Document:

EXHIBIT 10.1

 

CO-PROMOTION AGREEMENT

 

dated as of August 31, 2005

 

by and between

 

CEPHALON, INC.

 

and

 

McNEIL CONSUMER & SPECIALTY

PHARMACEUTICALS, a Division of

McNEIL-PPC, INC.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  RIGHTS AND OBLIGATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Grant
  of Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  McNeil
  Duties and Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Cephalon Duties and Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Ownership

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  JOINT COMMERCIAL COMMITTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Members;
  Officers

  	
   

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Quorum;
  Voting; Decisions

  	
   

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Minutes

  	
   

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Expenses

  	
   

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Responsibilities

  	
   

  
	
   

  	
   

  	
   

  
	
  3.6

  	
  Meetings

  	
   

  
	
   

  	
   

  	
   

  
	
  3.7

  	
  Dispute
  Resolution

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  CO-PROMOTION AND DETAILING

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Marketing
  Activities and Expenses for the Product

  	
   

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  McNeil
  Sales Representative Requirements

  	
   

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  McNeil Sales Representatives

  	
   

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Cephalon
  Benefit Plans

  	
   

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  McNeil
  Salaries and Wages

  	
   

  
	
   

  	
   

  	
   

  
	
  4.6

  	
  Cephalon
  Sales Meetings

  	
   

  
	
   

  	
   

  	
   

  
	
  4.7

  	
  Non-Compete
  and Non Solicitation

  	
   

  
	
   

  	
   

  	
   

  
	
  4.8

  	
  Reports
  and Audit Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  FINANCIAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Net
  Sales Reports

  	
   

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  GAAP

  	
   

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Manner
  of Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Interest
  on Late Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  Financial
  Records; Audits

  	
   

  

 

i

 

	
  ARTICLE 6

  	
  PROMOTIONAL
  MATERIALS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Ownership of Promotional
  Materials

  	
   

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Content,
  Quantity Compliance with Laws and Distribution of Promotional Materials

  	
   

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Payment for Promotional Materials

  	
   

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Review of Promotional Materials in the
  Territory

  	
   

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Discontinued Use

  	
   

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Use of McNeil Name

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  INFORMATION
  CONCERNING THE PRODUCT

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Statements Consistent with Labeling

  	
   

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Medical Inquiries

  	
   

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  Standard Operating Procedures

  	
   

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  Exchange of Drug Safety Information

  	
   

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Recalls Or Other Corrective Action

  	
   

  
	
   

  	
   

  	
   

  
	
  7.6

  	
  Events Affecting Integrity or Reputation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  ORDERS;
  SUPPLY AND RETURNS; REGULATORY

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Orders and Terms of Sale

  	
   

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Misdirected Orders

  	
   

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Product Returns

  	
   

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Regulatory

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  CONFIDENTIAL
  INFORMATION

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Confidential Information

  	
   

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Permitted Disclosure and Use

  	
   

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Public Announcements

  	
   

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Confidentiality of this Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  REPRESENTATIONS
  AND WARRANTIES; COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Mutual Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Additional Cephalon Representations,
  Warranties and Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Indemnification by Cephalon

  	
   

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  Indemnification by McNeil

  	
   

  

 

ii

 

	
  11.3

  	
  Procedure for Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Assumption of Defense

  	
   

  
	
   

  	
   

  	
   

  
	
  11.5

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  11.6

  	
  Waivers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  TERM AND
  TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Termination for Breach

  	
   

  
	
   

  	
   

  	
   

  
	
  12.3

  	
  Termination for Bankruptcy

  	
   

  
	
   

  	
   

  	
   

  
	
  12.4

  	
  McNeil Termination for Other Reason

  	
   

  
	
   

  	
   

  	
   

  
	
  12.5

  	
  Effects of Expiration or Termination of
  this Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Relationship of the Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Registration and Filing of this
  Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  13.3

  	
  Force Majeure

  	
   

  
	
   

  	
   

  	
   

  
	
  13.4

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  13.5

  	
  Dispute Resolution; Arbitration

  	
   

  
	
   

  	
   

  	
   

  
	
  13.6

  	
  Assignment

  	
   

  
	
   

  	
   

  	
   

  
	
  13.7

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  13.8

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  13.9

  	
  Headings

  	
   

  
	
   

  	
   

  	
   

  
	
  13.10

  	
  Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  13.11

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  13.12

  	
  No License

  	
   

  
	
   

  	
   

  	
   

  
	
  13.13

  	
  Third Party Beneficiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  13.14

  	
  Counterparts

  	
   

  

 

iii

 

CO-PROMOTION AGREEMENT

 

This CO-PROMOTION AGREEMENT (“Agreement”) dated
as of August 31, 2005 (the “Effective Date”), is made by and
between McNEIL CONSUMER & SPECIALTY PHARMACEUTICALS, a division of McNEIL-PPC, Inc.,
a New Jersey corporation having its principal office at 7050 Camp Hill Road,
Fort Washington, Pennsylvania 19034 (“McNeil”) and CEPHALON, INC., a
Delaware corporation having its principal office at 41 Moores Road, Frazer,
Pennsylvania 19355 (“Cephalon”). 
McNeil and Cephalon may be referred to as a “Party” or together
as the “Parties”.

 

RECITALS

 

WHEREAS, Cephalon is awaiting Marketing Authorization
(as hereinafter defined) to market and sell the Product (as hereinafter
defined) in the Territory (as hereinafter defined);

 

WHEREAS, McNeil is interested in Co-Promoting (as
hereinafter defined) and Detailing (as hereinafter defined) the Product in the
Territory; and

 

WHEREAS, Cephalon desires to appoint McNeil as an
independent party for the purposes of exclusively (together with Cephalon) Co-Promoting
and Detailing the Product in the Territory and McNeil desires to be so
appointed by Cephalon.

 

NOW, THEREFORE, in consideration of the foregoing
premises and the representations, covenants and agreements contained herein,
McNeil and Cephalon, intending to be legally bound, hereby agree as follows:

 

ARTICLE 1

DEFINITIONS

 

For purposes of this Agreement, the following
initially capitalized terms, whether used in the singular or plural, shall have
the following meanings:

 

1.1           “ADD”  means attention deficit disorder.

 

1.2           “ADHD”
means attention deficit hyperactivity disorder.

 

1.3           “Adverse
Drug Experience” means any of: an “adverse drug experience,” a “life-threatening
adverse drug experience,” a “serious adverse drug experience,” or an “unexpected
adverse drug experience,” as those terms are defined at either 21 C.F.R. § 312.32
or 21 C.F.R. § 314.80.

 

1.4           “Affiliate”
means, with respect to a Party, any Person, whether de jure or de facto,
which directly or indirectly controls, is controlled by, or is under common
control with such Person for so long as such control exists, where “control”
means the decision-making authority as to such Person and, further, where such
control shall be presumed to exist where a Person owns more than fifty percent
(50%) of the equity having the power to vote on or direct the affairs of the
entity.

 

 

1.5           “Agreement
Year” means the period commencing on the first day of the first month
following the First Commercial Sale and ending twelve (12) consecutive calendar
months later, and each successive twelve (12) consecutive calendar months
period; provided, however, that the first Agreement Year shall include the
period beginning on the date of the First Commercial Sale and prior to the
first day of the first Agreement Year if such first day does not occur on the
first day of a month.

 

1.6           “Annual
Net Sales” means the Net Sales during a particular Agreement Year.

 

1.7           “Anti-Kickback
Statute” means the Medicare and Medicaid Anti-Kickback Statute set forth at
42 U.S.C.

§1320a-7b(b).

 

1.8           “Applicable
Commercial Practices Policies” means the portions as identified by a Party
of the Commercial Practices Policies of such Party applicable to the marketing,
sale, promotion and detailing of pharmaceutical products, as amended or
supplemented from time to time.  Copies
of Cephalon’s Applicable Commercial Practices Policies and McNeil’s Applicable
Commercial Practices Policies are attached to this Agreement as Schedule 1.8
and may be updated in writing by one Party to the other Party from time to
time.

 

1.9           “Base
Sunset Commission Fees” shall have the meaning set forth in Section 5.1.3.

 

1.10         “Calendar
Quarter” means each of the three month periods ending March 31, June 30,
September 30 and December 31; provided, however, that the first
calendar quarter for the first Calendar Year shall extend from the date of the
First Commercial Sale to the end of the first complete calendar quarter
thereafter.

 

1.11         “Call”
means (a) with respect to a McNeil Sales Representative, a personal visit
by a McNeil Sales Representative to a member of the Target Audience during
which such McNeil Sales Representative Details the Product, and (b) with
respect to a Cephalon Sales Representative, a personal visit by a Cephalon
Sales Representative to a physician with authority to prescribe a
pharmaceutical product or issue hospital orders for a pharmaceutical product in
the United States during which such Cephalon Sales Representative Details the
Product.

 

1.12         “Cephalon’s
Medical Education Grants Committee” or “CMEGC” means the committee
formed by Cephalon to address issues related to medical education grants or any
successor committee thereto.

 

1.13         “Cephalon
Sales Representative” means a field based sales representative engaged or
employed by Cephalon and deployed by Cephalon to Co-Promote and Detail the
Product.

 

1.14         “Claims”
means all charges, complaints, actions, suits, proceedings, hearings,
investigations, claims and demands.

 

1.15         “Commission
Fees” shall have the meaning set forth in Section 5.1.1.

 

 

2

 

1.16         “CONCERTA®”
means the finished product of McNeil’s ADHD formulation of methylphenidate HCl
in all package sizes and dosage forms, including all improvements, line
extensions and formulations thereto.

 

1.17         “Confidential
Information” means all secret, confidential or proprietary information or
data, whether provided in written, oral, graphic, video, computer or other
form, provided by one Party (the “Disclosing Party”) to the other Party
(the “Receiving Party”) pursuant to this Agreement or generated pursuant
to this Agreement, including but not limited to, information relating to the
Disclosing Party’s existing or proposed research, development efforts, patent
applications, business or products, the terms of this Agreement and any other
materials that have not been made available by the Disclosing Party to the
general public.  Notwithstanding the
foregoing sentence, Confidential Information shall not include any information
or materials that:

 

1.17.1      were
already known to the Receiving Party (other than under an obligation of
confidentiality), at the time of disclosure by the Disclosing Party to the
extent such Receiving Party has documentary evidence to that effect;

 

1.17.2      were
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the Receiving Party;

 

1.17.3      became
generally available to the public or otherwise part of the public domain after
its disclosure or development, as the case may be, and other than through any
act or omission of a Party in breach of such Party’s confidentiality
obligations under this Agreement;

 

1.17.4      were
disclosed to a Party under an obligation of confidentiality that has
subsequently expired;

 

1.17.5      were
disclosed to a Party, other than under an obligation of confidentiality, by a
Third Party who had no obligation to the Disclosing Party not to disclose such
information to others; or

 

1.17.6      were
independently discovered or developed by or on behalf of the Receiving Party without
the use of the Confidential Information belonging to the other Party and the
Receiving Party has documentary evidence to that effect.

 

1.18         “Co-Promotion”
means those promotional activities undertaken by a pharmaceutical company’s
sales force in concert with at least one other pharmaceutical company’s sales
force to implement the marketing and sales plans with respect to a particular
prescription pharmaceutical product under a single trademark.  When used as a verb, “Co-Promote”
shall mean to engage in such activities.

 

1.19         “Continuing
Product Employee” shall have the meaning set forth in Section 10.3.5.

 

1.20         “Detail”
or “Detailing” means, with respect to the Product, the communication by
a Sales Representative during a Call (a) involving face-to-face contact, (b) describing
in a fair

 

 

3

 

and balanced
manner, the FDA-approved indicated uses, and other relevant characteristics of
the Product, (c) using the Promotional Materials in an effort to educate the
prescriber concerning the Product and its FDA-approved indicated uses and (d) made
at the Target Audience member’s office. 
For the avoidance of doubt, discussions at conventions shall not
constitute “Details” or “Detailing”.

 

1.21         “Designated
Senior Officer” means the senior officer designated by a Party to have
final decision-making authority over certain disputes which, unless otherwise
notified, shall be the President or Chief Executive officer of the Party;
provided that the Designated Senior Officer of Cephalon shall not be the Chair
of the JCC.

 

1.22         “Detail
Requirements” shall have the meaning set forth in Section 2.2.

 

1.23         “Disputed
Matters” shall have the meaning set forth in Section 3.7.

 

1.24         “FDA”
means the United States Food and Drug Administration and any successor agency
thereto.

 

1.25         “FD&C
Act” means the United States Federal Food, Drug, and Cosmetic Act, as
amended, and the regulations promulgated thereunder from time to time.

 

1.26         “First
Commercial Sale” means the first shipment of commercial quantities of the
Product sold to a Third Party by Cephalon or its sublicensees in the Territory
after receipt of Marketing Authorization for the Product in the Territory.  Sales for test marketing, sampling and
promotional uses, clinical trial purposes or compassionate or similar uses
shall not be considered to constitute a First Commercial Sale.

 

1.27         “First
Position Detail” means a Detail for the Product in the first (or only)
position.

 

1.28         “Governmental
Authority” means any court, tribunal, arbitrator, agency, legislative body,
commission, official or other instrumentality of (a) any government of any
country, (b) a federal, state, province, county, city or other political
subdivision thereof or (c) any supranational body.

 

1.29         “Incentive
Compensation” means the total sales performance incentive compensation for
a product or all products, as applicable, available to be earned by a Sales
Representative pursuant to the terms of the then current incentive compensation
plan for such Sales Representative.

 

1.30         “Joint
Commercial Committee” or “JCC” shall have the meaning set forth in Section 3.1.

 

1.31         “Laws”
means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the binding effect of law of any Governmental Authority.

 

1.32         “Losses”
means any and all damages, awards, deficiencies, settlement amounts, defaults,
assessments, fines, dues, penalties, costs, fees, liabilities, obligations,
taxes, liens, losses

 

 

4

 

and expenses
(including without limitation court costs, interest and reasonable fees of
attorneys, accountants and other experts) incurred by or awarded to Third
Parties and required to be paid to Third Parties with respect to a Claim by
reason of any judgment, order, decree, stipulation or injunction, or any
settlement entered into in accordance with the provisions of this Agreement,
together with all documented reasonable out-of-pocket costs and expenses
incurred in complying with any judgments, orders, decrees, stipulations and
injunctions that arise from or relate to a Claim of a Third Party (including,
without limitation, court costs, interest and reasonable fees of attorneys,
accountants and other experts).

 

1.33         “Lost
CONCERTA® Market Exclusivity” shall occur if a drug product, that contains
the same active ingredient as CONCERTA® (inactive ingredients may vary), is
approved by the FDA in the Territory and designated by the FDA as “A/B Rated,”
or the bioequivalent of, CONCERTA® and obtains sales in the Territory for sixty
(60) days, which generic drug product sales are evidenced by independent market
data (where available), such as that published by IMS.

 

1.34         “Marketing
Authorization” means, with respect to the Territory, the regulatory
authorization required to market and sell the Product in the Territory as
granted by the FDA.

 

1.35         “Marketing
Budget” means the annual marketing budget for the Product prepared by
Cephalon and distributed by Cephalon to the JCC at least thirty (30) days prior
to the beginning of any Agreement Year. 
A copy of the Marketing Budget for the First Agreement Year is attached
to this Agreement as Schedule 1.35.

 

1.36         “McNeil
ADHD Sales Force” means those McNeil sales representatives whose primary
responsibility is the detailing and selling of CONCERTA® on the Effective Date.

 

1.37         “McNeil
Medical Science Liaisons” means independent contractors of McNeil who
provide medical and scientific information to meet the needs of the medical
community.

 

1.38         “McNeil
Sales Representative” means a field based sales representative engaged or
employed by McNeil to conduct, among other sales responsibilities, Detailing
and other promotional efforts with respect to products of McNeil including
CONCERTA® for so long as McNeil continues to Detail CONCERTA®, and the Product.

 

1.39         “McNeil
Termination Date” shall have the meaning set forth in Section 10.3.3.

 

1.40         “Net
Sales” means the aggregate amount invoiced on account of sales of the
Product by Cephalon or any of its Affiliates or their sublicensees to a Third
Party in the Territory (but not including sales between Cephalon and its
Affiliates where the Product is intended for resale) less the following
relating to such sales: (a) trade, quantity and cash discounts or rebates
actually allowed and taken, which are
not already reflected in the amount invoiced; (b) any adjustments
or allowances on account of price adjustments, billing errors, rejected goods,
damaged goods and returns; (c) credits, volume rebates, charge-back and
prime vendor rebates, fees, reimbursements or similar payments granted or given
to wholesalers and other distributors, buying groups, health care insurance
carriers, pharmacy benefit management companies, health maintenance
organizations or other institutions or health care organizations, which are not

 

 

5

 

already reflected in the amount invoiced; (d) any tax,
tariff, customs duty, excise or other duty or other governmental charge (other
than a tax on income) levied on the sale, transportation or delivery of the
Product and borne by the seller thereof,
itemized on the applicable invoice and remitted to the applicable taxing
authority; (e) payments or rebates paid in connection with sales of
the Product to any governmental or regulatory authority in respect of any state
or federal Medicare, Medicaid or similar programs, which are not already reflected in the amount invoiced; and (f) any
invoiced charge for freight, insurance or other transportation costs charged to
the customer.  For purposes of this definition, the Product shall be considered “sold”
when so recorded in Cephalon’s financial statements audited in accordance with
generally accepted accounting principles, consistently applied.

 

1.41         “PDMA”
means the Prescription Drug Marketing Act of 1987, as amended, and the
regulations promulgated thereunder from time to time.

 

1.42         “Person”
means any natural person, corporation, general partnership, limited
partnership, joint venture, proprietorship or other business organization.

 

1.43         “PhRMA
Code” means the PhRMA Code on Interactions with Health Care Professionals,
as amended.

 

1.44         “Plans”
means the strategic and tactical plans developed by Cephalon related to the
marketing, promotion, sampling and sale of the Product in the Territory, which
may be amended by Cephalon from time to time during the Term.

 

1.45         “PRC”
means the committee formed by Cephalon to review Promotional Materials, which
committee shall incorporate at least one representative of McNeil as a member
with respect to the review of Promotional Materials.

 

1.46         “Primary
Detail Equivalents” or “PDEs” means a numerical amount that scores
the value of Details performed by Sales Representatives as follows:  [**] for each First Position Detail and [**]
for each Second Position Detail.

 

1.47         “Product”
means the finished product of Cephalon’s ADHD formulation of modafinil in all
package sizes and dosage forms, including all improvements, line extensions and
new approved indications (including, without limitation, ADD).

 

1.48         “Promotion”
means those promotional activities undertaken by a pharmaceutical company’s
sales force to implement the marketing and sales plans with respect to a
particular prescription product under a single trademark.  When used as a verb, “Promote” shall mean to
engage in such activities.

 

1.49         “Promotional
Materials” means all written, printed, video or graphic advertising,
promotional, training and communication materials (other than Product labeling)
for marketing, advertising, promotion and sale of the Product for use in the
Territory by (a) Sales Representatives or (b) advertisements or
direct mail pieces.

 

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

 

6

 

1.50         “Sales
Representative” means a McNeil Sales Representative or a Cephalon Sales
Representative.  Sales Representatives
means McNeil Sales Representatives and Cephalon Sales Representatives.

 

1.51         “Second
Position Detail” means a Detail for the Product in the second position.

 

1.52         “Target
Audience” means for the Product the current prescribing audience for
CONCERTA®, including but not limited to the specialties set forth on Schedule 1.52,
with authority to prescribe a pharmaceutical product or issue hospital orders
for a pharmaceutical product in the United States.

 

1.53         “Term”
means the period of time from the Effective Date through the third anniversary
of the First Commercial Sale, provided that the First Commercial Sale occurs on
or prior to [**], and provided further that if the First Commercial Sale does
not occur on or prior to [**], “Term” means the period from the Effective Date
through [**], unless terminated earlier pursuant to the terms of this Agreement.

 

1.54         “Termination
Date” shall have the meaning set forth in Section 10.3.2.

 

1.55         “Territory”
means the United States, its territories and possessions.

 

1.56         “Third
Party” means a Person who is not a Party or an Affiliate of a Party.

 

1.57         “Upside
Sunset Commission Fees” shall have the meaning set forth in Section 5.1.4.

 

ARTICLE 2

RIGHTS AND OBLIGATIONS

 

2.1           Grant
of Rights.  Subject to the terms of
this Agreement, Cephalon grants to McNeil, on an exclusive basis together with
Cephalon, the non-sublicensable right to Co-Promote and Detail the Product to
the Target Audience in the Territory during the Term.  For the avoidance of doubt, the Parties
acknowledge that, in addition to the Target Audience, Cephalon retains the
right to Co-Promote and Detail the Product to all other health care
professionals (including, without limitation, primary care physicians,
neurologists and psychiatrists) to whom the Product may be Detailed in
compliance with all applicable Laws. Cephalon shall not enter into any other
co-promotion or similar arrangement with a Third Party regarding the Detailing
of the Product in the Territory during the Term.

 

2.2           McNeil
Duties and Obligations.

 

2.2.1        On
and as of the First Commercial Sale and thereafter during the Term, McNeil
shall use its commercially reasonable efforts to Co-Promote and Detail the
Product within the Territory in accordance with the terms of this Agreement, the
Plans as directed by the Joint Commercial Committee, the PhRMA Code, the
Applicable Commercial Practices Policies and all applicable Laws, including,
without limitation, the FD&C Act, the Anti-Kickback Statute and the PDMA.  McNeil shall cause the McNeil Sales
Representatives to conduct the total Details required (the “Detail
Requirements”) to be performed by the McNeil Sales 

 

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

 

7

 

Representatives
during the Term as set forth on Schedule 2.2.1.  Notwithstanding anything to the contrary
contained in this Agreement, if the FDA or any Federal health authority imposes
or requires additional or modified restrictions or safety measures in relation
to the use of the Product or with respect to its labeling, including, without
limitation, warnings, contraindications or special precautions, which would
place the safety profile of the Product at a materially competitive
disadvantage when objectively compared with other products in the ADHD market,
then the Parties will promptly negotiate in good faith to determine whether a
reduction in, or elimination of, the Parties’ Detail Requirements and the
Parties’ other obligations under this Agreement is appropriate.

 

2.2.2        Except
as otherwise agreed, McNeil shall be responsible for providing its own
management, equipment, automobiles, offices and fixtures, working facilities,
and such other facilities and services as may be required for the McNeil Sales
Representatives at its own expense.

 

2.2.3        McNeil
shall not make any representation or statement, written or otherwise,
concerning prices, terms of delivery, terms of payment or conditions of sale
for the Product except and to the extent that the same is authorized by
Cephalon.  McNeil shall have no right or
authority to make any price guarantees, offer or agree to any discounts and/or
accept any orders on Cephalon’s behalf.

 

2.2.4        McNeil
shall be responsible for planning and conducting all training for the McNeil
Sales Representatives, subject to timely (i) receipt of all training
materials from Cephalon and (ii) training of McNeil’s trainers by
Cephalon.  Subject to the timely
provision by Cephalon of applicable training and accompanying training
materials, McNeil shall be responsible for causing each McNeil Sales
Representative to attend and successfully complete a training program with
respect to the Promotional Materials regarding the Product provided by Cephalon
prior to such McNeil Sales Representative Co-Promoting and Detailing the
Product in the Territory.

 

2.2.5        McNeil
shall cause at least [**] McNeil Medical Science Liaisons to [**] with respect
to the Product.  The McNeil Medical
Science Liaisons shall ensure the appropriate dissemination of information,
scientific knowledge and services in a timely and ethical manner.  A member of McNeil’s regulatory and/or medical
departments agrees to meet with one or more members of Cephalon’s regulatory
and/or medical departments on a quarterly basis to discuss the prior and future
activities by the McNeil Medical Science Liaisons related to the Product during
the Term.  Continuing medical education
activities relating to the Product shall be determined and conducted
independently by the CMEGC in the sole discretion of Cephalon.

 

2.2.6        Promptly
after the First Commercial Sale and to the extent that it is legally permitted
to do so, McNeil shall use its commercially reasonable efforts to provide
Cephalon with an electronic file listing of physician targets, including
hospitals, physicians and other prescribers; number of Calls and type of
Details (listed by First Position Details and Second Position Details)
completed by prescriber on a weekly basis; and such other information as
Cephalon may reasonably request.  In
addition, McNeil shall provide to Cephalon within [**] an electronic file
containing monthly call data including number of Calls and types of Details at
an individual prescriber level.  McNeil
shall provide to Cephalon, [**], reports of actual aggregate

 

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

 

8

 

Incentive Compensation
received by the McNeil Sales Representatives with respect to the Product in
form and format agreed to by the Parties.

 

2.3           Cephalon
Duties and Obligations.

 

2.3.1        Cephalon
shall be responsible for timely conducting all training for McNeil’s training managers
who will provide the training required pursuant to Section 2.2.4. Cephalon’s
training managers shall attend all training programs required pursuant to Section 2.2.4
solely to the extent that such training programs relate to the Product;
provided that Cephalon shall fund all travel, lodging and other out-of-pocket
costs associated with its training managers attending such training programs.

 

2.3.2        Cephalon
shall be responsible for planning and conducting all training for the Cephalon
Sales Representatives.  Cephalon shall be
responsible for causing each Cephalon Sales Representative to attend and
successfully complete a training program with respect to medical and technical
information regarding the Product prior to such Cephalon Sales Representative
Co-Promoting and Detailing the Product in the Territory.

 

2.3.3        On
and as of the First Commercial Sale and thereafter during the Term Cephalon
will use commercially reasonable efforts to ensure that at least [**] Cephalon
Sales Representatives Co-Promote and Detail the Product within the Territory in
accordance with the terms of this Agreement, the Plans as directed by the Joint
Commercial Committee, the PhRMA Code, the Applicable Commercial Practices
Policies and all applicable Laws, including without limitation, the FD&C
Act, the Anti-Kickback Statute and the PDMA. 
Cephalon shall cause the Cephalon Sales Representative to conduct the
Detail Requirements to be performed by the Cephalon Sales Representatives during
the Term as set forth on Schedule 2.2.1.

 

2.3.4        Unless
otherwise mutually agreed to by the Parties pursuant to Section 3.5.9,
Cephalon shall be responsible for initiating and funding all advisory boards
and speaker training programs, market research, clinical studies and
collaborative research trials, if any, with respect to the Product.

 

2.3.5        Cephalon
shall use its commercially reasonable efforts to spend not less than [**] percent
([**]%) of the total aggregate amounts set forth in the Marketing Budget and
agrees, in any event, not to spend less than $[**] in brand marketing expenses
in support of the Product during the First Agreement Year.

 

2.4           Ownership.  McNeil shall not represent to any Third Party
that is has any proprietary or property right or interest in the Product,
except for such rights granted to McNeil under this Agreement.

 

ARTICLE 3

JOINT COMMERCIAL COMMITTEE

 

3.1           Members;
Officers.  Within ten (10) days
after the Effective Date, the Parties shall establish a commercialization
committee (the “Joint Commercial Committee” or “JCC”), and
Cephalon and McNeil shall designate an equal number of representatives, up to a
maximum

 

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

 

9

 

total of [**]
members on the JCC.  The Chair of the JCC
shall be selected by Cephalon from among Cephalon’s JCC members.  Each of Cephalon and McNeil may replace any
or all of its representatives on the JCC at any time upon written notice to the
other.  Such representatives shall include
individuals who have experience and expertise in pharmaceutical product marketing,
sales and regulatory matters.  At least [**]
percent ([**]%) of the JCC members from each of the Parties shall hold
positions of reasonable seniority in their respective organizations, as
reasonably determined by the Party designating its own JCC members.  A Party may designate a substitute to
temporarily attend and perform the functions of such Party’s designee at any
meeting of the JCC.  Cephalon and McNeil
each may, upon prior written notice to the other Party, invite non-member
representatives of such Party to attend meetings of the JCC.  The Chair shall prepare the agenda for each
meeting of the JCC (which agenda shall be distributed to the JCC members at
least five (5) days, or such shorter period if five (5) days is not
practical as may be mutually agreed upon by the Parties from time to time,
prior to any scheduled meeting) and shall appoint a secretary of the JCC for
such meeting, who shall be a representative of McNeil.

 

3.2           Quorum;
Voting; Decisions.  At each JCC
meeting, the presence in person of at least one (1) member designated by
each of Cephalon and McNeil shall constitute a quorum.  All decisions of the JCC shall be made by
majority vote; provided, that, any member designated by either Cephalon or
McNeil shall have the right to cast the votes of any of such Party’s member of
the JCC who are absent from the meeting. 
Alternatively, the JCC may act by written consent signed by all members
designated by each of Cephalon and McNeil. 
Whenever any action by the JCC is called for hereunder during a time
period in which the JCC is not scheduled to meet, the Chair shall cause the JCC
to take the action in the requested time period by calling a special meeting or
by circulating a written consent.

 

3.3           Minutes.  The JCC shall keep minutes of its meetings
that record, in reasonable detail, all decisions and all actions recommended or
taken.  Drafts of the minutes shall be
prepared and circulated to the members of the JCC within a reasonable time
after the meeting, and McNeil shall be responsible for the preparation and
circulation of draft minutes.  The draft
minutes shall be approved, disapproved and revised as necessary at the next JCC
meeting.  Upon approval, final minutes of
each meeting shall be circulated to the members of the JCC by the Chair.

 

3.4           Expenses.  Each Party shall bear all expenses of their
respective JCC representatives related to their participation on the JCC and
attendance at JCC meetings.

 

3.5           Responsibilities.  The JCC shall perform the following functions
with the objective of maximizing Net Sales and profitability of the Product,
subject to applicable Laws and the Applicable Commercial Practices Policies:

 

3.5.1        Discuss
the manner in which McNeil Sales Representatives and Cephalon Sales
Representatives will Promote and Detail the Product in the ADHD marketplace
based on the available information and data regarding the safety and efficacy
of the Product;

 

3.5.2        Coordinate
the Co-Promotion and Detailing activities related to the Product of the
Cephalon Sales Representatives and McNeil Sales Representatives in the
Territory;

 

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

 

10

 

3.5.3        Discuss
the state of the markets for the Product in the Territory and opportunities and
issues concerning the Co-Promotion and Detailing of the Product in the
Territory;

 

3.5.4        Discuss
marketing support for the Product;

 

3.5.5        Discuss
the pricing of the Product in a manner whereby Cephalon agrees to consider in
good faith any McNeil suggestions with respect to such matters, but Cephalon
retains sole discretion with respect to all final pricing decisions relating to
the Product;

 

3.5.6        Discuss
issues raised by Sales Representatives relating to Co-Promotion and Detailing
of the Product in the Territory;

 

3.5.7        Discuss
incentive compensation programs for the Sales Representatives;

 

3.5.8        Discuss
the Plans and the Marketing Budget in a manner whereby Cephalon agrees to
consider in good faith any McNeil suggestions with respect to such matters,
but, subject to Sections 2.3.5, 3.7, 6.4 and 6.6, Cephalon retains final
decision-making authority with respect to the Plans and the Marketing Budget;

 

3.5.9        Discuss
[**]; and

 

3.5.10      Having
such other responsibilities as may be mutually agreed upon by the Parties from
time to time; provided that the JCC shall not have responsibility for (a) any
aspect of the marketing, sale or promotion of CONCERTA®, or (b) with
respect to the Product, any interactions with customers concerning rebating or
discounting of any type or, subject to Section 3.5.5, other terms or
conditions of sale or the development or implementation of strategies for the
managed care market.

 

3.6           Meetings.  Unless otherwise agreed to by the Parties,
the JCC shall meet at least [**] during every Calendar Quarter, and more
frequently as Cephalon and McNeil mutually deem appropriate, on such dates, and
at such places and times, as such Parties shall agree; provided that the
Parties shall endeavor to have the first meeting of the JCC within thirty (30)
days after the establishment of the JCC. 
Meetings of the JCC that are held in person shall alternate between the
United States offices of Cephalon and McNeil, or such other nearby place as the
Party hosting the meeting may reasonably designate.  The first meeting of the JCC shall be held at
Cephalon’s offices.  The members of the
JCC also may convene or be polled or consulted from time to time by means of
telecommunications, video conferences, electronic mail or correspondence, as
deemed necessary or appropriate.

 

3.7           Dispute
Resolution.  The JCC members shall use
reasonable efforts to reach agreement on any and all matters.  In the event that, despite such reasonable
efforts, agreement on a particular matter cannot be reached by the JCC within
thirty (30) days after the JCC first meets to consider such matter (each such
matter, a “Disputed Matter”), then the Chair of the JCC shall refer such
Disputed Matter to the Designated Senior Officers of Cephalon and McNeil, who
shall promptly initiate discussions in good faith to resolve such Disputed
Matter.  If such Disputed Matter is not
resolved by such Designated Senior Officers within thirty (30) days of the

 

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

 

11

 

date that the
matter was referred to such Designated Senior Officers, then the Designated
Senior Officer of Cephalon shall have the right to make the final decision on
any Disputed Matter relating directly to the Promotion and sale of the Product,
but such Designated Senior Officer shall only exercise such right in good faith
after full consideration of the positions of both Parties.  Notwithstanding the foregoing, (a) neither
Party shall have final decision-making authority regarding the interpretation,
or alleged breaches, of this Agreement, including a determination as to whether
McNeil or Cephalon has fulfilled its obligations under this Agreement, (b) no
decision or action requiring the consent or approval of one Party or both
Parties pursuant to the terms of this Agreement shall be taken without the
consent or approval of such Party or Parties, (c) the dispute resolution
procedure set forth in this Section 3.7 shall not in any way limit either
Party’s right to exercise any right of termination it may have under this
Agreement and (d) McNeil shall not be required to implement any Plans or
other marketing plans, or use any materials or engage in any activity which, in
any case, references CONCERTA® or which McNeil reasonably believes to be in
violation of any Laws or the Applicable Commercial Practices Policies of
McNeil.

 

ARTICLE 4

CO-PROMOTION AND DETAILING

 

4.1           Marketing
Activities and Expenses for the Product. 
Except for the responsibilities set forth in Section 2.2, the
Parties acknowledge and agree that McNeil will have no other duties and
obligations with respect to the Product, and McNeil will not, without the prior
written consent of Cephalon, initiate any advisory boards, speaker training
programs or any other programs as part of its services herein where
compensation is paid to a healthcare provider, provide any grants, or conduct
any market research, in each case, solely with respect to the Product.

 

4.2           McNeil
Sales Representative Requirements.

 

4.2.1        McNeil
represents and warrants to Cephalon that during the Term, McNeil will not
knowingly hire or employ an Ineligible Person to Co-Promote and Detail the
Product as provided in this Agreement. 
For the purposes of this Section 4.2, an “Ineligible Person”
means an individual who (x) is currently excluded, debarred, suspended or
otherwise ineligible to participate in a federal health care program or in
federal procurement or nonprocurement programs, or (y) has been convicted of a
criminal offense that falls within the ambit of 42 U.S.C. §1320a-7(a), but has
not yet been excluded, debarred, suspended or otherwise declared
ineligible.  If McNeil has actual notice
that one of the McNeil Sales Representatives has become or is likely to become
an Ineligible Person, McNeil will remove such person from any responsibility
associated with any Co-Promotion or Detailing of the Product in the Territory
or this Agreement.  Subject to applicable
Laws, McNeil will promptly provide Cephalon with any data required by Cephalon
for the purposes of complying with disclosure, reporting or compliance
obligations under federal and state laws relating to reporting obligations for
Ineligible Persons.

 

4.2.2        McNeil
will use commercially reasonable efforts to ensure that during the Term (a) there
are at least three hundred (300) McNeil Sales Representatives, (b) each of
the McNeil Sales Representatives shall have received training and education of
a quality substantially similar to

 

 

12

 

that required and
provided to the McNeil ADHD Sales Force and (c) the McNeil Sales
Representatives, as a whole, shall have on average at least [**] years
experience conducting sales responsibilities for ADHD products.

 

4.3           McNeil
Sales Representatives.  For the
avoidance of doubt, McNeil Sales Representatives will not be, and will not be
considered or deemed to be, employees of Cephalon for any purpose.  Cephalon will not have any responsibility for
the hiring, termination, compensation, benefits or other conditions of
employment of the employees of McNeil for any reason.

 

4.4           Cephalon
Benefit Plans.  Subject to Article 10,
McNeil Sales Representatives are not eligible to participate in any benefit
programs offered by Cephalon to its employees, or in any pension plans, profit
sharing plans, insurance plans or any other employee benefit plans offered from
time to time by Cephalon to its employees. 
McNeil acknowledges and agrees that Cephalon does not, and will not,
maintain or procure any workers’ compensation or unemployment compensation
insurance for or on behalf of the McNeil’s employees, including, without
limitation, McNeil Sales Representatives.

 

4.5           McNeil
Salaries and Wages.  Subject to Article 10,
McNeil acknowledges and agrees that it will be solely responsible for paying
all salaries, wages, benefits and other compensation which its employees,
including without limitation the McNeil Sales Representatives, may be entitled
to receive in connection with providing services under this Agreement.  The Parties acknowledge and McNeil agrees
that at all times during the Term, the percentage of the Incentive Compensation
available to be earned by McNeil Sales Representatives with respect to the
Product will be [**] of Incentive Compensation available to be earned by McNeil
Sales Representatives with respect to [**]. 
The Parties acknowledge and agree that the percentage of Incentive
Compensation available to be earned by each McNeil Sales Representatives with
respect to the Product shall be at least [**] percent ([**]%) of the total
Incentive Compensation available to be earned by such McNeil Sales
Representatives.  The Parties also
acknowledge and agree that the actual percentage of Incentive Compensation
earned in the aggregate by the McNeil Sales Representatives with respect to the
Product shall be at least [**] percent ([**]%) of the total Incentive
Compensation earned by such McNeil Sales Representatives.  In addition, at all times during the Term,
Incentive Compensation available to be earned by McNeil Sales Representatives
as a percentage of total compensation available to be earned by such McNeil
Sales Representatives shall not be less than an amount equal to [**] percent ([**]%);
provided, however, that Cephalon acknowledges and agrees that McNeil may at any
time in its sole discretion [**] to the extent arising out of [**] where such [**]
are applied proportionately to [**].

 

4.6           Cephalon
Sales Meetings.  McNeil Sales
Representatives will be invited to attend and participate in all portions of
Cephalon sales meetings that pertain to the Product and shall be required to
attend the launch sales meeting prior to the First Commercial Sale, which
meeting shall be no more than [**] days in duration.  Costs and expenses of the sales meetings
shall be borne by Cephalon and costs and expenses of lodging and transportation
attributable to individual attendees of McNeil at such sales meetings shall be
borne by McNeil.

 

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

 

13

 

4.7           Non-Compete and Non Solicitation.

 

4.7.1        McNeil
acknowledges and agrees that during the Term, it will not, without the prior
written consent of Cephalon, market, sell, offer for sale or import in the
Territory any pharmaceutical product that has been approved by the FDA and is
indicated in the treatment of ADHD, except for the Product and CONCERTA®.

 

4.7.2        Cephalon
acknowledges and agrees that during the Term, it will not, without the prior written
consent of McNeil, market, sell, offer for sale or import in the Territory any
pharmaceutical product that has been approved by the FDA and is indicated in
the treatment of ADHD, except for the Product.

 

4.7.3        During
the Term, McNeil shall not, directly or indirectly, solicit for employment any
Cephalon Sales Representative or Cephalon representative on the JCC, provided
that a general solicitation of employment shall not constitute a violation of
this Section 4.7.3.

 

4.7.4        Except
as otherwise permitted by Sections 10.3.3 and 10.3.4, during the Term, Cephalon
shall not directly or indirectly solicit for employment any McNeil Sales
Representative or McNeil representative on the JCC, provided that a general
solicitation of employment shall not constitute a violation of this Section 4.7.4.

 

4.8           Reports
and Audit Rights.

 

4.8.1        McNeil
will use its commercially reasonable efforts to keep accurate records in
accordance with its customary practices of the number of Calls and type of
Details completed solely with respect to the Product and aggregate Incentive
Compensation received by the McNeil Sales Representatives during the period for
which such Incentive Compensation is paid. 
McNeil shall keep such records regarding such McNeil Sales
Representatives during the Term and for a period of one (1) year
thereafter.

 

4.8.2        Upon
the request of Cephalon upon ten (10) days’ prior notice during normal
business hours during the Term and for six (6) months thereafter, McNeil
will permit an independent third party selected and engaged by Cephalon who
undertakes appropriate confidentiality obligations to McNeil and reasonably
acceptable to McNeil to inspect, audit and examine only those McNeil records
setting out the number of Calls and type of Details completed by the McNeil
Sales Representatives and the aggregate Incentive Compensation paid to the
McNeil Sales Representatives; provided, however that such audit may not be
performed on behalf of Cephalon more than once per Agreement Year and that
Cephalon shall not be permitted to audit the same period of time more than
once.  Such third party shall be
instructed not to reveal to Cephalon the details of its review, except for (a) such
information as is required to be disclosed under this Agreement and (b) such
information presented in a summary fashion as is necessary to report such third
party’s conclusions to Cephalon, and all such information shall be deemed
Confidential Information of McNeil.  Any
and all audits undertaken by Cephalon pursuant to this Section 4.8.2 will
be performed at the sole and exclusive expense of Cephalon.

 

4.8.3        Upon
the request of McNeil upon ten (10) days’ prior notice during normal
business hours during the Term and for six (6) months thereafter, Cephalon
will permit an independent third party selected and engaged by McNeil who
undertakes appropriate

 

 

14

 

confidentiality
obligations to Cephalon and reasonably acceptable to Cephalon to inspect, audit
and examine only those Cephalon records setting out the number of Calls and
type of Details completed by the Cephalon Sales Representatives; provided,
however that such audit may not be performed on behalf of McNeil more than once
per Agreement Year and that McNeil shall not be permitted to audit the same period
of time more than once.  Such third party
shall be instructed not to reveal to McNeil the details of its review, except
for (a) such information as is required to be disclosed under this
Agreement and (b) such information presented in a summary fashion as is
necessary to report such third party’s conclusions to McNeil, and all such
information shall be deemed Confidential Information of Cephalon.  Any and all audits undertaken by McNeil
pursuant to this Section 4.8.3 will be performed at the sole and exclusive
expense of McNeil.

 

ARTICLE 5

FINANCIAL PROVISIONS

 

5.1           Payments.

 

5.1.1        As
reimbursement for McNeil’s Detailing and Co-Promotional activities pursuant to
this Agreement, Cephalon shall pay to McNeil within thirty (30) days after the
end of each Calendar Quarter commencing with the Calendar Quarter in which the
First Commercial Sale occurs the following commission fees (“Commission Fees”)
calculated as a percentage of the Annual Net Sales during the Term:

 

	
  Annual Net Sales

  	
   

  	
  Commission Fees

  	
   

  
	
  $

  	
  [**]

  	
   

  	
  [**]

  	
  %

  
					

 

5.1.2        In
addition to the Commission Fees, Cephalon shall pay to McNeil the following
one- time sales milestones within thirty (30) days after the achievement of
each such milestone if such milestones are reached during the Term:

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  	
   

  
	
  $

  	
  [**]

  	
   

  	
  $

  	
  [**]

  	
   

  
						

 

5.1.3        Following
the expiration of the Term, provided that the Annual Net Sales during the last
Calendar Year of the Term were at least $[**], Cephalon shall pay to McNeil
within thirty (30) days after the end of each Calendar Quarter the following
commission fees (the “Base Sunset Commission Fees”) based upon the
Annual Net Sales of the Product in the Territory during each of such years:

 

	
  Period

  	
   

  	
  Base Sunset Commission Fees

  	
   

  
	
  [**]

  	
   

  	
  [**]

  	
  %

  

 

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

 

15

 

5.1.4        If,
following the expiration of the Term, provided that the Annual Net Sales during
the last Calendar Year of the Term were at least $[**], then in lieu of any
payment under Section 5.1.3 Cephalon shall pay to McNeil within thirty
(30) days after the end of each Calendar Quarter the following commission fees
(the “Upside Sunset Commission Fees”) based upon the Annual Net Sales of
the Product in the Territory during each of such years: 

 

	
  Period

  	
   

  	
  Upside Sunset Commission Fees

  	
   

  
	
  [**]

  	
   

  	
  [**]

  	
  %

  

 

5.1.5        If
during the period that Cephalon is paying McNeil either Base Sunset Commission
Fees or the Upside Sunset Commission Fee, McNeil promotes, markets or sells a
product for ADHD other than CONCERTA®, then Cephalon’s obligation to pay such
fees shall immediately terminate.

 

5.2           Net
Sales Reports.  Within thirty (30)
days after the end of each Calendar Quarter after the First Commercial Sale and
each calendar quarter during which Base Sunset Fees, Upside Sunset Fees or any
other amounts may be payable by Cephalon to McNeil, Cephalon shall submit to
McNeil a written report setting forth Net Sales in the Territory with respect
to such Calendar Quarter or calendar quarter, as the case may be (each a “Net
Sales Report”). In addition, Cephalon shall provide actual gross sales
recorded in the Territory from time to time, and, in any event at least on a
monthly basis and in such detail and format as Cephalon otherwise prepares.

 

5.3           GAAP.  All financial terms and standards defined or
used in this Agreement for sales or activities occurring in the Territory shall
be governed by and determined in accordance with United States generally
accepted accounting principles, consistently applied.

 

5.4           Manner
of Payments.  All sums due to McNeil
under this Agreement shall be payable in United States Dollars by bank wire
transfer in immediately available funds to such bank account(s) as McNeil shall
designate.  Cephalon shall notify McNeil
as to the date and amount of any such wire transfer to McNeil at least two (2) business
days prior to such transfer.

 

5.5           Interest
on Late Payments.  If Cephalon shall
fail to make a timely payment pursuant to this Agreement, any such payment that
is not paid on or before the date such payment is due under this Agreement shall
bear interest, to the extent permitted by applicable Law, at [**], effective
for the first date on which payment was delinquent and calculated on the number
of days such payment is overdue or, if such rate is not regularly published, as
published in such source as the Parties agree.

 

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

 

16

 

5.6           Financial
Records; Audits.  Cephalon shall
keep, and shall cause its Affiliates and sublicensees to keep, such accurate
and complete records of Net Sales in the Territory as are necessary to
determine the amounts due to McNeil under this Agreement during the Term and
the period during which Base Sunset Fees, Upside Sunset Fees or any other
amounts may be payable by Cephalon to McNeil and for a period of one (1) year
thereafter.  During normal business hours
and with not less than [**] advance written notice to Cephalon, such records
shall be made available for inspection, review and audit, at the request and
expense of McNeil, by an independent certified public accountant appointed by
McNeil and reasonably acceptable to Cephalon for the sole purpose of verifying
the accuracy of Cephalon’s accounting reports and payments made or to be made
pursuant to this Agreement; provided, however that such audits may not be performed
by McNeil more than once per Calendar Year and that McNeil shall not be
permitted to audit the same period of time more than once.  Such accountants shall be instructed not to
reveal to McNeil the details of its review, except for (a) such information
as is required to be disclosed under this Agreement and (b) such
information presented in a summary fashion as is necessary to report the
accountants’ conclusions to McNeil, and all such information shall be deemed
Confidential Information of Cephalon.  All
costs and expenses incurred in connection with performing any such audit shall
be paid by McNeil unless the audit discloses at least a [**] percent ([**]%)
shortfall in the amounts due to McNeil, in which case Cephalon will bear the
full cost of the audit for such Calendar Year. 
McNeil will be entitled to recover any shortfall in payments due to it
as determined by such audit, plus interest thereon calculated in accordance
with Section 5.5.

 

ARTICLE 6

PROMOTIONAL MATERIALS

 

6.1           Ownership
of Promotional Materials.  Cephalon
will own all right, title and interest in and to all Promotional Materials
during and after the Term, including, without limitation, any related
copyrights and trademarks related to the Product.  Subject to Section 6.6 and the approval
of the JCC, Promotional Materials used during the Term shall bear the names and
logos of both Cephalon and McNeil giving equal positioning to both names and
logos.  Notwithstanding anything in this
Agreement to the contrary, if the Parties are unable to agree on any matters
related to the use of the Promotional Materials and the Promotional Materials
include the McNeil name or logo, then Cephalon shall, during any period when a
dispute or disagreement relating to the Promotional Materials is ongoing, include
only the Cephalon name and logo in the Promotional Materials and both Cephalon
and McNeil shall use such Promotional Materials; provided that McNeil shall not
be required to use such Promotional Materials if such Promotional Materials
reference CONCERTA® or McNeil reasonably believes that such Promotional
Materials violate any Law or conflict with McNeil’s Applicable Commercial
Practices Policies.

 

6.2           Content,
Quantity Compliance with Laws and Distribution of Promotional Materials.  The determination of the content of the
Promotional Materials related to the Product shall be the responsibility of
Cephalon; provided, however, that the Promotional Materials may not reference
CONCERTA®.  All Promotional Materials shall
comply with all applicable Laws.  The
quantity and method of distribution of the Promotional Materials in the
Territory for the McNeil Sales Representatives shall be equivalent to that for
the Cephalon Sales Representatives.

 

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

 

17

 

6.3           Payment
for Promotional Materials.  Cephalon
shall make available to McNeil all Promotional Materials and McNeil will
purchase such Promotional Materials at Cephalon’s cost.  McNeil shall distribute such Promotional
Materials at McNeil’s cost.  McNeil will
store and subsequently distribute such Promotional Materials to the McNeil
Sales Representatives, at its own cost, which will, in no event exceed an
amount equal to $[**] per Agreement Year. Each Party will be responsible for
managing the Promotional Materials usage and inventory levels with respect to
its own Sales Representatives.  Subject
to Section 6.6, all copyright, trademark and other intellectual property
rights included in the Promotional Materials will inure to the benefit of
Cephalon and will remain owned by and vested in Cephalon upon termination of
this Agreement for any reason. Each Party will ensure that its Sales
Representatives and other employees and contractors utilize and handle all
Promotional Materials in compliance with the terms and conditions of this
Agreement.  Unless and until Promotional
Materials are approved by Cephalon for publication or other general
dissemination, McNeil shall maintain them as Confidential Information.

 

6.4           Review
of Promotional Materials in the Territory. 
Cephalon shall provide to McNeil copies of all Promotional Materials in
the Territory that Cephalon desires to be used by either Party in connection
with this Agreement or Detailing activities related to the Product during the
Term.  If the Promotional Materials
reference CONCERTA® or McNeil believes that the Promotional Materials violate
any Law or conflict with McNeil’s Applicable Commercial Practices Policies,
McNeil shall promptly refer such matter to the PRC.  McNeil may appoint up to [**] representatives
to attend meetings of the PRC relating to the Product.  Cephalon agrees to provide to McNeil
sufficient advance notice, which shall be not less than five (5) business days’
notice of any PRC meeting and to include with such notice the Promotional Materials
being discussed at such PRC meeting. While the PRC shall consider in good faith
any suggestions from the McNeil representative(s), subject to the last proviso
hereof, any and all final decisions of the PRC shall be decided in the sole
discretion of Cephalon; provided, however, that if such matter is not resolved
by the PRC to McNeil’s satisfaction within ten (10) business days after
such referral, McNeil shall not be required to use any such Promotional
Materials if such Promotional Materials reference CONCERTA® or McNeil
reasonably believes that such Promotional Materials violate any Law or conflict
with McNeil’s Applicable Commercial Practices Policies and such non-use by
McNeil shall not itself give rise to a breach of Section 12.2 by either
Party under this Agreement.

 

6.5           Discontinued
Use.  Promptly after the termination
or expiration of this Agreement, McNeil shall (a) immediately cease use of
all Promotional Materials relating to the Product and (b) use its
commercially reasonable efforts to return, or otherwise dispose of in
accordance with instructions from Cephalon, all Promotional Materials relating
to the Product that remain in McNeil’s or its Affiliates’ possession or
control; provided however that McNeil shall be entitled to retain one copy of
such Promotional Materials in its legal records.

 

6.6           Use of
McNeil Name.  McNeil will own all
right, title and interest in and to the McNeil name and logo during and after
the Term. McNeil hereby agrees to permit Cephalon to use the McNeil name and
logo in the Territory during the Term solely on Promotional Materials that have
been approved in writing by McNeil. 
McNeil shall review and notify Cephalon of McNeil’s approval or reasons
for non-approval of the use of the McNeil name and logo in such

 

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

 

18

 

Promotional
Materials within five (5) days of receipt of such Promotional Materials
from Cephalon.  All rights not expressly
granted in the McNeil name and logo are reserved by McNeil and Cephalon acknowledges
that nothing in this Agreement shall give it any right, title or interest in
the McNeil name and logo other than the permission granted herein.

 

ARTICLE 7

INFORMATION CONCERNING THE PRODUCT

 

7.1           Statements
Consistent with Labeling.  Neither Party
shall make, nor permit its Sales Representatives to make, any promotional
statement, representation or warranty, oral or written, concerning Products
inconsistent with, or contrary to, the approved Product labeling or Promotional
Materials.  Each Party shall ensure that
its Sales Representatives Detail the Product in a fair and balanced manner in
the Territory and consistent with the requirements of the FD&C Act,
including, but not limited to, the regulations at 21 C.F.R. § 202 in the
Territory.

 

7.2           Medical
Inquiries.  Cephalon shall identify
to McNeil the Person or Persons to whom McNeil and its Affiliates shall refer
all medical questions or inquiries from members of the medical and paramedical
professions and consumers regarding the Product in the Territory that McNeil
and its Affiliates cannot readily answer by reference to the Product
literature.  McNeil shall use its
commercially reasonable efforts to refer, and to cause its Affiliates to refer,
all such medical questions or inquiries to such identified Person or Persons.

 

7.3           Standard
Operating Procedures.  Prior to the
McNeil Sales Representatives being deployed to Co-Promote the Product, Cephalon
shall provide to McNeil for its review and approval, such approval not to be
unreasonably withheld or denied, a set of Cephalon’s standard operating
procedures for responding promptly to medical questions or inquiries and
product complaints in the Territory from members of the medical and paramedical
professions and consumers relating to the Product.  McNeil shall cause the McNeil Sales
Representatives to comply with any Cephalon standard operating procedures
regarding how to respond to medical questions or inquiries and Product
complaints in the Territory.  In addition,
Cephalon shall train the McNeil Sales Representatives on how to respond to such
questions or inquiries sufficiently in advance of receipt of such inquiries by
the McNeil Sales Representatives and such training shall be consistent with
applicable Laws.

 

7.4           Exchange
of Drug Safety Information.  Cephalon
shall have the sole responsibility for investigating and reporting to
Governmental Authorities all Adverse Drug Experiences for the Product in
accordance with Law.  McNeil shall have
the responsibility for promptly forwarding to Cephalon, as reasonably
instructed by Cephalon, any and all reports received by McNeil of Adverse Drug
Experience of the Product, which reports shall be investigated by
Cephalon.  Cephalon shall ensure that, in
the Co-Promotion and Detailing of the Product, it will record, investigate,
summarize, notify, report and review all Adverse Drug Experiences in accordance
with Law.  Each Party shall require that
such Affiliates (a) adhere to all requirements of applicable Laws which
relate to the reporting and investigation of Adverse Drug Experiences by such
Party, and (b) keep the Parties informed of such events, in each case with
respect to the Product.

 

 

19

 

7.5           Recalls
Or Other Corrective Action.  Cephalon
shall promptly notify McNeil of any material actions to be taken by Cephalon
with respect to any recall or market withdrawal or other corrective action
related to the Product in the Territory, which decision to recall, withdraw or
take any other corrective action relating to the Product in the Territory shall
be made by Cephalon in its sole discretion and at Cephalon’s sole cost and
expense.

 

7.6           Events
Affecting Integrity or Reputation. 
During the Term, the Parties shall notify each other immediately of any
circumstances of which they are aware and which could impair the integrity and
reputation of the Product or if a Party is threatened by the unlawful activity
of any Third Party in relation to the Product, which circumstances shall
include, by way of illustration, deliberate tampering with or contamination of
the Product by any Third Party as a means of extorting payment from the Parties
or another Third Party.  In any such
circumstances, the Parties shall use commercially reasonable efforts to limit
any damage to the Parties and/or to the Product with the understanding that the
health and welfare of patients is of foremost importance.  The Parties shall promptly call a meeting to
discuss and resolve such circumstances.

 

ARTICLE 8

ORDERS; SUPPLY AND RETURNS; REGULATORY

 

8.1           Orders
and Terms of Sale.  Cephalon shall
have the sole right in the Territory to (a) receive, accept and fill
orders for the Product, (b) control pricing, invoicing, order processing
and collection of accounts receivable for the sales of the Product and (c) record
the sales of the Product in its books of account.

 

8.2           Misdirected
Orders.  If, for any reason, McNeil
receives orders for the Product, McNeil shall forward such orders to Cephalon
(or if directed by Cephalon to Cephalon’s wholesalers) as soon as practical.

 

8.3           Product
Returns.  Except as provided below,
if any quantities of the Product are returned to McNeil, McNeil shall promptly
notify Cephalon and ship them to the facility and in a manner designated by
Cephalon, with any reasonable or authorized shipping or other documented direct
cost to be paid by Cephalon upon receipt of an invoice from McNeil, or at
Cephalon’s request, McNeil shall destroy the Product, the cost of such
destruction to be borne by Cephalon. 
McNeil, at its option, may advise the customer who made the return that
the Product should have been returned to Cephalon, but shall take no other
steps in respect of any return without the consent of Cephalon, such consent
not to be unreasonably withheld, refused, conditioned or delayed.  In the event the Product is returned as a
result of McNeil’s breach of this Agreement, or otherwise as a result of McNeil’s
gross negligence, then any costs associated with such destruction shall be the
sole responsibility of McNeil.

 

8.4           Regulatory.

 

8.4.1        Approvals.  Cephalon shall have exclusive authority to
obtain, maintain and seek revisions of Marketing Authorization for the
Product.  Cephalon shall be solely
responsible for communications with the FDA regarding the Product, including
but not limited to, reporting on Adverse Drug Experiences and complaints,
provided that McNeil may communicate with FDA with respect to the Product where
McNeil’s failure to so communicate

 

 

20

 

would violate
applicable Law and provided further that McNeil shall use reasonable efforts to
share in advance any such communications with Cephalon.  It shall be the obligation of Cephalon to
ensure that the incidence, severity and/or nature of Adverse Drug Experiences
are accurately reflected in the package inserts for the Product to the extent
required under, and in accordance with, applicable Laws.

 

8.4.2        Provision
of Reports to McNeil.  Cephalon shall
provide McNeil with copies of: (a) the periodic Adverse Drug Experience
reports submitted to any Governmental Authorities in the Territory regarding
Product, within ten (10) days of submission to any Governmental
Authorities in the Territory; and (b) all annual reports submitted by
Cephalon to Governmental Authorities in the Territory redacted to include
information only regarding the Product.

 

8.4.3        Actions
by Governmental Authorities. 
Cephalon shall promptly notify McNeil of any inspections, proposed
regulatory actions, investigations or requests, and any corrective actions
initiated by Cephalon with any Governmental Authorities in the Territory, in
each case relating to the Product, and Cephalon shall provide McNeil with
copies of all relevant documentation relating to the foregoing.

 

ARTICLE 9

CONFIDENTIAL INFORMATION

 

9.1           Confidential
Information.  Each of Cephalon and
McNeil shall keep all Confidential Information received from the other Party
with the same degree of care it maintains the confidentiality of its own
Confidential Information.  Neither Party
shall use such Confidential Information for any purpose other than in
performance of this Agreement or disclose the same to any other Person other
than to such of its agents who have a need to know such Confidential
Information to implement the terms of this Agreement or enforce its rights
under this Agreement.  A Receiving Party
shall advise any agent who receives such Confidential Information of the
confidential nature thereof and of the obligations contained in this Agreement
relating thereto, and the Receiving Party shall ensure that all such agents
comply with such obligations as if they had been a Party hereto.  Upon termination of this Agreement, the
Receiving Party shall use its commercially reasonable efforts to return or
destroy, at the Receiving Party’s option, all documents, tapes or other media
containing Confidential Information of the Disclosing Party that remain in the
Receiving Party’s or its agents’ possession, except that the Receiving Party
may keep one copy of the Confidential Information in the legal department files
of the Receiving Party, solely for archival purposes.  Such archival copy shall be deemed to be the
property of the Disclosing Party, and shall continue to be subject to the
provisions of this Article 9. 
Notwithstanding anything to the contrary in this Agreement, the
Receiving Party shall have the right to disclose any Confidential Information
provided hereunder if, in the reasonable opinion of the Receiving Party’s legal
counsel, such disclosure is necessary to comply with the terms of this Agreement,
or the requirements of any Law.  Where
possible, the Receiving Party shall notify the Disclosing Party of the
Receiving Party’s intent to make such disclosure of Confidential Information
pursuant to the provision of the preceding sentence sufficiently prior to
making such disclosure so as to allow the Disclosing Party adequate time to
take whatever action the Disclosing Party may deem to be appropriate to protect
the confidentiality of the information.

 

 

21

 

9.2           Permitted
Disclosure and Use.  Notwithstanding Section 9.1,
a Party may disclose Confidential Information belonging to the other Party only
to the extent such disclosure is reasonably necessary to: (a) enforce the
provisions of this Agreement; or (b) comply with Laws.  If a Party deems it necessary to disclose
Confidential Information of the other Party pursuant to this Section 9.2,
such Party shall give reasonable advance notice of such disclosure to the other
Party to permit such other Party sufficient opportunity to object to such
disclosure or to take measures to ensure confidential treatment of such
information.

 

9.3           Public
Announcements.  Except as may be
expressly required by applicable Laws, neither Party will make any public
announcement of any information regarding this Agreement or the Product under
this Agreement without the prior written approval of the other Party.  Once any written statement is approved for
disclosure by the Parties or information is otherwise made public in accordance
with the preceding sentence, either Party may make a subsequent public
disclosure of the contents of such statement solely to the extent such
disclosure is required by applicable Laws following advance written notice to
the other Party.

 

9.4           Confidentiality
of this Agreement.  The terms of this
Agreement shall be Confidential Information of each Party and, as such, shall
be subject to the provisions of this Article 9.

 

9.5           Survival.  The obligations and prohibitions contained in
this Article 9 shall survive the expiration or termination of this
Agreement for a period of [**].

 

ARTICLE 10

REPRESENTATIONS AND WARRANTIES; COVENANTS

 

10.1         Mutual
Representations and Warranties. 
McNeil and Cephalon each represents and warrants to the other as of the
Effective Date that:

 

10.1.1      Such
Party (a) is a company duly organized, validly existing, and in good
standing under the Laws of the jurisdiction of its incorporation; (b) is
duly qualified as a corporation and in good standing under the Laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, where the failure to be so qualified
would have a material adverse effect on its financial condition or its ability
to perform its obligations hereunder; (c) has the requisite corporate
power and authority and the legal right to conduct its business as now
conducted and hereafter contemplated to be conducted; (d) has or will
obtain all necessary licenses, permits, consents, or approvals from or by, and
has made or will make all necessary notices to, all Governmental Authorities
having jurisdiction over such Party, to the extent required for the ownership
and operation of its business, where the failure to obtain such licenses,
permits, consents or approvals, or to make such notices, would have a material
adverse effect on its financial condition or its ability to perform its
obligations hereunder; and (e) is in compliance with its charter
documents;

 

10.1.2      The
execution, delivery and performance of this Agreement by such Party and all
instruments and documents to be delivered by such Party hereunder (a) are
within the corporate power of such Party; (b) have been duly authorized by
all necessary or proper corporate action; (c) do not conflict with any
provision of the charter documents of such Party;

 

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

 

22

 

(d) will not,
to the best of such Party’s knowledge, violate any law or regulation or any
order or decree of any court of governmental instrumentality; and (e) will
not violate or conflict with any terms of any indenture, mortgage, deed of
trust, lease, license, agreement, or other instrument to which such Party is a
party, or by which such Party or any of its property is bound, which violation
would have a material adverse effect on its financial condition or on its
ability to perform its obligations hereunder; and

 

10.1.3      This
Agreement has been duly executed and delivered by such Party and constitutes a
legal, valid and binding obligation of such Party, enforceable against such
Party in accordance with its terms, except as such enforceability may be
limited by applicable insolvency and other Laws affecting creditors’ rights
generally, or by the availability of equitable remedies.

 

10.2         Additional
Cephalon Representations, Warranties and Covenants.

 

Cephalon
represents, warrants and covenants to McNeil as follows:

 

10.2.1      that
as of the Effective Date the manufacture, use, importation, offer for sale or
sale of the Product, and the creation, use and dissemination of Promotional
Materials as contemplated hereunder does not infringe, and will not infringe,
any Third Party intellectual property right in the Territory;

 

10.2.2      that
with respect to all regulatory filings to obtain the Marketing Authorization,
the data and information in Cephalon’s submissions are and shall be free from
fraud or material falsity, that the Marketing Authorization has not been and
will not be obtained either through bribery or the payment of illegal
gratuities, that the data and information in Cephalon’s submissions (and
provided to McNeil in connection with its evaluation of the Product) are and
shall be accurate and reliable for purposes of supporting approval of the
submissions, and that the Marketing Authorization shall be obtained without illegal
or unethical behavior of any kind;

 

10.2.3      that
Cephalon solely owns all right, title and interest in the Product, the Cephalon
patents and the Cephalon trademark with respect to the Product and has not
granted any right to a Third Party that is in conflict with the rights granted
hereunder;

 

10.2.4      that
Cephalon has not received written notice from a Third Party claiming that a
patent owned by such Third Party would be infringed by the manufacture, use,
sale, offer for sale or import of the Product in the Territory, and no Third
Party has threatened in writing to make any such claim;

 

10.2.5      that
regulatory filings seeking Marketing Authorization have been accepted by the
FDA;

 

10.2.6      that
the Product labeling and the related Promotional Materials and training
materials provided to McNeil by Cephalon shall conform to the FDA approved
labeling for the Product and will comply with all applicable Laws; and

 

 

23

 

10.2.7      that
Cephalon shall manufacture the Product in accordance with the provisions of the
FD&C Act and the FDA’s Current Good Manufacturing Practices and regulations
promulgated thereunder, relating to the manufacture of pharmaceutical products.

 

10.3         Covenants.

 

10.3.1      Each
Party hereby covenants and agrees during the Term that it shall carry out the
Co-Promotion and Detailing of the Product and its other obligations or
activities hereunder in accordance with (a) the terms of this Agreement
and (b) all applicable Laws.

 

10.3.2      If
Lost CONCERTA® Market Exclusivity occurs during the Term, then the Parties
shall meet immediately thereafter but in no event later than [**] following
Lost CONCERTA® Market Exclusivity, and one of the following consequences shall
apply: (a) within [**] after Lost CONCERTA® Market Exclusivity, the
Parties may mutually agree to terminate this Agreement on a date that is at
least [**] following the date of such mutual agreement (the “Termination
Date”), in which case the consequences set forth in Sections 10.3.4(a) and
10.3.5 shall apply or (b) if the Parties do not mutually agree to so
terminate this Agreement pursuant to Section 10.3.2(a), then unless and
until McNeil terminates this Agreement pursuant to Section 10.3.3, the
Parties shall continue this Agreement and [**] percent ([**]%) of the Details
by the McNeil Sales Representatives shall be First Position Details until the
effective date of the termination or expiration of this Agreement, provided
that, notwithstanding anything to the contrary set forth in Section 10.3.2(b),
there shall be no decrease in the number of total Details or total PDEs in the
first Agreement Year as set forth on Schedule 2.2.1.  If McNeil terminates this Agreement pursuant
to Section 10.3.3, then the consequences set forth in Sections 10.3.4(b) and
10.3.5 shall apply.

 

10.3.3      If
Lost CONCERTA® Market Exclusivity occurs during the Term and the Parties do not
terminate this Agreement pursuant to Section 10.3.2(a), then McNeil may,
at its option, at any time following Lost CONCERTA® Market Exclusivity,
terminate this Agreement in accordance with the provisions of this Section 10.3.3.  Except as set forth in the next sentence,
McNeil may only terminate this Agreement pursuant to this Section 10.3.3
effective on or after a date that is six (6) months following the First
Commercial Sale by providing to Cephalon at least ninety (90) days’ advance
written notice of termination prior to the effective date of termination, in
which case the consequences set forth in Sections 10.3.4(b) and 10.3.5
shall apply.  If Lost CONCERTA® Market
Exclusivity occurs prior to the First Commercial Sale, McNeil may terminate
this Agreement at its option by providing at least ninety (90) days’ advance
written notice of termination to Cephalon where such termination will become effective
on or after a date that is the later of (a) the four-month anniversary of
Lost CONCERTA® Market Exclusivity and (b) April 30, 2006; provided
that if the First Commercial Sale occurs before such effective date of
termination, McNeil may only terminate this Agreement pursuant to this Section 10.3.3
where such termination will become effective on or after a date that is at
least six (6) months following the First Commercial Sale.  The applicable effective date of termination
of the Agreement under this Section 10.3.3 shall be referred to as the “McNeil
Termination Date.”

 

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

 

24

 

10.3.4

 

(a) If
the Parties mutually agree to terminate this Agreement pursuant to Section 10.3.2(a),
then Cephalon shall within [**] of receipt of notice of termination make offers
of employment to all of the McNeil Sales Representatives.  The term of any such offers shall be at least
substantially comparable to the then terms of employment of the McNeil Sales
Representatives as to job description, base salary and incentive
compensation.  Such offers shall include
an agreement by Cephalon that if any McNeil Sales Representative accepts
employment with Cephalon, and Cephalon within [**] following such acceptance,
severs employment with such Sales Representative, Cephalon will pay such Sales
Representative severance that is at least equal to the severance which such
Sales Representatives would have been entitled to receive in the event that
McNeil had terminated such employment based on combined service with McNeil and
with Cephalon.  McNeil shall fully
cooperate to assist Cephalon in its efforts to hire the McNeil Sales
Representatives. McNeil and McNeil’s Affiliates will not offer positions of
employment to any of the McNeil Sales Representatives prior to the Termination
Date. In addition, for a period of [**] following the Termination Date, McNeil
and McNeil’s Affiliates will not offer positions of employment to any of the
McNeil Sales Representatives who have accepted positions of employment with
Cephalon.  If Lost CONCERTA® Market
Exclusivity occurs after the First Commercial Sale of the Product, and at least
[**] percent ([**]%) of the McNeil Sales Representatives accept positions with
Cephalon within thirty (30) days following receipt of Cephalon’s offer of
employment, Cephalon shall pay to McNeil within sixty (60) days after the end
of each Calendar Quarter during the [**] following the Termination Date a [**]
percent ([**]%) commission fee calculated as a percentage of the Annual Net
Sales during such [**] year period.

 

(b) 
If McNeil voluntarily terminates this Agreement pursuant to Section 10.3.3,
then Cephalon may, within [**] of receipt of notice of termination make offers
of employment to such McNeil Sales Representatives as it deems appropriate, in
its sole discretion.  The term of any
such offers shall be at least substantially comparable to the then terms of
employment of the McNeil Sales Representatives as to job description, base salary
and incentive compensation.  Such offers
shall include an agreement by Cephalon that if any McNeil Sales Representative
accepts employment with Cephalon, and Cephalon within [**] following such
acceptance, severs employment with such Sales Representative, Cephalon will pay
such Sales Representative severance that is at least equal to the severance
which such Sales Representatives would have been entitled to receive in the
event that McNeil had terminated such employment based on combined service with
McNeil and with Cephalon.  McNeil shall
fully cooperate to assist Cephalon in its efforts to hire the McNeil Sales
Representatives. McNeil and McNeil’s Affiliates will not offer positions of
employment to any of the McNeil Sales Representatives prior to the McNeil
Termination Date; provided that in the event that Cephalon has notified any
McNeil Sales Representative that Cephalon will not be offering such McNeil
Sales Representative an offer of employment, McNeil and its Affiliates may
thereafter offer positions of employment to any such McNeil Sales
Representative. In addition, for a period of [**] following the McNeil
Termination Date, McNeil and McNeil’s Affiliates will not offer positions of
employment to any of the McNeil Sales Representatives who have accepted
positions of employment with Cephalon.

 

10.3.5      Each
McNeil Sales Representative who accepts an employment offer with Cephalon (each
a “Continuing Product Employee”) shall be covered under the employee
benefit

 

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

 

25

 

plans of Cephalon
available to other employees of Cephalon who are employed in similar categories
of employment.  Cephalon shall offer each
McNeil Sales Representative the opportunity, as of the Termination Date or the
McNeil Termination Date, as the case may be, to participate in all of Cephalon’s
employee benefit plans for which each such person would be eligible under the
guidelines for such plans.  Within the 30
day period after the date of this Agreement, Cephalon shall provide to McNeil
summaries of the material terms and conditions of and guidelines for employee
benefit plans (including, but not limited to, medical and dental insurance
plans, life insurance plan, 401(k) savings plan, short-term and long-term
disability plans, vacation plan and severance or termination plan).  For vesting and eligibility purposes under
all of Cephalon’s employee benefit plans, all Continuing Product Employees
shall be given full credit for all service with McNeil, McNeil’s Affiliates or
McNeil’s former Affiliates.  In addition
to such recognition of all such prior service for purposes of vesting and
eligibility, all Continuing Product Employees shall be given credit for such
prior service for purposes of (i) accrual of severance benefits and (ii) accrual
of vacation benefits.  Schedule 10.3.5
hereto lists all periods of service of each McNeil Sales Representative with
McNeil, McNeil’s Affiliates or McNeil’s former Affiliates, and Cephalon shall
be entitled to rely on such Schedule 10.3.5 for the purposes of
determining periods of prior service under this Section.  Cephalon agrees that in complying with the
benefit requirements set forth in this Article 10, no pre-existing medical
condition of any Continuing Product Employee or his or her eligible dependents
shall cause Cephalon to deny, delay or otherwise alter coverage under Cephalon
benefit plans to any such person.  At the
commencement of employment with Cephalon, each Continuing Product Employee
shall be entitled to vacation in accordance with the current Cephalon vacation
policy.  The Continuing Product Employee
shall be given credit for years of service at McNeil, McNeil’s Affiliates or
McNeil’s former Affiliates in determining the amount of vacation he/she is
entitled to under the current Cephalon vacation policy.  McNeil agrees to pay each Continuing Product
Employee for all accrued and unused vacation through the Termination Date or
the McNeil Termination Date, as the case may be, and each Continuing Product
Employee shall have the right to take such vacation with Cephalon, without pay.

 

ARTICLE 11

INDEMNIFICATION

 

11.1         Indemnification
by Cephalon.  Cephalon shall defend,
indemnify and hold harmless McNeil and its Affiliates and each of their
officers, directors, shareholders, employees, successors and assigns from and
against all Claims of Third Parties, and all associated Losses, to the extent
arising out of (a) Cephalon’s gross negligence or willful misconduct in
performing any of its obligations under this Agreement, (b) a breach of,
or inaccuracy in, any of the representations, warranties, covenants or
agreements made by Cephalon under this Agreement, or (c) the distribution,
manufacture, importation, promotion, marketing, use or sale of the Product,
including without limitation, Claims involving any actual or alleged
infringement of any intellectual property rights or misappropriation of any
trade secrets of any Third Party and product liability Claims; provided,
however, that in all cases referred to in this Section 11.1, Cephalon
shall not be liable to indemnify McNeil for any Losses of McNeil to the extent
that such Losses of McNeil were caused by (x) the gross negligence or willful
misconduct of McNeil or (y) any breach by McNeil of its representations,
warranties, covenants or agreements hereunder.

 

 

26

 

11.2         Indemnification
by McNeil.  McNeil shall defend,
indemnify and hold harmless Cephalon and its Affiliates and each of their
officers, directors, shareholders, employees, successors and assigns from and
against all Claims of Third Parties, and all associated Losses, to the extent
arising out of (a) McNeil’s gross negligence or willful misconduct in
performing any of its obligations under this Agreement, or (b) a breach
of, or inaccuracy in, any of the representations, warranties, covenants or
agreements made by McNeil under this Agreement; provided, however, that in all
cases referred to in this Section 11.2, McNeil shall not be liable to
indemnify Cephalon for any Losses of Cephalon to the extent that such Losses of
Cephalon were caused by (x) the gross negligence or willful misconduct of
Cephalon or (y) any breach by Cephalon of its representations, warranties,
covenants or agreements hereunder.

 

11.3         Procedure
for Indemnification.

 

11.3.1      Notice.  Each Party will promptly notify the other
Party in writing if it receives a Claim by any Third Party (a “Third Party
Claim”) for which indemnification may be sought by that Party and will give
such information with respect thereto as the other Party shall reasonably
request.  If any proceeding (including
any governmental investigation) is instituted involving any Party for which
such Party may seek an indemnity under Section 11.1 or 11.2, as the case
may be (the “Indemnified Party”), the Indemnified Party shall promptly
notify the other Party (the “Indemnifying Party”) in writing and, to the
extent consistent with Applicable Laws, the Indemnifying Party and Indemnified
Party shall meet to discuss how to respond to any Third Party Claims that are
the subject matter of such proceeding.

 

11.3.2      Defense
of Claim.  The Indemnifying Party
may, to the extent permitted by applicable Law, elect to control the defense of
a Third Party Claim; provided that (i) the Indemnifying Party gives notice
to the Indemnified Party of its intention to do so within thirty (30) days
after the receipt of the written notice from the Indemnified Party of the
indemnifiable Third Party Claim, (ii) the Indemnifying Party expressly
agrees the Indemnifying Party shall be responsible for satisfying and
discharging any award made to the Third Party as a result of such proceedings
or settlement amount agreed with the Third Party in respect of the Third Party
Claim, (iii) the Indemnifying Party can demonstrate that it has adequate
insurance or other financial means to satisfy the Third Party Claim and (iv) only
monetary damages, and not, injunctive relief, are sought by such Third Party
Claim (collectively, the “Litigation Condition”).  Subject to compliance with the Litigation
Condition, the Indemnifying Party shall retain counsel reasonably acceptable to
the Indemnified Party (such acceptance not to be unreasonably withheld,
refused, conditioned or delayed) to represent the Indemnified Party and shall
pay the fees and expenses of such counsel related to such proceeding.  In any such proceeding, the Indemnified Party
shall have the right to retain its own counsel, but, to the extent the
Litigation Condition is satisfied, the fees and expenses of such counsel shall
be at the expense of the Indemnified Party, and otherwise such fees and expenses
shall be at the expense of the Indemnifying Party.  The Indemnified Party shall, if requested by
the Indemnifying Party, cooperate in all reasonable respects in the defense of
such claim that is being managed and/or controlled by the Indemnifying Party.  The Indemnifying Party shall not, without the
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, refused, conditioned or delayed), effect any settlement
of any pending or threatened proceeding in which the Indemnified Party is, or
based on the same set of facts could have been, a party and

 

 

27

 

indemnity could
have been sought hereunder by the Indemnified Party, unless such settlement
includes an unconditional release of the Indemnified Party from all liability
on claims that are the subject matter of such proceeding and does not include
any injunctive relief against the Indemnified Party.  If the Litigation Condition is not met, then
neither Party shall have the right to control the defense of such Third Party
Claim and the Parties shall reasonably cooperate in and be consulted on the
material aspects of such defense at the Indemnifying Party’s expense.

 

11.4         Assumption
of Defense.  An Indemnified Party
shall be entitled to assume the defense of any Third Party Claim with respect
to the Indemnified Party, upon written notice to the Indemnifying Party
pursuant to this Section 11.4, in which case the Indemnifying Party shall
be relieved of liability under Section 11.1 or 11.2, as applicable, solely
for such Third Party Claim and related Losses.

 

11.5         Insurance.

 

11.5.1      During
the Term and for a period of [**] after the termination or expiration of this
Agreement, Cephalon shall obtain and/or maintain at its sole cost and expense,
liability insurance (including product liability insurance, workers
compensation, general liability, automobile liability, and advertising
liability insurance), which may be through self-insured arrangements, in
amounts which are reasonable and customary in the U.S. pharmaceutical industry
for companies of comparable size and activities at the respective place of
business of Cephalon.  Such liability
insurance or self-insured arrangements shall insure against bodily injury,
physical injury or property damage arising out of the manufacture, sale,
storage, promotion, distribution, or marketing of the Product.  Cephalon shall provide written proof of the
existence of such insurance to McNeil upon request.

 

11.5.2      During
the Term, McNeil will obtain and maintain workers compensation, general
liability, automobile liability, and advertising liability insurance (including
any self-insured arrangements) in amounts which are reasonable and customary in
the U.S. pharmaceutical industry for companies of comparable size and
activities at the respective place of business of McNeil.

 

11.6         Waivers.  EACH PARTY HERETO WAIVES ANY CLAIM TO PUNITIVE, EXEMPLARY OR MULTIPLIED
DAMAGES FROM THE OTHER PARTY. EACH PARTY HERETO WAIVES ANY CLAIM OF
CONSEQUENTIAL DAMAGES FROM THE OTHER PARTY.  THE
FOREGOING SENTENCE SHALL NOT LIMIT THE OBLIGATIONS OF EITHER PARTY TO INDEMNIFY
THE OTHER PARTY FROM AND AGAINST THIRD PARTY CLAIMS UNDER THIS ARTICLE 11.

 

ARTICLE 12

TERM AND TERMINATION

 

12.1         Term.  Unless otherwise mutually agreed to by the
Parties, this Agreement shall commence on the Effective Date and shall continue
for the Term, unless terminated sooner as permitted hereunder.  The Term may be extended for additional one (1) year
periods upon mutual written agreement of the Parties.

 

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

 

28

 

12.2         Termination
for Breach.  Either Party may,
without prejudice to any other remedies available to it at law or in equity,
terminate this Agreement in the event that the other Party (as used in this
subsection, the “Breaching Party”) shall have breached or defaulted in
the performance of any of its material obligations.  The Breaching Party shall, if such breach can
be cured, have sixty (60) days after written notice thereof was provided to the
Breaching Party by the non-breaching Party to remedy such default (or, if such
default cannot be cured within such 60-day period, the Breaching Party must
commence and diligently continue actions to cure such default during such 60-day
period).  Any such termination shall
become effective at the end of such 60-day period unless the Breaching Party
has cured any such breach or default prior to the expiration of such 60-day
period (or, if such default is capable of being cured but cannot be cured
within such 60-day period, the Breaching Party has commenced and diligently
continued actions to cure such default provided always that, in such instance,
such cure must have occurred within one hundred twenty (120) days after written
notice thereof was provided to the Breaching Party by the non-breaching Party
to remedy such default). Notwithstanding the foregoing, breaches related to the
failure to timely pay amounts due hereunder, must be cured by the Breaching
Party within ten (10) days after written notice thereof was provided to
the Breaching Party by the non-breaching Party to remedy such default, and if
such default is not timely remedied, the Breaching Party may at any time
thereafter while such default remains, at its election, terminate this
Agreement.

 

12.3         Termination
for Bankruptcy.  Either Party shall
have the right to terminate this Agreement effective upon written notice to the
other Party in the event the non-notifying party becomes insolvent or makes an
assignment for the benefit of creditors, or in the event bankruptcy or
insolvency proceedings are instituted against the non-notifying party or on the
non-notifying party’s behalf.

 

12.4         McNeil
Termination for Other Reason.  McNeil
shall have the right to terminate this Agreement upon written notice to
Cephalon in the event that the FDA determines that the Product is unreasonably
unsafe, dangerous, or ineffective or the Product is withdrawn from the market
in the Territory.

 

12.5         Effects
of Expiration or Termination of this Agreement.  Upon the expiration or termination of this
Agreement, the following shall occur:

 

12.5.1      Return
of Materials.  McNeil shall promptly
transfer to Cephalon, at Cephalon’s cost, copies of all data, reports, records
and materials for the Territory in its possession or control that relate to the
Product and return to Cephalon, or destroy at Cephalon’s request, all relevant
records and materials in McNeil’s possession or control containing Confidential
Information of Cephalon (provided that McNeil may keep one copy of such Confidential
Information of Cephalon for archival purposes only).

 

12.5.2      Return
of McNeil Confidential Information. 
Cephalon shall promptly return to McNeil, at McNeil’s cost, or destroy
at McNeil’s request all relevant records and materials in Cephalon’s possession
or control containing Confidential Information of McNeil (provided that
Cephalon may keep one copy of such Confidential Information of McNeil for
archival purposes only).

 

 

29

 

12.5.3      Termination
of Rights.  All rights granted by
Cephalon to McNeil with respect to the Product under this Agreement shall be
terminated.

 

12.5.4      Accrued
Rights; Surviving Obligations. 
Termination, relinquishment or expiration of this Agreement for any
reason shall be without prejudice to any rights that shall have accrued to the
benefit of any Party prior to such termination, relinquishment or
expiration.  Such termination,
relinquishment or expiration shall not relieve any Party from obligations which
are expressly or by implication intended to survive termination, relinquishment
or expiration of this Agreement and shall not affect or prejudice any provision
of this Agreement which is expressly or by implication provided to come into
effect on, or continue in effect after, such termination, relinquishment or
expiration.

 

ARTICLE 13

MISCELLANEOUS

 

13.1         Relationship
of the Parties.  Each Party shall
bear its own costs incurred in the performance of its obligations hereunder
without charge or expense to the other except as expressly provided in this
Agreement.  Subject to Article 10,
neither Party shall have any responsibility for the hiring, termination or
compensation of the other Party’s employees or for any employee benefits of
such employee.  No employee or
representative of a Party shall have any authority to bind or obligate the
other Party to this Agreement for any sum or in any manner whatsoever, or to
create or impose any contractual or other liability on the other Party without
said Party’s approval.  For all purposes,
and notwithstanding any other provision of this Agreement to the contrary,
McNeil’s legal relationship under this Agreement to Cephalon shall be that of
independent contractor.  This Agreement
is not a partnership agreement and nothing in this Agreement shall be construed
to establish a relationship of co-partners or joint venturers between the
Parties.

 

13.2         Registration
and Filing of this Agreement.  To the
extent, if any, that either Party concludes in good faith that it or the other
Party is required to file or register this Agreement or a notification thereof
with any Governmental Authority, including without limitation the U.S.
Securities and Exchange Commission, in accordance with Law, such Party shall
inform the other Party thereof.  Should
both Parties jointly agree that either Party is required to submit or obtain
any such filing, registration or notification, the Parties shall reasonably
cooperate with one another, and all out-of-pocket expenses incurred by the
Parties in connection with such filing, registration or notification shall be
borne by the Party making such filing, registration or notification.  In such filing, registration or notification,
the Parties shall request confidential treatment of sensitive provisions of
this Agreement, to the extent permitted by Law. 
The Parties shall promptly inform each other as to the activities or
inquiries of any such Governmental Authority relating to this Agreement, and
shall reasonably cooperate to respond to any request for further information
therefrom on a timely basis.

 

13.3         Force
Majeure.  The occurrence of an event
which materially interferes with the ability of a Party to perform its
obligations or duties hereunder (other than the obligation to pay money to the
other Party hereunder) which is not within the reasonable control of the Party
affected or any of its Affiliates, not due to malfeasance by such Party or its
Affiliates, and which could not with the exercise of due diligence have been
avoided (each, a “Force Majeure Event”),

 

 

30

 

including, but not
limited to, an injunction, order or action by a Governmental Authority, fire,
accident, labor difficulty, strike, riot, civil commotion, act of God,
inability to obtain raw materials, delay or errors by shipping companies or
change in law, shall not excuse such Party from the performance of its
obligations or duties under this Agreement, but shall merely suspend such
performance during the continuation of the Force Majeure Event.  The Party prevented from performing its
obligations or duties because of a Force Majeure Event shall promptly notify
the other Party of the occurrence and particulars of such Force Majeure Event
and shall provide the other Party, from time to time, with its best estimate of
the duration of such Force Majeure Event and with notice of the termination
thereof.  The Party so affected shall use
its commercially reasonable efforts to avoid or remove such causes of
nonperformance as soon as is reasonably practicable.  Upon termination of the Force Majeure Event,
the performance of any suspended obligation or duty shall promptly
recommence.  The Party subject to the
Force Majeure Event shall not be liable to the other Party for any direct, indirect,
consequential, incidental, special, punitive, exemplary or other damages
arising out of or relating to the suspension or termination of any of its
obligations or duties under this Agreement by reason of the occurrence of a
Force Majeure Event, provided such Party complies in all material respects with
its obligations under this Section 13.3.

 

13.4         Governing
Law.  This Agreement shall be
construed, and the respective rights of the Parties determined, according to
the substantive law of the State of Delaware notwithstanding the provisions governing
conflict of laws under such Delaware law to the contrary.

 

13.5         Dispute
Resolution; Arbitration.

 

13.5.1      Any
dispute, claim or controversy arising from or related in any way to this
Agreement or the interpretation, application, breach, termination or validity
thereof, including any claim of inducement of this Agreement by fraud or
otherwise, other than Disputed Matters relating directly to the Promotion and
sale of the Product which shall be resolved in accordance with Section 3.7,
will be submitted for resolution to arbitration pursuant to the rules then
pertaining of the International Institute for Conflict
Prevention and Resolution for Non-Administered Arbitration (available at
http://www.cpradr.org), or successor (“CPR”),
except where those rules conflict with these provisions, in which case
these provisions control.  The
arbitration will be held in Philadelphia, Pennsylvania.

 

13.5.2      The
panel shall consist of three arbitrators chosen from the CPR Panels of
Distinguished Neutrals (or, by agreement, from another provider of arbitrators)
each of whom is a lawyer with at least fifteen (15) years experience with a law
firm or corporate law department of over twenty-five (25) lawyers or who was a
judge of a court of general jurisdiction. 
In the event the aggregate damages sought by the claimant are stated to
be less than $5 million, and the aggregate damages sought by the
counterclaimant are stated to be less than $5 million, and neither side seeks
equitable relief, then a single arbitrator shall be chosen, having the same
qualifications and experience specified above. Each
arbitrator shall be impartial and independent of the parties and shall abide by
the Code of Ethics for Arbitrators in Commercial Disputes (available
at http://www.adr.org/EthicsAndStandards).

 

13.5.3      The
parties agree to cooperate (a) to attempt to select the arbitrator(s) by
agreement within 45 days of initiation of the arbitration, including jointly
interviewing the final

 

 

31

 

candidates, (b) to
meet with the arbitrator(s) within forty-five (45) days of selection and (c) to
agree at that meeting or before upon procedures for discovery and as to the
conduct of the hearing which will result in the hearing being concluded within
no more than nine (9) months after selection of the arbitrator(s) and in
the award being rendered within sixty (60) days of the conclusion of the
hearings, or of any post-hearing briefing, which briefing will be completed by
both sides within forty-five (45) days after the conclusion of the hearings.

 

13.5.4      In
the event the parties cannot agree upon selection of the arbitrator(s), the CPR
will select arbitrator(s) as follows: CPR shall provide the parties with a list
of no less than twenty-five (25) proposed arbitrators (fifteen (15) if a single
arbitrator is to be selected) having the credentials referenced above.  Within twenty-five (25) days of receiving
such list, the parties shall rank at least sixty-five percent (65%) of the
proposed arbitrators on the initial CPR list, after exercising cause
challenges.  The parties may then
interview the five candidates (three if a single arbitrator is to be selected)
with the highest combined rankings for no more than one hour each and,
following the interviews, may exercise one peremptory challenge each.  The panel will consist of the remaining three
candidates (or one, if one arbitrator is to be selected) with the highest
combined rankings.  In the event these
procedures fail to result in selection of the required number of arbitrators,
CPR shall select the appropriate number of arbitrators from among the members
of the various CPR Panels of Distinguished Neutrals, allowing each side
challenges for cause and three peremptory challenges each.

 

13.5.5      In
the event the parties cannot agree upon procedures for discovery and conduct of
the hearing meeting the schedule set forth in Section 13.5.3, then
the arbitrator(s) shall set dates for the hearing, any post-hearing briefing,
and the issuance of the award in accord with the Section 13.5.3
schedule.  The arbitrator(s) shall
provide for discovery according to those time limits, giving recognition to the
understanding of the parties that they contemplate reasonable discovery,
including document demands and depositions, but that such discovery be limited
so that the Section 13.5.3 schedule may be met without difficulty. In
no event will the arbitrator(s), absent agreement of the parties, allow more
than a total of ten days for the hearing or permit either side to obtain more
than a total of forty (40) hours of deposition testimony from all witnesses,
including both fact and expert witnesses, or serve more than twenty (20)
individual requests for documents, including subparts, or twenty (20)
individual requests for admission or interrogatories, including subparts.  Multiple hearing days will be scheduled
consecutively to the greatest extent possible.

 

13.5.6      The
arbitrator(s) must render their award by application of the substantive law of
Delaware and are not free to apply “amiable compositeur” or “natural justice
and equity.”  The arbitrator(s) shall
render a written opinion setting forth findings of fact and conclusions of law
with the reasons therefore stated.  A
transcript of the evidence adduced at the hearing shall be made and shall, upon
request, be made available to either party. 
The arbitrator(s) shall have power to exclude evidence on grounds of
hearsay, prejudice beyond its probative value, redundancy, or irrelevance and
no award shall be overturned by reason of such ruling on evidence.  To the extent possible, the arbitration
hearings and award will be maintained in confidence.

 

13.5.7      In
the event the panel’s award exceeds $5 million in monetary damages or includes
or consists of equitable relief, or rejects a claim in excess of that amount or
for that

 

 

32

 

relief, then the
losing party may obtain review of the arbitrators’ award or decision by a
single appellate arbitrator (the “Appeal Arbitrator”) selected from the
CPR Panels of Distinguished Neutrals by agreement or, failing agreement within
seven (7) working days, pursuant to the selection procedures specified in Section 13.5.4.
If CPR cannot provide such services, the parties will together select another
provider of arbitration services that can. 
No Appeal Arbitrator shall be selected unless he or she can commit to
rendering a decision within forty-five days following oral argument as provided
in Section 13.5.8.  Any such review
must be initiated within thirty (30) days following the rendering of the award
referenced in Section 13.5.6.

 

13.5.8      The
Appeal Arbitrator will make the same review of the arbitration panel’s ruling
and its bases that the U.S. Court of Appeals of the Circuit where the
arbitration hearings are held would make of findings of fact and conclusions of
law rendered by a district court after a bench trial and then modify, vacate or
affirm the arbitration panel’s award or decision accordingly, or remand to the
panel for further proceedings.  The
Appeal Arbitrator will consider only the arbitration panel’s findings of fact
and conclusions of law, pertinent portions of the hearing transcript and
evidentiary record as submitted by the parties, opening and reply briefs of the
party pursuing the review, and the answering brief of the opposing party, plus
a total of no more than four (4) hours of oral argument evenly divided
between the parties.  The party seeking
review must submit its opening brief and any reply brief within seventy-five
(75) and one hundred thirty (130) days, respectively, following the date of the
award under review, whereas the opposing party must submit its responsive brief
within one hundred ten (110) days of that date. 
Oral argument shall take place within five (5) months after the
date of the award under review, and the Appeal Arbitrator shall render a
decision within forty-five (45) days following oral argument.  That decision will be final and not subject
to further review, except pursuant to the Federal Arbitration Act.

 

13.5.9      The
parties consent to the jurisdiction of the Federal District Court for the
district in which the arbitration is held for the enforcement of these
provisions and the entry of judgment on any award rendered hereunder (including
after review by the Appeal Arbitrator where such an appeal is pursued). Should
such court for any reason lack jurisdiction, any court with jurisdiction shall
act in the same fashion.

 

13.5.10    Each
party has the right before or, if the arbitrator(s) cannot hear the matter
within an acceptable period, during the arbitration to seek and obtain from the
appropriate court provisional remedies such as attachment, preliminary
injunction, replevin, etc. to avoid irreparable harm, maintain the status
quo, or preserve the subject matter of the arbitration.

 

13.5.11    EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.

 

13.5.12    EACH PARTY HERETO WAIVES ANY CLAIM FOR ATTORNEYS’ FEES AND COSTS AND
PREJUDGMENT INTEREST FROM THE OTHER.

 

 

33

 

13.6         Assignment.  This Agreement may not be assigned by either
Party without the prior consent of the other Party; provided, however that
either Party may assign this Agreement, in whole or in part, to any of its
Affiliates if such Party remains liable for the performance of this Agreement
by such Affiliate; and provided further that either Party may assign this
Agreement to a successor to all or substantially all of the assets of such
Party whether by merger, sale of stock, sale of assets or other similar transaction.  This Agreement shall be binding upon, and
subject to the terms of the foregoing sentence, inure to the benefit of the
Parties hereto, their permitted successors, legal representatives and assigns.

 

13.7         Notices.  All demands, notices, consents, approvals,
reports, requests and other communications hereunder must be in writing and
will be deemed to have been duly given only if delivered personally, by
facsimile with confirmation of receipt, by mail (first class, postage prepaid),
or by overnight delivery using a globally-recognized carrier, to the Parties at
the following addresses:

 

	
  McNeil:

  	
  McNeil
  Consumer & Specialty

  
	
   

  	
  Pharmaceuticals,
  a Division of

  
	
   

  	
  McNeil-PPC, Inc.

  
	
   

  	
  7050 Camp Hill
  Road

  
	
   

  	
  Fort Washington,
  Pennsylvania 19034

  
	
   

  	
  Facsimile:
  215-273-4124

  
	
   

  	
  Attn: President

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Office of
  General Counsel

  
	
   

  	
   

  	
  Johnson & Johnson

  
	
   

  	
   

  	
  One Johnson & Johnson Plaza

  
	
   

  	
   

  	
  New Brunswick,
  New Jersey 08933

  
	
   

  	
   

  	
  Attn: Thomas J.
  Spellman III, Esq.

  
	
   

  	
   

  	
  Facsimile:
  732-524-2788

  
	
   

  	
   

  	
   

  
	
  Cephalon:

  	
  Cephalon, Inc.

  
	
   

  	
  41 Moores Road

  
	
   

  	
  Frazer,
  Pennsylvania 19355

  
	
   

  	
  Attn: Company
  Secretary

  
	
   

  	
  Facsimile:
  610-738-6258

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Dechert LLP

  
	
   

  	
   

  	
  4000 Bell
  Atlantic Tower

  
	
   

  	
   

  	
  1717 Arch Street

  
	
   

  	
   

  	
  Philadelphia,
  Pennsylvania 19103

  
	
   

  	
   

  	
  Attn: James A.
  Lebovitz, Esq.

  
	
   

  	
   

  	
  Facsimile:
  215-655-2510

  

 

or to such other address
as the addressee shall have last furnished in writing in accord with this
provision to the addressor.  All notices
shall be deemed effective upon receipt by the addressee.

 

 

34

 

13.8         Severability.  In the event of the invalidity of any
provisions of this Agreement or if this Agreement contains any gaps, the
Parties agree that such invalidity or gap shall not affect the validity of the
remaining provisions of this Agreement. 
Nothing in this Agreement shall be interpreted so as to require either
Party to violate any applicable Law.

 

13.9         Headings.  The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the provisions
hereof.

 

13.10       Waiver.  Any term or condition of this Agreement may
be waived at any time by the Party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the Party waiving such term or condition.  No waiver by any Party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.  Except
as expressly set forth in this Agreement, all rights and remedies available to
a Party, whether under this Agreement or afforded by law or otherwise, will be
cumulative and not in the alternative to any other rights or remedies that may
be available to such Party.

 

13.11       Entire
Agreement.  This Agreement (including
the exhibits and schedules hereto) constitutes the entire agreement between the
Parties hereto with respect to the within subject matter and supersedes all
previous agreements and understandings between the Parties, whether written or
oral.  This Agreement may be altered,
amended or changed only by a writing making specific reference to this
Agreement and signed by duly authorized representatives of McNeil and Cephalon.

 

13.12       No
License.  Nothing in this Agreement
shall be deemed to constitute the grant of any license or other right in either
Party, to or in respect of any Product, patent, trademark, Confidential
Information, trade secret or other data or any other intellectual property of
the other Party, except as expressly set forth herein.

 

13.13       Third
Party Beneficiaries.  None of the
provisions of this Agreement shall be for the benefit of or enforceable by any
Third Party, including without limitation any creditor of either Party
hereto.  No such Third Party shall obtain
any right under any provision of this Agreement or shall by reasons of any such
provision make any Claim in respect of any debt, liability or obligation (or
otherwise) against either Party hereto.

 

13.14       Counterparts.  This Agreement may be executed in any two
counterparts, each of which, when executed, shall be deemed to be an original
and both of which together shall constitute one and the same document.

 

[Signature Page Follows]

 

 

35

 

IN
WITNESS WHEREOF, McNeil and Cephalon, by their duly authorized officers, have
executed this Agreement as of the Effective Date.

 

 

	
  McNEIL-PPC,
  INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY AND
  THROUGH ITS DIVISION,

  	
   

  	
   

  
	
  McNEIL
  CONSUMER & SPECIALTY

  	
   

  	
   

  
	
  PHARMACEUTICALS

  	
   

  	
   

  
	
   

  	
  CEPHALON,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Colin Watts

  	
   

  	
  By:

  	
  /s/ J. Kevin
  Buchi

  	
   

  
	
   

  	
       Name:
  Colin Watts

  	
   

  	
   

  	
  Name: J. Kevin
  Buchi

  
	
   

  	
       Title:
  President

  	
   

  	
   

  	
  Title: Sr. Vice
  President & CFO

  
							

 

 

36

 

SCHEDULE 1.8

 

Applicable Commercial Practices Policies

 

[**]

 

 

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

 

 

SCHEDULE 1.35

 

Marketing Budget for

First Agreement Year

 

[**]

 

 

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

 

 

SCHEDULE 1.52

 

Target Audience

 

[**]

[**]

Pediatricians

Psychiatrists

Pediatric Neurologists

[**]

[**]

 

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

 

 

SCHEDULE 2.2.1

 

Detail Requirements for the Product

 

McNeil Minimum Number of
Total Details and PDEs for the Product:

 

	
  Agreement Year

  	
   

  	
  Total Details(1)(2)

  	
   

  	
  Total PDEs(1)(2)

  	
   

  
	
  First

  	
   

  	
  [**]

  	
  (3)

  	
  [**]

  	
  (3)

  
	
  Second

  	
   

  	
  [**]

  	
  (4)

  	
  [**]

  	
   

  
	
  Third

  	
   

  	
  [**]

  	
  (4)

  	
  [**]

  	
   

  

 

(1)  At least [**]
percent ([**]%) of the Total Details and Total PDEs for any Agreement Year
shall be completed during each month of such Agreement Year.

 

(2)  Subject to Article 10.

 

(3)  In the first [**]
months of the First Agreement Year, all Details shall be First Position
Details.  In months [**] of the First
Agreement Year, all Details may be either First Position Details or Second
Position Details.  In months [**] of the
First Agreement Year, all Details shall be First Position Details.

 

(4)  At least [**] of
these Details shall be First Position Details and the balance, if any, shall be
Second Position Details.

 

Cephalon Minimum Number
of PDEs for the Product:

 

 

	
  Agreement Year

  	
   

  	
  Total PDEs

  	
   

  
	
  First

  	
   

  	
  [**]

  	
   

  
	
  Second

  	
   

  	
  [**]

  	
   

  
	
  Third

  	
   

  	
  [**]

  	
   

  

 

 

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

 

 

SCHEDULE 10.3.5

 

Service Periods for McNeil Sales Representatives

 

[**]

 

Accrued Vacation for McNeil Sales Representatives

 

[**]

 

 

**Portions of the
Exhibit have been omitted and have been filed separately pursuant to an
application for confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as
amended.EXHIBIT 10.2

 

Credit Suisse First Boston International

One Cabot Square

London E 14 4OJ

 

TERMINATION AGREEMENT

 

	
  Date:

  	
  July 18,
  2005

  
	
   

  	
   

  
	
  To:

  	
  Cephalon, Inc.

  
	
  Attn:

  	
  J. Kevin Buchi

  
	
   

  	
   

  
	
  From:

  	
  Credit Suisse
  First Boston International

  

 

External ID: 8181764

 

TERMINATION
AGREEMENT dated as of July 18, 2005 between Cephalon, Inc. (“Counterparty”)
and Credit Suisse First Boston International (“CSFBi’).

 

WHEREAS,
Counterparty and Credit Suisse First Boston International entered into a
transaction (the “Transaction”) certain terms of which are set forth
below:

 

	
  Trade Date:

  	
   

  	
  January 22,
  2003

  
	
   

  	
   

  	
   

  
	
  Termination
  Date:

  	
   

  	
  December 15,
  2006

  
	
   

  	
   

  	
   

  
	
  Reference Bonds:

  	
   

  	
  $600,000,000,
  2.5% Convertible Subordinated Notes Due December 15, 2006, issued by
  Cephalon, Inc., Cusip# 156708AD1 and 156708AE9

  
	
   

  	
   

  	
   

  
	
  Notional Amount:

  	
   

  	
  $200,000,000

  

 

WHEREAS,
the Transaction is evidenced by a Confirmation dated January 22, 2003 (the
“Confirmation”) between Counterparty.

 

WHEREAS, subject to the
term and provisions hereof, Credit Suisse First Boston International and
Counterparty wish to cancel the Transaction.

 

NOW, THEREFORE, in
consideration of the mutual premises herein, Credit Suisse First Boston
International and Counterparty have agreed as follows:

 

1.                                       The
Transaction shall be terminated and cancelled with effect from and including 18
July 2005 (the ‘Cancellation Date’) and all rights, duties, claims and
obligations of Credit Suisse First Boston International and Counterparty
thereunder shall be released and discharged with effect from and including the Cancellation
Date without prejudice to any such rights, duties, claims and obligations which
arose prior to the Cancellation Date.

 

2.                                       In
consideration of the cancellation of the Transaction as outlined above,
Counterparty shall pay to Credit Suisse First Boston International the sum of
USD 5,400,000.00 for value 21 July 2005.

 

3.                                       This
Cancellation Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which shall be deemed to be
one and the same instrument.

 

4.                                       This
Cancellation Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without reference to choice of law doctrine
and each party hereby submits to the jurisdiction of the Courts of the State of
New York.

 

 

5.                                       Credit
Suisse First Boston International and Counterparty each represents to the other
that it has entered into this Cancellation Agreement in reliance upon such tax,
accounting, regulatory, legal, and financial advice as it deems necessary and
not upon any view expressed by the other.

 

6.                                       Account
Details:

 

	
  Credit Suisse
  First Boston International:

  	
   

  	
  Bank of New
  York, NYC

  
	
   

  	
   

  	
  ABA 021 000 018

  
	
   

  	
   

  	
  Acct #
  890-0360-968

  
	
   

  	
   

  	
  Acct name CSFB
  Intl

  
	
   

  	
   

  	
   

  
	
  Payments to
  Party B:

  	
   

  	
  To be advised

  

 

7.                                       Office:

 

Credit Suisse First Boston International is acting
through its London Office for the purposes of this Transaction.

 

Credit Suisse First
Boston International is authorised and regulated by The Financial Services
Authority and has entered into this cancelled transaction as principal. The
time at which the above cancelled transaction was executed will be notified to
Party B on request.

 

 

	
   

  	
  Yours
  Faithfully,

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE
  FIRST BOSTON

  INTERNATIONAL

  
	
   

  	
   

  
	
   

  	
  By its agent:
  Credit Suisse First Boston LLC

  
	
   

  	
  By:

  	
  /s/ Ricardo
  Harewood

  	
   

  
	
   

  	
  Name: Ricardo
  Harewood

  
	
   

  	
  Title: Vice
  President, Operations

  
	
   

  	
   

  
	
   

  	
   

  
	
  Confirmed as of
  the date first written above:

  	
   

  
	
  CEPHALON, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ J. Kevin
  Buchi

  	
   

  	
   

  
	
  Name: J. Kevin
  Buchi

  	
   

  
	
  Title: Sr. Vice
  President & CFO

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