EXHIBIT 10.28
CONFIDENTIAL PORTIONS OF THIS
EXHIBIT MARKED [ ] HAVE BEEN
OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND
EXCHANGE COMMISSION
DISTRIBUTION AGREEMENT
----------------------
This Distribution Agreement (the "Agreement") is entered into as of
the 24th day of February, 1994 (the "Execution Date") by and among SANO
Corporation, a Florida corporation ("SANO"), Pharmaceutical Resources,
Inc., a New Jersey corporation ("PRI"), and Par Pharmaceutical, Inc., a
New Jersey corporation ("PPI").
WHEREAS, SANO has two transdermal generic drug delivery products in
clinical testing, more fully described in Appendix I hereto as Product
"A" and Product "B" (the "Licensed Products"); and
WHEREAS, SANO has three other transdermal generic drug delivery
products at less advanced stages of development and testing, as more
fully described in Appendix II hereto, and may develop other transdermal
generic drug delivery products during the term of this Agreement
(collectively, the "Option Products"); and
WHEREAS, SANO desires to implement the program described in Exhibit
A with respect to the Licensed Products (the "Development Program"); and
WHEREAS, PPI desires to purchase certain rights with respect to the
distribution of the Licensed Products and the Option Products, subject to
the terms and conditions of this Agreement;
NOW, therefore, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
TERMS AND CONDITIONS
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1.1 Definitions. As used in this Agreement, the following terms
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shall have the meaning ascribed to them below:
(a) "Affiliate," as to any Person, shall have the meaning set
forth in Rule 405 under the Securities Act of 1933.
(b) "Costs" shall mean, with respect to production of a
Licensed Product, the cost of goods incurred by SANO in the production
thereof determined in accordance with generally accepted accounting
principles applied on a consistent basis, as determined by SANO's
independent certified public accountants; provided, however, that
notwithstanding the foregoing, it being the intent of the parties that
Costs make SANO whole with respect to all reasonable expenditures related
to the Licensed Product, Costs shall include, without limitation, (i) the
delivered cost of all ingredients and other raw materials used therein,
(ii) a percentage of SANO's overall labor cost equal to the portion which
labor hours devoted to the Licensed Product's production bears to total
labor hours devoted to all SANO product production, (iii) packaging and
other direct manufacturing and quality control costs and (iv) ratably
allocated costs of marketing and promotion (if any), product liability
insurance and general overhead; provided, further, that, notwithstanding
the foregoing, Costs shall not include (i) any cost incurred by SANO in
completing the Development Program, (ii) any royalties or similar
payments paid or payable by SANO with respect to any Licensed Product, or
(iii) any cost specifically related to the distribution of the Licensed
Product outside the United States.
(c) "Development Program" shall mean all actions, including,
without limitation, research conducted as a part of SANO's pre-clinical
and clinical activities, which is required or reasonably necessary to
obtain all requisite governmental approvals for the testing, manufacture
and sale of Licensed Products during the term of this
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Agreement, in substantial conformity with the program described in
Exhibit A.
(d) "Exclusive" shall mean, with respect to any right herein
granted, that no other party shall have such right, directly or
indirectly.
(e) "Generic" shall mean, with respect to any drug or product,
that such drug or product does not comprise a substance or compound that
is covered by a claim under any unexpired U.S. Patent and/or which is not
entitled to any period of market exclusivity under the Orphan Drug Act or
the Drug Price Competition and Patent Term Restoration Act of 1984
according to 21 U.S.C.A. 355(j)(4)(D)(i)or (ii).
(f) "Licensed Product" shall mean any Transdermal Generic Drug
Delivery System listed on Exhibit A hereto, or which may become a
Licensed Product pursuant to Article XII hereof.
(g) "Net Sales" shall have the meaning set forth in Exhibit B
hereto.
(h) "Person" shall include any individual, corporation,
partnership, association, cooperative, joint venture, or any other form
of business entity recognized under the law.
(i) "Sale" shall mean any action involving selling.
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(j) "SANO's Technology" shall mean any and all data,
information, technology, know-how, process, technique, method, skill,
proprietary information, trade secret, development, discovery, and
inventions, owned or controlled by SANO and specifically related to a
Transdermal Generic Drug Delivery System for the Licensed Products now
existing or developed in the future under and during the course of the
Development Program or otherwise, as well as information related to the
manufacture of Licensed Product(s) and specifications and procedures
related thereto.
(k) "Sell" shall mean to, directly or indirectly, sell,
distribute, supply, solicit or accept orders for, negotiate for the sale
or distribution of, or take any other action that is in furtherance of
any of the foregoing.
(l) "Specifications" shall mean the terms and conditions
applicable to the Licensed Product(s) as described in the abbreviated new
drug application ("ANDA") approved by the United States Food and Drug
Administration (the "FDA") covering the Licensed Product(s), as the same
may be supplemented from time to time.
(m) "Standard Packaging" shall mean a Licensed Product packaged
in individual pouches and in individual folding cartons consisting of
pouch units per carton reasonably specified by PPI and containing any
labels and labelling required therefor by the FDA and provided in
packages that are appropriate for regulatory and marketing purposes, and
produced at a SANO facility in the United States, the grade and quality
of
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the labels, labelling and packaging materials being as specified in the
ANDA therefor.
(n) "Transdermal Generic Drug Delivery System" shall mean a
generic version of a branded transdermal adhesive patch.
(o) "United States" shall mean the 50 states of the United
States of America, plus the District of Columbia, the Commonwealth of
Puerto Rico, the U.S. Virgin Island, Guam, Samoa and any other territory
which, on the Execution Date, is a United States government protectorate
wherein an ANDA approved by the FDA is required to sell the Licensed
Products in such territory.
ARTICLE II
REPRESENTATIONS OF SANO
-----------------------
2.1 SANO represents and warrants as follows:
2.1.1 Organization, etc. It is duly organized and validly
------------------
existing under the laws of the State of Florida, has all requisite power
and authority to conduct its business as now, and as proposed to be,
conducted and to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly authorized, executed and
delivered by SANO and represents a valid and binding obligation
enforceable against SANO in accordance with its terms.
2.1.2 No Conflicts; Consents. Execution and delivery hereof,
----------------------
or performance by SANO hereunder, will not (a) violate or create a
default under (i) SANO's
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Articles of Incorporation or by-laws (true and correct copies of which
have been delivered to PPI), (ii) any mortgage, indenture, agreement,
note or other instrument to which it is a party or to which its assets
are subject or (iii) any court order or decree or other governmental
directive or (b) result in the action of any lien, charge or encumbrance
on any material portion of SANO's assets, except as contemplated hereby.
2.1.3 SANO's Technology. SANO's Technology is, to the best
-----------------
knowledge of SANO, sufficient to enable SANO to complete the Development
Program as contemplated hereby. SANO has received no notice, and is not
aware, that any portion of SANO's Technology infringes upon the rights of
any other Person.
2.1.4 Development Program. SANO has successfully completed all
-------------------
phases of the Development Program scheduled on Exhibit A hereto for
completion on or prior to the Execution Date and has no knowledge of any
fact or circumstance which is reasonably likely to delay or prevent
completion of the Development Program, other than general conditions
related to the approval process; SANO does not hereby represent or
warrant that the Development Program will be completed in accordance with
the schedule set forth in the Development Program, or at all.
2.1.5 Information. All data and other information relating to
-----------
SANO and/or the Licensed Products provided by SANO, or its agents, to PPI
was derived from SANO's records (which have been diligently, and to the
best of SANO's knowledge, accurately maintained in all material respects)
and is an accurate copy or summary thereof in all material respects.
2.1.6 Employees. All key employees of SANO have executed
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appropriate
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confidentiality agreements with SANO and assignments of intellectual
property rights in favor of SANO. All key employees of SANO have
executed appropriate non-compete agreements which, by their terms, extend
to not earlier than [December 31, 1996].
2.1.7 SANO represents and warrants to PPI that, to the best of
its knowledge, information and belief, it is not prohibited by any
federal, state or local law, rule or regulation or by any order,
directive or policy of the United States government or any state or local
government thereof or any federal, state or local regulatory agency or
authority having jurisdiction with respect to the distribution of
pharmaceutical products within its territorial jurisdiction from selling
the Licensed Products within the territorial jurisdiction of such
government, regulatory agency or authority (on the assumption that it
holds whatever licenses are required for a foreign corporation to carry
on business generally within such jurisdiction) and that SANO is not an
Ineligible Person or Person from whom any United States federal, state or
local government, regulatory authority or agency which purchases
pharmaceutical products (including, without limitation, the federal
Defense Logistics Agency) will or may not purchase any products
manufactured by it or with whom it will or may not otherwise conduct
business as a result its being publicly listed or otherwise (except for
the fact that it is a foreign corporation). SANO further represents and
warrants that it is not aware of any claims of infringement against the
Licensed Products or of any requirement that it obtain licenses to
patents or other proprietary rights with respect thereto. SANO shall use
its reasonable efforts to have all its employees and, to the extent
reasonably practicable, its agents and consultants employed in or for any
Development Program, execute written agreements requiring
7
assignment to SANO of any developments, discoveries, improvements and/or
inventions in any Licensed Product made by such employees under and
during the course of the Development Program.
ARTICLE III
OBLIGATIONS OF SANO
-------------------
3.1 Level of Effort. SANO shall use its reasonable efforts,
---------------
including, without limitation, the employment of a sufficient number of
technically qualified officers and employees, to complete the Development
Program for each Licensed Product as set forth in Exhibit A.
3.2 Progress Reports. SANO shall, on a monthly basis, by the
----------------
tenth day of each month, inform PPI in writing of the progress of the
Development Program and the commencement of any project within the
Development Program.
3.3 Program Updates. On a date which shall be approximately three
---------------
(3) months after the date hereof, and at three-month intervals
thereafter, representatives of SANO and of PPI shall meet to review the
progress and status of the Development Program then underway. At such
meetings, PPI shall have the right to request the allocation of
priorities to the various projects comprising the Development Program and
to suggest procedures for their implementation, which requests shall be
reasonably considered by SANO.
3.4 Bioavailability Study; Use of Funds. SANO will commence a
-----------------------------------
single dose bioavailability study with respect to the relevant Licensed
Product promptly upon its
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receipt of the payments specified in Section 7.1(a)(ii) and Section
7.1(b)(ii), respectively, and shall use such amounts in respect thereof,
to the extent necessary. All payments under Section 7.1 will be added to
SANO's general funds and will not be specifically set aside for the
development of any other product of SANO or to fund costs specific to the
distribution of a Licensed Product outside the United States.
3.5 Supply and Use of Information. The parties shall, as promptly
-----------------------------
as possible, provide to each other any information that comes to the
knowledge of a responsible officer of any party relating to any adverse
reaction or other adverse event occasioned during research on,
development or use of a Licensed Product. Any provision of information
to PPI shall be subject to the confidentiality obligations of Section
14.4.
3.6 Clinical Testing. All pre-clinical, clinical and post-
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clinical testing and stability testing and other actions, including but
not limited to completion of the Development Program, required to obtain
all requisite government approvals in the United States for the
manufacture and sale of each Licensed Product shall be conducted by SANO,
at its sole expense.
3.7 Governmental Approvals. SANO shall file all appropriate
----------------------
requests and other filings with the appropriate government agencies
within the United States in order to obtain all requisite approvals for
the testing, manufacture, sale and use of the Licensed Product(s). The
decision regarding the timing of said filings shall be in SANO's sole
discretion. SANO shall have full and complete ownership of all
governmental approvals relating to Licensed Products. SANO shall provide
PPI with appropriate sections of and a right of reference to any
application for registration in the United States except with
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respect to those aspects of any formulation or manufacturing process that
is reasonably deemed proprietary by SANO.
3.8 Other Products. SANO shall reasonably apportion or allocate
--------------
its resources among its products to accommodate the Development Programs
for Licensed Products.
3.9 Title. SANO will protect and defend its rights to all
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Licensed Products and SANO's Technology, and will indemnify and hold PPI,
PRI and their Affiliates, harmless, from and against any claims of
infringement or other claim that SANO is not the owner thereof.
3.10 Subsidiaries and Affiliates. SANO will cause its subsidiaries
---------------------------
and affiliates to comply with the restrictions and limitations imposed on
SANO hereunder with respect to Licensed Products and Option Products.
ARTICLE IV
EXCLUSIVE DISTRIBUTOR
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4.1 Subject to the provisions of this Agreement, SANO hereby
appoints PPI as the exclusive distributor of the Licensed Products for
the United States and PPI hereby accepts such appointment and agrees to
act as such exclusive distributor. The rights and licenses granted to
PPI under this Agreement shall henceforth be referred to as "the Right."
PPI acknowledges that it has no rights with respect to SANO's Technology
or the Licensed Products, except for the distribution rights with respect
to the Licensed Products as herein described.
4.2 SANO covenants and agrees that, during the term of this
Agreement or until the Right (or its exclusive nature) is terminated in
accordance with the provisions hereof:
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4.2.1 SANO will refer to PPI all inquiries concerning
potential purchases of Licensed Products received by it from Persons
located in the United States or from Persons outside the United States if
SANO knows or reasonably suspects that such Person intends to resell or
export the Licensed Product to the United States;
4.2.2 SANO will not, directly or indirectly, knowingly sell any
Licensed Product in the United States nor to any Person outside of the
United States if SANO reasonably expects that such Person intends to
resell or export the Licensed Product to the United States and, if
notified by PPI that one of SANO's customers is selling the Licensed
Product in the United States in any material respect, SANO shall either
cease to supply such customer or obtain (and enforce, if necessary) an
undertaking from such customer not to sell the Licensed Product in the
United States (unless SANO is precluded from taking such action under
applicable law). PPI acknowledges that SANO will use reasonable efforts
to prevent the sale of Licensed Products in United States by Persons
other than PPI, but shall not be held responsible if, despite such
efforts, it is unsuccessful in so doing (subject to its obligations above
to cease to supply or to obtain and enforce the undertaking as and to the
extent contemplated above).
4.2.3 PPI shall not, and shall not authorize, permit or suffer
any of its Affiliates to, purchase any Transdermal Generic Drug Delivery
System which has the same strength, contains the same active ingredient
and is for the same indication as, and is competitive with, any of the
Licensed Products (a "Competitive Product") for distribution, sale or use
in the United States from any Person other than SANO. PPI shall not, and
shall not authorize, permit or suffer any of its Affiliates to, seek
regulatory
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approval in the United States for any Competitive Product or to, directly
or indirectly, manufacture, sell, handle, distribute or be financially
interested (except as a stockholder with not greater than a 5% interest
in a public company) in the sales of such products within the United
States for its own account or for the account of any other Person as
agent, distributor or otherwise. The foregoing shall not apply to a
Licensed Product that is not then available from SANO for commercial sale
by PPI and is substantially behind the schedule set forth in the relevant
Development Program.
Notwithstanding the foregoing, if PPI or PRI becomes an
Affiliate of an entity (the "Merger Partner") as a result of a merger,
acquisition, or other similar extraordinary corporate transaction, and
such Merger Partner is engaged in the manufacture or distribution of a
Competitive Product that PPI is then distributing pursuant to the
provisions of this Agreement, PPI shall so notify SANO and shall offer
(the "Offer") to sell, assign and transfer to SANO the Right with respect
to the Licensed Product with which such Competitive Product is
competitive in exchange for an amount equal to the Licensed Product Fee
(as hereinafter defined) for such Licensed Product. If, within thirty
(30) days after its receipt of the Offer, SANO accepts the Offer, SANO
shall, within fifteen (15) days of such acceptance, deliver to PPI,
against delivery of appropriate instruments of release and transfer, its
promissory note in form and substance reasonably acceptable to PPI,
payable to the order of PPI, in the principal amount of the Licensed
Product Fee, bearing interest at the prime rate of Citibank, N.A., as
announced from time to time at its offices in New York City (the "Prime
Rate"), with interest and principal payable on the first anniversary of
the date of delivery of such note. From and
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after the date of delivery of such note, PPI shall have no rights with
respect to the relevant Licensed Product and SANO shall be free to grant
any rights related thereto to a third party or to retain such rights for
itself. If SANO declines to accept the Offer or fails to accept the
Offer within the aforesaid 30-day period, this Agreement shall remain in
full force and effect, except that the provisions of this Section 4.2.3
shall not apply to the Competitive Product. PPI shall have no rights
with respect to an Option Product as to which a Merger Partner has a
Competitive Product. PPI shall notify SANO promptly if any Merger
Partner has a Competitive Product with respect to an Option Product.
4.2.4 PPI shall not, and shall not authorize, permit or suffer
any of its Affiliates to, directly or indirectly, sell any Licensed
Product to any Person outside of the United States, nor to any Person in
the United States if PPI or any of its Affiliates reasonably expects that
such Person intends, directly or indirectly, to sell or export the
Licensed Product outside of the United States. If PPI is notified by
SANO that one of its customers or a customer of PPI or any of its
Affiliates is exporting the Licensed Product out of the United States in
any material respect PPI shall (or shall cause its Affiliates to) either
cease to supply such customer or obtain (and enforce, if necessary) an
undertaking from such customer not to sell the Product outside of the
United States (unless PPI or any such Affiliate is precluded from taking
such action under applicable law). SANO acknowledges that PPI will use
(and will cause its Affiliates to use) reasonable efforts to prevent its
customers from exporting any Licensed Product out of the United States
but shall not be held responsible if, despite such efforts, it is
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unsuccessful in so doing (subject to its obligations above to cease to
supply or to obtain and enforce the undertaking as and to the extent
contemplated above).
4.2.5 PPI shall refer to SANO any inquiry or order for Licensed
Products which PPI or any of its Affiliates may receive from any Person
located outside of the United States and from any Person located in the
United States where PPI or any of its Affiliates knows or has reason to
suspect that such Person intends to export the Licensed Products outside
of the United States.
4.2.6 The parties acknowledge, agree and declare that the
relationship hereby established between PPI and SANO is solely that of
buyer and seller, that each is an independent contractor engaged in the
operation of its own respective business, that neither party shall be
considered to be the agent of the other party for any purpose whatsoever,
except as otherwise expressly indicated in this Agreement, and that,
except as otherwise expressly indicated in this Agreement, neither party
has any authority to enter into any contract, assume any obligations or
make any warranties or representations on behalf of the other party.
Nothing in this Agreement shall be construed to establish a partnership
or joint venture relationship between or among the parties.
ARTICLE V
REPRESENTATIONS OF PPI AND PRI; OBLIGATIONS
-------------------------------------------
5.1 PPI and PRI represent and warrant as follows:
5.1.1 Organization, etc. They are duly organized and validly
------------------
existing under the laws of the State of New Jersey, have all requisite
power and authority to
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conduct their business as now and as proposed to be conducted and to
execute, deliver and perform their obligations under this Agreement.
This Agreement has been duly authorized, executed and delivered by PPI
and PRI and represents a valid and binding obligation enforceable against
PPI and PRI in accordance with its terms.
5.1.2 No Conflicts; Consents. Execution and delivery hereof,
----------------------
or performance by either PPI or PRI hereunder, will not (a) violate or
create a default under (i) PPI's and PRI's Certificates of Incorporation
or by-laws (true and correct copies of which have been delivered to
SANO), (ii) any mortgage, indenture, agreement, note or other instruments
to which either is a party or by which either's assets are subject or
(iii) any court order or decree or other governmental direction or (b)
result in the action of any lien, charge or encumbrance or any material
portion of PPI's and PRI's assets.
5.1.3 Information. All data and other information relating to
-----------
PPI and PRI provided to SANO by PPI and PRI, or their agents, was derived
from PPI's and PRI's records (which have been diligently maintained) and
is an accurate copy or summary thereof in all material respects.
5.1.4 Sufficiency. PPI maintains and agrees that it will
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continue to maintain those places of business and equipment to be used in
storing and shipping the Licensed Products in accordance with Current
Good Manufacturing Practices of the FDA and all other applicable
requirements of the FDA (as the same may be modified from time to time).
PPI hereby further represents and warrants that it currently has and/or
has available to it and maintains and agrees to continue to have and/or
to have available to it and maintain an adequate marketing organization
and qualified sales persons to
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promote the sale of the Licensed Products in the United States.
5.2 PPI shall purchase the Products from SANO as contemplated in
Section 6.1 hereof.
5.3 PPI will use its reasonable efforts (utilizing its marketing,
distribution and management systems and those of its Affiliates) to
develop a market for and sell the Licensed Products in the United States,
such efforts to be not less rigorous than those efforts used by PPI in
relation to its leading or principal products. PPI shall devote
particular attention to the marketing and sale of the Licensed Products
and shall use its resources in a way it deems most effective in promoting
the Licensed Products given market conditions. SANO shall not engage in
marketing and promotion of the Licensed Products unless reasonably
requested to do so by PPI.
5.4 PPI shall have sole discretion in setting the sales price for
the sale of the Licensed Products, provided that PPI shall not
specifically discount the price of the Licensed Products for the benefit
of PPI or any of its Affiliates' other products or to otherwise use the
Licensed Products as a loss leader or incentive to procure the sale of
PPI's or any of its Affiliates' other products. Rebate and other
discount programs (excluding any program where the price of the Licensed
Products are discounted primarily for the benefit of enhancing the sale
of PPI's or any of its Affiliates' other products) generally available to
PPI's customers on the purchase of pharmaceutical products shall not be
prohibited by this Section 5.4, provided that such programs shall be in
accordance with industry standards for comparable products and shall be
designed to promote the sale of the Licensed Products and not other
products.
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5.5 PPI shall comply with all applicable laws, rules and
regulations relating to transporting, storing, advertising, promoting and
selling of the Licensed Products within the United States and shall
assume sole responsibility for all credit risks and collection of
receivables with respect to Licensed Products sold by it and its
Affiliates, and, except as expressly provided herein, in respect of all
dealings between itself (and its Affiliates) and its (and their)
customers.
5.6 PPI shall notify SANO promptly upon becoming aware of any
adverse information relating to the safety or effectiveness of a Licensed
Product and shall consult from time to time with regard to competition or
potentially competitive products.
5.7 PPI hereby further represents and warrants to SANO that, to
the best of its knowledge, information and belief, neither it nor any of
its Affiliates is prohibited by any federal, state or local law, rule or
regulation or by any order, directive or policy of the United States
government or any state or local government thereof or any federal, state
or local regulatory agency or authority having jurisdiction with respect
to the distribution of pharmaceutical products within its territorial
jurisdiction from selling the Licensed Products within the territorial
jurisdiction of such government, regulatory agency or authority and that
neither PPI nor any of its Affiliates is a Person who, by public notice,
is listed by a United States federal agency as debarred, suspended,
proposed for debarment or otherwise ineligible for federal programs in
the United States (an "Ineligible Person") or Person from whom any United
States federal, state or local government, regulatory authority or agency
which purchases pharmaceutical products (including, without limitation,
the federal Defense Logistics Agency) will or may not
17
purchase any products or with whom it will or may not otherwise conduct
business as a result of any of its Affiliates or PPI being publicly
listed or otherwise.
5.8 PPI shall consult with SANO from time to time with respect to
opportunities of which it becomes aware for the development of
transdermal applications for generic or proprietary drugs or of
opportunities for the development of ingredients in transdermal form. In
the event that PPI or its Affiliates intend to engage in the development
of a transdermal product, PPI or such Affiliate shall afford SANO the
opportunity to participate in such development, shall negotiate with SANO
on the terms of such participation, and shall not enter into an agreement
with any other manufacturer of transdermal delivery systems without
offering SANO the right of first refusal in accordance with the following
procedure: PPI shall notify SANO of the material terms and conditions on
which it proposes to enter into such agreement. Within 30 days of its
receipt of such notice, SANO shall notify PPI whether it wishes to enter
into such an agreement on such terms and conditions. If SANO notifies
PPI within such 30 days that it does wish to enter into such an
agreement, PPI and SANO shall prepare and enter into a definitive
agreement on substantially the terms and conditions set forth in the
notice. If SANO fails to so notify PPI within such 30 days, PPI may
enter into such an agreement with a third party on substantially the
terms and conditions set forth in the notice. The foregoing shall not be
deemed to require PPI (i) to divulge confidential information of other
manufacturers, (ii) to disclose to SANO the contents of confidential
proposals made to PPI by other Persons, or (iii) to refrain from dealing
with manufacturers of transdermal delivery systems under development by
such manufacturers that are not a
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Competitive Product with respect to any Licensed Product or Option
Products under active development.
ARTICLE VI
DELIVERY
--------
6.1 Licensed Products shall be made available to PRI for pickup
ready for shipment in Standard Packaging, or as otherwise permitted by
the FDA, at SANO's facilities located in Plantation, Florida, or such
other facilities in the continental United States as SANO may utilize
with the consent of PPI, which consent shall not be unreasonably withheld
or delayed, and SANO shall use its reasonable efforts to make available
to PPI sufficient quantities of the Licensed Products to satisfy orders
for the Licensed Products. SANO shall be solely responsible for the
contents of the labels and artwork on all finished labelled products sold
by PRI and its Affiliates. SANO shall provide all Standard Packaging for
the Licensed Products.
6.2 To assist SANO in scheduling production for the manufacture of
the Licensed Products, PPI shall provide to SANO, quarterly, a nine month
rolling forecast of its requirements for a Licensed Product. The first
forecast shall be provided by PPI to SANO approximately six months prior
to the anticipated market launch of a Licensed Product, as reasonably
estimated by the parties, and thereafter shall be provided to SANO on or
before the 20th day of the first month of each successive quarterly
period (to forecast the requirements for the next nine succeeding
calendar months). It is understood and agreed that all forecasts are
estimates only and PPI shall only be bound
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to purchase the Licensed Products pursuant to purchase orders submitted
by it to SANO. All purchase orders shall be for minimum batch size
quantities reasonably agreed by the parties and shall anticipate an
order/production/availability cycle of approximately twelve weeks during
the first two contract years (as defined below) of this Agreement and an
order/production/availability cycle of approximately sixteen weeks
thereafter.
6.3 PPI shall arrange for shipping and/or transportation of the
Licensed Products from SANO's facility to PPI's Spring Valley, New York
facility and pay all shipping and related costs. Risk of loss and title
to the Licensed Product(s) shall pass to PPI upon pick-up of the Licensed
Products by, on behalf of or for the account of PPI at SANO's facility.
6.3.1 SANO shall promptly notify PPI by both fax and telephone
that any order (or part thereof acceptable to PPI) is available for pick-
up at SANO (this notice shall hereafter be referred to as the
"Availability Notice").
6.3.2 PPI shall use reasonable and good faith efforts to pick
up the Licensed Products that are the subject of an Availability Notice
within ten (10) business days of receipt of the Availability Notice;
provided that, if such pickup has not occurred on or prior to the expiry
of such ten day period, PPI shall, for purposes of its payment
obligations to SANO pursuant to Section 7.2 below, be deemed to have
picked up the Licensed Products which are the subject of the Availability
Notice on the last business day of such ten-day period. If the Licensed
Products in question have not been picked up by or on behalf of PPI
within twenty business days of an Availability Notice, SANO may, but
shall not be obligated to, cause the Licensed Products to be delivered to
PPI's
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Spring Valley, New York, facility by truck or other overland delivery at
PPI's sole cost and expense and risk of loss and title to the Products
shall pass to PPI upon pickup of the Products at SANO's facility in the
same manner as if the pickup had been effected by PPI itself, provided
that SANO shall provide for the Licensed Products to be insured during
transit in a commercially reasonable manner at PPI's sole cost and
expense.
ARTICLE VII
FEE PRICE AND PAYMENT TERMS
---------------------------
7.1 Initial Fee Payment. As consideration for the rights herein
-------------------
granted, in addition to all payments hereinafter described, PRI shall
pay to SANO a fee (each, a "Licensed Product Fee") of [ ]
for each of the Licensed Products listed in Appendix I hereto, payable
by wire transfer or certified check, as follows:
(a) PRODUCT "A" - (i) [ ] upon execution of this Agreement.
- (ii) [ ] within seven days after receipt
of notice from SANO that it is
prepared to commence a single-
dose bioavailability study.
(b) PRODUCT "B" - (i) [ ] upon execution of this Agreement.
- (ii) [ ] within seven days after receipt
of notice from SANO that it is
prepared to commence a single-
dose bioavailability study.
7.2 Price. The price to PRI for each order, or part thereof
-----
acceptable to PRI as contemplated in Section 8.2(d), of Licensed Products
made available to PRI hereunder shall be SANO's Costs related to such
order or part thereof. PPI shall also pay to SANO
21
any applicable federal or state sales or excise tax payable on the
purchase of such Licensed Products, which payment shall be remitted with
the payment of the price as contemplated in Section 7.3 below and upon
payment thereof by PPI to SANO, SANO shall be solely responsible for
remitting the amount so paid on account of such taxes to the relevant
governmental collecting authorities. Promptly upon PPI's request, SANO
shall provide PPI with reasonable evidence of such direct costs and
applicable taxes and payment of such taxes.
7.3 Payment Terms. Payment for each order of Licensed Products
-------------
made available by SANO for pick-up by PPI shall be due within 35 days of
pick-up (whether actual or deemed pursuant to Section 6.3.2) by PPI at
SANO's facility.
ARTICLE VIII
PRODUCT ACCEPTANCE
------------------
8.1 SANO shall manufacture the Licensed Products and make them
available for pickup by PPI in accordance with all applicable laws, rules
and regulations including, without limitation, the Specifications
applicable to the Licensed Product in question, Current Good
Manufacturing Practices of the FDA (as the same may change from time to
time) and all other applicable requirements of the FDA and other
governmental authorities having jurisdiction.
8.2 All Licensed Products made available for pick up by PPI shall
be accompanied by quality control certificates of analysis signed by a
duly authorized laboratory official of SANO confirming that each batch of
Licensed Product covered by such
22
certificate meets its release Specifications and shall be deemed accepted
by it unless PPI, acting reasonably and in good faith, shall give written
notice of rejection (hereafter referred to as a "Rejection Notice") to
SANO within 35 days after pick up of the Licensed Products by, on behalf
of or for the account of PPI at SANO's facility.
(a) The Rejection Notice shall state in reasonable detail
(sufficient to enable SANO to identify the nature of the problem and the
tests or studies to be conducted by or on its behalf to confirm or
dispute same) the reason why the Licensed Products are not acceptable to
PPI. If the Licensed Products meet the applicable provisions of Section
8.1 and are in quantities specified in a purchase order, PPI shall not be
entitled to reject them. Any Rejection Notice shall be accompanied by
copies of all written reports relating to tests, studies or
investigations performed to that date by or for PPI on the Licensed
Product batch rejected.
(b) Upon receipt of such Rejection Notice, SANO may require PPI
to return the rejected Licensed Products or samples thereof to SANO for
further testing, in which event such Licensed Products or samples
thereof, as the case may be, shall be returned by PPI to SANO or at
SANO's direction at SANO's expense. If it is later determined by the
parties or by an independent laboratory or consultant that PPI was not
justified in rejecting the Licensed Products or that PPI or its
Affiliates were the cause of or were responsible for the problem, PPI
shall reimburse SANO for the costs of the return, as well as any other
costs or expenses incurred by SANO as a result of the rejection or
return.
(c) PPI's test results or basis for rejection shall be
conclusive unless
23
SANO notifies PPI, within 30 days of receipt by SANO of the rejected
Licensed Products or samples or such longer periods of time as may be
reasonable in the circumstances to enable SANO to conduct (and receive
the results of) the appropriate tests, studies or investigations which
SANO should reasonably conduct to confirm the problem in question and to
identify the source thereof, that it disagrees with such test results or
its responsibility for the problem in question. In the event of such a
notice by SANO, representative samples of the batch of the Licensed
Product in question shall be submitted to a mutually acceptable
independent laboratory or consultant (if not a laboratory analysis issue)
for analysis or review, the costs of which shall be paid by the party
that is determined by the independent laboratory or consultant to have
been responsible for the rejection.
(d) If a Licensed Product is rejected by PPI, PPI's duty to pay
the amount payable to SANO pursuant to Section 7.2 hereof in respect of
the rejected Licensed Product shall be suspended until such time as it is
determined (I) by an independent laboratory or consultant that the
Licensed Product in question should not have been rejected by PPI or (II)
by the parties or by any arbitration conducted pursuant hereto or by a
final order of a court of competent jurisdiction (which is not subject to
further appeal) that any act or omission of, on behalf of or for which
PPI or its Affiliates is responsible was the cause of the problem that
was the basis for the rejection. If only a portion of an order is
rejected, only the duty to pay the amount allocable to such portion shall
be suspended.
8.3 In the event any Licensed Products are appropriately rejected
by PPI (being
24
Licensed Products that do not meet the applicable provisions of Section
8.1 other than as a result of any act or omission by PPI or its
Affiliates), SANO shall replace such Licensed Products with conforming
goods or, if requested by PPI, shall provide a credit to PPI for the
amount, if any, previously paid by PPI to SANO on account of the Licensed
Products in question. The credit shall be provided by SANO to PPI
immediately following the expiry of the period during which SANO may
dispute a Rejection Notice as contemplated in Section 8.2(c) above
(unless the Rejection Notice is disputed by SANO, in which event such
credit shall be given only if the dispute is resolved in favor of PPI).
Replacement Licensed Products, as aforesaid, shall be delivered to PPI at
no cost to PPI if PPI has already paid for the rejected Licensed Products
and not received a credit therefor, as aforesaid. All delivery costs,
including insurance, incident to the return of Licensed Products to SANO
and delivery of the replacement Licensed Products to PPI's Spring Valley
facility shall be paid by SANO, unless the rejection is determined not to
have been appropriately rejected, in which case the last sentence of
Section 8.2(a) shall apply.
ARTICLE IX
RETURNS AND ALLOWANCES
----------------------
9.1 Returns. If PPI, acting reasonably and in good faith, accepts
-------
from a customer a return of a Licensed Product and issues to such
customer a credit for the invoice price thereof, PPI may debit against
the amount of Additional Consideration, as hereinafter defined, due to
SANO with respect to Net Sales, as hereinafter defined, in
25
the month in which such return occurs, any Gross Profit, as hereinafter
defined, previously paid, credited or due to SANO in respect of the sale
of such returned Licensed Product.
9.2 Handling of Returns.
-------------------
(a) In the event any Licensed Product is returned to PPI by its
customers because the Licensed Product is alleged to be defective and PPI
reasonably believes that such defect is due to the fault of SANO, PPI
shall notify SANO within ten (10) working days of any such return and
provide or make available to SANO such samples (if available) and other
information concerning the returned Licensed Product so as to allow SANO
to test and evaluate the allegedly defective Licensed Product. PPI shall
retain a sufficient number of samples of the allegedly defective Licensed
Product so that additional samples are available at a later date should
additional testing be required by an independent testing laboratory as
described in Section 9.2(b) below, or by PPI or SANO for their own
purposes. If not enough samples exist to be so divided, then the parties
shall confer and reach agreement as to the handling of any available
samples.
(b) SANO shall complete its review and evaluation of the
returned Licensed Product within twenty (20) business days of receiving
the returned Licensed Product from PPI or such longer period of time as
may be reasonable in the circumstances to enable SANO to conduct or cause
to be conducted such tests, studies or investigations (and to receive the
results therefrom) as may be required to confirm or dispute the existence
of the problem or to identify the cause or source thereof.
9.3 Costs and Credits.
-----------------
26
(a) If SANO concludes or it is otherwise determined pursuant to
Section 9.3(b) hereof that the returned Licensed Product is defective due
to the fault of SANO:
(i) any replacement Licensed Product to be provided by
SANO in respect of the returned Licensed Product shall be made
available to PPI without charge or appropriate credit shall be
given therefor (giving account to any adjustment made pursuant to
Section 9.1 hereof);
(ii) all delivery costs, including insurance, incident to
the delivery of the replacement Licensed Products to PPI's Spring
Valley facility shall be paid by SANO or appropriate credit shall
be given therefor; and
(iii) SANO shall provide a credit to PPI for the
reasonable costs incurred by PPI (or where the duty has been
performed by an Affiliate, pursuant to the provisions of this
Agreement, for the reasonable costs incurred by such Affiliate) in
respect of the defective Licensed Product.
(b) If SANO asserts that the returned Licensed Product is
defective due primarily to any act or omission of PPI or its Affiliates
or any agents or other persons acting on their behalf as aforesaid, then
representative samples of the Licensed Products shall be submitted to a
mutually acceptable independent laboratory or consultant (if not a
laboratory analysis issue) for analysis or review, the costs of which
shall be paid by the party determined by the independent laboratory or
consultant to have been responsible.
(c) If it is determined in accordance with Section 9.3(b) above
that any such defect is primarily due to any act or omission by PPI, then
no credit or other
27
payment of costs shall be due from SANO, and PPI shall reimburse SANO for
all costs and expenses it incurred in connection with the return and
investigation.
(d) If it is determined in accordance with Section 9.3(b) above
that no such defect exists or, if existing, cannot be attributable
primarily to an act or omission of either party, then any replacement
Licensed Product in respect of the returned Licensed Product shall be
made available to PPI without additional charge or appropriate credit, if
any, shall be given therefor, but no other credits or payments of costs
shall be due from SANO.
9.4 PPI acknowledges that the Licensed Products may be of a
perishable nature and that the Licensed Product must be stored and
shipped in accordance with the Specifications applicable thereto (to the
extent disclosed in writing to PPI or its Affiliates) or the conditions,
if any, set forth on its package label.
9.5 PPI agrees to notify SANO of any customer complaints with
respect to the quality, nature or integrity of a Licensed Product or
alleged adverse-drug experiences ("ADE") within five (5) working days of
their receipt by PPI and of any PPI or FDA complaints within 24 hours,
except on weekends and holidays. SANO shall have the sole and primary
obligation to file any required adverse experience report with FDA. SANO
shall also be responsible for maintaining complaint files as required by
FDA regulations. SANO agrees to investigate and respond in writing to
any complaint or ADE forwarded to it by PPI promptly and in no event
later than 30 days after receipt of the ADE or complaint from PPI (or
such longer period as may be required in the circumstances to enable SANO
to conduct such tests, studies or investigations as may be reasonably
28
required [and to receive the results therefrom] to enable SANO to
appropriately respond). SANO shall provide PPI with a copy of any
correspondence, reports, or other documents relating to a complaint or
ADE within a reasonable period following generation of such document by
SANO.
9.6 The provisions of this Article 9 shall survive the termination
or expiration of this Agreement.
ARTICLE X
DAMAGES, INDEMNIFICATION AND INSURANCE
--------------------------------------
10.1 Subject to the limitations set forth in this Article X and to
the other provisions of this Agreement, SANO, on the one hand, and PPI,
on the other hand, covenant and agree to indemnify and save harmless the
other of them from and against any and all claims, demands, actions,
causes of action, suits, proceedings, judgments, damages, expenses
(including reasonable attorney fees and expenses), losses, fines,
penalties and other similar assessments (the "Damages") relating to or
arising out of a breach by any such party of any of its representations,
warranties, covenants or agreements contained herein; provided that,
except where the breach arises out of a representation or warranty made
by a party in this Agreement being intentionally false or inaccurate, or
constitutes a wilful material breach by a party of any of its duties or
obligations hereunder, the claim of an aggrieved party for Damages
arising out of the breach shall be limited to claiming the amounts owing
or payable to it in accordance with the provisions of this Agreement and
any out-of-pocket costs and expenses (including
29
amounts paid or payable by it to third parties, other than re-procurement
costs [except to the extent contemplated in Section 14.3 hereof] which it
has incurred and the aggrieved party shall not be entitled to recover
from the defaulting or breaching party any lost profits or consequential
or punitive damages, including loss or damage to its goodwill or
reputation. For purposes of this Agreement where PPI is in breach of its
duties or obligations hereunder and such duties or obligations, if
delegated by PPI to any of its Affiliates, could reasonably be performed
by such Affiliate and PPI has either not delegated such duty or
obligation to such Affiliate or such Affiliate has either refused to
perform or wilfully breached such duty or obligation then PPI shall be
deemed to have wilfully breached such duty or obligation hereunder.
Similarly, whenever in this Agreement PPI is required to cause any of its
respective Affiliates to do or to refrain from doing any thing herein
provided and such Affiliate refuses to do or refrain from doing such
thing or otherwise willfully breaches the provision herein contemplated
(on the assumption that such Affiliate were bound by the provision herein
contemplated as if a signatory hereto) then PPI will be deemed to have
willfully breached the provision of this Agreement in question.
10.2 In the event that the release of a Licensed Product by PPI or
its Affiliates in the United States results in a third party claim:
(a) to the extent that the Damages awarded or incurred relate
to or arise out of the safety or effectiveness of the Licensed Product or
the manufacturing, packaging, labelling, storage or handling of the
Product by SANO, SANO shall be responsible therefor and shall indemnify
and hold PPI harmless from and against all such
30
damages; and
(b) to the extent that the Damages awarded or incurred relate
to or arise out of the transportation, storage, handling or selling of
the Licensed Product by PPI or its Affiliates, then PPI shall be
responsible therefor and shall indemnify and hold SANO harmless from and
against all such damages.
Upon the assertion of any third party claim against a party hereto
that may give rise to a right of indemnification under this Agreement,
the party claiming a right to indemnification (the "Indemnified Party")
shall give prompt notice to the party alleged to have the duty to
indemnify (the "Indemnifying Party") of the existence of such claim and
shall give the Indemnifying Party reasonable opportunity to control,
defend and/or settle such claim at its own expense and with counsel of
its own selection; provided, however, that the Indemnified Party shall,
at all times, have the right fully to participate in such defense at its
own expense and with separate counsel and, provided, further, that both
parties, to the extent they are not contractually or legally excluded
therefrom or otherwise prejudiced in their legal position by so doing,
shall cooperate with each other and their respective insurers in relation
to the defense of such third party claims. In the event the Indemnifying
Party elects to defend such claim, the Indemnified Party may not settle
the claim without the prior written consent of the Indemnifying Party.
The Indemnifying Party may not settle the claim without the prior written
consent of the Indemnified Party unless, as part of such settlement, the
Indemnified Party shall be unconditionally released therefrom or the
Indemnified Party otherwise consents thereto in writing. If the
Indemnifying Party shall, within a reasonable time after such notice
31
has been given, fail to defend, compromise or settle such claim, then the
Indemnified Party shall have the right to defend, compromise or settle
such claim without prejudice to its rights of indemnification hereunder.
Notwithstanding the foregoing, in the event of any dispute with respect
to indemnity hereunder, each party shall be entitled to participate in
the defense of such claim and to join and implead the other in any such
action.
In addition to the foregoing, SANO will defend, at its sole cost
and expense, its rights with respect to the Licensed Products and PPI's
rights to distribute the Licensed Products hereunder against any claim,
action, suit or proceeding ("Action") by any third party asserting prior
or superior rights with respect to the Licensed Product, product
infringement or similar claims (other than as may be based on acts of PPI
not contemplated herein or authorized hereby) and shall indemnify and
hold PPI and its affiliates harmless from the cost of the defense
thereof. PPI shall, at all times, have the right fully to participate in
such defense at its own expense. SANO shall control such defense and
shall, in its reasonable discretion, defend or settle such Action;
provided that, notwithstanding the foregoing SANO shall not enter into
any settlement or compromise of any such Action which requires PPI or any
of its Affiliates to make payments of any kind without the prior written
consent of PPI or an unconditional release of PPI and its Affiliates with
respect to the subject matter of such Action. The provisions of this
paragraph should not be construed as requiring SANO to bear any damages,
judgments or other liabilities entered against PPI in any such Action,
provided that the foregoing shall not be construed as or deemed a waiver
of any rights PPI may have against SANO
32
as a result of such Action hereunder, at law or otherwise, and all of
such rights, if any, are expressly reserved.
10.3 Insurance. Each of SANO and PPI shall carry product liability
---------
insurance in an amount at least equal to [
] with an insurance carrier reasonably acceptable to the other party,
such insurance to be in place at times reasonably acceptable to the
parties, but not later than the date of the first commercial sale of a
Licensed Product. Each party shall promptly furnish to the other
evidence of the maintenance of the insurance required by this Section
10.3 and shall name the other as an "additional insured" under such
insurance policy. Each party's coverage shall (i) include broad form
vendor coverage and such other provisions as are typical in the industry
and (ii) name the other party as an additional insured thereunder. SANO
shall carry clinical testing insurance in an amount and at times
reasonably acceptable to the parties.
10.4 Survival. The provisions of this Article X shall survive the
--------
termination or expiration of this Agreement, provided that the
requirement to maintain the insurance contemplated in Section 10.3 above
shall only survive for a period of 36 months from the effective date of
termination or expiration of this Agreement.
33
ARTICLE XI
ADDITIONAL CONSIDERATION, REPORTING AND VERIFICATION
----------------------------------------------------
11.1 Additional Consideration. As additional consideration for
------------------------
SANO entering into this Agreement and permitting PPI to sell the Licensed
Products in the United States in accordance with the provisions hereof,
PPI agrees to pay to SANO the additional amounts more particularly
described in Exhibit B to this Agreement in respect of the aggregate Net
Sales (as that term is defined in Exhibit B) of the Licensed Products.
The amount payable to SANO determined in accordance with Exhibit B is
herein and in Exhibit B annexed hereto referred to as the "Additional
Consideration." PPI shall pay to SANO, monthly, on the seventh day of
each month, commencing on the seventh day of the third month after the
month in which sales of the Licensed Products commence, the Additional
Consideration payable to SANO in respect of the Net Sales of the Licensed
Products made by PPI and its Affiliates during the third preceding month.
For greater certainty, examples of what constitutes the "third preceding
calendar month" are contained in Exhibit B annexed hereto. The
consideration payable to SANO pursuant to this Article XI shall be paid
to it as part of the sale price of the Licensed Product from SANO to PPI
and shall not be treated as a royalty or similar payment.
11.2 Reporting and Information Obligations of PPI.
--------------------------------------------
(a) Approved Contracts. PPI shall provide to SANO, monthly,
------------------
within seven days of the expiry of each calendar month during the term
hereof, a copy of each Approved Contract (as hereinafter defined),
entered into by PPI with its customers during the immediately preceding
month irrespective of whether a copy of such contract had
34
previously been forwarded to SANO. If the Approved Contract has a term
of less than 18 months, PPI may delete (e.g., by blacking out) any
information in the Approved Contract that tends to indicate the identity
or location of the PPI customer; provided, however, that PPI marks each
such Approved Contract with a unique customer code relative to the
customer that is the party to that Approved Contract.
(b) Net Sales and Gross Profits. PPI shall report to SANO
---------------------------
monthly, on the 7th day of each calendar month during the term hereof and
for 12 months after the termination hereof:
(i) a sales summary, in the form annexed hereto as
Exhibit C, showing all sales of the Licensed Products made by PPI
and its Affiliates during the immediately preceding calendar month;
(ii) a detailed statement showing all returns and all
credits, rebates, allowances and other debit and credits relevant
to the calculation of Net Sales and Gross Profits (as those terms
are defined in Exhibit B annexed hereto) for the immediately
preceding calendar month together with copies of all documentation
to support allowable adjustments used in computing Net Sales during
the period in question;
(iii) a certificate signed by the Chief Financial
Officer of PPI certifying that, to the best of his knowledge,
information and belief, after reasonable investigation, the
foregoing statements contemplated in (i) and (ii) above are true
and correct and do not omit any material information required to be
provided pursuant to this Section 11.2(b) and
35
(iv) a summary of the calculation of the Additional
Consideration payable to SANO on such date.
For purposes of this Agreement a sale shall be considered to have
been made at the time the Product(s) are shipped to the customer.
11.3 PPI shall make available for inspection by SANO at PPI's
facilities and shall cause its Affiliates to make available for
inspection by SANO at their respective facilities, promptly following a
reasonable request therefor, such additional information concerning any
sales (including, without limitation, in respect of any sale, the date of
the shipment, the code number of the customer [or the name of the
customer in the case of a customer disclosed to SANO pursuant to Section
11.2(a) hereof and an Approved Contract], the number of units of each
Licensed Product in each dosage involved (broken down by container size
per Product [e.g., 18 boxes of 30 patches of Product A], and the invoice
price charged by PPI or its Affiliates), credits, returns, allowances and
other credits and debits previously reported to SANO pursuant to Section
11.2(b)(ii) hereof or with respect to Approved Contracts previously
reported to SANO pursuant to Section 11.2(a) hereof as SANO may
reasonably require from time to time (except information concerning the
identity or location of a customer where PPI is not already required to
disclose that information to SANO pursuant to Section 11.2(a) hereof) to
enable SANO to confirm or reconcile the amounts which are or were to have
been paid to it pursuant to this Agreement (without the need to audit the
books and records of PPI or its Affiliates pursuant to Section 11.4
hereof).
11.4 PPI shall keep and shall cause its Affiliates to keep complete
and accurate
36
records and books of account containing all information required for the
computation and verification of the amounts to be paid to SANO hereunder.
PPI further agrees that at the request of SANO, it will permit and will
cause its Affiliates to permit one or more accountants selected by SANO,
except any to whom PPI or such Affiliate has some reasonable objection,
at any time and from time to time, to have access during ordinary working
hours to such records as may be necessary to audit, with respect to any
payment report period ending prior to such request, the correctness of
any report or payment made under this Agreement, or to obtain information
as to the payments due for any such period in the case of failure of PPI
to report or make payment pursuant to the terms of this Agreement. Such
accountant shall not disclose to SANO any information relating to the
business of PRI except that which is reasonably necessary to inform SANO
of:
(i) the accuracy or inaccuracy of PPI's reports and payments;
(ii) compliance or non-compliance by PPI with the terms and
conditions of this Agreement; and
(iii) the extent of any such inaccuracy or non-compliance;
provided, that if it is not reasonably possible to separate
information relating to the business of PPI from that which is
reasonably necessary to so inform SANO, the accountant may disclose
any information necessary to so inform SANO and SANO shall retain
all other information disclosed as confidential.
PPI shall provide and shall cause its Affiliates to provide full
and complete access to the accountant to PPI's and such Affiliates'
pertinent books and records and the accountant shall have the right to
make and retain copies (including photocopies). Should
37
any such accountant discover information indicating inaccuracy in any of
PPI's payments or non-compliance by PPI or its Affiliates with any of
such terms and conditions, and should PPI fail to acknowledge in writing
to SANO the deficiency or non-compliance discovered by such accountant
within ten (10) business days of being advised of same in writing by the
accountant, the accountant shall have the right to deliver to SANO copies
(including photocopies) of any pertinent portions of the records and
books of account which relate to or disclose the deficiency or non-
compliance (to the extent not acknowledged by PPI). In the event that
the accountant shall have questions which are not in its judgment
answered by the books and records provided to it, the accountant shall
have the right to confer with officers of PPI or such Affiliate,
including PPI's or such Affiliate's Chief Financial Officer. If any audit
under this Section shall reveal an underpayment or understatement of the
amount payable to SANO by more than $10,000.00 for any period in
question, PPI shall reimburse SANO for all costs and expenses relating to
such investigational audit. SANO shall only have the right to audit such
books and records of PPI and its Affiliates pursuant to this Section 11.4
no more often than twice in any contract year unless earlier in such
contract year or in any of the prior three contract years such
investigation revealed a discrepancy of more than $10,000.00, as
aforesaid, in which case SANO shall have the right to audit such books
and records three times in such contract year. For purposes of this
Agreement, a contract year shall be a period of twelve months commencing
on either the date of this Agreement or on an anniversary thereof.
Unless the disclosure of same is reasonably required by SANO in
connection with any litigation or arbitration arising out of such
38
audit, the accountant shall not reveal to SANO the name or address (or
other information reasonably tending to identify the location of a
customer) of any customer of PPI or its Affiliates [other than one whose
name has been disclosed to SANO pursuant to Section 11.2 hereof], but
shall identify such customer to SANO, if necessary, by the customer code
number used by PPI in its reporting obligations to SANO [and PPI and its
Affiliates shall make such information known to the accountant]. PPI
may, as a condition to providing any accountant access to its books and
records (or those of its Affiliates), require SANO to execute a
reasonable confidentiality agreement consistent with the terms of this
Section 11.4.
11.5 Except as specifically set forth to the contrary, all payments
to be made under this Agreement shall bear interest equal to two percent
above the prime rate as quoted by Citibank N.A., New York, New York,
calculated daily (as at the close of business on each such day) and
compounded monthly, from the day following the day the payment is due
until the date on which it is paid. Any adjustment to the prime rate as
quoted by Citibank N.A. from time to time shall result in a corresponding
adjustment to the rate of interest payable hereunder, the rate of
interest quoted by Citibank N.A. at the close of business on each day to
be the rate applicable for such day.
11.6 The obligation of PPI to make the payments contemplated in
Section 11.1 and to provide the reports and information contemplated in
Sections 11.2 and 11.3 and the right of SANO to conduct its audits or
investigations pursuant to Section 11.4 hereof shall survive the
termination or expiration of this Agreement and shall apply to all
Licensed Products made available to PPI by SANO prior to the effective
date of the
39
termination or expiration of this Agreement (or made available to PPI
after such date pursuant to any provision of this Agreement)
notwithstanding that such Licensed Products may have been resold by PPI
or its Affiliates to its or their customers after the effective date of
termination or expiration. For greater certainty, the parties acknowledge
and agree that it is their intention that PPI pay to SANO the Additional
Consideration applicable to Net Sales of all Licensed Products supplied
by SANO to PPI pursuant to this Agreement (in respect of which the
purchase price charged by SANO to PPI therefor [whether paid or owing]
was determined in accordance with the provisions of Section 7.2 hereof or
was provided to PPI free of such charge pursuant to any other provision
of this Agreement) irrespective of whether such Licensed Product is
resold by PPI or its Affiliates prior to or subsequent to the effective
date of termination or expiration of this Agreement and that SANO's
rights pursuant to Section 11.4 hereof shall continue for a period of
twelve (12) months following the final sale of all such Licensed
Products.
11.7 PPI shall have the right, upon reasonable advance written
notice to SANO, to inspect SANO's facilities at which the Licensed
Products are being manufactured to monitor compliance by SANO with FDA
Good Manufacturing Practices and to otherwise confirm that the Licensed
Products are being manufactured in accordance with their respective
Specifications. Similarly, SANO shall have the right, upon reasonable
advance written notice to PPI to inspect those facilities of PPI and any
of its Affiliates which are used in the storage of any of the Licensed
Products to ensure compliance by PPI or such Affiliate with FDA Good
Manufacturing Practices and to otherwise ensure that the Licensed
Products do not cease to meet their Specifications as a result of any
40
storage or shipping conducted by PPI or its Affiliates. SANO shall
cooperate with PPI in providing access to its facilities and PPI shall
cooperate and shall cause its Affiliates to cooperate in providing access
to SANO to its facilities and those of its Affiliates used as aforesaid.
11.8 SANO shall keep complete and accurate records and books of
account containing all information required for the computation and
verification of SANO's Costs as contemplated in Section 7.2 hereof with
respect to the Licensed Product(s) made available to PPI by SANO pursuant
hereto. SANO further agrees that at the request of PPI it will permit
one or more accountants selected by PPI except any to whom SANO has some
reasonable objection, to have access during ordinary working hours to
such books and records as may be necessary to audit the amounts
previously charged by SANO to PPI pursuant to Section 7.2 hereof. Such
accountant shall not disclose to PPI any information relating to the
business of SANO except the accuracy or inaccuracy of SANO's previously
reported charges and the amount, if any, that PPI may have been
overcharged or undercharged with respect to Licensed Products made
available to it. Should any such accountant discover information
indicating that PPI has been overcharged for Products made available to
it, and should SANO fail to acknowledge in writing to PPI the inaccuracy
discovered by such accountant within ten (10) business days of being
advised of same in writing by the accountant, the accountant shall have
the right to make and retain copies (including photocopies) of any
pertinent portions of the records and books of account which relate to or
disclose the inaccuracy (to the extent not acknowledged by SANO). SANO
shall provide full and complete access to the
41
accountant to SANO's pertinent books and records. In the event that the
accountant shall have questions which are not in its judgment answered by
such books and records, the accountant shall have the right to confer
with officers of SANO, including SANO's Chief Financial Officer. If any
audit under this Section shall reveal an overstatement of the amount
payable to SANO by more than $10,000.00 for the Licensed Products in
question, SANO shall reimburse PPI for all costs and expenses relating to
such investigation/audit. It is understood and agreed that PPI shall
only have the right to audit such books and records of SANO pursuant to
this Section 11.8 no more often than twice in any contract year unless
earlier in such contract year or in any of the prior three contract years
such investigation revealed a discrepancy of more than $10,000.00, as
aforesaid, in which case PPI shall have the right to audit such books and
records three times in such contract year. Unless the disclosure of same
is reasonably required by PPI in connection with any litigation or
arbitration arising out of such audit, the accountant shall not reveal to
PPI the name or address (or other information reasonably tending to
identify the location of a supplier) of any supplier of materials to SANO
in the manufacturing or packaging of the Licensed Products (but shall
identify such supplier to PPI if necessary, by a code name or number
supplied by such accountant) or the name of or financial information
relating to any employee of SANO. SANO may, as a condition to providing
any accountant access to its books-and records, require PPI to execute a
reasonable confidentiality agreement consistent with the terms of this
Section 11.8. The rights of PPI pursuant to this Section 11.8 shall
survive the termination or expiration of this Agreement for a period of
one year.
42
ARTICLE XII
OPTION PRODUCTS
---------------
12.1 Option Products. With respect to the Option Products,
---------------
including for the purposes of this Section 12.1, any product developed by
SANO within ten years of the Effective Date which is a generic version of
an existing marketed transdermal drug, PPI shall have the option, in its
sole and absolute discretion, to include such products, on a product-by-
product basis, as Licensed Products hereunder, in accordance with the
following provisions.
12.2 Option Product Development Program. For each Option Product,
----------------------------------
SANO shall devise and communicate to PPI a clinical and product
development program and a related budget, setting forth (i) a proposed
schedule for pre-clinical and clinical activities required or reasonably
necessary to obtain governmental approvals for such Option Product, (ii)
the Licensed Product Fee for which it is willing to include such product
as a Licensed Product hereunder (which shall be reasonably related to the
Costs of product development and shall include only [ ]% [but not
more than [ ] ] of the costs of pre-clinical activities); (iii) the
developmental milestones that would trigger payment of appropriate
portions of such Licensed Product Fee, which payments shall reflect the
related expenditures involved in the pre-clinical activities (to the
limits set forth above) and the clinical testing program and (iv) any
special storage or shipping requirements (the "Option Product Development
Program"). SANO shall also advise PPI of a reasonable Product Sales
Threshold (as hereinafter defined) for the initial 24-month period after
the product is to be made available for commercial sale, that would be
43
applicable to the product if it were included as a Licensed Product
hereunder. Within 30 days of its receipt of an Option Product
Development Program, PPI shall notify SANO whether it wishes to exercise
its option to have the relevant product included hereunder as a Licensed
Product. If PPI notifies SANO within such 30 days that it wishes to
exercise such option, the product will be treated for all purposes as a
Licensed Product hereunder, the Option Product Development Program shall
become a part of this Agreement and PPI shall become obligated to make
the payments described therein. If PPI fails to notify SANO of its
election to exercise such option within such 30 days, SANO may enter into
a license or distribution agreement with respect to such Option Product
with a third party on substantially the same terms as set forth in the
Option Product Development Program, and providing for payments for
products and additional consideration consistent with the provisions
hereof. SANO may not enter into such an agreement with a third party on
terms substantially different from those set forth in the relevant Option
Product Development Program and herein without first offering such terms
to PPI for a period of thirty days.
ARTICLE XIII
TERMS AND TERMINATION
---------------------
13.1 This Agreement shall become effective on the date hereof and
shall remain in effect for a period of ten years per Licensed Product
starting on the date such Licensed Product becomes available for sale in
commercial quantities, unless earlier terminated in accordance with the
provisions of this Agreement. Thereafter, this Agreement shall
44
automatically be renewed as to each Licensed Product from year to year
unless either party gives notice of termination to the other party at
least one hundred and twenty days prior to the expiry of the initial term
or of any renewal term.
13.2 Either party may, by notice in writing to the other party,
terminate this Agreement if such other party shall have breached any of
its material duties or obligations under this Agreement (other than the
obligations of PPI to pay to SANO any amount due to SANO hereunder
[whether on account of Additional Consideration, the price for the
Licensed Products or otherwise] or to provide SANO with the reports or
information contemplated in Section 11.2 or 11.3 hereof) and such breach
shall remain uncured for at least sixty days after the aggrieved party
shall have given notice of the breach to the other party.
13.3 SANO may, by notice in writing to PPI, terminate this
Agreement if PPI fails to pay to SANO any amount payable by PPI to SANO
hereunder, whether on account of the Additional Consideration, the
purchase price for the Licensed Products, interest or otherwise, as and
when the same shall have become due and payable or PPI shall have failed
to deliver (or caused to be delivered, as the case may be), in timely
fashion, the reports or information contemplated in Section 11.2 or 11.3
hereof, and in either case, such breach shall have continued unremedied
for a period of twelve business days after written notice of such breach
has been given by SANO to PPI; provided that PPI shall not have the right
to such twelve-day grace period within which to cure such default and
SANO shall have the immediate right to terminate the Agreement for such
breach if PPI shall have previously breached Section 11.2 or 11.3, or
failed to remit any
45
sums of at least $10,000.00 to SANO, when due, in the aggregate, one time
in the twelve month period immediately preceding the default in question.
13.4 Either party may terminate this Agreement on thirty days prior
written notice to the other party if such party or the other party is
legally prohibited from performing its obligations hereunder (other than
by reason of a breach of its obligations hereunder) or becomes (or, in
the case of PPI, its Affiliate becomes) an Ineligible Person (and, where
the party purporting to terminate the Agreement is also the party
prohibited from performing or it or its Affiliate is the Ineligible
Person, it [or its Affiliate, as the case may be] has made diligent good
faith best efforts to remove the prohibition or its status as an
Ineligible Person) and such prohibition or status as an Ineligible Person
shall have continued uninterrupted for a period of 120 days.
13.5 Either party may terminate this Agreement in respect of a
particular Licensed Product (the "Specific Product"), but this Agreement
shall continue in respect of any other Licensed Product, on thirty (30)
days prior written notice to the other party (which notice must be
delivered within 90 days of the expiration of the applicable contract
year) if the Gross Profit (as that term is defined in Exhibit B annexed
hereto) attributable to aggregate Net Sales of the Specific Product made
by PRI and its Affiliates for any complete contract year after the second
anniversary of the date on which such Specified Product became available
for sale shall be less than the amounts stated in or determined pursuant
to Section 13.8; provided, however, SANO may not terminate with respect
to any Specific Product pursuant to this Section 13.5 without the consent
of PPI in the event that SANO shall have previously terminated the
exclusive nature of the Right
46
pursuant to Section 13.8 and shall be selling, directly or indirectly,
such Licensed Product in the United States.
13.6 Either party may terminate this Agreement in accordance with
the provisions of Section 15.1 hereof.
13.7 PPI or SANO shall have the right to terminate this Agreement
upon written notice to the other in the event that any one or more of the
following events shall become applicable to such other party (herein
referred to as the "Party"):
(a) an order is made or a resolution or other action of such
Party is taken for the dissolution, liquidation, winding up or other
termination of its corporate existence;
(b) the Party commits a voluntary act of bankruptcy, becomes
insolvent, makes an assignment for the benefit of its creditors or
proposes to its creditors a reorganization, arrangement, composition or
readjustment of its debts or obligations or otherwise proposes to take
advantage of or shelter under any statute in force in the United States
for the protection of debtors;
(c) if any proceeding is taken with respect to a compromise or
arrangement, or to have such Party declared bankrupt or to have a
receiver appointed in respect of such Party or a substantial portion of
its property and such proceeding is instituted by such Party or is not
opposed by such Party or if such proceeding is instituted by a Person
other than such Party, such Party does not proceed diligently and in good
faith to have such proceeding withdrawn forthwith;
(d) a receiver or a receiver and manager of any of the assets
of such
47
Party is appointed and such receiver or receiver and manager is not
removed within ninety days of such appointment;
(e) such Party ceases or takes steps to cease to carry on its
business.
SANO shall similarly have the right to terminate this Agreement upon
written notice to PRI if any of the foregoing events becomes applicable
to any of its Affiliates.
13.8 (a) If
(i) in the twenty-four (24) month period (such period
being herein referred to as the "A Period") beginning on the date
(the "A Commencement Date") the first of any shipments of Licensed
Product "A" is made available to PPI hereunder, the aggregate Net
Sales of Licensed Product "A" for such A Period is less than the
Product Sales Threshold (as hereinafter defined);
(ii) in the twenty-four (24) month period (such period
being herein referred to as the "B Period") beginning on the date
(the "B Commencement Date") the first of any shipments of Licensed
Product "B" is made available to PPI hereunder, the aggregate Net
Sales of Licensed Product "B" for such B Period is less than the
Product Sales Threshold; or
(iii) in any twenty-four (24) month period (such period
being herein referred to as the "O Period") beginning on the date
(the "O Commencement Date") the first of any shipments of each
other Licensed Product, if any, hereunder is made available to PPI
hereunder, the aggregate Net Sales of any such other Licensed
Product for such Period is less than the Product Sales Threshold;
or
48
(iv) in any twelve month period commencing on the second
and each subsequent anniversary of the A Commencement Date, the B
Commencement Date or any O Commencement Date, the Net Sales of the
relevant Licensed Product sold by PPI and its Affiliates in such
period is less than the Product Sales Threshold;
and the shortfall in sales cannot be attributable primarily to the fault
of SANO, SANO shall have the right to convert PPI's Right hereunder from
an exclusive to a non-exclusive right to distribute such Licensed Product
upon ninety days prior written notice to PPI. As used herein, as to any
Licensed Product, the Product Sales Threshold shall mean an amount
reasonably agreed upon by PPI and SANO after consideration of relevant
market factors and conditions, provided that if PPI and SANO shall fail
or be unable to agree as to any Licensed Product for any period in
question, the Product Sales Threshold for such period and Licensed
Product shall be [ ].
(b) Notwithstanding the exercise by SANO of its right pursuant
to Section 13.8(A) hereof, and the resultant conversion of PPI to a non-
exclusive distributor hereunder, PPI shall have the right to sell the
Licensed Products on a non-exclusive basis on the terms and conditions as
set forth herein, except as provided otherwise in this Paragraph 13.8,
during the balance of the term of the Agreement (subject to earlier
termination as herein provided) and SANO shall continue to supply the
Licensed Products to PPI in accordance with the provisions hereof,
provided that the obligation of SANO to use its reasonable best efforts
to supply PPI with its requirements of the Licensed Products shall take
into account PPI's requirements as well as the requirements of SANO
49
and any other third party distributor or distributors appointed by SANO
to sell the Licensed Products in the United States.
(c) In the event that SANO exercises its rights under Section
13.8(a) and contemporaneously therewith or subsequent thereto enters into
an agreement with any Person (herein referred to as a "Third Party
Licensee"), authorizing or licensing such Third Party Licensee to sell
any of the Products in the United States on royalty, payment or other
cash equivalent or otherwise readily economically measured terms more
favorable to the Third Party Licensee (such more favorable terms being
herein referred to as the "MFP") then:
(i) SANO shall promptly notify PPI of such agreement and
shall describe in the notice both the MFP and any obligations,
duties, undertakings or other consideration to be provided by the
Third Party Licensee; and
(ii) PPI shall have thirty days from the date of receipt
of such notice to notify SANO whether PPI desires to have the
benefit of the MFP, which can be accepted only if PPI shall agree
(to the extent not already assumed in this Agreement) to any
additional obligations, duties, or undertakings, and to provide any
consideration to be provided by the Third Party Licensee.
PPI's entitlement to seek the benefit of the MFP shall be conditioned
upon and subject to PPI assuming and being capable of fully performing
all the non-cash obligations assumed by the Third Party Licensee in a
manner substantially as valuable to SANO. If PPI shall dispute such
assessment, PPI shall so notify SANO, whereupon the issue shall be deemed
to be a dispute between the parties and subject to resolution pursuant to
50
Section 16.2 hereof.
13.9 Notwithstanding the termination or expiration of this
Agreement pursuant to this Article XIII or any other provision of this
Agreement, all rights and obligations which were incurred or which
matured prior to the effective date of termination or expiration,
including accrued Additional Consideration and any cause of action for
breach of contract, shall survive termination and be subject to
enforcement under the terms of this Agreement. Termination of this
Agreement shall not affect any duty of PPI or SANO existing prior to the
effective date of termination or expiration and which is, whether or not
by expressed terms, intended to survive termination. Without limiting
the generality of the foregoing, termination shall not affect any duty to
keep confidential any Confidential Information (within the meaning of
Section 14.4 hereof) disclosed by one party to the other (or its
Affiliate) as contemplated in Section 14.4 hereof, but rather such
Confidential Information shall be held by the receiving party subject to
such restrictions on use and disclosure as provided in the said Section.
13.10 Upon termination of this Agreement by PPI pursuant to
Section 13.2 or 13.7 or pursuant to Section 13.4 as a result of SANO's
inability to perform its obligations hereunder or becoming an Ineligible
Person or the termination of this Agreement by SANO pursuant to Section
13.5 hereof, SANO shall, at the request of PPI, repurchase all Licensed
Products then in the possession, custody or control of PPI and available
for sale (and which have not been adulterated since they were made
available for pick up by PPI) and all packaging material in the
possession, custody or control of PPI which were specifically acquired by
PPI for these Licensed Products and which cannot be used by
51
PPI or its Affiliates for any other products sold by any of them, at the
price originally paid by PPI therefor plus all transportation costs
previously incurred (even if not yet paid) by PPI payable in cash on
delivery by PPI to SANO. SANO shall pay all transportation costs
associated with shipping the repurchased Licensed Product to SANO or to
such other places SANO may require.
13.11 In the event that this Agreement is terminated pursuant to
the provisions of Section 13.4 hereof as a result of a party (herein
referred to as the "Prohibited Party") being unable to perform its
obligations hereunder as therein contemplated or having become (or its
Affiliate having become) an Ineligible Person and within twelve (12)
months of the effective date of termination of this Agreement the
Prohibited Party is again able to perform its obligations hereunder or
has ceased (or its Affiliate has ceased) to be an Ineligible Person, then
the Prohibited Party shall, by notice in writing, advise the other party
(herein referred to as the "Receiving Party") that it is no longer
legally prohibited from performing its duties and obligations hereunder
or that it has ceased (or that its Affiliate has ceased) to be an
Ineligible Person and the Receiving Party shall have the right, to be
exercised by notice in writing given to the Prohibited Party within
thirty (30) days of receipt of the aforesaid notice from Prohibited
Party, to reinstate this Agreement; provided, however, that if the
Prohibited Party is PPI then SANO shall have the right to reinstate this
Agreement as if a proper notice had been given pursuant to Section 13.8
of this Agreement and PPI shall be reinstated on a non-exclusive basis,
but only to the extent that such reinstatement will not violate the
provisions of any agreement SANO shall have entered into during the
period PPI was a Prohibited Party.
52
13.12 If SANO terminates this Agreement pursuant to Section 13.2,
13.3 and 13.7 hereof then PPI shall not and shall cause its Affiliates
not to, for a period of twelve (12) months following the effective date
of termination, sell in the United States any Competitive Product.
13.13 In the event that SANO terminates this Agreement pursuant to
Section 13.5 hereof, SANO shall, at the request of PPI, make available to
PPI within a reasonable period of time of such termination, such number
of units of each Licensed Product as shall be equal to the net number of
units of such Licensed Product sold by PPI during the entire contract
year immediately preceding the year in which this Agreement is so
terminated or such lesser number of units of each such Product as PPI
shall advise SANO in writing within ten business days of such
termination. Such Licensed Products shall be made available to PPI in
accordance with the provisions of this Agreement and the provisions of
this Agreement shall apply to all such Licensed Products as if such
Licensed Products had been supplied by SANO during the term of this
Agreement.
13.14 If SANO has not received at least one approval of an ANDA
for a Licensed Product prior to November 30, 1996, PPI may terminate this
Agreement and neither party shall have any obligation hereunder (other
than applicable confidentiality provisions).
53
ARTICLE XIV
RECALLS, ADMINISTRATIVE MATTERS AND CONFIDENTIALITY
---------------------------------------------------
14.1 Recalls. In the event that it becomes necessary to conduct a
-------
recall, market withdrawal or field correction (hereafter collectively
referred to as "recall") of any Product manufactured by SANO and sold by
PPI or its Affiliates the following provisions shall govern such a
recall:
(a) After consulting with SANO, and on terms and conditions
reasonably satisfactory to SANO, PPI shall conduct (and shall cause its
Affiliate to conduct) the recall and shall have primary responsibility
therefore and SANO and PPI shall each cooperate with the other in
recalling any affected Licensed Product(s). PPI covenants and agrees to
maintain and to cause its Affiliates to maintain such records of all
sales of the Products made by PPI or its Affiliates as are required by
the FDA or as are reasonably appropriate for a distributor of
pharmaceutical products to maintain so as to enable a recall to be
properly completed.
(b) Irrespective of whether the recall is initiated by PPI or
by SANO:
(i) If it is later demonstrated that the reason for the
recall was due primarily to acts or omissions of SANO (or the
safety or efficacy of the Licensed Product other than as a result
of acts or omissions of PPI or its Affiliates), then SANO shall pay
or reimburse, as the case may be, all reasonable direct out-of-
pocket expenses, including but not limited to reasonable attorney's
fees and expenses and credits and recall expenses claimed by and
paid to customers, incurred by PPI or SANO in connection with
performing any such recall, provided
54
that expenses incurred by PPI shall be in accordance with the terms
and conditions of the recall approved by SANO; or
(ii) If it is later determined that the reason for the
recall was due primarily to the acts or omissions of PPI or its
Affiliates, then PPI shall pay or reimburse, as the case may be,
all direct out-of-pocket expenses, including but not limited to
reasonable attorney's fees and expenses and credits and recall
expenses claimed by and paid to customers, incurred by PPI or SANO
in connection with performing any such recall; or
(iii) If the parties are unable to agree that the cause
of the recall was due primarily to the act or omission of one of
the parties (or its Affiliates, as the case may be) within sixty
days of the initiation of the recall and have not commenced
arbitration proceedings to resolve such dispute within such sixty
day period then all direct out-of-pocket costs incurred by PPI and
SANO, including but not limited to reasonable attorney's fees and
expenses and credits and recall expenses claimed by and paid to
customers, shall be shared by the parties in proportion to their
sharing of Gross Profits in respect of the Licensed Products
recalled.
Each of the parties shall use its reasonable best efforts to minimize the
expenses of recall which it incurs. It is understood and agreed that the
direct out-of-pocket costs and expenses of the recall contemplated in
Paragraphs (i), (ii) and (iii) above shall not include the invoice price
charged by PRI or its Affiliates to the customers for the Products
recalled, which amount shall be dealt with in accordance with the
provisions of
55
Section 9 hereof and shall also not include any excess re-procurement
costs (within the meaning of Paragraph 14.3 hereof) and related penalties
and assessments, which costs, penalties and assessments shall be an
expense of PPI except to the extent that it is an expense of SANO
pursuant to Section 14.3 hereof (provided that where the provisions of
Paragraph (iii) above apply, the excess reprocurement costs and related
penalties and assessments incurred pursuant to Approved Contracts [as
that term is defined in Section 14.3 hereof] shall be shared by the
parties in the proportion in which Gross Profits are shared in respect of
the recalled Products sold pursuant to such Approved Contracts).
(c) All Licensed Products recalled pursuant to this Section
14.1 shall be treated as Licensed Products returned to PPI by its
customers and the provisions of Section 9 shall apply thereto.
(d) The party initiating the recall shall inform FDA of the
proposed recall; however, nothing contained herein shall preclude either
party from informing FDA of any proposed or actual recall by either party
should the recalling party fail to inform FDA of that recall within ten
(10) days of a written request by the non-recalling party to so inform
FDA.
(e) For greater certainty, in the event of a recall, neither
party or its Affiliates shall profit from any out-of-pocket expenses
incurred by it in connection with the recall and for which it is
reimbursed by the other party and, except where the recall relates
directly to an intentional breach of a representation or warranty
contained in this Agreement or arises directly out of a wilful material
breach by a party of any of its duties or obligations hereunder (in each
case, as contemplated in Section 10.1 hereof), neither
56
party shall have a claim against the other party for any damages, losses
or expenses which it suffers or incurs as a result thereof except to the
extent permitted or contemplated in this Section 14.
(f) Each party shall provide reasonable evidence to the other
of the out-of-pocket expenses being claimed by it and the rights of SANO
pursuant to Section 11.4 and the rights of PPI pursuant to Section 11.8
shall apply thereto.
14.2 ANDA-Related FDA Correspondence. Each of the parties shall
-------------------------------
provide the other with a copy of any correspondence or notices received
by such party from FDA relating or referring to the Licensed Product(s)
within ten (10) days of receipt. Each party shall also provide the other
with copies of any responses to any such correspondence or notices within
ten (10) days of making the response.
14.3 Excess Re-procurement Costs.
---------------------------
(a) In the event that a recall occurs which recall was
necessitated primarily by any act or omission of SANO and SANO does not
supply PPI with replacement Licensed Product on a timely basis or if
SANO, in breach of its obligations under this Agreement, fails to make
Licensed Product(s) available to PPI, SANO shall, in addition to any
reimbursement required under Section 14.1, pay any excess re-procurement
costs and/or related penalties or assessments incurred by, or assessed
on, PPI by a customer of PPI pursuant to an Approved Contract (as that
term is defined below) due to PPI's inability to supply Licensed
Product(s) to such customer due to the aforesaid acts, omissions or
breaches of SANO.
(b) SANO shall cooperate with PPI with respect to any legal or
adminis-
57
trative proceedings that arise pursuant to the Approved Contracts as a
result of PPI's inability to supply Licensed Product(s) to such customer
due to the aforesaid acts, omissions or breaches by SANO. The foregoing
shall be without prejudice to any other damages, expense or costs that
PPI may have suffered in connection with SANO's inability to supply the
Licensed Product as aforesaid, subject to the limitations and other
provisions set forth in this Agreement.
(c) For purposes hereof the term "Approved Contract" shall mean
a contract entered into by PPI on or after the Execution Date with one of
its customers:
(i) pursuant to which PPI agrees to supply such customer
with pharmaceutical products which include the Licensed Products
(or any of them), and which provides that if PPI fails to supply
such customer with the Licensed Product in accordance with
specified terms and conditions therein set forth then such customer
shall have the right to procure a comparable replacement product
for the Licensed Product in substitution for the Licensed Products
that PPI has failed to supply to such customer in accordance with
the provisions of its agreement and to charge back to PPI any costs
and expenses incurred by such customer to acquire such comparable
replacement product in excess of the price which was to have been
charged by PPI to the customer for the Licensed Products which it
failed to provide (such excess costs and expenses being the excess
re-procurement costs contemplated in Section 14.1 and in this
Section 14.3);
(ii) which has a term of twelve (12) months or less; and
(iii) which provides for the supply of the relevant
Licensed Product
58
in an amount not greater than the amount forecast by PPI pursuant
to Section 6.2 hereof, taking into account all other sales of the
Licensed Product in the relevant period; or
(iv) where the contract has a term of more than 12
months, or provides for an amount greater than that contemplated by
Paragraph (iii) above, SANO has approved or has been deemed to have
approved such contract in accordance with the provisions of Section
14.3(v) hereof; or
(v) if the approval of SANO as contemplated in Paragraph
(iv) above is requested, PPI shall have provided to SANO, in
accordance with the provisions of this paragraph, a complete copy
of the proposed final agreement between PPI and its customer prior
to entering into such contract. A copy of any contract to be
provided to SANO as contemplated in this Paragraph (v) shall be
forwarded to SANO in the manner contemplated in Section 15.4
hereof. SANO shall have a period of ten business days from the
date upon which copies of such contract are actually received by it
as aforesaid to notify PPI in writing that it does not approve of
the contract and failing such notice from SANO within such ten
business day period SANO shall be deemed to have approved of such
contract.
14.4 Confidentiality.
---------------
(a) The parties agree that, without the prior written consent
of the other party (such consent not to be unreasonably withheld) or
except as may be required under law or court order, the provisions of the
Agreement shall remain confidential and shall not be disclosed to any
Person not affiliated with any of the parties.
59
(b) PPI and SANO hereby agree not to reveal or disclose any
Confidential Information (as defined below) to any Person without first
obtaining the written consent of the disclosing party, except as may be
necessary in regulatory proceedings or litigation. For purposes hereof
Confidential Information shall mean all information, in whatever form,
which is or was disclosed by one party to another or to an Affiliate of
the other prior to or during the term of this Agreement and which relates
in any way to the Products or to the business of the disclosing party,
including, without limitation information relating to customers and
pricing. Confidential Information shall not include information that a
party can demonstrate by written evidence:
(i) is in the public domain (provided that information in
the public domain has not and does not come into the public domain
as a result of the disclosure by the receiving party or any of its
Affiliates);
(ii) is known to the receiving party or any of its
Affiliates prior to the disclosure by the other party: or
(iii) becomes available to the party on a non-
confidential basis from a source other than an Affiliate of that
party or the disclosing party
and PPI covenants and agrees to cause its Affiliates to comply with the
provisions of this Section 14.4.
60
ARTICLE XV
GENERAL TERMS AND CONDITIONS
----------------------------
15.1 Force Majeure Clauses. Neither party shall be considered to
---------------------
be in default in respect of any obligation hereunder, other than the
obligation of a party to make payment of amounts due to the other party
under or pursuant to this Agreement, if failure of performance shall be
due to Force Majeure. If either party is affected by a Force Majeure
event, such party shall, within 20 days of its occurrence, give notice to
the other party stating the nature of the event, its anticipated duration
and any action being taken to avoid or minimize its effect. The
suspension of performance shall be of no greater scope and not longer
duration than is required and the non-performing party shall use its
reasonable best efforts to remedy its inability to perform. The
obligation to pay money in a timely manner is absolute and shall not be
subject to the Force Majeure provisions, except to the extent prohibited
by governmental rule or regulations other than rules or regulations
incident to bankruptcy or insolvency proceedings of a party. Force
Majeure shall mean an unforeseeable or unavoidable cause beyond the
control and without the fault or negligence of a party (and, where the
party is PPI, beyond the control and without the fault or negligence of
any of its Affiliates) including, but not limited to, explosion, flood,
war (whether declared or otherwise), accident, labor strike, or other
labor disturbance, sabotage, acts of God, newly enacted legislation,
newly issued orders or decrees of any Court or of any governmental
agency. Notwithstanding anything in this Section to the contrary, the
party to whom performance is owed but to whom it is not rendered because
of any event of Force Majeure as contemplated in this Section 15.1
61
shall, after the passage of one hundred and twenty days, have the option
to terminate this Agreement on thirty days prior written notice to the
other party hereto. For greater certainty, the inability or failure of
PPI to cause any of its respective Affiliates to comply with any of the
provisions of this Agreement expressed to be applicable to its Affiliates
or which require such party to cause the Affiliate to do or not to do
something shall not be considered Force Majeure unless the Affiliate in
question is unable to comply by reason of unforeseeable or unavoidable
causes beyond the control and without the fault or negligence of such
Affiliate.
15.2 Arbitration. All disputes arising out of, or in relation to,
-----------
this Agreement (other than disputes arising out of any claim by a third
party in an action commenced against a party), shall be referred for
decision forthwith to a senior executive of each party not involved in
the dispute. If no agreement can be reached through this process within
thirty days of request by one party to the other to nominate a senior
executive for dispute resolution, then either party hereto shall be
entitled to refer such dispute to a single arbitrator for arbitration
under Florida law, such arbitration to be held in Miami, Florida on an
expedited basis in accordance with the rules and regulations of the
American Arbitration Association. Any party demanding arbitration shall
with service of its demand for arbitration propose a neutral arbitrator
selected by it. In the event that the parties cannot agree upon a
neutral arbitrator within thirty (30) days after the demand for
arbitration, an arbitrator shall be appointed by the American Arbitration
Association who shall be a partner in a Miami, Florida law firm having at
least ten (10) partners.
15.3 Assignment. This Agreement may not be assigned nor can the
----------
performance
62
of any duties hereunder be delegated by PPI or by SANO without the prior
written consent of the other parties, which consent shall not be
unreasonably withheld; provided that any such assignment shall not
relieve the assignor from any of its obligations hereunder or under any
other document or agreement delivered by such party pursuant to, or
delivered (or acknowledged to have been delivered) contemporaneously with
or in connection with the execution of, this Agreement, which shall
continue to be binding upon such party notwithstanding such assignment.
Notwithstanding the foregoing, PPI may delegate from time to time some of
its duties hereunder to any of its Affiliates provided that, prior to any
such delegation, it gives written notice thereof to SANO (indicating the
duties being so delegated and the duration of such delegation); provided
that no such delegation shall relieve PPI from any of its obligations
hereunder in respect of the duties being delegated or otherwise.
15.4 Notices. Any notice required or permitted to be given under
-------
this Agreement shall be sufficiently given if in writing and delivered by
registered or certified mail (return receipt requested), facsimile (with
confirmation of transmittal), overnight courier (with confirmation of
delivery), or hand delivery to the appropriate party at the address set
forth below, or to such other address as such party may from time to time
specify for that purpose in a notice similarly given:
If to SANO:
SANO Corporation
1700 N. W. 65th Avenue
Suite 13
Plantation, Florida 33313
Attn: President
Fax: 305-587-9909
63
with a copy to (other than regularly prepared notices, reports, etc.
required to be delivered hereunder):
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Gary Epstein, Esq.
Fax: 305-579-0717
If to PRI
c/o PRI Distributors, Ltd.
One Ram Ridge Road
Spring Valley, NY 10977
Attn: President
Fax: 914-425-7922
with a copy to (other than regularly prepared notices, reports, etc.
required to be delivered hereunder):
Hertzog, Calamari & Gleason
100 Park Avenue
New York, New York 10017
Attn: Stephen A. Ollendorff, Esq.
Fax: (212) 213-1199
Any such notice shall be effective (i) if sent by mail, as aforesaid,
five business days after mailing, (ii) if sent by facsimile, as
aforesaid, when sent, and (iii) if sent by courier or hand delivered, as
aforesaid, when received. Provided that if any such notice shall have
been sent by mail and if on the date of mailing thereof or during the
period prior to the expiry of the third business day following the date
of mailing there shall be a general postal disruption (whether as a
result of rotating strikes or otherwise) in the United States then such
notice shall not become effective until the fifth business day following
the date of resumption of normal mail service.
64
15.5 Governing Law and Consent to Jurisdiction.
-----------------------------------------
(a) Except as otherwise provided herein, this Agreement shall
be deemed to have been made under, and shall be governed by, the laws of
the State of Florida in all respects including matters of construction,
validity and performance, but without giving effect to Florida's choice
of law provisions.
(b) In connection with any action commenced hereunder, each of
the undersigned consent to the jurisdiction of the state and federal
courts located in Miami, Florida. Notwithstanding the foregoing, each
party also agrees to the jurisdiction of any court in which any third
party claim may be brought.
15.6 Binding Agreement. This Agreement shall be binding upon the
-----------------
parties hereto, and their respective successors and permitted assigns.
15.7 Entire Agreement. This Agreement and all other documents and
----------------
instruments delivered by any of the parties or their Affiliates pursuant
hereto or in connection with the execution and delivery of this Agreement
contain the entire agreement and understanding of the parties with
respect to the subject matter hereof and thereof and supersedes all
negotiations, prior discussions and agreements relating to the Licensed
Products or the Right. This Agreement may not be amended or modified
except by a written instrument signed by all of the parties hereto.
15.8 Headings. The headings to the various articles and paragraphs
--------
of this Agreement have been inserted for convenience only and shall not
affect the meaning of the language contained in this Agreement.
15.9 Waiver. The waiver by any party of any breach by another
------
party of any
65
term or condition of this Agreement shall not constitute a waiver of any
subsequent breach or nullify the effectiveness of that term or condition.
15.10 Counterparts. This Agreement may be executed in identical
------------
duplicate copies. The parties agree to execute at least two identical
original copies of the Agreement. Each identical counterpart shall be
deemed an original, but all of which together shall constitute one and
the same instrument.
15.11 Severability of Provisions. If, for any reason whatsoever,
--------------------------
any term, covenant or condition of this Agreement or of any other
document or instrument executed and delivered by either PPI or SANO
pursuant hereto or in connection with the completion of the transaction
contemplated herein, or the application thereof to any party or
circumstance is to any extent held or rendered invalid, unenforceable or
illegal, then such term, covenant or condition:
(i) is deemed to be independent of the remainder of such
document and to be severable and divisible therefrom and its
validity, unenforceability or illegality does not affect, impair or
invalidate the remainder of such document or any part thereof; and
(ii) continue to be applicable and enforceable to the
fullest extent permitted by law against any party and circumstances
other than those as to which it has been held or rendered invalid,
unenforceable or illegal.
15.12 Publicity. Neither party shall issue any press release or
---------
other public statement regarding, or disclosing the existence of, this
Agreement without the prior written consent of the other party; provided,
however, that neither party shall be
66
prevented from complying with any disclosure obligation it may have under
applicable law. The parties shall use their best efforts to agree on the
form and content of any such public statement.
ARTICLE XVI
GUARANTEE OF PRI
16.1 Guarantee. PRI does hereby unconditionally guarantee to SANO
---------
the full and prompt payment and performance by PPI of all of the
obligations of every nature whatsoever to be performed by PPI under this
Agreement (the "Guaranteed Obligations") as and when required to be paid
or performed under this Agreement. The guarantee set forth in the
preceding sentence (this "Guarantee") is an absolute, unconditional and
continuing guarantee of the full and punctual payment and performance of
the Guaranteed Obligations and is in no way conditioned upon any
requirement that SANO first attempt to enforce any of the Guaranteed
Obligations against PPI, any other guarantor of the Guaranteed
Obligations or any other Person or resort to any other means of obtaining
performance of any of the Guaranteed Obligations. This Guarantee shall
continue in full force and effect until PPI shall have satisfactorily
performed or fully discharged all of the Guaranteed Obligations. No
performance or payment made by PPI, PRI, any other guarantor or any other
Person, or received or collected by SANO from PPI, PRI, any other
guarantor or any other Person in performance of or in payment of the
Guaranteed Obligations shall be deemed to modify, reduce (except to the
extent that any such performance or payment shall reduce the Guaranteed
Obligations), release or otherwise
67
affect the liability of PRI under this Guarantee which shall,
notwithstanding any such payment or performance other than those made by
PRI in respect of the Guaranteed Obligations or those received or
collected from PRI in respect of the Guaranteed Obligations, remain
liable for the amount of the Guaranteed Obligations, until the Guaranteed
Obligations are paid and performed in full.
16.2 No Subrogation. Notwithstanding any payment or performance by
--------------
PRI, PRI shall not be entitled to be subrogated to any of the rights of
SANO or any other guarantor or any collateral security held by SANO
against PPI or any other guarantor or any collateral security for the
payment of the Guaranteed Obligations, nor shall PRI seek or be entitled
to seek any contribution or reimbursement from PPI or any other guarantor
in respect of payments made by PRI under this Guarantee. PRI HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS AND CLAIMS
WHICH PRI MAY NOW HAVE OR HEREAFTER ACQUIRE TO BE SUBROGATED TO ANY SUCH
RIGHTS OF SANO AND TO SEEK OR BE ENTITLED TO SEEK ANY SUCH CONTRIBUTION
OR REIMBURSEMENT FROM PPI OR ANY OTHER GUARANTOR. THE OBLIGATIONS OF AND
WAIVERS BY PRI SET FORTH IN THIS SECTION 16.2 SHALL SURVIVE THE
TERMINATION OF THIS GUARANTEE AND THE PAYMENT, PERFORMANCE AND
SATISFACTION IN FULL OF ALL OF THE GUARANTEED OBLIGATIONS.
16.3 Amendments, etc with Respect to Guaranteed Obligations; Waiver
--------------------------------------------------------------
of Rights. PRI shall remain obligated under this Guarantee
---------
notwithstanding that, without any reservation of rights against PRI and
without notice to or further assent by PRI, any
68
demand for payment or performance of any of the Guaranteed Obligations
made by SANO may be rescinded by SANO and any of the Guaranteed
Obligations continued, and the Guaranteed Obligations, or the liability
of any other Person upon or for any part thereof, or any collateral
security (or guarantee therefor may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered or released by SANO and this Agreement, any
collateral security document or other guarantee or document in connection
herewith may be amended, modified, supplemented or terminated, in whole
or in part, as SANO may deem advisable from time to time, and any
collateral security or guarantee at any time held by SANO for the payment
or performance of the Guaranteed Obligations may be sold, exchanged,
waived, surrendered or released. SANO shall not have any obligation to
protect, secure, perfect or insure any lien at any time held by it as
security for the Guaranteed Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against PRI,
SANO may, but shall be under no obligation to, make a similar demand on
PPI or any other guarantor, and any failure by SANO to make any such
demand or to collect any payments from PPI or any such other guarantor or
any release of PPI or such other guarantor shall not relieve PRI of its
obligations or liabilities under this Guarantee, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of
law, of SANO against PRI.
16.4 Extent of Liability and Waivers. PRI understands and agrees
-------------------------------
that the obligation of guarantee of PRI pursuant to Section 16.1 are
intended to render PRI liable hereunder in each instance where PPI would
be liable under this Agreement, and no
69
more, and except that the obligations of PRI hereunder shall not be
discharged by any bankruptcy or similar proceeding which may discharge
PPI herefrom. Accordingly, PRI acknowledges that it will not assert, and
hereby waives to the fullest extent permitted by law, any rights to avoid
performance hereunder available to it as guarantor which are not also
available to PPI. PRI waives any and all notice of the creation,
renewal, extension or accrual of any of the Guaranteed Obligations and
notice of or proof of reliance by SANO upon this Guarantee or acceptance
of this Guarantee; the Guaranteed Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guarantee;
and all dealings between PPI or PRI, on the one hand, and SANO on the
other, pursuant to this Agreement shall likewise be conclusively presumed
to have been had or consummated in reliance upon this Guarantee. PRI
waives diligence, presentment, protest, demand for payment and notice of
default or nonpayment or nonperformance to or upon PPI or any other
guarantors with respect to the Guaranteed Obligations. When pursuing its
rights and remedies hereunder against PRI, SANO may, but shall be under
no obligation to, pursue such rights and remedies as it may have against
PPI or any other Person or against any collateral security or guarantee
for the Guaranteed Obligations, and any failure by PRI to pursue such
other rights or remedies or to collect any payments from PPI or any such
other Person or to realize upon any such collateral security or
guarantee, or any release of PPI or any such other Person or any such
collateral security or guarantee, shall not relieve PRI of any liability
hereunder and shall not impair or affect the rights and remedies, whether
express, implied or available as a matter of law,
70
of SANO against PRI. This Guarantee shall remain in full force and
effect and be binding upon PRI and its successors and assigns and shall
inure to the benefit of SANO and its successors and assigns, until all
the Guaranteed Obligations shall have been satisfied by payment and
performance in full.
16.5 Reinstatement. This Guarantee shall continue to be effective,
-------------
or be reinstated, as the case may be, if at any time payment or
performance, or any part thereof, of any of the Guaranteed Obligations is
rescinded or must otherwise be restored or returned by SANO upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of PPI
or PRI, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, PPI or
PRI, or any substantial part of its or their property, or otherwise, all
as though such payments had not been made.
16.6 No Waiver; Cumulative Remedies. SANO shall not by any act
------------------------------
(except by a written instrument pursuant to Section 15.7), delay,
indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any breach of any of the terms
and conditions of this Agreement. No failure to exercise, nor any delay
in exercising, on the part of SANO, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by SANO of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy
which the SANO would otherwise have on any future occasion. The rights
and remedies
71
herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
16.7 Affiliates. To the extent that PPI or PRI is obligated
----------
hereunder to cause its Affiliates to do or refrain from doing anything,
PRI will do all things that it may lawfully and reasonably do to cause
such Affiliate to comply.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the Execution Date.
SANO CORPORATION
By:/s/Mark M. Watson
-----------------
(Signature)
Name:Mark M. Watson
--------------
Title:Chairman
--------
PHARMACEUTICAL RESOURCES, INC.
By:/s/Kenneth I. Sawyer
--------------------
(Signature)
Name:Kenneth I. Sawyer
-----------------
Title:President & CEO
---------------
PAR PHARMACEUTICAL, INC.
By:/s/Kenneth I. Sawyer
--------------------
(Signature)
Name:Kenneth I. Sawyer
-----------------
Title:President & CEO
---------------
72
APPENDIX I
LICENSED PRODUCTS
Product "A"
-----------
[ ]
Product "B"
-----------
[ ]
APPENDIX II
OPTION PRODUCTS
[ ]
[ ]
[ ]
EXHIBIT A
DEVELOPMENT PROGRAM
[ ]
EXHIBIT B
As used herein, the term "Net Sales" shall mean the gross amount
invoiced for sales of Licensed Product(s) made by PRI or its Affiliates
to independent third parties, reduced by the following to the extent that
they are properly allocable to the quantity of Licensed Product(s) so
sold: all trade, quantity and cash discounts allowed; credits or
allowances actually granted on account of rejections; returns, billing
errors and retroactive price reductions (including, without limitation,
shelf stock adjustments); credits, rebates, chargeback rebates, fees,
reimbursements or similar payments granted or given to wholesalers and
other distributors, buying groups, health care insurance carriers,
governmental agencies and other institutions in respect of the purchase
price; freight, transportation, insurance or other delivery charges; and
all taxes (except income taxes), tariffs, duties and other similar
governmental charges paid by the seller on sales of the Licensed
Product(s) and not reimbursed by the purchaser. "Gross Profit" shall
mean the difference between Net Sales for any amount of Licensed
Product(s) and the price paid to SANO pursuant to Section 7.2 hereof in
respect of such Licensed Product(s).
[ ]
[ ]
EXHIBIT C
[SALES SUMMARY FORM]