DISTRIBUTION AGREEMENT
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EXHIBIT 10.28
This Distribution Agreement (the "Agreement") is entered into as of
the 24th day of February, 1994 (the "Execution Date") by and among SANO
Corporation, a Florida corporation ("SANO"), Pharmaceutical Resources,
Inc., a New Jersey corporation ("PRI"), and Par Pharmaceutical, Inc., a New
Jersey corporation ("PPI").
WHEREAS, SANO has two transdermal generic drug delivery products in
clinical testing, more fully described in Appendix I hereto as Product "A"
and Product "B" (the "Licensed Products"); and
WHEREAS, SANO has three other transdermal generic drug delivery
products at less advanced stages of development and testing, as more fully
described in Appendix II hereto, and may develop other transdermal generic
drug delivery products during the term of this Agreement (collectively, the
"Option Products"); and
WHEREAS, SANO desires to implement the program described in Exhibit A
with respect to the Licensed Products (the "Development Program"); and
WHEREAS, PPI desires to purchase certain rights with respect to the
distribution of the Licensed Products and the Option Products, subject to
the terms and conditions of this Agreement;
NOW, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
TERMS AND CONDITIONS
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1.1 Definitions. As used in this Agreement, the following terms
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shall have the meaning ascribed to them below:
(a) "Affiliate," as to any Person, shall have the meaning set
forth in Rule 405 under the Securities Act of 1933.
(b) "Costs" shall mean, with respect to production of a Licensed
Product, the cost of goods incurred by SANO in the production thereof
determined in accordance with generally accepted accounting principles
applied on a consistent basis, as determined by SANO's independent
certified public accountants; provided, however, that notwithstanding the
foregoing, it being the intent of the parties that Costs make SANO whole
with respect to all reasonable expenditures related to the Licensed
Product, Costs shall include, without limitation, (i) the delivered cost of
all ingredients and other raw materials used therein, (ii) a percentage of
SANO's overall labor cost equal to the portion which labor hours devoted to
the Licensed Product's production bears to total labor hours devoted to all
SANO product production, (iii) packaging and other direct
manufacturing and quality control costs and (iv) ratably allocated costs of
marketing and promotion (if any), product liability insurance and general
overhead; provided, further, that, notwithstanding the foregoing, Costs
shall not include (i) any cost incurred by SANO in completing the
Development Program, (ii) any royalties or similar payments paid or payable
by SANO with respect to any Licensed Product, or (iii) any cost
specifically related to the distribution of the Licensed Product outside
the United States.
(c) "Development Program" shall mean all actions, including,
without limitation, research conducted as a part of SANO's pre-clinical and
clinical activities, which is required or reasonably necessary to obtain
all requisite governmental approvals for the testing, manufacture and sale
of Licensed Products during the term of this Agreement, in substantial
conformity with the program described in Exhibit A.
(d) "Exclusive" shall mean, with respect to any right herein
granted, that no other party shall have such right, directly or indirectly.
(e) "Generic" shall mean, with respect to any drug or product,
that such drug or product does not comprise a substance or compound that is
covered by a claim under any unexpired U.S. Patent and/or which is not
entitled to any period of market exclusivity under the Orphan Drug Act or
the Drug Price Competition and Patent Term Restoration Act of 1984
according to 21 U.S.C.A. 355(j)(4)(D)(i) or (ii).
(f) "Licensed Product" shall mean any Transdermal Generic Drug
Delivery System listed on Exhibit A hereto, or which may become a Licensed
Product pursuant to Article XII hereof.
(g) "Net Sales" shall have the meaning set forth in Exhibit B
hereto.
(h) "Person" shall include any individual, corporation,
partnership, association, cooperative, joint venture, or any other form of
business entity recognized under the law.
(i) "Sale" shall mean any action involving selling.
(j) "SANO's Technology" shall mean any and all data, information,
technology, know-how,
process, technique, method, skill, proprietary information, trade secret,
development, discovery, and inventions, owned or controlled by SANO and
specifically related to a Transdermal Generic Drug Delivery System for the
Licensed Products now existing or developed in the future under and during
the course of the Development Program or otherwise, as well as information
related to the manufacture of Licensed Product(s) and specifications and
procedures related thereto.
(k) "Sell" shall mean to, directly or indirectly, sell,
distribute, supply, solicit or accept orders for, negotiate for the sale or
distribution of, or take any other action that is in furtherance of any of
the foregoing.
(l) "Specifications" shall mean the terms and conditions
applicable to the Licensed Product(s) as described in the abbreviated new
drug application ("ANDA") approved by the United States Food and Drug
Administration (the "FDA") covering the Licensed Product(s), as the same
may be supplemented from time to time.
(m) "Standard Packaging" shall mean a Licensed Product packaged
in individual pouches and in individual folding cartons consisting of pouch
units per carton reasonably specified by PPI and containing any labels and
labelling required therefor by the FDA and provided in packages that are
appropriate for regulatory and marketing purposes, and produced at a SANO
facility in the United States, the grade and quality of the labels,
labelling and packaging materials being as specified in the ANDA therefor.
(n) "Transdermal Generic Drug Delivery System" shall mean a
generic version of a branded transdermal adhesive patch.
(o) "United States" shall mean the 50 states of the United States
of America, plus the District of Columbia, the Commonwealth of Puerto Rico,
the U.S. Virgin Island, Guam, Samoa and any other territory which, on the
Execution Date, is a United States government protectorate wherein an ANDA
approved by the FDA is required to sell the Licensed Products in such
territory.
ARTICLE II
REPRESENTATIONS OF SANO
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2.1 SANO represents and warrants as follows:
2.1.1 Organization, etc. It is duly organized and validly
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existing under the laws of the State of Florida, has all requisite power
and authority to conduct its business as now, and as proposed to be,
conducted and to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly authorized, executed and delivered
by SANO and represents a valid and binding obligation enforceable against
SANO in accordance with its terms.
2.1.2 No Conflicts; Consents. Execution and delivery hereof, or
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performance by SANO hereunder, will not (a) violate or create a default
under (i) SANO's Articles of Incorporation or by-laws (true and correct
copies of which have been delivered to PPI), (ii) any mortgage, indenture,
agreement, note or other instrument to which it is a party or to which its
assets are subject or (iii) any court order or decree or other governmental
directive or (b) result in the action of any lien, charge or encumbrance on
any material portion of SANO's assets, except as contemplated hereby.
2.1.3 SANO's Technology. SANO's Technology is, to the best
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knowledge of SANO, sufficient to enable SANO to complete the Development
Program as contemplated hereby. SANO has received no notice, and is not
aware, that any portion of SANO's Technology infringes upon the rights of
any other Person.
2.1.4 Development Program. SANO has successfully completed all
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phases of the Development Program scheduled on Exhibit A hereto for
completion on or prior to the Execution Date and has no knowledge of any
fact or circumstance which is reasonably likely to delay or prevent
completion of the Development Program, other than general conditions
related to the approval process; SANO does not hereby represent or warrant
that the Development Program will be completed in accordance with the
schedule set forth in the Development Program, or at all.
2.1.5 Information. All data and other information relating to
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SANO and/or the Licensed Products provided by SANO, or its agents, to PPI
was derived from SANO's records (which have been diligently, and to the
best of SANO's knowledge, accurately maintained in all material respects)
and is an accurate copy or summary thereof in all material respects.
2.1.6 Employees. All key employees of SANO have executed
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appropriate confidentiality agreements with SANO and assignments of
intellectual property rights in favor of SANO. All key employees of SANO
have executed appropriate non-compete agreements which, by their terms,
extend to not earlier than
[December 31, 1996].
2.1.7 SANO represents and warrants to PPI that, to the best of
its knowledge, information and belief, it is not prohibited by any federal,
state or local law, rule or regulation or by any order, directive or
policy of the United States government or any state or local government
thereof or any federal, state or local regulatory agency or authority
having jurisdiction with respect to the distribution of pharmaceutical
products within its territorial jurisdiction from selling the Licensed
Products within the territorial jurisdiction of such government, regulatory
agency or authority (on the assumption that it holds whatever licenses are
required for a foreign corporation to carry on business generally within
such jurisdiction) and that SANO is not an Ineligible Person or Person from
whom any United States federal, state or local government, regulatory
authority or agency which purchases pharmaceutical products (including,
without limitation, the federal Defense Logistics Agency) will or may not
purchase any products manufactured by it or with whom it will or may not
otherwise conduct business as a result its being publicly listed or
otherwise (except for the fact that it is a foreign corporation). SANO
further represents and warrants that it is not aware of any claims of
infringement against the Licensed Products or of any requirement that it
obtain licenses to patents or other proprietary rights with respect
thereto. SANO shall use its reasonable efforts to have all its employees
and, to the extent reasonably practicable, its agents and consultants
employed in or for any Development Program, execute written agreements
requiring assignment to SANO of any developments, discoveries, improvements
and/or inventions in any Licensed Product made by such employees under and
during the course of the Development Program.
ARTICLE III
OBLIGATIONS OF SANO
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3.1 Level of Effort. SANO shall use its reasonable efforts,
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including, without limitation, the employment of a sufficient number of
technically qualified officers and employees, to complete the Development
Program for each Licensed Product as set forth in Exhibit A.
3.2 Progress Reports. SANO shall, on a monthly basis, by the tenth
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day of each month, inform PPI in writing of the progress of the Development
Program and the commencement of any project within the Development Program.
3.3 Program Updates. On a date which shall be approximately three
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(3) months after the date hereof, and at three-month intervals thereafter,
representatives of SANO and of PPI shall meet to review the progress and
status of the Development Program then underway. At such meetings, PPI
shall have the right
to request the allocation of priorities to the various projects comprising
the Development Program and to suggest procedures for their implementation,
which requests shall be reasonably considered by SANO.
3.4 Bioavailability Study; Use of Funds. SANO will commence a single
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dose bioavailability study with respect to the relevant Licensed Product
promptly upon its receipt of the payments specified in Section 7.1(a)(ii)
and Section 7.1(b)(ii), respectively, and shall use such amounts in respect
thereof, to the extent necessary. All payments under Section 7.1 will be
added to SANO's general funds and will not be specifically set aside for
the development of any other product of SANO or to fund costs specific to
the distribution of a Licensed Product outside the United States.
3.5 Supply and Use of Information. The parties shall, as promptly as
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possible, provide to each other any information that comes to the knowledge
of a responsible officer of any party relating to any adverse reaction or
other adverse event occasioned during research on, development or use of a
Licensed Product. Any provision of information to PPI shall be subject to
the confidentiality obligations of Section 14.4.
3.6 Clinical Testing. All pre-clinical, clinical and post-clinical
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testing and stability testing and other actions, including but not limited
to completion of the Development Program, required to obtain all requisite
government approvals in the United States for the manufacture and sale of
each Licensed Product shall be conducted by SANO, at its sole expense.
3.7 Governmental Approvals. SANO shall file all appropriate requests
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and other filings with the appropriate government agencies within the
United States in order to obtain all requisite approvals for the testing,
manufacture, sale and use of the Licensed Product(s). The decision
regarding the timing of said filings shall be in SANO's sole discretion.
SANO shall have full and complete ownership of all governmental approvals
relating to Licensed Products. SANO shall provide PPI with appropriate
sections of and a right of reference to any application for registration in
the United States except with respect to those aspects of any formulation
or manufacturing process that is reasonably deemed proprietary by SANO.
3.8 Other Products. SANO shall reasonably apportion or allocate its
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resources among its products to accommodate the Development Programs for
Licensed Products.
3.9 Title. SANO will protect and defend its rights to all Licensed
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Products and SANO's Technology, and will indemnify and hold PPI, PRI and
their Affiliates, harmless, from and against any claims of infringement or
other claim that SANO is not the owner thereof.
3.10 Subsidiaries and Affiliates. SANO will cause its subsidiaries
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and affiliates to comply with the restrictions and limitations imposed on
SANO hereunder with respect to Licensed Products and Option
Products.
ARTICLE IV
EXCLUSIVE DISTRIBUTOR
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4.1 Subject to the provisions of this Agreement, SANO hereby appoints
PPI as the exclusive distributor of the Licensed Products for the United
States and PPI hereby accepts such appointment and agrees to act as such
exclusive distributor. The rights and licenses granted to PPI under this
Agreement shall henceforth be referred to as "the Right." PPI acknowledges
that it has no rights with respect to SANO's Technology or the Licensed
Products, except for the distribution rights with respect to the Licensed
Products as herein described.
4.2 SANO covenants and agrees that, during the term of this Agreement
or until the Right (or its exclusive nature) is terminated in accordance
with the provisions hereof:
4.2.1 SANO will refer to PPI all inquiries concerning potential
purchases of Licensed Products received by it from Persons located in the
United States or from Persons outside the United States if SANO knows or
reasonably suspects that such Person intends to resell or export the
Licensed Product to the United States;
4.2.2 SANO will not, directly or indirectly, knowingly sell any
Licensed Product in the United States nor to any Person outside of the
United States if SANO reasonably expects that such Person intends to resell
or export the Licensed Product to the United States and, if notified by PPI
that one of SANO's customers is selling the Licensed Product in the United
States in any material respect, SANO shall either cease to supply such
customer or obtain (and enforce, if necessary) an undertaking from such
customer not to sell the Licensed Product in the United States (unless
SANO is precluded from taking such action under applicable law). PPI
acknowledges that SANO will use reasonable efforts to prevent the sale of
Licensed Products in United States by Persons other than PPI, but shall not
be held responsible if, despite such efforts, it is unsuccessful in so
doing (subject to its obligations above to cease to supply or to obtain and
enforce the undertaking as and to the extent contemplated above).
4.2.3 PPI shall not, and shall not authorize, permit or suffer
any of its Affiliates to, purchase any Transdermal Generic Drug Delivery
System which has the same strength, contains the same active ingredient and
is for the same indication as, and is competitive with, any of the Licensed
Products (a "Competitive Product") for distribution, sale or use in the
United States from any Person other than SANO. PPI shall not, and shall
not authorize, permit or suffer any of its Affiliates to, seek regulatory
approval in the
United States for any Competitive Product or to, directly or indirectly,
manufacture, sell, handle, distribute or be financially interested (except
as a stockholder with not greater than a 5% interest in a public company)
in the sales of such products within the United States for its own account
or for the account of any other Person as agent, distributor or otherwise.
The foregoing shall not apply to a Licensed Product that is not then
available from SANO for commercial sale by PPI and is substantially behind
the schedule set forth in the relevant Development Program.
Notwithstanding the foregoing, if PPI or PRI becomes an Affiliate
of an entity (the "Merger Partner") as a result of a merger, acquisition,
or other similar extraordinary corporate transaction, and such Merger
Partner is engaged in the manufacture or distribution of a Competitive
Product that PPI is then distributing pursuant to the provisions of this
Agreement, PPI shall so notify SANO and shall offer (the "Offer") to sell,
assign and transfer to SANO the Right with respect to the Licensed Product
with which such Competitive Product is competitive in exchange for an
amount equal to the Licensed Product Fee (as hereinafter defined) for such
Licensed Product. If, within thirty (30) days after its receipt of the
Offer, SANO accepts the Offer, SANO shall, within fifteen (15) days of such
acceptance, deliver to PPI, against delivery of appropriate instruments of
release and transfer, its promissory note in form and substance reasonably
acceptable to PPI, payable to the order of PPI, in the principal amount of
the Licensed Product Fee, bearing interest at the prime rate of Citibank,
N.A., as announced from time to time at its offices in New York City (the
"Prime Rate"), with interest and principal payable on the first anniversary
of the date of delivery of such note. From and after the date of delivery
of such note, PPI shall have no rights with respect to the relevant
Licensed Product and SANO shall be free to grant any rights related thereto
to a third party or to retain such rights for itself. If SANO declines to
accept the Offer or fails to accept the Offer within the aforesaid 30-day
period, this Agreement shall remain in full force and effect, except that
the provisions of this Section 4.2.3 shall not apply to the Competitive
Product. PPI shall have no rights with respect to an Option Product as to
which a Merger Partner has a Competitive Product. PPI shall notify SANO
promptly if any Merger Partner has a Competitive Product with respect to an
Option Product.
4.2.4 PPI shall not, and shall not authorize, permit or suffer
any of its Affiliates to, directly or indirectly, sell any Licensed Product
to any Person outside of the United States, nor to any Person in the United
States if PPI or any of its Affiliates reasonably expects that such Person
intends, directly or indirectly, to sell or export the Licensed Product
outside of the United States. If PPI is notified by SANO that one of its
customers or a customer of PPI or any of its Affiliates is exporting the
Licensed Product out of the United
States in any material respect PPI shall (or shall cause its Affiliates to)
either cease to supply such customer or obtain (and enforce, if necessary)
an undertaking from such customer not to sell the Product outside of the
United States (unless PPI or any such Affiliate is precluded from taking
such action under applicable law). SANO acknowledges that PPI will use (and
will cause its Affiliates to use) reasonable efforts to prevent its
customers from exporting any Licensed Product out of the United States but
shall not be held responsible if, despite such efforts, it is unsuccessful
in so doing (subject to its obligations above to cease to supply or to
obtain and enforce the undertaking as and to the extent contemplated
above).
4.2.5 PPI shall refer to SANO any inquiry or order for Licensed
Products which PPI or any of its Affiliates may receive from any Person
located outside of the United States and from any Person located in the
United States where PPI or any of its Affiliates knows or has reason to
suspect that such Person intends to export the Licensed Products outside of
the United States.
4.2.6 The parties acknowledge, agree and declare that the
relationship hereby established between PPI and SANO is solely that of
buyer and seller, that each is an independent contractor engaged in the
operation of its own respective business, that neither party shall be
considered to be the agent of the other party for any purpose whatsoever,
except as otherwise expressly indicated in this Agreement, and that,
except as otherwise expressly indicated in this Agreement, neither party
has any authority to enter into any contract, assume any obligations or
make any warranties or representations on behalf of the other party.
Nothing in this Agreement shall be construed to establish a partnership or
joint venture relationship between or among the parties.
ARTICLE V
REPRESENTATIONS OF PPI AND PRI; OBLIGATIONS
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5.1 PPI and PRI represent and warrant as follows:
5.1.1 Organization, etc. They are duly organized and validly
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existing under the laws of the State of New Jersey, have all requisite
power and authority to conduct their business as now and as proposed to be
conducted and to execute, deliver and perform their obligations under this
Agreement. This Agreement has been duly authorized, executed and delivered
by PPI and PRI and represents a valid and binding obligation enforceable
against PPI and PRI in accordance with its terms.
5.1.2 No Conflicts; Consents. Execution and delivery hereof, or
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performance by either PPI or PRI hereunder, will not (a) violate or create
a default under (i) PPI's and PRI's Certificates of Incorporation
or by-laws (true and correct copies of which have been delivered to SANO),
(ii) any mortgage, indenture, agreement, note or other instruments to which
either is a party or by which either's assets are subject or (iii) any
court order or decree or other governmental direction or (b) result in the
action of any lien, charge or encumbrance or any material portion of PPI's
and PRI's assets.
5.1.3 Information. All data and other information relating to
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PPI and PRI provided to SANO by PPI and PRI, or their agents, was derived
from PPI's and PRI's records (which have been diligently maintained) and is
an accurate copy or summary thereof in all material respects.
5.1.4 Sufficiency. PPI maintains and agrees that it will
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continue to maintain those places of business and equipment to be used in
storing and shipping the Licensed Products in accordance with Current Good
Manufacturing Practices of the FDA and all other applicable requirements of
the FDA (as the same may be modified from time to time). PPI hereby
further represents and warrants that it currently has and/or has available
to it and maintains and agrees to continue to have and/or to have available
to it and maintain an adequate marketing organization and qualified sales
persons to promote the sale of the Licensed Products in the United States.
5.2 PPI shall purchase the Products from SANO as contemplated in
Section 6.1 hereof.
5.3 PPI will use its reasonable efforts (utilizing its marketing,
distribution and management systems and those of its Affiliates) to develop
a market for and sell the Licensed Products in the United States, such
efforts to be not less rigorous than those efforts used by PPI in relation
to its leading or principal products. PPI shall devote particular
attention to the marketing and sale of the Licensed Products and shall use
its resources in a way it deems most effective in promoting the Licensed
Products given market conditions. SANO shall not engage in marketing and
promotion of the Licensed Products unless reasonably requested to do so by
PPI.
5.4 PPI shall have sole discretion in setting the sales price for the
sale of the Licensed Products, provided that PPI shall not specifically
discount the price of the Licensed Products for the benefit of PPI or any
of its Affiliates' other products or to otherwise use the Licensed Products
as a loss leader or incentive to procure the sale of PPI's or any of its
Affiliates' other products. Rebate and other discount programs (excluding
any program where the price of the Licensed Products are discounted
primarily for the benefit of enhancing the sale of PPI's or any of its
Affiliates' other products) generally available to PPI's customers on the
purchase of pharmaceutical products shall not be prohibited by this Section
5.4, provided that such programs shall be in accordance with industry
standards for comparable products and shall be designed to promote the
sale of the Licensed Products and not other products.
5.5 PPI shall comply with all applicable laws, rules and regulations
relating to transporting, storing, advertising, promoting and selling of
the Licensed Products within the United States and shall assume sole
responsibility for all credit risks and collection of receivables with
respect to Licensed Products sold by it and its Affiliates, and, except as
expressly provided herein, in respect of all dealings between itself (and
its Affiliates) and its (and their) customers.
5.6 PPI shall notify SANO promptly upon becoming aware of any adverse
information relating to the safety or effectiveness of a Licensed Product
and shall consult from time to time with regard to competition or
potentially competitive products.
5.7 PPI hereby further represents and warrants to SANO that, to the
best of its knowledge, information and belief, neither it nor any of its
Affiliates is prohibited by any federal, state or local law, rule or
regulation or by any order, directive or policy of the United States
government or any state or local government thereof or any federal, state
or local regulatory agency or authority having jurisdiction with respect to
the distribution of pharmaceutical products within its territorial
jurisdiction from selling the Licensed Products within the territorial
jurisdiction of such government, regulatory agency or authority and that
neither PPI nor any of its Affiliates is a Person who, by public notice, is
listed by a United States federal agency as debarred, suspended, proposed
for debarment or otherwise ineligible for federal programs in the United
States (an "Ineligible Person") or Person from whom any United States
federal, state or local government, regulatory authority or agency which
purchases pharmaceutical products (including, without limitation, the
federal Defense Logistics Agency) will or may not purchase any products or
with whom it will or may not otherwise conduct business as a result of any
of its Affiliates or PPI being publicly listed or otherwise.
5.8 PPI shall consult with SANO from time to time with respect to
opportunities of which it becomes aware for the development of transdermal
applications for generic or proprietary drugs or of opportunities for the
development of ingredients in transdermal form. In the event that PPI or
its Affiliates intend to engage in the development of a transdermal
product, PPI or such Affiliate shall afford SANO the opportunity to
participate in such development, shall negotiate with SANO on the terms of
such participation, and shall not enter into an agreement with any other
manufacturer of transdermal delivery systems without offering SANO the
right of first refusal in accordance with the following procedure: PPI
shall notify SANO of the material terms and conditions on which it
proposes to enter into such agreement. Within 30 days of its receipt of
such notice, SANO shall notify PPI whether it wishes to enter into such an
agreement on such terms
and conditions. If SANO notifies PPI within such 30 days that it does wish
to enter into such an agreement, PPI and SANO shall prepare and enter into
a definitive agreement on substantially the terms and conditions set forth
in the notice. If SANO fails to so notify PPI within such 30 days, PPI may
enter into such an agreement with a third party on substantially the terms
and conditions set forth in the notice. The foregoing shall not be deemed
to require PPI (i) to divulge confidential information of other
manufacturers, (ii) to disclose to SANO the contents of confidential
proposals made to PPI by other Persons, or (iii) to refrain from dealing
with manufacturers of transdermal delivery systems under development by
such manufacturers that are not a Competitive Product with respect to any
Licensed Product or Option Products under active development.
ARTICLE VI
DELIVERY
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6.1 Licensed Products shall be made available to PRI for pickup ready
for shipment in Standard Packaging, or as otherwise permitted by the FDA,
at SANO's facilities located in Plantation, Florida, or such other
facilities in the continental United States as SANO may utilize with the
consent of PPI, which consent shall not be unreasonably withheld or
delayed, and SANO shall use its reasonable efforts to make available to PPI
sufficient quantities of the Licensed Products to satisfy orders for the
Licensed Products. SANO shall be solely responsible for the contents of
the labels and artwork on all finished labelled products sold by PRI and
its Affiliates. SANO shall provide all Standard Packaging for the Licensed
Products.
6.2 To assist SANO in scheduling production for the manufacture of
the Licensed Products, PPI shall provide to SANO, quarterly, a nine month
rolling forecast of its requirements for a Licensed Product. The first
forecast shall be provided by PPI to SANO approximately six months prior to
the anticipated market launch of a Licensed Product, as reasonably
estimated by the parties, and thereafter shall be provided to SANO on or
before the 20th day of the first month of each successive quarterly period
(to forecast the requirements for the next nine succeeding calendar
months). It is understood and agreed that all forecasts are estimates only
and PPI shall only be bound to purchase the Licensed Products pursuant to
purchase orders submitted by it to SANO. All purchase orders shall be for
minimum batch size quantities reasonably agreed by the parties and shall
anticipate an order/production/availability cycle of approximately twelve
weeks during the first two contract years (as defined below) of this
Agreement and an order/production/availability cycle of approximately
sixteen weeks thereafter.
6.3 PPI shall arrange for shipping and/or transportation of the
Licensed Products from SANO's
facility to PPI's Spring Valley, New York facility and pay all shipping and
related costs. Risk of loss and title to the Licensed Product(s) shall
pass to PPI upon pick-up of the Licensed Products by, on behalf of or for
the account of PPI at SANO's facility.
6.3.1 SANO shall promptly notify PPI by both fax and telephone
that any order (or part thereof acceptable to PPI) is available for pick-up
at SANO (this notice shall hereafter be referred to as the "Availability
Notice").
6.3.2 PPI shall use reasonable and good faith efforts to pick up
the Licensed Products that are the subject of an Availability Notice within
ten (10) business days of receipt of the Availability Notice; provided
that, if such pickup has not occurred on or prior to the expiry of such ten
day period, PPI shall, for purposes of its payment obligations to SANO
pursuant to Section 7.2 below, be deemed to have picked up the Licensed
Products which are the subject of the Availability Notice on the last
business day of such ten-day period. If the Licensed Products in question
have not been picked up by or on behalf of PPI within twenty business days
of an Availability Notice, SANO may, but shall not be obligated to, cause
the Licensed Products to be delivered to PPI's Spring Valley, New York,
facility by truck or other overland delivery at PPI's sole cost and expense
and risk of loss and title to the Products shall pass to PPI upon pickup of
the Products at SANO's facility in the same manner as if the pickup had
been effected by PPI itself, provided that SANO shall provide for the
Licensed Products to be insured during transit in a commercially reasonable
manner at PPI's sole cost and expense.
ARTICLE VII
FEE PRICE AND PAYMENT TERMS
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7.1 Initial Fee Payment. As consideration for the rights herein granted,
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in addition to all payments hereinafter described, PRI shall pay to SANO a fee
(each, a "Licensed Product Fee") of _________________________ for each of the
Licensed Products listed in Appendix I hereto, payable by wire transfer or
certified check, as follows:
(a) Product "A" - (i) ________ upon execution of this Agreement.
- (ii) ________ within seven days after receipt of
notice from SANO that it is prepared
to commence a single-dose
bioavailability study.
(b) Product "B" - (i) ________ upon execution of this Agreement.
- (ii) ________ within seven days after receipt of
notice from SANO that it is
prepared to commence a single-dose
bioavailability study.
7.2 Price. The price to PRI for each order, or part thereof
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acceptable to PRI as contemplated in Section 8.2(d), of Licensed Products
made available to PRI hereunder shall be SANO's Costs related to such order
or part thereof. PPI shall also pay to SANO any applicable federal or
state sales or excise tax payable on the purchase of such Licensed
Products, which payment shall be remitted with the payment of the price as
contemplated in Section 7.3 below and upon payment thereof by PPI to SANO,
SANO shall be solely responsible for remitting the amount so paid on
account of such taxes to the relevant governmental collecting authorities.
Promptly upon PPI's request, SANO shall provide PPI with reasonable
evidence of such direct costs and applicable taxes and payment of such
taxes.
7.3 Payment Terms. Payment for each order of Licensed Products made
-------------
available by SANO for pick-up by PPI shall be due within 35 days of pick-up
(whether actual or deemed pursuant to Section 6.3.2) by PPI at SANO's
facility.
ARTICLE VIII
PRODUCT ACCEPTANCE
------------------
8.1 SANO shall manufacture the Licensed Products and make them
available for pickup by PPI in accordance with all applicable laws, rules
and regulations including, without limitation, the Specifications
applicable to the Licensed Product in question, Current Good Manufacturing
Practices of the FDA (as the same may change from time to time) and all
other applicable requirements of the FDA and other governmental authorities
having jurisdiction.
8.2 All Licensed Products made available for pick up by PPI shall be
accompanied by quality control certificates of analysis signed by a duly
authorized laboratory official of SANO confirming that each batch of
Licensed Product covered by such certificate meets its release
Specifications and shall be deemed accepted by it unless PPI, acting
reasonably and in good faith, shall give written notice of rejection
(hereafter referred to as a "Rejection Notice") to SANO within 35 days
after pick up of the Licensed Products by, on behalf of or for the account
of PPI at SANO's facility.
(a) The Rejection Notice shall state in reasonable detail
(sufficient to enable SANO to identify the nature of the problem and the
tests or studies to be conducted by or on its behalf to confirm or
dispute same) the reason why the Licensed Products are not acceptable to
PPI. If the Licensed Products meet the applicable provisions of Section
8.1 and are in quantities specified in a purchase order, PPI shall not be
entitled to reject them. Any Rejection Notice shall be accompanied by
copies of all written reports relating to tests, studies or investigations
performed to that date by or for PPI on the Licensed Product batch
rejected.
(b) Upon receipt of such Rejection Notice, SANO may require PPI
to return the rejected Licensed Products or samples thereof to SANO for
further testing, in which event such Licensed Products or samples thereof,
as the case may be, shall be returned by PPI to SANO or at SANO's direction
at SANO's expense. If it is later determined by the parties or by an
independent laboratory or consultant that PPI was not justified in
rejecting the Licensed Products or that PPI or its Affiliates were the
cause of or were responsible for the problem, PPI shall reimburse SANO for
the costs of the return, as well as any other costs or expenses incurred by
SANO as a result of the rejection or return.
(c) PPI's test results or basis for rejection shall be conclusive
unless SANO notifies PPI, within 30 days of receipt by SANO of the rejected
Licensed Products or samples or such longer periods of time as may be
reasonable in the circumstances to enable SANO to conduct (and receive the
results of) the appropriate tests, studies or investigations which SANO
should reasonably conduct to confirm the problem in question and to
identify the source thereof, that it disagrees with such test results or
its responsibility for the problem in question. In the event of such a
notice by SANO, representative samples of the batch of the Licensed Product
in question shall be submitted to a mutually acceptable independent
laboratory or consultant (if not a laboratory analysis issue) for analysis
or review, the costs of which shall be paid by the party that is determined
by the independent laboratory or consultant to have been responsible for
the rejection.
(d) If a Licensed Product is rejected by PPI, PPI's duty to pay
the amount payable to SANO pursuant to Section 7.2 hereof in respect of the
rejected Licensed Product shall be suspended until such time as it is
determined (I) by an independent laboratory or consultant that the Licensed
Product in question should not have been rejected by PPI or (II) by the
parties or by any arbitration conducted pursuant hereto or by a final
order of a court of competent jurisdiction (which is not subject to further
appeal) that any act or omission of, on behalf of or for which PPI or its
Affiliates is responsible was the cause of the problem that was the basis
for the rejection. If only a portion of an order is rejected, only the
duty to pay the amount allocable to such portion shall be suspended.
8.3 In the event any Licensed Products are appropriately rejected by
PPI (being Licensed Products that do not meet the applicable provisions of
Section 8.1 other than as a result of any act or omission by PPI
or its Affiliates), SANO shall replace such Licensed Products with
conforming goods or, if requested by PPI, shall provide a credit to PPI for
the amount, if any, previously paid by PPI to SANO on account of the
Licensed Products in question. The credit shall be provided by SANO to PPI
immediately following the expiry of the period during which SANO may
dispute a Rejection Notice as contemplated in Section 8.2(c) above (unless
the Rejection Notice is disputed by SANO, in which event such credit shall
be given only if the dispute is resolved in favor of PPI). Replacement
Licensed Products, as aforesaid, shall be delivered to PPI at no cost to
PPI if PPI has already paid for the rejected Licensed Products and not
received a credit therefor, as aforesaid. All delivery costs, including
insurance, incident to the return of Licensed Products to SANO and delivery
of the replacement Licensed Products to PPI's Spring Valley facility shall
be paid by SANO, unless the rejection is determined not to have been
appropriately rejected, in which case the last sentence of Section 8.2(a)
shall apply.
ARTICLE IX
RETURNS AND ALLOWANCES
----------------------
9.1 Returns. If PPI, acting reasonably and in good faith, accepts
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from a customer a return of a Licensed Product and issues to such customer
a credit for the invoice price thereof, PPI may debit against the amount of
Additional Consideration, as hereinafter defined, due to SANO with respect
to Net Sales, as hereinafter defined, in the month in which such return
occurs, any Gross Profit, as hereinafter defined, previously paid, credited
or due to SANO in respect of the sale of such returned Licensed Product.
9.2 Handling of Returns.
-------------------
(a) In the event any Licensed Product is returned to PPI by its
customers because the Licensed Product is alleged to be defective and PPI
reasonably believes that such defect is due to the fault of SANO, PPI shall
notify SANO within ten (10) working days of any such return and provide or
make available to SANO such samples (if available) and other information
concerning the returned Licensed Product so as to allow SANO to test and
evaluate the allegedly defective Licensed Product. PPI shall retain a
sufficient number of samples of the allegedly defective Licensed Product so
that additional samples are available at a later date should additional
testing be required by an independent testing laboratory as described in
Section 9.2(b) below, or by PPI or SANO for their own purposes. If not
enough samples exist to be so divided, then the parties shall confer and
reach agreement as to the handling of any available samples.
(b) SANO shall complete its review and evaluation of the returned
Licensed Product
within twenty (20) business days of receiving the returned Licensed Product
from PPI or such longer period of time as may be reasonable in the
circumstances to enable SANO to conduct or cause to be conducted such
tests, studies or investigations (and to receive the results therefrom) as
may be required to confirm or dispute the existence of the problem or to
identify the cause or source thereof.
9.3 Costs and Credits.
-----------------
(a) If SANO concludes or it is otherwise determined pursuant to
Section 9.3(b) hereof that the returned Licensed Product is defective due
to the fault of SANO:
(i) any replacement Licensed Product to be provided by SANO
in respect of the returned Licensed Product shall be made available to
PPI without charge or appropriate credit shall be given therefor
(giving account to any adjustment made pursuant to Section 9.1
hereof);
(ii) all delivery costs, including insurance, incident to
the delivery of the replacement Licensed Products to PPI's Spring
Valley facility shall be paid by SANO or appropriate credit shall be
given therefor; and
(iii) SANO shall provide a credit to PPI for the reasonable
costs incurred by PPI (or where the duty has been performed by an
Affiliate, pursuant to the provisions of this Agreement, for the
reasonable costs incurred by such Affiliate) in respect of the
defective Licensed Product.
(b) If SANO asserts that the returned Licensed Product is
defective due primarily to any act or omission of PPI or its Affiliates or
any agents or other persons acting on their behalf as aforesaid, then
representative samples of the Licensed Products shall be submitted to a
mutually acceptable independent laboratory or consultant (if not a
laboratory analysis issue) for analysis or review, the costs of which shall
be paid by the party determined by the independent laboratory or consultant
to have been responsible.
(c) If it is determined in accordance with Section 9.3(b) above
that any such defect is primarily due to any act or omission by PPI, then
no credit or other payment of costs shall be due from SANO, and PPI shall
reimburse SANO for all costs and expenses it incurred in connection with
the return and investigation.
(d) If it is determined in accordance with Section 9.3(b) above
that no such defect exists or, if existing, cannot be attributable
primarily to an act or omission of either party, then any replacement
Licensed Product in respect of the returned Licensed Product shall be made
available to PPI without additional charge or appropriate credit, if any,
shall be given therefor, but no other credits or payments of costs shall be
due from SANO.
9.4 PPI acknowledges that the Licensed Products may be of a
perishable nature and that the Licensed Product must be stored and shipped
in accordance with the Specifications applicable thereto (to the extent
disclosed in writing to PPI or its Affiliates) or the conditions, if any,
set forth on its package label.
9.5 PPI agrees to notify SANO of any customer complaints with respect
to the quality, nature or integrity of a Licensed Product or alleged
adverse-drug experiences ("ADE") within five (5) working days of their
receipt by PPI and of any PPI or FDA complaints within 24 hours, except on
weekends and holidays. SANO shall have the sole and primary obligation to
file any required adverse experience report with FDA. SANO shall also be
responsible for maintaining complaint files as required by FDA regulations.
SANO agrees to investigate and respond in writing to any complaint or ADE
forwarded to it by PPI promptly and in no event later than 30 days after
receipt of the ADE or complaint from PPI (or such longer period as may be
required in the circumstances to enable SANO to conduct such tests,
studies or investigations as may be reasonably required [and to receive the
results therefrom] to enable SANO to appropriately respond). SANO shall
provide PPI with a copy of any correspondence, reports, or other documents
relating to a complaint or ADE within a reasonable period following
generation of such document by SANO.
9.6 The provisions of this Article 9 shall survive the termination or
expiration of this Agreement.
ARTICLE X
DAMAGES, INDEMNIFICATION AND INSURANCE
--------------------------------------
10.1 Subject to the limitations set forth in this Article X and to the
other provisions of this Agreement, SANO, on the one hand, and PPI, on the
other hand, covenant and agree to indemnify and save harmless the other of
them from and against any and all claims, demands, actions, causes of
action, suits, proceedings, judgments, damages, expenses (including
reasonable attorney fees and expenses), losses, fines, penalties and other
similar assessments (the "Damages") relating to or arising out of a breach
by any such party of any of its representations, warranties, covenants or
agreements contained herein; provided that, except where the breach arises
out of a representation or warranty made by a party in this Agreement being
intentionally false or inaccurate, or constitutes a wilful material breach
by a party of any of its duties or obligations hereunder, the claim of an
aggrieved party for Damages arising out of the breach shall be limited to
claiming the amounts owing or payable to it in accordance with the
provisions of this Agreement and any out-of-pocket costs and expenses
(including amounts paid or payable by it to third parties, other than
re-procurement costs [except to the extent contemplated in Section 14.3
hereof] which it has incurred and the aggrieved party shall not be
entitled to recover from the defaulting or breaching party any lost profits
or consequential or punitive damages, including loss or damage to its
goodwill or reputation. For purposes of this Agreement where PPI is in
breach of its duties or obligations hereunder and such duties or
obligations, if delegated by PPI to any of its Affiliates, could reasonably
be performed by such Affiliate and PPI has either not delegated such duty
or obligation to such Affiliate or such Affiliate has either refused to
perform or willfully breached such duty or obligation then PPI shall be
deemed to have willfully breached such duty or obligation hereunder.
Similarly, whenever in this Agreement PPI is required to cause any of its
respective Affiliates to do or to refrain from doing any thing herein
provided and such Affiliate refuses to do or refrain from doing such thing
or otherwise willfully breaches the provision herein contemplated (on the
assumption that such Affiliate were bound by the provision herein
contemplated as if a signatory hereto) then PPI will be deemed to have
willfully breached the provision of this Agreement in question.
10.2 In the event that the release of a Licensed Product by PPI or its
Affiliates in the United States results in a third party claim:
(a) to the extent that the Damages awarded or incurred relate to
or arise out of the safety or effectiveness of the Licensed Product or the
manufacturing, packaging, labelling, storage or handling of the Product by
SANO, SANO shall be responsible therefor and shall indemnify and hold PPI
harmless from and against all such damages; and
(b) to the extent that the Damages awarded or incurred relate to
or arise out of the transportation, storage, handling or selling of the
Licensed Product by PPI or its Affiliates, then PPI shall be responsible
therefor and shall indemnify and hold SANO harmless from and against all
such damages.
Upon the assertion of any third party claim against a party hereto
that may give rise to a right of indemnification under this Agreement, the
party claiming a right to indemnification (the "Indemnified Party") shall
give prompt notice to the party alleged to have the duty to indemnify (the
"Indemnifying Party") of the existence of such claim and shall give the
Indemnifying Party reasonable opportunity to control, defend and/or settle
such claim at its own expense and with counsel of its own selection;
provided, however, that the Indemnified Party shall, at all times, have the
right fully to participate in such defense at its own expense and with
separate counsel and, provided, further, that both parties, to the extent
they are not contractually or legally excluded therefrom or otherwise
prejudiced in their legal position by so doing, shall cooperate with each
other and their respective insurers in relation to the defense of such
third party claims. In the event the Indemnifying Party elects to defend
such claim, the Indemnified Party may not settle the claim without the
prior written
consent of the Indemnifying Party. The Indemnifying Party may not settle
the claim without the prior written consent of the Indemnified Party
unless, as part of such settlement, the Indemnified Party shall be
unconditionally released therefrom or the Indemnified Party otherwise
consents thereto in writing. If the Indemnifying Party shall, within a
reasonable time after such notice has been given, fail to defend,
compromise or settle such claim, then the Indemnified Party shall have the
right to defend, compromise or settle such claim without prejudice to its
rights of indemnification hereunder. Notwithstanding the foregoing, in the
event of any dispute with respect to indemnity hereunder, each party shall
be entitled to participate in the defense of such claim and to join and
implead the other in any such action.
In addition to the foregoing, SANO will defend, at its sole cost and
expense, its rights with respect to the Licensed Products and PPI's rights
to distribute the Licensed Products hereunder against any claim, action,
suit or proceeding ("Action") by any third party asserting prior or
superior rights with respect to the Licensed Product, product infringement
or similar claims (other than as may be based on acts of PPI not
contemplated herein or authorized hereby) and shall indemnify and hold PPI
and its affiliates harmless from the cost of the defense thereof. PPI
shall, at all times, have the right fully to participate in such defense at
its own expense. SANO shall control such defense and shall, in its
reasonable discretion, defend or settle such Action; provided that,
notwithstanding the foregoing SANO shall not enter into any settlement or
compromise of any such Action which requires PPI or any of its Affiliates
to make payments of any kind without the prior written consent of PPI or an
unconditional release of PPI and its Affiliates with respect to the subject
matter of such Action. The provisions of this paragraph should not be
construed as requiring SANO to bear any damages, judgments or other
liabilities entered against PPI in any such Action, provided that the
foregoing shall not be construed as or deemed a waiver of any rights PPI
may have against SANO as a result of such Action hereunder, at law or
otherwise, and all of such rights, if any, are expressly reserved.
10.3 Insurance. Each of SANO and PPI shall carry product liability
---------
insurance in an amount at least equal to ________________________ with an
insurance carrier reasonably acceptable to the other party, such insurance
to be in place at times reasonably acceptable to the parties, but not
later than the date of the first commercial sale of a Licensed Product.
Each party shall promptly furnish to the other evidence of the maintenance
of the insurance required by this Section 10.3 and shall name the other as
an "additional insured" under such insurance policy. Each party's coverage
shall (i) include broad form vendor coverage and such other provisions as
are typical in the industry and (ii) name the other party as an additional
insured thereunder. SANO shall carry clinical testing insurance in an
amount
and at times reasonably acceptable to the parties.
10.4 Survival. The provisions of this Article X shall survive the
--------
termination or expiration of this Agreement, provided that the requirement
to maintain the insurance contemplated in Section 10.3 above shall only
survive for a period of 36 months from the effective date of termination or
expiration of this Agreement.
ARTICLE XI
ADDITIONAL CONSIDERATION, REPORTING AND VERIFICATION
----------------------------------------------------
11.1 Additional Consideration. As additional consideration for SANO
------------------------
entering into this Agreement and permitting PPI to sell the Licensed
Products in the United States in accordance with the provisions hereof, PPI
agrees to pay to SANO the additional amounts more particularly described in
Exhibit B to this Agreement in respect of the aggregate Net Sales (as that
term is defined in Exhibit B) of the Licensed Products. The amount payable
to SANO determined in accordance with Exhibit B is herein and in Exhibit B
annexed hereto referred to as the "Additional Consideration." PPI shall pay
to SANO, monthly, on the seventh day of each month, commencing on the
seventh day of the third month after the month in which sales of the
Licensed Products commence, the Additional Consideration payable to SANO in
respect of the Net Sales of the Licensed Products made by PPI and its
Affiliates during the third preceding month. For greater certainty,
examples of what constitutes the "third preceding calendar month" are
contained in Exhibit B annexed hereto. The consideration payable to SANO
pursuant to this Article XI shall be paid to it as part of the sale price
of the Licensed Product from SANO to PPI and shall not be treated as a
royalty or similar payment.
11.2 Reporting and Information Obligations of PPI.
--------------------------------------------
(a) Approved Contracts. PPI shall provide to SANO, monthly,
------------------
within seven days of the expiry of each calendar month during the term
hereof, a copy of each Approved Contract (as hereinafter defined), entered
into by PPI with its customers during the immediately preceding month
irrespective of whether a copy of such contract had previously been
forwarded to SANO. If the Approved Contract has a term of less than 18
months, PPI may delete (e.g., by blacking out) any information in the
Approved Contract that tends to indicate the identity or location of the
PPI customer; provided, however, that PPI marks each such Approved Contract
with a unique customer code relative to the customer that is the party to
that Approved Contract.
(b) Net Sales and Gross Profits. PPI shall report to SANO
---------------------------
monthly, on the 7th day of each calendar month during the term hereof and
for 12 months after the termination hereof:
(i) a sales summary, in the form annexed hereto as Exhibit
C, showing all sales of the Licensed Products made by PPI and its
Affiliates during the immediately preceding calendar month;
(ii) a detailed statement showing all returns and all
credits, rebates, allowances and other debit and credits relevant to
the calculation of Net Sales and Gross Profits (as those terms are
defined in Exhibit B annexed hereto) for the immediately preceding
calendar month together with copies of all documentation to support
allowable adjustments used in computing Net Sales during the period in
question;
(iii) a certificate signed by the Chief Financial Officer
of PPI certifying that, to the best of his knowledge, information and
belief, after reasonable investigation, the foregoing statements
contemplated in (i) and (ii) above are true and correct and do not
omit any material information required to be provided pursuant to this
Section 11.2(b) and
(iv) a summary of the calculation of the Additional
Consideration payable to SANO on such date.
For purposes of this Agreement a sale shall be considered to have been
made at the time the Product(s) are shipped to the customer.
11.3 PPI shall make available for inspection by SANO at PPI's
facilities and shall cause its Affiliates to make available for inspection
by SANO at their respective facilities, promptly following a reasonable
request therefor, such additional information concerning any sales
(including, without limitation, in respect of any sale, the date of the
shipment, the code number of the customer [or the name of the customer in
the case of a customer disclosed to SANO pursuant to Section 11.2(a) hereof
and an Approved Contract], the number of units of each Licensed Product in
each dosage involved (broken down by container size per Product [e.g., 18
boxes of 30 patches of Product A], and the invoice price charged by PPI or
its Affiliates), credits, returns, allowances and other credits and debits
previously reported to SANO pursuant to Section 11.2(b)(ii) hereof or with
respect to Approved Contracts previously reported to SANO pursuant to
Section 11.2(a) hereof as SANO may reasonably require from time to time
(except information concerning the identity or location of a customer where
PPI is not already required to disclose that information to SANO pursuant
to Section 11.2(a) hereof) to enable SANO to confirm or reconcile the
amounts which are or were to have been paid to it pursuant to this
Agreement (without the need to audit the books and records of PPI or its
Affiliates pursuant to Section 11.4 hereof).
11.4 PPI shall keep and shall cause its Affiliates to keep complete
and accurate records and books of account containing all information
required for the computation and verification of the amounts to be paid to
SANO hereunder. PPI further agrees that at the request of SANO, it will
permit and will cause its Affiliates to permit one or more accountants
selected by SANO, except any to whom PPI or such Affiliate has some
reasonable objection, at any time and from time to time, to have access
during ordinary working hours to such records as may be necessary to audit,
with respect to any payment report period ending prior to such request, the
correctness of any report or payment made under this Agreement, or to
obtain information as to the payments due for any such period in the case
of failure of PPI to report or make payment pursuant to the terms of this
Agreement. Such accountant shall not disclose to SANO any information
relating to the business of PPI except that which is reasonably necessary
to inform SANO of:
(i) the accuracy or inaccuracy of PPI's reports and payments;
(ii) compliance or non-compliance by PPI with the terms and
conditions of this Agreement; and
(iii) the extent of any such inaccuracy or non-compliance;
provided, that if it is not reasonably possible to separate
information relating to the business of PPI from that which is
reasonably necessary to so inform SANO, the accountant may disclose
any information necessary to so inform SANO and SANO shall retain all
other information disclosed as confidential.
PPI shall provide and shall cause its Affiliates to provide full and
complete access to the accountant to PPI's and such Affiliates' pertinent
books and records and the accountant shall have the right to make and
retain copies (including photocopies). Should any such accountant discover
information indicating inaccuracy in any of PPI's payments or non-
compliance by PPI or its Affiliates with any of such terms and conditions,
and should PPI fail to acknowledge in writing to SANO the deficiency or
non-compliance discovered by such accountant within ten (10) business days
of being advised of same in writing by the accountant, the accountant shall
have the right to deliver to SANO copies (including photocopies) of any
pertinent portions of the records and books of account which relate to or
disclose the deficiency or non-compliance (to the extent not acknowledged
by PPI). In the event that the accountant shall have questions which are
not in its judgment answered by the books and records provided to it, the
accountant shall have the right to confer with officers of PPI or such
Affiliate, including PPI's or such Affiliate's Chief Financial Officer. If
any audit under this Section shall reveal an underpayment or understatement
of the amount payable to SANO by more than $10,000.00 for any
period in question, PPI shall reimburse SANO for all costs and expenses
relating to such investigational audit. SANO shall only have the right to
audit such books and records of PPI and its Affiliates pursuant to this
Section 11.4 no more often than twice in any contract year unless earlier
in such contract year or in any of the prior three contract years such
investigation revealed a discrepancy of more than $10,000.00, as aforesaid,
in which case SANO shall have the right to audit such books and records
three times in such contract year. For purposes of this Agreement, a
contract year shall be a period of twelve months commencing on either the
date of this Agreement or on an anniversary thereof. Unless the disclosure
of same is reasonably required by SANO in connection with any litigation or
arbitration arising out of such audit, the accountant shall not reveal to
SANO the name or address (or other information reasonably tending to
identify the location of a customer) of any customer of PPI or its
Affiliates [other than one whose name has been disclosed to SANO pursuant
to Section 11.2 hereof], but shall identify such customer to SANO, if
necessary, by the customer code number used by PPI in its reporting
obligations to SANO [and PPI and its Affiliates shall make such information
known to the accountant]. PPI may, as a condition to providing any
accountant access to its books and records (or those of its Affiliates),
require SANO to execute a reasonable confidentiality agreement consistent
with the terms of this Section 11.4.
11.5 Except as specifically set forth to the contrary, all payments to
be made under this Agreement shall bear interest equal to two percent above
the prime rate as quoted by Citibank N.A., New York, New York, calculated
daily (as at the close of business on each such day) and compounded
monthly, from the day following the day the payment is due until the date
on which it is paid. Any adjustment to the prime rate as quoted by
Citibank N.A. from time to time shall result in a corresponding adjustment
to the rate of interest payable hereunder, the rate of interest quoted by
Citibank N.A. at the close of business on each day to be the rate
applicable for such day.
11.6 The obligation of PPI to make the payments contemplated in
Section 11.1 and to provide the reports and information contemplated in
Sections 11.2 and 11.3 and the right of SANO to conduct its audits or
investigations pursuant to Section 11.4 hereof shall survive the
termination or expiration of this Agreement and shall apply to all Licensed
Products made available to PPI by SANO prior to the effective date of the
termination or expiration of this Agreement (or made available to PPI after
such date pursuant to any provision of this Agreement) notwithstanding that
such Licensed Products may have been resold by PPI or its Affiliates to its
or their customers after the effective date of termination or expiration.
For greater certainty, the parties acknowledge and agree that it is their
intention that PPI pay to SANO the Additional Consideration applicable
to Net Sales of all Licensed Products supplied by SANO to PPI pursuant to
this Agreement (in respect of which the purchase price charged by SANO to
PPI therefor [whether paid or owing] was determined in accordance with the
provisions of Section 7.2 hereof or was provided to PPI free of such charge
pursuant to any other provision of this Agreement) irrespective of whether
such Licensed Product is resold by PPI or its Affiliates prior to or
subsequent to the effective date of termination or expiration of this
Agreement and that SANO's rights pursuant to Section 11.4 hereof shall
continue for a period of twelve (12) months following the final sale of all
such Licensed Products.
11.7 PPI shall have the right, upon reasonable advance written notice
to SANO, to inspect SANO's facilities at which the Licensed Products are
being manufactured to monitor compliance by SANO with FDA Good
Manufacturing Practices and to otherwise confirm that the Licensed Products
are being manufactured in accordance with their respective Specifications.
Similarly, SANO shall have the right, upon reasonable advance written
notice to PPI to inspect those facilities of PPI and any of its Affiliates
which are used in the storage of any of the Licensed Products to ensure
compliance by PPI or such Affiliate with FDA Good Manufacturing Practices
and to otherwise ensure that the Licensed Products do not cease to meet
their Specifications as a result of any storage or shipping conducted by
PPI or its Affiliates. SANO shall cooperate with PPI in providing access
to its facilities and PPI shall cooperate and shall cause its Affiliates to
cooperate in providing access to SANO to its facilities and those of its
Affiliates used as aforesaid.
11.8 SANO shall keep complete and accurate records and books of
account containing all information required for the computation and
verification of SANO's Costs as contemplated in Section 7.2 hereof with
respect to the Licensed Product(s) made available to PPI by SANO pursuant
hereto. SANO further agrees that at the request of PPI it will permit one
or more accountants selected by PPI except any to whom SANO has some
reasonable objection, to have access during ordinary working hours to such
books and records as may be necessary to audit the amounts previously
charged by SANO to PPI pursuant to Section 7.2 hereof. Such accountant
shall not disclose to PPI any information relating to the business of SANO
except the accuracy or inaccuracy of SANO's previously reported charges and
the amount, if any, that PPI may have been overcharged or undercharged
with respect to Licensed Products made available to it. Should any such
accountant discover information indicating that PPI has been overcharged
for Products made available to it, and should SANO fail to acknowledge in
writing to PPI the inaccuracy discovered by such accountant within ten (10)
business days of being advised of same in writing by the accountant, the
accountant shall have the right to make and retain copies (including
photocopies) of any pertinent portions of the records and books of account
which relate to or disclose the inaccuracy (to the extent not acknowledged
by SANO). SANO shall provide full and complete access to the accountant to
SANO's pertinent books and records. In the event that the accountant shall
have questions which are not in its judgment answered by such books and
records, the accountant shall have the right to confer with officers of
SANO, including SANO's Chief Financial Officer. If any audit under this
Section shall reveal an overstatement of the amount payable to SANO by more
than $10,000.00 for the Licensed Products in question, SANO shall
reimburse PPI for all costs and expenses relating to such
investigation/audit. It is understood and agreed that PPI shall only have
the right to audit such books and records of SANO pursuant to this Section
11.8 no more often than twice in any contract year unless earlier in such
contract year or in any of the prior three contract years such
investigation revealed a discrepancy of more than $10,000.00, as aforesaid,
in which case PPI shall have the right to audit such books and records
three times in such contract year. Unless the disclosure of same is
reasonably required by PPI in connection with any litigation or arbitration
arising out of such audit, the accountant shall not reveal to PPI the name
or address (or other information reasonably tending to identify the
location of a supplier) of any supplier of materials to SANO in the
manufacturing or packaging of the Licensed Products (but shall identify
such supplier to PPI if necessary, by a code name or number supplied by
such accountant) or the name of or financial information relating to any
employee of SANO. SANO may, as a condition to providing any accountant
access to its books and records, require PPI to execute a reasonable
confidentiality agreement consistent with the terms of this Section 11.8.
The rights of PPI pursuant to this Section 11.8 shall survive the
termination or expiration of this Agreement for a period of one year.
ARTICLE XII
OPTION PRODUCTS
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12.1 Option Products. With respect to the Option Products, including
---------------
for the purposes of this Section 12.1, any product developed by SANO within
ten years of the Effective Date which is a generic version of an existing
marketed transdermal drug, PPI shall have the option, in its sole and
absolute discretion, to include such products, on a product-by-product
basis, as Licensed Products hereunder, in accordance with the following
provisions.
12.2 Option Product Development Program. For each Option Product,
----------------------------------
SANO shall devise and communicate to PPI a clinical and product development
program and a related budget, setting forth (i) a proposed schedule for
pre-clinical and clinical activities required or reasonably necessary to
obtain
governmental approvals for such Option Product, (ii) the Licensed Product
Fee for which it is willing to include such product as a Licensed Product
hereunder (which shall be reasonably related to the Costs of product
development and shall include only ____% [but not more than _________] of
the costs of pre-clinical activities); (iii) the developmental milestones
that would trigger payment of appropriate portions of such Licensed Product
Fee, which payments shall reflect the related expenditures involved in the
pre-clinical activities (to the limits set forth above) and the clinical
testing program and (iv) any special storage or shipping requirements (the
"Option Product Development Program"). SANO shall also advise PPI of a
reasonable Product Sales Threshold (as hereinafter defined) for the initial
24-month period after the product is to be made available for commercial
sale, that would be applicable to the product if it were included as a
Licensed Product hereunder. Within 30 days of its receipt of an Option
Product Development Program, PPI shall notify SANO whether it wishes to
exercise its option to have the relevant product included hereunder as a
Licensed Product. If PPI notifies SANO within such 30 days that it wishes
to exercise such option, the product will be treated for all purposes as a
Licensed Product hereunder, the Option Product Development Program shall
become a part of this Agreement and PPI shall become obligated to make the
payments described therein. If PPI fails to notify SANO of its election to
exercise such option within such 30 days, SANO may enter into a license or
distribution agreement with respect to such Option Product with a third
party on substantially the same terms as set forth in the Option Product
Development Program, and providing for payments for products and additional
consideration consistent with the provisions hereof. SANO may not enter
into such an agreement with a third party on terms substantially different
from those set forth in the relevant Option Product Development Program and
herein without first offering such terms to PPI for a period of thirty
days.
ARTICLE XIII
TERMS AND TERMINATION
---------------------
13.1 This Agreement shall become effective on the date hereof and
shall remain in effect for a period of ten years per Licensed Product
starting on the date such Licensed Product becomes available for sale in
commercial quantities, unless earlier terminated in accordance with the
provisions of this Agreement. Thereafter, this Agreement shall
automatically be renewed as to each Licensed Product from year to year
unless either party gives notice of termination to the other party at least
one hundred and twenty days prior to the expiry of the initial term or of
any renewal term.
13.2 Either party may, by notice in writing to the other party,
terminate this Agreement if such
other party shall have breached any of its material duties or obligations
under this Agreement (other than the obligations of PPI to pay to SANO any
amount due to SANO hereunder [whether on account of Additional
Consideration, the price for the Licensed Products or otherwise] or to
provide SANO with the reports or information contemplated in Section 11.2
or 11.3 hereof) and such breach shall remain uncured for at least sixty
days after the aggrieved party shall have given notice of the breach to the
other party.
13.3 SANO may, by notice in writing to PPI, terminate this Agreement
if PPI fails to pay to SANO any amount payable by PPI to SANO hereunder,
whether on account of the Additional Consideration, the purchase price for
the Licensed Products, interest or otherwise, as and when the same shall
have become due and payable or PPI shall have failed to deliver (or caused
to be delivered, as the case may be), in timely fashion, the reports or
information contemplated in Section 11.2 or 11.3 hereof, and in either
case, such breach shall have continued unremedied for a period of twelve
business days after written notice of such breach has been given by SANO to
PPI; provided that PPI shall not have the right to such twelve-day grace
period within which to cure such default and SANO shall have the immediate
right to terminate the Agreement for such breach if PPI shall have
previously breached Section 11.2 or 11.3, or failed to remit any sums of at
least $10,000.00 to SANO, when due, in the aggregate, one time in the
twelve month period immediately preceding the default in question.
13.4 Either party may terminate this Agreement on thirty days prior
written notice to the other party if such party or the other party is
legally prohibited from performing its obligations hereunder (other than by
reason of a breach of its obligations hereunder) or becomes (or, in the
case of PPI, its Affiliate becomes) an Ineligible Person (and, where the
party purporting to terminate the Agreement is also the party prohibited
from performing or it or its Affiliate is the Ineligible Person, it [or its
Affiliate, as the case may be] has made diligent good faith best efforts to
remove the prohibition or its status as an Ineligible Person) and such
prohibition or status as an Ineligible Person shall have continued
uninterrupted for a period of 120 days.
13.5 Either party may terminate this Agreement in respect of a
particular Licensed Product (the "Specific Product"), but this Agreement
shall continue in respect of any other Licensed Product, on thirty (30)
days prior written notice to the other party (which notice must be
delivered within 90 days of the expiration of the applicable contract
year) if the Gross Profit (as that term is defined in Exhibit B annexed
hereto) attributable to aggregate Net Sales of the Specific Product made by
PRI and its Affiliates for any complete contract year after the second
anniversary of the date on which such Specified Product became available
for sale shall be less than the amounts stated in or determined pursuant
to Section 13.8; provided, however, SANO
may not terminate with respect to any Specific Product pursuant to this
Section 13.5 without the consent of PPI in the event that SANO shall have
previously terminated the exclusive nature of the Right pursuant to Section
13.8 and shall be selling, directly or indirectly, such Licensed Product in
the United States.
13.6 Either party may terminate this Agreement in accordance with the
provisions of Section 15.1 hereof.
13.7 PPI or SANO shall have the right to terminate this Agreement upon
written notice to the other in the event that any one or more of the
following events shall become applicable to such other party (herein
referred to as the "Party"):
(a) an order is made or a resolution or other action of such
Party is taken for the dissolution, liquidation, winding up or other
termination of its corporate existence;
(b) the Party commits a voluntary act of bankruptcy, becomes
insolvent, makes an assignment for the benefit of its creditors or proposes
to its creditors a reorganization, arrangement, composition or readjustment
of its debts or obligations or otherwise proposes to take advantage of or
shelter under any statute in force in the United States for the protection
of debtors;
(c) if any proceeding is taken with respect to a compromise or
arrangement, or to have such Party declared bankrupt or to have a receiver
appointed in respect of such Party or a substantial portion of its
property and such proceeding is instituted by such Party or is not opposed
by such Party or if such proceeding is instituted by a Person other than
such Party, such Party does not proceed diligently and in good faith to
have such proceeding withdrawn forthwith;
(d) a receiver or a receiver and manager of any of the assets of
such Party is appointed and such receiver or receiver and manager is not
removed within ninety days of such appointment;
(e) such Party ceases or takes steps to cease to carry on its
business.
SANO shall similarly have the right to terminate this Agreement upon
written notice to PRI if any of the foregoing events becomes applicable to
any of its Affiliates.
13.8 (a) If
(i) in the twenty-four (24) month period (such period being
herein referred to as the "A Period") beginning on the date (the "A
Commencement Date") the first of any shipments of Licensed Product "A"
is made available to PPI hereunder, the aggregate Net Sales of
Licensed Product "A" for such A Period is less than the Product Sales
Threshold (as hereinafter defined);
(ii) in the twenty-four (24) month period (such period being
herein referred to
as the "B Period") beginning on the date (the "B Commencement Date")
the first of any shipments of Licensed Product "B" is made available
to PPI hereunder, the aggregate Net Sales of Licensed Product "B" for
such B Period is less than the Product Sales Threshold; or
(iii) in any twenty-four (24) month period (such period
being herein referred to as the "O Period") beginning on the date
(the "O Commencement Date") the first of any shipments of each other
Licensed Product, if any, hereunder is made available to PPI
hereunder, the aggregate Net Sales of any such other Licensed Product
for such Period is less than the Product Sales Threshold; or
(iv) in any twelve month period commencing on the second and
each subsequent anniversary of the A Commencement Date, the B
Commencement Date or any O Commencement Date, the Net Sales of the
relevant Licensed Product sold by PPI and its Affiliates in such
period is less than the Product Sales Threshold;
and the shortfall in sales cannot be attributable primarily to the fault of
SANO, SANO shall have the right to convert PPI's Right hereunder from an
exclusive to a non-exclusive right to distribute such Licensed Product upon
ninety days prior written notice to PPI. As used herein, as to any
Licensed Product, the Product Sales Threshold shall mean an amount
reasonably agreed upon by PPI and SANO after consideration of relevant
market factors and conditions, provided that if PPI and SANO shall fail or
be unable to agree as to any Licensed Product for any period in question,
the Product Sales Threshold for such period and Licensed Product shall be
____________________________________________.
(b) Notwithstanding the exercise by SANO of its right pursuant to
Section 13.8(A) hereof, and the resultant conversion of PPI to a non-
exclusive distributor hereunder, PPI shall have the right to sell the
Licensed Products on a non-exclusive basis on the terms and conditions as
set forth herein, except as provided otherwise in this Paragraph 13.8,
during the balance of the term of the Agreement (subject to earlier
termination as herein provided) and SANO shall continue to supply the
Licensed Products to PPI in accordance with the provisions hereof, provided
that the obligation of SANO to use its reasonable best efforts to supply
PPI with its requirements of the Licensed Products shall take into account
PPI's requirements as well as the requirements of SANO and any other third
party distributor or distributors appointed by SANO to sell the Licensed
Products in the United States.
(c) In the event that SANO exercises its rights under Section
13.8(a) and contemporaneously therewith or subsequent thereto enters into
an agreement with any Person (herein referred to as a "Third Party
Licensee"), authorizing or licensing such Third Party Licensee to sell any
of the Products in the United
States on royalty, payment or other cash equivalent or otherwise readily
economically measured terms more favorable to the Third Party Licensee
(such more favorable terms being herein referred to as the "MFP") then:
(i) SANO shall promptly notify PPI of such agreement and
shall describe in the notice both the MFP and any obligations, duties,
undertakings or other consideration to be provided by the Third Party
Licensee; and
(ii) PPI shall have thirty days from the date of receipt of
such notice to notify SANO whether PPI desires to have the benefit of
the MFP, which can be accepted only if PPI shall agree (to the extent
not already assumed in this Agreement) to any additional obligations,
duties, or undertakings, and to provide any consideration to be
provided by the Third Party Licensee.
PPI's entitlement to seek the benefit of the MFP shall be conditioned upon
and subject to PPI assuming and being capable of fully performing all the
non-cash obligations assumed by the Third Party Licensee in a manner
substantially as valuable to SANO. If PPI shall dispute such assessment,
PPI shall so notify SANO, whereupon the issue shall be deemed to be a
dispute between the parties and subject to resolution pursuant to Section
16.2 hereof.
13.9 Notwithstanding the termination or expiration of this Agreement
pursuant to this Article XIII or any other provision of this Agreement, all
rights and obligations which were incurred or which matured prior to the
effective date of termination or expiration, including accrued Additional
Consideration and any cause of action for breach of contract, shall
survive termination and be subject to enforcement under the terms of this
Agreement. Termination of this Agreement shall not affect any duty of PPI
or SANO existing prior to the effective date of termination or expiration
and which is, whether or not by expressed terms, intended to survive
termination. Without limiting the generality of the foregoing, termination
shall not affect any duty to keep confidential any Confidential Information
(within the meaning of Section 14.4 hereof) disclosed by one party to the
other (or its Affiliate) as contemplated in Section 14.4 hereof, but rather
such Confidential Information shall be held by the receiving party subject
to such restrictions on use and disclosure as provided in the said Section.
13.10 Upon termination of this Agreement by PPI pursuant to Section
13.2 or 13.7 or pursuant to Section 13.4 as a result of SANO's inability to
perform its obligations hereunder or becoming an Ineligible Person or the
termination of this Agreement by SANO pursuant to Section 13.5 hereof, SANO
shall, at the request of PPI, repurchase all Licensed Products then in the
possession, custody or control of PPI and available for sale (and which
have not been adulterated since they were made available for pick up by
PPI) and all
packaging material in the possession, custody or control of PPI which were
specifically acquired by PPI for these Licensed Products and which cannot
be used by PPI or its Affiliates for any other products sold by any of
them, at the price originally paid by PPI therefor plus all transportation
costs previously incurred (even if not yet paid) by PPI payable in cash on
delivery by PPI to SANO. SANO shall pay all transportation costs
associated with shipping the repurchased Licensed Product to SANO or to
such other places SANO may require.
13.11 In the event that this Agreement is terminated pursuant to the
provisions of Section 13.4 hereof as a result of a party (herein referred
to as the "Prohibited Party") being unable to perform its obligations
hereunder as therein contemplated or having become (or its Affiliate having
become) an Ineligible Person and within twelve (12) months of the effective
date of termination of this Agreement the Prohibited Party is again able to
perform its obligations hereunder or has ceased (or its Affiliate has
ceased) to be an Ineligible Person, then the Prohibited Party shall, by
notice in writing, advise the other party (herein referred to as the
"Receiving Party") that it is no longer legally prohibited from performing
its duties and obligations hereunder or that it has ceased (or that its
Affiliate has ceased) to be an Ineligible Person and the Receiving Party
shall have the right, to be exercised by notice in writing given to the
Prohibited Party within thirty (30) days of receipt of the aforesaid
notice from Prohibited Party, to reinstate this Agreement; provided,
however, that if the Prohibited Party is PPI then SANO shall have the right
to reinstate this Agreement as if a proper notice had been given pursuant
to Section 13.8 of this Agreement and PPI shall be reinstated on a non-
exclusive basis, but only to the extent that such reinstatement will not
violate the provisions of any agreement SANO shall have entered into during
the period PPI was a Prohibited Party.
13.12 If SANO terminates this Agreement pursuant to Section 13.2,
13.3 and 13.7 hereof then PPI shall not and shall cause its Affiliates not
to, for a period of twelve (12) months following the effective date of
termination, sell in the United States any Competitive Product.
13.13 In the event that SANO terminates this Agreement pursuant to
Section 13.5 hereof, SANO shall, at the request of PPI, make available to
PPI within a reasonable period of time of such termination, such number of
units of each Licensed Product as shall be equal to the net number of units
of such Licensed Product sold by PPI during the entire contract year
immediately preceding the year in which this Agreement is so terminated or
such lesser number of units of each such Product as PPI shall advise SANO
in writing within ten business days of such termination. Such Licensed
Products shall be made available to PPI in accordance with the provisions
of this Agreement and the provisions of this Agreement shall apply to all
such Licensed Products as if such Licensed Products had been supplied by
SANO during the term of this Agreement.
13.14 If SANO has not received at least one approval of an ANDA for a
Licensed Product prior to November 30, 1996, PPI may terminate this
Agreement and neither party shall have any obligation hereunder (other than
applicable confidentiality provisions).
ARTICLE XIV
RECALLS, ADMINISTRATIVE MATTERS AND CONFIDENTIALITY
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14.1 Recalls. In the event that it becomes necessary to conduct a
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recall, market withdrawal or field correction (hereafter collectively
referred to as "recall") of any Product manufactured by SANO and sold by
PPI or its Affiliates the following provisions shall govern such a recall:
(a) After consulting with SANO, and on terms and conditions
reasonably satisfactory to SANO, PPI shall conduct (and shall cause its
Affiliate to conduct) the recall and shall have primary responsibility
therefore and SANO and PPI shall each cooperate with the other in recalling
any affected Licensed Product(s). PPI covenants and agrees to maintain and
to cause its Affiliates to maintain such records of all sales of the
Products made by PPI or its Affiliates as are required by the FDA or as are
reasonably appropriate for a distributor of pharmaceutical products to
maintain so as to enable a recall to be properly completed.
(b) Irrespective of whether the recall is initiated by PPI or by
SANO:
(i) If it is later demonstrated that the reason for the
recall was due primarily to acts or omissions of SANO (or the safety
or efficacy of the Licensed Product other than as a result of acts or
omissions of PPI or its Affiliates), then SANO shall pay or reimburse,
as the case may be, all reasonable direct out-of-pocket expenses,
including but not limited to reasonable attorney's fees and expenses
and credits and recall expenses claimed by and paid to customers,
incurred by PPI or SANO in connection with performing any such recall,
provided that expenses incurred by PPI shall be in accordance with the
terms and conditions of the recall approved by SANO; or
(ii) If it is later determined that the reason for the
recall was due primarily to the acts or omissions of PPI or its
Affiliates, then PPI shall pay or reimburse, as the case may be, all
direct out-of-pocket expenses, including but not limited to reasonable
attorney's fees and expenses and credits and recall expenses claimed
by and paid to customers, incurred by PPI or SANO in connection with
performing any such recall; or
(iii) If the parties are unable to agree that the cause of
the recall was due primarily
to the act or omission of one of the parties (or its Affiliates, as
the case may be) within sixty days of the initiation of the recall and
have not commenced arbitration proceedings to resolve such dispute
within such sixty day period then all direct out-of-pocket costs
incurred by PPI and SANO, including but not limited to reasonable
attorney's fees and expenses and credits and recall expenses claimed
by and paid to customers, shall be shared by the parties in proportion
to their sharing of Gross Profits in respect of the Licensed Products
recalled.
Each of the parties shall use its reasonable best efforts to minimize the
expenses of recall which it incurs. It is understood and agreed that the
direct out-of-pocket costs and expenses of the recall contemplated in
Paragraphs (i), (ii) and (iii) above shall not include the invoice price
charged by PRI or its Affiliates to the customers for the Products
recalled, which amount shall be dealt with in accordance with the
provisions of Section 9 hereof and shall also not include any excess re-
procurement costs (within the meaning of Paragraph 14.3 hereof) and related
penalties and assessments, which costs, penalties and assessments shall be
an expense of PPI except to the extent that it is an expense of SANO
pursuant to Section 14.3 hereof (provided that where the provisions of
Paragraph (iii) above apply, the excess reprocurement costs and related
penalties and assessments incurred pursuant to Approved Contracts [as that
term is defined in Section 14.3 hereof] shall be shared by the parties in
the proportion in which Gross Profits are shared in respect of the recalled
Products sold pursuant to such Approved Contracts).
(c) All Licensed Products recalled pursuant to this Section 14.1
shall be treated as Licensed Products returned to PPI by its customers and
the provisions of Section 9 shall apply thereto.
(d) The party initiating the recall shall inform FDA of the
proposed recall; however, nothing contained herein shall preclude either
party from informing FDA of any proposed or actual recall by either party
should the recalling party fail to inform FDA of that recall within ten
(10) days of a written request by the non-recalling party to so inform FDA.
(e) For greater certainty, in the event of a recall, neither
party or its Affiliates shall profit from any out-of-pocket expenses
incurred by it in connection with the recall and for which it is reimbursed
by the other party and, except where the recall relates directly to an
intentional breach of a representation or warranty contained in this
Agreement or arises directly out of a wilful material breach by a party of
any of its duties or obligations hereunder (in each case, as contemplated
in Section 10.1 hereof), neither party shall have a claim against the
other party for any damages, losses or expenses which it suffers or incurs
as a result thereof except to the extent permitted or contemplated in this
Section 14.
(f) Each party shall provide reasonable evidence to the other of
the out-of-pocket expenses being claimed by it and the rights of SANO
pursuant to Section 11.4 and the rights of PPI pursuant to Section 11.8
shall apply thereto.
14.2 ANDA-Related FDA Correspondence. Each of the parties shall
-------------------------------
provide the other with a copy of any correspondence or notices received by
such party from FDA relating or referring to the Licensed Product(s) within
ten (10) days of receipt. Each party shall also provide the other with
copies of any responses to any such correspondence or notices within ten
(10) days of making the response.
14.3 Excess Re-procurement Costs.
---------------------------
(a) In the event that a recall occurs which recall was
necessitated primarily by any act or omission of SANO and SANO does not
supply PPI with replacement Licensed Product on a timely basis or if SANO,
in breach of its obligations under this Agreement, fails to make Licensed
Product(s) available to PPI, SANO shall, in addition to any reimbursement
required under Section 14.1, pay any excess re-procurement costs and/or
related penalties or assessments incurred by, or assessed on, PPI by a
customer of PPI pursuant to an Approved Contract (as that term is defined
below) due to PPI's inability to supply Licensed Product(s) to such
customer due to the aforesaid acts, omissions or breaches of SANO.
(b) SANO shall cooperate with PPI with respect to any legal or
administrative proceedings that arise pursuant to the Approved Contracts as
a result of PPI's inability to supply Licensed Product(s) to such customer
due to the aforesaid acts, omissions or breaches by SANO. The foregoing
shall be without prejudice to any other damages, expense or costs that PPI
may have suffered in connection with SANO's inability to supply the
Licensed Product as aforesaid, subject to the limitations and other
provisions set forth in this Agreement.
(c) For purposes hereof the term "Approved Contract" shall mean a
contract entered into by PPI on or after the Execution Date with one of its
customers:
(i) pursuant to which PPI agrees to supply such customer
with pharmaceutical products which include the Licensed Products (or
any of them), and which provides that if PPI fails to supply such
customer with the Licensed Product in accordance with specified terms
and conditions therein set forth then such customer shall have the
right to procure a comparable replacement product for the Licensed
Product in substitution for the Licensed Products that PPI has failed
to supply to such customer in accordance with the provisions of its
agreement and to charge back to PPI any costs and expenses incurred by
such customer to acquire such comparable replacement product in excess
of the
price which was to have been charged by PPI to the customer for the
Licensed Products which it failed to provide (such excess costs and
expenses being the excess re-procurement costs contemplated in Section
14.1 and in this Section 14.3);
(ii) which has a term of twelve (12) months or less; and
(iii) which provides for the supply of the relevant
Licensed Product in an amount not greater than the amount forecast by
PPI pursuant to Section 6.2 hereof, taking into account all other
sales of the Licensed Product in the relevant period; or
(iv) where the contract has a term of more than 12 months,
or provides for an amount greater than that contemplated by Paragraph
(iii) above, SANO has approved or has been deemed to have approved
such contract in accordance with the provisions of Section 14.3(v)
hereof; or
(v) if the approval of SANO as contemplated in Paragraph
(iv) above is requested, PPI shall have provided to SANO, in
accordance with the provisions of this paragraph, a complete copy of
the proposed final agreement between PPI and its customer prior to
entering into such contract. A copy of any contract to be provided to
SANO as contemplated in this Paragraph (v) shall be forwarded to SANO
in the manner contemplated in Section 15.4 hereof. SANO shall have a
period of ten business days from the date upon which copies of such
contract are actually received by it as aforesaid to notify PPI in
writing that it does not approve of the contract and failing such
notice from SANO within such ten business day period SANO shall be
deemed to have approved of such contract.
14.4 Confidentiality.
---------------
(a) The parties agree that, without the prior written consent of
the other party (such consent not to be unreasonably withheld) or except as
may be required under law or court order, the provisions of the Agreement
shall remain confidential and shall not be disclosed to any Person not
affiliated with any of the parties.
(b) PPI and SANO hereby agree not to reveal or disclose any
Confidential Information (as defined below) to any Person without first
obtaining the written consent of the disclosing party, except as may be
necessary in regulatory proceedings or litigation. For purposes hereof
Confidential Information shall mean all information, in whatever form,
which is or was disclosed by one party to another or to an Affiliate of
the other prior to or during the term of this Agreement and which relates
in any way to the Products or to
the business of the disclosing party, including, without limitation
information relating to customers and pricing. Confidential Information
shall not include information that a party can demonstrate by written
evidence:
(i) is in the public domain (provided that information in
the public domain has not and does not come into the public domain as
a result of the disclosure by the receiving party or any of its
Affiliates);
(ii) is known to the receiving party or any of its
Affiliates prior to the disclosure by the other party; or
(iii) becomes available to the party on a non-confidential
basis from a source other than an Affiliate of that party or the
disclosing party and PPI covenants and agrees to cause its Affiliates
to comply with the provisions of this Section 14.4.
ARTICLE XV
GENERAL TERMS AND CONDITIONS
----------------------------
15.1 Force Majeure Clauses. Neither party shall be considered to be
---------------------
in default in respect of any obligation hereunder, other than the
obligation of a party to make payment of amounts due to the other party
under or pursuant to this Agreement, if failure of performance shall be due
to Force Majeure. If either party is affected by a Force Majeure event,
such party shall, within 20 days of its occurrence, give notice to the
other party stating the nature of the event, its anticipated duration and
any action being taken to avoid or minimize its effect. The suspension of
performance shall be of no greater scope and not longer duration than is
required and the non-performing party shall use its reasonable best efforts
to remedy its inability to perform. The obligation to pay money in a
timely manner is absolute and shall not be subject to the Force Majeure
provisions, except to the extent prohibited by governmental rule or
regulations other than rules or regulations incident to bankruptcy or
insolvency proceedings of a party. Force Majeure shall mean an
unforeseeable or unavoidable cause beyond the control and without the fault
or negligence of a party (and, where the party is PPI, beyond the control
and without the fault or negligence of any of its Affiliates) including,
but not limited to, explosion, flood, war (whether declared or otherwise),
accident, labor strike, or other labor disturbance, sabotage, acts of God,
newly enacted legislation, newly issued orders or decrees of any Court or
of any governmental agency. Notwithstanding anything in this Section to
the contrary, the party to whom performance is owed but to whom it is not
rendered because of any event of Force Majeure as contemplated in this
Section 15.1 shall, after the passage of one hundred and twenty days, have
the option to terminate this Agreement on
thirty days prior written notice to the other party hereto. For greater
certainty, the inability or failure of PPI to cause any of its respective
Affiliates to comply with any of the provisions of this Agreement expressed
to be applicable to its Affiliates or which require such party to cause
the Affiliate to do or not to do something shall not be considered Force
Majeure unless the Affiliate in question is unable to comply by reason of
unforeseeable or unavoidable causes beyond the control and without the
fault or negligence of such Affiliate.
15.2 Arbitration. All disputes arising out of, or in relation to,
-----------
this Agreement (other than disputes arising out of any claim by a third
party in an action commenced against a party), shall be referred for
decision forthwith to a senior executive of each party not involved in the
dispute. If no agreement can be reached through this process within thirty
days of request by one party to the other to nominate a senior executive
for dispute resolution, then either party hereto shall be entitled to refer
such dispute to a single arbitrator for arbitration under Florida law, such
arbitration to be held in Miami, Florida on an expedited basis in
accordance with the rules and regulations of the American Arbitration
Association. Any party demanding arbitration shall with service of its
demand for arbitration propose a neutral arbitrator selected by it. In the
event that the parties cannot agree upon a neutral arbitrator within thirty
(30) days after the demand for arbitration, an arbitrator shall be
appointed by the American Arbitration Association who shall be a partner in
a Miami, Florida law firm having at least ten (10) partners.
15.3 Assignment. This Agreement may not be assigned nor can the
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performance of any duties hereunder be delegated by PPI or by SANO without
the prior written consent of the other parties, which consent shall not be
unreasonably withheld; provided that any such assignment shall not relieve
the assignor from any of its obligations hereunder or under any other
document or agreement delivered by such party pursuant to, or delivered (or
acknowledged to have been delivered) contemporaneously with or in
connection with the execution of, this Agreement, which shall continue to
be binding upon such party notwithstanding such assignment.
Notwithstanding the foregoing, PPI may delegate from time to time some of
its duties hereunder to any of its Affiliates provided that, prior to any
such delegation, it gives written notice thereof to SANO (indicating the
duties being so delegated and the duration of such delegation); provided
that no such delegation shall relieve PPI from any of its obligations
hereunder in respect of the duties being delegated or otherwise.
15.4 Notices. Any notice required or permitted to be given under this
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Agreement shall be sufficiently given if in writing and delivered by
registered or certified mail (return receipt requested), facsimile (with
confirmation of transmittal), overnight courier (with confirmation of
delivery), or hand delivery to the appropriate party at the address set
forth below, or to such other address as such party may from time to time
specify for that purpose in a notice similarly given:
If to SANO:
SANO Corporation
1700 N. W. 65th Avenue
Suite 13
Plantation, Florida 33313
Attn: President
Fax: 305-587-9909
with a copy to (other than regularly prepared notices, reports,
etc. required to be delivered hereunder):
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Gary Epstein, Esq.
Fax: 305-579-0717
If to PRI
c/o PRI Distributors, Ltd.
One Ram Ridge Road
Spring Valley, NY 10977
Attn: President
Fax: 914-425-7922
with a copy to (other than regularly prepared notices, reports,
etc. required to be delivered hereunder):
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Attn: Stephen A. Ollendorff, Esq.
Fax: (212) 213-1199
Any such notice shall be effective (i) if sent by mail, as aforesaid, five
business days after mailing, (ii) if sent by facsimile, as aforesaid, when
sent, and (iii) if sent by courier or hand delivered, as aforesaid, when
received. Provided that if any such notice shall have been sent by mail
and if on the date of mailing thereof or during the period prior to the
expiry of the third business day following the date of mailing there shall
be a general postal disruption (whether as a result of rotating strikes or
otherwise) in the United States then such notice shall not become effective
until the fifth business day following the date of resumption of normal
mail service.
15.5 Governing Law and Consent to Jurisdiction.
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(a) Except as otherwise provided herein, this Agreement shall be
deemed to have been made under, and shall be governed by, the laws of the
State of Florida in all respects including matters of construction,
validity and performance, but without giving effect to Florida's choice of
law provisions.
(b) In connection with any action commenced hereunder, each of
the undersigned consent to the jurisdiction of the state and federal courts
located in Miami, Florida. Notwithstanding the foregoing,
each party also agrees to the jurisdiction of any court in which any third
party claim may be brought.
15.6 Binding Agreement. This Agreement shall be binding upon the
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parties hereto, and their respective successors and permitted assigns.
15.7 Entire Agreement. This Agreement and all other documents and
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instruments delivered by any of the parties or their Affiliates pursuant
hereto or in connection with the execution and delivery of this Agreement
contain the entire agreement and understanding of the parties with respect
to the subject matter hereof and thereof and supersedes all negotiations,
prior discussions and agreements relating to the Licensed Products or the
Right. This Agreement may not be amended or modified except by a written
instrument signed by all of the parties hereto.
15.8 Headings. The headings to the various articles and paragraphs of
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this Agreement have been inserted for convenience only and shall not affect
the meaning of the language contained in this Agreement.
15.9 Waiver. The waiver by any party of any breach by another party
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of any term or condition of this Agreement shall not constitute a waiver of
any subsequent breach or nullify the effectiveness of that term or
condition.
15.10 Counterparts. This Agreement may be executed in identical
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duplicate copies. The parties agree to execute at least two identical
original copies of the Agreement. Each identical counterpart shall be
deemed an original, but all of which together shall constitute one and the
same instrument.
15.11 Severability of Provisions. If, for any reason whatsoever, any
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term, covenant or condition of this Agreement or of any other document or
instrument executed and delivered by either PPI or SANO pursuant hereto or
in connection with the completion of the transaction contemplated herein,
or the application thereof to any party or circumstance is to any extent
held or rendered invalid, unenforceable or illegal, then such term,
covenant or condition:
(i) is deemed to be independent of the remainder of such
document and to be severable and divisible therefrom and its validity,
unenforceability or illegality does not affect, impair or invalidate
the remainder of such document or any part thereof; and
(ii) continue to be applicable and enforceable to the
fullest extent permitted by law against any party and circumstances
other than those as to which it has been held or rendered invalid,
unenforceable or illegal.
15.12 Publicity. Neither party shall issue any press release or
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other public statement regarding, or disclosing the existence of, this
Agreement without the prior written consent of the other party; provided,
however, that neither party shall be prevented from complying with any
disclosure obligation it may have under applicable law. The parties shall
use their best efforts to agree on the form and content of any such public
statement.
ARTICLE XVI
GUARANTEE OF PRI
16.1 Guarantee. PRI does hereby unconditionally guarantee to SANO the
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full and prompt payment and performance by PPI of all of the obligations of
every nature whatsoever to be performed by PPI under this Agreement (the
"Guaranteed Obligations") as and when required to be paid or performed
under this Agreement. The guarantee set forth in the preceding sentence
(this "Guarantee") is an absolute, unconditional and continuing guarantee
of the full and punctual payment and performance of the Guaranteed
Obligations and is in no way conditioned upon any requirement that SANO
first attempt to enforce any of the Guaranteed Obligations against PPI, any
other guarantor of the Guaranteed Obligations or any other Person or resort
to any other means of obtaining performance of any of the Guaranteed
Obligations. This Guarantee shall continue in full force and effect until
PPI shall have satisfactorily performed or fully discharged all of the
Guaranteed Obligations. No performance or payment made by PPI, PRI, any
other guarantor or any other Person, or received or collected by SANO from
PPI, PRI, any other guarantor or any other Person in performance of or in
payment of the Guaranteed Obligations shall be deemed to modify, reduce
(except to the extent that any such performance or payment shall reduce the
Guaranteed Obligations), release or otherwise affect the liability of PRI
under this Guarantee which shall, notwithstanding any such payment or
performance other than those made by PRI in respect of the Guaranteed
Obligations or those received or collected from PRI in respect of the
Guaranteed Obligations, remain liable for the amount of the Guaranteed
Obligations, until the Guaranteed Obligations are paid and performed in
full.
16.2 No Subrogation. Notwithstanding any payment or performance by
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PRI, PRI shall not be entitled to be subrogated to any of the rights of
SANO or any other guarantor or any collateral security held by SANO
against PPI or any other guarantor or any collateral security for the
payment of the Guaranteed Obligations, nor shall PRI seek or be entitled to
seek any contribution or reimbursement from PPI or any other guarantor in
respect of payments made by PRI under this Guarantee. PRI HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVERS ANY AND ALL RIGHTS AND CLAIMS WHICH
PRI MAY NOW HAVE OR HEREAFTER ACQUIRE TO BE SUBROGATED TO ANY SUCH RIGHTS
OF SANO AND TO SEEK
OR BE ENTITLED TO SEEK ANY SUCH CONTRIBUTION OR REIMBURSEMENT FROM PPI OR
ANY OTHER GUARANTOR. THE OBLIGATIONS OF AND WAIVERS BY PRI SET FORTH IN
THIS SECTION 16.2 SHALL SURVIVE THE TERMINATION OF THIS GUARANTEE AND THE
PAYMENT, PERFORMANCE AND SATISFACTION IN FULL OF ALL OF THE GUARANTEED
OBLIGATIONS.
16.3 Amendments, etc with Respect to Guaranteed Obligations; Waiver of
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Rights. PRI shall remain obligated under this Guarantee notwithstanding
- - - - - - - ------
that, without any reservation of rights against PRI and without notice to
or further assent by PRI, any demand for payment or performance of any of
the Guaranteed Obligations made by SANO may be rescinded by SANO and any of
the Guaranteed Obligations continued, and the Guaranteed Obligations, or
the liability of any other Person upon or for any part thereof, or any
collateral security (or guarantee therefor may, from time to time, in whole
or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by SANO and this Agreement,
any collateral security document or other guarantee or document in
connection herewith may be amended, modified, supplemented or terminated,
in whole or in part, as SANO may deem advisable from time to time, and any
collateral security or guarantee at any time held by SANO for the payment
or performance of the Guaranteed Obligations may be sold, exchanged,
waived, surrendered or released. SANO shall not have any obligation to
protect, secure, perfect or insure any lien at any time held by it as
security for the Guaranteed Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against PRI,
SANO may, but shall be under no obligation to, make a similar demand on PPI
or any other guarantor, and any failure by SANO to make any such demand or
to collect any payments from PPI or any such other guarantor or any release
of PPI or such other guarantor shall not relieve PRI of its obligations or
liabilities under this Guarantee, and shall not impair or affect the rights
and remedies, express or implied, or as a matter of law, of SANO against
PRI.
16.4 Extent of Liability and Waivers. PRI understands and agrees that
-------------------------------
the obligation of guarantee of PRI pursuant to Section 16.1 are intended to
render PRI liable hereunder in each instance where PPI would be liable
under this Agreement, and no more, and except that the obligations of PRI
hereunder shall not be discharged by any bankruptcy or similar proceeding
which may discharge PPI herefrom. Accordingly, PRI acknowledges that it
will not assert, and hereby waivers to the fullest extent permitted by law,
any rights to avoid performance hereunder available to it as guarantor
which are not also available to PPI. PRI waivers any and all notice of the
creation, renewal, extension or accrual of any of the Guaranteed
Obligations and notice of or proof of reliance by SANO upon this Guarantee
or acceptance of this Guarantee; the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived,
in reliance upon this Guarantee; and all dealings between PPI or PRI, on
the one hand, and SANO on the other, pursuant to this Agreement shall
likewise be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. PRI waivers diligence, presentment, protest,
demand for payment and notice of default or nonpayment or nonperformance to
or upon PPI or any other guarantors with respect to the Guaranteed
Obligations. When pursuing its rights and remedies hereunder against PRI,
SANO may, but shall be under no obligation to, pursue such rights and
remedies as it may have against PPI or any other Person or against any
collateral security or guarantee for the Guaranteed Obligations, and any
failure by PRI to pursue such other rights or remedies or to collect any
payments from PPI or any such other Person or to realize upon any such
collateral security or guarantee, or any release of PPI or any such other
Person or any such collateral security or guarantee, shall not relieve PRI
of any liability hereunder and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of SANO
against PRI. This Guarantee shall remain in full force and effect and be
binding upon PRI and its successors and assigns and shall inure to the
benefit of SANO and its successors and assigns, until all the Guaranteed
Obligations shall have been satisfied by payment and performance in full.
16.5 Reinstatement. This Guarantee shall continue to be effective, or
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be reinstated, as the case may be, if at any time payment or performance,
or any part thereof, of any of the Guaranteed Obligations is rescinded or
must otherwise be restored or returned by SANO upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of PPI or PRI, or
upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, PPI or PRI, or any
substantial part of its or their property, or otherwise, all as though such
payments had not been made.
16.6 No Waiver; Cumulative Remedies. SANO shall not by any act
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(except by a written instrument pursuant to Section 15.7), delay,
indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any breach of any of the terms
and conditions of this Agreement. No failure to exercise, nor any delay in
exercising, on the part of SANO, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by SANO of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the SANO would
otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any
rights or remedies provided by law.
16.7 Affiliates. To the extent that PPI or PRI is obligated hereunder
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to cause its Affiliates to do or refrain from doing anything, PRI will do
all things that it may lawfully and reasonably do to cause such Affiliate
to comply.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the Execution Date.
SANO CORPORATION
By:
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(Signature)
Name:
----------------------------
Title:
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PHARMACEUTICAL RESOURCES, INC.
By:
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(Signature)
Name:
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Title:
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PAR PHARMACEUTICAL, INC.
By:
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(Signature)
Name:
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Title:
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