Exhibit 10.11
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ASSIGNMENT, TRANSFER AND ASSUMPTION AGREEMENT
This ASSIGNMENT, TRANSFER AND ASSUMPTION AGREEMENT (the "Agreement") is
entered into as of February 18, 2002 (the "Effective Date"), by and between
NEOSAN PHARMACEUTICALS INC. ("NeoSan"), a corporation organized and existing
under the laws of the State of Delaware with offices located at 2320 Scientific
Park Drive, Wilmington, NC 28409, and ELI LILLY AND COMPANY ("Lilly"), a
corporation organized and existing under the laws of the State of Indiana with
offices located at Lilly Corporate Center, Indianapolis, Indiana 46285. NeoSan
and Lilly are sometimes referred to herein individually as a "Party" and
collectively as "Parties".
RECITALS
WHEREAS, subject to the terms and conditions set forth in this Agreement,
Lilly and NeoSan desire to enter into an agreement pursuant to which: (i) Lilly
will sell or license to NeoSan, and NeoSan will purchase or license from Lilly,
certain promotional materials, new drug applications, copyrights, trade dress,
technology and trademarks owned by Lilly or its Affiliates, as set forth below,
(ii) NeoSan will license to Lilly (or Lilly will reserve) certain rights under
the new drug applications, technology, copyrights, trade dress, trademarks and
other assets purchased by or licensed to NeoSan to be used by Lilly to
manufacture Product for NeoSan under the Manufacturing Agreement, and (iii)
NeoSan will assume certain liabilities associated with the rights transferred
herein, each in accordance with the terms and conditions set forth herein; and
WHEREAS, Lilly and NeoSan desire to enter into a separate manufacturing
agreement of even date herewith (the "Manufacturing Agreement") whereby Lilly
will manufacture certain presentations of Product on behalf of NeoSan.
NOW, THEREFORE, in consideration of the foregoing, the covenants and
promises contained in this Agreement, and other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, Lilly and NeoSan
agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms will have the meanings
set forth below:
1.1 "ACTION OR PROCEEDING" means any action, suit, proceeding, arbitration,
inquiry, hearing, assessment with respect to fines or penalties, or
litigation (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental or Regulatory Authority.
1.2 "ACTIVITIES" means the manufacturing, packaging, marketing, distribution,
promoting, co-marketing, co-promoting and selling of the Product as
conducted by Lilly in the United States on or before the Closing Date.
1.3 "AFFILIATES" means, with respect to a Party, any Persons directly or
indirectly controlling, controlled by, or under common control with, such
Party. For purposes of this definition, a Person has control of another
Person if it has the direct or indirect ability or power to direct or cause
the direction of management policies of such other Person or otherwise
direct the affairs of such other Person, whether through ownership of at
least fifty percent (50%) of the voting securities of such other Person, by
contract or otherwise.
1.4 "APPLICABLE LAWS" means all applicable laws, ordinances, rules,
regulations, writs, judgments, decrees, injunctions (whether preliminary or
final), orders and other requirements of any kind whatsoever of any
Governmental or Regulatory Authority, including all laws, ordinances, rules
and regulations promulgated by the World Health Organization and the FDA,
including cGMP (as defined in the Manufacturing Agreement).
1.5 "ASSIGNED TRADE DRESS" means any unique appearance, look, shape, size or
color of the Product marketed by Lilly or its Affiliates as of the
Effective Date other than the Licensed Trademark and Trade Dress.
1.6 "ASSIGNED TRADEMARKS" means the trademarks listed in SCHEDULE 1.6 attached
hereto, and all amendments thereto. For avoidance of doubt, the Assigned
Trademarks do not include the Assigned Trade Dress or Licensed Trademarks
and Trade Dress.
1.7 "ASSUMED LIABILITIES" will have the meaning set forth in Article 10.
2
1.8 "BASE YEAR'S AVERAGE QUARTERLY NET SALES" means fifteen million eight
hundred thousand US dollars ($15,800,000). For any partial Calendar Quarter
in which a NeoSan New Product is sold, the Base Year's Average Quarterly
Net Sales for such Calendar Quarter with respect to such NeoSan New Product
means the product of (a) fifteen million eight hundred thousand U.S.
dollars ($15,800,000) multiplied by (b) the quotient of the number of days
in such partial Calendar Quarter divided by ninety (90) days.
1.9 "B OF A" will have the meaning set forth in Section 6.25.
1.10 "BOND OFFERING" will have the meaning set forth in Section 6.25.
1.11 "BOND FINANCING HIGHLY-CONFIDENT LETTER" will have the meaning set forth in
Section 6.25.
1.12 "BOOKS AND RECORDS" means all files, documents, instruments, papers, books
and records (including scientific, regulatory and financial) owned by Lilly
or an Affiliate of Lilly to the extent, and only to the extent, they are
significantly related to the Purchased Assets (including the Products or
the manufacture, marketing, promotion, sale or distribution thereof),
including any sales records, pricing lists, customer lists (to the extent
owned by Lilly or its Affiliates), vendor lists, financial data, regulatory
information or files (including adverse event reports and annual regulatory
reports), litigation files, patent prosecution files, adverse claims or
demands, investigation information or files, trademark registration
certificates, trademark renewal certificates.
1.13 "CALENDAR QUARTER" means the three month period ending on March 31, June
30, September 30, or December 31. The initial Calendar Quarter will be
deemed to begin on the Closing Date and end on the first to occur of March
31, June 30, September 30 or December31.
1.14 "CALENDAR YEAR" means the twelve (12) month period ending on December 31st.
The initial Calendar Year will be deemed to begin on the Closing Date and
end on December 31, 2002.
1.15 "CLOSING DATE" will have the meaning set forth in Section 7.3(a).
1.16 "COMBINATION PATENTS" will have the meaning set forth in Section 3.7.
1.17 "COMMON LAW LICENSED TRADE DRESS" means the rights to the appearance, look,
shape or size (but not color) of the parabaloidal capsule as it relates to
the Product in the United States.
3
1.18 "CONFIDENTIAL INFORMATION" means information received (whether disclosed in
writing, machine readable form, orally or by observation) by one Party (the
"Receiving Party") from the other Party (the "Disclosing Party") that the
Receiving Party has a reasonable basis to believe is confidential to the
Disclosing Party or is treated by the Disclosing Party as confidential,
unless such information:
(a) was known to the Receiving Party or its Affiliates prior to
receipt from the Disclosing Party, as documented in written records or
publications, that lawfully are in the possession of the Receiving Party or
its Affiliates;
(b) was lawfully available to the trade or to the public prior to
receipt from the Disclosing Party;
(c) becomes lawfully available to the trade or to the public after
receipt from the Disclosing Party through no act on the part of the
Receiving Party or its Affiliates;
(d) is obtained by the Receiving Party or its Affiliates from any
Third Person without an obligation of confidentiality; or
(e) is independently developed by an employee, contractor or agent of
the Receiving Party or its Affiliates, subsequent to and without access or
reference to the information received from the Disclosing Party, as
demonstrated by contemporaneous written records.
Notwithstanding the foregoing, (i) where a Disclosing Party discloses
Confidential Information relating to an asset of such Disclosing Party to
the Receiving Party, and the Receiving Party is or later becomes the owner
of the asset, the Confidential Information then will be deemed to be
Confidential Information of the Receiving Party, and the Disclosing Party
may disclose and use such Confidential Information only in accordance with
Article 8, below, provided, however, that where such Confidential
Information was originally owned by Lilly, Lilly may use such Confidential
Information for, and disclose such Confidential Information in connection
with, the Permitted Uses without the prior written consent of NeoSan, and
(ii) with respect to Confidential Information related to the Licensed
Technology and Licensed Trademark and Trade Dress, NeoSan may use and
disclose such Confidential Information without the prior written consent of
Lilly.
1.19 "CONTRACT" means any and all legally binding commitments, contracts,
purchase orders, leases, or other agreements, whether written or oral.
4
1.20 "COPYRIGHTS" means all of Lilly's copyright rights listed in SCHEDULE 1.20
attached hereto, and any and all package inserts (excluding any Lilly-owned
trademarks, logos or designs or trademarks, logos or designs licensed by
Lilly other than those trademarks, logos or designs expressly assigned or
licensed to NeoSan pursuant to the terms hereof), which are or were used or
exercised by Lilly or its Affiliates in connection with the Activities or
the Product.
1.21 "DAMAGES" means any and all costs, losses, claims, demands for payment,
threatened government enforcement actions, liabilities, fines, penalties,
expenses, court costs, and reasonable fees and disbursements of counsel,
consultants and expert witnesses incurred by a Party hereto or its
Affiliates (including interest which may be imposed in connection
therewith).
1.22 "DEA" means the United States Drug Enforcement Agency, and any successor
agency or entity thereto that may be established hereafter.
1.23 "DEDUCTIBLE AMOUNT" will have the meaning set forth in Section 11.4.
1.24 "EFFECTIVE DATE" will have the meaning set forth in the first paragraph of
this Agreement.
1.25 "ENCUMBRANCE" means any mortgage, pledge, assessment, security interest,
deed of trust, lease, lien, adverse claim, levy, charge or other
encumbrance, third-party right or retained right of any kind, or any
conditional sale or title retention agreement or other agreement to give
any of the foregoing in the future.
1.26 "EXCLUDED LIABILITIES" means all Obligations of Lilly and its Affiliates
other than Assumed Liabilities, including:
(a) any Obligations arising out of any claims by the FDA, DEA or any
other government entity or regulatory body that Lilly has failed to fulfill
Lilly's regulatory obligations in connection with the NDAs prior to the
Closing Date (except to the extent that such Damages arise out of any
action or inaction on the part of NeoSan);
(b) any Obligations arising out of the manufacture, marketing or sale
of the Product prior to the Closing Date; and
(c) any Obligations that Lilly expressly covenants and agrees to
perform pursuant to the provisions of this Agreement or the Manufacturing
Agreement.
1.27 "EXPIRED TRADEMARKS" will have the meaning set forth in Section 4.1.
5
1.28 "FDA" means the United States Food and Drug Administration, and any
successor agency or entity thereto that may be established hereafter.
1.29 "GOVERNMENTAL OR REGULATORY AUTHORITY" means any United States federal,
state or local governmental or regulatory authority, agency, commission,
court or instrumentality, including the FDA.
1.30 "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
Section 7A of the Clayton Act, 15 U.S.C. Section 18a, as amended.
1.31 "IMPLEMENTATION TEAM" will have the meaning set forth in Section 6.1.
1.32 "INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" will have the meanings set
forth in Section 11.3.
1.33 "INTELLECTUAL PROPERTY" will have the meaning set forth in Section 4.1.
1.34 "KNOW-HOW" means all of the following to the extent pertaining to Product
as of the Closing Date and any pending or terminated analogs, derivatives,
improvements or variations thereon as of the Closing Date and the
manufacture, promotion, marketing, sale, use or importation of the
foregoing (except to the extent specifically and exclusively related to the
Combination Patents) as of the Closing Date: specifications; tangible or
intangible manufacturing, physical chemistry and formulation know-how;
analytical testing methods and validations; technical knowledge; expertise;
skill; practices and procedures; formulae; tangible or intangible trade
secrets; inventions (whether or not patentable); ideas; conceptions;
reductions-to-practice; confidential and/or proprietary information;
analytical methodology; processes (including any portion, step and
component of such processes); methods; preclinical, clinical, stability and
other data and results; chemical samples or substances; market studies; and
all other experience and know-how, whether or not patentable, provided that
nothing in this Agreement will require Lilly to locate or review the files
or records specifically pertaining to the Combination Patents or the
combination products covered thereby for potential Know-How and provided
further that, subject to the limitations set forth in Section 3.2, the
foregoing exclusion with respect to the Combination Patents will not
preclude NeoSan or its Affiliates or permitted sublicensees or assignees
from utilizing the Know-How licensed or transferred hereunder with respect
to their own combination pharmaceutical products that do not infringe the
Combination Patents.
6
1.35 "LICENSED TECHNOLOGY" means all Know-How which have been issued, filed,
developed, created, made, used or acquired on or before the Closing Date by
Lilly or its Affiliates, to the extent such Know-How are used by Lilly in
connection with the development, manufacture, use or sale of the Products
in the United States as of the Closing Date; provided that "Licensed
Technology" does not include the Combination Patents.
1.36 "LICENSED TRADEMARK AND TRADE DRESS" means (i) the United States
Pulvules(R) Trademark, (ii) the Common Law Licensed Trade Dress, and (iii)
the United States Parabaloidal Capsule Trade Dress.
1.37 "LOAN FACILITY" will have the meaning set forth in Section 6.25.
1.38 "LOAN FACILITY HIGHLY-CONFIDENT LETTER" will have the meaning set forth in
Section 6.25.
1.39 "MANUFACTURING AGREEMENT" will have the meaning set forth in the second
WHEREAS clause of this Agreement.
1.40 "MARKETING MATERIALS" means (i) all market research, marketing plans, media
plans, advertising, marketing-related clinical study results, form letters
and medical queries, sale straining materials, customer information solely
with respect to sales of Products in the United States (including doctors,
general purchasing organizations (GPOs) and pharmacists), promotional and
marketing books and records owned by Lilly and its Affiliates solely
pertaining to the marketing and promotion of the Products in the United
States; and (ii) the Promotional Materials, provided that "Marketing
Materials" will exclude the labeling of the Products, which will be deemed
part of the Regulatory Approvals.
1.41 "MATERIAL ADVERSE EFFECT" means an effect or condition that individually or
in the aggregate is materially adverse to (i) the Purchased Assets taken as
a whole; (ii) any material Product or its Regulatory Approval in the United
States, each taken individually; or (iii) the business of manufacturing,
marketing or selling Products, taken as a whole, as conducted by Lilly and
its Affiliates in the ordinary course of business in the United States
prior to the Closing Date.
1.42 "MYLAN" means Mylan Pharmaceuticals, Inc.
1.43 "MYLAN AGREEMENT" means the propoxyphene Supply Agreement between Lilly and
Mylan entered into as of the 18th of April 1994, as thereafter amended.
1.44 "NDAS" mean the United States New Drug Applications and Investigational New
Drug applications ("IND") listed in SCHEDULE 1.44 attached hereto and all
other submissions, sup-
7
plements or amendments pertaining thereto, and the official and working
regulatory and clinical files and data pertaining to any of the foregoing
in the possession or control of Lilly or its Affiliates as of the Closing
Date. For avoidance of doubt, the NDAs do not include any marketing
authorizations in any jurisdiction outside of the United States or any
other submissions, supplements or amendments pertaining thereto filed
outside of the United States.
1.45 "NEOSAN IMPROVEMENTS" means any inventions, ideas, conceptions, or
reductions-to-practice, patentable or not, information, works, and/or data
pertaining to Products or analogs, derivatives, improvements or variations
thereof that are generated, identified, discovered, created and/or made by
NeoSan, its Affiliates, or its or its Affiliates' employees or a Third
Person contracted by or otherwise controlled by NeoSan based on the use or
practice of the Licensed Technology.
1.46 "NEOSAN NEW PRODUCT" means (i) any pharmaceutical product that is an
analog, derivative, improvement or variation of a Product arising out of
NeoSan Improvements, (ii) any pharmaceutical product which includes
propoxyphene or any analog, derivative, improvement, or variation of
propoxyphene as an active ingredient arising out of an invention related to
the Product conceived and reduced to practice by a NeoSan or a NeoSan
Affiliate employee(s) or a Third Person contracted by or otherwise
controlled by NeoSan, (iii) any other pharmaceutical product developed by
NeoSan and/or a Third Person contracted by or otherwise controlled by
NeoSan which includes propoxyphene or any analog, derivative, improvement,
or variation of propoxyphene as an intended active ingredient, or (iv) any
pharmaceutical product marketed under a name which includes "Darvon,"
"Darvocet," "Distalgesic," "Digesic"or "Doloxene." Notwithstanding the
foregoing, a pharmaceutical product which includes propoxyphene or any
analog, derivative, improvement or variation thereof will not constitute an
NeoSan New Product to the extent such product is acquired by NeoSan or its
Affiliates as a result of any (a)(i) merger or (ii) acquisition by NeoSan
or its Affiliates of substantially all of the assets of a Third Person
(each, an "NeoSan Relationship"), in which the other party or parties
involved in such NeoSan Relationship at that time already conducts or
engages in the manufacturing, marketing, selling, promoting, distributing,
co-marketing, co-promoting, importing, exporting or active developing of a
pharmaceutical product which includes propoxyphene or any analog,
derivative, improvement or variation thereof, or (b) acquisition by NeoSan
or its Affiliates of any pharmaceutical product (whether or not containing
propoxyphene as an active ingredient), either before or after the
acquisitions contemplated by this Agreement, and any analogs, derivatives,
improvements or variations of or for such acquired pharmaceutical product,
that are not marketed under a name which includes "Darvon," "Darvocet,"
"Distalgesic," "Digesic" or "Doloxene".
8
1.47 "NET SALES" means, with respect to the Product or any NeoSan New Product,
as the context requires, the gross amount invoiced by Lilly or a Permitted
Seller of the Product or such NeoSan New Product, as the context requires,
for sales of the Product or such NeoSan New Product, as the context
requires, to Third Persons (other than Permitted Sellers), less
(a) trade, quantity and/or cash discounts actually allowed;
(b) discounts, refunds, rebates, chargebacks, retroactive price
adjustments and any other allowances, credits or payments which effectively
reduce the net selling price;
(c) actual Product or NeoSan New Product returns and allowances, as
the context requires; and
(d) any costs of insurance, freight or sales Tax or governmental
levies, and import duties, provided that they are included in such gross
invoice amount and are itemized or readily identifiable on such invoice or
other readily accessible documentation.
Such amounts will be determined from books and records maintained in
accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). No
deductions will be made for commissions.
1.48 "NET SALES VOLUME ADJUSTMENT" will have the meaning set forth in Section
2.2.
1.49 "OBLIGATIONS" will have the meaning set forth in Article 10.
1.50 "PATENTS" means U.S. patents, patent applications, and statutory invention
registrations (which, for the purpose of this Agreement, will be deemed to
include provisional applications and invention disclosures), including
reissues, divisions, continuations, continuations-in-part, extensions and
reexaminations thereof, all inventions disclosed therein, all rights
provided by international treaties and conventions, and all rights to
obtain and file for patents and registrations thereto.
1.51 "PERMITTED ENCUMBRANCE" means (i) any Encumbrance for Taxes, assessments
and other governmental charges not yet due and payable or that may
thereafter be paid without penalty, or that are being contested in good
faith by appropriate proceedings for which adequate reserves have been
established, (ii) any imperfection of title or other Encumbrance that,
individually or in the aggregate with other such imperfections and
Encumbrances, would not have a material adverse effect on any material
Purchased Asset, and (iii) any rights expressly reserved or retained by
Lilly pursuant to the terms of this Agreement.
9
1.52 "PERMITTED SELLER" means NeoSan and its Affiliates and any assignee,
licensee or sublicensee having the right to sell Product or a NeoSan New
Product.
1.53 "PERMITTED USES" means, with respect to Lilly or its Affiliates, (a)
manufacturing the Product, or having the Product manufactured, for NeoSan
under the Manufacturing Agreement and otherwise fulfilling its obligations
thereunder, (b) making or having the Product made in the United States for
purposes of Lilly or its Affiliates distributing, using, selling, offering
to sell, importing (except importing into the United States), exporting
(except exporting to the United States), marketing, promoting, co-marketing
and co-promoting the Product outside the United States, or (c) making,
having made, distributing, using, selling, offering to sell, importing
(except importing into the United States), exporting (except exporting to
the United States), marketing, promoting, co-marketing and co-promoting the
Product outside of the United States.
1.54 "PERSON" means a natural person, a corporation, a partnership, a trust, a
joint venture, a limited liability company, any Governmental or Regulatory
Authority or any other organization or entity.
1.55 "PRODUCT" means propoxyphene or propoxyphene-based pharmaceutical products
(including such products wherein propoxyphene is at least one of the active
ingredients) in all forms marketed or marketable in the United States under
the NDAs, as existing as of the Closing Date, under whatever name sold.
Notwithstanding the foregoing, "Product" will not mean or include any new
formulations (including any NeoSan New Product).
1.56 "PRODUCT INTELLECTUAL PROPERTY" means (a) the Copyrights, (b) Assigned
Trade Dress, and (c) the Assigned Trademark. NeoSan acknowledges and agrees
that "Product Intellectual Property" does not include the Combination
Patents or any rights thereto.
1.57 "PROMOTIONAL MATERIALS" means all existing advertising and promotional
materials, including flyers, brochures, pamphlets, video cassettes,
computer disks, CD-ROMs, non- licensed software, tradeshow materials and
booths, literature, journal articles or reprints, or any similar materials
or items, which are owned by Lilly and are readily available and pertain
solely to the promotion of the Product in the United States or the
Activities.
1.58 "PURCHASED ASSETS" means: (i) all rights, title and interest in and to the
Products; (ii) all rights, title and interest in and to the Regulatory
Approvals; (iii) the Product Intellectual, Property; (iv), the Marketing
Materials; or (v) the Books and Records. The Purchased Assets do not
include any fixed assets or inventory.
10
1.59 "QUALITY AGREEMENT" will have the meaning set forth in the Manufacturing
Agreement.
1.60 "REGULATORY APPROVALS" means the NDAs.
1.61 "REMEDIES" will have the meaning set forth in Section 6.17.
1.62 "REQUIRED LILLY THIRD PARTY CONSENTS" has the meaning set forth in Section
4.14.
1.63 "REPRESENTATIVES" of a Party means that Party's agents, contractors,
employees, officers, directors, consultants, and advisors; its Affiliates;
and the agents, contractors, employees, officers, directors, consultants
and advisors of its Affiliates, agents, contractors, consultants and
advisors.
1.64 "SUBSEQUENT EXCHANGE OFFER" will have the meaning set forth in Section
8.2(g).
1.65 "TAX" means all of the following tax by any Governmental or Regulatory
Authority in connection with the operations of either Party or its
Affiliates or the transactions contemplated hereby: (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment; (ii)
any Obligation for the payment of any amounts of the type described in (i)
above as a result of being a member of any affiliated, consolidated,
combined, unitary or other group for any taxable period; and (iii) any
Obligation for the payment of any amounts of the type described in (i) or
(ii) above as a result of any express or implied obligation to indemnify
any other person.
1.66 "THIRD PERSON" means a Person that is not a Party to this Agreement or an
Affiliate of a Party to this Agreement.
1.67 "TRANSACTION FINANCING" will have the meaning set forth in Section 6.25.
1.68 "UNITED STATES" or "U.S." means the fifty (50) states and the District of
Columbia constituting the United States of America and any territory or
commonwealth owned or controlled by the United States of America, including
Puerto Rico.
1.69 "UNITED STATES PARABOLOIDAL CAPSULE TRADEMARK" means the United States
registered trademark design for a paraboloidal capsule, registration number
732,292, registration date 06/05/1962.
11
1.70 "UNITED STATES PULVULES(R) TRADEMARK" means the United States registered
trademark Pulvules(R), registration number 144210, registration date
06/28/1921.
ARTICLE 2
CONSIDERATION
In consideration of (i) Lilly's sale of Purchased Assets to NeoSan as
set forth in this Agreement and (ii) the licenses granted by Lilly to
NeoSan under the Licensed Technology and Licensed Trademark and Trade
Dress, as set forth in this Agreement, NeoSan will pay the following
amounts, as set forth in Sections 2.1 and 2.4:
2.1 NEOSAN'S PAYMENT UPON THE CLOSING DATE. On the Closing Date, NeoSan will
pay to Lilly the sum of Two Hundred Eleven Million Four Hundred Thousand
United States Dollars (US$211,400,000) by Federal Reserve electronic wire
transfer in immediately available funds to an account designated by Lilly.
2.2 NET SALES VOLUME ADJUSTMENT. In the event that, during any consecutive
twelve (12) calendar month period occurring between (and including) January
1,2002 and the last day of the calendar month that contains the first year
anniversary of the Closing Date, the aggregate of the (i) Net Sales of
Product by Lilly and (ii) the Net Sales of Product by NeoSan or other
Permitted Sellers equals or exceeds fifty million United States dollars
($50,000,000), Lilly will not owe NeoSan any purchase price adjustment
("Net Sales Volume Adjustment") pursuant to this Section 2.2; otherwise,
Lilly will pay to NeoSan a Net Sales Volume Adjustment calculated as set
forth in SCHEDULE 2.2 attached hereto. For purposes of this Agreement, a
Net Sale of Product will be deemed to have been made by Lilly, NeoSan or a
Permitted Seller, as applicable, as of the recorded sale date according to
GAAP, without regard to whether its customer has actually paid Lilly,
NeoSan or a Permitted Seller, as applicable. NeoSan will deliver to Lilly
within fifteen (15) days of the end of each calendar month, a report
detailing the Net Sales made by NeoSan or another Permitted Seller during
the previous Calendar Month. Lilly will pay any Net Sales Volume Adjustment
owed by Lilly pursuant to this Section 2.1 within thirty days after the
last day of the calendar month that contains the one (1) year anniversary
of the Closing Date.
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2.3 PURCHASE PRICE ADJUSTMENT. For any Net Sales of Product by Lilly during any
calendar month during the period beginning February 1, 2002 and ending the
day before the Closing Date in excess of (i) four million one hundred
sixty-seven thousand United States dollars ($4,167,000) for each full
calendar month during such period, and (ii) the product of four million one
hundred sixty-seven thousand United States dollars ($4,167,000) multiplied
by the quotient of the number of days prior to the Closing Date in the
calendar month that the Closing Date occurs divided by thirty (30) (the
"Excess Net Sales"), Lilly will pay to NeoSan within thirty (30) days after
the Closing Date a purchase price adjustment equal to ninety percent (90%)
of such Excess Net Sales.
2.4 ROYALTY PAYMENT.
(a) NeoSan will accrue and owe a royalty to Lilly equal to [**]
percent ([**]%) of Net Sales of a NeoSan New Product in a Calendar Quarter
in the United States by a Permitted Seller (collectively referred to as the
"Royalty Payment"), to the extent, and only to the extent, that such Net
Sales of all NeoSan New Products plus all Net Sales of Products by
Permitted Sellers in such Calendar Quarter in the United States exceed, in
the aggregate, the Base Year's Average Quarterly Net Sales. For any partial
Calendar Quarter in which a NeoSan New Product is sold in the United
States, for purposes of determining if and to what extent a Royalty Payment
is due and owing with respect to such NeoSan New Product, the Net Sales of
all NeoSan New Products in the United States plus all Net Sales of Products
by Permitted Sellers in the United States in such Calendar Quarter will be
deemed to be equal to the product of (a) the total of such Net Sales
multiplied by (b) the quotient of the number of days in such partial
Calendar Quarter divided by ninety (90) days. For purposes of clarity and
not in limitation thereof, no royalties will be owed by NeoSan or its
Affiliates with respect to any Net Sales of Products or any pharmaceutical
product not coming within the definition of "NeoSan New Product". This
Section 2.3(a) will be in force with respect to each NeoSan New Product in
the United States until ten (10) years from the commercial launch of such
NeoSan New Product in the United States.
(b) NeoSan will pay to Lilly the Royalty Payment attributable to Net
Sales of NeoSan New Products made during a Calendar Quarter within sixty
(60) days of the end of such Calendar Quarter, without regard to whether
the Permitted Seller's customer has actually paid NeoSan. For purposes of
this Agreement, a Net Sale of a NeoSan New Product will be deemed to have
been made as of the recorded sale date according to GAAP, without regard to
whether its customer has actually paid NeoSan. Within sixty (60) days of
the end of such Calendar Quarter, NeoSan will provide Lilly with a written
report detailing the Net
13
Sales of NeoSan New Products made during the previous Calendar Quarter. All
payments to Lilly pursuant to this Section 2.2 will be made by NeoSan by
wire transfer on its due date to an account designated by Lilly no less
than two business days prior to the date of payment, unless otherwise
instructed by Lilly.
2.5 AUDITS. NeoSan will keep full and accurate books and records relating to
the performance required of it of its Royalty Payment obligations under
this Agreement and its Net Sales of Product. For any period in which NeoSan
is obligated to pay a Royalty Payment with respect to Net Sales of NeoSan
New Products, plus two (2) years thereafter, and the period beginning on
the Closing Date and ending the last day of the calendar month that
contains the one (1) year anniversary of the Closing Date with respect to
Net Sales of Product, plus two (2) years thereafter, Lilly will have the
right, during regular business hours and upon reasonable advance notice, to
have such books and records of NeoSan audited no more frequently than once
per Calendar Year so as to verify the accuracy of the information
previously reported to Lilly. Lilly will, for purposes of such audit,
utilize only the services of an independent CPA firm selected by Lilly and
approved by NeoSan, such approval not to be unreasonably withheld.
Such audit may cover the two (2) Calendar Years preceding the date of
the request for such audit. Notwithstanding the foregoing, no audit of
NeoSan pursuant to this Section 2.3 will cover any period of time preceding
the Closing Date. As a condition for their access to conduct such audit,
such accountants will agree with NeoSan to keep confidential any in
formation obtained during such audit and will report to Lilly only their
conclusions, with a copy or full summary of their oral or written reports
being provided to NeoSan. The cost of such audit will be borne by Lilly;
however, in the event such audit reveals that the Royalty Payments or Net
Sales of Product previously reported to Lilly are less than the properly
calculated amount of Royalty Payments hereunder or Net Sales of Product, as
applicable, by five percent (5%) or more, the cost of the audit will be
borne by NeoSan. NeoSan will include in all sublicenses granted in
accordance herewith, and any other agreements enabling a Third Person to be
a Permitted Seller, an audit provision substantially similar to the
foregoing requiring such Permitted Seller to keep full and accurate books
and records relating to sales of Products and NeoSan New Products thereby
and granting Lilly the right to have an independent public accounting firm
audit the accuracy of the information reported by the sublicensee in
connection therewith.
2.6 LATE PAYMENTS. Any amounts not paid by either Party when due under this
Agreement or the Manufacturing Agreement will be subject to interest from
and including the date payment
14
is due through and including the date upon which the other Party has
collected the funds in accordance herewith at a rate equal to the lesser of
(i) the sum of three percent (3%) plus the prime rate of interest quoted in
the Money Rates section of the Wall Street Journal, calculated daily on the
basis of a three hundred sixty-five (365) day year, or (ii) the maximum
interest rate allowed by law.
ARTICLE 3
ASSIGNMENT AND LICENSE OF RIGHTS; CLOSING
3.1 ASSIGNMENT OF PURCHASED ASSETS TO NEOSAN. Subject to the terms and
conditions set forth herein and in the bill of sale, a form of which is
attached hereto as Exhibit A ("Lilly Bill of Sale"), on the Closing Date,
Lilly agrees to assign, sell, convey, transfer and deliver to Neo San and
to cause its Affiliates to assign, sell, convey, transfer and deliver to
NeoSan, and NeoSan agrees to buy and accept, Lilly's and its Affiliates'
entire right, title and interest in and to the Purchased Assets, free and
clear from all Encumbrances other than Permitted Encumbrances. NeoSan
hereby acknowledges receipt of copies of certain Books and Records during
the due diligence process. Lilly will deliver to NeoSan any additional
Books and Re cords requested by NeoSan on or after the Closing Date within
a commercially reasonable time after such request. Notwithstanding the
foregoing, Lilly will be entitled to retain a copy of all or any portion of
the Books and Records for archive purposes. In the event, following the
Closing Date, that Lilly or NeoSan discover that any of the Purchased
Assets were held at the time of Closing by any Affiliate of Lilly and not
transferred to NeoSan at the Closing, Lilly will cause the transfer thereof
to NeoSan or NeoSan's designee as soon as is commercially practicable after
such discovery. Notwithstanding the foregoing, Lilly and its Affiliates'
assignment, sale, conveyance, transfer and delivery of the Assigned Trade
Dress is restricted to the use of such trade dress with the Product and any
NeoSan New Product, and neither this Section 3.1 nor any other part of this
Agreement will be construed to restrict Lilly, its Affiliates or its
licensees, assignees or successors from utilizing the Assigned Trade Dress
in connection with any product or use other than the Product and any NeoSan
New Product.
3.2 GRANT OF LICENSE TO NEOSAN UNDER LICENSED TECHNOLOGY. Subject to the terms
and conditions set forth herein, as of the Closing Date, Lilly hereby
grants to NeoSan, on behalf of Lilly and its Affiliates, and NeoSan
accepts, under the Licensed Technology, an irrevocable (subject to
suspension to the extent expressly set forth herein), fully-paid,
royalty-free, exclusive license, with a right to sublicense or assign such
license rights in
15
accordance with the terms of this Agreement, solely to make, have made,
distribute, use, sell, offer to sell, have sold, market, co-market, import,
export, promote and co-promote the Products, any analogs, derivatives,
improvements or variations thereon, the NeoSan Improvements, NeoSan New
Products, or other pharmaceutical products which utilize propoxyphene as an
active ingredient thereof, in the United States (and to make or have made
any of the foregoing outside the United States solely for importation into,
and distribution, use, sale, market, co-market, promote and co-promote any
of the foregoing in, the United States); provided, however, that the
foregoing license with respect to making or having made any of the
foregoing outside the United States will be non-exclusive; provided
further, however, that the foregoing license will not be deemed to be a
representation, warranty or covenant by Lilly that NeoSan will be able to
practice the Licensed Technology to make and have made anywhere in the
world any pharmaceutical product other than the Product or to make or have
made the Product or any other pharmaceutical product outside of the United
States. Notwithstanding anything in this Section 3.2 to the contrary, the
license under the Licensed Technology granted to NeoSan pursuant to this
Section 3.2 will not preclude Lilly from utilizing the Licensed Technology
for any Permitted Uses during the term thereof. Further notwithstanding
anything in this Agreement to the contrary, nothing in this Agreement will
be deemed to preclude Lilly from granting a license under the Licensed
Technology to a Third Person solely for purposes of making or having made
the Product in the United States for distribution, exportation (outside of
the United States), use, sale, marketing, co-marketing, promoting and
co-promoting the Product outside of the United States, and Lilly will have
no liability for granting such license. The licenses granted to NeoSan
pursuant to this Section 3.2 will be subject to the rights reserved by
Lilly in the preceding two sentences.
3.3 GRANT OF LICENSE TO LICENSED TRADEMARK AND TRADE DRESS TO NEOSAN.
(a) Subject to the terms and conditions set forth herein, as of the
Closing Date, Lilly hereby grants to NeoSan, and NeoSan accepts, under the
Common Law Licensed Trade Dress, a fully paid, royalty-free, exclusive
license solely to make, have made, distribute, use, sell, offer to sell,
have sold, market, co-market, promote and co-promote the Product or NeoSan
New Product in the United States.
(b) Subject to the terms and conditions set forth herein, as of the
Closing Date, Lilly hereby grants to NeoSan, and NeoSan accepts, under the
United States Pulvules(R) Trademark and United States Paraboloidal Capsule
Trademark, a fully-paid, royalty-free, exclusive license solely to make,
have made, distribute, use, sell, offer to sell, have sold,
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market, co-market, promote and co-promote the Product or NeoSan New
Products in the United States.
(c) All uses by NeoSan of the Licensed Trademark and Trade Dress will
be in an appropriate manner, without jeopardizing the significance,
distinctiveness or validity of the Licensed Trademark and Trade Dress; will
use the designation "R" with the Licensed Trademark and Trade Dress which
are registered trademarks and trade dress; will indicate that Pulvules(R)
and the appearance of the paraboloidal capsule are registered trademarks of
Lilly; and will only be in such form and manner as approved in writing by
Lilly. All trademark and trade dress rights from NeoSan's use of the
Licensed Trademark and Trade Dress will inure to the benefit of Lilly.
NeoSan will not contest or challenge the validity of, or Lilly's ownership
of, the Licensed Trademark and Trade Dress.
(d) All Product featuring any of the Licensed Trademark and Trade
Dress must be manufactured, labeled, sold, distributed and advertised in
accordance with the Specifications (as defined in the Manufacturing
Agreement) and all Applicable Laws, including cGMP and FDCA (as those terms
are defined in the Manufacturing Agreement). Once each Calendar Year, in
order that Lilly can assure itself of the maintenance of the
above-described quality standards, NeoSan will: (i) provide to Lilly free
of charge two (2) then-current production samples of each Product and
NeoSan New Product featuring any of the Licensed Trademark and Trade Dress
(with then-current packaging) not manufactured by Lilly, and (ii) permit
Lilly to inspect the manufacturing process for each Product and NeoSan New
Product not manufactured by Lilly featuring any of the Licensed Trademark
and Trade Dress upon five (5) days prior notice.
(e) Notwithstanding anything in this Section 3.3 to the contrary, the
licenses under the Licensed Trademark and Trade Dress granted to NeoSan
pursuant to this Section 3.3 will not preclude Lilly or its Affiliates from
carrying out activities within the scope of the Permitted Uses. Further
notwithstanding anything in this Agreement to the contrary, nothing in this
Agreement will be deemed to preclude Lilly from granting a license under
the Licensed Trademark and Trade Dress to a Third Person solely for
purposes of making or having made the Product in the United States for
distribution, exportation (outside of the United States), use, sale,
marketing, co-marketing, promoting and co-promoting the Product outside of
the United States, and Lilly will have no liability hereunder for granting
such license. The licenses granted to NeoSan pursuant to this Section 3.3
will be subject to the rights reserved by Lilly in the preceding two
sentences.
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(f) Notwithstanding anything in this Section 3.3 to the contrary, any
license granted to NeoSan under a Licensed Trademark and Trade Dress will
terminate in the United States upon the date that NeoSan ceases to make,
have made, sell, have sold, use, market, promote, co-market and co-promote
all Products and NeoSan New Products that use such Licensed Trademark and
Trade Dress in the United States.
3.4 SUBLICENSES. The licenses granted herein by Lilly to NeoSan pursuant to
Sections 3.2 and 3.3 may be freely sublicensed by NeoSan after payment of
the $211,400,000 pursuant to Section 2.1, subject to the sublicensee's
compliance with the relevant obligations hereof with respect to such
licensed rights, without any consent by Lilly, provided that (a) NeoSan
provides written notice of such sublicense or assignment to Lilly prior to
granting such sublicense, (b) NeoSan and aaiPharma Inc. ("aaiPharma") will
guarantee the performance of any sublicensee permitted pursuant to this
Section 3.4 in a form comparable to aaiPharma's guaranty appended hereto
with respect to NeoSan's obligations hereunder, and (c) NeoSan will remain
liable for Royalty Payments as a result of Net Sales made by a Third Person
pursuant to a sublicense or license permitted pursuant to this Section 3.4.
The licenses granted herein by Lilly to NeoSan pursuant to Sections 3.2 and
3.3 may be sublicensed by NeoSan without continuing liability or guaranty
to Lilly therefore only with the prior written consent of Lilly, which will
not unreasonably be withheld.
3.5 GRANT OF LICENSE TO LILLY.
(a) Subject to the terms and conditions set forth herein, as of the
Closing Date, NeoSan hereby grants to Lilly and its Affiliates, for no
additional consideration, and Lilly and its Affiliates accept, a
royalty-free, non-exclusive license, with a right to sublicense, except as
limited below, in the United States under the Product Intellectual
Property, the NDAs and the Marketing Materials solely to manufacture, or to
have manufactured, the Products for NeoSan under the Manufacturing
Agreement and otherwise fulfill its obligations thereunder; provided,
however, that the non-exclusive license granted by NeoSan above will
terminate effective upon the termination of the Manufacturing Agreement.
(b) Subject to the terms and conditions set forth herein, as of the
Closing Date, NeoSan hereby grants to Lilly and its Affiliates, for no
additional consideration, and Lilly and its Affiliates accept, an
exclusive, royalty-free license, with the right to sublicense, under the
Marketing Materials, Copyrights and Assigned Trade Dress to sell,
distribute, use, offer to sell, import, market and promote the Product
outside the United States or to make or have made the Product inside the
United States for selling, distributing, using, offering to sell,
importing, marketing and promoting the Product outside of the United
States. The license
18
granted pursuant to this Section 3.5(b) will terminate with respect to the
Copyrights, the Marketing Materials or the Assigned Trade Dress on NeoSan's
receipt of written notification from Lilly that it is abandoning its
license with respect to the Copyrights, the Marketing Materials and the
Assigned Trade Dress.
3.6 RETAINED RIGHTS. Notwithstanding anything in this Agreement to the
contrary, the rights granted to NeoSan pursuant to this Agreement will not
be deemed to preclude Lilly or its Affiliates from (i) delivering any
remaining Product to Mylan that Lilly is required to deliver pursuant to
the Mylan Agreement, and (ii) manufacturing in the United States and
supplying propoxyphene to Lilly's or its Affiliates' customers outside the
United States within the scope of Permitted Uses or otherwise conducting
the Permitted Uses. The assets assigned or licensed to NeoSan pursuant to
this Agreement are subject to the rights and obligations of Lilly, its
Affiliates and Third Persons under the foregoing sentence.
3.7 EXCLUDED ASSETS. Anything herein to the contrary notwithstanding, except as
set forth in the Manufacturing Agreement, NeoSan will have no right, title
or interest in or to: (i) the trademarks "ELI LILLY AND COMPANY" and
"LILLY" and any variation thereof, and any other rights in or to such
names; and (ii) the patents and patent applications listed in SCHEDULE 3.7
attached hereto (the "Combination Patents"); and (iii) the Mylan Agreement.
3.8 LILLY EMPLOYEE HEALTH SERVICES. Lilly reserves the right, and the rights
granted or licensed to NeoSan are subject to Lilly's right, to utilize all
supplies of finished Product held by Lilly's employee health services on
the Closing Date for purpose of dispensing Product to its employees and
relatives of employees until such supply is exhausted.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF LILLY
4.1 INTELLECTUAL PROPERTY. Lilly represents and warrants that the Product
Intellectual Property (other than the Assigned Trade Dress), Marketing
Materials, the Licensed Trademark and Trade Dress (other than the Common
Law Licensed Trade Dress), and the Licensed Technology (collectively, the
"Intellectual Property") and the Assigned Trade Dress and Common Law
Licensed Trade Dress contain all the Patents, Know-How, technology, trade
secrets, trademarks, and trade dress necessary to conduct the Activities or
to make, have made, distribute, use, sell, offer to sell, have sold,
market, co-market, import (into the United States), promote and co-promote
Products in the United States. However, should Lilly or NeoSan
19
after the Closing Date discover or learn that Lilly has inadvertently
omitted any Intellectual Property or any Patents (other than the
Combination Patents) that contain claims that directly relate to the
manufacture, use or sale of Product and are used by Lilly to conduct the
Activities, the Parties will discuss in good faith how to amend this
Agreement to include (whether by assignment or license) such inadvertently
omitted intellectual property or Patents, such omission will not be deemed
to be a breach of this Agreement by Lilly, and Lilly will have no liability
whatsoever with respect to such omission. Lilly makes no representation or
warranty that NeoSan will be able to conduct the Activities after the
Closing Date without acquiring the consents, approvals and permits and
taking other procedural or substantive steps that are required by
Applicable Law. For avoidance of doubt, "Intellectual Property does not
mean or include the Assigned Trade Dress or Common Law Licensed Trade
Dress. Notwithstanding the foregoing, NeoSan acknowledges and agrees that
Lilly is not and will not be assigning or licensing to NeoSan the expired
trademarks listed in SCHEDULE 4.1 attached hereto or any other expired
trademarks directly and exclusively related to Lilly's propoxyphene
business (collectively referred to herein as the "Expired Trademarks"), and
Lilly will have no liability for failing to do so. Lilly acknowledges and
agrees that NeoSan will have no liability to Lilly in the event that
NeoSan, following the Closing Date, acts to register or otherwise obtain
new trademarks substantially similar to, or the same as, the Expired
Trademarks or uses such new trademarks on its products. The Expired
Trademarks do not include any of the trademarks listed on Schedule 1.6
hereto.
4.2 OWNERSHIP OF INTELLECTUAL PROPERTY. Lilly represents and warrants that: (i)
either Lilly or an Affiliate of Lilly is the owner of the Intellectual
Property, and (ii) Lilly or its Affiliates can, and have the right to,
assign or license, as applicable, the Intellectual Property to NeoSan
without the consent of any Third Person. However, should Lilly or NeoSan
after the Closing Date discover or learn that the consent of additional
Third Persons is necessary with respect to the Intellectual Property, if
the omitted consent does not result in material harm to a material Product
being sold, or to be sold, by NeoSan in the United States, then such
inadvertent omission will not be deemed to be a breach of this Agreement by
Lilly and Lilly will have no liability whatsoever with respect to such
omission; provided, however, that Lilly diligently pursues such consent
from such Third Persons.
4.3 CLAIMS RELATED TO USE OF INTELLECTUAL PROPERTY. Lilly represents and
warrants that there are no pending, or to Lilly's knowledge as of the
Effective Date, threatened claims against Lilly or its Affiliates asserting
that any of the Intellectual Property infringes or violates the rights of
Third Persons or that NeoSan, by practicing under the Intellectual Property
in conducting
20
the Activities in the United States as of the Closing Date, would violate
any of the intellectual property rights of any Third Person.
4.4 NOTICE TO THIRD PERSONS. Lilly represents and warrants that Lilly has not
given any notice within the two (2) years prior to the Effective Date to
any Third Persons, asserting infringement by such Third Persons upon any of
the Intellectual Property.
4.5 VALIDITY OF TRADEMARKS, TRADE DRESS, COPYRIGHTS AND TECHNOLOGY. Lilly
represents and warrants that, to its knowledge as of the Effective Date,
the Product Intellectual Property (other than the Assigned Trade Dress) and
the Licensed Trademark and Trade Dress (other than the Common Law Licensed
Trade Dress), are valid and enforceable, and, to Lilly's knowledge as of
the Effective Date, the Licensed Trademark and Trade Dress (other than the
Common Law Licensed Trade Dress) are free of all Encumbrances except
Permitted Encumbrances. Notwithstanding the foregoing, NeoSan acknowledges
that the status of the Assigned Trademarks will change in the ordinary
course of business prior to the Closing Date. Lilly will not be in breach
of this representation or warranty with respect to, and NeoSan will have no
right to refuse to close the transactions contemplated by this Agreement
because of, changes in the status of the Assigned Trademarks so long as
Lilly maintains the Assigned Trademarks in the ordinary course of business
prior to the Closing Date. Lilly is assigning, selling, conveying,
transferring and delivering the Assigned Trade Dress to NeoSan "AS IS", and
is licensing the Common Law Licensed Trade Dress to NeoSan "AS IS."
4.6 RIGHTS GRANTED TO THIRD PERSONS. Except with respect to the remaining
deliveries required pursuant to Mylan Agreement, rights granted to its
Affiliates that, following the Closing Date, will not extend past the
Permitted Uses, rights granted to its wholesalers and government
purchasers, Lilly represents and warrants that Lilly and its Affiliates
have not executed or granted to any Third Person, directly or indirectly,
or entered into any agreement for, or retained, any license or other right
to develop, manufacture, market, distribute, sell or offer for sale the
Product or generic substitutes therefor in the United States or to import
the Product or any other rights in or with respect to the Products, generic
substitutes therefor, or other propoxyphene-based pharmaceutical products
into the United States.
4.7 MAINTENANCE. Lilly represents and warrants that, as of the Closing Date,
all necessary papers and fees concerning the Assigned Trademarks (which are
registered as of the Closing Date and are unexpired), and the Licensed
Trademark and Trade Dress (other than the Common Law Licensed Trade Dress)
have been timely paid and filed with the appropriate governmental agencies
or authority.
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4.8 NDAS; REGULATORY MATTERS. Lilly represents and warrants that Lilly has
furnished NeoSan with access to a complete copy of the NDAs, including all
amendments and supplements thereto and that Lilly has no new drug
applications or INDs pertaining to propoxyphene-based pharmaceutical
products, whether issued, pending, abandoned, withdrawn, or in draft form,
other than those pertaining to the NDAS. Although the NDAs are not "state
of the art" (which NeoSan hereby acknowledges), Lilly further represents
and warrants that (i) Lilly has complied in all material respects with all
Applicable Laws in connection with the preparation and submission to the
FDA of each of the NDAs, (ii) each of the NDAs has been approved by FDA,
and, except with respect to those of the NDAs listed in SCHEDULE 4.8
attached hereto, nothing has come to the attention of Lilly which has led
Lilly to believe that any of the NDAs are not in good standing with the
FDA, and (iii) Lilly has filed with the FDA all required notices,
supplemental applications and annual or other reports, including adverse
experience reports, with respect to each NDA which are material to the
ability of Lilly to conduct the Activities. All of the Regulatory Approvals
are owned exclusively by Lilly or its Affiliates. All Products being sold
by Lilly in the United States are covered by a Regulatory Approval therein
that permits such sale in the United States. There is no Action or
Proceeding by any Governmental or Regulatory Authority pending or, to the
knowledge of Lilly as of the Effective Date, threatened seeking the
revocation or suspension of any Regulatory Approval. Except as set forth in
SCHEDULE 4.8 attached hereto, during the three years prior to the date of
this Agreement, Lilly and its Affiliates have not received or been subject
to: (i) any FDA Form 483's directly relating to any Product or directly
relating to any facility in which such Product is manufactured; (ii) any
FDA Notices of Adverse Findings directly relating to any Product or
directly relating to any facility in which such Product is manufactured; or
(iii) any warning letters or other written correspondence from the FDA or
any other Governmental or Regulatory Authority directly relating to the
Product or directly relating to any facility in which such Product is
manufactured, in which the FDA or such other Governmental or Regulatory
Authority asserted that the operations of Seller were not in compliance
with Applicable Law with respect to any Product or the facilities in which
any Product is manufactured, tested or stored. Except for the
representation and warranty contained in this Section 4.8, NeoSan has had
full and adequate opportunity to review and evaluate the NDAs, NeoSan is
relying upon its own judgment and experience in connection with the NDAs,
and Lilly is assigning, selling, conveying, transferring and delivering the
NDAs to NeoSan "AS IS."
4.9 ORGANIZATION AND STANDING. Lilly represents and warrants that Lilly is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Indiana. Lilly and its relevant Affiliates
hereunder are duly qualified to conduct its business and is in good
22
standing in the United States wherein the nature of such business requires
such qualification, except for any failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect or materially
impair or delay Lilly's ability to perform its obligations hereunder.
4.10 POWER AND AUTHORITY. Lilly represents and warrants that (i) Lilly has all
requisite corporate power and authority to execute, deliver, and perform
this Agreement and the other agreements and instruments to be executed and
delivered by it pursuant hereto and thereto and to consummate the
transactions contemplated herein and therein; and (ii) the execution,
delivery and performance of this Agreement by Lilly does not, and the
consummation of the transactions contemplated hereby will not, violate any
provisions of Lilly's organizational documents, bylaws, or any Applicable
Law applicable to Lilly, or any agreement, mortgage, lease, instrument,
order, judgment, or decree to which Lilly is a party or by which Lilly or
any of the Purchased Assets is bound.
4.11 CORPORATE ACTION; BINDING EFFECT. Lilly represents and warrants that (i)
Lilly has duly and properly taken all action required by law, its
organizational documents, or otherwise, to authorize the execution,
delivery, and performance of this Agreement and the other instruments to be
executed and delivered by it pursuant hereto and thereto and the
consummation of the transactions contemplated hereby and thereby; and (ii)
this Agreement has been duly executed and delivered by Lilly and
constitutes, and the other instruments contemplated hereby when duly
executed and delivered by Lilly will constitute, legal, valid, and binding
obligations of Lilly enforceable against it in accordance with its
respective terms, except as enforcement may be affected by bankruptcy,
insolvency, or other similar laws.
4.12 REGULATORY STATUS OF NDAS. Except as set forth in SCHEDULE 4.12, Lilly
represents and warrants that, to Lilly's knowledge, there have been no
recalls, withdrawals, or market replacements of the Product in the United
States in the past two (2) years and that, to Lilly's knowledge as of the
Effective Date, there exists no set of facts or circumstances that would
cause Lilly to believe or suspect that a recall, withdrawal or market
replacement for the Product in the United States is pending, likely or
necessary.
4.13 LAWS AND REGULATIONS. Lilly represents and warrants that it and its
Affiliates have conducted all the Activities in material compliance with
Applicable Laws.
4.14 CONSENTS AND APPROVALS. Lilly represents and warrants that no consent,
approval, waiver, order or authorization of, or registration, declaration
or filing with, any Governmental or Regulatory Authority or any other Third
Person is required in connection with the execution,
23
delivery and performance of this Agreement, or any agreement or instrument
contemplated by this Agreement, by Lilly or the performance by Lilly of its
obligations contemplated hereby and thereby other than (a) the filings
required of both Parties pursuant to the HSR Act, (b) the information
submissions required of a former owner of the NDAs pursuant to 21 C.F.R.
Section 314.72, (c) any filings reasonably requested by NeoSan as may be
necessary to change the records of ownership in the U.S. Trademark or
Copyright Office, and (d) as set forth in SCHEDULE 4.14 attached hereto.
SCHEDULE 4.14 sets forth a complete and accurate list of all consents,
waivers, approvals, or authorizations of, or notices to, any third party
(other than a Governmental or Regulatory Authority) that are required by or
with respect to Lilly or its Affiliates in connection with the execution
and delivery of this Agreement by Lilly as it relates to the United States
or the performance of its obligations hereunder as it relates to the United
States, except for such consents, waivers, approvals, or authorizations the
failure to obtain which, and such notices the failure to give which, would
not have a Material Adverse Effect or materially impair or delay Lilly's
ability to perform its obligations hereunder (the "Required Lilly Third
Party Consents").
4.15 BROKERAGE. Lilly represents and warrants that no broker, finder or similar
agent has been employed by or on behalf of Lilly, and no Person with which
Lilly has had any dealings or communications of any kind is entitled to any
brokerage commission, finder's fee or any similar compensation, in
connection with this Agreement or the transactions contemplated hereby.
4.16 NOT DEBARRED. Lilly represents and warrants that Lilly is not debarred and
has not and will not use in any capacity the services of any Person
debarred under subsections 306(a) or (b) of the Generic Drug Enforcement
Act of 1992. If at any time this representation and warranty is no longer
accurate, Lilly will immediately notify NeoSan of such fact.
4.17 LITIGATION. Lilly represents and warrants that there are no pending or, to
Lilly's knowledge as of the Effective Date, threatened judicial,
administrative or arbitral Actions or Proceedings pending as of the date
hereof against Lilly or its Affiliates in the United States which, either
individually or together with any other, will have a material adverse
effect on the ability of Lilly to perform its obligations under this
Agreement or any agreement or instrument contemplated hereby or otherwise
have a Material Adverse Effect.
4.18 MATERIAL CONTRACTS. SCHEDULE 4.18 sets forth a complete and correct list of
each Contract (other than wholesaler agreements) to be performed in the
United States to which Lilly or any of its Affiliates is a party with a
value in excess of $50,000 and that relates to (i) the manufacture,
marketing, sale or distribution of any of the Products in the United
States; (ii)
24
the acquisition, sale, licensing in or out, or assignment of Product
Intellectual Property; or (iii) sales of Products to any Governmental or
Regulatory Authority (collectively, the "Material Contracts"). Lilly has
made available to NeoSan complete and correct copies of Material Contracts.
The Material Contracts are the only Contracts material to the Activities in
the United States other than wholesaler agreements. Each of the Material
Contracts is in effect and constitutes a legal, valid and binding
agreement, enforceable in accordance with its terms, of Lilly; and Lilly
has performed all of its required material obligations under, and is not in
material violation or breach of or default under, any such Material
Contract; and no other party to the Material Contracts is in material
violation or breach of or default under any such Contract.
4.19 TITLE TO PURCHASED ASSETS. Lilly, on the Closing Date, will have good and
marketable title to the Purchased Assets, free and clear of any
Encumbrances other than Permitted Encumbrances, and will have the legal
right and ability to transfer the Purchased Assets to NeoSan.
4.20 SURVIVAL PERIOD. The representations and warranties contained in this
Article 4 and any indemnification obligation of Lilly set forth in Article
11 associated with such representations and warranties will terminate on
the one (1) year anniversary date of the date of expiration or termination
of the Manufacturing Agreement, provided that any claims with respect
thereto that are timely brought prior to such termination will survive and
continue until their final resolution.
4.21 IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 4 AND
ARTICLE 6 OF THE MANUFACTURING AGREEMENT, LILLY MAKES NO REPRESENTATION OR
WARRANTY AS TO THE PRODUCT, COPYRIGHTS, THE LICENSED TECHNOLOGY, THE
ASSIGNED TRADEMARKS, ASSIGNED TRADE DRESS, THE MARKETING MATERIALS, THE
EXPIRED TRADEMARKS, BOOKS AND RECORDS, THE LICENSED TRADEMARKS AND TRADE
DRESS, NDAs OR THE ACTIVITIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY
OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND LILLY SPECIFICALLY DISCLAIMS
ANY AND ALL IMPLIED OR STATUTORY WARRANTIES, INCLUDING ANY IMPLIED WARRANTY
OF MERCHANTABILITY, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND
WARRANTY OF NON-ENFRINGEMENT. Without limiting the foregoing, NeoSan
acknowledges that it has not and is not relying upon any implied warranty
of merchantability, fitness for a particular purpose, noninfringement, or
upon any representation or warranty whatsoever as to the future prospects
(financial, regulatory or otherwise), or the likelihood of commercial
success of the Activities after the date of this Agreement.
25
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF NEOSAN
5.1 ORGANIZATION AND STANDING. NeoSan represents and warrants that NeoSan is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware.
5.2 POWER AND AUTHORITY. NeoSan represents and warrants that (i) NeoSan has all
requisite corporate power and authority to execute, deliver, and perform
this Agreement and the other agreements and instruments to be executed and
delivered by it pursuant hereto and thereto and to consummate the
transactions contemplated herein and therein; (ii) the execution, delivery,
and performance of this Agreement by NeoSan does not, and the consummation
of the transactions contemplated hereby will not, violate any provisions of
NeoSan's organizational documents, bylaws, any Applicable Law applicable to
NeoSan, or any agreement, mortgage, lease, instrument, order, judgment, or
decree to which NeoSan is a party or by which NeoSan is bound.
5.3 CORPORATE ACTION; BINDING EFFECT. NeoSan represents and warrants that (i)
NeoSan has duly and properly taken all action required by law, its
organizational documents, or otherwise, to authorize the execution,
delivery, and performance of this Agreement and the other instruments to be
executed and delivered by it pursuant hereto and thereto and the
consummation of the transactions contemplated hereby and thereby; and (ii)
this Agreement has been duly executed and delivered by NeoSan and
constitutes, and the other instruments contemplated hereby when duly
executed and delivered by NeoSan will constitute legal, valid, and binding
obligations of NeoSan enforceable against it in accordance with its
respective terms, except as enforcement may be affected by bankruptcy,
insolvency, or other similar laws.
5.4 GOVERNMENTAL APPROVAL. NeoSan represents and warrants that no consent,
approval, waiver, order or authorization of, or registration, declaration
or filing with, any Governmental or Regulatory Authority or any other Third
Person is required in connection with the execution, delivery and
performance of this Agreement, or any agreement or instrument contemplated
by this Agreement, by NeoSan or the performance by NeoSan of its
obligations contemplated hereby and thereby other than (a) the filings
required of both Parties pursuant to the HSR Act, and (b) the information
submissions required by the FDA with respect to the NDAs.
26
5.5 BROKERAGE. NeoSan represents and warrants that no broker, finder or similar
agent has been employed by or on behalf of NeoSan, and no Person with which
NeoSan has had any dealings or communications of any kind is entitled to
any brokerage commission, finder's fee or any similar compensation, in
connection with this Agreement or the transactions contemplated hereby.
5.6 NOT DEBARRED. NeoSan represents and warrants that NeoSan is not debarred
and has not and will not use in any capacity the services of any Person
debarred under subsections 306(a) or (b) of the Generic Drug Enforcement
Act of 1992. If at any time this representation and warranty is no longer
accurate, NeoSan will immediately notify Lilly of such fact.
5.7 LITIGATION. NeoSan represents and warrants that there are no pending or, to
NeoSan's knowledge as of the Effective Date, threatened judicial,
administrative or arbitral Actions or Proceedings pending as of the date
hereof against NeoSan which, either individually or together with any
other, will have a material adverse effect on the ability of NeoSan to
perform its obligations under this Agreement or any agreement or instrument
contemplated hereby.
5.8 NO OTHER OR IMPLIED WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS
ARTICLE 5 AND ARTICLE 7 OF THE MANUFACTURING AGREEMENT, NEOSAN MAKES NO
OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY
OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND NEOSAN SPECIFICALLY
DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
OF THE PARTIES
6.1 IMPLEMENTATION TEAM. The Parties will form a team (the "Implementation
Team") to oversee the activities contemplated by this Agreement. The
Implementation Team will be comprised of three (3) members from each Party.
Each Party will appoint a member representing each of manufacturing,
marketing/sales and regulatory. Either Party may change its
representative(s) on the Implementation Team at any time by providing prior
written notice to the other Party. Unless otherwise agreed to by the
Parties, after the Closing Date, the Implementation Team will meet (in
person or by telephone or video conference) at least one (1) time each
Calendar Quarter upon no less than thirty (30) days prior written notice
from one Party to the other to discuss any matters arising out of a Party's
performance (or non-
27
performance) of its obligations under this Agreement. The Implementation
Team will initially be responsible for creating detailed operational plans
for the transition contemplated by this Agreement; provided, however, that
the activities contemplated by the foregoing will not take place until
after the Closing Date to the extent doing so would be in violation of
Applicable Law. The detailed operational plans will include a time line and
clear understanding of roles and responsibilities contemplated by this
Agreement. The Implementation Team will also have responsibility for
coordinating effective communication of progress and issues that arise
between the Parties. Special meetings of the Implementation Team may be
called by either Party upon no less than thirty (30) days' prior written
notice to the other Party, which notice must be accompanied by a written
agenda of items to be discussed at such special meeting.
6.2 GOVERNMENTAL FILINGS. Lilly and NeoSan each agree to prepare and file
whatever filings, requests or applications are required to be filed with
any Governmental or Regulatory Authority in connection with the transfer of
rights in Article 3 of this Agreement and to cooperate with one another as
reasonably necessary to accomplish the foregoing, including (i) the filings
required of both Parties pursuant to the HSR Act, (ii) the information
submissions to the FDA provided for pursuant to 21 C.F.R. Section 314.72,
and (iii) any necessary submissions to the DEA that will facilitate the
transfer of manufacturing capabilities from Lilly to NeoSan or a contract
manufacturer of NeoSan during the term of the Manufacturing Agreement.
NeoSan will deliver to Lilly the information submission described in (ii),
above, on the Closing Date.
6.3 COMPLIANCE WITH LAW. NeoSan agrees and acknowledges that as owner of the
NDAs, it will have sole responsibility for, among other things, adverse
event reporting, product quality complaints, label maintenance, other
regulatory reporting obligations, payment of any and all product
establishment fees, and medical and technical inquiries. Lilly and NeoSan
each will keep all records and reports required to be kept by Applicable
Laws, and each will make its facilities available at reasonable times
during regular business hours for inspection by representatives of
governmental agencies. Lilly and NeoSan each will notify the other within
twenty-four (24) hours of receipt of any notice or any other indication
whatsoever of any FDA, DEA or other governmental agency inspection,
investigation or other inquiry, or other notice or communication of any
type from a governmental agency, involving the manufacturing, selling,
marketing, promoting, co-promoting and co-marketing of the Product in the
United States. NeoSan and Lilly will cooperate with each other during any
such inspection, investigation or other inquiry including allowing upon
reasonable request a representative of the other to be present during the
applicable portions of any such inspection, investigation or
28
other inquiry and providing copies of all relevant documents. NeoSan and
Lilly will discuss any response to observations or notifications received
in connection with any such inspection, investigation or other inquiry and
each will give the other an opportunity to comment upon any proposed
response before it is made. In the event of disagreement concerning the
form or content of such response, however, Lilly will be responsible for
deciding the appropriate form and content of any response with respect to
any of its cited activities and NeoSan will be responsible for deciding the
appropriate form and content of any response with respect to any of its
cited activities.
6.4 EXPENSES. Lilly and NeoSan will each bear their own direct and indirect
expenses incurred in connection with the negotiation and preparation of
this Agreement and, except as set forth in this Agreement, the performance
of the obligations contemplated hereby.
6.5 REASONABLE EFFORTS. Lilly and NeoSan each hereby agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary or proper to make
effective the transactions contemplated by this Agreement, including such
actions as may be reasonably necessary to obtain approvals and consents of
Governmental or Regulatory Authorities and other Persons (including all
applicable drug listing and NDA notifications to the FDA and DEA
identifying NeoSan as a distributor of the Product); provided, however,
that no Party will be required to (i) pay money (other than as expressly
required pursuant to this Agreement or as implicitly required in order for
a Party to carry out its obligations hereunder), or (ii) assume any other
material obligation not otherwise required to be assumed by this Agreement.
6.6 PUBLICITY. The Parties agree that no publicity release or announcement
concerning the transactions contemplated hereby and under the Manufacturing
Agreement or, with respect to a NeoSan publicity release or announcement,
that includes the name of Lilly with respect to such transaction, will be
issued without the advance written consent of the other, which will not be
unreasonably withheld, except to the extent such publicity release or
announcement is after the later of the date of (i) the last to be delivered
to Lilly of the Loan Facility Highly-Confident Letter and the Bond
Financing Highly-Confident Letter executed by B of A or (ii) the date that
both Parties have made the filings required by both Parties pursuant to the
HSR Act, and is substantially similar to, or whose relevant statements are
consistent with the statements in, the press release set forth in SCHEDULES
6.6 attached hereto. Notwithstanding the above, upon the later of the date
of (i) the last to be delivered to Lilly of the Loan Facility
Highly-Confident Letter and the Bond Financing Highly-Confident Letter
executed by B of A or (ii) the date that both Parties have made the filings
required by both Parties pursuant to
29
the HSR Act (or such later date as agreed to by the Parties), NeoSan may
issue the press release set forth at SCHEDULE 6.6. Notwithstanding anything
in this Section 6.6 and Article 8 to the contrary, each Party may make
filings or disclosures that are required by Applicable Laws (as determined
to be so required by outside counsel for the disclosing Party) including
filings or disclosures required by or to the Securities and Exchange
Commission (and any other applicable securities exchanges) that discuss the
subject matter of this Agreement or the Manufacturing Agreement or
otherwise make reference to the other Party in any way whatsoever;
provided, however, that such Party provides the other Party with no less
than three (3) business days to review and comment on such filings, or the
relevant portions thereof, pertaining to the transactions contemplated
hereby or by the Manufacturing Agreement, and such Party does not
unreasonably reject the incorporation of such comments into such filings;
provided further, however, that such Party will redact any Confidential
Information of the other Party that, in the opinion of such disclosing
Party's outside counsel, is not required by Applicable Laws from such
filings or disclosures; provided further, however, that, such Party will
use commercially reasonable efforts to obtain confidential treatment by
such security exchanges with respect thereto.
6.7 COOPERATION. If either Party becomes engaged in or participates in any
investigation, claim, litigation or other proceeding with any Third Person,
including the FDA and DEA, relating in any way to the manufacturing,
selling, marketing, promoting, co-marketing or co-promoting the Product in
the United States, the other Party will cooperate in all reasonable
respects with such Party in connection therewith, including using its
reasonable efforts to make available to the other such employees who may be
helpful with respect to such investigation, claim, litigation or other
proceeding, provided that, for purposes of this provision, reasonable
efforts to make available any employee will be deemed to mean providing a
Party with reasonable access to any such employee at no cost for a period
of time not to exceed twenty-four (24) hours (e.g., three (3) eight (8)
-hour business days), and provided further that neither Party is required
to disclose any legally privileged documents or information to the other
Party. Thereafter, any such employee will be made available for such time
and upon such terms and conditions (including compensation) as the Parties
may mutually agree.
6.8 CONFLICTING RIGHTS. Neither Party will grant any right to any Third Person
which would violate the terms of or conflict with the rights granted by
such Party to the other Party pursuant to this Agreement.
30
6.9 DEEMED BREACH OF COVENANT. Neither Lilly nor NeoSan will be deemed to be in
breach of this Agreement to the extent such Party's breach is the result of
any action or inaction on the part of the other Party.
6.10 CUSTOMER ORDERS. Lilly will take such steps as may be reasonably required
to insure that all customer orders for Product received after the Closing
Date from customers in the United States are forwarded to NeoSan in writing
within forty-eight (48) hours after receipt by Lilly. Lilly agrees that any
customer in the United States ordering or requesting any information with
respect to the Product after the Closing Date will be informed that NeoSan
is now supplying the Product.
6.11 EXISTING CONTRACTS. NeoSan will fulfill all contractual pricing offered by
Lilly on Product only for a period of time sufficient to ensure that Lilly
is in compliance with its contractual obligation to a Third Person for sale
of Products in the United States ("Customer Contracts"). Other than
complying with these preexisting contractual obligations, NeoSan will be
free in its sole and absolute discretion and without consultation with
Lilly, to set its prices on Product offered by NeoSan. Lilly and NeoSan
agree to prorate as of the Closing Date any amounts under the Customer
Contracts in favor of Lilly with respect to amounts which become due and
payable after the Closing Date to the extent the benefit is attributable to
the period prior to the Closing Date, and any amounts under the Customer
Contracts in favor of NeoSan with respect to amounts which are paid prior
to the Closing Date to the extent the benefit is attributable to the period
subsequent to the Closing Date.
6.12 NO ASSIGNMENT OR LICENSES OUTSIDE THE UNITED STATES. Notwithstanding
anything in this Agreement to the contrary, NeoSan acknowledges and agrees
that Lilly is not assigning or licensing to NeoSan the rights to make, have
made, distribute, use, sell, offer to sell, have sold, import, market,
co-market, promote or co-promote the Product outside the United States,
except for the non-exclusive rights to make or have made Product outside of
the United States solely for importation and sale in the United States. The
rights granted to NeoSan in the United States will in no way limit Lilly's
rights outside the United States.
6.13 NEOSAN NEW PRODUCTS. During the three-year period beginning on the date of
receipt by Lilly of written notice from NeoSan that NeoSan has initiated
development activities related to NeoSan New Products (which NeoSan must do
within a reasonable time after initiating such development activities),
NeoSan will, at its sole cost and expense, work diligently and using
commercially reasonable efforts, consistent with prudent business judgment
and a balancing of important priorities of NeoSan, based upon the existing
business situation, to develop at least two NeoSan New Products where in
NeoSan's good faith opinion, such devel-
31
opment is technically feasible and commercially justifiable ("Commercially
Attractive Neo San New Products"), devoting the same degree of attention
and diligence to such efforts that it devotes to such activities for its
other products at a comparable stage in development and of comparable
commercial and development potential, with the objective of developing such
Commercially Attractive NeoSan New Products for the United States as soon
as commercially practicable, provided that NeoSan may terminate such
development activities at any time in the event that it determines in good
faith that such candidates are unlikely to succeed in becoming Commercially
Attractive NeoSan New Products.
6.14 MEDICAID AND OTHER REBATES. The Parties will administer and pay all
rebates, chargebacks and other similar programs as follows:
(a) Lilly Sales Prior to Closing Date. Lilly will process and be
responsible for the administration and payment of all federal, state and
local managed care and other rebate programs, including Medicaid/Medicare
rebates and Obligations, as well as chargebacks for the Product, in each
case, related to Product that was sold by Lilly prior to the Closing Date;
(b) Sales After the Closing Date. NeoSan will process and be
responsible for the administration and payment of all federal, state and
local managed care and other rebate programs in the United States,
including Medicaid/Medicare rebates and Obligations, as well as chargebacks
for the Product and NeoSan New Products, in each case, related to Product
and NeoSan New Product that is sold by NeoSan on or after the Closing Date.
If the Parties are unable to determine whether a Product was sold by Lilly
prior to the Closing Date or by NeoSan on or after the Closing Date, then
Lilly will be responsible for any and all such rebates and chargebacks
received during the sixty (60) day period following the Closing Date, and
NeoSan will be responsible thereafter.
(c) Product Returns. NeoSan will be responsible for all returns of
Product sold on or after the Closing Date in the United States, and Lilly
will be responsible for returns of Product sold before the Closing Date. If
the Parties are unable to determine whether a Product was sold by Lilly
prior to the Closing Date or by NeoSan on or after the Closing Date, in
each case in the United States, then Lilly will be responsible for all
returns of such Product received during the sixty (60) day period following
the Closing Date, and NeoSan will be responsible thereafter with respect to
the United States.
6.15 RESPONSIBILITY FOR THE NDAS. On the Closing Date, Lilly will transfer the
NDAs to NeoSan. Following the Closing Date, NeoSan will be responsible for
and will fulfill all regulatory requirements with respect to the Product
that are imposed upon NeoSan as the owner of
32
the NDAs under Applicable Laws. NeoSan will provide Lilly with all
assistance that is reasonably necessary to effectuate such transfers.
Notwithstanding the sale and transfer of the NDAs, Lilly will complete the
assay validations and supplement the NDAs with respect to the change of
equipment in Lilly's Puerto Rico facility, all as further described in
SCHEDULE 6.15 attached hereto; provided, however, that if Lilly
subsequently determines in its reason able discretion that regulatory
submissions identified in SCHEDULE 6.15 are not needed in order to continue
manufacturing the Product and the FDA does not require such regulatory
submissions, Lilly will have no obligation to complete the activities
described in this sentence or supplement the NDA as described in SCHEDULE
6.15. Nothing in this Section 6.15 will be construed as requiring Lilly to
update or upgrade the NDAs to "state of the art" conditions, or requiring
Lilly to otherwise update the NDA. Upon the Closing Date, NeoSan hereby
grants to Lilly the right to reference the NDAs for purposes of obtaining
and/or maintaining marketing authorizations outside of the United States.
6.16 INTELLECTUAL PROPERTY MAINTENANCE. Following the Closing, NeoSan will have
the sole right to file, prosecute and maintain, at its sole cost and
expense, (i) the Product Intellectual Property and (ii) any patent
applications or Patents that cover a NeoSan New Product(s) developed by
NeoSan or its Affiliates. Lilly will be responsible for and promptly pay
when due all fees necessary to and will otherwise maintain the Licensed
Trademark and Trade Dress (other than the Common Law Licensed Trade Dress).
6.17 ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS.
(a) Right to Seek Relief. NeoSan will promptly notify Lilly of any
infringement or suspected infringement which may come to its notice of any
Licensed Technology or the Licensed Trademark and Trade Dress, and will
provide Lilly with any information with respect thereto. Lilly will
promptly notify NeoSan of any infringement or suspected infringement which
may come to its notice of any intellectual property rights relating to the
Product, including the Product Intellectual Property, Licensed Technology,
or the Licensed Trademark and Trade Dress, and will provide NeoSan with any
information with respect thereto. In the event of any past, present or
future infringement by a Third Person of any intellectual property rights
relating to Copyrights, Assigned Trade Dress (only as it relates to an
infringement in the United States) or Assigned Trademarks, NeoSan will have
the sole right (but no obligation) to pursue any and all injunctive relief,
and any or all compensatory and other remedies and relief (collectively,
"Remedies") against such Third Person.
In the event of any infringement by a Third Person of any intellectual
property rights relating solely to Assigned Trade Dress (as it relates to
infringement outside the United
33
States), Licensed Technology or Licensed Trademark and Trade Dress, Lilly
will have the first right (but not the obligation) to pursue any and all
Remedies against such Third Person. Should Lilly determine not to pursue
Remedies with respect to any such intellectual property within thirty (30)
days after notice from NeoSan requesting Lilly to do so, then NeoSan will
have the right (but not the obligation) to pursue Remedies against such
Third Person inside the United States.
In the event of any infringement by a Third Person in the United
States of any intellectual property related to the Product or NeoSan New
Products other than that described in the preceding sentences, NeoSan will
have the first right (but not the obligation) to pursue any and all
Remedies against such Third Person. Should NeoSan determine not to pursue
Remedies with respect to any such intellectual property within thirty (30)
days after notice from Lilly requesting NeoSan to do so, then Lilly will
have the right (but not the obligation) to pursue Remedies against such
Third Person.
(b) Assistance and Cooperation. In the event that a Party will pursue
Remedies hereunder, the other Party will use all reasonable efforts to
assist and cooperate with the Party pursuing such Remedies. Each Party will
bear its own costs and expenses relating to such pursuit. Any damages or
other amounts collected will be distributed, first, to the Party that
pursued Remedies to cover its costs and expenses and, second, to the other
Party to cover its costs and expenses, if any, relating to the pursuit of
such Remedies; any remaining amount will be distributed to the Party that
pursued the Remedies.
6.18 INFRINGEMENT OF THIRD PERSON RIGHTS. In the event that a Third Person
institutes a patent, trade secret, trademark or other infringement suit, or
a misappropriation or unfair competition suit in the United States
(including any suit claiming confusion, deception or dilution of a
trademark by the Assigned Trademarks, Assigned Trade Dress or Licensed
Trademark and Trade Dress or interference with any patent claim (pending or
issued)) against NeoSan or another Permitted Seller during the term of this
Agreement, alleging that the manufacture, marketing, sale or use of the
Product infringes one or more Patent, trademark or other intellectual
property rights held by such Third Person or constitutes misappropriation
or unfair competition, then NeoSan will have the first right (but not the
obligation), at its sole expense, to assume direction and control of the
defense of such claims except to the extent such suit relates to the
Assigned Trade Dress (as it relates to an infringement outside of the
United States), the Licensed Technology, or the Licensed Trademark and
Trade Dress, as to which Lilly will have the first right (but not the
obligation), at its sole expense, to assume direction and control of the
defense of such claims. Should NeoSan or Lilly, as applicable, determine
34
not to pursue the defense of a particular claim within thirty (30) days
after notice from the other Party requesting NeoSan or Lilly, as
applicable, to do so, then the other Party will have the right (but not the
obligation), at its sole expense, to assume direction and control of such
claims. NeoSan will not have the right to settle or otherwise dispose of
any such claim with respect to the Assigned Trade Dress (as it relates to
an infringement outside of the United States), the Licensed Technology or
the Licensed Trademark and Trade Dress without the consent of Lilly, which
consent will not be unreasonably withheld.
6.19 SALES TRAINING. Lilly will have no obligation to provide sales training to
NeoSan.
6.20 NO LIENS. NeoSan will keep the Licensed Technology and Licensed Trademark
and Trade Dress free from all Encumbrances other than Permitted
Encumbrances.
6.21 MAINTENANCE OF ACTIVITIES PRIOR TO CLOSING. Except as otherwise set forth
in Section 6.25, from the date of this Agreement to the Closing Date, Lilly
will conduct the Activities in the ordinary course of business and not
enter into any new Contracts including the Product or other Purchased
Assets (a) giving any third Persons any rights, title or interests in the
Purchased Assets (other than sales of Products in the ordinary course of
business), or (b) creating any Encumbrances on the foregoing other than
Permitted Encumbrances. Lilly agrees that: after the date hereof, without
NeoSan's prior written consent, which will not be unreasonably withheld, it
will not take any action with respect to any Material Contract that would
(x) extend the term of such Material Contract with respect to any Product,
(y) create or agree to any additional obligations with respect to any
Product other than price adjustments in the normal course of business, or
(z) otherwise materially adversely affect NeoSan (other than to terminate
any such Material Contract in the ordinary course of business).
6.22 UNAVAILABLE CONSENTS.
(a) Notwithstanding anything to the contrary contained in this
Agreement, if the sale, assignment, transfer, conveyance or delivery or
attempted sale, assignment, transfer, conveyance or delivery to NeoSan of
any asset that would be a Purchased Asset is (i) prohibited by any
Applicable Law or (ii) would require any authorizations, approvals,
consents or waivers from a Third Person or Governmental or Regulatory
Authority and such authorizations, approvals, consents or waivers will not
have been obtained prior to the Closing Date, then in either case the
Closing may proceed without the sale, assignment, transfer, conveyance or
delivery of such affected asset and this Agreement will not constitute a
sale, assignment, transfer, conveyance or delivery of such asset; provided
that nothing in this Section 6.22 will be deemed to waive the rights of
NeoSan not to consummate the transactions con-
35
templated by this Agreement if the conditions to its obligations set forth
in Article 7 have not been satisfied or waived.
(b) In the event that the Closing proceeds without the sale,
assignment, transfer, conveyance or delivery of any such affected asset set
forth in Section 6.22(a), then (i) following the Closing, the Parties will
use their commercially reasonable best efforts, and cooperate with each
other, to obtain promptly such authorizations, approvals, consents or
waivers, and (ii) pending such authorization, approval, consent or waiver,
the Parties will cooperate with each other in any mutually agreeable,
reasonable and lawful arrangements designed to provide to NeoSan the
benefits of use of such asset and to Lilly the benefits, including any
indemnities, that, in each case, it would have obtained had the asset been
conveyed to NeoSan on the Closing Date; provided, however, that such
arrangement does not cause either Party to be in breach of any obligation
owed to a Third Person.
(c) If authorization, approval, consent or waiver for the sale,
assignment, transfer, conveyance or delivery of any such asset not sold,
assigned, transferred, conveyed or delivered on the Closing Date is
subsequently obtained, Lilly will assign, transfer, convey and deliver such
asset to NeoSan at no additional cost to NeoSan; provided, however, that
NeoSan has paid the full purchase price described in Section 2.1, above.
6.23 GUARANTY. NeoSan will cause aaiPharma to execute a Guaranty in the form
attached hereto as Exhibit B (the "Guaranty").
6.24 FINANCIAL STATEMENTS. Lilly will deliver to NeoSan, at NeoSan's expense,
audited financial statements with respect to the Products in the United
States for calendar years 1999, 2000 and 2001 which are compliant with the
rules and regulations of the United States Securities and Exchange
Commission and will specifically include Net Sales and gross margin of the
Products in the United States (the "Financial Statements"). NeoSan will pay
the cost of the Financial Statements regardless of whether the transactions
contemplated by this Agreement close.
6.25 FINANCING. NeoSan (or aaiPharma on NeoSan's behalf) will use its
commercially reasonable best efforts to initiate an offering to raise, on
commercially reasonable terms (for a comparably-sized company and a
comparably-sized financing transaction, including interest rate and
duration), the funds necessary to pay the purchase price described in
Section 2.1 and, pursuant to such offering, to deliver Offering Memoranda
to potential investors no later than February 21, 2002 (with respect to the
Offering Memoranda pertaining to the loan syndication portion of the
Transaction Financing (the "Loan Facility")) and March 1, 2002 (with
respect
36
to the Offering Memoranda pertaining to the bond offering portion of the
Transaction Financing (the "Bond Offering")). NeoSan (or aaiPharma on
NeoSan's behalf) will utilize its commercially reasonable best efforts to
close the financings described in both Offering Memoranda (the "Transaction
Financing") no later than March 15, 2002. The Transaction Financing will
take the form of a syndicated loan or bond offering, or any combination
thereof. Notwithstanding anything in this Agreement to the contrary, Lilly
will be free to discuss transactions related to the Product with Third
Persons (but not sign any binding agreements) until NeoSan (or aaiPharma on
NeoSan's behalf) closes the Transaction Financing for the purpose of having
a back-up purchaser for the asset should the Transaction Financing fail. A
prerequisite for NeoSan's distribution of the Offering Memoranda pertaining
to the Loan Facility to banks and other financial institutions will be (i)
Lilly's prior written approval of such Offering Memoranda, such approval
not to be unreasonably withheld, and (ii) Bank of America's ("B of A")
providing to NeoSan and aaiPharma (and NeoSan will have provided a copy
thereof to Lilly) a duly executed "highly confident" letter with respect to
the successful funding of such Loan Facility at the closing of the
Transaction Financing in a form substantially similar to Exhibit C attached
hereto (the "Loan Facility Highly-Confident Letter"). A prerequisite for
NeoSan's distribution of the Offering Memoranda pertaining to the Bond
Offering to potential investors will be (i) Lilly's prior written approval
of such Offering Memoranda, such approval not to be unreasonably withheld,
(ii) B of A's providing to NeoSan and aaiPharma (and NeoSan will have
provided a copy thereof to Lilly) a duly executed "highly confident" letter
with respect to the successful funding of the Bond Offering at the closing
of the Transaction Financing in a form substantially similar to Exhibit D
attached hereto (the "Bond Financing Highly-Confident Letter"), and (iii)
that NeoSan (or aaiPharma on NeoSan's behalf) will have been and will
continue to actively progress with the closing of the Loan Facility in good
faith. In the event that B of A fails to provide NeoSan (and NeoSan fails
to provide Lilly with a copy) with the Loan Facility Highly-Confident
Letter by February 21, 2002, fails to provide the Parties with the Bond
Financing Highly-Confident Letter by March 1, 2002, or is prohibited from
issuing the Offering Memorandum pertaining to the Bond Offering as of March
1, 2002 because of its (or aaiPharma's on NeoSan's behalf) failure to
actively progress with the closing of the Loan Facility in good faith,
Lilly will have the right (but not the obligation) to terminate this
Agreement by written notice to NeoSan at any time prior to B of A's
delivery to Lilly of such Loan Facility Highly-Confident Letter or such
Bond Financing Highly-Confident Letter or NeoSan's or aaiPharma's active
progression with the closing of the Loan Facility in good faith, as the
case may be. Unless aaiPharma is advised by its outside SEC counsel that,
in such counsel's opinion, earlier public disclosure or filing with the
Securities and Exchange Commission or
37
relevant securities exchange with respect to the transactions covered by
this Agreement is required by applicable law or regulation, NeoSan will
not, and will cause aaiPharma not to, make any such public disclosure or
filing until the Parties have received the Bond Financing Highly-Confident
Letter. Following the receipt of such Bond Financing Highly-Confident
Letter or such legal advice of an earlier public disclosure or filing
obligation, whichever comes first, NeoSan and aaiPharma will be free to
make such legally required public disclosures or filings, provided that
such public disclosures or filings will be limited to that which
aaiPharma's outside SEC counsel advises aaiPharma is legally required, in
such counsel's opinion, or which is otherwise permitted under Section 6.6
or Article 8 (other than 8.2(g)) hereof at the relevant time, unless Lilly
consents to additional disclosure. Notwithstanding the foregoing, NeoSan's
right to make such public disclosure or filing pursuant to this Section
6.25 is subject to the conditions set forth in the three provisos at the
end of Section 6.6 pertaining to disclosures that are required by
Applicable Laws. NeoSan will cause B of A to have in place Confidentiality
Agreements no less restrictive than those confidentiality obligations
customarily used by B of A with Third Persons in other loan syndication
transactions, with Third Persons to which B of A or its representatives
discuss the Loan Facility portion of the Transaction Financing.
ARTICLE 7
CONDITIONS PRECEDENT TO THE CLOSING; CLOSING DATE
7.1 CONDITIONS PRECEDENT TO NEOSAN'S OBLIGATIONS. Subject to waiver as set
forth in Section 12.3, below, all obligations of NeoSan to close the
transactions contemplated under this Agreement are subject to the
fulfillment or satisfaction of each of the following conditions precedent:
(a) Representations and Warranties True as of the Closing Date. The
representations and warranties of Lilly contained in this Agreement, the
Manufacturing Agreement and in any schedule, certificate or document
delivered by Lilly to NeoSan pursuant to the provisions hereof will have
been true on the date hereof and will be true on the Closing Date with the
same effect as though such representations and warranties were made as of
such date.
(b) Compliance with this Agreement. Lilly will have performed and
complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or by the Closing Date.
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(c) Closing Certificate. NeoSan will have received a certificate from
Lilly, executed by an officer of Lilly, certifying in such detail as NeoSan
may reasonably request that the conditions specified in Sections 7.1 (a)
and 7.1 (b), above, have been fulfilled and certifying that Lilly has
obtained all consents and approvals required by Section 7.1(e), below.
(d) No Threatened or Pending Litigation. Except for Actions or
Proceedings, injunctions or final judgments solely pertaining to contracts
or other obligations between NeoSan and any Third Person on the Effective
Date, no Action or Proceeding, or injunction or final judgment relating
thereto, will be threatened or be pending against Lilly or NeoSan or its
Affiliates before any Governmental or Regulatory Authority in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might result in any such
suit, action or proceeding will be pending or threatened.
(e) Consents and Approvals. Lilly will have either received notice
from the Federal Trade Commission or the U.S. Department of Justice of
early termination of the waiting period provided by the HSR Act or such
waiting period will have expired with no further action required or sought
by the Competition Authority on the part of Lilly or NeoSan.
(f) Quality Agreement. Lilly will have entered into the Quality
Agreement.
(g) Receipt of Funds. NeoSan (or aaiPharma or any of its Affiliates)
will have received an amount equal to the payment set forth in Section 2.1
hereof as described in Section 6.25 hereof.
(h) Financial Statements. NeoSan will have received the Financial
Statements.
7.2 CONDITIONS PRECEDENT TO LILLY'S OBLIGATIONS. Subject to waiver as set forth
in Section 12.3, below, all obligations of Lilly to close the transactions
contemplated under this Agreement are subject to the fulfillment or
satisfaction of each of the following conditions precedent:
(a) Representations and Warranties True as of the Closing Date. The
representations and warranties of NeoSan contained in this Agreement, the
Manufacturing Agreement, and in any schedule, certificate or document
delivered by NeoSan to Lilly pursuant to the provisions hereof will have
been true on the date hereof and will be true on the Closing Date with the
same effect as though such representations and warranties were made as of
such date.
39
(b) Compliance with this Agreement. NeoSan will have performed and
complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or by the Closing Date.
(c) Closing Certificate. Lilly will have received a certificate from
NeoSan, executed by an officer of NeoSan, certifying in such detail as
Lilly may reasonably request that the conditions specified in Sections
7.2(a) and 7.2(b), above, have been fulfilled and certifying that NeoSan
has obtained all consents and approvals required by Section 7.2(e), below.
(d) No Threatened or Pending Litigation. On the Closing Date, no
Action or Proceeding, or injunction or final judgment relating thereto,
will be threatened or be pending against Lilly or NeoSan or any of its
Affiliates before any Governmental or Regulatory Authority in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby, and no investigation that might result in any such
suit, action or proceeding will be pending or threatened.
(e) Consents and Approvals. NeoSan will have either received notice
from the Federal Trade Commission or the U.S. Department of Justice of
early termination of the waiting period provided by the HSR Act or such
waiting period will have expired with no further action required or sought
by the Federal Trade Commission or the U.S. Department of Justice on the
part of NeoSan.
(f) Quality Agreement and Guaranty. NeoSan will have entered into the
Quality Agreement and aaiPharma will have entered into the Guaranty.
7.3 CLOSING DATE.
(a) Subject to Section 7.3(b), below, the closing of the transactions
contemplated by this Agreement will take place at 10:00 a.m., Indianapolis
time, on the third (3rd) Lilly business day following the later of (i) the
date on which the last required FTC notice of the early termination of the
waiting period provided by the HSR Act or such applicable waiting periods
have expired with no further action required of either Party, (ii) the day
on which the last of the certificates required by Sections 7.1(c) and
7.2(c) has been delivered by one Party to the other, unless receipt of such
certificate has been waived in writing by the necessary Party, and (iii)
the day that the last condition precedents set forth in Sections 7.1 and
7.2 above has been satisfied or waived by the necessary party, or on such
other date as may be mutually agreed upon in writing by the Parties (the
"Closing Date") at the offices of Eli Lilly
40
and Company, Lilly Corporate Center, Indianapolis, Indiana. Each Party
hereby agrees to use its commercially reasonable best efforts to deliver
the certificates described in Sections 7.1(c) and 7.2(c) to the other in a
timely manner.
(b) If the closing of the transactions contemplated hereby will not
have taken place on or before sixty (60) days after the Effective Date, or
such later date as will be mutually agreed to in writing by Lilly and
NeoSan, because the conditions described in Sections 7.1 and/or 7.2, above,
have not been satisfied or waived, then Lilly and NeoSan agree to discuss
in good faith which substantive terms set forth in this Agreement, the
Manufacturing Agreement, or any document attached hereto and thereto need
to be modified as a result of the delay in such closing; provided, however,
that neither Party will have an obligation to agree to such modification.
Each Party hereby agrees to use commercially reasonable best efforts to
consummate the transactions contemplated herein, as modified, on or before
the sixtieth (60th) day after the Effective Date; provided, however, that
if the Parties are unable to close the transactions contemplated hereby
within one-hundred twenty (120) days after the Effective Date, or such
later date as is mutually agreed to in writing by Lilly and NeoSan, then
any Party that is not in material default of its obligations under this
Agreement (including its obligation to deliver the certificates described
in Sections 7.1(c) in the case of Lilly and 7.2(c) in the case of NeoSan)
may terminate this Agreement upon written notice to the other and each may
pursue such other remedies as are available to it at law, in equity or
under this Agreement. If neither Party is then in default of its
obligations under this Agreement upon delivery of such termination notice,
then this Agreement will terminate and neither Party will have any
Obligation to the other with respect to such termination. In all other
circumstances, the Parties may each pursue such remedies as are available
to it at law, in equity or under this Agreement. In addition to, but in no
way in limitation of the foregoing, Lilly may terminate this Agreement in
its entirety if NeoSan (or aaiPharma) has not initiated the Loan Facility
portion of the Transaction Financing by February 21, 2002 (unless such
termination right has not been exercised by written notice to NeoSan prior
to the commencement of the offering of the Loan Facility), the Bond
Offering Portion of the Transaction Financing by March 1, 2002 (unless such
termination right has not been exercised by written notice to NeoSan prior
to the commencement of the Bond Offering), and closed the Transaction
Financing by March 15, 2002 as more fully described in Section 6.25. In the
event Lilly terminates this Agreement for NeoSan's or aaiPharma's failure
to close the Transaction Financing by March 15, 2002, NeoSan will have no
Obligation to Lilly with respect to such termination provided that NeoSan
and/or aaiPharma used commercially reasonable best efforts to close the
Transaction Financing by March 15, 2002 and NeoSan is not otherwise in
breach of this Agreement.
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7.4 DELIVERIES AT CLOSING.
(a) CLOSING DELIVERIES BY LILLY. At the Closing, Lilly will deliver or
cause to be delivered to NeoSan:
(i) physical possession of all tangible personal property
included in the Purchased Assets, including (A) the Regulatory Approvals,
and (B) the Marketing Materials;
(ii) the duly executed Lilly Bill of Sale;
(iii) copies of all Required Lilly Third Party Consents obtained
as of Closing Date;
(iv) a duly executed counterpart of the Quality Agreement; and
(v) the certificate contemplated by Section 7.1 (c), above, duly
executed by an authorized representative of Lilly.
(b) CLOSING DELIVERIES BY NEOSAN. At the Closing, NeoSan will deliver
or cause to be delivered to Lilly:
(i) the payment required of it pursuant to Section 2.1;
(ii) a duly executed counterpart of the Quality Agreement;
(iii) the certificate contemplated by Section 7.2(c), above, duly
executed by an authorized representative of NeoSan; and
(iv) the Guaranty duly executed by an authorized representative
of aaiPharma.
7.5 SALES TAXES. Lilly will be responsible for all sales, use, stamp duty,
transfer, value added and other related or similar Taxes (excluding VAT
Taxes associated with Product delivered to NeoSan in accordance with the
Manufacturing Agreement), if any, arising out of the sale by Lilly and its
Affiliates of the Purchased Assets to NeoSan pursuant to this Agreement or
payable in connection with the transactions contemplated hereby.
42
ARTICLE 8
CONFIDENTIALITY
8.1 CONFIDENTIAL INFORMATION. The Parties agree that, for a ten (10)-year
period following the Effective Date, the Receiving Party will keep
completely confidential, will not publish or otherwise disclose and will
not use directly or indirectly for any purpose other than as contemplated
by this Agreement or the Manufacturing Agreement any such Confidential
Information of the Disclosing Party, whether such Confidential Information
was received by the Receiving Party prior to, on or after the Effective
Date. Notwithstanding anything to the contrary herein, neither Party will
be under any non-disclosure or non-use obligation whatsoever with respect
to its own Confidential Information.
8.2 DISCLOSURE. Each Party may disclose the other Party's Confidential
Information to the extent that such disclosure is:
(a) made in response to a valid order or subpoena of a court of
competent jurisdiction or other governmental body of a country or any
political subdivision thereof of competent jurisdiction; provided, however,
that the Receiving Party will first have given notice to the Disclosing
Party and given the Disclosing Party a reasonable opportunity to quash such
order or subpoena and to obtain a protective order requiring that the
Confidential Information and documents that are the subject of such order
or subpoena be held in confidence by such court or governmental body or, if
disclosed, be used only for purposes for which the order or subpoena was
issued; provided further, however, that if a disclosure order or subpoena
is not quashed or a protective order is not obtained, the Confidential
Information disclosed in response to such court or governmental order or
subpoena will be limited to that information which is legally required to
be disclosed in such response to such court or governmental order or
subpoena;
(b) otherwise as required by law, in the opinion of legal counsel to
the Receiving Party, as expressed in an opinion letter in form and
substance reasonably satisfactory to the Disclosing Party, which will be
provided to the Disclosing Party at least twenty-four (24) hours prior to
the Receiving Party's disclosure of the Confidential Information pursuant
to this Section 8.2;
(c) made by NeoSan as the Receiving Party to the Governmental or
Regulatory Authority as required to obtain or maintain marketing approval
for the Product or a NeoSan New Product, provided that reasonable measure
will be taken to assure confidential treatment of such information;
43
(d) made by Lilly as Receiving Party to a Third Person as may be
necessary or useful in connection with the activities of Lilly and its
Affiliates following the Closing Date within the scope of the Permitted
Uses during the remaining term thereof or made by NeoSan as the Receiving
Party in connection with the activities of NeoSan, its Affiliates and
contractors in the manufacture or development and commercialization of the
Product and NeoSan New Product, provided that the Receiving Party will in
each case obtain from the proposed Third Person recipient a written
confidentiality agreement containing confidentiality obligations no less
onerous than those set forth in this Section;
(e) made by the Receiving Party to a United States tax authority;
(f) made by the Receiving Party to its Representatives; provided,
however, that (i) the Representative has a need to know such Confidential
Information for purposes of this Agreement or the Manufacturing Agreement;
(ii) the Receiving Party informs its Representatives receiving Confidential
Information of its confidential nature; and (iii) the Receiving Party will
be responsible for any breach of this Section 8 by any of its
Representatives to the same extent as if the breach were by the Receiving
Party; or
(g) by NeoSan and aaiPharma with respect to the Financial Statements
(and Confidential Information pertaining to the Products that is required,
in the opinion of their outside SEC counsel, to be included in legally
required filings or disclosures with the Securities and Exchange Commission
or that, in the opinion of their outside counsel or of B of A, is
commercially necessary in carrying out the Transaction Financing and
subsequent public exchange offer for the Bond Offering (the "Subsequent
Exchange Offer")) that are incorporated into, included in, or attached to,
(I) aaiPharma's filings with the Securities and Exchange Commission
pertaining to the entering into of this Agreement by the Parties, at such
times as aaiPharma makes such filings as provided in Sections 6.6 or 6.25,
subject to the conditions set forth in the three provisos at the end of
Section 6.6 pertaining to disclosures that are required by Applicable Laws;
provided, however, that such disclosure of information for which aaiPharma
receives confidential treatment from the Securities and Exchange Commission
will only be made to the Securities and Exchange Commission, and provided
further that NeoSan and aaiPharma may use and disclose, without further
restriction, Confidential Information included in any such filings or
disclosures with the Securities and Exchange Commission which is not
accorded confidential treatment by the Securities and Exchange Commission
and, as a result, enters the public domain; and (II) the Offering Memoranda
and other documents pertaining to the Transaction Financing and Subsequent
Exchange Offer, (A) at any time (with respect to recipients who have
entered into Confidentiality Agreements no
44
less restrictive than those confidentiality obligations customarily used by
B of A with Third Persons in other similar transactions), and (B) at and
after the time set forth in Section 6.25 (i.e., following the receipt of
such Bond Financing Highly-Confident Letter or such legal advice of an
earlier public disclosure or filing obligation (subject to the conditions
set forth in Section 6.25), whichever comes first) (with respect to the
Offering Memoranda and other documents related to the Bond Offering and
Subsequent Exchange Offer) to potential investors; provided, however, that
such disclosures will only be made as permitted by and within the scope of
Section 6.25.
8.3 NOTIFICATION. The Receiving Party will notify the Disclosing Party
immediately, and cooperate with the Disclosing Party as the Disclosing
Party may reasonably request, upon the Receiving Party's discovery of any
loss or compromise of the Disclosing Party's Confidential Information.
8.4 REMEDIES. Each Party agrees that the unauthorized use or disclosure of any
Confidential Information by the Receiving Party in violation of this
Agreement or any other agreement forming a part of this transaction will
cause severe and irreparable damage to the Disclosing Party. In the event
of any violation of this Article 8, the Receiving Party agrees that the
Disclosing Party will be authorized and entitled to obtain from any court
of competent jurisdiction injunctive relief, whether preliminary or
permanent, without the necessity of proving irreparable harm or monetary
damages, as well as any other relief permitted by applicable law. The
Receiving Party agrees to waive any requirement that the Disclosing Party
post bond as a condition for obtaining any such relief. Except as otherwise
limited pursuant to Section 11.7, below, the rights provided in the
immediately preceding sentences will be cumulative and in addition to any
other rights or remedies that may be available to Disclosing Party. Nothing
in this Section is intended, or should be construed, to limit a Party's
right to preliminary and permanent injunctive relief or any other remedy
for a breach of any other provision of this Agreement.
ARTICLE 9
TERMINATION
9.1 TERMINATION PRIOR TO THE CLOSING. Anything herein to the contrary
notwithstanding, this Agreement may be terminated as follows prior to the
Closing Date:
(a) Termination for Insolvency. Each Party may Immediately terminate
this Agreement by providing written notice to the other Party if the other
Party (or, in the case of
45
NeoSan, an Affiliate of NeoSan) is declared insolvent or bankrupt by a
court of competent jurisdiction, or a voluntary petition of bankruptcy is
filed in any court of competent jurisdiction by the other Party (or, in the
case of Neosan, an Affiliate of NeoSan), or an involuntary petition for
relief under the United States Bankruptcy Code is filed in a court of
competent jurisdiction against the other Party (or, in the case of NeoSan,
an Affiliate of NeoSan) which is not dismissed within thirty (30) days of
its filing, or the other Party (or, in the case of NeoSan, an Affiliate of
NeoSan) makes or executes any assignment for the benefit of creditors.
(b) Termination for Default. Either Party may terminate this entire
Agreement because of a material breach or material default of this
Agreement by the other Party as follows: The terminating Party will give
the other Party prior written notice thereof, specifying in reasonable
detail the alleged material breach or material default, and if such alleged
material breach or material default continues unremedied for a period of
thirty (30) days with respect to monetary breaches or defaults or sixty
(60) days with respect to non-monetary material breaches or material
defaults after the date of receipt of the notification or, if the
non-monetary material breach or material default reasonably cannot be
corrected or remedied within sixty (60) days, then if (i) the defaulting
Party has not commenced remedying said material breach or material default
with said sixty (60) days and be diligently pursuing completion of same,
and (ii) said material breach or material default has not been corrected or
remedied within one-hundred twenty (120) days, then such terminating Party
may immediately terminate this Agreement by again providing written
notification to the defaulting Party. Except as otherwise limited pursuant
to Section 11.7 of this Agreement and Section 11.2 of the Manufacturing
Agreement, this Section 9.1(b) will not be exclusive and will not be in
lieu of any other remedies available to a Party hereto for any breach or
default hereunder on the part of the other Party.
9.2 TERMINATION FOLLOWING CLOSING. Following the Closing Date and the payment
by NeoSan of the $211,400,000 to be paid pursuant to Section 2.1, this
Agreement may not be terminated by either Party, except that Lilly may
suspend the licenses granted pursuant to Sections 3.2 and 3.3 utilizing the
procedures set forth in Section 9.1(b) as a result of any breach by NeoSan
in the payment of Royalty Payments owed with respect to a NeoSan New
Product in the United States only to the extent such licenses relate to the
affected NeoSan New Product therein (but will have no such effect with
respect to any Products or other NeoSan New Products in the United States
and will not constitute a material breach of this Agreement or give Lilly
any rights to terminate any rights of NeoSan hereunder whatsoever other
than the foregoing express suspension with respect to the relevant NeoSan
New Product) until and
46
unless NeoSan pays Lilly any Royalty Payments so owed (including with
respect to relevant Net Sales of such NeoSan New Product during any period
of suspension), plus accrued interest as provided in Section 2.5, at which
time such licenses will be automatically reinstated. Except as otherwise
set forth in this Section 9.2, the Parties agree that the sole and
exclusive remedies following the Closing Date will be to seek injunctive
relief to require compliance by the breaching Party and relief to seek
damages (subject to Section 11.7) with respect to such breach.
9.3 TERMINATION OF SUBLICENSES. Any sublicenses granted by NeoSan under this
Agreement with respect to the Licensed Technology or License Trademark and
Trade Dress will provide for immediate termination (or suspension, as the
case may be) upon termination (or suspension) of this Agreement or the
licenses granted in Sections 3.2 and 3.3, as the case may be, to the same,
and only to the same, extent as such termination (or suspension).
9.4 CONTINUING OBLIGATIONS. Termination of this Agreement for any reason will
not relieve the Parties of any antecedent breach of the provisions of this
Agreement or any obligation accruing prior thereto and, subject to Section
11.7, below, will be without prejudice to the rights and remedies of either
Party with respect to any antecedent breach of the provisions of this
Agreement. Without limiting the generality of the foregoing and in addition
to the foregoing, no termination of this Agreement, whether by lapse of
time or otherwise, will serve to terminate the rights and obligations under
Section 9.4 and Articles 8, 11 and 12 hereof, and such obligations will
survive any such termination.
9.5 NON-EXCLUSIVE REMEDIES. Except as otherwise limited pursuant to Section
11.7, below, the remedies set forth in this Article 9 or elsewhere in this
Agreement will be in addition to, and will not be to the exclusion of, any
other remedies available to the Parties at law, in equity or under this
Agreement,
ARTICLE 10
ASSUMPTION OF LIABILITIES BY NEOSAN
Except as otherwise provided in this Agreement, NeoSan hereby assumes
and agrees, in each case, following the Closing Date, to bear and be
responsible for and to perform and satisfy all responsibilities, duties
(including compliance with all Applicable Laws), obligations, claims,
Damages, liabilities, debts, burdens and problems of any nature whatsoever
(whether known or unknown, asserted or unasserted, absolute or contingent,
accrued or
47
unaccrued, liquidated or unliquidated, matured or unmatured, determinable
or undeterminable and due or to become due) (collectively, the
"Obligations") to the extent arising following the Closing Date from
NeoSan's ownership, licensing, operation and/or use of the Product
Intellectual Property, the Marketing Materials, the Licensed Trademark and
Trade Dress, the NDAs, Books and Records and the Licensed Technology, as
well as those associated directly or indirectly with the manufacturing (but
only to the extent the Product has been manufactured by NeoSan or its
contractor (other than Lilly)), distributing, marketing, promoting, selling
or using the Product from and after the Closing Date, including all
recalls, all warranty claims and all product liability claims (without
regard to the nature of the causes of action alleged or theories of
recovery asserted) arising in connection with Product sold on or after the
Closing Date, except for those Obligations with respect to which Lilly is
providing indemnification pursuant to the provisions of Section 11.1 of
this Agreement, which Obligations will remain the responsibility of Lilly
as set forth herein. All of the foregoing are hereinafter collectively
referred to as the "Assumed Liabilities." Notwithstanding the foregoing,
NeoSan will not be deemed to, and does not, assume the Excluded
Liabilities.
ARTICLE 11
INDEMNIFICATION; INSURANCE
11.1 INDEMNIFICATION BY LILLY. Lilly will indemnify and hold NeoSan (and its
Affiliates, and its and its Affiliates' directors, officers, and employees)
harmless from and against any and all Damages incurred or suffered by
NeoSan (and its Affiliates, and its and its Affiliates' directors, officers
and employees) to the extent caused by or arising out of or in connection
with:
(a) any breach of any representation or warranty made by Lilly in this
Agreement or the Manufacturing Agreement;
(b) any failure to perform duly and punctually any covenant, agreement
or undertaking on the part of Lilly contained in this Agreement or the
Manufacturing Agreement;
(c) any Excluded Liabilities;
(d) Lilly's failure to comply in all material respects with Applicable
Laws in connection with the performance of its obligations hereunder or the
Manufacturing Agreement;
48
(e) the negligence, gross negligence or willful misconduct of Lilly,
its Affiliates, or its or its Affiliates' employees, agents or contractors
(other than NeoSan); and
(f) Lilly's and its Affiliates' conduct of Activities prior to the
Closing Date, including the material compliance of such Activities pursuant
to Applicable Law or applicable obligations pursuant to Contracts.
11.2 INDEMNIFICATION BY NEOSAN. NeoSan will indemnify and hold Lilly (and its
Affiliates and its and its Affiliates' directors, officers and employees)
harmless from and against any and all Damages incurred or suffered by Lilly
(and its Affiliates and its and its Affiliates' directors, officers and
employees) to the extent caused by or arising out of or in connection with:
(a) any breach of any representation or warranty made by NeoSan in
this Agreement or the Manufacturing Agreement;
(b) any failure to perform duly and punctually any covenant, agreement
or undertaking on the part of NeoSan contained in this Agreement or the
Manufacturing Agreement;
(c) any Assumed Liabilities;
(d) any NeoSan New Product or assets related to the NeoSan New
Products infringing or violating the patent rights or other intellectual
property rights of Third Persons;
(e) the manufacturing, handling, possession, marketing, distribution,
promotion, sale, importation or use of the Product by NeoSan or a Permitted
Seller after the Closing Date including any Third Person claim alleging
breach of any express or implied warranties of merchantability or fitness
for a particular purpose or asserting strict liability, except to the
extent such Damage is caused by Lilly Error (as defined in the
Manufacturing Agreement), by a breach of this Agreement or the
Manufacturing Agreement by Lilly or is an Excluded Liability;
(f) NeoSan's failure to comply in all material respects with
Applicable Laws in connection with the performance of its obligations
hereunder or under the Manufacturing Agreement or NeoSan's failure to
comply with Applicable Laws relating to its using, importing, distributing,
marketing, promoting and selling of the Product or NeoSan New Products on
or following the Closing Date;
(g) the handling, possession, marketing, distribution, promotion,
sale, importation or use of any NeoSan New Product by NeoSan or any other
Permitted Seller, including
49
any Third Person claim alleging breach of any express or implied warranties
of merchantability or fitness for a particular purpose or asserting strict
liability; and
(h) the negligence, gross negligence or willful misconduct of NeoSan,
its Affiliates or its or its Affiliates' employees, agents or contractors
(other than Lilly).
11.3 NOTICE AND OPPORTUNITY TO DEFEND. Promptly after receipt by a Party hereto
of notice of any claim which could give rise to a right to indemnification
pursuant to Section 11.1 or 11.2, such Party (the "Indemnified Party") will
give the other Party (the "Indemnifying Party") written notice describing
the claim in reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein will not relieve the Indemnifying
Party of its obligations under this Article 11, except to the extent that
such failure to give notice materially prejudices the Indemnifying Party's
ability to defend such claim. The Indemnifying Party will have the right,
at its option, to compromise or defend, at its own expense and by its own
counsel, any such matter involving the asserted liability of the Party
seeking such indemnification. The assumption of the defense of a claim by
the Indemnifying Party will be construed as a binding acknowledgement that
the Indemnifying Party is liable to indemnify any indemnitee for Damages in
respect to such claim. If the Indemnifying Party undertakes to compromise
or defend any such asserted liability, it will promptly (and in any event
not more than ten (10) business days after receipt of the Indemnified
Party's original notice) notify the Indemnified Party in writing of its
intention to do so, and the Indemnified Party agrees to cooperate fully
with the Indemnifying Party and its counsel in the compromise or defense
against any such asserted liability, provided that the Indemnified Party is
not obligated to disclose legally privileged documents or information in
such cooperation. All reasonable costs and expenses incurred in connection
with such cooperation will be borne by the Indemnifying Party. If the
Indemnifying Party elects not to compromise or defend the asserted
liability, fails to timely notify the Indemnified Party of its election to
compromise or defend as herein provided, fails to admit its obligation to
indemnify under this Agreement or the Manufacturing Agreement with respect
to the claim, or, if in the reasonable opinion of the Indemnified Party,
the claim could result in the Indemnified Party becoming subject to
injunctive relief or relief (other than the payment of money damages) that
could materially adversely affect the ongoing business of the Indemnified
Party, the Indemnified Party will have the right, at its option, to pay,
compromise or defend such asserted liability by its own counsel and its
reasonable costs, expenses, and any payment made therewith will be included
as part of the indemnification obligation of the Indemnifying Party
hereunder, where such indemnification obligation exists hereunder.
Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnified Party may settle or compromise any claim without
50
consent of the other where such settlement or compromise would impose
injunctive obligations on the non-settling or non-compromising Party or any
Damages on the non-settling or non-compromising Party that are not subject
to indemnification hereunder; provided, however, that consent to settlement
or compromise will not be unreasonably withheld. In any event, the
Indemnified Party and the Indemnifying Party may participate, at their own
expense (or at the Indemnifying Party's expense, in the circumstances
described above (i.e., if the Indemnifying Party elects not to compromise
or defend the asserted liability where such indemnification obligation
exists hereunder)), in the defense of such asserted liability. If the
Indemnifying Party chooses to defend any claim, the Indemnified Party will
make available to the Indemnifying Party any non-privileged books, records
or other documents within its control that are necessary or appropriate for
such defense; provided, however, any such books, records or other documents
within the control of the Indemnified Party which are made available to the
Indemnifying Party hereunder will be held in strict confidence by the
Indemnifying Party (except to the extent disclosure is reasonably necessary
for the defense of such claim) and will be disclosed by the Indemnified
Party to the Indemnifying Party only to the extent that such books, records
or other documents relate to the claim.
Notwithstanding anything to the contrary in this Section 11.3, (a) the
Party conducting the defense of a claim will (1) keep the other Party
informed on a reasonable and timely basis as to the status of the defense
of such claim (but only to the extent such other Party is not participating
jointly in the defense of such claim), and (2) conduct the defense of such
claim in a prudent manner, and (b) to the extent the Indemnifying Party has
elected to defend a claim, the Indemnifying Party will not cease to defend
such claim without the prior written consent of the Indemnified Party
(which consent will not be unreasonably withheld).
11.4 INDEMNIFICATION PAYMENT OBLIGATION. Notwithstanding anything in this
Agreement to the contrary, Lilly and NeoSan will have no obligations under
subsections 11.1 (a) and 11.2(a), respectively, of this Agreement and as
incorporated by reference in the Manufacturing Agreement to indemnify the
other Party (or its Affiliates or its or its Affiliates' directors,
officers and employees) until the cumulative aggregate amount of Damages
incurred or suffered by such other Party (or its Affiliates or its or its
Affiliates' directors, officers and employees) which Lilly or NeoSan, as
the case may be, is otherwise subject to under this Agreement and the
Manufacturing Agreement exceeds one hundred thousand US Dollars
(US$100,000) (the "Deductible Amount"), at which time Lilly or NeoSan will
have the obligation under subsections 11.1 (a) and 11.2(a), respectively,
of this Agreement and as incorporated by reference in the Manufacturing
Agreement to indemnify the other Party (or its Af-
51
filiates or its or its Affiliates' directors, officers and employees) only
for Damages in excess of the Deductible Amount.
11.5 INDEMNIFICATION PAYMENT ADJUSTMENTS. The amount of any Damages for which
indemnification is provided under this Article 11 will be reduced by the
net insurance proceeds received and any other amount recovered, if any, by
the Indemnified Party with respect to any Damages; provided, however, that
the foregoing will not under any circumstances reduce the Damages for which
either Party is obligated to indemnify the other to the extent the
insurance proceeds received result from a self-insurance program or are
required to be repaid to the insurer upon recovery of Damages; provided,
however, that to the extent that an insurance claim would be made under a
self-insurance program, an Indemnified Party will not be subject to an
obligation to pursue an insurance claim relating to any Damages for which
indemnification is sought hereunder, and provided further that the
Indemnifying Party will reimburse the Indemnified Party for the present
value of any increased premiums directly attributable to such claims for
the five year period following such increase, discounted at a 15% discount
rate. To the extent the preceding sentence is applicable, if any
Indemnified Party will have received any payment pursuant to this Article
11 with respect to any Damages and will subsequently have received
insurance proceeds or other amounts with respect to such Damages, then such
Indemnified Party will pay to the Indemnifying Party an amount equal to the
difference (if any) between (a) the sum of the amount of those insurance
proceeds or other amounts received and the amount of the payment by such
Indemnifying Party pursuant to this Article 11 with respect to such Damages
and (b) the amount necessary to fully and completely indemnify and hold
harmless such Indemnified Party from and against such Damages; provided,
however, that in no event will such Indemnified Party have any obligation
pursuant to this sentence to pay to such Indemnifying Party an amount
greater than the amount of the payment by such Indemnifying Party pursuant
to this Article 11 with respect to such Damages.
11.6 INDEMNIFICATION PAYMENT. Upon the final determination of liability and the
amount of the indemnification payment under this Article 11, the
Indemnifying Party will pay to the Indemnified Party, within ten (10)
business days after such determination, the amount of any claim for
indemnification made hereunder.
11.7 LIMITATION OF LIABILITY. EXCEPT FOR (i) THE COSTS OF RECALL ENUMERATED IN
SECTION 10.3 OF THE MANUFACTURING AGREEMENT TO THE EXTENT SUCH COSTS
CONSTITUTE INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES, AND (ii) WTTH RESPECT TO DAMAGES INCURRED BY
52
THIRD PERSONS FOR WHICH A PARTY HERETO OTHERWISE HAS AN INDEMNIFICATION
OBLIGATION PURSUANT TO SECTION 11.1 OR SECTION 11.2 OF THIS AGREEMENT OR
SECTION 11.1 OF THE MANUFACTURING AGREEMENT, IN NO EVENT WILL EITHER PARTY
BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST
PROFITS) OR PUNITIVE DAMAGES, HOWEVER CAUSED OR UPON ANY THEORY OF
LIABILITY (INCLUDING A PARTY'S OR ITS AFFILIATES' OWN NEGLIGENCE, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OR THE NEGLIGENCE, GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF A PARTY'S OR A PARTY'S AFFILIATES' EMPLOYEES, AGENTS
OR CONTRACTORS), ARISING OUT OF THIS AGREEMENT OR THE PERFORMANCE OF, OR
THE FAILURE TO PERFORM, ANY OBLIGATION(S) SET FORTH HEREIN. NOTWITHSTANDING
THE FOREGOING, A PARTY'S AGGREGATE LIABILITY TO THE OTHER PARTY UNDER THIS
AGREEMENT AND THE MANUFACTURING AGREEMENT WITH RESPECT TO ALL INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST PROFITS) OR PUNITIVE
DAMAGES INCURRED BY THIRD PARTIES FOR WHICH SUCH PARTY HERETO OTHERWISE HAS
AN INDEMNIFICATION OBLIGATION PURSUANT TO SECTION 11.1 OR SECTION 11.2 OF
THIS AGREEMENT OR SECTION 11.1 OF THE MANUFACTURING AGREEMENT WILL BE
LIMITED TO FIVE MILLION US DOLLARS ($5,000,000).
11.8 INSURANCE. NeoSan will maintain at its own expense, with a reputable
insurance carrier reasonably acceptable to Lilly, insurance coverage for
NeoSan, written on a claims made basis, which will name Lilly as an
additional insured, including errors and omissions insurance and
comprehensive general liability insurance for claims for damages arising
from bodily injury (including death) and property damages arising out of
acts or omissions of NeoSan, which will be specifically endorsed to name
Lilly as an additional insured. Minimum limits of such insurance (not
warranted to be necessarily sufficient for the purposes of NeoSan's
obligation under this Agreement or the Manufacturing Agreement) will be ten
million US Dollars (US$10,000,000) annual aggregate coverage. Maintenance
of such insurance coverage will not relieve NeoSan of any responsibility
under this Agreement or the Manufacturing Agreement for damage in excess of
insurance limits or otherwise. NeoSan will provide Lilly with a certificate
from the insurer(s), evidencing such insurance coverage.
11.9 SURVIVAL. Each Indemnified Party's rights under Article 11 will not be
deemed to have been waived or otherwise affected by such Indemnified
Party's waiver of the breach of any representation, warranty, agreement or
covenant contained in or made pursuant this Agreement or the Manufacturing
Agreement, unless such waiver expressly and in writing
53
the Manufacturing Agreement, unless such waiver expressly and in writing
also waives any or all of the Indemnified Party's right under Article 11.
ARTICLE 12
MISCELLANEOUS
12.1 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and will inure
to the benefit of the Parties hereto and their respective successors and
assigns; provided that NeoSan may only assign this Agreement as follows:
(a) NeoSan may freely make such assignments in NeoSan's sole
discretion following the payment of the $211,400,000 pursuant to
Section 2.1, for assignments wherein NeoSan remains liable for
the assignee's performance hereunder; and
(b) NeoSan may make such assignments following such payment only with
Lilly's consent, which may not be unreasonably withheld, for
assignments wherein NeoSan does not remain liable for the
assignee's performance hereunder.
12.2 NOTICES. Unless otherwise stated in this Agreement as to the method of
delivery, all notices or other communications required or permitted to be
given hereunder will be in writing and will be deemed to have been duly
given if delivered by hand, courier, facsimile or if mailed first class,
postage prepaid, by registered or certified mail, return receipt requested
(such notices will be deemed to have been given on the date delivered in
the case of hand delivery or delivery by courier, on the date set forth in
the confirmation sheet in the case of facsimile delivery, and on the fifth
business day following the date of post mark in the case of delivery by
mail) as follows:
If to Lilly, as follows:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Facsimile: (317) 433-3000
Attn: Executive Vice President, Pharmaceutical Products
With a copy to:
Eli Lilly and Company
Lilly Corporate Center
54
Indianapolis, Indiana 46285
Facsimile: (317) 433-3000
Attn: General Counsel
If to NeoSan, as follows:
NeoSan Pharmaceuticals Inc.
2320 Scientific Park Drive
Wilmington, NC 28405
Facsimile: (910) 815-2387
Attn: Mr. David Hurley, President
With copies to:
aaiPharma Inc.
2320 Scientific Park Drive
Wilmington, NC 28405
Facsimile: (910) 815-2387
Attn: Gregory S. Bentley, General Counsel
Attn: Dr. Philip Tabbiner, President
or in any case to such other address or addresses as hereafter will be
furnished in a written notice as provided in this Section 12.2 by any Party
hereto to the other Party.
12.3 WAIVER. Any term or provision of this Agreement may be waived at any time
by the Party entitled to the benefit thereof only by a written instrument
executed by such Party. No delay on the part of Lilly or NeoSan in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of either Lilly or NeoSan of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor will any single or partial exercise of
any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
12.4 ENTIRE AGREEMENT. This Agreement, the Manufacturing Agreement, each of
their appendices, exhibits, schedules and certificates and all documents
and certificates delivered in connection herewith and therewith constitute
the entire agreement between the Parties with respect to the subject matter
hereof and supersede all prior agreements or understandings of the Parties
relating thereto.
12.5 AMENDMENT. This Agreement may be modified or amended only by written
agreement of the Parties hereto signed by authorized representatives of the
Parties.
55
12.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original but all of which together will
constitute a single instrument.
12.7 GOVERNING LAW. This Agreement will be governed and construed in accordance
with the laws of the State of New York excluding any choice of law rules
that may direct the application of the law of another state.
12.8 CAPTIONS. All section titles or captions contained in this Agreement and in
any exhibit, schedule or certificate referred to herein or annexed to this
Agreement are for convenience only, will not be deemed a part of this
Agreement and will not affect the meaning or interpretation of this
Agreement.
12.9 NO THIRD-PERSON RIGHTS. No provision of this Agreement will be deemed or
construed in any way to result in the creation of any rights or obligation
in any Person not a Party to this Agreement (except for the rights of a
Party's Affiliates and its and its Affiliates' directors, officers and
employees to receive indemnification from the other Party hereunder and
except for rights of permitted assignees hereunder pursuant to Section
12.1).
12.10 CONSTRUCTION. This Agreement will be deemed to have been drafted by both
Lilly and NeoSan and will not be construed against either Party as the
draftsperson hereof. Unless the context of this Agreement otherwise
requires: (a) words of any gender include each other gender; (b) words
using the singular or plural number also include the plural or singular
number, respectively, (c) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (d) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (e) the term "including" or "includes" means "including
without limitation" or "includes without limitation." Whenever this
Agreement refers to a number of days, such number will refer to calendar
days unless business days are specified.
12.11 APPENDICES, EXHIBITS, SCHEDULES AND CERTIFICATES. Each appendix, exhibit,
schedule and certificate attached hereto is incorporated herein by
reference and made a part of this Agreement.
12.12 NO JOINT VENTURE. Nothing contained herein will be deemed to create any
joint venture or partnership between the Parties hereto, and, except as is
expressly set forth herein, neither Party will have any right by virtue of
this Agreement to bind the other Party in any manner whatsoever.
56
12.13 SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective while this
Agreement remains in effect, the legality, validity and enforceability of
the remaining provisions will not be affected thereby.
12.14 FORCE MAJEURE. If either Party is prevented from complying, either totally
or in part, with any of the terms or provisions set forth herein by reason
of force majeure, including, by way of example and not of limitation, fire,
flood, explosion, storm, strike, lockout or other labor dispute, riot, war,
rebellion, accidents, acts of God, acts of governmental agencies or
instrumentalities, failure of suppliers or any other similar or dissimilar
cause, in each case to the extent beyond its control despite its
commercially reasonable best efforts to avoid, minimize, and resolve such
cause as promptly as possible, said Party will (a) provide written notice
of same to the other Party and (b) subject to its following obligations
with respect to said Party's efforts to remove the disability, its
obligations that are prevented from compliance by such force majeure are
suspended, without liability, during such period of force majeure. Said
notice will be provided within five (5) business days of the occurrence of
such event and will identify the requirements of this Agreement or such of
its obligations as may be affected. The Party prevented from performing
hereunder will use commercially reasonable best efforts to remove such
disability as promptly as possible and will continue performance whenever
such causes are removed. The Party so affected will give to the other Party
a good faith estimate of the continuing effect of the force majeure
condition and the duration of the affected Party's nonperformance. If the
Closing Date has not occurred and the period of any previous actual
nonperformance of Lilly because of Lilly force majeure conditions plus the
anticipated future period of Lilly nonperformance because of such
conditions will exceed an aggregate of one hundred twenty (120) days within
any one year period, NeoSan may terminate this Agreement immediately by
written notice to Lilly. If the Closing Date has not occurred and the
period of any previous actual nonperformance of NeoSan because of NeoSan
force majeure conditions plus the anticipated future period of NeoSan
nonperformance because of such conditions will exceed an aggregate of one
hundred twenty (120) days within any one year period, Lilly may terminate
this Agreement immediately by written notice to NeoSan. When such
circumstances as those contemplated herein arise, the Parties will discuss
in good faith, what, if any, modification of the terms set forth herein may
be required in order to arrive at an equitable solution.
57
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ELI LILLY AND COMPANY
By: /s/ John C. Lechleiter
------------------------------------
Printed Name: John C. Lechleiter
Title: Executive Vice President
NEOSAN PHARMACEUTICALS INC.
By: /s/ Dr. Philip Tabbiner
------------------------------------
Dr. Philip Tabbiner
President
58
EXHIBIT A
LILLY BILL OF SALE
BILL OF SALE
KNOW ALL BY THESE PRESENTS, that for good and valuable consideration
described in the Assignment Agreement (hereafter defined), the receipt and
sufficiency of which are hereby acknowledged, Eli Lilly and Company, an Indiana
corporation having offices at Lilly Corporate Center, Indianapolis, Indiana
46285 ("Lilly"), does hereby assign, sell, convey, transfer and deliver to
NeoSan Pharmaceuticals Inc., a corporation organized and existing under the laws
of the State of Delaware with offices located at 2320 Scientific Park Drive,
Wilmington, North Carolina 28405 ("NeoSan"), free and clear of Encumbrances
other than Permitted Encumbrances, all of Lilly's right, title and interest in
and to the Purchased Assets.
This Bill of Sale is being delivered to NeoSan pursuant to that certain
Assignment, Transfer and Assumption Agreement between Lilly and NeoSan dated the
__________ day of ______________, 2002 (the "Assignment Agreement"), and nothing
herein shall be construed as modifying or superseding the terms of the
Assignment Agreement, the Manufacturing Agreement between Lilly and NeoSan dated
the __________ day of ______________, 2002, or any document or agreement
contemplated by the Assignment Agreement or Manufacturing Agreement. Capitalized
terms not otherwise defined herein will have the meaning given to them in the
Assignment Agreement.
IN WITNESS WHEREOF, the undersigned duly authorized representative of Lilly
has executed this Bill of Sale effective as of this __________ day of
____________, 2002.
ELI LILLY AND COMPANY
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
59
EXHIBIT B
GUARANTY
Guaranty
In consideration of Lilly's entering into that certain Assignment, Transfer
and Assumption Agreement dated the ________ day of ________________, 2002 (the
"Assignment Agreement") with NeoSan Pharmaceuticals Inc. ("Neosan"), which is a
wholly-owned subsidiary of aaiPharma Inc., and that certain Manufacturing
Agreement dated the ________ day of ______________, 2002 (the "Manufacturing
Agreement") with NeoSan, aaiPharma Inc. hereby guaranties the performance by
Neosan of Neosan's obligations under the Assignment Agreement and the
Manufacturing Agreement, when and as due, subject to all defenses that Neosan
may lawfully have with respect to any claims by Lilly.
aaiPHARMA INC.
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
Dated:
---------------------------------
60
EXHIBIT C
LOAN FACILITY HIGHLY-CONFIDENT LETTER
[BANC OF AMERICA SECURITIES LLC LETTERHEAD]
HIGHLY CONFIDENT LETTER - SENIOR SECURED CREDIT FACILITIES
February [__], 2002
aaiPharma, Inc.
2320 Scientific Park Drive
Wilmington, NC 28405
Attention: Dr. Philip S. Tabbiner, D.B.A.
Dear Mr. Tabbiner:
You have advised Bane of America Securities LLC ("BAS") that aaiPharma, Inc.
("AAIPHARMA") intends to acquire the United States' rights to the Darvon(R) and
Darvocet(R) branded product lines ("DARVON(R)") from Eli Lilly and Company (the
"ACQUISITION"). You have further advised us that you propose to finance a
portion of the Acquisition (including the refinancing of existing indebtedness)
and related fees and expenses from at least $[**] million in senior secured
credit facilities (the "FINANCING") comprised of (i) term loan facilities
aggregating $[_________] and (ii) a $[_________] million revolving credit
facility.
We are pleased to inform you that, based upon (and subject to) our understanding
of the Acquisition and current market conditions and subject to the conditions
set forth below, we are highly confident of our ability, as underwriter or
placement agent, to sell or place the Financing in connection with the
Acquisition. The structure, interest rate and yield, covenants and terms of, and
the documentation for, the Financing will be as agreed upon by BAS and you based
on market conditions at the time of the sale or placement and on the structure
and documentation of the Acquisition and all the financing therefor.
Our confidence in our ability to consummate the sale or placement of the
Financing is subject to: (i) the principal economic terms and structure of the
Acquisition and the related financing components being on the terms as described
to BAS on the date hereof with such other terms and conditions reasonably
acceptable to BAS and the execution of documentation relating thereto reasonably
satisfactory in form and substance to BAS; (ii)
61
there not having occurred any material adverse change or development in the
condition (financial or otherwise), results of operations, business or prospects
of aaiPharma and Darvon(R) (including, without limitation, any legal or
regulatory change or development), since December 31, 2001 or in the business
plan of aaiPharma as provided to BAS, in each case, in BAS' reasonable judgment;
and (iii) no new material adverse information concerning aaiPharma or Darvon(R)
having come to the attention of BAS subsequent to the signing of this letter.
You acknowledge that BAS and its affiliates may share with each other any
information related to you, (including information relating to
creditworthiness), or the Acquisition or the financing therefor provided that
BAS and such affiliates agree to hold any non-public information confidential in
accordance with their respective customary policies related to non-public
information and in accordance of BAS' obligations of non-disclosure and non-use
to Eli Lilly and Company.
This letter is not intended to be and should not be construed as a commitment
with respect to the underwriting, sale or placement of the Financing and creates
no obligations or liability on our part or your part, or on the part of any of
our respective affiliates, in connection therewith.
This letter is only for your benefit and no other person or entity shall be a
third party beneficiary of this letter. Except as otherwise required by law or
unless BAS has otherwise consented in writing, you are not authorized to show or
circulate this letter to any other person or entity other than your advisors and
to Eli Lilly and Company and its advisors.
Very truly yours,
BANC OF AMERICA SECURITIES LLC
By:
---------------------------------
Managing Director
62
EXHIBIT D
BOND FINANCING HIGHLY-CONFIDENT LETTER
[BANC OF AMERICA SECURITIES LLC LETTERHEAD]
HIGHLY CONFIDENT LETTER - SENIOR SUBORDINATED NOTES
March 9, 2002
aaiPharma, Inc.
2320 Scientific Park Drive
Wilmington, NC 28405
Attention: Dr. Philip S. Tabbiner, D.B.A.
Dear Dr. Tabbiner:
You have advised Banc of America Securities LLC ("BAS") that aaiPharma, Inc.
("AAIPHARMA") intends to acquire the United States' rights to the Darvon(R) and
Darvocet(R) branded product lines ("DARVON(R)") from Eli Lilly and Company (the
"ACQUISITION"). You have further advised us that you propose to finance a
portion of the Acquisition (including the refinancing of existing indebtedness)
and related fees and expenses from at least $[[**]million in gross cash proceeds
from the issuance of senior subordinated notes (the "SECURITIES") in a public
offering or Rule 144A private placement with registration rights.
We are pleased to inform you that, based upon (and subject to) our understanding
of the Acquisition and current market conditions and subject to the conditions
set forth below, we are highly confident of our ability, as underwriter or
placement agent, to sell or place the Securities in connection with the
Acquisition. The structure, interest rate and yield, covenants and terms of, and
the documentation for, the Securities will be as agreed upon by BAS and you
based on market conditions at the time of the sale or placement and on the
structure and documentation of the Acquisition and all the financing therefor.
We have attached an indicative term sheet for the Securities for your review.
Our confidence in our ability to consummate the sale or placement of the
Securities is subject to: (i) the principal economic terms and structure of the
Acquisition and the related financing components being on the terms as described
to BAS on the date hereof with such other terms and conditions reasonably
acceptable to BAS and the execution of
63
documentation relating thereto reasonably satisfactory in form and substance to
BAS; (ii) there not having occurred any material adverse change or development
in the condition (financial or otherwise), results of operations, business or
prospects of aaiPharma or Darvon(R) (including, without limitation, any legal or
regulatory change or development), since December 31, 2001 or in the business
plan of aaiPharma as provided to BAS, in each case, in BAS' reasonable judgment;
(iii) there not having been any disruption or change or development in the
market for new issues of high yield securities or the financial or capital
markets in general, in the reasonable judgment of BAS, that could reasonably be
expected to have a material adverse effect on the placement or sale of the
Securities; (iv) the execution of a customary underwriting, purchase or
placement agreement and the satisfaction of the conditions stated therein in all
material respects, and of a customary indenture, registration rights agreement,
if applicable, and other customary documentation, in each case with respect to
the Securities, in form and substance reasonably satisfactory to BAS; (v) no new
material adverse information concerning aaiPharma or Darvon(R) having come to
the attention of BAS subsequent to the execution of this letter; and (vi) the
Securities having been rated at least B- and B3 by Standard & Poors Ratings
Group and Moody's Investor Service, Inc., respectively, with no notice of
possible change to either such rating.
You acknowledge that BAS and its affiliates may share with each other any
information related to you, (including information relating to
creditworthiness), or the Acquisition or the financing therefor provided that
BAS and such affiliates agree to hold any non-public information confidential in
accordance with their respective customary policies related to non-public
information and in accordance of BAS' obligations of non-disclosure and non-use
to Eli Lilly and Company.
This letter is not intended to be and should not be construed as a commitment
with respect to the underwriting, sale or placement of the Securities and
creates no obligations or liability on our part or your part, or on the part of
any of our respective affiliates, in connection therewith.
This letter is only for your benefit and no other person or entity shall be a
third party beneficiary of this letter. Except as otherwise required by law or
unless BAS has otherwise consented in writing, you are not authorized to show or
circulate this letter to any other person or entity other than your advisors and
to Eli Lilly and Company and its advisors.
Very truly yours,
BANC OF AMERICA SECURITIES LLC
By:
---------------------------------
Managing Director
64
SCHEDULE 1.6
TRADEMARKS
GenericName Trademark Country Name Status App In No Filing Date Reg No Reg Date
- ----------- ---------- ------------- ---------- --------- ----------- ------ ---------
PROPOXYPHENE NAPSYLATE AND DARVOCET-N United States Registered 24-Sep-71 949683 02-Jan-73
ACETAMINOPHEN, LILLY of America
PROPOXYPHENE HYDROCHLORIDE, LILLY DARVON United States Registered 664975 29-Jul-58
of America
PROPOXYPHENE NAPSYLATE, LILLY DARVON-N United States Registered 24-Sep-71 952573 06-Feb-73
of America
65
SCHEDULE 1.20
COPYRIGHTS
LILLY PUBLICATION ORDER
INDEX NUMBER OR OTHER
NUMBER DESCRIPTION PUBLICATION IDENTIFICATION
- ------ ---------------------------------------------- --------------------------
1 Ring in 1986 with the New Darvon Products December 1985
Special Offer
2 1982 Fall Offer September 1982
3 A Continuing Tradition September 1974
4 Similar Yet Different July 1983
5 Darvocet N-100 August, 1976
6 When Fever and Pain are Part of the Patient's November, 1977
Condition
7 Pharmacokinetic differences of Analgesics...in March, 1978
humans
8 When Pain is a Major Part of the Patient's November, 1977
Condition
9 What do you Prescribe for the Relief of Acute April, 1978
Pain? What do you Prescribe for the Relief of
Chronic Pain?
10 When Pain is a Major Part of the Patient's February, 197
Condition
11 What do you Prescribe for the Relief of Acute April, 1970
Pain? What do you prescribe for the Relief of
Chronic Pain?
February, 1979
12 Darvocet-N 100
66
13 Dentist Dimension April-June 1979
14 The Most Recent information on Darvocet-N 100 June, 1979
15 When do you see an Increase in Office Visits October, 1978
Due to the Aches and Pains of the Flu?
16 Therapeutic Agents Useful in Dentistry December 14, 1978
17 To Help her Cope with Pain November, 1978
18 When you Diagnose an Infection.... January 22, 1979
19 Darvocet-N 100 June,1978
67
SCHEDULE 1.44
NDAS
U.S. NEW DRUG APPLICATIONS (NDAS) AND INVESTIGATIONAL NEW DRUG (IND)
APPLICATIONS
NDA/IND LIST
IND/NDA # LY # Product Description # of Vols Date Withdrawn
- --------- ----- ------------------- --------- --------------
48 Darvon Compound - with A.S.A. 1
320 29352 Darvon - Suspension 1
1194 Darvon and Amytal and A.S.A. 1
1218 Darvon and Aventyl 2
3027 Darvon - N Propoxyphene Napsylate 2
1599 21720 Darvon (Ampoules) 1
1656 29352 Darvon N - Dextro Propoxyphene Napsylate 6 02/67
5159 29352 Darvocet - Propoxyphene HCL w/ Acetaminophen 1 11/90
5655 Darvocet N - Suspension 1 11/90
5727 29352 Darvocet N - Tablets 8
10471 Darvon N - Pediatric Suspension 1
APPROX. NUMBER OF IND VOLS 25
16-844 Darvocet tablet 30
17-122 Darvocet N tablet 73
17-507 Darvocet N 100 suspension 3
10-996 Darvon pulvule no 50
10-997 Darvon pulvule no. 364,365 45
16-827 Darvon N pulvules 40
16-829 Darvon N w/ A.S.A. 4
16-861 Darvon N suspension 15
16-862 Darvon N tablet 20
16-863 Darvon N w/ A.S.A. tablet 13
16-864 Darvocomp N-100 tablet 7
12-032 Darvotran pulvules 10
14-168 Darvon with ASA 11/78
APPROX. NUMBER OF NDA VOLS 300
68
SCHEDULE 2.2
NET SALES VOLUME ADJUSTMENT
(ALL FIGURES ARE IN UNITED STATES DOLLARS)
NET SALES VOLUME
NET SALES OF PRODUCT* ADJUSTMENT TO NEOSAN
- ---------------------------- --------------------
[**] million or greater None
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million to [**] million [**] million
69
[**] million to [**] million [**] million
[**] million to [**] million [**] million
[**] million or less [**] million
* Net Sales of Product in this column represent, during any consecutive
twelve (12) calendar month period occurring between (and including) January
1, 2002 and the last day of the calendar month that contains the first year
anniversary of the Closing Date, the (i) Net Sales of Product by Lilly and
(ii) the Net Sales of Product by NeoSan or other Permitted Sellers.
70
SCHEDULE 3.7
COMBINATION PATENTS
PATENTS
Patent Number Date of Patent Description
- ------------- -------------- -----------
U.S. 4,594,358 06/10/86 Analgesic Method
PATENT APPLICATIONS
Application Number Filing Date Country Status
- ------------------ ----------- ------- ------
60/188, 135 03/09/00 United States Pending
Application Number Filing Date Country Status
- ------------------ ----------- ------- ------
PCT/US 01/00009 01/16/01 Outside the United States Pending
71
SCHEDULE 4.1
EXPIRED TRADEMARKS
GenericName Trademark Country Name Status App In No Filing Date Reg No Reg Date
- ----------- ------------ ------------- ----------- --------- ----------- ------- ----------
PROPOXYPHENE HYDROCHLORIDE AND DARVOCET United States Expired September 950243 January 9,
ACETAMINOPHEN, LILLY of America January 9, 24, 1971 1973
1979
PROPOXYPHENE NAPSYLATE, LILLY DARVON S United States Expired 810739 July 5,
of America July 5, 1966
1986
PROPOXYPHENE AND ACETYLSALICYLIC ACID, DARVO-TRAN United States Expired 697029 May 30,
LILLY of America May 3, 1980 1960
ASPIRIN, PHENACETIN AND CAFFEINE, DARVOCOMP-N United States Expired 82271 March 31, 1048852 September
LILLY PROXYPHENE NAPSYLATE of America September 1976 28, 1976
28, 1982
PARMETHASONE, PROPOXYPHENE AND ASPIRIN STERO-DARVON United States Expired 809172 May 31,
of America May 31, 1966
1986
72
SCHEDULE 4.8
WITHDRAWN/PENDING NDAS
NDAS
IND/NDA # LY # Product Description # of Vols Date Withdrawn
- --------- ----- ------------------- --------- --------------
1656 29352 Darvon N - Dextro Propoxyphene Napsylate 6 02/67
5159 29352 Darvocet - Propoxyphene HCL w/ Acetaminophen 1 11/90
5655 Darvocet N - Suspension 11/90
14-168 Darvon with ASA 1 11/78
73
SCHEDULE 4.12
REGULATORY STATUS OF NDAS
NONE
74
SCHEDULE 4.14
REQUIRED CONSENTS
NONE
75
SCHEDULE 4.18
MATERIAL CONTRACTS
COUNTRY AGREEMENT TYPE ENTITY NAME START DATE END DATE
- ------- --------------------- -------------------------- ---------- ----------
U.S. N.Y.C.H.H.C 12/05/2000 11/30/2002
U.S. N.Y.C.H.H.C 12/05/2000 11/30/2002
U.S. CONGRESSIONAL MANDATE PHS-CE 1/01/2002 3/31/2002
U.S. CONGRESSIONAL MANDATE FSS-PUBLIC HEALTH SE 10/01/2001 09/30/2002
U.S. CONGRESSIONAL MANDATE VETERANS ADMINISTRATION 10/01/2001 09/30/2002
U.S. CONGRESSIONAL MANDATE DEPT. OF VETERAN'S AFFAIRS 10/01/2001 09/30/2002
U.S. CONGRESSIONAL MANDATE MILITARY BUYING GROUP 10/01/2001 09/30/2002
U.S. CONGRESSIONAL MANDATE OTHER GOVERNMENT AGENCIES 10/01/2001 09/30/2002
76
SCHEDULE 6.6
PRESS RELEASE
AAIPHARMA(TM) NEWS
DEVELOPING CHEMISTRY INTO MEDICINE RELEASE
2320 SCIENTIFIC PARK DRIVE CONTACT
WILMINGTON NC 28405 AAIPHARMA INC.
Bill Ginna
NASDAQ: AAII Chief Financial Officer
Jon Gavigan
Corporate Development
910-254-7000
FEINSTEIN KEAN HEALTHCARE
Media: Harriet Ullman
617-577-8110
MORGEN-WALKE ASSOCIATES
Investors: Sarah Torres
Financial Media: Dan Budwick
212-850-5600
Draft 2-15-02
FOR IMMEDIATE RELEASE
aaiPharma Acquires Darvon(R) and Darvocet N(R) Pain Franchise from Eli
Lilly and Company
WILMINGTON, NORTH CAROLINA (MARCH ___, 2002) - aaiPharma Inc. (Nasdaq: AAII), a
specialty pharmaceutical company, announced today that its NeoSan
Pharmaceuticals business unit purchased the United States rights to the
Darvon(R) and Darvocet N(R) family of pain products from Eli Lilly and Company
(NYSE: LLY).
Under the terms of the agreement, NeoSan will purchase the product line for
$211.4 million plus royalties on future product reformulations. The Darvon(R)
and Darvocet N(R)
77
franchise will become the brand outlet for aaiPharma's pipeline of pain
management products.
The completion of this transaction is awaiting clearance by the Federal Trade
Commission and the Department of Justice of NeoSan Pharmaceutical's recent
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. With this
approval and the closing of the transaction, the Darvon(R) and Darvocet N(R)
family of products would become the latest addition to NeoSan's growing product
portfolio.
"Darvon(R) and Darvocet N(R) represent a tremendous entry vehicle for NeoSan
into the Pain Management Marketplace. Upon closing, we will begin to expand our
sales and marketing operations to drive and grow this brand and our R&D programs
to rapidly develop line extensions to better handle unmet patient needs," said
Dr. Philip Tabbiner, President of NeoSan Pharmaceuticals.
The Darvon(R) and Darvocet N(R) family of pain products are indicated for mild
to moderate pain, a specialty market segment which continues to experience solid
growth in the US.
NeoSan Pharmaceuticals plans to market the Darvon and Darvoet N(R) family with
its growing sales and contracting groups.
"With this acquisition, NeoSan Pharmaceuticals will take another step forward in
its quest to build a robust and exciting pipeline of brands with proven safety
and efficacy records," said Fred Sancilio, Ph.D., Chairman and CEO of aaiPharma.
"As with the other products in our pipeline, we are poised to utilize our proven
scientific expertise to enhance and grow these products, thereby maximizing
their value for our shareholders."
ABOUT NEOSAN PHARMACEUTICALS
NeoSan Pharmaceuticals is a specialty pharmaceutical company that acquires,
enhances, and markets branded drugs using the Company's proprietary product life
cycle management expertise. Focusing on targeted therapeutic areas, the Company
applies innovative technologies to increase the commercial potential of products
with proven efficacy and safety histories. As an aaiPharma business unit, NeoSan
Pharmaceuticals leverages more than 20 years of development experience and
established industry relationships into unique pharmaceutical product
commercialization opportunities. For more information, please visit
www.neosan.com.
ABOUT AAIPHARMA
aaiPharma is an experienced leader in pharmaceutical research and development,
uniquely positioned to leverage its long-term businesses and partnerships with
major pharmaceutical companies into new product opportunities. Using its
proprietary drug
78
delivery technologies as well as its expertise in chemistry, the Company offers
a capability to focus on the development, enhancement, and commercialization of
mature and branded pharmaceutical products. For more information on aaiPharma,
please visit www.aaipharma.com.
FORWARD-LOOKING STATEMENTS
Information in this press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934, including the statements pertaining
to future plans to use the acquired franchise to become the brand outlet for
aaiPharma's pipeline of pain management products, future product improvements
and line extensions, plans to expand the Company's sales force and efforts, and
collaborative work among the Company's business units to leverage the
capabilities of the other business units to improve NeoSan's products, including
Darvon(R) and Darvocet N(R) products upon closing of the transaction. These
statements involve risks and uncertainties that could cause actual results to
differ materially, including, without limitation, risks and uncertainties
pertaining to aaiPharma's or its individual business units' ability to
successfully find, acquire, develop, improve, enhance the safety or efficacy of
and sell, on a commercially profitable basis, pharmaceutical products without
adversely affecting its fee-for-service client relationships or business
opportunities. Additional factors that may cause the actual results to differ
materially are discussed in aaiPharma's recent filings with the Securities and
Exchange Commission, including, but not limited to, its registration statement,
as amended, its Annual Report on Form 10-K filed with the SEC on April 2, 2001,
its Quarterly Reports on Form 10-Q filed with the SEC on November 13, 2001,
including the exhibits thereof, its Form 8-Ks and its other periodic filings.
###
79
SCHEDULE 6.15
PENDING REGULATORY SUPPLEMENTS
[**]
[**]
80
Exhibit 10.11
AMENDMENT NO. 1 TO THE ASSIGNMENT, TRANSFER AND ASSUMPTION AGREEMENT
This Amendment No. l to the Assignment, Transfer and Assumption Agreement
(the "Amendment") is executed as of the 28th day of March, 2002 ("Amendment
Effective Date"), by and between Eli Lilly and Company ("Lilly") and NeoSan
Pharmaceuticals Inc. ("NeoSan").
RECITALS
1. Lilly and NeoSan heretofore entered into that certain Assignment,
Transfer and Assumption Agreement (the "Agreement") dated as of February 18,
2002.
2. The parties now wish to amend the Agreement as set forth in this
Amendment.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. As of the Effective Date (as defined in the Agreement), SCHEDULE 1.44 of
the Agreement will be replaced in its entirety by SCHEDULE 1.44 attached to this
Amendment and incorporated herein by reference.
2. As of the Effective Date, SCHEDULE 4.8 of the Agreement will be replaced
in its entirety by SCHEDULE 4.8 attached to this Amendment and incorporated
herein by reference.
3. As of the Effective Date, the last sentence of Section 6.2 will be
replaced in its entirety with the following: "Lilly and NeoSan will deliver the
information submissions described in (ii) above to the FDA by overnight delivery
to be received by the FDA on the business day following the Closing Date."
4. As of the Effective Date, the first sentence of Section 6.15 will be
replaced in its entirety with the following: "On the Closing Date, Lilly will
transfer the NDAs to NeoSan; provided, however, that the information submissions
described in (ii) of Section 6.2 will be sent by Lilly and NeoSan to the FDA via
overnight delivery to be received by the FDA on the business day following the
Closing Date."
5. In all other respects, the Agreement shall remain in full force and
effect.
6. This Amendment may be executed in any number of counterparts, each of
which will be deemed an original but all of which together constitute a single
instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused this Amendment to be entered
into by their duly authorized representatives as of the date first above
written.
ELI LILLY AND COMPANY NEOSAN PHARMACEUTICALS INC.
By: /s/ John C. Lechleiter By:
--------------------------------- ------------------------------------
Printed Name: John C. Lechleiter Printed Name:
Title: Executive Vice President --------------------------
Title:
---------------------------------
2
IN WITNESS WHEREOF, the parties have caused this Amendment to be entered
into by their duly authorized representatives as of the date first above
written.
ELI LILLY AND COMPANY NEOSAN PHARMACEUTICALS INC.
By: By: /s/ David M. Hurley
--------------------------------- ------------------------------------
Printed Name: Printed Name: David M. Hurley
----------------------- Title: President of Neosan
Title: Pharmaceuticals
------------------------------
2
AMENDMENT NO. 2 TO THE ASSIGNMENT,
TRANSFER AND ASSUMPTION AGREEMENT
This Amendment No. 2 to the Assignment, Transfer and Assumption Agreement
(the "Amendment") is executed as of the 31st day of October, 2002 and effective
as of March 28, 2002 (the "Effective Date"), by and between Eli Lilly and
Company ("Lilly") and aaiPharma LLC (f/k/a NeoSan Pharmaceuticals Inc.)
("aaiPharma LLC").
RECITALS
1. Lilly and aaiPharma LLC heretofore entered into that certain Assignment,
Transfer and Assumption Agreement (the "Agreement") dated as of February 18,
2002 and entered into that certain Amendment No. 1 ("Amendment No. 1") dated as
of March 28, 2002.
2. The parties now wish to further amend the Agreement as set forth in this
Amendment.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Capitalized terms not otherwise defined herein will have the meaning
given to them in the Agreement. All references in the Agreement and Amendment
No. 1 to "NeoSan Pharmaceuticals, Inc." are hereby replaced by references to
"aaiPharma LLC", and all references in the Agreement and Amendment No. 1 to
"NeoSan" are hereby replaced by references to "aaiPharma LLC".
2. As of the Effective Date, SCHEDULE 1.6 of the Agreement will be replaced
in its entirety by SCHEDULE 1.6 attached to this Amendment and incorporated
herein by reference.
3. As of the Effective Date, Section 1.12 of the Agreement will be replaced
in its entirety with the following:
"1.12 BOOKS AND RECORDS" means all files, documents, instruments,
papers, books and records (including scientific, regulatory and financial)
owned by Lilly or an Affiliate of Lilly to the extent, and only to the
extent, they are significantly related to the Purchased Assets (including
the Products or the manufacture, marketing, promotion, sale or distribution
thereof), including the DMFs, any sales records, pricing lists, customer
lists (to the extent owned by Lilly or its Affiliates), vendor lists,
financial data, regulatory information or files (including adverse event
reports and annual regulatory reports), litigation files, patent
prosecution files, adverse claims or demands, investigation information or
files, trademark registration certificates, trademark renewal certificates.
4. As of the Effective Date, SCHEDULE 1.44 of the Agreement will be
replaced in its entirety by SCHEDULE 1.44 attached to this Amendment and
incorporated herein by reference. The attached SCHEDULE 1.44 replaces and
supersedes the SCHEDULE 1.44 in the Agreement and Amendment No. 1.
5. As of the Effective Date, SCHEDULE 4.8 of the Agreement will be replaced
in its entirety by SCHEDULE 4.8 attached to this Amendment and incorporated
herein by reference. The attached SCHEDULE 4.8 replaces and supersedes the
SCHEDULE 4.8 in the Agreement and Amendment No. 1.
6. As of the Effective Date, a new Section 1.71 is hereby added and will
read as follows:
"1.71 "DMFS" mean those drug master files listed in SCHEDULE 1.71
attached hereto."
7. As of the Effective Date, the SCHEDULE 1.71 attached hereto and
incorporated herein by reference will be SCHEDULE 1.71 of the Agreement.
8. As of the Effective Date, Section 3.5 will be replaced in its entirety
with the following:
"3.5 GRANT OF LICENSE TO LILLY.
(a) Subject to the terms and conditions set forth herein, as of the
Closing Date, aaiPharma LLC hereby grants to Lilly and its Affiliates, for
no additional consideration, and Lilly and its Affiliates accept, a
royalty-free, non-exclusive license, with a right to sublicense, except as
limited below, in the United States under the Product Intellectual
Property, the NDAs, the DMFs and the Marketing Materials solely to
manufacture, or to have manufactured, the Products for aaiPharma LLC under
the Manufacturing Agreement and otherwise fulfill its obligations
thereunder; provided, however, that the non-exclusive license granted by
aaiPharma LLC above will terminate effective upon the termination of the
Manufacturing Agreement.
(b) Subject to the terms and conditions set forth herein, as of the
Closing Date, aaiPharma LLC hereby grants to Lilly and its Affiliates, for
no additional consideration, and Lilly and its Affiliates accept, an
exclusive, royalty-free license, with the right to sublicense, under the
Marketing Materials, DMFs, Copyrights and Assigned Trade Dress to sell,
distribute, use, offer to sell, import, market and promote the Product
outside the United States or to make or have made the Product inside the
United States for selling, distributing, using, offering to sell,
importing, marketing and promoting the Product outside of the United
States. The license granted pursuant to this Section 3.5(b) will terminate
with respect to the Copyrights, the Marketing Materials, the DMFs or the
Assigned Trade Dress on aaiPharma LLC's receipt of written notification
from Lilly that it is abandoning its license with respect to the
Copyrights, the Marketing Materials, the DMFs and the Assigned Trade Dress.
9. As of the Effective Date, the first sentence of Section 4.1 will be
replaced in its entirety with the following:
"Lilly represents and warrants that the Product Intellectual Property
(other than the Assigned Trade Dress), Marketing Materials, the Licensed
Trademark and Trade Dress (other than the Common Law Licensed Trade Dress)
and the Licensed Technology (collectively, the "Intellectual Property") and
the Assigned Trade Dress, Common Law Licensed Trade Dress and DMFs contain
all the Patents, Know-How, technology, trade secrets, trademarks, and trade
dress necessary to conduct the Activities or to make, have made,
distribute, use, sell, offer to sell, have sold, market, co-market, import
(into the United States), promote and co-promote Products in the United
States."
10. As of the Effective Date, the fourth sentence of Section 4.1 will be
replaced in its entirety with the following: "For avoidance of doubt,
"Intellectual Property" does not mean or include the Assigned Trade Dress,
Common Law Licensed Trade Dress or the DMFs."
11. As of the Effective Date, the first sentence of Section 4.8 will be
replaced in its entirety with the following: "Except with respect to those of
the NDAs listed in part c. of SCHEDULE 4.8 attached hereto, Lilly represents and
warrants that Lilly has furnished aaiPharma LLC with access to a complete copy
of the NDAs, including all amendments and supplements thereto, and that Lilly
has no new drug applications or INDs pertaining to propoxyphene-based
pharmaceutical products, whether issued, pending, abandoned, withdrawn, or in
draft form, other than those pertaining to the NDAs."
12. As of the Effective Date, subpart (ii) of the second sentence of
Section 4.8 will be replaced in its entirety with the following: "(ii) except
with respect to those of the NDAs listed in SCHEDULE 4.8 attached hereto which
are designated as never having been approved by the FDA, each of the NDAs has
been approved by FDA, and, except with respect to those of the NDA's listed in
part a. of SCHEDULE 4.8 attached hereto, nothing has come to the attention of
Lilly which has led Lilly to believe that any of the NDAs are not in good
standing with the FDA."
13. As of the Effective Date, the reference to "SCHEDULE 4.8" in the sixth
sentence of Section 4.8 will be replaced in its entirety with "part b. of
Schedule 4.8."
14. As of the Effective Date, the last sentence of Section 4.8 will be
replaced in its entirety with the following: "Except for the representation and
warranty contained in this Section 4.8, aaiPharma LLC has had full and adequate
opportunity to review and evaluate the NDAs (except as otherwise disclosed in
SCHEDULE 4.8 attached hereto), aaiPharma LLC is relying upon its own judgment
and experience in connection with all of the NDAs, and Lilly is assigning,
selling, conveying, transferring and delivering all of the NDAs to aaiPharma LLC
"AS IS"."
15. As of the Effective Date, subpart (c) of the first sentence of Section
4.14 will be replaced in its entirety with the following: "(c) any filing
reasonably requested by aaiPharma LLC as may be necessary to change the records
of ownership of the DMFs with the ED A or to change the records of ownership in
the U.S. Trademark or Copyright Office,".
16. As of the Effective Date, the last sentence of Section 6.15 will be
replaced in its entirety with the following: "Upon the Closing Date, aaiPharma
LLC hereby grants to Lilly the right to reference the NDAs and DMFs for purposes
of performing the Permitted Uses and obtaining and/or maintaining marketing
authorizations outside of the United States.
17. In all other respects, the Agreement, as amended by Amendment No. 1,
shall remain in full force and effect.
18. This Amendment No. 2 may be executed in any number of counterparts,
each of which will be deemed an original but all of which together constitute a
single instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be entered
into by their duly authorized representatives as of the date first above
written.
ELI LILLY AND COMPANY aaiPHARMA LLC
By: /s/ John C. Lechleiter By: /s/ /s/ David Hurley
--------------------------------- ------------------------------------
Printed Name: John C. Lechleiter By: David Hurley
Title: Executive V.P. Title: President
SCHEDULE 1.44
NDAS
U.S. NEW DRUG APPLICATIONS (NDAS) AND INVESTIGATIONAL NEW DRUG (IND)
APPLICATIONS
NDA/IND LIST
Date Withdrawn or
IND/NDA# LY # Product Description # of Vols Inactivated
- -------- ----- ---------------------------------------------- ---------- -----------------
48 Darvon Compound - with A.S.A. 1 04/65
320 29352 Darvon - Suspension 1 02/66
1,194 Darvon and Amytal and A.S.A. 1 07/67
1,218 Darvon and Aventyl 2 10/65
1,357 Stero Darvon with ASA 3 02/68
3,029 Darvon - N Propoxyphene Napsylate 2 01/69
1,599 21720 Darvon (Ampoules) 1 02/67
1,656 29352 Darvon N - Dextro Propoxyphene Napsylate 6 11/90
5,159 29352 Darvocet - Propoxyphene HCL w/ Acetaminophen 1 11/90
5,655 Darvocet N - Suspension 1 06/84
5,727 29352 Darvocet N - Tablets 9
10,471 Darvon N - Pediatric Suspension 1 05/84
Propoxyphene derivatives, dextro, sustained
1,393 action 2 08/68
9,750 Propoxyphene napsylate and methadone HCL 1 09/80
APPROX. NUMBER OF IND VOLS 32
16-844 Darvocet tablet 30
17-122 Darvocet N tablet 76
17-507 Darvocet N 100 suspension 3
10-996 Darvon pulvule 50
10-997 Darvon pulvule no. 364,365 47
16-827 Darvon N pulvules 38
16-829 Darvon N w/ A.S.A. 4
16-861 Darvon N suspension 13
16-862 Darvon N tablet 20
16-863 Darvon N w/ A.S.A. tablet 13
16-864 Darvocomp N-100 tablet 7
12-032 Darvotran pulvules 10 03/75
14-768 Stero-Darvon with ASA 13 11/78
16-828 Darvon-N Compound 100 with aspirin, phenacetin 4 NA
and caffeine
17-124 Actimets Darvon 4 NA
13-804 Darvon Injection 11 11/65
12-928 Levo-propoxyphene napsylate pulvules 9
10-995 Darvon with A.S.A. pulvules 2 09/71
13-662 Propoxyphene napsylate suspension 8 08/71
12-629 Levo-propoxyphene oxide HCL none found 08/71
13-097 Levo-propoxyphene with aspirin 2 06/77
APPROX. NUMBER OF NDA VOLS 364
NA = NEVER APPROVED
SCHEDULE 1.71
DMFS
DMF# Compound/location Status
- ---- -------------------------------------- -----------
4886 propoxyphene hydrochloride- Mayaguez current
5430 propoxyphene hydrochloride- Tippecanoe not current
4880 propoxyphene napsylate- Mayaguez current
5477 propoxyphene napsylate- Tippecanoe not current
SCHEDULE 4.8
A. WITHDRAWN INDS/NDAS
IND/NDA # LY# Product Description # of Vols Date Withdrawn
- --------- ----- ---------------------------------------------- --------- --------------
1,357 Stero Darvon with ASA 3 02/68
1,599 21720 Darvon (Ampoules) 1 02/67
1,656 29352 Darvon N - Dextro Propoxyphene Napsylate 6 11/90
5,159 29352 Darvocet - Propoxyphene HCL w/ Acetaminophen 1 11/90
12-032 Darvotran pulvules 10 03/75
14-768 Darvon with ASA 13 11/78
10-995 Darvon with A.S.A. pulvules 2 09/71
13-662 Propoxyphene napsylate suspension 8 08/71
12-629 Levo-propoxyphene oxide HCL 0 08/71
13-097 Levo-propoxyphene with aspirin 2 06/77
1,393 Propoxyphene derivatures, dextro, sustained 2 08/68
action
9750 Propoxyphene napsylate and methadone 1 09/80
13-804* Darvon Injection 11 11/65
16-828* Darvon N compound 100 with aspirin, phenacetin 4 NA
and caffeine
17-124* Actimets Darvon 4 NA
B. FORM 483S
Form 483 issued by the FDA November 10, 1999 with respect to Lilly's
Mayaguez, Puerto Rico facility
C. COPIES NOT MADE AVAILABLE TO AAIPHARMA LLC
IND/NDA # LY# Product Description # of Vols Date Withdrawn
- --------- ----- ---------------------------------------------- --------- --------------
12-928 Levo-Propoxyphene napsylate pulvules 9
1,357 Stero Darvon with ASA 3 02/68
10-995 Darvon with A.S.A. pulvules 2 09/71
13-662 Propoxyphene napsylate suspension 8 08/71
12-629 Levo-propoxyphene oxide HCL 0 08/71
13-097 Levo-propoxyphene with aspirin 2 06/77
1,393 Propoxyphene derivatures, dextro, sustained 2 08/68
action
9,750 Propoxyphene napsylate and methadone HCL 1 09/80
13-804* Darvon Injection 11 11/65
* NDAs never approved by FDA