EXCLUSIVE LICENSE AGREEMENT

 

This Exclusive License Agreement (this “ Agreement ”) is dated this 19 th  day of November, 2008 (the “ Execution Date ”) by and between Solvay Pharmaceuticals, Inc., with offices at 901 Sawyer Road, Marietta, GA 30062 (“ Solvay ”) and Depomed, Inc., with offices at 1360 O’Brien Drive, Menlo Park, CA 94025 (“ Depomed ”).  Each of Solvay and Depomed are referred to individually herein as a “ Party ” and collectively as the “ Parties .”

 

RECITALS

 

WHEREAS , Depomed has used its proprietary AcuForm™ gastric retentive technology to develop an oral dosage form of gabapentin known as Gabapentin GR®, and is conducting Phase III clinical development of Gabapentin GR®;

 

WHEREAS , Solvay wishes to obtain an exclusive license under Depomed’s intellectual property rights in and to Gabapentin GR® to commercialize and clinically develop the Product (as defined below) within the Field (as defined below) in the Territory (as defined below); and

 

WHEREAS , Depomed wishes to license to Solvay its intellectual property rights with respect to the Product within the Field in the Territory.

 

NOW, THEREFORE , in consideration of the foregoing, the covenants and promises contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Depomed and Solvay agree as follows:

 

ARTICLE 1
DEFINITIONS

 

The terms in this Agreement with initial letters capitalized, whether used in the singular or the plural, shall have the meaning set forth below or, if not listed below, the meaning designated in places throughout this Agreement.

 

1.1                                “AE Profile” has the meaning set forth on Exhibit A.

 

1.2                                “Affiliate” means any corporation or other business entity controlled by, controlling, or under common control with a Party to this Agreement but only for so long as such relationship exists, with “control” meaning the (a) direct or indirect beneficial ownership of more than fifty percent (50%) of the voting stock of, or more than a fifty percent (50%) interest in the income of, such corporation or other business entity, or (b) direct or indirect ability or power to direct or cause the direction of management policies of an entity or otherwise direct the affairs of such entity, whether through ownership of voting securities or otherwise.

 

1.3                                “Applicable Law” means all laws, statutes, ordinances, codes, rules, regulations, and other pronouncements that have been enacted by a Governmental Authority, in each case to the extent that the same are applicable to the performance by a Party of its obligations, and/or exercise of its rights, under this Agreement.

 

 

Confidential Information, indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission

 

1.4                                “Business Day” means any day that is not a Saturday or a Sunday or a day on which the Nasdaq Stock Market or New York Stock Exchange is closed.

 

1.5                                “Calendar Quarter” means the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 and December 31; provided, however, that (a) the first Calendar Quarter of the term of this Agreement shall extend from the Effective Date to the end of the first full Calendar Quarter thereafter, and (b) the last Calendar Quarter of the term of this Agreement shall end upon the expiration or termination of this Agreement.

 

1.6                                “Calendar Year” means (a) for the first Calendar Year of the term of this Agreement, the period beginning on the Effective Date and ending on December 31, 2009, (b) for each Calendar Year of the term of this Agreement thereafter, each successive period beginning on January 1 and ending twelve (12) consecutive calendar months later on December 31, and (c) for the last Calendar Year of the term of this Agreement, the period beginning on January 1 of the Calendar Year in which the Agreement expires or terminates and ending on the effective date of expiration or termination of this Agreement.

 

1.7                                “Commercially Reasonable Efforts” means those efforts and resources [***] .

 

1.8                                “Controlled” means, with respect to any intellectual property right, that the Party (a) owns or (b) has a license to such intellectual property right and has the ability to grant to the other Party a sublicense to such intellectual property right as provided for herein without (i)violating the terms of any agreement or other arrangements with any Third Party existing at the time such Party would be first required hereunder to grant the other Party such sublicense, and (ii) incurring additional payment obligations arising from the grant of such sublicense under this agreement, subject to Section 2.1(c).

 

1.9                                “Depomed Inventions” means any and all Inventions that describe, claim, cover or relate to the Product and (a) are conceived during the term of this Agreement by one or more employees of Depomed or persons contractually obligated to assign or license patent rights covering such Inventions to Depomed and (b) are not Joint Inventions.

 

1.10                         “Depomed Know-How” means, subject to Section 2.1(c), any and all Know-How that (a) is possessed, as of the Effective Date, by Depomed or by any Affiliate of Depomed as of the Effective Date, or that is developed or acquired during the term of this Agreement by (i) Depomed, (ii) any Affiliate of Depomed, or (iii) any person contractually obligated to assign or license patent rights covering such Know-How to Depomed, (b) is Controlled by Depomed or its Affiliates, and (c) is reasonably required or useful for the clinical development, use, registration, manufacture, packaging, commercialization or sale of the Product including without limitation any Know-How Controlled by Depomed relating to Formulation Technology applied to the Product.  Depomed Know-How excludes Product Data but includes without limitation Depomed Inventions and Depomed’s interest in Joint Inventions, in each case to the extent falling within subsections (a) through (c).

 

1.11                         “Depomed Patents” means, subject to Section 2.1(c), (a) any and all patent applications that (i) are Controlled by Depomed and are filed prior to or during the term of this

 

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Confidential Information, indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission

 

Agreement in the United States or any foreign jurisdiction, including without limitation any addition, continuation, continuation-in-part, continued prosecution application or divisional application thereof or any substitute application therefor and (ii) claim inventions that are reasonably required or useful for the clinical development, use, registration, manufacturing, packaging, commercialization or sale of the Product including without limitation those relating to Formulation Technology applied to the Product; (b) any patent issued from any such patent application; (c) any reissue, reexamination, extension or patent term extension of any such patent; and (d) any other U.S. or foreign patent or inventor’s certificate Controlled by Depomed that claims inventions reasonably required or useful for the clinical development, use, registration, manufacturing, packaging, commercialization or sale of the Product.  Depomed Patents include without limitation those Patent Rights set forth on Exhibit B and Patent Rights Controlled by Depomed claiming Depomed Inventions and Joint Inventions, in each case to the extent falling within subsection (a).

 

1.12                         “Depomed Technology” means Depomed Know-How and Depomed Patents.

 

1.13                         “Detail” (and, with correlative meanings, the terms “Details” and “Detailing”) means, with respect to the Product, the activity undertaken on a face-to-face basis by a sales representative with respect to a target physician or other healthcare professional with prescribing authority involved or potentially involved in prescribing the Product.

 

1.14                         “Detailing Costs” means that amount determined by multiplying the total number of PDEs promoting Product in a given Calendar Year (a) by [***] Dollars ($ [***] ) for the remainder of 2008, and (b) for subsequent Calendar Years, by an amount equal to [***] Dollars ($ [***] ) increased by the cumulative percentage increase in the United States Consumer Price Index (found at: http://www.bls.gov/cpi/) between the first Calendar Year of the term of this Agreement and the relevant Calendar Year.

 

1.15                         “Dollars” or “$” means the lawful currency of the United States.

 

1.16                         “Drug Approval Application” means, in the United States, an NDA, including an NDA submitted under Section 505(b)(2) of the Food, Drug and Cosmetic Act, a supplement to an NDA or an Abbreviated New Drug Application for the Product, or in the OUS Territory, an equivalent application for regulatory approval required before commercial sale or commercial use of the Product in a regulatory jurisdiction.

 

1.17                         “Effective Date” shall mean the later of:  (a) the Execution Date; or (b) the HSR Clearance Date.

 

1.18                         “FDA” means the U.S. Food and Drug Administration or any successor agency thereto.

 

1.19                         “Field” means the treatment or amelioration of pain, including without limitation treatment of post-herpetic neuralgia (“PHN”), pain associated with diabetic neuropathy (“DPN”), Phantom Pain and fibromyalgia.

 

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1.20                         “First Position Call” means a Detail made to healthcare professionals employed by or practicing at a given healthcare facility, in which a sales representative spends at least sixty percent (60%) of the time during such Detail discussing the Product.

 

1.21                         “Formulation Technology” means Depomed’s proprietary gastric retentive drug delivery technology currently known as AcuForm TM  technology used to optimize delivery of a drug by achieving improved pharmacokinetic and/or pharmacodynamic characteristics of an oral formulation of such drug when compared to immediate release formulations of such drug.

 

1.22                         “FTE” means a full time equivalent employee of Depomed directly involved in the relevant activity with respect to the Product, calculated assuming that such employee works one thousand eight hundred eighty (1880) hours per Calendar Year.

 

1.23                         “FTE Charges” means the amount of [***] dollars ($ [***] ) per Calendar Year per FTE engaged in the relevant activity, for the remainder of 2008.  For each subsequent Calendar year thereafter, the foregoing FTE Charge shall be [***] dollars ($ [***] ) per Calendar Year per FTE engaged in the relevant activity increased by the cumulative percentage increase in the United States Consumer Price Index between 2008 and the relevant Calendar Year.

 

1.24                         “Generic Product” means a pharmaceutical product that is the subject of either (i) an Abbreviated New Drug Application referencing data contained in an NDA and for which Regulatory Approval has been granted by the FDA, or (ii) an equivalent application and equivalent approval by a regulatory authority for such a pharmaceutical product in the OUS Territory.

 

1.25                         “Governmental Authority” means any governmental agency, board or commission or other governmental authority or other instrumentality of the United States, any state, county, city or other political subdivision within the United States or any other jurisdiction within the Territory (including without limitation the FDA).

 

1.26                         “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

1.27                         “HSR Clearance Date” shall mean the earliest date on which the Parties have actual knowledge that all applicable waiting periods under the HSR Act with respect to the transactions contemplated hereunder have expired or have been terminated.

 

1.28                         “HSR Filing” shall mean filings by the Parties or their respective Affiliates with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice of a Notification and Report Form for Certain Mergers and Acquisitions (as that term is defined in the HSR Act) with respect to the matters set forth in this Agreement, together with all required documentary attachments thereto.

 

1.29                         “Indicated” means with respect to a specific product, that a label has been approved by FDA for such product that expressly includes the use of such product to treat a specific ailment, disease or condition.

 

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Confidential Information, indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission

 

1.30                         “Inventions” means any and all inventions (whether or not patentable), that are conceived during the term of and pursuant to this Agreement by one or more employees of, or persons contractually obligated to assign or license Patent Rights covering such inventions to, Depomed or Solvay.

 

1.31                         “Joint Inventions” means any and all Inventions that describe, claim, cover or relate to the Product and are jointly conceived by one or more employees of, or persons contractually obligated to assign or license patent rights covering such inventions to, each of Depomed and Solvay.

 

1.32                         “Know-How” means inventions, discoveries, trade secrets, information, experience, data, formulas, protocols, procedures and results, including without limitation biological, chemical or physical materials, processes, documents, formulations, compositions, toxicological, pharmacological, preclinical, clinical, and veterinary data, dosage regimens, control assays and product specifications.

 

1.33                         “Launch” means the first commercial sale of the Product to a Third Party in the Field in the Territory.

 

1.34                         “NDA” means a New Drug Application requiring approval by FDA before the Product may be introduced or delivered for introduction into interstate commerce in the United States.

 

1.35                         “Net Sales” means the gross invoice price of Product sold or otherwise disposed of for consideration by Solvay, its Affiliates or sublicensees to Third Parties, reduced by the following amounts (calculated in accordance with International Financial Reporting Standards, consistently applied): (a) the amounts actually allowed as volume, quantity, trade and/or cash discounts, prompt pay discounts, refunds, credits, rebates, charge-backs or accruals, including without limitation rebates paid to assistance programs and any other price reductions required by a Governmental Authority or Applicable Laws; (b) credits actually given in connection with retroactive price reductions (including, without limitation, managed care and similar types of rebates), or for returned or rejected Product (including withdrawals, expired product and recalls); (c) sales, value added, excise and turnover taxes and customs duties, imposed directly on and actually paid by Solvay, its Affiliates or sublicensees (including, without limitation, duties or other governmental charges levied on, absorbed, or otherwise imposed on the sale of the Product, value added taxes and other governmental charges otherwise measured by the billing amount, when including in billing, but not including national, state, and local taxes based on income); (d) any inventory management fees, wholesaler service fees or inducements or similar fees paid to wholesalers or distributors in connection with the Product; and (e) transportation costs, including cost of export licenses, insurance and shipping, freight, and handling charges and other similar expenses, to the extent billed separately to customers.

 

If Solvay or its Affiliates or sublicensees receive non-cash consideration for Product sold or otherwise transferred to a Third Party, the fair market value of such non-cash consideration on the date of the transfer will be calculated assuming that the gross invoice price that Solvay currently charges Third Parties for units of Product sold or transferred to such Third Party is the fair market value of such units of Product, with the aggregate such fair market value deemed the

 

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Confidential Information, indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission

 

Net Sales for such Product sold or otherwise transferred, reduced by any applicable amounts in (a)-(e) above.  Any goods or services provided in exchange of the supply, disposal of the Product for, or use of the Product, in clinical or preclinical trials, as free samples or as charitable donations shall not give rise to any Net Sales.

 

If the Product is sold in a country together with other goods, with or without a separate price for such Product, then the Net Sales applicable to the quantity of such Product included in such transaction will be deemed to be the average Net Sales for such quantity of the Product for all transactions of such Product made in such country during the last full Calendar Quarter prior to such transaction or during the current Calendar Quarter if the Product was not commercially available in such country in the last full Calendar Quarter.

 

1.36                         “OUS Territory” means that portion of the Territory that is outside of the United States.

 

1.37                         “Patent Rights” means (a) letters patent (or other equivalent legal instrument), including without limitation utility and design patents, and including without limitation any extension, substitution, registration, confirmation, reissue, re-examination or renewal thereof, (b) an application for letters patent, including without limitation a reissue application, a re-examination application, a continuation application, a continued prosecution application, a continuation-in-part application, a divisional application or any equivalent thereof that is pending at any time during the term of this Agreement before a government patent agency, and (c) all foreign or international equivalents of any of the foregoing in any country.

 

1.38                         “PDE” means primary detail equivalents and is calculated by adding A + B + C, where “A” is 1.0 times the number of First Position Calls, “B” is 0.5 times the number of Second Position Calls, and “C” is 0.1 times the number of Third Position Calls.

 

1.39                         “ Phantom Pain ” means a sensation of pain from a part of the body that has been amputated or in which the nerves have been destroyed.

 

1.40                         “Product” means the product known as Gabapentin GR® in the formulation and at the dosage being studied in Depomed Protocol 81-0062, “A Phase 3 Multicenter, Randomized, Double-Blind, Placebo-Controlled, Flexible-Dose Study of the Safety and Efficacy of Gabapentin Extended Release (G-ER) Tablets in the Treatment of Patients with Postherpetic Neuralgia,” dated the 25 th  day of January, 2008, and any alternative strengths of such dosage form, or line extensions of such product for use within the Field.

 

1.41                         “Product Data” means any and all data generated in the course of the development of Products for use in the Field that might reasonably be useful to or included in any Drug Approval Application seeking any marketing authorization or other permit, license, registration, or approval to investigate, market, sell, manufacture and distribute the Product in the Territory.

 

1.42                         “Promotional Expenditures” means all expenses determined in accordance with Generally Accepted Accounting Practices, applied consistently, incurred by or on behalf of Solvay to the extent attributable to the marketing, advertising or promotion of the Product in the

 

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Confidential Information, indicated by [***] has been omitted from this filing and filed separately with the Securities Exchange Commission

 

Field in the Territory (but excluding Detailing Costs), including without limitation, to the extent reasonably attributable to the marketing, advertising or promotion of the Product in the Field in the Territory, the following:

 

(a)                                   Pre-Launch and Launch expenses;

 

(b)                                   Marketing, advertising and marketing research expenses (including Detail messaging audits);

 

(c)                                   Non-personal promotion and advertising expenses (including agency fees, direct-to-consumer advertising, direct mail, internet programs, telemarketing, e-marketing, reminder promotions and journal advertising);

 

(d)                                   Expenses of exhibit opportunities carried out at medical conventions, professional and scientific symposia and other similar events;

 

(e)                                   Expenses of promotional activities associated with key opinion leaders and educational programs;

 

(f)                                     Expenses of managed care marketing programs incurred with the aim of promoting the Product to managed care audiences;

 

(g)                                  Expenses of data, market research, including all incremental secondary data purchases, and pharmacoeconomics studies;

 

(h)                                  Costs of creating, developing, printing and distributing promotional materials and voucher/co-pay assistance programs; and

 

(i)                                     Amounts paid to Third Parties in connection with producing training materials for the Product, including (i) costs of samples and any amounts paid to Third Parties for (1) warehousing of samples prior to distribution, and (2) the distribution of samples to Solvay’s distribution centers; (ii) expenses of promotional and sales meetings and Product management; and (iii) costs of such other activities reasonably attributable to the marketing, advertising or promotion of the Product, including funds allocated to regional marketing managers and/or accounts (including lunch and learns).

 

1.43                         “Regulatory Approval” means, with respect to a particular regulatory jurisdiction, the approval of a Drug Approval Application by the applicable Governmental Authority in such regulatory jurisdiction.

 

1.44                         “Regulatory Filings” means all applications, filings, dossiers and the like submitted to a Governmental Authority for the purpose of obtaining Regulatory Approval from that Governmental Authority in the Territory.  Regulatory Filings shall include, but not be limited to, all Drug Approval Applications.

 

1.45                         “Second Position Call” means a Detail made to healthcare professionals employed by or practicing at a given healthcare facility, in which a sales representative spends at

 

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least thirty percent (30%) of the time or more but less than sixty percent (60%) of the time during such Detail discussing the Product.

 

1.46                         “Solvay Inventions” means any and all Inventions that describe, claim, cover or relate to the Product and (a) are conceived during the term of this Agreement by one or more employees of Solvay or persons contractually obligated to assign or license patent rights covering such inventions to Solvay and (b) are not Joint Inventions.

 

1.47                         “Solvay Know-How” means any and all Know-How that describes, claims, covers or relates to the Product that (a) is possessed, as of the Effective Date, by Solvay or by any Affiliate of Solvay as of the Effective Date, or that is developed or acquired during the term of this Agreement by (i) Solvay, (ii) any Affiliate of Solvay, or (iii) any person contractually obligated to assign or license patent rights covering such Know-How to Solvay, (b) is Controlled by Solvay or its Affiliates, and (c) is reasonably required or useful for the clinical development, use, registration, manufacture, packaging, commercialization or sale of the Product.  Solvay Know-How includes without limitation Solvay Inventions and Solvay’s interest in Joint Inventions, in each case to the extent falling within subsections (a) through (c).  Solvay Know-How excludes Product Data.

 

1.48                         “Solvay Patents” means (a) any and all patent applications that describe, claim, cover or relate to the Product that (i) are Controlled by Solvay and are filed prior to or during the term of this Agreement in the United States or any foreign jurisdiction, including without limitation any addition, application, continuation, continuation-in-part, continued prosecution application or division thereof or any substitute application therefore and (ii) claim an invention that is reasonably required or useful for the clinical development, use, registration, manufacturing, packaging, commercialization or sale of the Product; (b) any patent issued from any such patent application, (c) any reissue, extension, reexamination or patent term extension of any such patent; and (d) any other U.S. or foreign patent or inventor’s certificate Controlled by Solvay, that claims inventions reasonably required or useful for the clinical development, use, registration, manufacturing, packaging, commercialization or sale of the Product.  Solvay Patents include without limitation Patent Rights Controlled by Solvay claiming Solvay Inventions and Joint Inventions, in each case to the extent falling within subsection (a).

 

1.49                         “Solvay Technology” means Solvay Know-How and Solvay Patents.

 

1.50                         “Termination Event” means any (a) withdrawal of the Product in the Field from the market in the Territory, (b) material medical or scientific concerns as to toxicity, safety and/or efficacy of Product in the Field, (c) written request of any Governmental Authority or the applicable institutional review board or data safety monitoring board to stop clinical trials of the Product in the Field, (d) failure of the Product to meet all primary endpoints in clinical trials conducted prior to Regulatory Approval of Product in the Field, (e) a Patent Right controlled by a Third Party is identified that is not included in the Depomed Patents and that is not otherwise licensed to Solvay, which Patent Right (i) claims inventions reasonably necessary for the manufacture, use, sale, offer for sale or import of the Product in the Field in the Territory and (ii) is not available for licensing or otherwise transferable to Solvay on terms reasonably acceptable to Solvay, or (f) any of the following events: (i) a determination that the Product is not approvable by FDA, as evidenced by a written communication from FDA to Solvay, its Affiliate

 

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or sublicensee; (ii) a Governmental Authority imposing significant restrictions on Solvay’s ability to promote the Product in a manner consistent with standard practices in the pharmaceutical industry for products of similar market potential; or (iii) managed care providers, comprising at least a majority of the managed care environment in the United States, blocking, materially restricting (including, without limitation, imposition of step edits or prior authorizations) or declining coverage and/or reimbursement for the Product.

 

1.51                         “Territory” means the United States, Canada and Mexico.

 

1.52                         “Third Party” means any person or entity other than Depomed, Solvay, and their respective Affiliates.

 

1.53                         “Third Position Call” means a Detail made to healthcare professionals employed by or practicing at a given healthcare facility, in which a sales representative spends less than thirty percent (30%) but no less than ten percent (10%) of the time during such Detail discussing the Product.

 

1.54                         “United States” means the United States of America (including, without limitation, its territories and possessions and Puerto Rico).

 

1.55                         “VMS Indication” means the treatment or amelioration of vasomotor symptoms in a patient including without limitation hot flashes.

 

1.56                         “Year” means any consecutive twelve (12) month period commencing upon a specified date or the occurrence of a specified event.

 

ARTICLE 2
GRANT OF RIGHTS; EXCLUSIVITY

 

2.1                                Licenses. 

 

(a)                                   Subject to the terms and conditions of this Agreement, Depomed grants to Solvay under the Depomed Technology (i) an exclusive (even as to Depomed), royalty-bearing license to develop, have developed, make, have made, use, market, have marketed, promote, have promoted, commercialize, have commercialized, exploit, import, export, sell, have sold and offer to sell the Product in the Field in the Territory and (ii) a nonexclusive license to develop, have developed, make, have made, import and export the Product in the Field outside the Territory.  Such licenses shall be sublicensable without the prior written consent of Depomed.  Subject to the terms and conditions of this Agreement, Depomed grants to Solvay a nonexclusive license to use the Product Data Controlled by Depomed or its Affiliates in the Field in the Territory solely in connection with Solvay’s exercise of its rights and performance of its obligations under this Agreement.  For clarity, the foregoing license does not include the right to practice, research, develop, make or commercialize the Formulation Technology independently of the Product.

 

(b)                                   Subject to the terms and conditions of this Agreement, Solvay grants to Depomed under the Product Data Controlled by Solvay, its Affiliates or sublicensees a nonexclusive, fully-paid license to use the same as necessary to sell the Product outside the Field in the Territory and in all fields outside the Territory.

 

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2.3                                Construction.  It is the intention of the Parties that if any of the restrictions or covenants contained in Article 2 are held impermissible or unenforceable by Applicable Law or in any way construed to be too broad or to any extent invalid, such provision shall not be construed to be null, void and of no effect, but to the extent such provision would be valid or enforceable under Applicable Law, such provision shall be construed and interpreted or reformed so as to provide for a covenant having the maximum enforceable geographic area, time period and other provisions, although not greater than those contained herein, as shall be valid and enforceable under such Applicable Law.  Each of the Parties acknowledges, however, that the terms of this Agreement have been negotiated by the Parties and that the limitations on activities are reasonable in light of the circumstances pertaining to the Parties.  The Parties further acknowledge that each Party’s and its Affiliates’ commitments in Article 2 are a material inducement for the other Party to have entered into the transactions contemplated by this Agreement.

 

2.4                                Imports Into or Sales Within and Outside the Territory.  Depomed shall use commercially reasonable efforts to ensure that the Product is not imported into or marketed, distributed, or sold in the Territory for use in the Field by Depomed, its Affiliates or any Third Party authorized by Depomed or its Affiliates.  If Depomed learns of any such activities it shall promptly respond to any report of such activity and shall use commercially reasonable efforts to take all appropriate measures to halt it.  Solvay shall use commercially reasonable efforts to ensure (i) that the Product is not imported into the Territory, or marketed, distributed, or sold in the Territory for use outside the Field and (ii) that Product is not exported from, or marketed, distributed or sold outside, the Territory for any uses, by Solvay, a Solvay Affiliate or any Third Party authorized by Solvay or its Affiliates.  If Solvay learns of any such activities, it shall promptly respond to any report of such activity and shall use commercially reasonable efforts to take all appropriate measures to halt it.

 

2.5                                Restrictions Within the Territory.

 

Notwithstanding anything contained in this Agreement to the contrary, the Parties acknowledge and agree that, for so long as the Product is being developed, marketed, promoted, and/or commercialized (a) by Solvay in the Territory in the Field and (b) by Depomed, an Affiliate of Depomed, a Third Party authorized by Depomed or an Affiliate of Depomed (hereinafter in this section only, “Depomed”) in the Territory outside of the Field (including for the VMS Indication), Solvay and Depomed will:

 

(i)                                                                                      use commercially reasonable efforts to obtain separate and distinct NDC numbers for its respective Product;

 

(ii)                                                                                   use a separate and distinct trade name (brand name) for its respective Product;

 

(iii)                                                                                manufacture, market, promote, commercialize and sell its respective Product using a tablet color that is substantially different from that used by the other Party for its Product;

 

(iv)                                                                               use commercially reasonable efforts to [***] ;

 

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(v)                                                                                  not [***] ;

 

(vi)                                                                               not [***] ;

 

(vii)                                                                            not [***] ; and

 

(viii)                                                                         not [***] .

 

In addition, Solvay agrees not to [***] .  Depomed (including any Affiliate of Depomed and/or a Third Party authorized by Depomed or an Affiliate of Depomed) agrees not to [***] .   Solvay (including any Affiliate of Solvay and/or a Third Party authorized by Solvay or an Affiliate of Solvay) agrees not to [***] .

 

(a)                                   Both Parties envision that there will be two separate NDAs (or equivalents thereto) for the Product developed and commercialized in the Territory within the Field by Solvay, its Affiliates and sublicensees, and outside the Field by Depomed, its Affiliates and sublicensees, respectively.

 

(b)                                   Notwithstanding anything to the contrary contained herein, [***] .

 

(c)                                   In the event [***] .

 

(d)                                   In the event [***] .

 

(e)                                   The Parties acknowledge and agree that in no event [***] .

 

2.6                                Trademarks.  Depomed acknowledges and agrees that Solvay has the right to develop and maintain, in Solvay’s name, any and all trademarks, names and logos not owned or Controlled by Depomed as of the Effective Date (collectively, “Trademarks”) to be used for the Product in the Field in the Territory.

 

2.7                                No Implied License.  No right or license under any intellectual property right is granted or shall be granted by Depomed or Solvay by implication.  All such rights or licenses are or shall be granted only as expressly provided in this Agreement.  Depomed reserves and retains all rights in the Depomed Technology other than the rights expressly granted under this Agreement.  Solvay reserves and retains all rights in the Solvay Technology other than the rights expressly granted under this Agreement.  Solvay shall not practice the Depomed Technology or use the Product Data outside the scope of its licenses under Section 2.1.  Depomed shall not practice the Solvay Technology outside the scope of its licenses under Section 2.1.

 

ARTICLE 3
PAYMENTS

 

3.1                                Fees.  In consideration for the licenses and other rights granted herein, Solvay will pay to Depomed a nonrefundable, non-creditable license fee of Ten Million Dollars ($10,000,000).  Solvay will also pay to Depomed a nonrefundable, non-creditable fee of Fifteen Million Dollars ($15,000,000) as reimbursement for costs incurred by Depomed in connection with the research and development of the Product (the payments described in this Section 3.1 are

 

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hereinafter referred to as the “Upfront Fee”).  The Upfront Fee will be paid to Depomed within sixty (60) days following the Effective Date.

 

3.2                                Milestone Payments.  In consideration for the licenses and other rights granted under this Agreement, Solvay shall pay to Depomed each amount set forth on Exhibit A within thirty (30) days after the first achievement of the corresponding milestone identified therein by Solvay, its Affiliates or their sublicensees.  Each such milestone payment shall be payable one time, and shall be nonrefundable and non-creditable.

 

3.3                                Running Royalty.  In consideration for the licenses and other rights granted under this Agreement, Solvay shall pay to Depomed incremental royalties based on the Net Sales (by Solvay and its Affiliates and sublicensees), during the term of this Agreement.  The royalty rate shall be tiered based on the level of aggregate annual Net Sales of the Product in a given Year following the date upon which Launch of Product in the Field and in the Territory occurs, or any anniversary of such date, as set forth in the following table:

 

 

Royalties shall be calculated using the applicable royalty rate or rates set forth in the table above and shall be determined based on the annual Net Sales for the Year in question, and shall be paid at the rate applicable to the portion of Net Sales within each of the above Net Sales tiers during such Year.  The royalty rates determined in accordance with this Section 3.3 are incremental rates, which apply only for the respective increment of annual Net Sales described in the “Portion of Net Sales in a Year” column in the table above.

 

3.4                                Reports and Payments.  Within twenty-five (25) days after the end of each Calendar Quarter, Solvay shall submit to Depomed a report setting out the sales of the Product in the Territory in such quarter in reasonably sufficient detail, but not including any specific customer data, to substantiate its calculation of any payments payable under this Agreement with respect to such Calendar Quarter, including without limitation the gross amount invoiced for and the Net Sales resulting from sales of the Product sold by Solvay, its Affiliates and their respective sublicensees during such Calendar Quarter reporting period and the specific deductions applied in the calculation of such Net Sales amounts (the “Quarterly Report”).  Solvay shall require its Affiliates and sublicensees to record information regarding Net Sales of Product that Solvay is obligated to report under this Section 3.4, and shall provide such information to Depomed for purposes of confirming payments due to Depomed.  In conjunction with its submission to Depomed of the Quarterly Report, Solvay shall pay to Depomed the full amount of any payments due under this Agreement with respect to such Calendar Quarter.

 

3.5                                Right to Audit.  Solvay shall keep records in sufficient detail to permit the determination of Net Sales and royalties payable under this Agreement, as well as Detailing

 

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Costs and Promotional Expenditures incurred by Solvay under this Agreement.  Solvay shall also keep or cause to be kept such records as are required to determine the number of sales representatives used to provide Details in the Territory and to verify the information required to be provided pursuant to Section 4.6.  At the request and expense of Depomed, Solvay shall permit an independent certified public accounting firm of nationally recognized standing or another mutually acceptable accounting firm, which is subject to a confidentiality agreement with Solvay, to examine during ordinary business hours, no more than once in each Calendar Year and upon no less than thirty (30) days prior written notice, such records of Solvay and its sublicensees and their respective Affiliates as may be necessary or reasonably useful to verify the accuracy or completeness of any report or payment made under this Agreement for any Calendar Year period ending not more than three (3) years prior to the date of such request.  These rights with respect to any Calendar Year shall terminate three (3) years after the end of any such Calendar Year.  Depomed shall provide Solvay with a copy of such accounting firm’s written report within thirty (30) days after completion of such report.  If such accounting firm concludes that an overpayment or underpayment exists, then the owing Party shall pay the amount due to the other Party within thirty (30) days after the date Depomed delivers to Solvay such accounting firm’s written report so concluding, provided that such payment shall include interest determined in accordance with Section 3.8 from the date any such underpayment was originally due, as applicable, until payment thereof.  Depomed shall bear the full cost of such audit unless such audit discloses that any underpayment by Solvay for the audited period is more than five percent (5%) of the amount actually due for that audited period, in which case Solvay shall pay the reasonable fees and expenses charged by the accounting firm.

 

3.6                                Manner of Payment; Exchange Rate.  All payments to be made by Solvay to Depomed under this Agreement shall be made in Dollars from a Solvay entity located in the United States and shall be paid by electronic transfer in immediately available funds to such bank account in the United States designated in writing by Depomed.  When calculating the Net Sales, the amount of such sales in foreign currencies shall be converted into Dollars at the spot rate for buying Dollars published in the Wall Street Journal as of last day of the applicable measurement or activity period (e.g., Calendar Quarter, month, etc.).  Solvay shall provide reasonable documentation of the calculation and reconciliation of the conversion figures on a country-by-country basis as part of its report of Net Sales for the period covered under the Quarterly Report.

 

3.7                                Withholding Taxes.  In the event that any royalties or other payments due to Depomed are subject to withholding tax required by Applicable Law to be paid by Solvay to the taxing authority of any foreign country on Depomed’s behalf, Solvay may deduct the amount of such tax from the applicable royalties or other payment otherwise payable to Depomed.  In such event, Solvay shall pay the taxes to the proper taxing authority and shall send evidence of the obligation together with proof of payment to Depomed following such payment and shall reasonably cooperate with Depomed in its efforts to avoid or minimize such withholding obligations and/or to obtain credit for payment thereof.

 

3.8                                Interest Due.  Solvay shall pay Depomed interest on any payments that are not paid on or before the date such payments are due under this Agreement at a rate of one percent (1%) per month, or the maximum applicable legal rate, if less, calculated based on the total number of days payment is delinquent.

 

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ARTICLE 4
DEVELOPMENT, PROMOTIONAL AND COMMERCIALIZATION ACTIVITIES

 

4.1                                Development.  Depomed shall be responsible for completing those clinical development and manufacturing activities for Product in the Field and in the Territory that are being conducted or are planned as of the Effective Date and are set forth in Exhibit D, at Depomed’s sole expense (though Depomed will include Solvay in the performance of these activities).  Solvay shall be responsible, at its sole expense, for conducting all other development, manufacturing (to the extent not performed by Depomed pursuant to Section 4.8) and regulatory activities for Product in the Field and in the Territory.

 

4.2                                Commercially Reasonable Efforts to Commercialize.  Commencing upon issuance to Solvay of Regulatory Approval with respect to the Product in a country of the Territory, Solvay will exercise Commercially Reasonable Efforts to commercialize the Product in the Field in such country of the Territory.  Without limiting the foregoing, Solvay shall, itself or through Affiliates or sublicensees, Launch the Product in each country of the Territory within [***] days after it receives a letter from the Regulatory Authority in such country stating that the Product is approved in such country.

 

4.3                                Specific Activities.   Subject to Section 4.2 and provided that no Generic Product has been approved for commercial sale in the Field in the United States, and except to the extent limited by restrictions imposed by any Governmental Authority or Applicable Law, Solvay agrees to engage in the following specific activities relating to the Product in the United States:

(a)                                   Creation of [***] ;

 

(b)                                   Creation of [***] ;

 

(c)                                   [***] ;

 

(d)                                   [***] ;

 

(e)                                   [***] ;

 

(f)                                     [***] ;

 

(g)                                  [***] ;

 

(h)                                  [***] ;

 

(i)                                     [***] ;

 

(j)                                     [***] ;

 

(k)                                 [***] ;

 

(l)                                     [***] ;

 

(m)                               [***] ;

 

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(n)                                  [***] ;

 

(o)                                   Creation of [***] ;

 

(p)                                   [***] ; and

 

(q)                                   Creation of [***] .

 

4.4                                Promotional Requirements.  Provided that no Generic Product has been introduced in the Field in the United States, and except to the extent expressly prohibited or restricted by Governmental Authority or Applicable Law, Solvay shall, in the United States, perform the activities described in subsections (a) and (b):

 

(a)                                   conduct Details with respect to the Product in the Field in the Territory as follows:

 

(i)                                     if the AE Profile relating to somnolence is [***] , then a minimum of [***] ; or

 

(ii)                                 if the AE Profile relating to somnolence is [***] , then a minimum of [***] ; and

 

(b)                                   spend not less than:

 

(iii)                             [***] Dollars ($ [***] ) on Promotional Expenditures in and/or [***] ;

 

(iv)                                [***] Dollars ($ [***] ) on Promotional Expenditures in [***] ;

 

(v)                                    in [***] , an amount equal to [***] ; and

 

(vi)                                in [***] , an amount equal to [***] .

 

4.5                                Compliance with Applicable Law.

 

(a)                                   Solvay will comply in all material respects with all Applicable Laws.  Solvay acknowledges and agrees that all of its sales representatives and other employees and agents are not, and are not intended to be or be treated as, employees of Depomed or any of its Affiliates, and that such individuals are not, and are not intended to be, eligible to participate in any benefits programs or in any “employee benefit plans”, as such term is defined in Section 1002(3) of the Employee Retirement Income Security Act of 1974, as amended, that are sponsored by Depomed or any of its Affiliates or that are offered from time to time by Depomed or its Affiliates to their own employees.  Solvay shall be solely responsible and liable for the payment of all compensation and benefits under any such benefit plans to such sales representatives and other employees and agents, even if it is subsequently determined by any court, the Internal Revenue Service or any other governmental agency that such individual may be deemed a common law employee of Depomed or any of its Affiliates.

 

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4.6                                Reports.   Solvay shall record [***].  Such records shall be maintained for at least three (3) years after the end of the Calendar Year to which they pertain.  Within ten (10) days after the end of each Calendar Quarter, Solvay shall provide a report to Depomed containing [***].  Depomed shall have the right, through a Third Party subject to a confidentiality agreement with Solvay at its own expense, to audit Solvay’s records to confirm the accuracy of such report as provided in Section 3.5 and to confirm Solvay’s compliance with this Article 4.

 

4.7                                Product Pricing.  For the avoidance of doubt, Solvay shall have the right, in its sole discretion, to establish the prices at which Solvay will sell the Product in the Field in the Territory.

 

4.8                                Manufacturing and Supply.

 

(a)                                   Depomed shall supply Product for use in conducting Depomed’s development activities for Product in the Field and in the Territory as set forth in Exhibit D.

 

(b)                                   During the four-year period beginning on the Effective Date (the “Supply Period”), Depomed shall supply and package (or have supplied and packaged) Product pursuant to this Section 4.8.  Depomed will use commercially reasonable efforts to enter into a long-term Product supply agreement with [***] days after the Effective Date (the “ Depomed Supply Agreement ”) that will be freely assignable to Solvay or its Affiliates, successors or assigns at any time.  In addition, Depomed and Solvay will negotiate and enter into a Product supply agreement with business terms substantially similar to the Depomed Supply Agreement concurrently with the execution and delivery by Depomed and [***] of the Depomed Supply Agreement (the “ Solvay Supply Agreement ”, and, together with the Depomed Supply Agreement, the “ Supply Agreements ”).  The Supply Agreements will, together, contain the following provisions (among others mutually agreeable to the Parties):

 

(i)                                     Under the Solvay Supply Agreement, Depomed will agree to supply Solvay with its requirements of finished, packaged Product during the Supply Period;

 

(ii)                                 All manufacturing and records will be performed and maintained in accordance with specifications, cGMP and Applicable Law;

 

(iii)                             Depomed will provide reasonable assistance to Solvay in the event Solvay wishes to qualify a backup Product manufacturer;

 

(iv)                                Depomed shall [***] ;

 

(v)                                    Solvay will pay Depomed the following amounts in connection with all activities performed by or on behalf of Depomed associated with Product manufacture and supply (other than activities specified on Exhibit D) (A)  [***] % of Depomed’s out-of-pocket costs incurred in connection with such manufacture and supply of Product to Solvay, and (B) a labor charge equal to the FTE Charges for all Depomed employees allocated to the manufacture and supply of Product to Solvay, not to exceed FTE Charges for an aggregate of [***] during any given calendar quarter (and Depomed shall provide to Solvay periodic reports detailing the FTE Charges for which Solvay must pay Depomed hereunder);

 

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(vi)                                Payments for activities described in subsection (v) will be made to Depomed within twenty (20) days after Solvay’s receipt of an invoice from Depomed, with the Solvay Manufacturing Agreement to include provisions specifying the allocation of costs between the Product for use within and outside the Field as applicable; and

 

(vii)                            Depomed and Solvay will establish a CMC committee including quality, regulatory and manufacturing personnel, which committee will meet on a monthly basis throughout the Supply Period to coordinate Product manufacturing and supply activities.

 

(c)                                   The Parties acknowledge [***] .

 

4.9                                Rights of First Negotiation.

 

(a)                                   If Solvay develops and obtains Regulatory Approval of Product for a fibromyalgia indication, Solvay shall and hereby does grant to Depomed a right of first negotiation to co-promote the Product in the Field in the Territory solely for the fibromyalgia indication and solely to obstetricians and gynecologists.  Solvay shall notify Depomed in writing no later than [***] prior to [***] .  If Depomed is interested in negotiating with Solvay the terms under which Depomed would co-promote the Product for such indication to obstetricians and gynecologists in the Territory, it shall so notify Solvay in writing within [***] days after Depomed receives such notice from Solvay.  For [***] days after Solvay’s receipt of Depomed’s notice of interest, the Parties shall negotiate in good faith the terms of a co-promotion agreement for such indication in the Territory with respect to obstetricians and gynecologists.  If the Parties do not execute a co-promotion agreement within such [***] day period of time, Solvay shall be free to promote itself or with or through Third Parties the Product for such indication to obstetricians and gynecologists in the Territory; provided, however, that Solvay shall not grant to any Third Party the right to co-promote Product for such indication to obstetricians and gynecologists in the Territory [***] .

 

(b)                                   If Depomed desires to offer to Third Parties the opportunity to participate in [***] .  Depomed shall so notify Solvay in writing prior to offering such opportunity to any Third Party.  If Solvay is interested in negotiating with Depomed the terms under which Solvay would [***] , it shall so notify Depomed in writing within [***] days after it receives such notice from Depomed.  If Solvay so notifies Depomed, the Parties shall negotiate in good faith during the [***] day period following Depomed’s receipt of Solvay’s notice of interest the terms under which Solvay may [***] .  If the Parties do not execute an agreement or [***] within such [***] day time period, or if Solvay does not provide a notice of interest within such [***] day time period, then Depomed shall have no further obligation to Solvay with respect to [***] .

 

ARTICLE 5

REGULATORY

 

5.1                                Regulatory Responsibilities in the United States.

 

(a)                                   Solvay shall be responsible for making all Regulatory Filings and seeking Regulatory Approvals for the Product in the Field in the United States, including

 

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without limitation submitting all reports and responses necessary as part of a Drug Approval Application.  All Regulatory Filings in the Field in the United States shall be filed in the name of Solvay, and Solvay shall be responsible for all communications, meetings and other dealings with the Governmental Authorities relating to the Product in the Field in the United States, at its expense.

 

(b)                                   Subject to Section 5.1(a), Depomed shall be primarily responsible, in consultation with Solvay, for preparing the first Drug Approval Application for the Product in the Field in the United States, including without limitation preparing all reports necessary to support such Drug Approval Application.  Depomed shall also be responsible for preparing responses for review and submission by Solvay to address any deficiencies or other issue arising in the Drug Approval Application identified by FDA during the course of review. Solvay shall have the right to provide substantive and procedural comments on all such Drug Approval Applications and related filings and documents reasonably in advance of the anticipated filing or performance dat