Document:

Exhibit 10.2

 

PROVIGIL SETTLEMENT AGREEMENT

 

THIS
SETTLEMENT AGREEMENT (“Agreement”) is entered into effective this 1st day of
February, 2006, by and between CEPHALON, INC., a corporation organized and
existing under the laws of the State of Delaware, with its principal place of
business at 41 Moores Road, Frazer, Pennsylvania, and BARR LABORATORIES, INC.,
a corporation organized and existing under the laws of the State of Delaware,
with its principal place of business at 400 Chestnut Ridge Road, Woodcliff Lake,
New Jersey.

 

WHEREAS,
Cephalon is the owner by assignment of all right and title in U.S. Reissue
Patent No. RE37,516 (“the RE ‘516 Patent”), issued by the United States Patent
and Trademark Office on January 15, 2002 and expiring on October 6, 2014.

 

WHEREAS,
Provigil, which is covered by claims of the RE ‘516 Patent, is the commercial
formulation of modafinil developed, manufactured and sold by Cephalon pursuant
to FDA approval of Cephalon’s NDA 20-717.

 

WHEREAS,
by letter dated February 20, 2003, Barr notified Cephalon that Barr had
submitted ANDA No. 76-597 to the FDA under Section 505(j) of the Federal Food,
Drug and Cosmetic Act (21 U.S.C. § 355(j)), seeking approval to engage in the
commercial manufacture, use, and sale of tablets containing 100 mg and 200 mg
of modafinil, a generic version of Provigil tablets, before the expiration date
of the RE ‘516 Patent, and certifying that the RE ‘516 Patent is invalid,
unenforceable, or not infringed by Barr’s generic product.

 

WHEREAS,
Cephalon timely filed suit against Barr and three other companies that had also
filed Paragraph IV ANDAs concerning Provigil in an action captioned Cephalon, Inc. v. Mylan Pharmaceuticals Inc., et al.,
Civil Action No. 03-CV-1394 (JCL), in the United States

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

 

District Court for the District of New Jersey, seeking, among other
things, a declaration that Barr’s making, using, offering to sell, selling, or
importing Barr ANDA Modafinil Tablets would infringe the RE ‘516 Patent, an
order providing that the effective date of any approval of Barr’s ANDA No.
76-597 shall be a date which is not earlier than the date of the expiration of
the RE ‘516 Patent; and an order permanently enjoining Barr from making, using,
offering to sell, selling, or importing tablets as described in Barr’s ANDA No.
76-597 until after the date of the expiration of the RE ‘516 Patent.

 

WHEREAS,
Barr answered Cephalon’s complaint by denying infringement, by asserting an
affirmative defense that incorporated by reference Barr’s co-defendants’
allegations that the RE ‘516 patent is invalid and unenforceable, and by filing
a counterclaim seeking declaratory judgment of noninfringement.

 

WHEREAS,
Cephalon and Barr have taken discovery, but no partial or final judgment has
entered as to any issue in dispute.

 

WHEREAS,
to avoid the time and expense of further litigation, and in compromise of the
disputed claims set forth above, the parties now desire to resolve their
disputes by settlement.

 

WHEREAS,
Cephalon desires to purchase and license from Barr, and Barr is willing to sell
and license to Cephalon on the terms and conditions set forth herein, certain
intellectual property rights owned by Barr.

 

NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
conditions herein set forth, the receipt and sufficiency of which consideration
is hereby acknowledged, the parties agree as follows:

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

2

 

1.                                      DEFINITIONS

 

1.1                                 “Action” shall
mean Cephalon, Inc. v. Mylan Pharmaceuticals
Inc., et al., Civil Action No. 03-CV-1394 (JCL), pending in the
United States District Court for the District of New Jersey.

 

1.2                                 “Affiliate”
shall mean any corporation, partnership, joint venture or firm which controls,
is controlled by or under common control with a specified person or entity. For
purposes of this definition, “control” shall be presumed to exist if one of the
following conditions is met: (a) in the case of corporate entities, direct or
indirect ownership of at least fifty percent (50%) of the stock or shares
having the right to vote for the election of directors and (b) in the case of
non-corporate entities, direct or indirect ownership of at least fifty percent
(50%) of the equity interest with the power to direct the management and policy
decisions of such non-corporate entities.

 

1.3                                 “[**]
Application” shall mean [**].

 

1.4                                 “Barr” shall
mean BARR LABORATORIES, INC., a corporation organized and existing under the
laws of the State of Delaware, with its principal place of business at 400
Chestnut Ridge Road, Woodcliff Lake, New Jersey, and its directors, officers,
employees, agents and representatives, predecessors, successors, and assigns
(including without limitation any assignee of the Barr Modafinil ANDA); its
subsidiaries, divisions, groups, and the respective directors, officers,
employees, agents and representatives, successors, and assigns of each.

 

1.5                                 “Barr ANDA
Modafinil Product” shall mean [**].

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

3

 

1.6                                 “Barr Modafinil
ANDA” shall mean ANDA No. 76-597.

 

1.7                                 “Cephalon”
shall mean CEPHALON, INC., a corporation organized and existing under the laws
of the State of Delaware, with its principal place of business at 41 Moores
Road, Frazer, Pennsylvania, and its directors, officers, employees, agents and representatives,
predecessors, successors, and assigns; its subsidiaries, divisions, groups, and
the respective directors, officers, employees, agents and representatives,
successors, and assigns of each.

 

1.8                                 “Effective Date”
shall mean the date first written above.

 

1.9                                 “Intellectual
Property Rights” shall mean any and all United States and foreign patent
applications, including, without limitation, all provisional applications,
continuations, continuations-in-part (but not continuations-in-part claiming patentably
distinct subject matter) and divisionals, and any and all Letters Patent,
whether United States or foreign, that are or may be granted therefrom,
including, without limitation, all reissues, extensions, substitutions,
confirmations, re-registrations, re-examinations, validations, supplementary
protection certificates and patents of addition, and the underlying inventions
described therein.

 

1.10                           “Listed Patents”
shall mean [**].

 

1.11                           “Modafinil
License and Supply Agreement” shall mean the Modafinil License and Supply
Agreement attached hereto as Exhibit A.

 

1.12                           “Patent In Suit”
shall mean the RE ‘516 Patent.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

4

 

1.13                           “Provigil”
means the commercial formulation of modafinil developed, manufactured and, as
of the date of this Agreement, sold by Cephalon pursuant to FDA approval of
Cephalon’s NDA 20-717.

 

1.14                           “Subject
Modafinil Product” shall mean [**].

 

2.                                      EFFECTIVENESS

 

2.1                                 This Agreement
shall become effective on the Effective Date.

 

3.                                      OBLIGATIONS
OF THE PARTIES

 

3.1                                 Barr agrees
that it will not challenge the validity or the enforceability of the Patent in
Suit. Barr agrees that the Patent in Suit would be infringed by making, using,
offering to sell, or selling Barr ANDA Modafinil Product by Barr and/or its
Affiliates within the United States, or by importing or causing to be imported
any Barr ANDA Modafinil Product by Barr and/or its Affiliates into the United
States, without a license to do so. Barr agrees that the Patent in Suit would
be infringed by actively inducing any other entity to make, use, offer to sell,
or sell Barr ANDA Modafinil Product within the United States, or to import or
cause to be imported any Barr ANDA Modafinil Product into the United States,
without a license to do so. Barr and its Affiliates shall make no
representation or assertion to the contrary in any forum or context at any
time.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

5

 

3.2                                 Barr agrees
that it will not sell Subject Modafinil Product in the United States prior to
the effective date of the license granted by Cephalon to Barr pursuant to the
terms of the Modafinil License and Supply Agreement.

 

3.3                                 On [**],
Cephalon shall make a [**] payment to Barr of [**], in recognition of the
savings inuring to Cephalon in terms of the avoidance of costs, expenditure of
time and resources, disruption and burden associated with prosecuting the
Action against Barr.

 

3.4                                 Transfers of
Intellectual Property

 

(a)                                  Barr hereby
sells and assigns to Cephalon its entire right, title, and interest throughout
the world in and to the [**] Application and the inventions claimed therein. Barr
also hereby grants to Cephalon and its Affiliates a non-exclusive,
non-royalty-bearing, world-wide license (including the right to sublicense) to
all Intellectual Property Rights owned or controlled by Barr that are related
to the [**] Application and necessary to permit Cephalon to
practice the inventions claimed in the [**] Application (the “[**] Intellectual
Property Rights”) to manufacture, have manufactured, develop, formulate,
use, sell, offer to sell, and import API and finished pharmaceutical products.

 

(b)                                 Cephalon hereby
grants to Barr and its Affiliates a non-exclusive, non-royalty-bearing,
world-wide license to the [**] Application and the inventions claimed therein
to manufacture, have manufactured, develop, formulate, use, sell, offer to
sell, and import API and finished pharmaceutical products.

 

(c)                                  In
consideration of the sale, assignment and license set forth in Section 3.4(a)
above, Cephalon shall make a lump sum payment to Barr in the amount of [**]. This
payment

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

6

 

shall be made [**].

 

(d)                                 Barr represents
and warrants that, as of the Effective Date: (i) it owns all right, title, and
interest in and to the [**] Application; (ii) it has the right to enter into
this agreement with respect to the [**] Intellectual Property Rights; (iii) it
has not granted and will not grant during the term of this agreement rights in
or to the [**] Intellectual Property Rights that are inconsistent with the
rights granted herein; (iv) to Barr’s knowledge, there are no claims of third
parties that would call into question the rights of Barr to grant to Cephalon
the rights contemplated hereunder; (v) except for the Intellectual Property
Rights related to the [**] Application, as of the Effective Date, Barr does not
own, control, or have any rights to any patents or patent applications that
would dominate any practice of the Intellectual Property Rights related to the [**]
Application; and (vi) to Barr’s knowledge, there are no threatened or pending
actions, suits, investigations, claims, or proceedings in any way relating to
the Intellectual Property Rights related to the [**] Application.

 

(e)                                  At Cephalon’s
request, Barr shall timely execute any and all documents necessary to reflect
the sale and assignment set forth in Sections 3.4(a) above, including
confirmatory patent assignments.

 

(f)                                    Cephalon shall
have the sole right, but not the obligation, to apply for, prosecute, maintain,
renew, extend, abandon, disclaim in whole or in part, or otherwise dispose of,
including without limitation the right to prosecute, defend, settle, resolve or
otherwise dispose of any patent litigation or any patent interference with any
third party’s patent rights, including without limitation any patent rights of
Cephalon, whether before the United States Patent and Trademark Office (“PTO”)
or any United States court (all of the foregoing, to “Prosecute”), the

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

7

 

[**] Application and all other Intellectual Property Rights related to
the [**] Application, using counsel selected by Cephalon. All reasonable costs
and expenses of the Prosecution of the [**] Application and all other
Intellectual Property Rights related to the [**] Application (including all
governmental filing fees) shall be paid by Cephalon.

 

3.5                                 Cephalon and
Barr have entered into the Modafinil License and Supply Agreement.

 

3.6                                 Cephalon
covenants that it will not sue Barr for infringement under the Listed Patents,
or any other patents now owned or subsequently acquired by Cephalon, for any
sales by Barr in the United States of a product that is manufactured or sold
pursuant to an ANDA for which the reference listed drug is Provigil, provided
that any such sales are in accordance with the terms of this Agreement. Barr
agrees that it will not challenge the validity or enforceability of the Listed
Patents in any context or forum. Cephalon agrees that it will not assert the
Listed Patents against Barr in any context or forum, including with regard to
any pharmaceutical product, except in the event of a breach by Barr of this
Section 3.6 or any provision of Sections 3.1 or 3.2 of this Agreement. Cephalon
agrees to provide [**] notice to Barr prior to listing any patent other than [**]

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

8

 

4.                                      DISMISSAL

 

4.1                                 Upon the
Effective Date, Cephalon and Barr shall execute and file with the United States
District Court for the District of New Jersey a Joint Stipulation for
Dismissal, in the form attached hereto as Exhibit B. Each party shall bear its
own costs with respect to the settlement of the Action.

 

4.2                                 Cephalon and
Barr waive any right to appeal any order previously entered in the Action.

 

5.                                      MUTUAL
RELEASES

 

5.1                                 Barr, on behalf
of itself and its subsidiaries, successors, and assigns, hereby releases,
acquits, and forever discharges Cephalon from and against any and all claims,
demands, liabilities, causes of action, damages, duties, or obligations arising
under, concerning, or relating to the Patent In Suit, including, without
limitation, any claim for declaratory judgment that the Patent In Suit is
invalid, unenforceable, or would not be infringed by any Barr ANDA Modafinil
Product, but specifically excluding a breach by Cephalon of its covenants and
obligations under this Agreement.

 

5.2                                 Cephalon, on
behalf of itself and its subsidiaries, successors, and assigns, hereby
releases, acquits, and forever discharges Barr from any and all claims,
demands, liabilities, causes of action, damages, duties, or obligations arising
under, concerning, or relating to infringement of the Patent In Suit by the
filing of the Barr Modafinil ANDA with a Paragraph IV certification, but specifically
excluding a breach by Barr of its covenants and obligations under this
Agreement.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

9

 

6.                                      CONFIDENTIALITY

 

6.1                                 Cephalon and
Barr shall continue to be bound by and to comply with the terms of the Stipulated
Protective Order previously executed in the Action.

 

6.2                                 Cephalon and
Barr agree that the terms of this Agreement shall remain confidential and shall
not be disclosed to third parties except subject to a nondisclosure agreement,
and pursuant to business discussions relating to asset sales, mergers, or
change of control transactions, or upon order of a court of competent
jurisdiction or to the extent required by law or governmental regulation;
provided that Cephalon and Barr may issue mutually agreeable press releases and
make public statements consistent with the text of those press releases. Cephalon
and Barr agree that they will not otherwise publicize the terms and conditions
of this Agreement or make any statements or comments to any news media and/or
trade publication, or any third person or entity (except as set forth above)
regarding the terms and conditions of this Agreement. Information otherwise in
the public domain is not subject to the provisions of this Section.

 

7.                                      INDEMNIFICATION
BY CEPHALON

 

7.1                                 In the event
that Barr becomes the subject of a civil complaint, state or federal inquiry,
or other governmental proceeding or investigation (“Proceeding”) arising from
this Agreement (excluding any action to enforce the terms of this Agreement),
Cephalon shall indemnify Barr, its Affiliates and subsidiaries, the officers,
directors, and employees of each of them, and Barr’s current supplier of
modafinil API, Chemagis Ltd. and its applicable Affiliates, (collectively, the “Barr
Indemnitees”), for expenses reasonably and in good faith incurred by or

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

10

 

on behalf of the Barr Indemnitees in responding to, or defending
against, any such Proceeding (including court costs, reasonable attorneys’
fees, economists’, accountants’, and other experts’ fees, or other related
expenses of litigation or other proceedings), provided that Barr has given
Cephalon notice of such Proceeding as set forth in Section 7.2 below.

 

7.2                                 (a)                                  Barr shall
provide written notice to Cephalon of any Proceeding for which indemnification
will be sought by the Barr Indemnitees within twenty (20) business days of Barr’s
receipt of notice of such Proceeding. This notice to Cephalon (“Indemnification
Notice”) shall include:  (i) a request
for indemnification pursuant to the terms of this Section; (ii) a copy of any
informal or formal notice of investigation, summons, subpoena, complaint, or
other document relating to such Proceeding with which any of the Barr
Indemnitees are served; and (iii) any other documentation and information
available to Barr as is reasonably necessary to determine whether and to what
extent the Barr Indemnitees are entitled to indemnification under this Section.
However, the parties acknowledge and agree that the failure by Barr to provide
such notice within the six months after the expiration of the 20-day time
period set forth above shall not deprive the Barr Indemnitees of their right to
indemnification, provided that the delay in the provision of such notice does
not in any way prejudice Cephalon. It is understood and agreed, however, that
if Cephalon has actual knowledge of the Proceeding for which indemnification is
being sought within said six month period, then the failure by Barr to provide
notice within the six month period shall not deprive the Barr Indemnitees of
their right to indemnification.

 

(b)                                 Within ten (10)
business days of Cephalon’s receipt of an Indemnification Notice from Barr,
Cephalon shall provide a written acknowledgement to Barr (“Indemnification

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

11

 

Acknowledgement”) in which Cephalon shall:  (i) agree that the Barr Indemnitees are
entitled to indemnification under this Section in connection with the
Proceeding; or (ii) dispute that the Barr Indemnitees are entitled to such
indemnification.

 

(c)                                  During the
thirty (30) day period following the date of an Indemnification Acknowledgement
that reflects a dispute, Cephalon and Barr shall use good faith efforts to
resolve the dispute. In the absence of an agreement, such dispute shall be
resolved in accordance with Section 8.4 of this Agreement.

 

7.3                                 Barr shall have
the right to select its own legal counsel in connection with such Proceeding,
subject to Cephalon’s consent which shall not be unreasonably withheld. Barr
shall notify and keep Cephalon apprised in writing of such Proceeding, and
shall consider and take into account Cephalon’s reasonable interests and
requests regarding such Proceeding. Cephalon shall have the right, in Cephalon’s
sole discretion and at Cephalon’s expense, to join or otherwise participate in
such Proceeding, with legal counsel selected by Cephalon. Notwithstanding the
above, nothing in this Section shall be construed as limiting or interfering
with Barr’s right to pursue its own interests in the conduct of such
Proceeding.

 

7.4                                 In order to
obtain payment for any indemnified expenses pursuant to this Section, Barr
shall submit to Cephalon (either periodically while the Proceeding is ongoing,
or after final disposition of such Proceeding) a statement of the expenses
actually incurred by or on behalf of the Barr Indemnitees in connection with a
Proceeding. Such statement shall include a copy of any invoices reflecting
expenses for which Barr is seeking payment from Cephalon. Cephalon shall make
payment to Barr within thirty (30) days after the receipt by Cephalon of each
such statement from Barr.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

12

 

7.5                                 In the event
that either the FTC or the DOJ threatens to institute its own judicial or
administrative proceeding against either of the parties related to this
Agreement, the parties shall promptly meet in good faith to discuss the
feasibility of possible modifications to this Agreement.

 

8.                                      MISCELLANEOUS

 

8.1                                 The terms of this
Agreement shall be binding upon and inure to the benefit of the parties hereto,
their respective successors, heirs, and assigns.

 

8.2                                 No party shall
assign any of its rights or obligations hereunder to any non-Affiliated third
party without first obtaining the written consent of the other party hereto,
which consent may not be unreasonably withheld.

 

8.3                                 The Agreement
shall be interpreted in accordance with and governed by the law of the State of
Delaware.

 

8.4                                 Cephalon and
Barr agree that the United States District Court for the District of New Jersey
shall be the proper and exclusive forum for any action to enforce this
Agreement. Each party consents to the personal jurisdiction of that court for
such purposes.

 

8.5                                 Notices under
this Agreement shall be sent by overnight or first class mail, return receipt
or other proof of delivery requested, to the following:

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

13

 

If to Cephalon:

 

Legal Department

Cephalon, Inc.

41 Moores Road

Frazer, PA  19355

Attn:  John E. Osborn

Sr. Vice President, General
Counsel & Secretary

Telephone: (610) 738-6337

Fax:           (610) 738-6590

 

If to Barr:

 

Barr Laboratories, Inc.

400 Chestnut Ridge Road

Woodcliff Lake, NJ 07677

Attention:  President

Facsimile:  (201) 930-3335

 

8.6                                 This Agreement
may not be modified, amended, supplemented, or repealed except by written
agreement executed by duly authorized representatives of the parties.

 

8.7                                 This Agreement
and its attachments represent the entire agreement between Cephalon and Barr
with respect to the subject matter of this Agreement and supersedes all prior
or contemporaneous agreements, proposals, or understandings, whether written or
oral, between Cephalon and Barr with respect to that subject matter.

 

8.8                                 If one or more
provisions of this Agreement are ruled wholly or partly invalid or
unenforceable by a court or other government body of competent jurisdiction,
then the validity and enforceability of all other provisions of this Agreement
shall not in any way be affected or impaired.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

14

 

8.9                                 No waiver of,
failure of a party to object to, or failure of a party to take affirmative
action with respect to any default, term, or condition of this Agreement, or
any breach thereof, shall be deemed to imply or constitute a waiver of any
other like default, term, or condition of this Agreement, or subsequent breach
thereof.

 

8.10                           Nothing in this
Agreement shall be construed so as to result in a license under, or waiver of,
any right of a party, in each case, without an express license or waiver by
such party in writing, either hereunder or in a separate writing signed by the
parties. For the avoidance of doubt:

 

(a)                                  Nothing in this
Agreement shall operate or be construed as granting Barr a license under, or
any other rights with respect to, any patents owned by Cephalon other than the
Listed Patents, except as specifically stated in Sections 3.4(b) and 3.6; and

 

(b)                                 Nothing in this
Agreement shall operate or be construed as a waiver by Barr of any rights to
challenge any patent owned by Cephalon other than [**].

 

8.11                           Cephalon and
Barr have had all desired counsel, legal and otherwise, in entering into this
Agreement, and do so in accordance with their own free acts and deeds. This
Agreement shall therefore be deemed to have been negotiated and prepared at the
joint request, direction, and instruction of each of the parties, at arms
length, with the advice and participation of counsel, and will be interpreted
in accordance with its terms without favor to either party.

 

8.12                           Each party
represents that it is duly existing; that it has the full power and authority
to enter into this Agreement and the Modafinil License and Supply Agreement;
that there are no other persons or entities whose consent to this Agreement and
the Modafinil License

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

15

 

and Supply Agreement or whose joinder herein or therein is necessary to
make fully effective the provisions of this Agreement and the Modafinil License
and Supply Agreement; that this Agreement and the Modafinil License and Supply
Agreement do not and will not interfere with any other agreement to which it is
a party and that it will not enter into any agreement the execution and/or
performance of which would violate or interfere with this Agreement and the
Modafinil License and Supply Agreement.

 

8.13                           This Agreement
may be signed in counterparts, each of which shall be deemed an original
hereof, but all of which together shall constitute one and the same instrument.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

16

 

IN
WITNESS WHEREOF, Cephalon and Barr have executed this Agreement effective as of
the date first written above.

 

 

	
  CEPHALON, INC.

  	
  BARR LABORATORIES, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Frank Baldino, Jr., Ph.D.

  	
   

  	
  By:

  	
  /s/
  Paul M. Bisaro

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed
  Name:

  	
  Frank
  Baldino, Jr., Ph.D.

  	
   

  	
  Printed
  Name:

  	
  Paul
  M. Bisaro

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Chairman
  and CEO

  	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:
  

  	
  February
  1, 2006

  	
   

  	
  Date:

  	
  February
  1, 2006

  	
   

  
																			

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended.

 

17Exhibit 10.3

 

MODAFINIL LICENSE AND SUPPLY AGREEMENT

 

This Modafinil
License and Supply Agreement (this “Agreement”) is entered into as of
this 1st day of February 2006 (the “Effective Date”) by and between
Cephalon, Inc., a Delaware corporation, having its principal place of
business located at 41 Moores Road, P.O. Box 4011, Frazer, Pennsylvania
19355, and Barr Laboratories, Inc., a Delaware corporation, having its
principal place of business located at 400 Chestnut Ridge Road, Woodcliff Lake,
New Jersey 07677.

 

WHEREAS, Cephalon is the owner by assignment
of all right and title in U.S. Reissue Patent No. RE37,516 (the “RE ‘516
Patent”), issued by the United States Patent and Trademark Office on January 15,
2002 and expiring on October 6, 2014.

 

WHEREAS, PROVIGIL® modafinil, which is
covered by claims of the RE ‘516 Patent, is the commercial formulation of
modafinil developed, manufactured and sold by Cephalon pursuant to FDA approval
of Cephalon’s NDA 20-717.

 

WHEREAS, by letter dated February 20,
2003, Barr notified Cephalon that Barr had submitted ANDA No. 76-597 to
the FDA under Section 505(j) of the U.S. Federal Food, Drug, and Cosmetic
Act (21 U.S.C. § 355(j)), seeking approval to engage in the commercial
manufacture, use, and sale of tablets containing 100 mg and 200 mg of
modafinil, a generic version of PROVIGIL® modafinil tablets, before the
expiration date of the RE ‘516 Patent, and certifying that the RE ‘516 Patent
is invalid, unenforceable, or not infringed by Barr’s generic product.

 

WHEREAS, Cephalon timely filed suit against
Barr and three other companies that had also filed Paragraph IV ANDAs
concerning PROVIGIL® modafinil in an action captioned Cephalon, Inc. v. Mylan Pharmaceuticals Inc., et
al., Civil Action No. 03-CV-1394 (JCL), in the United States
District Court for the District of New Jersey, seeking, among other things, a
declaration that Barr’s making, using, offering to sell, selling, or importing
tablets as described in Barr’s ANDA No. 76-597 would infringe the RE ‘516
Patent, an order providing that the effective date of any approval of Barr’s
ANDA No. 76-597 shall be a date which is not earlier than the date of the
expiration of the RE ‘516 Patent, and an order permanently enjoining Barr from
making, using, offering to sell, selling, or importing tablets as described in
Barr’s ANDA No. 76-597 until after the date of the expiration of the RE ‘516
Patent.

 

WHEREAS, Barr answered Cephalon’s complaint
by denying infringement, by asserting an affirmative defense that incorporated
by reference Barr’s co-defendants’ allegations that the RE ‘516 patent is
invalid and unenforceable, and by filing a counterclaim seeking declaratory
judgment of noninfringement.

 

WHEREAS, Cephalon and Barr have taken
discovery, but no partial or final judgment has been entered as to any issue in
dispute.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

 

WHEREAS, to
avoid the time and expense of further litigation, and in compromise of the
disputed claims set forth above, the Parties now desire to resolve their
disputes by settlement in accordance with that certain Provigil Settlement
Agreement dated February 1, 2006 between the Parties (the “Provigil
Settlement Agreement”).

 

WHEREAS, in
connection with such settlement, Cephalon wishes to grant to Barr, and Barr
wishes to receive, certain rights and licenses, subject to the terms and
conditions of this Agreement.

 

NOW,
THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and adequacy of which is hereby affirmed, and
intending to be legally bound hereby, the Parties hereby agree as follows.

 

1.             DEFINITIONS

 

1.1           “Affiliate”
means any corporation, partnership, joint venture or firm which controls, is
controlled by or under common control with a specified person or entity. For
purposes of this definition, “control” shall be presumed to exist if one of the
following conditions is met: (a) in the case of corporate entities, direct
or indirect ownership of at least fifty percent (50%) of the stock or shares
having the right to vote for the election of directors and (b) in the case
of non-corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the equity interest with the power to direct the management
and policy decisions of such non-corporate entities.

 

1.2           “ANDA”
means an Abbreviated New Drug Application, as defined under 21 U.S.C. § 355
(j) et seq.

 

1.3           “Barr”
means Barr Laboratories, Inc., a corporation organized and existing under
the laws of the State of Delaware, with its principal place of business at 400
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, and its directors,
officers, employees, agents and representatives, predecessors, successors, and
assigns; its subsidiaries, divisions, groups, and the respective directors,
officers, employees, agents and representatives, successors, and assigns of
each.

 

1.4           “Barr
ANDA Modafinil Product” means [**].

 

1.5           “Barr
Generic Modafinil Product” means a Barr ANDA Modafinil Product or a
Cephalon Supplied Modafinil Product.

 

1.6           “Barr
Indemnitees” has the meaning assigned in Section 8.1.

 

1.7           “Barr
Modafinil ANDA” means ANDA No. 76-597.

 

1.8           “Cephalon”
means Cephalon, Inc., a corporation organized and existing under the laws
of the State of Delaware, with its principal place of business at 41 Moores
Road, Frazer, Pennsylvania, and its directors, officers, employees, agents and
representatives, predecessors,

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

2

 

successors, and assigns; its subsidiaries, divisions, groups, and the
respective directors, officers, employees, agents and representatives,
successors, and assigns of each.

 

1.9           “Cephalon
Indemnitees” has the meaning assigned in Section 8.2.

 

1.10         “Cephalon
Supplied Modafinil Product” means Subject Modafinil Product sold by
Cephalon to Barr for ultimate resale in the United States pursuant to the terms
and conditions of a separate supply agreement between the Parties as described
in Article 4.

 

1.11         “Commercially
Reasonable Efforts” means efforts and resources that would normally be
expected to be used by a pharmaceutical company to develop, seek required FDA
approvals for, manufacture, control and assure quality of, introduce into
markets and otherwise commercialize a drug product owned by it or to which it
has rights, which is of similar market potential at a similar stage of
development or product life, taking into account issues of safety and efficacy,
competitiveness in the marketplace, the proprietary position of the drug
product, the regulatory structure(s) involved, the profitability of the drug
product, and other material and relevant factors.

 

1.12         “Confidential
Information” has the meaning assigned in Section 7.1.

 

1.13         “Date
Certain” means the later of: (a) October 6, 2011 (which is
three years prior to the expiration of the RE ‘516 Patent); or (b) in the
event that Cephalon obtains a pediatric extension of the RE ‘516 Patent, April 6,
2012 (which is three years prior to the expiration of Pediatric Exclusivity, if
obtained).

 

1.14         “FDA”
means the United States Food and Drug Administration.

 

1.15         “Independent
Auditor” has the meaning assigned in Section 3.7.

 

1.16         “Listed
Patents” means [**].

 

1.17         “Modafinil
License Effective Date” has the meaning assigned in Section 2.2.

 

1.18         “Modafinil
Litigation” means (a) Cephalon, Inc.
v. Mylan Pharmaceuticals Inc., et al., Civil Action No. 03-CV-1394
(JCL), pending in the United States District Court for the District of New
Jersey; (b) Cephalon, Inc. v.
Carlsbad Tech., Inc., Civil Action No. 05-CV-1089 (JCL),
pending in the United States District Court for the District of New Jersey; and
(c) any action filed under Title 35, United States Code, 35 U.S.C. §§ 271
and 281 against any Modafinil Paragraph IV ANDA Filing Entity.

 

1.19         “Modafinil
Paragraph IV ANDA Filing Entity” shall mean any entity that has notified or
subsequently notifies Cephalon that it has filed an ANDA with a Paragraph IV
certification concerning a product containing modafinil as an active ingredient
for which Provigil is the reference listed drug.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

3

 

1.20         “NDA”
means New Drug Application, as defined under 21 U.S.C. § 355(b) et seq.

 

1.21         “Net
Profits” means the gross receipts derived in arm’s-length transactions from
the sale of Barr Generic Modafinil Product in the United States by Barr (or by
its Affiliates), to independent third parties in the United States, less the
sum of the following items:

 

(a)           Import,
export, excise and sales taxes and custom duties paid or allowed by the selling
party and any other governmental charges imposed upon the production,
importation, use or sale of Barr Generic Modafinil Product by Barr and/or its
Affiliates;

 

(b)           Credits
for returns, refunds, rebates and allowances, or trades to customers for
returned or recalled Barr Generic Modafinil Product;

 

(c)           Trade,
quantity and cash discounts actually allowed;

 

(d)           Transportation,
freight and insurance allowances;

 

(e)           Rebates
to wholesalers, administrative fees in lieu of rebates paid to managed care and
other similar institutions, chargebacks and retroactive price adjustments,
including Shelf Stock Adjustments, and any other similar allowances which
effectively reduce the net selling price; and

 

(f)            The
purchase price paid to Cephalon for such Barr Generic Modafinil Product that is
Cephalon Supplied Modafinil Product or Barr’s direct and reasonable costs of
making such Barr Generic Modafinil Product that is Barr ANDA Modafinil Product,
as applicable.

 

Gross and Net
Profits shall be calculated according to US GAAP. Sales or transfers between or
among Barr and its Affiliates shall be excluded from the computation of Net
Profits except where such Affiliates are end users, but Net Profits shall
include the subsequent final sales to third parties by such Affiliates.

 

Where (i) Barr
Generic Modafinil Product is sold as one of a number of items without a separate
price; or (ii) the consideration for the Barr Generic Modafinil Product
shall include any non-cash element; or (iii) the Barr Generic Modafinil
Product shall be transferred in any manner other than an invoiced sale, the
gross sales applicable to any such transaction shall be deemed to be the
selling party’s average gross sales for the applicable quantity of Barr Generic
Modafinil Product during the calendar quarter. If there are no independent
gross sales of Barr Generic Modafinil Product in the United States at that
time, then Barr and Cephalon shall mutually agree on a surrogate measure to be
used in lieu thereof.

 

1.22         “Other
Modafinil Paragraph IV ANDA Filing Entity” means any Modafinil Paragraph IV
ANDA Filing Entity besides Barr or Cephalon or its and their Affiliates.

 

1.23         “Party”
or “Parties” means a party, or the parties, to this Agreement.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

4

 

1.24         “Pediatric
Exclusivity” means exclusivity obtained in accordance with the requirements
of Section 505(a) of the U.S. Federal Food, Drug, and Cosmetic Act
(21 U.S.C. § 355(a)).

 

1.25         “Providing
Party” has the meaning assigned in Section 7.1.

 

1.26         “Provigil”
means the commercial formulation of modafinil developed, manufactured and, as
of the Effective Date, sold by Cephalon pursuant to FDA approval of Cephalon’s
NDA 20-717.

 

1.27         “Receiving
Party” has the meaning assigned in Section 7.1 of this Agreement.

 

1.28         “Shelf
Stock Adjustment” means the customary practice of providing a purchaser of
Barr Generic Modafinil Product an adjustment to the net purchase price for
on-hand inventory in response to an offer from a supplier of a competing
Subject Modafinil Product.

 

1.29         “Subject
Modafinil Product” shall mean [**].

 

2.             GRANT OF RIGHTS

 

2.1           Grant
of License. Subject to Sections 2.2 and 2.3 below, Cephalon grants to Barr
a royalty-bearing, non-exclusive license, without a right to sublicense, under
the Listed Patents and any regulatory exclusivities, including Pediatric
Exclusivity, to use, offer for sale, sell, distribute and have distributed,
promote, market and advertise, import and have imported, the Barr Generic
Modafinil Product, and to make and have made the Barr ANDA Modafinil Product,
in the United States.

 

2.2           Modafinil
License Effective Date. The license granted by Cephalon to Barr pursuant to
Section 2.1 shall become effective upon the earliest of:

 

(a)           the
Date Certain;

 

(b)           the
sale of a Subject Modafinil Product in the United States pursuant to a license
or authorization granted by Cephalon to a third party (other than a license or
authorization granted to a third party, whether by settlement or otherwise,
under circumstances similar to those that would trigger Barr’s license under Section 2.2(c) below,
and that is subject to suspension provisions similar to those set forth in Section 2.3);

 

(c)           the
sale of a Subject Modafinil Product by any Other Modafinil Paragraph IV ANDA
Filing Entity in the United States that is not pursuant to a license or
authorization granted by Cephalon (in which case, Barr would receive a license
to enter the market which is subject to suspension as set forth in Section 2.3);
and

 

(d)           the
entry of a final, non-appealable judgment in the Modafinil Litigation declaring
that one or more Other Modafinil Paragraph IV ANDA Filing Entities may sell
or offer

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

5

 

to sell Subject Modafinil Products in the United States without
infringing any valid, enforceable claim of any Listed Patent on which Cephalon
has brought suit in such litigation.

 

The earliest to occur of the dates in subsections (a) through (d) of
this Section 2.2 shall constitute the “Modafinil License Effective Date”.

 

2.3           Suspension
of License. If, at any time after the Modafinil License Effective Date
(where such Modafinil License Effective Date is triggered as a result of an
event set forth in Section 2.2(c)), (a) Cephalon obtains a temporary
restraining order or other relief sufficient to stop further offers to sell or
sales in the United States of Subject Modafinil Products by all Other Modafinil
Paragraph IV ANDA Filing Entities, or (b) Cephalon prevails against all
Other Modafinil Paragraph IV ANDA Filing Entities in any Modafinil Litigation,
such that offers to sell or sales in the United States of Subject Modafinil
Products by Other Modafinil Paragraph IV ANDA Filing Entities are admitted by
such Other Modafinil Paragraph IV ANDA Filing Entities or held by the court to
infringe one or more valid and enforceable claims of the Listed Patents, then (i) Barr’s
license under Section 2.1 shall be suspended until the Date Certain, or,
if applicable, the earlier occurrence of an event described in Section 2.2(b),
(ii) Barr and/or its Affiliates shall immediately cease offering to sell
and/or selling any Barr Generic Modafinil Product as of the earliest date on
which such injunctive or other relief may be enforced, or otherwise when
Cephalon prevails in the action described in subsection (b) above,
and (iii) [**]. For purposes of clarity, nothing in this Agreement or in the
Provigil Settlement Agreement shall obligate Cephalon to seek injunctive or
other relief to stop any Other Modafinil Paragraph IV ANDA Filing Entity from
offering to sell or selling Subject Modafinil Products in the United States.

 

2.4           Notification
to FDA of License. Subject to Section 2.3, immediately upon the
Modafinil License Effective Date, Cephalon shall reasonably cooperate with Barr
in notifying the FDA that Cephalon has granted Barr the license set forth in Section 2.1,
including, but not limited to, by filing with the FDA such documentation as is
necessary to affirm such license.

 

2.5           Infringement.

 

(a)           Notice
Regarding and Authority to Take Action Against Infringers. Barr shall
promptly notify Cephalon of any known infringement by third parties of the
rights licensed to Barr under this Agreement. If any of the Listed Patents are
infringed, Cephalon shall have the sole and exclusive right, but not the
obligation, to commence appropriate legal action to enjoin such infringement at
its sole expense. Barr shall provide its complete cooperation to Cephalon, at
Cephalon’s expense. Cephalon shall be entitled to retain any damages or awards
that may result from its initiation of any such action.

 

(b)           Infringement
of Third Party Patents. Each Party shall have the right, but not the
obligation, to defend against a claim alleging infringement by its own products
of the patents and patent applications of third parties. For purposes of
clarification, Cephalon shall have the right, but not the obligation, to defend
such claims against Provigil and Subject Modafinil Product sold by Cephalon,
and Barr shall have the right, but not the obligation, to

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

6

 

defend such claims against Barr Generic Modafinil Product sold by Barr
(other than Cephalon Supplied Modafinil Product where Cephalon elects to
defend).

 

2.6           Reservation.
Cephalon reserves all rights not expressly granted hereunder, including,
without limitation, the right to enforce the Listed Patents against Barr prior
to the Modafinil License Effective Date (or during the period of any suspension
pursuant to Section 2.3) and/or against any other person or entity at any
time. Notwithstanding anything to the contrary herein, the rights and licenses
granted to Barr hereunder exclude, and Cephalon retains, all rights and
licenses with respect to Cephalon’s Sparlon® and Nuvigil®
products and any generic versions thereof.

 

3.             ROYALTIES; ESCROW

 

3.1           Royalty.

 

(a)           From
and after the Modafinil License Effective Date, Barr shall pay Cephalon a
royalty equal to [**] Barr Generic Modafinil Product sold by Barr or its
Affiliates in the United States.

 

(b)           Notwithstanding
Section 3.1(a), in the event that a final, non-appealable judgment in the
Modafinil Litigation is entered prior to the Date Certain declaring that one or
more Other Modafinil Paragraph IV ANDA Filing Entities may sell Subject
Modafinil Products in the United States without infringing any valid,
enforceable claim of any Listed Patent on which Cephalon has brought suit, or
in the event that any party is selling Subject Modafinil Product in the United
States pursuant to a license from Cephalon, then, in lieu of the royalty set
forth in Section 3.1(a):

 

(i)            To
the extent [**], Barr shall pay to Cephalon a royalty of [**] Barr Generic
Modafinil Product sold by Barr or its Affiliates in the United States;

 

(ii)           [**],
Barr shall pay to Cephalon a royalty of [**] Barr Generic Modafinil Product
sold by Barr or its Affiliates in the United States; and

 

(iii)          In
the event that (A) Cephalon offers to sell or sells a Subject Modafinil
Product following such final, non-appealable judgment in the Modafinil
Litigation or (B) such final, non-appealable judgment is based upon a
finding of invalidity or unenforceability of the RE ‘516 Patent, Barr shall [**]
to Cephalon [**] Barr Generic Modafinil Product in the United States made by
Barr or its Affiliates. Cephalon shall provide Barr with written notice of any
decision by Cephalon to offer to sell or sell a Subject Modafinil Product.

 

(c)           The
royalty obligations set forth in Sections 3.1(a) and 3.1(b)(i) and (ii) shall
remain in effect until the later of (i) the expiration of the
last-to-expire Listed Patent, or (ii) the end of Pediatric Exclusivity on
Provigil, subject to any subsequent negotiation concerning an extension of
generic rights.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

7

 

3.2           Escrow.

 

(a)           Withholding.
In the event that any Other Modafinil Paragraph IV ANDA Filing Entity sells in
the United States (other than pursuant to a license from Cephalon described in Section 2.2(b) above)
any Subject Modafinil Product prior to a non-appealable final judgment in any
Modafinil Litigation to which such Other Modafinil Paragraph IV ANDA Filing
Entity is a party, such that Barr’s license hereunder would be subject to
suspension in accordance with Section 2.3 above, then Cephalon shall [**] the
royalty payments received from Barr pursuant to Section 3.1(a) or 3.1(b) above.

 

(b)           Disbursement.

 

(i)            In
the event that Cephalon does not prevail against such Other Modafinil Paragraph
IV ANDA Filing Entity in the Modafinil Litigation, such that offers to sell or
sales in the United States of Subject Modafinil Products by such Other
Modafinil Paragraph IV ANDA Filing Entity are admitted by Cephalon or held by
the court not to infringe any valid and enforceable claims of any Listed Patent
on which Cephalon has brought suit, or if Cephalon settles with such Other
Modafinil Paragraph IV ANDA Filing Entity such that it permits such entity to continue
to sell Subject Modafinil Products in the United States pursuant to license or
authorization, [**] Cephalon pursuant to Section 3.2(a) above shall [**].

 

(ii)           Upon
any suspension pursuant to Section 2.3 of the license granted in Section 2.1,
Cephalon shall [**] pursuant to Section 3.2(a).

 

3.3           Reporting.
Not later than [**] after the end of each calendar quarter during the period
during which royalties are payable under Section 3.1, Barr shall deliver
to Cephalon a statement setting forth the Net Profits generated during the
preceding calendar quarter, itemized in such manner as may be reasonably
requested by Cephalon and containing such sales information as Cephalon may reasonably
require.

 

3.4           Payment.
Barr shall pay to Cephalon all royalties due in respect of any calendar quarter
within [**] after the end of such calendar quarter. All payments hereunder
shall be made by check or wire transfer to such bank and account as Cephalon may from
time to time designate in writing. All payments shall be made in U.S. Dollars. All
payments due hereunder but not paid on the due date shall bear interest (in
U.S. Dollars) at the rate which is the lesser of: (a) [**] per month; and (b) the
maximum interest rate permitted under applicable law. No part of any
amount payable to Cephalon hereunder may be reduced due to any
counterclaim, set-off, adjustment or other right which Barr might have against
Cephalon or any of its Affiliates. Barr shall be permitted to withhold any
applicable withholding taxes from any payments to Cephalon hereunder.

 

3.5           Annual
True-Up. Within [**] after the end of each calendar year during the Term,
Barr shall perform a “true up” reconciliation (and shall provide Cephalon
with a written report of such reconciliation) of the deductions specified in Section 1.21
(a), (b) (excluding returns), (c), (d), (e) and (f). The
reconciliation shall be based on actual cash paid or credits issued and
estimates related to the reported invoiced sales, but not yet issued for such
items. If the foregoing reconciliation report shows either an underpayment or
an overpayment to Barr,

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

8

 

then Cephalon or Barr (respectively) shall pay the amount of the
difference to the other within [**] of the date of delivery of such report.

 

3.6           Final
Returns True-Up. Within [**] of the termination or expiration of this
Agreement, Barr shall perform a “true-up” reconciliation (and shall
provide Cephalon with a written report of such reconciliation) of the
deductions for returns specified in Section 1.21(b). The reconciliation
shall be based on actual cash paid or credits issued for returns, through the [**]
period following the termination or expiration. If the foregoing reconciliation
report shows either an underpayment or an overpayment to Barr, then Cephalon or
Barr (respectively) shall pay the amount of the difference to the other within [**]
of the date of delivery of such report.

 

3.7           Right
to Audit. Barr agrees to make and keep full and accurate books and records
in sufficient detail to enable royalties payable to Cephalon hereunder to be
determined. Cephalon shall have the right to appoint an independent accounting
firm, reasonably acceptable to Barr (“Independent Auditor”), to make a
special audit of the books and records of Barr [**]. The Independent Auditor
shall treat as confidential all information obtained in such audit and shall
not disclose the same to Cephalon or others, except that the Independent
Auditor may disclose to Cephalon such information as may pertain to [**].
Upon ten (10) days prior written notice to Barr, the Independent Auditor
shall have full access to the books and records of Barr necessary [**]. [**]. If
it is determined following such audit that [**], then Barr shall [**].

 

4.             SUPPLY

 

On Barr’s
request, Cephalon shall supply Barr with Cephalon Supplied Modafinil Product on
commercially reasonable terms to be mutually agreed, for sale in accordance
with the terms of this Agreement.

 

5.             TERM AND TERMINATION

 

5.1           Term.
This Agreement shall commence as of the Effective Date and shall remain in
effect unless terminated in accordance with Section 5.2 below.

 

5.2           Termination
due to Material Breach by Either Party. Upon material breach of any term of
this Agreement, the breaching Party will be given written notice thereof and
shall have [**] within which to remedy such breach; or, if applicable, such
longer period (not exceeding [**]) as would be reasonably necessary for a
diligent Party to cure such material breach; provided, however,
that the breaching Party has commenced and continues diligent efforts to cure
during the initial [**] period following receipt of such notice of breach. In
the event of the breaching Party’s failure to remedy any such breach within
this time period, the non-breaching Party shall be entitled to terminate this
Agreement and seek available remedies at law or equity.

 

5.3           Survival
of Rights and Terms. Termination or expiration of this Agreement shall not
affect any accrued rights of either Party. Notwithstanding termination of this
Agreement for any reason, the following Sections shall survive: this Section 5.3
and Articles 3, 6, 7, 8 and 9.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

9

 

6.             REPRESENTATIONS AND
WARRANTIES

 

6.1           General.
Cephalon and Barr hereby represent and warrant to the other that (a) the
execution, delivery and performance of this Agreement by each of them does not
conflict with, or constitute a breach of any order, judgment, agreement, or
instrument to which they are a party; (b) the execution, delivery and performance
of this Agreement by each of them does not require the consent of any person or
the authorization of (by notice or otherwise) any governmental or regulatory
authority (other than those relating to the granting of approvals by the FDA as
contemplated herein); and (c) the rights granted by each of them does not
conflict with any rights granted by either of them to any third party. In
addition, Cephalon warrants that it has rights to license or sublicense, as the
case may be, the Listed Patents as licensed hereunder.

 

6.2           Disclaimer
of Warranty. EXCEPT AS EXPRESSLY SET FORTH HEREIN IN SECTION 6.1, NO
GUARANTEE, WARRANTY, CONDITION, UNDERTAKING OR TERM, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, IS GIVEN OR ASSUMED BY CEPHALON, AND ALL SUCH GUARANTEES,
WARRANTIES, CONDITIONS, UNDERTAKINGS AND TERMS ARE HEREBY EXCLUDED.

 

7.             CONFIDENTIALITY

 

7.1           Confidential
Information. During the term of this Agreement, and for ten (10) years
after its termination or expiration, each Party shall maintain in confidence
any information concerning the subject matter hereof provided by the other
Party (the “Providing Party”), and that is considered to be confidential
by the Providing Party, regardless of whether provided prior to or after the
date of this Agreement. Such information (collectively, the “Confidential
Information”) includes but is not limited to documentation, business plans,
cost and operational information, whether or not related to Provigil or Barr
Generic Modafinil Product. Confidential Information shall not be used or
disclosed to others except for carrying out the purpose of this Agreement. The
foregoing obligation of confidentiality shall not apply to any portion of the
Confidential Information that a Party (“Receiving Party”) can
demonstrate:

 

(a)           was
already known to the Receiving Party;

 

(b)           was
generally available to the public or otherwise part of the public domain
at the time of its disclosure;

 

(c)           became
generally available to the public or otherwise part of the public domain
after its disclosure to the Receiving Party, other than through any act or
omission of the Receiving Party in breach of this Agreement;

 

(d)           was
subsequently lawfully disclosed to the Receiving Party by a third party; or

 

(e)           the
Receiving Party was compelled to disclose by governmental administrative agency
or judicial requirements; provided, however, that any disclosure under this Section 7.1(e) shall
neither relieve the Receiving Party from attempting to impose confidentiality

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

10

 

obligations on the governmental administrative agency or judicial body,
to the extent feasible, nor shall it relieve the Receiving Party from
maintaining the confidentiality of the Confidential Information with respect to
third parties other than the agency or body as to which such compelled
disclosure has been made.

 

7.2           Protection
of Confidential Information. The Parties shall take all reasonable steps to
eliminate the risk of disclosure of Confidential Information, including,
without limitation, ensuring that only employees, agents, and representatives
with a need to know the Confidential Information have access thereto. The
Parties acknowledge by the signing of this Agreement that such employees,
agents, and representatives are to be bound by substantially similar
obligations of confidentiality as are established under this Article 7.

 

7.3           Presumptive
Confidentiality of Information Exchanged. All information exchanged by the
Parties under the terms and conditions of this Agreement shall be considered
Confidential Information and treated as such unless otherwise specified and
agreed upon by the Parties; provided, however, that the fact of this Agreement
shall not be considered Confidential Information. In addition, Cephalon and
Barr shall consult with one another before issuing, and provide each other the
opportunity to review and make reasonable comment upon, any press release or
other public disclosure under the Securities Act of 1934, as amended, with
respect to this Agreement or the terms hereof, and shall not issue any such
disclosure without the prior consent of the other Party, which will not be
unreasonably withheld or delayed; provided that a Party need not obtain the
consent of the other Party to make public statements consistent with any press
release or other public disclosure that previously has been issued by or
consented to by the other Party and may (but after prior consultation, to
the extent practicable in the circumstances) issue such disclosure as may be
required by applicable law or stock exchange rule.

 

8.             INDEMNIFICATION

 

8.1           Indemnification
by Cephalon. Cephalon shall indemnify and hold Barr, its Affiliates and
subsidiaries, and the officers, directors and employees of each of them (“Barr
Indemnitees”), harmless from any and all losses, liabilities, obligations,
claims, fees or expenses, including reasonable attorneys’ fees, that stem from
claims brought by third parties that are based upon (a) any infringement
by Provigil or Subject Modafinil Product, other than Barr ANDA Modafinil
Product, sold by Cephalon of the intellectual property rights of third parties;
(b) the death or injury to person or damage to property resulting directly
from damaged or defective, or otherwise nonconforming Cephalon Supplied
Modafinil Products at the time of delivery to Barr, (c) the material
breach of any representations or warranties made by Cephalon in Article 6
herein; (d) the negligence, recklessness or willful misconduct of Cephalon
or Cephalon’s officers, employees or agents hereunder; or (e) the
successful enforcement by Barr of its rights under this Section 8.1. Notwithstanding
the foregoing, Cephalon shall not be obligated to indemnify Barr for any
liability related to the Cephalon Supplied Modafinil Products to the extent
Barr has assumed an indemnification obligation with respect thereto under Section 8.2
below.

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

11

 

8.2           Indemnification
by Barr. Barr shall indemnify and hold Cephalon, its Affiliates and
subsidiaries, and the officers, directors and employees of each of them (“Cephalon
Indemnitees”), harmless from any and all losses, liabilities, obligations,
claims, fees or expenses, including reasonable attorneys’ fees, that stem from
claims brought by third parties that are based upon (a) any infringement
by Barr Generic Modafinil Product of the intellectual property rights of third
parties; (b) the use or sale or other distribution of Barr Generic
Modafinil Product by Barr or its Affiliate in violation of the terms of this
Agreement; (c) any representation made or warranty given by Barr or
subdistributors with respect to the Barr Generic Modafinil Product; (d) the
death or injury to person or damage to property resulting from Barr ANDA
Modafinil Product; (e) the death or injury to person or damage to property
resulting from (i) improper handling, storage or transport of Cephalon
Supplied Modafinil Product by Barr or (ii) the unauthorized alteration,
modification or adulteration of Cephalon Supplied Modafinil Product by Barr; (f) the
material breach of any representation or warranties made by Barr in Article 6
herein; (g) the negligence, recklessness or willful misconduct of Barr or
Barr’s officers, employees or agents hereunder; or (h) the successful
enforcement by Cephalon of its rights under this Section 8.2. Notwithstanding
the foregoing, Barr shall not be obligated to indemnify Cephalon for any
liability related to the Cephalon Supplied Modafinil Products to the extent
Cephalon has assumed an indemnification obligation with respect thereto under Section 8.1
above.

 

8.3           Notification.
In the event that one Party receives notice of a claim, lawsuit, or liability
for which it is entitled to indemnification by the other Party, the Party
receiving notice shall give prompt notification to the indemnifying Party.

 

8.4           Cooperation.
The Party being indemnified shall cooperate fully with the indemnifying Party
throughout the pendency of the claim, lawsuit or liability, and the
indemnifying Party shall have complete control over the conduct and disposition
of the claim, lawsuit, or liability.

 

9.             GENERAL

 

9.1           Headings.
The headings and captions used herein are for the convenience of the Parties
only and are not to be construed to define, limit or affect the construction or
interpretation hereof.

 

9.2           Severability.
In the event that any provision of this Agreement is found to be invalid or
unenforceable, then the offending provision shall not render any other
provision of this Agreement invalid or unenforceable, and all other provisions
shall remain in full force and effect and shall be enforceable, unless the
provisions which have been found to be invalid or unenforceable shall
substantially affect the remaining rights or obligations granted or undertaken
by either Party.

 

9.3           Entire
Agreement. This Agreement and the Provigil Settlement Agreement contain the
entire agreement of the Parties regarding the subject matter hereof and thereof
and supersede all prior agreements, understandings or conditions (whether oral
or written) regarding

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

12

 

the same. This Agreement may not be changed, modified, amended or
supplemented except by a written instrument signed by both Parties.

 

9.4           Assignment.
This Agreement and the rights established hereunder may not be assigned or
transferred by either Party without the prior written consent of the other
Party.

 

9.5           Independent
Contractors. The Parties are independent contractors under this Agreement. Nothing
contained in this Agreement is to be construed so as to create a joint venture
or to constitute Cephalon and Barr as partners, agents or employees of the
other, including with respect to this Agreement. Neither Party shall have any
express or implied right or authority to assume or create any obligations on
behalf of, or in the name of, the other Party or to bind the other Party to any
contract, agreement or undertaking with any third party. Each Party is solely
responsible for the payment of any and all taxes arising from the existence or
operation of its business or from the performance of its obligations hereunder
including, without limitation, income taxes, withholding taxes, employee
payroll and social security and welfare taxes which may be imposed upon
said Party in accordance with applicable laws. Similarly, each Party is solely
responsible for satisfying any and all obligations which may arise from
its employment of any persons.

 

9.6           Further
Assurances. Each Party shall execute, acknowledge and deliver such further
instruments, and to take such other actions, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

 

9.7           Notices
and Reports. All notices, consents or approvals required by this Agreement
shall be in writing and sent by express courier, certified or registered air
mail, postage prepaid or by facsimile or cable (confirmed by such certified or
registered mail) to the Parties at the following addresses or such other
addresses as may be designated in writing by the respective Parties. Notices
shall be deemed effective on the date of mailing.

 

If to Cephalon:

 

Cephalon, Inc.

41 Moores Road

P.O. Box 4011

Frazer, Pennsylvania 19355

Attention: 
Senior Vice President & General Counsel

Facsimile: 
(610) 738-6258

 

If to Barr:

 

Barr Laboratories, Inc.

400 Chestnut Ridge Road

Woodcliff Lake, NJ 07677

Attention: 
President

Facsimile: 
(201) 930-3335

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

13

 

9.8           Disputes;
Applicable Law

 

(a)           Governing
Laws. This Agreement shall be governed by and interpreted in accordance
with the substantive laws of the State of Delaware, United States of America.

 

(b)           Dispute
Resolution. In the event that any dispute arising between the Parties
relating to this Agreement cannot be resolved by their respective staffs, said
dispute shall be referred promptly to the Chief Executive Officer of Cephalon
and the Chief Executive Officer of Barr, who shall make a good faith effort to
resolve the matter within [**] from the date of any such referral. In the event
that the Parties still cannot amicably resolve any such dispute or claim, then
the Parties shall be free to seek any remedy available at law or in equity.

 

9.9           Force
Majeure. Either Party’s failure to perform its obligations hereunder
(except to make payments hereunder) shall be excused to the extent and for the
period of time such nonperformance is caused by an event of force majeure,
including but not limited to war, invasion, fire, explosion, flood, riot,
strikes, acts of God, delays or defaults of carriers, energy shortage, failure
or curtailment in Cephalon’s usual sources of supply, acts of government, its
agencies or instrumentalities, or contingencies or causes beyond such Party’s
reasonable control.

 

9.10         Waiver.
The waiver by either Party of a breach of any provision that is contained
herein shall be effective only if made in writing and shall in no way be
construed as a waiver of any succeeding breach of such provision or the waiver
of the provision itself.

 

9.11         Counterparts.
This Agreement may be executed in multiple counterparts, each of which
shall be considered and shall have the force and effect of an original.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

14

 

IN WITNESS
WHEREOF, the Parties have executed this Agreement by their duly authorized
representatives, as of the day and year first above written.

 

 

	
  BARR LABORATORIES, INC.

  	
  CEPHALON, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Paul M. Bisaro

  	
   

  	
  By:

  	
  /s/ Frank Baldino, Jr., Ph.D

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name:

  	
  Paul M. Bisaro

  	
   

  	
  Printed Name:

  	
  Frank Baldino, Jr., Ph.D

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  Chairman and CEO

  	
   

  
															

 

**Portions of the Exhibit have been omitted and have been filed
separately pursuant to an application for confidential treatment filed with the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

 

15

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