**EXHIBIT 10.1**

**TERMINATION AND ASSIGNMENT AGREEMENT**

This Termination andAssignment Agreement (the “Agreement”) is made and entered into this 5thday of July 2007, by and between Depomed, Inc. (“Depomed”), a Californiacorporation having an address at 1360 O’Brien Drive, Menlo Park, California94025, and Esprit Pharma, Inc., (“Esprit”), a Delaware corporationhaving an address at 2 Tower Center Boulevard, East Brunswick, New Jersey08816.

**RECITALS**

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

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

It is therefore agreed asfollows:

# **1.             DEFINITIONS**

The terms defined in thisArticle 1 shall, for all purposes of this Agreement, have the followingmeanings:

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

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

 

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

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

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

“Esprit Change of Control”means (i) the acquisition by any person or group (as defined in Section13(d)(3) or 14(d)(2) of the Securities and Exchange Act of 1934, as amended) ofdirect or beneficial ownership (as defined in Rule 13d-3 under the Securitiesand Exchange Act of 1934, as amended) of more than fifty percent of the votingstock of Esprit; (ii) any merger, amalgamation or consolidation of Esprit or anAffiliate of Esprit with another corporation or other entity in which thestockholders of Esprit, immediately prior to such amalgamation, consolidation,or merger, own less than fifty percent of the voting stock of the survivingcorporation immediately after such transaction; or (iii) the sale or exclusivelicense of substantially all of the assets of Esprit.  Notwithstanding the foregoing, for purposesof Esprit Licensed Product detailing obligations referred to in Section 6.2below, an Esprit Change of Control does not include any transaction or seriesof related transactions between Esprit and any existing stockholder of Espritthat would otherwise constitute an Esprit Change of Control.

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

“FDA” means theUnited States Food and Drug Administration or any successor United Statesgovernmental agency performing similar functions with respect to pharmaceuticalproducts.

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

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

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

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

“Party” means Depomedor Esprit, and “Parties” means both Depomed and Esprit and theirAffiliates.

 

 

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

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

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

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

“Trademark(s)” meansthe Proquin® trademark, U.S. Registration No. 2,968,719, and all related domainnames identified on Exhibit A, and other common law trademark rightsrelated thereto.

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

# **2.             TERMINATION OF PROQUIN® XR AGREEMENTS**

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

##                 2.2           Termination of Co-PromotionAgreement.  The Co-PromotionAgreement is hereby terminated in its entirety, provided that the rights andobligations provided in Section 10 and Section 11 shall survive suchtermination as provided in Section 10.2 and Section 11.2.

##                 2.3           Termination of License Agreement.  The License Agreement is hereby terminated inits entirety, provided that the rights and obligations identified in Section20.6 of the License Agreement shall survive such termination.

##                 2.4           Conflicting Terms.  Notwithstanding the provisions of theforegoing Sections 2.1, 2.2 and 2.3, to the extent that any surviving rightsand obligations of the Parties under the ProQuin® XR Agreements directlyconflict with the express rights and obligations of the Parties providedherein, the terms of this Agreement shall govern.

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

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

# **3.             PAYMENT OBLIGATIONS**

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

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

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

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

# **4.             INTELLECTUAL PROPERTY MATTERS; PRODUCT DOCUMENTATION**

#                 4.1           Termination of Rights and Licenses;Reversion of Rights.  Withoutlimiting the generality of Section 2, all of Esprit’s rights and licenses underthe following Sections of the License Agreement shall, as of the EffectiveDate, terminate, and all rights and licenses granted therein shall immediatelyand automatically revert to Depomed: Sections 2.1, 2.2, and 4.1.

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

4.3           Product Documentation.* *Esprit herebyassigns to Depomed Esprit’s right, title and interest in and to any and allpromotional or other materials or documents (including sales

 

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

#  **5.            REGULATORY MATTERS; RECALLS**

#                 5.1           Transfer of Regulatory Approvals;Notification to FDA.  Esprit herebyassigns to Depomed all of Esprit’s right, title and interest in and to any andall Regulatory Data, Regulatory Approvals and other filings with or approvalsgranted by any and all agencies or authorities of the United States federalgovernment and any state or local agencies or authorities that pertain orrelate to the Licensed Product.  On theEffective Date, Esprit shall send executed letters in substantially the formsattached hereto as Exhibit B-1 and Exhibit B-2 to FDA authorizingthe transfer of the NDA and the IND for the Licensed Product to Depomed.

#                 5.2           Regulatory Records.  On the Effective Date, Esprit shall deliverto Depomed all files and documents in Esprit’s possession or control as of suchdate relating to the approvals or filings described in Section 5.1, achronology of discussions with FDA relating to the Licensed Product, and otherinformation in Esprit’s possession or control as of such date necessary tomaintain compliance with the US regulatory authorities.

###                 5.3           Communication with RegulatoryAuthorities; Product Complaints. From and after the effective date of the transfer by Esprit to Depomed ofthe IND and NDA for the Licensed Product as described in Section 5.1, Depomedshall have the sole right and obligation to: (i) take all actions and conductall communications with the appropriate US regulatory authorities in respect ofsuch IND and NDA, including preparing and filing all reports (including adversedrug experience reports) with the appropriate US regulatory authorities; (ii)take all actions and conduct all communications with Third Parties (includingwithout limitation patients, pharmacists, physicians and other health careproviders) in respect of Licensed Product sold pursuant to such NDA (whethersold before or after the Effective Date), including responding to allcomplaints in respect thereof, including complaints related to tampering orcontamination; (iii) investigate all complaints and adverse drug experiences inrespect of Licensed Product sold pursuant to such NDA (whether sold before orafter the Effective Date); and (iv) respond to any inquiry related to theLicensed Product directed to Esprit from and after the Effective Date from anygovernmental health authority (including without limitation the FDA and anystate, county or other health authority). Following the Effective Date, as provided in the Transition Plan, Espritwill promptly notify Depomed’s Regulatory Affairs department in accordance withapplicable laws and regulations, and in reasonably sufficient time to allowDepomed to make any filings with, or notification to, governmental authoritieswithin the time periods required by law, of any inquiry (written or verbal)received by Esprit related to any of the foregoing, including withoutlimitation any inquiry received by Esprit with respect to the Licensed Product(either commercial drug product or commercial samples) bearing Esprit’s name onthe container-closure.  Esprit shallcooperate with Depomed’s reasonable requests and use commercially reasonableefforts to assist Depomed in connection with any of the foregoing.

 

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

###                 5.5           Recalls.  From and after the Effective Date, Depomedshall have the sole right and obligation to conduct, and shall bear all costsand expenses in connection with, voluntary and involuntary recalls of units ofLicensed Product (whether sold before or after the Effective Date), includingrecalls required by any US regulatory authority; provided, however, that to theextent that any such recall is involuntary and is attributable to LicensedProduct sold by Esprit or its Affiliates prior to the Effective Date, thenEsprit shall reimburse Depomed for all reasonable costs and expenses actuallyincurred by Depomed in connection with the conduct of the recall of suchLicensed Product, including without limitation, the cost of replacing suchLicensed Product, unless Depomed is required to bear such costs and expensesunder Section 13.3 of the Supply Agreement, in which case Esprit shall not berequired to so reimburse Depomed.  EachParty promptly (and in any event within the time periods required by law) shallnotify the other Party in the event that the notifying Party becomes aware thata recall of Licensed Product sold by Esprit is necessary.

# **6.             TRANSITIONAL COMMERCIAL OBLIGATIONS**

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

###                 6.2           LicensedProduct Post-Termination Detailing. Commencing on the Effective Date and continuing until the earlier of (a)September 15, 2007 or (b) the occurrence of an Esprit Change of Control, Espritshall assign its field sales force, currently consisting of 158 members, tomaking Detail Calls, as specified in the Transition Plan, and shall implementthe incentive compensation program specified in the Transition Plan.  Except in the instance of a breach of Section6.4, Esprit shall have no liability to Depomed whatsoever in connection withthe acts and omissions of Esprit’s field sales force in connection with suchDetail Calls.

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### *               *6.3           Distribution Channel.

### (a)           Exhibit D attached hereto sets forth, to the bestof Esprit’s knowledge, a true and accurate reconciliation (the “DistributionChannel Reconciliation”), as of the Effective Date, of all quantities ofLicensed Product (including Licensed Product samples) purchased by Esprit fromDepomed pursuant to the Supply Agreement against:  (i) the current inventory of Licensed Productowned by Esprit and held at its Third Party logistics provider (includingsamples of Licensed Product); (ii) Licensed Product sold by Esprit towholesalers and distributors, and held in inventory at wholesalers anddistributors (specifying quantities held at each wholesaler and distributor) asof June 29, 2007 (separately setting forth and identifying Licensed Product forwhich a return is pending or in process, as indicated, for example, by arequest for a return authorization number); (iii) Licensed Product donated tocharity by Esprit; (iv) Licensed Product dispensed to patients through June 30,2007, as reflected in data provided by IMS Health Incorporated; (v) LicensedProduct distributed as samples to physicians or others authorized to receiveLicensed Product samples; (vi) Licensed Product destroyed by Esprit (whether inconnection with Licensed Product Returns or otherwise); (vii) samples ofLicensed Product in the possession of Esprit sales representatives; (viii)Licensed Product that does not correspond to the any other category specifiedin this Section 6.3 and that is not held at retail pharmacies (with adescription of the status of such Licensed Product as of the Effective Datespecifying the location where such Licensed Product is held and the purpose forholding such Licensed Product at that location, or a description of how suchLicensed Product was disposed of, and the purpose for its disposition); and(ix) Licensed Product held at retail pharmacies that has not been dispensed topatients as of the Effective Date (assuming for purposes of this item (ix) thatthe information set forth in item (iv) above is accurate and current throughthe Effective Date).  The Transition Plansets forth Esprit’s obligations with respect to actions to be taken followingthe Effective Date in respect of inventory of Licensed Product existing as ofthe Effective Date.

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

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

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# Licensed Product in adherence to applicable laws and incompliance with the then current Pharmaceutical Research and Manufacturers ofAmerica Code on Interactions with Healthcare Professionals.

# 6.5           Covenantsof Depomed.  Depomed shall performits obligations under the Transition Plan (a) only in a manner which isconsistent with FDA and all other applicable regulatory approvals orrequirements which are then in effect with respect to the Licensed Product and(b) in compliance with all applicable laws, restrictions and regulations of theFDA, the Department of Commerce and any other United States, state, local, orapplicable agency or authority.  Depomedshall (a) be responsible for submitting all necessary filings and taking allsuch actions necessary to have the Licensed Products packaged with NDC numbersof Depomed; and (b) not sell or offer for sale any Licensed Products bearing anEsprit NDC Number; provided, however, that from and after January 1, 2010,Depomed may sell or offer for sale Licensed Product bearing the NDC number1391300150.

# 7.             **COMMERCIAL****CONTRACTS; PRODUCT RETURNS, CHARGEBACKS ANDREBATES**

###                 7.1           CommercialContracts.

###                                 (a)           Exhibit E sets forth a completeand correct list of each contract to which Esprit is a party that relatesexclusively to the manufacture, marketing, sale or distribution of the LicensedProduct.  Except as otherwise provided inthe Transition Plan, as promptly as reasonably possible on or after theEffective Date, Esprit shall use commercially reasonable efforts to terminateeach such contract.

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

                7.2           ProductReturns.  Esprit will be responsiblefor issuing credits or other forms of reimbursement, at its own expense, inconnection with all Licensed Product bearing an Esprit NDC Number that isreturned after the Effective Date, and shall process and issue credits (orrender reimbursement in such other form as Esprit may determine) for all suchreturned Licensed Product.

###                 7.3           Government Rebates.  Esprit will be responsible for all rebatespursuant to any government rebate programs with respect to government claimsfor the Licensed Product bearing an Esprit NDC Number sold (whether sold beforeor after the Effective Date) and accruing after the Effective Date.  Any such rebate shall continue to beprocessed and issued pursuant to the 

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

###                 7.4           Commercial Rebates.  Esprit will be responsible for all rebateswith respect to the Licensed Product bearing an Esprit NDC Number which areowed to any managed care provider, wholesaler or retailer with whom Esprit hadentered into a commercial rebate agreement, and shall process and issue anysuch rebate.

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

###                 7.6           Mutual Expectations Regarding Licensed Product Returns.  Without limiting in any way Esprit’sobligations under this Article VII or any other provision of this Agreement,the parties acknowledge that as of the Effective Date, and on the basis of (a)the Distribution Channel Reconciliation, and (b) the expiration dating ofLicensed Product Distributed by Esprit through the Effective Date (other thanapproximately 900 bottles of Licensed Product in the 50 count tradepresentation with November 2008 expiration dating that have been Distributed byEsprit), and (c) Esprit’s obligations under this Agreement, the Partiesanticipate that it is likely that by December 31, 2008, Esprit will havecomplied with any financial obligations it has under this Agreement in respectof Licensed Product returns (provided that Esprit complies promptly and in allrespects with its obligations under this Agreement and that expired LicensedProduct Distributed by Esprit is returned to Esprit before or promptlyfollowing its expiration in accordance Esprit’s current returned goods policy).

# **8.             CONFIDENTIALITY**

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

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### practicable, to clinical investigators is inaccordance with a written agreement imposing essentially the same obligation ofconfidentiality on such Party as is imposed upon the recipient hereunder.  For avoidance of doubt, this Section shallnot limit or replace the obligations of the Parties under Section 8 of theLicense Agreement.

# **9.             REPRESENTATIONS AND WARRANTIES**

### Each Party hereby represents and warrants to theother Party as follows:

###                                 (a)           It is a corporation duly organized,validly existing and in good standing under the laws of the jurisdiction of itsincorporation.  It has all requisitepower and authority to carry on its business and to own and operate its propertiesand assets.  The execution, delivery andperformance of this Agreement have been duly authorized by its Board ofDirectors.  Such Party has obtained allauthorizations, consents and approvals, governmental or otherwise, necessaryfor the execution and delivery of this Agreement, and to otherwise perform suchParty’s obligations under this Agreement.

###                                 (b)           There is no pending or, to itsknowledge, threatened litigation involving it which would have any materialadverse effect on this Agreement or on its ability to perform its obligationshereunder.

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

# **10.          INDEMNIFICATION**

### 10.1         Indemnification. Each Party will defend, at its own expense, indemnify and hold harmlessthe other Party and its Affiliates from and against any and all damages,liabilities, losses, costs, and expenses, including attorneys fees(collectively, “Losses”), arising out of any claim, suit or proceeding (“Claim”)brought against the other Party (or paid in settlement of any threatened Claim)to the extent such Claim or threatened Claim is based upon, arises out of, orrelates to (i) any breach or violation of, or failure to perform, any covenantor agreement made by such indemnifying Party in this Agreement, unless waivedin writing by the indemnified Party; (ii) any breach of the representations orwarranties made by such indemnifying Party in this Agreement (ignoring forpurposes of this Section 10.1 any knowledge qualifiers included in any such representationsor warranties); or (iii) the negligence or willful misconduct of theindemnifying Party, except (under any of (i) and (ii)) to the extent arisingout of the breach, violation, failure, negligence or willful misconduct of theindemnified Party.  Each Party agreesthat it shall promptly notify the other in writing of any such Claim orthreatened Claim and give the indemnifying Party full information andassistance in connection therewith.  Theindemnifying Party shall have the sole right to control the defense if any suchClaim and the sole right to settle or compromise any such Claim, except thatthe prior written consent of the other Party shall be required in connectionwith any settlement or compromise which could (i) place any obligation on orrequire any action of such other Party; (ii) admit or imply any liability orwrongdoing of such other Party; or (iii) adversely affect the goodwill orpublic image of such 

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### other Party. Notwithstanding the foregoing, the indemnified Party may participatetherein through counsel of its choice, but the cost of such counsel shall beborne solely by the indemnified Party.

### 10.2         Basket.  There shall be no obligation to indemnify, defend and hold harmlessunder Section 10.1 unless and until the aggregate of all Losses for which theapplicable indemnified Party is entitled to indemnification thereunder exceedson a cumulative basis an amount equal to $25,000.00, in which event theindemnified Party shall be entitled to indemnification in respect of allindemnifiable Losses.

# **11.          LIMITATION OF LIABILITY**

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

# **12.          PUBLICITY**

Neither Party will originateany publicity, news release, public comment or other public announcement, writtenor oral, 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 each Party shall beentitled to refer publicly to the termination of the ProQuin® XR Agreements ina manner that is not damaging to the business or reputation 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 shallhave the right to make such filings with governmental agencies, includingwithout limitation the United States Securities and Exchange Commission, as tothe contents and existence of this Agreement as it shall reasonably deemnecessary or appropriate, provided that theParties shall work together to redact any Proprietary Informationcontained therein in a mutuallyagreeable manner that complies with the applicable requirements of suchregulatory authority, provided, however, that the final determination as to therequired disclosure of Proprietary Information shallbe made by the Party making the disclosure.  The Parties have agreed upon the form andcontent of a joint press release to be issued by the Parties promptly followingthe execution of this Agreement.

 

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# **13.          ASSIGNABILITY**

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

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

# **14.          NOTICES**

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

                                DEPOMED,INC.

                                1360O’Brien Drive

                                MenloPark, California  94025

                                Attention:  President

                                Facsimile:  650-462-9991

                                ESPRITPHARMA, INC.

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

##                 14.2         Receipt.  Any such notice mailed as aforesaid shall bedeemed to have been received by and given to the addressee on the datespecified on the notice of receipt and delivery evidenced to the sender.

# **15.          MISCELLANEOUS**

##                 15.1         Enforceability.  It is the desire and intent of the Partiesthat the provisions of this Agreement shall be enforced to the extentpermissible under the laws and public policies applied in each jurisdiction inwhich enforcement is sought. Accordingly, if any particular provision of this Agreement whichsubstantially affects the commercial basis of this Agreement shall bedetermined to be invalid or unenforceable, such provision shall be amended ashereinafter provided to delete therefrom or revise the portion thus determinedto be invalid or unenforceable, such amendment to apply only with respect tothe operation of such provision of this Agreement in the particularjurisdiction for which such determination is made.  In such event, the Parties agree to usereasonable efforts to agree on substitute provisions, which, while valid, willachieve as closely as possible the same economic effects or commercial basis asthe invalid provisions, and this Agreement otherwise shall continue in fullforce and effect.  If the Parties cannotagree 

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## to such revision within sixty days after suchinvalidity or unenforceability is established, the matter may be submitted byeither Party to arbitration as provided in this Agreement to finalize suchrevision.

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

##                 15.3         Waiver.  The waiver by a Party of any single defaultor breach or succession of defaults or breaches by the other shall not depriveeither Party of any right under this Agreement arising out of any subsequentdefault or breach.

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

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

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

## [signature page follows]

 

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IN WITNESS WHEREOF, theundersigned have caused this Agreement to be duly executed by their dulyauthorized officers on the date first above written.
| DEPOMED, INC.       |                    |
|---------------------|-------------------------|
|                |                    |
| By:                 | /s/ John W. Fara, Ph.D. |   |
|                | John W. Fara, Ph.D.     |   |
|                | President and CEO       |   |
|                |                    |   |   |
| ESPRIT PHARMA, INC. |                    |
|                |                    |
| By:                 | /s/ John T. Spitznagel  |   |
|                | John T. Spitznagel      |   |
|                | Chairman and CEO        |   |

 

 

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