Document:

EX-10.3 Asset Purchase Agreement

 

Exhibit 10.3

The confidential portions of this exhibit have been filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment request in
accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended.
REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

 

 

 

ASSET PURCHASE AGREEMENT

by and between

SYNTHON PHARMACEUTICALS, INC.

and

JDS PHARMACEUTICALS, LLC

relating to

Purchase Of PEXEVA® Product Line

Dated October 17, 2005

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	1.	 	Definitions	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	Purchase and Sale of Purchased Assets	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	2.1.	 	 	Purchase and Sale
	 	 	6	 
	 

	 	 	2.2.	 	 	Inventory
	 	 	6	 
	 

	 	 	2.3.	 	 	Retained Assets
	 	 	7	 
	 

	 	 	2.4.	 	 	Delivery of Know-How
	 	 	7	 
	 

	 	 	2.5.	 	 	Contracts and NDA
	 	 	7	 
	 

	 	 	2.6.	 	 	Patent License
	 	 	7	 
	 

	 	 	2.7.	 	 	Right to Use Equipment and Machinery
	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Purchase Price	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	3.1.	 	 	Payments of Purchase Price
	 	 	8	 
	 

	 	 	3.2.	 	 	Purchase Price Adjustment for Inventory
	 	 	8	 
	 

	 	 	3.3.	 	 	Purchase Price Adjustment for Distribution Channel Inventory
	 	 	8	 
	 

	 	 	3.4.	 	 	Additional Fee
	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	Representations and Warranties of Synthon	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	4.1.	 	 	Organization; Standing
	 	 	11	 
	 

	 	 	4.2.	 	 	Authorization; Binding Effect
	 	 	11	 
	 

	 	 	4.3.	 	 	No Conflict; Consents
	 	 	11	 
	 

	 	 	4.4.	 	 	Title to Purchased Assets; Liens and Encumbrances
	 	 	11	 
	 

	 	 	4.5.	 	 	Claims; Litigation
	 	 	11	 
	 

	 	 	4.6.	 	 	Product Intellectual Property
	 	 	11	 
	 

	 	 	4.7.	 	 	Contracts
	 	 	13	 
	 

	 	 	4.8.	 	 	Legal and Regulatory Compliance; Specifications
	 	 	13	 
	 

	 	 	4.9.	 	 	Financial and Other Information
	 	 	14	 
	 

	 	 	4.10.	 	 	Inventory
	 	 	14	 
	 

	 	 	4.11.	 	 	Environmental Representation
	 	 	14	 
	 

	 	 	4.12.	 	 	Employment Matters
	 	 	15	 
	 

	 	 	4.13.	 	 	Full Disclosure
	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	Representations and Warranties of JDS	 	 	15	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	5.1.	 	 	Organization; Standing
	 	 	15	 
	 

	 	 	5.2.	 	 	Authorization; Binding Effect
	 	 	16	 
	 

	 	 	5.3.	 	 	No Conflict; Consents
	 	 	16	 
	 

	 	 	5.4.	 	 	No Violation; Litigation or Regulatory Action
	 	 	16	 
	 

	 	 	5.5.	 	 	Availability of Financing
	 	 	16	 
	 

	 	 	5.6.	 	 	Disclosure
	 	 	16	 
	 

	 	 	5.7.	 	 	Hart-Scott-Rodino Compliance
	 	 	16	 

i

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	Covenants of Synthon and JDS	 	 	16	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	6.1.	 	 	Access
	 	 	16	 
	 

	 	 	6.2.	 	 	Notice by Synthon; Statements by Synthon Representatives
	 	 	17	 
	 

	 	 	6.3.	 	 	Chargebacks, Rebates and Returns
	 	 	17	 
	 

	 	 	6.4.	 	 	Manufacturing Agreements
	 	 	19	 
	 

	 	 	6.5.	 	 	Stability Programs; Complaints
	 	 	19	 
	 

	 	 	6.6.	 	 	Safety Data
	 	 	20	 
	 

	 	 	6.7.	 	 	Transition Services
	 	 	20	 
	 

	 	 	6.8.	 	 	Regulatory Matters
	 	 	20	 
	 

	 	 	6.9.	 	 	Offers of Employment
	 	 	21	 
	 

	 	 	6.10.	 	 	Conduct Pending Closing
	 	 	21	 
	 

	 	 	6.11.	 	 	Financial Statements
	 	 	21	 
	 

	 	 	6.12.	 	 	Insurance
	 	 	22	 
	 

	 	 	6.13.	 	 	Synthon Covenant Regarding the Trademarks
	 	 	22	 
	 

	 	 	6.14.	 	 	Retained Asset Dispositions
	 	 	22	 
	 

	 	 	6.15.	 	 	Prohibition on Assignment
	 	 	22	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	Closing	 	 	22	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	7.1.	 	 	Time and Place
	 	 	22	 
	 

	 	 	7.2.	 	 	Conditions Precedent to JDS’s Obligations
	 	 	22	 
	 

	 	 	7.3.	 	 	Conditions Precedent to Synthon’s Obligations
	 	 	23	 
	 

	 	 	7.4.	 	 	Deliveries at Closing
	 	 	24	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	Confidentiality and Cooperation; Non-Competition	 	 	25	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	8.1.	 	 	Confidential Information
	 	 	25	 
	 

	 	 	8.2.	 	 	Confidentiality Obligation
	 	 	25	 
	 

	 	 	8.3.	 	 	Cooperation
	 	 	25	 
	 

	 	 	8.4.	 	 	Non-Competition
	 	 	26	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	Further Assurances	 	 	26	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	Indemnification; Insurance	 	 	26	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	10.1.	 	 	Indemnification Obligations of the Parties
	 	 	26	 
	 

	 	 	10.2.	 	 	Limitations on Indemnification Liability
	 	 	27	 
	 

	 	 	10.3.	 	 	Procedure for Indemnification
	 	 	27	 
	 

	 	 	10.4.	 	 	Representation
	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	Survival of Indemnification Obligations and Covenants	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	12.	 	Dispute Resolution	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	12.1.	 	 	Negotiation
	 	 	28	 
	 

	 	 	12.2.	 	 	Arbitration
	 	 	28	 
	 

	 	 	12.3.	 	 	Interim Relief
	 	 	28	 

ii

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	13.	 	Termination	 	 	28	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	13.1.	 	 	Termination
	 	 	28	 
	 

	 	 	13.2.	 	 	Survival
	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	14.	 	Specific Performance	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	15.	 	Assignment	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	16.	 	Choice of Law	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	17.	 	Notices	 	 	29	 
	 
	 	 	 	 	 	 	 	 	 	 
	18.	 	Miscellaneous	 	 	30	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	18.1.	 	 	Entire Agreement
	 	 	30	 
	 

	 	 	18.2.	 	 	Amendment and Modification
	 	 	30	 
	 

	 	 	18.3.	 	 	Severability
	 	 	30	 
	 

	 	 	18.4.	 	 	Non-Disclosure
	 	 	30	 
	 

	 	 	18.5.	 	 	Brokerage Indemnity
	 	 	30	 
	 

	 	 	18.6.	 	 	Execution; Facsimile Signatures
	 	 	30	 

	 	 	 	 	 
	Schedule 1A & 1B

	 	—
	 	Licensed Patents
	Schedule 1C

	 	—
	 	Patents
	Schedule 1D

	 	—
	 	Manufacturing Agreements
	Schedule 1E

	 	—
	 	Inventory Costs
	Schedule 1F

	 	—
	 	Equipment and Machinery
	Schedule 3.3(a)

	 	—
	 	Intentionally Deleted
	Schedule 3.3(c)

	 	—
	 	Intentionally Deleted
	Schedule 4

	 	—
	 	Exceptions
	Schedule 4.6(a)

	 	—
	 	Product Intellectual Property
	Schedule 4.7

	 	—
	 	Contracts
	Schedule 4.10

	 	—
	 	Inventory As of September 30, 2005
	Schedule 4.12

	 	—
	 	Employment Matters
	Schedule 6.3(f)

	 	—
	 	Synthon Returned Goods Policy
	Schedule 7.2(f)

	 	—
	 	Synthon Consents and Approvals
	Schedule 7.3(e)

	 	—
	 	JDS Consents and Approvals
	 
	 	 	 	 
	Exhibit A

	 	—
	 	Form of Transition Services Agreement
	Exhibit B

	 	—
	 	Form of Pledge and Security Agreement
	Exhibit C

	 	—
	 	Form of License
	Exhibit D

	 	—
	 	Form of Supply Agreement
	Exhibit E

	 	—
	 	Form of Guaranty

iii

 

ASSET PURCHASE AGREEMENT

     ASSET PURCHASE AGREEMENT (“Agreement”) dated this 17th day of October, 2005 by and
between SYNTHON PHARMACEUTICALS, INC., a North Carolina corporation having its principal offices at
9000 Development Drive, Research Triangle Park, North Carolina 27709 (“Synthon”) and JDS
PHARMACEUTICALS, LLC, a Delaware limited liability company having its principal offices at 122 East
42nd Street, 41st Floor, New York, New York 10168 (“JDS”).

R E C I T A L S:

     A. Synthon owns the proprietary rights to a pharmaceutical product manufactured, marketed and
sold by or on behalf of Synthon under the trademark “PEXEVA®” (as more fully defined herein).

     B. JDS desires to purchase certain assets relating to the Product (as more fully defined in
Section 1, the “Purchased Assets”) from Synthon for purposes of marketing and selling the
Product in the Territory (as defined herein), and Synthon has agreed to sell the Purchased Assets
to JDS, all in accordance with, and subject to, the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the foregoing and of the terms and conditions hereinafter
set forth, and good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     1. Definitions. As used herein, the following terms shall have the respective
meanings set forth below:

          “Additional Fee” shall have the meaning set forth in Section 3.4 (a).

          “Additional Fee Aggregate Minimum” shall have the meaning set forth in Section 3.4
(d).

          “Additional Fee Credit” shall have the meaning set forth in Section 3.4 (f).

          “Additional Fee Expiration Date” shall mean the last date on which U.S. Patent No. 5,874,447
or any divisional thereof (provided such divisional is listed in the FDA publication entitled “Food
and Drug Administration Center for Drug Evaluation and Research Approved Drug Products with
Therapeutic Equivalent Evaluations” with respect to the Product (the “Orange Book”)) expires
(including any patent term extension).

          “Additional Fee Period” shall mean the period commencing on the Closing Date and ending on
Additional Fee Expiration Date or such earlier date as there has been a judicial finding of
invalidity of U.S. Patent No. 5,874,447 and all divisionals thereof (provided such divisionals are
listed in the Orange Book with respect to the Product) as to which no appeal has or can be taken.

          “Affiliate” shall mean any person or legal entity controlling, controlled by or under common
control with the person with respect to whom such status is at issue and shall include, without
limitation, any corporation 50% or more of the voting power of which (or other comparable ownership
interest for an entity other than a corporation) is owned, directly or indirectly, by a party
hereto or any corporation, person or entity which owns 50% or more of such voting power of a party
hereto. With respect to Synthon, the term “Affiliate” shall include, but not be limited to,
Synthon Holding BV, Synthon BV, Synthon BCT Technologies, LLC and Synthon IP Inc.

1

 

          “API” shall mean the compound generally referred to as paroxetine mesylate.

          “Average Selling Price” shall mean ***.

          “Average Wholesaler Inventory” shall have the meaning specified in Section 3.3(a).

          “Chargebacks” shall mean discounts or rebates provided in the form of chargeback and similar
payments to wholesalers or other distributors in connection with the Product.

          “Closing” shall have the meaning set forth in Section 7.1.

          “Closing Date” shall have the meaning set forth in Section 7.1.

          “Closing Wholesaler Inventory” shall have the meaning specified in Section 3.3(b).

          “Confidential Information” shall have the meaning set forth in Section 8.1.

          “Contracts” shall mean all contracts, agreements, arrangements or understandings, to the
extent directly related to the Purchased Assets or the Product in the Territory or related to the
synthesis or manufacture of the Product or any component thereof anywhere in the world to the
extent exclusively related to the marketing, sale, offer for sale, distribution, or use of the
Product in the Territory as set forth on Schedule 4.7. Contracts shall include, without
limitation, contracts or arrangements relating to the sale, use or marketing of the Product in the
Territory (including agreements with managed care organizations and hospitals to the extent
specifically related to the Product in the Territory) and shall include the Manufacturing
Agreements and shall include contracts, agreements, arrangements or understandings relating to the
synthesis or manufacture of the Product or any component thereof executed or to be performed
outside of the Territory which relate to the marketing, sale, offer for sale, distribution or use
of the Product in the Territory.

          “Credits” shall mean credits, utilization based rebates (other than Medicaid rebates),
reimbursements, and similar payments to buying groups, managed care organizations and benefit
managers, insurers and other institutions in connection with the Product.

          “Damages” shall have the meaning set forth in Section 10.1.

          “Dollars” or “$” shall mean U.S. dollars.

          “Encumbrance” shall mean any mortgage, pledge, security interest, deed of trust, lease, lien,
adverse claim (including any claim of adverse ownership), levy, charge, easement, right of way,
covenant, restriction, or other encumbrance, third-party right or retained right of any kind
whatsoever, or any conditional sale or title retention agreement or other agreement to give any of
the foregoing in the future.

          “Environmental Law” shall have the meaning set forth in Section 4.11.

          “ERISA” and “ERISA Plans” shall have the respective meanings assigned to those terms in
Section 4.12.

          “FDA” shall mean the United States Food and Drug Administration or any successor agency having
a similar jurisdiction and the corresponding regulatory agency in Canada.

          “Federal Program” shall have the meaning set forth in Section 6.3(d).

2

 

          “Financial Data” shall have the meaning set forth in Section 4.9.

          “Indemnifying Party” shall have the meaning set forth in Section 10.1(c).

          “Indemnitee” shall have the meaning set forth in Section 10.1(c).

          “Inventory” shall mean all saleable inventory of Product with at least twelve (12) months of
remaining shelf-life as of the Closing in finished form (and whether in bulk tablet or final
packaged form) and inventory of finished samples which comply with the NDA on hand at Synthon as of
the Closing.

          “Inventory Cost” with respect to a unit of Inventory shall mean Synthon’s inventory cost
determined in accordance with US GAAP. Schedule 1E sets forth a schedule of Inventory Cost
for units of Inventory.

          “JDS Know-How” shall have the meaning set forth in the last sentence of the definition of
“Know-How” below.

          “Know-How” shall mean all methods, processes, techniques, compositions, technology,
information, data, results of tests, studies, statistical and other analyses and expertise, whether
patented or unpatented to the extent related to the Product in the Territory or to the extent
related to the synthesis or manufacture of the Product or any component thereof anywhere in the
world to the extent exclusively related to the marketing, selling, offering for sale, distributing
or using the Product in the Territory, now in possession of Synthon or an Affiliate of Synthon,
which are at the time of the Closing used in development, formulation, manufacture of the Product.
Know-How shall include, without limitation, pharmacology, toxicology, drug stability, manufacturing
and formulation methodologies and techniques, clinical and non clinical safety and efficacy
studies, marketing studies and absorption, excretion, metabolism studies, quality control and
quality assurance, and all tangible manifestations thereof, subject to Synthon’s rights to retain a
copy of documents set forth in the definition of “Purchased Assets” below. To the extent any of
such information, technology or know-how has applicability to products other than the Product in
the Territory or other than to the synthesis or manufacture of the Product or any component thereof
anywhere in the world to the extent exclusively related to the marketing, selling, offering for
sale, distribution or use of the Product in the Territory, the assignment of Know-How hereunder
shall be limited to the grant of a fully paid, exclusive (with respect to the Territory), perpetual
license to use such information, technology or know-how only to the extent related to the Product.
“JDS Know-How” shall mean any such Know-How now or hereafter possessed by JDS which would be
defined in this Section if possessed or developed by Synthon.

          “Law” shall mean all applicable laws (including, without limitation, the Federal Food, Drug
and Cosmetic Act, as amended, corresponding Canadian law and other national, state, provincial and
local laws) governing the manufacture, marketing, advertising, distribution and sale of the Product
or any other obligations of the parties thereunder, including regulations promulgated thereunder.

          “Licensed Patents” shall mean

          (a) each claim of each patent of Synthon or any Affiliate listed on Schedule 1A and
Schedule 1B;

          (b) each claim of each patent issuing from or on each patent application listed on
Schedule 1A and Schedule 1B; and

3

 

          (c) each claim of each application for letters patent which has been filed by or assigned to
Synthon, or any of its Affiliates, as the case may be, and each claim of each patent issuing from
or on any such application, claiming the Product or methods for making or using the Product and in
each case (including subsections (a) and (b) above) including extensions, continuations,
continuations-in-part, reissues and divisions thereof, and any other patents or patent applications
relating to any form or derivative of paroxetine, including, but not limited to, salts, esters,
chelates, enantiomers, diastereoisomers, prodrugs and metabolites.

          For purposes of this definition only, the term “Product” shall be deemed to include any form or
derivative of paroxetine, including but not limited to, salts, esters, chelates, enantiomers,
diastereoisomers, prodrugs and metabolites. From and after the date hereof, from time to time as
appropriate, Synthon shall update Schedules 1A and 1B to reflect any additional patents and patent
applications which fall within the scope of subsection (c) above.

          “Manufacturing Agreements” shall mean the contracts and agreements identified on Schedule
1D relating to the formulation, manufacture, packaging, testing, validation, storage or
shipment of the Product or any component thereof.

          “Marketing Authorization” shall mean the approval by a Regulatory Authority permitting the
marketing, sale and distribution (and, if applicable, pricing and reimbursement) of the Product
within the Territory, including, without limitation, the NDA.

          “Marketing Information” shall have the meaning set forth in Section 4.9.

          “Marketing Materials and Data” shall mean all physician lists, customer lists, marketing
studies, market research materials, advertising and promotional materials, other similar
information and data, including without limitation, records of sales and cost data for the
immediate three (3) years preceding the Closing, to the extent pertaining to the marketing or
distribution of the Product in the Territory which items are in the possession or control of
Synthon or any of its Affiliates, promotional booths and displays, and all equipment and other
materials used in connection with the sale or promotion of the Product whether or not located at
Synthon’s offices.

          “NDA” shall mean a New Drug Application including amendments and supplements thereto approved
by the FDA in respect of the marketing of the Product in the United States and all corresponding
applications and approvals in Canada.

          “Net Sales” of the Product for a period following the Closing shall mean the gross proceeds
from sales of the Product in the Territory by JDS and its Affiliates or permitted licensees to
unaffiliated third parties, less (i) allowances for returns and discounts given to customers,
including, without limitation, discounts made by means of rebates, Chargebacks or contract
administration fees with customers that are directly related to sales of Product in the Territory
(and including rebates or other payments required to be paid to governmental entities in connection
with sales of Product in the Territory pursuant to the Omnibus Budget Reconciliation Act of 1990
and similar or other Federal or state legislation or programs) and (ii) any taxes or duties
included in gross invoice amounts. For purposes of the definition of Net Sales, the term “Product”
shall include all products marketed by JDS or a permitted licensee within the Territory which
contain paroxetine mesylate. The Net Sales shall be calculated in accordance with US GAAP.

          “Patents” shall mean:

          (a) each claim of each patent of Synthon or any Affiliate listed on Schedule 1C; and

4

 

          (b) each claim of each patent issuing from or on each patent application listed on
Schedule 1C.

          “Product” shall mean any pharmaceutical product containing paroxetine mesylate in all dosage
forms and formulations, including, without limitation, the pharmaceutical product known as Pexeva®
paroxetine mesylate approved for marketing in the United States pursuant to NDA 21-299, whether
sold under the “Pexeva®” trademark, any other brand name or as a generic product.

          “Product Intellectual Property” shall mean any and all of the following intellectual property
rights now owned or controlled (including, without limitation, by means of in-license) by Synthon
or any Affiliate to the extent used in the development, manufacture, sale, use, marketing and
distribution of the Product in the Territory or to the extent used in the synthesis or manufacture
of the Product or any component anywhere in the world to the extent exclusively related to the
marketing, sale, offer to sell, distribution or use of the Product in the Territory, or in
obtaining Marketing Authorizations: (i) Patents (other than those listed in Schedules 1A and 1B
which are addressed as “Licensed Patents” in Section 2.6); (ii) Know-How; (iii) copyrights in any
copyrightable Marketing Material and Data; and (iv) Trademarks, proprietary rights to universal
resource locators (URLs), websites and web pages to the extent exclusively related to the Product
within the Territory.

          “Purchase Price” shall mean the consideration as further defined in Section 3.1 below
paid by JDS to Synthon for the transfer of Synthon and it Affiliates’ entire right, title, and
interest in the Product in the Territory and with respect to the synthesis and manufacture of the
Product or any component thereof anywhere in the world to the extent exclusively related to the
marketing, sale, offer for sale, distribution or use of the Product in the Territory.

          “Purchased Assets” shall mean the following: (i) the Product Intellectual Property; (ii) the
license to the Licensed Patents referred to in Section 2.6, (iii) all outstanding orders
relating to the Product in the Territory and Contracts; (iv) the Inventory (but only to the extent
JDS has elected to acquire Inventory at Closing pursuant to Section 2.2); (v) the Marketing
Material and Data; (vi) the NDA; (vii) all rights or claims of Synthon or any Affiliate in respect
to any of the foregoing against any third party including, without limitation, any prior owner of
Product Intellectual Property but excluding any right of Synthon to receive payment for Product
shipped prior to Closing; (viii) a nonexclusive right to use all Synthon equipment and machinery
located at facilities where Product is manufactured (as set forth on Schedule 1F, which
Schedule includes the location of such equipment and machinery) as long as JDS is manufacturing
Product at such facility and in accordance with the further provisions set forth in Section
2.7; and (ix) all goodwill relating to any of the above. Synthon may retain a copy of all
documents or materials included in the Purchased Assets for archival purposes, for purposes of
fulfilling its obligations under this Agreement and under applicable Law and to the extent such
documents or materials include or relate to Retained Assets (as hereinafter defined).

          “Quarter” shall mean the calendar quarterly periods ending March 31, June 30, September 30 and
December 31.

          “Regulatory Authority” shall mean any governmental regulatory authority involved in the
granting of approvals for the manufacture, sale, marketing, reimbursement or pricing of the Product
(including, without limitation, the FDA) in the Territory.

          “Retained Assets” shall mean all assets of Synthon of any type, nature, status or description
whatsoever, other than the Purchased Assets. For purposes of clarity and not of limitation,
“Retained Assets” shall include (i) any Synthon intellectual property other than Product
Intellectual
Property and (ii) plant, equipment and fixed assets of Synthon other than as expressly
included in the Purchased Assets.

5

 

          “Security Agreement” shall have the meaning set forth in Section 3.1(b).

          “Specifications” shall have the meaning set forth in Section 4.8.

          “Supply Agreement” shall mean that certain supply agreement to be entered into between Synthon
and JDS on the Closing Date whereby Synthon has agreed to supply JDS with certain quantities of API
and Inventory from time to time pursuant to the terms of such agreement in form and substance as
annexed hereto as Exhibit D.

          “Territory” shall mean the United States and Canada.

          “Threshold Loss Amount” shall have the meaning set forth in Section 10.2(a).

          “Trademarks” shall mean the trademarks set forth on Schedule 4.6(a), including all
goodwill associated therewith.

          “Transition Period” shall mean a period not to exceed ninety (90) days from the Closing during
which time Synthon will assist JDS with certain defined services more fully set forth in the
Transition Services Agreement.

          “Transition Services” shall mean the services provided by Synthon during the Transition Period
under the Transition Services Agreement.

          “Transition Services Agreement” shall mean that certain transition services agreement entered
into between Synthon and JDS on the Closing Date whereby Synthon will provide the Transition
Services to JDS during the Transition Period in form and substance as annexed hereto as Exhibit
A.

          “United States” shall mean the United States of America, and its territories and possessions,
including Puerto Rico irrespective of its political status.

          “US GAAP” shall mean generally accepted accounting principles that are in effect in the United
States.

     2. Purchase and Sale of Purchased Assets.

          2.1. Purchase and Sale. Subject to the terms and conditions of this Agreement, at the
Closing, Synthon shall sell, transfer, convey, assign and deliver, or cause to be sold,
transferred, conveyed, assigned and delivered, to JDS, free and clear of all Encumbrances, and JDS,
or any assignee or Affiliate of JDS, shall purchase, acquire and accept from Synthon (and, to the
extent applicable, Affiliates of Synthon) all of Synthon’s (and, if applicable, its Affiliates’)
right, title and interest in and to the Purchased Assets.

          2.2. Inventory. Prior to the Closing Date, the Parties shall cooperate to provide
information to JDS as to Inventory (including lot numbers, dosage strengths and dating) which
Synthon reasonably expects to have available as of the Closing Date. At least two (2) business
days prior to the Closing Date, JDS will provide Synthon with a written notice of Inventory which
JDS intends to purchase at closing (the “Inventory Notice). Promptly following receipt of the
Inventory Notice, and in any event no later than, the business day prior to the Closing, Synthon
shall provide JDS with written notice based

6

 

on the Inventory Notice indicating the number of lots of Inventory with at least 18 months
left before expiration that it will have available at Closing, including specific dosage strengths
and dating information (the “Closing Inventory”). JDS may elect, but shall not be obligated, to
purchase some or all of the Closing Inventory at Inventory Cost. By notice to Synthon delivered at
the Closing, JDS will indicate which lots of inventory are to be included in the Purchased Assets.
Synthon shall deliver at Closing a Certificate stating that the Closing Inventory delivered to JDS
as part of the Purchased Assets conforms to the description of the Closing Inventory (e.g., the
number of lots, dosage strengths and dating) set forth on the JDS Inventory Notice. To the extent
JDS has so elected to purchase Inventory at Closing, the cash portion of the Purchase Price payable
pursuant to Section 3.1 will be increased as provided by Section 3.2. Any
remaining Inventory may be purchased by JDS from time to time pursuant to the Supply Agreement,
provided, however, Inventory with less than twelve (12) months before expiration may be donated to
accredited or recognized charitable organizations by Synthon outside of the Territory (subject to
JDS prior written consent and provided the recipient agrees in writing not to export the Inventory
to the Territory) or destroyed by Synthon. To the extent that Inventory purchased by JDS at
Closing or pursuant to the Supply Agreement is not sold in the ordinary course, JDS may return to
Synthon remaining Inventory with less than twelve (12) months left before expiration for a full
refund, which JDS may obtain by offsetting the amount thereof against payments due to Synthon
pursuant to 3.4 below, or to any other payments due to Synthon pursuant to this Agreement or the
Supply Agreement.

          2.3. Retained Assets. Notwithstanding anything contained in this Agreement to the
contrary, from and after the Closing, Synthon shall retain all of its right, title and interest in
and to the Retained Assets. Notwithstanding the foregoing, except as expressly provided elsewhere
in this Agreement, Synthon shall retain no interest, royalty or intellectual property rights
relating to the Product in the Territory or relating to the synthesis or manufacture of the Product
or any component thereof anywhere in the world to the extent exclusively related to the marketing,
selling, offering for sale, distribution or use of the Product in the Territory.

          2.4. Delivery of Know-How. As described herein, Synthon shall disclose to JDS any
Know-How in its possession on the Closing Date relating to the Product in the Territory or with
respect to the synthesis or manufacture of the Product or any component thereof anywhere in the
world to the extent exclusively related to the marketing, sale, offer for sale, distribution or use
of the Product in the Territory and shall deliver to JDS at the Closing all tangible manifestations
thereof, subject to the rights of Synthon to retain copies provided herein. From and after the
Closing Date, Synthon shall continue to cooperate with JDS, as JDS may from time to time reasonably
request, in order to more fully convey the Know-How to JDS.

          2.5. Contracts and NDA. Subject only to the provisions of the Transition Services
Agreement and as set forth below, JDS will assume the obligations under the Contracts and the NDA
to the extent arising from and after the Closing.

          2.6. Patent License. At the Closing, Synthon shall grant to JDS a fully paid-up,
perpetual license in form and substance as set forth on Exhibit C.

          2.7. Right to Use Equipment and Machinery. In connection with and during the term of
the grant by Synthon to JDS of the non-exclusive right to use the equipment and machinery listed on
Schedule 1E included in the Purchased Assets, Synthon agrees that it shall not remove or
relocate any of such equipment or machinery from its current location or use or authorize the use
of any such equipment or machinery in any manner which would prevent or delay the use thereof by
JDS for the manufacture of Product. To the extent Synthon uses or grants a licensee the use of any
of the equipment or machinery for any purpose, any incremental costs incurred in connection with
the use of such equipment or machinery
for the manufacture of Product, including but not limited to costs associated with cleaning or
validation of the equipment and machinery, shall be for Synthon’s account.

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     3. Purchase Price.

          3.1. Payments of Purchase Price. As full consideration for the Purchased Assets, JDS
shall pay or cause to be paid to Synthon the following separate and distinct payments which
together constitute the Purchase Price (the “Purchase Price”):

          (a) US $10,000,000, subject to adjustment as set forth in Sections 3.2 and 3.3 below,
to be paid by wire transfer of immediately available funds on the Closing Date to an account
designated by Synthon in writing;

          (b) US $2,000,000 on each of December 31, 2007 and December 31, 2008 plus (i) $1,000,000 if
Net Sales during the calendar year ending on the date of such payment equal or exceed US $7,000,000
but are less than US $8,000,000 or (ii) $2,000,000 if Net Sales during the calendar year ending on
the date of such payment equal or exceed US $8,000,000. Any additional payment pursuant to
subclauses (i) or (ii) of this Section shall be paid by wire transfer on the last business day of
the first calendar quarter of the year immediately following the calendar year in respect of which
such payment became due. At the Closing, JDS and Synthon will execute and deliver a security
agreement in substantially the form and substance as annexed hereto as Exhibit B (the
“Security Agreement”) pursuant to which JDS will provide collateral security to Synthon for the
payments contemplated by this subsection (b) in accordance with the terms and conditions therein
set forth. JDS reserves the right to prepay all or any portion of the Purchase Price provided by
this Section 3.1(b) at any time on or after the Closing. The parties agree that any such
prepayment will be discounted at a rate of 9.75% per annum from the original due date of the
payment to the date of payment prepaid based on the number of days in such period, determined in
the inverse order of maturity. Notwithstanding the foregoing, any prepayment which does not
include payment with respect to amounts which may become due pursuant to subclauses (i) or (ii)
above will not discharge the obligation to make any such payments as they otherwise become due and
payable;

          (c) US $1,250,000, payable with respect to each of the first two calendar years, if any, from
2007 through 2017, inclusive, as to which annual Net Sales equal or exceed US $10,000,000. Each
such payment shall be paid by wire transfer on the last business day of the first calendar quarter
of the year immediately following the calendar year in respect of which such payment became due.
In the event one or both of the payments provided by this subsection does not accrue before January
1, 2009, any of such payments which subsequently become due shall be increased by a factor of 5%
per annum commencing on January 1, 2009; and

          (d) US $5,000,000, payable with respect to the first calendar year, if any, from the Closing
through and including 2017, as to which annual Net Sales equal or exceed US $30,000,000. Such
payment shall be made by wire transfer on or before the last business day of the first calendar
quarter of the year immediately following the calendar year in respect of which such payment became
due.

          3.2. Purchase Price Adjustment for Inventory. To the extent JDS has elected to
purchase Inventory as of the Closing Date, the Purchase Price payment pursuant to Section
3.1(a) shall be increased by an amount equal to the product of (i) the number and type of units
of Inventory purchased multiplied by (ii) the Inventory Cost for each such Unit.

          3.3. Purchase Price Adjustment for Distribution Channel Inventory. In addition to the
adjustment provided by Section 3.2 and whether or not JDS has elected to purchase Inventory
at the

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Closing, the Purchase Price payable pursuant to Section 3.1(a) shall be adjusted to
reflect Inventory of Product sold by Synthon prior to the Closing and then held by wholesalers or
other distributors in accordance with the following provisions of this Section:

          (a) Synthon and JDS agree that the average quantities of Product historically maintained by
wholesalers in the Territory or to the extent exclusively maintained for sale, offer for sale,
distribution or use in the Territory (the “Average Wholesaler Inventory”) is *** bottles.

          (b) Prior to the Closing, Synthon shall obtain and disclose to JDS inventory reports from
McKesson, Amerisource Bergen, and Cardinal, which reports provide information as to wholesaler
inventory and in-transit in-bound quantities of Product as of the most recent practicable date
prior to the Closing Date (the “Closing Wholesaler Inventory”). The parties agree that the sum of
the McKesson, Amerisource Bergen, and Cardinal inventory reports shall be deemed to constitute
eighty-five percent (85%) of the Closing Wholesaler Inventory.

          (c) In the event the Closing Wholesaler Inventory exceeds the Average Wholesaler Inventory,
the Purchase Price payable pursuant to Section 3.1 (as adjusted, to the extent required, by
Section 3.2) shall be reduced by an amount equal to the product of (i) the number of
bottles by which the Closing Wholesaler Inventory exceeds the Average Wholesaler Inventory and (ii)
the Average Selling Price.

          3.4. Additional Fee.

          (a) As part of the Purchase Price delivered in consideration for the Purchased Assets, and in
addition to the amounts set forth in Section 3.1 hereof, JDS shall pay Synthon $.075 for
each tablet of the Product or any product containing paroxetine mesylate as an active ingredient
that is sold for commercial distribution by JDS, its agents or Affiliates (the “Additional Fee”)
during the Additional Fee Period. For purposes of clarification, no Additional Fee shall be
attributed to the Product or any product containing paroxetine mesylate as an active ingredient
distributed as samples or held in inventory by JDS, its agents or Affiliates. Additional Fee shall
be payable Quarterly within 45 days of the end of the Quarter to which each payment relates. Each
payment of Additional Fee shall be accompanied by a statement setting forth the number of tablets
sold by JDS, its agent or Affiliate for the Quarter.

          (b) Subject to sections (c), (e) and (f) below, in the event the Additional Fee payments for a
calendar year are less than $350,000, JDS shall pay Synthon the difference between the total
Additional Fee paid with respect to such calendar year and $350,000, which amount shall be paid
together with the Additional Fee payment for the first Quarter of the following calendar year.

          (c) In the event the Additional Fee payments for any calendar year are in excess of $350,000,
the excess shall be applied to reduce the annual minimum Additional Fee obligation for the next
(and subsequent) calendar years until such entire excess has been so applied.

          (d) JDS’s total payments of Additional Fees to Synthon with respect to sales of the Product or
any product containing paroxetine mesylate as an active ingredient during the Additional Fee Period
shall equal at least the Additional Fee Aggregate Minimum (as defined below). The Additional Fee
Aggregate Minimum shall be equal to $10,000,000, provided however, if the Additional Fee Period
ends prior to the Additional Fee Expiration Date, the Additional Fee Aggregate Minimum shall be
adjusted to equal $10,000,000 multiplied by a fraction, the numerator of which is the number of
months in the Additional Fee Period and the denominator of which shall be the number of months from
the Closing Date until June 10, 2017. In the event payments of Additional Fee pursuant to this
Section during the Additional Fee Period are less than the Additional Fee Aggregate Minimum, JDS
shall pay the

9

 

difference between the total Additional Fee paid and the Additional Fee Aggregate Minimum
within 45 days of the Additional Fee Period. JDS reserves the right to prepay the amount of any
Additional Fee Aggregate Minimum remaining due (after taking into account all previous payments of
Additional Fee) at any time on or after Closing. The parties agree that any such prepayment will
be discounted at a rate of 9.75% per annum from June 10, 2017 to the date of payment prepaid based
on the number of days in such period. The prepayment of the Additional Fee Aggregate Minimum shall
constitute payment in full of all obligations pursuant to this Section 3.4 and no further payments
of Additional Fee shall be due thereafter.

          (e) With respect to the partial calendar years at the beginning and the end of the Additional
Fee Period, that is (i) the period from the Closing Date until the end of the first Calendar Year
and (ii) the period from January 1 of the final year of the Additional Fee Period and the last day
of the Additional Fee Period, (assuming the last day is prior to December 31 of the final year of
the Additional Fee Period) the minimum threshold amount described in Section 3.4(b) shall
be adjusted downward on a pro rata basis. For example, if there are only 292 days in a partial
calendar year, the minimum Additional Fees for such period shall be $280,000.

          (f) To the extent that JDS has purchased Inventory, excluding samples, from Synthon as of the
Closing Date pursuant to Section 3.2 above, a credit in the amount of $.075 times each
Tablet included in the purchased Inventory, excluding samples, (the “Additional Fee Credit”) shall
be applied (i) to reduce any Additional Fee payment required pursuant to Section 3.4 (a) as such
Additional Fee becomes due and payable until the entire Additional Fee Credit has been so applied
and (ii) to reduce the $350,000 Additional Fee minimum payable pursuant to Section 3.4(b)
until the entire Additional Fee Credit has been so applied, provided, however, the Additional Fee
Credit shall not be applied to reduce the $10,000,000 total Additional Fee Aggregate Minimum
payable pursuant to Section 3.4(d).

          (g) JDS shall maintain accurate books and records for a period of no less than three years
from the periods covered reflecting commercial sales of Product during the Additional Fee Period,
which books and records shall be available for audit and inspection by Synthon or an independent
auditing firm to which JDS has no reasonable objection from time to time upon reasonable advance
notice solely for purposes of verifying the amount of Additional Fees and other payments due under
this Agreement. In the event any such audit discloses that Additional Fee payments or other
payments were underpaid by 5% or more with respect to any consecutive six (6) month period, JDS
shall reimburse Synthon for the reasonable cost of the audit and shall be liable for interest
equivalent to 1% compounded monthly of the aggregate amount of the discrepancy from the date such
payments were due.

          3.5. Adjustments upon Transfer. Unless otherwise waived by means of a written waiver
by Synthon, JDS shall not assign, transfer or exclusively license (whether by means of a sale of
substantially all of JDS’s business or assets, or by merger, stock sale or similar corporate
reorganization) its rights to the Product to any third party other than an Affiliate unless,
effective with closing of any such transaction, all Purchase Price provided by Section 3.1(b)
(except to the extent of additional payments pursuant to subclause (i) or (ii) thereof not yet due,
which will be treated in accordance with the further provisions of this Section) and the Additional
Fee Aggregate Minimum provided by Section 3.4(d) and not yet payable as of such date, shall have
been paid to Synthon, provided that each such payment shall be discounted at a rate of 9.75% per
annum from the original due date of the payment to the date of payment prepaid based on the number
of days in such period, determined in the inverse order of maturity. The prepayment of the
Additional Fee Aggregate Minimum shall constitute payment in full of all obligations pursuant to
Section 3.4 and no further payments of Additional Fee shall be due thereafter. In addition, JDS
shall be required to cause the purchaser or transferee of JDS’s rights to the Product to assume in
writing for the benefit of Synthon the obligation to make all other payments pursuant to Section
3.1 as and when such payments would otherwise become due and payable hereunder. In the event the
purchaser or transferee of JDS’s rights to the Product defaults in any payment obligation pursuant
to Section 3.1,

10

 

JDS shall remain liable for the full amount of such obligation until such time as the amount
is paid in full and shall promptly, and in no event later than ninety (90) days, remit such payment
to Synthon upon receipt of a notice of payment default on the part of such purchaser or transferee.
JDS agrees to provide notice to Synthon of the pendency of any transaction referred to in this
Section 3.5 as promptly as practicable in advance of the closing of any such transaction.

     4. Representations and Warranties of Synthon. Except as otherwise disclosed on
Schedule 4 (Exceptions) (which Schedule indicates the section to which each exception
relates), Synthon hereby represents and warrants to JDS as follows:

          4.1. Organization; Standing. Synthon is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the corporate power and
authority to execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.

          4.2. Authorization; Binding Effect. The execution and delivery by Synthon of this
Agreement, the performance by Synthon of its obligations hereunder and the consummation by Synthon
of the transactions contemplated hereby have been duly authorized by all necessary action on the
part of Synthon. This Agreement has been duly executed and delivered by a duly authorized
representative of Synthon and constitutes the valid and legally binding obligation of Synthon
enforceable against Synthon in accordance with its terms.

          4.3. No Conflict; Consents. The execution, delivery and performance of this Agreement
by Synthon do not (a) violate or result in the breach of, constitute a default under, or accelerate
the performance required by, any term of any covenant, agreement or understanding to which Synthon
or any Affiliate is a party, or any judgment, order, decree, law, rule or regulation to which
Synthon or any Affiliate is subject or (b) require the consent or agreement of any third party
(including governmental bodies).

          4.4. Title to Purchased Assets; Liens and Encumbrances. Synthon or an Affiliate has,
and on the Closing Date will have, good title to the Purchased Assets, free and clear of all
Encumbrances whatsoever. Synthon’s disclosure and delivery of the Product Intellectual Property,
including Know-How, prior to, on or after the Closing Date to JDS in the manner contemplated hereby
will not violate the rights of any third party.

          4.5. Claims; Litigation. There is no action, arbitration, or other legal or
administrative proceeding, pending, or, to the knowledge of Synthon, threatened, against Synthon or
any Affiliate pertaining to the Product or the Purchased Assets (including, without limitation,
claims in the nature of product liability or patent or other intellectual property infringement),
no claims by any individual named on Schedule 4.12 against Synthon, and, to the best of
Synthon’s knowledge, no governmental investigation pertaining to any of the foregoing is pending or
threatened, in each such case in any country. Synthon has in good faith made available to JDS all
of its files and the files of each Affiliate relating to the Purchased Assets and has delivered
true and complete copies thereof to JDS, all communications with regulatory authorities in the
Territory with respect to the Product (except for purely ministerial, non-substantive
communications).

          4.6. Product Intellectual Property.

          (a) Schedule 4.6(a) constitutes a true and correct list of all Product Intellectual
Property (inclusive of such properties as are owned, or in-licensed by Synthon or any Affiliate or
presently used by Synthon or its Affiliates). Synthon or an Affiliate owns all right, title and
interest in

11

 

and to all of the Synthon or Affiliate owned properties, and the full right and interest in
and to the in-licensed properties, and is legally entitled to transfer to JDS, all of the Product
Intellectual Property. Such transfer to JDS is free and clear of all Encumbrances (for all
properties) and free of license or royalty obligations to any third party whatsoever (other than
those designated as in-licensed, in which case any royalty or other obligation of Synthon or any
Affiliate to any third party is separately identified and disclosed on Schedule 4.6(a)) and
free of all license or royalty obligations to any party other than the identified licensor and
obligations for in-licensed properties identified on Schedule 4.6(a). No third party
(including, for this purpose, directors, officers, employees or other consultants to or agents for
Synthon or any Affiliate) has any legal or beneficial interest in the Product Intellectual Property
or any right to restrict, limit or terminate any of Synthon’s or its Affiliates’ rights to the
Product Intellectual Property.

          (b) All necessary registration, maintenance and renewal fees due in connection with such
Product Intellectual Property have been paid through the Closing Date and all necessary documents
and certificates in connection with such Product Intellectual Property have been filed with the
relevant patent, copyright or other governmental or Regulatory Authorities for the purposes of
maintaining such Product Intellectual Property.

          (c) Synthon does not know of any reasonable basis for anyone to assert that the manufacture,
importation, sale, marketing, promotion or use of the Product infringes or misappropriates the
intellectual property rights of any third party in the Territory, or anywhere in the world with
respect to Purchased Assets to the extent utilized by Synthon for purpose of making, using,
selling, offering to sell, or distributing the Product in the Territory or synthesizing or making
the Product anywhere in the world to the extent exclusively related to the marketing, sale, offer
for sale, distribution or use of the Product in the Territory, and has not received any notice from
any person of any claims of infringement or misappropriation with respect thereto. Other than the
patent interference proceedings with GlaxoSmithKline described further on Schedule 4 that
were resolved in Synthon’s favor, no claim of ownership, infringement or invalidity adverse to the
ownership or use by Synthon or any Affiliate of any of the Product Intellectual Property (including
without limitation, any such claim by any shareholder, officer, director, manager, employee,
consultant or agent of Synthon or any Affiliate) has been asserted nor does Synthon know of any
reasonable basis for any such claim. Synthon does not know of any activity being conducted which
would constitute an infringement of the Product Intellectual Property in the Territory or with
respect to Purchased Assets to the extent utilized by Synthon for purposes of marketing, selling,
offering for sale, distribution or use of the Product in the Territory or utilized by Synthon for
purpose of synthesizing or manufacturing the Product anywhere in the world to the extent
exclusively related to the marketing sale, offer for sale, distribution or use of the Product in
the Territory.

          (d) All Trademarks relating to the Product are the sole property of Synthon. Synthon has no
knowledge of any prior use, infringement, piracy or counterfeiting of such Trademarks, any superior
rights by any third party in such Trademarks, or any adverse claims pertaining to such Trademarks.

          (e) The Product Intellectual Property includes all of Synthon’s and its Affiliates interest
and rights to make, use, sell, offer to sell, distribute and import the Product in the Territory
and to synthesize or manufacture the Product or any component thereof anywhere in the world to the
extent exclusively related to the marketing, sale, offer for sale, distribution or use of the
Product in the Territory and all of its rights to prevent others from making, selling, offering to
sell, distributing, using or importing the Product in the Territory and from synthesizing or
manufacturing the Product or any component thereof anywhere in the world to the extent exclusively
related to the marketing, sale, offer for sale, distribution or use of the Product in the
Territory.

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          (f) For purposes of this Section 4.6, the term “Product Intellectual Property” shall be deemed
to include the Licensed Patents.

          4.7. Contracts. Set forth on Schedule 4.7 is a true, correct and complete
list of the Contracts. Synthon has previously furnished to JDS, or has provided JDS with access
to, true, complete and correct copies of the Contracts (or with respect to any of the Contracts
which are in oral form true, complete and correct written descriptions thereof). Except as
otherwise set forth on Schedule 4.7, the Contracts constitute the only contracts, licenses,
agreements, commitments and arrangements, whether oral or written, used by Synthon or any Affiliate
or of which Synthon or any Affiliate has the benefit, with respect to the marketing, promotion,
sale or distribution of the Product in the Territory or with respect to formulation, manufacture,
validation, testing or storage of the Product anywhere in the world to the extent exclusively
related to the sale, offer for sale, marketing, distribution or use of the Product in the
Territory. The Contracts are in full force and effect, without revocation or change, and neither
Synthon nor, to Synthon’s knowledge, any other party to any of the Contracts is in default of its
respective obligations thereunder, nor does any condition exist which, with notice or lapse of time
or both, would constitute a default by any such party of its respective obligations under any of
the Contracts. Synthon is not aware of any dispute with respect to the performance of any material
term or condition of any of the Contracts.

          4.8. Legal and Regulatory Compliance; Specifications. To the best of Synthon’s
knowledge, the NDA included in the Purchased Assets is the only governmental permit, authorization
or approval required for the manufacture, labeling, packaging, sale, shipment, marketing or
promotion of the Product in the United States excepting any such permits, authorizations or
approvals applicable generally to the transaction of pharmaceutical business by corporations in
jurisdictions where Synthon and its Affiliates currently conduct business, including, without
limitation, state prescription drug wholesaler licenses. The Product, as manufactured, sold and
delivered by Synthon or its Affiliates in the Territory or anywhere in the world to the extent
exclusively related to the making, sale, offer for sale, distribution or use of the Product in the
United States prior to the date hereof (including, without limitation, the Inventory) was (i)
manufactured, packaged, labeled, stored, sold and shipped in compliance with the NDA and with the
quality control procedures, formulae and specifications (collectively “Specifications”) previously
furnished to JDS in writing and in substantial compliance with all applicable FDA, and federal,
state and local laws and regulations, including, without limitation, applicable current Good
Manufacturing Practice regulations promulgated by the FDA and all rules and regulations promulgated
thereunder; and (ii) free from all material defects in manufacture, storage, packaging and the
printing and affixing of labels. The Product and the Inventory at the date hereof is labeled in
compliance with all applicable FDA and state and local regulations. The Specifications
substantially comply with all applicable FDA and corresponding state and local regulations,
including, without limitation, applicable current Good Manufacturing Practice regulations
promulgated by the FDA. The NDA remains in effect and Synthon has submitted all reports to the FDA
with respect to the NDA required to have been submitted prior to the date hereof. No regulatory
action is pending or to Synthon’s knowledge threatened with respect to the NDA. To the best of
Synthon’s knowledge, no regulatory action is pending or threatened with respect to the Product or
any component thereof anywhere in the world where the Product or any such component is being
manufactured, stored or shipped to the extent exclusively related to the marketing, sale, offer for
sale, use or distribution in the Territory. Synthon has paid all fees applicable to its ownership
of the NDA for all periods prior to the Closing.

          During the past two (2) years, Synthon has been in material compliance with all Laws relating
to the marketing and distribution of the Product in the Territory and has filed or submitted all
reports and information required by such Laws on a timely basis.

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          4.9. Financial and Other Information. Synthon has previously furnished to JDS or has
identified to JDS and provided JDS an opportunity to review, (i) a copy of the NDA included in the
Purchased Assets and copies of all correspondence and other communications between Synthon and
the FDA related thereto; (ii) all representative information and data in Synthon’s possession or
control concerning the manufacturing formulae, manufacturing and control procedures, quality
control specifications, validation data and stability data in respect of the manufacture,
packaging, labeling, storing, sale and delivery of the Product in or with respect to the Territory;
(iii) representative financial information (including, without limitation, (A) sales of Product in
the Territory through December 31, 2004 and the six-month period ended June 30, 2005, (B)
representative wholesaler stocking data and return and allowance percentages and other data
possessed by Synthon with respect to returns and allowances pertaining to the Product with respect
to the Territory, (C) representative sales data and costs to Synthon of the manufacture, packaging,
labeling, storage, sale and delivery of the Product with respect to the Territory, and (D)
representative sales, promotional, advertising and marketing expenses relating to the Product with
respect to the Territory (collectively, the “Financial Data”)); and (iv) representative information
in Synthon’s possession or control (“Marketing Information”) relating to the sale, promotion,
advertising and marketing of the Product in the Territory other than the Financial Data. Sales,
cost and expense information included in the Financial Data were prepared on a basis consistent
with generally accepted accounting principles. The Financial Data furnished or to be furnished by
Synthon to JDS do not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the facts disclosed therein not materially misleading in light of the
circumstances in which disclosed. The Marketing Information is representative of such information
utilized by Synthon in connection with its marketing and distribution of the Product in the
Territory. In addition, Synthon has furnished to JDS complete and unaltered copies of all
marketing data pertaining to the Product with respect to the Territory in the possession or control
of Synthon or any Affiliate prepared by third parties on behalf of Synthon or any such Affiliate.

          As used in this Section 4.9, the term “representative” as applied to data or
information shall not necessarily mean every item of such data or information but shall mean data
or information which, when taken as a whole, presents a fair and accurate depiction of the subject
matter of the data or information being presented and which does not reasonably require the
provision of other data or information in respect of such subject matter to make the data and
information presented not materially misleading.

          4.10. Inventory. Schedule 4.10 sets forth the amount, kind and dating of
Inventory on hand as of September 30, 2005, including batch numbers by SKU and corresponding
expiration dates. As of the Closing Date, all such Inventory is in good and marketable condition
and is in compliance with all applicable federal, state and local laws and regulations applicable
to its manufacture, labeling and storage. The expiration dates applicable to all such Inventory
(which provide for at least twelve (12) months dating) are sufficient to permit the sale thereof in
the normal course of business as has historically been conducted by Synthon with respect to its
sales of the Product in the Territory.

          4.11. Environmental Representation.

          (a) To the best of its knowledge, Synthon is not in violation, or alleged to be in violation,
of any federal, state or local judgment, decree, order, consent agreement, law (including common
law), license, rule or regulation pertaining to environmental health or safety matters, including
without limitation those arising under the Resource Conservation and Recovery Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986 as amended, the Water Act, as amended, the
Federal Clean Air Act, as amended, the Toxic Substances Control Act, or any state or local analogue
(an “Environmental Law”).

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          (b) Synthon has not received any notice, complaint, order, directive, claim or citation from
any third party, including without limitation any federal, state or local governmental authority,
indicating or alleging that Synthon or any predecessor may have any liability or obligation under
any Environmental Law.

          4.12. Employment Matters.

          (a) Schedule 4.12 sets forth the name of each employee (other than the vice president
of sales and marketing) of Synthon as of September 30, 2005 with responsibilities in the detailing
of the Product to physicians or other customers including employees with responsibilities for
communications with managed care organizations, long-term care providers, Federal and state
governmental agencies and other institutions to which the Product is marketed or sold), together
with the annual compensation and bonus paid to each such employee from February 1, 2004 to
September 30, 2005. Schedule 4.12 also includes a true and complete description of (a)
each incentive compensation plan or other compensation plan, including any retention bonus plan,
currently in effect or in effect since January 1, 2004 in which such employees currently
participate or have participated since January 1, 2004, (b) all employment agreements, whether oral
or written, to which Synthon or any Affiliate and any of such employees are parties and a
description of the terms and conditions applicable to current at-will employment arrangements to
which such employees are subject and (c) each “multiemployer pension plan,” “employee welfare
benefit plan” or “employee pension benefit plan” (as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended to date and the regulations promulgated
thereunder (“ERISA”) and referred to collectively hereinafter as “ERISA Plans”) covering any of
such employees or which covered any of such employees from January 1, 2004 to the date hereof. To
the extent JDS hires employees of Synthon as contemplated by Section 6.9 and in connection
with such employment offers incentive compensation or retention bonuses which credit employees for
service to Synthon under comparable Synthon incentive compensation or bonus programs, payments of
incentive compensation or retention bonuses shall be apportioned between JDS and Synthon on a pro
rata basis based on the period of employment of the affected employee by each company,
respectively.

          (b) To the best of Synthon’s knowledge: each ERISA Plan complies in all material respects
with all applicable laws and regulations and is operated in accordance with its terms; neither
Synthon nor any Affiliate has withdrawn from any “multiemployer pension plan” included in the ERISA
Plans; each of Synthon and its Affiliates has paid all premiums (and interest and late payment
charges, if applicable) due for any period prior to the Closing to the Pension Benefit Guaranty
Compensation (“PBGC”) with respect to each ERISA Plan; there has been no “reportable event” as
defined in Section 4043(b) of ERISA and regulations of the PBGC; and the PBGC has not instituted
proceedings to terminate any ERISA Plan.

          4.13. Full Disclosure. Synthon has not failed to disclose to JDS any documents,
contracts, information and data in its possession or control which are materially adverse to the
Purchased Assets. To the best of Synthon’s knowledge, none of the information supplied or to be
supplied to JDS by Synthon under or in connection with this Agreement, contains or will contain any
untrue statement of a material fact or omits to state any material fact necessary in order to make
the statements, in light of the circumstances under which they were made, not misleading.

     5. Representations and Warranties of JDS. JDS hereby represents and warrants to
Synthon as follows:

          5.1. Organization; Standing. JDS is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware, USA and has all
requisite power and authority to execute and deliver this Agreement, to own, lease and operate its
properties and to
carry on its business as now being conducted, including the performing of all its obligations
hereunder and to consummate the transactions contemplated hereby.

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          5.2. Authorization; Binding Effect. The execution and delivery by JDS of this
Agreement, the performance by JDS of its obligations hereunder and the consummation by JDS of the
transactions contemplated hereby have been duly authorized by all necessary action on the part of
JDS. This Agreement has been duly executed and delivered by a duly authorized officer of JDS and
constitutes the valid and legally binding obligation of JDS enforceable against JDS in accordance
with its terms.

          5.3. No Conflict; Consents. The execution, delivery and performance of this Agreement
by JDS will not violate or result in the breach of, constitute a default under, or accelerate the
performance required by, any term of any covenant, agreement or understanding to which JDS or any
Affiliate is a party, or any judgment, order, decree, law, rule or regulation to which JDS or any
Affiliate is subject and no consents or agreements of any third party (including governmental
bodies) are necessary for the performance by JDS of its obligations under this Agreement.

          5.4. No Violation, Litigation or Regulatory Action. As of date hereof, there are no
actions pending or, to the knowledge of JDS, threatened against JDS or any Affiliate that are
reasonably expected to materially impair the ability of JDS to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby. As of the date hereof,
there is no action pending or, to the knowledge of JDS, threatened that questions the legality or
propriety of the transactions contemplated by this Agreement.

          5.5. Availability of Financing. JDS has, and on the Closing Date will have available
funds adequate to pay the Purchase Price payable pursuant to Section 3.1(a).

          5.6. Disclosure. No representation or warranty by JDS contained in this Agreement,
and to the best of JDS’s knowledge, no statement contained in any other document, certificate or
other instrument delivered by or on behalf of JDS pursuant to this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or therein not
misleading.

          5.7. Hart-Scott-Rodino Compliance. JDS has performed an estimate of the fair market
value of the Purchased Assets in accordance with Rule 801.10(c) of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, 16 C.F.R. § 801.10(c), and determined that the value of the assets being
acquired is less than $53.1 million.

     6. Covenants of Synthon and JDS.

          6.1. Access. Synthon will permit JDS and its representatives, for as long as Synthon
is required to maintain the applicable records pursuant to any legal or regulatory requirement in
the Territory, to review from time to time during normal business hours, on reasonable notice, for
reasonable business purposes and in such manner as does not unreasonably interfere with the conduct
of Synthon’s business, all books, records and documents of Synthon or any Affiliate pertaining to
(i) the manufacture, formulae, manufacturing and control procedures, stability data and cost of the
Product in the Territory, (ii) all regulatory status and claims information relating to the Product
in the Territory, and (iii) all clinical data, stability data, bioavailability data and reports
pertaining to the Product in the Territory, to the extent any of the foregoing has not previously
been furnished to JDS. In addition, upon JDS’s request, Synthon agrees to make available to JDS,
from time to time during such period, at the facilities of Synthon, personnel of Synthon or its
Affiliates who then have positions of responsibility with respect to the matters above set forth in
this Section (and, to the extent then employed by Synthon or any Affiliate, additional

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personnel to the extent their familiarity with such matters may reasonably be required). To
the extent any of such assistance is best provided by personnel who are no longer employed by
Synthon, Synthon shall, upon JDS’s request, provide JDS with information Synthon may possess and
may lawfully disclose as to the whereabouts of such personnel for purposes of consultation with JDS
or its designated representatives. If Synthon is in possession of information as to the
whereabouts of such former personnel and is unable to disclose such information to JDS, Synthon
will so notify JDS and will transmit any information including JDS’s contact information to such
personnel at JDS’s sole cost and expense.

          6.2. Notice by Synthon; Statements by Synthon Representatives. Within three (3)
business days after the Closing Date, or as soon as practicable thereafter, Synthon agrees to mail
a written notice in form and substance as agreed to by the parties to all current customers in the
Territory listed in Synthon’s records. All sales representatives and national account managers of
Synthon and its Affiliates shall be instructed that, in connection with any inquiries regarding the
Product with respect to the Territory (other than inquiries related to the use of the Product in
the Territory prior to the date hereof) from and after the date hereof, they will indicate (i) if
such representatives or managers have not elected to become employees of JDS following the Closing,
that the Product with respect to the Territory has been acquired by JDS and that JDS should be
contacted for further information with respect thereto and (ii) if such representatives or managers
have elected to become employees of JDS following the Closing, that the Product with respect to the
Territory has been acquired by JDS and such employees will continue to represent the Product to
such customers on behalf of JDS. The parties will cooperate as may be reasonably required to
assure a smooth transition of sales and marketing efforts with respect to the Product with respect
to the Territory.

          6.3. Chargebacks, Rebates and Returns. The parties have agreed to proceed as set
forth below with respect to Chargebacks, Credits or government contracting and similar obligations:

          (a) Chargebacks and Credits. All Chargebacks or Credits with respect to Product sales
which occurred prior to the Closing pursuant to a Contract or with respect to Product sales for
which Synthon received the purchase price thereof shall be for the account of Synthon and all
Chargebacks or Credits with respect to Product sales which occur after the Closing pursuant to a
Contract or with respect to which Product was sold by or on behalf of JDS shall be for the account
of JDS. For the avoidance of doubt, the parties agree that the party that ultimately receives the
benefit of the underlying Product sale shall be responsible for handling and paying any related
Chargeback or Credit.

               Notwithstanding the preceding, in light of the difficulties of determining which party may
have sold Product which is the subject of a wholesaler Chargeback or Credit as to which lot numbers
are not included in the relevant Chargeback invoice, the parties have agreed to assign
responsibility for such Chargebacks and Credits (“Unidentified Claims”) as follows: All such
Unidentified Claims with respect to wholesaler invoices to the trade dated on or before the Closing
Date plus 24 days shall be for the account of Synthon and all such Unidentified Claims with respect
to wholesaler invoices to the trade dated after such date shall be for the account of JDS. In
addition, the responsibility for the allocation of wholesaler corrections and customer re-bills,
irrespective of when received by Synthon or JDS, shall be allocated in accordance with the
preceding provisions based upon the date for the wholesaler invoice which originally reflected the
sales to which such correction or re-bill is made. The parties will cooperate and share all
relevant wholesaler data so as to be able to allocate the responsibility for Chargebacks and
Credits in accordance with the foregoing and to verify such allocations.

17

 

          (b) Medicaid Information. With respect to any Product sold by JDS after the Closing
Date which bears a National Drug Code number of Synthon or any of its Affiliates, JDS will deliver
to Synthon, within fifteen (15) days after the end of each calendar quarter, the following
information: (i) the “best price” (as defined under the Social Security Act, 42 U.S.C. §1396r-8(c)(1)(C) for each
Product identified by National Drug Code number, (ii) the “average manufacturer price” (as defined
under the Social Security Act, 42 U.S.C. §1396r-8(k)(1)) and the number of sales units and dollars
for the Product, each identified by National Drug Code number and (iii) any penalties, including
without limitation CPI based rebates. JDS agrees to provide to Synthon any additional data or
other information regarding sales or pricing of the Product by JDS which Synthon requests as
necessary for the calculation of the rebates contemplated in this Section. JDS agrees that Synthon
may use all information described in this Section in Synthon’s reporting to the Center for Medicaid
Services. Synthon shall provide to JDS the base date average manufacturer price and any
assumptions with respect to the calculation thereof for the Products.

          (c) Medicaid Rebates for Products. Synthon shall be responsible for paying the
percentage of all Medicaid rebates incurred in the quarter in which the Closing Date occurs
determined by dividing the number of days in the quarter up to the Closing Date plus 24 days by the
total number of days in such quarter. JDS shall be responsible for paying directly or upon receipt
of an invoice from Synthon as the case may be) the percentage of Medicaid rebates incurred in the
quarter in which the Closing Date occurs determined by dividing the number of days in the quarter
remaining following the Closing Date (after subtracting 24 days from the previous sentence) by the
total number of days in such quarter. Thereafter, JDS shall be responsible for paying all Medicaid
rebates (directly or upon receipt of an invoice from Synthon as the case may be) in all subsequent
quarters. Each party may invoice the other for the direct cost of processing any such Medicaid
rebates. In the event that Net Sales in the quarter in which the Closing Date occurs change by
more than twenty-five percent (25%) over the previous quarter, the parties shall in good faith
negotiate their respective payment obligations hereunder. Synthon understands that it shall
continue to be responsible for paying when due all Medicaid rebate claims stemming from Synthon
labeling of the Product which may arise after the Closing Date. JDS agrees to reimburse Synthon
for all Medicaid rebate claims paid by Synthon for which JDS is responsible hereunder. The
foregoing provisions notwithstanding, if there is sufficient information to reasonably determine
the party responsible for the sale of the Product to which such Medicaid rebate claim relates, in
which case such selling party shall be responsible for such Medicaid rebate. Any and all payments
due and owing under this Section shall be paid no later than seven (7) days following Synthon’s or
JDS’s receipt of the other party’s invoice therefore, which invoice shall include reasonable
supporting documentation and shall specify: (i) each rebate program to which the rebate is paid,
(ii) the period covered by the payment, (iii) the specific amount of the rebate paid to any such
program; and (iv) a reasonable description of the direct cost to such party of processing such
claim. Synthon may, from time to time upon reasonable notice and request to JDS, audit rebates
charged to it by JDS, and JDS shall reasonably cooperate with any such audit or inquiry by Synthon
with respect to the amount or validity of any rebate, subject to any confidentiality obligations to
which JDS is subjected. Subject only to the foregoing, each party shall at all times have the
exclusive responsibility for the processing and payment of any and all rebates arising from or with
respect to Product bearing its National Drug Code numbers. For clarification, Synthon shall be
responsible for the processing and payment of all Medicaid rebates for Products bearing its NDC
number and shall invoice JDS for any and all such rebates that are JDS’s responsibility under the
terms of this Section 6.3(c).

          (d) Federal Government Pricing Programs. Subject to the provisions of the Transition
Services Agreement, promptly after the Closing Date, Synthon shall notify the Center for Medicaid
Services, the United States Department of Defense, the Office of Drug Pricing and the Veteran’s
Affairs National Acquisition Center (the foregoing being hereinafter collectively referred to as
the “Federal Programs”) of JDS’s distribution rights with respect to the Product, and that as of
the Closing Date that Synthon will no longer support or sell the Product under any contracts in
place with said Federal Programs. JDS shall establish its own contractual relationships with the
Federal Programs as soon as commercially reasonable, and Synthon shall cooperate with JDS to assure
the smooth transition of federal contracting to JDS.

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          (e) Recalls. If any Regulatory Authority with applicable jurisdiction shall order, or
it shall otherwise become necessary to perform, any corrective action or market action with respect
to the Product following the Closing (including, without limitation, any recall, field correction,
market withdrawal, stock recovery, customer notice or restriction), JDS shall have the exclusive
responsibility to appropriately manage such action. If such corrective action or market action is
necessitated by the breach by one of the parties of any of its warranties, representations,
obligations, covenants or agreements contained herein, then such party shall be liable, and shall
reimburse the other party, for all reasonable costs incurred by the non-breaching party in
connection with such action (including, without limitation, reasonable attorney’s fees and
expenses). If each of the parties is partly responsible for such corrective action or market
action, then each party shall be responsible for its proportionate share of such costs. If neither
party is responsible for such corrective action or market action, then JDS shall be responsible for
such costs. JDS shall also be exclusively responsible for handling all customer complaints,
inquiries and the like, and Synthon shall appropriately cooperate with JDS, including the
completion of an investigation and the preparation and submission of a complaint report to JDS or
its designees. The preceding shall not be in lieu or limitation of any obligation of indemnity of
a Party pursuant to Sections 10.1 or 10.2.

          (f) Product Returns. Returns shall be the responsibility of the party who shipped the
lot with respect to which a return has occurred. From and after the Closing, Synthon shall be
responsible for, and shall reimburse JDS for, the invoiced value of the returns of the Product from
batches from which any sale has been made by Synthon prior to the Closing Date other than as set
forth on Schedule 4.10. Schedule 4.10 sets forth all batch numbers by SKU and
expiration date of batches existing on the Closing Date from which no sale has been made by Synthon
other than as specifically set forth on Schedule 4.10. The mechanism for handling returns
is set forth in the Transition Services Agreement. During the Transition Period, JDS shall not
engage in any special pricing, rebate allowance, promotional or marketing program or activities,
special returns policy or special restocking program that would impact the normal course or level
of expected returns with respect to the Product.

          (g) Cooperation. The parties shall cooperate following the Closing (including,
without limitation, through tracking and exchange of lot number information and pro-ration of
amounts due pursuant to Contracts) from time to time and for such period as may reasonably be
required to implement the intended allocation of economic responsibilities set forth in subsections
(a) through (f) above.

          6.4. Contracts. To the extent requested by JDS, each of Synthon and JDS will use
commercially reasonable efforts and shall cooperate (including, without limitation, by providing
access to information, assistance in negotiations) to obtain assignments of the Contracts
(excluding the Manufacturing Agreements) to JDS, together with obtaining such amendments or
modifications thereto as JDS may reasonably request by the end of the Transition Period. In the
event Synthon is unable to assign any such Contract to JDS by the end of the Transition Period, the
parties agree to cooperate so that JDS will continue to receive the benefit of such Contract,
subject to JDS’s accepting the obligations thereunder, in similar fashion as provided by the
Transition Services Agreement until the expiration of any such Contract.

          6.5. Stability Programs; Complaints. As of the date hereof Synthon represents that it
is conducting or causing to be conducted all stability testing required by applicable laws or
regulations in the Territory to be conducted. Synthon shall continue such testing through its
completion at JDS’s sole cost and expense. Synthon shall report the results of such tests to JDS
as soon as practicable, but in no event later than thirty (30) days after each stability testing
station.

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          6.6. Safety Data. Each of the parties hereto shall disclose to the other party all
safety reports and other information (collectively “Safety Data”) which they may from time to time
receive or obtain (whether from sources within or without the Territory) with respect to any adverse drug
experiences with respect to the Product, in accordance with a reporting protocol to be mutually
agreed by the parties as promptly as possible following the Closing Date. JDS shall be responsible
for the reporting of Safety Data to regulatory authorities in the Territory.

          6.7. Transition Services. During the Transition Period, Synthon agrees to provide the
Transition Services as more fully set forth in the Transition Services Agreement.

          6.8. Regulatory Matters.

          (a) Responsibility for the Product. Subject to compliance by the parties with the
applicable provisions of the Transition Services Agreement, from and after the Closing Date, JDS
shall have all regulatory responsibilities under applicable laws and regulations, reporting and
otherwise, in connection with the Product in the Territory.

          (b) Transfer of NDA. Subject only to the respective obligations of the parties set
forth in the Transition Services Agreement:

     (i) On the Closing Date, the parties shall file with the FDA all of the documents and
information required by the FDA to effect the transfer of the NDA in the Territory from
Synthon or any Affiliate to JDS or an Affiliate of JDS designated by JDS. Synthon shall
file and shall cause its Affiliates to file all of the documents and the information
required of a former owner, including but not limited to a letter acknowledging the transfer
of ownership of the NDA, and JDS shall file the information required of a new owner. Each of
JDS and Synthon shall take any and all other actions required by the FDA or other relevant
Regulatory Authorities, if any, to effect the transfer of the NDA from Synthon or its
Affiliate to JDS or its designated Affiliate as soon as reasonably practicable. Synthon may
retain an archival copy of the NDA, including supplements and records that are required to
be kept under 21 C.F.R. §314.81.

     (ii) From and after the Closing Date, JDS shall assume from Synthon or its Affiliate
all responsibility for any and all fee obligations for holders or owners of approved NDAs
relating to the Product in the Territory, including, but not limited to, those defined under
the Prescription Drug User Fee Act of 1992, as the same may be amended from time to time.

     (iii) From and after the Closing Date, JDS shall assume all regulatory responsibility
with respect to the Product including those related to (A) the marketing and promotion of
the Product in the Territory; (B) Adverse Drug Reaction reporting relating to the Product in
the Territory; and (C) the filing of NDAs and / or supplements to NDAs for product line
extensions, extensions of the expiry date and additional product claims or additions to the
labeling of the Product.

          (c) Communications with Regulatory Agencies. Subject to the respective obligations of
the parties set forth in the Transition Services Agreement, from and after the Closing Date, JDS
shall have responsibility for all communication with the FDA with respect to the matters relating
to the Product in or with respect to the Territory. From and after the Closing Date, Synthon shall
make available to JDS, copies of all correspondence to or from the FDA or other applicable
Regulatory Authority relating to the manufacturing and testing of the Product. From and after the
Closing Date, Synthon shall make available to JDS copies of all regulatory correspondence regarding
regulatory warning letters, withdrawal of any Product, and correspondence bearing on the safety and
efficacy of the Product.

20

 

          (d) Additional Information. From and after the Closing Date, Synthon shall provide to
JDS in a timely manner, but in no event less than sixty (60) days prior to the due date of JDS’s
annual report to the FDA with respect to the Product, all information (in written form) which JDS
reasonably requests regarding the manufacture of the Product which may be needed for JDS to comply
with applicable annual reporting requirements of the FDA and applicable Laws.

          6.9. Offers of Employment. Subject to the accuracy of the relevant representations
and warranties of Synthon set forth herein and relevant information provided to JDS by Synthon
hereunder, JDS shall offer or shall arrange to have a third party contract sales organization offer
in writing to employ the individuals named on Schedule 4.12, effective at the expiration of
the Transition Period. Such offers of employment will include (i) base salary and incentive
compensation opportunities substantially equivalent to the base salary and incentive compensation
opportunities currently provided to such employees by Synthon, (ii) the waiver of waiting periods
for health insurance coverage to the extent permitted by JDS’s insurance carrier or in the event
JDS determines that such waiver is impracticable to obtain, an obligation to reimburse premium
payments for continuation coverage with respect to health insurance currently maintained by Synthon
pursuant to COBRA or similar state law, and (iii) credit for such employee’s period of employment
with Synthon towards retirement plans of JDS, if any. All other economic and other terms and
conditions of such employment offered shall be in the sole discretion of JDS. Unless otherwise
determined by JDS in its sole discretion, such offers of employment will be on an “at-will” basis
(as such term is generally interpreted in accordance with the laws of the State of New York). To
the extent any of such employees are based in the offices of Synthon or any Affiliate, any such
offers of employment may be made be conditional upon the relocation of the employee to the New York
metropolitan area.

          6.10. Conduct Pending Closing.

          (a) Each party agrees that from and after the date hereof until the Closing Date, it shall
conduct its business operations so that the representations and warranties made by it hereunder
shall remain true and correct throughout such period. If notwithstanding such efforts, one or more
of such representations or warranties shall be rendered materially untrue or incorrect, the party
making such representation shall endeavor to eliminate such condition at the earliest possible
date, rendering the representation or warranty true and correct before the Closing Date.

          (b) Synthon agrees that from and after the date hereof until the Closing Date, it shall
conduct its business operations with respect to the Product in the ordinary course of business
consistent with past practices. Without limiting the generality of the foregoing, Synthon shall
not institute any price discounts or other promotional programs or price increases not in effect as
of the date hereof without the prior written consent of JDS.

          6.11. Financial Statements. In the event JDS determines that it requires financial
statements relating to the Product with respect to the Territory prepared and audited in accordance
with US GAAP for any period prior to the Closing, Synthon shall cooperate with JDS at JDS’s sole
expense to create and have audited such financial statements.

          6.12. Insurance. From and after the Closing, JDS shall procure and maintain, at its
expense, insurance policies covering the risks associated with the manufacture, marketing, sale
distribution and use of the Product in or with respect to the Territory (including, without
limitation, product liability insurance of no less than *** individually and in the aggregate),
which policies shall be of such character and in such amounts as are customarily maintained by
entities engaged in such activities with respect to products similar to the Product. JDS shall, at
Synthon’s request, provide evidence of such insurance reasonably satisfactory to Synthon.

21

 

          6.13. Synthon Covenant Regarding the Trademarks. From and after the Closing, Synthon
agrees that it will not utilize or seek to utilize the Trademarks or the goodwill associated
therewith anywhere in the world.

          6.14. Retained Asset Dispositions. Synthon will not sell, transfer, assign or
otherwise dispose of any of the Retained Assets without making adequate provision, to the
reasonable satisfaction of JDS, for the assumption and performance by any assignee or transferee of
Synthon’s obligations to JDS hereunder, and under the Transition Services Agreement.

          6.15. Prohibition on Assignment. From and after the Closing, JDS will not assign,
transfer or sub-license the Product unless it complies with the provisions of Section 3.5.

     7. Closing.

          7.1. Time and Place. The Closing of the transactions contemplated by this Agreement,
including the purchase and sale of the Purchased Assets (the “Closing”), shall take place at the
offices of Hutchinson + Mason PLLC, Raleigh, North Carolina, counsel to Synthon, on November 1,
2005 or as soon as practicable thereafter (the “Closing Date”). In the event the Closing has not
occurred by December 31, 2005, either party (unless such party is the cause of the delay in
Closing) may elect to terminate this Agreement (without prejudice to any other right or remedy
provided such party hereunder) by furnishing written notice to the other party.

          7.2. Conditions Precedent to JDS’s Obligations. Each and every obligation of JDS to
be performed on the Closing Date shall be subject to the satisfaction prior to or on the Closing
Date of each of the following conditions, any or all of which may be waived by JDS in writing:

          (a) Representations and Warranties True on the Closing Date; No Adverse Change. Each
of the representations and warranties made by Synthon in this Agreement shall be true and correct
in all material respects when made and shall be true and correct in all material respects at and as
of the Closing Date as though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms of this Agreement or consented to
in writing by JDS, and no event or condition exists or has occurred which may have a material
adverse effect, nor has there been any damage, destruction or loss materially affecting the
Purchased Assets or the properties, business or condition of Synthon to the extent related to the
Purchased Assets or the Product, whether or not covered by insurance.

          (b) Compliance with Agreement. Synthon shall have in all material respects performed
and complied with all of its agreements and obligations under this Agreement which are to be
performed or complied with by it prior to or on the Closing Date, including the delivery of the
closing instruments and documents specified in Section 7.4(a).

          (c) Absence of Litigation. No material litigation related to the Product or the
Purchased Assets shall have been commenced or threatened, and no material investigation by any
government entity shall have been commenced, against JDS, Synthon or any of the Affiliates,
officers, directors or managers of any of them, which, in the reasonable judgment of JDS, might
materially impair JDS’s title to the Purchased Assets or the transactions contemplated hereby.

          (d) Transition Services Agreement, Security Agreement & Guaranty. Synthon shall have
executed and delivered the Transition Services Agreement and the Security Agreement, each of which
shall be in full force and effect and legally binding in accordance with its terms. Synthon shall
have caused Synthon Holding BV to have executed and delivered the Guaranty in form and substance as
Exhibit E attached hereto having an effective date of even date herewith and which shall be in
full force and effect and legally binding in accordance with its terms.

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          (e) Manufacturing Agreements. JDS shall have entered into binding contractual
obligations reasonably satisfactory to it providing for the performance of equivalent
manufacturing, packaging, validation and testing of Product and Product components for sale,
distribution and future development in the Territory *** with each of OSG Norwich Pharmaceuticals,
Inc. and Synthon (which agreement with Synthon shall be in the form and substance as set forth on
Exhibit D).

          (f) Consents and Approvals. Except as otherwise specifically provided in this
Agreement, Synthon shall have received all approvals, consents and waivers as set forth on
Schedule 7.2(f) that are required to effect the transactions contemplated hereby and copies
of such documents which are in Synthon’s possession shall have been received, and copies thereof
shall have been delivered to JDS on or prior to the Closing Date.

          (g) Promotion Agreements. ***

          7.3. Conditions Precedent to Synthon’s Obligations. Each and every obligation of
Synthon to be performed on the Closing Date shall be subject to the satisfaction prior to or on the
Closing Date of each of the following conditions, any or all of which may be waived by Synthon in
writing:

          (a) Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by JDS in this Agreement shall be true and correct in all
material respects when made and shall be true and correct in all material respects at and as of the
Closing Date as though such representations and warranties were made or given on and as of the
Closing Date, except for any changes permitted by the terms of this Agreement or consented to in
writing by Synthon.

          (b) Compliance with Agreement. JDS shall have in all material respects performed and
complied with all of its agreements and obligations under this Agreement which are to be performed
or complied with by it prior to or on the Closing Date, including the delivery of the Purchase
Price and the closing documents specified in Section 7.4(b).

          (c) Absence of Litigation. No material litigation shall have been commenced or
threatened, and no material investigation by any government entity shall have been commenced,
against JDS, Synthon or any of the Affiliates, officers, directors or managers of any of them,
which might, in the reasonable judgment of Synthon, materially impair the transactions contemplated
hereby.

          (d) Transition Services Agreement and Security Agreement. JDS shall have executed and
delivered the Transition Services Agreement and the Security Agreement, each of which shall be in
full force and effect and legally binding in accordance with its terms.

          (e) Consents and Approvals. Except as otherwise specifically provided in this
Agreement, all approvals, consents and waivers as set forth on Schedule 7.3(e) that are
required to effect the transactions contemplated hereby shall have been received, and copies
thereof shall have been delivered to Synthon on or prior to the Closing Date.

23

 

          7.4. Deliveries at Closing.

          (a) Synthon Deliveries. At or as part of the Closing, Synthon shall have delivered or
caused to be delivered to JDS:

     (i) physical possession (or the implementation of arrangements reasonably satisfactory
to JDS of transfer and delivery of physical possession) of all tangible personal property
(or copies thereof) included in the Purchased Assets, including all tangible personal
property included in the Product Intellectual Property and appropriate documents of transfer
related thereto in form and substance reasonably acceptable to Synthon and JDS;

     (ii) a Bill of Sale and assignments of the Product Intellectual Property duly executed
on behalf of Synthon or its Affiliates, as the case may be, in customary form;

     (iii) the License duly executed on behalf of Synthon or its Affiliates, as the case may
be;

     (iv) a certificate, dated the Closing Date and signed by a duly authorized officer, to
the effect that all corporate proceedings required to be taken by Synthon in connection with
the transactions contemplated hereby have been taken and that all representations and
warranties are true and correct as of the Closing Date;

     (v) duly executed counterparts of the Transition Services Agreement and Security
Agreement;

     (vi) the Guaranty of Synthon Holding BV in form and substance as Exhibit E attached
hereto;

     (vii) notifications to Regulatory Authorities effecting the transfer of the NDA and any
other Marketing Authorization to JDS, in customary form;

     (viii) employee personnel records for all sales representatives and national account
managers who accept employment with JDS or its designee prior to Closing which Synthon may
lawfully deliver, provided, however, in the event employees are engaged by a designee of
JDS, Synthon shall deliver such personal records to such designee; and

     (ix) such other documents, instruments and certificates as JDS and Synthon may mutually
agree upon.

          (b) Deliveries by JDS. At or as part of Closing, JDS shall deliver or cause to be
delivered to Synthon:

     (i) the portion of the Purchase Price specified in Section 3.1(a), as adjusted
in accordance with Sections 3.2 and 3.3, by certified or bank check or wire
transfer;

     (ii) a certificate, dated the Closing Date and signed by a duly authorized officer, to
the effect that all proceedings required to be taken by JDS in connection with the
transactions contemplated hereby have been taken and that all representations and warranties
are true and correct as of the Closing Date;

     (iii) duly executed counterparts of the License, the Transition Services Agreement and
the Security Agreement;

     (iv) a list of employees with outstanding employment offers from JDS or its designee
which have not yet been accepted; and

     (v) such other documents, instruments and certificates as JDS and Synthon may mutually
agree upon.

24

 

     8. Confidentiality and Cooperation; Non-Competition.

          8.1. Confidential Information. For purposes of this Agreement, the term “Confidential
Information” shall mean any Know-How, including JDS Know-How or any other information and any
non-public Product Intellectual Property, whether or not reduced to writing, which any party shall
from time to time possess in relation to the development, formulation, manufacture, testing,
marketing or distribution of the Product in the Territory or in relation to the manufacture or
synthesis of the Product or any component thereof anywhere in the world to the extent exclusively
related to the marketing, sale, offer for sale, distribution or use of the Product in the Territory
and which is not generally known to the public or within the pharmaceutical industry and which one
party hereto discloses to the other party. For purposes of the preceding definition, Know-How
included in the Purchased Assets shall be deemed “Confidential Information” of JDS from and after
the Closing. Confidential Information does not include information that (a) is or becomes part of
the public domain through no act of the receiving party in breach of this Agreement, (b) was
lawfully in the possession of the receiving party without any restriction on use or disclosure
prior to its disclosure hereunder, (c) is lawfully received from another source subsequent to the
date of this Agreement without any restriction on use or disclosure, (d) is deemed in writing by
the disclosing entity no longer to be Confidential Information, (e) is developed by or for the
receiving party independently of disclosures hereunder, as shown by written records, or (f) is
required to be disclosed by order of any court of competent jurisdiction or other governmental
authority (provided, however, in such latter case, however, that the receiving party shall timely
inform the disclosing party of all such legal or governmental proceedings so that the disclosing
party may attempt by appropriate legal means to limit such disclosure, and the receiving party
shall further use its best efforts to limit the disclosure and maintain confidentiality to the
maximum extent possible).

          8.2. Confidentiality Obligation. The parties shall each keep in strictest confidence
all Confidential Information and shall not use or disclose such Confidential Information except as
necessary in connection with the transactions provided for or contemplated hereby including such
disclosures to permitted licensees, sublicensees, assigns or successors to the business of a party
or its pharmaceutical business, as may be reasonably required to permit the exploitation of the
Product in the Territory, the Purchased Assets, or the Retained Assets. To the extent either party
is permitted to disclose Confidential Information pursuant to the previous sentence, such party
shall only disclose the Confidential Information to employees, consultants or other agents who need
to receive such Confidential Information for the purpose of achieving an objective of this
Agreement and who are bound by obligations of confidentiality with respect thereto, or as may
otherwise be required by law and to the extent related to the exploitation of the Product in the
Territory, the Purchased Assets or the Retained Assets. Each such licensee, sublicense, assignee
or successor shall be obligated to execute an agreement of confidentiality which shall be
applicable both within and without the Territory. The parties shall exercise all necessary
precautions to safeguard the secrecy of Confidential Information and to prevent the unauthorized
disclosure thereof. Except as otherwise provided herein, the obligations of this Section shall
survive the termination or expiration of this Agreement for a period of ten years following the
Closing Date.

          8.3. Cooperation.

          (a) Each party covenants and agrees as to any third-party suit, action, arbitration or
judicial proceeding or any governmental investigation or inquiry, relating to the Purchased Assets
or the Product, being prosecuted or defended by the other party, to cooperate in making records
available to such other party and to provide such access to, and use of, such information and data
as reasonably requested by such other party in connection therewith. Each party will reimburse the
party providing such cooperation for its reasonable out-of-pocket expenses incurred in connection with its
obligations under this Section 8.3(a).

25

 

          (b) From time to time after the Closing, the parties hereto shall deliver to each other such
information and data concerning the transactions contemplated hereby as either party may reasonably
request including that required in order to enable such party to complete and file all national,
state and local forms which may be required to be filed by it and to complete all customary tax and
accounting procedures and otherwise to enable such party to satisfy its internal accounting, tax
and other requirements.

          8.4. Noncompetition. Synthon agrees that from the Closing Date until the later to
occur of *** neither Synthon nor any Affiliate or third party licensed or authorized by Synthon or
any Affiliate will engage in the marketing, sale or distribution of the Product in the Territory or
any pharmaceutical product containing paroxetine mesylate or any pharmaceutically acceptable form
of paroxetine, including, without limitation, salts, esters, chelates, enantiomers,
diastereoisomers, prodrugs, and metabolites; and all pharmaceutically acceptable paroxetine
containing materials and derivatives, including, but not limited to, salts, esters, chelates,
enantiomers, diastereoisomers, prodrugs and metabolites. *** Notwithstanding the foregoing,
Synthon’s receipt of royalties pursuant to the terms of the license to be granted at Closing
pursuant to Section 2.6 shall not be deemed a breach of this Section.

     9. Further Assurances. From time to time after the Closing, without further
consideration, Synthon and its Affiliates, as the case may be, shall perform all such other actions
and shall execute, acknowledge and deliver all such assignments, transfers, consents and other
documents as JDS or its counsel may reasonably request to vest more fully in JDS, and perfect JDS’s
right, title and interest in, the Purchased Assets and to more completely convey the Know-How.
Synthon will, at JDS’s sole expense, cooperate and will ensure the cooperation of its personnel and
the personnel of its Affiliates, including, without limitation, by the provision of testimony by
affidavit or in person as may be requested by JDS in connection with any patent prosecution,
maintenance or infringement action.

     10. Indemnification; Insurance.

          10.1. Indemnification Obligations of the Parties.

          (a) Synthon shall indemnify and hold JDS (including for this purpose its Affiliates, officers,
directors and agents) harmless from and against any direct costs, expenses (including, without
limitation, reasonable attorneys’ fees and expenses), or damages (collectively, “Damages”) incurred
by JDS which arise from (i) the breach by Synthon of any of its representations, covenants,
warranties or obligations set forth herein, (ii) the development, registration, manufacture,
marketing, sale or distribution of the Product before the Closing (including, without limitation,
lawsuits, regulatory or other actions or proceedings, recalls, complaints or other Damages incurred
with respect to the Product sold by Synthon prior to the Closing Date) except to the extent such
Damages are caused by or arise from the negligence or willful misconduct of JDS or its Affiliates,
***.

          (b) JDS shall indemnify and hold Synthon (including for this purpose its Affiliates, officers,
directors and agents) harmless from and against any Damages incurred by Synthon which arise from
(i) the breach by JDS of any of its representations, covenants, warranties or obligations set forth
herein, (ii) the development, registration, marketing, sale or distribution of the Product by JDS
from and after the Closing, (iii) the manufacture of the Product anywhere in the world to the
extent relating to the marketing, sale, offer for sale, distribution or use of the Product in the
Territory following the Closing (including, without limitation, lawsuits, regulatory or other
actions or proceedings, recalls, complaints or other Damages incurred with respect to the Product
sold by JDS from and after the Closing Date or with

26

 

respect to Product manufactured by JDS following the Closing Date) except to the extent that
such Damages were caused by or arise from the negligence or willful misconduct of Synthon or its
Affiliates; and (iv) any claim by Relialab respecting the promotion and marketing services provided
by JDS pursuant to the Transition Services Agreement during the termination period.

          (c) The party obligated to provide indemnity pursuant to this Section is hereinafter referred
to as the “Indemnifying Party” and the party to be indemnified (together with its Affiliates,
officers, directors and agents) is hereinafter referred to as the “Indemnitee.”

          10.2. Limitations on Indemnification Liability.

          (a) The Indemnifying Party’s indemnification obligations under Section 10.1 shall not
arise for any individual claim for damages in an amount less than $5,000 and until the sum of the
aggregate amount of damages for which the Indemnifying Party is so required to indemnify exceeds
$75,000 (the “Threshold Loss Amount”), provided that once the amount of individual claims exceeds
the Threshold Loss Amount the indemnification obligation shall apply to all claims including those
below the Threshold Loss Amount. Individual claims for damages that are similar in subject matter
or that arise out of like or similar circumstances shall, where appropriate (based on all facts and
circumstances including the nature and timing of the relevant claim for Damages) constitute a
single claim for the purpose of this Section 10.2.

          (b) The limitations on indemnification liability provided in this Section shall not apply to
the allocation of responsibility for Chargebacks, Credits and rebates set forth in Section
6.3 above. In no event shall either party be liable for punitive, consequential, special,
incidental or similar damages under or in connection with this Agreement.

          10.3. Procedure for Indemnification. Promptly after the receipt by any party hereto
of notice of (i) any third-party claim or (ii) the commencement of any suit, action, arbitration or
judicial proceeding by a third-party, such party will, if a claim with respect thereto is to be
made against any party obligated to provide indemnification pursuant to Section 10.1
hereof, give such Indemnifying Party written notice of such claim or the commencement of such
action or proceeding. Such Indemnifying Party shall have the right, at its option, to compromise
or defend, at its own expense and by its counsel, any such matter involving the asserted liability
of the party seeking such indemnification subject to the consent of the Indemnitee which shall not
be unreasonably withheld, conditioned or delayed. Such notice, and the opportunity to compromise
or defend, shall be a condition precedent to any liability of the Indemnifying Party under the
indemnification agreement contained in said Section 10.1. In the event that any
Indemnifying Party shall undertake to compromise or defend any such asserted liability, it shall
promptly notify the Indemnitee of its intention to do so, and the Indemnitee agrees to cooperate
fully with the Indemnifying Party and its counsel in the compromise of, or defense against, any
such asserted liability. In any event, the Indemnitee shall have the right, at its own expense, to
participate in the defense of such asserted liability, provided that the Indemnifying Party shall
make all final decisions concerning the defense or compromise or settlement of such litigation and
the Indemnitee shall have the right to be separately represented by counsel at the expense of the
Indemnifying Party if there is a conflict of interest in representation by a single counsel.
Notwithstanding the foregoing, no compromise or settlement of any claim, action, liability, etc.
pursuant to this Section 10.3 may be effected by the Indemnifying Party without
Indemnitee’s consent, which shall not be unreasonably withheld, conditioned or delayed, unless (A)
there is no finding or admission of any violation of legal requirements or any violation of the
right of any person or entity and no effect on any other claims that may be made against the
Indemnitee and (B) the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party.

27

 

          10.4. Representation. Each of the parties hereto shall be entitled to be represented
at any action, arbitration or proceeding brought by the other party against a third party under
this Section 10 by its own counsel, at its own expense, and shall fully cooperate with the
other party in any such proceeding, provided it is adequately reimbursed for its out-of-pocket
costs and expenses, excluding attorneys’ fees.

     11. Survival of Indemnification Obligations and Covenants. Except as otherwise
expressly set forth herein, all indemnifications, obligations, agreements and covenants contained
in this Agreement shall survive the Closing Date and shall remain in full force and effect for a
period of ten years following the Closing Date, provided, however, that the obligations relating to
the representations and warranties (except to the extent related to indemnity obligations for third
party claims, with respect to which such representations and warranties shall remain in full force
and effect for the duration of such indemnity obligations) shall remain in full force and effect
for a period of twelve (12) months following the Closing Date.

     12. Dispute Resolution.

          12.1. Negotiation. Any dispute, controversy or claim arising out of or relating to
this Agreement or the breach, termination, or invalidity hereof shall be submitted for negotiation
and settlement in the first instance to the Chief Operating Officer of Synthon, or such person’s
designee of equivalent or superior position, and the Chief Operating Officer of JDS, or such
person’s designee of equivalent or superior position.

          12.2. Arbitration. If the parties are unable to settle a dispute, controversy or
claim hereunder pursuant to Section 12.1, the matter shall be finally resolved by
arbitration in accordance with the rules of American Arbitration Association, except as modified by
this Section 12.2. The number of arbitrators shall be three (3), one (1) of whom is
selected by JDS, one (1) of whom is selected by Synthon and one (1) of whom is selected by Synthon
and JDS (or by the other two (2) arbitrators if the parties cannot agree). The arbitration
proceeding shall be conducted in the English language. The arbitration proceeding shall be brought
in the District of Columbia, unless the parties agree in writing to conduct the arbitration in
another location. The arbitration decision shall be binding and not be appealable to any court in
any jurisdiction. The prevailing party may enter such decision in any court having competent
jurisdiction. Each party shall pay its own expenses of arbitration and the expenses of the
arbitrators shall be equally shared except that if, in the opinion of the arbitrators, any claim by
a party hereto or any defense or objection thereto by the other party was unreasonable, the
arbitrators may in their discretion assess as part of the award any part of the arbitration
expenses of the other party (including reasonable attorneys’ fees) and expenses of the arbitrators
against the party raising such unreasonable claim, defense or objection.

          12.3. Interim Relief. Any party may, without inconsistency with this Agreement, apply
to any court having jurisdiction hereof and seek injunctive relief so as to maintain the status quo
or to prevent irreparable harm as to any matter as to which there is no adequate remedy at law
until such time as the arbitration award is rendered or the controversy is otherwise resolved.

     13. Termination.

          13.1. Termination. Either party shall have the right to terminate this Agreement,
effective upon written notice to the other party, if the Closing has not occurred on or before
December 31, 2005 and the terminating party is not otherwise in material default hereunder.

28

 

          13.2. Survival.

          (a) Provisions of the Agreement which recite by their terms that they apply to a period of
time beyond the Closing Date shall survive the Closing in accordance with their terms.

          (b) In the event that this Agreement is terminated as a result of the default of either party,
the obligations of confidentiality shall survive and continue to bind the parties, and in all other
respects the rights and obligations of the parties shall be determined in accordance with the
provisions of this Agreement.

     14. Specific Performance. Each party agrees that a breach of Section 8.1 or
Section 8.2 of this Agreement will cause irreparable injury to the other, and that such
other party shall be entitled, in addition to any other rights and remedies it may have hereunder
or at law or in equity, to seek an injunction or similar equitable remedy or conservatory and
interim measures enjoining and restraining any such breach or threatened breach thereof.

     15. Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective assigns and successors in interest. Without limiting the
generality of the foregoing, subject only to Section 3.5, the parties acknowledge that JDS
shall have the right to assign all of its right, title and interest hereunder to any third party.

     16. Choice of Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware without giving effect to its principles of conflicts of
law.

     17. Notices. Any notice, request or other communication required or permitted by this
Agreement to be given by any party to the other shall be in writing and either mailed by registered
or certified mail, return receipt requested, by express delivery service or by facsimile
transmission, addressed to such party as set forth below or to such other address as such party may
previously have designated by like written notice. Notice shall be deemed to have been given upon
receipt.

	 	 	 
	If to JDS:

	 	JDS Pharmaceuticals, LLC
	 

	 	122 East 42nd Street, 41st Floor
	 

	 	New York, New York 10168
	 

	 	Facsimile No.: (212) 682-1946
	 
	 	 
	With a copy to:

	 	Dornbush Schaeffer Strongin & Weinstein, LLP
	 

	 	747 Third Avenue
	 

	 	New York, NY 10017
	 

	 	Attn: Herschel S. Weinstein, Esq.
	 

	 	Facsimile No.: (212) 753-7673

29

 

	 	 	 
	 
	 	 
	If to Synthon:

	 	Synthon Pharmaceuticals, Ltd.
	 

	 	9000 Development Drive
	 

	 	Research Triangle Park, NC 27709
	 

	 	Attn: President & CEO
	 

	 	Facsimile No.: (919) 493-6104
	 
	 	 
	With a copy to:

	 	Hutchison+Mason
	 

	 	3110 Edwards Mill Road, Suite 100
	 

	 	Raleigh, North Carolina 27612
	 

	 	Attn: Fred D. Hutchison, Esq.
	 

	 	Facsimile No.: (919) 829-9696

     18. Miscellaneous.

          18.1. Entire Agreement. This Agreement, the Transition Services Agreement and the
Pledge and Security Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior written or oral agreements or understandings
concerning the subject matter hereof or in conflict with their terms.

          18.2. Amendment and Modification. No modification or waiver of any of the terms of
this Agreement shall be deemed valid unless it is in writing and signed by both parties. The
failure of either party to insist upon the strict performance of any term of this Agreement or the
waiver by either party of any breach under this Agreement shall not prevent the subsequent strict
enforcement of such term nor be deemed a waiver of any subsequent breach.

          18.3. Severability. Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any applicable
jurisdiction, the invalid or unenforceable part or provision shall, provided that it does not go to
the essence of this Agreement, be replaced with a revision which accomplishes, to the extent
possible, the original commercial purpose of such part or provision in a valid and enforceable
manner, and the balance of this Agreement shall remain in full force and effect and binding upon
the parties hereto.

          18.4. Non-Disclosure. Prior to Closing, neither party shall publicly disclose the
subject matter or terms and conditions hereof without the prior consent of the other, except to the
extent of disclosures which either party may be required to make by any applicable Laws or
regulations. On and after Closing, each party shall grant the other the opportunity to review,
comment upon, and approve any proposed press release describing the transactions contemplated
hereby prior to public release.

          18.5. Brokerage Indemnity. Each party represents to the other that no brokerage or
finders fee is due to any third party with respect to the transactions contemplated hereby and
hereby indemnifies the other against any claim therefore arising with respect to such party.

          18.6. Execution; Facsimile Signatures. This Agreement may be executed in
counterparts, each of which will be considered an original and all of which together will be
considered one and the same instrument. Any counterpart may be signed and transmitted by facsimile
with the same force and effect as if such counterpart was an ink-signed original.

[SIGNATURE PAGE FOLLOWS]

30

 

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

	 	 	 	 	 
	 	JDS PHARMACEUTICALS, LLC 

 	 
	 	By:  	/s/ Michael Satow
 	 
	 	 	Name:  	Michael Satow                                	 
	 	 	Title:  	Chief Operating Officer 	 
	 

	 	 	 	 	 
	 	SYNTHON PHARMACEUTICALS, INC. 

 	 
	 	By:  	/s/ Peter van Straelen
 	 
	 	 	Name:  	Peter van Straelen                          	 
	 	 	Title:  	President and Chief Operating Officer 	 
	 

31EX-10.4 Development, License and Supply Agreement

 

Exhibit 10.4

The confidential portions of this exhibit have been filed separately with the Securities and
Exchange Commission pursuant to a confidential treatment request in accordance with Rule
24b-2 of the Securities and Exchange Act of 1934, as amended. REDACTED PORTIONS OF THIS
EXHIBIT ARE MARKED BY AN ***.

DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT

by and between

BANNER PHARMACAPS INC.,
a Delaware

Corporation

and

JDS PHARMACEUTICALS, LLC,
a Delaware Limited

Liability Company

dated

April 26, 2007

-1-

 

TABLE OF CONTENTS

Page

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Article 1.

	 	Definitions and Construction Principles
	 	 	3	 
	 
	 	 	 	 	 	 
	Article 2.

	 	Registration; Regulatory Matters; Product Development;
Milestone Payments
	 	 	7	 
	 
	 	 	 	 	 	 
	Article 3.

	 	Purchase/Supply of Product(s); Exclusivity;
Non-Competition
	 	 	13	 
	 
	 	 	 	 	 	 
	Article 4.

	 	Terms of Purchase of Product(s) from Banner
	 	 	17	 
	 
	 	 	 	 	 	 
	Article 5.

	 	Supply of Ingredients, Finishing, and Packaging
	 	 	22	 
	 
	 	 	 	 	 	 
	Article 6.

	 	Performance Standards
	 	 	23	 
	 
	 	 	 	 	 	 
	Article 7.

	 	Product(s) Complaints; Recalls; Withdrawals
	 	 	24	 
	 
	 	 	 	 	 	 
	Article 8.

	 	Product(s) Marketing and Sales
	 	 	28	 
	 
	 	 	 	 	 	 
	Article 9.

	 	Term and Termination
	 	 	29	 
	 
	 	 	 	 	 	 
	Article 10.

	 	Treatment of Confidential Information
	 	 	32	 
	 
	 	 	 	 	 	 
	Article 11.

	 	Indemnities; Insurance
	 	 	32	 
	 
	 	 	 	 	 	 
	Article 12.

	 	Intellectual Property
	 	 	34	 
	 
	 	 	 	 	 	 
	Article 13.

	 	Miscellaneous
	 	 	40	 
	 
	 	 	 	 	 	 
	Appendix A.

	 	Active Ingredient, Product(s), Specifications
	 	 	 	 
	 
	 	 	 	 	 	 
	Appendix B.

	 	Agreement Indications
	 	 	 	 
	 
	 	 	 	 	 	 
	Appendix C.

	 	Shipping Instructions
	 	 	 	 
	 
	 	 	 	 	 	 
	Sch. 3.4

	 	Non-Competition
	 	 	 	 
	 
	 	 	 	 	 	 
	Sch. 12.1.

	 	Banner Intellectual Property
	 	 	 1	 

-2-

 

THIS DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT (“Agreement”) is entered into as of the
26th day of April, 2007 (the “Commencement Date”), by and between BANNER PHARMACAPS INC.
(“Banner”), a Delaware corporation, having an office at 4125 Premier Drive, High Point, North
Carolina 27265, and JDS PHARMACEUTICALS, LLC, (“JDS”) a Delaware Limited Liability Company, having
an office at The Chrysler Building, 405 Lexington Avenue, 59th Floor, New York, New York 10174.

RECITALS

a. Banner possesses expertise in the manufacture of pharmaceutical Product(s) in softgel and other
dosage forms. Banner has filed (or intends to file) an NDA(s) for FDA approval to market and sell
the Product(s) (as such capitalized terms are defined below).

b. JDS possesses expertise in the marketing and sales of pharmaceuticals and desires to obtain the
rights to market and sell the Product(s) consistent with the NDA(s) filed by Banner and to have
Banner supply the Product(s) in accordance with the terms of this Agreement.

c. Both parties desire this Agreement to set forth the terms and conditions pursuant to which
Banner will supply for sale to JDS, and JDS will purchase from Banner and market the Product(s) in
the Territory based on Banner’s NDA(s).

NOW, THEREFORE, in consideration of the premises and the mutual promises hereinafter set forth,
the parties agree as follows:

Article 1. Definitions and Construction Principles.

1.1 Definitions. The terms defined in this Section 1.1 shall for all purposes of this
Agreement have the meanings specified in this Section 1.1. These definitions are applicable in the
possessive, singular and plural forms.

“Act” shall mean the United States Food, Drug and Cosmetic Act and its associated regulations, all
as amended from time to time.

“Active Ingredient” shall mean the active pharmaceutical ingredient listed in Appendix A attached
hereto.

“Adverse Event” shall mean any event associated with the Product(s), whether or not considered
drug-related, that could reasonably be expected to have an adverse impact on the Regulatory
Approval, safety, efficacy or marketability of the Product(s).

“Affiliate” shall mean any corporation, partnership, association, trust, or other business entity
or organization, directly or indirectly controlling, controlled by, or under common control with
such party. For purposes of this definition, “control” shall mean (a) in the

-3-

 

case of corporate entities, direct or indirect ownership of more than fifty percent (50%) of
the stock or shares having the right to vote for the election of directors and (b) in the case of
non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity
interest with the power to direct the management and policies of such noncorporate entity.

“Agreement Indications” shall mean ***.

“Applicable Law” shall mean all applicable laws, rules, regulations and guidelines (including any
amendments, extensions or replacements thereto) of a Governmental Body, including, without
limitation, cGMPs and the Act.

“cGMPs” shall mean current Good Manufacturing Practices as further defined in regulations
promulgated by the FDA under the Act.

“CNS Physicians” shall mean ***.

“Commercially Available” shall mean (i) that all validation required by the FDA is completed as to
the applicable Product, and (ii) that Banner has made and is ready to deliver at least *** Unit
batches of each dosage strength listed on Appendix A for the applicable Product to JDS, for
shipment by JDS to its third party customers and/or for physician samples as determined and
allocated by JDS.

“Commencement Date” shall have the meaning assigned to it in the first paragraph of this Agreement.

“Direct Competitor” shall mean ***.

“Dispute” shall have the meaning assigned to it in Section 13.3.

-4-

 

“FDA” shall mean the United States Food and Drug Administration and any of its successor
agencies or departments.

“First Commercial Sale” shall mean the date of the first sale of Product(s) on a Product by
Product basis by JDS to JDS’s third party customer.

“Generally Applicable Technology” shall mean technology used or useful to make Product(s) which is
owned or controlled by Banner and which has general application to the development, use or
manufacture of soft gelatin capsules and, as such, the technology is not predominately or
exclusively used or useful for Product(s).

“Governmental Body” shall mean any nation or government, any state, province, or other political
subdivision thereof, or any entity with legal authority to exercise executive, legislative,
judicial, regulatory, or administrative functions or pertaining to government in the Territory.

“Initial Term” shall have the meaning assigned to it in Section 9.1.

“Initial Valproic Acid EnteriCareTM Minimum Royalty Period” shall mean the period of time commencing
with the First Commercial Sale of the Valproic Acid EnteriCareTM Product and continuing for ***
following the occurrence of the First Commercial Sale of the Valproic Acid EnteriCareTM Product.

“Initial Valproic Acid VersatrolTM Minimum Royalty Period” shall mean the period of time commencing
with the First Commercial Sale of the Valproic Acid VersatrolTM Product and continuing for ***
following the occurrence of the First Commercial Sale of the Valproic Acid VersatrolTM Product.

“Intellectual Property” shall mean any patent, patent application, trademark, service mark, trade
name, trade dress, copyright, trade secret, proprietary know-how, discovery, development or
invention, whether or not patentable.

“Latent Defect” shall mean any instance where Product fails to conform to the applicable
Specifications, and such failure would not be discoverable upon visual inspection of such Product
by JDS. For the purposes of this Agreement, “visual inspection” shall mean: (a) comparing the
applicable Purchase Order against documentation accompanying the shipment to verify that the
delivery date, identity, quantity and exterior shipment labeling comply with the Purchase Order,
and (b) visually inspecting the exterior of the shipment of Products to verify that the shipment
appears to be in good condition.

“Minimum Royalty Payment(s)” shall mean the sum(s) payable by JDS to Banner in accordance with
Section 3.3.

“NDA” shall mean a duly prepared New Drug Application filed with the FDA for the purpose of
obtaining Regulatory Approval to market the Product(s) in the Territory.

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“Net Sales Revenue” shall mean gross revenue invoiced by JDS for sales of the Product(s) to
unrelated third parties reduced by (a) reasonable customer discounts, and (b) amounts repaid or
credited, returns, chargebacks, rebates (including government mandated rebates) and allowances
given in the ordinary course of business (including amounts refunded or credited for Product that
was rejected, spoiled, damaged, outdated or returned). JDS shall determine Net Sales Revenue in
accordance with generally accepted accounting principles.

“Nonconformity” means a Product(s) characteristic that causes any Product(s) to fail to conform to
the Specifications.

“Opt Out Right” shall mean ***

“Packaged Product” shall mean quantities of Product(s) packaged in retail size containers or as
physician samples, as the case may be, and not intended for repackaging or re-labeling under the
Act.

“Product(s)” shall mean either the Valproic Acid EnteriCareTM Product or the Valproic Acid
VersatrolTM Product, or both of them, in Packaged Product form, which are intended for resale for
the Agreement Indications.

“Purchase Forecast” shall have the meaning assigned to it in Section 4.4.

“Purchase Order” shall have the meaning assigned to it in Section 4.4.

“Recall” shall mean removal of Product(s) from distribution or retail locations or from patients
ordered or directed by the FDA or other Governmental Body.

“Regulatory Approval” shall mean the approval by the FDA necessary and effective for the commercial
manufacture, distribution, marketing, promotion, offer of sale, sale and use of the Product(s) in
the Territory including, without limitation, the approval of the NDA, but not including pricing and
third party reimbursement approvals.

“Royalty Payment” shall mean a royalty payment made by JDS to Banner under Section 4.1 (e) of this
Agreement.

“Section 2.3(b) Notice” shall have the meaning set forth in Section 2.3(b).

“Shipping Instructions” shall have the meaning set forth in Section 7.2(e).

“Specifications” shall mean those specifications, tests and associated values contained in the
NDA, as approved by the FDA, for the composition and manufacture of the Product(s) including the
imprinting and packaging thereof.

-6-

 

“Term” shall mean the periods of time measured separately with respect to the Valproic Acid
VersatrolTM Product and to the Valproic Acid EnteriCareTM Product as defined in Section 9.1.

“Territory” shall mean the United States of America and its territories and possessions, including
without limitation, Puerto Rico.

“Withdrawal” shall mean a voluntary withdrawal of Product(s) from distribution or retail locations
or from patients by the manufacturer or distributor not requested by the FDA or other Governmental
Body.

“Unit” shall mean each soft gelatin capsule of Product(s) with specifications and characteristics
set forth in Section 6.1.

“Valproic Acid EnteriCareTM Product” shall mean enteric release soft gelatin capsules containing
the Active Ingredient in the dosage strengths and dosage forms for the Valproic Acid EnteriCareTM
Product described in Appendix A attached hereto and made using Banner’s EnteriCareTM technology.

“Valproic Acid VersatrolTM Product” shall mean extended release soft gelatin capsules containing
the Active Ingredient in the dosage strengths and dosage forms for the Valproic Acid VersatrolTM
Product described in Appendix A attached hereto and made using Banner’s VersatrolTM technology.

1.2 Construction Principles. As used in this Agreement:

(a) references to Sections shall mean sections of this Agreement, unless otherwise expressly
indicated;

(b) references to days, weeks, months, quarters, and years shall be references to calendar days,
weeks, months, quarters, and years, unless otherwise stated in this Agreement, for example, in
Section 3.3(a);

(c) all sums of money are in United States Dollars.

Article 2. Registration; Regulatory Matters; Product Development; Milestone Payments.

2.1 Regulatory Matters.

	 	(a)	 	Responsibility for Regulatory Submissions.
	 
	 	 	 	(i) Banner shall be responsible for interacting with the FDA and shall diligently
act to complete any requirements for obtaining Regulatory Approval of the
Product(s). Banner may discharge its responsibility under this Section 2.1(a)(i)
directly or through a third party. Banner shall consult

-7-

 

	 	 	 	with JDS prior to selection of any such third party, Banner shall be
responsible to maintain all Regulatory Approvals or other FDA-filings or
applications for Regulatory Approval as long as required for use in connection with
either party’s activities under this Agreement.
	 
	 	 	 	(ii) JDS shall be responsible, with Banner’s full cooperation, to prepare FDA
approvable label copy, proposed samples of packaging and artwork for Products, and
shall use reasonable commercial efforts to provide such label copy and artwork to
Banner in sufficient time to prevent any delay in obtaining Regulatory Approval due
to the label copy, proposed samples of packaging or artwork; provided however, that
in the case of the Valproic Acid EnteriCareTM Product, such proposed label copy and
artwork (but not samples of packaging) shall be provided by JDS to Banner no later
than ***. All such JDS label copy and final packaging specifications shall be
subject to Banner’s prior approval to the extent it contains information subject to
Regulatory Approval.
	 
	 	 	 	(iii) Upon request by Banner, JDS shall cooperate with Banner in, and shall provide
Banner with, all other information with respect to JDS or its activities hereunder
reasonably necessary for filing in connection with obtaining or maintaining the
Regulatory Approval of the Product(s) and/or in responding to any questions or
requests for additional information by the FDA.
	 
	 	(b)	 	NDA Ownership. Banner owns the rights to and shall retain all Regulatory
Approvals and all applications for Regulatory Approval (including, without limitation, any
NDA and any other registration or FDA-filed dossier) for the Product(s).
	 
	 	(c)	 	Costs and Expenses of Registration Activities and Maintaining Regulatory
Approval. Banner shall be responsible for and timely make payment for the costs and
expenses related to the maintenance, preparation and filing of NDA or other documents
necessary to obtain and/or maintain the Regulatory Approval of the Product(s). JDS shall be
responsible for and timely make payment of all costs and expenses related to the
development and preparation of the label copy, samples of packaging and artwork for the
Product(s).
	 
	 	(d)	 	Extraordinary Regulatory Events. ***

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***

-9-

 

***

     2.2 Milestone Payments to Banner. In consideration of Banner’s regulatory and development
services related to the Product(s), JDS shall make milestone payments to Banner in immediately
available funds payable to an account specified by Banner, which when paid shall be nonrefundable.
Milestone payments payable by JDS to Banner are as follows:

(a) $1,900,000.00 (one million nine hundred thousand dollars) shall be due and payable
immediately upon execution and delivery of this Agreement by both parties.

(b) $1,500,000.00 (one million five hundred thousand dollars) shall be due and payable ***.

(c) $500,000.00 (five hundred thousand dollars) shall be due and payable ***.

(d) $1,000,000.00 (one million dollars) shall be due and payable ***.

(e) Subject to *** $3,000,000.00 (three million dollars) ***

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***

	2.3	 	Product Developments.
	 
	 	 	(a) Dosage Strengths. From time to time during the Term, Banner and JDS may agree to
develop dosage strengths of Products for the Agreement Indications in addition to the dosage
strengths listed on Appendix A attached hereto. Upon agreement to develop such dosage
strengths, (i) Banner and JDS shall negotiate in good faith and enter into a development
agreement specifying, among other things, defined timelines and an established budget
pursuant to which JDS shall reimburse Banner for all costs of developing such mutually
agreed to additional dosage strengths, including without limitation, actual direct out of
pocket costs, Banner’s internal research and development costs determined in an established
project accounting system at standard hourly rates, and the costs to obtain Regulatory
Approval to market the additional strengths in the Territory. Banner shall invoice JDS for
such costs for developing the additional dosage strengths and JDS shall pay such invoices
within thirty (30) days from the date of the invoice received, and (ii) Appendix A attached
hereto shall be amended to include such additional dosage strengths so that the terms and
conditions of this Agreement shall then be applicable to the additional dosage strengths so
added. If in developing the additional dosage strengths, Banner develops, discovers or
creates patentable Intellectual Property that provides a commercial advantage for Product(s)
over the then existing technology used to make, use or sell Product(s), and the parties
agree that it is commercially advantageous for Banner to implement such Intellectual
Property to develop, make, use or sell the Product(s) in new dosage strengths, the parties
shall negotiate in good faith appropriate fair compensation to Banner for the added
commercial value of such new Banner Intellectual Property (e.g., by upfront milestone fees
and/or additional royalties on sales of the new Product dosage strengths). The determination
of such fair compensation to Banner will take into consideration, among other things, the
amount of funds already expended and to be expended by JDS in developing the Product(s) in
additional dosage strengths, the contribution of JDS to the development of the product
concept, and the financial return likely to be earned from the proposed

-11-

 

	 	 	commercialization of the Product(s) in new dosage strengths. However, if the parties
cannot agree to the appropriate fair compensation to Banner for the added commercial value
of such new Intellectual Property for the new Product dosage strengths, Appendix A shall
not be amended to include such new dosage strengths and such new dosage strengths shall not
be included in the Product(s) covered by this Agreement.
	 	 	(b) Additional Indications. ***
	 
	 	 	(c) Dosage Forms. If during the Term, Banner decides to develop additional dosage
forms of Valproic Acid or its salts for the Agreement Indications (i.e., dosage forms other
than soft gelatin capsules and enrobed tablets), then Banner shall notify JDS of its
decision in writing and shall provide information as reasonably requested by JDS with
respect to such development projects from time to time. ***

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***

Article 3. Purchase/Supply of Product(s); Exclusivity; Non-Competition.

3.1 Banner’s Supply Commitments. Banner shall manufacture, imprint and supply Product(s)
to JDS pursuant to JDS’s Purchase Orders (submitted by JDS pursuant to the terms and conditions of
this Agreement) and in accordance with the Regulatory Approval, the Specifications and in
compliance with Applicable Law.

3.2 JDS’s Commitment.

(a) Exclusive Purchases. JDS shall, during the Term, purchase exclusively from
Banner all of JDS’s requirements of the Product(s) for distribution and sale in the
Territory in accordance with the terms and conditions of this Agreement.

(b) Efforts. JDS shall use reasonable commercial efforts (i) to achieve the First
Commercial Sale of each Product within *** after the Regulatory Approval for that Product
provided that such Product is Commercially Available; and (ii) to thereafter legally
maximize JDS’s sales volume of that Product throughout the Territory. Notwithstanding the
foregoing, JDS shall have no obligation to achieve the First Commercial Sale of a Product
on or before ***, unless an earlier launch date is agreed to in writing by the parties.

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	3.3	 	Exclusivity.
	 
	 	 	(a) Definition. As used in this Section 3.3, “year” means each period of twelve
(12) full consecutive calendar months during the Term, with the first “year” beginning on
the First Commercial Sale of each Product and ending at the end of the twelfth full
calendar month after the First Commercial Sale of such Product.
	 
	 	 	(b) Minimum Royalty Payments. JDS shall have the exclusive right to sell the
Products in the Territory, provided that JDS pays Banner at least the Minimum Royalty
Payment each year for each Product.

	 	 	 	(i) Product Contributions to Minimum Royalty Payment. The respective dollar
contribution of each Product to the Minimum Royalty Payment shall be calculated as
follows:
	 
	 	 	 	***

-14-

 

	 	 	 	*** 
	 	 	 	(ii) Carryover Contributions. If in any year the Royalty Payments actually
paid by JDS to Banner exceed the Minimum Royalty Payment required for that year,
the excess amount shall be credited in the immediately following year solely to the
extent needed to allow JDS to achieve the Minimum Royalty Payment.
	 
	 	 	 	(iii) Minimum Royalty Payment Abatement. If for reasons directly
attributable to Banner’s actions or failure to act, or to Force Majeure, JDS cannot
fulfill JDS’s customer orders for Product(s) and, as a consequence, JDS’s Net Sales
Revenue is reduced, and not merely delayed, then JDS may reduce the Minimum Royalty
Payment due to Banner for the applicable year by an amount proportionate to the
amount that JDS’s Net Sales Revenue was reduced in such year because of Banner’s
actions or failure to act, or because of Force Majeure.

(c) Termination of Exclusivity. Banner shall have the right, in its sole
discretion, upon thirty (30) days prior written notice to JDS, to terminate JDS’s exclusive
right to sell the Product(s) in the Territory, on a Product by Product basis, and
thereafter shall have the right to offer coextensive rights to one or more third parties if
both of the following conditions exist during the same year: ***

-15-

 

	 	 	*** Should Banner terminate JDS’s exclusive right to sell one or more Product(s) in
the Territory under this Section 3.3(c) then the non-competition restrictions imposed on
Banner under Section 3.4 shall also terminate with respect to such Product(s).
	 
	3.4	 	Non-Competition.
	 
	 	 	(a) Subject to Section 3.3(c), with the exception of soft gelatin capsules containing as an
active ingredient Valproic Acid, salts thereof or oligomers thereof that Banner supplies to
third parties in the Territory as of the Commencement Date pursuant to written agreements
as of the Commencement Date, which third parties and agreements are listed on Schedule 3.4
attached hereto (the “Exception”), Banner shall not, directly or indirectly, either itself
or through a third party, supply for sale, market or otherwise commercialize in the
Territory any Valproic Acid, salt thereof or oligomer thereof, in each case, in the form of
a soft gelatin capsule, hard gelatin capsule or tablet product that possesses FDA marketing
approval for any Agreement Indication. For the avoidance of doubt, the Exception shall be
limited to the specific products that Banner is supplying in the Territory to the scheduled
third parties, or their successors, pursuant to the scheduled written agreements as of the
Commencement Date.
	 
	 	 	(b) Other than the Products supplied by Banner under this Agreement, JDS shall not,
directly or indirectly, either itself or through a third party, offer for sale, market or
otherwise commercialize in the Territory any Valproic Acid, salt thereof or oligomer
thereof, in each case, in the form of a soft gelatin capsule, hard gelatin capsule or
tablet product that possesses FDA marketing approval for the Agreement Indications.
	 
	 	 	(c) Banner shall be free to sell the Products and any other Valproic Acid product,
including salts thereof and oligomers thereof in any dosage form, any dosage strength and
for any indication, to one or more third parties for resale or distribution outside the
Territory without restriction except as follows:
	 
	 	 	***

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     ***

Article 4. Terms of Purchase of Product(s) from Banner.

	4.1	 	Pricing; Royalties.
	 
	 	 	(a) The price as of the Commencement Date for Valproic Acid EnteriCareTM

Products in Packaged Product form shall be:
	 
	 	 	***
	 
	 	 	(b) The price for Valproic Acid VersatrolTM Products in Packaged Product form shall be
determined according to Banner’s standard cost systems in accordance with generally
accepted accounting principles and shall be consistent with Banner’s determination of the
Valproic Acid EnteriCareTM Product price in Packaged Product form charged by Banner to JDS.
Banner shall provide JDS with summary documentation to support such price determination,
including, without limitation, to the extent that the pricing of Valproic Acid

-17-

 

	 	 	VersatrolTM Product is greater than the pricing of Valproic Acid EnteriCareTM Product,
the components and the costs associated with such components that caused such increase in
pricing. The price for Valproic Acid VersatrolTM Product shall be fixed only after the
formulation for the Valproic Acid VersatrolTM Product is finalized and scale up to full
batch size is completed.
	 
	 	 	(c) At JDS’s option, up to ***
	 
	 	 	(d) Pricing provided under this Section 4.1 is based on a minimum production lot size of
*** Units. Should JDS require smaller or larger size lots, pricing shall be negotiated in
good faith and pricing adjusted accordingly.
	 
	 	 	(e) In addition to the Product(s) price set forth above, JDS shall make Royalty Payments to
Banner as follows:
	 
	 	 	***

-18-

 

	 	 	***
	 
	 	 	(f) JDS shall make Royalty Payments quarterly. Accrued but unpaid Royalty Payments shall be
paid within thirty (30) days after the end of each quarter, in the same manner as invoice
payments under Section 4.3. With each Royalty Payment, JDS shall provide to Banner a
summary statement of Net Sales Revenue for the applicable quarter.
	 
	 	 	(g) If there is a delay in achieving the First Commercial Sale of Valproic Acid EnteriCareTM
Product so that it does not occur before *** and this delay is due to circumstances beyond
JDS’s reasonable control including delay in obtaining Regulatory Approval not attributable
to JDS and Force Majeure, then the Royalty Payment set forth in Section 4.1(e)(i) shall
commence on the date of the First Commercial Sale of the Valproic Acid EnteriCareTM Product
and shall end *** thereafter, and the beginning of each new Royalty Payment set forth in
Sections 4.1(ii), (iii) and (iv) shall be extended and commence accordingly.
	 
	 	 	(h) Upon request of JDS, the parties shall discuss in good faith terms and conditions under
which JDS could buy out its obligation to make Royalty Payments under this Agreement,
however, neither party is bound to agree to or accept any such term or condition.

4.2 Price Adjustments. Banner shall be entitled to increase the labor and overhead
component of the price of the Product(s) annually at a percentage rate equal to the change in the
United States Department of Labor’s Bureau of Labor Statistics’ Producer Price Index for
Pharmaceutical Preparations from the previous year, provided however, that in the event Banner
determines that an extraordinary labor condition exists that has caused or will cause Banner’s
labor and overhead costs to increase at a rate exceeding the annual adjustment, Banner shall
provide JDS with reasonably detailed documentation of the actual or projected increased labor and
overhead costs and the parties shall negotiate in good faith appropriate price increases to
compensate Banner for the extraordinary labor condition on a going forward basis. In addition, no
more than once per calendar quarter, Banner shall decrease or increase the price of Products to
reflect decreased or increased raw materials costs for new Purchase Orders if the aggregate
decrease or increase in raw materials costs is at least five percent (5%) of the raw materials cost
at the Commencement Date or at the date the last price decrease or increase due to raw materials
costs was implemented, whichever is later. The benefits of decreases in raw material prices shall
be shared by the parties equally so that price decreases implemented by Banner shall not exceed an
amount greater that *** of the subject aggregate raw material price decrease. Banner shall provide
JDS with sixty (60) days written notice of any price increase or decrease under this Section 4.2.
If requested, Banner shall provide JDS with reasonable written evidence of raw material cost
increases and decreases, and with the calculation of any extraordinary increase in labor and
overhead costs.

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4.3 Payment Terms. Banner shall invoice JDS upon each shipment of Product(s), and JDS
shall pay such invoices within *** from the date of such invoice. Banner shall deliver to JDS
correct and complete invoices at, or promptly after, the date Product(s) ship to JDS. Payment
shall be in U.S. dollars and paid to an account designated by Banner in writing. All amounts
payable by JDS to Banner under this Agreement shall, if delinquent, accrue interest at one (1%)
percent per month from the date of the delinquency.

	4.4	 	Purchase Forecasts.
	 
	 	 	(a) JDS shall submit to Banner a forecast of the quantity of Product(s) that JDS
anticipates ordering from Banner for the first twelve (12) months of the Term (the
“Purchase Forecast”). JDS’s initial Purchase Forecast shall be due at a date agreed to by
the parties which date shall be a reasonable period in advance of the anticipated date of
the Regulatory Approval. JDS shall update this Purchase Forecast on or before the tenth
(10th) day of every calendar month, thereby creating a 12-month rolling
forecast. The first four (4) months of such forecast shall be a binding purchase commitment
and the remaining eight (8) months shall be non-binding. Banner shall use commercially
reasonable efforts, but is not obligated, to supply any monthly forecast that exceeds one
hundred and twenty percent (120%) of the quantity previously forecast for that month.
	 
	 	 	(b) At least six (6) months prior to the anticipated date of Regulatory Approval of a
Product, Banner and JDS shall cooperate to determine the details of the first Purchase
Forecast, including without limitation, the launch quantities of such Product, the Product
mix (e.g., dosage strengths) and the desirable mix of Product quantities as physicians
samples and as retail size containers. As promptly as practicable following the delivery to
Banner of the first Purchase Forecast JDS shall provide Banner with binding firm orders
(each a “Purchase Order”) for the first four (4) months of the Purchase Forecast. The
Purchase Orders shall meet the requirements for Purchase Orders set forth in Section 4.5.
	 
	4.5	 	Purchase Orders.
	 
	 	 	(a) Each month within two (2) weeks after submission of the Purchase Forecast for that
month, JDS shall provide Banner with Purchase Orders for the fourth month (i.e., the month
newly added to the binding purchase commitment under Section 4.4). The Purchase Order shall
specify: the specific Product(s) being ordered, the proposed shipment date to JDS, the
quantities of Product(s) ordered (which total monthly volume for the order period shall be
no less than the applicable binding portion of the Purchase Forecast as provided in Section
4.4), and the requested place and manner of delivery, including any carrier designated for
use by JDS. If JDS does not designate a carrier, then Banner shall select the carrier. In no
event shall Banner be obligated to accept any Purchase Order for less than the minimum batch
size of ***

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	 	 	***. Banner shall be provided a minimum lead-time for delivery of *** on Purchase
Orders. Within five (5) business days after receipt of a Purchase Order, Banner shall
notify JDS of its acceptance of such Purchase Order as a binding order or shall indicate
what portion of the amounts covered by the Purchase Order Banner is willing to accept as a
binding order. Such confirmation shall also confirm the proposed shipment date or specify a
reasonable alternate shipment date. Both parties shall make reasonable good faith efforts
to adjust order requirements to reflect market conditions, except that change requests may
not be made within *** from the scheduled ship date of the subject Product(s) without
Banner’s written approval not to be unreasonably withheld.
	 
	 	 	(b) Banner’s acceptance of any Purchase Order is limited to the terms and conditions stated
in this Agreement. All terms and conditions proposed by JDS in any Purchase Order or
otherwise which are different from or in addition to this Agreement are expressly rejected.
No purported oral or verbal agreement or other understanding which attempts in any way to
modify the conditions stated herein will be binding, unless both parties agree to the
modification, in advance and in writing.
	 
	 	 	(c) If Banner (i) is unable to fulfill JDS Purchase Orders for Product or (ii) becomes aware
of any circumstances (including Force Majeure) that will cause Banner to become unable to
fulfill JDS Purchase Orders, in each case, for any continuous sixty (60) day period, Banner
shall give JDS prompt written notice, describing such circumstances together with a proposed
course of action to remedy such failure, which may include supplying Product from a second
source (including without limitation a Banner Affiliate) qualified to provide Product under
the Regulatory Approval. In the event Banner cannot fulfill JDS Purchase Orders from a
qualified second source, JDS may, in its discretion, cancel each affected Purchase Order
and/or meet the shortfall from any alternate source or sources selected by JDS in its sole
discretion. Any procurement by JDS from such alternative sources shall be limited to the
extent of the material shortfall by Banner and such procurement shall cease as soon as
Banner is able to resume normal supplies, subject to depletion of any inventory on hand that
was purchased or is to be delivered pursuant to binding contractual commitments to purchase
from the alternate source or sources. In meeting its requirements under this Section 4.5(c),
JDS shall not enter into any long term supply commitments with any third party source. The
Net Sales Revenue from the product that JDS purchases from a source other than Banner under
the terms of this Agreement shall be included in Net Sales Revenue.
	 
	 	 	(d) If Banner orders a specific raw material ingredient for a Product(s) and the raw
material is delayed or fails to meet Banner’s acceptance criteria, through no act or
omission by Banner, then for all purposes of this Agreement, Banner’s shipment timetable
shall be extended by the period of such delay, or in the case of unacceptable material to
allow Banner adequate time to obtain an acceptable

-21-

 

	 	 	replacement material, but if the delay exceeds sixty (60) days then the provisions of
Section 4.5(c) shall apply.
	4.6	 	Shipment.
	 
	 	 	(a) With respect to Products: (i) Banner or it’s third party finish packager will ship each
order of Product(s) Ex Works the packaging facility, (ii) Banner shall package the
Product(s), or arrange to have the Product(s) packaged, for shipment in accordance with
customary practices in the trade and shall arrange for shipment to the location designated
by JDS, and (iii) freight and insurance shall be for the account of JDS, and JDS shall bear
the risk of loss, delay or damage in transit from and after delivery by Banner or such
third party finish packager to the carrier for shipment to JDS.
	 
	 	 	(b) Any extra reasonable cost incurred by Banner on account of shipment changes requested
by JDS shall be reimbursed by JDS.
	 
	 	 	(c) Banner shall include the following with each shipment of the Product(s): (i) the
Purchase Order number; (ii) the lot number; (iii) the quantity of the Product(s); and (i) a
certificate of analysis as required by Section 6.2 hereof.

Article 5. Supply of Ingredients, Finishing, and Packaging.

5.1 Product Ingredients. Banner shall supply the Active Ingredient and all other raw
materials as required for compounding, processing and imprinting the Product(s), and the
components for bulk packaging and bulk labeling, if applicable. Banner’s receipt, processing,
handling and storage of the Active Ingredient and all raw materials required hereunder shall be
conducted in accordance with Applicable Law. In the manufacture of Product(s), Banner shall not
use any materials that fail to meet the current standards for materials under Applicable Law,
where such standards are established and are applicable.

5.2 Finish Packaging. Banner shall supply, or arrange for the supply of, all finish
packaging components, including without limitation and if applicable, bottles, labels, outserts,
caps, blister and corrugated materials. Banner may finish package Product itself or arrange for
finish packaging by a third party. In the latter case, Banner hereby assumes the liabilities,
responsibilities and obligations pertaining to arranging for finish packaging of Product(s).
Banner shall, in its own discretion, select the third party finish packager after consultation
with JDS regarding the selection. Banner shall cause the finished packaging of the Product(s) to
be conducted in accordance with all Applicable Law. Banner shall not assume any obligation,
responsibility or liability of JDS with respect to the content, development or supply of label
copy, or artwork.

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Article 6. Performance Standards.

6.1 Specifications and Characteristics. Banner shall manufacture and provide to JDS
Product(s) in compliance with the Regulatory Approval, the Specifications and Applicable Law. The
Product(s) shall have a minimum shelf life of at least *** with respect to finished Product(s) and
at least *** with respect to physician samples, at the time of delivery to JDS (provided JDS takes
delivery in accordance with requested date of delivery on the applicable Purchase Order). After
Banner completes stability studies in accordance with Applicable Law which Banner undertakes to
complete within a reasonable period of time after the Commencement Date, Product(s) shall have a
minimum shelf life of at least *** at the time of delivery to JDS (provided JDS takes delivery in
accordance with requested date of delivery on the applicable Purchase Order).

6.2 Certificate of Analysis. Concurrent with shipment, Banner shall deliver to JDS a
certificate of analysis, in Banner’s customary form, for each lot of Product(s) sold to JDS,
confirming that the Product(s) meets the Specifications.

6.3 Product(s) Acceptance.

	 	 	(a) Within thirty (30) days of receipt of Product(s) by JDS, JDS or its designee shall
conduct a visual inspection of Product(s). Should the visual inspection indicate a deviation
from the Specifications, JDS shall promptly notify Banner in writing by facsimile. If after
conducting its own investigation of the samples within fourteen (14) calendar days, Banner
agrees that such samples do not conform to the Specifications, and unless Banner reasonably
determines that the Nonconformity is directly attributable to JDS’s or its agents’ shipping,
handling, distribution or storage of the nonconforming Products, Banner shall promptly
provide JDS, free of any additional charge, with new deliveries of the same quantity of the
Product(s) as the delivered shipment, or identifiable subset thereof, from which the sample
was taken, or, in Banner’s discretion and at its cost, and if appropriate under Applicable
Law, Banner may promptly reprocess the nonconforming Product(s) to meet the Specifications.
In either event (unless Banner reasonably determines that the Nonconformity is directly
attributable to JDS or its agents’ shipping, handling, distribution or storage of the
nonconforming Products), JDS shall return, at Banner’s expense, the particular lot, portion,
or shipment of the non-conforming Product(s) if requested to do so by Banner; provided that
if Banner elects to destroy such nonconforming Product(s), Banner shall arrange for such
destruction at its expense. If Banner reasonably determines that the Nonconformity is
directly attributable to JDS’s or its agent’s shipping, handling, distribution or storage of
the nonconforming Products, and JDS disagrees, the matter shall be submitted to an
independent testing laboratory pursuant to Section 6.3(c). Except as to Latent Defects, if
JDS fails to notify Banner of a non-conforming Product(s) by the thirty-fifth
(35th) day following JDS’s receipt of the Product(s), then JDS shall be deemed to
have accepted such Product(s).

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	 	 	(b) Promptly after either Banner or JDS become aware of a Latent Defect, it shall
notify the other of the batch involved, and at JDS’s election, the batch shall be
quarantined as of the date of such notice. If the parties agree that the Product(s) have
one or more Latent Defects, then if Banner is responsible for the Latent Defect Banner
shall refund all monies paid for that shipment of Product to JDS, and shall reimburse JDS
for its reasonable and customary actual out of pocket costs and expenses incurred in
accepting returns from its customers and shall be responsible for all actual out of pocket
costs reasonably incurred by JDS in recalling Product(s) that have Latent Defects,
including costs of destroying such Products as necessary. If it is determined that JDS is
responsible for the Latent Defect, then JDS shall pay Banner the purchase price for such
Product in accordance with the terms of this Agreement and shall be responsible for any and
all costs of recalling the Product(s), including costs of destroying such Products as
necessary and the cost of accepting returns. Banner shall replace each nonconforming
shipment of Product, or the nonconforming portion thereof, with conforming Product as soon
as reasonably practicable after receipt of notice of rejection thereof. If the parties do
not agree on whether Product(s) have Latent Defects, testing shall be performed in
accordance with Section 6.3(c).
	 
	 	 	(c) If Banner and JDS do not agree on whether the Product(s) conforms to the
Specifications, the matter will be submitted to an independent testing laboratory
acceptable to both parties for its review and determination. The parties will agree on an
inter-laboratory methods transfer process to be implemented at the laboratory to ensure
acceptable data from a scientific and regulatory (cGMP) basis. The determination of such
independent laboratory will be binding on both parties. The cost of the independent
laboratory shall be borne by the party whose testing results were in error. If the
Product(s) is determined not to conform to the Specifications, then Banner and JDS shall
have the obligations with respect to the non-conforming Product(s) set forth in Section
6.3(a) or 6.3(b) as applicable. If the Product(s) is determined to conform to the
Specifications, then JDS shall accept and pay for the Product(s) in accordance with the
terms of this Agreement.
	 
	 	 	(d) Subject to the indemnification obligations of Section 11.1, Banner’s obligations
including to reprocess or replace Product(s) in this Section 6.3 shall constitute JDS’s
sole remedy for non-conforming Product(s) and is not in addition to any other remedy.

Article 7. Product(s) Complaints; Recalls; Withdrawals.

7.1 Product(s) Complaints; Nonconformities; Adverse Events. Any and all confirmed
Product(s) complaints, Nonconformities, or Adverse Events of which either party becomes aware
relating to any Product(s) shall be promptly reported to the other party. JDS shall also forward
summary reports of complaints it receives from end-users to Banner on a monthly basis. JDS shall
report serious Adverse Events to Banner within

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five (5) days of its knowledge of such serious Adverse Event. Notification of serious Adverse
Events shall be given by facsimile. Banner shall be responsible for completion and submission of
all required reports to applicable authorities with respect to Adverse Events in accordance with
Applicable Law.

	7.2	 	Investigations.
	 
	 	 	(a) General. The parties shall investigate all reports of Nonconformities,
Product(s) complaints and Adverse Events in order to assure the conformity of Product(s) to
Specifications and Applicable Law and the safety and efficacy of the Product(s). The
parties shall act promptly and shall cooperate fully in such investigations.
	 
	 	 	(b) Direction. Banner, as the holder of the NDA, shall have the responsibility and
sole right to control and direct any or all aspects of an investigation conducted under
this Section 7.2. Banner shall advise JDS from time to time throughout such investigation
of Banner’s intentions regarding control and direction of the investigation.
	 
	 	 	(c) Assistance. Upon written request, each party shall provide all reasonably
requested assistance and information to the other in connection with an investigation of
any Nonconformity, Product(s) complaint or Adverse Event. Each party shall have the right
to conduct at its own expense any further tests it deems appropriate regarding such
investigation provided that it shall share the results with the other.
	 
	 	 	(d) Reporting. Each party shall provide to the other (i) a preliminary written
report of its determinations and conclusions from any investigation conducted by it,
testing or other requested assistance related to such investigation as soon as reasonably
practicable, but in no event later than five (5) days after the completion of such
investigation, and (ii) preliminary samples (if available) of the affected Product(s). Any
final report regarding a Nonconformity, Product(s) complaint or Adverse Event shall be
submitted to the other party within thirty (30) days of a notification given by the other
party under Section 7.1. Upon request, Banner shall provide to JDS a written report of
Banner’s determinations and conclusions from any investigation, report, testing, or
portions thereof. Each party shall hold all communications related to such investigation,
testing or other requested assistance in confidence according to the provisions of Section
10. Banner shall be responsible for maintaining Adverse Event and complaint master files in
accordance with Applicable Law.
	 
	 	 	(e) Costs of Investigations and Reporting. Costs, if any, associated with
investigations, shall be borne by the party that is determined to be responsible for the
Nonconformity, Product(s) complaint or Adverse Event. If neither party is responsible, or
fault cannot be determined, then Banner shall bear such costs if JDS can demonstrate through
applicable records that the shipping, handling and

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	 	 	storage of the Products, after delivery to JDS or its agent, are in compliance with
Applicable Law and with Shipping Instructions; provided however, that if despite such
records, Banner can demonstrate that JDS or its agent is responsible for such
Nonconformity, Product(s) complaint or Adverse Event then JDS shall bear the costs
associated with the investigations. For purposes of this Agreement, “Shipping Instructions”
shall mean Banner’s written instructions for shipping, handling and storage of the
Products, a copy of which is attached hereto as Appendix C, as may be amended by Banner as
reasonably necessary and in accordance with customary industry practices for soft gelatin
capsules, upon prior written notice to JDS. The parties shall equally share the reasonable,
customary and required costs of (i) Adverse Event reporting, (ii) the maintenance of
Adverse Event records, and (iii) pharmacovigilance activities related to the Product(s).
	7.3	 	Certain Product(s) Events.
	 
	 	 	(a) Notification and Cooperation. In the event Banner, after consultation with JDS
on how best to proceed, initiates a Recall, Withdrawal or field correction, field alert
report or comparable report with respect to Product(s), whether or not such Recall,
Withdrawal, field correction or field alert report has been requested or ordered by any
Governmental Body, Banner shall notify JDS in writing, and Banner and JDS shall fully
cooperate with each other to implement the same.
	 
	 	 	(b) Coordination of Efforts. In the event either party becomes aware of information
that may warrant Banner taking any action with respect to Product(s), it shall immediately
provide the other with such information in writing. The parties shall cooperate with each
other in determining the necessity and nature of such action; provided, however, that JDS
shall take no action to effect the same without the written concurrence of Banner.
	 
	 	 	(c) Contacts and Statements. With respect to any Recall, Withdrawal, field
correction, field alert report or comparable report with respect to any Product(s), Banner
shall consult with JDS and Banner shall make all contacts with the applicable Governmental
Body and shall be responsible for coordinating all of the necessary activities in
connection with any such Recall, Withdrawal, field correction, field alert report or
comparable report. Banner and JDS shall meaningfully consult with each other with respect
to statements to the media made by JDS and/or Banner, including press releases and
interviews for publication or broadcast, but Banner as the NDA owner, acting reasonably and
in good faith, shall have the right of final approval of such media statements.

7.4 Retained Samples; Stability Studies; Product(s) Storage. Banner shall retain the Active
Ingredient raw material and samples, in each case, from each batch of Product(s) for a period of
one (1) year after the expiration date of such batch or such longer period required by Applicable
Law for record keeping, testing and regulatory purposes for each Product(s). When storing
Product(s), Nonconforming Product(s) or

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Product(s) returns, JDS shall comply with, and shall maintain all storage facilities in
compliance with applicable provisions of this Agreement, the Specifications and Applicable Law.
Banner shall be responsible, at its expense unless otherwise agreed by the parties in writing, to
conduct on-going stability studies on the Products and report thereon to the FDA in accordance
with Applicable Law, with a copy of such report promptly forwarded to JDS.

7.5 Recall, Withdrawal, Field Correction Costs. In the event of any Recall, Withdrawal, or
field correction with respect to any Product(s), the party that is determined to be responsible
for the cause of the Recall or Withdrawal, or field corrections shall be responsible for the costs
of such Recall, Withdrawal, or field correction (including cost of goods, distribution expenses,
destruction costs, and third party recall expenses), in addition to the cost of promptly
replacing, or if practicable, reprocessing, the affected quantity of Product(s). If neither party
is responsible, or fault cannot be determined, then Banner shall bear such costs if JDS can
demonstrate through applicable records that the shipping, handling and storage of the Products,
after delivery to JDS or its agent, are in compliance with Applicable Law and with Shipping
Instructions; provided however, that if despite such records Banner can demonstrate that JDS or
its agent is responsible, then JDS shall bear such costs.

	7.6	 	Inspections and Reports by Regulatory Authorities.
	 
	 	 	(a) Inspections. Each party shall notify the other party in writing within five (5)
days in the event of any inspection by representatives of any Governmental Body with
respect to the Product(s) or to its cGMP compliance status relating to or affecting the
manufacture of the Product(s), and shall provide to the other party summary descriptions of
any correspondence with the Governmental Body relating to such inspection to the extent
related to the Product(s), including, without limitation, summaries of the respective
Governmental Body’s inspection report and the party’s response.
	 
	 	 	(b) Reports. Each party shall promptly notify the other of its receipt from the FDA
of a Form 483 report (or any similar form or notice from a governmental oversight authority)
specifically addressing the Product(s) or matters affecting a Party’s or its subcontractor’s
performance under this Agreement. Each party shall provide to the other summaries of (i) all
material correspondence, notices or responses received from and to the FDA and other
Governmental Bodies relating to the Product(s) and its manufacture or marketing, including,
without limitation, all inspection reports issued by the FDA and such other authorities
during the Term, and related correspondence, and (ii) reports and correspondence relating to
the Products and their manufacture as become available in connection with any of the
following events: (a) receipt of a Warning Letter or similar advisory from the FDA or any
other Governmental Body relating to the manufacture, packaging and storage of the Products;
and (b) any regulatory comments relating to the manufacture of the Products requiring a
response or action by the notifying party, including without limitation, a 483 Report
and the party’s responses thereto.

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7.7 Product(s) Returns from the Field. In the event that any third party returns any
Product(s) to JDS, JDS shall promptly notify Banner in writing and include all information JDS has
relating to the return. JDS shall promptly forward all such Product(s) to a location specified by
Banner, and shall take no other action regarding such Product(s) (except for safeguarding such
Product(s)), unless requested in writing by Banner or required by Applicable Law. This Section 7.7
shall not apply to Product(s) returned to JDS due to excess inventory or expired or short-dated
shelf life.

Article 8. Product(s) Marketing and Sales.

8.1 Marketing and Sales Activities. With the exception of materials associated with the
Regulatory Approval that Banner has the right to approve consistent with its ownership of the
Regulatory Approval in accordance with Section 2.1 (a)(ii), JDS shall be solely responsible for
the conduct of all marketing and sales activities of the Product(s) sold hereunder in the
Territory and shall have commercial operating freedom in its discretion with respect to all
commercialization matters relating to the Products, including, without limitation, with respect to
the use of trademarks, trade names, logos, and trade dress owned by JDS, provided that JDS shall
conduct all marketing and sales activities at all times in compliance with the Regulatory Approval
and Applicable Laws, and provided further that JDS complies with Section 12.1(e). JDS may engage a
third party sales force to assist in the marketing and sales of Product(s) subject to Banner’s
prior written consent, not to be unreasonably withheld.

8.2 Packaging, Labeling. Marketing and Promotional Materials. JDS shall be solely
responsible for the content of the package label copy, content of labeling, marketing and
promotional materials for the Product(s), subject only to Banner’s right of prior approval of
package label copy and final packaging materials for compliance with the Regulatory Approval under
Section 2.1(a)(ii). JDS covenants and agrees that such materials will at all times comply with the
Regulatory Approval and Applicable Law. JDS shall provide Banner with samples of such packaging,
content of labeling, marketing and promotional materials upon request. Banner shall have no
responsibility or liability for JDS’s packaging, advertising, promotional materials, trademarks or
content of labeling, except with respect to any changes, additions, or modifications requested by
Banner. JDS shall not make any claims or statements whether in or on its packaging, labeling,
promotional materials or otherwise, that is not in compliance with, or that is outside, the scope
of the Regulatory Approval.

8.3 Terms and Conditions of Sale. JDS shall determine the price, terms and conditions of
sales of Product(s) to JDS’s customers.

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Article 9. Term and Termination.

9.1 Term; Renewal. For the Valproic Acid EnteriCareTM Product, the Term of this Agreement
shall start on the Commencement Date and continue for an initial period of five (5) years
following the date the Regulatory Approval is received for the Valproic Acid EnteriCareTM Product
(the “Initial Term” for Valproic Acid EnteriCareTM Products). For the Valproic Acid VersatrolTM
Product, the Term of this Agreement shall start on the Commencement Date and continue for an
initial period of five (5) years following the date the Regulatory Approval is received for the
Valproic Acid VersatrolTM Product (the “Initial Term” for Valproic Acid VersatrolTM Products). Upon
expiration of each such Initial Term, this Agreement shall automatically renew as to the pertinent
Product for successive renewal terms of two (2) years without further action of the parties.

9.2 Termination by Either Party. This Agreement may be terminated by either party, at any
time, on a Product by Product basis, by providing written notice to the non-terminating party upon
the occurrence of the following events or conditions:

	 	 	(a) If the other party commits a material breach of any of its obligations herein (other
than an obligation to pay money owed) and fails (i) to remedy that breach within sixty (60)
days after written notice from the non-breaching party where a remedy is reasonably
possible and is required by the non-breaching party; or (ii) where a remedy is not
reasonably possible within sixty (60) days after written notice from the non-breaching
party, and the non-breaching party requests remedy of such breach, to propose a plan within
sixty (60) days which is reasonably capable of providing a remedy, and subsequently fails
to diligently and continuously execute the proposed plan;
	 
	 	 	(b) If a party fails to pay any amounts due and payable hereunder to the other party within
ten (10) days after written notice of such failure to pay;
	 
	 	 	(c) If the other party (i) applies for or consents to the appointment of a receiver, trustee
or liquidator of it or of its properties and assets; (ii) admits in writing its inability to
pay its debts as they mature; (iii) makes a general assignment for the benefit of creditors;
(iv) is adjudicated a bankrupt or insolvent; (v) files a voluntary petition under the United
States Federal Bankruptcy Code or takes advantage of any insolvency, readjustment of debt,
dissolution or liquidation law or statute or files an answer admitting the material
allegations of a petition filed against it at any proceeding under any such law; or (vi) has
entered against it an order, judgment or decree issued by any court of competent
jurisdiction approving a petition seeking reorganization of it or of its properties and
assets or appointing a receiver, trustee or liquidator of it;
	 
	 	 	(d) If the other party has received from the FDA a Form 483 report with respect to
Product(s) or the packaging or manufacturing facilities thereof, which Form 483 report would
prevent the party who received the Form 483 report from materially performing its
obligations under this Agreement, and such party has
not taken appropriate and necessary actions to address the matters raised in such Form
483 and is thereby not diligently pursuing corrective action in response thereto.

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	 	 	(e) If the other party is prevented by reason of any circumstances referred to in Section
9.5 of this Agreement from performing any of its obligations hereunder for a continuous
period of six (6) months.

9.3 Termination by Banner. This Agreement may be terminated by Banner, upon thirty (30)
days written notice to JDS, effective at the end of any calendar year during the Term beginning
at the end of 2008 if:

	 	 	(a) both of the following conditions exist during the same calendar year after the end of
2007: ***; or
	 
	 	 	(b) all three of the following conditions exist during the same calendar year after the end
of 2007:***.

9.4 Termination by JDS.

     ***

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	 	 	***
	 
	 	 	(b) This Agreement may be terminated by JDS upon thirty (30) days prior written notice to
Banner if Banner fails to obtain Regulatory Approval for the Valproic Acid EnteriCareTM
Product on or before ***.
	 
	 	 	(c) JDS may elect to terminate all of this Agreement or only the portions of this Agreement
related to a specific Product pursuant to Section 12.4(d).
	 
	9.5	 	Post Termination Obligations.
	 
	 	 	(a) Upon termination of this Agreement by Banner under Section 9.2 or Section 9.3, JDS
shall purchase from Banner and pay Banner for all Product(s) for which JDS has outstanding
Purchase Orders that have been accepted by Banner and shall reimburse Banner for the actual
cost of materials obtained by Banner due to the rolling forecast provided by JDS and which
materials Banner cannot use because of the termination of this Agreement.
	 
	 	 	(b) Upon termination of this Agreement under Section 9.2(unless due to the breach of
Banner), Section 9.3, Section 9.4(a) or Section 9.4(c), at Banner’s election, JDS and
Banner shall negotiate in good faith appropriate terms and conditions for Banner to
purchase from JDS the trademarks and trade dress associated with the Product(s).
	 
	 	 	(c) In the event this Agreement is terminated by JDS under Section 9.2(a) Banner shall use
reasonable commercial efforts to continue to satisfy JDS’s requirements for the Products
consistent with the terms of this Agreement for a period, at JDS’s option, of up to twelve
(12) months following such termination.

9.6 Quality Agreement. Banner and JDS agree to enter into a quality agreement for the
manufacture of the Product(s), which will specify each party’s responsibility for quality,
compliance, and regulatory matters, within ninety (90) days from the Commencement Date.

9.7 Force Majeure. Neither Banner nor JDS shall be considered in default or be liable to
the other party for any delay in performance or for non-performance of the terms of this Agreement
caused by circumstances that the delaying party can establish was beyond the reasonable control of
such party and not due to its act or failure to act, including but not limited to, acts of God;
explosion; fire; flood; earthquake or tremor; war, whether declared or not; acts of terrorism;
substantial unavailability, shortage or interruption in the usual supply of raw materials;
unusually severe weather; insurrection; riot; sabotage; accident; labor strike or labor
disturbances; or orders or decrees of any court; provided, however, that the terms of this Section
9.7 shall not forgive or excuse any failure of a party hereto to make a payment to the other party
or a third party when and as required under this Agreement.

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Article 10. Treatment of Confidential Information.

During the Term of this Agreement and for a period ending at the occurrence of one of the
exceptions to restrictions (a) through (c) or (e) found below in this Article 10, JDS and Banner
each shall keep, and shall cause its respective Affiliates, officers, directors, employees and
agents to keep, confidential all information proprietary to the other party and that has been
acquired by it through its participation in the negotiation and performance of this Agreement, and
each shall use such information solely for purposes of performing its obligations or exercising
its rights hereunder, provided that the foregoing restriction shall not apply to information that
(a) is or hereafter becomes generally available to the public other than by reason of any default
with respect to confidentiality under this Agreement; (b) is hereafter disclosed to such party by
a third party who is not in default of any confidentiality obligation to the other party (and such
disclosure can be properly demonstrated by the receiving party); (c) was previously or is
hereafter developed by or on behalf of such party, without reference to confidential information
of the other party acquired prior to or after the date hereof (and such can be properly
demonstrated by the receiving party); (d) is required to be disclosed in compliance with
applicable laws or regulations or order by a court or other governmental or regulatory agency or
body having competent jurisdiction, provided that reasonable measures shall be taken to assure
confidential treatment of such information, but the disclosure restrictions shall only be released
to the extent of such specific disclosure required under this clause (d); (e) is provided by such
party under appropriate terms and conditions, including confidentiality provisions equivalent to
those in this Agreement, to accountants and/or lawyers; or (f) if such party considers it
reasonably necessary to disclose such information in connection with any action, suit or
proceeding before any court or any governmental or other regulatory agency or body or any arbitral
panel, or any audit or investigation brought by any governmental or other regulatory agency or
body, or the assertion of any claim against any insurer or other third party, but then only after
providing prompt written notice to the other party and a reasonable opportunity for the other
party to object to disclosure and protect its rights. Each of JDS and Banner recognizes that any
violation of this confidentiality provision may cause the other irreparable harm and agrees that
the other party shall be entitled, in addition to any other right or remedy it may have, at law or
in equity, to an injunction without the posting of any bond or other security, enjoining the
disclosing party, its Affiliates and their respective officers, directors, employees and agents
from any violation or potential violation of this Article 10. The terms of this Article 10 shall
survive any termination of this Agreement.

Article 11. Indemnities; Insurance,

11.1 Indemnification By Banner. Notwithstanding anything contained in this Agreement to the
contrary, Banner shall indemnify and hold JDS and its Affiliates and their respective officers,
directors, members, shareholders and employees harmless against any and all liability, damage,
loss, cost or expense (including reasonable and actual attorneys fees) resulting from any third
party claim made or suit brought against

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JDS or such persons to the extent such claim (a) is caused by Banner’s gross negligence or
willful misconduct; or (b) is caused by Banner’s material breach of any representation, warranty,
covenants, or term of this Agreement; (c) is caused by a Product’s failure to conform to the
Applicable Law, the Regulatory Approval or the Specifications and such failure is attributable to
Banner’s or its agents’ actions or failure to act; or (d) is caused by any infringement or alleged
infringement of any Intellectual Property right of a third party resulting from or relating to
Banner’s use of Generally Applicable Technology. Upon being notified of the filing of any such
claim or suit, JDS shall promptly notify Banner thereof and shall permit Banner, at its cost, to
handle and control such claim or suit with counsel of Banner’s own choosing. JDS shall have the
right to participate in the defense of such claim or suit at its own expense. Banner shall make no
admission on behalf of JDS without JDS’s prior express written consent.

11.2 Indemnification By JDS. JDS shall indemnify and hold Banner and its Affiliates and
their respective officers, directors, members, shareholders and employees harmless against any and
all liability, damage, loss, cost or expense (including reasonable and actual attorney fees)
resulting from any third party claim made or suit brought against Banner or such persons to the
extent such claim (a) is caused by JDS’s gross negligence or willful misconduct; (b) is caused by
JDS’s material breach of any representation, warranty, covenant, or term of this Agreement; (c) is
caused by a Product’s failure to conform to the Applicable Law, the Regulatory Approval or the
Specifications and the failure is attributable to JDS ‘s or its agents’ actions or failure to act;
(d) alleges any infringement by the Product(s)’s retail packaging copy, artwork, content of
labeling, advertising or marketing materials, of Intellectual Property rights of third parties.
Upon being notified of the filing of any such claim or suit, Banner shall immediately notify JDS
thereof and shall permit JDS at its cost to handle and control such claim or suit with counsel of
its own choosing. Banner shall have the right to participate in the defense of such claim or suit
at its own expense. JDS shall make no admission on behalf of Banner without Banner’s prior express
written consent signed by its President or its Global Vice President/Legal and Public Affairs.

11.3 Claims. No claim shall be made, or be enforceable against either party, under this
Article 11 unless written notice thereof with full particulars is received by the indemnifying
party within thirty (30) days after the existence of the claim is known to the indemnified party,
however, failure to notify the indemnifying party within such thirty (30) day period shall not
relieve the indemnifying party of its obligations under this Article 11 unless such indemnifying
party is demonstrably prejudiced as a result of the delay.

11.4 Insurance. Both JDS and Banner shall each maintain, during the Term of this Agreement
and the three (3) years thereafter, at least *** in Product(s) liability coverage, with the other
party listed as an additional insured. Within thirty (30) days following the date of this Agreement
and then annually thereafter for the Term of this Agreement and the three (3) years thereafter,
each party shall provide the other with a certificate of insurance evidencing the coverage
maintained in accordance with this Section 11.4.

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11.5 LIABILITY LIMITATIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, BUT EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 12, NEITHER BANNER NOR JDS SHALL BE LIABLE
FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION,
LOST PROFITS OR REVENUE, IN EACH CASE WHETHER OR NOT DETERMINED TO BE A DIRECT OR INDIRECT
DAMAGE), WHETHER OR NOT FORESEEABLE, OR WHETHER OR NOT EITHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, RESULTING FROM THE FAILURE OF THE PRODUCT(S) TO MEET THE
SPECIFICATIONS OR FOR ANY BREACH OF THIS AGREEMENT. SUCH LIMITATION SHALL APPLY TO ALL CLAIMS MADE
UNDER OR RELATING TO THIS AGREEMENT EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 12, INCLUDING, WITHOUT
LIMITATION, ANY CLAIM FOR INDEMNIFICATION UNDER THIS ARTICLE 11.

Article 12. Intellectual Property

	12.1	 	Banner Intellectual Property.
	 
	 	 	(a) Title to and the right of enforcement for all Banner formulations, technology, all
other Banner Intellectual Property applicable to the Product(s) (including, without
limitation, the patents and patent applications listed on Schedule 12.1 attached hereto)
owned by Banner prior to the Commencement Date shall remain with Banner. Banner shall use
reasonable efforts to notify JDS of additional patents or patent applications relating
directly to the Products that are filed by or on behalf of Banner in the Territory during
the Term.
	 
	 	 	(b) Banner shall own and retain all right, title and interest in and to any and all
inventions, whether invented, developed or discovered solely by Banner or jointly by Banner
and JDS, relating to (i) excipient system formulations, fill formulations, or gelatin or
non-gelatin shell formulations, (including, without limitation, relating in any manner to
Banner’s VersatrolTM or EnteriCareTM technologies), or (ii) making Product(s) utilizing
gelatin or non-gelatin technology, or (iii) otherwise relating to developing, using or
making soft gel capsules or enrobed tablets.
	 
	 	 	(c) Banner shall own and retain all right, title and interest in and to any and all
Intellectual Property of a non-technical nature invented, created or discovered by Banner
under this Agreement.
	 
	 	 	(d) Banner grants to JDS a non-transferable (except as set forth in Section 13.4), license
consistent in scope with the terms and conditions of this Agreement under Banner
Intellectual Property, whether existing at the Commencement Date or thereafter developed or
acquired, only to the extent necessary to use, have used, market, distribute, sell and have
sold Products in the Territory except that JDS shall not use, or permit its customers to
use, Banner’s name or trademarks in any advertising, promotions, marketing, and/or labeling
of the Product(s) or similar Product(s), without the prior written consent
of Banner. JDS may grant sublicenses to a third party sales force consistent with the
provisions of Section 8.1.

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	 	 	(e) When applicable to the Product(s), JDS shall cause a reference to Banner’s patent
numbers relative to the Product(s) to be placed on the finished packaging for the
Product(s). At Banner’s request and when applicable, JDS shall also cause the term “patent
pending” and/or Banner’s EnteriCareTM or VersatrolTM trademark to be placed on the finished
packaging for the Product(s). Changes to the finished packaging of the Products, including
changes to the listing of patent numbers relative to the Product(s), that are requested by
Banner shall be at Banner’s expense if not necessitated by the Regulatory Approval or
Governmental Bodies.
	 
	 	 	(f) JDS acknowledges that it will not acquire any Intellectual Property rights in and to
the Product(s) subject to Section 12.2, or to the trademarks VersatrolTM or EnteriCareTM.
	 
	 	 	(g) Except as set forth in Section 3.4 or as otherwise expressly set forth in this
Agreement, this Agreement does not restrict Banner from using any soft gelatin capsule
related technology whether previously owned or controlled, or subsequently owned or
controlled, or developed or acquired as a result of this Agreement, for other Banner
customers, or for Banner’s own account.
	 
	12.2	 	JDS Intellectual Property.
	 
	 	 	(a) Title to and the right of enforcement for all JDS Intellectual Property owned by JDS
prior to the Commencement Date shall remain with JDS.
	 
	 	 	(b) JDS shall own and retain all right, title and interest in and to any and all
Intellectual Property related to the sales, marketing, promotion and distribution of the
Product(s) which is invented, developed or discovered by JDS or jointly by JDS and Banner,
including, without limitation, trademarks, trade names, logos and trade dress with respect
to the Product(s), and including, without limitation, capsule color and color combination,
and graphics. For the avoidance of doubt, Banner shall have title to the trademarks
VersatrolTM and EnteriCareTM.
	 
	 	 	(c) JDS grants to Banner a non-exclusive license under JDS Intellectual Property only to
the extent necessary for Banner to receive and maintain Regulatory Approval within the
Territory.

12.3 Publicity/ Press Releases. Unless required to do so by law or regulation, neither
party shall issue any press release or other public communication related to the relationship
between the parties or the existence of this Agreement without the prior written consent of the
other party. The party desiring to issue the communication shall provide the other party with an
advance copy of the proposed text of the public

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communication for review and shall adopt any reasonable changes requested by the reviewing
party prior to issuing such public communication.

	12.4	 	Intellectual Property Enforcement and Defense.
	 
	(a)	 	Intellectual Property Enforcement. Unless otherwise specifically agreed
by the parties in writing:
	 
	 	 	(i) If either Banner or JDS suspects third party infringement of any of the
Intellectual Property covering or relating to Product(s), that party shall promptly
advise the other as to the facts and circumstances surrounding the suspected
infringement. If Banner determines that an infringement action is commercially
reasonable (taking into account the likelihood of success and relative
cost/benefits), Banner may institute an infringement action against said third
party. However, should Banner decide not to bring an infringement action, JDS may
request Banner to undertake such infringement action using counsel of Banner’s
choice (after conferring with JDS) at JDS’s expense. Banner and JDS shall confer
regarding strategy for any patent infringement action brought under this Section
12.4(a) but Banner shall be solely responsible for the management and control of
such patent infringement action. Notwithstanding the foregoing, nothing in this
Section 12.4(a)(i) shall require JDS to participate in or contribute to the cost of
Banner’s Intellectual Property enforcement efforts unless the third party’s
infringement directly and materially adversely impacts, or is reasonably likely to
directly and materially adversely impact, sales of the Product(s) and, in all other
situations Banner is free to enforce Banner Intellectual Property on its own
behalf, at its own cost, and without contribution or indemnification thereof by
JDS. In this latter case, Banner shall retain for itself all awards paid by third
parties (whether by settlement or otherwise) as a result of Banner’s enforcement
efforts.
	 
	 	 	(ii) Subject to Section 12.4(a)(i), the costs and expenses of any enforcement
action by Banner (including reasonable fees and expenses of attorneys and other
third parties) shall be paid by Banner and one-half (1/2) of any such costs and
expenses incurred by Banner shall be invoiced to JDS monthly and paid net thirty
(30) days of issuance.
	 
	 	 	(iii) Each party shall execute all necessary and proper documents and take such
actions as shall be reasonably requested by the other to allow it to institute and
prosecute any such enforcement actions, including being named as a co-plaintiff in
the action if warranted, in accordance with the terms of this Section.
	 
	 	 	(iv) Provided that JDS has actually participated in the cost of enforcement efforts
pursuant to Section 12.4(a)(i) and (ii) and to the extent any award paid by third
parties as a result of such an enforcement

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	 	 	action (whether by way of settlement or otherwise) relates to lost revenue
associated with the Product(s), such award shall be treated as Net Sales Revenue
hereunder (after deduction by Banner and JDS, as the case may be, of all costs and
expenses, including, without limitation internal personnel costs, relating to such
action). All other awards, or portions of awards not related to lost revenue
associated with the Products, shall be shared by the parties equally.
	 
	(b)	 	Declaratory Relief.
	 
	 	 	(i) If a third party commences an action for declaratory relief or similar action
against Banner attacking the applicability, validity or enforceability of any
Intellectual Property relating to Product(s), Banner shall advise JDS as to the
facts and circumstances surrounding the action. Banner shall defend said action
and/or institute an infringement counterclaim against the third party if Banner
determines it is legally advisable and commercially reasonable to do so (taking into
account the likelihood of success and relative cost/benefits). However, should
Banner decide not to defend said action and/or institute an infringement
counterclaim against the third party, JDS may request Banner to undertake such
action using counsel of Banner’s choice (after conferring with JDS) at JDS’s
expense. Banner and JDS shall confer regarding strategy for any action or defense
brought under this Section 12.4(b) but Banner shall be solely responsible for the
management and control of such action. Notwithstanding the foregoing, nothing in
this Section 12.4(b)(i) shall require JDS to participate or contribute to the cost
of Banner’s Intellectual Property enforcement or defense efforts unless the third
party’s legal action (if successful) or infringement directly and materially
adversely impacts, or is reasonably likely to directly and materially adversely
impact, sales of the Product(s) and, in all other declaratory judgment actions
relating to the Banner Intellectual Property, Banner is free to defend suit
(including asserting Banner Intellectual Property infringement as a counterclaim) on
its own behalf, at its own cost, and without contribution or indemnification thereof
by JDS. In this latter case, Banner shall retain for itself all awards paid by third
parties (whether by settlement or otherwise) as a result of Banner’s enforcement
efforts.
	 
	 	 	(ii) Subject to Section 12.4(b)(i), the costs and expenses of any such defense
and/or counterclaim by Banner (including reasonable fees and expenses of attorneys
and other third parties) shall be treated in the same manner as patent enforcement
expenses pursuant to Section 12.4(a)(ii).
	 
	 	 	(iii) Each party shall execute all necessary and proper documents and take such
actions as shall be reasonably requested by the other to defend said action and/or
institute and prosecute such counterclaim, including
being named as a co-plaintiff or co-defendant in the action and/or counterclaim
if warranted, in accordance with the terms of this Section.

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	 	 	(iv) Provided that JDS has actually participated in the cost of enforcement efforts
pursuant to Section 12.4(b)(i) and (ii), any award paid by third parties as a result
of a counterclaim brought under this Section 12.4(b) (whether by way of settlement
or otherwise) shall be treated in the same manner as patent enforcement award
pursuant to Section 12.4(a)(iv). Any award due to third parties as a result of the
action shall be treated in the same manner as an award pursuant to Section
12.4(c)(iv).
	 
	(c)	 	Intellectual Property Defense.
	 
	 	 	(i) In the event a third party commences an action against Banner for Intellectual
Property infringement, or threatens to do so, for activities pertaining to the
making, using, or selling of Product(s) and not primarily pertaining to the
Generally Applicable Technology, Banner shall advise JDS as to the facts and
circumstances surrounding the action. Banner shall defend said action if Banner
determines it is legally advisable and commercially reasonable to do so (taking
into account the likelihood of success and relative cost/benefits). However, should
Banner decide not to defend said action, JDS may request Banner to undertake such
defense using counsel of Banner’s choice (after conferring with JDS) at JDS’s
expense, and in this case, JDS shall pay all damages awarded as a result of the
action directly relating to the Products as well as expenses reasonably incurred by
Banner in maintaining such action, for example, reasonable internal personnel
costs; provided, however, that JDS shall have a right to reimburse itself and
deduct such damages and expenses from the Royalty Payments otherwise due to Banner
under Section 4.1(e). In the event a third party commences an action against Banner
for Intellectual Property infringement, or threatens to do so, for activities
pertaining to the making, using, or selling of Product(s) but primarily pertaining
to the Generally Applicable Technology, Banner shall advise JDS as to the facts and
circumstances surrounding the action, and the parties shall discuss and negotiate
in good faith the allocation between them of costs and expenses of any such defense
and/or counterclaim. Banner and JDS shall confer regarding strategy for any defense
maintained under this Section 12.4(c) but Banner shall be solely responsible for
the management and control of such action.
	 
	 	 	(ii) Except as set forth in Section 12.4(c)(i), the costs and expenses of any such
defense and/or counterclaim by Banner (including reasonable fees and expenses of
attorneys and other third parties) shall be shared equally by the parties and paid
in the same manner as Intellectual Property enforcement expenses pursuant to Section
12.4(a)(ii).

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	 	 	(iii) Each party shall execute all necessary and proper documents and take such
actions as shall be reasonably requested by the other to defend said action,
including being named as a co-plaintiff in the action and/or any counterclaim if
warranted, in accordance with the terms of this Section.
	 
	 	 	(iv) Except as provided in Section 12.4(c)(i), any damages award paid to third
parties as a result of an infringement action brought by any third party (whether by
way of settlement or otherwise) shall be shared equally by the parties. The parties
shall agree with respect to any settlement requiring payments by way of royalties or
otherwise that are unrelated to actual damages for past infringement.

	 	 	(d) Notwithstanding anything in this Section 12.4 to the contrary unless where JDS has
requested Banner to undertake actions for infringement, enforcement or defense pursuant to
Section 12.4(a)(i), 12.4(b)(i) or 12.4(c)(i), if JDS determines that the risks and/or costs
presented by the actions for infringement, enforcement or defense hereunder outweigh the
benefits of such actions, then JDS shall have the right, upon written notice to Banner if
given prior to the date of the close of discovery, to terminate this Agreement with respect
to the Product(s) which are the subject of such actions and JDS shall have no further
obligation to participate in or contribute to the cost of going forward with such actions,
provided, however that JDS shall participate in any damage award (whether by way of
settlement or otherwise) as provided under Section 12.4(c)(iv) subject to the following
limit (i) fifty percent (50%) of the greater of the amount of damages sought by or accrued
to the third party at the time of JDS triggering this provision; (ii) fifty percent (50%)
of the lowest good faith settlement offer by the opposing litigant that is acceptable to
JDS but that is unacceptable to Banner; or (iii) fifty percent (50%) of the actual award
paid by Banner, whichever is less. Promptly following such notice, the parties shall amend
this Agreement to remove the provisions affected by such termination and, thereafter,
Banner shall have unrestricted rights to commercialize the effected Product(s), including,
but not limited to, the right to offer to any third party exclusive rights to such
Product(s) in any dosage forms, in any dosage strengths and for any indications,
notwithstanding any provision of this Agreement to the contrary.
	 
	 	 	(e) If any actions for infringement, enforcement or defense in which JDS participates
pursuant to the terms of this Section 12.4 relates to the Products and other Banner
products, then the parties will discuss in good faith to determine an appropriate
allocation of costs and expenses of any such action and any damages payable by JDS.
	 
	 	 	(f) Banner shall provide JDS with information reasonably requested by JDS with respect to
any action contemplated by this Section 12, and Banner shall
promptly provide JDS with written notice and a reasonably detailed description of any
settlement offers by the third party.

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	 	 	(g) Effect of Opt Out Right. JDS’s obligations under this Section 12.4 are subject
to JDS’s Opt Out Right such that, if JDS has elected to exercise its Opt Out Right, then
JDS shall have no obligations or rights under this Section 12.4 to the extent that any
Intellectual Property infringement, enforcement or defense action is related solely to the
Valproic Acid VersatrolTM Product, provided however, that to the extent that any action
relates to both the Valproic Acid VersatrolTM Product and the Valproic Acid EnteriCareTM
Product, then JDS shall be obligated under this Section 12.4 in the same proportion that
the harm alleged in such action relates to the Valproic Acid EnteriCareTM Product.

Article 13. Miscellaneous.

13.1 Inspection. Either party and their respective representatives shall have the right,
at reasonable intervals, on at least ten (10) business days prior notice and during normal
business hours, to inspect the other party’s (or such party’s subcontractor provided that Banner
shall use reasonable commercial efforts to include substantially similar inspection rights with
respect to its third party packager) applicable areas of their performance, manufacturing,
laboratory, packaging and warehousing facilities used in the manufacture, packaging, storage,
testing, shipping and receiving of the Product(s) or its components. The frequency and extent of
routine inspections shall be no more than once per calendar year, unless upon just cause, or as
otherwise mutually agreed to by the parties. Any information learned through such inspection shall
be confidential in accordance with Section 10.

	13.2	 	Representations and Warranties.

	 	(a)	 	Banner Representations and Warranties. Banner represents and warrants that:

	 	 	 	(i) Products manufactured hereunder shall conform to the applicable Specifications;
	 
	 	 	 	(ii) Products shall be manufactured, tested, packaged and stored in compliance with
the Regulatory Approval and all Applicable Laws, and shall not be adulterated or
misbranded under any Applicable Law;
	 
	 	 	 	(iii) It does not, to its best knowledge, (A) employ an individual who has been
debarred by the FDA pursuant to 21 U.S.C. § 335a(a) or (b) (“Debarred Individual”)
to provide services in any capacity to a person or entity that has an approved or
pending drug product application, or an employer, employee or partner of such a
Debarred Individual or, (B) utilize a corporation, partnership or association that
has been debarred by FDA pursuant to 21 U.S.C. § 335a(a) or 21 U.S.C. § 335a(b)
(“Debarred Entity”) from submitting or assisting in the submission of a
drug
application, or an employee, partner, shareholder, member, subsidiary, or
Affiliate of a Debarred Entity.

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	 	 	 	(iv) As of the Commencement Date:

	 	 	 	(a) It has the right to grant the rights and licenses granted to JDS
hereunder;
	 
	 	 	 	(b) To its best knowledge, it is the owner of the Banner Intellectual
Property to the extent related primarily to the Product(s); and to its best
knowledge, there is no pending or threatened action, suit, proceeding or
claim by others challenging Banner’s rights in or to Banner Intellectual
Property to the extent related primarily to the Product(s);
	 
	 	 	 	(c) To its best knowledge, there is no pending or threatened action, suit,
proceeding or claim by others challenging the validity or scope of the
Banner Intellectual Property to the extent related primarily to the
Product(s);
	 
	 	 	 	(d) To its best knowledge, there is no pending or threatened action, suit,
proceeding or claim by others that the development, making, using or selling
of the Product(s) infringes or otherwise violates any patent or trade secret
rights of others; and
	 
	 	 	 	(e) To its best knowledge, there is no patent or patent application of
another which contains claims that dominate or may dominate any Banner
Intellectual Property to the extent related primarily to the Products.

For purposes of this Section 13.2(a), “best knowledge” shall mean those matters known to
Banner’s directors, officers, key employees or its legal counsel after due inquiry.

     (b) Mutual Representations and Warranties. Each of Banner and JDS represents
and warrants that:

(i) It has full corporate power and authority to enter into this Agreement and
consummate the transactions contemplated hereby;

(ii) It has such permits, licenses and authorizations of Governmental Bodies as are
necessary to own its respective properties, conduct its business and consummate the
transactions contemplated hereby; and

(iii) There are no agreements with third parties that conflict with or impair its
right to enter into this Agreement or to grant the rights or accept the obligations
hereunder.

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	 	 	(c) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BANNER AND JDS MAKE NO WARRANTY
OR REPRESENTATION, EXPRESS OR IMPLIED, CONCERNING “PRODUCT(S)” OR THEIR RESPECTIVE
PERFORMANCE UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO “PRODUCT(S).”
	 
	13.3	 	Dispute Resolution.
	 
	 	 	(a) Good Faith Negotiation. The parties agree that, before resorting to any formal dispute
resolution process concerning any dispute arising from or in any way relating to this
Agreement (a “Dispute”), they will first attempt to engage in good faith negotiations in an
effort to find a solution that serves their respective and mutual interests, including
their continuing business/professional relationship. If after thirty (30) days following
receipt of notice by one party from the other of a Dispute, the parties are unable to
resolve the Dispute, then within ten (10) business days following the end of such thirty
(30) day period, the parties shall each appoint a principal to personally review the facts
of the Dispute and seek to resolve the matter by means of direct discussion between the
appointed principals. Unless otherwise agreed in writing, the parties shall have five (5)
business days from the date the principals are appointed to begin the direct discussions
between them and ten (10) business days to resolve the Dispute by such direct discussions.
	 
	 	 	(b) Mediation. If the principals are not appointed, or the negotiations do not take place
within the time provided in Section 13.3(a), or if the negotiations do not conclude with a
mutually agreed upon solution within that time frame (or its agreed upon extension), the
parties agree to mediate any Dispute. If the parties cannot agree upon a mediator within ten
(10) days following the conclusion of their good faith negotiations or expiration of the
time within which to negotiate as provided in Section 13.3(a), then each shall select one
name from a list of mediators maintained by any bona fide dispute resolution provider or
other private mediator; the two selected shall then choose a third person who will serve as
mediator. The parties agree to appoint principals to participate in the mediation process,
including being reasonably present throughout the mediation session(s). The parties shall
have thirty (30) days within which to commence the first mediation session following the
conclusion of their good faith negotiations or expiration of the time within which to
negotiate as provided in Section 13.3(a). The parties further confirm their motivating
purpose in selecting mediation is to find a solution that serves their respective and mutual
interests, including their continuing business/professional relationship.
	 
	 	 	(c) Costs. The parties agree to share the mediator’s fees equally.

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	 	 	(d) Notice of Dispute. The notice of a Dispute shall be in writing. It shall provide
sufficient details of the Dispute to apprise the other party of the basis of the
disputant’s claims. The notice should include the invitation to begin negotiation, and
where unsuccessful, mediation.
	 
	 	 	(e) Litigation. Should the negotiations and mediations contemplated by this Section 13.3
fail to achieve a mutually acceptable resolution of the Dispute, either party may file a
lawsuit related to the Dispute. Except for disputes predominantly related to intellectual
property which may be brought in any jurisdiction at the sole discretion of the party
bringing the lawsuit, the party filing the lawsuit shall file it in the state or federal
judicial district where the other party’s principal U.S. executive offices are located.
	 
	 	 	(f) Injunctive Relief. Each party has the right before or during the negotiation and/or
mediation contemplated by this Section 13.3 to seek and obtain from a court of competent
jurisdiction equitable relief in the form of preliminary injunction to avoid irreparable
harm, maintain the status quo or preserve the subject matter of the Dispute.

13.4 Successors and Assigns. Neither party may assign this Agreement or assign or
subcontract any of its rights, duties or obligations hereunder without the express prior written
consent of the other party, which shall not be unreasonably withheld, except that Banner may
assign part or all of its responsibilities and obligations under this Agreement to one or more
wholly-owned subsidiaries, and except that either party may assign this Agreement and its rights,
subject to its obligations, hereunder in connection with the transfer of all or substantially all
of its business or assets, or in the case of its merger, consolidation, change of control or
similar transaction, provided that JDS may not assign this Agreement or any of its rights or
obligations hereunder to a Direct Competitor of Banner.

13.5 Entire Agreement. This Agreement and any attachments, appendices and exhibits which
are referenced herein set forth the entire agreement between the parties relating to the subject
matter contained herein, and supersede any prior agreement with respect to the subject matter
herein (written or verbal) between the parties. Neither this Agreement, nor any of its provisions,
may be modified, amended or waived except by a written agreement signed by the parties hereto

13.6 Severability. The provisions of this Agreement shall be deemed separate. Therefore,
if any part of this Agreement is rendered void, invalid or unenforceable, such rendering shall not
affect the validity and enforceability of the remainder of this Agreement unless the part or parts
which are void, invalid or unenforceable shall substantially impair the value of the whole
Agreement to either party.

13.7 Notices. Unless otherwise stated in this Agreement, any and all communications
required as provided for in this Agreement shall be in writing and sent by (a) Certified or
Registered Mail, postage prepaid, return receipt requested; (b) facsimile followed by a

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letter of confirmation; or (c) by an express overnight courier service, postage prepaid,
return receipt requested and addressed as set forth below. Notices shall be deemed given three (3)
days following mailing by Certified or Registered Mail, and one (1) day following the date sent by
facsimile or overnight courier.

Any notice to be given to Banner shall be addressed to:

Banner Pharmacaps Inc.

4125 Premier Drive

High Point, North Carolina 27265

Attention: President and CEO

With a copy (which shall not constitute notice) to;

Banner
Pharmacaps Inc.

4100 Mendenhall Oaks Parkway, Suite 301

High Point, NC 27265

Attention: Global Vice-President/Legal and Public Affairs

Any notice to be given to JDS shall be addressed to:

JDS Pharmaceuticals, LLC. The

Chrysler Building

405 Lexington Avenue

59th Floor

New York, New York 10174

Attention: Michael Satow

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

Cohen Tauber Spievack & Wagner, LLP

420 Lexington Avenue, Suite 2400

New York, New York 10170

Attention: Y. Jerry Cohen, Esq.

Either party may give written notice of a change of address, and after such notice has been
received, any notice thereafter shall be given to such party as provided above at such changed
address.

13.8 Headings. The headings used in this Agreement are for the convenience of the parties
only, and shall not be considered in interpreting or applying the provisions of this Agreement.

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

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13.10 Relationship of the Parties. The relationship of Banner and JDS established by
this Agreement is that of independent contractors, and nothing contained herein shall be construed
to (a) give either party any right or authority to create or assume any obligation of any kind on
behalf of the other or (b) constitute the parties as partners, joint venturers, co-owners or
otherwise as participants in a joint or common undertaking.

13.11 Survival. The following sections of this Agreement, and the definitions referenced
therein, as well as any other section necessary to interpret such sections shall survive
termination of this Agreement for any reason: Sections 1.1, 1.2, 7.1-7.7 but only to the extent
applicable to Product(s) supplied under this Agreement, Sections 9.5, 9.7, 10, 11.1-11.5, 12.1,
12.2, 12.3, 12.4, 13.2, 13.11 and 13.12.

13.12 Governing Law: Jurisdiction. This Agreement shall be governed and construed in all
respects by and under the laws of the State of North Carolina. The federal courts located in the
States of North Carolina and New York and courts of the States of North Carolina and New York shall
have non-exclusive jurisdiction to hear any and all disputes arising under or concerning this
Agreement.

[Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered, or caused to be duly
executed and delivered, this Agreement as of the day and year first above written.

	 	 	 	 	 
	 	BANNER PHARMACAPS INC.

 	 
	 	By:  	/s/ Roger E. Gordon
 	 
	 	 	Roger E. Gordon, Ph.D. President and CEO 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	JDS PHARMACEUTICALS, LLC

 	 
	 	By:  	/s/ Phillip M. Satow
 	 
	 	 	Phillip M. Satow  Chairman and CEO 	 
	 	 	 	 
	 

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