Document:

exv10w1

 

EXHIBIT 10.1

VISX, INCORPORATED

2000 STOCK PLAN

Amended and Restated Effective as of the Date of
the 2004 Annual Meeting of Stockholders

     
1.     Purposes of
the Plan. The purposes of this 2000 Stock Plan are:

			
	 	• 	
    to attract and retain the best available
    personnel for positions of substantial responsibility,
    
	 
	 	• 	
    to provide additional incentive to such
    personnel, and
    
	 
	 	• 	
    to promote the success of the Company’s
    business.
    

     
Options granted under the Plan may be Incentive
Stock Options or Nonstatutory Stock Options, as determined by
the Administrator at the time of grant. The Plan also provides
for the grant of Restricted Stock Awards and Stock Appreciation
Rights; provided, however, that (i) in no event shall more
than 10% of the Shares issuable under the Plan be granted
pursuant to SARS with an exercise price that is less than 100%
of Fair Market Value, and (ii) in no event shall more than
10% of the Shares issuable under the Plan be granted as
Restricted Stock Awards.

     
2.     Definitions.
As used herein, the following definitions shall apply:

		
	 	     
    (a) “Administrator” means
    the Board or any of its Committees as shall be administering the
    Plan, in accordance with Section 4 of the Plan.
    
	 
	 	     
    (b) “Applicable Laws” means
    the requirements relating to the administration of stock option
    plans under U.S. state corporate laws, U.S. federal
    and state securities laws, the Code, any stock exchange or
    quotation system on which the Common Stock is listed or quoted
    and the applicable laws of any foreign country or jurisdiction
    where Options, Stock Awards or Stock Appreciation Rights are, or
    will be, granted under the Plan.
    
	 
	 	     
    (c) “Board” means the Board
    of Directors of the Company.
    
	 
	 	     
    (d) “Change of Control”
    means the occurrence of any of the following events:
    

		
	 	     
    (i) any “person,” as such term is
    used in Sections 13(d) and 14(d) of the Exchange Act, other
    than the Company, a subsidiary of the Company or a Company
    employee benefit plan, including any trustee of such plan acting
    as trustee, is or becomes the “beneficial owner” (as
    defined in Rule 13d-3 under the Exchange Act), directly or
    indirectly, of securities of the Company representing twenty
    percent (20%) or more of the combined voting power of the
    Company’s then outstanding securities entitled to vote
    generally in the election of directors; or
    
	 
	 	     
    (ii) a merger or consolidation of the
    Company or any direct or indirect subsidiary of the Company with
    any other corporation, other than a merger or consolidation
    which would result in the voting securities of the Company
    outstanding immediately prior thereto continuing to represent
    (either by remaining outstanding or by being converted into
    voting securities of the surviving entity) at least fifty
    percent (50%) of the total voting power represented by the
    voting securities of the
    

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    Company or such surviving entity outstanding
    immediately after such merger or consolidation, or the
    stockholders of the Company approve an agreement for the sale or
    disposition by the Company of all or substantially all the
    Company’s assets; or
    
	 
	 	     
    (iii) a change in the composition of the
    Board, as a result of which fewer than a majority of the
    directors are Incumbent Directors. “Incumbent
    Directors” shall mean directors who either (A) are
    Directors as of the date this Plan is approved by the Board, or
    (B) are elected, or nominated for election, to the Board
    with the affirmative votes of at least a majority of the
    Incumbent Directors and whose election or nomination was not in
    connection with any transaction described in (i) or
    (ii) above or in connection with an actual or threatened
    proxy contest relating to the election of directors of the
    Company.
    

		
	 	     
    (e) “Code” means the
    Internal Revenue Code of 1986, as amended.
    
	 
	 	     
    (f) “Committee” means a
    committee of Directors appointed by the Board in accordance with
    Section 4 of the Plan.
    
	 
	 	     
    (g) “Common Stock” means
    the common stock of the Company.
    
	 
	 	     
    (h) “Company” means
    VISX, Incorporated, a Delaware corporation.
    
	 
	 	     
    (i) “Consultant” means any
    person, including an advisor, engaged by the Company or a Parent
    or Subsidiary to render services to such entity.
    
	 
	 	     
    (j) “Director” means a
    member of the Board.
    
	 
	 	     
    (k) “Disability” means
    total and permanent disability as defined in
    Section 22(e)(3) of the Code.
    
	 
	 	     
    (l) “Employee” means any
    person, including Officers and Directors, employed by the
    Company or any Parent or Subsidiary of the Company. A Service
    Provider shall not cease to be an Employee in the case of
    (i) any leave of absence approved by the Company or
    (ii) transfers between locations of the Company or between
    the Company, its Parent, any Subsidiary, or any successor. For
    purposes of Incentive Stock Options, no such leave may exceed
    ninety (90) days, unless reemployment upon expiration of
    such leave is guaranteed by statute or contract. If reemployment
    upon expiration of a leave of absence approved by the Company is
    not so guaranteed, then three (3) months following the
    ninety-first (91st) day of such leave, any Incentive Stock
    Option held by the Optionee shall cease to be treated as an
    Incentive Stock Option and shall be treated for tax purposes as
    a Nonstatutory Stock Option. Neither service as a Director nor
    payment of a director’s fee by the Company shall be
    sufficient to constitute “employment” by the Company.
    
	 
	 	     
    (m) “Exchange Act” means
    the Securities Exchange Act of 1934, as amended.
    
	 
	 	     
    (n) “Fair Market Value”
    means, as of any date, the value of Common Stock determined as
    follows:
    

		
	 	     
    (i) If the Common Stock is listed on any
    established stock exchange or a national market system,
    including without limitation the New York Stock Exchange,
    the Fair Market Value of a Share of Common Stock shall be the
    closing sales price for such stock (or the closing bid, if no
    sales were reported) as quoted on such system or exchange (or
    the exchange with the greatest volume of
    

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    trading in Common Stock) on the day of
    determination, as reported in The Wall Street Journal or
    such other source as the Board deems reliable;
    
	 
	 	     
    (ii) If the Common Stock is quoted on any
    established stock exchange or regularly quoted by a recognized
    securities dealer but selling prices are not reported, the Fair
    Market Value of a Share of Common Stock shall be the mean
    between the high bid and low asked prices for the Common Stock
    on the day of determination, as reported in The Wall Street
    Journal or such other source as the Board deems
    reliable, or;
    
	 
	 	     
    (iii) In the absence of an established
    market for the Common Stock, the Fair Market Value thereof shall
    be determined in good faith by the Board.
    

		
	 	     
    (o) “Incentive Stock
    Option” means an Option intended to qualify as an
    incentive stock option within the meaning of Section 422 of
    the Code and the regulations promulgated thereunder.
    
	 
	 	     
    (p) “Nonstatutory Stock
    Option” means an Option not intended to qualify as an
    Incentive Stock Option.
    
	 
	 	     
    (q) “Notice of Grant” means
    a written or electronic notice evidencing certain terms and
    conditions of an individual Option grant. The Notice of Grant is
    part of the Option Agreement.
    
	 
	 	     
    (r) “Officer” means a
    person who is an officer of the Company within the meaning of
    Section 16 of the Exchange Act and the rules and
    regulations promulgated thereunder
    
	 
	 	     
    (s) “Option” means a stock
    option granted pursuant to the Plan.
    
	 
	 	     
    (t) “Option Agreement”
    means an agreement between the Company and an Optionee
    evidencing the terms and conditions of an individual Option
    grant. The Option Agreement is subject to the terms and
    conditions of the Plan.
    
	 
	 	     
    (u) “Optioned Stock” means
    the Common Stock subject to an Option, SAR or Restricted Stock
    Award.
    
	 
	 	     
    (v) “Optionee” means the
    holder of an outstanding Option, SAR or Restricted Stock Award
    granted under the Plan.
    
	 
	 	     
    (w) “Parent” means a
    “parent corporation,” whether now or hereafter
    existing, as defined in Section 424(e) of the Code.
    
	 
	 	     
    (x) “Plan” means this 2000
    Stock Plan.
    
	 
	 	     
    (y) “Restricted Stock”
    means Shares acquired pursuant to the grant of a Restricted
    Stock Award under Section 11 below.
    
	 
	 	     
    (z) “Restricted Stock
    Award” means an award of Restricted Stock issued
    pursuant to Section 11 below.
    
	 
	 	     
    (aa) “Restricted Stock Award
    Agreement” means a written agreement between the
    Company and the Employee evidencing the terms and restrictions
    applying to stock granted under this Plan. The Restricted Stock
    Award Agreement is subject to the terms and conditions of the
    Plan.
    

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    (bb) “Stock Appreciation Right or
    SAR” means an award issued pursuant to Section 12
    below.
    
	 
	 	     
    (cc) “Rule 16B-3”
    means Rule 16b-3 of the Exchange Act or any successor to
    Rule 16b-3, as in effect when discretion is being exercised
    with respect to the Plan.
    
	 
	 	     
    (dd) “Section 16(b)”
    means Section 16(b) of the Exchange Act.
    
	 
	 	     
    (ee) “Service Provider”
    means an Employee, Director or Consultant.
    
	 
	 	     
    (ff) “Share” means a share
    of the Common Stock, as adjusted in accordance with
    Section 14 of the Plan.
    
	 
	 	     
    (gg) “Subsidiary” means a
    “subsidiary corporation”, whether now or hereafter
    existing, as defined in Section 424(f) of the Code.
    

     
3.     Stock Subject
to the Plan. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of Shares that may be
optioned and sold under the Plan is six million three
hundred thousand (6,300,000) Shares; provided, however, that
(i) in no event shall more than 10% of the Shares issuable
under the Plan as of May 23, 2003 (the date of the
Company’s 2003 Annual Meeting of Stockholders) plus 10% of
the Shares approved for addition to the plan on May 13,
2004 (the date of the Company’s 2004 Annual Meeting of
Stockholders), a total of 330,684 Shares, be granted
pursuant to SARS with an exercise price that is less than 100%
of Fair Market Value, and (ii) in no event shall more than
10% of the Shares issuable under the Plan as of May 23,
2003 plus 10% of the Shares approved for addition to the plan on
May 13, 2004, a total of 330,684 Shares, be granted as
Restricted Stock Awards. The Shares may be authorized, but
unissued, or reacquired Common Stock.

     
If an Option, SAR or Restricted Stock Award
expires or becomes unexercisable without having been exercised
in full, or, with respect to a Restricted Stock Award, is
forfeited back to or repurchased by the Company, the unpurchased
Shares (or for Restricted Stock Awards, the forfeited or
repurchased Shares) which were subject thereto shall become
available for future grant or sale under the Plan (unless the
Plan has terminated). With respect to SARs, only Shares actually
issued pursuant to an SAR (or in the event of a cash payout, the
share equivalent) shall cease to be available under the Plan;
all remaining Shares under SARs shall remain available for
future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued
under the Plan, upon exercise of either an Option, SAR or
Restricted Stock Award shall not be returned to the Plan and
shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased
by the Company at their original purchase price or forfeited to
the Company, such Shares shall become available for future grant
under the Plan.

     
4.     Administration
of the Plan.

     
(a) Procedure.

		
	 	     
    (i) Multiple Administrative Bodies.
    Different Committees may administer the Plan with respect to
    different groups of Service Providers.
    
	 
	 	     
    (ii) Section 162(m). To the
    extent that the Administrator determines it to be desirable to
    qualify Options granted hereunder as “performance-based
    compensation” within the meaning of Section 162(m)
    

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    of the Code, the Plan shall be administered by a
    Committee of two or more “outside directors” within
    the meaning of Section 162(m) of the Code.
    
	 
	 	     
    (iii) Rule 16b-3. To the extent
    desirable to qualify transactions hereunder as exempt under
    Rule 16b-3, the transactions contemplated hereunder shall
    be structured to satisfy the requirements for exemption under
    Rule 16b-3.
    
	 
	 	     
    (iv) Other Administration. Other than
    as provided above, the Plan shall be administered by
    (A) the Board or (B) a Committee, which committee
    shall be constituted to satisfy Applicable Laws.
    

     
(b) Powers of the Administrator.
Subject to the provisions of the Plan, and in the case of a
Committee, subject to the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority,
in its discretion:

		
	 	     
    (i) to determine the Fair Market Value in
    accordance with Section 2(n) of the Plan;
    
	 
	 	     
    (ii) to select the Service Providers to whom
    Options, SARs and Restricted Stock Awards may from time to time
    be granted hereunder;
    
	 
	 	     
    (iii) to determine the number of Shares to
    be covered by each Option, SAR or Restricted Stock Award granted
    hereunder;
    
	 
	 	     
    (iv) to approve forms of agreement for use
    under the Plan;
    
	 
	 	     
    (v) to determine the terms and conditions of
    any Option, SAR or Restricted Stock Award granted hereunder.
    Such terms and conditions include, but are not limited to, the
    exercise price, the time or times when Options, SARs or
    Restricted Stock Awards may be exercised or granted (which may
    be based on performance criteria), any vesting acceleration or
    waiver of forfeiture restrictions, and any other restriction or
    limitation regarding any Option, SAR or Restricted Stock Award
    or the Common Stock relating thereto, based in each case on such
    factors as the Administrator, in its sole discretion, shall
    determine, provided that the Administrator may not accelerate
    vesting of any Restricted Stock Award except in circumstances it
    determines to be extraordinary or non-recurring;
    
	 
	 	     
    (vi) to construe and interpret the terms of
    the Plan and awards granted pursuant to the Plan;
    
	 
	 	     
    (vii) to prescribe, amend and rescind rules
    and regulations relating to the Plan, including rules and
    regulations relating to sub-plans established for the purpose of
    qualifying for preferred tax treatment under foreign tax laws;
    
	 
	 	     
    (viii) to allow Optionees to satisfy
    withholding tax obligations by electing to have the Company
    withhold from the Shares to be issued upon exercise of an Option
    or SAR or the Shares of Restricted Stock that vest that number
    of Shares having a Fair Market Value equal to the minimum amount
    required to be withheld, and no more in any event. The Fair
    Market Value of the Shares to be withheld shall be determined on
    the date that the amount of tax to be withheld is to be
    determined. All elections by Optionees to have Shares withheld
    for this purpose shall be made in such form and under such
    conditions as the Administrator may deem necessary or advisable;
    
	 
	 	     
    (ix) to modify or amend each Option (subject
    to Section 17(c) of the Plan), including the discretionary
    authority to extend the post-termination exercisability period
    of Options longer than is
    

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    otherwise provided for in the Plan, provided that
    the Board may not amend any Option to reduce the exercise price
    of the option below 100% of the Fair Market Value per Share on
    the date of grant;
    
	 
	 	     
    (x) to authorize any person to execute on
    behalf of the Company any instrument required to effect the
    grant of an Option, SAR or Restricted Stock Award previously
    granted by the Administrator;
    
	 
	 	     
    (xi) to make all other determinations deemed
    necessary or advisable for administering the Plan.
    

     
(c) Effect of Administrator’s
Decision. The Administrator’s decisions, determinations
and interpretations shall be final and binding on all Optionees.

     
5.     Eligibility.
Nonstatutory Stock Options, SARs and Restricted Stock Awards may
be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.

     
6.     Limitations.

     
(a) Each Option shall be designated in the
Option Agreement as either an Incentive Stock Option or a
Nonstatutory Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value
of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any
calendar year (under all plans of the Company and any Parent or
Subsidiary) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken
into account in the order in which they were granted. The Fair
Market Value of the Shares shall be determined as of the time
the Option with respect to such Shares is granted.

     
(b) Neither the Plan nor any Option, SAR or
Restricted Stock Award shall confer upon any Optionee any right
with respect to continuing the Optionee’s relationship as a
Service Provider with the Company, nor shall it interfere in any
way with his or her right or the Company’s right to
terminate such relationship at any time, with or without cause.

     
(c) The following limitations shall apply to
grants of Options and SARs with an exercise price equal to a
minimum of 100% of Fair Market Value on the date of grant:

		
	 	     
    (i) No Service Provider shall be granted, in
    any fiscal year of the Company, Options or SARs to purchase more
    than 500,000 Shares.
    
	 
	 	     
    (ii) In connection with his or her initial
    service, a Service Provider may be granted Options or SARs to
    purchase up to an additional 500,000 Shares, which shall
    not count against the limit set forth in
    subsection (i) above.
    
	 
	 	     
    (iii) The foregoing limitations shall be
    adjusted proportionately in connection with any change in the
    Company’s capitalization as described in Section 14.
    
	 
	 	     
    (iv) If an Option or SAR is cancelled in the
    same fiscal year of the Company in which it was granted (other
    than in connection with a transaction described in
    Section 14), the cancelled Option or SAR will be counted
    against the limits set forth in subsections (i) and
    (ii) above. For this purpose, if the exercise price of an
    Option is reduced, the transaction will be treated as a
    cancellation of the Option and the grant of a new Option.
    

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7.     Term of
Plan. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten
(10) years unless terminated earlier under Section 17
of the Plan.

     
8.     Term of
Option. The term of each Option shall be stated in the
Option Agreement. The term of each Option shall be ten
(10) years from the date of grant or such shorter term as
may be provided in the Option Agreement. Moreover, in the case
of an Incentive Stock Option granted to an Optionee who, at the
time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option
shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.

     
9.     Option
Exercise Price and Consideration.

     
(a) Exercise Price. The per share
exercise price for the Shares to be issued pursuant to exercise
of an Option shall be determined by the Administrator provided
that such exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant of such Option. In
the case of an Incentive Stock Option granted to an Employee
who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.

     
(b) Waiting Period and Exercise
Dates. At the time an Option is granted, the Administrator
shall fix the period within which the Option may be exercised
and shall determine any conditions that must be satisfied before
the Option may be exercised.

     
(c) Form of Consideration. The
Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of
payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of
consideration at the time of grant. Such consideration may
consist (but only to the extent permitted by Applicable Law)
entirely of:

		
	 	     
    (i) cash;
    
	 
	 	     
    (ii) check;
    
	 
	 	     
    (iii) promissory note;
    
	 
	 	     
    (iv) other Shares which (A) in the case
    of Shares acquired upon exercise of an option, have been owned
    by the Optionee for more than six months on the date of
    surrender, and (B) have a Fair Market Value on the date of
    surrender equal to the aggregate exercise price of the Shares as
    to which said Option shall be exercised;
    
	 
	 	     
    (v) consideration received by the Company
    under a cashless exercise program implemented by the Company in
    connection with the Plan;
    
	 
	 	     
    (vi) a reduction in the amount of any
    Company liability to the Optionee, including any liability
    attributable to the Optionee’s participation in any
    Company-sponsored deferred compensation program or arrangement;
    
	 
	 	     
    (vii) any combination of the foregoing
    methods of payment; or
    

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    (viii) such other consideration and method
    of payment for the issuance of Shares to the extent permitted by
    Applicable Laws.
    

     
10.     Exercise of
Option.

     
(a) Procedure for Exercise; Rights as a
Stockholder. Any Option granted hereunder shall be
exercisable according to the terms of the Plan and at such times
and under such conditions as determined by the Administrator and
set forth in the Option Agreement. An Option may not be
exercised for a fraction of a Share.

     
An Option shall be deemed exercised when the
Company receives: (i) written or electronic notice of
exercise (in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and
method of payment authorized by the Administrator and permitted
by the Option Agreement and the Plan. Shares issued upon
exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the
Optionee and his or her spouse or a trust for the benefit
therefore (so long as such trust may hold the option under
Applicable Laws). Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued,
except as provided in Section 14 of the Plan.

     
Exercising an Option in any manner shall decrease
the number of Shares thereafter available, both for purposes of
the Plan and for sale under the Option, by the number of Shares
as to which the Option is exercised.

     
(b) Termination of Relationship as a
Service Provider. If an Optionee ceases to be a Service
Provider, other than upon the Optionee’s death or
Disability, the Optionee may exercise his or her Option within
such period of time as is specified in the Option Agreement to
the extent that the Option is vested on the date of termination
(but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall
remain exercisable for three (3) months following the
Optionee’s termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

     
(c) Disability of Optionee. If an
Optionee ceases to be a Service Provider as a result of the
Optionee’s Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option
Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months
following the Optionee’s termination. If, on the date of
termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. If, after termination, the

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Optionee does not exercise his or her Option
within the time specified herein, the Option shall terminate,
and the Shares covered by such Option shall revert to the Plan.

     
(d) Death of Optionee. If an Optionee
dies while a Service Provider, the Option may be exercised
within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the
Optionee’s estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the
extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following
the Optionee’s death. If, at the time of death, the
Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. The Option may be exercised by
the executor or administrator of the Optionee’s estate or,
if none, by the person(s) entitled to exercise the Option under
the Optionee’s will or the laws of descent or distribution.
If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

     
11.     Restricted
Stock Awards.

     
(a) Grant of Restricted Stock Awards.
Subject to the terms and conditions of the Plan, Restricted
Stock Awards may be granted to Service Providers at any time and
from time to time as shall be determined by the Administrator,
in its sole discretion. The Administrator shall have complete
discretion to determine (i) the number of Shares subject to
a Restricted Stock Award granted to any Service Provider, and
(ii) the conditions that must be satisfied, including
performance-based milestones, upon which is conditioned the
grant or vesting of a Restricted Stock Award.

     
(b) Terms. The Administrator, subject
to the provisions of the Plan, shall have complete discretion to
determine the terms and conditions of Restricted Stock Awards
granted under the Plan. Restricted Stock Awards shall be subject
to the terms, conditions, and restrictions determined by the
Administrator at the time the stock is awarded, which may
include such performance-based milestones as are determined
appropriate by the Administrator. Unless otherwise determined by
the Administrator and subject to the terms of the Plan
(i) any Restricted Stock Award that is subject to
performance-based milestones shall not vest sooner than the
first anniversary of the date of grant and (ii) any
Restricted Stock Award that is not subject to performance-based
milestones shall vest over a minimum of three years. The
Administrator may require the recipient to sign a Restricted
Stock Award Agreement as a condition of the award. The
certificates representing the Shares awarded shall bear such
legends as shall be determined by the Administrator.

     
(c) Restricted Stock Award Agreement.
Each Restricted Stock Award grant shall be evidenced by an award
agreement that shall specify the purchase price (if any) and
such other terms and conditions as the Administrator, in its
sole discretion, shall determine.

     
12.     Stock
Appreciation Rights.

     
(a) Grant of SARS. Subject to the
terms and conditions of the Plan, SARs may be granted to Service
Providers at any time and from time to time as shall be
determined by the Administrator, in its sole discretion. The
Administrator shall have complete discretion to determine the
number of SARs granted to any Service Provider.

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(b) Exercise Price and Other Terms.
The Administrator, subject to the provisions of the Plan, shall
have complete discretion to determine the terms and conditions
of SARs granted under the Plan.

     
(c) Payment of SAR Amount. Upon
exercise of a SAR, an Optionee shall be entitled to receive
payment from the Company in an amount determined by multiplying:

		
	 	     
    (i) The difference between the Fair Market
    Value of a Share on the date of exercise over the exercise
    price; times
    
	 
	 	     
    (ii) The number of Shares with respect to
    which the SAR is exercised.
    

     
(d) Payment Upon Exercise of SAR. At
the discretion of the Administrator, payment for a SAR may be in
cash, Shares or a combination thereof.

     
(e) Cash Settlements and Plan Share
Allocation. Cash payments of Stock Appreciation Rights as
well as Common Stock issued upon exercise of Stock Appreciation
Rights shall be applied against the maximum number of Shares
that may be issued pursuant to the Plan. The number of Shares to
be applied against such maximum number of Shares in such
circumstances shall be the number of Shares equal to the amount
of the cash payment divided by the Fair Market Value of a Share
on the date the Stock Appreciation Right is granted.

     
(f) SAR Agreement. Each SAR grant
shall be evidenced by an award agreement that shall specify the
exercise price, the term of the SAR, the conditions of exercise,
and such other terms and conditions as the Administrator, in its
sole discretion, shall determine.

     
(g) Expiration of SARS. A SAR granted
under the Plan shall expire upon the date determined by the
Administrator, in its sole discretion, and set forth in the
Award Agreement.

     
13.     Non-Transferability
of Options, SARS and Restricted Stock Awards. Except as
determined otherwise by the Administrator in its discretion,
Options, SARs and Restricted Stock Awards may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an
Option, SAR or Restricted Stock Award transferable, such Option,
SAR or Restricted Stock Award shall contain such additional
terms and conditions as the Administrator deems appropriate.

     
14.     Adjustments
Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
or Change of Control.

     
(a) Changes in Capitalization.
Subject to any required action by the stockholders of the
Company, the number of Shares covered by each outstanding
Option, SAR or Restricted Stock Award, and the number of Shares
which have been authorized for issuance under the Plan but as to
which no Option, SARs or Restricted Stock Awards have yet been
granted or which have been returned to the Plan upon
cancellation or expiration of an Option, SAR or Restricted Stock
Award, as well as the price per share of Stock covered by each
such outstanding Option, SAR or Restricted Stock Award, shall be
proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the
number of issued Shares effected without receipt of
consideration by the Company. The conversion of any convertible
securities of the Company shall not be deemed to have been
“effected without receipt of consideration.” Such

10

 

adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option, SAR or
Restricted Stock Award.

     
(b) Dissolution or Liquidation. In
the event of the proposed dissolution or liquidation of the
Company, the Administrator shall notify each Optionee as soon as
practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for
an Optionee to have the right to exercise his or her Option or
SAR until ten (10) days prior to such transaction as to all
of the Optioned Stock covered thereby, including Shares as to
which the Option or SAR would not otherwise be exercisable. In
addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon
exercise of an Option, SAR or Restricted Stock Award or
forfeiture rights with respect to Restricted Stock shall lapse
as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously
exercised, an Option or SAR will terminate immediately prior to
the consummation of such proposed action.

     
(c) Merger or Asset Sale. In the
event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option, SAR, and Restricted Stock
Award shall be assumed or an equivalent option, right or
agreement substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that a
Restricted Stock Award Agreement is not assumed or substituted
by the successor corporation or a Parent or Subsidiary thereof,
the Company’s right to return or repurchase of forfeited
Shares, including as to performance-based vesting, shall
terminate as of the date of the closing of the merger or asset
sale and any performance-based grant requirements shall be
deemed to have been completely satisfied immediately prior to
such date. In the event that the successor corporation or a
Parent or Subsidiary thereof refuses to assume or substitute for
an Option or SAR, the Optionee shall fully vest in and have the
right to exercise the Option or SAR as to all of the Optioned
Stock, including Shares as to which it would not otherwise be
vested or exercisable and including any performance-based
vesting limitations. If an Option or SAR becomes fully vested
and exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the Option
or SAR shall be fully exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or
SAR shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option, SAR or Restricted Stock
Award shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to
the Option, SAR or Restricted Stock Award immediately prior to
the merger or sale of assets, the consideration (whether stock,
cash, or other securities or property) received in the merger or
sale of assets by holders of Stock for each Share held on the
effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or
sale of assets is not solely stock of the successor corporation
or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be
received upon the exercise of the Option, SAR or Restricted
Stock Award, for each Share of Optioned Stock subject to the
Option, SAR or Restricted Stock Award, to be solely Stock of the
successor corporation or its Parent equal in fair market value
to the per share consideration received by holders of Shares in
the merger or sale of assets.

11

 

     
(d) Change of Control.
Notwithstanding Section 14(c), in the event of a Change of
Control, the Optionee shall fully vest in and have the right to
exercise his or her Option or SAR as to all of the Optioned
Stock, including Shares as to which it would not otherwise be
vested or exercisable, and any Shares subject to a Restricted
Stock Award shall vest 100%, including as to any
performance-based vesting or grant limitations. If an award
hereunder becomes fully vested and/or exercisable in the event
of a Change of Control, the Administrator shall notify the
Optionee in writing or electronically that the award is fully
vested and/or exercisable.

     
15.     Leaves of
Absence. In the event of a Service Provider’s leave of
absence that is approved by the Company, vesting of Options,
SARs and Restricted Stock Awards shall continue during the first
90 days of such leave, but shall cease thereafter until
such time, as any, if such Service Provider resumes his or her
active duties with the Company or its Parent or Subsidiaries,
unless otherwise determined by the Administrator or as required
by Applicable Laws. In the event of a Service Provider’s
leave of absence that is not approved by the Company, vesting of
Options, SARs and Restricted Stock Awards shall cease
immediately upon the commencement of such leave until such time,
as any, if such Service Provider resumes his or her active
duties with the Company or its Parent or Subsidiaries, unless
otherwise determined by the Administrator or as required by
Applicable Laws.

     
16.     Time of
Granting Options, SARS and Restricted Stock Awards. The date
of grant of an Option, SAR or Restricted Stock Award shall, for
all purposes, be the date on which the Administrator makes the
determination granting such Option, SAR or Restricted Stock
Award, or such other subsequent date as is determined by the
Administrator. Notice of the determination shall be given to
each Service Provider to whom an Option, SAR or Restricted Stock
Award is so granted within a reasonable time after the date of
such grant.

     
17.     Amendment and
Termination of the Plan.

     
(a) Amendment and Termination. The
Board may at any time amend, alter, suspend or terminate the
Plan, provided that the Board may not, without stockholder
approval, (i) amend the Plan to permit the repricing,
including by way of exchange, of any Option, SAR or Restricted
Stock Award, (ii) materially increase the benefits accruing
to any Optionee under the Plan, (iii) materially increase
the number of securities which may be issued under the Plan, or
(iv) materially modify the requirements for participation
in the Plan.

     
(b) Stockholder Approval. The Company
shall obtain stockholder approval of any Plan amendment to the
extent necessary and desirable to comply with Applicable Laws.

     
(c) Effect of Amendment or
Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by
the Optionee and the Company. Termination of the Plan shall not
affect the Administrator’s ability to exercise the powers
granted to it hereunder with respect to Options, SARs or
Restricted Stock Awards granted under the Plan prior to the date
of such termination.

12

 

     
18.     Conditions
Upon Issuance of Shares.

     
(a) Legal Compliance. Shares shall
not be issued pursuant to the exercise of an Option or SAR or
the purchase or receipt of Restricted Stock unless the exercise
of such Option or SAR or the purchase or receipt of Restricted
Stock and the issuance and delivery of such Shares shall comply
with Applicable Laws and shall be further subject to the
approval of counsel for the Company with respect to such
compliance.

     
(b) Investment Representations. As a
condition to the exercise of an Option or SAR or the purchase or
receipt of Restricted Stock, the Company may require the person
exercising such award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.

     
19.     Inability to
Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which
authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.

     
20.     Reservation
of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

13ORPHAN MEDICAL, INC. EXHIBIT 10.19 TO FORM 10-K/A DATED 12-31-2003

EXHIBIT 10.15 

CONFIDENTIAL  

EXECUTION VERSION 

ORPHAN MEDICAL INC. 

AND 

CELLTECH PHARMACEUTICALS LTD. 

XYREM® LICENSE AND DISTRIBUTION AGREEMENT 

	* 	  	
Denotes confidential information that has been omitted from the exhibit and filed
separately, accompanied by a confidential treatment request, with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933. 

  

TABLE OF CONTENTS  

			Page 

	
ARTICLE I     DEFINITIONS	 	1	 
	
ARTICLE II     APPOINTMENT	 	6	 
	
2.1	 	Appointment as Distributor	 	6	 
	2.2	 	License Grant	 	7	 
	2.3	 	Right of First Negotiation for Other Indications	 	7	 
	2.4	 	Subdistributors/Sublicensees	 	8	 
	2.5	 	Sales Outside the Territory	 	8	 
	2.6	 	Option to Expand the Territory	 	9	 
	2.7	 	Competitive Product	 	9	 
	
ARTICLE III     REGULATORY APPROVALS; COMPLIANCE WITH LAWS AND REGULATIONS	 	9	 
	
3.1	 	Marketing Authorizations	 	9	 
	3.2	 	Regulatory Timelines	 	10	 
	3.3	 	Other Approvals	 	11	 
	3.4	 	Return of Initial Payment	 	11	 
	3.5	 	Product Changes	 	11	 
	3.6	 	Clinical Trials	 	12	 
	3.7	 	Compliance With Applicable Laws	 	12	 
	3.8	 	Approved Product Packaging and Labeling; Relevant Testing	 	12	 
	3.9	 	Steering Committee	 	13	 
	
ARTICLE IV     ROYALTIES AND MILESTONE PAYMENTS	 	14	 
	
4.1	 	Milestone Payments	 	14	 
	4.2	 	Royalty	 	14	 
	4.3	 	Minimum Royalty Requirement	 	15	 
	4.4	 	Royalty and Milestone Payments	 	15	 
	4.5	 	Exchange Rates	 	16	 
	4.6	 	Taxes	 	16	 
	4.7	 	Reports	 	16	 
	4.8	 	Books and Records; Audit	 	16	 
	
ARTICLE V     REGULATORY COMPLIANCE; PRODUCT MANUFACTURE	 	17	 
	
5.1	 	Regulatory Reporting	 	17	 
	5.2	 	Product Recalls	 	17	 
	5.3	 	Adverse Event Notifications and Reporting	 	17	 
	5.4	 	Correspondence/Complaints	 	17	 
	5.5	 	Translations	 	18	 
	5.6	 	Manufacture; Quality	 	18	 
	5.7	 	Product Specifications	 	18	 
	5.8	 	Manufacturing Audits by Celltech	 	18	 

i 

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			Page 

	  	  	  	  	  	  
	
ARTICLE VI     MARKETING EFFORTS	 	19	 
	
6.1  	 	Marketing Efforts	 	19	 
	6.2  	 	Approved Product Claims	 	19	 
	6.3  	 	Development of Marketing Strategy	 	19	 
	6.4  	 	Marketing Materials	 	20	 
	6.5  	 	Sales and Technical Literature Developed by Orphan Medical	 	20	 
	6.6  	 	Marketing Reports	 	20	 
	6.7  	 	Cooperation	 	20	 
	6.8  	 	Named Patient Basis Sales	 	21	 
	
ARTICLE VII     PURCHASE AND DELIVERY OF PRODUCT	 	21	 
	
7.1  	 	Forecasts	 	21	 
	7.2  	 	Pricing	 	22	 
	7.3  	 	Consignment of Product	 	22	 
	7.4  	 	Purchase Orders	 	24	 
	7.5  	 	Delivery From Other Than Consignment Inventory	 	25	 
	7.6  	 	Transfer Price Variations	 	25	 
	7.7  	 	Payment Terms	 	26	 
	7.8  	 	Short Supply Allocation	 	27	 
	7.9  	 	Product Expiration	 	27	 
	7.10	 	Certificate of Analysis	 	28	 
	7.11	 	Storage	 	28	 
	7.12	 	Rejection of Shipments For Product Non-Conformance	 	28	 
	7.13	 	Testing of Product Upon Receipt	 	29	 
	
ARTICLE VIII     REPRESENTATIONS AND WARRANTIES	 	29	 
	
8.1  	 	Orphan Medical Warranties	 	29	 
	8.2  	 	Disclaimer	 	32	 
	8.3  	 	Celltech Warranties	 	32	 
	
ARTICLE IX     INDEMNIFICATION	 	33	 
	
9.1  	 	Indemnification by Orphan Medical	 	33	 
	9.2  	 	Indemnification by Celltech	 	34	 
	9.3  	 	Procedure	 	34	 
	9.4  	 	Insurance	 	34	 
	
ARTICLE X     INTELLECTUAL PROPERTY RIGHTS PERFECTION AND USE	 	35	 
	
10.1	 	License Perfection	 	35	 
	10.2	 	Quality Standards	 	35	 
	10.3	 	Use of Trademark	 	35	 
	10.4	 	Registration and Approvals	 	35	 
	10.5	 	Reservation of Rights	 	36	 

ii 

TABLE OF CONTENTS  

			Page 

	  	  	  	  	  	  
	
ARTICLE XI     INTELLECTUAL PROPERTY INFRINGEMENTS	 	36	 
	
11.1    	 	Protection of Intellectual Property	 	36	 
	
ARTICLE XII     IMPROVEMENTS	 	37	 
	
12.1    	 	Improvements by Celltech	 	37	 
	12.2    	 	Improvements by Orphan Medical	 	37	 
	12.3    	 	Disclosure	 	37	 
	
ARTICLE XIII     CONFIDENTIALITY	 	37	 
	
13.1    	 	Proprietary Information	 	37	 
	13.2    	 	Exclusions	 	38	 
	13.3    	 	Third Party Disclosure	 	38	 
	13.4    	 	Third Party Confidentiality Agreement	 	38	 
	13.5    	 	Confidentiality of Agreement	 	39	 
	13.6    	 	Prior Confidentiality Agreement	 	39	 
	
ARTICLE XIV     TERM AND TERMINATION	 	39	 
	
14.1    	 	Term	 	39	 
	14.2    	 	Mutual Termination	 	39	 
	14.3    	 	Termination by Orphan Medical	 	39	 
	14.4    	 	Rights and Obligations on Termination	 	40	 
	14.5    	 	Partial Termination	 	40	 
	14.6    	 	Sell-Off Period	 	40	 
	14.7    	 	Survival	 	41	 
	14.8    	 	Assignment of Authorizations	 	41	 
	14.9    	 	Rights on Termination for Cause	 	41	 
	14.10  	 	No Compensation	 	41	 
	
ARTICLE XV     ARBITRATION	 	41	 
	
15.1    	 	Litigation Rights Reserved	 	41	 
	15.2    	 	Arbitration	 	41	 
	15.3    	 	Governing Law	 	42	 
	
ARTICLE XVI     FORCE MAJEURE	 	42	 
	
16.1    	 	Events of Force Majeure	 	42	 
	16.2    	 	Notice	 	43	 
	16.3    	 	Hardship	 	43	 
	
ARTICLE XVII     MISCELLANEOUS	 	43	 
	
17.1    	 	Notices	 	43	 
	17.2    	 	Waiver	 	44	 
	17.3    	 	Entire Agreement	 	44	 
	17.4    	 	Amendment	 	44	 

iii 

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	17.5    	 	Headings	 	44	 
	17.6    	 	Relationship of the Parties	 	44	 
	17.7    	 	Assignment	 	44	 
	17.8    	 	Severability	 	44	 
	17.9    	 	Publicity	 	45	 
	17.10  	 	Counterparts	 	45	 
	17.11  	 	LIMITATION OF DAMAGES	 	45	 

APPENDICES 

Appendix A – Territory

Appendix B – Trademark and Patent Rights

Appendix C – Product Specifications

Appendix D – Standard Operating Procedure for Exchange of Safety Data

Appendix E – Quality Agreement

Appendix F – Celltech First Commercial Year Forecast

Appendix G – Components of Standard Manufacturing Cost and Transfer Price

Appendix H – Regulatory Assistance

Appendix I – Trademark Use Standards 

SCHEDULES 

ORPHAN MEDICAL

8.1(e)(ii) – Patent Rights, Trademarks and Other Intellectual Property

8.1(e)(iii) – Infringement or Conflict

8.1(f)(i) – Contracts

8.1(f)(ii) – Default, Breach or Violation

8.1(g)(i) – Claims

8.1(h) – Required Approvals  

CELLTECH

8.1(e)(i) – Contracts

8.1(e)(ii) – Default, Breach or Violation

8.1(f)(i) – Claims

8.2(g) – Required Approvals 

iv 

XYREM LICENSE AND
DISTRIBUTION AGREEMENT  

        This
LICENSE AND DISTRIBUTION AGREEMENT (this “Agreement”) is made and entered
into as of October 29, 2003 (“Effective Date”), by and between Orphan
Medical, Inc., a corporation having its principal place of business at 13911 Ridgedale
Drive, Suite 250, Minnetonka, Minnesota 55305, USA (together with its Affiliates,
“Orphan Medical”), and Celltech Pharmaceuticals, Ltd., a
biopharmaceutical company organized under the laws of England having its principal place
of business at 208 Bath Road, Slough, Berkshire SL1 3WE, United Kingdom (together with its
Affiliates, “Celltech”). 

RECITALS  

        WHEREAS,
Orphan Medical has developed, patented, registered with the FDA and currently sells the
Product (as defined below) in the United States, and wishes to sell the Product to
Celltech for distribution in the Territory (as defined below); 

        WHEREAS,
Celltech has regulatory and marketing expertise necessary to review and re-format
regulatory pharmaceutical applications and to market ethical pharmaceuticals targeted to
specified populations of patients in the Territory; and 

        WHEREAS,
Celltech wishes to register, package, label, promote, market, sell and distribute the
Product in the Territory, as hereinafter defined, and Orphan Medical wishes to authorize
Celltech to do so, all on the terms and conditions set forth herein. 

        NOW,
THEREFORE, in consideration of the mutual covenants hereinafter set forth and other good
and valuable consideration, the receipt and adequacy of which are hereby acknowledged,
Orphan Medical and Celltech agree as follows: 

ARTICLE I

DEFINITIONS  

        “Affiliate”
shall mean any corporation or non-corporate business entity controlled by, controlling
or under common control with, a party to this Agreement. For the purpose of this
definition, “control” shall mean the direct or indirect ownership or control of
at least fifty percent (50%) of the voting stock of a corporation or a) in the absence of
ownership of at least fifty percent (50%) of the voting stock of that corporation, or b)
in the case of a non-corporate business entity, if it possesses, directly or indirectly,
whether by virtue of an ownership interest of any kind, by contract or otherwise, the
power to direct or cause the direction of the management and policies of the corporation
or non-corporate business entity or to elect or cause the election of a majority of the
board of directors or other governing body of such corporation or non-corporate business
entity. 

        “Adverse
Event” means the ICH guideline definition as further defined in
Appendix D. 

        “API”
means the active pharmaceutical ingredient sodium oxybate contained in the Product. 

        “Claims”
shall have the meaning provided in Section 9.1. 

  

        “Commercial
Forecasts” shall have the meaning provided in Section 7.1. 

        “Commercially
Reasonable Efforts” means all those efforts that are commercially reasonable
under the prevailing circumstances, but in no event will such efforts be less than those
that the applicable party would undertake for its own purposes. 

        “Components”
means the dosing cups and lids, syringe, tamper resistant seal and PIBA included in the
pack issued to customers along with each bottle of Product. 

        “Contract
Year” means each twelve (12) month period during the Term of this Agreement
starting on 01 January and ending on 31 December. 

        “Current
Good Manufacturing Practices” or “cGMP” means the regulations
set forth in 21 C.F.R. Parts 210 - 211, 820 and 21 C.F.R. Subchapter C
(Drugs), Quality System Regulations and the requirements thereunder imposed by the FDA,
and the equivalent regulations and requirements applicable in the Territory. 

        “DEA”
means the United States Drug Enforcement Administration, or any successor thereto, having
the administrative authority to regulate the scheduling and distribution of certain drugs
in the United States. 

        “EMEA”
means the European Medicines Evaluation Agency or any successor entity which coordinates
the scientific review of human pharmaceutical products under the centralized licensing
procedure in the European Union. 

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

        “First
Commercial Sale” means the first sale of the Product by or on behalf of Celltech
to a wholesaler, distributor or end-user in the Territory following Registration of the
Product in the Territory. 

        “ICH”
means International Conference on Harmonization of technical requirements for registration
and manufacturing of pharmaceuticals for human use as may be amended from time to time. 

        “Indemnification
Amounts” shall have the meaning provided in Section 9.1. 

        “Indication”
means any medical condition or set of symptoms for the treatment of which a medicinal
product is or may be prescribed. 

        “Improvements”
means any and all inventions or discoveries (including, without limitation, manufacturing,
manufacturing processes and procedures, analytical processes, procedures or methods and
analytical results) any route(s) of synthesis, new formulations and/or delivery forms of
or with respect to the API and/or Product (other than the current form of the Product as
defined herein), including all information and data relating thereto, whether patentable
or not, whether originating from Orphan Medical or from Celltech, including copyrights,
trademarks, patents, patent applications, trade secrets, NDAs and Know How. 

2 

        “Know
How” means data and information regarding toxicology, pharmacology, clinical
trials, analytical methodologies, and use of the Product that is necessary or useful for
Celltech to fulfill its obligations hereunder, all of which is proprietary to Orphan
Medical. 

        “Licensed
Indications” means narcolepsy and its associated conditions including without
limitation cataplexy and excessive daytime sleepiness and any other Indication(s) for
which Celltech obtains the right to develop the Product pursuant to Section 2.3 hereof. 

        “Licensed
Intellectual Property” shall have the meaning provided in Section 2.2. 

        “Major
European Country(ies)” means those countries listed as such on Appendix A
hereto, as such Appendix may be amended from time to time in accordance with Section 2.6
of this Agreement. 

        “Manufacturing
Know How” means all data, information and materials relating to the manufacture
of the Product that is not included in the Know How. 

        “Marketing
Authorization” means a Regulatory Authority approval necessary to commercially
promote and distribute the Product for a Licensed Indication in the Territory including
where applicable, price and reimbursement approval which must be granted for the Product
to be sold in such country. Marketing Authorization as applied to any country within the
Territory does not include the approval of a treatment IND, pre-approval human use trials
under a protocol or distribution of a product under an emergency use program, e.g.,
distribution on a Named Patient Basis. 

        “Market
Sales Price” means the price for the Product approved by the Regulatory Authority
in each country of the Territory, or in countries where pricing is not regulated, the
price at which Celltech sells the Product. 

        “Minor
European Country(ies)” means those countries listed as such on Appendix A
hereto, as such Appendix may be amended from time to time in accordance with Section 2.6
of this Agreement. 

        “Named
Patient Basis” means any distribution of Product by Orphan Medical or Celltech,
as its designee, for sale prior to Registration of the Product through approval by a
Regulatory Authority in the Territory or as otherwise allowed by local law. 

        “NDA”
means a New Drug Application filed by Orphan Medical with the FDA or any equivalent
successor application for approval to commercially promote and distribute the Product in
the United States. 

        “Net
Sales” means for purposes of calculating the payments payable by Celltech to
Orphan Medical pursuant to Sections 4.1, 4.2 and 4.3 of this Agreement, the gross sales
prices received by Celltech, its Subdistributors or Sublicensees from sales of the
Product, not including Product samples, sold by or for Celltech, its Subdistributors or
Sublicensees to independent third parties in the Territory, after in each case, deduction
of the following items allowed, given, granted, paid or borne by or for Celltech, its
Subdistributors or Sublicensees with respect to sales of the Product: 

3 

                (a)              all
bona fide promotional, cash, trade and quantity discounts and rebates;  

                (b)              all
bona fide allowances to end users or credits (whether in the form of a credit or
free Product) on account of price adjustments, rejection or return, recalls,
charge backs or governmental program rebates (including without limitation to
managed care organizations); 

                (c)              all
sales, consumption, excise and any other taxes, tariffs, duties or government
charges (including any tax such as value added or similar tax or government
charge other than income tax) with respect to sales of the Product; and

                (d)              any
charges for freight or insurance.  

        For
avoidance of doubt, in order to avoid any double counting when determining Net
Sales (i) Net Sales shall not include any royalties, proceeds or other amounts
paid to Celltech by any Sublicensee and (ii) if the gross sales price received
by a Subdistributor from one or more sales has been counted, then Net Sales
shall not include any royalties, proceeds or other amounts that are paid by such
Subdistributor to Celltech in connection with such sales. 

        “Option
Country” means a country listed as such on Appendix A hereto which is not
currently located in the Territory and which Celltech has the option, in its sole
discretion, to include in the Territory, if after the Effective Date, such Option Country
joins the European Union or European Free Trade Area. 

        “Orphan
Drug Designation” means designation by the EMEA as an orphan drug, a drug for a
specified rare disease or condition, or the equivalent designation by a Regulatory
Authority of any country of the Territory. 

        “Patent
Rights” means European patent Number EP 1140061 and any other patents listed on
Appendix B hereto, the inventions described and claimed therein relating to the
Product and any application for letters patent relating thereto, including, without
limitation a continuation application, a continued prosecution application, a continuation
in part application or a divisional application, and any supplementary protection
certificates, extensions, substitutions, confirmations, divisions, continuations,
continuations-in-part, patents issuing thereon and reissues or re-examinations thereof
(each which shall be automatically incorporated in and added to this Agreement and shall
periodically be added to Appendix B attached to this Agreement and made a part
hereof). 

        “Person”
means any individual, general or limited partnership, corporation, limited liability
company, association, business trust, joint venture, Regulatory Authority, business entity
or other entity of any kind or nature. 

        “Product”
means Orphan Medical’s proprietary pharmaceutical product Xyrem containing the API as
its active ingredient in bulk, unlabeled bottles, for use as a treatment for the Licensed
Indications and all Components therefor unless Celltech shall elect to source such
Components from a Third Party as contemplated by Section 2.1(d). 

        “Product
Specifications” means specifications of the Product as approved in the Marketing
Authorizations including specifications of secondary packaging, or as otherwise 

4 

agreed upon by Orphan Medical and
Celltech. The Product Specifications contained in the NDA as of the Effective Date are
attached as Appendix C hereto.  

        “Proprietary
Information” shall mean the terms and provisions of this Agreement and all
non-public information or data relating to the Product and the subject matter hereof first
communicated by or on behalf of one party to the other, whether in writing or orally,
including without limitation, all scientific, clinical, commercial, financial and business
information and data, know-how, compilations, formulae, processes, plans, technical
information, new product information, compounds, formulations, methods of
product-delivery, test procedures, product samples, specifications and other information
or data. 

        “Registration”
shall have occurred and shall continue in each country in the Territory when the Marketing
Authorization required in respect of such country shall have been issued and shall
continue to be effective. 

        “Regulatory
Authority” means the EMEA and each other regulatory and drug scheduling authority
equivalent to the FDA and DEA in the Territory or a country in the Territory, which has
responsibility for scheduling drugs and approving Marketing Authorizations. 

        “Steering
Committee” means the joint committee established pursuant to Section 3.9. 

        “Subdistributors”
means any subdistributor (exclusive of pre-wholesalers, wholesalers and Sublicensees) of the Product in the Territory appointed by Celltech from and after the
Effective Date pursuant to this Agreement. 

        “Sublicensee”
means any Third Party who is licensed by Celltech to promote, market, sell and distribute
the Product in the Territory in consideration of the payment to Celltech of a purchase
price for the Product and royalties on sales of the Product to Third Parties. 

        “Term”
shall have the meaning provided in Section 14.1 hereof. 

        “Territory”
means the Major European Countries and the Minor European Countries set forth in
Appendix A, as such Appendix may be amended from time to time pursuant to
Section 2.6 of this Agreement. 

        “Third
Party” means a Person who or which is neither a party to this Agreement nor an
Affiliate thereof. 

        “Trademark”
means the trademark set forth in Appendix B. 

        “Transfer
Price” means the price(s) Orphan Medical charges Celltech for Product on a per
bottle and per Component basis; provided, however, that the Transfer Price
shall not exceed * for the Product, exclusive of Components plus, when Components are
being purchased, 100% of Orphan Medical’s cost of Components. The constituents
comprising Orphan Medical’s standard manufacturing cost are listed on Appendix G,
which also shows a Transfer Price of * for the Product including Components as of
the date hereof. 

5 

        “Weighted
Average List Price” means Celltech’s total annual gross sales receipts for
the Product received from Celltech’s customers in the Territory calculated based on
the Market Sales Price, divided by the quantity of Product sold in the Territory. 

ARTICLE II

APPOINTMENT 

        2.1   Appointment as Distributor.   Subject
to the terms and conditions of this Agreement, Orphan Medical hereby appoints
Celltech, and Celltech accepts such appointment, as Orphan Medical’s
exclusive distributor of the Product in the Territory. During the Term of this
Agreement, Celltech shall purchase all of its requirements of the Product from
Orphan Medical as the sole supplier except as follows:  

                (a)   Celltech Manufacturing.   Orphan
Medical agrees to discuss with Celltech the feasibility and commercial viability
of transferring the manufacture of the Product to Celltech’s FDA approved
facilities or qualifying and registering Celltech as a back-up manufacturer for
the Product for the Territory and/or for the rest of the world. 

                (b)   Third Party Manufacturing.   If
Orphan Medical is unable to manufacture or supply the quantity of Product
ordered by Celltech in accordance with this Agreement for any reason whatsoever,
including, without limitation, by reason of an event described in Section 16.1
(Events of Force Majeure), Celltech shall have the right at its sole election to
(A) take over the manufacture of the Product or appoint a Third Party
manufacturer to fulfill Orphan Medical’s manufacturing and supply
obligations under this Agreement thereafter through the remaining Term of this
Agreement and/or (B) purchase the API from Orphan Medical and itself convert, or
appoint a Third Party manufacturer to convert, the API into Product through the
Term of the Agreement; provided, however, such right shall be exercisable only
if (1) Orphan Medical’s inability to manufacture or supply the Product
could reasonably be expected to result in a period of time of at least three (3)
months during which less than fifty percent (50%) of Product ordered pursuant to
Celltech’s last firm purchase order would be available to Celltech for
commercial sale, (2) Celltech provides reasonable evidence of its ability to
procure a Third Party manufacturer or take over the manufacture of the Product
or the API more rapidly than Orphan Medical could restart production and supply
of Product, and (3) Orphan Medical’s inability to manufacture or supply
Product did not result, wholly or in part, from a breach by Celltech of its
obligations hereunder. Orphan Medical shall provide Celltech with all reasonable
assistance in taking over or obtaining and qualifying a Third Party
manufacturer, including without limitation, licensing its Manufacturing Know-How
to Celltech and/or such Third Party manufacturer solely for the purpose of
manufacturing the API and/or the Product pursuant to this Section 2.1(b).

            (c)   Price for Manufacturing Changes.   In
the event Celltech shall manufacture Product or API or cause Product or API to
be manufactured pursuant to this Agreement, a manufacturing royalty, transfer
price or price of manufacturing services to Orphan Medical, and any other
related terms therefor, shall be negotiated in good faith. 

            (d)   Component Sourcing.   Celltech
shall be permitted at any time during the Term on sixty (60) days prior written
notice to Orphan Medical to cease purchasing some or all Components from Orphan
Medical and purchase some or all of the Components directly from 

6 

Orphan Medical’s
suppliers or qualify another Third Party(ies) to supply Components;
provided that, subject to Sections 7.7 and 7.12, Celltech must
purchase all Components delivered by Orphan Medical pursuant to a firm order
regardless of whether such delivery is made after Celltech delivers notice to
Orphan Medical of its intent to purchase the Components from Orphan
Medical’s suppliers or another Third Party(ies). Celltech shall bear any
and all costs associated with qualifying any Third Party(ies) to supply
Components pursuant to this Section 2.1(d); provided that if Orphan
Medical desires to purchase the same Components from such Third Party(ies) as
Celltech is purchasing, then Orphan Medical and Celltech shall each bear fifty
percent (50%) of any such costs.  

        2.2   License Grant.   Subject
to the terms and conditions of this Agreement, Orphan Medical hereby grants
Celltech an exclusive nontransferable, royalty-bearing right and license (with
the right of sublicense, as specifically set forth herein), to use the NDA, Know
How, Trademark, Patent Rights and all Improvements and Proprietary Information
of Orphan Medical related thereto or to the Product together with the goodwill
associated therewith (the “Licensed Intellectual Property”) during the
Term, solely in the Territory, and solely for the purposes of (i) preparing
applications for Marketing Authorizations and obtaining and maintaining
Registrations and packaging, labeling, promoting, marketing, selling and
distributing the Product under the Trademark in the Territory solely for the
Licensed Indications and (ii) exercising its other rights under this Agreement
including those provided in Articles X and XI hereof and making or having made
API and/or Product but only as provided in Section 2.1. Except as set forth in
Section 6.8, no license is granted to Celltech hereunder for any rights to
market the Product for other Indications. Except as provided in Section 14.6,
the license set forth above shall terminate automatically upon termination or
expiration of this Agreement. Subject only to the foregoing express license
grant and its other rights as herein provided, Celltech shall not have and shall
not assert any claim, right, title or interest in or to the Licensed
Intellectual Property.  

        2.3   Right of First Negotiation for Other Indications.  

                (a)       Negotiation Notice.   If,
during the Term of this Agreement, Orphan Medical desires to pursue further
development of the Product in the Territory for one or more Indications other
than the Licensed Indications, or in the Option Countries or in Australia for
the Licensed Indications or one or more Indications other than the Licensed
Indications, Orphan Medical shall provide written notice to Celltech (the
“Negotiation Notice”) of its intent to negotiate an agreement
therefor.  The Negotiation Notice shall identify the relevant country or
countries and Indications. Delivery of a Negotiation Notice shall create a
mutual obligation to negotiate in good faith on an exclusive basis for the grant
to Celltech of exclusive rights to the Product for the specified countries for
such Indication(s). If no response is received within ninety (90) days after
delivery of the Negotiation Notice to Celltech, the offer shall be deemed
declined, and Orphan Medical may then negotiate with any Third Party for the
grant of any license for the Product for such countries for such Indication(s)
subject, however, to the last sentence of Section 2.3(b).  

               (b)       Procedure of Negotiations.   The
parties shall have ninety (90) days from the date Orphan Medical receives
Celltech’s response to the Negotiation Notice to negotiate in good faith
(and on a confidential basis), and enter into a letter of intent, term sheet or
final agreement with regard to, as applicable, Celltech’s distribution of
the Product in the Territory for 

7 

the new Indication(s) or in the
Option Countries or Australia for the Licensed Indications or one or more Indications
other than the Licensed Indications.  In the event that (i) Celltech shall have
failed to have responded to the Negotiation Notice within the 90-day period provided in
paragraph (a) above or (ii) within the 90-day period provided in this paragraph (b) Orphan
Medical and Celltech have not entered into such letter of intent, term sheet or final
agreement, Orphan Medical shall have no further obligation to undertake or continue
negotiations with Celltech for such license, and Orphan Medical shall be free to commence
negotiations for a license to the Product for such countries for such Indication(s) with
any Third Party subject to the following: (i) if a letter of intent, term sheet or final
agreement with a Third Party shall not have been signed by Orphan Medical and such Third
Party within two hundred seventy (270) days of the termination of Celltech’s right of
first negotiation, then Celltech’s right of first negotiation shall again become
effective on the terms herein provided and (ii) without Celltech’s prior written
consent, the terms and conditions agreed by Orphan Medical with such Third Party may not
be in the aggregate materially more favorable to such Third Party than those last offered
to Celltech. 

                (c)   OptionCountries.   If
Orphan Medical shall determine to enter into a license for the Product with a
Third Party in an Option Country upon expiration of Celltech’s right of
first negotiation pursuant to Section 2.3(b) above, such license shall contain a
provision automatically terminating such License should such country
subsequently join the European Union or European Free Trade Area during the Term
and Celltech shall have exercised its Option under Section 2.6 as to such
country. 

                (d)   No Trademark License.   If
pursuant to this Section 2.3 Orphan Medical licenses to a Third Party the
Product in the Territory for one or more Indications other than the Licensed
Indications or in the Option Countries or Australia for one or more Indications
other than the Licensed Indications, then such Third Party shall be obligated to
market the Product under a trademark different from the Product Trademark and
Orphan Medical shall not grant, license or otherwise transfer to such Third
Party any rights to the Trademark or otherwise permit any use of the Trademark
by such Third Party. 

        2.4   Subdistributors/Sublicensees.   Celltech
may appoint Subdistributors and Sublicensees with the prior written approval of
Orphan Medical, which approval shall not be unreasonably withheld. No such
appointment or delegation shall relieve Celltech from any obligations hereunder,
and each agreement with a Subdistributor or Sublicensee shall include terms
ensuring the protection of Orphan Medical’s rights under this Agreement.
Celltech shall guarantee and be responsible for the making of all payments due,
and the making of reports required under this Agreement by its Subdistributors
and Sublicensees, and their compliance with all applicable terms of this
Agreement. All agreements between Celltech and its Subdistributors and
Sublicensees shall include a provision prohibiting the further appointment of
Subdistributors or Sublicensees, as the case may be, and a provision terminating
the Subdistributor or Sublicensee agreement to the extent such agreement relates
to the Product in the Territory upon termination of this Agreement for any
reason. 

        2.5   Sales Outside the Territory.   Except
as otherwise set forth in this Agreement, Celltech shall not distribute, sell or
otherwise provide the Product outside of the Territory and shall not solicit
customers for the Product outside the Territory or establish any office through 

8 

which orders are solicited or any
depot at which inventories of the Product are stored outside the Territory. Celltech
shall not sell the Product to customers outside the Territory, provided that nothing
herein shall preclude Celltech from selling the Product to any customer, wherever
located, who purchases Product with a view to its use within any country of the
Territory.  

        2.6   Option to Expand the Territory.   If,
after the Effective Date, an Option Country joins the European Union or European
Free Trade Area, Celltech, in its sole discretion, may add such Option Country
to the Territory and may designate such Option Country as a Major European
Country or a Minor European Country. Celltech shall notify Orphan Medical of its
decision within thirty (30) days after the date Celltech first learns of such
country joining the European Union or European Free Trade Area, and, if Celltech
so chooses to add such Option Country to either the Major European Countries or
Minor European Countries, then Appendix A hereto shall be amended to so
reflect such addition. 

        2.7   Competitive Product.   Orphan
Medical acknowledges that (i) Celltech has developed and is marketing
methylphenidate in certain countries within the Territory for Indications other
than the Licensed Indications, but that methylphenidate is occasionally used on
an off-label basis to treat the Licensed Indications; (ii) Celltech is
marketingdexedrine in the United Kingdom for the Licensed Indications;
and (iii) Celltech will be marketing Equasym IR in France for the Licensed
Indications. With the exception of the off-label use of methylphenidate in the
Territory, dexedrine in the United Kingdom, and Equasym IR in France, Celltech
shall not, for five (5) years from the Effective Date of this Agreement, either
directly or indirectly through subdistributors, sublicensees or otherwise,
develop, manufacture, promote, market or distribute products in the Territory
that are competitive with the Product; provided, however, nothing
herein shall prohibit Celltech from acquiring, by stock purchase, asset purchase
or merger any company, or division of a company, that is developing, marketing,
manufacturing, promoting or distributing a competitive product where the annual
sales (or in the case of a product in development, the projected sales) of such
competitive product in the Territory are less than twenty percent (20%) of such
company’s or division’s total annual sales. For purposes of this
Section 2.7, a competitive product shall be one that:(a) is approved for
prescription for a Licensed Indication or (b) is used off-label for a Licensed
Indication and such off-label sales comprise more than twenty percent (20%) of
such product’s sales in the Territory or more than twenty percent (20%) of
the sales of the Product in the Territory. 

ARTICLE III

REGULATORY APPROVALS;

COMPLIANCE WITH LAWS AND REGULATIONS 

        3.1   Marketing Authorizations.   Celltech
shall prepare and submit to Orphan Medical, (i) within sixty (60) days
of the Effective Date, a written plan for obtaining approval from the EMEA to
commercially promote and distribute the Product for the cataplexy Licensed
Indication and (ii) within one hundred twenty (120) days of the Effective
Date, a written plan for obtaining approval to commercially promote and
distribute the Product for the cataplexy Licensed Indication from the Regulatory
Authority of each country in the Territory not covered by an EMEA Registration.
On the basis of Orphan Medical’s NDA and the Know How and related
Proprietary Information delivered pursuant to Section 3.2, Celltech shall
collect, assemble, organize and format all necessary components required to
apply for such approvals, and shall 

9 

submit such materials to the
appropriate Regulatory Authorities in accordance with Section 3.2. Celltech shall
maintain, at its own expense, the Registrations and other authorizations necessary to
import, label, promote, market, sell and distribute the Product in the Territory. Orphan
Medical shall provide, at its own cost and expense (but subject to the limitations set
forth in Section 3.2), reasonable assistance to Celltech in the acquisition of such
Registrations, including without limitation, the services set forth on Appendix H hereto.
All applications for Marketing Authorizations for the Product shall be submitted in the
name of Celltech and all Marketing Authorizations for the Product shall be assigned to
Orphan Medical upon termination of this Agreement for any reason. Celltech shall ensure
that all pages of documents submitted to Regulatory Authorities for the purpose of
obtaining Registrations and Marketing Authorizations shall be coded as confidential.  

        3.2   Regulatory
Timelines.   (a)  Within thirty (30) days of
the Effective Date, Orphan Medical shall (i) transfer the Orphan Medical
Drug Designation in the Territory from IDIS World Medicines to Celltech, and
(ii) provide Celltech with the NDA and the Know How and the related
Proprietary Information to enable Celltech to prepare and timely file the
applications to commercially promote and distribute the Product for the
cataplexy Licensed Indication in the Territory. Celltech shall use its
Commercially Reasonable Efforts to cause a pre-submission meeting to be held
with the EMEA in respect of the cataplexy Licensed Indication within one hundred
eighty (180) days of the Effective Date. Within thirty (30) days of such
meeting with the EMEA, Celltech shall report to Orphan Medical about the content
of such meeting and advise Orphan Medical as to whether additional data or
documentation or additional action is required or deemed reasonably necessary by
Celltech to obtain approval from the EMEA to commercially promote and distribute
the Product for the cataplexy Licensed Indication. If additional data or
documentation or additional action is required or deemed reasonably necessary by
Celltech to obtain such approval and Orphan Medical has or could readily produce
such data or documentation or take such additional action, Orphan Medical shall
so provide the additional data or documentation or take the additional action at
its sole cost and expense; provided, however, that in the event
the cost of any single study or other report required by the EMEA or deemed
reasonably necessary by Celltech shall exceed * or the aggregate cost of all
studies or other reports required by the EMEA or deemed reasonably necessary by
Celltech shall exceed *, Celltech and Orphan Medical shall meet and discuss in
good faith the apportionment of such costs between them. Provided that Orphan
Medical’s NDA and other relevant Know How and related Proprietary
Information are deemed reasonably sufficient by Celltech, Celltech shall, at its
own expense, file the application for approval of the Product by the EMEA as an
orphan drug. 

                (b)   Following
approval from the EMEA to commercially promote and distribute the Product for
the cataplexy Licensed Indication, Celltech shall use Commercially Reasonable
Efforts to obtain Registration of the Product for the cataplexy Licensed
Indication (i) in the Major European Countries no later than December 31, 2005
(the “Registration Date”) and (ii) in the other countries in
the Territory within such time frames as are consistent with the regulatory plan
submitted by Celltech to Orphan Medical as provided in Section 3.1; unless, in
any such case, additional data or documentation or additional action is
required, in which case, the timeframe shall be extended by the time required to
generate the additional data or documentation or take the additional action.
Where a Regulatory Authority requires additional data or documentation or
additional action that is not within Orphan Medical’s sole obligation as
delineated in paragraph (a) above and that neither party has or could readily
produce or which 

10 

cannot readily be taken by either
party, the parties shall negotiate in good faith the terms upon which such data or
documentation should be generated or actions taken by either party, if at all, or failing
agreement, to terminate this Agreement in so far as it relates to a country in the
Territory not a member of the European Union or the European Free Trade Area.  

                (c)   Anything
herein to the contrary notwithstanding, (i) except as provided in
paragraphs (a) and (b) above, in connection with providing additional
data and documentation or taking additional actions pursuant to this
Section 3.2, each party shall be responsible for all costs and expenses of
its respective employees, agents, contractors, sublicensees and subdistributors,
and (ii) no party shall be obligated to conduct any clinical trials after
the Effective Date. 

                (d)   Following
the development by Orphan Medical of a supplemental NDA for the excessive
daytime sleepiness Licensed Indication, which such supplemental NDA shall be
developed by Orphan Medical as soon as practicable after the Effective Date, a
copy thereof shall be delivered to Celltech to enable it to prepare an
application to the EMEA for approval to commercially promote and distribute the
Product in the Territory for the excessive daytime sleepiness Licensed
Indication. Such application shall be filed by Celltech no later than the later
of (i) issuance of the license to Celltech by the EMEA for the cataplexy
Licensed Indication or (ii) one hundred eighty (180) days after Orphan Medical
delivers such supplemental NDA to Celltech, unless additional data or
documentation or additional action is required from Orphan Medical or a Third
Party, in which case the one hundred eighty (180) days shall be extended by the
time required to generate the additional data or documentation or take the
additional action. 

        3.3   Other
Approvals.   Celltech undertakes and covenants that as soon
as reasonably practicable following the Effective Date it shall take all other
actions to obtain and maintain during the Term all other approvals, licenses and
permits necessary to import, promote, market, sell and distribute the Product in
the Territory. 

        3.4   Return
of Initial Payment.   In the event that following and as a
result of the pre-submission meeting with the EMEA, the parties mutually agree
that it is not possible or commercially viable under the prevailing
circumstances to obtain Registration for the Product in the Major European
Countries, the parties may agree to terminate this Agreement, and such
termination shall be subject to the terms of Article 14. Upon any such
termination, Orphan Medical shall refund to Celltech a portion of the initial
$2.5million US Dollar payment due on the Effective Date under Section
4.1(a). Such refund shall be $1.25 million US Dollars within ninety (90) days of
Celltech’s providing to Orphan Medical input relating to the pre-submission
meeting pursuant to Section 3.2, and $750,000 US Dollars ninety (90) days
thereafter. If the parties do not mutually agree that Registration in the Major
European Countries is not possible or commercially viable under the prevailing
circumstances, then they shall submit the matter to arbitration in accordance
with the provisions of Section 15.2 of this Agreement. 

        3.5   Product
Changes.   Orphan Medical shall give Celltech ninety
(90) days prior written notice of any major formulation or packaging change
to the Product being requested or required by the FDA, or any other U.S.
Regulatory Authority, whenever such change affects a Registration in any country
within the Territory. Orphan Medical may change the Product, or analytical test
methods as it deems appropriate, provided Orphan Medical continues to supply
Product conforming to the Product Specifications then in effect until such times
as the Marketing 

11 

Authorizations are amended to
reflect such changes. In the event of such changes, Celltech shall be solely responsible
for additional submissions and/or regulatory updates which may be required by the
Regulatory Authorities in the Territory, provided that all necessary data and
information shall be furnished by Orphan Medical at Orphan Medical’s expense for
such purposes, and provided; further that in no event shall Celltech’s
failure to obtain any required amendments to the Marketing Authorizations to reflect such
additional submissions and/or regulatory updates, relieve Orphan Medical of its
obligation to supply Product conforming to the Product Specifications. In the event a
Regulatory Authority in any country in the Territory requires a formulation or packaging
change to the Product, Orphan Medical and Celltech shall cooperate to develop a mutually
agreeable plan to address the regulatory requirement, and, if necessary, to include the
production of separate lots, at Celltech’s expense, for the Territory. In the event
Orphan Medical and Celltech mutually agree it is not commercially reasonable to meet such
requirements, Celltech shall cease promoting, marketing, selling and/or distributing the
Product in that country in the Territory and shall promptly terminate the Registrations
in such country. If the parties are in disagreement as to whether it is commercially
reasonable to meet such requirements, then they shall submit the matter to arbitration in
accordance with the provisions of Section 15.2 of this Agreement.  

        3.6   Clinical
Trials.   The parties shall keep one another fully and
currently informed as to all tests and trials that they intend to carry out for
purposes of compliance with regulatory requirements in the Territory or that
might affect Marketing Authorization applications or Registrations in the
Territory. The parties shall cooperate in the design of such tests and trials in
order to ensure to the maximum possible extent that duplication of effort shall
be avoided, and that the results shall be suitable for filing with the
Regulatory Authorities in the Territory and shall otherwise be useful for
purposes of meeting all applicable regulatory requirements. Without limiting the
generality of the foregoing, the parties shall use their Commercially Reasonable
Efforts to ensure that all clinical trials undertaken after the Effective Date,
if any, shall be designed and conducted in accordance with good clinical
practices and good laboratory practices as established for both the United
States and the European Union. 

        3.7   Compliance
With Applicable Laws.   Celltech shall comply with all applicable laws
and regulations of each country in the Territory (including, without limitation, any laws
or regulations in the Territory governing the distribution of a scheduled drug, as
designated under regulations promulgated by the DEA). Celltech shall also comply with all
U.S. laws applicable to the Registration, promotion, marketing, sale and distribution of
the Product in the Territory, including but not limited to U.S. Export Administration
Regulations, the US Foreign Corrupt Practices Act and all regulations promulgated by the
DEA. Celltech shall comply with all Marketing Authorizations issued in the Territory.  

        3.8   Approved
Product Packaging and Labeling; Relevant Testing.   After the Product
receives a Marketing Authorization in any country of the Territory, Celltech shall
package and label the Product and shall include all required labeling for Product sold in
such country(ies). For all orders submitted by Celltech after Registration is received in
a particular country, Orphan Medical shall supply to Celltech unlabeled bottles, and
final labeling and packaging of Product for such country(ies) shall be completed by
Celltech. After the Product receives Marketing Authorization in a country in the
Territory, Celltech shall be solely responsible for all final release testing in such
country(ies) and for ensuring in such country(ies) that the Product labeling 

12 

and packaging complies with the
Marketing Authorizations and all other applicable laws of each such country in the
Territory. Celltech shall provide Orphan Medical with copies of all foreign language
labels. To the extent permitted by applicable laws and regulations in each country in the
Territory, all labels shall identify Orphan Medical as the manufacturer of the Product
for Celltech.  

        3.9   Steering
Committee.   Within a reasonable period of time after the Effective Date,
Orphan Medical and Celltech shall form a Steering Committee made up of commercial and
technical employees from both companies that shall have certain decision-making
authority, and provide oversight for the administration of this Agreement. Each party
shall maintain two (2) members on the Steering Committee with other members added as
needed. The parties shall each select one of its representatives to serve as a
co-chairperson of the Steering Committee. The Steering Committee shall have the authority
to conduct the following activities and such other activities as may be agreed to in
writing by the parties: (a) review ongoing regulatory issues, (b) review the
medical aspects of standards of care in the Territory, (c) review clinical
developments across territories, (d) review marketing campaigns and new marketing
plans, (e) review sales activities and results, (f) review aspects of Product
manufacturing campaigns and Product forecasts, consignment and non-consignment inventory
stocks and ordering, and (g) review the arrangement for distributing Product on a Named
Patient Basis. In the event and to the extent that the Steering Committee is unable to
come to a consensus on any matter relating to the development or manufacture of the
Product or the Registration, packaging, labeling, promoting, marketing, sale or
distribution of the Product outside the Territory, the views of the Orphan Medical
Steering Committee members shall prevail. In the event and to the extent that the
Steering Committee is unable to come to a consensus on any matter relating to the
Registration, packaging, labeling, promoting, marketing, sale or distribution of the
Product within the Territory, the views of the Celltech Steering Committee members shall
prevail. Notwithstanding the foregoing, in the event a particular matter for which there
is no consensus of the Steering Committee could, in the good faith judgment of the party
who does not have the ultimate decision making authority as to such matter (as provided
in the previous two sentences), materially affect the rights or obligations under this
Agreement of such party, Orphan Medical and Celltech agree to use Commercially Reasonable
Efforts to resolve the matter in a manner which will minimize the impact on such rights
or obligations of such party. During each Contract Year, the parties shall hold at least
four (4) regular meetings of the Steering Committee. Members of the Steering Committee
may participate in meetings of the Steering Committee in person or by conference
telephone call. At least one (1) of the four (4) Steering Committee meetings shall be
conducted in-person. Employees of each party who are not members of the Steering
Committee may attend meetings of the Steering Committee as required. In-person Steering
Committee meetings shall alternate between Orphan Medical’s designated facility and
a facility designated by Celltech. The co-chairpersons of the Steering Committee shall
alternate responsibility for the preparation of minutes setting forth discussions made at
each committee meeting, with the Orphan Medical Chairperson preparing minutes for the
first Steering Committee meeting; provided, however, that such minutes
shall not become official until agreed upon by both co-chairpersons.  

13 

ARTICLE IV

ROYALTIES AND MILESTONE PAYMENTS  

        4.1   Milestone Payments.   In
consideration of the rights and licenses granted hereunder, Celltech shall pay
to Orphan Medical milestone payments totaling * US Dollars according to the
following schedule:  

                (a)   $2,500,000
US Dollars on the Effective Date.  

                (b)   *
US Dollars upon filing of cataplexy Marketing Authorization application with the EMEA.  

                (c)   *
US Dollars upon approval by the EMEA to commercially promote and distribute the
Product for the cataplexy Licensed Indication.  

                (d)   *
US Dollars upon pricing approval for the cataplexy Licensed Indication in
France provided the price approved (ex works) is at least 115 Euros per 180 ml
bottle. 

                (e)   *
US Dollars upon delivery to Celltech by Orphan Medical of supplemental NDA
package for the excessive daytime sleepiness Licensed Indication. 

                (f)   *
US Dollars upon approval by the EMEA to commercially promote and distribute the
Product for the excessive daytime sleepiness Licensed Indication. 

                (g)   *
US Dollars upon first complete Contract Year in which Celltech’s and its
Subdistributors annual Net Sales in the Territory exceed £10 million. 

                (h)   *
US Dollars upon first complete Contract Year in which Celltech’s and its
Subdistributors annual Net Sales in the Territory exceed £15 million.  

                (i)   *
US Dollars upon first complete Contract Year in which Celltech’s and its
Subdistributors annual Net Sales in the Territory exceed £20 million.  

        4.2   Royalty.   (a)  In consideration of the license granted by Orphan Medical hereunder,
Celltech shall pay Orphan Medical a quarterly royalty of * on Net Sales of the
Product. The royalty rate shall be reduced to * as of the date when Celltech
ceases to have the exclusive right in the Territory, enforceable against Third
Parties, to promote, market and sell for the Licensed Indications products
containing sodium oxybate as an active pharmaceutical ingredient, because of the
expiration or termination in the Territory of Patent Rights and/or regulatory
exclusivity based on the Product’s Orphan Drug designation in the
Territory. The royalty rate shall be further reduced to * if there is subsequent
competition by a generic product for the Product in the Territory. 

                (b)   If
(i) Orphan Medical licenses the Product in the Territory to a Third Party
for one or more Indications other than the Licensed Indications pursuant to
Section 2.3(b), and (ii) the Product licensed in the Territory to such Third
Party by Orphan Medical is being used off-label for a Licensed Indication, and
(iii) Celltech can demonstrate that such off-label sales results in material
erosion of the Product’s sale price in the Territory and/or a material loss
of 

14 

Product sales by Celltech for
Licensed Indications in the Territory, then regardless of whether the * royalty rate is
in effect, the parties shall negotiate in good faith a reduction in the royalty rate to
appropriately compensate Celltech for such erosion of sales price and/or sales. As part
of its demonstration of such material erosion and/or material loss of sales, Celltech
shall obtain at its expense, and furnish to Orphan Medical, a report compiled by a
recognized market research company having substantial expertise in the pharmaceutical
industry, which sets forth both the sales of the Product and the off-label sales of the
Third Party product in the Territory or sets forth other relevant information
demonstrating that Celltech has lost material Product sales or has suffered a material
price reduction for the Product due to such off-label sales of the product licensed to
the Third Party.  

        4.3   Minimum
Royalty Requirement.   Commencing with the Contract Year in
which the First Commercial Sale in a Major European Country occurs, if the
royalties payable pursuant to Section 4.2 shall be less than the amounts set
forth in this Section 4.3, then Celltech shall pay such additional royalty
amounts to Orphan Medical so that Orphan Medical shall have received aggregate
royalty payments with respect to Net Sales of the Products in the Territory
equal to the following minimum amounts (reducing the minimum for the first year
proportionally for the days therein prior to the date of the First Commercial
Sale); provided, however that the following minimum royalty
amounts shall be adjusted by written agreement of the parties after the
Effective Date as appropriate to take into account any royalty rate reductions
determined in accordance with Section 4.2(b): 

	  		Minimum Royalty Payment (£) 
	
	Year 
		   *    
		   *    
		   *    

	1	 	*	 	*	 	*	 
	2	 	*	 	*	 	*	 
	3	 	*	 	*	 	*	 
	4	 	*	 	*	 	*	 
	5-10 and 11+	 	*	 	*	 	*	 

                For
the avoidance of doubt, the parties acknowledge and agree that the minimum royalty payment
described in this Section 4.3 shall not be payable with respect to any sales made by
Celltech on a Named Patient Basis. 

        4.4   Royalty and Milestone Payments.   Unless
otherwise agreed by Orphan Medical in writing, all milestone payments set forth
in Section 4.1 shall be payable within thirty (30) days after achievement of the
relevant milestone, except for the initial $2.5 million payment due on the
Effective Date under Section 4.1(a), which shall be due and payable by Celltech
no later than five (5) days after the Effective Date. Royalty payments shall be
paid within forty-five (45) days from the end of each calendar quarter after the
date of First Commercial Sale and any additional royalty amounts payable as
stated in Section 4.3 shall be paid within forty-five (45) days of the end of
each Contract Year. All payments shall be made in United States Dollars by wire
transfer to a USA bank designated by Orphan Medical. Any overdue payment from
Celltech to Orphan Medical under this Agreement shall accrue interest at the
rate of 3/4% per month or the highest rate allowed by law, whichever is less.
Orphan Medical shall have the right to recover its reasonable collection costs
and expenses (including attorneys’ fees) for late payments. 

15 

        4.5   Exchange
Rates.   For purposes of determining the amount of Net Sales
and the amount of royalties payable pursuant to Section 4.2 during any calendar
quarter, the total of all sales in each currency during such quarter shall be
converted into US Dollar currency at the average daily exchange rate for such
calendar quarter as reported by oanda.com or, if such website is not available,
the Wall Street Journal. For purposes of determining the minimum royalty amount
for each Contract Year as provided in Section 4.3, the amounts set forth therein
shall be converted into US dollar currency at the average daily exchange rate
for such Contract Year as reported by oanda.com or, if such website is not
available, The Wall Street Journal. 

        4.6   Taxes.   Celltech
shall be entitled to deduct from royalties paid hereunder the amount of any
withholding taxes or other taxes, levies or charges required to be withheld by
Celltech, to the extent Celltech pays to the appropriate governmental authority
on behalf, and for the account of, Orphan Medical such taxes, levies or charges.
Celltech shall use reasonable efforts (including making, or assisting Orphan
Medical in making, any relevant application to any tax authority) to minimize
any such taxes, levies or charges which are required to be withheld by Celltech
from royalties paid hereunder and paid on behalf of Orphan Medical by Celltech.
Celltech shall promptly deliver to Orphan Medical proof of payment of all such
taxes, levies and other charges, together with copies of all communications from
or with such governmental authority with respect thereto. 

        4.7   Reports.   Each
royalty payment made by Celltech hereunder shall be accompanied by a report
showing all revenue generated by sales of the Product to Third Parties
(including all sales by Subdistributors and Sublicensees) during the immediately
preceding quarter, the computation of Net Sales, and the calculation of royalty
payments due for such quarter, all on a country-by-country basis. If actual Net
Sales of any Subdistributor or Sublicensee for that quarter is unavailable at
the time such quarterly report is due, Celltech shall include in its report for
that quarter a good faith estimate of such Net Sales, and an appropriate
adjustment for the difference between the actual and estimated Net Sales shall
be made in the report for the following quarter, with a corresponding adjustment
in the amount of royalties payable in respect of that quarter. 

        4.8   Books
and Records; Audit.   Celltech shall keep for at least three
(3) years or such longer period as may be required by law following the end
of the calendar year to which they pertain, accurate and complete records
showing all sales of the Product by Celltech and its Subdistributors and
Sublicensees. Such records shall include all information reasonably necessary to
verify the total amount and computation of earned royalties hereunder, and shall
be open to inspection and audit, during reasonable business hours, to the extent
necessary to verify the amount of such royalties. Such inspection and audit
shall be conducted at the request and expense of Orphan Medical by an
independent Certified Public Accountant appointed by Orphan Medical. Such
inspection and audit shall be made not more often than once in each Contract
Year. Such Certified Public Accountant shall undertake a confidentiality
obligation to Celltech permitting it to disclose only to Orphan Medical the
amount of the royalties due hereunder, and no other information. Orphan Medical
shall bear the costs of any such inspection and audit; provided that if
any inspection and audit reveals an underpayment of more than five percent (5%),
Celltech shall reimburse Orphan Medical for its reasonable, documented
out-of-pocket costs for such inspection and audit. 

16 

ARTICLE V

REGULATORY COMPLIANCE; PRODUCT MANUFACTURE  

        5.1   Regulatory
Reporting.   Celltech shall timely file all reports relating to the
Product required by the Regulatory Authorities in each country in the Territory and shall
deliver a copy of each such report in hardcopy and on diskette, if available, to Orphan
Medical within thirty (30) calendar days of making such report in accordance with laws in
the Territory regarding transfer of data and confidentiality of patient information.  

        5.2   Product
Recalls.   (a)  Each party shall promptly notify
the other party in the event of any recall, market withdrawal or correction of
Product ordered by any Regulatory Authority, whether in the Territory, the
United States, or anywhere in the world. The parties shall cooperate in good
faith to handle and dispose of a recall, market withdrawal or correction in the
Territory. 

                (b)   Subject
to Section 5.2(c) below, in the event of a recall, market withdrawal or
correction (i) by reason of the failure of all or part of the Product supplied
by Orphan Medical to meet the Product Specifications, any requirement of the FDA
or any Marketing Authorization or other requirement of applicable law that is
not the result of any action or omission of Celltech or its Subdistributors or
Sublicensees as described in paragraph (c) below or (ii) because
Product that meets the Product Specifications, by whomsoever manufactured, is
inherently defective, unsafe, dangerous or may harm users of the Product, Orphan
Medical shall bear the costs of such recall, market withdrawal or correction
(including without limitation Celltech’s reasonable attorney’s fees).

                (c)   In
the event of a recall, market withdrawal or correction by reason of the failure
of Celltech to have obtained or properly maintained or complied with a Marketing
Authorization or as a result of Celltech’s (or its Subdistributors’,
Sublicensees’ or Third Party manufacturers’) breach of any of their
obligations under this Agreement (including without limitation Section 3.7), or
the willful misconduct or negligent acts or omissions of Celltech (or its
Subdistributors, Sublicensees’ or Third Party manufacturers’),
Celltech shall bear all costs of such recall, market withdrawal, or correction
(including without limitation Orphan Medical’s reasonable attorneys’
fees). 

        5.3   Adverse
Event Notifications and Reporting.   The exchange of Adverse Event reports
relating to the Product between the parties shall be made according to the procedures in
Appendix D.  

        5.4   Correspondence/Complaints.   (a)  Celltech
shall promptly provide Orphan Medical with copies of any material regulatory
correspondence with respect to the Product in the Territory and all related
documentation, information and other materials received or prepared by Celltech,
including, but not limited to, copies of the proposed applications for Marketing
Authorization prepared by or on behalf of Celltech for Registration of the
Products in the Territory and any subsequent amendments, supplements, or annual
updates thereto. 

                (b)   Celltech
agrees to inform Orphan Medical in writing of all significant complaints
regarding the Product that relate to Product Specifications within fifteen
(15) business days after Celltech’s receipt thereof in all countries
of the Territory. Celltech shall also 

17 

provide written quarterly reports of
all complaints regarding the Product, regardless of significance, in English, as well as
the actions taken by Celltech to address all such complaints. Such reports shall be
delivered to Orphan Medical within thirty (30) days after the end of each calendar
quarter during the Term.  

        5.5   Translations.   Celltech
shall provide Orphan Medical English translations of any material regulatory
correspondence received in a language other than the English language relating
to a Serious Adverse Event (as defined in Appendix D). Furthermore,
Celltech shall provide to Orphan Medical copies of translations of any other
regulatory correspondence and reports delivered pursuant to Sections 5.1,
5.3 or 5.4 to the extent Celltech has otherwise translated such
correspondence and reports for its own purposes. 

        5.6   Manufacture;
Quality.   Subject to Article VII, Orphan Medical agrees
to manufacture Celltech’s requirements for Product as necessary to satisfy
Celltech’s forecasts and purchase orders submitted by Celltech pursuant to
this Agreement. Products delivered to Celltech pursuant to this Agreement shall
be manufactured in accordance with the Quality Agreement negotiated and
finalized between Orphan Medical and Celltech prior to Marketing Authorization
approval in any country in the Territory, such agreement to be substantially in
the form attached hereto as Appendix E. Such Quality Agreement shall
be agreed upon by the parties no later than twelve (12) months after the
Effective Date. The Quality Agreement shall include the obligations and
pharmaceutical responsibilities of Orphan Medical, Orphan Medical’s
sub-contractors and Celltech relating to the quality assurance requirements for
the manufacture and supply of the Product, all in accordance with cGMP and
applicable regulatory requirements. 

        5.7   Product
Specifications.   Product supplied to Celltech by Orphan Medical shall meet
the Product Specifications that are approved by the Regulatory Authorities in the
Territory. Should the approved Product Specifications differ from the specifications
contained in Orphan Medical’s NDA which are set forth on Appendix C, the
Product Specifications approved by the Regulatory Authorities shall control.  

        5.8   Manufacturing
Audits by Celltech.   Upon sixty (60) days prior written notice for
cause, or with one hundred eighty (180) days written notice for an annual audit, Celltech
or a representative thereof shall have the right, if within the power of Orphan Medical
to grant such right, to participate in the conduct of compliance or other inspections,
audits and/or investigations of the operations and facilities where the Product and the
raw materials and components used to manufacture, package, inspect, test, store and
supply the Product, including, without limitation, the API and the Components, are
manufactured, packaged, inspected, tested and stored. Such inspections, audits and/or
investigations shall take place during normal business hours at the relevant
manufacturing site(s) in the presence of Celltech and Orphan Medical’s
representatives and Celltech shall abide by any confidentiality requirements or security
procedures of Orphan Medical’s suppliers. Orphan Medical shall facilitate and lead
the audit, and it shall be Orphan Medical’s responsibility to discuss any audit
findings with its sub-contractors and suppliers. Celltech and Orphan Medical along with
any other licensing partner will agree upon a final single audit report that will be sent
to the vendor by Orphan Medical. In the event of any disagreement among the parties
relating to the audit report, Orphan Medical shall be the deciding entity and will
finalize the audit report. Orphan Medical shall require its 

18 

sub-contractors and suppliers to
take all reasonably necessary corrective actions identified by Celltech as necessary to
comply with cGMP requirements and Registrations in the Territory. In the case where a
vendor will not allow Celltech to accompany Orphan Medical during such audit, Orphan
Medical will either audit on behalf of Celltech, or will jointly, with Celltech engage an
independent third party to audit the supplier on behalf of both parties. Orphan Medical
is generally allowed one audit each year of each vendor. If additional costs are imposed
due to accompaniment of Celltech with Orphan Medical during such audits, Celltech shall
bear the burden of any additional costs.  

ARTICLE VI

MARKETING EFFORTS  

        6.1   Marketing
Efforts.   Celltech shall have, directly or through its Subdistributors or
Sublicensees, the following obligations with respect to the marketing and distribution of
the Product in the Territory:  

                (a)   To
use its Commercially Reasonable Efforts to promote, market, sell and distribute
the Product in the countries in the Territory where Registrations are in good
standing; provided, however, that Celltech shall not be required
to market the Product in any country in the Territory where pricing is regulated
and the approved end user price is less than * of the Weighted Average List
Price; 

                (b)   To
promptly respond to all inquiries or complaints from purchasers of the Product; 

                (c)   To
maintain adequate and qualified staff to enable it to fully perform its
obligations hereunder; 

                (d)   To
provide adequate and appropriate training to its staff concerning the Product;
and  

                (e)   To
conduct its business in a professional manner.  

        6.2   Approved
Product Claims.   Celltech shall not make and shall cause its
Subdistributors and Sublicensees to not make claims to any Third Party
concerning the Product except as contained in or permitted by the relevant
Marketing Authorization or as approved in the Territory by the appropriate
Regulatory Authority. 

        6.3   Development
of Marketing Strategy.   Celltech agrees to cooperate in the
development of a consistent message strategy to promote the Product in an effort
to protect and strengthen branding. The global positioning of the Product for
the U.S. and the Territory should be discussed before Celltech launches the
Product in a country in the Territory and at least once per year (or more
frequently if reasonably requested by Orphan Medical) to ensure a message which
is consistent with the local Marketing Authorizations and local treatment
guidelines in such country, and, where possible, consistent with the
international message. Celltech and Orphan Medical agree to work in good faith
to develop such a strategy. 

19 

        6.4   Marketing
Materials.   Celltech agrees to provide Orphan Medical with copies of all
marketing and promotional materials within thirty (30) days of first use. Celltech shall
be solely responsible for the text, graphics, and compliance of such materials with the
laws and regulations of the Territory, but may rely (without further investigation) on
all Product information provided by Orphan Medical, except that Celltech may not rely on
such information to the extent Celltech knows or reasonably should know that such
information is inaccurate.  

        6.5   Sales
and Technical Literature Developed by Orphan Medical.   From
time to time during the Term Orphan Medical shall provide to Celltech reasonable
quantities of such training, sales and technical literature and materials
relating to the Product as Orphan Medical may have prepared, including, without
limitation, the materials set forth on Appendix H hereto, and shall
make available copies of promotional artwork it may have. The cost of printing
quantities or customizing materials shall be borne by Celltech. Orphan Medical
shall provide the same to Celltech in electronic format. Orphan Medical shall
also provide Celltech with copies of all post-marketing studies and updates to
its regulatory filings that it provides to the FDA. Celltech shall use such
materials solely as provided under this Agreement. Orphan Medical retains all
right, title and interest in and to such materials subject, however, to the
terms of this Agreement. 

        6.6   Marketing
Reports.   (a)  At least one hundred eighty
(180) days prior to the anticipated date of the First Commercial Sale,
Celltech shall provide Orphan Medical with sales and marketing plans for the
Major European Countries for the balance of the Contract Year in which such
First Commercial Sale occurs; provided, however, that in respect
of Italy, Celltech shall deliver a proposal to appoint a sub-licensee within one
hundred eighty (180) days prior to the anticipated date of the First Commercial
Sale, and shall provide Orphan Medical with a sales and marketing plan for Italy
as soon as practicable after executing an agreement with a sub-licensee relating
to distribution of the Product in Italy. 

                (b)   By
31 January of each Contract Year following the year in which the First
Commercial Sale occurs, Celltech shall provide Orphan Medical with a written
report summarizing its sales and marketing activities in the Major European
Countries for the immediately preceding year, and sales and marketing plans in
the Major European Countries for the current Contract Year. Simultaneously with
delivery of each marketing report described in this Section 6.6(b),
Celltech shall deliver reports as to the sales and marketing activities in the
Minor European Countries (for the same periods as provided for the Major
European Countries), provided that such reports need only outline the most
important aspects and plans of the sales and marketing in such Minor European
Countries. Each report shall include the potential market for the Product in all
countries of the Territory where Registration has been achieved and is
anticipated during the Contract Year in question, and other information that
Celltech deems helpful to determine the market for Product and the proper
marketing methods for the same. 

        6.7   Cooperation.   Orphan
Medical and Celltech agree to maintain open communications relating to the
ongoing performance of this Agreement to ensure joint understanding of current
or new issues, data, and information. Orphan Medical shall answer reasonable
technical or marketing questions Celltech may submit to Orphan Medical. Celltech
acknowledges that Orphan Medical does not have international marketing and
regulatory staff for preparation of regulatory submissions and marketing plans.
Orphan Medical and Celltech agree to provide each other copies of market
research study protocols and subsequent results 

20 

therefrom, which studies are
designed to generate qualitative and/or quantitative data pertaining to the Product,
subject to any Third Party rights therein.  

        6.8   Named
Patient Basis Sales.   (a)  Orphan Medical has contracted with * to distribute
the Product on a Named Patient Basis until the Product receives Marketing Authorization
within the Territory. On or prior to the Effective Date, Orphan Medical shall provide to
Celltech marketing and sales information to which Orphan Medical has rights under the *
agreement that has been collected by * .  

                (b)   Promptly
after the Effective Date, the Steering Committee shall consider whether Orphan
Medical should terminate Orphan Medical’s contract with * with respect to
the Territory and cause * to discontinue sales of the Product within the
Territory, in which event Celltech would then be granted the right, subject to
any necessary regulatory approvals, to distribute the Product on a Named Patient
Basis in the Territory. 

                (c)   Upon
determination by the Steering Committee to proceed according to the arrangement
described in Section 6.8(b) above, the parties shall in good faith negotiate and
establish the terms and conditions which shall apply to such arrangement,
including, the price at which the Product will be sold. If * continues to
distribute the Product on a Named Patient Basis, then the parties shall in good
faith negotiate and establish a royalty amount to be paid to Celltech on the
revenues received by Orphan Medical from * on Named Patient Basis Product sales.

ARTICLE VII

PURCHASE AND DELIVERY OF PRODUCT  

        7.1   Forecasts.   Celltech
will provide Orphan Medical with rolling five (5) calendar quarter forecasts
(“Commercial Forecasts”) of its anticipated requirements of
Product to assist Orphan Medical to adequately plan for and meet Celltech’s
requirements for each country in the Territory. No later than one hundred twenty
(120) days prior to the anticipated date of the First Commercial Sale,
Celltech shall provide Orphan Medical with the initial Commercial Forecast which
shall cover the five (5) calendar quarters commencing with and including
the calendar quarter in which the First Commercial Sale is expected to occur.
Each Commercial Forecast after the first (i) shall cover the five
(5) calendar quarters commencing with the second calendar quarter of the
preceding Commercial Forecast (ii) shall be delivered to Orphan Medical at
least one hundred twenty (120) days prior to the first day of such five
(5) calendar quarter period and (iii) without Orphan Medical’s written
consent may not forecast an aggregate quantity of Products that is more than
three (3) times the aggregate quarterly forecast in the preceding Commercial
Forecast. The quantities of Product for the first calendar quarter of each
Commercial Forecast shall be firm and Celltech shall be obligated to submit
purchase orders in respect thereof. The quantities of Product for the remaining
four (4) calendar quarters in each Commercial Forecast shall be non-binding
estimates based on Celltech’s reasonable business judgment. Celltech’s
non-binding estimate for the first Contract Year in which the First Commercial
Sale is expected to occur is provided in Appendix F hereto.  

21 

        7.2   Pricing.   Subject
to Sections 2.1(b) and 2.1(d) hereto, during the Term of this Agreement,
Celltech shall purchase from Orphan Medical all of its requirements of the
Product in the Territory for the Transfer Price, plus any applicable customs
duties or VAT. 

        7.3   Consignment of Product.  

                (a)   General.   Within
a reasonable period in advance of the anticipated date of the First Commercial
Sale, to the extent importation is then permitted under applicable law, Orphan
Medical shall transfer to Celltech’s specified facility in England at least
* of the Product (such Product, together with subsequent inventory of the
Product to be held by Celltech as baillee pursuant to the terms of this
Section 7.3, shall be “Consignment Inventory”). Orphan
Medical shall thereafter transfer to Celltech such quantities of the Product as
the parties, with input from the Steering Committee, may subsequently agree in
order that the amount of Consignment Inventory plus the amount of finished goods
inventory maintained by Celltech shall equal approximately the next six
(6) months anticipated demand for the Product in the Territory;
provided, that, Orphan Medical shall in no event be required to
transfer, and Celltech shall in no event be required to hold Consignment
Inventory of more than one and one-half full lot quantities * without its prior
written consent. Celltech shall hold the Consignment Inventory as baillee for
and on behalf of Orphan Medical. Celltech hereby acknowledges and agrees that
Celltech’s holding the Consignment Inventory in its premises pursuant to
the terms of this Section 7.3 shall constitute a gratuitous bailment and
not a bailment for valuable consideration governed by the U.K. Supply of Goods
and Services Act 1982. The Product in the Consignment Inventory will at all
times remain under the control of Celltech and be held for and on behalf of
Orphan Medical by Celltech as baillee until such time as the Product is removed
from the Consignment Inventory by Celltech in fulfillment of a purchase order
placed by Celltech in accordance with Section 7.4 hereof or repossessed by
Orphan Medical or returned by Celltech in accordance with Section 7.3(e)(iii)
hereof. 

                (b)   Prices and Payment.  

	  	        (i)   Celltech
may remove Product from Consignment Inventory from time to time on a
first-expired-first-out basis (subject, however, to Section 7.9) once per
month upon submission of a purchase order pursuant to Section 7.4. Whenever
an item of Consignment Inventory is removed from the Consignment Inventory,
Celltech shall inform Orphan Medical in writing specifying the quantity removed,
the batch/lot number of each bottle of the Product removed and the expiration
date thereof. Orphan Medical shall thereupon forward an invoice for such removed
items of the Consignment Inventory, dated as of the date of removal. Title to,
ownership and risk of loss of each such item shall be deemed to pass to Celltech
as from the moment said item is physically removed from the Consignment
Inventory. The Transfer Price for such item, including duties and VAT, if any,
shall become due and payable by Celltech by the last day of the first full
calendar month after the date of removal in accordance with provisions of
Section 7.7 hereof. 

	  	        (ii)   Celltech
agrees to act as the fiscal representative of Orphan Medical for purposes of customs,
duties and VAT, and Celltech shall be solely  

22 

	  	responsible for
payment of all such duties and taxes to the appropriate U.K. authorities when
due. 

	  	        (iii)   Celltech
shall pay (or reimburse Orphan Medical for) all freight charges, insurance in
transit, taxes (including import VAT) and import duties incurred in connection
with the transfer of the Consignment Inventory from Orphan Medical’s
designated supplier in the U.S. to Celltech’s facilities. 

                (c)   Storage  and Risk.  

	  	        (i)   Celltech
will at all times store the Consignment Inventory in premises which have been
certified by the Medicines Healthcare Regulatory Authority and any other
relevant Regulatory Authority as suitable for U.K. Schedule 4, Part 1
controlled substances and as otherwise provided in Section 7.11. 

	  	        (ii)   In
the event that any item of Consignment Inventory is lost or damaged through no
fault of Orphan Medical, Celltech shall indemnify Orphan Medical in respect of
any such loss or damage by paying the Transfer Price for each item lost or
damaged, plus duties and VAT, if any. 

	  	        (iii)   Celltech
will store the Consignment Inventory separately from any goods that belong to
Celltech or any Third Party and shall clearly mark and identify the Consignment
Inventory as being held on behalf of Orphan Medical. 

	  	        (iv)   Celltech
shall at its expense at all times maintain adequate insurance covering any risk
of loss or damage to the Consignment Inventory for its full Transfer Price and
naming Orphan Medical as sole loss payee and shall forward a copy of evidence of
such insurance and any amendment thereto to Orphan Medical. 

                (d)   Records.   Celltech
shall maintain full and accurate records showing the quantity of Consignment
Inventory, the lot identification, expiration dates and such other information
as is necessary to enable a Third Party to identify that each item of
Consignment Inventory forms part of the Consignment Inventory and is being held
on behalf of Orphan Medical under the supervision and control of Celltech.

                (e)   Termination. 

	  	        (i)   The
bailment created pursuant to this Section 7.3 shall terminate with
immediate effect on the last day of the Term of this Agreement. 

	  	        (ii)   Orphan
Medical may also terminate the bailment created pursuant to this
Section 7.3 with immediate effect, by giving written notice to that effect
to Celltech, if any liquidation, receivership, administration or other
insolvency procedure is commenced or threatened with respect to Celltech or any
entity which has control over Celltech. Orphan Medical may also terminate this

23 

	  	Agreement if any
action is taken or threatened which might jeopardise Orphan Medical’s
rights in the Consignment Inventory. 

	  	        (iii)   Termination
of the bailment for whatever reason shall be without prejudice to the accrued
rights of a party. Celltech shall not thereafter use any items of Consignment
Inventory or remove any items from Consignment Inventory without the specific
prior written consent of Orphan Medical. Upon such termination, Celltech’s
obligations under this Section 7.3 shall continue in full force and effect
until such time as Orphan Medical has repossessed the Consignment Inventory as
provided in paragraph (f) or Celltech has returned the Consignment Inventory by
shipment to Orphan Medical Ex Works (Incoterms 2000) at the Celltech facility at
which it is kept. 

                (f)   Return
of Consignment Inventory.   Orphan Medical shall be entitled
to repossess the Consignment Inventory immediately upon termination of the
bailment or prior to termination if Orphan Medical determines in its sole
discretion that repossession is necessary for any reason. Celltech, or any
person managing Celltech’s activities, shall give any duly authorised
representative or agent of Orphan Medical such access to Celltech’s
premises as are required for purposes of repossessing the Consignment Inventory.

                (g)   Periodic
Review.   At any time and from time to time, either party may
request the other party to discuss and consider in good faith changes in, or
termination of, the arrangements for Consignment Inventory, whereupon the
parties shall be mutually obligated to negotiate in good faith as to such
matters. 

        7.4   Purchase Orders.  

                (a)   Content.   All
purchase orders placed by Celltech shall be in writing and shall state the
quantity of Product, the delivery date, shipping information (except when the
Product is to be drawn from Consignment Inventory pursuant to Section 7.3) and
such other similar information as may be reasonably requested by Orphan Medical.

                (b)   Lead
Time.   Unless otherwise agreed by Orphan Medical, all
purchase orders must be delivered to Orphan Medical at least one hundred twenty
(120) days in advance of the requested delivery date(s) (except when the
Product is to be drawn from Consignment Inventory pursuant to Section 7.3). 

                (c)   Number
of Orders.   Celltech may submit only one purchase order per
quarter for Product to be filled by Orphan Medical from other than Consignment
Inventory and may submit one purchase order per month for Product to be drawn
from Consignment Inventory. 

                (d)    Maximum
Quantities.   Orphan Medical may in its sole discretion
reject purchase orders that specify a quantity of Product in respect of a
particular calendar quarter in excess of (A) * of the firm Commercial
Forecast for such quarter if such firm Commercial Forecast is more than *
greater than the most recent non-binding Commercial Forecast for such quarter
and (B) * of the firm Commercial Forecast if such firm Commercial Forecast
is less than * greater than the most recent non-binding Commercial Forecast
for such quarter; provided, however, that the maximum quantities
that Orphan Medical shall be required to deliver in a 

24 

particular calendar quarter
determined in accordance with clauses (A) and (B) above shall be reduced by the
quantity of Product Orphan Medical shall have delivered in the preceding calendar quarter
pursuant to paragraph (e) below in excess of the maximum quantities it was required
to provide in such preceding calendar quarter as determined pursuant to this paragraph (d).  

                (e)   Miscellaneous.   Orphan
Medical shall use its Commercially Reasonable Efforts to fill purchase orders
that exceed the quantity limits provided in paragraph (d) above or that are
delivered to Orphan Medical less than one hundred twenty (120) days in
advance of the requested delivery date(s) as required by paragraph (b)
above in respect of purchase orders to be filled by Orphan Medical from other
than Consignment Inventory. No accepted order may be modified or canceled by
either party except as agreed in writing by the parties. Celltech’s orders
(including mutually agreed change orders) shall be subject to the provisions of
this Agreement, and any terms or conditions contained therein that conflict with
the terms of this Agreement shall be deemed excluded. 

        7.5   Delivery
From Other Than Consignment Inventory.   Where purchase
orders are to be filled by Orphan Medical from other than Consignment Inventory,
Orphan Medical shall deliver the Products no later than five (5) business
days after the date(s) indicated in the applicable purchase order and no earlier
than five (5) business days prior to such specified date(s). Orphan Medical
shall provide prompt written notice to Celltech in the event of any anticipated
delays in the scheduled delivery date and shall cooperate with Celltech to
reschedule delivery at the earliest possible date so as to minimize the impact
on Celltech, provided, however, the foregoing shall in no way
modify or mitigate Orphan Medical’s obligation to supply Product properly
ordered in accordance with this Agreement or Celltech’s rights and remedies
under this Agreement in respect of any failure to timely supply, including
Celltech’s right to assert its remedies in respect of a breach hereof and
Celltech’s rights to appoint a Third Party manufacturer in accordance with
Section 2.1(b) or to terminate this Agreement in accordance with
Section 14.2(b). Orphan Medical shall send Celltech on the date of shipment
an invoice and shipping notice, in a format to be agreed upon by the parties.
All Products shall be properly packaged and shipped in accordance with the
Product Specifications and instructions included in the applicable purchase
order. Unless otherwise agreed in writing by Orphan Medical, all deliveries of
the Product from other than Consignment Inventory shall be made Ex Works
(Incoterms 2000) Orphan Medical’s designated supplier in the U.S. 

        7.6   Transfer
Price Variations.   At least one hundred twenty
(120) days prior to the end of the 2004 Contract Year and each Contract
Year thereafter, Orphan Medical shall notify Celltech of the Transfer Price for
the Product for the next Contract Year. Orphan Medical shall reserve the right
to increase transfer pricing on an annual basis for any increases in the costs
identified in Appendix G imposed on Orphan Medical by its suppliers.
Orphan Medical shall reduce transfer pricing on an annual basis for any
decreases in the costs referenced in the preceding sentence and for any other
reductions in the components of Orphan Medical’s standard manufacturing
costs as listed on Appendix G (including any reductions that may
result from decreases in the required fill volume resulting from improvements in
the PIBA). Each such notice shall include all necessary documentation reasonably
required for Celltech to verify the adjusted Transfer Price; provided,
however that notwithstanding Orphan Medical’s delivery of such
documentation, Celltech shall be permitted to conduct inspections and audits
during 

25 

reasonable business hours, to the
extent necessary to verify the Transfer Price and adjustments thereto. Such inspections
and audits shall be conducted at the request (not to be made more than once per Contract
Year) and expense of Celltech by an independent Certified Public Accountant appointed by
Celltech. Such Certified Public Accountant shall undertake a confidentiality obligation
to Orphan Medical permitting it to disclose only to Celltech the amount of the Transfer
Price and adjustments and the information required to verify such Transfer Price and
adjustments, and no other information.  

        7.7   Payment Terms.  

                (a)   General.   Unless
otherwise agreed by Orphan Medical in writing, payments for the Product shall be
paid net on the last day of the first full calendar month following the date of
the invoice therefor, provided that no invoice shall be dated prior to the date
of actual shipment of the Product covered by the invoice or removal of the
Product from Consignment Inventory. All payments shall be made in United States
Dollars by wire transfer to a U.S. bank designated by Orphan Medical at
least five (5) days prior to the date of payment. Any overdue payment from
Celltech to Orphan Medical under this Agreement shall accrue interest at the
rate of 3/4% per month or the highest rate allowed by law, whichever is less.
Orphan Medical shall have the right to recover its reasonable collection costs
and expenses (including attorneys’ fees) for late payments. Notwithstanding
the above, in the event Celltech disputes the amount, or any portion thereof, of
any invoice submitted to it by Orphan Medical, Celltech shall promptly notify
Orphan Medical of the amount and nature of the disagreement. Before relying on
the provisions of Section 15.2 hereof, the parties first shall promptly
attempt to resolve such disagreement in good faith in a manner provided in
Section 7.7(b) and Celltech shall make payments with respect to disputed
invoices as provided in such Section. 

                (b)   Order and Invoice Non-Conformance. 

	  	        (i)   In
the event Celltech disputes whether Product supplied by Orphan Medical conforms
to an order placed for such Product pursuant to Section 7.4 with respect to
quantity where purchase orders are to be filled by Orphan Medical from other
than Consignment Inventory, Celltech shall provide notice to Orphan Medical in
accordance with the provisions relating to apparent non-conformities of Product
set forth in Section 7.12. In the case of any such non-conformity which
results from delivery of less Product than ordered, Orphan Medical shall supply
additional Product promptly. In such case, Celltech shall pay for the quantity
actually received in accordance with the provisions of Section 7.7(a). In
the case of any such non-conformity which results from delivery of more Product
than ordered, Celltech may elect to (A) add such excess Product to
Consignment Inventory or, if Orphan Medical shall so specify, return to Orphan
Medical, at Orphan Medical’s expense, any Product in excess of the quantity
of Product ordered in accordance with the procedures for return set forth in
Section 7.12, or (B) accept any Product in excess of the quantity
ordered as against future orders of Product. In such latter case, Celltech shall
pay for the quantity actually received and accepted in accordance with the
provisions of Section 7.7(a) unless otherwise agreed. 

26 

	  	        (ii)   In
the event that Celltech disputes any invoice due to the price at which any
quantity of Product is invoiced as a result of the parties being unable to reach
agreement with respect to the calculation of the Transfer Price, Celltech shall
be obligated to pay the undisputed amount of such invoice in full in accordance
with the provisions of Section 7.7(a) pending resolution of the dispute
pursuant to Section 15.2. 

	  	        (iii)   In
the event that Celltech disputes any invoice due to non-conformance of the
Product supplied by Orphan Medical with the Product Specifications, such dispute
shall be resolved in accordance with Sections 7.12 and 7.13 of this
Agreement. Pending resolution of such dispute, Celltech shall not be obligated
to pay the amount of such invoice that relates to Product alleged to be
non-conforming. Upon resolution of any such dispute in favor of Orphan Medical,
Celltech shall pay the unpaid balance of such invoice within ten (10) days
of such resolution.

        7.8   Short
Supply Allocation.   If Orphan Medical is unable to supply
all of Celltech’s orders for Product hereunder in a timely manner, Orphan
Medical shall equitably allocate its available sources and supplies among
Celltech, Orphan Medical and Orphan Medical’s other partners (distributors,
licensees, agents, etc.) and internal needs, taking into consideration the
respective requirements of each of the parties during a reasonable time period
prior to allocation and their requirements during the allocation period,
provided, however, the foregoing shall in no way modify or
mitigate Orphan Medical’s obligation to supply Product properly ordered in
accordance with this Agreement or Celltech’s rights and remedies under this
Agreement in respect of any failure to timely supply, including in respect of a
breach hereof and Celltech’s rights to appoint a Third Party manufacturer
in accordance with Section 2.1(b) or to terminate this Agreement in
accordance with Section 14.2(b). 

        7.9   Product
Expiration.   (a)  All Product supplied by Orphan
Medical from other than Consignment Inventory shall have a minimum expiration
dating of thirty-six (36) months at the time of its delivery Ex Work’s
Orphan Medical’s designated supplier pursuant to Section 7.5. 

                (b)   The
Product delivered in the initial transfer of Consignment Inventory from Orphan
Medical to Celltech made in accordance with the first sentence of
Section 7.3(a) shall have minimum expiration dating of forty-two
(42) months at the time it is delivered to Celltech’s facility in
England. Thereafter, all Product delivered by Orphan Medical as Consignment
Inventory pursuant to Section 7.3 shall have minimum expiration dating of
thirty-six (36) months at the time it is delivered to Celltech’s
facility in England. Celltech shall not be required to draw out of Consignment
Inventory any Product with expiration dating of less than twenty-four
(24) months on the date that it is drawn out of Consignment Inventory;
provided, however, that if the Consignment Inventory shall at any
time contain Product with less than 24-month’s expiration dating, Celltech
shall use Commercially Reasonable Efforts to sell such Consignment Inventory,
and provided, further, however, that if Celltech shall not
be able to sell such short-dated Consignment Inventory, Celltech shall, at
Orphan Medical’s direction, either return such Product to Orphan Medical Ex
Work’s Celltech’s facility in England or destroy the Product and
provide the certification described in Section 7.12, and in either such event
Orphan 

27 

Medical shall reimburse Celltech for
all amounts paid by Celltech pursuant to Sections 7.3(b)(ii) and (iii).  

                (c)   In
the event the applicable Regulatory Authority grants an expiration date of less
than thirty-six (36) months, Orphan Medical and Celltech shall negotiate in good
faith a reasonable minimum expiration, taking into account the differing
expiration dates set forth herein for Product which is and Product which is not
drawn out of Consignment Inventory. 

                (d)   Celltech
shall not sell any Product beyond its stated expiration date.  

        7.10   Certificate
of Analysis.   With each delivery of the Product into
Consignment Inventory pursuant to Section 7.3 or to Celltech from other
than Consignment Inventory, Orphan Medical shall provide to Celltech (i) a
Certificate of Analysis and Certificate of Conformity confirming that the
Product has been manufactured in accordance with cGMP and the Product
Specifications, (ii) a copy of all batch documentation from the Product
manufacturer for the first three (3) batches of Product delivered to Celltech
and (iii) a copy of the annual stability test report, provided that
the provision of the certificates and other documents listed in (i) –(iii)
above shall not release Celltech from any of its obligations hereunder,
including, without limitation, its obligation to conduct all necessary release
testing to ensure that the Products distributed in the Territory comply with all
applicable regulatory requirements in the Territory. 

        7.11   Storage.   Celltech
shall at its own expense maintain adequate and suitable storage facilities for
the storage of Consignment Inventory and Product delivered to Celltech from
other than Consignment Inventory, in each case in accordance with cGMP, the
Marketing Authorizations, and all applicable laws and regulations. Orphan
Medical or its representative shall have the right no more than twice per
calendar year to inspect, during normal business hours, such storage facilities
upon sixty (60) days prior written notice. 

        7.12   Rejection
of Shipments For Product Non-Conformance.   If Celltech
rejects a shipment from other than Consignment Inventory on the determination
that such shipment of Product fails to conform to the purchase order therefor or
a shipment of Consignment Inventory or Product delivered to Celltech from other
than Consignment Inventory or drawn by Celltech out of Consignment Inventory on
the grounds that it fails to conform to the Product Specifications, Celltech
shall give written notice of such rejection to Orphan Medical within fifteen
(15) days after receipt thereof, in the case of apparent non-conformance,
and sixty (60) days of the receipt of definitive test results obtained
pursuant to Section 7.13 in the case of non-conformance established by such
tests. Such notice of rejection shall specify the manner in which the Product
fails to conform to the relevant purchase order, or otherwise fails to conform
to the Product Specifications. If Celltech fails to provide Orphan Medical such
notice in respect of Product delivered to Celltech pursuant to a purchase order,
whether drawn from Consignment Inventory or otherwise, within fifteen (15) or
sixty (60) days, as the case may be, of the date of delivery, the Product
shall be deemed accepted by Celltech; provided, however, that such
deemed acceptance shall not (i) impair Celltech’s right to reject
shipment or recover damages in respect of any non-conformance that is not
apparent and cannot be determined by such tests or (ii) reduce, diminish or
alter Celltech’s rights to indemnification as specified in Article IX
hereof or to terminate this Agreement in accordance with Section 14.2(b).
If Celltech expects to make a claim against Orphan Medical in accordance with
this Section 7.12, Celltech shall not dispose or 

28 

allow the disposal of the Product in
question without the express written authorization and instructions of Orphan Medical.
Any such instructions from Orphan Medical, or Celltech’s compliance therewith, shall
not relieve Celltech of its obligation to dispose of any Product in accordance with all
applicable laws and regulations in the relevant country in the Territory. Celltech shall
not return any rejected Product to Orphan Medical without a Return Material Authorization
(“RMA”) from Orphan Medical. Orphan Medical shall promptly issue a RMA
for any reasonably rejected Product, provided, however, appropriate samples
may be retained by Celltech as evidence of the basis for such rejection by Celltech.
Proof of destruction or disposal shall be certified in writing to Orphan Medical by an
officer of Celltech. Within thirty (30) days of receipt of a statement detailing and
documenting all of Celltech’s costs and expenses associated with Orphan Medical’s
delivery of non-conforming Products, including without limitation, any payments made or
other Indemnification Amounts arising out of Claims and the return, destruction or
disposal of such Product pursuant to this Section 7.12, Orphan Medical shall
reimburse Celltech for all such amounts. Any disputes between the parties relating to
such reimbursement amounts shall be resolved in accordance with the procedures set forth
in Section 15.2.  

        7.13   Testing
of Product Upon Receipt.   Celltech shall, as soon as
practical after receipt of Product into Consignment Inventory or from other than
Consignment Inventory, examine the Product for any apparent non-conformance and
carry out or have carried out, routine laboratory testing and other chemical
analysis of the Product as required by the relevant Marketing Authorizations
and/or Regulatory Authority(ies). Celltech shall promptly notify Orphan Medical
if such examination or testing establishes the basis to reject the Product for
non-conformance. Any such notice shall identify the specific claims of
non-conformance and include copies of relevant test results or other materials
indicating such non-conformance. Upon receipt of a notification of
non-conformance, Orphan Medical and Celltech shall compare test results obtained
during release testing of the Product by Orphan Medical to the results Celltech
obtained during acceptance testing to evaluate the potential cause of
discrepancy. If Orphan Medical confirms such non-conformity, it shall promptly
so notify Celltech. If Orphan Medical does not confirm such non-conformity, it
shall promptly so notify Celltech, and the parties shall submit the disputed
Product shipment for testing to an independent testing laboratory or other
independent Third Party expert mutually acceptable to the parties.
Notwithstanding Section 15.2, the findings of the testing laboratory or
Third Party expert shall be binding on the parties. The expenses of such testing
shall be borne by Orphan Medical if the non-conformity is confirmed, and
otherwise by Celltech. Without limiting Celltech’s other remedies as herein
provided, Orphan Medical shall promptly replace properly rejected Product.
Celltech shall return such Product or, if requested by Orphan Medical, destroy
the Product and provide the certification described in Section 7.12. 

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES  

        8.1   Orphan Medical Warranties.   Orphan
Medical represents and warrants to Celltech that:  

29 

                (a)   It
is a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware, U.S.A. and has the corporate power to own its
assets and properties and to carry on its business as now being and heretofore
conducted. 

                (b)   It
has all requisite power and authority (corporate and otherwise) to enter into
this Agreement and it has duly authorized, by all necessary action, the
execution and delivery hereof by the officer or individual whose name is signed
on its behalf below. Orphan Medical’s execution and delivery of this
Agreement does not and will not conflict with or result in a breach of or a
default under its organizational documents or any agreement, instrument, order,
law or regulation applicable to it or by which it or the Product may be bound.
This Agreement has been duly and validly executed and delivered by Orphan
Medical and constitutes Orphan Medical’s valid and legally binding
obligation, enforceable against Orphan Medical in accordance with its terms,
except as enforcement may be limited by laws of bankruptcy or insolvency or
other laws of general application relating to or affecting the enforcement of
creditor’s rights and general equitable principles. 

                (c)   At
the time of its shipment to Celltech, each order of Product shall have been
manufactured, stored and shipped in accordance with cGMP, the Product
Specifications and the Marketing Authorizations and other applicable laws and
regulations, shall be in compliance with the Marketing Authorizations, and shall
not be adulterated or misbranded within the meaning of the United States Food,
Drug and Cosmetics Act, as in effect at the time of shipment; 

                (d)   At
the time of its shipment to Celltech, each order of the Product shall conform to
the Product Specifications until the expiration of the shelf life approved by
the Regulatory Authorities. 

                (e)   Patent
Rights, Trademarks and Other Intellectual Property Rights.  

	  	        (i)   Orphan
Medical has good title and ownership or rights to the Licensed Intellectual
Property free and clear of all liens. To Orphan Medical’s actual knowledge,
it has all intellectual property rights necessary for (A) the manufacture
of the Product by Orphan Medical and the distribution, marketing, promotion and
sale by Celltech of the Product in the Territory in accordance with the terms of
this Agreement and (B) the grant by Orphan Medical to Celltech of the
rights granted under this Agreement. 

	  	        (ii)   Schedule 8.1(e)(ii)
hereto contains a true and complete list of all Patent Rights in the Territory
and all Trademarks and all other intellectual property rights of Orphan Medical
relating to the Product in the Territory, indicating for each whether it is
registered or is the subject of a pending application with any patent and/or
trademark office with jurisdiction in the Territory, and all licenses and other
contracts and similar rights relating thereto. 

	  	        (iii)   Except
as set forth on Schedule 8.1(e)(iii), to Orphan Medical’s actual
knowledge, the Product as manufactured and delivered to Celltech by Orphan Medical for
distribution in the Territory pursuant to this Agreement, and Celltech’s use of the
Licensed Intellectual Property in the Territory as 

30 

	  	contemplated
hereby, does not and will not infringe or conflict with any intellectual
property rights or trade secrets of any Person. 

                (f)   Contracts; No Default.  

	  	        (i)   Except
for those contracts described in Section 6.8 or set forth on Schedule 8.1(f)(i)
and Schedule 8.1(e)(ii) and except for this Agreement, as of the
date hereof, there are no material contracts, agreements, understandings,
arrangements or commitments, written or oral, including without limitation,
manufacturing, supply, sales agency, sales representative, distributor, dealer,
license, supplier, wholesaler, or similar contracts or agreements
(“Contracts”) of Orphan Medical relating to the Product in the
Territory. 

	  	        (ii)   Except
as set forth on Schedule 8.1(f)(ii), Orphan Medical and, to Orphan
Medical’s actual knowledge, each other party to Orphan Medical’s
Contracts referenced in clause (i) above (other than Celltech) has
performed in all material respects, and is now performing in all material
respects, its obligations under, and is not in material default (and would not
by the mere lapse of time or the giving of notice or both be in default) under,
or in material breach or violation of any of such Contracts; nor has Orphan
Medical received notice of any asserted claim of a default by any other party
thereto under, or a breach or violation by such other party of any of such
Contracts. 

                (g)   Actions.  

	  	        (i)   Except
as set forth on Schedule 8.1(g)(i), there are no Claims pending or,
to Orphan Medical’s actual knowledge, threatened against Orphan Medical
before any Regulatory Authority that (A) question or challenge the validity
of this Agreement or any action taken or proposed to be taken by Orphan Medical
pursuant hereto or in connection with the transactions contemplated hereby, or
(B) relate to the Product or would if adversely determined, singly or in
the aggregate, prohibit or materially impair Orphan Medical’s or
Celltech’s ability to perform its obligations under this Agreement. 

	  	        (ii)   There
are no outstanding judgments, orders, decrees, writs, awards, stipulations, or
injunctions of any Regulatory Authority against or affecting the Product or
Orphan Medical with respect to the Product or which would if adversely
determined, singly or in the aggregate, prohibit or materially impair Orphan
Medical’s or Celltech’s ability to perform its obligations under this
Agreement. 

                (h)   Approvals.   Except
as contemplated by this Agreement or set forth on Schedule 8.1(h) or
as shall already have been made, obtained or given, no approval of any
Regulatory Authority or other Person is required to be made, obtained or given
by or with respect to Orphan Medical or the Product in connection with the
execution or delivery by Orphan Medical of this Agreement, the performance by it
of its obligations hereunder or the consummation by it of the transactions
contemplated hereby. 

31 

        8.2   Disclaimer.   EXCEPT
AS SET FORTH IN THIS ARTICLE VIII, ORPHAN MEDICAL MAKES NO WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO THE PRODUCT OR CELLTECH’S SALE AND DISTRIBUTION THEREOF IN THE
TERRITORY. The warranties given by Orphan Medical are for the sole benefit of
Celltech and Celltech shall not extend such warranties to any customer thereof
or any Third Party. This provision does not affect the right of any patient to
pursue legal remedy in the event Orphan Medical provides Product that is
adulterated or misbranded or if Product does not meet Product Specifications.
Except as provided in Section 2.1, nothing in this Agreement shall be
construed as, and Orphan Medical expressly disclaims, any warranty or agreement
to furnish any manufacturing information beyond that required to obtain
Registrations for the Product in the Territory. Celltech agrees that as between
Celltech and Orphan Medical, Celltech alone shall be liable, to the exclusion of
Orphan Medical, for the breach of any warranties given by Celltech, its
Subdistributors or its Sublicensees to customers or others regarding the
Product, provided, however, nothing herein shall reduce, diminish
or alter Celltech’s rights as herein provided including its right to assert
claims against Orphan Medical in respect of the same facts that form or might
form the basis of Claims against Celltech by its Subdistributors or Sublicensees
and its or their customers. 

        8.3   Celltech Warranties.   Celltech
represents and warrants to Orphan Medical that:  

                (a)   It
is a corporation duly organized, validly existing and in good standing under the
laws of England and has the corporate power to own its assets and properties and
to carry on its business as now being and heretofore conducted. 

                (b)   It
has all requisite power and authority (corporate and otherwise) to enter into
this Agreement and it has duly authorized, by all necessary action, the
execution and delivery hereof by the officer or individual whose name is signed
on its behalf below. Celltech’s execution and delivery of this Agreement
does not and will not conflict with or result in a breach of or a default under
its organizational documents or any agreement, instrument, order, law or
regulation applicable to it or by which it or the Product may be bound. This
Agreement has been duly and validly executed and delivered by Celltech and
constitutes Celltech’s valid and legally binding obligation, enforceable
against Celltech in accordance with its terms, except as enforcement may be
limited by laws of bankruptcy or insolvency or other laws of general application
relating to or affecting the enforcement of creditor’s rights and general
equitable principles. 

                (c)   It
shall and shall cause its Subdistributors, Sublicensees and Third Party
manufacturers to manufacture (if applicable), store, package, label, promote,
market, sell and distribute the Product in compliance with this Agreement, the
Registrations and all applicable laws and regulations in the Territory.

                (d)   Celltech
shall not, and shall cause its Subdistributors, Sublicensees and Third Party
manufacturers to not knowingly, infringe any Third Party patents, copyrights,
trademarks, trade secrets or other Third Party intellectual property or
proprietary rights in the performance of its obligations hereunder. 

32 

                (e)   Contracts; No Default.  

	  	        (i)   Except
for those Contracts set forth on Schedule 8.1(e)(i) and except for
this Agreement, as of the date hereof, there are no material Contracts of
Celltech relating to the Product in the Territory. 

	  	        (ii)   Except
as set forth on Schedule 8.1(e)(ii), Celltech and, to
Celltech’s actual knowledge, each other party to Celltech’s Contracts
referenced in clause (i) above (other than Orphan Medical) has performed in
all material respects, and is now performing in all material respects, its
obligations under, and is not in material default (and would not by the mere
lapse of time or the giving of notice or both be in default) under, or in
material breach or violation of any of such Contracts; nor has Celltech received
notice of any asserted claim of a default by any other party thereto under, or a
breach or violation by such other party of any of such Contracts. 

                (f)   Actions.  

	  	        (i)   Except
as set forth on Schedule 8.1(f)(i), there are no Claims pending or,
to Celltech’s actual knowledge threatened against Celltech before any
Regulatory Authority that (A) question or challenge the validity of this
Agreement or any action taken or proposed to be taken by Celltech pursuant
hereto or thereto or in connection with the transactions contemplated hereby, or
(B) would if adversely determined, singly or in the aggregate, prohibit or
materially impair Orphan Medical’s or Celltech’s ability to perform
its obligations under this Agreement. 

	  	        (ii)   There
are no outstanding judgments, orders, decrees, writs, awards, stipulations,
injunctions of any Regulatory Authority against or affecting Celltech which
would if adversely determined, singly or in the aggregate, prohibit or
materially impair Celltech’s ability to perform its obligations under this
Agreement. 

                (g)   Approvals.   Except
as contemplated by this Agreement or set forth on Schedule 8.2(g) or
as shall already have been made, obtained or given, no approval of any
Regulatory Authority or other Person is required to be made, obtained or given
by or with respect to Celltech or the Product in connection with the execution
or delivery by Celltech of this Agreement, the performance by it of its
obligations hereunder or the consummation by it of the transactions contemplated
hereby.

ARTICLE IX

INDEMNIFICATION  

        9.1   Indemnification by Orphan Medical.   Subject
to Section 9.2, Orphan Medical shall indemnify and hold harmless Celltech and
its directors, officers, employees and agents from and against all claims,
disputes, actions, arbitrations, mediations, litigations, proceedings, suits and
governmental investigations brought by a Third Party and any appeal therefrom
(the “Claims”) and all liabilities, damages, losses, costs and
expenses (including reasonable 

33 

attorneys’ fees and
expenses in respect of Claims and to enforce rights to indemnification as herein
provided (“Indemnification Amounts”)) arising out of (i) a
breach by Orphan Medical of any representation, warranty or covenant provided in
this Agreement, including, without limitation, the representations and
warranties set forth in Section 8.l, (ii) an allegation that bodily injury
(including death) or tangible personal property damage was caused by, resulted
from or arose out of the use of the Product for a Licensed Indication by
whomsoever such Product was sold (including Celltech, its Subdistributors and
Sublicensees) and regardless of the legal theory on which such Claim is based,
except, however, where such bodily injury and/or property damage
is due to (a) a circumstance described in Section 9.2(i)
or 9.2(iii) hereof or (b) failure of a Third Party manufacturer
appointed by Celltech pursuant to Section 2.1 to manufacture, store or ship
the Product in accordance with cGMP, the Marketing Authorizations and other
applicable laws and regulations or due to the action or inaction of such Third
Party manufacturer which causes the Product to be adulterated or misbranded
within the meaning of the United States Food, Drug and Cosmetic Act, as in
effect at the time of shipment; and (iii) negligence, gross negligence or
willful misconduct of or attributable to Orphan Medical, its sublicensees (other
than Celltech, its Subdistributors, Sublicensees or Third Party manufacturers),
contractors, manufacturers and its or their directors, officers, agents,
employees, consultants or clinical investigators in connection with the
manufacture, storage or supply of API and/or the Product.  

        9.2   Indemnification
by Celltech.   Celltech agrees to indemnify, defend and hold
harmless Orphan Medical and its directors, officers, employees and agents from
and against all Claims and Indemnification Amounts arising out of (i) a
breach by Celltech of any representation, warranty or covenant provided in this
Agreement, (ii) an allegation that bodily injury (including death) or
tangible personal property damage was caused by, resulted from or arose out of
the Products sold by Celltech, its Subdistributors, Sublicensees or Third Party
manufacturers that were used other than for a Licensed Indication, regardless of
the legal theory on which such Claim is based, except, however,
where such bodily injury and/or property damage is due to a circumstance
described in Sections 9.1(i) and 9.1(iii) hereof,
(iii) negligence, gross negligence or willful misconduct of or attributable
to Celltech, its Subdistributors, Sublicenses or Third Party manufacturers and
its or their directors, officers, agents, employees, consultants or clinical
investigators in connection with the storage, packaging, labeling, promotion,
marketing, sale and distribution of the Product in the Territory; and (iv) any
express or implied warranty, whether oral or written, including any implied
warranty or the merchantability or fitness of the Product for a particular
purpose asserted by any customer of Celltech, its Subdistributors or
Sublicensees, if such warranty was extended by or arising from any undertaking,
action or inaction of Celltech, its Subdistributors or Sublicensees. 

        9.3   Procedure.   A
party seeking indemnification (an “indemnified party”) shall
give the other party (an “indemnifying party”) written notice
of any Claim promptly upon becoming aware thereof. The indemnifying party shall
have sole and exclusive control of the defense of any Claim, including the
choice and direction of legal counsel. The indemnified party shall have the
right to participate in such defense through its own counsel, at its own
expense. Neither party may settle or compromise any Claim for which
indemnification is being sought without the written consent of the other party,
which may not be unreasonably withheld.  

        9.4   Insurance.   Both
parties shall maintain during the Term of this Agreement, and for a reasonable
period thereafter, general liability insurance (whether Third Party insurance or
self-

34 

insurance provided through a captive
insurance subsidiary), which insurance shall include product liability coverage and shall
be in amounts and of a type customarily maintained by companies similarly situated. Such
insurance shall provide at least * U.S. Dollars in coverage per occurrence. Each party
shall use Commercially Reasonable Efforts to name the other party as an additional
insured on such party’s insurance policy(ies). On or prior to the Effective Date,
each party shall deliver to the other evidence of its insurance.  

ARTICLE X

INTELLECTUAL PROPERTY RIGHTS

PERFECTION AND USE  

        10.1   License
Perfection.   In the event that the execution and filing of
any document is required in connection with the license granted in
Section 2.2 to Celltech for the Trademark or Patent Rights under the laws
of any country in the Territory, Celltech shall promptly notify Orphan Medical,
and Orphan Medical shall cause such document to be executed and filed, and
Celltech shall sign such document if necessary and otherwise cooperate in the
filing thereof. 

        10.2   Quality
Standards.   All Products sold and marketed under the
Trademark by Celltech or its Subdistributors or Sublicensees, including all
related advertising, promotional materials, and all other related uses of the
Trademark shall comply with the reasonable trademark use standards adhered to by
Orphan Medical in the manufacture, sale and promotion of the Product, which such
standards are set forth in Appendix I. In particular, and
without limiting the generality of the foregoing, upon reasonable request by
Orphan Medical, Celltech shall provide Orphan Medical with samples of Products
bearing the Trademark, as well as copies of all materials, including but not
limited to brochures, professional literature, packaging and consumer
instructions, which are created or intended for use by Celltech, its
Subdistributors and/or Sublicensees in the advertising, promotion, marketing or
sale or other distribution of the Product in the Territory, for examination and
testing to verify compliance with the trademark use standards set forth in
Appendix I. Celltech shall also permit Orphan Medical, not more
than once per Contract Year and upon thirty (30) days prior written notice
and at reasonable times during normal business hours, to examine stocks of the
Product held by it or its Subdistributors or Sublicensees to verify compliance
with such standards. Orphan Medical shall notify Celltech in writing of any
noncompliance herewith, and Celltech shall use Commercially Reasonable Efforts
to correct the problem and bring such Products into compliance with applicable
standards. 

        10.3   Use
of Trademark.   Celltech shall and shall cause its
Subdistributors and Sublicensees to market the Product under the Trademark;
provided, however that if the Trademark is unavailable or unusable
in a particular country in the Territory, the parties shall mutually agree on a
suitable alternative. In addition, to the extent permitted by applicable law in
each country in the Territory, all labeling for the Product shall bear a legend,
identifying Orphan Medical as the manufacturer of the Product for Celltech. 

        10.4   Registration
and Approvals.   Attached hereto as Appendix B is
a list of the registrations and pending applications for registration for the
Trademark and Patent Rights in the Territory. Orphan Medical shall file
applications and maintain trademark registrations (including for the Trademark
and any alternative trademarks pursuant to Section 10.3) and patent 

35 

registrations (including for the
Patent Rights) in each country in the Territory including without limitation the
registrations and pending applications for the Trademark and Patent Rights in each
country listed in Appendix B as shall be reasonably useful or necessary to
protect Celltech’s rights under this Agreement; provided, however,
that if Orphan Medical shall fail to file a useful or necessary application or maintain a
useful or necessary registration for any trademarks, alternative trademarks or patents in
a country in the Territory, or to maintain the Trademark and Patent Rights registrations
in each country listed in Appendix B, Celltech shall have the right to file
such applications and maintain such registrations in each such country in the Territory
for such trademarks, alternative trademarks or patents at the expense and in the name and
on behalf of Orphan Medical (or in Celltech’s own name if that is not permitted in
the applicable country). Such registration and use of the Trademark and Patent Rights
shall inure to the benefit of and be on behalf of Orphan Medical. On any termination of
this Agreement pursuant to Article XIV hereof, Celltech shall promptly assign to Orphan
Medical registrations and any applications for registration of trademarks, alternative
trademarks or patents for the Product in the Territory filed in its name pursuant to this
Section 10.4.  

        10.5   Reservation
of Rights.   Except as otherwise provided herein,
(i) nothing in this Agreement shall entitle Celltech to any right, title or
interest in or to any of the Patent Rights, Know How, Manufacturing Know How,
Trademark, Improvements, and Proprietary Information of Orphan Medical or any
associated goodwill, which is and shall remain the sole and exclusive property
of Orphan Medical and (ii) Celltech shall not take and shall cause its
Subdistributors, Sublicensees and Third Party manufacturers to not take any
action that might (a) impair any right, title or interest of Orphan Medical
in and to the Patent Rights, Know How, Manufacturing Know How, Trademark,
Improvements and Proprietary Information; or (b) create any right, title or
interest in or to such Patent Rights, Know How, Trademark, Improvements and
Proprietary Information in Celltech or any other Person. Celltech acknowledges
Orphan Medical’s proprietary rights as provided in the preceding sentence,
and hereby waives in favor of Orphan Medical any right Celltech may have in and
to the Patent Rights, Know How, Manufacturing Know How, Trademark, Improvements
and Proprietary Information except as herein provided. 

ARTICLE XI

INTELLECTUAL PROPERTY INFRINGEMENTS  

        11.1   Protection
of Intellectual Property.   Celltech shall cooperate with
Orphan Medical and take all reasonable actions which Orphan Medical may
reasonably request, at Orphan Medical’s sole cost and expense, in order to
protect and enforce Orphan Medical’s intellectual property rights,
including, but not limited to, carrying out any act Orphan Medical may
reasonably require in connection with any registration, enforcement or
protection thereof. Celltech shall promptly notify Orphan Medical upon becoming
aware of any use in the Territory by a Third Party of the Patent Rights, Know
How, Manufacturing Know How, Trademark, Improvements or Proprietary Information
of Orphan Medical related thereto, or any other Orphan Medical intellectual
property relating to the Product which may constitute an infringement thereof.
Orphan Medical shall have the first right, at its option, to institute
proceedings against Third Party infringers in respect of infringements occurring
in the Territory. If Orphan Medical elects not to institute such proceedings
within a period of thirty (30) days after its discovery of the
infringement, Celltech shall have the right at its option to do so. The party
instituting proceedings in the Territory pursuant to this Article XI shall
bring all such 

36 

proceedings in the name of both
parties. Orphan Medical shall have the exclusive right in its sole discretion to
institute proceedings solely in its name against Third Party infringers in respect of
infringements occurring outside the Territory. Each party shall cooperate fully with the
other party in connection with any such proceedings against third-party infringers. All
expenses of any such proceedings shall be borne by the party instituting the proceedings
and damages which may be awarded or agreed upon in settlement of such action shall be
allocated first to reimburse the documented costs of the proceedings incurred by the
party bringing suit, with the balance of such amounts, if any, to be allocated between
the parties in accordance with their relative economic loss from such infringement.  

ARTICLE XII

IMPROVEMENTS  

        12.1   Improvements
by Celltech.   Subject to Celltech’s rights therein as
provided elsewhere in this Agreement, including without limitation
Section 2.2, Celltech hereby irrevocably assigns, releases, and transfers
to Orphan Medical its entire right, title and interest in and to any Improvement
solely relating to the API and/or Product (whether patentable or not) made or
conceived solely by Celltech employees or contractors. 

        12.2   Improvements
by Orphan Medical.   Subject to Celltech’s rights
therein as provided elsewhere in this Agreement, including without limitation
Section 2.2, Orphan Medical shall own all right, title and interest in and
to any Improvement relating to the API and/or Product (whether patentable or
not) made or conceived solely by Orphan Medical employees or by any Orphan
Medical contractor, other than Celltech, including, without limitation, any
manufacturing or analytical process, procedure or method or any source of
synthesis given to Celltech. 

        12.3   Disclosure.   Celltech
shall promptly disclose to Orphan Medical any and all Improvements relating to
the API and/or Product by Celltech’s employees or contractors, either alone
or together with Orphan Medical’s employees or contractors. Celltech shall
execute at Orphan Medical’s expense any assignments, applications or other
instruments or documents reasonably requested by Orphan Medical to obtain,
maintain, and otherwise to perfect Orphan Medical’s interest therein as
provided by this Agreement. Celltech’s and Orphan Medical’s
obligations hereunder shall survive termination of this Agreement. 

ARTICLE XIII

CONFIDENTIALITY  

        13.1   Proprietary
Information.   During the Term hereof and for a period of
five (5) years thereafter, any Proprietary Information disclosed by one
party (the “Disclosing Party”), directly or indirectly, to the
other party (the “Receiving Party”) under this Agreement shall
be deemed confidential, and trade secret information, whether so designated or
not, and shall not be disclosed by the Receiving Party to any Third Party,
except as set forth below. Access to such Proprietary Information shall be
limited to employees, agents, consultants or contractors of the Receiving Party
who reasonably require such Proprietary Information for purposes of performing
the Receiving Party’s obligations hereunder and who are bound to the
Receiving Party by similar obligations in respect of confidentiality and use.
Such employees, agents, consultants or 

37 

contractors shall be advised of the
nature and existence of the undertakings in respect of such Proprietary Information
pursuant to this Agreement and of the applicability of such undertakings to them. The
Receiving Party shall use such Proprietary Information only to carry out its obligations
or to exercise its rights hereunder and shall not use such Proprietary Information for
its own benefit or for the benefit of others or in any way inconsistent with this
Agreement.  

        13.2   Exclusions.   Information shall not be deemed Proprietary Information which:  

                (a)   at
the time of disclosure, is already in the public domain or thereafter becomes
part of the public domain through no act or omission of the Receiving Party;

                (b)   was
rightfully in the possession of the Receiving Party prior to the time of the
disclosure;  

                (c)   is
independently disclosed to the Receiving Party by a Third Party who has not
violated any confidential obligation owed to the Disclosing Party;  

                (d)   was
independently developed by the Receiving Party without any use of or reliance on
any Proprietary Information of the Disclosing Party; 

                (e)   is
required to be disclosed by legal process, provided that, in each case the party
so disclosing information timely informs the other and uses its best efforts to
limit the disclosure and maintain confidentiality to the extent possible and
permits the other party to attempt by appropriate legal means to limit such
disclosure; 

                (f)   is
information which is required to be included in patent applications or required
to be provided to the FDA or any other Regulatory Authority in the Territory in
order that Registrations for the Product can be obtained or otherwise to comply
with applicable regulatory requirements; provided, however, that
no Proprietary Information of Celltech or Orphan Medical shall be disclosed in
any such patent application or Registration without the prior written consent of
the Disclosing Party, which consent shall not be unreasonably withheld; or 

                (g)   is
information which is required to be disclosed to customers, users, and
prescribers of the Product or which is reasonably necessary to disclose in
connection with the ethical marketing of the Product, if applicable. 

        13.3   Third
Party Disclosure.   Disclosure by the Receiving Party to a
Third Party shall be made only to the extent necessary to enable the Receiving
Party to comply with its contractual obligations to the Disclosing Party, and
only if such Third Party has executed a confidentiality agreement containing
terms that are at least as protective as the terms of this Agreement. 

        13.4   Third
Party Confidentiality Agreement.   Each Third Party to which
Proprietary Information is disclosed other than a Regulatory Authority shall
agree in writing prior to such disclosure to keep the Proprietary Information in
strict confidence. 

38 

        13.5   Confidentiality
of Agreement.   Except as otherwise required by law,
applicable regulations or the terms of this Agreement or as mutually agreed upon
by the parties hereto, each party shall treat as confidential the terms and
conditions of this Agreement. 

        13.6   Prior
Confidentiality Agreement.   The Confidentiality Disclosure
Agreement between the parties hereto dated 20 November 2002 is hereby
superseded and terminated. Any disclosure of Proprietary Information by either
party pursuant to such Confidentiality Agreement shall be deemed to have been
made hereunder and shall be subject to this Article 13. 

ARTICLE XIV

TERM AND TERMINATION  

        14.1   Term.   This
Agreement shall become effective as of the Effective Date and shall remain in
full force and effect until the last of Orphan Medical’s Patent Rights to
expire or ten (10) years from the date Celltech receives approval from the
EMEA to commercially promote and distribute the Product, whichever is longer.
This Agreement will be automatically extended indefinitely thereafter unless and
until terminated by Celltech upon not less than twelve (12) months written
notice to Orphan Medical. All references herein to “Term” or
“Term of this Agreement” shall be deemed to include both the
initial and any extended terms.  

        14.2   Mutual Termination.   This
Agreement may be terminated prior to its normal Term as follows:  

                (a)   Either
party may terminate this Agreement immediately upon notice if the other party
files a petition of any type as to its bankruptcy, is declared bankrupt, becomes
insolvent, makes an assignment for the benefit of creditors, goes into
liquidation or receivership, or otherwise loses legal control of its business
involuntarily. 

                (b)   Either
party may terminate this Agreement if the other party materially defaults or
commits a material breach of this Agreement and has failed to cure such default
or breach within ninety (90) days of receipt of written notice thereof from
the first party. 

                (c)   Either
party may terminate this Agreement in accordance with Section 16.2 or Section 16.3. 

        14.3   Termination
by Orphan Medical.   Orphan Medical may terminate this
Agreement upon written notice to Celltech if any of the following continues
uncured for a period of ninety (90) days following receipt of written
notice thereof from Orphan Medical: 

                (a)   Celltech
shall have failed to meet the applicable minimum royalty payment requirements
for the Product as provided in Article IV hereof. 

                (b)   Celltech
ceases to sell the Product in the Territory. 

                (c)   Celltech
alters any Product except as permitted hereunder or with Orphan Medical’s
prior written consent. 

39 

                (d)   Except
as otherwise herein provided, as to the countries in which EMEA approval is
required for a Registration, if Celltech shall have failed to obtain a
Registration in at least one Major European Country by December 31, 2006,
and as to each other country in the Territory, if Celltech shall have failed to
use Commercially Reasonable Efforts to obtain a Registration in such country,
if, in each case, such failure shall not be due to a breach by Orphan Medical of
its obligations under this Agreement. 

        14.4   Rights
and Obligations on Termination.   In the event of termination
of this Agreement for any reason, the parties shall have the following rights
and obligations: 

	  	        (i)   Neither
party shall be released from the obligation to make payment of all amounts then
or thereafter due and payable in respect of the Term prior to such termination
as otherwise herein provided. 

	  	        (ii)   Except
as provided in Section 14.6, Celltech shall cease to market, promote, sell
and distribute the Product and shall return to Orphan Medical, at
Celltech’s expense, all copies of promotional and technical materials and
artwork provided by Orphan Medical; provided, however, that if
this Agreement is terminated by Celltech pursuant to Section 14.2(b),
Orphan Medical shall pay all expenses related to such return of materials and
artwork; 

	  	        (iii)   Orphan
Medical may, if Celltech elects not to pursue its sell-off rights under
Section 14.6, repurchase Celltech’s inventory of non-obsolete and
non-expired Product at the price paid by Celltech for such Product or direct
Celltech to sell them to the Third Party or parties selected by Orphan Medical
at the price paid by Celltech; provided, however, that if this
Agreement is terminated by Celltech pursuant to Section 14.2(b), Orphan
Medical must repurchase such inventory at the price paid by Celltech if Celltech
elects not to pursue its sell-off rights under Section 14.6; 

	  	        (iv)   Celltech
shall return or, if requested by Orphan Medical, destroy all of Orphan
Medical’s Proprietary Information, including, if applicable, all electronic
copies thereof and shall certify in writing that it has done so; and 

	  	        (v)   Celltech
shall comply with the provisions of Section 10.4 regarding the assignment to
Orphan Medical of trademark and/or patent rights registrations filed in
Celltech’s name. 

        14.5   Partial
Termination.   In the event that a cause of termination shall
relate solely to any country not subject to regulation by the EMEA, then
termination of this Agreement shall be limited and applied only to such country
or portion of the Territory. 

        14.6   Sell-Off
Period.   Notwithstanding anything to the contrary in
Section 14.4 hereto, upon expiration or termination of this Agreement,
Celltech shall have the right to continue to distribute its existing inventory
of non-expired Product for a period of six (6) months after the effective
date of expiration or the effective date of termination of this Agreement as the
case may be. Any such continued distribution shall be in accordance with all
applicable laws and regulations and the terms of this Agreement. 

40 

        14.7   Survival.   The
provisions of Articles I (Definitions), VIII (Representations &
Warranties), IX (Indemnification), XIII (Confidentiality), XIV (Term and
Termination), XV (Arbitration), and XVII (Miscellaneous), as well as the
provisions of Articles III (Compliance with Laws and Regulations), XI
(Intellectual Property Infringement), XII (Improvements) Article XIII
(Confidentiality), Article XIV (Termination), Article XV
(Arbitration), Article XVII (Miscellaneous) and the other provisions hereof
which by their terms are intended to survive the expiration or termination of
this Agreement (including without limitation, Sections 3.4 (Return of
Initial Payment), Section 4.8 (Books and Records) and Section 7.3(e)
(Consignment of Product – Return of Consignment Inventory) shall
survive any termination or expiration of this Agreement. 

        14.8   Assignment
of Authorizations.   As soon as possible following the expiration or
earlier termination of this Agreement, Celltech shall take all necessary steps to ensure
expeditious assignment of all Marketing Authorizations and Orphan Drug Designations which
are in Celltech’s name to Orphan Medical. If an assignment to Orphan Medical is
prohibited under the laws of a country in the Territory, Celltech agrees to and hereby
grants Orphan Medical authorization to distribute the Product under such Marketing
Authorization until Orphan Medical or its designee has obtained Marketing Authorizations
and Orphan Drug Designations in its own name for the Product in that country; provided that
Orphan Medical shall defend, indemnify and hold harmless Celltech from and against all
Claims and Indemnification Amounts of whatsoever kind or nature that result from, arise
out of or relate to Orphan Medical’s distribution of the Product under the Marketing
Authorizations and Drug Designations continuing in Celltech’s name as contemplated
by this Section 14.8.  

        14.9   Rights
on Termination for Cause.   In the event of termination of
this Agreement by Orphan Medical pursuant to the provisions of
Sections 14.2(a) or (b) or 14.3(a) – (c), Celltech shall
provide to Orphan Medical, at no expense to Orphan Medical, its then current
list of prospects and customers, including company name, contact, address and
telephone number. 

        14.10   No
Compensation.   In the event of any expiration or termination
of this Agreement for any reason, neither party shall owe any compensation to
the other party for lost profits, lost opportunities, good will, or any other
loss or damage in respect of future periods as a result of or arising from such
termination or expiration. 

ARTICLE XV

ARBITRATION  

        15.1   Litigation
Rights Reserved.   If any dispute arises with respect to the
unauthorized use of Proprietary Information by either Party or, Orphan
Medical’s Trademark, Patent Rights, Know How, Manufacturing Know How, and
Improvements by Celltech, or with respect to acts or omissions of Celltech or
Orphan Medical relating to the Product which in the good faith discretion of
Orphan Medical or Celltech, as the case may be, negatively impact the safety of
the public, Orphan Medical or Celltech, as the case may be, may seek any
available equitable remedy from a court of competent jurisdiction. 

        15.2   Arbitration.   Except
as provided in Sections 7.13 and 15.1, all disputes arising between
the parties in connection with this Agreement shall be settled through friendly 

41 

consultations between the parties
and if no agreement can be reached through consultations, they shall be submitted to
arbitration for settlement. The arbitration shall take place in New York, New York, and
be conducted by the American Arbitration Association in accordance with the commercial
arbitration rules thereof (the “Rules”) except as modified hereby. All
necessary determinations, including the arbitration decision, shall be made by a panel of
three arbitrators (the “Panel”). Within ten (10) days after
delivery of a notice of arbitration, each of the two parties shall select one arbitrator
as a member of the Panel. The two parties shall select as the third member of the Panel
an independent arbitrator with no past or current business affiliations with either
party, and if the parties cannot agree on such independent arbitrator within ten (10) days
after delivery of a notice of arbitration, such independent arbitrator shall be selected
in accordance with the Rules. The Panel shall establish a schedule of discovery and
hearing such that the Panel’s final written decision shall be issued within one
hundred and twenty (120) days after selection of the independent arbitrator serving
on the Panel. Each party must produce all relevant non-privileged documents requested by
the other party within thirty (30) days after the request therefor. The Panel’s
decision must be in writing and shall set forth the reasons therefor. Such decision shall
be conclusive determination of the matter and binding on the parties, shall have the
effect of an arbitration award, and shall not (to the extent permitted by applicable law)
be contested by any of them. The fees and expenses of an arbitrator selected by a party
shall be borne by such party. The fees and expenses of the third independent arbitrator
shall initially be borne equally by the parties, and shall be allocated between the
parties in accordance with the final decision of the Panel, which decision shall allocate
such fees between the parties as determined by the Panel.  

        15.3   Governing
Law.   This Agreement shall be governed by, and interpreted
and construed in accordance with, the laws of the State of New York, U.S.A.,
excluding (i) its choice of law rules and (ii) the United Nations
Convention on the International Sale of Goods, provided that
(x) enforcement and operation of the Consignment Inventory arrangements in
Section 7.3 shall be governed by the laws of England, and
(y) enforcement and operation of the arbitration agreement contained in
Section 15.2 hereof, and the enforcement of any award rendered pursuant
thereto, shall be governed by United States federal law to the exclusion of
State law. 

ARTICLE XVI

FORCE MAJEURE  

        16.1   Events
of Force Majeure.   Anything in this Agreement to the
contrary notwithstanding, neither party shall be liable or responsible for any
failure or delay in performance (excluding payment of sums owed hereunder) due
to causes affecting such party and, in the case of Orphan Medical, its
designated suppliers, and, in the case of Celltech, its Subdistributors,
Sublicensees and Third Party manufacturers, beyond the reasonable control of
such party, including, without limitation, any act of God; regulation or law of
any government or an agency thereof, excluding, however, if a
Regulatory Authority enjoins manufacture of the Product or otherwise closes the
Product manufacturing facilities due to Orphan Medical’s failure to comply
with cGMP or any other breach by Orphan Medical of its obligations under this
Agreement; war; terrorism; insurrection or civil commotion; earthquake, tornado,
fire, flood or storm; epidemic; or failure of public utilities or common
carriers. Such excuse shall continue as long as the condition preventing the
performance continues. Upon cessation of such condition, such party shall
promptly resume performance hereunder. 

42 

        16.2   Notice.   A
party affected by an event of force majeure shall give the other party prompt
written notice of the occurrence of any event of force majeure and the nature
and duration thereof. An affected party shall use all Commercially Reasonable
Efforts to resume performance as quickly as possible and to give the other party
prompt written notice when it is again fully able to perform such obligations.
If such event of force majeure continues for more than one hundred eighty
(180) days, either party may terminate this Agreement by giving ten
(10) days written notice to the other party. If Celltech is the affected
party, such notice of resumption of performance shall state the quantities of
Product Orphan Medical needs to ship to enable Celltech to resume performance of
obligations.

        16.3   Hardship.   In
the event that, during the Term, any law or government-enacted regulation or
decree renders the performance by either party of its respective obligations
hereunder unduly onerous or infeasible to implement, Celltech and Orphan Medical
shall consult each other and show mutual understanding with a view to making
such adjustments as would appear to be necessary and feasible. The party who
considers that the change in regulation or decree is unduly onerous or
infeasible to implement, shall notify the other within ninety (90) days of the
change in regulation or decree, specifying the specific date and change, an
evaluation of the hardship which is or shall be suffered and the proposal made
by it to remedy that change if feasible. If the parties fail to reach an
agreement within ninety (90) days after the date of the notice, either party
shall at any time thereafter be entitled to terminate this Agreement upon
written notice only with respect to the country or countries affected by such
change in regulation or decree. 

ARTICLE XVII

MISCELLANEOUS  

        17.1   Notices.   All
notices to the parties shall be made at the following addresses (or at such
other address as shall be specified by it by like notice):  

	To: 	 	Orphan Medical, Inc.

Attention:  Chief Executive Officer

13911 Ridgedale Drive, Suite 250

Minnetonka, Minnesota 55305

United States

Copy: Director of International Business

Fax: 952 540 9209 	 
	 
	To: 	 	Celltech Pharmaceuticals Ltd.

Attention: Chief Executive Officer

208 Bath Road

Slough, Berkshire SL1 3WE

United Kingdom

Copy: Company Secretary

Fax: 011 44 175 353 6632 	 

        Notices
permitted or required to be given hereunder shall be deemed sufficient if given by (a) registered
or certified airmail, postage prepaid, return receipt requested, (b) private 

43 

courier service or (c) facsimile
transmission with electronic confirmation of receipt. Notices so given shall be effective
(1) upon receipt by the party to whom notice is given, or (2) on the tenth
(10th) day following international mailing, as may be the case, whichever occurs
first.  

        17.2   Waiver.   No
failure by either party to take any action or assert any right hereunder shall
be deemed to be a waiver of such right in the event of the continuation or
repetition of the circumstances giving rise to such right. 

        17.3   Entire
Agreement.   This Agreement and the Schedules and Appendices
hereto constitute the entire agreement of the parties with respect to the
subject matter hereof, and supersede all previous agreements by and between the
parties as well as all proposals, oral or written, and all negotiations,
conversations or discussions heretofore had between the parties related to this
Agreement. 

        17.4   Amendment.   No
modification or amendment of this Agreement shall be binding unless in writing
and signed by both parties. 

        17.5   Headings.   Article,
section and paragraph headings used in this Agreement are for convenience only,
have no legal significance, and in no way change the construction or meanings of
the terms hereof. 

        17.6   Relationship
of the Parties.   The parties shall be deemed independent
contractors of each other and, as such, they shall not be entitled to any
benefits applicable to employees of the other party. Nothing contained in this
Agreement shall be construed or implied to create an agency, partnership, or
employer and employee relationship between Orphan Medical and Celltech. At no
time shall one party make commitments or incur any charges or expenses for or in
the name of the other party except as specifically provided herein. 

        17.7   Assignment.   Neither
party may assign this Agreement without the prior written consent of the other
party except that either Orphan Medical or Celltech may assign this Agreement
(a) to an Affiliate or (b) in connection with a merger, stock sale, or
the sale or transfer of all or substantially all of the assets of such party or
the division of such party manufacturing or marketing the Product, as the case
may be, provided, however, any permitted assignee shall assume all obligations
of its assignor under this Agreement and in the case of clause (a), the
assigning party shall remain primarily liable for the performance of such
Affiliate. Any purported assignment in violation of the foregoing sentence shall
be null and void. No assignment shall relieve either party of responsibility for
the performance of any accrued obligation under this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
permitted successors or permitted assigns of Celltech and Orphan Medical,
respectively. 

        17.8   Severability.   If
any term or condition of this Agreement is found by a court of competent
jurisdiction to violate the provisions of any applicable statute, law or
regulation, the remainder of this Agreement shall remain in full force and
effect. The parties shall then negotiate in good faith to modify this Agreement,
to the extent necessary to make the affected term or condition of this Agreement
valid and enforceable, having full regard for the original intent of the
parties. 

44 

        17.9   Publicity.   This
Agreement is confidential and neither party shall issue press releases or engage
in other types of publicity of any nature (whether written or oral) dealing with
the existence or details of this Agreement without the other party’s prior
written approval, which approval shall not be unreasonably withheld;
provided that, approval of such disclosure shall be deemed to be
given to the extent such disclosure is required to comply with governmental
rules, regulations or requirements. In such event, the disclosing party shall
furnish a copy of such disclosure to the other party. 

        17.10   Counterparts.   This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original, and all of which together shall constitute one and the
same Agreement. This Agreement may be executed and delivered via facsimile
transmission with the same force and effect as if it were executed and delivered
in writing. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one fully executed counterpart. 

        17.11   LIMITATION
OF DAMAGES.   NEITHER ORPHAN MEDICAL NOR CELLTECH SHALL HAVE
ANY LIABILITY OF ANY KIND TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, EVEN IF ORPHAN MEDICAL OR
CELLTECH, AS THE CASE MAY BE, SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
POTENTIAL LOSS OR DAMAGE BY THE OTHER PARTY. FOR PURPOSES OF THE LIMITATION OF
LIABILITY IN THE IMMEDIATELY PRECEDING SENTENCE, (i) LEGAL FEES AND
EXPENSES THAT ARE RECOVERABLE AS PROVIDED IN ARTICLE IX SHALL NOT BE
CONSIDERED INDIRECT DAMAGES, (ii) INDIRECT DAMAGES PAYABLE BY AN
INDEMNIFIED PARTY TO A THIRD PARTY THAT WOULD BE RECOVERABLE UNDER THE INDEMNITY
PROVISIONS IN ARTICLE IX BUT FOR SUCH LIMITATION OF LIABILITY SHALL BE
RECOVERABLE NOTWITHSTANDING SAID LIMITATION OF LIABILITY AND (iii) LOST
PROFITS SHALL NOT BE DEEMED TO BE SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES
EXCEPT IN RESPECT OF FUTURE PERIODS FOLLOWING A TERMINATION OF THIS AGREEMENT IN
ACCORDANCE WITH THE TERMS HEREOF. 

45 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement by their respective
duly authorized representatives as of the Effective Date. 

	 	 	 	 	 	 
	 	 	CELLTECH PHARMACEUTICALS LTD.
	

   		

By:  	 	

   	 
	 	

		Name:
Title:	 
	 	 	

ORPHAN MEDICAL, INC.
	

   		

By:  	 	

   	 
	 	

		Name:
Title:	 

  

APPENDIX A 

TERRITORY  

	 	 	 	 
	Major European Countries

France

Germany

Italy

Spain

United Kingdom of Great Britain and Northern Ireland 		Minor European Countries

Austria

Belgium

Czech Republic

Denmark

Estonia

Finland

Greece

Hungary

Iceland

Ireland

Latvia

Lithuania

Luxemburg

Malta

Netherlands

Norway

Poland

Portugal

Slovak Republic

Slovenia

Sweden

Switzerland 
	 
	Option Countries

Turkey	

A-1 

APPENDIX B 

TRADEMARK  

	Xyrem®	 	 	 
	
European Community Trademark 		
Reg. No.: 957712
Registered: 10 March 2000 	
	
Norway 		
Reg. No.: 217395
Registered: 23 January 2003 	
	
Iceland		
Reg. No.: 679/2002
Registered: 31 July 2002 	
	
Switzerland		
Reg. No.: 503.859
Registered: 9 October 2002 	
	
Czech Republic		
Reg. No.: 251135
Registered: 27 January 2003 	
	
Slovak Republic		
Application No.:  POZ 1676-2002
Registered: Pending 	
	
Poland		
Appl. No.:  Z-251131
Registered: Pending 	
	
Hungary		
Appl. No.: M 02 02667
Registered: Pending 	

PATENT RIGHTS  

	Country	Stage		Serial #		Date Filed		Patent #		Issue Date	
	

	European	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Austria	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Belguim	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Denmark	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Finland	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	France	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Germany	 	Granted	 	99964320.8	 	12/22/99	 	69907508.408	 	5/2/03	 
	Ireland	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Italy	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Netherlands	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Spain	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Sweden	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Switzerland	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	United Kingdom	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 

B-1 

APPENDIX C 

PRODUCT SPECIFICATIONS  

Xyrem® (sodium oxybate) oral solution

Expiration Period:   48 months

Storage Conditions:   15 – 30(Degree)C

Release Specifications:   

*

Approval Signatures on File:

               Regulatory Affairs

Verified By: ____________________________  

C-1 

APPENDIX D 

STANDARD OPERATING PROCEDURE FOR EXCHANGE OF SAFETY DATA  

        The
Orphan Medical and Celltech individuals in charge of pharmacovigilance shall follow the
procedure outlined below in reporting adverse experiences. 

        1.   Definitions.   Definitions
shall be those in use by the International Conference on Harmonization (ICH) as
may be amended by ICH from time to time. Current definitions are: 

                 1.1.   Adverse Event (“AE”)
means any untoward medical occurrence in a patient or clinical investigation
subject administered a pharmaceutical product and which does not necessarily
have to have a causal relationship with this treatment. An AE can therefore be
any unfavorable and unintended sign (including an abnormal laboratory finding),
symptom, or disease temporarily associated with the use of a medicinal
(investigational) product, whether or not related to the medicinal
(investigational) product.  

                 1.2.   Serious Adverse Event (“SAE”) means any untoward medical
occurrence that at any dose: 

	  	  	•  	  	results in death, 

	  	  	•  	  	is life-threatening, 

	  	  	•  	  	requires inpatient hospitalization or prolongation of existing hospitalization, 

	  	  	•  	  	results
in persistent or significant disability/incapacity, or 

	  	  	•  	  	results
in a congenital anomaly/birth defect. 

                 1.3.   Adverse
Drug Reaction (“ADR”)  

	  	  	•  	  	ADRs in the
clinical setting refer to all noxious and unintended responses to a medicinal
product (i.e., where the relationship between an adverse event and product can
not be ruled out) related to any doses. 

	  	  	•  	  	ADRs regarding
marketed medicinal products shall refer to a response to a drug which is noxious
and unintended and which occurs at doses normally used in man for prophylaxis,
diagnosis, or therapy of disease or for modification of physiological function.

                 1.4.   Serious
Adverse Drug Reaction (“SADR”) means an ADR having the
characteristics described in 1.2.  

                 1.5.   Unexpected
Adverse Drug Reaction (“UADR”) means an ADR, the nature or
severity of which is not consistent with the applicable product information
(e.g., 

D-1 

Investigator’s Brochure for an
unapproved investigational product or package insert for an approved product.)  

        2.   Transmission
of data between Orphan Medical and Celltech.  

                 2.1.   In the context of clinical trials: 

                         2.1.1.   All
the SAEs related (expected and unexpected) to the drug as assessed by
investigators shall be forwarded on a quarterly basis under the form of
tabulated summary in English. Such summary shall bear at least the following
information: patient’s ID number, protocol identification, Investigator
Center, type of serious event, symptomatology or pathology observed, notified
SAE. These clinical or biological manifestations shall be named according to the
dictionary in use by each party (e.g. MeDRA or WHO). 

                         2.1.2.   Each
party, upon request, may receive available additional or follow-up data from the
other party. 

                 2.2.   In the context of post-marketing surveillance: 

                         2.2.1.   In
the case of SAEs, the parties shall exchange data within five (5) days of
becoming aware of such SAE. In the case of SADRs and UADRs, the parties shall
exchange data within ten (10) days after becoming aware of such SADR or UADR. In
the case of any other AE or ADR the parties shall exchange data within thirty
(30) days of becoming aware of such AE or ADR. 

                 2.3.   All
information between the parties shall be sent using the standard reporting
format for Health Authorities in force in the respective countries concerned.

D-2 

APPENDIX E 

QUALITY AGREEMENT 

BY AND BETWEEN 

ORPHAN MEDICAL, INC. 

13911 Ridgedale Drive,
Suite 250 

Minnetonka, Minnesota, USA
55305 

(hereafter called “ORPHAN”) 

on one hand 

Approved by: Dayton T. Reardan, Ph.D., RAC 

Vice President of Regulatory Affairs, Orphan Medical, Inc. 

Date:_______________           Signature:_____________________ 

And 

Celltech Pharmaceuticals Ltd. 

(hereafter called “CELLTECH”) 

Approved by: _____________________ 

Bob Morgan, Site Director 

Date:_______________          Signature:_____________________ 

For the Product Xyrem (sodium oxybate) 50% oral solution, 

hereafter call the “Product” 

E-1 

TABLE OF CONTENTS  

	
1.  	 	QUALITY AGREEMENT  	 	1  	 
	     1.1  	 	     Purpose   	 	1  	 
	     1.2  	 	     Relationship to License Agreement   	 	1  	 
	
2.  	 	DEFINITIONS  	 	1  	 
	
3.  	 	ADMINISTRATIVE INFORMATION  	 	1  	 
	     3.1  	 	     ORPHAN Contact Names  	 	1  	 
	     3.2  	 	     CELLTECH Contact Names   	 	1  	 
	     3.3  	 	     Emergency Contacts Names   	 	1  	 
	
4.  	 	TERM OF AGREEMENT   	 	2  	 
	
5.  	 	MANUFACTURING GMP COMPLIANCE  	 	2  	 
	     5.1  	 	     General  	 	2  	 
	     5.2  	 	     Premises  	 	2  	 
	     5.3  	 	     GMP Guidelines  	 	3  	 
	     5.4  	 	     Materials  	 	3  	 
	     5.5  	 	     Master Production Records  	 	4  	 
	     5.6  	 	     Standard Operation Procedures and documentation  	 	4  	 
	     5.7  	 	     Methods Validation/Certification  	 	4  	 
	     5.8  	 	     Batch Numbers  	 	4  	 
	     5.9  	 	     Dates of Manufacture and Expiration  	 	4  	 
	     5.10  	 	     Manufacturing and Equipment Data  	 	5  	 
	     5.11  	 	     Storage and Shipment  	 	5  	 
	
6.  	 	QUALITY CONTROL  	 	6  	 
	     6.1  	 	     General  	 	6  	 
	     6.2  	 	     In-Process and Product Testing  	 	6  	 
	     6.3  	 	     Retain Samples  	 	6  	 
	     6.4  	 	     Routine Stability Program  	 	7  	 
	     6.5  	 	     Out-of-Specification (OOS) Investigations  	 	7  	 
	     6.6  	 	     Contract Quality Control Laboratories  	 	7  	 

E-2 

	
7.  	 	QUALITY ASSURANCE  	 	8  	 
	     7.1  	 	     Deviations and Investigations  	 	8  	 
	     7.2  	 	     Lot Disposition  	 	8  	 
	     7.3  	 	     Quality Assurance Certificate of Compliance/Analysis  	 	8  	 
	     7.4  	 	     Product Release  	 	9  	 
	     7.5  	 	     Product Complaints and Recalls  	 	9  	 
	     7.6  	 	     Records Retention  	 	9  	 
	     7.7  	 	     Quality Assurance Presence in the Manufacturing Facility  	 	10  	 
	
8.  	 	REGULATORY COMPLIANCE  	 	10  	 
	     8.1  	 	     Regulatory Compliance  	 	10  	 
	     8.2  	 	     Regulatory Actions  	 	11  	 
	     8.3  	 	     Regulatory Affairs  	 	11  	 
	
9.  	 	DISPUTE RESOLUTION  	 	11  	 
	     9.1  	 	     Non-Conformity Dispute  	 	11  	 
	     9.2  	 	     Other Disputes  	 	12  	 
	
10.  	 	CHANGE MANAGEMENT  	 	12  	 
	     10.1  	 	     Technical & cGMP Impact Assessment  	 	12  	 
	
11.  	 	PRODUCT AND PROCESS VALIDATION  	 	13  	 
	     11.1  	 	     Process Validation  	 	13  	 
	     11.2  	 	     Equipment, Computer, Facility and Utilities Qualification  	 	13  	 
	     11.3  	 	     Laboratory Qualification  	 	13  	 
	
12.  	 	ANNUAL PRODUCT REVIEW AND ANNUAL REPORT  	 	14  	 
	     12.1  	 	     Annual Product Review  	 	14  	 

E-3 

	  	
Appendix 1 :   ORPHAN and CELLTECH's responsibilities  

	  	Appendix 2 :   Formula and European Product Specifications  

	  	Appendix 3 :   Contact Names  

	  	Appendix 4 :   Release Documentation  

	  	Appendix 5 :   Specifications  

	  	•  	  	Bulk
Packaged Drug Product  

	  	•  	  	Analytical
Specifications Once Approved by EMEA 

	  	        *  

E-4 

APPENDIX F 

CELLTECH FIRST
COMMERCIAL YEAR FORECAST 

        * 

F-1 

APPENDIX G 

COMPONENTS OF STANDARD MANUFACTURING COST

AND

TRANSFER PRICE 

        * 

G-1 

APPENDIX H 

REGULATORY ASSISTANCE 

        1.      Marketing Authorizations and Registrations  

        In
connection with Celltech’s acquisition of the Marketing Authorizations and
Registrations and in addition to Orphan Medical’s obligations set forth elsewhere in
this Agreement, Orphan Medical will, at its own cost and expense (but subject to the
limitations set forth in Section 3.2), take the following actions: 

	  	A.  	  	Promptly provide
Celltech with copies of the NDA(s) and other relevant Know How and documentation
currently in Orphan Medical’s possession; 

	  	B.  	  	On
Celltech’s reasonable request, provide reasonable assistance in reviewing
Product clinical studies; and 

	  	C.  	  	Promptly review
and comment upon, as necessary, all applications for Marketing Authorizations
and supporting documentation that Celltech shall submit to Orphan Medical for
review prior to filing with the appropriate Regulatory Authorities in the
Territory. 

        2.      Training, Sales and Technical Literature.  

        In
addition to the materials that Orphan Medical is to provide Celltech pursuant to Section
6.5 of this Agreement, Orphan Medical shall also provide to Celltech in accordance with
Section 6.5, the following materials: 

	  	A.  	  	All training
materials used by Orphan Medical during the Term; 

	  	B.  	  	Copies of
all studies relating to the Product conducted by or on behalf of Orphan Medical,
and all updates thereto; 

	  	C.  	  	During each of
the first three (3) years of the Term, Orphan Medical, at its sole cost and
expense, shall provide five (5) eight (8) hour days of sales and technical
training to Celltech’s employees, agents, independent contractors,
Subdistributors or Sublicensees at the Celltech facility specified by Celltech.
Celltech and Orphan Medical shall use Commercially Reasonable Efforts to
coordinate mutually convenient days for such training; provided,
however, if the parties cannot agree on a mutually convenient time for
Orphan Medical to provide such services, Celltech shall designate the dates for
such training and notify Orphan Medical thereof at least thirty (30) days prior
to the first designated training date. 

H-1 

APPENDIX I 

TRADEMARK USE STANDARDS 

The trademark use standards below are
minimum requirements to ensure consistent and appropriate use of the Xyrem®
trademark. The consistent application of the Xyrem® trademark
standards are essential to conveying a common image to reinforce consumer awareness and
recognition of the Xyrem® trademark. 

        Use
Requirements:  

        * 

        Color
Requirements  

	  	Two color Xyrem Logo:     *  

	  	Four color print to match Xyrem logo:     *  

	  	Black and White Xyrem logo:     *  

I-1 

Schedule 8.1(e)(ii) 

Patent Rights, Trademark and Other Intellectual Property 

Relating to the Product in the Territory 

Patent(1)  

	Country	Stage		Serial #		Date Filed		Patent #		Issue Date	
	

	European	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Austria	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Belguim	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Denmark	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Finland	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	France	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Germany	 	Granted	 	99964320.8	 	12/22/99	 	69907508.408	 	5/2/03	 
	Ireland	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Italy	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Netherlands	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Spain	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Sweden	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	Switzerland	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 
	United Kingdom	 	Granted	 	99964320.8	 	12/22/99	 	1140061	 	5/2/03	 

Trademark(1) 

	
European Community Trademark 		
Reg. No.: 957712

Registered: 10 March 2000 	
	
Norway 		
Reg. No.: 217395

Registered: 23 January 2003 	
	
Iceland		
Reg. No.: 679/2002

Registered: 31 July 2002 	
	
Switzerland		
Reg. No.: 503.859

Registered: 9 October 2002 	

1 

	 	 	 	 
	
Czech Republic		
Reg. No.: 251135

Registered: 27 January 2003 	
	
Slovak Republic		
Application No.:  POZ 1676-2002

Registered: Pending 	
	
Poland		
Appl. No.:  Z-251131

Registered: Pending 	
	
Hungary		
Appl. No.: M 02 02667

Registered: Pending 	

* 

_________________
(1)   All are registered in the name of Orphan Medical Inc.

2 

Schedule 8.1(e)(iii) 

Infringement or Conflict 

None 

  

Schedule 8.1(f)(i) 

Contracts 

* 

  

Schedule 8.1(f)(ii) 

Default, Breach or
Violation 

None 

  

Schedule 8.1(g)(i) 

Claims 

None 

  

Schedule 8.1(h) 

Required Approvals 

None 

  

Schedule 8.1(e)(i) 

Contracts 

None 

  

Schedule 8.1(e)(ii) 

Default, Breach or Violations 

None 

  

Schedule 8.1(f)(i) 

Claims 

None 

  

Schedule 8.2(g) 

Required Approvals 

None

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