**Exhibit 10.2**

 

CERTAINCONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH “***”. ACOMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARYOF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTINGCONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE EXCHANGE ACT OF 1934.

 

**AMENDED AND RESTATED PROMOTION AGREEMENT**

 

This AMENDEDAND RESTATED PROMOTION AGREEMENT (this “Agreement”) is made as ofSeptember 21, 2007 (the “Effective Date”), by and between Depomed, Inc.,a California corporation (“Depomed”), and Watson Pharma, Inc., aDelaware corporation (“Watson”). Each of Depomed and Watson is referredto herein individually as a “Party” and collectively as the “Parties”.

 

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

 

WHEREAS,Depomed and Watson desire to amend and restate the Original Agreement as setforth herein;

 

NOW,THEREFORE, in consideration of the foregoing and of the mutual covenants hereincontained, the Parties hereto intending to be legally bound hereby agree asfollows:

 

# ***ARTICLE I***

# * *

# ***DEFINITIONS***

# * *

As used inthis Agreement, the following terms shall have the following meanings:

 

## Section 1.1             “2007 Plan” has the meaning setforth in Section 4.5.

##  

## Section 1.2             “Act” means the United StatesFederal Food, Drug and Cosmetic Act, 21 U.S.C. 301, *et. seq.*, as it may be amended from time to time, and theregulations 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 or312.32, associated with the Product.

##  

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

##  

## Section 1.5             “Affiliate” means, with respect toany Person, any other Person that directly or indirectly controls, iscontrolled by or is under common control with, such first Person. For thepurposes of this definition, “control” (including, with correlativemeanings, the terms “controlling,” “controlled by” and “undercommon control with”), as applied to any Person, means the possession,directly or indirectly, of the power to direct or cause the direction of themanagement and policies of that Person, whether through the ownership of votingsecurities, by contract or otherwise. Notwithstandingthe foregoing, for purposes of this Agreement, a Wholesaler Affiliateshall not constitute an Affiliate of Watson.

##  

## Section 1.6             “Agreement” has the meaning setforth in the preamble to this Agreement

 

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## Section 1.7             “Agreement Month” means eachcalendar month during the Term (including any partial calendar month in thecase of the first and last calendar months of the Term).

##  

## Section 1.8             “Agreement Quarter” means theInitial Agreement Quarter, each successive period of three months during theTerm after the Initial Agreement Quarter and the Final Agreement Quarter.

##  

## Section 1.9             “Alert Report” is the report perFDA 21 CFR 314.80 Reporting Requirements for postmarketing 15-day “Alert”reports; these are adverse drug experience reports that are both serious andunexpected, 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” shallmean current “Good Manufacturing Practices” as such term is defined from timeto time by the FDA or other relevant Governmental Authority having jurisdictionover the manufacture or sale of the Product pursuant to its regulations,guidelines or otherwise.

##  

## Section 1.12           “Channel” shallmean the long-term sales channel asreported in the Prescriber Data, which includes but is not limited to nursinghomes and assisted living facilities.

##  

## Section 1.13           Co-Chairs” hasthe meaning set forth in Section 3.2.

##  

## Section 1.14           “COGS” means,for a particular period, Depomed’s expenses for cost of goods sold (calculatedin accordance with Section 7.2(d)) for Product in the Territory for such periodincluding any expenses incurred directly in connection with the distribution ofthe Product in the Territory. The COGS as of the Initial Effective Date is setforth on Schedule 1.14.

##  

## Section 1.15           “ConfidentialityAgreement” means that certain Confidentiality Agreement, dated as ofFebruary 26, 2007, between Depomed and Watson.

##  

## Section 1.16           “Control” or “Controlled”means, with respect to patents, know-how or other intellectual property rightsof any kind, the possession by a Party of the ability to grant a license orsublicense of such rights without the payment of additional consideration andwithout violating the terms of any agreement or arrangement between such Partyand any Third Party.

##  

## Section 1.17           “DDMAC” meansthe FDA’s Division of Drug Marketing, Advertising and Communications.

##  

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

##  

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

 

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## Section 1.20           “Depomed Trademarks”means (a) the ProQuin® trademark, (b) the AcuFormTM trademark, forwhich Depomed has sought registration for in the United States Patent andTrademark Office, and (c) Depomed®, and, in each case, all related domainnames, successor trademarks and other trademark related rights. The DepomedTrademarks are attached hereto as Schedule 1.20.

##  

## Section 1.21           “Detail” meansan in-person, face-to-face sales presentation of the Product made by a SalesRepresentative to a Professional, including a P1 Detail or a P2 Detail, andafter December 31, 2008, a P3 Detail.

##  

## Section 1.22           “Detail Minimum”means, for a particular period, the sum of (A) the Urology Detail Minimum forsuch 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 forsuch period, minus (B) the actual number of PDEs performed during such period. Indetermining the actual number of PDEs performed during any period (includingwithout limitation for purposes of Section 8.2(a)):  (a) only PDEs performed on Professionals onthe Watson Physician List shall be taken into account; and (b) not more than100% of the P1 Details, 100% of the P2 Details and 100% of the P3 Details (ifapplicable) required to be performed for such period within each of the UrologyField and the Ob/Gyn Field, as reflected in the applicable Annual Plan(s) or2007 Plan, shall be taken into account.

##  

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

##  

## Section 1.25           “EducationalPrograms” means any activities undertaken with respect to the medicaleducation of Professionals and customers regarding the Product and the marketor funded by unrestricted educational grants, including educational programsand 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” meansEsprit Pharma, Inc., a Delaware corporation.

##  

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

##  

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

##  

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

 

2

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## 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 suchofficer, its President or Chief Executive Officer).

##  

## Section 1.32           “FDA” means theUnited States Food and Drug Administration or any successor agency performingcomparable functions in the Territory.

##  

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

##  

## Section 1.34           “Field BaselinePrescriptions Per Month” means, subject to Section 8.2(a), the monthlyaverage number of Units of Product included within total prescriptionsdispensed during the three-month period beginning on June 1, 2007 and ending onAugust 31, 2007 in the Territory within the Field (as reflected in thePrescriber Data).

##  

## Section 1.35           “Field BaselinePrescriptions” means, for any particular period, the result of (A) FieldBaseline Prescriptions Per Month, multiplied by (B) the number of months withinsuch 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) FieldNet 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 PrescriptionUnits” means, for a particular period, the remainder of (A) the sum of (i)the number of Units of Product included within prescriptions filled during suchperiod 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 suchperiod, as reflected in the PrescriberData, 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) FieldPrescription Units for such period, divided by (ii) the number of Units ofProduct included within Product prescriptions filled during such period in theTerritory, as reflected in the Prescriber Data (such quotient being the “FieldPhysician Ratio”), plus (B) the product of (i) the quotient of (x) PA/NPPrescription Units for such period, divided by (y) the number of Units ofProduct included within Product prescriptions filled during such period in theTerritory, as reflected in the Prescriber Data, multiplied by (ii) the FieldPhysician Ratio.

##  

## Section 1.41           “Final AgreementQuarter” means the period commencing on the first day following the lastfull 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

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## Section 1.43           “GAAP” has themeaning set forth in Section 7.2(c).

##  

## Section 1.44           “GovernmentalAuthority” shall mean any court, agency, authority, department, regulatorybody or other instrumentality of any government or country or of any national,federal, state, provincial, regional, county, city or other politicalsubdivision of any such government or any supranational organization of whichany such country is a member, which has competent and binding authority todecide, mandate, regulate, enforce, or otherwise control the activities of theParties contemplated by this Agreement.

##  

## Section 1.45           “Initial AgreementQuarter” means the period commencing on the Effective Date and ending onSeptember 30, 2007.

##  

## Section 1.46           “Initial EffectiveDate” means July 18, 2007.

##  

## Section 1.47           “JAMS” has themeaning set forth in Section 3.5(b).

##  

## Section 1.48           “JSC” has themeaning set forth in Section 3.1.

##  

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

##  

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

##  

## Section 1.51           “NDA” means any “newdrug application” (as such term is used under the Act) filed or acquired byDepomed or any Affiliate with the FDA with respect to the Product and allsubsequent submissions, supplements and amendments thereto, including NDA No.21-744 filed with the FDA on July 18, 2004 (as such NDA may be amended orsupplemented subsequent to the Initial Effective Date).

##  

## Section 1.52           “Net Sales”means, for a particular period, the gross amount invoiced on sales of Productin the Territory recognized as gross revenue in accordance with GAAP by Depomed,its Affiliates, licensees, sublicensees and assigns to independent, unrelatedThird Parties during such period in bona fide arms’ length transactions, lessthe following deductions, calculated in accordance with GAAP: (a) freight,insurance (but only insurance with respect to shipping the Product), and othertransportation charges to the extent added to the sales price and set forthseparately as such on the total amount invoiced; (b) any sales, use,value-added, excise taxes or duties or allowances on the selling price ofProduct; (c) chargebacks, trade, quantity and cash discounts and rebates to theextent customary in the trade, including governmental rebates; (d) allowancesor credits, including allowances or credits to customers on account of rejection,defects or returns of the Product entering trade after the PromotionCommencement Date, or because of a retroactive price reduction;  and (f) costs associated with any Productvoucher or co-pay assistance programs, to the extent funded by Depomed and approvedby 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 theresale by such Affiliate, licensee, sublicensee or assign of Watson or Depomedshall be considered a sale of such Product.

 

4

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

 

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

##  

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

##  

## Section 1.55           “Order” meansany award, decision, injunction, judgment, decree, order, ruling, or verdictentered, issued, made, or rendered by any Governmental Authority or by anyarbitrator.

##  

## 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 PrescriptionUnits” means, for a particular period, the number of Units of Productincluded within Product prescriptions filled during such period in theTerritory that result from prescriptions written by Physician Assistants andNurse Practitioners, as reflected in the Prescriber Data.

##  

## Section 1.60           “PDE” means aPrimary Detail Equivalent, and is equivalent to either of the following:  [***]. Details other than P1 Details, P2Details and P3 Details will have no effect on any calculation of PDEs. P3Details will have no effect on the calculation of PDEs prior to December 31,2008.

##  

## Section 1.61           “PDMA” means thePrescription Drug Marketing Act, as amended, and the rules and regulationspromulgated thereunder.

##  

## Section 1.62           “Person” meansany individual, corporation (including any non-profit corporation), general orlimited partnership, limited liability company, joint venture, estate, trust,association, organization, labor union, or other entity or GovernmentalAuthority.

##  

## Section 1.63           “Prescriber Data”means IMS Health National Prescription Audit data, which measures both totalprescriptions dispensed and extended units dispensed (i.e., Units) forProduct  in the Territory, separatelysetting forth the Urology Field, the Ob/Gyn Field, the sales Channel (long termcare), and prescriptions attributable to Physician Assistants and NursePractitioners during a specified time period, or such data from an alternativesource mutually agreed in writing by the Parties.

##  

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

 

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## 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 toprescribe Product.

##  

## Section 1.67           “Promote,” “Promotional”and “Promotion” mean, with respect to the Product, any activitiesundertaken to encourage sales or use of the Product, including Details, productsampling, detail aids, drop-offs, coupons, discount cards, journal advertising,direct mail programs, direct-to-consumer advertising, convention exhibits andall other forms of marketing, advertising, public relations or promotion.

##  

## Section 1.68           “PromotionCommencement 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           “PromotionalMaterials” has the meaning set forth in Section 4.4(a).

##  

## Section 1.72           “ProprietaryInformation” means any proprietary or confidential information communicatedfrom one Party to the other in connection or relating to this Agreement, whichis identified as confidential or proprietary, or which the other Party knows orhas reason to know is confidential or proprietary, including the Technology andfinancial, 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 informationdescribed in Section 4.6, whether communicated in writing, orally orelectronically. Proprietary Information shall not include information that thereceiving Party can show through written documentation:

##  

### (a)           at the time ofdisclosure, is publicly known;

###  

### (b)           after the time ofdisclosure, becomes part of the public domain, except by breach of an agreementbetween the disclosing Party or any Affiliate thereof and the receiving Partyor any Affiliate thereof;

###  

### (c)           is or was in thepossession of the receiving Party or any Affiliate thereof at the time ofdisclosure by the disclosing Party and was not acquired directly or indirectlyfrom the disclosing Party or any Affiliate thereof or from any other partyunder an agreement of confidentiality to the disclosing Party or any Affiliatethereof; and

###  

### (d)           is or was developed bythe receiving Party or its Affiliates without use of or reference to the otherParty’s Proprietary Information.

###  

## Section 1.73           “Regulatory Approval”means any and all consents or other authorizations or approvals required from aGovernmental Authority to market and sell the Product in the Territory, butexcluding any form of reimbursement approval.

 

2

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

 

## Section 1.74           “Sales Representatives”means sales representatives employed by Watson to Promote the Product, who havebeen trained and equipped to Promote the Product in accordance with thisAgreement. Third Parties may only be engaged as Sales Representatives if theyare full-time contractors of Watson, exclusive to Watson, and carry Watson’sbusiness card.

##  

## Section 1.75           “Samples” hasthe meaning set forth in Section 6.5.

##  

## Section 1.76           “Serious AdverseDrug Experience” means any Adverse Drug Experience, including those subjectto expedited reporting as defined in the regulations cited below, that is fatalor life-threatening, requires hospitalization or prolongation of existinghospitalization, results in persistent or significant disability or incapacity,is a congenital anomaly/birth defect, or is of comparable medical significanceor any other event which would constitute a “serious” Adverse Drug Experiencepursuant to the terms of 21 C.F.R. 314.80 or 312.32.

##  

## Section 1.77           “Serious AdverseDrug Experience Report” means any Adverse Drug Experience Report thatinvolves a Serious Adverse Drug Experience.

##  

## Section 1.78           “Tail Gross MarginPercentage” means the following:

##  

### (a)                                  ifthis Agreement terminates on or after September 30, 2010 and before September30, 2011, [***] (if the Tail Period is eight calendar quarters) or [***] (ifthe Tail Period is four calendar quarters);

###  

### (b)                                 ifthis Agreement terminates on or after September 30, 2011 and before September30, 2012, [***] (if the Tail Period is eight calendar quarters) or [***] (if theTail Period is four calendar quarters); or

###  

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

###  

### If this Agreement terminates only in partwith respect to the Ob/Gyn Field or the Urology Field pursuant to Section8.2(a), the Tail Gross Margin Percentage shall be determined as set forth inclauses (a) – (c) above with respect to each sub-Field upon the termination ofthis 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 leastSeptember 30, 2010. If this Agreement terminates only in part with respect tothe Ob/Gyn Field or the Urology Field pursuant to Section 8.2(a), there shallbe a separate Tail Period for each sub-Field, and the length of each such TailPeriod shall be determined as set forth in the immediately preceding sentence.

##  

## Section 1.80           “Technology”means all pharmacological, toxicological, preclinical, clinical, technical orother information, data and analysis and know-how relating to the registration,manufacture, packaging, use, marketing and sale of the Product and allproprietary

 

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

 

## rights relating thereto owned by Depomed or its Affiliates or to whichDepomed or its Affiliates has rights so as to be able to license, and relatingor pertaining to the Product.

##  

## Section 1.81           “Term” has themeaning set forth in Section 8.1.

##  

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

##  

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

##  

## Section 1.84           “Unit” means asingle tablet of the Product.

##  

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

##  

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

##  

## Section 1.87           “Urology Field”means Professionals practicing urology, as so identified by primary AMAspecialty 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 themeaning set forth in the preamble to this Agreement.

##  

## Section 1.90           “Watson PhysicianList” means the list of Professionals to whom the Watson Sales Forcepresents Details, which list has been agreed to in writing by the Parties priorto the Effective Date (it being understood that such list includes [***]. TheWatson Physician List is subject to change from time to time throughout theTerm of this Agreement to reflect the then current [***], or as otherwiseagreed in writing by the Parties.

##  

## Section 1.91           “Watson Sales Force”means the field force of Sales Representatives employed or contracted by Watsonto 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 distributionof pharmaceutical products.

 

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# ***ARTICLE II***

# * *

# ***GRANT***

# * *

## Section 2.1             **Grantof Promotion Rights.**During the Term, subject to the terms andconditions of this Agreement, Depomed hereby grants to Watson and itsAffiliates and Watson and its Affiliates hereby accept a co-exclusive right(together with Depomed and its Affiliates only) to Promote the Product underthe Depomed Trademarks in the Territory within the Field and Channel on theterms and subject to the conditions set forth herein.

##  

## Section 2.2             **Sublicense.**Watson shall not sublicense, subcontract or otherwise transfer or delegateany of its rights or obligations under this Agreement without the expresswritten consent of Depomed, which consent may not be unreasonably withheld ordelayed by Depomed.

##  

## Section 2.3             **Limitationon Promotion.**

##  

### (a)           During the Term of this Agreement, theWatson Sales Force shall not (i) Promote in the Territory any productcontaining ciprofloxacin hydrochloride, or (ii) Promote in the Territory withinthe Field any product for the treatment of urinary tract infections, in eachcase other than the Product.

###  

### (b)           During the period beginning on the InitialEffective Date and ending on December 31, 2008, Watson shall not, and shallcause if Affiliates not to, Promote in the Territory any product containingciprofloxacin hydrochloride, other than the Product.

###  

## Section 2.4             **Retentionof Rights.**Depomed retains and shall retain all proprietary andproperty interests in the Product until the point of sale or, in the case ofSamples, until delivered to Watson as contemplated by Section 6.5. Watson willnot have nor represent that it has any control or proprietary or propertyinterests in the Product, except for the licenses and rights specifically grantedhereunder. Except as expressly set forth herein, nothing contained herein shallbe deemed to grant Watson, by implication, a license or other right or interestin any patent, trademark or other similar property of Depomed or itsAffiliates, except as may be necessary for Watson to Promote the Productpursuant to this Agreement. Except as expressly set forth herein, nothingcontained herein shall be deemed to grant Depomed, by implication, a license orother right or interest in any patent, trademark or other similar property ofWatson or its Affiliates, except as may be necessary for Depomed to Promote theProduct pursuant to this Agreement.

##  

## Section 2.5             **EspritTermination Agreement.**Depomed has entered into the EspritTermination Agreement, which provides for, among other matters, the terminationof the Esprit License Agreement and a transition plan providing for thetransition of the Product back to Depomed from Esprit that includes specificactivities and timelines (the “Transition Plan”). Watson has reviewedthe Transition Plan. Depomed will use its reasonable best efforts to causeEsprit to comply with its obligations under the Esprit Termination Agreementand the Transition Plan. So long as Depomed uses its reasonable best efforts tocause Esprit to comply with its obligations under the Esprit TerminationAgreement and the Transition Plan, Depomed shall not

 

2

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## be in breach of this Agreement as a result ofany failure by Esprit to comply with its obligations under the EspritTermination 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 JointSteering Committee (the “JSC”). The Parties acknowledge and agree thatthe JSC does not have the power to amend, modify or waive any of the terms orconditions of this Agreement.

##  

## Section 3.2             **JointSteering Committee.**The JSC shall be established by the Partiesand shall be comprised of four members, two of whom shall be appointed by Depomedand two of whom shall be appointed by Watson. Each Party’s respective initialappointments to the JSC are set forth on Schedule 3.2 hereto. A Partymay change any of its representatives at any time if a new person is appointedto any of the foregoing positions by giving written notice to the other Party. Thetotal number of JSC members may be changed by unanimous vote of the JSC fromtime to time as appropriate; provided, that the JSC shall in all casesbe comprised of an equal number of members from each of Depomed and Watson. Watsonand Depomed each will designate one representative of such Party to serve asco-chairs of the JSC (the “Co-Chairs”). The members appointed to the JSCby each Party shall be employees of such Party and shall be vested withappropriate decision-making authority and power by such Party. The ChiefExecutive Officers of Watson and Depomed shall not be members of the JSC.

##  

## Section 3.3             **JSCResponsibilities.**The responsibilities of the JSC shall beexercised consistent with this Agreement and shall include, but shall not belimited to:

##  

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

###  

### (b)           monitoring and reviewing compliance with the2007 Plan or the Annual Plan;

###  

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

###  

### (d)           reviewing Product-related activitiesassociated with managed markets, trade pipeline, manufacturing, anddistribution;

###  

### (e)           reviewing pricing for the Product;

###  

### (f)            reviewing Product-related regulatorymatters;

###  

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

 

3

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### (h)           reviewing and approving sales incentivecompensation for the Watson Sales Force related to the Product for periodsafter December 31, 2008;

###  

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

###  

For the avoidance of doubt, (i) the JSC shallnot have any review or approval rights with respect to any matters relating tothe development of the Product and (ii) any decisions of the JSC with respectto matters which relate to Regulatory Approval for the Product shall requireDepomed’s prior written consent.

 

## Section 3.4             **Meetingsof the JSC.**Meetings of the JSC may be called by the Co-Chairsof the JSC from time to time and, upon no less than five days’ notice, shallotherwise be called when requested by a Party; provided, however,that meetings of the JSC shall be held on at least a monthly basis during thefirst three months of the Term, and on at least a quarterly basis thereafter. Ifpossible, the meetings shall be held in person or where appropriate, by videoor telephone conference. Unless otherwise agreed, the location of any in-personmeetings of the JSC shall alternate between the corporate offices of theParties. The Parties shall determine the form of the meetings. Subject toSection 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 leasttwo members either by written proxy or actual presence at the meeting at whichthe vote is taken. Subject to appropriate confidentiality undertakings whereapplicable, each Party shall have the right, upon written notice to the otherParty, to have present at JSC meetings additional, non-voting participants (notto exceed six such participants at any JSC meeting without the consent of theother Party). Such additional participants shall not be deemed to be, or haveany rights or responsibilities of, a member of the JSC. The Parties shall causetheir respective representatives on the JSC to use their reasonable efforts toresolve all matters presented to them as expeditiously as possible. Watsonshall propose the agenda for each regular meeting and appoint a secretary tothe meeting who shall record the minutes of the meeting. Such minutes shall becirculated to the Parties promptly following the meeting for review and commentand for unanimous ratification by both Parties. Each Party shall bear its owntravel and related costs incurred in connection with participation in the JSC.

##  

## Section 3.5             **JSCDisputes.**

##  

### (a)           In the event that the JSC is, after a periodof ten (10) days, unable to make a decision due to a lack of requiredunanimity, either Party may submit the matter being considered to the ExecutiveOfficers for a joint decision. In such event, either Co-Chair of the JSC, bywritten notice to the other Party, shall formally request the dispute beresolved by the Executive Officers, specifying the nature of the dispute withsufficient detail to permit adequate consideration by the Executive Officers. TheExecutive Officers shall diligently and in good faith attempt to resolve thereferred dispute expeditiously and, in any event, within fifteen (15) days ofreceiving such written notification.

###  

### (b)           In the event that the Executive Officers areunable to reach a resolution of any referred dispute after good faithnegotiations during the fifteen (15) day period referred to in

 

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

###  

### Section 3.5(a) above and in the event such dispute is not related tocompliance with this Agreement, regulatory matters, or the validity, breach orinterpretation of this Agreement, either Party may commence mediation withinfifteen days after the conclusion of such fifteen (15) day period by providingto the other Party a written request for non-binding mediation, setting forththe 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, andin scheduling the mediation proceedings. The Parties shall endeavor to concludeany mediation under this Section 3.5 within thirty (30) days after delivery byeither Party of Mediation Notice. The Parties covenant that they willparticipate in the mediation in good faith and that they will share equally inits costs; provided that each Party will be responsible for its own attorney’sfees. Either Party may seek equitable relief prior to the mediation to preservethe status quo pending the completion of that process. Except for such anaction to obtain equitable relief, neither Party may commence a civil actionwith respect to the matters submitted to mediation until after the completionof the initial mediation session, or thirty days after delivery of theMediation Notice, whichever occurs first.

###  

### (c)           In furtherance of the foregoing provisionsof Section 3.5(b), in connection with any mediation conducted as set forthpursuant to Section 3.5(b) with respect to a Detailing or IncentiveCompensation Dispute (as defined below), each Party shall submit to themediator selected pursuant to Section 3.5(b) and to the other Party, at leasttwo weeks in advance of the mediation proceedings, a brief summarizing andsupporting its contentions with respect to the dispute for the purpose offacilitating the mediation proceedings. If the Parties fail to resolve anyDetailing or Incentive Compensation Dispute following the completion ofmediation proceedings with respect to such Detailing or Incentive CompensationDispute (a “Detailing or Incentive Compensation Impasse”), Depomed mayterminate this Agreement pursuant to Section 8.2(c). A “Detailing orIncentive Compensation Dispute” is any dispute regarding either (i) theincentive compensation payable to the Watson Sales Force in respect of theProduct for any period after December 31, 2008 where Watson proposes that lessthan [***] of the incentive compensation payable to Watson SalesRepresentatives detailing the Product will be dependent on sales of theProduct, or (ii) the number of P1 Details, P2 Details or P3 Details to beperformed by Watson for any period after December 31, 2009 where Watsonproposes to perform fewer than [***] annual PDEs (on a pro-rated basis forpartial years).

###  

### (d)           The Parties agree that items that are solelyreviewed by the JSC, and not both reviewed and approved by the JSC, are notsubject to the dispute resolution mechanism set forth in this Section 3.5. Anydisputes referred to the Executive Officers for resolution pursuant to thisSection 3.5 shall not be subject to any dispute resolution mechanism orprocedure unless and until the dispute resolutions procedures set forth in thisSection 3.5 are exhausted.

 

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

 

# ***ARTICLE IV***

# * *

# ***PRODUCT PROMOTION***

# * *

## Section 4.1             **ProductPromotion.**

##  

### (a)           Subject to applicableLegal Requirements, as well as the provisions of this Agreement, Watson shall,from and after the Promotion Commencement Date, at its sole expense, usecommercially reasonable efforts to Promote the Product in the Territory withinthe 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 ofeffort (including with respect to the reach and frequency of Details) thatWatson would use for the Promotion of any of Watson’s products that represent asimilar commercial opportunity. The Parties acknowledge that efforts thatconstitute commercially reasonable efforts may change during the Term. Allstatements, core selling messages and materials to be utilized by Watson toPromote the Product shall be consistent in all material respects with thePromotional Materials provided or utilized by Depomed. Watson will cause theWatson Sales Force and Watson employees and agents acting on Watson’s behalf tocomply with this Agreement and all applicable Legal Requirements in connectionwith the Promotion of the Product. It is understood, and Watson agrees, that itwill be accountable for the acts or omissions of the Watson Sales Force and itsemployees and agents to the extent such acts or omissions fail to comply withWatson’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 inaccordance with this Agreement and the performance of the other obligationscontained herein that are required to be performed from and after the PromotionCommencement Date as soon as practicable following the date hereof, but nolater than October 15, 2007.

###  

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

###  

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

###  

### (i)            perform an aggregateof at least [***] P1 Details and [***] P2 Details on Professionals on theWatson Physician List within the Urology Field; and

###  

### (ii)           perform an aggregate ofat least [***] P2 Details on Professionals on the Watson Physician List withinthe Ob/Gyn Field.

 

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

 

### (e)           During each AgreementQuarter in 2008, Watson shall perform at least [***] P1 Details and [***] P2Details on Professionals on the Watson Physician List within the Urology Field.

###  

### (f)            During the AgreementQuarters ending on March 31, 2008 and December 31, 2008, Watson shall performat least [***] P1 Details on Professionals on the Watson Physician List withinthe Ob/Gyn Field.

###  

### (g)           During the AgreementQuarters ending on June 30, 2008 and September 30, 2008, Watson shall performat least [***] P2 Details on Professionals on the Watson Physician List withinthe Ob/Gyn Field.

###  

### (h)           During each AgreementQuarter in 2009, Watson shall perform at least [***] Details on Professionalson the Watson Physician List within the Urology Field, which Details shall beallocated between P1 Details, P2 Details and P3 Details as reflected in theAnnual Plan for 2009 approved by the JSC.

###  

### (i)            During each AgreementQuarter during the Term commencing with the Agreement Quarter beginning onJanuary 1, 2009, Watson shall perform such number of Details on Professionalson the Watson Physician List within the Ob/Gyn Field, and allocated between P1Details, P2 Details and P3 Details, as is reflected in the Annual Plan approvedby the JSC for the applicable year.

###  

### (j)            During each AgreementQuarter during the Term commencing with the Agreement Quarter beginning onJanuary 1, 2010, Watson shall perform such number of Details on Professionalson the Watson Physician List within the Urology Field, and allocated between P1Details, P2 Details and P3 Details, as is reflected in the Annual Plan approvedby the JSC for the applicable year.

###  

### (k)           **Representations to Customers.**Watsonwill not make any false or misleading representations to Professionals,customers or others regarding Depomed or the Product and will not make anyrepresentations, warranties or guarantees with respect to the specifications,features or capabilities of the Product that are not consistent with theapplicable then-current FDA approved labeling, package insert or otherdocumentation accompanying or describing the Product, including Depomed’sstandard limited warranty and disclaimers. Watson agrees to undertake timelyand complete corrective action for any deviations from this Section 4.2,subject to discussion and review by Depomed’s regulatory affairs and qualityassurance department.

###  

## Section 4.2             **WatsonSales Force Staffing, Training and Compensation.**

##  

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

 

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

 

### its commercially reasonable efforts to ensure that the number of SalesRepresentatives comprising the Watson Sales Force meets or exceeds the MinimumSales Force Level.

###  

### (b)           Watson shall be solely responsible for allcosts and expenses of compensating its Sales Representatives. Consistent withapplicable Legal Requirements, Watson shall pay incentive compensation toWatson Sales Representatives with respect to the Product in accordance withWatson’s incentive compensation; provided, however, that throughDecember 31, 2007, at least [***] and through December 31, 2008, at least [***]of the incentive compensation payable to Watson Sales Representatives detailingthe Product will be dependent on sales of the Product. In addition, Depomed maysponsor sales contests or other special incentive compensation, at its ownexpense, for Watson’s sales force with Watson’s approval. Watson will beresponsible for implementing any such contest or incentive compensation.

###  

### (c)           Watson shall notify its SalesRepresentatives prior to the Promotion Commencement Date, consistent with itsprocedures for Watson’s other products, of the total potential incentivecompensation for the Product. Promptly after the adoption by Watson of an incentivecompensation payment plan with respect to the Product pursuant to, and incompliance with, this Agreement, and promptly after any material amendments tosuch plan, Watson shall provide to Depomed a summary of the methodology used byWatson to make incentive compensation payments for the Product pursuant to suchplan.

###  

### (d)           The Parties hereby agree that Depomed shallprovide to Watson, at no charge to Watson and in quantities agreed by theParties in writing prior to the Initial Effective Date, previously generatedtraining materials and/or associated electronic copies thereof whereapplicable. Watson shall furthermore have the option to purchase from Depomed,in sufficient quantities for the Watson Sales Force, additional trainingmaterials for the Product created or owned by Depomed, at Depomed’sout-of-pocket cost for such materials. It is anticipated that Watson willutilize Depomed’s training materials in connection with the Product-relatedtraining of its Sales Representatives. Any training materials for Watson’sSales Representatives developed or created by Watson shall be subject toDepomed’s review as Promotional Materials as provided in Section 4.4. Watsonshall, at its own expense prior to the Promotion Commencement Date, train itsSales Representatives using such training materials, the other PromotionalMaterials and such programs as Watson shall deem appropriate that are incompliance with Watson’s obligations hereunder and all other Legal Requirements.Such programs shall include training with respect to reporting Adverse DrugExperiences and technical complaints. After the initial training, Watson shallperiodically provide additional training to each of its Sales Representatives,and shall update its training materials as appropriate in connection with suchadditional training, in accordance with this Section 4.3. Representatives ofDepomed may attend, at Depomed’s expense, any Watson training session relatedto the Product. Watson will notify Depomed at least two weeks in advance of anysuch training session.

###  

## Section 4.3             **PromotionalMaterials; 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

 

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### Materials”) tosupport the Promotional Effort for the Product in the Territory within theField. Such Promotional Materials may include, by way of example, detailingaids; leave items; journal advertising; appropriate reprints and reprintcarriers; and product monographs. All Promotional Materials used by the WatsonSales Force will be subject to the review and approval of the Depomed APL. AllPromotional Materials developed by Watson hereunder shall prominently displaysuch Depomed Trademark(s) as shall be specified by Depomed to Watson followingits review of the applicable prototype in accordance with Section 4.4(b).

###  

### (b)           Each Party shall provide to the other aprototype of any Promotional Materials it creates to support the PromotionalEffort for the Product in the Territory within the Field, for review by theother Party. The reviewing Party shall notify the creating Party of anyobjections it has to such prototype and the basis therefor as soon asreasonably practicable, but no later than ten (10) business days following itsreceipt thereof. The creating Party shall modify such Promotional Materials tothe extent necessary to resolve any objections made by the reviewing Party tosuch Promotional Materials on the grounds that such Promotional Materials areinconsistent with any Legal Requirements or this Agreement and shall in goodfaith consider any other objection raised by the reviewing Party. The finalversion of the Promotional Materials approved by the Depomed APL shall bereviewed and approved by the Parties to confirm their consistency with theprototype approved by the Parties and the resolution of any objections inaccordance with this Section 4.4(b), which review and approval shall occur, assoon as reasonably practicable, but no later than ten business days followingits receipt by the reviewing Party. Upon approval, the Promotional Materialsmay be produced in quantity. Depomed’s regulatory affairs department willnotify Watson’s regulatory affairs department when Promotional Materials havebeen submitted to the FDA. Such Promotional Materials may only be used byWatson subsequent to such notification from Depomed’s regulatory affairsdepartment. The Parties have reviewed and approved certain PromotionalMaterials acquired by Depomed from Esprit in connection with the EspritTermination Agreement (the “Esprit Promotional Materials”), as set forthon a list of such approved Esprit Promotional Materials agreed to in writingprior to the execution of the Original Agreement. Depomed will deliver to Watson,free of charge, such quantities of existing Esprit Promotional Materials thatDepomed receives from Esprit pursuant to the Esprit Termination Agreement asthe Parties agreed in writing prior to the execution of the Original Agreement.

###  

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

###  

### (d)           Depomed shall own all copyrights to allPromotional Materials that are created during the Term of this Agreement inconnection with the Promotion of the Product. Watson shall use commerciallyreasonable efforts consistent with accepted business practices to obtain suchassignments from the authors and creators of such materials as may be necessaryto vest ownership of the copyright in Depomed. Depomed shall, and does hereby,grant to Watson a royalty-free license to use and reproduce such materialssolely in conjunction with its Promotion of the Product pursuant to thisAgreement, which license shall not be assignable or transferable by Watson.

###  

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

 

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## Section 4.4             **2007Plan; Annual Plan; Promotion Expenses.**

##  

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

###  

#### (i)            the anticipated numberof quarterly and annual P1 Details and P2 Details to be provided by the WatsonSales Force;

####  

#### (ii)           pharmacy efforts;

####  

#### (iii)          any training and/orsampling programs to be conducted;

####  

#### (iv)          medical educationprograms to be conducted;

####  

#### (v)           planned publicrelations activities;

####  

#### (vi)          Sample forecasts anddelivery schedules;

####  

#### (vii)         voucher or co-payassistance plans;

####  

#### (viii)        format and quantity ofsales, marketing and educational materials

####  

#### (ix)           convention schedule;

####  

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

####  

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

####  

### (b)           The JSC shall use allreasonable efforts to approve each Annual Plan not later than November 1 ofeach preceding calendar year.

###  

### (c)           Each Party will bearits own operating expenses associated with the Product and Promotion thereof,including all personnel, general and administrative and overhead costs. Watsonwill bear all Watson Sales Force expenses. Depomed will bear all costsassociated with maintaining and continuing all Regulatory Approvals of theProduct in the Territory, including all costs associated with Adverse DrugExperience reporting and all clinical and regulatory requirements. NeitherParty has the authority to incur costs or expenses on behalf of the otherParty, without the other Party’s express prior written approval.

 

3

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##  

## Section 4.5             **Watson Promotion Reports; Prescriber Data.**

##  

### (a)           Within fifteen (15) days followingthe end of each Agreement Quarter, Watson shall provide the JSC with a statusreport, which report will summarize Watson’s Promotional activities pursuant tothis Agreement for such prior Agreement Quarter and on a calendar year-to-datebasis, including, to the extent Watson customarily creates the followingreports for Watson’s other products which are promoted by or on behalf ofWatson:  (a) the number of P1 Details, P2Details and P3 Details (if applicable) made and recorded by Watson’s standardrecord keeping procedures (separately setting forth Details performed withinthe Urology Field and Details performed within the Ob/Gyn Field); (b) thenames, addresses and medical education numbers of the Professionals called upon(separately setting Professionals within the Urology Field and Professionalswithin the Ob/Gyn Field); (c) the percentage of Professionals Detailed who wereprovided with Samples; (d) the average number of such Samples delivered on eachDetail; (e) a breakdown of all information required to be contained in eachreport on an aggregate basis; and (f) such other information as may be requiredin 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 thesame form as such Prescriber Data is provided to Watson.

###  

## Section 4.6             **Medical Inquiries.**The Partiesacknowledge that each may receive requests for medical information concerningthe Product from members of the medical and paramedical professions andconsumers regarding the Product. All such requests will be directed to, andhandled by, Depomed’s medical affairs department (or a Third Party medicalaffairs firm designated by Depomed).

##  

## Section 4.7             **Trademarks.**

##  

### (a)           The “Depomed” trademark must appearon 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 grantsto Watson a non-assignable, non-sublicensable, non-exclusive, royalty-freeright and license to use the Depomed Trademarks in the Territory solely inconnection with Watson’s Promotion of the Product in accordance with thisAgreement; provided Watson may assign and sublicense such right and license inaccordance with Section 2.2. Such license shall expire immediately upon theexpiration or termination of this Agreement. Subject to this Section 4.8 and toapplicable Legal Requirements, Watson shall have the right to use the WatsonTrademarks, and include the name “Watson” or any variation thereof on thePromotional Materials developed by Watson; provided, that such WatsonTrademarks shall not appear in such Promotional Materials in greater prominenceor in greater frequency than the Depomed Trademark(s). Watson recognizesDepomed’s title to the Depomed Trademarks, and shall not at any time, during orafter the Term, do or knowingly suffer to be done any act or thing which willin any way impair the rights of Depomed in or to the Depomed Trademarks. Watsonacknowledges and agrees that it shall not acquire and shall not claim any titleto the Depomed Trademarks adverse to Depomed by virtue of the rights grantedunder this Agreement or through Watson’s use of the Depomed Trademarks, itbeing the intention of the Parties that all goodwill

 

4

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

###  

### (b)           Watsonhereby grants to Depomed a non-assignable, non-sublicensable, non-exclusive,royalty-free right and license to use the Watson Trademarks in the Territorysolely in connection with Depomed’s Promotion of the Product in the Field. Suchlicense shall expire immediately upon the expiration or termination of thisAgreement. 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 byDepomed in accordance with this Agreement. Depomed recognizes Watson’s title tothe Watson Trademarks, and shall not at any time, during or after the Term, door knowingly suffer to be done any act or thing which will in any way impairthe rights of Watson in or to the Watson Trademarks. Depomed shall not beobligated to use the Watson Trademarks in the Depomed Promotional Materials. Depomedacknowledges and agrees that it shall not acquire and shall not claim any titleto the Watson Trademarks adverse to Watson by virtue of the rights grantedunder this Agreement or through Depomed’s use of the Watson Trademarks, itbeing the intention of the Parties that all goodwill and improved reputationgenerated by Depomed and use of the Watson Trademarks shall inure to thebenefit of Watson.

###  

### (c)           Eachof Watson with respect to its use of the Depomed Trademarks and Depomed withrespect to its use of the Watson Trademarks will maintain quality standards forall of its uses of the trademarks of the other Party in connection with thePromotion of the Product that are substantially equivalent to those standardsused by the owner of such trademarks in connection with pharmaceutical products.Subject to the foregoing and to the other provisions of this Agreement, eachParty acknowledges and agrees that the owner or licensee of the trademark hasthe right, at any time, to modify or supplement such quality standards and thatthe licensee or sublicensee must implement such new standards or changesfollowing receipt of notice of such additions or changes; provided that thelicensor agrees to bear all reasonable costs associated with such modificationsand supplements.

###  

# ***ARTICLE V***

# * *

# ***CLINICAL AND REGULATORY AFFAIRS;DEVELOPMENT***

# * *

## Section 5.1             **Regulatory Approvals.**Depomed shall usecommercially reasonable efforts to maintain and continue all RegulatoryApprovals currently in effect for the Product. Watson agrees that allRegulatory Approvals, applications therefor and any other submissions to aGovernmental Authority with respect to the Product shall be in the name of, andshall be owned by, Depomed or its designee.

##  

## Section 5.2             **Compliance with Regulatory Requirements.**Unlessotherwise required by law or expressly required by this Agreement, Depomed willretain exclusive authority over and responsibility for complying with allregulatory requirements and maintaining all contacts with GovernmentalAuthorities with respect to the Product, including maintaining and updating ofthe NDA, the development and submission of applications for new indications,the reporting of any adverse drug reactions to the FDA, the compliance ofPromotional Materials with FDA rules and regulations and the filing ofPromotional Materials with the FDA.

 

5

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## Section 5.3             **Compliance.**In performing its dutieshereunder, 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 ofprescription drug products, DDMAC’s promotional guidelines, the Department ofHealth and Human Services Office of the Inspector General Compliance ProgramGuidance for Pharmaceutical Manufacturers, the American Medical Association’sGuidelines on Gifts to Physicians, the PhRMA Code on Interactions with HealthcareProviders, the Prescription Drug Marketing Act of 1987, as amended, and therules and regulations promulgated thereunder, the ACCME Standards forCommercial 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 governmentalor private health care payors, and all industry and professional standards,which may be applicable to the activities (including the warehousing, handlingand distribution of Samples) to be performed by such Party hereunder. None ofWatson, Depomed, and either Party’s employees and agents (including the membersof the Watson Sales Force) shall offer, pay, solicit or receive any remunerationto or from Professionals in order to induce referrals of or purchase of theProduct. The Watson Sales Force shall have no direct contact with, nor shallthe Watson Sales Force be involved with the delivery of Product to patients,other than delivery of Samples directly to Professionals authorized toprescribe the Product. The Watson Sales Force shall be trained in connectionwith compliance with Sec. 1128B(b) of the Social Security Act and the AMAGuidelines on Gifts to Physicians from Industry prior to engaging in Promotionof the Product.

##  

## Section 5.4             **Communications with Regulatory Authorities.**

##  

### (a)           Allcommunications with Government Authorities concerning the Product shall be thesole responsibility of Depomed. Depomed shall within two (2) business daysprovide Watson with copies of communications reasonably considered to be significant per CFR 314(including summaries of all relevant verbal communications) related toPromotional Materials (DDMAC interactions other than clerical in nature) ;routine communications of any type (e.g., FDA 2253 correspondence) are to beforwarded to Watson within ten (10) business days.

###  

### (b)           Watsonshall not, without the consent of Depomed or unless so required by LegalRequirements (and then only pursuant to the terms of this Section 5.4, unlessthis Section 5.4 is inconsistent with Legal Requirements), correspond orcommunicate with the FDA or with any other Governmental Authority, whetherwithin the Territory or otherwise, concerning the Product, or otherwise takeany action concerning any Regulatory Approval under which the Product is soldor any application for Regulatory Approval of the Product; provided that****during the Term,****Watson shall have the right to communicate with the FDA orany other Governmental Authority regarding the Product if such communication isnecessary to comply with the terms of this Agreement or any Legal Requirement(including without limitation state or local Legal Requirements related tomarketing activities undertaken by Watson or the Watson Sales Force), or ifWatson made a request of such agency to communicate with Depomed instead, andsuch Governmental Authority denied such request (in any such case, Watson shallgive Depomed notice as soon as reasonably practicable of such communication and,to the extent practicable, Depomed shall be permitted to accompany Watson, takepart in any such communications and receive copies of all such communications).Watson shall, immediately upon receipt of any communication from the FDA orfrom any other Governmental Authority relating to the Product,

###  

### 6

### 

###  

### forward a copy of the same to Depomed andrespond to all inquiries by Depomed relating thereto. If Watson is required bylaw to communicate with the FDA or with any other Governmental Authorityrelating to the Product, then Watson shall so advise Depomed immediately(within one business day) and provide Depomed in advance with a copy of anyproposed written communication, or a written summary of any proposed oralcommunication with the FDA or any other Governmental Authority. Watson shallcomply with any and all reasonable direction of Depomed concerning any meetingor written or oral communication with the FDA or any other GovernmentalAuthority relating to the Product unless otherwise required by LegalRequirements.

###  

## Section 5.5             **Product Complaints.**Depomed shallretain the sole responsibility to record, investigate and close out all ProductComplaints. Watson shall refer any oral or written Product Complaints which itreceives concerning the Product to Depomed within four (4) calendar days of itsreceipt thereof; provided, that all complaints concerning suspected oractual Product tampering, contamination or mix-up shall be delivered withintwenty-four hours of its receipt thereof. Watson shall not take any otheraction in respect of any such complaint without the consent of Depomed unlessotherwise required by Legal Requirements. If requested by Depomed, Watson willcooperate with Depomed to resolve any Product Complaints. All ProductComplaints shall be directed to the attention of Depomed’s Vice President,Regulatory Affairs, at Depomed’s address set forth in Section 13.1. Depomedshall provide Watson with a summary of all Product Complaints received byDepomed within ten (10) business days of its receipt thereof.

##  

## Section 5.6             **Adverse Drug Experience Reports.**

##  

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

###  

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

###  

### (c)           Exceptas may otherwise be required by Legal Requirements, (i) Watson shall notdisclose any information concerning Adverse Drug Experience Reports or SeriousAdverse Drug Experience Reports to any Person or Governmental Authority withoutthe prior consent of Depomed; and (ii) Depomed shall have the soleresponsibility in its discretion to determine whether any Product Complaint,Adverse Drug Experience Report or Serious Adverse Drug Experience Report mustbe reported to the FDA or any other Governmental Authority.

###  

### (d)           Allfollow-up investigations concerning Adverse Drug Experience Reports and SeriousAdverse Drug Experience Reports shall be conducted by Depomed; providedthat

 

7

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### Watson shall have the right to participate insuch investigations upon its request. Watson shall provide all reasonablecooperation with any such follow-up investigation as may be requested byDepomed from time to time.

###  

## Section 5.7             **Recalls or Other Corrective Action.**Depomedshall have sole responsibility for and shall make all decisions with respect toany recall (including recall of packaging and promotion materials), marketwithdrawals or any other corrective action related to the Product. Depomedshall promptly notify Watson of any such actions taken by Depomed, includingall actions that are reasonably likely to result in a material adverse effecton the marketability of the Product in the Territory. At Depomed’s request,Watson shall provide assistance to Depomed in conducting such recall, marketwithdrawal or other corrective action (including retrieving Samples distributedby the Watson Sales Force to Professionals). With respect to any recall, marketwithdrawal or corrective action initiated by Depomed as a result of Depomedbecoming aware of any manufacturing defect in Product, Depomed shall reimburseWatson for its reasonable, documented, direct, out-of-pocket costs incurred inconnection with participating in such recall, market withdrawal or othercorrective action provided that Watson’s breach of its obligations hereunder isnot a material cause of the recall, market withdrawal or other correctiveaction. Except as set forth above, Depomed shall be under no liabilitywhatsoever to compensate Watson or make any other payment to Watson for anydecision to recall, initiate a market withdrawal or take any other correctiveaction with respect to the Product.

##  

# ***ARTICLE VI***

# * *

# ***MANUFACTURING AND SUPPLY; SALES;PRICING***

# * *

## Section 6.1             **Obligations of Depomed.**

##  

## (a)           Inaccordance with the provisions of this Agreement and all applicable LegalRequirements, Depomed shall, at its cost and expense, use commerciallyreasonable 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 Productin the Territory in order to fill orders for Product (conforming to thethen-current Volume Forecast) in a timely and efficient manner.

##  

## (b)           Depomed has prepared and delivered, withinput 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 theTerritory shall be manufactured to meet applicable specifications for theProduct in accordance with the NDA, cGMP and in compliance with all otherapplicable Legal Requirements.

##  

## Section 6.3             **Volume Forecasts.**At least 30 daysprior to the beginning of each Agreement Quarter ending after the PromotionCommencement Date, unless the Parties otherwise agree in writing to analternative method of forecasting Product prescriptions in the Territory withinthe Field, Watson shall submit to the JSC a written non-binding forecast by

##  

## 8

## 

##  

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

##  

## month of the number of Units of Productincluded within prescriptions expected to be filled in the Territory during thetwelve (12) month period beginning with such Agreement Quarter, which forecastshall be prepared by Watson in good faith. The JSC shall review and discusssuch forecast and shall make such modifications thereto as may be necessary forsuch forecast to be unanimously approved by the JSC and to be consistent withthe forecasting and purchasing provisions of Depomed’s Third Party supplyagreement relating to the Product (as so modified and approved for theapplicable twelve (12) month period, the “Volume Forecast”). Depomedshall use commercially reasonable efforts to manufacture and distribute, orcause to be manufactured and distributed, Product consistent with the VolumeForecast or such other method of forecasting Product prescriptions in theTerritory within the Field as is agreed in writing by the Parties. The Partieshave agreed in writing to the Volume Forecast for the twelve month periodbeginning on August 1, 2007.

##  

## Section 6.4             **Sales; Pricing.**

##  

### (a)           Depomedor its Affiliates shall book all sales of the Product in the Territory andshall be responsible for entering into any contracts and other arrangementswith any Person regarding the sale of the Product, and for establishing andapproving the form, content and terms and conditions thereof, including anydiscount, allowance, rebate, chargeback or other term granted therein. For purposesof clarity, any contracts or arrangements supported by Watson as contemplatedby Section 6.4(b) must be executed in Depomed’s name and administered byDepomed.

###  

### (b)           Watsonwill provide reasonable assistance to Depomed in support of managed markets andtrade customer groups with respect to the Product to enable Depomed to enterinto such contracts and other arrangements described in Section 6.4(a) above. Inparticular, as contemplated in the 2007 Plan, (i) Watson’s sales team dedicatedto the Channel will provide reasonable assistance to Depomed in connection withDepomed’s contracting efforts within the Channel and (ii) Watson will providereasonable assistance to Depomed in connection with Depomed’s efforts to stockthe Product within retail pharmacies.

###  

## Section 6.5             **Samples.**

##  

### (a)           Depomedshall provide or cause to be provided to Watson, from time to time ascontemplated by the Annual Plan, samples of the Product that are not for saleand with no fee associated (“Samples”) to be distributed by Watson solelyin connection with the performance of Details. Depomed shall supply suchSamples FOB Depomed’s or its designee’s warehouse, and the risk of loss andresponsibility for handling and warehousing of the Samples shall pass to Watsonupon delivery to a carrier designated by Watson. Watson shall be responsiblefor distributing the Samples to its Sales Representatives in a timely manner. Depomedshall invoice Watson for each shipment of Samples at [***] payable withinthirty (30) days of the invoice date (excluding [***]). Watson shall also beresponsible for securing the return and appropriate disposal of and reconcilingexisting Sample inventories from discontinued Sales Representatives.

###  

### (b)           Samplessupplied by Depomed to Watson shall be used by Watson solely in performingDetails to Professionals in accordance with this Agreement. Upon its receipt of

###  

### 

###  

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

###  

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

###  

### (c)           Samplingvolume will be included as a part of each Annual Plan.

###  

# ***ARTICLE VII***

# * *

# ***COMPENSATION***

# * *

## Section 7.1             **Promotion Fees.**

##  

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

###  

### (b)           Duringthe Term, upon the later to occur of (A) 30 days following the end of eachAgreement Quarter, and (B) 20 days following Depomed’s receipt from Watson of thePrescriber 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 AgreementQuarter;

####  

#### (ii)           Field Prescription Units during suchAgreement Quarter;

####  

#### (iii)          the Field Ratio for such AgreementQuarter;

####  

#### (iv)          Field Net Sales during such AgreementQuarter;

####  

#### (v)           Field COGS during such AgreementQuarter

####  

#### (vi)          Field Gross Margin for such AgreementQuarter;

####  

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

####  

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

 

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### (c)           Exceptas expressly specified otherwise, any amounts payable by one Party to the otherParty in respect of any Agreement Quarter pursuant to this Agreement shall bepaid within forty-five (45) days after the end of such Agreement Quarter.

###  

### (d)           Anexample calculation of a Promotional Fee is attached as Schedule 7.1.

###  

## Section 7.2             **Maintenance of Records.**

##  

### (a)           EachParty agrees to keep, for a period of at least three years after the date ofentry (or such longer period as may be required by Legal Requirements) full andaccurate records maintained in accordance with such Party’s accountingpractices 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) andSection 7.4, and (ii) in the case of Watson, P1 Details, P2 Details and P3Details (if applicable) completed by the Watson Sales Force. Upon thirty (30)days prior written notice, such records shall be made available by the auditedParty for audit by an independent certified public accounting firm designatedby the other Party and reasonably acceptable to the Party whose records are tobe examined. The independent auditor will only examine such books and recordsduring business hours but not more than once each fiscal year while thisAgreement 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 Section7.1(b)(i)-(vii) and Section 7.4, and, in the case of Watson, P1 Details, P2Details and P3 Details (if applicable) completed by the Watson Sales Force. Suchindependent auditor shall keep confidential any information obtained duringsuch examination and shall report only the amounts which the independentauditor believes to be due and payable hereunder. The fees and expenses of theindependent auditor performing such verification examination shall be borne bythe Party conducting the verification; provided, however, that ifany verification reveals that the audited Party has reported incorrectly, andthe amount of such discrepancy is at least five percent (5%) of the aggregateamount that should have been reported for the period examined, then the auditedParty shall pay the entire amount of the fees and expenses for suchverification.

###  

### (b)           EachParty shall have the right, upon five (5) business days’ prior written notice,to audit all applicable records of the other Party (other than recordsdescribed in Section 7.2(a)) for the purpose of determining the audited Party’scompliance with the obligations set forth in this Agreement, including withrespect to training programs and certifications and records reports for theSamples. The audit will be conducted during normal business hours, atconvenient times. Any such audit may be conducted no more than once each fiscalyear. 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 forone year after expiration or termination of this Agreement.

###  

### (c)           Wheneverin this Agreement a Party is required to report its costs, or is entitled toreceive or obligated to make a payment based on its costs, such costs shall bedetermined in accordance with generally accepted accounting principles asapplied in the United States (“GAAP”), consistent with the terms of thisAgreement, 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 Partiesand 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)           COGSshall be determined in accordance with GAAP, except that COGS shall in no eventinclude labor of more than one full-time equivalent Depomed employee for anyperiod for which COGS is calculated under this Agreement.

###  

## Section 7.3             **Payments.**Any payments required to bemade by either Party under this Agreement shall be made in United Statesdollars via wire transfer of immediately available funds to such bank accountas the other Party shall designate in writing prior to the date of suchpayment.

##  

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

 

# ***ARTICLE VIII***

# * *

# ***TERM AND TERMINATION***

# * *

## Section 8.1             **Term**. The term of this Agreement shallcommence on the Initial Effective Date and shall continue, unless terminatedsooner in accordance with this Article VIII, until September 30, 2010 (the “InitialTerm”). Subject to Section 8.2(a)(i), Watson may extend the Term of thisAgreement 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 Depomedof Watson’s decision to extend the Term at least ninety (90) days prior to theend to the Initial Term or then current Renewal Term.

##  

## Section 8.2             **Early Termination**.

##  

### (a)           Thefollowing provisions shall apply in respect of any Renewal Term, and failuresby Watson to perform the Detail Minimum, the Urology Detail Minimum, or theOb/Gyn Detail Minimum:

###  

### (i)            Depomed may elect to terminate thisAgreement with respect to the Ob/Gyn Field effective as of September 30, 2010or September 30, 2011 upon at least 120 days’ prior written notice to Watson,provided that Depomed commences Promotion of the Product within the Ob/GynField directly through its own sales force within sixty (60) days after anysuch 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 withthe Securities Exchange Commission***

 

### (ii)           If Watson does not perform, in theaggregate, [***] 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 theaggregate, [***] the Urology Detail Minimum or the Ob/Gyn Detail Minimum in anytwo consecutive Agreement Quarters, Depomed shall have the right to terminatethis Agreement with respect to the Urology Field or the Ob/Gyn Field (asapplicable) on thirty (30) days’ prior written notice to Watson.

###  

### (iv)          If Depomed desires to exercise itsoption to terminate this Agreement in whole or in part pursuant to Section8.2(a)(ii) or (iii), it must give written notice to Watson within 60 days afterreceiving the report of the Agreement Quarter giving rise to the right toterminate this Agreement in whole or in part pursuant to this Section8.2(a)(ii) or (iii).

###  

### (v)           If Depomed terminates this Agreementonly with respect to the Urology Field or the Ob/Gyn Field pursuant to Section8.2(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., theUrology Field or the Ob/Gyn Field) with respect to which this Agreement hasbeen terminated, and (B) “Field Baseline Prescriptions Per Month” shallno longer include Units of Product attributable to the sub-Field with respectto which this Agreement has been terminated. The Parties shall acknowledge inwriting not later than October 31, 2007 the number of Units of Product withinthe Field Baseline Prescriptions Per Month attributable to the Urology Fieldand the number of Units of Product within the Field Baseline Prescriptions PerMonth 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 notbefore the two consecutive Agreement Quarters ending on March 31, 2009), eitherParty shall have the right to terminate this Agreement on 120 days’ priorwritten notice to the other Party. If either Party desires to exercise itsoption to terminate this Agreement pursuant to this Section 8.2(b), it mustgive written notice to the other Party within 60 days after receiving thereport of the Agreement Quarter giving rise to the right to terminate thisAgreement pursuant to this Section 8.2(b).

###  

### (c)           Ifthere is a Detailing or Incentive Compensation Impasse, Depomed may terminatethis Agreement upon thirty (30) days’ prior written notice to Watson; providedthat such notice is provided to Watson within sixty (60) days after theoccurrence of such Detailing or Incentive Compensation Impasse.

###  

## Section 8.3             **Termination for Cause.**Either Party mayterminate this Agreement, effective at any time after providing sixty (60) dayswritten 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 theevent of a material failure of the other Party to comply with its materialobligations contained in this Agreement. If such cure is effected, such noticewith respect to such termination shall be null and void.

 

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## Section 8.4             **Termination for Bankruptcy or Force Majeure.**To the extent permitted by law, each Party will have the right to terminatethis Agreement immediately upon notice to the other Party, in the event ofeither of the following:

##  

### (a)           Theentry of an order for relief under the United States Bankruptcy Code (or anycorresponding remedy under successor laws) against the other Party; the filingof a petition by or against the other Party under any bankruptcy, insolvency orsimilar law (which petition is not dismissed within sixty days after filing),except Chapter 11 of the United States Bankruptcy Code or any successor statutethat permits a corporation to continue its operation while protecting it fromcreditors; the appointment of a receiver for the other Party’s business orproperty; or the other Party’s making of a general assignment for the benefitof its creditors; or

###  

### (b)           AnyForce Majeure Event affecting the other Party beyond the other Party’s controlwhich lasts for a period of at least six months and which is of sufficientintensity to interrupt or prevent the carrying out of such other Party’smaterial obligations under this Agreement during such period.

###  

Notwithstanding the occurrence of any of theevent specified in subsection (a) of this Section 8.4, the Parties acknowledgeand agree that, to the extent Section 365(n) of the United States BankruptcyCode applies to this Agreement, the non-insolvent Party may elect to retain andexercise the rights granted to it hereunder with respect to the intellectualproperty owned or controlled by the insolvent Party.

 

## Section 8.5             **Force Majeure.**Any Force Majeure Eventof the type described in Section 15.7 affecting a Party hereunder shall entitlethe other Party hereto, at any time after the expiry of the period of sixmonths specified therein and upon sixty days written notice given after suchsix-month period (such notice being, null and void if the Force Majeure Eventis discontinued during such sixty-day period), in addition to the right toterminate this Agreement under Section 8.4, the right to (i) extend thisAgreement for a period equal to the duration of the Force Majeure Event whichoccasioned the delay, interruption or prevention (subject to the maximum termof six months) or (ii) continue the Agreement in full force and effect withoutmodification. In no circumstances will either Party be liable to the other forits inability to perform under this Agreement due to any such Force MajeureEvent.

##  

## Section 8.6             **Recall.**Either Party shall have theright to terminate this Agreement in the event of a large scale recall or withdrawalof the Product from the Territory resulting from a significant safety riskinherent in the Product and not due to tampering, a remediable manufacturingproblem, or other defect that can be cured with respect to Productsmanufactured after such risk is discovered.

##  

## Section 8.7             **Effect of Termination.**

##  

### (a)           Noadditional payment obligations arising under Article VII hereof shall accrueafter the date of expiration or termination of this Agreement except as setforth in Section 7.4; provided, however, that expiration ortermination of this Agreement shall not relieve either Party of any obligationsaccruing prior to such expiration or termination. Certain provisions of thisAgreement by their terms continue after the expiration or termination of thisAgreement. In addition, any other provisions required to interpret and enforcethe Parties’ rights and obligations

 

2

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### under this Agreement shall also survive, butonly to the extent required for the full observation and performance of thisAgreement.

###  

### (b)           Exceptas indicated in Section 8.5, expiration or termination of this Agreement shallbe without prejudice to (a) any remedies which any Party may then or thereafterhave hereunder or at law; and (b) a Party’s right to receive any paymentaccrued under the Agreement prior to the termination date but which becamepayable thereafter; and (c) either Party’s right to obtain performance of anyobligations provided for in this Agreement which survive termination by theirterms or by a fair interpretation of this Agreement. Except as expressly setforth herein, the rights to terminate as set forth herein shall be in additionto all other rights and remedies available under this Agreement, at law, or inequity or otherwise.

###  

### (c)           Notwithstandingany provision herein to the contrary:

###  

### (i)            if Watson terminates this Agreementpursuant to Section 8.3 during the Initial Term, Watson shall be entitled to aTail Promotion Fee in accordance with Section 7.4. For purposes of calculation,in such an event, the Tail Period shall be determined in accordance withSection 1.72 and the Tail Gross Margin Percentage shall be calculated as if theAgreement had terminated on or after September 30, 2010 and before September30, 2011; and

###  

### (ii)           if Depomed terminates this Agreementpursuant to Section 8.3, Watson shall not be entitled to any Tail PromotionFee.

###  

### (d)           Uponthe expiration or termination of this Agreement pursuant to this Article VIII,each Party shall promptly transfer and return to the other Party allProprietary Information of the other Party (provided that each Party may keepone copy of such Proprietary Information of for archival purposes only). Uponthe expiration or termination of this Agreement, Watson shall provide to Depomed,at Watson’s out-of-pocket cost therefor, all Samples and Promotional Materialsin Watson’s possession (including electronic files of all PromotionalMaterials); provided, however, that Watson may destroy anyprinted copies of Promotional Materials bearing the Watson Trademarks and mayremove the Watson Trademarks from electronic files of Promotional Materials.

###  

# ***ARTICLE IX***

# * *

# ***REPRESENTATIONS AND WARRANTIES***

# * *

## Section 9.1             **Representations and Warranties of Depomed.**Depomedhereby 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 goodstanding under the laws of the state of California, and (ii) has all necessarycorporate power and corporate authority to own its properties and to conductits business, as currently conducted.

###  

### (b)           Authorization.The execution and delivery of this Agreement and the consummation of thetransactions contemplated hereby are within the corporate power of

 

3

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### Depomed, have been duly authorized by allnecessary corporate proceedings of Depomed, and this Agreement has been dulyexecuted and delivered by Depomed.

###  

### (c)           NoConflict. The execution and delivery of this Agreement and the consummationof the transactions contemplated hereby do not: (i) conflict with or result in a breach of any provision of Depomed’sorganizational documents; (ii) result in a material breach of any materialagreement to which Depomed is Party; (iii) result in a violation of any Orderto which Depomed is subject; (iv) require Depomed to obtain any materialapproval or consent from any Governmental Authority or Third Party other thanthose consents and approvals which have been obtained prior to the date hereof;or (v) violate any Legal Requirement applicable to Depomed in any materialrespect.

###  

### (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 ofcreditors’ rights in general and to general principles of equity (regardless ofwhether 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 thisAgreement or the transactions contemplated hereby.

###  

### (f)            DepomedIntellectual Property. To the knowledge of Depomed, the Promotion and saleof Product in the Territory in accordance with this Agreement will not infringeany patents, trademarks or other intellectual property rights of any ThirdParty; provided, that Depomed makes no representation as to the WatsonTrademarks.

###  

### (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 theProduct or which would reasonably be expected to materially affect Depomed’sability to perform its obligations hereunder.

###  

### (h)           Supply.Depomed currently has access to sufficient supplies of Product to perform themanufacturing obligations required by it under this Agreement. All Product willbe manufactured with reasonable due care and in conformity with currentgenerally accepted standards and procedures for manufacturing the Product andcGMP.

###  

## Section 9.2             **Representations and Warranties of Watson.**Watsonhereby 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 goodstanding under the laws of the state of Delaware, and (ii) has all necessarycorporate power and corporate authority to own its properties and to conductits business, as currently conducted.

###  

### (b)           Authorization.The execution and delivery of this Agreement and the consummation of thetransactions contemplated hereby are within the corporate power of Watson, havebeen duly authorized by all necessary corporate proceedings of Watson, and thisAgreement has been duly executed and delivered by Watson.

###  

### 4

### 

###  

### (c)           NoConflict. The execution and delivery of this Agreement and the consummationof the transactions contemplated hereby do not: (i) conflict with or result in a breach of any provision of Watson’sorganizational documents; (ii) result in a material breach of any materialagreement to which Watson is Party; (iii) result in a violation of any Order towhich Watson is subject; (iv) require Watson to obtain any material approval orconsent from any Governmental Authority or Third Party other than thoseconsents 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 bankruptcyreorganization, insolvency and other similar laws affecting the enforcement ofcreditors’ rights in general and to general principles of equity (regardless ofwhether 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 orthe transactions contemplated hereby.

###  

### (f)            WatsonTrademarks. To the knowledge of Watson, the use of the Watson Trademarks toPromote and sell Product in the Territory in accordance with this Agreementwill not infringe any trademarks or other intellectual property rights of anyThird 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 theProduct or which would reasonably be expected to materially affect Watson’sability to perform its obligations hereunder.

###  

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

##  

## Section 9.4             **Watson Disclaimer.**EXCEPT AS EXPRESSLYPROVIDED HEREIN, WATSON DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDINGTHE WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR A PARTICULARPURPOSE.

##  

# ***ARTICLE X***

# * *

# ***INTELLECTUAL PROPERTY MATTERS***

# * *

## Section 10.1           **Infringement.**

##  

### (a)           Ifeither Party shall learn of a claim or assertion that the manufacture, use orsale of the Product in the Territory infringes or otherwise violates theintellectual property rights of any Third Party or that any Third Partyviolates the intellectual property rights owned or Controlled by (i) Depomed inthe Product and the Depomed Trademarks in the Territory or (ii) Watson in theWatson Trademarks, then the Party becoming so informed shall promptly, but in

 

5

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### all events within fifteen (15) business daysthereof, notify the other Party to this Agreement of the claim or assertion.

###  

### (b)           Ifwarranted in the opinion of Depomed, after consultation with the JSC, Depomedshall take such legal action as is advisable in Depomed’s opinion to restraininfringement of such Depomed patent rights or the Depomed Trademarks. Watsonshall cooperate fully with, and as reasonably requested by, Depomed in Depomed’sattempt to restrain such infringement, and Depomed shall reimburse Watson forits out-of-pocket expenses incurred in providing such cooperation. Watson maybe represented by counsel of its own selection at its own expense in any suitor proceeding brought to restrain such infringement, but Depomed shall have theright to control the suit or proceeding.

###  

### (c)           Ifwarranted in the opinion of Watson, Watson shall take such legal action as isadvisable in Watson’s opinion to restrain such infringement of the WatsonTrademarks. Depomed shall cooperate fully with, and as requested by, Watson inWatson’s attempt to restrain such infringement, and Watson shall reimburseDepomed for its out-of-pocket expenses incurred in providing such cooperation. Depomedmay be represented by counsel of its own selection at its own expense in anysuit or proceeding brought to restrain such infringement, but Watson shall havethe right to control the suit or proceeding.

###  

# ***ARTICLE XI***

# * *

# ***INDEMNIFICATION; LIMITS ON LIABILITY***

# * *

## Section 11.1           **Indemnification.**Each Party willdefend, at its own expense, indemnify and hold harmless the other Party and itsAffiliates 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 outof any Third Party claim, suit or proceeding brought against the other Party orits Affiliates to the extent such claim, suit, or proceeding is based upon aclaim arising out of or relating to (i) any breach or violation of, or failureto perform, any covenant or agreement made by such indemnifying Party in thisAgreement, unless waived in writing by the indemnified Party; (ii) any breachof the representations or warranties made by such indemnifying Party in thisAgreement; or (iii) the negligence or willful misconduct of the indemnifyingParty, except (under any of (i) or (ii)) to the extent arising out of thebreach, violation, failure, negligence or willful misconduct of the indemnifiedParty. In addition, Depomed will defend, at its own expense, indemnify and holdharmless Watson and its Affiliates and their respective directors, officers,employees, consultants, contractors, representatives and agents from andagainst 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 suchclaim, 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 theProduct infringes or misappropriates the patent, trademark, or otherintellectual property rights of such Person, except with respect to any claimrelating to the Watson Trademarks; (y) the Esprit License Agreement or theEsprit Termination Agreement and (z) any product liability claim made by anyPerson with respect to the Product, except to the extent liability is based ona breach by Watson of Section 4.2. Each Party agrees that it shall promptlynotify the other in writing of any such claim or action and give

 

6

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## the indemnifying Party full information andassistance in connection therewith. The indemnifying Party shall have the soleright to control the defense and the sole right to settle or compromise anysuch claim or action, except that the prior written consent of the other Partyshall 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. Notwithstandingthe foregoing, the indemnified Party may participate therein through counsel ofits choice, but the cost of such counsel shall be borne solely by theindemnified Party. The provisions of this Section 11.1 shall survive thetermination of this Agreement for seven (7) years (except as to claims as towhich a Party has notified the other in writing prior to the third anniversaryof the termination date of this Agreement, in which event, the indemnifyingParty’s obligations under this Section 11.1 shall survive with respect to anysuch claim until its resolution).

##  

## Section 11.2           **Consequential Damages.**NEITHER WATSONNOR DEPOMED (WHICH FOR THE PURPOSES OF THIS SECTION 11.2 SHALL INCLUDE THEIRRESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS) SHALL HAVEANY 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 SUCHLIMITATION SHALL NOT APPLY IN THE CASE OF FRAUD OR WILLFUL MISCONDUCT OR TOAMOUNTS PAYABLE TO A THIRD PARTY THAT ARE SUBJECT TO INDEMNIFICATION PURSUANTTO THIS ARTICLE 11.

##  

# ***ARTICLE XII***

# * *

# ***CONFIDENTIALITY AND PUBLICITY***

# * *

## Section 12.1           **Proprietary Information.**Pursuant tothis Agreement, a Party receiving Proprietary Information from the other,directly or indirectly, will treat such Proprietary Information asconfidential, will use such Proprietary Information only for the purposes ofthis Agreement and will not disclose, and will take all reasonable precautionsto prevent the disclosure of, such Proprietary Information to (a) any of itsofficers, directors, managers, equity holders, employees, agents,representatives, Affiliates or consultants who are not required to know suchProprietary Information or who are not bound by a like obligation ofconfidentiality or (b) to Third Parties.

##  

## Section 12.2           **Disclosures Required by Law.**In theevent the recipient Party is required (i) under applicable Legal Requirementsto disclose Proprietary Information of the disclosing Party to any GovernmentalAuthority to obtain any Regulatory Approval for the Product, (ii) to discloseProprietary Information in connection with bona fide legal process (includingin connection with any bona fide dispute hereunder) or (iii) to discloseProprietary Information under the rules of the securities exchange upon whichits securities are traded, the recipient Party may do so only if it limitsdisclosure to that purpose after giving the disclosing Party prompt writtennotice of any instance of such a requirement in reasonable time for thedisclosing Party to attempt to object to or to limit such disclosure. In the eventof disclosures

 

7

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## required under applicable Legal Requirements,the recipient Party shall cooperate with the disclosing Party as reasonablyrequested thereby.

##  

## Section 12.3           **Publicity.**Neither Party will originateany publicity, news release, public comment or other public announcement,whether to the press, to stockholders, or otherwise, relating to thisAgreement, without the consent of the other Party, except for such announcementwhich, in accordance with the advice of legal counsel to the Party making suchannouncement, is required by law; provided, however, that eachParty shall be entitled to refer publicly to the relationship of the Partiesreflected in this Agreement in a manner that is consistent with the joint pressrelease issued by the Parties and that is not damaging to the business orreputation of the other Party. Except as otherwise permitted pursuant to theimmediately preceding sentence, any Party making any announcement which isrequired by law will, unless prohibited by law, give the other Party anopportunity to review the form and content of such announcement and commentbefore it is made. Either Party shall have the right to make such filings withgovernmental agencies, including the United States Securities and ExchangeCommission (the “SEC”), as to the contents and existence of thisAgreement as it shall reasonably deem necessary or appropriate. In such event,the filing Party shall consult with the other Party with respect to the extentof such disclosure, including whether and to what extent confidential treatmentshall be sought; provided, that, notwithstanding the foregoing,the filing Party shall retain ultimate control and responsibility for anydisclosure with the SEC. The Parties have agreed upon the form and content of ajoint press release to be issued by the Parties promptly following theexecution of this Agreement. Once such press release or any other writtenstatement is approved for disclosure by both Parties, either Party may makesubsequent public disclosure of the contents of such statement without thefurther approval of the other Party. The provisions of this Article 12 shallsurvive termination of the agreement and shall remain in effect until a datethree years after the Term of this Agreement.

##  

# ***ARTICLE XIII***

# * *

# ***NOTICES***

# * *

## Section 13.1           **Notices.**All notices required orpermitted hereunder shall be given in writing and sent by facsimiletransmission (with a copy sent by first-class mail), or mailed postage prepaidby certified or registered mail (return receipt requested), or sent by anationally recognized express courier service, or hand-delivered at thefollowing address:

##  

If to Depomed:

 

Depomed, Inc. 1360 O’Brien Drive Menlo Park, California  94025Attention:  PresidentFax No.:  (650) 462-9991

 

If to Watson:

 

Watson Pharma, Inc.

 

8

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360 Mt. Kemble Avenue Morristown, New Jersey 07962Attention:  President, Brand DivisionFax No:  (973) 355-8580

 

With a copy to:

 

Watson Pharmaceuticals, Inc.

311 Bonnie Circle Corona, California 92880Attention:  General Counsel Fax No:  (951) 493-5821

 

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

 

# ***ARTICLE XIV***

# * *

# ***INSURANCE***

# * *

## Section 14.1           **Insurance.**

##  

### (a)           Duringthe Term and for a period of two (2) years after any expiration or terminationof this Agreement, each Party shall maintain (i) a commercial general liabilityinsurance policy or policies with minimum limits of $10 million per occurrenceand $10 million in the aggregate on an annual basis and (ii) a productliability insurance policy or policies with minimum limits of $10 million peroccurrence and $15 million in the aggregate on an annual basis.

###  

### (b)           Uponrequest, each Party shall provide certificates of insurance to the otherevidencing the coverage specified herein. Neither Party’s liability to theother is in any way limited to the extent of its insurance coverage.

###  

# ***ARTICLE XV***

# * *

# ***MISCELLANEOUS***

# * *

## Section 15.1           **Headings.**The titles, headings orcaptions and paragraphs in this Agreement are for convenience only and do notdefine, limit, extend, explain or describe the scope or extent of thisAgreement or any of its terms or conditions and therefore shall not beconsidered in the interpretation, construction or application of thisAgreement.

##  

## Section 15.2           **Severability.**In the event that any ofthe provisions or a portion of any provision of this Agreement is held to beinvalid, illegal, or unenforceable by a court of competent jurisdiction or agovernmental authority, such provision or portion of provision will beconstrued and enforced as if it had been narrowly drawn so as not to beinvalid, illegal, or unenforceable, and the validity, legality, andenforceability of the enforceable portion of any such provision and theremaining provisions will not be adversely affected thereby.

##  

## 9

## 

##  

## Section 15.3                             **Entire Agreement.**This Agreement,together with the schedules and exhibits hereto and the ConfidentialityAgreement, all of which are incorporated by reference, contains all of theterms agreed to by the Parties regarding the subject matter hereof andsupersedes any prior agreements (including without limitation the OriginalAgreement), understandings, or arrangements between them, whether oral or inwriting.

##  

## Section 15.4                             **Amendments.**This Agreement may not beamended, modified, altered, or supplemented except by means of a writtenagreement or other instrument executed by both of the Parties hereto. No courseof conduct or dealing between the Parties will act as a modification or waiverof any provisions of this Agreement.

##  

## Section 15.5                             **Counterparts.**This Agreement may beexecuted in any number of counterparts, each of which will be deemed anoriginal as against the Party whose signature appears thereon, but all of whichtaken together will constitute but one and the same instrument.

##  

## Section 15.6                             **Waiver.**The failure of either Party toenforce or to exercise, at any time or for any period of time, any term of orany right arising pursuant to this Agreement does not constitute, and will notbe construed as, a waiver of such term or right, and will in no way affect thatParty’s right later to enforce or exercise such term or right.

##  

## Section 15.7                             **Force Majeure.**

##  

### (a)                                 In the event of anyfailure or delay in the performance by a Party of any provision of thisAgreement due to acts beyond the reasonable control of such Party (such as, forexample, fire, explosion, strike or other difficulty with workmen, shortage oftransportation equipment, accident, act of God, declared or undeclared wars,acts of terrorism, or compliance with or other action taken to carry out theintent or purpose of any law or regulation) (a “Force Majeure Event”),then such Party shall have such additional time to perform as shall bereasonably necessary under the circumstances. In the event of such failure ordelay, the affected Party will use its diligent efforts, consistent with soundbusiness judgment and to the extent permitted by law, to correct such failureor delay as expeditiously as possible. In the event that a Party is unable toperform by a reason described in this Section 15.7, its obligation to performunder the affected provision of this Agreement shall be suspended during suchtime of nonperformance.

###  

### (b)                                 Neither Party shall beliable hereunder to the other Party nor shall be in breach for failure toperform its obligations caused by a Force Majeure Event. In the case of anysuch event, the affected Party shall promptly, but in no event later than 10days of its occurrence, notify the other Party stating the nature of thecondition, its anticipated duration and any action being taken to avoid orminimize its effect. Furthermore, the affected Party shall keep the other Partyinformed of the efforts to resume performance. After sixty (60) days of suchinability to perform, the Parties agree to meet and in good faith discuss howto proceed. In the event that the affected Party is prevented from performingits 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 tothe provisions of Sections 8.4(b).

###  

### 10

### 

###  

## Section 15.8                             **Successors and Assigns.**Subject toSection 15.9, this Agreement shall be binding upon and shall inure to thebenefit of the Parties hereto and their respective successors and assignspermitted under this Agreement.

##  

## Section 15.9                             **Assignment.**This Agreement and therights granted herein shall not be assignable by either Party hereto withoutthe prior written consent of the other Party. Any attempted assignment withoutconsent shall be void. Notwithstanding the foregoing, a Party may transfer,assign or delegate its rights and obligations under this Agreement withoutconsent to (a) an Affiliate or (b) a successor to all or substantially all ofits business or assets of the assigning Party to which this Agreement relates,whether by sale, merger, consolidation, acquisition, transfer, operation of lawor otherwise.

##  

## Section 15.10                      **Construction.**The Parties acknowledgeand agree that: (a) each Party and its representatives have reviewed andnegotiated the terms and provisions of this Agreement and have contributed toits revision; and (b) the terms and provisions of this Agreement will beconstrued fairly as to each Party hereto and not in favor of or against eitherParty regardless of which Party was generally responsible for the preparationor drafting of this Agreement. Unless the context of this Agreement otherwiserequires: (i) words of any gender include each other gender; (ii) words usingthe singular or plural number also include the plural or singular number,respectively; (iii) the terms “hereof,” “herein,” “hereby,” and derivative orsimilar 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 notnecessarily exclusive; and (vi) the term “including” or “includes” means “includingwithout limitation” or “includes without limitation.”  Whenever this Agreement refers to a number ofdays, such number shall refer to calendar days unless business days arespecified.

##  

## Section 15.11                      **Governing Law.**This Agreement will beconstrued under and in accordance with, and governed in all respects by, thelaws of the State of New York, without regard to its conflicts of lawprinciples.

##  

## Section 15.12                      ****EquitableRelief****. Each Party acknowledges that a breach by it of theprovisions of this Agreement may not reasonably or adequately be compensated indamages in an action at law and that such a breach may cause the other Partyirreparable injury and damage. By reason thereof, each Party agrees that theother Party is entitled to seek, in addition to any other remedies it may haveunder this Agreement or otherwise, preliminary and permanent injunctive andother equitable relief to prevent or curtail any breach of this Agreement bythe other Party; provided, however, that no specification in thisAgreement of a specific legal or equitable remedy will be construed as a waiveror prohibition against the pursuing of other legal or equitable remedies in theevent 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 predicatedupon this Agreement, or otherwise, will not constitute a defense to theenforcement by the other Party, or its successors or assigns, of the covenantscontained in this Agreement.

##  

## Section 15.13                      **Relationship Between Parties.**TheParties hereto are acting and performing as independent contractors, andnothing in this Agreement creates the relationship of partnership, jointventure, sales agency, or principal and agent. Neither Party is the agent ofthe

 

11

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## other, and neither Party may hold itself outas such to any other Party. All financial obligations associated with eachParty’s business will be the sole responsibility of such Party.

##  

[Signaturepage follows]

 

12

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IN WITNESS WHEREOF, the Parties have caused this Agreement to beexecuted 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 |

 

----

 

***ConfidentialInformation, indicated by [***], has been omitted from this filing and filedseparately 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                                  |

 

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

 

**Schedule 3.2**

 

**Depomed Initial JSC Representatives:**

 

**[***] (Co-chair*)***

**[***]**

 

**Watson Initial JSCRepresentatives:**

 

**[***] (Co-chair*)***

**[***]**

 

----

 

***ConfidentialInformation, indicated by [***], has been omitted from this filing and filedseparately with the Securities Exchange Commission***

 

**Schedule 7.1**

 

**Example Calculation of PromotionalFees**

 

**[***]**

 

----