DEVELOPMENT AND MARKETING STRATEGIC ALLIANCE AGREEMENT AMONG ENDO PHARMACEUTICALS INC. SKYEPHARMA, INC. AND SKYEPHARMA CANADA INC. DATED AS OF December 31, 2002

               (ii) in the case of Endo, to:

or to such other address for such Party as it shall have specified by like notice to the other Party; provided, that, notices of a change of address shall be effective only upon receipt thereof. If delivered personally or by facsimile transmission, the date of delivery shall be deemed to be the date on which such notice or request was given. If sent by overnight express courier service, the date of delivery shall be deemed to be the next business day after such notice or request was deposited with such service. If sent by certified mail, the date of delivery shall be deemed to be the third business day after such notice or request was deposited with the U.S. Postal Service.

8. REPRESENTATIONS AND WARRANTIES AND CONVENANTS.

     8.1 Representations and Warranties of Both Parties. Each Party represents and warrants to the other Party, as of the Effective Date, that:

          (a) Such Party is duly organized and validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

          (b) Such Party has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this

-37-

Agreement and has full power and authority to enter into this Agreement and perform its obligations under this Agreement;

          (c) This Agreement has been duly executed by such Party and assuming due authorization, execution and delivery by the other Party, constitutes a valid and legally binding obligation of such Party, enforceable in accordance with its terms, subject to and limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws generally applicable to creditors’ rights; and (ii) judicial discretion in the availability of equitable relief;

          (d) With the exception of compliance with the applicable provisions of HSR and the approval of applicable Regulatory Authorities, such Party has obtained, or is not required to obtain, the consent, approval, order, or authorization of any Third Party, or has completed, or is not required to complete any registration, qualification, designation, declaration or filing with, any Regulatory Authority, in connection with the execution and delivery of this Agreement and the performance by such Party of its obligations under this Agreement, including any grant of rights to the other Parties pursuant to this Agreement; and

          (e) The execution and delivery of this Agreement, and the performance by such Party of its obligations under this Agreement, including the grant of rights to the other Party pursuant to this Agreement, does not and will not: (i) conflict with, nor result in any violation of or default under any such instrument, judgment, order, writ, decree, contract or provision to which such Party is otherwise bound; (ii) except as disclosed by SkyePharma on Schedule 8.1(e), give rise to any lien, charge or encumbrance upon any assets of such Party or the suspension, revocation, impairment, forfeiture or non-renewal of any material permit, license, authorization, or approval that applies to such Party, its business or operations or any of its assets or properties, except any or all of which could not reasonably be expected to have a material adverse effect on its ability to perform its obligations under this Agreement or on the rights of the other Party under this Agreement; or (iii) conflict with any rights granted by such Party to any Third Party or breach any obligation that such Party has to any Third Party.

     8.2 Representations and Warranties of SkyePharma. SkyePharma represents and warrants to Endo, as of the Effective Date, that:

          (a) SkyePharma is the owner of, or has exclusive rights to, all of the SkyePharma Product Patents in existence on the Effective Date, and has the exclusive right to grant the rights granted under this Agreement therefor. To the knowledge of SkyePharma, all of the issued SkyePharma Product Patents in existence on the Effective Date are valid, in full force and effect and have been maintained to date, and are not the subject of any interference or opposition proceedings;

          (b) SkyePharma has provided Endo, or given Endo access to, true, complete and unredacted (except as expressly noted) copies of all (i) Regulatory Documentation, and (ii) material agreements (including any letter agreements) between SkyePharma and any licensee, production or financing partner or other Third Party, including all effective amendments to any such agreements, which, in any event (A) affects or may affect Endo’s rights under this Agreement, or (B) relates to a Product;

-38-

          (c) There is no pending or, to the knowledge of SkyePharma, threatened claim, interference, opposition or demand of any Third Party challenging the ownership, validity or scope of any SkyePharma Product Patents in existence as of the Effective Date. To the knowledge of SkyePharma, the manufacture, use or sale of the Products as contemplated by this Agreement will not infringe or otherwise violate any intellectual property right of any Third Party; and

          (d) No representation or warranty made by SkyePharma in this Agreement, any Quality Agreement or any Supply Agreement, nor any statement or record contained in any schedule or exhibit hereto or thereto furnished by SkyePharma, contains any untrue statement of a material fact or omits any material fact necessary to make the statements contained herein or therein not misleading.

     8.3 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 8, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND EACH PARTY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE OR USE.

     8.4 Freedom to Operate. Each Freedom to Operate Opinion previously delivered to Endo concludes that there are no Third Party intellectual property rights which adversely affect the Parties’ right to make, use, sell, and offer for sale the Products as contemplated by this Agreement. In addition, the Parties expect that any update of such Freedom to Operate Opinions sought pursuant to Section 3.2(f) will conclude that there are no Third Party intellectual property rights which adversely affect the Parties’ right to make, use, sell, and offer for sale the Products as contemplated by this Agreement. However, it is agreed and understood by both Parties that such a Freedom to Operate Opinion or any updated Freedom to Operate Opinion shall in no way constitute a representation or warranty by or on behalf of SkyePharma that either Party is, in fact, free to make, use, sell, and offer for sale the Product in any way, without infringing the intellectual property rights of a Third Party.

     8.5 Negative Pledge. SkyePharma represents, warrants, and covenants that, except as set forth on Schedule 8.1(e), there are no liens or claims currently existing on or to the SkyePharma Product IP or SkyePharma Product Patents (including any liens or claims on or to rights to ▇▇▇ for past, present and future infringements thereof, any licenses, claims, damages, and proceeds of suit arising therefrom, or any payments or rights to payments arising out of the sale, lease, license, assignment, or other disposition thereof), any additions to, and substitutions for, any or all of the foregoing or any “proceeds” (as defined in Article 9 of the Uniform Commercial Code) of any or all of foregoing that could reasonably be expected to adversely affect Endo’s benefits and rights under this Agreement. SkyePharma will not create, incur, or permit to exist on or to any SkyePharma Product IP or SkyePharma Product Patents, will defend such SkyePharma Product IP or SkyePharma Product Patents against, and will take such other action as is necessary to remove in respect to such SkyePharma Product IP or SkyePharma Product Patents, any lien or claim, other than the liens or claims created hereby. Further, SkyePharma covenants and agrees not to enter into any agreements which would prohibit the

-39-

creation or attachment of a security interest upon such SkyePharma Product IP or SkyePharma Product Patents.

9.     PUBLICATION; CONFIDENTIALITY.

     9.1 Notification and Review with Respect to SkyePharma and Endo.

          (a) Both Parties recognize that each may wish to publish the results of their work relating to the subject matter of this Agreement. However, both Parties also recognize the importance of acquiring patent protection and otherwise maintaining the confidentiality of commercially sensitive information. Consequently, any proposed publication, by either Party (including its Affiliates, Sublicensees or Subcontractors), that includes information related to the Products or any Development Program, or which otherwise includes proprietary information of the other Party or Confidential Information, may not be made by either Party without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed.

          (b) SkyePharma agrees not to make any public announcement or disclosure (including, without limitation, any press release, summary or Q&A) affecting the marketing or commercialization of, or the identity or potential applications of any Product, without first obtaining the prior written approval of Endo (acting in its capacity as commercialization partner). Notwithstanding the foregoing, on and after the Effective Date, either Party may issue a press release, the content of which will be agreed upon in advance by the Parties, with respect to the execution of this Agreement.

          (c) The JDC will review the manuscript, abstract, text or any other material provided to it under this Section 9.1 to determine whether patentable subject matter is disclosed. The JDC will notify the publishing Party within *** days of receipt of the proposed publication if the JDC, in good faith, determines that patentable subject matter is or may be disclosed, or if the JDC, in good faith, believes Confidential Information is or may be disclosed. If it is determined by the JDC that patent applications should be filed, the publishing Party shall delay its publication or presentation for a period not to exceed *** days from the JDC’s receipt of the proposed publication or presentation to allow time for the filing of patent applications covering patentable subject matter. In the event that the delay needed to complete the filing of any necessary patent application will exceed the *** day period, the JDC will discuss the need for obtaining an extension of the publication delay beyond the *** day period. If it is determined in good faith by the JDC that Confidential Information or proprietary information is being disclosed, the Parties shall consult in good faith to arrive at an agreement on mutually acceptable modifications to the proposed publication or presentation to avoid such disclosure.

          (d) Each Party shall cooperate fully with the other with respect to all disclosures regarding this Agreement required under applicable rules and regulations promulgated by the United States Securities and Exchange Commission and any other governmental or regulatory agencies; provided, that, nothing herein shall restrict a Party from making any disclosure that is required by law.

-40-

          (e) In addition, neither Party shall disclose, under any circumstances except as set forth in this Section 9 or as otherwise required by law, the terms of this Agreement or the identity or potential applications of any Products to any Third Party other than to professional advisors and financing sources, and in that case, only under confidentiality terms at least as stringent in material respects as this Section 9.

     9.2 Confidentiality; Exceptions. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing, during the term of this Agreement and for five years thereafter, the receiving Party shall keep, and shall ensure that its Affiliates, employees, officers and directors keep, confidential and shall not publish or otherwise disclose and shall not use for any purpose except to effectuate this Agreement (a) any information furnished to it by the other Party, or (b) any information developed under or in connection with this Agreement by either Party; except to the extent that it can be established by the receiving Party by competent proof that such information: (i) was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure by the other Party; (ii) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (iii) became generally available to the public or was otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement; or (iv) was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others (all such information to which none of the foregoing exceptions applies, “Confidential Information”).

     9.3 Exceptions to Obligation. The restrictions contained in Section 9.2 shall not apply to Confidential Information that (a) is submitted by the recipient to Regulatory Authorities to facilitate the issuance of Registrations for the Products, provided, that, reasonable measures shall be taken to assure confidential treatment of such information; (b) is provided by the recipient to Third Parties under confidentiality agreements having provisions at least as stringent as those in this Agreement in connection with its responsibilities under the Development Programs and Commercialization Programs; (c) is otherwise required to be disclosed in compliance with applicable laws or regulations or order by a court or other regulatory body having competent jurisdiction; provided, that, if a Party is required to make any such disclosure of the other Party’s Confidential Information such Party will give reasonable advance written notice to the other Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use its commercially reasonable best efforts to secure confidential treatment of such Confidential Information required to be disclosed; (d) was developed by the receiving Party independent of any disclosure received under this Agreement; or (e) is developed under or is in connection with this Agreement by either Party and needs to be used by the Party which developed same to prepare, file and/or prosecute patent applications in the United States, Canada and other countries consistent with the terms of this Agreement. In addition, the restrictions contained in Section 9.1 or 9.2 shall not apply to SkyePharma to the extent the Confidential Information relates to any Product or any application of any SkyePharma IP, SkyePharma Product Patent, SkyePharma Product IP or Invention; in each case, for any application (i) outside the Territory, whether or not in the Exclusivity Field, or (ii) outside the Exclusivity Field, whether or not in the Territory.

-41-

     9.4 Remedies. Each Party shall be entitled, in addition to any other right or remedy it may have, at law or in equity, to an injunction, without the posting of any bond or other security, enjoining or restraining the other Party from any violation found by a court of competent jurisdiction of this Section 9.

10.     INDEMNIFICATION; INSURANCE.

     10.1 By SkyePharma. SkyePharma shall indemnify, defend and hold harmless Endo and its Affiliates, Sublicensees and Subcontractors, and their respective directors, officers, employees and agents, from and against any and all liabilities, damages, losses, costs and expenses (including the reasonable fees of attorneys and other professionals) (collectively, “Damages”) arising out of or resulting from:

          (a) gross negligence, recklessness or wrongful intentional acts or omissions of SkyePharma or its Affiliates, Sublicensees or Subcontractors, and their respective directors, officers, employees and agents, in connection with SkyePharma’s activities contemplated under this Agreement, the Supply Agreements and the Quality Agreements;

          (b) any warranty claims, Product recalls or any tort claims of personal injury (including death) or property damage relating to or arising out of any use, sale or offer for sale of any Product;

          (c) any breach of any representation or warranty or covenant made by SkyePharma pursuant to Section 8 or pursuant to Section 5 of the Supply Agreements;

          (d) any claim made or action taken by ▇▇▇▇ Capital Royalty Acquisition Fund, L.P., its affiliates or its or their respective successors or assigns against Endo or its Affiliates, Sublicensees and Subcontractors in any way arising out of or resulting from the transactions contemplated by this Agreement or the Product, except for the failure by Endo to make payment either to SkyePharma or as directed by SkyePharma to ▇▇▇▇ Capital with respect to all or a portion of the payment to which SkyePharma is obligated to make to ▇▇▇▇ Capital; and

          (e) any claim made or action taken (including without limitation injunctive action) which is referred to in the letter from ▇▇▇▇▇ ▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, dated December 31, 2002;

in the case of clauses (a) through (c), only to the extent not due to the gross negligence, recklessness or wrongful intentional acts or omissions of Endo or its Affiliates, Sublicensees or Subcontractors, and their respective directors, officers, employees and agents.

It is specifically agreed that in the case of indemnification pursuant to Section 10.1(e), the Damages shall include all payments made by Endo to SkyePharma relating to ***. In the event that any such amounts have been paid or credited by SkyePharma prior to the occurrence of any of the foregoing events and subsequently such claim or action covered under Section 10.1(e) is finally determined (whether by a final court order, final settlement or otherwise) which does not result in any of the foregoing events, such amounts so paid or credited shall become immediately due and owing from Endo to SkyePharma.

-42-

     10.2 By Endo. Endo shall indemnify, defend and hold harmless SkyePharma and its Affiliates, Sublicensees and Subcontractors, and their respective directors, officers, employees and agents, from and against any and all Damages arising out of or resulting from:

          (a) gross negligence, recklessness or wrongful intentional acts or omissions of Endo or its Affiliates, Sublicensees or Subcontractors, and their respective directors, officers, employees and agents, in connection with Endo’s activities contemplated under this Agreement, the Supply Agreements and the Quality Agreements; or

          (b) any claims relating to or arising out of the marketing or sales activities of Endo or its Affiliates, Sublicensees or Subcontractors, but only to the extent not covered by Sections 6.9 or 10.1; or

          (c) any breach of any representation or warranty or covenant made by Endo pursuant to Section 8 or pursuant to Section 5 of the Supply Agreements;

in each case, only to the extent not due to the gross negligence, recklessness or wrongful intentional acts or omissions of SkyePharma or its Affiliates, Sublicensees or Subcontractors, and their respective directors, officers, employees and agents.

     10.3 Notice. In the event that any person (an “Indemnitee”) entitled to indemnification under Section 10.1 or 10.2 is seeking such indemnification, such Indemnitee shall inform the indemnifying Party of the claim as soon as reasonably practicable after such Indemnitee receives notice of such claim, shall permit the indemnifying Party to assume direction and control of the defense of the claim (including the sole right to settle it at the sole discretion of the indemnifying Party, provided, that, such settlement does not impose any obligation on the Indemnitee or the other Party) and shall cooperate as requested (at the expense of the indemnifying Party) in the defense of the claim.

     10.4 Complete Indemnification. As the Parties intend complete indemnification, all costs and expenses, including without limitation, legal fees and expenses, actually incurred by an Indemnitee in connection with enforcement of this Section 10 shall also be reimbursed by the indemnifying Party.

     10.5 Insurance.

          (a) Each party shall maintain during the performance of this Agreement the following insurance or self-insurance in amounts no less than that specified for each type:

               (i) General liability insurance with combined limits of not less than $*** per occurrence and $*** per accident for bodily injury, including death and property damage;

               (ii) Workers’ compensation insurance in the amounts required by the law of the state(s) in which such party’s workers are located and employer’s liability insurance with limits of not less than $*** per occurrence;

-43-

               (iii) In the event that the use of a company-owned motor vehicle is required in the performance of this Agreement, automobile liability insurance with combined limits of not less than $*** per occurrence and $*** per accident for bodily injury, including death and property damage, is required;

               (iv) Product liability insurance with limits not less than $***; and

               (v) Excess insurance, in excess of all coverages set forth above, with limits not less than $***.

          (b) Each Party shall provide to the other *** days prior written notice of any cancellation or change in its coverage.

11.     TERM; TERMINATION.

     11.1 Term. This Agreement shall become effective as of the Effective Date and, unless earlier terminated pursuant to the other provisions of this Section 11, shall expire:

          (a) on a Product-by-Product, country-by-country basis, upon the later of (i) the expiration of the Valid Claims of all Patents covering such Product in each country within the Territory, and (ii) the 15th anniversary of First Commercial Sale of such Product; and

          (b) in its entirety upon the last to occur of the events referenced in Section 11.1(a) in respect to the last remaining Product to which this Agreement applies.

     11.2 Termination for Cause. Either Party (the “Non-breaching Party”) may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in its entirety or with respect to any Product or with respect to any Product in any country in the Territory, in the event the other Party (the “Breaching Party”) shall have materially breached or defaulted in the performance of any of its material obligations hereunder or, with respect to such Product or such Product in a country, so materially breached or defaulted with respect to that Product or that Product in such country, and such default shall have continued for *** after written notice thereof was provided to the Breaching Party by the Non-breaching Party (or, if such default cannot be cured within such *** period, if the Breaching Party does not commence and diligently continue actions to cure such default during such *** period). Any such termination shall become effective at the end of such *** period unless the Breaching Party has cured any such breach or default prior to the expiration of such *** period (or, if such default cannot be cured within such *** period, if the Breaching Party has commenced and diligently continued actions to cure such default). The right of either Party to terminate this Agreement as provided in this Section 11.2 shall not be affected in any way by its waiver or failure to take action with respect to any previous default.

     11.3 Termination in Connection with Bankruptcy. Either Party may terminate this Agreement effective immediately in the event that the other Party (i) has become insolvent or has been dissolved or liquidated, filed or has filed against it, a petition, case or other proceeding under any Bankruptcy Laws, and such petition, case or proceeding if filed against it is not

-44-

dismissed within *** of the filing; (ii) makes a general assignment for the benefit of creditors; or (iii) has a receiver, custodian, trustee or other Person exercising similar functions appointed for all or substantially all of its assets. Notwithstanding the foregoing, Endo may elect to terminate this Agreement upon the occurrence of one of the foregoing events solely with respect to SkyePharma Canada Inc. and/or its subsidiaries and not SkyePharma, Inc. and/or its subsidiaries if the occurrence of such event is reasonably anticipated by Endo to have a material adverse effect on the rights and benefits of Endo under this Agreement.

     11.4 Termination For Delay. In the event that SkyePharma has not received written notice that the FDA has:

          (a) accepted the Registration Application for DepoMorphine in the United States on or before September 1, 2004; or

          (b) finally approved the Registration of DepoMorphine in the United States with the Target Labeling on or before December 1, 2005; or

          (c) accepted the Registration Application for Propofol IDD-D in the United States on or before March 31, 2006; or

          (d) finally approved the Registration of Propofol IDD-D in the United States with the Target Labeling on or before June 1, 2007;

then, in each case, Endo shall have the right to terminate its rights and obligations under this Agreement and all ancillary agreements related thereto by giving written notice to SkyePharma as provided in Section 11.9(i)(A).

     11.5 Termination For Failure to Achieve the Target Labeling. Upon Endo’s receipt of notice from SkyePharma of the FDA’s final approval of the Registration of DepoMorphine or Propofol IDD-D, as the case may be, in the United States which does not meet the applicable Target Labeling together with a copy of the labeling that was approved by the FDA, Endo shall have the right to terminate its rights and obligations under this Agreement only if the approved labeling materially fails to meet the applicable Target Labeling such that expected sales of DepoMorphine or Propofol IDD-D, as the case may be, are significantly adversely affected and, within *** after receiving such notice from SkyePharma, Endo gives SkyePharma notice certifying same and stating that it is exercising this termination right as provided in Section 11.9(i)(A). In the event Endo so exercises its right to terminate, the milestone payable to SkyePharma pursuant to Section 4.2 upon the FDA’s final approval of the Registration of DepoMorphine or Propofol IDD-D, as the case may be, in the United States shall not become due.

     11.6 Long-Term Inability to Supply. In the event that a Long-Term Inability to Supply has occurred with respect to a Product, Endo shall have the right, in its sole discretion, upon written notice to terminate this Agreement in its entirety or solely as to the Product not adequately supplied.

-45-

     11.7 Safety. If during a Product’s Development Program or Commercialization Program, such Product becomes subject to a pattern of Serious Adverse Drug Experiences or either Party receives notice from a Regulatory Authority, independent review committee, data safety monitoring board or another similar clinical trial or post-marketing monitoring body alleging significant concern regarding a patient safety issue, in each case which Endo, in good faith, reasonably believes would seriously impact the long-term viability of the Product, Endo shall have the right, upon *** prior written notice to SkyePharma setting forth the reasons therefor, to have the JEC determine whether or not there exists such serious impact on the long-term viability of a Product and, what if anything, the Parties should do to address the matter. In the event the JEC is unable to reach a unanimous resolution of the matter within *** of the matter being referred to the JEC, Endo may terminate its rights and obligations under this Agreement upon written notice as provided in Section 11.9(i)(A) so long as Endo reasonably believes the patient safety issue would seriously impact the long-term viability of the Product.

     11.8 Other Termination. Endo shall have the right in its sole discretion to terminate this Agreement in its entirety, if not terminated by Endo under any other provision of this Agreement, upon *** prior written notice; provided that in such event, Endo shall pay SkyePharma on the effective date of such termination Five Million Dollars ($5,000,000.00); provided further that, notwithstanding the foregoing, Endo shall not be obligated to make such payment to SkyePharma in the event that Endo has been involved in a merger, consolidation or similar transaction or sale of all or substantially all of its assets which has resulted in a change of control of Endo prior to such termination.

     11.9 Effect of Expiration or Termination.

          (a) Upon the expiration of the term of this Agreement with respect to a Product in any country in the Territory pursuant to Section 11.1, Endo’s rights and obligations with respect to such Product shall terminate.

          (b) If this Agreement is terminated by SkyePharma with respect to a particular Product in one or more countries in the Territory pursuant to Section 11.2, in addition to any other remedies available to SkyePharma at law or in equity: (i) at Endo’s expense, Endo shall promptly transfer to SkyePharma copies of all relevant data, reports, records and materials in Endo’s possession or control that relate to such Product in the country or countries, as applicable, in respect to which termination has occurred and return to SkyePharma all relevant records and materials in Endo’s possession or control containing Confidential Information of SkyePharma relating to such Product in such country or countries, as applicable (provided, that, Endo may keep one copy of such Confidential Information of SkyePharma for archival purposes only); (ii) to the extent Endo owns or holds any right, title and interest in trademarks, trade names, and logos under which such Product has been or is being marketed or sold in such country or countries, as applicable, Endo shall assign the same to SkyePharma; (iii) the license granted under Section 6.1 and by SkyePharma under Section 6.6(d) shall terminate with respect to such Product in such country or countries, as applicable; (iv) SkyePharma shall pay a royalty to Endo on the Net Sales of such Product in such country or countries, as applicable, which shall be determined in accordance with Section 11.9(h); (v) all sublicenses granted by Endo under this Agreement shall continue in full force and effect in accordance with the terms and conditions of

-46-

the respective sublicense agreements, and Endo will assign to SkyePharma those sublicense agreements to the extent relating to such Product in such country or countries, as applicable; (vi) if DepoMorphine is the Product being terminated, then subsections (a) and (b) of the definition of Exclusivity Field and subsection (a) of the definition of Development Field shall terminate and no longer have any effect through the application of such terms in this Agreement in such country or countries, as applicable; (vii) if Propofol IDD-D is the Product being terminated, then subsection (c) of the definition of Exclusivity Field and subsection (b) of the definition of Development Field shall terminate and no longer have any effect through the application of such term in this Agreement in such country or countries as applicable; and (viii) if DepoMorphine is the Product being terminated and is being terminated in all countries in the Territory, Section 2.11 shall terminate; and (ix) Endo shall, at Endo’s expense, provide SkyePharma with all reasonably necessary or useful assistance to enable SkyePharma to coordinate and undertake the orderly continued development and commercialization of such Product in such country or countries as applicable (such assistance shall include, but not be limited to, providing access to, copies of and the right to use customer lists, marketing materials, marketing plans and marketing presentations solely to the extent related to such Product in such country or countries, as applicable, as well as advice and recommendations on which sales representatives, sales organizations and sales methods would most likely prove most beneficial to promote sales of such Product).

          (c) If this Agreement is terminated by SkyePharma in its entirety pursuant to Section 11.2, in addition to any other remedies available to SkyePharma at law or in equity: (i) at Endo’s expense, Endo shall promptly transfer to SkyePharma copies of all relevant data, reports, records and materials in Endo’s possession or control that relate to a Development Program or a Commercialization Program and return to SkyePharma all relevant records and materials in Endo’s possession or control containing Confidential Information of SkyePharma (provided, that, Endo may keep one copy of such Confidential Information of SkyePharma for archival purposes only); (ii) to the extent Endo owns or holds any right, title and interest in any trademarks, trade names, and logos under which any Product(s) have been or are being marketed or sold in the Territory, Endo shall assign the same to SkyePharma; (iii) the licenses granted under Section 6.1 and by SkyePharma under Section 6.6(b) shall terminate with respect to all Products; (iv) SkyePharma shall pay a royalty to Endo on the Net Sales of the Products which shall be determined in accordance with Section 11.9(h); (v) all sublicenses granted by Endo under this Agreement shall continue in full force and effect in accordance with the terms and conditions of the respective sublicense agreements, and Endo will assign all such sublicense agreements to SkyePharma; and (vi) Endo shall, at Endo’s expense, provide SkyePharma with all reasonably necessary or useful assistance to enable SkyePharma to coordinate and undertake the orderly continued development and commercialization of the Products (such assistance shall include, but not be limited to, providing access to, copies of and the right to use customer lists, marketing materials, marketing plans and marketing presentations solely to the extent related to the Products as well as advice and recommendations on which sales representatives, sales organizations and sales methods would most likely prove most beneficial to promote sales of the Products).

          (d) If this Agreement is terminated by SkyePharma in its entirety pursuant to Section 11.3, in addition to any other remedies available to SkyePharma at law or in equity: (i) at

-47-

Endo’s expense, Endo shall promptly transfer to SkyePharma copies of all relevant data, reports, records and materials in Endo’s possession or control that relate to a Development Program or a Commercialization Program and return to SkyePharma all relevant records and materials in Endo’s possession or control containing Confidential Information of SkyePharma (provided, that, Endo may keep one copy of such Confidential Information of SkyePharma for archival purposes only); (ii) to the extent Endo owns or holds any right, title and interest in any trademarks, trade names, and logos under which any Product(s) have been or are being marketed or sold in the Territory, Endo shall assign the same to SkyePharma; (iii) the license granted to Endo under Sections 6.1 and Section 6.6(d) shall terminate with respect to all Products and SkyePharma shall be permitted to market and sell such Product in the Territory, whether or not in the Exclusivity Field, without any obligation to Endo; and (iv) all sublicenses granted by Endo under this Agreement shall continue in full force and effect in accordance with the terms and conditions of the respective sublicense agreements, and Endo will assign all such sublicense agreements to SkyePharma.

          (e) If this Agreement is terminated by Endo with respect to a particular Product in one or more countries in the Territory pursuant to Section 11.2, in addition to any other remedies available to Endo at law or in equity: (i) at SkyePharma’s expense, SkyePharma shall promptly transfer to Endo copies of all relevant data, reports, records and materials in SkyePharma’s possession or control that relate to such Product in the country or countries, as applicable, in respect to which termination has occurred and return to Endo all relevant records and materials in SkyePharma’s possession or control containing Confidential Information of Endo relating to such Product in such country or countries, as applicable, (provided, that, SkyePharma may keep one copy of such Confidential Information of Endo for archival purposes only); (ii) SkyePharma shall, upon Endo’s request and at SkyePharma’s expense, provide Endo with all information necessary or desirable to cross-reference and/or assume responsibility for any of SkyePharma’s INDs, Registration Applications, Registrations and other regulatory filings for the applicable Target Indications in the applicable Development Field with respect to such Product in such country or countries, as applicable; (iii) the licenses granted under Section 6.1 and by Endo under Section 6.6(d) shall terminate with respect to such Product; (iv) a new license is hereby granted to Endo under which Endo shall have a royalty-bearing (such royalty to be determined in accordance with Section 11.9(h)), exclusive (even as to SkyePharma) right and license under SkyePharma’s rights in any Inventions, SkyePharma Product IP and SkyePharma Product Patents in such country or countries, as applicable, in each case to enable Endo to develop, use, make, have made, offer for sale, sell, and import such Product(s) in such country or countries, as applicable, in the Territory for the applicable Target Indications; (v) if DepoMorphine is the Product being terminated, then subsections (a) and (b) of the definition of Exclusivity Field and subsection (a) of the definition of Development Field shall terminate and no longer have any effect through the application of such terms in this Agreement in such country or countries, as applicable; (vi) if Propofol IDD-D is the Product being terminated, then subsection (c) of the definition of Exclusivity Field and subsection (b) of the definition of Development Field shall terminate and no longer have any effect through the application of such term in this Agreement in such country or countries, as applicable; (vii) all Third Party manufacturing and supply agreements entered into by SkyePharma in connection with this Agreement shall continue in full force and effect in accordance with the terms and conditions of

-48-

the respective Third Party manufacturing and supply agreement, and SkyePharma will assign to Endo such agreements to the extent relating to such Product in such country or countries, as applicable; and (viii) SkyePharma shall, at SkyePharma’s expense, provide Endo with all reasonably necessary or useful assistance to enable Endo to coordinate and undertake the orderly continued development and commercialization of such Product in such country or countries, as applicable (such assistance shall include, but not be limited to, providing access to, copies of and the right to use supplier lists and development and supplier materials solely to the extent related to such Product in such country or countries, as applicable, as well as advice and recommendations on which suppliers or developers would most likely prove most beneficial in developing, manufacturing and supplying such Product).

          (f) If this Agreement is terminated by Endo in its entirety pursuant to Section 11.2, in addition to any other remedies available to Endo at law or in equity: (i) at SkyePharma’s expense, SkyePharma shall promptly transfer to Endo copies of all relevant data, reports, records and materials in SkyePharma’s possession or control that relate to a Development Program or a Commercialization Program and return to Endo all relevant records and materials in SkyePharma’s possession or control containing Confidential Information of Endo (provided, that, SkyePharma may keep one copy of such Confidential Information of Endo for archival purposes only); (ii) SkyePharma shall, upon Endo’s request and at SkyePharma’s expense, provide Endo with all information necessary or desirable to cross-reference and/or assume responsibility for any of SkyePharma’s INDs, Registration Applications, Registrations and other regulatory filings for the applicable Target Indications in the applicable Development Field in the Territory with respect to all Products; (iii) the licenses granted under Section 6.1 and by Endo under Section 6.6(d) shall terminate with respect to all Products; (iv) a new license is hereby granted to Endo under which Endo shall have a royalty-bearing (such royalty to be determined in accordance with Section 11.9(h)), exclusive (even as to SkyePharma) right and license under SkyePharma’s rights in Inventions, SkyePharma Product IP and SkyePharma Product Patents, in each case to enable Endo to develop, use, make, have made, offer for sale, sell, and import all Products in the Territory for the applicable Target Indications; (v) all Third Party manufacturing and supply agreements entered into by SkyePharma in connection with this Agreement shall continue in full force and effect in accordance with the terms and conditions of the respective Third Party manufacturing and supply agreements, and SkyePharma will assign to Endo such agreements; and (vi) SkyePharma shall, at SkyePharma’s expense, provide Endo with all reasonably necessary or useful assistance to enable Endo to coordinate and undertake the orderly continued development and commercialization of such Product in such country or countries, as applicable (such assistance shall include, but not be limited to, providing access to, copies of and the right to use supplier lists and development and supplier materials solely to the extent related to the Products, as well as advice and recommendations on which suppliers or developers would most likely prove most beneficial in developing, manufacturing and supplying the Products).

          (g) If this Agreement is terminated by Endo in its entirety pursuant to Section 11.3, in addition to any other remedies available to Endo at law or in equity: (i) at SkyePharma’s expense, SkyePharma shall promptly transfer to Endo copies of all relevant data, reports, records and materials in SkyePharma’s possession or control that relate to a Development Program or a Commercialization Program and return to Endo all relevant records and materials in SkyePharma’s possession or control containing Confidential Information of Endo (provided,

-49-

that, SkyePharma may keep one copy of such Confidential Information of Endo for archival purposes only); (ii) SkyePharma shall, upon Endo’s request and at SkyePharma’s expense, provide Endo with all information necessary or desirable to cross-reference and/or assume responsibility for any of SkyePharma’s INDs, Registration Applications, Registrations and other regulatory filings for the applicable Target Indications in the applicable Field in the Territory with respect to all Products; (iv) the licenses granted under Section 6.1 and by SkyePharma under Section 6.6(d) shall survive with respect to all Products and (v) all Third Party manufacturing and supply agreements entered into by SkyePharma in connection with this Agreement shall continue in full force and effect in accordance with the terms and conditions of the respective Third Party manufacturing and supply agreements, and SkyePharma will assign to Endo such agreements. If this Agreement is terminated by Endo pursuant to Section 11.3 in respect to SkyePharma Canada Inc. only, then, in addition to any other remedies available to Endo at law or in equity, Endo shall have the rights and remedies referenced in clauses (i) through (v) of this Section 11.9(g) to the extent applicable to SkyePharma Canada Inc.

          (h) Royalties, if any, payable under Sections 11.9(b), (c), (e), (f) and (j), inclusive, shall be payable on the Net Sales of the Product(s) that are subject to such termination. Upon such a termination occurring, the Parties shall enter into good faith negotiations regarding (i) the applicable royalty rate(s) payable with respect to such Product(s) based upon the application of the factors set forth in the following sentence. The factors that shall be considered are: the then current market practices for pharmaceutical products of similar commercial promise, the relative financial contributions of the Parties to the development and commercialization of such Product(s), the market potential of such Product(s), the apparent risks of going forward with development and commercialization and the damages caused, if any, by the circumstances of the termination in question to the development and commercialization prospects for such Product(s). Such matters on which the Parties cannot reach consensus within *** after such termination shall be conclusively settled in accordance with the Special Arbitration Provisions in a manner consistent with the foregoing guidelines.

          (i) (A) If Endo determines to terminate this Agreement in its entirety pursuant to Sections 11.4, 11.5 or 11.7, Endo shall give notice to SkyePharma of its intent to terminate which notice will give rise to the Parties’ good faith obligations to attempt to renegotiate the terms of this Agreement. To the extent that the Parties are unable to agree to mutually acceptable terms within***, this Agreement shall terminate in its entirety upon a second notice from Endo and the Parties shall submit to arbitration pursuant to Section 13.13(a) to determine the percentage interest in Net Proceeds of each Product to which each Party is entitled, based on factors such as the then current market practices for pharmaceutical products of similar commercial promise, the relative financial contributions of the Parties to the development and commercialization of such Product(s), the market potential of such Product(s), and the apparent risks of going forward with development and commercialization, if any. Any such termination shall be effective upon a decision of the arbitrator(s) pursuant to Section 13.13(a). Unless the Parties agree otherwise, SkyePharma shall pay to Endo such percentage of the Net Proceeds of such Product, as and when received. For purposes of Sections 11.9(i) and 11.9(k), Net Proceeds shall mean any payments received by SkyePharma from a Third Party in respect to the development and commercialization of a Product, whether in the form of milestone payments, royalties, sales splits, product sales to customers or otherwise, net of the costs incurred by

-50-

SkyePharma in effectuating the transactions which generate such payments. After termination, SkyePharma shall use commercially reasonable efforts to commercialize the Products (which may include licensing such Products to a Third Party, divesting the Product or selling such Product itself or through an Affiliate). If SkyePharma fails to so commercialize a Product within *** months of termination, it shall use commercially reasonable efforts to sell such Products as soon as reasonably possible and pay to Endo the percentage of Net Proceeds of a resulting sale determined as referenced above in this paragraph.

               (B) Upon termination of this Agreement under Sections 11.4, 11.5 or 11.7, (i) at the Parties’ joint expense, Endo shall promptly transfer to SkyePharma copies of all relevant data, reports, records and materials in Endo’s possession or control that relate to the Development Program or the Commercialization Program and return to SkyePharma all relevant records and materials in Endo’s possession or control containing Confidential Information of SkyePharma (provided, that, Endo may keep one copy of such Confidential Information of SkyePharma for archival purposes only); (ii) to the extent Endo owns or holds any right, title and interest in any trademarks, trade names, and logos under which Products have been or are being marketed or sold in the Territory, Endo shall assign the same to SkyePharma; (iii) the licenses granted under Section 6.1 and by SkyePharma under Section 6.6(d) shall terminate and SkyePharma shall be permitted to market and sell the Products in the Territory, whether or not in the Exclusivity Field, without any obligation to Endo except as set forth above; (iv) all sublicenses granted by Endo under this Agreement shall terminate to the extent relating to the Products; (v) Endo shall, at the Parties joint expense, provide SkyePharma with all reasonably necessary or useful assistance to enable SkyePharma to coordinate and undertake the orderly continued development and commercialization of the Products (such assistance shall include, but not be limited to, providing access to, copies of and the right to use customer lists, marketing materials, marketing plans and marketing presentations solely to the extent related to the Products as well as advice and recommendations on which sales representatives, sales organizations and sales methods would most likely prove most beneficial to promote sales of the Products).

          (j) If this Agreement is terminated by Endo with respect to a particular Product pursuant to Section 11.6, in addition to any other remedies available to Endo at law or in equity: (i) at SkyePharma’s expense, SkyePharma shall promptly transfer to Endo copies of all relevant data, reports, records and materials in SkyePharma’s possession or control that relate to such Product in respect to which termination has occurred and return to Endo all relevant records and materials in SkyePharma’s possession or control containing Confidential Information of Endo relating to such Product (provided, that, SkyePharma may keep one copy of such Confidential Information of Endo for archival purposes only); (ii) SkyePharma shall, upon Endo’s request and at SkyePharma’s expense, provide Endo with all information necessary or desirable to cross-reference and/or assume responsibility for any of SkyePharma’s INDs, Registration Applications, Registrations and other regulatory filings for the applicable Target Indications in the applicable Development Field with respect to such Product; (iii) the licenses granted under Section 6.1 and by Endo under Section 6.6(d) shall terminate with respect to such Product; (iv) a new license is hereby granted to Endo under which Endo shall have a royalty-bearing (such royalty to be determined in accordance with Section 11.9(h)), exclusive (even as to SkyePharma) right and license under SkyePharma’s rights in any Inventions, SkyePharma

-51-

Product IP and SkyePharma Product Patents, in each case to enable Endo to develop, use, make, have made, offer for sale, sell, and import such Product(s) in the Territory for the applicable Target Indications; (v) if DepoMorphine is the Product being terminated, then subsections (a) and (b) of the definition of Exclusivity Field and subsection (a) of the definition of Development Field shall terminate and no longer have any effect through the application of such terms in this Agreement, (vi) if Propofol IDD-D is the Product being terminated, then subsection (c) of the definition of Exclusivity Field and subsection (b) of the definition of Development Field shall terminate and no longer have any effect through the application of such term in this Agreement; (vii) all Third Party manufacturing and supply agreements entered into by SkyePharma in connection with this Agreement shall continue in full force and effect in accordance with the terms and conditions of the respective Third Party manufacturing and supply agreement, and SkyePharma will assign to Endo such agreements to the extent relating to such Product; and (viii) SkyePharma shall, at SkyePharma’s expense, provide Endo with all reasonably necessary or useful assistance to enable Endo to coordinate and undertake the orderly continued development and commercialization of such Product (such assistance shall include, but not be limited to, providing access to, copies of and the right to use supplier lists and development and supplier materials solely to the extent related to such Product, as well as advice and recommendations on which suppliers or developers would most likely prove most beneficial in developing, manufacturing and supplying such Product).

          (k) (A) If Endo terminates this Agreement in its entirety pursuant to Section 11.6, the Parties shall submit to arbitration pursuant to Section 13.13(a) to determine the percentage interest in Net Proceeds of each Product to which each Party is entitled, based on factors such as the then current market practices for pharmaceutical products of similar commercial promise, the relative financial contributions of the Parties to the development and commercialization of such Product(s), the market potential of such Product(s), and the apparent risks of going forward with development and commercialization of such Product(s), if any, and if the Long-Term Inability to Supply is caused by any reason other than Force Majeure, the damages caused if any, by the circumstances of the termination in question to the development and commercialization prospects of such Product(s). Any such termination shall be effective upon a decision of the arbitrator(s) pursuant to Section 13.13(a). Unless the Parties agree otherwise, SkyePharma shall pay to Endo such percentage of the Net Proceeds of such Product, as and when received. After termination, SkyePharma shall use commercially reasonable efforts to commercialize the Products (which may include licensing such Products to third party, divesting the Product or selling such Product itself or through an Affiliate). If SkyePharma fails to so commercialize a Product within *** months of termination, it shall use commercially reasonable efforts to sell such Products as soon as reasonably possible and pay to Endo the percentage of Net Proceeds of a resulting sale determined as referenced above in this paragraph.

               (B) Upon termination of this Agreement in its entirety under Section 11.6, at SkyePharma’s expense, Endo shall promptly transfer to SkyePharma copies of all relevant data, reports, records and materials in Endo’s possession or control that relate to the Development Program or the Commercialization Program for the Products and return to SkyePharma all relevant records and materials in Endo’s possession or control containing Confidential Information of SkyePharma relating to the Products (provided, that, Endo may keep one copy of such Confidential Information of SkyePharma for archival purposes only); (ii) to the

-52-

extent Endo owns or holds any right, title and interest in any trademarks, trade names, and logos under which the Products have been or are being marketed or sold in the Territory, Endo shall assign the same to SkyePharma; (iii) the licenses granted under Section 6.1 and by SkyePharma under Section 6.6(d) shall terminate and SkyePharma shall be permitted to market and sell the Products in the Territory, whether or not in the Exclusivity Field, without any obligation to Endo except as set forth above; (iv) all sublicenses granted by Endo under this Agreement shall terminate to the extent relating to the Products; (v) Endo shall, at the Parties joint expense, provide SkyePharma with all reasonably necessary or useful assistance to enable SkyePharma to coordinate and undertake the orderly continued development and commercialization of the Products (such assistance shall include, but not be limited to, providing access to, copies of and the right to use customer lists, marketing materials, marketing plans and marketing presentations solely to the extent related to the Products as well as advice and recommendations on which sales representatives, sales organizations and sales methods would most likely prove most beneficial to promote sales of the Products).

          (l) Upon termination of this Agreement in its entirety under Section 11.8, at Endo’s expense, Endo shall promptly transfer to SkyePharma copies of all relevant data, reports, records and materials in Endo’s possession or control that relate to the Development Program or the Commercialization Program for the Products and return to SkyePharma all relevant records and materials in Endo’s possession or control containing Confidential Information of SkyePharma relating to the Products (provided, that, Endo may keep one copy of such Confidential Information of SkyePharma for archival purposes only); (ii) to the extent Endo owns or holds any right, title and interest in any trademarks, trade names, and logos under which the Products have been or are being marketed or sold in the Territory, Endo shall assign the same to SkyePharma; (iii) the licenses granted under Section 6.1 and by SkyePharma under Section 6.6(d) shall terminate and SkyePharma shall be permitted to market and sell the Products in the Territory, whether or not in the Exclusivity Field, without any obligation to Endo except as set forth above; (iv) all sublicenses granted by Endo under this Agreement shall terminate to the extent relating to the Products; (v) Endo shall, at the Parties joint expense, provide SkyePharma with all reasonably necessary or useful assistance to enable SkyePharma to coordinate and undertake the orderly continued development and commercialization of the Products (such assistance shall include, but not be limited to, providing access to, copies of and the right to use customer lists, marketing materials, marketing plans and marketing presentations solely to the extent related to the Products as well as advice and recommendations on which sales representatives, sales organizations and sales methods would most likely prove most beneficial to promote sales of the Products).

          (m) At the expiration or any termination of this Agreement in its entirety, each Party’s payment obligations under this Agreement shall terminate as of the effective date of such expiration or termination, except for payments to the other Party that accrued prior to the effective date of such expiration or termination and are due and payable by one Party to the other Party pursuant to this Agreement and except for the payments referenced in this Agreement that are to survive termination.

-53-

     11.10 Accrued Rights; Surviving Obligations.

          (a) Termination, relinquishment or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of either Party prior to such termination, relinquishment or expiration. Such termination, relinquishment or expiration shall not relieve either Party from obligations that are expressly indicated to survive termination or expiration of this Agreement.

          (b) All of the Parties’ rights and obligations under Sections 5, 6.6 (subject to Section 11), 7, 8, 9, 10, 11, 12, and 13 shall survive termination, relinquishment or expiration of this Agreement.

12.     FORCE MAJEURE.

     Neither Party shall be held liable or responsible to the other Party nor be deemed to be in default under, or in breach of any provision of, this Agreement for failure or delay in fulfilling or performing any obligation of this Agreement when such failure or delay is due to force majeure, and without the fault or negligence of the Party so failing or delaying. For purposes of this Agreement, force majeure is defined as causes beyond the control of the Party, including, without limitation, acts of God; acts, regulations, or laws of any government adopted after the date of this Agreement or subject to a new interpretation after the date of this Agreement that render impossible or illegal performance by a Party of its obligations under this Agreement; war; civil commotion; destruction of production facilities or materials by fire, flood, earthquake, explosion or storm; labor disturbances; epidemic; and failure of public utilities or common carriers. In such event SkyePharma or Endo, as the case may be, shall immediately notify the other Party, with written notice to follow, of such inability and of the period for which such inability is expected to continue. The Party giving such notice shall thereupon be excused from such of its obligations under this Agreement as it is thereby disabled from performing for so long as it is so disabled. To the extent possible, each Party shall use reasonable efforts to minimize the duration of any force majeure.

13.     MISCELLANEOUS.

     13.1 Relationship of Parties. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein.

     13.2 Assignment. Neither Party shall be entitled to assign its rights or delegate its obligations hereunder without the express written consent of the other Party hereto, except that each Party may assign its rights and transfer its duties hereunder (i) without obtaining such written consent in the event of such Party’s merger, consolidation or sale of all or substantially all of its assets (a “change of control”), or (ii) to an assignee of that portion of its business to which this Agreement relates upon obtaining the express written consent of the other Party which consent shall not be unreasonably withheld as long as the assignee has the skill and financial ability to perform the assignor’s obligations hereunder and is not otherwise a competitor of the remaining Party. No assignment and transfer shall be valid or effective unless done in accordance with this Section 13.2 and unless and until the assignee, transferee or successor-in-

-54-

interest shall agree in writing to be bound by the provisions of this Agreement, and upon such agreement, all references herein to the assignor, transferor or predecessor shall be deemed to refer and apply to the assignee, transferee or successor in interest.

     13.3 Books and Records. Any books and records to be maintained under this Agreement shall be maintained in accordance with GAAP.

     13.4 Further Actions. Each Party shall execute, acknowledge and deliver such further instruments, and do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. If required at any time, each Party will promptly make any necessary filings required under HSR and will share equally the filing fees related thereto, and thereafter shall comply at the earliest practicable date with any request for additional information made by any governmental authority pursuant to HSR and use all reasonable efforts to assist the other Party in making such filings and complying with such requests.

     13.5 Notice.

     (a)  Except for notices given pursuant to Section 7.1, any notice or request required or permitted to be given under or in connection with this Agreement shall be deemed to have been sufficiently given if in writing and personally delivered or sent by certified mail (return receipt requested), facsimile transmission (receipt verified), or overnight express courier service (signature required), prepaid, to the Party for which such notice is intended, at the address set forth for such Party below:

          (i) in the case of SkyePharma, to:

          (ii) in the case of Endo, to:

or to such other address for such Party as it shall have specified by like notice to the other Party, provided, that, notices of a change of address shall be effective only upon receipt thereof. With respect to notices given pursuant to Section 7.1 or this Section 13.5, (i) if delivered personally or by facsimile transmission, the date of delivery shall be deemed to be the date on which such notice or request was given; (ii) if sent by overnight express courier service, the date of delivery shall be deemed to be the next business day after such notice or request was deposited with such service; and (iii) if sent by certified mail, the date of delivery shall be deemed to be the third business day after such notice or request was deposited with the U.S. Postal Service.

-55-

          (b) All correspondence, notices and other communications shall be promptly provided to the other Party.

     13.6 Use of Name. Except as otherwise provided herein, neither Party shall have any right, express or implied, to use in any manner the name or other designation of the other Party or any other trade name, trademark or logo of the other Party for any purpose in connection with the performance of this Agreement.

     13.7 Public Announcements. Except as required by law (including, without limitation, disclosure requirements of the U.S. Securities and Exchange Commission, NASDAQ or any other stock exchange on which securities issued by a Party or a Party’s Affiliates are traded) and as permitted by Section 9, neither Party shall make any public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld, provided, that, it shall not be unreasonable for a Party to withhold consent with respect to any of such Party’s Confidential Information. In the event of a required public announcement, to the extent practicable under the circumstances, the Party making such announcement shall provide the other Party with a copy of the proposed text prior to such announcement and with financial terms in advance of the scheduled release of such announcement.

     13.8 Waiver. A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.

     13.9 Compliance with Law. Nothing in this Agreement shall be deemed to permit a Party to export, reexport or otherwise transfer any Products sold under this Agreement without compliance with applicable laws.

     13.10 Severability. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

     13.11 Amendment. No amendment, modification or supplement of any provisions of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.

     13.12 Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to conflict of law principles.

-56-

     13.13 Arbitration.

          (a) Except as expressly otherwise provided in this Agreement, any dispute arising out of or relating to the interpretation of any provisions of this Agreement or the failure of any Party to perform or comply with any obligations or conditions applicable to such Party pursuant to this Agreement shall be first attempted to be settled by referring the dispute to the Parties’ senior management and, failing resolution, finally settled by arbitration under the then current commercial arbitration rules of the American Arbitration Association in accordance with the terms set forth in this Section 13.13(a). In addition, such other matters shall be submitted to arbitration as specifically set forth in this Agreement.

               (i) The place of arbitration shall be Philadelphia, Pennsylvania. Such arbitration shall be conducted by one arbitrator, appointed by the Parties or by the American Arbitration Association provided, that, at the request of any Party the arbitration shall instead be conducted by three arbitrators. Each arbitrator shall be a person with relevant experience in the pharmaceutical industry. SkyePharma and Endo shall instruct the arbitrator(s) to render a determination within four months after the appointment of the arbitrator(s), or in the case of a submission under Section 11.9(i) or Section 11.9(k) within *** after the appointment of the arbitrator(s).

               (ii) Any award rendered or determination made by the arbitrator(s) shall be final and binding upon the Parties. Judgment upon any award rendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. Each Party shall pay its own expenses of arbitration, and the expenses of the arbitrator(s) shall be equally shared between the Parties unless the arbitrator(s) assesses as part of the award all or any part of the arbitration expenses of a Party or Parties (including reasonable attorneys’ fees) against the other Party or Parties, as the case may be.

               (iii) This Section 13.13(a) shall not prohibit a Party from seeking injunctive relief from a court of competent jurisdiction in the event of a breach or prospective breach of this Agreement by any other Party which would cause irreparable harm to the first Party.

          (b) Whenever a dispute arising out of or relating to the interpretation of any provisions of this Agreement or the failure of any Party to perform or comply with any obligations or conditions applicable to such Party pursuant to this Agreement arises or any other matter arising under or relating to this Agreement and such dispute is expressly designated as one to be resolved through the Special Arbitration Provisions, then such dispute shall be finally settled by arbitration under the then current expedited procedures applicable to the then current commercial arbitration rules of the American Arbitration Association in accordance with the terms set forth in this Section 13.13(b) (the “Special Arbitration Provisions”). Either Party shall have the right to refer the dispute in question to an Expert for expedited arbitration as set forth in Sections 13.13(b)(i) through (iii).

-57-

               (i) Upon written request by either Party to the other Party, the Parties shall promptly negotiate in good faith to appoint a mutually acceptable independent person, with scientific, technical and regulatory experience with respect to the development of pharmaceutical products in the same Development Field as the Products in question necessary to resolve such dispute (an “Expert”). If the Parties are not able to agree within five business days after the receipt by a Party of the written request in the immediately preceding sentence, the American Arbitration Association shall be responsible for selecting an Expert within ten business days of being approached by a Party. The fees and costs of the Expert and the American Arbitration Association, if applicable, shall be shared equally by the Parties. The place of arbitration of any dispute shall be Philadelphia, Pennsylvania, unless the Parties agree otherwise or the selection of the Expert requires otherwise.

               (ii) Within *** business days after the designation of the Expert, the Parties shall each simultaneously submit to the Expert and one another a written statement of their respective positions on such disagreement. Each Party shall have *** business days from receipt of the other Party’s submission to submit to the Expert and the other Party a written response thereto, which shall include any scientific and technical information in support thereof. The Expert shall have the right to meet with the Parties, either alone or together, as necessary to make a determination.

               (iii) No later than *** business days after the designation of the Expert, the Expert shall make a determination by selecting the resolution proposed by one of the Parties that the Expert deems as a whole to be the most fair and reasonable to the Parties in light of the totality of the circumstances. The Expert shall provide the Parties with a written statement setting forth the basis of the determination in connection therewith. The decision of the Expert shall be final and conclusive.

     13.14 Endo Right to Cure SkyePharma Breach. In the event that SkyePharma materially fails to satisfy any of its material obligations under this Agreement, whether due to insolvency or otherwise, and this Agreement or an applicable Supply Agreement does not otherwise expressly provide Endo with a specific remedy for or otherwise specifically address Endo’s rights upon such failure, Endo, itself or through any other Person reasonably acceptable to SkyePharma shall be permitted to fulfill such obligations on behalf of SkyePharma. Upon receipt by SkyePharma of written notice from Endo as to the identity of the Person that Endo proposes would fulfill SkyePharma’s obligations, SkyePharma shall promptly notify Endo whether such Person is acceptable. SkyePharma shall pay Endo’s Fully Loaded Costs therefor, but only to the extent necessary and only for so long as SkyePharma’s failure continues and provided, that, all such expenditures of Endo are reasonable given the circumstances under which they are made. As work is performed by Endo pursuant to this Section 13.14, Endo shall set off its Fully Loaded Costs against any amounts due and owing from Endo to SkyePharma. Pursuant to Section 5.5, SkyePharma may audit Endo’s Fully Loaded Costs, the components thereof and cure activities undertaken by Endo, in each case undertaken under this Section 13.14. The decision by Endo to exercise its rights under this Section 13.14 shall not be deemed to obligate Endo to perform for SkyePharma in the future, but shall constitute a waiver of any other rights or remedies Endo may have under this Agreement with respect to the specific failure by SkyePharma which Endo seeks to fulfill pursuant to this Section 13.14.

-58-

     13.15 Nature of Licenses. All rights and licenses granted pursuant to this Agreement are, and shall otherwise be deemed to be, for purposes of 11 U.S.C. § 365(n) of the Bankruptcy Laws, licenses of rights to “intellectual property” as defined under 11 U.S.C. § 101(35A) of the Bankruptcy Laws. The Parties agree that Endo, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights, including any right to enforce any exclusivity provision of this Agreement, remedies, and elections under Bankruptcy Laws. To the fullest extent permitted by law, the Parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against SkyePharma under the Bankruptcy Laws, Endo shall be entitled to all applicable rights under 11 U.S.C. § 365(n) of the Bankruptcy Laws, including copies and access to, as appropriate, any such intellectual property and all embodiments of such intellectual property upon written request therefor by Endo, and such, if not already in its possession, shall be promptly delivered to Endo.

     13.16 Entire Agreement. This Agreement, together with the Exhibits hereto, that certain letter dated December 31, 2002 from ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, every Supply Agreement, every Quality Agreement and every Annual Development Plan and Annual Commercialization Plan, sets forth the entire agreement and understanding between the Parties as to the subject matter hereof and merges all prior discussions and negotiations between them, and neither of the Parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the Party to be bound thereby.

     13.17 Liability Limitation. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY DISCLAIM ANY AND ALL LIABILITY FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL AND INDIRECT DAMAGES.

     13.18 Parties in Interest. All of the terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Parties hereto and their respective permitted successors and assigns.

     13.19 Descriptive Headings. The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement. References to Sections herein shall refer to sections of this Agreement unless otherwise specified.

     13.20 Counterparts. This Agreement may be executed simultaneously in any number of identical counterparts, any one of which need not contain the signature of more than one Party, but all such counterparts taken together shall constitute one and the same agreement.

* * *

-59-

     IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its duly authorized representative as of the date first above written.

-60-

     In order to induce Endo to enter into this Agreement, the undersigned hereby guarantees, as surety, the full and timely payment and performance by SkyePharma, Inc. and SkyePharma Canada Inc., both Affiliates of the undersigned, of their respective payment obligations under the foregoing Agreement, including for all purposes, indemnification obligations and obligations of the foregoing parties upon a termination of this Agreement.

-61-

EXHIBIT A

FINANCIAL APPENDIX

     This provides the definitions of certain financial terms applicable to the Parties for purposes of the Agreement. All capitalized terms used herein without definition shall have the meanings ascribed thereto in the Agreement, unless otherwise expressly provided herein.

     A.1 Principles of Reporting

     The presentation of Net Sales and Commercialization Program shall be based on Endo’s financial information and shall be presented:

     1) for each seller (Endo and each Affiliate, Sublicensee and Subcontractor of Endo) for each Product in each Territory

     2) for all sellers on a consolidated basis for each Product

     3) for each Product on a consolidated basis

     in the reporting format depicted as follows:

     The presentation of the Development Program shall be based on SkyePharma’s, or Endo’s if applicable) financial information and shall be presented by Product and for all Products on a consolidated basis:

     It is the intention of the Parties that the interpretation of these definitions shall be consistent with GAAP.

     If necessary, a Party shall make the appropriate adjustments to the financial information it supplies under the Agreement to conform to the above format of reporting results of operation.

     A.2 Frequency of Reporting

     The fiscal year shall be a calendar year.

     Reports of Sales, Net Purchases, Inventory Write-offs and Commercialization Program Costs shall be made to the Joint Executive Committee and Development Program Costs to the Product Development Committee on a quarterly basis and on a year-to-date basis compared against the approved budget in the format and containing the information described in Section A1 - Principles of Reporting.

A-2

     A.3 Definitions

     “Allocable Overhead”, with respect to a Party’s activities, means costs directly related to such activities and incremental costs actually incurred by such Party or for its account including, but not limited to, those which are attributable to such Party’s supervisory services, occupancy costs, and its payroll, information systems, or purchasing functions and which are allocated to company departments based on space occupied or headcount or other activity-based method consistently applied by such Party, or a standard rate if agreed to by the Parties, relating to activities of such Party under the Development Program or Commercialization Program, as the case may be. Allocable Overhead shall not include any costs attributable to general corporate activities including, by way of example, executive management, investor relations, business development, legal affairs, human relations, and finance, related to activities of such Party under the Development Program or Commercialization Program, as the case may be.

     “Development Costs” means the development costs actually incurred by each Party with respect to any Product for the applicable Target Indications in the applicable Development Field, in each country within the Territory including:

          (i) costs required to obtain and/or maintain the first Registration of a Product and to obtain and/or maintain the FDA or applicable regulatory approval to manufacture, formulate, fill, use, ship and sell such Product in commercial quantities to Third Parties; and

          (ii) costs of research or development including costs of studies on the toxicological, pharmacokinetic, metabolic, pharmaceutical or clinical aspects of a Product conducted internally or by individual investigators or consultants, and costs for preparing, submitting, reviewing or developing data or information for the purpose of submission to a Regulatory Authority to obtain and/or maintain the first Registration of a Product.

          (iii) expenses for data management, statistical designs and studies, document preparation, and other administration expenses associated with the clinical testing program or Phase IV studies required to maintain such first Registration.

     In determining Development Costs each Party shall use its respective project accounting systems and shall review and approve its respective project accounting systems and methodologies with the other Party.

     In the event of New Indications being agreed between the Parties pursuant to Section 2.12 of this agreement the cost items included for such New Indication Development costs shall be the same as those reported for Development Costs and the costs for each New Indication shall be separately identifiable.

     “Distribution Costs” means the costs specifically identifiable to the distribution of a Product in the Territory, by a Party including customer services, order entry, billing, shipping, bad debt, credit and collection and other such activities.

A-3

     “First Commercial Sale” shall mean, with respect to DepoMorphine and Propofol IDD-D, the first sale for which payment has been invoiced for use or consumption by the general public of DepoMorphine or Propofol IDD-D, as the case may be, in a country in the Territory after all required Registrations, including pricing approvals (if applicable), have been granted by the Regulatory Authority in such country in the Territory.

     “Fully Loaded Costs”, with respect to the activities of a Party, shall mean such Party’s direct out-of-pocket costs and Allocable Overhead incurred due directly to such activities.

     “Inventory Write-offs” of a Product means the number of units of Product multiplied by the Product Price relating to such units of Product pursuant to a Supply Agreement which have been purchased by Endo its Affiliates, Sublicensees or Subcontractors (and are not subject to the waiver set forth in Section 9.4(a)(ii) of the Supply Agreement) and have not been included in Net Sales due to unacceptable remaining shelf-life.

     “Marketing Costs” means the costs actually incurred for marketing, promotion, advertising, Product promotional materials, professional education, Product related public relations, relationships with opinion leaders and professional societies, market research (after the first Registration), collection of data about sales to hospitals and other end users, healthcare economics studies, and other similar activities, relating to activities of a Party under a Commercialization Program for a Product. Such costs of a Party shall include, without limitation, (i) both direct internal costs actually incurred by a Party or for its account which are attributable to activities of such Party under a Product’s Commercialization Program (e.g., without limitation, salaries, benefits, supplies and materials, etc.), and (ii) outside services and expenses (e.g., without limitation, consultants, agency fees, meeting costs, etc.), relating to activities of such Party under a Product’s Commercialization Program. Such costs of a Party shall also include, without limitation, the cost of all pre-launch marketing activities and the cost of activities related to obtaining reimbursement from payers and costs of sales and marketing data.

     “Marketing Trials” shall mean all Phase IV studies other than those necessary to maintain the first Registration of a Product and other similar activities.

     “Net Purchases” shall mean the number of units of Product which are delivered pursuant to Purchase Orders submitted by Endo pursuant to Supply Agreements, and not returned by Endo pursuant to Supply Agreements, multiplied by the Product Price, as defined in the applicable Supply Agreement.

     “Net Sales”

     (a)  “Net Sales” means, with respect to DepoMorphine and Propofol IDD-D, the gross amount invoiced for sales of DepoMorphine or Propofol IDD-D, as the case may be, in arm’s length sales by Endo or its Affiliates, Sublicensees or Subcontractors to Third Parties, commencing with the First Commercial Sale of such product, less the following deductions from such gross amounts which are actually incurred, allowed, accrued or specifically allocated:

A-4

          (i) credits, price adjustments or allowances for damaged products, returns or rejections of such products;

          (ii) normal and customary trade, cash and quantity discounts, allowances and credits (other than those granted at the time of invoicing which have already been included in the gross amount invoiced);

          (iii) chargeback payments and rebates (or the equivalent thereof) granted to group purchasing organizations, managed health care organizations or to federal, state/provincial, local and other governments, including their agencies, or to trade customers;

          (iv) any freight invoiced by Endo, postage, shipping, insurance and other transportation charges (excluding such charges that are included in Distribution Costs); and

          (v) sales taxes, value-added taxes (to the extent not refundable in accordance with applicable law), and excise taxes, tariffs and duties, and other taxes directly related to the sale (but not including taxes assessed against the income derived from such sale).

          (vi) bundling discounts created by the bundling of product(s) in accordance with Section 4.5 of this Agreement. “Net Sales” shall not include any provision for unpaid amounts owed by Third Party purchasers of the Products or sales of such Products among the Parties, their respective Affiliates, Sublicensees or Subcontractors. Net Sales, as set forth in this definition, shall be calculated applying, in accordance with GAAP, the standard accounting practices Endo customarily applies to other products sold by it.

     “Product Price” for DepoMorphine shall mean the then ruling Price as defined pursuant to the Supply Agreement for DepoMorphine. For Propofol IDD-D the Product Price shall be such Price agreed between the Parties pursuant to the Supply Agreement for Propofol IDD-D.

     “Sales Costs” means costs actually incurred by the Parties or for their account and specifically identifiable to activities of a Party under a Product’s Commercialization Program in the Territory in all markets, including without limitation, the managed care market.

     “Sales Costs” shall include, without limitation, costs associated with sales representatives for Products, including compensation, benefits and travel, supervision and training of such sales representatives, sales meetings, and other sales related expenses.

     “Sales Costs” shall not include the start-up costs associated with any Party’s sales force relating to that Party’s sales efforts, including recruiting, relocation and other similar costs.

     “Units” shall mean the number of units of such Product sold or transferred during the period and included in Net Sales.

A-5

EXHIBIT B

TARGET LABELING

DepoMorphine

Target Indication: ***.

Target Profile: ***.

Target Labeling: The Target Indication and Target Profile.

Propofol IDD-D

Target Indication: ***.

Target Profile: ***.

Target Labeling: The Target Indication and Target Profile.

B-1

EXHIBIT C

FORM OF PROPOFOL SUPPLY AGREEMENT

FORM OF PROPOFOL

SUPPLY AGREEMENT

By and Between

SKYEPHARMA, INC.

and

ENDO PHARMACEUTICALS INC.

Dated as of ____________, 2003

FORM OF PROPOFOL SUPPLY AGREEMENT

     THIS PROPOFOL SUPPLY AGREEMENT dated as of this      day of      , 2003, is entered into by and between Endo Pharmaceuticals Inc., a corporation organized and existing under the laws of Delaware, having offices located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (“Endo”) and SkyePharma, Inc., a corporation organized and existing under the laws of the State of California, having offices located at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (“SkyePharma”) (each of Endo and SkyePharma, a “Party” and, collectively, the “Parties”).

PRELIMINARY STATEMENTS

     A.     Endo wishes to distribute commercially a certain pharmaceutical product currently known as Propofol in finished dosage form for human use; and

     B.     SkyePharma has the experience and expertise necessary to perform chemical and pharmaceutical development, manufacturing, packaging, analytical testing and quality assurance services for the manufacturing, labeling and packaging of such product for sale to Endo; and

     ▇.     ▇▇▇▇ desires SkyePharma to perform such services or have such services performed and to supply such product to Endo; and SkyePharma desires to perform such services or have such services performed and to sell such product to Endo, all on the terms and conditions set forth in this Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants and promises set forth herein, the Parties agree as follows:

1. DEFINITIONS.

     Capitalized terms not otherwise defined herein shall have the meanings set forth in that certain Development and Marketing Strategic Alliance Agreement between the Parties dated as of the date hereof (the “Alliance Agreement”). The following terms, whether used in the singular or plural, shall have the meanings assigned to them below for purposes of this Agreement:

     “Active Ingredient” shall mean Propofol.

     “Active Ingredient Specifications” shall mean the specifications for the Active Ingredients as set forth in a monograph for Propofol finalized by the U.S. Pharmacopeia (“USP”) or in the event a monograph has not been finalized by the USP, such specifications as determined by the JMC prior to submission of the Registration Application for the Product, as such specifications may be amended from time to time by the JMC.

     “Affiliate” shall mean any corporation or non-corporate entity which directly or indirectly controls, is controlled by, or is under common control with a Party. A corporation or non-corporate entity shall be regarded as in control of another corporation if it owns or directly or indirectly controls at least fifty percent (50%) of the voting stock of the other corporation; or (a) in the absence of the ownership of at least fifty percent (50%) of the voting stock of a

C-1

corporation or (b) in the case of a non-corporate entity, the power to direct or cause the direction of the management and policies of such corporation or non-corporate entity, as applicable.

     “Agreement” shall mean this Supply Agreement.

     “Breaching Party” shall have the meaning assigned to such term in Section 12.3.

     “cGMP” means those practices in the manufacture of pharmaceutical products that are recognized as the current good manufacturing practices by the FDA in accordance with FDA regulations, guidelines, other administrative interpretations, and rulings in connection therewith, including but not limited to those regulations cited in 21 C.F.R. parts 210 and 211, all as they may be amended from time to time.

     “Commencement Date” shall mean the date of Product Approval for commercial manufacturing at SkyePharma or at a Third Party manufacturer subcontracted by SkyePharma.

     “Contract Year” shall mean the period of twelve (12) successive calendar months commencing on the first day of the month in which the FDA approves the manufacturing of the Product at SkyePharma or at a Third Party manufacturer, and each successive twelve (12) month period thereafter.

     “Delivery Date” shall mean a date for which delivery of Product is stated in a purchase order.

     “Effective Date” shall have the meaning first written above.

     “Excipients” shall mean the raw materials, other than the Active Ingredient, required to manufacture the Product in accordance with the Product Specifications.

     “Excipient Specifications” shall mean the specifications for the Excipients which shall be determined by the JMC prior to submission of the Registration Application for the Product, as such specifications may be amended from time to time by the JMC.

     “FD&C Act” shall mean the United States Federal Food, Drug and Cosmetic Act, as amended.

     “FDA” shall mean the United States Food and Drug Administration, or any successor entity.

     “First Commercial Sale” shall mean the first commercial sale of the Product by Endo or its Affiliates in the Territory following Product Approval.

     “Forecast” shall have the meaning assigned to such term in Section 8.1.

     “Force Majeure Event” shall have the meaning assigned to such term in Section 15.1(a).

C-2

     “Long-Term Inability to Supply” shall mean, with respect to a Product, SkyePharma’s failure to (a) supply Endo with at least *** of the quantities of Product ordered by Endo in accordance with the terms of this Agreement for a period that exceeds (i) *** for any reason other than Force Majeure, or (ii) *** as a result of Force Majeure, or (b) supply any Product ordered by Endo in accordance with the terms of this Agreement for a period that exceeds *** for any reason other than Force Majeure, provided that such failure to supply referred to in this clause (b) has resulted in an inability for Endo to fulfill customer orders in the marketplace.

     “Manufacturing Facility Registration” means the approvals, permits, applications, licenses or registrations which have been received for a manufacturing facility in order to manufacture the Product or any other product at the manufacturing facility.

     “NDA” shall mean the Product’s New Drug Application as filed, amended and/or supplemented from time to time in accordance with 21 CFR Part 314 et al.

     “Non-breaching Party” shall have the meaning assigned to such term in Section 12.3.

     “Packaging Specifications” shall mean the packaging and labeling specifications for the Product which shall be determined by the JMC prior to submission of the Registration Application for the Product, as such specifications may be amended from time to time by the JMC.

     “Product” shall mean a pharmaceutical product using Propofol as an active pharmaceutical ingredient ***, in finished dosage form, filled, labeled and packaged for commercial sale or distribution as samples, as the case may be, by SkyePharma or a Third Party Manufacturer in accordance with the Specifications.

     “Product Approval” shall mean final FDA approval of the NDA for the Product.

     “Product Price” shall mean the Product price set forth in Exhibit 1 attached hereto and made a part hereof, as such price may be amended from time to time in accordance with this Agreement.

     “Product Registration” shall mean the approvals, permits, applications, licenses or registrations (including but not limited to the NDA) for the Product which have been received in order to market or sell same in the Territory.

     “Product Specifications” shall mean the specifications for the Product which shall be determined by the JMC prior to submission of the Registration Application for the Product, as such specifications may be amended from time to time by the JMC.

     “Purchase Order” shall have the meaning assigned to such term in Section 9.1.

     “Quality Agreement” shall mean the Quality Agreement, as further defined in Section 7, which shall be substantially in the form of Exhibit 2 hereto.

C-3

     “Specifications” shall mean the Active Ingredient Specifications, Excipient Specifications, Product Specifications, and the Packaging Specifications for the Product.

     “Territory” shall mean the United States of America and Canada, and their territories and possessions.

     “Third Party” shall mean any party other than Endo, SkyePharma and their respective Affiliates.

     “Unit” shall mean a single vial of Product or such other size as may be mutually agreed upon by the Parties from time to time.

2. SALE AND PURCHASE OF PRODUCT.

     During each Contract Year throughout the term of this Agreement, SkyePharma agrees to manufacture, or to have manufactured, and sell to Endo, and Endo agrees to purchase from SkyePharma, Product for marketing, sale and distribution in the Territory, in accordance with the terms and subject to the conditions of this Agreement, including the Exhibits hereto.

3. QUALIFICATION OF SECOND SITE.

     3.1 Second Manufacturing Site. SkyePharma agrees to qualify and obtain final regulatory approval for a second manufacturing site for the Product, either internally or through a Third Party manufacturer, within *** of the date of First Commercial Sale. The identification of the second manufacturing site will be the responsibility of the JMC.

     3.2 Third Party Manufacturer. In the event that SkyePharma contracts with a Third Party to manufacture, test and/or package the Product (either as the primary or secondary source of supply), Endo shall be given the opportunity to review and comment on such manufacturing agreement in advance of its execution, and SkyePharma shall give good faith consideration to Endo’s comments. Such Third Party manufacturing agreement(s) shall provide that Endo shall be an intended third party beneficiary of such Third Party manufacturer’s obligations to SkyePharma thereunder, including with rights of direct enforcement by Endo. In addition, each Third Party manufacturing agreement shall provide, in substance, that, in the event that SkyePharma, or any other Person acting on behalf of SkyePharma or its estate pursuant to any Bankruptcy Laws, shall seek or obtain a Bankruptcy Rejection of such Third Party manufacturing agreement, then the Third Party manufacturer shall (i) timely exercise its rights to continue any and all licenses (if any) thereunder, pursuant to 11 U.S.C. § 365(n) of the Bankruptcy Laws, and (ii) to the extent that Bankruptcy Rejection effectively terminated the Third Party manufacturing agreement, immediately enter into an agreement with Endo for the Product in the Territory, on substantially the same terms and conditions. The Third Party manufacturing agreements may contain such additional terms and conditions as SkyePharma and the Third Party manufacturer shall agree to, subject to the review (but not the approval) of the JMC prior to the execution of such Third Party manufacturing agreement and provided that such additional terms and conditions do not prejudice, reduce or limit Endo’s rights under this Agreement (including this Section 3.2) or the Alliance Agreement.

C-4

4. ACTIVE INGREDIENTS; EXCIPIENTS.

     The costs of procuring Active Ingredients and Excipients for the Product as well as all other materials required to manufacture, test, package, label and release the Product are included as part of the Product Price.

5. REPRESENTATIONS AND WARRANTIES; COVENANTS

     5.1 By Both Parties. Each Party represents and warrants to the other Party, as of the Effective Date, that:

          (a) Such Party is duly organized and validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

          (b) Such Party has taken all corporate action necessary to authorize the execution and delivery of this Agreement and the performance of its obligations under this Agreement and has full power and authority to enter into this Agreement and perform its obligations under this Agreement;

          (c) This Agreement has been duly executed by such Party and assuming due authorization, execution and delivery by the other Party, constitutes a valid and legally binding obligation of such Party, enforceable in accordance with its terms, subject to and limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, and other laws generally applicable to creditors’ rights; and (ii) judicial discretion in the availability of equitable relief;

          (d) With the exception of the Product Approval, the Manufacturing Facility Registration and the Product Registration, such Party has obtained, or is not required to obtain, the consent, approval, order, or authorization of any Third Party, or to complete any registration, qualification, designation, declaration or filing with, any governmental entity, in connection with the execution and delivery of this Agreement and the performance by such Party of its obligations under this Agreement; and

          (e) The execution and delivery of this Agreement, and the performance by such Party of its obligations under this Agreement, does not: (i) conflict with, nor result in any violation of or default under any such instrument, judgment, order, writ, decree, contract or provision to which such Party is otherwise bound; or (ii) conflict with any rights granted by such Party to any Third Party or breach any obligation that such Party has to any Third Party.

     5.2 By SkyePharma. SkyePharma represents and warrants to Endo that the Product, at the time of delivery to Endo, (a) will conform to the Specifications, as then in effect, (b) will have been manufactured in compliance with all applicable laws and regulations and in accordance with cGMPs; (c) will not be (i) adulterated or misbranded by SkyePharma within the meaning of the FD&C Act or (ii) an article that may not be introduced into interstate commerce under the provisions of Sections 404 or 505 of the FD&C Act; and (d) other than the first three commercial lots which require prior authorization from Endo before release by SkyePharma,

C-5

shall have a minimum of *** of the Product shelf life as per the applicable Product registrations still available.

     5.3 By Endo. Endo represents and warrants to SkyePharma that Endo will adhere to Specifications and all applicable laws relating to the handling, storage and disposal of the Products.

     5.4 Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR THE ALLIANCE AGREEMENT, THERE ARE NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED, MADE OR GIVEN BY EITHER PARTY HEREUNDER, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF QUALITY, PERFORMANCE, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OF ANY PRODUCT DELIVERED HEREUNDER, WHETHER USED ALONE OR IN COMBINATION WITH OTHER SUBSTANCES.

     5.5 Legal Compliance. Each Party shall comply in all material respects with all federal and state laws and regulations applicable to the conduct of its business pursuant to this Agreement, including, but not limited to, the FD&C Act.

6. CHANGES TO SPECIFICATIONS; VALIDATION.

     6.1 Optional Changes to Specifications.

          (a) To the extent that SkyePharma desires to implement any change to Specifications which is not required pursuant to Section 6.2, SkyePharma shall be responsible for making or shall cause the making of any required filing to any Product Registration or Manufacturing Facility Registration with respect to such change and seeking approval from each applicable regulatory authority. Payment for the cost and expense of implementing such change to Specifications shall be the responsibility of SkyePharma.

          (b) To the extent that Endo desires to have any change to Specifications implemented which is not required pursuant to Section 6.2, Endo shall obtain the consent of SkyePharma regarding such proposed change to Specifications. If consent from SkyePharma is obtained, at Endo’s cost and expense, SkyePharma shall be responsible for making or shall cause the making of any required filing to any Product Registration or Manufacturing Facility Registration with respect to such change and seeking approval from each applicable regulatory authority. Payment for the cost and expense of implementing such change to Specifications shall be the responsibility of Endo.

     6.2 Required Changes to Specifications. If any proposed change in Specifications is in response to a pronouncement of the FDA, a change in controlling compendial monograph, a Force Majeure Event, or a change in applicable law, each Party will cooperate with the other in any reasonable manner to effect such change in a timely manner. SkyePharma shall be responsible for making or shall cause the making of any required filing to any Product Registration or Manufacturing Facility Registration with respect to such change and seeking

C-6

approval from each applicable regulatory authority. Payment for the cost and expense of implementing such changes to Specification shall be the responsibility of SkyePharma.

     6.3 Cooperation. In the event that any change to Specifications is implemented, the Parties agree to cooperate with each other in good faith to enable each Party to comply with the terms of this Agreement.

     6.4 Validation. SkyePharma shall prepare or shall have prepared equipment qualification and manufacturing validation procedures, and shall perform or have performed qualification of utilities as well as validation of the manufacturing, packaging and cleaning processes in accordance with such procedures.

7. QUALITY AGREEMENT.

     The Quality Agreement attached hereto as Exhibit 2 (“Quality Agreement”) further details the quality assurance obligations and responsibilities of the Parties with respect to the Product. Notwithstanding anything to the contrary in this Agreement or in any other document or agreement, in the event of a conflict between this Agreement and the Quality Agreement, the Quality Agreement shall govern and control.

8. FORECASTS AND ORDERS.

     8.1 Forecast. Within *** of the Effective Date or *** before the anticipated Product launch, whichever is later, Endo shall submit to SkyePharma a written estimate of its *** requirements for Product for each of the next succeeding *** (this forecast and each succeeding forecast, a “Forecast”). Each Forecast shall be updated *** on the *** of the *** on a *** rolling basis. Each Forecast shall include, during the relevant periods, the quantities necessary for commercial launch, ramp-up and pipeline fill. Endo shall make all Forecasts in good faith given market conditions and other information available to Endo.

     8.2 Firm Purchase Requirement. The forecast of the most current *** period shall be binding on the Parties and shall be deemed a firm purchase order for which Endo shall provide a written purchase order stating in detail the required quantities of Products and the required delivery dates in accordance with Section 9.1 below. The forecast for the remaining *** period of each rolling forecast is for planning purposes only and shall not constitute a commitment to purchase or supply Product.

     8.3 Quantity Limits.

          (a) Unless otherwise mutually agreed upon by the Parties, all Purchase Orders submitted by Endo for delivery of Product in any given month shall not be less than *** of the amount forecasted for such month in the Forecast immediately preceding the Forecast that is deemed to be a firm purchase order for such month.

          (b) In the event that Endo submits any Purchase Order to purchase Product in any given month in an amount in excess of *** of the amount forecasted for such month in the Forecast immediately preceding the Forecast that is deemed to be a firm purchase order for such month or if Endo desires to increase the amount of Products to be manufactured pursuant to an already submitted Purchase Order, SkyePharma shall use its commercially reasonable efforts to deliver or have delivered the quantity ordered by Endo; provided, however, SkyePharma shall not be liable to Endo for any inability to deliver the amount of Products ordered by Endo in excess of such amount.

C-7

9. PURCHASE OF PRODUCT; DELIVERIES.

     9.1 Purchase Orders.

          (a) Except to the extent the Parties may otherwise agree with respect to a particular shipment, the Product shall be ordered by Endo pursuant to written purchase orders, which shall be sent to SkyePharma not less than *** prior to the Delivery Dates specified in such purchase orders and which shall indicate the quantities of Product required (“Purchase Order”). Upon receipt of each Purchase Order by SkyePharma hereunder, SkyePharma shall supply or have supplied the Product, in such quantities (with any variances permitted hereunder) and shall deliver or have delivered such Product to Endo within *** of the Delivery Dates specified in such Purchase Order. Purchase Orders are firm and may not be cancelled or modified without SkyePharma’s prior written consent.

          (b) The Parties specifically agree that the failure of SkyePharma to deliver Product within *** of the Delivery Dates shall not be deemed a material breach of this Agreement for purposes of Section 12.3 unless SkyePharma’s failure to timely deliver Product is a repeating occurrence.

     9.2 Purchase Quantities. All Product shall be ordered in lot sizes or whole multiples thereof. Each Purchase Order shall specify the quantity of Units of Product being ordered. Quantities actually shipped pursuant to a given Purchase Order may vary from the quantities reflected in such Purchase Order by up to *** and still be deemed to be in compliance with such Purchase Order; provided, however, that Endo shall only be invoiced and required to pay for the quantities of Product which SkyePharma actually ships or have shipped to Endo. Endo will manage its inventory of Product in a manner reasonably consistent with its ordinary business practices.

     9.3 Delivery Terms.

          (a) SkyePharma shall be responsible for shipping and delivery of Product to Endo’s facility at Memphis, TN (including the cost of any insurance), and Endo shall be responsible for the cost of freight for the Product between SkyePharma’s or Third Party’s manufacturing facility and Endo’s facility, which costs are not included in the cost of goods sold.

          (b) SkyePharma shall package and ship or shall caused to be packaged and shipped all Products in accordance with the Packaging Specifications and each shipment shall be accompanied by appropriate transportation and other agreed upon documentation. SkyePharma shall ship or have shipped the Products in accordance with all laws and regulations relating to the Products, including, without limitation, those laws and regulations relating to Class II controlled substances. SkyePharma shall make all arrangements with a common carrier for delivery of the Products to Endo’s facility in Memphis, TN or other location designated by Endo.

          (c) Title and risk of loss and/or damage to the Product shall pass to Endo upon delivery of the Product to Endo’s facility in Memphis, TN or other location designated by Endo.

C-8

     9.4 Late Dated Product.

          (a) In the event that SkyePharma makes available to Endo Product which does not meet the dating warranty set forth in
Section 5.2(d) (e.g., validation batches) (“Late Dated Product”), Endo may, in its sole discretion, take possession of such Late Dated Product.

               (i) Notwithstanding any other provision of this Agreement, in the event that the late dating was caused by a request initiated by Endo for delivery of a quantity of Units of Product in excess of its Purchase Order, Endo shall not be entitled to reject such product for failure to meet the dating warranty set forth in Section 5.2(d).

               (ii) Notwithstanding any other provision of this Agreement, in the event that the late dating was caused by a manufacturing problem, quality investigation or other event which is the responsibility of SkyePharma, Endo shall take possession of such Late Dated Product without waiver of its rights to reject such Late Dated Product at any time, including, without limitation, upon its inability to sell the Late Dated Product or upon the return of such Late Dated Product by an Endo customer, and Endo shall be entitled to all remedies for non-conforming Product set forth herein regardless of the date of such rejection by Endo.

     9.5 Technical Assistance. In the event of a Long-Term Inability to Supply with respect to a Product or termination of this Agreement by Endo pursuant to Section 12.4, SkyePharma agrees to provide Endo with all reasonable technical assistance and support to qualify a Third Party Manufacturer to supply the Product.

10. PRICE.

     10.1 Price. For all Product which is the subject of Purchase Orders submitted by Endo prior to or during the first Contract Year, Endo shall pay to SkyePharma the Product Price set forth in Exhibit 1 hereto, subject to adjustment as set forth in Section 10.2 hereof.

     10.2 Price Changes. The Product Price shall be firm until the ***anniversary of the Commencement Date. After the ***, the Parties shall adjust the Product Price by ***. The adjusted Purchase Price shall be effective as of *** of the following calendar year.

     10.3 Taxes. The Product Price set forth in Exhibit 1 does not include sales, use, consumption, or excise taxes of any taxing authority. The amount of such taxes, if any, will be added to the Product Price in effect at the time of shipment thereof and shall be reflected in the invoices submitted to Endo by SkyePharma pursuant to this Agreement. Endo shall pay the amount of such taxes to SkyePharma in accordance with the payment provisions of this Agreement.

     10.4 Method of Payment. At the time of each shipment of Product hereunder, SkyePharma shall invoice Endo, and Endo shall pay all undisputed invoices within *** days of the release of the Product by Endo’s Quality Assurance Department in accordance with Section 13 hereto. All payments due hereunder to SkyePharma shall be payable in United States dollars

C-9

by check or by wire transfer to such accounts as SkyePharma may designate to Endo in writing from time to time.

11. RECALLS; ADVERSE EVENT REPORTING; CONFIDENTIALITY.

     The procedures for recalls, adverse event reporting and maintenance of Confidential Information shall be in accordance with the terms set forth in the Alliance Agreement.

12. TERM AND TERMINATION.

     12.1 Term. Unless sooner terminated pursuant to the terms hereof, the term of this Agreement shall commence on the Effective Date and shall continue until the expiration or termination of the Product under the Alliance Agreement.

     12.2 Termination by Mutual Agreement. This Agreement may be terminated at any time upon mutual written agreement between the Parties.

     12.3 Termination for Default. Either Party (the “Non-breaching Party”) may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in its entirety, in the event the other Party (the “Breaching Party”) shall have materially breached or defaulted in the performance of any of its material obligations hereunder and such default shall have continued for *** after written notice thereof was provided to the Breaching Party by the Non-breaching Party (or, if such default cannot be cured within such *** period, if the Breaching Party does not commence and diligently continue actions to cure such default during such *** period). Any such termination shall become effective at the end of such *** period unless the Breaching Party has cured any such breach or default prior to the expiration of such *** period (or, if such default cannot be cured within such *** period, if the Breaching Party has commenced and diligently continued actions to cure such default). The right of either party to terminate this Agreement as provided in this Section 12.3 shall not be affected in any way by its waiver or failure to take action with respect to any previous default.

     12.4 Bankruptcy; Insolvency. Either Party may terminate this Agreement effective immediately in the event that the other Party (i) has become insolvent or has been dissolved or liquidated, filed or has filed against it, a petition, case or other proceeding under any Bankruptcy Laws, and such petition, case or proceeding if filed against it is not dismissed within *** of the filing; (ii) makes a general assignment for the benefit of creditors; or (iii) has a receiver, custodian, trustee or other Person exercising similar functions appointed for all or substantially all of its assets. The effects of such termination shall be as set forth herein and in the Alliance Agreement.

     12.5 Consequences of Termination. In addition to the consequences set forth in the Alliance Agreement, upon expiration or termination of this Agreement, whichever is sooner (but in the case of termination, only if directed by the terminating Party in the notice of termination), SkyePharma shall manufacture and ship, and Endo shall purchase in accordance with the provisions hereof any and all amounts of Product ordered by Endo hereunder prior to the date on which such notice is given.

C-10

     12.6 Accrued Rights; Surviving Obligations.

          (a) Termination or expiration of this Agreement for any reason shall be without prejudice to any rights which shall have accrued to the benefit of either Party prior to such termination or expiration and such termination or expiration shall not relieve either Party from its obligations which are expressly indicated to survive.

          (b) All of the Parties’ rights and obligations under Sections 5, 9.5, 12, 14, and 16 shall survive termination or expiration hereof.

13. NON-CONFORMING PRODUCTS.

     13.1 Non-conforming Products.

          (a) Endo shall promptly conduct an inspection of the Products delivered by SkyePharma for any visual defect or damage after Endo’s receipt of such Product and all associated quality assurance documents, including, without limitation, the certificate of analysis. Endo shall have *** upon such receipt to give SkyePharma written notice of rejection of such shipment of Products to the extent Endo determines that the Products fail to conform with any warranty or Specifications set forth herein following its visual inspection. Any rejection notice given hereunder shall specify the manner in which the Product fails to meet such warranty or Specifications.

          (b) If it is determined by agreement of the Parties (or in the absence of agreement of the Parties, in accordance with the dispute resolution set forth in Article IX of the Quality Agreement) that the Product is non-conforming, then SkyePharma shall credit Endo’s account for the price invoiced for such non-conforming Product, together with all out-of-pocket expenses (including, without limitation, all shipping and insurance charges) associated with the purchase and return of the Product. If payment therefor has previously been made by Endo, SkyePharma shall, at Endo’s option, (x) pay Endo the amount of such credit, (y) offset the amount thereof against other amounts then due SkyePharma hereunder, or (z) replace such nonconforming Product with conforming Product at no additional cost to Endo.

          (c) Except as set forth in 13.2, if Endo does not provide SkyePharma with any written notice of rejection within such *** period, Endo shall be deemed to have accepted and released the Product.

     13.2 Endo may reject Products at any time for defects that were not detected during the inspection undertaken by Endo pursuant to Section 13.1 so long as Endo notifies SkyePharma of such rejection promptly after its discovery of such defect.

     13.3 Disposition of Non-Conforming Product. Endo shall not dispose of any non-conforming Product without authorization and instructions from SkyePharma either to dispose of the non-conforming Product or to return the non-conforming Product to SkyePharma.

C-11

     13.4 Product Holds or Rejections. SkyePharma agrees to notify Endo of any Product hold or Product rejection that may have a material impact on the manufacturing process or that may reasonably lead to a delay in supply of Product to Endo.

14. LONG-TERM INABILITY TO SUPPLY

     14.1 In the event that a Long-Term Inability to Supply has occurred, Endo shall have the right, at its sole discretion, to:

          (a) use a Third Party Manufacturer, and take such other related actions as may be necessary, to fill the Product supply shortfall and deduct all amounts paid to such Third Party manufacturer relating to the Product from sales splits otherwise due SkyePharma pursuant to the Alliance Agreement; or

          (b) terminate all requirements or commitments under this Agreement; or

          (c) terminate this Agreement and/or the Alliance Agreement in its entirety or solely as to the Product not adequately supplied.

     14.2 In the event that a Long-Term Inability to Supply has occurred, SkyePharma shall have the obligation, upon request by Endo, to:

          (a) provide the Technical Assistance set forth is Section 9.5; and

          (b) reimburse Endo for the costs of its Propofol sales force and non-cancellable marketing expenses incurred during the Long-Term Inability to Supply. Endo may set-off this reimbursement obligation against amounts otherwise owed SkyePharma. For purposes of clarity, if Endo chooses to terminate this Agreement and/or the Alliance Agreement, in whole or in part, pursuant to Section 14.1(c), Endo will not have any right to reimbursement pursuant to this Section 14.2(b).

C-12

15. FORCE MAJEURE.

     15.1 Effects of Force Majeure.

          (a) Neither Party shall be held liable or responsible to the other Party nor be deemed to be in default under, or in breach of any provision of, this Agreement for failure or delay in fulfilling or performing any obligation of this Agreement when such failure or delay is due to force majeure, and without the fault or negligence of the Party so failing or delaying. For purposes of this Agreement, force majeure is defined as set forth in the Alliance Agreement (a “Force Majeure Event”). Such excuse shall continue for the shorter of (i) as long as the Force Majeure Event continues or (ii) ***; provided, however, that Endo may cancel without penalty any and all Purchase Orders in the event SkyePharma is unable to fulfill an outstanding Purchase Order within *** of its scheduled delivery date due to a Force Majeure Event. Upon cessation of such Force Majeure Event, such Party shall promptly resume performance on all Purchase Orders which have not been terminated.

          (b) Notice of Force Majeure Event. In the event either Party is delayed or rendered unable to perform due to a Force Majeure Event, the affected Party shall give notice thereof and its expected duration to the other Party promptly after the occurrence of the Force Majeure Event; and thereafter, the obligations of the affected Party will be suspended during the continuance of the Force Majeure Event. The affected Party shall take commercially reasonable steps to remedy the Force Majeure Event with all reasonable dispatch, but such obligation shall not require the settlement of strikes or labor controversies on terms unfavorable to the affected Party.

16. MISCELLANEOUS.

     16.1 Independent Contractors. Nothing in this Agreement is intended or shall be deemed to constitute a partnership, agency, employer-employee or joint venture relationship between the Parties. No Party shall incur any debts or make any commitments for the other, except to the extent, if at all, specifically provided herein.

     16.2 Assignment; Subcontractors.

          (a) Except as otherwise provided for in this Agreement, neither Party shall be entitled to assign its rights or delegate its obligations hereunder without the express written consent of the other Party hereto, except that each Party may assign its rights and transfer its duties hereunder (i) without obtaining such written consent in the event of such Party’s merger, consolidation or sale of all or substantially all of its assets, or (ii) to an assignee of that portion of its business to which this Agreement relates upon obtaining the express written consent of the other Party which consent shall not be unreasonably withheld as long as the assignee has the skill and financial ability to perform the assignor’s obligations hereunder and is not otherwise a competitor of the remaining Party. No assignment and transfer shall be valid or effective unless done in accordance with this Section 16.2 and unless and until the assignee, transferee or successor-in-interest shall agree in writing to be bound by the provisions of this Agreement, and

C-13

upon such agreement, all references herein to the assignor, transferor or predecessor shall be deemed to refer and apply to the assignee, transferee or successor in interest.

          (b) The Parties agree that SkyePharma may subcontract its obligations to be performed hereunder at anytime.

     16.3 Books and Records. Any books and records to be maintained under this Agreement shall be maintained in accordance with GAAP.

     16.4 Further Actions. Each Party shall execute, acknowledge and deliver such further instruments, and do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

     16.5 Inconsistency.

          (a) If there is any inconsistency between the provisions of this Agreement and any Purchase Orders, the provisions of this Agreement shall control and be determinative.

          (b) If there is any inconsistency between the provisions of this Agreement and the Quality Agreement, the provisions of the Quality Agreement shall control and be determinative.

          (c) If there is any inconsistency between the provisions of this Agreement and the Alliance Agreement, the provisions of the Alliance Agreement shall control and be determinative.

     16.6 Waiver. A waiver by either Party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach hereof. All rights, remedies, undertakings, obligations and agreements contained in this Agreement shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either Party.

     16.7 Compliance with Law. Nothing in this Agreement shall be deemed to permit a Party to export, re-export or otherwise transfer any Products sold under this Agreement without compliance with applicable laws.

     16.8 Severability. When possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

     16.9 Amendment. No amendment, modification or supplement of any provisions of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.

C-14

     16.10 Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to conflict of law principles.

     16.11 Arbitration. Except as expressly otherwise provided in this Agreement, any dispute arising out of or relating to the interpretation of any provisions of this Agreement, or the failure of any Party to perform or comply with any obligations or conditions applicable to such Party pursuant to this Agreement, shall be first attempted to be settled by referring the dispute to the Parties’ senior management and, failing resolution, finally settled by arbitration under the then current commercial arbitration rules of the American Arbitration Association in accordance with the terms set forth in Section 13.13 (a) of the Alliance Agreement

     16.12 Descriptive Headings. The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.

     16.13 Construction. This Agreement has been jointly prepared on the basis of the mutual understanding of the Parties and shall not be construed against either Party by reason of such Party’s being the drafter hereof or thereof.

     16.14 Entire Agreement. This Agreement, together with the Exhibits hereto, and the Quality Agreement, together with its Exhibits thereto, and the Alliance Agreement, together with its Exhibits thereto, sets forth the entire agreement and understanding between the Parties as to the subject matter hereof and merges all prior discussions and negotiations between them, and neither of the Parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or as duly set forth on or subsequent to the date hereof in writing and signed by a proper and duly authorized officer or representative of the Party to be bound thereby.

     16.15 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered personally or sent by (a) registered or certified mail, return receipt requested, (b) a nationally-recognized courier service guaranteeing next-day delivery, charges prepaid or (c) facsimile (with the original promptly sent by any of the foregoing manners), and shall be deemed to have been given upon mailing or upon transmission by facsimile, as the case may be. Any such notices shall be addressed to the receiving Party at such Party’s address set forth below, or at such other address as may from time to time be furnished by similar notice by either Party:

          (a) If to SkyePharma:

C-15

          (b) If to Endo:

     16.16 Counterparts. This Agreement may be executed simultaneously in any number of identical counterparts, any one of which need not contain the signature of more than one Party, but all such counterparts taken together shall constitute one and the same agreement.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representatives as of the day and year first above written.

C-16

SCHEDULE 3

INITIAL MEMBERS OF JOINT EXECUTIVE COMMITTEE

SCHEDULE 8.1(e)

SCHEDULE OF EXCEPTIONS

     Pursuant to a Security Agreement dated as of December 29, 2000, SkyePharma, Inc. has granted to ▇▇▇▇ Capital Royalty Acquisition Fund, L.P. a security interest in certain amounts payable by Endo to SkyePharma, Inc. under this Agreement.

     Pursuant to a Security Agreement dated as of March 7, 2002, SkyePharma Canada Inc. has granted to ▇▇▇▇ Capital Royalty Acquisition Fund, L.P. a security interest in certain amounts payable by Endo to SkyePharma Canada Inc. under this Agreement.