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Exhibit 10.21  

 
 

AGREEMENT    
    

        THIS AGREEMENT ("Agreement") is entered into this 8th day of December, 2005, and is effective as of December 4, 2005 ("Effective Date"), by and between
CEPHALON, INC., a Delaware corporation, with its principal place of business at 41 Moores Road, Frazer, Pennsylvania 19355 (together with its Affiliates, referred to hereinafter as "Cephalon"),
on the one hand, and Teva Pharmaceutical Industries Ltd., an Israeli corporation, with its principal place of business located at 5 Basel St., Petah Tikva, Israel (hereinafter "Teva Israel"),
and Teva Pharmaceuticals USA, Inc., a Delaware corporation, with its principal place of business located at 1090 Horsham Road, P.O. Box 1090, North Wales, Pennsylvania 19454 (hereinafter
"Teva USA") (Teva Israel and Teva USA, each together with its and their Affiliates, shall be collectively referred to hereinafter from time to time as "Teva"). 

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

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

        WHEREAS
by letter dated February 25, 2003, Teva notified Cephalon that Teva had submitted ANDA No. 76-596 to the FDA under Section 505(j) of the Federal
Food, Drug and Cosmetic Act (21 U.S.C. § 355(j)), seeking approval to engage in the commercial manufacture, use, and sale of tablets containing 100 mg and 200 mg of modafinil, a generic
version of PROVIGIL® modafinil tablets, before the expiration date of the RE “516 Patent. 

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

 

        WHEREAS Cephalon timely filed suit against Teva and three other companies that had also filed Paragraph IV ANDAs concerning
PROVIGIL® modafinil in an action captioned Cephalon, Inc. v. Mylan Pharmaceuticals Inc., et al., Civil Action
No. 03-CV-1394 (JCL), in the United States District Court for the District of New Jersey, seeking, among other things, a declaration that Teva's making, using, offering
to sell, selling, or importing Teva ANDA Modafinil tablets would infringe the RE “516 Patent, an order providing that the effective date of any approval of Teva's ANDA
No. 76-596 shall be a date which is not earlier than the date of the expiration of the RE “516 Patent; and an order permanently enjoining Teva from making, using,
offering to sell, selling, or importing tablets as described in Teva's ANDA No. 76-596 until after the date of the expiration of the RE “516 Patent. 

        WHEREAS,
Teva answered Cephalon's complaint by denying infringement, and by asserting affirmative defenses that the RE “516 patent is either not infringed, invalid and/or
unenforceable. 

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

        WHEREAS,
Cephalon, Cephalon (UK) Limited, Teva UK Limited and Tenlec Pharma Limited are parties to a lawsuit in the United Kingdom High Court of Justice, Chancery Division, HC 05 CO 1802
(the "UK Action"). 

        WHEREAS,
Cephalon is the owner of European Patents (UK) Nos. 0 731 698 and 0 966 962 for "Modafinil having defined particle size'," (the "UK Patents"), which are the subject of the UK
Action. 

        WHEREAS,
the parties respectively possess other relevant intellectual property rights 

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

2

 

related to modafinil in the United States, Europe or elsewhere that are or may be the subject of further as yet unfiled disputes between the parties related to
matters at issue in the respective litigations in the United States and/or United Kingdom, or with respect to which the parties may have interest in reaching suitable commercial arrangements so as to
avoid the necessity of future litigation. 

        WHEREAS,
to avoid the time and expense of further litigation, and in compromise of the disputed claims set forth above, the parties now desire to resolve their disputes on a worldwide
basis, including, but not limited to, with respect to the litigation matters pending in the United States and the United Kingdom, by settlement and to enter into such licensing or other commercial
arrangements as shall fairly effect an amicable resolution of such unfiled disputes to avoid the time and expense of future potential litigation. 

        WHEREAS,
Cephalon desires to license from Teva Israel, and Teva Israel is willing to license to Cephalon on the terms and conditions set forth herein, worldwide intellectual property
rights owned by Teva that relate to the compound modafinil [**]. 

        WHEREAS,
in addition to the above-described arrangements, 

	(a)
	the
parties desire to provide for the supply by Teva Israel and the purchase by Cephalon of the active pharmaceutical ingredient ("API") modafinil; and

	(b)
	Teva
desires to obtain and Cephalon desires to grant Teva a license to use certain clinical and safety data obtained from studies of [**]. 

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

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

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1.     DEFINITIONS  

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

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

        1.3
"Cephalon Modafinil Product" shall mean [**]. 

        1.4
"Teva Generic Modafinil Product" shall mean any Subject Modafinil Product marketed and sold by Teva pursuant to the terms of this Agreement or the same or similar finished
pharmaceutical product that contains modafinil as the active ingredient marketed and sold by Teva in a jurisdiction other than the United States. 

        1.5
"Teva USA" shall mean the corporation so designated in the preamble and shall also include its predecessors, successors, assigns, subsidiaries, divisions, and groups. 

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

4

 

        1.6 "Teva Israel" shall mean the corporation so designated in the preamble and shall also include its predecessors, successors, assigns,
subsidiaries, divisions, and groups. 

        1.7
"Teva ANDA Modafinil Product" shall mean [**]. 

        1.8
"Teva Modafinil ANDA" shall mean ANDA No. 76-596. 

        1.9
"Cephalon" shall mean the corporation so designated in the preamble and shall also include its predecessors, successors, assigns, subsidiaries, divisions, and groups. 

        1.10
"Date Certain" shall mean the later of: (a) October 6, 2011 (three years prior to the expiration of the Patent In Suit); or (b) in the event that Cephalon
obtains a pediatric extension on the Patent in Suit, April 6, 2012 (which is three years prior to the expiration of the pediatric extension, if obtained). 

        1.11
"Generic Modafinil Product" shall mean any Subject Modafinil Product that is not marketed under the mark PROVIGIL®. 

        1.12
"Listed Patents" shall mean [**]. 

        1.13
"Modafinil Litigation" shall mean (a) Cephalon, Inc. v. Mylan Pharmaceuticals Inc., et al., Civil Action
No. 03-CV-1394 (JCL), pending in the United States District Court for the District of New Jersey; (b) Cephalon, Inc. v. Carlsbad
Tech., Inc., Civil Action No. 05-CV-1089 (JCL), pending in the United States District Court for the District of New Jersey; and
(c) any action filed under Title 35, United States Code, 35 U.S.C. §§ 271 and 281 against any Modafinil Paragraph IV ANDA Filing Entity. 

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

5

   
        1.14 "Modafinil Paragraph IV ANDA Filing Entity" shall mean any entity that has notified or subsequently notifies Cephalon that it has filed an ANDA with a Paragraph IV
certification concerning a product containing modafinil as an active ingredient for which PROVIGIL® (or any modafinil drug product that is the subject of Cephalon's NDA 20-717)
is the reference listed drug. 

        1.15
"Net Profits" shall mean the gross receipts derived in arms-length transactions from the sale of Teva Generic Modafinil Product in the United States, or applicable other
markets by Teva (or by its Affiliates or sublicensees), to independent third parties in the United States or applicable other markets, less the sum of the following items: 

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

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

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

	(d)
	Transportation,
freight and insurance allowances;

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

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

6

 

	(f)
	The
purchase price paid to Cephalon for Teva Generic Modafinil Product pursuant to any applicable Cephalon/Teva License and Supply Agreement, or Teva's costs of making Teva Generic
Modafinil Product. 

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

        Where
(i) Teva Generic Modafinil Product is sold as one of a number of items without a separate price; or (ii) the consideration for the Teva Generic Modafinil Product
shall include any non-cash element; or (iii) the Teva Generic Modafinil Product shall be transferred in any manner other than an invoiced sale, the gross sales applicable to any
such transaction shall be deemed to be the selling party's average gross sales for the applicable quantity of Teva Generic Modafinil Product during the calendar quarter. If there are no independent
gross sales of Teva Generic Modafinil Product in the United States or applicable other markets at that time, then Teva and Cephalon shall appoint a mutually acceptable third party (that is not an
Affiliate of either Teva or Cephalon) to determine in good faith an estimate of the gross sales applicable to any such transactions based on a consideration of all relevant market factors, taking into
account practices and policies customary in the industry. 

        1.16
"Net Sales" shall mean the gross receipts derived in arms-length transactions from the sale of Cephalon 

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

7

 

Modafinil Product in the United States or other applicable markets by Cephalon (or by its Affiliates, distributors and resellers) (but excluding any sales of
Cephalon Modafinil Product sold by Cephalon to Teva in the United Kingdom pursuant to the terms of the United Kingdom supply and distribution agreement to be entered into by the parties as
contemplated in Section 2.6, or pursuant to the terms of any analogous agreements between the parties for other EU countries as contemplated by that Section) to independent third parties in the
United States or other applicable markets, less the sum of the following items: 

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

	(b)
	Credit
for returns, refunds, rebates and allowances, or trades to customers for returned or recalled Cephalon Modafinil Product;

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

	(d)
	Transportation,
freight and insurance allowances; and

	(e)
	Rebates
actually granted to wholesalers or other customers, administrative fees in lieu of rebates paid to managed care and other similar institutions, chargebacks and retroactive
price adjustments and any other similar allowances which effectively reduce the net selling price. 

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

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

8

 

        Where (i) Cephalon Modafinil Product is sold as one of a number of items without a separate price; or (ii) the consideration for the
Cephalon Modafinil Product shall include any non-cash element; or (iii) the Cephalon Modafinil Product shall be transferred in any manner other than an invoiced sale, the gross
sales applicable to any such transaction shall be deemed to be the selling party's average gross sales for the applicable quantity of Cephalon Modafinil Product during the calendar quarter. If there
are no independent gross sales of Cephalon Modafinil Product in the United States at that time, then Teva and Cephalon shall appoint a mutually acceptable third party (that is not an Affiliate of
either Teva or Cephalon) to determine in good faith and estimate of the gross sales applicable to any such transactions based on a consideration of all relevant market factors, taking into account
practices and policies customary in the industry. 

        1.17
"Other Modafinil Paragraph IV ANDA Filing Entity" shall mean any Modafinil Paragraph IV ANDA Filing Entity besides Teva or Cephalon or its and their Affiliates. 

        1.18
"Patent In Suit" shall mean the RE “516 Patent. 

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

9

 

        1.19 "Subject Modafinil Product" shall mean [**]. 

        1.20
"Intellectual Property Rights" means all patents (including, without limitation, all reissues, extensions, substitutions, confirmations, re-registrations,
re-examinations, invalidations, supplementary protection certificates and patents of addition) and patent applications (including, without limitation, all provisional applications,
continuations, continuations-in-part and divisions), copyrights, data rights, trade secret
rights, and know-how owned by Teva on or after the Effective Date that claim or otherwise cover any aspect of the compound modafinil, including, without limitation,
[**], including without limitation those set forth in Annex 1.20 of this Agreement. 

2.     OBLIGATIONS OF THE PARTIES  

        2.1
Teva and Cephalon Warranties Regarding the Action. 

        The
parties agree that this Agreement includes a settlement which is a compromise of disputed claims and that acceptance of the consideration herein is not to be construed as an
admission by either party as to the underlying merits of the Action. However, as an express inducement to Cephalon to enter into this settlement, in consideration of the terms hereof, Teva hereby
warrants, represents and agrees that Teva, on behalf of itself and its Affiliates, will not make, use, offer to sell, or sell or actively induce or assist any other entity to make, use, offer to sell,
or sell Subject Modafinil Product within the United States, or to import or cause to be imported any Subject Modafinil Product into the United States, except as otherwise permitted under, and
according to the terms of, the license granted by Cephalon in this Agreement. The parties agree that [**]. 

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

10

 

        2.2 License to Cephalon. 

	(a)
	Teva
Israel hereby grants to Cephalon a non-exclusive, worldwide license to all Intellectual Property Rights solely for the manufacture, development, formulation, use,
sale, offer for sale, and importation of finished pharmaceutical products that contain the compound modafinil, including, without limitation, [**]. Further, as an express
inducement to Teva to enter into this Agreement, in consideration of the terms hereof, Cephalon hereby warrants, represents and agrees that Cephalon, on behalf of itself and its Affiliates, will not
challenge or otherwise dispute any issued patents included in the Intellectual Property Rights on a worldwide basis.

	(b)
	In
consideration of the license set forth in Section 2.2 (a) above, Cephalon shall make royalty payments to Teva Israel as follows, commencing as of the Effective Date:

	(i)
	within
[**]: a lump sum royalty payment of [**] for the Intellectual Property Rights licensed hereunder;

	(ii)
	upon
the achievement of worldwide sales by Cephalon and its Affiliates of [**] as determined based upon IMS data, a lump sum payment of
[**];

	(iii)
	upon
the achievement of worldwide sales by Cephalon and its Affiliates of [**] as determined based upon IMS data, a lump sum payment of
[**];

	(iv)
	on
the date of [**], a lump sum payment [**]; and

	(v)
	From
January 1, 2006 and until the earlier of: 

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

11

 

	(a)
	the
last to expire of any issued patents in the Intellectual Property Rights containing a valid and enforceable claim (the Intellectual Property Rights will be deemed valid and
enforceable unless determined otherwise by a final nonappealable decision of a court of competent jurisdiction); or

	(b)
	such
time as the cumulative sum of all royalties paid by Cephalon under this Section 2.2 (b) (i) through(iv) above & this Section 2.2
(b) (v), as demonstrated by its accounting records maintained in accordance with GAAP, shall have reached a total of [**] ("Royalty Cap"); 

        Cephalon
shall pay to Teva a royalty in the amount of [**]. For the removal of doubt, both this [**] royalty payment and the lump sum
payments set forth in Section 2.2 (b) (i) through (iv) shall apply against the Royalty Cap. 

	(c)
	It
is understood and agreed that upon the earlier of (i) the last to expire of any issued patents in the Intellectual Property Rights containing a valid and enforceable claim
(the Intellectual Property Rights will be deemed valid and enforceable unless determined otherwise by a final nonappealable decision of a court of competent jurisdiction) or (ii) the date as of
which Cephalon royalty payments have reached the Royalty Cap, Cephalon's royalty obligation shall cease and Cephalon shall thereupon have a fully-paid up non-exclusive,
worldwide license to all such Intellectual Property Rights owned by Teva.

	(d)
	Cephalon
agrees to use commercially reasonable efforts to sell the Cephalon Modafinil Product. 

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

12

   
        2.3 License to Teva of the Right to Use of [**] 

        In
consideration of the payment by Teva Israel to Cephalon of the amount of [**], Cephalon hereby grants to Teva the right to use certain clinical and safety data
[**], including the categories of information and data set forth on Annex 2.3.1 hereto, agrees to cooperate promptly in good faith with the reasonable requests of Teva for
assistance in identifying and providing such further information related thereto as may be in Cephalon's possession and control as Teva shall reasonably and in good faith request from time to time,
and hereby consents to the use of such data by Teva solely for purposes of supporting [**]. The above-mentioned [**] payment shall be made by Teva
Israel to Cephalon within [**]. 

        Cephalon
represents that it has or is or will be authorized by all necessary authority to permit Teva the right to use the information for the above purposes. Cephalon agrees to
cooperate in good faith to [**]. 

        2.4
Modafinil API Supply Agreement 

        Cephalon
and Teva Israel shall enter into a supply agreement, by which Teva Israel shall supply, and Cephalon shall purchase in the United States the following annual volumes of
modafinil API per Cephalon specifications at the below prices and upon such other reasonable and customary terms in the industry as the parties shall negotiate in good faith, it being understood that
Teva Israel shall use its commercially reasonable efforts to work continuously in good faith to reduce associated costs and increase efficiencies while consistently meeting specifications, and to
reflect all such cost reductions and efficiencies through appropriate 

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

13

 

        reductions
to the per kilogram price. In addition, the parties agree to cooperate in good faith to work together to help reduce costs. 

        Teva
Israel warrants and represents that the Year 1 price below in this Section 2.4 reflects [**]. For purposes of this Section, the parties agree that the
initial year of this five year supply commitment shall be calendar year [**]. The parties further agree that they shall undertake to work together in good faith promptly
following the Effective Date to qualify Teva API material in Cephalon's regulatory filings for modafinil. 

        Teva
Israel agrees to supply and Cephalon agrees to purchase modafinil API per Cephalon specifications at the below minimum quantities as follows: 

        Contract
Year 

	 
	 	Minimum

Kg Price
	 	Volume
	 	Total Payment
	 
	1	 	[**]	*	[**]	 	[**]	*
	2	 	[**]	*	[**]	 	[**]	*
	3	 	[**]	*	[**]	 	[**]	*
	4	 	[**]	*	[**]	 	[**]	*
	5	 	[**]	*	[**]	 	[**]	*

*=subject
to Teva's agreement to use commercially reasonable efforts to work continuously in good faith to reduce costs and create efficiencies while consistently meeting specifications and to reflect
all such reductions and efficiencies through appropriate reductions to the associated per kilogram price. 

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

14

 

        2.5
Settlement of UK Action and Other Potential Disputes; And Associated Teva Warranties. 

	(a)
	The
parties agree that this Agreement includes a settlement which is a compromise of disputed claims and that acceptance of the consideration herein is not to be construed as an
admission by either party as to the underlying merits of the UK Action or any other dispute. However, as an express inducement to Cephalon to enter into the settlement of the UK Action, and the
settlement of potential litigation and disputes in other countries where Cephalon holds modafinil patent rights, Teva Israel, on behalf of itself and its Affiliates, hereby warrants, represents and
agrees that Teva will not itself make, use, offer to sell, or sell or actively induce or assist any other entity to make, use, offer to sell, or sell any finished drug which has modafinil as an active
ingredient within the United Kingdom or any other country where Cephalon holds modafinil patent rights (other than in the United States market which is addressed in Section 2.1 above) or to
import or cause to be imported any finished drug which has modafinil as an active ingredient into the United Kingdom or any other country where Cephalon holds modafinil patent rights (other than the
United States market which is addressed in Section 2.1 above), except as otherwise permitted under, and according to the terms of, the license granted by Cephalon in connection with this
Agreement. Subject to Section 3.6 below, the parties agree that [**].

	(b)
	In
full and final settlement of the UK Action (to be dismissed in accordance with Section 4.2 below), Cephalon shall, within [**] of the entry of an
appropriate order of the English Court dismissing the UK Action with prejudice, release or otherwise pay to Teva Israel the proceeds of the bond issued to Teva Israel by Cephalon in connection with
said 

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

15

 

litigation
in the amount of [**], in recognition of the savings inuring to Cephalon in terms of the avoidance of costs, expenditure of time and resources, disruption and burden
associated with prosecuting such litigation in the United Kingdom. 

	(c)
	[**],
Cephalon shall make a [**] payment to Teva Israel of [**] in recognition of the savings inuring to
Cephalon in terms of the avoidance of costs, expenditure of time and resources, disruption and burden associated with prosecuting patent or other litigation in European and other markets outside of
the United States or the United Kingdom, wherein Cephalon and Teva have intellectual property rights that are or may in the future be the subject of patent disputes. 

        2.6
United Kingdom Supply and Distribution Agreement, and Other Potential Distribution Arrangements. 

	(a)
	Cephalon
shall appoint Teva UK Limited (or shall appoint such other subsidiary designated by Teva Israel) as the exclusive distributor in the United Kingdom for all Cephalon Modafinil
Product for a period of [**] commencing on or about [**] and shall supply such products to Teva at a price equal to [**]. These
terms shall be set forth in an exclusive supply and distribution agreement between Cephalon and the appointed distributor and all terms of said agreement shall be negotiated in good faith by the
parties and shall comply with all applicable laws and be substantially similar to those customary in the industry. Cephalon shall provide sufficient quantities of Cephalon Modafinil Product to Teva in
advance of the commencement date to allow for timely launch by Teva in the United Kingdom. 

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

16

 

	(i)
	Upon
[**], Cephalon shall [**] to Teva Israel, in recognition of the cost and expense involved in Teva's preparation for
[**] and in recognition of the license to the Intellectual Property Rights.

	(ii)
	In
the event that Teva intends to enter the United Kingdom with its own generic modafinil product, as permitted hereunder pursuant to Article 3, the parties
shall discuss in good faith any appropriate modifications to the exclusive supply and distribution agreement. If the parties are unable to agree upon such appropriate modifications despite such good
faith efforts within thirty (30) days, the exclusive supply and distribution agreement shall terminate.

	(b)
	The
parties will also undertake to consider in good faith whether a similar resale and distribution services provider arrangement as discussed above in this Section 2.6 may be
feasible in any other countries. 

        2.7
Potential Expansion of TREANDA® Supply Agreement 

        The
parties agree to discuss commercially reasonable terms for expansion of an existing clinical supply and development relationship between Cephalon and Teva's affiliate, Pharmachemie
B.V., to include a potential commercial supply agreement for Cephalon requirements for the API contained in the Cephalon cancer drug TREANDA®. 

        2.8
Teva Generic Rights. Cephalon shall also grant Teva the generic rights set forth in Section 3 below 

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

17

 

3.     TEVA GENERIC RIGHTS  

        3.1
Generic Rights. Cephalon grants to Teva the non-exclusive right under the Listed Patents (as applicable) to manufacture, use, market and sell Generic Modafinil Product in
the United States and other markets (including provision of modafinil API for Subject Modafinil Product or finished drug which has modafinil as an active ingredient) according to the following terms: 

        3.1.1
Teva's generic rights under section 3.1 shall be effective on the Date Certain in the United States, or with respect to any market outside the United States, the earlier of
October 6, 2012 or the date which is three calendar years prior to the expiration of the applicable patents and exclusivities in such markets. Teva shall pay Cephalon a royalty equal to
[**] sold by Teva and/or its Affiliates in the United States and other markets on or after the effective date of such generic rights until the later of (i) the
expiration of all Listed Patents (as applicable) or (ii) the end of any pediatric extension on the Patent in Suit, or with respect to any market outside of the United States, the equivalent
later date in such market, subject to any subsequent negotiation concerning an extension of generic rights. 

        3.1.2
Notwithstanding Section 3.1.1 above, in the event that Cephalon licenses or permits any other entity to sell any Generic Modafinil Product in the United States or other
applicable market prior to the applicable effective date of Teva's generic rights as set forth above in Section 3.1.1, Teva's generic rights under Section 3.1 shall become effective in
that market at the same time, i.e., no later than the
earliest date on which such other licensed entity begins selling a Generic Modafinil Product in the United States or 

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

18

 

other
applicable markets. In the event that Teva is permitted to sell Teva Generic Modafinil Product in the United States or other applicable markets prior to the applicable effective date of Teva's
generic rights as set forth above in Section 3.1.1, Teva shall pay Cephalon a royalty equal to [**] sold by Teva and/or its Affiliates in the United States and other
markets prior to the effective date of Teva's generic rights as set forth above in Section 3.1.1. 

        3.1.3
Notwithstanding Section 3.1.1 and subject to Section 3.1.2, in the event that any Other Modafinil Paragraph IV ANDA Filing Entity sells in the United States
any Subject Modafinil Product prior to a non-appealable final judgment in any Modafinil Litigation to which such Other Modafinil Paragraph IV ANDA Filing Entity is a party, Teva's
non-exclusive generic right shall be effective at the same time, subject to the following restrictions: 

        3.1.3.1
Teva shall pay to Cephalon prior to the effective date of Teva's generic rights as set forth above in Section 3.1.1. a royalty equal to [**] made
by Teva and/or its Affiliates pursuant to Section 3.1.3, unless and to the extent and during any period that Cephalon has licensed or permitted another entity to sell any Generic Modafinil
Product pursuant to Section 3.1.2, in which case the royalty rate from that Section shall apply. 

        3.1.3.2
In the event that Cephalon seeks a temporary restraining order or other relief against such Other Modafinil Paragraph IV ANDA Filing Entity to stop such Entity from
offering to sell or selling in the United States its Subject Modafinil Products, Teva and/or its Affiliates may continue to market and sell Teva Generic Modafinil Product in 

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

19

 

the
United States until a court of competent jurisdiction renders a decision on Cephalon's request for a temporary restraining order or other relief, as further described in Sections 3.1.3.3 through
3.1.3.4. 

        3.1.3.3
If Cephalon obtains a temporary restraining order or other relief sufficient to stop further offers to sell or sales in the United States of Subject Modafinil Products by all
such Other Modafinil Paragraph IV ANDA Filing Entities, and assuming that Cephalon has directed all licensed or permitted entities to cease offering to sell and/or sell Generic Modafinil
Product and such licensed or permitted entities have in fact ceased offering to sell and/or selling Generic Modafinil Product, 

	(a)
	Teva's
generic rights shall be suspended until the earlier of (i) the date the injunction is lifted, (ii) the date of entry into the market of any licensed
or permitted entity selling Generic Modafinil Product, or (iii) the Date Certain, and Teva and/or its Affiliates shall immediately cease offering to sell and/or selling any Teva Generic
Modafinil Product until such date, and

	(b)
	[**].

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

20

  

        3.1.3.4
If Cephalon requests but does not obtain a temporary restraining order or other relief, Teva may continue to market and sell Teva Generic Modafinil Product in the United States
until the resolution of pending Modafinil Litigation. Teva shall continue to pay to Cephalon a royalty equal to [**] as set forth in Sections 3.1.3.1 above, until the Date
Certain, at which time, the royalty rate effective in Section 3.1.1 shall apply (or upon the entry of a Cephalon licensee or other permitted entity of Generic Modafinil Product as provided in
Section 3.1.2, at which time, the royalty rate effective in Section 3.1.2 shall apply).    

        3.1.3.5
Nothing in this Section or the Agreement shall obligate Cephalon to seek injunctive or other relief to stop such Other Modafinil Paragraph IV ANDA Filing Entity from
offering to sell or selling Subject Modafinil Products in the United States. 

        3.1.3.6
In the event that Cephalon prevails against all such Other Modafinil Paragraph IV ANDA Filing Entities in Modafinil Litigation, such that offers to sell or sales in the
United States of Subject Modafinil Products by all such Other Modafinil Paragraph IV ANDA Filing Entities are admitted by such Other Modafinil Paragraph IV ANDA Filing Entities or held
by the court to infringe one or more valid and enforceable claims of the Listed Patents, Teva's generic rights shall be suspended until the Date Certain and Teva and/or its Affiliates shall
immediately cease marketing and/or selling Teva Generic Modafinil Product until the Date Certain (or upon the entry of a Cephalon licensee or other permitted entity of Generic Modafinil Product as
provided in Section 3.1.2). [**]. 

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

21

 

        3.1.3.7
Notwithstanding Section 3.1.1 above, in the event that a final, non-appealable judgment in Modafinil Litigation is entered prior to the Date Certain declaring
that one or more Other Modafinil Paragraph IV ANDA Filing Entities may offer to sell or sell Subject Modafinil Products in the United States without infringing any valid, enforceable claim of
any Listed Patent on which Cephalon has brought suit, Teva may then market and sell Teva Generic Modafinil Product in the United States. If such final judgment is based on a finding of the invalidity
of the Patent in Suit or the
Patent in Suit is found to be unenforceable, no royalty will thereafter be due to Cephalon. Otherwise, Teva shall pay a royalty to Cephalon of [**]. 

        3.2
Cephalon and Teva agree that, [**] of the date of this Agreement, they shall prepare and execute whatever documents are necessary to carry out the terms of
Sections 2 and 3 above, which documents shall include, without limitation, the following: (a) License Agreement with respect to those licenses set forth in Article III,
(b) Intellectual Property License Agreement, (c) United Kingdom Exclusive Supply and Distribution Agreement, (d) API Supply Agreement. However, subject to applicable laws, the
terms and conditions contained herein are binding notwithstanding the failure of the parties to enter into the agreements referenced in this Section 3.2. 

        3.3
All sections of Article 3 shall apply mutatis mutantis to territories outside of the United States despite specific reference
to the United States, including without limitation the right to enter the market upon entry by another generic set forth in Sections 3.1.2 and 3.1.3. 

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

22

 

        3.4
To the extent that Cephalon shall have reason to anticipate the triggering of Teva's rights under Sections 3.1.2 or 3.1.3 above, it will provide prompt notice thereof to Teva in
order to allow Teva adequate time to prepare for launch. 

        3.5
Teva shall have the right to commence manufacturing activities in preparation of launch a reasonable period of time prior to agreed upon effective date of license rights granted to
Teva hereunder, provided however, that Teva shall not have the right to launch in advance of such effective date, nor to communicate its ability to do so to third parties earlier than
[**] prior to the anticipated launch date, without prior written consent of Cephalon. 

        3.6
This Agreement shall neither operate nor be construed to prohibit any pre-existing contractual relationships of Teva for supply of API, provided, however, that Teva
agrees that it shall not prospectively continue any such current (as of the Effective Date hereof) relationships beyond their current term nor prospectively enter into any new such relationships to
the extent same would be reasonably likely to operate to cause Teva to breach its obligations under this Agreement, including
Sections 2.1 and/or 2.5 above. In addition, to the extent that Teva is [**], the parties acknowledge that [**]. 

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

23

   
        3.7 In order for Teva to exercise the rights under the Listed Patents (as applicable) as contemplated by this Section 3, Cephalon agrees to provide such reasonable assistance and
other documentation, including appropriate waivers of exclusivities or evidence of patent licenses, as reasonably necessary for Teva to obtain regulatory approval of Teva ANDA Modafinil Products (or
similar non-United States modafinil products). 

        3.8
Notwithstanding the terms of this Section 3, Cephalon covenants that it will not sue Teva for infringement under the Listed Patents, or any other patents owned by Cephalon on
or after the Effective Date, for any sales by Teva of a generic version of PROVIGIL® (or the same product sold by Cephalon under a different mark in a jurisdiction other than the United
States), provided that such sales are not otherwise in breach of this Agreement. Provided, however, in the event that Cephalon changes the mark for the product currently being marketed in the United
States as PROVIGIL®, the provisions of this Section 3.8 shall continue to apply to any sales by Teva of a generic version of this same product with this new mark. 

4.     DISMISSAL  

        4.1
Within five (5) business days following the Effective Date, Cephalon and Teva shall execute and file with the United States District Court for the District of New Jersey a
Joint Stipulation for Dismissal With Prejudice, in the form attached hereto as Exhibit A, to be entered by the Court as a final judgment in the litigation, and joint motion for entry thereof.
Each party shall bear its own costs with respect to the Settlement of the Action. Teva warrants, represents 

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

24

 

and
agrees that it has or will obtain the consent and agreement of any other parties necessary to give effect to this Agreement. 

        4.2
As soon as practicable, the parties agree to execute whatever documents are necessary to obtain discontinuance with no rights to reinstate the UK Action and effectuate the terms of
this Agreement with respect to the Settlement of the UK Action, including a release of Cephalon and Cephalon (UK) Limited by Teva UK Limited and Tenlec Pharma Limited of any claims or counterclaims
which they have or could have asserted in the UK Action. Teva warrants, represents and agrees that it will obtain the consent and agreement of Teva UK Limited and Tenlec Pharma Limited and any other
parties necessary to give effect to this Agreement. Each party shall bear its own costs with respect to the Settlement of the UK Action. 

        4.3
Cephalon and Teva waive any right to appeal any order previously entered in the Action or the UK Action. 

5      MUTUAL RELEASES  

        5.1
Teva, on behalf of itself and its subsidiaries, successors, and assigns, including Teva UK Limited, hereby irrevocably releases, acquits, and forever discharges Cephalon and Cephalon
(UK) Limited from and against any and all claims, demands, suits, liabilities, actions, causes of action, damages, duties, losses, expenses, costs or obligations of every kind and nature whatsoever,
suspected or unsuspected, known or unknown, foreseen or unforeseen, that Teva, its subsidiaries, successors, and assigns, including Teva UK Limited, may now have or at any time may have had up until
the date of this Agreement against Cephalon or Cephalon (UK) 

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

25

 

Limited
arising under, concerning, or relating to the Action or the UK Action, but specifically excluding a breach by Cephalon of its covenants and obligations under this Agreement (or related
agreements referenced in Section 3.2). 

        5.2
Cephalon, on behalf of itself and its subsidiaries, successors, and assigns, including Cephalon (UK) Limited hereby irrevocably releases, acquits, and forever discharges Teva and
Teva UK Limited from any and all claims, demands, suits, liabilities, actions, causes of action, damages, duties, losses, expenses, costs or obligations of every kind and nature whatsoever, suspected
or unsuspected, known or unknown, foreseen or unforeseen, that Cephalon, its subsidiaries, successors, and assigns, including Cephalon (UK) Limited, may now have or at any time may have had up until
the date of this Agreement against Teva or Teva UK Limited arising under, concerning, or relating to the Action or the UK Action, but specifically excluding a breach by Teva of its covenants and
obligations under this Agreement (or related agreements referenced in Section 3.2). 

6      CONFIDENTIALITY  

        6.1
Cephalon and Teva shall continue to be bound by and to comply with the terms of the Stipulated Protective Order previously executed in the Action and the terms of the CDA executed
between them as of November 29, 2005; 

        6.2
Cephalon and Teva agree that the terms of this Agreement shall remain confidential and shall not be disclosed to third parties except subject to a nondisclosure agreement, and
pursuant to business discussions relating to asset sales, mergers, or change of control transactions, or upon order of a court of competent jurisdiction or to the extent required 

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

26

 

by
law or governmental regulation Cephalon and Teva agree that within 10 days of the execution of this Agreement, they will jointly agree in good faith upon the text of and disseminate an
appropriate press release respecting the subject matter of this Agreement, and that they will not otherwise publicize the
terms and conditions of this Agreement or make any statements or comments to any news media and/or trade publication, or any third person or entity (except as set forth above) regarding the terms and
conditions of this Agreement, except as may be required by law, and then only after having conferred in good faith to obtain the reasonable agreement of the other party. Information otherwise in the
public domain is not subject to the provisions of this Section. 

7      FILINGS WITH FTC AND DOJ  

        7.1
Within ten (10) business days following the date hereof, each party shall file or cause to be filed with the U.S. Federal Trade Commission Bureau of Competition ("FTC") and
the Antitrust Division of the U.S. Department of Justice ("DOJ") this Agreement and any notifications required to be filed pursuant to Title XI of the Medicare Prescription Drug Improvement and
Modernization Act (Subtitle B—Federal Trade Commission Review) signed into law on December 8, 2003 and any other Applicable Law. 

        7.2
The parties shall use all commercially reasonable efforts to coordinate the foregoing filings and any responses thereto, to make such filings promptly and to respond promptly to any
requests for additional information made by either of such agencies. Each party reserves the right to communicate with the FTC or DOJ regarding such filings as it believes appropriate. Each party
shall keep the other reasonably informed of such communications and 

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

27

 

shall
not disclose the Confidential Information of the other without such other party's consent (not to be unreasonably withheld). 

        7.3
In the event that either the FTC or DOJ threatens to institute its own judicial or administrative proceeding against either of the parties related to this Agreement, the parties
shall promptly meet in good faith to discuss the feasibility of possible modifications to this Agreement. 

8      MISCELLANEOUS  

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

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

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

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

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

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

28

 

	 	 	If to Cephalon:
	

 	
 	

Legal Department

Cephalon, Inc.

41 Moores Road

Frazer, PA 19355
	

 	
 	

Attn: John E. Osborn

Sr. Vice President, General Counsel & Secretary

Telephone: (610)-738-6337

Fax: (610)-738-6590
	

 	
 	

If to Teva:
	

 	
 	

Legal Department

Teva North America

425 Privet Road, Horsham, PA 19044

Attn: Richard Egosi, Senior Vice President & General Counsel

Telephone: (215) 293-6400

Fax: (215) 293-6499
	

 	
 	

With copies to:
	

 	
 	

Teva Pharmaceutical Industries Ltd.

5 Basel Street

PO Box 3190

Petach Tikva 49131, Israel

Attn: Corporate Legal Department—Attention General Counsel

Telephone: 011 972-3-926-7297

Fax: 011 972-3-926-7429
	

 	
 	

Teva Pharmaceutical Industries Ltd.

5 Basel Street

PO Box 3190

Petach Tikva 49131, Israel

Attn: Vice President, API Division

Telephone:

Fax:

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

29

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

        8.7
Payments due to Teva under this Agreement shall be made by wire transfer to the following account: 

	 	 	Bank Name:	 	[**]
	 	 	Bank Address:	 	[**]
	 	 	Bank ABA:	 	[**]
	 	 	Beneficiary Account:	 	[**]
	 	 	Beneficiary Name:	 	[**]
	 	 	Beneficiary Address:	 	[**]

        8.8 Each party shall have the right, at its own expense, once each fiscal year upon reasonable advance notice, to have a mutually acceptable independent auditor
conduct an audit (consistent with US GAAP and applicable laws) of the financial books and accounts of the other party for the purposes of ascertaining the payments due under this Agreement (including,
without limitation, calculation of [**], and royalty payments due to Teva under Article 2) as well as the compliance with all financial obligations hereunder. 

        8.9
This Agreement represents the entire agreement between Cephalon and Teva with respect to the subject matter of this Agreement and supersedes all prior or contemporaneous agreements,
proposals, or understandings, whether written or oral, between Cephalon and Teva with respect to that subject matter. 

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

30

 

        8.10
If one or more provisions of this Agreement are ruled wholly or partly invalid or unenforceable by a court or other government body of competent jurisdiction, then the validity and
enforceability of all other provisions of this Agreement shall not in any way be affected or impaired. 

        8.11
No waiver of, failure of a party to object to, or failure of a party to take affirmative action with respect to any default, term, or condition of this Agreement, or any breach
thereof, shall be deemed to imply or constitute a waiver of any other like default, term, or condition of this Agreement, or subsequent breach thereof. 

        8.12
Nothing in this Agreement shall be construed so as to result in a license under, or waiver of, any right of a party, in each case, without an express license or waiver by such party
in writing, either hereunder or in a separate writing signed by the parties. For the removal of doubt: 

	(a)
	Nothing
in this Agreement shall operate or be construed as granting Teva a license under, or any other rights with respect to, any patents owned by Cephalon other than the Listed
Patents; and

	(b)
	Nothing
in this Agreement shall operate or be construed as a waiver by Teva of any right to challenge any patent owned by Cephalon other than the Listed Patents. 

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

31

 

        8.13
Cephalon and Teva have had all desired counsel, legal and otherwise, in entering into this Agreement, and do so in accordance with their own free acts and deeds. This Agreement
shall therefore be deemed to have been negotiated and prepared at the joint request, direction, and instruction of each of the parties, at arms length, with the advice and participation of counsel,
and will be interpreted in accordance with its terms without favor to either party. 

        8.14
Each party represents that it is duly existing; that it has the full power and authority to enter into this Agreement; that there are no other persons or entities whose consent to
this Agreement or whose joinder herein is necessary to make fully effective the provisions of this Agreement; that this Agreement does not and will not interfere with any other agreement to which it
is a party and that it will not enter into any agreement the execution and/or performance of which would violate or interfere with this Agreement. 

        8.15
This Agreement may be signed in counterparts, each of which shall be deemed an original hereof, but all of which together shall constitute one and the same instrument. 

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

32

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first written above. 

	TEVA PHARMACEUTICALS USA, INC.	 	CEPHALON, INC.
	

By:	
 	

/s/  RICHARD EGOSI      
	
 	

By:	
 	

/s/  FRANK BALDINO, PH.D.      

	 	 	Printed Name: Richard Egosi	 	 	 	Frank Baldino, Ph.D.
	 	 	Title: SVP, General Counsel	 	 	 	Chief Executive Officer
	 	 	Date: December 8, 2005	 	 	 	Date: December 8, 2005
	 	 	 	 	 	 	 

	TEVA PHARMACEUTICAL INDUSTRIES LTD.	 	 
	

By:	
 	

/s/  AHARON YAARI      
	
 	

 
	 	 	Printed Name: Aharon (Arik) Yaari

Title: President, Teva API Division

Date: December 8, 2005	 	 
	

By:	
 	

/s/  RICHARD EGOSI      
 Printed Name: Richard Egosi

Title: SVP, General Counsel

Date: December 8, 2005	
 	

 

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

33

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Exhibit 10.22  

 
 

AGREEMENT    
    

        THIS SETTLEMENT AGREEMENT ("Agreement") is entered into effective this 22nd day of December, 2005 ("Effective Date"), by and between CEPHALON, INC., a
corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 41 Moores Road, Frazer, Pennsylvania 19355, and RANBAXY LABORATORIES LIMITED, a
corporation existing and operating under the laws of India with principal place of business at Plot 90, Sector 32, Gurgaon 122001 (Haryana), India. 

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

        WHEREAS
PROVIGIL® (modafinil) is the commercial formulation of modafinil manufactured and sold by Cephalon pursuant to FDA approval of Cephalon's NDA
No. 20-717. 

        WHEREAS
by letter dated March 21, 2003, Ranbaxy notified Cephalon that Ranbaxy had submitted ANDA No. 76-595 to the FDA under Section 505(j) of the
Federal Food, Drug and Cosmetic Act (21 U.S.C. § 355(j)), seeking approval to engage in the commercial manufacture, use, and sale of tablets containing 100 mg and 200 mg of modafinil, a
generic version of PROVIGIL® (modafinil) tablets, before the expiration date of the RE “516 Patent. 

        WHEREAS
Cephalon filed suit against Ranbaxy and three other companies that had also filed Paragraph IV ANDAs concerning PROVIGIL® (modafinil) in an action captioned  Cephalon, Inc. v. Mylan Pharmaceuticals Inc., et
al., Civil Action No. 03-CV-1394 (JCL), in the United
States District Court for the District of New Jersey, seeking, among other things, a declaration that Ranbaxy's making, using, offering to sell, selling, or importing Ranbaxy ANDA 

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

 

Modafinil
Tablets would infringe the RE “516 Patent, an order providing that the effective date of any approval of Ranbaxy's ANDA No. 76-595 shall be a date which is not
earlier than the date of the expiration of the RE “516 Patent; and an order permanently enjoining Ranbaxy from making, using, offering to sell, selling, or importing tablets as described
in Ranbaxy's ANDA No. 76-595 until after the date of the expiration of the RE “516 Patent. 

        WHEREAS,
Ranbaxy answered Cephalon's complaint by denying infringement, by asserting affirmative defenses that the RE “516 patent is invalid and unenforceable, and by filing
counterclaims seeking declaratory judgment of noninfringement, invalidity and unenforceability. 

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

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

        WHEREAS,
the parties desire to provide for the supply by Ranbaxy and the purchase by Cephalon of the active pharmaceutical ingredient, modafinil. 

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

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

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

2

 

1.     DEFINITIONS  

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

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

        1.3
"API" shall mean the active pharmaceutical ingredient in Subject Modafinil Product, modafinil (it is understood by the parties that where the term "API" is used in this Agreement to
refer to a compound or product made by, used by, sold by, or supplied to Cephalon, the term shall mean the active pharmaceutical ingredient modafinil). 

        1.4
"Ranbaxy Generic Modafinil" shall mean any Subject Modafinil Product marketed and sold by Ranbaxy pursuant to the terms of this Agreement. 

        1.5
"Ranbaxy" shall mean RANBAXY LABORATORIES LIMITED, a corporation existing and operating under the laws of India with principal place of business at Plot 90, 

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

3

 

Sector
32, Gurgaon 122001 (Haryana), India, and its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups, and the
respective directors, officers, employees, agents and representatives, successors, and assigns of each. 

        1.6
"Ranbaxy ANDA Modafinil Product" shall mean [**]. 

        1.7
"Ranbaxy Modafinil ANDA" shall mean ANDA No. 76-595. 

        1.8
"Cephalon" shall mean CEPHALON, INC., a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 41 Moores Road,
Frazer, Pennsylvania, and its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups, and the respective directors,
officers, employees, agents and representatives, successors, and assigns of each. 

        1.9
"Date Certain" shall mean the later of: (a) October 6, 2011 (three years prior to the expiration of the Patent In Suit); or (b) in the event that Cephalon
obtains a pediatric extension on the Patent in Suit, April 6, 2012 (three years prior to the expiration of the pediatric extension, if obtained). 

        1.10
"Generic Modafinil Product" shall mean any Subject Modafinil Product that is not marketed under the mark PROVIGIL®. 

        1.11
"Listed Patents" shall mean [**]. 

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

4

 

        1.12
"Modafinil Litigation" shall mean (a) Cephalon, Inc. v. Mylan Pharmaceuticals Inc., et al., Civil Action
No. 03-CV-1394 (JCL), pending in the United States District Court for the District of New Jersey; (b) Cephalon, Inc. v. Carlsbad
Tech., Inc., Civil Action No. 05-CV-1089 (JCL), pending in the United States District Court for the District of New Jersey; and
(c) any action filed under Title 35, United States Code, 35 U.S.C. §§ 271 and 281 against any Modafinil Paragraph IV ANDA Filing Entity. 

        1.13
"Modafinil Paragraph IV ANDA Filing Entity" shall mean any entity that has notified or subsequently notifies Cephalon that it has filed an ANDA with a Paragraph IV
certification concerning a product containing modafinil as an active ingredient for which PROVIGIL® is the reference listed drug. 

        1.14
"Ranbaxy Net Sales" shall mean the gross sales (number of units shipped times the invoiced price per unit) derived in arms-length transactions from the sale of Ranbaxy
Generic Modafinil in the United States by Ranbaxy (or by its Affiliates) to independent third parties in the United States for such period less: (a) promotional allowances, rebates, quantity
and cash discounts, and other usual and customary discounts to customers, (b) taxes and duties paid, absorbed, or allowed which are directly related to the sale (c) the amount of
chargebacks and amounts repaid or credited by reason of rejections, damages or return of goods, or because of retroactive price adjustments justified by trade practices, (d) discounts, rebates
or other payments required by law to be made under Medicaid, Medicare, or other governmental special medical assistance programs and (e) any amounts written off as uncollectible payments or
debts owed, all determined in accordance with GAAP. 

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

5

 

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

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

        1.15
"Other Modafinil Paragraph IV ANDA Filing Entity" shall mean any Modafinil Paragraph IV ANDA Filing Entity besides Ranbaxy or Cephalon or its and their Affiliates. 

        1.16
"Patent In Suit" shall mean the RE “516 Patent. 

        1.17
"Subject Modafinil Product" shall mean [**]. 

        1.18
"Manufacturing Costs" shall mean with respect to any calendar year, the actual cost (expressed on a per unit manufactured basis) of manufacturing and/or acquiring the Materials,
manufacturing the finished dosage of Ranbaxy Generic Modafinil, Labeling, and Packaging, including and limited to the cost of all Materials (active and inactive ingredients), 

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

6

 

Direct
Labor and Benefits, and Direct Overhead for manufacturing and quality control, all determined in accordance with GAAP. 

        1.19
"Materials" shall mean all ingredients, items or substances used or required to be used to manufacture Ranbaxy Generic Modafinil, including API, excipients, packaging components,
printed materials and manufacturing materials associated with Ranbaxy Generic Modafinil. 

        1.20
"Operating Profit" shall mean an amount determined by deducting from Ranbaxy Net Sales: (a) Ranbaxy's Manufacturing Costs, and (b) a Sales, Marketing, and Distribution
allowance equal to [**]. 

        1.21
"Intellectual Property Rights" means the international applications published under the Patent Cooperation Treaty ("PCT") having the International Publication Numbers
[**], and any and all related patents and patent applications (whether now pending or subsequently filed), including without limitation any provisional,
non-provisional, United States, PCT, foreign or international issued patents or pending patent applications, and any continuations, continuations-in-part (but not
continuations-in-part claiming patentably distinct subject matter), divisions, or any substitute applications thereof, any patent that has issued or subsequently issues with
respect to any such applications, any reissue, re-examination, renewal or extension (including any supplemental patent certificate) of any such patent, and any confirmation patent or
registration patent or patent of addition based on any such patent, and any and all United States and foreign counterparts of any of the foregoing. 

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

7

 

2.     OBLIGATIONS OF THE PARTIES  

        2.1
Ranbaxy Warranty. 

        The
parties agree that this Agreement includes a settlement which is a compromise of a disputed claim and that acceptance of the consideration herein is not to be construed as an
admission by either party as to the underlying merits of the Action. However, as an express inducement to Cephalon to enter
into this settlement, in consideration of the terms hereof, Ranbaxy hereby warrants, represents and agrees that Ranbaxy, on behalf of itself and its Affiliates, will not make, use, offer to sell, or
sell, or actively induce or assist any other entity to make, use, offer to sell, or sell Ranbaxy ANDA Modafinil Product within the United States, or import or cause to be imported any Ranbaxy ANDA
Modafinil Product into the United States, except as otherwise permitted under, and according to the terms of, the license granted by Cephalon in connection with this Agreement. The parties agree that,
as used in this Section 2.1, "induce" and "assist" shall include Ranbaxy's provision of modafinil API to parties it knows or has reason to know will use the API provided by Ranbaxy to make,
use, offer to sell, sell, import or cause to be imported into the United States a Subject Modafinil Product. 

        2.2
On [**], Cephalon shall make a one-time payment to Ranbaxy of [**], in recognition of the savings inuring to Cephalon in
terms of the avoidance of costs, expenditure of time and resources, disruption and burden associated with prosecuting the Action against Ranbaxy. 

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

8

 

        2.3
Modafinil API Supply Agreement. 

        Cephalon
and Ranbaxy shall enter into a supply agreement, by which Ranbaxy shall supply, and Cephalon shall purchase in the United States, the following annual volumes of modafinil API
per Cephalon specifications at the below prices, and upon such other reasonable and customary terms in the industry as the parties shall negotiate in good faith, it being understood that Ranbaxy shall
use its commercially reasonable efforts to work continuously in good faith to reduce associated costs and increase efficiencies while consistently meeting Cephalon specifications, and to reflect all
such cost reductions and efficiencies through appropriate reductions to the per kilogram price. In addition, the parties agree to cooperate in good faith to work together to help reduce costs. 

        For
purposes of this Section, the parties agree that the initial year ("Year 1") of this five year supply commitment shall be calendar year 2006, and also agree that, assuming Ranbaxy is
qualified under applicable regulations to and does produce or provide the Year 1 volume of conforming API for Cephalon hereunder during calendar year 2006, Cephalon will purchase such Year 1 volume of
API set forth below in 2006. Cephalon also agrees that it will purchase from Ranbaxy at least [**] of the Year 1 volume set forth below by [**] (again
assuming that Ranbaxy is qualified under applicable regulations to and does produce or provide [**] of conforming API for
Cephalon hereunder by [**]). The parties further agree that they shall undertake to work together in good faith promptly following the Effective Date to qualify Ranbaxy API
material in Cephalon's regulatory filings for modafinil. 

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

9

   
        Ranbaxy agrees to supply, and Cephalon agrees to purchase, modafinil API per Cephalon specifications at the below minimum quantities as follows: 

	Contract Year
 
	 	Kg Price
	 	Volume
	 	Total Payment
	 
	1	 	[**]	*	[**]	 	[**]	*
	2	 	[**]	*	[**]	 	[**]	*
	3	 	[**]	*	[**]	 	[**]	*
	4	 	[**]	*	[**]	 	[**]	*
	5	 	[**]	*	[**]	 	[**]	*

	*
	subject
to Ranbaxy's agreement to use commercially reasonable efforts to work continuously in good faith to reduce costs and create efficiencies while consistently meeting
specifications and to reflect all such reductions and efficiencies through appropriate reductions to the associated per kilogram price. The parties agreed that the prices charged herein shall be
adjusted [**]. 

        2.4
Ranbaxy Generic Rights. Cephalon shall also grant to Ranbaxy the non-exclusive generic rights set forth in Section 3 below. 

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

10

 

        2.5
License to Cephalon. 

	(a)
	Ranbaxy
hereby grants to Cephalon a non-exclusive, worldwide license to all Intellectual Property Rights for the manufacture, development, formulation, use, sale, offer
for sale, and importation of API and finished pharmaceutical products. As an express inducement to Ranbaxy to enter into this Agreement, and in consideration of the terms hereof, Cephalon hereby
warrants, represents and agrees that Cephalon, on behalf of itself and its Affiliates, will not challenge or otherwise dispute any issued patents included in the Intellectual Property Rights.

	(b)
	In
consideration of the license set forth in Section 2.5(a) above, Cephalon shall make royalty payments to Ranbaxy as follows:

	(i)
	within
[**] of the execution of this Agreement: a lump sum royalty payment of [**];

	(ii)
	within
[**] of the date of issuance of the first United States patent included in the Intellectual Property Rights that
[**] ("First Issue Date"): a lump sum royalty payment of [**];

	(iii)
	on
or before [**] First Issue Date: a lump sum royalty payment of [**];

	(iv)
	on
or before [**] First Issue Date: a lump sum royalty payment of [**]; and 

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

11

 

	(v)
	on
or before [**] First Issue Date: a lump sum royalty payment of [**].

	(c)
	It
is understood and agreed that upon the date of the lump sum royalty payment set forth in Section 2.5(b)(v) above, Cephalon's royalty obligation shall cease and
Cephalon shall thereupon have a fully-paid up, non-exclusive worldwide license to all Intellectual Property Rights owned by Ranbaxy.

	(d)
	[**].

3.     RANBAXY GENERIC RIGHTS  

        3.1
Cephalon grants to Ranbaxy the non-exclusive right (without the right to grant sublicenses) under the Listed Patents and all other modafinil-related patents owned or
subsequently acquired by Cephalon, or to which Cephalon has or subsequently acquires sublicense rights, to manufacture, have manufactured, use, market and sell Generic Modafinil Product in the United
States according to the following terms: 

        3.1.1.
Ranbaxy's non-exclusive generic rights under section 3.1 shall be effective on the Date Certain. Ranbaxy shall pay Cephalon a royalty equal to:
(a) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any authorized generic entrant),
(b) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any authorized generic entrant),
(c) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any authorized generic entrant) from all Ranbaxy Generic
Modafinil sold by 

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

12

 

Ranbaxy
and/or its Affiliates in the United States on or after the Date Certain until the later of (i) the expiration of all Listed Patents or (ii) the end of any pediatric extension on
the Patent in Suit, subject to any subsequent negotiation concerning an extension of generic rights. 

        3.1.2.
Notwithstanding Section 3.1.1, in the event that Cephalon licenses or permits any other entity to sell any Generic Modafinil Product in the United States prior to the Date
Certain, Ranbaxy's non-exclusive generic rights under section 3.1 shall become effective on the date on which such other licensed entity begins selling a Generic Modafinil Product
in the United States. In the event that Ranbaxy is permitted to sell Ranbaxy Generic Modafinil in the United States prior to the Date Certain under the terms of this Section, Ranbaxy shall pay
Cephalon a royalty equal to:
(a) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any authorized generic entrant),
(b) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any authorized generic entrant),
(c) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any authorized generic entrant) from all Ranbaxy Generic
Modafinil sold by Ranbaxy and/or its Affiliates in the United States prior to the Date Certain. However, the parties expressly acknowledge and agree that sales by a third party of Generic Modafinil
Product in the United States prior to the Date Certain pursuant to a license granted by Cephalon (whether by settlement or otherwise) that is subject to suspension provisions similar to those set
forth in 

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

13

 

Sections
3.1.3.3 and 3.1.3.6 shall not trigger Ranbaxy's rights under this Section 3.1.2. 

        3.1.3.
Notwithstanding Section 3.1.1, in the event that any Other Modafinil Paragraph IV ANDA Filing Entity sells in the United States any Subject Modafinil Product prior
to a non-appealable final judgment in any Modafinil Litigation to which such Other Modafinil Paragraph IV ANDA Filing Entity is a party, Ranbaxy's non-exclusive generic
rights shall be effective at the same time, subject to the following restrictions: 

        3.1.3.1
Ranbaxy shall pay to Cephalon a royalty equal to: (a) [**] (provided market entry by Ranbaxy and [**] generic market
entrants, including any authorized generic entrant), (b) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any
authorized generic entrant), (c) [**] (provided market entry by Ranbaxy and [**] generic market entrants, including any authorized generic
entrant) from all Ranbaxy Generic Modafinil sold by Ranbaxy and/or its Affiliates in the United States pursuant to Section 3.1.3. 

        3.1.3.2
In the event that Cephalon seeks a temporary restraining order or other relief against such Other Modafinil Paragraph IV ANDA Filing Entity to stop such Entity from
offering to sell or selling in the United States its Subject Modafinil Product, Ranbaxy and/or its Affiliates may continue to market and sell Ranbaxy Generic Modafinil in the United States until a 

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

14

 

court
of competent jurisdiction renders a decision on Cephalon's request for a temporary restraining order or other relief, as further described in Sections 3.1.3.3 through 3.1.3.4 

        3.1.3.3
If Cephalon obtains a temporary restraining order or other relief sufficient to stop further offers to sell or sales in the United States of Subject Modafinil Product by any
Other Modafinil Paragraph IV ANDA Filing Entity, Ranbaxy's generic rights shall be suspended until the Date Certain, and Ranbaxy and/or its Affiliates shall immediately cease offering to sell
and/or selling any Ranbaxy Generic Modafinil as of the earliest date on which such injunctive or other relief may be enforced. [**]. 

        3.1.3.4
If Cephalon requests but does not obtain a temporary restraining order or other relief, Ranbaxy may continue to market and sell Ranbaxy Generic Modafinil in the United States
until the resolution of pending Modafinil Litigation. Ranbaxy shall continue to pay to Cephalon a royalty equal to: (a) [**] (provided market entry by Ranbaxy and
[**] generic market entrants, including any authorized generic entrant), (b) [**] (provided market entry by Ranbaxy and
[**] generic market entrants, including any authorized generic entrant), (c) [**] (provided market entry by Ranbaxy and
[**] generic market entrants, including any authorized generic entrant) from all Ranbaxy Generic Modafinil sold by Ranbaxy and/or its Affiliates in the United States as set
forth in Section 3.1.3.1 above. 

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

15

  

        3.1.3.5
Nothing in this Section or the Agreement shall obligate Cephalon to seek injunctive or other relief to stop such Other Modafinil Paragraph IV ANDA Filing Entity from
offering to sell or selling Subject Modafinil Product in the United States. 

        3.1.3.6
In the event that Cephalon prevails against such Other Modafinil Paragraph IV ANDA Filing Entity in Modafinil Litigation, such that offers to sell or sales in the United
States of Subject Modafinil Product by such Other Modafinil Paragraph IV ANDA Filing Entity are admitted by such Other Modafinil Paragraph IV ANDA Filing Entity or held by the court to
infringe one or more valid and enforceable claims of the Listed Patents, Ranbaxy's generic rights shall be suspended until the Date Certain and Ranbaxy and/or its Affiliates shall immediately cease
marketing and/or selling Ranbaxy Generic Modafinil until the Date Certain. [**]. 

        3.1.3.7
Notwithstanding Section 3.1.1., in the event that a final, non-appealable judgment in Modafinil Litigation is entered prior to the Date Certain declaring that
one or more Other Modafinil Paragraph IV ANDA Filing Entities may offer to sell or sell Subject Modafinil Product in the United States without infringing any valid, enforceable claim of any
Listed Patent on which Cephalon has brought suit, Ranbaxy may then market and sell Ranbaxy Generic Modafinil in the United States, with royalties to Cephalon determined as follows: Ranbaxy shall pay
to Cephalon a royalty 

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

16

 

equal
to [**] from all Ranbaxy Generic Modafinil sold by Ranbaxy and/or its Affiliates in the United States. Provided, however, that in the event that the final,
non-appealable judgment referenced earlier in this Section 3.1.3.7 is based on a finding that the RE "516 Patent is invalid, unenforceable, dedicated to the public, lapsed, or null
and void for any reason, Ranbaxy and/or its Affiliates may market and sell Ranbaxy Generic Modafinil in the United States as of the date of such judgment with no royalty obligation to Cephalon. 

        3.1.3.8
In the event that a United States District Court enters a judgment prior to the Date Certain declaring that the RE "516 Patent is invalid, unenforceable, dedicated to the public,
lapsed, or null and void for any reason, Ranbaxy shall pay any royalties due under this Section 3 on or after the date of such judgment into an escrow account (the terms of the escrow account
to be established in the underlying license agreement to be negotiated by the parties pursuant to Section 7.1). In the event that (i) such District Court judgment is affirmed in a final,
non-appealable 

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

17

 

judgment
that is based on a finding that the RE "516 Patent is invalid, unenforceable, dedicated to the public, lapsed, or null and void for any reason, or (ii) Cephalon does not file an appeal
of such District Court judgment within the time allowed under applicable rules of civil procedure, all escrowed royalties shall be paid to Ranbaxy. In that event that (i) such District Court
judgment is reversed in a final, non-appealable judgment, or (ii) such District Court judgment is affirmed in a final, non-appealable judgment that is not based on a
finding that the RE "516 Patent is invalid, unenforceable, dedicated to the public, lapsed, or null and void for any reason, all escrowed royalties shall be paid to Cephalon. 

        3.2
Ranbaxy shall have the right to commence manufacturing activities in preparation of launch a reasonable period of time prior to the agreed upon effective date of the
non-exclusive generic rights granted to Ranbaxy hereunder, provided however, that Ranbaxy shall not have the right to launch in advance of such effective date, nor to communicate its
ability to do so to third parties earlier than 10 days prior to the anticipated launch date, without prior written consent of Cephalon. In the event that Ranbaxy commences manufacturing
activities in preparation of a launch under this provision, but is precluded from such launch due to any action (including litigation activity) by Cephalon, [**]. 

        3.3
In order for Ranbaxy to exercise the rights under the Listed Patents as contemplated by this Section 3, Cephalon agrees to provide appropriate waivers of exclusivities or
evidence of patent licenses as reasonably necessary for Ranbaxy to obtain regulatory approval of Ranbaxy Generic Modafinil in the United States. 

        3.4
Notwithstanding the terms of this Section 3, Cephalon covenants that it will not sue Ranbaxy for infringement under the Listed Patents, or any other patents owned or
subsequently acquired by Cephalon, or to which Cephalon has or subsequently acquires rights, for any sales by Ranbaxy in the United States of a product that is manufactured or sold pursuant 

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

18

 

to
an ANDA for which [**], provided that any such sales are not otherwise in breach of this Agreement. Ranbaxy agrees that it will not challenge the validity or enforceability
of [**] in any context or forum. Cephalon agrees that it will not assert [**] against Ranbaxy in any context or forum, except in the event of a breach
by Ranbaxy of any provision of Section 2.1 of this Agreement. 

        3.5
(a) Ranbaxy shall have the one time right, to be exercised upon thirty (30) days' written notice from Ranbaxy to Cephalon, and at any time following Ranbaxy's first commercial
marketing of Ranbaxy Generic Modafinil in accordance with the terms of this Agreement, to request that Cephalon provide to a mutually agreeable independent third-party accounting firm
[**]. The [**] provided by Cephalon to the third-party accounting firm [**], and Cephalon shall take any other steps necessary
to facilitate compliance with any confidentiality obligations owed by Cephalon and the requirements of applicable laws, while still providing sufficient information about [**].
These [**] shall not be disclosed to Ranbaxy, except to the extent contemplated in Section 3.5(d) below. 

        (b)
The information provided to the third-party accounting firm shall be limited solely to [**], and shall not include [**]. 

        (c)
Cephalon shall provide [**] to the third-party accounting firm for the sole purpose of enabling said accounting firm [**], so that
said accounting firm may determine (in good faith and in accordance with the professional standards of the industry and principles of US GAAP, consistently applied) [**]. All
fees and expenses of the third-party accounting firm shall be paid by Ranbaxy. 

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

19

 

        (d)
In the event that said accounting firm determines in good faith that [**], the accounting firm shall promptly notify Ranbaxy of [**]
(and also provide Cephalon a copy of such notice). By way of clarification, the accounting firm is not to determine [**], but rather is simply to provide Ranbaxy with a copy of
[**]. Ranbaxy shall then have the one-time option (exercisable upon written notice to Cephalon, to be given within ten days of receipt of the notice from the
accounting firm) to elect either [**]. 

        (e)
The license agreement contemplated by Section 7.1 below shall include a dispute resolution provision pursuant to which Cephalon can submit any dispute it might have with the
conclusion reached by the third-party accounting firm. In the event of such a dispute, [**] shall continue to apply until the dispute is resolved, [**]. 

        (f)
The parties agree that, if at any time after the parties have completed the review process set forth in this Section 3.5, [**]. 

4.     DISMISSAL  

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

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

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

20

   5.     MUTUAL RELEASES  

        5.1
Ranbaxy, on behalf of itself and its subsidiaries, successors, and assigns, hereby releases, acquits, and forever discharges Cephalon from and against any and all claims, demands,
liabilities, causes of action, damages, duties, or obligations arising under, concerning, or relating to the Action, but specifically excluding a breach by Cephalon of its covenants and obligations
under this Agreement. 

        5.2
Cephalon, on behalf of itself and its subsidiaries, successors, and assigns, hereby releases, acquits, and forever discharges Ranbaxy from any and all claims, demands, liabilities,
causes of action, damages, duties, or obligations arising under, concerning, or relating to the Action, but specifically excluding a breach by Ranbaxy of its covenants and obligations under this
Agreement. 

6.     CONFIDENTIALITY  

        6.1
Cephalon and Ranbaxy shall continue to be bound by and to comply with the terms of the Stipulated Protective Order previously executed in the Action and the confidentiality
obligations agreed upon between the parties on November 25, 2005. 

        6.2
Cephalon and Ranbaxy agree that the terms of this Agreement shall remain confidential and shall not be disclosed to third parties except subject to a nondisclosure agreement, and
pursuant to business discussions relating to asset sales, mergers, or change of control transactions, or upon order of a court of competent jurisdiction or to the extent required by law or
governmental regulation. Cephalon and Ranbaxy agree that within 10 days of the 

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

21

 

execution
of this Agreement, they will jointly agree in good faith upon the text of and disseminate appropriate press releases respecting the subject matter of this agreement, and that they will not
otherwise publicize the terms and conditions this Agreement or make any statements or comments to any news media and/or trade publication, or any third person or entity (except as set forth above)
regarding the terms and conditions of this Agreement, except as may be required by law, and then only after having conferred in good faith to obtain the reasonable agreement of the party. Information
otherwise in the public domain is not subject to the provisions of this Section. 

7.     MISCELLANEOUS  

        7.1
Cephalon and Ranbaxy agree that, [**] of the date of this Agreement, they shall prepare and execute whatever documents are necessary (including license and
supply agreements, as appropriate) to carry out the terms of Sections 2 and 3 above. However, subject to applicable laws, the terms and conditions contained in this Agreement are binding
notwithstanding the failure of the parties to enter into the agreements referenced in this Section 7.1. 

        7.2
The terms of this Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors, heirs, and assigns. 

        7.3
No party shall assign any of its rights or obligations hereunder to any non-Affiliated third party without first obtaining the written consent of the other party hereto,
which consent may not be unreasonably withheld. 

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

22

 

        7.4
The Agreement shall be interpreted in accordance with and governed by the law of the State of Delaware. 

        7.5
Cephalon and Ranbaxy agree that the United States District Court for the District of New Jersey shall be the proper and exclusive forum for any action to enforce this Agreement. Each
party consents to the personal jurisdiction of that court for such purposes. 

        7.6
Notices under this Agreement shall be sent by overnight or first class mail, return receipt or other proof of delivery requested, to the following: 

	 	 	If to Cephalon:
	

 	
 	

Legal Department

Cephalon, Inc.

41 Moores Road

Frazer, PA 19355

Attn: John E. Osborn

Sr. Vice President, General Counsel & Secretary

Telephone: (610)-738-6337

Fax: (610)-738-6590
	

 	
 	

If to Ranbaxy:
	

 	
 	

President

Ranbaxy Inc.

600 College Road East

Princeton, NJ 08540

Telephone: (609)-720-9200

Fax: (609)-720-1155

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

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

23

 

        7.8
Each party shall have the right, at its own expense, once each fiscal year upon reasonable advance notice, to have a mutually acceptable independent auditor conduct an audit
(consistent with US GAAP and applicable laws) of the financial books and accounts of the other party for the purposes of ascertaining the payments due under this Agreement as well as the compliance
with all financial obligations hereunder. 

        7.9
This Agreement represents the entire agreement between Cephalon and Ranbaxy with respect to the subject matter of this Agreement and supersedes all prior or contemporaneous
agreements, proposals or understandings, whether written or oral, between Cephalon and Ranbaxy with respect to
that subject matter. 

        7.10
If one or more provisions of this Agreement are ruled wholly or partly invalid or unenforceable by a court or other government body of competent jurisdiction, then the validity and
enforceability of all other provisions of this Agreement shall not in any way be affected or impaired. 

        7.11
No waiver of, failure of a party to object to, or failure of a party to take affirmative action with respect to any default, term, or condition of this Agreement, or any breach
thereof, shall be deemed to imply or constitute a waiver of any other like default, term, or condition of this Agreement, or subsequent breach thereof. 

        7.12
Nothing in this Agreement shall be construed so as to result in a license under, or waiver of, any right of a party, in each case, without an express license or waiver by such party
in writing, either hereunder or in a separate writing signed by the parties. For the avoidance of doubt: 

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

24

 

	(a)
	Nothing
in this Agreement shall operate or be construed as granting Ranbaxy a license under, or any other rights with respect to, any patents owned by Cephalon other than the Listed
Patents, except as specifically stated in Sections 3.1 and 3.4; and

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

        7.13
Cephalon and Ranbaxy have had all desired counsel, legal and otherwise, in entering into this Agreement, and do so in accordance with their own free acts and deeds. This Agreement
shall therefore be deemed to have been negotiated and prepared at the joint request, direction, and instruction of each of the parties, at arms length, with the advice and participation of counsel,
and will be interpreted in accordance with its terms without favor to either party. 

        7.14
Each party represents that it is duly existing; that it has the full power and authority to enter into this Agreement; that there are no other persons or entities whose consent to
this Agreement or whose joinder herein is necessary to make fully effective the provisions of this Agreement; that this Agreement does not and will not interfere with any other agreement to which it
is a party and that it will not enter into any agreement the execution and/or performance of which would violate or interfere with this Agreement. 

        7.15
This Agreement may be signed in counterparts, each of which shall be deemed an original hereof, but all of which together shall constitute one and the same instrument. 

        7.16
Except as specifically provided in Section 3.4, nothing in this agreement is intended to or shall be construed to preclude Ranbaxy from filing an ANDA, seeking regulatory 

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

25

 

approval
for a product, marketing and selling a product, or providing API to any other entity for any product based on [**]. Similarly, nothing in this agreement is intended or
shall be construed to preclude Cephalon from filing suit for infringement of any patent [**], or taking any other action with respect to such an ANDA filing or such other
actions by Ranbaxy. 

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

26

 

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

	CEPHALON, INC.	 	RANBAXY LABORATORIES LIMITED
	

By:	
 	

/s/  FRANK BALDINO, JR.      
	
 	

By:	
 	

/s/  RAM S. RAMASUNDAR      

	 	 	Printed Name: Frank Baldino, Jr., Ph.D.	 	 	 	Printed Name: Ram S. Ramasundar
	 	 	Title: Chief Executive Officer	 	 	 	Title: EVP—Finance & CFO
	 	 	Date: December 22, 2005	 	 	 	Date: December 22, 2005

27

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AGREEMENT

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