DEVELOPMENT AND LICENSE AGREEMENT

Exhibit 10.22

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “***”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE EXCHANGE ACT OF 1934.

DEVELOPMENT
AND
LICENSE AGREEMENT

between

Eurand, Inc.

and

Avanir Pharmaceuticals, Inc.

For a Controlled Release Neurodex ^® Capsule

CONFIDENTIAL

DEVELOPMENT AND LICENSE AGREEMENT

PREAMBLE

      THIS DEVELOPMENT AND LICENSE AGREEMENT (the “Agreement”, as hereinafter defined) dated as of August 7, 2006 (the “Effective Date”), is by and between Eurand, Inc., incorporated in Nevada with its principal offices at 845 Center Dr., Vandalia, Ohio 45377 (“EURAND”) and Avanir Pharmaceuticals, Inc. incorporated in California with its principal offices at 11388 Sorrento Valley Road, Suite 200, San Diego, CA 92121 (“AVANIR”).

RECITALS:

     A. EURAND is the owner or licensee of certain technology including processes, patents, trade secrets, trademarks and know-how for the development and manufacture of orally administered pharmaceutical formulations, including controlled release technologies.

     B. AVANIR desires that EURAND undertake a development project (“Program”, as hereinafter defined) directed towards developing a pharmaceutical product (“Product”, as hereinafter defined).

     C. AVANIR also desires to receive a license from EURAND to use, sell and offer for sale the Product in the Territory (as hereinafter defined).

     D. EURAND is willing to undertake such a Program and to grant such a license on the terms and conditions set forth hereinafter.

     E. EURAND and AVANIR also desire to enter into a related agreement pursuant to which EURAND will exclusively manufacture and supply the Product to AVANIR and/or its sublicensees in the Territory.

     NOW, THEREFORE, in consideration of the agreements and covenants hereinafter set forth and intending to be legally bound hereby, EURAND and AVANIR hereto agree as follows:

1. DEFINITIONS . The following capitalized terms shall have the following meanings when used in this Agreement and all terms defined in the singular will have the same meanings when used in the plural (and vice versa), unless otherwise specified. Further, the word “ including ” or any variation thereof means “including without limitation” and the word “ including ” or any variation thereof will not be construed to limit any general statement which it follows to the specific or similar items or matters immediately following it.

     1.1 “ AAA ” shall have the meaning set forth in Section 13.15(a).

     1.2 “ Act ” means the United States Federal Food, Drug and Cosmetic Act, as amended from time to time.

     1.3 “ Action ” shall have the meaning set forth in Section 8.7(b).

     1.4 “ Affiliate ” means, with reference to any Entity, any other Entity, directly or indirectly controlling, controlled by or under common control with such Entity and, for purposes of this Section 1.4

only, “control” means (a) in the case of corporate Entities direct or indirect beneficial ownership of more than fifty percent (50%) of the voting stock or shares entitled to vote for the election of directors, (b) in the case of non-corporate Entities direct or indirect ownership of more than fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate Entities and (c) in the case of any other Entity, the right or power to appoint more than one-half of the Board of Directors or senior management of an Entity or otherwise having effective control of the Entity.

     1.5 “ Agreement ” means this Development and License Agreement, together with all exhibits annexed hereto.

     1.6 “ API ” or “ APIs ” means the active pharmaceutical ingredient dextromethorphan hydrobromide (Chemical Abstracts Registry #125-69-9) or quinidine sulfate (Chemical Abstracts Registry #56-54-2) separately, or dextromethorphan hydrobromide and quinidine sulfate together.

     1.7 “ Applicable Laws ” means the applicable provisions of all laws, treaties, ordinances, judgments, decrees, directives, injunctions, orders of any court, arbitrator or governmental agency or authority, rules, regulations, interpretations, authorizations and Applicable Permits of any international, national, regional, local or other governmental body, agency, authority, court or Entity having jurisdiction over or related to the development, registration, manufacture, pricing, sale and use of the Product, as may be in effect from time to time.

     1.8 “ Applicable Permits ” means all waivers, exemptions, variances, permits, licenses or similar approvals, including, without limitation, pricing clearances and registrations by health or other government entities, required to be obtained or maintained under Applicable Laws in connection with the development, registration, manufacture, pricing, marketing, sale and use of the Product.

     1.9 “ Approval Date ” means the date on which Regulatory Approval is granted for the Product on a country by country basis in the Territory.

     1.10 “ AVANIR Development Activities ” shall have the meaning set forth in Section 2.1(f).

     1.11 “ AVANIR Intellectual Property Rights ” means those intellectual property rights of AVANIR or any of its Affiliates, including the Patent Rights relating to the Drug Combination that are used in connection with or embodied in the Product including the patents and applications set forth in Exhibit C hereto.

     1.12 “ Business Day ” means any day other than a day which is a Saturday, a Sunday or any day banks are authorized or required to be closed in Ohio, California, or Italy.

     1.13 “ Calendar Day ” means any day, including Saturdays, Sundays and holidays.

     1.14 “ Calendar Quarter ” means each of the consecutive three (3) month periods ending March 31, June 30, September 30, and December 31; provided, however, that the first (1 ^st ) Calendar Quarter under this Agreement will be the period beginning on the Effective Date and ending on the end of the Calendar Quarter in which the Effective Date is encompassed.

     1.15 “ Calendar Year ” means, for the first Calendar Year, the period beginning on the Effective Date and ending December 31, 2006, and for each Calendar Year thereafter, each successive period beginning on January 1 and ending twelve (12) consecutive calendar months later on December 31; provided, however, that the last Calendar Year of the Term will be the period beginning on January 1 and ending on the effective date of expiration or termination of the Term.

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     1.16 “ cGMP ” or “ GMP ” means FDA current Good Manufacturing Practices as in effect at any given time, based on statutory authority and presently set forth as regulations in Parts 210 and 211 of the United States Code of Federal Regulations and all applicable FDA rules, regulations, guides and guidances, as amended from time to time and in effect during the Term.

     1.17 “ Clinical Studies ” means any testing, use or administration of the CTM or Product in animals or humans in preparation for obtaining Regulatory Approval to commercialize Product in the Territory, including, but not limited to, bioequivalence studies, pharmacokinetic studies, and/or clinical efficacy studies.

     1.18 “ Combination Product(s) ” shall have the meaning set forth in Section 1.44.

     1.19 “ Commercially Reasonable Efforts ” or “ Commercially Reasonable ” means, with respect to either Party, the efforts, resources, and criteria which would be used by that Party consistent with prevailing pharmaceutical industry standards for a company of similar size and scope to such Party with respect to a product or potential product at a similar stage in its development or product life and of similar market potential taking into account efficacy, safety, the anticipated regulatory authority approved labeling, the competitiveness of alternative products in the market place or under development, the patent and other proprietary position of the Product and of Third Parties, the likelihood of obtaining all Applicable Permits, and the commercial value of the Product and other relevant factors.

     1.20 “ Commercial Supply Agreement ” means that agreement to be negotiated and entered by the Parties pursuant to Section 3.3.

     1.21 “ Competitive Product ” means any ^*** which is not ***.

     1.22 “ Confidential Information ” shall have the meaning set forth in Section 13.2.

     1.23 “ CTM ” (i.e., “clinical trial material”) means presentations and quantities of the Product that meet the Specifications and have been produced under cGMP conditions for use in Clinical Studies.

     1.24 “ Cure Period ” shall have the meaning set forth in Section 11.6(a).

     1.25 “ Data ” means all data resulting from AVANIR’s in vitro testing or Clinical Studies.

     1.26 “ Development Milestones ” means the events defined in Section 6.3.

     1.27 “ Development Payments ” means the payments due EURAND upon achieving the Development Milestones under Section 6.3.

     1.28 “ DMF ” means the Drug Master File developed and filed with the FDA by EURAND which relates to and describes the composition and manufacture of the Product (including all manufacturing batch records, stability information, quality control and assurance assays and procedures for the Product that are reasonably necessary for the chemistry and manufacturing controls section of an NDA.

     1.29 “ Drug Combination ” means any combination of the APIs.

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     1.30 “ Effective Date ” shall have the meaning set forth in the Preamble.

     1.31 “ Entity ” or “ Entities ” means any individual, partnership, association, joint venture, limited liability company, corporation or other business entity.

     1.32 “ EURAND Development Activities ” means those activities to be carried out by EURAND in connection with the Program.

     1.33 “ EURAND Intellectual Property Rights ” means those intellectual property rights which are ^*** or *** to ***, or any of *** on and as of the Effective Date, *** the *** and ***, that are *** or *** in the *** and its *** the *** and ***.

     1.34 “ EURAND Trademark License ” shall have the meaning set forth in Section 7.6.

     1.35 “ EURAND Trademarks ” shall have the meaning set forth in Section 7.6.

     1.36 “ FDA ” means the United States Food and Drug Administration, and corresponding governmental regulatory agencies in other countries within the Territory.

     1.37 “ First Commercial Sale ” means the first bona fide sale, in the normal course of business, of the Product for use or consumption by the general public after the Approval Date.

     1.38 “ Force Majeure ” means any cause or causes which wholly or partially prevent or delay the performance of obligations arising under this Agreement. and which are not reasonably within the control of the non-performing Party and cannot be prevented by applying due care and economically appropriate means, including but not limited to, fire, floods, explosions, embargoes, epidemics, war, acts of war (whether war is declared or not), insurrections, riots, civil commotions, terrorism, the existence or administration of any laws, rules or regulations, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority or the other Party.

     1.39 “ Formulation ” means both (i) the identification and selection of ingredients, including the Drug Combination, *** , and (ii) the EURAND Patent Rights and Know-How solely related to the Product and improvements thereto. For the avoidance of doubt, the definition of Formulation herein does not include (i) any AVANIR Intellectual Property Rights or (ii) any EURAND Intellectual Property Rights that existed prior to the Effective Date, or methods, conditions, or batch records related to the manufacture of the Product. As between EURAND and AVANIR, EURAND shall own the Formulation, *** the ***, *** and *** EURAND shall have no rights in the Drug Combination standing alone.

     1.40 “ GAAP ” means either Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or an alternative set of internationally recognized accounting standards mutually acceptable to both Parties.

     1.41 “ IP ” shall have the meaning set forth in Section 13.7.

     1.42 “ Know-How ” means proprietary and confidential know-how, trade secrets, patented and unpatented inventions, data, formulations, methods, technology and information of a Party. “Know-How” shall include, without limitation, ideas, designs, processes, techniques, innovations, discoveries,

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improvements, and/or analytical methodology used in development, testing, analysis, manufacture and/or medical, clinical, toxicological testing as well as other scientific data.

     1.43 “ NDA ” means a New Drug Application under the Act in the United States.

     1.44 “ Net Sales ” means the aggregate gross sales of the Product invoiced directly by AVANIR, its Affiliates or sublicensees on a country by country basis, in each case on an arms-length basis, less:

          (a) ***;

          (b) ***;

          (c) ***;

          (d) ***;

          (e) ***;

          (f) ***;

          (g) ***;

          (h) ***;

          (i) ***, *** and *** in connection with the *** of the Product to *** and to the extent such *** are remitted to the ***; and

          (j) *** to the extent included in the invoice price and separately identified on the invoice or other documentation maintained in the ordinary course of business; each of the above, as determined in accordance with GAAP.

In the event that AVANIR, its Affiliates or their sublicensees sell a Product together with any other distinct product or active ingredient that does not comprise a Product (“Combination Product(s)”) pursuant to an agreement with an independent customer specifying (i) a single price, (ii) other terms of purchase not separately identifying either a price for the Product or the discounts, allowances, credits and similar adjustments applicable to a sale of the Product or (iii) a price for the Product which is discounted below the average sale price per unit of the Product not sold as a Combination Product during the applicable Calendar Quarter in a particular country more than the amount that all other products are discounted below such other product’s average sale price per unit not sold as a Combination Product during the applicable Calendar Quarter in a particular country, the Net Sales of the Product, for the purposes of determining the Royalty, shall be determined by multiplying the Net Sales of the Combination Product by the fraction, A/(A+B), where A is the average sale price per unit of the Product during the applicable Calendar Quarter in a particular country when sold separately in finished form and B is the average sale price per unit of the other product(s) during the applicable Calendar Quarter in that same country sold separately in finished form. In the event that such average sale price per unit cannot be determined for both the Product and the other product(s) in combination, Net Sales for purposes of determining the Royalty shall be agreed by the Parties based on the relative value contributed by each

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component, such agreement not to be unreasonably withheld nor shall such agreement have the effect of reducing the Net Sales of the Product by more than fifty percent (50%). Failing agreement on such relative value contribution within ^*** Calendar Days from written notice from one Party to the other, the dispute resolution procedures set forth in this Agreement shall be employed.

     1.45 “***” means a *** and the *** to the current ***.

     1.46 “ Nonparticipating Party ” shall have the meaning set forth in Section 8.7(d).

     1.47 “ Party ” means either EURAND or AVANIR, or their successors as the case may be, and “ Parties ” means EURAND and AVANIR, collectively.

     1.48 “ Patent Rights ” means patents and applications for patents including continuations, divisionals, reissues, re-examinations, and patents issuing from these and any foreign counterparts thereof.

     1.49 “ Pilot Clinical Study ” means the first Clinical Study whereby AVANIR is seeking to *** of the Product.

     1.50 “ Pivotal Clinical Study ” means a Clinical Study whereby AVANIR is seeking to *** the *** of the Product.

     1.51 “ PK Profile ” shall have the meaning set forth in Section 2.1(d).

     1.52 “ Pre-Registration Activities ” means those activities that are necessary prerequisites to the preparation and filing of the NDA for the Product with the FDA consisting of: (i) filing and/or updating the DMF, (ii) completing stability studies as necessary for such NDA filing, and (iii) conducting Clinical Studies.

     1.53 “ Product ” means the ***.

     1.54 “ Product Rights ” shall have the meaning set forth in Section 7.4.

     1.55 “ Program ” means the development work conducted by both Parties under this Agreement as specified in the Proposal and such other work as mutually agreed upon by the Parties from time to time during the Term, including, without limitation, any additional work associated with changes agreed under Section 2.2.

     1.56 “ Program Initiation ” means the initiation of the EURAND Development Activities within five (5) Business Days of August 21, 2006.

     1.57 “ Proposal ” shall have the meaning set forth in Section 2.1(b).

     1.58 “ Regulatory Approval ” means granting of all the Applicable Permits necessary for the commercialization of the Product including, but not limited to pricing, in a country of the Territory.

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     1.59 “ Regulatory Filings ” means any filing under the Act in the United States, or a corresponding filing required in other countries of the Territory, in which AVANIR, or its sublicensee, is seeking Applicable Permits, including any NDA.

     1.60 “ Royalty ” means the royalties due EURAND on Net Sales of the Product by or on behalf of AVANIR, its Affiliates or any sublicensee in accordance with Section 10.

     1.61 “ Sales Milestones ” means the events defined in Section 6.4.

     1.62 “ Specifications ” means the specifications for the Product as agreed upon in writing and as amended from time to time by the Parties.

     1.63 “ Stage ” means the subsections under the EURAND Development Activities as outlined in the Proposal.

     1.64 “ Sublicensing Revenue ” means with respect to Product only, any fees, including without limitation, up-front, milestone, or other license, marketing, development, or technology access payments or other consideration received by AVANIR or its Affiliates, ^*** , from a sublicensee, or acquirer in the event of a divestment pursuant to Section 7.4, in conjunction with any sublicense or commercialization agreement regarding the Product. For the avoidance of doubt, Sublicensing Revenue (i) shall not include *** (ii) shall include ***, and (iii) shall not include *** provided ***.

     1.65 “ Term ” shall have the meaning set forth in Section 11.1.

     1.66 “ Territory ” means the world.

     1.67 “ Third Party ” means any Entity other than EURAND or AVANIR or their respective Affiliates.

     1.68 “ Third Party Infringement ” shall have the meaning set forth in Section 8.7(a).

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

     1.70 “ Trademark ” means trademarks, trade names, brand names, copyrights, logo types, symbols, service marks, designs, domain names and URLs, including, without limitation, registrations and applications for registrations thereof and all renewals, modifications and extensions thereof.

     1.71 “ United States ” means the United States of America, its territories, possessions, and jurisdictions in commonwealth with it.

     1.72 “***” means means (i) *** in an *** and *** within the *** , (ii) a *** in *** to *** to *** , or (iii) any *** in *** that is *** or *** to *** that has ***; in each case provided that such *** (a) *** or *** not ***, (b) ***, or *** or *** in a *** of a *** or *** that is *** or *** the *** for *** and (c) has ***.

2. PROGRAM

     2.1 General .

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          (a) AVANIR hereby engages EURAND, and EURAND hereby agrees to conduct the EURAND Development Activities in accordance with the Program, the Specifications, and the terms and conditions of this Agreement.

          (b) The EURAND Development Activities will be conducted as initially set forth in the product development proposal (attached as Exhibit A (“Proposal”)). EURAND shall assign professionally qualified personnel to perform the EURAND Development Activities and shall perform the EURAND Development Activities in compliance with the requirements of Applicable Laws, including cGMPs when appropriate. EURAND may delegate all or any portion of the EURAND Development Activities to one or more of EURAND’s Affiliates, provided that any such Affiliate will be bound by the terms and conditions of this Agreement, and that EURAND shall remain responsible for its obligations under this Agreement.

          (c) EURAND shall initiate the EURAND Development Activities promptly after the Effective Date, and EURAND shall carry out the EURAND Development Activities in accordance with the proposed timelines. AVANIR shall cooperate with EURAND in carrying out the Program. Each Party shall make available such of its scientific, regulatory, clinical, engineering, manufacturing and other personnel necessary to perform its respective responsibilities in accordance with the terms hereof.

          (d) Prior to the completion of Stage 1 of the Proposal the Parties shall meet and agree in writing on the pharmacokinetic profile (the “PK Profile”) and reasonable acceptance criteria (e.g., including the acceptable deviation from the agreed upon PK Profile) to be pursued in the Pilot Clinical Study.

          (e) With the exception of ^*** activities, EURAND shall *** pertaining to an *** the Proposal without *** . AVANIR shall not be liable for any costs or expenses incurred by EURAND or any other payments set forth in this Agreement in respect of *** conducted in ***.

          (f) AVANIR, at its sole discretion and expense, will be solely responsible for, conducting all aspects of the development of the Program other than the EURAND Development Activities (the “AVANIR Development Activities”), including, without limitation, determining the clinical and regulatory strategy for the Product, the conduct of any and all Clinical Studies, and the filing and maintenance of all Regulatory Filings, with the exception of the filing and maintenance of the DMF.

          (g) The Parties shall use prudence and reasonable care in the use, handling, storage, transportation, disposition and containment of the APIs, Formulation, CTM, and Product resulting from the EURAND Development Activities. The Parties agree that the APIs, Formulation, CTM, and Product will be used in compliance with all applicable statues and regulations, including without limitation those governing disposal of hazardous materials.

          (h) In connection with the EURAND Development Activities, AVANIR shall procure and supply to EURAND, such quantities of the APIs which EURAND may reasonably require, or as otherwise agreed in writing between the Parties. ***. Prior to receipt by EURAND of the APIs, AVANIR shall provide EURAND with all material information in AVANIR’s possession pertaining to procedures and warnings for the safe handling and use of the APIs, including, without limitation, material data safety sheets, and update the same during the course of the Agreement. AVANIR shall provide the APIs to EURAND at no cost to EURAND and such APIs shall meet AVANIR’s established specifications for the APIs. AVANIR shall deliver to EURAND with each such shipment of API a

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certificate of analysis stating that the API meets its specifications and has been manufactured in accordance with cGMP. Title and risk of loss for all APIs supplied to EURAND by AVANIR in accordance herewith, other than due to EURAND’s negligence, shall be and remain at all times with AVANIR. For the purposes of initiating the EURAND Development Activities, AVANIR shall provide EURAND with ^*** of each API.

     2.2 Program Changes . The Parties acknowledge that the nature of the development process is such that modifications to the Program (including modifications relating to the acquisition of additional equipment and materials) may be desirable or reasonably necessary at certain times for regulatory, legal, commercial or other reasons. In the event that either of the Parties believes that changes to the Program are required, that Party shall promptly notify the other Party in writing of the exact nature of such changes and the specific reasons therefor. The Parties shall then meet promptly to discuss the changes that may be needed. If the Parties agree that changes in the Program are required, the Parties shall amend the Program to reflect the necessary changes, and also to set out any appropriate change in cost or time necessary to fulfill the Program. Any mutually agreed increase in cost due to expansion of the Program shall be borne wholly by AVANIR ***.

3. SUPPLY OF CLINICAL AND COMMERCIAL MATERIAL

     3.1 Clinical Supply .

          (a) The Parties will mutually define specific quantities and timing for the manufacture and delivery of CTM for any and all Clinical Studies required during the Program and for purposes of obtaining all Applicable Permits.

          (b) Each shipment of CTM shall be sampled and analyzed by EURAND to determine if the shipment meets the Specifications. EURAND shall deliver to AVANIR with each such shipment of CTM a certificate of analysis stating that the CTM meets the Specifications and has been manufactured in accordance with cGMP and Applicable Laws.

          (c) AVANIR may conduct its own analyses on each shipment of the CTM delivered to AVANIR pursuant to this Agreement. AVANIR shall notify EURAND within *** Business Days after delivery of such CTM if there are shortages, or within *** Calendar Days if the same does not meet the Specifications or terms and conditions of this Agreement, or is adulterated or misbranded within the meaning of the Act. Unless AVANIR advises EURAND that a shipment is unsatisfactory within *** Calendar Days of its receipt, or if AVANIR uses such CTM in a Clinical Study, such shipment shall be deemed accepted.

          (d) In the event any dispute arises between EURAND and AVANIR concerning the acceptability of any shipment of CTM, the Parties agree to cooperate in good faith to resolve any disputes arising therefrom and, in the event that the Parties shall be unable to resolve such dispute within *** Calendar Days from the date of AVANIR’s notice pursuant to this Section 3.1, then if the dispute involves whether or not the CTM meets the Specifications, the Parties shall submit such dispute to a mutually agreed-to independent laboratory. The determination by such laboratory shall be final and binding on the Parties and the costs therefor shall be borne by the non-prevailing Party. AVANIR shall not dispose of any CTM claimed by it not to comply with the terms and conditions hereof until resolution

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of any dispute with respect thereto. EURAND shall supply retained samples to such independent laboratory for testing. If the dispute concerning the acceptability of any shipment does not relate to whether the CTM meets the Specifications, the dispute shall be settled in accordance with Section 13.15 hereof.

          (e) EURAND shall replace, ^*** any CTM delivered hereunder that is rejected in good faith by AVANIR and agreed to by EURAND or that fails to satisfy the representations and warranties set forth herein, unless subject to a dispute under Section 3.1(d). EURAND’S LIABILITY UNDER SUCH WARRANTY IS LIMITED TO THE REPLACEMENT OF SUCH CTM, PROVIDED *** AND ***.

          (f) Unless otherwise agreed upon by the Parties, EURAND is not responsible for the conduct, costs and/or expenses of the Clinical Studies and/or the preparation, filing, and prosecution of the Regulatory Filings, with the exception of the DMF.

          (g) EURAND shall retain sole responsibility for releasing the CTM to AVANIR or to the clinical sites if clinical sites have been designated for receipt of the CTM by AVANIR.

     3.2 Delivery . All CTM and Product shall be shipped FCA (Incoterms 2000) EURAND’s manufacturing facility in the ***, currently located in ***, at AVANIR’s expense via a carrier identified by AVANIR. Delivery shall occur, and title and risk of loss of such quantities of the CTM and Product shall pass to AVANIR, upon delivery of such material to such common carrier. AVANIR shall be responsible for freight and insurance charges.

     3.3 Commercial Supply Agreement . Promptly following the delivery of CTM for the first Pivotal Clinical Study as indicated by the payment by AVANIR of the Development Payment pursuant to Section 6.3(e), the Parties shall enter good faith negotiations for the purpose of executing a Commercial Supply Agreement under which EURAND will exclusively manufacture the Product. Such Commercial Supply Agreement will include reasonable and customary terms pursuant to which EURAND will supply the Product at *** to be set initially when the final Specifications for the Product have been agreed upon by the Parties. Such initial transfer pricing shall *** $*** (for a Product ***). The *** of the Effective Date and is subject to the following assumptions being met: (i) that the *** of the Product is no later than the end of Calendar Year *** and (ii) that the Formulation of the Product is not materially different than that which is proposed in the Proposal. The Parties acknowledge that the *** validation and prior to the Approval Date of the NDA by the FDA. The Parties further acknowledge that AVANIR’s initial good faith *** for the Product is ***. The price expressed above shall include all costs for *** or other ***. The Commercial Supply Agreement shall include provisions under which adjustments to the initial price and subsequent annual prices may be made by EURAND, including but not limited to, increases in raw material costs, changes to the Formulation or manufacturing process requested by AVANIR, or changes in Applicable Laws or practice dictated by *** or the FDA, ***, which *** or ***. The Commercial Supply Agreement additionally shall assign roles and responsibilities for *** the Product, and include provisions and circumstances under which EURAND, pursuant to Section 7.2, shall provide ***. Those circumstances include (i) *** of EURAND, (ii) ***, or (iii)***.

4. REGULATORY

     4.1 During the Program, to the extent required by the FDA to conduct Clinical Studies or to receive Applicable Permits in the United States, EURAND shall prepare a DMF and submit the DMF to

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the FDA. EURAND will provide AVANIR with an authorization letter such that AVANIR can reference the DMF in its Regulatory Filings. ^*** , and *** a *** and *** but *** and ***. In the event that a *** hold on the Program or material delay in a regulatory process is due to the negligence of EURAND in the preparation or submission of the DMF or results in material deficiencies in the DMF noted by the FDA, *** or *** the ***. The cost of EURAND personnel associated with resolving such deficiencies shall be solely borne by EURAND. EURAND shall notify AVANIR of the submission date for the DMF, or any subsequent revisions or amendments thereto, at least *** Business Days prior to each such submission, and notify AVANIR within *** Business Days regarding any material issues with respect to the filing or maintenance of the DMF.

     4.2 The Parties shall cooperate fully with each other so as to diligently complete the Pre-Registration Activities, and shall inform each other regularly *** of the progress of all Pre-Registration Activities.

     4.3 Following completion of the Pre-Registration Activities, ***, and ***, AVANIR shall *** submit an NDA for the Product in the United States. EURAND shall have the right to review and comment upon the portions of proposed protocols and investigator brochures for any Clinical Studies solely relating to the EURAND Intellectual Property Rights and EURAND’s Confidential Information. AVANIR shall consider such changes suggested by EURAND in good faith to the extent they are Commercially Reasonable and comply with Applicable Laws. With exception of the DMF, it is understood that the Parties’ intentions are to have AVANIR prepare and make all other necessary filings with the FDA required to seek Regulatory Approval in the United States. EURAND agrees, upon written request from AVANIR, to promptly provide AVANIR with such information as AVANIR may reasonably require to complete any and all such regulatory filings and submissions, unless such information is contained in the DMF in which case the information will be filed with the DMF. AVANIR shall own and be the holder of the NDA and the Applicable Permits and EURAND shall own the DMF with AVANIR, its Affiliates, and sublicensees having full rights to reference such DMF as necessary for Regulatory Filings worldwide.

     4.4 AVANIR shall notify EURAND of the submission date of each Regulatory Filing at least *** Business Days prior to such submission, and notify EURAND of the Approval Dates not later than *** Business Days after each such date. After submitting the Regulatory Filings, AVANIR shall use Commercially Reasonable Efforts in diligently prosecuting the Regulatory Filings before the FDA so as to obtain the Applicable Permits for the sale of the Product throughout the Territory as quickly as feasible. AVANIR shall update EURAND on the status of all Regulatory Filings and Applicable Permits in the Territory every Calendar Quarter following completion of the Pre-Registration Activities and thereafter on the status of its progress toward making the First Commercial Sale of the Product in the United States and throughout the Territory. AVANIR shall notify EURAND within *** Business Days of the date of First Commercial Sale in each country of the Territory.

     4.5 EURAND and AVANIR shall cooperate with respect to preparing, prosecuting, and maintaining necessary Regulatory Filings and Applicable Permits.

     4.6 EURAND shall give AVANIR reasonable notice of any impending governmental or Third Party audit of EURAND that directly relates to the manufacture or testing of the Product or CTM supplied to AVANIR pursuant to this Agreement or which are of general impact which could reasonably be expected to materially interfere with EURAND’s ability to perform under this Agreement, and *** or ***. In the event that any such audit involves an inspection of a EURAND facility, then EURAND shall

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provide AVANIR the opportunity to be on-site during such inspection, provided that AVANIR acknowledges that EURAND does not control the timing of such inspections and, as such, cannot guarantee timing that will permit AVANIR’s attendance. AVANIR’s participation in any such audit shall be limited to that of being an observer. EURAND shall also provide AVANIR the opportunity to ^*** Business Days *** or *** or *** and shall *** AVANIR with the results of *** following its conclusion which are directly related to the Product or CTM; however, while EURAND will give any comments or suggestions of AVANIR good faith consideration, EURAND shall have the final discretion in responding to any such audit. EURAND agrees that AVANIR shall have the right from time to time during the term of this Agreement to carry out an audit of EURAND’s *** facility for conformance with cGMPs, but not more than once per Calendar Year, unless an audit results in adverse findings in which case AVANIR shall be entitled to re-audit EURAND with respect to such adverse findings pursuant to this Section 4.6 without reference to the once per Calendar Year limitation. AVANIR must provide advanced written notice at least *** Business Days prior to such audits and audits may only be scheduled at the consent and approval of EURAND, such approval not to be unreasonably delayed or withheld.

     4.7 Within *** Business Days EURAND shall provide AVANIR with notification of its receipt of any of the following related to the manufacture or testing of the Product or CTM or that would materially impair its ability to perform under this Agreement: a copy of any list of observations (Form FD 483), warning letter, information letter, regulatory letter or the like issued by the FDA as well as provide AVANIR an opportunity to review any written response and shall consider any comments by AVANIR in good faith prior to submission to the issuing agency. However, EURAND shall have sole discretion regarding the resolution of any matter pertaining to such inspections and submissions.

      5.  INFORMATION AND USE .

     5.1 EURAND shall furnish AVANIR with reports summarizing the progress of the Program as described in the Proposal during the course of the Program, and as requested by AVANIR and mutually agreed upon by the Parties from time to time.

     5.2 AVANIR shall expressly not analyze, nor have analyzed, the Product or CTM for the purpose of reverse engineering the EURAND Intellectual Property Rights.

     5.3 AVANIR shall own all Data and shall provide EURAND with the Data. Except pursuant to Section 5.4 or as otherwise agreed between the Parties in writing, EURAND shall only use the Data to complete the EURAND Development Activities. EURAND shall *** or *** except in the performance of this Agreement.

     5.4 For the purposes of demonstrating to Third Parties the benefits of the EURAND Intellectual Property Rights, EURAND is entitled to disclose to Third Parties the numerical values underlying the results obtained by or provided to AVANIR and/or the Data, provided that (i) EURAND first provides such materials to AVANIR for approval, such approval not to be unreasonably withheld, and (ii) AVANIR’s name, the name of the Drug Combination, or information by which a Third Party could reasonably determine the identity of the Drug Combination or AVANIR shall not be disclosed.

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6. COMPENSATION

     6.1 Development Fees .

          (a) EURAND shall invoice AVANIR on or after the last Business Day of each calendar month for its personnel time, costs and expenses incurred in performance of the Program pursuant to this Agreement. AVANIR shall also reimburse EURAND for all out-of-pocket expenses associated directly with the performance of the Program, provided they are disclosed to and approved by AVANIR in writing in advance.

          (b) EURAND’s monthly invoice shall reflect an ^*** $*** until ***; such rate may be adjusted *** each Calendar Year thereafter by EURAND to reflect reasonable and customary changes to its billing rates, ***. EURAND’s invoiced personnel time shall *** percent (***%), unless attributable to changes under Section 2.2, or an additional expense under Section 6.2, or as otherwise agreed to in advance and in writing by AVANIR.

     6.2 Additional Expenses . In addition to the cost estimates set forth in Exhibit A hereto, AVANIR shall be responsible for the following additional costs and/or expenses:

          (a) the cost of any additional development work performed by EURAND in accordance with Section 2.2;

          (b) the cost of any CTM required for the conduct of additional Clinical Studies not already included in the Proposal, provided that the manufacture of such material is approved in advance by AVANIR;

          (c) the cost of any external contract research;

          (d) the packaging of CTM;

          (e) the cost of the APIs; and

          (f) the cost of any dedicated, project-specific consumables or other equipment, if approved in advance by AVANIR in writing.

     6.3 Development Payments . In consideration of EURAND’s performance of the EURAND Development Activities, AVANIR shall pay EURAND the following non-refundable Development Payments in United States dollars upon achievement of the following events (&#822