EXHIBIT
10.3


CERTAIN
CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “***”.   A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN
FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2
OF THE EXCHANGE ACT OF 1934.


EXECUTION
COPY


PROMOTION AGREEMENT


This PROMOTION AGREEMENT
(this “Agreement”) is made as of June 27, 2006 (the “Effective Date”),
by and between Depomed, Inc., a California corporation (“Depomed”), and
King Pharmaceuticals, Inc., a Tennessee corporation (“King”).  Each of Depomed and King is referred to
herein individually as a “party” and collectively as the “parties.”


WHEREAS, Depomed desires
to engage King to promote and market the Product in the Territory (each as
defined below), and King desires to promote and market the Product, all in
accordance with the terms and conditions contained herein;


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


ARTICLE I


DEFINITIONS


As used in this
Agreement, the following terms shall have the following meanings:


Section 1.1             “1000mg Formulation” has the
meaning set forth in Section 6.8(a).


Section 1.2             “Act” means the United
States Federal Food, Drug and Cosmetic Act, 21 U.S.C. 301, et. seq., as it may be amended from time to time, and the
regulations promulgated thereunder, including the Generic Drug Act.


Section 1.3             “AcuForm Patent License” has
the meaning set forth in Section 10.1.


Section 1.4             “Adverse Drug Experience”
means any “adverse drug experience” as defined or contemplated by 21 C.F.R.
314.80 or 312.32, associated with the Product.


Section 1.5             “Adverse Drug Experience Report”
means any oral, written or electronic report of any Adverse Drug Experience
transmitted to any Person.


Section 1.6             “Advertising/Marketing/Educational
Expenses” means the direct, out-of-pocket expenses of directly Promoting
the Product and conducting Educational Programs with respect to the Product,
each clearly identified as such, pursuant to the Launch Plan or an Annual
Plan.  Advertising/Marketing/Educational
Expenses will include (a) King’s out-of-pocket costs for Samples incurred as
contemplated by Section 6.5, (b) all out-of-pocket costs for Promotional
Materials and training materials, and (c) out-of-pocket costs for the purchase
of the Prescriber









 



Data. 
Advertising/Marketing/Educational Expenses will not include (i) any
expenses of the King Sales Force or Depomed Sales Force, (ii) any costs
incurred by Depomed with respect to the Depomed Sales Force, including as
described in Section 4.9(g), or (iii) any costs for the personnel of King or
Depomed.


Section 1.7             “Affiliate”
means, with respect to any Person, any other Person that directly or indirectly
controls, is controlled by or is under common control with, such first
Person.  For the purposes of this
definition, “control” (including, with correlative meanings, the terms “controlling,”
“controlled by” and “under common control with”), as applied to
any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities, by contract or otherwise.


Section 1.8             “Agreement”
has the meaning set forth in the preamble to this Agreement.


Section 1.9             “Agreement
Month” means each calendar month during the Term (including any partial
calendar month in the case of the first and last calendar months of the Term).


Section 1.10           “Agreement
Quarter” means the Initial Agreement Quarter, each successive period of
three months during the Term after the Initial Agreement Quarter and the Final
Agreement Quarter.


Section 1.11           “Altace
Physician List” means the list of physicians or other health care
practitioners to whom King’s sales representatives present in-person,
face-to-face sales presentations of King’s Altace® product, as such list may be
amended from time to time by King.


Section 1.12           “Annual
Plan” has the meaning set forth in Section 4.5.


Section 1.13           “Baseline
Percentage” means the percentage determined by dividing (a) the total
amount of unit sales for Product based on prescriptions written by
Professionals on the Depomed Physician List during the two complete Agreement
Quarters prior to the delivery by Depomed of its intention to commence
Promotion of the Product in the Territory pursuant to Section 4.9, by (b) the
total amount of unit sales of Product based on all prescriptions written during
such two complete Agreement Quarters, based on Prescriber Data for such two
complete Agreement Quarters; as it may be amended pursuant to Section 4.9.


Section 1.14           “BLS”
means Biovail Laboratories International SRL.


Section 1.15           “BLS
Agreements” means that certain Amended and Restated License Agreement,
dated as of December 13, 2005, by and between Depomed and BLS, the BLS Supply
Agreements, and any other agreements between Depomed and BLS with respect to
the Product, including the 1000mg Formulation.


Section 1.16           “BLS
Supply Agreements” means that certain Manufacturing Transfer Agreement,
dated as of December 13, 2005, by and between Depomed and BLS and that certain
Supply Agreement, dated as of December 13, 2005, between Depomed and BLS.



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Section 1.17           “BLS
Fees” means, for any period, the sum of (a) *** for such period, and (b)
*** for such period ***; but *** such amount is payable (and is paid in or
subsequent to such period) ***.  In the
event the amounts payable under either such agreement are reduced or terminate,
the BLS Fees will correspondingly be reduced or terminate.


Section 1.18           “cGMP”
shall mean current “Good Manufacturing Practices” as such term is defined from
time to time by the FDA or other relevant Governmental Authority having
jurisdiction over the manufacture or sale of the Product pursuant to its
regulations, guidelines or otherwise.


Section 1.19           “Co-Chairs”
has the meaning set forth in Section 3.2.


Section 1.20           “COGS”
means, for any period, Depomed’s expenses for cost of goods sold (calculated in
accordance with Section 7.2(d)) for Product in the Territory for such period,
including any expenses incurred directly in connection with the distribution of
the Product in the Territory, multiplied by the Promotion Percentage for such
period.


Section 1.21           “Combination
Product” has the meaning set forth in Section 13.2.


Section 1.22           “Combination
Product License” has the meaning set forth in Section 13.1(a).


Section 1.23           “Confidentiality
Agreement” means that certain Confidentiality Agreement, dated as of
February 21, 2006, between Depomed and King.


Section 1.24           “Control”
or “Controlled” means, with respect to patents, know-how or other
intellectual property rights of any kind, the possession by a party of the
ability to grant a license or sublicense of such rights without the payment of
additional consideration and without violating the terms of any agreement or
arrangement between such party and any Third Party.


Section 1.25           “DDMAC”
means the FDA’s Division of Drug Marketing, Advertising and Communications.


Section 1.26           “Depomed”
has the meaning set forth in the preamble to this Agreement.


Section 1.27           “Depomed
Net Sales” means, for a particular period, Net Sales for such Period,
multiplied by the Depomed Percentage for such period.


Section 1.28           “Depomed
Percentage” means, for a particular period, the difference of (a) the
percentage determined by dividing (i) the total amount of unit sales for
Product based on prescriptions written during such period by Professionals on
the Depomed Physician List, by (ii) the total amount of unit sales of Product
based on all prescriptions written during such period, in each case based on
Prescriber Data for the applicable period; minus (b) the Baseline Percentage;
provided that the Depomed Percentage shall not be less than zero.


Section 1.29           “Depomed
Physician List” means the list of Professionals to whom the Depomed Sales
Force may present Details, as such list may be amended from time to time as



 3
 






 



contemplated by this Agreement; provided that the list must conform to
the requirements of Section 4.9.


Section 1.30           “Depomed
Promotional Materials” has the meaning set forth in Section 4.9(f).


Section 1.31           “Depomed
Sales Force” means the field force of Sales Representatives employed or
contracted by Depomed.


Section 1.32           “Depomed
Supply Failure” means (a) with respect to the 500mg formulation of the
Product, Depomed’s failure to fill orders from its wholesalers and distributors
for the 500mg formulation of the Product equal to or in excess of (i) ***  percent of the aggregate amount of 500mg
formulation of the Product ordered during any period of three consecutive
Agreement Months that does not exceed the then-current Volume Forecast for such
period, or (ii) *** percent of the amount of 500mg formulation of the Product ordered
for three consecutive Agreement Months that does not exceed the then-current
Volume Forecast for such period; and (b) with respect to the 1000mg
Formulation, Depomed’s failure to fill orders from its wholesalers and
distributors for the 1000mg Formulation equal to or in excess of (i) ***
percent of the aggregate amount of 1000mg Formulation ordered during any period
of six consecutive Agreement Months that does not exceed the then-current
Volume Forecast for such period, or (ii) *** percent of the amount of 1000mg
Formulation ordered for twelve consecutive Agreement Months that does not
exceed the then-current Volume Forecast for such period; provided, in each
case, that (x) any back-up manufacturing rights in favor of Depomed pursuant to
any exclusive supply arrangement relating to the applicable formulation of the
Product are applicable as a result of such supply failure, and (y) Depomed is
not diligently exercising such back-up manufacturing rights.


Section 1.33           “Depomed
Trademarks” means (a) the GlumetzaTM trademark, for which Depomed’s licensor has
sought registration for in the United States Patent and Trademark Office, (b) the AcuFormTM trademark, for which Depomed has sought registration for in the United States
Patent and Trademark Office, and (c) Depomed®, and, in each case, all related
domain names and other trademark related rights.  The Depomed Trademarks are attached hereto as
Schedule 1.33.


Section 1.34           “Detail”
means an in-person, face-to-face sales presentation of the Product made by a Sales
Representative to a Professional, including a P1 Detail, P2 Detail, or P3
Detail.


Section 1.35           “Educational
Programs” means any activities undertaken with respect to the medical
education of Professionals and customers regarding the Product and the market
or funded by unrestricted educational grants, including educational programs
and seminars and continuing medical education materials.


Section 1.36           “Effective
Date” has the meaning set forth in the preamble to this Agreement.


Section 1.37           “Evaluation
Period” has the meaning set forth in Section 13.2.



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Section 1.38           “Executive
Officers” means the Chief Operating Officer of Depomed (or, if there is no
such officer, its President or Chief Executive Officer) and the Chief
Commercial Officer of King (or, if there is no such officer, its President or
Chief Executive Officer).


Section 1.39           “FDA”
means the United States Food and Drug Administration or any successor agency
performing comparable functions in the Territory.


Section 1.40           “Final
Agreement Quarter” means the period commencing on the first day following
the last full Agreement Quarter during the Term and ending on the last day of
the Term.


Section 1.41           “Force
Majeure Event” has the meaning set forth in Section 16.6.


Section 1.42           “GAAP”
has the meaning set forth in Section 7.2(c).


Section 1.43           “Generic
Drug Act” has the meaning set forth in Section 9.1(j).


Section 1.44           “Governmental
Authority” shall mean any court, agency, authority, department, regulatory
body or other instrumentality of any government or country or of any national,
federal, state, provincial, regional, county, city or other political
subdivision of any such government or any supranational organization of which
any such country is a member, which has competent and binding authority to decide,
mandate, regulate, enforce, or otherwise control the activities of the parties
contemplated by this Agreement.


Section 1.45           “Gross
Margin” means, for a particular period, (A) Promotion Net Sales for such
period minus (B) all BLS Fees and COGS for such period.


Section 1.46           “Initial
Agreement Quarter” means the period commencing on the Effective Date and
ending on September 30, 2006.


Section 1.47           “JAMS”
has the meaning set forth in Section 3.5(b).


Section 1.48           “JCC”
has the meaning set forth in Section 3.1.


Section 1.49           “King”
has the meaning set forth in the Preamble to this Agreement.


Section 1.50           “King
CCC” means King’s Copy Clearance Committee.


Section 1.51           “King
Manufacturing Notice” has the meaning set forth in Section 6.6.


Section 1.52           “King
Physician List” means the list of Professionals to whom the King Sales
Force presents Details agreed to in writing prior to the Effective Date, as
such list may be amended from time to time as part of the Annual Plan or in
accordance with Section 4.1(d).


Section 1.53           “King
Sales Force” means the field force of Sales Representatives employed or
contracted by King.


Section 1.54           “King
Trademarks” means the trademarks set forth on Schedule 1.54,
including the “King Pharmaceuticals” trademark and associated design



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Section 1.55           “Launch
Period” means the period beginning on the Effective Date and ending on
December 31, 2006.


Section 1.56           “Launch
Plan” means the plan and schedule for the commercial launch of the Product
in the Territory during the Launch Period, including the parties’
responsibilities for the activities associated with such commercial launch of
the Product, a budget for the activities to be undertaken in connection with
such commercial launch (taking into account Advertising/Marketing/Educational
Expenses incurred by Depomed prior to the Effective Date), and the parties’
responsibilities for the payment of such budgeted expenses.  The initial Launch Plan describing a summary
of the plan and schedule for commercial launch is attached hereto as Schedule
1.56, which plan will be amended by the JCC in accordance with Section 4.5.


Section 1.57           “Launch
Promotional Materials” has the meaning set forth in Section 4.4(c).


Section 1.58           “Legal
Requirements” means laws, rules and regulations of any Governmental
Authority.


Section 1.59           “Metformin
Product Rights” has the meaning set forth in Section 13.2.


Section 1.60           “Minimum
Sales Force Level” has the meaning set forth in Section 4.3(a).


Section 1.61           “NDA”
means any “new drug application” (as such term is used under the Act) filed or
acquired by Depomed or any Affiliate with the FDA with respect to the Product
and all subsequent submissions, supplements and amendments thereto, including
NDA No. 21-748 filed with the FDA on April 27, 2004 (as such NDA may be amended
or supplemented subsequent to the Effective Date).


Section 1.62           “Negotiation
Period” has the meaning set forth in Section 13.2.


Section 1.63           “Net
Sales” means, for any period, the actual gross amount invoiced on sales of
Product in the Territory by Depomed, its Affiliates, licensees, sublicensees
and assigns to independent, unrelated Third Parties during such period in
bona fide arms’ length transactions, less the following deductions, so long as
they conform with the requirements of Section 6.4, allowed and taken by Third
Parties and not otherwise recovered by or reimbursed to Depomed, its
Affiliates, licensees, sublicensees or assigns: (a) freight, insurance (but
only insurance with respect to shipping the Product), and other
transportation charges to the extent added to the sales price and set
forth separately as such on the total amount invoiced; (b) any sales, use,
value-added, excise taxes or duties or allowances on the selling price of
Product which fall due and are paid as a consequence of such sale; (c) chargebacks,
trade, quantity and cash discounts and rebates to the extent customary in the
trade, including governmental rebates, in each case, accrued in accordance with
GAAP; and (d) allowances or credits, including allowances or credits to
customers on account of rejection, defects or returns of the Product or
because of a retroactive price reduction, actually taken by customers that are
customary in the trade.  Net Sales shall
not include (a) a sale or transfer to an Affiliate, licensee, sublicensee or assign
of King or Depomed or if done for clinical, regulatory or governmental purposes
where no consideration is received; but the resale by such Affiliate, licensee,
sublicensee or assign of King or Depomed shall be considered a sale of such
Product; or (b) a sale to a wholesaler or distributor



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during the Launch Period in connection with the initial stocking of the
Product with respect to which (x) the invoice relating to such sale has not
been paid as of the date on which a report setting forth Net Sales for such
period is due pursuant to this Agreement, and (y) the wholesaler or distributor
has the right to return the Product as of the date on which a report setting
forth Net Sales for such period is due pursuant to this Agreement.


Section 1.64           “Order”
means any award, decision, injunction, judgment, decree, order, ruling, or
verdict entered, issued, made, or rendered by any Governmental Authority or by
any arbitrator.


Section 1.65           “P1
Detail” means a Detail where the Product is the first item presented and
comprises more than one-half of the presentation time.


Section 1.66           “P2
Detail” means a Detail where the Product is the second item presented and
comprises at least one-third of the presentation time.


Section 1.67           “P3
Detail” means a Detail where the Product is not the first item presented
and comprises at least 15% of the presentation time.


Section 1.68           “PDE”
means a Primary Detail Equivalent, and is equivalent to any of the
following:  (a) one P1 Detail; (b) two P2
Details; or (c) five P3 Details.  Details
other than P1 Details, P2 Details and P3 Details will have no effect on any
calculation of PDEs.


Section 1.69           “PDE
Cost” means $*** per PDE.


Section 1.70           “PDE
Minimum” has the meaning set forth in Section 8.2(a)(i).


Section 1.71           “PDE
Shortfall” has the meaning set forth in Section 8.2(a)(i).


Section 1.72           “PDMA”
means the Prescription Drug Marketing Act, as amended, and the rules and
regulations promulgated thereunder.


Section 1.73           “Person”
means any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Authority.


Section 1.74           “Prescriber
Data” means data provided by a Third Party which measures prescriptions
filled for Product (by individual prescriber) in the Territory during a
specified time period, from a source mutually agreed in writing by the parties
(it being understood that IMS Health Incorporated is a source agreeable to the
parties).


Section 1.75           “Product”
means any once-daily oral tablet formulation containing metformin as the sole
active pharmaceutical ingredient, including the 1000mg Formulation.


Section 1.76           “Product
Complaints” means any report concerning the quality, purity, quantity,
weight, pharmacologic activity, labeling, identity or appearance of the
Product.



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Section 1.77           “Professional”
means a physician or other health care practitioner who is permitted by law to
prescribe Product.


Section 1.78           “Promote,”
“Promotional” and “Promotion” mean, with respect to the Product,
any activities undertaken to encourage sales or use of the Product, including
Details, product sampling, detail aids, drop-offs, coupons, discount cards,
journal advertising, direct mail programs, direct-to-consumer advertising,
convention exhibits and all other forms of marketing, advertising, public
relations or promotion.


Section 1.79           “Promotion
Commencement Date” has the meaning set forth in Section 4.1(c).


Section 1.80           “Promotion
Fees” has the meaning set forth in Section 7.1(a).


Section 1.81           “Promotion
Net Sales” means Net Sales multiplied by the Promotion Percentage.


Section 1.82           “Promotion
Percentage” means, for a particular period, 100% minus the Depomed
Percentage for such period, if any Depomed Net Sales occur in such period.


Section 1.83           “Promotional
Effort” has the meaning set forth in Section 4.1(a).


Section 1.84           “Promotional
Materials” has the meaning set forth in Section 4.4(a).


Section 1.85           “Proprietary
Information” means any proprietary or confidential information communicated
from one party to the other in connection or relating to this Agreement, which
is identified as confidential or proprietary, or which the other party knows or
has reason to know is confidential or proprietary, including the Technology and
financial, marketing, business, technical and scientific information or data,
information related to King’s compensation of its Sales Representatives,
information contained within the Annual Plan and Launch Plan, and the
information described in Section 4.6, whether communicated in writing, orally
or electronically.  Proprietary
Information shall not include information that the receiving party can show
through written documentation:


(a)           at
the time of disclosure, is publicly known;


(b)           after
the time of disclosure, becomes part of the public domain, except by breach of
an agreement between the disclosing party or any Affiliate thereof and the
receiving party or any Affiliate thereof;


(c)           is
or was in the possession of the receiving party or any Affiliate thereof at the
time of disclosure by the disclosing party and was not acquired directly or
indirectly from the disclosing party or any Affiliate thereof or from any other
party under an agreement of confidentiality to the disclosing party or any
Affiliate thereof; and


(d)           is
or was developed by the receiving party or its Affiliates without use of or
reference to the other party’s Proprietary Information.



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Section 1.86           “Reconciliation
Report” has the meaning set forth in Section 7.5(d).


Section 1.87           “Regulatory
Approval” means any and all consents or other authorizations or approvals
required from a Governmental Authority to market and sell the Product in the
Territory, but excluding any form of reimbursement approval.


Section 1.88           “Safety
Stock” has the meaning defined in Section 6.1


Section 1.89           “Sales
Representatives” means sales representatives employed by King or Depomed,
or a Third Party engaged by King or Depomed, to Promote the Product, who have
been trained and equipped to Promote the Product in accordance with this
Agreement.  In the case of King, Third
Parties may only be engaged as Sales Representatives if they are full-time
contractors of King, exclusive to King, and carry King’s business card.


Section 1.90           “Samples”
has the meaning set forth in Section 6.5.


Section 1.91           “Serious
Adverse Drug Experience” means any Adverse Drug Experience, including those
subject to expedited reporting as defined in the regulations cited below, that
is fatal or life-threatening, requires hospitalization or prolongation of
existing hospitalization, results in persistent or significant disability or
incapacity, is a congenital anomaly/birth defect, or is of comparable medical
significance or any other event which would constitute a “serious” Adverse Drug
Experience pursuant to the terms of 21 C.F.R. 314.80 or 312.32.


Section 1.92           “Serious
Adverse Drug Experience Report” means any Adverse Drug Experience Report
that involves a Serious Adverse Drug Experience.


Section 1.93           “Standard
Cost” means, (a) with respect to COGS, the cost assigned from time to time,
but at least annually, by Depomed to use in calculating Gross Margin under
Section 7.1(a) for the purpose of facilitating timely reporting of Gross
Margin; and, (b) with respect to Samples, the cost assigned from time to time,
but at least annually, by Depomed to use in calculating
Advertising/Marketing/Educational Expenses pursuant to Section 4.5(e); each
determined in accordance with Section 7.2(e).


Section 1.94           “Subcontracting”
means subcontracting or sublicensing a party’s rights or obligations hereunder
(a) pursuant to which a Third Party will manufacture the Product; or (b)
pursuant to which a Third Party Sales Representative is engaged to Promote the
Product.  “Subcontractor” means
the Third Party with whom the Subcontracting agreement is entered into.


Section 1.95           “Technology”
means all pharmacological, toxicological, preclinical, clinical, technical or
other information, data and analysis and know-how relating to the registration,
manufacture, packaging, use, marketing and sale of the Product and all
proprietary rights relating thereto owned by Depomed or its Affiliates or to
which Depomed or its Affiliates has rights so as to be able to license, and
relating or pertaining to the Product.


Section 1.96           “Term”
has the meaning set forth in Section 8.1.


Section 1.97           “Territory”
means the United States, including its possessions and Puerto Rico.



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Section 1.98           “Third
Party” means any Person other than King or Depomed or their respective
Affiliates.


Section 1.99           “Unit”
means a single tablet of the Product.


Section 1.100         “United
States Bankruptcy Code” shall mean the U.S. Bankruptcy Code, 11 U.S.C. §§
101, et seq.


Section 1.101         “Volume
Forecast” has the meaning set forth in Section 6.3.


ARTICLE
II


GRANT


Section 2.1             Grant of Promotion Rights.  During the Term, subject to the terms and
conditions of this Agreement, Depomed hereby grants to King and its Affiliates
and King and its Affiliates hereby accept a co-exclusive right to Promote the
Product under the Depomed Trademarks in the Territory together with Depomed and
its Affiliates only, on the terms and subject to the conditions set forth
herein.  Depomed agrees that its and its
Affiliates’ right to Promote the Product is limited to the rights set forth in
Section 4.9.


Section 2.2             Sublicense.  Except pursuant to Section 16.9 or in
connection with the use of Third Party Sales Representatives, King shall not
assign, subcontract or otherwise transfer or delegate any of its rights or
obligations under this Agreement without the express written consent of
Depomed, which consent may be withheld by Depomed in its sole discretion.


Section 2.3             Limitation on Metformin Promotion.  Except as expressly contemplated by this
Agreement (including Article XIII hereof) and subject to Section 13.1 hereof,
King shall not promote, market or distribute any product containing metformin
hydrochloride as the sole active ingredient in the Territory during the Term of
this Agreement, other than the Product.


Section 2.4             Retention of Rights.  Depomed retains and shall retain all
proprietary and property interests in the Product until the point of sale or,
in the case of Samples, until delivered to King as contemplated by Section 6.5.  King will not have nor represent that it has
any control or proprietary or property interests in the Product, except for the
licenses and rights specifically granted hereunder.  Except as expressly set forth herein, nothing
contained herein shall be deemed to grant King, by implication, a license or
other right or interest in any patent, trademark or other similar property of
Depomed or its Affiliates, except as may be necessary for King to Promote the
Product pursuant to this Agreement or to manufacture the Product in accordance
with Section 6.6.  Except as expressly
set forth herein, nothing contained herein shall be deemed to grant Depomed, by
implication, a license or other right or interest in any patent, trademark or
other similar property of King or its Affiliates, except as may be necessary
for Depomed to Promote the Product pursuant to this Agreement.


 



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ARTICLE
III


JOINT
COMMERCIALIZATION COMMITTEE


Section 3.1             Establishment.  The parties agree to establish, for the
purposes specified herein, a Joint Commercialization Committee (the “JCC”).  The parties acknowledge and agree that the
JCC does not have the power to amend, modify or waive any of the terms or
conditions of this Agreement.


Section 3.2             Joint Commercialization Committee.  The JCC shall be established by the parties
and shall be comprised of eight members, four of whom shall be appointed by
Depomed and four of whom shall be appointed by King.  Each party’s respective initial appointments
to the JCC are set forth on Schedule 3.2 hereto.  A party may change any of its representatives
at any time if a new person is appointed to any of the foregoing positions by
giving written notice to the other party. 
The total number of JCC members may be changed by unanimous vote of the
JCC from time to time as appropriate; provided, that the JCC shall in
all cases be comprised of an equal number of members from each of Depomed and
King.  King and Depomed each will
designate one representative of such party to serve as co-chairs of the JCC
(the “Co-Chairs”).  The members appointed
to the JCC by each party shall be employees of such party and shall be vested
with appropriate decision-making authority and power by such party.  The Chief Executive Officers of King and
Depomed, the Chief Operating Officer of Depomed, and the Chief Commercial
Officer of King shall not be members of the JCC.


Section 3.3             JCC Responsibilities.  Except as otherwise set forth herein, the JCC
shall direct all Promotional and marketing activities for the Product
hereunder.  The responsibilities of the
JCC shall be exercised consistent with this Agreement and shall include, but
shall not be limited to:


(a)           reviewing
and approving modifications to the Launch Plan (provided that no such
modification may increase or reduce the Advertising/Marketing/Educational
Expenses allocated to the parties under the Launch Plan, or modify any call
plan or sampling plan set forth in the Launch Plan, without both parties’
written approval).


(b)           reviewing
and approving the Annual Plan as contemplated by Section 4.5, including
developing the Advertising/Marketing/Educational Expenses associated with the
Promotion activities under the Annual Plan;


(c)           monitoring
and reviewing compliance with the Annual Plan and the Launch Plan;


(d)           reviewing
and approving any modifications to the Annual Plan to address market or
Product-related issues and opportunities (provided that, without the written
approval of both parties, such modifications do not (i) result in a decrease of
more than 10% of the annual budget set forth in the Annual Plan, or (ii) result
in an increase of more than 5% of the Advertising/Marketing/Educational Expenses
allocated to either party under the Annual Plan);


(e)           developing
Product Promotion strategies and objectives, including Product positioning,
messaging and branding, and reviewing and approving all material communications
to Third Parties related to commercial matters for the purpose of Promoting the
Product;



 11
 






 



(f)            monitoring
the Depomed Sales Force call plan for coordination with the King Sales Force;


(g)           monitoring
advertising placement and market responses, including any post-implementation
reviews;


(h)           reviewing
and approving any Volume Forecasts and Sample forecasts;


(i)            establishing
pricing for the Product, including the timing of any pricing changes;


(j)            reviewing,
but not approving, sales incentive compensation for the King Sales Force
related to the Product;


(k)           establishing
contracting guidelines for the distribution of the Product;


(l)            overseeing
the coordination of the parties’ efforts in respect of managed care marketing
strategies;


(m)          proposing
any new packaging design for the Product (subject to Depomed’s approval, and
followed by and subject to applicable FDA and other Legal Requirements);


(n)           reviewing
and approving reductions to the King Physician List (provided that, without the
approval of both parties, (i) the King Physician List may not be reduced prior
to the second anniversary of the Promotion Commencement Date, and (ii) the
number of Professionals on the King Physician List may not be decreased such
that the number of Professionals on the King Physician List is less than ***%
of the number of Professionals on the King Physician List as of the Effective
Date); and


(o)           such
other functions as may be mutually agreed upon by the parties from time to
time.


For the avoidance of
doubt, (i) the JCC shall not have any review or approval rights with respect to
any matters relating to the development of the Product and (ii) any decisions
of the JCC with respect to matters which relate to Regulatory Approval for the
Product shall require Depomed’s prior written consent.


Section 3.4             Meetings
of the JCC.  Meetings of
the JCC may be called by the Co-Chairs of the JCC from time to time and, upon
no less than five days’ notice, shall otherwise be called when requested by a
party; provided, however, that meetings of the JCC shall be held
on at least a monthly basis during the first six months of the Term, and on at
least a quarterly basis thereafter.  If
possible, the meetings shall be held in person or where appropriate, by video
or telephone conference.  Unless
otherwise agreed, the location of any in-person meetings of the JCC shall
alternate between the corporate offices of the parties.  The parties shall determine the form of the
meetings.  Subject to Section 3.5,
decisions shall be made unanimously, each party having one (1) vote regardless
of the number of representatives present or voting; provided, that no
such vote shall be valid unless each party is represented by at least two
members either by written proxy or actual presence at the meeting at which the
vote is taken.  Subject to appropriate
confidentiality undertakings where applicable, each party shall have the right,
upon written



 12
 






 



notice to the other
party, to have present at JCC meetings additional, non-voting participants (not
to exceed ten such participants at any JCC meeting without the consent of the
other party).  Such additional
participants shall not be deemed to be, or have any rights or responsibilities
of, a member of the JCC.  The parties
shall cause their respective representatives on the JCC to use their reasonable
efforts to resolve all matters presented to them as expeditiously as
possible.  The party hosting any meeting
shall propose the agenda for the meeting and appoint a secretary to the meeting
who shall record the minutes of the meeting. 
Such minutes shall be circulated to the parties promptly following the
meeting for review and comment and for unanimous ratification by both
parties.  Each party shall bear its own
travel and related costs incurred in connection with participation in the JCC.


Section 3.5             JCC Disputes.


(a)           In
the event that the JCC is, after a period of ten days, unable to make a
decision due to a lack of required unanimity, either party may submit the
matter being considered to the Executive Officers for a joint decision.  In such event, either Co-Chair of the JCC, by
written notice to the other party, shall formally request the dispute be
resolved by the Executive Officers, specifying the nature of the dispute with
sufficient detail to permit adequate consideration by the Executive Officers.  The Executive Officers shall diligently and
in good faith attempt to resolve the referred dispute expeditiously and, in any
event, within fifteen days of receiving such written notification.


(b)           In
the event that the Executive Officers are unable to reach a resolution of any
referred dispute after good faith negotiations during the fifteen-day period
referred to in Section 3.5(a) above and in the event such dispute is not
related to compliance with this Agreement, regulatory matters, or the validity,
breach or interpretation of this Agreement, either party may commence mediation
within fifteen days after the conclusion of such fifteen-day period by
providing to the other party a written request for non-binding mediation,
setting forth the subject of the dispute and the relief requested (a “Mediation
Notice”).  The parties will cooperate
with Judicial Arbitration and Mediation Services (“JAMS”) and with one
another in selecting a mediator from JAMS’ panel of neutrals, and in scheduling
the mediation proceedings.  The parties shall
endeavor to conclude any mediation under this Section 3.5 within thirty days
after delivery by either party of Mediation Notice.  The parties covenant that they will
participate in the mediation in good faith and that they will share equally in
its costs; provided that each party will be responsible for its own attorney’s
fees.  Either party may seek equitable
relief prior to the mediation to preserve the status quo pending the completion
of that process.  Except for such an
action to obtain equitable relief, neither party may commence a civil action
with respect to the matters submitted to mediation until after the completion
of the initial mediation session, or thirty days after delivery of the
Mediation Notice, whichever occurs first.


(c)           Any
disputes referred to the Executive Officers for resolution pursuant to this
Section 3.5 shall not be subject to any dispute resolution mechanism or
procedure other than pursuant to this Section 3.5.



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ARTICLE
IV


PRODUCT
PROMOTION


Section 4.1             Product Promotion.


(a)           Subject
to applicable Legal Requirements, as well as the provisions of this Agreement,
King shall, from and after the Promotion Commencement Date, at its sole
expense, use commercially reasonable efforts to Promote the Product within the
Territory in accordance with the Launch Plan or Annual Plan (the “Promotional
Effort”).  For purposes of the
preceding sentence, King’s commercially reasonable efforts shall mean, until
***, at least the same degree of effort (including with respect to the reach
and frequency of Details) that King would use for the Promotion of any of King’s
products that are promoted in the ***, are of a similar market size and patent
life, and represent a similar commercial opportunity; thereafter, King will
apply the same standard, except that it may fulfill its obligations by
Promoting the Product in the ***.  All
statements, core selling messages and materials to be utilized by King to
Promote the Product shall be consistent in all material respects with the
Annual Plan and the Launch Plan.  King
will cause the King Sales Force and King employees and agents acting on King’s
behalf to comply with this Agreement and all applicable Legal Requirements in
connection with the Promotion of the Product. 
It is understood, and King agrees, that it will be accountable for the
acts or omissions of the King Sales Force and its employees and agents to the
extent such acts or omissions fail to comply with King’s obligations under this
Agreement.


(b)           From
and after the Promotion Commencement Date, King shall perform at least *** PDEs
per calendar year, with such amount prorated over the initial and final
calendar years of the Term if either such year is a partial year.  In fulfilling its obligations under this Section
4.1(b), King will perform ***, as follows: 
King will perform no
less than an average of ***, with such reach and frequency as the JCC
determines as part of the Annual Plan each year.  The determination of the ***
will be based on *** used by King with respect to ***; provided that the *** by
King will be *** will be deemed the ***.  Notwithstanding the foregoing, the parties
acknowledge and agree that during the first month following the Commencement
Date, King will be building its Promotional Efforts.


(c)           King
shall commence (the date of such commencement, the “Promotion Commencement
Date”) Promotion (including Details by the King Sales Force) of the Product
in accordance with this Agreement and the performance of the other obligations
contained herein that are required to be performed from and after the Promotion
Commencement Date as soon as practicable following the date hereof, but no
later than September 5, 2006, or as soon thereafter as the Product (including
Samples) is available in commercial quantities reasonably adequate to support the
commercial launch of the Product in the Territory.  The parties agree to cooperate with each
other in good faith in furtherance of the preceding sentence.


(d)           Any
Professional on the King Physician List who does not receive *** Detail prior
to the end of the Launch Period will be removed from the King Physician List at
the end of the Launch Period.  From time
to time, King may Promote the Product to Professionals who are not on the King
Physician List or the Depomed Physician List. 
At such time as King conducts



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*** Details to any such Professional during a six-month period, such Professional will automatically be added
to the King Physician List.


Section 4.2             Representations to Customers.  King will not make any false or misleading
representations to Professionals, customers or others regarding Depomed or the
Product and will not make any representations, warranties or guarantees with
respect to the specifications, features or capabilities of the Product that are
not consistent with the applicable then-current FDA approved labeling, package
insert or other documentation accompanying or describing the Product, including
Depomed’s standard limited warranty and disclaimers.  King agrees to undertake timely and complete
corrective action for any deviations from this Section 4.2, subject to
discussion and review by Depomed’s regulatory affairs and quality assurance
department.


Section 4.3             Staffing; Training.


(a)           King
agrees that from and after the Promotion Commencement Date, the King Sales
Force will be staffed with at least *** full-time Sales Representatives
(subject to vacancies consistent with average vacancy rate experienced by King
across its total sales force) who are actively promoting the Product in
accordance with the Launch Plan or Annual Plan (the “Minimum Sales Force
Level”); provided that King may meet such requirement to actively promote
the Product by promoting the Product through P2 Details and P3 Details.  Throughout the remainder of the Term, King
shall use its commercially reasonable efforts to ensure that the number of
Sales Representatives comprising the King Sales Force meets or exceeds the
Minimum Sales Force Level, including by promptly filling all vacant positions
in the King Sales Force resulting from resignations or terminations.


(b)           King
shall be solely responsible for all costs and expenses of compensating its
Sales Representatives.  Consistent with
applicable Legal Requirements, King shall pay incentive compensation to its
Sales Representatives with respect to the Product in accordance with King’s
incentive compensation plan for King’s own products; it being understood that,
(i) through ***, King shall determine the target incentive payment for the
Product in a manner consistent with the way in which King determines the target
incentive payment for pharmaceutical drug products that are promoted in the
***, are of a similar market size and patent life, and represent a similar
commercial opportunity; and (ii) thereafter, King shall determine the target
incentive payment for the Product in a manner consistent with the way in which
King determines the target incentive payment for pharmaceutical drug products
promoted by King that are of a similar market size and patent life, and
represent a similar commercial opportunity. 
King shall notify its Sales Representatives prior to the Promotion
Commencement Date, or coinciding with the launch of the Product and consistent
with its procedures for King’s other products, of the total potential incentive
compensation for the Product.  Promptly
after the adoption by King of an incentive compensation payment plan with
respect to the Product pursuant to this Agreement and any material amendments
thereto, King shall provide to Depomed *** for the Product pursuant to such
plan.


(c)           Depomed
shall make available to King any training materials created by Depomed prior to
the Effective Date at Depomed’s out-of-pocket cost for such materials.  In consultation with Depomed, King shall
develop, ***, training materials for its Sales



 15
 






 



Representatives in other media or forms provided that such materials
shall be subject to Depomed’s review as Promotional Materials as provided in
Section 4.4.  King shall, at its own
expense prior to the Promotion Commencement Date, train its Sales
Representatives using such training materials, the other Promotional Materials
and such programs as King shall deem appropriate that are in compliance with
King’s obligations hereunder and all other Legal Requirements and that have
been approved by the JCC.  Such programs
shall include training with respect to reporting Adverse Drug Experiences and
technical complaints.  After the initial
training, King shall periodically provide additional training to each of its
Sales Representative, and shall update its training materials as appropriate in
connection with such additional training, in accordance with this
Section 4.3.


Section 4.4             Promotional Materials; Educational Materials.


(a)           Subject
to Sections 4.4(b), 4.4(c) and 4.9, King shall, ***, create, develop,
produce or otherwise obtain, and utilize sales, promotional, advertising,
marketing, educational and training materials (“Promotional Materials”)
which are necessary to support fully the Promotional Effort for the
Product.  Such Promotional Materials may
include, by way of example, detailing aids; leave items; journal advertising;
educational programs; formulary binders; appropriate reprints and reprint
carriers; product monographs; patient support kits; convention exhibit
materials; direct mail; market research survey and analysis; training materials;
and scripts for telemarketing and teleconferences.  All Promotional Materials used by the King
Sales Force or bearing the King Trademarks will be subject to the review and
approval of the King CCC.  All
Promotional Materials developed by King hereunder shall prominently display
such Depomed Trademark(s) as shall be specified by Depomed to King following
its review of the applicable prototype in accordance with Section 4.4(b).


(b)           Prior
to the use thereof, King shall provide to Depomed a prototype of any
Promotional Materials created by King for review.  Depomed shall notify King of any objections
it has to such prototype and the basis therefor as soon as reasonably
practicable, but no later than ten business days following its receipt thereof
(five business days during the Launch Period). 
King shall modify such Promotional Materials to the extent necessary to
resolve any objections made by Depomed to such Promotional Materials on the
grounds that such Promotional Materials are inconsistent with any Legal
Requirements or this Agreement and shall in good faith consider and address any
of Depomed’s other objections.  The final
version of the Promotional Materials approved by the King CCC shall be provided
to Depomed for its review and approval to confirm their consistency with the
prototype approved by Depomed and the resolution of Depomed’s objections in
accordance with this Section 4.4(b), which review and approval shall occur, as
soon as reasonably practicable, but no later than ten business days (five
business days during the Launch Period) following its receipt by Depomed.  Upon approval, the Promotional Materials may
be produced in quantity, and King shall provide Depomed with the requisite
number of copies of the final printed form in a timely manner so as to allow
Depomed to satisfy its obligation to file such materials with the FDA prior to
the first use of the Promotional Materials, and Depomed will make such filing
with the FDA within five business days of its receipt of such copies.


(c)           Notwithstanding
the provisions of Section 4.4(a), Depomed shall maintain responsibility for the
creation and development of Promotional Materials to be utilized in



 16
 






 



connection with the commercial launch of the Product (the “Launch
Promotional Materials”).  Depomed
shall provide to King prototypes of all Launch Promotional Materials for the
review and approval of the King CCC. 
King shall notify Depomed of any objections it has to such prototype and
the basis therefor within five business days following its receipt thereof.  Depomed shall modify such Promotional
Materials to the extent necessary to resolve any objections made by King to
such Promotional Materials on the grounds that such Promotional Materials are
inconsistent with any Legal Requirements or this Agreement, and shall in good
faith consider and endeavor to resolve and address any of King’s other
objections.  The final version of the
Launch Promotional Materials shall be provided to King for the review and
approval of the King CCC to confirm their consistency with the prototype
approved by King and the resolution of King’s objections in accordance with
this Section 4.4(c), which review and approval shall occur, as soon as
reasonably practicable, but no later than five business days following its
receipt by Depomed.  On or prior to the
Promotion Commencement Date, Depomed shall deliver to King all King-approved
Launch Promotional Materials created by Depomed in its inventory, less a
reasonable amount thereof necessary to support Promotion efforts undertaken by
Depomed.  The Launch Promotional
Materials supplied to King under this Section 4.4(c) shall be delivered to
a single location specified by King in writing prior to such delivery.  Depomed hereby grants to King the
non-exclusive right, during the Term, to use the Launch Promotional Materials
supplied to King pursuant to this Section 4.4(c) in the performance of its
obligations under this Agreement.


(d)           Depomed
shall own all copyrights to all Promotional Materials that are created during
the Term of this Agreement in connection with the Promotion of the
Product.  King shall use commercially
reasonable efforts consistent with accepted business practices to obtain such
assignments from the authors and creators of such materials as may be necessary
to vest ownership of the copyright in Depomed. 
Depomed shall, and does hereby, grant to King a royalty-free license to
use and reproduce such materials solely in conjunction with its Promotion of
the Product pursuant to this Agreement, which license shall not be assignable
or transferable by King, except in accordance with the terms of Section 2.2.


(e)           All
written materials relating to Educational Programs that are funded using
Advertising/Marketing/Educational Expenses shall identify both Depomed and King
as sponsors of such Educational Programs, unless otherwise agreed by the JCC.


Section 4.5             Launch Plan; Annual Plan; Promotion Expenses.


(a)           The
JCC shall use all reasonable efforts to refine the Launch Plan prior to the
Promotion Commencement Date in order to set forth in detail the parties’
responsibilities during the Launch Period, incorporating the components of an
Annual Plan set forth in Section 4.5(b) below.


(b)           On
or prior to September 1 of the preceding calendar year with respect to each
calendar year during the Term beginning with the 2007 calendar year, King shall
develop an annual commercialization plan (the “Annual Plan”) and submit
the Annual Plan to the JCC for review and approval; provided that the Annual
Plan for the 2007 calendar year will be developed on or prior to December 1,
2006.  The Annual Plan shall set forth
the manner in which



 17
 






 



the Product is to be Promoted and commercialized during the period to
which the Annual Plan relates and shall include, at a minimum:


(i)            the
anticipated number of quarterly and annual Details (including P1 Details, P2
Details and P3 Details) to be provided by the King Sales Force;


(ii)           the
King Physician List;


(iii)          Product
positioning, strategy and tactics with supporting advertising and promotional
activity to be undertaken, including all material communications to Third
Parties related to commercial matters for the purpose of Promoting the Product;


(iv)          any
training and/or sampling programs to be conducted;


(v)           medical
education programs to be conducted;


(vi)          planned
public relations activities;


(vii)         Product
production forecasts;


(viii)        Sample
forecasts and delivery schedules;


(ix)           pricing
and contracting strategies;


(x)            format
and quantity of sales, marketing and educational materials;


(xi)           managed
health care strategies and tactics;


(xii)          customer
targets;


(xiii)         Product
manufacturing and distribution;


(xiv)        post-marketing
clinical studies that Depomed, in its sole discretion, decides to conduct; and


(xv)         a
detailed, itemized budget for all costs and expenses associated with the
activities to be undertaken pursuant to the Annual Plan (including all
Advertising/Marketing/Educational Expenses), and the allocation of such costs
and expenses between the parties.


(c)           The
JCC shall use all reasonable efforts to approve the Annual Plan not later than
November 1 of each preceding calendar year; provided that the Annual Plan for
the 2007 calendar year will be approved no later than January 1, 2007.  The Annual Plan for 2007 shall incorporate
tasks, activities and responsibilities in addition to any tasks, activities and
responsibilities in the Launch Plan.  The
JCC shall endeavor to ensure the parties there are no tasks, activities or
responsibilities in the Launch Plan inconsistent with those set forth in the
Annual Plan for 2007.



 18
 






 



(d)           Each
party shall use its commercially reasonable efforts to perform all tasks,
responsibilities and activities for which it is responsible under the Launch
Plan and the Annual Plan.  Neither party
shall have any obligation to incur Advertising/Marketing/Educational Expenses
in excess of those set forth in the Annual Plan; provided, that King shall be
responsible for any and all costs and expenses associated with creating and
approving any new Product packaging design proposed by King (and such costs and
expenses shall be in addition to King’s Advertising/Marketing/Educational
Expenses).  Furthermore, except to the
extent the JCC has approved any payment in accordance with this Agreement,
including approval as part of an Annual Plan, or except for a party’s
obligation to pay its portion of the Advertising/Marketing/Educational Expenses
described in Section 4.5(e) below, neither party shall (i) be obligated to
incur any costs or expend any funds that have not been approved by such party
or (ii) have the authority to cause the other party to incur any costs or
expend any funds that have not been approved by such other party.


(e)           All
Advertising/Marketing/Educational Expenses incurred by a party on and after the
Effective Date (and such expenses incurred prior to the Effective Date as are
specifically set forth in the Launch Plan attached hereto as Schedule 1.56)
shall be allocated between the parties according to the following
percentages:  ***% will be allocated to
King and ***% will be allocated to Depomed; provided that the first $*** of
Advertising/Marketing/Educational Expenses set forth in the Launch Plan is
allocated to, and shall be paid by, Depomed and the next $*** of
Advertising/Marketing/Educational Expenses set forth in the Launch Plan is allocated
to, and shall be paid by, King.  Without
the prior written consent of each party, the aggregate
Advertising/Marketing/Educational Expenses to be incurred by the parties each
calendar year during the Term shall be as set forth on Schedule 4.5.  With the prior written consent of each party,
the JCC may increase or decrease the Advertising/Marketing/Educational Expenses
above those amounts set forth on such schedule.


(f)            Each
party will bear its own operating expenses associated with the Product and Promotion
thereof, including all personnel, general and administrative and overhead
costs.  King will bear all King Sales
Force expenses, and Depomed will bear all Depomed Sales Force expenses.  Depomed will bear all costs associated with
maintaining and continuing all Regulatory Approvals of the Product in the
Territory, including all costs associated with Adverse Drug Experience
reporting and all clinical and regulatory requirements.


Section 4.6             King Promotion Reports.  Within thirty (30) days following the end of
each Agreement Quarter, King shall provide the JCC with a status report, which
report will summarize King’s Promotional activities pursuant to this Agreement
for such prior Agreement Quarter and on a calendar year-to-date basis,
including, to the extent King customarily creates the following reports for
King’s other products which are promoted by or on behalf of King:  (a) the number of P1, P2 and P3 Details made
and recorded by King’s standard record keeping procedures; (b) the names and
addresses of the Professionals called upon; (c) the percentage of Professionals
Detailed who were provided with Samples; (d) the average number of such Samples
delivered on each Detail; (e) a breakdown of all information required to be
contained in each report on an aggregate basis; (f) any Professionals added to
the King Physician List during such quarter; and (g) such other information as
may be required in the then-current Annual Plan.



 19
 






 



Section 4.7             Medical Inquiries.  The parties acknowledge that each may
receive requests for medical information concerning the Product from members of
the medical and paramedical professions and consumers regarding the
Product.  If such requests come from a
Professional on the King Physician List or are otherwise received by King, the request
will be handled by King’s medical department. 
The King medical department will submit all form letters to the Depomed’s
development department for approval prior to use.  King will comply with direction provided by
Depomed as to the content of any such letters or communications.  Depomed shall be responsible for responding
to such requests that do not come from Professionals on the King Physician List
or are not otherwise received by King, which responses shall be in compliance
with all applicable Legal Requirements and the NDA.  The parties shall use the same form of letter
or communication for all such responses to Professionals and consumers.  Each party shall promptly provide the other
party with (i) copies of all written materials and (ii) written
summaries of all oral advice, provided by such party in response to such
inquiries.


Section 4.8             Trademarks.


(a)           The
“Depomed” trademark must appear on all Promotional Material that makes
reference to the Product.  The “AcuForm”
trademark must appear on all Promotional Materials that make reference to the “AcuForm”
drug delivery technology incorporated into the Product.  Depomed hereby grants to King a
non-assignable, non-sublicensable, non-exclusive, royalty-free right and
license to use the Depomed Trademarks in the Territory solely in connection
with King’s Promotion of the Product in accordance with this Agreement;
provided King may assign and sublicense such right and license in accordance
with Section 2.2.  Such license shall
expire immediately upon the expiration or termination of this Agreement.  Subject to this Section 4.8 and to
applicable Legal Requirements, King shall have the right to use the King
Trademarks, and include the name “King” or any variation thereof on the
Promotional Materials developed by King; provided, that such King
Trademarks shall not appear in such Promotional Materials in greater prominence
or in greater frequency than the Depomed Trademark(s).  In addition, the JCC will discuss including
the King Trademarks, in equal prominence to the Depomed Trademarks and in
accordance with all Legal Requirements, on all packaging for Samples
distributed by the King Sales Force, with determination as to including such
marks being based on the timing for implementing such change and the costs
associated therewith, with all costs associated with creating and approving new
packaging borne by King in accordance with Section 4.5(d).  King recognizes Depomed’s title to the
Depomed Trademarks, and shall not at any time, during or after the Term, do or
knowingly suffer to be done any act or thing which will in any way impair the
rights of Depomed in or to the Depomed Trademarks.  King acknowledges and agrees that it shall
not acquire and shall not claim any title to the Depomed Trademarks adverse to
Depomed by virtue of the rights granted under this Agreement or through King’s
use of the Depomed Trademarks, it being the intention of the parties that all
goodwill and improved reputation generated by King and use of the Depomed
Trademarks shall inure to the benefit of Depomed.


(b)           King
hereby grants to Depomed a non-assignable, non-sublicensable (except to any
Third Party acting as the Depomed Sales Force), non-exclusive, royalty-free
right and license to use the King Trademarks in the Territory solely in
connection with Depomed’s Promotion of the Product.  Such license shall expire immediately upon
the expiration or


 



 20














 


termination of this Agreement. 
Subject to this Section 4.8 and to applicable Legal Requirements,
Depomed shall have the right to use Depomed Trademarks, and include the name “Depomed,”
“AcuForm,” or any variation thereof on the Promotional Materials developed by
Depomed in accordance with this Agreement. 
Depomed recognizes King’s title to the King Trademarks, and shall not at
any time, during or after the Term, do or knowingly suffer to be done any act
or thing which will in any way impair the rights of King in or to the King
Trademarks.  Depomed shall not be
obligated to use the King Trademarks in the Depomed Promotional Materials.  Depomed acknowledges and agrees that it shall
not acquire and shall not claim any title to the King Trademarks adverse to King
by virtue of the rights granted under this Agreement or through Depomed’s use
of the King Trademarks, it being the intention of the parties that all goodwill
and improved reputation generated by Depomed and use of the King Trademarks
shall inure to the benefit of King.


(c)           Each
of King with respect to its use of the Depomed Trademarks and Depomed with
respect to its use of the King Trademarks will maintain quality standards for
all of its uses of the trademarks of the other party in connection with the Promotion
of the Product that are substantially equivalent to those standards used by the
owner of such trademarks in connection with pharmaceutical products.  Subject to the foregoing and to the other
provisions of this Agreement, each party acknowledges and agrees that the owner
or licensee of the trademark has the right, at any time, to modify or
supplement such quality standards and that the licensee or sublicensee must
implement such new standards or changes following receipt of notice of such
additions or changes; provided that the licensor agrees to bear all reasonable
costs associated with such modifications and supplements.  Compliance with this Section 4.8(c) shall be
determined pursuant to the Promotional Material and Depomed Promotional
Materials review and approval procedures set forth in Sections 4.4(b) and
4.9(e), as applicable.


Section 4.9             Promotion by Depomed.


(a)           At
Depomed’s option, it may, but is not obligated to, have the Depomed Sales Force
Promote the Product directly to Professionals who are (i) not on the King
Physician List or (ii) are on the King Physician List but did not receive at
least *** Details in the four most complete Agreement Quarters following the
Promotion Commencement Date (or, if Depomed desires to commence Details prior
to March 31, 2008, at least *** Details during the two Agreement Quarters on
which the Baseline Percentage is determined). 
If Depomed desires to use the Depomed Sales Force for this purpose, it
will inform King at least 90 days in advance of the commencement of Details by
the Depomed Sales Force and provide King with the Depomed Physician List.  During such 90-day period, King will be
entitled to review the Depomed Physician List and confirm that such list does
not contain any Professionals that are not, as of the date of King’s receipt of
the Depomed Physician List, eligible for inclusion on the Depomed Physician
List.  Following creation of the initial
Depomed Physician List, from time to time but not more than two times per
calendar year, Depomed may add Professionals to the Depomed Physician List
pursuant to the procedure set forth above, so long as Depomed has conducted at
least *** Details to such Professional during the six-month period immediately
prior to being added.  Following the
addition of such Professionals to the Depomed Physician List, the Baseline
Percentage shall be adjusted to reflect prescriptions written by any such
Professionals by adding to the then-current Baseline Percentage the quotient
obtained by dividing (x) *** prior to



 21
 






 



Depomed’s commencement of providing Details to such Professionals, by
(y) ***, based on Prescriber Data for such two complete Agreement Quarters.


(b)           Depomed
will submit to the JCC a call plan setting forth the Details to be performed by
the Depomed Sales Force.  Such call plan
may be taken into account in developing the Annual Plan.  Any Professional on the Depomed Physician
List who does not receive at least *** Details in each full calendar year
following the commencement of Promotion of the Product by the Depomed Sales
Force will be excluded from the Depomed Physician List in subsequent calendar
years for purposes of calculating Depomed Net Sales, and for purposes of
calculating the Baseline Percentage.


(c)           During
any period in which the Depomed Sales Force is making Details, efforts will be
made at the local level to coordinate the Details by the Depomed Sales Force
with Details by the King Sales Force to ensure the most effective coverage of
the target audiences and to minimize non-productive efforts.  Depomed will provide the JCC with such
information related to Depomed’s promotion activities as is reasonably
necessary to assist in such efforts.


(d)           All
Details made by the Depomed Sales Force will be reported to King.  Such reports by Depomed will be made in the
same manner as King’s Details under Section 4.6 (to the extent Depomed
customarily creates such reports for Depomed’s other products which are
promoted by or on behalf of Depomed).


(e)           Depomed
may purchase from King, ***, copies of any Promotional Materials created by
King for use by the Depomed Sales Force. 
Upon Depomed’s request, King will provide to Depomed electronic copies
of Promotional Materials created by or for King, which Promotional Materials
may be modified for use by Depomed; provided that any modification must be
approved in the same manner as approval of Depomed Promotional Materials (as
defined below).  King *** for such
Promotional Materials.  Depomed may also
create and develop its own Promotional Materials for use by the Depomed Sales
Force (“Depomed Promotional Materials”). 
Prior to the use thereof, Depomed shall provide to the JCC a prototype
of any Depomed Promotional Materials. 
The JCC may review such prototype for consistency with Legal Requirements
and the Product positioning and messaging reflected in the then-current Annual
Plan.  If the JCC notifies Depomed within
10 business days after receipt of a prototype that is objects to such prototype
on the grounds that it is inconsistent with the Product positioning and
messaging reflected in the then current Annual Plan, Depomed shall modify such
Depomed Promotional Materials to the extent necessary to resolve any objections
made by the JCC to such Depomed Promotional Materials on such grounds.  In addition, Depomed shall in good faith
consider any other objections the JCC may have to any Depomed Promotional
Materials.  The Depomed Promotional
Materials will not contain any King Trademark unless such materials are subject
to the review and approval of the King CCC. 
King may purchase from Depomed, ***, copies of any Depomed Promotional
Materials.  Upon King’s request, Depomed
will provide to King electronic copies of Depomed Promotional Materials created
by or for Depomed, which Depomed Promotional Materials may be modified for use
by King; provided that any modification must be approved in the same manner as
approval of Promotional Materials.


(f)            Depomed
may purchase from King, ***, copies of training materials developed by King
related to the Product for use by Depomed in the training of the Depomed Sales
Force.



 22
 






 



Depomed shall be responsible for training of the Depomed Sales Force,
and may, at its own expense, develop training materials for the Depomed Sales
Force in other media or forms, provided that such materials shall be subject to
King’s review as Depomed Promotional Materials as provided in
Section 4.9(e).  Depomed shall, at
its own expense, train the Depomed Sales Force using such training materials,
the other Promotional Materials and Depomed Training Materials and such programs
as Depomed shall deem appropriate that are in compliance with Depomed’s
obligations hereunder.  Such programs
shall include training with respect to reporting Adverse Drug Experiences and
technical complaints.  After the initial
training, Depomed shall periodically provide additional training to each Sales
Representative, and shall update its training materials as appropriate in
connection with such additional training, in accordance with this
Section 4.9(f).


(g)           ***
Depomed’s costs or expenses related to any activities of the Depomed Sales
Force, including costs for Depomed Promotional Materials, training or training
materials or the purchase from King of Promotional Materials for the Depomed
Sales Force, will be included in Advertising/Marketing/Educational Expenses or
be reimbursable by King.


(h)           It
is understood, and Depomed agrees, that it will be accountable for the acts or
omissions of its employees and agents to the extent such acts or omissions fail
to comply with Depomed’s obligations under this Agreement.


ARTICLE V


CLINICAL
AND REGULATORY AFFAIRS; DEVELOPMENT


Section 5.1             Regulatory Approvals.  Depomed shall use commercially reasonable
efforts to maintain and continue all Regulatory Approvals currently in effect
for the Product.  King agrees that all
Regulatory Approvals, applications therefor and any other submissions to a
Governmental Authority with respect to the Product shall be in the name of, and
shall be owned by, Depomed or its designee.


Section 5.2             Compliance with Regulatory Requirements.  Unless otherwise required by law or expressly
required by this Agreement, Depomed will retain exclusive authority over and
responsibility for complying with all regulatory requirements and maintaining
all contacts with Governmental Authorities with respect to the Product,
including maintaining and updating of the NDA, the development and submission
of applications for new indications, the reporting of any adverse drug
reactions to the FDA, the compliance of Promotional Materials with FDA rules
and regulations and the filing of Promotional Materials with the FDA.


Section 5.3             Compliance.  In performing its duties hereunder, each
party shall, and shall cause the King Sales Force or Depomed Sales Force, as
applicable, and its employees and agents to, comply with all Legal
Requirements, including the FDA’s regulations and guidelines concerning the
advertising of prescription drug products, DDMAC’s promotional guidelines, the
Department of Health and Human Services Office of the Inspector General
Compliance Program Guidance for Pharmaceutical Manufacturers, the American
Medical Association’s Guidelines on Gifts to Physicians, the PhRMA Code on
Interactions with Healthcare Providers, the Prescription Drug Marketing Act of
1987, as amended, and the rules and regulations promulgated thereunder,



 23
 






 



the ACCME Standards for Commercial Support of Continuing Medical
Education, equal employment, non-discrimination and federal and state
anti-kickback Legal Requirements, Legal Requirements with respect to submission
of false claims to governmental or private health care payors, and all industry
and professional standards, which may be applicable to the activities
(including the warehousing, handling and distribution of Samples) to be
performed by such party hereunder.  None
of King, Depomed, the King Sales Force, the Depomed Sales Force and either
party’s employees and agents shall offer, pay, solicit or receive any
remuneration to or from Professionals in order to induce referrals of or
purchase of the Product.  The King Sales
Force and the Depomed Sales Force shall have no direct contact with, nor shall
the King Sales Force or the Depomed Sales Force be involved with the delivery
of Product to patients, other than delivery of Samples directly to
Professionals authorized to prescribe the Product.  The King Sales Force and the Depomed Sales
Force shall be trained in connection with compliance with Sec. 1128B(b) of
the Social Security Act and the AMA Guidelines on Gifts to Physicians from
Industry prior to engaging in Promotion of the Product.


Section 5.4             Communications with Regulatory Authorities.


(a)           All
communications with Government Authorities concerning the Product shall be the
sole responsibility of Depomed.  Depomed
shall within two business days provide King with copies of all such
communications (including summaries of all relevant verbal communications)
related to Promotional Materials and Serious Adverse Drug Experiences (except
that routine communications as to such matters (e.g., FDA 2253 correspondence)
may be forwarded to King within 5 business days).  Depomed will consult with King concerning
adverse drug reaction reporting to the FDA that Depomed reasonably considers to
be significant to the Product, including regulatory responses to follow up
inquiries regarding adverse drug reactions. 
Depomed will provide to King a copy of all draft responses related to
such matters as soon as practicable, and will endeavor to provide them at least
five business days in advance of their submission (to the extent allowable
under Legal Requirements), and will consider in good faith any comments
provided to Depomed by King.


(b)           King
shall not, without the consent of Depomed or unless so required by Legal
Requirements (and then only pursuant to the terms of this Section 5.4,
unless this Section 5.4 is inconsistent with Legal Requirements),
correspond or communicate with the FDA or with any other Governmental
Authority, whether within the Territory or otherwise, concerning the Product,
or otherwise take any action concerning any Regulatory Approval under which the
Product is sold or any application for Regulatory Approval of the Product; provided
that during the Term, King shall have the right to
communicate with the FDA or any other Governmental Authority regarding the
Product if such communication is necessary to comply with the terms of this
Agreement or any Legal Requirement, or if King made a request of such agency to
communicate with Depomed instead, and such Governmental Authority denied such
request (in any such case, King shall give Depomed notice as soon as reasonably
practicable of such communication and, to the extent practicable, Depomed shall
be permitted to accompany King, take part in any such communications and
receive copies of all such communications). 
King shall, immediately upon receipt of any communication from the FDA
or from any other Governmental Authority relating to the Product, forward a
copy of the same to Depomed and respond to all inquiries by Depomed relating
thereto.  If King is required by law to
communicate with the FDA or with any other Governmental Authority relating to
the Product, then King shall



 24
 






 



so advise Depomed immediately (within one business day) and provide
Depomed in advance with a copy of any proposed written communication, or a
written summary of any proposed oral communication with the FDA or any other
Governmental Authority.  King shall
comply with any and all reasonable direction of Depomed concerning any meeting
or written or oral communication with the FDA or any other Governmental
Authority relating to the Product unless otherwise required by Legal
Requirements.


Section 5.5             Product Complaints.  King shall refer any oral or written Product
Complaints which it receives concerning the Product to Depomed within four
calendar days of its receipt thereof; provided, that all complaints
concerning suspected or actual Product tampering, contamination or mix-up
shall be delivered within twenty-four hours of its receipt thereof.  King shall not take any other action in
respect of any such complaint without the consent of Depomed unless otherwise
required by Legal Requirements.  If
requested by Depomed, King will collaborate with Depomed to resolve any Product
Complaints.  All Product Complaints shall
be directed to the attention of Depomed’s Vice President, Regulatory Affairs,
at Depomed’s address set forth in Section 14.1. 
Depomed shall provide King with a summary of all Product Complaints
received by Depomed within ten business days of its receipt thereof.


Section 5.6             Adverse Drug Experience Reports.


(a)           Each
party shall notify the other: 
(i) of all Serious Adverse Drug Experience Reports within forty-eight
(48) hours of the time such Serious Adverse Drug Experience Report becomes
known to such party (including its employees); and (ii) of all Adverse Drug
Experience Reports within five (5) calendar days of the time such Adverse Drug
Experience Report becomes known to such party (including its employees).


(b)           Except
as may otherwise be required by Legal Requirements, (i) King shall not
disclose any information concerning Adverse Drug Experience Reports or Serious
Adverse Drug Experience Reports to any Person or Governmental Authority without
the prior consent of Depomed; and (ii) Depomed shall have the sole
discretion to determine whether any Product Complaint, Adverse Drug Experience
Report or Serious Adverse Drug Experience Report must be reported to the FDA or
any other Governmental Authority.


(c)           All
follow-up investigations concerning Adverse Drug Experience Reports and
Serious Adverse Drug Experience Reports shall be conducted by Depomed; provided
that King shall have the right to participate in such investigations upon its
request.  King shall provide all
reasonable cooperation with any such follow-up investigation as may be
requested by Depomed from time to time.


Section 5.7             Recalls or Other Corrective Action.  Depomed shall have sole responsibility for
and shall make all decisions with respect to any recall (including recall of
packaging and promotion materials), market withdrawals or any other corrective
action related to the Product.  Depomed
shall promptly notify King of any such actions taken by Depomed, including all
actions that are reasonably likely to result in a material adverse effect on
the marketability of the Product in the Territory.  At Depomed’s request, King shall provide
assistance to Depomed in conducting such recall, market withdrawal or other
corrective action (including retrieving Samples distributed by the King Sales
Force to Professionals).  With



 25
 






 



respect to any recall, market withdrawal or corrective action initiated
by Depomed as a result of Depomed becoming aware of any manufacturing defect in
Product (other than Product manufactured by King in accordance with Section
6.6), Depomed shall reimburse King for its reasonable, documented, direct,
out-of-pocket costs incurred in connection with participating in such recall,
market withdrawal or other corrective action provided that King’s breach of its
obligations hereunder is not a material cause of the recall, market withdrawal
or other corrective action.  Except as
set forth above, Depomed shall be under no liability whatsoever to compensate
King or make any other payment to King for any decision to recall, initiate a
market withdrawal or take any other corrective action with respect to the
Product.


Section 5.8             Assistance.  Each party agrees to provide to the other all
reasonable assistance and take all actions reasonably requested by the other
party that are necessary to enable the other party to comply with any Legal
Requirement applicable to the Product.


ARTICLE
VI


MANUFACTURING
AND SUPPLY; SALES; PRICING; 1000MG FORMULATION


Section 6.1             Obligations of Depomed.  In accordance with the provisions of this
Agreement and all applicable Legal Requirements, Depomed shall, at its cost and
expense, use reasonable best efforts to perform or cause to be performed all
Product manufacture, labeling, packaging, warehousing, distribution and return,
order entry, customer services and all other activities to supply and
distribute the Product in the Territory in order to fill orders for Product
conforming to the then-current Volume Forecast in a timely and efficient
manner.  From and after the completion of
the sixth full calendar month following the Promotion Commencement Date,
Depomed shall use commercially reasonable efforts to maintain at least one
month’s safety stock of Product (“Safety Stock”) to address
unanticipated changes in demand for the Product (calculated on the basis of the
Volume Forecast contained in the then-current Annual Plan).


Section 6.2             Manufacturing Activities.  The Product, including all Samples, to be
manufactured by or for Depomed for sale in the Territory shall be manufactured
to meet applicable specifications for the Product in accordance with the NDA,
cGMP and in compliance with all other applicable Legal Requirements.


Section 6.3             Volume Forecasts.  At least 30 days prior to the beginning of
each Agreement Quarter ending after the Promotion Commencement Date, King shall
submit to the JCC a written forecast by month of the number of Units of Product
expected to be sold in the Territory during the twelve (12) month period
beginning with such Agreement Quarter, which forecast shall be prepared by King
in good faith.  In order to assist King
in developing such forecasts, Depomed shall give King trade wholesaler stocking
levels information within ten days following
the beginning of each Agreement Quarter ending after the Promotion Commencement
Date (or, if later, within two business days after such information becomes
available to Depomed).  The JCC shall
review and discuss such forecast and shall make such modifications thereto as
may be necessary for such forecast to be unanimously approved by the JCC and to
be consistent with the forecasting and purchasing provisions of Depomed’s Third
Party supply agreement relating to the Product (as so modified and approved for
the applicable twelve (12) month period, the “Volume Forecast”).  Depomed shall use reasonable best efforts to



 26
 






 



manufacture and distribute, or cause to be manufactured and
distributed, Product consistent with the Volume Forecast.  The Volume Forecast for the twelve month
period beginning on August 1, 2006 is attached hereto as Schedule 6.3.


Section 6.4             Sales; Pricing.


(a)           Depomed
or its Affiliates shall book all sales of the Product in the Territory and
shall be responsible for entering into any contracts and other arrangements
with any Person regarding the sale of the Product, and for establishing and
approving the form, content and terms and conditions thereof, including any
discount, allowance, rebate, chargeback or other term granted therein; provided,
however, that (i) the pricing of the Product shall be consistent with
the pricing established by the JCC in accordance with Section 3.3 hereof, (ii)
the terms of such contract and other arrangement shall be consistent with the
contracting guidelines established by the JCC in accordance with Section 3.3(k)
and reflected in the Annual Plan, and (iii) any deductions from gross amounts
invoiced pursuant to any such contract or arrangement shall correspond to one
or more of the categories of deductions set forth in the definition of “Net
Sales” in Article I.  The parties have
reviewed the initial pricing and contracting guidelines applicable to the
Product.  The parties agree to discuss among the JCC
and finalize the initial pricing and contracting guidelines within two weeks
after the Effective Date.


(b)           King
will work on behalf of Depomed to provide necessary support for managed markets
and trade customer groups with respect to the Product to enable Depomed to
enter into such contracts and other arrangements described above.  For purposes of clarity, all such contracts
and arrangements supported by King must be executed and administered by
Depomed.


Section 6.5             Samples.


(a)           Depomed
shall provide or cause to be provided to King, from time to time as
contemplated by the Annual Plan, with samples of the Product that are not for
sale and with no fee associated (“Samples”) to be distributed by King
solely in connection with the performance of Details.  Depomed shall supply such Samples FOB Depomed’s
or its designee’s warehouse, and the risk of loss and responsibility for
handling and warehousing of the Samples shall pass to King upon delivery to a
carrier designated by King.  King shall
be responsible for distributing the Samples to its Sales Representatives in a
timely manner.  Depomed shall invoice
King for each shipment of Samples at its Standard Cost payable within 30 days
of the invoice date.  King shall also be
responsible for securing the return and appropriate disposal of and reconciling
existing Sample inventories from discontinued Sales Representatives.


(b)           Samples
supplied by Depomed to King shall be used by King solely in performing Details
to Professionals in accordance with this Agreement.  Upon its receipt of Samples, King shall be
solely responsible for accountability and compliance with the PDMA for the King
Sales Force, and other applicable Legal Requirements relating to such Samples
or the distribution of same by the King Sales Force, and shall be responsible
for adherence by its Sales Representatives to such Legal Requirements.



 27
 






 



(c)           Sampling
volume shall be consistent with King’s Promotional Effort and considered a
component of the Advertising/Marketing/Educational Expenses.  Sampling volume will be included as a part of
each Annual Plan.


Section 6.6             Inability to Supply.  In the event that a Depomed Supply Failure
occurs, notwithstanding its compliance with its obligations under
Section 6.1, to fulfill all orders for the Product generated by King
activities in a timely and efficient manner, upon written notice to Depomed (a “King
Manufacturing Notice”), King shall have, and hereby grants King,
exercisable only in accordance with the provisions hereof, the right, but not
the obligation, to manufacture, or have manufactured, the Product on behalf of
Depomed, at Depomed’s expense, including expenses related to the technical
transfer of the Product, and Depomed will provide reasonable assistance to King
in connection therewith, including by transferring or licensing to King all
Technology necessary or useful to give King the capability of manufacturing the
Product so that King can undertake manufacture of the Product; provided,
however, that Depomed shall not be required to reimburse King for more
than *** percent (***%) of Depomed’s standard cost for such Product.  Any such Product manufactured by King will be
sold by Depomed in accordance with this Agreement.  King’s right to use the Technology to
manufacture, or have manufactured, the Product under this Section 6.6
shall terminate upon the later to occur of (a) the second (2nd) anniversary of the date upon which King
delivered the King Manufacturing Notice to Depomed and (b) the six (6)
month anniversary of the date upon which Depomed shall have delivered to King a
certification of its CEO as to Depomed’s ability to fulfill all orders for the
Product generated by King activities in a timely and efficient manner, but in
any event on termination of this Agreement.


Section 6.7             Manufacture by King.  Depomed
agrees to consider in good faith any proposal by King to manufacture the 500mg
formulation of the Product at King’s Bristol facility that would result in a
reduction in the supply price applicable to the Product relative to Depomed’s
then current contract manufacturer, and would be suitable to Depomed’s
operations, regulatory affairs, and quality assurance groups.  Any fixed and determinable savings in Product
manufacturing cost to Depomed realized during the Term, and during the eight
calendar quarters during which a payment is being paid pursuant to Section 7.4,
that results from any definitive long-term supply arrangement between Depomed
and King relating to the Product relative to Depomed’s then current long-term
supply arrangement ***; provided that, in the event King continues to
manufacture the Product for Depomed, the parties will negotiate in good faith
with respect to adjusting the pricing mechanism for the manufacture of such
Product following the Term, and such eight calendar quarter period, in order to
compensate King for such savings and for any discounts King provided to Depomed
as a result of the relationship of the parties hereunder.  Any manufacture by King of the Product would
be subject to regulatory approval of a supplemental NDA providing for such
manufacture.


Section 6.8             1000mg Formulation.


(a)           The
parties acknowledge that Depomed will use commercially reasonable efforts to
submit a supplemental new drug application to the FDA and to obtain Regulatory
Approval for a 1000mg formulation using metformin as the sole active
pharmaceutical ingredient (the “1000mg Formulation”) to which Depomed
has certain rights pursuant to the BLS Supply Agreements.



 28
 






 



(b)           The
provisions of Section 6.1 through 6.6 will not apply to the 1000mg Formulation
unless and until Depomed obtains Regulatory Approval for the 1000mg
Formulation, at which time such provisions will apply, except as follows: (i)
Depomed shall have no obligation to continue to supply and distribute the
1000mg Formulation if Depomed, in the exercise of its reasonable business
judgment after consultation with the JCC, determines that marketing the 1000mg
Formulation in the Territory is not commercially feasible due to reasons
related to intellectual property matters, safety, FDA, manufacturing or supply
issues, or market conditions; and (ii) Depomed shall have no liability under
this Agreement for any failure by BLS to timely deliver and supply the 1000mg
Formulation under the BLS Supply Agreement in accordance with the terms
thereof, and any such failure on the part of BLS shall not be a breach or
default of this Agreement by Depomed (except to the extent that any such
failure by BLS arises directly from Depomed’s failure to comply with its
obligations, including paying amounts due, under such agreement).


Section 6.9             BLS Supply Agreements.  The parties acknowledge that Depomed is
subject to certain obligations under the BLS Supply Agreements.  Depomed shall not amend, terminate or cause
to be terminated any BLS Supply Agreement (or any other agreement between
Depomed and BLS concerning rights to, or the supply or marketing of, the
Product in the Territory) without the prior written consent of King, which
consent shall not to be unreasonably withheld, delayed or conditioned; provided
that Depomed shall have the right to amend any BLS Agreement without the
consent of King if such amendment does not materially and adversely affect (a)
Depomed’s ability to maintain Regulatory Approval for the 1000mg Formulation,
(b) Depomed’s ability to purchase the 1000mg Formulation in commercial
quantities under the BLS Supply Agreements, or (c) King’s economic benefits
hereunder.


ARTICLE
VII


COMPENSATION


Section 7.1             Promotion Fees.


(a)           In
consideration for King’s performance of its obligations under this Agreement,
Depomed shall pay promotion fees (the “Promotion Fees”) to King as
follows:  following each Agreement
Quarter during the Term, Depomed shall pay to King 50% of the Gross Margin for
such Agreement Quarter.


(b)           Within
thirty (30) days following the end of each Agreement Quarter during the Term,
Depomed shall provide King with a statement setting forth:


(i)            the
aggregate number of Units of Product sold to customers in the Territory during
such Agreement Quarter;


(ii)           Net
Sales during such Agreement Quarter;


(iii)          Depomed
Net Sales during such Agreement Quarter (if any);


(iv)          COGS
during such Agreement Quarter (based on Depomed’s Standard Cost);



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(v)           Advertising/Marketing/Educational
Expense with respect to the costs of Samples (based on Depomed’s Standard Cost)
during such Agreement Quarter;


(vi)          Gross
Margin for such Agreement Quarter; and


(vii)         a
calculation of the amount, if any, payable by Depomed to King in respect of
such Agreement Quarter pursuant to Section 7.3(a).


(c)           Within
4 business days following the end of each Agreement Month (or if later, within
two business days after such information becomes available to Depomed) during
the Term, Depomed shall provide King with a statement setting forth the
aggregate number of Units of Product sold to customers in the Territory during
such Agreement Month.


(d)           Except
as expressly specified otherwise, any amounts payable by one party to the other
party in respect of any Agreement Quarter pursuant to this Agreement shall be
paid within forty-five (45) days after the end of such Agreement Quarter.


Section 7.2             Maintenance of Records.


(a)           Each
party agrees to keep, for a period of at least three years after the date of
entry (or such longer period as may be required by Legal Requirements) full and
accurate records maintained in accordance with such party’s accounting
practices in sufficient detail to enable a Third Party to accurately calculate
(i) in the case of Depomed, COGS, BLS Fees, Depomed’s
Advertising/Marketing/Educational Expenses, Net Sales and Depomed Net Sales
reported, payments to be made under this Agreement and Details completed by the
Depomed Sales Force, and (ii) in the case of King, King’s
Advertising/Marketing/Educational Expenses and PDEs completed by the King Sales
Force.  Upon 30 days prior written
notice, such records shall be made available by the audited party for audit by
an independent certified public accounting firm designated by the other party
and reasonably acceptable to the party whose records are to be examined.  The auditor will only examine such books and
records during business hours but not more than once each fiscal year while
this Agreement remains in effect and for three years thereafter in order to
verify expenses, Net Sales, Depomed Net Sales, PDEs or Details completed, or
payments due under this Agreement.  The
fees and expenses of the auditor performing such verification examination shall
be borne by the party conducting the verification; provided, however, that if any
verification reveals that the audited party has reported incorrectly, and the
amount of such discrepancy is at least five percent of the aggregate amount
that should have been reported for the period examined, then the audited party
shall pay the entire amount of the fees and expenses for such verification.


(b)           Each
party shall have the right, upon five business days’ prior written notice, to
audit all applicable records of the other party (other than records described
in Section 7.2(a)) for the purpose of determining the audited party’s compliance
with the obligations set forth in this Agreement, including with respect to
training programs and certifications and records reports for the Samples.  The audit will be conducted during normal
business hours, at convenient times.  Any
such audit may be conducted no more than once each fiscal year.  The fees and expenses of the auditing party
shall be borne by such party.  This right
to audit shall extend throughout the term of this Agreement and for one year
after expiration or termination of this Agreement.



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(c)           Whenever
in this Agreement a party is required to report its costs, or is entitled to
receive or obligated to make a payment based on its costs, such costs shall be
determined in accordance with generally accepted accounting principles as
applied in the United States (“GAAP”), consistent with the terms of this
Agreement.  The term “out-of-pocket”
costs or expenses means cost or expenses paid to Third Parties and shall not
include any fixed costs or expenses, personnel costs or expenses, overhead
costs or expenses, or other costs or expenses of a similar nature.


(d)           COGS
and all Advertising/Marketing/Educational Expenses, including Samples, shall be
determined in accordance with GAAP, except as follows:  (i) COGS and Samples shall be calculated at
Depomed’s Standard Cost for each Agreement Quarter and reconciled periodically
as set forth in Section 7.5(d); and (ii) COGS shall include costs incurred by
Depomed associated with achieving manufacturing efficiencies and ensuring
Product supply.


(e)           Depomed
shall calculate Standard Costs in good faith to approximate as closely as
reasonably practicable such actual costs calculated in accordance with GAAP (e.g., the unit cost of finished goods by
bottle size or packaged samples) and shall provide the JCC with its methodology
for calculating such costs.  The JCC
shall review Depomed’s methodology for calculating Standard Cost at least
annually during the Term to ensure that Depomed’s Standard Costs continue to
approximate as closely as reasonably practicable such actual costs calculated
in accordance with GAAP, and Depomed shall revise such methodology following
such review in accordance with the recommendations of the JCC.


Section 7.3             Payments.  Any payments required to be made by either
party under this Agreement shall be made in United States dollars via wire
transfer of immediately available funds to such bank account as the other party
shall designate in writing prior to the date of such payment.


Section 7.4             Tail Promotion Fees.  Following the termination of this Agreement at the
conclusion of the initial five year term or any additional term, for each of
the eight full calendar quarters following such termination, Depomed shall pay
to King an amount equal to, in each of the first four such calendar quarters,
***% of the Net Sales for each such quarter and, in each of the fifth through
eighth such calendar quarters, ***% of such Net Sales for each such quarter.


Section 7.5             Expense Reimbursement.


(a)           If
Depomed pays Advertising/Marketing/Educational Expenses allocated to King under
the Launch Plan or the Annual Plan, Depomed shall notify King at least five
business days in advance of the payment of such
Advertising/Marketing/Educational Expenses, and, unless King objects in writing
to Depomed before the end of such five business-day period, King shall
reimburse Depomed for such Advertising/Marketing/Educational Expenses within
thirty days’ after receipt of a detailed invoice therefor.  If King pays
Advertising/Marketing/Educational Expenses allocated to Depomed under the
Launch Plan or the Annual Plan, King shall notify Depomed at least five
business days in advance of the payment of such
Advertising/Marketing/Educational Expenses, and, unless Depomed objects in
writing to King before the end of such five business-day period, Depomed shall
reimburse King for such



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Advertising/Marketing/Educational Expenses within thirty days’ after
receipt of a detailed invoice therefor.


(b)           Within
15 days following the end of each Agreement Quarter, each party shall provide
to the JCC a report setting forth in reasonable detail
Advertising/Marketing/Educational Expenses incurred by such party in such
Agreement Quarter in accordance with GAAP, including expenses incurred by a
party but not reimbursed by the other party pursuant to Section 7.5(a) above or
expenses reimbursed by a party pursuant to such section.  Within 10 days thereafter, the JCC shall
produce a report setting forth the calculation of
Advertising/Marketing/Educational Expenses and its allocation between the
parties in accordance with Section 4.5(e) above.  The report shall also set forth the amount of
any payments that a party must make to the other party in order to achieve such
allocation between the parties.  All such
payments shall be made within 45 days following the end of the applicable
Agreement Quarter.


(c)           At
the end of each Agreement Quarter, the parties will reconcile their respective
payments and expenses hereunder, including Promotion Fee payments and expense
reimbursements pursuant to this Article VII, and, at the discretion of the
party who has paid an amount greater than that allocable to such party for the
relevant Agreement Quarter, such over-paying party will be reimbursed by the
other party within 45 days following the end of the applicable Agreement Quarter,
based on the report of the JCC described in Section 7.5(b) above or, at its
discretion, will receive a credit against amounts payable by the over-paying
party to the other party in the subsequent Agreement Quarter(s), which credit
amount will be carried forward until fully credited or reimbursed.  Reimbursement of expenses pursuant to this
Section 7.5(c) shall be made based on Advertising/Marketing/Educational
Expenses recorded in accordance with GAAP.


(d)           The
statement submitted by Depomed pursuant to Section 7.1(b) for the final
Agreement Quarter of each calendar year during the Term, and the final
Agreement Quarter of the Term, shall be accompanied by a report created by
Depomed (a “Reconciliation Report”) that (i) reconciles Depomed’s
Standard Cost for COGS and Samples during such calendar year (or partial
calendar year, as applicable) to Depomed’s actual COGS and Depomed’s actual
out-of-pocket cost for Samples calculated in accordance with Section 7.2(d),
(ii) sets forth any adjustment to Gross Margin for such calendar year (or
partial calendar year, as applicable) on the basis of such reconciliation, and
(iii) sets forth any adjustment to Advertising/Marketing/Educational Expenses
for such calendar year (or partial calendar year, as applicable) based on
reconciliation of actual costs for Samples. 
The report shall also set forth the amount of any payments that a party
must make to the other party in order to achieve the proper allocation of the
adjusted Gross Margin between the parties, pursuant to Section 7.1(a), for such
calendar year and the proper allocation of Advertising/Marketing/Educational
Expenses between the parties, pursuant to Section 4.5(e), for such calendar
year.  All such payments shall be made within
45 days following the receipt of the Reconciliation Report.  Depomed may elect to submit Reconciliation
Reports on a quarterly basis in accordance with the provisions of this Section
7.5(d), in which event (i) such quarterly Reconciliation Reports will accompany
the statement submitted by Depomed pursuant to Section 7.1(b), and (ii) each
reference in this Section 7.5(d) to a calendar year shall be deemed to be
reference to an Agreement Quarter.



 32
 






 



Section 7.6             Depomed Percentage.  If, prior to or following the commencement of
Product Promotion by the Depomed Sales Force, Depomed reasonably determines
that the Prescriber Data fails to, or is likely to fail to, reasonably
accurately reflect the portion of Net Sales attributable to prescriptions
written by Professionals on the Depomed Physician List (whether as a result of
Professionals opting out of the American Medical Association’s Physician
Masterfile database or otherwise), the parties shall negotiate in good faith
with respect to implementing a revised manner of measuring the portion of Net Sales
attributable to prescriptions written by Professionals on the Depomed Physician
List, and reflect any such modification in the definition of “Depomed
Percentage” and the “Baseline Percentage.” 
The parties shall consider in their discussions any other customary
manner of determining similar information as may arise in light of
Professionals opting out of the American Medical Association’s Physician
Masterfile database.


ARTICLE
VIII


TERM AND
TERMINATION


Section 8.1             Term.  The term of this Agreement shall commence on
the Effective Date and shall continue, unless terminated sooner in accordance
with this Article VIII, until June 27, 2011 (the “Term”).  The Term of this Agreement shall be extended
for subsequent one year periods upon the mutual agreement of the parties, which
agreement shall be set forth in writing (in which event a party that desires to
so extend the Term of this Agreement shall notify the other party at least 120
days prior to the termination of this Agreement).


Section 8.2             Early Termination.


(a)           Depomed
and King shall have the following rights with respect to the performance of
PDEs:


(i)            In
the event King performs more than *** PDEs each Agreement Quarter (the “PDE
Minimum”) in any Agreement Quarter, such excess PDEs will be carried forward
to the immediately following Agreement Quarter. 
In the event that King does not perform the PDE Minimum in any Agreement
Quarter (the difference between such PDE Minimum and the number of PDEs
actually conducted, the “PDE Shortfall”), King will have until the end
of the Agreement Quarter immediately following to cure its failure by providing
a sufficient number of excess PDEs in the immediately following Agreement
Quarter.


(ii)           If
King does not perform, in the aggregate, two times the PDE Minimum in any two
consecutive Agreement Quarters, Depomed may demand that King cure such default
by (A) *** and (B) ***, in each case, prior to the end of the next succeeding
Agreement Quarter following notice from Depomed.


(iii)          Upon
the third failure by King to meet the PDE Minimum during any six consecutive
Agreement Quarters, Depomed shall have the right to *** or demand that King
shall cure such default in the same manner outlined in clause (i) above for the
first such default.


(b)           If,
as of the end of any period of the immediately previous four consecutive
Agreement Quarters, Promotion Net Sales for such period are less than $***,
either party shall



 33
 






 



have the right to terminate this Agreement on 120 days’ prior written
notice to the other party, which notice may not be given before the third
anniversary of the Promotion Commencement Date.


(c)           If
a party desires to exercise its option to terminate this Agreement pursuant to
this Section 8.2 or demand any *** or cure pursuant to Section 8.2(a), it must
give written notice to the other party within 60 days after receiving the
report of the Agreement Quarter or Agreement Month giving rise to the right to
terminate this Agreement pursuant to Section 8.2.


Section 8.3             Termination for Cause.  Either party may terminate this Agreement,
effective at any time after providing sixty days written notice and an
opportunity to cure during such sixty day period (ninety days in the case of a
breach by Depomed of Section 6.1), in the event of a material failure of the
other party to comply with its material obligations contained in this
Agreement.  If such cure is effected,
such notice with respect to such termination shall be null and void.


Section 8.4             Termination for Bankruptcy or Force Majeure.  To the extent permitted by law, each party
will have the right to terminate this Agreement immediately upon notice to the
other party, in the event of either of the following:


(a)           The
entry of an order for relief under the United States Bankruptcy Code (or any
corresponding remedy under successor laws) against the other party; the filing
of a petition by or against the other party under any bankruptcy, insolvency or
similar law (which petition is not dismissed within sixty days after filing),
except Chapter 11 of the United States Bankruptcy Code or any successor statute
that permits a corporation to continue its operation while protecting it from
creditors; the appointment of a receiver for the other party’s business or
property; or the other party’s making of a general assignment for the benefit
of its creditors; or


(b)           Any
Force Majeure Event affecting the other party beyond the other party’s control
which lasts for a period of at least six months and which is of sufficient
intensity to interrupt or prevent the carrying out of such other party’s
material obligations under this Agreement during such period.


Notwithstanding the
occurrence of any of the event specified in subsection (a) of this Section 8.4,
the parties acknowledge and agree that, to the extent Section 365(n) of the
United States Bankruptcy Code applies to this Agreement, the non-insolvent
party may elect to retain and exercise the rights granted to it hereunder with
respect to the intellectual property owned or controlled by the insolvent
party.


Section 8.5             Force Majeure.  Any Force Majeure Event of the type described
in Section 16.7 affecting a party hereunder shall entitle the other party
hereto, at any time after the expiry of the period of six months specified
therein and upon sixty days written notice given after such six month period
(such notice being, null and void if the Force Majeure Event is discontinued
during such sixty-day period), in addition to the right to terminate this
Agreement under Section 8.4, the right to (i) extend this Agreement for a
period equal to the duration of the Force Majeure Event which occasioned the
delay, interruption or prevention (subject to the maximum term of six months)
or (ii) continue the Agreement in full force and effect without



 34
 






 



modification. 
In no circumstances will either party be liable to the other for its
inability to perform under this Agreement due to any such Force Majeure Event.


Section 8.6             Recall.  Either party shall have the right to
terminate this Agreement in the event of a large scale recall or withdrawal of
the Product from the Territory resulting from a significant safety risk
inherent in the Product and not due to tampering, a remediable manufacturing
problem, or other defect that can be cured with respect to Products
manufactured after such risk is discovered.


Section 8.7             Effect of Termination.


(a)           No
additional payment obligations arising under Article VII hereof shall accrue
after the date of expiration or termination of this Agreement except as set
forth in Section 7.4; provided, however, that expiration or termination of this
Agreement shall not relieve either party of any obligations accruing prior to
such expiration or termination.  Certain
provisions of this Agreement by their terms continue after the expiration or
termination of this Agreement.  In
addition, any other provisions required to interpret and enforce the parties’
rights and obligations under this Agreement shall also survive, but only to the
extent required for the full observation and performance of this Agreement.


(b)           Except
as indicated in Sections 8.5, expiration or termination of this Agreement shall
be without prejudice to (a) any remedies which any party may then or thereafter
have hereunder or at law; and (b) a party’s right to receive any payment
accrued under the Agreement prior to the termination date but which became
payable thereafter; and (c) either party’s right to obtain performance of any
obligations provided for in this Agreement which survive termination by their
terms or by a fair interpretation of this Agreement.  Except as expressly set forth herein, the
rights to terminate as set forth herein shall be in addition to all other
rights and remedies available under this Agreement, at law, or in equity or
otherwise.


(c)           Upon
the expiration or termination of this Agreement pursuant to this Article VIII,
each party shall promptly transfer and return to the other party all
Proprietary Information of the other party (provided that each party may keep
one copy of such Proprietary Information of for archival purposes only).  Upon the expiration or termination of this
Agreement, King shall provide to Depomed, at King’s out-of-pocket cost
therefor, all Promotional Materials in King’s possession (including electronic
files of all Promotional Materials); provided, however, that King may destroy
any printed copies of Promotional Materials bearing the King Trademarks and may
remove the King Trademarks from electronic files of Promotional Materials.


ARTICLE
IX


REPRESENTATIONS
AND WARRANTIES


Section 9.1             Representations and Warranties of Depomed.  Depomed hereby represents and warrants to
King as of the date hereof as follows:


(a)           Organization.  Depomed (i) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
California, and (ii) has all necessary corporate



 35
 






 



power and corporate authority to own its properties and to conduct its
business, as currently conducted.


(b)           Authorization.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby are within the
corporate power of Depomed, have been duly authorized by all necessary
corporate proceedings of Depomed, and this Agreement has been duly executed and
delivered by Depomed.


(c)           No
Conflict.  The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
do not:  (i) conflict with or result
in a breach of any provision of Depomed’s organizational documents;
(ii) result in a material breach of any material agreement to which
Depomed is party; (iii) result in a violation of any Order to which
Depomed is subject; (iv) require Depomed to obtain any material approval
or consent from any Governmental Authority or Third Party other than those
consents and approvals which have been obtained prior to the date hereof; or
(v) violate any Legal Requirement applicable to Depomed in any material
respect.


(d)           Enforceability.  This Agreement constitutes the valid and
binding obligation of Depomed, enforceable against Depomed in accordance with
its terms, subject to bankruptcy, reorganization, insolvency and other similar
laws affecting the enforcement of creditors’ rights in general and to general
principles of equity (regardless of whether considered in a proceeding in
equity or an action at law).


(e)           Broker.  Depomed has not employed any broker, finder,
or agent with respect to this Agreement or the transactions contemplated
hereby.


(f)            Depomed
Intellectual Property.  To the
knowledge of Depomed, the Promotion and sale of Product in the Territory in
accordance with this Agreement will not infringe any patents, trademarks or
other intellectual property rights of any Third Party; provided, that Depomed
makes no representation as to the King Trademarks.  Depomed has the right, power and authority to
grant the licenses granted by it hereunder, including the right, power and
authority to license to King, pursuant to Section 6.6, all Technology necessary
for the manufacture of the Product.


(g)           Litigation.  There is no litigation, arbitration
proceeding, governmental investigation, action or claims of any kind, pending
or, to the knowledge of Depomed, threatened, by or against Depomed or any of
its Affiliates relating to the Product or which would reasonably be expected to
materially affect Depomed’s ability to perform its obligations hereunder.


(h)           Documentation. 
Depomed has made available to King copies of substantially all clinical
data and reports, medical information, competitive information, marketing
research and other documentation related to the Product in Depomed’s possession
that have been requested by King in the course of King’s due diligence
investigation of the Product.


(i)            Supply.  Depomed currently has access to sufficient
supplies of Product to perform the manufacturing obligations required by it
under this Agreement.  All Product will
be



 36
 






 



manufactured with reasonable due care and in conformity with current
generally accepted standards and procedures for manufacturing the Product and
cGMP.


(j)            Generic
Drug Act.  Pursuant to the Generic
Drug Enforcement Act of 1992, 21 U.S.C. § 335a, as may be amended or
supplemented (the “Generic Drug Act”),


(i)            none
of Depomed, its Affiliates, or any Person under its direction or control is
currently debarred by the FDA under the Generic Drug Act;


(ii)           none
of Depomed, its Affiliates, or any Person under its direction or control is
currently using or will use in any capacity in connection with the Product any
Person that is debarred by FDA under the Generic Drug Act; and


(iii)          there
have been no convictions of Depomed, its Affiliates, or any Person under its
direction or control for any of the types of crimes set forth in the Generic
Drug Act within the five years prior to the Effective Date.


(k)           Legal
Requirements.  None of Depomed, its
Affiliates, or Person under its direction or control is currently excluded from
a federal or state health care program under Sections 1128 or 1156 of the
Social Security Act, 42 U.S.C. §§ 1320a-7, 1320c-5 as may be amended or
supplemented.  None of Depomed, its
Affiliates, or Person under its direction or control is otherwise currently
excluded from contracting with the federal government.  None of Depomed, its Affiliates, or Person
under its direction or control is otherwise currently excluded, suspended, or
debarred from any federal or state program. 
Depomed shall immediately notify King if, at any time during the Term,
Depomed, its Affiliates, or any Person under its direction or control is
convicted of an offense that would subject it or King to exclusion, suspension,
or debarment from any federal or state program.


(l)            NDA
Acquisition.  Depomed has not
committed fraud in relation to the filing or acquisition of an NDA or used
unfair methods of competition in connection with such filing or acquisition,
including, in either case, in connection with any data supplied by Depomed to
the FDA.  The parties acknowledge that a
breach of this representation is a material failure of a material obligation
and is not subject to cure.


(m)          BLS
Agreements.  Depomed is not in
material breach of the BLS Agreements and has not submitted to BLS any notice
(written or oral) to the effect that BLS is in breach of the BLS
Agreements.  Depomed has not received
from BLS any notice (written or oral) to the effect that Depomed is in breach
of the BLS Agreements.  The BLS
Agreements are legal, valid, binding, enforceable and in full force and effect
in all material respects.


Section 9.2             Representations and Warranties of King.  King hereby represents and warrants to
Depomed as of the date hereof as follows:


(a)           Organization.  King (i) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Tennessee, and (ii) has all necessary corporate power and corporate
authority to own its properties and to conduct its business, as currently
conducted.



 37
 






 



(b)           Authorization.  The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby are within the
corporate power of King, have been duly authorized by all necessary corporate
proceedings of King, and this Agreement has been duly executed and delivered by
King.


(c)           No
Conflict.  The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
do not:  (i) conflict with or result
in a breach of any provision of King’s organizational documents; (ii) result
in a material breach of any material agreement to which King is party;
(iii) result in a violation of any Order to which King is subject;
(iv) require King to obtain any material approval or consent from any
Governmental Authority or Third Party other than those consents and approvals
which have been obtained prior to the date hereof; or (v) violate any
Legal Requirement applicable to King in any material respect.


(d)           Enforceability.  This Agreement constitutes the valid and
binding obligation of King, enforceable against King in accordance with its
terms, subject to bankruptcy reorganization, insolvency and other similar laws
affecting the enforcement of creditors’ rights in general and to general
principles of equity (regardless of whether considered in a proceeding in
equity or an action at law).


(e)           Broker.  King has not employed any broker or finder
with respect to this Agreement or the transactions contemplated hereby.


(f)            King
Trademarks.  To the knowledge of
King, the use of the King Trademarks to Promote and sell Product in the
Territory in accordance with this Agreement will not infringe any trademarks or
other intellectual property rights of any Third Party.


(g)           Litigation.  There is no litigation, arbitration
proceeding, governmental investigation, action or claims of any kind, pending
or, to the knowledge of King, threatened, by or against King or any of its
Affiliates relating to the Product or which would reasonably be expected to
materially affect King’s ability to perform its obligations hereunder.


(h)           Generic
Drug Act.  Pursuant to the Generic
Drug Act,


(i)            none
of King, its Affiliates, or any Person under its direction or control is
currently debarred by the FDA under the Generic Drug Act;


(ii)           none
of King, its Affiliates, or any Person under its direction or control is
currently using or will use in any capacity in connection with the Product any
Person that is debarred by FDA under the Generic Drug Act; and


(iii)          there
have been no convictions of King, its Affiliates, or any Person under its
direction or control for any of the types of crimes set forth in the Generic
Drug Act within the five years prior to the Effective Date.


(i)            Legal
Requirements.  None of King, its
Affiliates, or Person under its direction or control is currently excluded from
a federal or state health care program under Sections 1128 or 1156 of the
Social Security Act, 42 U.S.C. §§ 1320a-7, 1320c-5 as may be amended or



 38
 






 



supplemented.  None of King, its
Affiliates, or Person under its direction or control is otherwise currently
excluded from contracting with the federal government.  None of King, its Affiliates, or Person under
its direction or control is otherwise currently excluded, suspended, or
debarred from any federal or state program. 
King shall immediately notify Depomed if, at any time during the Term,
King, its Affiliates, or any Person under its direction or control is convicted
of an offense that would subject it or Depomed to exclusion, suspension, or
debarment from any federal or state program.


Section 9.3             Depomed Disclaimer.  EXCEPT AS EXPRESSLY PROVIDED HEREIN, DEPOMED
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO THE PRODUCT,
INCLUDING THE WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE.


Section 9.4             King Disclaimer.  EXCEPT AS EXPRESSLY PROVIDED HEREIN, KING
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF
MERCHANTABILITY AND WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.


ARTICLE X


INTELLECTUAL
PROPERTY MATTERS


Section 10.1           Third Party Competition.  Expressly excluding Article XIII of this
Agreement, nothing in this Agreement shall limit or restrict Depomed’s ability
to grant non-exclusive patent licenses to patents and patent applications
included within the Technology or otherwise covering the Product in connection
with the settlement of any pending, threatened or contemplated patent
litigation with respect to extended release metformin products commercialized
in the Territory prior to the Effective Date, including any such litigation
against marketers of metformin products (each such license, an “AcuForm
Patent License”).  However, in
recognition of the parties’ agreement to co-exclusively Promote Products, in
accordance with the terms and conditions of this Agreement, Depomed agrees that
if Depomed or any Affiliate thereof grants to any Affiliate or Third Party a
license, covenant not to sue, right of reference, right of supply or other
intellectual right (in any case, other than AcuForm Patent Licenses and
covenants not to sue and other rights in connection with the grant of AcuForm
Patent Licenses for extended release metformin products commercialized in the
Territory prior to the Effective Date) related to the manufacture, use, offer
for sale, sale, importation, marketing or promotion of any Product that uses
Depomed’s or its Affiliate’s proprietary drug delivery technology currently
referred to as the AcuForm technology and described in U.S. Patent Nos.
6,340,475 and 6,635,280 or other drug delivery technology incorporated into any
formulation of the Product, including any authorized generic version of any
Product covered by any NDA, then the parties shall negotiate in good faith
financial adjustments to this Agreement adequate to compensate King for any
lost market share attributable to sales of product by or on behalf of such
Third Party or Affiliate, taking into account the consideration received by
Depomed or its Affiliates for the grant of such rights.


Section 10.2           Infringement.



 39














 


(a)           If
either party shall learn of a claim or assertion that the manufacture, use or
sale of the Product in the Territory infringes or otherwise violates the
intellectual property rights of any Third Party or that any Third Party
violates the intellectual property rights owned or Controlled by (i) Depomed in
the Product and the Depomed Trademarks in the Territory or (ii) King in the
King Trademarks, then the party becoming so informed shall promptly, but in all
events within fifteen (15) business days thereof, notify the other party to
this Agreement of the claim or assertion.


(b)           If
warranted in the opinion of Depomed, after consultation with the JCC, Depomed
shall take such legal action as is advisable in Depomed’s opinion to restrain
infringement of such Depomed patent rights or the Depomed Trademarks.  King shall cooperate fully with, and as
reasonably requested by, Depomed in Depomed’s attempt to restrain such
infringement, and Depomed shall reimburse King for its out-of-pocket expenses
incurred in providing such cooperation. 
King may be represented by counsel of its own selection at its own
expense in any suit or proceeding brought to restrain such infringement, but
Depomed shall have the right to control the suit or proceeding.


(c)          
If warranted in the opinion of King, King shall take such legal action as is
advisable in King’s opinion to restrain such infringement of the King
Trademarks.  Depomed shall cooperate
fully with, and as requested by, King in King’s attempt to restrain such
infringement, and King shall reimburse Depomed for its out-of-pocket expenses
incurred in providing such cooperation. 
Depomed may be represented by counsel of its own selection at its own
expense in any suit or proceeding brought to restrain such infringement, but
King shall have the right to control the suit or proceeding.


ARTICLE
XI


INDEMNIFICATION;
LIMITS ON LIABILITY


Section 11.1           Indemnification.  Each party will defend, at its own
expense, indemnify and hold harmless the other party and its Affiliates from
and against any and all damages, liabilities, losses, costs, and expenses,
including reasonable attorneys’ fees, arising out of any Third Party claim,
suit or proceeding brought against the other party or its Affiliates to the
extent such claim, suit, or proceeding is based upon a claim arising out of or
relating to (i) any breach or violation of, or failure to perform, any covenant
or agreement made by such indemnifying party in this Agreement, unless waived
in writing by the indemnified party; (ii) any breach of the representations or
warranties made by such indemnifying party in this Agreement; or (iii) the
negligence or willful misconduct of the indemnifying party, except (under any
of (i) or (ii)) to the extent arising out of the breach, violation, failure,
negligence or willful misconduct of the indemnified party.  In addition, Depomed will defend, at its own
expense, indemnify and hold harmless King and its Affiliates from and against
any and all damages, liabilities, losses, costs, and expenses, including
reasonable attorneys’ fees, arising out of any Third Party claim, suit or
proceeding brought against King or its Affiliates to the extent such claim,
suit, or proceeding is based upon a claim arising out of or relating to (w) any
actions of the Depomed Sales Force, including any false or misleading
representations to Professionals, customers or others regarding King or the
Product; (x) any agreement between Depomed and BLS; or (y) any claim made by
any Person that the manufacture, use or sale of the Product infringes or
misappropriates the



 40
 






 



patent, trademark, or other intellectual property rights of such
Person, except with respect to any claim relating to the King Trademarks; and
(z) any product liability claim made by any Person with respect to the Product,
except to the extent liability is based on a breach by King of Section 4.2.  Each party agrees
that it shall promptly notify the other in writing of any such claim or action
and give the indemnifying party full information and assistance in connection
therewith.  The indemnifying party shall
have the sole right to control the defense and the sole right to settle or
compromise any such claim or action, except that the prior written consent of
the other party shall be required in connection with any settlement or compromise
which could (i) place any obligation on or require any action of such other
party; (ii) admit or imply any liability or wrongdoing of such other party; or
(iii) adversely affect the goodwill or public image of such other party.  Notwithstanding the foregoing, the
indemnified party may participate therein through counsel of its choice, but
the cost of such counsel shall be borne solely by the indemnified party.  The provisions of this Section 11.1 shall
survive the termination of this Agreement for three years (except as to claims
as to which a party has notified the other in writing prior to the third
anniversary of the termination date of this Agreement, in which event, the
indemnifying party’s obligations under this Section 11.1 shall survive with
respect to any such claim until its resolution).


Section 11.2           Consequential Damages.  NEITHER KING NOR DEPOMED (WHICH FOR THE
PURPOSES OF THIS SECTION 11.2 SHALL INCLUDE THEIR RESPECTIVE AFFILIATES,
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS) SHALL HAVE ANY LIABILITY TO THE
OTHER FOR ANY PUNITIVE DAMAGES, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT
DAMAGES, RELATING TO OR ARISING FROM THIS AGREEMENT, EVEN IF SUCH DAMAGES MAY
HAVE BEEN FORESEEABLE; PROVIDED THAT SUCH LIMITATION SHALL NOT APPLY IN
THE CASE OF FRAUD OR WILLFUL MISCONDUCT.


ARTICLE
XII


CONFIDENTIALITY
AND PUBLICITY


Section 12.1           Proprietary Information.  Pursuant to this Agreement, a party receiving
Proprietary Information from the other, directly or indirectly, will treat such
Proprietary Information as confidential, will use such Proprietary Information
only for the purposes of this Agreement and will not disclose, and will take
all reasonable precautions to prevent the disclosure of, such Proprietary
Information to (a) any of its officers, directors, managers, equity holders,
employees, agents, representatives, Affiliates or consultants who are not
required to know such Proprietary Information or who are not bound by a like
obligation of confidentiality or (b) to Third Parties.


Section 12.2           Disclosures Required by Law.  In the event the recipient party is required
under applicable Legal Requirements to disclose Proprietary Information of the
disclosing party to any Governmental Authority to obtain any Regulatory
Approval for the Product, is required to disclose Proprietary Information in
connection with bona fide legal process (including in connection with any bona
fide dispute hereunder) or is required to disclose Proprietary Information
under the rules of the securities exchange upon which its securities are
traded, the recipient party may do so only if it limits disclosure to that
purpose after giving the



 41
 






 



disclosing party prompt written notice of any instance of such a
requirement in reasonable time for the disclosing party to attempt to object to
or to limit such disclosure.  In the
event of disclosures required under applicable Legal Requirements, the
recipient party shall cooperate with the disclosing party as reasonably
requested thereby.


Section 12.3           Publicity.  Neither party will originate any publicity,
news release, public comment or other public announcement, whether to the
press, to stockholders, or otherwise, relating to this Agreement, without the
consent of the other party, except for such announcement which, in accordance
with the advice of legal counsel to the party making such announcement, is
required by law; provided, however, that each party shall be entitled to refer
publicly to the relationship of the parties reflected in this Agreement (i.e.,
Depomed as the developer of the Product and King as the co-promoter of the
Product in the Territory) in a manner that is consistent with the joint press
release issued by the parties and that is not damaging to the business or
reputation of the other party.  Except as
otherwise permitted pursuant to the immediately preceding sentence, any party
making any announcement which is required by law will, unless prohibited by
law, give the other party an opportunity to review the form and content of such
announcement and comment before it is made. 
Either party shall have the right to make such filings with governmental
agencies, including the United States Securities and Exchange Commission, as to
the contents and existence of this Agreement as it shall reasonably deem
necessary or appropriate.  The parties
have agreed upon the form and content of a joint press release to be issued by
the parties promptly following the execution of this Agreement.  Once such press release or any other written
statement is approved for disclosure by both parties, either party may make
subsequent public disclosure of the contents of such statement without the
further approval of the other party.  The
provisions of this Article 12 shall survive termination of the agreement and
shall remain in effect until a date three years after the Term of this
Agreement.


ARTICLE
XIII


COMBINATION
PRODUCTS; RIGHT OF FIRST NEGOTIATION


Section 13.1           Combination Products.


(a)           Depomed
agrees to grant and hereby grants to King an exclusive option (exercisable at
King’s sole discretion by providing written notice of intent at any time, but
in no event later than 180 days after the Effective Date) to obtain an
exclusive license in the Territory to certain of Depomed’s proprietary drug
delivery technology in combination with both metformin hydrochloride and any
other active pharmaceutical ingredients (a “Combination Product License”).  If King notifies Depomed in writing within
180 days after the Effective Date that King desires to exercise its option to
obtain a Combination Product License, King and Depomed shall promptly commence
good-faith negotiations regarding a definitive agreement providing for the
Combination Product License, for a period of 60 days or such longer period as may be mutually agreed upon by the
parties in writing; and it is agreed that, as part of such good faith
negotiations, the parties will discuss, for inclusion in any definitive
agreement, appropriate non-compete obligations for each party with respect to
any product containing metformin hydrochloride as an active pharmaceutical
ingredient.  If Depomed and King fail to
enter into such a definitive agreement during such period, then Depomed shall
thereafter have the right to



 42
 






 



negotiate and enter into one or more agreements with Third Parties
related to Depomed’s proprietary drug delivery technology in combination with
both metformin hydrochloride and other active pharmaceutical ingredients;
provided that, for a period of 6 months, any such agreement may not be on terms
and conditions materially more favorable to the Third Party than the terms and
conditions last offered by King prior to the termination of discussions with
Depomed.


(b)           In
the event the parties are not able to enter a definitive agreement with respect
to a Combination Product License, pursuant to Section 13.1(a), then prior to
the expiration or termination of this Agreement, except pursuant to this
Agreement, (i) neither party, nor any Person controlled by a party, will be
entitled to commercially launch in the Territory (either directly or indirectly
through a marketing partner) a product containing metformin as an active
pharmaceutical ingredient, and (ii) no Affiliate of Depomed will be entitled to
commercially launch in the Territory (either directly or indirectly through a
marketing partner) a product that (A) contains metformin as an active
pharmaceutical ingredient and (B) uses Depomed’s or its Affiliate’s proprietary
drug delivery technology currently referred to as the AcuForm technology and
described in U.S. Patent Nos. 6,340,475 and 6,635,280.


Section 13.2           Right of First Negotiation.  Depomed shall notify King in writing in
the event that Depomed desires to divest itself of its rights to the Product in
the Territory (e.g., by asset sale or product license to a Third Party), or of
its rights in the Territory to a product owned or controlled by Depomed
containing metformin and another active pharmaceutical ingredient in
combination with Depomed’s proprietary drug delivery technology incorporated
within the Product (currently referred to as the AcuForm technology) (a “Combination
Product”).  If King notifies Depomed
in writing within 30 days after receipt of such notice (the “Evaluation
Period”) that King is not interested in obtaining all of Depomed’s rights
in and to the Product or the applicable Combination Product (such rights, “Metformin
Product Rights”), or if King fails to notify Depomed of King’s interest in
obtaining the Metformin Product Rights, in either case prior to the expiration
of the Evaluation Period, then Depomed shall have no further obligation to King
under this Agreement with respect to the applicable Metformin Product
Rights.  If King is interested in
obtaining the Metformin Product Rights, it shall so notify Depomed in writing
prior to the expiration of the Evaluation Period, and upon Depomed’s receipt of
such notice King and Depomed shall promptly commence good-faith negotiations,
for a period of 30 days and
such longer period as may be mutually agreed upon by the parties in writing in
the event the parties have made material progress in the negotiations (the “Negotiation
Period”), regarding the commercially reasonable terms of an agreement
pursuant to which King shall obtain the Metformin Product Rights.  If Depomed and King fail to enter into an
agreement for the Metformin Product Rights prior to the expiration of the
Negotiation Period, then Depomed shall thereafter have the right to negotiate
and enter into an agreement with a Third Party granting the Metformin Product
Rights to a Third Party; provided that, for a period of 6 months, any such
agreement may not be on terms and conditions materially more favorable to the
Third Party than the terms and conditions last offered by King prior to the
termination of discussions with Depomed. 
The provisions of this Section 13.2 shall not apply to, and Depomed
shall have no obligation to King under this Section 13.2 in respect of, any
acquisition of Depomed by a Third Party, any merger or consolidation with or
involving Depomed, any acquisition by a Third Party of any material portion of
the stock of Depomed, or any acquisition by a Third Party of a material portion
of the assets of Depomed in addition to the Product or any Combination



 43
 






 



Product; provided that such Third Party must remain bound by the terms
and conditions of this Agreement, including this Section 13.2.


ARTICLE
XIV


NOTICES


Section 14.1           Notices.  All notices required or permitted hereunder
shall be given in writing and sent by facsimile transmission (with a copy sent
by first-class mail), or mailed postage prepaid by certified or registered mail
(return receipt requested), or sent by a nationally recognized express courier
service, or hand-delivered at the following address:


If to Depomed:


Depomed, Inc. 

1360 O’Brien Drive 

Menlo Park, California  94025

Attention:  President

Fax No.:  (650) 462-9991


With a copy to:


Heller Ehrman LLP

275 Middlefield Road 

Menlo Park, CA  94025

Attention:  Julian Stern

Fax No:  (650) 324-0638


If to King:


King
Pharmaceuticals, Inc.

501 Fifth Street

Bristol, Tennessee 37620

Attn: Legal Affairs Department

Facsimile: (423) 990-2566


All
notices shall be deemed made upon receipt by the addressee as evidenced by the
applicable written receipt.


ARTICLE
XV


INSURANCE


Section 15.1           Insurance.


(a)           During the Term and for a period of two (2) years after
any expiration or termination of this Agreement, each party shall maintain (i)
a commercial general liability insurance policy or policies with minimum limits
of $*** per occurrence and $*** in the



 44
 






 



aggregate on an annual basis and (ii) a
product liability insurance policy or policies with minimum limits of $*** per
occurrence and $*** in the aggregate on an annual basis; provided that the
minimum product liability policy limits set forth above shall be increased to
at least $*** per occurrence and $*** in the aggregate on an annual basis no
later than December 31, 2006. 
Furthermore, Depomed will undertake to direct its insurance broker  to conduct an analysis to determine the
appropriate level of product liability insurance with respect to the Product to
be maintained by Depomed, which analysis will be conducted prior to Depomed’s
next insurance renewal, currently scheduled to occur in October 2006.  Such analysis will include, among other
considerations, product risk characteristics, product litigation history, comparable
company coverage and insurance availability. 
Depomed will share such analysis with King


(b)           Upon request, each party shall provide certificates of
insurance to the other evidencing the coverage specified herein.  Neither party’s liability to the other is in
any way limited to the extent of its insurance coverage.


ARTICLE
XVI


MISCELLANEOUS


Section 16.1           Headings.  The titles, headings or captions and
paragraphs in this Agreement are for convenience only and do not define, limit,
extend, explain or describe the scope or extent of this Agreement or any of its
terms or conditions and therefore shall not be considered in the
interpretation, construction or application of this Agreement.


Section 16.2           Severability.  In
the event that any of the provisions or a portion of any provision of this
Agreement is held to be invalid, illegal, or unenforceable by a court of
competent jurisdiction or a governmental authority, such provision or portion
of provision will be construed and enforced as if it had been narrowly drawn so
as not to be invalid, illegal, or unenforceable, and the validity, legality,
and enforceability of the enforceable portion of any such provision and the
remaining provisions will not be adversely affected thereby.


Section 16.3           Entire Agreement.  This
Agreement, together with the schedules and exhibits hereto and the
Confidentiality Agreement, all of which are incorporated by reference, contains
all of the terms agreed to by the parties regarding the subject matter hereof
and supersedes any prior agreements, understandings, or arrangements between
them, whether oral or in writing.


Section 16.4           Amendments.  This
Agreement may not be amended, modified, altered, or supplemented except by
means of a written agreement or other instrument executed by both of the
parties hereto.  No course of conduct or
dealing between the parties will act as a modification or waiver of any
provisions of this Agreement.


Section 16.5           Counterparts.  This
Agreement may be executed in any number of counterparts, each of which will be
deemed an original as against the party whose signature appears thereon, but
all of which taken together will constitute but one and the same instrument.


Section 16.6           Waiver.  The
failure of either party to enforce or to exercise, at any time or for any
period of time, any term of or any right arising pursuant to this Agreement
does not



 45
 






 



constitute,
and will not be construed as, a waiver of such term or right, and will in no
way affect that party’s right later to enforce or exercise such term or right.


Section 16.7           Force Majeure.


(a)           In
the event of any failure or delay in the performance by a party of any
provision of this Agreement due to acts beyond the reasonable control of such
party (such as, for example, fire, explosion, strike or other difficulty with
workmen, shortage of transportation equipment, accident, act of God, declared
or undeclared wars, acts of terrorism, or compliance with or other action taken
to carry out the intent or purpose of any law or regulation) (a “Force
Majeure Event”), then such party shall have such additional time to perform
as shall be reasonably necessary under the circumstances.  In the event of such failure or delay, the
affected party will use its diligent efforts, consistent with sound business
judgment and to the extent permitted by law, to correct such failure or delay
as expeditiously as possible.  In the
event that a party is unable to perform by a reason described in this Section
16.7, its obligation to perform under the affected provision of this Agreement
shall be suspended during such time of nonperformance.


(b)           Neither
party shall be liable hereunder to the other party nor shall be in breach for
failure to perform its obligations caused by a Force Majeure Event.  In the case of any such event, the affected party
shall promptly, but in no event later than 10 days of its occurrence, notify
the other party stating the nature of the condition, its anticipated duration
and any action being taken to avoid or minimize its effect.  Furthermore, the affected party shall keep
the other party informed of the efforts to resume performance.  After sixty (60) days of such inability to
perform, the parties agree to meet and in good faith discuss how to proceed.  In the event that the affected party is
prevented from performing its obligations pursuant to this Section 16.7
for a period of six (6) months, the other party shall have the right to
terminate this Agreement pursuant to the provisions of Sections 8.4(b).


Section 16.8           Successors and Assigns.  Subject to Section 16.9, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns permitted under this Agreement.


Section 16.9           Assignment.  This Agreement and the rights granted herein
shall not be assignable by either party hereto without the prior written
consent of the other party.  Any
attempted assignment without consent shall be void.  Notwithstanding the foregoing, a party may
transfer, assign or delegate its rights and obligations under this Agreement
without consent to (a) an Affiliate or (b) a successor to all or substantially
all of its business or assets of the assigning party to which this Agreement
relates, whether by sale, merger, consolidation, acquisition, transfer,
operation of law or otherwise or (c) in the case of either party, to one or
more financial institutions providing financing to such party pursuant to the
terms of a security agreement relating to such financing.  In connection with any assignment, or
Subcontracting pursuant to which a Third Party Sales Representative is engaged
to Promote the Product, of this Agreement or any of the rights granted herein
pursuant to this Section 16.9, the assignor, or party Subcontracting to
another, shall ensure that the assignee, or Subcontractor, represents and
warrants the matters set forth in Sections 9.1(j) and (k) (in substantially the
same form as set forth in Sections 9.1(j) and (k)), where Depomed (or one of
its successors or assigns) is the assignor or Subcontracting party, or Sections
9.2(h) and (i) (in substantially the same form as set



 46
 






 



forth in Sections 9.2(h) and (i)), where King (or one of its successors
or assigns) is the assignor or Subcontracting party.  In connection with any Subcontracting
pursuant to which a Third Party will manufacture the Product, the party
Subcontracting to another shall use its commercially reasonable efforts to
cause the Subcontractor to represent and warrant the matters set forth in
Sections 9.1(j) and (k) (in substantially the same form as set forth in Sections
9.1(j) and (k)).  Neither party shall
knowingly engage any Third Party appearing on the FDA’s debarment list or the
list of excluded individuals/entities of the Office of Inspector General of the
Department of Health and Human Services to perform, or assist such party in the
performance of, its obligations under this Agreement, and each party shall
review each such list prior to engaging any such Third Party.


Section 16.10         Construction.  The
parties acknowledge and agree that: (a) each party and its representatives have
reviewed and negotiated the terms and provisions of this Agreement and have
contributed to its revision; and (b) the terms and provisions of this Agreement
will be construed fairly as to each party hereto and not in favor of or against
either party regardless of which party was generally responsible for the
preparation or drafting of this Agreement. 
Unless the context of this Agreement otherwise requires: (i) words of
any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the
terms “hereof,” “herein,” “hereby,” and derivative or similar words refer to
this entire Agreement; (iv) the terms “Article,” “Section,” “Exhibit,” “Schedule,”
or “clause” refer to the specified Article, Section, Exhibit, Schedule, or
clause of this Agreement; (v) “or” is disjunctive but not necessarily
exclusive; and (vi) the term “including” or “includes” means “including without
limitation” or “includes without limitation.” 
Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless business days are specified.


Section 16.11         Governing Law.  This
Agreement will be construed under and in accordance with, and governed in all
respects by, the laws of the State of New York, without regard to its conflicts
of law principles.


Section 16.12         Equitable Relief.  Each party acknowledges that a breach by it
of the provisions of this Agreement may not reasonably or adequately be
compensated in damages in an action at law and that such a breach may cause the
other party irreparable injury and damage. 
By reason thereof, each party agrees that the other party is entitled to
seek, in addition to any other remedies it may have under this Agreement or
otherwise, preliminary and permanent injunctive and other equitable relief to
prevent or curtail any breach of this Agreement by the other party; provided,
however, that no specification in this Agreement of a specific legal or
equitable remedy will be construed as a waiver or prohibition against the
pursuing of other legal or equitable remedies in the event of such a breach.
Each party agrees that the existence of any claim, demand, or cause of action
of it against the other party, whether predicated upon this Agreement, or
otherwise, will not constitute a defense to the enforcement by the other party,
or its successors or assigns, of the covenants contained in this Agreement.


Section 16.13         Relationship Between Parties.  The
parties hereto are acting and performing as independent contractors, and
nothing in this Agreement creates the relationship of partnership, joint
venture, sales agency, or principal and agent. 
Neither party is the agent of the other, and neither party may hold
itself out as such to any other party. 
All financial obligations associated with each party’s business will be
the sole responsibility of such party.



 47
 






 



[Signature page follows]



 48
 






 



IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.


 


	
  

  	
  DEPOMED, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John W. Fara

  
	
   

  	
   

  	
  Name:

  	
  John W. Fara

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  KING PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian A. Markison

  
	
   

  	
   

  	
  Name:

  	
  Brian A. Markison

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  



 



 49
















PROMOTION AGREEMENT



by and between



DEPOMED, INC.



and



KING PHARMACEUTICALS, INC.



Dated as of June 27, 2006









 



SCHEDULES


Schedule 1.33 – Depomed
Trademarks


Schedule 1.54 – King
Trademarks


Schedule 1.56 – Initial
Launch Plan


Schedule 3.2 – JCC
Members


Schedule 4.5 –
Advertising/Marketing/Educational Expenses


Schedule 6.3 – Volume
Forecast









 



Schedule
1.33


Depomed Trademarks


 




	
  Mark

  	
   

  	
  Serial/Registration Numbers

  
	
  GLUMETZA

  	
   

  	
  Ser. No. 78340355

  
	
  DEPOMED

  	
   

  	
  Reg. No. 2112593

  
	
  DEPOMED (word and design mark)

  	
   

  	
  Ser. No. 78781903

  
	
  ACUFORM

  	
   

  	
  Ser. No. 78781863

  






 









 



Schedule 1.54


King Trademarks




	
  Mark

  	
   

  	
  Serial/Registration Numbers

  
	
  KING PHARMACEUTICALS

  	
   

  	
  Reg. No. 2871392

  
	
  KING PHARMACEUTICALS

  	
   

  	
  Reg. No. 2927079

  
	
  KING PHARMACEUTICALS and Design

  	
   

  	
  Ser. No. 78-842125

  
	
  Design Mark

  	
   

  	
  Ser. No. 78-842009

  






 









 



Schedule
1.56


Glumetza Initial Launch Plan


Market Overview


***
affects *** people in the US, and *** have shown that ***. The cost ***.  ***, or roughly ***, is spent *** of the ***
with ***. Of this, *** is spent *** that can *** of the ***.


***
has been well *** to its *** at *** and its ***. However, *** have ***. ***.
*** frequently need *** quickly, usually the ***. Still, *** per year. And
although ***, there is an ***.


Product Background


Glumetza
*** a full ***. Although the ***.


·              ***
were able to ***


·              ***
of the *** – significantly more than the ***


·              Several
***


·              Less
*** than ***


·              Similar
***, but with ***


·              ***
in minimal ***


Launch Overview


Glumetza
product will be *** the first *** by the 2nd or 3rd ***. The *** which will
begin ***, and such ***. The product *** on called ***.


Positioning


Glumetza is the ***


·              Reaching
*** is a *** — *** is to *** the most *** from ***,  ***


·              ***
various *** that *** in the ***


·              Represents
the *** that *** and *** to the ***


Key areas of focus


1.             ***


***
AcuFormTM as *** factor: 
Glumetza ***Depomed’s AcuForm technology which is the *** for its ***.
It has several *** its better ***. ***, Glumetza *** better *** than all ***.


In
*** research, *** onto the *** as the reason to *** Glumetza *** better than
***. Furthermore, *** were willing *** on how the *** better ***.


***
Need:  *** is commonly accepted as
the *** to its ***. However, *** how it ***, such as ***. Ultimately the ***.


Our
*** on the ***. At its *** off a *** for ***, even more ***.


***: 
Glumetza will ***, and emphasize that its ***. *** Glumetza *** that
demonstrates ***, and we will ***.


***,
we will apply *** and *** to describe ***, yet do not ***.









 



 


Glumetza
*** goal:  *** goals is *** and Glumetza will its *** on
how it ***. Significantly *** Glumetza (without any ***). ***, because Glumetza
***.


Goal
***:  Together with *** that *** goals, *** plan to
***. One idea is to *** Glumetza ***.


***
the ***


***: 
Depomed has ***, to assist *** that are *** that is ***.


***: 
While Glumetza *** have data that ***. ***, where appropriate, ***.


Not
only will the ***, but also will ***.


***: 
Glumetza already has ***. We expect another ***.


***: 
Years of *** for *** that will ***. Healthcare *** will be done ***. ***
is the *** for which ***.


2.             Point of Sale


***: 
Glumetza currently has ***. We anticipate ***, which should ***. We plan
to *** in order to ***.


To
support the ***, we have *** Glumetza. *** emphasizes the *** – particularly in
***.


Depomed
has *** with the ***.


***: 
Glumetza ***. There are *** Glumetza. We plan to *** through various
***, as determined ***. We will *** to encourage ***.


Glumetza
is already ***, however we are *** Glumetza receives a ***.


***:  We
have initiated *** that will ***. *** will be ***.


Other launch plans


Pricing:  The
*** price range will be ***. The pricing ***. These ***, will further refine
the price ***.


***: 
Depomed will have *** with the ***. The first *** will be the ***. ***
King Pharmaceuticals *** to have *** upon the *** Glumetza.


***:  We
are preparing a Glumetza *** that ***, Glumetza and its ***. This module will
*** general ***.


***:  ***
will be a *** of the ***. *** of the ***. While the exact *** to be *** have
begun ***.


***: 
Glumetza will be ***.


***:  ***
over the ***.


Launch
***:  *** will take ***, with many ***. We expect
***.









 



 


***:  ***
during ***.


	
  

  	
  ***

  	
   

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  ***

  
	
  ***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  ***

  
	
  ***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  ***

  
	
  ***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ***

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


Budget:  The
budget for the Launch Plan will *** with the ***. ***, the parties ***, with
the *** (of which Depomed ***) *** King. The parties *** will not ***; provided
that *** Depomed *** (and included with the ***) ***. *** will determine a ***.


 


 









 



Schedule
3.2


Depomed Initial JCC
Representatives:


***


King Initial JCC
Representatives:


***









 



Schedule
4.5




	
  Year

  	
   

  	
  Advertising/Marketing/Educational Expenses

  	
   

  
	
  2006

  	
   

  	
  $

  	
  ***

  	
   

  
	
  2007

  	
   

  	
  $

  	
  ***

  	
   

  
	
  2008

  	
   

  	
  $

  	
  ***

  	
   

  
	
  2009

  	
   

  	
  $

  	
  ***

  	
   

  
	
  2010

  	
   

  	
  $

  	
  ***

  	
   

  
	
  2011

  	
   

  	
  $

  	
  ***

  	
   

  






 

















 


Schedule
6.3


Volume Forecast


Glumetza***
Forecast for the 1st 12 Months after Launch


	
  (000s)

  	
   

  	
  Aug-06

  	
   

  	
  Sep-06

  	
   

  	
  Oct-06

  	
   

  	
  Nov-06

  	
   

  	
  Dec-06

  	
   

  	
  Jan-07

  	
   

  	
  Feb-07

  	
   

  	
  Mar-07

  	
   

  	
  Apr-07

  	
   

  	
  May-07

  	
   

  	
  Jun-07

  	
   

  	
  Jul-07

  	
   

  	
  Aug-07

  	
   

  	
  Sep-07

  	
   

  	
  Oct-07

  	
   

  	
  Nov-07

  	
   

  	
  Dec-07

  	
   

  
	
  Demand Fcst in ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Adj to Demand Fcst

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Ex-Factory Fcst in ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Projected Inventory on
  Hand

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  
	
  Projected Inventory MOHs

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  



 


Assumptions:

Stock in Quantity:  ***

*** = ***
Wholesalsers will reduce




	
  1st 12 Mths

  	
   

  	
  2006

  	
   

  
	
  Total

  	
   

  	
  Total

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***

  	
   

  
	
  ***

  	
   

  	
  ***