EXCLUSIVE PATENT AND KNOW-HOW AGREEMENT

“Affiliate”

means any firm, person or company which controls, is controlled by or is under common control with a party to this Agreement and for the purpose of this definition the term “control” means the possession, directly or indirectly of the power to direct or cause the direction of the management and policies of such firm, person or company whether through the ownership of voting securities, by contract or otherwise or the ownership either directly or indirectly of 50% or more of the voting securities of such firm, person or company;

“a Distributor”

means a distributor under the terms of a Distributor Agreement;

“a Distributor Agreement”

means an agreement which allows a third party to purchase from Laxdale (or a Licensee of Laxdale) and distribute the Products as finished packaged goods;

“the Effective Date”

means the date of this Agreement;

“EMEA”

means the European Agency for the Evaluation of Medicinal Products;

“European Union”

means all the current member states of the European Union or any other countries which shall subsequently accede to the membership of the European Union;

“EU”

means the European Union;

“FDA”

means the United States Food and Drug Administration;

“the Field of Use”

means any and all psychiatric and central nervous system disorders, including pain;

“Holding Company”

means a holding company within the meaning of sections 736 and 736a of the Companies Act 1985

“the Improvements”

means any improvement, enhancement or modification to a Product or its method of manufacture within the Field of Use;

“Intellectual Property”

means Patents, Orphan Drug Designations, marketing authorisations, confidential information, Scarista Know-how or other intellectual rights and Improvements developed pursuant to Clause 4.2, owned by or licensed to Scarista;

“Know-how”

means all secret and substantial know-how, experience, drawings, designs and all other technical and other information including but not limited to

data, formulae, ideas, inventions, procedures for experiments and tests, manufacturing processes, specifications and techniques;

“LAX-101”

means ethyl-eicosapentaenoate (ethyl-EPA) of greater than 90% purity as the active ingredient;

“Licence”

means any form of agreement or arrangement other than a Distributor Agreement which occurs when Laxdale does not sell the Product itself to the relevant Third Party but permits such a Third Party to manufacture and/or sell or otherwise commercialise Products in the Laxdale Territory;

“Licensee”

means a licensee under the terms of a Licence;

“the Laxdale Know-how”

means all Know-how owned by Laxdale in connection with the Patents and Orphan Drug Designation;

“the Laxdale Licence”

means the licence of even date hereto granted by Laxdale to Scarista in terms of which Scarista is entitled to exploit certain patents and intellectual property in the Scarista Territory;

“the Laxdale Territory”

means Canada, the United States of America, the European Union and Japan;

“the Net Sales Value”

means the gross invoice price of Products sold by Laxdale(or a wholly owned subsidiary) (in each case other than pursuant to a Licence, Sub-license or a Distributor Agreement) to a Third Party (“Customer”)

less the following items to the extent they are included in the invoice price

(i)            normal and reasonable discounts actually granted;

(ii)           freight, shipment and insurance costs directly incurred by Laxdale (or a wholly owned subsidiary) in transporting Products to Customers;

(iii)          taxes, tariffs, trade or ordinary discounts actually granted, government rebates, amounts repaid or credited because of return of goods (but excluding any free samples given to Customers);

(iv)          customs duties and other governmental charges incurred in connection with the sale, exportation or importation of the Products.

For the avoidance of doubt a supply of Products by Laxdale (or a wholly owned subsidiary) (i) involving a supply margin of 10% or less; or (ii) to one of its current Sub-licensees on current terms shall not fall within the defined terms “Net Sales Value” or “Net Income” for the purposes of this Agreement.

If Laxdale sells Products in any transaction which is not at arm’s length the Net Sales Value shall not be the price as charged, invoiced or received but shall be the open market price in the part of the world where the transaction was effected.

The transfer or sale of Products to a wholly owned subsidiary shall not be considered a sale. In such

cases, the Net Sales Value shall be determined based on the invoiced sale price by the wholly owned subsidiary to the Customer, less the deductions allowed by this clause.

“Net Income”

means all income received by Laxdale with respect to commercial exploitation of the Patents or Orphan Drug Designation and the associated Scarista Know-how in the Laxdale Territory. Such Net Income shall include: a) when a Product is sold by Laxdale (or a wholly owned subsidiary) directly to a Third Party, Net Income shall equal Net Sales Value as defined separately; b)when a Product is sold by a Third Party (or an Affiliate which is not a wholly owned subsidiary) under a Licence, Sub-License or Distributor Agreement, then Net Income shall equal all income received by Laxdale from any source under such an agreement whether in the form of profit-sharing, royalties, license fees, share issues (which shall be valued at time of and on the terms of such disposal (in cases where Laxdale shares are subscribed for)and on acquisition (in cases where Laxdale is paid a milestone by way of a shares in a Third Party), milestone payments, outright sale of the Intellectual Property.

If Laxdale receives income in any transaction which is not at arm’s length the Net Income shall not be the price as charged invoiced or received but shall be the open market price in the part of the world where the transaction was effected.

“Nutricia Licences”

means the licences granted by Scotia Holdings Plc to Nutricia International BV (“Nutricia”) dated 31 December 1998 and 16 August 1999 respectively (in each case in relation to the fields defined within those licence agreements).

“Nutricia IP”

means patent case numbers 37, 51, 71, 98 and 110 as detailed in the Schedule licensed to Nutricia under the Nutricia Licences.

“Nutricia”

means Nutricia International BV (registered number 27112523 in the Netherlands Commercial Register) whose registered office/principal place of business is at Euste, Startionsstroat 18b, 2712 HM Zoetemeer.

“Orphan Drug Designation”

means the orphan drug designation of the approval process for a Product as granted by a Regulatory Authority;

“Patents”

means the patents or patent applications as described in Schedule 1 (including any and all divisions, continuations, continuations in part, extensions, substitutions, renewals, registrations, revalidations, re-issues thereof or additions thereto and including supplementary certificates of protection or similar of or to any such patent or patent application), together with all Patents which may be granted pursuant to any such patent applications;

“Products”

means a pharmaceutical product within the Field of Use within the scope of any of the Patents or Orphan Drug Designation or utilising a not insubstantial part of the Scarista Know-how and/or the Intellectual Property of Scarista;

“Regulatory Approval”

the grant of all necessary governmental and regulatory approvals by a Regulatory Authority to sell Product in any country of the Laxdale Territory including without limitation approvals required for pricing and reimbursements (if appropriate);

“Regulatory Authority”

the FDA or similar governmental or other agency in a country having authority to grant a Regulatory Approval;

“Regulatory Dossier”

means a dossier and all formal responses and submissions to any questions or issues raised by a regulatory authority in response to such a Regulatory Dossier once submitted which contains all the relevant information relating to a drug which is required by a Regulatory Authority as the case may be. Such a dossier will normally contain information about the chemistry, formulation, manufacture, toxicology, pharmacology, pharmacokinetics and clinical studies related to a drug;

“the Scarista Know-how”

means all Know-how used by Scarista in connection with the Patents and Orphan Drug Designation;

“the Scarista Territory”

means world-wide except those countries which comprise the Laxdale Territory from time to time;

“Schedule 1”

means Schedule 1 which sets out details of the Patents dealt with in this Agreement and which forms an integral part of this Agreement;

“Schedule 2”

means Schedule 2 as referred to in Clause 5.3;

“Schedule 3”

means Schedule 3 as referred to in Clause 12.1.2;

“Sub-license”

means any form of agreement or arrangement which occurs when a Licensee of Laxdale permits a Third Party to sell or otherwise commercialise Products (other than via a Distributor Agreement) in the Laxdale Territory;

“Sub-Licensee”

means any Third Party granted a Sub-license to sell or otherwise commercialise Product under a Sub-license;

“Third Party”

means any party which is not an Affiliate or wholly owned subsidiary of Laxdale or Scarista;

“the Trade Marks”

means such trade marks, brands, signs or logos which are applied to the Products.

2.1.1

Within the Field of Use Scarista hereby grants to Laxdale the exclusive right and licence (save in respect of Scarista which shall retain the same right) under the Patents Orphan Drug Designation, the Scarista Know-

How and the Intellectual Property of Scarista to develop, to have developed, to make, to have made and to use (other than to market and sell), pharmaceutical products (including Products) on a world wide basis. To the extent that either Scarista or Laxdale wish to develop, to have developed, to make, to have made and to use (other than to market and sell), pharmaceutical products (including Products on a world wide basis in either of the other respective territory they shall consult with each other with a view to not prejudicing either of their mutual interests

2.1.2

Within the Field of Use, Scarista hereby grants to Laxdale the exclusive right and licence under the Patents, the Scarista Know-How and the Intellectual Property of Scarista to market, sell and distribute pharmaceutical products (including Products) in the Laxdale Territory.

2.2

Scarista and Laxdale acknowledge that it is in their mutual commercial interests to exploit the Patents set out in Schedule 1 together with the Know-how in a co-operative and collaborative manner and, without limitation, neither Scarista nor Laxdale (or any of their respective Affiliates) will endeavour to enter into any form of exclusive purchase or supply agreement with any Third Party in respect of the Products within the Field of Use which could materially hinder or prevent the other party contracting with such Third Party.

2.3

In the event that Scarista has, or subsequently does, license a Product within the Scarista Territory and a country or countries designated in such licence then becomes part of the Laxdale Territory then in such circumstances such licence shall, provided the same was granted on an arms length bona fide basis, continue with full force and effect (notwithstanding Clause 2.1.2) in respect of such Licence for the Product and indication(s) and in respect of such country or countries detailed therein but in all other respects such country or countries shall fall within the definition of Laxdale Territory and shall be subject to Laxdale’s rights set out in Clause 2.1.2.

2.4

Licensing and Sub-licensing and Distributorship

Laxdale may grant Licences or enter into Distributor Agreements under the licences granted pursuant to Clause 2.1 above, (including a right under the Licence to grant further Sub-licences on the same terms granted by this Clause), on condition that:-

(a)

any such Licence or Distributor Agreement shall include like obligations and undertakings on the part of the Licensee or Distributor as are contained in this Agreement provided, for the avoidance of doubt, that Laxdale shall remain solely responsible to Scarista in respect of the payment of royalties pursuant to this Agreement;

(b)

any such Licence or Distributor Agreement shall not exceed in scope or duration, the scope and duration of the licences granted hereunder;

(c)

Laxdale shall be responsible to Scarista for any failure of Licensees or Distributors to observe and perform the terms and conditions of their Licence or Distributor Agreements;

(d)

Laxdale shall provide to Scarista details of who it has granted Licences, (and details of any Sub-licences granted by its Licensees) or Distributor Agreements to together with a copy of the clauses, schedules and/or definitions of each Licence, Sub-licence and Distributor Agreement it grants which are relevant to the payment of sums due to Scarista under clauses 5.2 and 5.3 within thirty (30) days of the respective dates of execution of such Licence, Sub-licence or Distributor agreement;

(e)

Laxdale’s Licences and Distributor Agreements will provide for automatic termination of the Licence or Distributor Agreement in the event of a challenge by the Licensee or Distributor to the validity of any of the Patents licensed thereunder;

(f)

the conditions contained in this Clause 2.4 shall not apply to any Licences or Distributor Agreements entered into by Laxdale at the date hereof.

2.5

Formal Licences

The parties agree to execute such formal licences and other documents and take such other action as each party reasonably requires from time to time for registration with Patent Offices and/or other relevant authorities or otherwise to give effect to this Agreement at the expense of the requesting party.  Until the grant of any such licence the parties  shall so far as legally possible have the same rights and obligations towards each other as if such licence has been granted.  In the event of any conflict in meaning between any such licence and the provisions of this Agreement, the provisions of this Agreement shall prevail.  The parties shall use their reasonable endeavours to ensure that, to the extent permitted by relevant authorities, this Agreement shall not form part of any public record.

3.

Know-how

3.1

Forthwith after the Effective Date from time to time as reasonably requested Scarista shall disclose to Laxdale the Scarista Know-how and Laxdale shall disclose to Scarista the Laxdale Know-how which it is at liberty to disclose. All Know-how furnished by either party shall be subject to the provisions of Clause 7, (confidentiality) and shall be used by the recipient party only for the purposes of this Agreement.

3.2

Scarista shall be entitled to have full access on reasonable notice to Regulatory Dossiers, in Laxdale’s possession and control, for any Product and to use or adapt them for the purposes of this Agreement and at its own expense in the Scarista Territory without payment to Laxdale. For the avoidance of doubt all Scarista licensees of the Intellectual Property in the Scarista Territory in terms of this

Agreement shall also be entitled to have full access via Scarista on reasonable notice to all such Regulatory Dossier without payment.

4.

Improvements

4.1

If during the term of this Agreement Laxdale develops or conceives any Improvement or receives the benefit of a licence of any Improvement then Laxdale shall grant to Scarista a non-exclusive licence for severable Improvements (provided it is entitled to do so) or an exclusive licence for non-severable Improvements (provided it is entitled to do so) for the Scarista Territory until termination or expiry of this Agreement together with the right to grant sub-licences or distributor agreements pursuant to such Improvement licence(s)and there shall be no further payment to Laxdale save for any payment due pursuant to the Laxdale Licence.

4.2

If during the term of this Agreement Scarista develops or conceives any Improvement or receives the benefit of a licence of any Improvement the rights to use and exploitation of such Improvements shall be granted automatically to Laxdale at no additional cost under the same terms and conditions set forth in Clause 2.1.save that where Scarista receives the benefit of a non-exclusive licence then Laxdale shall only be entitled to receive a non-exclusive sub-licence hereunder.

4.3

Improvements arising from the work carried out by either party alone shall remain the exclusive property of that party subject to any grant of any licence provided herein.

4.4

When Improvements are identified by either party, the parties will endeavour to collaborate to secure their optimum commercialisation.

5.

Payment

5.1

Laxdale, upon the Effective Date, shall pay to Scarista a signing fee in the amount of £500,000.

5.2

Laxdale, in consideration of the rights granted to it under Clause 2.1, 2.3 and 4.2 of this Agreement shall during the term of this Agreement pay to Scarista a royalty of 5% on the Net Income received from exploitation or sale of Products within the Laxdale Territory PROVIDED THAT no royalty shall be due and payable in relation to sales of a Product in a country which is part of the Laxdale Territory on the later of (i) expiry of the last Patent relating to the Product in such country;(ii) expiry of any regulatory exclusivity relating to the Product in such country;(iii) the Scarista Know how ceasing to be secret and substantial in such country. For the avoidance of doubt all Net Income accruing to Laxdale from the Effective Date will be subject to this Clause 5. Further, and also for the avoidance of doubt, if any Product referred to under this Clause 5.2 attracts any other payment or royalty payable by Laxdale to Scarista whether pursuant to this Agreement, the Laxdale Licence, or otherwise the maximum aggregate amount payable by Laxdale to Scarista in respect of such Products shall be 5% of the Net Income.

5.3

Laxdale, in consideration of Scarista renegotiating the terms of the licence agreement between the parties hereto dated 24 March 2000 wherein the Intellectual Property set out in Schedule 2 was transferred to Laxdale shall during the term of this Agreement pay to Scarista 5% of the Net Income arising from the sale or exploitation of Products within the Laxdale Territory PROVIDED THAT no royalty shall be due and payable under this Clause in relation to the exploitation or sale of a Product in a country which is part of the Laxdale Territory on the later of (i) expiry of the last Patent (which for this purpose shall be a Patent set out in Schedule 2) relating to the Product in such country; (ii) expiry of any regulatory exclusivity relating to the Product in such country; (iii) the relevant Know how ceasing to be secret and substantial in such country. For the avoidance of doubt, if any Product

referred to under this Clause 5.3 attracts any other payment or royalty payable by Laxdale to Scarista whether pursuant to this Agreement, the Laxdale Licence, or otherwise the maximum aggregate amount payable by Laxdale to Scarista whether pursuant to this Agreement or otherwise shall be 5% of the Net Income for the relevant Product. For the purposes of this Clause 5.3 the terms;

“Net Income” shall have the same meaning as ascribed to it in this Agreement;

“Product(s)” shall mean a pharmaceutical product within the Field of Use within the scope of any Regulatory or Orphan Drug exclusivity or of the patents or patent applications set out in Schedule 2.

5.4

Payment due under Clauses 5.2 and 5.3 shall be made within thirty (30) days after the end of each calendar quarter in respect of any Net Income received by Laxdale.

5.5

All sums due under this Agreement:

5.5.1

are exclusive of any value added tax which shall be payable;

5.5.2

shall be paid in pounds sterling to the credit of a bank account to be designated in writing by the recipient.  In the event that either party receives monies in currencies other than pounds sterling (and in respect of which a royalty is payable to the other party) conversion of such monies into pounds sterling shall be calculated:-

5.5.2.1

in the case of each royalty payment at the rate of exchange ruling in London on the last day of the calendar quarter in respect of which the payment is due;

5.5.2.2

in the case of all other payments at the rate of exchange ruling on the day payment is made or due whichever is earlier.

5.5.3

shall be made after deduction of taxes, charges and other duties, (including any withholding or other income taxes), required to be made by law it being acknowledged that the party making such payments with deductions shall provide reasonable assistance to the other party in recovering any such taxes charges or other duties paid where appropriate.

5.6

Laxdale shall in respect of payments to be made by it hereunder, pay interest on any overdue payments at 2% above the base lending rate of The Bank of Scotland in force from the time payment was due to the date when the payment is actually received by the other party’s bank.

6.

Records and Reports

6.1

Laxdale agrees to keep true and accurate records of account containing all data necessary for the determination of payments made under Clauses 5.2 and 5.3 which records and books and accounts shall upon reasonable notice by Scarista (but not more than once in any calendar year)be open at all reasonable times during business hours for inspection by Scarista or its nominated representative for the purpose of verifying the accuracy of the reports under this Agreement. Scarista or its nominated representative may take copies of the records and books of accounts but shall not disclose any information relating to the business or affairs of Laxdale other than such information as properly should have been contained in any statement required to be furnished. Scarista shall be solely responsible for the costs of inspection unless any reports disclose a shortfall in payments made of more than 5% in respect of any 12 month period in which event Laxdale shall reimburse Scarista its reasonable costs of inspection and shall, where appropriate, immediately pay Scarista all royalties due in relation to any shortfall disclosed by the inspection.

6.2

Each party shall submit to the other within thirty (30) days after the end of eac