EXHIBIT 10.1


TERMINATION AND ASSIGNMENT AGREEMENT


This Termination and
Assignment Agreement (the “Agreement”) is made and entered into this 5th
day of July 2007, by and between Depomed, Inc. (“Depomed”), a California
corporation having an address at 1360 O’Brien Drive, Menlo Park, California
94025, and Esprit Pharma, Inc., (“Esprit”), a Delaware corporation
having an address at 2 Tower Center Boulevard, East Brunswick, New Jersey
08816.


RECITALS


A.            Depomed and Esprit are parties to: (i) that certain
Exclusive License and Marketing Agreement dated July 21, 2005, as amended by
Amendment No. 1 to Exclusive License and Marketing Agreement dated July 24,
2006 (together, the “License Agreement”), (ii) that certain Supply
Agreement dated July 21, 2005 (the “Supply Agreement”) and a related
Quality Agreement, dated as of April 6, 2007 (the “Quality Agreement”)
and (iii) that certain Co-Promotion Agreement dated July 24, 2006 (the “Co-Promotion
Agreement” and together with the License Agreement,  the Supply Agreement and the Quality Agreement,
the “ProQuin® XR Agreements”). 
Capitalized terms used herein without definition shall have the meanings
ascribed to them in the License Agreement.


B.            The Parties desire to terminate the ProQuin® XR
Agreements on the terms set forth herein.


It is therefore agreed as
follows:


1.             DEFINITIONS


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


“Active Ingredient”
means the chemical compound known as ciprofloxacin hydrochloride.


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


 

















 


“Call” means a
face-to-face contact between a member of Esprit’s sales force and a prescriber
or potential prescriber of Licensed Product during which relevant
characteristics of Licensed Product are described by the member of Esprit’s
sales force.


“Distribute” or “Distribution”
means the distribution of, and fulfillment of customer orders for, Licensed
Product, as well as the distribution of samples of Licensed Product.


“Effective Date”
means the date first referred to above.


“Esprit Change of Control”
means (i) the acquisition by any person or group (as defined in Section
13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended) of
direct or beneficial ownership (as defined in Rule 13d-3 under the Securities
and Exchange Act of 1934, as amended) of more than fifty percent of the voting
stock of Esprit; (ii) any merger, amalgamation or consolidation of Esprit or an
Affiliate of Esprit with another corporation or other entity in which the
stockholders of Esprit, immediately prior to such amalgamation, consolidation,
or merger, own less than fifty percent of the voting stock of the surviving
corporation immediately after such transaction; or (iii) the sale or exclusive
license of substantially all of the assets of Esprit.  Notwithstanding the foregoing, for purposes
of Esprit Licensed Product detailing obligations referred to in Section 6.2
below, an Esprit Change of Control does not include any transaction or series
of related transactions between Esprit and any existing stockholder of Esprit
that would otherwise constitute an Esprit Change of Control.


“Esprit NDC Number”
means any of the following NDC numbers related to Licensed Product Distributed
by Esprit on or before the Effective Date: 
(i) NDC No. 1545600103, which corresponds to the three tablet blister
pack commercial presentation of Licensed Product Distributed by Esprit; (ii)
NDC No. 1391300150, which corresponds to the fifty count bottle of Licensed
Product Distributed by Esprit; (iii) NDC No. 1545600150, which corresponds to a
fifty count bottle of Licensed Product; (iv) NDC No. 1545600199, which
corresponds to the three tablet blister pack sample presentation of Licensed
Product Distributed by Esprit to prescribers of Licensed Product.


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


“IND” means an
Investigational New Drug Application filed with the FDA.


“Licensed Product”
means the once-daily oral tablet formulation that contains Active Ingredient,
is known as ProQuin® XR, and is approved in the Territory under NDA No. 21-744
filed with the FDA on July 18, 2004 (as such NDA may be amended or supplemented
subsequent to the Effective Date).


“Market” means to
promote, Distribute, market, advertise, sell or offer to sell.


“NDA” means a New
Drug Application or application for approval to market submitted to the FDA.


“Party” means Depomed
or Esprit, and “Parties” means both Depomed and Esprit and their
Affiliates.


 


 


2

















 


“Proprietary Information”
means any and all scientific, clinical, regulatory, marketing, financial and
commercial information or data, whether communicated in writing, orally or by
any other means, which is owned and under the protection of one Party and is
provided by that Party to the other Party in connection with this Agreement.


“Regulatory Approval”
means the permission or consent granted by the FDA for the Marketing of the
Licensed Product in the Territory.


“Regulatory Data”
means data including, but not limited to, medical, toxicological,
pharmacological and clinical data to the extent necessary to, required for, or
included in any governmental regulatory filing to obtain or maintain Regulatory
Approval to Market the Licensed Product, including post-approval reports,
filings and submissions.


“Third Party(ies)”
means a person or entity who or which is neither a Party nor an Affiliate of a
Party.


“Trademark(s)” means
the Proquin® trademark, U.S. Registration No. 2,968,719, and all related domain
names identified on Exhibit A, and other common law trademark rights
related thereto.


“Voided Payment”
means any payment by Esprit under this Agreement that is subsequently
invalidated, declared to be fraudulent or preferential or set aside or is
required to be repaid to a trustee, receiver or any other party, under any
bankruptcy, insolvency, reorganization or similar act or law, state, federal or
foreign law, common law or equitable cause.


2.             TERMINATION OF PROQUIN® XR AGREEMENTS


                2.1           Termination of Supply Agreement
and Quality Agreement.  The Supply
Agreement is hereby terminated in its entirety, provided that the rights and
obligations identified in Section 16.3 of the Supply Agreement shall survive
such termination as and to the extent set forth in such Section 16.3.  In addition, the Quality Agreement is hereby
terminated in its entirety.


                2.2           Termination of Co-Promotion
Agreement.  The Co-Promotion
Agreement is hereby terminated in its entirety, provided that the rights and
obligations provided in Section 10 and Section 11 shall survive such
termination as provided in Section 10.2 and Section 11.2.


                2.3           Termination of License Agreement.  The License Agreement is hereby terminated in
its entirety, provided that the rights and obligations identified in Section
20.6 of the License Agreement shall survive such termination.


                2.4           Conflicting Terms.  Notwithstanding the provisions of the
foregoing Sections 2.1, 2.2 and 2.3, to the extent that any surviving rights
and obligations of the Parties under the ProQuin® XR Agreements directly
conflict with the express rights and obligations of the Parties provided
herein, the terms of this Agreement shall govern.


                2.5           Mutual
Releases.  Each of the Parties, by
and for itself and on behalf of its employees, agents, other representatives,
officers, directors, stockholders, partners, members, Affiliates, subsidiaries,
predecessors, successors, and assigns, fully releases and discharges the


3

















other Party and its
employees, agents, other representatives, officers, directors, stockholders,
partners, members, Affiliates, subsidiaries, predecessors, successors, and
assigns, from any and all claims, rights, demands, liabilities, obligations,
damages, actions, and causes of action, of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed, arising out of any act, omission, event, transaction or
occurrence on or before the Effective Date that relates to (a) the Licensed
Product, and/or (b) the Proquin® XR Agreements; provided that this release (x)
shall not affect the surviving rights and obligations under the Proquin® XR
Agreements as set forth in Section 2.1, Section 2.2, or Section 2.3, or any
rights and obligations under this Agreement (and the exhibits hereto), and (y)
shall cease to be effective as a release of Esprit in the event of a Voided
Payment.


3.             PAYMENT OBLIGATIONS


                3.1           Certain Payments. 
Esprit shall make the following termination payments to Depomed on the
Effective Date, by wire transfer of immediately available funds to a Depomed
account pursuant to wire transfer instructions provided to Esprit by Depomed on
or before the Effective Date:


                                (a)           Ten Million Dollars ($10,000,000),
representing the license fee payable by Esprit on or before July 21, 2007,
pursuant to the License Agreement;


                                (b)           Two and One-Half Million Dollars
($2,500,000), representing of one-half of the minimum royalty on Licensed
Product for 2007 pursuant to the License Agreement; and


                                (c)           Five Million Dollars ($5,000,000),
representing a termination fee.


4.             INTELLECTUAL PROPERTY MATTERS; PRODUCT DOCUMENTATION


                4.1           Termination of Rights and Licenses;
Reversion of Rights.  Without
limiting the generality of Section 2, all of Esprit’s rights and licenses under
the following Sections of the License Agreement shall, as of the Effective
Date, terminate, and all rights and licenses granted therein shall immediately
and automatically revert to Depomed: 
Sections 2.1, 2.2, and 4.1.


4.2           Ownership of Intellectual Property.  Esprit hereby represents and warrants to
Depomed that: (i) to the best of Esprit’s knowledge, none of Esprit’s
employees, agents, or other persons acting under its authority, developed,
conceived or reduced to practice any inventions, discoveries or know-how
relating to the Licensed Product, including formulations thereof, or methods of
making or using same, or Improvements thereof during the term of, or in the
course of performance of, any of the ProQuin® XR Agreements (collectively, “Inventions”),
(ii) that in the event that any Inventions were so developed, conceived or
reduced to practice by any such parties, Esprit does hereby assign all of its
right, title and interest therein to Depomed and (iii) that in the event that
Esprit becomes aware of the existence of any such Inventions, it will provide
prompt written notice to Depomed of same, including without limitation, a
written description of such Invention, and it will take such actions as Depomed
shall reasonably request to evidence such assignment and to enable Depomed to
understand and exploit such Invention.


4.3           Product Documentation.  Esprit hereby
assigns to Depomed Esprit’s right, title and interest in and to any and all
promotional or other materials or documents (including sales


 


4

















and
training materials, website, marketing documents) related to the Licensed
Product, including without limitation any such materials created for Esprit by
or on behalf of Esprit’s agents, consultants or vendors.  Copies of all such materials in Esprit’s
possession or control shall be delivered to Depomed (including without
limitation in electronic form) as contemplated by the Transition Plan.


 5.            REGULATORY MATTERS; RECALLS


                5.1           Transfer of Regulatory Approvals;
Notification to FDA.  Esprit hereby
assigns to Depomed all of Esprit’s right, title and interest in and to any and
all Regulatory Data, Regulatory Approvals and other filings with or approvals
granted by any and all agencies or authorities of the United States federal
government and any state or local agencies or authorities that pertain or
relate to the Licensed Product.  On the
Effective Date, Esprit shall send executed letters in substantially the forms
attached hereto as Exhibit B-1 and Exhibit B-2 to FDA authorizing
the transfer of the NDA and the IND for the Licensed Product to Depomed.


                5.2           Regulatory Records.  On the Effective Date, Esprit shall deliver
to Depomed all files and documents in Esprit’s possession or control as of such
date relating to the approvals or filings described in Section 5.1, a
chronology of discussions with FDA relating to the Licensed Product, and other
information in Esprit’s possession or control as of such date necessary to
maintain compliance with the US regulatory authorities.


                5.3           Communication with Regulatory
Authorities; Product Complaints. 
From and after the effective date of the transfer by Esprit to Depomed of
the IND and NDA for the Licensed Product as described in Section 5.1, Depomed
shall have the sole right and obligation to: (i) take all actions and conduct
all communications with the appropriate US regulatory authorities in respect of
such IND and NDA, including preparing and filing all reports (including adverse
drug experience reports) with the appropriate US regulatory authorities; (ii)
take all actions and conduct all communications with Third Parties (including
without limitation patients, pharmacists, physicians and other health care
providers) in respect of Licensed Product sold pursuant to such NDA (whether
sold before or after the Effective Date), including responding to all
complaints in respect thereof, including complaints related to tampering or
contamination; (iii) investigate all complaints and adverse drug experiences in
respect of Licensed Product sold pursuant to such NDA (whether sold before or
after the Effective Date); and (iv) respond to any inquiry related to the
Licensed Product directed to Esprit from and after the Effective Date from any
governmental health authority (including without limitation the FDA and any
state, county or other health authority). 
Following the Effective Date, as provided in the Transition Plan, Esprit
will promptly notify Depomed’s Regulatory Affairs department in accordance with
applicable laws and regulations, and in reasonably sufficient time to allow
Depomed to make any filings with, or notification to, governmental authorities
within the time periods required by law, of any inquiry (written or verbal)
received by Esprit related to any of the foregoing, including without
limitation any inquiry received by Esprit with respect to the Licensed Product
(either commercial drug product or commercial samples) bearing Esprit’s name on
the container-closure.  Esprit shall
cooperate with Depomed’s reasonable requests and use commercially reasonable
efforts to assist Depomed in connection with any of the foregoing.


 


5

















                5.4           Adverse Event Reporting.  From and after the Effective Date, as
provided in the Transition Plan, Esprit shall promptly (and in any event, in
reasonably sufficient time to allow Depomed to make any filings with, or
notification to, governmental authorities within the time periods required by
law) notify Depomed if Esprit receives a complaint or a report of an adverse
drug experience in respect of the Licensed Product.  In addition, through December 31, 2007, Esprit
shall cooperate with Depomed’s reasonable requests and use commercially
reasonable efforts to assist Depomed in connection with the investigation of,
and response to, any complaint or adverse drug experience related to Licensed
Product sold by Esprit.


                5.5           Recalls.  From and after the Effective Date, Depomed
shall have the sole right and obligation to conduct, and shall bear all costs
and expenses in connection with, voluntary and involuntary recalls of units of
Licensed Product (whether sold before or after the Effective Date), including
recalls required by any US regulatory authority; provided, however, that to the
extent that any such recall is involuntary and is attributable to Licensed
Product sold by Esprit or its Affiliates prior to the Effective Date, then
Esprit shall reimburse Depomed for all reasonable costs and expenses actually
incurred by Depomed in connection with the conduct of the recall of such
Licensed Product, including without limitation, the cost of replacing such
Licensed Product, unless Depomed is required to bear such costs and expenses
under Section 13.3 of the Supply Agreement, in which case Esprit shall not be
required to so reimburse Depomed.  Each
Party promptly (and in any event within the time periods required by law) shall
notify the other Party in the event that the notifying Party becomes aware that
a recall of Licensed Product sold by Esprit is necessary.


6.             TRANSITIONAL COMMERCIAL OBLIGATIONS


                6.1           Transition Plan.  Attached hereto as Exhibit C is a plan
(the “Transition Plan”) pursuant to which Esprit and Depomed shall
cooperate in transitioning the Marketing of the Licensed Product from Esprit to
Depomed as efficiently as reasonably possible. 
Each Party agrees to use all reasonable efforts to perform its
obligations as set forth in the Transition Plan.  Esprit hereby designates Mark Janofsky and
Chris Berardi, and Depomed hereby designates Tom Lee and Jill Jene to serve as
a joint transition committee (the “JTC”) charged with overseeing the
planning and implementation of the activities set forth in the Transition Plan
on behalf of Esprit and Depomed.  Each
Party may designate replacement members to the JTC by notice to the other
Party.  The JTC shall have no authority
to amend this Agreement or to materially modify the Transition Plan.  The JTC shall meet on a monthly  basis during the six-month period beginning on the
Effective Date.  Esprit shall have the
right to designate the location of the first such meeting.  The right to designate the location of
subsequent meetings of the JTC shall thereafter alternate between Depomed and
Esprit.


                6.2           Licensed
Product Post-Termination Detailing. 
Commencing on the Effective Date and continuing until the earlier of (a)
September 15, 2007 or (b) the occurrence of an Esprit Change of Control, Esprit
shall assign its field sales force, currently consisting of 158 members, to
making Detail Calls, as specified in the Transition Plan, and shall implement
the incentive compensation program specified in the Transition Plan.  Except in the instance of a breach of Section
6.4, Esprit shall have no liability to Depomed whatsoever in connection with
the acts and omissions of Esprit’s field sales force in connection with such
Detail Calls.


6

















                6.3           Distribution Channel.


(a)           Exhibit D attached hereto sets forth, to the best
of Esprit’s knowledge, a true and accurate reconciliation (the “Distribution
Channel Reconciliation”), as of the Effective Date, of all quantities of
Licensed Product (including Licensed Product samples) purchased by Esprit from
Depomed pursuant to the Supply Agreement against:  (i) the current inventory of Licensed Product
owned by Esprit and held at its Third Party logistics provider (including
samples of Licensed Product); (ii) Licensed Product sold by Esprit to
wholesalers and distributors, and held in inventory at wholesalers and
distributors (specifying quantities held at each wholesaler and distributor) as
of June 29, 2007 (separately setting forth and identifying Licensed Product for
which a return is pending or in process, as indicated, for example, by a
request for a return authorization number); (iii) Licensed Product donated to
charity by Esprit; (iv) Licensed Product dispensed to patients through June 30,
2007, as reflected in data provided by IMS Health Incorporated; (v) Licensed
Product distributed as samples to physicians or others authorized to receive
Licensed Product samples; (vi) Licensed Product destroyed by Esprit (whether in
connection with Licensed Product Returns or otherwise); (vii) samples of
Licensed Product in the possession of Esprit sales representatives; (viii)
Licensed Product that does not correspond to the any other category specified
in this Section 6.3 and that is not held at retail pharmacies (with a
description of the status of such Licensed Product as of the Effective Date
specifying the location where such Licensed Product is held and the purpose for
holding such Licensed Product at that location, or a description of how such
Licensed Product was disposed of, and the purpose for its disposition); and
(ix) Licensed Product held at retail pharmacies that has not been dispensed to
patients as of the Effective Date (assuming for purposes of this item (ix) that
the information set forth in item (iv) above is accurate and current through
the Effective Date).  The Transition Plan
sets forth Esprit’s obligations with respect to actions to be taken following
the Effective Date in respect of inventory of Licensed Product existing as of
the Effective Date.


(b)           Esprit represents and warrants to Depomed that:  (i) to the best of Esprit’s knowledge after
due inquiry, the Distribution Channel Reconciliation is true, accurate and
complete in all respects as of the Effective Date; and (ii) Esprit has provided
to Depomed true, accurate and complete copies of the documentation that serves
as the basis of for the Distribution Channel Reconciliation; and (iii) Esprit
has not Distributed any Licensed Product bearing NDC No. 1545600150, NDC No.
1545600130, or NDC No. 1391300103.


                6.4           Representations and Covenants of
Esprit Regarding Transition Services. 
Esprit shall perform its obligations under the Transition Plan (a) only
in a manner which is consistent with FDA and all other applicable regulatory
approvals or requirements which are then in effect with respect to the Licensed
Product and (b) in compliance with all applicable laws, restrictions and
regulations of the FDA, the Department of Commerce and any other United States,
state, local, or applicable agency or authority.  Esprit shall (i) destroy all existing inventory
of the Licensed Product in Esprit’s possession bearing an Esprit NDC Number as
set forth in the Transition Plan, (ii) limit its claims of efficacy and safety
for Licensed Product to those within approved promotional materials and
FDA-approved prescribing information for Licensed Product in the Territory,
(iii) not add, delete or modify claims of efficacy and safety in the Marketing
of Licensed Product under this Agreement from those claims of efficacy and
safety within the FDA-approved prescribing information and applicable law and
(iv) Market the


7

















Licensed Product in adherence to applicable laws and in
compliance with the then current Pharmaceutical Research and Manufacturers of
America Code on Interactions with Healthcare Professionals.


6.5           Covenants
of Depomed.  Depomed shall perform
its obligations under the Transition Plan (a) only in a manner which is
consistent with FDA and all other applicable regulatory approvals or
requirements which are then in effect with respect to the Licensed Product and
(b) in compliance with all applicable laws, restrictions and regulations of the
FDA, the Department of Commerce and any other United States, state, local, or
applicable agency or authority.  Depomed
shall (a) be responsible for submitting all necessary filings and taking all
such actions necessary to have the Licensed Products packaged with NDC numbers
of Depomed; and (b) not sell or offer for sale any Licensed Products bearing an
Esprit NDC Number; provided, however, that from and after January 1, 2010,
Depomed may sell or offer for sale Licensed Product bearing the NDC number
1391300150.


7.             COMMERCIAL
CONTRACTS; PRODUCT RETURNS, CHARGEBACKS AND
REBATES


                7.1           Commercial
Contracts.


                                (a)           Exhibit E sets forth a complete
and correct list of each contract to which Esprit is a party that relates
exclusively to the manufacture, marketing, sale or distribution of the Licensed
Product.  Except as otherwise provided in
the Transition Plan, as promptly as reasonably possible on or after the
Effective Date, Esprit shall use commercially reasonable efforts to terminate
each such contract.


                                (b)           Exhibit F sets forth a
complete and correct list of each contract to which Esprit is a party and
pursuant to which Esprit sells Licensed Product, together with other
pharmaceutical products of Esprit, to a Third Party, or that is otherwise
related to the manufacture, marketing, sale or distribution of the Licensed
Product, together with other pharmaceutical products of Esprit (the “Multi-Product
Contracts”).  Esprit has made
available to Depomed copies of all Multi-Product Contracts; provided that such
copies have been redacted to prevent disclosure of information not related to
the Licensed Product.  As promptly as
reasonably possible after a request by Depomed with respect to such a contract,
Esprit shall use commercially reasonable efforts to terminate such
Multi-Product Contract as it pertains to Licensed Products.


                7.2           Product
Returns.  Esprit will be responsible
for issuing credits or other forms of reimbursement, at its own expense, in
connection with all Licensed Product bearing an Esprit NDC Number that is
returned after the Effective Date, and shall process and issue credits (or
render reimbursement in such other form as Esprit may determine) for all such
returned Licensed Product.


                7.3           Government Rebates.  Esprit will be responsible for all rebates
pursuant to any government rebate programs with respect to government claims
for the Licensed Product bearing an Esprit NDC Number sold (whether sold before
or after the Effective Date) and accruing after the Effective Date.  Any such rebate shall continue to be
processed and issued pursuant to the 


 


8

















terms of that certain letter agreement, dated as of
September 15, 2005, between Depomed and Esprit.


                7.4           Commercial Rebates.  Esprit will be responsible for all rebates
with respect to the Licensed Product bearing an Esprit NDC Number which are
owed to any managed care provider, wholesaler or retailer with whom Esprit had
entered into a commercial rebate agreement, and shall process and issue any
such rebate.


                7.5           Chargeback Claims.  Esprit shall be solely responsible for all
chargeback claims for the Licensed Product bearing an Esprit NDC Number to the
extent a chargeback invoice with respect to each such claim is dated (i.e. date
of sale from the wholesaler to the wholesaler customer) prior to July 31, 2007
(the “Transition Chargebacks”), and shall process any such Transition
Chargebacks.  Notwithstanding the
foregoing, the Parties acknowledge that the VA National Acquisition Center must
approve the removal of the Products from Esprit’s Federal Supply Schedule (“FSS”)
before the responsibility of processing such rebates is transferred from Esprit
to Depomed.  Accordingly, in the event
such approval is not obtained prior to July 31, 2007, Esprit shall continue to
be responsible for processing the FSS chargebacks on Depomed’s behalf, and
Depomed shall reimburse Esprit for same.


                7.6           Mutual Expectations Regarding Licensed Product Returns.  Without limiting in any way Esprit’s
obligations under this Article VII or any other provision of this Agreement,
the parties acknowledge that as of the Effective Date, and on the basis of (a)
the Distribution Channel Reconciliation, and (b) the expiration dating of
Licensed Product Distributed by Esprit through the Effective Date (other than
approximately 900 bottles of Licensed Product in the 50 count trade
presentation with November 2008 expiration dating that have been Distributed by
Esprit), and (c) Esprit’s obligations under this Agreement, the Parties
anticipate that it is likely that by December 31, 2008, Esprit will have
complied with any financial obligations it has under this Agreement in respect
of Licensed Product returns (provided that Esprit complies promptly and in all
respects with its obligations under this Agreement and that expired Licensed
Product Distributed by Esprit is returned to Esprit before or promptly
following its expiration in accordance Esprit’s current returned goods policy).


8.             CONFIDENTIALITY


Except as specifically authorized by this Agreement,
each Party shall, for the term of this Agreement and for five (5) years after
the expiration or termination of this Agreement, keep confidential, not
disclose to others and use only for the purposes authorized herein all
Proprietary Information provided by the other under this Agreement; provided,
however, that the foregoing obligations of confidentiality shall not apply to
the extent that any such information is (i) already known to the recipient at
the time of disclosure as evidenced by its prior written records; (ii)
published or publicly known prior to or after disclosure other than through
unauthorized acts or omissions of the recipient; (iii) disclosed in good faith
to the recipient by a Third Party entitled to make such disclosure; or (iv)
independently developed by or on behalf of the recipient without recourse to
the disclosure herein as documented in writing. 
Notwithstanding the aforesaid, the recipient may disclose Proprietary
Information to governmental agencies as required by law, and to vendors and
clinical investigators having a need to know and as may be necessary for the
recipient to perform its obligations hereunder, but only if such disclosure to
vendors and, where 


9

















practicable, to clinical investigators is in
accordance with a written agreement imposing essentially the same obligation of
confidentiality on such Party as is imposed upon the recipient hereunder.  For avoidance of doubt, this Section shall
not limit or replace the obligations of the Parties under Section 8 of the
License Agreement.


9.             REPRESENTATIONS AND WARRANTIES


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


                                (a)           It is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.  It has all requisite
power and authority to carry on its business and to own and operate its properties
and assets.  The execution, delivery and
performance of this Agreement have been duly authorized by its Board of
Directors.  Such Party has obtained all
authorizations, consents and approvals, governmental or otherwise, necessary
for the execution and delivery of this Agreement, and to otherwise perform such
Party’s obligations under this Agreement.


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


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


10.          INDEMNIFICATION


10.1         Indemnification. 
Each Party will defend, at its own expense, indemnify and hold harmless
the other Party and its Affiliates from and against any and all damages,
liabilities, losses, costs, and expenses, including attorneys fees
(collectively, “Losses”), arising out of any claim, suit or proceeding (“Claim”)
brought against the other Party (or paid in settlement of any threatened Claim)
to the extent such Claim or threatened Claim is based upon, arises out of, or
relates 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 (ignoring for
purposes of this Section 10.1 any knowledge qualifiers included in any such representations
or warranties); or (iii) the negligence or willful misconduct of the
indemnifying Party, except (under any of (i) and (ii)) to the extent arising
out of the breach, violation, failure, negligence or willful misconduct of the
indemnified Party.  Each Party agrees
that it shall promptly notify the other in writing of any such Claim or
threatened Claim and give the indemnifying Party full information and
assistance in connection therewith.  The
indemnifying Party shall have the sole right to control the defense if any such
Claim and the sole right to settle or compromise any such Claim, 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 


10

















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.


10.2         Basket.  There shall be no obligation to indemnify, defend and hold harmless
under Section 10.1 unless and until the aggregate of all Losses for which the
applicable indemnified Party is entitled to indemnification thereunder exceeds
on a cumulative basis an amount equal to $25,000.00, in which event the
indemnified Party shall be entitled to indemnification in respect of all
indemnifiable Losses.


11.          LIMITATION OF LIABILITY


EXCEPT
WITH RESPECT TO CLAIMS ARISING OUT OF BREACHES OF CONFIDENTIALITY, BREACHES OF
SECTIONS 6.1, 6.2 AND 6.3, THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A
PARTY, OR LOSSES COVERED BY ARTICLE 10 HEREOF, IN NO EVENT SHALL EITHER PARTY
BE LIABLE TO THE OTHER, OR THE OTHER’S CUSTOMERS, SUBLICENSEES, EMPLOYEES,
OFFICERS, AGENTS, DIRECTORS OR CONTRACTORS, FOR ANY INCIDENTAL, SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND, INCLUDING LOSS OF
PROFITS OR LOSS OF REVENUE, WHETHER ARISING IN CONTRACT, TORT, STRICT LIABILITY
OR OTHERWISE, EVEN IF A PARTY HAS BEEN APPRISED OF THE POSSIBILITY OF SUCH
DAMAGES.


12.          PUBLICITY


Neither Party will originate
any publicity, news release, public comment or other public announcement, written
or oral, whether to the press, to stockholders, or otherwise, relating to this
Agreement, without the 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 termination of the ProQuin® XR Agreements in
a manner 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
without limitation the United States Securities and Exchange Commission, as to
the contents and existence of this Agreement as it shall reasonably deem
necessary or appropriate, provided that the
Parties shall work together to redact any Proprietary Information
contained therein in a mutually
agreeable manner that complies with the applicable requirements of such
regulatory authority, provided, however, that the final determination as to the
required disclosure of Proprietary Information shall
be made by the Party making the disclosure.  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.


 


11

















 


13.          ASSIGNABILITY


                13.1         Assignment.  This Agreement may not be assigned by either
Party without the prior written consent of the other Party, which consent shall
not be unreasonably withheld or delayed.


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


14.          NOTICES


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


                                DEPOMED,
INC.


                                1360
O’Brien Drive


                                Menlo
Park, California  94025


                                Attention:  President


                                Facsimile:  650-462-9991


                                ESPRIT
PHARMA, INC.


                                2 Tower Center Boulevard
                                 East
Brunswick, NJ  08816
                                 Attn:  Steve Bosacki, General Counsel
                                 Facsimile:  (732) 828-9954


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


15.          MISCELLANEOUS


                15.1         Enforceability.  It is the desire and intent of the Parties
that the provisions of this Agreement shall be enforced to the extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. 
Accordingly, if any particular provision of this Agreement which
substantially affects the commercial basis of this Agreement shall be
determined to be invalid or unenforceable, such provision shall be amended as
hereinafter provided to delete therefrom or revise the portion thus determined
to be invalid or unenforceable, such amendment to apply only with respect to
the operation of such provision of this Agreement in the particular
jurisdiction for which such determination is made.  In such event, the Parties agree to use
reasonable efforts to agree on substitute provisions, which, while valid, will
achieve as closely as possible the same economic effects or commercial basis as
the invalid provisions, and this Agreement otherwise shall continue in full
force and effect.  If the Parties cannot
agree 


12

















to such revision within sixty days after such
invalidity or unenforceability is established, the matter may be submitted by
either Party to arbitration as provided in this Agreement to finalize such
revision.


                15.2         Entire Agreement.  This Agreement (including all Exhibits)
represents the entire agreement between the Parties concerning the subject
matter herein (except as specifically noted herein) and supersedes all prior or
contemporaneous oral or written agreements of the Parties.  This agreement may be modified, amended or
changed only by a written instrument signed and delivered by the Parties, with
clear intent to modify, amend or change the provisions hereof.


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


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


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


                15.7         Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original.


[signature page follows]


 


13

















 


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


	
  DEPOMED, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John W. Fara, Ph.D.

  	 

	
   

  	
  John W. Fara, Ph.D.

  	 

	
   

  	
  President and CEO

  	 

	
   

  	
   

  	
   

  	 

	
  ESPRIT PHARMA, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John T. Spitznagel

  	
   

  
	
   

  	
  John T. Spitznagel

  	
   

  
	
   

  	
  Chairman and CEO

  	
   

  



 


 


14