Document:

exv10w17

Exhibit 10.17

EXECUTION VERSION

AMENDED AND RESTATED PRODUCTS DEVELOPMENT AGREEMENT

     This Amended and Restated Products Development Agreement (this “Agreement”) is made
and dated as of December 29, 2006 (the “Effective Date”), and amended and restated as of
the 27th day of August, 2008, by and between Cornerstone Biopharma, Inc., a Nevada
corporation (“Cornerstone”), and Neos Therapeutics, L.P., a Texas limited partnership
(“Neos”) (Cornerstone and Neos are sometimes referred to herein individually as a “Party”
and collectively as the “Parties”).

     Whereas, Cornerstone desires to engage Neos to develop certain products (collectively and as
further defined below, “Products” and each individually a “Product”), each in the
form of an extended release liquid; and

     Whereas, Cornerstone and Neos desire that Cornerstone will prepare and prosecute with the
United States Food and Drug Administration (“FDA”) a new drug application or other
appropriate regulatory submission (each, an “NDA”) and other necessary or desirable
applications in connection with Products that are successfully developed hereunder and as provided
below; and

     Whereas, Cornerstone and Neos will, with respect to each Product that is subject of an
approved NDA and subject to the other terms hereof, enter into a separate Manufacturing Agreement
related to the manufacture of such Product in the form attached hereto as Exhibit “A” at or around
the time of such approval; and

     Whereas, Cornerstone, in consideration of this Agreement and Neos’s performance hereunder, has
forgiven all principal and interests amounts owed by Neos to Cornerstone under that certain Secured
Subordinated Promissory Note dated August 1, 2006, in the principal amount of $500,000.00; and

     Whereas, Cornerstone and Neos desire to define the obligations between the Parties as respects
the development, regulatory application submission process and manufacture of the Products.

     WHEREAS, Cornerstone and Neos previously entered into a Products Development Agreement (the
“Original Agreement”) on December 29, 2006; and

     WHEREAS, the Parties wish to amend and restate the Original Agreement;

     Now, therefore, in consideration of the premises and the representations, warranties,
covenants and agreements set forth hereby and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

 

 

     1. Products — Generally. The Parties agree that Neos will use its commercially
reasonable efforts to develop the following extended-release liquid Products to be sold by doctor’s
prescription only containing the following active pharmaceutical ingredients in accordance with the
terms hereof using Neos’ patent-pending Dynamic Time Release Suspension technology as provided
herein, with each of the following Products to be manufactured in a dosage to be agreed upon by the
Parties and with the same active ingredients as listed below or with active ingredients that are
suggested by Cornerstone and approved by Neos:

          a. [***] (which Product shall not be the subject of an abbreviated new drug application with
FDA based on equivalence with or comparability to the product sold under the proprietary name
[***], Application No. {***]) (sometimes referred to herein as the “First Product”);

          b. [***];

          c. [***]; and

          d. [***].

     2. Product Development.

          a. Development — Generally.

               i. Product Development Plans. The First Product Development Plan (hereinafter defined) and any
Subsequent Product Development Plan (hereinafter defined) shall include the following: Neos shall
use its commercially reasonable efforts to develop (and validate a method for the testing of) a
commercially viable subject Product (the “Development”) starting upon Cornerstone’s
request. Contingent upon the successful completion of the Development, Neos will produce an
exhibit batch (each, the “Exhibit Batch”) of the greater of a 1/10 scale of a batch of the
Product or 200 liters of the subject Product and place the Exhibit Batch on stability (the
“Stability Work”). Neos will use its commercially reasonable efforts to complete adequate
Stability Work on the applicable Product. If adequate Stability Work is completed successfully in
accordance with Neos’ stability protocol, Neos will manufacture a reasonable amount of the Product
designated by Cornerstone to be used in the Clinical Studies (defined below). If the Clinical
Studies are successfully completed for a Product, Neos shall use its commercially reasonable
efforts to validate its process for manufacturing the Product (the “Process Validation
Work”), including the manufacture of any lots reasonably necessary to complete the Process
Validation Work.

               ii. No Guarantee of Success; Repeated Steps; Additional Steps. Cornerstone understands, that:
(i) there is no guarantee that Neos will be successful in the Development with respect to the First
Product or with respect to any other Product; (ii) while Neos will use its commercially reasonable
efforts to achieve the Development with respect to the First Product or any other Product in
accordance with the applicable development plan, it may be

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

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necessary or desirable to repeat one or more of the steps contained in an applicable development
plan, and it may also be necessary or desirable to be perform additional steps in order to prepare
any Product for Clinical Studies. Neos may repeat such steps or perform such additional steps in
its reasonable discretion with the prior consent of Cornerstone, which consent may not be
unreasonably withheld. Neos understands that there is no guarantee that Cornerstone will be
successful in applying for an NDA or commercializing the First Product or any other Product.

               iii. Termination of Development Obligations. Neos shall have no obligation to develop any
Product for Cornerstone beyond the Exclusivity Period (defined below).

          b. Development of the First Product. Neos agrees to formulate and complete stability testing
and validation regarding the First Product in accordance with the outline of actions, processes and
procedures as provided by a product development plan on the First Product which the Parties agree
to use their respective reasonable efforts to complete within forty five (45) days from a request
from Cornerstone to begin drafting the plan (the “First Product Development Plan”). Once
completed, the First Product Development Plan shall be attached hereto as Appendix I. Neos agrees
to use its commercially reasonable diligent efforts to complete the milestones related to the
development of the First Product by the dates contained in such Appendix.

          c. Consecutive Development. The Products will be developed consecutively, not concurrently,
so that no two Products are in active development at the same time. However once the first Clinical
Study is successfully completed for a given Product, upon Cornerstone’s request, the development of
the next Product shall commence.

               i. First Product Successfully Developed. If the First Product is successfully developed in
accordance with the First Product Development Plan: (A) Cornerstone shall, in accordance with the
terms of Section 3 hereof, use its commercially reasonable efforts to prepare and successfully
prosecute, in Cornerstone’s name, a NDA with FDA on the First Product; and (B) Neos and Cornerstone
shall each use their commercially reasonable efforts to agree on a subsequent Product to be
developed by Neos hereunder.

               ii. First Product Not Successfully Developed. If the First Product is not successfully
developed in accordance with the First Product Development Plan, Cornerstone may elect to go
forward with the development and/or application approval with respect to Subsequent Products by
providing Neos with prompt written notice thereof, which notice must be delivered to Neos within
sixty (60) days after Neos’ notice to Cornerstone that the First Product cannot reasonably be
successfully developed in accordance with the First Product Development Plan. In the event that
Cornerstone does not timely provide such notice, this Agreement will terminate. In the event that
Cornerstone timely provides such notice, Neos and Cornerstone shall each use their commercially
reasonable efforts to agree on a subsequent Product to be developed by Neos hereunder.

          d. Development of Subsequent Product(s). If the First Product is successfully developed in
accordance with the First Product Development Plan or if Cornerstone provides notice to Neos in
accordance with Section 2.c.ii. hereof, Neos agrees to formulate and

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complete stability testing and validation regarding the subsequent Product chosen by
Cornerstone and Neos in accordance with the terms of Section 2.b.i. hereof. Such work by Neos
shall be performed in accordance with a Subsequent Product Development Plan (hereinafter defined)
for such subsequent Product. As used herein, the term “Subsequent Product Development
Plan” shall mean a plan for the development of a subsequent Product that is agreed on by the
Parties that is substantially in the form of the First Product Development Plan, but that takes
into account the specific characteristics of the subject Product to be developed and the issues and
challenges associated with the development of such subject Product. The Parties each agree to use
their commercially reasonable efforts to jointly develop and approve each Subsequent Product
Development Plan.

               i. Subsequent Product Successfully Developed. If a subsequent Product is successfully
developed after the Parties proceed with development based on the successful completion of the
first Clinical Study, in accordance with the applicable Subsequent Product Development Plan: (A)
Cornerstone shall, in accordance with the terms of Section 3. hereof, use its commercially
reasonable efforts to prepare and prosecute, in Cornerstone’s name, a NDA with FDA on the subject
subsequent Product; and (B) Neos and Cornerstone shall each use their commercially reasonable
efforts to choose another subsequent Product to be developed by Neos hereunder. Such chosen
subsequent Product shall be developed by Neos hereunder in accordance with a new Subsequent Product
Development Plan, which Subsequent Product Development Plan shall be developed and approved as
provided above in this Section 2.c.

               ii. Subsequent Product Not Successfully Developed. If a Subsequent Product is not successfully
developed in accordance with the applicable Subsequent Product Development Plan, Neos and
Cornerstone shall each use their commercially reasonable efforts to choose a subsequent Product to
be developed by Neos hereunder or, if the Parties agree or if the Parties fail to agree on a
subsequent Product, there shall be no further development obligations hereunder with respect to any
subsequent Product.

               iii. All Products. If the First Product is successfully developed in accordance with the terms
of the First Product Development Plan, the processes described in Sections 2.d.i. and 2.d.ii. above
shall be repeated (as provided herein) until each subsequent Product is the subject of a Subsequent
Product Development Plan.

          e. Exclusivity. During the License Term (as defined below), each Party agrees that it will
work exclusively with the other Party in developing (or attempting to develop) the Products for
sale in the United States in accordance with the terms of this Agreement until the earlier of the
termination of this Agreement unless earlier terminated (the “Exclusivity Period”). This
obligation shall not restrict in any way Cornerstone’s ability to engage third parties to assist
Cornerstone in performing its clinical development, regulatory or commercial activities related to
Products that are developed under this Agreement. This obligation of exclusivity shall commence on
the Effective Date for and shall apply to the First Product and for each of the other Products
identified as provided by Section 1 and expire for any Product if and when the Parties determine
not to continue development of that Product under this Agreement.

     3. Clinical Trials and Regulatory Filings. With respect to each Product that is
successfully developed beyond the first Clinical Study, in accordance with its product

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development plan, Cornerstone shall initiate the performance of Clinical Studies (hereinafter
defined) in connection with the First Product with a clinical research organization (each, a
“CRO”) that Cornerstone has contracted with to perform the Clinical Studies and that has
been jointly approved by the Parties in their respective reasonable discretion. Each contract
entered into with a CRO for each Clinical Study under or in connection with this Agreement shall be
between Cornerstone and such CRO (and Neos shall not be a party thereto), and each such contract
shall require the CRO to maintain such Clinical Studies, including the results thereof,
confidential. Further, with respect to the First Product, Cornerstone shall, as soon as reasonably
possible, enter into an agreement with a CRO for the Clinical Studies for the First Product and, as
soon as the Process Validation Work is completed and the first study successfully completed on the
First Product, if ever, authorize the Clinical Studies to begin in order that it is completed as
soon as reasonably possible. As used herein, the term “Clinical Studies” shall mean,
collectively and individually, a study and studies in which a Product is tested in humans in order
to confirm that a Product substantially meets its specifications or is otherwise acceptable to
Cornerstone in its reasonable discretion. Neos shall provide its reasonable assistance to a CRO in
connection with the Clinical Studies, including providing samples manufactured by Neos necessary
for such Clinical Studies. Cornerstone recognizes and agrees that Clinical Studies may have to be
repeated in connection with any Product and/or Regulatory Approvals (hereinafter defined),
Cornerstone shall, during the pendancy of the Clinical Studies on the First Product (or any other
Product, as applicable), begin assembling materials for a NDA for the Product. Cornerstone shall,
if Clinical Studies show that the First Product (or another Product) meets its specifications or is
otherwise acceptable to Cornerstone in its reasonable discretion, use its commercially reasonable
efforts to assemble to remainder of the materials and the application for such NDA. Neos shall have
the right to participate and consult in any work relating to regulatory filings related to any
Product at its cost and Neos shall provide reasonable assistance to Cornerstone, as provided in
Section 6. hereof, in connection with the chemistry, manufacturing and controls section of each
regulatory filing submitted in connection with a Product pursuant to the terms hereof. If the
Clinical Study shows that the First Product (or another Product) meets its specifications and is
otherwise acceptable to Cornerstone in its reasonable discretion, then Cornerstone shall move
forward with the submission and prosecution of the NDA, which Cornerstone shall use its reasonable
efforts to file and prosecute as soon as reasonably possible. Neos acknowledges that the continued
prosecution of an NDA and related commercialization activities are subject to the continued
generation of favorable data necessary for the NDA related to the Product as determined by
Cornerstone in its reasonable discretion. In connection with the foregoing, Cornerstone shall
determine, in its reasonable discretion, whether any Investigational New Drug Application
(“IND”), pre-IND meeting or other regulatory submissions, approvals or requirements are
reasonably necessary (all of which, together with each NDA on a Product, and the applications and
submissions in connection with each of the foregoing, are referred to herein collectively as
“Regulatory Approvals”) and arrange for the completion thereof, with the reasonable
assistance of Neos. All Regulatory Approvals shall be in the name of and owned by Cornerstone and
Cornerstone shall designate Neos as the manufacturer, and no other person or entity, in each
Regulatory Approval or any time thereafter so long as Neos is able and is approved by the FDA to
manufacture in accordance with the terms of the relevant Manufacturing Agreement the Product that
is the subject of a Regulatory Approval. Cornerstone agrees to use its commercially reasonable
diligent efforts to complete the milestones related to Regulatory Approval of the First Product by
the dates contained in the First Product Development Plan.

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     4. Manufacturing Agreement. A reasonable time prior to the approval of any NDA
submitted on a Product under this Agreement, Cornerstone and Neos will enter into a separate
Manufacturing Agreement related to the manufacture of such Product substantially in a form mutually
acceptable to the parties, which form the parties agree to negotiate in good faith within forty
five (45) days from the submission date of the applicable NDA. The Parties agree that they will
schedule, in their commercially reasonable discretion, the timing of the manufacture of the first
commercial lots of each Product that is the subject of a Manufacturing Agreement in order to allow
such Product to be commercially sold as soon as reasonably possible after approval of a NDA
hereunder. If Neos is unwilling or unable, subject to the terms of the applicable Manufacturing
Agreement, to enter into or perform all of its obligations under such a Manufacturing Agreement,
Cornerstone may elect to have Product made by a contract manufacturer (the “Contract
Manufacturer”) during the term of such unwillingness or inability, as applicable, pursuant to
the license grant in Section 7.d. hereof. The selection of the Contract Manufacturer shall be
subject to the approval of Neos, which shall not be unreasonably withheld as long as the Contract
Manufacturer meets reasonable commercial and industry standards, does not have a conflict of
interest in connection with Neos’ technology and executes a confidentiality and non-use agreement
with Neos that is acceptable to Neos. Cornerstone must make such election in writing (a
“Cornerstone Election”). In the event that Cornerstone makes such an election: (a) Neos
shall, upon Cornerstone’s request and at Cornerstone’s expense, provide reasonable technology
transfer assistance sufficient to enable Cornerstone or its designee to manufacture the Product;
(b) Neos shall provide Cornerstone and Contract Manufacturer with a license (as further described
in Section 7.d. below) to use all necessary Intellectual Property belonging to Neos as reasonably
necessary for Contract Manufacturer to manufacture the Product; (c) Cornerstone shall pay Neos
during the term of the license a royalty of the higher of (x) [***] of its Net Sales (defined
below) of the Product if a patent has not issued covering any material used in or process used for
the production of such Product; or (y) [***] of its Net Sales of the Product if a patent has
issued, has not been invalidated nor expired, and covers any material used in or process used for
the production of the Product; and (d) Cornerstone covenants that all transfers of the Product
shall be in bona fide arm’s length transactions to third parties (except that Cornerstone may
distribute a reasonable amount of samples of the Product solely to increase sales of the Product in
bona fide arm’s length transactions). As used in this Agreement, the term “Net Sales” shall
mean the gross amount invoiced for any sale of any Product by Cornerstone in a bona fide arm’s
length transaction, less the following allowable deductions to the extent specifically related to
the Product and actually taken or paid: (i) cash discounts and/or quantity discounts allowed;
credits and allowances for returns, rejections and recalls; (ii) costs incurred for freight,
insurance and transportation; (iii) quantity and other trade discounts, credits or allowances; (iv)
sales and use taxes and other similar taxes incurred and government mandated rebates; and (v)
reasonable accruals for estimated contract rebates and bid rebates, all of which shall be
determined in accordance with United States generally accepted accounting practices
(“GAAP”). In the event that Cornerstone provides a Cornerstone Election as provided above,
Cornerstone shall have no further rights or remedies against Neos with respect to the Product
except to fulfill its obligations to Cornerstone set forth in this Section 4.

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

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     5. Cornerstone Option on Products Outside of the United States. To the extent that
Neos desires, during the term of this Agreement, to develop any Product for sale outside of the
United States by a third party, Neos must first offer such development to Cornerstone by giving
Cornerstone written notice of the general business terms, including general financial terms,
territory and term of development, that Neos so intends or desires to pursue (“RFO
Notice”), so that Cornerstone may consider such offer and negotiate a complete development
agreement in such territory outside of the United States. Cornerstone shall, within a reasonable
period of time, not to exceed thirty (30) days after Cornerstone’s receipt of a RFO Notice, inform
Neos, that it does not wish to enter into such an agreement in such territory, in which case Neos
shall be free to enter into any such agreements under terms that are not materially more favorable
to the third party than those contained in the RFO Notice. Should Cornerstone notify Neos that is
desires to enter into an agreement containing the terms contained in the RFO Notice, it must
provide notice of such desire within a reasonable period of time, not to exceed thirty (30) days
after its receipt of the RFO Notice, and within thirty (30) days after such notice, the Parties
shall undertake good faith negotiations to conclude a development agreement. Neos shall not, during
the term of this Agreement, enter into an agreement with a third party related to a territory
outside of the United States for the development of any Product on terms that are materially more
favorable than those contained in the RFO Notice. Neos shall include in any such agreement with a
third party express prohibitions on marketing or selling any such product in the United States or
its territories.

     6. Payment for Development and Regulatory Work.

          a. Execution. Upon execution of this Agreement, all debt owing from Neos to Cornerstone shall
be forgiven, including, without limitation, all amounts owing (including principal and interest)
under that certain Secured Subordinated Promissory Note dated August 1, 2006, in the principal
amount of $500,000.00 (and Cornerstone’s liens in Neos’ property shall contemporaneously
terminate).

          b. Regular Payments. Neos, at its own expense, will develop the First Product up to an
including completion of the first Clinical Study in humans, which shall be a pilot study, i.e., a
clinical study not suitable to support submission of an NDA in and of itself without further
Clinical Studies (with each of the costs referenced in this sentence being collectively referred to
as the “Neos First Product Expenses”). The Neos First Product Expenses shall: (A) begin
after the effective date of this Agreement; (B) be approved by Cornerstone in advance, which
consent may not be unreasonably withheld or delayed; and (C) shall be evidenced by reasonable
documentation in accordance with GAAP (as applicable). After Neos has discharged its obligations
under the first two sentences of this Section 6.b., Cornerstone shall pay Neos, within thirty (30)
days after it receives an invoice from Neos in connection with its development efforts hereunder,
all direct, actual costs and expenses incurred by Neos plus ten
percent (10%) of those costs and expenses, plus $150 per hour for time spent by
scientific and other appropriate-level personnel.

          c. Milestone Payments. Cornerstone shall provide the following consideration and pay the
following milestone payments to Neos within ten (10) days of its

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receipt of notice that any of the below events have occurred with respect to the First Product and
each subsequent Product (and if any of such payment(s) is/are due, Cornerstone must have made the
preceding milestone payment(s)):

	 	 	 
	Milestone	 	Amount
	[***]
	 	[***]
	[***]
	 	[***]
	[***]
	 	[***]
	[***]
	 	[***]

For clarification, each of the foregoing milestone payments shall be due only once for each
Product, including the First Product and each subsequent Product.

     7. Intellectual Property.

          a. Neos Intellectual Property. Except as specifically provided by Section 7.b. below, as
between Neos and Cornerstone, all intellectual property owned by Neos or developed by Neos during
the term of this Agreement, including, without limitation, all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service marks and service mark
rights, service names and service name rights, inventions, processes, formulae, copyrights and
copyright rights, trade dress, business and product names, logos, slogans, trade secrets,
industrial models, processes, designs, methodologies, other proprietary information and related
documentation, technical information, manufacturing, engineering and technical drawings, know-how
and all pending applications for and registrations of patents, trademarks, service marks and
copyrights (collectively, “Intellectual Property”) shall remain and be the sole and
exclusive property of Neos. Further, except as specifically provided by Section 7.b. below, Neos
shall be the sole owner of all Intellectual Property, or any modifications or improvements thereto,
developed under or in connection with this Agreement, whether by Neos, Cornerstone or in
combination, Neos makes no representation or warranty with respect to the validity of any patent,
trademark, or copyright that may be granted with respect to any of its Intellectual Property.

          b. Cornerstone Intellectual Property. Cornerstone shall have exclusive rights to: any brand
name and trade mark(s) assigned by Cornerstone to Products; trade dress specifically associated
with Products that is developed by Cornerstone; and data generated from Clinical Studies and
pre-Clinical Studies and post-Regulatory Approval (but not the Intellectual Property of Neos
included therein), filings for Regulatory Approval (but not the Intellectual Property of Neos
included therein) and sales and marketing information. Cornerstone shall not distribute, market or
sell Products under Neos’ proprietary trademarks, trade names, service marks or use any of Neos’
copyrights, unless such permission is obtained in advance in writing. Cornerstone will not
distribute, market or sell the Product under any proprietary trademarks, trade names, service
marks, or copyrights to which it is not legally entitled. Intellectual Property

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

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independently developed by Cornerstone, without exposure to or knowledge of Neos’ Intellectual
Property as established by Cornerstone’s written records, during the term of this Agreement shall
remain the property of Cornerstone.

          c. Further Documentation. Both during the term of this Agreement and at any time thereafter,
the Parties agree to execute any documents reasonably requested by the other Party to effect the
above provisions of this Article 7.

          d. License Grant.

               i. Generally. As used herein, “License Term” shall begin on the Effective Date and,
unless earlier terminated as herein provided, shall end on the earlier of (A) the expiration or
termination of this Agreement, or (B) December 31, 2026. Neos grants Cornerstone an exclusive
license to its Intellectual Property only to the extent necessary to research, develop, make, have
made, offer for sale, sell Products in the United States and its territories, but such license
shall not exclude Neos. This license shall be on a Product-by-Product basis (but shall not begin
with respect to each Product, on a Product -by-Product basis until such Product is finally
determined in accordance with Section 1 hereof), provided that the right to make or have made
Products will not be in effect except as specifically provided in Section 4 hereof. The license
does not and will not, under any circumstance, be construed to extend beyond the Products.
Accordingly, the license shall be irrevocable for the term thereof for any Product that is the
subject of an NDA submission by Cornerstone or its successors, licensees or assigns and shall
terminate with respect to any Product that is abandoned prior to filing an NDA submission.
Cornerstone will have the right to grant sublicenses under the licenses from Neos with Neos’ prior
written consent, which consent may not be unreasonably withheld, except the license to manufacture
or have manufactured the Product may only be sublicensed to a Contract Manufacturer and only as
specifically provided by Section 4 and subject to a Contract Manufacturer Agreement (hereinafter
defined). The grant of any such sublicense hereunder will not relieve Cornerstone of its
obligations under this Agreement. Cornerstone shall have the right to enforce the Intellectual
Property against third party infringement in the United States and its territories only to the
extent that such Intellectual Property infringement is on a Product and to retain any damages or
settlements resulting from such enforcement, [***]. Neos shall reasonably cooperate in any such
action and Cornerstone shall reimburse Neos for its reasonable costs incurred in providing such
cooperation.

               ii. Contract Manufacturer Agreement. Should Cornerstone properly make a Cornerstone
Election, Cornerstone shall enter into a written sublicense and manufacturing agreement with the
Contract Manufacturer, subject to Section 4 hereof (the “Contract Manufacturer Agreement”)
that is reasonable acceptable to Neos. Cornerstone shall indemnify and hold harmless Neos from all
third-party claims, judgments, and expenses in connection with any breach of the Contract
Manufacturer Agreement by Contract Manufacturer to the extent that Cornerstone participated in or
had knowledge of and could have prevented the breach by Contract Manufacturer. The Contract
Manufacturer Agreement shall include the following provisions:

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

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                    A. that the use of Neos’ technology shall be restricted to that necessary to manufacture the
Product in the United States for the term of the Contract Manufacturer Agreement (and for no other
purpose);

                    B. that all intellectual property developed under or in connection with the Contract
Manufacturer Agreement and/or Neos’ Intellectual Property shall be the sole property of Neos,
unless any invention thereof or contribution thereto by Cornerstone or Contract Manufacturer is
independent, as documented by competent written records, of the intellectual property developed
under or in connection with the Contract Manufacturer Agreement and/or Neos’ Intellectual Property;

                    C. that Contract Manufacturer must keep and maintain adequate financial records in accordance
with GAAP which contain information that is reasonably accessible to or controlled by Contract
Manufacturer, which financial records shall be available for review by Cornerstone on reasonable
notice to Contract Manufacturer and shall be subject to audit by Cornerstone;

                    D. that such license shall expire contemporaneously with the termination of the Exclusivity
Period;

                    E. that Neos’ Intellectual Property shall only be used in facilities that meet cGMP standards;
and

                    F. that New York governing law shall apply.

     8. Confidential Information.

               i. Definitions. Confidential Information. Confidential information shall include all such
information, in whole or in part, that a Party (each, a “Disclosing Party”) furnishes,
demonstrates, presents, discusses, whether affixed to a tangible medium or not to another Party
(each, a “Receiving Party”) or such Receiving Party’s representatives, whether such
information is furnished before, concurrently with or after this Agreement, together with analyses,
compilations, studies, notes of conversations or other documents prepared by a Receiving Party or
such Receiving Party’s representatives that contain or otherwise reflect such information (the
“Confidential Information”). Such Confidential Information may include, but is not limited
to, ideas, know-how, procedures, methodologies or techniques, analysis, designs, inventions,
patents, patent applications, specifications or documentation whether written or not.

               ii. Non-Confidential Information. The following information shall not be deemed Confidential
Information subject to this Section of this Agreement (the “Non-Confidential Information”):

                    A. information that is or becomes generally available to the public other than a result of
disclosure by a Receiving Party or such Receiving Party’s representatives;

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                    B. information that was available to a Receiving Party or such Receiving Party’s
representatives on a non-confidential basis prior to its disclosure by a Disclosing Party or such
Disclosing Party’s representatives;

                    C. information that becomes available to a Receiving Party or such Receiving Party’s
representatives on a non-confidential basis from a person (other than a Disclosing Party or such
Disclosing Party’s affiliates) who is not otherwise obligated to maintain such information in
confidence;

                    D. information that a Receiving Party can show was already independently developed by and in
the possession of a Receiving Party at the time of the disclosure hereunder; or

                    E. information that, before or after disclosure hereunder, is lawfully acquired by a Receiving
Party from a third party who has no obligation directly or indirectly with respect thereto.

          b. Restrictions on and Scope of Use. Each Party shall not directly or indirectly disclose,
display, provide, transfer or otherwise make available all or any part of the other Party’s
Confidential Information to any person or entity at any time, unless such Party has received prior
written permission from the other Party. Each Receiving Party shall not make copies of a Disclosing
Party’s Confidential Information or any portion thereof except as necessary to comply with the
terms of this Agreement. A Receiving Party shall not provide access to a Disclosing Party’s
Confidential Information to third parties, including consultants and independent contractors,
without receiving prior written consent from such Disclosing Party. Each Receiving Party shall not
at any time incorporate all or any portion of the other Party’s Confidential Information into any
other work, presentation or product without the express prior written approval of such other Party.
Each Receiving Party shall not use any portion of the other Party’s Confidential Information
outside the scope of this Agreement, Each Party agrees that it shall be responsible for any breach
of this Agreement by its representatives.

          c. Return of Information. Each Receiving Party agrees that, upon request of the Disclosing
Party, such Receiving Party shall return to such Disclosing Party all copies of the Disclosing
Party’s Confidential Information and all notes, memoranda or analysis relating thereto. In
addition, upon the request of the Disclosing Party, the Receiving Party shall erase, delete or
destroy all notes, documents, electronic mail, magnetic media or other computer storage, including
system backups, which contain any of the Disclosing Party’s Confidential Information and shall
certify same in writing to the Disclosing Party.

          d. Acknowledgments. Cornerstone acknowledges that Neos has superior rights and/or owns in
whole or in part the rights, title and interest in and to all Intellectual Property rights
including, but not limited to, all patents, trademarks, copyrights and trade secrets relating to
any ideas, methodologies, protocols, procedures or techniques that are a result of any meetings or
disclosure of Confidential Information between the Parties, subject to the rights of the
Cornerstone under Section 7.b. Neos and Cornerstone acknowledge and reaffirm their respective
obligations under that certain Confidentiality Agreement between the Parties dated March 17, 2006
(the “CA”), and the Parties each confirm that any and all sensitive business

11

 

information shared between the Parties was shared subject to the terms of the CA, which CA
shall remain in full force and effect. The confidentiality obligations hereunder expand upon and do
not diminish the Parties’ rights and obligations under the CA.

          e. Use of Information. Notwithstanding the foregoing provisions of Article 8 and the CA, each
Party may disclose Confidential Information belonging to another Party to the extent such Party
determines in good faith that disclosure is reasonably necessary to:

               i. prosecute or defend litigation relating to this Agreement or such Party’s rights or
obligations hereunder;

               ii. exercise its rights hereunder provided such disclosure is covered by terms of
confidentiality similar to those set forth herein;

               iii. file, pursue or maintain an IND, NDA or other regulatory filings or approvals necessary
or appropriate in connection with the development or commercialization of one or more Products; and

               iv. to evidence, on a confidential basis, that Neos’ Intellectual Property is effective as
shown in data generated from Clinical Studies and pre-Clinical Studies and post-Regulatory
Approval.

In the event a Party shall deem it reasonably necessary to disclose Confidential Information
belonging to another Party pursuant to this 8.e., the disclosing Party shall to the extent possible
give reasonable advance written notice of such disclosure to the other Party and take reasonable
measures to ensure confidential treatment of such information.

          f. SEC Filings and Other Disclosures. A Party may disclose the terms of this Agreement (i) to
the extent required, in the reasonable opinion of such Party’s legal counsel, to comply with
applicable laws, including the rules and regulations promulgated by the United States Securities
and Exchange Commission; (ii) to the extent required, in the reasonable opinion of such Party’s
legal counsel, to comply with other applicable governmental laws and regulations; and (iii) in
connection with a prospective acquisition of, merger by or financing for such Party, to prospective
acquirers or merger candidates or to existing or potential investors, provided that prior to such
disclosure each such candidate or investor shall be agree in writing to be bound by obligations of
confidentiality and non-use no less restrictive in scope than those set forth in this Article 8. If
a Party discloses this Agreement or any of the terms hereof in accordance with clause (i) or clause
(ii) above, such Party shall, at its own expense, seek such confidential treatment of portions of
this Agreement or such terms, as may be reasonably requested by the other Parties.

          g. Compelled Disclosure. In the event that a Receiving Party or anyone to whom such Receiving
Party or any of such Receiving Party’s representatives transmits the Disclosing Party’s
Confidential Information becomes legally compelled to disclose any of such Disclosing Party’s
Confidential Information, the Receiving Party will provide the Disclosing Party with prompt notice
so that the Disclosing Party may have the opportunity to seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that
such protective order or other remedy is not obtained, or that the

12

 

Disclosing Party waives compliance in writing with the provisions of this Agreement, the
Receiving Party or the Receiving Party’s representatives will furnish only that portion of the
Disclosing Party’s Confidential Information that is legally required to be disclosed (by judicial
or similar process that would subject the Receiving Party or the Receiving Party’s representatives
to contempt or similar penalty for failure to disclose) and the Receiving Party shall exercise its
best efforts to assure that, before and after a legally required disclosure, the disclosed
Disclosing Party’s Confidential Information shall remain as confidential as possible.

     9. Regulatory Environment. The Parties specifically acknowledge that Neos is
regulated by the U.S. Food and Drug Administration, the U.S. Drug Enforcement Administration, the
Environmental Protection Agency, the Occupational Safety and Health Administration, the Federal
Trade Commission, as well as other federal agencies and ancillary state authorities (hereinafter
referred to individually and collectively as “Federal or State Regulatory Authorities”).
The Parties further acknowledge that each of these Federal or State Regulatory Authorities has the
authority to impose restrictions on Neos’ operations that could result in the commercial
infeasibility of the objectives of this Agreement. Such restrictions may be the result of statutory
or regulatory change, changes in non-regulatory guidances and policies issued by such federal or
state regulatory authorities, or enforcement actions, all of which are outside of Neos’ and
Cornerstone’s control. The regulatory environment under which Neos operates, including current
statutory and regulatory requirements, guidances, and policies, as well as any changes to such
statutory and regulatory requirements, guidances, and policies promulgated or otherwise made
effective after the date of execution of this Agreement are hereinafter referred to as the
“Regulations.” Neos warrants that, as of the date of execution of this Agreement, it knows of no
current impediments under the aegis of such Regulations to successful completion of the objectives
of this Agreement.

     10. Term/Termination.

          a. Term. Unless sooner terminated pursuant to the terms hereof, this Agreement shall remain
in full force and effect until December 31, 2026.

          b. Termination.

               i. Breach. This Agreement may be terminated upon written notice by a Party to another Party
that such other Party has materially breached its obligations to under this Agreement (each, a
“Breach Notice”), with each Breach Notice specifically describing the alleged breach by the
receiving Party of its obligations under this Agreement and why such alleged breach is material, if
the receiving Party fails to materially cure the alleged breach described in the applicable Breach
Notice within sixty (60) days of its receipt of such applicable Breach Notice, except for
non-payment which shall have a ten (10) day cure period, provided, however, that in the event of a
good faith dispute with respect to the existence of a material breach or cure thereof, the sixty
(60) day or ten (10) day, as applicable, cure period shall be tolled until such time as the dispute
is resolved pursuant to Section 11. hereof. Termination for breach shall not be a non-breaching
Party’s sole remedy against the breaching Party.

               ii. Regulatory. This Agreement may be terminated upon written notice by either Party to the
other that Federal or State Regulatory Authorities with jurisdiction

13

 

over a Party and the Products has effected, or will effect at a time certain, changes to the
Regulations or have instituted one or more enforcement actions that can, in the determination of
the relevant Party, be reasonably expected to result in the commercial infeasibility of the
objectives of this Agreement.

               iii. Bankruptcy. This Agreement may be terminated by any Party if (i) the other Party hereto
applies for or consents to the appointment of a custodian, receiver, trustee, or liquidator of all
or a substantial part of its assets, or makes a general assignment for the benefit of creditors, or
(ii) the other Party hereto files, or submits, a petition or answer seeking an arrangement with its
creditors under any bankruptcy or insolvency law or proceeding, or (iii) any order, judgment or
decree is entered against the other Party hereto, without the application, consent or approval of
such Party appointing a custodian, receiver, trustee or liquidator or a substantial part of its
assets or approving a petition seeking reorganization of such Party and such order, judgment, or
decree shall continue unstayed and in effect for any period of sixty (60) days, or (iv) any Party
hereto fails to remove an involuntary petition in bankruptcy filed against it within forty five
(45) days of the filing thereof, or (v) any order for relief is entered against any other Party
hereto under the United States Bankruptcy Code. All rights and licenses granted under or pursuant
to this Agreement by Neos are, and will otherwise be deemed to be, for purposes of Section 365(n)
of the U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section
101 of the U.S. Bankruptcy Code, The Parties agree that the Cornerstone, as a licensee of such
rights under this Agreement, will retain and may fully exercise all of its rights and elections
under the U.S. Bankruptcy Code.

               iv. Commercial. This Agreement may be terminated upon written notice by Cornerstone to Neos
if Cornerstone determines that continued investment in the development or commercialization of the
Products is not commercially advisable, which notice must be sent immediately after Cornerstone
makes such a determination. In the event that Cornerstone terminates this Agreement pursuant to the
terms of this Section l0.b.iv. Neos shall have no further obligations to Cornerstone hereunder and
Cornerstone shall transfer ownership to Neos of all NDAs applied for (but not received) hereunder
in connection with each Product and all data generated in connection with Products, including,
without limitation, data from Clinical Studies and pre-Clinical Studies, all of which shall be free
and clear of all liens and encumbrances. In addition, Cornerstone shall, from time to time, deliver
all documents and other recordings, whether electronic or otherwise, related to any and all of the
foregoing, and execute any and all reasonable instruments, documents and things as reasonably
requested by Neos from time to time to evidence Neos’ sole ownership of each of the foregoing.

               v. Force Majeure. The Parties agree that in the event of a Force Majeure (hereinafter
defined) which renders it impossible for a Party (the “FM Party”) to perform its
obligations under this Agreement, the other Party (the “non-FM Party”) may terminate this
Agreement by providing the FM Party with written notice identifying such Force Majeure (hereinafter
defined) (a “FM Notice”), which FM Notice shall specify the non-FM Party’s assertion that
such Force Majeure (hereinafter defined) will render it impossible for the FM Party to perform its
obligations under this Agreement, but such termination shall only be effective if the FM Party
fails to materially perform its obligations under this Agreement as

14

 

specified in the applicable FM Notice within [***] days after the FM Party’s receipt of such FM
Notice. Neither Party shall be liable or responsible for any Force Majeure. As used herein, the
term “Force Majeure” shall mean any delays and/or defaults hereunder due to strikes, riots, acts of
God, shortages of labor or materials, war, governmental laws, regulations or restrictions, or any
other cause whatsoever beyond the reasonable control of a Party.

          c. Separate Agreements. In the event that this Agreement is terminated by either Party
pursuant to Section l0.b. above, the Parties respective rights and obligations hereunder shall
terminate except for those Surviving Obligations (hereinafter defined). However, any such
termination shall have no effect on any Manufacturing Agreement entered into under or in connection
with this Agreement, each of which shall be a separate and apart from this Agreement.

          d. Damage Limitation. No Party shall be liable to the other Party for any indirect, special,
incidental, punitive or consequential damages in connection with any breach of this Agreement.
Notwithstanding the foregoing, there shall be no limitation as to the foregoing damages in
connection with a willful breach of this Agreement or in connection with the misappropriation or
infringement of a Party’s Intellectual Property.

     11. Dispute Resolution. Any dispute under or related to this Agreement shall be
settled by non-binding mediation followed, if necessary, by binding arbitration.

          a. Mediation. Any dispute, controversy or claim arising out of or related to this Agreement,
or the interpretation, application, breach, termination or validity thereof, which claim would, but
for this provision, be submitted to arbitration shall, before submission to arbitration, first be
mediated through non-binding mediation conducted by the American Arbitration Association (the
“AAA”) in accordance with Commercial Arbitration Rules and Mediation Procedures (Including
Procedures for Large, Complex Commercial Disputes) (the “ADR Rules”), except where that
procedure conflicts with these provisions, in which case these provisions control. If the AAA is
not in existence at the time of such dispute, the Parties shall agree upon a method for mediation
or an alternate party to conduct mediation, as applicable. The mediation shall be conducted in
Chicago, Illinois and shall be attended by an individual or individuals from each Party with
authority to resolve the dispute.

               i. Mediator. The mediator shall be neutral, independent, disinterested and shall be selected
from a professional mediation firm.

               ii. Selection of Mediator. The Parties shall promptly confer in an effort to select a mediator
by agreement. In the absence of such an agreement, within ten (10) days of initiation of the
mediation, the mediator shall be selected by AAA.

               iii. Mediation Procedure. The mediator shall confer with the Parties to design procedures to
conclude the mediation within no more than forty five (45) days after initiation. Under no
circumstances may the commencement of arbitration above be delayed more than forty five (45) days
by the mediation process specified herein absent contrary agreement of the Parties.

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

15

 

               iv. Effect of Mediation. Each Party agrees not to use the period or pendency of the
mediation to disadvantage the other Party, procedurally or otherwise. No statements made by either
side during the mediation may be used by the other or referred to during any subsequent
proceedings. Notwithstanding anything to the contrary in this Section 1l.a., each Party has the
right to pursue provisional relief from any court, such as attachment, preliminary injunction or
replevin, to avoid irreparable harm, maintain the status quo, or preserve the subject matter of the
arbitration, even though mediation has not been commenced or completed.

          b. Arbitration. Should the Parties not settle a dispute pursuant to mediation in accordance
with Section 11.a, above, any such dispute, controversy or claim arising out of or related to this
Agreement, or the interpretation, application, breach, termination or validity thereof, shall be
resolved through binding arbitration conducted by the AAA in accordance with the ADR Rules, except
where that procedure conflicts with these provisions, in which case these provisions control. The
Parties also agree that the AAA Optional Rules for Emergency Measures of Protection shall apply to
the proceedings. If the AAA is not in existence at the time of such dispute, the Parties shall
agree upon a method for arbitration or an alternate party to conduct arbitration, as applicable.
The arbitration shall be conducted in Chicago, Illinois.

               i. Initiation of Arbitration and Selection of Arbitrator. Upon the unsuccessful termination of
a mediation conducted in accordance with Section 11.a. above, a Party shall notify the other Party
that it wishes to proceed with arbitration of the matters mediated in such mediation. The Parties
shall agree upon an arbitrator within ten (10) business days after receipt by the other Party of
such notice. Should the Parties not agree upon an arbitrator within the ten (10) business day
period, then the Parties or any one of them may immediately, by petition to the AAA, or its
successor, request the appointment of three (3) persons, each of whom shall be qualified to serve
as an arbitrator, and none of whom shall have any interest in or be in any way affiliated with or
related to any Party as a stockholder, officer, employee or agent of a relative of any such person.
From the three (3) persons thus appointed, each Party shall, within fifteen (15) days after both
Parties’ written receipt of such appointment, strike one (1) name, the Party who initiated the
arbitration striking first, The remaining person shall act as the arbitrator. If any Party shall
fail or refuse within the time provided to strike from the list of the three (3) persons appointed
by the court as set forth above, the other Party shall proceed to select the third arbitrator from
said list, Notwithstanding and in addition to anything else contained in this Agreement, the
arbitrator(s) shall be chosen from a class of disinterested experts qualified by education,
training and/or experience to resolve the particular issue in dispute in an informed and efficient
manner, By the way of illustration and not limitation, if the issue in dispute pertains to how a
transaction shall be treated under accounting principles, then the arbitrator(s) shall be certified
public accountant(s) with at least five (5) years experience or, if the issue in dispute pertains
to proper manufacturing procedures, then the arbitrator shall have at least ten (10) years
experience in business similar to that of Neos. In the event the American Arbitration Association,
or its successor, is requested to designate an arbitrator or arbitrators as aforesaid, and declines
to do so, then the entire issue to be arbitrated may be submitted by either Party to the American
Arbitration Association, or its successor, for binding arbitration.

               ii. Arbitration Procedure. After an arbitrator has been appointed as provided in Section
ll.b.i. above, the arbitrator shall hold such meetings as a Party may

16

 

reasonably request and at such meetings hear and consider any evidence that a Party desires to
present. Within thirty (30) days after the hearing concludes, the arbitrator shall make his or
determination.

               iii. Determinations Binding. All determinations made by the arbitrator shall be in writing and
signed. Such written determinations shall be in all respects final. No Party shall have any right
to appeal therefrom to the courts or otherwise, and judgment upon the determination may be entered
in any court of competent jurisdiction.

               iv. Fees and Expenses. The fees and expenses of a mediator or an arbitrator hereunder shall be
borne equally between the Parties. Any fees and expenses charged by the AAA shall be borne equally
between the Parties.

     12. Indemnification.

          a. By Cornerstone. Cornerstone hereby agrees to indemnify and hold Neos harmless from and
against any and all actions, suits, proceedings, claims, losses, liabilities, damages and expenses
(including attorneys’ and experts’ fees and sums reasonably expended in investigation and
settlement of litigation, pending or threatened) arising out of or in connection with third party
claims resulting from: (i) any breach by Cornerstone of any term, provision, covenant, agreement,
representation or warranty contained herein; or (ii) the willful or knowing infringement by
Cornerstone of a third party’s intellectual property rights or misappropriation of any trade secret
related to the Product, including, without limitation, patents, trademarks and/or copyrights, in
connection with this Agreement or the performance of Cornerstone’s obligations hereunder except to
the extent arising out of or in connection with the willful or knowing infringement by Neos of a
third party’s foregoing intellectual property rights.

          b. By Neos. Neos hereby agrees to indemnify and hold Cornerstone harmless from and against any
and all actions, suits, proceedings, claims, losses, liabilities, damages and expenses (including
attorneys’ and experts’ fees and sums reasonably expended in investigation and settlement of
litigation, pending or threatened) arising out of or in connection with (i) any breach by Neos of
any term, provision, covenant, agreement, representation or warranty contained herein or (ii) the
willful or knowing infringement of any patent or misappropriation of any trade secret by Neos in
connection with this Agreement or the performance of Neos’ obligations hereunder except to the
extent arising out of or in connection with the willful or knowing infringement by Cornerstone of a
third party’s patent rights or misappropriation of any trade secret.

          c. Procedure. Upon the occurrence of any event giving rise to a right to seek
indemnification hereunder, the Party seeking indemnification shall give the indemnifying Party
written notice of such claim, action or proceeding within ten (10) days after it becomes known to
such Party, provided, however, that the failure to give such notice shall not relieve the
indemnifying Party of its obligations to indemnify unless such failure materially and adversely
affects the defense of such action. The indemnifying Party shall, within ten (10) days after
receipt of such notice, notify the other Party as to whether or not it intends to take over the
defense of such action, failing which, the Party seeking indemnification shall be entitled to take
over the defense of the action. Upon proper notification by the indemnifying Party of its

17

 

intention to defend the claim, the indemnifying Party shall engage counsel reasonably
satisfactory to the indemnified Party to assume the investigation and defense of the claim, and
shall keep the indemnified Party and its counsel currently informed as to all material aspects of
the claim and its investigation and defense. The indemnified Party may, in such case, engage
counsel to assist in the investigation and defense of the claim, but shall not be entitled to
reimbursement for any expenses related to the engagement of such counsel. If the indemnifying Party
elects not to assume the investigation and defense of the claim, or fails to make any election
within the time period herein provided, or if in the reasonable opinion of counsel to the
indemnified Party, the indemnified Party has available to it defenses which are contrary to the
interests of the indemnifying Party in any such action, then the indemnified Party shall be
entitled to engage its own counsel for such investigation and defense, and shall be entitled to the
full indemnification therefor.

     13. Representations and Warranties.

          a. Authority. Each Party represents and warrants that as of date hereof, it has the full
right, power and authority to enter into this Agreement and that this Agreement has been duly
executed by such Party and constitutes a legal, valid and binding obligation of such Party,
enforceable in accordance with its terms.

          b. Duly Organized.

               i. Neos. Neos represents and warrants that it is duly organized and validly existing as a
limited partnership in good standing under the laws of Texas, with power to conduct any lawful
business activity.

               ii. Cornerstone. Cornerstone represents and warrants that it is duly organized and validly
existing as a corporation in good standing under the laws of Nevada, with corporate power to
conduct any lawful business activity.

          c. Intellectual Property. Neos has the full right and power to grant the licenses set forth
in Article 7. Neos is not a party to any outstanding agreements that are inconsistent with the
provisions of this Agreement. Each of the patents in the Intellectual Property has been prosecuted
in a diligent and professional manner. None of such patents (i) is subject to a pending
interference action, opposition action, re-examination proceeding, litigation or other similar
action by a Third Party challenging such patents or patent applications, (ii) has been abandoned,
(iii) has been asserted to be invalid or unenforceable in a written communication to Neos or (iv)
to the best of Neos’ knowledge, is the subject of an on-going unauthorized use, infringement or
misappropriation claim by a Third Party.

          d. Disclaimer of Warranties. EXCEPT AS SET FORTH ABOVE, NEOS AND CORNERSTONE MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH
RESPECT TO THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.

18

 

     14. Cornerstone Change of Control. In the event that Cornerstone or the First Product
experiences a Change of Control (defined below), during the License Term, then [***]. Further,
Cornerstone shall, during said term, promptly inform Neos of any transaction or series of
transactions results in a Change of Control. As used herein, the term Change of Control shall mean
that any of the following occur: (a) (i) ownership of more than fifty percent (50%) of the First
Product is transferred by Cornerstone to a third party; or (ii) Cornerstone exclusively licenses
its rights to the First Product to a third party; and (b)(i) there shall have been consummated: (A)
any merger of Cornerstone wherein Cornerstone is not the continuing or surviving entity or pursuant
to which shares of Cornerstone’s common stock or similar ownership interests would be converted to
cash, securities or other property, other than a merger of Cornerstone wherein the holders of
Cornerstone’s common stock or other similar ownership interest immediately prior to the merger
collectively have a majority ownership of common stock or similar ownership interests of the
surviving entity immediately after the merger; (B) any sale, lease, exchange or transfer (in one
transaction or a series of related transactions) of all, or substantially all, of Cornerstone’s
assets; (ii) the owners of Cornerstone approve a plan or proposal for the liquidation or
dissolution of Cornerstone; or (iii) any person or group (as that term is used in Rule 13d-5 of the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”)), that is not on the
date of this Agreement a beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act) of
more than fifty percent (50%) of Cornerstone’s outstanding common stock, shall become the
beneficial owner (within the meaning of Rule 13d-3 of the Exchange Act) of more than fifty percent
(50%) of Cornerstone’s outstanding common stock.

     15. Notices. Any and all notices, elections, demands, requests and responses thereto
permitted or required to be given under this Agreement shall be in writing, signed by or on behalf
of the Party giving the same, and shall be deemed to have been properly given and shall be
effective and deemed delivered upon being personally delivered or delivered by nationally
recognized courier such as Federal Express which maintains a record of receipt and delivery, or
three (3) days after being deposited in the United States mail, postage prepaid, registered or
certified with return receipt requested, to the other Party at the address of such other Party set
forth below or at such other address within the continental United States as such other Party may
designate by notice specifically designated as a notice of change of address and given in
accordance herewith; provided, however, that the time period in which a response to any such
notice, election, demand or request must be given shall commence on the earlier of the date of
actual or deemed receipt thereof; and provided further that no notice of change of address shall be
effective until the earlier of the date of actual or deemed receipt thereof. Personal delivery to a
Party or to any officer, agent or employee of such Party at said address shall constitute receipt.
Rejection or other refusal to accept or inability to deliver because of changed address of which no
notice has been received shall also constitute receipt. Any such notice, election, demand, request
or response shall be addressed as follows:

	 	 	 	 	 
	 

	 	If to Neos, to:
	 	Neos Therapeutics, L.P.
	 

	 	 	 	2940 N. Hwy. 360

Grand Prairie, Texas 75050

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

19

 

	 	 	 	 	 
	 

	 	If to Cornerstone, to:
	 	Cornerstone Biopharma, Inc.
	 

	 	 	 	2000 Regency Parkway, Suite 255

Cary, North Carolina 27511

     16. Continuing Obligations. The termination or expiration of this Agreement shall not
relieve the Parties of any obligations accruing prior to such termination, and any such termination
shall be without prejudice to the rights of either Party against the other. The provisions of
Sections 7 and 8 shall survive any termination or expiration of this Agreement (with the foregoing
referred to herein as the “Surviving Obligations”).

     17. Relationship between the Parties. Neos and Cornerstone acknowledge that they are,
and shall at all times remain, independent contractors. Cornerstone and Neos and their agents,
servants, and employees shall under no circumstances be deemed agents or representatives of each
for any purpose whatsoever, unless otherwise agreed to in writing, and Neos and Cornerstone shall
have no authority to enter into any contracts or commitments in the name or on behalf of each other
or to bind the other in any way. No Party hereto is or shall be deemed to be a franchisee of any
other Party hereto, and each covenants and agrees not to make any representation to any person,
express or implied, to the contrary.

     18. Severability. The Parties agree that each of the provisions included in this
Agreement is separate, distinct and severable from the other and remaining provisions of this
Agreement, and that the invalidity or unenforceability of any Agreement provision shall not affect
the validity or enforceability of any other provision or provisions of this Agreement.
Notwithstanding the foregoing, if from any circumstances whatsoever fulfillment of any term or
provision of this Agreement shall involve transcending the limit of validity of any applicable law
with regard to obligations of like character, then ipso facto the obligation to be fulfilled shall
be reduced to the limit of such validity and such obligation shall be fulfilled to the limit of
such validity.

     19. Assignment. This Agreement and the rights and obligations of Cornerstone and Neos
hereunder may not be assigned by either Party in whole or in part without the prior written consent
of the other Party, which consent may not be unreasonably withheld, provided that either Party may
assign all of its rights and obligations under this Agreement in connection with a merger or the
sale of all or substantially all of that Party’s assets or in connection with a sale or other
transfer by a Party of all or substantially all of its assets related to the Products,
Notwithstanding the foregoing, this Agreement and the rights and obligations of Cornerstone and
Neos may be wholly assigned by either Party to its wholly-owned subsidiaries or any entity which is
otherwise related to such Party, provided that in all events the Party that is originally a party
hereto shall financially guarantee the obligations of such assigning Party hereunder. In the event
of an assignment, the obligations under Section 2.e. shall not apply to activities based on
technologies or intellectual property rights owned or controlled by the assignee or successor at
the time of the assignment or to any products in development or commercialization by the assignee
or successor at the time of the assignment.

20

 

     20. Waiver. The waiver by a Party of any breach of this Agreement shall not be
effective unless in writing, and no such waiver shall operate or be construed as a waiver of the
same or another breach on a subsequent occasion.

     21. Governing Law. This Agreement shall be governed and construed in accordance with
the laws of the State of New York.

     22. Independent Judgment. The Parties acknowledge that: (a) they have read this
Agreement; (b) they understand the terms and conditions of this Agreement; (c) they have had the
opportunity to seek legal counsel and advice; (d) they are of equal bargaining power; and (e) they
have relied on their own judgment in entering into this Agreement.

     23. Entire Agreement; Recitals. This Agreement embodies the entire agreement of the
Parties concerning the subject matter hereof. No amendment or modification of this Agreement shall
be valid or binding unless made in writing and signed by the Parties. Except for the CA, all prior
understandings and agreements relating to the subject matter of this Agreement are hereby expressly
terminated. The Parties agree that the recitals to this Agreement are an integral part hereof.

     24. Insurance. Each party shall, throughout the term of this Agreement, obtain and
maintain at its own cost and expense from a qualified insurance company appropriate liability
insurance naming the other Party as an additional insured. Such policy shall provide protection
against all claims, demands, and causes of action arising out of any defects or failure to perform,
alleged or otherwise, of the Product or any material used in connection therewith or any use
thereof.

     25. Counterparts. This Agreement may be executed in two or more counterparts, or
facsimile or electronic versions, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same agreement.

[signature page follows]

21

 

[Signature Page to Amended and Restated Products Development Agreement]

     Cornerstone and Neos have each caused this Agreement to be executed by its duly authorized
officer as of the date first shown above.

	 	 	 	 	 	 	 
	Neos:	 	Cornerstone:
	 
	 	 	 	 	 	 
	NEOS THERAPEUTICS, L.P.	 	CORNERSTONE BIOPHARMA, INC.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Mark Tengler 	 	By:
	 	/s/ Craig Collard
	 

	 	 
	 	 	 	 
	 

	 	Mark Tengler

President
	 	 	 	Craig Collard

President and CEO

 

 

APPENDIX I

First Product Development Planexv10w18

Exhibit 10.18

Supply and Marketing Agreement

ARISTOS PHARMACEUTICALS, INC. and SOVEREIGN PHARMACEUTICALS, LTD
agree as follows:

Article 1 — Definitions

	1.0	 	As used throughout this Agreement, the initially capitalized terms shall have the meanings
ascribed to them in Sections 1.1 through 1.42.
	 
	1.1	 	“Act” shall mean collectively the Federal Food, Drug, and Cosmetic Act of 1938, including any
amendments thereto, and all regulations promulgated thereunder, and the Federal Controlled
Substances Act, including all amendments thereto, and any regulations promulgated thereunder.
	 
	1.2	 	“Affiliate” shall mean: (a) any corporation or business entity fifty percent (50%) or more of
the voting stock or voting equity interests of which are owned directly or indirectly by a
Party; or (b) any corporation or business entity which directly or indirectly owns fifty
percent (50%) or more of the voting stock or voting equity interests of a Party; or (c) any
corporation or business entity directly or indirectly controlling or under common control of a
corporation or business entity as described in (a) or (b).
	 
	1.3	 	“Agreement” shall mean this Supply and Marketing Agreement entered into by and between the
Parties as of the Effective Date.
	 
	1.4	 	“ARISTOS” means ARISTOS PHARMACEUTICALS, INC, a Delaware corporation having a place of
business at 2000 Regency Parkway, Suite 255, Cary, NC, 27518.
	 
	1.5	 	“Business Day” shall mean any day, other than a Saturday or Sunday, on which commercial banks
are not authorized by law to close in the State of North Carolina.
	 
	1.6	 	“cGMP” shall mean the quality systems and current good manufacturing practices set forth in
21 C.F.R. (Parts 210 and 211), as amended from time to time and in effect during the Term of
this Agreement.
	 
	1.7	 	“Change of Control” shall have the meaning ascribed to it in Section 6.4.
	 
	1.8	 	“DESI” means any drug approved between 1938 and 1962 that was permitted to stay on the market
while evidence of their effectiveness was reviewed.
	 
	1.9	 	“Distribution Cost” means the amount, in respect of any calendar month, which is equal to the
actual cost of shipping of the Product from the Distributor for such calendar month.
	 
	1.10	 	“Distributor” means any wholesaler, food/drug/mass merchandising chain, or other company that
purchase Product from ARISTOS.

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

 

 

	1.11	 	“Effective Date” shall mean May 1, 2008.
	 
	1.12	 	“Facility(ies)” shall mean a production facility which has been validated and approved by the
Regulatory Authority of the country in which the Product produced in such Facility is to be
Marketed, and which complies with the requirements of the Regulatory Authority of the country
in which the production facility is located. Initially the Facility shall be SOVEREIGN
Pharmaceuticals at 7590 Sand Street, Fort Worth, TX, 76118 which has been inspected and
approved.
	 
	1.13	 	“FDA” shall mean the United States Food and Drag Administration or any successor thereof.
	 
	1.14	 	“Initial Commercial Delivery” shall mean the receipt by ARISTOS of the initial batch
quantities of each SKU of the Product set forth in the “Per Batch Forecast” contained in the
Initial Forecast attached hereto as Exhibit C and to be delivered hereunder as provided for in
Section 2.4.
	 
	1.15	 	“Initial Forecast” shall have the meaning ascribed to it in Section 2.1 (a).
	 
	1.16	 	“Initial Order” shall have the meaning ascribed to it in Section 2.1 (b).
	 
	1.17	 	“Losses” shall mean judgments, losses, liabilities, costs or expenses (including reasonable
attorney’s fees).
	 
	1.18	 	“Manufacturer” shall mean SOVEREIGN if it Manufactures Product, or the Third Party engaged
through agreement of ARISTOS and SOVEREIGN to Manufacture at a Facility if SOVEREIGN does not
Manufacture.
	 
	1.19	 	“Manufacturing” or “Manufacture” shall mean the activities associated with producing a
finished dosage form of the Product including Materials acquisition, manufacturing, packaging,
testing and labeling of finished dosage form of the Product.
	 
	1.20	 	“Market”, “Marketing”, or ‘Marketed” shall mean the advertising, marketing sale, selling,
marketing, and/or distribution of Product.
	 
	1.21	 	“Materials” means all ingredients, packaging supplies, printed materials and all other
components used to Manufacture the Product.
	 
	1.22	 	“Net Profit Share” means the amount equal to a [***]% of Net Receipts (as defined in Section
1.23) between ARISTOS and SOVEREIGN, attached hereto as Exhibit A.
	 
	1.23	 	“Net Receipts” means with respect to a calendar month, the Net Sales for such calendar month
less the sum of: (i) the Distribution Cost, (ii) the shipping cost from the Facility to
ARISTOS’S designated site, (iii) the shipping cost from the ARISTOS’S designated site to
Distributors and (iv) the Purchase Price for the Units of Product sold during such calendar
month.

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

 

 

	1.24	 	“Net Sales” means the total gross invoices for Units of Product sold during a calendar month
to Third Party customers in the Territory in bona fide arms length transactions, less: (a)
quantity and/or cash discounts actually allowed or taken, (b) customs duties and taxes, if
any, directly related to the sale of the Product and paid by ARISTOS, (c) amounts allowed or
credited by reason of rejections, return of goods, and any retroactive price reductions
specifically identifiable as relating to the Product, within limits which are customary in the
pharmaceutical industry with respect to the marketing of generic products, (d) amounts
incurred resulting from mandated rebate programs of the government of the Territory (or any
agency thereof), (e) third party rebates and chargebacks related to the sale of the Product,
to the extent allowed, and (f) floor stocks.
	 
	1.25	 	“Party” or “Parties’ shall mean ARISTOS or SOVEREIGN or both of them, depending on the
context.
	 
	1.26	 	“Person” means any individual, corporation, partnership, joint venture, limited liability
company, trust or unincorporated organization or government or any agency or political
subdivision thereof.
	 
	1.27	 	“Product” shall mean one or more DESI products in the forms and strengths identified in
Exhibit D, in finished form, packaged and labeled as set forth in Exhibit E (each such package
being referred to herein as a “Unit” and each strength and bottle size collectively referred
to herein as a “SKU”).
	 
	1.28	 	“Product Specifications” shall mean those product, process, Manufacturing, packaging and
labeling specifications required in the Manufacture and delivery to ARISTOS of Products in
compliance with all applicable Regulatory Requirements, including the Product formula and
materials required for the Manufacture of the Product that are to be purchased and supplied
under this Agreement, as such are in effect as of the Effective Date and as such may be
modified by SOVEREIGN after the Effective Date.
	 
	1.29	 	“Purchase Order” shall have the meaning set forth in Section 2.3.
	 
	1.30	 	“Purchase Price” shall mean with respect to each Unit of Product, the prices to be paid by
ARISTOS to SOVEREIGN per Unit during the Term and which are set forth in Exhibit B.
	 
	1.31	 	“Quality Agreement” shall mean the agreement that shall be entered into by and between the
Parties within thirty (30) days of the Effective Date and which shall govern all quality and
regulatory issues arising out of the transactions contemplated by this Agreement.
	 
	1.32	 	“Registration” shall mean all permits, licenses, approvals and authorizations granted by any
Regulatory Authority with regard to the Product.
	 
	1.33	 	“Regulatory Authority” shall mean any federal, state or local regulatory agency, department,
bureau or other governmental entity, including, without limitation, the FDA and the U.S. Drug
Enforcement Administration, which is responsible for issuing

 

 

	 	 	approvals, licenses, registrations (including the Registrations), permits or authorizations
necessary for, or otherwise governs, the Manufacture, handling, use, storage, import,
transport, distribution or sale of the Product in the Territory.
	 
	1.34	 	“Regulatory Requirements” shall mean all applicable approvals, licenses, registrations
(including the Registrations), cGMPs, and authorizations and all other requirements of each
applicable Regulatory Authority in relation to the Product, including each of the foregoing
which is necessary for, or otherwise governs, the Manufacture, handling, use, storage, import,
transport, distribution or sale of the Product.
	 
	1.35	 	“SKU” shall have the meaning ascribed to it in Section 1.27.
	 
	1.36	 	“SOVEREIGN” shall mean SOVEREIGN Pharmaceuticals Ltd, a Texas limited partner, located at
7590 Sand Street, Fort Worth, TX, 76118
	 
	1.37	 	“Standard Manufacturing Batch” shall mean, with respect to each Product, the standard
finished lot size as set forth on Exhibit G attached hereto.
	 
	1.38	 	“Subsequent Forecast” shall have the meaning ascribed to it in Section 2.2.
	 
	1.39	 	“Term” shall have the meaning ascribed to it in Section 6.0.
	 
	1.40	 	“Territory” shall mean the United States of America, its territories and possessions,
including Puerto Rico.
	 
	1.41	 	“Third Party” shall mean any Person other than ARISTOS or SOVEREIGN.
	 
	1.42	 	“Unit” shall have the meaning ascribed to it in Section 1.27.

Article 2 — Manufacture. Orders, Pricing, Payment and Conformance

	2.0	 	Manufacture and Sale of Product.

	 	(a)	 	SOVEREIGN hereby grants to ARISTOS the exclusive right during the Term to
Market in the Territory.
	 
	 	(b)	 	During the Term, SOVEREIGN shall not grant to any Third Party in the Territory
the right to Market the Product, as listed in Exhibit D
	 
	 	(c)	 	SOVEREIGN shall Manufacture, sell and deliver the Product hereunder in
accordance with (i) the Product Specifications; (ii) cGMP; and (iii) the Act and all
other applicable Regulatory Requirements.
	 
	 	(d)	 	Product shall be Manufactured at the SOVEREIGN Facility at 7590 Sand Street,
Fort Worth, TX, 76118 or at a Third Party Manufacturer’s Facility.

 

 

	2.1	 	Initial Forecast: Initial Order.

	 	(a)	 	ARISTOS shall within fifteen (15) Business Days of the Effective Date, provide
a forecast of the monthly requirements of Product to be manufactured and supplied by
the Manufacturer hereunder for the first twelve (12) full calendar months of this
Agreement (the “Initial Forecast”).
	 
	 	(b)	 	The first three (3) full calendar month portion of the Initial Forecast shall
be deemed a firm order (the “Initial Order”).
	 
	 	(c)	 	A Purchase Order for the Initial Order shall be submitted on or before the
twentieth (20th) Business Day after the Effective Date.
	 
	 	(d)	 	The production and supply requirements specified in and for the remaining
period of such Initial Forecast shall constitute ARISTOS’S best estimate forecast of
its Product production and supply requirements.

	2.2	 	Rolling Forecast. On or before the first (1st) calendar day of the last month of any
calendar quarter (excluding only the first such date following the Effective Date), ARISTOS
shall provide SOVEREIGN with an updated twelve (12) month forecast for the Product (each, a
“Subsequent Forecast”).

	 	(a)	 	Accompanying each Subsequent Forecast will be a Purchase Order for the first
three (3) months of such Subsequent Forecast;
	 
	 	(b)	 	SOVEREIGN will confirm its acceptance of the Subsequent Forecast no later than
the 15th calendar day of the calendar month preceding the forecast period covered by
such Subsequent Forecast at which time such Subsequent Forecast shall become a firm
order; provided, however, that if SOVEREIGN is not able to commit to supply the
forecasted amount in such Subsequent Forecast, it shall inform ARISTOS of the amount it
can supply and the Parties shall meet and discuss the discrepancy.
	 
	 	(c)	 	Forecasts (both the Initial Forecast and Subsequent Forecasts) and Purchase
Orders shall be in full Standard Manufacturing Batches.

	 	(1)	 	If a particular strength of Product is sold in SKU’s of varying
bottle sizes, then the composite of the forecasted SKUs with respect to such
strength of Product must equate to a Standard Manufacturing Batch.
	 
	 	(2)	 	If a generically equivalent product to a Product launches, the
Forecast will be adjusted within thirty (30) days of notification of the
generically equivalent product’s launch.

	 	(d)	 	All Product batches shall be made to order. ARISTOS will provide firm Purchase
Orders at least twelve (12) weeks prior to the expected delivery date.
	 
	 	(e)	 	SOVEREIGN will use reasonable efforts to maintain adequate active
pharmaceutical ingredient and other components to meet the requirements of the forecast
provided by ARISTOS.

 

 

	2.3	 	Orders. Each purchase order or any acknowledgment thereof, whether printed, stamped,
typed or written, shall be governed by the terms of this Agreement and none of the provisions
of such purchase order or acknowledgment shall be applicable, except those specifying quantity
ordered and required delivery dates which shall be as specified in the relevant Initial
Forecast or the Subsequent Forecast, as the case may be (each, a “Purchase Order”).
	 
	2.4	 	Delivery: Risk of Loss.

	 	(a)	 	SOVEREIGN shall complete the Initial Commercial Delivery on or before dates as
set forth in Exhibit H.
	 
	 	(b)	 	SOVEREIGN shall complete all other deliveries of Product hereunder in
accordance with the terms as set forth in 2.2(d).
	 
	 	(c)	 	Shipment of Product shall be to the ARISTOS location designated in the Purchase
Order and shall be FOB ARISTOS PHARMACEUTICALS, INC.’s distribution center in Memphis,
TN or such other site as ARISTOS may designate during the Term.
	 
	 	(d)	 	Title and risk of loss to Product supplied hereunder shall pass to ARISTOS upon
delivery of the Product to the designated carrier at the SOVEREIGN’S warehouse
specified in Section 2.6(c).

	2.5	 	Inventory. Upon the expiration or termination of this Agreement:

	 	(a)	 	ARISTOS may elect to submit a Purchase Order for and if so submitted, SOVEREIGN
shall sell to ARISTOS, in accordance with all Regulatory Requirements, the amount of
Product in the current Subsequent Forecast or Subsequent Forecast for next calendar
quarter for which ARISTOS has not already placed a Purchase Order.
	 
	 	(b)	 	SOVEREIGN agrees that, notwithstanding the expiration or termination of this
Agreement, ARISTOS may continue to sell Product in its inventory, including Product
purchased under this Section 2.5, until such inventory is exhausted.
	 
	 	(c)	 	This Section 2.5 shall survive expiration or termination of this Agreement.

	2.6	 	Shipment: Payment Terms.

	 	(a)	 	SOVEREIGN shall invoice ARISTOS, upon shipment for the Purchase Price

corresponding to the quantities and types of Product delivered pursuant to the applicable Purchase
Order consistent with the terms of this agreement.

	 	(b)	 	ARISTOS shall make payment in U.S. dollars net ninety (90) days following
receipt of each invoice unless a longer period is agreed between ARISTOS
PHARMACEUTICALS, INC. and SOVEREIGN.

 

 

	 	(c)	 	SOVEREIGN’S designated warehouse is located in Fort Worth, TX.
	 
	 	(d)	 	The Purchase Price set forth in Exhibit B shall be applicable throughout the
Term.

	2.7	 	Non-Availability of Product.

	 	(a)	 	At Fault. In the event that SOVEREIGN fails to deliver batch quantities of
Product consistent with the Initial Forecast or any Subsequent Forecast and such
delivery failures result in stock outages through fault of SOVEREIGN that result in
penalties from Distributors, SOVEREIGN will reimburse all fines associated with said
penalties to ARISTOS.
	 
	 	(b)	 	No Fault. In the event that SOVEREIGN fails to deliver batch quantities of
Product consistent with the Initial Forecast or any Subsequent Forecast and such
delivery failures result in stock outages through no fault of SOVEREIGN that are not
resolved through good faith discussions, then ARISTOS may elect to purchase Product
from Third Parties for the period that SOVEREIGN is unable to deliver Product
hereunder.

	2.8	 	Reports. On the thirtieth (30th) day of each calendar month, ARISTOS shall provide to
SOVEREIGN a report setting forth, by SKU, the number of Units sold and the gross sales dollars
for the previous calendar month. If the market price for Product listed on Exhibit D
decrease(s) by more than ten percent (10%), ARISTOS shall so notify SOVEREIGN within seven (7)
Business Days of ARISTOS’s receipt of such information.
	 
	2.9	 	Payment to SOVEREIGN. ARISTOS shall within ninety (90) days after the end of each
calendar month:

	 	(a)	 	provide SOVEREIGN with a written statement detailing the computation of the Net
Profit Share for each Product for such month, and
	 
	 	(b)	 	pay to SOVEREIGN such Net Profit Share. See Exhibit A.

	2.10	 	SOVEREIGN’S Audit Rights. ARISTOS shall maintain and shall require its Affiliates to
maintain, at their respective offices, accurate and complete books and records relating to the
Products in such form and in such reasonable detail as to enable SOVEREIGN and its Affiliates
to verify such information. Upon the written request of SOVEREIGN, but not more than once each
Contract Year, ARISTOS shall permit an independent certified public accounting firm or
consultants to have access during normal business hours to such of the records of ARISTOS as
shall be necessary to verify the accuracy of ARISTOS’s payments to SOVEREIGN. If such
accounting firm or consultant concludes that there are discrepancies in the reporting or
calculation of the Product sales such accounting firm shall recalculate such amounts and (a)
ARISTOS shall pay any additional sums underpaid to SOVEREIGN within thirty (30) calendar days
of such redetermination; or (b) SOVEREIGN shall credit ARISTOS for any overpaid amounts. The
fees and expenses charged by such accounting firm shall be paid by SOVEREIGN.

 

 

Article 3 — Warranties, Covenants and Indemnification

	3.0	 	By SOVEREIGN. SOVEREIGN hereby represents, warrants and covenants to ARISTOS that:

	 	(a)	 	all of the Product supplied and delivered by SOVEREIGN to ARISTOS under and
pursuant to this Agreement shall:

	 	(1)	 	conform in all respects to the Product Specifications;
	 
	 	(2)	 	comply with all of the requirements under the Act and any
Regulatory Requirements
	 
	 	(3)	 	at the time of delivery, not be (A) adulterated or misbranded
within the meaning of the Act, or (B) be an article which may not, under the
provisions of the Act, be introduced into interstate commerce;
	 
	 	(4)	 	be free from all liens, encumbrances and defects in title other
than those that arise directly as a result of actions taken by ARISTOS;
	 
	 	(5)	 	not, to its knowledge, infringe any patents, trademarks or
copyrights or misappropriate any trade secrets of any Third Party in the
Territory;

	 	(b)	 	it shall not, directly or indirectly, during the Term and for so long as
ARISTOS’s rights are exclusive, Market other than through ARISTOS;
	 
	 	(c)	 	it will, on or before May 1, 2008, exclusively own all the right, title and
interest in any intellectual property associated with the Product in Exhibit D
	 
	 	(d)	 	it has the exclusive right to purchase Product from SOVEREIGN;
	 
	 	(f)	 	it has the right to have ARISTOS order Product directly from SOVEREIGN;
	 
	 	(g)	 	that SOVEREIGN will fill ARISTOS’ s orders for Product at the Purchase Price;
	 
	 	(h)	 	has the right to license the rights set forth in (d), (e) and (f) to ARISTOS;
and
	 
	 	(i)	 	it will, in carrying out the terms of this Agreement, act in a reasonable
commercial manner.

	3.1	 	By ARISTOS. ARISTOS hereby represents, warrants and covenants to SOVEREIGN that:

	 	(a)	 	the Marketing shall comply with all of the requirements under the Act and any
Regulatory Requirements;
	 
	 	(b)	 	it will not sell or promote Product in the Territory for any application other
than the indications) approved by the applicable Regulatory Authorities in the
Territory as determined by SOVEREIGN;

 

 

	 	(c)	 	it will not sell Product at a loss in order to obtain sales of another ARISTOS
product.

	3.2	 	Indemnification.

	 	(a)	 	SOVEREIGN agrees to defend, indemnify and hold ARISTOS, its Affiliates and all
of their respective parents, Affiliates, subsidiaries, officers, directors, employees,
agents, assignees and successors harmless from and against any and all Losses resulting
or arising from any claims, demands, actions, causes of action, liabilities, suits,
proceedings, investigations, inquiries, injunctions or regulatory actions by a Third
Party to the extent such Losses arise from a material breach by SOVEREIGN of any of its
representations, warranties, agreements, covenants or obligations contained in or made
pursuant to this Agreement; provided, however, SOVEREIGN shall not be required to
indemnify ARISTOS to the extent such Losses arise from the (i) negligence or willful
misconduct of ARISTOS or its Affiliates, or (ii) a material breach of this Agreement by
ARISTOS.
	 
	 	(b)	 	ARISTOS agrees to defend, indemnify and hold SOVEREIGN., its Affiliates and all
of their respective parents, Affiliates, subsidiaries, officers, directors, employees,
agents, assignees and successors harmless from and against any and all Losses resulting
from any claims, demands, actions, causes of action, liabilities, suits, proceedings,
investigations, inquiries, injunctions or regulatory actions by a Third Party to the
extent such Losses arise from a material breach by ARISTOS of any of its
representations, agreements, covenants or obligations contained in or made pursuant to
this Agreement; provided, however, ARISTOS shall not be required to indemnify SOVEREIGN
to the extent such Losses arise from the (i) negligence or willful misconduct of
SOVEREIGN or its Affiliates, or (ii) a material breach of this Agreement by SOVEREIGN.
	 
	 	(c)	 	No Party against whom a claim of indemnification is made under this Agreement
shall be liable hereunder with respect to an indemnification claim relating to a Third
Party claim or cause of action unless the indemnified Party making such claim shall:

	 	(1)	 	notify the indemnifying Party of such claim in accordance with
Section 8.10 promptly upon becoming aware of the existence or threatened
existence of any such claim giving rise to or that may give rise to a claim of
indemnification hereunder, and
	 
	 	(2)	 	allow the indemnifying Party full control over the defense of
such claim,
	 
	 	(3)	 	cooperate in the defense of such claim at the indemnifying
Party’s expense;

 

 

	 	(d)	 	Notwithstanding the provisions of Section 3.2(c):

	 	(1)	 	the failure to so notify, provide information and assistance
will only relieve the indemnifying Party of its obligations to the indemnified
Party hereunder if and to the extent that the indemnifying Party is materially
prejudiced thereby.
	 
	 	(2)	 	if the indemnifying Party does not acknowledge its
indemnification obligation hereunder with respect to such claim and/or elects
not to defend such claim, the indemnified Party shall have the right, but not
the obligation, to defend and settle such claim until such time as the
indemnifying Party acknowledges in writing its indemnification obligation
hereunder with respect to such claim and/or elects in writing to defend and
settle such claim in accordance with the indemnification provisions herein.
	 
	 	(3)	 	the indemnified Party shall, at its own cost, have the right to
participate in any legal proceeding, settlement negotiation or other like event
and to contest and defend a claim and to be represented by legal counsel of its
choosing, but shall have no right to settle a claim without the prior written
approval of the indemnifying Party.
	 
	 	(4)	 	Each Party shall cooperate with and provide to the other all
information and assistance which the latter may reasonably request in
connection with any claim entitling any Party to indemnification hereunder.
	 
	 	(5)	 	No Party shall be responsible for or bound by any settlement
that imposes any obligation on it that is made without its prior written
consent, which consent shall not be unreasonably withheld or delayed.

	 	(e)	 	Notwithstanding the foregoing, it is understood that neither Party shall have
any obligation to indemnify the other Party for any amount in excess of the amount of
insurance it is required to carry under Section 8.5.
	 
	 	(f)	 	This Section 3.2 shall survive the termination of this Agreement.

	3.3	 	Limitations on Liability.

	 	(a)	 	NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL LOSSES INCLUDING LOST PROFITS ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
	 
	 	(b)	 	This Section 3.3 shall survive the termination of this Agreement.

Article 4 — Regulatory and Quality Matters

	4.0	 	The Parties shall enter into the Quality Agreement within thirty (30) days of the Effective
Date and such agreement shall be incorporated herein and made a part hereof. ARISTOS shall
also enter into a Quality Agreement with the Manufacturer and SOVEREIGN shall use reasonable
efforts to assist ARISTOS in obtaining one. If ARISTOS cannot obtain

 

 

	 	 	executed Quality Agreements within thirty (30) days of the Effective Date, ARISTOS, in its
sole discretion, may elect to terminate this Agreement.
	 
	4.1	 	SOVEREIGN will cooperate with ARISTOS and, without limitation, further support ARISTOS with
all other possible and reasonable regulatory information required by the FDA during the Term
of this Agreement.

Article 5— Marketing

	5.0	 	ARISTOS shall directly or through one or more of its Affiliates exert commercially reasonable
efforts to Market each Product in the Territory and to maximize sales of the Product in the
Territory.

Article 6 — Term and Termination

	6.0	 	Term. This Agreement shall commence on the Effective Date and shall, unless earlier
terminated as set forth herein, continue through April 30, 2011 and shall continue thereafter
from year to year unless one Party gives notice of non-renewal to the other Party at least
ninety (90) days prior to the end of the then current term (such period of time being known as
the “Term”).
	 
	6.1	 	Material Breach with Opportunity to Cure. Either Party may terminate this Agreement
upon thirty (30) calendar days’ prior written notice in accordance with Section 8.10 to the
other Party if the other Party is in material breach of any material provision of this
Agreement and fails to cure that breach within such thirty (30) day period. Each Party shall
promptly notify the other Party of any breach of this Agreement by the other Party.
	 
	6.2	 	Termination without Opportunity to Cure. Either Party may terminate this Agreement on
immediate notice if at any time the other Party:

	 	(a)	 	shall voluntarily file in any court pursuant to any statute of any
Governmental Authority in any country a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of such Party or of its
assets;
	 
	 	(b)	 	shall be served with an involuntary petition against it, filed in any
insolvency proceeding, and such petition shall not be dismissed within sixty (60) days
after the filing thereof;
	 
	 	(c)	 	shall be a Party to any dissolution or liquidation; or
	 
	 	(d)	 	shall make a general assignment for the benefit of its creditors.

	6.3	 	This Agreement may be terminated by either Party in the event that relevant procedures shall
be commenced for bankruptcy, insolvency, receivership, liquidation or winding up of either
party, the other party may forthwith terminate this Agreement by a written notice to that
effect.

 

 

	6.4	 	ARISTOS shall be entitled to immediately terminate this Agreement by written notice in any of
the following events:

	 	(a)	 	If all or substantially all of the assets of SOVEREIGN related to this
Agreement are transferred to an unaffiliated Third Party or if the majority of the
voting shares in SOVEREIGN shall be acquired by an unaffiliated Third Party or if
SOVEREIGN shall be merged or consolidated with an unaffiliated Third Party (hereinafter
referred to as the “Change of Control”). SOVEREIGN shall provide written notice at
least thirty (30) days prior to the Change of Control. SOVEREIGN will provide ARISTOS
with audited financial statements that reflect that such unaffiliated Third Party is in
a sound financial status at least equal to that of SOVEREIGN or otherwise sufficient to
perform this Agreement and SOVEREIGN provides ARISTOS with written certification that
such unaffiliated Third Party is not then selling directly or through its affiliate(s)
any Product that competes in the same marketplace in the Territory. . ARISTOS shall
provide written notice of either consent to continue or objection with termination
within thirty (30) days of SOVEREIGN’S notification.. If ARISTOS does not provide
either consent or a notice of objection within such 30-day period, ARISTOS shall be
deemed to be in acceptance of the Change of Control.
	 
	 	(b)	 	If there shall be discontinuance for any reason of the commercial sale of the
Product by Regulatory Authority

	6.5	 	Effect of Termination. Termination of this Agreement shall not affect any obligations
of either Party incurred prior to its termination, including, without limitation, each Party’s
obligations with respect to any Purchase Orders that have been submitted or are deemed to have
been submitted pursuant to Article 2.
	 
	6.6	 	The obligations under Sections 2.5, 3.2, 3.3, and Article 7, or any other provision that
expressly or by implication is intended to survive expiration or termination, shall survive
expiration or termination of this Agreement.

Article 7- Confidentiality

	7.0	 	ARISTOS’s Information. All information provided by ARISTOS to SOVEREIGN concerning
this Agreement shall be maintained in strict confidence by SOVEREIGN. Such information shall
remain the property of ARISTOS and SOVEREIGN shall not make use of any such information except
for the purposes for which it was provided.
	 
	7.1	 	SOVEREIGN’S Information. All information provided by SOVEREIGN to ARISTOS concerning
this Agreement shall be maintained in strict confidence by ARISTOS Such information shall
remain the property of SOVEREIGN and ARISTOS shall not make use of any such information except
for the purposes for which it was provided.
	 
	7.2	 	Exceptions. The covenants of the receiving Party contained in Section 7.0 and Section
7.1 shall not apply to information that:

	 	(a)	 	is already in the public domain at the time of disclosure;

 

 

	 	(b)	 	becomes part of the public domain through no action or omission of the
receiving Party after disclosure to the receiving Party;
	 
	 	(c)	 	is already known to the receiving Party at the time of disclosure as evidenced
by the receiving Party’s written records;
	 
	 	(d)	 	has been or is disclosed to the receiving Party in good faith by a Third Party
who was or is not, at the time of disclosure, under any obligation of confidence to the
other Party hereto at the time the Third Party disclosed such information to the
receiving Party; or
	 
	 	(e)	 	is required to be disclosed by law or a court or other Governmental Authority
or Regulatory Authority.

	7.3	 	Survival. This Article 7 shall survive termination of this Agreement for a period of
five (5) years.

Article 8 — Miscellaneous

	8.0	 	Corporate Organization and Authority. Each Party represents and warrants to the other
Party with respect to itself that:

	 	(a)	 	it is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction wherein it is organized,
	 
	 	(b)	 	it has all necessary power and authorization to perform its obligations under
this Agreement and to discharge them pursuant to the terms hereof,
	 
	 	(c)	 	this Agreement is enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, reorganization and similar laws of general applicability
effecting the rights and remedies of creditors and to general principles of equity,
regardless of whether enforcement is sought in proceedings in equity or at law and
	 
	 	(d)	 	this Agreement does not violate or conflict with any obligations by such Party
to Third Parties by contract, judicial order or otherwise.

	8.3	 	Public Announcements.

	 	(a)	 	Except for any disclosures pursuant to Regulatory Requirements made to any
applicable state boards of pharmacy naming SOVEREIGN as the supplier of the Product
and/or as required by the registration form for purposes of registration with such
applicable state boards, neither Party shall make any publicity releases, interviews or
other dissemination of information concerning this Agreement or its terms, or either
Party’s performance hereunder, to communication media, financial analysts or others
without the prior written approval of the other Party, which approval shall not be
unreasonably withheld or delayed.

 

 

	 	(b)	 	Either Party may make any disclosure in filings with Governmental Authorities
or Regulatory Authorities as required by law or applicable court or other order;
provided, however, that the other Party shall have the opportunity to review and
comment on such disclosures and filings.

	8.2	 	Force Majeure.

	 	(a)	 	Neither Party shall be liable to the other if, and to the extent that, the
performance or delay in performance of any of its obligations under this Agreement is
prevented, restricted, delayed or interfered with due to circumstances beyond the
reasonable control of such Party, including, without limitation, fires, floods,
explosions, epidemics, accidents, acts of terrorism, acts of God and/or wars, riots,
strikes, lockouts or other concerted acts of workers.
	 
	 	(b)	 	The Party claiming an event of force majeure shall promptly notify the other
Party in writing and provide full particulars of the cause or event and the date of
first occurrence thereof as soon as possible after the event and also keep the other
Party informed of any further developments.
	 
	 	(c)	 	The Party so affected shall use its commercially reasonable efforts to remove
the cause of non-performance, and both Parties shall resume performance hereunder with
the utmost dispatch when such cause is removed, unless this Agreement has previously
been terminated under Article 6 hereof.

	8.3	 	Entire Agreement. This Agreement, including the Quality Agreement, contains the
entire agreement and understanding between the Parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, whether written or oral,
relating to such subject matter.
	 
	8.4	 	Amendment and Waiver.

	 	(a)	 	Only a writing that specifically states that such is an amendment, specifically
states its purpose and that is signed by both Parties may amend this Agreement.
	 
	 	(b)	 	No course of dealing between the Parties or failure by either Party to exercise
any right or remedy hereunder shall constitute an amendment to this Agreement or a
waiver of any other right or remedy or the later exercise of any right or remedy.

	8.5	 	Insurance. Each of ARISTOS and SOVEREIGN shall obtain and maintain in full force
during the Term of this Agreement insurance policies from a reputable insurance company or
with respect to ARISTOS only, pursuant to a self-insurance program providing such Party with
insurance coverage for the Product in an amount of Five Million Dollars (US$5,000,000) each
occurrence and in aggregate coverage for any 12-month period or such higher amount that is
reasonably consistent with the levels of insurance coverage customarily maintained in the
pharmaceutical industry. Each Party shall maintain at least this level of coverage during the
Term.

 

 

	8.6	 	Governing Law. This Agreement shall be governed by and construed in accordance with
the substantive law of the State of North Carolina.
	 
	8.7	 	Successors and Assigns. The provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and assigns,
provided, however, that except as otherwise provided herein, no Party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without first
receiving the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed, except that either Party may assign and delegate its rights
and duties hereunder without obtaining such consent (a) to any Affiliate of such Party so long
as the assigning Party remains liable for the performance of its Affiliate or (b) to any
Person or entity that acquires substantially all of the business or assets of such Party.
	 
	8.8	 	Nature of Agreement.

	 	(a)	 	In performing this Agreement, each Party shall act independently and this
Agreement shall not be construed as creating any partnership, joint venture or
incorporated business entity.
	 
	 	(b)	 	Neither Party shall have any authority to incur any liability or obligation
whatsoever on behalf of the other Party.
	 
	 	(c)	 	The Parties hereby acknowledge and agree that the pricing for the sale of
Product to Third Parties by ARISTOS shall be determined at the sole discretion of
ARISTOS, without any input whatsoever from or by SOVEREIGN, and that no agreements,
arrangements or understandings regarding such pricing exist between the Parties.

	8.9	 	Severability. The Parties agree that if any term or provision of this Agreement
contravenes or is invalid under any federal, state or local law, court decision, rule,
ordinance or regulation, this Agreement shall, as to the jurisdiction under which such legal
authority is promulgated or rendered, be construed as if it did not contain the offending term
or provision, and the remaining provisions of this Agreement shall not be affected thereby;
provided, however, that if the removal of such offending term or provision
materially alters the burdens or benefits of any of the Parties under this Agreement, the
Parties agree to negotiate in good faith such modifications to this Agreement as are
appropriate to insure the burdens and benefits of each Party under such modified Agreement are
reasonably comparable to the burdens and benefits originally contemplated and expected.
	 
	8.10	 	Notices.

	 	(a)	 	All communications, notices and consents (including forecasts and other
manufacturing related communications) provided for herein shall be in writing and be
given in person or by means of telex, facsimile or other means of wire transmission
(with request for assurance of receipt in a manner typical with

 

 

	 	 	 	respect to communications of that type), by overnight courier or by mail, and shall
become effective:

	 	(1)	 	on delivery if given in person;
	 
	 	(2)	 	on the date of transmission if sent by telex, facsimile or
other means of wire transmission;
	 
	 	(3)	 	one (1) Business Day after delivery to the overnight service;
or
	 
	 	(4)	 	four (4) Business Days after being deposited in the United
States mail, with proper postage and documentation, for first-class registered
or certified mail, prepaid.

	 	(b)	 	Except as set forth Exhibit F and Section 4.1, all such communications, notices
and consents shall be addressed as follows:

If to SOVEREIGN, to:

SOVEREIGN PHARMACEUTICALS, Ltd

7590 Sand Street

Fort Worth, TX 76118

Attention: Miles Davis

Fax: (817) 284-0531 e-mail: m.davis@sovpharm.com

If to ARISTOS, to:

ARISTOS PHARMACEUTICALS, INC.

2000 Regency Parkway, Suite 255

Cary, NC 27518

Attention: Steve Lutz

Fax: (919) 678-6599 e-mail: slutz@aristospharm.com

provided, however, that if either Party shall have designated a
different address by notice to the other Party pursuant to this Section 8.10, then
to the last address so designated.

	8.11	 	Construction.

	 	(a)	 	The language in all parts of this Agreement shall be construed, in all cases,
according to its fair meaning.
	 
	 	(b)	 	SOVEREIGN and ARISTOS acknowledge that each Party and its counsel have reviewed
and revised this Agreement and that any rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party shall not be employed in the
interpretation of this Agreement.

 

 

	 	(c)	 	Whenever used herein, the words “include,” “includes” and “including” shall
mean “include, without limitation,” “includes, without limitation” and “including,
without limitation,” respectively.
	 
	 	(d)	 	The masculine, feminine or neuter gender and the singular or plural number
shall each be deemed to include the others whenever the context so indicates.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly
authorized representatives as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 
	ARISTOS PHARMACEUTICALS, INC.	 	 	 	SOVEREIGN PHARMACEUTICALS, LTD.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Steve Lutz
	 	 	 	By:
	 	/s/ Miles Davis	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 

 

 

Exhibit A

Calculation of [***] Net Profit Share Agreement

Products: Hyomax SL, SR, FT

Example of Net Profit Share Calculation

	 	 	 	 	 	 	 	 	 
	 	 	Hyomax SL	 	Hyomax SR	 	Hyomax FT	 	Total
	100ct Equivalent Bottle [***]

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	WAC price per bottle

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 
	Gross Sales subject to royalty

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 
	Allowance for Cash Discounts – [***]

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	Allowance for Returns – [***]

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	Allowance for Medicaid Rebates – [***]

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	Allowance for Chargebacks – [***]

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	DSA Fees @[***]

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 
	Net Sales

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 
	 
	 	 	 	 	 	 	 	 
	Purchase Price – Cost of Goods (at
[***] per 100 ct bottle)

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	Distribution

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 
	Net Profit

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 
	 
	[***] Net Profit Share

	 	[***]
	 	[***]
	 	[***]
	 	[***]
	 	 	 

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

 

 

Exhibit B

Purchase Price

	 	 	 	 	 
	Unit
	 	Purchase Price/Unit
	HyoMax-SR l00ct bottle
	 	 	[***]	 
	 
	 
	 	 	 	 
	HyoMax-FT l00ct bottle
	 	 	[***]	 
	 
	 
	 	 	 	 
	HyoMax-SL 100ct bottle
	 	 	[***]	 
	 

Purchase price per unit represents the actual costs to manufacture each product which includes no
mark-ups. SOVEREIGN and ARISTOS acknowledge that business operating conditions and/or volumes may
change, resulting in changes in the costs structure compared to that presented above. Therefore,
for any subsequent six (6) month period after the effective date of the contract commencement, both
parties agree to a business review, which may result in a change to the above reflected prices.
Price changes must be agreed upon by both parties in writing.

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

 

 

Exhibit C

Initial Forecast

	 	 	 	 	 
	Tablet	 	Tablets/Bottle	 	Bottles for 1st 12 Months (est.)
	HyoMax-SR

	 	100 tablets/bottle
	 	[***] (est.)
	HyoMax-FT

	 	100 tablets/bottle
	 	[***] (est.)
	HyoMax-SL

	 	100 tablets/bottle
	 	[***] (est.)

 

[***] Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

 

 

Exhibit D

Product Strengths

HyoMax-SR 0.375mg

HyoMax-FT 0.125mg

HyoMax-SL 0.125mg

 

 

Exhibit E

Packaging and Labeling

 

 

 

 

 

 

 

 

Exhibit F

Quality Agreement

Will be fully negotiated and signed within thirty (30) days of the Effective Date. (Attached)

 

 

Sovereign Pharmaceuticals, LTD

QUALITY AGREEMENT

SOVEREIGN PHARMACEUTICALS, LTD & ARISTOS PHARMACEUTICALS

	 	 	 
	 

	 	CONFIDENTIAL
	 

	 	Quality Agreement with ARISTOS
	 

	 	Revision: 1

	 	 	 	 	 
	Revision	 	Date	 	Summary Of Changes
	1
	 	October 28, 2008
	 	Initial Release

Page 1 of 9 

 

QUALITY AGREEMENT

SOVEREIGN & ARISTOS

Revision 1

APPROVALS

	 	 	 	 	 
	Name/Title	 	Signature	 	Date
	Johanna Hunter

Vice President Sales & Marketing

Sovereign Pharmaceuticals, LTD

	 	 	 	October 28, 2008
	 
	 	 	 	 
	Kenneth F. Miles, Ph.D., RAC

Vice President Quality & Regulatory

Sovereign Pharmaceuticals, LTD

	 	 	 	October 28, 2008
	 
	 	 	 	 
	Steve Lutz

President

Aristos Pharmaceuticals, Inc.
	 	 	 	 
	 
	 	 	 	 
	Brian Dickson

Chief Medical Officer

Aristos Pharmaceuticals, Inc.
	 	 	 	 

	 	 	 	 	 
	Originator Name/Title	 	Signature	 	Date
	Johanna Hunter

Vice President Sales & Marketing

	 	 	 	October 28, 2008

Page 2 of 9 

 

QUALITY AGREEMENT

By and Between

Aristos Pharmaceuticals

And

Sovereign Pharmaceuticals, LTD

	1.0	 	PURPOSE
	 
	 	 	The purpose of this agreement is to ensure a mutual understanding of key responsibilities to
ensure ARISTOS’ product(s) are produced according to specifications and comply with all
governing regulations and corporate policies. It is acknowledge that this will be a
continually evolving process. This agreement is applicable to all ARISTOS product(s)
manufactured by Sovereign Pharmaceuticals, LTD., Fort Worth, Texas, from the date of
approval of this document (Note: Any noncompliance to this agreement, at the time of
approval, shall be noted and reviewed between ARISTOS and Sovereign Pharmaceuticals, LTD.)
	 
	2.0	 	MAIN CONTACTS

	 	 	 	 	 
	 	 	SOVEREIGN	 	ARISTOS
	Title

	 	Johanna Hunter

Vice President Sales & Marketing
	 	Stacy Wheeler

Sr. Mgr, Supply Chain
	Telephone

	 	(817) 284-0429
	 	(919)678-6519
	E-Mail

	 	jhunter@sovpharm.com
	 	swheeler@cornerstonebiopharm.com

	2.0	 	SCOPE
	 
	 	 	This agreement applies to the product(s) listed below.

	 	 	 	 	 
	Product Name	 	NDC #	 	Description
	HYOMAX SL TABLETS

	 	24486-601-10
	 	0.125mg hyoscyamine sulfate
	HYOMAX FT TABLETS

	 	24486-603-10
	 	0.125mg hyoscyamine sulfate
	HYOMAX SR TABLETS

	 	24486-602-10
	 	0.375mg hyoscyamine sulfate
	RESPIVENT D TABLETS

	 	24486-702-60
	 	120mg pseudoephedrine, 2.5mg
	 

	 	 	 	methscopolamine nitrate

	4.0	 	CONFIDENTIALITY
	 
	 	 	Confidentiality is documented in the current Confidentiality Agreement between ARISTOS and
Sovereign Pharmaceuticals, LTD. All terms of this Quality Agreement shall be deemed
“Confidential Information” under the current version of the Quality Agreement between
ARISTOS and Sovereign Pharmaceuticals, LTD.

Page 3 of 9 

 

	5.0	 	COMPLIANCE
	 
	 	 	Sovereign shall manufacture, package, test, and store the materials and the product(s) in
compliance with all applicable federal and state requirements, including, but not limited to
cGMP regulation 21 CFR Part 210 & 211. Sovereign shall manufacture, package, and test the
product(s) in compliance with all established raw material, component, bulk product and
finished product specifications as applicable. Materials shall be tested per current USP,
or internally developed and validated methods where there are none established in the USP.
	 
	 	 	ARISTOS is responsible for performing audits of Sovereign on an agreed upon basis, typically
once per year. This rate may be adjusted based on performance. Sovereign is responsible for
responding to the audit observations within 30 days of receipt of the audit report. This
response shall include a corrective action plan and target completion date of the corrective
actions identified.
	 
	 	 	ARISTOS may conduct surveillance sampling of product(s) manufactured by Sovereign. Results
of the sampling will be shared with Sovereign.
	 
	 	 	Sovereign will maintain all appropriate licenses and/or permits required to manufacture and
ship the Product(s) to the Sovereign customer facility, including maintaining DEA licensed
facility provided that there are Product(s) that require this type of licensing.
	 
	6.0	 	DEVIATIONS
	 
	 	 	Any deviations which have an impact on the finished product specifications occurring at
Sovereign from manufacturing, packaging, or testing specifications procedures must be
investigated. The investigation shall be documented in a written report identifying the
root cause and corrective action.
	 
	7.0	 	RELEASE
	 
	 	 	Final release of the product(s) is the responsibility of Sovereign QA.
	 
	8.0	 	RESERVE SAMPLES
	 
	 	 	Reserve samples shall be maintained by Sovereign according to cGMP requirements and internal
procedures.
	 
	9.0	 	STABILITY – (ANDA ARISTOS Only)
	 
	 	 	Copies of stability summaries of the validation batches will be provided to ARISTOS at the
completion of three months accelerated studies. Sovereign will inform ARISTOS during the 3
month period where any testing results is trending out of specification.
	 
	 	 	Sovereign shall place at least one lot annually per calendar year for each product(s)
manufactured in a long term stability program. Additional lots may be included into the
stability program based on an assessment of the trends in the stability data, or changes
made to the product(s) or any other changes which may impact product(s) quality or
effectiveness.
	 
	10.0	 	ANNUAL PRODUCT REVIEW (APR) – (ANDA ARISTOS Only)
	 
	 	 	Annual Product Reviews including a stability summary will be conducted by Sovereign. The
APR report will be in a format mutually acceptable to ARISTOS and Sovereign and be provided
to ARISTOS within

Page 4 of 9 

 

	 	 	60 days of the due date. The due dates will be defined by Sovereign and a
list provided to ARISTOS for
monitoring purposes.
	 
	11.0	 	CHANGE CONTROL- (ANDA ARISTOS Only)
	 
	 	 	Any changes in materials, methods, procedures, USP specifications, test methods, test
equipment, or other critical product parameters shall be the responsibility of Sovereign.
Prior to initiating the change, Sovereign will assess the need for re-validation and shall
provide ARISTOS QA written notification of their intention to make the change. The
notification shall be in sufficient detail for ARISTOS to make an objective assessment of
the likely impact of the change on that product(s), and any other similar ARISTOS product(s)
formulations. Where there is an impact on the product(s), ARISTOS will notify Sovereign and
make any applicable recommendations. A copy of Sovereign’s completed change control
documentation will be forwarded to ARISTOS upon request.
	 
	12.0	 	LABELING
	 
	 	 	Sovereign shall be responsible for assuring that labeling is in compliance with the approved
artwork supplied by the customer, or distributor of the finished product(s). ARISTOS shall
be responsible for approving labeling copy carrying the ARISTOS name only. Sovereign will
conduct acceptance review of each labeling shipment upon receipt, and prior to use, using
approved label copy per Sovereign’s internal procedures.
	 
	13.0	 	COMPLAINTS
	 
	 	 	Complaint samples received by ARISTOS, which were manufactured by Sovereign shall be forward
to Sovereign for evaluation and identification of root cause and if applicable, corrective
action. Sovereign shall provide an initial evaluation report on the returned complaint
samples to ARISTOS within 30 days of receipt of the samples.
	 
	 	 	If ARISTOS’ complaint concerns the quantity of such Product, ARISTOS shall provide Sovereign
written notice of its complaint and provide sufficient evidence to substantiate the short
quantity. Upon receipt of such written notice and substantiating evidence, Sovereign shall
supply to ARISTOS as promptly as practicable, however in no event later than sixty (60)
days, (provided that Sovereign has all necessary component materials in the manufacturing
facility) the said short quantity of such Product. Sovereign shall provide such replacement
quantity at no additional cost to ARISTOS if ARISTOS has previously been invoiced for such
short quantity.
	 
	14.0	 	FIELD ACTION
	 
	 	 	If Sovereign determines that any field action of the product(s) is warranted, they shall
verbally notify ARISTOS within 24 hours of the decision, to be followed by formal written
confirmation within 5 working days. The written notification shall include a plan for
correction of the product(s) in the field.
	 
	15.0	 	AGENCY INSPECTIONS
	 
	 	 	Sovereign shall notify ARISTOS of any Regulatory Agency audit, which directly affects
ARISTOS’ product(s). Notification must be within two (2) days of the first day of the FDA
audit. Sovereign shall promptly provide ARISTOS copies of any inspection reports that it
receives or any notice of any claim or action by the FDA relating to noncompliance with any
applicable laws, rules, or regulations.

Page 5 of 9 

 

	16.0	 	SUBCONTRACTING
	 
	 	 	In the event Sovereign wishes to engage the services of a third party for laboratory testing
purposes, then
Sovereign will ensure that any outside laboratory utilized is in conformance with cGMP as
defined in 21 CFR Part 210 and 211 prior to the commencement of testing. In addition,
Sovereign will ensure that
ARISTOS receives a cGMP compliance certificate and executed test method transfer document
for each test procedure conducted on each product(s) by the outside laboratory prior to
commencement of testing by the third party.
	 
	17.0	 	AGREEMENT MAINTENANCE
	 
	 	 	This agreement will be reviewed annually and renewed if changes are warranted by ARISTOS or
Sovereign.
Modification/addenda can be made as required. Any such changes must be in writing and
approved by the same functions that signed the original agreement.

Page 6 of 9 

 

Quality Agreement Responsibility Table

	 	 	 	 	 	 	 
	Responsibilities	 	Sovereign	 	ARISTOS	 	NA
	Compliance
	 	 	 	 	 	 
	Facility Registration with FDA and availability of
registration form.
	 	X	 	 	 	 
	The current versions of the defined quality criteria in
effect at the time of this agreement are attached.
(Attachment of quality criteria is optional).
	 	X	 	X	 	 
	Mutually agree on specifications for the product which
are the subject of this agreement.
	 	X	 	X	 	 
	Specifications in place at the time of this agreement
are attached. (Attachment of specifications is
optional).
	 	X	 	X	 	 
	Changes to the agreed upon specifications must be
mutually agreed upon and communicated in writing between
the parties to this agreement, except for compendia
changes which can be implemented without mutual
agreement.
	 	X	 	X	 	 
	Ensure that the specification for compendia API and
Excipients are in compliance with current compendia.
	 	X	 	X	 	 
	Manufacture product(s) according to the mutually agreed
upon specifications.
	 	X	 	 	 	 
	Upon request, disclose to the ARISTOS recent regulatory
agency inspections and findings pertaining to the
product(s).
	 	X	 	 	 	 
	Notify promptly if, in the course of a regulatory
inspection, negative findings are made related to the
quality of the product(s) supplied.
	 	X	 	 	 	 
	Manufacturing, Packaging and Labeling
	 	 	 	 	 	 
	Appropriately document qualification of the product
manufacturing and packaging process, qualification of
critical systems and equipment used in the manufacture
and control of the product(s), cleaning validation, if
applicable and analytical method validation.
	 	X	 	 	 	 
	Samples will be retained for a period of_____ years from
                     (specify).
	 	X	 	 	 	 
	Agree upon special labeling requirements.
	 	X	 	X	 	 
	Maintain facility, work flow and handling to prevent
damage, contamination, and mix-up during storage and
production.
	 	X	 	 	 	 
	Expiration Date Control.
	 	X	 	 	 	 
	Cartoning and Bundling
	 	X	 	 	 	 
	Palletizing and Storage.
	 	X	 	 	 	 
	Quarantine and Storage SOP
	 	X	 	 	 	 
	Issue and
maintenance of standard reference sample for printed labels.
	 	X	 	 	 	 
	Documentation and Records
	 	 	 	 	 	 
	Certificate of analysis will be supplied with each batch.
	 	X	 	 	 	 
	Agree upon special certificate of analysis requirements
	 	X	 	X	 	 
	Records required by the agreed upon quality system will
be maintained for a period of                      years
from                     (specify).
	 	X	 	X	 	 
	Manufacturing Batch Records.
	 	X	 	 	 	 
	Packaging Batch Records
	 	X	 	 	 	 

Page 7 of 9 

 

	 	 	 	 	 	 	 
	Responsibilities	 	Sovereign	 	ARISTOS	 	NA
	Storage and Distribution
	 	 	 	 	 	 
	Maintain documentation that supports the recommended
storage conditions and reevaluation or expiry dates as
well as an appropriate sample retention procedure.
	 	X	 	 	 	 
	Communicate the recommended storage and transportation
conditions of the product(s).
	 	X	 	 	 	 
	Ensure that product(s) is stored and shipped in
accordance with recommended storage conditions.
	 	X	 	X	 	 
	Agree upon requirements for shipping containers.
	 	X	 	X	 	 
	Change Control
	 	 	 	 	 	 
	Changes will be evaluated and communicated based upon
agreed criteria.
	 	X	 	 	 	 
	Non-Conformance
	 	 	 	 	 	 
	Approval for use of nonconforming raw materials or
components in the “Product(s)” that may impact safety
efficacy or stability.
	 	X	 	X	 	 
	Approval for changes to raw materials supplier and or
supplier location or components in the “Product(s) that
may impact safety, efficacy or stability.
	 	X	 	X	 	 
	Notification of all components deviations and
non-conformances related to the production of ARISTOSs
product(s) that would be released to the field.
	 	X	 	X	 	 
	Maintenance of system for logging and tracking
“Product(s)” non-conformance.
	 	X	 	 	 	 
	Investigate and implement corrective/preventive actions
for “Product non-conformance.
	 	X	 	 	 	 
	Approval of release of non-conforming “Product(s).
	 	 	 	X	 	 
	Out of Specification (OOS)
	 	 	 	 	 	 
	Out-of-specification (OOS) test results should be
investigated and documented according to a documented
procedure. Where applicable this includes the
identification of the root cause, a risk analysis, the
actions taken for correction of the problem and the
formal conclusion by quality assurance.
	 	X	 	 	 	 
	Deviations
	 	 	 	 	 	 
	If significant deviations from an established process
are recorded there should be evidence of suitable
investigations and a review of the quality of the
product.
	 	X	 	 	 	 
	Complaints
	 	 	 	 	 	 
	Have a written procedure to investigate and document
quality related complaints. A root cause analysis,
actions taken for correction of the problem and the
formal conclusion will be provided to the ARISTOS within
a reasonable time after receipt of the complaint.
	 	X	 	 	 	 
	Complaints made shall at least indicate the Sovereign
batch number of the product(s) and complaint subject.
The complaint shall be communicated to the ARISTOS
within a reasonable time after receipt of the product.
Samples will be provided where appropriate and
available.
	 	 	 	X	 	 
	The parties shall cooperate in the exchange of
information required to effectively conduct an
investigation.
	 	X	 	X	 	 
	Recalls
	 	 	 	 	 	 

Page 8 of 9 

 

	 	 	 	 	 	 	 
	Responsibilities	 	Sovereign	 	ARISTOS	 	NA
	In the case of a recall of the Product(s), Sovereign
shall inform ARISTOS without unreasonable delay of the
planned recall. The parties shall cooperate in the
exchange of information required to effectively conduct
the recall.
	 	X	 	X	 	 
	Have a written recall procedure.
	 	X	 	 	 	 
	Auditing
	 	 	 	 	 	 
	Have the right to audit Sovereign’s facility and
systems, as they relate to the manufacture of
Product(s), at mutually agreed upon times.
	 	X	 	X	 	 
	If required, a written confidentiality agreement will be
executed within a reasonable period of time prior to the
audit.
	 	X	 	X	 	 
	ARISTOS shall issue a confidential written audit report
to the Sovereign, which will include audit observations;
within 30 days.
	 	 	 	X	 	 
	Sovereign shall issue responses within 30 days to all
observations in writing to ARISTOS Quality Assurance.
Where the supplier commits to a corrective action, a
description and timeframe for completion will be
included in the written response.
	 	X	 	 	 	 

Page 9 of 9 

 

Exhibit G

Standard Finished Lot Size

HyoMax-SR – [***] tablets

HyoMax-SL – [***] tablets

HyoMax-FT – [***] tablets

 

			
	[***]	 	Confidential portions of the exhibit have been omitted and filed separately with the
Securities and Exchange Commission.

 

 

Exhibit H

Initial Commercial Delivery Dates

HyoMax SL – On or before June 15, 2008

HyoMax SR – On or before June 15, 2008

HyoMax FT – On or before June 30, 2008

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00148-of-00352.parquet"}]]