Exhibit 10.23

 

CONFIDENTIAL TREATMENT REQUESTED

 

EXECUTION COPY

 

‘MANUFACTURING TRANSFER AGREEMENT
(Controlled Release Metformin Formulations — USA)

 

DEPOMED, INC.
a company organized under the laws of California, USA
with offices at
1360 O’Brien Drive
Menlo Park,
California, 94025

 

AND:

 

BIOVAIL LABORATORIES INTERNATIONAL SRL
a Barbados society with restricted liability,
whose head office is
Chelston Park
Building 2, Collymore Rock
St. Michael BH1
Barbados, West Indies

 

Biovail – Depomed Manufacturing Transfer Agreement

 

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Contents

 

1.

DEFINITIONS

2

 

 

 

2.

1000MG PRODUCT LICENSES

7

 

 

 

 

PATENT LICENSE

7

 

TRADEMARK LICENSE

7

 

RESERVATION OF RIGHTS

8

 

EXPORTATION

8

 

 

 

3.

TRANSFER OF NDA

9

 

 

 

 

TRANSFER OF TECHNICAL INFORMATION

9

 

MANUFACTURING OF THE 500MG PRODUCT

11

 

 

 

4.

ROYALTIES

11

 

 

 

 

NO ROYALTIES ON CERTAIN PRODUCTS

11

 

ROYALTIES ON 1000MG PRODUCT

11

 

ROYALTIES ON 500MG PRODUCT

12

 

REDUCTION OF ROYALTIES

12

 

ROYALTY REPORTS AND PAYMENTS

13

 

RECORDS AND AUDITS

13

 

 

 

5.

PATENTS, INFRINGEMENT

14

 

 

 

 

INFRINGEMENT

14

 

INFRINGEMENT OF THIRD PARTY PATENTS

15

 

 

 

6.

OWNERSHIP OF INVENTIONS AND KNOW-HOW

16

 

 

 

 

OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS

16

 

DISCLOSURE OF INVENTIONS

17

 

FILING AND PROSECUTION OF PATENT APPLICATIONS BY DEPOMED

17

 

FILING AND PROSECUTION OF PATENT APPLICATIONS BY BLS

18

 

 

 

7.

REPRESENTATIONS AND WARRANTIES; NON-COMPETITION

19

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF BLS

19

 

MUTUAL REPRESENTATIONS AND WARRANTIES

20

 

NON-COMPETITION

20

 

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8.

INDEMNIFICATION

21

 

 

 

 

INDEMNIFICATION OF BLS

21

 

INDEMNIFICATION OF DEPOMED

22

 

 

 

9.

CONFIDENTIALITY

23

 

 

 

10.

TERM

24

 

 

 

11.

EXPIRY AND TERMINATION

25

 

 

 

12.

PUBLICITY

27

 

 

 

13.

ASSIGNABILITY

27

 

 

 

14.

PATENT LIFE EXTENSION

28

 

 

 

15.

NOTICES

28

 

 

 

16.

FORCE MAJEURE

29

 

 

 

17.

MISCELLANEOUS

30

 

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MANUFACTURING TRANSFER AGREEMENT
(Controlled Release Metformin Formulations — USA)

 

THIS MANUFACTURING TRANSFER AGREEMENT is made as of the 13th day of December,
2005, by and between

 

DEPOMED, INC.
a company organized under the laws of California, USA
with offices at
1360 O’Brien Drive
Menlo Park,
California, 94025

 

(Hereinafter referred to as “Depomed”)

 

AND:

 

BIOVAIL LABORATORIES INTERNATIONAL SRL
a Barbados society with restricted liability,
whose head office is
Chelston Park
Building 2, Collymore Rock
St. Michael BH1
Barbados, West Indies

 

(Hereinafter referred to as “BLS”)

 

RECITALS

 

A.                                   BLS is the owner of original processes, a
patent application and know-how for the development and manufacture of oral drug
delivery systems which form the basis of the 1000mg Product (as defined herein).

 

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B.                                     BLS has developed and may further develop
products using proprietary BLS drug delivery technology, including without
limitation as contemplated by the Supply Agreement.

 

C.                                     BLS has agreed to assign to Depomed the
Regulatory Approval obtained by BLS or its Affiliate for the 500mg Product,
which Regulatory Approval will be supplemented with an Application for
Regulatory Approval for the 1000mg Product.

 

D.                                    Depomed desires to obtain rights to market
and sell the 1000mg Product in the Territory.

 

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

 

1.                                      DEFINITIONS.

 

The terms defined in this Article 1 shall, for all purposes of this Agreement,
have the following meanings:

 

1.1                                 “1000mg Product” shall mean the once-daily
oral formulation of the Active Ingredient in combination with BLS’s proprietary
drug delivery technology described in the Patent Rights and developed pursuant
to the Work Plan.

 

1.2                                 “500mg Product” shall mean the once daily
oral tablet formulation of the Active Ingredient in a 500 mg strength using the
AcuForm Delivery Technology that is the subject of NDA No. 21-748 filed with the
FDA on April 27, 2004 (as such NDA may be amended or supplemented subsequent to
the Effective Date).

 

1.3                                 “Active Ingredient” shall mean the chemical
compound known as metformin HCl.

 

1.4                                 “Affiliate” shall mean any corporation or
other entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with the designated party
but only for so long as such relationship exists. For the purposes of this
Section, “Control” shall mean ownership of at least fifty percent (or such
lesser percent as may be the maximum that may be owned by foreign interests
pursuant to the laws of the country of incorporation) of the shares of stock
entitled to vote for directors in the case of a corporation and at least fifty
percent (or such lesser percent as may be the

 

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maximum that may be owned by foreign interests pursuant to the laws of the
country of domicile) of the interests in profits in the case of a business
entity other than a corporation.

 

1.5                                 “Application for Regulatory Approval” shall
mean an application made to a Regulatory Authority in any country for permission
to Market a pharmaceutical product in that country.

 

1.6                                 “AcuForm Delivery Technology” shall mean
Depomed’s delivery system designed to be retained in the stomach for an extended
period of time while that delivery system delivers the incorporated drug or
drugs, and includes the Depomed Patent Rights.

 

1.7                                 “Depomed Revenues” shall mean for any
calendar quarter, the aggregate of all amounts received, or receivable in future
periods, by Depomed or its Affiliates and assigns in respect of sales of 1000mg
Product by Distributors made in that calendar quarter, or in respect of sales by
Depomed’s licensees of the 500mg Product made in that calendar quarter, as
applicable, including without limitation supply prices, royalties, trademark
license fees, handling fees and commissions, less the following deductions
actually allowed and taken and not otherwise recovered by or reimbursed to
Depomed or its Affiliates and assigns in respect of such amounts:  (i) rebates,
credits or other reimbursements actually paid; and (ii) amounts repaid or
credited by reason of rejections, defects or returns or because of retroactive
price reductions. Depomed Revenues shall not include amounts in respect of sales
of 1000mg Product or 500mg Product between or among Depomed or its Affiliates or
assigns.

 

1.8                                 “Distributor” shall mean an entity
designated by Depomed to perform its distribution and Marketing activities with
respect to the 1000mg Product in the Territory, in accordance with the terms of
this Agreement.

 

1.9                                 “Effective Date” shall mean the date first
written on page 1 of this Agreement.

 

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1.10                           “FDA” shall mean the United States Food and Drug
Administration or any successor United States governmental agency performing
similar functions with respect to pharmaceutical products.

 

1.11                           “Final Judgment” shall mean a judgment by a court
of competent jurisdiction that is unappealed (and the time for appealing has
expired) or is unappealable.

 

1.12                           “Invention” shall mean each of the 500mg Product
and the 1000mg Product, any improvement to the 500mg Product or the 1000mg
Product, any new use of the 500mg Product or the 1000mg Product, any new
performance characteristic of the 500mg Product or the 1000mg Product, any new
process used to Manufacture the 500mg Product or the 1000mg Product, or any step
or steps in any such process, and includes all formulations of the 500mg Product
or the 1000mg Product.

 

1.13                           “Know-How” shall mean all inventions,
discoveries, trade secrets, improvements and information not in the public
domain, whether or not patented or patentable (but excluding Patent Rights),
together with all experience, data, formulas, procedures and results, and
improvements thereon, now or hereafter developed or acquired by and proprietary
or licensed with right to sublicense to BLS on the date hereof or which are
developed or acquired during the term of and in connection with this Agreement,
which relate to or are used in conjunction with the development, manufacture or
use of 1000mg Product.

 

1.14                           “Knowledge” or “knowledge” shall mean, with
respect to BLS, the actual knowledge of the executive officers of BLS, after
reasonable inquiry directed to such employees of BLS who would reasonably be
expected to have knowledge of relevant matters.

 

1.15                           “Manufacture” shall mean to process, prepare,
make, and analyze, and Manufacturing and Manufactured shall have a corresponding
meaning.

 

1.16                           “Market” shall mean to promote, distribute,
package, label, market, advertise, sell or offer to sell, and Marketing shall
have a corresponding meaning.

 

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1.17                           “NDA” shall mean a New Drug Application or
equivalent application for approval to market submitted to the FDA.

 

1.18                           “Net Sales” shall mean the total of all amounts
invoiced by Depomed, its Affiliates, Distributors, licensees and assigns for
1000mg Product and 500mg Product, as applicable, sold to independent, unrelated
third parties in the Territory in bona fide arms-length transactions, less the
following deductions actually allowed and taken by such third parties and not
otherwise recovered by or reimbursed to Depomed or its Affiliates, sub-licensees
and assigns: (i) trade, cash and quantity discounts in such amounts as are
customary in the trade; (ii) rebates, credits or other reimbursements actually
paid; (iii) taxes on sales (such as sales or use taxes) to the extent added to
the sales price and set forth separately as such in the total amount invoiced;
(iv) value added taxes when included as part of the sales price and not refunded
to the payor; (v) freight, insurance, and other transportation charges to the
extent added to the sales price and set forth separately as such in the total
amount invoiced; and (vi) amounts repaid or credited by reason of rejections,
defects or returns or because of retroactive price reductions. Net Sales shall
not include sales of a 1000mg Product or a 500mg Product between or among
Depomed, its Affiliates, Distributors, licensees or assigns.

 

1.19                           “Party” shall mean BLS or Depomed, and “Parties”
shall mean BLS and Depomed.

 

1.20                           “Patent Rights” shall mean any patent application
or issued patent covering 1000mg Product or any improvement to 1000mg Product or
any methods for making or using 1000mg Product or any improvement to such
methods, which patents or patent applications are owned by or licensed to BLS as
of the date hereof or which are developed or acquired by or licensed to BLS
during the term of this Agreement, in the Territory, including any addition,
continuation, continuation-in-part, or division thereof or any substitute
application thereof, any reissue or extension of any such patent, and any
confirmation patent, registration patent revalidation patent, or patent of
addition based on

 

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any such patent, and includes without limitation the United States patent
application set forth in Schedule 1.20.

 

1.21                           “Regulatory Approval” shall mean the permission
or consent granted by any relevant Regulatory Authority for the Marketing of
1000mg Product in the Territory, and includes all of the contents of the
Application for Regulatory Approval as approved by that Regulatory Authority,
and any Drug Master File referenced by that Application for Regulatory Approval.

 

1.22                           “Regulatory Authority” shall mean, in respect of
any country, any government or other agency responsible for the issuance of
approval to Market pharmaceutical products in or sold from that country,
including without limitation the FDA.

 

1.23                           “Regulatory Data” shall mean all information and
data necessary to obtain or maintain Regulatory Approval for 1000mg Product in
the Territory, including post-approval reports, filings and submissions and
shall include, but not be limited to, any Clinical Information required for that
purpose.

 

1.24                           “Supplemental NDA” shall mean the supplemental
NDA related to the 1000mg Product to be developed and submitted in accordance
with the Work Plan.

 

1.25                           “Supply Agreement” shall mean the Supply
Agreement, dated as of the Effective Date, between Depomed and BLS relating,
inter alia, to the 1000mg Product.

 

1.26                           “Technical Information” shall mean all Know-How,
and all trade secrets, inventions, data and technology relating to the 500mg
Product or the 1000mg Product, and any improvements and modifications to any of
the foregoing, and includes, without limitation, processes and analytical
methodology used in the development, testing, analysis and manufacture of the
500mg Product or the 1000mg Product, and medical, clinical, toxicological and
other scientific data relating to the 500mg Product or the 1000mg Product.

 

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1.27                           “Territory” shall mean the United States and its
possessions, including Puerto Rico.

 

1.28                           “Trademark” shall mean the “Glumetza” trademark
owned by BLS.

 

1.29                           “Valid Claim” shall mean a claim of (a) an
unexpired issued patent falling within Patent Rights, which claim shall not have
been withdrawn, cancelled, disclaimed or held invalid by a court, tribunal,
arbitrator or governmental agency of competent jurisdiction in a final or
unappealed or unappealable decision or (b) of any patent application that has
not been cancelled, withdrawn or abandoned, or has been pending for more than
seven years.

 

1.30                           “Work Plan” shall mean the work plan related to
the development of the 1000mg Product, as referred in the Supply Agreement.

 

2.                                      1000MG PRODUCT LICENSES

 

Patent License

 

2.1                                 Subject to the provisions of Section 2.4,
BLS hereby grants to Depomed an exclusive license in the Territory under Patent
Rights, with the right to grant sublicenses of the same scope as the license
granted by this Agreement, (except that any sublicensee shall have no right to
grant further sublicenses), to Manufacture, have Manufactured, Market, use and
sell 1000mg Product.

 

Trademark License

 

2.2                                 Subject to the provisions of Section 2.4,
BLS hereby grants to Depomed an exclusive license in the Territory to the
Trademark for the purpose of Marketing the 1000mg Product in the Territory.
Except as set forth in the preceding sentence, nothing herein shall be deemed to
give either Party any rights to the trademarks of the other Party.

 

2.3                                 The licenses granted to Depomed pursuant to
sections 2.1 in respect of the Manufacture of the 1000mg Product shall become
operative only when Depomed acquires the right to

 

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grant a sublicense to a third party supplier pursuant to Section 16.2(b) of the
Supply Agreement.

 

Reservation of Rights

 

2.4                                 BLS reserves to itself the right

 

(a)                                  to Manufacture the 1000mg Product for
supply to Depomed pursuant to the terms of the Supply Agreement, and to grant
licenses to its Affiliates and to qualified third parties the right to
Manufacture the 1000mg Product for that purpose; and

 

(b)                                 to Manufacture the 1000mg Product in the
Territory for Marketing outside the Territory.

 

Exportation

 

2.5                                 To the extent legally permissible, Depomed
shall use, and shall cause its Affiliates to use, commercially reasonable
efforts to prevent the exportation of the 1000mg Product outside of the
Territory. Depomed shall not, and shall cause its Affiliates not to, directly or
indirectly, in any manner whatsoever, enter into or engage in the Marketing of
the 1000mg Product outside the Territory, and shall not sell the 1000mg Product
to any person or entity whom Depomed or an Affiliate of Depomed has reason to
believe may sell or who, to the knowledge of Depomed or an Affiliate of Depomed,
has in the past sold the 1000mg Product outside the Territory (any such sale, an
“Unauthorized Sale”). Depomed shall promptly use commercially reasonable efforts
to take any action reasonably available to Depomed, and shall within sixty (60)
days after any Unauthorized Sale has come to the attention of Depomed or an
Affiliate of Depomed, initiate all steps lawfully available to Depomed or that
Affiliate in the Territory, to prevent such Unauthorized Sales.

 

2.6                                 BLS and its Affiliates in the United States,
shall use commercially reasonable efforts to take steps lawfully and reasonably
available to them to prevent or reduce Unauthorized Sales.

 

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3.                                      TRANSFER OF NDA

 

3.1                                 As soon as practicable but in no event later
than forty-five (45) days after the Effective Date, BLS shall provide Depomed
with letters addressed to FDA authorizing and requesting that each of the NDA
and IND owned by BLS and pertaining to the 500mg Product and 1000mg Product be
transferred, in its entirety, to the name of Depomed. BLS shall provide Depomed
with a copy of the letter and Depomed shall immediately send a letter to FDA
accepting the NDA and IND. The Parties acknowledge that, prior to the transfer
to Depomed contemplated by this Section 3.1:  (i) the CMC Section of the NDA
related to the 1000mg Product will be transferred to a drug master file in order
to preserve the confidentiality of certain BLS proprietary information reflected
therein, and (ii) certain information related to a solvent-based 1000 mg
extended release metformin formulation currently included within the NDA
covering the 500mg Product will be removed from the NDA or transferred to a drug
master file.

 

Transfer of Technical Information

 

3.2                                 The Parties acknowledge that BLS has
generated certain Technical Information related to the 500mg Product subsequent
to the execution of the Prior Agreement. Accordingly, BLS shall at the written
request of Depomed (a) disclose and transfer to Depomed all of the Technical
Information in the possession of BLS and (b) provide to Depomed such training
and support at the facilities of Depomed, its licensee or its contract
manufacturer, as Depomed, its licensee or its contract manufacturer reasonably
requires to efficiently and economically optimize use of the Technical
Information related to the 500mg Product in the Manufacture and Marketing of the
500mg Product (the “Technology Transfer”). Depomed shall arrange for access to
the facilities of any licensee or contract manufacturer, at its own expense, to
enable such disclosure and transfer to be conducted. BLS shall provide
sufficient personnel to assist in the Technology Transfer as described in this
Article 3, and may direct or authorize any contract manufacturer of BLS to
provide any part of such Technology Transfer. BLS and Depomed shall cooperate to
ensure that

 

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the Technology Transfer may be completed as expeditiously as possible, but not
later than [***].

 

3.3                                 The training and support to be provided by
BLS to Depomed for the Manufacture of the 500mg Product shall include, without
limitation:

 

(a)                                  training and support in all of the methods
necessary to practice the Technical Information in the analysis, formulation and
manufacturing of the 500mg Product;

 

(b)                                 demonstration of, and support and training
in, the manufacturing processes, analytical testing, packaging and QC using the
Technical Information at that manufacturing facility of BLS or any third party
contract manufacturer, and

 

(c)                                  technical support for the successful
manufacturing by Depomed of three validation batches of the 500mg Product.

 

3.4                                 In fulfillment of the obligations of BLS
under Section 3.3, and at Depomed’s request upon reasonable notice, during
normal business hours, BLS shall provide not more than three (3) people who are
in BLS’s reasonable determination fully qualified with respect to and familiar
with the procedures and processes used in the Manufacture of the 500mg Product,
for a cumulative period of not more than ten (10) business days each, to provide
or to cause to be provided to Depomed the assistance and Know-How required
pursuant to Section 3.3 to enable Depomed to Manufacture the 500mg Product in
the Territory and to observe and assist in the Manufacture by Depomed, at
Depomed’s own expense, of three (3) pivotal batches of the 500mg Product, at no
cost to Depomed. BLS shall not be required to update any dossiers or other files
provided to Depomed as part of the assistance to be provided to Depomed pursuant
to this Article 3 beyond what is required to put such dossiers or files in
compliance with the then current Laws of the Territory. The obligations of BLS
to provide technical assistance under Section this Article 3 shall expire [***]
years after Depomed’s first request for documents or information under
Section 3.3.

 

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Manufacturing of the 500mg Product

 

3.5                                 BLS will assist Depomed in facilitating
supply arrangements between Depomed and BLS’s tablet and active pharmaceutical
ingredient manufacturers of the 500mg Product, and other suppliers to BLS
involved in the manufacture or packaging of the 500mg Product. Concurrently with
the execution of this Agreement, BLS shall have eliminated any conditions in its
supply agreements related to the 500mg Product that preclude any BLS supplier
from manufacturing either the 500mg Product or active pharmaceutical ingredient
for Depomed, and has provided Depomed with evidence of the elimination of any
such provision.

 

4.                                      ROYALTIES

 

No Royalties on Certain Products

 

4.1                                 Notwithstanding the provisions of Sections
4.2 to 4.7 below, no royalties shall be payable on any Net Sales of, or on any
Depomed Revenues relating to, any quantities of the 1000mg Product supplied to
Depomed pursuant to the provisions of the Supply Agreement.

 

Royalties on 1000mg Product

 

4.2                                 In consideration for the licenses granted
herein, and subject to the other provisions of this Article 4 (including without
limitation Section 4.1), Depomed shall pay to BLS an earned royalty equal to the
lesser of:

 

(a)                                  six percent of Net Sales which are Net
Sales of 1000mg Product; and

 

(b)                                 thirty percent of Depomed Revenues in
respect of Net Sales which are of 1000mg Product.

 

4.3                                 Subject to the provisions of Section 4.4,
Depomed shall pay the earned royalties required by Section 4.2, in respect of
the Net Sales (or, if applicable, Depomed Revenues) of the 1000mg Product in the
Territory until:

 

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(a)                                  the expiry of [***] from the first
commercial sale of 1000mg Product in the Territory; or

 

(b)                                 the 1000mg Product is no longer covered by a
Valid Claim,

 

whichever is later.

 

4.4                                 If at any time during the term of this
Agreement, the 1000mg Product is not covered by a Valid Claim, and the ten year
period referred to in Section 4.3(a) has not expired in the Territory, then the
Net Sales (or, if applicable, Depomed Revenues) of the 1000mg Product in the
Territory that are subject to payment of earned royalty shall be reduced to
one-half of such actual Net Sales (or, if applicable, Depomed Revenues).

 

4.5                                 Upon the expiration of the obligations of
Depomed to make the royalty payments required by Section 4.2 in the Territory,
the licenses granted to Depomed by Sections 2.1 and 2.2 shall be perpetual and
fully paid-up.

 

Royalties on 500mg Product

 

4.6                                 In consideration for the licenses granted
herein, and subject to the other provisions of this Article 2.5 of this
Agreement, Depomed shall pay to BLS an earned royalty of the lesser of:

 

(a)                                  one percent of Net Sales which are Net
Sales of 500mg Product; and

 

(b)                                 five percent of Depomed Revenues in respect
of Net Sales which are Net Sales of 500mg Product.

 

4.7                                 Depomed shall pay the earned royalties
required by Section 4.6, in respect of the Net Sales (or, if applicable, Depomed
Revenues) of the 500mg Product in the Territory until the expiry of [***] from
the first commercial sale of the 500mg Product in the Territory.

 

Reduction of Royalties

 

4.8                                 In the event that a court or governmental
agency compels Depomed to grant a sub-license to any third party for 1000mg
Product under terms or conditions more favorable than

 

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OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
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those contained herein, Depomed shall automatically have the benefit of the more
favorable terms with respect to all sales of 1000mg Product in the Territory
wherein such third-party compulsory license has been granted.

 

Royalty Reports and Payments

 

4.9                                 Within ten (10) days after the end of any
calendar month in which Depomed has made any sales of 1000mg Product not
purchased pursuant to the Supply Agreement, Depomed shall deliver a report to
BLS specifying the gross sales of the 1000mg Product sold by Depomed and its
Distributors in that calendar month in the Territory.

 

4.10                           Within fifteen (15) days after the end of any
calendar quarter in which Depomed has made any sales of 1000mg Product not
purchased pursuant to the Supply Agreement, Depomed shall submit to BLS a report
setting forth separately the Net Sales of 1000mg Product (and, if applicable,
the Depomed Revenues in respect of Net Sales of 1000mg Product) and the 500mg
Product (and, if applicable, the Depomed Revenues in respect of Net Sales of
500mg Product) sold during said calendar quarter in the Territory, the
calculation of earned royalties payable for such calendar quarter, and the basis
for any reduction in those earned royalties taken pursuant to this Agreement.
Earned royalty payments hereunder shall be made in United States dollars within
forty-five days following the end of each calendar quarter, and each payment
shall include royalties which shall have accrued during said calendar quarter.

 

4.11                           No multiple royalties shall be payable because
1000mg Product, its manufacture, use or sale is or shall be covered by more than
one Patent Right. No multiple royalties shall be payable because 500mg Product,
its manufacture, use or sale is or shall be covered by more than one Depomed
Patent Right.

 

Records and Audits

 

4.12                           Depomed and its Affiliates shall keep and
maintain, and shall cause its Distributors, licensees and assigns to keep and
maintain, records of Net Sales and Depomed Revenues.

 

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Such records shall be open to inspection by BLS or, in the case of Distributors,
licensees and assigns, by Depomed on behalf of BLS, at any mutually agreeable
time during normal business hours within two years after the royalty period to
which such records relate by an independent certified public accountant
reasonably acceptable to Depomed but selected by BLS. Said accountant shall have
the right to examine the records kept pursuant to this Agreement and report
findings of said examination of records to BLS only insofar as it is necessary
to evidence any error on the part of Depomed. This right of inspection shall be
exercised only once for any calendar year. The cost of such inspection shall be
borne by BLS unless the result of such examination is the determination that Net
Sales (or, if applicable, Depomed Revenues) have been understated by at least
three percent for any calendar year in which event Depomed shall bear the
reasonable cost of such inspection.

 

5.                                      PATENTS, INFRINGEMENT

 

Infringement

 

5.1                                 If either Party determines that any of the
Patent Rights have been infringed by the Manufacture or Marketing in the
Territory of a product containing metformin as its sole active ingredient, such
Party shall give to the other Party notice of such alleged infringement, in
which event Depomed may at its discretion take such steps as it may consider
necessary to prosecute such infringement. Depomed may not settle any such
litigation in a manner that adversely affects the rights of BLS hereunder
without the consent of BLS, which consent shall not be unreasonably withheld.
BLS shall have the right, at its own expense, to be represented by counsel in
any such litigation. If Depomed, after such notice, elects not to bring suit, it
shall notify BLS of such election within thirty days after receipt of such
notice and BLS shall then have the right to bring suit at its own expense. BLS
shall also have the right to bring suit if Depomed fails to institute suit
within ninety days from the date of the original notice of infringement by BLS.
In furtherance and not in limitation of the foregoing provisions of this
Section 5.1, BLS may at its discretion take such steps as it may consider
necessary to prosecute any

 

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infringement of any patent or other intellectual property rights owned or
Controlled by BLS by the Manufacture or Marketing outside of the Territory of
any product containing metformin as the sole active ingredient, and Depomed
shall have no right to prosecute, or otherwise participate in the prosecution
of, any such infringement.

 

5.2                                 In any litigation brought by Depomed under
Section 5.1, Depomed shall notify BLS of the commencement of that litigation and
shall have the right to use and sue in BLS’s name, and BLS shall have the right,
at its own expense, to be represented by counsel. In any such litigation, BLS
may elect by notice to Depomed to share equally with Depomed the costs of such
litigation (including any costs incurred by BLS prior to the Effective Date) in
exchange for the right to share equally with Depomed in any recovery of damages
resulting from such litigation. Such election by BLS shall be made not later
than 60 days from the date such litigation is commenced. Depomed may not settle
any such litigation in a manner that adversely affects the rights of BLS
hereunder without BLS’s consent, which consent shall not be unreasonably
withheld.

 

5.3                                 In any litigation brought by BLS following
an election by Depomed pursuant to Section 5.1 not to bring suit, BLS shall
notify Depomed of the commencement of that litigation and shall have the right
to use and sue in Depomed’s name, and Depomed shall have the right, at its own
expense, to be represented by counsel. In any such litigation, Depomed may elect
by notice to BLS to share equally with BLS the costs of such litigation in
exchange for the right to share equally with BLS in any recovery of damages
resulting from such litigation. Such election by Depomed shall be made not later
than 60 days from the date of the commencement of any such action. BLS may not
settle any such litigation in a manner that adversely affects the rights granted
to Depomed under this Agreement without Depomed’s consent.

 

Infringement of Third Party Patents

 

5.4                                 In the event of a judgment in any suit
relating to the 1000mg Product requiring Depomed to pay damages or a royalty in
respect of the 1000mg Product to a third party or in the

 

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event of a settlement of such suit or threatened suit consented to by BLS (which
consent shall not be unreasonably withheld) requiring damages or royalty
payments to be made in respect of the 1000mg Product, the future royalty
payments due to BLS pursuant to Sections 4.2, 4.3 and 4.4 in respect of the
1000mg Product shall be reduced by the full amounts due under the requirement of
such Final Judgment or under the terms of such settlement, until the full amount
of such judgment or settlement has been recovered by Depomed.

 

6.                                      OWNERSHIP OF INVENTIONS AND KNOW-HOW

 

Ownership of Intellectual Property Rights

 

6.1                                 Each of Depomed and BLS shall retain its
rights in and/or title to all Inventions which it owned or controlled prior to
the date hereof.

 

6.2                                 All Inventions made by Depomed or by BLS in
the performance of their respective obligations under the Prior Agreement, this
Agreement, or the Work Plan shall be owned as follows:

 

(a)                                  any such Inventions relating to the
formulations of the 1000mg Product, to the BLS drug delivery technology
described in the Patent Rights, or to any process for manufacturing the 1000mg
Product shall belong to BLS; and

 

(b)                                 any such Inventions relating to the clinical
use of the 1000mg Product shall belong to the Party making such Invention.

 

6.3                                 Depomed shall have the exclusive right to
use, within the Territory, any Invention relating to the clinical use of the
1000mg Product that is subject to Section 6.2(b) and that is owned or controlled
by BLS. BLS shall have the exclusive right to use, outside of the Territory, any
Invention relating to the clinical use of the 1000mg Product that is subject to
Section 6.2(b) and that is owned or controlled by Depomed.

 

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THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
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6.4                                 The determination of inventorship for
Inventions shall be made in accordance with applicable laws relating to
inventorship set forth in the patent laws of the United States (Title 35, United
States Code).

 

6.5                                 Except as expressly provided in this
Agreement, each joint owner may make, use, sell, keep, license, assign, or
mortgage any jointly owned Inventions, and otherwise undertake all activities a
sole owner might undertake with respect to such inventions, to the extent of the
joint owner’s interest therein, without the consent of and without accounting to
the other joint owner.

 

6.6                                 Each of Depomed and BLS shall cause any
inventor of any Invention employed by Depomed or BLS respectively to assign any
and all rights that any such inventor may have in any such Invention to Depomed
or to BLS, as contemplated by this Agreement, and shall at no further cost to
Depomed execute any documents that may reasonably be required to apply for and
to obtain any such patents.

 

Disclosure of Inventions

 

6.7                                 Each of BLS and Depomed shall endeavour to
advise the other of any Inventions and of any patent applications that it
intends to file that may be subject to the provisions of this Article 6, as
promptly as possible, to arrange, to the fullest extent possible, for
simultaneous filing of applications where appropriate and to avoid as much as
possible any disclosure that may be considered to be prior art to an application
filed by the other Party. If at any time during the term of this Agreement it
appears that any further agreement between the Parties is reasonably required to
assist in obtaining patent protection for the 1000mg Product, the Parties shall
act diligently and reasonably to negotiate the terms of, and enter into, such an
agreement.

 

Filing and Prosecution of Patent Applications by Depomed

 

6.8                                 Depomed shall have right and the
responsibility for filing, prosecuting and maintaining patents and patent
applications for all Inventions owned by Depomed.

 

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6.9                                 Depomed shall advise BLS in writing of its
plans to file patent applications for any such Invention, and of the countries
in which Depomed intends to file such applications. BLS may at its own expense
file an application for any Invention in any country in respect of which Depomed
has not indicated it will file an application. Any such application filed by BLS
and any patent issuing therefrom shall be filed in the name of the inventors or
of Depomed and shall at the request of BLS be assigned to BLS.

 

Filing and Prosecution of Patent Applications by BLS

 

6.10                           BLS shall have right and the responsibility for
filing, prosecuting and maintaining patents and patent applications for all
Inventions owned by BLS in the Territory. BLS shall disclose to Depomed the
complete texts of all patent applications filed by BLS that relate to the 1000mg
Product owned by BLS, as well as all information received concerning the
institution or possible institution of any interference, opposition,
re-examination, reissue, revocation, nullification or any official proceeding
involving such a patent application anywhere in the world. Depomed shall have
the right to review all such pending applications and other proceedings and make
recommendations to BLS concerning such applications. BLS shall keep Depomed
promptly and fully informed of the course of patent prosecution or other
proceedings relating to any such invention, and shall provide to Depomed copies
of any substantive communications submitted to or received from patent offices
throughout the world.

 

6.11                           Depomed shall have the right to assume
responsibility for any patent or patent application filed in the Territory
relating to the 1000mg Product that BLS intends to abandon or otherwise cause or
allow to be forfeited. BLS shall give Depomed reasonable written notice prior to
abandonment or other forfeiture of any patent or patent application so as to
permit Depomed to exercise its rights under this Section at its own expense.

 

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7.                                      REPRESENTATIONS AND WARRANTIES;
NON-COMPETITION

 

Representations and Warranties of BLS

 

7.1                                 BLS hereby warrants and represents to
Depomed that:

 

(a)                                  to BLS’s knowledge, BLS has full right,
title, and interest in and to or the right to practice all presently existing
Patent Rights, Know-How, and Technical Information relating to 1000mg Product;

 

(b)                                 there are no outstanding written or oral
agreements inconsistent with this Agreement; and

 

(c)                                  to BLS’s knowledge, it is empowered and has
the right to enter into this Agreement and to grant the licenses provided herein
without burdens, encumbrances, restraints, or limitations of any kind which
could adversely affect the rights of Depomed under this Agreement; and

 

(d)                                 BLS has no knowledge of any patents or
patent applications owned by a third party and not licensed to BLS that would be
infringed by the practice of the presently existing Patent Rights, Know-How or
Technical Information or by the Manufacture or Marketing of the 1000mg Product
in the Territory nor has BLS received any claims by third parties with respect
to such matters.

 

(e)                                  BLS has no knowledge of any claim that any
third party asserts ownership rights in any of the Patent Rights, Know-How, and
Technical Information,

 

(f)                                    BLS has no knowledge that BLS’s or its
Affiliates’ use of any of the Patent Rights, Know-How, or Technical Information
infringes any right of any third party.

 

(g)                                 except for general disclosures that have not
been and will not be in detail sufficient to enable the recipient to Manufacture
the 1000mg Product, and to BLS’s knowledge, BLS’s Technical Information has not
been disclosed to others, and will

 

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not be disclosed to persons other than Depomed, except pursuant to appropriate
confidentiality agreements or to the extent disclosed in the patents, or as
otherwise expressly permitted by this Agreement.

 

Mutual Representations and Warranties

 

7.2                                 Each Party hereby represents and warrants to
the other Party as follows:

 

(a)                                  It is a corporation (or, in the case of
BLS, a society with restricted liability) duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization. It has
all requisite power and authority to carry on its business and to own and
operate its properties and assets. The execution, delivery and performance of
this Agreement have been duly authorized by its Board of Directors;

 

(b)                                 There is no pending or, to its knowledge,
threatened litigation involving it which would have any material adverse effect
on this Agreement or on its ability to perform its obligations hereunder; and

 

(c)                                  There is no indenture, contract, or
agreement to which it is a party or by which it is bound which prohibits or
would prohibit the execution and delivery by it of this Agreement or the
performance or observance by it of any material term or condition of this
Agreement.

 

Non-Competition

 

7.3                                 BLS covenants and agrees with Depomed that,
during the term of this Agreement, BLS shall not, in the Territory, whether for
its own or any Affiliate’s account or for the account or benefit of any third
party, make, have made, use, import, offer for sale, sell, or otherwise
commercialise any product that includes the Active Ingredient (or any other
salt, chiral forms or metabolites thereof) as the sole active ingredient except
as contemplated by this Agreement, or authorize, permit or assist any other
person to do any of the foregoing, except as permitted by this Agreement.

 

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7.4                                 The provisions of Section 7.3 shall not
apply to the Manufacture or Marketing by BLS of the 1000mg Product if this
Agreement is terminated by BLS with respect to the 1000mg Product, or if BLS
acquires or re-acquires the right to the 1000mg Product from Depomed pursuant to
this Agreement or to the Supply Agreement.

 

8.                                      INDEMNIFICATION

 

Indemnification of BLS

 

8.1                                 Depomed shall indemnify and hold harmless
BLS and its officers, directors, employees and agents against and from any
losses, damages, injuries, liabilities, claims, demands, settlement, judgments,
awards, fines, penalties, taxes, fees, charges, or expenses (including
reasonable attorneys’ fees) of BLS or any of its officers, directors, employees
or agents arising from or relating to:

 

(a)                                  The breach or inaccuracy in any material
respect of any Depomed representation or warranty contained in Article 7 of this
Agreement;

 

(b)                                 Any claim that 1000mg Product packaging,
labels, inserts and marketing and sales materials infringe a trademark, trade
dress or copyright of a third party in the Territory (excluding any claim
related to the Trademark);

 

(c)                                  Any injury or alleged injury to any person
(including death) or to the property of any person not a party hereto arising
out of the gross negligence or intentional act or omission of Depomed or its
employees or agents relating to the Marketing of 1000mg Product;

 

(d)                                 The Marketing of 1000mg Product by Depomed,
its Affiliates, its sublicensees, distributors and customers; or

 

(e)                                  The enforcement of BLS’s indemnification
rights hereunder.

 

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Indemnification of Depomed

 

8.2                                 BLS shall indemnify and hold harmless
Depomed and its officers, directors, employees and agents against and from any
losses, damages, injuries, liabilities, claims, demands, settlement, judgments,
awards, fines, penalties, taxes, fees, charges or expenses (including reasonable
attorneys’ fees) of Depomed or a third party arising from or relating to:

 

(a)                                  The breach or inaccuracy in any material
respect of any BLS representation, warranty or covenant contained in Article 7
of this Agreement;

 

(b)                                 Any injury or alleged injury to any person
(including death) or to the property of any person not a party hereto arising
out of the gross negligence or intentional act or omission of BLS or its
employees or agents relating to 1000mg Product;

 

(c)                                  Any injury or alleged injury to any person
(including death) or to the property of any person not a party hereto arising
out of the use of BLS’s proprietary drug delivery technology in the 1000mg
Product;

 

(d)                                 The CMC section of the NDA for the 1000mg
Product;

 

(e)                                  The manufacture of the 1000mg Product by or
on behalf of BLS or its Affiliates; or

 

(f)                                    The enforcement of Depomed’s
indemnification rights hereunder.

 

8.3                                 If any indemnified Party intends to claim
indemnification under this Article 8 it shall promptly notify the other Party in
writing of such alleged claim. The indemnifying Party shall have the sole right
to control the defense and settlement thereof. The indemnified Party shall
cooperate with the indemnifying Party and its legal representatives in the
investigation of any action, claim or liability covered by this Article 8. The
indemnified Party shall not, except at its own cost, voluntarily make any
payment or incur any expense with respect to any claim or suit without the prior
written consent of the indemnifying Party. In addition, the indemnifying Party
shall be subrogated to the rights

 

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of the indemnified Party against any third party, and such indemnified Party
hereby assigns to the indemnifying Party all claims, causes of action and other
rights that the indemnified Party may then have against any third party,
including Affiliates and sublicensees, with respect to the claim, suit or
proceeding. Conversely, and without in any way limiting the obligation of either
Party to indemnify the other Party as herein provided, to the extent that any
Party shall fail to perform its indemnification obligations under Section 8.1 or
Section 8.2, such Party owing a duty of indemnification hereby assigns to the
indemnified Party to whom indemnification is owed all claims, cause of action
and other rights that the Party owing such duty may then have against any third
party, including Affiliates and sublicensees with respect to the claim, suit or
proceeding.

 

9.                                      CONFIDENTIALITY

 

9.1                                 Each of Depomed and BLS shall maintain all
Technical Information and Clinical Information, and any other information about
this Agreement and the businesses or affairs of the other relating to each of
the 500mg Product and the 1000mg Product, in confidence, and shall not at any
time disclose any such information to persons other than their Affiliates,
officers, employees, agents, consultants, advisers, and licensees and potential
sub-licensees, except where permitted by this Agreement, and only to the extent
necessary for the purposes of this Agreement. Depomed and BLS shall use such
information only to the extent necessary or permitted by this Agreement, or
required by law. Depomed and BLS shall take all reasonable steps to ensure that
their respective Affiliates, agents, officers, employees, representatives,
consultants, advisors and licensees and potential licensees and sub-licensees
maintain the obligations of confidence imposed on Depomed and BLS by this
Agreement.

 

9.2                                 Section 9.1 shall not apply to any Technical
Information or Clinical Information that:

 

(a)                                  is owned or Controlled by Depomed, or
jointly by Depomed and BLS;

 

(b)                                 was known to Depomed at the time of its
disclosure by BLS;

 

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(c)                                  has been published or is otherwise within
the public knowledge or is generally known to the public;

 

(d)                                 has come into the public domain without any
breach of this Agreement;

 

(e)                                  became known or available to Depomed from a
source having the right to make such disclosure to Depomed and without
restriction on such disclosure to Depomed;

 

(f)                                    is disclosed to the public and is
generally available to the public as a result of compliance with any applicable
law or regulation;

 

(g)                                 is disclosed as the result of any
applications for patents relating to the 1000mg Products anywhere in the world;
or

 

(h)                                 after Regulatory Approval of the 1000mg
Product is reasonably required by Depomed for the Marketing of the 1000mg
Product in the Territory

 

9.3                                 Each Party acknowledges that improper use or
disclosure of information of the other Party that must be kept in confidence
under Section 9.1 above would cause substantial harm to the other Party (in
particular in barring patent protection for that Party’s technology), and that
such harm could not be remedied by the payment of damages alone. Accordingly,
each Party will be entitled to preliminary and permanent injunctive relief and
other equitable relief for any breach of this Article 9 by the other Party,
without prejudice to all other remedies available at law or in equity.

 

10.                               TERM

 

10.1                           Unless sooner terminated as herein provided, this
Agreement shall become effective on the Effective Date and shall continue in
effect thereafter until it is terminated in accordance with the terms hereof.

 

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11.                               EXPIRY AND TERMINATION

 

11.1                           Unless earlier terminated pursuant to
Section 11.2 below, this Agreement shall not expire.

 

11.2                           At any time during the Term of this Agreement,
either BLS or Depomed may terminate this Agreement with respect to the 500mg
Product or the 1000mg Product if the other Party is in material breach or
default in the performance or observance of any of the provisions of this
Agreement applicable to it and relating to the product in respect of which
termination of this Agreement is sought, and such breach or default is not cured
within sixty days (or thirty days in the case of failure to make royalty or
other payments due hereunder) after the giving of notice by the Party specifying
such breach or default.

 

11.3                           At any time during the Term of this Agreement,
either Depomed or BLS may terminate this Agreement forthwith for cause, as
“Cause” is described below, by giving written notice to the other Party. “Cause”
for termination by one Party of this Agreement shall be deemed to exist if, with
respect to the other Party:

 

(a)                                  (i) a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
instituted by such Party, or such Party shall consent to the entry of any order
for relief in an involuntary case under any such law; (ii) a general assignment
for the benefit of creditors shall be made by such Party; (iii) such Party shall
consent to the appointment of or possession by a receiver, liquidation, trustee,
custodian, sequestrator or similar official of the property of such Party or of
any substantial part of its property; or (iv) such Party shall adopt a directors
resolution in furtherance of any of the foregoing actions specified in this
subsection (a); or

 

(b)                                 a decree or order for relief by a court of
competent jurisdiction shall be entered in respect of such Party in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, trustee,
sequestrator or other similar official of such Party to wind up or

 

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liquidate its affairs, and any such decree or order shall remain unstayed or
undischarged and in effect for a period of sixty days.

 

11.4                           Upon termination by BLS for Cause, Depomed shall,
at the request of BLS, assign to BLS the Regulatory Approval for the 1000mg
Product in the Territory, within ten (10) days after BLS has paid to Depomed all
of the costs incurred by Depomed in obtaining Regulatory Approval of the 1000mg
Product in the Territory.

 

11.5                           Except as set forth in Sections 11.1 and 11.4,
upon termination of this Agreement pursuant to Section 11.2, the licenses
granted to Depomed in Sections 2.1 and 2.2 of this Agreement shall terminate.
Notwithstanding such termination, and subject to the terms and conditions of
this Agreement, Depomed may dispose of, by sale or otherwise, any remaining
inventory of 1000mg Product that Depomed may have in its possession or control
on the date of termination.

 

11.6                           Termination shall not release Depomed or BLS from
any obligations or liabilities that matured prior to termination, including
without limitation the obligations of Depomed to make any payments owing at the
time of termination through the date of termination. If the terms of this
Agreement expressly state that a right or obligation shall survive expiration or
termination of this Agreement, such right or obligation shall survive expiration
or termination to the degree necessary to allow complete fulfilment or discharge
of the right or obligation. The provisions of Articles 6.1 - 6.5, 7, 8, 9 and 12
of this Agreement shall survive the expiration or termination of this Agreement.

 

11.7                           In the event of termination or expiration, each
of BLS and Depomed shall retain ownership of the ideas, inventions, discoveries,
developments, designs, trademarks, trade secrets, improvements, know-how,
process, procedures, techniques, formulae, computer programs, drawings,
technology(ies) and intellectual and industrial property accorded to each under
the terms of this Agreement.

 

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12.                               PUBLICITY

 

12.1                           Neither Party will originate any publicity, news
release, public comment or other public announcement, written or oral, whether
to the press, to stockholders, or otherwise, relating to this Agreement, without
the written consent of the other Party, except for such announcement which, in
accordance with the advice of legal counsel to the Party making such
announcement, is required by law or the regulations of the securities exchange
or market on which the disclosing Party’s securities are traded. The Party
making any announcement which is required by law or the regulations of the
securities exchange or market on which the disclosing Party’s securities are
traded will, unless prohibited by law, give the other Party an opportunity to
review the form and content of such announcement and comment before it is made.
Either Party shall have the right to make such filings with governmental
agencies as to the contents and existence of this Agreement as it shall
reasonably deem necessary or appropriate.

 

13.                               ASSIGNABILITY

 

13.1                           This Agreement may be assigned by either Party to
an Affiliate or as part of the sale by either Party of all of its business of
which this Agreement may be a part without the consent of the other Party;
provided, however, that neither Party shall assign this Agreement to an
Affiliate that is not reasonably capable of performing all of its obligations
under this Agreement. Except as permitted by this Section 13.1, Depomed shall
not assign any rights licensed to BLS under this Agreement. BLS may assign,
sublicense, subcontract or delegate, to any Affiliate of BLS reasonably capable
of performing such obligations, all or part of the rights and obligations of BLS
under this Agreement, but in no event shall such assignment, sublicensing,
subcontracting or delegation be deemed to relieve BLS of its liabilities or
obligations to Depomed under this Agreement. BLS expressly acknowledges and
agrees that BLS shall remain fully and unconditionally obligated and responsible
for the full and complete performance of all of BLS’s obligations under the
terms and conditions of this Agreement. This Agreement

 

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may not otherwise be assigned by either Party without the prior written consent
of the other Party, which consent shall not be unreasonably withheld.

 

13.2                           No assignment permitted by this Article 13 to an
Affiliate of either Party shall serve to release either Party from liability for
the performance of its obligations hereunder.

 

14.                               PATENT LIFE EXTENSION

 

Each Party undertakes to inform the other Party of:

 

(a)                                  the date of filing any Applicable Permit
covering 1000mg Product in a given country;

 

(b)                                 the date of approval by the FDA or its
equivalent from the relevant authority in the country, if required;

 

(c)                                  the date of obtaining Product approval (or
equivalent authorization) from the FDA or its equivalent in a given country;

 

(d)                                 if applicable, the date of obtaining the
price approval in a given country as well as the amount of the price approval
with regard to any such country;

 

(e)                                  the date of the first sale of 1000mg
Product in a given country; and

 

(f)                                    any events which might be material to the
other Party in connection with a possible extension of the patent protection
term.

 

15.                               NOTICES

 

15.1                           All notifications, demands, approvals and
communications required to be made under this Agreement shall be given in
writing and shall be effective when either personally delivered or sent by
facsimile if followed by prepaid air express addressed as set forth below. The
Parties hereto shall have the right to notify each other of changes of address
during the Term of this Agreement.

 

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Depomed, Inc.
1360 O’Brien Drive
Menlo Park, California 94025
Attention: President

 

Facsimile: 650-462-9991

 

With a copy to:

 

Heller Ehrman LLP
275 Middlefield Road
Menlo Park, California 94025
Attention:  Matthew Gosling
Facsimile: 650-324-0638

 

Biovail Laboratories International SRL
Chelston Park
Building 2, Collymore Rock
St. Michael BH1
Barbados, West Indies

 

Attention: Mr. Eugene Melnyk, President
Facsimile No.: (246) 437-7085

 

With a copy to:

 

Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
L5N 8M5

 

Attention: Vice President, Associate General Counsel
Facsimile: 905 286 3374

 

Any such notice mailed as aforesaid shall be deemed to have been received by and
given to the addressee on the date specified on the notice of receipt and
delivery evidenced to the sender.

 

16.                               FORCE MAJEURE

 

16.1                           In the event of any failure or delay in the
performance by a Party of any provision of this Agreement due to acts beyond the
reasonable control of such Party (such as, for example,

 

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fire, explosion, strike or other difficulty with workmen, shortage of
transportation equipment, accident, act of God, or compliance with or other
action taken to carry out the intent or purpose of any law or regulation, or an
order or judgment of any court of competent jurisdiction, whether interim,
temporary, interlocutory or permanent), then such Party shall have such
additional time to perform as shall be reasonably necessary under the
circumstances. In the event of such failure or delay, the affected Party will
use its diligent efforts, consonant with sound business judgment and to the
extent permitted by law, to correct such failure or delay as expeditiously as
possible.

 

16.2                           In the event that a Party is unable to
perform any of its obligations under this Agreement by a reason described in
Section 16.1 above, the obligations under this Agreement shall be suspended
during such time of non-performance.

 

17.                               MISCELLANEOUS

 

17.1                           This Agreement and the Supply Agreement define
the full extent of the legally enforceable undertakings of the Parties hereto
with respect to the Manufacture and Marketing of the 500mg Product and the
1000mg Product for and in the Territory as of and after the Effective Date, and
with respect to the rights and obligations of the Parties relating the
Manufacture and Marketing of the 500mg Product and the 1000mg Product for and in
the Territory after the Effective Date, supersedes all previous writings and
understandings. No terms or provisions of this Agreement shall be varied or
modified by any prior or subsequent statement, conduct or act of either of the
Parties, except that the Parties may amend this Agreement by written instruments
specifically referring to and executed in the same manner as this Agreement.
Nothing in this Agreement affects any rights or obligations of the Parties
relating to the Manufacture or Marketing of the 500mg Product for or in the
Territory prior to the Effective Date, and except as otherwise expressly
provided by this Agreement, none of the rights or obligations of the Parties
under the Prior Agreement, any amendments thereto or any other agreements
between the Parties relating to the 500mg Product in the Territory prior to the
Effective Date are

 

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affected by this Agreement, provided, however, that no such rights or
obligations created or arising prior to the Effective Date shall continue in
force after the Effective Date except as expressly provided in this Agreement.
No promise or representation, written or oral, with respect to the subject
matter hereof which is not set forth explicitly in this Agreement is intended by
either Party to be legally binding. Both Parties acknowledge that in deciding to
enter into this Agreement and to consummate the transactions contemplated
hereby, neither has relied upon any statements or representations, written or
oral, other than those explicitly set forth in this Agreement.

 

17.2                           It is the desire and intent of the Parties that
the provisions of this Agreement shall be enforced to the extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement which substantially affects the commercial basis of this Agreement
shall be determined to be invalid or unenforceable, such provision shall be
amended as hereinafter provided to delete therefrom or revise the portion thus
determined to be invalid or unenforceable. Such amendment shall apply only with
respect to the operation of such provision of this Agreement in the particular
jurisdiction for which such determination is made, provided no unfairness
results. In such event, the Parties agree to use reasonable efforts to agree on
substitute provisions, which, while valid, will achieve as closely as possible
the same economic effects or commercial basis as the invalid provisions, and
this Agreement otherwise shall continue in full force and effect. If the Parties
cannot agree to such revision within sixty days after such invalidity or
unenforceability is established, the matter may be submitted by either Party to
arbitration as provided in this Agreement to finalize such revision.

 

17.3                           The waiver by a Party of any single default or
breach or succession of defaults or breaches by the other shall not deprive
either Party of any right under this Agreement arising out of any subsequent
default or breach.

 

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17.4                           All matters affecting the interpretation,
validity, and performance of this Agreement shall be governed by the laws of the
State of New York without regard to that state’s conflict of laws rules or
principles.

 

17.5                           Nothing in this Agreement authorizes either Party
to act as agent for the other Party as to any matter. The relationship between
BLS and Depomed is that of independent contractors.

 

17.6                           Any and all disputes between the Parties relating
in any way to the entering into of this Agreement and/or the validity,
construction, meaning, enforceability, or performance of this Agreement or any
of its provisions, or the intent of the Parties in entering into this Agreement,
or any of its provisions arising under this Agreement, except for any disputes
relating to the provisions of Articles 5, 7, 8 and 11, shall be settled by
binding arbitration. Such arbitration shall be conducted at New York, New York,
in accordance with the rules then pertaining of the American Arbitration
Association with a panel of three arbitrators. Each Party shall select one
arbitrator and the two selected arbitrators shall select the third arbitrator.
If the two selected arbitrators cannot agree on a third arbitrator then the
American Arbitration Association shall select said arbitrator from the National
Panel of Arbitrators. Reasonable discovery as determined by the Arbitrators
shall apply to the arbitration proceeding. The law of the State of New York
shall apply to the arbitration proceedings. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. The
successful Party in such arbitration, in addition to all other relief provided,
shall be entitled to an award of all its reasonable costs and expenses including
attorney costs. Both Parties agree to waive, and the Arbitrators shall have no
right to award, punitive damages in connection with an arbitration proceeding
hereunder.

 

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by their duly authorized officers on the date first above written.

 

 

 

DEPOMED, INC.

 

 

 

 

 

By:

/s/ Carl A. Pelzel

 

Name:

Carl A. Pelzel

 

Title:

Executive Vice President & COO

 

 

 

 

 

BIOVAIL LABORATORIES

 

INTERNATIONAL SRL

 

 

 

 

 

By:

/s/ John A.R. McCleery

 

Name:

John A.R. McCleery

 

Title:

Vice President, General Manager

 

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Schedule 1.20

 

Patent Rights - Patents and Patent Applications

 

[***]

 

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