applicable Laws. NeoSan will provide Lilly with all
     assistance that is reasonably necessary to effectuate such transfers.
     Notwithstanding the sale and transfer of the NDAs, Lilly will complete the
     assay validations and supplement the NDAs with respect to the change of
     equipment in Lilly's Puerto Rico facility, all as further described in
     SCHEDULE 6.15 attached hereto; provided, however, that if Lilly
     subsequently determines in its reason able discretion that regulatory
     submissions identified in SCHEDULE 6.15 are not needed in order to continue
     manufacturing the Product and the FDA does not require such regulatory
     submissions, Lilly will have no obligation to complete the activities
     described in this sentence or supplement the NDA as described in SCHEDULE
     6.15. Nothing in this Section 6.15 will be construed as requiring Lilly to
     update or upgrade the NDAs to "state of the art" conditions, or requiring
     Lilly to otherwise update the NDA. Upon the Closing Date, NeoSan hereby
     grants to Lilly the right to reference the NDAs for purposes of obtaining
     and/or maintaining marketing authorizations outside of the United States.

6.16 INTELLECTUAL PROPERTY MAINTENANCE. Following the Closing, NeoSan will have
     the sole right to file, prosecute and maintain, at its sole cost and
     expense, (i) the Product Intellectual Property and (ii) any patent
     applications or Patents that cover a NeoSan New Product(s) developed by
     NeoSan or its Affiliates. Lilly will be responsible for and promptly pay
     when due all fees necessary to and will otherwise maintain the Licensed
     Trademark and Trade Dress (other than the Common Law Licensed Trade Dress).

6.17 ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS.

          (a) Right to Seek Relief. NeoSan will promptly notify Lilly of any
     infringement or suspected infringement which may come to its notice of any
     Licensed Technology or the Licensed Trademark and Trade Dress, and will
     provide Lilly with any information with respect thereto. Lilly will
     promptly notify NeoSan of any infringement or suspected infringement which
     may come to its notice of any intellectual property rights relating to the
     Product, including the Product Intellectual Property, Licensed Technology,
     or the Licensed Trademark and Trade Dress, and will provide NeoSan with any
     information with respect thereto. In the event of any past, present or
     future infringement by a Third Person of any intellectual property rights
     relating to Copyrights, Assigned Trade Dress (only as it relates to an
     infringement in the United States) or Assigned Trademarks, NeoSan will have
     the sole right (but no obligation) to pursue any and all injunctive relief,
     and any or all compensatory and other remedies and relief (collectively,
     "Remedies") against such Third Person.

          In the event of any infringement by a Third Person of any intellectual
     property rights relating solely to Assigned Trade Dress (as it relates to
     infringement outside the United

                                       33

<PAGE>

     States), Licensed Technology or Licensed Trademark and Trade Dress, Lilly
     will have the first right (but not the obligation) to pursue any and all
     Remedies against such Third Person. Should Lilly determine not to pursue
     Remedies with respect to any such intellectual property within thirty (30)
     days after notice from NeoSan requesting Lilly to do so, then NeoSan will
     have the right (but not the obligation) to pursue Remedies against such
     Third Person inside the United States.

          In the event of any infringement by a Third Person in the United
     States of any intellectual property related to the Product or NeoSan New
     Products other than that described in the preceding sentences, NeoSan will
     have the first right (but not the obligation) to pursue any and all
     Remedies against such Third Person. Should NeoSan determine not to pursue
     Remedies with respect to any such intellectual property within thirty (30)
     days after notice from Lilly requesting NeoSan to do so, then Lilly will
     have the right (but not the obligation) to pursue Remedies against such
     Third Person.

          (b) Assistance and Cooperation. In the event that a Party will pursue
     Remedies hereunder, the other Party will use all reasonable efforts to
     assist and cooperate with the Party pursuing such Remedies. Each Party will
     bear its own costs and expenses relating to such pursuit. Any damages or
     other amounts collected will be distributed, first, to the Party that
     pursued Remedies to cover its costs and expenses and, second, to the other
     Party to cover its costs and expenses, if any, relating to the pursuit of
     such Remedies; any remaining amount will be distributed to the Party that
     pursued the Remedies.

6.18 INFRINGEMENT OF THIRD PERSON RIGHTS. In the event that a Third Person
     institutes a patent, trade secret, trademark or other infringement suit, or
     a misappropriation or unfair competition suit in the United States
     (including any suit claiming confusion, deception or dilution of a
     trademark by the Assigned Trademarks, Assigned Trade Dress or Licensed
     Trademark and Trade Dress or interference with any patent claim (pending or
     issued)) against NeoSan or another Permitted Seller during the term of this
     Agreement, alleging that the manufacture, marketing, sale or use of the
     Product infringes one or more Patent, trademark or other intellectual
     property rights held by such Third Person or constitutes misappropriation
     or unfair competition, then NeoSan will have the first right (but not the
     obligation), at its sole expense, to assume direction and control of the
     defense of such claims except to the extent such suit relates to the
     Assigned Trade Dress (as it relates to an infringement outside of the
     United States), the Licensed Technology, or the Licensed Trademark and
     Trade Dress, as to which Lilly will have the first right (but not the
     obligation), at its sole expense, to assume direction and control of the
     defense of such claims. Should NeoSan or Lilly, as applicable, determine

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<PAGE>

     not to pursue the defense of a particular claim within thirty (30) days
     after notice from the other Party requesting NeoSan or Lilly, as
     applicable, to do so, then the other Party will have the right (but not the
     obligation), at its sole expense, to assume direction and control of such
     claims. NeoSan will not have the right to settle or otherwise dispose of
     any such claim with respect to the Assigned Trade Dress (as it relates to
     an infringement outside of the United States), the Licensed Technology or
     the Licensed Trademark and Trade Dress without the consent of Lilly, which
     consent will not be unreasonably withheld.

6.19 SALES TRAINING. Lilly will have no obligation to provide sales training to
     NeoSan.

6.20 NO LIENS. NeoSan will keep the Licensed Technology and Licensed Trademark
     and Trade Dress free from all Encumbrances other than Permitted
     Encumbrances.

6.21 MAINTENANCE OF ACTIVITIES PRIOR TO CLOSING. Except as otherwise set forth
     in Section 6.25, from the date of this Agreement to the Closing Date, Lilly
     will conduct the Activities in the ordinary course of business and not
     enter into any new Contracts including the Product or other Purchased
     Assets (a) giving any third Persons any rights, title or interests in the
     Purchased Assets (other than sales of Products in the ordinary course of
     business), or (b) creating any Encumbrances on the foregoing other than
     Permitted Encumbrances. Lilly agrees that: after the date hereof, without
     NeoSan's prior written consent, which will not be unreasonably withheld, it
     will not take any action with respect to any Material Contract that would
     (x) extend the term of such Material Contract with respect to any Product,
     (y) create or agree to any additional obligations with respect to any
     Product other than price adjustments in the normal course of business, or
     (z) otherwise materially adversely affect NeoSan (other than to terminate
     any such Material Contract in the ordinary course of business).

6.22 UNAVAILABLE CONSENTS.

          (a) Notwithstanding anything to the contrary contained in this
     Agreement, if the sale, assignment, transfer, conveyance or delivery or
     attempted sale, assignment, transfer, conveyance or delivery to NeoSan of
     any asset that would be a Purchased Asset is (i) prohibited by any
     Applicable Law or (ii) would require any authorizations, approvals,
     consents or waivers from a Third Person or Governmental or Regulatory
     Authority and such authorizations, approvals, consents or waivers will not
     have been obtained prior to the Closing Date, then in either case the
     Closing may proceed without the sale, assignment, transfer, conveyance or
     delivery of such affected asset and this Agreement will not constitute a
     sale, assignment, transfer, conveyance or delivery of such asset; provided
     that nothing in this Section 6.22 will be deemed to waive the rights of
     NeoSan not to consummate the transactions con-

                                       35

<PAGE>

     templated by this Agreement if the conditions to its obligations set forth
     in Article 7 have not been satisfied or waived.

          (b) In the event that the Closing proceeds without the sale,
     assignment, transfer, conveyance or delivery of any such affected asset set
     forth in Section 6.22(a), then (i) following the Closing, the Parties will
     use their commercially reasonable best efforts, and cooperate with each
     other, to obtain promptly such authorizations, approvals, consents or
     waivers, and (ii) pending such authorization, approval, consent or waiver,
     the Parties will cooperate with each other in any mutually agreeable,
     reasonable and lawful arrangements designed to provide to NeoSan the
     benefits of use of such asset and to Lilly the benefits, including any
     indemnities, that, in each case, it would have obtained had the asset been
     conveyed to NeoSan on the Closing Date; provided, however, that such
     arrangement does not cause either Party to be in breach of any obligation
     owed to a Third Person.

          (c) If authorization, approval, consent or waiver for the sale,
     assignment, transfer, conveyance or delivery of any such asset not sold,
     assigned, transferred, conveyed or delivered on the Closing Date is
     subsequently obtained, Lilly will assign, transfer, convey and deliver such
     asset to NeoSan at no additional cost to NeoSan; provided, however, that
     NeoSan has paid the full purchase price described in Section 2.1, above.

6.23 GUARANTY. NeoSan will cause aaiPharma to execute a Guaranty in the form
     attached hereto as Exhibit B (the "Guaranty").

6.24 FINANCIAL STATEMENTS. Lilly will deliver to NeoSan, at NeoSan's expense,
     audited financial statements with respect to the Products in the United
     States for calendar years 1999, 2000 and 2001 which are compliant with the
     rules and regulations of the United States Securities and Exchange
     Commission and will specifically include Net Sales and gross margin of the
     Products in the United States (the "Financial Statements"). NeoSan will pay
     the cost of the Financial Statements regardless of whether the transactions
     contemplated by this Agreement close.

6.25 FINANCING. NeoSan (or aaiPharma on NeoSan's behalf) will use its
     commercially reasonable best efforts to initiate an offering to raise, on
     commercially reasonable terms (for a comparably-sized company and a
     comparably-sized financing transaction, including interest rate and
     duration), the funds necessary to pay the purchase price described in
     Section 2.1 and, pursuant to such offering, to deliver Offering Memoranda
     to potential investors no later than February 21, 2002 (with respect to the
     Offering Memoranda pertaining to the loan syndication portion of the
     Transaction Financing (the "Loan Facility")) and March 1, 2002 (with
     respect

                                       36

<PAGE>

     to the Offering Memoranda pertaining to the bond offering portion of the
     Transaction Financing (the "Bond Offering")). NeoSan (or aaiPharma on
     NeoSan's behalf) will utilize its commercially reasonable best efforts to
     close the financings described in both Offering Memoranda (the "Transaction
     Financing") no later than March 15, 2002. The Transaction Financing will
     take the form of a syndicated loan or bond offering, or any combination
     thereof. Notwithstanding anything in this Agreement to the contrary, Lilly
     will be free to discuss transactions related to the Product with Third
     Persons (but not sign any binding agreements) until NeoSan (or aaiPharma on
     NeoSan's behalf) closes the Transaction Financing for the purpose of having
     a back-up purchaser for the asset should the Transaction Financing fail. A
     prerequisite for NeoSan's distribution of the Offering Memoranda pertaining
     to the Loan Facility to banks and other financial institutions will be (i)
     Lilly's prior written approval of such Offering Memoranda, such approval
     not to be unreasonably withheld, and (ii) Bank of America's ("B of A")
     providing to NeoSan and aaiPharma (and NeoSan will have provided a copy
     thereof to Lilly) a duly executed "highly confident" letter with respect to
     the successful funding of such Loan Facility at the closing of the
     Transaction Financing in a form substantially similar to Exhibit C attached
     hereto (the "Loan Facility Highly-Confident Letter"). A prerequisite for
     NeoSan's distribution of the Offering Memoranda pertaining to the Bond
     Offering to potential investors will be (i) Lilly's prior written approval
     of such Offering Memoranda, such approval not to be unreasonably withheld,
     (ii) B of A's providing to NeoSan and aaiPharma (and NeoSan will have
     provided a copy thereof to Lilly) a duly executed "highly confident" letter
     with respect to the successful funding of the Bond Offering at the closing
     of the Transaction Financing in a form substantially similar to Exhibit D
     attached hereto (the "Bond Financing Highly-Confident Letter"), and (iii)
     that NeoSan (or aaiPharma on NeoSan's behalf) will have been and will
     continue to actively progress with the closing of the Loan Facility in good
     faith. In the event that B of A fails to provide NeoSan (and NeoSan fails
     to provide Lilly with a copy) with the Loan Facility Highly-Confident
     Letter by February 21, 2002, fails to provide the Parties with the Bond
     Financing Highly-Confident Letter by March 1, 2002, or is prohibited from
     issuing the Offering Memorandum pertaining to the Bond Offering as of March
     1, 2002 because of its (or aaiPharma's on NeoSan's behalf) failure to
     actively progress with the closing of the Loan Facility in good faith,
     Lilly will have the right (but not the obligation) to terminate this
     Agreement by written notice to NeoSan at any time prior to B of A's
     delivery to Lilly of such Loan Facility Highly-Confident Letter or such
     Bond Financing Highly-Confident Letter or NeoSan's or aaiPharma's active
     progression with the closing of the Loan Facility in good faith, as the
     case may be. Unless aaiPharma is advised by its outside SEC counsel that,
     in such counsel's opinion, earlier public disclosure or filing with the
     Securities and Exchange Commission or

                                       37

<PAGE>

     relevant securities exchange with respect to the transactions covered by
     this Agreement is required by applicable law or regulation, NeoSan will
     not, and will cause aaiPharma not to, make any such public disclosure or
     filing until the Parties have received the Bond Financing Highly-Confident
     Letter. Following the receipt of such Bond Financing Highly-Confident
     Letter or such legal advice of an earlier public disclosure or filing
     obligation, whichever comes first, NeoSan and aaiPharma will be free to
     make such legally required public disclosures or filings, provided that
     such public disclosures or filings will be limited to that which
     aaiPharma's outside SEC counsel advises aaiPharma is legally required, in
     such counsel's opinion, or which is otherwise permitted under Section 6.6
     or Article 8 (other than 8.2(g)) hereof at the relevant time, unless Lilly
     consents to additional disclosure. Notwithstanding the foregoing, NeoSan's
     right to make such public disclosure or filing pursuant to this Section
     6.25 is subject to the conditions set forth in the three provisos at the
     end of Section 6.6 pertaining to disclosures that are required by
     Applicable Laws. NeoSan will cause B of A to have in place Confidentiality
     Agreements no less restrictive than those confidentiality obligations
     customarily used by B of A with Third Persons in other loan syndication
     transactions, with Third Persons to which B of A or its representatives
     discuss the Loan Facility portion of the Transaction Financing.

                                    ARTICLE 7
                CONDITIONS PRECEDENT TO THE CLOSING; CLOSING DATE

7.1  CONDITIONS PRECEDENT TO NEOSAN'S OBLIGATIONS. Subject to waiver as set
     forth in Section 12.3, below, all obligations of NeoSan to close the
     transactions contemplated under this Agreement are subject to the
     fulfillment or satisfaction of each of the following conditions precedent:

          (a) Representations and Warranties True as of the Closing Date. The
     representations and warranties of Lilly contained in this Agreement, the
     Manufacturing Agreement and in any schedule, certificate or document
     delivered by Lilly to NeoSan pursuant to the provisions hereof will have
     been true on the date hereof and will be true on the Closing Date with the
     same effect as though such representations and warranties were made as of
     such date.

          (b) Compliance with this Agreement. Lilly will have performed and
     complied with all agreements and conditions required by this Agreement to
     be performed or complied with by it prior to or by the Closing Date.

                                       38

<PAGE>

          (c) Closing Certificate. NeoSan will have received a certificate from
     Lilly, executed by an officer of Lilly, certifying in such detail as NeoSan
     may reasonably request that the conditions specified in Sections 7.1 (a)
     and 7.1 (b), above, have been fulfilled and certifying that Lilly has
     obtained all consents and approvals required by Section 7.1(e), below.

          (d) No Threatened or Pending Litigation. Except for Actions or
     Proceedings, injunctions or final judgments solely pertaining to contracts
     or other obligations between NeoSan and any Third Person on the Effective
     Date, no Action or Proceeding, or injunction or final judgment relating
     thereto, will be threatened or be pending against Lilly or NeoSan or its
     Affiliates before any Governmental or Regulatory Authority in which it is
     sought to restrain or prohibit or to obtain damages or other relief in
     connection with this Agreement or the consummation of the transactions
     contemplated hereby, and no investigation that might result in any such
     suit, action or proceeding will be pending or threatened.

          (e) Consents and Approvals. Lilly will have either received notice
     from the Federal Trade Commission or the U.S. Department of Justice of
     early termination of the waiting period provided by the HSR Act or such
     waiting period will have expired with no further action required or sought
     by the Competition Authority on the part of Lilly or NeoSan.

          (f) Quality Agreement. Lilly will have entered into the Quality
     Agreement.

          (g) Receipt of Funds. NeoSan (or aaiPharma or any of its Affiliates)
     will have received an amount equal to the payment set forth in Section 2.1
     hereof as described in Section 6.25 hereof.

          (h) Financial Statements. NeoSan will have received the Financial
     Statements.

7.2  CONDITIONS PRECEDENT TO LILLY'S OBLIGATIONS. Subject to waiver as set forth
     in Section 12.3, below, all obligations of Lilly to close the transactions
     contemplated under this Agreement are subject to the fulfillment or
     satisfaction of each of the following conditions precedent:

          (a) Representations and Warranties True as of the Closing Date. The
     representations and warranties of NeoSan contained in this Agreement, the
     Manufacturing Agreement, and in any schedule, certificate or document
     delivered by NeoSan to Lilly pursuant to the provisions hereof will have
     been true on the date hereof and will be true on the Closing Date with the
     same effect as though such representations and warranties were made as of
     such date.

                                       39

<PAGE>

          (b) Compliance with this Agreement. NeoSan will have performed and
     complied with all agreements and conditions required by this Agreement to
     be performed or complied with by it prior to or by the Closing Date.

          (c) Closing Certificate. Lilly will have received a certificate from
     NeoSan, executed by an officer of NeoSan, certifying in such detail as
     Lilly may reasonably request that the conditions specified in Sections
     7.2(a) and 7.2(b), above, have been fulfilled and certifying that NeoSan
     has obtained all consents and approvals required by Section 7.2(e), below.

          (d) No Threatened or Pending Litigation. On the Closing Date, no
     Action or Proceeding, or injunction or final judgment relating thereto,
     will be threatened or be pending against Lilly or NeoSan or any of its
     Affiliates before any Governmental or Regulatory Authority in which it is
     sought to restrain or prohibit or to obtain damages or other relief in
     connection with this Agreement or the consummation of the transactions
     contemplated hereby, and no investigation that might result in any such
     suit, action or proceeding will be pending or threatened.

          (e) Consents and Approvals. NeoSan will have either received notice
     from the Federal Trade Commission or the U.S. Department of Justice of
     early termination of the waiting period provided by the HSR Act or such
     waiting period will have expired with no further action required or sought
     by the Federal Trade Commission or the U.S. Department of Justice on the
     part of NeoSan.

          (f) Quality Agreement and Guaranty. NeoSan will have entered into the
     Quality Agreement and aaiPharma will have entered into the Guaranty.

7.3  CLOSING DATE.

          (a) Subject to Section 7.3(b), below, the closing of the transactions
     contemplated by this Agreement will take place at 10:00 a.m., Indianapolis
     time, on the third (3rd) Lilly business day following the later of (i) the
     date on which the last required FTC notice of the early termination of the
     waiting period provided by the HSR Act or such applicable waiting periods
     have expired with no further action required of either Party, (ii) the day
     on which the last of the certificates required by Sections 7.1(c) and
     7.2(c) has been delivered by one Party to the other, unless receipt of such
     certificate has been waived in writing by the necessary Party, and (iii)
     the day that the last condition precedents set forth in Sections 7.1 and
     7.2 above has been satisfied or waived by the necessary party, or on such
     other date as may be mutually agreed upon in writing by the Parties (the
     "Closing Date") at the offices of Eli Lilly

                                       40

<PAGE>

     and Company, Lilly Corporate Center, Indianapolis, Indiana. Each Party
     hereby agrees to use its commercially reasonable best efforts to deliver
     the certificates described in Sections 7.1(c) and 7.2(c) to the other in a
     timely manner.

          (b) If the closing of the transactions contemplated hereby will not
     have taken place on or before sixty (60) days after the Effective Date, or
     such later date as will be mutually agreed to in writing by Lilly and
     NeoSan, because the conditions described in Sections 7.1 and/or 7.2, above,
     have not been satisfied or waived, then Lilly and NeoSan agree to discuss
     in good faith which substantive terms set forth in this Agreement, the
     Manufacturing Agreement, or any document attached hereto and thereto need
     to be modified as a result of the delay in such closing; provided, however,
     that neither Party will have an obligation to agree to such modification.
     Each Party hereby agrees to use commercially reasonable best efforts to
     consummate the transactions contemplated herein, as modified, on or before
     the sixtieth (60th) day after the Effective Date; provided, however, that
     if the Parties are unable to close the transactions contemplated hereby
     within one-hundred twenty (120) days after the Effective Date, or such
     later date as is mutually agreed to in writing by Lilly and NeoSan, then
     any Party that is not in material default of its obligations under this
     Agreement (including its obligation to deliver the certificates described
     in Sections 7.1(c) in the case of Lilly and 7.2(c) in the case of NeoSan)
     may terminate this Agreement upon written notice to the other and each may
     pursue such other remedies as are available to it at law, in equity or
     under this Agreement. If neither Party is then in default of its
     obligations under this Agreement upon delivery of such termination notice,
     then this Agreement will terminate and neither Party will have any
     Obligation to the other with respect to such termination. In all other
     circumstances, the Parties may each pursue such remedies as are available
     to it at law, in equity or under this Agreement. In addition to, but in no
     way in limitation of the foregoing, Lilly may terminate this Agreement in
     its entirety if NeoSan (or aaiPharma) has not initiated the Loan Facility
     portion of the Transaction Financing by February 21, 2002 (unless such
     termination right has not been exercised by written notice to NeoSan prior
     to the commencement of the offering of the Loan Facility), the Bond
     Offering Portion of the Transaction Financing by March 1, 2002 (unless such
     termination right has not been exercised by written notice to NeoSan prior
     to the commencement of the Bond Offering), and closed the Transaction
     Financing by March 15, 2002 as more fully described in Section 6.25. In the
     event Lilly terminates this Agreement for NeoSan's or aaiPharma's failure
     to close the Transaction Financing by March 15, 2002, NeoSan will have no
     Obligation to Lilly with respect to such termination provided that NeoSan
     and/or aaiPharma used commercially reasonable best efforts to close the
     Transaction Financing by March 15, 2002 and NeoSan is not otherwise in
     breach of this Agreement.

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<PAGE>

7.4  DELIVERIES AT CLOSING.

          (a) CLOSING DELIVERIES BY LILLY. At the Closing, Lilly will deliver or
     cause to be delivered to NeoSan:

               (i) physical possession of all tangible personal property
     included in the Purchased Assets, including (A) the Regulatory Approvals,
     and (B) the Marketing Materials;

               (ii) the duly executed Lilly Bill of Sale;

               (iii) copies of all Required Lilly Third Party Consents obtained
     as of Closing Date;

               (iv) a duly executed counterpart of the Quality Agreement; and

               (v) the certificate contemplated by Section 7.1 (c), above, duly
     executed by an authorized representative of Lilly.

          (b) CLOSING DELIVERIES BY NEOSAN. At the Closing, NeoSan will deliver
     or cause to be delivered to Lilly:

               (i) the payment required of it pursuant to Section 2.1;

               (ii) a duly executed counterpart of the Quality Agreement;

               (iii) the certificate contemplated by Section 7.2(c), above, duly
     executed by an authorized representative of NeoSan; and

               (iv) the Guaranty duly executed by an authorized representative
     of aaiPharma.

7.5  SALES TAXES. Lilly will be responsible for all sales, use, stamp duty,
     transfer, value added and other related or similar Taxes (excluding VAT
     Taxes associated with Product delivered to NeoSan in accordance with the
     Manufacturing Agreement), if any, arising out of the sale by Lilly and its
     Affiliates of the Purchased Assets to NeoSan pursuant to this Agreement or
     payable in connection with the transactions contemplated hereby.

                                       42

<PAGE>

                                    ARTICLE 8
                                 CONFIDENTIALITY

8.1  CONFIDENTIAL INFORMATION. The Parties agree that, for a ten (10)-year
     period following the Effective Date, the Receiving Party will keep
     completely confidential, will not publish or otherwise disclose and will
     not use directly or indirectly for any purpose other than as contemplated
     by this Agreement or the Manufacturing Agreement any such Confidential
     Information of the Disclosing Party, whether such Confidential Information
     was received by the Receiving Party prior to, on or after the Effective
     Date. Notwithstanding anything to the contrary herein, neither Party will
     be under any non-disclosure or non-use obligation whatsoever with respect
     to its own Confidential Information.

8.2  DISCLOSURE. Each Party may disclose the other Party's Confidential
     Information to the extent that such disclosure is:

          (a) made in response to a valid order or subpoena of a court of
     competent jurisdiction or other governmental body of a country or any
     political subdivision thereof of competent jurisdiction; provided, however,
     that the Receiving Party will first have given notice to the Disclosing
     Party and given the Disclosing Party a reasonable opportunity to quash such
     order or subpoena and to obtain a protective order requiring that the
     Confidential Information and documents that are the subject of such order
     or subpoena be held in confidence by such court or governmental body or, if
     disclosed, be used only for purposes for which the order or subpoena was
     issued; provided further, however, that if a disclosure order or subpoena
     is not quashed or a protective order is not obtained, the Confidential
     Information disclosed in response to such court or governmental order or
     subpoena will be limited to that information which is legally required to
     be disclosed in such response to such court or governmental order or
     subpoena;

          (b) otherwise as required by law, in the opinion of legal counsel to
     the Receiving Party, as expressed in an opinion letter in form and
     substance reasonably satisfactory to the Disclosing Party, which will be
     provided to the Disclosing Party at least twenty-four (24) hours prior to
     the Receiving Party's disclosure of the Confidential Information pursuant
     to this Section 8.2;

          (c) made by NeoSan as the Receiving Party to the Governmental or
     Regulatory Authority as required to obtain or maintain marketing approval
     for the Product or a NeoSan New Product, provided that reasonable measure
     will be taken to assure confidential treatment of such information;

                                       43

<PAGE>

          (d) made by Lilly as Receiving Party to a Third Person as may be
     necessary or useful in connection with the activities of Lilly and its
     Affiliates following the Closing Date within the scope of the Permitted
     Uses during the remaining term thereof or made by NeoSan as the Receiving
     Party in connection with the activities of NeoSan, its Affiliates and
     contractors in the manufacture or development and commercialization of the
     Product and NeoSan New Product, provided that the Receiving Party will in
     each case obtain from the proposed Third Person recipient a written
     confidentiality agreement containing confidentiality obligations no less
     onerous than those set forth in this Section;

          (e) made by the Receiving Party to a United States tax authority;

          (f) made by the Receiving Party to its Representatives; provided,
     however, that (i) the Representative has a need to know such Confidential
     Information for purposes of this Agreement or the Manufacturing Agreement;
     (ii) the Receiving Party informs its Representatives receiving Confidential
     Information of its confidential nature; and (iii) the Receiving Party will
     be responsible for any breach of this Section 8 by any of its
     Representatives to the same extent as if the breach were by the Receiving
     Party; or

          (g) by NeoSan and aaiPharma with respect to the Financial Statements
     (and Confidential Information pertaining to the Products that is required,
     in the opinion of their outside SEC counsel, to be included in legally
     required filings or disclosures with the Securities and Exchange Commission
     or that, in the opinion of their outside counsel or of B of A, is
     commercially necessary in carrying out the Transaction Financing and
     subsequent public exchange offer for the Bond Offering (the "Subsequent
     Exchange Offer")) that are incorporated into, included in, or attached to,
     (I) aaiPharma's filings with the Securities and Exchange Commission
     pertaining to the entering into of this Agreement by the Parties, at such
     times as aaiPharma makes such filings as provided in Sections 6.6 or 6.25,
     subject to the conditions set forth in the three provisos at the end of
     Section 6.6 pertaining to disclosures that are required by Applicable Laws;
     provided, however, that such disclosure of information for which aaiPharma
     receives confidential treatment from the Securities and Exchange Commission
     will only be made to the Securities and Exchange Commission, and provided
     further that NeoSan and aaiPharma may use and disclose, without further
     restriction, Confidential Information included in any such filings or
     disclosures with the Securities and Exchange Commission which is not
     accorded confidential treatment by the Securities and Exchange Commission
     and, as a result, enters the public domain; and (II) the Offering Memoranda
     and other documents pertaining to the Transaction Financing and Subsequent
     Exchange Offer, (A) at any time (with respect to recipients who have
     entered into Confidentiality Agreements no

                                       44

<PAGE>

     less restrictive than those confidentiality obligations customarily used by
     B of A with Third Persons in other similar transactions), and (B) at and
     after the time set forth in Section 6.25 (i.e., following the receipt of
     such Bond Financing Highly-Confident Letter or such legal advice of an
     earlier public disclosure or filing obligation (subject to the conditions
     set forth in Section 6.25), whichever comes first) (with respect to the
     Offering Memoranda and other documents related to the Bond Offering and
     Subsequent Exchange Offer) to potential investors; provided, however, that
     such disclosures will only be made as permitted by and within the scope of
     Section 6.25.

8.3  NOTIFICATION. The Receiving Party will notify the Disclosing Party
     immediately, and cooperate with the Disclosing Party as the Disclosing
     Party may reasonably request, upon the Receiving Party's discovery of any
     loss or compromise of the Disclosing Party's Confidential Information.

8.4  REMEDIES. Each Party agrees that the unauthorized use or disclosure of any
     Confidential Information by the Receiving Party in violation of this
     Agreement or any other agreement forming a part of this transaction will
     cause severe and irreparable damage to the Disclosing Party. In the event
     of any violation of this Article 8, the Receiving Party agrees that the
     Disclosing Party will be authorized and entitled to obtain from any court
     of competent jurisdiction injunctive relief, whether preliminary or
     permanent, without the necessity of proving irreparable harm or monetary
     damages, as well as any other relief permitted by applicable law. The
     Receiving Party agrees to waive any requirement that the Disclosing Party
     post bond as a condition for obtaining any such relief. Except as otherwise
     limited pursuant to Section 11.7, below, the rights provided in the
     immediately preceding sentences will be cumulative and in addition to any
     other rights or remedies that may be available to Disclosing Party. Nothing
     in this Section is intended, or should be construed, to limit a Party's
     right to preliminary and permanent injunctive relief or any other remedy
     for a breach of any other provision of this Agreement.

                                    ARTICLE 9
                                   TERMINATION

9.1  TERMINATION PRIOR TO THE CLOSING. Anything herein to the contrary
     notwithstanding, this Agreement may be terminated as follows prior to the
     Closing Date:

          (a) Termination for Insolvency. Each Party may Immediately terminate
     this Agreement by providing written notice to the other Party if the other
     Party (or, in the case of

                                       45

<PAGE>

     NeoSan, an Affiliate of NeoSan) is declared insolvent or bankrupt by a
     court of competent jurisdiction, or a voluntary petition of bankruptcy is
     filed in any court of competent jurisdiction by the other Party (or, in the
     case of Neosan, an Affiliate of NeoSan), or an involuntary petition for
     relief under the United States Bankruptcy Code is filed in a court of
     competent jurisdiction against the other Party (or, in the case of NeoSan,
     an Affiliate of NeoSan) which is not dismissed within thirty (30) days of
     its filing, or the other Party (or, in the case of NeoSan, an Affiliate of
     NeoSan) makes or executes any assignment for the benefit of creditors.

          (b) Termination for Default. Either Party may terminate this entire
     Agreement because of a material breach or material default of this
     Agreement by the other Party as follows: The terminating Party will give
     the other Party prior written notice thereof, specifying in reasonable
     detail the alleged material breach or material default, and if such alleged
     material breach or material default continues unremedied for a period of
     thirty (30) days with respect to monetary breaches or defaults or sixty
     (60) days with respect to non-monetary material breaches or material
     defaults after the date of receipt of the notification or, if the
     non-monetary material breach or material default reasonably cannot be
     corrected or remedied within sixty (60) days, then if (i) the defaulting
     Party has not commenced remedying said material breach or material default
     with said sixty (60) days and be diligently pursuing completion of same,
     and (ii) said material breach or material default has not been corrected or
     remedied within one-hundred twenty (120) days, then such terminating Party
     may immediately terminate this Agreement by again providing written
     notification to the defaulting Party. Except as otherwise limited pursuant
     to Section 11.7 of this Agreement and Section 11.2 of the Manufacturing
     Agreement, this Section 9.1(b) will not be exclusive and will not be in
     lieu of any other remedies available to a Party hereto for any breach or
     default hereunder on the part of the other Party.

9.2  TERMINATION FOLLOWING CLOSING. Following the Closing Date and the payment
     by NeoSan of the $211,400,000 to be paid pursuant to Section 2.1, this
     Agreement may not be terminated by either Party, except that Lilly may
     suspend the licenses granted pursuant to Sections 3.2 and 3.3 utilizing the
     procedures set forth in Section 9.1(b) as a result of any breach by NeoSan
     in the payment of Royalty Payments owed with respect to a NeoSan New
     Product in the United States only to the extent such licenses relate to the
     affected NeoSan New Product therein (but will have no such effect with
     respect to any Products or other NeoSan New Products in the United States
     and will not constitute a material breach of this Agreement or give Lilly
     any rights to terminate any rights of NeoSan hereunder whatsoever other
     than the foregoing express suspension with respect to the relevant NeoSan
     New Product) until and

                                       46

<PAGE>

     unless NeoSan pays Lilly any Royalty Payments so owed (including with
     respect to relevant Net Sales of such NeoSan New Product during any period
     of suspension), plus accrued interest as provided in Section 2.5, at which
     time such licenses will be automatically reinstated. Except as otherwise
     set forth in this Section 9.2, the Parties agree that the sole and
     exclusive remedies following the Closing Date will be to seek injunctive
     relief to require compliance by the breaching Party and relief to seek
     damages (subject to Section 11.7) with respect to such breach.

9.3  TERMINATION OF SUBLICENSES. Any sublicenses granted by NeoSan under this
     Agreement with respect to the Licensed Technology or License Trademark and
     Trade Dress will provide for immediate termination (or suspension, as the
     case may be) upon termination (or suspension) of this Agreement or the
     licenses granted in Sections 3.2 and 3.3, as the case may be, to the same,
     and only to the same, extent as such termination (or suspension).

9.4  CONTINUING OBLIGATIONS. Termination of this Agreement for any reason will
     not relieve the Parties of any antecedent breach of the provisions of this
     Agreement or any obligation accruing prior thereto and, subject to Section
     11.7, below, will be without prejudice to the rights and remedies of either
     Party with respect to any antecedent breach of the provisions of this
     Agreement. Without limiting the generality of the foregoing and in addition
     to the foregoing, no termination of this Agreement, whether by lapse of
     time or otherwise, will serve to terminate the rights and obligations under
     Section 9.4 and Articles 8, 11 and 12 hereof, and such obligations will
     survive any such termination.

9.5  NON-EXCLUSIVE REMEDIES. Except as otherwise limited pursuant to Section
     11.7, below, the remedies set forth in this Article 9 or elsewhere in this
     Agreement will be in addition to, and will not be to the exclusion of, any
     other remedies available to the Parties at law, in equity or under this
     Agreement,

                                   ARTICLE 10
                       ASSUMPTION OF LIABILITIES BY NEOSAN

          Except as otherwise provided in this Agreement, NeoSan hereby assumes
     and agrees, in each case, following the Closing Date, to bear and be
     responsible for and to perform and satisfy all responsibilities, duties
     (including compliance with all Applicable Laws), obligations, claims,
     Damages, liabilities, debts, burdens and problems of any nature whatsoever
     (whether known or unknown, asserted or unasserted, absolute or contingent,
     accrued or

                                       47

<PAGE>

     unaccrued, liquidated or unliquidated, matured or unmatured, determinable
     or undeterminable and due or to become due) (collectively, the
     "Obligations") to the extent arising following the Closing Date from
     NeoSan's ownership, licensing, operation and/or use of the Product
     Intellectual Property, the Marketing Materials, the Licensed Trademark and
     Trade Dress, the NDAs, Books and Records and the Licensed Technology, as
     well as those associated directly or indirectly with the manufacturing (but
     only to the extent the Product has been manufactured by NeoSan or its
     contractor (other than Lilly)), distributing, marketing, promoting, selling
     or using the Product from and after the Closing Date, including all
     recalls, all warranty claims and all product liability claims (without
     regard to the nature of the causes of action alleged or theories of
     recovery asserted) arising in connection with Product sold on or after the
     Closing Date, except for those Obligations with respect to which Lilly is
     providing indemnification pursuant to the provisions of Section 11.1 of
     this Agreement, which Obligations will remain the responsibility of Lilly
     as set forth herein. All of the foregoing are hereinafter collectively
     referred to as the "Assumed Liabilities." Notwithstanding the foregoing,
     NeoSan will not be deemed to, and does not, assume the Excluded
     Liabilities.

                                   ARTICLE 11
                           INDEMNIFICATION; INSURANCE

11.1 INDEMNIFICATION BY LILLY. Lilly will indemnify and hold NeoSan (and its
     Affiliates, and its and its Affiliates' directors, officers, and employees)
     harmless from and against any and all Damages incurred or suffered by
     NeoSan (and its Affiliates, and its and its Affiliates' directors, officers
     and employees) to the extent caused by or arising out of or in connection
     with:

          (a) any breach of any representation or warranty made by Lilly in this
     Agreement or the Manufacturing Agreement;

          (b) any failure to perform duly and punctually any covenant, agreement
     or undertaking on the part of Lilly contained in this Agreement or the
     Manufacturing Agreement;

          (c) any Excluded Liabilities;

          (d) Lilly's failure to comply in all material respects with Applicable
     Laws in connection with the performance of its obligations hereunder or the
     Manufacturing Agreement;

                                       48

<PAGE>

          (e) the negligence, gross negligence or willful misconduct of Lilly,
     its Affiliates, or its or its Affiliates' employees, agents or contractors
     (other than NeoSan); and

          (f) Lilly's and its Affiliates' conduct of Activities prior to the
     Closing Date, including the material compliance of such Activities pursuant
     to Applicable Law or applicable obligations pursuant to Contracts.

11.2 INDEMNIFICATION BY NEOSAN. NeoSan will indemnify and hold Lilly (and its
     Affiliates and its and its Affiliates' directors, officers and employees)
     harmless from and against any and all Damages incurred or suffered by Lilly
     (and its Affiliates and its and its Affiliates' directors, officers and
     employees) to the extent caused by or arising out of or in connection with:

          (a) any breach of any representation or warranty made by NeoSan in
     this Agreement or the Manufacturing Agreement;

          (b) any failure to perform duly and punctually any covenant, agreement
     or undertaking on the part of NeoSan contained in this Agreement or the
     Manufacturing Agreement;

          (c) any Assumed Liabilities;

          (d) any NeoSan New Product or assets related to the NeoSan New
     Products infringing or violating the patent rights or other intellectual
     property rights of Third Persons;

          (e) the manufacturing, handling, possession, marketing, distribution,
     promotion, sale, importation or use of the Product by NeoSan or a Permitted
     Seller after the Closing Date including any Third Person claim alleging
     breach of any express or implied warranties of merchantability or fitness
     for a particular purpose or asserting strict liability, except to the
     extent such Damage is caused by Lilly Error (as defined in the
     Manufacturing Agreement), by a breach of this Agreement or the
     Manufacturing Agreement by Lilly or is an Excluded Liability;

          (f) NeoSan's failure to comply in all material respects with
     Applicable Laws in connection with the performance of its obligations
     hereunder or under the Manufacturing Agreement or NeoSan's failure to
     comply with Applicable Laws relating to its using, importing, distributing,
     marketing, promoting and selling of the Product or NeoSan New Products on
     or following the Closing Date;

          (g) the handling, possession, marketing, distribution, promotion,
     sale, importation or use of any NeoSan New Product by NeoSan or any other
     Permitted Seller, including

                                       49

<PAGE>

     any Third Person claim alleging breach of any express or implied warranties
     of merchantability or fitness for a particular purpose or asserting strict
     liability; and

          (h) the negligence, gross negligence or willful misconduct of NeoSan,
     its Affiliates or its or its Affiliates' employees, agents or contractors
     (other than Lilly).

11.3 NOTICE AND OPPORTUNITY TO DEFEND. Promptly after receipt by a Party hereto
     of notice of any claim which could give rise to a right to indemnification
     pursuant to Section 11.1 or 11.2, such Party (the "Indemnified Party") will
     give the other Party (the "Indemnifying Party") written notice describing
     the claim in reasonable detail. The failure of an Indemnified Party to give
     notice in the manner provided herein will not relieve the Indemnifying
     Party of its obligations under this Article 11, except to the extent that
     such failure to give notice materially prejudices the Indemnifying Party's
     ability to defend such claim. The Indemnifying Party will have the right,
     at its option, to compromise or defend, at its own expense and by its own
     counsel, any such matter involving the asserted liability of the Party
     seeking such indemnification. The assumption of the defense of a claim by
     the Indemnifying Party will be construed as a binding acknowledgement that
     the Indemnifying Party is liable to indemnify any indemnitee for Damages in
     respect to such claim. If the Indemnifying Party undertakes to compromise
     or defend any such asserted liability, it will promptly (and in any event
     not more than ten (10) business days after receipt of the Indemnified
     Party's original notice) notify the Indemnified Party in writing of its
     intention to do so, and the Indemnified Party agrees to cooperate fully
     with the Indemnifying Party and its counsel in the compromise or defense
     against any such asserted liability, provided that the Indemnified Party is
     not obligated to disclose legally privileged documents or information in
     such cooperation. All reasonable costs and expenses incurred in connection
     with such cooperation will be borne by the Indemnifying Party. If the
     Indemnifying Party elects not to compromise or defend the asserted
     liability, fails to timely notify the Indemnified Party of its election to
     compromise or defend as herein provided, fails to admit its obligation to
     indemnify under this Agreement or the Manufacturing Agreement with respect
     to the claim, or, if in the reasonable opinion of the Indemnified Party,
     the claim could result in the Indemnified Party becoming subject to
     injunctive relief or relief (other than the payment of money damages) that
     could materially adversely affect the ongoing business of the Indemnified
     Party, the Indemnified Party will have the right, at its option, to pay,
     compromise or defend such asserted liability by its own counsel and its
     reasonable costs, expenses, and any payment made therewith will be included
     as part of the indemnification obligation of the Indemnifying Party
     hereunder, where such indemnification obligation exists hereunder.
     Notwithstanding the foregoing, neither the Indemnifying Party nor the
     Indemnified Party may settle or compromise any claim without

                                       50

<PAGE>

     consent of the other where such settlement or compromise would impose
     injunctive obligations on the non-settling or non-compromising Party or any
     Damages on the non-settling or non-compromising Party that are not subject
     to indemnification hereunder; provided, however, that consent to settlement
     or compromise will not be unreasonably withheld. In any event, the
     Indemnified Party and the Indemnifying Party may participate, at their own
     expense (or at the Indemnifying Party's expense, in the circumstances
     described above (i.e., if the Indemnifying Party elects not to compromise
     or defend the asserted liability where such indemnification obligation
     exists hereunder)), in the defense of such asserted liability. If the
     Indemnifying Party chooses to defend any claim, the Indemnified Party will
     make available to the Indemnifying Party any non-privileged books, records
     or other documents within its control that are necessary or appropriate for
     such defense; provided, however, any such books, records or other documents
     within the control of the Indemnified Party which are made available to the
     Indemnifying Party hereunder will be held in strict confidence by the
     Indemnifying Party (except to the extent disclosure is reasonably necessary
     for the defense of such claim) and will be disclosed by the Indemnified
     Party to the Indemnifying Party only to the extent that such books, records
     or other documents relate to the claim.

          Notwithstanding anything to the contrary in this Section 11.3, (a) the
     Party conducting the defense of a claim will (1) keep the other Party
     informed on a reasonable and timely basis as to the status of the defense
     of such claim (but only to the extent such other Party is not participating
     jointly in the defense of such claim), and (2) conduct the defense of such
     claim in a prudent manner, and (b) to the extent the Indemnifying Party has
     elected to defend a claim, the Indemnifying Party will not cease to defend
     such claim without the prior written consent of the Indemnified Party
     (which consent will not be unreasonably withheld).

11.4 INDEMNIFICATION PAYMENT OBLIGATION. Notwithstanding anything in this
     Agreement to the contrary, Lilly and NeoSan will have no obligations under
     subsections 11.1 (a) and 11.2(a), respectively, of this Agreement and as
     incorporated by reference in the Manufacturing Agreement to indemnify the
     other Party (or its Affiliates or its or its Affiliates' directors,
     officers and employees) until the cumulative aggregate amount of Damages
     incurred or suffered by such other Party (or its Affiliates or its or its
     Affiliates' directors, officers and employees) which Lilly or NeoSan, as
     the case may be, is otherwise subject to under this Agreement and the
     Manufacturing Agreement exceeds one hundred thousand US Dollars
     (US$100,000) (the "Deductible Amount"), at which time Lilly or NeoSan will
     have the obligation under subsections 11.1 (a) and 11.2(a), respectively,
     of this Agreement and as incorporated by reference in the Manufacturing
     Agreement to indemnify the other Party (or its Af-

                                       51

<PAGE>

     filiates or its or its Affiliates' directors, officers and employees) only
     for Damages in excess of the Deductible Amount.

11.5 INDEMNIFICATION PAYMENT ADJUSTMENTS. The amount of any Damages for which
     indemnification is provided under this Article 11 will be reduced by the
     net insurance proceeds received and any other amount recovered, if any, by
     the Indemnified Party with respect to any Damages; provided, however, that
     the foregoing will not under any circumstances reduce the Damages for which
     either Party is obligated to indemnify the other to the extent the
     insurance proceeds received result from a self-insurance program or are
     required to be repaid to the insurer upon recovery of Damages; provided,
     however, that to the extent that an insurance claim would be made under a
     self-insurance program, an Indemnified Party will not be subject to an
     obligation to pursue an insurance claim relating to any Damages for which
     indemnification is sought hereunder, and provided further that the
     Indemnifying Party will reimburse the Indemnified Party for the present
     value of any increased premiums directly attributable to such claims for
     the five year period following such increase, discounted at a 15% discount
     rate. To the extent the preceding sentence is applicable, if any
     Indemnified Party will have received any payment pursuant to this Article
     11 with respect to any Damages and will subsequently have received
     insurance proceeds or other amounts with respect to such Damages, then such
     Indemnified Party will pay to the Indemnifying Party an amount equal to the
     difference (if any) between (a) the sum of the amount of those insurance
     proceeds or other amounts received and the amount of the payment by such
     Indemnifying Party pursuant to this Article 11 with respect to such Damages
     and (b) the amount necessary to fully and completely indemnify and hold
     harmless such Indemnified Party from and against such Damages; provided,
     however, that in no event will such Indemnified Party have any obligation
     pursuant to this sentence to pay to such Indemnifying Party an amount
     greater than the amount of the payment by such Indemnifying Party pursuant
     to this Article 11 with respect to such Damages.

11.6 INDEMNIFICATION PAYMENT. Upon the final determination of liability and the
     amount of the indemnification payment under this Article 11, the
     Indemnifying Party will pay to the Indemnified Party, within ten (10)
     business days after such determination, the amount of any claim for
     indemnification made hereunder.

11.7 LIMITATION OF LIABILITY. EXCEPT FOR (i) THE COSTS OF RECALL ENUMERATED IN
     SECTION 10.3 OF THE MANUFACTURING AGREEMENT TO THE EXTENT SUCH COSTS
     CONSTITUTE INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
     DAMAGES, AND (ii) WTTH RESPECT TO DAMAGES INCURRED BY

                                       52

<PAGE>

     THIRD PERSONS FOR WHICH A PARTY HERETO OTHERWISE HAS AN INDEMNIFICATION
     OBLIGATION PURSUANT TO SECTION 11.1 OR SECTION 11.2 OF THIS AGREEMENT OR
     SECTION 11.1 OF THE MANUFACTURING AGREEMENT, IN NO EVENT WILL EITHER PARTY
     BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST
     PROFITS) OR PUNITIVE DAMAGES, HOWEVER CAUSED OR UPON ANY THEORY OF
     LIABILITY (INCLUDING A PARTY'S OR ITS AFFILIATES' OWN NEGLIGENCE, GROSS
     NEGLIGENCE OR WILLFUL MISCONDUCT OR THE NEGLIGENCE, GROSS NEGLIGENCE OR
     WILLFUL MISCONDUCT OF A PARTY'S OR A PARTY'S AFFILIATES' EMPLOYEES, AGENTS
     OR CONTRACTORS), ARISING OUT OF THIS AGREEMENT OR THE PERFORMANCE OF, OR
     THE FAILURE TO PERFORM, ANY OBLIGATION(S) SET FORTH HEREIN. NOTWITHSTANDING
     THE FOREGOING, A PARTY'S AGGREGATE LIABILITY TO THE OTHER PARTY UNDER THIS
     AGREEMENT AND THE MANUFACTURING AGREEMENT WITH RESPECT TO ALL INDIRECT,
     SPECIAL, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST PROFITS) OR PUNITIVE
     DAMAGES INCURRED BY THIRD PARTIES FOR WHICH SUCH PARTY HERETO OTHERWISE HAS
     AN INDEMNIFICATION OBLIGATION PURSUANT TO SECTION 11.1 OR SECTION 11.2 OF
     THIS AGREEMENT OR SECTION 11.1 OF THE MANUFACTURING AGREEMENT WILL BE
     LIMITED TO FIVE MILLION US DOLLARS ($5,000,000).

11.8 INSURANCE. NeoSan will maintain at its own expense, with a reputable
     insurance carrier reasonably acceptable to Lilly, insurance coverage for
     NeoSan, written on a claims made basis, which will name Lilly as an
     additional insured, including errors and omissions insurance and
     comprehensive general liability insurance for claims for damages arising
     from bodily injury (including death) and property damages arising out of
     acts or omissions of NeoSan, which will be specifically endorsed to name
     Lilly as an additional insured. Minimum limits of such insurance (not
     warranted to be necessarily sufficient for the purposes of NeoSan's
     obligation under this Agreement or the Manufacturing Agreement) will be ten
     million US Dollars (US$10,000,000) annual aggregate coverage. Maintenance
     of such insurance coverage will not relieve NeoSan of any responsibility
     under this Agreement or the Manufacturing Agreement for damage in excess of
     insurance limits or otherwise. NeoSan will provide Lilly with a certificate
     from the insurer(s), evidencing such insurance coverage.

11.9 SURVIVAL. Each Indemnified Party's rights under Article 11 will not be
     deemed to have been waived or otherwise affected by such Indemnified
     Party's waiver of the breach of any representation, warranty, agreement or
     covenant contained in or made pursuant this Agreement or the Manufacturing
     Agreement, unless such waiver expressly and in writing

                                       53

<PAGE>

     the Manufacturing Agreement, unless such waiver expressly and in writing
     also waives any or all of the Indemnified Party's right under Article 11.

                                   ARTICLE 12
                                  MISCELLANEOUS

12.1 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and will inure
     to the benefit of the Parties hereto and their respective successors and
     assigns; provided that NeoSan may only assign this Agreement as follows:

          (a)  NeoSan may freely make such assignments in NeoSan's sole
               discretion following the payment of the $211,400,000 pursuant to
               Section 2.1, for assignments wherein NeoSan remains liable for
               the assignee's performance hereunder; and

          (b)  NeoSan may make such assignments following such payment only with
               Lilly's consent, which may not be unreasonably withheld, for
               assignments wherein NeoSan does not remain liable for the
               assignee's performance hereunder.

12.2 NOTICES. Unless otherwise stated in this Agreement as to the method of
     delivery, all notices or other communications required or permitted to be
     given hereunder will be in writing and will be deemed to have been duly
     given if delivered by hand, courier, facsimile or if mailed first class,
     postage prepaid, by registered or certified mail, return receipt requested
     (such notices will be deemed to have been given on the date delivered in
     the case of hand delivery or delivery by courier, on the date set forth in
     the confirmation sheet in the case of facsimile delivery, and on the fifth
     business day following the date of post mark in the case of delivery by
     mail) as follows:

     If to Lilly, as follows:

          Eli Lilly and Company
          Lilly Corporate Center
          Indianapolis, Indiana 46285
          Facsimile: (317) 433-3000
          Attn: Executive Vice President, Pharmaceutical Products

     With a copy to:

          Eli Lilly and Company
          Lilly Corporate Center

                                       54

<PAGE>

          Indianapolis, Indiana 46285
          Facsimile: (317) 433-3000
          Attn: General Counsel

     If to NeoSan, as follows:

          NeoSan Pharmaceuticals Inc.
          2320 Scientific Park Drive
          Wilmington, NC 28405
          Facsimile: (910) 815-2387
          Attn: Mr. David Hurley, President

     With copies to:

          aaiPharma Inc.
          2320 Scientific Park Drive
          Wilmington, NC 28405
          Facsimile: (910) 815-2387
          Attn: Gregory S. Bentley, General Counsel
          Attn: Dr. Philip Tabbiner, President

     or in any case to such other address or addresses as hereafter will be
     furnished in a written notice as provided in this Section 12.2 by any Party
     hereto to the other Party.

12.3 WAIVER. Any term or provision of this Agreement may be waived at any time
     by the Party entitled to the benefit thereof only by a written instrument
     executed by such Party. No delay on the part of Lilly or NeoSan in
     exercising any right, power or privilege hereunder will operate as a waiver
     thereof, nor will any waiver on the part of either Lilly or NeoSan of any
     right, power or privilege hereunder operate as a waiver of any other right,
     power or privilege hereunder, nor will any single or partial exercise of
     any right, power or privilege hereunder preclude any other or further
     exercise thereof or the exercise of any other right, power or privilege
     hereunder.

12.4 ENTIRE AGREEMENT. This Agreement, the Manufacturing Agreement, each of
     their appendices, exhibits, schedules and certificates and all documents
     and certificates delivered in connection herewith and therewith constitute
     the entire agreement between the Parties with respect to the subject matter
     hereof and supersede all prior agreements or understandings of the Parties
     relating thereto.

12.5 AMENDMENT. This Agreement may be modified or amended only by written
     agreement of the Parties hereto signed by authorized representatives of the
     Parties.

                                       55

<PAGE>

12.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
     each of which will be deemed an original but all of which together will
     constitute a single instrument.

12.7 GOVERNING LAW. This Agreement will be governed and construed in accordance
     with the laws of the State of New York excluding any choice of law rules
     that may direct the application of the law of another state.

12.8 CAPTIONS. All section titles or captions contained in this Agreement and in
     any exhibit, schedule or certificate referred to herein or annexed to this
     Agreement are for convenience only, will not be deemed a part of this
     Agreement and will not affect the meaning or interpretation of this
     Agreement.

12.9 NO THIRD-PERSON RIGHTS. No provision of this Agreement will be deemed or
     construed in any way to result in the creation of any rights or obligation
     in any Person not a Party to this Agreement (except for the rights of a
     Party's Affiliates and its and its Affiliates' directors, officers and
     employees to receive indemnification from the other Party hereunder and
     except for rights of permitted assignees hereunder pursuant to Section
     12.1).

12.10 CONSTRUCTION. This Agreement will be deemed to have been drafted by both
     Lilly and NeoSan and will not be construed against either Party as the
     draftsperson hereof. Unless the context of this Agreement otherwise
     requires: (a) words of any gender include each other gender; (b) words
     using the singular or plural number also include the plural or singular
     number, respectively, (c) the terms "hereof," "herein," "hereby" and
     derivative or similar words refer to this entire Agreement; (d) the terms
     "Article" or "Section" refer to the specified Article or Section of this
     Agreement; and (e) the term "including" or "includes" means "including
     without limitation" or "includes without limitation." Whenever this
     Agreement refers to a number of days, such number will refer to calendar
     days unless business days are specified.

12.11 APPENDICES, EXHIBITS, SCHEDULES AND CERTIFICATES. Each appendix, exhibit,
     schedule and certificate attached hereto is incorporated herein by
     reference and made a part of this Agreement.

12.12 NO JOINT VENTURE. Nothing contained herein will be deemed to create any
     joint venture or partnership between the Parties hereto, and, except as is
     expressly set forth herein, neither Party will have any right by virtue of
     this Agreement to bind the other Party in any manner whatsoever.

                                       56

<PAGE>

12.13 SEVERABILITY. If any provision of this Agreement is held to be illegal,
     invalid, or unenforceable under present or future laws effective while this
     Agreement remains in effect, the legality, validity and enforceability of
     the remaining provisions will not be affected thereby.

12.14 FORCE MAJEURE. If either Party is prevented from complying, either totally
     or in part, with any of the terms or provisions set forth herein by reason
     of force majeure, including, by way of example and not of limitation, fire,
     flood, explosion, storm, strike, lockout or other labor dispute, riot, war,
     rebellion, accidents, acts of God, acts of governmental agencies or
     instrumentalities, failure of suppliers or any other similar or dissimilar
     cause, in each case to the extent beyond its control despite its
     commercially reasonable best efforts to avoid, minimize, and resolve such
     cause as promptly as possible, said Party will (a) provide written notice
     of same to the other Party and (b) subject to its following obligations
     with respect to said Party's efforts to remove the disability, its
     obligations that are prevented from compliance by such force majeure are
     suspended, without liability, during such period of force majeure. Said
     notice will be provided within five (5) business days of the occurrence of
     such event and will identify the requirements of this Agreement or such of
     its obligations as may be affected. The Party prevented from performing
     hereunder will use commercially reasonable best efforts to remove such
     disability as promptly as possible and will continue performance whenever
     such causes are removed. The Party so affected will give to the other Party
     a good faith estimate of the continuing effect of the force majeure
     condition and the duration of the affected Party's nonperformance. If the
     Closing Date has not occurred and the period of any previous actual
     nonperformance of Lilly because of Lilly force majeure conditions plus the
     anticipated future period of Lilly nonperformance because of such
     conditions will exceed an aggregate of one hundred twenty (120) days within
     any one year period, NeoSan may terminate this Agreement immediately by
     written notice to Lilly. If the Closing Date has not occurred and the
     period of any previous actual nonperformance of NeoSan because of NeoSan
     force majeure conditions plus the anticipated future period of NeoSan
     nonperformance because of such conditions will exceed an aggregate of one
     hundred twenty (120) days within any one year period, Lilly may terminate
     this Agreement immediately by written notice to NeoSan. When such
     circumstances as those contemplated herein arise, the Parties will discuss
     in good faith, what, if any, modification of the terms set forth herein may
     be required in order to arrive at an equitable solution.

                                       57

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                        ELI LILLY AND COMPANY

                                        By: /s/ John C. Lechleiter
                                            ------------------------------------
                                        Printed Name: John C. Lechleiter
                                        Title: Executive Vice President

                                        NEOSAN PHARMACEUTICALS INC.

                                        By: /s/ Dr. Philip Tabbiner
                                            ------------------------------------
                                            Dr. Philip Tabbiner
                                            President

                                       58
<PAGE>

                                    EXHIBIT A
                               LILLY BILL OF SALE

                                  BILL OF SALE

     KNOW ALL BY THESE PRESENTS, that for good and valuable consideration
described in the Assignment Agreement (hereafter defined), the receipt and
sufficiency of which are hereby acknowledged, Eli Lilly and Company, an Indiana
corporation having offices at Lilly Corporate Center, Indianapolis, Indiana
46285 ("Lilly"), does hereby assign, sell, convey, transfer and deliver to
NeoSan Pharmaceuticals Inc., a corporation organized and existing under the laws
of the State of Delaware with offices located at 2320 Scientific Park Drive,
Wilmington, North Carolina 28405 ("NeoSan"), free and clear of Encumbrances
other than Permitted Encumbrances, all of Lilly's right, title and interest in
and to the Purchased Assets.

     This Bill of Sale is being delivered to NeoSan pursuant to that certain
Assignment, Transfer and Assumption Agreement between Lilly and NeoSan dated the
__________ day of ______________, 2002 (the "Assignment Agreement"), and nothing
herein shall be construed as modifying or superseding the terms of the
Assignment Agreement, the Manufacturing Agreement between Lilly and NeoSan dated
the __________ day of ______________, 2002, or any document or agreement
contemplated by the Assignment Agreement or Manufacturing Agreement. Capitalized
terms not otherwise defined herein will have the meaning given to them in the
Assignment Agreement.

     IN WITNESS WHEREOF, the undersigned duly authorized representative of Lilly
has executed this Bill of Sale effective as of this __________ day of
____________, 2002.

                                        ELI LILLY AND COMPANY

                                        By:
                                            ------------------------------------
                                        Printed Name:
                                                      --------------------------
                                        Title:
                                               ---------------------------------

                                       59

<PAGE>

                                    EXHIBIT B
                                    GUARANTY

                                    Guaranty

     In consideration of Lilly's entering into that certain Assignment, Transfer
and Assumption Agreement dated the ________ day of ________________, 2002 (the
"Assignment Agreement") with NeoSan Pharmaceuticals Inc. ("Neosan"), which is a
wholly-owned subsidiary of aaiPharma Inc., and that certain Manufacturing
Agreement dated the ________ day of ______________, 2002 (the "Manufacturing
Agreement") with NeoSan, aaiPharma Inc. hereby guaranties the performance by
Neosan of Neosan's obligations under the Assignment Agreement and the
Manufacturing Agreement, when and as due, subject to all defenses that Neosan
may lawfully have with respect to any claims by Lilly.

                                        aaiPHARMA INC.

                                        By:
                                            ------------------------------------
                                        Printed Name:
                                                      --------------------------
                                        Title:
                                               ---------------------------------
                                        Dated:
                                               ---------------------------------

                                       60

<PAGE>

                                    EXHIBIT C
                      LOAN FACILITY HIGHLY-CONFIDENT LETTER

                   [BANC OF AMERICA SECURITIES LLC LETTERHEAD]

           HIGHLY CONFIDENT LETTER - SENIOR SECURED CREDIT FACILITIES

February [__], 2002

aaiPharma, Inc.
2320 Scientific Park Drive
Wilmington, NC 28405

Attention: Dr. Philip S. Tabbiner, D.B.A.

Dear Mr. Tabbiner:

You have advised Bane of America Securities LLC ("BAS") that aaiPharma, Inc.
("AAIPHARMA") intends to acquire the United States' rights to the Darvon(R) and
Darvocet(R) branded product lines ("DARVON(R)") from Eli Lilly and Company (the
"ACQUISITION"). You have further advised us that you propose to finance a
portion of the Acquisition (including the refinancing of existing indebtedness)
and related fees and expenses from at least $[**] million in senior secured
credit facilities (the "FINANCING") comprised of (i) term loan facilities
aggregating $[_________] and (ii) a $[_________] million revolving credit
facility.

We are pleased to inform you that, based upon (and subject to) our understanding
of the Acquisition and current market conditions and subject to the conditions
set forth below, we are highly confident of our ability, as underwriter or
placement agent, to sell or place the Financing in connection with the
Acquisition. The structure, interest rate and yield, covenants and terms of, and
the documentation for, the Financing will be as agreed upon by BAS and you based
on market conditions at the time of the sale or placement and on the structure
and documentation of the Acquisition and all the financing therefor.

Our confidence in our ability to consummate the sale or placement of the
Financing is subject to: (i) the principal economic terms and structure of the
Acquisition and the related financing components being on the terms as described
to BAS on the date hereof with such other terms and conditions reasonably
acceptable to BAS and the execution of documentation relating thereto reasonably
satisfactory in form and substance to BAS; (ii)

                                       61

<PAGE>

there not having occurred any material adverse change or development in the
condition (financial or otherwise), results of operations, business or prospects
of aaiPharma and Darvon(R) (including, without limitation, any legal or
regulatory change or development), since December 31, 2001 or in the business
plan of aaiPharma as provided to BAS, in each case, in BAS' reasonable judgment;
and (iii) no new material adverse information concerning aaiPharma or Darvon(R)
having come to the attention of BAS subsequent to the signing of this letter.

You acknowledge that BAS and its affiliates may share with each other any
information related to you, (including information relating to
creditworthiness), or the Acquisition or the financing therefor provided that
BAS and such affiliates agree to hold any non-public information confidential in
accordance with their respective customary policies related to non-public
information and in accordance of BAS' obligations of non-disclosure and non-use
to Eli Lilly and Company.

This letter is not intended to be and should not be construed as a commitment
with respect to the underwriting, sale or placement of the Financing and creates
no obligations or liability on our part or your part, or on the part of any of
our respective affiliates, in connection therewith.

This letter is only for your benefit and no other person or entity shall be a
third party beneficiary of this letter. Except as otherwise required by law or
unless BAS has otherwise consented in writing, you are not authorized to show or
circulate this letter to any other person or entity other than your advisors and
to Eli Lilly and Company and its advisors.

Very truly yours,

BANC OF AMERICA SECURITIES LLC

By:
    ---------------------------------
    Managing Director

                                       62

<PAGE>

                                    EXHIBIT D
                     BOND FINANCING HIGHLY-CONFIDENT LETTER

                   [BANC OF AMERICA SECURITIES LLC LETTERHEAD]

               HIGHLY CONFIDENT LETTER - SENIOR SUBORDINATED NOTES

March 9, 2002

aaiPharma, Inc.
2320 Scientific Park Drive
Wilmington, NC 28405

Attention: Dr. Philip S. Tabbiner, D.B.A.

Dear Dr. Tabbiner:

You have advised Banc of America Securities LLC ("BAS") that aaiPharma, Inc.
("AAIPHARMA") intends to acquire the United States' rights to the Darvon(R) and
Darvocet(R) branded product lines ("DARVON(R)") from Eli Lilly and Company (the
"ACQUISITION"). You have further advised us that you propose to finance a
portion of the Acquisition (including the refinancing of existing indebtedness)
and related fees and expenses from at least $[[**]million in gross cash proceeds
from the issuance of senior subordinated notes (the "SECURITIES") in a public
offering or Rule 144A private placement with registration rights.

We are pleased to inform you that, based upon (and subject to) our understanding
of the Acquisition and current market conditions and subject to the conditions
set forth below, we are highly confident of our ability, as underwriter or
placement agent, to sell or place the Securities in connection with the
Acquisition. The structure, interest rate and yield, covenants and terms of, and
the documentation for, the Securities will be as agreed upon by BAS and you
based on market conditions at the time of the sale or placement and on the
structure and documentation of the Acquisition and all the financing therefor.
We have attached an indicative term sheet for the Securities for your review.

Our confidence in our ability to consummate the sale or placement of the
Securities is subject to: (i) the principal economic terms and structure of the
Acquisition and the related financing components being on the terms as described
to BAS on the date hereof with such other terms and conditions reasonably
acceptable to BAS and the execution of

                                       63

<PAGE>

documentation relating thereto reasonably satisfactory in form and substance to
BAS; (ii) there not having occurred any material adverse change or development
in the condition (financial or otherwise), results of operations, business or
prospects of aaiPharma or Darvon(R) (including, without limitation, any legal or
regulatory change or development), since December 31, 2001 or in the business
plan of aaiPharma as provided to BAS, in each case, in BAS' reasonable judgment;
(iii) there not having been any disruption or change or development in the
market for new issues of high yield securities or the financial or capital
markets in general, in the reasonable judgment of BAS, that could reasonably be
expected to have a material adverse effect on the placement or sale of the
Securities; (iv) the execution of a customary underwriting, purchase or
placement agreement and the satisfaction of the conditions stated therein in all
material respects, and of a customary indenture, registration rights agreement,
if applicable, and other customary documentation, in each case with respect to
the Securities, in form and substance reasonably satisfactory to BAS; (v) no new
material adverse information concerning aaiPharma or Darvon(R) having come to
the attention of BAS subsequent to the execution of this letter; and (vi) the
Securities having been rated at least B- and B3 by Standard & Poors Ratings
Group and Moody's Investor Service, Inc., respectively, with no notice of
possible change to either such rating.

You acknowledge that BAS and its affiliates may share with each other any
information related to you, (including information relating to
creditworthiness), or the Acquisition or the financing therefor provided that
BAS and such affiliates agree to hold any non-public information confidential in
accordance with their respective customary policies related to non-public
information and in accordance of BAS' obligations of non-disclosure and non-use
to Eli Lilly and Company.

This letter is not intended to be and should not be construed as a commitment
with respect to the underwriting, sale or placement of the Securities and
creates no obligations or liability on our part or your part, or on the part of
any of our respective affiliates, in connection therewith.

This letter is only for your benefit and no other person or entity shall be a
third party beneficiary of this letter. Except as otherwise required by law or
unless BAS has otherwise consented in writing, you are not authorized to show or
circulate this letter to any other person or entity other than your advisors and
to Eli Lilly and Company and its advisors.

Very truly yours,

BANC OF AMERICA SECURITIES LLC

By:
    ---------------------------------
    Managing Director

                                       64

<PAGE>

                                  SCHEDULE 1.6

                                   TRADEMARKS

<TABLE>
<CAPTION>
GenericName                          Trademark    Country Name     Status     App In No   Filing Date   Reg No    Reg Date
-----------                         ----------   -------------   ----------   ---------   -----------   ------   ---------
<S>                                 <C>          <C>             <C>          <C>         <C>           <C>      <C>
PROPOXYPHENE NAPSYLATE AND          DARVOCET-N   United States   Registered                24-Sep-71    949683   02-Jan-73
ACETAMINOPHEN, LILLY                             of America
PROPOXYPHENE HYDROCHLORIDE, LILLY   DARVON       United States   Registered                             664975   29-Jul-58
                                                 of America
PROPOXYPHENE NAPSYLATE, LILLY       DARVON-N     United States   Registered                24-Sep-71    952573   06-Feb-73
                                                 of America
</TABLE>

                                       65

<PAGE>

                                  SCHEDULE 1.20

                                   COPYRIGHTS

<TABLE>
<CAPTION>
                                                            LILLY PUBLICATION ORDER
 INDEX                                                          NUMBER OR OTHER
NUMBER                     DESCRIPTION                    PUBLICATION IDENTIFICATION
------   ----------------------------------------------   --------------------------
<S>      <C>                                              <C>
  1      Ring in 1986 with the New Darvon Products               December 1985
         Special Offer

  2      1982 Fall Offer                                        September 1982

  3      A Continuing Tradition                                 September 1974

  4      Similar Yet Different                                     July 1983

  5      Darvocet N-100                                          August, 1976

  6      When Fever and Pain are Part of the Patient's          November, 1977
         Condition

  7      Pharmacokinetic differences of Analgesics...in           March, 1978
         humans

  8      When Pain is a Major Part of the Patient's             November, 1977
         Condition

  9      What do you Prescribe for the Relief of Acute            April, 1978
         Pain? What do you Prescribe for the Relief of
         Chronic Pain?

  10     When Pain is a Major Part of the Patient's              February, 197
         Condition

  11     What do you Prescribe for the Relief of Acute            April, 1970
         Pain? What do you prescribe for the Relief of
         Chronic Pain?
                                                                February, 1979
  12     Darvocet-N 100
</TABLE>

                                       66

<PAGE>

<TABLE>
<S>      <C>                                              <C>
  13     Dentist Dimension                                      April-June 1979

  14     The Most Recent information on Darvocet-N 100            June, 1979

  15     When do you see an Increase in Office Visits            October, 1978
         Due to the Aches and Pains of the Flu?

  16     Therapeutic Agents Useful in Dentistry                December 14, 1978

  17     To Help her Cope with Pain                             November, 1978

  18     When you Diagnose an Infection....                    January 22, 1979

  19     Darvocet-N 100                                            June,1978
</TABLE>

                                       67

<PAGE>

                                  SCHEDULE 1.44

                                      NDAS

      U.S. NEW DRUG APPLICATIONS (NDAS) AND INVESTIGATIONAL NEW DRUG (IND)
                                  APPLICATIONS

                                  NDA/IND LIST

<TABLE>
<CAPTION>
IND/NDA #    LY #   Product Description                            # of Vols   Date Withdrawn
---------   -----   -------------------                            ---------   --------------
<S>         <C>     <C>                                            <C>         <C>
48                  Darvon Compound - with A.S.A.                  1
320         29352   Darvon - Suspension                            1
1194                Darvon and Amytal and A.S.A.                   1
1218                Darvon and Aventyl                             2
3027                Darvon - N Propoxyphene Napsylate              2
1599        21720   Darvon (Ampoules)                              1
1656        29352   Darvon N - Dextro Propoxyphene Napsylate       6                02/67
5159        29352   Darvocet - Propoxyphene HCL w/ Acetaminophen   1                11/90
5655                Darvocet N - Suspension                        1                11/90
5727        29352   Darvocet N - Tablets                           8
10471               Darvon N - Pediatric Suspension                1
                                      APPROX. NUMBER OF IND VOLS   25

16-844              Darvocet tablet                                30
17-122              Darvocet N tablet                              73
17-507              Darvocet N 100 suspension                      3
10-996              Darvon pulvule no                              50
10-997              Darvon pulvule no. 364,365                     45
16-827              Darvon N pulvules                              40
16-829              Darvon N w/ A.S.A.                             4
16-861              Darvon N suspension                            15
16-862              Darvon N tablet                                20
16-863              Darvon N w/ A.S.A. tablet                      13
16-864              Darvocomp N-100 tablet                         7
12-032              Darvotran pulvules                             10
14-168              Darvon with ASA                                                 11/78
                                      APPROX. NUMBER OF NDA VOLS   300
</TABLE>

                                       68

<PAGE>

                                  SCHEDULE 2.2

                           NET SALES VOLUME ADJUSTMENT
                   (ALL FIGURES ARE IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
                                 NET SALES VOLUME
    NET SALES OF PRODUCT*      ADJUSTMENT TO NEOSAN
----------------------------   --------------------
<S>                            <C>
   [**] million or greater            None

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

[**] million to [**] million       [**] million
</TABLE>

                                       69

<PAGE>

<TABLE>
<S>                            <C>
[**] million to [**] million       [**] million

[**] million to [**] million       [**] million

    [**] million or less           [**] million
</TABLE>

*    Net Sales of Product in this column represent, during any consecutive
     twelve (12) calendar month period occurring between (and including) January
     1, 2002 and the last day of the calendar month that contains the first year
     anniversary of the Closing Date, the (i) Net Sales of Product by Lilly and
     (ii) the Net Sales of Product by NeoSan or other Permitted Sellers.

                                       70

<PAGE>

                                  SCHEDULE 3.7
                               COMBINATION PATENTS

                                     PATENTS

<TABLE>
<CAPTION>
Patent Number    Date of Patent   Description
-------------    --------------   -----------
<S>              <C>              <C>
U.S. 4,594,358   06/10/86         Analgesic Method
</TABLE>

                               PATENT APPLICATIONS

<TABLE>
<CAPTION>
Application Number   Filing Date   Country                     Status
------------------   -----------   -------                     ------
<S>                  <C>           <C>                         <C>
60/188, 135          03/09/00      United States               Pending
</TABLE>

<TABLE>
<CAPTION>
Application Number   Filing Date   Country                     Status
------------------   -----------   -------                     ------
<S>                  <C>           <C>                         <C>
PCT/US 01/00009      01/16/01      Outside the United States   Pending
</TABLE>

                                       71

<PAGE>

                                  SCHEDULE 4.1

                               EXPIRED TRADEMARKS

<TABLE>
<CAPTION>
GenericName                               Trademark    Country Name     Status    App In No  Filing Date   Reg No   Reg Date
-----------                             ------------  -------------  -----------  ---------  -----------  -------  ----------
<S>                                     <C>           <C>            <C>          <C>        <C>          <C>      <C>
PROPOXYPHENE HYDROCHLORIDE AND          DARVOCET      United States  Expired                   September   950243  January 9,
ACETAMINOPHEN, LILLY                                  of America     January 9,                 24, 1971                 1973
                                                                     1979

PROPOXYPHENE NAPSYLATE, LILLY           DARVON S      United States  Expired                               810739     July 5,
                                                      of America     July 5,                                             1966
                                                                     1986

PROPOXYPHENE AND ACETYLSALICYLIC ACID,  DARVO-TRAN    United States  Expired                               697029     May 30,
LILLY                                                 of America     May 3, 1980                                         1960

ASPIRIN, PHENACETIN AND CAFFEINE,       DARVOCOMP-N   United States  Expired         82271     March 31,  1048852  September
LILLY PROXYPHENE NAPSYLATE                            of America     September                      1976             28, 1976
                                                                     28, 1982

PARMETHASONE, PROPOXYPHENE AND ASPIRIN  STERO-DARVON  United States  Expired                               809172     May 31,
                                                      of America     May 31,                                             1966
                                                                     1986
</TABLE>

                                       72

<PAGE>

                                  SCHEDULE 4.8

                             WITHDRAWN/PENDING NDAS

                                      NDAS

<TABLE>
<CAPTION>
IND/NDA #    LY #   Product Description                              # of Vols   Date Withdrawn
---------   -----   -------------------                              ---------   --------------
<S>         <C>     <C>                                              <C>         <C>
1656        29352   Darvon N - Dextro Propoxyphene Napsylate             6            02/67
5159        29352   Darvocet - Propoxyphene HCL w/ Acetaminophen 1                    11/90
5655                Darvocet N - Suspension                                           11/90
14-168              Darvon with ASA                                      1            11/78
</TABLE>

                                       73

<PAGE>

                                  SCHEDULE 4.12

                            REGULATORY STATUS OF NDAS

                                      NONE

                                       74

<PAGE>

                                  SCHEDULE 4.14

                                REQUIRED CONSENTS

                                      NONE

                                       75

<PAGE>

                                  SCHEDULE 4.18

                               MATERIAL CONTRACTS

<TABLE>
<CAPTION>
COUNTRY       AGREEMENT TYPE              ENTITY NAME          START DATE    END DATE
-------   ---------------------   --------------------------   ----------   ----------
<S>       <C>                     <C>                          <C>          <C>
U.S.                              N.Y.C.H.H.C                  12/05/2000   11/30/2002
U.S.                              N.Y.C.H.H.C                  12/05/2000   11/30/2002
U.S.      CONGRESSIONAL MANDATE   PHS-CE                       1/01/2002    3/31/2002
U.S.      CONGRESSIONAL MANDATE   FSS-PUBLIC HEALTH SE         10/01/2001   09/30/2002
U.S.      CONGRESSIONAL MANDATE   VETERANS ADMINISTRATION      10/01/2001   09/30/2002
U.S.      CONGRESSIONAL MANDATE   DEPT. OF VETERAN'S AFFAIRS   10/01/2001   09/30/2002
U.S.      CONGRESSIONAL MANDATE   MILITARY BUYING GROUP        10/01/2001   09/30/2002
U.S.      CONGRESSIONAL MANDATE   OTHER GOVERNMENT AGENCIES    10/01/2001   09/30/2002
</TABLE>

                                       76
<PAGE>

                                  SCHEDULE 6.6

                                  PRESS RELEASE

AAIPHARMA(TM)                                                               NEWS
DEVELOPING CHEMISTRY INTO MEDICINE                                       RELEASE
2320 SCIENTIFIC PARK DRIVE                                               CONTACT
WILMINGTON NC 28405                                               AAIPHARMA INC.
                                                                      Bill Ginna
NASDAQ: AAII                                             Chief Financial Officer
                                                                     Jon Gavigan
                                                           Corporate Development
                                                                    910-254-7000
                                                       FEINSTEIN KEAN HEALTHCARE
                                                           Media: Harriet Ullman
                                                                    617-577-8110
                                                         MORGEN-WALKE ASSOCIATES
                                                         Investors: Sarah Torres
                                                    Financial Media: Dan Budwick
                                                                    212-850-5600

                                  Draft 2-15-02

FOR IMMEDIATE RELEASE

     aaiPharma Acquires Darvon(R) and Darvocet N(R) Pain Franchise from Eli
                                Lilly and Company

WILMINGTON, NORTH CAROLINA (MARCH ___, 2002) - aaiPharma Inc. (Nasdaq: AAII), a
specialty pharmaceutical company, announced today that its NeoSan
Pharmaceuticals business unit purchased the United States rights to the
Darvon(R) and Darvocet N(R) family of pain products from Eli Lilly and Company
(NYSE: LLY).

Under the terms of the agreement, NeoSan will purchase the product line for
$211.4 million plus royalties on future product reformulations. The Darvon(R)
and Darvocet N(R)

                                       77

<PAGE>

franchise will become the brand outlet for aaiPharma's pipeline of pain
management products.

The completion of this transaction is awaiting clearance by the Federal Trade
Commission and the Department of Justice of NeoSan Pharmaceutical's recent
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. With this
approval and the closing of the transaction, the Darvon(R) and Darvocet N(R)
family of products would become the latest addition to NeoSan's growing product
portfolio.

"Darvon(R) and Darvocet N(R) represent a tremendous entry vehicle for NeoSan
into the Pain Management Marketplace. Upon closing, we will begin to expand our
sales and marketing operations to drive and grow this brand and our R&D programs
to rapidly develop line extensions to better handle unmet patient needs," said
Dr. Philip Tabbiner, President of NeoSan Pharmaceuticals.

The Darvon(R) and Darvocet N(R) family of pain products are indicated for mild
to moderate pain, a specialty market segment which continues to experience solid
growth in the US.

NeoSan Pharmaceuticals plans to market the Darvon and Darvoet N(R) family with
its growing sales and contracting groups.

"With this acquisition, NeoSan Pharmaceuticals will take another step forward in
its quest to build a robust and exciting pipeline of brands with proven safety
and efficacy records," said Fred Sancilio, Ph.D., Chairman and CEO of aaiPharma.
"As with the other products in our pipeline, we are poised to utilize our proven
scientific expertise to enhance and grow these products, thereby maximizing
their value for our shareholders."

ABOUT NEOSAN PHARMACEUTICALS

NeoSan Pharmaceuticals is a specialty pharmaceutical company that acquires,
enhances, and markets branded drugs using the Company's proprietary product life
cycle management expertise. Focusing on targeted therapeutic areas, the Company
applies innovative technologies to increase the commercial potential of products
with proven efficacy and safety histories. As an aaiPharma business unit, NeoSan
Pharmaceuticals leverages more than 20 years of development experience and
established industry relationships into unique pharmaceutical product
commercialization opportunities. For more information, please visit
www.neosan.com.

ABOUT AAIPHARMA

aaiPharma is an experienced leader in pharmaceutical research and development,
uniquely positioned to leverage its long-term businesses and partnerships with
major pharmaceutical companies into new product opportunities. Using its
proprietary drug

                                       78

<PAGE>

delivery technologies as well as its expertise in chemistry, the Company offers
a capability to focus on the development, enhancement, and commercialization of
mature and branded pharmaceutical products. For more information on aaiPharma,
please visit www.aaipharma.com.

FORWARD-LOOKING STATEMENTS

Information in this press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934, including the statements pertaining
to future plans to use the acquired franchise to become the brand outlet for
aaiPharma's pipeline of pain management products, future product improvements
and line extensions, plans to expand the Company's sales force and efforts, and
collaborative work among the Company's business units to leverage the
capabilities of the other business units to improve NeoSan's products, including
Darvon(R) and Darvocet N(R) products upon closing of the transaction. These
statements involve risks and uncertainties that could cause actual results to
differ materially, including, without limitation, risks and uncertainties
pertaining to aaiPharma's or its individual business units' ability to
successfully find, acquire, develop, improve, enhance the safety or efficacy of
and sell, on a commercially profitable basis, pharmaceutical products without
adversely affecting its fee-for-service client relationships or business
opportunities. Additional factors that may cause the actual results to differ
materially are discussed in aaiPharma's recent filings with the Securities and
Exchange Commission, including, but not limited to, its registration statement,
as amended, its Annual Report on Form 10-K filed with the SEC on April 2, 2001,
its Quarterly Reports on Form 10-Q filed with the SEC on November 13, 2001,
including the exhibits thereof, its Form 8-Ks and its other periodic filings.

                                       ###

                                       79

<PAGE>

                                  SCHEDULE 6.15
                         PENDING REGULATORY SUPPLEMENTS

[**]

     [1 page of Confidential Materials omitted and filed separately with the
Securities and Exchange Commission].

                                       80
<PAGE>

                                                                   Exhibit 10.11

      AMENDMENT NO. 1 TO THE ASSIGNMENT, TRANSFER AND ASSUMPTION AGREEMENT

     This Amendment No. l to the Assignment, Transfer and Assumption Agreement
(the "Amendment") is executed as of the 28th day of March, 2002 ("Amendment
Effective Date"), by and between Eli Lilly and Company ("Lilly") and NeoSan
Pharmaceuticals Inc. ("NeoSan").

                                    RECITALS

     1. Lilly and NeoSan heretofore entered into that certain Assignment,
Transfer and Assumption Agreement (the "Agreement") dated as of February 18,
2002.

     2. The parties now wish to amend the Agreement as set forth in this
Amendment.

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

     1. As of the Effective Date (as defined in the Agreement), SCHEDULE 1.44 of
the Agreement will be replaced in its entirety by SCHEDULE 1.44 attached to this
Amendment and incorporated herein by reference.

     2. As of the Effective Date, SCHEDULE 4.8 of the Agreement will be replaced
in its entirety by SCHEDULE 4.8 attached to this Amendment and incorporated
herein by reference.

     3. As of the Effective Date, the last sentence of Section 6.2 will be
replaced in its entirety with the following: "Lilly and NeoSan will deliver the
information submissions described in (ii) above to the FDA by overnight delivery
to be received by the FDA on the business day following the Closing Date."

     4. As of the Effective Date, the first sentence of Section 6.15 will be
replaced in its entirety with the following: "On the Closing Date, Lilly will
transfer the NDAs to NeoSan; provided, however, that the information submissions
described in (ii) of Section 6.2 will be sent by Lilly and NeoSan to the FDA via
overnight delivery to be received by the FDA on the business day following the
Closing Date."

     5. In all other respects, the Agreement shall remain in full force and
effect.

     6. This Amendment may be executed in any number of counterparts, each of
which will be deemed an original but all of which together constitute a single
instrument.

                            [Signature Page Follows]

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Amendment to be entered
into by their duly authorized representatives as of the date first above
written.

ELI LILLY AND COMPANY                   NEOSAN PHARMACEUTICALS INC.

By: /s/ John C. Lechleiter              By:
    ---------------------------------       ------------------------------------
Printed Name: John C. Lechleiter        Printed Name:
Title: Executive Vice President                       --------------------------
                                        Title:
                                               ---------------------------------

                                        2

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Amendment to be entered
into by their duly authorized representatives as of the date first above
written.

ELI LILLY AND COMPANY                   NEOSAN PHARMACEUTICALS INC.

By:                                     By: /s/ David M. Hurley
    ---------------------------------       ------------------------------------
Printed Name:                           Printed Name: David M. Hurley
              -----------------------   Title: President of Neosan
Title:                                          Pharmaceuticals
       ------------------------------

                                        2

<PAGE>

                       AMENDMENT NO. 2 TO THE ASSIGNMENT,
                        TRANSFER AND ASSUMPTION AGREEMENT

     This Amendment No. 2 to the Assignment, Transfer and Assumption Agreement
(the "Amendment") is executed as of the 31st day of October, 2002 and effective
as of March 28, 2002 (the "Effective Date"), by and between Eli Lilly and
Company ("Lilly") and aaiPharma LLC (f/k/a NeoSan Pharmaceuticals Inc.)
("aaiPharma LLC").

                                    RECITALS

     1. Lilly and aaiPharma LLC heretofore entered into that certain Assignment,
Transfer and Assumption Agreement (the "Agreement") dated as of February 18,
2002 and entered into that certain Amendment No. 1 ("Amendment No. 1") dated as
of March 28, 2002.

     2. The parties now wish to further amend the Agreement as set forth in this
Amendment.

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

     1. Capitalized terms not otherwise defined herein will have the meaning
given to them in the Agreement. All references in the Agreement and Amendment
No. 1 to "NeoSan Pharmaceuticals, Inc." are hereby replaced by references to
"aaiPharma LLC", and all references in the Agreement and Amendment No. 1 to
"NeoSan" are hereby replaced by references to "aaiPharma LLC".

     2. As of the Effective Date, SCHEDULE 1.6 of the Agreement will be replaced
in its entirety by SCHEDULE 1.6 attached to this Amendment and incorporated
herein by reference.

     3. As of the Effective Date, Section 1.12 of the Agreement will be replaced
in its entirety with the following:

          "1.12 BOOKS AND RECORDS" means all files, documents, instruments,
     papers, books and records (including scientific, regulatory and financial)
     owned by Lilly or an Affiliate of Lilly to the extent, and only to the
     extent, they are significantly related to the Purchased Assets (including
     the Products or the manufacture, marketing, promotion, sale or distribution
     thereof), including the DMFs, any sales records, pricing lists, customer
     lists (to the extent owned by Lilly or its Affiliates), vendor lists,
     financial data, regulatory information or files (including adverse event
     reports and annual regulatory reports), litigation files, patent
     prosecution files, adverse claims or demands, investigation information or
     files, trademark registration certificates, trademark renewal certificates.

     4. As of the Effective Date, SCHEDULE 1.44 of the Agreement will be
replaced in its entirety by SCHEDULE 1.44 attached to this Amendment and
incorporated herein by reference. The attached SCHEDULE 1.44 replaces and
supersedes the SCHEDULE 1.44 in the Agreement and Amendment No. 1.

     5. As of the Effective Date, SCHEDULE 4.8 of the Agreement will be replaced
in its entirety by SCHEDULE 4.8 attached to this Amendment and incorporated
herein by reference. The attached SCHEDULE 4.8 replaces and supersedes the
SCHEDULE 4.8 in the Agreement and Amendment No. 1.

     6. As of the Effective Date, a new Section 1.71 is hereby added and will
read as follows:

<PAGE>

          "1.71 "DMFS" mean those drug master files listed in SCHEDULE 1.71
     attached hereto."

     7. As of the Effective Date, the SCHEDULE 1.71 attached hereto and
incorporated herein by reference will be SCHEDULE 1.71 of the Agreement.

     8. As of the Effective Date, Section 3.5 will be replaced in its entirety
with the following:

          "3.5 GRANT OF LICENSE TO LILLY.

          (a) Subject to the terms and conditions set forth herein, as of the
     Closing Date, aaiPharma LLC hereby grants to Lilly and its Affiliates, for
     no additional consideration, and Lilly and its Affiliates accept, a
     royalty-free, non-exclusive license, with a right to sublicense, except as
     limited below, in the United States under the Product Intellectual
     Property, the NDAs, the DMFs and the Marketing Materials solely to
     manufacture, or to have manufactured, the Products for aaiPharma LLC under
     the Manufacturing Agreement and otherwise fulfill its obligations
     thereunder; provided, however, that the non-exclusive license granted by
     aaiPharma LLC above will terminate effective upon the termination of the
     Manufacturing Agreement.

          (b) Subject to the terms and conditions set forth herein, as of the
     Closing Date, aaiPharma LLC hereby grants to Lilly and its Affiliates, for
     no additional consideration, and Lilly and its Affiliates accept, an
     exclusive, royalty-free license, with the right to sublicense, under the
     Marketing Materials, DMFs, Copyrights and Assigned Trade Dress to sell,
     distribute, use, offer to sell, import, market and promote the Product
     outside the United States or to make or have made the Product inside the
     United States for selling, distributing, using, offering to sell,
     importing, marketing and promoting the Product outside of the United
     States. The license granted pursuant to this Section 3.5(b) will terminate
     with respect to the Copyrights, the Marketing Materials, the DMFs or the
     Assigned Trade Dress on aaiPharma LLC's receipt of written notification
     from Lilly that it is abandoning its license with respect to the
     Copyrights, the Marketing Materials, the DMFs and the Assigned Trade Dress.

     9. As of the Effective Date, the first sentence of Section 4.1 will be
replaced in its entirety with the following:

          "Lilly represents and warrants that the Product Intellectual Property
     (other than the Assigned Trade Dress), Marketing Materials, the Licensed
     Trademark and Trade Dress (other than the Common Law Licensed Trade Dress)
     and the Licensed Technology (collectively, the "Intellectual Property") and
     the Assigned Trade Dress, Common Law Licensed Trade Dress and DMFs contain
     all the Patents, Know-How, technology, trade secrets, trademarks, and trade
     dress necessary to conduct the Activities or to make, have made,
     distribute, use, sell, offer to sell, have sold, market, co-market, import
     (into the United States), promote and co-promote Products in the United
     States."

<PAGE>

     10. As of the Effective Date, the fourth sentence of Section 4.1 will be
replaced in its entirety with the following: "For avoidance of doubt,
"Intellectual Property" does not mean or include the Assigned Trade Dress,
Common Law Licensed Trade Dress or the DMFs."

     11. As of the Effective Date, the first sentence of Section 4.8 will be
replaced in its entirety with the following: "Except with respect to those of
the NDAs listed in part c. of SCHEDULE 4.8 attached hereto, Lilly represents and
warrants that Lilly has furnished aaiPharma LLC with access to a complete copy
of the NDAs, including all amendments and supplements thereto, and that Lilly
has no new drug applications or INDs pertaining to propoxyphene-based
pharmaceutical products, whether issued, pending, abandoned, withdrawn, or in
draft form, other than those pertaining to the NDAs."

     12. As of the Effective Date, subpart (ii) of the second sentence of
Section 4.8 will be replaced in its entirety with the following: "(ii) except
with respect to those of the NDAs listed in SCHEDULE 4.8 attached hereto which
are designated as never having been approved by the FDA, each of the NDAs has
been approved by FDA, and, except with respect to those of the NDA's listed in
part a. of SCHEDULE 4.8 attached hereto, nothing has come to the attention of
Lilly which has led Lilly to believe that any of the NDAs are not in good
standing with the FDA."

     13. As of the Effective Date, the reference to "SCHEDULE 4.8" in the sixth
sentence of Section 4.8 will be replaced in its entirety with "part b. of
Schedule 4.8."

     14. As of the Effective Date, the last sentence of Section 4.8 will be
replaced in its entirety with the following: "Except for the representation and
warranty contained in this Section 4.8, aaiPharma LLC has had full and adequate
opportunity to review and evaluate the NDAs (except as otherwise disclosed in
SCHEDULE 4.8 attached hereto), aaiPharma LLC is relying upon its own judgment
and experience in connection with all of the NDAs, and Lilly is assigning,
selling, conveying, transferring and delivering all of the NDAs to aaiPharma LLC
"AS IS"."

     15. As of the Effective Date, subpart (c) of the first sentence of Section
4.14 will be replaced in its entirety with the following: "(c) any filing
reasonably requested by aaiPharma LLC as may be necessary to change the records
of ownership of the DMFs with the ED A or to change the records of ownership in
the U.S. Trademark or Copyright Office,".

     16. As of the Effective Date, the last sentence of Section 6.15 will be
replaced in its entirety with the following: "Upon the Closing Date, aaiPharma
LLC hereby grants to Lilly the right to reference the NDAs and DMFs for purposes
of performing the Permitted Uses and obtaining and/or maintaining marketing
authorizations outside of the United States.

     17. In all other respects, the Agreement, as amended by Amendment No. 1,
shall remain in full force and effect.

     18. This Amendment No. 2 may be executed in any number of counterparts,
each of which will be deemed an original but all of which together constitute a
single instrument.

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Amendment to be entered
into by their duly authorized representatives as of the date first above
written.

ELI LILLY AND COMPANY                   aaiPHARMA LLC

By: /s/ John C. Lechleiter              By: /s/ /s/ David Hurley
    ---------------------------------       ------------------------------------
Printed Name: John C. Lechleiter        By: David Hurley
Title: Executive V.P.                   Title: President

<PAGE>

                                 SCHEDULE 1.44

                                      NDAS

      U.S. NEW DRUG APPLICATIONS (NDAS) AND INVESTIGATIONAL NEW DRUG (IND)
                                  APPLICATIONS

                                  NDA/IND LIST

<TABLE>
<CAPTION>
                                                                                 Date Withdrawn or
IND/NDA#    LY #                 Product Description                 # of Vols      Inactivated
--------   -----   ----------------------------------------------   ----------   -----------------
<S>        <C>     <C>                                              <C>          <C>
48                 Darvon Compound - with A.S.A.                    1                  04/65
320        29352   Darvon - Suspension                              1                  02/66
1,194              Darvon and Amytal and A.S.A.                     1                  07/67
1,218              Darvon and Aventyl                               2                  10/65
1,357              Stero Darvon with ASA                            3                  02/68
3,029              Darvon - N Propoxyphene Napsylate                2                  01/69
1,599      21720   Darvon (Ampoules)                                1                  02/67
1,656      29352   Darvon N - Dextro Propoxyphene Napsylate         6                  11/90
5,159      29352   Darvocet - Propoxyphene HCL w/ Acetaminophen     1                  11/90
5,655              Darvocet N - Suspension                          1                  06/84
5,727      29352   Darvocet N - Tablets                             9
10,471             Darvon N - Pediatric Suspension                  1                  05/84
                   Propoxyphene derivatives, dextro, sustained
1,393              action                                           2                  08/68
9,750              Propoxyphene napsylate and methadone HCL         1                  09/80
                   APPROX. NUMBER OF IND VOLS                       32
16-844             Darvocet tablet                                  30
17-122             Darvocet N tablet                                76
17-507             Darvocet N 100 suspension                        3
10-996             Darvon pulvule                                   50
10-997             Darvon pulvule no. 364,365                       47
16-827             Darvon N pulvules                                38
16-829             Darvon N w/ A.S.A.                               4
16-861             Darvon N suspension                              13
16-862             Darvon N tablet                                  20
16-863             Darvon N w/ A.S.A. tablet                        13
</TABLE>

<PAGE>

<TABLE>
<S>        <C>     <C>                                              <C>          <C>
16-864             Darvocomp N-100 tablet                           7
12-032             Darvotran pulvules                               10                  03/75
14-768             Stero-Darvon with ASA                            13                  11/78
16-828             Darvon-N Compound 100 with aspirin, phenacetin   4                     NA
                   and caffeine
17-124             Actimets Darvon                                  4                     NA
13-804             Darvon Injection                                 11                  11/65
12-928             Levo-propoxyphene napsylate pulvules             9
10-995             Darvon with A.S.A. pulvules                      2                   09/71
13-662             Propoxyphene napsylate suspension                8                   08/71
12-629             Levo-propoxyphene oxide HCL                      none found          08/71
13-097             Levo-propoxyphene with aspirin                   2                   06/77
                   APPROX. NUMBER OF NDA VOLS                       364
</TABLE>

NA = NEVER APPROVED

<PAGE>

                                 SCHEDULE 1.71

                                      DMFS

<TABLE>
<CAPTION>
DMF#              Compound/location                Status
----   --------------------------------------   -----------
<S>    <C>                                      <C>
4886   propoxyphene hydrochloride- Mayaguez     current
5430   propoxyphene hydrochloride- Tippecanoe   not current
4880   propoxyphene napsylate- Mayaguez         current
5477   propoxyphene napsylate- Tippecanoe       not current
</TABLE>

<PAGE>

                                  SCHEDULE 4.8

                             A. WITHDRAWN INDS/NDAS

<TABLE>
<CAPTION>
IND/NDA #    LY#                  Product Description                # of Vols   Date Withdrawn
---------   -----   ----------------------------------------------   ---------   --------------
<S>         <C>     <C>                                              <C>         <C>
1,357               Stero Darvon with ASA                            3           02/68
1,599       21720   Darvon (Ampoules)                                1           02/67
1,656       29352   Darvon N - Dextro Propoxyphene Napsylate         6           11/90
5,159       29352   Darvocet - Propoxyphene HCL w/ Acetaminophen     1           11/90
12-032              Darvotran pulvules                               10          03/75
14-768              Darvon with ASA                                  13          11/78
10-995              Darvon with A.S.A. pulvules                      2           09/71
13-662              Propoxyphene napsylate suspension                8           08/71
12-629              Levo-propoxyphene oxide HCL                      0           08/71
13-097              Levo-propoxyphene with aspirin                   2           06/77
1,393               Propoxyphene derivatures, dextro, sustained      2           08/68
                    action
9750                Propoxyphene napsylate and methadone             1           09/80
13-804*             Darvon Injection                                 11          11/65
16-828*             Darvon N compound 100 with aspirin, phenacetin   4           NA
                    and caffeine
17-124*             Actimets Darvon                                  4           NA
</TABLE>

                                  B. FORM 483S

     Form 483 issued by the FDA November 10, 1999 with respect to Lilly's
Mayaguez, Puerto Rico facility

                  C. COPIES NOT MADE AVAILABLE TO AAIPHARMA LLC

<TABLE>
<CAPTION>
IND/NDA #    LY#                  Product Description                # of Vols   Date Withdrawn
---------   -----   ----------------------------------------------   ---------   --------------
<S>         <C>     <C>                                              <C>         <C>
12-928              Levo-Propoxyphene napsylate pulvules             9
1,357               Stero Darvon with ASA                            3           02/68
10-995              Darvon with A.S.A. pulvules                      2           09/71
13-662              Propoxyphene napsylate suspension                8           08/71
12-629              Levo-propoxyphene oxide HCL                      0           08/71
13-097              Levo-propoxyphene with aspirin                   2           06/77
</TABLE>

<PAGE>

<TABLE>
<S>         <C>     <C>                                              <C>         <C>
1,393               Propoxyphene derivatures, dextro, sustained      2           08/68
                    action
9,750               Propoxyphene napsylate and methadone HCL         1           09/80
13-804*             Darvon Injection                                 11          11/65
</TABLE>

*    NDAs never approved by FDA<PAGE>

                                                                   Exhibit 10.12

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.

                               LICENSING AGREEMENT

     This Licensing Agreement (hereinafter, "Agreement"), dated as of October
12, 2007 ("Effective Date"), between XenoPort, Inc., a Delaware corporation
having a place of business at 3410 Central Expressway, Santa Clara, CA 95051
("XenoPort"), and Xanodyne Pharmaceuticals, Inc., a Delaware corporation having
a place of business at One Riverfront Place, Suite 900, Newport, KY 41071
("Xanodyne").

                                   BACKGROUND

     A. XenoPort has developed a Transported Prodrug(TM) of tranexamic acid (as
further defined below, the "Compound"), for the treatment of excessive bleeding,
including menorrhagia and potentially other indications. XenoPort owns or
controls certain patents, know-how and other intellectual property relating to
the Compound and the Intermediate (as defined below) used to manufacture the
Compound.

     B. Xanodyne is currently developing a formulation of tranexamic acid (as
further defined below, the "Xanodyne Product"), for the treatment of
menorrhagia. Xanodyne owns or controls certain patents, know-how and other
intellectual property relating to such Xanodyne Product.

     C. Xanodyne desires to further develop and commercialize the Compound and
products containing the Compound (as further defined below, "XenoPort Products")
in the Territory (as defined below), and XenoPort desires to have the Compound
and XenoPort Products developed and commercialized in the Territory by Xanodyne,
in accordance with this Agreement.

     D. Xanodyne desires to obtain from XenoPort certain distribution and
license rights for the Compound and XenoPort Products in the Territory, and
XenoPort is willing to grant to Xanodyne such rights on the terms and conditions
set forth in this Agreement.

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

                                   ARTICLE 1
                                   DEFINITIONS

     1.1 "Adverse Drug Experience" or "ADE" shall mean any adverse experience as
defined in 21 C.F.R. Section 312.32(a) for investigational drugs or 21 C.F.R.
Section 314.80(a) for approved drugs, as applicable.

<PAGE>

     1.2 "Affiliate" of a Party shall mean any person, corporation or other
entity that, directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such Party, as the
case may be, for so long as such control exists. As used in this Section 1.2,
"control" shall mean: (a) to possess, directly or indirectly, the power to
direct the management and policies of such person, corporation or other entity,
whether through ownership of voting securities or by contract relating to voting
rights or corporate governance; or (b) direct or indirect beneficial ownership
of at least fifty percent (50%) (or such lesser percentage that is the maximum
allowed to be owned by a foreign corporation in a particular jurisdiction) of
the voting share capital in such person, corporation or other entity.

     1.3 "Annual Net Sales" shall mean the total Net Sales of the applicable
Product(s) sold in the Territory by or under the authority of Xanodyne or its
Affiliate in a particular calendar year. For such purposes, units of Product
shall be considered sold when such Product is shipped to the customer, or the
revenue from such sale is recognized by the Selling Party (as defined in Section
1.20 below) for financial purposes, whichever occurs first.

     1.4 "Commercially Reasonable Efforts" shall mean the level of efforts and
resources required to carry out a particular task or obligation, consistent with
the efforts generally used by pharmaceutical companies with respect to their own
high priority pharmaceutical products of similar commercial potential and at a
similar stage in development or product life for which Marketing Approval is
being sought, or for which Marketing Approval has been obtained, as the case may
be. Without limiting the foregoing, "Commercially Reasonable Efforts" with
respect to the Menorrhagia Indication shall mean such level of efforts and
resources required to carry out a particular task or obligation, and consistent
with the preceding sentence, as if the XenoPort Products were the only high
priority pharmaceutical products at the same stage of development or product
life, as the case may be, being developed and commercialized by or under the
authority of Xanodyne for the Menorrhagia Indication.

     1.5 "Compound" shall mean that certain compound referred to internally at
XenoPort as XP21510 ("XP21510") and/or any other compound within the genus of
[**], the structures of which are set forth in Exhibit 1.5.

     1.6 "Control" (including any variations such as "Controlled" or
"Controlling"), in the context of intellectual property rights, shall mean that
a Party owns or possesses rights to intellectual property sufficient to grant
the applicable license under this Agreement, without violating the terms of any
agreement with any Third Party.

     1.7 "Cost of Goods" shall mean the fully burdened costs incurred and
substantiated by XenoPort to manufacture or have manufactured the Compound
calculated in accordance with GAAP and XenoPort's then prevailing standard
procedures for calculating cost of goods. Cost of Goods shall not include any
margins or other markup. As used in this Section 1.7, "manufacture" includes all
of the activities required to manufacture or have manufactured the Compound
pursuant to good manufacturing practices and to deliver the same to the [**]
specified in Section 9.2.5 below, and shall include the net cost or credit of
any value-added taxes or duties actually paid or utilized on account of the
Compound and the costs of quantities of Compound destroyed in quality control
testing (as such costs are calculated above).

                                       2

<PAGE>

     1.8 "Data" shall mean both the XenoPort Data and Xanodyne Data defined as
follows:

          1.8.1 "XenoPort Data" shall mean: (a) all research data (including,
but not limited to, the synthetic process, physical properties and like
information), pharmacology data, preclinical data and/or clinical data for the
Compound, and/or XenoPort Products; and/or (b) all regulatory documentation,
information and submissions pertaining to, or made in association with, an IND,
Marketing Approval Application, Marketing Approval or the like for the Compound
or any XenoPort Product; in each case, that are Controlled by XenoPort or its
Affiliates as of the Effective Date and/or during the term of this Agreement.

          1.8.2 "Xanodyne Data" shall mean: (a) all research data, pharmacology
data, preclinical data and/or clinical data for the Compound and/or XenoPort
Products; and/or (b) all regulatory documentation, information and submissions
pertaining to, or made in association with, an IND, Marketing Approval
Application, Marketing Approval or the like for the Compound or any XenoPort
Product; in each case, that are Controlled by Xanodyne as of the Effective Date
and/or during the term of this Agreement. As used herein, "Xanodyne Data" shall
also include (i) all research data, pharmacology data, preclinical data and/or
clinical data for a Xanodyne Product generated by, or on behalf of, Xanodyne or
its Affiliates; and (ii) all regulatory documentation, information and
submissions pertaining to, or made in association with, an IND, MAA, Marketing
Approval or the like for a Xanodyne Product; in each case that are Controlled by
Xanodyne or its Affiliates as of the Effective Date and/or during the term of
this Agreement and which are relied upon by Xanodyne in association with any
IND, MAA or other approval for the Compound or a XenoPort Product in the
Territory. Notwithstanding the foregoing, Xanodyne Data shall exclude the Tools.

     1.9 "Excessive Bleeding Indications" shall mean any indication related to
the prevention or treatment of excessive bleeding, including, but not limited
to, [**], but specifically excluding [**].

     1.10 "FDA" shall mean the United States Food and Drug Administration, or
any successor entity thereto performing similar functions.

     1.11 "Filing" of an NDA shall be deemed to occur upon the earlier of: (a)
receipt of written notice of acceptance from the FDA of such NDA for substantive
review; or (b) once sixty (60) days has passed from the date of written notice
of receipt of the NDA by the FDA, provided that no notice of "refusal to file"
is received within such sixty (60) day period.

     1.12 "GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time, consistently applied by a Party
across its entire business.

     1.13 "IND" shall mean any Investigational New Drug Application (including
any amendments thereto) filed with the FDA pursuant to 21 C.F.R. Section 312
before the commencement of clinical trials involving a Product, or any
comparable filing with any Regulatory Authority in any other jurisdiction.

                                       3

<PAGE>

     1.14 "Indications" shall mean the Menorrhagia Indication, Excessive
Bleeding Indications, and any and all Other Indications.

     1.15 "Intermediate" shall mean that certain compound employed by XenoPort
as of the Effective Date in the manufacture of XP21510 and/or any other compound
within the genus of compounds, the structures of which are set forth on Exhibit
1.15.

     1.16 "Marketing Approval" shall mean all final approvals, licenses,
registrations or authorizations of a Regulatory Authority in a country,
necessary for the manufacture, use, storage, import, marketing and sale of a
Product in such country. For countries where governmental approval of pricing
and/or reimbursement is required for marketing in such country, Marketing
Approval shall not be deemed to occur until such pricing or reimbursement
approval is obtained. For clarity, an "Approvable" designation granted by FDA
does not constitute Marketing Approval for a Product in the Territory.

     1.17 "Marketing Approval Application" (or "MAA") shall mean an NDA in the
United States, or a comparable application that has been submitted to a
Regulatory Authority in another jurisdiction.

     1.18 "Menorrhagia Indication" shall mean an indication involving the
management, prevention or treatment of menorrhagia, hyper-menorrhea or
excessive, abnormally heavy or prolonged menstrual bleeding, or any similar such
indication as may be approved by a Regulatory Authority in the Territory.

     1.19 "New Drug Application" (or "NDA") shall mean a New Drug Application
(or its equivalent) submitted to the FDA.

     1.20 "Net Sales" shall mean the gross invoice price for the applicable
Product sold by or under the authority of Xanodyne or its Affiliates (each, a
"Selling Party"), less reasonable and customary deductions allowed to a Third
Party customer by the Selling Party, to the extent actually taken by such Third
Party customer, on such sales for:

               (a) trade, quantity and cash discounts and allowances;

               (b) credits, rebates (including those rebates under the Medical
Prescription Drug Rebate and Improved Access to Medicines requirements of the
Omnibus Budget Reconciliation Act of 1990 and comparable federal and state
requirements, as of the Effective Date or hereafter in effect) and charge backs
or equivalents thereof (including those to managed care entities and national,
state, and local government agencies) and allowances to the customer on account
of rejection or returns of such Product (including wholesaler and retailer
returns), or on account of retroactive price reductions affecting such Product
or errors related to incorrect billing;

               (c) freight, postage and duties, and any other transportation
expenses related to the Product, including handling and insurance thereon,
separately identified on the invoice or other documentation maintained in the
ordinary course of business;

                                       4

<PAGE>

               (d) sales and excise taxes, other consumption taxes, customs
duties and compulsory payments to governmental authorities and any other
governmental charges imposed upon the importation, use or sale of such Product
to the customer and separately identified on the invoice or other documentation
maintained in the ordinary course of business; and

               (e) commissions paid to Third Party wholesalers, or other similar
Third Party distributors, in each case, who do not engage in the marketing or
promotion of such Product.

     Sales between Xanodyne and its Affiliates for resale shall be excluded from
the computation of Net Sales, but the subsequent resale of Products shall be
included within the computation of Net Sales. If a Product is sold or
transferred for consideration other than cash, or in a transaction not at arm's
length, the Net Sales from such sale or transfer shall be deemed the then fair
market value of such Product.

     In the event that [**], the Net Sales [**] shall be [**] during the
applicable reporting period by [**]. If sales [**] during the applicable
reporting period, the [**] in which sales [**] shall be used. In the event that
[**], then Net Sales for purposes of determining royalty payments shall be [**]
shall not be unreasonably withheld or delayed.

     1.21 "Other Indication" shall mean any indication other than the
Menorrhagia Indication and Excessive Bleeding Indications.

     1.22 "Party" shall mean XenoPort or Xanodyne, individually, and "Parties"
shall mean XenoPort and Xanodyne, collectively.

     1.23 "Patent(s)" shall mean any patents and patent applications, together
with all additions, divisions, continuations, continuations-in-part,
substitutions, reissues, re-examinations, extensions, registrations, patent term
extensions, supplemental protection certificates and renewals of any of the
foregoing.

     1.24 "Phase 2" shall mean a human clinical trial conducted on patients with
the disease being studied for the principal purpose of achieving a preliminary
determination of efficacy and establishing appropriate dosage ranges for use in
Phase 3 trials of a Product, as further described in 21 C.F.R. Section
312.21(b).

     1.25 "Phase 3" shall mean a human clinical trial, the principal purpose of
which is to establish safety and efficacy in patients with the disease or
condition being studied, as further described in 21 C.F.R. Section 312.21(c),
which is designed and intended to be of a size and statistical power sufficient
to serve as a pivotal study to support the filing of an NDA for the indication
being studied.

     1.26 "Product" shall mean, individually, either the Xanodyne Product or any
XenoPort Product, and, collectively, the Xanodyne Product and the XenoPort
Products.

                                       5

<PAGE>

     1.27 "Product Trademark(s)" shall mean the product specific trademark(s),
symbol(s), logo(s) and/or trade dress identified for use with the XenoPort
Product(s) in accordance with Section 11.1.

     1.28 "Regulatory Authority" shall mean the FDA, or a regulatory body with
similar regulatory authority in any other jurisdiction outside the Territory.

     1.29 "Territory" shall mean the United States of America, its territories
and possessions and the District of Columbia.

     1.30 "Third Party" shall mean any person, corporation, joint venture or
other entity, other than Xanodyne, XenoPort and their respective Affiliates.

     1.31 "Tools" shall mean: (a) physician and/or patient tools, [**] used to
identify patients with menorrhagia and assess patient's response to therapy for
menorrhagia owned or controlled by Xanodyne; and/or (b) sales and marketing
information, materials and like items for use in the promotion of a Product
owned or controlled by Xanodyne.

     1.32 "Valid Claim" means a claim of an issued Patent owned or Controlled by
a Party, including the XenoPort Patents and the Xanodyne Patents, that: (a) has
not been revoked or held unenforceable or invalid by a decision of a court or
governmental agency of competent jurisdiction from which no appeal can be, or
has been, taken; and (b) has not been admitted to be invalid or unenforceable
through reissue, re-examination, disclaimer or otherwise.

     1.33 "Xanodyne Know-How" shall mean any and all scientific, medical,
technical, regulatory and other information (excluding any Tools) relating to
the Compound, any Xanodyne Product and/or any XenoPort Products and Xanodyne
Data, that are Controlled by Xanodyne as of the Effective Date and/or during the
term of this Agreement, that are needed by, or reasonably useful to, XenoPort in
order to develop and/or commercialize the Compound and/or XenoPort Products for
marketing, promotion and/or sale outside the Territory and that are relied upon
or utilized by Xanodyne or its Affiliates in order to develop and/or
commercialize the Compound or any XenoPort Product.

     1.34 "Xanodyne Patents" shall mean the Patents owned or Controlled by
Xanodyne or its Affiliates that are listed on Exhibit 1.34, together with all
additions, divisions, continuations, substitutions, re-issues, re-examinations,
extensions, registrations, patent term extensions, supplemental protection
certificates and renewals of any such Patents.

     1.35 "Xanodyne Product" shall mean the formulation of tranexamic acid
developed by, or under the authority of, Xanodyne, as further described on
Exhibit 1.35, and/or any modified form of such formulation developed by, or
under the authority of, Xanodyne during the term of this Agreement, including
any such formulation where the manufacture, use, sale or import is covered by
any Xanodyne Patents.

     1.36 "XenoPort Know-How" shall mean: (a) all scientific, medical,
technical, regulatory and/or other information relating to: (i) the
Intermediate, but only to the extent necessary or

                                       6

<PAGE>

reasonably useful to make the Compound; and (ii) the Compound and/or XenoPort
Products; in each case, that were generated or utilized by XenoPort or its
Affiliates in developing or producing the Intermediate and/or the Compound; (b)
XenoPort Data; and (c) Compound Improvements; and with respect to each of
paragraphs (a), (b) and (c), that are Controlled by XenoPort as of the Effective
Date and/or during the term of this Agreement, and that are needed by or
otherwise reasonably useful to Xanodyne in order to exercise its rights and
perform its obligations with respect to the Compound and/or XenoPort Products
under this Agreement.

     1.37 "XenoPort Patents" shall mean the XenoPort Compound Patents and the
XenoPort Intermediate Patents.

          1.37.1 "XenoPort Compound Patent(s)" shall mean the Patents owned or
Controlled by XenoPort or its Affiliates as listed on Exhibit 1.37.1, together
with all additions, divisions, continuations, substitutions, re-issues,
re-examinations, extensions, registrations, patent term extensions, supplemental
protection certificates and renewals of any such Patents.

          1.37.2 "XenoPort Intermediate Patent(s)" shall mean the Patents owned
or Controlled by XenoPort or its Affiliates as listed on Exhibit 1.37.2,
together with all additions, divisions, continuations, substitutions, re-issues,
re-examinations, extensions, registrations, patent term extensions, supplemental
protection certificates and renewals of any such Patents.

     1.38 "XenoPort Product" shall mean any pharmaceutical product containing
the Compound, alone or in combination with one or more other active
pharmaceutical ingredients, in any dosage form or formulation.

     1.39 "XenoPort Product Approval Date" shall mean the date on which
Marketing Approval for the First XenoPort Product in the Territory is obtained.

     1.40 Additional Definitions. Each of the following terms shall have the
meaning described in the corresponding section of this Agreement below.

<TABLE>
<CAPTION>
TERM                             SECTION DEFINED               TERM               SECTION DEFINED
----                             ---------------   ----------------------------   ---------------
<S>                              <C>               <C>                            <C>
Agreement                        Introduction      [**]                           9.2.4
Commercial Milestones            6.2.2(b)          Joint Commercialization
                                                   Committee / JCC                3.2.1
Commercialization Plan           5.1.2             Joint Development Committee
                                                   / JDC                          3.1.1
Committee                        3.3.1             Joint Patent                   10.1.1
Compound Improvements            10.1.2(b)         Liabilities                    16.1
Compound Improvement Patents     10.2.1            Loss of Exclusivity            6.2.2(a)(ii)
Confidential Information         12.1              Negotiation Period             5.4.2
Cooperating Party                12.5              Option Notice                  5.4.1
Co-Promotion Agreement           5.4.2             Pharmaco-Vigilance Agreement   4.7.1
Co-Promotion Field               5.4               Product Infringement Actions   10.4.1
Co-Promotion Partner             5.4.1(b)(ii)      Product Materials              14.2.6
</TABLE>

                                       7

<PAGE>

<TABLE>
<CAPTION>
TERM                             SECTION DEFINED               TERM               SECTION DEFINED
----                             ---------------   ----------------------------   ---------------
<S>                              <C>               <C>                            <C>
Damages                          10.4.4(c)         Prosecution and Maintenance    10.2.1
Development Plan                 4.1.1             Requesting Party               12.5
Dispute                          17.1              Royalty Transition Date        6.3.1(a)(ii)
Effective Date                   Introduction      Selling Party                  1.20
Election Notice                  5.4.2             [**]                           3.5
[**]                             3.5               [**]                           10.4.4(a)
First Xanodyne Product           6.2.2(a)(i)       Supply Transition Date         9.1
First XenoPort Product           6.2.2(a)(i)       Supply Transition Plan         9.1
Generic Product                  6.4.2(c)          Third Party Claim              16.1
ICH                              4.7.1             Third Party Royalties          6.4.1
[**]                             6.4.2(a)          Wind-down Period               14.2.1(b)
Improvements                     10.1.2(d)         Withdrawal Notice              3.3.2
Improvement Patents              10.1.2(d)         Xanodyne                       Introduction
Increased Royalty Commencement   6.3.1(a)(ii)      Xanodyne Indemnitees           16.2
Date
Indemnitee                       16.3              Xanodyne Product Approval      6.3.1(a)(i)
                                                   Date
Indemnitor                       16.3              Xanodyne Product               4.1.1
                                                   Development Plan
Infringement                     10.3.1            XenoPort                       Introduction
Infringement Actions             10.4.1            XenoPort Indemnitees           16.1
Intermediate Infringement        10.4.1            XenoPort Product               4.1.1
Actions                                            Development Plan
JAMS                             17.3.1            XenoPort Supply Costs          9.2.2(b)
[**]                             9.2.4             XP21510                        1.5
</TABLE>

                                    ARTICLE 2
                                GRANT OF LICENSE

     2.1 License. Subject to the terms and conditions of this Agreement,
XenoPort hereby grants to Xanodyne during the term of this Agreement:

          2.1.1 an exclusive license under the XenoPort Compound Patents,
XenoPort Know-How and Compound Improvement Patents to develop, use, import,
offer for sale, sell, market, distribute and promote the Compound, alone or as
incorporated into a XenoPort Product, for all Indications in the Territory; and

          2.1.2 a non-exclusive license under the XenoPort Compound Patents, the
XenoPort Know-How and Compound Improvement Patents: (a) to develop or have
developed the Compound, alone or as incorporated into a XenoPort Product,
outside the Territory; and/or (b) to manufacture or have manufactured the
Compound and/or the XenoPort Products within or outside the Territory solely:
(i) for development of the Compound, alone or as incorporated into a XenoPort
Product, in or outside the Territory; and (ii) for use, import, offer for sale,
and sale of the Compound, alone or as incorporated into a XenoPort Product, in
the Territory; provided however that, in each case, the grant of such license to
develop or have developed the Compound, alone or as incorporated into a XenoPort
Product, outside the Territory shall exclude the right to conduct any clinical
trials; and

                                       8

<PAGE>

          2.1.3 a non-exclusive license under the XenoPort Intermediate Patents:
(a) to make, have made or use the Intermediate; and (b) to practice any method,
process or procedure to make, have made or use the Intermediate, within or
outside the Territory (i.e., worldwide), in each case solely for the purpose of
manufacturing or having manufactured the Compound for use, import, offer for
sale and sale of the Compound, alone or as incorporated into a XenoPort Product,
in the Territory.

          2.1.4 The rights and licenses in Section 2.1.1 shall be exclusive even
as to XenoPort, except with respect to: (a) the development (excluding
performing and having performed clinical trials), manufacture, import, and use
as necessary for such development, manufacture and import, of the Compound
and/or XenoPort Products; (b) all scientific, medical, technical, regulatory
and/or other information relating to the Intermediate comprising XenoPort
Know-How; and (c) XenoPort's rights to co-promote the XenoPort Products in
accordance with any Co-Promotion Agreement executed by the Parties pursuant to
Section 5.4. The rights and licenses in Sections 2.1.2 and 2.1.3 shall be
non-exclusive and Xanodyne's exercise of such right and license shall be subject
to the Parties' agreement with respect to supply by XenoPort to Xanodyne of the
Compound prior to the Supply Transition Date pursuant to Article 9 below.

     2.2 Affiliates; Sublicenses. Xanodyne shall have the right to exercise the
license granted under Section 2.1 through its Affiliates solely for so long as
such entity remains an Affiliate of Xanodyne, and Xanodyne shall remain
responsible for the compliance of such Affiliate with the applicable terms of
this Agreement. Xanodyne shall not otherwise have the right to grant sublicenses
under its rights under Section 2.1 without the prior written consent of
XenoPort, [**] provided that, notwithstanding the foregoing, [**] in accordance
with [**] provided further that, it is understood [**], to the extent
applicable. For the purposes of this Agreement, a "sublicense" shall mean an
agreement or arrangement between Xanodyne and an Affiliate or a Third Party to
whom Xanodyne grants a right to market, distribute and/or promote the Compound
or any XenoPort Product in the Territory.

     2.3 Activities Outside the Territory. Xanodyne agrees that neither it, nor
any of its Affiliates, will: (a) file for Marketing Approval with respect to,
market, distribute, promote or sell the Compound or any XenoPort Product
anywhere in the world, except in the Territory, and, within the Territory, only
in accordance with and under this Agreement; and (b) import to, or export from,
the Territory the Compound and/or XenoPort Products except for the purposes of
conducting development activities and/or manufacturing Compound and/or XenoPort
Products, in each case, only in accordance with this Agreement. Xanodyne agrees
that neither it, nor any of its Affiliates, will use or otherwise exploit
XenoPort Patents and/or XenoPort Know-How, except as licensed in this Agreement.

     2.4 No Other Rights. Except for the rights and licenses expressly granted
in this Agreement, XenoPort retains all rights under its intellectual property,
and no additional rights shall be deemed granted to Xanodyne by implication,
estoppel or otherwise. For clarity, the licenses and rights granted in this
Agreement shall not be construed to convey any licenses or rights under the
XenoPort Patents with respect to any active pharmaceutical ingredient other than
Compound(s).

                                       9

<PAGE>

                                    ARTICLE 3
                                   GOVERNANCE

     3.1 Joint Development Committee.

          3.1.1 Establishment. [**] XenoPort and Xanodyne shall establish a
development committee ("Joint Development Committee" or "JDC") to monitor the
progress of the development activities against the Development Plan for the
Products for all Indications in the Territory and, to the extent Xanodyne is
permitted to conduct development activities outside the Territory in accordance
with Section 2.1, outside the Territory.

          3.1.2 Duties. The JDC shall:

               (a) Review and approve the Development Plan in accordance with
Section 4.1;

               (b) Subject to, and within the parameters of, the Development
Plan;

                    (i) Monitor the progress of the development activities
against the Development Plan (including, review of the conduct of clinical
trials conducted pursuant to the Development Plan); and

                    (ii) Approve certain regulatory matters as provided in
Section 4.4.2 below;

               (c) Facilitate the exchange of Data and other information and/or
materials between the Parties to the extent relating to the XenoPort Products;
and

               (d) Perform such other duties as are specifically assigned to the
JDC in this Agreement or otherwise agreed in writing by the Parties.

     3.2 Joint Commercialization Committee.

          3.2.1 Establishment. [**] XenoPort and Xanodyne shall establish a
joint commercialization committee ("Joint Commercialization Committee" or "JCC")
to monitor the progress of the commercialization, marketing and promotion
activities against the Commercialization Plan.

          3.2.2 Duties. The JCC shall:

               (a) Review the Commercialization Plan developed in accordance
with Section 5.1.2;

               (b) Subject to, and within the parameters of, the
Commercialization Plan, monitor the commercialization, marketing and promotion
activities against the Commercialization Plan; and

                                       10

<PAGE>

               (c) Perform such other duties as are specifically assigned to the
JCC in this Agreement or otherwise agreed in writing by the Parties.

     3.3 Committee Membership.

          3.3.1 Committee Membership. The JDC and JCC (each, a "Committee")
shall each be composed of an equal number of representatives from each of
Xanodyne and XenoPort, selected by such Party. Unless the Parties otherwise
agree, the exact number of representatives for each of Xanodyne and XenoPort
shall be three (3) representatives, and at least one (1) from each Party shall
be [**]. Either Party may replace its respective Committee representatives at
any time with prior written notice to the other Party; provided that the
criteria for composition of each Committee set forth in the preceding sentence
continues to be satisfied following any such replacement of a Party's
representative on any such Committee. Each Committee will be chaired by a
Xanodyne representative [**] and Xanodyne may, from time to time and in its sole
discretion, change the representative who serves as the chairperson of any
Committee with prior written notice to XenoPort.

          3.3.2 Withdrawal from Committees. Notwithstanding Sections 3.1, 3.2
and 3.3.1 above, it is understood that XenoPort's participation in any Committee
is not an obligation of, or a deliverable to be provided by, XenoPort under this
Agreement and that such participation is a right of XenoPort that XenoPort may
exercise or waive, in its discretion. At any time during the term of the
Agreement and for any reason, XenoPort shall have the right to withdraw from
participation in one (1) or more Committees upon written notice to Xanodyne,
which notice shall be effective immediately upon receipt ("Withdrawal Notice").
Following the issuance of a Withdrawal Notice and subject to this Section 3.3.2,
XenoPort's representatives to the applicable Committee(s) shall not participate
in any meetings of such Committee(s), nor shall XenoPort have any right to vote
on decisions within the authority of such Committee(s). If, at any time,
following the issuance of a Withdrawal Notice, XenoPort wishes to resume
participation in such Committee(s), XenoPort shall notify Xanodyne in writing
and, thereafter, XenoPort's representatives to such Committee(s) shall be
entitled to attend any subsequent meeting of such Committee(s) and to
participate in the activities of, and decision-making by, such Committee(s) as
provided in this Article 3 as if a Withdrawal Notice had not been issued by
XenoPort pursuant to this Section 3.3.2. Following XenoPort's issuance of a
Withdrawal Notice pursuant to this Section 3.3.2, unless and until XenoPort
resumes participation in the applicable Committee(s) in accordance with this
Section 3.3.2: (a) all meetings of such Committee(s) shall be held at Xanodyne's
facilities; (b) Xanodyne shall have the right to make the final decision on all
matters within the scope of authority of such Committee(s); and (c) XenoPort
shall have the right to continue to receive the minutes of such Committee
meetings, but shall not have the right to approve the minutes for any such
Committee meeting held after XenoPort's issuance of a Withdrawal Notice. For
clarity, XenoPort's election to withdraw from participation in any or all
Committees shall not constitute a breach of this Agreement by XenoPort.

     3.4 Committee Meetings. The JDC and, from and after such time as is
appropriate, the JCC, shall meet at least twice each calendar year, or more or
less often as otherwise agreed to by the Parties. All Committee meetings may be
conducted by telephone, video-conference or in person (subject to the
requirement below) as reasonably determined by the chairperson of the applicable

                                       11

<PAGE>

Committee; provided, however, that each Committee shall meet in person at least
once each calendar year, unless the Parties mutually agree to meet by
alternative means. Unless otherwise agreed by the Parties, all in-person
Committee meetings shall be held on an alternating basis between XenoPort's
facilities and Xanodyne's facilities. Each Party shall bear its own personnel
and travel costs and expenses relating to Committee meetings. With the consent
of the Parties (not to be unreasonably withheld or delayed), other employee
representatives of the Parties may attend any Committee meeting as non-voting
observers. Minutes of each Committee meeting will be prepared by the chairperson
and distributed to the members of the applicable Committee for review and
comment within twenty (20) days after each meeting of the applicable Committee,
and will be approved as the first order of business at the immediately
succeeding meeting of such Committee.

     3.5 Decision-Making. Decisions of each Committee shall be made by [**].
Subject to Section 3.3.2, in the event the JDC or the JCC fails to reach [**]
with respect to a particular matter within its authority, then the [**] shall
have the right to [**] on any such matter before the JDC or JCC, except that the
[**] with respect to the following matters: [**]. If the JDC fails to reach [**]
with respect to any of the matters described [**] above, [**] have such matter
[**]. [**] shall meet [**] to resolve such matter. If, [**] to resolve such
matter [**], the Parties shall resolve the matter in accordance with the
provisions of Section 17.3.

     3.6 Scope of Governance. Notwithstanding the creation of the JDC and JCC,
each Party shall retain the rights, powers and discretion granted to it
hereunder, and no Committee shall be delegated or vested with rights, powers or
discretion unless such delegation or vesting is expressly provided herein, or
the Parties expressly so agree in writing. No Committee shall have the power to
amend or modify this Agreement, and no decision of any Committee shall be in
contravention of any terms and conditions of this Agreement. It is understood
and agreed that issues to be formally decided by the JDC and, if applicable, the
JCC are only those specific issues that are expressly provided in this Agreement
to be decided by the JDC and JCC, as applicable.

                                       12

<PAGE>

                                    ARTICLE 4
                                   DEVELOPMENT

     4.1 Development Plan.

          4.1.1 Initial Development Plans. An initial development plan for the
Compound and XenoPort Products is attached to this Agreement as Exhibit 4.1
("XenoPort Product Development Plan") and sets forth the development activities
to be conducted in the Territory and, to the extent permitted in accordance with
Section 2.1, the development activities to be conducted outside the Territory
for the Compound and XenoPort Products. Within [**] following the Effective
Date, Xanodyne shall provide to XenoPort an initial development plan for the
Xanodyne Product, which shall set forth the development activities to be
conducted for the Xanodyne Product ("Xanodyne Product Development Plan"). Upon
receipt by XenoPort, the Xanodyne Product Development Plan shall be deemed to be
incorporated into this Agreement and, upon request by either party, Exhibit 4.1
shall be updated to include the initial Xanodyne Product Development Plan. For
the purposes of this Agreement, the XenoPort Product Development Plan and the
Xanodyne Product Development Plan shall be referred to collectively as the
"Development Plan".

          4.1.2 JDC Approval of Development Plan. Within [**] following the
Effective Date, Xanodyne will prepare and provide to the JDC an expanded
Development Plan, which shall be consistent with the initial XenoPort Product
Development Plan and Xanodyne Product Development Plan and shall include details
relating to those items described in sub-paragraphs (i) to (viii) of the last
sentence of this Section 4.1.2 to the extent such information is applicable and
available to Xanodyne as of such date. Within [**] following the Effective Date,
the JDC shall review the details of such expanded Development Plan and approve
the details of such Development Plan to the extent applicable to the Compound
and/or XenoPort Products only. For the purpose of clarity, Xanodyne agrees that
the scope of the Development Plan shall include, or shall be updated promptly to
include, the following details, as and when such information becomes applicable
and available to Xanodyne during the development of the Compound and Products:
[**].

          4.1.3 Changes to the Development Plan. The JDC shall review the
Development Plan on an ongoing basis, and in no event less frequently than [**]
each calendar year. The JDC may propose revisions to the then-current
Development Plan to the extent related to the development activities for
XenoPort Products; provided, however, the aspects of the Development Plan
relating to [**]. Any changes to the Development Plan related to the development
activities for the [**]; provided, however, that, [**] on such proposed changes,
[**]. For the sake of clarity, [**].

                                       13

<PAGE>

     4.2 Development Activities in the Territory.

          4.2.1 Responsibility. Xanodyne shall, at its expense, be responsible
for all preclinical, clinical and other development activities required to
obtain Marketing Approval for the Products in the Territory. Xanodyne shall
carry out all activities in accordance with the provisions of this Agreement,
and Xanodyne shall use Commercially Reasonable Efforts (i) to carry out all such
activities in accordance with the then-current Development Plan and (ii) to
achieve the goals of the then-current Development Plan with respect to the
Compound and the XenoPort Products in accordance with the timelines specified
therein. Xanodyne shall keep XenoPort reasonably informed as to the progress of
its development and regulatory activities relating to the Compound and each
XenoPort Product in the Territory, by way of updates to the JDC at its meetings,
and as otherwise reasonably requested by XenoPort.

          4.2.2 Conduct of Activities. Xanodyne shall conduct the activities
under the Development Plan in compliance in all material respects with all
applicable laws, rules and regulations and in accordance with good scientific
and clinical practices, applicable under the laws and regulations within the
portion of the Territory in which such activities are conducted.

     4.3 Development Activities Outside the Territory. Except for those
development activities conducted by Xanodyne or its Affiliates outside the
Territory in accordance with this Agreement, XenoPort, or its Affiliates and/or
other licensee(s), shall be responsible for all development and regulatory
activities for the Compound and XenoPort Products outside the Territory.
XenoPort agrees to keep Xanodyne reasonably informed as to the progress of its
and/or (to the extent it is able to do so) its other licensees' clinical
development and regulatory activities relating to the Compound and XenoPort
Products outside the Territory by way of updates to the JDC at its meetings and
as otherwise reasonably requested by Xanodyne. Except to the extent development
activities are permitted to be conducted by Xanodyne or its Affiliates outside
the Territory in accordance with this Agreement, it is understood and agreed
that all development efforts for the Compound and XenoPort Products outside the
Territory shall be at the sole cost and expense of XenoPort, its Affiliates or
its other licensee(s).

     4.4 Regulatory Matters.

          4.4.1 Responsibility for Regulatory Filings. Xanodyne shall be
responsible, at its expense, for filing, obtaining and maintaining approvals for
the development and commercialization of the Products for all Indications in the
Territory, including any such IND, NDA or Marketing Approval by the FDA, as well
as pricing or reimbursement approvals in the Territory. All such activity shall
be reviewed by the JDC, [**]. All such filings will be in the name of Xanodyne.

          4.4.2 Role of the JDC. The JDC shall review the overall strategy and
positioning of all material submissions and filings for the Compound and
XenoPort Products with the FDA prior to their submission or filing. In
connection with such review, Xanodyne shall promptly provide to the JDC all such
submissions or filings, and such other information regarding a proposed filing
as XenoPort may reasonably request.

                                       14

<PAGE>

          4.4.3 Regulatory Cooperation. The Parties shall cooperate with respect
to regulatory matters as set forth in this Section 4.4.3. Xanodyne shall be
responsible for liaising with and managing all interactions with Regulatory
Authorities in the Territory with respect to the Compound and Products. Xanodyne
shall provide XenoPort with: (a) reasonable advanced notice of substantive
meetings with the FDA that are either scheduled with, or initiated by or under
the authority of, Xanodyne with respect to the Compound or any XenoPort Product;
and (b) an opportunity to have up to [**] XenoPort representatives participate
in all substantive meetings with the FDA with respect to the Compound or any
XenoPort Product; it being understood that XenoPort's participation in any FDA
meeting is subject to the acceptance by the FDA. In any case, Xanodyne shall
keep XenoPort informed as to all material interactions with the FDA with respect
to the Compound and Products. Xanodyne will promptly provide XenoPort, upon
reasonable request, copies of any documents, reports and communications from or
to the FDA relating to the Compound or any Product or any activities under this
Agreement.

     4.5 Exchange of Data and Know-How.

          4.5.1 By XenoPort. [**] the Effective Date, XenoPort will make
available or provide, as applicable, to Xanodyne, all XenoPort Know-How relating
to the Compound in the Territory that is necessary or reasonably useful for
Xanodyne to develop and/or commercialize the Compound and XenoPort Products in
the Territory, including all Data from any preclinical studies of the Compound,
any pre-formulation Data, any formulation Data, and any synthetic process
development Data that have been generated or obtained by XenoPort as of the
Effective Date.

          4.5.2 By Either Party. During the term of this Agreement, each Party
shall make available or provide, as applicable, to the other Party all such
Party's Know-How (i.e., in case of XenoPort, all XenoPort Know-How, and in the
case of Xanodyne, all Xanodyne Know-How) that: (a) such Party considers to be
necessary or reasonably useful for the other Party to develop and/or
commercialize the Compound and XenoPort Products in accordance with this
Agreement (in the case of Xanodyne) or for marketing, promotion and/or sale
outside of the Territory (in the case of XenoPort); or (b) is reasonably
requested by the other Party; in each case, as promptly as possible. The Party
providing such Know-How shall provide the same in electronic form to the extent
the same exists in electronic form, and shall provide copies as reasonably
requested and an opportunity for the other Party or its designee to inspect (and
copy) all other materials comprising such Know-How (including for example,
original patient report forms and other original source data). The Parties will
cooperate and reasonably agree upon formats and procedures to facilitate the
orderly and efficient exchange of the XenoPort Know-How and the Xanodyne
Know-How pursuant to this Section 4.5.

          4.5.3 Use of Data and Know-How. Xanodyne may not use any XenoPort Data
or other XenoPort Know-How: (i) outside the Territory except as may be
necessary, as permitted by and in accordance with Sections 2.1 and 9.3, to
manufacture the Intermediate, Compound or any XenoPort Product or develop
(excluding performing or having performed clinical trials) the Compound or any
XenoPort Product; nor (ii) for any products other than the XenoPort Product.

          4.5.4 Other Licensees. XenoPort shall [**] to the extent that [**]. It
is understood that [**] by XenoPort. However, XenoPort agrees that it [**]. For
the purposes of this

                                       15

<PAGE>

Section 4.5.4, "data" shall be deemed to refer to data of the type described in
paragraphs (a) and (b) of the definition of "Xanodyne Data" in Section 1.8.2
above, and "know-how" shall be deemed to refer to information of the type
described in the definition of "Xanodyne Know-How" in Section 1.33 above.

     4.6 Sharing of Regulatory Filings. Without limiting Section 4.5 above, each
Party shall permit the other Party to access, and shall provide the other Party
with sufficient rights to reference and use in association with exercising its
rights and performing its obligations with respect to the Compound and/or
XenoPort Products under this Agreement (including the right of XenoPort to
commercialize, alone or through its Affiliates and/or licensees, the Compound
and XenoPort Products outside the Territory) all of such Party's and its
Affiliates' Data, regulatory filings and regulatory communications associated
with the submissions of INDs, MAAs or other approvals for the Compound and/or
XenoPort Products in the Territory. XenoPort shall permit Xanodyne to access,
and shall provide Xanodyne with sufficient rights to reference and use in
association with Xanodyne's exercise of its rights and performance of its
obligations with respect to the Compound and/or XenoPort Products in the
Territory, Data, regulatory filings and regulatory communications, associated
with the submissions of INDs, MAAs or approvals for the Compound and/or XenoPort
Products outside the Territory to the extent XenoPort has the right to do so.
Each Party shall pay the costs and expenses associated with its exercise of the
rights granted in this Section 4.6.

     4.7 Reporting; Adverse Drug Reactions.

          4.7.1 Pharmaco-Vigilance Agreement. [**] the Parties shall enter into
a pharmaco-vigilance agreement on terms no less stringent than those required by
the applicable guidelines of the International Conference on Harmonisation of
Technical Requirements for Registration of Pharmaceuticals for Human Use (or, to
the extent such organization ceases to exist, any successor or equivalent
organization performing similar functions) ("ICH"), including: (i) providing
detailed procedures regarding the maintenance of core safety information and the
exchange of safety data relating to the Compound and XenoPort Products within
appropriate timeframes and in an appropriate format to enable Xanodyne and
XenoPort (or its designee) to meet both expedited and periodic regulatory
reporting requirements; and (ii) allowing Xanodyne and XenoPort (or its
designee) to comply with the reporting requirements of all applicable Regulatory
Authorities on a worldwide basis for the reporting of safety data in accordance
with standards stipulated in the applicable ICH guidelines, and all applicable
regulatory and legal requirements regarding the management of safety data (the
"Pharmaco-Vigilance Agreement").

          4.7.2 Adverse Event Reporting. As between the Parties: (i) Xanodyne
shall be responsible for the timely reporting of all ADEs, product quality,
product complaints and safety data relating to the Compound and Products to the
appropriate Regulatory Authorities in the Territory; and (ii) XenoPort (or its
designee) shall be responsible for reporting all ADEs, product quality, product
complaints and safety data relating to the Compound and XenoPort Products to the
appropriate Regulatory Authorities outside the Territory; all in accordance with
the appropriate laws and regulations of the relevant countries and Regulatory
Authorities. Until the execution of the Pharmaco-Vigilance Agreement, each Party
shall keep the other Party informed on a regular basis with listings about any
ADEs and/or any pregnancies of which such Party is aware or is informed

                                       16

<PAGE>

regarding the use of the Compound or XenoPort Products. Xanodyne shall ensure
that its Affiliates comply with such reporting obligations in the Territory, and
XenoPort shall ensure that either it or its Affiliates and/or other licensees
comply with such reporting obligations outside the Territory.

                                    ARTICLE 5
                                COMMERCIALIZATION

     5.1 Commercialization of Products in the Territory.

          5.1.1 Xanodyne's Responsibility. Subject to the terms and conditions
set forth in this Agreement, Xanodyne shall be responsible, at its expense, for
commercialization, distribution, marketing and promotion of Products in the
Territory.

          5.1.2 Commercialization Plan. Following the first Filing of an MAA for
the first Xanodyne Product in the Territory, and in any event at least [**]
prior to the anticipated first commercial sale of such Xanodyne Product in the
Territory, and thereafter not less frequently than [**], Xanodyne shall prepare
a plan setting forth the strategic plan for the marketing, promotion,
distribution and commercialization of the Products for the Menorrhagia
Indication and, to the extent Xanodyne has elected to pursue in the Territory,
any Excessive Bleeding Indication and/or any Other Indications in the Territory
("Commercialization Plan"); provided that each Commercialization Plan shall be
in reasonable scope and detail and shall include sales forecasts for each
Product in the Territory. The Commercialization Plan shall be presented by
Xanodyne to the JCC[**]. The JCC shall review the Commercialization Plan
periodically and in no event less frequently than [**]. [**] Xanodyne shall keep
XenoPort reasonably informed as to the progress of its launch and
commercialization activities relating to each Product in the Territory, by way
of updates to the JCC at its meeting and as otherwise reasonably requested by
XenoPort, but no more often than [**] other than at JCC meetings.

          5.1.3 Conduct of Activities. Unless the Parties execute a Co-Promotion
Agreement pursuant to Section 5.4 below, Xanodyne shall carry out, at its
expense, all marketing, promotion and commercialization of the XenoPort Products
in the Territory consistent with the then-current Commercialization Plan and the
provisions of this Agreement.

     5.2 Commercialization Activities Outside the Territory. XenoPort, or its
Affiliates and/or other licensee(s), shall be responsible for launching and
commercializing the XenoPort Products outside the Territory. XenoPort shall keep
Xanodyne reasonably informed as to the progress of its, and/or (to the extent it
is able to do so) its other licensees', launch and commercialization activities
relating to the XenoPort Products outside the Territory, by way of updates to
the JCC at its meeting and as otherwise reasonably requested by Xanodyne, but no
more often than [**] other than at JCC meetings. It is understood and agreed
that any and all commercialization efforts for the Compound and XenoPort
Products outside the Territory shall be at the sole discretion and expense of
XenoPort, its Affiliates or its other licensees.

     5.3 Re-importation. Subject to XenoPort's obligations under Article 9,
XenoPort agrees that it shall not, itself or through its Affiliates or Third
Parties, develop, commercialize, offer for

                                       17

<PAGE>

sale, sell, market, distribute, or promote for use in the Territory a product
that contains the Compound. Subject to XenoPort's obligations under Article 9,
XenoPort and/or its Affiliates shall not sell any XenoPort Products to a
purchaser outside the Territory if it has knowledge that such purchaser or its
transferees are reasonably likely to import such XenoPort Products into the
Territory. Similarly, Xanodyne and/or its Affiliates shall not sell any Compound
or XenoPort Products to a purchaser if it has knowledge that such purchaser or
its transferees are reasonably likely to import such Compound or XenoPort
Products outside the Territory. It is understood, however, that the foregoing
shall not be deemed to prevent or restrict either Party and its Affiliates (and,
if applicable, its licensees) from importing Compound and/or XenoPort Products
for use for development activities (excluding clinical trials) in the other
Party's territory and/or for the purpose of manufacturing or having manufactured
the Compound and/or XenoPort Products in the other Party's territory, in each
case, in accordance with this Agreement.

     5.4 Co-Promotion Option. This Section 5.4 sets out the terms and conditions
of XenoPort's option to co-promote the Products in the Territory: (a) for each
Indication other than the Menorrhagia Indication; and/or (b) to primary care
physicians (each, a "Co-Promotion Field").

          5.4.1 Option Notice.

               (a) Notice of MAA Filing for an Indication other than the
Menorrhagia Indication. Xanodyne shall notify XenoPort within [**], and no less
than [**], prior to the first Filing of an MAA for a XenoPort Product for each
Indication other than the Menorrhagia Indication in the Territory. Together with
such notice, Xanodyne shall provide to XenoPort: (i) a copy of the Data package
with respect to such Indication to be provided by Xanodyne to the FDA in support
of such MAA; and (ii) [**] in the Territory.

               (b) Primary Care Physicians.

                    (i) Without limiting Xanodyne's obligations under Section
5.4.1(a) above, if at any time during the term of this Agreement, Xanodyne
desires to enter into a co-marketing or co-promotion arrangement with respect to
the marketing and promotion of any XenoPort Product to primary care physicians
in the Territory [**], Xanodyne shall so notify XenoPort in writing [**] with
any Third Party with respect thereto. Together with such notice, Xanodyne shall
provide to XenoPort [**] in the Territory.

                    (ii) Notwithstanding Section 5.4.1(b)(i) above, Xanodyne
shall not be obligated to deliver notice to XenoPort under Section 5.4.1(b)(i)
in the circumstances described in this Section 5.4.1(b)(ii). If, prior to [**],
Xanodyne has entered into a co-marketing or co-promotion arrangement with a
Third Party with respect to the co-marketing and co-promotion to primary care
physicians of any Xanodyne Product approved for the Menorrhagia Indication
("Co-Promotion Partner"), Xanodyne may initiate discussions, negotiate and/or
offer to such Co-Promotion Partner the right to co-market and co-promote any
XenoPort Product approved for the Menorrhagia Indication on terms [**]. If such
Co-Promotion Partner agrees in writing with Xanodyne to co-market and co-promote
such XenoPort Product on such terms, Xanodyne shall not be obligated to issue to
XenoPort any notice under Section 5.4.1(b)(i) with respect to such XenoPort
Product and XenoPort shall not have an option to co-market and co-promote such
XenoPort Product to primary

                                       18

<PAGE>

care physicians for so long as the agreement (or any renewal thereof) between
Xanodyne and its Co-Promotion Partner is in effect with respect to such XenoPort
Product.

     Any notice issued by Xanodyne under Sections 5.4.1(a) or 5.4.1(b)(i) shall
be an "Option Notice" for the purposes of this Agreement.

          5.4.2 Election to Negotiate. XenoPort shall have [**] after receiving
an Option Notice pursuant to Sections 5.4.1(a) or 5.4.1(b)(i) above, as
applicable, to notify Xanodyne in writing that XenoPort is interested in
co-promoting the applicable XenoPort Product(s) and Xanodyne Products in the
Territory for the applicable Co-Promotion Field (an "Election Notice"). Together
with any such Election Notice, XenoPort shall provide to Xanodyne a report of
XenoPort's co-promotion capabilities in the Territory with respect to the
applicable Co-Promotion Field in reasonably sufficient detail to demonstrate
that XenoPort has, or will have, reasonably sufficient commercialization
capabilities to co-promote such XenoPort Product(s) and, if applicable, Xanodyne
Products in the Territory in the applicable Co-Promotion Field. Promptly upon
receipt of an Election Notice, and in no event more than [**] following the date
of such Election Notice, [**], Xanodyne shall provide XenoPort with a term sheet
outlining the economic and other relevant terms of such co-promotion, and the
Parties shall negotiate in good faith towards mutually acceptable terms and
conditions on which XenoPort may co-promote such XenoPort Product(s) and, if
applicable, Xanodyne Products in the Territory in the applicable Co-Promotion
Field. During such negotiations, Xanodyne shall promptly provide to XenoPort
such additional information regarding the commercialization of such XenoPort
Product(s) and, if applicable, Xanodyne Products in the Territory in the
applicable Co-Promotion Field as is reasonable and customary in due diligence
reviews for prospective co-marketing and/or co-promotion arrangements. If the
Parties agree on such terms, the Parties shall prepare and execute a definitive
agreement setting forth the agreed terms (a "Co-Promotion Agreement"). If
XenoPort fails to issue an Election Notice within [**] after receiving an Option
Notice for a particular Co-Promotion Field or, if Xanodyne provided to XenoPort
a term sheet within the [**] period specified above and the Parties have not
entered into a Co-Promotion Agreement within [**] after the date of such
Election Notice ("Negotiation Period"), then Xanodyne shall be free to
commercialize such XenoPort Product(s) in the Territory in the applicable
Co-Promotion Field alone, or to initiate negotiations with a Third Party with
respect to rights to co-market and co-promote such XenoPort Product(s) in the
Territory in such Co-Promotion Field.

          5.4.3 Additional Matters.

               (a) It is understood that XenoPort's rights under this Section
5.4 to elect to co-promote the XenoPort Products and, if applicable, Xanodyne
Products in the Territory in each Co-Promotion Field are cumulative and that the
obligations imposed on Xanodyne in this Section 5.4 shall continue to apply for
a particular Co-Promotion Field, even if XenoPort has exercised its option
hereunder with respect to any other Co-Promotion Field.

               (b) Notwithstanding Section 5.4.3(a) above, if prior to the
issuance of any Election Notice with respect to a particular Co-Promotion Field
pursuant to Section 5.4.2 above, the Parties have already executed a
Co-Promotion Agreement with respect to any other Co-Promotion

                                       19

<PAGE>

Field, the Parties may mutually agree not to execute an additional Co-Promotion
Agreement but rather to amend such existing Co-Promotion Agreement to include
economic and other appropriate terms with respect to the co-promotion of the
XenoPort Products and, if applicable, Xanodyne Products in the Territory for
such additional Co-Promotion Field.

               (c) It is further understood that nothing in this Section 5.4
shall be deemed to modify, amend or extend the license and other rights granted
to Xanodyne under Article 2 to develop or commercialize the Compound and
XenoPort Products.

                                    ARTICLE 6
                             PAYMENTS AND ROYALTIES

     6.1 Initial License Fee. Xanodyne shall pay to XenoPort an initial license
fee of Twelve Million Dollars ($12,000,000) in two installments, as follows:

          6.1.1 Six Million Dollars ($6,000,000) within ten (10) days following
the Effective Date; and

          6.1.2 Six Million Dollars ($6,000,000) on or before the twelve (12)
month anniversary of the Effective Date.

     The initial license fee set forth in this Section 6.1 shall be paid in
accordance with the payment provisions of Article 7 and shall not be refundable
or creditable against any future milestone payments, royalties or other payments
by Xanodyne to XenoPort under this Agreement.

     6.2 Milestones.

          6.2.1 Milestone Payments. In addition, Xanodyne shall pay to XenoPort
the milestone payments set forth below following the first achievement by
Xanodyne or any of its Affiliates in the Territory of the corresponding
milestone below, in accordance with this Section 6.2 and the payment provisions
in Article 7:

<TABLE>
<CAPTION>
MILESTONE EVENT                                                                    MILESTONE PAYMENT
---------------                                                                    -----------------
<S>                                                                                <C>
1.   [**] by [**] the [**] in the Territory:                                             $[**]

2.   [**] with [**]:                                                                     $[**]

3.   [**] in the Territory for the [**]:                                                 $[**]

4.   [**] in the Territory for the [**]:                                                 $[**]

5.   [**] in the Territory:                                                              $[**]

6.   [**] for the [**] in the Territory:                                                 $[**]
</TABLE>

                                       20

<PAGE>

<TABLE>
<CAPTION>
MILESTONE EVENT                                                                    MILESTONE PAYMENT
---------------                                                                    -----------------
<S>                                                                                <C>
7.   [**] in the Territory:                                                              $[**]

8.   Additional Milestones for [**] in the Territory [**] in the Territory:

     (a)  [**] in the Territory [**] in the Territory:                                   $[**]

     (b)  The [**] in the Territory provided that [**] in the Territory as of            $[**]
          such date:

9.   A one time payment for the first time Annual Net Sales of the XenoPort              $[**]
     Products or Products, as applicable and as further described in Section
     6.2.2(b) below, exceed [**] Dollars [**] after receipt of Marketing
     Approval for the First XenoPort Product in the Territory:

10.  A one time payment for the first time Annual Net Sales of the XenoPort              $[**]
     Products or Products, as applicable and as further described in Section
     6.2.2(b) below, exceed [**]Dollars[**] after receipt of Marketing Approval
     for the First XenoPort Product in the Territory:

11.  A one time payment for the first time Annual Net Sales of the XenoPort              $[**]
     Products or Products, as applicable and as further described in Section
     6.2.2(b) below, exceed [**]Dollars[**] after receipt of Marketing Approval
     for the First XenoPort Product in the Territory:

12.  A one time payment for the first time Annual Net Sales of the XenoPort              $[**]
     Products or Products, as applicable and as further described in Section
     6.2.2(b) below, exceed [**]Dollars [**] after receipt of Marketing Approval
     for the First XenoPort Product in the Territory:
</TABLE>

          6.2.2 Certain Terms.

               (a) Definitions. For the purposes of this Article 6:

                    (i) The "First XenoPort Product" and "First Xanodyne
Product" shall mean the first XenoPort Product or first Xanodyne Product, as
applicable, to achieve such milestone; and

                    (ii) "Loss of Exclusivity" shall mean expiration of the
period for which the applicable Product has marketing exclusivity pursuant to 21
C.F.R Section 314.108.

                                       21

<PAGE>

               (b) Calculation of Commercial Milestones. The Milestones
specified as 9 through 12 in Section 6.2.1 above are referred to in this
Agreement as the "Commercial Milestones". For the purposes of determining
whether any of the Commercial Milestones are achieved in the calendar year in
which the XenoPort Product Approval Date occurs or the first full calendar year
thereafter, only the Annual Net Sales of the XenoPort Products shall be used to
determine whether any of the Commercial Milestones are achieved. In the second
full calendar year after the XenoPort Product Approval Date and each calendar
year thereafter, Annual Net Sales of both the Xanodyne Products and the XenoPort
Products shall be used to determine whether any of the Commercial Milestones are
achieved.

          6.2.3 Skipped Milestone Payment. If, upon the first achievement of
[**], the amounts corresponding to [**], then such milestone(s) [**]. Similarly,
if, upon the first achievement of [**], the amounts corresponding to [**], then
such previous milestone(s) [**].

          6.2.4 Reports and Payments. Except [**], Xanodyne shall notify
XenoPort in writing [**] after the achievement of each milestone set forth in
Section 6.2.1 by Xanodyne or any of its Affiliates, and each such notice shall
be accompanied by the appropriate milestone payment. With respect to [**],
XenoPort shall [**] and the corresponding milestone payment [**] that such
milestone has been achieved. Any milestone payable by Xanodyne pursuant to this
Section 6.2 shall be made no more than once with respect to the achievement of
each milestone set forth in Section 6.2.1 and in no event shall the aggregate
amount to be paid by Xanodyne under this Section 6.2 exceed One Hundred Thirty
Five Million Dollars ($135,000,000). For the avoidance of doubt, each milestone
payment set forth in this Section 6.2 shall not be refundable and shall not be
creditable against future milestone payments, royalties or other payments to
XenoPort under this Agreement.

     6.3 Royalty Payments. Subject to the terms and conditions of this
Agreement, in further consideration of the license and rights granted by
XenoPort to Xanodyne under this Agreement, Xanodyne shall pay to XenoPort
royalties on the Net Sales of Products in the Territory as set forth in this
Section 6.3.

          6.3.1 Prior to [**] of the Increased Royalty Commencement Date.

               (a) Royalty Rates for Xanodyne Products.

                    (i) Upon receipt of Marketing Approval for the First
Xanodyne Product in the Territory (the "Xanodyne Product Approval Date") and
prior to the Increased Royalty Commencement Date (as defined in Section
6.3.1(a)(ii) below), Xanodyne shall pay to XenoPort royalties at the rates set
out below on Net Sales of Xanodyne Products in the Territory:

                                       22

<PAGE>

<TABLE>
<CAPTION>
                         ANNUAL NET SALES OF XANODYNE PRODUCTS                            ROYALTY RATE
                         -------------------------------------                            ------------
<S>                                                                                       <C>
Portion of Annual Net Sales of Xanodyne Products up to and including [**] Dollars [**]        [**]%
Portion of Annual Net Sales of Xanodyne Products in excess of [**] Dollars [**] up to         [**]%
and including [**] Dollars [**]
Portion of Annual Net Sales of Xanodyne Products in excess of [**] Dollars [**]               [**]%
</TABLE>

               Example: If Xanodyne has Annual Net Sales of Xanodyne Products in
               the Territory equal to

               [**], the royalty due to XenoPort would be calculated as follows

               [**]% of [**]

               [**]% of [**] = [**]

               [**]% of [**] = [**]

               The total royalty due XenoPort would be [**] (which is the sum of
               [**] and [**] and [**]

                    (ii) Commencing on [**] (the "Royalty Transition Date"; the
date which is the earlier of the XenoPort Product Approval Date or the Royalty
Transition Date shall be referred to as the "Increased Royalty Commencement
Date"), Xanodyne shall pay to XenoPort royalties on the Net Sales of Xanodyne
Products in the Territory as follows:

                         (A) Beginning on the Increased Royalty Commencement
Date and [**], the royalty rates set forth in the table in Section 6.3.1(a)(i)
above shall each be increased by [**] from the original rate; i.e., the
applicable rates during such [**] period shall be [**], respectively, for the
corresponding tiers of Annual Net Sales of Xanodyne Products; and

                         (B) Beginning on [**] of the Increased Royalty
Commencement Date, the royalty rates set forth in the table in Section
6.3.1(a)(i) above shall each be increased by [**] from the original rate; i.e.,
the applicable rates during such [**] period shall be [**], respectively, for
the corresponding tiers of Annual Net Sales of Xanodyne Products.

                    (b) Royalty Rates for XenoPort Products. To the extent
applicable, commencing on the XenoPort Product Approval Date, and ending on [**]
of the Increased Royalty Commencement Date, Xanodyne shall pay to XenoPort
royalties at the rates set out below on Net Sales of XenoPort Products in the
Territory:

                                       23

<PAGE>

<TABLE>
<CAPTION>
                         ANNUAL NET SALES OF XENOPORT PRODUCTS                            ROYALTY RATE
                         -------------------------------------                            ------------
<S>                                                                                       <C>
Portion of Annual Net Sales of XenoPort Products up to and including [**] Dollars [**]        [**]%
Portion of Annual Net Sales of XenoPort Products in excess of [**] Dollars [**] up to         [**]%
and including [**] Dollars [**]
Portion of Annual Net Sales of XenoPort Products in excess of [**] Dollars [**] up to         [**]%
and including [**] Dollars [**]
Portion of Annual Net Sales of XenoPort Products in excess of [**] Dollars [**] up to         [**]%
and including [**] Dollars [**]
Portion of Annual Net Sales of XenoPort Products in excess of [**] Dollars [**]               [**]%
</TABLE>

                               (c) Royalty Term.

                         (i) Subject to Section 6.3.1(c)(iii) below, Xanodyne's
obligation to pay royalties under Section 6.3.1(a) shall continue on a Xanodyne
Product-by-Xanodyne Product basis until the later to occur of: (i) expiration of
the last Valid Claim of a Xanodyne Patent in the Territory that covers such
Xanodyne Product or the manufacture, use, sale or importation thereof in the
Territory; and (ii) the Loss of Exclusivity for such Xanodyne Product.

                         (ii) To the extent applicable and subject to Section
6.3.1(c)(iii) below, Xanodyne's obligation to pay royalties under Section
6.3.1(b) shall continue on a XenoPort Product-by-XenoPort Product basis until
the later to occur of: (i) expiration of the last Valid Claim owned or
Controlled by a Party in the Territory that covers such XenoPort Product or the
manufacture, use, sale or importation thereof in the Territory; and (ii) the
Loss of Exclusivity for such XenoPort Product.

                         (iii) Xanodyne's obligations to pay royalties under
this Section 6.3.1 shall terminate on day prior to the second (2nd) anniversary
of the Increased Royalty Commencement Date, and thereafter no royalty payments
shall be due with respect to Products in the Territory under this Section 6.3.1;
it being understood that royalties on such Products may continue to be payable
in accordance with Section 6.3.2 on and from the second (2nd) anniversary of the
Increased Royalty Commencement Date.

          6.3.2 On and From [**] of the Increased Royalty Commencement Date.

               (a) Royalty Rates. On and from [**][**] of the Increased Royalty
Commencement Date, Xanodyne shall pay to XenoPort royalties at the rates set
forth below on Net Sales of Xanodyne Products or Products (i.e., Xanodyne
Products and XenoPort Products), as applicable, in the Territory:

                                       24

<PAGE>

<TABLE>
<CAPTION>
                             ANNUAL NET SALES OF PRODUCTS                                 ROYALTY RATE
                             ----------------------------                                 ------------
<S>                                                                                       <C>
Portion of Annual Net Sales of Products up to and including [**] Dollars [**]                 [**]%
Portion of Annual Net Sales of Products in excess of [**] Dollars [**] up to and              [**]%
including [**] Dollars [**]
Portion of Annual Net Sales of Products in excess of [**] Dollars [**] up to and              [**]%
including [**] Dollars [**]
Portion of Annual Net Sales of Products in excess of [**] Dollars [**] up to and              [**]%
including [**] Dollars [**]
Portion of Annual Net Sales of Products in excess of [**] Dollars [**]                        [**]%
</TABLE>

               Example: If Xanodyne has Annual Net Sale of Products in the
               Territory equal to [**], the royalty due to XenoPort would be
               calculated as follows:

               [**] of [**] = [**]

               [**]% of [**] = [**]

               [**]% of [**] = [**]

               [**]% of [**] = [**]

               [**]% of [**] = [**]

               The total royalty due XenoPort would be [**](which is the sum of
               [**] and [**] and [**] and [**] and [**]

          (b) Royalty Term. Xanodyne's obligation to pay royalties under Section
6.3.2(a) shall commence on the second (2nd) anniversary of the Increased Royalty
Commencement Date, and shall continue on a Product-by-Product basis until the
later of: (i) the expiration of the last Valid Claim owned or Controlled by a
Party in the Territory that covers such Product or the manufacture, use, sale or
import thereof in the Territory; (ii) the Loss of Exclusivity for such Product;
or (iii) with respect to the XenoPort Products only, fifteen (15) years after
the first commercial sale of such XenoPort Product in the Territory. Thereafter,
no further royalty payments shall be due with respect to such Product in the
Territory.

          6.3.3 Reports and Payments. Commencing upon the first commercial sale
of the first Product by or under the authority of Xanodyne or its Affiliates in
the Territory, within [**] after the end of each calendar quarter, Xanodyne
shall deliver to XenoPort a report setting out in reasonable detail the
information necessary to calculate the royalty payments due under this Section
6.3 with respect to Net Sales of the applicable Products made during such
calendar quarter, including:

               (a) units of the Products sold by or under the authority of
Xanodyne or its Affiliates in the Territory during the relevant calendar
quarter;

                                       25

<PAGE>

               (b) gross sales of the Products by or under the authority of
Xanodyne or its Affiliates in the Territory in the relevant calendar quarter;

               (c) Net Sales of the Products in the Territory in the relevant
calendar quarter;

               (d) all relevant deductions or credits due to Xanodyne in
accordance with the terms of this Agreement; and

               (e) the applicable royalty rates used to calculate the royalties
payable to XenoPort for such calendar quarter.

     Any amounts due under Section 6.3.1 or Section 6.3.2, as applicable, for
such calendar quarter shall accompany such statement.

     6.4 Certain Reductions to Royalties.

          6.4.1 Third Party Royalties. In the event Xanodyne or any of its
Affiliates is required to pay to a Third Party royalties or any other amounts
under agreements for Patents not licensed under this Agreement or other
intellectual property rights not licensed under this Agreement that cover the
composition of matter or therapeutic use of the Compound, or that cover all
feasible methods to manufacture the Compound ("Third Party Royalties"), then
Xanodyne may deduct [**] of the Third Party Royalties from the amounts owed to
XenoPort pursuant to Section 6.3.1(b) or 6.3.2 above, as applicable, with
respect to Net Sales of XenoPort Products; provided the amounts paid to XenoPort
will not be so reduced to less than [**] of the royalties otherwise due pursuant
to Section 6.3.1(b) or 6.3.2, as applicable, with respect to Net Sales of
XenoPort Products.

          6.4.2 Generic Competition.

               (a) XenoPort Products. On a XenoPort Product-by-XenoPort Product
basis if: (i) [**]; (ii) one or more Generic Product(s) is/are being marketed
for an approved Indication of such XenoPort Product in the Territory; and (iii)
[**] in the aggregate, in the Territory in any calendar quarter determined by
[**] and Xanodyne reasonably determines that it is not likely to recover such
lost market share; then the royalties payable pursuant to Section 6.3.1(b) or
6.3.2, as applicable, with respect to such XenoPort Product sold in the
Territory for such quarter shall thereafter be reduced by [**]. In addition, if
(1) the [**] period specified in Section 6.3.2(b)(iii) has expired; (2)
paragraphs (i) and (ii) in the preceding sentence are satisfied and (3) [**], in
the aggregate, in the Territory in any calendar quarter determined by [**], and
Xanodyne reasonably determines that it is not likely to recover such lost market
share; then [**] with respect to such XenoPort Product sold in the Territory for
such quarter.

               (b) Xanodyne Products. On a Xanodyne Product-by- Xanodyne Product
basis if: (i) [**]; (ii) one or more Generic Product(s) is/are being marketed
for an approved Indication of such Xanodyne Product in the Territory; and (iii)
[**] in the aggregate, in the Territory in any calendar quarter determined by
[**] and Xanodyne reasonably determines that it is not likely

                                       26

<PAGE>

to recover such lost market share; then [**] with respect to such Xanodyne
Product sold in the Territory for such quarter.

               (c) "Generic Product" shall mean a [**] in all respects [**];
(ii) that [**]; (iii) [**] in the Territory by an entity other than Xanodyne or
its Affiliates; and (iv) [**].

          6.4.3 Royalty Floor. Except as expressly provided in paragraphs (a)
and (b) below, in no event shall the royalties payable by Xanodyne with respect
to Net Sales of XenoPort Products after receipt of Marketing Approval for the
First XenoPort Product in the Territory be reduced to [**] of the royalty rates
set forth in Section 6.3.1(b) or 6.3.2 above, as applicable; provided that: (a)
solely for the purposes of any deductions that Xanodyne is entitled to make in
accordance with Section 10.3.3(b) below, in no event shall the royalties payable
by Xanodyne with respect to Net Sales of XenoPort Products be reduced to [**] of
the royalty rates set forth in Section 6.3.1(b) or 6.3.2 above, as applicable;
and (b) this Section 6.4.3 shall not limit the application of the last sentence
in Section 6.4.2(a), [**].

     6.5 Conflicts of Interest. Xanodyne and its Affiliates shall set prices and
discounts for the XenoPort Products in the Territory solely in the interest of
the commercial success of such XenoPort Products in the Territory and not for
the interest of its other products and services. However, the foregoing shall
not be construed to dictate to Xanodyne or its Affiliates any resale prices for
the Products in the Territory.

                                   ARTICLE 7
                           PAYMENTS; BOOKS AND RECORDS

     7.1 Payment Method. Unless otherwise expressly stated in this Agreement,
all payments under this Agreement shall be made by bank wire transfer in
immediately available funds to an account designated by the Party to which such
payments are due. All dollar amounts specified in, and all payments made under,
this Agreement shall be in U.S. dollars.

     7.2 Late Payments. Any payments or portions thereof due under this
Agreement that are not paid by the date such payments are due under this
Agreement shall bear interest at a rate equal to: (a) the prime rate as reported
by Citibank N.A. on the date such payment is due, plus [**]; or (b) if lower,
the maximum rate permitted by applicable law; calculated on the number of days
such payment is delinquent, compounded annually and computed on the basis of a
three hundred sixty five (365) day year. This shall in no way limit any other
remedies available to the Parties.

     7.3 Accounting Matters. In the event that XenoPort is, or reasonably
determines that it shall be, unable to recognize any payments hereunder by
reason of the Financial Accounting Standards Board, Emerging Issues Task Force
No. 00-21, Revenue Arrangements with Multiple Deliverables, or any related
accounting principles, the Parties shall cooperate as reasonably necessary and
in good faith to allow XenoPort to recognize any such payments in a manner that
does not have any material adverse effect on either Party, in exercise of
Xanodyne's reasonable discretion.

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     7.4 Records; Inspection.

          7.4.1 Xanodyne. Xanodyne shall keep, and require its Affiliates to
keep, complete, true and accurate books of accounts and records for the purpose
of determining the amounts payable to XenoPort pursuant to this Agreement. Such
books and records shall be kept for at least [**] following the end of the
calendar quarter to which they pertain. Such records will be open for inspection
during such [**] period by an independent auditor chosen by XenoPort, and
reasonably acceptable to Xanodyne, for the purpose of verifying the amounts
payable by Xanodyne hereunder. Such inspections may be made no more than once
each calendar year, at reasonable times and on reasonable prior written notice.
Such records for any particular calendar quarter shall be subject to no more
than one inspection. The independent auditor shall be obligated to execute a
reasonable confidentiality agreement prior to commencing any such inspection.
Inspections conducted under this Section 7.4.1 shall be at the expense of
XenoPort, unless a variation or error producing an underpayment in amounts
payable exceeding [**] of the amount paid for any period covered by the
inspection is established, in which case, all reasonable costs relating to the
inspection for such period and any unpaid amounts that are discovered shall be
paid by Xanodyne, together with interest on such unpaid amounts at the rate set
forth in Section 7.2 above. If XenoPort has been overpaid by an amount exceeding
[**] of the amount due for any period covered by the inspection, then such
overpayment less any reasonable expenses related to the inspection shall be a
credit against the next royalties owed to XenoPort by Xanodyne. The Parties will
endeavor in any such inspection to minimize disruption of Xanodyne's normal
business activities to the extent reasonably practicable.

          7.4.2 XenoPort. XenoPort shall keep complete, true and accurate books
of accounts and records for the purpose of determining payments due from
Xanodyne pursuant to this Agreement (e.g., Cost of Goods). Such books and
records shall be kept for at least [**] following the end of the calendar
quarter to which they pertain. Such records will be open for inspection during
such [**] period by an independent auditor chosen by Xanodyne, and reasonably
acceptable to XenoPort, for the purpose of verifying the amounts payable by
Xanodyne hereunder. Such inspections may be made no more than once each calendar
year, at reasonable times and on reasonable prior written notice. Such records
for any particular calendar quarter shall be subject to no more than one
inspection. Xanodyne's independent auditor shall be obligated to execute a
reasonable confidentiality agreement prior to commencing any such inspection.
Inspections conducted under this Section 7.4.2 shall be at the expense of
Xanodyne, unless a variation or error producing an overpayment in amounts
payable to XenoPort exceeding [**] of the amount paid for any period covered by
the inspection is established in the course of any such inspection, in which
case, all reasonable costs relating to the inspection for such period and any
overpaid amounts that are discovered shall be paid to Xanodyne by XenoPort,
together with interest on such overpaid amounts at the rate set forth in Section
7.2 above. If XenoPort has been underpaid, then Xanodyne shall pay such
underpayment to XenoPort. The Parties will endeavor in such inspection to
minimize disruption of XenoPort's normal business activities to the extent
reasonably practicable.

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<PAGE>

                                    ARTICLE 8
                          DILIGENCE; CERTAIN COVENANTS

     8.1 Commercially Reasonable Efforts of Xanodyne. Xanodyne shall use
Commercially Reasonable Efforts to develop, achieve Marketing Approval for, and
launch a XenoPort Product for a Menorrhagia Indication in the Territory as soon
as practicable, and thereafter to market, promote and sell XenoPort Product(s)
and to maximize the Net Sales of XenoPort Products in the Territory. In
addition, Xanodyne shall use Commercially Reasonable Efforts to identify
Excessive Bleeding Indications for which the Compound and XenoPort Products may
provide a tangible benefit over existing therapies that have received Marketing
Approval for any such Excessive Bleeding Indication(s) in the Territory and for
which a commercially favorable return in the Territory is reasonably possible.
Following Xanodyne's determination in accordance with the preceding sentence
that a commercially favorable return in the Territory is reasonably possible for
any such Excessive Bleeding Indication(s), and subject to the approval of the
JDC (not to be unreasonably withheld), Xanodyne shall use Commercially
Reasonable Efforts to develop, achieve Marketing Approval for, and launch a
XenoPort Product for such Excess Bleeding Indication(s) in the Territory.

                                    ARTICLE 9
                            MANUFACTURING AND SUPPLY

     9.1 Transfer of Manufacturing and Supply Responsibilities. [**] following
the Effective Date, XenoPort and Xanodyne shall develop and reasonably agree
upon a detailed plan ("Supply Transition Plan") to transfer responsibility for
manufacturing and supply of the Intermediate (for the purposes of manufacturing
or having manufactured the Compound and XenoPort Products in accordance with
this Agreement) and the Compound and XenoPort Products for marketing, promotion
and/or sale in the Territory to Xanodyne by [**] after the Effective Date
("Supply Transition Date"); provided however that, upon the reasonable written
request of Xanodyne, prior to the expiration of such [**] period, such period
may be extended for a further [**]; i.e., [**] (in which event, such date shall
be deemed to be the Supply Transition Date). XenoPort shall use commercially
reasonable efforts and cooperate in good faith with Xanodyne to effect, at
Xanodyne's expense, the transfer of responsibility for the manufacturing and
supply of the Intermediate (for the purposes of manufacturing or having
manufactured the Compound and XenoPort Products in accordance with this
Agreement), the Compound and XenoPort Products for marketing, promotion and/or
sale in the Territory to Xanodyne in an orderly manner in accordance with the
Supply Transition Plan and the timelines set forth therein. Without limiting the
foregoing, the Supply Transition Plan shall include the provision to Xanodyne of
all XenoPort Know-How necessary for the manufacture of the Intermediate and/or
Compound in accordance with the licenses granted to Xanodyne under this
Agreement.

     9.2 Activities Prior to the Supply Transition Date.

          9.2.1 Supplies of the Compound. Upon Xanodyne's written request,
XenoPort shall use commercially reasonable efforts to supply to Xanodyne the
Compound for use in connection with the development activities for the Compound
and XenoPort Products under this Agreement

                                       29

<PAGE>

prior to the Supply Transition Date. It is understood that XenoPort shall
provide Xanodyne the Compound in the same form as in use by XenoPort immediately
prior to the Effective Date.

          9.2.2 Reimbursement of XenoPort Supply Costs.

               (a) Xanodyne shall reimburse XenoPort the amount of the XenoPort
Supply Costs (as defined below) incurred in supplying, or obtaining supply of,
the Compound pursuant to Section 9.2.1 above and/or in performing activities
pursuant to the Supply Transition Plan. XenoPort will invoice Xanodyne for the
XenoPort Supply Costs on a monthly basis, and Xanodyne shall pay XenoPort the
applicable amounts within thirty (30) days following the date of each such
invoice.

               (b) "XenoPort Supply Costs" shall mean the following costs
incurred by XenoPort: (i) the Cost of Goods for quantities of the Compound
supplied to Xanodyne pursuant to Section 9.2.1 above; and (ii) [**] Dollars [**]
per year per XenoPort FTE on a pro rata basis for each XenoPort FTE performing
activities pursuant to the Supply Transition Plan (including, those activities
specified in Section 9.2.4 below). For such purposes, "FTE" shall mean a full
time equivalent employee (i.e., one fully-committed employee or
multiple-partially committed employees aggregating one full-time employee)
employed by XenoPort and assigned to perform specified work.

          9.2.3 Forecast. The Development Plan shall include a reasonable
forecast, prepared and provided by Xanodyne in good faith, of the quantities of
the Compound that will be required by Xanodyne and its Affiliates prior to the
Supply Transition Date for use in the development of the Compound and XenoPort
Products in accordance with this Agreement. The Development Plan shall specify
mutually agreed delivery dates for delivery of the Compound to Xanodyne.
Notwithstanding the foregoing, XenoPort shall not have any obligation to supply
any quantities of the Compound in excess of the forecasted amounts unless
otherwise agreed by XenoPort in writing.

          9.2.4 Further Assistance. Xanodyne acknowledges that, as of the
Effective Date, XenoPort is a party to that certain [**] Agreement between
XenoPort and [**], effective as of [**], pursuant to which XenoPort may obtain
from [**] supplies of the Compound and/or the Intermediate. Until the Supply
Transition Date, XenoPort shall have responsibility for the direct management of
the arrangements with [**]. XenoPort agrees to [**] (for the purposes of
manufacturing or having manufactured the Compound and XenoPort Products in
accordance with this Agreement) and/or the Compound. During the term of this
Agreement, XenoPort shall provide Xanodyne the ability to reference any Drug
Master Files of XenoPort, its Affiliates, or its suppliers regarding the
Compound. For the purposes of this Section 9.2.4, "Drug Master File" shall mean
a submission to the FDA that may be used to provide confidential detailed
information about facilities, processes or articles used in the manufacturing,
processing, packaging and storing of a pharmaceutical product.

          9.2.5 Delivery. Compound supplied by XenoPort under this Section 9.2
shall be delivered to Xanodyne [**], or at such other location as the Parties
may mutually agree in writing. The title to such Compound shall pass [**].

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<PAGE>

          9.2.6 Other Matters. XenoPort represents to Xanodyne that the [**]
obligates [**] to [**]. XenoPort agrees that it shall not execute any amendment
to the [**] that would result in [**].

     9.3 Activities After the Transition of Supply and Manufacturing
Responsibilities. On and from the date supply of the Compound for use by, or on
behalf of, Xanodyne in the Territory is transferred to Xanodyne (and in any
event no later than the Supply Transition Date), Xanodyne shall have the right,
subject to the terms and conditions of this Agreement, to manufacture, or have
manufactured, the Compound and XenoPort Products and, to practice any method,
process or procedure in connection with the manufacture of the Intermediate for
the purposes of manufacturing or having manufactured the Compound and the
XenoPort Products for use and commercialization in the Territory.

                                   ARTICLE 10
                              INTELLECTUAL PROPERTY

     10.1 Ownership of Inventions.

          10.1.1 General. As between the Parties: (a) XenoPort shall have sole
and exclusive ownership of all right, title and interest in and to all XenoPort
Patents and XenoPort Know-How, subject to the rights and licenses granted to
Xanodyne under this Agreement; and (b) Xanodyne shall have the sole and
exclusive ownership of all right, title and interest in and to all Xanodyne
Patents and Xanodyne Know-How, subject to the rights and licenses granted to
XenoPort under this Agreement. Title to all inventions and other intellectual
property made: (i) solely by Xanodyne personnel in connection with this
Agreement shall be owned by Xanodyne; (ii) solely by XenoPort personnel in
connection with this Agreement shall be owned by XenoPort; and (iii) made
jointly by personnel of XenoPort and Xanodyne in connection with this Agreement
shall be jointly owned by Xanodyne and XenoPort (any Patent with respect to such
jointly-owned inventions or other intellectual property, a "Joint Patent").
Except as expressly provided in this Agreement, it is understood that neither
Party shall have any obligation to obtain any approval of, nor pay a share of
the proceeds to, the other Party to practice, enforce, license, assign or
otherwise exploit such jointly-owned inventions or intellectual property and
each Party hereby waives any right it may have under the laws of any
jurisdiction to require such approval or accounting.

          10.1.2 Improvements. Notwithstanding Section 10.1.1 above:

               (a) Disclosure. Xanodyne agrees to disclose to XenoPort all
Improvements made by, or under the authority of, Xanodyne in connection with the
development and/or commercialization of the Compound and/or any XenoPort Product
under this Agreement.

               (b) Ownership. Title to all Improvements, excluding any
Improvement directed to any Tools, that relate directly to any Compound,
XenoPort Product, Intermediate, and/or any other [**], and/or the formulation,
manufacture and/or use of any of the foregoing (collectively, "Compound
Improvements") shall be owned by XenoPort, and Xanodyne hereby assigns to
XenoPort all of its right, title and interest in and to any Compound
Improvements made by, or under

                                       31

<PAGE>

the authority of, Xanodyne, alone or jointly with XenoPort. Xanodyne shall
promptly take, or cause to be taken, any and all actions necessary to confirm
and/or perfect XenoPort's rights in and to Compound Improvements.

               (c) License. Xanodyne hereby grants to XenoPort a non-exclusive,
worldwide, irrevocable, fully paid-up license, with the right to grant and
authorize sublicenses, under any Improvements (other than Compound Improvements
or any Improvements directed to any Tools) and Improvement Patents to make, have
made, use, offer for sale, sell, import, practice and otherwise exploit the
same, subject to the exclusive rights granted to Xanodyne under this Agreement
with respect to the Compound and XenoPort Products in the Territory.

               (d) Certain Terms. As used in this Agreement, "Improvements"
means any inventions or other intellectual property [**] in connection with
development and/or commercialization of the Compound and/or any XenoPort Product
under this Agreement that is: (i) applicable to the Compound, any XenoPort
Product, [**] and/or (ii) using [**]; and "Improvement Patents" means any Patent
claiming or disclosing an Improvement, other than a Compound Improvement.

     10.2 Prosecution and Maintenance of XenoPort Patents and Joint Patents.

          10.2.1 Patents Directed to the Compound, any XenoPort Product and/or
Compound Improvements. XenoPort shall control, at its expense, the Prosecution
and Maintenance of: (a) the XenoPort Patents as of the Effective Date, or which
may be filed after the Effective Date; and (b) any Joint Patents pursuant to
Section 10.1 above; and (c) any Patents directed to a Compound Improvement
("Compound Improvement Patents"). XenoPort shall: (i) diligently Prosecute and
Maintain the XenoPort Patents and Compound Improvement Patents in the Territory
and any Joint Patents; (ii) [**]; and (iii) shall [**] described in the
preceding subparagraph (ii). If XenoPort determines not to file any Patent, or
to abandon any Patent, within the XenoPort Compound Patents or Compound
Improvement Patents in the Territory or any Joint Patent, as applicable,
XenoPort shall provide Xanodyne with at least [**] written notice of such
decision, prior to the deadline for filing any such XenoPort Compound Patent,
Compound Improvement Patent or Joint Patent, as applicable, or prior to the date
on which such abandonment would become effective. In such event, Xanodyne shall
have the right, at its option, to control the Prosecution and Maintenance of
such XenoPort Compound Patent, Compound Improvement Patent or such Joint Patent.
For the purposes of this Section 10.2, "Prosecution and Maintenance" (including
variations such as "Prosecute and Maintain") shall mean, with respect to a
Patent, the preparing, filing, prosecuting and maintenance of such Patent, as
well as continuations, divisionals, re-examinations, reissues and requests for
patent term extensions and the like with respect to such Patent, together with
the conduct of interferences, the defense of oppositions and other similar
proceedings with respect to a Patent.

          10.2.2 Xanodyne Patents. Xanodyne shall control, at its expense, the
Prosecution and Maintenance of Patents included in the Xanodyne Patents as of
the Effective Date, or that may be filed after the Effective Date.

          10.2.3 Cooperation. Each Party shall cooperate with the other Party in
connection with all activities relating to the Prosecution and Maintenance of
the XenoPort Patents and, if

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<PAGE>

applicable, any Joint Patents and Compound Improvement Patents undertaken by
such other Party pursuant to this Section 10.2, including: (a) making available
in a timely manner any documents or information such other Party reasonably
requests to facilitate such other Party's Prosecution and Maintenance of the
applicable XenoPort Patents, Joint Patents and/or Compound Improvement Patents
pursuant to this Section 10.2; and (b) if and as appropriate, signing (or
causing to have signed) all documents relating to the Prosecution and
Maintenance of any applicable XenoPort Patents, Joint Patents and/or Compound
Improvement Patents by such other Party. Each Party shall also promptly provide
to the other Party all information reasonably requested by such other Party with
regard to such Party's activities pursuant to this Section 10.2. The Parties
shall treat all information of the other Party disclosed to it under this
Section 10.2 as Confidential Information of such other Party.

     10.3 Enforcement.

          10.3.1 Notice. In the event that XenoPort or Xanodyne becomes aware
of: (a) actual or threatened infringement or misappropriation of any XenoPort
Compound Patent or Compound Improvement Patent by the manufacture, sale or use
in the Territory of a product comprising a pro-drug of tranexamic acid (an
"Infringement") or (b) actual or threatened infringement or misappropriation of
any XenoPort Intermediate Patent, that Party shall promptly notify the other
Party in writing.

          10.3.2 Actions with Respect to Infringement. Xanodyne shall have the
first right, but not the obligation, to bring an enforcement action with respect
to an Infringement, at its own expense and using the counsel of its own choice.
XenoPort shall have the right, at its own expense, to participate in any such
action with counsel of its own choice, subject to Xanodyne's control. If
Xanodyne does not initiate any action against such an Infringement, within [**]
of receipt of a request by XenoPort to do so, then XenoPort shall be entitled to
initiate infringement proceedings or take other appropriate action against an
Infringement at its own expense. The Party conducting such action under this
Section 10.3.2 shall have full control over the conduct of such action,
including settlement thereof; provided, however, that the Party [**] (including,
any [**] within or outside the Territory), [**]. In any event, the Parties shall
assist one another and cooperate in any such action, at their own expense, at
the other's reasonable request.

          10.3.3 Recovery.

               (a) Xanodyne and XenoPort agree that any monetary recovery
realized from a litigation or settlement thereof by either Party pursuant to
Section 10.3.2 shall first [**]. Any excess amount of such a recovery shall [**]
in the Territory.

               (b) In the event that: (i) Xanodyne conducts and controls an
action with respect to an Infringement pursuant to Section 10.3.2; (ii) [**]
from the settlement of such action; and (iii) [**] in accordance with Section
10.3.2 above; then, Xanodyne shall be entitled to [**] associated with such
action from the [**] of the XenoPort Products; provided that, upon XenoPort's
reasonable request, Xanodyne shall promptly provide to XenoPort [**]; provided,
further, that Xanodyne shall make [**] after the date that a final judgment is
awarded or a settlement is executed which is covered by paragraph (ii) above.

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<PAGE>

          10.3.4 Cooperation. The Parties shall keep one another informed of the
status of their respective activities regarding any litigation or settlement
thereof pursuant to Section 10.3 and shall assist one another and cooperate in
any such litigation at the other's reasonable request (including joining as a
party plaintiff to the extent necessary and requested by the other Party).

     10.4 Third Party Infringement Claims.

          10.4.1 Notice. If the manufacture, use, sale, offer for sale or
importation of any Compound or any Product pursuant to this Agreement results in
a claim, suit or proceeding alleging patent infringement against XenoPort or
Xanodyne (or, to the extent applicable, their respective Affiliates or
licensees) (collectively, "Product Infringement Actions"), such Party shall
promptly notify the other Party hereto in writing. Similarly, if the
manufacture, use, sale, offer for sale or importation of the Intermediate
pursuant to this Agreement results in a claim, suit, proceeding alleging patent
infringement against XenoPort or Xanodyne (or, to the extent applicable, their
respective Affiliates or licensees), such Party shall promptly notify the other
Party hereto in writing (collectively, "Intermediate Infringement Actions"). For
the purposes of this Section 10.4, an "Infringement Action" shall mean,
individually, either a Product Infringement Action or an Intermediate
Infringement Action, as applicable, and collectively, Product Infringement
Actions and Intermediate Infringement Actions.

          10.4.2 Control of Defense. With respect to any Product Infringement
Action in the Territory, the Party subject to such Infringement Action shall
have the right to direct and control the defense thereof at its own expense with
counsel of its choice; provided, however, that the other Party may participate
in the defense and/or settlement thereof at its own expense with counsel of its
choice. With respect to (a) any Intermediate Infringement Action in or outside
of the Territory and (b) any Product Infringement Action outside the Territory
related to any Compound or XenoPort Product, XenoPort (or its designee) shall
have the sole right to direct and control the defense and/or settlement thereof
at its own expense with counsel of its choice; provided that, to the extent
Xanodyne is the subject of any such Infringement Action: (i) Xanodyne shall
cooperate fully with XenoPort (or its designee) and its legal representatives in
any such Infringement Action, as reasonably requested by XenoPort; and (ii)
Xanodyne may participate in the defense of any such Infringement Action, at its
own expense, with counsel of its choice. In any event, the Party that is
controlling the defense of an Infringement Action agrees to keep the other Party
hereto reasonably informed of all material developments in connection with any
such Infringement Action.

          10.4.3 Product Infringement Actions Involving Any Compound or XenoPort
Product. With respect to any Product Infringement Action related to any Compound
or XenoPort Product in the Territory, the following provisions shall apply. The
Party who is subject to any Product Infringement Action described in the
foregoing sentence agrees: (a) [**]; and (b) [**] in such Product Infringement
Action, [**]; in each case, [**].

          10.4.4 Damages Reimbursement/Offset.

               (a) With respect to any Intermediate Infringement Action: (i)
XenoPort shall [**]; and (ii) Xanodyne may [**] above; provided that [**] and,
to the extent such [**], XenoPort shall [**].

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<PAGE>

               (b) With respect to any Product Infringement Action involving any
Compound or XenoPort Product, Xanodyne may, at its option: (i) [**]; or (ii)
[**]; provided that the amount of [**].

               (c) As used herein, "Damages" shall mean out-of-pocket costs
incurred by Xanodyne with respect to a Product Infringement Action relating to
any Compound or XenoPort Product or any Intermediate Infringement Action,
including but not limited to: (i) reasonable attorney's fees; (ii) monetary
damages awarded by a court and other liabilities that are part of any final
judgment against Xanodyne, and (iii) any monetary amounts paid by Xanodyne in a
settlement of the action that are: (A) in the case of an Intermediate
Infringement Action, agreed to by XenoPort; or (B) in the case of a Product
Infringement Action, approved by XenoPort, such approval not to be unreasonably
withheld or delayed.

     10.5 Patent Marking. Xanodyne agrees to mark, and have its Affiliates mark,
all patented Products they sell or distribute pursuant to this Agreement in
accordance with the applicable patent statutes or regulations in the Territory.

                                   ARTICLE 11
                                   TRADEMARKS

     11.1 Product Trademarks. It is the intent of the Parties to develop, to the
extent reasonably possible, Product Trademarks that are capable of use on and in
connection with the marketing, sale, advertising and/or promotion of the
XenoPort Products worldwide. Accordingly, the Parties shall cooperate in good
faith to identify, in consultation with the JCC, Product Trademarks for use with
each of the XenoPort Products in the Territory, and shall take into account in
the selection of such trademarks, the ability to register and otherwise use such
trademarks in connection with the XenoPort Products outside the Territory;
provided, however, that [**]. In addition, if following the selection of any
Product Trademark in accordance with this Section 11.1, XenoPort determines that
it is not possible to register or otherwise use such Product Trademark in a
particular country outside the Territory, or that the use of such Product
Trademark would not be beneficial from a commercial perspective, XenoPort (or
its designee) may select an appropriate alternative trademark for adoption in
such country. The Parties shall also cooperate and mutually agree upon
assignment of responsibility between Xanodyne and XenoPort for the registration
of Internet domain names that include or are similar to any Product Trademarks.

     11.2 Ownership. As between the Parties: (a) Xanodyne shall own all right,
title and interest in and to the Product Trademark(s) in the Territory and all
goodwill from the use of the Product Trademark(s) in the Territory shall vest in
and inure to the benefit of Xanodyne; and (b) XenoPort shall own all right,
title and interest in and to the Product Trademarks in each country outside the
Territory and all goodwill from the use of the Product Trademarks outside the
Territory shall vest in and inure to the benefit of XenoPort. Following the
selection of any Product Trademark, Xanodyne shall take, or cause to be taken,
any and all actions necessary to confirm and/or perfect XenoPort's rights in and
to such Product Trademark outside the Territory, as reasonably requested by
XenoPort and at XenoPort's expense.

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<PAGE>

     11.3 Registration of Product Trademarks. Xanodyne shall file, register and
maintain, for the term of this Agreement, appropriate registrations for the
Product Trademark(s) in the Territory, at Xanodyne's sole expense. XenoPort (or
its designee) shall, at its sole expense, file, prosecute and maintain
appropriate registrations for the Product Trademarks outside the Territory. Upon
XenoPort's reasonable request, and at XenoPort's expense, Xanodyne shall
cooperate with XenoPort (or its designee) and take such actions as may be
reasonably necessary to assist XenoPort (or its designees) in the filing and
registration of Product Trademarks in countries outside the Territory. Xanodyne
shall not, and shall not authorize any Affiliate or Third Party to: (a) use any
Product Trademark in connection with any product other than the XenoPort
Products for use within the Territory; nor (b) register, or attempt to register,
any trademarks, marks or trade names confusingly similar to any Product
Trademark, within or outside of the Territory.

     11.4 Display. Xanodyne shall have the right to determine all packaging
materials, labels and promotional materials for the XenoPort Products in the
Territory as it considers appropriate, provided that such packaging materials,
labels and promotional materials shall display the trade names of both XenoPort
and Xanodyne. The trademarks of Xanodyne, trade dress, style of packaging and
the like with respect to each XenoPort Product in the Territory shall be
determined by Xanodyne in a manner that is consistent with Xanodyne's standard
trade dress and style.

     11.5 Grant of License to XenoPort Trade Name. Subject to the terms and
conditions of this Agreement, XenoPort hereby grants to Xanodyne an exclusive
license to use the XenoPort trade name in the Territory for the packaging,
marketing, distribution, sale and/or promotion of the XenoPort Products in
accordance with Section 11.4 above. As between the Parties, XenoPort shall own
all right, title and interest in and to the XenoPort trade name and all goodwill
from the use of the XenoPort trade name under this Agreement shall vest in and
inure to the benefit of XenoPort.

     11.6 Approval of Packaging and Promotional Materials. To the extent
necessary to preserve XenoPort's legal rights in its trade names, Xanodyne shall
submit representative promotional materials, packaging and XenoPort Product
displaying XenoPort's trade name to XenoPort for XenoPort's review and approval
prior to the first use of such promotional materials, packaging or XenoPort
Product and prior to any subsequent change or addition to such promotional
materials, packaging or XenoPort Product; provided that if XenoPort has not
responded within [**] after the submission of such promotional materials,
packaging or XenoPort Product, XenoPort's approval will be deemed to have been
received.

     11.7 Termination of Trademark License. Xanodyne's right to use the XenoPort
trade name in the Territory shall terminate if Xanodyne's rights to distribute
the XenoPort Products are terminated or expire. Xanodyne shall take all such
steps as XenoPort may reasonably request to transfer to XenoPort of all rights,
registrations, recordations and the like for such trade name.

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                                   ARTICLE 12
                                 CONFIDENTIALITY

     12.1 Confidential Information. Except as expressly authorized in this
Agreement, the Parties agree that the receiving Party shall not publish or
otherwise disclose and shall not use for any purpose any information furnished
to it by the other Party hereto pursuant to this Agreement (collectively,
"Confidential Information"). Notwithstanding the foregoing, Confidential
Information shall not include information that, in each case as demonstrated by
written documentation:

               (a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure or was developed by the
receiving Party prior to its disclosure by the disclosing Party;

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

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

               (d) was subsequently lawfully disclosed to the receiving Party by
a person other than the disclosing Party, and who did not directly or indirectly
receive such information from disclosing Party; or

               (e) is developed by the receiving Party without use of, or
reference to, any information or materials disclosed by the disclosing Party.

     12.2 Permitted Disclosures. Notwithstanding the provisions of Section 12.1
above and subject to Sections 12.3 and 12.4 below, each Party hereto may use and
disclose the other Party's Confidential Information to its Affiliates,
licensees, contractors and any other Third Parties to the extent such use and/or
disclosure is reasonably necessary to exercise the rights granted to it, or
reserved by it, under this Agreement, in prosecuting or defending litigation,
complying with applicable governmental laws or regulations, submitting
information to applicable Regulatory Authorities, United States Securities
Exchange Commission, tax or other governmental authorities or conducting
clinical trials as permitted hereunder with respect to the Compound or any
XenoPort Product. If a Party is required by law or regulations to make any such
disclosure of the other Party's Confidential Information, to the extent it may
legally do so, it will give reasonable advance notice to the other Party of such
disclosure and, save to the extent inappropriate in the case of patent
applications or otherwise, will use its good faith efforts to secure
confidential treatment of such Confidential Information prior to its disclosure
(whether through protective orders or otherwise). For any other disclosures of
the other Party's Confidential Information, including to Affiliates, licensees,
contractors and other Third Parties, a Party shall ensure that the recipient
thereof is bound by a written confidentiality agreement as materially protective
of such Confidential Information as this Article 12.

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<PAGE>

     12.3 Confidential Terms. Each Party agrees not to disclose to any Third
Party [**], except each Party may disclose [**]: (a) [**] on a need to know
basis, [**]; and (b) [**] provided that in the case of the foregoing paragraph
(b), the disclosing Party shall promptly notify the other Party [**] allow the
other Party [**] to the extent allowable by law, to seek limitations on the
portion of the Agreement that is required to be disclosed. Notwithstanding the
foregoing, the Parties [**]; thereafter, each Party may each disclose to Third
Parties the information [**].

     12.4 Publication of XenoPort Product Information. Prior to its publishing,
publicly presenting and/or submitting for written or oral publication a
manuscript, abstract or the like that includes Data or other information
relating to the Compound or any XenoPort Product that has not previously been
published pursuant to this Section 12.4, a Party shall provide the other Party a
copy thereof for its review for at least [**] (unless such Party is required by
law to publish such information sooner). The publishing Party shall consider in
good faith any comments provided by the other Party during such [**] period. In
addition, the publishing Party shall, at the request of the other Party, remove
any Confidential Information of the other Party therefrom, except each Party
shall have the right to publicly disclose any information, including
Confidential Information, pertaining to safety or efficacy of the Compound
and/or any XenoPort Product that such Party believes in good faith it is
obligated or ethically bound to disclose. The contribution of each Party shall
be noted in all publications or presentations by acknowledgment or
co-authorship, whichever is appropriate.

     12.5 General Publicity. The Parties acknowledge the importance of
supporting each other's efforts to publicly disclose results and significant
developments regarding the Compound and XenoPort Products and other activities
in connection with this Agreement, beyond what is required by law, and each
Party may make such disclosures from time to time with the approval of the other
Party, which approval shall not be unreasonably withheld or delayed. Such
disclosures may include, without limitation, achievement of Milestones under
Section 6.2, significant events in the research, development and regulatory
process with respect to the Compound or a Product, commercialization activities
and the like. When a Party (the "Requesting Party") elects to make any such
public disclosure under this Section 12.5, it will give the other Party (the
"Cooperating Party") at least [**] notice to review and comment on such
statement, it being understood that if the Cooperating Party does not notify the
Requesting Party in writing within such [**] period of any reasonable
objections, as contemplated in this Section 12.5, such disclosure shall be
deemed approved; and in any event, the Cooperating Party shall work diligently
and reasonably to agree on the text of any proposed disclosure in an expeditious
manner. The principles to be observed in such disclosures shall be accuracy,
compliance with applicable law and regulatory guidance documents, reasonable
sensitivity to potential negative reactions of the FDA (and its foreign
counterparts) and the need to keep investors informed regarding the Requesting
Party's business. Accordingly, the Cooperating Party shall not withhold its
approval of a proposed disclosure that complies with such principles.

     12.6 Prior Non-Disclosure Agreements. Upon execution of this Agreement, the
terms of this Article 12 shall supersede any prior non-disclosure, secrecy or
confidentiality agreement between the Parties, including that certain
confidentiality agreement between the Parties dated November 15, 2006. Any
information disclosed under such prior agreements shall be deemed disclosed
under this Agreement.

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<PAGE>

                                   ARTICLE 13
                              TERM AND TERMINATION

     13.1 Term. This Agreement commences on the Effective Date and, unless
terminated earlier as provided in this Article 13, shall continue in full force
and effect on a Product-by-Product basis until Xanodyne has no remaining royalty
obligations with respect to such Product. Upon expiration (but not an earlier
termination) of this Agreement in the Territory with respect to a XenoPort
Product, Xanodyne shall have a perpetual, non-exclusive, fully paid-up,
royalty-free license under the XenoPort Know-How to: (a) develop or have
developed and make or have made, such XenoPort Product in or outside the
Territory (but, outside the Territory, excluding any development constituting
the conduct of clinical trials); and (b) use, import, sell, market, offer for
sale, distribute and promote such XenoPort Product in the Territory.

     13.2 Breach. Either Party to this Agreement may terminate this Agreement in
the event the other Party shall have materially breached or defaulted in the
performance of any of its material obligations hereunder, and such default shall
have continued for [**] after written notice thereof was provided to the
breaching Party by the non-breaching Party. Any such termination shall become
effective at the end of such [**] period unless the breaching Party has cured
any such breach or default prior to the expiration of the [**] period.

     13.3 Termination For Convenience. Xanodyne may terminate this Agreement in
its entirety for any reason upon one hundred twenty (120) days prior written
notice to XenoPort; provided that Xanodyne shall not issue any notice of
termination under this Section 13.3 within the first twelve (12) months after
the Effective Date unless Xanodyne first accelerates and pays to XenoPort the
remaining initial license fee installment as set forth in Section 6.1.2. If at
any time after the first anniversary of the Effective Date there are no XenoPort
Products for which material clinical development activities are being
undertaken, or that are being sold, by Xanodyne in the Territory for a period of
one hundred eighty (180) days, XenoPort may terminate this Agreement on written
notice to Xanodyne.

                                   ARTICLE 14
                              EFFECT OF TERMINATION

     14.1 Accrued Obligations. The expiration or termination of this Agreement
for any reason shall not release either Party from any liability that, at the
time of such expiration or termination, has already accrued to the other Party
or that is attributable to a period prior to such expiration or termination, nor
will any termination of this Agreement preclude either Party from pursuing all
rights and remedies it may have under this Agreement, or at law or in equity,
with respect to any breach of this Agreement.

     14.2 Rights on Termination. This Section 14.2 shall apply upon any
termination of Xanodyne's rights under this Agreement, excluding termination of
this Agreement by Xanodyne pursuant to Section 13.2 above for XenoPort's breach
of this Agreement.

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<PAGE>

          14.2.1 Wind-down Period.

               (a) Development. In the event there are any ongoing clinical
trials of any XenoPort Product in the Territory, at XenoPort's request,
following the date a notice of termination has been issued pursuant to Section
13.2 or 13.3, as applicable, Xanodyne agrees: (i) to take steps to complete such
clinical trials, or any portion thereof, unless any such clinical trials are
required to be terminated by a directive or order of the FDA or the
institutional review board of an applicable clinical trial site; or (ii) to the
extent so requested by XenoPort, to promptly transition to XenoPort or its
designee such clinical trials or portions thereof; in each case, at XenoPort's
expense. Xanodyne shall continue to conduct any such clinical trials to be
completed by Xanodyne pursuant to this Section 14.2.1(a) in accordance with the
terms and conditions of this Agreement.

               (b) Commercialization. To avoid a disruption in the supply of
XenoPort Products to patients, if this Agreement is terminated after the first
commercial sale of any XenoPort Product in the Territory, Xanodyne and its
Affiliates shall continue to market, promote, distribute and otherwise
commercialize (including with the assistance of any Co-Promotion Partner, to the
extent permitted by any agreement with such Co-Promotion Partner) the XenoPort
Products in the Territory for which Marketing Approval by the FDA has been
obtained (unless the FDA or a court of competent jurisdiction in the Territory
issues a directive or order that a particular XenoPort Product be recalled or
withdrawn in the Territory, or the Parties mutually agree that a particular
XenoPort Product should be recalled or withdrawn in the Territory) and in
accordance with the terms and conditions of this Agreement, until the date on
which XenoPort notifies Xanodyne in writing that XenoPort has secured an
alternative distributor or licensee for the Compound and XenoPort Products in
the Territory, but in no event for more than six(6) months after the effective
date of any such termination of this Agreement (the "Wind-down Period");
provided that Xanodyne and its Affiliates shall cease such activities, or any
portion thereof, upon sixty (60) days' notice by XenoPort requesting that such
activities (or portion thereof) be ceased. Notwithstanding any other provision
of this Agreement, during the Wind-down Period, Xanodyne's rights with respect
to the Compound and XenoPort Products in the Territory shall be non-exclusive
and, without limiting the foregoing, XenoPort shall have the right to engage one
or more other distributor(s) and/or licensee(s) of the Compound and/or any
XenoPort Product in the Territory. Any Products sold or disposed by Xanodyne in
the Territory during the Wind-down Period shall be subject to the applicable
payment obligations under Article 6 above and all relevant deductions or credits
due to Xanodyne in accordance with this Agreement. Within thirty (30) days of
expiration of the Wind-down Period, Xanodyne shall notify XenoPort of any
quantity of the Intermediate, Compound and/or XenoPort Products remaining in
Xanodyne's inventory and XenoPort shall have the option, upon notice to
Xanodyne, to repurchase any such quantities of the Intermediate, Compound and/or
XenoPort Products, as applicable, from Xanodyne at a price equal to the fully
burdened costs (excluding overhead) incurred by Xanodyne to manufacture or have
manufactured such Intermediate, Compound and/or XenoPort Products, as
applicable, calculated in accordance with GAAP and Xanodyne's then-prevailing
standard procedures for calculating costs of good sold. For the sake of clarity,
such fully burdened costs shall not include any margins or other markup.

               14.2.2 Assignment of Regulatory Filings and Marketing Approvals.
At XenoPort's option, which shall be exercised by written notice to Xanodyne,
Xanodyne shall assign to XenoPort or its designee (or, to the extent not so
assignable, Xanodyne shall take all reasonable actions to make available to
XenoPort or its designee the benefits of) all regulatory filings and
registrations (including INDs, NDAs and Marketing Approvals by the FDA) for the
Compound and XenoPort Products in the Territory. In each case, unless otherwise
required by any applicable law or regulation, the foregoing assignment (or
availability) shall be effected within thirty (30) days after the effective date
of any such termination of this Agreement. In addition, Xanodyne shall promptly
provide to XenoPort a copy of all Data and Xanodyne Know-How pertaining to the
Compound and all XenoPort Products in the Territory, or otherwise relied upon by
Xanodyne in association with any

                                       40

<PAGE>

IND, NDA or other approval for the Compound or any XenoPort Product in the
Territory, to the extent not previously provided to XenoPort, and XenoPort shall
have the right to use and disclose all such Data and Xanodyne Know-How following
termination of this Agreement.

          14.2.3 Supply. To the extent applicable, Xanodyne shall cooperate
fully to transition to XenoPort, upon XenoPort's request, any arrangement with
any contractor from which Xanodyne had arranged to obtain a supply of the
Intermediate, and/or any Compound and/or XenoPort Product, as applicable. In the
event that such materials are manufactured by Xanodyne, then Xanodyne shall sell
to XenoPort such materials pursuant to purchase orders submitted by XenoPort to
Xanodyne, and XenoPort shall purchase from Xanodyne such materials in the
quantities specified in any such purchase orders, for a price calculated in
accordance with this Section 14.2.3 until such time as XenoPort is able to
procure an alternative source of the same; provided that XenoPort shall use
diligent efforts to obtain such alternative source as soon as practicable, and
in any event, Xanodyne's obligations to supply such materials during such
transition time shall not continue for a period of more than eighteen (18)
months. Xanodyne shall provide the Intermediate, Compound or XenoPort Products
to XenoPort pursuant to this Section 14.2.3 at a price equal to the fully
burdened costs (excluding overhead costs) incurred by Xanodyne to manufacture or
have manufactured such Intermediate, Compound and/or XenoPort Products, as
applicable, calculated in accordance with GAAP and Xanodyne's then prevailing
standard procedures for calculating cost of goods. For the sake of clarity, such
fully burdened costs shall not include any margins or other markup. In addition,
Xanodyne shall promptly provide to XenoPort a copy of all Data pertaining to the
manufacture of the Intermediate, Compound and/or XenoPort Products, as
applicable, to the extent not previously provided to XenoPort, during the term
or pursuant to Section 14.2.2, and XenoPort shall have the right to use (and
authorize the use of), and to disclose, all such Data following termination of
this Agreement.

          14.2.4 Transition. Without limiting the foregoing, Xanodyne shall use
Commercially Reasonable Efforts to cooperate with XenoPort and/or its designee
to effect a smooth and orderly transition in the development, manufacture, sale
and ongoing marketing, promotion and commercialization of the Compound and
XenoPort Products for the Territory during the Wind-down Period. Xanodyne shall,
upon written request from XenoPort, provide XenoPort copies of customer lists,
customer data and other customer information relating to all XenoPort Products
in the Territory (except as prevented by the applicable laws and regulations
relating to the protection of personal information), which XenoPort shall have
the right to use and disclose. Without limiting the foregoing, Xanodyne shall
conduct in a reasonable manner any activities to be conducted under this Section
14.2.

          14.2.5 Assignment of Product Trademarks. Promptly following the
effective date of any termination of this Agreement pursuant to Section 13.2 or
13.3, Xanodyne shall assign, or cause to be assigned, to XenoPort or its
designee, at XenoPort's expense, all right, title and interest in and to the
Product Trademarks, together with all registrations or applications for
registration of such trademarks, in the Territory. In each case, unless
otherwise required by any applicable law or regulation or requested by XenoPort,
the foregoing assignment shall be made within thirty (30) days after the
effective date of any termination of this Agreement. XenoPort hereby grants to
Xanodyne a non-exclusive license to use the Product Trademarks in the Territory
for the packaging, marketing, distributing, sale and promotion of the XenoPort
Products solely for the purposes of permitting Xanodyne to comply with its
obligations under this Section 14.2. Such license shall become effective upon
the assignment to XenoPort of the Product Trademarks, and all registrations and

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<PAGE>

applications for registration of such Product Trademarks, in the Territory and
shall persist until the expiration of the applicable periods described in
Section 14.2.1 or 14.2.3 above, as applicable.

          14.2.6 Return of Materials. Within thirty (30) days after the end of
the Wind-down Period (or, to the extent applicable, within thirty (30) days
after the termination of Xanodyne's obligations under Section 14.2.3), Xanodyne
shall either return to XenoPort or destroy, as directed by XenoPort, all
tangible items comprising, bearing or containing any Product Trademarks, the
XenoPort trade name, and/or any Data ("Product Materials") and all Confidential
Information of XenoPort, that is in Xanodyne's possession. Except as necessary
to comply with its obligations in Section 14.2.3, effective upon the end of the
Wind-down Period (or, to the extent applicable, within thirty (30) days after
the termination of Xanodyne's obligations under Section 14.2.3): (a) Xanodyne
shall cease to use all trademarks (including the Product Trademarks) and trade
names of XenoPort in the Territory; and (b) all rights granted to Xanodyne
hereunder with respect to the Compound and XenoPort Products in the Territory
shall terminate. In addition, all Data generated by, or on behalf of, Xanodyne
hereunder during the term of the Agreement shall, to the extent it specifically
pertains to the Compound and/or the XenoPort Products, be deemed Confidential
Information of XenoPort and not Confidential Information of Xanodyne (and will
not be subject to the exclusion under Section 12.1(a) and (d) above); it being
understood that the foregoing shall not apply to any Tools.

     14.3 Survival. Upon the expiration or termination of this Agreement, all
rights and obligations of the Parties under this Agreement shall terminate
except those described in the following Articles and Sections: Articles 1, 12,
14, 16 and 18; and Section 7.4.1, Section 10.4, Xanodyne's obligations under
Section 10.3.4, Xanodyne's obligations under Section 12.5 (with respect to any
Compound or XenoPort Product), and Section 15.5 (with respect to any damages
arising or resulting from activities of a Party during the term of this
Agreement). In addition: (a) upon termination of this Agreement other than by
Xanodyne pursuant to Section 13.2: (i) to the extent that any Product is sold
during the Wind-down Period, the sub-section of Section 6.3 (i.e., Section 6.3.1
or 6.3.2) which was in effect as of the date of such termination shall apply to
determine the rates at which royalties are payable by Xanodyne in accordance
with Section 14.2.1(b); and (ii) all payments which accrue as a result of
activities conducted during the Wind-down Period shall be made in accordance
with Article 7; (b) upon termination of this Agreement for any reason, the
following Sections shall also survive: Section 7.4.2 (but only if this Agreement
is terminated within the first four (4) years following the Effective Date); and
Sections 10.2.1 and 10.2.3 (with respect to Joint Patents); and (c) upon
expiration (but not an earlier termination of this Agreement), the following
Sections shall also survive: Section 4.5.3; Section 4.6 (with respect to Data,
regulatory filings and regulatory communications that were made or generated
during the term of this Agreement); Section 4.7.2 (other than the second
sentence thereof); Section 10.3.3(a); Xanodyne's obligations and XenoPort's
rights under Section 12.4; and Section 13.1 (last sentence only).

                                   ARTICLE 15
                         REPRESENTATIONS AND WARRANTIES

     15.1 General Representations. Each Party represents and warrants to the
other as of the Effective Date as follows:

          15.1.1 Duly Organized. Such Party is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the conduct of its business or
the ownership of its properties requires such qualification and failure to have
such would prevent such Party from performing its obligations under this
Agreement.

          15.1.2 Due Execution; Binding Agreement. This Agreement is a legal and
valid obligation binding upon such Party and enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws of general application affecting the rights and
remedies of creditors and by general equity principles. The execution, delivery
and performance of this Agreement by such Party have been duly authorized by all
necessary corporate action and do not and will not: (a) require any consent or
approval of its stockholders; except, with respect to Xanodyne, the consent of
its preferred stockholders as required

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<PAGE>

by the certificate of incorporation of Xanodyne, which consent has been obtained
as of the Effective Date; (b) to such Party's knowledge, violate any law, rule,
regulation, order, writ, judgment, decree, determination or award of any court,
governmental body or administrative or other agency having jurisdiction over
such Party; nor (c) conflict with, or constitute a default under, any agreement,
instrument or understanding, oral or written, to which such Party is a party or
by which it is bound.

     15.2 Representations and Warranties of XenoPort. XenoPort represents and
warrants to Xanodyne that, as of the Effective Date:

          15.2.1 it has the full right and authority to grant the rights and
licenses as provided herein;

          15.2.2 it: (i) has not previously granted any right, license or
interest in or to the XenoPort Data, the XenoPort Know-How, the XenoPort
Patents, the Compound or any portion thereof; and (ii) is under no obligation to
grant any such license, right or interest; in each case, that is in conflict
with the rights or licenses granted to Xanodyne under this Agreement;

          15.2.3 the XenoPort Patents listed on Exhibit 1.37.1 and Exhibit
1.37.2 are the only Patents owned or Controlled by XenoPort in the Territory
that are (i) necessary to make, have made, use, import, offer for sale or sell
the Compound or the XenoPort Products in the Territory; and (ii) to make or have
made, use and import the Intermediate for the purposes of making or having made
the Compound, alone or as incorporated into a XenoPort Product, in the
Territory;

          15.2.4 to its knowledge, XenoPort owns or Controls all of the
processes necessary to manufacture the Intermediate in the form and in the
manner in which the Intermediate is being manufactured as of the Effective Date,
specifically, to its knowledge, there are no licenses required from a Third
Party to make or have made the Intermediate in such form and manner;

          15.2.5 there are no actual, pending, alleged, or to its knowledge,
threatened actions, suits, claims, interference or governmental investigations,
or intellectual property right litigation, or, to its best knowledge, threatened
product liability action, in each case, in the Territory, involving the
Intermediate, Compound, the XenoPort Patents or the XenoPort Know-How by or
against XenoPort or any of its Affiliates;

          15.2.6 all necessary consents, approvals and authorizations of all
Regulatory Authorities, other governmental authorities and other persons or
entities required to be obtained by XenoPort in order to enter into this
Agreement have been obtained;

          15.2.7 there is no actual, pending, alleged, or to its knowledge,
threatened infringement by a Third Party of any of the XenoPort Patents in the
Territory, and there is no actual, pending, alleged, or to its knowledge,
threatened misappropriation by a Third Party of any of the XenoPort Know-How in
the Territory, and it is not aware of any facts that would give rise to any
claim of infringement of any Third Party's intellectual property as a result of
the manufacture, use or sale of the Compound in the Territory;

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<PAGE>

          15.2.8 to its knowledge, none of the issued XenoPort Patents are
invalid or unenforceable in the Territory; and

          15.2.9 XenoPort does not have any knowledge that any of Xanodyne's
representations and warranties set forth in Section 15.1 above and Section 15.3
are inaccurate.

     15.3 Representations and Warranties of Xanodyne. Xanodyne represents and
warrants to XenoPort that, as of the Effective Date:

          15.3.1 it has the full right and authority to grant the rights granted
herein;

          15.3.2 the Xanodyne Patents listed on Exhibit 1.34 are the only
Patents owned or Controlled by Xanodyne that are necessary for the manufacture,
sale, use or importation of Xanodyne Products;

          15.3.3 there are no actual, pending, alleged, or to its knowledge,
threatened actions, suits, claims, interference or governmental investigations
or intellectual property right litigation or, to its best knowledge, threatened
product liability action involving any Xanodyne Product, or the Xanodyne
Patents, by or against Xanodyne or any of its Affiliates;

          15.3.4 to its knowledge, none of the issued Xanodyne Patents are
invalid or unenforceable in the Territory;

          15.3.5 to its knowledge, there are no facts or circumstances that
would prevent, or be reasonably likely to prevent, Xanodyne from obtaining
marketing exclusivity for a Xanodyne Product in the Territory pursuant to 21
C.F.R. Section 314.108.

          15.3.6 all necessary consents, approvals and authorizations of all
Regulatory Authorities, other governmental authorities and other persons or
entities required to be obtained by Xanodyne in order to enter into this
Agreement have been obtained;

          15.3.7 there is no actual, pending, alleged or, to its knowledge,
threatened infringement by a Third Party of any of the Xanodyne Patents, and
there is no actual, pending, alleged, or to its knowledge, threatened
misappropriation by a Third Party of any of the Xanodyne Know-How, and it is not
aware of any facts which would give rise to any claim of infringement of any
Third Party's intellectual property as a result of the manufacture, use or sale
of the Xanodyne Products in the Territory; and

          15.3.8 Xanodyne does not have any knowledge that any of XenoPort's
representations and warranties set forth in Sections 15.1 and 15.2 above are
inaccurate.

     15.4 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OR VALIDITY
OF ANY PATENTS ISSUED OR PENDING.

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<PAGE>

     15.5 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR
OTHERWISE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER WITH RESPECT TO ANY
SUBJECT MATTER OF THIS AGREEMENT, WHETHER UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY, FOR ANY INCIDENTAL, INDIRECT,
SPECIAL, EXEMPLARY, PUNITIVE, MULTIPLE OR CONSEQUENTIAL DAMAGES (INCLUDING,
WITHOUT LIMITATION, LOST PROFITS, LOSS OF USE, DAMAGE TO GOODWILL OR LOSS OF
BUSINESS) EXCEPT IN THE CASE OF (A) BREACH OF ARTICLE 12 OR (B) SUCH DAMAGES
OWED TO THIRD PARTIES PURSUANT TO ARTICLE 16.

                                   ARTICLE 16
                                 INDEMNIFICATION

     16.1 Indemnification of XenoPort. Xanodyne shall indemnify and hold
harmless each of XenoPort and its Affiliates and their respective directors,
officers and employees and the respective successors and assigns of any of the
foregoing (the "XenoPort Indemnitees"), from and against any and all
liabilities, damages, penalties, fines, costs and expenses (including reasonable
attorneys' fees and other expenses of litigation) ("Liabilities") from any
claims, actions, suits or proceedings brought by a Third Party (a "Third Party
Claim") incurred by any XenoPort Indemnitee, arising from, or occurring as a
result of: (a) the manufacture, use, marketing, distribution, sale or promotion
of the Compound and/or any Product by Xanodyne, or its Affiliates or licensees;
or (b) any material breach of any representations, warranties or covenants given
by Xanodyne under this Agreement; except to the extent such Third Party Claim
falls within the scope of XenoPort's indemnification obligations set forth in
Section 16.2 below or resulted from the gross negligence or willful misconduct
of a XenoPort Indemnitee.

     16.2 Indemnification of Xanodyne. XenoPort shall indemnify and hold
harmless each of Xanodyne and its Affiliates and their respective directors,
officers and employees and the respective successors and assigns of any of the
foregoing (the "Xanodyne Indemnitees"), from and against any and all Liabilities
from any Third Party Claims incurred by any Xanodyne Indemnitee, arising from,
or occurring as a result of: (a) the manufacture, use, marketing, distribution,
sale or promotion of the Compound and/or any XenoPort Product by XenoPort, or
its Affiliates or licensees (other than Xanodyne or its Affiliates or
licensees); or (b) any material breach of any representations, warranties or
covenants given by XenoPort under this Agreement; except to the extent any such
Third Party Claim falls within the scope of Xanodyne's indemnification
obligations set forth in Section 16.1 above or resulted from the gross
negligence or willful misconduct of a Xanodyne Indemnitee.

     16.3 Procedure. A Party that intends to claim indemnification under this
Article 16 (the "Indemnitee") shall promptly notify the other Party (the
"Indemnitor") in writing of any Third Party Claim, in respect of which the
Indemnitee intends to claim such indemnification, and the Indemnitor shall have
sole control of the defense and/or settlement thereof. The indemnity arrangement
in this Article 16 shall not apply to amounts paid in settlement of any action
with respect to a Third Party Claim if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld or delayed
unreasonably. The failure to deliver written notice to the Indemnitor within a
reasonable time after the commencement of any action with respect to a Third
Party Claim, if

                                       45

<PAGE>
 prejudicial to its ability to defend such action, shall relieve such Indemnitor
of any liability to the Indemnitee under this Article 16, but the omission to so
deliver written notice to the Indemnitor shall not relieve the Indemnitor of any
liability that it may have to any Indemnitee otherwise than under this Article
16. The Indemnitee under this Article 16 shall, at its expense, cooperate fully
with the Indemnitor and its legal representatives in the investigation of any
action with respect to a Third Party Claim covered by this indemnification. For
clarity, it is understood that (a) Xanodyne shall not be obligated to indemnify
XenoPort for any amounts for which XenoPort agrees to reimburse Xanodyne
pursuant to Section 10.4.4(a) above as a result of an Intermediate Infringement
Action or any amounts representing the portion of any Settlement Royalties or
other Damages that Xanodyne is entitled to deduct from royalties and/or
milestone payments to XenoPort in accordance with Section 10.4.4(a) or Section
10.4.4(b) above, as applicable; except, in each case, to the extent Xanodyne is
obligated to indemnify XenoPort for any such amount in accordance with paragraph
(b) of Section 16.1 above; and (b) XenoPort shall not be obligated to indemnify
Xanodyne for any amount representing the portion of any Settlement Royalties or
other Damages which Xanodyne is not entitled to deduct from royalties and/or
milestone payments to XenoPort in accordance with Section 10.4.4(a) or Section
10.4.4(b) above, as applicable; except to the extent XenoPort is obligated to
indemnify Xanodyne for any such amount in accordance with paragraph (b) of
Section 16.2 above.

     16.4 Insurance. Each Party shall secure and maintain, during the term of
this Agreement and for a period of [**] thereafter, comprehensive general
liability insurance, including products liability insurance and coverage for
clinical trials, underwritten by a reputable and financially secure insurance
carrier, in a form and having liability limits consistent with standards in the
pharmaceutical industry based upon such Party's activities and indemnification
obligations under this Agreement, as applicable. Each Party shall furnish to the
other Party, on request, certificates of insurance setting forth the amount of
liability insurance and a provision that the other Party shall receive [**]
written notice prior to termination or material reduction to the level of
coverage.

                                   ARTICLE 17
                               DISPUTE RESOLUTION

     17.1 Dispute Resolution. The Parties agree that any dispute arising with
respect to the interpretation, enforcement, termination or invalidity of this
Agreement, or the failure of any Committee to reach [**] (each a "Dispute"),
shall be resolved through the procedures set forth in this Article 17.

     17.2 [**] Intervention. Except for any failure of any Committee to reach
[**], which shall be resolved in accordance with the procedures specified in
Section 3.5 above, the Dispute shall first be presented to [**]. If [**] cannot
resolve the Dispute within [**] of the request to do so, either Party may
initiate arbitration proceedings in accordance with Section 17.3 below, with
respect to a Dispute which the Parties have agreed to submit to arbitration, as
provided in Section 17.3, or initiate legal proceedings with respect to any
other Dispute.

     17.3 Arbitration Proceedings. If the [**] do not reach a mutually
acceptable resolution as to a Dispute under Section 3.5 above, upon written
notice by either Party to the other Party, the Dispute shall be submitted for
resolution by final, binding arbitration in the manner described in this Section
17.3.

          17.3.1 Conduct of Arbitration. Any arbitration pursuant to this
Section 17.3 shall be conducted in English, by the Judicial Arbitration and
Mediation Services, Inc. ("JAMS") in New York City, New York, or such other
location as the Parties agree, in accordance with the JAMS Streamlined
Arbitration Rules and Procedures, as modified by this Section 17.3, by a single

                                       46

<PAGE>

arbitrator appointed in accordance with such Rules, or if the Rules do not
provide for such appointment, by the chief executive officer of JAMS. If the
arbitrator determines it appropriate, the arbitrator shall select an expert who
[**] or an individual as nearly meeting such qualifications as is practicable as
determined by the arbitrator, to advise on the proposed resolution of the
dispute. Each Party shall [**]. If so requested by the arbitrator, [**] pursuant
to this Section 17.3.1; provided that [**].

          17.3.2 Completion in [**]. In any arbitration under this Section 17.3,
the arbitrator and the Parties shall use all reasonable efforts to resolve such
dispute within [**] after the selection of the arbitrator, or as soon thereafter
as is practicable.

          17.3.3 Costs. The costs of any arbitration under this Section 17.3
shall be shared equally by the Parties, and each Party shall bear its own costs
and expenses in connection with such arbitration; provided that the arbitrator
may require the non-prevailing Party to bear one hundred percent (100%) of such
costs, and/or the direct expenses of the prevailing Party to the extent the
arbitrator determines that the non-prevailing Party pursued the Dispute in bad
faith. The decision of the arbitrator shall be binding on the Parties, and any
judgment upon such decision of the arbitrator may be entered and enforced in any
court of competent jurisdiction.

     17.4 Interim Relief. Notwithstanding anything in this Article 17 to the
contrary, XenoPort and Xanodyne shall each have the right to apply to any court
of competent jurisdiction for appropriate interim or provisional relief, as
necessary to protect the rights or property of that Party, pending the selection
of the arbitrator or the arbitrator's determination of the merits of any
Dispute.

                                   ARTICLE 18
                                  MISCELLANEOUS

     18.1 Force Majeure. If the performance of any part of this Agreement
(except for any payment obligation for goods already shipped or amounts already
accrued under this Agreement) by either Party is prevented, restricted,
interfered with or delayed by reason of force majeure (including fire,
earthquake, flood, embargo, power shortage or failure, acts of war or terrorism,
insurrection, riot, lockout or other labor disturbance, governmental acts or
orders or restrictions, or acts of God), the Party so affected shall, upon
giving written notice to the other Party, be excused from such performance to
the extent of such prevention, restriction, interference or delay; provided that
the affected Party shall use its reasonable efforts to avoid or remove such
causes of non-performance and shall continue performance with the utmost
dispatch whenever such causes are removed.

     18.2 Governing Law. This Agreement and all questions regarding its validity
or interpretation, or the breach or performance of this Agreement, shall be
governed by, and construed in accordance with, the laws of the State of New
York, without reference to conflicts of laws principles.

     18.3 Waiver of Breach. Except as otherwise expressly provided in this
Agreement, any term of this Agreement may be waived only by a written instrument
executed by a duly authorized representative of the Party waiving compliance.
The delay or failure of either Party at any time to

                                       47

<PAGE>

require performance of any provision of this Agreement shall in no manner affect
such Party's rights at a later time to enforce the same. No waiver by either
Party of any condition or term in any one or more instances shall be construed
as a further or continuing waiver of such condition or term or of another
condition or term.

     18.4 Modification. No amendment or modification of any provision of this
Agreement shall be effective unless in writing signed by a duly authorized
representative of each Party. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by a duly authorized representative of each Party.

     18.5 Severability. If any provision of this Agreement, or the application
of such provision to any Party or circumstance, shall be held invalid, illegal
or unenforceable, the Parties shall negotiate in good faith a valid, legal and
enforceable substitute provision that most nearly reflects the original intent
of the Parties and the remainder of this Agreement shall continue in full force
and effect. In the event a Party seeks to avoid a provision of this Agreement by
asserting that such provision is invalid, illegal or otherwise unenforceable,
the other Party shall have the right to terminate this Agreement upon [**] prior
written notice to the asserting Party, unless such assertion is eliminated and
the effect of such assertion is cured within such [**] period. Any termination
in accordance with the foregoing sentence shall be deemed an election by
Xanodyne to terminate pursuant to Section 13.3 if XenoPort exercises its right
to terminate under this Section 18.5, and a termination for the breach of
XenoPort pursuant to Section 13.2 if Xanodyne exercises its right to terminate
under this Section 18.5.

     18.6 Entire Agreement. This Agreement (including the Exhibits attached
hereto), together with any Pharmaco-Vigilance Agreement executed by the Parties
pursuant to Section 4.7.1 and/or any Co-Promotion Agreement executed by the
Parties pursuant to Section 5.4, constitute the entire agreement between the
Parties relating to its subject matter, and supersede all prior or
contemporaneous agreements, understandings or representations, either written or
oral, between XenoPort and Xanodyne with respect to such subject matter.

     18.7 Notices. Unless otherwise agreed by the Parties or specified in this
Agreement, all communications between the Parties relating to, and all written
documentation to be prepared and provided under, this Agreement shall be in the
English language. Any notice required or permitted under this Agreement shall be
in writing in the English language: (a) delivered personally; (b) sent by
registered or certified mail (return receipt requested and postage prepaid); (c)
sent by express courier service providing evidence of receipt, postage pre-paid
where applicable; or (d) sent by facsimile (receipt verified and a copy promptly
sent by another permissible method of providing notice described in paragraphs
(a), (b) or (c) above), to the following addresses of the Parties or such other
address for a Party as may be specified by like notice:

                                       48

<PAGE>

To XenoPort:                            To Xanodyne:
------------                            ------------
XenoPort, Inc.                          Xanodyne Pharmaceuticals, Inc.
3410 Central Expressway                 One Riverfront Place,
Santa Clara, California 95051,          Newport, Kentucky 41071,
Attention: Secretary                    Attention: General Counsel
Phone: (408) 616-7200                   Telephone: (859) 371-6383
Facsimile: (408) 616-7211               Facsimile: (859) 371-6391

With a copy to:                         With a copy to:
Wilson Sonsini Goodrich & Rosati        Dinsmore & Shohl LLP
650 Page Mill Road                      255 East Fifth Street, Suite 1900
Palo Alto, California 94304-1050        Cincinnati, Ohio 45202-4700
Attention: Kenneth A. Clark, Esq.       Attention: Paul R. Mattingly, Esq.
Telephone: (650) 493-9300               Telephone: (513) 977-8200
Facsimile: (650) 493-6811               Facsimile: (513) 977-8141

     Any notice required or permitted to be given concerning this Agreement
shall be effective upon receipt by the Party to whom it is addressed, or within
seven (7) days of dispatch whichever is earlier.

     18.8 Assignment. This Agreement shall not be assignable by either Party to
any Third Party without the written consent of the other Party hereto; except
either Party may assign this Agreement without the other Party's consent to an
entity that acquires substantially all of the business or assets of the
assigning Party which relate to the line of business to which this Agreement
relates, whether by merger, acquisition or otherwise; provided that the entity
to whom this Agreement is assigned assumes this Agreement in writing or by
operation of law. In addition, either Party shall have the right to assign this
Agreement to an Affiliate upon written notice to the non-assigning Party;
provided that the assigning Party guarantees the performance of this Agreement
by such Affiliate; and further provided that if the non-assigning Party
reasonably believes such assignment could result in material adverse tax
consequences to the non-assigning Party, such assignment shall not be made
without the non-assigning Party's consent. Subject to the foregoing, this
Agreement shall inure to the benefit of each Party, its successors and permitted
assigns. Any assignment of this Agreement in contravention of this Section 18.8
shall be null and void.

     18.9 Independent Contractors. Nothing contained in this Agreement is
intended, or shall be deemed or construed, to establish a joint venture or
partnership between XenoPort or Xanodyne. No Party to this Agreement shall have
any express or implied right or authority to assume or create any obligations on
behalf of, or in the name of, the other Party, or to bind the other Party to any
contract, agreement or undertaking with any Third Party.

     18.10 Interpretation. The captions to the several Articles and Sections of
this Agreement are not a part of this Agreement, but are included for
convenience of reference and shall not affect its meaning or interpretation. In
this Agreement: (a) the word "including" shall be deemed to be followed by the
phrase "without limitation" or like expression; (b) the singular shall include
the plural and vice versa; and (c) masculine, feminine and neuter pronouns and
expressions shall be

                                       49

<PAGE>

interchangeable. Each accounting term used herein that is not specifically
defined herein shall have the meaning given to it under GAAP, or other generally
accepted cost accounting principles in the United States, but only to the extent
consistent with its usage and the other definitions in this Agreement.

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

      [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

                                       50

<PAGE>

     IN WITNESS WHEREOF, the Parties hereto have caused this Licensing Agreement
to be duly executed as of the date first above written.

XENOPORT, INC.                          XANODYNE PHARMACEUTICALS, INC.

By: /s/ Ronald W. Barrett               By: /s/ Gregory D. Flexter
    ---------------------------------       ------------------------------------
Name: Ronald W. Barrett                 Name: Gregory D. Flexter
Title: Chief Executive Officer          Title: President and Chief Executive
                                               Officer
<PAGE>

                                   EXHIBIT 1.5

                                    COMPOUND

[**]

     [1 page of Confidential Materials omitted and filed separately with the
Securities and Exchange Commission].
<PAGE>

                                  EXHIBIT 1.15

                                  INTERMEDIATE

[**]

     [1 page of Confidential Materials omitted and filed separately with the
Securities and Exchange Commission].
<PAGE>

                                  EXHIBIT 1.34

                                XANODYNE PATENTS

[**]

     [1 page of Confidential Materials omitted and filed separately with the
Securities and Exchange Commission].
<PAGE>

                                  EXHIBIT 1.35

                                XANODYNE PRODUCT

Provided to Gia Bosko, General Counsel, XenoPort, Inc. by Tom Jennings, General
Counsel, Xanodyne Pharmaceuticals, Inc. by email dated October 1, 2007.

<PAGE>

                                 EXHIBIT 1.37.1

                            XENOPORT COMPOUND PATENTS

[**]

     [1 page of Confidential Materials omitted and filed separately with the
Securities and Exchange Commission].
<PAGE>

                                 EXHIBIT 1.37.2

                          XENOPORT INTERMEDIATE PATENTS

{**}

     [1 page of Confidential Materials omitted and filed separately with the
Securities and Exchange Commission].

<PAGE>

                                   EXHIBIT 4.1

                                DEVELOPMENT PLAN

                                 (See attached.)

<PAGE>

[**]

     [5 pages of Confidential Materials omitted and filed separately with the
Securities and Exchange Commission].

<PAGE>

                                  EXHIBIT 12.3

                                  PRESS RELEASE

                                 (See attached.)

<PAGE>

(XENOPORT(R) LOGO)                     (XANODYNE(TM) PHARMACEUTICALS, INC. LOGO)

NEWS RELEASE                                            Company Contacts:
For Immediate Distribution                              XenoPort: Jackie Cossmon
                                                        408-616-7220
                                                        ir@XenoPort.com

                                                        Xanodyne: Tom Jennings
                                                        859-371-6383
                                                        pr@xanodyne.com

             XENOPORT AND XANODYNE ANNOUNCE EXCLUSIVE U.S. LICENSING
                              AGREEMENT FOR XP21510

Novel Product Candidate Represents Potential Treatment for Women with
Menorrhagia

SANTA CLARA, CA, AND NEWPORT, KY, OCTOBER __, 2007 -- XenoPort, Inc. (Nasdaq:
XNPT) and Xanodyne Pharmaceuticals, Inc. announced today that they have entered
into an exclusive license agreement for the development and commercialization by
Xanodyne in the United States of a preclinical, non-hormonal, oral product
candidate known as XP21510, discovered by XenoPort, for the potential treatment
of women diagnosed with menorrhagia, or heavy menstrual bleeding. It is
estimated that 9 to 14 percent of healthy women suffer from menorrhagia.

Greg Flexter, chief executive officer of Xanodyne, stated, "Women suffering from
menorrhagia and their healthcare providers need improved treatments for this
potentially life-altering disorder. Our collaboration with XenoPort to develop
XP21510 may provide a non-hormonal, non-surgical option for addressing the
biological processes resulting in menorrhagia. We plan to develop XP21510, which
is covered by an allowed U.S. composition of matter patent, as a follow on
product to Xanodyne's Phase 3 tranexamic acid product candidate, XP12B, for the
treatment of menorrhagia. We believe that XP12B and XP21510 may provide for a
sustainable product life cycle opportunity in this treatment area."

Ronald W. Barrett, Ph.D., chief executive officer of XenoPort, stated, "We
believe that Xanodyne, which focuses on developing and commercializing products
addressing women's health issues, will be an excellent partner for XP21510. This
agreement with Xanodyne is an excellent example of our strategy to maximize the
value of XenoPort's discovery engine by licensing compounds that fall outside
our therapeutic focus while we concentrate our internal resources on the
development and commercialization of our pipeline of central nervous system
product candidates."

                                   -- more --

<PAGE>

XENOPORT AND XANODYNE ANNOUNCE EXCLUSIVE U.S. LICENSING                   PAGE 2
AGREEMENT FOR XP21510

Under the terms of the agreement, Xanodyne receives exclusive rights to develop
and commercialize XP21510 in the United States. In exchange for these rights,
XenoPort is entitled to receive up-front cash payments totaling $12 million, of
which $6 million is payable upon execution of the agreement and the remaining $6
million is due on the 12-month anniversary of the execution date. XenoPort also
will be eligible to receive aggregate cash payments of up to $130 million and $5
million for XP21510 and XP12B, respectively, upon the achievement of certain
development, regulatory and commercial milestones. In addition, XenoPort is
entitled to receive tiered double-digit royalty payments on potential future
sales of XP21510, as well as escalating single-digit royalties on potential
future sales of XP12B.

ABOUT XP21510

XP21510 is a new chemical entity that is a Transported Prodrug of tranexamic
acid. A prodrug is a chemical precursor to an active drug that is metabolized in
the body to form the active drug and provide its medical benefits. XP21510 is
designed to use the body's natural mechanisms for actively transporting
nutrients through the gastrointestinal tract to enhance the delivery of
tranexamic acid into the bloodstream after oral administration. Tranexamic acid
is approved in many countries in Europe and Asia for the treatment of women with
menorrhagia. Tranexamic acid is a man-made derivative of the naturally occurring
amino acid lysine and works to inhibit, on a molecular basis, the break down of
blood clots.

XP21510 was discovered at XenoPort. A United States patent application with
composition-of-matter claims relating to XP21510, publication number US
2007/0027210, has been allowed by the United States Patent and Trademark Office.

ABOUT XP12B

XP12B is a sustained-release formulation of tranexamic acid developed by
Xanodyne that received Fast Track status from the FDA for the potential
treatment of women with menorrhagia. Xanodyne is conducting Phase 3 clinical
trials with XP12B in the United States.

ABOUT MENORRHAGIA

Women with menorrhagia experience abnormally heavy and prolonged menstrual
periods at regular intervals. While a normal menses cycle lasts 21 to 35 days
with an average of five days of bleeding and total blood flow between 25 and 80
milliliters (mL), women with menorrhagia can have seven or more days of bleeding
and lose more than 80 mL of blood per menses. It is estimated that 9 to 14
percent of healthy women suffer from menorrhagia. Because quantitative means of
diagnosing menorrhagia are generally impractical, healthcare professionals often
diagnose menorrhagia symptomatically by considering frequency of tampon or
sanitary napkin change, spotting and staining events, presence of constant pain
in the lower abdomen, interference with regular work and social routines and
measurements of anemia.

                                   -- more --

<PAGE>

XENOPORT AND XANODYNE ANNOUNCE EXCLUSIVE U.S. LICENSING                   PAGE 3
AGREEMENT FOR XP21510

ABOUT XENOPORT

XenoPort, Inc. is a biopharmaceutical company focused on developing a portfolio
of internally discovered product candidates that utilize the body's natural
nutrient transport mechanisms to improve the therapeutic benefits of existing
drugs. XenoPort's most advanced product candidate, XP13512, has successfully
completed a pivotal trial in its Phase 3 clinical program for the treatment of
restless legs syndrome and has successfully completed a Phase 2a clinical trial
for the management of post-herpetic neuralgia. XenoPort has also reported
positive results from a Phase 2a clinical trial of its second product candidate,
XP19986, in patients with gastroesophageal reflux disease.

To learn more about XenoPort, please visit the web site at www.XenoPort.com.

ABOUT XANODYNE

Xanodyne Pharmaceuticals, Inc. is a privately held pharmaceutical company
focused on applying proprietary drug delivery technologies to known drug
compounds. Xanodyne develops and commercializes new products for significant
markets in the therapeutic areas of women's healthcare and pain management. The
company, located in the greater Cincinnati area, has a nationwide sales force
and currently markets numerous pharmaceutical products. More information
regarding Xanodyne can be accessed at www.xanodyne.com.

FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking" statements, including, without
limitation, all statements related to Xanodyne's future development of XP21510
and XP12B; the therapeutic and commercial potential of XP21510 and XP12B; and
potential receipt by XenoPort of future development, regulatory and commercial
milestone and royalty payments with respect to XP21510 and XP12B. Any statements
contained in this press release that are not statements of historical fact may
be deemed to be forward-looking statements. Words such as "believes,"
"anticipates," "plans," "expects," "will," "intends," "potential" and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are based upon XenoPort's current expectations.
Forward-looking statements involve risks and uncertainties. XenoPort's actual
results and the timing of events could differ materially from those anticipated
in such forward-looking statements as a result of these risks and uncertainties,
which include, without limitation, the uncertainty of the timing and results of
clinical trials of our product candidates; the uncertainty of the FDA approval
process and other regulatory requirements; our dependence on our current and
additional collaborative partners; and the therapeutic and commercial value of
the company's compounds. These and other risk factors are discussed under the
heading "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2007, filed with the Securities and Exchange Commission on August
9, 2007. XenoPort expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking

                                   -- more --

<PAGE>

XENOPORT AND XANODYNE ANNOUNCE EXCLUSIVE U.S. LICENSING                   PAGE 4
AGREEMENT FOR XP21510

statements contained herein to reflect any change in the company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statements are based.

XenoPort and Transported Prodrug are U.S. trademarks of XenoPort, Inc. Xanodyne
is a U.S. trademark of Xanodyne Pharmaceuticals, Inc.

XNPT2G

                                      #####

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