Document:

Exhibit 10.2

 

EXECUTION COPY

 

SECOND AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT

 

This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Second  Amendment”) is
entered into effective as of April 26, 2004 (the “Second  Amendment Effective Date”), among
ENBRIDGE ENERGY PARTNERS, L.P., a Delaware limited partnership, as borrower
(the “Borrower”),
the financial institutions parties to the Credit Agreement hereinafter
referenced (collectively, the “Existing  Lenders”), each New Lender (hereinafter defined) and
BANK OF AMERICA, N.A., as administrative agent (in such capacity, the “Administrative Agent”)
and as L/C Issuer (in such capacity, the “L/C Issuer”).  As used herein, the term “New Lender” means each financial institution
that is named as a Lender on the signature pages hereto that is not an Existing
Lender and the term “Lenders”
means, collectively, the New Lenders and the Existing Lenders.

 

WHEREAS, the Borrower, the Existing Lenders, the Administrative Agent,
and the other agents named therein are parties to that certain Amended and
Restated Credit Agreement dated as of January 24, 2003, as amended by that
certain First Amendment to Amended and Restated Credit Agreement dated as of
January 12, 2004 (as amended, the “Credit Agreement”);

 

WHEREAS, the
Borrower has requested that the Credit Agreement be further amended and
modified to effect the matters described in Section 2 below.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

 

SECTION 1.                                Definitions.  Unless otherwise defined in this Second
Amendment, terms used in this Second Amendment which are defined in the Credit
Agreement shall have the meanings assigned to such terms in the Credit
Agreement.  The interpretive provisions
set forth in Section 1.02 of the Credit Agreement shall apply to this
Second Amendment.

 

SECTION 2.                                Amendments
to the Credit Agreement.  Subject to
satisfaction of the conditions precedent set forth in Section 3 of this
Second Amendment, effective as of the Second Amendment Effective Date, the
Credit Agreement is hereby amended as follows:

 

(a)                                  The
definition of “Applicable Rate” set forth in Section 1.01 of the
Credit Agreement is hereby amended by deleting the chart set forth therein and
replacing it with the following:

 

Applicable
Rate

 

	
  Pricing

  Level

  	
   

  	
  Debt
  Ratings

  S&P/Moody’s

  	
   

  	
  Facility

  Fee Rate

  	
   

  	
  Applicable
  Rate for

  Eurodollar Loans

  and Applicable Rate

  for Letters of Credit

  	
   

  	
  Applicable

  Rate for

  Base Rate

  Loans

  	
   

  	
  Utilization

  Fee Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  A/A2 or
  higher

  	
   

  	
  .100

  	
  %

  	
  .300

  	
  %

  	
  -0-

  	
   

  	
  .100

  	
  %

  
	
  2

  	
   

  	
  A-/A3

  	
   

  	
  .125

  	
  %

  	
  .400

  	
  %

  	
  -0-

  	
   

  	
  .100

  	
  %

  
	
  3

  	
   

  	
  BBB+/Baa1

  	
   

  	
  .150

  	
  %

  	
  .475

  	
  %

  	
  -0-

  	
   

  	
  .125

  	
  %

  
	
  4

  	
   

  	
  BBB/Baa2

  	
   

  	
  .175

  	
  %

  	
  .575

  	
  %

  	
  -0-

  	
   

  	
  .125

  	
  %

  
	
  5

  	
   

  	
  BBB-/Baa3

  	
   

  	
  .225

  	
  %

  	
  .900

  	
  %

  	
  -0-

  	
   

  	
  .125

  	
  %

  
	
  6

  	
   

  	
  Lower than
  BBB-/Baa3 or unrated

  	
   

  	
  .300

  	
  %

  	
  1.200

  	
  %

  	
  -0-

  	
   

  	
  .250

  	
  %

  

 

 

(b)                                 The
definition of “Letter of Credit Sublimit” set forth in Section 1.01
of the Credit Agreement is hereby amended by replacing the term “$50,000,000”
with the term “$100,000,000”.

 

(c)                                  The
definition of “Pro Forma EBITDA” set forth in Section 1.01 of the
Credit Agreement is hereby amended as follows: in clause (b)(2), the term “5%
of Consolidated EBITDA” is replaced with the term “10% of Consolidated EBITDA”.

 

(d)                                 The
definition of “Scheduled Maturity Date” as set forth in the definition
of “Maturity Date” set forth in Section 1.01 of the Credit
Agreement is hereby amended by replacing the term “April 26, 2006” set forth
therein with the term “April 26, 2007”.

 

(e)                                  Section
2.10(c) of the Credit Agreement (Other Fees) is hereby amended by
adding the following sentence at the end thereof:  “The term ‘Agent/Arranger Fee Letter’ shall include the letter
agreement dated April 15, 2004 among the Borrower, the Arranger and the Administrative
Agent.”

 

(f)                                    Section
2.15 of the Credit Agreement (Extension of Maturity Date) is hereby
amended by replacing the term “Maturity Date” each time such term is set forth
therein with the term “Scheduled Maturity Date”.

 

(g)                                 Section
7.13 of the Credit Agreement (Consolidated Leverage Ratio) is hereby
amended as follows: clause (b) thereof is amended to read as follows:

 

“(b) Pro Forma EBITDA of no greater than (1) during the period July 1,
2003 through March 31, 2004, 4.75 to 1.00, (2) during the period from April 1,
2004 to and including September 30, 2005, 5.25 to 1.00, and (3) thereafter,
5.00 to 1.00;”

 

(h)                                 (i)
The Commitments under the Credit Agreement are hereby increased from
$300,000,000 to $600,000,000, (ii) each New Lender is a Lender under the
Credit Agreement with all rights, powers, obligations, duties and privileges
attendant thereto, and (iii) each New Lender’s and each Existing Lender’s
Commitment is as set forth on Schedule 2.01 attached hereto.

 

(i)                                     Schedule
2.01 attached to the Credit Agreement (Commitments and Pro Rata Shares)
is hereby amended in its entirety to read as set forth on revised Schedule 2.01 attached
hereto.

 

SECTION 3.                                Conditions
of Effectiveness.  The amendments to
the Credit Agreement set forth in Section 2 of this Second Amendment shall be
effective on the Second Amendment Effective Date, provided that the
Administrative Agent shall have received the following:

 

(a)                                  a
counterpart of this Second Amendment executed by each of the parties hereto
(which may be by telecopy transmission);

 

(b)                                 such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of a Responsible Officer as the Administrative Agent may
reasonably require to establish the identities of and verify the authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible
Officer in connection with this Second Amendment;

 

(c)                                  a
certificate from the appropriate governmental authority in the Borrower’s state
of organization evidencing that the Borrower is in good standing, and a
certificate of a Responsible Officer certifying that no amendments have been
made to the Borrower’s Organization Documents since January 24, 2003, or
if such amendments have been made, certifying a copy of such amendments;

 

2

 

(d)                                 a
certificate of a Responsible Officer certifying that there has been no event or
circumstance since the date of the financial statements dated as of
December 31, 2003 delivered pursuant to Section 6.01(a) of the
Credit Agreement which has or could reasonably be expected to have a Material
Adverse Effect;

 

(e)                                  an
opinion of counsel to the Borrower with respect to the Credit Agreement as
amended, substantially in the form attached as Exhibit E to the Credit
Agreement;

 

(f)                                    evidence
that the commitments under the Amended and Restated 364-Day Credit Agreement,
dated as of January 24, 2003, by and among the Borrower, the Administrative
Agent, the Existing Lenders, and the other agents named therein, as amended by
that certain First Amendment to Amended and Restated 364-Day Credit Agreement
dated as of January 12, 2004, have been, or concurrently with the Second
Amendment Effective Date are being, terminated, and that the Borrower has
repaid all amounts owed thereunder upon such termination;

 

(g)                                 all
arrangement and upfront fees and expenses of the Arranger required to be paid
by the Borrower concurrently with the Second Amendment Effective Date; and

 

(h)                                 such
other assurances, certificates, documents, consents or opinions as the
Administrative Agent, the L/C Issuer, or the Required Lenders reasonably may
require and timely request.

 

SECTION 4.                                Notes.
As a condition to the initial extension of credit on or after the Second
Amendment Effective Date, the Borrower shall execute, in favor of each Lender
requesting a Note, a Note in a maximum principal amount equal to such Lender’s
Commitment, which Note, to the extent delivered in favor of an Existing Lender,
shall be a renewal and replacement of, and shall be given in substitution and
exchange for, but not in payment of, those Notes held by such Existing Lender
prior to the date hereof.

 

SECTION 5.                                Acknowledgment
and Ratification.  As a material
inducement to the Administrative Agent and the Lenders to execute and deliver
this Second Amendment, the Borrower agrees and acknowledges that the execution,
delivery, and performance of this Second Amendment shall, except as expressly
provided herein, in no way release, diminish, impair, reduce, or otherwise
affect the obligations of the Borrower under the Loan Documents, which Loan
Documents shall remain in full force and effect.

 

SECTION 6.                                Borrower’s
Representations and Warranties.  As a material inducement to the
Administrative Agent and the Lenders to execute and deliver this Second
Amendment, the Borrower represents and warrants to the Lenders (with the
knowledge and intent that the Lenders are relying upon the same in entering
into this Second Amendment) that as of the Second Amendment Effective Date and
as of the date of its execution of this Second Amendment, that:

 

(a)                                  This
Second Amendment, the Credit Agreement as amended hereby, and each other Loan
Document have been duly authorized, executed and delivered by the Borrower and
constitute its legal, valid and binding obligations enforceable against it in
accordance with their respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors’ rights generally and to general principles of
equity).

 

(b)                                 There
has been no event or circumstance since the date of the financial statements
dated as of December 31, 2003 delivered pursuant to Section 6.01(a)
of the Credit Agreement which has or could reasonably be expected to have a Material
Adverse Effect.  The representations and
warranties set forth in Article V of the Credit Agreement are true and
correct in all material respects on and as of the Second Amendment Effective
Date, after giving effect to this Second Amendment, as if made on and as

 

3

 

of the Second Amendment Effective Date except to the extent such
representations and warranties relate solely to an earlier date, in which case,
they shall be true and correct as of such date.

 

(c)                                  As
of the date hereof, at the time of and after giving effect to this Second
Amendment, no Default or Event of Default has occurred and is continuing.

 

(d)                                 No
approval, consent, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority is required to be obtained or made
by the Borrower by any material statutory law or regulation applicable to it as
a condition to the execution, delivery or performance by, or enforcement
against, the Borrower of this Second Amendment.  The execution, delivery and performance by the Borrower of this
Second Amendment has been duly authorized by all necessary corporate or other
organizational action, and does not and will not (i) violate the terms of any
of the Borrower’s Organization Documents, (ii) result in any breach of,
constitute a default under, or require pursuant to the express provisions
thereof, the creation of any consensual Lien on the properties of the Borrower
under, any Contractual Obligation to which the Borrower is a party or any
order, injunction, writ or decree of any Governmental Authority to which the
Borrower or its property is subject, or (iii) violate any Law, in each case
with respect to the preceding clauses (i) through (iii), which would reasonably
be expected to have a Material Adverse Effect.

 

SECTION 7.                                Administrative
Agent, L/C Issuer and Lenders Make No Representations or Warranties. None
of the Administrative Agent, the L/C Issuer nor any Lender (a) makes any
representation or warranty nor assumes any responsibility with respect to any
statements, warranties, or representations made in or in connection with the
Loan Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency, or value of the Credit Agreement, the Loan Documents,
or any other instrument or document furnished pursuant thereto, or (b) makes
any representation or warranty nor assumes any responsibility with respect to
the financial condition of the Borrower or any other Person or the performance
or observance by such Persons of any of their obligations under the Loan
Documents, or any other instrument or document furnished pursuant thereto.

 

SECTION 8.                                New
Lenders’ Representations, Warranties, Covenants, and Agreements.  Each New Lender (a) confirms that it has
received a copy of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Second Amendment and become a Lender party to the
Credit Agreement, (b) agrees that it will, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Loan Documents,
(c) appoints or authorizes the Administrative Agent to take such action on its
behalf and to exercise such powers under the Loan Documents as are delegated by
the terms thereof, together with such powers as are reasonably incidental
thereto, (d) agrees that it will perform in accordance with their terms all of
the obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender, and (e) specifies as its lending office and
address for notices the offices set forth on the administrative details form
provided to the Administrative Agent.

 

SECTION 9.                                Costs.  The Borrower agrees to pay, within 30 days
of receipt of a corresponding reasonably-detailed statement of related time,
charges and other information, the reasonable Attorney Costs of the
Administrative Agent and all other reasonable costs and expenses of the
Administrative Agent, in connection with the preparation, execution and
delivery of this Second Amendment and any other documents executed by the
Borrower in connection herewith.

 

4

 

SECTION 10.                          Effect
of Amendment.

 

(a)                                  This
Second Amendment (i) except as expressly provided herein, shall not be deemed
to be a consent to the modification or waiver of any other term or condition of
the Credit Agreement or of any of the instruments or agreements referred to
therein and (ii) shall not prejudice any right or rights which the
Administrative Agent or the Lenders may now have under or in connection with
the Credit Agreement, as amended by this Second Amendment.  Except as otherwise expressly provided by
this Second Amendment, all of the terms, conditions and provisions of the
Credit Agreement shall remain the same. 
It is declared and agreed by each of the parties hereto that the Credit
Agreement, as amended hereby, shall continue in full force and effect, and that
this Second Amendment and such Credit Agreement shall be read and construed as
one instrument.

 

(b)                                 From
and after the Second Amendment Effective Date, (i) each reference in the Credit
Agreement, including the schedules and exhibits thereto and the other documents
delivered in connection therewith, to the “Credit Agreement,” “this Agreement,”
“hereunder,” “hereof,” “herein,” or words of like import, shall mean and be a
reference to the Credit Agreement as amended hereby, (ii) each reference in the
Credit Agreement, including the schedules and exhibits thereto and the other
documents delivered in connection therewith, to “$300,000,000” shall be deemed
to be and shall be a reference to “$600,000,000” and (iii) each reference in
the Credit Agreement, including the schedules and exhibits thereto and the
other documents delivered in connection therewith, to “Lenders” shall include
each of the New Lenders.

 

SECTION 11.                          Existing
Loans and Letters of Credit.  As of
the Second Amendment Effective Date, each Existing Lender shall be deemed to
have assigned, without recourse, to the New Lenders such portion of such
Existing Lender’s Loans and L/C Obligations such that the Pro Rata Share of
each Lender (including each Existing Lender and each New Lender) shall be as
set forth on Schedule 2.01 of the Credit Agreement as amended
hereby.  The parties hereto consent to
all reallocations and assignments of Commitments and Outstanding Amounts
effected pursuant to this Second Amendment, and agree that such reallocations
and assignments shall be deemed effective as if such reallocations and
assignments were evidenced by an Assignment and Acceptance in the form attached
as Exhibit D to the Credit Agreement. 
On the Second Amendment Effective Date, the New Lenders and Existing
Lenders shall make full cash settlement with each other either directly or
through the Administrative Agent, as the Administrative Agent may direct or
approve, with respect to all assignments and reallocations as reflected in this
Section such that after giving effect to such settlement each Lender’s
(including each Existing Lender’s and each New Lender’s) Pro Rata Share of the
Commitments equals (with customary rounding) its Pro Rata Share as reflected on
Schedule 2.01 to the Credit Agreement as amended hereby of (a) the
Outstanding Amount of all Loans, and (b) the Outstanding Amount of all L/C
Obligations.

 

SECTION 12.                          Miscellaneous.  This Second Amendment shall for all purposes
be construed in accordance with and governed by the laws of the State of New
York and applicable federal law.  The
captions in this Second Amendment are for convenience of reference only and
shall not define or limit the provisions hereof.  This Second Amendment may be executed in separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which together shall constitute one instrument.  In proving this Second Amendment, it shall not be necessary to
produce or account for more than one such counterpart.  This Second Amendment, and any documents
required or requested to be delivered pursuant to Section 3 hereof, may be
delivered by facsimile transmission of the relevant signature pages hereof and
thereof, as applicable.

 

SECTION 13.                          USA
PATRIOT Act Notice.  Each Lender and
the Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”),
it is required to obtain, verify and record information that identifies the
Borrower, which information includes

 

5

 

the name and address of the Borrower and other information that will
allow such Lender or the Administrative Agent, as applicable, to identify the
Borrower in accordance with the Act.

 

SECTION 14.                          Entire
Agreement.  THE CREDIT AGREEMENT (AS
AMENDED BY THIS SECOND AMENDMENT) AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.

 

[SIGNATURES BEGIN ON
NEXT PAGE]

 

6

 

IN WITNESS
WHEREOF, the parties hereto have caused this Second Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first above written.

 

	
   

  	
  ENBRIDGE
  ENERGY PARTNERS, L.P.,

  
	
   

  	
  a Delaware
  limited partnership, as Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ENBRIDGE
  ENERGY MANAGEMENT, L.L.C.,

  
	
   

  	
   

  	
  as delegate
  of Enbridge Energy Company, Inc.,

  
	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ CHRIS
  KAITSON

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Corporate
  Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ MARK
  MAKI

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  VP Finance

  	
   

  
							

 

 

[SIGNATURE PAGE TO SECOND AMENDMENT TO

AMENDED AND RESTATED CREDIT AGREEMENT]

 

 

	
   

  	
  BANK OF
  AMERICA, N.A., as Administrative Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ KEVIN L.
  AHART

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Assistant
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK OF
  AMERICA, N.A., as a Lender and

  L/C Issuer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JEFF
  SUSMAN

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  
										

 

 

	
   

  	
  BANK OF
  MONTREAL, as Syndication Agent

  
	
   

  	
  and as a
  Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RANDALL
  E. JOHNSON

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  

 

 

	
   

  	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION

  
	
   

  	
  (formerly
  known as First Union National Bank), as

  Co-Documentation Agent and as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ILLEGIBLE

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

	
   

  	
  CITIBANK,
  N.A., as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ SELIM
  BARKAT

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  VP/CO1

  	
   

  

 

 

	
   

  	
  CIBC INC.,
  as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  GERALDINE KERR

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Executive
  Director

  	
   

  

 

 

	
   

  	
  TORONTO
  DOMINION (TEXAS), INC., as

  Co-Documentation Agent and as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ILLEGIBLE

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

	
   

  	
  ABN AMRO
  BANK N.V., CAYMAN ISLANDS

  BRANCH, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ LAWRENCE
  J. MALONEY

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID F.
  WINGELDER

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  	
   

  

 

 

	
   

  	
  DEUTSCHE
  BANK AG NEW YORK BRANCH,

  
	
   

  	
  as a Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOEL
  MAKOWSKY

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ OLIVER
  RIEDINGER

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  	
   

  

 

 

	
   

  	
  ROYAL BANK
  OF CANADA, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ SUZANNE
  KAICHER

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Attorney-in-Fact

  	
   

  

 

 

 

	
   

  	
  SUNTRUST
  BANK, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOSEPH
  M. MCCREERY

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  	
   

  

 

 

	
   

  	
  UBS LOAN
  FINANCE LLC, as a Lender

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ILLEGIBLE

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ILLEGIBLE

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

SCHEDULE 2.01

 

COMMITMENTS

AND PRO RATA SHARES

	
  Lender

  	
   

  	
  Commitment

  	
   

  	
  Pro Rata
  Share

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  80,000,000

  	
   

  	
  13.333333333

  	
  %

  
	
  Bank of Montreal

  	
   

  	
  $

  	
  80,000,000

  	
   

  	
  13.333333333

  	
  %

  
	
  Wachovia Bank, National Association

  	
   

  	
  $

  	
  80,000,000

  	
   

  	
  13.333333333

  	
  %

  
	
  Citibank, N.A.

  	
   

  	
  $

  	
  60,000,000

  	
   

  	
  10.000000000

  	
  %

  
	
  CIBC Inc.

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  8.333333333

  	
  %

  
	
  Toronto Dominion (Texas), Inc.

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  8.333333333

  	
  %

  
	
  ABN AMRO Bank N.V., Cayman Islands Branch

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  6.666666667

  	
  %

  
	
  Deutsche Bank AG New York Branch

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  6.666666667

  	
  %

  
	
  Royal Bank of Canada

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  6.666666667

  	
  %

  
	
  SunTrust Bank

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  6.666666667

  	
  %

  
	
  UBS Loan Finance LLC

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  6.666666667

  	
  %

  
	
  Total

  	
   

  	
  $

  	
  600,000,000

  	
   

  	
  100.000000000

  	
  %Exhibit
10.1

 

CONFIDENTIAL
TREATMENT REQUESTED

 

 

AMENDED DEVELOPMENT AND LICENSE AGREEMENT

(Extended Release Metformin Formulations)

 

 

DEPOMED, INC.

a company organized under the laws of California, USA 

with offices at 

1360 O’Brien Drive

Menlo Park,

California, 94025

 

 

AND:

 

 

BIOVAIL LABORATORIES INCORPORATED

a Barbados corporation incorporated under the

International Business Companies Act, 1991-24,

whose head office is

Chelston Park

Building 2, Collymore Rock

St. Michael BH1

Barbados, West Indies

 

 

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

 

 

Contents

 

	
  1.

  	
  DEFINITIONS.

  	
   

  
	
   

  	
   

  
	
  2.

  	
  PRODUCT
  DEVELOPMENT

  	
   

  
	
   

  	
   

  
	
  WORK
  PLAN

  	
   

  
	
  PROTOCOLS AND METHODS

  	
   

  
	
  SUBCONTRACTED TESTS AND STUDIES

  	
   

  
	
  DEPOMED FACILITIES AND
  EMPLOYEES

  	
   

  
	
  DEVELOPMENT REVIEW TEAM.

  	
   

  
	
  CHANGE IN CONTROL OF DEPOMED

  	
   

  
	
   

  	
   

  
	
  3.

  	
  TERMINATION OF
  DEVELOPMENT

  	
   

  
	
   

  	
   

  
	
  INABILITY OF DEPOMED TO CONTINUE
  DEVELOPMENT

  	
   

  
	
  FAILURE OF DEPOMED TO FUND THE
  DEVELOPMENT

  	
   

  
	
   

  	
   

  
	
  4.

  	
  PRODUCT
  DEVELOPMENT COSTS

  	
   

  
	
   

  	
   

  
	
  5.

  	
  DISCLOSURE
  OF INFORMATION AND REPORTING

  	
   

  
	
   

  	
   

  
	
  RECORDS AND REPORTS.

  	
   

  
	
   

  	
   

  
	
  6.

  	
  INFORMATION FOR
  REGULATORY APPROVAL

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  APPLICATION
  FOR REGULATORY APPROVAL

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  CONFIDENTIALITY.

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  LICENSE PAYMENT BY
  BLI.

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  LICENSE TO DEPOMED.

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  LICENSE OF
  PRODUCT;

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  ROYALTIES.

  	
   

  
	
   

  	
   

  	
   

  
	
  REDUCTION OF ROYALTIES

  	
   

  
	
  ROYALTY REPORTS AND PAYMENTS

  	
   

  
	
  RECORDS AND AUDITS

  	
   

  
	
  LICENSED PRODUCT SUBSTITUTION

  	
   

  
				

 

2

 

	
  13.

  	
  TECHNOLOGY TRANSFER.

  	
   

  
	
   

  	
   

  	
   

  
	
  TOXICOLOGY STUDIES

  	
   

  
	
   

  	
   

  
	
  14.

  	
  COMBINATION
  PRODUCT.

  	
   

  
	
   

  	
   

  
	
  OPTION TO COMBINATION PRODUCT.

  	
   

  
	
   

  	
   

  
	
  15.

  	
  PATENTS,
  INFRINGEMENT.

  	
   

  
	
   

  	
   

  
	
  [**]

  	
   

  
	
  OTHER INFRINGEMENT

  	
   

  
	
  INFRINGEMENT OF THIRD PARTY
  PATENTS

  	
   

  
	
  [**]

  	
   

  
	
   

  	
   

  
	
  16.

  	
  OWNERSHIP
  OF INVENTIONS AND KNOW-HOW.

  	
   

  
	
   

  	
   

  	
   

  
	
  OWNERSHIP OF INTELLECTUAL PROPERTY
  RIGHTS

  	
   

  
	
  DISCLOSURE OF INVENTIONS

  	
   

  
	
  FILING AND PROSECUTION OF
  PATENT APPLICATIONS BY BLI

  	
   

  
	
  FILING AND PROSECUTION OF PATENT
  APPLICATIONS BY DEPOMED

  	
   

  
	
  ENFORCEMENT OF INTELLECTUAL
  PROPERTY RIGHTS.

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  REPRESENTATIONS
  AND WARRANTIES; NON-COMPETITION.

  	
   

  
	
   

  	
   

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES
  OF DEPOMED.

  	
   

  
	
  MUTUAL REPRESENTATIONS AND
  WARRANTIES.

  	
   

  
	
  NON-COMPETITION.

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  INDEMNIFICATION OF DEPOMED.

  	
   

  
	
  INDEMNIFICATION OF BLI.

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  TERM.

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  EXPIRY AND
  TERMINATION.

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  PUBLICITY.

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  ASSIGNABILITY.

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  PATENT LIFE
  EXTENSION.

  	
   

  
	
   

  	
   

  	
   

  
	
  24.

  	
  NOTICES.

  	
   

  
	
   

  	
   

  	
   

  
	
  25.

  	
  FORCE MAJEURE.

  	
   

  

 

3

 

	
  26.

  	
  MISCELLANEOUS.

  	
   

  

 

4

 

AMENDED DEVELOPMENT AND LICENSE AGREEMENT

(Controlled Release Metformin Formulations)

 

THIS AMENDED AGREEMENT is made as of the 27th day of April,
2004, by and between

 

DEPOMED, INC.

a company organized under the laws of California, USA 

with offices at 

1360 O’Brien Drive

Menlo Park,

California, 94025

 

(Hereinafter
referred to as “DepoMed”)

 

AND:

 

BIOVAIL LABORATORIES INCORPORATED

a Barbados corporation incorporated under the

International Business Companies Act, 1991-24,

whose head office is

Chelston Park

Building 2, Collymore Rock

St. Michael BH1

Barbados, West Indies

 

(Hereinafter referred to
as “BLI”)

 

RECITALS

 

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

 

1

 

B.                                     BLI
is the owner or licensee of original processes, patents and know-how for the
development and manufacture of oral drug delivery systems which form the basis
of the BLI Metformin Product (as defined herein);

 

C.                                     DepoMed
and BLI are parties to that certain Development and License Agreement, dated as
of May 28, 2002 (the “Original
Agreement”);

 

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

 

E.                                      BLI
has developed the BLI Metformin Product;

 

F.                                      BLI
desires to obtain rights and options to market and sell products utilizing the
GR System and an active drug component in the Territory;

 

G.                                     DepoMed
desires to permit BLI to use the Regulatory Data for the purpose of obtaining
Regulatory Approval of the BLI Metformin Product in the Territory; and

 

I.                                         DepoMed
and BLI desire to amend the License Agreement as set forth herein.

 

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

 

1.                                      DEFINITIONS.

 

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

 

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

 

1.3                                 “Adjusted Percentage”
shall mean the percentage obtained by dividing the aggregate of the amounts set
out in Schedule 1.43 for each step in the Work Plan to be conducted after

 

2

 

the date hereof and successfully completed by DepoMed
after the date hereof, by the Development Budget.

 

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

 

1.5                                 “Amendment Date”
shall mean the date first written on page 1 of this Amended Agreement.

 

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

 

1.7                                 “BLI Delivery System”
shall mean the oral controlled release tablet matrix technologies used by BLI
to develop the BLI Metformin Product.

 

1.8                                 “BLI
Metformin Product” shall mean a once daily oral tablet formulation
of the Active Ingredient in a 1000 mg strength using the BLI Delivery System.

 

1.9                                 “BLI Patent Rights” shall
mean any patent application or issued patent covering BLI Metformin Product or
any improvement to BLI Metformin Product or any methods for making or using BLI
Metformin Product or any improvement to such methods, which patents or patent
applications are owned by or licensed to BLI or any of its affiliates as of the
Amendment Date or which are developed or acquired by or licensed to BLI or any
of its Affiliates during the term of this Agreement, in any jurisdiction
outside the Territory,

 

3

 

including any addition, continuation,
continuation-in-part, or division thereof or any substitute application
thereof, any reissue or extension of any such patent, and any confirmation
patent, registration patent revalidation patent, or patent of addition based on
any such patent, and includes without limitation the United States patents and
patent applications, and foreign patents and applications set forth in Schedule
1.9.

 

1.10                           “[**]” means [**].

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

1.20                           “GR System” shall mean DepoMed’s delivery system designed
to be retained in the stomach for an extended period of time while that
delivery system delivers the incorporated drug or drugs, and includes the
delivery system described in the patents and patent applications listed in
Schedule 1.32 and any and all improvements to that delivery system.

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

1.29                        “Net Sales”
shall mean the total of all amounts invoiced by BLI and its Affiliates for
Licensed Product and BLI Metformin Product sold to independent, unrelated third
parties in the Territory in bona fide arms-length transactions, less the
following deductions actually allowed and taken by such third parties and not
otherwise recovered by or reimbursed to BLI or its Affiliates: (i) trade, cash
and quantity discounts in such amounts as are customary in the trade; (ii)
rebates, credits or other reimbursements actually paid; (iii) taxes on sales
(such as sales or use taxes) to the extent added to the sales price and

 

6

 

set forth separately as such in the total amount
invoiced; (iv) value added taxes when included as part of the sales price
and not refunded to the payor; (v) freight, insurance, and other
transportation charges to the extent added to the sales price and set forth
separately as such in the total amount invoiced; and (vi) amounts repaid
or credited by reason of rejections, defects or returns or because of
retroactive price reductions. Net Sales shall not include sales of a Licensed
Product or a BLI Metformin Product between or among BLI and its Affiliates, or
from BLI or an Affiliate of BLI to a sub-licensee, and shall not include
Sub-Licensee Net Sales.

 

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

 

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

 

1.32                           “Patent Rights”
shall mean any patent application or issued patent covering Licensed Product or
any improvement to Licensed Product or any methods for making or using Licensed
Product or any improvement to such methods, which patents or patent
applications are owned by or licensed to DepoMed as of the date hereof or which
are developed or acquired by or licensed to DepoMed during the term of this
Agreement, in the Territory, including any addition, continuation,
continuation-in-part, or division thereof or any substitute application
thereof, any reissue or extension of any such patent, and any confirmation
patent, registration patent revalidation patent, or patent of addition based on
any such patent, and includes without limitation the United States patents and
patent applications, and foreign patents and applications set forth in Schedule
1.32.

 

1.33                           “Regulatory Data”
shall mean all information and data necessary to obtain or maintain Regulatory
Approval for Licensed Product in the Territory, including post-approval
reports, filings and submissions and shall include, but not be limited to, any
Clinical Information required for that purpose.

 

1.34                           “Regulatory Approval” shall mean the permission or consent granted by any relevant
Regulatory Authority for the Marketing of a Product in the BLI Territory, and
includes all

 

7

 

of the contents of the Application for Regulatory
Approval as approved by that Regulatory Authority.

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

1.43                           “Work Plan”
shall mean a statement of the purposes, activities and goals to be utilized and
performed in Developing a 500 mg strength of the Licensed Product, identifying
the tasks and obligations to be undertaken by DepoMed and the timetable within
which it is contemplated that DepoMed will complete each of those tasks and
obligations, as the same may from time-to-time be refined by the DRT in
accordance with this Agreement. The Work Plan as of the date hereof is attached
hereto as Schedule 1.43.

 

2.                                      PRODUCT DEVELOPMENT

 

Work Plan

 

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

 

2.2                                 BLI acknowledges that DepoMed has commenced the Development of the
Licensed Product prior to the Effective Date. All of the obligations of DepoMed
under this Agreement or any Work Plan referred to in this Agreement shall
commence as soon as reasonably possible, but no later than sixty (60) days,
after the Effective Date.  DepoMed

 

9

 

shall use diligent efforts to carry out such
obligations in accordance with the time limits set out in the Work Plan. The
Parties recognize that the time frames in the Work Plan include “Target Dates”
and “Assumptions” and may be dependent on FDA actions.

 

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

 

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

 

Protocols and Methods

 

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

 

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

 

Subcontracted Tests and Studies

 

2.7                                 None of the tests or studies required by the Work Plan, excluding
those already sub-contracted, shall be sub-contracted by DepoMed unless the
sub-contract is approved by the DRT. Provided that BLI or any contract research
organization designated by BLI is

 

10

 

capable of conducting any tests or studies required by
the Work Plan within a time period set out in the Work Plan, DepoMed shall
arrange for all of such studies to be conducted at the contract research
facilities of BLI or such designated contract research organization. DepoMed
shall not be responsible for any deficiencies or defects in any studies
conducted by a contract research organization designated by BLI pursuant to
this section, or for any delays in the filing of an Application for Regulatory
Approval caused by or arising from the use of any such contract research
organization.

 

DepoMed Facilities and Employees

 

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

 

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

 

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

 

Development Review Team.

 

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

 

11

 

2.12                           Regardless of the number of representatives from each party on the
DRT, each Party shall present one consolidated view and, subject to the
provisions of section 2.18, shall have one vote on any issue in dispute. All
decisions of the DRT shall be made by majority vote. Each member of the DRT
shall ensure that any issue for decision by the DRT has received the prior
review and written approval of any appropriate internal management committees
of the Party that he or she is representing on the DRT and shall be deemed to
have all necessary authority to act and to vote on behalf of that Party. If the
DRT fails to decide any matter before it for consideration in the manner
required by this section, the matter shall be submitted to the Chief Executive
Officer of DepoMed and the President of BLI for resolution. Any disputes within
the DRT that remain unresolved after discussion between the Chief Executive of
DepoMed and the President of the BLI, shall be resolved by the Chairman of BLI,
acting in the best interests of the Development of the Licensed Product.

 

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

 

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

 

2.15                           At each meeting of the DRT, the DRT shall review the Development of
the Licensed Product to date, and shall determine if any adjustments or
refinements to the Work Plan

 

12

 

are required. At each such meeting, the DRT shall
review and approve the Development work to be carried out by DepoMed, and the
protocols to be used in that Development work, in the calendar quarter
following that meeting.

 

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

 

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

 

Change in Control of DepoMed

 

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

 

3.                                      TERMINATION OF DEVELOPMENT

 

Inability of DepoMed to Continue Development

 

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

 

13

 

Failure of DepoMed to Fund the Development

 

3.2                                 If DepoMed fails:

 

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

 

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

 

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

 

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

 

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

 

4.                                      PRODUCT DEVELOPMENT COSTS

 

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

 

14

 

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

 

5.                                      DISCLOSURE OF
INFORMATION AND REPORTING

 

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

 

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

 

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

 

5.4                                 DepoMed shall provide to BLI copies of all material correspondence,
including correspondence with any Regulatory Authority, contracts with third
parties including

 

15

 

contract research organizations, and reports relating
to the Development of the Licensed Product received by DepoMed from any
contract research organization engaged by DepoMed to conduct any tests or
studies relating to the Development of the Licensed Product, as soon as
reasonably possible, but no later than fifteen (15) days, after receipt of such
correspondence or reports by DepoMed.

 

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

 

Records and Reports.

 

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

 

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

 

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

 

16

 

6.                                      INFORMATION FOR REGULATORY APPROVAL

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

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

 

7.                                      APPLICATION FOR REGULATORY APPROVAL

 

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

 

18

 

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

 

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

 

7.3                                 BLI shall have the right to use any Regulatory Data relating to the
Licensed Product at any time after the Effective Date for the purpose of
obtaining Regulatory Approval of the BLI Metformin Product in the Territory.

 

8.                                      CONFIDENTIALITY.

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)                                 after Regulatory Approval of the Licensed Product is
reasonably required by BLI for the Marketing of the Licensed Product, , in the
Territory

 

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

 

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

 

20

 

9.                                      LICENSE PAYMENT BY BLI.

 

9.1                                 BLI shall make a payment to DepoMed of twenty five million US
dollars (US$25,000,000) within thirty (30) days after the grant of Regulatory
Approval of the first of the Licensed Product or a Substitute Product to
receive Regulatory Approval in the United States. Any such payment in respect
of a Substitute Product shall be in consideration of the rights granted to BLI
in Article 11 of this Agreement, of the waiver by DepoMed of certain
obligations of BLI under this Agreement, and of the reduction in the royalty
rates applicable to certain sales as provided in Article 12.

 

10.                               LICENSE TO DEPOMED.

 

10.1                           DepoMed shall be entitled to use the Regulatory Data at any time
after the Effective Date for the purpose of obtaining Regulatory Approval of
the Licensed Product  in jurisdictions
outside of the Territory.

 

11.                               LICENSE OF PRODUCT;

 

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

 

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

 

21

 

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

 

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

 

12.                               ROYALTIES.

 

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

 

(a)                                  of the first US$[**] of aggregate Net Sales in the
Territory in each calendar year, [**] per cent ([**]%) of such Net Sales which
are Net Sales of Licensed Product and [**] per cent ([**]%) of such Net Sales
which are Net Sales of BLI Metformin Product;

 

(b)                                 of the next US$[**] of such aggregate Net Sales in the
Territory in each calendar year, [**] per cent ([**]%) of such Net Sales which
are Net Sales of Licensed Product and [**] per cent ([**]%) of such Net Sales
which are Net Sales of BLI Metformin Product; and

 

(c)                                  of all aggregate Net Sales in the Territory in excess
of US$[**] in each calendar year, [**] per cent ([**]%) of such Net Sales which
are Net Sales of Licensed Product and [**] per cent ([**]%) of such Net Sales
which are Net Sales of BLI Metformin Product.

 

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

 

22

 

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

 

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

 

(c)                                  of all aggregate Sub-Licensee Net Sales in the
Territory in excess of US$[**] in each calendar year, [**] per cent ([**]%) of
such Sub-Licensee Net Sales which are Sub-Licensee Net Sales of Licensed
Product and [**] ([**]%) of such Sub-Licensee Net Sales which are Sub-Licensee
Net Sales of BLI Metformin Product.

 

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

 

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

 

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

 

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

 

(a)                                  the expiry of [**] years from the first commercial
sale of Licensed Product or the BLI Metformin Product as applicable on a
product-by-product basis in that country; or

 

23

 

(b)                                 the Licensed Product or the BLI Metformin Product is
no longer covered by a Valid Claim of an issued patent included in Patent
Rights or the BLI Patent Rights, as applicable on a product-by-product
basis  in that country,

 

whichever is later.

 

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

 

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

 

Reduction of Royalties

 

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

 

12.8                           In the event that a court or governmental agency compels BLI to
grant a sub-license to any third party for Licensed Product under terms or
conditions more favorable than those contained herein, BLI shall automatically
have the benefit of the more favorable terms with respect to all sales of
Licensed Product in the country or countries of the Territory wherein such
third-party compulsory license has been granted.

 

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

 

24

 

(a)                                  the royalty rate payable pursuant to section 12.3
shall be reduced to the Adjusted Percentage of the royalty rate written in
section 12.3; and

 

(b)                                 the amount payable under section 12.7 by BLI to
terminate its obligation to make the royalty payment required by section 12.3
of this Agreement shall be reduced to the Adjusted Percentage of the amount
written in section 12.7.

 

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

 

Royalty Reports and Payments

 

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

 

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

 

12.13                     The remittance of royalties payable on Net Sales outside the United
States shall be made to DepoMed in United States dollars at the free market
rate of exchange of the currency, as published in the most recent issue of the
Wall Street Journal (New York edition), of the

 

25

 

country from which the royalties are payable on the
particular date the particular United States dollars are transmitted for
payment as royalties, less any withholding or transfer taxes which are
applicable. BLI shall supply DepoMed with proof of payment of any taxes
deducted from the royalties payable to DepoMed and paid on DepoMed’s behalf.

 

12.14                     If the transfer or the conversion of all or a part of the remittance
into the United States dollar equivalent in any such instance is not lawful or
possible, the payment of such part of the royalties shall be made by the
deposit thereof, in the currency of the country where the sale on which the
royalty was based was made, to the credit and account of DepoMed or its nominee
in any commercial bank or trust company of DepoMed’s choice located in that
country. Notification of such choice of bank or trust company shall be given to
DepoMed at least thirty days prior to the date that any payment is due. Prompt
notice of deposits by BLI shall be given to DepoMed. Any tax burden levied by
any country on payments due or made by BLI to DepoMed under this Agreement
shall be borne by DepoMed.

 

Records and Audits

 

12.15                     BLI and its Affiliates shall keep and maintain, and shall cause its
sub-licensees and assigns to keep and maintain, records of Net Sales and
Sub-Licensee Net Sales. Such records shall be open to inspection by DepoMed or,
in the case of sub-licensees and assigns, by BLI on behalf of DepoMed, at any
mutually agreeable time during normal business hours within two years after the
royalty period to which such records relate by an independent certified public
accountant (or the equivalent in countries other than the United States)
reasonably acceptable to BLI but selected by DepoMed. Said accountant shall
have the right to examine the records kept pursuant to this Agreement and
report findings of said examination of records to DepoMed only insofar as it is
necessary to evidence any error on the part of BLI. This right of inspection
shall be exercised only once with respect to each country in the Territory for
any calendar year. The cost of such inspection shall be borne by DepoMed unless
the result of such examination is the determination that Net Sales in a
particular country have been understated by at least [**]

 

26

 

percent for any calendar year in which event BLI shall
bear the reasonable cost of such inspection for such country.

 

Licensed Product Substitution

 

12.16                     If at any time during the Term of this Agreement BLI determines that
the 500 mg strength of the Licensed Product should not be Marketed in the
Territory, BLI may Market, and authorize any sub-licensee to Market, a
Substitute Product. BLI shall pay to DepoMed the royalties that would be
required by this Article 12 if the Substitute Product were a Licensed Product,
in respect of all net sales of that Substitute Product by BLI or by its
sub-licensee, calculated in a manner consistent with sections 1.29 and
1.36 of this Agreement. Such payment respecting Substitute Product shall be
supported by the consideration set out in section 9.1 of this Agreement.
Provided that BLI makes the payments required by this Agreement in respect of
such Substitute Product, BLI shall not be deemed to be in default of its
obligations under this Agreement by reason of that substitution or its failure
to Market the Licensed Product.

 

13.                               TECHNOLOGY TRANSFER.

 

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

 

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

 

27

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

Toxicology Studies

 

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

 

14.                               COMBINATION PRODUCT.

 

Option to Combination Product.

 

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

 

15.                               PATENTS, INFRINGEMENT.

 

15.1                        [**]

 

Other Infringement

 

15.2                           If either party determines that any of the Patent Rights have been
infringed by the Manufacture or Marketing in the Territory of a product
containing metformin as its sole active ingredient, such party shall give to
the other party notice of such alleged infringement, in which event BLI may at
its discretion take such steps as it may consider necessary to prosecute such
infringement. BLI may not settle any such litigation in a manner that adversely
affects the rights of DepoMed hereunder without the consent of DepoMed, which
consent shall not be unreasonably withheld. DepoMed shall have the

 

29

 

right, at its own expense, to be represented by
counsel in any such litigation. If BLI, after such notice, elects not to bring
suit, it shall notify DepoMed of such election within thirty days after receipt
of such notice and DepoMed shall then have the right to bring suit at its own
expense. DepoMed shall also have the right to bring suit if BLI fails to
institute suit within ninety days from the date of the original notice of
infringement by DepoMed.

 

15.3                           In any litigation brought by BLI under section 15.2, but excluding
any litigation relating to the matter referred to in Schedule 17.1
attached hereto, BLI shall notify DepoMed of the commencement of that
litigation and shall have the right to use and sue in DepoMed’s name, and
DepoMed shall have the right, at its own expense, to be represented by counsel.
In any such litigation, DepoMed may elect by notice to BLI to share equally
with BLI the costs of such litigation (including any costs incurred by DepoMed
prior to the Effective Date) in exchange for the right to share equally with
BLI in any recovery of damages resulting from such litigation. Such election by
DepoMed shall be made not later than 60 days from the date such litigation is
commenced. BLI may not settle any such litigation in a manner that adversely
affects the rights of DepoMed hereunder without DepoMed’s consent, which
consent shall not be unreasonably withheld.

 

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

 

30

 

Infringement of Third party Patents

 

15.5                           In the event of a judgment in any suit, except the litigation
referred to in sections 15.6 through 15.10 and 17.1, requiring BLI to pay
damages or a royalty to a third party or in the event of a settlement of such
suit or threatened suit consented to by DepoMed (which consent shall not be
unreasonably withheld) requiring damages or royalty payments to be made, the
future royalty payments due to DepoMed pursuant to Article 12 shall be reduced
by the full amounts due under the requirement of such Final Judgment or under
the terms of such settlement, until the full amount of such judgment or
settlement has been recovered by BLI.

 

15.6                        [**]

 

15.7                        [**]

 

15.8                        [**]

 

15.9                        [**]

 

15.10                 [**]

 

16.                               OWNERSHIP OF
INVENTIONS AND KNOW-HOW.

 

Ownership of Intellectual Property Rights

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

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

 

Disclosure of Inventions

 

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

 

32

 

Filing and Prosecution of Patent Applications by BLI

 

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

 

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

 

Filing and Prosecution of Patent Applications by DepoMed

 

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

 

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

 

33

 

Enforcement of Intellectual Property Rights.

 

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

 

17.                               REPRESENTATIONS AND WARRANTIES; NON-COMPETITION.

 

Representations and Warranties of DepoMed.

 

17.1                           DepoMed expressly warrants and represents to BLI that:

 

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

 

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

 

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

 

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

 

34

 

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

 

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

 

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

 

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

 

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

 

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

 

35

 

Mutual Representations and Warranties.

 

17.2                           Each party hereby represents and warrants to the other party as
follows:

 

(a)                                  It is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
It has all requisite power and authority to carry on its business and to own
and operate its properties and assets. The execution, delivery and performance
of this Agreement have been duly authorized by its Board of Directors;

 

(b)                                 There is no pending or, to its knowledge, threatened
litigation involving it which would have any material adverse effect on this
Agreement or on its ability to perform its obligations hereunder except, in the
case of DepoMed, as set forth in Schedule 17.1 attached hereto; and

 

(c)                                  There is no indenture, contract, or agreement to which
it is a party or by which it is bound which prohibits or would prohibit the
execution and delivery by it of this Agreement or the performance or observance
by it of any material term or condition of this Agreement except, in the case
of DepoMed, as set forth in Schedule 17.1 attached hereto.

 

Non-Competition.

 

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

 

36

 

18.                               INDEMNIFICATION

 

Indemnification of DepoMed.

 

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

 

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

 

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

 

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

 

(d)                                 Any injury or alleged injury to any person (including
death) or to the property of any person not a party hereto arising out of the
use of the BLI Delivery System in the BLI Metformin Product;

 

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

 

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

 

Indemnification of BLI.

 

18.2                           DepoMed shall indemnify and hold harmless BLI and its officers,
directors, employees and agents against and from any losses, damages, injuries,
liabilities, claims, demands,

 

37

 

settlement, judgments, awards, fines, penalties,
taxes, fees, charges or expenses (including reasonable attorneys’ fees) of BLI
or a third party arising from or relating to:

 

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

 

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

 

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

 

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

 

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

 

38

 

action and other rights that the Party owing such duty
may then have against any third party, including Affiliates and sublicensees
with respect to the claim, suit or proceeding.

 

19.                               TERM.

 

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

 

20.                               EXPIRY AND TERMINATION.

 

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

 

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

 

20.3                           At any time during the Term of this Agreement, either BLI or DepoMed
may terminate this Agreement forthwith for cause, as “Cause” is described
below, by giving written notice to the other party. “Cause” for termination by
one party of this Agreement shall be deemed to exist (i) if the other party is
in material breach or default in the performance or observance of any of the
provisions of this Agreement applicable to it, and such breach or default is
not cured within sixty days (or thirty days in the case of failure to make
royalty or other payments due hereunder) after the giving of notice by the
party specifying such breach or default, or (ii) if, with respect to the other
party:

 

(a)                                  (i) a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect shall be instituted
by such party, or such party shall consent to the entry of any order for relief
in an involuntary case under any such law; (ii) a general assignment for
the benefit of creditors shall be made by such

 

39

 

party; (iii) such party shall consent to the
appointment of or possession by a receiver, liquidation, trustee, custodian,
sequestrator or similar official of the property of such party or of any
substantial part of its property; or (iv) such party shall adopt a
directors resolution in furtherance of any of the foregoing actions specified
in this subsection (a); or

 

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

 

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

 

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

 

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

 

40

 

or obligation. The provisions of Articles 8, 17, 18
and 21 of this Agreement shall survive the expiration or termination of this
Agreement.

 

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

 

21.                               PUBLICITY.

 

21.1                           Neither party will originate any publicity, news release, public
comment or other public announcement, written or oral, whether to the press, to
stockholders, or otherwise, relating to this Agreement, without the written
consent of the other party, except for such announcement which, in accordance
with the advice of legal counsel to the party making such announcement, is
required by law. The party making any announcement which is required by law
will, unless prohibited by law, give the other party an opportunity to review
the form and content of such announcement and comment before it is made. Either
party shall have the right to make such filings with governmental agencies as
to the contents and existence of this Agreement as it shall reasonably deem
necessary or appropriate.

 

22.                               ASSIGNABILITY.

 

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

 

41

 

by either party without the prior written consent of
the other party, which consent shall not be unreasonably withheld.

 

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

 

23.                               PATENT LIFE EXTENSION.

 

23.1                           Each party undertakes to inform the other party of:

 

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

 

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

 

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

 

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

 

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

 

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

 

24.                               NOTICES.

 

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

 

42

 

DepoMed, Inc.

1360 O’Brien Drive

Menlo Park, California 94025 

Attention: President

 

Facsimile: 650-462-9991

 

With a copy to:

 

Heller Ehrman White &
McAuliffe LLP

275 Middlefield Road

Menlo Park, California 94025

Attention: Julian N. Stern

Facsimile: 650-324-0638

 

Biovail Laboratories Incorporated

Chelston Park

Building 2, Collymore Rock

St. Michael BH1

Barbados, West Indies

 

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

Facsimile No.: (246) 437-7085

 

With a copy to:

 

Biovail Corporation 

7150  Mississauga
Road

Mississauga, Ontario

L5N 8M5

 

Attention: Chief Legal
Officer

Facsimile: 905 286 3071

 

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

 

25.                               FORCE MAJEURE.

 

25.1                           In the event of any failure or delay in the performance by a party
of any provision of this Agreement due to acts beyond the reasonable control of
such party (such as, for example, fire, explosion, strike or other difficulty
with workmen, shortage of transportation

 

43

 

equipment, accident, act of God, or compliance with or
other action taken to carry out the intent or purpose of any law or regulation,
or an order or judgment of any court of competent jurisdiction, whether
interim, temporary, interlocutory or permanent), then such party shall have
such additional time to perform as shall be reasonably necessary under the
circumstances. In the event of such failure or delay, the affected party will
use its diligent efforts, consonant with sound business judgment and to the
extent permitted by law, to correct such failure or delay as expeditiously as
possible.

 

25.2                           In the event that a party is unable to perform any of its
obligations under this Agreement by a reason described in Section 25.1
above, the obligations under this Agreement shall be suspended during such time
of non-performance.

 

26.                               MISCELLANEOUS.

 

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

 

26.2                           It is the desire and intent of the parties that the provisions of
this Agreement shall be enforced to the extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Agreement which substantially
affects the commercial basis of this Agreement shall be determined to be
invalid or unenforceable, such provision shall be amended as hereinafter
provided to delete therefrom or revise the portion thus determined to be
invalid or unenforceable. Such amendment shall apply only with respect to the
operation of such provision of this Agreement in the particular jurisdiction
for which such determination is made, provided no unfairness results. In such
event, the parties agree to use reasonable efforts to agree on substitute
provisions, which, while valid, will achieve as closely as possible the same
economic effects or commercial basis as the invalid

 

44

 

provisions, and this Agreement otherwise shall
continue in full force and effect. If the parties cannot agree to such revision
within sixty days after such invalidity or unenforceability is established, the
matter may be submitted by either party to arbitration as provided in this
Agreement to finalize such revision.

 

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

 

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

 

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

 

26.6                           Any and all disputes between the parties relating in any way to the
entering into of this Agreement and/or the validity, construction, meaning,
enforceability, or performance of this Agreement or any of its provisions, or
the intent of the parties in entering into this Agreement, or any of its
provisions arising under this Agreement, except for any disputes relating to
the provisions of Articles 15, 17, 18 and 20, shall be settled by binding
arbitration. Such arbitration shall be conducted at New York, New York, in
accordance with the rules then pertaining of the American Arbitration
Association with a panel of three arbitrators. (Each party shall select one
arbitrator and the two selected arbitrators shall select the third arbitrator.
If the two selected arbitrators cannot agree on a third arbitrator then the
American Arbitration Association shall select said arbitrator from the National
Panel of Arbitrators.) Reasonable discovery as determined by the Arbitrators
shall apply to the arbitration proceeding. The law of the State of New York
shall apply to the arbitration proceedings. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. The
successful party in such arbitration, in addition to all other relief provided,
shall be entitled to an award of all its reasonable

 

45

 

costs and expenses including attorney costs. Both
parties agree to waive, and the Arbitrators shall have no right to award,
punitive damages in connection with an arbitration proceeding hereunder.

 

46

 

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

 

 

	
   

  	
  BIOVAIL LABORATORIES
  INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eugene Melnyk

  	
   

  
	
   

  	
  Name:

  	
  Eugene Melnyk

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEPOMED, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ John W. Fara

  	
   

  
	
   

  	
  Name:

  	
  John W. Fara

  
	
   

  	
  Title:

  	
  President

  

 

47

 

Schedule 1.9 BLI Patent Rights

 

[**]

 

48

 

Schedule 1.32 to 

Development and License Agreement

 

[**]

 

49

 

Schedule 17.1 to Development and License Agreement

 

 

Litigation

 

 

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

 

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

 

50

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