Exhibit 10.2


 


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.


 


AMENDED AND RESTATED PROMOTION AGREEMENT


 


This AMENDED
AND RESTATED PROMOTION AGREEMENT (this “Agreement”) is made as of
September 21, 2007 (the “Effective Date”), by and between Depomed, Inc.,
a California corporation (“Depomed”), and Watson Pharma, Inc., a
Delaware corporation (“Watson”). Each of Depomed and Watson is referred
to herein individually as a “Party” and collectively as the “Parties”.


 


WHEREAS,
Depomed and Watson are parties to that certain Promotion Agreement, dated as of
July 18, 2007 related to the Product (the “Original Agreement”);


 


WHEREAS,
Depomed and Watson desire to amend and restate the Original Agreement as set
forth 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             “2007 Plan” has the meaning set
forth in Section 4.5.


 


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


 


Section 1.5             “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. Notwithstanding
the foregoing, for purposes of this Agreement, a Wholesaler Affiliate
shall not constitute an Affiliate of Watson.


 


Section 1.6             “Agreement” has the meaning set
forth in the preamble to this Agreement


 

















 


Section 1.7             “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 1.8             “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 1.9             “Alert Report” is the report per
FDA 21 CFR 314.80 Reporting Requirements for postmarketing 15-day “Alert”
reports; these are adverse drug experience reports that are both serious and
unexpected, and must be reported in writing to the FDA within 15 calendar days.


 


Section 1.10           “Annual Plan”
has the meaning set forth in Section 4.5.


 


Section 1.11           “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 1.12           “Channel” shall
mean the long-term sales channel as
reported in the Prescriber Data, which includes but is not limited to nursing
homes and assisted living facilities.


 


Section 1.13           Co-Chairs” has
the meaning set forth in Section 3.2.


 


Section 1.14           “COGS” means,
for a particular 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. The COGS as of the Initial Effective Date is set
forth on Schedule 1.14.


 


Section 1.15           “Confidentiality
Agreement” means that certain Confidentiality Agreement, dated as of
February 26, 2007, between Depomed and Watson.


 


Section 1.16           “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 1.17           “DDMAC” means
the FDA’s Division of Drug Marketing, Advertising and Communications.


 


Section 1.18           “Depomed” has
the meaning set forth in the preamble to this Agreement.


 


Section 1.19           “Depomed APL”
means Depomed’s Advertising and Promotional Labeling Committee responsible for
reviewing and approving Promotional Materials related to the Product.


 

















 


Section 1.20           “Depomed Trademarks”
means (a) the ProQuin® trademark, (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, successor trademarks and other trademark related rights. The Depomed
Trademarks are attached hereto as Schedule 1.20.


 


Section 1.21           “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 or a P2 Detail, and
after December 31, 2008, a P3 Detail.


 


Section 1.22           “Detail Minimum”
means, for a particular period, the sum of (A) the Urology Detail Minimum for
such period, plus (B) the Ob/Gyn Detail Minimum for such period.


 


Section 1.23           “Detail Shortfall”
means, for a particular period, the remainder of (A) the Detail Minimum for
such period, minus (B) the actual number of PDEs performed during such period. In
determining the actual number of PDEs performed during any period (including
without limitation for purposes of Section 8.2(a)):  (a) only PDEs performed on Professionals on
the Watson Physician List shall be taken into account; and (b) not more than
100% of the P1 Details, 100% of the P2 Details and 100% of the P3 Details (if
applicable) required to be performed for such period within each of the Urology
Field and the Ob/Gyn Field, as reflected in the applicable Annual Plan(s) or
2007 Plan, shall be taken into account.


 


Section 1.24           “Detail Shortfall
Ratio” means, for any period, the quotient of (A) the remainder of (x) the
Detail Minimum for such period, minus (y) the Detail Shortfall for such Period
(if any), divided by (B) the Detail Minimum for such period. Notwithstanding
the foregoing, if the Detail Shortfall is a negative number, the Detail
Shortfall Ratio shall be equal to 1.0.


 


Section 1.25           “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 1.26           “Effective Date”
has the meaning set forth in the preamble to this Agreement.


 


Section 1.27           “Esprit” means
Esprit Pharma, Inc., a Delaware corporation.


 


Section 1.28           “Esprit License
Agreement” means the Exclusive License and Marketing Agreement, dated as of
July 21, 2005, between Depomed and Esprit, as amended.


 


Section 1.29           “Esprit Promotional
Materials” has the meaning set forth in Section 4.3(b).


 


Section 1.30           “Esprit Termination
Agreement” means the Termination Agreement between Depomed and Esprit,
dated as of July 5, 2007, providing for, among other matters, the termination
of the Esprit License Agreement.


 


2

















 


Section 1.31           “Executive Officers”
means the Chief Operating Officer of Depomed (or, if there is no such officer,
its President or Chief Executive Officer) and the President, Brand Division of Watson (or, if there is no such
officer, its President or Chief Executive Officer).


 


Section 1.32           “FDA” means the
United States Food and Drug Administration or any successor agency performing
comparable functions in the Territory.


 


Section 1.33           “Field” means
the Urology Field and the Ob/Gyn Field, subject to provisions of Sections 7.4
and 8.2(a).


 


Section 1.34           “Field Baseline
Prescriptions Per Month” means, subject to Section 8.2(a), the monthly
average number of Units of Product included within total prescriptions
dispensed during the three-month period beginning on June 1, 2007 and ending on
August 31, 2007 in the Territory within the Field (as reflected in the
Prescriber Data).


 


Section 1.35           “Field Baseline
Prescriptions” means, for any particular period, the result of (A) Field
Baseline Prescriptions Per Month, multiplied by (B) the number of months within
such period (rounded to the nearest one-tenth of one month).


 


Section 1.36           “Field COGS”
means, for a particular period, the result of (A) COGS for such period,
multiplied by (B) the Field Ratio for such period.


 


Section 1.37           “Field Gross Margin”
means, for a particular period, the result of (A) the remainder of (x) Field
Net Sales for such period minus (y) Field COGS for such period, multiplied by
(B) the Detail Shortfall Ratio for such period.


 


Section 1.38           “Field Net Sales”
means, for a particular period, the result of (A) Net Sales for such period,
multiplied by (B) the Field Ratio for such period.


 


Section 1.39           “Field Prescription
Units” means, for a particular period, the remainder of (A) the sum of (i)
the number of Units of Product included within prescriptions filled during such
period in the Territory within the Field, as reflected in the Prescriber Data,
plus (ii) the number of Units of Product included within the Channel for such
period, as reflected in the Prescriber
Data, minus (B) Field Baseline Prescriptions for such period.


 


Section 1.40           “Field Ratio”
means, for a particular period, the sum of (A) the quotient of (i) Field
Prescription Units for such period, divided by (ii) the number of Units of
Product included within Product prescriptions filled during such period in the
Territory, as reflected in the Prescriber Data (such quotient being the “Field
Physician Ratio”), plus (B) the product of (i) the quotient of (x) PA/NP
Prescription Units for such period, divided by (y) the number of Units of
Product included within Product prescriptions filled during such period in the
Territory, as reflected in the Prescriber Data, multiplied by (ii) the Field
Physician Ratio.


 


Section 1.41           “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 1.42           “Force Majeure Event”
has the meaning set forth in Section 15.7.


 


3

















 


Section 1.43           “GAAP” has the
meaning set forth in Section 7.2(c).


 


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           “Initial Agreement
Quarter” means the period commencing on the Effective Date and ending on
September 30, 2007.


 


Section 1.46           “Initial Effective
Date” means July 18, 2007.


 


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


 


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


 


Section 1.49           “Legal Requirements”
means laws, rules and regulations of any Governmental Authority in the
Territory.


 


Section 1.50           “Minimum Sales Force
Level” has the meaning set forth in Section 4.3(a).


 


Section 1.51           “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.
21-744 filed with the FDA on July 18, 2004 (as such NDA may be amended or
supplemented subsequent to the Initial Effective Date).


 


Section 1.52           “Net Sales”
means, for a particular period, the gross amount invoiced on sales of Product
in the Territory recognized as gross revenue in accordance with GAAP 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, calculated in accordance with GAAP: (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; (c) chargebacks, trade, quantity and cash discounts and rebates to the
extent customary in the trade, including governmental rebates; (d) allowances
or credits, including allowances or credits to customers on account of rejection,
defects or returns of the Product entering trade after the Promotion
Commencement Date, or because of a retroactive price reduction;  and (f) costs associated with any Product
voucher or co-pay assistance programs, to the extent funded by Depomed and approved
by Watson. Net Sales shall not include a sale or transfer to an Affiliate,
licensee, sublicensee or assign of Watson 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 Watson or Depomed
shall be considered a sale of such Product.


 


4

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


Section 1.53           “Ob/Gyn Detail
Minimum” means, for a particular period, [***] of the PDEs required to be
performed on Professionals on the Watson Physician List within the Ob/Gyn Field
for such Period, as reflected in the Annual Plan(s) or the 2007 Plan (as
applicable) for such period and in Sections 4.1(c) – (j) of this Agreement (as
applicable).


 


Section 1.54           “Ob/Gyn Field”
means Professionals practicing obstetrics and/or gynecology, as so identified
by primary AMA specialty, and set forth in the Prescriber Data.


 


Section 1.55           “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 1.56           “P1 Detail”
means a Detail where the Product is the first item presented.


 


Section 1.57           “P2 Detail”
means a Detail where the Product is the second item presented.


 


Section 1.58           “P3 Detail”
means a Detail where the Product is the third item presented.


 


Section 1.59           “PA/NP Prescription
Units” means, for a particular period, the number of Units of Product
included within Product prescriptions filled during such period in the
Territory that result from prescriptions written by Physician Assistants and
Nurse Practitioners, as reflected in the Prescriber Data.


 


Section 1.60           “PDE” means a
Primary Detail Equivalent, and is equivalent to either of the following:  [***]. Details other than P1 Details, P2
Details and P3 Details will have no effect on any calculation of PDEs. P3
Details will have no effect on the calculation of PDEs prior to December 31,
2008.


 


Section 1.61           “PDMA” means the
Prescription Drug Marketing Act, as amended, and the rules and regulations
promulgated thereunder.


 


Section 1.62           “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 1.63           “Prescriber Data”
means IMS Health National Prescription Audit data, which measures both total
prescriptions dispensed and extended units dispensed (i.e., Units) for
Product  in the Territory, separately
setting forth the Urology Field, the Ob/Gyn Field, the sales Channel (long term
care), and prescriptions attributable to Physician Assistants and Nurse
Practitioners during a specified time period, or such data from an alternative
source mutually agreed in writing by the Parties.


 


Section 1.64           “Product” means
the once-daily oral tablet formulation containing ciprofloxacin as the sole
active pharmaceutical ingredient known as ProQuin XR and approved in the
Territory under NDA No. 21-744 approved by the FDA on May 19, 2005 (as such NDA
may be amended or supplemented subsequent to the Initial Effective Date).


 

















 


Section 1.65           “Product Complaints”
means any report concerning the quality, purity, quantity, weight,
pharmacologic activity, labeling, identity or appearance of the Product.


 


Section 1.66           “Professional”
means a physician or other health care practitioner who is permitted by law to
prescribe Product.


 


Section 1.67           “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 1.68           “Promotion
Commencement Date” has the meaning set forth in Section 4.1(b).


 


Section 1.69           “Promotion Fees”
has the meaning set forth in Section 7.1(a).


 


Section 1.70           “Promotional Effort”
has the meaning set forth in Section 4.1(a).


 


Section 1.71           “Promotional
Materials” has the meaning set forth in Section 4.4(a).


 


Section 1.72           “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 Watson’s compensation of its Sales Representatives,
information contained within the Annual Plan and 2007 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.


 


Section 1.73           “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.


 


2

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


Section 1.74           “Sales Representatives”
means sales representatives employed by Watson to Promote the Product, who have
been trained and equipped to Promote the Product in accordance with this
Agreement. Third Parties may only be engaged as Sales Representatives if they
are full-time contractors of Watson, exclusive to Watson, and carry Watson’s
business card.


 


Section 1.75           “Samples” has
the meaning set forth in Section 6.5.


 


Section 1.76           “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 1.77           “Serious Adverse
Drug Experience Report” means any Adverse Drug Experience Report that
involves a Serious Adverse Drug Experience.


 


Section 1.78           “Tail Gross Margin
Percentage” means the following:


 


(a)                                  if
this Agreement terminates on or after September 30, 2010 and before September
30, 2011, [***] (if the Tail Period is eight calendar quarters) or [***] (if
the Tail Period is four calendar quarters);


 


(b)                                 if
this Agreement terminates on or after September 30, 2011 and before September
30, 2012, [***] (if the Tail Period is eight calendar quarters) or [***] (if the
Tail Period is four calendar quarters); or


 


(c)                                  if
this Agreement terminates on or after September 30, 2012, [***] (if the Tail
Period is eight calendar quarters) or [***] (if the Tail Period is four
calendar quarters).


 


If this Agreement terminates only in part
with respect to the Ob/Gyn Field or the Urology Field pursuant to Section
8.2(a), the Tail Gross Margin Percentage shall be determined as set forth in
clauses (a) – (c) above with respect to each sub-Field upon the termination of
this Agreement with respect to that sub-Field).


 


Section 1.79           “Tail Period”
means, [***]. Notwithstanding the foregoing, but subject to Section 8.7(c),
there shall be no Tail Period unless the Term shall be in effect until at least
September 30, 2010. If this Agreement terminates only in part with respect to
the Ob/Gyn Field or the Urology Field pursuant to Section 8.2(a), there shall
be a separate Tail Period for each sub-Field, and the length of each such Tail
Period shall be determined as set forth in the immediately preceding sentence.


 


Section 1.80           “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


 

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


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


 


Section 1.82           “Territory”
means the United States, including its territories and possessions and Puerto
Rico.


 


Section 1.83           “Third Party”
means any Person other than Watson or Depomed or their respective Affiliates.


 


Section 1.84           “Unit” means a
single tablet of the Product.


 


Section 1.85           “United States
Bankruptcy Code” shall mean the U.S. Bankruptcy Code, 11 U.S.C. §§ 101, et seq.


 


Section 1.86           “Urology Detail
Minimum” means, for a particular period, [***] of the PDEs required to be
performed on Professionals on the Watson Physician List within the Urology
Field for such Period, as reflected in the Annual Plan(s) or the 2007 Plan (as
applicable) for such period and in Sections 4.1(c) – (j) of this Agreement (as
applicable).


 


Section 1.87           “Urology Field”
means Professionals practicing urology, as so identified by primary AMA
specialty and set forth in the Prescriber Data.


 


Section 1.88           “Volume Forecast”
has the meaning set forth in Section 6.3.


 


Section 1.89           “Watson” has the
meaning set forth in the preamble to this Agreement.


 


Section 1.90           “Watson Physician
List” means the list of Professionals to whom the Watson Sales Force
presents Details, which list has been agreed to in writing by the Parties prior
to the Effective Date (it being understood that such list includes [***]. The
Watson Physician List is subject to change from time to time throughout the
Term of this Agreement to reflect the then current [***], or as otherwise
agreed in writing by the Parties.


 


Section 1.91           “Watson Sales Force”
means the field force of Sales Representatives employed or contracted by Watson
to Promote the Product in the Territory within the Field.


 


Section 1.92           “Watson Trademarks”
means the trademarks set forth on Schedule 1.92.


 


Section 1.93           “Wholesaler Affiliate” shall mean an affiliate of Watson,
substantially all of the business of which consists of the wholesale distribution
of pharmaceutical products.


 

















 


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 Watson and its
Affiliates and Watson and its Affiliates hereby accept a co-exclusive right
(together with Depomed and its Affiliates only) to Promote the Product under
the Depomed Trademarks in the Territory within the Field and Channel on the
terms and subject to the conditions set forth herein.


 


Section 2.2             Sublicense.
Watson shall not sublicense, 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 not be unreasonably withheld or
delayed by Depomed.


 


Section 2.3             Limitation
on Promotion.


 


(a)           During the Term of this Agreement, the
Watson Sales Force shall not (i) Promote in the Territory any product
containing ciprofloxacin hydrochloride, or (ii) Promote in the Territory within
the Field any product for the treatment of urinary tract infections, in each
case other than the Product.


 


(b)           During the period beginning on the Initial
Effective Date and ending on December 31, 2008, Watson shall not, and shall
cause if Affiliates not to, Promote in the Territory any product containing
ciprofloxacin hydrochloride, 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 Watson as contemplated by Section 6.5. Watson 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 Watson, 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 Watson to Promote the Product
pursuant to this Agreement. 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
Watson or its Affiliates, except as may be necessary for Depomed to Promote the
Product pursuant to this Agreement.


 


Section 2.5             Esprit
Termination Agreement. Depomed has entered into the Esprit
Termination Agreement, which provides for, among other matters, the termination
of the Esprit License Agreement and a transition plan providing for the
transition of the Product back to Depomed from Esprit that includes specific
activities and timelines (the “Transition Plan”). Watson has reviewed
the Transition Plan. Depomed will use its reasonable best efforts to cause
Esprit to comply with its obligations under the Esprit Termination Agreement
and the Transition Plan. So long as Depomed uses its reasonable best efforts to
cause Esprit to comply with its obligations under the Esprit Termination
Agreement and the Transition Plan, Depomed shall not


 


2

















 


be in breach of this Agreement as a result of
any failure by Esprit to comply with its obligations under the Esprit
Termination Agreement or the Transition Plan.


 


ARTICLE III


 


JOINT STEERING COMMITTEE


 


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


 


Section 3.2             Joint
Steering Committee. The JSC shall be established by the Parties
and shall be comprised of four members, two of whom shall be appointed by Depomed
and two of whom shall be appointed by Watson. Each Party’s respective initial
appointments to the JSC 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 JSC members may be changed by unanimous vote of the JSC from
time to time as appropriate; provided, that the JSC shall in all cases
be comprised of an equal number of members from each of Depomed and Watson. Watson
and Depomed each will designate one representative of such Party to serve as
co-chairs of the JSC (the “Co-Chairs”). The members appointed to the JSC
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 Watson and Depomed shall not be members of the JSC.


 


Section 3.3             JSC
Responsibilities. The responsibilities of the JSC shall be
exercised consistent with this Agreement and shall include, but shall not be
limited to:


 


(a)           reviewing and approving the Annual Plan as
contemplated by Section 4.5 (which approval shall include, without limitation,
approval of the number of P1 Details, P2 Details and P3 Details to be performed
by the Watson Sales Force for periods after December 31, 2008);


 


(b)           monitoring and reviewing compliance with the
2007 Plan or the Annual Plan;


 


(c)           reviewing Product Promotion strategies and
objectives, including Product positioning, messaging and branding;


 


(d)           reviewing Product-related activities
associated with managed markets, trade pipeline, manufacturing, and
distribution;


 


(e)           reviewing pricing for the Product;


 


(f)            reviewing Product-related regulatory
matters;


 


(g)           reviewing sales incentive compensation for
the Watson Sales Force related to the Product for periods through December 31,
2008;


 


3

















 


(h)           reviewing and approving sales incentive
compensation for the Watson Sales Force related to the Product for periods
after December 31, 2008;


 


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


 


For the avoidance of doubt, (i) the JSC 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 JSC 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 JSC. Meetings of the JSC may be called by the Co-Chairs
of the JSC 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 JSC shall be held on at least a monthly basis during the
first three 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 JSC 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 notice to the other
Party, to have present at JSC meetings additional, non-voting participants (not
to exceed six such participants at any JSC 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 JSC. The Parties shall cause
their respective representatives on the JSC to use their reasonable efforts to
resolve all matters presented to them as expeditiously as possible. Watson
shall propose the agenda for each regular 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 JSC.


 


Section 3.5             JSC
Disputes.


 


(a)           In the event that the JSC is, after a period
of ten (10) 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 JSC, 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 (15) 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 (15) day period referred to in


 


4

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


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 (15) 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 (30) 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)           In furtherance of the foregoing provisions
of Section 3.5(b), in connection with any mediation conducted as set forth
pursuant to Section 3.5(b) with respect to a Detailing or Incentive
Compensation Dispute (as defined below), each Party shall submit to the
mediator selected pursuant to Section 3.5(b) and to the other Party, at least
two weeks in advance of the mediation proceedings, a brief summarizing and
supporting its contentions with respect to the dispute for the purpose of
facilitating the mediation proceedings. If the Parties fail to resolve any
Detailing or Incentive Compensation Dispute following the completion of
mediation proceedings with respect to such Detailing or Incentive Compensation
Dispute (a “Detailing or Incentive Compensation Impasse”), Depomed may
terminate this Agreement pursuant to Section 8.2(c). A “Detailing or
Incentive Compensation Dispute” is any dispute regarding either (i) the
incentive compensation payable to the Watson Sales Force in respect of the
Product for any period after December 31, 2008 where Watson proposes that less
than [***] of the incentive compensation payable to Watson Sales
Representatives detailing the Product will be dependent on sales of the
Product, or (ii) the number of P1 Details, P2 Details or P3 Details to be
performed by Watson for any period after December 31, 2009 where Watson
proposes to perform fewer than [***] annual PDEs (on a pro-rated basis for
partial years).


 


(d)           The Parties agree that items that are solely
reviewed by the JSC, and not both reviewed and approved by the JSC, are not
subject to the dispute resolution mechanism set forth in this Section 3.5. 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 unless and until the dispute resolutions procedures set forth in this
Section 3.5 are exhausted.


 

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


ARTICLE IV


 


PRODUCT PROMOTION


 


Section 4.1             Product
Promotion.


 


(a)           Subject to applicable
Legal Requirements, as well as the provisions of this Agreement, Watson shall,
from and after the Promotion Commencement Date, at its sole expense, use
commercially reasonable efforts to Promote the Product in the Territory within
the Field in accordance with the 2007 Plan or Annual Plan for subsequent years
(the “Promotional Effort”). For purposes of the preceding sentence,
Watson’s commercially reasonable efforts shall mean at least the same degree of
effort (including with respect to the reach and frequency of Details) that
Watson would use for the Promotion of any of Watson’s products that represent a
similar commercial opportunity. The Parties acknowledge that efforts that
constitute commercially reasonable efforts may change during the Term. All
statements, core selling messages and materials to be utilized by Watson to
Promote the Product shall be consistent in all material respects with the
Promotional Materials provided or utilized by Depomed. Watson will cause the
Watson Sales Force and Watson employees and agents acting on Watson’s behalf to
comply with this Agreement and all applicable Legal Requirements in connection
with the Promotion of the Product. It is understood, and Watson agrees, that it
will be accountable for the acts or omissions of the Watson Sales Force and its
employees and agents to the extent such acts or omissions fail to comply with
Watson’s obligations under this Agreement.


 


(b)           Watson shall commence
(the date of such commencement, the “Promotion Commencement Date”)
Promotion (including Details by the Watson 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 October 15, 2007.


 


(c)           During the period
beginning on the Promotion Commencement Date and ending four months thereafter,
Watson shall perform a P1 Detail on at least [***] of the Professionals on the
Watson Physician List within the Urology Field at least once every [***];


 


(d)           During the period
beginning on the Promotion Commencement Date and ending on December 31, 2007,
Watson shall:


 


(i)            perform an aggregate
of at least [***] P1 Details and [***] P2 Details on Professionals on the
Watson Physician List within the Urology Field; and


 


(ii)           perform an aggregate of
at least [***] P2 Details on Professionals on the Watson Physician List within
the Ob/Gyn Field.


 

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


(e)           During each Agreement
Quarter in 2008, Watson shall perform at least [***] P1 Details and [***] P2
Details on Professionals on the Watson Physician List within the Urology Field.


 


(f)            During the Agreement
Quarters ending on March 31, 2008 and December 31, 2008, Watson shall perform
at least [***] P1 Details on Professionals on the Watson Physician List within
the Ob/Gyn Field.


 


(g)           During the Agreement
Quarters ending on June 30, 2008 and September 30, 2008, Watson shall perform
at least [***] P2 Details on Professionals on the Watson Physician List within
the Ob/Gyn Field.


 


(h)           During each Agreement
Quarter in 2009, Watson shall perform at least [***] Details on Professionals
on the Watson Physician List within the Urology Field, which Details shall be
allocated between P1 Details, P2 Details and P3 Details as reflected in the
Annual Plan for 2009 approved by the JSC.


 


(i)            During each Agreement
Quarter during the Term commencing with the Agreement Quarter beginning on
January 1, 2009, Watson shall perform such number of Details on Professionals
on the Watson Physician List within the Ob/Gyn Field, and allocated between P1
Details, P2 Details and P3 Details, as is reflected in the Annual Plan approved
by the JSC for the applicable year.


 


(j)            During each Agreement
Quarter during the Term commencing with the Agreement Quarter beginning on
January 1, 2010, Watson shall perform such number of Details on Professionals
on the Watson Physician List within the Urology Field, and allocated between P1
Details, P2 Details and P3 Details, as is reflected in the Annual Plan approved
by the JSC for the applicable year.


 


(k)           Representations to Customers. Watson
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. Watson 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 4.2             Watson
Sales Force Staffing, Training and Compensation.


 


(a)           Watson agrees that from and after the
Promotion Commencement Date, the Watson Sales Force will be staffed with at
least [***] full-time Sales Representatives (subject to vacancies consistent
with average vacancy rate experienced by Watson across its total sales force)
who are actively promoting the Product in accordance with the 2007 Plan or
Annual Plan (the “Minimum Sales Force Level”). Throughout the remainder
of the Term, Watson shall use


 

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


its commercially reasonable efforts to ensure that the number of Sales
Representatives comprising the Watson Sales Force meets or exceeds the Minimum
Sales Force Level.


 


(b)           Watson shall be solely responsible for all
costs and expenses of compensating its Sales Representatives. Consistent with
applicable Legal Requirements, Watson shall pay incentive compensation to
Watson Sales Representatives with respect to the Product in accordance with
Watson’s incentive compensation; provided, however, that through
December 31, 2007, at least [***] and through December 31, 2008, at least [***]
of the incentive compensation payable to Watson Sales Representatives detailing
the Product will be dependent on sales of the Product. In addition, Depomed may
sponsor sales contests or other special incentive compensation, at its own
expense, for Watson’s sales force with Watson’s approval. Watson will be
responsible for implementing any such contest or incentive compensation.


 


(c)           Watson shall notify its Sales
Representatives prior to the Promotion Commencement Date, consistent with its
procedures for Watson’s other products, of the total potential incentive
compensation for the Product. Promptly after the adoption by Watson of an incentive
compensation payment plan with respect to the Product pursuant to, and in
compliance with, this Agreement, and promptly after any material amendments to
such plan, Watson shall provide to Depomed a summary of the methodology used by
Watson to make incentive compensation payments for the Product pursuant to such
plan.


 


(d)           The Parties hereby agree that Depomed shall
provide to Watson, at no charge to Watson and in quantities agreed by the
Parties in writing prior to the Initial Effective Date, previously generated
training materials and/or associated electronic copies thereof where
applicable. Watson shall furthermore have the option to purchase from Depomed,
in sufficient quantities for the Watson Sales Force, additional training
materials for the Product created or owned by Depomed, at Depomed’s
out-of-pocket cost for such materials. It is anticipated that Watson will
utilize Depomed’s training materials in connection with the Product-related
training of its Sales Representatives. Any training materials for Watson’s
Sales Representatives developed or created by Watson shall be subject to
Depomed’s review as Promotional Materials as provided in Section 4.4. Watson
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 Watson shall deem appropriate that are in
compliance with Watson’s obligations hereunder and all other Legal Requirements.
Such programs shall include training with respect to reporting Adverse Drug
Experiences and technical complaints. After the initial training, Watson shall
periodically provide additional training to each of its Sales Representatives,
and shall update its training materials as appropriate in connection with such
additional training, in accordance with this Section 4.3. Representatives of
Depomed may attend, at Depomed’s expense, any Watson training session related
to the Product. Watson will notify Depomed at least two weeks in advance of any
such training session.


 


Section 4.3             Promotional
Materials; Educational Materials.


 


(a)           Subject to Section 4.4(b), The Parties may,
each at its sole expense, create prototypes of promotional, advertising,
marketing and educational materials (“Promotional


 

















 


Materials”) to
support the Promotional Effort for the Product in the Territory within the
Field. Such Promotional Materials may include, by way of example, detailing
aids; leave items; journal advertising; appropriate reprints and reprint
carriers; and product monographs. All Promotional Materials used by the Watson
Sales Force will be subject to the review and approval of the Depomed APL. All
Promotional Materials developed by Watson hereunder shall prominently display
such Depomed Trademark(s) as shall be specified by Depomed to Watson following
its review of the applicable prototype in accordance with Section 4.4(b).


 


(b)           Each Party shall provide to the other a
prototype of any Promotional Materials it creates to support the Promotional
Effort for the Product in the Territory within the Field, for review by the
other Party. The reviewing Party shall notify the creating Party of any
objections it has to such prototype and the basis therefor as soon as
reasonably practicable, but no later than ten (10) business days following its
receipt thereof. The creating Party shall modify such Promotional Materials to
the extent necessary to resolve any objections made by the reviewing Party 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 any other objection raised by the reviewing Party. The final
version of the Promotional Materials approved by the Depomed APL shall be
reviewed and approved by the Parties to confirm their consistency with the
prototype approved by the Parties and the resolution of any 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 following
its receipt by the reviewing Party. Upon approval, the Promotional Materials
may be produced in quantity. Depomed’s regulatory affairs department will
notify Watson’s regulatory affairs department when Promotional Materials have
been submitted to the FDA. Such Promotional Materials may only be used by
Watson subsequent to such notification from Depomed’s regulatory affairs
department. The Parties have reviewed and approved certain Promotional
Materials acquired by Depomed from Esprit in connection with the Esprit
Termination Agreement (the “Esprit Promotional Materials”), as set forth
on a list of such approved Esprit Promotional Materials agreed to in writing
prior to the execution of the Original Agreement. Depomed will deliver to Watson,
free of charge, such quantities of existing Esprit Promotional Materials that
Depomed receives from Esprit pursuant to the Esprit Termination Agreement as
the Parties agreed in writing prior to the execution of the Original Agreement.


 


(c)           The Parties may purchase from each other
sufficient copies of Promotional Materials for use by either Party’s sales
force at the other Party’s out-of-pocket cost therefor.


 


(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. Watson 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 Watson 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 Watson.


 


(e)           Disputes between the Parties with respect to
Promotional Materials shall be subject to the dispute resolution procedures
applicable to JSC disputes set forth in Section 3.5.


 


2

















 


Section 4.4             2007
Plan; Annual Plan; Promotion Expenses.


 


(a)           Watson has provided a
sales plan for the remainder of 2007 (the “2007 Plan”) with respect to
the Urology Field. Watson will revise the 2007 Sales Plan within fifteen (15)
days of the Effective Date to reflect additional activities directed to the
Ob/Gyn Field. On or prior to October 1 of the preceding calendar year with
respect to each calendar year during the Term beginning with the 2008 calendar
year, Watson shall develop an annual sales plan (the “Annual Plan”) and
submit the Annual Plan to the JSC for review and approval. The Annual Plan
shall set forth the manner in which the Product is to be Promoted by Watson in
the Territory within the Field during the period to which the Annual Plan
relates and shall include, at a minimum:


 


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


 


(ii)           pharmacy efforts;


 


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


 


(iv)          medical education
programs to be conducted;


 


(v)           planned public
relations activities;


 


(vi)          Sample forecasts and
delivery schedules;


 


(vii)         voucher or co-pay
assistance plans;


 


(viii)        format and quantity of
sales, marketing and educational materials


 


(ix)           convention schedule;


 


(x)            marketing plans and
strategies for the Channel and other managed markets, and for trade; and


 


(xi)           any non-personal
Promotion (including, but not limited to, e-detailing, e-sampling, direct mail,
and telemarketing).


 


(b)           The JSC shall use all
reasonable efforts to approve each Annual Plan not later than November 1 of
each preceding calendar year.


 


(c)           Each Party will bear
its own operating expenses associated with the Product and Promotion thereof,
including all personnel, general and administrative and overhead costs. Watson
will bear all Watson 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. Neither
Party has the authority to incur costs or expenses on behalf of the other
Party, without the other Party’s express prior written approval.


 


3
















 


Section 4.5             Watson Promotion Reports; Prescriber Data.


 


(a)           Within fifteen (15) days following
the end of each Agreement Quarter, Watson shall provide the JSC with a status
report, which report will summarize Watson’s Promotional activities pursuant to
this Agreement for such prior Agreement Quarter and on a calendar year-to-date
basis, including, to the extent Watson customarily creates the following
reports for Watson’s other products which are promoted by or on behalf of
Watson:  (a) the number of P1 Details, P2
Details and P3 Details (if applicable) made and recorded by Watson’s standard
record keeping procedures (separately setting forth Details performed within
the Urology Field and Details performed within the Ob/Gyn Field); (b) the
names, addresses and medical education numbers of the Professionals called upon
(separately setting Professionals within the Urology Field and Professionals
within the Ob/Gyn Field); (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; and (f) such other information as may be required
in the then-current Annual Plan.


 


(b)           At the end of each Agreement Quarter,
Watson shall provide directly to Depomed, within ten (10) days of its receipt,
the Prescriber Data for such Agreement Quarter related to the Product, in the
same form as such Prescriber Data is provided to Watson.


 


Section 4.6             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. All such requests will be directed to, and
handled by, Depomed’s medical affairs department (or a Third Party medical
affairs firm designated by Depomed).


 


Section 4.7             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 Watson a non-assignable, non-sublicensable, non-exclusive, royalty-free
right and license to use the Depomed Trademarks in the Territory solely in
connection with Watson’s Promotion of the Product in accordance with this
Agreement; provided Watson 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, Watson shall have the right to use the Watson
Trademarks, and include the name “Watson” or any variation thereof on the
Promotional Materials developed by Watson; provided, that such Watson
Trademarks shall not appear in such Promotional Materials in greater prominence
or in greater frequency than the Depomed Trademark(s). Watson 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. Watson
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 Watson’s use of the Depomed Trademarks, it
being the intention of the Parties that all goodwill


 


4

















 


and improved reputation generated by Watson
and use of the Depomed Trademarks shall inure to the benefit of Depomed.


 


(b)           Watson
hereby grants to Depomed a non-assignable, non-sublicensable, non-exclusive,
royalty-free right and license to use the Watson Trademarks in the Territory
solely in connection with Depomed’s Promotion of the Product in the Field. Such
license shall expire immediately upon the expiration or 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 Watson’s title to
the Watson 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 Watson in or to the Watson Trademarks. Depomed shall not be
obligated to use the Watson Trademarks in the Depomed Promotional Materials. Depomed
acknowledges and agrees that it shall not acquire and shall not claim any title
to the Watson Trademarks adverse to Watson by virtue of the rights granted
under this Agreement or through Depomed’s use of the Watson Trademarks, it
being the intention of the Parties that all goodwill and improved reputation
generated by Depomed and use of the Watson Trademarks shall inure to the
benefit of Watson.


 


(c)           Each
of Watson with respect to its use of the Depomed Trademarks and Depomed with
respect to its use of the Watson 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.


 


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. Watson 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.


 


5

















 


Section 5.3             Compliance. In performing its duties
hereunder, each Party shall, and shall cause its employees and agents
(including the Watson Sales Force) 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, 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
Watson, Depomed, and either Party’s employees and agents (including the members
of the Watson Sales Force) shall offer, pay, solicit or receive any remuneration
to or from Professionals in order to induce referrals of or purchase of the
Product. The Watson Sales Force shall have no direct contact with, nor shall
the Watson 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 Watson 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 (2) business days
provide Watson with copies of 
communications reasonably considered to be significant per CFR 314
(including summaries of all relevant verbal communications) related to
Promotional Materials (DDMAC interactions other than clerical in nature) ;
routine communications of any type (e.g., FDA 2253 correspondence) are to be
forwarded to Watson within ten (10) business days.


 


(b)           Watson
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,  Watson 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
(including without limitation state or local Legal Requirements related to
marketing activities undertaken by Watson or the Watson Sales Force), or if
Watson made a request of such agency to communicate with Depomed instead, and
such Governmental Authority denied such request (in any such case, Watson shall
give Depomed notice as soon as reasonably practicable of such communication and,
to the extent practicable, Depomed shall be permitted to accompany Watson, take
part in any such communications and receive copies of all such communications).
Watson shall, immediately upon receipt of any communication from the FDA or
from any other Governmental Authority relating to the Product,


 


6





















 


forward a copy of the same to Depomed and
respond to all inquiries by Depomed relating thereto. If Watson is required by
law to communicate with the FDA or with any other Governmental Authority
relating to the Product, then Watson shall 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. Watson 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. Depomed shall
retain the sole responsibility to record, investigate and close out all Product
Complaints. Watson shall refer any oral or written Product Complaints which it
receives concerning the Product to Depomed within four (4) 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. Watson 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, Watson will
cooperate 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 13.1. Depomed
shall provide Watson with a summary of all Product Complaints received by
Depomed within ten (10) business days of its receipt thereof.


 


Section 5.6             Adverse Drug Experience Reports.


 


(a)           Depomed
shall provide Watson with a copy of all Adverse Drug Experience Periodic
Reports per 21 CFR 314.80 within twenty (20) business days of the such Reports
becoming available to Depomed or other Agents or partners for Depomed
(including employees).


 


(b)           Watson
will notify Depomed of all Serious Adverse Drug Experience Reports (cases or
incidents) reported directly to Watson within forty-eight hours if possible,
and in no case beyond two (2) business days of the time such report becomes
known to Watson (including its employees), and of all Adverse Drug Experience
Reports within five (5) business days of the time such Report becomes known to
Watson (including its employees) to allow Depomed Medical and Regulatory
Departments sufficient time to triage and report such events to the Agency.


 


(c)           Except
as may otherwise be required by Legal Requirements, (i) Watson 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
responsibility in its 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.


 


(d)           All
follow-up investigations concerning Adverse Drug Experience Reports and Serious
Adverse Drug Experience Reports shall be conducted by Depomed; provided
that


 


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Watson shall have the right to participate in
such investigations upon its request. Watson 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 Watson 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,
Watson shall provide assistance to Depomed in conducting such recall, market
withdrawal or other corrective action (including retrieving Samples distributed
by the Watson Sales Force to Professionals). With 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, Depomed shall reimburse
Watson 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 Watson’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 Watson or make any other payment to Watson for any
decision to recall, initiate a market withdrawal or take any other corrective
action with respect to the Product.


 


ARTICLE VI


 


MANUFACTURING AND SUPPLY; SALES;
PRICING


 


Section 6.1             Obligations of Depomed.


 


(a)           In
accordance with the provisions of this Agreement and all applicable Legal
Requirements, Depomed shall, at its cost and expense, use commercially
reasonable 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.


 


(b)           Depomed has prepared and delivered, with
input from Watson, a commercial stocking plan for the Product.


 


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, unless the Parties otherwise agree in writing to an
alternative method of forecasting Product prescriptions in the Territory within
the Field, Watson shall submit to the JSC a written non-binding forecast by


 


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Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


month of the number of Units of Product
included within prescriptions expected to be filled in the Territory during the
twelve (12) month period beginning with such Agreement Quarter, which forecast
shall be prepared by Watson in good faith. The JSC 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 JSC 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 commercially reasonable efforts to manufacture and distribute, or
cause to be manufactured and distributed, Product consistent with the Volume
Forecast or such other method of forecasting Product prescriptions in the
Territory within the Field as is agreed in writing by the Parties. The Parties
have agreed in writing to the Volume Forecast for the twelve month period
beginning on August 1, 2007.


 


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. For purposes
of clarity, any contracts or arrangements supported by Watson as contemplated
by Section 6.4(b) must be executed in Depomed’s name and administered by
Depomed.


 


(b)           Watson
will provide reasonable assistance to Depomed in support of managed markets and
trade customer groups with respect to the Product to enable Depomed to enter
into such contracts and other arrangements described in Section 6.4(a) above. In
particular, as contemplated in the 2007 Plan, (i) Watson’s sales team dedicated
to the Channel will provide reasonable assistance to Depomed in connection with
Depomed’s contracting efforts within the Channel and (ii) Watson will provide
reasonable assistance to Depomed in connection with Depomed’s efforts to stock
the Product within retail pharmacies.


 


Section 6.5             Samples.


 


(a)           Depomed
shall provide or cause to be provided to Watson, from time to time as
contemplated by the Annual Plan, samples of the Product that are not for sale
and with no fee associated (“Samples”) to be distributed by Watson 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 Watson
upon delivery to a carrier designated by Watson. Watson shall be responsible
for distributing the Samples to its Sales Representatives in a timely manner. Depomed
shall invoice Watson for each shipment of Samples at [***] payable within
thirty (30) days of the invoice date (excluding [***]). Watson 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 Watson shall be used by Watson solely in performing
Details to Professionals in accordance with this Agreement. Upon its receipt of



 





















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


Samples, Watson shall be solely
responsible for accountability and compliance with the PDMA for the Watson
Sales Force, and other applicable Legal Requirements relating to such Samples
or the distribution of same by the Watson Sales Force, and shall be responsible
for adherence by its Sales Representatives to such Legal Requirements.


 


(c)           Sampling
volume will be included as a part of each Annual Plan.


 


ARTICLE VII


 


COMPENSATION


 


Section 7.1             Promotion Fees.


 


(a)           In
consideration for Watson’s performance of its obligations under this Agreement,
for each Agreement Quarter beginning with the Agreement Quarter ending on
December 31, 2007, Depomed shall pay promotion fees (the “Promotion Fees”)
in an amount equal to [***] of the Field Gross Margin for such Agreement
Quarter. In the event that Promotion Fees payable to Watson under this
Agreement for a particular period is a negative number, Watson will not be
required to make a payment to Depomed equal to the negative Promotion Fees, and
Depomed shall credit an amount equal to any negative Promotion Fees against any
future payments due to Watson under this Agreement.


 


(b)           During
the Term, upon the later to occur of (A) 30 days following the end of each
Agreement Quarter, and (B) 20 days following Depomed’s receipt from Watson of the
Prescriber Data for such Agreement Quarter as contemplated by Section 4.6(b),
Depomed shall provide Watson with a statement setting forth:


 


(i)            Net Sales during such Agreement
Quarter;


 


(ii)           Field Prescription Units during such
Agreement Quarter;


 


(iii)          the Field Ratio for such Agreement
Quarter;


 


(iv)          Field Net Sales during such Agreement
Quarter;


 


(v)           Field COGS during such Agreement
Quarter


 


(vi)          Field Gross Margin for such Agreement
Quarter;


 


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


 


Notwithstanding the foregoing, within fifteen (15) days after the end
of each Agreement Quarter, Depomed shall provide to Watson a non-binding, good
faith estimate of the calculation of the amount payable to Watson for such
Agreement Quarter to enable Watson to meet its financial reporting obligations.
Where applicable, the foregoing calculation shall be based on such Prescriber
Data (if any) for such Agreement Quarter as is then readily available to
Depomed.


 

















 


(c)           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.


 


(d)           An
example calculation of a Promotional Fee is attached as Schedule 7.1.


 


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, the items set forth in Section 7.1(b)(i)-(vii) and
Section 7.4, and (ii) in the case of Watson, P1 Details, P2 Details and P3
Details (if applicable) completed by the Watson Sales Force. Upon thirty (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 independent 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,
in the case of Depomed, one or more of the items set forth in Section
7.1(b)(i)-(vii) and Section 7.4, and, in the case of Watson, P1 Details, P2
Details and P3 Details (if applicable) completed by the Watson Sales Force. Such
independent auditor shall keep confidential any information obtained during
such examination and shall report only the amounts which the independent
auditor believes to be due and payable hereunder. The fees and expenses of the
independent 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 (5%) 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 (5) 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.


 


(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, except as set forth in Section 7.2(d) with respect to COGS. 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.


 


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(d)           COGS
shall be determined in accordance with GAAP, except that COGS shall in no event
include labor of more than one full-time equivalent Depomed employee for any
period for which COGS is calculated under this Agreement.


 


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. During the Tail Period, Depomed shall pay to Watson an amount equal to
the result of (A) the Tail Gross Margin Percentage, multiplied by (B) the Field
Gross Margin for each calendar quarter within the Tail Period; provided,
however, that in no event shall the amount payable to Watson in respect
of any single calendar quarter within the Tail Period exceed an amount equal to
the result of (A) the Tail Gross Margin Percentage, multiplied by (B) the
average Field Gross Margin for the last two full Agreement Quarters prior to
the termination of this Agreement. In the event that this Agreement is
terminated only in part with respect to the Ob/Gyn Field or the Urology Field
pursuant to Section 8.2(a), and the Tail Period applies to either or both
sub-Fields, then the “Field” for purposes of the calculation of the amount
payable under this Section 7.4 with respect to each sub-Field shall include
only that sub-Field.


 


ARTICLE VIII


 


TERM AND TERMINATION


 


Section 8.1             Term. The term of this Agreement shall
commence on the Initial Effective Date and shall continue, unless terminated
sooner in accordance with this Article VIII, until September 30, 2010 (the “Initial
Term”). Subject to Section 8.2(a)(i), Watson may extend the Term of this
Agreement for two (2) additional one (1) year periods (each, a “Renewal Term”),
to a total Term of approximately five (5) years, upon written notice to Depomed
of Watson’s decision to extend the Term at least ninety (90) days prior to the
end to the Initial Term or then current Renewal Term.


 


Section 8.2             Early Termination.


 


(a)           The
following provisions shall apply in respect of any Renewal Term, and failures
by Watson to perform the Detail Minimum, the Urology Detail Minimum, or the
Ob/Gyn Detail Minimum:


 


(i)            Depomed may elect to terminate this
Agreement with respect to the Ob/Gyn Field effective as of September 30, 2010
or September 30, 2011 upon at least 120 days’ prior written notice to Watson,
provided that Depomed commences Promotion of the Product within the Ob/Gyn
Field directly through its own sales force within sixty (60) days after any
such termination of this Agreement with respect to Ob/Gyn Field.


 


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Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


(ii)           If Watson does not perform, in the
aggregate, [***] the Detail Minimum in any two consecutive Agreement Quarters,
Depomed shall have the right to terminate this Agreement on thirty (30) days’
prior written notice to Watson.


 


(iii)          If Watson does not perform, in the
aggregate, [***] the Urology Detail Minimum or the Ob/Gyn Detail Minimum in any
two consecutive Agreement Quarters, Depomed shall have the right to terminate
this Agreement with respect to the Urology Field or the Ob/Gyn Field (as
applicable) on thirty (30) days’ prior written notice to Watson.


 


(iv)          If Depomed desires to exercise its
option to terminate this Agreement in whole or in part pursuant to Section
8.2(a)(ii) or (iii), it must give written notice to Watson within 60 days after
receiving the report of the Agreement Quarter giving rise to the right to
terminate this Agreement in whole or in part pursuant to this Section
8.2(a)(ii) or (iii).


 


(v)           If Depomed terminates this Agreement
only with respect to the Urology Field or the Ob/Gyn Field pursuant to Section
8.2(a)(i) or (iii), then from and after such termination, (A) the “Field”
for purposes of this Agreement shall no longer include the sub-Field (i.e., the
Urology Field or the Ob/Gyn Field) with respect to which this Agreement has
been terminated, and (B) “Field Baseline Prescriptions Per Month” shall
no longer include Units of Product attributable to the sub-Field with respect
to which this Agreement has been terminated. The Parties shall acknowledge in
writing not later than October 31, 2007 the number of Units of Product within
the Field Baseline Prescriptions Per Month attributable to the Urology Field
and the number of Units of Product within the Field Baseline Prescriptions Per
Month attributable to the Ob/Gyn Field.


 


(b)           If,
as of the end of any period, aggregate Field Gross Margin is less than [***]
for the immediately preceding two consecutive Agreement Quarters (but not
before the two consecutive Agreement Quarters ending on March 31, 2009), either
Party shall have the right to terminate this Agreement on 120 days’ prior
written notice to the other Party. If either Party desires to exercise its
option to terminate this Agreement pursuant to this Section 8.2(b), it must
give written notice to the other Party within 60 days after receiving the
report of the Agreement Quarter giving rise to the right to terminate this
Agreement pursuant to this Section 8.2(b).


 


(c)           If
there is a Detailing or Incentive Compensation Impasse, Depomed may terminate
this Agreement upon thirty (30) days’ prior written notice to Watson; provided
that such notice is provided to Watson within sixty (60) days after the
occurrence of such Detailing or Incentive Compensation Impasse.


 


Section 8.3             Termination for Cause. Either Party may
terminate this Agreement, effective at any time after providing sixty (60) days
written notice and an opportunity to cure during such sixty (60) day period
(ninety (90) 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 15.7 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
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


 


2

















 


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 Section 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)           Notwithstanding
any provision herein to the contrary:


 


(i)            if Watson terminates this Agreement
pursuant to Section 8.3 during the Initial Term, Watson shall be entitled to a
Tail Promotion Fee in accordance with Section 7.4. For purposes of calculation,
in such an event, the Tail Period shall be determined in accordance with
Section 1.72 and the Tail Gross Margin Percentage shall be calculated as if the
Agreement had terminated on or after September 30, 2010 and before September
30, 2011; and


 


(ii)           if Depomed terminates this Agreement
pursuant to Section 8.3, Watson shall not be entitled to any Tail Promotion
Fee.


 


(d)           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, Watson shall provide to Depomed,
at Watson’s out-of-pocket cost therefor, all Samples and Promotional Materials
in Watson’s possession (including electronic files of all Promotional
Materials); provided, however, that Watson may destroy any
printed copies of Promotional Materials bearing the Watson Trademarks and may
remove the Watson 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 Watson 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 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


 


3

















 


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 Watson
Trademarks.


 


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


 


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


 


(a)           Organization.
Watson (i) is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware, and (ii) has all necessary
corporate 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 Watson, have
been duly authorized by all necessary corporate proceedings of Watson, and this
Agreement has been duly executed and delivered by Watson.


 


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(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 Watson’s
organizational documents; (ii) result in a material breach of any material
agreement to which Watson is Party; (iii) result in a violation of any Order to
which Watson is subject; (iv) require Watson 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 Watson in any material respect.


 


(d)           Enforceability.
This Agreement constitutes the valid and binding obligation of Watson,
enforceable against Watson 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.
Watson has not employed any broker or finder with respect to this Agreement or
the transactions contemplated hereby.


 


(f)            Watson
Trademarks. To the knowledge of Watson, the use of the Watson 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 Watson,
threatened, by or against Watson or any of its Affiliates relating to the
Product or which would reasonably be expected to materially affect Watson’s
ability to perform its obligations hereunder.


 


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             Watson Disclaimer. EXCEPT AS EXPRESSLY
PROVIDED HEREIN, WATSON 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           Infringement.


 


(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) Watson in the
Watson Trademarks, then the Party becoming so informed shall promptly, but in


 


5

















 


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 JSC, 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. Watson
shall cooperate fully with, and as reasonably requested by, Depomed in Depomed’s
attempt to restrain such infringement, and Depomed shall reimburse Watson for
its out-of-pocket expenses incurred in providing such cooperation. Watson 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 Watson, Watson shall take such legal action as is
advisable in Watson’s opinion to restrain such infringement of the Watson
Trademarks. Depomed shall cooperate fully with, and as requested by, Watson in
Watson’s attempt to restrain such infringement, and Watson 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 Watson 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 and their respective directors, officers, employees,
consultants,  contractors,
representatives and agents 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 Watson and its Affiliates and their respective directors, officers,
employees, consultants, contractors, representatives and agents 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 Watson or its Affiliates to the extent such
claim, suit, or proceeding is based upon a claim arising out of or relating to
(x) any claim made by any Person that the manufacture, use or sale of the
Product infringes or misappropriates the patent, trademark, or other
intellectual property rights of such Person, except with respect to any claim
relating to the Watson Trademarks; (y) the Esprit License Agreement or the
Esprit Termination Agreement 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 Watson of Section 4.2. Each Party agrees that it shall promptly
notify the other in writing of any such claim or action and give


 


6

















 


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 seven (7) 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 WATSON
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 OR TO
AMOUNTS PAYABLE TO A THIRD PARTY THAT ARE SUBJECT TO INDEMNIFICATION PURSUANT
TO THIS ARTICLE 11.


 


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 (i) under applicable Legal Requirements
to disclose Proprietary Information of the disclosing Party to any Governmental
Authority to obtain any Regulatory Approval for the Product, (ii) to disclose
Proprietary Information in connection with bona fide legal process (including
in connection with any bona fide dispute hereunder) or (iii) 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 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


 


7

















 


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 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 (the “SEC”), as to the contents and existence of this
Agreement as it shall reasonably deem necessary or appropriate. In such event,
the filing Party shall consult with the other Party with respect to the extent
of such disclosure, including whether and to what extent confidential treatment
shall be sought; provided, that, notwithstanding the foregoing,
the filing Party shall retain ultimate control and responsibility for any
disclosure with the SEC. 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


 


NOTICES


 


Section 13.1           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


 


If to Watson:


 


Watson Pharma, Inc.


 


8

















 


360 Mt. Kemble Avenue 

Morristown, New Jersey 07962

Attention:  President, Brand Division

Fax No:  (973) 355-8580


 


With a copy to:


 


Watson Pharmaceuticals, Inc.


311 Bonnie Circle 

Corona, California 92880

Attention:  General Counsel 

Fax No:  (951) 493-5821


 


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


 


ARTICLE XIV


 


INSURANCE


 


Section 14.1           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 $10 million per occurrence
and $10 million in the aggregate on an annual basis and (ii) a product
liability insurance policy or policies with minimum limits of $10 million per
occurrence and $15 million in the aggregate on an annual basis.


 


(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 XV


 


MISCELLANEOUS


 


Section 15.1           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 15.2           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.


 


9




















 


Section 15.3                             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 (including without limitation the Original
Agreement), understandings, or arrangements between them, whether oral or in
writing.


 


Section 15.4                             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 15.5                             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 15.6                             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 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 15.7                             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 15.7, 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 15.7 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).


 


10





















 


Section 15.8                             Successors and Assigns. Subject to
Section 15.9, 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 15.9                             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.


 


Section 15.10                      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 15.11                      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 15.12                      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 15.13                      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


 


11

















 


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.


 


[Signature
page follows]


 


12

















 


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/ Carl A. Pelzel

  
	
   

  	
  Name:

  	
  Carl A.
  Pelzel

  
	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WATSON
  PHARMA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward
  F. Heimers, Jr.

  
	
   

  	
  Name:

  	
  Edward F.
  Heimers, Jr.

  
	
   

  	
  Title:

  	
  President, Brand Division

  



 

















 


Confidential
Information, indicated by [***], has been omitted from this filing and filed
separately with the Securities Exchange Commission


 


Schedule 1.14


 


Product COGS as of the Initial Effective Date


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Estimated Range for

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2007

  	
   

  	
   

  	
   

  
	
  2007 Estimation

  	
   

  	
  Low

  	
   

  	
  High

  	
   

  	
  Low

  	
   

  	
  High

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WAC per Tablet

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
   

  	
   

  
	
  Gross to Net
  Discounts & Allowances

  	
   

  	
  [***

  	
  ]

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  (low model includes launch incentives)

  	
   

  
	
  Net Sales per
  Tablet

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COGS per Tablet

  	
   

  	
  [***

  	
  ]

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  (COGS per tablet will drop with higher quantities
  and shift towards 30 count bottles - Also, first 3-packs will have rework
  costs)

  	
   

  
	
  Gross Margin

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Watson Profit
  Share per Tablet

  	
   

  	
  [***

  	
  ]

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
   

  	
   

  



 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Estimated Range for

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2008

  	
   

  
	
  2008 Estimation

  	
   

  	
  Low

  	
   

  	
  High

  	
   

  	
  Low

  	
   

  	
  High

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WAC per Tablet

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  
	
  Gross to Net Discounts & Allowances

  	
   

  	
  [***

  	
  ]

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  
	
  Net Sales per Tablet

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  COGS per Tablet

  	
   

  	
  [***

  	
  ]

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gross Margin

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Watson Profit Share per Tablet

  	
   

  	
  [***

  	
  ]

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  	
  $

  	
  [***

  	
  ]

  



 

















 


Schedule 1.20


 


Depomed Trademarks


 


	
  Mark

  	
   

  	
  Serial/Registration Numbers

  
	
  PROQUIN

  	
   

  	
  Reg. No. 2968719

  
	
  DEPOMED

  	
   

  	
  Reg. No. 2112593

  
	
  DEPOMED (word and design mark)

  	
   

  	
  Ser. No. 78781903

  
	
  ACUFORM

  	
   

  	
  Ser. No. 78781863

  



 

















 


Schedule 1.92


 


Watson Trademarks


 


	
  Mark

  	
   

  	
  Serial/Registration Numbers

  
	
  Watson (typed drawing)

  	
   

  	
  2384629/75516726

  
	
  Watson Pharma (typed drawing)

  	
   

  	
  2387161/75636020

  
	
  Watson Logo (mortar)

  	
   

  	
  N/A

  



 

















 


Confidential Information,
indicated by [***], has been omitted from this filing and filed separately with
the Securities Exchange Commission


 


Schedule 3.2


 


Depomed Initial JSC Representatives:


 


[***] (Co-chair)


[***]


 


Watson Initial JSC
Representatives:


 


[***] (Co-chair)


[***]


 

















 


Confidential
Information, indicated by [***], has been omitted from this filing and filed
separately with the Securities Exchange Commission


 


Schedule 7.1


 


Example Calculation of Promotional
Fees


 


[***]