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Exhibit 10.7

 

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

 

PROMOTION AGREEMENT

 

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

 

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

 

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

 

ARTICLE I
DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 



 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 1.33           “ Depomed Physician List ” means the list of obstetrics and gynecology Professionals to whom the Depomed Sales Force may present Details, as such list may be amended from time to time as contemplated by this Agreement; provided that the list must conform to the requirements of Section 4.9.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Section 1.61           “ Minimum Detailing Period ” has the meaning set forth in Section 4.1(b).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II
GRANT

 

Section 2.1             Grant of Promotion Rights

 

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

 

Section 2.2             Sublicense

 

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

 

Section 2.3             Limitation on Metformin Promotion

 

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

 

Section 2.4             Retention of Rights

 

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

 

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

 

ARTICLE III
JOINT COMMERCIALIZATION COMMITTEE

 

Section 3.1             Establishment

 

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

 

Section 3.2             Joint Commercialization Committee

 

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

 

Section 3.3             JCC Responsibilities

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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Section 3.4             Meetings of the JCC.

 

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

 

Section 3.5             JCC Disputes

 

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

 

(b)           In the event that the Executive Officers are unable to reach a resolution of any referred dispute after good faith negotiations during the fifteen (15)-day period referred to in Section 3.5(a) above and in the event such dispute is not related to compliance with this Agreement, regulatory matters, or the validity, breach or interpretation of this Agreement, either party may commence mediation within fifteen (15) days after the conclusion of such fifteen (15)-day period by providing to the other party a written request for non-binding mediation, setting forth the subject of the dispute and the relief requested (a “ Mediation Notice ”).  The parties will cooperate with Judicial Arbitration and Mediation Services (“ JAMS ”) and with one another in selecting a mediator from JAMS’ panel of neutrals, and in scheduling the mediation proceedings.  The parties shall endeavor to conclude any mediation under this Section 3.5 within thirty (30) days after delivery by either party of Mediation Notice.  The parties covenant that they will participate in the mediation in good faith and that they will share equally in its costs; provided that each party will be responsible for its own attorneys’ fees.  Either party may seek equitable relief prior to the mediation to preserve the status quo pending the completion of that process.  Except for such an action to obtain equitable relief, neither party may commence a civil action with respect to the matters submitted to mediation until after the completion of the initial mediation session, or thirty (30) days after delivery of the Mediation Notice, whichever occurs first.

 

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


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