Exhibit 10.1

CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

LICENSE AND DEVELOPMENT AGREEMENT

This License and Development Agreement (the “Agreement”) is made as of
September 5, 2007 (the “Effective Date”) by and between BioDelivery Sciences
International, Inc., a Delaware corporation with an office at 2501 Aerial Center
Parkway, Suite 205, Morrisville, North Carolina 27560 USA (“Parent”), its
wholly-owned subsidiary Arius Pharmaceuticals, Inc., a Delaware corporation with
an office at the same address (“Arius”, and together with Parent, “BDSI”), and
Meda AB, a Swedish corporation with its principal office at Pipers väg 2 A,
SE-170 09, Solna, Sweden (“Meda”). BDSI and Meda are sometimes referred to
collectively herein as the “Parties” or singly as a “Party.”

R E C I T A L S

WHEREAS, BDSI wishes to grant to Meda, and Meda wishes to obtain from BDSI, an
exclusive license to develop, manufacture (or have manufactured), market,
advertise, promote, distribute, offer for sale, sell, export, and import BDSI’s
BEMA fentanyl product in the United States, Mexico and Canada on the terms and
subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements contained herein, the Parties hereto, intending to be
legally bound, do hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. In addition to the capitalized terms defined elsewhere
in this Agreement, the following terms used in this Agreement shall have the
meaning set forth below:

“ADE” means any Adverse Event associated with any Licensed Product or the
Demonstration Samples (including Adverse Drug Reactions).

“Adverse Event” or “AE” means any untoward medical occurrence in a patient or
clinical investigation subject administered Licensed Products or Demonstration
Samples and which does not necessarily have to have a causal relationship with
such treatment.

“Adverse Reaction” or “Adverse Drug Reaction” or “ADR” means a response to any
Licensed Product or Demonstration Sample which is noxious and unintended and
which occurs at doses normally used in man for prophylaxis, diagnosis or therapy
of disease or for modification of physiological function.

“Advertising and Promotional Expenses” for any period means all reasonable,
documented out-of-pocket costs and expenses incurred and paid, or accrued as
payable, to Third Parties by Meda or its Affiliates with respect to the
advertising, marketing and sales of the

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Fentanyl Product with respect to the First Indication in the Territory for such
period, including, to the extent attributable or incurred with respect to the
promotion, sale, or marketing of the Fentanyl Product for the First Indication
in the Territory, costs for advertisements, advertising agency fees, marketing,
sales, or promotional meetings scheduled primarily for the Fentanyl Product with
respect to the First Indication, sales and marketing meetings, development and
production of sales force training materials, website costs, conventions and
seminars, market research, sponsorships, funding of continuing medical education
programs that are relevant to the Fentanyl Product with respect to the First
Indication (which are supervised by Meda’s Medical Affairs Department in
accordance with Accreditation Counsel for Continuing Medical Education (ACCME)
guidelines), and other payments for programs to institutional and managed care
purchasers, acquisition and shipping costs of training and sales and marketing
materials, together with the cost of field aids and sales premiums and other
similar tokens; provided however that “Advertising and Promotional Expenses”
shall not include any amounts, even if such amounts would otherwise be included
above, to the extent payable or incurred in respect of the preparation,
implementation, or execution of, or compliance with, any RiskMAP or as
compensation and benefits to Meda’s or its Affiliates’ employees or Third
Parties engaged as sales representatives.

“Affiliate” means an individual, trust, business trust, joint venture,
partnership, corporation, association or any other entity which owns, is owned
by or is under common ownership with, a Party. For the purposes of this
definition, the term “owns” (including, with correlative meanings, the terms
“owned by” and “under common ownership with”) as used with respect to any Party,
shall mean the possession (directly or indirectly) of more than 50% of the
outstanding voting securities of a corporation or comparable equity interest in
any other type of entity.

“API” means an active pharmaceutical ingredient.

“Applicable Laws” means all applicable laws, rules, regulations and guidelines
that may apply to the development, marketing, manufacturing or sale of any
Licensed Product or the performance of either Party’s obligations under this
Agreement, including but not limited to all laws, regulations and guidelines
governing the import, export, development, marketing, distribution and sale of
any Licensed Product in the Territory, to the extent relevant, all Good
Manufacturing Practices or Good Clinical Practices standards or guidelines
promulgated by the FDA or other Competent Authorities, all laws, rules,
regulations, and guidelines applicable to the manufacture, use, shipment,
handling, sale, marketing, and distribution of fentanyl as a Schedule II
controlled substance under the United States’ Controlled Substances Act and any
similar foreign laws, rules, and regulations, and trade association guidelines
(including but not limited to, with respect to all of the foregoing, those which
apply to the handling of narcotics), where applicable.

“Applicable Royalty Percentage” means on a Licensed Product-by-Licensed Product
and country-by-country basis, *** percent (***%) for the Initial Term and ***
percent (***%) for the Subsequent Term.

 

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CONFIDENTIAL TREATMENT REQUESTED

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“Arius Two Agreement” means that certain License Agreement executed between
Arius and Arius Two, Inc. (“Arius Two”), dated September 5, 2007, subject to the
Sublicensing Consent executed by Arius Two and Arius dated September 5, 2007
(the “Arius Two Consent”); such License Agreement and the Arius Two Consent are
attached hereto as Exhibit A.

“BDSI-Supplied Unit” means a Unit supplied by or on behalf of BDSI to Meda or
its Affiliates under the Supply Agreement or any subsequent agreement entered
into by the parties for the supply of *** Products, as contemplated by
Section 2.09(b) (such agreement, the “*** Supply Agreement”).

“BEMA” means the proprietary bioerodible, mucoadhesive multi-layer polymer film
technology Controlled by BDSI or Arius Two.

“Books and Records” means, in whatever media, any and all books and records,
reports and accounts in connection with or related to any Licensed Product, the
Commercialization thereof, the Development Program, Competent Authorities,
Applicable Laws or this Agreement. Books and Records shall also include any
market research and competitive reports, marketing reports, and related data.

“Bundled Product” means any Licensed Product when (i) sold together with any
other products and/or services within the Territory at a unit price, whether
packaged together or separately with another pharmaceutical product or other
device, equipment, instrumentation, or other components (other than solely
containers or packaging exclusively for such Licensed Product), (ii) used as a
“loss leader”, (iii) a discount, rebate, or similar financial incentive is
offered on the Licensed Product as consideration or incentive for a Third Party
to buy other products or services from Meda, or (iv) such Licensed Product is
otherwise bundled with sales of any other products or services in any
discounting program.

“CDC Agreement” means that certain Clinical Development and License Agreement
between BDSI and CDC IV, LLC (“CDC”) dated July 14, 2005, as amended, and
subject to those certain sublicensing consents dated August 2, 2006 and
September 5, 2007; the body of such Clinical Development and License Agreement
(but not its exhibits), its amendments, and the referenced consents are attached
hereto as Exhibit B.

“Commercialization” means the marketing, promotion, advertising, selling and/or
distribution of any Licensed Product in the Territory after regulatory approval
therefor has been obtained; and the term “Commercialize” has a corresponding
meaning.

“Commercially Reasonable Efforts” means, except as otherwise explicitly set
forth in this Agreement, efforts consistent with the reasonable exercise of
prudent scientific and business judgment and generally accepted practices in the
pharmaceutical industry, as applied to similar products having comparable market
potential. “Comparable market potential” shall be ***. Commercially Reasonable
Efforts requires that a Party, ***. The term “Commercially Reasonable” has a
corresponding meaning.

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

“Commercial Sale” means the sale after Governmental Approval for use,
consumption or resale of each Licensed Product in the Territory by Meda, its
Affiliates, or Sublicensees. A sale to an Affiliate or Sublicensee shall not
constitute a Commercial Sale unless the Affiliate is the end user of the
Licensed Product.

“Competent Authorities” means collectively the governmental entities in the
Territory responsible for the regulation of medicinal products intended for
human use

“Competing Product” means a pharmaceutical product that: (a) is labeled for the
indication of breakthrough pain or (b) incorporates fentanyl as an API;
provided, that, with respect to ***.

“Confidential Information” means any confidential or proprietary information of
a Party, whether in oral, written, graphic or electronic form. Confidential
Information shall not include any information which the receiving Party can
prove by competent evidence:

(a) is now, or hereafter becomes, through no act or failure to act on the part
of the receiving Party, generally known or available;

(b) is known by the receiving Party at the time of receiving such information,
as evidenced by its written records maintained in the ordinary course of
business;

(c) is hereafter furnished to the receiving Party by a Third Party, as a matter
of right and without restriction on disclosure;

(d) is independently developed by the receiving Party, as evidenced by its
written records maintained in the ordinary course of business, without knowledge
of, and without the aid, application or use of, the disclosing Party’s
Confidential Information; or

(e) is the subject of a written permission to disclose provided by the
disclosing Party.

“Control” means the possession of the ability to grant a license or sublicense
as provided for herein without violating the terms of any agreement or other
arrangement with any Third Party existing on the Effective Date or, with respect
to any intellectual property rights acquired from a Third Party following the
Effective Date, any agreements in effect at the time such rights are acquired.

“Demonstration Samples” means Units, lacking fentanyl, used to demonstrate the
manner in which a Licensed Product is prepared and used, and labeled
“demonstration samples, for demonstration purposes only.”

“Development Costs” means the total direct and indirect costs incurred by either
Party in accordance with the Development Program in developing Fentanyl Product
*** under this Agreement, including any travel, out-of-pocket, and Third Party
costs.

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

“Development Program” means, with respect to the Territory, the plan for
completing clinical development for the Licensed Products and obtaining
Governmental Approvals for the Licensed Products, or conducting
post-Governmental Approval studies of Licensed Products, including ***. The
initial Development Program is attached as Exhibit C.

“EU Agreement” means that certain License and Development Agreement, dated
August 2, 2006, between Meda and BDSI.

“FDA” means the United States Food and Drug Administration.

“Fentanyl Product” means any Licensed Product ***.

“First Indication” means the treatment of breakthrough cancer pain.

“First Commercial Sale” means the first Commercial Sale of a Licensed Product in
the Territory.

“FTE” means the equivalent of one person working full time for one 12-month
period in a research, development, commercialization, regulatory or other
relevant capacity, approximating *** hours per year. In the interests of
clarity, though, a single individual who works more than *** hours in a single
year shall be treated as one FTE regardless of the number of hours worked.

“Good Clinical Practices” means good clinical practices as defined in 21 CFR §
50 et seq. and § 312 et seq. and equivalent standards established by Competent
Authorities with respect to the Territory.

“Governmental Approval” means all permits, licenses and authorizations,
including but not limited to, import permits and Marketing Authorizations
required by any Competent Authority as a prerequisite to the manufacturing,
marketing or selling of a Licensed Product for human therapeutic use in the
Territory.

“Governmental Authority” means any court, tribunal, arbitrator, agency,
legislative body, commission, official or other instrumentality of (a) any
government of any country, (b) a federal, state, province, county, city or other
political subdivision thereof or (c) any supranational body, including the FDA.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Improvements” means any and all developments, inventions or discoveries
relating to the Licensed Technology developed or acquired by, or under the
Control of, a Party or, in the case of BDSI, Arius Two at any time during the
Term and shall include such developments intended to enhance the safety and/or
efficacy of a Licensed Product.

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

“Initial Term” means the period of time commencing on the First Commercial Sale
of a Licensed Product in the Territory and ending, on a country-by-country and
Licensed Product-by-Licensed Product basis, on the earlier of (a) the later of
(i) expiration of the last to expire of the Valid Claims of Patent Rights
(whether Licensed Patent Rights or Patent Rights claiming a Meda Improvement)
covering such Licensed Product in such country or (ii) ***.

“Generic Product” means a product sold by a Third Party that (a) contains the
same active ingredient(s) as a particular Licensed Product *** (b) is a
Therapeutic Equivalent of such Licensed Product, (c) is approved for use for one
or more of the same clinical indications approved for such Licensed Product
under an application submitted under Section 505(b)(2) of the United States
Federal Food, Drug, and Cosmetic Act, an abbreviated new drug application
(ANDA), a similar abridged application, or a similar application under
applicable laws or regulations of any such country other than the United States,
and (d) is not sold pursuant to a sublicense granted under this Agreement to
such Third Party by Meda, its Affiliates, or Sublicensees with respect to such
Licensed Product or any rights related thereto.

“Know-How” means all know-how, trade secrets, inventions, data, processes,
techniques, procedures, compositions, devices, methods, formulas, protocols and
information, whether or not patentable, which are not generally publicly known,
including, without limitation, all chemical, biochemical, toxicological, and
scientific research information, whether in written, graphic or video form or
any other form or format.

“Sufficient Launch Stocks” means quantities of a particular Licensed Product
reasonably sufficient to support the commencement of the marketing and sale of
such Licensed Product in a particular country, which quantities shall not in any
event exceed the amount of such Licensed Product ordered by Meda for such
purposes under the Supply Agreement ***.

“Licensed Know-How” means all Know-How (including all Improvements) related to
the Licensed Product that is under the Control of BDSI or Arius Two as of the
Effective Date, or is created or acquired by, or under the Control of, BDSI or
Arius Two during the Term including data and documentation of clinical trials,
pharmacological, toxicological, clinical, assay, control, and manufacturing
data, techniques, processes, methods, or systems, and any other information
relating to the Licensed Product that is not covered by the Licensed Patent
Rights, but is or would be necessary or useful to develop, manufacture (or
prepare for the manufacture of), or commercialize the Licensed Product.

“Licensed Patent Rights” means all Patent Rights in the Territory claiming the
Licensed Product or any Improvement, or that are necessary or useful to develop,
manufacture and commercialize the Licensed Product in the Territory (including
all patents claiming the composition of matter, formulation or method of
manufacture or use of the Licensed Products), and that are under the Control of
BDSI or Arius Two as of the Effective Date or during the Term, including the
patents listed on Exhibit D.

“Licensed Product” means individually and collectively the BEMA-based product
which (i) contains fentanyl as it sole API, (ii) is currently the subject of
Phase III clinical trials being conducted by BDSI as of the Effective Date***,
(iii) would, but for the licenses granted under

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

this Agreement, infringe one or more claims of the Licensed Patent Rights (or,
if applicable, Patent Rights claiming a Meda Improvement), and (iv) ***,
provided that, after the expiration of the Initial Term in a particular country
with respect to a particular Licensed Product, the “Licensed Product” in such
country shall be deemed to be the BEMA-based product that (1) contains fentanyl
as it sole API *** and (2) was sold in such country as a Licensed Product by
Meda, its Affiliates, or Sublicensees in such country during the applicable
Initial Term under this Agreement. Notwithstanding the foregoing, ***.

“Licensed Technology” means the Licensed Patent Rights and the Licensed
Know-How.

“LTS Pharma Agreement” means that certain Process Development Agreement between
BDSI and LTS Lohmann Therapie-Systeme AG (“LTS”), dated December 15, 2006.

“Marks” means “BEMA”, alone or accompanied by any logo or design and any
non-English language equivalents in figure, sound or meaning, whether registered
or not. BEMA is the subject of a pending trademark application in the United
States (no. 78424675, filed May 25, 2004).

“Meda Marks” means any trademarks, service marks, trade dress, or logos used by
Meda specifically for any Licensed Product at any time in connection with the
use, development, promotion, marketing, distribution, offer for sale, or sale of
such Licensed Product in the Territory, provided that Meda Marks shall exclude
the Marks and all Trade Names.

“Marketing Authorization” means all necessary and appropriate regulatory
approvals, including variations thereto and, if applicable or reasonably
advisable with respect to a particular jurisdiction, Pricing and Reimbursement
Approvals to put a Licensed Product on the market for sale for human therapeutic
use in a particular jurisdiction in the Territory.

“Meda Product Cost” means, with respect to any Unit of Fentanyl Product not
supplied by or on behalf of BDSI, Meda’s reasonable, documented direct and
indirect cost of manufacturing or having manufactured such Unit of Fentanyl
Product.

“Minimum Unit Price” means, with respect to a particular Licensed Product, an
amount equal to ***.

“NDA” means a new drug application, all amendments and supplements thereto, and
all additional documentation required to be filed with the FDA for approval to
commence commercial sale of a Licensed Product in the United States.

“Net Sales” means the gross amounts invoiced by Meda, its Affiliates, and their
Sublicensees for their sales of Licensed Products to Third Parties in bona fide
arm’s length transactions, less the following items: ***.

Licensed Products shall be considered sold when billed out or invoiced.
Components of Net Sales shall be determined in the ordinary course of business
in accordance with historical practice and using the accrual method of
accounting in accordance with GAAP.

 

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CONFIDENTIAL TREATMENT REQUESTED

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DENOTED WITH “***”

 

In the event Meda or any Affiliate thereof transfers Licensed Product to a Third
Party in a bona fide arm’s length transaction for consideration, in whole or in
part, other than cash or to a Third Party in other than a bona fide arm’s length
transaction, ***.

Notwithstanding anything to the contrary, in the event that Meda, its
Affiliates, or its Sublicensees sells Licensed Product to a Third Party at a
discount that is greater than the discount generally given to such Third Party
for their other products sold to such Third Party (including establishing a list
price at a lower than normal level), then Net Sales to such Third Party shall be
deemed to be equal to the arm’s length price that the Third Party would
generally pay for such Licensed Product alone when not purchasing other products
or services from Meda, its Affiliates, or Sublicensees.

“Net Unit Royalty” means, for a particular Unit, the ***.

“Non-Cancer Indication” means an Indication of the Fentanyl Product in the
treatment of (i) generalized breakthrough pain not associated with any specific
disease or condition, (ii) breakthrough pain, whether a generalized or specific
indication*** or (iii) a breakthrough pain indication associated with any other
specific disease or condition to which the Parties mutually agree in writing,
such agreement not to be unreasonably withheld. Once a Non-Cancer Indication is
the subject of an NDA approved by FDA for the Fentanyl Product, such Non-Cancer
Indication shall be deemed the Non-Cancer Indication for all purposes under this
Agreement.

“Non-Royalty Sublicensing Revenue” means all ***, if granted by BDSI, to the
relevant sublicense under Section 3.02(a) below.

“Oral Fentanyl Product” means any human therapeutic product delivering fentanyl
through the oral mucosa, either buccally or sublingually, including Actiq™,
Fentora™, Rapinyl™, and the Licensed Product, but excluding tablets, capsules,
oral suspensions, or other formulations taken orally (swallowed) that deliver
fentanyl primarily via absorption into the bloodstream from the gastrointestinal
tract (and not through the oral mucosa).

“Packaging” means any and all containers, cartons, shipping cases, inserts,
package inserts or other similar material, including instructions for use, used
in packaging or accompanying the Licensed Product.

“Patent Rights” means all rights under patents and patent applications, and any
and all patents issuing therefrom (including utility, model and design patents
and certificates of invention), together with any and all substitutions,
extensions (including supplemental protection certificates), registrations,
confirmations, reissues, divisionals, continuations, continuations-in-part,
re-examinations, renewals and domestic and foreign counterparts of the
foregoing, and all improvements, supplements, modifications or additions.

“Phase III” means an expanded controlled or uncontrolled clinical trial
performed after preliminary evidence suggesting effectiveness of a Licensed
Product has been obtained, in order to gather the additional information about
effectiveness and safety that is needed to evaluate the overall benefit-risk
relationship of the Licensed Product and to provide an adequate basis for
physician labeling.

 

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“Phase IV” means, as applicable, a study or program designed to obtain
additional safety or efficacy data, detect new uses for or abuses of a Licensed
Product, or to determine effectiveness for labeled indications under conditions
of widespread usage, which is commenced after regulatory approval of the
Licensed Product.

“Pricing and Reimbursement Approvals” means any pricing and reimbursement
approvals which may or must be obtained before placing a Licensed Product on the
market in a particular jurisdiction in the Territory.

“Prime Rate of Interest” means the prime rate of interest published from time to
time in the Wall Street Journal as the prime rate; provided, however that if the
Wall Street Journal does not publish the Prime Rate of Interest, then the term
“Prime Rate of Interest” shall mean the rate of interest publicly announced by
Bank of America, N.A., as its Prime Rate, Base Rate, Reference Rate or the
equivalent of such rate, whether or not such bank makes loans to customers at,
above, or below said rate.

“Product Price” means BDSI’s *** costs of supplying a particular Unit to Meda
under the Supply Agreement ***, which shall include but not be limited to ***.

“Product Recall” means any recall, market withdrawal, or field correction of a
Licensed Product from or in the Territory.

“QLT Agreements” means that certain Intellectual Property Assignment Agreement,
Secured Promissory Note, Amended and Restated Security Agreement (concerning the
Territory), and Amended and Restated Patent and Trademark Security Agreement
(concerning the Territory) between QLT USA, Inc. (“QLT”) and BDSI, dated
September 5, 2007.

“Remaining Supply Losses” means the difference between

(A) the sum of Supply Losses plus, with respect to all Units of Fentanyl
Products sold by Meda under this Agreement that are subject to the adjusted
royalty rates described in Section 4.01(d) or 4.01(e), the aggregate Meda
Product Price for such Units of Fentanyl Products less

(B) the sum of (i) *** of Net Sales of such Units of Fentanyl Products sold
during the applicable Initial Term(s) and (ii) *** of Net Sales of such Units
Fentanyl Products sold during the applicable Subsequent Term(s).

“RiskMAP” means any Risk Minimization Action Plan, as such term is commonly used
by FDA with respect to pharmaceutical products, with respect to a Licensed
Product.

“Royalty” means the ***.

 

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“Royalty Quarter” means, for the first Royalty Quarter, the period commencing on
the earlier of the date of (i) the First Commercial Sale or (ii) Meda’s or its
Affiliates’ initial receipt of Non-Royalty Sublicensing Revenue and ending on
the last day of that calendar quarter; and, for subsequent Royalty Quarters, the
successive calendar quarters thereafter.

“Royalty Year” means for the first Royalty Year, the period commencing on
earlier of the date of (i) the First Commercial Sale or (ii) Meda’s or its
Affiliates’ initial receipt of Non-Royalty Sublicensing Revenue and ending on
December 31st of such calendar year; and for subsequent Royalty Years, the
successive calendar years thereafter.

“Serious Adverse Event” or “SAE” means an Adverse Event that at any dose
(i) results in death, (ii) is life-threatening, (iii) requires inpatient
hospitalization or prolongation of existing hospitalization, (iv) results in
persistent or significant disability/incapacity, or (v) is a congenital
anomaly/birth defect. The term “life-threatening” in this definition refers to
an event in which the patient was at risk of death at the time of the event; it
does not refer to an event which hypothetically might have caused death if it
had been more severe. Important medical events that may not be immediately
life-threatening or result in death or hospitalization but may jeopardize the
patient or require intervention to prevent one of the other outcomes listed
above should also be included in this definition to the extent reasonable
medical and scientific judgement indicates that expedited reporting is
appropriate under Applicable Laws.

“Serious Adverse Reaction” or “SAR” means an Adverse Reaction that at any dose
(i) results in death, (ii) is life-threatening, (iii) requires inpatient
hospitalization or prolongation of existing hospitalization, (iv) results in
persistent or significant disability/incapacity, or (v) is a congenital
anomaly/birth defect. The term “life-threatening” in this definition refers to
an event in which the patient was at risk of death at the time of the event; it
does not refer to an event which hypothetically might have caused death if it
had been more severe. Important medical events that may not be immediately
life-threatening or result in death or hospitalization but may jeopardize the
patient or require intervention to prevent one of the other outcomes listed
above should also be included in this definition to the extent reasonable
medical and scientific judgement indicates that expedited reporting is
appropriate under Applicable Laws.

“Steering Committee” means the Steering Committee established pursuant to
Section 2.08 below.

“Sublicensee” means any Third Party, other than an Affiliate of Meda, to whom
Meda sublicenses any of its rights under this Agreement as permitted hereby.

“Subsequent Term” means, on a country-by-country and Licensed
Product-by-Licensed Product basis, the period beginning on the expiration of the
Initial Term in a particular country for a particular Licensed Product and
continuing until the termination of this Agreement with respect to such Licensed
Product in such country.

 

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CONFIDENTIAL TREATMENT REQUESTED

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DENOTED WITH “***”

 

“Supply Losses” means, as agreed to in writing by BDSI or, if the Parties are
unable to agree within thirty (30) days of initiation of discussions concerning
such matter, determined by arbitration conducted in accordance with the
procedures established under Section 14.03, ***.

“Supply Price” means, for a particular Unit ***.

“Therapeutic Equivalent” has the meaning given to such term by the FDA in the
current edition of the “Approved Drug Product with Therapeutic Equivalence
Evaluations”, as the same may be amended from time to time during the Term.

“Trade Name” means each trade name established for a Licensed Product under this
Agreement.

“Term” means the Initial Term and the Subsequent Term for a particular Licensed
Product in a particular country.

“Territory” means the United States, Canada and Mexico.

“Third Party” means any entity other than: (a) BDSI, (b) Meda, or (c) an
Affiliate of BDSI or Meda.

“Transfer Price” means an amount equal to the greater of (i) *** (“Estimated
Average Unit Price”), or (ii) ***.

“Unexpected Adverse Reaction” means an Adverse Reaction, the nature or severity
of which is not consistent with the applicable information concerning a Licensed
Product or Demonstration Sample (e.g. Investigator’s Brochure for the Licensed
Product).

“Unit” means a single saleable unit of Licensed Product and its Packaging.

“Valid Claim” means a claim of any pending patent application or issued and
unexpired Patent Right that has not been disclaimed, revoked, held
unenforceable, unpatentable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and that has not been admitted to be invalid or
unenforceable through re-examination, re-issue, disclaimer or otherwise, or lost
in an interference proceeding; provided, however, that if a claim of a pending
patent application shall not have issued within *** or, in the case of claims
included in a patent application that is appealed to the United States Patent
and Trademark Office’s Board of Appeals and Interferences within such ***
period, and which appeal BDSI pursues in Commercially Reasonable fashion, ***
after the filing date of such application, such claim shall not constitute a
Valid Claim for the purposes of this Agreement unless and until a patent issues
with such a claim (or similar claim). Notwithstanding anything to the contrary
in this Agreement, if claim in a patent application (i) is initially considered
a Valid Claim hereunder, (ii) at some subsequent date no longer is considered a
Valid Claim as a result of the time limitations established above, and
(iii) later is included, or a similar claim not previously a Valid Claim is
included, as a claim in an issued patent, and therefore would otherwise be
considered upon such issuance a Valid Claim, any

 

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royalties or other amounts that would have been paid under this Agreement on the
basis of such claim were it considered a Valid Claim during the period of time
it did not satisfy the definition of Valid Claim hereunder shall become due and
payable within forty-five (45) days of the end of the calendar quarter in which
a patent issues with such claim.

Section 1.02 Interpretation. The Section headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Except where the context clearly requires to
the contrary: (a) each reference in this Agreement to a designated “Section” or
“Exhibit” is to the corresponding Section or Exhibit of or to this Agreement;
(b) instances of gender or entity-specific usage (e.g., “his” “her” “its”
“person” or “individual”) shall not be interpreted to preclude the application
of any provision of this Agreement to any individual or entity; (c) “including”
shall mean “including, without limitation”; (d) references to Applicable Laws
shall mean such Applicable Laws in effect during the Term (taking into account
any amendments thereto effective at such time without regard to whether such
amendments were enacted or adopted after the Effective Date); (e) references to
“US$” or “dollars” shall mean the lawful currency of the United States;
(f) references to “Federal” or “federal” shall be to laws, agencies or other
attributes of the United States (and not to any State or locality thereof);
(g) the meaning of the terms “domestic” and “foreign” shall be determined by
reference to the United States; (h) references to “days” shall mean calendar
days; (i) references to months or years shall be to the actual calendar months
or years at issue (taking into account the actual number of days in any such
month or year); and (j) days, business days and times of day shall be determined
by reference to local time in Raleigh, North Carolina.

ARTICLE IA

GOVERNMENTAL CONSENTS

Section 1A.01 Required Filings. As soon as reasonably practicable, but in any
event no later than within ***, after the execution and delivery of this
Agreement, the Parties, as applicable, shall complete and file, or cause to be
completed and filed, with the United States Federal Trade Commission (“FTC”) and
the Antitrust Division of the United States Department of Justice (“DOJ”) all
filings, materials and information required to be filed in connection with the
transactions contemplated by this Agreement under the HSR Act, including the
“Antitrust Improvements Act Notification and Report Form for Certain Mergers and
Acquisitions” (the “HSR Notification and Report Form”). The Parties shall
coordinate and cooperate with one another in exchanging and providing such
information to each other and in making the filings required by this
Section 1A.01 and shall promptly supply such reasonable assistance as may be
reasonably requested by each in connection with the foregoing.

Section 1A.02 Early Termination. The Parties, as applicable, shall request early
termination of the waiting period with respect to the HSR Notification and
Report Form, shall use their reasonable best efforts and shall reasonably
cooperate with each other to obtain such early termination of the waiting
period, and shall make any further filings and shall promptly complete and file
responses to all requests for additional data and information that may be made
by the FTC or the DOJ. Without limiting the foregoing, the Parties, as
applicable, shall promptly take all such actions, and shall promptly file and
use reasonable best efforts to have declared effective or approved, all
documents and notifications with any Governmental

 

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Authority(ies) as may be necessary or may reasonably be requested under
applicable state and federal antitrust laws for the consummation of the
transactions contemplated by this Agreement. Anything to the contrary herein
notwithstanding, neither of the Parties nor their Affiliates shall be required
to sell, transfer or otherwise divest assets in order to obtain approval under
the HSR Act or other applicable federal and state antitrust laws for the
consummation of the transactions contemplated by this Agreement.

Section 1A.03 Effectiveness of Agreement. The rights and obligations of the
Parties under this Agreement shall not become effective until both Parties shall
have filed their respective HSR Notification and Report Forms, the applicable
waiting period, including any extensions thereof, under the HSR Act shall have
expired or the applicable Parties shall have received early termination thereof
(the date of such expiration or early termination, the “HSR Date”), and Meda
shall have paid the amount due under Section 3.01; the Parties shall use their
best efforts to cause the HSR Date to occur as soon as reasonably possible.
Except as provided by Section 13.02, neither Party shall have any right to
terminate this Agreement prior to the HSR Date, provided that if, despite the
reasonable best efforts of the Parties in accordance with this Article 1A,
(i) the HSR Date has not occurred within 180 days of the Effective Date or
(ii) either Party has reasonably determined, prior to the 180th day following
the Effective Date but following the 90th day following the Effective Date, that
the HSR Date is not reasonably capable of being achieved as described above
within *** of the Effective Date, either Party shall be entitled to terminate
upon written notice to the other Party, provided no termination under clause
(ii) above may be effective prior to the 91st day following the Effective Date.

ARTICLE II

DEVELOPMENT

Section 2.01 Responsibility and Control. BDSI shall be responsible for using
Commercially Reasonable Efforts to conduct the development of the Fentanyl
Product for the First Indication up to the NDA approval in accordance with the
Development Program, including planning, strategy, administrative management,
and fiscal control; provided, however, that BDSI shall use reasonable efforts to
include Meda in such efforts in a consultative capacity. The Development Program
shall be coordinated from the facilities of BDSI. BDSI shall keep Meda
reasonably apprised of the status of the Development Program through the
Development Committee. BDSI shall comply, and shall require all of its Third
Party agents and contractors, if any, to comply, with all Applicable Laws in the
conduct of the Development Program and in the performance by BDSI of its
obligations hereunder. BDSI shall be responsible for all Development Costs
incurred by it *** for the Fentanyl Product for the First Indication. *** for
the Fentanyl Product for the First Indication, Meda will be responsible for all
the Development Costs (including those incurred by BDSI), including those
attributable to Phase IIIB and Phase IV studies required by *** or otherwise
agreed to by the Development Committee, and any additional studies to be
required after Governmental Approval of the Fentanyl Product for the First
Indication. After the *** of the Fentanyl Product, Meda be responsible for
conducting the continued development of the Fentanyl Product for the First
Indication in accordance with the Development Program, including planning,
strategy, administrative management, and fiscal

 

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control; provided, that Meda shall use reasonable efforts to include BDSI in
such efforts in a consultative capacity. BDSI shall be responsible, in
accordance with the applicable portion of the Development Program, for the
conduct of all clinical trials for the Fentanyl Product for the Non-Cancer
Indication ***, including planning, strategy, administrative management, and
fiscal control; provided, that BDSI shall use reasonable efforts to include Meda
in such efforts in a consultative capacity.

Section 2.02 Development Program. The initial Development Program set forth in
Exhibit C was prepared by BDSI, and shall be subject to review by and comments
from Meda, as approved by the Development Committee within *** of the HSR Date.
BDSI shall use Commercially Reasonable Efforts to conduct pre-Governmental
Approval Licensed Product development activities in accordance with the
Development Program, provided that such activities shall not include the
activities of Meda with respect to Mexico and Canada contemplated by
Section 2.03(b)(i). Notwithstanding the foregoing or any other provision of this
Agreement, Meda acknowledges and agrees that (a) the Development Program is
experimental in nature; and (b) BDSI does not guarantee that the Development
Program will be successful or that Governmental Approval will be obtained for
any Licensed Product or indication therefor. During the Term, BDSI may revise
the Development Program at any time and from time to time, provided, to the
extent reasonably practicable, BDSI provides the Development Committee with a
reasonable opportunity to review and comment (which opportunity shall not be
required to be any longer than ***). Meda shall, notwithstanding anything to the
contrary, use Commercially Reasonable Efforts to continue development of the
Fentanyl Product for each of the First Indication and Non-Cancer Indication
following receipt of Governmental Approval therefor, and, if Commercially
Reasonable, develop the Fentanyl Product for and seek Governmental Approval of
the Fentanyl Product for such other indications as the Parties agree to pursue
in addition to the First Indication and Non-Cancer Indication, in a Commercially
Reasonable manner intended to maximize the Parties’ collective economic benefit
with respect to the Fentanyl Product, including the conduct of post-approval
Phase IIIB and Phase IV studies concerning the Fentanyl Product for the First
Indication and, if approved by FDA, the Non-Cancer Indication; Meda shall
include BDSI in such efforts in a consultative capacity. The Parties agree that
it is their intent that the above-described continued development be included in
the Development Program, provided that the failure of the Development Program to
include such above-described development shall not limit Meda’s obligations in
the preceding sentence.

Section 2.03 Clinical and Governmental Approval.

(a) Conduct by BDSI. BDSI agrees to use Commercially Reasonable Efforts to
obtain FDA approval of the Fentanyl Product for the First Indication.

(b) Regulatory Submissions.

(i) The Parties acknowledge that no Licensed Product has been reviewed or
approved for sale or use as a human therapeutic product by any Governmental
Authority. BDSI shall use Commercially Reasonable Efforts to prepare and file in
the United States all required application(s) for Governmental Approval of the
Fentanyl Product for the First Indication, including the ***. Subject to
Section 2.03(c), BDSI shall prepare, or cause to be

 

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prepared by a Third Party, and file simultaneously with the filing of the NDA, a
proposed final draft RiskMAP with respect to the First Indication of the
Fentanyl Product. Notwithstanding anything to the contrary in this Agreement,
Meda shall use Commercially Reasonable Efforts to prepare and file, and be
responsible for the preparation and filing of, all required application(s) for
Governmental Approval of the Licensed Products in all other countries in the
Territory (including, on a Licensed Product-by-Licensed Product basis,
Governmental Approvals for all indications approved by FDA in the United
States), provided that (i) Meda shall not, by act or omission, in the course of
exercising such rights and satisfying such obligations, create any circumstance
reasonably likely to materially adversely affect the development or
Commercialization of any Licensed Product in any country of the Territory
without BDSI’s prior written consent and, in the event Meda intends to file any
application(s) for Governmental Approval for Licensed Products in such other
jurisdictions in the Territory prior to receipt of Governmental Approval thereof
in the United States, (ii) the form and content of any such application (and any
related correspondence) shall, notwithstanding anything to the contrary herein,
be subject to BDSI’s prior written consent.

(ii) At all times, the Party responsible for preparing and filing applications
for Governmental Approval in a particular country of the Territory (i.e. BDSI in
the United States, Meda in Mexico and Canada) shall (i) inform the other Party
of all material communications with the relevant Competent Authority(ies) in
such country concerning the Licensed Product and (ii) provide copies of proposed
material submissions to the relevant Competent Authority(ies) in such country
concerning the Licensed Product to the Development Committee and the other Party
prior to their submission to such Competent Authority. At all times, the
responsible Party in a particular country of the Territory will not respond
substantively to any material communication with a particular Competent
Authority or otherwise make any submissions to a Competent Authority concerning,
in either case, the Licensed Product, without first giving the other Party a
reasonable opportunity to review and comment, such opportunity not to be
required to exceed ***, unless the urgency of such matter and its related
response reasonably precludes providing the other Party such an opportunity, in
which case the responsible Party shall be entitled to respond as it determines
in its reasonable discretion. The Party responsible for filing an application
for Governmental Approval in a particular country of the Territory shall review
and consider in good faith any reasonable comments received from the other Party
related to material communications or material submissions to and from the
relevant Competent Authority(ies) in such country related to any Licensed
Product and any reasonable comments or suggestions from the other Party
otherwise related to any of the Governmental Approvals for any Licensed Product
in such country. In the event the other Party raises any reasonable, material
objection to any such submission to a Competent Authority, including the
proposed label or any formulation changes, such matters shall be subject to
resolution by the Development Committee unless timing constraints make
submission of the matter to the Development Committee reasonably impracticable
or the Development Committee becomes deadlocked with respect to such matters, in
which case such matters shall be as determined by BDSI, in its reasonable
discretion, except that, in such case, BDSI may not, without Meda’s consent
(such consent not to be unreasonably withheld), so determine any matter in a
manner that (i) is reasonably likely to materially increase any Development
Costs to be paid by Meda, (ii) materially changes the intended indications for
which a Licensed Product is developed, or

 

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(iii) is reasonably likely to materially adversely affect the Commercialization
of a Licensed Product, including changes to labeling and RiskMAP procedures that
are reasonably likely to have such an effect. The Parties shall cooperate in
good faith with respect to obtaining, and each Party shall use its Commercially
Reasonable Efforts to enable an employee of the other Party to attend, if and as
requested by the other Party, all formal meetings with any Competent Authority
relating to, Governmental Approval of any Licensed Product. The Parties shall
cooperate in good faith with respect to the conduct of any inspections by any
regulatory authority of a Party’s site and facilities related to any Licensed
Product. To the extent either Party receives material written or material oral
communication from the FDA or any other Competent Authority relating to any
Governmental Approval process with respect to any Licensed Product, the Party
receiving such communication shall promptly notify the other Party and provide a
copy of any written communication as soon as reasonably practicable.

(iii) If no Trade Name(s) submitted by BDSI to the FDA prior to the Effective
Date are approved by the FDA, BDSI shall not submit any other Trade Name(s) for
approval unless (A) such other Trade Name(s) has(have) been approved by the
Commercial Committee, subject to Meda’s prior written consent, such consent not
to be unreasonably withheld, and (B) BDSI has conducted reasonably customary
market research with physicians that indicates that such other Trade Name(s)
is(are) not materially confusing or otherwise materially misleading and has
reasonably appropriate back-up documentation regarding the same. Meda shall use
the Trade Names determined pursuant to the foregoing sentence in its
applications for Governmental Approval in Canada and Mexico unless otherwise
agreed in writing by the Parties. Subject to (i) the rights of Arius Two under
the Arius Two Agreement with respect thereto, (ii) the rights of CDC under the
CDC Agreement with respect thereto, and (iii) the effects of Section 13.06(c)
upon termination of this Agreement, upon a Governmental Approval of a Licensed
Product (including approval of the Trade Name therefor by FDA), BDSI shall
assign to Meda, and Meda shall own, all right, title, and interest in the
Territory to all Trade Names approved for such Licensed Product and intellectual
property rights related thereto (including trademark and copyright), free and
clear of all liens, claims, and encumbrances, and BDSI take any and all actions
reasonably requested by BDSI in furtherance of the foregoing.

(iv) Subject to Section 2.05 and the rights of CDC in Program Data (as defined
in the CDC Agreement) and Arius Two’s rights under the Arius Two Agreement upon
termination thereof, BDSI shall own, in its entirety (but subject to the license
granted to Meda under Section 3.02), all clinical data, information, and reports
related to Licensed Product studies (including clinical trials for the Licensed
Product) or Governmental Approval of the Licensed Product.

(c) Development Costs and Related Rights: Generally; Phase IIIB/IV; RiskMAP.

(i) Except as otherwise provided in this Agreement, BDSI shall be solely
responsible for the payment of all Development Costs incurred by it with respect
to the Fentanyl Product in the Territory *** for the Fentanyl Product for the
First Indication in the United States. ***, Meda will be responsible for all
(i) Development Costs incurred by either

 

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Party with respect to the development of the Fentanyl Product, including Phase
IIIB and Phase IV studies required by FDA as a condition to the granting of
Governmental Approval of the Fentanyl Product or proposed by either Party and
approved by the Development Committee, and any development work performed for
purposes of obtaining Governmental Approval of the Fentanyl Product for the
Non-Cancer Indication, and (ii) subject to Section 2.03(c)(ii), all costs and
expenses incurred by either Party with respect to any modification,
implementation, or execution of, or compliance with, any RiskMAP.

Furthermore, in respect of the development of the Fentanyl Product for the
Non-Cancer Indication, Meda will promptly reimburse the pro-rated cost of
full-time equivalent employees to the extent used by BDSI in performing its
obligations under this Agreement shall not be higher than the FTE rates listed
below:

 

  (A) US$*** per hour for Vice President level employees and above,

 

  (B) US$*** per hour for Director level employees and above,

 

  (C) US$*** per hour for supervisor level employees, and

 

  (D) US$*** per hour for non-supervisor, laboratory, or regulatory associates.

Such reimbursement, if not otherwise provided for in the Development Program,
shall be paid by Meda within *** of its receipt from BDSI of a reasonably
detailed invoice setting forth such costs and expenses. BDSI shall keep complete
and accurate books and records pertaining to the Development Costs incurred by
or on behalf of it pursuant to this Agreement in sufficient detail to permit
Meda to confirm the accuracy of such Development Costs. Meda shall have the
right to audit and inspect such Books and Records pursuant to the terms of
Section 14.11, but only to the extent reasonably necessary to confirm the
accuracy of the calculation of the Development Costs.

(ii) BDSI shall be responsible for the payment of all costs and expenses
associated with preparation of a draft RiskMAP to be filed with the NDA with
respect to the Fentanyl Product for the First Indication, which expenses have
been incurred through the Effective Date. If such draft RiskMAP is not in form
and substance sufficient for filing with the FDA as of the Effective Date, or if
after such filing the FDA determines that such draft RiskMAP requires
modification in any respect, or otherwise requests or suggests (but does not
require) modification thereof, or any communications or interactions with the
FDA lead BDSI to reasonably conclude that modification of such draft RiskMAP is
advisable, then Meda shall bear the reasonable costs and expenses incurred by
BDSI with respect to Third Party consultants, contractors, advisors, or
suppliers after the Effective Date in connection with the preparation or
modification of such RiskMAP, and such RiskMAP, any modification thereto, and
the implementation, execution, maintenance, and modification of the risk
minimization program thereunder shall be subject to the approval of the
Development Committee. Notwithstanding the foregoing, Meda shall be responsible
for payment of all costs and expenses associated with modification to and
implementation and execution of any and all RiskMAPs following the approval of
the NDA for the Fentanyl Product for the First Indication.

 

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Section 2.04 Reporting. Each Party shall (a) provide the other Party at
regularly scheduled meetings of the Development Committee with summary updates
regarding the progress of its activities with respect to the Development Program
and Governmental Approval process for the Fentanyl Product in the First
Indication, Non-Cancer Indication, and any additional indications *** (and any
other development activities with respect any Licensed Product in the
Territory), (b) promptly advise the other Party of any unforeseen material
problems or delays encountered since the date of its last report in connection
with the Development Program (or other development of Licensed Products in the
Territory), and (c) provide the other Party as soon as reasonably practicable
with such other material information as the other Party may reasonably request
in writing from time to time with respect to the status of the Development
Program (or other development of Licensed Products in the Territory).

Section 2.05 Ownership of Regulatory and Clinical Documentation.

(a) Subject to the terms of this Agreement, the rights of CDC in Program Data
(as defined and established in the CDC Agreement), and Arius Two’s rights under
the Arius Two Agreement upon termination thereof, BDSI, shall upon receipt of
any Governmental Approval of a Licensed Product, assign to Meda all of BDSI’s
rights in and to such Governmental Approval (together with evidence of the
termination of all security interests therein) and related documentation,
including all notes, summaries and analyses related thereto, developed in
connection with all clinical trials performed under the Development Program and
regulatory submissions related thereto (the “Clinical Documentation”) and the
results of all research and development conducted under the Development Program
(the “Results”); provided, it being understood that BDSI is not transferring to
Meda ownership of Results owned by CDC pursuant to the CDC Agreement. Meda shall
provide BDSI and any designee thereof (provided that such designee has entered
into undertakings of confidentiality and non-use) with copies of and access to
all such Clinical Documentation and Results (including that generated by Meda),
including but not limited to information reasonably sufficient for
(1) establishing that Meda undertakes Commercially Reasonable Efforts to
maintain and comply with such Governmental Approvals, (2) enabling BDSI to
exercise and enforce its rights under this Agreement (including but not limited
to its right of reference with respect to such Clinical Documentation and
Results and the right to audit and inspect the materials in such Books and
Records pursuant to Section 14.11), and (3) enabling BDSI to comply with
Sections 3.2, 3.3, 10.5.1, 4.1.1, 4.2, 4.3, 4.4, 4.5.1, 4.5.2 and 4.6 of the CDC
Agreement and the CDC Consent and Arius to comply with Sections 2.01(b),
2.01(c), 2.04(a), 2.04(b), 11.01, 14.05(a), and 15.12 and Article VI of the
Arius Two Agreement. The foregoing shall not be interpreted to grant ownership
to Meda of the results of any research and development conducted by or on behalf
of BDSI outside the Development Program or for use outside the Territory,
regardless of whether or not such results are referred to in any regulatory
submissions of Meda.

Subject to the rights of Meda under the EU Agreement, Meda hereby grants to BDSI
an exclusive royalty-free, fully-paid, irrevocable, worldwide perpetual license
and right of

 

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reference under the Governmental Approvals, Clinical Documentation, and Results
for (i) the development, manufacturing and commercialization of any BEMA-based
products other than the Licensed Products, (ii) the research and development of
the Licensed Products, (iii) the Commercialization of Licensed Products outside
the Territory, and, upon termination or rendering nonexclusive of the rights
licensed to Meda under this Agreement, the Commercialization of Licensed
Products inside the Territory, provided that such license shall also include,
with respect to the rights described in (ii) and, if and as may be consented to
in writing by Meda, such consent not to be unreasonably withheld, (iii) above,
rights under the Trade Name(s) and associated intellectual property rights. Upon
termination of this Agreement, Meda will assign to BDSI all rights title and
interest in and to Governmental Approvals, Clinical Documentation, the Results,
Marketing Authorizations, the Trade Name(s), all intellectual property rights
associated therewith (including copyright and trademark), and all other data,
reports, studies, analysis or similar items created or obtained by or on behalf
of Meda, owned by Meda, or assigned to Meda hereunder in connection with the
development, marketing or commercialization of Licensed Products in the
Territory, free and clear of all liens, claims, and encumbrances, pursuant to
the terms and conditions set forth in Section 13.06(c)

Section 2.06 Development Committee.

(a) Establishment. The Parties hereby establish a committee consisting of six
(6) members, three (3) of whom shall be Meda designees and three (3) of whom
shall be BDSI designees (the “Development Committee”). Each of the Development
Committee members shall have appropriate expertise to perform the functions
assigned to the Development Committee pursuant to this Agreement. The initial
Development Committee members shall be designated by each Party within one week
after the HSR Date. Each Party shall have the right at any time and from time to
time to designate a replacement, on a permanent or temporary basis, for any or
all of its previously-designated members of the Development Committee. At the
beginning of each calendar year during the Term, each Party shall appoint one of
its designees to serve as a Co-Chair of the Development Committee. The initial
Co-Chairs shall be designated by each Party within one week after the HSR Date.

(b) Meetings and Procedures.

(i) The Development Committee shall meet at least once per calendar quarter, and
more frequently at the request of either Party or as required to resolve
disputes or disagreements with respect to matters assigned to the Development
Committee under Section 2.1, on such dates, and at such places and times, as the
Parties shall agree; provided, however, that the Parties shall use their
reasonable efforts to cause the first meeting of the Development Committee to
occur within thirty (30) days after the HSR Date. The two Co-Chairs shall
cooperate to send a notice and agenda for each meeting of the Development
Committee to all members of the Development Committee reasonably, but no less
than one (1) week (unless otherwise agreed to by the Parties), in advance of the
meeting. The location of regularly-scheduled Development Committee meetings
shall alternate between the offices of the Parties, unless otherwise agreed. The
members of the Development Committee also may convene or be polled or consulted
from time to time by means of telephone conference, video conference,

 

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electronic mail or correspondence and the like, as deemed necessary or
appropriate by the Co-Chairs. The Party hosting any Development Committee
meeting shall appoint one person (who need not be a member of the Development
Committee) to attend the meeting and record the minutes of the meeting in
writing. Such minutes shall be circulated to the members of the Development
Committee within two (2) weeks following the meeting for review and comment.

(ii) All decisions of the Development Committee shall be made by unanimous vote
or unanimous written consent of both Parties, with each Party having,
collectively among its respective designees, one vote in all decisions, subject
to the deadlock process provided below. The members of the Development Committee
shall use Commercially Reasonable Efforts to decide all matters assigned to the
Development Committee under this Agreement or otherwise referred to it by mutual
agreement of the Parties; provided however that, in the event of a deadlock of
the Development Committee, except as otherwise expressly provided herein and
subject to the express rights of the Parties as set forth herein, the ultimate
decision with respect to the deadlocked matter shall rest with ***.

(c) Purpose and Powers. Subject to the express rights of the Parties as set
forth herein, the functions of the Development Committee are as follows:

(i) Acting as liaison between the Parties to ensure that they are informed of
the ongoing progress of the Development Program and report to the Steering
Committee on all matters that may come before the Development Committee;

(ii) Reviewing and providing comments to any proposed amendments to the
Development Program;

(iii) Reviewing, consulting on and providing input in respect of activities
related to the worldwide research and development work related to the Licensed
Product including but not limited to new indications therefor, the worldwide
manufacturing of the Licensed Product and, if necessary, the selection of
replacement manufacturer(s) of the Licensed Product;

(iv) Formulating a strategy for the design and implementation of (a) Phase IIIB
and/or Phase IV studies for the Fentanyl Product that may be required by FDA as
a condition to Governmental Approval for, as applicable, the First Indication,
Non-Cancer Indication, and other indications, (b) clinical studies to support
Governmental Approval of the Non-Cancer Indication, (c) clinical studies to
support, if Commercially Reasonable, additional indications of the Licensed
Product, (d) Phase IIIB or Phase IV studies that are not required for obtaining
or maintaining Governmental Approval for, as applicable, the First Indication,
Non-Cancer Indication, or other indications, ***;

(v) Reviewing and approving any NDA or other application for Governmental
Approval for filing; and

 

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(vi) Performing such other responsibilities as may be assigned to the
Development Committee pursuant to this Agreement or as may be mutually agreed
upon in writing by the Parties from time to time.

Section 2.07 Commercialization Committee.

(a) Establishment. The Parties hereby establish a committee, separate from the
Development Committee, responsible for such matters related to Commercialization
of the Licensed Products as may be described below and consisting of six
(6) members, three (3) of whom shall be Meda designees and three (3) of whom
shall be BDSI designees (the “Commercialization Committee”). The initial
Commercialization Committee members shall be designated by each Party within one
week after the HSR Date. Each Party shall have the right at any time and from
time to time to designate a replacement, on a permanent or temporary basis, for
any or all of its previously-designated members of the Commercialization
Committee. At the beginning of each calendar year during the Term, each Party
shall appoint one of its designees to serve as a Co-Chair of the
Commercialization Committee. The initial Co-Chairs shall be designated by each
Party within one week after the HSR Date.

(b) Procedures. All decisions of the Commercialization Committee shall be made
by unanimous vote or unanimous written consent of both Parties, with each Party
having, collectively among its respective designees, one vote in all decisions,
subject to the deadlock process provided below. The members of the
Commercialization Committee shall use Commercially Reasonable Efforts to decide
all matters assigned to the Commercialization Committee under this Agreement or
otherwise referred to it by mutual agreement of the Parties; provided however
that, in the event of a deadlock of the Commercialization Committee, except as
otherwise expressly provided herein and subject to the express rights of the
Parties as set forth herein, ***; provided, however, that with respect to all
decisions relating to: ***.

(c) Responsibilities. The Commercialization Committee shall have responsibility
for, with respect to the Commercialization of any Licensed Product in the
Territory, (i) reviewing and approving the commercialization and launch plans
for any Licensed Product in each country of the Territory, (ii) reviewing and
approving medical claims and core launch marketing materials, (iii) coordinating
the activities of the Parties related to the Commercialization, (iv) monitoring
commercial launch readiness and post launch implementation of plans,
(v) monitoring of post launch sales performance, (vi) review of sales forecasts
and updates to the forecast that may impact production needs, (vii) reviewing
proposed advertising and promotional materials, (viii) reviewing proposed
pricing and discount strategies and policies, (ix) reviewing, commenting on, and
approving the list of potentially high volume prescribing physicians for the
Licensed Products, as such list may be amended from time-to-time, and (x) such
other responsibilities as may be specified in this Agreement. The
Commercialization Committee will report to the Steering Committee on all matters
that may come before the Commercialization Committee.

(d) Commercialization Plan. Meda shall provide BDSI and the Commercialization
Committee with a draft Commercialization plan for the launch and sale of the
Licensed Products for the United States, Canada, and Mexico within three
(3) months of the

 

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HSR Date. Following the HSR Date, Meda shall present to the Commercialization
Committee an updated Commercialization plan in each country in the Territory
every six months, no later than January 1 and July 1 of each calendar year. Meda
will reasonably consider and in good faith any comments that BDSI
representatives to the Commercialization Committee may have with respect to any
such Commercialization plan or material revision thereto, provided that the
final decision on any such matter shall be made by the Commercialization
Committee.

Section 2.08 Steering Committee.

(a) Responsibilities. Within *** of the HSR Date, the Parties shall establish a
Steering Committee (“Steering Committee”) as described in this Section 2.08,
which will oversee the Development Committee and the Commercialization
Committee. The Steering Committee shall exist during the term of this Agreement.
The Steering Committee shall be updated regarding the Parties’ progress under
the Development Program and with respect to the Commercialization of the
Licensed Products and advise the Parties with respect thereto. The Steering
Committee shall have no authority to amend the body of this Agreement document.
The Steering Committee shall also have such rights, responsibilities, and
decision-making authority as may be specified elsewhere in this Agreement. The
Steering Committee shall make recommendations and provide strategic guidance to
the Development Committee, as applicable on all significant research,
development, clinical, regulatory, manufacturing, and to the Commercialization
Committee regarding Commercialization issues relating to the Licensed Products.
Each Party shall keep the Steering Committee reasonably informed of its progress
and activities regarding the development and Commercialization of the Licensed
Products during the Term.

(b) Membership. The Steering Committee will be comprised of an equal number of
representatives from each Party. The exact number of such representatives shall
be as agreed upon by the Parties, but no event shall such number be less than
*** for each Party, and each Party shall include at least one separate
representative on the Steering Committee from each of the following three
general areas of responsibility and expertise: development, regulatory affairs,
and marketing/sales; each of such representatives shall have reasonably relevant
experience and responsibility within the relevant Party’s organization. The
initial Steering Committee members shall be designated by each Party within one
week after the HSR Date.

Each Party may replace any or all of its representatives on the Steering
Committee at any time upon written notice to the other Party. Any member of the
Steering Committee may designate a substitute to attend and perform the
functions of that member at any meeting of the Steering Committee. Each Party
may, in its reasonable discretion, invite non-member representatives of such
Party to attend meetings of the Steering Committee. Meda shall designate one
person of the Steering Committee to act as chairperson of the Steering Committee
and BDSI shall designate a member of the Steering Committee to act as secretary
of the Steering Committee.

(c) Meetings. During the Term, the Steering Committee shall meet via
teleconference at least four times per annum or more frequently as the Parties
deem appropriate,

 

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on such dates, and at such places and times as the Parties shall reasonably
agree, provided, however, that the first meeting shall be held within *** of the
HSR Date. The Steering Committee shall meet in person at least once per calendar
year. Meetings of the Steering Committee shall, if personal attendance is
required, alternate between the offices of the Parties or their respective
Affiliates, or such other place as the Parties may agree. The members of the
Steering Committee also may hold meetings, convene or be polled or consulted
from time to time by means of telecommunications, video conferences, electronic
mail or correspondence, as deemed necessary or appropriate, provided that the
members hold at least one face-to-face meeting each year. Each Party shall bear
all costs and expenses relating to its members’ attendance at meetings of the
Steering Committee. The chairperson of the Steering Committee will be
responsible for setting all meeting dates and arranging logistics for the
meetings, subject to the reasonable scheduling and logistics requests of the
Parties, and the secretary will be responsible for recording and distributing
minutes. If and as requested by Arius Two (or any assignee thereof with respect
to the Arius Two Agreement), a representative of Arius Two (or its assignee with
respect to the Arius Two Agreement) shall be entitled to attend all meetings of
the Steering Committee on a non-voting basis, in person or by means of
telecommunications or video conferences; Arius Two and any such assignee shall
be deemed third party beneficiaries of this Agreement for purposes of enforcing
the aforementioned right to attend Steering Committee meetings.

(d) Decision-Making. The Steering Committee and its members shall use good faith
efforts to operate and make decisions by majority vote of members, provided that
in the event the Steering Committee is unable to obtain a majority vote of its
members regarding any matter before the Steering Committee within a reasonable
period of time not to exceed ***, the unresolved matter will be referred to a
member of the Meda Executive Committee and the BDSI Chief Executive Officer (or,
if such office is not held by any individual, the highest ranking executive
officer) and such officers shall then use commercially reasonable efforts to
negotiate in good faith in an attempt to resolve such matter. If, within *** of
being referred to such officers for resolution, such officers are unable to
resolve such matter, ***.

(e) Liaison. Each Party will designate an individual to serve as the liaison
between the Parties to undertake and coordinate any day-to-day communications as
may be required between the Parties relating to their respective activities
under this Agreement. Each Party may change such liaison from time to time
during the Term upon written notice thereof to the other Party.

Section 2.09 Supply of Licensed Products.

(a) BDSI will be the exclusive supplier to Meda of Fentanyl Products, and BDSI
shall supply Fentanyl Products for sale within the Territory exclusively to
Meda, as described in, and during the term of, the supply agreement attached
hereto as Exhibit E (the “Supply Agreement”). Meda shall only manufacture, have
manufactured, or obtain Fentanyl Products from Third Parties as provided for in
the Supply Agreement. However, if, during the Subsequent Term for the Fentanyl
Product in the United States, the Minimum Unit Price therefor exceeds *** for
the Fentanyl Product in the United States in a particular calendar quarter, then

 

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the Parties shall meet to discuss in good faith a mutually-agreeable revision to
the economic terms of this Agreement and the Supply Agreement, provided that if
the Parties are unable to reach an agreement within thirty *** of initiating
such discussions, Meda shall be entitled to terminate the Supply Agreement, as
further described therein, and secure its supply of Fentanyl Product in the
Territory by its own manufacture or through a Third Party manufacturer. To the
extent the Supply Agreement expires, is terminated, or is rendered nonexclusive
in accordance with its terms, the License granted under Section 3.02(a) and the
licenses granted under Section 3.06 shall be deemed to include, subject to the
terms of this Agreement, the right under the Licensed Technology and Marks to
manufacture or have manufactured Fentanyl Product for use or sale in the
Territory in accordance with the terms of this Agreement, provided that (i) Meda
shall provide BDSI written notice of its intent to secure its supply through a
Third Party manufacturer and provide BDSI a reasonable opportunity to discuss,
review, and comment on any potential Third Party manufacturers prior to Meda
entering into any discussions with any potential Third Party manufacturer and
(ii) Meda shall not enter into any discussions with any potential Third Party
manufacturer or manufacturing agreement with any potential Third Party
manufacturer without, in each case, BDSI’s prior written approval, such approval
not to be unreasonably withheld.

(b) No later than *** prior to Governmental Approval of the *** Product, the
Parties shall use Commercially Reasonable Efforts in good faith to negotiate and
enter into a supply agreement under which BDSI shall be the exclusive supplier
of *** Products to Meda for sale in the Territory. If the Parties are unable to
reach an agreement within *** of initiating such discussions, and Meda has used
Commercially Reasonable Efforts in good faith during such *** period to reach
such an agreement with BDSI, (X) Meda shall be free to secure its supply of ***
Product for the Territory by its own manufacture or through a Third Party
manufacturer, ***, provided that (i) Meda shall provide BDSI written notice of
its intent to secure such supply through a Third Party manufacturer and provide
BDSI a reasonable opportunity to discuss, review, and comment on any potential
Third Party manufacturers prior to Meda entering into any discussions with any
potential Third Party manufacturer and (ii) Meda shall not enter into any
discussions with any potential Third Party manufacturer or manufacturing
agreement with any potential Third Party manufacturer without, in each case,
BDSI’s prior written approval, such approval not to be unreasonably withheld.

ARTICLE III

LICENSE

Section 3.01 License Fee. In partial consideration for the licenses granted
under Section 3.02(a), Meda shall pay to BDSI an initial one-time non-refundable
license fee of US$30,000,000, by wire transfer of immediately available funds to
an account to be designated by BDSI. Meda shall pay such license fee as soon as
reasonably possible following, but in any event within two (2) business days of,
the HSR Date.

Section 3.02 License Terms. The terms and conditions of the license (the
“License”) granted to Meda shall be as follows:

 

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(a) Subject to the terms and conditions of this Agreement, (i) BDSI hereby
grants to Meda during the Initial Term an exclusive, royalty-bearing
sub-licensable license, under the Licensed Technology to market, advertise,
promote, distribute, offer for sale, sell and import the Licensed Product(s) in
the Territory and (ii) BDSI hereby grants to Meda during the Term a
non-exclusive, sub-licensable license under the Licensed Technology to, on a
Licensed Product-by-Licensed Product basis and effective only with respect to
the development of a Licensed Product for a particular indication following
Governmental Approval of such Licensed Product for such indication, research and
develop such Licensed Product in the Territory. During the term of this
Agreement, BDSI and its Affiliates shall not sell any Licensed Product or any
Competing Product with respect thereto for use in the Territory, nor grant any
right or license to any Third Party with respect to the Licensed Product or any
Competing Product in the Territory. Notwithstanding anything to the contrary,
nothing in this Agreement shall limit BDSI’s right to (i) research or develop
Licensed Products in the Territory or to manufacture, use, sell, offer for sale,
promote, import, or distribute products for end use outside the Territory or
(ii) ***.

Meda shall have the right to sublicense any rights granted hereunder within the
Territory, provided that (i) except in respect of sublicenses to Affiliates,
Meda shall provide BDSI with a copy of any proposed sublicense for BDSI’s review
and comment prior to execution, (ii) except in respect of sublicenses to
Affiliates, Meda shall not enter into any such sublicense unless consented to in
writing by BDSI and CDC, provided that neither BDSI nor CDC may unreasonably
withhold such consent with respect to any matter regarding such sublicense other
than the final definition of Non-Royalty Sublicensing Revenue to be negotiated
by the Parties, (iii) Meda shall secure all reasonably appropriate covenants,
obligations and rights from any such Sublicensee to ensure that Meda can comply
with its obligations under this Agreement, (iv) Meda shall provide, upon written
request by BDSI, reasonable assurance that its Sublicensees comply with
confidentiality, indemnity, reporting, audit rights, and information obligations
comparable to those set forth in this Agreement, (v) Meda shall be responsible
and liable for such Sublicensee’s performance of Meda’s obligations hereunder
and compliance with the terms of this Agreement, (vi) all Sublicensees shall
agree to be subject to the terms of this Agreement, (vii) except in respect of
sublicenses to Affiliates, BDSI shall be provided with a copy of all sublicenses
executed hereunder by Meda, and (viii) all such sublicenses shall terminate upon
the termination of this Agreement. Neither Meda, its Affiliates, nor their
Sublicensees shall sell, offer for sale, promote, market, or distribute any
Licensed Product in a country unless and until all necessary Governmental
Approvals have been obtained in such country.

(b) Meda acknowledges that it shall have no right, title or interest in or to
the Licensed Technology, Licensed Products, or Marks except to the extent set
forth in this Agreement, and BDSI reserves all rights to make, have made, use,
sell, offer for sale, and import the Licensed Technology and Licensed Products
except as otherwise expressly granted to Meda pursuant to this Agreement.
Nothing in this Agreement shall be construed to grant Meda any rights or license
to any intellectual property of BDSI other than as expressly set forth herein.

 

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(c) All Affiliates of Meda shall be subject to the terms of this Agreement. Meda
shall be fully responsible and liable for the acts and omissions of its
Affiliates in the course of exercising any rights granted under this Agreement
as if such acts or omissions had been those of Meda, including but not limited
to any breach of the provisions of this Agreement, and Meda shall ensure that
all of Meda’s Affiliates shall comply with the terms of this Agreement.

Section 3.03 Commercial Commitment.

(a) Within *** of receiving Governmental Approval to market and sell a Licensed
Product in the United States, Meda will commence the marketing and sale of such
Licensed Product in the United States; provided, that BDSI (or its Third Party
manufacturer) shall have by such date manufactured and shipped Sufficient Launch
Stocks for the United States to Meda, its Affiliate, or Sublicensee, as
appropriate. Within *** of receiving Governmental Approval (including, if and as
necessary in a country, Pricing and Reimbursement Approvals) to market and sell
a Licensed Product in a country in the Territory other than the United States,
Meda will commence the marketing and sale of such Licensed Product in such
country; provided, that (i) BDSI (or its Third Party manufacturer) shall have by
such date manufactured and shipped Sufficient Launch Stocks for such country and
(ii) if Governmental Approval of such Licensed Product is obtained in Canada or
Mexico prior to receipt of Governmental Approval of such Licensed Product in the
United States, the parties shall meet in good faith to negotiate an alternative,
Commercially Reasonable launch date requirement for the Licensed Product in
Canada or Mexico, as appropriate, in order to avoid or minimize any adverse
effect the launch of such Licensed Product in Canada or Mexico prior to the
launch thereof in the United States may have on the Commercialization of the
Licensed Product in the United States.

(b) Notwithstanding the exclusivity provided in Section 3.02, if Meda fails to
fulfill any of its obligations under this Section 3.03 in respect of any
country, Meda shall be in breach of this Agreement and BDSI may, provided that
Meda fails to remedy such breach within *** from receipt of written notice
thereof, upon *** written notice, terminate this Agreement in respect of such
country or render nonexclusive in whole or in part Meda’s licenses hereunder in
respect of such country, which remedies shall be in addition to all other
remedies BDSI may have at law or in equity. Notwithstanding the exclusivity
provided in Section 3.02 and, in addition to BDSI’s rights under the preceding
sentence, if Meda fails to fulfill any of its obligations under this
Section 3.03 in respect of the United States, Meda shall be in breach of this
Agreement and BDSI may, provided that Meda fails to remedy such breach within
*** from receipt of written notice thereof, upon *** written notice, terminate
this Agreement in respect of the entire Territory or render nonexclusive in
whole or in part Meda’s licenses hereunder in respect of the entire Territory,
which remedies shall be in addition to all other remedies BDSI may have at law
or in equity.

(c) BDSI agrees that, notwithstanding the nonexclusivity of certain rights
granted under the Arius Two Agreement upon the expiration of the Royalty Term
(as defined in the Arius Two Agreement) pursuant to Section 3.05 thereof and
resulting nonexclusivity of any licenses granted hereunder to Meda by BDSI as
referenced herein, BDSI shall not grant rights to any Third Party in the
Territory under the Licensed Technology, Improvements or Marks with respect to
the Commercialization of any Licensed Product in the Territory during the Term.

 

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Section 3.04 Trademarks. Subject to the terms and conditions of this Agreement
and the nonexclusivity of certain rights granted under the Arius Two Agreement
upon the expiration of the Royalty Term (as defined in the Arius Two Agreement)
pursuant to Section 3.05 thereof, BDSI hereby grants to Meda an exclusive,
paid-up, sub-licensable (subject to the constraints on sublicensing described in
Section 3.02 above), royalty-free license to use the Marks during the Term
solely in connection with the promotion, marketing, distribution, offer for
sale, and sale of the Licensed Product in the Territory. Meda acknowledges that
it shall have no right, title or interest in or to the Marks except to the
extent set forth in the license granted to Meda under this Section 3.05, and
BDSI reserves all rights to use the Marks other than those rights granted
herein. All promotional materials and advertising concerning the Licensed
Product shall reasonably prominently display the Marks and Trade Name obtained
in accordance with this Agreement and, to the extent permitted by Applicable
Laws, reference BDSI as the supplier and, to the extent required by the terms of
that certain Supply Agreement between Aveva Drug Delivery Systems, Inc.
(“Aveva”) and BDSI dated October 17, 2005, as amended (the “Aveva Agreement”)
***, Aveva as the manufacturer of, in each case, to the extent applicable, the
Licensed Products, all in the manner illustrated on Exhibit F or such other
reasonable manner to be determined by the Commercialization Committee, subject
to BDSI’s approval with respect thereto. All content or other specific graphic
elements provided by BDSI or Aveva shall remain the property of BDSI or Aveva
and the Marks and any such content or graphic elements, or any content or
graphic elements to be used by Meda with the Licensed Products, shall be used
only in the manner set forth in this Agreement and previously approved in
writing by BDSI, such approval not to be unreasonably withheld. Notwithstanding
anything to the contrary, Meda shall be entitled to use any trademark other than
the Marks, together with the Marks or otherwise, in connection with the use,
development, promotion, marketing, distribution, offer for sale, and sale of the
Licensed Products in the Territory. For the avoidance of doubt, such trademarks
shall be the exclusive property of Meda. Subject to Meda’s rights under the EU
Agreement, Meda hereby grants BDSI the perpetual, irrevocable, royalty-free,
fully-paid right and license to use Meda Marks (excluding, for the avoidance of
doubt, the Meda name, logo and trade dress and any graphic elements relating
thereto) in any manner previously approved in writing by Meda, such approval not
to be unreasonably withheld, in connection with the manufacture, use,
development, promotion, marketing, distribution, offer for sale, sale, and
import of Licensed Products for commercialization outside the Territory and,
following any termination of this Agreement by Meda pursuant to Section 13.03A
or 13.04 or by BDSI, inside the Territory.

Section 3.05 Ownership of Intellectual Property; Improvements.

(a) Each Party will own all right, title and interest in and to any Improvements
made solely by such Party or its Affiliates, and all intellectual property
rights related thereto; the Parties shall jointly own all right, title, and
interest in and to any Improvements made jointly by the Parties, and all
intellectual property rights related thereto. For Improvements made solely by
Meda or jointly by Meda and BDSI (“Meda Improvements”), Meda hereby grants to
BDSI an exclusive, royalty-free, fully-paid, perpetual worldwide right and
license, with rights to

 

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sublicense, to Meda’s rights in such Meda Improvements for (i) the development,
manufacturing and commercialization of any BEMA-based products other than the
Licensed Products, (ii) the research and development of the Licensed Products,
(iii) the Commercialization of Licensed Products outside the Territory, and,
upon termination of the rights licensed to Meda under this Agreement,
(iv) Commercialization of Licensed Products inside the Territory. Meda shall
take all actions and execute all documents necessary to effect the purposes of
the foregoing, as requested by BDSI, and cause its Affiliates, employees,
contractors, and other representatives to do the same. During the Term, each
Party shall promptly notify the other Party in writing of Improvements made,
solely or jointly with another Party, by such Party (the “Improving Party”). In
addition to any exclusive rights licensed hereunder and notwithstanding
Section 3.05(b), BDSI shall, during the Term hereof, grant to Meda an exclusive
license under Improvements and any Patent Rights claiming such Improvements
Controlled by BDSI or Arius Two to the extent reasonably necessary to develop,
market, advertise, promote, distribute, offer for sale, and sell the Licensed
Products in the Territory.

(b) For the avoidance of doubt and except as specifically set forth in this
Agreement, Meda shall have no right, title, or interest in or to the Licensed
Technology, Marks, or any Improvements Controlled by BDSI.

Section 3.06 License Following Expiration of the Initial Term. After expiration
of the Initial Term in a particular country in the Territory, Meda shall retain,
during the Subsequent Term, subject to compliance with its payment obligations
under Article IV and the nonexclusivity of certain rights granted under the
Arius Two Agreement upon the expiration of the Royalty Term (as defined in the
Arius Two Agreement) pursuant to Section 3.05 thereof, an exclusive,
royalty-bearing license under the Licensed Know-How, Improvements, and Marks, to
the extent under the Control of BDSI or Arius Two, to sell, offer for sale and
import Licensed Products in such country, consistent with other terms applying
to the licenses granted hereunder during the Initial Term.

Section 3.07 ***

ARTICLE IV

ROYALTY AND MILESTONE PAYMENTS

Section 4.01 Payments on Sales.

(a) For any BDSI-Supplied Units intended for sale by Meda, its Affiliates, or
their Sublicensees, Meda shall pay the Transfer Price for each such Unit within
*** after BDSI’s invoice, which shall be issued upon delivery thereof pursuant
to the terms of the Supply Agreement. Meda shall advise BDSI in writing no later
than *** in advance of the placing of the first order for Units to be supplied
for sale in a particular Royalty Year of the Estimated Average Unit Price for
such Royalty Year. Subject to the adjustments set forth in Section 4.06, and
except with respect to the payments set forth in Sections 4.02, 4.03, 4.04, and
4.05, such payment shall constitute full consideration for the supply of
Licensed Products under the Supply Agreement *** and the grant of licenses and
other rights to Meda under this Agreement.

 

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(b) Except as otherwise provided in subsections (c), (d), (e), and (f) below,
for each Licensed Product sold by Meda, its Affiliates, or Sublicensees that is
not a BDSI-Supplied Unit, Meda shall pay BDSI the greater of ***. In the event
that, with respect to a particular Licensed Product, no BDSI-Supplied Units have
been commercially sold or distributed by Meda, its Affiliates, or their
Sublicensees prior to the sale of the applicable Unit, the Parties shall use
commercially reasonable efforts to in good faith negotiate a commercially
reasonable royalty per Unit based on the Applicable Royalty Percentage and a
Commercially Reasonable estimate of the anticipated cost of manufacturing or
having manufactured the applicable Licensed Product, provided that (i) if the
Parties are unable to reach agreement concerning such a royalty within thirty
(30) days of initiating such negotiations, such royalty rate shall be determined
pursuant to the dispute resolution procedures in Section 4.07, and (ii) the
applicable royalty rate determined in accordance with this sentence shall not,
in any event, be less than *** during the Initial Term for a particular Licensed
Product.

(c) In the event (i) a Temporary Back-Up Trigger (as defined in the Supply
Agreement) occurs and (ii) Meda exercises its rights under Section 4.10 of the
Supply Agreement to itself manufacture Fentanyl Product or obtain Fentanyl
Product from a Third Party, for all Net Sales of Fentanyl Products sold by Meda,
its Affiliates, or Sublicensees that are not BDSI-Supplied Units, Meda shall pay
BDSI an amount equal to ***. With respect to the circumstances described in this
subsection (c), Meda shall (i) at all times purchase from BDSI as many Units of
Fentanyl Products as BDSI can reasonably supply to Meda (provided that such
amount to be purchased from BDSI shall (x) not in any event be required to
exceed Meda’s reasonably forecasted total needs for Products in the Territory
with respect to a particular relevant time period and (y) be subject to
Commercially Reasonable minimum production or purchase requirements established
by Meda or required by any Third Party manufacturer as reasonably necessary to
cover Meda’s shortfall in supply of Fentanyl Products on Commercially Reasonable
terms, with any such time requirement not to exceed a *** supply commitment or
term so long as BDSI is capable of supplying all of Meda’s needs after the
expiration of such time period, (ii) use Commercially Reasonable Efforts to
manage its inventory of Units supplied by BDSI and others, and (iii) use
Commercially Reasonable Efforts to restore BDSI as its exclusive supplier of
Fentanyl Products as soon as possible.

(d) In the event (i) a Termination Back-Up Trigger (as defined in the Supply
Agreement) occurs and (ii) Meda terminates the Supply Agreement or renders it
permanently nonexclusive pursuant to Section 4.10 thereof, for all Net Sales of
Fentanyl Products sold by Meda, its Affiliates, or Sublicensees that are not
BDSI-Supplied Units, Meda shall pay BDSI an amount equal to ***. Meda shall
(i) use Commercially Reasonable Efforts to manage its inventory of Units
supplied by BDSI and others, (ii) use Commercially Reasonable Efforts to
mitigate Supply Losses and minimize the Meda Product Cost, and (iii) promptly
notify BDSI in writing when the Remaining Supply Losses equal zero.

(e) In the event Meda terminates the Supply Agreement pursuant to
Section 13.03(a) thereof, for all Net Sales of Fentanyl Products sold by Meda,
its Affiliates, or Sublicensees that are not BDSI-Supplied Units, Meda shall pay
BDSI an amount equal to ***.

 

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Meda shall (x) use Commercially Reasonable Efforts to manage its inventory of
Units supplied by BDSI and others, (y) use Commercially Reasonable Efforts to
mitigate Supply Losses and minimize the Meda Product Cost, and (z) promptly
notify BDSI in writing when the Remaining Supply Losses equal zero.

(f) Notwithstanding anything to the contrary, upon any assignment of this
Agreement to Arius Two or CDC as contemplated by Sections 9.11 and 13.06(g), on
a Licensed Product-by-Licensed Product and country-by-country basis, for all
Licensed Products sold by Meda, its Affiliates, or Sublicensees that are not
BDSI-Supplied Units, Meda shall pay the assignee, in lieu of the amount
described above, an amount equal to *** percent (***%) of Net Sales of such
Licensed Products during the Initial Term, provided that if Meda’s aggregate
gross margin for the Licensed Product in the Territory would become less than
***%, Meda, Arius Two, and CDC will enter into good faith discussions for a
possible reduction of the aforementioned ***% royalty rate.

Section 4.02 Milestone Payments. Meda shall pay to BDSI, as additional license
fees, the following non-refundable, non-creditable milestone payments upon the
occurrence of the specified milestone event:

 

  (a) US$15,000,000 upon FDA approval of an NDA filed with respect to the
Fentanyl Product;

 

  (b) US$15,000,000 upon the earliest of (i) First Commercial Sale of the
Fentanyl Product, (ii) BDSI’s (or its Third Party manufacturer’s) manufacture of
bulk Fentanyl Product, lacking final labeling or packaging inserts dependent on
the terms of the final form of Governmental Approval, in sufficient quantities
to provide Sufficient Launch Stocks of Fentanyl Product for the United States,
or (iii) BDSI’s (or its Third Party manufacturer’s) manufacture of Sufficient
Launch Stocks of Fentanyl Product for the United States; provided, that FDA
approval of an NDA filed with respect to the Fentanyl Product was granted prior
to or on the accomplishment of (i), (ii), or (iii) above; if such FDA approval
has not yet been granted upon the accomplishment of (i), (ii), or (iii) above,
such milestone shall payable upon the grant of such FDA approval

 

  (c) US$10,000,000 when aggregate Net Sales in a Sales Year (as defined below)
is equal to or greater than $75,000,000;

 

  (d) US$10,000,000 when aggregate Net Sales in a Sales Year is equal to or
greater than $125,000,000; and

 

  (e) US$10,000,000 when aggregate Net Sales in a Sales Year is equal to or
greater than $175,000,000.

 

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For the purposes of this Agreement, each “Sales Year” shall be a twelve
(12)-month period, with the “First Sales Year” period beginning on the first day
of the first calendar month following the First Commercial Sale, the “Second
Sales Year” beginning 12 months after the first day of the of the First Sales
Year, the Third Sales Year beginning 12 months after the first day of the Second
Sales Year and so on and so forth for each successive 12-month period for the
term of this Agreement; if the term “Sales Year” is explicitly tied to a
particular country in any provision of this Agreement (e.g. Section 5.01(c)),
its precise meaning in such provision shall be determined in accordance with the
foregoing based on the date of First Commercial Sale in such country. For the
avoidance of doubt, each milestone payment referred to in this Section 4.02
shall be paid only once by Meda. BDSI shall provide Meda prompt written notice
of each milestone specified in subsections (a) and (b) above, and Meda shall pay
BDSI the designated amount for the applicable milestone within *** of BDSI
providing such notice; Meda shall provide BDSI written notice of the achievement
of each milestone specified in clauses (c), (d) and (e) above, and pay the
indicated amount, within *** of the end of the calendar month in which it is
achieved, provided that, notwithstanding the foregoing, in no event will the
payment pursuant to clause (d) be required less than *** after the payment in
clause (c) is due; and in no event will the payment pursuant to clause (e) be
required less than *** after the payment in clause (d) is due.

Section 4.03 Non-Royalty Sublicensing Revenue. Meda shall pay BDSI an amount
equal to *** percent (***%) of all Non-Royalty Sublicensing Revenue received by
Meda or its Affiliates.

Section 4.04 Minimum Royalties. The following minimum royalties shall apply:

(a) If the total, aggregate Net Unit Royalties for (or, if applicable, amounts
otherwise payable under Section 4.01 with respect to) the Second Sales Year do
not equal at least US$***, then not later than *** days after the end of the
Second Sales Year, Meda shall pay to BDSI an amount equal to the amount by which
US$*** exceeds the total, aggregate Net Unit Royalties for (or, if applicable,
amounts otherwise payable under Section 4.01 with respect to) the Second Sales
Year.

(b) If the total, aggregate Net Unit Royalties for (or, if applicable, amounts
otherwise payable under Section 4.01 with respect to) the Third Sales Year do
not equal at least US$***, then not later than *** after the end of the Third
Sales Year, Meda shall pay to BDSI an amount equal to the amount by which US$***
exceeds the total, aggregate Net Unit Royalties for (or, if applicable, amounts
otherwise payable under Section 4.01 with respect to) the Third Sales Year.

(c) If the total, aggregate Net Unit Royalties for (or, if applicable, amounts
otherwise payable under Section 4.01 with respect to) the Fourth, Fifth, Sixth,
and Seventh Sales Years do not equal at least US$*** for each such Sales Year,
then not later than *** after the end of the applicable Sales Year, Meda shall
pay to BDSI an amount equal to the amount by which US$*** exceeds total,
aggregate Net Unit Royalties for (or, if applicable, amounts otherwise payable
under Section 4.01 with respect to) such Sales Year.

 

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(d) If the royalties payable under this Agreement on Fentanyl Products that are
not BDSI-Supplied Units are adjusted as provided in Section 4.01(c), 4.01(d), or
4.01(e), the applicable minimum royalty amounts above shall be proportionately
adjusted in the same proportion the weighted average royalty rate (calculated as
described below) payable under this Agreement in a Sales Year compares to ***%.
For example, if the weighted average royalty rate (calculated as described
below) equals *** percent (***%) in the Fourth Sales Year, the minimum royalties
payable under Section 4.04(c) in the Fourth Sales Year shall be $***. The
weighted average royalty rate referenced above shall be calculated as an average
for all Licensed Products sold by Meda in a given Sales Year based on the total
Net Unit Royalties for all BDSI-Supplied Units sold by Meda in such Sales Year
and the amounts payable under Section 4.01(b), 4.01(c), 4.01(d), 4.01(e), and
4.01(f) on all other Licensed Products sold by Meda in such Sales Year (e.g. if,
in a given Sales Year, ***% of the Licensed Products sold by Meda are
BDSI-Supplied Units having a Net Unit Royalty of ***%, and ***% of the Licensed
Products sold by Meda are not BDSI-Supplied Units and are subject to the ***%
royalty referenced in Section 4.01(c), the weighted average royalty rate for
such Sales Year would 18.25%).

Section 4.05 ***

Section 4.06 Reconciliations, Reports, and Payments.

(a) Meda, on behalf of itself and its Affiliates, shall, beginning with respect
to the initial Royalty Quarter, furnish to BDSI a quarterly written report
(each, a “Royalty Statement”) showing in reasonably specific detail ***. Royalty
Statements shall be due no later than *** following the close of each Royalty
Quarter.

(b) In the event that, with respect to any BDSI-Supplied Units, the total
aggregate Supply Price calculated with respect to particular Licensed Products
sold by Meda, its Affiliates, or Sublicensees during a particular Royalty
Quarter exceeds the Transfer Price paid to BDSI with respect to such Licensed
Products, Meda shall pay BDSI an amount equal to such excess; in the event that
the total aggregate Transfer Price paid to BDSI with respect to particular
Licensed Products sold by Meda, its Affiliates, and Sublicensees during a
particular Royalty Quarter exceeds the Supply Price with respect to such
Licensed Products, BDSI shall pay Meda an amount equal to such excess. In the
event that the weighted average Supply Price for a particular Licensed Product
is greater than *** (***%) or less than *** (***%) of such Licensed Product’s
Transfer Price for *** consecutive Royalty Quarters, the Transfer Price for such
Licensed Product shall be changed for the remainder of that Royalty Year to ***.

(c) All payments due BDSI under Sections 4.01, 4.02, 4.03, and 7.04(b) with
respect to a particular Royalty Quarter shall be due no later than *** following
the close of each Royalty Quarter; all payments due Meda under Section 4.04 or
4.06(b) with respect to a particular Sales Year shall be due no later than ***
following the end of such Sales Year. All payments hereunder shall be payable in
United States Dollars. With respect to each Royalty Quarter, whenever conversion
of payments from any foreign currency shall be required, such conversion shall
be made at the rate of exchange reported in The Wall Street Journal on the last
business day of the applicable Royalty Quarter. All payments owed under this
Agreement shall be made by wire transfer to a bank account designated by the
Party owed payment, unless otherwise specified in writing by such Party.

 

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(d) In the event that any payment, including contingent payments, due hereunder
is not made when due, each such payment shall accrue interest from the date due
at an annual rate equal to the Prime Rate of Interest plus *** percent (***%)
or, if less, the maximum legally permissible interest rate, pro rated for any
partial years during which such interest shall accrue. The payment of such
interest shall not limit BDSI from exercising any other rights it may have under
this Agreement as a consequence of the lateness of any payment.

(e) During the Term and for a period of *** thereafter, or longer if and as
required in order for Meda to comply with Applicable Law, Meda shall keep
complete and accurate records in sufficient detail to permit BDSI to confirm the
completeness and accuracy of (i) the information presented in each Royalty
Statement and all payments due hereunder and (ii) the calculation of Net Sales.
BDSI and any designee thereof shall have the right to audit and inspect such
records pursuant to the terms of Section 14.11.

(f) All taxes levied on account of the payments accruing to a Party under this
Agreement shall be paid by such Party for its own account, including taxes
levied thereon as income to such Party. If provision is made in applicable law
or regulation for withholding, such tax shall be deducted from the payment made
by a Party (the “Paying Party”) to the other Party (the “Paid Party”) hereunder,
shall be paid to the proper taxing authority by the Paying Party, and a receipt
of payment of such tax shall be secured and promptly delivered to the Paid
Party, provided that, notwithstanding the foregoing, to the extent that any such
deduction by Meda with respect to a particular Unit would result in the sum of
(i) the actual amount paid to BDSI by Meda with respect to such Unit following
such deduction plus (ii) any portion of such withholding or tax paid by Meda
with respect to such Unit that is refundable to or recoverable by BDSI under the
applicable law(s), regulations, or other binding authority being less than the
Product Price for such Unit, Meda shall not be entitled to any such deduction
and shall instead be responsible for such payment on behalf of BDSI. Each Party
agrees to reasonably assist the other Party in claiming exemption from such
deductions or withholdings under any double taxation or similar agreement or
treaty from time to time in force or in otherwise seeking the return, refund, or
credit of any such withheld amount as applicable.

(g) Notwithstanding any other provision of this Agreement, if Meda is prevented
from making any payments by virtue of the statutes, laws, codes or governmental
regulations of the country from which the payment is to be made, then such
payment shall be paid by depositing funds in the currency in which it accrued to
BDSI’s account in a bank acceptable to BDSI in the country whose currency is
involved.

Section 4.07 Dispute Resolution. If the Parties are unable to reach agreement
concerning any matter intended to be resolved pursuant to good faith
negotiations between the Parties pursuant to Section 4.01 or the definition of
Net Unit Royalty as established in Section 1.01 within thirty (30) days of the
initiation of such negotiations, upon receipt of written notice from either
Party, the unresolved matter will be referred to the Parties’ Chief Executive
Officers (or, if such office is not held by any individual, highest ranking
executive officer) and such

 

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officers shall then use commercially reasonable efforts to negotiate in good
faith in attempt to resolve such matter. If, within forty five (45) days of
being referred to such officers for resolution, such officers are unable to
resolve such matter, then the disputed aspects of such matter shall be settled
pursuant to arbitration as described in Section 14.03.

ARTICLE V

COMMERCIALIZATION

Section 5.01 Promotion and Marketing Obligations.

(a) Meda, at its own expense, will be responsible for all sales and marketing
activities related to the Licensed Products in the Territory.

(b) Meda agrees to use Commercially Reasonable Efforts to promote the sale,
marketing, and distribution of the Licensed Products in each country of the
Territory for all indications that have received Governmental Approval. The
Commercialization Committee shall have the opportunity to review and comment on
Meda’s initial plan for commercializing the Licensed Products in the Territory
and any subsequent amendments, revisions, or updates to such plan, and to
oversee, monitor, advise, and comment on Meda’s execution of such plan(s). Meda,
its Affiliates, and Sublicensees shall maintain standards with respect to the
quantity and quality of, and expenditures on, marketing and promotion of the
Licensed Products, including ***. In the event Meda sublicenses any of its
rights under this Agreement, the activities of Sublicensees may apply to the
satisfaction of the foregoing or its obligations under subsection (c) below,
provided, that, subject to the foregoing, Meda’s obligations under this
Agreement shall not be reduced or otherwise affected by any sublicensing by Meda
of its rights under this Agreement. Meda shall promptly advise BDSI of any
issues that materially and adversely affect its ability to market any Licensed
Product in the Territory. In such event, senior executives of Meda and BDSI
shall meet and in good faith discuss what actions may be taken in light of such
issues.

(c) Meda shall expend the following amounts in the following periods in respect
of the Advertising and Promotional Expenses for the First Indication of the
Fentanyl Product:

***

Notwithstanding the foregoing, if Meda reasonably believes in good faith that
expenditure of the full amount required above for any United States’ Sales Year
following the United States’ Second Sales Year would not be Commercially
Reasonable in light of prevailing regulatory and market conditions and after
taking into account the sales level of the Fentanyl Product, Meda may notify
BDSI in writing and, promptly following such notice, the Parties shall use
commercially reasonable efforts to in good faith negotiate a Commercially
Reasonable adjustment of such required amounts for subsequent twelve (12) month
periods. No later than *** prior to Governmental Approval of the Non-Cancer
Indication of the Fentanyl Product, the parties will meet and in good faith
negotiate an amended or separate, Commercially Reasonable marketing expenditure
commitment for the Fentanyl Product. ***.

 

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(d) Beginning on the date of First Commercial Sale, Meda shall use Commercially
Reasonable Efforts to deploy its sales representatives to sell the Fentanyl
Product in the Territory, who will target physicians reasonably identified by
Meda as potentially high volume prescribing physicians for the Fentanyl Product
(which shall include, but not be limited to, the highest volume prescribing
physicians of Oral Fentanyl Products as identified by IMS Health data, and which
shall include oncologists, pain specialists, rehabilitation specialists and
primary care physicians), as reasonably agreed upon by the Parties (“Target
Physicians”), and associated health care professionals. During each year of the
two (2)-year period following the First Commercial Sale of the Fentanyl Product,
Meda will have its sales representatives deliver no less than a total of ***
first position details of Fentanyl Product to Target Physicians. ***, Meda shall
deploy a number of sales representatives, and will deliver such number and type
of details, in each case as is Commercially Reasonable for the Licensed
Products. Not later than *** prior to Governmental Approval of the Non-Cancer
Indication of the Fentanyl Product, the parties will meet and in good faith
renegotiate an amended or separate, Commercially Reasonable sales force
commitment (including number of representatives, details, and target physicians)
for the Fentanyl Product. ***.

(e) Any trademark, logo, design and/or trade dress for the Licensed Products
used by Meda, its Affiliates, or Sublicensees in the Territory shall be subject
to BDSI’s prior written approval, such approval not to be unreasonably withheld,
and comply with Applicable Laws.

(f) *** prior to the expected date of the First Commercial Sale and at least ***
prior to the beginning of each calendar year thereafter, Meda shall submit to
BDSI in writing a marketing, sales and distribution plan for the Licensed
Products detailing Meda’s, its Affiliates’, and Sublicensees’ proposed
marketing, sales and distribution strategy and tactics for the sale and
distribution of the Licensed Products during the following calendar year,
including the expected selling price schedules for Licensed Products (including
any (i) prompt payment or other trade or quantity discounts which are expected
to be offered and (ii) commission rates or rebates which are expected to be
offered to distributors and agents). Meda shall provide the Commercialization
Committee a reasonable opportunity to review and comment on such strategy and
tactics prior to implementing them. In addition, upon the request of BDSI, Meda
shall provide BDSI with copies of any market research reports relating to
Licensed Product sales and Licensed Product competition in Meda or its
Affiliates possession.

Section 5.02 Co-Promote.

(a) Beginning on the date that is *** months after the date on which
Governmental Approval of the Fentanyl Product for the First Indication is
obtained in the United States, BDSI shall have the right to co-promote the
Licensed Products in the Territory by providing written notice to Meda (i) at
any time following the date that is *** after the date on which Governmental
Approval of the Fentanyl Product for the First Indication is obtained in the
United States and (ii) at least *** in advance of BDSI’s planned commencement of
such co-promote activities; provided, that if BDSI provides such notice, the
Parties shall use good faith commercially reasonable efforts to enter into an
appropriate co-promotion agreement containing

 

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customary terms for a co-promotion arrangement of this type within *** of the
date of such notice. In no event will BDSI engage more than *** sales
representatives in connection with the co-promotion of the Licensed Products.

(b) Meda shall pay to BDSI the fair market value per detail for the first ***
during which BDSI provides such co-promotion efforts. Notwithstanding anything
to the contrary in this Agreement or the Supply Agreement, during such ***, the
Supply Price in respect of the Units sold *** that are directly attributable to
Licensed Product prescriptions written by prescribers detailed by ***. As an
example of the foregoing calculation, ***. The Parties shall work together in
good faith to establish Commercially Reasonable and appropriate procedures to
track sales resulting from prescribers detailed by the BDSI sales force (and not
the Meda sales force) and determine the Unit sales and Net Sales attributable to
such prescribers.

(c) Meda and BDSI shall use reasonable good faith efforts to agree on the
physician-specialty mix to be covered by each of Meda and BDSI if BDSI exercises
its co-promote right. All marketing materials, including any medical claims and
other materials and documents, to be used by BDSI in connection with the
exercise of its co-promote right shall be provided by Meda at its expense, and,
if and as elected by BDSI in writing, Meda shall be responsible for training and
supporting BDSI’s sales force with respect to the sales and promotion of the
Licensed Product, provided that, if BDSI so elects, BDSI shall reimburse Meda
for the reasonable, documented direct costs of such training and support. If
BDSI exercises its co-promote right, Meda shall be responsible for booking
sales, warehousing and distribution of all of the Licensed Product marketed by
BDSI, and for performing all services related to such Licensed Product’s
distribution and customer service as provided herein. If BDSI receives any
orders for Licensed Product in the Territory, it shall refer such orders to Meda
to be filled, and sales based on such orders shall be included in Net Sales for
purposes of this Agreement.

Section 5.03 Labeling and Artwork. The Parties agree that the label for Licensed
Products in the Territory shall be, and all packaging and presentations
concerning the Licensed Products shall display, a Meda label in accordance with
Meda’s customary practices and the Parties shall use Commercially Reasonable
Efforts to cooperate in gaining Governmental Approval to sell Licensed Products
in the Territory under the Meda label. Each Licensed Product Commercialized by
Meda or its Affiliates or permitted sublicensees under this Agreement shall be
marked (to the extent not prohibited by Applicable Laws and reasonably practical
and customary in the pharmaceutical industry) with applicable patent and other
intellectual property notices relating to the Licensed Patents in such a manner
as may be required by applicable law or reasonably necessary to ensure the
availability of all remedies which may be available for infringement of the
Licensed Patents. The Commercialization Committee shall be provided with copies
of any labeling and proposed changes to the labeling of any Licensed Product for
the Commercialization Committee’s review, comment, and approval. Any such
labeling or proposed changes thereto shall not be effected by Meda unless
approved in advance by the Commercialization Committee. The actual cost of
implementing such change will be at Meda’s sole cost and expense, including any
materials made obsolete by Meda’s changes to the artwork. All labeling, artwork,
and proposed changes thereto shall at all times comply with Applicable Laws.

 

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Section 5.04 Publicity. BDSI and Meda will collaborate to create a public
relations campaign with respect to the relationship established under this
Agreement reasonably intended to maximize shareholder value for both Parties,
which may include the issuance of press releases concerning the following (to
the extent permitted under Applicable Laws and stock exchange rules): (a) deal
closure, (b) data transfer, (c) FDA and EU submissions concerning any Licensed
Product, (d) Governmental Approvals of any Licensed Product, (e) First
Commercial Sale of each Licensed Product, (f) key data from Phase IIIB/IV
publications concerning any Licensed Product, (g) submission and Governmental
Approval of additional indications for any Licensed Product, (h) payment of any
milestone to BDSI, and (i) other events as agreed by both Parties. For a period
of at least ***, Meda will also incorporate the Licensed Products into their
corporate efforts as a key pipeline product, including but not limited to
investor presentations and the Meda website. The Parties shall reasonably
cooperate on all of these activities as needed and will have rights to review
and comment on all items regarding the Licensed Products.

ARTICLE VI

REGULATORY COMPLIANCE

Section 6.01 Marketing Authorization Holder. Subject to Meda’s obligations upon
termination pursuant to Section 13.05, Meda shall, following final approval of a
particular Governmental Approval or Marketing Authorization by a given Competent
Authority, be the holder and owner of such Marketing Authorization and
Governmental Approval in the Territory. Meda agrees that neither it nor its
Affiliates will do anything to recklessly, negligently, or intentionally
adversely affect any Marketing Authorization or Governmental Approval.

Section 6.02 Maintenance of Marketing Authorizations. With respect to the
Licensed Products, Meda agrees, at its sole cost and expense, to maintain all
Marketing Authorizations and Government Approvals throughout the Term including
obtaining any supplemental applications, annual reports, variations or renewals
thereof.

Section 6.03 Interaction with Competent Authorities. After the HSR Date, each
Party shall provide to the other Party a copy of any material correspondence or
materials that it receives from a Competent Authority regarding any Licensed
Product. If such correspondence is not received in English, a summary in English
of all material matters addressed thereby will be provided. Such correspondence
or summary shall be provided within *** business days of receipt thereof by the
relevant Party. Following Governmental Approval, BDSI shall be provided
reasonable advance written notice of all material meetings, conferences, or
calls with Competent Authorities in the Territory concerning any Licensed
Product, and BDSI shall be permitted to have one representative attend all such
meetings, conferences, or calls. With respect to any Licensed Product following
Governmental Approval thereof, Meda shall provide BDSI with copies of any
materials relating to any material regulatory matter and, when reasonably
practicable, shall provide copies of any documents to be presented to any
Competent Authority in respect of such matters prior to their presentation
thereto, and, in either case, if such primary materials are not in English, a
summary in English of all material matters addressed thereby, so that the
Development Committee, if practicable, shall have an opportunity to review and
approve

 

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thereof in advance. The materials provided to BDSI under this Article VI with
respect to material interactions with any Competent Authority will be forwarded
to BDSI within ***. Further, Meda agrees to take such reasonable actions,
provide such documentation, and allow such access as necessary to enable BDSI to
comply with Section 3.2 and Sections 4.1.1, 4.2, 4.3, 4.4, 4.5.2 and 4.6 of the
CDC Agreement and Arius to comply with Article VI of the Arius Two Agreement.

Section 6.04 ADE Reporting and Phase IV Surveillance.

(a) General. Meda shall, at its sole cost and expense, be responsible for all
post-Governmental Approval reporting of ADEs and Phase IV surveillance in the
Territory, if and as required by Competent Authorities, provided the Steering
Committee shall be provided a copy of any relevant proposed report to such
Competent Authorities in advance of its submission thereto in order to provide a
reasonable opportunity for the Steering Committee to review and provide comment
with respect thereto. All correspondence and communication will be in English.
The Party sending the communication will translate as necessary. Meda shall
provide BDSI with a copy of all safety-related correspondence with any Competent
Authority within *** of its receipt or submission.

(b) Safety Related Regulatory Documents. Following Governmental Approval, Meda
will be responsible for (i) maintaining the Company Core Safety Information
(“CCSI”), as included in the Company Core Data Sheet (“CCDS”), in the Territory
and (ii) maintaining the CCSI, as included in the Package Insert/Prescribing
Information (“PI”), in the United States. Meda will also be responsible for
submission of any safety-related supplemental applications for changes to any
package insert or other labeling. The Steering Committee shall be provided a
copy of any proposed safety-related supplemental application in order to provide
a reasonable opportunity for the Steering Committee to review and provide
comment in advance of its submission to the relevant Competent Authority.

(c) Safety Databases. Following Governmental Approval, Meda (or its agent) will
maintain a pharmacovigilance database for each Licensed Product in the Territory
(or each country thereof, if/as applicable). The database (s) will include all
ADE reports from spontaneous sources, scientific literature, and PMS reports
(serious) and SAE reports from clinical studies coming into the knowledge of
Meda Pharmacovigilance Department (or its agent). Spontaneous cases will include
reports received from both healthcare professionals and consumers. AE data will
be coded to the latest version of MedDRA. Report handling and classifying will
be carried out in accordance with Meda’s (or its agent’s) SOPs. All reasonable
assistance and access requested by either Party in responding to safety
inquiries will be provided upon request. Information in Meda’s safety databases
will be used by Meda to compile periodic safety update reports (PSURs) to the
FDA (providing a waiver of the requirement to submit postmarketing periodic
safety reports in the format described in the regulations has been granted) and
other Competent Authorities and prepare safety-related supplemental applications
for changes in the package insert(s)/labelling for Licensed Products.

 

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(d) Reporting of Adverse Drug Reactions (ADRs)

i. The Parties shall keep each other informed on all safety matters related to
the Licensed Products and on any information received from any source concerning
any ADR coming to either Party’s knowledge with regard to the Licensed Products.

ii. Each Party is responsible for fulfilling its reporting obligations to the
appropriate regulatory authorities with respect to the Licensed Products in
accordance with the applicable national laws and regulations of the different
countries.

iii. Independently of any national reporting requirements, the Parties hereto
shall in relation to the Licensed Products report to each other all SAEs from
clinical trials with a reasonable suspicion of causal relationship to the
administered study medication and all serious spontaneously reported suspected
ADRs within the first ***, but not later than *** after having come to a Party’s
attention including a case description and medical causality assessment on the
International Adverse Event Report Form (CIOMS form) in English. If required,
follow up will be carried out by the Market Authorization holder on all SARs
(listed and unlisted) and non-serious unlisted ADRs in the Territory according
to its own internal procedures, which shall be commercially reasonable and
consistent with industry standards. Following Governmental Approval, non-serious
listed ADRs in the Territory shall be followed up by Meda if there is a safety
concern, and pregnancy and in utero reports will be followed up by Meda at the
expected due date. Reasonable attempts shall be made by Meda to obtain the
required minimum information: identifiable patient, reporter, suspect drug, and
AE.

iv. Life-threatening or fatal SAEs originating from clinical trials in the
Territory with a reasonable suspicion of causal relationship to the Licensed
Products shall be reported by a Party to the other Party and, if and as required
thereby, by the appropriate Party (as determined by Applicable Law) to
appropriate Competent Authorities within ***, but not later than ***. In the
case of incomplete or insufficient data available, an initial report has to be
issued meeting the time frame, followed by reasonably prompt follow up
report(s). Any ADRs originated by either Party are to be reported on CIOMS form
as soon as reasonably possible, but no later than *** after first receipt. Meda
will report all other ADRs in tabular format (CIOMS line listings) in monthly
intervals.

v. In any case where a change in the risk-benefit-ratio of the Licensed Products
becomes evident or safety actions due to ADR seem to be necessary (e.g. change
of the label, product information, special information/warnings to the medical
profession, patients, authorities or Product Recall ), the Parties hereto will
inform each other without delay and use commercially reasonable efforts to

 

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harmonize further measures as appropriate. Such exchange of information is
realized through direct contacts between the responsible departments. Therefore,
both Parties undertake to inform each other on any change in the responsible
persons, the address, telephone and fax-numbers in due time. If specific safety
measures are to be taken with respect to any Licensed Products following
Governmental Approval thereof, Meda will ensure the implementation of such in
the Territory within mutually agreed timeframes or according to regulatory
obligations.

vi. Regulatory inquiries related to safety concerns for the Licensed Products
received by either Party will be promptly forwarded to the other Party. The
Parties shall work in good faith to develop a mutually agreeable response with
respect to any such inquiry in the Territory at least *** before the response is
required. The aforementioned information shall be addressed to:

In case of BDSI:

Director, Regulatory Affairs

BioDelivery Sciences International, Inc.

2501 Aerial Center Parkway, Suite 205

Morrisville, NC 27560, USA

Tel.: 919-653-5164

Fax: 919-653-5161

Email: dtwright@bdsinternational.com

In case of Meda:

MEDA GmbH & Co. KG

Corporate Pharmacovigilance

Benzstrasse 1

D-61352 Bad Homburg v.d.H., Germany

Tel.: +49-6172-888-2880

Fax: +49-6172-888-2661

Email: drug-safety@medapharma.de

(e) Literature for marketed products. Meda will have the primary responsibility
for reviewing the world-wide relevant scientific literature for any serious and
non-serious unlisted ADRs related to the Licensed Products in the Territory
according to Applicable Laws.

(f) Signal detection / Safety monitoring. Meda will perform signal detection
concerning the Licensed Products according to its own internal documented
practices (as outlined in SOPs/guidelines), which shall be commercially
reasonable and consistent with industry standards. Any conclusion raised from
the subsequent analysis revealing relevant safety concerns regarding the
Licensed Products will be communicated to BDSI in due time or immediately if the
conclusions affect the safety profile of the Licensed Products.

 

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(g) Periodic reports. Meda will be responsible for preparing the periodic
reports to be submitted to Competent Authorities in the Territory (Periodic
Safety Update Reports (“PSURs”), Annual Safety Reports for clinical trials) in
accordance with its own standard operating procedures (“SOPs”), which shall be
commercially reasonable and consistent with industry standards, and Applicable
Laws. BDSI will, on Meda’s reasonable request provide Meda with all data (e.g.
CIOMS line listings for SAEs originating from BDSI’s clinical trials) in its
possession which may reasonably be required for regulatory report compilation in
the Territory.

Section 6.05 Commercial Sale Testing and Reporting. If, after the date of First
Commercial Sale, a Competent Authority requires additional testing, modification
or communication related to approved indications of any Licensed Product, then
the Development Committee shall design any such testing, modification, or
communication. BDSI shall be responsible for any additional formulation or CMC
work as required, at Meda’s cost, while Meda shall be responsible for an
additional pre-clinical and clinical testing and any other items required by
such Competent Authority, at its cost.

Section 6.06 Assistance. Upon receipt of a written request, each Party shall
provide reasonable assistance to the other Party, in connection with such
Party’s obligations pursuant to this Article VI, subject to reimbursement of all
of its pre-approved out-of-pocket costs by the requesting Party.

Section 6.07 Compliance. Meda and BDSI shall comply with all Applicable Laws in
exercising their rights and performing their obligations under this Agreement,
including the provision of information by Meda and BDSI, to the extent in its
possession, to each other necessary for BDSI and Meda to comply with any
applicable reporting requirements. Each Party shall promptly notify the other
Party of any comments, responses or notices received from, or inspections by,
any applicable Competent Authorities, which relate to or may impact any Licensed
Product or the manufacture of the Licensed Product or the sales and marketing of
any Licensed Product, and shall promptly inform the other Party of any responses
to such comments, responses, notices or inspections and the resolution of any
issue raised by any Competent Authorities with respect to any Licensed Product.

ARTICLE VII

PATENTS AND TRADEMARKS

Section 7.01 Maintenance of Patents and Marks. BDSI shall maintain and protect
the Licensed Patent Rights in the Territory, including but not limited to the
use of Commercially Reasonable Efforts to defend any interference actions
initiated by or in any jurisdiction’s patent office with respect to the Licensed
Patent Rights and Marks in the Territory. Notwithstanding the foregoing,
(i) upon written request by BDSI, Meda shall provide such assistance as may be
necessary to enable BDSI to prosecute and obtain new patents related to any
Improvements other than Meda Improvements (“BDSI Improvements”), with the cost
and expense of such assistance

 

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to be borne by BDSI to the extent relating to Patent Rights outside the
Territory, and by Meda to the extent relating to Patent Rights in the Territory.
BDSI shall keep Meda advised by forwarding to Meda copies of all official
correspondence (including, but not limited to, applications, office actions,
responses, etc.) relating to the prosecution and maintenance of the Licensed
Patent Rights, and shall provide Meda an opportunity to comment on any proposed
responses, voluntary amendments, submissions, or other actions of any kind to be
made with respect to Licensed Patent Rights.

In the event that BDSI desires to abandon any Licensed Patent Rights and/or the
Marks in the Territory, BDSI shall provide reasonable prior written notice to
Meda of its intention to abandon. In the event that BDSI provides such notice to
Meda, then Meda shall have the right, but not the obligation, upon written
notice to BDSI, to assume responsibility for the preparation, filing,
prosecution or maintenance thereof, provided, however that such assumption shall
include Meda’s acknowledgement of its continued indemnification responsibilities
as described in Section 10.02. Upon Meda’s assumption of responsibility for the
preparation, filing, prosecution or maintenance of such Licensed Patent Rights
or Marks pursuant to the foregoing, Meda will thereafter use Commercially
Reasonable Efforts to prosecute and maintain the same at its own cost to the
extent that Meda desires to do so and Meda shall keep BDSI and CDC advised by
forwarding to them copies of all official correspondence (including, but not
limited to, applications, office actions, responses, etc.) relating to the
prosecution and maintenance of such Licensed Patent Rights, and shall provide
CDC and BDSI an opportunity to comment on any proposed responses, voluntary
amendments, submissions, or other actions of any kind to be made with respect to
such Licensed Patent Rights. In the event that Meda thereafter desires to
abandon any such Licensed Patent Rights and/or the Marks in the Territory, Meda
shall provide reasonable prior written notice to CDC and BDSI of its intention
to abandon. In the event that Meda provides such notice to CDC, then CDC shall
have the right, but not the obligation, upon written notice to Meda and BDSI, to
assume responsibility for the preparation, filing, prosecution or maintenance
thereof.

Section 7.02 Cooperation. Meda shall make available to BDSI or its authorized
attorneys, agents or representatives, its employees and, to the extent
reasonably practicable, its consultants or agents as necessary or appropriate to
enable BDSI to file, prosecute and maintain patent applications for the Licensed
Patent Rights in the Territory, and with respect to BDSI Improvements, anywhere
in the world, for a reasonable period of time sufficient for BDSI to obtain the
assistance it needs from such personnel. Meda shall be solely responsible for
all reasonable, documented costs and expenses incurred in making its attorneys,
agents, representatives or consultants available pursuant to the foregoing.

Section 7.03 Prosecution of Infringement. During the Term, each Party shall
(I) give prompt notice to the other Party of any Third Party act that
(X) concerns any product(s) (a) that contain fentanyl as the sole API *** and
(Y) may infringe the Licensed Patent Rights and/or the Marks in the Territory
and (II) cooperate with the other Party to terminate such infringement. If legal
proceedings become necessary with respect to any such act, Meda shall, in each
country in which Meda’s rights to the Licensed Patent Rights and Marks under
this Agreement are exclusive, have the first right to bring and control such
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potential or actual infringement, using counsel reasonably acceptable to BDSI,
and Meda shall solely bear the cost with respect thereto. If Meda is unable to
initiate or to prosecute such action solely in its own name or it is otherwise
Commercially Reasonable and reasonably advisable to obtain an effective remedy,
BDSI shall join such action and will execute, and cause its Affiliates to
execute, all documents necessary for Meda to initiate litigation to prosecute
and maintain such action. The above notwithstanding, Meda may only settle or
enter into any form of voluntary disposition of any such claim with BDSI’s prior
written consent, such consent not to be unreasonably withheld, provided that any
such settlement or voluntary disposition which (i) admits fault or wrongdoing,
or incurs liability, on the part of BDSI or (ii) adversely affects any of the
Licensed Patent Rights, Licensed Know-How, or Marks shall require BDSI’s prior
written consent, which BDSI may withhold in its sole discretion. BDSI shall
provide, at Meda’s expense, such assistance and cooperation to Meda as may be
necessary to successfully prosecute any action against such Third Party. Any
damages, monetary awards, or other amounts recovered or received in settlement
by Meda shall be applied proportionately first to defray the unreimbursed costs
and expenses (including reasonable attorneys’ fees) incurred by Meda and BDSI in
the action. If any balance remains, Meda shall be entitled to retain an amount
equal to *** percent (***%) of the portion of such balance with the remaining
balance being paid to BDSI by Meda.

Notwithstanding the foregoing, if Meda wishes BDSI to share the costs of
pursuing any such actual, potential, or alleged infringer of the Licensed Patent
Rights and/or Marks in the Territory, it shall provide written notice thereof to
BDSI within *** of Meda’s becoming aware of the actual, potential, or alleged
infringement. Upon written notice thereof, the Parties shall enter into good
faith discussions for a period not to exceed *** concerning the possibility and
terms of any such cost-sharing, provided that (i) neither Party shall have any
obligation to enter into such an arrangement and (ii) any such arrangement will
provide for the sharing of any damages, monetary awards, or other amounts
recovered or received in settlement of such matter in a manner, based on the
portion of such costs to be shared by BDSI, proportionately more favorable to
BDSI than the sharing of any such damages, monetary awards, or other amounts
recovered or received in settlement absent such cost-sharing, as contemplated
under the first paragraph of this Section 7.03.

In the event Meda fails to institute proceedings or undertake reasonable efforts
to terminate any such Third Party infringement of the Licensed Patent Rights
and/or Marks in the Territory within *** of the later of: (a) receiving
notification from BDSI of any such infringement or (b) sending notice to BDSI of
such action, or the Parties are unable to reach an agreement concerning the
sharing of the costs of pursuing any actual, potential, or alleged infringer
(and increased share of any proceeds from such action for the benefit of BDSI,
as contemplated by the preceding paragraph) within *** of Meda’s notice
indicating its desire to enter into such discussions, BDSI may take (but shall
have no obligation to take) such action as it deems appropriate, including the
filing of a lawsuit against such Third Party. In such event Meda will provide
such assistance and cooperation to BDSI as may be necessary, at BDSI’s cost and
expense, and BDSI shall be entitled to retain the entire balance of any recovery
or settlement from any such action.

 

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Section 7.04 Infringement Claimed by Third Parties.

(a) In the event a Third Party commences a judicial or administrative proceeding
against a Party and such proceeding, other than a proceeding to which
Section 7.01 applies, pertains to the manufacture, use, sale, marketing, or
import of a Licensed Product in the Territory (the “Third Party Claim”), or
threatens to commence such a Third Party Claim, the Party against whom such
proceeding is threatened or commenced shall give prompt notice to the other
Party. Meda shall, using counsel reasonably acceptable to BDSI, at Meda’s own
cost and expense, defend any and all such Third Party Claims or proceedings, and
BDSI shall, at Meda’s cost and expense, provide such assistance and cooperation
to Meda as may be necessary to successfully defend any such Third Party Claims.
The above notwithstanding, Meda may only settle or enter into any form of
voluntary disposition of any such claim with BDSI’s prior written consent, such
consent not to be unreasonably withheld, provided that any such settlement or
voluntary disposition which (i) admits fault or wrongdoing, or incurs liability,
on the part of BDSI or (ii) adversely affects any of the Licensed Patent Rights,
Licensed Know-How, or Marks shall require BDSI’s prior written consent, which
BDSI may withhold in its sole discretion. The above notwithstanding, if Meda
elects not to defend a Third Party Claim that is not based upon, or does not
result from, activities of BDSI or a Third Party under an agreement between BDSI
and such Third Party, or the grant of rights from BDSI to such Third Party, and
involves a material adverse risk to either Party or Net Sales notwithstanding
the survivability provisions of Section 13.06(e), the License may be terminated
or rendered nonexclusive by BDSI to the extent Arius’ License (as defined in
Section 3.02 of the Arius Two Agreement) is terminated or rendered nonexclusive
by Arius Two pursuant to Section 7.04 of the Arius Two Agreement, upon notice to
Meda within *** of Meda’s election not to defend such Third Party Claim, and, in
any event and independent of (i) any action or lack thereof by Arius Two under
the Arius Two Agreement and (ii) any termination or rendering nonexclusive of
the License by BDSI pursuant to the foregoing, BDSI shall have the right to
control the defense of such claims at BDSI’s cost and expense using counsel of
its own choice.

(b) If it becomes necessary (as reasonably determined by either Party based on
the advice of patent counsel and good faith discussions between the Parties) to
obtain a license under a Patent Right Controlled by a Third Party in order to
permit Meda, its Affiliates, or its Sublicensees to exercise the rights granted
under this Agreement because such Patent Right might otherwise be infringed by
the manufacture, use, sale, offer for sale or importation of a Licensed Product
in a given country within the Territory (or Meda, its Affiliates, or its
Sublicensee are required to make any payments to settle, or satisfy any judgment
in, any such infringement proceeding, provided (a) each Party is provided a
reasonable opportunity to review and discuss any proposed settlement, voluntary
disposition, or license and (b) any such amount paid under any such settlement,
voluntary disposition, or license is Commercially Reasonable, then the amount of
the Royalties due hereunder for such Licensed Product in such country in any
calendar quarter shall be reduced by *** percent (***%) of the payment paid by
Meda or its Affiliates or Sublicensees to such Third Party (or to BDSI as
reimbursement for payments made or owed by BDSI to such a Third Party, if BDSI
is the direct licensee of such Third Party as contemplated below) in respect of
such country in such quarter, provided that, notwithstanding

 

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the foregoing, the Royalties payable to BDSI under this Agreement shall not in
any event be reduced to an amount less than the greater of (Y) *** percent
(***%) of the Royalties that would otherwise have been payable to BDSI absent
the application of this Section 7.04(b) or (Z) *** percent (***%) of Net Sales.
Notwithstanding anything to the contrary in this Agreement, if and as requested
by BDSI, Meda shall enable, and shall cause its Affiliates and Sublicensees to
enable, BDSI (and not Meda or any Affiliate thereof or Sublicensee) to be the
Party to enter into a license with such Third Party for such Patent Right and,
in such an event, Meda shall be responsible for and promptly pay, in addition to
the consideration otherwise due BDSI under this Agreement, any royalties,
license fees, milestone fees, maintenance fees, and similar amounts due under
such Third Party license agreement to the extent related to or triggered by the
exercise of the rights granted hereunder by Meda, its Affiliates, or
Sublicensees, subject to the adjustment of payments otherwise due to BDSI as
described above.

Section 7.05 Payment of Costs and Expenses. Upon its receipt of a reasonably
detailed invoice setting forth BDSI’s reasonable, documented costs and expenses
incurred pursuant to any provision of this Article VII relating to the
Territory, for which Meda shall be liable, Meda shall pay such costs and
expenses within ***.

ARTICLE VIII

CONFIDENTIALITY

Section 8.01 Confidentiality. During the Term and for a period of ***
thereafter, each Party shall maintain all Confidential Information of the other
Party as confidential and shall not disclose any such Confidential Information
to any Third Party or use any such Confidential Information for any purpose,
except (a) as expressly authorized by this Agreement, (b) as required by law,
rule, regulation or court order (provided that the disclosing Party shall first
notify the other Party, shall use Commercially Reasonable Efforts to obtain
confidential treatment of any such information required to be disclosed, and
shall disclose only the minimum information required to be disclosed in order to
comply), or (c) to its Affiliates, employees, agents, consultants and other
representatives to accomplish the purposes of this Agreement or, in the case of
BDSI, to (i) satisfy its obligations under the CDC Agreement and Arius’
obligations under the Arius Two Agreement and (ii) develop, market, and/or sell
any BEMA-based products, so long as such persons are under an obligation of
confidentiality no less stringent than as set forth herein. Each Party may use
such Confidential Information only to the extent required to accomplish the
purposes of this Agreement. Each Party shall use at least the same standard of
care as it uses to protect its own Confidential Information (but not less than a
reasonable standard of care) to ensure that its Affiliates, employees, agents,
consultants and other representatives do not disclose or make any unauthorized
use of the other Party’s Confidential Information. Each Party shall promptly
notify the other Party upon discovery of any unauthorized use or disclosure of
the other Party’s Confidential Information.

Section 8.02 Disclosure of Agreement. Neither Party shall release to any Third
Party or publish in any way any non-public information with respect to the terms
of this Agreement

 

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without the prior written consent of the other Party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing a Party may disclose the
terms of this Agreement to potential investors, lenders, investment bankers and
other financial institutions of its choice solely for purposes of financing the
business operations of such Party, or, in the case of BDSI, to any prospective
or actual sublicensee, licensor, manufacturer, marketing or other corporate
partner, acquirer, or acquisition target; provided such Party only discloses
such information under conditions of confidentiality on terms substantially
similar to those contained in this Article VIII. Nothing contained in this
paragraph shall prohibit either Party from filing this Agreement as required by
the rules and regulations of the Securities and Exchange Commission, national
securities exchanges (including those located in countries outside of the United
States) or the Nasdaq Stock Market; provided the disclosing Party discloses only
the minimum information required to be disclosed in order to comply with such
requirements, including requesting confidential treatment of this Agreement
(after consultation with the other Party) and filing this Agreement in redacted
form. The Parties agree to cooperate with respect to requests for confidential
treatment to be submitted to the Securities and Exchange Commission or any
similar foreign authority with respect to certain portions of this Agreement and
any redactions thereof for such purposes.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES

Section 9.01 Corporate Power. As of the Effective Date, each Party hereby
represents and warrants that such Party is duly organized and validly existing
under the laws of the jurisdiction of its organization and has full power and
authority to enter into this Agreement and the transactions contemplated hereby
and to carry out the provisions hereof.

Section 9.02 Due Authorization. As of the Effective Date, each Party hereby
represents and warrants that such Party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.

Section 9.03 Binding Obligation. As of the Effective Date, each Party hereby
represents and warrants that this Agreement is a legal and valid obligation
binding upon it and is enforceable in accordance with its terms, except that the
enforcement of the rights and remedies created hereby is subject to bankruptcy,
insolvency, reorganization and similar laws of general application affecting the
rights and remedies of creditors and that the availability of the remedy of
specific performance or of injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought. As of the Effective
Date, each Party represents and warrants that the execution, delivery and
performance of this Agreement by such Party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a party
or by which it may be bound, nor, subject to compliance with Article IA hereof,
violate any law or regulation of any court, governmental body or administrative
or other agency having authority over it, including, with respect to Meda, any
competition, antitrust, or similar laws, statutes, regulations, or directives in
the Territory.

 

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Section 9.04 Legal Proceedings. As of the Effective Date, each Party hereby
represents and warrants to the other Party that there is no action, suit or
proceeding pending against or affecting, or, to the knowledge of either Party,
threatened against or affecting that Party, or any of its assets, before any
court or arbitrator or any governmental body, agency or official that would, if
decided against either Party, have a material adverse impact on the business,
properties, assets, liabilities or financial condition of that Party (that are
not already reflected in that Party’s respective financial statements as filed
with the Securities and Exchange Commission (or foreign equivalent thereof) or
otherwise made public or provided to the other Party) and which would have a
material adverse effect on that Party’s ability to consummate the transactions
contemplated by this Agreement.

Section 9.05 Limitation on Warranties. Except as expressly set forth in this
Agreement, nothing herein shall be construed as a representation or warranty by
BDSI to Meda that the Licensed Technology is not infringed by any Third Party,
or that the practice of such rights does not infringe any intellectual property
rights of any Third Party. Neither Party makes any warranties, express or
implied, concerning the success of the Development Program or the commercial
utility, merchantability, or fitness for a particular purpose of any Licensed
Product.

Section 9.06 Limitation of Liability. EXCEPT WITH RESPECT TO CLAIMS OF PATENT
INFRINGEMENT, BREACHES BY MEDA OF SECTIONS 3.02 OR 3.04, BREACHES BY EITHER
PARTY OF ARTICLE VIII, AND THIRD PARTY DAMAGES COVERED BY THE INDEMNIFICATION
PROVIDED UNDER ARTICLE X, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE
OTHER PARTY ANY SPECIAL, EXEMPLARY, CONSEQUENTIAL, INDIRECT, OR PUNITIVE DAMAGES
(AS SUCH TERMS ARE DEFINED IN BLACK’S LAW DICTIONARY, SIXTH EDITION) IN
CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER.

Section 9.07 Sufficient Rights. BDSI represents and warrants that, subject to
Section 3.05 of the Arius Two Agreement, it has and shall maintain during the
Term of this Agreement (i) an exclusive license to or ownership of, as
applicable, the Licensed Technology, the Marks and any other intellectual
property rights which are the subject of Meda’s licenses under this Agreement,
(ii) the right to grant the licenses described in this Agreement, and that the
grant of such licenses by BDSI will not conflict with the terms of any existing
agreement of BDSI concerning the Licensed Technology or the Marks, and (iii) the
Control of all such rights and licenses.

Section 9.08 No Infringement. BDSI represents and warrants that, to BDSI’s
knowledge as of the Effective Date, BDSI is not aware of any Third Party
intellectual property rights which would be infringed by the manufacture, use,
or sale of the Fentanyl Product in the Territory.

Section 9.09 Intellectual Property. BDSI represents and warrants that (i) the
licenses granted to Meda hereunder comprise, to BDSI’s knowledge as of the
Effective Date, all intellectual property rights reasonably necessary for Meda
to manufacture, use, and sell the Fentanyl Product and (ii) Arius Two and Arius
are the only Affiliates of Parent with any rights to or ownership of the
Licensed Technology or the Marks, and there are no Affiliates of any of the

 

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foregoing (other than Arius Two, Arius, and Parent themselves) with any rights
to or ownership of any Licensed Technology or Marks. BDSI covenants that it will
not, without Meda’s prior written consent, amend any agreement between any of
Parent, Arius, and/or Arius Two in any manner which would materially adversely
affect Meda’s rights hereunder. Further BDSI represents and warrants that the
third party licenses mentioned in Section 3.02(a) of that certain License
Agreement, dated May 27, 2004, as amended July 14, 2005 and August 2, 2006, and
terminated September 5, 2007, between QLT USA, Inc. and Arius concerning rights
to BEMA technology have expired or been terminated and do not in any way impair
the rights granted to Meda hereunder.

Section 9.10 Documents. BDSI represents and warrants that, to its knowledge, all
documents provided to Meda by or on behalf of BDSI prior to the Effective Date
are materially true and correct and no document provided to Meda by or on behalf
of BDSI, contains any untrue statement of a relevant material fact or omits to
state a relevant material fact necessary not to make the statements contained in
the document materially misleading.

Section 9.11 Survival Upon Termination of CDC and Arius Two Agreements. BDSI
shall use Commercially Reasonable Efforts to (i) materially comply with all of
its obligations under the CDC Agreement, QLT Agreements, Arius Two Agreement,
and LTS Pharma Agreement and to (ii) avoid termination of any such agreement as
a result of any breach thereof by BDSI, provided that such covenant shall not be
construed to require BDSI to (i) pay any amounts to CDC, QLT, Arius Two, or LTS
in excess of the amounts properly due such parties under such agreements or
(ii) agree to become subject to any obligations in excess of those currently
provided under such agreements. BDSI represents and warrants that, subject to
Section 13.06(g), any licenses granted to Meda under this Agreement will, as
described in the (1) that certain Sublicensing Consent and Amendment, dated as
of the date hereof, between BDSI, CDC, and Meda (the “CDC Consent”) and
(2) Arius Two Consent, respectively, executed by (i) CDC, Meda, and BDSI and
(ii) Arius Two, Arius, CDC, and Meda, respectively, prior to or in conjunction
with the execution of this Agreement, (Y) survive any (a) exclusive licensing
and assignment to CDC, upon termination of the CDC Agreement by CDC pursuant to
Section 10.2, 10.3, or 10.4 thereof for which BDSI does not exercise its
continuation rights under Section 10.7 of the CDC Agreement, of BDSI’s rights
under the Licensed Technology, Marks, and other intellectual property rights
which are the subject of Meda’s licenses under this Agreement or (b) termination
of Arius’ rights under the Arius Two Agreement (or, if applicable, any rights
granted to CDC by Arius Two pursuant to a separate agreement executed pursuant
to Section 2.04(d) of the Arius Two Agreement) with respect to the Licensed
Technology, Marks, and other intellectual property rights which are the subject
of Meda’s licenses under this Agreement and (Z) be assigned to CDC or Arius Two,
as appropriate, subject to Meda’s continued compliance with the terms of this
Agreement, provided that (i) such termination of the CDC Agreement or Arius Two
Agreement does not result from and is not related to any breach of this
Agreement by Meda and (ii) Meda, as of the date the CDC Agreement and/or Arius
Two Agreement, as applicable, is terminated, is not, and has not previously
been, in material breach of this Agreement.

 

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Section 9.12 Debarment. Each Party represents and warrants to the other that it
has never been and is not currently debarred by the FDA pursuant to 21 U.S.C.
§335(a) or (b) (“Debarred Entity”), and each Party agrees that it will not
obtain advice or assistance from any individual debarred pursuant to 21 U.S.C.
§335(a) or (b). Each Party represents and warrants to the other that it has no
knowledge of any circumstances that may affect the accuracy of the foregoing
warranties and representations, including, but not limited to, FDA
investigations of, or debarment proceedings against, it or any person or entity
with which it is associated or that provides services to such Party, and such
Party will immediately notify the other in writing if it becomes aware of any
such circumstances during the term of this Agreement.

Section 9.13 CDC Acknowledgement. Meda hereby expressly acknowledges to CDC
that, to the extent (i) provided in this Agreement or the CDC Consent and
(ii) provisions of the CDC Agreement, as modified by the CDC Consent, expressly
apply to sublicensees of BDSI thereunder, this Agreement shall be subject to the
rights of CDC under the CDC Agreement.

ARTICLE X

INDEMNIFICATION AND INSURANCE

Section 10.01 Meda Indemnified by BDSI. BDSI shall indemnify and hold Meda, its
Affiliates, and their respective employees, directors and officers, harmless
from and against any liabilities or obligations, damages, losses, claims,
encumbrances, costs or expenses (including attorneys’ fees) (any or all of the
foregoing herein referred to as “Loss”) insofar as a Loss or actions in respect
thereof occurs subsequent to the Effective Date arises out of: (a) any
misrepresentation or breach of any of the warranties, covenants or agreements
made by BDSI in this Agreement; or (b) BDSI’s conduct of any development
activities in respect of any Licensed Product; or (c) BDSI’s negligence or
intentional misconduct. BDSI’s obligations to indemnify Meda hereunder shall not
apply to the extent any such Loss arises out of or is based on any (a) inactions
or actions of Meda or its Affiliates for which Meda is obligated to indemnify
BDSI under Section 10.02 or (b) negligence or intentional misconduct of Meda or
its Affiliates.

Section 10.02 BDSI Indemnified by Meda. Meda shall indemnify and hold BDSI, its
Affiliates, Arius Two and CDC, and all of the employees, directors and officers
of any of the foregoing, harmless from and against any Loss insofar as such Loss
or actions in respect thereof occurs subsequent to the Effective Date and arises
out of or is based upon (a) any misrepresentation or breach of any of the
warranties, covenants or agreements made by Meda in this Agreement; (b) Meda’s,
its Affiliates’, or their Sublicensees’ development, use, marketing,
manufacture, sale, distribution, promotion, handling, or storage of any Licensed
Product or any Demonstration Samples; (c) any product liability claim that is
brought by any Third Party due to the use of any Licensed Product in the
Territory; or, subject to the terms of Section 7.04(b), (d) Meda’s prosecution
or defense of a Third Party infringement claim pursuant to Article VII. Meda’s
obligations to indemnify BDSI hereunder shall not apply to the extent any such
Loss arises out of or is based on the negligence or intentional misconduct of
BDSI, and Meda’s obligations to indemnify any licensor of BDSI or its Affiliates
shall not apply with respect to such licensor to the extent any such Loss arises
out of or is based on the negligence or intentional misconduct of such licensor.

 

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Section 10.03 Prompt Notice Required. No claim for indemnification hereunder
shall be valid unless notice of the matter which may give rise to such claim is
given in writing by the indemnitee (the “Indemnitee”) to the persons against
whom indemnification may be sought (the “Indemnitor”) as soon as reasonably
practicable after such Indemnitee becomes aware of such claim, provided that the
failure to notify the Indemnitor shall not relieve the Indemnitor from any
liability except to the extent that such failure to notify actually adversely
impacts the Indemnitor’s ability to defend such claim. Such notice shall state
that the Indemnitor is required to indemnify the Indemnitee for a Loss and shall
specify the amount of Loss and relevant details thereof. The Indemnitor shall
notify Indemnitee no later than 60 days from such notice of its intention to
assume the defense of any such claim. In the event the Indemnitor fails to give
such notice within that time the Indemnitor shall no longer be entitled to
assume such defense.

Section 10.04 Defense and Settlement. The Indemnitor shall at its expense, have
the right, subject to the limitations of this Section 10.04, to settle and
defend, through counsel reasonably satisfactory to the Indemnitee, any action
which may be brought in connection with all matters for which indemnification is
available. In such event the Indemnitee of the Loss in question and any
successor thereto shall permit the Indemnitor full and free access to its books
and records and otherwise fully cooperate with the Indemnitor in connection with
such action; provided that this Indemnitee shall have the right fully to
participate in such defense at its own expense. The defense by the Indemnitor of
any such actions shall not be deemed a waiver by the Indemnitor of its right to
assert a claim with respect to the responsibility of the Indemnitor with respect
to the Loss in question. The Indemnitor shall not settle or compromise any claim
against the Indemnitee without the prior written consent of the Indemnitee,
provided that such consent shall not be unreasonably withheld. No Indemnitee
shall pay or voluntarily permit the determination of any liability which is
subject to any such action while the Indemnitor is negotiating the settlement
thereof or contesting the matter, except with the prior written consent of the
Indemnitor, which consent shall not be unreasonably withheld. If the Indemnitor
fails to give Indemnitee notice of its intention to defend any such action as
provided herein, the Indemnitee involved shall have the right to assume the
defense thereof with counsel of its choice, at the Indemnitor’s expense, and
defend, settle or otherwise dispose of such action. With respect to any such
action which the Indemnitor shall fail to promptly defend, the Indemnitor shall
not thereafter question the liability of the Indemnitor hereunder to the
Indemnitee for any Loss (including counsel fees and other expenses of defense).

Section 10.05 Insurance. Each Party shall, at its sole cost and expense, obtain
and keep in force comprehensive general liability insurance, including any
applicable self-insurance coverage, with bodily injury, death and property
damage including contractual liability and product liability coverage, of the
types and in amounts which are (i) reasonable and customary in the
pharmaceutical industry for companies of comparable size and activities and
(ii) reasonably sufficient to enable Arius to comply with the terms of the Arius
Two Agreement and BDSI to comply with the terms of the CDC Agreement, ***. Each
Party will provide written proof of the existence of such insurance to the other
Party upon request. The minimum amounts of insurance coverage required shall not
be construed to create or limit a Party’s liability with respect to its
indemnification under this Agreement.

 

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ARTICLE XI

COVENANTS

Section 11.01 Access to Books and Records. Each Party covenants and agrees that
it shall permit the other Party (or any Third Party granted such rights under
this Agreement) to exercise such inspection rights as set forth in this
Agreement.

Section 11.02 Marketing Expenses. Meda covenants and agrees that, as between
Meda and BDSI and except as may be provided in the co-promotion agreement
referred to in Section 5.02, Meda shall be solely responsible for the cost and
implementation of all marketing, sales, promotional and related activities
concerning the marketing, sale and promotion of the Licensed Products in the
Territory.

Section 11.03 Affiliates. Each of Meda and BDSI shall cause its respective
Affiliates to comply with all obligations of such Affiliates under this
Agreement. Each Party shall be responsible and liable for such Party’s
Affiliates performance of such Party’s obligations hereunder and compliance with
the terms of this Agreement, and any breach of the terms of this Agreement by
any Affiliate of a particular Party shall be deemed a breach of this Agreement
by such Party.

Section 11.04 Compliance. Meda covenants and agrees that it shall comply with
all Applicable Laws affecting the use, possession, distribution, advertising and
all forms of promotion in connection with the sale and distribution of the
Licensed Products and the Demonstration Samples in the Territory.
Notwithstanding anything to the contrary, any failure of Meda, any Affiliate
thereof, or any Sublicensee to adhere to any Applicable Laws in any country or
supranational jurisdiction of the Territory concerning the handling of narcotics
which materially adversely affects the future manufacture, use, shipment,
handling, sale, marketing, or distribution of fentanyl (or any product
incorporating fentanyl) shall be deemed a material breach of this Agreement
entitling BDSI, subject to prior notice and, with respect solely to the first
*** such failures, a right to cure in the same manner as provided in
Section 13.02, to terminate this Agreement immediately pursuant to Section 13.03
in respect of such country or supranational jurisdiction.

Section 11.05 Reports. Meda covenants and agrees that, except as otherwise
specified in this Agreement, Meda shall, following receipt of a Governmental
Approval, have the obligation and responsibility for and shall make any and all
necessary reports to each Competent Authority with respect to the Licensed
Product subject to such Governmental Approval and shall provide BDSI with a
complete copy of any such report simultaneously with its submission of the
report to each Competent Authority; if any such report is submitted to the
appropriate Competent Authority in a language other than English, Meda shall
also provide BDSI with a summary of the material matters addressed in such
report in English. Meda covenants and agrees that, except as otherwise specified
in this Agreement, Meda shall, if relevant, have the obligation and

 

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responsibility for and shall make any and all necessary reports in respect of
the safe and lawful handling of the Licensed Products as a narcotic substance to
each Competent Authority, and shall provide BDSI with a complete copy of any
such report simultaneously with the submission of the report to each Competent
Authority; if any such report is submitted to the appropriate Competent
Authority in a language other than English, Meda shall also provide BDSI with a
detailed summary of the material matters addressed in such report in English.

Section 11.06 Further Actions. Upon the terms and subject to the conditions
hereof, each of the Parties hereto shall use its Commercially Reasonable Efforts
to (a) take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary, proper or advisable under Applicable Law or
otherwise to consummate and make effective the transactions contemplated by this
Agreement, (b) obtain from Competent Authorities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made by the Parties in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated by this
Agreement, and (c) make all necessary filings, and thereafter make any other
required submissions, with respect to this transaction under (i) the United
States’ Securities Exchange Act of 1934, as amended and the United States’
Securities Act of 1933, as amended, and the rules and regulations thereunder and
any other applicable securities laws and (ii) any other Applicable Law. The
Parties hereto shall cooperate with each other in connection with the making of
all such filings, including by providing copies of all such documents to the
other Party’s counsel (subject to appropriate confidentiality restrictions)
prior to filing and, if requested, by accepting all reasonable additions,
deletions or changes suggested in connection therewith.

Section 11.07 Protection of the Marks. Meda covenants and agrees that neither it
nor its Affiliates shall publish, employ, or cooperate in the publication of any
misleading or deceptive advertising material with regard to the Parties, the
Licensed Products, the Licensed Technology, the Marks, or any trademarks of
BDSI.

Section 11.08 Equitable Relief. The Parties understand and agree that because of
the difficulty of measuring economic losses to the non-breaching Party as a
result of a breach of the covenants set forth in Article VIII or in this Article
XI, and because of the immediate and irreparable damage that may be caused to
the non-breaching Party for which monetary damages would not be a sufficient
remedy, the Parties agree that the non-breaching Party will be entitled to seek
specific performance, temporary and permanent injunctive relief, and such other
equitable remedies to which it may then be entitled against the breaching Party.
This Section 11.08 shall not limit any other legal or equitable remedies that
the non-breaching Party may have against the breaching Party for violation of
the covenants set forth in Article VIII or in this Article XI. The Parties agree
that the non-breaching Party shall have the right to seek relief for any
violation or threatened violation of Article VIII or this Article XI by the
breaching Party from any court of competent jurisdiction in any jurisdiction
authorized to grant the relief necessary to prohibit the violation or threatened
violation of Article VIII or this Article XI. This Section 11.08 shall apply
with equal force to the breaching Party’s Affiliates.

 

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Section 11.09 Bundled Products. Meda covenants and agrees that it shall not, and
shall not permit its Affiliates or Sublicensees, to market or sell any Licensed
Product as part of or in connection with a Bundled Product except as may be
approved in writing and in advance by BDSI.

Section 11.10 Competing Products. During the Term, neither Meda, BDSI, nor any
Affiliate of either of the foregoing shall, directly or indirectly, enable or
contract with any Third Party to develop, manufacture, market, sell or
distribute any Competing Product for therapeutic use in the Territory or itself
develop, manufacture, market, sell or distribute any Competing Product for
therapeutic use in the Territory, provided that, the foregoing shall not be
construed to limit BDSI’s rights to develop, manufacture, use, or sell in the
Territory any products which are intended for commercial sale outside the
Territory.

Section 11.11 No Encumbrances. Except to the extent Meda may assign this
Agreement under Section 14.01, Meda shall not, without the prior written consent
of BDSI and CDC, such consents not to be unreasonably withheld, sell, license
(except as permitted by Section 3.02(a), encumber or otherwise transfer to a
third party any rights in Governmental Approvals, the Clinical Documentation,
the Results, the Marketing Authorizations, the Trade Name(s), or any
intellectual property rights associated therewith (including copyright and
trademark).

ARTICLE XII

PRODUCT RECALL

Section 12.01 Product Recall Determination. If at any time or from time to time,
a Competent Authority requests Meda to conduct a Product Recall of any Licensed
Product in the Territory or if a voluntary Product Recall of any Licensed
Product in the Territory is contemplated by Meda, Meda shall immediately notify
BDSI in writing, and except as otherwise set forth in this Article XII, Meda
will, at its sole cost and expense, conduct such Product Recall in as
reasonable, prudent, and expeditious a manner as possible to preserve the
goodwill and reputation of the Licensed Products and the goodwill and reputation
of the Parties, provided that:

(a) Meda shall not carry out a voluntary Product Recall in the Territory with
respect to such Licensed Product without the prior written approval of BDSI,
such approval not to be unreasonably withheld (for the avoidance of doubt, any
Product Recall that is reasonably deemed necessary in order to avoid serious
personal injury shall not be considered as a voluntary Product Recall, provided
that Meda shall provide BDSI the opportunity to advise and comment with respect
to any such Product Recall prior to its execution); and

(b) the Parties shall reasonably cooperate, at Meda’s expense, in the conduct of
any Product Recall for such Licensed Product in the Territory.

Notwithstanding the foregoing, Meda may, without BDSI’s prior consent,
immediately effect any Product Recall (A) resulting from any death or
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associated with any Licensed Product or (B) required to comply with any
regulatory or legal requirements, guidelines, directives, orders, or injunctions
with respect to any Licensed Product. In the event Meda does not undertake such
a Product Recall in a reasonable period of time, BDSI shall be entitled to do so
without Meda’s prior written consent.

Section 12.02 Product Recall Management. Meda shall have the right to control
and/or conduct any Product Recall in the Territory, subject to Section 12.01.
The Product Recall shall be the sole responsibility of Meda or its Affiliates
and shall be carried out by Meda or its Affiliates in as reasonable, prudent,
and expeditious a manner as possible to preserve the goodwill and reputation of
the Licensed Products and the goodwill and reputation of the Parties, provided
that BDSI shall share any such Product Recall responsibilities to the extent
assumed by BDSI pursuant to the Supply Agreement. Meda shall maintain records of
all sales and distribution of Licensed Products and customers in the Territory
sufficient to reasonably adequately administer a Product Recall, for the period
required by Applicable Law, and make such records available to BDSI or any
designee thereof immediately upon request.

Section 12.03 Product Recall Costs. Notwithstanding Section 12.02, except as may
be provided in the Supply Agreement, Meda shall bear all costs and expenses
related to the conduct of any Product Recall in the Territory.

Section 12.04 Notification of Threatened Action. Throughout the duration of this
Agreement and with respect to all Licensed Products the Parties shall
immediately notify each other of any information a Party receives regarding any
threatened or pending action, inspection or communication by or from a concerned
Competent Authority which may affect the safety or efficacy claims of the
Licensed Products or the continued marketing of the Licensed Products. Upon
receipt of such information during the duration of this Agreement, Meda shall
not take any action whatsoever without BDSI’s prior review and approval, such
approval shall not be unreasonably withheld.

ARTICLE XIII

TERM AND TERMINATION

Section 13.01 Term. This Agreement shall commence as of the Effective Date and
shall only expire on the termination of this Agreement.

Section 13.02 Termination by Either Party for Cause. Either Party may terminate
this Agreement prior to the expiration of the Term upon the occurrence of any of
the following:

(a) Upon or after the cessation of operations of the other Party or the
bankruptcy, insolvency, dissolution or winding up of the other Party (other than
dissolution or winding up for the purposes or reconstruction or amalgamation);
or

(b) Upon or after the breach of any material provision of this Agreement by the
other Party (other than a failure to pay by Meda, which is addressed in
Section 13.03(d) below), if the breaching Party has not cured such breach, if
capable of being cured within such

 

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time period, within *** after written notice thereof by the non-breaching Party,
provided that, notwithstanding the foregoing, BDSI shall be entitled to
terminate this Agreement pursuant to Section 13.03 without providing the
aforementioned opportunity to cure.

Section 13.03 Termination by BDSI. BDSI may, by written notice to Meda,
terminate this Agreement upon the occurrence of any of the following:

(a) Upon the failure by Meda to pay the license fee pursuant to Section 3.01.

(b) On a country-by-country basis upon the loss, revocation, suspension,
termination, or expiration of Meda’s license to sell narcotics in any country in
the Territory, if Meda fails to take the actions necessary to reinstate such
license within *** of such loss, revocation, suspension, termination, or
expiration, or any material breach of Section 11.04 which is not remedied within
*** thereof.

(c) Upon or after the breach of any material provision of the Supply Agreement
by Meda (other than a failure to pay by Meda, which is addressed in
Section 13.03(d) below), if Meda has not cured such breach, if capable of being
cured within such time period, within *** after written notice thereof by the
non-breaching Party, provided that, notwithstanding the foregoing, BDSI shall be
entitled to terminate this Agreement pursuant to Section 13.03(d) without
providing the aforementioned opportunity to cure.

(d) Upon the failure by Meda to pay any amount in excess of US$*** overdue under
this Agreement or the Supply Agreement within *** from receipt of a second
written notice (as given pursuant to Section 14.06 hereof) thereof from BDSI
(with respect to products supplied under the Supply Agreement ***, the invoice
accompanying such products or otherwise provided in conjunction with their
shipment shall not be deemed the first “notice” for purposes of this paragraph),
with a copy of such second notice (as given pursuant to Section 14.06 hereof) to
Meda´s CEO at the address referenced in Section 14.06. If any payment, or
portion thereof, due under this Agreement is the subject of a reasonable good
faith dispute (a “Disputed Amount”) between Meda and BDSI, BDSI shall not be
entitled to terminate this Agreement with respect to any failure by Meda to pay
the Disputed Amount until such dispute has been resolved by the Parties
(including, if necessary, pursuant to any arbitration under Section 14.03).

(e) Upon the occurrence of any material misrepresentation or omission in any
Royalty Statement, which misrepresentation or omission is caused by Meda’s
willful misconduct, gross negligence, or bad faith.

Section 13.03A Termination by Meda. Meda shall have the right, following the HSR
Date and in its sole discretion, to terminate this Agreement upon *** written
notice.

Section 13.04 Termination for Failure to Satisfy Minimum Royalties. In the event
that Meda does not achieve Net Sales sufficient to generate total, aggregate Net
Unit Royalties (or, if applicable, amounts otherwise payable under Section 4.01)
that equal or exceed the minimum amounts set forth in Section 4.04 for a Sales
Year, then the parties will use commercially reasonable efforts to renegotiate
the minimum royalties which, if unsuccessful, after *** of good

 

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faith negotiations, Meda may, in its sole discretion, elect to terminate this
Agreement by providing BDSI written notice of its intent to terminate. Such
termination will be effective at the end of the Sales Year during which such
notice is provided if not more than *** after the Sales Year. Termination under
this Section 13.04 will not relieve Meda of its obligations under Section 4.04
for any Sales Year, including the Sales Year immediately preceding the effective
date of termination.

Section 13.05 Remedies. All of the non-breaching Party’s remedies with respect
to a breach of this Agreement shall be cumulative, and the exercise of one
remedy under this Agreement by the non-defaulting Party shall not be deemed to
be an election of remedies. These remedies shall include the non-breaching
Party’s right to sue for damages for such breach without terminating this
Agreement.

Section 13.06 Effect of Termination.

(a) Upon any termination of this Agreement by either party, Meda shall reimburse
BDSI for Development Costs reasonably incurred or committed to by BDSI in
accordance with the Development Program prior to the effective date of such
termination and for which Meda is otherwise obligated to reimburse BDSI pursuant
to this Agreement, provided that (1) BDSI shall use Commercially Reasonable
Efforts to minimize such costs and expenses between the termination notice date
and the date of termination and (2) Meda shall not be required to reimburse any
such costs incurred by BDSI to the extent they represent the cost of performing
specific activities which activities themselves constitute a breach of this
Agreement.

(b) Upon any termination of this Agreement by either Party under Section 13.02
or 13.03, or any termination of this Agreement by Meda under Section 13.03A or
13.04 with respect to a particular Licensed Product, (i) Meda’s rights under the
Licensed Patent Rights, Marks, and the Licensed Technology (or, with respect to
a termination by Meda under Section 13.03A with respect to a particular Licensed
Product, Meda’s rights with respect to such Licensed Product) shall terminate
and (ii) Meda shall use its commercially reasonable efforts, if and as requested
by BDSI, to have assigned to BDSI any manufacturing or other contracts entered
into by Meda concerning the development, manufacture, marketing, distribution,
or sale of the Licensed Product(s) subject to such termination.

(c) Upon any termination of this Agreement, Meda hereby grants and assigns, to
the extent not previously assigned to BDSI, to BDSI all right, title and
interest in, to or under all Governmental Approvals, the Clinical Documentation,
the Results, the Marketing Authorizations, the Trade Name(s), all intellectual
property rights associated therewith (including copyright and trademark), and
all other data, reports, studies, analysis or similar items created or obtained
by or on behalf of Meda, or previously assigned to Meda by BDSI as contemplated
herein, in connection with the development, marketing or commercialization in
the Territory of the Licensed Product(s) subject to such termination (or, if
terminated by BDSI with respect to a particular country in the Territory under
Section 13.03(b), in such country), and subject to any sublicenses, free, clear
of any and all liens, claims, and encumbrances. Meda shall deliver all such
items, including any copies thereof, to BDSI within five days of any termination
of this Agreement and agrees to take such actions as BDSI may reasonably request
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effectuate the assignment set forth in this paragraph. Further, Meda hereby
irrevocably appoints BDSI (which appointment is coupled with an interest) as its
attorney in fact to execute and deliver in the name of and on behalf of Meda all
documentation necessary to effectuate the assignment set forth in this
paragraph.

(d) Upon termination of this Agreement other than by Meda under Section 13.02,
as elected by BDSI, Meda (and/or its Affiliates, if and as applicable) shall
either (i) have the right, for a period of three months from the date of
termination to distribute and sell existing inventory of Licensed Products,
provided that such Licensed Products shall be sold at a price no less than ***%
of the then current fair market value and that such sales shall be subject to
the applicable terms and conditions of this Agreement; (ii) sell remaining
inventory of Licensed Products and Demonstration Samples to BDSI at the
applicable Product Price for such inventory (or, if manufactured by Meda, its
Affiliates, or Meda’s Third Party manufacturers, the cost and expense of such
manufacture), or (iii) destroy remaining inventory of Licensed Products and
Demonstration Samples in accordance with Applicable Law, providing BDSI with
proof of destruction in writing sufficient to comply with Applicable Law. Any
sales of Licensed Products or Demonstration Samples made by Meda to BDSI
pursuant to clause (ii) in the preceding sentence shall be made by Meda within
30 days of Meda’s receipt of BDSI’s written notice electing to make such
purchase, and shall be shipped to BDSI appropriately packaged and stored. All
transportation costs in connection with such sale, including without limitation,
insurance, freight and duties, shall be paid by Meda. Amounts owed by BDSI to
Meda pursuant to this Section 13.06(d) for the Licensed Products or
Demonstration Samples sold to BDSI shall be paid by BDSI within *** after
receipt by BDSI of an appropriately detailed invoice from Meda for the amount so
owing to it by BDSI under this Section 13.06(d).

(e) Except as otherwise provided in this Agreement, expiration or termination of
this Agreement shall not relieve the Parties of any obligation accruing prior to
such expiration or termination. Except as set forth below or elsewhere in this
Agreement, the obligations and rights of the Parties under Sections 2.05,
3.02(c), 3.04 (with respect to BDSI’s rights to Meda Marks), 3.05, 4.06, 4.07,
7.02, 7.05, 9.05, 9.06, 9.11, 11.01, 11.03, 11.05 (with respect to Meda’s
activities during the Term and, if applicable, Licensed Products sold by Meda
following termination in accordance with this Agreement), 11.06, 11.07 and 11.08
and Articles I, VI, VIII, X, XII (with respect to Licensed Products sold by
Meda), XIII, and XIV shall survive expiration or termination of this Agreement.

(f) Subject to the provisions of this Section 13.05, within *** following the
expiration or termination of this Agreement, each Party shall return to the
other Party, or destroy, upon the written request of the other Party, any and
all Confidential Information of the other Party in its possession and upon a
Party’s request, such destruction (or delivery) shall be confirmed in writing to
such Party by a responsible officer of the other Party.

(g) In the event (i) BDSI’s rights with respect to the Licensed Product under
the Licensed Technology, Marks, and any other intellectual property rights which
are the subject of Meda’s licenses under this Agreement are, in the case of a
termination of the CDC Agreement by CDC pursuant to Section 10.2, 10.3, or 10.4
thereof for which BDSI does not exercise its

 

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continuation rights under Section 10.7 of the CDC Agreement, exclusively
licensed and assigned to CDC or (ii) Arius’ rights under the Arius Two Agreement
(or, if applicable, any rights granted to CDC by Arius Two pursuant to a
separate agreement, as contemplated by Section 2.04(d) of the Arius Two
Agreement) with respect to the Licensed Product under the Licensed Technology,
Marks, and any other intellectual property rights which are the subject of
Meda’s licenses under this Agreement are terminated as a result of a termination
of the Arius Two Agreement (or, if applicable, subsequent agreement between CDC
and Arius Two entered into pursuant to Section 2.04(d) of the Arius Two
Agreement) then with respect to Arius Two, this Agreement, and with respect to
CDC, the rights and benefits of BDSI under this Agreement, in each case, to the
extent (A) not imposing obligations in excess of those imposed on CDC or Arius
Two, respectively, under the CDC Agreement or Arius Two Agreement, respectively,
and Arius Two in the Arius Two Consent, respectively, and (B) relating to the
rights of BDSI subject to the above referenced terminations by CDC or Arius Two,
shall be automatically assigned to CDC or Arius Two, as described in the CDC
Consent and Arius Two Consent, as applicable, to provide for Meda’s continued
quiet enjoyment of the rights granted to it under this Agreement in accordance
with its terms.

ARTICLE XIV

MISCELLANEOUS

Section 14.01 Assignment. Except as explicitly contemplated by this Agreement,
neither this Agreement nor any rights or obligations hereunder may be assigned
or otherwise transferred by either Party without the prior written consent of
the other Party (which consent shall not be unreasonably withheld); provided,
however, that either Party may assign this Agreement and its rights and
obligations hereunder without the other Party’s consent (a) in connection with
the transfer or sale of all or substantially all of the business of such
assigning Party to which this Agreement relates to a Third Party, whether by
merger, sale of stock, sale of assets or otherwise, or (b) to any of its
Affiliates. Notwithstanding the foregoing, any such assignment to an Affiliate
shall not relieve the assigning Party of its responsibilities for performance of
its obligations under this Agreement, so long as such Affiliate remains an
Affiliate of the assigning Party. The rights and obligations of the Parties
under this Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the Parties. Any purported assignment not in
accordance with this Agreement shall be void.

Section 14.02 Force Majeure. Neither Party shall be held liable or responsible
to the other Party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected Party, including, but not limited to,
fire, floods, embargoes, terrorism, war, acts of war (whether war be declared or
not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party, or for any other reason which is
completely beyond the reasonable control of the Party (collectively a “Force
Majeure”); provided that the Party whose performance is delayed or prevented
shall continue to use good faith diligent efforts to mitigate, avoid or end such
delay or failure in performance as soon as practicable.

 

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Section 14.03 Governing Law; Jurisdiction; Dispute Resolution. This Agreement
shall be governed by and construed under the state laws of the State of New
York, without reference to its conflicts of laws principles. All disputes
arising under or in connection with this agreement shall be finally settled by
binding arbitration, initiated by either Party on ten (10) days notice to the
other Party, under the Rules of Arbitration of the International Chamber of
Commerce (“ICC”), applying the laws of the State of New York, without regards to
its conflicts of law provisions, before three (3) independent, neutral
arbitrators experienced in the pharmaceutical industry. The place of arbitration
shall be New York, New York. Meda and BDSI shall each be entitled to select one
(1) such arbitrator, with the two such arbitrators so selected selecting the
third such arbitrator. In the event either Party fails to select its arbitrator
within such ten (10) day period, the arbitrator selected by the other Party
within such ten (10) day period shall be entitled to select such arbitrator. The
arbitration shall be conducted in English. The decision of the arbitrators will
be final and binding on the Parties, and any decision of the arbitrators may be
enforced in any court of competent jurisdiction. Notwithstanding the foregoing,
any Party may seek injunctive, equitable, or similar relief from a court of
competent jurisdiction as necessary to enforce its rights hereunder without the
requirement of arbitration.

Section 14.04 Waiver. Except as specifically provided for herein, the waiver
from time to time by either of the Parties of any of their rights or their
failure to exercise any remedy shall not operate or be construed as a continuing
waiver of same or of any other of such Party’s rights or remedies provided in
this Agreement.

Section 14.05 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Any provision of this Agreement held invalid or unenforceable in part or degree
will remain in full force and effect to the extent not held invalid or
unenforceable.

Section 14.06 Notices. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given (a) on
the date of delivery, if delivered personally, by e-mail or by facsimile
machine, receipt confirmed, (b) on the following business day, if delivered by a
nationally recognized overnight courier service, with receipt acknowledgement
requested, or (c) three business days after mailing, if sent by registered or
certified mail, return receipt requested, postage prepaid, in each case, to the
Party to whom it is directed at the following address (or at such other address
as any Party hereto shall hereafter specify by notice in writing to the other
Parties hereto):

 

If to BDSI:    BioDelivery Sciences International, Inc.    2501 Aerial Center
Parkway, Suite 205    Morrisville, North Carolina 27560 USA    Attn: Mark Sirgo,
Chief Executive Officer    Telephone: (919) 653-5160    Facsimile: (919)
653-5161

 

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DENOTED WITH “***”

 

Copies to:    Wyrick Robbins Yates & Ponton LLP    4101 Lake Boone Trail, Suite
300    Raleigh, North Carolina 27607 USA    Attn: Larry E. Robbins, Esq.   
Telephone: (919) 781-4000    Facsimile: (919) 781-4865 If to Meda:    Meda AB   
Box 906    Pipers vag 2A    17009    Solna    Sweden    Attn: Anders Lonners,
CEO    Telephone: +46 8 630 19 00    Facsimile: +46 8-630 19 19 Copies to:   
James F. Farrington, Jr.    Wiggin and Dana LLP    400 Atlantic Street   
Stamford, CT 06901    Fax: +1 203 363 7676

Section 14.07 Independent Contractors. It is expressly agreed that BDSI and Meda
shall be independent contractors and that the relationship between the two
Parties shall not constitute a partnership or agency of any kind. Neither BDSI
nor Meda shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other Party, without the prior written consent of the other Party.

Section 14.08 Rules of Construction. The Parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the Party drafting such agreement or
document. Whenever the context hereof shall so require, the singular shall
include the plural, the male gender shall include the female gender and neuter,
and vice versa.

Section 14.09 Publicity. Meda and BDSI shall consult with each other before
issuing any press release with respect to this Agreement or the transactions
contemplated hereby and neither shall issue any such press release or make any
such public statement without the prior consent of the other, which consent
shall not be unreasonably withheld; provided, however, (a) that a Party may,
without the prior consent of the other Party, issue such press release or make
such public statement as may upon the advice of counsel be required by law or
the rules and regulations of the Nasdaq or any other stock exchange, or (b) if
it has used reasonable efforts to

 

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DENOTED WITH “***”

 

consult with the other Party prior thereto, (such consent shall be deemed to
have been given if the recipient of the press release or public statement fails
to respond to the other Party within 48 hours after the recipient’s receipt of
such press release or public statement). No such consent of the other Party
shall be required to release information which has previously been made public.

Section 14.10 Entire Agreement; Amendment. This Agreement (including the
Exhibits attached hereto) sets forth all of the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto with respect to the subject matter hereof and supersedes and terminates
all prior agreements and understandings between the Parties. There are no
covenants, promises, agreements, warranties, representations conditions or
understandings, either oral or written, between the Parties other than as set
forth herein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties hereto unless reduced to writing and
signed by the respective authorized officers of the Parties.

Section 14.11 Inspection Rights. Upon five days prior written notice from either
Party (the “Requesting Party”), the Party receiving such notice (the “Audited
Party”) shall permit an independent certified public accountant selected by the
Requesting Party and reasonably acceptable to the Audited Party to audit and/or
inspect only those books and records (including but not limited to financial
records) as may be necessary pursuant to the terms of the applicable Section of
this Agreement granting the applicable inspection rights to the Requesting Party
pursuant to this Section 14.11. Any such independent accounting firm shall be
subject to the confidentiality provisions of this Agreement. A copy of any
report provided to a Party by the accountant shall be given concurrently to the
other Party. Subject to the terms of this paragraph, such inspection shall be
conducted (a) at the sole cost of the Requesting Party and (b) during the
Audited Party’s normal business hours. If the applicable audit involves the
calculation of payments to be made by one Party to the other Party and such
accounting firm concludes that such calculations erroneously resulted in an
overpayment or underpayment by one Party to the other Party with respect to any
payment(s) due hereunder (a “Calculation Error”), within 30 days of the date of
delivery of such accounting firm’s report concluding that a Calculation Error
occurred, the amount overpaid shall be repaid or the amount underpaid shall be
augmented as necessary to correct the underpayment or overpayment caused by such
Calculation Error, and if such Calculation Error resulted in an overpayment to
or an underpayment from the Party responsible for such error, such Party shall
pay interest on such amount at the Prime Rate of Interest plus ***. If the
Audited Party was responsible for the Calculation Error and such Calculation
Error was greater than ***% of the proper amount payable with respect to any
particular Royalty Quarter, the Audited Party shall be solely responsible for
the reasonable, documented costs associated with the audit. The rights granted
to BDSI under this Section 14.11 may be exercised by CDC or Arius Two in a
manner consistent with similar rights established with respect to each of them
in Section 6.10 of the CDC Agreement and Sections 2.01(c), 2.04(b), 4.07(d), and
15.12 of the Arius Two Agreement, as applicable.

Section 14.12 Headings. The captions contained in this Agreement are not a part
of this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles hereof.

 

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Section 14.13 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures to this
Agreement may be transmitted via facsimile and such signatures shall be deemed
to be originals.

Section 14.14 Third Party Beneficiary. CDC shall be an intended third party
beneficiary to this Agreement for the sole purpose of enforcing Sections 7.01,
10.02, 11.01, 11.11, and 13.06(g) and enforcing BDSI’s rights under Sections
2.03(b)(ii), 2.04, 2.05, 2.07(d), 3.02(a), 4.06, 5.01(b) (solely for purposes of
the second sentence thereof), 5.01(f), 6.03, 6.04, and 11.05 of this Agreement.

[Signature page to follow.]

 

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

 

ARIUS PHARMACEUTICALS, INC. By:  

/s/ Mark A. Sirgo

Name:   Mark A. Sirgo Title:   President BIODELIVERY SCIENCES INTERNATIONAL,
INC. By:  

/s/ Mark A. Sirgo

Name:   Mark A. Sirgo Title:   President and CEO MEDA AB By:  

/s/ Anders Lonners

Name:   Anders Lonners Title:   CEO

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EXHIBIT A

ARIUS TWO AGREEMENT

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EXHIBIT B

CDC AGREEMENT

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EXHIBIT C

INITIAL DEVELOPMENT PROGRAM

***

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EXHIBIT D

LICENSED PATENT RIGHTS

 

App. No./

Patent No.

  

Filing Date/

Issue Date

  

Country

  

Title

  

Status

  

Attorney

Docket No.

60/750,191    13-Dec-2005    US    Abuse Resistant Transmucosal Drug Delivery
Device    Expired    076-1 60/764,619    02-Feb-2006    US    Same as Above   
Expired    076-2 11/639,408    13-Dec-2006    US    Same As Above    Pending   
076 60/832,725    21-Jul-2006    US    Transmucosal Delivery Devices With
Enhanced Uptake    Expired    088-1 60/839,504    23-Aug-2006    US    Same As
Above    Expired    088-2 60/832,726    21-Jul-2006    US    Same As Above   
Expired    089-1

PCT/US07/1

6634

   23-Jul-2007    Int’l 1    Same As Above    Pending    088PC

08/734,519

5,800,832

  

18-Oct-1996

01-Sep-1998

   US    Bioerodable Film For Delivery Of Pharmaceutical Compounds To Mucosal
Surfaces    Granted    092

09/144,827

6,159,498

  

01-Sep-1998

12-Dec-2000

   US    Same As Above    Granted    092CN 09/069,703    29-Apr-1998    US   
Pharmaceutical Carrier Device Suitable For Delivery Of Pharmaceutical Compounds
To Mucosal Surfaces    Pending    092CPRCE 09/684,682    04-Oct-2000    US   
Same As Above    Abandoned    092CPDVRCE 10/962,833    12-Oct-2004    US    Same
As Above    Published    092CPDVCN 11/069,089    01-Mar-2005    US    Same As
Above    Published    092CPDVCN2

--------------------------------------------------------------------------------

1

Designates all PCT jurisdictions (including the US and CA)

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

App. No./

Patent No.

  

Filing Date/

Issue Date

  

Country

  

Title

  

Status

  

Attorney

Docket No.

2,268,187

2,268,187

  

16-Oct-1997

05-Jun-2007

   CA    Bioerodable Film For Delivery Of Pharmaceutical Compounds To Mucosal
Surfaces    Granted    092CA 2,329,128    29-Apr-1999    CA    Pharmaceutical
Carrier Device Suitable For Delivery Of Pharmaceutical Compounds To Mucosal
Surfaces    Pending    092PC2CA 60/495,356    15-Aug-2003    US    Adhesive
Bioerodible Transmucosal Drug Delivery System    Expired    093-1

PCT/US04/0

26531

   16-Aug-2004    PCT    Same As Above    Nationalized    093PC 11/355,312   
15-Feb-2006    US    Same As Above    Pending    093CN 11/645,091    22-Dec-2006
   US    Same As Above    Pending    093CN2 2,535,846    16-Aug-2004    CA   
Same As Above    Pending    093CA

PA/a/2006/0

01776

   16-Aug-2004    MX    Same As Above    Pending    093MX 10/121,430   
11-Apr-2002    US    Process For Loading A Drug Delivery Device    Abandoned   
094

PCT/US03/1

1313

   11-Apr-2003    PCT    Same As Above    Abandoned    094PC 60/441,829   
22-Jan-2003    US    Bioerodable Film For Delivery Of Pharmaceutical Compounds
To Mucosal Surfaces    Expired    095-1 10/763,063    22-Jan-2004    US    Same
As Above    Pending    095

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EXHIBIT E

SUPPLY AGREEMENT

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EXHIBIT F

LABELING GUIDELINES

***