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EXHIBIT 10.9
    
    

 Additional Retention and Incentive Arrangements  

        During the Company's financial restructuring, independent advisors recommended that additional retention and incentive arrangements be put in place for key
personnel during the period following the Company's emergence from bankruptcy. Accordingly, upon the Company's emergence from bankruptcy in January 2002, the Board of Directors approved a
retention and incentive cash bonus program to cover 29 key employees, including several executive officers. Under the program, covered employees are to be paid cash bonuses of different amounts
calculated as varying percentages of base compensation. The bonuses are paid in two installments—one-third in January 2002, after the Company emerged from bankruptcy,
and the remaining two-thirds in January 2003. The second payment is conditioned upon the employee's continued employment with the Company (except for a termination by the Company
without cause) and upon the Company's satisfying certain performance objectives. The aggregate amount paid in January 2002 was $3,043,335. If all conditions for payment are satisfied, an
aggregate amount of $6,086,699 will be paid in January 2003. 

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EXHIBIT 10.9QuickLinks
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SCHEDULE TO EXHIBIT 10.11    
  

Indemnification Agreements with Directors and Executive Officers  

	Name
 
	 	Date of Agreement

	Directors:	 	 
	 	David H. Batchelder	 	January 25, 2002
	 	Michael R. D'Appolonia	 	March 25, 2002
	 	William J. Flanagan	 	April 19, 2002
	 	C. Scott Greer	 	March 25, 2002
	 	Stephen G. Hanks	 	January 25, 2002
	 	William H. Mallender	 	March 25, 2002
	 	Michael P. Monaco	 	March 25, 2002
	 	Cordell Reed	 	March 25, 2002
	 	Dennis R. Washington	 	January 25, 2002
	 	Bettina M. Whyte	 	March 25, 2002
	 	Dennis K. Williams	 	March 25, 2002
	

Officers:	
 	

 
	 	Reed N. Brimhall	 	January 25, 2002
	 	Ralph R. DiSibio	 	January 25, 2002
	 	Frank S. Finlayson	 	January 25, 2002
	 	Stephen M. Johnson	 	January 25, 2002
	 	George H. Juetten	 	January 25, 2002
	 	Larry L. Myers	 	January 25, 2002
	 	Charles R. Oliver	 	January 25, 2002
	 	Richard D. Parry	 	January 25, 2002
	 	Ambrose L. Schwallie	 	January 25, 2002
	 	Cynthia M. Stinger	 	January 25, 2002
	 	Guy M. Stricklin	 	January 25, 2002
	 	Craig G. Taylor	 	January 25, 2002
	 	Greg P. Therrien	 	January 25, 2002
	 	G. Bretnell Williams	 	January 25, 2002
	 	Thomas H. Zarges	 	January 25, 2002

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SCHEDULE TO EXHIBIT 10.11CONFIDENTIAL
TREATMENT REQUESTED

Exhibit
10.1

DEVELOPMENT
AND LICENSE AGREEMENT

(Metformin
GR)

 

 

DEPOMED,
INC.

a company organized under the laws of California, USA 

with offices at 

1360 O’Brien Drive

Menlo Park,

California, 94025

AND:

BIOVAIL
LABORATORIES INCORPORATED

a Barbados corporation incorporated under
the

International Business Companies Act, 1991-24,

whose head office is

Chelston Park

Building 2, Collymore Rock

St. Michael BH1

Barbados, West Indies

 

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 PORTIONS.

 

 

 

 

Contents

	
  1.

  	
  DEFINITIONS

  	
   

  	
  2

  
	
  2.

  	
  PRODUCT DEVELOPMENT

  	
   

  	
  9

  
	
   

  	
   

  	
  WORK PLAN

  	
   

  	
  9

  
	
   

  	
   

  	
  PROTOCOLS
  AND METHODS

  	
   

  	
  10

  
	
   

  	
   

  	
  SUBCONTRACTED TESTS AND
  STUDIES

  	
   

  	
  10

  
	
   

  	
   

  	
  DEPOMED FACILITIES AND
  EMPLOYEES

  	
   

  	
  11

  
	
   

  	
   

  	
  DEVELOPMENT
  REVIEW TEAM

  	
   

  	
  11

  
	
   

  	
   

  	
  CHANGE IN CONTROL OF
  DEPOMED

  	
   

  	
  13

  
	
  3.

  	
  TERMINATION OF DEVELOPMENT

  	
   

  	
  13

  
	
   

  	
   

  	
  INABILITY
  OF DEPOMED TO CONTINUE DEVELOPMENT

  	
   

  	
  13

  
	
   

  	
   

  	
  FAILURE OF
  DEPOMED TO FUND THE DEVELOPMENT

  	
   

  	
  13

  
	
  4.

  	
  PRODUCT DEVELOPMENT COSTS

  	
   

  	
  14

  
	
  5.

  	
  DISCLOSURE OF
  INFORMATION AND REPORTING

  	
   

  	
  15

  
	
   

  	
   

  	
  RECORDS
  AND REPORTS

  	
   

  	
  16

  
	
  6.

  	
  INFORMATION FOR
  REGULATORY APPROVAL

  	
   

  	
  17

  
	
  7.

  	
  APPLICATION FOR
  REGULATORY APPROVAL

  	
   

  	
  18

  
	
  8.

  	
  CONFIDENTIALITY

  	
   

  	
  19

  
	
  9.

  	
  LICENSE PAYMENT BY BLI

  	
   

  	
  20

  
	
  10.

  	
  LICENSE PAYMENT BY DEPOMED

  	
   

  	
  21

  
	
  11.

  	
  LICENSE OF PRODUCT;

  	
   

  	
  22

  
	
  12.

  	
  ROYALTIES

  	
   

  	
  22

  
	
   

  	
   

  	
  REDUCTION
  OF ROYALTIES

  	
   

  	
  24

  
	
   

  	
   

  	
  ROYALTY REPORTS AND
  PAYMENTS

  	
   

  	
  25

  
	
   

  	
   

  	
  RECORDS AND
  AUDITS

  	
   

  	
  26

  
	
   

  	
   

  	
  LICENSED PRODUCT
  SUBSTITUTION

  	
   

  	
  26

  
	
  13.

  	
  TECHNOLOGY TRANSFER

  	
   

  	
  27

  

 

i

 

	
   

  	
   

  	
  TOXICOLOGY
  STUDIES

  	
   

  	
  28

  
	
  14.

  	
  COMBINATION PRODUCT

  	
   

  	
  29

  
	
   

  	
   

  	
  OPTION TO COMBINATION
  PRODUCT

  	
   

  	
  29

  
	
  15.

  	
  PATENTS,
  INFRINGEMENT

  	
   

  	
  29

  
	
   

  	
   

  	
  BMS LITIGATION

  	
   

  	
  29

  
	
   

  	
   

  	
  OTHER
  INFRINGEMENT

  	
   

  	
  29

  
	
   

  	
   

  	
  INFRINGEMENT OF
  THIRD PARTY PATENTS

  	
   

  	
  31

  
	
   

  	
   

  	
  CONSEQUENCES OF BMS
  LITIGATION

  	
   

  	
  31

  
	
  16.

  	
  OWNERSHIP OF
  INVENTIONS AND KNOW-HOW

  	
   

  	
  32

  
	
   

  	
   

  	
  OWNERSHIP OF
  INTELLECTUAL PROPERTY RIGHTS

  	
   

  	
  32

  
	
   

  	
   

  	
  DISCLOSURE
  OF INVENTIONS

  	
   

  	
  33

  
	
   

  	
   

  	
  FILING
  AND PROSECUTION OF PATENT APPLICATIONS BY BLI

  	
   

  	
  33

  
	
   

  	
   

  	
  FILING
  AND PROSECUTION OF PATENT APPLICATIONS BY DEPOMED

  	
   

  	
  34

  
	
   

  	
   

  	
  ENFORCEMENT
  OF INTELLECTUAL PROPERTY RIGHTS

  	
   

  	
  34

  
	
  17.

  	
  REPRESENTATIONS
  AND WARRANTIES; NON-COMPETITION

  	
   

  	
  35

  
	
   

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES OF DEPOMED

  	
   

  	
  35

  
	
   

  	
   

  	
  MUTUAL
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  36

  
	
   

  	
   

  	
  NON-COMPETITION

  	
   

  	
  37

  
	
  18.

  	
  INDEMNIFICATION

  	
   

  	
  37

  
	
   

  	
   

  	
  INDEMNIFICATION OF DEPOMED

  	
   

  	
  37

  
	
   

  	
   

  	
  INDEMNIFICATION
  OF BLI

  	
   

  	
  38

  
	
  19.

  	
  TERM

  	
   

  	
  39

  
	
  20.

  	
  EXPIRY AND TERMINATION

  	
   

  	
  39

  
	
  21.

  	
  PUBLICITY

  	
   

  	
  41

  
	
  22.

  	
  ASSIGNABILITY

  	
   

  	
  42

  
	
  23.

  	
  PATENT LIFE EXTENSION

  	
   

  	
  42

  
	
  24.

  	
  NOTICES

  	
   

  	
  43

  
	
  25.

  	
  FORCE MAJEURE

  	
   

  	
  44

  
	
  26.

  	
  MISCELLANEOUS

  	
   

  	
  45

  

 

 

ii

 

DEVELOPMENT
AND LICENSE AGREEMENT

(Metformin GR)

THIS
AGREEMENT is made as of the 28th day of May, 2002, by and between

DEPOMED,
INC.

a company organized under the laws of California, USA 

with offices at 

1360 O’Brien Drive

Menlo Park,

California, 94025

(Hereinafter
referred to as “DepoMed”)

AND:

BIOVAIL
LABORATORIES INCORPORATED

a Barbados corporation incorporated under
the

International Business Companies Act, 1991-24,

whose head office is

Chelston Park

Building 2, Collymore Rock

St. Michael BH1

Barbados, West Indies

(Hereinafter referred to as “BLI”)

RECITALS

A.            DepoMed is the owner of original
processes, patents and know-how for the development and manufacture of oral
drug delivery systems which form the basis of the Licensed Product (as defined
herein);

 

 

1

 

B.            DepoMed has developed and may
further develop products using DepoMed’s GR SystemTM (as defined
herein) which, to DepoMed’s knowledge, will be subject to patent protection at
least to the extent of the GR System; and

C.            BLI desires to obtain rights and
options to market and sell products utilizing the GR System and an active drug
component.

NOW,
THEREFORE, in consideration of the agreements and covenants hereinafter set
forth herein and intending to be legally bound hereby, the parties hereto
covenant and agree as follows:

1.                                      DEFINITIONS.

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

1.2                                 “Active Ingredient” shall
mean the chemical compound known as metformin HCl.

1.3                                 “Adjusted Percentage”
shall mean the percentage obtained by dividing the aggregate of the amounts set
out in Schedule 1.39 for each step in the Work Plan to be conducted after the
date hereof and successfully completed by DepoMed after the date hereof, by the
Development Budget.

1.4                                 “Affiliate”
shall mean 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” shall 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.

 

 

2

 

1.5                                 “Applicable Permits”
shall mean all permits or approvals necessary to market the Licensed Product in
the United States or Canada, including, without limitation, Regulatory
Approvals granted by the FDA and the TPD.

1.6                                 “Cash Flow” means
the amount, calculated for any financial period, and excluding any amounts
required to be paid to BLI pursuant to sections 15.6 to 15.10 of this Agreement
for that financial period, equal to:

(a)                                  the amount that is or would be described as “Net
Increase (Decrease) in Cash and Cash Equivalents” in DepoMed’s Statement of
Cash Flows (the “Statement”)
prepared for that financial period in accordance with US GAAP; plus

(b)                                 the aggregate of all amounts, if any, that were
deducted on that Statement in determining the amount defined in subsection (a)
above in respect of:

(i)                                     the acquisition
of a business; or the acquisition, other than in the ordinary course of
business, of a product right, a technology, a patent from a third party, or a
similar asset, or a right or license in respect of any of the foregoing; or

(ii)                                  the acquisition
of fixed assets, to the extent such amounts exceed two hundred and fifty
thousand dollars (US$250,000) for each calendar quarter in that financial
period, and to the extent that funding specific to that asset acquisition has
not been acquired by DepoMed,

provided,
however, that if the Cash Flow in any calendar quarter is less than zero, the
amount by which such Cash Flow is less than zero ( the “Shortfall”) shall be
deducted from the positive amount of Cash Flow otherwise determined for the
next quarter in that calendar year, and any remaining amount of unapplied
Shortfall shall be applied to reduce the Cash Flow otherwise determined for
subsequent calendar quarters in that calendar year. In the event that DepoMed
is merged with or into or amalgamated or consolidated with another corporation
other than BLI or an Affiliate of BLI, the

 

 

3

 

calculations
required by this section shall be carried out with respect to the revenues and
expenditures of the surviving corporation.

1.7                                   “Change in Control”
with respect to DepoMed shall mean an event whereby:

(a)                                  any person or group (as defined in Section 13(d)(3) or
14(d)(2) of the Exchange Act) other than BLI or an Affiliate of BLI has become
the direct or beneficial owner (as defined in Rule 13d-3 under the Exchange
Act) of more than 20% of the voting stock of DepoMed, or

(b)                                 DepoMed is merged with or into or amalgamated or
consolidated with another corporation other than BLI or an Affiliate of BLI and
the stockholders of DepoMed, immediately prior to such amalgamation,
consolidation, or merger, own less than eighty per cent (80%) of the voting
stock of the surviving corporation immediately after such transaction.

1.8                                 “Application for Regulatory Approval” means
an application made to a Regulatory Authority in any country for permission to
Market a pharmaceutical product in that country, and includes a New Drug
Application (an “NDA”) and an Abbreviated New Drug Application (an “ANDA”).

1.9                                 “Clinical Information”  means
all in-vivo or clinical, pharmacology, toxicology, safety and efficacy data,
formulary submissions, pharmaco-economic data, Phase I, II and III clinical
data and results, and other such information now or hereafter known and
available to DepoMed or BLI or their Affiliates, whether generally known to
others or not, relating to the Licensed Product.

1.10                           “Develop” shall
mean to perform all of the work set out in the Work Plan and this Agreement,
and “Developed”
and “Development”
have corresponding meanings.

1.11                           “Development Budget”
means the total cost of the Development work set out in the Work Plan minus the
amounts shown in the Work Plan as having been incurred prior to the date
hereof.

 

 

4

 

1.12                           “Development Review Team”
means the development review team established pursuant to section 2.11.

1.13                           “Effective Date”
shall mean the date upon which the waiting period (and any extension thereof)
under the HSR Act applicable to the transactions contemplated by this Agreement
shall have been terminated or shall have expired..

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

1.15                           “Final Judgment” shall mean a judgment by a court of competent
jurisdiction that is unappealed (and the time for appealing has expired) or is
unappealable.

1.16                           “GR System” shall mean 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, and includes the delivery
system described in the patents and patent applications listed in Schedule 1.28
and any and all improvements to that delivery system.

1.17                           “HSR Act”
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

1.18                           “Invention” means the Licensed Product,
any improvement to the Licensed Product, any new use of the Licensed Product,
any new performance characteristic of the Licensed Product, any new process
used to Manufacture the Licensed Product, or any step or steps in any such
process, and includes all formulations of the Licensed Product Developed
pursuant to this Agreement.

1.19                           “Know-How”
shall mean 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 date hereof or which 

 

 

5

 

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 Licensed
Product.

1.20                           “Knowledge” or “knowledge”
shall mean, with respect to DepoMed, the actual knowledge of the executive
officers of DepoMed, after reasonable inquiry directed to such employees of
DepoMed who would reasonably be expected to have knowledge of relevant matters.

1.21                           “Licensed Product” shall
mean a once daily oral formulation of the Active Ingredient in combination with
the GR System.

1.22                           “Manufacture” means to process, prepare,
make, and analyze, and Manufacturing and Manufactured have a corresponding meaning.

1.23                           “Market” means to promote,
distribute, package, label, market, advertise, sell or offer to sell, and Marketing has a
corresponding meaning.

1.24                           “NDA” shall mean a New
Drug Application or equivalent application for approval to market submitted to
the FDA.

1.25                           “Net Sales”
shall mean the total of all amounts invoiced by BLI and its Affiliates for
Licensed Product sold to independent, unrelated third parties in the Territory
in bona fide arms-length transactions, less the following deductions actually
allowed and taken by such third parties and not otherwise recovered by or
reimbursed to BLI or its Affiliates: (i) trade, cash and quantity discounts in
such amounts as are customary in the trade; (ii) rebates, credits or other
reimbursements actually paid; (iii) taxes on sales (such as sales or use taxes)
to the extent added to the sales price and set forth separately as such in the
total amount invoiced; (iv) value added taxes when included as part of the
sales price and not refunded to the payor; (v) freight, insurance, and
other transportation charges to the extent added to the sales price and set
forth separately as such in the total amount invoiced; and (vi) amounts
repaid or credited by reason of rejections, defects or returns or because of
retroactive price reductions. Net Sales shall not include sales of a Licensed 

 

 

6

 

Product between or among BLI
and its Affiliates, or from BLI or an Affiliate of BLI to a sub-licensee, and
shall not include Sub-Licensee Net Sales.

1.26                           “Orange Book”
shall mean the “Approved Drug Products with Therapeutic Equivalence
Evaluations” publication of the FDA.

1.27                           “Party” shall mean
DepoMed or BLI, and Parties shall mean DepoMed and BLI.

1.28                           “Patent Rights”
shall mean any patent application or issued patent covering Licensed Product or
any improvement to Licensed Product or any methods for making or using Licensed
Product or any improvement to such methods, which patents or patent
applications are owned by or licensed to DepoMed as of the date hereof or which
are developed or acquired by or licensed to DepoMed during the term of this
Agreement, in the Territory, 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, and includes without limitation the United States patents and
patent applications, and foreign patents and applications set forth in Schedule
1.28.

1.29                           “Regulatory Data”
shall mean all information and data necessary to obtain or maintain Regulatory
Approval for Licensed Product in the territory, including post-approval
reports, filings and submissions and shall include, but not be limited to,
medical, toxicological, pharmacological and clinical data included within
Technical Information.

1.30                           “Regulatory Approval”
shall mean the permission or consent granted by any relevant Regulatory
Authority for the Marketing of a Product in the BLI Territory, and includes all
of the contents of the Application for Regulatory Approval as approved by that
Regulatory Authority.

1.31                           “Regulatory Authority”
shall mean, in respect of any country, any government or other agency
responsible for the issuance of approval to Market pharmaceutical products in
or sold from that country, including without limitation the FDA.

 

 

7

1.32                           “Sub-Licensee Net Sales” shall mean the
total of all amounts invoiced by a sublicensee of BLI for sales of Licensed
Product to independent, unrelated third parties in bona fide arms-length
transactions, less the following deductions actually allowed and taken by such
third parties and not otherwise recovered by or reimbursed to that sublicensee:
(i) trade, cash and quantity discounts in such amounts as are customary in the
trade; (ii) rebates, credits or other reimbursements actually paid; (iii) taxes
on sales (such as sales or use taxes) to the extent added to the sales price
and set forth separately as such in the total amount invoiced; (iv) value
added taxes when included as part of the sales price and not refunded to the
payor; (v) freight, insurance, and other transportation charges to the
extent added to the sales price and set forth separately as such in the total
amount invoiced; and (vi) amounts repaid or credited by reason of
rejections, defects or returns or because of retroactive price reductions.

1.33                           “Substitute Product”
means any once daily oral formulation containing between 480 mg and 520 mg of
Active Ingredient and utilizing technology other than the GR System and that
does not infringe a Valid Claim of the Patent Rights, for which Regulatory
Approval is obtained by way of a supplement or an amendment to the NDA filed
for the Licensed Product.

1.34                           “Technical Information”
shall mean all Know-How, and all trade secrets, inventions, data and technology
relating to the Licensed Product, and any improvements and modifications to any
of the foregoing, and includes, without limitation, processes and analytical
methodology used in the development, testing, analysis and manufacture of the
Licensed Product, and medical, clinical, toxicological and other scientific
data relating to the Licensed Product.

1.35                           “Territory”
shall mean all the United States of America (including Puerto Rico) and Canada.

1.36                             “Toxicology Studies”
means any toxicology studies that have been conducted by or for BLI with respect
to the Active Ingredient.

 

 

8

 

1.37                           “US GAAP”
shall mean accounting principles generally accepted in the United States of
America.

1.38                           “Valid Claim”
shall mean a claim of an unexpired issued patent falling within Patent Rights,
which claim shall not have been withdrawn, cancelled, disclaimed or held
invalid by a court, tribunal, arbitrator or governmental agency of competent
jurisdiction in a final or unappealed or unappealable decision.

1.39                           “Work Plan”
shall mean a statement of the purposes, activities and goals to be utilized and
performed in Developing a 500 mg strength of the Licensed Product, identifying
the tasks and obligations to be undertaken by DepoMed and the timetable within
which it is contemplated that DepoMed will complete each of those tasks and
obligations, as the same may from time-to-time be refined by the DRT in
accordance with this Agreement. The Work Plan as of the date hereof is attached
hereto as Schedule 1.39.

2.                                      PRODUCT DEVELOPMENT

Work Plan

2.1                                 DepoMed
shall, at its own expense but subject to the provisions of section 4.2, use
diligent efforts (i) to carry out its obligations under this Agreement and the
Work Plan to Develop a 500 mg strength of the Licensed Product, and (ii) to the
extent specified in the Work Plan, design and undertake any required analytical
testing and clinical studies.

2.2                                 BLI
acknowledges that DepoMed has commenced the Development of the Licensed Product
prior to the date hereof. All of the obligations of DepoMed under this
Agreement or any Work Plan referred to in this Agreement shall commence as soon
as reasonably possible, but no later than sixty (60) days, after the date
hereof. DepoMed shall use diligent efforts to carry out such obligations in accordance
with the time limits set out in the Work Plan. The Parties recognize that the
time frames in the Work Plan include “Target Dates” and “Assumptions” and may
be dependent on FDA actions.

 

 

9

 

2.3                                 DepoMed
shall follow any direction and guidelines provided by the DRT, (provided such
directions and guidelines are not inconsistent with the applicable Work Plan or
this Agreement) in the Development of a 500 mg strength of the Licensed
Product.

2.4                                 DepoMed
shall be responsible for obtaining, at its own expense, all materials, supplies
and resources required for the Development of a 500 mg strength of the Licensed
Product in accordance with this Agreement and the Work Plan.

Protocols and Methods

2.5                                 DepoMed
shall develop all of the analytical and clinical protocols that have not
already been developed and that are required for Regulatory Approval of the
Licensed Product, and shall provide copies of any such protocols to the DRT for
review and approval before the commencement of any test or study in which that
protocol is to be used. DepoMed shall conduct any tests or studies required by
this Agreement or by the Work Plan only in accordance with protocols approved
by the DRT.

2.6                                 DepoMed
shall use diligent efforts to develop and validate all necessary analytical
methods not already developed for the Licensed Product, and shall disclose
those to the DRT for review and approval before use. BLI shall, at the request
of DepoMed, provide to DepoMed any validated analytical methods known to BLI
and that BLI may determine are useful in the development of the Licensed
Product, but DepoMed shall not be obliged to use any such method unless DepoMed
is unable to develop and validate any required analytical process.

Subcontracted Tests and Studies

2.7                                 None
of the tests or studies required by the Work Plan, excluding those already
sub-contracted, shall be sub-contracted by DepoMed unless the sub-contract is
approved by the DRT. Provided that BLI or any contract research organization
designated by BLI is capable of conducting any tests or studies required by the
Work Plan within a time period set out in the Work Plan, DepoMed shall arrange
for all of such studies to be conducted at the contract research facilities of
BLI or such designated contract research organization.

 

 

10

 

DepoMed shall not be responsible for any
deficiencies or defects in any studies conducted by a contract research
organization designated by BLI pursuant to this section, or for any delays in
the filing of an Application for Regulatory Approval caused by or arising from
the use of any such contract research organization.

DepoMed Facilities and Employees

2.8                                 DepoMed
shall use commercially reasonable efforts to ensure that any facilities at
which all or part of the Development of the 500 mg strength of the Licensed
Product is conducted complies with all required GMP Standards.

2.9                                 DepoMed
shall use commercially reasonable efforts to ensure that any employee or
sub-contractor of DepoMed to whom any Development work is assigned or
sub-contracted is competent to perform the tasks assigned or sub-contracted at
the time of such assignment or sub-contract, and shall at the request of the
DRT replace any employee or sub-contractor determined on reasonable grounds by
the DRT to lack the skills, competence or experience necessary to perform the
Development work required.

2.10                           DepoMed
shall bear the cost of any Development work that must be repeated because the
facilities at which the work was conducted did not comply with all required GMP
standards, or because the work was assigned or sub-contracted to persons who
were not competent to do that work.

Development Review Team

2.11                           DepoMed
and BLI shall within seven (7) days after the date hereof establish a
Development Review Team (“DRT”),
consisting of up to three representatives of DepoMed and up to three
representatives of BLI. One of the DepoMed members, chosen at the sole
discretion of DepoMed, shall serve as chair of the DRT.

2.12                           Regardless
of the number of representatives from each party on the DRT, each Party shall
present one consolidated view and, subject to the provisions of section 2.18,
shall have one vote on any issue in dispute. All decisions of the DRT shall be
made by majority vote. Each member of the DRT shall ensure that any issue for
decision by the DRT has 

 

 

11

 

received the prior review
and written approval of any appropriate internal management committees of the Party
that he or she is representing on the DRT and shall be deemed to have all
necessary authority to act and to vote on behalf of that Party. If the DRT
fails to decide any matter before it for consideration in the manner required
by this section, the matter shall be submitted to the Chief Executive Officer
of DepoMed and the President of BLI for resolution. Any disputes within the DRT
that remain unresolved after discussion between the Chief Executive of DepoMed
and the President of the BLI, shall be resolved by the Chairman of BLI, acting
in the best interests of the Development of the Licensed Product.

2.13                           Meetings
of the DRT shall be held at least quarterly, or more frequently as mutually
agreed upon, or whenever called by either DepoMed or BLI with not less than ten
(10) days notice to the other Party unless such notice is waived, unless no
later than thirty (30) days in advance of any meeting there is a determination
by the DRT that no new business or other activity has transpired since the
previous meeting, and that there is no need for a meeting. The DRT may, by
mutual agreement, convene by means of telecommunication, video-conference or
face-to-face meetings. The location of any face to face meetings shall
alternate between the facilities of BLI’s Affiliate in Chantilly, Virginia, and
the DepoMed facility in Menlo Park, California. DRT Each of DepoMed and BLI
shall disclose to the other proposed agenda items reasonably in advance of each
meeting of the DRT. Each of DepoMed and BLI shall bear its own costs for
participation in the DRT.

2.14                           The
first meeting of the DRT shall occur within seven (7) days after the date
hereof for the purpose of supplementing all of the necessary details to the
Work Plan, and to approve any protocols that have been submitted by for
approval by the DRT at that time.

2.15                           At
each meeting of the DRT, the DRT shall review the Development of the Licensed
Product to date, and shall determine if any adjustments or refinements to the
Work Plan are required. At each such meeting, the DRT shall review and approve
the Development work to be carried out by DepoMed, and the protocols to be used
in that Development work, in the calendar quarter following that meeting.

 

 

12

 

2.16                           Minutes
of each DRT meeting shall be transcribed and issued by the Chairman or his
designee within fifteen (15) days after each meeting and shall be approved as
the first order of business at the immediately succeeding DRT meeting.

2.17                           DepoMed
shall not be responsible for any delays or increased costs experienced or
incurred in the Development of the Licensed Product as a consequence of a
decision of the Chairman of BLI or his designate inconsistent with the views of
DepoMed on that issue.

Change in Control of DepoMed

2.18                           Notwithstanding
the provisions of sections 2.11 to 2.17, BLI shall have the right, upon any
Change in Control of DepoMed, to appoint an additional voting member to the
DRT, and upon that appointment, BLI shall have two votes and DepoMed shall have
one vote.

3.                                      TERMINATION OF DEVELOPMENT

Inability of
DepoMed to Continue Development

3.1                                 BLI
may, by notice in writing to DepoMed, assume responsibility for the Development
of the Licensed Product under the Work Plan if there is a Change in Control of
DepoMed, or if BLI determines, in good faith, that DepoMed is unable to
complete the Work Plan, except for any inability due to lack of funding
available to DepoMed, to the satisfaction of BLI, or to Develop the 500 mg
strength of the Licensed Product capable of receiving Regulatory Approval. BLI
shall thereafter use diligent efforts to carry out the obligations of DepoMed
under this Agreement and the Work Plan to Develop a 500 mg strength of the
Licensed Product. DepoMed shall continue to fund the Development of the
Licensed Product to the extent otherwise required by this Agreement, to the
limit of the Development Budget.

Failure of
DepoMed to Fund the Development

3.2                                 If
DepoMed fails:

 

 

13

 

(a)                                  to carry out its obligations under the Work Plan,
including the trial protocols, and the target dates set out in the first three
pages of the Work Plan but excluding any time limits in those trial protocols;
or

(b)                                 to fund the Development of the 500 mg strength of the
Licensed Product; or

(c)                                  to fulfill its obligations under sections 2.1, 2.3,
2.4, 2.7, 6.1, 6.2 and 6.4 of this Agreement,

BLI, acting
reasonably, but without affording DepoMed any time otherwise provided by this
Agreement to cure any breach of this Agreement, may on notice in writing to
DepoMed, assume responsibility for the Development of the Licensed Product and
carry out those obligations, or engage a qualified third party to carry out
those obligations, all at BLI’s expense.

3.3                                 Upon
the delivery by BLI to DepoMed of a notice pursuant to Section 3.2, DepoMed
shall assign to BLI any assignable contracts that DepoMed may have with any
contract research organization under which any of the Development work is being
conducted. BLI shall have no responsibility or liability for any such contracts
that are not assigned to BLI.

4.                                      PRODUCT DEVELOPMENT COSTS

4.1                                 In
consideration of the entering into of this Agreement by BLI, and the agreement
by BLI to make the license payment required by Article 9 of this Agreement, and
to pay the royalties required by section 12 of this Agreement, DepoMed agrees
to carry out its obligations under this Agreement and the Work Plan for the
Licensed Product after the Effective Date, as that Work Plan may be adjusted
pursuant to section 2.15 of this Agreement.

4.2                                 Any
costs required to obtain Regulatory Approval of the Licensed Product in the
Territory other than the costs to be incurred by DepoMed under this Agreement
and the Work Plan shall be paid by BLI.

 

 

14

 

5.                                      DISCLOSURE OF INFORMATION AND REPORTING

5.1                                 Upon
execution of this Agreement and thereafter during the term hereof, each Party
shall disclose to the other, in confidence under the terms of Article 8 hereof,
Technical Information and Clinical Information, and copies of correspondence
with any Regulatory Authority, as the same shall become available, including
information and correspondence relating to the safety and efficacy of Licensed
Product and any regulatory problems relating thereto, all to the extent
necessary or useful to enable the receiving party to Develop, Manufacture or
Market the Licensed Product in accordance with its obligations under this
Agreement.

5.2                                 DepoMed
shall deliver to BLI, within fourteen (14) days after any request of BLI for
information about the Development of the Licensed Product, a written report
setting out the steps taken by DepoMed to Develop the Licensed Product, and
summaries of any tests or studies conducted by DepoMed on the Licensed Product
since the last such report was delivered to BLI, and a comparison of the
progress made in the Development of the Licensed Product against the Work Plan.

5.3                                 DepoMed
shall deliver to BLI every ninety (90) days during the Development of the
Licensed Product, at least seven (7) days in advance of each regularly
scheduled meeting of the DRT, a written report setting out the steps taken by
DepoMed to Develop the Licensed Product, summaries of any tests or studies
conducted by DepoMed and all Clinical Information generated since the last such
report was delivered, and a comparison of the progress made in the Development
of the Licensed Product against the Work Plan. DepoMed shall provide to BLI
those portions of any internal R&D report dealing with the Licensed Product.

5.4                                 DepoMed
shall provide to BLI copies of all material correspondence, including
correspondence with any Regulatory Authority, contracts with third parties
including contract research organizations, and reports relating to the
Development of the Licensed Product received by DepoMed from any contract
research organization engaged by DepoMed to conduct any tests or studies
relating to the Development of the Licensed 

 

 

15

 

Product, as soon
as reasonably possible, but no later than fifteen (15) days, after receipt of
such correspondence or reports by DepoMed.

5.5                                 DepoMed
shall complete the product development report required for an Application for
Regulatory Approval within ten (10) months after the successful completion of
the Work Plan.

Records and Reports

5.6                                 DepoMed
shall maintain records, in sufficient detail and in compliance with GMP
Standards and generally accepted accounting principles, and for a period of
three (3) years after the completion of the Work Plan, which records shall
fully and properly reflect all work done, and all results achieved by DepoMed
in the performance of its obligations under this Agreement. Upon request,
DepoMed shall provide copies of these records to BLI at BLI’s cost. BLI shall
have the right, not more frequently than once per month, during normal business
hours and upon one week’s notice, to inspect and copy all such records of
DepoMed.

5.7                                 BLI
shall have the right to arrange for its employees and/or consultants involved
in the activities contemplated hereunder to visit DepoMed at its offices and
laboratories during normal business hours and upon one week’s notice, and to
discuss the Work Plan, the progress of the Development work, its results, and
the data and information generated, with the technical personnel and
consultants of DepoMed.

5.8                                 Any
report or protocol required by this Agreement to be approved by BLI shall be
deemed to be approved by BLI upon the expiry of thirty (30) days from the date
of delivery to BLI, unless BLI has within those thirty (30) days advised
DepoMed of any defects or deficiencies in that report or protocol. BLI may
designate any third person to inspect, under confidentiality, any such report
or protocol, at BLI’s expense.

 

 

16

6.                                      INFORMATION FOR REGULATORY APPROVAL

6.1                                 DepoMed
shall develop, and provide to BLI, all Technical Information relating to the
Licensed Product that may be reasonably necessary to enable BLI to complete the
CMC Section for  the Licensed Product.
Any such information that DepoMed has in its possession at the Effective Date
shall be provided within sixty (60) days after the Effective Date, or within
such other time that the DRT may set, and thereafter such Technical Information
shall be provided within twenty (20) Business Days of the acquisition or
development of such information. Such information shall include, without
limitation:

(a)                                  all manufacturing procedures and processes used to
manufacture the Clinical Batches, including a copy of each master batch record
used to manufacture the Clinical Batches, raw material lists and
specifications, equipment lists and specifications;

(b)                                 master formula describing quantitative composition of
all active and inactive components used to manufacture the Clinical Batches,
together with the specifications for each component;

(c)                                  all in vitro and in vivo test methodologies,
method validations, test results and product specifications generated by
DepoMed in connection with the manufacture of the Clinical Batches;

(d)                                 all reports of stability studies conducted by DepoMed
in connection with the manufacture of the Clinical Batches; and,

(e)                                  all other data and information in the possession of or
available to DepoMed and required by or reasonably useful to BLI in the
preparation of an Application for Regulatory Approval.

6.2                                 DepoMed
shall deliver to BLI within sixty (60) days after the Effective Date, for each
of the Clinical Batches of the Licensed Product, and in a form reasonably
acceptable to BLI:

 

 

17

 

(a)                                  a GMP certificate duly prepared and signed by a senior
quality assurance of compliance officer of DepoMed; and

(b)                                 any letters of access required to permit the FDA or
any other Regulatory Authority in the Territory to access any drug master files
or site reference files relating to the Licensed Product for the purpose of
reviewing any Application for Regulatory Approval of the Licensed Product in
the Territory; and

(c)                                  a Site Reference File for the DepoMed Facility at
which the Clinical Batches for the Licensed Product were prepared; and

(d)                                 any other information related to the Licensed Product
which is in the possession or control of DepoMed and is required for an
Application for Regulatory Approval.

6.3                                 DepoMed
shall provide to BLI such assistance as BLI may reasonably require in the
preparation of the CMC Section of an Application for Regulatory Approval of the
Licensed Product.

6.4                                 DepoMed
shall develop and provide to BLI all Clinical Information relating to the
Licensed Product that is Developed by DepoMed pursuant to this Agreement. Any
such information that DepoMed has in its possession at the Effective Date shall
be provided within sixty (60) days after the Effective Date, or within such
other time that the DRT may set, and thereafter such Clinical Information shall
be provided within twenty (20) Business Days of the acquisition or development
of such information. DepoMed may retain copies of the Clinical Information and
Technical Information for its own use as permitted by this Agreement.

7.                                        APPLICATION FOR REGULATORY APPROVAL

7.1                                 Provided
that DepoMed has complied in all material respects with its obligations under
of this Agreement, and that all of the other data and information required for
that purpose are available to BLI in the form required for an Application for
Regulatory Approval, and subject to any provisions of the Work Plan, BLI shall
use all reasonable efforts to file, as 

 

 

18

 

soon as reasonably possible,
at the expense of BLI, and in the name of BLI, or any Affiliate or sub-licensee
of BLI, any Applications for Regulatory Approval required for the Licensed
Product in the Territory.

7.2                                 Subject
only to Section 20.4, BLI, or its Affiliate or sub-licensee, shall retain
ownership of each Application for Regulatory Approval in the Territory, and all
associated files and data and information relating to the Licensed Product,
except for any Site Reference Files relating to the Licensed Product prepared
by or for DepoMed. Any Regulatory Approval, import licenses, formulary listings
or other licenses or approvals for the Licensed Product in the Territory, or
any agency or instrumentality thereof authorizing import and/or sale of the
Licensed Product shall be issued in the name of BLI or any Affiliate or
sub-licensee of BLI.

8.                                        CONFIDENTIALITY.

8.1                                 Each
of BLI and DepoMed shall maintain all Technical Information and Clinical
Information, and any other information about this Agreement and the businesses
or affairs of the other relating to the Licensed Product, in confidence, and
shall not at any time disclose any such information to persons other than their
Affiliates, officers, employees, agents, consultants, advisers, and licensees
and potential sub-licensees, except where permitted by this Agreement, and only
to the extent necessary for the purposes of this Agreement. BLI and DepoMed
shall use such information only to the extent necessary or permitted by this
Agreement, or required by law. BLI and DepoMed shall take all reasonable steps
to ensure that their respective Affiliates, agents, officers, employees,
representatives, consultants, advisors and licensees and potential licensees
and sub-licensees maintain the obligations of confidence imposed on BLI and
DepoMed by this Agreement.

8.2                                 Section
8.1 shall not apply to any Technical Information or Clinical Information that:

(a)                                  was known to BLI at the time of its disclosure by
DepoMed;

 

 

19

 

(b)                                 has been published or is otherwise within the public
knowledge or is generally known to the public;

(c)                                  has come into the public domain without any breach of
this Agreement;

(d)                                 became known or available to BLI from a source having
the right to make such disclosure to BLI and without restriction on such
disclosure to BLI;

(e)                                  is disclosed to the public and is generally available
to the public as a result of compliance with any applicable law or regulation;
or

(f)                                    is disclosed as the result of any applications for
patents relating to the Licensed Products anywhere in the world.

8.3                                 Each
Party acknowledges that improper use or disclosure of information of the other
Party that must be kept in confidence under Section 8.1 above would cause
substantial harm to the other Party (in particular in barring patent protection
for that Party’s technology), and that such harm could not be remedied by the
payment of damages alone. Accordingly, each Party will be entitled to
preliminary and permanent injunctive relief and other equitable relief for any
breach of this Article 8 by the other Party, without prejudice to all other
remedies available at law or in equity.

8.4                                 Notwithstanding
the provisions of section 8.1 to 8.3, DepoMed shall not disclose to or discuss
with any person employed or retained by, or associated in any way with Elan
Corporation, PLC (“Elan”) or any Affiliate of Elan, any data or information
concerning the development of the Licensed Product, the Work Plan or any
business or financial information concerning the proposed Manufacture or
Marketing of the Licensed Product by BLI.

9.                                      LICENSE PAYMENT BY BLI.

9.1                                 BLI
shall make a payment to DepoMed of twenty five million US dollars
(US$25,000,000) within thirty (30) days after the grant of Regulatory Approval
of the first of the Licensed Product or a Substitute Product to receive
Regulatory Approval in 

 

 

20

 

the United States. Any such
payment in respect of a Substitute Product shall be in consideration of the
rights granted to BLI in Article 11 of this Agreement, of the waiver by DepoMed
of certain obligations of BLI under this Agreement, and of the reduction in the
royalty rates applicable to certain sales as provided in Article 12.

10.                               LICENSE PAYMENT BY DEPOMED.

10.1                           DepoMed
shall be entitled to use the Regulatory Data at any time after the Effective
Date for the purpose of obtaining Regulatory Approval of the Licensed Product
in jurisdictions outside of the Territory. In consideration for the right to
use such Regulatory Data, and provided that BLI is not in default of any of its
payment obligations under this Agreement, DepoMed shall pay to BLI, in each
calendar quarter following the later of (1) the payment by BLI of the amount
required by section 9.1; and (2) the first commercial sale of any product
comprising the GR system and metformin as the sole active ingredient in any
country outside the territory,:

(a)                                  [**] per cent ([**]%) of any licensing fees or
milestone payments received by DepoMed from any licensee in that quarter, plus

(b)                                 the lesser of [**] dollars; and [**] per cent per cent
([**] %) of all amounts received by DepoMed from sales of any product comprised
of the GR System in combination with metformin as the sole active ingredient in
any country outside of the Territory

10.2                           The
obligations of DepoMed under section 10.1 shall expire when the total amount
that DepoMed has paid to BLI under section 10.1 first exceeds [**] dollars
($[**]).

10.3                           DepoMed
may terminate its obligation under section 10.1 of this Agreement by paying to
BLI the sum of [**] dollars ($[**]) at any time before the first commercial
sale of any product comprising the GR system and metformin as the sole active
ingredient in any country outside the territory.

 

 

21

 

11.                               LICENSE OF PRODUCT;

11.1                           DepoMed
hereby grants to BLI an exclusive license in the Territory under Patent Rights,
Know-How and Technical Information, with the right to grant sublicenses of the
same scope as the license granted by this Agreement, (except that any
sublicensee shall have no right to grant further sublicenses), to develop, have
developed, Manufacture, Market and import Licensed Product in the Territory.

11.2                           BLI
shall have the right to market and sell Licensed Product under any trademark or
trademarks that BLI chooses and has the legal right to use, whether now or
hereafter acquired or developed. Nothing herein shall be deemed to give either
party any rights to the trademarks of the other party. BLI may freely refer to
the trademark “GR System” with respect to Licensed Product so long as it is
used in a form that is approved by DepoMed and protects the proprietary
interests of DepoMed in such trademark. BLI shall endeavour to indicate in any
promotional and marketing materials for the Licensed Product that the Licensed
Products incorporates the GR System.

11.3                           BLI
shall make, or shall cause an Affiliate or sub-licensee to make, the first
commercial sale of the 500 mg strength of the Licensed Product in each country
in the Territory within one hundred and twenty (120) days following the grant
of Regulatory Approval in that country.

11.4                           BLI
shall use diligent efforts in the marketing and sales of the 500 mg strength of
the Licensed Product consistent with the same diligence that it pursues with
products of its own with similar potential value.

12.                               ROYALTIES.

12.1                           In
consideration for the license granted herein, and subject to the other
provisions of this Article 12 of this Agreement, BLI shall pay to DepoMed an
earned royalty of:

(a)                                  [**] per cent ([**]%) of the first US$[**] of
aggregate Net Sales of Licensed Product in the Territory in each calendar year;

 

 

22

 

(b)                                 [**] per cent ([**]%) of the next US$[**] of such
aggregate Net Sales in the Territory in each calendar year; and

(c)                                  [**] per cent ([**]%) of all aggregate Net Sales in
the Territory in excess of US$[**] in each calendar year.

12.2                           In
consideration for the license granted herein, and in addition to the royalties
payable under section 12.1 if this Agreement, and subject to the other
provisions of this Article 12 of this Agreement, BLI shall pay to DepoMed an
earned royalty of:

(a)                                  [**] per cent ([**]%) of the first US$[**] of
aggregate Sub-Licensee Net Sales of Licensed Product in the Territory in each
calendar year;

(b)                                 [**] per cent ([**]%) of the next US$[**] of such
aggregate Sub-Licensee Net Sales in the Territory in each calendar year; and

(c)                                  [**] per cent ([**]%) of all aggregate Sub-Licensee
Net Sales in the Territory in excess of US$[**] in each calendar year.

12.3                           In
addition to the royalties payable pursuant to sections 12.1 and 12.2 of this
Agreement, and subject to in the other provisions of this Article 12 of this
Agreement, BLI shall pay to DepoMed an additional royalty of:

(a)                                  [**] per cent ([**]%) of the first US$[**] of the
aggregate Net Sales and Sub-Licensee Net Sales of Licensed Product in the
Territory in each calendar year; and

(b)                                 [**] per cent ([**]%) of the aggregate Net Sales and
Sub-Licensee Net Sales of Licensed Product in the Territory in excess of
US$[**] in each calendar year.

12.4                           BLI
shall pay the earned royalties required by sections 12.1, 12.2 and 12.3 in
respect of the Net Sales and Sub-Licensee Net Sales of the Licensed Product in
each country in the Territory until:

(a)                                  the expiry of [**] years from the first commercial
sale of Licensed Product in that country; or

 

 

23

 

(b)                                 the Licensed Product is no longer covered by a Valid
Claim of an issued patent included in Patent Rights in that country,

whichever
is later.

12.5                           Subject
to the provisions of section 12.10, if at any time during the term of this Agreement,
Licensed Product is not, or is no longer, covered by a Valid Claim of an issued
patent included in Patent Rights in any country in the Territory, but the [**]
year period referred to in section 12.4(a) has not expired in that country,
then the Net Sales and Sub-Licensee Net Sales in that country that are subject
to payment of earned royalty shall be reduced to one-half of such actual Net
Sales and Sub-Licensee Net Sales.

12.6                           Upon
the expiration of the obligations of BLI to make the royalty payments required
by sections 12.1, 12.2 and 12.3 in any country in the Territory, BLI shall have
a fully paid-up, royalty free license to develop, have developed, make, have
made, use, sell and import Licensed Product in that country.

Reduction of Royalties

12.7                           BLI,
at its election exercisable on ten (10) days notice in writing delivered to
DepoMed at any time during the term of this Agreement, may terminate its
obligation to make the royalty payment required by section 12.3 of this
Agreement by paying to DepoMed the sum of thirty five million (US$35,000,000).

12.8                           In
the event that a court or governmental agency compels BLI to grant a
sub-license to any third party for Licensed Product [**].

12.9                           If
BLI has assumed responsibility for the Development of the 500 mg strength of
the Licensed Product pursuant to section 3.2 of this Agreement:

(a)                                  the royalty rate payable pursuant to section 12.3
shall be reduced to [**]; and

(b)                                 the amount payable under section 12.7 by BLI to
terminate its obligation to make the royalty payment required by section 12.3
of this Agreement shall be reduced [**].

 

 

24

 

12.10                     If as a result of
any litigation brought by BMS or any successor to BMS against DepoMed arising
out of any of the matters set out in schedule 17.1 the Patent Rights are
invalidated to the extent that the Licensed Product is not covered by a Valid
Claim in any of the patents within the Patent Rights that are eligible for
listing in the Orange Book, then the Net Sales and Sub-Licensee Net Sales that
are subject to payment of earned royalty shall be reduced to [**] of such actual
Net Sales and Sub-Licensee Net Sales.

Royalty Reports and Payments

12.11                     Earned royalty
payments hereunder shall be made within forty-five days following the end of
each calendar quarter, and each payment shall include royalties which shall
have accrued during said calendar quarter. Such quarterly payments shall be
accompanied by a report setting forth separately the Net Sales of Licensed
Product sold during said calendar quarter in each country in the Territory, the
basis for any reduction in those earned royalties taken pursuant to this
Agreement, and the calculation of earned royalties payable for such calendar
quarter.

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

12.13                     The remittance of
royalties payable on Net Sales outside the United States shall be made to
DepoMed in United States dollars at the free market rate of exchange of the
currency, as published in the most recent issue of the Wall Street Journal (New
York edition), of the country from which the royalties are payable on the
particular date the particular United States dollars are transmitted for
payment as royalties, less any withholding or transfer taxes which are
applicable. BLI shall supply DepoMed with proof of payment of any taxes
deducted from the royalties payable to DepoMed and paid on DepoMed’s behalf.

12.14                     If the transfer
or the conversion of all or a part of the remittance into the United States
dollar equivalent in any such instance is not lawful or possible, the payment
of such part of the royalties shall be made by the deposit thereof, in the
currency of the country where the sale on which the royalty was based was made,
to the credit and account of DepoMed or its nominee in any commercial bank or
trust company of DepoMed’s choice located in 

 

 

25

 

that country. Notification
of such choice of bank or trust company shall be given to DepoMed at least
thirty days prior to the date that any payment is due. Prompt notice of
deposits by BLI shall be given to DepoMed. Any tax burden levied by any country
on payments due or made by BLI to DepoMed under this Agreement shall be borne
by DepoMed.

Records and Audits

12.15                     BLI and its Affiliates
shall keep and maintain, and shall cause its sub-licensees and assigns to keep
and maintain, records of Net Sales and Sub-Licensee Net Sales. Such records
shall be open to inspection by DepoMed or, in the case of sub-licensees and
assigns, by BLI on behalf of DepoMed, at any mutually agreeable time during
normal business hours within two years after the royalty period to which such
records relate by an independent certified public accountant (or the equivalent
in countries other than the United States) reasonably acceptable to BLI 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 BLI. This right of inspection shall be exercised only once with
respect to each country in the Territory 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 in a particular country have been
understated by at least [**] percent for any calendar year in which event BLI
shall bear the reasonable cost of such inspection for such country.

Licensed Product Substitution

12.16                     If at any time during
the Term of this Agreement BLI determines that the 500 mg strength of the
Licensed Product should not be Marketed in the Territory, BLI may Market, and
authorize any sub-licensee to Market, a Substitute Product. BLI shall pay to
DepoMed the royalties that would be required by this Article 12 if the
Substitute Product were a Licensed Product, in respect of all net sales of that
Substitute Product by BLI or by its sub-licensee, calculated in a manner
consistent with sections 1.25 and 1.32 of this 

 

 

26

 

Agreement. Such payment
respecting Substitute Product shall be supported by the consideration set out
in section 9.1 of this Agreement. Provided that BLI makes the payments required
by this Agreement in respect of such Substitute Product, BLI shall not be
deemed to be in default of its obligations under this Agreement by reason of
that substitution or its failure to Market the Licensed Product.

13.                               TECHNOLOGY TRANSFER.

13.1                           DepoMed
shall at the written request of BLI (a) disclose and transfer to BLI all of the
Technical Information and (b) provide to BLI such training and support as BLI
reasonably requires to enable BLI to efficiently and economically optimize use
of the Technical Information in the Manufacture and Marketing of the Licensed
Product (the “Technology Transfer”). DepoMed shall provide sufficient personnel
to assist in the Technology Transfer as described in this Article 13. DepoMed
shall cooperate with BLI to ensure that the Technology Transfer may be
completed as expeditiously as possible. BLI shall reimburse DepoMed for any
travel and accommodation expenses reasonably incurred by DepoMed in connection
with such assistance.

13.2                           The
training and support to be provided by DepoMed to BLI throughout the Technology
Transfer for the Licensed Product shall include, without limitation:

(a)                                  training and support in the DepoMed Facility at which
the Licensed Product has been manufactured in all of the methods necessary to
practice the Technical Information in the formulation, development and
manufacturing of the Licensed Product;

(b)                                 demonstration of, and support and training in, the use
of any manufacturing equipment necessary for the use of the Technical
Information at a BLI facility and in the operational and performance
qualifications of such equipment at that BLI facility,

(c)                                  technical support for the operational start-up of that
manufacturing equipment at that BLI facility,

 

 

27

 

(d)                                 demonstration of, and support and training in, the
manufacturing processes using the Technical Information at that BLI facility,
and

(e)                                  technical support for the successful manufacturing by
BLI of three validation batches of the Licensed Product at that BLI facility.

13.3                           In
addition, a reasonable number of employees of BLI and its Affiliates shall be
entitled to visit the DepoMed Facility to observe relevant processes involving
the Technical Information in operation. DepoMed shall provide technical
consultation reasonably requested by BLI on an as-needed basis following
Regulatory Approval of Product for any reasonable time period requested by BLI.
DepoMed also shall be available, at the reasonable request of BLI, for
consultation during any regulatory inspection or to assist in responding to
regulatory questions that may occur during the prosecution of any Application
for Regulatory Approval of the Licensed Product.

13.4                           BLI
shall use the Technical Information transferred pursuant to this Agreement only
in accordance with this Agreement and shall not use it for any other purpose.

Toxicology Studies

13.5                           If
BLI terminates this Agreement other than for Cause, BLI shall provide to
DepoMed a copy of the Toxicology Studies and the results thereof for use by
DepoMed only for the purposes of seeking Regulatory Approval of the 500 mg
strength of the Licensed Product pursuant to section 505(b)(1) of the Food,
Drugs and Cosmetic Act, or any comparable regulatory legislation in the
Territory.

13.6                           In
consideration for the use by DepoMed, and only if used by DepoMed, the right
granted by BLI to DepoMed in section 13.5, DepoMed shall pay to BLI:

(a)                                  [**] per cent ([**]%) of any licensing fees or
milestone payments received by DepoMed from any licensee in that quarter, plus

 

 

28

 

(b)                                 [**] per cent ([**]%) of all amounts received by
DepoMed from sales of any product for which Regulatory Approval is obtained by
referring to the Toxicology Studies.

14.                               COMBINATION PRODUCT.

Option to Combination Product.

14.1                           During the period beginning on the Effective Date and
ending on the termination of this Agreement, BLI shall have the option to enter
into a license agreement with respect to or otherwise acquire rights to
commercialize any fixed dose combination product incorporating metformin and any hypoglycemic compound as active ingredients (a “Combination Product”) developed by DepoMed on terms and
conditions to be negotiated by the parties. DepoMed shall not license, or
otherwise grant rights to, a Combination Product to any third party other than
BLI prior to the termination of this Agreement without the prior written
consent of BLI.

15.                               PATENTS, INFRINGEMENT.

BMS
Litigation

15.1                        DepoMed shall retain carriage and control of the
litigation commenced by DepoMed relating to the matter referred to in Schedule
17.1 attached hereto. DepoMed shall, to the fullest extent practicable, provide
BLI with copies of all pleadings, discoveries, depositions, expert reports and
witness statements filed or intended to be filed in that litigation. [**]  BLI shall have the right, at its own
expense, to be represented by counsel in any such litigation.
DepoMed shall use diligent efforts to keep BLI fully advised of the status of
the action and of all significant steps taken by any party to that action.
DepoMed shall have the final decision on any substantive issues in the conduct
of that litigation.

Other Infringement

15.2                           If
either party determines that any of the Patent Rights have been infringed by
the Manufacture or Marketing in the Territory of a product containing metformin
as its sole 

 

 

29

 

active ingredient, such
party shall give to the other party notice of such alleged infringement, in
which event BLI may at its discretion take such steps as it may consider
necessary to prosecute such infringement. BLI may not settle any such
litigation in a manner that adversely affects the rights of DepoMed hereunder
without the consent of DepoMed, which consent shall not be unreasonably
withheld. DepoMed shall have the right, at its own expense, to be represented
by counsel in any such litigation. If BLI, after such notice, elects not to
bring suit, it shall notify DepoMed of such election within thirty days after
receipt of such notice and DepoMed shall then have the right to bring suit at
its own expense. DepoMed shall also have the right to bring suit if BLI fails
to institute suit within ninety days from the date of the original notice of
infringement by DepoMed.

15.3                           In
any litigation brought by BLI under section 15.2, but excluding any litigation
relating to the matter referred to in Schedule 17.1 attached hereto, BLI shall
notify DepoMed of the commencement of that litigation and 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. In any such litigation, DepoMed may
elect by notice to BLI to [**]. Such election by DepoMed shall be made not
later than 60 days from the date such litigation is commenced. BLI may not
settle any such litigation in a manner that adversely affects the rights of
DepoMed hereunder without DepoMed’s consent, which consent shall not be
unreasonably withheld.

15.4                           In
any litigation brought by DepoMed following an election by BLI pursuant to
section 15.3 not to bring suit, DepoMed shall notify BLI of the commencement of
that litigation and shall have the right to use and sue in BLI’s name, and BLI
shall have the right, at its own expense, to be represented by counsel. In any
such litigation, BLI may elect by notice to DepoMed to [**]. Such election by
BLI shall be made not later than 60 days from the date of the commencement of
any such action. DepoMed may not settle any such litigation in a manner that
adversely affects the rights granted to BLI under this Agreement without BLI’s
consent.

 

 

30

Infringement of
Third party Patents

15.5                           In
the event of a judgment in any suit, except the litigation referred to in
sections 15.6 through 15.10 and 17.1, requiring BLI to pay damages or a royalty
to a third party or in the event of a settlement of such suit or threatened
suit consented to by DepoMed (which consent shall not be unreasonably withheld)
requiring damages or royalty payments to be made, [**].

Consequences of BMS Litigation

15.6                           If as a result of any litigation brought by BMS or any successor to BMS
against DepoMed relating to the matters set out in schedule 17.1 and asserting
that DepoMed is not the owner of the Licensed Product or of the technology
embodied in the Licensed Product, BLI is ordered by a Final Judgment to cease
sales of the Licensed Product, DepoMed shall [**].

(a)                                  [**]; and

(b)                                 [**].

15.7                        If
as a result of any litigation brought by BMS or any successor to BMS against
DepoMed relating to the matters set out in schedule 17.1 and asserting that
DepoMed is not the owner of the Licensed Product or of the technology embodied
in the Licensed Product, BLI is required to pay to BMS, by a Final Judgment or
by way of settlement, any amount including any damages, profits or royalties,
DepoMed shall [**].

15.8                        If
as a result of a Final Judgment in any litigation brought by BMS or any
successor to BMS against DepoMed arising out of any of the matters set out in
schedule 17.1 the Patent Rights are invalidated to the extent that the Licensed
Product is not covered by a Valid Claim in any of the patents within the Patent
Rights that are eligible for listing in the Orange Book, DepoMed shall [**].

15.9                           DepoMed
shall pay any amounts owing to BLI under sections 15.6 to 15.8 of this
Agreement after the entry of any Final Judgment in quarterly payments, payable
within 

 

 

31

 

thirty days after the end of
each calendar quarter, equal to the lesser of, in respect of each calendar
quarter:

(a)                                  [**]; and

(b)                                 [**].

provided,
however, that no quarterly payment shall be less than [**] of the Cash Flow for
that calendar quarter.

15.10                     DepoMed may, by
notice in writing to BLI, elect to reduce the quarterly payments to be made
pursuant to section 15.9 by permitting BLI to offset the amount of any such
quarterly payment against any royalties payable by BLI to DepoMed under this
Agreement.

16.                               OWNERSHIP OF INVENTIONS AND KNOW-HOW

Ownership of
Intellectual Property Rights

16.1                           Each
of BLI and DepoMed shall retain its rights in and/or title to all Inventions
which it owned or controlled prior to the date hereof.

16.2                           All
Inventions relating to the Licensed Product made by any Party outside the scope
of work set out in the Work Plan for the Licensed Product, or after the
completion of the Work Plan for the Licensed Product, shall belong to the Party
making that Invention.

16.3                           All Inventions made by BLI or by DepoMed in the performance of their respective obligations
under this Agreement or the Work Plan shall be owned as follows:

(a)                                  any such Inventions relating to the formulations of
the Licensed Product, to the GR System, or to any process for manufacturing the
Licensed Product shall belong to DepoMed; and

(b)                                 any such Inventions relating to the clinical use of
the Licensed Product shall belong to BLI.

 

 

32

 

16.4                           The
determination of inventorship for Inventions shall be made in accordance with
applicable laws relating to inventorship set forth in the patent laws of the
United States (Title 35, United States Code).

16.5                           Except
as expressly provided in this Agreement, each joint owner may make, use, sell,
keep, license, assign, or mortgage any jointly owned Inventions, and otherwise
undertake all activities a sole owner might undertake with respect to such
inventions, to the extent of the joint owner’s interest therein, without the
consent of and without accounting to the other joint owner.

16.6                           Each
of BLI and DepoMed shall cause any inventor of any Invention employed by BLI or
DepoMed respectively to assign any and all rights that any such inventor may
have in any such Invention to BLI or to DepoMed, as contemplated by this
Agreement, and shall at no further cost to BLI execute any documents that may
reasonably be required to apply for and to obtain any such patents.

Disclosure of Inventions

16.7                           Each
of DepoMed and BLI shall endeavour to advise the other of any Inventions and of
any patent applications that it intends to file that may be subject to the
provisions of this Article 15.8, as promptly as possible, to arrange, to the
fullest extent possible, for simultaneous filing of applications where
appropriate and to avoid as much as possible any disclosure that may be
considered to be prior art to an application filed by the other Party.

Filing and
Prosecution of Patent Applications by BLI

16.8                           BLI
shall have right and the responsibility for filing, prosecuting and maintaining
patents and patent applications for all Inventions owned by BLI.

16.9                           BLI
shall advise DepoMed in writing of its plans to file patent applications for
any such Invention, and of the countries in which BLI intends to file such
applications. DepoMed may at its own expense file an application for any
Invention in any country in respect of which BLI has not indicated it will file
an application. Any such application filed by 

 

 

33

 

DepoMed and any patent
issuing therefrom shall be filed in the name of the inventors or of BLI and
shall at the request of DepoMed be assigned to DepoMed.

Filing and
Prosecution of Patent Applications by DepoMed

16.10                     DepoMed shall
have right and the responsibility for filing, prosecuting and maintaining
patents and patent applications for all Inventions owned by DepoMed in each
country in the Territory. DepoMed shall disclose to BLI the complete texts of
all patent applications filed by DepoMed that relate to the Licensed Product
owned by DepoMed, as well as all information received concerning the
institution or possible institution of any interference, opposition,
re-examination, reissue, revocation, nullification or any official proceeding
involving such a patent application anywhere in the world. BLI shall have the
right to review all such pending applications and other proceedings and make
recommendations to DepoMed concerning such applications. DepoMed shall keep BLI
promptly and fully informed of the course of patent prosecution or other
proceedings relating to any such invention, and shall provide to BLI copies of
any substantive communications submitted to or received from patent offices
throughout the world.

16.11                     BLI shall have
the right to assume responsibility for any patent or patent application
relating to the Licensed Product that DepoMed intends to abandon or otherwise
cause or allow to be forfeited. DepoMed shall give BLI reasonable written
notice prior to abandonment or other forfeiture of any patent or patent
application so as to permit DepoMed to exercise its rights under this section
at its own expense.

Enforcement of
Intellectual Property Rights

16.12                     Each of BLI and
DepoMed shall immediately report to the other any infringement or any
unauthorized use or misuse of the DepoMed Technology or the BLI Technology that
may come to its attention.

 

 

34

 

17.                               REPRESENTATIONS AND WARRANTIES; NON-COMPETITION

Representations
and Warranties of DepoMed

17.1                           DepoMed
expressly warrants and represents to BLI that:

(a)                                  subject only to the possible claim described in
Schedule 17.1, and to DepoMed’s knowledge, DepoMed has full right, title, and
interest in and to or the right to practice all presently existing Patent
Rights, Know-How, and Technical Information relating to Licensed Product;

(b)                                 there are no outstanding written or oral agreements
inconsistent with this Agreement; and

(c)                                  subject only to the possible claim described in
Schedule 17.1, and to DepoMed’s knowledge, it is empowered and has the right to
enter into this Agreement and to grant the licenses provided herein without
burdens, encumbrances, restraints, or limitations of any kind which could
adversely affect the rights of BLI under this Agreement; and

(d)                                 subject only to the patent application referred to in
Schedule 17.1, DepoMed has no knowledge of any patents or patent applications
owned by a third party and not licensed to DepoMed that would be infringed by
the practice of the presently existing Patent Rights, Know-How or Technical
Information or by the Manufacture or Marketing of the Licensed Product in the
Territory nor has DepoMed received any claims by third parties with respect to
such matters;

(e)                                  that all data and information to be supplied to BLI
will, at the time the data and information are disclosed, accurately reflect
the results of the tests and studies performed, and all other information
relating to the Licensed Product, known to DepoMed;

 

 

35

 

(f)                                    subject only to the possible claim described in
Schedule 17.1, DepoMed has no knowledge of any claim that any Third party
asserts ownership rights in any of the Patent Rights, Know-How, and Technical
Information,

(g)                                 subject only to the possible claim described in
Schedule 17.1, and to the patent application referred to in Schedule 17.1
DepoMed has no knowledge that DepoMed’s or its subsidiaries’ use of any of the
Patent Rights, Know-How, or Technical Information infringes any right of any
third party,

(h)                                 except for general disclosures that have not been and
will not be in detail sufficient to enable the recipient to manufacture the
Licensed Product, and to DepoMed’s knowledge, DepoMed’s Technical Information
has not been disclosed to others, and will not be disclosed to persons other
than BLI, except pursuant to appropriate confidentiality agreements or to the
extent disclosed in the patents, or as otherwise expressly permitted by this
Agreement;

(i)                                     DepoMed will diligently carry out the Development of
the Licensed Product in accordance with its obligations under the Work Plan and
this Agreement; and

(j)                                     The formulation of the Licensed Product Developed by
DepoMed under this Agreement will contain only ingredients, and in the
quantities, that are listed in the inactive ingredient guide as issued and
upgraded periodically by the FDA, that are approved by the FDA for use in
pharmaceutical preparations intended for oral administration to humans, that
are in compliance with the Reference listed product and for which there is a
Drug Master File available in all countries in the Territory where Drug Master
Files are required.

Mutual
Representations and Warranties

17.2                           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, 

 

 

36

 

delivery and performance of this Agreement have been
duly authorized by its Board of Directors;

(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 except, in the
case of DepoMed, as set forth in Schedule 17.1 attached hereto; and

(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 except, in the case
of DepoMed, as set forth in Schedule 17.1 attached hereto.

Non-Competition

17.3                           DepoMed
covenants and agrees with BLI that, during the term of this Agreement, DepoMed
shall not, in the Territory, whether for its own or any Affiliate’s account or
for the account or benefit of any third party, make, have made, use, import,
offer for sale, sell, or otherwise commercialize: (i) any product that includes
the Active Ingredient or any other salt, chiral forms or metabolites of metformin
except as contemplated by this Agreement; or (ii) any Combination Product, or
authorize, permit or assist any other person to do any of the foregoing, except
as permitted by this Agreement.

18.                               INDEMNIFICATION

Indemnification of DepoMed

18.1                           BLI
shall indemnify and hold harmless DepoMed and its officers, directors,
employees and agents against and from any losses, damages, injuries,
liabilities, claims, demands, settlement, judgments, awards, fines, penalties,
taxes, fees, charges, or expenses (including reasonable attorneys’ fees) of
DepoMed or any of its officers, directors, employees or agents arising from or
relating to:

 

 

37

 

(a)                                  The breach or inaccuracy in any material respect of
any BLI representation or warranty contained in Article 17 of this Agreement;

(b)                                 Any claim that Licensed Product packaging, labels,
inserts and marketing and sales materials infringe a trademark, trade dress or
copyright of a third party in the Territory;

(c)                                  Any injury or alleged injury to any person (including
death) or to the property of any person not a party hereto arising out of the
gross negligence or intentional act or omission of BLI or its employees or
agents relating to the manufacture or sale of Licensed Product;

(d)                                 The use, manufacture, promotion, marketing and sale of
Licensed Product by BLI, its Affiliates, its sublicensees, distributors and
customers; or

(e)                                  The enforcement of DepoMed’s indemnification rights
hereunder.

Indemnification of BLI

18.2                           DepoMed
shall indemnify and hold harmless BLI and its officers, directors, employees
and agents against and from any losses, damages, injuries, liabilities, claims,
demands, settlement, judgments, awards, fines, penalties, taxes, fees, charges
or expenses (including reasonable attorneys’ fees) of BLI or a third party
arising from or relating to:

(a)                                  The breach or inaccuracy in any material respect of
any DepoMed representation, warranty or covenant contained in Article 17 of
this Agreement;

(b)                                 Any injury or alleged injury to any person (including
death) or to the property of any person not a party hereto arising out of the
gross negligence or intentional act or omission of DepoMed or its employees or
agents relating to Licensed Product; or

(c)                                  Any injury or alleged injury to any person (including
death) or to the property of any person not a party hereto arising out of the
use of the GR System in the Licensed Product; or

 

 

38

 

(d)                                 The enforcement of BLI’s indemnification rights
hereunder.

18.3                           If
any indemnified Party intends to claim indemnification under this Article 18 it
shall promptly notify the other Party in writing of such alleged claim. The
indemnifying Party shall have the sole right to control the defense and settlement
thereof. The indemnified Party shall cooperate with the indemnifying Party and
its legal representatives in the investigation of any action, claim or
liability covered by this Article 18. The indemnified Party shall not, except
at its own cost, voluntarily make any payment or incur any expense with respect
to any claim or suit without the prior written consent of the indemnifying
Party. In addition, the indemnifying Party shall be subrogated to the rights of
the indemnified Party against any third party, and such indemnified Party
hereby assigns to the indemnifying Party all claims, causes of action and other
rights that the indemnified Party may then have against any third party,
including Affiliates and sublicensees, with respect to the claim, suit or
proceeding. Conversely, and without in any way limiting the obligation of
either Party to indemnify the other Party as herein provided, to the extent
that any Party shall fail to perform its indemnification obligations under
Section 18.1 or Section 18.2, such Party owing a duty of indemnification hereby
assigns to the indemnified Party to whom indemnification is owed all claims,
cause of action and other rights that the Party owing such duty may then have
against any third party, including Affiliates and sublicensees with respect to
the claim, suit or proceeding.

19.                               TERM

19.1                           Unless
sooner terminated as herein provided, this Agreement shall become effective on
the Effective Date and shall continue in effect thereafter until it is
terminated in accordance with the terms hereof.

20.                               EXPIRY AND TERMINATION

20.1                           This
Agreement shall not become effective until any applicable waiting period (and
any extension thereof) applicable to the transactions contemplated by this
Agreement under the HSR Act shall have been terminated or shall have expired.

 

 

39

 

20.2                           Unless
earlier terminated pursuant to Section 20.3 below, this Agreement shall not
expire. Upon the expiration of the payment term for the license grant in all countries
as set forth in Article 11, BLI shall have a fully-paid up, perpetual and
non-terminable exclusive license in the Territory for the Licensed Product.

20.3                           At
any time during the Term of this Agreement, either BLI 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 royalty or other
payments due hereunder) 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 subsection (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.

 

 

40

20.4                           Upon termination by DepoMed for Cause, BLI shall, at
the request of DepoMed, assign to DepoMed the Regulatory Approval for the
Licensed Product in each country in the Territory, within ten (10) days after
DepoMed has paid to BLI all of the costs incurred by BLI in the Development of
the Licensed Product and in obtaining Regulatory Approval of the Licensed
Product.

20.5                           Except
as set forth in Sections 20.1 and 20.4, upon termination of this Agreement
pursuant to section 20.3, the licenses granted to BLI in Sections 11.1 and 11.2
of this Agreement shall terminate. Notwithstanding such termination, and
subject to the terms and conditions of this Agreement, BLI may dispose of, by
sale or otherwise, any remaining inventory of Licensed Product that BLI may have
in its possession or control on the date of termination.

20.6                           Termination
shall not release BLI or DepoMed from any obligations or liabilities that
matured prior to termination, including without limitation the obligations of
BLI to make any payments owing at the time of termination through the date of
termination. If the terms of this Agreement expressly state that a right or
obligation shall survive expiration or termination of this Agreement, such
right or obligation shall survive expiration or termination to the degree
necessary to allow complete fulfilment or discharge of the right or obligation.
The provisions of Articles 8, 17, 18 and 21 of this Agreement shall survive the
expiration or termination of this Agreement.

20.7                           In
the event of termination or expiration, each of DepoMed and BLI shall retain
ownership of the ideas, inventions, discoveries, developments, designs,
trademarks, trade secrets, improvements, know-how, process, procedures,
techniques, formulae, computer programs, drawings, technology(ies) and
intellectual and industrial property accorded to each under the terms of this
Agreement.

21.                               PUBLICITY.

21.1                           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 written consent of the other
party, except for such

 

41

 

announcement which, in
accordance with the advice of legal counsel to the party making such
announcement, is required by law. The party making any announcement which is
required by law will, unless prohibited by law, give the other party an
opportunity to review the form and content of such announcement and comment
before it is made. Either party shall have the right to make such filings with
governmental agencies as to the contents and existence of this Agreement as it
shall reasonably deem necessary or appropriate.

22.                               ASSIGNABILITY.

22.1                           This Agreement may be assigned by either party to an
Affiliate or as part of the sale by either party of all of its business of
which this Agreement may be a part without the consent of the other party;
provided, however, that DepoMed shall not assign this Agreement to an Affiliate
that is not reasonably capable of performing all of DepoMed's obligations under
this Agreement. Except as permitted by this Section 22.1 DepoMed shall not
assign any rights licensed to BLI under this Agreement. BLI may assign or
delegate any of its obligations under this Agreement to any Affiliate of BLI
reasonably capable of performing such obligations. 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.

22.2                           No
assignment permitted by this Article 22 shall serve to release either party
from liability for the performance of its obligations hereunder.

23.                               PATENT LIFE EXTENSION.

23.1                           Each
party undertakes to inform the other party of:

(a)                                  the date of filing any Applicable Permit covering
Licensed Product in a given country;

(b)                                 the date of approval by the FDA or its equivalent from
the relevant authority in the country, if required;

 

 

42

 

(c)                                  the date of obtaining Product approval (or equivalent
authorization) from the FDA or its equivalent in a given country;

(d)                                 if applicable, the date of obtaining the price
approval in a given country as well as the amount of the price approval with
regard to any such country;

(e)                                  the date of the first sale of Licensed Product in a
given country; and

(f)                                    any events which might be material to the other party
in connection with a possible extension of the patent protection term.

24.                               NOTICES.

24.1                           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 Term 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 White & McAuliffe LLP

275 Middlefield Road

Menlo Park, California 94025

Attention: Julian N. Stern

Facsimile: 650-324-0638

Biovail Laboratories Incorporated

Chelston Park

Building 2, Collymore Rock

St. Michael BH1

Barbados, West Indies

 

 

43

 

Attention:
Mr. Eugene Melnyk, President and Chief Executive Officer

Facsimile No.: 246 427 7085

With a copy to:

Biovail Corporation 

2488 Dunwin Drive

Mississauga, Ontario

L5L 1J9

Attention:
Mr. Ken Cancellara, Senior Vice President and General Counsel

Facsimile: 416 285 6499

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.

25.                               FORCE MAJEURE.

25.1                           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, or an order or judgment of any
court of competent jurisdiction, whether interim, temporary, interlocutory or
permanent), 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, consonant with
sound business judgment and to the extent permitted by law, to correct such
failure or delay as expeditiously as possible.

25.2                           In
the event that a party is unable to perform any of its obligations under this
Agreement by a reason described in Section 0 above, the obligations under this Agreement shall be
suspended during such time of non-performance.

 

 

44

 

26.                               MISCELLANEOUS.

26.1                           This
Agreement defines the full extent of the legally enforceable undertakings of
the parties hereto. No promise or representation, written or oral, which is not
set forth explicitly in this Agreement is intended by either party to be
legally binding. Both parties acknowledge that in deciding to enter into this
Agreement and to consummate the transaction contemplated hereby neither has
relied upon any statements or representations, written or oral, other than
those explicitly set forth in this Agreement.

26.2                           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 shall apply only with respect to the operation of such provision of
this Agreement in the particular jurisdiction for which such determination is
made, provided no unfairness results. 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.

26.3                           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.

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

 

 

45

 

26.5                           Nothing
in this Agreement authorizes either party to act as agent for the other party
as to any matter. The relationship between DepoMed and BLI is that of
independent contractors.

26.6                           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 arising under
this Agreement, except for any disputes relating to the provisions of Articles
15, 17, 18 and 20, shall be settled by binding arbitration. Such arbitration
shall be conducted at New York, New York, 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 New York 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.

 

 

46

 

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

 

	
   

  	
  BIOVAIL LABORATORIES INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene Melnyk

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Eugene
  Melnyk

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEPOMED, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ John W. Fara

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John W. Fara

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  

 

 

47

 

	
  Schedule 1.28 to

  Development and License Agreement

   

  
	
   

  
	
  Patent Rights - Patents and Patent Applications

   

  
	
  Issued
  Patent No./

  Pending
  Patent Application No.

  	
  Title of
  Invention

  
	
   

  	
   

  
	
  [**]

  	
  [**]

  
	
   

  

 

 

 

 

SCHEDULE
1.39: WORK PLAN

 

[**]

 

 

 

 

Schedule
17.1 to Development and License Agreement

 

Litigation

 

In
January 2002, DepoMed filed a complaint against Bristol-Myers Squibb Company ("BMS")
claiming that BMS's once-daily metformin product, Glucophage XR, infringes
DepoMed's United States Patent No. 6,340,475 (the "BMS Lawsuit"). The BMS
Lawsuit may result in successful counterclaims by BMS against DepoMed based on
an allegation that DepoMed has breached the terms of a letter agreement dated
the 11th of July, 1996, relating to a joint research project for the
production of a product consisting of formulations of metformin hydrochloride
incorporated in the DepoMed GR System, or alleging that United States Patent
No. 6,340,475 is invalid.

DepoMed
is aware of BMS published PCT Patent Application WO99 47128 A1 entitled
“Biphasic Controlled Release Delivery System for High Solubility
Pharmaceuticals and Method”

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}], [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}]]