Exhibit 10.1


 


THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF
THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


CONFIDENTIAL TREATMENT REQUESTED


 


EXCLUSIVE LICENSE
AND MARKETING AGREEMENT


 


This Exclusive License and Marketing Agreement is made
and entered into this 21st day of July, 2005, by and between Depomed, Inc.
(“Depomed”), a California corporation having an address at 1360 O’Brien
Drive, Menlo Park, California 94025, and Esprit Pharma, Inc., (“Esprit”),
a Delaware  corporation having an address
at 2 Tower Center Boulevard, East Brunswick, New Jersey  08816.


 


RECITALS


 


A.                                   Depomed
is the owner of original processes, patents and know-how for the development
and manufacture of, and has marketing rights in the Territory (as defined
below) to, the Licensed Product (as defined below).


 


B.                                     Esprit
is engaged in the business of distributing and marketing pharmaceutical
products.


 


C.                                     Esprit
desires to obtain rights to market and sell the Licensed Product in the
Territory.


 


It is therefore agreed as follows:


 


1.                                       Definitions.


 


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


 


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


 


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


 


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


 





















 


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


 


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


 


“Esprit Change of Control” means (i) the
acquisition by any person or group (as defined in Section 13(d)(3) or
14(d)(2) of the Securities and Exchange Act of 1934, as amended) of direct
or beneficial ownership (as defined in Rule 13d-3 under the Securities and
Exchange Act of 1934, as amended) of more than fifty percent of the voting
stock of Esprit; (ii) any merger, amalgamation or consolidation of Esprit
or an Affiliate of Esprit with another corporation or other entity in which the
stockholders of Esprit, immediately prior to such amalgamation, consolidation,
or merger, own less than fifty percent of the voting stock of the surviving
corporation immediately after such transaction; or (iii) the sale or
exclusive license of substantially all of the assets of Esprit.


 


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


 


“First Commercial Sale”
means the date of the first commercial sale of Licensed Product in the
Territory.


 


“GR System” means
Depomed’s delivery system designed to be retained in the stomach for an
extended period of time while that delivery system delivers the incorporated
drug or drugs, as described in the Patent Rights.


 


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


 


“Know-How” means all inventions, discoveries,
trade secrets, improvements and information not in the public domain, whether
or not patented or patentable (but excluding Patent Rights), together with all
experience, data, formulas, procedures and results, and improvements thereon,
now or hereafter developed or acquired by and proprietary or licensed with
right to sublicense to Depomed on the Effective Date or which are developed or
acquired during the term of and in connection with this Agreement, which relate
to or are used in conjunction with the development, manufacture or use of the
Licensed Product.


 


“Licensed Product” means the extended release
ciprofloxacin HCl pharmaceutical product known as ProquinTM XR
comprised of the GR System and the Active Ingredient.


 


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


 


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


 


“Net Sales” means the actual gross amount
invoiced on sales of the Licensed Product in the Territory by Esprit, its
Affiliates, sublicensees and assigns to independent, unrelated Third
Parties during a calendar year in bona fide arms length transactions, less the
following deductions 


 


2





















 


allowed and taken by Third Parties and not otherwise
recovered by or reimbursed to Esprit, its Affiliates, sublicensees or assigns: (a) freight,
insurance and other transportation charges to the extent added to the
sales price and set forth separately as such on the total amount invoiced;
(b) any sales, use, value-added, excise taxes and/or duties or allowances
on the selling price of the Licensed Product which fall due and are paid as a
consequence of such sale; (c) chargebacks, trade, quantity and cash
discounts and rebates actually allowed and taken to the extent customary in the
trade, including, without limitation, governmental rebates; (d) allowances
or credits, including but not limited to, allowances or credits to customers on
account of rejection, defects or returns of the Licensed Product or
because of a retroactive price reduction, and such other deductions (including without
limitation shortage deductions) actually taken by customers that are customary
in the trade; and (e) bad debt. Net Sales shall not include a sale or
transfer to an Affiliate, sublicensee and assign or if done for clinical,
regulatory or governmental purposes where no consideration is received but the
resale by such Affiliate, sublicensee, or assign shall be considered a sale of
such Licensed Product.


 


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


 


“Patent Rights” mean any patent application or
issued patent relating to the Licensed Product or improvement thereof or to
methods for making or using Licensed Product or improvement thereof, which
rights are owned or acquired by or licensed to Depomed as of the Effective Date
or which are developed or acquired by Depomed during the term of this
Agreement, in the United States, including any addition, continuation,
continuation-in-part, or division thereof or any substitute application
thereof, any reissue or extension of any such patent, and any confirmation
patent, registration patent revalidation patent, or patent of addition based on
any such patent.  All United States
patents and patent applications currently within this definition and applicable
to this Agreement are set forth in Exhibit A, which Exhibit shall
be amended as necessary to reflect changes or additions to the Patent Rights.


 


“Primary Care Market” means the market for the
Product in the Territory, excluding the Urology Market.


 


“Primary Position Detail Call” means a Call in
which (i) Licensed
Product is the first product detailed during the Call, (ii) a majority of
the total time of the Call is spent on the presentation of Licensed Product,
and (iii) key Licensed Product attributes are presented.


 


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


 


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


 


“Regulatory Data” means data including, but not
limited to, medical, toxicological, pharmacological and clinical data to the
extent necessary to, required for, or included in any 


 


3





















 


governmental regulatory filing to obtain or maintain
Regulatory Approval to Market the Licensed Product, including post-approval
reports, filings and submissions.


 


“Secondary Position
Detail Call” means a Call in which key Licensed Product attributes are
presented after a detail of another product.


 


“Supply Agreement” means the Supply Agreement,
dated as the date of this Agreement, by and between Depomed and Esprit related
to the supply of Licensed Product by Depomed to Esprit.


 


“Territory” means the United States, Puerto
Rico and the possessions of the United States.


 


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


 


“Trademark(s)” means
the Proquin® XR trademark,
for which Depomed has filed an application for federal registration with the
United States Patent and Trademark Office (Ser. No. 78/356,939, which was
approved for registration on April 22, 2005), and all related domain names
identified on Exhibit A, and other common law trademark rights related
thereto.


 


“Urology Market” means the market for the
Licensed Product comprising all urologists in the Territory.


 


“Valid Claim” mean a claim of an unexpired
issued patent falling within Patent Rights which shall not have been withdrawn,
canceled, or disclaimed nor held invalid by a court, tribunal, arbitrator or
governmental agency of competent jurisdiction in a final or unappealed or
unappealable decision.


 


2.                                       License Grant and Royalties.


 


2.1                                 License Grant. 
Depomed hereby grants to Esprit an exclusive license in the Territory
under the Patent Rights, with the right to grant sublicenses, to Market the
Licensed Product.


 


2.2                                 Trademarks.  Esprit shall
have the right to Market the Licensed Product under the Trademark.  Except as set forth in the preceding
sentence, nothing herein shall be deemed to give either Party any rights to the
trademarks of the other Party, provided that Esprit may freely refer to the
trademark “GR System” with respect to the Licensed Product so long as it is
used in a form that protects the proprietary interests of Depomed in such
trademark.


 


2.3                                 Royalties.


 


(a)                                  In consideration for the licenses granted
herein, Esprit will pay to Depomed an earned royalty of:


 


4





















 


(i)                                     fifteen percent (15%) of the first Twenty
Million Dollars ($20,000,000) of aggregate Net Sales of Licensed Product in the
Territory in each calendar year;


 


(ii)                                  seventeen and one-half (17.5%) of the
next Twenty Million Dollars ($20,000,000) of aggregate Net Sales of Licensed
Product in the Territory in each calendar year;


 


(iii)                               twenty percent (20%) of the next Forty Million Dollars
($40,000,000) of aggregate Net Sales of Licensed Product in the Territory in
each calendar year; and


 


(iv)                              twenty-five percent (25%) of aggregate
Net Sales of Licensed Product in the Territory in excess of Eighty Million
Dollars ($80,000,000) in each calendar year.


 


(b)                                 Notwithstanding the foregoing provisions
of Section 2.3(a), Depomed will be entitled to the minimum royalty
payments set forth on Exhibit B (each, a “Minimum Annual Royalty
Amount”) for each calendar year of the term of this Agreement beginning on
or after January 1, 2006); provided, however, that any minimum annual
royalty payment payable pursuant to this Section 2.3(b) shall be
pro-rated for any portion of any calendar year of the term of this Agreement
during which Depomed fails to meet its supply obligations to Esprit pursuant to
the Supply Agreement.


 


(c)                                  Esprit shall pay earned royalties in each
case for the greater of ten years from
the First Commercial Sale of the Licensed Product or until the Licensed Product
is no longer covered by a Valid Claim of an issued patent included in Patent
Rights.  If the Licensed Product was not
or is no longer covered by a Valid Claim but the ten-year period has not expired, then the aggregate annual Net
Sales that are subject to payment of earned royalty shall be reduced to one-half of such actual Net Sales (on
a pro rated basis for any partial year during which such reduced royalty rate
is in effect).  Upon the expiration of
such period as provided in this Section 2.3, Esprit shall have a fully
paid-up nonexclusive license to Market the Licensed Product in the Territory.


 


2.4                                 Payment of Royalties. 
Earned royalty payments under Section 2.3 shall be made, to the
extent permitted by law, within thirty days following the end of each calendar
quarter, and each payment shall include royalties which shall have accrued
during said calendar quarter.  The
quarterly payment for the fourth quarter of each calendar year beginning on January 1,
2006 shall be accompanied by a payment equal to the excess of the Minimum
Annual Royalty Amount applicable to such calendar year over the aggregate
amount of earned royalty payments for such calendar year otherwise payable
under Section 2.3.  Such quarterly
payments shall be accompanied by a report setting forth separately the Net
Sales of Licensed Product sold during said calendar quarter and the calculation
of royalties payable for such calendar quarter.


 


2.5                                 No Multiple Royalties. 
No multiple royalties shall be payable because the Licensed Product, its
manufacture, use or sale is or shall be covered by more than one Patent Right.


 


5





















 


2.6                                 Records.  Esprit and
its Affiliates, sublicensees and assigns shall keep and maintain records of Net
Sales.  Such records shall be open to
inspection at any mutually agreeable time during normal business hours within
three years after the royalty period to which such records relate by an
independent certified public accountant reasonably acceptable to Esprit but
selected by Depomed.  Said accountant
shall have the right to examine the records kept pursuant to this Agreement and
report findings of said examination of records to Depomed only insofar as it is
necessary to evidence any error on the part of Esprit.  This right of inspection shall be exercised
only once for any calendar year.  The
cost of such inspection shall be borne by Depomed unless the result of such
examination is the determination that Net Sales have been understated by at
least three percent for any calendar year, in which event Esprit shall bear the
reasonable cost of such inspection.


 


2.7                                 Licensed Product Derivatives. 
Any product that is sold by Esprit or an Affiliate, sublicensee or
assign of Esprit which is a derivative, analogue or modification of the
Licensed Product or which is included in the Patent Rights shall be considered
to be Licensed Product, on the Net Sales of which Esprit shall owe Depomed
royalties as set forth in Section 2.3.


 


2.8                                 Judgments.  In the event
of a judgment in any suit arising from or related to the Patent Rights or the
Trademark requiring Esprit to pay damages or a royalty to, grant a sublicense
to, or enter into a cross-licensing arrangement with, a Third Party or in the
event of a settlement of such suit consented to by Depomed (which consent shall
not be unreasonably withheld) requiring damages or royalty payments to be made,
sublicenses to be granted, or cross-licenses to be entered into, the future
royalty payments due to Depomed from the applicable Net Sales under this Agreement
(and the amount of any Minimum Annual Royalty Payment applicable pursuant to Section 2.3)
shall be correspondingly reduced by the amounts due under the requirement of
such judgment or under the terms of such settlement but not by more than fifty
percent thereof.


 


2.9                                 No Inconsistent License Grant. 
Except as expressly permitted, and only to the extent permitted, under Section 5.3(a) of
this Agreement, during the term of this Agreement, Depomed shall not grant to
any Third Party a license in the Territory under the Patent Rights to Market
the Licensed Product.


 


3.                                       License Fees.


 


Esprit shall make the following license fee payments
to Depomed:


 


(a)                                  Five Million Dollars ($5,000,000) on the
Effective Date;


 


(b)                                 Twenty-Five Million Dollars ($25,000,000)
on or before the fifteenth day after the Effective Date;


 


(c)                                  Ten Million Dollars ($10,000,000) on the
first anniversary of the Effective Date; and


 


(d)                                 Ten Million Dollars ($10,000,000) on the
second anniversary of the Effective Date.


 


6





















 


4.                                       Distribution; Supply; Non-competition.


 


4.1                                 Distribution in the Territory. 
Esprit shall be responsible for the Distribution of Licensed Product in
the Territory.


 


4.2                                 Supply.  Esprit shall
purchase from Depomed, on the terms and subject to the conditions set forth in
the Supply Agreement, all of Esprit’s requirements of the Licensed Product.


 


4.3                                 Order Entry.  Esprit or its third party contractor shall
provide all order entry, customer service, reimbursement management, warehousing,
physical distribution, invoicing, credit and collections and other related
facilities and services for the Distribution of Licensed Product in the
Territory.  Esprit or its third party
contractor shall be exclusively responsible for accepting and filling purchase
orders for Licensed Product and for processing billing and returns with respect
to Product.


 


4.4           Non-competition.  During the Term of this Agreement, neither
Esprit nor Depomed shall, whether for its own account or for the account or benefit
of any Third Party, offer for sale, sell, distribute or otherwise commercialize
in the Territory any product that includes the Active Ingredient, except as
contemplated by this Agreement.


 


5.                                       Diligence Obligations and Covenants of
Esprit.


 


5.1                                 Diligence Obligations of Esprit. 
Throughout the term of the Agreement, Esprit shall use its commercially
reasonable efforts to develop an active market for, and to Market, the Licensed
Product in the Territory.  In connection
with such obligations, and not intended as a limitation on the range of
obligations of the foregoing sentence, Esprit shall use its commercially
reasonable efforts to:


 


(a)                                  cause the First Commercial Sale to occur
no later than November 1, 2005 or, if later, within 15 days after Licensed
Product is available in commercial quantities pursuant to the terms of the
Supply Agreement;


 


(b)                                 provide a professional field sales force
sufficient to cover the Primary Care Market in the Territory from and after the
date that is six months after the First Commercial Sale (which sales force
shall consist of at least [***]
full-time representatives);


 


(c)                                  provide a professional field sales force
sufficient to cover urologists responsible for at least ninety percent of
ciprofloxacin HCl prescriptions written in the United States (which sales force
shall consist of at least [***]
full-time representatives from and after November 1, 2005 or, if later,
within 15 days after Licensed Product is available in commercial quantities
pursuant to the terms of the Supply Agreement);


 


THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF
THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


7





















 


(d)                                 build an active and continuous marketing
and sales program capable of addressing the market opportunity for the Licensed
Product in the Territory;


 


(e)                                  accept, and Distribute in response to,
customer orders and requests for Licensed Product in the Territory so as not to
result in shortages of Licensed Product in the Territory;


 


(f)                                    carry adequate inventories of Products to
service all accounts within the Territory;


 


(g)                                 provide a dedicated product specialist,
customer support and technical support for the Licensed Product at a level
reasonably calculated to assure sales performance, customer satisfaction
(including without limitation (A) establish and maintain a sufficiently
detailed tracking system to permit successful tracking of Products in the event
of a recall and (B) keep a record of all customer complaints and
communicate promptly to Depomed all such complaints);


 


(h)                                 provide reasonable and adequate
advertising and promotion capable of addressing the market opportunity for the
Licensed Product in the Territory (and, with respect to the period beginning on
the Effective Date and ending on December 31, 2006, consistent with the
marketing budget attached hereto as Exhibit C); and


 


(i)                                     provide sufficient samples of Licensed
Product for its field sales force.


 


5.2                                 Compliance with Regulations. 
Esprit shall perform its obligations in respect of the Distribution of
Licensed Product in the Territory and the Marketing of Licensed Product in the
Territory (a) only in a manner which is consistent with FDA and all other
applicable regulatory approvals or requirements which are then in effect with
respect to the Licensed Product and (b) in compliance with all applicable
laws, restrictions and regulations of the FDA, the Department of Commerce and
any other United States, state, local, or applicable agency or authority.  Esprit shall (a) limit
its claims of efficacy and safety for Licensed Product to those that are
consistent with approved promotional materials and FDA-approved prescribing
information for Licensed Product in the Territory, (b) not add, delete or
modify claims of efficacy and safety in the Marketing of Licensed Product under
this Agreement from those claims of efficacy and safety that are consistent
with the FDA-approved prescribing information and applicable law and (c) Market
the Licensed Product in adherence to applicable laws and in compliance with the
then current Pharmaceutical Research and Manufacturers of America Code on
Interactions with Healthcare Professionals.


 


8





















 


5.3                                 Sales Force.


 


(a)                                  Establishment
of Primary Care Sales Force.  In the event that Esprit fails to provide a professional field sales force
of at least [***] representatives
to cover the Primary Care Market in the Territory within six months after the
First Commercial Sale as required pursuant to Section 5.1(b), then Esprit
shall present to Depomed a plan of action to provide such a sales force of at
least [***] representatives within
nine months after the First Commercial Sale. 
If, as of the nine-month anniversary of the First Commercial Sale,
Esprit has not established and maintained a professional field sales force of
at least [***] representatives to
cover the Primary Care Market in the Territory, then, in Depomed’s sole
discretion, Depomed may, but shall have no obligation to, elect to either (i) convert
the license granted pursuant to Section 2.1 into a non-exclusive license
with respect to the Primary Care Market (in which event the license shall
remain exclusive with respect to the Urology Market), or (ii) terminate
the license granted pursuant to Section 2.1 with respect to the Primary
Care Market.  Either such election shall
take effect immediately upon written notice from Depomed to Esprit.  In the event that Depomed makes either such
election, the Parties shall negotiate in good faith any necessary or desirable
modifications to this Agreement (including without limitation modifications
with respect to the Distribution of the Licensed Product and the elimination of
Depomed’s non-competition obligations set forth in Section 4.4 above with
respect to the Primary Care Market) to ensure that Depomed receives the royalty
payment required pursuant to Section 2.3 with respect to Net Sales within
the Urology Market and that Esprit is reasonably compensated for any
Distribution of Licensed Product in respect of sales of Licensed Product not
made by Esprit or its sublicensees.


 


(b)                                 Maintenance of Sales Force. 
The parties acknowledge and agree that Depomed shall have the right to
terminate this Agreement for “Cause” pursuant to Section 15.2 with respect
to a breach by Esprit of its obligation to (i) maintain a sales force of
at least [***] representatives
(after the nine month anniversary of the First Commercial Sale) to cover the
Primary Care Market as required by Section 5.1(b) or (ii) maintain
a sales force of at least [***]
representatives to cover the Urology Market only after Depomed notifies Esprit
of such breach pursuant to Section 15.2 and Esprit fails to cure such breach
within sixty days after such notice from Depomed, as contemplated by Section 15.2.


 


5.4                                 Details Following an Esprit Change of
Control.  From and after the occurrence of an Esprit
Change of Control or any assignment of this Agreement by Esprit pursuant to Article 17,
during each calendar year of the term of this agreement, Esprit (or its
successor in interest or assignee, as applicable) shall provide the following
number of minimum Calls: (a) [***];
(b) [***]; (c) [***]; and (d) [***].  The foregoing minimum call obligations shall
be pro-rated for the calendar year in which the Esprit Change of Control or
assignment occurs, or any other partial calendar year of the term of this
Agreement.


 


THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF
THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


9





















 


6.                                       Promotional Materials.


 


Esprit shall limit its statements, discussions and
claims regarding the Licensed Product, including those as to safety and
efficacy, to those which are consistent with the Licensed Product labeling and
the promotional materials related to the Licensed Product.


 


7.                                       Manufacturing.


 


Nothing in this Agreement
is intended to grant to Esprit any rights to manufacture, have manufactured by
any Third Party, or otherwise produce Licensed Product.  Any such rights shall be granted only
pursuant to the Supply Agreement.


 


8.                                       Confidentiality.


 


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


 


9.                                       Regulatory Affairs


 


9.1                                 Regulatory Responsibility. 
Effective as of thirty days after the Effective Date, and thereafter
during the term of this Agreement, Esprit shall have full control and
authority, with full responsibility over, commercialization of Licensed Product
in the Territory, and all such activity shall be undertaken at Esprit’s expense.
Esprit will use commercially reasonable efforts in undertaking investigations
and actions required to maintain appropriate governmental approvals to market
Licensed Product in the Territory. 
During the thirty day period beginning on the Effective Date, Depomed
will cooperate with Esprit to transfer to Esprit such materials and
documentation reasonably requested by Esprit, and provide Esprit with such
other assistance as may be reasonably requested by Esprit, to facilitate the
transfer to Esprit of the responsibilities set forth in this Section 9.1.


 


9.2                                 Transfer of NDA. 
Within twenty days after receiving Esprit’s written request, Depomed
shall provide Esprit with a letter addressed to FDA authorizing and requesting
that 


 


10





















 


each of the NDA and IND owned by Depomed and
pertaining to Licensed Product in the Territory be transferred, in its
entirety, to the name of Esprit.  Depomed
shall provide Esprit with a copy of the letter and Esprit shall immediately
send a letter to FDA accepting the NDA and IND. 
Depomed will be entitled to copy and reference the NDA and IND, and any
safety database or other safety information related to the Licensed Product,
outside the Territory freely as it determines. Each Party will notify the other
immediately by telephone (with prompt written follow-up) of any inquiry,
contact or communication received from any governmental regulatory agency or
other official body (within or outside of the Territory) which relates to
Licensed Product or any component or ingredient thereof, and will promptly
furnish the other party with copies of all written communications relating
thereto sent to or received from such regulatory agency.  Esprit shall consult with Depomed prior to
making a material modification to the NDA or IND pertaining to the Licensed
Product, and shall consider in good faith Depomed’s views with respect to the
impact any such modification may have on the marketing and commercialization of
the Licensed Product outside of the Territory. 
Esprit shall provide, at Depomed’s expense, such cooperation as may be
reasonably necessary to assist Depomed in referencing the NDA or IND pertaining
to Licensed Product or safety information related to Licensed Product in
connection with regulatory applications and approvals for Licensed Product
outside of the Territory made by Depomed or Depomed’s licensees; provided that,
in Esprit’s reasonable judgment, such assistance is not unduly burdensome to
Esprit’s senior management.  In furtherance
and not in limitation of the immediately preceding sentence, Depomed may
request that Esprit supplement, at Depomed’s expense, the NDA related to the
Licensed Product (e.g., to include additional data related to the Licensed
Product) in connection with regulatory applications and approvals for Licensed
Product outside of the Territory, which modifications will be subject to the
written approval of Esprit, not to be unreasonably withheld.


 


9.3                                 Maintenance of NDA. 
Esprit shall bear responsibility for, and shall bear all costs related
thereto, to take such actions as may be necessary, in accordance with accepted
business practices and legal requirements, to obtain and maintain the
authorization and/or ability to Market the Licensed Product in the Territory.  Any required Phase IV studies related to the
Licensed Product shall be conducted by Esprit.


 


9.4                                 Communications with Regulatory
Authorities.  Esprit shall have the responsibility, and
shall bear all costs related to, communications with any government agencies to
satisfy its requirements regarding the authorization and/or continued
authorization to Market the Licensed Product in commercial quantities in the
Territory.  Depomed shall promptly notify
Esprit of any inquiry or other communication that it receives from the FDA
concerning the Licensed Product.  Esprit
shall handle all communications with the FDA concerning the Licensed Product
(other than any such communications by or on behalf of Depomed required to be
made in connection with the manufacture of Licensed Product by or on behalf of
Depomed), including but not limited to reporting adverse reactions and
responding to any inquiries concerning advertising or promotional materials,
and shall provide copies of all such communication to Depomed.  Depomed, however shall be able to communicate
with such governmental agency regarding the Licensed Product if:


 


(a)                                  Such communication is necessary to comply
with the terms of this Agreement or the requirements of any law, governmental
order or regulation; or


 


11





















 


(b)                                 Depomed, if practical, made a request of
such agency to communicate with Esprit instead, and such agency refused such
request;


 


(c)                                  Such communication relates to the CMC Section of
the NDA for the Licensed Product, manufacturing specifications related to the
Licensed Product, or the GR System generally (and not specifically to the
Licensed Product);


 


(d)                                 provided, however, that before making any
communication under (a), (b) or (c) of this Section, Depomed shall
give Esprit notice as soon as possible of Depomed’s intention to make such
communication, and Esprit shall be permitted to accompany Depomed, take part in
any such communications and receive copies of all such communications.


 


9.5                                 Medical Inquiries.  Esprit shall respond to medical questions or
inquiries relating to the Licensed Product and shall instruct its sales force
to direct medical inquiries either to its own medical personnel or to the
Esprit toll-free number referred to in Section 9.6, within a reasonable
time from the Effective Date.  Esprit
shall designate an individual to serve as medical liaison in order to ensure
consistency in the handling of medical inquiries.  The medical liaison will regularly review
Licensed Product inquiries and responses and will also be available for
responding to non-routine inquiries should these arise.


 


9.6                                 Toll-Free Number. 
Esprit shall maintain a toll-free telephone number to provide
information in response to inquiries from health care professionals and consumers.  This number shall be noted in all appropriate
advertising and promotional materials, except that Depomed may, at its option,
use a different number in advertising and promotional materials that it
develops for use outside of the Territory.


 


9.7                                 Adverse Reactions; Recalls. 
Except as otherwise set forth in the Supply Agreement, Esprit shall be
responsible for handling all complaints from customers in the Territory
relating to adverse reaction reports, adverse events, and recall activities
with respect the Licensed Product. 
Depomed shall promptly transfer and notify Esprit of any such
complaints, and shall cooperate with Esprit as necessary to resolve or address
the situation, including, without limitation, by providing detailed
distribution records to Esprit.


 


9.8                                 NDC Number.  The Parties acknowledge and agree that (a) the
Licensed Product may be distributed initially for a limited period under the
National Drug Code number for the Licensed Product assigned to Depomed and (b) Esprit
shall be responsible, at its expense, for complying with on Depomed’s behalf,
or assisting Depomed in its compliance, with all FDA and other obligations and
requirements (including without limitation adverse reaction reports, adverse
events, and recall activities) applicable to Depomed as a result of any and all
distribution of the Licensed Product under the National Drug Code number for
the Licensed Product assigned to Depomed.


 


9.9                                 Withdrawal of NDA. 
The Parties acknowledge and agree that “Cause” shall be deemed to exist pursuant
to Section 15.2 of this Agreement upon any breach of the provisions of
this Agreement (including without limitation this Article 9) by Esprit
that results in the 


 


12





















 


withdrawal of the NDA pertaining to Licensed Product,
or any material interruption in the supply of Licensed Product.


 


10.                                 Ownership of Technology; Third Party
Infringement.


 


10.1                           Ownership.  Depomed shall
(i) have and retain all right, title and interest in or Control over, as
applicable, all Depomed Patents, inventions, discoveries, and Know-How
concerning the Licensed Product, including formulations thereof, or methods of
making or using same which have been made, conceived, reduced to practice or
generated by its employees, agents, or other persons acting under its authority
prior to the Effective Date and (ii) have and retain all rights, title and
interest in all inventions, discoveries and Know-How relating to the Licensed
Product including formulations thereof, or methods of making or using same, or
Improvements thereof, which are made, conceived, reduced to practice or
generated, (A) solely by Depomed’s employees, agents, or other persons
acting under its authority, (B) solely by Esprit’ employees, agents, or
other persons acting under its authority or (C) jointly by Depomed’s
employees, agents, or other persons acting under Depomed’s authority and Esprit’s
employees, agents, or other persons acting under Esprit’s authority
(collectively, “Inventions”). 
Esprit shall make available to Depomed all information in its possession
necessary or expedient for the filing of patent applications arising out of or
related to Inventions.


 


10.2                           Third Party Infringement. 
If in the opinion of either Party any issued patent contained in the
Patent Rights has been infringed by a product in competition with Licensed
Product, such Party shall give to the other party notice of such alleged
infringement, in which event Depomed may at its discretion take such steps as
it may consider necessary to prosecute such infringement.  If Depomed, after such notice, elects to
bring suit, it shall be entitled to all damages recovered as a result of said
infringement.  Esprit shall have the right,
at its own expense, to be represented by counsel in any such litigation.  In addition, in any such litigation, Esprit
may elect by notice to Depomed to share equally with Depomed the costs of such
litigation in exchange for the right to share equally with Depomed in any
recovery of damages resulting from such litigation. Such election by Esprit
shall be made not later than 60 days from the date such litigation is
commenced.  If Depomed, after such notice
from Esprit, elects not to bring suit, it shall notify Esprit of such election
within thirty days after receipt of such notice and Esprit shall then have the
right to bring suit at its own expense. 
Esprit shall also have the right to bring suit if Depomed fails to
institute suit within six months from the date of the original notice of infringement
by Esprit.  In addition, in any such
litigation, Depomed may elect by notice to Esprit to share equally with Esprit
the costs of such litigation in exchange for the right to share equally with
Esprit in any recovery of damages resulting from such litigation. Such election
by Depomed shall be made not later than 60 days from the date such litigation
is commenced.  In any litigation brought
by Esprit, Esprit shall have the right to use and sue in Depomed’s name, and
Depomed shall have the right, at its own expense, to be represented by counsel.  Any recovery or damages received by Esprit
shall be retained by Esprit.


 


11.                                 Representations and Warranties.


 


11.1                           Representations and Warranties of Depomed. 
Depomed expressly warrants and represents to Esprit that:


 


13





















 


(a)                                  to its knowledge, it has full right,
title, and interest in and to or the right to practice all presently existing
Patent Rights and Know-How relating to the Licensed Product or the GR System;
that there are no outstanding written or oral agreements inconsistent with this
Agreement; that it has all necessary corporate power and authority to enter
into this Agreement and grant the license provided herein without burdens,
encumbrances, restraints, or limitations of any kind which could adversely
affect the rights of Esprit under this Agreement; that, as of the Effective
Date, it has all necessary corporate power and authority to grant the right of
first refusal granted to Esprit under Article 13; and that, as of the
Effective Date, there are no written or oral agreements inconsistent with the
right of first refusal granted to Esprit under Article 13.


 


(b)                                 it is presently aware of no patents or
patent applications owned by a Third Party and not licensed to Depomed which
would be infringed by the practice of the presently existing Patent Rights or
Know-How related to the Licensed Product or the GR System nor has Depomed
received, or is aware of, any claims by Third Parties, either asserted or
unasserted, with respect to such matters.


 


(c)                                  As of the Effective Date, Depomed is not
conducting any research or development with respect to any product or product
candidate containing the Active Ingredient, other than the Licensed Product.


 


11.2                           Mutual Representations and Warranties. 
Each Party hereby represents and warrants to the other Party as follows:


 


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


 


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


 


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


 


12.                                 Indemnification; Insurance.


 


12.1                           Indemnification. 
Each Party will defend, at its own expense, indemnify and hold harmless
the other Party and its Affiliates from and against any and all damages,
liabilities, losses, costs, and expenses, including attorneys fees, arising out
of any claim, suit or proceeding brought against the other Party to the extent
such claim, suit, or proceeding is based upon a claim 


 


14





















 


arising out of or relating to (i) any breach or
violation of, or failure to perform, any covenant or agreement made by such
indemnifying Party in this Agreement, unless waived in writing by the
indemnified Party; (ii) any breach of the representations or warranties
made by such indemnifying Party in this Agreement; or (iii) the negligence
or willful misconduct of the indemnifying Party, except (under any of (i) and
(ii)) to the extent arising out of the breach, violation, failure, negligence
or willful misconduct of the indemnified Party. 
Each Party agrees that it shall promptly notify the other in writing of
any such claim or action and give the indemnifying Party full information and
assistance in connection therewith.  The
indemnifying Party shall have the sole right to control the defense if any such
claim or action and the sole right to settle or compromise any such claim or
action, except that the prior written consent of the other Party shall be
required in connection with any settlement or compromise which could (i) place
any obligation on or require any action of such other Party; (ii) admit or
imply any liability or wrongdoing of such other Party; or (iii) adversely
affect the goodwill or public image of such other Party.  Notwithstanding the foregoing, the
indemnified Party may participate therein through counsel of its choice, but
the cost of such counsel shall be borne solely by the indemnified Party.


 


12.2                           Insurance.  Esprit shall maintain, commencing as of the
First Commercial Sale and for a period of [***]
after any expiration of termination of this Agreement, a Commercial General
Liability Insurance policy or policies with minimum limits of [***] in the aggregate.  Upon request Esprit shall provide
certificates of insurance to Depomed evidencing the coverage specified herein.
Except as expressly stated herein, Esprit’s liability to Depomed is in no way
limited to the extent Esprit’s insurance coverage.


 


13.                                 Right of First Refusal.


 


If at any time during the term of this Agreement,
Depomed receives a bona fide proposal from a Third Party requesting to enter
into a license to Market Licensed Product in Canada (a “Canadian License”),
then Depomed shall so notify Esprit and shall provide to Esprit a summary of
the terms of the proposed Canadian License (a “Canadian License Notice”).  Esprit may, but shall not be obliged to,
deliver to Depomed within fifteen days after the delivery of the Canadian
License Notice, a notice advising Depomed that Esprit wishes to enter into a
Canadian License on substantially the terms set forth in the Canadian License
Notice.  During the thirty day period
following the delivery of any notice by Esprit pursuant to the immediately
preceding sentence, Depomed and Esprit shall diligently negotiate in good faith
modifications to this Agreement necessary to provide for the Marketing of
Licensed Product within Canada by Esprit pursuant to this Agreement (which
modifications shall include, among others, that Esprit shall be responsible for
obtaining and maintaining any regulatory approval necessary to Market Licensed
Product in Canada).  During the sixty day
period following the expiration of such thirty day period, Depomed shall be
free to negotiate and conclude with a Third Party a Canadian License on terms
no less favorable to Depomed, taken as a whole, than those reflected in the
Canadian License Notice.  Nothing herein
shall obligate either Party to agree to or enter into a Canadian License.


 


THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF
THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION.  CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


15





















 


14.                                 Term.


 


Unless sooner terminated as herein provided, this
Agreement shall become effective on the Effective Date and shall continue in
effect thereafter until expiration or termination in accordance with the terms
of this Agreement.


 


15.                                 Expiry and Termination.


 


15.1                           Termination. 
Unless earlier terminated pursuant to Section 15.2 below, this
Agreement shall expire upon the expiration of the payment term for the license
grant as set forth in Section 2.3. 
Notwithstanding the foregoing, the last sentence of Section 2.3
shall survive any such expiration of this Agreement.


 


15.2                           Termination for Cause. 
At any time prior to the expiration of this Agreement, either Esprit or
Depomed may terminate this Agreement forthwith for cause, as “Cause” is
described below, by giving written notice to the other Party.  “Cause” for termination by one Party of this
Agreement shall be deemed to exist (i) if the other Party is in material
breach or default in the performance or observance of any of the provisions of
this Agreement applicable to it, and such breach or default is not cured within
sixty days (or thirty days in the case of failure to make license fee or
royalty payments) after the giving of notice by the Party specifying such
breach or default, or (ii) if, with respect to the other Party:


 


(a)                                  (i) a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect shall be instituted by such Party, or such Party shall consent to the
entry of any order for relief in an involuntary case under any such law; (ii) a
general assignment for the benefit of creditors shall be made by such Party; (iii) such
Party shall consent to the appointment of or possession by a receiver,
liquidation, trustee, custodian, sequestrator or similar official of the property
of such Party or of any substantial part of its property; or (iv) such
Party shall adopt a directors resolution in furtherance of any of the foregoing
actions specified in this subparagraph (a); or


 


(b)                                 a decree or order for relief by a court
of competent jurisdiction shall be entered in respect of such Party in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator, trustee,
sequestrator or other similar official of such Party to wind up or liquidate
its affairs, and any such decree or order shall remain unstayed or undischarged
and in effect for a period of sixty days.


 


15.3                           Termination by Depomed. 
Depomed shall be entitled to terminate this Agreement immediately upon
notice to Esprit in the event that Esprit fails to make to Depomed the
$25,000,000 license fee payment required pursuant to Section 3(b) on
or before the thirtieth day after the Effective Date.


 


15.4                           Termination by
Esprit.  Beginning on the Effective Date and ending at 5:00 p.m.,
New York time, on the fourth business day after the Effective Date (the “Patent
Diligence Period”), Esprit shall be permitted to conduct a freedom to
operate analysis with respect to the 


 


16





















 


Patent Rights (the “Freedom to Operate Analysis”).  The Freedom to Operate Analysis shall be
conducted on Esprit’s behalf by outside patent counsel to Esprit.  If, as a result of the Freedom to Operate
Analysis, such outside patent counsel provides Esprit with a written opinion to
the effect that Esprit’s ability to Market the Licensed Product in the
Territory will be materially and adversely affected by the valid, issued claims
of a United States patent owned by a Third Party, then (i) Esprit shall so
notify Depomed and, upon the request of Depomed, shall immediately provide such
written opinion to Depomed; and (ii) as Esprit’s sole and exclusive remedy
for any breach or default of this Agreement by Depomed, if any, Esprit shall be
entitled to terminate this Agreement immediately upon notice to Depomed at any
time prior to the expiration of the Patent Diligence Period.  Within three business days after any
termination of this Agreement by Esprit pursuant to this Section 15.4,
Depomed shall return to Esprit the $5,000,000 payment made by Esprit to Depomed
on the Effective Date.  Esprit may waive
any termination right under this Section 15.4 by written notice to
Depomed.


 


15.5                           Payment Obligations. 
Termination of this Agreement shall not terminate the obligations of
Esprit to make any payments then owing through the date of termination or the
obligations of confidentiality imposed on either Party.


 


15.6                           Transfer of NDA and IND. 
In the event of any termination of this Agreement, (a) Esprit shall
within three days prepare and send an executed letter to FDA authorizing the
transfer of the NDA and the IND for the Licensed Product to Depomed, and Esprit
shall also transfer to Depomed all regulatory documents, a chronology of
discussions with FDA, and other information necessary to maintain compliance
with the US regulatory authorities, and (b) Esprit will continue to
provide Depomed with assistance, at Depomed’s expense during the six month
period beginning on the termination date (or such longer period as may be
reasonably required), ensuring the orderly transition of the Licensed Product
and its corresponding regulatory approvals to Depomed.  If so requested by Depomed, in connection
with the transfer of the NDA and the IND for the Licensed Product to Depomed as
contemplated by this Section 15.6, Esprit shall also (a) assign to
Depomed any or all assignable customer contracts, customer orders, sublicenses
and distribution agreements related to the Licensed Product, if so requested by
Depomed and (b) provide to Depomed any and all sales, promotional and
training material in Esprit’s possession at the time of such transfer.


 


16.                                 Publicity.


 


Neither Party will originate any publicity, news
release, public comment or other public announcement, written or oral, whether
to the press, to stockholders, or otherwise, relating to this Agreement,
without the consent of the other Party, except for such announcement which, in
accordance with the advice of legal counsel to the Party making such
announcement, is required by law; provided, however, that each Party shall be
entitled to refer publicly to the relationship of the Parties reflected in this
Agreement (i.e., Depomed as the developer of the Licensed Product and Esprit as
the exclusive distributor of the Licensed Product in the Territory and Depomed’s
exclusive licensee of Marketing rights in the Territory) in a manner that is
not damaging to the business or reputation of the other Party.  Except as otherwise permitted pursuant to the
immediately preceding sentence, any Party making any announcement which is
required by law will, unless prohibited by law, give the other Party an
opportunity to review the form and content 


 


17





















 


of such announcement and comment before it is
made.  Either Party shall have the right
to make such filings with governmental agencies, including without limitation
the United States Securities and Exchange Commission, as to the contents and
existence of this Agreement as it shall reasonably deem necessary or
appropriate.  The Parties have agreed
upon the form and content of a joint press release to be issued by the Parties
promptly following the execution of this Agreement.


 


17.                                 Assignability.


 


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


 


17.2                           Liability.  No assignment
permitted by this Article 17 shall serve to release either Party from
liability for the performance of its obligations hereunder.


 


18.                                 Notices.


 


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


 


DEPOMED, INC.


1360 O’Brien Drive


Menlo Park, California 
94025


Attention: 
President


Facsimile:  650-462-9991


 


With a copy to:


 


Heller Ehrman LLP


275 Middlefield Road


Menlo Park, California 
94025


Attention: 
Matthew M. Gosling


Facsimile:  650-324-0638


 


ESPRIT PHARMA, INC.


 


2 Tower Center Boulevard


East Brunswick, NJ 
08816


Attn:  Steve
Bosacki, General Counsel


Facsimile: 
(732) 828-9954


 


18





















 


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


 


19.                                 Force Majeure.


 


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


 


19.2                           Performance. 
In the event that a Party is unable to perform by a reason described in Section 19.1
above, its obligation to perform under the affected provision of this Agreement
shall be suspended during such time of nonperformance.


 


20.                                 Miscellaneous.


 


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


 


20.2                           Entire Agreement. 
This Agreement and the Supply Agreement represent the entire agreement
between the Parties concerning the subject matter herein (except as
specifically noted herein) and supersedes all prior or contemporaneous oral or
written agreements of the Parties; except that information disclosed pursuant
to the confidentiality agreement between the Parties dated June 22, 2005
shall continue to be subject to the terms of that agreement until the effective
date of this Agreement, from which date it will be treated as Proprietary
Information pursuant to Article 8 of this Agreement.  This agreement may be modified, amended or
changed 


 


19





















 


only by a written instrument signed and delivered by
the Parties, with clear intent to modify, amend or change the provisions
hereof.


 


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


 


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


 


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


 


20.6                           Survival.  The
provisions of Articles 8, 10, 12, 14, 15, 16, 17, 18, 19 and 20 shall survive
any termination of this Agreement.


 


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


 


20.8                           Arbitration. 
Any and all disputes between the Parties relating in any way to the
entering into of this Agreement and/or the validity, construction, meaning,
enforceability, or performance of this Agreement or any of its provisions, or
the intent of the Parties in entering into this Agreement, or any of its
provisions, or any dispute relating to patent validity or infringement arising
under this Agreement shall be settled by arbitration.  Such arbitration shall be conducted in San
Francisco, California (if brought by Esprit) or Newark, New Jersey (if brought
by Depomed) in accordance with the rules then pertaining of the American
Arbitration Association with a panel of three arbitrators.  (Each Party shall select one arbitrator and
the two selected arbitrators shall select the third arbitrator.  If the two selected arbitrators cannot agree
on a third arbitrator then the American Arbitration Association shall select
said arbitrator from the National Panel of Arbitrators.)  Reasonable discovery as determined by the
Arbitrators shall apply to the arbitration proceeding.  The law of the State of California shall
apply to the arbitration proceedings. 
Judgment upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. 
The successful Party in such arbitration, in addition to all other
relief provided, shall be entitled to an award of all its reasonable costs and
expenses including attorney costs.  Both
Parties agree to waive, and the Arbitrators shall have no right to award, punitive
damages in connection with an arbitration proceeding hereunder.


 


20.9                           Co-Promotion. 
Esprit will consider any proposal by Depomed to co-promote the Licensed
Product within the Territory.  Esprit may
accept or reject any such proposal in its sole discretion.  The terms of any such co-promotion
arrangement will be set forth in a separate, mutually agreeable contract
between the Parties.


 


[signature page follows]


 


20





















 


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


 


	
  DEPOMED, INC.

  
	
   

  
	
  By:

  	
  /s/ John W.
  Fara

  	
   

  
	
  Name:

  	
  John W.
  Fara

  	
   

  
	
  Title:

  	
  President &
  CEO

  	
   

  
	
   

  
	
  ESPRIT PHARMA,
  INC.

  
	
   

  
	
  By:

  	
  /s/ John T.
  Spitznagel

  	
   

  
	
  Name:

  	
  John T.
  Spitznagel

  	
   

  
	
  Title:

  	
  Chairman &
  CEO

  	
   

  
								



 


21





















 


Exhibit A


 


Depomed Patents and Registered
Intellectual Property


 


United States Patents


 


[***]


 


United
States Patent Applications:


 


[***]


 


United States Trademarks


 


ProquinTM


FluroquinTM


 


Domain Names


 


proquinxr.com


proquinxr.net


proquinxr.org


proquinxr.us


proquinxr.biz


proquinxr.info


proquin.com


proquin.net


proquin.org


proquin.us


proquin.biz


proquin.info


 


THE SYMBOL [***] IS USED
TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION.  CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.


 


22





















 


Exhibit B


 


Minimum
Royalty Payments


 


	
  Calendar Year

  	
   

  	
  Minimum
  Annual Royalty

  Amount ($ )

  	
   

  
	
  2006

  	
   

  	
  4,600,000

  	
   

  
	
  2007

  	
   

  	
  5,000,000

  	
   

  
	
  2008 - end of term

  	
   

  	
   

  	
  *

  



 










 * Beginning in 2008, the applicable Minimum
Annual Royalty shall increase annually from the prior year to reflect any
increase in the United States Bureau of Labor Statistics Consumer Price Index — All Commodities (or
any successor index) for such year (measured as of the first day of such
year relative to the first day of the prior year).


 





















 


Exhibit C


 


Initial
Marketing Budget


 


Esprit plans to spend [***]
on Licensed Product marketing between the Effective Date and December 31,
2006.


 


THE SYMBOL [***] IS USED
TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. 
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED
PORTION.