Document:

exv10w2

Exhibit 10.2

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

PROMOTION AGREEMENT

by and between

DEPOMED, INC.

and

SANTARUS, INC.

Dated as of July 21, 2008

 

 

PROMOTION AGREEMENT

     This PROMOTION AGREEMENT (this “Agreement”) is made as of July 21, 2008 (the
“Effective Date”), by and between Depomed, Inc., a California corporation
(“Depomed”), and Santarus, Inc., a Delaware corporation (“Santarus”). Each of
Depomed and Santarus is referred to herein individually as a “party” and collectively as
the “parties.”

     WHEREAS, Depomed desires to engage Santarus to promote and market the Products in the
Territory (each as defined below), and Santarus desires to promote and market the Products, all in
accordance with the terms and conditions contained herein;

     NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants herein
contained, the parties hereto intending to be legally bound hereby agree as follows:

ARTICLE I

DEFINITIONS

     As used in this Agreement, the following terms shall have the following meanings:

     Section 1.1 “500mg Product” means the once-daily formulation of 500 mg of metformin
HCl that is the subject of NDA No. 21-748 filed with FDA on April 27, 2004 (as such NDA may be
amended or supplemented subsequent to the filing date).

     Section 1.2 “1000mg Product” means the once-daily formulation of 1000 mg of metformin
HCl that is the subject of NDA No. 21-748 filed with FDA on April 27, 2004 (as such NDA may be
amended or supplemented subsequent to the filing date).

     Section 1.3 “Act” means the United States Federal Food, Drug and Cosmetic Act, 21
U.S.C. 301, et. seq., as it may be amended from time to time, and the regulations promulgated
thereunder, including the Generic Drug Act.

     Section 1.4 “AcuForm Patent License” has the meaning set forth in Section 10.1.

     Section 1.5 “Adverse Drug Experience” means any “adverse drug experience” as
defined or contemplated by 21 C.F.R. 314.80 or 312.32, associated with a Product.

     Section 1.6 “Adverse Drug Experience Report” means any oral, written or electronic
report of any Adverse Drug Experience transmitted to any Person.

     Section 1.7 “Advertising/Marketing/Educational Expenses” means the following Santarus
expenses for directly Promoting the Products and conducting Educational Programs with respect to
the Products in the Territory: (a) all out-of-pocket costs for Samples incurred as contemplated by
Section 6.5 as well as all out-of-pocket costs for Sample warehousing and distribution, (b) all
out-of-pocket costs for Promotional Materials and training materials, (c) all

 

 

out-of-pocket costs for sales training meetings to the extent attributable to the Products,
(d) all out-of-pocket costs for the purchase of Prescriber Data (including any prescriber data for
competitive products), (e) all out-of-pocket costs associated with market research, advisory
boards, speaker programs, trade shows and “lunch and learns” and other outreach programs with
respect to the Products, (f) all costs related to scientific liaisons, and national and regional
account managers to the extent attributable to the Products, (g) all costs related to up to one (1)
full-time equivalent dedicated product manager; (h) all Medical Affairs Expenses reimbursed by
Santarus pursuant to Section 4.7; and (i) all other out-of-pocket costs and expenses of Santarus
for directly Promoting the Products and conducting Educational Programs with respect to the
Products in the Territory. In the case of Product voucher, coupon, loyalty card or other co-pay
assistance programs approved by the JCC, all out-of-pocket costs of Santarus associated with such
programs (other than redemption costs) shall be treated as Advertising/Marketing/ Educational
Expenses. Notwithstanding the foregoing, (A) the costs set forth in items (f) and (g) above shall
be subject to a $[***] cap per Agreement Quarter and (B) the costs set forth in item (c) above
shall be subject to a $[***] cap during the Launch Period and to a $[***] cap during each twelve
(12) month period thereafter; and such costs in excess of the caps set forth in clauses (A) and (B)
shall not be treated as Advertising/Marketing/Educational Expenses.

     Section 1.8 “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control with, such first
Person. For the purposes of this definition, “control” (including, with correlative
meanings, the terms “controlling,” “controlled by” and “under common control
with”), as applied to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.

     Section 1.9 “Agreement” has the meaning set forth in the preamble to this Agreement.

     Section 1.10 “Agreement Month” means each calendar month during the Term (including
any partial calendar month in the case of the first and last calendar months of the Term).

     Section 1.11 “Agreement Quarter” means the Initial Agreement Quarter, each successive
period of three months during the Term after the Initial Agreement Quarter and the Final Agreement
Quarter.

     Section 1.12 “Annual Plan” has the meaning set forth in Section 4.5(a).

     Section 1.13 “Baseline Percentage” means the percentage determined by dividing (a) the
total number of Units of Product prescribed by Professionals on the Depomed Physician List during
the two (2) complete Agreement Quarters prior to delivery by Depomed of its intention to commence
Promotion and Detailing of the Product in the Territory pursuant to Section 4.9, by (b) the total
number of Units of Product prescribed by all Professionals during such two (2) complete Agreement
Quarters, based on Prescriber Data for such two (2) complete Agreement Quarters, as such percentage
may be amended pursuant to Section 4.9.

 

			
	***	 	Certain information on this page has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to the omitted
portions.

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     Section 1.14 “BLS” means Biovail Laboratories International SRL, or any Person which
succeeds to the obligations of Biovail Laboratories International SRL under the BLS Agreements.

     Section 1.15 “BLS Agreements” means, collectively, the BLS License Agreement, the BLS
Manufacturing Transfer Agreement and the BLS Supply Agreement.

     Section 1.16 “BLS Fees” means, for any period, the sum of the following amounts
actually paid by Depomed to BLS in such period: (a) earned royalty payments made pursuant to
Section 4.6 of the BLS Manufacturing Transfer Agreement attributable to Promotion Net Sales of the
500mg Product, and (b) (i) the Supply Price (as defined under the BLS Supply Agreement) for the
1000mg Product or (ii) in the event that BLS is no longer supplying the 1000mg Product under the
BLS Supply Agreement, earned royalty payments made pursuant to Section 4.2 of the BLS Manufacturing
Transfer Agreement attributable to Promotion Net Sales of the 1000mg Product; but only to the
extent and for so long as such amounts are actually paid by Depomed in respect of supply or the
Promotion Net Sales for such period under the applicable BLS Agreement. In the event the amounts
actually paid under any such BLS Agreement are reduced or terminate, or Depomed receives a credit
for any prior payment of BLS Fees or receives any other payment from BLS under any BLS Agreement,
the BLS Fees will correspondingly be reduced or terminate or the credit or other payment shall be
applied to the then-current calculation of BLS Fees.

     Section 1.17 “BLS License Agreement” means that certain Amended and Restated License
Agreement (Extended Release Metformin Formulations — Canada), dated as of December 13, 2005, by
and between Depomed and BLS, as the same may be amended from time to time.

     Section 1.18 “BLS Manufacturing Transfer Agreement” means that certain Manufacturing
Transfer Agreement (Controlled Release Metformin Formulations — USA), dated as of December 13,
2005, by and between Depomed and BLS, as the same may be amended from time to time.

     Section 1.19 “BLS Supply Agreement” means that certain Supply Agreement (Extended
Release Metformin Formulations — U.S.A.), dated as of December 13, 2005, between Depomed and BLS,
as amended on June 30, 2007, as the same may be amended from time to time.

     Section 1.20 “Branded Extended Release Metformin Products” shall mean (i) Glucophage
XR (metformin hydrochloride) Extended Release Tablets (NDA No. 21202) and Fortamet (metformin
hydrochloride) Extended Release Tablets (NDA No. 21574), each in the dosage strengths and
formulations marketed as of the Effective Date (and excluding any generic forms of such products);
and (ii) the Products.

     Section 1.21 “Branded Metformin Products” shall mean (i) Glucophage (metformin
hydrochloride) Tablets (NDA No. 20357) in the dosage strengths and formulations marketed as of the
Effective Date (and excluding any generic forms of such product); and (ii) the Branded Extended
Release Metformin Products.

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     Section 1.22 “cGMP” shall mean current “Good Manufacturing Practices” as such term is
defined from time to time by the FDA or other relevant Governmental Authority having jurisdiction
over the manufacture or sale of a Product pursuant to its regulations, guidelines or otherwise.

     Section 1.23 “Co-Chairs” has the meaning set forth in Section 3.2.

     Section 1.24 “COGS” means, for a particular period, Depomed’s cost of goods sold
(calculated in accordance with Section 7.3(c)) for the Products in the Territory for such period,
but not including (i) BLS Fees, (ii) expenses which are to be deducted from gross sales in reaching
the calculation of Net Sales hereunder, and (iii) costs of Samples purchased from Depomed by
Santarus hereunder.

     Section 1.25 “Combination Product” has the meaning set forth in Section 13.1.

     Section 1.26 “Confidentiality Agreement” means that certain Confidentiality Agreement,
dated as of May 20, 2004, between Depomed and Santarus.

     Section 1.27 “Control” or “Controlled” means, with respect to patents,
know-how or other intellectual property rights of any kind, the possession by a party of the
ability to grant a license or sublicense of such rights without the payment of additional
consideration and without violating the terms of any agreement or arrangement between such party
and any Third Party.

     Section 1.28 “DDMAC” means the FDA’s Division of Drug Marketing, Advertising and
Communications, or any successor Governmental Authority performing comparable functions in the
Territory.

     Section 1.29 “Depomed” has the meaning set forth in the preamble to this Agreement.

     Section 1.30 “Depomed Gross Margin” means, for a particular period, (A) Depomed Net
Sales for such period minus (B) (i) all BLS Fees for such period (multiplied by the Depomed
Percentage for such period) and (ii) COGS for such period (multiplied by the Depomed Percentage for
such period).

     Section 1.31 “Depomed Net Sales” means, for a particular period, Net Sales for such
Period, multiplied by the Depomed Percentage for such period.

     Section 1.32 “Depomed Percentage” means, for a particular period during which Depomed
is Promoting and Detailing a Product pursuant to Section 4.9, the difference of (a) the percentage
determined by dividing (i) the total number of Units of Product prescribed during such period by
Professionals on the Depomed Physician List, by (ii) the total number of Units of Product
prescribed during such period by all Professionals, in each case based on Prescriber Data
for the applicable period; minus (b) the Baseline Percentage; provided that the Depomed
Percentage shall not be less than zero.

     Section 1.33 “Depomed Physician List” means the list of obstetrics and gynecology
Professionals to whom the Depomed Sales Force may present Details, as such list may be

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amended from
time to time as contemplated by this Agreement; provided that the list must conform to the
requirements of Section 4.9.

     Section 1.34 “Depomed Promotional Materials” has the meaning set forth in Section
4.9(d).

     Section 1.35 “Depomed Sales Force” means the field force of Sales Representatives
employed or contracted by Depomed.

     Section 1.36 “Depomed Supply Failure” means any circumstances under which any back-up
manufacturing rights in favor of Depomed pursuant to any supply arrangement relating to the
applicable formulation of the Product are applicable as a result of a failure to fill wholesaler
and distributor orders of the applicable Product.

     Section 1.37 “Depomed Trademarks” means (a) Glumetza® , (b) the AcuFormTM trademark,
for which Depomed has sought registration for in the United States Patent and Trademark Office, and
(c) Depomed®, and, in each case, all related domain names and other trademark related rights. The
Depomed Trademarks are attached hereto as Schedule 1.37.

     Section 1.38 “Detail” means an in-person, face-to-face sales presentation of a Product
made by a Sales Representative to a Professional, including a P1 Detail or P2 Detail.

     Section 1.39 “Educational Programs” means any activities undertaken with respect to
the education of Professionals, pharmacists, managed care representatives or customers regarding a
Product or any indication for a Product or funded by unrestricted educational grants, including
educational programs and seminars and education materials.

     Section 1.40 “Effective Date” has the meaning set forth in the preamble to this
Agreement.

     Section 1.41 “Evaluation Period” has the meaning set forth in Section 13.1.

     Section 1.42 “Executive Officers” means the Chief Executive Officers of Santarus and
Depomed (or, if there is no such officer, its President or other executive officer designated by
the Chief Executive Officer).

     Section 1.43 “FDA” means the United States Food and Drug Administration or any
successor agency performing comparable functions in the Territory.

     Section 1.44 “Final Agreement Quarter” means the period commencing on the first day
following the last full Agreement Quarter during the Term and ending on the last day of the Term.

     Section 1.45 “Force Majeure Event” has the meaning set forth in Section 16.7.

     Section 1.46 “GAAP” has the meaning set forth in Section 7.3(c).

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     Section 1.47 “Generic Drug Act” has the meaning set forth in Section 9.1(j).

     Section 1.48 “[***]” means [***].

     Section 1.49 “Governmental Authority” shall mean any court, agency, authority,
department, regulatory body or other instrumentality of any government or country or of any
national, federal, state, provincial, regional, county, city or other political subdivision of any
such government or any supranational organization of which any such country is a member, which has
competent and binding authority to decide, mandate, regulate, enforce, or otherwise control the
activities of the parties contemplated by this Agreement.

     Section 1.50 “Gross Margin” means, for a particular period, (A) Promotion Net Sales
for such period minus (B) (i) all BLS Fees for such period (multiplied by the Promotion Percentage
for such period), and (ii) COGS for such period (multiplied by the Promotion Percentage for such
period).

     Section 1.51 “Initial Agreement Quarter” means the period commencing on the Effective
Date and ending on December 31, 2008.

     Section 1.52 “JAMS” has the meaning set forth in Section 3.5(b).

     Section 1.53 “JCC” has the meaning set forth in Section 3.1.

     Section 1.54 “Launch Period” means the period beginning on the Effective Date and
ending on March 31, 2009.

     Section 1.55 “Launch Plan” means the plan and schedule for the commercial re-launch of
the Products in the Territory during the Launch Period, including the parties’ responsibilities for
the activities associated with such commercial re-launch of the Products, a budget for the
activities to be undertaken in connection with such commercial re-launch. The initial Launch Plan
describing a summary of the plan and schedule for commercial re-launch is attached hereto as
Schedule 1.55.

     Section 1.56 “Legal Requirements” means laws, rules and regulations of any
Governmental Authority in the Territory, including, for clarity, all guidelines, policies and
procedures referenced in Section 5.3 of this Agreement.

     Section 1.57 “Mediation Notice” has the meaning set forth in Section 3.5(b).

     Section 1.58 “Medical Affairs Expenses” means all of Depomed’s out-of-pocket costs
related to the handling of medical inquiries under Section 4.7 to the extent attributable to the
Product.

     Section 1.59 “Metformin Product Rights” has the meaning set forth in Section 13.1.

     Section 1.60 “Minimum Detailing Obligations” has the meaning set forth in Section
4.1(b).

 

			
	***	 	Certain information on this page has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to the omitted
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     Section 1.61 “Minimum Detailing Period” has the meaning set forth in Section 4.1(b).

     Section 1.62 “NDA” means any “new drug application” (as such term is used
under the Act) filed or acquired by Depomed or any Affiliate with the FDA with respect to a Product
and all subsequent submissions, supplements and amendments thereto, including NDA No. 21-748 filed
with the FDA on April 27, 2004 (as such NDA may be amended or supplemented subsequent to the filing
date).

     Section 1.63 “Negotiation Period” has the meaning set forth in Section 13.1.

     Section 1.64 “Net Sales” means, for a particular period, the gross amount invoiced on
sales of Product in the Territory recognized as gross revenue in accordance with GAAP by Depomed,
its Affiliates, licensees, sublicensees and assigns to independent, unrelated Third Parties during
such period in bona fide arms’ length transactions, less the following deductions, calculated to
arrive at net sales in accordance with GAAP: (a) freight, insurance (but only insurance with
respect to shipping the Product), and other transportation charges to the extent added to the sales
price and set forth separately as such on the total amount invoiced; (b) any sales, use,
value-added, excise taxes or duties or allowances on the selling price of Product to the extent
added to the sales price and set forth separately as such on the total amount invoiced; (c)
chargebacks, trade, quantity and cash discounts and rebates to the extent customary in the trade,
including governmental rebates; (d) allowances or credits, including allowances or credits to
customers on account of rejection, defects or returns of the Product, or because of a retroactive
price reduction; and (e) redemption costs associated with any Product voucher, coupon, loyalty card
or other co-pay assistance programs approved by the JCC, or listed in Schedule 4.5(h). Net
Sales shall not include a sale or transfer to an Affiliate, licensee, sublicensee or assign of
Santarus or Depomed or if done for clinical, regulatory or governmental purposes where no
consideration is received; but the resale by such Affiliate, licensee, sublicensee or assign of
Santarus or Depomed shall be considered a sale of such Product. For purposes of clarity, it is the
intent of the parties that “Net Sales” for the purposes of this Agreement shall be consistent with
the GAAP net sales reported by Depomed in its periodic reports with the U.S. Securities and
Exchange Commission.

     Section 1.65 “Order” means any award, decision, injunction, judgment, decree, order,
ruling, or verdict entered, issued, made, or rendered by any Governmental Authority or by any
arbitrator.

     Section 1.66 “P1 Detail” means a Detail in which the promotional message involving a
Product is presented in the first position and is the principal topic of discussion during the
contact.

     Section 1.67 “P2 Detail” means a Detail in which the promotional message involving a
Product is presented in the second position and is emphasized more than any other product in the
Detail, except for the product in the P1 Detail.

     Section 1.68 “PDMA” means the Prescription Drug Marketing Act, as amended, and the
rules and regulations promulgated thereunder.

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     Section 1.69 “Patheon” means Patheon Puerto Rico, Inc. (f/k/a MOVA Pharmaceutical
Corporation), or any Person which succeeds to the obligations of Patheon Puerto Rico, Inc. under
the Patheon Agreement.

     Section 1.70 “Patheon Agreement” means that certain Commercial Manufacturing
Agreement, dated as of December 19, 2006, by and between Depomed and Patheon, as the same may be
amended from time to time.

     Section 1.71 “Person” means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint venture, estate,
trust, association, organization, labor union, or other entity or Governmental Authority.

     Section 1.72 “Prescriber Data” means data provided by a Third Party which measures
prescriptions filled for Products (by individual prescriber) in the Territory during a specified
time period, from a source mutually agreed in writing by the parties (it being understood that each
of IMS Health Incorporated and Wolters Kluwer is a source agreeable to the parties).

     Section 1.73 “Product(s)” means any pharmaceutical product formulation for human use
containing metformin or any other salt, chiral forms or metabolites thereof as the sole active
pharmaceutical ingredient, including the 500mg Product and the 1000mg Product.

     Section 1.74 “Product Complaints” means any report concerning the quality, purity,
quantity, weight, pharmacologic activity, labeling, identity or appearance of a Product.

     Section 1.75 “Professional” means a physician or other health care practitioner who is
permitted by law to prescribe Products.

     Section 1.76 “Promote,” “Promotional” and “Promotion” mean, with
respect to a Product, any activities undertaken to encourage sales or use of such Product,
including Details, product sampling, detail aids, drop-offs, coupons, discount cards, journal
advertising, direct mail programs, direct-to-consumer advertising, convention exhibits and all
other forms of marketing, advertising, public relations or promotion.

     Section 1.77 “Promotion Commencement Date” has the meaning set forth in Section
4.1(e).

     Section 1.78 “Promotion Fees” has the meaning set forth in Section 7.2(a).

     Section 1.79 “Promotion Net Sales” means Net Sales multiplied by the Promotion
Percentage.

     Section 1.80 “Promotion Percentage” means, for a particular period, 100% minus the
Depomed Percentage for such period, if any Depomed Net Sales occur in such period.

     Section 1.81 “Promotional Effort” has the meaning set forth in Section 4.1(a).

     Section 1.82 “Promotional Materials” has the meaning set forth in Section 4.4(a).

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     Section 1.83 “Proprietary Information” means any proprietary or confidential
information communicated from one party to the other in connection or relating to this Agreement,
which is identified as confidential or proprietary, or which the other party knows or has reason to
know is confidential or proprietary, including the Technology and financial, marketing, business,
technical and scientific information or data, information related to Santarus’ compensation of its
Sales Representatives, information contained within the Annual Plan and Launch Plan, and the
information described in Section 4.6, whether communicated in writing, orally or electronically.
Proprietary Information shall not include information that the receiving party can show through
written documentation:

          (a) at the time of disclosure, is publicly known;

          (b) after the time of disclosure, becomes part of the public domain, except by breach of an
agreement between the disclosing party or any Affiliate thereof and the receiving party or any
Affiliate thereof;

          (c) is or was in the possession of the receiving party or any Affiliate thereof at the time of
disclosure by the disclosing party and was not acquired directly or indirectly from the disclosing
party or any Affiliate thereof or from any other party under an agreement of confidentiality to the
disclosing party or any Affiliate thereof; and

          (d) is or was developed by the receiving party or its Affiliates without use of or reference
to the other party’s Proprietary Information.

     Section 1.84 “Regulatory Approval” means any and all consents or other authorizations
or approvals required from a Governmental Authority to market and sell a Product in the Territory,
but excluding any form of reimbursement approval.

     Section 1.85 “Safety Stock” has the meaning set forth in Section 6.1.

     Section 1.86 “Sales Force Expenditures” means the costs allocated to the Santarus
Sales Force in accordance with Section 4.1(c).

     Section 1.87 “Sales Representatives” means sales representatives employed by Santarus
or Depomed, or a Third Party engaged by Santarus or Depomed, to Detail the Products, who have been
trained and equipped to Detail the Products in accordance with this Agreement.

     Section 1.88 “Samples” has the meaning set forth in Section 6.5.

     Section 1.89 “Santarus” has the meaning set forth in the Preamble to this Agreement.

     Section 1.90 “Santarus CAC” means Santarus’ Copy Approval Committee.

     Section 1.91 “Santarus Manufacturing Notice” has the meaning set forth in Section 6.6.

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     Section 1.92 “Santarus Sales Force” means the field force of Sales Representatives
employed or engaged by Santarus, including field-based sales force management such as regional and
district sales managers.

     Section 1.93 “Santarus Trademarks” means the trademarks set forth on Schedule
1.93, including the “Santarus” trademark and associated design and logo.

     Section 1.94 “Serious Adverse Drug Experience” means any Adverse Drug Experience,
including those subject to expedited reporting as defined in the regulations cited below, that is
fatal or life-threatening, requires hospitalization or prolongation of existing hospitalization,
results in persistent or significant disability or incapacity, is a congenital anomaly/birth
defect, or is of comparable medical significance or any other event which would constitute a
“serious” Adverse Drug Experience pursuant to the terms of 21 C.F.R. 314.80 or 312.32.

     Section 1.95 “Serious Adverse Drug Experience Report” means any Adverse Drug
Experience Report that involves a Serious Adverse Drug Experience.

     Section 1.96 “Subcontracting” means subcontracting or sublicensing a party’s rights or
obligations hereunder (a) pursuant to which a Third Party will manufacture the Products; or (b)
pursuant to which a Third Party Sales Representative is engaged to Promote the Products.
“Subcontractor” means the Third Party with whom the Subcontracting agreement is entered
into.

     Section 1.97 “Technology” means all pharmacological, toxicological, preclinical,
clinical, technical or other information, data and analysis and know-how relating to the
registration, manufacture, packaging, use, marketing or sale of a Product and all proprietary
rights relating thereto owned by Depomed or its Affiliates or to which Depomed or its Affiliates
has rights so as to be able to license.

     Section 1.98 “Term” has the meaning set forth in Section 8.1.

     Section 1.99 “Territory” means the United States, including its territories and
possessions and Puerto Rico.

     Section 1.100 “Third Party” means any Person other than Santarus or Depomed or their
respective Affiliates.

     Section 1.101 “Unit” means one (1) tablet of the 1000mg Product and two (2) tablets of
the 500mg Product; provided that “Unit” shall have such other meaning as the parties may negotiate
in good faith in the event that either party reasonably determines that the then current definition
of Unit does not equitably reflect differences in value between the 500mg Product and the 1000mg
Product for purposes of calculating the Baseline Percentage and the Depomed Percentage.  

     Section 1.102 “United States Bankruptcy Code” means the U.S. Bankruptcy Code, 11
U.S.C. §§ 101, et seq.

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     Section 1.103 “Valid Claim” means a claim in any issued patent or pending patent
application which (a) has not been held invalid or unenforceable by a non-appealed or un-appealable
decision of a court or government agency or other appropriate body of competent jurisdiction and
has not been admitted invalid through disclaimer or dedication to the public, and (b) has not
expired, been determined to be unenforceable, been cancelled, withdrawn, abandoned or been on file
with the applicable patent office for more than seven (7) years from the earlier of its date of
filing or earliest claim of priority under 35 U.S.C. §119 or §120 and its successors in the United
States.

     Section 1.104 “Volume Forecast” has the meaning set forth in Section 6.3.

ARTICLE II

GRANT

     Section 2.1 Grant of Promotion Rights

     During the Term, subject to the terms and conditions of this Agreement (including Depomed’s
right to elect to Promote the Products as set forth in Section 4.9), Depomed hereby grants to
Santarus and its Affiliates and Santarus and its Affiliates hereby accept an exclusive right to
Promote the Products under the Depomed Trademarks in the Territory, on the terms and subject to the
conditions set forth herein. Depomed agrees that its and its Affiliates’ right to Promote the
Products is limited to the rights set forth in Section 4.9.

     Section 2.2 Sublicense

     Except pursuant to Section 16.9 or in connection with the use of Third Party Sales
Representatives, Santarus shall not assign, subcontract or otherwise transfer or delegate any of
its rights or obligations under this Agreement without the express written consent of Depomed,
which consent may be withheld by Depomed in its sole discretion.

     Section 2.3 Limitation on Metformin Promotion

     Except as expressly contemplated by this Agreement (including Article XIII hereof) and subject
to Section 13.1 hereof, Santarus shall not promote, market or distribute any product containing
metformin hydrochloride as the sole active ingredient in the Territory during the Term of this
Agreement, other than the Products.

     Section 2.4 Retention of Rights

     Depomed retains and shall retain all proprietary and property interests in the Products until
the point of sale or, in the case of Samples, until delivered to Santarus as contemplated by
Section 6.5. Santarus will not have nor represent that it has any control or proprietary or
property interests in the Products, except for the licenses and rights specifically granted
hereunder. Except as expressly set forth herein, nothing contained herein shall be deemed to grant
Santarus, by implication, a license or other right or interest in any patent, trademark or other
similar property of Depomed or its Affiliates, except as may be necessary for Santarus to Promote
the Products pursuant to this Agreement or to manufacture the Products in accordance with Section
6.6. Except

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as expressly set forth herein, nothing contained herein shall be deemed to grant
Depomed, by implication, a license or other right or interest in any patent, trademark or other
similar property of Santarus or its Affiliates, except as may be necessary for Depomed to Promote
the Products pursuant to this Agreement.

ARTICLE III

JOINT COMMERCIALIZATION COMMITTEE

     Section 3.1 Establishment

     The parties agree to establish, for the purposes specified herein, a Joint Commercialization
Committee (the “JCC”). The parties acknowledge and agree that the JCC does not have the
power to amend, modify or waive any of the terms or conditions of this Agreement.

     Section 3.2 Joint Commercialization Committee

     The JCC shall be established by the parties and shall be comprised of four (4) members, two
(2) of whom shall be appointed by Depomed and two (2) of whom shall be appointed by Santarus. Each
party has indicated to the other its initial appointments to the JCC. A party may change any of
its representatives at any time if a new person is appointed to any of the foregoing positions by
giving written notice to the other party. The total number of JCC members may be changed by
unanimous vote of the JCC from time to time as appropriate; provided, that the JCC shall in all
cases be comprised of an equal number of members from each of Depomed and Santarus. Santarus and
Depomed each will designate one representative of such party to serve as co-chairs of the JCC (the
“Co-Chairs”). The members appointed to the JCC by each party shall be employees of such
party and shall be vested with appropriate decision-making authority and power by such party. The
Chief Executive Officers of Santarus and Depomed shall not be members of the JCC.

     Section 3.3 JCC Responsibilities

     Except as otherwise set forth herein, the JCC shall provide strategic oversight of all
Promotional activities for the Products hereunder, it being understood that Santarus shall be
responsible for directing such Promotional and marketing activities. The responsibilities of the
JCC shall be exercised consistent with this Agreement and shall include, but shall not be limited
to:

          (a) reviewing the Annual Plan as contemplated by Section 4.5(a);

          (b) reviewing material modifications by Santarus to the Annual Plan or the Launch Plan;

          (c) reviewing Santarus’ Product Promotion strategies and objectives, including Product
positioning, messaging and branding;

          (d) if applicable, monitoring the Depomed Sales Force call plan for coordination with the
Santarus Sales Force;

12

 

          (e) monitoring advertising placement and market responses, including any post-implementation
reviews;

          (f) reviewing and approving any Volume Forecasts and reviewing any Sample forecasts,
consistent with Section 6.3;

          (g) establishing pricing for commercial sale of Products by or on behalf of Depomed, including
the timing of any pricing changes;

          (h) reviewing sales incentive compensation plans for the Santarus Sales Force related to the
Products;

          (i) establishing contracting guidelines for the distribution of the Products (or if no such
guidelines have been established, approving any new or amended contracts);

          (j) establishing contracting guidelines for the managed care and government markets (or if no
such guidelines have been established, approving any new or amended contracts);

          (k) proposing any new packaging design for the Products (subject to Depomed’s approval, and
followed by and subject to applicable FDA and other Legal Requirements);

          (l) establishing the Net Sales forecast for 2009 for purposes of calculating the minimum
Advertising/Marketing/Educational Expenses for that year in accordance with Section 4.1(d);

          (m) reviewing and approving any Product voucher, coupon, loyalty card or other co-pay
assistance programs;

          (n) reviewing and approving any proposed material capital expenditures relating to the
manufacture of the Products; and

          (o) such other functions as may be mutually agreed upon by the parties from time to time.

For the avoidance of doubt, (i) the JCC shall not have any review or approval rights with respect
to any matters relating to the development of the Products, (ii) any decisions of the JCC with
respect to matters which relate to Regulatory Approval for a Product shall require Depomed’s prior
written consent, (iii) the JCC cannot require Santarus to pay more than the minimum amounts
described in Section 4.1 with respect to Advertising/Marketing/Educational Expenses or Sales Force
Expenditures, and (iv) “reviewing” as set forth above shall not imply any approval right or other
decision-making power on the part of the JCC.

     Section 3.4 Meetings of the JCC.

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     Meetings of the JCC may be called by the Co-Chairs of the JCC from time to time and, upon no
less than ten (10) days’ notice, shall otherwise be called when requested by a party; provided,
however, that meetings of the JCC shall be held monthly during the first six months of the Term,
and on at least a quarterly basis thereafter. If possible, the meetings shall be held in person or
where appropriate, by video or telephone conference. Unless otherwise agreed, the location of any
in-person meetings of the JCC shall alternate between the corporate offices of the parties. The
parties shall determine the form of the meetings. Subject to Section 3.5, decisions shall be made
unanimously, each party having one (1) vote regardless of the number of representatives present or
voting; provided, that no such vote shall be valid unless each party is represented by at least two
(2) members either by written proxy or actual presence at the meeting at which the vote is taken.
Subject to appropriate confidentiality undertakings where applicable, each party shall have the
right, upon written notice to the other party, to have present at JCC meetings additional,
non-voting participants (not to exceed ten such participants at any JCC meeting without the consent
of the other party). Such additional participants shall not be deemed to be, or have any rights or
responsibilities of, a member of the JCC. The parties shall cause their respective representatives
on the JCC to use their reasonable efforts to resolve all matters presented to them as
expeditiously as possible. The party hosting any meeting shall propose the agenda for the meeting
and appoint a secretary to the meeting who shall record the minutes of the meeting. Such minutes
shall be circulated to the parties promptly following the meeting for review and comment and for
unanimous ratification by both parties. Each party shall bear its own travel and related costs
incurred in connection with participation in the JCC.

     Section 3.5 JCC Disputes

          (a) In the event that the JCC is, after a period of ten (10) days, unable to make a decision
due to a lack of required unanimity, either party may submit the matter being considered to the
Executive Officers for a joint decision. In such event, either Co-Chair of the JCC, by written
notice to the other party, shall formally request the dispute be resolved by the Executive
Officers, specifying the nature of the dispute with sufficient detail to permit adequate
consideration by the Executive Officers. The Executive Officers shall diligently and in good faith
attempt to resolve the referred dispute expeditiously and, in any event, within fifteen (15) days
of receiving such written notification.

          (b) In the event that the Executive Officers are unable to reach a resolution of any referred
dispute after good faith negotiations during the fifteen (15)-day period referred to in Section
3.5(a) above and in the event such dispute is not related to compliance with this Agreement,
regulatory matters, or the validity, breach or interpretation of this Agreement, either
party may commence mediation within fifteen (15) days after the conclusion of such fifteen
(15)-day period by providing to the other party a written request for non-binding mediation,
setting forth the subject of the dispute and the relief requested (a “Mediation Notice”).
The parties will cooperate with Judicial Arbitration and Mediation Services (“JAMS”) and
with one another in selecting a mediator from JAMS’ panel of neutrals, and in scheduling the
mediation proceedings. The parties shall endeavor to conclude any mediation under this Section 3.5
within thirty (30) days after delivery by either party of Mediation Notice. The parties covenant
that they will participate in the mediation in good faith and that they will share equally in its
costs; provided that each party will be responsible for its own attorneys’ fees. Either party may
seek equitable relief prior to the mediation to preserve the status quo pending the completion of
that process. Except

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for such an action to obtain equitable relief, neither party may commence a
civil action with respect to the matters submitted to mediation until after the completion of the
initial mediation session, or thirty (30) days after delivery of the Mediation Notice, whichever
occurs first.

          (c) Any disputes referred to the Executive Officers for resolution pursuant to this Section
3.5 shall not be subject to any dispute resolution mechanism or procedure other than pursuant to
this Section 3.5.

ARTICLE IV

PRODUCT PROMOTION

     Section 4.1 Product Promotion

          (a) Subject to applicable Legal Requirements, as well as the provisions of this Agreement,
Santarus shall, from and after the Promotion Commencement Date, at its sole expense, use
commercially reasonable efforts to Promote the Products within the Territory in accordance with the
Launch Plan or Annual Plan (the “Promotional Effort”). For purposes of the preceding
sentence, Santarus’ commercially reasonable efforts shall be met if Santarus is in compliance with
its obligations under Section 4.1(b), 4.1(c), 4.1(d) and 4.1(e) of this Agreement. Santarus will
cause the Santarus Sales Force and Santarus employees and agents acting on Santarus’ behalf to
comply with this Agreement and all applicable Legal Requirements in connection with the Promotion
of the Products. It is understood, and Santarus agrees, that it will be accountable for the acts
or omissions of the Santarus Sales Force and its employees and agents to the extent such acts or
omissions fail to comply with Santarus’ obligations under this Agreement.

          (b) From the Promotion Commencement Date and through the first anniversary of such Promotion
Commencement Date (the “Minimum Detailing Period”), the Santarus Sales Force shall perform
a minimum of [***] P1 Details and a minimum of [***] P2 Details (the “Minimum Detailing
Obligations”); [***]. For purposes of determining P1 and P2 Details hereunder, each Product
shall be deemed to be the same Product and shall be counted only once. By way of illustration,
Santarus shall not have the right to count both a P1 Detail for the 500mg Product and a P2 Detail
for the 1000mg Product. In such case, only the P1 Detail shall be counted for purposes of
determining compliance with the Minimum Detailing Obligations.

          (c) During each of the [***] periods within the [***] month period following the end of the
Minimum Detailing Period, Santarus Sales Force Expenditures shall equal at least
[***] percent ([***]%) of the immediately prior [***] Promotion Net Sales. From and after the
end of such [***] month period, the minimum shall be reduced to [***] percent ([***]%) of the
immediately prior [***] Promotion Net Sales. Santarus Sales Force Expenditures for any [***]
period shall be calculated as follows: (i) each P1 Detail shall be valued at $[***]; and (ii) each
P2 Detail shall be valued at $[***] ($[***] for any period during which a particular Santarus Sales
Representative who is delivering Details is at the same time delivering details for two (2) or more
additional products), with such amounts to be increased on each May 1 by the amount of increase in
the Consumer Price Index published for the prior year.

 

			
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          (d) From and after the Effective Date and for the remainder of the Term, Santarus shall spend
at least the following amounts on Advertising/Marketing/Educational Expenses during the periods set
forth below:

	 	 	 
	Period	 	Advertising/Marketing/Educational Expenses
	Effective Date through March 31, 2008
	 	$5,000,000
	[***]
	 	[***]
	[***]
	 	[***]
	[***]
	 	[***]

          (e) Santarus shall commence (the date of such commencement, the “Promotion Commencement
Date”) Promotion (including Details by the Santarus Sales Force) of the Products in accordance
with this Agreement and the performance of the other obligations contained herein that are required
to be performed from and after the Promotion Commencement Date as soon as practicable following the
date hereof, but no later than [***], 2008. The parties agree to cooperate with each other in good
faith in furtherance of the preceding sentence.

          (f) For the avoidance of doubt, the obligations of Santarus as set forth in this Section 4.1
shall be suspended for any period of time during which Depomed is unable to: (i) timely supply
Samples or trade Product in accordance with Article 6 or (ii) maintain the continued effectiveness
of the Regulatory Approvals.

     Section 4.2 Representations to Customers

     Santarus will not make any false or misleading representations to Professionals, customers or
others regarding Depomed or the Products and will not make any representations, warranties or
guarantees with respect to the specifications, features or capabilities of the Products that are
not consistent with the applicable then-current FDA approved labeling and package insert (except to
the extent permitted by Legal Requirements). Santarus agrees to undertake timely and complete
corrective action for any deviations from this Section 4.2, subject to discussion and review by
Depomed’s regulatory affairs and quality assurance department.

     Section 4.3 Staffing; Training

          (a) Santarus shall be solely responsible for all costs and expenses of compensating its Sales
Representatives. Consistent with applicable Legal Requirements, Santarus shall pay incentive
compensation to its Sales Representatives with respect to the Products in accordance with Santarus’
incentive compensation plan for Santarus’ own products; it being understood that, through the
Minimum Detailing Period, such incentive compensation shall constitute (i) at least [***] percent
([***]%) (on a pro-rated basis) of the total targeted cash

 

			
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16

 

incentive compensation under Santarus’ field incentive compensation plans for the aggregate of
Santarus Sales Representatives engaged in Detailing Products under this Agreement, and (ii) at
least [***] percent ([***]%) (on a pro-rated basis) of the sales component (and excluding any MBO
component) of the targeted cash incentive compensation under Santarus’ field incentive compensation
plans for the aggregate of Santarus district sales managers involved in the Promotion of the
Product. Santarus shall notify its Sales Representatives and district sales managers prior to the
Promotion Commencement Date and consistent with its procedures for Santarus’ other products of the
total potential incentive compensation for the Products. For clarity, the minimum incentive
compensation requirement in this Section 4.3 does not apply to sales force management (other than
district sales managers), such as regional sales managers.

          (b) Depomed shall make available to Santarus any training materials created by Depomed prior
to the Effective Date at Depomed’s out-of-pocket cost for printing and delivering such materials
(and such costs shall be included in the Advertising/Marketing/Education Expenses for Santarus).
In consultation with Depomed, Santarus may modify any such training materials or develop additional
training materials for its Sales Representatives with respect to a Product; provided that such
modified or developed training materials shall be subject to Depomed’s review as Promotional
Materials as provided in Section 4.4. Promptly after the Effective Date, at a time and location to
be agreed upon by the parties consistent with the Launch Plan, Depomed shall make available to
Santarus, at Depomed’s cost and expense, personnel and materials for one “train the trainers”
meeting to facilitate Santarus’ training of its Sales Representatives. Santarus shall, at its own
expense subsequent to the “train the trainers” meeting and prior to the Promotion Commencement
Date, provide training programs to its Sales Representatives consistent with Santarus’ obligations
hereunder and all other Legal Requirements. Such programs shall include training with respect to
reporting Adverse Drug Experiences and technical complaints. After the initial training, Santarus
shall periodically provide additional training to each of its Sales Representatives, and shall
update its training materials as appropriate in connection with such additional training, in
accordance with this Section 4.3.

     Section 4.4 Promotional Materials; Educational Materials

          (a) Subject to Sections 4.4(b), 4.4(c) and 4.9, Santarus shall, at its own expense (which for
clarity shall be included as an Advertising/Marketing/Educational Expense hereunder) have the right
to create, develop, produce or otherwise obtain, and utilize sales, promotional, advertising,
marketing, educational and training materials (“Promotional Materials”) which are necessary
to support fully the Promotional Effort for the Products. Such Promotional Materials may include,
by way of example, detailing aids; leave behind items; premium branded items; journal advertising;
educational programs; formulary binders; appropriate reprints and reprint carriers; product
monographs; patient support kits; convention exhibit materials; direct mail; market research survey
and analysis; training materials; and scripts for telemarketing and teleconferences. All
Promotional Materials used by the Santarus Sales Force or bearing the Santarus Trademarks will be
subject to the review and approval of the Santarus CAC. All Promotional Materials developed by
Santarus hereunder shall prominently display such Depomed Trademark(s) as shall be specified by
Depomed to Santarus following its review of the applicable prototype in accordance with Section
4.4(b).

 

			
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          (b) Prior to the use thereof, Santarus shall provide to Depomed a prototype of any Promotional
Materials created by Santarus for review. Depomed shall notify Santarus of any objections it has
to such prototype and the basis therefor as soon as reasonably practicable, but no later than ten
(10) business days following its receipt thereof (five (5) business days during the Launch Period).
Santarus shall modify such Promotional Materials to the extent necessary to resolve any objections
made by Depomed to such Promotional Materials on the grounds that such Promotional Materials are
inconsistent with any Legal Requirements or this Agreement and shall in good faith consider any of
Depomed’s other objections. The final version of the Promotional Materials approved by the
Santarus CAC shall be provided to Depomed for its review and approval to confirm their consistency
with the prototype approved by Depomed and the resolution of Depomed’s objections in accordance
with this Section 4.4(b), which review and approval shall occur, as soon as reasonably practicable,
but no later than five (5) business days following its receipt by Depomed. Upon approval, the
Promotional Materials may be produced in quantity, and Santarus shall provide Depomed with the
requisite number of copies of the final printed form in a timely manner so as to allow Depomed to
satisfy its obligation to file such materials with the FDA prior to the first use of the
Promotional Materials, and Depomed will make such filing with the FDA within five (5) business days
of its receipt of such copies. In furtherance of the foregoing provisions of this Section 4.4(b),
the parties will endeavor to cooperate to facilitate the timely and efficient review of Promotional
Materials and resolution of any disputes or disagreements related to Promotional Materials, with a
view to containing both parties’ internal personnel resources and external costs associated with
the creation, review and approval of the Promotional Materials.

          (c) At Santarus’ request, Depomed shall make available to Santarus any Promotional Materials
created by Depomed prior to the Effective Date, including electronic copies of Promotional
Materials, at Depomed’s out-of-pocket cost for printing and delivering such materials (and such
costs shall be included in the Advertising/Marketing/Education Expenses for Santarus). On or prior
to the Promotion Commencement Date, Depomed shall deliver to Santarus all such Promotional
Materials created by Depomed in its inventory. The Promotional Materials supplied to Santarus
under this Section 4.4(c) shall be delivered to a single location specified by Santarus in writing
prior to such delivery. Depomed hereby grants to Santarus the exclusive right, during the Term, to
use the Promotional Materials supplied to Santarus pursuant to this Section 4.4(c) in the
performance of its obligations under this Agreement.

          (d) Depomed shall own all copyrights to all Promotional Materials that are created during the
Term of this Agreement in connection with and to the extent relating to the Promotion of the
Products. Santarus shall use commercially reasonable efforts consistent with accepted business
practices to obtain such assignments from the authors and creators of such materials as may be
necessary to vest ownership of the copyright in Depomed. Depomed shall, and does hereby, grant to
Santarus a royalty-free license to use and reproduce such materials solely in conjunction with its
Promotion of the Products pursuant to this Agreement, which license shall not be assignable or
transferable by Santarus, except in accordance with the terms of Section 2.2.

     Section 4.5 Annual Plan; Promotion Expenses

          (a) On or prior to October 31st of the preceding calendar year with respect to each calendar
year during the Term beginning with the 2009 calendar year, Santarus shall develop

18

 

an annual commercialization plan (the “Annual Plan”) and submit the Annual Plan to the
JCC for review. The Annual Plan shall set forth the manner in which Santarus anticipates it will
Promote the Products during the period to which the Annual Plan relates; provided, however, that
the Annual Plan may be modified from time to time as Santarus reasonably deems appropriate for the
Promotion of the Products, subject where applicable to Santarus’ compliance with its obligations
under this Agreement, including without limitation the obligations set forth in Section 4.1. Any
such modified Annual Plan shall be provided to the JCC for its review at its next regularly
scheduled meeting. The Annual Plan shall include, at a minimum:

               (i) the anticipated number of quarterly and annual Details (including P1 Details and P2
Details) to be provided by the Santarus Sales Force, and the physicians targeted to receive those
Details;

               (ii) product positioning, strategy and tactics with supporting advertising and promotional
activity to be undertaken;

               (iii) planned public relations activities, if any;

               (iv) any training or sampling programs to be conducted;

               (v) medical education programs to be conducted;

               (vi) pricing and contracting strategies; provided, however, that Product pricing shall be
established as set forth in Section 3.3;

               (vii) managed health care strategies and tactics; provided, however, that managed care
contracting guidelines shall be established as set forth in Section 3.3; and

               (viii) a budget for all costs and expenses associated with the activities to be undertaken
pursuant to the Annual Plan (including the projected Advertising/Marketing/Educational Expenses and
Sales Force Expenditures).

          (b) In addition, on or prior to October 31st of the preceding calendar year with respect to
each calendar year during the Term beginning with the 2009 calendar year, Depomed shall provide the
following information to the JCC to assist the JCC in its review of the Annual Plan: (i) Product
manufacturing and distribution forecasts for the coming year (including forecasted COGS and BLS
Fees), and (ii) plans for and reasonably detailed reports summarizing any data resulting from
post-marketing clinical studies that Depomed, in its sole discretion and expense, decides to
conduct. Depomed shall also provide to the JCC its proposed Volume Forecast on a quarterly basis
pursuant to Section 6.3.

          (c) The JCC shall use all reasonable efforts to review and provide comments to the Annual Plan
not later than December 1 of each preceding calendar year. Santarus will consider in good faith
any comments to the Annual Plan provided by the JCC.

          (d) Santarus shall not have any obligation to incur Sales Force Expenditures or
Advertising/Marketing/Educational Expenses in excess of the minimum amounts provided in Sections
4.1(c) and (d), respectively, of this Agreement.

19

 

          (e) [***].

          (f) Each party will bear its own operating expenses associated with the Products and Promotion
thereof, including all personnel, general and administrative and overhead costs. Santarus will
bear all Santarus Sales Force expenses, and Depomed will bear all Depomed Sales Force expenses.
Depomed will bear all costs associated with maintaining and continuing all Regulatory Approvals of
the Products in the Territory, including all costs associated with Adverse Drug Experience
reporting, filing annual reports in connection with the NDAs, user fees and establishment fees
associated with the NDAs and all clinical and regulatory requirements.

          (g) At the end of each Agreement Quarter, Santarus shall provide directly to Depomed, within
ten (10) business days of its receipt, the Prescriber Data for such Agreement Quarter related to
the Product, to the extent and in such form as is permitted under the applicable Third Party
agreements under which Santarus purchases the Prescriber Data.

          (h) From the Effective Date through September 15, 2008, Depomed shall maintain, at a minimum,
the Promotion activity set forth in Schedule 4.5(h).

     Section 4.6 Santarus Promotion Reports

          (a) Within forty-five (45) days following the end of each Agreement Quarter, Santarus shall
provide the JCC with a status report, which report will summarize Santarus’ Detailing activities
pursuant to this Agreement for such prior Agreement Quarter and on a calendar year-to-date basis,
including, to the extent Santarus customarily creates the following reports for Santarus’ other
products which are promoted by or on behalf of Santarus: (a) the number of P1 and P2 Details made
and recorded by Santarus’ standard record keeping procedures; (b) the names and addresses of the
Professionals called upon; (c) the percentage of Professionals Detailed who were provided with
Samples; (d) the average number of such Samples delivered on each Detail; (e)
Advertising/Marketing/Education Expenses for such Agreement Quarter; and (f) such other information
as may be agreed upon in writing by the parties.

          (b) [***].

     Section 4.7 Medical Inquiries

     The parties acknowledge that each may receive requests for medical information concerning the
Product from members of the medical and paramedical professions and consumers regarding the
Product. If such requests are received by Santarus, the request will be referred to Depomed’s
medical department. Depomed shall also be responsible for responding to such requests that are not
received by Santarus, all of which responses shall be in compliance with all applicable Legal
Requirements and the NDA. Depomed shall promptly provide Santarus with (i) copies of all written
materials and (ii) written summaries of all oral advice, provided by Depomed in response to such
inquiries. Depomed shall be obligated for any costs associated with its responsibilities pursuant
to this Section 4.7; [***].

 

			
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     Section 4.8 Trademarks

          (a) The “Depomed” trademark must appear on all Promotional Material that makes reference to
the Products, to the extent such Promotional Materials would typically contain a company trademark.
The “AcuForm” trademark must appear on all Promotional Materials that make reference to the
“AcuForm” drug delivery technology incorporated into the Products. Depomed hereby grants to
Santarus a non-assignable, non-sublicensable, non-exclusive, royalty-free right and license to use
the Depomed Trademarks in the Territory solely in connection with Santarus’ Promotion of the
Products in accordance with this Agreement; provided Santarus may assign and sublicense such right
and license in accordance with Section 2.2. Such license shall expire immediately upon the
expiration or termination of this Agreement. Subject to this Section 4.8 and to applicable Legal
Requirements, Santarus shall have the right to use the Santarus Trademarks, and include the name
“Santarus” or any variation thereof on the Promotional Materials; provided that such Santarus
Trademarks will not appear in greater prominence or in greater frequency than the Depomed
Trademarks. In addition, the JCC will discuss including the Santarus Trademarks, in equal
prominence to the Depomed Trademarks and in accordance with all Legal Requirements, on all
packaging for Samples distributed by the Santarus Sales Force, with determination by the JCC as to
including such marks being based on the timing for implementing such change and the costs
associated therewith, with all out-of-pocket costs associated with creating and approving new
packaging borne by Santarus if so approved by the JCC. Santarus recognizes Depomed’s title to the
Depomed Trademarks, and shall not at any time, during or after the Term, do or knowingly suffer to
be done any act or thing which will in any way impair the rights of Depomed in or to the Depomed
Trademarks. Santarus acknowledges and agrees that it shall not acquire and shall not claim any
title to the Depomed Trademarks adverse to Depomed by virtue of the rights granted under this
Agreement or through Santarus’ use of the Depomed Trademarks, it being the intention of the parties
that all goodwill and improved reputation generated by Santarus and use of the Depomed Trademarks
shall inure to the benefit of Depomed.

          (b) Santarus hereby grants to Depomed a non-assignable, non-sublicensable (except to any Third
Party acting as the Depomed Sales Force), non-exclusive, royalty-free right and license to use the
Santarus Trademarks in the Territory solely in connection with Depomed’s Promotion of the Products
in the Territory in accordance with this Agreement. Such license shall expire immediately upon the
expiration or termination of this Agreement. Subject to this Section 4.8 and to applicable Legal
Requirements, Depomed shall have the right to use Depomed Trademarks, and include the name
“Depomed,” “AcuForm,” or any variation thereof on the Promotional Materials developed by Depomed in
accordance with this Agreement. Depomed recognizes Santarus’ title to the Santarus Trademarks, and
shall not at any time, during or after the Term, do or knowingly suffer to be done any act or thing
which will in any way impair the rights of Santarus in or to the Santarus Trademarks. Depomed
shall not be obligated to use the Santarus Trademarks in the Depomed Promotional Materials.
Depomed acknowledges and agrees that it shall not acquire and shall not claim any title to the
Santarus Trademarks adverse to Santarus by virtue of the rights granted under this Agreement or
through Depomed’s use of the Santarus Trademarks, it being the intention of the parties that all
goodwill and improved reputation generated by Depomed and use of the Santarus Trademarks shall
inure to the benefit of Santarus.

21

 

          (c) Each of Santarus with respect to its use of the Depomed Trademarks and Depomed with
respect to its use of the Santarus Trademarks will maintain quality standards for all of its uses
of the trademarks of the other party in connection with the Promotion of the Products that are
substantially equivalent to those standards used by the owner of such trademarks in connection with
pharmaceutical products. Subject to the foregoing and to the other provisions of this Agreement,
each party acknowledges and agrees that the owner or licensee of the trademark has the right, at
any time, to modify or supplement such quality standards and that the licensee or sublicensee must
implement such new standards or changes following receipt of notice of such additions or changes;
provided that the licensor agrees to bear all reasonable costs associated with such modifications
and supplements. Compliance with this Section 4.8(c) shall be determined pursuant to the
Promotional Material and Depomed Promotional Materials review and approval procedures set forth in
Sections 4.4(b) and 4.9(f), as applicable.

     Section 4.9 Election by Depomed to Promote in the Territory

          (a) Depomed may elect, at any time prior to the third (3rd) anniversary of the Effective Date,
to have the Depomed Sales Force Promote and Detail the Products directly to obstetrics and
gynecology Professionals who are on the Depomed Physician List. If Depomed desires to make this
election and to use the Depomed Sales Force for this purpose, it will inform Santarus at least
sixty (60) days in advance of the commencement of Details by the Depomed Sales Force and provide
Santarus with the proposed Depomed Physician List and Depomed shall commence its Promotion and
Detailing activities no later than ninety (90) days after the date of its notice to Santarus.
During such sixty (60)-day period, Santarus will be entitled to review the Depomed Physician List
and confirm that such list does not contain any Professionals that are not, as of the date of
Santarus’ receipt of the Depomed Physician List, eligible for inclusion on the Depomed Physician
List. Following creation of the initial Depomed Physician List, from time to time but not more
than two (2) times per calendar year, Depomed may add Professionals to the Depomed Physician List
pursuant to the procedure set forth above. Following the addition of such Professionals to the
Depomed Physician List, the Baseline Percentage shall be adjusted to reflect prescriptions written
by any such Professionals by adding to the then-current Baseline Percentage the quotient obtained
by dividing (x) [***], by (y) [***]. Notwithstanding the foregoing, the average number of
Professionals on the Depomed Physician List shall in no event exceed [***] Professionals per
Depomed Sales Representative providing Details.

          (b) Depomed will submit to the JCC a call plan setting forth the Details to be performed by
the Depomed Sales Force. Such call plan may be taken into account in developing subsequent Annual
Plans. Any Professional on the Depomed Physician List who does not receive at least [***] Details
in each full calendar year following the commencement of Promotion of the Product by the Depomed
Sales Force will be excluded from the Depomed Physician List in subsequent calendar years for
purposes of calculating Depomed Net Sales, and for purposes of calculating the Baseline Percentage.

          (c) All Details made by the Depomed Sales Force will be reported to Santarus. Such reports by
Depomed will be made in the same manner as Santarus’ Details under Section 4.6(a). Depomed shall
be responsible for purchasing Prescriber Data relating to the Depomed Physician List at its sole
cost and expense.

 

			
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portions.

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          (d) Depomed may purchase from Santarus, at Santarus’ actual out-of-pocket costs, copies of any
Promotional Materials created by Santarus for use by the Depomed Sales Force. Upon Depomed’s
request, Santarus will provide to Depomed electronic copies of Promotional Materials created by or
for Santarus, which Promotional Materials may be modified for use by Depomed; provided that any
modification must be approved as described below. Depomed may also create and develop its own
Promotional Materials for use by the Depomed Sales Force (“Depomed Promotional Materials”).
Prior to the use thereof, Depomed shall provide to Santarus a prototype of any Depomed Promotional
Materials for review. Santarus shall notify Depomed of any objections it has to such prototype and
the basis therefor as soon as reasonably practicable, but no later than ten (10) business days
following its receipt thereof. Depomed shall modify such Depomed Promotional Materials to the
extent necessary to resolve any objections made by Santarus to such Depomed Promotional Materials
on the grounds that such Depomed Promotional Materials are inconsistent with the overall Product
positioning and messaging for the Products and shall in good faith consider any of Santarus’ other
objections. The final version of the Depomed Promotional Materials shall be provided to Santarus
for its review and approval to confirm their consistency with the prototype approved by Santarus
and the resolution of Santarus’ objections in accordance with this Section 4.9(d), which review and
approval shall occur, as soon as reasonably practicable, but no later than five (5) business days
following its receipt by Santarus. The Depomed Promotional Materials will not contain any Santarus
Trademark unless such materials are approved by the Santarus CAC. Santarus may purchase from
Depomed, at Depomed’s out-of-pocket costs for printing and delivering such materials, copies of any
Depomed Promotional Materials. Upon Santarus’ request, Depomed will provide to Santarus electronic
copies of Depomed Promotional Materials created by or for Depomed, which Depomed Promotional
Materials may be modified for use by Santarus; provided that any modification must be approved in
the same manner as approval of Promotional Materials.

          (e) Depomed may purchase from Santarus, at Santarus’ actual out-of-pocket costs, copies of
training materials developed and Controlled by Santarus related to the Products for use by Depomed
in the training of the Depomed Sales Force. Depomed shall be responsible for training of the
Depomed Sales Force, and may, at its own expense, develop training materials for the Depomed Sales
Force in other media or forms, provided that such materials shall be subject to Santarus’ review as
Depomed Promotional Materials as provided in Section 4.9(d). Depomed shall, at its own expense,
train the Depomed Sales Force using such training materials, the other Promotional Materials and
Depomed Training Materials and such programs as Depomed shall deem appropriate that are in
compliance with Depomed’s obligations hereunder. Such programs shall include training with respect
to reporting Adverse Drug Experiences and technical complaints. After the initial training,
Depomed shall periodically provide additional training to each Sales Representative, and shall
update its training materials as appropriate in connection with such additional training, in
accordance with this Section 4.9(e).

          (f) Depomed shall be solely responsible for costs or expenses related to any activities of the
Depomed Sales Force, including costs for Depomed Promotional Materials, training or training
materials or the purchase from Santarus of Promotional Materials for the Depomed Sales Force.

          (g) Depomed will cause the Depomed Sales Force and Depomed employees and agents acting on
Depomed’s behalf to comply with this Agreement and all applicable Legal

23

 

Requirements in connection with the Promotion of the Products. It is understood, and Depomed
agrees, that it will be accountable for the acts or omissions of its employees and agents to the
extent such acts or omissions fail to comply with Depomed’s obligations under this Agreement.

          (h) Depomed will not make any false or misleading representations to Professionals, customers
or others regarding Santarus or the Products and will not make any representations, warranties or
guarantees with respect to the specifications, features or capabilities of the Products that are
not consistent with the applicable then-current FDA approved labeling, package insert or other
documentation accompanying or describing the Products. Depomed agrees to undertake timely and
complete corrective action for any deviations from this Section 4.9(h).

     Section 4.10 Product Website

     Unless otherwise agreed in writing by the parties, Depomed shall maintain the existing Product
website and implement any changes to such Product website, subject to the procedure set forth in
Section 4.4 used for Promotional Materials. Santarus will reimburse Depomed for its direct
out-of-pocket costs associated with implementing any changes requested by Santarus. Such
reimbursed costs shall be included in the Advertising/Marketing/Educational Expenses for Santarus.

ARTICLE V

CLINICAL AND REGULATORY AFFAIRS; DEVELOPMENT

     Section 5.1 Regulatory Approvals

     Depomed shall use active, sustained, diligent efforts to maintain and continue all Regulatory
Approvals currently in effect for the Products. Santarus agrees that all Regulatory Approvals,
applications therefor and any other submissions to a Governmental Authority with respect to the
Products shall be in the name of, and shall be owned by, Depomed or its designee and Santarus shall
have access, free of charge, to all clinical and non-clinical data related to the Products
generated by or on behalf of and controlled by Depomed, whether before or after the Effective Date.

     Section 5.2 Compliance with Regulatory Requirements

     Unless otherwise required by law or expressly required by this Agreement, Depomed will retain
exclusive authority over and responsibility for complying with all regulatory requirements and
maintaining all contacts with Governmental Authorities with respect to the Products, including
maintaining and updating of the NDA, the development and submission of applications for new
formulations, dosage strengths or indications of the Products, the reporting of any Adverse Drug
Experiences to the FDA, the compliance of Promotional Materials with FDA rules and regulations and
the filing of Promotional Materials with the FDA.

     Section 5.3 Compliance

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     In performing its duties hereunder, each party shall, and shall cause the Santarus Sales Force
or Depomed Sales Force, as applicable, and its employees and agents to, comply with all Legal
Requirements, including the FDA’s regulations and guidelines concerning the advertising of
prescription drug products, DDMAC’s promotional guidelines, the PhRMA Code on Interactions with
Healthcare Providers, the Prescription Drug Marketing Act of 1987, as amended, and the rules and
regulations promulgated thereunder, equal employment, non-discrimination and federal and state
anti-kickback Legal Requirements, and Legal Requirements with respect to submission of false claims
to governmental or private health care payors, which may be applicable to the activities (including
the warehousing, handling and distribution of Samples) to be performed by such party hereunder.
None of Santarus, Depomed, the Santarus Sales Force, the Depomed Sales Force and either party’s
employees and agents shall offer, pay, solicit or receive any remuneration to or from Professionals
in order to induce referrals of or purchase of the Products in violation of applicable Legal
Requirements, including without limitation federal or state anti-kickback Legal Requirements. The
Santarus Sales Force and the Depomed Sales Force shall have been trained in compliance with
applicable Legal Requirements prior to engaging in Promotion of the Products.

     Section 5.4 Communications with Regulatory Authorities

          (a) Except to the extent set forth in Section 5.4(b), all communications with Government
Authorities concerning the Product shall be the sole responsibility of Depomed. Depomed shall
within two (2) business days provide Santarus with copies of all such communications (including
summaries of all relevant verbal communications) related to Promotional Materials and Serious
Adverse Drug Experiences (except that routine communications as to such matters (e.g., FDA 2253
correspondence) may be forwarded to Santarus within five (5) business days) and shall reasonably
respond to all inquiries by Santarus relating thereto. Depomed will reasonably consult with
Santarus concerning adverse drug reaction reporting to the FDA and communications related to
Promotional matters with the FDA or other Governmental Authorities that Depomed reasonably
considers to be significant to the Product, including regulatory responses to follow up inquiries
regarding adverse drug reactions. Depomed will provide to Santarus a copy of all draft responses
related to such matters as soon as practicable, and will endeavor to provide such responses at
least five (5) business days in advance of their submission (to the extent allowable under Legal
Requirements), and will consider in good faith any comments provided to Depomed by Santarus.

          (b) Santarus shall not, without the consent of Depomed or unless so required by Legal
Requirements, correspond or communicate with the FDA or with any other Governmental Authority,
whether within the Territory or otherwise, concerning the Products, or otherwise take any action
concerning any Regulatory Approval under which the Products are sold or any application for
Regulatory Approval of the Products; provided that during the Term, Santarus shall have the
right to communicate with the FDA or any other Governmental Authority regarding the Products if
such communication is necessary to comply with the terms of this Agreement or any Legal Requirement
(including without limitation state or local Legal Requirements related to marketing activities
undertaken by Santarus or the Santarus Sales Force), or if Santarus made a request of such agency
to communicate with Depomed instead, and such Governmental Authority denied such request (in any
such case, Santarus shall give Depomed notice as soon as reasonably practicable of such
communication and, to the extent practicable, Depomed shall be permitted to accompany Santarus,
take part in any such communications and receive copies of all such

25

 

communications). Santarus shall within two (2) business days upon receipt of any
communication from the FDA or from any other Governmental Authority relating to the Products,
forward a copy of the same to Depomed and reasonably respond to all inquiries by Depomed relating
thereto. If Santarus is required by law to communicate with the FDA or with any other Governmental
Authority relating to the Products, then Santarus shall so advise Depomed within two (2) business
days and provide Depomed in advance with a copy of any proposed written communication, or a written
summary of any proposed oral communication with the FDA or any other Governmental Authority.
Santarus shall comply with any and all reasonable direction of Depomed concerning any meeting or
written or oral communication with the FDA or any other Governmental Authority relating to the
Product unless otherwise required by Legal Requirements.

     Section 5.5 Product Complaints

     Santarus shall refer any oral or written Product Complaints which it receives concerning the
Products to Depomed within four (4) days of its receipt thereof; provided, that all
complaints concerning suspected or actual Product tampering, contamination or mix-up shall be
delivered within twenty four (24) hours of its receipt thereof. Santarus shall not take any other
action in respect of any such complaint without the consent of Depomed unless otherwise required by
Legal Requirements. If requested by Depomed, Santarus will collaborate with Depomed to resolve any
Product Complaints. All Product Complaints shall be directed to the attention of Depomed’s Vice
President, Regulatory Affairs, at Depomed’s address set forth in Section 14.1. Depomed shall
provide Santarus with a summary of all Product Complaints received by Depomed within ten (10)
business days of its receipt thereof; provided, however, that all complaints concerning suspected
or actual Product tampering, contamination or mix-up shall be delivered within twenty-four (24)
hours of its receipt thereof.

     Section 5.6 Adverse Drug Experience Reports

          (a) Each party shall notify the other: (i) of all Serious Adverse Drug Experience Reports
within forty-eight (48) hours of the time such Serious Adverse Drug Experience Report becomes known
to such party (including its employees); and (ii) of all Adverse Drug Experience Reports within
five (5) days of the time such Adverse Drug Experience Report becomes known to such party
(including its employees).

          (b) Except as may otherwise be required by Legal Requirements, (i) Santarus shall not disclose
any information concerning Adverse Drug Experience Reports or Serious Adverse Drug Experience
Reports to any Person or Governmental Authority without the prior consent of Depomed; and (ii)
Depomed shall have the sole discretion to determine whether any Product Complaint, Adverse Drug
Experience Report or Serious Adverse Drug Experience Report must be reported to the FDA or any
other Governmental Authority.

          (c) All follow-up investigations concerning Adverse Drug Experience Reports and Serious
Adverse Drug Experience Reports shall be conducted by Depomed; provided that Santarus shall
have the right to participate in such investigations upon its request. Santarus shall provide all
reasonable cooperation with any such follow-up investigation as may be requested by Depomed from
time to time.

26

 

          (d) The parties will enter into a separate and more detailed pharmacovigilance agreement,
consistent with the terms of this Agreement, reasonably in advance of the Promotion Commencement
Date.

     Section 5.7 Recalls or Other Corrective Action

     Depomed shall have sole responsibility for and shall make all decisions with respect to any
recall (including recall of packaging and promotion materials), market withdrawals or any other
corrective action related to the Products. Depomed shall promptly consult with Santarus with
respect to any such actions proposed to be taken by Depomed (and in all events prior to the taking
of such actions), including all actions that are reasonably likely to result in a material adverse
effect on the marketability of the Products in the Territory. At Depomed’s request, Santarus shall
provide assistance to Depomed in conducting such recall, market withdrawal or other corrective
action (including retrieving Samples distributed by the Santarus Sales Force to Professionals).
With respect to any recall, market withdrawal or corrective action initiated by Depomed as a result
of Depomed becoming aware of any manufacturing defect in Products (other than Products manufactured
by Santarus in accordance with Section 6.6), Depomed shall reimburse Santarus for its reasonable,
documented, direct, out-of-pocket costs incurred in connection with participating in such recall,
market withdrawal or other corrective action provided that a breach of the provisions of
this Agreement, or a violation of Legal Requirements, by Santarus is not a material cause of the
recall, market withdrawal or other corrective action. Except as set forth above, but subject to
Depomed’s indemnification obligations under Section 11.1, Depomed shall be under no liability
whatsoever to compensate Santarus or make any other payment to Santarus for any decision to recall,
initiate a market withdrawal or take any other corrective action with respect to the Products,
unless such actions results from a breach of the provisions of this Agreement or a violation of
Legal Requirements by Depomed.

     Section 5.8 Assistance

     Each party agrees to provide to the other all reasonable assistance and take all actions
reasonably requested by the other party that are necessary to enable the other party to comply with
any Legal Requirement applicable to the Products in the Territory.

ARTICLE VI

MANUFACTURING AND SUPPLY; SALES; PRICING

     Section 6.1 Obligations of Depomed

     In accordance with the provisions of this Agreement and all applicable Legal Requirements,
Depomed shall, at its cost and expense, use reasonable best efforts to perform or cause to be
performed all Product manufacture, labeling, packaging, warehousing, distribution and return, order
entry, customer services and all other activities to supply and distribute the Products in the
Territory in order to fill orders for (a) Product conforming to the then current Volume Forecast
and (b) Santarus’ Sample requirements pursuant to Section 6.5 in a timely and efficient manner.
Depomed shall use commercially reasonable efforts to maintain at least three (3) month’s safety
stock of Product (“Safety Stock”) to address unanticipated changes in demand or other
manufacturing need for the Products (calculated on the basis of the then current Volume Forecast).

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Depomed shall also request that BLS continue any ongoing stability programs to support
extending the expiry dating for the 1000mg Product.

     Section 6.2 Manufacturing Activities

     The Products, including all Samples, to be manufactured by or for Depomed for sale in the
Territory shall be manufactured to meet applicable specifications for the Products in accordance
with the NDA, cGMP and in compliance with all other applicable Legal Requirements.

     Section 6.3 Volume Forecasts; Wholesaler Activities

          (a) At least thirty (30) days prior to the beginning of each Agreement Quarter ending after
the Promotion Commencement Date, Santarus shall submit to the JCC a written forecast by month of
the number of units of Product expected to be prescribed in the Territory during the twelve (12)
month period beginning with such Agreement Quarter, which forecast shall be prepared by Santarus in
good faith. Depomed shall provide to Santarus trade wholesaler stocking levels information within
ten (10) days following the beginning of each Agreement Quarter ending after the Promotion
Commencement Date (or, if later, within two (2) business days after such information becomes
available to Depomed).

          (b) The JCC shall review and discuss such forecast and shall make such modifications thereto
as may be necessary for such forecast, to be unanimously approved by the JCC and to be consistent
with the anticipated trade demand for the Products and with the forecasting and purchasing
provisions of any applicable Third Party Product supply agreement, including the Patheon Agreement
or the BLS Supply Agreement (as so modified and approved by the JCC for the applicable twelve (12)
month period, the “Volume Forecast”).

          (c) Depomed shall promptly inform Santarus of any back-order situations or other situations in
which wholesaler orders of the Product have not been filled (collectively, “Back Order
Events”); the parties will work together to establish a remediation plan for any such Back
Order Events. In addition, Depomed shall provide Santarus with access to general wholesaler
ordering and shipment reports, on no less frequently than a weekly basis.

     Section 6.4 Sales; Pricing

          (a) Depomed or its Affiliates shall book all sales of the Products in the Territory and shall
be responsible for entering into any contracts and other arrangements with any Person regarding the
sale of the Products, and for establishing and approving the form, content and terms and conditions
thereof, including any discount, allowance, rebate, chargeback or other term granted therein;
provided, however, that (i) the pricing of the Products shall be consistent with
the pricing established by the JCC in accordance with Section 3.3(i), (ii) the terms of such
contract and other arrangement shall be consistent with the contracting guidelines established by
the JCC in accordance with Section 3.3(j) and reflected in the Annual Plan, with Santarus to
negotiate the rebate and chargeback amounts, the formulary position and other conditions for
Product to qualify for such rebate and chargeback amounts in compliance with the contracting
guidelines previously approved, and (iii) any deductions from gross amounts invoiced pursuant to
any such contract or arrangement shall correspond to one or more of the categories of deductions

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set forth in the definition of “Net Sales” in Article I. The parties agree to discuss at the
JCC and finalize the initial pricing and contracting guidelines on or before November 1, 2008.

          (b) Santarus will work on behalf of Depomed to provide reasonably necessary support for
managed markets with respect to the Products to enable Depomed to enter into such contracts and
other arrangements described above. For purposes of clarity, all such contracts and arrangements
supported by Santarus must be executed and administered by Depomed.

     Section 6.5 Samples

          (a) Depomed shall provide or cause to be provided to Santarus, as ordered by Santarus
hereunder, samples of the Products that are not for sale and with no fee associated
(“Samples”) to be distributed by Santarus solely in connection with the performance of
Details or as otherwise required by the rules, guidelines and policies applicable to any
Professional.

          (b) At least thirty (30) days prior to the beginning of each Agreement Quarter ending after
the Promotion Commencement Date, Santarus shall submit to Depomed a written non-binding forecast by
month of the number of units of Samples, on a Product-by-Product basis, for the twelve (12) month
period beginning with such Agreement Quarter. Such sample forecast shall be consistent with
Depomed’s Third Party Product supply agreements (as of the Effective Date, the Patheon Agreement
and the BLS Supply Agreement). Santarus shall place binding orders with Depomed for Samples, in a
mutually agreeable format, to the same extent as Depomed is required to place binding orders for
Samples with its Third Party Suppliers.

          (c) Depomed shall supply such Samples FOB Depomed’s or its designee’s warehouse, and the risk
of loss and responsibility for handling and warehousing of the Samples shall pass to Santarus upon
delivery to a carrier designated by Santarus. Santarus shall be responsible for distributing the
Samples to its Sales Representatives in a timely manner. Depomed shall invoice Santarus for each
shipment of Samples, at Depomed’s out-of-pocket cost, within thirty (30) days of the invoice date.
Santarus shall also be responsible for securing the return and appropriate disposal of and
reconciling existing Sample inventories from discontinued Santarus Sales Representatives.

          (d) Samples supplied by Depomed to Santarus shall be used by Santarus solely in performing
Details to Professionals in accordance with this Agreement. Upon its receipt of Samples, Santarus
shall be solely responsible for accountability and compliance with the PDMA for the Santarus Sales
Force, and other applicable Legal Requirements relating to such Samples or the distribution of same
by the Santarus Sales Force, and shall be responsible for adherence by its Sales Representatives to
such Legal Requirements.

          (e) Notwithstanding Sections 6.5(a) and 6.5(b) hereof, Depomed agrees to supply Samples to
Santarus during the Launch Period as mutually agreed upon based upon Santarus’ desired requirements
and Depomed’s available inventory and scheduled receipts from the Sample manufacturers.

          (f) All Samples supplied to Santarus under this Agreement with approved expiry dating of 30
months or greater will have a minimum shelf life of 24 months at time of

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shipment to Santarus, and all Samples supplied to Santarus under this Agreement with approved
expiry dating of less than 30 months will be shipped to Santarus within 6 months of the start of
manufacture.

          (g) Depomed shall promptly reimburse Santarus for the cost of any Samples purchased by
Santarus, to the extent that such Samples are unusable as a result of Depomed’s failure to
manufacture and supply such Samples in all material respects in accordance with this Agreement.

     Section 6.6 Manufacturing Matters; Inability to Supply.

          (a) Depomed shall promptly inform Santarus in the event that Depomed becomes aware of any
matters which might reasonably be expected to: (i) result in a breach of Section 6.2 hereof; or
(ii) have an adverse impact on the ability to supply trade Products or Samples in a timely manner.
In each such event, Depomed shall provide Santarus with a reasonable opportunity to participate
directly in discussions with Depomed’s Third Party manufacturers of Products concerning the
investigation and resolution of such matters. Notwithstanding the generality of the foregoing,
Depomed agrees to notify Santarus within twenty-four (24) hours after Depomed has become aware of
any event or circumstance related to the manufacture of the Product that might reasonably be
expected to impact the safety or efficacy of Product that has been released by Depomed or that
might reasonably be expected to cause such released Product to be adulterated or misbranded within
the meaning of the Act.

          (b) In the event that a Depomed Supply Failure occurs, notwithstanding its compliance with its
obligations under Section 6.1, Depomed shall diligently exercise its back-up manufacturing rights.
In the event that Depomed is not diligently exercising its back-up manufacturing rights, upon
written notice to Depomed (a “Santarus Manufacturing Notice”), Santarus shall have, and
Depomed hereby grants Santarus, exercisable only in accordance with the provisions hereof, the
right, but not the obligation, to manufacture, or have manufactured, the Product on behalf of
Depomed, at Depomed’s expense, including expenses related to the technical transfer of the Product,
and Depomed will provide reasonable assistance to Santarus in connection therewith, including by
transferring or licensing to Santarus all Technology necessary or useful to give Santarus the
capability of manufacturing the Product so that Santarus can undertake manufacture of the Product.
Any such Product manufactured by Santarus will be sold by Depomed in accordance with this
Agreement. [***].

     Section 6.7 Third Party Agreements

          (a) The parties acknowledge that Depomed is subject to certain rights and obligations under
the BLS Agreements. Depomed shall not amend, terminate or cause to be terminated any of the BLS
Agreements (or any other agreement between Depomed and BLS concerning rights to, or the supply or
marketing of, a Product in the Territory) without the prior written consent of Santarus, which
consent shall not to be unreasonably withheld, delayed or conditioned; provided that Depomed shall
have the right to amend any such BLS Agreement without the consent of Santarus if such amendment
does not materially and adversely affect (i) Depomed’s ability to maintain Regulatory Approval for
the applicable Product, (ii) Depomed’s ability to purchase the applicable Product in commercial
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Agreement, (iii) Santarus’ economic benefits hereunder, including the BLS Fees or COGS, or
(iv) the applicable lead-time and forecasting requirements. In the event of any failure by BLS to
timely deliver and supply the 1000mg Product under the BLS Supply Agreement in accordance with the
terms thereof, Depomed shall promptly pursue any recourse it may have under such BLS Agreement to
remedy such failure. In such event, Depomed’s liability to Santarus for such failure shall be
limited to the recourse that Depomed receives, if any, from BLS, and any such failure on the part
of BLS shall not be a breach or default of this Agreement by Depomed (except to the extent that any
such failure by BLS arises directly from Depomed’s failure to comply with its obligations,
including paying amounts due, under the BLS Supply Agreement). If requested by Santarus and after
consultation with Santarus, Depomed will request that BLS agree to modify certain provisions of the
BLS Supply Agreement relating to ordering and forecasting matters.

          (b) The parties acknowledge that Depomed is subject to certain rights and obligations under
the Patheon Agreement. Depomed shall not amend, terminate or cause to be terminated the Patheon
Agreement (or any other agreement between Depomed and Patheon concerning rights to, or the supply
or marketing of, a Product in the Territory) without the prior written consent of Santarus, which
consent shall not to be unreasonably withheld, delayed or conditioned; provided that Depomed shall
have the right to amend the Patheon Agreement without the consent of Santarus if such amendment
does not materially and adversely affect (i) Depomed’s ability to maintain Regulatory Approval for
the applicable Product (ii) Depomed’s ability to purchase the applicable Product in commercial
quantities under the Patheon Agreement, (iii) Santarus’ economic benefits hereunder, or (iv) the
applicable lead-time and forecasting requirements. In addition, upon Santarus’ request, Depomed
shall exercise any of its rights under the Patheon Agreement reasonably necessary to ensure
continued supply of the applicable Product in the Territory.

ARTICLE VII

COMPENSATION

     Section 7.1 Santarus Payments

          (a) In consideration for Santarus’ future share of the Gross Margin in respect of the current
500mg Product Net Sales established by Depomed prior to the Effective Date, Santarus shall pay to
Depomed a one-time signing payment of Twelve Million Dollars ($12,000,000), payable on the
Effective Date.

          (b) In consideration for the rights granted to Santarus hereunder, Santarus shall pay to
Depomed the following one-time milestone payments:

               (i) [***] Dollars ($[***]) when aggregate Promotion Net Sales in any calendar year during the
Term exceed [***] Dollars ($[***]);

               (ii) [***] Dollars ($[***]) when aggregate Promotion Net Sales in any calendar year during the
Term exceed [***] Dollars ($[***]);

               (iii) [***] Dollars ($[***]) when aggregate Promotion Net Sales in any calendar year during
the Term exceed [***] Dollars ($[***]); and

 

			
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               (iv) [***] Dollars ($[***]) when aggregate Promotion Net Sales in any calendar year during the
Term exceed [***] Dollars ($[***]).

Payments under Section 7.1(b) shall be made within thirty (30) days after receiving from Depomed a
statement pursuant to Section 7.2(b) indicating that such aggregate Promotion Net Sales levels have
been achieved.

     Section 7.2 Promotion Fees

          (a) In consideration for Santarus’ performance of its obligations under this Agreement,
beginning with the Agreement Month ending on October 31, 2008, Depomed shall pay promotion fees
(the “Promotion Fees”) to Santarus as follows:

               (i) Beginning on the Promotion Commencement Date and continuing for [***] Agreement Quarters
thereafter, Depomed shall pay to Santarus [***] percent ([***]%) of the Gross Margin;

               (ii) Thereafter during the Term, Depomed shall pay to Santarus [***] [***] percent ([***]%) of
the Gross Margin;

               (iii) Beginning on the Promotion Commencement Date and continuing for [***] Agreement Quarters
thereafter, Depomed shall pay to Santarus [***] percent ([***]%) of the Depomed Gross Margin; and

               (iv) Thereafter during the Term, Depomed shall pay to Santarus [***] percent ([***]%) of the
Depomed Gross Margin.

          (b) Within [***] days following the end of each Agreement Month during the Term, Depomed shall
provide Santarus with a statement in a mutually agreeable format setting forth:

               (i) the aggregate number of units of Product (on a Product-by-Product basis) sold to customers
in the Territory during such Agreement Month;

               (ii) Net Sales during such Agreement Month;

               (iii) Depomed Net Sales during such Agreement Month, if any;

               (iv) BLS Fees during such Agreement Month;

               (v) COGS during such Agreement Month;

               (vi) Medical Affairs Expenses during such Agreement Month; and

               (vii) Gross Margin for such Agreement Month.

          (c) Within [***] days following the end of each Agreement Month (or if later, within two (2)
business days after such information becomes available to Depomed) during the

 

			
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Term, Depomed shall provide Santarus with a statement setting forth the aggregate number of
units of Product sold to customers in the Territory during such Agreement Month.

          (d) Except as expressly specified otherwise, any amounts payable by one party to the other
party in respect of any Agreement Month pursuant to this Agreement shall be paid within thirty (30)
days after the end of such Agreement Month. Statements required to be provided to Santarus under
this Section 7.2 shall be emailed to such email addresses as Santarus may from time to time
designate in writing.

          (e) In the event that Promotion Fees payable to Santarus under this Agreement for a particular
period is a negative number, Santarus will not be required to make a payment to Depomed equal to
the negative Promotion Fees, and Depomed shall credit an amount equal to any negative Promotion
Fees against any future payments due to Santarus under this Agreement.

     Section 7.3 Maintenance of Records

          (a) Each party agrees to keep, for a period of at least three years after the date of entry
(or such longer period as may be required by Legal Requirements) full and accurate records
maintained in accordance with such party’s accounting practices in sufficient detail to enable a
Third Party to accurately calculate (i) in the case of Depomed, COGS, BLS Fees, Medical Affairs
Expenses, Net Sales and Depomed Net Sales reported, payments to be made under this Agreement and
Details completed by the Depomed Sales Force, if any, and (ii) in the case of Santarus,
Advertising/Marketing/Educational Expenses, Sales Force Expenditures (i.e., Details completed by
the Santarus Sales Force, including as to each Detail whether it was a P1 Detail or P2 Detail) and,
with respect to the first twelve (12) months following the Promotion Commencement Date, Details,
including as to each Detail whether it was a P1 Detail or P2 Detail, completed by the Santarus
Sales Force. Upon thirty (30) days prior written notice, such records shall be made available by
the audited party for audit by an independent certified public accounting firm designated by the
other party and reasonably acceptable to the party whose records are to be examined. The auditor
will only examine such books and records during business hours but not more than once each fiscal
year while this Agreement remains in effect and for three years thereafter in order to verify
expenses, COGS, BLS Fees, Medical Affairs Expenses, Gross Margin, Net Sales, Depomed Net Sales or
such Details completed, or payments due under this Agreement. The fees and expenses of the auditor
performing such verification examination shall be borne by the party conducting the verification;
provided, however, that if any verification reveals that the audited party has
reported incorrectly, and the amount of such discrepancy is at least five percent (5%) of the
aggregate amount that should have been reported for the period examined, then the audited party
shall pay the entire amount of the fees and expenses for such verification.

          (b) Each party shall have the right, upon ten (10) business days’ prior written notice, to
audit all applicable records of the other party (other than records described in Section 7.3(a))
for the purpose of determining the audited party’s compliance with the obligations set forth in
this Agreement, including with respect to training programs and certifications and records and
reports for the Samples. The audit will be conducted during normal business hours, at convenient
times. Any such audit may be conducted no more than once each fiscal year. The fees and expenses
of the auditing party shall be borne by such party. This right to audit shall extend

33

 

throughout
the term of this Agreement and for one year after expiration or termination of this Agreement.

          (c) Whenever in this Agreement a party is required to report its costs, or is entitled to
receive or obligated to make a payment based on its costs, such costs (including COGS, Medical
Affairs Expenses and Advertising/Marketing/Educational Expenses) shall be determined in accordance
with generally accepted accounting principles as applied in the United States (“GAAP”),
consistent with the terms of this Agreement. The term “out-of-pocket” costs or expenses means cost
or expenses paid to Third Parties and shall not include any fixed costs or expenses, personnel
costs or expenses, overhead costs or expenses, or other costs or expenses of a similar nature.

     Section 7.4 Payments

     Any payments required to be made by either party under this Agreement shall be made in United
States dollars via wire transfer of immediately available funds to such bank account as the other
party shall designate in writing prior to the date of such payment. All payments shall bear
interest from the date due until paid at a rate equal to the prime rate effective for the date that
payment was due plus eight percent (8%), as quoted by the Wall Street Journal, New York Edition, on
the date such payment was due, or, if less, the maximum rate permitted by applicable law.

     Section 7.5 Tail Promotion Fees

     Following the termination of this Agreement at the conclusion of the initial three (3) years
of the Term or thereafter, for each of the [***] full calendar quarters following such termination,
Depomed shall pay to Santarus an amount equal to [***] percent ([***]%) of aggregate Net Sales for
each such quarter (excluding any Depomed Net Sales as of the effective termination date).

     Section 7.6 Depomed Percentage

     If, prior to or following the commencement of Product Promotion by the Depomed Sales Force,
either party reasonably determines that the Prescriber Data fails to, or is likely to fail to,
reasonably accurately reflect the portion of Net Sales attributable to prescriptions written by
Professionals on the Depomed Physician List (whether as a result of Professionals opting out of the
American Medical Association’s Physician Masterfile database or otherwise), the parties shall
negotiate in good faith with respect to implementing a revised manner of measuring the portion of
Net Sales attributable to prescriptions written by Professionals on the Depomed Physician List, and
reflect any such modification in the definition of “Depomed Percentage” and the “Baseline
Percentage.” The parties shall consider in their discussions any other customary manner of
determining similar information as may arise in light of Professionals opting out of the
American Medical Association’s Physician Masterfile database or otherwise.

ARTICLE VIII

TERM AND TERMINATION

     Section 8.1 Term

 

			
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     The term of this Agreement shall commence on the Effective Date and shall continue, unless
terminated sooner in accordance with this Article VIII, until the expiration of the last-to-expire
patent or patent application with a Valid Claim in the Territory covering a Product or its uses
(the “Term”).

     Section 8.2 Early Termination

     (a) Depomed may terminate this Agreement, at any time after providing sixty (60) days’ prior
written notice, in the event that Santarus fails to meet its obligations under Section 4.1(b), (c)
or (d) with respect to minimum Promotion obligations. Notwithstanding the foregoing, Santarus
shall have an opportunity to cure any such breach within ninety (90) days following written notice
from Depomed provided that: (i) Santarus has complied with at least ninety percent (90%) of the
aggregate obligations in effect under such Sections during the relevant time period; and (ii) no
other breach of the obligations set forth in Sections 4.1(b), (c) or (d) has occurred within the
prior twelve (12) month period.

     (b) Santarus may terminate this Agreement for any reason upon ninety (90) days’ prior written
notice; provided, however, that the effective date for such termination may not occur prior to
eighteen (18) months following the Effective Date.

     (c) Santarus may terminate this Agreement immediately upon written notice to Depomed in the
event of (i) any action taken or objection raised by any Governmental Authority that prevents
Santarus from performing its obligations under this Agreement or otherwise makes such activity
unlawful, (ii) loss of a Product’s market exclusivity in the Territory (whether through the
introduction of a generic product or otherwise), or (iii) Depomed’s failure to supply Product
reasonably necessary to meet trade demand for the Product and consistent with the then-current
Volume Forecast, which failure continues for a period of three (3) months or longer.

     (d) Either party shall have the right to terminate this Agreement immediately in the event of
a large scale recall or withdrawal of the Product from the Territory resulting from a significant
safety risk inherent in the Product and not due to tampering, a remediable
manufacturing problem, or other defect that can be cured with respect to Products manufactured
after such risk is discovered.

     (e) Depomed shall have the right to terminate this Agreement upon one hundred eighty (180)
days’ prior written notice if Santarus fails to timely deliver the written confirmation related to
Sales Force Expenditures required by Section 4.5(e) (provided that if such failure is cured within
thirty (30) days following receipt of Depomed’s notice, such notice with respect to such
termination shall be null and void).

     Section 8.3 Termination for Cause

     Either party may terminate this Agreement, effective at any time after providing sixty (60)
days written notice and an opportunity to cure during such sixty (60)-day period (ninety (90) days
in the case of a breach by Depomed of Section 6.1), in the event of a material failure of the other
party to comply with its material obligations contained in this Agreement. If such cure is
effected, such notice with respect to such termination shall be null and void.

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     Section 8.4 Termination for Bankruptcy or Force Majeure

     To the extent permitted by law, each party will have the right to terminate this Agreement
immediately upon notice to the other party, in the event of either of the following:

          (a) The entry of an order for relief under the United States Bankruptcy Code (or any
corresponding remedy under successor laws) against the other party; the filing of a petition by or
against the other party under any bankruptcy, insolvency or similar law (which petition is not
dismissed within sixty (60) days after filing), except Chapter 11 of the United States Bankruptcy
Code or any successor statute that permits a corporation to continue its operation while protecting
it from creditors; the appointment of a receiver for the other party’s business or property; or the
other party’s making of a general assignment for the benefit of its creditors; or

          (b) Any Force Majeure Event affecting the other party beyond the other party’s control which
lasts for a period of at least six (6) months and which is of sufficient intensity to interrupt or
prevent the carrying out of such other party’s material obligations under this Agreement during
such period.

Notwithstanding the occurrence of any of the events specified in subsection (a) of this Section
8.4, the parties acknowledge and agree that, to the extent Section 365(n) of the United States
Bankruptcy Code applies to this Agreement, the non-insolvent party may elect to retain and exercise
the rights granted to it hereunder with respect to the intellectual property owned or controlled by
the insolvent party.

     Section 8.5 Force Majeure

     Any Force Majeure Event of the type described in Section 16.7 affecting a party hereunder
shall entitle the other party hereto, at any time after the expiry of the period of six (6) months
specified therein and upon sixty (60) days written notice given after such six (6)-month period
(such notice being null and void if the Force Majeure Event is
discontinued during such sixty (60)-day period), in addition to the right to terminate this Agreement under Section 8.4, the
right to continue the Agreement in full force and effect without modification. In no circumstances
will either party be liable to the other for its inability to perform under this Agreement due to
any such Force Majeure Event.

     Section 8.6 Effect of Termination

          (a) No additional payment obligations arising under Article VII hereof shall accrue after the
date of expiration or termination of this Agreement except as set forth in Section 7.5;
provided, however, that expiration or termination of this Agreement shall not
relieve either party of any obligations accruing prior to such expiration or termination. Certain
provisions of this Agreement by their terms continue after the expiration or termination of this
Agreement, including Sections 3.5, 4.4(d), 5.5, 5.6, 7.3, 7.4, 7.5, this Section 8.6, 15.1 and
Articles XI and XII and solely with respect to the reports required for the Final Agreement
Quarter, Sections 4.5(g) and 4.6(a). In addition, any other provisions required to interpret and
enforce the parties’ rights and obligations under this Agreement shall also survive, but only to
the extent required for the full observation and performance of this Agreement.

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          (b) Except as indicated in Section 8.5, expiration or termination of this Agreement shall be
without prejudice to (i) any remedies which any party may then or thereafter have hereunder or at
law or in equity; and (ii) a party’s right to receive any payment accrued under the Agreement prior
to the termination date but which became payable thereafter; and (iii) either party’s right to
obtain performance of any obligations provided for in this Agreement which survive termination by
their terms or by a fair interpretation of this Agreement. Except as expressly set forth herein,
the rights to terminate as set forth herein shall be in addition to all other rights and remedies
available under this Agreement, at law, or in equity or otherwise.

          (c) Upon the expiration or termination of this Agreement pursuant to this Article VIII, each
party shall promptly transfer and return to the other party all Proprietary Information of the
other party (provided that each party may keep one copy of such Proprietary Information for
archival purposes only). Upon the expiration or termination of this Agreement, Santarus shall, if
requested by Depomed, provide to Depomed all Promotional Materials in Santarus’ possession
(including electronic files of all Promotional Materials) at Santarus’ out-of-pocket cost for
printing and delivering such materials; provided, however, that Santarus shall,
unless otherwise requested by Depomed, destroy any printed copies of Promotional Materials bearing
the Santarus Trademarks and may remove the Santarus Trademarks from electronic files of Promotional
Materials.

          (d) Upon the expiration or termination of this Agreement pursuant to this Article VIII other
than pursuant to Depomed’s termination under Sections 8.3 or 8.4, Depomed may, but is not obligated
to, purchase from Santarus, at Santarus’ cost (as determined pursuant to this Agreement) all
remaining Samples; provided, however, that Depomed shall be obligated to purchase such Samples from
Santarus in the event that this Agreement is terminated pursuant to Section 8.3 for Depomed’s
breach.

ARTICLE IX

REPRESENTATIONS AND WARRANTIES

     Section 9.1 Representations and Warranties of Depomed

     Depomed hereby represents and warrants to Santarus as of the date hereof as follows:

     (a) Organization. Depomed (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of California, and (ii) has all necessary corporate
power and corporate authority to own its properties and to conduct its business, as currently
conducted.

     (b) Authorization. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby are within the corporate power of Depomed, have been duly
authorized by all necessary corporate proceedings of Depomed, and this Agreement has been duly
executed and delivered by Depomed.

     (c) No Conflict. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not: (i) conflict with or result in a breach of any
provision of Depomed’s organizational documents; (ii) result in a material breach of

37

 

any material
agreement to which Depomed is party; (iii) result in a violation of any Order to which Depomed is
subject; (iv) require Depomed to obtain any material approval or consent from any Governmental
Authority or Third Party other than those consents and approvals which have been obtained prior to
the date hereof; or (v) violate any Legal Requirement applicable to Depomed in any material
respect.

     (d) Enforceability. This Agreement constitutes the valid and binding obligation of
Depomed, enforceable against Depomed in accordance with its terms, subject to bankruptcy,
reorganization, insolvency and other similar laws affecting the enforcement of creditors’ rights in
general and to general principles of equity (regardless of whether considered in a proceeding in
equity or an action at law).

     (e) Broker. Depomed has not employed any broker, finder, or agent with respect to
this Agreement or the transactions contemplated hereby.

     (f) Depomed Intellectual Property. To the knowledge of Depomed, the Promotion and
sale of Product in the Territory in accordance with this Agreement will not infringe any patents,
trademarks or other intellectual property rights of any Third Party; provided, that Depomed makes
no representation as to the Santarus Trademarks. Depomed has the right, power and authority to
grant the licenses granted by it hereunder, including the right, power and authority to license to
Santarus, pursuant to Section 6.6, all Technology necessary for the manufacture of the Products.
Other than [***]: (i) Depomed has not received any written claim or demand from any Third Party
alleging that any infringement, violation or misappropriation of such Third Party’s intellectual
property rights has occurred as a result of the manufacture, use, offer for sale, sale or
importation of any Product in the Territory; (ii) Depomed is not aware of any actual, alleged or
threatened infringement, violation or misappropriation by a Third Party of any Depomed intellectual
property rights covering a Product or its uses; and (iii) Depomed has not
received any written claim or demand from any Third Party alleging invalidity or
unenforceability of any patents or patent applications owned or licensed by Depomed covering a
Product or its uses.

     (g) Litigation. There is no litigation, arbitration proceeding, governmental
investigation, action or claims of any kind, pending or, to the knowledge of Depomed, threatened,
by or against Depomed, BLS, Patheon or any of their respective Affiliates relating to the Products
or which would reasonably be expected to materially affect Depomed’s ability to perform its
obligations hereunder.

     (h) Documentation. Depomed has made available to Santarus copies of substantially all
clinical data and reports, medical information, competitive information, marketing research,
agreements and other documentation related to the Products in Depomed’s possession that have been
requested by Santarus in the course of Santarus’ due diligence investigation of the Products.

     (i) Supply. Depomed currently has access to sufficient supplies of Products to
satisfy the manufacturing obligations required by it under this Agreement. All Products will be
manufactured with reasonable due care and in conformity with the NDAs, current generally

 

			
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accepted standards and procedures for manufacturing the Products, cGMP and all other
applicable Legal Requirements.

     (j) Generic Drug Act. Pursuant to the Generic Drug Enforcement Act of 1992, 21 U.S.C.
§ 335a, as may be amended or supplemented (the “Generic Drug Act”),

               (i) none of Depomed, its Affiliates, or any Person under its direction or control is currently
debarred by the FDA under the Generic Drug Act;

               (ii) none of Depomed, its Affiliates, or any Person under its direction or control is
currently using or will use in any capacity in connection with the Products any Person that is
debarred by FDA under the Generic Drug Act; and

               (iii) there have been no convictions of Depomed, its Affiliates, or any Person under its
direction or control for any of the types of crimes set forth in the Generic Drug Act within the
five years prior to the Effective Date.

     (k) Legal Requirements. None of Depomed, its Affiliates, or any Person under its
direction or control is currently excluded from a federal or state health care program under
Sections 1128 or 1156 of the Social Security Act, 42 U.S.C. §§ 1320a-7, 1320c-5 as may be amended
or supplemented. None of Depomed, its Affiliates, or Person under its direction or control is
otherwise currently excluded from contracting with the federal government. None of
Depomed, its Affiliates, or Person under its direction or control is otherwise currently
excluded, suspended, or debarred from any federal or state program. Depomed shall immediately
notify Santarus if, at any time during the Term, Depomed, its Affiliates, or any Person under its
direction or control is convicted of an offense that would subject it or Santarus to exclusion,
suspension, or debarment from any federal or state program. To Depomed’s knowledge, the
manufacture, use, offer for sale, sale and importation of the Products in the Territory has been in
material compliance with all Legal Requirements.

     (l) NDA Acquisition. Depomed has not committed fraud in relation to the filing or
acquisition of an NDA or used unfair methods of competition in connection with such filing or
acquisition, including, in either case, in connection with any data supplied by Depomed to the FDA.
The parties acknowledge that a breach of this representation is a material failure of a material
obligation and is not subject to cure. The data regarding the efficacy and safety of the Products
contained in the NDAs and other regulatory filings submitted to the FDA in support of marketing
approval of the Products are complete and accurate in all material respects. The NDAs and other
regulatory filings submitted to the FDA in support of marketing approval for the Products do not
contain any material misstatement of a material fact related to safety or efficacy nor omit to
state any material fact in Depomed’s possession related to safety or efficacy.

     (m) BLS Agreements. Depomed is not in material breach of any BLS Agreement and has
not submitted to BLS any notice (written or oral) to the effect that BLS is in breach of any BLS
Agreement. Depomed has not received from BLS any notice (written or oral) to the effect that
Depomed is in breach of any BLS Agreement. Each of the BLS Agreements is legal, valid, binding,
enforceable and in full force and effect in all material respects.

39

 

     (n) Patheon Agreement. Depomed is not in material breach of the Patheon Agreement and
has not submitted to Patheon any notice (written or oral) to the effect that Patheon is in breach
of the Patheon Agreement. Depomed has not received from Patheon any notice (written or oral) to
the effect that Depomed is in breach of the Patheon Agreement. The Patheon Agreement is legal,
valid, binding, enforceable and in full force and effect in all material respects.

     (o) Inventory Levels. Since January 1, 2008, Depomed has not (i) materially altered
its distribution practices or terms with respect to the Products (other than pricing increases in
the ordinary course of business), (ii) altered its activities and practices with respect to
inventory levels of the Products maintained at the wholesale, chain, institutional or retail levels
in any material respect, or (iii) experienced abnormally high levels of returns of the Products
when compared to historical norms.

     Section 9.2 Representations and Warranties of Santarus

     Santarus hereby represents and warrants to Depomed as of the date hereof as follows:

          (a) Organization. Santarus (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware, and (ii) has all necessary corporate
power and corporate authority to own its properties and to conduct its business, as currently
conducted.

          (b) Authorization. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby are within the corporate power of Santarus, have been duly
authorized by all necessary corporate proceedings of Santarus, and this Agreement has been duly
executed and delivered by Santarus.

          (c) No Conflict. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby do not: (i) conflict with or result in a breach of any
provision of Santarus’ organizational documents; (ii) result in a material breach of any material
agreement to which Santarus is party; (iii) result in a violation of any Order to which Santarus is
subject; (iv) require Santarus to obtain any material approval or consent from any Governmental
Authority or Third Party other than those consents and approvals which have been obtained prior to
the date hereof; or (v) violate any Legal Requirement applicable to Santarus in any material
respect.

          (d) Enforceability. This Agreement constitutes the valid and binding obligation of
Santarus, enforceable against Santarus in accordance with its terms, subject to bankruptcy
reorganization, insolvency and other similar laws affecting the enforcement of creditors’ rights in
general and to general principles of equity (regardless of whether considered in a proceeding in
equity or an action at law).

          (e) Broker. Santarus has not employed any broker or finder with respect to this
Agreement or the transactions contemplated hereby.

          (f) Santarus Trademarks. To the knowledge of Santarus, the use of the Santarus
Trademarks to Promote and sell Products in the Territory in accordance with this

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Agreement will not
infringe any trademarks or other intellectual property rights of any Third Party.

          (g) Litigation. There is no litigation, arbitration proceeding, governmental
investigation, action or claims of any kind, pending or, to the knowledge of Santarus, threatened,
by or against Santarus or any of its Affiliates relating to the Products or which would reasonably
be expected to materially affect Santarus’ ability to perform its obligations hereunder.

          (h) Generic Drug Act. Pursuant to the Generic Drug Act,

               (i) none of Santarus, its Affiliates, or any Person under its direction or control is
currently debarred by the FDA under the Generic Drug Act;

               (ii) none of Santarus, its Affiliates, or any Person under its direction or control is
currently using or will use in any capacity in connection with the Products any Person that is
debarred by FDA under the Generic Drug Act; and

               (iii) there have been no convictions of Santarus, its Affiliates, or any Person under its
direction or control for any of the types of crimes set forth in the Generic Drug Act within the
five years prior to the Effective Date.

          (i) Legal Requirements. None of Santarus, its Affiliates, or any Person under its
direction or control is currently excluded from a federal or state health care program under
Sections 1128 or 1156 of the Social Security Act, 42 U.S.C. §§ 1320a-7, 1320c-5 as may be amended
or supplemented. None of Santarus, its Affiliates, or any Person under its direction or control is
otherwise currently excluded from contracting with the federal government. None of Santarus, its
Affiliates, or Person under its direction or control is otherwise currently excluded, suspended, or
debarred from any federal or state program. Santarus shall immediately notify Depomed if, at any
time during the Term, Santarus, its Affiliates, or any Person under its direction or control is
convicted of an offense that would subject it or Depomed to exclusion, suspension, or debarment
from any federal or state program.

     Section 9.3 Depomed Disclaimer

     EXCEPT AS EXPRESSLY PROVIDED HEREIN, DEPOMED DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, WITH REGARD TO THE PRODUCTS, INCLUDING THE WARRANTY OF MERCHANTABILITY AND WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE.

     Section 9.4 Santarus Disclaimer

     EXCEPT AS EXPRESSLY PROVIDED HEREIN, SANTARUS DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY AND WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE.

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ARTICLE X

INTELLECTUAL PROPERTY MATTERS

     Section 10.1 Intellectual Property Prosecution and Maintenance

     Depomed shall use commercially reasonable efforts to prosecute and maintain the Depomed
intellectual property in the Territory related to any Product Promoted pursuant to this Agreement
(a “Promoted Product”) or its use, including patents, the Depomed Trademarks and any
copyrights associated with the Promotional Materials (subject, in the case of the 1000mg Product,
to Depomed’s rights in respect of intellectual property under the BLS Agreements). Depomed shall
make available to Santarus (or its designated counsel) copies of such patent application files and
shall make available to Santarus (or its designated counsel) all office actions relating to any
Promoted Product wherein at least one (1) claim is directed to the Promoted Product in those patent
applications, and copies of material correspondence with the U.S. Patent and Trademark Office
relating to such patent applications to the extent they relate to the Promoted Product or its use.
Santarus shall have the right to comment upon the prosecution of such patent applications (subject,
in the case of the 1000mg Product, to Depomed’s rights in respect of intellectual property under
the BLS Agreements). Depomed shall, in good faith, consider such comments of Santarus. In
addition, Depomed shall keep Santarus reasonably informed regarding material developments relating
to the prosecution, maintenance or enforcement of Depomed’s intellectual property rights related to
any Promoted Product outside the Territory that could reasonably be expected to have a material
impact on Depomed’s intellectual property rights related to the Promoted Product in the Territory.

     Section 10.2 Third Party Competition

     Nothing in this Agreement shall limit or restrict Depomed’s ability to grant non-exclusive
patent licenses to patents and patent applications included within the Technology or otherwise
covering a Product in connection with the settlement of any pending, threatened or contemplated
patent litigation with respect to [***] commercialized in the Territory prior to the Effective Date
(each such license, a “Patent License”). However, in recognition of the parties’ agreement
to exclusively Promote Products, in accordance with the terms and conditions of this Agreement,
Depomed agrees that if Depomed or any Affiliate thereof grants to any Affiliate or Third Party a
license, covenant not to sue, right of reference, right of supply, other intellectual property
right or other settlement (in any case, other than Patent Licenses and covenants not to sue and
other rights in connection with the grant of Patent Licenses for [***] commercialized in the
Territory prior to the Effective Date) related to the manufacture, use, offer for sale, sale,
importation, marketing or promotion of any Product, including any authorized generic version of any
Product covered by any NDA, then Depomed shall obtain Santarus’ consent (not to be unreasonably
withheld) in advance of the grant of any such license, covenant not to sue, right of reference,
right of supply, other intellectual property right or other settlement, and as part of such consent
the parties shall negotiate in good faith financial adjustments to this Agreement adequate to
compensate Santarus for any payments made by Santarus prior to such grant or other settlement
(including signing and any milestone payments) and any lost market share attributable to sales of
the product by or on behalf of such Third Party or Affiliate, taking into account the consideration
received by Depomed or its Affiliates for the grant of such rights or other settlement.

 

			
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     Section 10.3 Infringement

          (a) If either party shall learn of a claim or assertion that the manufacture, use or sale of a
Promoted Product in the Territory infringes or otherwise violates the intellectual property rights
of any Third Party or that any Third Party violates the intellectual property rights owned or
Controlled by (i) Depomed in a Promoted Product and the Depomed Trademarks in the Territory or (ii)
Santarus in the Santarus Trademarks, then the party becoming so informed shall promptly, but in all
events within fifteen (15) days thereof, notify the other party to this Agreement of the claim or
assertion. In the event Depomed receives a notice under Paragraph IV of the U.S. Federal Drug
Price Competition and Patent Term Restoration Act of 1984, as amended, also known as the
Hatch-Waxman Act, with respect to any Promoted Product, Depomed shall provide Santarus with written
notice of such Paragraph IV notice within two (2) business days (each, a “Paragraph IV
Notice”).

          (b) If warranted in the opinion of Depomed, after consultation with the JCC, Depomed shall
take such legal action (“Enforcement Action”) as is advisable in Depomed’s opinion to
restrain infringement of such Depomed patent rights related to any Product or the Depomed
Trademarks in the Territory. Santarus shall cooperate fully with, and as reasonably requested by,
Depomed in any Enforcement Action, and Depomed shall reimburse Santarus for its out-of-pocket
expenses incurred in providing such cooperation. Santarus may be represented by counsel of its own
selection at its own expense in any Enforcement Action. If (i) Depomed elects in writing not to
bring or defend an Enforcement Action with respect to any Product in the Territory, (ii) within
ninety (90) days following a written request by Santarus to do so (provided that in the case of a
Paragraph IV Notice, Depomed shall confirm in writing its election to bring such Enforcement Action
no later than twenty (20) days following receipt of the Paragraph IV Notice), or (iii) Depomed
fails to bring or defend an Enforcement Action or take other reasonable action to protect the
Depomed patent rights related to any Product or the Depomed Trademarks in the Territory from such
infringement, or to abate such infringement, then, in compliance with the BLS Manufacturing
Transfer Agreement or other in-license agreement with respect to applicable Product patent rights
licensed from a Third Party, if any, Santarus shall have the right, at its sole discretion, to
institute an Enforcement Action in its own name using counsel of its choice, at its own expense,
and with the right to control the course of such Enforcement Action (and Depomed shall provide all
reasonable assistance, other than financial, to Santarus for such Enforcement Action, at Santarus’
expense, including joining such Enforcement Action if necessary to maintain the Enforcement Action,
and Depomed shall have the right to join and participate in the Enforcement Action whether or not
such joinder is requested by Santarus) (the “Santarus Step-In Rights”); provided, however,
that (i) the Santarus Step-In Rights shall not apply to the extent the Enforcement Action relates
to [***]; and (ii) Santarus shall obtain Depomed’s consent (not to be unreasonably withheld) in
advance of the grant of any license, covenant not to sue, right of reference, right of supply,
other intellectual property right or other settlement in any Enforcement Action. Any recovery
received as a result of any Enforcement Action shall be used first to reimburse the parties for
their costs and expenses (including attorneys’ and professional fees) incurred in connection with
such Enforcement Action (and not previously reimbursed). Of any remaining amounts, the amount (if
any) which is required to be paid to BLS pursuant to the BLS Agreements or to any other licensors
of the applicable patent rights or Depomed Trademarks under the terms of the respective in-license
agreement, if any, shall then be paid to BLS or such

 

			
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portions.

43

 

other licensor, if any, and any amounts remaining thereafter shall be shared seventy-five percent
(75%) to Santarus and twenty-five percent (25%) to Depomed.

          (c) If warranted in the opinion of Santarus, Santarus shall take such legal action as is
advisable in Santarus’ opinion to restrain such infringement of the Santarus Trademarks. Depomed
shall cooperate fully with, and as requested by, Santarus in Santarus’ attempt to restrain such
infringement, and Santarus shall reimburse Depomed for its out-of-pocket expenses incurred in
providing such cooperation. Depomed may be represented by counsel of its own selection at its own
expense in any suit or proceeding brought to restrain such infringement, but Santarus shall have
the right to control the suit or proceeding.

ARTICLE XI

INDEMNIFICATION; LIMITS ON LIABILITY

     Section 11.1 Indemnification

     Each party will defend, at its own expense, indemnify and hold harmless the other party and
its Affiliates, and their respective directors, officers, employees, agents, Sales Representatives
and other representatives, from and against any and all damages, liabilities, losses, costs, and
expenses, including reasonable attorneys’ fees, arising out of any Third Party claim, suit or
proceeding brought against the other party or its Affiliates, and their respective directors,
officers, employees, agents, Sales Representatives and other representatives, to the extent such
claim, suit, or proceeding is based upon a claim arising out of or relating to (i) any breach or
violation of, or failure to perform, any covenant or agreement made by such indemnifying party in
this Agreement, unless waived in writing by the indemnified party; (ii) any breach of the
representations or warranties made by such indemnifying party in this Agreement; or (iii) the
negligence or willful misconduct of the indemnifying party, except (under any of (i) or (ii)) to
the extent arising out of the breach, violation, failure, negligence or willful misconduct of the
indemnified party. In addition, Depomed will defend, at its own expense, indemnify and hold
harmless Santarus and its Affiliates, and their respective directors, officers, employees, agents,
Sales Representatives and other representatives, from and against any and all damages, liabilities,
losses, costs, and expenses, including reasonable attorneys’ fees, arising out of any Third Party
claim, suit or proceeding brought against Santarus or its Affiliates, or their respective
directors, officers, employees, agents, Sales Representatives and other representatives, to the
extent such claim, suit, or proceeding is based upon a claim arising out of or relating to (v) any
sale, use, Promotion or other commercialization of a Product by Depomed or any Third Party,
including King Pharmaceuticals, Inc., prior to the Promotion Commencement Date; (w) any actions of
the Depomed Sales Force, including any false or misleading representations to Professionals,
customers or others regarding Santarus or the Products; (x) any agreement between Depomed and BLS;
(y) any agreement between Depomed and Patheon; or (z) any claim made by any Person that the
manufacture, use or sale of the Products infringes or misappropriates the patent, trademark, or
other intellectual property rights of such Person, except with respect to any claim relating to the
Santarus Trademarks; or (z) any Product liability claim made by any person with respect to the
Product, except to the extent liability is based on a breach by Santarus of Section 4.2. Each
party agrees that it shall promptly notify the other in writing of any such claim or action and
give the indemnifying party full information and assistance in connection therewith. The
indemnifying party shall have the sole right to control the defense and the sole right to settle or
compromise any

44

 

such claim or action, except that the prior written consent of the other party shall be
required in connection with any settlement or compromise which could (i) place any obligation on or
require any action of such other party; (ii) admit or imply any liability or wrongdoing of such
other party; or (iii) adversely affect the goodwill or public image of such other party.
Notwithstanding the foregoing, the indemnified party may participate therein through counsel of its
choice, but the cost of such counsel shall be borne solely by the indemnified party. The
provisions of this Section 11.1 shall survive termination of this Agreement for the applicable
statute of limitations (except as to claims as to which a party has notified the other in writing
prior to the expiration of the applicable statute of limitations, in which event, the indemnifying
party’s obligations under this Section 11.1 shall survive with respect to any such claim until its
resolution pursuant to the terms of this Article XI).

     Section 11.2 Consequential Damages

     NEITHER SANTARUS NOR DEPOMED (WHICH FOR THE PURPOSES OF THIS SECTION 11.2 SHALL INCLUDE THEIR
RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS) SHALL HAVE ANY LIABILITY TO THE
OTHER FOR ANY PUNITIVE DAMAGES, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES, RELATING TO
OR ARISING FROM THIS AGREEMENT, EVEN IF SUCH DAMAGES MAY HAVE BEEN FORESEEABLE; PROVIDED THAT SUCH
LIMITATION SHALL NOT APPLY IN THE CASE OF EITHER PARTY’S INDEMNIFICATION OBLIGATIONS UNDER SECTION
11.1 OR IN THE CASE OF FRAUD OR WILLFUL MISCONDUCT.

ARTICLE XII

CONFIDENTIALITY AND PUBLICITY

     Section 12.1 Proprietary Information

     Pursuant to this Agreement, a party receiving Proprietary Information from the other, directly
or indirectly, will treat such Proprietary Information as confidential, will use such Proprietary
Information only for the purposes of this Agreement and will not disclose, and will take all
reasonable precautions to prevent the disclosure of, such Proprietary Information to (a) any of its
officers, directors, managers, equity holders, employees, agents, representatives, Affiliates or
consultants, except those who need to know such Proprietary Information and who are bound by a like
obligation of confidentiality or (b) to Third Parties.

     Section 12.2 Disclosures Required by Law

     In the event the recipient party is required under applicable Legal Requirements to disclose
Proprietary Information of the disclosing party to any Governmental Authority to obtain any
Regulatory Approval for the Products, is required to disclose Proprietary Information in connection
with bona fide legal process (including in connection with any bona fide dispute hereunder) or is
required to disclose Proprietary Information under the rules of the securities exchange upon which
its securities are traded, the recipient party may do so only if it limits disclosure to that
purpose after giving the disclosing party prompt written notice of any instance of such a
requirement in reasonable time for the disclosing party to attempt to object to or to limit

45

 

such disclosure. In the event of disclosures required under applicable Legal Requirements,
the recipient party shall cooperate with the disclosing party as reasonably requested thereby.

     Section 12.3 Publicity

     The parties have agreed upon the form and content of a joint press release to be issued by the
parties promptly following the execution of this Agreement. Once such press release or any other
written statement is approved for disclosure by both parties, either party may make subsequent
public disclosure of the contents of such statement without the further approval of the other
party. Any other publicity, news release, public comment or other public announcement, whether to
the press, to stockholders, or otherwise, relating to this Agreement, shall first be reviewed and
approved by both parties, except no such approval shall be required for such publicity, news
release, public comment or other public announcement which, in accordance with the advice of legal
counsel to the party making such disclosure, is required by law or for appropriate market
disclosure; provided, however, that each party shall be entitled to refer publicly
to the relationship of the parties reflected in this Agreement (i.e., Depomed as the developer of
the Products and Santarus as the promoter of the Products in the Territory) in a manner that is
consistent with the joint press release issued by the parties. For clarity, any party making any
announcement which is required by law will, unless prohibited by law, give the other party an
opportunity to review the form and content of such announcement and comment before it is made. The
parties shall work together to coordinate filings with governmental agencies, including the United
States Securities and Exchange Commission, as to the contents and existence of this Agreement as
the parties shall reasonably deem necessary or appropriate and each party shall provide the other
party an opportunity to comment on any proposed filings, including redactions thereto. The
provisions of this Article XII shall survive termination of this Agreement and shall remain in
effect until a date three years after the Term of this Agreement.

ARTICLE XIII

RIGHT OF FIRST NEGOTIATION FOR CERTAIN COMBINATION PRODUCTS;

EXCLUSIVITY

     Section 13.1 Right of First Negotiation

     Depomed shall notify Santarus in writing in the event that Depomed desires to divest itself of
its rights to the Product in the Territory (e.g., by asset sale or product license to a Third
Party) or to grant rights to a Third Party to develop or commercialize a pharmaceutical product
containing metformin and another generic active pharmaceutical ingredient (i.e., an active
pharmaceutical ingredient that is produced and distributed within the Territory without composition
of matter patent protection for the compound) in combination with Depomed’s proprietary AcuForm
drug delivery technology incorporated within the Products (a “Combination Product”). If
Santarus notifies Depomed in writing within [***] days after receipt of such notice (the
“Evaluation Period”) that Santarus is not interested in obtaining all of Depomed’s rights
in and to the Products or the applicable Combination Product (such rights, “Metformin Product
Rights”), or if Santarus fails to notify Depomed of Santarus’ interest in obtaining the
Metformin Product Rights, in either case prior to the expiration of the Evaluation Period, then
Depomed shall have no further obligation to Santarus under this Agreement with respect to the
applicable Metformin Product Rights. If Santarus is interested in obtaining the Metformin Product
Rights, it

 

			
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Exchange Commission. Confidential treatment has been requested with respect to the omitted
portions.

46

 

shall so notify Depomed in writing prior to the expiration of the Evaluation Period, and upon
Depomed’s receipt of such notice Santarus and Depomed shall promptly commence good-faith
negotiations, for a period of [***] days and such longer period as may be mutually agreed upon by
the parties in writing in the event the parties have made material progress in the negotiations
(the “Negotiation Period”), regarding the commercially reasonable terms of an agreement
pursuant to which Santarus shall obtain the Metformin Product Rights. If Depomed and Santarus fail
to enter into an agreement for the Metformin Product Rights prior to the expiration of the
Negotiation Period, then Depomed shall thereafter have the right to negotiate and enter into an
agreement with a Third Party granting the Metformin Product Rights to a Third Party; provided that,
for a period of [***], any such agreement may not be on terms and conditions materially more
favorable to the Third Party than the terms and conditions last offered by Santarus prior to the
termination of discussions with Depomed. The provisions of this Section 13.1 shall not apply to,
and Depomed shall have no obligation to Santarus under this Section 13.1 in respect of, any
acquisition of Depomed by a Third Party, any merger or consolidation with or involving Depomed, any
acquisition by a Third Party of any material portion of the stock of Depomed, or any acquisition by
a Third Party of a material portion of the assets of Depomed in addition to the Products or any
Combination Product (“Merger Transaction”).

     Section 13.2 Exclusivity

     During the Term, Depomed shall not, directly or indirectly, develop, promote, market,
distribute, sell or offer for sale in the Territory any single agent metformin products for human
use, other than the Products in accordance with the terms of this Agreement. Depomed shall not
use, and shall not permit any Third Party to use, the Glumetza® trademark in the Territory with
respect to any product other than the Products.

ARTICLE XIV

NOTICES

     Section 14.1 Notices

     All notices required or permitted hereunder shall be given in writing and sent by facsimile
transmission (with a copy sent by first-class mail), or mailed postage prepaid by certified or
registered mail (return receipt requested), or sent by a nationally recognized express courier
service, or hand-delivered at the following address:

If to Depomed:

Depomed, Inc.

1360 O’Brien Drive

Menlo Park, California 94025

Attention: President

Fax No.: (650) 462-9991

 

			
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Exchange Commission. Confidential treatment has been requested with respect to the omitted
portions.

47

 

With a copy to:

Heller Ehrman LLP

275 Middlefield Road

Menlo Park, CA 94025

Attention: Julian Stern

Fax No: (650) 324-0638

If to Santarus:

Santarus, Inc.

3721 Valley Centre Drive

Suite 400

San Diego, California 92130

Attn: Legal Affairs Department

Facsimile: (858) 314-5702

With a copy to (which shall not constitute notice

hereunder):

Latham & Watkins LLP

12636 High Bluff Drive, Suite 400

San Diego, California 92130

Attention: Faye H. Russell

Fax No: (858) 523-5450

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

ARTICLE XV

INSURANCE

     Section 15.1 Insurance

          (a) During the Term and for a period of two (2) years after any expiration or termination of
this Agreement, each party shall maintain (i) a commercial general liability insurance policy or
policies with minimum limits of $[***] per occurrence and $[***] in the aggregate on an annual
basis and (ii) a product liability insurance policy or policies with minimum limits of $[***] per
occurrence and $[***] in the aggregate on an annual basis.

          (b) Upon request, each party shall provide certificates of insurance to the other evidencing
the coverage specified herein. Neither party’s liability to the other is in any way limited to the
extent of its insurance coverage.

 

			
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Exchange Commission. Confidential treatment has been requested with respect to the omitted
portions.

48

 

ARTICLE XVI

MISCELLANEOUS

     Section 16.1 Headings

     The titles, headings or captions and paragraphs in this Agreement are for convenience only and
do not define, limit, extend, explain or describe the scope or extent of this Agreement or any of
its terms or conditions and therefore shall not be considered in the interpretation, construction
or application of this Agreement.

     Section 16.2 Severability

     In the event that any of the provisions or a portion of any provision of this Agreement is
held to be invalid, illegal, or unenforceable by a court of competent jurisdiction or a
governmental authority, such provision or portion of provision will be construed and enforced as if
it had been narrowly drawn so as not to be invalid, illegal, or unenforceable, and the validity,
legality, and enforceability of the enforceable portion of any such provision and the remaining
provisions will not be adversely affected thereby.

     Section 16.3 Entire Agreement

     This Agreement, together with the schedules and exhibits hereto and the Confidentiality
Agreement, all of which are incorporated by reference, contains all of the terms agreed to by the
parties regarding the subject matter hereof and supersedes any prior agreements, understandings, or
arrangements between them, whether oral or in writing.

     Section 16.4 Amendments

     This Agreement may not be amended, modified, altered, or supplemented except by means of a
written agreement or other instrument executed by both of the parties hereto. No course of conduct
or dealing between the parties will act as a modification or waiver of any provisions of this
Agreement.

     Section 16.5 Counterparts

     This Agreement may be executed in any number of counterparts, each of which will be deemed an
original as against the party whose signature appears thereon, but all of which taken together will
constitute but one and the same instrument.

     Section 16.6 Waiver

     The failure of either party to enforce or to exercise, at any time or for any period of time,
any term of or any right arising pursuant to this Agreement does not constitute, and will not be
construed as, a waiver of such term or right, and will in no way affect that party’s right later to
enforce or exercise such term or right.

49

 

     Section 16.7 Force Majeure

          (a) 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, declared or undeclared wars, acts of terrorism, or compliance with or other action
taken to carry out the intent or purpose of any law or regulation, but not any failure of such
party to perform under a Third Party agreement) (a “Force Majeure Event”), then such party
shall have such additional time to perform as shall be reasonably necessary under the
circumstances. In the event of such failure or delay, the affected party will use its diligent
efforts, consistent with sound business judgment and to the extent permitted by law, to correct
such failure or delay as expeditiously as possible. In the event that a party is unable to perform
by a reason described in this Section 16.7, its obligation to perform under the affected provision
of this Agreement shall be suspended during such time of nonperformance.

          (b) Neither party shall be liable hereunder to the other party nor shall be in breach for
failure to perform its obligations caused by a Force Majeure Event. In the case of any such event,
the affected party shall promptly, but in no event later than ten (10) days of its occurrence,
notify the other party stating the nature of the condition, its anticipated duration and any action
being taken to avoid or minimize its effect. Furthermore, the affected party shall keep the other
party informed of the efforts to resume performance. After sixty (60) days of such inability to
perform, the parties agree to meet and in good faith discuss how to proceed. In the event that the
affected party is prevented from performing its obligations pursuant to this Section 16.7 for a
period of six (6) months, the other party shall have the right to terminate this Agreement pursuant
to the provisions of Sections 8.4(b).

     Section 16.8 Successors and Assigns

     Subject to Section 16.9, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns permitted under this Agreement.

     Section 16.9 Assignment

     This Agreement and the rights granted herein shall not be assignable (or otherwise
transferred) by either party hereto without the prior written consent of the other party. Any
attempted assignment without consent shall be void. Notwithstanding the foregoing, a party may
transfer, assign or delegate its rights and obligations under this Agreement without consent to (a)
an Affiliate reasonably capable of performing such party’s obligations under this Agreement or (b)
a successor to all or substantially all of its business or assets of the assigning party to which
this Agreement relates, whether by sale, merger, consolidation, acquisition, transfer, operation of
law or otherwise or (c) in the case of either party, to one or more financial institutions
providing financing to such party pursuant to the terms of a security agreement relating to such
financing. In connection with any assignment, or Subcontracting pursuant to which a Third Party
Sales Representative is engaged to Promote the Products, of this Agreement or any of the rights
granted herein pursuant to this Section 16.9, the assignor, or party Subcontracting to another,
shall ensure that the assignee, or Subcontractor, represents and warrants the matters set forth in
Sections 9.1(j) and (k) (in substantially the same form as set forth in Sections 9.1(j) and (k)),
where Depomed (or

50

 

one of its successors or assigns) is the assignor or Subcontracting party, or Sections 9.2(h)
and (i) (in substantially the same form as set forth in Sections 9.2(h) and (i)), where Santarus
(or one of its successors or assigns) is the assignor or Subcontracting party. In connection with
any Subcontracting pursuant to which a Third Party will manufacture the Products, the party
Subcontracting to another shall use its commercially reasonable efforts to cause the Subcontractor
to represent and warrant the matters set forth in Sections 9.1(j) and (k) (in substantially the
same form as set forth in Sections 9.1(j) and (k)). Neither party shall knowingly engage any Third
Party appearing on the FDA’s debarment list or the list of excluded individuals/entities of the
Office of Inspector General of the Department of Health and Human Services to perform, or assist
such party in the performance of, its obligations under this Agreement, and each party shall review
each such list prior to engaging any such Third Party.

     Section 16.10 Construction

     The parties acknowledge and agree that: (a) each party and its representatives have reviewed
and negotiated the terms and provisions of this Agreement and have contributed to its revision; and
(b) the terms and provisions of this Agreement will be construed fairly as to each party hereto and
not in favor of or against either party regardless of which party was generally responsible for the
preparation or drafting of this Agreement. Unless the context of this Agreement otherwise
requires: (i) words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii) the terms “hereof,”
“herein,” “hereby,” and derivative or similar words refer to this entire Agreement; (iv) the terms
“Article,” “Section,” “Exhibit,” “Schedule,” or “clause” refer to the specified Article, Section,
Exhibit, Schedule, or clause of this Agreement; (v) “or” is disjunctive but not necessarily
exclusive; and (vi) the term “including” or “includes” means “including without limitation” or
“includes without limitation.” Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless business days are specified.

     Section 16.11 Governing Law

     This Agreement will be construed under and in accordance with, and governed in all respects
by, the laws of the State of California, without regard to its conflicts of law principles.

     Section 16.12 Equitable Relief

     Each party acknowledges that a breach by it of the provisions of this Agreement may not
reasonably or adequately be compensated in damages in an action at law and that such a breach may
cause the other party irreparable injury and damage. By reason thereof, each party agrees that the
other party is entitled to seek, in addition to any other remedies it may have under this Agreement
or otherwise, preliminary and permanent injunctive and other equitable relief to prevent or curtail
any breach of this Agreement by the other party; provided, however, that no specification in this
Agreement of a specific legal or equitable remedy will be construed as a waiver or prohibition
against the pursuing of other legal or equitable remedies in the event of such a breach. Each party
agrees that the existence of any claim, demand, or cause of action of it against the other party,
whether predicated upon this Agreement, or otherwise, will not constitute a defense to the
enforcement by the other party, or its successors or assigns, of the covenants contained in this
Agreement.

51

 

     Section 16.13 Relationship Between Parties

     The parties hereto are acting and performing as independent contractors, and nothing in this
Agreement creates the relationship of partnership, joint venture, sales agency, or principal and
agent. Neither party is the agent of the other, and neither party may hold itself out as such to
any other party. All financial obligations associated with each party’s business will be the sole
responsibility of such party.

[Signature page follows]

52

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in duplicate on the day
and year first above written.

	 	 	 	 	 
	 	DEPOMED, INC.

 	 
	 	/s/ Carl A. Pelzel
 	 
	 	By: Carl A. Pelzel 	 
	 	Its: President and CEO 	 
	 
	 	SANTARUS, INC.

 	 
	 	/s/ Gerald T. Proehl
 	 
	 	By: Gerald T. Proehl 	 
	 	Its: President and CEO 	 

53

 

	 	 	 	 	 

SCHEDULES

Schedule 1.37 — Depomed Trademarks

Schedule 1.55 — Launch Plan

Schedule 1.93 — Santarus Trademarks

Schedule 4.5(h) — Depomed Promotional Activities

 

 

Schedule 1.37

Depomed Trademarks

	 	 	 
	Mark	 	Serial/Registration Numbers
	GLUMETZA1

	 	Reg. No. 3366577
	DEPOMED

	 	Reg. No. 2112593
	DEPOMED (word and design mark)

	 	Ser. No. 78781903
	ACUFORM

	 	Ser. No. 78781863
	G (stylized design mark)

	 	Ser. No. 78931764

 

			
	1	 	Owned by BLS, and licensed in the United States to
Depomed for the purpose of promoting the Products.

 

 

Schedule 1.55

Launch Plan

[***]

[Schedule redacted in its entirety (10 pages)]

 

			
	***	 	Certain information on this page has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to the omitted
portions.

 

 

Schedule 1.93

Santarus Trademarks

	 	 	 
	Mark	 	Serial/Registration Numbers
	SANTARUS

	 	Reg. No. 2,711,984
	SANTARUS logo

	 	Reg. No. 2,896,926
	Triangle logo

	 	Reg. No. 2,899,097

 

 

Schedule 4.5(h)

Depomed Promotional Activities

[***]

 

			
	***	 	Certain information on this page has been omitted and filed separately with the Securities and
Exchange Commission. Confidential treatment has been requested with respect to the omitted
portions.exv10w1

Exhibit 10.1

LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective Date between
SILICON VALLEY BANK, a California corporation (“Bank”), and DOT HILL SYSTEMS CORP., a Delaware
corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower
shall repay Bank. The parties agree as follows:

     1 ACCOUNTING AND OTHER TERMS

     Accounting terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP (except for non-compliance with FAS
123R in monthly reporting). Capitalized terms not otherwise defined in this Agreement shall have
the meanings set forth in Section 13. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meaning provided by the Code to the extent such terms are
defined therein.

     2 LOAN AND TERMS OF PAYMENT

     2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding
principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due
in accordance with this Agreement.

     2.1.1 Revolving Advances.

          (a) Availability. Subject to the terms and conditions of this Agreement and, while
Borrower’s Net Cash is less than $20,000,000, to deduction of Reserves if reasonably required by
Bank, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed hereunder
may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable
terms and conditions precedent herein.

          (b) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all
other Obligations relating to the Revolving Line shall be immediately due and payable.

          (c) Early Termination. This Agreement may be terminated prior to the Revolving Line
Maturity Date. If this Agreement is terminated by Borrower for any reason (i) prior to the first
(1st) anniversary of the Effective Date, Borrower shall pay to Bank a termination fee in an amount
equal to eight tenths of one percent (0.80%) of the Revolving Line, or (ii) after the first (1st)
anniversary of the Effective Date, but prior to the second (2nd) anniversary of the Effective Date,
Borrower shall pay to Bank a termination fee in an amount equal to four tenths of one percent
(0.40%) of the Revolving Line; in either case, the “Early Termination Fee”. The Early Termination
Fee shall be due and payable on the effective date of such termination and thereafter shall bear
interest at a rate equal to the highest rate applicable to any of the Obligations.

     2.1.2 Letters of Credit Sublimit.

          (a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit for
Borrower’s account. Such aggregate amounts utilized hereunder shall at all times reduce the amount
otherwise available for Advances under the Revolving Line. The aggregate amount available to be
used for the issuance of Letters of Credit may not exceed (i) the lesser of (A) Thirty Million
Dollars ($30,000,000) or (B) the Borrowing Base, minus (ii) the outstanding principal amount of any
Advances (including the face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit). If, on the Revolving Line Maturity Date, there are any
outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral in
an amount equal to one hundred five percent (105%) of the face amount of all such Letters of Credit
plus all interest, fees, and costs due or to become due in connection therewith (as estimated by
Bank in its good faith business judgment), to secure all of the Obligations relating to said
Letters of Credit. All Letters of Credit shall be in form and substance acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank’s standard Application and
Letter of Credit Agreement (the “Letter of Credit Application”). Borrower agrees to

 

 

execute any further documentation in connection with the Letters of Credit as Bank may
reasonably request. Borrower further agrees to be bound by the regulations and interpretations of
the issuer of any Letters of Credit guarantied by Bank and opened for Borrower’s account or by
Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s account, and Borrower
understands and agrees that Bank shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrower’s instructions or those contained in the Letters
of Credit or any modifications, amendments, or supplements thereto.

          (b) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters
of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit
Application. Such reimbursement obligations may be satisfied in cash or, subject to availability
hereunder, through an Advance at Borrower’s option.

     2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal amount of any
Advances, plus (b) the face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) (such sum being an “Overadvance”) exceeds the lesser of either the
Revolving Line or the Borrowing Base, Borrower shall immediately pay to Bank in cash such
Overadvance. Without limiting Borrower’s obligation to repay Bank any amount of the Overadvance,
Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance, on demand, at
the Default Rate.

     2.3 Payment of Interest on the Credit Extensions.

          (a) Interest Rate; Advances. Subject to Section 2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a per annum rate equal to (i) one
percentage point (1.00%) above the Prime Rate while Borrower’s Net Cash is less than Twenty Million
Dollars ($20,000,000), or (ii) the Prime Rate at all other times; which interest shall, in either
case, be payable monthly.

          (b) Default Rate. Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per annum which is three percentage
points (3.00%) above the rate that is otherwise applicable thereto (the “Default Rate”). Payment
or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Bank.

          (c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension
based on changes to the Prime Rate shall be effective on the effective date of any change to the
Prime Rate and to the extent of any such change.

          (d) 360-Day Year. Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed.

          (e) Debit of Accounts. Bank may debit the Designated Deposit Account (and any of
Borrower’s other deposit accounts while any Event of Default has occurred and is continuing), for
principal and interest payments or any other amounts Borrower owes Bank when due. These debits
shall not constitute a set-off.

          (f) Payment; Interest Computation; Float Charge. Interest is payable monthly on the
last calendar day of each month. In computing interest on the Obligations, all payments received
after 12:00 p.m. Pacific time on any day shall be deemed received on the next Business Day. In
addition, if Borrower’s Net Cash is less than Twenty Million Dollars ($20,000,000) at any time,
until Borrower’s Net Cash is greater than Twenty Million Dollars ($20,000,000), Bank shall be
entitled to charge Borrower a “float” charge in an amount equal to two (2) Business Days interest,
at the interest rate applicable to the Advances, on all payments received by Bank. The float
charge for each month shall be payable on the last day of the month. Bank shall not, however, be
required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory
to Bank in its good faith business judgment, and Bank may charge Borrower’s Designated Deposit
Account for the amount of any item of payment which is returned to Bank unpaid.

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     2.4 Fees. Borrower shall pay to Bank:

          (a) Commitment Fee. A fully earned, non-refundable commitment fee of (i) Sixty
Thousand Dollars ($60,000), on the Effective Date, (ii) Forty-Five Thousand Dollars ($45,000) on
the first anniversary of the Effective Date, and (iii) fifteen hundredths of one percent (0.15%) of
the Revolving Line on the second anniversary of the Effective Date;

          (b) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, including, without limitation, a Letter of Credit Fee of one percent
(1.00%) per annum of the face amount of each Letter of Credit issued, upon the issuance, each
anniversary of the issuance, and the renewal of such Letter of Credit by Bank;

          (c) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line Facility
Fee”), payable quarterly, in arrears, on a calendar year basis, in an amount equal to three eighths
of one percent (0.375%) per annum of the average unused portion of the Revolving Line, as
determined by Bank. Borrower shall not be entitled to any credit, rebate or repayment of any
Unused Revolving Line Facility Fee previously earned by Bank pursuant to this Section
notwithstanding any termination of the Agreement, or suspension or termination of Bank’s obligation
to make loans and advances hereunder; provided that such Unused Revolving Line Facility Fee shall
cease to accrue upon termination of this Agreement;

          (e) Collateral Monitoring Fee. If Borrower’s Net Cash is less than Twenty Million
Dollars ($20,000,000) at any time, until Borrower’s Net Cash is again greater than or equal to
Twenty Million Dollars ($20,000,000), a monthly collateral monitoring fee of Two Thousand Dollars
($2,000), payable in arrears on the last day of each month (prorated for any partial month in which
such fee shall be applicable); and

          (d) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses, plus expenses, for documentation and negotiation of this Agreement) incurred through and
after the Effective Date, when due.

     2.5 Lockbox; Account Collection Services. No later than sixty (60) days after the Effective
Date and at all time thereafter, Borrower shall direct each Account Debtor (and each depository
institution where proceeds of Accounts are on deposit) to thereafter remit payments with respect to
the Accounts to a lockbox account with Bank or to wire transfer payments to a cash collateral
account with Bank (collectively, the “Lockbox”). Subject to the repayment provisions of Section
2.1.1(b), Bank shall sweep all amounts from the Lockbox to the Designated Deposit Account on a
daily (or as soon thereafter as is practical) basis. Provided however, if Borrower’s Net Cash is
less than Twenty Million Dollars ($20,000,000) at any time, until Borrower’s Net Cash is again
greater than or equal to Twenty Million Dollars ($20,000,000), Bank shall first apply all amounts
from the Lockbox to the outstanding Obligations and any excess shall be swept into the Designated
Deposit Account. This Section does not impose any affirmative duty on Bank to perform any act
other than as specifically set forth herein. All Accounts and the proceeds thereof are Collateral
and upon the occurrence and during the continuance of an Event of Default or if Borrower’s Net Cash
is less than Twenty Million Dollars ($20,000,000) at any time, until Borrower’s Net Cash is again
greater than or equal to Twenty Million Dollars ($20,000,000), Bank may apply the proceeds of such
Accounts to the Obligations then due and owing.

     2.6 Accordion Feature. At any time after the first anniversary of the Effective Date,
Borrower may request an increase in the Revolving Line to Fifty Million Dollars ($50,000,000), so
long as (i) Bank is able to find a participant lender acceptable to Bank in its sole discretion to
commit the additional Twenty Million Dollar ($20,000,000) increase, (ii) Borrower demonstrates a
minimum Borrowing Base of Forty Million Dollars ($40,000,000) for the ninety (90) day period
preceding such request, and (iii) Borrower pays to Bank for the benefit of Bank and any such other
lender a fee equal to two-tenths of one percent (0.20%) of the resulting increase in the Revolving
Line.

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     3 CONDITIONS OF LOANS

     3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial
Credit Extension is subject to the condition precedent that Borrower shall consent to or have
delivered, in form and substance satisfactory to Bank, such documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:

          (a) duly executed original signatures to the Loan Documents to which it is a party;

          (b) duly executed original signatures to the Control Agreements;

          (c) its Operating Documents and a good standing certificate of Borrower certified by the
Secretary of State of the State of Delaware as of a date no earlier than thirty (30) days prior to
the Effective Date;

          (d) duly executed original signatures to the completed Borrowing Resolutions for Borrower;

          (e) certified copies, dated as of a recent date, of financing statement searches, as Bank
shall request, accompanied by written evidence (including any UCC termination statements) that the
Liens indicated in any such financing statements either constitute Permitted Liens or have been or,
in connection with the initial Credit Extension, will be terminated or released;

          (f) the Perfection Certificate executed by Borrower;

          (g) evidence satisfactory to Bank that the insurance policies required by Section 6.5 hereof
are in full force and effect, together with appropriate evidence showing lender loss payable and/or
additional insured clauses or endorsements in favor of Bank;

          (h) the completion of the Initial Audit with results satisfactory to Bank in its sole and
absolute discretion, which Initial Audit shall be completed by Bank within sixty (60) days
following the Effective Date unless the Bank waives the right to complete the Initial Audit prior
to making the initial Credit Extension; and

          (i) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.

     3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following:

          (a) except as otherwise provided in Section 3.4, timely receipt of an executed Transaction
Report;

          (b) the representations and warranties in Section 5 shall be true in all material respects on
the date of the Transaction Report and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text thereof; and provided,
further that those representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no Event of Default shall
have occurred and be continuing or result from the Credit Extension. Each Credit Extension is
Borrower’s representation and warranty on that date that the representations and warranties in
Section 5 remain true in all material respects; provided, however, that such materiality qualifier
shall not be applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those representations and
warranties expressly referring to a specific date shall be true, accurate and complete in all
material respects as of such date; and

          (c) in Bank’s reasonable discretion, there has not been a Material Adverse Change.

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     3.3 Covenant to Deliver.

     Borrower agrees to deliver to Bank each item required to be delivered to Bank under this
Agreement as a condition to any Credit Extension. Borrower expressly agrees that a Credit
Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank
of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a
required item shall be made in Bank’s sole discretion.

     3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, to obtain an Advance (other
than Advances under Sections 2.1.2 or 2.1.3), Borrower shall notify Bank (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Pacific time on the Funding
Date of the Advance. Bank shall credit Advances to the Designated Deposit Account. Bank may make
Advances under this Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances are necessary to meet Obligations which have
become due. Bank may rely on any telephone notice given by a person whom Bank believes is a
Responsible Officer or designee.

     4 CREATION OF SECURITY INTEREST

     4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and
performance in full of all of the Obligations, a continuing security interest in, and pledges to
Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may have superior
priority to Bank’s Lien under this Agreement).

     If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
Obligations (other than inchoate indemnity obligations and cash collateralized Letters of Credit)
are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate
indemnity obligations and cash collateralized Letters of Credit) and at such time as Bank’s
obligation to make Credit Extensions has terminated, Bank shall, at Borrower’s sole cost and
expense, release its Liens in the Collateral and all rights therein shall revert to Borrower.

     4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file
financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or
protect Bank’s interest or rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.

     5 REPRESENTATIONS AND WARRANTIES

          Borrower represents and warrants as follows:

     5.1 Due Organization, Authorization; Power and Authority. Borrower is duly existing and in
good standing as a Registered Organization in its jurisdiction of formation and is qualified and
licensed to do business and is in good standing in any jurisdiction in which the conduct of its
business or its ownership of property requires that it be qualified except where the failure to do
so could not reasonably be expected to have a material adverse effect on Borrower’s business. In
connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by
Borrower, entitled “Perfection Certificate”. Borrower represents and warrants to Bank that (a)
Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature
page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set
forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately states that Borrower has none; (d)
the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than
one, its chief executive office as well as Borrower’s mailing address (if different than its chief
executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years,
changed its jurisdiction of formation, organizational structure or type, or any organizational
number assigned by its jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being
understood and agreed that Borrower may from time to time update

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certain information in the Perfection Certificate after the Effective Date to the extent
permitted by one or more specific provisions in this Agreement). If Borrower is not now a
Registered Organization but later becomes one, Borrower shall promptly notify Bank of such
occurrence and provide Bank with Borrower’s organizational identification number.

     The execution, delivery and performance by Borrower of the Loan Documents to which it is a
party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational
documents, (ii) contravene, conflict with, constitute a default under or violate any material
Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by which Borrower or any
its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any
action by, filing, registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already been obtained and are
in full force and effect) or (v) constitute an event of default under any material agreement by
which Borrower is bound. Borrower is not in default under any agreement to which it is a party or
by which it is bound in which the default could reasonably be expected to have a material adverse
effect on Borrower’s business.

     5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each
item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and
all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts
with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank
in connection herewith, or of which Borrower has given Bank notice and taken such actions as are
necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing
obligations of the Account Debtors.

     5.3 Accounts Receivable; Inventory.

          (a) For each Account with respect to which Advances are requested, on the date each Advance is
requested and made, such Account shall be an Eligible Account.

          (b) All statements made and all unpaid balances appearing in all invoices, instruments and
other documents evidencing the Eligible Accounts are and shall be true and correct and all such
invoices, instruments and other documents, and all of Borrower’s Books are genuine and in all
respects what they purport to be. When an Event of Default has occurred and is continuing or while
Borrower’s Net Cash is less than Twenty Million Dollars ($20,000,000), Bank may notify any Account
Debtor owing Borrower money of Bank’s security interest in such funds and verify the amount of such
Eligible Account. All sales and other transactions underlying or giving rise to each Eligible
Account shall comply in all material respects with all applicable laws and governmental rules and
regulations. Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any
Account Debtor whose accounts are Eligible Accounts in any Transaction Report. To Borrower’s
knowledge, all signatures and endorsements on all documents, instruments, and agreements relating
to all Eligible Accounts are genuine, and all such documents, instruments and agreements are
legally enforceable in accordance with their terms.

     5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of the
Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries
involving more than One Million Dollars ($1,000,000).

     5.5 No Material Deviation in Financial Statements. All consolidated financial statements for
Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects
Borrower’s consolidated financial condition and Borrower’s consolidated results of operations.
There has not been any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.

     5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay
its debts (including trade debts) as they mature.

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     5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled”
by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not
engaged as one of its important activities in extending credit for margin stock (under Regulations
X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries
is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a
“holding company” as each term is defined and used in the Public Utility Holding Company Act of
2005. Borrower has not violated any laws, ordinances or rules, the violation of which could
reasonably be expected to have a material adverse effect on its business. None of Borrower’s or
any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to
the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating,
or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made all declarations or filings with,
and given all notices to, all Governmental Authorities that are necessary to continue their
respective businesses as currently conducted.

     5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership interest or other
equity securities except for Permitted Investments.

     5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required
tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower, except that Borrower may defer payment of
any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the
taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies
Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts
bonds or takes any other steps required to prevent the governmental authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted
Lien”. Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax
years which could result in additional taxes becoming due and payable by Borrower. Borrower has
paid all amounts necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has
not permitted partial or complete termination of, or permitted the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

     5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as
working capital and to fund its general business requirements and not for personal, family,
household or agricultural purposes.

     5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank, as of the date such representation, warranty,
or other statement was made, taken together with all such written certificates and written
statements given to Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in
good faith and based upon reasonable assumptions are not viewed as facts and that actual results
during the period or periods covered by such projections and forecasts may differ from the
projected or forecasted results).

     6  AFFIRMATIVE COVENANTS

     Borrower shall do all of the following:

     6.1 Government Compliance.

          (a) Maintain its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in each jurisdiction in which the
failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s
business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws,
ordinances and regulations to which it is subject, noncompliance with which could reasonably be
expected to have a material adverse effect on Borrower’s business.

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          (b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its
obligations under the Loan Documents to which it is a party and the grant of a security interest to
Bank in all of the Collateral. Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Bank.

     6.2 Financial Statements, Reports, Certificates.

          (a) Borrower shall provide Bank with the following:

          (i) within twenty (20) days after the end of each month (and while Borrower’s Net Cash is less
than Twenty Million Dollars ($20,000,000), no less than weekly) and with each request for an
Advance, a Transaction Report (and any schedules related thereto);

          (ii) within twenty (20) days after the end of each month, (A) monthly accounts receivable
agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, (C) monthly reconciliations of accounts receivable
agings (aged by invoice date), transaction reports and general ledger, and (D) a report of
Borrower’s Cash balances; and

          (iii) no later than March 31 of each calendar year, (A) annual operating budgets (including
income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year
of Borrower, and (B) annual financial projections for the following fiscal year (on a quarterly
basis) as approved by Borrower’s board of directors, together with any related business forecasts
used in the preparation of such annual financial projections.

          (b) within five (5) days after filing, all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission or a link thereto on Borrower’s or another website on the
Internet, along with a Compliance Certificate signed by a Responsible Officer, certifying that as
of the end of such quarter, Borrower was in full compliance with all of the terms and conditions of
this Agreement, and setting forth calculations showing compliance with the financial covenants set
forth in this Agreement and such other information as Bank shall reasonably request, including,
without limitation, a statement that at the end of such month there were no held checks.

          (c) In accordance with Section 6.6, allow Bank to audit Borrower’s Collateral at Borrower’s
expense. Such audits shall be conducted no more often than twice per year if there are no Advances
outstanding (or three times per year when Advances outstanding) unless an Event of Default has
occurred and is continuing.

     6.3 Accounts Receivable.

          (a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank
transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard
forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect
or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to
advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein.
If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of
all contracts, orders, invoices, and other similar documents, and all shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on
its request, the originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Accounts, in the same form as received,
with all necessary indorsements, and copies of all credit memos.

          (b) Disputes. Borrower shall promptly notify Bank of all disputes or claims in excess
of Three Hundred Thousand Dollars ($300,000) relating to Accounts. Borrower may forgive
(completely or partially), compromise, or settle any Account for less than payment in full, or
agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, in arm’s-length transactions, and reports
the same to Bank in the regular reports provided to Bank; (ii) no Default or Event of Default has
occurred and is continuing; and (iii) after taking into account all such discounts, settlements

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and forgiveness, the total outstanding Advances will not exceed the lesser of the Revolving
Line or the Borrowing Base.

          (c) Collection of Accounts. Borrower shall have the right to collect all Accounts,
unless and until a Default or an Event of Default has occurred and is continuing. Whether or not
an Event of Default has occurred and is continuing, Borrower shall hold all payments on, and
proceeds of, Accounts in trust for Bank, and Borrower shall immediately deliver all such payments
and proceeds to Bank in their original form, duly endorsed, to be applied to the Obligations
pursuant to the terms of Section 9.4 hereof. As limited by Section 2.5 hereof, Bank may, in its
good faith business judgment, require that all proceeds of Accounts be deposited by Borrower into a
lockbox account, or such other “blocked account” as Bank may specify, pursuant to a blocked account
agreement in such form as Bank may specify in its good faith business judgment.

          (d) Returns. Provided no Event of Default has occurred and is continuing, if any
Account Debtor returns any Inventory in excess of Three Hundred Thousand Dollars ($300,000) to
Borrower, Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit
memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit
memorandum to Bank, upon request from Bank. In the event any attempted return occurs after the
occurrence and during the continuance of any Event of Default, Borrower shall promptly notify Bank
of the return of the Inventory.

          (e) Verification. While any Event of Default has occurred and is continuing, while
Borrower’s Net Cash is less than Twenty Million Dollars ($20,000,000) or with the consent of
Borrower, Bank may, from time to time, verify directly with the respective Account Debtors the
validity, amount and other matters relating to the Accounts, either in the name of Borrower or Bank
or such other name as Bank may choose.

          (f) No Liability. Bank shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of
which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any Account, or for settling
any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be
responsible for any of Borrower’s obligations under any contract or agreement giving rise to an
Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence
or willful misconduct.

     6.4 Remittance of Proceeds. Except as otherwise provided or limited by Section 6.3(c),
deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the
original form in which received by Borrower not later than the following Business Day after receipt
by Borrower, to be applied to the Obligations pursuant to the terms of Section 9.4 hereof. Except
as otherwise provided or limited by Section 6.3(c), Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower’s other funds or property, but will hold such proceeds
separate and apart from such other funds and property and in an express trust for Bank. Nothing in
this Section limits the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.

     6.5 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all
required tax returns and reports and timely pay, and require each of its Subsidiaries to timely
file, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by
Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant
to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates
attesting to such payments, and pay all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms.

     6.6 Access to Collateral; Books and Records. At reasonable times (but no more frequently than
set forth in Section 6.1(c), on two (2) Business Days’ notice (provided no notice is required if an
Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to
inspect the Collateral and the right to audit and copy Borrower’s Books. The foregoing inspections
and audits shall be at Borrower’s expense, and the charge therefor shall be $750 per person per day
(or such higher amount as shall represent Bank’s then-current standard charge for the same), plus
reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an audit more than five
(5) Business Days in advance, and Borrower cancels or seeks to reschedules the audit with less than
five (5) Business Days written notice to Bank, then (without limiting any of Bank’s rights or
remedies), Borrower

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shall pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate
Bank for the anticipated costs and expenses of the cancellation or rescheduling.

     6.7 Insurance. Keep its business insured for risks and in amounts standard for companies in
Borrower’s industry and location and as Bank may reasonably request. Insurance policies shall be
in a form, with companies, and in amounts that are satisfactory to Bank. All policies shall
provide that the insurer shall endeavor to give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Bank’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. If Borrower fails to obtain
insurance as required under this Section 6.7 or to pay any amount or furnish any required proof of
payment to third persons and Bank, Bank may make all or part of such payment or obtain such
insurance policies required in this Section 6.7, and take any action under the policies Bank deems
prudent.

     6.8 Operating Accounts.

          (a) No later than sixty (60) days after the Effective Date and at all time thereafter,
maintain its primary and its domestic Subsidiaries’ primary operating and other deposit accounts
with Bank. No later than sixty (60) days after the Effective Date and at all times thereafter,
maintain at least one securities account with Bank or its Affiliates, which securities account or
securities accounts shall represent at least twenty five percent (25%) of the dollar value of
Borrower’s and such Subsidiaries securities accounts at all financial institutions.

          (b) Provide Bank five (5) days prior written notice before establishing any Collateral Account
at or with any bank or financial institution other than Bank or Bank’s Affiliates. For each
Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or
financial institution (other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with respect to such
Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms
hereunder. The provisions of the previous sentence shall not apply to deposit accounts exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit
of Borrower’s employees and identified to Bank by Borrower as such.

     6.9 Financial Covenants.

          Borrower shall maintain at all times, to be tested as of the last day of each quarter, unless
otherwise noted:

          (a) Minimum Net Worth. A minimum Net Worth of at least Fifty Five Million Dollars
($55,000,000), increasing by fifty percent (50%) of Net Income, fifty percent (50%) of issuances of
equity after the Effective Date and fifty percent (50%) of the principal amount of Subordinated
Debt.

     6.10 Protection of Intellectual Property Rights. Borrower shall: (a) use commercially
reasonable efforts to protect, defend and maintain the validity and enforceability of its
Intellectual Property; (b) promptly advise Bank in writing of material infringements of its
Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’s business
to be abandoned, forfeited or dedicated to the public without Bank’s written consent.

     6.11 Litigation Cooperation. From the date hereof and continuing through the termination of
this Agreement, make available to Bank, without expense to Bank, Borrower and its officers,
employees and agents and Borrower’s books and records, to the extent that Bank may deem them
reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or
against Bank with respect to any Collateral or relating to Borrower.

     6.12 Further Assurances. Execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes
of this Agreement.

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     7 NEGATIVE COVENANTS

     Borrower shall not do any of the following without Bank’s prior written consent:

     7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively,
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of the Collateral or
the Inventory or Intellectual Property of Borrower or its Subsidiaries, except for Transfers (a) of
Inventory in the ordinary course of business; (b) in connection with Permitted Liens and Permitted
Investments; (c) of non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business, (d) exclusive licenses and Transfers to NetApp in
accordance with Borrower’s supply agreement with NetApp provided such supply agreement has been
provided to Bank and (e) other exclusive licenses which are limited by specified fields of use,
specific geographic location, or specific, limited periods of time.

     7.2 Changes in Business; Jurisdiction of Formation. Engage in any material line of business
other than those lines of business conducted by Borrower and its Subsidiaries on the date hereof
and any businesses reasonably related, complementary or incidental thereto or reasonable extensions
thereof. Borrower will not, without prior written notice, change its jurisdiction of formation.

     7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge
or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person except where (a) total
consideration including cash and the value of any non-cash consideration, for all such transactions
does not in the aggregate exceed Fifteen Million Dollars ($15,000,000) in any three hundred sixty
four (364) day period; (b) no Event of Default has occurred and is continuing or would exist after
giving effect to the transactions; and (c) Borrower is the surviving legal entity. A Subsidiary
may merge or consolidate into another Subsidiary or into Borrower.

     7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.

     7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral or any
Inventory or Intellectual Property of Borrower or its Subsidiaries, or assign or convey any right
to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so,
except for Permitted Liens, permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or other arrangement
(except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the
effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s Inventory or
Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of
“Permitted Lien” herein.

     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to
the terms of Section 6.8.(b) hereof.

     7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock in excess of One Million Dollars ($1,000,000) per
fiscal year; provided that (i) Borrower may convert any of its convertible securities into other
securities pursuant to the terms of such convertible securities or otherwise in exchange thereof,
(ii) Borrower may pay dividends solely in common stock; and (iii) Borrower may repurchase the stock
of former employees or consultants pursuant to stock repurchase agreements so long as an Event of
Default does not exist at the time of such repurchase and would not exist after giving effect to
such repurchase; or (b) directly or indirectly make any Investment other than Permitted
Investments, or permit any of its Subsidiaries to do so.

     7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any
material transaction with any Affiliate of Borrower, except for sales of equity securities and
transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a
non-affiliated Person.

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     7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under
the terms of the subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document relating to the
Subordinated Debt which would increase the amount thereof or adversely affect the subordination
thereof to Obligations owed to Bank.

     7.10 Compliance. Become an “investment company” or a company controlled by an “investment
company”, under the Investment Company Act of 1940, as amended, or undertake as one of its
important activities extending credit to purchase or carry margin stock (as defined in Regulation U
of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could
reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of
its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in,
permit partial or complete termination of, or permit the occurrence of any other event with respect
to, any present pension, profit sharing and deferred compensation plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.

     8 EVENTS OF DEFAULT

     Any one of the following shall constitute an event of default (an “Event of Default”) under
this Agreement:

     8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any
Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days
after such Obligations are due and payable (which three (3) day grace period shall not apply to
payments due on the Revolving Line Maturity Date). During the cure period, the failure to cure the
payment default is not an Event of Default (but no Credit Extension will be made during the cure
period);

     8.2 Covenant Default.

          (a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.5, 6.7, 6.8 or 6.9
or violates any covenant in Section 7; or

          (b) Borrower fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within ten (10) days after
the occurrence thereof; provided, however, that if the default cannot by its nature be cured within
the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10)
day period, and such default is likely to be cured within a reasonable time, then Borrower shall
have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to cure the default shall not be
deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Grace
periods provided under this section shall not apply, among other things, to financial covenants or
any other covenants set forth in subsection (a) above;

     8.3 Material Adverse Change. A Material Adverse Change occurs;

     8.4 Attachment; Levy; Restraint on Business. (a) (i) The service of process seeking to
attach, by trustee or similar process, any funds of Borrower or of any entity under control of
Borrower (including a Subsidiary) on deposit with Bank or any Bank Affiliate, or (ii) a notice of
lien, levy, or assessment is filed against any of Borrower’s assets by any government agency, and
the same under subclauses (i) and (ii) hereof are not, within twenty (20) days after the occurrence
thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided,
however, no Credit Extensions shall be made during any ten (10) day cure period; and (b) (i) any
material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a
trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from
conducting any part of its business;

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     8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they
become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty five (45)
days (but no Credit Extensions shall be made while of any of the conditions described in clause (a)
exist and/or until any Insolvency Proceeding is dismissed);

     8.6 Other Agreements. There is a default in any agreement to which Borrower is a party with a
third party or parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess of One Million
Dollars ($1,000,000) or that could reasonably be expected to have a material adverse effect on
Borrower’s business;

     8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an
amount, individually or in the aggregate, of at least One Million Dollars ($1,000,000) or (not
covered by independent third-party insurance as to which liability has been accepted by such
insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions
will be made prior to the satisfaction, vacation, or stay of such judgment, order, or decree);

     8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation,
warranty, or other statement now or later in this Agreement, any Loan Document or in any writing
delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material respect when made;

     8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower and
any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement
with Bank, or any creditor that has signed such an agreement with Bank breaches any terms of such
agreement; or

     8.10 Governmental Approvals. Any Governmental Approval shall have been (a) revoked,
rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a
full term or (b) subject to any decision by a Governmental Authority that designates a hearing with
respect to any applications for renewal of any of such Governmental Approval or that could result
in the Governmental Authority taking any of the actions described in clause (a) above, and such
decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could
reasonably be expected to have, a Material Adverse Change, or (ii) adversely affects the legal
qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any
applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal
could reasonably be expected to affect the status of or legal qualifications of Borrower or any of
its Subsidiaries to hold any Governmental Approval in any other jurisdiction.

     9 BANK’S RIGHTS AND REMEDIES

     9.1 Rights and Remedies. While an Event of Default occurs and continues Bank may, without
notice or demand, do any or all of the following:

          (a) declare all Obligations immediately due and payable (but if an Event of Default described
in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);

          (b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank;

          (c) demand that Borrower (i) deposits cash with Bank in an amount equal to the aggregate
amount of any Letters of Credit remaining undrawn, as collateral security for the repayment of any
future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the
remaining term of any Letters of Credit;

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          (d) settle or adjust disputes and claims directly with Account Debtors for amounts on terms
and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s
security interest in such funds, and verify the amount of such account;

          (e) make any payments and do any acts it considers necessary or reasonable to protect the
Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral
if Bank requests and make it available as Bank designates. Bank may enter premises where the
Collateral is located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of
its premises, without charge, to exercise any of Bank’s rights or remedies;

          (f) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any
amount held by Bank owing to or for the credit or the account of Borrower;

          (g) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or
other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or
any similar property as it pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this
Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;

          (h) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive
control, any entitlement order, or other directions or instructions pursuant to any Control
Agreement or similar agreements providing control of any Collateral;

          (i) demand and receive possession of Borrower’s Books in respect of the Collateral; and

          (j) exercise all rights and remedies available to Bank under the Loan Documents or at law or
equity, including all remedies provided under the Code (including disposal of the Collateral
pursuant to the terms thereof).

     9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of
Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b)
sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account
Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,
encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the
Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints
Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the Collateral regardless of whether an
Event of Default has occurred until all Obligations (other than inchoate indemnity obligations and
cash collateralized Letters of Credit) have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable
until all Obligations (other than inchoate indemnity obligations and cash collateralized Letters of
Credit) have been fully repaid and performed and Bank’s obligation to provide Credit Extensions
terminates.

     9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7
or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to
pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such
payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest applicable rate, and secured by the Collateral. Bank will make
reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it
is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to
make similar payments in the future or Bank’s waiver of any Event of Default.

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     9.4 Application of Payments and Proceeds. Borrower shall have no right to specify the order
or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower
to Bank or otherwise received by Bank under this Agreement when any such allocation or application
is not specified elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower account balances,
payments, proceeds realized as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole
discretion. Any surplus shall be paid to Borrower by credit to the Designated Deposit Account or
to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency.
If Bank, in its good faith business judgment, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have
the option, exercisable at any time, of either reducing the Obligations by the principal amount of
the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank
of cash therefor.

     9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking
practices regarding the safekeeping of the Collateral in the possession or under the control of
Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act
or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss,
damage or destruction of the Collateral.

     9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict
performance by Borrower of any provision of this Agreement or any other Loan Document shall not
waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance
herewith or therewith. No waiver hereunder shall be effective unless signed by Bank and then is
only effective for the specific instance and purpose for which it is given. Bank’s rights and
remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s
delay in exercising any remedy is not a waiver, election, or acquiescence.

     9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by
Bank on which Borrower is liable.

     10 NOTICES

     All notices, consents, requests, approvals, demands, or other communication by any party to
this Agreement or any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business
Days after deposit in the U.S. mail, first class, registered or certified mail return receipt
requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall
be addressed to the party to be notified and sent to the address, facsimile number, or email
address indicated below. Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance with the terms of
this Section 10.

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	 	If to Borrower:
	 	Dot Hill Systems Corp.
	 	 
	 

	 	 	 	2200 Faraday Avenue, Suite 100	 	 
	 

	 	 	 	Carlsbad, CA 92008	 	 
	 

	 	 	 	Attn: Chief Financial Officer	 	 
	 

	 	 	 	Fax:                                         	 	 
	 

	 	 	 	Email:         
                               	 	 
	 
	 	 	 	 	 	 
	 

	 	If to Bank:
	 	Silicon Valley Bank	 	 
	 

	 	 	 	38 Technology Drive, Suite 150	 	 
	 

	 	 	 	Irvine, CA 92618	 	 
	 

	 	 	 	Attn: Derek Hoyt	 	 
	 

	 	 	 	Fax: (949) 789-1930	 	 
	 

	 	 	 	Email:  dhoyt@svb.com	 	 

     11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE 

     California law governs the Loan Documents without regard to principles of conflicts of law.
Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in
Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed
to operate to preclude Bank from bringing suit or taking other legal action in any other
jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce
a judgment or other court order in favor of Bank. Borrower expressly submits and consents in
advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby
waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or
forum non conveniens and hereby consents to the granting of such legal or equitable relief as is
deemed appropriate by such court. Borrower hereby waives personal service of the summons,
complaints, and other process issued in such action or suit and agrees that service of such
summons, complaints, and other process may be made by registered or certified mail addressed to
Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be
deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.

     TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN
DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH
PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

     WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the
parties hereto agree that any and all disputes or controversies of any nature between them arising
at any time shall be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior
Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to
comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the
federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby
submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to
and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive. The private judge shall have the power, among others, to grant provisional relief,
including without limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be closed to the public
and confidential and all records relating thereto shall be permanently sealed. If during the
course of any dispute, a party desires to seek provisional relief, but a judge has not been
appointed at that point pursuant to the judicial reference procedures, then such party may apply to
the Santa Clara County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a court under the rules
of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which
shall be conducted in the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings. The private judge shall oversee discovery and may

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enforce all discovery rules and order applicable to judicial proceedings in the same manner as
a trial court judge. The parties agree that the selected or appointed private judge shall have the
power to decide all issues in the action or proceeding, whether of fact or of law, and shall report
a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a).
Nothing in this paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall
also determine all issues relating to the applicability, interpretation, and enforceability of this
paragraph.

     12 GENERAL PROVISIONS

     12.1 Termination Prior to Revolving Line Maturity Date. This Agreement may be terminated
prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after
written notice of termination is given to Bank. Notwithstanding any such termination, Bank’s lien
and security interest in the Collateral shall continue until Borrower fully satisfies its
Obligations. (other than inchoate indemnity obligations and cash collateralized Letters of
Credit). If such termination is at Borrower’s election, Borrower shall pay to Bank the Early
Termination Fee in accordance with Section 2.1.1(c) hereof.

     12.2 Successors and Assigns. This Agreement binds and is for the benefit of the successors
and permitted assigns of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Bank’s prior written consent (which may be granted or withheld in
Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell,
transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s
obligations, rights, and benefits under this Agreement and the other Loan Documents.

     12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors,
officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank
(each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and
liabilities (collectively, “Claims”) asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or
paid by such Indemnified Person from, following, or arising from transactions between Bank and
Borrower (including reasonable attorneys’ fees and expenses), except for Claims, losses and/or Bank
Expenses directly caused by such Indemnified Person’s gross negligence or willful misconduct.

     12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this
Agreement.

     12.5 Severability of Provisions. Each provision of this Agreement is severable from every
other provision in determining the enforceability of any provision.

     12.6 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in
this Agreement and the other Loan Documents consistent with the agreement of the parties.

     12.7 Amendments in Writing; Integration. All amendments to this Agreement must be in writing
and signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations between the parties about
the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan
Documents.

     12.8 Counterparts. This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and delivered, are an
original, and all taken together, constitute one Agreement.

     12.9 Survival. All covenants, representations and warranties made in this Agreement continue
in full force until this Agreement has terminated pursuant to its terms and all Obligations (other
than inchoate indemnity obligations and any other obligations which, by their terms, are to survive
the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2
to indemnify Bank shall survive until the statute of limitations with respect to such claim or
cause of action shall have run.

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     12.10 Confidentiality. In handling any confidential information, Bank shall exercise the same
degree of care that it exercises for its own proprietary information, but disclosure of information
may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to prospective transferees or purchasers
of any interest in the Credit Extensions (provided, however, Bank shall use commercially reasonable
efforts to obtain such prospective transferee’s or purchaser’s agreement to the terms of this
provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators
or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers
appropriate in exercising remedies under the Loan Documents; and (f) to third-party service
providers of Bank so long as such service providers have executed a confidentiality agreement with
Bank with terms no less restrictive than those contained herein. Confidential information does not
include information that either: (i) is in the public domain or in Bank’s possession when disclosed
to Bank, or becomes part of the public domain after disclosure to Bank through no fault of Bank; or
(ii) is disclosed to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.

     Bank may use confidential information for any purpose, including, without limitation, for the
development of client databases, reporting purposes, and market analysis, so long as Bank does not
disclose Borrower’s identity or the identity of any person associated with Borrower unless
otherwise expressly permitted by this Agreement. The provisions of the immediately preceding
sentence shall survive the termination of this Agreement.

     12.11 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and
Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to
recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any
other relief to which it may be entitled.

     13 DEFINITIONS

     13.1 Definitions. As used in this Agreement, the following terms have the following meanings:

     “Account” is any “account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable and other sums owing
to Borrower.

     “Account Debtor” is any “account debtor” as defined in the Code with such additions to such
term as may hereafter be made.

     “Advance” or “Advances” means an advance (or advances) under the Revolving Line.

     “Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person,
any Person that controls or is controlled by or is under common control with the Person, and each
of that Person’s senior executive officers, directors, partners and, for any Person that is a
limited liability company, that Person’s managers and members.

     “Agreement” is defined in the preamble hereof.

     “Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available
under the Borrowing Base minus (b) the amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit), and minus (c) the outstanding principal balance of any
Advances.

     “Bank” is defined in the preamble hereof.

     “Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and
enforcing the Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower.

     “Borrower” is defined in the preamble hereof

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     “Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state
tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition, and all computer programs or storage or any equipment containing
such information.

     “Borrowing Base” is eighty five percent (85%) of Eligible Accounts, as determined by Bank from
Borrower’s most recent Transaction Report; provided, however, that Bank may decrease the foregoing
percentage in its good faith business judgment based on events, conditions, contingencies, or risks
which, as determined by Bank, could reasonably be expected to materially adversely affect
Collateral.

     “Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in
the form attached hereto as Exhibit D.

     “Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.

     “Cash Equivalents” means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having maturities of not more
than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1)
year after its creation and having the highest rating from either Standard & Poor’s Ratings Group
or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than
one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the
assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of
this definition.

     “Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the State of California; provided, that, to the extent that the Code is used to define
any term herein or in any Loan Document and such term is defined differently in different Articles
or Divisions of the Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory provisions of law, any or
all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any
Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the
State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes on the provisions thereof relating to such
attachment, perfection, priority, or remedies and for purposes of definitions relating to such
provisions.

     “Collateral” is any and all properties, rights and assets of Borrower described on Exhibit
A.

     “Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.

     “Commodity Account” is any “commodity account” as defined in the Code with such additions to
such term as may hereafter be made.

     “Compliance Certificate” is that certain certificate in the form attached hereto as
Exhibit B.

     “Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or
not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation
of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted
or sold with recourse by that Person, or for which that Person is directly or indirectly liable;
(b) any obligations for undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement, interest rate cap or
collar agreement, or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business. The amount of a
Contingent Obligation is the stated or determined amount of the primary obligation for which the
Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability
for it determined by the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.

     “Control Agreement” is any control agreement entered into among the depository institution at
which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary
at which Borrower

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maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which
Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities
Account, or Commodity Account.

     “Credit Extension” is any Advance, Letter of Credit or any other extension of credit by Bank
for Borrower’s benefit.

     “Default Rate” is defined in Section 2.3(b).

     “Deferred Revenue” is all amounts received or invoiced in advance of performance under
contracts and not yet recognized as revenue.

     “Deposit Account” is any “deposit account” as defined in the Code with such additions to such
term as may hereafter be made.

     “Designated Deposit Account” is Borrower’s deposit account, account number                     ,
maintained with Bank.

     “Dollars,” “dollars” and “$” each mean lawful money of the United States.

     “Effective Date” is the date Bank executes this Agreement as indicated on the signature page
hereof.

     “Eligible Accounts” means Accounts which arise in the ordinary course of Borrower’s business
that meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the right at
any time after the Effective Date, upon written notice to Borrower, to adjust any of the criteria
set forth below and to establish new criteria in its good faith business judgment. Eligible
Accounts shall not include:

          (a) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date
regardless of invoice payment period terms;

          (b) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have
not been paid within ninety (90) days of invoice date;

          (c) Accounts billed in the United States and owing from an Account Debtor which does not have
its principal place of business in the United States or Canada unless such Accounts are otherwise
Eligible Accounts and (i) covered in full by credit insurance satisfactory to Bank, less any
deductible, (ii) supported by letter(s) of credit acceptable to Bank, (iii) supported by a guaranty
from the Export-Import Bank of the United States, or (iv) that Bank otherwise approves of in
writing;

          (d) Accounts billed and payable outside of the United States unless the Bank has a first
priority, perfected security interest or other enforceable Lien in such Accounts; notwithstanding
the foregoing, otherwise eligible accounts owing from Fujitsu-Siemens which are billed and payable
outside of the United States may be counted towards the Borrowing Base in an amount not to exceed
Five Million Dollars ($5,000,000);

          (e) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated
in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise — sometimes called
“contra” accounts, accounts payable, customer deposits or credit accounts), with the exception of
customary credits, adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

          (f) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;

          (g) Accounts with credit balances over ninety (90) days from invoice date;

          (h) Accounts owing from an Account Debtor, including Affiliates, whose total obligations to
Borrower exceed twenty-five (25%) of all Accounts, except for (i) SUN and NetApp, for which such
percentage is

- 20 -

 

fifty percent (50%), (ii) Hewlett-Packard for which such percentage is seventy percent (70%)
and (iii) Jabil for which such percentage is forty percent (40%), for the amounts that exceed that
foregoing percentages, unless Bank approves in writing;

          (i) Accounts owing from an Account Debtor which is a United States government entity or any
department, agency, or instrumentality thereof unless Borrower has assigned its payment rights to
Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940,
as amended;

          (j) Accounts for demonstration or promotional equipment, or in which goods are consigned, or
sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or other terms if Account
Debtor’s payment may be conditional;

          (k) Accounts owing from an Account Debtor that has not been invoiced or where goods or
services have not yet been rendered to the Account Debtor (sometimes called memo billings or
pre-billings);

          (l) Accounts subject to contractual arrangements between Borrower and an Account Debtor where
payments shall be scheduled or due according to completion or fulfillment requirements where the
Account Debtor has a right of offset for damages suffered as a result of Borrower’s failure to
perform in accordance with the contract (sometimes called contracts accounts receivable, progress
billings, milestone billings, or fulfillment contracts);

          (m) Accounts owing from an Account Debtor the amount of which may be subject to withholding
based on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the
extent of the amount withheld; sometimes called retainage billings);

          (n) Accounts subject to trust provisions, subrogation rights of a bonding company, or a
statutory trust;

          (o) Accounts owing from an Account Debtor that has been invoiced for goods that have not been
shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor have entered into an
agreement acceptable to Bank in its sole discretion wherein the Account Debtor acknowledges that
(i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the
goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from
Borrower (sometimes called “bill and hold” accounts);

          (p) Accounts owing from an Account Debtor with respect to which Borrower has received Deferred
Revenue (but only to the extent of such Deferred Revenue);

          (q) Accounts for which the Account Debtor has not been invoiced;

          (r) Accounts that represent non-trade receivables or that are derived by means other than in
the ordinary course of Borrower’s business;

          (s) Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond 90
days;

          (t) Accounts subject to chargebacks or others payment deductions taken by an Account Debtor
(but only to the extent the chargeback is determined invalid and subsequently collected by
Borrower);

          (u) Accounts in which the Account Debtor disputes liability or makes any claim (but only up to
the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding,
or becomes insolvent, or goes out of business; and

          (v) Accounts for which Bank in its good faith business judgment determines collection to be
doubtful.

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     “Equipment” is all “equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles
(including motor vehicles and trailers), and any interest in any of the foregoing.

     “ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

     “Event of Default” is defined in Section 8.

     “Funding Date” is any date on which a Credit Extension is made to or on account of Borrower
which shall be a Business Day.

     “GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other Person as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date of determination.

     “Governmental Approval” is any consent, authorization, approval, order, license, franchise,
permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or
other act by or in respect of, any Governmental Authority.

     “Governmental Authority” is any nation or government, any state or other political subdivision
thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions
of or pertaining to government, any securities exchange and any self-regulatory organization.

     “Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or
services, such as reimbursement and other obligations for surety bonds and letters of credit, (b)
obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease
obligations, and (d) Contingent Obligations.

     “Indemnified Person” is defined in Section 12.3.

     “Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral and Borrower’s
Books.

     “Insolvency Proceeding” is any proceeding by or against any Person under the United States
Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit
of creditors, compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

     “Intellectual Property” is (a) the manufacturing information and technology needed to produce
Borrower ‘s most current version(s) of its RAID Controllers, including (i) specifications,
software, schematics, designs, drawings, or other materials needed to manufacture the RAID
Controllers; and (ii) firmware and microcode of the RAID stack comprising the storage controller,
management controller, events controllers, software, firmware and microcode and (b) any other
intellectual property which is material to the operation of Borrower’s core business.

     “Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation all merchandise,
raw materials, parts, supplies, packing and shipping materials, work in process and finished
products, including without limitation such inventory as is temporarily out of Borrower’s custody
or possession or in transit and including any returned goods and any documents of title
representing any of the above.

     “Investment” is any beneficial ownership interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution to any Person.

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     “Letter of Credit” means a standby letter of credit issued by Bank or another institution
based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set
forth in Section 2.1.2.

     “Letter of Credit Application” is defined in Section 2.1.2(a).

     “Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other
encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise
against any property.

     “Loan Documents” are, collectively, this Agreement, the Perfection Certificate, any note, or
notes or guaranties executed by Borrower, and any other present or future agreement between
Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended,
restated, or otherwise modified.

     “Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s
Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the
business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment
of the prospect of repayment of any portion of the Obligations or (d) Bank determines, based upon
information available to it and in its reasonable judgment, that there is a reasonable likelihood
that Borrower shall fail to comply with the financial covenant in Section 6.9 during the next
succeeding financial reporting period.

     “Net Cash” means, at a given time, Borrower’s Cash and Cash Equivalents, minus all
Indebtedness owing from Borrower to Bank; provided however, for so long as Borrower’s Net Cash held
at Bank is greater than Five Million Dollars ($5,000,000) at all times after the Effective Date,
measured on a daily basis, for all other purposes under this Agreement, Net Cash shall be measured
on an average trailing three (3) month basis as of the last calendar day of each of the prior three
(3) calendar months.

     “Net Income” means, as calculated on a consolidated basis for Borrower for any period as at
any date of determination, the net profit (or loss), after provision for taxes, of Borrower for
such period taken as a single accounting period.

     “Net Worth” means stockholder’s equity as calculated in accordance with GAAP.

     “Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan
Documents, or otherwise, including, without limitation, all obligations relating to letters of
credit (including reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank,
and the performance of Borrower’s duties under the Loan Documents.

     “Operating Documents” are, for any Person, such Person’s formation documents, as certified
with the Secretary of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in
current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or
modifications thereto.

     “Overadvance” is defined in Section 2.2.

     “Perfection Certificate” is defined in Section 5.1.

     “Permitted Indebtedness” is:

          (a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;

          (b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

- 23 -

 

          (c) Subordinated Debt;

          (d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

          (e) Indebtedness incurred as a result of endorsing negotiable instruments received in the
ordinary course of business;

          (f) Indebtedness in an aggregate principal amount not to exceed One Million Dollars
($1,000,000) secured by Permitted Liens;

          (g) unsecured convertible notes having stated maturities no sooner than ninety (90) days after
the Revolving Line Maturity Date;

          (h) other unsecured Indebtedness not otherwise permitted by Section 7.4 not exceeding One
Million Dollars ($1,000,000) in the aggregate outstanding at any time; and

          (i) extensions, refinancings, modifications, amendments and restatements of any items of
Permitted Indebtedness (a) through (h) above, provided that the principal amount thereof is not
increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or
its Subsidiary, as the case may be.

     “Permitted Investments” are:

          (a) Investments shown on the Perfection Certificate and existing on the Effective Date;

          (b) (i) Cash Equivalents, and (ii) any Investments permitted by Borrower’s investment policy,
as amended from time to time, provided that such investment policy (and any such amendment thereto)
has been approved by Bank;

          (c) Investments consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of Borrower;

          (d) Investments consisting of deposit accounts in which Bank has a perfected security
interest;

          (e) Investments accepted in connection with Transfers permitted by Section 7.1 or Section 7.3;

          (f) Investments of Subsidiaries in or to other Subsidiaries or Borrower and Investments by
Borrower in Subsidiaries not to exceed Five Million Dollars ($5,000,000) in the aggregate;

          (g) Investments consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans to employees,
officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries
pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;

          (h) Investments (including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent obligations of, and other
disputes with, customers or suppliers arising in the ordinary course of business;

          (i) Investments consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business;
provided that this paragraph (i) shall not apply to Investments of Borrower in any Subsidiary;

- 24 -

 

          (j) Joint ventures or strategic alliances in the ordinary course of Borrower’s business
consisting of the licensing of technology, the development of technology or the providing of
technical support, provided that any cash Investments by Borrower do not exceed Two Million Five
Hundred Thousand Dollars ($2,500,000) in the aggregate in any fiscal year; and

          (k) Other Investments not otherwise permitted hereunder not exceeding One Million Dollars
($1,000,000) in the aggregate outstanding at any time.

     “Permitted Liens” are:

          (a) Liens existing on the Effective Date and shown on the Perfection Certificate or arising
under this Agreement and the other Loan Documents;

          (b) Liens for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains adequate reserves on
its Books, provided that no notice of any such Lien has been filed or recorded under the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

          (c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing
the acquisition of the Equipment securing no more than One Million Dollars ($1,000,000) in the
aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the Equipment;

          (d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature
arising in the ordinary course of business so long as such Liens attach only to Inventory, securing
liabilities in the aggregate amount not to exceed One Million Dollars ($1,000,000) and which are
not delinquent or remain payable without penalty or which are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of
the property subject thereto;

          (e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course of business (other than
Liens imposed by ERISA);

          (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (c), but any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the principal amount of the
indebtedness may not increase;

          (g) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or
Intellectual Property) granted in the ordinary course of Borrower’s business, if the
leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest;

          (h) non-exclusive license of Intellectual Property granted to third parties in the ordinary
course of business;

          (i) Liens arising from attachments or judgments, orders, or decrees in circumstances not
constituting an Event of Default under Sections 8.4 and 8.7; and

          (j) Liens in favor of other financial institutions arising in connection with Borrower’s
deposit and/or securities accounts held at such institutions, provided that Bank has a perfected
security interest in the amounts held in such deposit and/or securities accounts.

     “Person” is any individual, sole proprietorship, partnership, limited liability company, joint
venture, company, trust, unincorporated organization, association, corporation, institution, public
benefit corporation, firm, joint stock company, estate, entity or government agency.

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     “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.

     “Registered Organization” is any “registered organization” as defined in the Code with such
additions to such term as may hereafter be made

     “Requirement of Law” is as to any Person, the organizational or governing documents of such
Person, and any law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its property is subject.

     “Reserves” means, as of any date of determination, such amounts as Bank may from time to time
establish and revise in its good faith business judgment, reducing the amount of Advances and other
financial accommodations which would otherwise be available to Borrower (a) to reflect events,
conditions, contingencies or risks which, as determined by Bank in its good faith business
judgment, do or could reasonably be expected to adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without limitation any
increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any
Guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including
the enforceability, perfection and priority thereof); or (b) to reflect Bank’s good faith belief
that any collateral report or financial information furnished by or on behalf of Borrower to Bank
is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Bank determines in good faith constitutes an Event of Default or could
reasonably be expected to, with notice or passage of time or both, constitute an Event of Default.

     “Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial
Officer and Controller of Borrower.

     “Revolving Line” is an Advance or Advances in an amount equal to Thirty Million Dollars
($30,000,000), subject to Section 2.6.

     “Revolving Line Maturity Date” is the date three (3) years after the Effective Date.

     “Securities Account” is any “securities account” as defined in the Code with such additions to
such term as may hereafter be made.

     “Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now
or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar
agreement in form and substance satisfactory to Bank entered into between Bank and the other
creditor), on terms acceptable to Bank.

     “Subsidiary” means, with respect to any Person, any Person of which more than fifty percent
(50%) of the voting stock or other equity interests (in the case of Persons other than
corporations) is owned or controlled directly or indirectly by such Person or one or more of
Affiliates of such Person.

     “Transaction Report” is that certain report of transactions and schedule of collections in the
form attached hereto as Exhibit C.

     “Transfer” is defined in Section 7.1.

     “Unused Revolving Line Facility Fee” is defined in Section 2.4(c).

[Signature page follows.]

- 26 -

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
Effective Date.

	 	 	 	 	 
	BORROWER:
	 	 
	 
	 	 	 	 
	DOT HILL SYSTEMS CORP.	 	 
	 
	 	 	 	 
	By

	/s/
Hanif I. Jamal 

	 	 
	 

	 	 
	 
	 	 	 	 
	Name: 
	 	Hanif I. Jamal 	 	 
	 

	 

	 	 
	 
	 	 	 	 
	Title:
	 	Senior Vice President Chief
Financial Officer, and Treasurer 	 	 
	 

	 

	 	 
	 
	 	 	 	 
	BANK:
	 	 	 	 
	 
	 	 	 	 
	SILICON VALLEY BANK	 	 
	 
	 	 	 	 
	By

	/s/
Derek Hoyt 

	 	 
	 

	 	 
	 
	 	 	 	 
	Name: 
	 	Derek Hoyt 	 	 
	 

	 

	 	 
	 
	 	 	 	 
	Title:
	 	Deal Team Leader 	 	 
	 

	 

	 	 

Effective Date: July 21, 2008

 

 

EXHIBIT A — COLLATERAL DESCRIPTION

The Collateral consists of all of Borrower’s right, title and interest in and to the following
personal property:

     All Accounts (including health-care receivables), contract rights or rights to payment of
money, cash, Cash Equivalents, Deposit Accounts, Commodities Accounts and Securities Accounts
whether now owned or hereafter acquired, wherever located; and

     all Borrower’s Books, instruments (including any promissory notes), chattel paper (whether
tangible or electronic) and supporting obligations relating to the foregoing, and any and all
claims, rights and interests in any of the above and all substitutions for, additions, attachments,
accessories, accessions and improvements to and replacements, products, proceeds and insurance
proceeds of any or all of the foregoing.

     Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed
not to encumber any of its Inventory or Intellectual Property (except for Permitted Liens), and any
claims for damage by way of any past, present, or future infringement of any of the foregoing,
without Bank’s prior written consent.

     All defined terms above shall have the meanings ascribed to such terms in that certain Loan
and Security Agreement between Borrower and Silicon Valley Bank dated as of July 21, 2008, as may
be amended from time to time.

 

 

Exhibit B — Loan Payment/Advance Request Form

Deadline for same day processing is Noon P.S.T.

	 	 	 	 	 	 	 
	Fax To:

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 

LOAN PAYMENT:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	DOT HILL SYSTEMS CORP.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	From Account #

	 	 	 	 	 	To Account #	 	 	 	 
	 

	 

(Deposit Account #)
	 	 
	 	 	 

(Loan Account #)
	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Principal $

	 	 	 	 	 	and/or Interest $	 	 	 	 
	 

	 	 
	 	 	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Authorized Signature:	 	 	 	 	 	Phone Number:	 	 	 	 
	Print Name/Title:

	 	 

	 	 
	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 

Loan Advance:

Complete Outgoing Wire Request section below if all or a portion of the funds from this loan
advance are for an outgoing wire.

	 	 	 	 	 	 	 	 	 	 	 
	From Account #

	 	 	 	 	 	To Account #	 	 	 	 
	 

	 

(Loan Account #)
	 	 
	 	 	 

(Deposit Account #)
	 	 

	 	 	 	 	 
	Amount of Advance $
	 	 	 	 
	 

	 	 

	 	 

All Borrower’s representations and warranties in the Loan and Security Agreement are true, correct
and complete in all material respects on the date of the request for an advance; provided, however,
that such materiality qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and provided, further that
those representations and warranties expressly referring to a specific date shall be true, accurate
and complete in all material respects as of such date:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Authorized Signature:	 	 	 	 	 	Phone Number:	 	 	 	 
	 

	 	 

	 	 
	 	 	 

	 	 
	Print Name/Title:
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 

Outgoing Wire Request:

Complete only if all or a portion of funds from the loan advance above is to be wired.

Deadline for same day processing is noon, P.S.T.

	 	 	 	 	 	 	 	 	 	 	 
	Beneficiary Name: 
	 	 	 	 	 	Amount of Wire: $ 	 	 	 	 
	Beneficiary Bank:

	 

	 	 
	 	Account Number:
	 

	 	 
	City and State:

	 

	 	 
	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Beneficiary Bank Transit (ABA) #:

	 	 	 	 	 	Beneficiary Bank Code (Swift, Sort, Chip, etc.):	 	 	 	 
	 

	 

	 	 
	 	(For International Wire Only)
	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Intermediary Bank:

	 	 	 	 	 	Transit (ABA) #:	 	 	 	 
	For Further Credit to: 

	 

	 	 
	 	 	 

	 	 
	 	 
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Special Instruction:
	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be
processed in accordance with and subject to the terms and conditions set forth in the agreements(s)
covering funds transfer service(s), which agreements(s) were previously received and executed by me
(us).

	 	 	 	 	 	 	 	 	 	 	 
	Authorized Signature:

	 	 	 	 	 	2nd Signature (if required):	 	 	 	 
	 

	 	 
	 	 

	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Print Name/Title:

	 	 	 	 	 	Print Name/Title:	 	 	 	 
	Telephone #:

	 

	 	 
	 	Telephone #:
	 

	 	 
	 

	 	 
	 	 

	 	 

1

 

EXHIBIT C

Transaction Report

[EXCEL spreadsheet to be provided separately from lending officer.]

 

 

EXHIBIT D

BORROWING RESOLUTIONS

CORPORATE BORROWING CERTIFICATE

			
	Borrower: DOT HILL SYSTEMS CORP.

Bank:           Silicon Valley Bank
	 	Date: July 21, 2008

I hereby certify as follows, as of the date set forth above:

1. I am the Secretary, Assistant Secretary or other officer of the Borrower. My title is as set
forth below.

2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the
laws of the State of

                                                             .

           [print name of state]

3. Attached hereto are true, correct and complete copies of Borrower’s Certificate of
Incorporation (including amendments), as filed with the Secretary of State of the state in which
Borrower is incorporated as set forth in paragraph 2 above. Such Certificate of Incorporation have
not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect
as of the date hereof.

4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a
duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized
corporate action). Such resolutions are in full force and effect as of the date hereof and have
not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them
until Bank receives written notice of revocation from Borrower.

Resolved, that any one of the following officers or employees of Borrower, whose names,
titles and signatures are below, may act on behalf of Borrower:

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Authorized to
	 	 	 	 	 	 	Add or Remove
	Name	 	Title	 	Signature	 	Signatories
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	o
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	o
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	o
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	o
	 

	 	 
	 	 	 	 

Resolved Further, that any one of the persons designated above with a checked box
beside his or her name may, from time to time, add or remove any individuals to and from the
above list of persons authorized to act on behalf of Borrower.

Resolved Further, that such individuals may, on behalf of Borrower:

Borrow Money. Borrow money from Silicon Valley Bank (“Bank”).

 

 

Execute Loan Documents. Execute any loan documents Bank requires.

Grant Security. Grant Bank a security interest in any of Borrower’s assets.

Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or
other indebtedness in which Borrower has an interest and receive cash or otherwise use the
proceeds.

Letters of Credit. Apply for letters of credit from Bank.

Further Acts. Designate other individuals to request advances, pay fees and costs and
execute other documents or agreements (including documents or agreement that waive Borrowers
right to a jury trial) they believe to be necessary to effectuate such resolutions.

Resolved Further, that all acts authorized by the above resolutions and any prior acts
relating thereto are ratified.

5. The persons listed above are Borrower’s officers or employees with their titles and signatures
shown next to their names.

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

     *** If the Secretary, Assistant Secretary or other certifying officer executing above is
designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers,
this Certificate must also be signed by a second authorized officer or director of Borrower.

     I, the                                          of Borrower, hereby certify as to paragraphs 1 through 5
above, as of the date set forth above.

[print title]

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 

 

 

EXHIBIT E — COMPLIANCE CERTIFICATE

	 	 	 	 	 	 	 
	TO: SILICON VALLEY BANK

	 	Date:	 	 	 	 
	FROM: DOT HILL SYSTEMS CORP.

	 	 	 	 

	 	 

     The undersigned authorized officer of DOT HILL SYSTEMS CORP. (“Borrower”) certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the
“Agreement”), (1) Borrower is in complete compliance for the period ending                      with all
required covenants except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all material respects on
this date except as noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required
tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to
the terms of Section 5.12 of the Agreement, and (5) no Liens have been levied or claims made
against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to Bank. Attached are the required
documents supporting the certification. The undersigned certifies that these are prepared in
accordance with GAAP consistently applied from one period to the next except as explained in an
accompanying letter or footnotes or as permitted in the Agreement. The undersigned acknowledges
that no borrowings may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is determined not just at
the date this certificate is delivered. Capitalized terms used but not otherwise defined herein
shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	Transaction Report

	 	Weekly if Net Cash is less than
$20,000,000 and with each Advance
	 	Yes   No
	 
	 	 	 	 
	10-Q, 10-K and 8-K

	 	Within 5 days after filing with SEC
	 	Yes   No
	 
	 	 	 	 
	Compliance Certificate

	 	With 10-Q or 10-K
	 	Yes   No
	 
	 	 	 	 
	Cash Balance report, A/R & A/P Agings

	 	Monthly within 20 days
	 	Yes   No
	 
	 	 	 	 
	Annual Board of Director-approved projections

	 	March 31 of each year
	 	Yes   No

	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	Maintain on a Quarterly Basis:
	 	 	 	 	 	 
	Minimum Net Worth

	 	$                    *
	 	$                    
	 	Yes   No

 
 

*  ($55,000,000) increasing quarterly by fifty percent (50%) of Net Income and monthly by fifty
percent (50%) of issuances of equity after the Effective Date and the principal amount of
Subordinated Debt.

     The following are the exceptions with respect to the certification above: (If no exceptions
exist, state “No exceptions to note.”)

 

 

	 	 	 	 	 	 	 	 	 	 	 
	DOT HILL SYSTEMS CORP.	 	 	 	BANK USE ONLY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	 	 	 	 	Received by:	 	 
	 

	 	 

	 	 
	 	 	 	 

	 	 
	Name:

	 	 	 	 	 	 	 	authorized signer	 	 
	 

	 	 

	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 

	 	 
	 	 

	 	 
	 

	 	 	 	 	 	Verified:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	 	 	authorized signer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

 

 

Compliance Status:           Yes     No

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