EXHIBIT 10.43



 



Exhibit 10.43


Confidential


EXECUTION COPY


DEVELOPMENT AND MARKETING


STRATEGIC ALLIANCE AGREEMENT


AMONG


ENDO PHARMACEUTICALS INC.


SKYEPHARMA, INC.


AND


SKYEPHARMA CANADA INC.


DATED AS OF


December 31, 2002


The confidential portions of this exhibit have been filed
separately with the Securities and Exchange Commission pursuant to
a confidential treatment request in accordance with Rule 24b-2 of
the Securities and Exchange Act of
1934, as amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY
AN ***.


 






 


Table of Contents



	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	1.	 	DEFINITIONS	 	 
	2.	 	THE DEVELOPMENT AND COMMERCIALIZATION PROGRAMS	 	 
	 	 	
2.1
	 	Overview of the Development Programs and Annual Development Plans	 	 
	 	 	
2.2
	 	SkyePharma Responsibilities under each Development Program	 	 
	 	 	
2.3
	 	Endo Responsibilities under each Development Program	 	 
	 	 	
2.4
	 	Overview of the Commercialization Programs	 	 
	 	 	
2.5
	 	Endo Responsibilities under each Commercialization Program	 	 
	 	 	
2.6
	 	SkyePharma Responsibilities under each Commercialization Program	 	 
	 	 	
2.7
	 	Conduct of Development Program and Commercialization Activities	 	 
	 	 	
2.8
	 	Recall	 	 
	 	 	
2.9
	 	Allocation of Payment Responsibilities under the
Development Programs and Commercialization Programs	 	 
	 	 	
2.10
	 	DepoBupivacaine Option	 	 
	 	 	
2.11
	 	DepoFoam-Pain Right of First Negotiation	 	 
	 	 	
2.12
	 	Mutual Expansion of Indications	 	 
	 	 	
2.13
	 	Supply Agreements and Quality Agreements	 	 
	3.	 	GOVERNANCE	 	 
	 	 	
3.1
	 	Joint Executive Committee	 	 
	 	 	
3.2
	 	Responsibilities of the Joint Executive Committee	 	 
	 	 	
3.3
	 	Meetings	 	 
	 	 	
3.4
	 	Decision-making	 	 
	 	 	
3.5
	 	Product Development Committee	 	 
	 	 	
3.6
	 	Joint Manufacturing Committee	 	 
	 	 	
3.7
	 	Committee Terms	 	 
	 	 	
3.8
	 	Expenses	 	 
	 	 	
3.9
	 	Alliance Managers	 	 
	4.	 	FEES, MILESTONES, AND FUNDING	 	 



-i-






 


Table of Contents

(Continued)



	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	
4.1
	 	Up-front Payment
	 	 
	 	 	
4.2
	 	Milestone Payments	 	 
	 	 	
4.3
	 	Sales Split	 	 
	 	 	
4.4
	 	Bartering Prohibited	 	 
	 	 	
4.5
	 	Bundling	 	 
	5.	 	PAYMENTS AND REPORTS	 	 
	 	 	
5.1
	 	Payments	 	 
	 	 	
5.2
	 	Sales Split Payments	 	 
	 	 	
5.3
	 	Mode of Payment	 	 
	 	 	
5.4
	 	Records Retention	 	 
	 	 	
5.5
	 	Payment and Other Audits	 	 
	 	 	
5.6
	 	Taxes	 	 
	6.	 	GRANT OF RIGHTS; RESTRICTIONS; OWNERSHIP; PATENTS	 	 
	 	 	
6.1
	 	License Grant to Endo	 	 
	 	 	
6.2
	 	License Grant to SkyePharma	 	 
	 	 	
6.3
	 	Retained Rights of SkyePharma	 	 
	 	 	
6.4
	 	Sublicensing; Subcontracting	 	 
	 	 	
6.5
	 	Restriction on Activities	 	 
	 	 	
6.6
	 	Ownership	 	 
	 	 	
6.7
	 	Patent Prosecution and Maintenance	 	 
	 	 	
6.8
	 	Patent and Trademark Enforcement	 	 
	 	 	
6.9
	 	Infringement Actions by Third Parties	 	 
	 	 	
6.10
	 	Federal Food, Drug and Cosmetic Act	 	 
	7.	 	ADVERSE REACTION REPORTING	 	 
	 	 	
7.1
	 	Adverse Reaction Reporting	 	 
	8.	 	REPRESENTATIONS AND WARRANTIES AND CONVENANTS	 	 
	 	 	
8.1
	 	Representations and Warranties of Both Parties	 	 
	 	 	
8.2
	 	Representations and Warranties of SkyePharma	 	 



-ii-






 


Table of Contents

(Continued)



	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	
9.1
	 	Notification and Review with Respect to SkyePharma and Endo	 	 
	 	 	
8.3
	 	Disclaimer
	 	 
	 	 	
8.4
	 	Freedom to Operate	 	 
	 	 	
8.5
	 	Negative Pledge	 	 
	9.	 	PUBLICATION; CONFIDENTIALITY	 	 
	 	 	
9.1
	 	Notification and Review with Respect to SkyePharma and Endo	 	 
	 	 	
9.2
	 	Confidentiality; Exceptions	 	 
	 	 	
9.3
	 	Exceptions to Obligation	 	 
	 	 	
9.4
	 	Remedies	 	 
	10.	 	INDEMNIFICATION; INSURANCE	 	 
	 	 	
10.1
	 	By SkyePharma	 	 
	 	 	
10.2
	 	By Endo	 	 
	 	 	
10.3
	 	Notice	 	 
	 	 	
10.4
	 	Complete Indemnification	 	 
	 	 	
10.5
	 	Insurance	 	 
	11.	 	TERM; TERMINATION	 	 
	 	 	
11.1
	 	Term	 	 
	 	 	
11.2
	 	Termination for Cause	 	 
	 	 	
11.3
	 	Termination in Connection with Bankruptcy	 	 
	 	 	
11.4
	 	Termination For Delay	 	 
	 	 	
11.5
	 	Termination For Failure to Achieve the Target Labeling	 	 
	 	 	
11.6
	 	Long-Term Inability to Supply	 	 
	 	 	
11.7
	 	Safety	 	 
	 	 	
11.8
	 	Other Termination	 	 
	 	 	
11.9
	 	Effect of Expiration or Termination	 	 
	 	 	
11.10
	 	Accrued Rights; Surviving Obligations	 	 
	12.	 	FORCE MAJEURE	 	 
	13.	 	MISCELLANEOUS	 	 
	 	 	
13.1
	 	Relationship of Parties	 	 



-iii-






 


Table of Contents

(Continued)



	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	
13.2
	 	Assignment
	 	 
	 	 	
13.3
	 	Books and Records	 	 
	 	 	
13.4
	 	Further Actions	 	 
	 	 	
13.5
	 	Notice	 	 
	 	 	
13.6
	 	Use of Name	 	 
	 	 	
13.7
	 	Public Announcements	 	 
	 	 	
13.8
	 	Waiver	 	 
	 	 	
13.9
	 	Compliance with Law	 	 
	 	 	
13.10
	 	Severability	 	 
	 	 	
13.11
	 	Amendment	 	 
	 	 	
13.12
	 	Governing Law	 	 
	 	 	
13.13
	 	Arbitration	 	 
	 	 	
13.14
	 	Endo Right to Cure SkyePharma Breach	 	 
	 	 	
13.15
	 	Nature of Licenses	 	 
	 	 	
13.16
	 	Entire Agreement	 	 
	 	 	
13.17
	 	Liability Limitation	 	 
	 	 	
13.18
	 	Parties in Interest	 	 
	 	 	
13.19
	 	Descriptive Headings	 	 
	 	 	
13.20
	 	Counterparts	 	 




	 	 	 	 	 
	EXHIBIT A	 	
FINANCIAL APPENDIX
	 	A-1
	EXHIBIT B	 	
TARGET LABELING
	 	A-6
	EXHIBIT C	 	
FORM OF PROPOFOL SUPPLY AGREEMENT
	 	A-7
	SCHEDULE 3	 	
INITIAL MEMBERS OF JOINT EXECUTIVE COMMITTEE
	 	A-8
	SCHEDULE 8.1(e)	 	
SCHEDULE OF EXCEPTIONS
	 	A-9



-iv-






 



DEVELOPMENT, MARKETING AND STRATEGIC ALLIANCE AGREEMENT


December 31, 2002 (the “Effective Date”)


     THIS DEVELOPMENT, MARKETING AND STRATEGIC ALLIANCE AGREEMENT (this
“Agreement”), dated as of the date first written above, is entered into by and
among Endo Pharmaceuticals Inc., a corporation organized and existing under the
laws of Delaware, having offices located at 100 Painters Drive, Chadds Ford, PA
19317 (“Endo”), SkyePharma, Inc., a corporation organized and existing under
the laws of the State of California, having offices located at 10450 Science
Center Drive, San Diego, CA 92121, for itself and on behalf of its
subsidiaries, if any, and SkyePharma Canada Inc., a corporation organized and
existing under the laws of Canada, having offices located at 1000 chemin du
Golf, Verdun, Quebec, H3E 1H4 Canada, for itself and on behalf of its
subsidiaries (collectively, SkyePharma, Inc., SkyePharma Canada Inc. and the
subsidiaries of SkyePharma, Inc. and SkyePharma Canada Inc., “SkyePharma”).


PRELIMINARY STATEMENTS


     A.     SkyePharma owns and has all right, title and interest in, or has
acquired the exclusive rights to, the SkyePharma Product IP and SkyePharma
Product Patents.


     B.     SkyePharma and Endo collectively possess specialized skills, knowledge,
and expertise in the development, marketing and sale of products used in the
treatment of pain and desire to enter into a strategic alliance regarding the
further development and the marketing of certain such products.


     C.     SkyePharma desires to continue its development of the Products and to
apply its skills, knowledge and expertise toward obtaining the regulatory
approval of such Products under the terms and conditions set forth in this
Agreement.


     D.     Endo desires to apply its skills, knowledge, and expertise in the
marketing and sale of such Products under the terms and conditions set forth in
this Agreement.


     E.     Endo desires to obtain an exclusive license to sell, offer to sell,
import, and distribute such Products in the Territory, and SkyePharma desires
to grant such exclusive license to Endo, pursuant to the terms and conditions
of this Agreement.


     F.     Endo desires to obtain from SkyePharma, and SkyePharma desires to
provide to Endo, such Products in finished form to meet Endo’s commercial
requirements for such Products, pursuant to the terms and subject to the
conditions of (i) supply agreements by and between Endo and SkyePharma, Inc.
(each such agreement, a “Supply Agreement”) and (ii) quality agreements
governing the quality control procedures to be employed during the manufacture
of the Products (each such agreement, a “Quality Agreement”).


     NOW, THEREFORE, in consideration of the foregoing Preliminary Statements
and the mutual agreements and covenants set forth herein, intending to be
legally bound hereby, the Parties hereby agree as follows:


 






 


1. DEFINITIONS.


     As used in this Agreement and unless otherwise defined herein, the
following terms shall have the meanings set forth in this Section 1:


     "Adjusted $40 Million Milestone” shall have the meaning assigned to such
term in Section 4.2.


     "Agreement” shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.


     "Affiliate,” with respect to any Party, shall mean any entity controlling,
controlled by, or under common control with, such Party, for only so long as
such control exists. For these purposes, “control” shall refer to: (i) the
possession, directly or indirectly, of the power to direct the management or
policies of an entity, whether through the ownership of voting securities, by
contract or otherwise, or (ii) the beneficial ownership, directly or
indirectly, of more than 50% of the voting securities or other ownership
interest of an entity.


     "Alliance Manager” shall have the meaning assigned to such term in Section
3.9.


     "Allocable Overhead” shall have the meaning assigned to such term in the
Financial Appendix.


     "Annual Commercialization Plan” shall mean, as applicable, each plan and
budget defined in Section 2.4(d) and, when used in the plural, shall mean all
such plans and budgets.


     "Annual Development Plan” shall mean, as applicable, each plan defined in
Section 2.1(b) and, when used in the plural, shall mean all such plans.


     "Audited Party” shall have the meaning assigned to such term in Section
5.5(a).


     "Auditing Party” shall have the meaning assigned to such term in Section
5.5(a).


     "Bankruptcy Case” shall mean a bankruptcy case (whether for liquidation or
reorganization) under the Bankruptcy Laws with respect to SkyePharma, Inc.,
SkyePharma Canada, Inc. or any of their respective Affiliates, successors or
assignees.


     "Bankruptcy Laws” shall mean Title 11 of the United Stated Code, 11 U.S.C.
§§ 101-1330, as it may be amended from time to time, any successor statute or
any applicable state or foreign laws relating to bankruptcy, dissolution,
liquidation, winding up or reorganization.


     "Bankruptcy Rejection” shall mean the entry of an order in a Bankruptcy
Case authorizing the rejection of this Agreement, a Supply Agreement, a Quality
Agreement or a Third Party Manufacturing Agreement, or any material portion of
any such agreement, by SkyePharma, Inc., SkyePharma Canada, Inc. or any of
their respective Affiliates, successors or assignees, as debtor-in-possession
or by such entity’s bankruptcy trustee or any other person or entity authorized
to exercise rejection rights under 11 U.S.C.§365 or any other successor
statute; provided, however,


-2-






 




 that nothing in this Agreement shall be deemed an acknowledgement by any
Party hereto that this Agreement, a Supply Agreement, a Quality Agreement or a
Third Party Manufacturing Agreement may be rejected under the Bankruptcy Laws.


     "Breaching Party” shall have the meaning assigned to such term in Section
11.2.


     "Canada” shall mean Canada, including its possessions and territories.


     "cGMP” shall mean current Good Manufacturing Practice as defined in Parts
210 and 211 of Title 21 of the Code of Federal Regulations, as may be amended
from time to time, or any successor thereto.


     "Commercialization Program” shall mean, as applicable, each
Commercialization Program defined in Section 2.4(a) and, when used in the
plural, shall mean all Commercialization Programs for all Products.


     "Confidential Information” shall have the meaning assigned to such term in
Section 9.2.


     "Cure Product” shall have the meaning assigned to such term in Section
2.5(b)(iii).


     "Cure Sales Activities” shall have the meaning assigned to such term in
Section 2.5(b)(iii).


     "Cure Time Period” shall have the meaning assigned to such term in Section
2.5(b)(iii).


     "Damages” shall have the meaning assigned to such term in Section 10.1.


     "DepoBupivacaine” shall mean ***.


     "DepoBupivacaine Notice” shall have the meaning assigned to such term in
Section 2.10.


     "DepoMorphine” shall mean ***.


     "Development Costs” shall have the meaning assigned to such term in the
Financial Appendix.


     "Development Field” shall mean (a) with respect to DepoMorphine, ***, (b)
with respect to Propofol IDD-D, ***, and (c) any other uses of DepoMorphine or
Propofol IDD-D that are agreed upon by the Parties pursuant to Section 2.12.


     "Development Program” shall mean, as applicable, each Development Program
defined in Section 2.1 and, when used in the plural, shall mean all Development
Programs for all Products.


     "Distribution Costs” shall have the meaning assigned to such term in the
Financial Appendix.


-3-






 


     "Endo” shall have the meaning assigned to such term in the introductory
paragraph of this Agreement.


     "Effective Date” shall mean the date first written above.


     "Exclusivity Field” shall mean ***.


     "Executive Officers” shall have the meaning assigned to such term in
Section 3.4(b).


     "Expert” shall have the meaning set forth in Section 13.13(b)(i).


     "FDA” shall mean the United States Food and Drug Administration or any
successor agency.


     "Financial Appendix” shall mean Exhibit A hereto.


     "First Commercial Sale” shall have the meaning assigned to such term in
the Financial Appendix.


     "Freedom to Operate Opinions” shall mean those legal opinions delivered by
SkyePharma to Endo prior to the Effective Date rendered by SkyePharma’s outside
intellectual property counsel relating to whether the Parties are free to make,
have made, use, sell, offer for sale and import the Products as contemplated by
this Agreement without infringing on any Third Party’s intellectual property
rights.


     "Fully Loaded Costs” shall have the meaning assigned to such term in the
Financial Appendix.


     "GAAP” shall mean, with respect to Endo and SkyePharma, Inc., generally
accepted accounting principles in the United States, consistently applied, and,
with respect to SkyePharma Canada Inc. and its consolidated Canadian
subsidiaries, generally accepted accounting principles in Canada, consistently
applied.


     "HSR” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.


     "IND” shall mean, with respect to the U.S., an effective Notice of a
Claimed Investigational New Drug Exemption as defined in Title 21 of the Code
of Federal Regulations, and, with respect to every other country in the
Territory, the equivalent of such notice for such country, in each case
required to be on file with the applicable Regulatory Authority in such country
prior to the commencement of clinical trials of a product in humans in such
country.


     "Indemnitee” shall have the meaning assigned to such term in Section 10.3.


     "Infringement” shall have the meaning assigned to such term in Section
6.8(a).


     "Invention” shall mean any new or useful process, compound, composition of
matter, method of use or Know-how, whether or not patentable, related to the
Products, and any


-4-






 




 improvement, enhancement, modification or derivative work to any
SkyePharma IP; in each case, conceived or first reduced to practice or first
demonstrated to have utility during the term of this Agreement by either Party
or either Party’s Affiliates, Sublicensees or Subcontractors in connection with
the development or commercialization activities contemplated in this Agreement.


     "Inventory Write-offs” shall have the meaning assigned to such term in the
Financial Appendix.


     "Joint Executive Committee” or “JEC” shall have the meaning assigned to
such term in Section 3.1.


     "Joint Manufacturing Committee” or “JMC” shall have the meaning assigned
to such term in Section 3.6(a).


     "Know-how” shall mean any and all unpatented formulae, processes, trade
secrets, technologies and know-how, whether or not patentable, including,
without limitation, synthesis, preparation, recovery and purification processes
and techniques, control methods and assays, chemical data, toxicological and
pharmacological data and techniques, clinical data, medical uses, product forms
and product formulations and specifications.


     "Long-Term Inability to Supply” shall, with respect to a Product, have the
meaning assigned to such term in the applicable Supply Agreement.


     "Manufacturing Standards” shall mean, with respect to a Product, cGMP and
such additional manufacturing specifications or standards as may be established
by the JMC from time to time.


     "Marketing Costs” shall have the meaning assigned to such term in the
Financial Appendix.


     "Marketing Trials” shall have the meaning assigned to such term in the
Financial Appendix.


     "Net Purchases” shall have the meaning assigned to such term in the
Financial Appendix.


     "Net Sales” shall have the meaning assigned to such term in the Financial
Appendix.


     "New Indication” shall have the meaning assigned to such term in Section
2.12.


     "New Indication Development” shall have the meaning assigned to such term
in Section 2.12.


     "Non-breaching Party” shall have the meaning assigned to such term in
Section 11.2.


     "Original $40 Million Milestone” shall have the meaning assigned to such
term in Section 4.2.



-5-










 



     “Party” shall mean, as applicable, SkyePharma or Endo and, when used in
the plural, shall mean SkyePharma and Endo.


     “Patents” shall mean the patents and patent applications in any country in
the Territory, together with any patents that may issue therefor in any country
in the Territory, including any and all extensions, renewals, continuations,
continuations-in-part, divisions, patents-of-additions, reissues, supplementary
protection certificates or foreign counterparts of any of the foregoing and any
patents based on applications that claim priority from any of the foregoing;
and a “Patent” shall be any one of the foregoing.


     “Payment Period” shall have the meaning assigned to such term in Section
5.2.


     “Person” shall mean an individual or a corporation, partnership,
association, trust, or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.


     “Product” shall mean, as applicable, DepoMorphine or Propofol IDD-D, and,
when used in the plural, shall mean DepoMorphine and Propofol IDD-D; in each
case for application only in their respective Target Indications.


     “Product Development Committee” or “PDC” shall have the meaning given to
such term in Section 3.5(a).


     “Product Price” shall have the meaning assigned to such term in the
Financial Appendix.


     “Propofol” shall mean the nonbarbiturate sedative/anesthetic propofol.


     “Propofol IDD-D” shall mean ***.


     “Quality Agreement” shall have the meaning assigned to such term in the
Preliminary Statements and Section 2.13.


     “Registration” shall mean, with respect to each country in the Territory,
final approval of the Registration Application for a Product in such country,
which approval would allow the immediate marketing and sale of such Product in
such country.


     “Registration Application” shall mean any filing(s) made with the
Regulatory Authority in any country in the Territory for regulatory approval of
the manufacture and sale, and pricing when applicable, of a Product in such
country.


     “Regulatory Authority” shall mean any United States or Canadian domestic
(federal or state) or foreign court, commission or governmental, regulatory or
administrative body, board, bureau, agency, instrumentality, authority or
tribunal or any subdivision thereof, including, but not limited to, the FDA and
the authority(ies) in each country in the Territory that are comparable to the
FDA and have responsibility for granting regulatory approval for the
manufacture, use and sale of a Product in such country, including but not
limited to pricing and reimbursement approvals.


-6-






 


     “Regulatory Documentation” shall mean all submissions to Regulatory
Authorities, including clinical studies, tests, and biostudies, relating to the
Products, including all INDs and NDAs, as well as all correspondence with
Regulatory Authorities (registration and licenses, regulatory drug lists,
advertising and promotion documents), adverse event files, complaint files,
manufacturing records and inspection reports.


     “Sales Costs” shall have the meaning assigned to such term in the
Financial Appendix.


     “Serious Adverse Drug Experience” shall have the meaning assigned to such
term in Section 7.1(b).


     “Shortfall” shall have the meaning assigned to such term in Section
2.5(b)(iii).


     “SkyePharma” shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.


     “SkyePharma IP” shall mean all Know-how, trademarks and Patents owned or
licensed by SkyePharma.


     “SkyePharma Product IP” shall, with respect to a Product, mean all
Know-how and trademarks owned or licensed by SkyePharma, to the extent related
to such Product.


     “SkyePharma Product Patents” shall, with respect to a Product, mean all
claims set forth in the Patents owned or licensed by SkyePharma which are
infringed by the making, having made, using, selling, offering for sale or
importing of such Product.


     “Special Arbitration Provisions” shall have the meaning assigned to such
term in Section 13.13(b).


     “Subcontractor” shall mean a Third Party with which a Party has entered
into a contractual arrangement through which certain activities for which such
Party is responsible under this Agreement shall be carried out on behalf of
such Party in accordance with Section 6.4.


     “Sublicensee” shall mean a Third Party to which a Party has granted a
sublicense under a license granted under this Agreement.


     “Sufficient Supply” shall mean, with respect to a Product, at least *** of
the commercial launch supplies of such Product as ordered by Endo in accordance
with the applicable Supply Agreement.


     “Supply Agreement” shall have the meaning assigned to such term in the
Preliminary Statements and Section 2.13.


     “Target Indications” shall have the meaning assigned to such term in
Section 2.1(c).


     “Target Labeling” shall have the meaning assigned to such term in Section
2.1(c).


     “Territory” shall mean the U.S. and Canada.


-7-






 


     “Third Party” shall mean any person who or which is neither a Party nor an
Affiliate of a Party.


     “United States” or “U.S.” shall mean the United States of America,
including its possessions and territories.


     “Units” shall have the meaning assigned to such term in the Financial
Appendix.


     “Valid Claim” shall mean any claim of any Patent issued or pending in a
country in the Territory, which claim has not been held invalid or
unenforceable by decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal,
and which is not admitted to be invalid in a legally binding manner (through
disclaimer or otherwise).



	2.	 	THE DEVELOPMENT AND COMMERCIALIZATION PROGRAMS.



     2.1 Overview of the Development Programs and Annual Development Plans.


          (a) The “Development Program” for a Product with respect to each country
in the Territory shall be comprised of all research, development, and
regulatory activities related to such Product in the applicable Development
Field in the applicable country in the Territory up through the first
Registration of such Product in such country in the Territory and all filings,
reports and related regulatory interactions and Phase IV studies required by a
Regulatory Authority to maintain such first Registration. For the avoidance of
doubt, the scope of each Development Program of a Product shall at all times be
limited to the Target Indications applicable to such Product and shall not
extend to any other indication unless such indication becomes a Target
Indication pursuant to Section 2.12. SkyePharma shall be solely responsible
for the execution of all Development Programs.



          (b) For each Product through such Product’s first Registration and
completion of any Phase IV studies required by a Regulatory Authority to
maintain such first Registration, SkyePharma shall prepare and deliver to the
JEC a proposed Annual Development Plan for each calendar year. SkyePharma
shall deliver the initial proposed Annual Development Plan to the JEC as soon
as practicable following the Effective Date (but no later than March 1, 2003),
and thereafter, each successive proposed Annual Development Plan shall be due
not later than November 1st of each calendar year during the Development
Program (for the immediately following calendar year). For purposes hereof, a
“Annual Development Plan” shall mean a plan of the research, development, and
regulatory activities to be undertaken during the upcoming calendar year as
part of each Product’s Development Program and shall be prepared by SkyePharma
and subject to the approval of JEC in accordance with this Agreement. Such
Annual Development Plan shall include a description of the goals and scope of
such actions and a timeline and budget for undertaking the same. Once an
Annual Development Plan with respect to a Product proposed by SkyePharma has
been approved by the JEC pursuant to this Agreement, it shall be deemed an
“Annual Development Plan” for such Product.



-8-






 





          (c) The initial indications and labeling that will be pursued in the
course of the Development Program for each Product is set forth on Exhibit B
(the “Target Indications” and “Target Labeling”, respectively). From time to
time, the parties may add to or otherwise change the Target Labeling for each
Product only pursuant to Section 2.12, or otherwise by mutual written
agreement.



     2.2 SkyePharma Responsibilities under each Development Program. As part
of the Development Program for a particular Product, in accordance with the
applicable Annual Development Plan, SkyePharma shall:


          (a) use commercially reasonable efforts to conduct such research and
development activities necessary or desirable to obtain Registration approval
for the Products for the Target Indications in the applicable country in the
Territory, all as approved by the Joint Executive Committee, including without
limitation, formulation development, pre-Registration clinical trials,
toxicology studies and post-Registration studies required to be conducted by
Regulatory Authorities to maintain the first Registration of the Product;



          (b) use commercially reasonable efforts to manufacture, or have
manufactured, and supply the Product(s) in bulk form for use in the Development
Programs;



          (c) use commercially reasonable efforts to consult with and keep the PDC
informed during the Development Program through regular, periodic written
reports, which may be brief summaries, to be delivered at least once in each
calendar quarter, of all development progress made by SkyePharma in such
calendar quarter with respect to all Products;



          (d) prepare, file and maintain with the applicable Regulatory Authorities
those regulatory filings (approved by the Joint Executive Committee) to obtain
and maintain the first Registration necessary to market and sell the Products
for the Target Indications in the applicable country in the Territory;



          (e) conduct the Development Program in good scientific manner, and in
compliance in all material respects with all requirements of applicable laws,
rules and regulations, and all other requirements of any applicable cGMP, good
laboratory practice and current good clinical practice to use commercially
reasonable efforts to achieve the objectives of the Development Programs
efficiently and expeditiously;



          (f) maintain records, in sufficient detail and in good scientific manner,
which shall be complete and accurate and shall fully and properly reflect all
work done and results achieved in connection with the Development Programs in
the form required under all applicable laws and regulations. Endo shall have
the right, during normal business hours and upon reasonable prior written
notice, to inspect all such records at its own expense, so long as doing so is
not unreasonably disruptive. Endo shall maintain such records and information
contained therein in confidence in accordance with Section 9 and shall not use
such records or information except to the extent otherwise permitted by this
Agreement;



-9-






 





          (g) remain in compliance with all filing requirements to and for
applicable Regulatory Authorities and maintain all required filings in
accordance with applicable law and rules and regulations of the applicable
Regulatory Authorities;



          (h) use commercially reasonable efforts to provide Endo with complete
copies (or copies of relevant portions) of, and grant Endo, free of charge, the
right to cross-reference any INDs, Registration Applications, Registrations or
other regulatory filings made or held for the applicable Target Indications in
the applicable Development Field in the Territory; in each case, solely to
assist Endo in the performance of its obligations under the Development
Programs;



          (i) use commercially reasonable efforts to keep the JEC reasonably
promptly advised regarding any material development regarding Registration or
marketing activities with respect to any Product outside of the Territory to
the extent SkyePharma’s rights to do so are not limited by contractual
obligations; and



          (j) use commercially reasonable efforts to perform such other
responsibilities with respect to the Development Programs as may be reasonably
requested by the Joint Executive Committee pursuant to this Agreement or as may
be mutually agreed upon by the Parties from time to time.



     2.3 Endo Responsibilities under each Development Program. As part of the
Development Program for a particular Product, in accordance with the applicable
Annual Development Plan, Endo shall use commercially reasonable efforts to
perform such responsibilities with respect to such Development Program as may
be mutually agreed upon by the Parties from time to time; provided, that, any
development activities undertaken by Endo hereunder shall be invoiced to
SkyePharma, no more frequently than ***, at Endo’s Fully Loaded Costs, and
SkyePharma shall pay the portions of such invoices not subject to a good faith
dispute within *** after receipt of same. Any amount subject to a good faith
dispute shall be paid promptly after, and in no event more than ten business
days following, resolution of such dispute.


     2.4 Overview of the Commercialization Programs.


          (a) The “Commercialization Program” for each Product shall be comprised of
all marketing, advertising, promotional, launch (including pre-launch
marketing) and sales activities related to the applicable Target Indications of
such Product in the applicable Development Field in the applicable country in
the Territory.



          (b) Endo, either itself and/or by and through its Affiliates, Sublicensees
and Subcontractors, shall be responsible for, and except for the rights
specifically granted to SkyePharma in Section 2.5(b) of this Agreement, shall
have the exclusive right to engage in, all activities comprising the
Commercialization Program for each Product.



          (c) Endo shall select and determine the trademarks, trade names and logos
under which each Product shall be marketed and sold in the Territory.



          (d) The costs actually incurred by Endo in conducting the activities
comprising the Commercialization Programs for the Products shall be reported by
Endo to

-10-






 





SkyePharma in accordance with the Financial Appendix. Beginning one year
prior to the anticipated commercial launch of each Product in each country, and
thereafter, not later than November 1st of each calendar year during the
Development Program for such Product and throughout the Commercialization
Program for such Product, Endo shall prepare and deliver to the JEC a proposed
plan for the marketing and sales activities expected to be undertaken during
the upcoming calendar year as part of each Product’s Commercialization Program
with regard to each country in the Territory and a timeline and budget for
undertaking the same (each such plan for each Product, an “Annual
Commercialization Plan”). Without limiting the foregoing, each Annual
Commercialization Plan for a Product shall contain annual forecasts of sales,
production requirements, annual marketing plans, Marketing Trials, and the
number of primary details that are to be provided for such Product. Once an
Annual Commercialization Plan with respect to a Product proposed by Endo has
been approved by the JEC pursuant to this Agreement, it shall be deemed an
“Annual Commercialization Plan” for such Product.


     2.5 Endo Responsibilities under each Commercialization Program.


          (a) Without limiting Endo’s obligations set forth in Section 2.5(b) or
Section 2.5(c):



               (i) Endo shall launch each Product in the United States within six months
following Registration of such Product in the United States; provided, however,
Endo’s obligation to launch a Product in the United States shall be excused for
so long as SkyePharma fails to provide Endo with a Sufficient Supply of such
Product. By way of clarification and not in derogation of the materiality of
any other Section hereof, any breach of this Section 2.5(a)(i) by Endo shall be
deemed to be a material breach of a material obligation of this Agreement.



               (ii) After the launch of a Product in each country in the Territory, Endo
shall commercialize such Product in such country using a level of diligence and
resources substantially similar to those that Endo applies to comparable Endo
products in such country, taking into account the sales and profitability
potential of such Product and the level of supply of such Product. The
Commercialization Program and each Annual Commercialization Plan for each
Product shall reflect this level of diligence and resources Endo is hereby
committing to use in the commercialization of each Product.



          (b) Without limiting Endo’s obligations set forth in Section 2.5(a) or
Section 2.5(c):



               (i) If Endo fails to provide a minimum of *** of the number of prescriber
primary details set forth in the applicable Annual Commercialization Plan for
such Product, SkyePharma may, but shall not be required to, cure some or all of
the shortfall below the number of prescriber primary details set forth in the
applicable Annual Commercialization Plan for such Product during the following
calendar year in accordance with Section 2.5(b)(iii); or



               (ii) If Endo fails to provide a minimum of *** of the number of prescriber
primary details set forth in the applicable Annual Commercialization Plans for
such Product for each of two consecutive calendar years, SkyePharma may, but
shall not be required

-11-






 





to, cure some or all of the shortfall below the number of prescriber
primary details set forth in the applicable Annual Commercialization Plans for
such Product during the following two consecutive calendar years in accordance
with Section 2.5(b)(iii).


               (iii) In the event SkyePharma has the right to cure a shortfall under
Section 2.5(b)(i) or Section 2.5(b)(ii) (the “Shortfall”) with respect to any
Product (a “Cure Product”), SkyePharma may, but shall not be required to, cure
some or all of the Shortfall during the time period specified in Section
2.5(b)(i) or Section 2.5(b)(ii), as the case may be, (the “Cure Time Period”)
in the following manner. During the Cure Time Period, SkyePharma, at its
option, shall have the right to select from either or a combination of the
following (collectively, the “Cure Sales Activities”):



                    (1) SkyePharma, itself or through any other Person reasonably acceptable
to Endo, shall have the right to sell or have sold the Cure Product in the
Territory by having prescriber primary details performed with respect to the
Cure Product in the Territory for the benefit of the Parties. Upon receipt by
Endo of written notice from SkyePharma as to the identity of the Person that
SkyePharma proposes would sell Cure Products, Endo shall promptly notify
SkyePharma whether such Person is acceptable. Sales of a Product arising from
such Cure Sales Activities shall be included in Net Sales of such Product.
Endo shall, at Endo’s expense, provide SkyePharma with all reasonably necessary
or useful assistance to enable SkyePharma to coordinate and undertake such Cure
Sales Activities. Such assistance shall include, but not be limited to,
providing access to, copies of and the right to use prescriber target lists,
prescriber marketing materials, prescriber marketing plans and prescriber
marketing presentations related to the Cure Product as well as advice and
recommendations on which sales representatives, sales organizations and sales
methods would most likely prove most beneficial to promote sales of the Cure
Product.



                    (2) SkyePharma shall have the right to require Endo to provide additional
prescriber primary details up to the amount of the Shortfall, with respect to
the Cure Product in the Territory for the benefit of the Parties.



               (iv) Endo shall pay *** of SkyePharma’s Fully Loaded Costs for the Cure
Sales Activities. Endo shall pay SkyePharma such amounts within *** days of
being invoiced for such costs by SkyePharma. For the avoidance of doubt, no
Cure Sales Activities shall reduce the number of prescriber primary details
otherwise required to be performed by Endo under any Annual Commercialization
Plan. Pursuant to Section 5.5(a), SkyePharma may audit the number of
prescriber primary details performed by Endo as compared to that which is
required to be performed in an applicable Annual Commercialization Plan for a
Product. Pursuant to Section 5.5(a), Endo may audit SkyePharma’s Cure Sales
Activities. Within *** after the end of each calendar year, Endo shall certify
the number of prescriber primary details provided with respect to each Product
in each country within the Territory during the past calendar year, stating the
magnitude of any Shortfall that may exist and the reasons for any such
Shortfall. The decision by SkyePharma to exercise its rights under this
Section 2.5(b) shall not be deemed to obligate SkyePharma to perform for Endo
in the future, but shall constitute a waiver of any other rights or remedies
SkyePharma may have under this Agreement with respect to Endo’s specific
failure to provide the minimum prescriber primary details required by Section

-12-






 





2.5(b)(i) and Section 2.5(b) (ii) that triggered SkyePharma’s ability to
exercise its rights under this Section 2.5(b).


          (c) Without limiting Endo’s obligations set forth in Section 2.5(a) or
Section 2.5(b), as part of the Commercialization Program for a Product, in
accordance with the applicable Annual Commercialization Plan, Endo shall:



               (i) use commercially reasonable efforts to perform pre-commercialization
analysis, planning, market preparation, and related marketing activities for
the relevant country in the Territory;



               (ii) use commercially reasonable efforts to carry out the distribution,
marketing and sales of each Product for the applicable Target Indications in
the applicable Development Field in the Territory;



               (iii) use commercially reasonable efforts to conduct phase IV clinical
trials and marketing studies as Endo deems necessary or useful for
commercialization of each Product;



               (iv) conduct the Commercialization Program in compliance in all material
respects with applicable laws, rules and regulations;



               (v) maintain records, which shall be complete and accurate in all material
respects and shall fully and properly reflect all revenues and expenses in
connection with the Commercialization Programs. SkyePharma shall have the
right, during normal business hours and upon reasonable prior written notice,
to inspect all such records at its own expense, so long as doing so is not
unreasonably disruptive. SkyePharma shall maintain such records and
information contained therein in confidence in accordance with Section 9 and
shall not use such records or information except to the extent otherwise
permitted by this Agreement;



               (vi) use commercially reasonable efforts to consult with and keep the
Joint Executive Committee informed, through regular, periodic written reports,
which shall be brief summaries, to be delivered at least once in each calendar
quarter, of all such activities conducted in such preceding calendar quarter;



               (vii) use commercially reasonable efforts to undertake, and have primary
responsibility for, the filing of marketing materials with the Regulatory
Authorities;



               (viii) assure appropriate reporting of adverse events to SkyePharma in
accordance with Section 7; and



               (ix) use commercially reasonable efforts to perform such other
responsibilities with respect to the Commercialization Program as may be
reasonably requested by the Joint Executive Committee pursuant to this
Agreement or as may be mutually agreed upon by the Parties from time to time.



-13-






 





     2.6 SkyePharma Responsibilities under each Commercialization Program. As
part of the Commercialization Program for a Product, in accordance with the
applicable Annual Commercialization Plan, SkyePharma shall use commercially
reasonable efforts to:


          (a) except as set forth in Section 2.5(c)(vii), undertake all
communications with the applicable Regulatory Authorities regarding the Product
in the applicable Development Field in the Territory;



          (b) except as set forth in Section 2.5(c)(vii), maintain all regulatory
filings in good order, including timely filing of required reports regarding
the Product in the applicable Development Field in the Territory;



          (c) manufacture or have manufactured finished Product, package, label and
quality release such finished Product, and supply to Endo or its designees for
use and sale in the Territory, and only to Endo or its designees for use and
sale in the Territory, all of Endo’s requirements for the Product pursuant to
the applicable Supply Agreement;



          (d) develop a second source of supply for each Product in accordance with
the applicable Supply Agreement;



          (e) continue to provide Endo with complete copies (or copies of relevant
portions) of, and hereby grant Endo, free of charge, the right to
cross-reference any INDs, Registration Applications, Registrations or other
regulatory filings made or held in the applicable Target Indications in the
applicable Development Field in the Territory for such Products, in each case
in order to enable Endo to undertake its responsibilities under the
Commercialization Program; and



          (f) perform such other activities with respect to the Commercialization
Program as the Parties mutually agree in writing are necessary or useful from
time to time; provided, that, any such other activities undertaken by
SkyePharma with respect to the Commercialization Program shall (unless
otherwise agreed by the Parties) be invoiced to Endo, no more frequently than
***, at SkyePharma’s Fully Loaded Costs, and Endo shall pay the undisputed
portions of such invoices within *** days after receipt of same. Any disputed
amounts shall be paid promptly after, and in no event more than *** business
days following, resolution of such dispute.



     2.7 Conduct of Development Program and Commercialization Activities. Each
Party, acting in accordance with this Section 2, the relevant Annual
Development Plan and relevant Annual Commercialization Plan, when applicable,
shall:


          (a) reasonably cooperate with the other Party, as requested by the Party
with primary responsibility over the applicable Annual Development Plan or
Annual Commercialization Plan, as the case may be, to implement all such plans
and such other activities that, from time to time, the Joint Executive
Committee decides are necessary or useful for the commercial success of any of
the Development Programs or the Commercialization Programs;



-14-






 





          (b) allow representatives of the other Party, upon reasonable prior
written notice and during normal business hours, to visit such Party’s
facilities where any Development Program or Commercialization Program is being
conducted, and consult, during such visits and by telephone, with such Party’s
personnel performing work on any Development Program or Commercialization
Program, so long as such visits and consultations are not unreasonably
disruptive. The other Party shall maintain any information received (whether
by observation or otherwise) during such visit in confidence in accordance with
Section 9 and shall not use such information except to the extent otherwise
permitted by this Agreement.



     2.8 Recall. In the event that a Party becomes aware that a Product may
not comply with applicable rules and regulations (either by notification from a
Regulatory Authority or otherwise), such Party shall promptly notify the other
Party and the Joint Executive Committee shall undertake an appropriate
investigation and make a determination with respect to the disposition of any
such matter. If any Party is required, or should Joint Executive Committee
deem it appropriate, to recall any Product, the Parties shall mutually agree
upon a recall plan and SkyePharma shall bear all costs and expenses (including
all Fully Loaded Costs reasonably incurred by Endo) associated with conducting
such recall in accordance with such recall plan, unless such recall results
predominantly from Endo’s material breach of its obligations under this
Agreement or unless such recall otherwise predominantly results from the gross
negligence or wrongful intentional acts or omissions of Endo, in which case
Endo shall bear all costs and expenses associated with such recall. In all
cases, each Party shall take all commercially reasonable actions necessary to
implement any recall of any Product.


     2.9 Allocation of Payment Responsibilities under the Development Programs
and Commercialization Programs.


          (a) SkyePharma shall pay for all costs (including, without limitation, the
Development Costs) it incurs under and as part of each Development Program as
well as the Fully Loaded Costs, if any, incurred by Endo in providing services
as part of a Development Program that SkyePharma expressly agreed that Endo
should so provide. For the avoidance of doubt, SkyePharma shall not be
required to pay the costs of any Marketing Trials.



          (b) SkyePharma shall pay Endo ***, in respect of the first calendar year,
on the *** day following the First Commercial Sale of the first Product
launched by Endo under this Agreement; which shall be paid only if, as of the
time such payment is due, Endo is in substantial compliance with the Annual
Commercialization Plan applicable to such Product, which, if this is not the
case, such payment obligation shall be suspended (but not eliminated) until
such non-compliance is corrected by Endo. SkyePharma shall pay Endo an
additional ***, in respect of the second calendar year, on the *** day of the
calendar year immediately following the First Commercial Sale of the first
Product launched by Endo under this Agreement; which additional *** shall be
paid only if, as of the time such payment is due, Endo is in substantial
compliance with the Annual Commercialization Plan applicable to such Product,
which, if this is not the case, such payment obligation shall be suspended (but
not eliminated) until such non-compliance is corrected by Endo. The Parties
acknowledge and agree that each such payment made by

-15-






 





SkyePharma under this Section 2.11(b) shall be made in relation to
marketing activities undertaken by Endo in the calendar year in which such
payment is made by SkyePharma.


          (c) Endo shall pay for all costs it incurs under and as part of each
Commercialization Program as well as the Fully Loaded Costs, if any, incurred
by SkyePharma as part of each Commercialization Program other than those
obligations expressly set forth in Sections 2.6(a)-(e) (inclusive); provided,
that, Endo has first agreed in writing that SkyePharma should provide such
services. For the avoidance of doubt, Endo shall not at any time be
financially responsible for any Development Costs or any of SkyePharma’s
obligations pursuant to Sections 2.6(a)-(e) (inclusive). Endo shall deduct
from each sales split payment made hereunder an amount equal to the total
actual expense incurred by Endo in connection with the supply of Product during
such period.



     2.10 DepoBupivacaine Option. With respect to DepoBupivacaine, upon
SkyePharma’s submission of a written request for a end-of-Phase II meeting with
the FDA, SkyePharma shall immediately notify Endo and provide a draft of the
submission it plans to provide for such meeting, including, but not limited to,
the results of the Phase II clinical study and draft proposed protocols or
draft proposed protocol outlines for the pivotal Phase III clinical studies
(collectively, the “DepoBupivacaine Notice”). SkyePharma shall give Endo the
opportunity to comment on its end-of-Phase II submission before filing it with
the FDA and shall consider such comments in good faith. Endo shall have the
exclusive option, beginning upon receipt of the DepoBupivacaine Notice, of
entering into negotiations regarding a definitive agreement that would
incorporate DepoBupivacaine as a Product under this Agreement. Endo shall
exercise such option by giving SkyePharma notice of its exercise within ***
days of receipt of the DepoBupivacaine Notice from SkyePharma. If Endo elects
not to exercise such option within the initial *** day time period, (a) Endo
shall promptly provide SkyePharma with notice acknowledging Endo’s failure to
exercise such option, and (b) SkyePharma shall not have any further obligation
to Endo regarding DepoBupivacaine. If Endo does exercise such option within
the initial *** day period, the Parties shall promptly begin negotiating the
terms of such transaction, and the terms under which DepoBupivacaine will be
developed and commercialized. Unless and until the Parties enter into a
definitive agreement following the exercise of the aforementioned option which
provides otherwise, SkyePharma may, at any time, elect, in its sole discretion,
to accelerate, suspend, abandon or otherwise change its development of
DepoBupivacaine. If, despite each Party’s good faith efforts, the Parties are
not able to reach agreement on and do not execute such a definitive agreement
within *** days from the date Endo exercises its option, SkyePharma shall be
free to continue with the development and commercialization of DepoBupivacaine
without obligation to Endo; provided, that, for a period of *** after the
cessation of such negotiations, SkyePharma shall not be permitted to enter into
a commercialization or similar agreement relating to DepoBupivacaine with a
Third Party on terms more favorable to such Third Party than the terms last
offered by Endo, determined based on net present value of such terms. At least
*** business days prior to entering into a commercialization or similar
agreement relating to DepoBupivacaine with a Third Party during such ***
period, SkyePharma shall provide to Endo a certification with supporting
calculations to evidence compliance with the provisions in the previous
sentence. Endo shall be entitled as a matter of right to equitable relief,
including injunction and specific performance, in any court of

-16-






 




competent jurisdiction in the event of a breach by SkyePharma of its
obligations under this section.


     2.11 DepoFoam-Pain Right of First Negotiation. In the event SkyePharma
intends to pursue the development of any product that makes use of SkyePharma’s
DepoFoam technology for the prophylaxis or treatment of pain (other than (i)
DepoBupivacaine or (ii) a product having as an active ingredient a new chemical
entity, the making, using, selling or offering for sale of which is, at least
in part, covered or claimed by a Patent owned or controlled by a Third Party),
SkyePharma shall give Endo prompt written notice of such intent and Endo shall,
within *** days after receipt of such notice, notify SkyePharma in writing
whether it is interested in discussing jointly undertaking and/or funding such
development activities. If Endo fails to exercise such right within the
initial *** day time period, (a) Endo shall promptly provide SkyePharma with
notice acknowledging Endo’s failure to exercise such right, and (b) SkyePharma
shall not have any further obligation to Endo regarding such product, provided,
that, such product is not subject to the restrictions on activities set forth
in Section 6.5. If, within *** days after such original notice to Endo, Endo
gives SkyePharma notice of its interest in discussing jointly undertaking
and/or funding such development activities, the Parties shall enter into
negotiations regarding such joint undertaking. If, despite each Party’s good
faith efforts, the Parties are not able to reach agreement on and do not
execute (i) a non-binding term sheet within *** days from the date Endo
exercises its right under this Section 2.11, or (ii) a definitive agreement
within *** days from the date Endo exercises its right under this Section 2.11,
then for a period of *** after the cessation of such negotiations, SkyePharma
shall not be permitted to enter into a commercialization or similar agreement
relating to such product with a Third Party on terms more favorable to such
party than the terms last offered by Endo, determined based on net present
value of such terms. At least *** business days prior to entering into a
commercialization or similar agreement relating to such product with a Third
Party during such *** period, SkyePharma shall provide to Endo a certification
with supporting calculations to evidence compliance with the prior sentence.
Endo shall be entitled as a matter of right to equitable relief, including
injunction and specific performance, in any court of competent jurisdiction in
the event of a breach by SkyePharma of its obligations under this section.


     2.12 Mutual Expansion of Indications. In the event that the Parties
mutually agree in writing to develop a Product in the Development Field, and/or
proceed with testing and preparation and filing with the applicable Regulatory
Authorities those regulatory filings necessary to obtain the first Registration
of such a Product, in each case, for indications in the Development Field other
than the then-applicable Target Indications, including without limitation any
addition to or expansion of any Target Indication (such indication, a “New
Indication” and such development, “New Indication Development”), such New
Indication Development shall automatically, and without any further action by
the Parties hereto, be made and conducted under the terms of this Agreement.
However, the sales split obligations applicable to such Product shall be
equitably adjusted, and the Development Costs of the Development Program
relating to such New Indication shall be shared between the Parties, in the
manner, and subject to any further conditions, agreed to in writing by the
Parties. Once agreement has been reached on all such matters, the New
Indication shall become a Target Indication for the applicable Product in
question. In the event that the Parties are unable to agree

-17-






 




upon sales split payments, Development Costs or any other aspect of the
New Indication or New Indication Development, the Parties shall refer such
matters to the JEC for resolution; provided the Parties agree that the JEC must
reach a unanimous consensus regarding such matters and the resolution of such
matter may not be referred by action of either Party alone to arbitration for
resolution.


     2.13 Supply Agreements and Quality Agreements. Endo and SkyePharma, Inc.
shall enter into a Supply Agreement and a Quality Agreement on even date
herewith with respect to the supply and manufacture of DepoMorphine. As soon
as practicable after the Effective Date, the Parties shall enter into, with one
another and/or a Third Party, a Supply Agreement and a Quality Agreement with
respect to the supply and manufacture of Propofol IDD-D. The Propofol IDD-D
Supply Agreement shall be in the form annexed to this Agreement as Exhibit C
with such changes as may be agreed to by the Parties. The Propofol IDD-D
Quality Agreement shall as much as practicable be based upon the DepoMorphine
Quality Agreement and shall be negotiated and entered into in good faith by the
Parties.



	3.	 	GOVERNANCE



     3.1 Joint Executive Committee. The Parties hereby establish a joint
executive committee (the “Joint Executive Committee” or “JEC”), which shall
have general oversight duties with respect to the Parties’ activities
hereunder. The JEC shall consist of six members, namely, three members from
each of SkyePharma and Endo. The initial members of the JEC are specified on
Schedule 3. Each of SkyePharma and Endo may replace any or all of its
representatives on the JEC at any time upon written notice to the other in
accordance with Section 13.5 of this Agreement. Any member of the JEC may
designate a substitute with due authority to temporarily attend and perform the
functions of that member at any meeting of the JEC. SkyePharma and Endo each
may, in its sole discretion but subject to the written objection of the other
Party (with demonstrable reason for objection), invite to attend meetings or
portions of such meetings of the JEC a reasonable number of non-member
representatives of such Party (including, without limitation, its employees or
non-employee professional advisors), who have a reasonable purpose for
attending such meeting or portion of such meeting. The JEC shall be co-chaired
by a representative of each of SkyePharma and Endo, as such representative may
be changed by the designating Party at any time. The co-chairpersons shall
appoint a secretary of the JEC, and such secretary shall serve for such term as
designated by the co-chairpersons.


     3.2 Responsibilities of the Joint Executive Committee. The Joint
Executive Committee shall:


          (a) coordinate overall strategy for the development and commercialization
efforts described in this Agreement;



          (b) undertake a *** review and comparison of actual expenses to the
budgeted expenses in accordance with the Financial Appendix with respect to
each Product’s Annual Development Plan and Annual Commercialization Plan;



-18-






 





          (c) undertake a *** review and comparison of the status of each Product’s
Annual Development Plans and Annual Commercialization Plans, including, without
limitation the applicable timelines, and provide direction to the conduct of
each Development Program and Commercialization Program, as necessary;



          (d) review and evaluate the progress of the PDC and the JMC;



          (e) review and approve “go/no-go” decisions and other matters referred to
the JEC by the PDC or the JMC;



          (f) obtain and review updated Freedom to Operate Opinions for each Product
prior to launch (the cost of each such updated Freedom to Operate Opinion shall
be shared equally by the Parties) and determine the outcome of the “go/no-go”
decision for Product launch based upon the outcome of such updated Freedom to
Operate Opinions;



          (g) in accordance with, and to the extent specified in, the procedures
established in this Agreement, resolve disputes, disagreements and deadlocks
unresolved by the PDC or the JMC;



          (h) *** review and approve Endo’s overall strategy for the
Commercialization Program;



          (i) at least *** each calendar year by a date no later than each ***,
review and approve the Annual Development Plan for the next calendar year for
each Product;



          (j) at least *** each calendar year by a date no later than each ***,
review and approve the Annual Commercialization Plan for the next calendar year
for each Product;



          (k) *** review the implementation of each Annual Commercialization Plan;



          (l) review and approve any amendments or modifications to each Annual
Commercialization Plan;



          (m) review Endo’s multi-year expense forecasts and projected financial
results of each Commercialization Program;



          (n) review the trademarks, trade names and logos each Product shall be
marketed and sold under in the Territory;



          (o) decide whether and how to institute patent or trademark Infringement
actions against Third Parties in connection with the Products;



          (p) determine a course of action in the event of threatened or actual
litigation in connection with Third Party infringement claims; and



-19-






 





          (q) perform such other responsibilities as may be assigned to the Joint
Executive Committee pursuant to this Agreement or as may be mutually agreed
upon by the Parties from time to time.



     3.3 Meetings. The JEC may meet, convene or be polled in person or by
video or telephone conference (where all parties can hear and be heard). In
addition, the JEC may be polled through electronic mail or correspondence. The
JEC shall meet at least twice every year. The JEC shall meet on such dates,
and at such places and times or in such manner, as the members of the JEC shall
agree from time to time. Meetings of the JEC that are held in person shall
alternate between the offices of SkyePharma and Endo, or at such other place as
the Parties may agree.


     3.4 Decision-making.


          (a) The JEC may make decisions with respect to any subject matter that is
subject to the JEC’s decision-making authority and functions. Except as
expressly provided in this Agreement, all decisions of the JEC shall be made by
unanimous vote or written consent, with SkyePharma and Endo each having,
collectively, one vote in all decisions. The JEC shall use reasonable best
efforts to resolve the matters within its roles and functions or otherwise
referred to it.



          (b) If, with respect to a matter that is subject to the JEC’s
decision-making authority, the JEC cannot reach consensus within *** days after
it has met and attempted to reach such consensus or the Parties cannot reach
consensus on whether the JEC has decision-making authority regarding a matter
within *** days after such matter was first raised by either Party, the dispute
in question shall be referred to the Chief Executive Officer of SkyePharma,
Inc. on behalf of SkyePharma, or such other person holding a similar position
designated by SkyePharma, Inc. from time to time, and the Chief Executive
Officer of Endo, or such other person holding a similar position designated by
Endo from time to time (such officers collectively, the “Executive Officers”),
for resolution. The Executive Officers shall use reasonable efforts to resolve
the matter referred to them.



          (c) With regard to matters other than (1) the addition to or any other
change to the Target Labeling, Target Indications, New Indications or New
Indication Development, in each case with respect to any Product, or (2)
measuring Endo’s compliance with the obligations set forth in Section 2.5(a) or
Section 2.5(b):



               (i) if the dispute arising from the JEC pertains to any Development
Program (including SkyePharma’s post-registration regulatory responsibilities)
or the manufacture of any Product, and the Executive Officers cannot resolve
the matter within *** days, then the matter shall be decided by the Executive
Officer of SkyePharma in good faith, giving appropriate consideration to the
reasonable business and scientific concerns of Endo; and



               (ii) if the dispute arising from the JEC pertains to any aspect of the
Commercialization Program (other than the manufacture of Product), and the
Executive Officers cannot resolve the matter within *** days, then the matter
shall be decided by the Executive

-20-






 





Officer of Endo in good faith, giving appropriate consideration to the
reasonable business and scientific concerns of SkyePharma.


          (d) With respect to any dispute arising between the Parties not covered by
Section 3.4(c), if the Executive Officers cannot resolve the matter in
accordance with Section 3.4(b), such matters shall be conclusively settled in
accordance with the Special Arbitration Provisions; provided, however, no
Expert or arbitrator may add to or otherwise change the Target Labeling, Target
Indications, New Indications or New Indication Development, in each case with
respect to any Product.



          (e) For all purposes under this Agreement, any decision made pursuant to
this Section 3.4 shall be deemed to be the decision of the JEC.



     3.5 Product Development Committee.


          (a) The Parties hereby establish a product development committee (the
“Product Development Committee” or “PDC”), which shall consist of
representatives from each of SkyePharma and Endo, with up to four members from
each Party on such Committee unless otherwise agreed to by the Parties in
writing. Each of SkyePharma and Endo may replace any or all of its
representatives on the PDC at any time upon written notice to the other in
accordance with Section 13.5 of this Agreement. Such representatives shall be
employees of each such Party, and those representatives of each such Party
shall, individually or collectively, have expertise in pharmaceutical drug
development, regulatory matters, marketing, clinical studies, and/or other
expertise to the extent relevant. Any member of the PDC may designate a
substitute with due authority to temporarily attend and perform the functions
of that member at any meeting of the PDC. SkyePharma and Endo each may, in its
sole discretion but subject to the written objection of the other Party (with
demonstrable reason for objection), invite to attend meetings of the PDC a
reasonable number of non-member representatives of such Party (including,
without limitation, its employees or non-employee professional advisors), who
have a reasonable purpose for attending such meeting. The PDC shall be chaired
by a representative of SkyePharma. The secretary of the PDC shall be a
representative of SkyePharma.



          (b) The PDC shall perform the following functions:



               (i) review the implementation of each Annual Development Plan;



               (ii) review and approve any amendments or modifications to each Annual
Development Plan;



               (iii) evaluate progress and determine which pre-clinical studies, clinical
trials, and toxicology studies are necessary or desirable to meet the
requirements of the applicable Regulatory Authorities for the Registration of
the Products in each jurisdiction within the Territory;



               (iv) review and evaluate progress of the development activities; provided,
that, the PDC shall not have authority to make any determination that any Party
is in breach of this Agreement;



-21-






 





               (v) review and approve all compassionate use of the Product;



               (vi) review and recommend to the JEC “go/no-go” decisions;



               (vii) in connection with clinical trials, approve protocols, trial budget
and trial design;



               (viii) review regulatory data and regulatory documentation relating to any
material development regarding Registration or marketing activities with
respect to any Product outside of the Territory; and



               (ix) have such other responsibilities as may be assigned to the PDC
pursuant to this Agreement or as may be mutually agreed upon by the Parties
from time to time.



          (c) The PDC may meet, convene or be polled in person or by video or
telephone conference (where all parties can hear and be heard). In addition,
the PDC may be polled through electronic mail or correspondence. The PDC shall
meet at least once every calendar quarter, and at least once each calendar year
shall be in person. The PDC shall meet on such dates, and at such places and
times or in such manner, as the members of the PDC shall agree from time to
time. Meetings of the PDC that are held in person shall alternate between the
offices of SkyePharma and Endo, or at such other place as the Parties may
agree.



          (d) Endo and SkyePharma have established the PDC with a belief that
vigorous interaction and cooperation between the Parties are essential for the
success of the Product. Each Party shall use all reasonable efforts to reach
consensus decisions at the Committee level. The PDC may make decisions with
respect to any subject matter that is subject to the PDC’s decision-making
authority and functions as set forth in Section 3.5(b). All decisions of the
PDC shall be made by unanimous vote or written consent, with SkyePharma and
Endo each having, collectively, one vote in all decisions. If, with respect to
any matter that is subject to the PDC’s decision-making authority, after all
reasonable efforts to reach consensus have been exhausted, the PDC cannot reach
consensus within *** business days after it has first met and attempted to
reach such consensus, the matter shall be referred on the *** business day to
the JEC for resolution.



     3.6 Joint Manufacturing Committee.


          (a) Within *** days after the Effective Date, the Parties shall establish
a joint manufacturing committee (the “Joint Manufacturing Committee” or “JMC”),
which shall consist of representatives from each of SkyePharma and Endo, up to
four members from each Party, unless otherwise agreed to by the Parties in
writing. Each of SkyePharma and Endo may replace any or all of its
representatives on the JMC at any time upon written notice to the other in
accordance with Section 13.5 of this Agreement. Such representatives shall be
employees of each such Party with expertise in manufacturing, distribution
and/or packaging. Any member of the JMC may designate a substitute with due
authority to temporarily attend and perform the functions of that member at any
meeting of the JMC. SkyePharma and Endo each may, in its sole discretion but
subject to the written objection of the other Party (with demonstrable reason



-22-






 





for objection), invite to attend meetings of the JMC a reasonable number
of non-member representatives of such Party (including, without limitation, its
employees, non-employee professional advisors, its Sublicensees and its
Subcontractors), who have a reasonable purpose for attending such meeting. The
JMC shall be chaired by a representative of SkyePharma. The secretary of the
JMC shall be a representative of SkyePharma.


          (b) The JMC shall perform the following functions:



               (i) coordinate the manufacturing, supply and packaging of Product;



               (ii) oversee the formulation and manufacturing strategy for the Product,
including bulk drug procurement, formulation, filling and finishing of the
Product, and approve facilities to be used for such manufacture and production;



               (iii) approve Manufacturing Standards;



               (iv) reconcile the quality systems of Endo and SkyePharma, as needed; and



               (v) have such other responsibilities as may be assigned to the JMC
pursuant to this Agreement or as may be mutually agreed upon by the Parties
from time to time.



          (c) The JMC may meet, convene or be polled in person or by video or
telephone conference (where all parties can hear and be heard). In addition,
the JMC may be polled through electronic mail or correspondence. The JMC shall
meet at least once every calendar quarter, and at least once each calendar year
shall be in person. The JMC shall meet on such dates, and at such places and
times or in such manner, as the members of the JMC shall agree from time to
time. Meetings of the JMC that are held in person shall alternate between the
offices of SkyePharma and Endo, or at such other place as the Parties may
agree.



          (d) Endo and SkyePharma have chartered the JMC with a belief that vigorous
interaction and cooperation between the Parties are essential for the success
of the Product. Each Party shall use all reasonable efforts to reach consensus
decisions at the Committee level. The JMC may make decisions with respect to
any subject matter that is subject to the JMC’s decision-making authority and
functions as set forth in Section 3.6(b). All decisions of the JMC shall be
made by unanimous vote or written consent, with SkyePharma and Endo each
having, collectively, one vote in all decisions. If, with respect to any
matter that is subject to the JMC’s decision-making authority, after all
reasonable efforts to reach consensus have been exhausted, the JMC cannot reach
consensus within *** business days after it has first met and attempted to
reach such consensus, the matter shall be referred on the *** business day to
the Joint Executive Committee for resolution.



     3.7 Committee Terms. Each Committee shall exist until the termination or
expiration of this Agreement, unless otherwise agreed to by the Parties.


     3.8 Expenses. Each Party shall be responsible for all travel and related
costs and expenses for its members and other representatives to attend meetings
of, and otherwise participate on, a Committee.


-23-






 


     3.9 Alliance Managers. Each of SkyePharma and Endo shall appoint one
employee representative who possesses a general understanding of clinical,
regulatory, manufacturing and marketing issues to act as its respective
alliance manager for this relationship and who is not a member of the JEC
(each, an “Alliance Manager”). Each of SkyePharma and Endo may replace its
respective Alliance Manager at any time upon written notice to the other. Any
Alliance Manager may designate a substitute with due authority to temporarily
perform the functions of that Alliance Manager. Each Alliance Manager shall be
charged with creating and maintaining a collaborative work environment within
and among the Committees. Each Alliance Manager will also be responsible for:


          (a) coordinating the relevant functional representatives of the Parties,
in developing and executing strategies and plans for the Products in an effort
to ensure consistency and efficiency within the Territory;



          (b) providing a single point of communication for seeking consensus both
internally within the respective Party’s organizations and together regarding
key strategy and plan issues;



          (c) identifying and raising cross-Party and/or cross-function disputes to
the appropriate Committee in a timely manner; and



          (d) planning and coordinating: (i) cooperative efforts in the Territory;
and (ii) internal and external communications with respect to any Product.



The Alliance Managers shall be entitled to attend meetings of any of the
Committees, but shall not have, or be deemed to have, any rights or
responsibilities of a member of any Committee. Each Alliance Manager may bring
any matter to the attention of any Committee where such Alliance Manager
reasonably believes that such matter requires such attention.



	4.	 	FEES, MILESTONES, AND FUNDING.



     4.1 Up-front Payment. In consideration for past work in respect of
DepoMorphine, Endo shall pay a non-refundable, non-creditable up-front payment
of $25,000,000 to SkyePharma on or before the tenth business day after the
Effective Date.


     4.2 Milestone Payments. As further consideration to SkyePharma for the
license granted to Endo under this Agreement, Endo shall, upon the payment due
date following the first occurrence of the milestone events set forth below,
pay to SkyePharma the following non-refundable, non-creditable development
milestone payments (unless Endo has earlier exercised any of its termination
rights set forth in Section 11 by delivering a notice of intent to terminate as
provided in such Section):



-24-










 




	 	 	 	 	 	 	 
	Milestone Event	 	Payment Due Date	 	Milestone Payment
	
	 	
	 	

	Endo’s receipt of written notice from SkyePharma of the FDA’s
written acceptance of the Registration Application for
DepoMorphine in the United States	 	
30th day following the
occurrence of Milestone
Event
	 	$	5,000,000	 
	
	 	 	 	 	 	 
	Endo’s receipt of written notice from SkyePharma of the FDA’s
final approval of the Registration of DepoMorphine in the United
States, provided SkyePharma has provided Endo with Sufficient
Supply of such Product	 	
30th day following the
occurrence of Milestone
Event
	 	$	5,000,000	 
	
	 	 	 	 	 	 
	The first calendar year that Net Sales of DepoMorphine in the
Territory exceed $125,000,000.	 	
45th day following the
end of a quarter in which
Milestone Event occurs
	 	$	15,000,000	 
	
	 	 	 	 	 	 
	The first calendar year that Net Sales of DepoMorphine in the
Territory exceed $175,000,000.	 	
45th day following the
end of a quarter in which
Milestone Event occurs
	 	$	20,000,000	 
	
	 	 	 	 	 	 
	Endo’s receipt of written notice from SkyePharma of the FDA’s
written approval and acceptance of the protocol of the first of
the Phase III clinical trials for Propofol IDD-D in the United
States	 	
30th day following
occurrence of Milestone
Event
	 	$	5,000,000	 
	
	 	 	 	 	 	 
	Endo’s receipt of written notice from SkyePharma of the FDA’s
written acceptance of the Registration Application for Propofol
IDD-D in the United States	 	
30th day following the
occurrence of Milestone
Event
	 	$	5,000,000	 
	
	 	 	 	 	 	 
	Endo’s receipt of written notice from SkyePharma of the FDA’s
final approval of the Registration of Propofol IDD-D in the United
States for the Target Labeling, (“Original $40 Million
Milestone”)
provided SkyePharma has provided Endo with Sufficient Supply of
such Product	 	
30th day following the
occurrence of Milestone
Event
	 	$	40,000,000	 



     If Endo receives written notice from SkyePharma of the FDA’s final
approval of the Registration for Propofol IDD-D in the United States but the
approved labeling materially fails to meet the Target Labeling of Propofol
IDD-D such that the expected sales of Propofol IDD-D are significantly
adversely affected (“Adjusted $40 Million Milestone”), then provided SkyePharma


-25-






 




 has provided Endo with Sufficient Supply of such Product, Endo shall pay
to SkyePharma the $40,000,000 Milestone Payment referenced in the chart above
as follows:


               (i) $15,000,000 on the Milestone Due Date which shall be the 30th day
following occurrence of the Adjusted $40 Million Milestone;



               (ii) $5,000,000 on the 45th day following the end of the first calendar
quarter in the first year in which Net Sales of Propofol IDD-D in the Territory
exceed $33,000,000;



               (iii) $10,000,000 on the 45th day following the end of the first calendar
quarter in the first year in which Net Sales of Propofol IDD-D in the Territory
exceed $67,000,000; and



               (iv) $10,000,000 on the 45th day following the end of the first calendar
quarter in the first year in which the Net Sales of Propofol IDD-D in the
Territory equal or exceed $100,000,000.



     The unpaid amounts referenced in clauses (i), (ii), (iii) and/or (iv)
above shall be earlier paid (on the 30th day following the occurrence of the
Original $40 Million Milestone provided SkyePharma has provided Endo with
Sufficient Supply of such Product) if the Original $40 Million Milestone is
achieved prior to the satisfaction of the conditions in clauses (i) through
(iv) above.


     As a matter of clarification, in no event shall more than $40,000,000 in
the aggregate be paid by Endo to SkyePharma in respect to the FDA’s final
approval of the Registration of Propofol IDD-D in the United States whether for
the Target Labeling or otherwise.


     4.3 Sales Split. As further consideration to SkyePharma for the license
and other rights granted to Endo under this Agreement, Endo shall pay
SkyePharma a portion of Net Sales of DepoMorphine and Propofol IDD-D made by
Endo and its Affiliates, Sublicensees and Subcontractors in the manner set
forth in this Section 4.3; provided, that, in the event that the Parties agree
upon any New Indication(s) pursuant to Section 2.12, the sales thresholds may
be adjusted by mutual agreement of the Parties depending upon the outcome of
the negotiations regarding the matters set forth in Section 2.12.


          (a) Whenever calendar year annual Net Sales of DepoMorphine and Propofol
IDD-D made by Endo and its Affiliates, Sublicensees and Subcontractors are, in
the aggregate, less than or equal to $60,000,000, then, in accordance with
Section 5, Endo shall pay SkyePharma:



               (i) 20% of Net Sales of DepoMorphine made by Endo and its Affiliates,
Sublicensees and Subcontractors in such calendar year; and



               (ii) 30% of Net Sales of Propofol IDD-D made by Endo and its Affiliates,
Sublicensees and Subcontractors in such calendar year.

-26-






 




          (b) Whenever calendar year annual Net Sales of DepoMorphine and Propofol
IDD-D made by Endo and its Affiliates, Sublicensees and Subcontractors are, in
the aggregate, greater than $60,000,000 but less than or equal to $250,000,000,
then, in accordance with Section 5, Endo shall pay SkyePharma:



               (i) 20% of Net Sales of DepoMorphine made by Endo and its Affiliates,
Sublicensees and Subcontractors in such calendar year; and



               (ii) 35% of Net Sales of Propofol IDD-D made by Endo and its Affiliates,
Sublicensees and Subcontractors in such calendar year.



          (c) Whenever calendar year annual Net Sales of DepoMorphine and Propofol
IDD-D made by Endo and its Affiliates, Sublicensees and Subcontractors are, in
the aggregate, greater than $250,000,000 but less than or equal to
$400,000,000, then, in accordance with Section 5, Endo shall pay SkyePharma:



               (i) 55% of Net Sales of DepoMorphine made by Endo and its Affiliates,
Sublicensees and Subcontractors in such calendar year; and



               (ii) 55% of Net Sales of Propofol IDD-D made by Endo and its Affiliates,
Sublicensees and Subcontractors in the Territory arising in such calendar year.



          (d) Whenever calendar year annual Net Sales of DepoMorphine and Propofol
IDD-D made by Endo and its Affiliates, Sublicensees and Subcontractors are, in
the aggregate, greater than $400,000,000, then, in accordance with Section 5,
Endo shall pay SkyePharma:



               (i) 60% of Net Sales of DepoMorphine made by Endo and its Affiliates,
Sublicensees and Subcontractors in the Territory arising in such calendar year;
and



               (ii) 60% of Net Sales of Propofol IDD-D made by Endo and its Affiliates,
Sublicensees and Subcontractors in the Territory arising in such calendar year.



     4.4 Bartering Prohibited. Endo, its Affiliates, Sublicensees and its
Subcontractors shall not solicit or accept any bartered goods or services in
exchange for the sale or transfer of DepoMorphine or Propofol IDD-D.


     4.5 Bundling. Endo, its Affiliates, Sublicensees and its Subcontractors
shall be permitted to bundle any Product together with any other reasonable
product(s) in the sale or transfer of such product; provided, that, Endo shall
equitably allocate revenues from product bundles, and shall present the
strategy for the proposed apportionment of revenues derived from a proposed
bundle (as part of the Annual Commercialization Plan or otherwise) to the JEC
for approval in advance of any sales of bundled products. SkyePharma may
request an audit to determine adherence to the apportionment plan approved by
the JEC, in accordance with Section 5.5 hereof.



5. PAYMENTS AND REPORTS.


     5.1 Payments. Payments to be made in connection with the sale split of
Net Sales of DepoMorphine and Propofol IDD-D shall be made in accordance with
Sections 5.2 and 5.3. All other payments to be made under this Agreement shall
be made in accordance with the terms set forth in Section 5.3. The Parties
shall also follow the periodic reporting requirements set forth in the
Financial Appendix.





-27-






 


     5.2 Sales Split Payments.


          (a) All sales split payments due under Section 4.3 shall accrue and be
paid to SkyePharma quarterly within *** calendar days following the end of each
calendar quarter (each calendar quarter being a period of three consecutive
calendar months commencing January 1, April 1, July 1 or October 1, as the case
may be) (each such time period constituting a “Payment Period”).



          (b) Each such sales split payment shall be accompanied by a statement
showing the amounts of gross sales, Net Sales, the components of each Net Sales
amount, the number of Units of DepoMorphine and Propofol IDD-D sold by Endo
and, if applicable, by its Affiliates, Sublicensees and Subcontractors, during
such Payment Period (on a product-by-product and country-by-country basis), and
the amount of the sales split due on such Net Sales and the aggregate Net Sales
applicable to each such Product in the current calendar year-to-date. The
statement shall also show the amounts of all Net Purchases by Endo of Product
during such Payment Period and the amounts of all Inventory Write-offs by Endo
of Product during such Payment Period. Such aggregate Net Purchases of Product
shall be deducted from the sales split payment otherwise due SkyePharma and
such aggregate Inventory Write-offs shall be added to the sales split payment
otherwise due SkyePharma. For example, if the net sales split owed to
SkyePharma is $100,000 and the Net Purchases by Endo of Product is $40,000 and
the amount of Inventory Write-offs by Endo is $10,000, the amount to be paid by
Endo to SkyePharma shall equal $70,000. If as a result of the adjustment
referenced above, the sales split payment is a negative amount, such negative
amount shall be carried forward and shall reduce sales split payments otherwise
payable for future periods.



          (c) The sales split rate applicable to each Payment Period shall be based
on the rate that would be applicable to Net Sales during the 12 month period
ending with such Payment Period (as if such period were a calendar year). For
example, if Net Sales for the 12 month period ending June 30 were $270,000,000
the sales split rate applicable to such Payment Period would be 55% for
DepoMorphine and Propofol IDD-D.



          (d) Within *** days of the end of each full calendar year after the First
Commercial Sale, Endo shall deliver to SkyePharma an accounting of Net Sales
during such calendar year and shall at that time inform SkyePharma of any
reconciliation between the sales split paid that year and the sales split
actually owed on the basis of actual Net Sales for the calendar year and shall
pay any shortfall. Endo shall be entitled to carry forward as a credit against
future payments of net sales splits any excess payment, or upon termination of
this Agreement receive such excess payment.



     5.3 Mode of Payment. Each Party shall make all payments required under
this Agreement in the United States in U.S. dollars, via wire transfer of
immediately available funds as directed by the other Party from time to time,
net of any out-of-pocket transfer costs or fees. Accounting for Net Sales and
sales split due under this Agreement shall be in U.S. dollars. For billing and
reporting, the statement of operations and sales shall be translated into U.S.
dollars at


-28-






 




 the average rate of exchange listed in The Wall Street Journal on the
first and last business day of the applicable calendar quarter.


     5.4 Records Retention. The Parties shall keep complete and accurate
records pertaining to the milestones and sales achieved for each Product and
the number of primary details performed by each of them with respect the
Products, for a period of three calendar years after the year in which such
activities occurred or sales were made, and in sufficient detail to permit the
other Party to confirm the accuracy of the milestone and sales split payments
made hereunder and to confirm the accuracy of the number of primary details
performed hereunder.


     5.5 Payment and Other Audits.


          (a) Either Party (herein, the “Auditing Party”) may demand, no more than
*** for any calendar year in the term of this Agreement and only within ***
years following the end of such calendar year, an audit of the relevant books
and records of the other Party (herein, the “Audited Party”) in order to verify
the Audited Party’s reports on the matters addressed in this Agreement. Upon
no less than *** days’ prior written notice to the Audited Party, the Audited
Party shall grant reasonable access to members of a nationally recognized
independent public accounting firm selected by the Auditing Party to the
relevant books and records of the Audited Party in order to conduct a review or
audit thereof. Such access shall be permitted during normal business hours.
The Audited Party shall cooperate with such accounting firm and provide it
access to all records required in connection with such audit. The audit shall
be complete only when such accounting firm reasonably confirms that the audit
is complete. The accounting firm shall report its final conclusions and
calculations to the Auditing Party. In no event shall the accounting firm
disclose any information of the Audited Party to the Auditing Party except to
the extent necessary to verify the Audited Party’s reporting and other
compliance with the terms of this Agreement and, at the request of the Audited
Party, such accounting firm will execute appropriate non-disclosure agreements.
Except as otherwise provided in this Section 5.5, the Auditing Party shall
bear the full cost of the performance of any such audit.



          (b) If as a result of any audit of the books and records of the Audited
Party it is shown that a Party’s payments to the other Party under this
Agreement with respect to the period of time audited were less than the amount
that should have been paid to the other Party pursuant to this Agreement, then
the paying Party shall, within *** business days after the other Party’s demand
therefor, either pay to the other Party the amount of such shortfall plus
interest thereon or proceed to the dispute resolution mechanism set forth in
Section 5.5(c). Such interest shall be calculated from the date such amount
was due until the date such amount is actually paid, at the rate of *** over
the prime rate of interest reported in The Wall Street Journal for the date
such amount was due and shall continue to accrue during any resolution of
dispute regarding payment under Section 5.5(c). In addition, if any amount of
underpayment by an Audited Party is agreed to be more than *** percent of the
amount which should have been paid to the Auditing Party pursuant to this
Agreement with respect to the period in question as a result of incorrect
reporting or calculation by the Audited Party, then the Audited Party shall
also reimburse the Auditing Party for its documented reasonable out-of-pocket
costs and expenses incurred in connection with the audit (including, without
limitation, fees of attorneys, accountants and other professionals).

-29-






 




          (c) In the event that the Parties do not agree on the amount of
overpayment or underpayment, within *** business days, each Party shall select
an independent public accounting firm which shall meet and discuss the amount
in dispute and other related matters within *** business days thereafter. If
such independent public accounting firms cannot agree on a resolution mutually
agreeable to the Parties, such independent public accounting firms shall,
within *** business days after such selection and each Party shall pay the
costs of its own accounting firm, appoint a third independent public accounting
firm which shall resolve the issue within *** business days after its selection
and the Parties shall equally share the costs such accounting firm. The
recommendation of the third independent public accounting firm shall be final
and binding upon the Parties. A judgment on such firm’s disposition may be
entered in any court having jurisdiction over the Parties. In addition, if in
the final disposition of such matter, the amount of underpayment by the Audited
Party is more than *** percent of the amount which should have been paid to the
Auditing Party pursuant to this Agreement with respect to the period in
question as a result of incorrect reporting or calculation by the Audited
Party, then the Audited Party shall also reimburse the Auditing Party for its
documented reasonable out-of-pocket costs and expenses incurred in connection
with resolving such matter through the retention of such accounting firms
(including, without limitation, fees of attorneys, accountants and other
professionals).



     5.6 Taxes. In the event that a Party is mandated under the laws of a
country or other political subdivision of competent jurisdiction to withhold
any tax to the tax or revenue authorities in such jurisdiction in connection
with any payment to the other Party, such amount shall be deducted from the
payment to be made by such withholding Party; provided, that, the withholding
Party shall take reasonable and lawful actions to avoid and minimize such
withholding and promptly notify the other Party so that the other Party may
take lawful actions to avoid and minimize such withholding. The withholding
Party shall promptly furnish the other Party with copies of any tax certificate
or other documentation evidencing such withholding as necessary to satisfy the
requirements of the United States Internal Revenue Service related to any
application by such other Party for foreign tax credit for such payment. Each
Party agrees to reasonably cooperate with the other Party in claiming
exemptions from such deductions or withholdings under any agreement or treaty
from time to time in effect.


6. GRANT OF RIGHTS; RESTRICTIONS; OWNERSHIP; PATENTS.


     6.1 License Grant to Endo. Subject to the terms and conditions of this
Agreement and subject to the retained rights of SkyePharma set forth in Section
6.3:


          (a) SkyePharma hereby grants to Endo during the term of this Agreement
with respect to each Product an exclusive license in the Territory under the
SkyePharma Product IP, SkyePharma Product Patents, and Inventions to use, sell
and offer for sale such Product for the Target Indications applicable to such
Product.



          (b) SkyePharma hereby grants to Endo during the term of this Agreement
with respect to each Product a non-exclusive license in the Territory under the
SkyePharma Product IP, SkyePharma Product Patents and Inventions to enable Endo
to perform its obligations under the Development Program for such Product for
the Target Indications applicable to such Product.

-30-






 



          (c) Except as expressly set forth in Sections 6.1(a), 6.1(b) and 6.6(d),
no license is granted by SkyePharma under its rights in the SkyePharma IP,
SkyePharma Product Patents, SkyePharma Product IP, Inventions or any other
intellectual property of SkyePharma.



     6.2 License Grant to SkyePharma. No right or license is granted by Endo
under its rights in any Patents, Know-how, trademarks or any other intellectual
property owned by Endo, except:


          (a) Endo hereby grants SkyePharma the right to use (i) any Phase IV
clinical data of Endo, and (ii) any other non-proprietary information of Endo
that SkyePharma requests, and Endo, in its reasonable discretion, agrees to
provide; in each case, solely for use outside of the Territory; and



          (b) Endo hereby grants SkyePharma the right to own (and to register
ownership, if desired) and to use any trademarks, trade names or logos
specifically applicable to any Product(s) outside of the Territory (excluding
“Endo” and any derivatives thereof); provided, that, no such use that
significantly derogates from the image or goodwill of the Products in the
Territory shall be permitted.



     6.3 Retained Rights of SkyePharma. SkyePharma shall retain all rights to
the Products, SkyePharma IP, SkyePharma Product Patents, SkyePharma Product IP,
and all Inventions, in each case, for any application (a) outside the
Territory, whether or not in the Exclusivity Field, and (b) outside the
Exclusivity Field, whether or not in the Territory.


     6.4 Sublicensing; Subcontracting.


          (a) Endo shall have the right to grant sublicenses under the rights and
licenses granted to it under this Section 6 only after obtaining the prior
written consent of SkyePharma, which, in the case of sublicenses for activities
undertaken in Canada, shall not be unreasonably withheld or delayed.



          (b) Endo shall have the right to subcontract its responsibilities under
this Agreement, without obtaining the written consent of SkyePharma; provided,
that, Endo shall at all times maintain direct control over all promotional and
sales strategic activities and decisions and that Endo shall at all times
remain primarily responsible and liable for all such activities.



          (c) SkyePharma may subcontract any responsibility under this Agreement
that it reasonably deems necessary or useful without obtaining the written
consent of Endo provided, that, SkyePharma shall at all times remain primarily
responsible and liable for all such activities.



          (d) In addition to the requirements set forth in Sections 6.4(a) through
(c), inclusive, each sublicense or subcontracting arrangement granted under
this Agreement shall provide that: (i) the Party granting the sublicense or
subcontract, as the case may be, shall guarantee and be responsible for the
making of all payments due, and the making of any reports, under this
Agreement; (ii) each Affiliate, Sublicensee, and Subcontractor undertaking any
work under this Agreement agrees in writing to maintain financial and
scientific books and records and permit the Parties to review such books and
records and to visit such Affiliates’, Sublicensee’s

-31-






 




and Subcontractor’s facilities pursuant to the provisions of this
Agreement applicable to the activities being undertaken by such parties and to
observe all other applicable terms of this Agreement; and (iii) in the event of
a breach by such an Affiliate, Sublicensee or Subcontractor in the observance
of applicable terms of this Agreement, each Party shall be entitled to proceed
either directly against such Affiliate, Sublicensee or Subcontractor or
directly against the other Party, as such proceeding Party may determine in its
sole discretion, to enforce this Agreement.


     6.5 Restriction on Activities. Except as expressly permitted under this
Agreement, neither Party shall, and shall cause its Affiliates not to, directly
or indirectly, develop, attempt to develop, actively investigate or
commercialize for its own account or grant to a Third Party any right to
develop or commercialize any indication for any product that is both in the
Exclusivity Field and in the Territory; provided, that, in the event of a
change of control of a Party in which such Party becomes controlled by a Third
Party that has a competing product to one or both of the Products and that is
both in the Exclusivity Field and in the Territory (either on the market or
actively under development), the restrictions contained in this Section 6.5
shall ***.


     6.6 Ownership.


          (a) SkyePharma shall solely own all Registration Applications,
Registrations and other regulatory filings and approvals for the Products.



          (b) SkyePharma shall solely own all data and information developed in
connection with all Development Programs.



          (c) Endo shall solely own all data and information developed in connection
with all Commercialization Programs; provided SkyePharma shall be permitted to
use (a) any Phase IV clinical data, and (b) any other non-proprietary
information that SkyePharma requests, that Endo, in its reasonable discretion,
agrees to provide, solely for use outside of the Territory.



          (d) Ownership of Inventions shall be as follows: (i) Inventions made
solely by employees or contractors of SkyePharma shall be owned solely by
SkyePharma; (ii) Inventions made solely by employees or contractors of Endo
shall be owned solely by Endo, except that Inventions made solely by employees
or contractors of Endo that relate to the formulation or manufacturing process
for a Product (but excluding, without limitation, use for a Product) that
constitute an improvement, enhancement, modification or derivative work to any
SkyePharma IP (excluding SkyePharma Product IP) and which has general utility
for other products shall be owned jointly by the Parties; and (iii) Inventions
made jointly by employees or contractors of both Parties shall be owned jointly
by the Parties. To the extent an Invention owned by either Party relates to
DepoMorphine or Propofol IDD-D (x) if SkyePharma is the owner, SkyePharma
hereby grants Endo an exclusive royalty free license in the Exclusivity Field
and Territory under the Invention and any Patent arising therefrom to use, sell
and offer for sale such product, and (y) if Endo is the owner, Endo hereby
grants SkyePharma an exclusive royalty free license in the Exclusivity Field
and the Territory under the Invention and any Patent arising therefrom to
manufacture such product for Endo or its designees for use and sale in the
Territory.

-32-






 




          (e) Endo shall own all trademarks, trade names, and logos under which the
Products will be marketed and sold in the Territory. SkyePharma shall be
permitted to own (and to register ownership, if desired) and to use any
trademarks, trade names or logos specifically applicable to any Product(s)
outside of the Territory (excluding “Endo” and any derivatives thereof);
provided, that, no such use that in any way derogates from the image or
goodwill of the Products in the Territory shall be permitted.



          (f) Each Party shall be permitted to use jointly owned Inventions without
obligation to the other Party with respect to such Inventions that are (i)
outside the Territory, whether or not in the Exclusivity Field, or (ii) outside
the Exclusivity Field, whether or not in the Territory.



          (g) In the event that a future invention solely developed by one of the
Parties relates to DepoMorphine or Propofol IDD-D, such Party shall grant to
the other a royalty free, non-exclusive license to any such Patent arising
therefrom outside the Territory, but solely to the extent that such Patent
applies to such product and not for any other purpose.



     6.7 Patent Prosecution and Maintenance.


          (a) Each Party shall have full responsibility for, and shall control the
preparation and prosecution of, all patent applications and the maintenance of
all patents relating to the Inventions owned solely by it (including the
Patents) in the Territory. Each Party shall pay all costs of filing,
prosecuting and maintaining such patent applications and patents relating to
Inventions owned solely by it. SkyePharma shall control the preparation and
prosecution of all patent applications and the maintenance of all patents
relating to the Inventions owned jointly with Endo (including the Patents) in
the Territory. The costs of filing, prosecuting and maintaining patent
applications and patents relating to jointly owned Inventions shall be borne by
SkyePharma.



          (b) Each Party shall promptly provide to the other Party a complete
written disclosure of any Invention made by such Party. SkyePharma, in
consultation with Endo, shall determine whether any Invention owned solely by
it or jointly with Endo is patentable, and if so, shall proceed with the
preparation and prosecution of a patent application covering any such
Invention. Endo shall determine whether any Invention owned solely by it is
patentable, and if so, shall proceed with the preparation and prosecution of a
patent application covering any such Invention.



          (c) Each Party shall promptly provide copies to the other Party of any
filings made to, and any written communications received from, any patent
office relating, in whole or in part, to such patent applications or patents
granted thereon reasonably in advance of the relevant proposed filing or
response date. Each Party shall give reasonable consideration to any comments
that may be made by the other Party reasonably in advance of the relevant
proposed filing or response date relating to the filing and prosecution of such
patent applications or the maintenance of patents granted thereon.




          (d) The Parties shall cooperate with each other to execute all lawful
papers and instruments, to make all rightful oaths and declarations, and to
provide consultation and assistance as may be necessary in the preparation,
prosecution, maintenance and enforcement of all such patents.



          (e) Each Party shall undertake the obligation to maintain its respective
patent applications and patents within Patents directly relating to Products
during the term of this Agreement.





-33-






 



     6.8 Patent and Trademark Enforcement.


          (a) If either Party learns of an infringement, unauthorized use,
misappropriation or ownership claim or threatened infringement or other such
claim (an “Infringement”) by a Third Party with respect to any Product or
Product-related trademarks within the Territory, such Party shall promptly
notify the other Party in writing and shall promptly provide such other Party
with available evidence of such Infringement.



          (b) SkyePharma shall have the right, but not the duty, to institute patent
Infringement actions against Third Parties based on any Product in the
Territory. If SkyePharma does not institute an Infringement proceeding against
an offending Third Party within *** days of learning of such Infringement, Endo
shall have the right, but not the duty, to institute such an action with
respect to any Infringement by such Third Party. Neither Party may enter into
any settlement, consent judgment or other voluntary final disposition of such
action which adversely affects any Product, SkyePharma IP, SkyePharma Product
Patent, SkyePharma Product IP or Invention without the prior written consent of
the other Party which consent shall not be unreasonably withheld. The costs
and expenses of any such action (including reasonable fees of attorneys and
other professionals) shall be shared equally by the Parties. Each Party shall
execute all necessary and proper documents, take such actions as shall be
appropriate to allow the other Party to institute and prosecute such
Infringement actions and shall otherwise cooperate in the institution and
prosecution of such actions (including consenting to being named as a nominal
party thereto). Each Party prosecuting any such Infringement actions shall
keep the other Party reasonably informed as to the status of such actions. Any
award paid by Third Parties as a result of such an Infringement action (whether
by way of settlement or otherwise) shall be applied first to reimburse the
Parties for all costs and expenses incurred by the Parties with respect to such
action on a pro rata basis and, if after such reimbursement any funds shall
remain from such award, they shall be deemed to Net Sales for the Product
involved in such action and allocated between the Parties accordingly.



          (c) Endo shall have the right, but not the duty, to institute trademark
Infringement actions against Third Parties based on any Product-related
trademarks in the Territory. If Endo does not institute an Infringement
proceeding against an offending Third Party within *** days of learning of such
Infringement, SkyePharma shall have the right, but not the duty, to institute
such an action with respect to any Infringement by such Third Party. Neither
Party may enter into any settlement, consent judgment or other voluntary final
disposition of such action which adversely affects any Product-related
trademark without the prior written consent of the other Party which consent
shall not be unreasonably withheld. The costs and expenses of any such action
(including reasonable fees of attorneys and other professionals) shall be
shared equally by the Parties. Each Party shall execute all necessary and
proper documents, take such actions as shall be appropriate to allow the other
Party to institute and prosecute such Infringement actions and shall otherwise
cooperate in the institution and prosecution of such actions (including
consenting to being named as a nominal party thereto). Each Party prosecuting
any such Infringement actions shall keep the other Party reasonably informed as
to the status of such actions. Any award paid by Third Parties as a result of
such an Infringement



-34-






 


action (whether by way of settlement or otherwise) shall be applied first
to reimburse the Parties for all costs and expenses incurred by the Parties
with respect to such action on a pro rata basis and, if after such
reimbursement any funds shall remain from such award, they shall be deemed to
be Net Sales for the Product involved in such action and allocated between the
Parties accordingly.


     6.9 Infringement Actions by Third Parties.


          (a) In the event of the institution or threatened institution of any suit
by a Third Party against a Party for patent infringement involving the
manufacture, use, distribution, sale or marketing of a Product in the
Territory, such Party shall promptly notify the other Party in writing of such
suit. This Section 6.9(a) shall govern any such suit unless otherwise covered
by Section 10.1(e). The JEC shall determine how the Parties will defend such
suit and how the defense of such action shall be controlled. The Parties shall
equally share (a) all costs and expenses (including, without limitation,
reasonable fees of attorneys and other professionals) incurred by the Parties
with respect to such defense, and (b) damages awarded to and settlements made
with Third Parties bringing such suits. Each Party shall assist and cooperate
with the other Party, at the other Party’s reasonable request and expense, in
the defense of any such suit (including, without limitation, consenting to
being named as a nominal party thereto). During the pendency of such action,
Endo shall continue to make all payments due under this Agreement. Any award
paid by Third Parties as a result of such an infringement action (whether by
way of settlement or otherwise) shall be applied first to reimburse the Parties
for all costs and expenses incurred by the Parties with respect to such action
on a pro rata basis and, if after such reimbursement any funds shall remain
from such award, they shall be deemed to be Net Sales for the Product involved
in such action and allocated between the Parties accordingly.



          (b) In the event of the institution or threatened institution of any suit
by a Third Party against a Party for trademark infringement involving the
manufacture, use, distribution, sale or marketing of a Product in the
Territory, such Party shall promptly notify the other Party in writing of such
suit. Endo shall have the duty to defend such suit and shall control the
defense of such action. Endo shall bear (a) all costs and expenses (including,
without limitation, reasonable fees of attorneys and other professionals)
incurred by it with respect to such defense, and (b) damages awarded to and
settlements made with Third Parties bringing such suits. SkyePharma shall
assist and cooperate with Endo, at Endo’s reasonable request and expense, in
the defense of any such suit (including, without limitation, consenting to
being named as a nominal party thereto). Any award paid by Third Parties as a
result of such an infringement action (whether by way of settlement or
otherwise) shall be applied first to reimburse Endo for all costs and expenses
incurred by Endo with respect to such action and, if after such reimbursement
any funds shall remain from such award, they shall be deemed to be Net Sales
for the Product involved in such action and allocated between the Parties
accordingly.



     6.10 Federal Food, Drug and Cosmetic Act. Notwithstanding any other
provision contained in this Agreement (including, without limitation, Section
6.8), SkyePharma shall be solely responsible for all costs and expenses
(including, without limitation, reasonable fees of attorneys and other
professionals) which solely relate to legal action(s) brought in connection
with a certification made by SkyePharma with respect to a Product pursuant to
Section


-35-






 




 505(b)(2)(A)(iv) of the Federal Food, Drug and Cosmetic Act. In the event
that Endo incurs such costs or expenses in connection with any such legal
action(s), Endo shall be entitled to deduct such costs or expenses from sales
split on the Net Sales of Products otherwise owed to SkyePharma under this
Agreement.


7.     ADVERSE REACTION REPORTING.


     7.1 Adverse Reaction Reporting.


          (a) SkyePharma shall record, evaluate, summarize and review all adverse
drug experiences associated with the Products, and report all such information
to the FDA in accordance with its regulatory requirements as holder of the
Product Registration. In addition, each Party shall:



               (i) in a timely manner, provide to the other Party for initial and/or
periodic submission to Regulatory Authorities significant information on the
drug from preclinical laboratory, animal toxicology and pharmacology studies,
as well as adverse drug experience reports from clinical trials and commercial
experiences with each Product;



               (ii) in connection with investigational drugs, promptly report to the
other Party the receipt of a report of any unexpected serious adverse
experience with the drug, if required for either Party to comply with
regulatory requirements; and



               (iii) in connection with marketed drugs, promptly report to the other
Party any serious adverse experience with the drug that is unexpected.



          (b) For purposes of this Agreement, “Serious Adverse Drug Experience”
means any adverse drug experience occurring at any dose that results in any of
the following outcomes: death, a life-threatening adverse drug experience,
inpatient hospitalization or prolongation of existing hospitalization, a
persistent or significant disability/incapacity, or a congenital anomaly/birth
defect. Important medical events that may not result in death, be
life-threatening, or require hospitalization may be considered a Serious
Adverse Drug Experience when, based upon appropriate medical judgment, they may
jeopardize the patient or subject and may require medical or surgical
intervention to prevent one of the outcomes listed in this definition. An
unexpected adverse drug experience is one that is not listed in the current
labeling for the drug product. This includes events that may be
symptomatically and pathophysiologically related to an event listed in the
labeling, but differ from the event because of greater severity or specificity.



          (c) Each Party shall promptly report to the other Party the information
set forth above affecting any of the Products in any country, within or without
the Territory.



          (d) If a Party contracts with a Third Party for research to be performed
by such Third Party on any of the Products, that Party shall require such Third
Party to report to the contracting Party the information set forth above.



-36-






 


          (e) The details of adverse reaction reporting during the Development
Program(s) and thereafter shall be stipulated in separate agreements to be
entered into by the Parties in due course.



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



               (i) in the case of SkyePharma, to:




	 	SkyePharma, Inc.

10450 Science Center Drive

San Diego, CA 92121

Attention: Dr. Gordon Schooley

Facsimile No.: (858) 623-0376

Telephone No.: (858) 625-2414



               (ii) in the case of Endo, to:




	 	Endo Pharmaceuticals Inc.

100 Painters Dr.

Chadds Ford, PA 19317

Attention: Dr. Bradley Galer

Facsimile No.: (610) 558-9685

Telephone No.: (610) 558-9800



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


8. REPRESENTATIONS AND WARRANTIES AND CONVENANTS.


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


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



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



-37-






 


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


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



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



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



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


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



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



-38-






 


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



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



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


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


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


-39-






 




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


9.     PUBLICATION; CONFIDENTIALITY.


     9.1 Notification and Review with Respect to SkyePharma and Endo.


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



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



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



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

-40-






 





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



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


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


-41-






 


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


10.     INDEMNIFICATION; INSURANCE.


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


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



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



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



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



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



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


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


-42-






 


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


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



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



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



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


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


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


     10.5 Insurance.


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



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



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



-43-






 


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



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



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



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



11.     TERM; TERMINATION.


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


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



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



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


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


-44-






 




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


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


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



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



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



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



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


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


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


-45-






 


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


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


     11.9 Effect of Expiration or Termination.


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



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



-46-






 


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


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



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



-47-






 


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


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



-48-






 


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


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



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



-49-






 


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


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



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



-50-






 


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


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



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



-51-






 


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


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



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



-52-






 


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


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



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



-53-






 


     11.10 Accrued Rights; Surviving Obligations.




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



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



12.     FORCE MAJEURE.


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


13.     MISCELLANEOUS.


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


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


-54-






 




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


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


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


     13.5 Notice.


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


          (i) in the case of SkyePharma, to:




	 	SkyePharma, Inc.

10450 Science Center Drive

San Diego, CA 92121

Attention: Steve Thornton

Facsimile No.: (858) 623-0376



          (ii) in the case of Endo, to:




	 	Endo Pharmaceuticals Inc.

100 Painters Dr.

Chadds Ford, PA 19317

Attention: General Counsel

Facsimile No.: (610) 558-9684



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


-55-






 


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



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


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


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


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


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


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


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


-56-






 


     13.13 Arbitration.


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



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



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



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



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



-57-






 


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



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



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



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


-58-






 


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


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


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


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


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


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


* * *


-59-






 





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



	 	 	 	 	 	 	 
	 	 	ENDO PHARMACEUTICALS INC.
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Carol A. Ammon


	 	 	 	 	Name:

Title:
	 	Carol A. Ammon

Chairman and

Chief Executive Officer
	 	 	 	 	 	 	 
	 	 	SKYEPHARMA, INC.
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael R.D. Ashton


	 	 	 	 	Name:

Title:
	 	Michael R.D. Ashton

Chief Executive Officer of

SkyePharma PLC
	 	 	 	 	 	 	 
	 	 	SKYEPHARMA CANADA INC.
	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Michael R.D. Ashton


	 	 	 	 	Name:

Title:
	 	Michael R.D. Ashton

Chief Executive Officer

of SkyePharma PLC



-60-






 



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



	 	 	 	 	 
	 	 	SKYEPHARMA PLC
	 	 	 	 	 
	 	 	
By:
	 	/s/ Michael R.D. Ashton
	 	 	 	 	

	 	 	 	 	Name: Michael R.D. Ashton

Title: Chief Executive Officer




-61-










 



EXHIBIT A


FINANCIAL APPENDIX


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


     A.1 Principles of Reporting


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


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


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


     3) for each Product on a consolidated basis


     in the reporting format depicted as follows:



	 	 	 	 	 
	***	 	 	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 



 






 




	 	 	 	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 
	 	 	
***	 	 



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



	 	 	 
	***	 	
 
	***	 	 
	***	 	 



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


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


     A.2 Frequency of Reporting


     The fiscal year shall be a calendar year.


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


A-2






 


     A.3 Definitions


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


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


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



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



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



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


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


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


A-3






 


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


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


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


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


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


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


     “Net Sales”


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


A-4






 


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



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



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



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



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



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



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


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


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


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


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


A-5






 


EXHIBIT B


TARGET LABELING


DepoMorphine


Target Indication: ***.


Target Profile: ***.


Target Labeling: The Target Indication and Target Profile.


Propofol IDD-D


Target Indication: ***.


Target Profile: ***.


Target Labeling: The Target Indication and Target Profile.


B-1






 


EXHIBIT C


FORM OF PROPOFOL SUPPLY AGREEMENT


 






 





FORM OF PROPOFOL


SUPPLY AGREEMENT


By and Between


SKYEPHARMA, INC.


and


ENDO PHARMACEUTICALS INC.


Dated as of ____________, 2003


 






 





FORM OF PROPOFOL SUPPLY AGREEMENT


     THIS PROPOFOL SUPPLY AGREEMENT dated as of this      day of      , 2003,
is entered into by and between Endo Pharmaceuticals Inc., a corporation
organized and existing under the laws of Delaware, having offices located at
100 Painters Drive, Chadds Ford, PA 19317 (“Endo”) and SkyePharma, Inc., a
corporation organized and existing under the laws of the State of California,
having offices located at 10450 Science Center Drive, San Diego, CA 92121
(“SkyePharma”) (each of Endo and SkyePharma, a “Party” and, collectively, the
“Parties”).


PRELIMINARY STATEMENTS


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


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


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


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


1. DEFINITIONS.


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


     “Active Ingredient” shall mean Propofol.


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


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


C-1






 




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


     “Agreement” shall mean this Supply Agreement.


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


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


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


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


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


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


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


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


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


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


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


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


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


C-2






 


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


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


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


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


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


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


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


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


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


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


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


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


C-3






 


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


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


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


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




2. SALE AND PURCHASE OF PRODUCT.


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


3. QUALIFICATION OF SECOND SITE.


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


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


C-4






 


4. ACTIVE INGREDIENTS; EXCIPIENTS.


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


5. REPRESENTATIONS AND WARRANTIES; COVENANTS


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


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



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



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



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



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



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


C-5






 




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


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


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


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


6. CHANGES TO SPECIFICATIONS; VALIDATION.


     6.1 Optional Changes to Specifications.


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



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



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


C-6






 




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


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


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


7. QUALITY AGREEMENT.


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


8. FORECASTS AND ORDERS.


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


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


     8.3 Quantity Limits.


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



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




C-7






 


9. PURCHASE OF PRODUCT; DELIVERIES.


     9.1 Purchase Orders.


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



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



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


     9.3 Delivery Terms.


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



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



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





C-8






 





     9.4 Late Dated Product.


          (a) In the event that SkyePharma makes available to Endo Product which
does not meet the dating warranty set forth in 

Section 5.2(d) (e.g., validation
batches) (“Late Dated Product”), Endo may, in its sole discretion, take
possession of such Late Dated Product.



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



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



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


10. PRICE.


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


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


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


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


C-9






 




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


11. RECALLS; ADVERSE EVENT REPORTING; CONFIDENTIALITY.


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


12. TERM AND TERMINATION.


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


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


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


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


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


C-10






 


     12.6 Accrued Rights; Surviving Obligations.


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



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



13. NON-CONFORMING PRODUCTS.


     13.1 Non-conforming Products.


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



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



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



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


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


C-11






 


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


14. LONG-TERM INABILITY TO SUPPLY


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


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



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



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



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


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



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



C-12






 





15. FORCE MAJEURE.


     15.1 Effects of Force Majeure.


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



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



16. MISCELLANEOUS.


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


     16.2 Assignment; Subcontractors.


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



C-13






 





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


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



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


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


     16.5 Inconsistency.


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



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



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



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


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


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


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


C-14






 


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


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


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


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


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


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


          (a) If to SkyePharma:




	 	 	 
	10450 Science Center Dr	 	
 
	San Diego, CA 92121	 	 
	Attn: Steve Thornton	 	 
	Phone No.: 858-625-2424	 	 
	Facsimile No.: 858-623-0376	 	 



C-15






 



          (b) If to Endo:




	 	 	 
	Endo Pharmaceuticals, Inc.	 	
 
	100 Painters Drive	 	 
	Chadds Ford, PA 19317	 	 
	Attn: General Counsel	 	 
	Phone No.: (610) 558-9800	 	 
	Facsimile No.: (610) 558-9682	 	 



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


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



	 	 	 	 	 	 	 
	 	 	ENDO PHARMACEUTICALS INC.
	 	 	 	 	 	 	 
	 	 	
By:	 	 	 	 
	 	 	 	 	

	 	 	Name:
	 	Carol A. Ammon
	 	 	Title:
	 	Chairman and Chief Executive
Officer
	 	 	Date:	 	 
	 	 	 	 	

	 	 	 	 	 	 	 
	 	 	SKYEPHARMA, INC.
	 	 	 	 	 	 	 
	 	 	
By:	 	 	 	 
	 	 	 	 	

	 	 	Name:
	 	Michael R.D. Ashton
	 	 	Title:
	 	Chief Executive Officer of
SkyePharma PLC
	 	 	Date:	 	 
	 	 	 	 	




C-16






 



SCHEDULE 3


INITIAL MEMBERS OF JOINT EXECUTIVE COMMITTEE



	 	 	 
	Endo Representatives	 	SkyePharma Representatives
	
	 	

	***	 	
***
	 	 	 
	***	 	
***
	 	 	 
	***	 	
***



 






 



SCHEDULE 8.1(e)


SCHEDULE OF EXCEPTIONS


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


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