UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED SEPTEMBER 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________
TO _____________
Commission File Number: 0-27088
SANO CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 650263022
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3250 COMMERCE PARKWAY
MIRAMAR, FLORIDA 33025
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(Address of principal executive offices) (Zip Code)
(954) 430-3340
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1933 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.01 par value 10,511,781 shares as of November 7, 1997.
<PAGE>
SANO CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -- September 30, 1997 and December 31, 1996
Statements of Operations -- Three and nine months ended
September 30, 1997 and 1996
Statements of Cash Flows -- Nine months ended September 30, 1997
and 1996
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
<PAGE>
FINANCIAL STATEMENT
ITEM 1.
SANO CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,338,215 $ 6,696,361
Marketable securities 23,457,501 16,984,567
Receivables 1,285,380 2,066,196
Prepaid chemical supplies 1,782,220 1,154,298
Other current assets 168,974 302,578
------------ ------------
Total current assets 28,032,290 27,204,000
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET 15,946,026 11,647,346
------------ ------------
OTHER ASSETS
Patents, net 638,729 313,242
Deposits and other 829,884 456,161
------------ ------------
Total other assets 1,468,613 769,403
------------ ------------
TOTAL ASSETS $ 45,446,929 $ 39,620,749
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 2,049,645 $ 166,871
Current obligation under capitalized leases 40,459 44,418
Accounts payable 1,088,121 1,732,146
Accrued expenses 1,506,786 1,714,250
------------ ------------
Total current liabilities 4,685,011 3,657,685
------------ ------------
LONG TERM LIABILITIES
Deferred revenue 7,913,160 5,275,073
Capitalized lease obligations, net of current portion 37,425 68,204
Notes payable -- 521,262
------------ ------------
Total long term liabilities 7,950,585 5,864,539
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 5,000,000 authorized, none issued or outstanding -- --
Common stock $0.01 par value, 25,000,000 shares authorized, 10,505,115 and 9,243,735
issued and outstanding at September 30, 1997 and December 31, 1996, respectively 105,052 92,437
Additional paid-in-capital 60,844,037 45,424,428
Accumulated deficit (28,137,756) (15,418,340)
------------ ------------
Total stockholders' equity 32,811,333 30,098,525
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,446,929 $ 39,620,749
============ ============
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 944,800 $ 15,000,000 $ 944,800 $ 15,000,000
------------------- ------------------- --------------- -----------------
OPERATING EXPENSES
Research and development 4,477,385 4,326,524 12,982,950 10,161,958
General and administrative 1,139,961 1,603,053 2,803,489 2,693,919
------------------- ------------------- --------------- -----------------
Total operating expenses 5,617,346 5,929,577 15,786,439 12,855,877
------------------- ------------------- --------------- -----------------
OTHER INCOME (EXPENSE)
Interest and other income 992,466 336,967 2,254,590 975,287
Interest and other expense (38,536) (14,082) (132,367) (68,468)
------------------- ------------------- --------------- -----------------
Total other income (expense) 953,930 322,885 2,122,223 906,819
------------------- ------------------- --------------- -----------------
NET INCOME (LOSS) $ (3,718,616) $ 9,393,308 $(12,719,416) $ 3,050,942
=================== =================== =============== =================
NET INCOME (LOSS) PER COMMON SHARE (NOTE 3):
Primary $ (0.36) $ 0.91 $ (1.33) $ 0.30
====== ==== ====== ====
Fully diluted $ (0.36) $ 0.90 $ (1.33) $ 0.29
====== ==== ====== ====
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary 10,208,000 10,341,000 9,572,000 10,329,000
=================== =============== ============== ================
Fully diluted 10,208,000 10,423,000 9,572,000 10,402,000
=================== =============== =============== ================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
SANO CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (12,719,416) $ 3,050,942
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization 688,637 518,082
Expense from issuance of stock options to non-employees 194,105 --
Loss on sale of equipment -- 16,640
Accretion of discount on marketable securities (730,322) (246,106)
Interest accrued on notes payable 69,503 51,617
Gain on restructuring debt (415,481) --
Changes in operating assets and liabilities:
Decrease in accounts receivable 780,816 --
Increase in prepaid chemical supplies (627,922) --
Decrease (increase) in other current assets 133,604 (93,419)
Increase in deposits and other (373,723) (420,880)
(Decrease) increase in accounts payable and accrued
expenses (785,346) 1,084,014
------------------------- ----------------------
Net cash (used in) provided by operating (13,785,545) 3,960,890
activities ------------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,967,904) (5,006,517)
Sale of equipment -- 2,200
Sale and maturities of marketable securities 20,863,000 20,022,819
Purchase of marketable securities (26,605,612) (22,383,177)
Expenditures for patents (344,900) (118,383)
------------------------- ----------------------
Net cash used in investing activities (11,055,416) (7,483,058)
------------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private offering, net 15,120,839 -
Repayment of notes payable, capital leases & deferred revenue (2,169,418) (426,802)
Advances from distributors 6,413,160 1,866,854
Proceeds from exercise of stock options 51,137 39,385
Proceeds from notes payable 67,097 173,407
---------------------- ---------------------
Net cash provided by financing activities 19,482,815 1,652,844
---------------------- ---------------------
Net decrease in cash and cash equivalents (5,358,146) (1,869,324)
Cash and cash equivalents at beginning of period 6,696,361 5,517,061
====================== =====================
Cash and cash equivalents at end of period $ 1,338,215 3,647,737
====================== =====================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
In March 1997, the Company issued 4,337 shares of common stock to the Company's
401(k) plan.
In July 1997, the Company amended a distribution agreement which resulted in a
$1,406,199 reclassification between deferred revenue and notes payable.
SEE ACCOMPANYING NOTES
5
<PAGE>
SANO CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(1) BASIS OF PRESENTATION:
The information at September 30, 1997 and for the three and nine months ended
September 30, 1997 and 1996 is unaudited. However, such information includes all
adjustments (consisting of normal recurring adjustments) which in the opinion of
management of Sano Corporation (the "Company") are necessary for a fair
financial presentation of the results for the periods presented. The results of
operations and cash flows for the three and nine month periods ended September
30, 1997 are not necessarily indicative of results of operations and cash flows
to be expected for the entire year or any subsequent period. These financial
statements should be read in conjunction with the audited financial statements
for the year ended December 31, 1996.
(2) PREPAID CHEMICAL SUPPLIES:
Effective fourth quarter 1996, the Company adopted a policy in which raw
materials are classified as prepaid chemical supplies at the time of purchase.
When the raw materials are used, they are expensed as research and development
costs or cost of sales, as applicable.
(3) INCOME (LOSS) PER COMMON SHARE:
Income (loss) per common share is determined by dividing the net income (loss)
attributable to holders of the Company's common stock by the weighted average
number of shares of common stock and dilutive common stock equivalents
outstanding after applying the treasury stock method and after giving effect to
the reverse stock split effected in November 1995 and the conversion into common
stock of all outstanding preferred stock in connection with the Company's
initial public offering. For loss periods, common stock equivalents do not
include the issuance of stock options and warrants because their effect would be
anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earning Per Share" effective for fiscal years ending after December 15, 1997.
SFAS No. 128 simplifies the calculation of earnings per share to measure the
performance of an entity over a reporting period for both basic earnings per
share and diluted earnings per share. SFAS No. 128 does not currently have an
impact on the Company's earnings per share as the Company is incurring net
losses.
6
<PAGE>
SANO CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
(4) STOCK OPTION PLANS:
During 1993, the Board of Directors of the Company adopted the Sano Corporation
1993 Nonqualified Stock Option Plan (the "1993 Plan") which has been approved by
the Company's stockholders. All directors, officers, employees and certain
related parties of the Company designated by the Board are eligible to receive
options under the 1993 Plan.
The 1993 Plan is administered by the Stock Option Committee of the Board of
Directors of the Company. The 1993 Plan was established on May 5, 1993 and
terminates on May 4, 2003.
The purchase price per share of stock purchased under an option pursuant to the
Plan is determined by the Board, but in no event may such price be below the
fair market value of such stock. The maximum term of any option is ten years
from the date of grant. All options terminate within 120 days of termination of
employment.
In September 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan") which provides for the granting of stock options to employees, officers,
directors and independent contractors for the purchase of up to 500,000 shares
of the Company's common stock. Options granted under the Plan may be incentive
stock options or nonqualified options. In May 1997, an additional 300,000 shares
of common stock were approved by the stockholders to be reserved for issuance
pursuant to the exercise of stock options.
Additionally, under the 1995 Plan, each non-employee director shall receive, on
the date of his appointment as Director, an option to purchase 5,000 shares of
common stock and each subsequent year in which such director serves on the Board
an option to purchase 5,000 shares of common stock upon the release of the prior
year earnings.
The 1995 Plan provides for immediate vesting of options in the event of certain
changes in control of the Company.
The following is a summary of stock option activity:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
------------------ ------------------
<S> <C> <C>
Outstanding at December 31, 1996 1,450,807 $ 0.67 - 19.25
Granted 375,666 9.75 - 20.25
Exercised (57,043) 0.67 - 11.00
Canceled (13,393) 2.70 - 11.00
------------------ ------------------
Outstanding at September 30, 1997 1,756,037 0.67 - 20.25
================== ==================
Options exercisable at September 30, 1997 1,057,682 0.67 - 16.75
================== ==================
Shares of common stock available for future grants
at September 30, 1997 174,199
==================
</TABLE>
The following table summarizes information about fixed stock options outstanding
at September 30, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
NUMBER WEIGHTED
RANGE OF NUMBER OUTSTANDING AS REMAINING WEIGHTED AVERAGE EXERCISABLE AS OF AVERAGE
EXERCISE PRICES OF SEPTEMBER 30, 1997 CONTRACTUAL LIFE EXERCISE PRICE SEPTEMBER 30, 1997 EXERCISE PRICE
- --------------- --------------------- ---------------- -------------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
$0.67 560,170 .64 .67 493,497 .67
1.50 - 3.60 562,918 4.44 2.45 469,352 2.26
9.75 - 13.38 446,950 4.72 10.74 68,933 11.34
14.38 - 20.25 185,999 3.97 17.66 25,900 15.38
------- ---- ----- ------ -----
$0.67 - 20.25 1,756,037 3.25 5.61 1,057,682 2.44
</TABLE>
7
<PAGE>
SANO CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
(4) STOCK OPTION PLANS (CONTINUED):
The Company applies APB Opinion 25 and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for its fixed
stock option plans. Had compensation cost for the Company's stock been based on
the fair value at the grant dates for awards under those plans consistent with
the method of FASB Statement 123, the Company's net loss and loss per share
would have been reduced to the proforma amounts indicated below:
1997
----
Net Loss As reported.................. $ 12,719,416
Proforma................. $ 13,691,457
Loss Per Share As reported.................. $ 1.33
Proforma................. $ 1.43
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected volatility of 57.6%, risk-free interest rates ranging from
6.11% to 6.32%, expected dividends of $0 and expected lives of 5 years. For the
nine months ended September 30, 1997, the Company recorded compensation expense
of $194,105 related to stock options granted on various dates to non-employees
of the Company.
(5) LEGAL PROCEEDINGS:
On March 6, 1996, Key Pharmaceuticals, Inc. ("Key") filed a complaint in the
United States District Court of Florida alleging that one of the Company's
transdermal nitroglycerin patches, for which the Company had filed an
Abbreviated New Drug Application with the U.S. Food and Drug Administration,
infringed certain patents owned by Key. On October 17, 1997, Sano withdrew from
consideration by the United States Food and Drug Administration ("FDA") the
Abbreviated New Drug Application that gave rise to this lawsuit. The parties
have since agreed upon a stipulation and order dismissing the lawsuit.
On September 15, 1997, Novartis Pharmaceuticals Canada Inc. and Alza Corporation
filed a motion in the Federal Court of Canada, seeking to prohibit the Minister
of Health and Welfare from issuing a notice of compliance to the Company for
certain of the Company's transdermal nitroglycerine patches. The motion seeks to
determine if the Company's proposed patches infringe a Canadian patent owned by
Alza. The Company believes there is no merit to the allegations in the motion.
The Company is contesting the motion and intends to vigorously defend its
position.
(6) DISTRIBUTION AND LICENSE AGREEMENTS:
In August 1996, the Company entered into an exclusive worldwide distribution and
supply agreement with Bristol-Myers Squibb Company ("BMS") and received a $15
million license payment. Because the $15 million license payment is
non-refundable and the Company has no further obligations related to the license
payment, such amount has been recognized as revenue. Any milestone payments Sano
may receive under the BMS agreement will also be recorded as revenue upon the
achievement of the related milestones. An advance of $6 million received in
April 1997 from BMS to fund the purchase of production equipment is recorded as
deferred revenue and will be recognized as revenue as sales of the products are
made and related royalties are earned.
In May 1997, the Company entered into an exclusive distribution agreement with a
third party to distribute a generic transdermal product in Italy, Vatican City
and the Republic of San Marino. An upfront nonrefundable license payment of
$100,000 will be payable to the Company upon meeting certain regulatory filing
requirements expected to be completed in 1998.
8
<PAGE>
SANO CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(CONTINUED)
DISTRIBUTION & LICENSE AGREEMENTS (CONT.)
In July 1997, the Company entered into an exclusive license agreement for the
North American rights to use Nestorone(R), a novel progestin, in transdermal
patches for female hormone replacement therapy and contraception. Sano paid an
upfront license fee which is included in Patents, net in the accompanying
balance sheet which the Company is obligated to pay future royalties upon
marketing of this product. The Company also secured an option to acquire
exclusive worldwide rights for the transdermal use of a patented, synthetic
androgen, MENT, for the treatment of testosterone deficiency, male contraception
and muscle wasting in males. The Company paid an option fee which is included in
Patents, net in the accompanying balance sheet.
In July 1997, the Company amended its distribution agreement with Pharmaceutical
Resources, Inc. ("PAR") with respect to generic transdermal products under
development. The amendment confirms the Company's worldwide distribution rights
to all of its generic transdermal products with the exception of U.S. rights and
right of first refusal in Israel for one Nicotine and two Nitroglycerin products
(the "PAR Products").
In exchange for the retention of these rights, the Company has agreed to return
prior advances made by PAR for all products other than the PAR Products totaling
$3,906,786. Of this amount, $1,953,393 was repaid upon the execution of the
amendment and $1,953,393 will be repaid in the form of a promissory note due
September 1998 accruing interest at 8.5%.
The amendment provides for the Company to repay $1,500,000 of the prior advances
made by PAR for the PAR Products out of future gross profits. The balance of
such advance which had been deferred by the Company was $1,915,000 at September
30, 1997. Accordingly, the Company recognized other income of $415,000 in July
1997.
(7) PRIVATE OFFERING
In July 1997, the Company issued an additional 1,200,000 shares of Common Stock
through a private offering. Proceeds to the Company totaled approximately $15
million, net of expenses associated with the offering.
(8) SUBSEQUENT EVENTS
In October 1997, the Company was granted its first product approval on its
generic transdermal nicotine patch by the FDA.
In October 1997, the Company withdrew from consideration by the FDA the
abbreviated new drug application filed for one of its generic transdermal
nitroglycerine patches. In connection with the Company's decision to withdraw
this product, if the Company has not received an approval of the product by the
FDA prior to May 1998, the distribution company may terminate the agreement with
respect to this product and the Company will be required to return $844,000 in
advances.
9
<PAGE>
PART I. FINANCIAL INFORMATION:
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company develops novel controlled release drug delivery systems for
drug therapies licensed from others and for off-patent drugs ("Proprietary
Products"). The Company also develops generic versions of branded controlled
release products, generally where the advanced nature of the necessary
technologies may limit competition from other manufacturers ("Generic
Products"). The Company's strategy is to develop a comprehensive line of both
Proprietary Products and Generic Products utilizing controlled release
technologies. The Company now has nine Proprietary Products and ten Generic
Products in various stages of development. At September 30, 1997, the Company
had an accumulated deficit of $28.1 million, resulting from expenses incurred in
research and development, clinical trials, facilities operations, the
acquisition of supplies and, to a lesser extent, general and administrative
operations. The Company expects to incur losses at least through 1998, which
losses are likely to be substantial. The Company's sources of working capital
have been an initial public offering, equity financings, a license payment and
development fees from BMS and, to a lesser extent, interest earned on investment
of cash. In July 1997, the Company issued an additional 1,200,000 shares of
Common Stock through a private offering. Proceeds to the Company totaled
approximately $15 million, net of expenses associated with the offering. In the
near term, revenues are expected to consist principally of revenues from license
fees, milestone payments, research fees and payments from other entities under
collaborative marketing and other agreements. Such payments are likely to be
irregular and unpredictable.
In July 1997, the Company amended its distribution agreement with PAR for
generic transdermal products under development. The amendment confirms the
Company's worldwide distribution rights to all of its generic transdermal
products with the exception of U.S. rights and right of first refusal in Israel
for the PAR Products.
In exchange for these rights, the Company has agreed to return prior
advances made by PAR for all products other than the PAR Products, totaling
$3,906,786. Of this amount, $1,953,393 was repaid upon the execution of the
amendment and $1,953,393 will be repaid in the form of a promissory note due
September 1998 accruing interest at 8.5%.
The amendment provides for the Company to repay $1,500,000 of the prior
advances made by PAR for the PAR Products out of future gross profits. The
balance of such advance which had been deferred by the Company was $1,915,000 at
September 30, 1997. Accordingly, the Company recognized other income of $415,000
in July 1997.
Under its distribution and supply agreement with BMS, any milestone payments
the Company may receive under the BMS agreement will be recorded as revenue upon
the achievement of the related milestones. An advance received from BMS of $6.0
million to fund the purchase of production equipment is recorded as deferred
revenue and will be recognized as revenue as sales of the products are made and
related royalties are earned. The Company has agreed to repay the advance by BMS
from revenue earned from product sales.
In October 1997, the Company received FDA approval to market its generic
transdermal nicotine patch for smoking cessation. The product is the Company's
first FDA product approval.
In October 1997, the Company withdrew from consideration by the FDA the
abbreviated new drug application filed for one of its generic transdermal
nitroglycerine patches. In connection with the Company's decision to withdraw
this product, if the Company has not received an approval of the product by the
FDA prior to May 1998, the distribution company may terminate the agreement with
respect to this product and the Company will be required to return $844,000 in
advances.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
REVENUES. Under the Company's distribution agreement with BMS, the Company
recognized $945,000 in research and development revenue for the three months
ended September 30, 1997. As a result of the August 1996 license payment under
the BMS agreement, the Company recognized revenue of $15.0 million for the three
months ended September 30, 1996.
RESEARCH AND DEVELOPMENT. The Company's research and development expenses
increased by $151,000, or 3%, to $4.5 million for the three months ended
September 30, 1997, from $4.3 million during the comparable period in 1996. This
increase is primarily attributable to the Company's increase in personnel due to
preproduction start-up costs associated with staffing to prepare for product
commercialization. All manufacturing expenses incurred in production of supplies
for clinical trials are included within research and development expenses. The
Company intends to continue to increase its research and development
expenditures. Actual expenditures will depend on, among other things, the
outcome of clinical testing of products under development, delays or changes in
required governmental testing and approval procedures, technological and
10
<PAGE>
competitive developments and strategic marketing decisions.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased by
29%, to $1.1 for the three months ended September 30, 1997 from $1.6 million in
the comparable period of 1996. This decrease was attributable to the $1.0
million investment banking fee incurred in connection with the BMS agreement in
the quarter ended September 30 1996. This decrease was offset by increases in
personnel and personnel-related expenditures associated with the expansion of
facilities and administrative support for the Company's research and development
efforts, as well as increases in professional fees.
OTHER INCOME (EXPENSE). Interest and other income increased by $655,000 or
195% to $992,000 for the three months ended September 30, 1997 from $337,000 in
the comparable period in 1996. Included in interest and other income is $259,000
from BMS in connection with the Company supplying BMS with transdermal patches
for its clinical studies as well as reimbursements for other costs incurred by
the Company on behalf of BMS. Those costs are reimbursable to the Company
pursuant to the BMS Agreement and have been classified as other income. Included
in other income is $415,000 recognized in connection with the amendment of the
distribution agreement with PAR. Interest and other expense was $39,000 for the
three months ended September 30, 1997 compared to $14,000 in the comparable
period in 1996. Interest and other expense principally reflects the accretion of
interest on a discounted note.
NET INCOME (LOSS). As a result of the foregoing, the Company reported net
loss of $3.7 million for the three months ended September 30, 1997, compared to
a net income of $9.4 million in the comparable period in 1996.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
REVENUES. Under the Company's distribution agreement with BMS, the Company
recognized $945,000 in research and development revenue for the three months
ended September 30, 1997. As a result of the August 1996 license payment under
the BMS agreement, the Company recognized revenue of $15.0 million for the nine
months ended September 30, 1996.
RESEARCH AND DEVELOPMENT. The Company's research and development expenses
increased by $2.8 million, or 28%, to $13.0 million for the nine months ended
September 30, 1997, from $10.2 million during the comparable period in 1996.
This increase is primarily attributable to the Company's increased clinical
trial expenses. The significant increase in laboratory and clinical activity
required by the number of products in development resulted in a $393,000
increase in personnel and personnel related expenditures and a $1.6 million
increase in the cost of clinical trial programs, primarily the initiation of the
Phase III program for the Company's smoking cessation patch, as well as
continued research to expand the Company's product pipeline. Preproduction
start-up expenses associated with staffing to prepare for product
commercialization resulted in a $864,000 increase in personnel and personnel
related expenditures. All manufacturing expenses incurred in production of
supplies for clinical trials are included within research and development
expenses. The Company intends to continue to increase its research and
development expenditures. Actual expenditures will depend on, among other
things, the outcome of clinical testing of products under development, delays or
changes in required governmental testing and approval procedures, technological
and competitive developments and strategic marketing decisions.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by
4%, to $2.8 million for the nine months ended September 30, 1997 from $2.7
million in the comparable period of 1996. This decrease was attributable to the
$1.0 million investment banking fee incurred in connection with the BMS
agreement in the third quarter of 1996. This decrease was offset by increases in
personnel and personnel-related expenditures associated with expansion of
facilities and administrative support for the Company's research and development
efforts, as well as increases in professional fees, principally legal fees
incurred in connection with patent litigation. See "Notes to Financial
Statements-Legal Proceeding."
OTHER INCOME (EXPENSE). Interest and other income increased by $1.3
million, or 131% to $2.3 million for the nine months ended September 30, 1997
from $975,000 in the comparable period in 1996. Included in Interest and other
income is $951,000 from BMS in connection with the Company supplying BMS with
transdermal patches for its clinical studies as well as reimbursements for other
costs incurred by the Company on behalf of BMS. Those costs are reimbursable to
the Company pursuant to the BMS Agreement and have been classified as other
income. Included in other income is $415,000 recognized in connection with the
amendment of the distribution agreement with PAR. Interest and other expense was
$132,000 for the nine months ended September 30, 1997 compared to $68,000 in the
comparable period in 1996. Interest and other expense principally reflects the
accretion of interest on a discounted note.
NET INCOME (LOSS). As a result of the foregoing, the Company reported net
loss of $12.7 million for the nine months ended September 30, 1997, compared to
a net income of $3.1 million in the comparable period in 1996.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Net cash used in operating activities was $13.8 million for the nine months
ended September 30, 1997, compared to net cash provided by operating activities
of $4.0 million in the comparable period of 1996. This increase reflects the
increased cash outlays for clinical trials, payroll and overhead.
The Company had capital expenditures of $5.0 million for plant and equipment
acquisitions and $345,000 in expenditures for patents during the nine months
ended September 30, 1997, compared to $5.0 million and $118,000 respectively,
for the same period in 1996.
Net cash provided by financing activities totaled $19.5 million for the
nine months ended September 30, 1997 compared to $1.7 million for the same
period in 1996. In July 1997, the Company issued an additional 1,200,000 shares
of Common Stock through a private offering. Proceeds to the Company totaled
approximately $15.1 million, net of expenses associated with the offering. The
Company also received $4.0 million in net advances from distributors.
On April 1, 1997, the Company received a $6 million payment from BMS under
the terms of its distribution agreement with the Company for the development and
commercialization of transdermal buspirone for the treatment of anxiety and
attention deficit disorder. The payment was used to purchase and upgrade
equipment used in the manufacture of transdermal buspirone. The Company
recorded the $6 million payment as deferred revenue.
At September 30, 1997, the Company had working capital of $23.3 million
compared to working capital of $23.5 million at December 31, 1996. Cash and cash
equivalents and marketable securities were $24.8 million and $23.7 million at
September 30, 1997 and December 31, 1996, respectively. As of November 7, 1997,
Cash and cash equivalents and marketable securities were $23.3 million.
Based on its current expectations of product development, the Company
expects to continue to expend significant amounts on capital improvements,
machinery, equipment and clinical trials. Assuming no material changes in
clinical, research and development expenditures or product sales, the Company
believes that it has sufficient working capital to fund its requirements through
the fourth quarter 1998. The Company may seek additional debt or equity
financing, or other arrangements with strategic investors or partners. No
assurance can be given that such arrangements are available or can be negotiated
on terms favorable to the Company.
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains various "forward looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934 which
represent the Company's intentions, expectations or beliefs concerning future
events, including, but not limited to, statements regarding management's
expectations with respect to FDA approval, the commencement of sales and the
sufficiency of the Company's cash flow for the Company's future liquidity and
capital resource needs. These forward looking statements are qualified by
important factors that could cause actual results to differ materially from
those in the forward looking statements, including, without limitation, the
Company's ability to continue to complete development and clinical trials of its
products and ultimately to obtain approval for the sale of such products from
the FDA, neither of which is assured. Results actually achieved may differ
materially from expected results included in these statements as a result of
these or other factors.
12
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PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS
Incorporated by reference to "Notes to Financial Statements - Legal
Proceeding" in Part I of this Quarterly Report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
10.1 1993 Non-Qualified Stock Option Plan of Registrant (1)
10.2 1995 Stock Option Plan of Registrant (1)
10.3 Form of Indemnification Agreement between the Registrant and each
of its directors and executive officers (1)
10.4 Employment Agreement, dated as of September 20, 1995, between the Registrant and Marc M.
Watson (2)
10.5 Employment Agreement, dated as of September 20, 1995, between the Registrant and Reginald L.
Hardy (2)
10.6 Employment Agreement, dated as of May 31, 1993, between the Registrant and Charles Betlach
(1)
10.7 Employment Agreement, dated as of September 30, 1993, between the Registrant and Cheryl
Gentile, as amended (2)
10.8 Employment Agreement, dated as of May 28, 1993, between the Registrant and Jesus Miranda, as
amended (2)
10.9 Employment Agreement, dated as of September 30, 1993, between the Registrant and Joseph
Gentile (1)
10.10 Distribution Agreement, dated February 24, 1994, between the Registrant and Pharmaceutical
Resources, Inc. (1)
10.11 Lease Agreement, dated May 6, 1994, between the Registrant and Sunbeam Properties, Inc. (3250
Commerce Parkway, Miramar, Florida property) (1)
10.12 Lease Agreement, dated September10, 1994, between the Registrant and Sunbeam Properties, Inc.
(3251 Corporate Way, Miramar, Florida property) (1)
10.13 Consulting Agreement dated January 7, 1994 between the Registrant and Dr. Donald Robinson (2)
10.14(a) License Agreement dated October 28, 1994 by and between Dr. Jed E. Rose, Dr. Edward D.
Levin and Robert J. Schaap and the Registrant (3)
10.14(b) Amendment No. 1 dated May 15, 1996 to License Agreement dated October 28, 1994 by and between
Dr. Jed E. Rose, Dr. Edward D. Levin and Robert J. Schaap and the Registrant (5)
10.15 Distribution and Supply Agreement for Transdermal Buspirone, dated August 28, 1996, between the
Registrant and Bristol-Myers Squibb Company (5)
10.16 Letter agreement, dated May 8, 1995, between the Registrant and Pharmaceutical Resources, Inc. and PAR
Pharmaceutical, Inc. amending the PAR Agreement (5)
10.17 Extension of Employment Agreement, dated October 24, 1996, between the Registrant and Charles Betlach (4)
10.18 Extension of Employment Agreement, dated October 24, 1996, between the Registrant and Cheryl Gentile (4)
10.19 Extension of Employment Agreement, dated October 24, 1996, between the Registrant and Jesus Miranda (4)
10.20 Extension of Employment Agreement, dated October 24, 1996, between the Registrant and Joseph Gentile (4)
10.21 Business Lease, dated September 11, 1996, between the Registrant and Sunbeam
Properties, Inc. (4)
10.22 Lease Extension and Amendment, dated September 11, 1996, between the Registrant and Sunbeam
Properties, Inc. (3251 Corporate Way, Miramar, Florida property) (4)
10.23 Lease Extension and Amendment dated September 11, 1996, between the Registrant and Sunbeam
Properties, Inc. (3251 Corporate Way, Miramar, Florida property) (4)
10.24 License Agreement dated July 9, 1997 between the Registrant and the Population Council, Inc. (6)
10.25 Amended and Restated Distribution Agreement dated July 28, 1997 between the Registrant, Pharmaceutical
Resources, Inc. and PAR Pharmaceuticals, Inc., (6)
27. Financial Data Schedule
</TABLE>
- -----------------------------------------
(1) Exhibit is incorporated by reference to an identically numbered exhibit to
the Company's Registration Statement on Form S-1, file number 33-97194.
13
<PAGE>
PART II. OTHER INFORMATION (CONTINUED):
(2) Exhibit is incorporated by reference to an identically numbered
exhibit to the Company's Amendment No. 1 to Registration Statement on
Form S-1, file number 33-97194.
(3) Exhibit is incorporated by reference to an identically numbered
exhibit to the Company's Amendment No. 2 to Registration Statement on
Form S-1, file number 33-97194.
(4) Exhibit is incorporated by reference to an identically numbered
exhibit to the Company's Registration Statement on Form S-1, filed
October 25, 1996.
(5) Exhibit is incorporated by reference to the Company's Current Report
Form 8-K dated May 15, 1996.
(6) Certain marked portions of this Agreement have been redacted and
filed separately with the U.S. Securities and Exchange Commission
pursuant to Rule 406 of the Securities Act of 1933.
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the third quarter of 1997.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Reginald L. Hardy
-----------------------------------------
Dated: November 13, 1997 Reginald L. Hardy
PRESIDENT
(PRINCIPAL EXECUTIVE OFFICER)
By: /s/ Gerald S. Coombs
-----------------------------------------
Dated: November 13, 1997 Gerald S. Coombs
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
</TABLE>
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<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.25 Amended and Restated Distribution Agreement dated July 28,
1997 between the Registrant, Pharmaceutical Resources, Inc.
and PAR Pharmaceuticals, Inc.
10.26 License Agreement dated July 9, 1997 between the Registrant
and the Population Council, Inc.
27. Financial Data Schedule
EXHIBIT 10.25
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
This Amended and Restated Distribution Agreement (the "Agreement") is
entered into as of the 28th day of July, 1997 (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, PRI and PPI have previously entered into that certain
Distribution Agreement as of the 24th day of February, 1994 (the "Original
Agreement"); and
WHEREAS, SANO, PRI and PPI wish to amend and restate their agreement
with respect to the subject matter of the Original Agreement, and supersede the
Original Agreement in its entirety;
NOW, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
ARTICLE I
TERMS AND CONDITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms
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; additionally,
(x) with respect to the transdermal nicotine Licensed Product (generic of
Habitrol(R)) described herein as Product B, Costs shall be reduced on a one-time
basis by [*****], (y) with respect to the transdermal
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<PAGE>
nitroglycerin Licensed Product (generic of Nitro Dur(R)) described herein as
Product A, Costs shall be reduced on a one-time basis by the sum of the amount
set forth in Section 7.1 hereof as the Licensed Product Fee for such Licensed
Product and the amount set forth as an additional Licensed Product Fee for that
Licensed Product pursuant to Section 7.4 hereof, and (z) with respect to the
transdermal nitroglycerin Licensed Product (generic of Transderm Nitro(R))
described herein as Product C, Costs shall be reduced on a one-time basis by the
sum of the amount set forth in Section 7.1 hereof as the Licensed Product Fee
for such Licensed Product and the amounts set forth as an Additional Licensed
Product Fee for that Licensed Product pursuant to Section 7.4 hereof.
(c) "DEVELOPMENT PROGRAM" shall mean all actions, including,
without limitation, research conducted as a part of SANO's pre-clinical and
clinical activities, which is required or reasonably necessary to obtain all
requisite governmental approvals for the testing, manufacture and sale of
Licensed Products during the term of this Agreement.
(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 the Transdermal Generic
Drug Delivery Systems listed on Exhibit A hereto.
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<PAGE>
(g) "NET SALES" shall have the meaning set forth in Exhibit B
hereto.
(h) "PERSON" shall include any individual, corporation,
partnership, association, cooperative, joint venture, or any other form of
business entity recognized under the law.
(i) "SALE" shall mean any action involving selling.
(j) "SANO'S TECHNOLOGY" shall mean any and all data,
information, technology, know-how, process, technique, method, skill,
proprietary information, trade secret, development, discovery, and inventions,
owned or controlled by SANO and specifically related to a Transdermal Generic
Drug Delivery System for the Licensed Products now existing or developed in the
future under and during the course of the Development Program or otherwise, as
well as information related to the manufacture of Licensed Product(s) and
specifications and procedures related thereto.
(k) "SELL" shall mean to, directly or indirectly, sell,
distribute, supply, solicit or accept orders for, negotiate for the sale or
distribution of, or take any other action that is in furtherance of any of the
foregoing.
(l) "SPECIFICATIONS" shall mean the terms and conditions
applicable to the Licensed Product(s) as described in the abbreviated new drug
application ("ANDA") approved by the United States Food and Drug Administration
(the "FDA") covering the Licensed Product(s), as the same may be supplemented
from time to time.
(m) "STANDARD PACKAGING" shall mean a Licensed Product
packaged in individual pouches and in individual folding cartons consisting of
pouch units per carton reasonably specified by PPI and containing any labels and
labelling required therefor by the FDA and provided in packages that are
appropriate for regulatory and marketing purposes, and
4
<PAGE>
produced at a SANO facility in the United States, the grade and quality of the
labels, labelling and packaging materials being as specified in the ANDA
therefor.
(n) "TRANSDERMAL GENERIC DRUG DELIVERY SYSTEM" shall mean a
generic version of a branded transdermal adhesive patch.
(o) "UNITED STATES" shall mean the 50 states of the United
States of America, plus the District of Columbia, the Commonwealth of Puerto
Rico, the U.S. Virgin Islands, 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 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
5
<PAGE>
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. Except as set forth in Schedule 2.1.3, 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 filed an ANDA with
respect to each of the Licensed Products and has no knowledge of any fact or
circumstance which is reasonably likely to prevent approval by the FDA, other
than general conditions related to the approval process; SANO does not hereby
represent or warrant that any Licensed Product will be approved for commercial
sale, or will ultimately be marketed.
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
appropriate confidentiality agreements with SANO and assignments of intellectual
property rights in favor of SANO. All key employees of SANO have executed
appropriate non-compete agreements which, by their terms, extended at least
until December 31, 1996.
2.1.7 STATUS. 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
6
<PAGE>
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).
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 attempt to complete the
Development Program for each Licensed Product.
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.
7
<PAGE>
3.4 Intentionally omitted.
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-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 expense unless otherwise set
forth herein.
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 seek to obtain all requisite approvals for the testing,
manufacture, sale and use of the Licensed Product(s). The decision regarding the
timing of said filings shall be in SANO's sole discretion. SANO shall have full
and complete ownership of all governmental approvals relating to Licensed
Products. SANO shall provide PPI with appropriate sections of and a right of
reference to any application for registration in the United States except with
respect to those aspects of any formulation or manufacturing process that is
reasonably deemed proprietary by SANO.
3.8 OTHER PRODUCTS. SANO shall reasonably apportion or allocate its
resources among its products to accommodate the Development Programs for
Licensed Products.
8
<PAGE>
3.9 TITLE. SANO will protect and defend its rights to all 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.
ARTICLE IV
EXCLUSIVE DISTRIBUTOR
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, or PPI, as applicable, covenants and agrees that, during
the term of this Agreement or until the Right (or its exclusive nature) is
terminated in accordance with the provisions hereof:
4.2.1 SANO will refer to PPI all inquiries concerning
potential purchases of Licensed Products received by it from Persons located in
the United States or from Persons outside the United States if SANO knows or
reasonably suspects that such Person intends to resell or export the Licensed
Product to the United States;
4.2.2 SANO will not, directly or indirectly, knowingly sell
any Licensed Product in the United States nor to any Person outside of the
United States if SANO reasonably
9
<PAGE>
expects that such Person intends to resell or export the Licensed Product to the
United States and, if notified by PPI that one of SANO's customers is selling
the Licensed Product in the United States in any material respect, SANO shall
either cease to supply such customer or obtain (and enforce, if necessary) an
undertaking from such customer not to sell the Licensed Product in the United
States (unless SANO is precluded from taking such action under applicable law).
PPI acknowledges that SANO will use reasonable efforts to prevent the sale of
Licensed Products in United States by Persons other than PPI, but shall not be
held responsible if, despite such efforts, it is unsuccessful in so doing
(subject to its obligations above to cease to supply or to obtain and enforce
the undertaking as and to the extent contemplated above).
4.2.3 PPI shall not, and shall not authorize, permit or
suffer any of its Affiliates to, purchase any Transdermal Generic Drug Delivery
System which has the same strength, contains the same active ingredient and is
for the same indication as, and is competitive with, any of the Licensed
Products (a "Competitive Product") for distribution, sale or use in the United
States from any Person other than SANO. PPI shall not, and shall not authorize,
permit or suffer any of its Affiliates to, seek regulatory approval in the
United States for any Competitive Product or to, directly or indirectly,
manufacture, sell, handle, distribute or be financially interested (except as a
stockholder with not greater than a 5% interest in a public company) in the
sales of such products within the United States for its own account or for the
account of any other Person as agent, distributor or otherwise.
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, PPI shall so notify SANO and shall offer (the "Offer") to sell, assign
and
10
<PAGE>
transfer to SANO the Right with respect to the Licensed Product with which
such Competitive Product is competitive in exchange for an amount equal to the
Licensed Product Fee (as hereinafter defined) for such Licensed Product. If,
within thirty (30) days after its receipt of the Offer, SANO accepts the Offer,
SANO shall, within fifteen (15) days of such acceptance, deliver to PPI, against
delivery of appropriate instruments of release and transfer, its promissory note
in form and substance reasonably acceptable to PPI, payable to the order of PPI,
in the principal amount of the Licensed Product Fee, bearing interest at the
prime rate of Citibank, N.A., as announced from time to time at its offices in
New York City (the "Prime Rate"), with interest and principal payable on the
first anniversary of the date of delivery of such note. From and after the date
of delivery of such note, PPI shall have no rights with respect to the relevant
Licensed Product and SANO shall be free to grant any rights related thereto to a
third party or to retain such rights for itself. If SANO declines to accept the
Offer or fails to accept the Offer within the aforesaid 30-day period, this
Agreement shall remain in full force and effect, except that the provisions of
this Section 4.2.3 shall not apply to that Competitive Product. PPI shall notify
SANO promptly if any Merger Partner has a Competitive 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 from 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
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<PAGE>
States (unless PPI or any such Affiliate is precluded from taking such action
under applicable law). SANO acknowledges that PPI will use (and will cause its
Affiliates to use) reasonable efforts to prevent its customers from exporting
any Licensed Product out of the United States but shall not be held responsible
if, despite such efforts, it is unsuccessful in so doing (subject to its
obligations above to cease to supply or to obtain and enforce the undertaking as
and to the extent contemplated above).
4.2.5 PPI shall refer to SANO any inquiry or order for
Licensed Products which PPI or any of its Affiliates may receive from any Person
located outside of the United States and from any Person located in the United
States where PPI or any of its Affiliates knows or has reason to suspect that
such Person intends to export the Licensed Products outside of the United
States.
4.2.6 The parties acknowledge, agree and declare that the
relationship hereby established between PPI and SANO is solely that of buyer and
seller, that each is an independent contractor engaged in the operation of its
own respective business, that neither party shall be considered to be the agent
of the other party for any purpose whatsoever, except as otherwise expressly
indicated in this Agreement, and that, except as otherwise expressly indicated
in this Agreement, neither party has any authority to enter into any contract,
assume any obligations or make any warranties or representations on behalf of
the other party. Nothing in this Agreement shall be construed to establish a
partnership or joint venture relationship between or among the parties.
4.2.7 SANO shall not engage in marketing and promotion of the
Licensed Products in the United States unless reasonably requested to do so by
PPI.
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ARTICLE V
REPRESENTATIONS OF PPI AND PRI; OBLIGATIONS
5.1 PPI and PRI jointly and severally represent, warrant and covenant
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 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 on 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
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
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requirements of the FDA (as the same may be modified from time to time). PPI
hereby further represents and warrants that it currently has and/or has
available to it and maintains and agrees to continue to have and/or to have
available to it and maintain an adequate marketing organization and qualified
sales persons to promote the sale of the Licensed Products in the United States.
5.2 PPI shall purchase the Licensed Products from SANO as contemplated
in Article VI 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.
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 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.
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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 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.
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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 (20) business days of an Availability Notice, SANO
may, but shall not be obligated to, cause the Licensed Products to be delivered
to PPI's Spring Valley, New York, facility by truck or other overland delivery
at PPI's sole cost and expense and risk of loss and title to the Products shall
pass to PPI upon pickup of the Products at SANO's facility in the same manner as
if the pickup had been effected by PPI itself, provided that SANO shall provide
for the Licensed Products to be insured during transit in a commercially
reasonable manner at PPI's sole cost and expense.
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
ARTICLE VII
PAYMENTS AND PAYMENT TERMS
7.1 LICENSED PRODUCT FEE. As consideration for the rights herein
granted, upon execution hereof, PRI shall pay to SANO a fee (each, a "Licensed
Product Fee") as follows:
Product A (described in SANO's pending ANDA for transdermal
nitroglycerin--generic to Nitro Dur(R))---[*****]
Product B (described in SANO's pending ANDA for transdermal
nicotine--generic to Habitrol(R))---[*****]
Product C (described in SANO's pending ANDA for transdermal
nitroglycerin--generic to Transderm Nitro(R))---[*****]
7.2 PRICE. The price to PRI for each order, or part thereof reasonably
acceptable to PRI as contemplated in Section 8.2(d), of Licensed Products made
available to PRI hereunder shall be SANO's Costs related to such order or part
thereof. PPI shall also pay to SANO any applicable federal or state sales or
excise tax payable on the purchase of such Licensed Products, which payment
shall be remitted with the payment of the price as contemplated in Section 7.3
below and upon payment thereof by PPI to SANO, SANO shall be solely responsible
for remitting the amount so paid on account of such taxes to the relevant
governmental collecting authorities. Promptly upon PPI's request, SANO shall
provide PPI with reasonable evidence of such direct costs and applicable taxes
and payment of such taxes.
7.3 PAYMENT TERMS. Payment for each order of Licensed Products made
available by SANO for pick-up by PPI shall be due within 35 days of pick-up
(whether actual or deemed pursuant to Section 6.3.2) by PPI at SANO's facility.
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
7.4 ADDITIONAL LICENSED PRODUCT FEE. Upon request by SANO, PPI will
remit up to an aggregate of [*****] to fund skin irritation studies required by
the FDA for any of the Licensed Products. Such request shall specify the amount
to be paid for the specific Licensed Product which is the subject of such study
or studies, and the amount so paid by PPI shall be deemed an addition to and
part of the Licensed Product Fee for such Licensed Product.
7.5 ADDITIONAL CONSIDERATION. PPI shall pay to SANO the Additional
Consideration described in Section 11.1 and Schedule B hereto, in accordance
with the provisions of said Section 11.1.
7.6 PAYMENTS BY SANO. As consideration for prior payments by PPI and
for PPI's and PRI's agreements set forth herein, upon execution hereof, SANO
will (i) pay PPI [*****], and (ii) deliver its promissory note in the form
attached hereto as Schedule C.
ARTICLE VIII
PRODUCT ACCEPTANCE
8.1 SANO shall manufacture the Licensed Products and make them
available for pickup by PPI in accordance with all applicable laws, rules and
regulations including, without limitation, the Specifications applicable to the
Licensed Product in question, Current Good Manufacturing Practices of the FDA
(as the same may change from time to time) and all other applicable requirements
of the FDA and other governmental authorities having jurisdiction.
8.2 All Licensed Products made available for pick up by PPI shall be
accompanied by quality control certificates of analysis signed by a duly
authorized laboratory official of SANO confirming that each batch of Licensed
Product covered by such certificate meets its release
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Specifications and shall be deemed accepted by it unless PPI, acting reasonably
and in good faith, shall give written notice of rejection (hereafter referred to
as a "Rejection Notice") to SANO within 35 days after pick up of the Licensed
Products by, on behalf of or for the account of PPI at SANO's facility.
(a) The Rejection Notice shall state in reasonable detail
(sufficient to enable SANO to identify the nature of the problem and the tests
or studies to be conducted by or on its behalf to confirm or dispute same) the
reason why the Licensed Products are not acceptable to PPI. If the Licensed
Products meet the applicable provisions of Section 8.1 and are in quantities
specified in a purchase order, PPI shall not be entitled to reject them. Any
Rejection Notice shall be accompanied by copies of all written reports relating
to tests, studies or investigations performed to that date by or for PPI on the
Licensed Product batch rejected.
(b) Upon receipt of such Rejection Notice, SANO may require
PPI to return the rejected Licensed Products or samples thereof to SANO for
further testing, in which event such Licensed Products or samples thereof, as
the case may be, shall be returned by PPI to SANO or, at SANO's direction, at
SANO's expense. If it is later determined by the parties or by an independent
laboratory or consultant that PPI was not justified in rejecting the Licensed
Products or that PPI or its Affiliates were the cause of or were responsible for
the problem, PPI shall reimburse SANO for the costs of the return, as well as
any other costs or expenses incurred by SANO as a result of the rejection or
return.
(c) PPI's test results or basis for rejection shall be
conclusive unless SANO notifies PPI, within 30 days of receipt by SANO of the
rejected Licensed Products or samples or such longer periods of time as may be
reasonable in the circumstances to enable SANO to conduct (and receive the
results of) the appropriate tests, studies or investigations which SANO
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should reasonably conduct to confirm the problem in question and to identify the
source thereof, that it disagrees with such test results or its responsibility
for the problem in question. In the event of such a notice by SANO,
representative samples of the batch of the Licensed Product in question shall be
submitted to a mutually acceptable independent laboratory or consultant (if not
a laboratory analysis issue) for analysis or review, the costs of which shall be
paid by the party that is determined by the independent laboratory or consultant
to have been responsible for the rejection.
(d) If a Licensed Product is rejected by PPI, PPI's duty to
pay the amount payable to SANO pursuant to Section 7.2 hereof in respect of the
rejected Licensed Product shall be suspended until such time as it is determined
(I) by an independent laboratory or consultant that the Licensed Product in
question should not have been rejected by PPI or (II) by the parties or by any
arbitration conducted pursuant hereto or by a final order of a court of
competent jurisdiction (which is not subject to further appeal) that any act or
omission of, on behalf of or for which PPI or its Affiliates is responsible was
the cause of the problem that was the basis for the rejection. If only a portion
of an order is rejected, only the duty to pay the amount allocable to such
portion shall be suspended.
8.3 In the event any Licensed Products are appropriately rejected by
PPI (being Licensed Products that do not meet the applicable provisions of
Section 8.1 other than as a result of any act or omission by PPI or its
Affiliates), SANO shall replace such Licensed Products with conforming goods or,
if requested by PPI, shall provide a credit to PPI for the amount, if any,
previously paid by PPI to SANO on account of the Licensed Products in question.
The credit shall be provided by SANO to PPI immediately following the expiry of
the period during which SANO may dispute a Rejection Notice as contemplated in
Section 8.2(c) above (unless the
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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 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
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should additional testing be required by an independent testing laboratory as
described in Section 9.3(b) below, or by PPI or SANO for their own purposes. If
not enough samples exist to be so divided, then the parties shall confer and
reach agreement as to the handling of any available samples.
(b) SANO shall complete its review and evaluation of the
returned Licensed Product within twenty (20) business days of receiving the
returned Licensed Product from PPI or such longer period of time as may be
reasonable in the circumstances to enable SANO to conduct or cause to be
conducted such tests, studies or investigations (and to receive the results
therefrom) as may be required to confirm or dispute the existence of the problem
or to identify the cause or source thereof.
9.3 COSTS AND CREDITS.
(a) If SANO concludes or it is otherwise determined pursuant
to Section 9.3(b) hereof that the returned Licensed Product is defective due to
the fault of SANO:
(i) any replacement Licensed Product to be provided
by SANO in respect of the returned Licensed Product shall be made
available to PPI without charge or appropriate credit shall be given
therefor (giving account to any adjustment made pursuant to Section 9.1
hereof);
(ii) all delivery costs, including insurance,
incident to the delivery of the replacement Licensed Products to PPI's
Spring Valley facility shall be paid by SANO or appropriate credit
shall be given therefor; and
(iii) SANO shall provide a credit to PPI for the
reasonable costs incurred by PPI (or where the duty has been performed
by an Affiliate, pursuant to the
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provisions of this Agreement, for the reasonable costs incurred by
such Affiliate) in respect of the defective Licensed Product.
(b) If SANO asserts that the returned Licensed Product is
defective due primarily to any act or omission of PPI or its Affiliates or any
agents or other persons acting on their behalf as aforesaid, then representative
samples of the Licensed Products shall be submitted to a mutually acceptable
independent laboratory or consultant (if not a laboratory analysis issue) for
analysis or review, the costs of which shall be paid by the party determined by
the independent laboratory or consultant to have been responsible.
(c) If it is determined in accordance with Section 9.3(b)
above that any such defect is primarily due to any act or omission by PPI, then
no credit or other payment of costs shall be due from SANO, and PPI shall
reimburse SANO for all costs and expenses it incurred in connection with the
return and investigation.
(d) If it is determined in accordance with Section 9.3(b)
above that no such defect exists or, if existing, cannot be attributable
primarily to an act or omission of either party, then any replacement Licensed
Product in respect of the returned Licensed Product shall be made available to
PPI without additional charge or appropriate credit, if any, shall be given
therefor, but no other credits or payments of costs shall be due from SANO.
9.4 PPI acknowledges that the Licensed Products may be of a
perishable nature and that the Licensed Product must be stored and shipped in
accordance with the Specifications applicable thereto (to the extent disclosed
in writing to PPI or its Affiliates) or the conditions, if any, set forth on its
package label.
9.5 PPI agrees to notify SANO of any customer complaints with respect
to the quality, nature or integrity of a Licensed Product or alleged
adverse-drug experiences ("ADE")
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within five (5) working days of their receipt by PPI and of any PPI or FDA
complaints within 24 hours, except on weekends and holidays. SANO shall have the
sole and primary obligation to file any required adverse experience report with
FDA. SANO shall also be responsible for maintaining complaint files as required
by FDA regulations. SANO agrees to investigate and respond in writing to any
complaint or ADE forwarded to it by PPI promptly and in no event later than 30
days after receipt of the ADE or complaint from PPI (or such longer period as
may be required in the circumstances to enable SANO to conduct such tests,
studies or investigations as may be reasonably required [and to receive the
results therefrom] to enable SANO to appropriately respond). SANO shall provide
PPI with a copy of any correspondence, reports, or other documents relating to a
complaint or ADE within a reasonable period following generation of such
document by SANO.
9.6 The provisions of this Article 9 shall survive the termination or
expiration of this Agreement.
ARTICLE X
DAMAGES, INDEMNIFICATION AND INSURANCE
10.1 Subject to the limitations set forth in this Article X and to
the other provisions of this Agreement, SANO, on the one hand, and PPI, on the
other hand, covenant and agree to indemnify and save harmless the other of them
from and against any and all claims, demands, actions, causes of action, suits,
proceedings, judgments, damages, expenses (including reasonable attorney fees
and expenses), losses, fines, penalties and other similar assessments (the
"Damages") relating to or arising out of a breach by any such party of any of
its representations, warranties, covenants or agreements contained herein;
provided that, except where the breach arises out of a representation or
warranty made by a party in this Agreement being intentionally
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false or inaccurate, or constitutes a willful material breach by a party of any
of its duties or obligations hereunder, the claim of an aggrieved party for
Damages arising out of the breach shall be limited to claiming the amounts owing
or payable to it in accordance with the provisions of this Agreement and any
out-of-pocket costs and expenses (including amounts paid or payable by it to
third parties, other than re-procurement costs [except to the extent
contemplated in Section 14.3 hereof] which it has incurred and the aggrieved
party shall not be entitled to recover from the defaulting or breaching party
any lost profits or consequential or punitive damages, including loss or damage
to its goodwill or reputation. For purposes of this Agreement where PPI is in
breach of its duties or obligations hereunder and such duties or obligations, if
delegated by PPI to any of its Affiliates, could reasonably be performed by such
Affiliate and PPI has either not delegated such duty or obligation to such
Affiliate or such Affiliate has either refused to perform or willfully breached
such duty or obligation then PPI shall be deemed to have willfully breached such
duty or obligation hereunder. Similarly, whenever in this Agreement PPI is
required to cause any of its respective Affiliates to do or to refrain from
doing any thing herein provided and such Affiliate refuses to do or refrain from
doing such thing or otherwise willfully breaches the provision herein
contemplated (on the assumption that such Affiliate were bound by the provision
herein contemplated as if a signatory hereto) then PPI will be deemed to have
willfully breached the provision of this Agreement in question.
10.2 In the event that the release of a Licensed Product by PPI or
its Affiliates in the United States results in a third party claim:
(a) to the extent that the Damages awarded or incurred
relate to or arise out of the safety or effectiveness of the Licensed Product or
the manufacturing, packaging, labelling,
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storage or handling of the Product by SANO, SANO shall be responsible therefor
and shall indemnify and hold PPI harmless from and against all such damages; and
(b) to the extent that the Damages awarded or incurred
relate to or arise out of the transportation, storage, handling or selling of
the Licensed Product by PPI or its Affiliates, then PPI shall be responsible
therefor and shall indemnify and hold SANO harmless from and against all such
damages.
Upon the assertion of any third party claim against a party hereto that
may give rise to a right of indemnification under this Agreement, the party
claiming a right to indemnification (the "Indemnified Party") shall give prompt
notice to the party alleged to have the duty to indemnify (the "Indemnifying
Party") of the existence of such claim and shall give the Indemnifying Party
reasonable opportunity to control, defend and/or settle such claim at its own
expense and with counsel of its own selection; provided, however, that the
Indemnified Party shall, at all times, have the right fully to participate in
such defense at its own expense and with separate counsel and, provided,
further, that both parties, to the extent they are not contractually or legally
excluded therefrom or otherwise prejudiced in their legal position by so doing,
shall cooperate with each other and their respective insurers in relation to the
defense of such third party claims. In the event the Indemnifying Party elects
to defend such claim, the Indemnified Party may not settle the claim without the
prior written consent of the Indemnifying Party. The Indemnifying Party may not
settle the claim without the prior written consent of the Indemnified Party
unless, as part of such settlement, the Indemnified Party shall be
unconditionally released therefrom or the Indemnified Party otherwise consents
thereto in writing. If the Indemnifying Party shall, within a reasonable time
after such notice has been given, fail to defend, compromise or settle such
claim, then the Indemnified Party shall have the right to defend, compromise or
settle such
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claim without prejudice to its rights of indemnification hereunder.
Notwithstanding the foregoing, in the event of any dispute with respect to
indemnity hereunder, each party shall be entitled to participate in the defense
of such claim and to join and implead the other in any such action.
In addition to the foregoing, SANO will defend, at its sole cost and
expense, its rights with respect to the Licensed Products and PPI's rights to
distribute the Licensed Products hereunder against any claim, action, suit or
proceeding ("Action") by any third party asserting prior or superior rights with
respect to the Licensed Product, product infringement or similar claims (other
than as may be based on acts of PPI not contemplated herein or authorized
hereby) and shall indemnify and hold PPI and its affiliates harmless from the
cost of the defense thereof. PPI shall, at all times, have the right fully to
participate in such defense at its own expense. SANO shall control such defense
and shall, in its reasonable discretion, defend or settle such Action; provided
that, notwithstanding the foregoing SANO shall not enter into any settlement or
compromise of any such Action which requires PPI or any of its Affiliates to
make payments of any kind without the prior written consent of PPI or an
unconditional release of PPI and its Affiliates with respect to the subject
matter of such Action. The provisions of this paragraph should not be construed
as requiring SANO to bear any damages, judgments or other liabilities entered
against PPI in any such Action, provided that the foregoing shall not be
construed as or deemed a waiver of any rights PPI may have against SANO as a
result of such Action hereunder, at law or otherwise, and all of such rights, if
any, are expressly reserved.
10.3 INSURANCE. Each of SANO and PPI shall carry product liability
insurance in an amount at least equal to Ten Million Dollars ($10,000,000) with
an insurance carrier reasonably acceptable to the other party, such insurance to
be in place at times reasonably acceptable to the
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parties, but not later than the date of the first commercial sale of a Licensed
Product. Each party shall promptly furnish to the other evidence of the
maintenance of the insurance required by this Section 10.3 and shall name the
other as an "additional insured" under such insurance policy. Each party's
coverage shall (i) include broad form vendor coverage and such other provisions
as are typical in the industry and (ii) name the other party as an additional
insured thereunder. SANO shall carry clinical testing insurance in an amount and
at times reasonably acceptable to the parties.
10.4 SURVIVAL. The provisions of this Article X shall survive the
termination or expiration of this Agreement, provided that the requirement to
maintain the insurance contemplated in Section 10.3 above shall only survive for
a period of 36 months from the effective date of termination or expiration of
this Agreement.
ARTICLE XI
ADDITIONAL CONSIDERATION, REPORTING AND VERIFICATION
11.1 ADDITIONAL CONSIDERATION. As additional consideration for SANO
entering into this Agreement and permitting PPI to sell the Licensed Products in
the United States in accordance with the provisions hereof, PPI agrees to pay to
SANO the additional amounts more particularly described in Exhibit B to this
Agreement in respect of the aggregate Gross Profit (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
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month. For greater certainty, examples of what constitutes the "third preceding
calendar month" are contained in Exhibit B annexed hereto. The consideration
payable to SANO pursuant to this Article XI shall be paid to it as part of the
sale price of the Licensed Product from SANO to PPI and shall not be treated as
a royalty or similar payment.
11.2 REPORTING AND INFORMATION OBLIGATIONS OF PPI.
(a) APPROVED CONTRACTS. PPI shall provide to SANO, monthly,
within seven days of the expiry of each calendar month during the term hereof, a
copy of each Approved Contract (as hereinafter defined), entered into by PPI
with its customers during the immediately preceding month irrespective of
whether a copy of such contract had previously been forwarded to SANO. If the
Approved Contract has a term of less than 18 months, PPI may delete (e.g., by
blacking out) any information in the Approved Contract that tends to indicate
the identity or location of the PPI customer; provided, however, that PPI marks
each such Approved Contract with a unique customer code relative to the customer
that is the party to that Approved Contract.
(b) NET SALES AND GROSS PROFITS. PPI shall report to SANO
monthly, on the 7th day of each calendar month during the term hereof and for 12
months after the termination hereof:
(i) a sales summary, in the form annexed hereto as
Exhibit D, 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
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preceding calendar month together with copies of all documentation to
support allowable adjustments used in computing Net Sales during the
period in question;
(iii) a certificate signed by the Chief Financial
Officer of PPI certifying that, to the best of his knowledge,
information and belief, after reasonable investigation, the foregoing
statements contemplated in (i) and (ii) above are true and correct and
do not omit any material information required to be provided pursuant
to this Section 11.2(b) and
(iv) a summary of the calculation of the
Additional Consideration payable to SANO on such date.
For purposes of this Agreement a sale shall be considered to have been
made at the time the Product(s) are shipped to the customer.
11.3 PPI shall make available for inspection by SANO at PPI's
facilities and shall cause its Affiliates to make available for inspection by
SANO at their respective facilities, promptly following a reasonable request
therefor, such additional information concerning any sales (including, without
limitation, in respect of any sale, the date of the shipment, the code number of
the customer [or the name of the customer in the case of a customer disclosed to
SANO pursuant to Section 11.2(a) hereof and an Approved Contract], the number of
units of each Licensed Product in each dosage involved (broken down by container
size per Product [e.g., 18 boxes of 30 patches of Product A], and the invoice
price charged by PPI or its Affiliates), credits, returns, allowances and other
credits and debits previously reported to SANO pursuant to Section 11.2(b)(ii)
hereof or with respect to Approved Contracts previously reported to SANO
pursuant to Section 11.2(a) hereof as SANO may reasonably require from time to
time (except information concerning the identity or location of a customer where
PPI is not already required
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to disclose that information to SANO pursuant to Section 11.2(a) hereof) to
enable SANO to confirm or reconcile the amounts which are or were to have been
paid to it pursuant to this Agreement (without the need to audit the books and
records of PPI or its Affiliates pursuant to Section 11.4 hereof).
11.4 PPI shall keep and shall cause its Affiliates to keep complete
and accurate records and books of account containing all information required
for the computation and verification of the amounts to be paid to SANO
hereunder. PPI further agrees that at the request of SANO, it will permit and
will cause its Affiliates to permit one or more accountants selected by SANO,
except any to whom PPI or such Affiliate has some reasonable objection, at any
time and from time to time, to have access during ordinary working hours to such
records as may be necessary to audit, with respect to any payment report period
ending prior to such request, the correctness of any report or payment made
under this Agreement, or to obtain information as to the payments due for any
such period in the case of failure of PPI to report or make payment pursuant to
the terms of this Agreement. Such accountant shall not disclose to SANO any
information relating to the business of 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.
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PPI shall provide and shall cause its Affiliates to provide full and
complete access to the accountant to PPI's and such Affiliates' pertinent books
and records and the accountant shall have the right to make and retain copies
(including photocopies). Should any such accountant discover information
indicating inaccuracy in any of PPI's payments or non-compliance by PPI or its
Affiliates with any of such terms and conditions, and should PPI fail to
acknowledge in writing to SANO the deficiency or non-compliance discovered by
such accountant within ten (10) business days of being advised of same in
writing by the accountant, the accountant shall have the right to deliver to
SANO copies (including photocopies) of any pertinent portions of the records and
books of account which relate to or disclose the deficiency or non-compliance
(to the extent not acknowledged by PPI). In the event that the accountant shall
have questions which are not in its judgment answered by the books and records
provided to it, the accountant shall have the right to confer with officers of
PPI or such Affiliate, including PPI's or such Affiliate's Chief Financial
Officer. If any audit under this Section shall reveal an underpayment or
understatement of the amount payable to SANO by more than $10,000.00 for any
period in question, PPI shall reimburse SANO for all costs and expenses relating
to such investigational audit. SANO shall only have the right to audit such
books and records of PPI and its Affiliates pursuant to this Section 11.4 no
more often than twice in any contract year unless earlier in such contract year
or in any of the prior three contract years such investigation revealed a
discrepancy of more than $10,000.00, as aforesaid, in which case SANO shall have
the right to audit such books and records three times in such contract year. For
purposes of this Agreement, a contract year shall be a period of twelve months
commencing on either the date of this Agreement or on an anniversary thereof.
Unless the disclosure of same is reasonably required by SANO in connection with
any litigation or arbitration arising out of such audit, the accountant shall
not
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reveal to SANO the name or address (or other information reasonably tending to
identify the location of a customer) of any customer of PPI or its Affiliates
[other than one whose name has been disclosed to SANO pursuant to Section 11.2
hereof], but shall identify such customer to SANO, if necessary, by the customer
code number used by PPI in its reporting obligations to SANO [and PPI and its
Affiliates shall make such information known to the accountant]. PPI may, as a
condition to providing any accountant access to its books and records (or those
of its Affiliates), require SANO to execute a reasonable confidentiality
agreement consistent with the terms of this Section 11.4.
11.5 Except as specifically set forth to the contrary, all payments
to be made under this Agreement shall bear interest equal to two percent above
the prime rate as quoted by Citibank N.A., New York, New York, calculated daily
(as at the close of business on each such day) and compounded monthly, from the
day following the day the payment is due until the date on which it is paid. Any
adjustment to the prime rate as quoted by Citibank N.A. from time to time shall
result in a corresponding adjustment to the rate of interest payable hereunder,
the rate of interest quoted by Citibank N.A. at the close of business on each
day to be the rate applicable for such day.
11.6 The obligation of PPI to make the payments contemplated in
Section 11.1 and to provide the reports and information contemplated in Sections
11.2 and 11.3 and the right of SANO to conduct its audits or investigations
pursuant to Section 11.4 hereof shall survive the termination or expiration of
this Agreement and shall apply to all Licensed Products made available to PPI by
SANO prior to the effective date of the termination or expiration of this
Agreement (or made available to PPI after such date pursuant to any provision of
this Agreement) notwithstanding that such Licensed Products may have been resold
by PPI or its
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Affiliates to its or their customers after the effective date of termination or
expiration. For greater certainty, the parties acknowledge and agree that it is
their intention that PPI pay to SANO the Additional Consideration applicable to
Net Sales of all Licensed Products supplied by SANO to PPI pursuant to this
Agreement (in respect of which the purchase price charged by SANO to PPI
therefor [whether paid or owing] was determined in accordance with the
provisions of Section 7.2 hereof or was provided to PPI free of such charge
pursuant to any other provision of this Agreement) irrespective of whether such
Licensed Product is resold by PPI or its Affiliates prior to or subsequent to
the effective date of termination or expiration of this Agreement and that
SANO's rights pursuant to Section 11.4 hereof shall continue for a period of
twelve (12) months following the final sale of all such Licensed Products.
11.7 PPI shall have the right, upon reasonable advance written notice
to SANO, to inspect SANO's facilities at which the Licensed Products are being
manufactured to monitor compliance by SANO with FDA Good Manufacturing Practices
and to otherwise confirm that the Licensed Products are being manufactured in
accordance with their respective Specifications. Similarly, SANO shall have the
right, upon reasonable advance written notice to PPI to inspect those facilities
of PPI and any of its Affiliates which are used in the storage of any of the
Licensed Products to ensure compliance by PPI or such Affiliate with FDA Good
Manufacturing Practices and to otherwise ensure that the Licensed Products do
not cease to meet their Specifications as a result of any storage or shipping
conducted by PPI or its Affiliates. SANO shall cooperate with PPI in providing
access to its facilities and PPI shall cooperate and shall cause its Affiliates
to cooperate in providing access to SANO to its facilities and those of its
Affiliates used as aforesaid.
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11.8 SANO shall keep complete and accurate records and books of
account containing all information required for the computation and verification
of SANO's Costs as contemplated in Section 7.2 hereof with respect to the
Licensed Product(s) made available to PPI by SANO pursuant hereto. SANO further
agrees that at the request of PPI it will permit one or more accountants
selected by PPI except any to whom SANO has some reasonable objection, to have
access during ordinary working hours to such books and records as may be
necessary to audit the amounts previously charged by SANO to PPI pursuant to
Section 7.2 hereof. Such accountant shall not disclose to PPI any information
relating to the business of SANO except the accuracy or inaccuracy of SANO's
previously reported charges and the amount, if any, that PPI may have been
overcharged or undercharged with respect to Licensed Products made available to
it. Should any such accountant discover information indicating that PPI has been
overcharged for Products made available to it, and should SANO fail to
acknowledge in writing to PPI the inaccuracy discovered by such accountant
within ten (10) business days of being advised of same in writing by the
accountant, the accountant shall have the right to make and retain copies
(including photocopies) of any pertinent portions of the records and books of
account which relate to or disclose the inaccuracy (to the extent not
acknowledged by SANO). SANO shall provide full and complete access to the
accountant to SANO's pertinent books and records. In the event that the
accountant shall have questions which are not in its judgment answered by such
books and records, the accountant shall have the right to confer with officers
of SANO, including SANO's Chief Financial Officer. If any audit under this
Section shall reveal an overstatement of the amount payable to SANO by more than
$10,000.00 for the Licensed Products in question, SANO shall reimburse PPI for
all costs and expenses relating to such investigation/audit. It is understood
and agreed that PPI shall only have the right to audit such books and records of
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SANO pursuant to this Section 11.8 no more often than twice in any contract year
unless earlier in such contract year or in any of the prior three contract years
such investigation revealed a discrepancy of more than $10,000.00, as aforesaid,
in which case PPI shall have the right to audit such books and records three
times in such contract year. Unless the disclosure of same is reasonably
required by PPI in connection with any litigation or arbitration arising out of
such audit, the accountant shall not reveal to PPI the name or address (or other
information reasonably tending to identify the location of a supplier) of any
supplier of materials to SANO in the manufacturing or packaging of the Licensed
Products (but shall identify such supplier to PPI if necessary, by a code name
or number supplied by such accountant) or the name of or financial information
relating to any employee of SANO. SANO may, as a condition to providing any
accountant access to its books-and records, require PPI to execute a reasonable
confidentiality agreement consistent with the terms of this Section 11.8. The
rights of PPI pursuant to this Section 11.8 shall survive the termination or
expiration of this Agreement for a period of one year.
ARTICLE XII
RIGHT OF FIRST REFUSAL
12.1 RIGHT OF FIRST REFUSAL. During the term hereof, PPI shall have
the right of first refusal to distribute the Licensed Products in the State of
Israel, on a product by product basis, in accordance with the following
procedures.
12.2 PROCEDURES. For each Licensed Product with respect to which SANO
proposes to enter into a distribution agreement in Israel with a third party,
SANO shall communicate to PPI in writing a reasonably detailed description of
the provisions of such agreement (a "Proposed Israeli Distribution Agreement").
Within 30 days of its receipt of a Proposed Israeli
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Distribution Agreement (the "Acceptance Period"), PPI shall notify SANO whether
it wishes to enter into an agreement with SANO on such terms. If PPI notifies
SANO within the Acceptance Period that it wishes to do so, PPI and SANO will
enter into a distribution agreement on such terms. If PPI fails to notify SANO
of its election to enter into such an agreement within the Acceptance Period,
SANO may enter into a license or distribution agreement with respect to such
Licensed Product with a third party on substantially the same terms as set forth
in the Proposed Israeli Distribution Agreement and PPI's rights under this
Article XII will terminate. SANO may not enter into such an agreement with a
third party on terms substantially different from those set forth in the
relevant Proposed Israeli Distribution Agreement without first offering such
terms to PPI for a period of thirty days. If SANO shall not enter into the
Proposed Israeli Distribution Agreement within 30 days following the expiration
of the Acceptance Period or any extension thereof as set forth in the preceding
sentence, SANO's execution of any such Agreement or any other Proposed Israeli
Distribution Agreement shall again be subject to PPI's rights under this Article
XII. Each Proposed Israeli Distribution Agreement for each Licensed Product
shall be subject to PPI's rights of first refusal in accordance with the
procedures set forth in this Section 12.2.
ARTICLE XIII
TERMS AND TERMINATION
13.1 This Agreement shall become effective on the date hereof and
shall remain in effect for a period of ten years per Licensed Product starting
on the date such Licensed Product becomes available for sale in commercial
quantities, unless earlier terminated in accordance with the provisions of this
Agreement. Thereafter, this Agreement shall automatically be renewed as to each
Licensed Product from year to year unless either party gives notice of
termination to the
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other party at least one hundred and twenty days prior to the expiry of the
initial term or of any renewal term.
13.2 Either party may, by notice in writing to the other party,
terminate this Agreement if such other party shall have breached any of its
material duties or obligations under this Agreement (other than the obligations
of PPI to pay to SANO any amount due to SANO hereunder [whether on account of
Additional Consideration, the price for the Licensed Products or otherwise] or
to provide SANO with the reports or information contemplated in Section 11.2 or
11.3 hereof) and such breach shall remain uncured for at least sixty days after
the aggrieved party shall have given notice of the breach to the other party.
13.3 SANO may, by notice in writing to PPI, terminate this Agreement
if PPI fails to pay to SANO any amount payable by PPI to SANO hereunder, whether
on account of the Additional Consideration, the purchase price for the Licensed
Products, interest or otherwise, as and when the same shall have become due and
payable or PPI shall have failed to deliver (or caused to be delivered, as the
case may be), in timely fashion, the reports or information contemplated in
Section 11.2 or 11.3 hereof, and in either case, such breach shall have
continued unremedied for a period of twelve business days after written notice
of such breach has been given by SANO to PPI; provided that PPI shall not have
the right to such twelve-day grace period within which to cure such default and
SANO shall have the immediate right to terminate the Agreement for such breach
if PPI shall have previously breached Section 11.2 or 11.3, or failed to remit
any sums of at least $10,000.00 to SANO, when due, in the aggregate, one time in
the twelve month period immediately preceding the default in question.
13.4 Either party may terminate this Agreement on thirty days prior
written notice to the other party if such party or the other party is legally
prohibited from performing its
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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 aggregate Net Sales of
the Specific Product made by PRI and its Affiliates for any complete contract
year after the second anniversary of the date on which such Specified Product
became available for sale shall be less than the amounts stated in or determined
pursuant to Section 13.8; provided, however, SANO may not terminate with respect
to any Specific Product pursuant to this Section 13.5 without the consent of PPI
in the event that SANO shall have previously terminated the exclusive nature of
the Right pursuant to Section 13.8 and shall be selling, directly or indirectly,
such Licensed Product in the United States.
13.6 Either party may terminate this Agreement in accordance with the
provisions of Section 15.1 hereof.
13.7 PPI or SANO shall have the right to terminate this Agreement
upon written notice to the other in the event that any one or more of the
following events shall become applicable to such other party (herein referred to
as the "Party"):
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(a) an order is made or a resolution or other action of such
Party is taken for the dissolution, liquidation, winding up or other termination
of its corporate existence;
(b) the Party commits a voluntary act of bankruptcy, becomes
insolvent, makes an assignment for the benefit of its creditors or proposes to
its creditors a reorganization, arrangement, composition or readjustment of its
debts or obligations or otherwise proposes to take advantage of or shelter under
any statute in force in the United States for the protection of debtors;
(c) if any proceeding is taken with respect to a compromise
or arrangement, or to have such Party declared bankrupt or to have a receiver
appointed in respect of such Party or a substantial portion of its property and
such proceeding is instituted by such Party or is not opposed by such Party or
if such proceeding is instituted by a Person other than such Party, such Party
does not proceed diligently and in good faith to have such proceeding withdrawn
forthwith;
(d) a receiver or a receiver and manager of any of the assets
of such Party is appointed and such receiver or receiver and manager is not
removed within ninety days of such appointment;
(e) such Party ceases or takes steps to cease to carry on its
business.
SANO shall similarly have the right to terminate this Agreement upon written
notice to PRI if any of the foregoing events becomes applicable to any Affiliate
of PRI that has been expressly assigned obligations under this Agreement.
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
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
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 "C Period") beginning on the
date (the "C Commencement Date") the first of any shipments of Licensed
Product "C" is made available to PPI hereunder, the aggregate Net Sales
of Licensed Product "C" for such Period is less than [*****];
(iv) in any twelve month period commencing on the
second and each subsequent anniversary of the A Commencement Date or
the B 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; or
(v) in any twelve month period commencing on the
second and each subsequent anniversary of the C Commencement Date, the
Net Sales of Licensed Product "C" sold by PPI and its Affiliates in
such period is less than [*****];
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
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
and SANO shall fail or be unable to agree as to any Licensed Product for any
period in question, the Product Sales Threshold for such period and Licensed
Product shall be [*****].
(b) Notwithstanding the exercise by SANO of its right
pursuant to Section 13.8(a) hereof, and the resultant conversion of PPI to a
non-exclusive distributor hereunder, PPI shall have the right to sell the
Licensed Products on a non-exclusive basis on the terms and conditions as set
forth herein, except as provided otherwise in this Paragraph 13.8, during the
balance of the term of the Agreement (subject to earlier termination as herein
provided) and SANO shall continue to supply the Licensed Products to PPI in
accordance with the provisions hereof, provided that the obligation of SANO to
use its reasonable best efforts to supply PPI with its requirements of the
Licensed Products shall take into account PPI's requirements as well as the
requirements of SANO and any other third party distributor or distributors
appointed by SANO to sell the Licensed Products in the United States.
(c) In the event that SANO exercises its rights under
Section 13.8(a) and contemporaneously therewith or subsequent thereto enters
into an agreement with any Person (herein referred to as a "Third Party
Licensee"), authorizing or licensing such Third Party Licensee to sell any of
the Licensed 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
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(ii) PPI shall have thirty days from the date of
receipt of such notice to notify SANO whether PPI desires to have the
benefit of the MFP, which can be accepted only if PPI shall agree (to
the extent not already assumed in this Agreement) to any additional
obligations, duties, or undertakings, and to provide any consideration
to be provided by the Third Party Licensee.
PPI's entitlement to seek the benefit of the MFP shall be conditioned upon and
subject to PPI assuming and being capable of fully performing all the non-cash
obligations assumed by the Third Party Licensee in a manner substantially as
valuable to SANO. If PPI shall dispute such assessment, PPI shall so notify
SANO, whereupon the issue shall be deemed to be a dispute between the parties
and subject to resolution pursuant to Section 15.2 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.
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13.10 Upon termination of this Agreement by PPI pursuant to Section
13.2 or 13.7 or pursuant to Section 13.4 as a result of SANO's inability to
perform its obligations hereunder or becoming an Ineligible Person or the
termination of this Agreement by SANO pursuant to Section 13.5 hereof, SANO
shall, at the request of PPI, repurchase all Licensed Products then in the
possession, custody or control of PPI and available for sale (and which have not
been adulterated since they were made available for pick up by PPI) and all
packaging material in the possession, custody or control of PPI which were
specifically acquired by PPI for these Licensed Products and which cannot be
used by PPI or its Affiliates for any other products sold by any of them, at the
price originally paid by PPI therefor plus all transportation costs previously
incurred (even if not yet paid) by PPI payable in cash on delivery by PPI to
SANO. SANO shall pay all transportation costs associated with shipping the
repurchased Licensed Product to SANO or to such other places SANO may require.
13.11 In the event that this Agreement is terminated pursuant to the
provisions of Section 13.4 hereof as a result of a party (herein referred to as
the "Prohibited Party") being unable to perform its obligations hereunder as
therein contemplated or having become (or its Affiliate having become) an
Ineligible Person and within twelve (12) months of the effective date of
termination of this Agreement the Prohibited Party is again able to perform its
obligations hereunder or has ceased (or its Affiliate has ceased) to be an
Ineligible Person, then the Prohibited Party shall, by notice in writing, advise
the other party (herein referred to as the "Receiving Party") that it is no
longer legally prohibited from performing its duties and obligations hereunder
or that it has ceased (or that its Affiliate has ceased) to be an Ineligible
Person and the Receiving Party shall have the right, to be exercised by notice
in writing given to the Prohibited Party within thirty (30) days of receipt of
the aforesaid notice from Prohibited
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
Party, to reinstate this Agreement; provided, however, that if the Prohibited
Party is PPI then SANO shall have the right to reinstate this Agreement as if a
proper notice had been given pursuant to Section 13.8 of this Agreement and PPI
shall be reinstated on a non-exclusive basis, but only to the extent that such
reinstatement will not violate the provisions of any agreement SANO shall have
entered into during the period PPI was a Prohibited Party.
13.12 If SANO terminates this Agreement pursuant to Section 13.2,
13.3 and 13.7 hereof then PPI shall not and shall cause its Affiliates not to,
for a period of twelve (12) months following the effective date of termination,
sell in the United States any Competitive Product.
13.13 In the event that SANO terminates this Agreement in respect of
a Specific Product 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 such Specific Product as shall be equal to
the net number of units of such Specific 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 Specific Product as PPI
shall advise SANO in writing within ten business days of such termination. Such
Specific Product 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 Specific Product as if such Specific Product had been supplied by SANO
during the term of this Agreement.
13.14 (a) If SANO has not received an approval of an ANDA
for Licensed Product A prior to the later of [*****] PPI may terminate this
Agreement with respect to Licensed Product A by providing SANO with written
notice of such termination and neither party shall have any obligation hereunder
with respect to Licensed Product A other than applicable
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
confidentiality provisions and the payment by SANO described in the following
sentence. In the event of such termination, SANO shall pay PPI the sum of (i)
[*****] and (ii) the amount paid by PPI in respect of Licensed Product A
pursuant to Section 7.1 and Section 7.4 hereof, with half of such sum payable
three (3) months after SANO's receipt of notice of such termination and half of
such sum payable fifteen (15) months after SANO's receipt of notice of such
termination.
(b) If SANO has not received an approval of an ANDA for
Licensed Product B prior to the later of [*****] PPI may terminate this
Agreement with respect to Licensed Product B by providing SANO with written
notice of such termination and neither party shall have any obligation hereunder
with respect to Licensed Product B other than applicable confidentiality
provisions and the payment by SANO described in the following sentence. In the
event of such termination, SANO shall pay PPI the sum of (i) [*****] and (ii)
the amount paid by PPI in respect of Licensed Product B pursuant to Section 7.4
hereof, with half of such sum payable three (3) months after SANO's receipt of
notice of such termination and half of such sum payable fifteen (15) months
after SANO's receipt of notice of such termination.
(c) If SANO has not received an approval of an ANDA for
Licensed Product C prior to the later of [*****] PPI may terminate this
Agreement with respect to Licensed Product C by providing SANO with written
notice of such termination and neither party shall have any obligation hereunder
with respect to Licensed Product C other than applicable confidentiality
provisions and the payment by SANO described in the following sentence. In the
event of such termination, SANO shall pay PPI the sum of (i) [*****] and (ii)
the amount paid by PPI in respect of Licensed Product C pursuant to Section 7.1
and Section 7.4 hereof, with half of such
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sum payable three (3) months after SANO's receipt of such termination and half
of such sum payable fifteen (15) months after SANO's receipt of notice of such
termination.
(d) For the purposes of this Section 13.14, the dates on which
ANDAs were filed for the respective Licensed Products shall be as set forth on
Exhibit E attached hereto.
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 Licensed 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 Licensed 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
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claimed by and paid to customers, incurred by PPI or SANO in connection
with performing any such recall, provided that expenses incurred by PPI
shall be in accordance with the terms and conditions of the recall
approved by SANO; or
(ii) If it is later determined that the reason for
the recall was due primarily to the acts or omissions of PPI or its
Affiliates, then PPI shall pay or reimburse, as the case may be, all
direct out-of-pocket expenses, including but not limited to reasonable
attorney's fees and expenses and credits and recall expenses claimed by
and paid to customers, incurred by PPI or SANO in connection with
performing any such recall; or
(iii) If the parties are unable to agree that the
cause of the recall was due primarily to the act or omission of one of
the parties (or its Affiliates, as the case may be) within sixty days
of the initiation of the recall and have not commenced arbitration
proceedings to resolve such dispute within such sixty day period then
all direct out-of-pocket costs incurred by PPI and SANO, including but
not limited to reasonable attorney's fees and expenses and credits and
recall expenses claimed by and paid to customers, shall be shared by
the parties in proportion to their sharing of Gross Profits in respect
of the Licensed Products recalled.
Each of the parties shall use its reasonable best efforts to minimize the
expenses of recall which it incurs. It is understood and agreed that the direct
out-of-pocket costs and expenses of the recall contemplated in Paragraphs (i),
(ii) and (iii) above shall not include the invoice price charged by PRI or its
Affiliates to the customers for the Products recalled, which amount shall be
dealt with in accordance with the provisions of Section 9 hereof and shall also
not include any excess re-procurement costs (within the meaning of Paragraph
14.3 hereof) and related penalties
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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 willful material breach by a party of any of its duties or obligations
hereunder (in each case, as contemplated in Section 10.1 hereof), neither party
shall have a claim against the other party for any damages, losses or expenses
which it suffers or incurs as a result thereof except to the extent permitted or
contemplated in this Section 14.
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(f) Each party shall provide reasonable evidence to the
other of the out-of-pocket expenses being claimed by it and the rights of SANO
pursuant to Section 11.4 and the rights of PPI pursuant to Section 11.8 shall
apply thereto.
14.2 ANDA-RELATED FDA CORRESPONDENCE. Each of the parties shall
provide the other with a copy of any correspondence or notices received by such
party from FDA relating or referring to the Licensed Product(s) within ten (10)
days of receipt. Each party shall also provide the other with copies of any
responses to any such correspondence or notices within ten (10) days of making
the response.
14.3 EXCESS RE-PROCUREMENT COSTS.
(a) In the event that a recall occurs which recall was
necessitated primarily by any act or omission of SANO and SANO does not supply
PPI with replacement Licensed Product on a timely basis or if SANO, in breach of
its obligations under this Agreement, fails to make Licensed Product(s)
available to PPI, SANO shall, in addition to any reimbursement required under
Section 14.1, pay any excess re-procurement costs and/or related penalties or
assessments incurred by, or assessed on, PPI by a customer of PPI pursuant to an
Approved Contract (as that term is defined below) due to PPI's inability to
supply Licensed Product(s) to such customer due to the aforesaid acts, omissions
or breaches of SANO.
(b) SANO shall cooperate with PPI with respect to any legal
or administrative proceedings that arise pursuant to the Approved Contracts as a
result of PPI's inability to supply Licensed Product(s) to such customer due to
the aforesaid acts, omissions or breaches by SANO. The foregoing shall be
without prejudice to any other damages, expense or costs that PPI may have
suffered in connection with SANO's inability to supply the Licensed Product as
aforesaid, subject to the limitations and other provisions set forth in this
Agreement.
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(c) For purposes hereof the term "Approved Contract" shall
mean a contract entered into by PPI on or after the Execution Date with one of
its customers:
(i) pursuant to which PPI agrees to supply such
customer with pharmaceutical products which include the Licensed
Products (or any of them), and which provides that if PPI fails to
supply such customer with the Licensed Product in accordance with
specified terms and conditions therein set forth then such customer
shall have the right to procure a comparable replacement product for
the Licensed Product in substitution for the Licensed Products that PPI
has failed to supply to such customer in accordance with the provisions
of its agreement and to charge back to PPI any costs and expenses
incurred by such customer to acquire such comparable replacement
product in excess of the price which was to have been charged by PPI to
the customer for the Licensed Products which it failed to provide (such
excess costs and expenses being the excess re-procurement costs
contemplated in Section 14.1 and in this Section 14.3);
(ii) which has a term of twelve (12) months or less;
and
(iii) which provides for the supply of the
relevant Licensed Product in an amount not greater than the amount
forecast by PPI pursuant to Section 6.2 hereof, taking into account all
other sales of the Licensed Product in the relevant period; or
(iv) where the contract has a term of more than 12
months, or provides for an amount greater than that contemplated by
Paragraph (iii) above, SANO has approved or has been deemed to have
approved such contract in accordance with the provisions of Section
14.3(v) hereof; or
(v) if the approval of SANO as contemplated in
Paragraph (iv) above is requested, PPI shall have provided to SANO, in
accordance with the provisions of this
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paragraph, a complete copy of the proposed final agreement between PPI
and its customer prior to entering into such contract. A copy of any
contract to be provided to SANO as contemplated in this Paragraph (v)
shall be forwarded to SANO in the manner contemplated in Section 15.4
hereof. SANO shall have a period of ten business days from the date
upon which copies of such contract are actually received by it as
aforesaid to notify PPI in writing that it does not approve of the
contract and failing such notice from SANO within such ten business day
period SANO shall be deemed to have approved of such contract.
14.4 CONFIDENTIALITY.
(a) The parties agree that, without the prior written
consent of the other party (such consent not to be unreasonably withheld) or
except as may be required under law or court order, the provisions of the
Agreement shall remain confidential and shall not be disclosed to any Person not
affiliated with any of the parties.
(b) PPI and SANO hereby agree not to reveal or disclose any
Confidential Information (as defined below) to any Person without first
obtaining the written consent of the disclosing party, except as may be
necessary in regulatory proceedings or litigation. For purposes hereof
Confidential Information shall mean all information, in whatever form, which is
or was disclosed by one party to another or to an Affiliate of the other prior
to or during the term of this Agreement and which relates in any way to the
Products or to the business of the disclosing party, including, without
limitation information relating to customers and pricing. Confidential
Information shall not include information that a party can demonstrate by
written evidence:
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(i) is in the public domain (provided that
information in the public domain has not and does not come into the
public domain as a result of the disclosure by the receiving party or
any of its Affiliates);
(ii) is known to the receiving party or any of its
Affiliates prior to the disclosure by the other party: or
(iii) becomes available to the party on a
non-confidential basis from a source other than an Affiliate of that
party or the disclosing party and PPI covenants and agrees to cause its
Affiliates to comply with the provisions of this Section 14.4.
ARTICLE XV
GENERAL TERMS AND CONDITIONS
15.1 FORCE MAJEURE CLAUSES. Neither party shall be considered to be
in default in respect of any obligation hereunder, other than the obligation of
a party to make payment of amounts due to the other party under or pursuant to
this Agreement, if failure of performance shall be due to Force Majeure. If
either party is affected by a Force Majeure event, such party shall, within 20
days of its occurrence, give notice to the other party stating the nature of the
event, its anticipated duration and any action being taken to avoid or minimize
its effect. The suspension of performance shall be of no greater scope and not
longer duration than is required and the non-performing party shall use its
reasonable best efforts to remedy its inability to perform. The obligation to
pay money in a timely manner is absolute and shall not be subject to the Force
Majeure provisions, except to the extent prohibited by governmental rule or
regulations other than rules or regulations incident to bankruptcy or insolvency
proceedings of a party. Force Majeure shall mean an unforeseeable or unavoidable
cause beyond the control and without
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the fault or negligence of a party (and, where the party is PPI, beyond the
control and without the fault or negligence of any of its Affiliates) including,
but not limited to, explosion, flood, war (whether declared or otherwise),
accident, labor strike, or other labor disturbance, sabotage, acts of God, newly
enacted legislation, newly issued orders or decrees of any Court or of any
governmental agency. Notwithstanding anything in this Section to the contrary,
the party to whom performance is owed but to whom it is not rendered because of
any event of Force Majeure as contemplated in this Section 15.1 shall, after the
passage of one hundred and twenty days, have the option to terminate this
Agreement on thirty days prior written notice to the other party hereto. For
greater certainty, the inability or failure of PPI to cause any of its
respective Affiliates to comply with any of the provisions of this Agreement
expressed to be applicable to its Affiliates or which require such party to
cause the Affiliate to do or not to do something shall not be considered Force
Majeure unless the Affiliate in question is unable to comply by reason of
unforeseeable or unavoidable causes beyond the control and without the fault or
negligence of such Affiliate.
15.2 ARBITRATION. All disputes arising out of, or in relation to,
this Agreement (other than disputes arising out of any claim by a third party in
an action commenced against a party), shall be referred for decision forthwith
to a senior executive of each party not involved in the dispute. If no agreement
can be reached through this process within thirty days of request by one party
to the other to nominate a senior executive for dispute resolution, then either
party hereto shall be entitled to refer such dispute to a single arbitrator for
arbitration under Florida law, such arbitration to be held in Miami, Florida on
an expedited basis in accordance with the rules and regulations of the American
Arbitration Association. Any party demanding arbitration shall with service of
its demand for arbitration propose a neutral arbitrator selected by it. In the
event that
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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 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:
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If to SANO:
SANO Corporation
3250 Commerce Parkway
Miramar, Florida 33025
Attn: President
Fax: (954) 430-3390
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
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result of rotating strikes or otherwise) in the United States then such notice
shall not become effective until the fifth business day following the date of
resumption of normal mail service.
15.5 GOVERNING LAW AND CONSENT TO JURISDICTION.
(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 exclusive jurisdiction of the state and
federal courts located in Miami, Florida. Notwithstanding the foregoing, each
party also agrees to the jurisdiction of any court which a third party claim has
been 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.
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15.9 WAIVER. The waiver by any party of any breach by another party
of any term or condition of this Agreement shall not constitute a waiver of any
subsequent breach or nullify the effectiveness of that term or condition.
15.10 COUNTERPARTS. This Agreement may be executed in identical
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 prevented from complying with any
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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 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.
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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 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
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advisable from time to time, and any collateral security or guarantee at any
time held by SANO for the payment or performance of the Guaranteed Obligations
may be sold, exchanged, waived, surrendered or released. SANO shall not have any
obligation to protect, secure, perfect or insure any lien at any time held by it
as security for the Guaranteed Obligations or for this Guarantee or any property
subject thereto. When making any demand hereunder against PRI, SANO may, but
shall be under no obligation to, make a similar demand on PPI or any other
guarantor, and any failure by SANO to make any such demand or to collect any
payments from PPI or any such other guarantor or any release of PPI or such
other guarantor shall not relieve PRI of its obligations or liabilities under
this Guarantee, and shall not impair or affect the rights and remedies, express
or implied, or as a matter of law, of SANO against PRI.
16.4 EXTENT OF LIABILITY AND WAIVERS. PRI understands and agrees that
the obligation of guarantee of PRI pursuant to Section 16.1 are intended to
render PRI liable hereunder in each instance where PPI would be liable under
this Agreement, and no more, and except that the obligations of PRI hereunder
shall not be discharged by any bankruptcy or similar proceeding which may
discharge PPI herefrom. Accordingly, PRI acknowledges that it will not assert,
and hereby 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
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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, 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
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deemed to have waived any right or remedy hereunder or to have acquiesced in any
breach of any of the terms and conditions of this Agreement. No failure to
exercise, nor any delay in exercising, on the part of SANO, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by SANO of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the SANO would otherwise have
on any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
16.7 AFFILIATES. To the extent that PPI or PRI is obligated hereunder
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/ REGINALD HARDY
------------------------------------
(Signature)
Name: Reginald Hardy
Title: President
PHARMACEUTICAL RESOURCES, INC.
By: /s/ KENNETH I. SAWYER
------------------------------------
(Signature)
Name: Kenneth I. Sawyer
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Title: President & Chief Executive Officer
PAR PHARMACEUTICAL, INC.
By: /s/ KENNETH I. SAWYER
-------------------------------------
(Signature)
Name: Kenneth I. Sawyer
Title: President & Chief Executive Officer
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
EXHIBIT A
LICENSED PRODUCTS
PRODUCT "A"
DRUG NAME ANDA# SANO FILING FDA ACCEPTED
DATE DATE
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
*Generically equivalent to such strengths in Nitro Dur/registered/.
PRODUCT "B"
DRUG NAME ANDA# SANO FILING FDA ACCEPTED
DATE DATE
- --------------------------------------------------------------------------------
Nicotine Transdermal System
[*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nicotine Transdermal System
[*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nicotine Transdermal System
[*****]* [ ***** ]
- --------------------------------------------------------------------------------
*Generically equivalent to such strengths in Habitrol/registered/.
PRODUCT "C"
DRUG NAME ANDA# SANO FILING FDA ACCEPTED
DATE DATE
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
Nitroglycerin Transdermal
System [*****]* [ ***** ]
- --------------------------------------------------------------------------------
*Generically equivalent to such strengths in Transderm-Nitro/registered/.
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
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).
Product A. During the term of the Agreement, the Additional
Consideration payable to SANO with respect to Product A shall be [*****} of
Gross Profit, until aggregate Gross Profit with respect to that Licensed Product
shall have reached [*****], and [*****] of all Gross Profit thereafter. Payment
of Additional Consideration is to be made in respect of the third preceding
month, as set forth in Section 11.1.
The following illustrates payments to SANO under the foregoing formula,
assuming that sales of Product A commenced in January 1998:
<TABLE>
<CAPTION>
JAN. FEB., MARCH APRIL MAY JUNE JULY AUGUST SEPT. OCT. NOV. DEC.
1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES [***** ***** ***** ***** ***** ***** ***** ***** *****]
PRICE TO [***** ***** ***** ***** ***** ***** ***** ***** *****]
PRI -----------------------------------------------------------------------------------------------------------------
GROSS [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
PROFIT -----------------------------------------------------------------------------------------------------------------
PAYMENT [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
TO SANO
RETAINED [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
BY PPI
15% [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
INCREMENT
</TABLE>
- ----------------------------
* [*****]% of [*****]; [*****]% of [*****]. (total increment--[*****])
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
Product B. During the term of the Agreement, the Additional
Consideration payable to SANO with respect to Product B shall be [*****]% of all
Gross Profit. Payment of Additional Consideration is to be made in respect of
the third preceding month, as set forth in Section 11.1. The following
illustrates payments to SANO under the foregoing formula, assuming that sales of
Product B commenced in January 1998:
<TABLE>
<CAPTION>
JAN. FEB., MARCH APRIL MAY JUNE JULY AUGUST SEPT. OCT. NOV.
1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES [***** ***** ***** ***** ***** ***** ***** *****]
PRICE TO PRI [***** ***** ***** ***** ***** ***** ***** *****]
-----------------------------------------------------------------------------------------------------------------
GROSS PROFIT [***** ***** ***** ***** ***** ***** ***** *****]
-----------------------------------------------------------------------------------------------------------------
PAYMENT TO SANO [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
RETAINED BY PPI [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
15% INCREMENT [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
</TABLE>
Product C. During the term of the Agreement, the Additional
Consideration payable to SANO with respect to Product C shall be [*****] of
Gross Profit, until aggregate Gross Profit with respect to that Licensed Product
shall have reached [*****], and [*****] of all Gross Profit thereafter. Payment
of Additional Consideration is to be made in respect of the third preceding
month, as set forth in Section 11.1.
The following illustrates payments to SANO under the foregoing formula,
assuming that sales of Product C commenced in January 1998:
<TABLE>
<CAPTION>
JAN. FEB., MARCH APRIL MAY JUNE JULY AUGUST SEPT. OCT. NOV. DEC.
1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998 1998
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES [***** ***** ***** ***** ***** ***** ***** ***** *****]
PRICE TO PRI [***** ***** ***** ***** ***** ***** ***** ***** *****]
------------------------------------------------------------------------------------------------------------------
GROSS PROFIT [***** ***** ***** ***** ***** ***** ***** ***** *****]
------------------------------------------------------------------------------------------------------------------
PAYMENT TO [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
SANO
RETAINED BY [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
PPI
15% INCREMENT [***** ***** ***** ***** ***** ***** ***** ***** ***** ***** ***** *****]
</TABLE>
- ----------------------------
* [*****]% of [*****]; [*****]% of [*****]. (total increment--[*****])
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
EXHIBIT C
PROMISSORY NOTE
$ [*****] July 28, 1997
FOR VALUE RECEIVED, SANO CORPORATION, a Florida corporation (the
"Maker"), hereby unconditionally promises to pay to Par Pharmaceutical, Inc., a
New Jersey corporation (the "Payee"), at its offices located at One Ram Ridge
Road, Spring Valley, New York 10977 or at such other address as the Payee may
from time to time designate in writing to the Maker, the principal amount of
[*****], together with interest on the principal amount outstanding from time to
time at the rate per annum announced from time to time by Citibank N.A. as its
"Prime Rate." The principal amount of this Note, together with interest accrued
thereon, shall be due and payable on September 30, 1998.
This Promissory Note is delivered pursuant to that certain Amended and
Restated Distribution Agreement dated the 28th day of July, 1997 by and
among Maker, Payee and Pharmaceutical Resources, Inc., (the "Agreement").
This Promissory Note may be prepaid in whole or in part at any time and
from time to time prior to maturity without premium or penalty and shall be
prepaid as and to the extent set forth in the Agreement.
If any of the following events of default shall occur, the outstanding
principal amount of this Note, together with interest accrued and unpaid
thereon, shall become immediately due and payable:
(1) Maker shall default in the payment of principal of or interest on
this Note when and as due and payable; and
<PAGE>
(2) Maker (a) generally shall not pay its debts as they become due,
shall become insolvent, shall suspend its usual business or shall cease to
exist; (b) shall enter into an agreement with its creditors to reduce its
obligations to them or to defer their fulfillment, make a general assignment for
the benefit of its creditors, commence any proceeding relating to it under any
Chapter of Title 11 of the United States Code or seek discharge or reduction of
its debts, an arrangement, composition, reorganization or any other form of
relief from its creditors or from a court or governmental agency pursuant to any
bankruptcy, reorganization, arrangement, readjustment of debt, receivership,
dissolution, or liquidation law, statute or procedure of any jurisdiction
(federal, state or foreign) for the relief of financially distressed debtors
(each of the foregoing a "Debtor Relief Procedure"): (c) shall have instituted,
initiated or commenced against it a Debtor Relief Procedure and, if under Title
11 of the United States Code, an order for relief is entered or the petition is
controverted but is not dismissed within 30 days after the commencement of the
case or, if under another Debtor Relief Procedure, the substantial equivalent
occurs or the Debtor Relief Procedure is not dismissed or otherwise terminated
within 30 days of its commencement; or (d) shall take any action to effect any
event described in clauses (a), (b) or (c) above.
In the event that the Maker shall default in payment of this Promissory
Note when due, simple interest shall accrue on the then unpaid principal amount
hereof, from the date of any such default until the date the unpaid principal
amount hereof is paid in full, at the rate of ten percent (10%) per annum and
the Maker shall pay all reasonable costs of collection, paid or incurred by the
Payee, whether paid or incurred in connection with collection by suit or
otherwise.
<PAGE>
The Maker of this Promissory Note hereby waives demand, protest, notice
of dishonor and notice of maturity, non-payment or protest and any and all
requirements necessary to hold it liable as a maker of this Promissory Note.
All payments of principal, interest and any other amounts due hereunder
shall be made in the amounts required hereby without any reduction or set off of
any kind whatsoever, including, without limitation, any reduction or set off
with respect to any claim, counterclaim, defense or other right which Maker may
have against the Payee.
The waiver by the Payee of the Maker's prompt and complete performance
of, or default under, any provision of this Promissory Note shall not operate
nor be construed as a waiver of any subsequent breach or default, and the
failure by the Payee to exercise any right or remedy which it may possess
hereunder shall not operate nor be construed as a bar to the exercise of any
such right or remedy upon the occurrence of any subsequent breach or default.
This Promissory Note shall be governed by and construed in accordance
with the laws of the State of Florida.
This Promissory Note may not be modified, amended or terminated, except
in a writing executed by the Maker and the Payee.
IN WITNESS WHEREOF, the Maker, by and through its undersigned office
thereunto duly authorized, has executed and delivered this Promissory Note the
28th day of July, 1997.
Attested By: Sano Corporation
/s/ [illegible] By: /s/ REGINALD L. HARDY
- -------------------------- -----------------------------
Asst. Secretary Reginald L. Hardy, President
<PAGE>
EXHIBIT D
[SALES SUMMARY FORM]
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
LICENSE AGREEMENT
AGREEMENT, dated July 9, 1997, between THE POPULATION COUNCIL, INC., a
not-for-profit corporation organized under the laws of the State of New York
("TPC"), and SANO CORPORATION, a corporation organized under the laws of the
State of Florida ("Sano").
W I T N E S S E T H:
WHEREAS, TPC has developed, and owns the right to use, certain data and
information pertaining to the synthetic steroid Nestorone(R)
(17-acetoxy-16-methylene-19-norprogesterone);
WHEREAS, TPC has obtained certain patents rights covering the use of
Nestorone(R); WHEREAS, TPC and the manufacturer of Nestorone(R), [*****] have
entered into an agreement for, among, other things, the supply of Nestorone(R),
to manufacturers of products incorporating Nestorone(R), including products for
use in the field of human reproductive health;
WHEREAS, Sano desires to acquire an exclusive license within the Territory
(as hereinafter defined) under TPC's data, information and patent rights to
manufacture, use and sell certain products employing Nestorone(R) as set forth
herein; and
WHEREAS, in consideration of the grant of such exclusive rights, Sano
agrees to pay royalties and to perform other obligations as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, TPC and Sano hereby agree as follows:
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
1. DEFINITIONS
When used in this Agreement, the terms set forth in this Article I shall
have the following meanings:
"Affiliate" means, with respect to any corporation or organization, any
Person that, directly or indirectly, controls or is controlled by or is under
common control with, such corporation or organization. For purposes of this
definition, "control" (including the terms "controlled by" and "under common
control with"), as used with respect to any Person, means the ownership,
directly or indirectly, of at least fifty percent (50%) of the voting securities
or other equity interests thereof, or of such other interest as has the right to
direct the management of such Person.
"[*****] Agreement" has the meaning set forth in Section 4.2(g).
"African Territory" means the continent of Africa.
"Competing Product" has the meaning, set forth in Section 5.2(a).
"Compound" means the synthetic steroid Nestorone(R)
(17-acetoxy-16-methylene-19- norprogesterone).
"Compound Trademark" has the meaning set forth in Section 3.4(a).
"Drug Master File" means the confidential filing (or filings, as such may
be amended, modified or supplemented) made with any relevant Regulatory Agencies
with respect to, in connection with, or describing, the composition,
manufacture, packaging or storage of a Licensed Product.
"FDA" means the Food and Drug Administration, an administrative agency of
the United States of America.
2
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
"Field" means human hormone replacement therapy or contraception.
"[*****]" means [*****], its successors and assigns.
"Invention" has the meaning set forth in Section 3.3.
"Joint Development Agreement" has the meaning set forth in Section 2.1.
"Joint Development Committee" has the meaning set forth in Section 6.1.
"Licensed Product" means any and all transdermal patches for the
administration of the
Compound, either alone or in combination with other compounds, for use in
the Field.
"Licensed Technical Information" means all technical information, whether
or not patented or patentable, including, without limitation, physical,
chemical, clinical, pharmacokinetic, pharmacodynamic, toxicological, performance
and other information and data relating to the Compound or a Licensed Product
owned, possessed or controlled by TPC, including such ideas and information
developed by [*****] as to which TPC has rights during the term of, or
otherwise pursuant to, the Joint Development Agreement, in each case whether
developed, reduced to practice or otherwise acquired by TPC prior to the date
hereof or during the term of this Agreement, and shall include any
Registrations, the Patent Rights, and any Product Patent obtained by TPC
pursuant to Section 3.3(c).
"Sublicense Year" means the twelve calendar months beginning January 1
in any year during the term of this Agreement.
"Losses" has the meaning set forth in Section 7.3(a).
"Manufacturing Cost" means, with respect to each unit of a Licensed
Product manufactured by Sano during any period, (a) the sum of (i) the cost of
direct labor employed and
3
<PAGE>
materials used in the manufacture of units of the Licensed Product during such
period, (ii) an appropriate allocation to cover factory overhead, including,
without limitation, a reasonable portion of general, administrative and
financial expenses, all to the extent allocable to the manufacture and packaging
of the Licensed Product, and an allowance for depreciation relating to the
manufacture of units of the Licensed Product during such period, (iii) the
actual cost for such period of the insurance required under this Agreement, (iv)
taxes (other than income or similar taxes) imposed on the manufacture or sale of
units of the Licensed Product, (v) an allowance for amortization of the initial
costs of establishing manufacture of the Licensed Product, including expenses
incurred in connection with establishing the Drug Master File for the Licensed
Product, as applicable, the amount of such initial costs and such amortization
to be based on (A) estimates to be provided by Sano and approved by TPC and (B)
reasonable assumptions as to productivity and duration of production to be
agreed upon by TPC and Sano, (vi) the royalties paid by Sano to TPC pursuant to
Article 5 and (vii) any other costs or allowances, to be specified by Sano's
independent accountants, which may legitimately be allocated to the manufacture
of the Licensed Product, divided by (b) the number of units of the Licensed
Product sold or otherwise disposed of by Sano during such period, all determined
in accordance with generally accepted accounting principles consistently
applied. As and to the extent the Territory includes countries outside North
America, and TPC reasonably determines that the price charged to Public
Organizations located outside North America for a Licensed Product in accordance
with Section 4.3(a) is too high to serve TPC's goal of making low-cost
reproductive health products available to the public outside North America, the
parties shall meet to consider good faith amendments to the elements of
Manufacturing Cost as applicable to such Public Organizations, as well as
amendments to other
4
<PAGE>
Sections of this Agreement, including Section 4.3(a), affecting the price of the
Licensed Product to such Public Organizations under this Agreement.
"Manufacturing Standards" has the meaning set forth in Section 4.2(a)(i).
"NDA" means a New Drug Application or any equivalent application filed with any
relevant Regulatory Agency.
"Net Sales" means, with respect to any period, the gross amount, calculated
in United States Dollars, received by Sano and its Sublicensees, in cash or
other consideration, in respect of all sales of Licensed Products (other than to
Sano or Sublicensees or any of their respective Affiliates) during such period,
reduced by the following to the extent that they are properly allocable to the
Licensed Products so sold: all reasonable trade, quantity and cash discounts
allowed and actually granted; 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
buying groups, health care insurance carriers, governmental agencies and other
institutions in respect of the purchase price; freight, transportation,
insurance or other delivery charges actually paid by Sano or its Sublicensees,
and all taxes (except income taxes), tariffs, duties and other similar
governmental charges actually paid by Sano or its Sublicensees. If any of the
amounts on which a calculation of Net Sales is based is expressed in a currency
other than United States Dollars, such amount shall be converted to United
States Dollars at the exchange rate prevailing in New York City on the last day
of the calendar quarter during which such Net Sales are invoiced.
5
<PAGE>
"New Information" has the meaning set forth in Section 2.2(a).
"Patent Rights" means the patents covering the use of the Compound set
forth in Exhibit A hereto to the extent they have been issued, or have effect,
in the Territory, together with patents covering, the use of the Compound that
issue, or have effect, in the Territory beginning after the date hereof.
"Person" means an individual, corporation, partnership or any other entity
or any government, foreign or domestic, or an agency or political subdivision
thereof.
"Product" means a transdermal patch for the administration of the Compound,
either alone or in combination with other compounds.
"Product Patent" has the meaning set forth in Section 3.3.
"Product Trademark" has the meaning set forth in Section 3.4(b).
"Public Organization" means, with reference to the United States, its
territories and possessions, any non-profit organization, including entities
like Planned Parenthood Federation of America and its affiliated family planning
associations, whose principal function is to distribute in the United States
human reproductive health products to individual users, either free of charge or
at a price designed to recover the cost of providing them and, with reference to
the Territory other than the United States, its territories and possessions,
means any bilateral governmental development assistance agency, any government
or governmental agency of a country designated by TPC as "developing," any
intergovernmental agency or any not-for-profit organization, to the extent that
such agency, government or organization (a) administers a program for public
distribution of human reproductive health products, and (b) supplies such
products to individual users, either free of charge or at a price designed to
recover the cost of providing them. "Public Organization" shall include, without
limitation, (i) development assistance agencies such as United
6
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
States Agency for International Development and similar agencies; (ii)
intergovemmental agencies and organizations such as United Nations Childrens
Fund, United Nations Population Fund, World Health Organization and regional
health organizations like Pan American Health Organization; and (iii)
not-for-profit family planning or reproductive health organizations recognized
by TPC, including Association for Voluntary Surgical Contraception,
International Planned Parenthood Federation, and Pathfinder International,
together with their Affiliates.
"Registration" means any consent, approval, authorization, filing or
registration necessary to manufacture, import, use, market, sell and/or
distribute, as applicable, a Licensed Product in any country in the Territory,
including Drug Master Files and NDAs, but not including patents, patent
applications or trademarks.
"Regulatory Agency" means (a) the FDA or (b) any Person, governmental
department, bureau or commission in any country within the Territory responsible
for regulating the products and activities of Persons engaged in the
manufacture, sale, distribution and/or marketing of pharmaceuticals or any other
activities similar to those to be engaged in by Sano (or its Sublicensees) under
this Agreement, as the context may require, and including, in each case, any
Person succeeding to the functions of any of the foregoing.
"[*****] Territory" means the countries listed in Exhibit B attached
hereto.
"Sano Technical Information" means all technical information, whether or
not patented or patentable, including, without limitation, formulations,
components and manufacturing processes used in connection with Sano's
transdermal patch products, relating to any Licensed Product or the manufacture
or applications of any thereof or to applications of the Compound outside the
Field and outside the field of human reproductive health, owned, licensed,
possessed or controlled
7
<PAGE>
by Sano or its Sublicensees, including such information developed by a
Sublicensee as to which Sano has rights during the term of a Sublicense
Agreement, whether developed, reduced to practice or otherwise acquired prior to
the date hereof or during the term of this Agreement, and shall include Product
Patents, NDAs, Drug Master Files, New Information and Registrations, but shall
not include information that relates solely to the nature or properties of the
Compound.
"Specifications" has the meaning set forth in Section 3.2(d).
"Sublicense Agreement" means an agreement for the distribution, marketing
and sale of a Licensed Product, entered into by Sano, on the one hand, and a
Sublicensee, on the other, containing, without limitation, the provisions
required by this Agreement, but not terms or conditions that are inconsistent
with any of the terms of this Agreement.
"Sublicensee" means a Person with whom Sano contracts, under a Sublicense
Agreement, for the distribution, marketing and sale of Licensed Products in
accordance with the terms of this Agreement and which Person is (a) any of the
world's top 20 pharmaceutical companies, based on consolidated gross sales
revenues for the most recent fiscal year ended on or before the date of the
applicable Sublicense Agreement; (b) any Affiliate of any of the pharmaceutical
companies identified in (a), provided that the ultimate parent company thereof
guarantees such Affiliate's obligations under the applicable Sublicense
Agreement; (c) within any single country in the Territory, a domestic or foreign
pharmaceutical company that is among the top 10 pharmaceutical companies
distributing products in such country, based on consolidated gross sales
revenues in such country for the most recent fiscal year ended on or before the
date of the
8
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
applicable Sublicense Agreement, provided that such company is financially
responsible and reasonably capable of performing its obligations under a
Sublicense Agreement; (d) [*****], (e) any Affiliate of Sano, provided that Sano
guarantees such Affiliate's obligations under the applicable Sublicense
Agreement, or (f) any other person reasonably acceptable to TPC.
"Technical Information" means Licensed Technical Information and/or Sano
Technical Information, as the context may require.
"Territory" means the United States, its territories and possessions, and
Canada, as such territory may be expanded from time to time by written agreement
of the parties.
"Trademarks" means, collectively, Compound Trademarks and Product
Trademarks.
2. GRANTS OF LICENSES
2.1 GRANT BY COUNCIL. TPC hereby grants to Sano, during the term of this
Agreement, (a) an exclusive license (subject to TPC's right to use Licensed
Products for research activities), under the Licensed Technical Information,
with the right to grant sublicenses to Sublicensees, to manufacture, market,
use, sell and distribute the Licensed Products throughout the Territory and (b)
the non-exclusive right, with the right to grant sublicenses to Sublicensees, to
use any Compound Trademark in connection with the manufacture, marketing, use,
sale and distribution of Licensed Products only, in each case subject to, and in
accordance with, the terms of this Agreement. Nothing contained in this
Agreement shall preclude TPC from permitting other Persons, including other
licensees of TPC, to use or cross-reference any Licensed Technical Information
in connection with (i) in the case of [*****], the performance of its
obligations under the Joint Development and Supply Agreement, dated August 24,
1993, with
<PAGE>
TPC (the "Joint Development Agreement"); (ii) the development, manufacture,
marketing, use and/or sale of any product using the Compound other than the
Licensed Products, or (iii) the development, manufacture, marketing, use and/or
sale of any Licensed Product in any countryoutside the Territory or in any
country in the Territory in respect of which Sano has lost its exclusive rights,
as provided in this Agreement. TPC shall, promptly upon acquiring or developing,
new Licensed Technical Information, disclose such information to Sano, subject
to the terms and conditions of this Agreement.
2.2 GRANT BY SANO.
(a) Subject to the terms of this Agreement, Sano hereby grants to TPC (i) a
nonexclusive, perpetual royalty-free license to use new information developed by
Sano relating to the nature and/or properties of the Compound only, but not
including any Sano Technical Information (except to the extent expressly
permitted by Section 2.2(c)) with the right to grant sublicenses, for all
purposes not inconsistent with this Agreement; and (ii) a non-exclusive,
perpetual license to use new information developed by Sano relating to any
Product (or potential Product, but not to a Licensed Product) for use in the
field of human reproductive health (such new information, together with the new
information referred to in Clause 2.2(a)(i), the "New Information"), but not to
the manufacture of any component thereof or to any Sano Technical Information,
with the right to grant sublicenses, provided that, Sano shall not have any
obligation under this Agreement to develop or market any such new Product and
provided further, that Sano shall be entitled to receive from TPC or its
sublicensees using any such New Information under this clause 2.2(a)(ii) a
commercially reasonable royalty on net sales of such Products, to be mutually
agreed by Sano and TPC (and TPC shall, or shall cause its sublicensees to,
indemnify
<PAGE>
Sano against Losses in connection with the manufacture, sale or use of any such
Product, as set forth in Section 7.3(b)). Notwithstanding, anything contained
herein to the contrary, "New Information" shall not in any event include any
Sano Technical Information.
(b) To the extent that Sano or its Sublicensees develop new information,
including patents, relating to any Product for use outside the Field and outside
the field of human reproductive health, Sano shall have no obligation to grant
to TPC any rights therein but, to the extent Sano or any Affiliates or licensees
of Sano, develop and thereafter market any such Product, TPC shall be entitled
to receive a commercially reasonable royalty on net sales of such Products, to
be mutually agreed by Sano and TPC (and Sano shall, and shall cause its
licensees to, indemnify TPC against Losses in connection with the manufacture,
sale or use of any such Product, as set forth in Section 7.3(a)).
(c) To the extent, but only to the extent, necessary to permit TPC to
access information related solely to the nature or properties of the Compound in
connection with its rights under Section 2.2(a)(i), but not to access other
information therein that constitutes Sano Technical Information, Sano also
grants TPC the right, with the right to sublicense such right, to
cross-reference NDAs, Drug Master Files and Registrations obtained by Sano and
which otherwise constitute Sano Technical Information.
2.3 DISCLAIMER OF WARRANTY.
(a) TPC MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, RESPECTING ANY OF THE
LICENSED TECHNICAL INFORMATION, THE PATENT RIGHTS, THE COMPOUND TRADEMARK, THE
COMPOUND OR ANY LICENSED PRODUCT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS
TO THE
11
<PAGE>
ENFORCEABILITY OR VALUE OF ANY OF THE LICENSED TECHNICAL INFORMATION OR THE
DESIGN, VALUE, EFFICACY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
USE OF THE COMPOUND OR ANYLICENSED PRODUCT, EXCEPT AS EXPRESSLY SET FORTH
HEREIN. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NOTHING CONTAINED
HEREIN SHALL BE CONSTRUED AS A REPRESENTATION OR WARRANTY BY TPC THAT THE
DESIGN, MANUFACTURE, USE, SALE OR DISTRIBUTION OF ANY LICENSED PRODUCT WILL NOT
INFRINGE THE PATENTS OR OTHER PROPRIETARY INFORMATION OF ANY PERSON. In no event
shall TPC be liable to Sano or any other Person for any damages, direct or
indirect, special or consequential, in connection with any Licensed Product or
the use of any Licensed Technical Information, unless TPC is otherwise in
material breach of this Agreement and such damages are the result of such
breach. Sano shall not make, nor permit its Sublicensees to make, any warranty
respecting any Licensed Product or the Compound inconsistent with the foregoing.
(b) To the extent that Sano licenses to TPC New Information or Sano
Technical Information under Section 2.2, SANO MAKES NO WARRANTY, EITHER EXPRESS
OR IMPLIED, RESPECTING ANY OF SUCH LICENSED INFORMATION OR ANY PRODUCT,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO THE ENFORCEABILITY OR VALUE OF
ANY OF THE LICENSED INFORMATION OR THE DESIGN, VALUE, EFFICACY, MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE OF ANY PRODUCT, EXCEPT AS EXPRESSLY
SET FORTH HEREIN. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OR ANY OTHER
12
<PAGE>
AGREEMENT BETWEEN THE PARTIES RELATING TO SUCH LICENSE, NOTHING CONTAINED HEREIN
SHALL BE CONSTRUED AS A REPRESENTATION OR WARRANTY BY SANO THAT THE DESIGN,
MANUFACTURE, USE, SALE OR DISTRIBUTION OF ANY PRODUCT WILL NOT INFRINGE THE
PATENTS OR OTHER PROPRIETARY INFORMATION OF ANY PERSON. In no event shall Sano
be liable to TPC or any other Person for any damages, direct or indirect,
special or consequential, in connection with the use of such licensed
information or Product, unless Sano is otherwise in material breach of any
agreement with TPC relating to such licensed information and such damages are
the result of such breach. TPC shall not make, nor permit its sublicensees to
make, any warranty respecting any Product inconsistent with the foregoing. 3.
DEVELOPMENT OF LICENSED PRODUCTS
3.1 OBLIGATIONS OF TPC. TPC shall have the following obligations with
respect to the development of Licensed Products:
(a) CERTAIN STUDIES.
(i) TPC shall use its reasonable efforts, subject to circumstances and
events beyond its control, to begin, and thereafter complete, as soon as
practicable, at TPC's expense, carcinogenicity studies of the Compound as
described, and in accordance with the schedule set forth, in Exhibit C attached
hereto. Any other tests or studies, to be undertaken by TPC at Sano's expense,
shall be mutually agreed between the parties and described in one or more
addenda to Exhibit C.
(ii) If, as a result of TPC's breach of its obligations under Section 3.1
(a)(i), the required carcinogenicity studies are not completed substantially on
the schedule set forth in
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Exhibit C, the payments specified in Sections 5. 1 (b) and (c) may be withheld
by Sano, and shall be payable to TPC only upon completion of the carcinogenicity
studies, but at that time, such payments shall be reduced by an amount
reflecting interest on the aggregate amount of such payments at an annual rate
equal to the prime rate announced by Citibank N.A. in New York, New York on the
date on which the carcinogenicity studies were scheduled to be completed, plus
3%, accruing from such date through the actual date of their completion (or the
earlier termination of this Agreement). In no event shall TPC be required to
make any payment to Sano hereunder if the carcinogenicity studies are not timely
completed.
(iii) All data resulting from the tests set forth in Exhibit C (in addition
to all data resulting from tests relating to the Compound completed prior to the
date hereof) shall be included in the Licensed Technical Information and shall
be disclosed to Sano, subject to the terms and conditions of this Agreement, and
for use as permitted hereby, in a form suitable for incorporation in an NDA
filed with the FDA, as soon as practicable after they are obtained.
(b) CLINICAL STUDIES. TPC shall assist Sano in designing Phase III clinical
trials of Licensed Products. The Council shall not have any obligation to
prepare or submit any further INDs with respect to any Licensed Product.
(c) CROSS-REFERENCE. Subject to the provisions of this Agreement, TPC shall
permit Sano and its Sublicensees the right to cross-reference the Licensed
Technical Information, as and to the extent necessary to permit Sano and its
Sublicensees to perform their obligations under this Agreement and the
Sublicense Agreements. TPC shall provide to Sano, as reasonably requested by
Sano, copies of all filings with the FDA and other Regulatory Agencies as TPC
shall have made or shall hereafter from time to time have in its possession,
provided that Sano promptly
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
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ASTERIKS DENOTE SUCH OMMISSION
reimburses TPC for the costs of duplicating such materials. Sano shall, and
shall cause each of its Sublicensees to, notify TPC in advance of its intent to
make cross-references under this Section as occasions to cross-reference occur.
(d) [*****] DRUG MASTER FILES. TPC shall require [*****] to
agree to establish, and thereafter maintain, in each case at [*****]
expense, in accordance, with applicable standards, Drug Master Files for the
Compound with the relevant Regulatory Agencies within the Territory, as
necessary for the manufacture and sale of Licensed Products there, and to permit
Sano and its Sublicensees the right to cross-reference such Drug Master Files as
and to the extent necessary to permit Sano or its Sublicensees to perform their
obligations under this Agreement and the Sublicense Agreements.
3.2 OBLIGATIONS OF SANO. Sano shall have the following obligations with
respect to the development of Licensed Products:
(a) MANUFACTURING AND CONTROL PROCEDURES. In accordance with the
Specifications, Sano shall develop the manufacturing process and quality control
procedures for Licensed Products.
(b) DRUG MASTER FILES. Sano shall, at its expense, establish, and
thereafter maintain, in accordance with applicable standards, Drug Master Files
for Licensed Products with the relevant Regulatory Agencies within the
Territory, as necessary for the manufacture and sale of Licensed Products there.
(c) NDA. Unless this Agreement has been earlier terminated in accordance
with Section 9.2, Sano shall, at its expense, as soon as practicable following
the completion of
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necessary clinical trials, prepare, file, and thereafter maintain, with the FDA
and with the other relevant Regulatory Agencies within the Territory, the NDAs
for Licensed Products.
(d) CLINICAL STUDIES; SPECIFICATIONS. Sano shall, at its expense, design,
in consultation with TPC, and perform Phase III clinical trials of Licensed
Products as necessary for purposes of obtaining Registrations from the relevant
Regulatory Agencies throughout the Territory. Sano shall, at least 30 days prior
to beginning any Phase III trial, deliver the protocol therefor to TPC for its
review and comment. Based on the results of its studies, Sano shall develop
specifications for the use and manufacture of Licensed Products (the
"Specifications") and shall submit them to TPC for its review.
(e) SUPPLY OF PRODUCTS TO TPC. From time to time after the date hereof,
promptly following a request therefor, Sano shall supply to TPC, at no cost, (i)
up to 2,000 units of Licensed Products per year for research purposes only (and
not for commercial resale), provided that, if TPC does not request all such
units in a given year, the remaining amount shall be available to TPC in thc
next and subsequent years during the term of this Agreement, and (ii) all units
of Licensed Products reasonably necessary for TPC (or its licensees or
sublicensees) to conduct and complete acceptability studies of Licensed
Products.
3.3 PRODUCT PATENTS. Sano shall, at its expense, use its diligent efforts,
to the extent practicable, to patent the Licensed Products, as well as
patentable ideas, concepts, inventions or discoveries (collectively,
"Inventions") developed in connection with the Licensed Products or the
manufacture thereof during the term of this Agreement (any of which is referred
to as a "Product Patent") in countries throughout the Territory, to the extent
agreed by the parties.
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(a) PATENT APPLICATIONS. The parties shall consult with each other as to
whether or not to patent any Invention relating to a Licensed Product and the
countries in the Territory in which patent applications should be prosecuted.
Promptly after a decision to seek a patent, Sano shall, at its expense, file and
prosecute patent applications in respect of Product Patents in each such
country. TPC shall, at the request of Sano and at Sano's expense, execute such
documents and perform such acts as Sano may deem reasonably necessary and
advisable to assist in effecting the filing of such patent applications and to
procure letters patent thereon. Sano shall keep TPC informed of developments
concerning such patent applications and any Product Patents.
(b) TRADE SECRETS. If Sano reasonably determines not to patent any
Invention relating to a Licensed Product, Sano shall, and shall cause its
Sublicensees to, and TPC shall, thereafter treat such Invention as a trade
Secret in accordance with Section 7.1 and otherwise as appropriate to preserve
the proprietary nature and value of such Invention.
(c) ELECTION NOT TO MAINTAIN. If, at any time after obtaining a Product
Patent or applying therefor, Sano elects not to take action necessary to keep
such application or Product Patent in force, Sano shall give TPC written notice
of such election at least 30 days prior to the date such action is required to
be taken. In such event, TPC may, at its option and expense, assume
responsibility for keeping in force any such application or Product Patent, and
Sano shall promptly assign all of its right, title and interest in and to any
such application or Product Patent to TPC.
3.4 TRADEMARKS.
(a) COMPOUND TRADEMARKS. TPC has registered the name Nestorone(R) for the
Compound and may determine to adopt and/or register with any governmental
authority
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additional trademarks or service marks with respect to the Compound. TPC shall
own and maintain all such trademarks and service marks, whether or not
registered, obtained by TPC or which TPC has or acquires the right to use (any
of which is referred to as a "Compound Trademark").
(b) PRODUCT TRADEMARKS. Sano shall register and maintain with the
appropriate governmental authorities within the Territory trademarks or service
marks for the Licensed Products. Sano shall own any such trademark or service
mark, whether or not registered, obtained by Sano or which Sano has or acquires
the right to use (any of which is referred to as a "Product Trademark"). 4.
MANUFACTURE. MARKETING AND SUPPLY OF THE PRODUCT
4.1 OBLIGATIONS OF TPC. To the extent TPC or its licensees develop
additional information with respect to the Compound or Licensed Products which
is necessary or desirable for Sano to exercise its rights or perform its
obligations under this Agreement, such information shall promptly be disclosed
to Sano and shall be deemed included in the Licensed Technical Information and
the license granted to Sano under Section 2. 1. TPC shall, during the term of
this Agreement, maintain in effect the Patent Rights until their respective
expiration dates or other termination, provided that, if TPC elects not to take
action necessary to keep any of the Patent Rights in force, TPC shall give Sano
written notice of such election at least 30 days prior to the date such action
is required to be taken. In such event, Sano may, at its option and expense,
assume responsibility for keeping in force such Patent Rights, and TPC shall
promptly assign all of its right, title and interest in and to such Patent
Rights to Sano, subject, in each case, to all licenses and other rights in
effect at the time.
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
4.2 OBLIGATIONS OF SANO. Sano shall have the following obligations with
respect to the manufacture, marketing and supply of Licensed Products:
(a) MANUFACTURE AND SUPPLY OF THE PRODUCT. Sano shall:
(i) manufacture, sell and export Licensed Products in accordance with the
Specifications and FDA requirements and all other applicable rules and
regulations (together, the "Manufacturing Standards"), and establish appropriate
quality control review procedures in accordance with the requirements of the
FDA; and
(ii) establish the manufacturing capacity to supply Licensed Products in
accordance with the Specifications in such amounts as it and its Sublicensees
may require from time to time, and supply and cause its Sublicensees to supply
Licensed Products for sale to both Public Organizations and the private sector
in the Territory in accordance with the terms of this Agreement.
(b) PURCHASE OF THE COMPOUND. Sano shall:
(i) as long as the Compound is manufactured by [*****] in accordance with
FDA requirements, analytical specifications (A) reasonably acceptable to TPC,
Sano and [*****] and (B) acceptable to any relevant Regulatory Agency, and all
other applicable rules and regulations, purchase all supplies of the Compound
necessary to manufacture Licensed Products only from [*****], at a reasonable
price reflecting both the proprietary nature of the process developed by [*****]
to produce the Compound and the impact of such price on the ultimate commercial
feasibility of Licensed Products. Nevertheless, if [*****] is unable or
unwilling, for any reason, for any period of time, to manufacture and supply, at
such a reasonable price, the quantities of the Compound ordered in accordance
with this Section 4.2(b),
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
Sano shall purchase all required supplies of the Compound during such period of
time from a manufacturer selected by Sano and approved by TPC, which approval
shall not be unreasonably withheld or delayed;
(ii) not later than November 1 of each calendar year, beginning in the
calendar year preceding the first calendar year in which Sano expects to
purchase the Compound in connection with the manufacture of Licensed Products
for any purpose, deliver to [*****] a non-binding forecast of its expected
Compound requirements, including proposed delivery dates, during the two
calendar years following delivery of such forecast, and, to the extent
practicable, update such forecasts every three months during the period which
they cover; and
(iii) make quarterly written purchase orders setting forth the required
quantities of the Compound and requested delivery dates thereof for the
three-month period which begins 90 days following the forecast, which quantities
of the Compound Sano shall be required to purchase, and [*****] shall be
required to manufacture and deliver, in each case at the price agreed to, at the
times specified, in such orders, unless either party is prevented from doing so
as a result of circumstances or events beyond their respective control.
(c) OBTAIN SUBLICENSEES. Subject to the terms of this Agreement, Sano shall
use reasonable efforts to obtain Sublicensees to develop markets for, and to
distribute, Licensed Products in such portions of the Territory where Sano
itself shall not undertake such marketing and distribution, in accordance with
all applicable rules and regulations and pursuant to Sublicense Agreements.
(d) REGISTRATIONS. Sano shall, at its expense, or shall cause its
Sublicensees, at their expense, to effect and thereafter maintain all
Registrations necessary for the manufacture, import,
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
sale, use, marketing or distribution, as applicable, of Licensed Products
in such countries or territories within the Territory in which such activities
are to take place, provided that, to the extent the Territory includes countries
in the [*****[ Territory, [*****] shall, at its expense, effect and maintain all
necessary Registrations there.
(e) NEW INFORMATION. Sano shall, and shall cause its Sublicensees to,
inform TPC promptly of (i) New Information, (ii) any new application for the
Compound in the Field or in the field of human reproductive health, whether or
not such Invention shall be the subject of any Product Patent or application
therefor, and (iii) the results of testing programs conducted by Sano or its
Sublicensees with respect to any Licensed Product, including any information,
medical or otherwise, of an adverse nature received or developed by Sano or its
Sublicensees.
(f) MARKETING THE PRODUCT. Sano shall use commercially reasonable efforts
to develop Licensed Products for use in both hormone replacement therapy and
contraception and shall, and shall cause each of its Sublicensees to, use
commercially reasonable efforts to promote, market, sell and distribute all such
Licensed Products, in each case in compliance with all applicable laws, rules
and regulations in the countries and territories in the Territory, and including
to both Public Organizations and the private sector therein. For purposes of
this Section 4.2(f), commercially reasonable efforts to promote, market, sell
and distribute Licensed Products hereunder shall initially be deemed to have
been made if (i) an Investigational New Drug application with respect to a
Licensed Product for application in hormone replacement therapy shall have been
filed with the FDA within 12 months, and with respect to a Licensed Product for
application in contraception, within 24 months, after the date hereof, and (ii)
an NDA for a Licensed Product for application in hormone replacement therapy
shall have been filed with
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the FDA within five years, and with respect to a Licensed Product for
application in contraception, within six years, after the date hereof, and, over
time, shall be deemed to have been made if efforts comparable to those made by
Sano for other products in its portfolio achieving revenues and profits
comparable to such Licensed Product are made with respect thereto. If there are
no such comparable products, the parties shall determine what shall constitute
commercially reasonable efforts.
(g) FORFEITURE OF EXCLUSIVITY; LOSS OF RIGHTS.
(i) Notwithstanding anything contained herein to the contrary, the license
granted to Sano under Section 2.1 shall become non-exclusive with respect to a
Licensed Product in each country and/or territory in the Territory as to which
(A) applications for Registrations of such Licensed Product have not been
submitted at the times, and with the Regulatory Agencies, set forth in Section
4.2(f); (B) the first commercial sale of such Licensed Product therein has not
been made promptly following approval of all necessary Registrations by the
appropriate Regulatory Agencies or (C) royalties payable in respect of sales or
dispositions of such Licensed Product throughout the Territory in a License Year
do not equal or exceed the amounts set forth in Exhibit D by the dates set forth
therein, provided, that if such minimum royalties so payable have not accrued or
been paid, Sano may nevertheless maintain the exclusivity of the grant under
Section 2.1 with respect to a Licensed Product by paying to TPC the difference
between (x) the royalties actually paid in respect of the License Year and (y)
the total minimum royalties payable in respect of such Sublicense Year as set
forth in Exhibit D, which amount shall be paid by Sano within 30 days after the
last royalty payment in respect of such License Year was otherwise due, and
provided further that, as and to the extent the Territory is expanded to include
additional
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
counties in accordance with this Agreement, Exhibit D shall be amended to set
forth agreed deadlines for the submission of required Registrations and minimum
royalties with respect to such additional areas. In addition, Sano's license
under the Patent Rights shall be terminated if, and to the extent, required by
the Confidential Settlement Agreement, dated September 6,1994, between TPC and
[*****] (the "[*****] Agreement") (a redacted copy of which has been
provided to Sano) in the event that Sano or its Sublicensees do not meet, to the
extent applicable in the Territory, the diligence requirements prescribed by the
[*****] Agreement, as it is hereafter amended in accordance with Section 9.2(b)
and as set forth in Exhibit D, provided, that, except as otherwise expressly
required by the terms of this Agreement, such termination shall not affect the
license granted under Section 2.1 as to Licensed Technical Information other
than the Patent Rights.
(ii) To the extent that the license granted to Sano under Section 2.1
becomes nonexclusive with respect to a Licensed Product by operation of Section
4.2(g)(i) or otherwise, TPC shall have the right, with the right to sublicense
such right, to cross-reference the NDAs, Drug Master Files and Registrations
obtained by Sano with respect to the Compound and/or such Licensed Product in
the countries or territories in which Sano's license has become non-exclusive.
4.3 PRICE TO PUBLIC ORGANIZATIONS; SHORTAGES.
(a) The price (exclusive of any royalty payable to TPC under this
Agreement) charged Public Organizations in any country in the Territory during
any License Year for any Licensed Product shall be no more than [*****]% of the
price generally charged non-Public Organizations in such country for such
Licensed Product, provided that neither Sano nor its
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
Affiliates shall be required by this Agreement to charge any such Public
Organization less than [*****]% of the Manufacturing Cost, or, in the case of
sales by other Sublicensees, less than [*****]% of the sum of the actual cost of
such Licensed Product to the Sublicensee plus amounts reflecting costs incurred
by the Sublicensee allocable to items (iii), (iv), (vi) and (vii) of the
definition of Manufacturing Cost. If Licensed Products are sold in countries
where the parties agree that only Public Organizations are the purchasers
thereof, the price charged to such Public Organizations by any of Sano, its
Affiliates or other Sublicensees shall not exceed [*****]% of the Manufacturing
Cost, in the case of Sano or its Affiliates, or [*****]% of the sum of the
actual cost of such Licensed Product to the other Sublicensee plus amounts
reflecting the items listed above.
(b) If any Public Organization is unable to obtain from Sano or its
Sublicensees an adequate supply of a Licensed Product at prevailing prices for
Public Organizations in a similar locale, Sano agrees, upon reasonable notice
from TPC or such Public Organization, to make, or cause to be made, available
such supply to such Public Organization. If, through no fault of Sano or any of
its Sublicensees, there is a shortage of a Licensed Product such that all orders
cannot be filled, Sano shall, during the period of such shortage, allocate, or
cause to be allocated, the units of the Licensed Product available for
distribution to (i) Public Organizations wherever located and (ii) customers
other than Public Organizations in the same proportion in which actual sales to
both groups have occurred during the twelve-month period (or such shorter period
as has elapsed since the first sale of the Licensed Product) preceding the date
such shortage became apparent, provided that, if the Licensed Product as to
which the shortage occurs is for use in connection with hormone replacement
therapy and/or conditions related to menopausal or post-menopausal
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
syndrome, Sano shall not be required to allocate more than [*****]% of the
Licensed Product available from time to time to Public Organizations.
4.4 [*****] LICENSES.
(a) MANUFACTURING SUBLICENSE. Upon the extension of the Territory to
include any of the countries comprising the [*****] Territory or the African
Territory, and in the event that Sano determines to manufacture a Licensed
Product at production facilities to be located anywhere in the Territory and in
either the [*****] Territory or the African Territory, Sano shall offer a
sublicense to [*****] to manufacture such Licensed Product anywhere (whether or
not at the same location proposed by Sano) in the [*****] Territory or the
African Territory, as the case may be, that is part of the Territory, on
reasonable terms and conditions, provided that (i) [*****] manufacture would be
permitted under applicable law and (ii) [*****] would be able to establish
facilities and begin production in the [*****] Territory or the African
Territory, as the case may be, within the same reasonable time frame proposed by
Sano.
(b) MARKETING AND SALES SUBLICENSE. Upon the extension of the Territory to
include any of the countries comprising the [*****] Territory, Sano shall offer
[*****] an exclusive sublicense to market and sell Licensed Products in the
[*****] Territory upon reasonable terms and conditions, including those required
by this Agreement to be contained in Sublicense Agreements.
5. PAYMENT
5.1 FIXED PAYMENTS. Sano shall make the following payments to TPC, in
United Sates Dollars, within 10 days after the occurrence of the events
described below:
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
(a) [*****] upon the execution of this Agreement by all parties hereto;
(b) [*****] upon the completion of a pharmacokinetic study evidencing the
delivery of an effective dose of the Compound through a Licensed Product
sufficient, in the opinion of both parties, to lead to further clinical trials;
(c) [*****] upon commencement of the first Phase III clinical trial of a
Licensed Product by Sano;
(d) [*****] upon the filing of the first NDA for a Licensed Product in a
country in the Territory; and
(e) [*****] upon approval of the first NDA covering a Licensed Product.
5.2 ROYALTIES.
(a) GENERALLY. Sano shall, and shall require each of its Sublicensees to,
pay to TPC, quarterly in arrears, a royalty equal to [*****]% of Net Sales in
respect of Licensed Products sold during the term of this Agreement, provided,
that such royalty rate shall be reduced to [*****]% of Net Sales in respect of a
Licensed Product sold in any country in the Territory in which a competing
product is commercially available at the time such Net Sales are invoiced. For
purposes of this Agreement, a "competing product" of a Licensed Product shall
mean a transdermal patch incorporating the Compound, alone or together with
other active or inactive ingredients or compounds, for use in the same
application as the particular Licensed Product.
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(b) PAYMENT. All royalties payable hereunder shall be paid in United States
Dollars, determined by the exchange rate prevailing in New York City on the last
day of the calendar quarter in respect of which royalties are to be paid.
Payment shall be made within 45 days after the end of each calendar quarter
during the term of this Agreement.
(c) REPORTS. Together with the quarterly payments of royalties due under
this Agreement, Sano shall, and shall cause its Sublicensees to, furnish to TPC
written information with respect to sales of Licensed Products during such
calendar quarter, as follows:
(i) the identity of each Sublicensee that sold Licensed Products;
(ii) a statement setting forth for Sano and each Sublicensee the
following information:
(A) the total Net Sales of each Licensed Product;
(B) the royalty accruing thereon pursuant to this Agreement; and
(C) the gross amounts invoiced for the sale of Licensed Products and
an explanation of the calculation of Net Sales therefrom; and
(iii) the amount due to TPC as royalties under this Section 5.2.
If no royalty shall have accrued hereunder during any such calendar quarter or
portion thereof, such statement shall so report.
(d) The quarterly report in respect of the final quarter of a License Year
shall also contain the information set forth in Section 5.2(c) for the entire
License Year and, in addition, if the price charged to any Public Organization
for a Licensed Product was based thereon in accordance with Section 4.3(a), a
breakdown of the calculation of Manufacturing Cost, including an explanation of
the items listed in the definition of Manufacturing Cost. To the extent such
information with respect to Manufacturing Cost is proprietary to Sano, Sano's
officers
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or accountants will make such information available to TPC and TPC shall
thereafter hold it in confidence in accordance with Section 7. 1. Such final
quarterly report shall be certified by the Chief Financial Officer of Sano as
true, complete and correct.
(e) Within 90 days after termination of this Agreement for any reason, Sano
shall furnish to TPC a report, in the form described above, and royalty payment
covering sales of Licensed Products as to which such a report and royalties have
not been delivered previously hereunder.
5.3 RECORDS. Sano shall, and shall cause its Sublicensees to, maintain
complete and accurate records of all information necessary for the determination
of royalties due to TPC under this Agreement, and shall retain such records for
not less than five years after submitting the royalty report to which such
records pertain. Such records may, upon reasonable request by TPC and at its
expense, be examined by an independent certified public accountant retained by
TPC for the purpose of verifying the correctness of royalty payments made to
TPC, provided, that any such examination shall be performed during Sano's
ordinary business hours, and may take place no more frequently than
semi-annually. Any such independent accountant shall execute a confidentiality
agreement in form and substance reasonably acceptable to Sano and shall not
disclose to TPC any cost data or other information relating to Sano or its
Affiliates that is proprietary to Sano. In the event any such audit results in a
finding of an underpayment or an overpayment by Sano, TPC will so notify Sano
and Sano or TPC, as the case may be, shall make a corrective payment within 60
days following such notice. If any such audit reveals that Sano and/or its
Sublicensees have underpaid royalties to TPC in an aggregate amount equal to or
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exceeding 10% of the royalties actually due in respect of a License Year, Sano
shall also reimburse TPC for the reasonable costs of such audit.
5.4 WITHHOLDING. Any income or other tax that must be withheld and paid
(whether pursuant to governmental regulations or otherwise) with respect to
royalties payable to TPC under this Agreement shall be deducted prior to
remittance to TPC; provided, that Sano shall, at the request of TPC, furnish or
cause to be furnished to TPC proper evidence of taxes paid within 45 days after
such request, together with appropriate statements for the purpose of seeking
recovery of such tax.
6. JOINT DEVELOPMENT COMMITTEE
6.1 ESTABLISHMENT. Sano and TPC shall establish a joint development
committee (the "Joint Development Committee") in connection with the development
of Licensed Products hereunder. The Joint Development Committee shall initially
consist of six representatives, an equal number of which shall be appointed by
each of the parties within 30 days after the execution of the Agreement by both
parties. A party may change its appointed representatives from time to time upon
notice to the other party. The total number of members of the Joint Development
Committee may be changed from time to time, but shall always be an even number,
half of which shall be representatives of each party.
6.2 DUTIES. The Joint Development Committee shall make recommendations to
Sano with respect to the following: (a) a development program for Licensed
Products; (b) the review of all Phase II and III studies relating to Licensed
Products and any other studies proposed to be performed by Sano in connection
with obtaining Registrations for Licensed Products, and (c) the coordination of
all other regulatory and compliance issues relating to Licensed Products
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throughout the Territory. The Joint Development Committee will meet at least
quarter-annually during the term of this Agreement, at such dates and times as
are agreed to by the parties (and their representatives on the Committee),
unless activity with respect to Licensed Products reasonably requires more -- or
less -- frequent meetings. Meetings in person shall alternate between the
offices of the parties or shall take place elsewhere as may be mutually agreed
upon. The Joint Development Committee may also convene or be consulted from time
to time by means of telecommunications or correspondence.
6.3 LIMITATIONS.
(a) The Joint Development Committee shall have no power to bind either of
the parties hereto, it being understood that its role is advisory in nature.
Deadlocks among the members of the Joint Development Committee respecting
clinical program development and other matters relating to Licensed Products
including, without limitation, the preparation of protocols, the conduct of
Phase II and III studies, other studies proposed to be conducted or otherwise
required by any Regulatory Agency, and Registrations, shall be resolved by Sano,
provided that Sano has given due consideration to the recommendations and views
of the Joint Development Committee.
(b) The members of the Joint Development Committee shall agree in writing
to be bound by the same obligations of confidentiality set forth for the parties
in Section 7. 1.
6.4 INDEMNIFICATION. Sano shall indemnify and hold harmless each member of
the Joint Development Committee from time to time for all Losses incurred or
suffered by any such member in connection with the performance of his or her
duties in such capacity, provided that such duties are authorized or permitted
by this Agreement, and provided further, that Sano shall
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not be required to indemnify any member of the Joint Development Committee for
Losses incurred as a result of such member's gross negligence or willful
misconduct.
7. OTHER AGREEMENTS, REPRESENTATIONS
AND WARRANTIES OF THE PARTIES
7.1 CONFIDENTIALITY. During the term of this Agreement and for a period of
five years after the termination hereof for any reason, each of Sano and TPC
shall hold, and shall cause each of its Affiliates, employees, consultants and
agents to hold, as confidential and as a trade secret essential to the security
of the other party, the contents of this Agreement and all proprietary
information, including, without limitation, the Technical Information, whether
received from TPC, Sano or a Sublicensee hereunder, pursuant to the Joint
Development Agreement, a Sublicense Agreement or otherwise, except as permitted
in writing by the other party, and except that such information may be disclosed
to the Joint Development Committee and to Sublicensees to the extent necessary
to permit them to perform their obligations under this Agreement or Sublicense
Agreements, provided that the members of the Joint Development Committee and
such Sublicensees have agreed to be bound by confidentiality obligations with
respect thereto equivalent to the obligations of the parties in this Section 7.
1. Neither party shall be bound by the provisions of this Section with respect
to any proprietary information (a) which has become, or becomes in the future,
part of the public domain, other than as a result of or in connection with a
violation of any duty, liability or obligation set forth herein; (b) which is
required to be disclosed by law; or (c) to the extent necessary to disclose to
agents, employees, or Sublicensees in order to permit TPC or Sano, as the case
may be, to exercise any right hereunder. Each of TPC and Sano shall be entitled
to disclose any adverse information with respect to the
<PAGE>
Compound or a Licensed Product as required by law. TPC and Sano each shall take
such further action as shall be reasonably requested by the other party to
ensure the safeguarding and confidentiality of any proprietary information
required to be held confidential by the terms hereof. The parties agree that if
either party determines in good faith that it is required to file this Agreement
with any Regulatory Agency, such party will seek to redact the financial terms
hereof to the extent possible in order to keep them confidential.
7.2 PUBLICATION ANNOUNCEMENTS. Notwithstanding the provisions of Section 7.
1, either party may, with the written approval of the other party, which
approval shall not be unreasonably withheld or delayed, publish reports
concerning its activities hereunder, provided that (a) Sano shall have the right
to require TPC to delay the publication of such reports for a period of up to
six months for the purpose of obtaining patents as permitted under this
Agreement or otherwise processing pending Registrations with Regulatory Agencies
and (b) each party shall have the right to edit the information in the
publication in a reasonable manner in order to protect trade secrets. All
announcements and news conferences to be made at any time during development of
a Licensed Product or upon any Registration thereof shall, to the extent
practicable, be made or held jointly by Sano and TPC, provided that, Sano may
make its own announcements as required by applicable securities and other laws
after having delivered any such releases to TPC for its review prior to
publication and provided further, that such statements otherwise comply with the
requirements of this Agreement. The parties agree that they shall make a public
announcement upon the execution of this Agreement in the form of Exhibit E
attached hereto.
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXHCHANGE COMMISSION
ASTERIKS DENTOE SUCH OMMISSIONS
7.3 INDEMNITY.
(a) SANO'S OBLIGATION. Sano shall indemnify [*****], TPC and their
respective Affiliates, trustees, directors, shareholders, officers, employees
and agents, and hold them harmless from and against all claims, suits and
demands (whether based on death, personal injury or otherwise) against any of
them and all liabilities, losses, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) (collectively,
"Losses") incurred or payable by any of them arising out of or in connection
with (i) the breach of any material representation or warranty made by Sano
contained in this Agreement or by a Sublicensee in a Sublicense Agreement; (ii)
the failure of Sano or any of its Sublicensees to observe or perform any
material duty, covenant, liability or obligation arising under or in connection
with this Agreement or a Sublicense Agreement, as the case may be; (iii) Sano's
or any of its Sublicensees' manufacture, marketing, handling, distribution, use,
packaging, storage, shipment, delivery or sale, as the case may be, of any
Licensed Product or any portion thereof, including, without limitation, any
claim for product liability; or (iv) the infringement of the rights of any other
Persons by Sano, its Sublicensees or any of their respective Affiliates (other
than by exercising the license granted by this Agreement under the Licensed
Technical Information).
(b) TPC'S OBLIGATION. TPC shall indemnify Sano and its Affiliates,
directors, shareholders, officers, employees and agents, and hold them harmless
from and against all claims, suits and demands against any of them and all
Losses incurred or payable by any of them arising out of or in connection with
(i) TPC's breach of any material representation or warranty made by it contained
in this Agreement; (ii) TPC's failure to observe or perform any material duty,
covenant, liability or obligation arising under or in connection with this
Agreement; or (iii)
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXHCHANGE COMMISSION
ASTERIKS DENTOE SUCH OMMISSIONS
the gross negligence or willful misconduct of TPC in connection with any study
performed by TPC and contemplated by this Agreement.
(c) PROCEDURE. TPC (including [*****]) or Sano (in this capacity, the
"indemnitee") shall promptly notify the other party (the "indemnitor") of its
receipt of any threat, indication or other notice of any claim, suit or demand
which may give rise to any Loss within the purview of Section 7.3(a) or (b). The
indemnitor shall promptly assume full control of the defense against any such
claim, suit or demand with the assistance of counsel reasonably satisfactory to
the indemnitee and with the assistance of counsel to the indemnitee, and the
indemnitee shall cooperate with the indemnitor in the evaluation and defense
thereof, provided that the indemnitor shall reimburse the indemnitee for its
out-of-pocket expenses (including, without limitation, reasonable attorneys'
fees and disbursements) in connection therewith, which expenses shall not
include the time value of the indemnitee's employees or management. The
indemnitee shall not make any admission of liability or responsibility, enter
into any settlement, take any other action or incur any expense (except
reasonable attorneys' fees) with respect to any such claim, suit or demand
without the indemnitor's prior written consent, which consent shall not be
unreasonably withheld or delayed. Nothing contained in this Agreement shall
obligate an indemnitor to indemnify an indemnitee for any damages or Losses
incurred or payable by the indemnitee resulting from the indemnitee's own
negligence or willful misconduct.
7.4 INSURANCE. Each party shall, at its expense, maintain insurance to
cover the risks (including the defense of claims) set forth in Section 7.3(a),
in the case of Sano, or Section 7.3(b), in the case of TPC, to be placed in
amounts, and with carriers, reasonably satisfactory to the other party. Each
such insurance policy shall name the other party (and, in the case of Sano's
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
policy, shall name [*****]) as an additional insured and shall provide that at
least 30 days' prior written notice of cancellation or material change in
coverage under such policy shall be given to the additional insured(s). Each
party shall furnish copies of all policies and amendments thereto to the other
party, and evidence that such insurance has been obtained shall be delivered to
the other party (or [*****], as the case may be) promptly following a request
therefor.
7.5 INFRINGEMENT CLAIMS AGAINST THIRD PARTIES.
(a) ACTIONS. If either party shall receive notice of any action that, in
the reasonable opinion of such party hereto, infringes any of the Patent Rights,
such party shall promptly notify the other party hereto. Sano shall then have
the sole right to initiate, at its expense, a legal
proceeding against the infringing Person, in its own name and/or in the name of
TPC if necessary, together with the right to enforce and collect any judgment
thereon. If Sano elects to exercise such right, (i) TPC shall, at Sano's
request, take all appropriate or necessary action to assist in the prosecution
of such proceeding (including consenting to being joined in such proceeding),
(ii) TPC shall be reimbursed by Sano for its reasonable out-of-pocket fees and
expenses, including, without limitation, fees and expenses paid to attorneys and
consultants retained in connection with taking such actions and (iii) Sano shall
bear its own legal and other costs and expenses, together with all other costs
and expenses associated with the proceeding (including, without limitation,
court costs). Any monetary recovery in connection with any such infringement
action shall be applied first to reimburse Sano for its out-of-pocket expenses
(including reasonable attorneys' and consultants' fees) in prosecuting such
proceeding and the expenses of TPC to be reimbursed by Sano hereunder. Any net
balance shall be retained by
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Sano, subject to the payment of royalties to TPC at the full rate set forth in
Section 5.2(a) on such balance. During the pendency of any such infringement
proceeding, royalties required under this Agreement shall continue to be paid to
TPC.
(b) TPC'S RIGHT. If, in the reasonable opinion of TPC, Sano fails to take
appropriate and diligent action with respect to any infringement, TPC shall have
the right to initiate in its own name a legal proceeding for infringement, at
its expense, and the right to enforce and collect and retain any judgment
thereon. The initiation or failure to initiate any such proceeding by TPC shall
have no effect on the payment of royalties hereunder.
(c) EMPLOYEES' SERVICES. In the event the services of a salaried employee
of Sano or TPC, as the case may be, are utilized in, or in preparation for, any
suit or action hereunder, the party bringing the suit or action will pay for
such services an amount which shall not exceed the usual and reasonable charges
which would be made by other persons of like qualifications for like services,
provided that such charges shall in no event exceed a rate which is based on
such employee's salary.
7.6 INFRINGEMENT CLAIMS AGAINST THE PARTIES. If any infringement of its
rights by reason of the parties' exercise of their respective rights or
obligations under this Agreement is alleged by a third Person against TPC, Sano
or any of its Sublicensees, TPC shall investigate such allegations in
collaboration with Sano, and the parties agree to cooperate in taking
appropriate action to resolve any dispute that might arise therefrom.
7.7 EXPORT REGULATIONS. Neither TPC nor Sano shall make any disclosure,
written or oral, of technology or other information that originated in the
United States, nor shall Sano
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
permit any Sublicensee to make any such disclosure, without full compliance with
applicable laws regarding the export of technology.
7.8 USE OF NAMES. Neither Sano nor TPC shall use the name of the other or
refer to the other party, in writing or otherwise, in any manner, nor shall Sano
permit any Sublicensee to so use TPC's name, except with the prior written
consent of the other or as otherwise required by any Regulatory Agency or by
applicable law. Notwithstanding the above, Sano shall, in any promotional and
other materials or public information generated by Sano relating to a Licensed
Product, credit TPC for its assistance in developing the Licensed Product in the
form of Exhibit F attached hereto.
7.9 PATENT MAINTENANCE AND MARKING. All Licensed Products made, used or
sold under this Agreement, or their containers, shall be produced in accordance
with all applicable patent marking laws, TPC shall bear the reasonable costs of
maintaining, extending, to the extent practical, reexamining or reissuing the
patents included within the Patent Rights during the term of this Agreement.
7.10 REPRESENTATIONS AND WARRANTIES.
(a) TPC. TPC hereby represents that (i) it is a corporation duly organized,
validly existing and in good standing under the Not-for-Profit Corporation Law
of the State of New York and has full corporate power and authority to execute,
deliver and perform this Agreement; (ii) the execution, delivery and performance
of this Agreement have been authorized by all necessary corporate action on the
part of TPC; and (iii) except for (A) rights granted under the Joint Development
Agreement, (B) the rights of [*****] under the [*****] Agreement, (C) patents
belonging to [*****] (none of which TPC is aware are still in force),
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
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ASTERIKS DENOTE SUCH OMMISSIONS
and (D) certain patent filings made by [*****] in the United Kingdom and
South Africa, it is not aware of any patent rights or claims of any Persons that
may be violated or infringed as a result of the execution, delivery or
performance of this Agreement by either party or which could otherwise affect
the use or license of the Licensed Technical Information by Sano as permitted by
this Agreement. TPC agrees to keep Sano apprised from time to time of any
developments of which TPC becomes aware with respect to patent filings or other
filings or registrations relating to the Compound or Licensed Products which
have not been made by or on behalf of TPC, Sano, or any Sublicensee.
(b) SANO. Sano hereby represents and warrants that (i) it is a corporation
duly organized, validly existing and in good standing under the laws of Florida,
and has full corporate power and authority to execute, deliver and perform this
Agreement; (ii) the execution, delivery and performance of this Agreement have
been authorized or approved by all necessary corporate action on the part of
Sano; (iii) Sano's entry into, and performance under, this Agreement will not
violate any applicable law or regulation or any provision of any material
agreement to which Sano is a party and (iv) it is not aware of any patent rights
or claims of any Persons that may be violated or infringed as a result of its
execution, delivery or performance of this Agreement by either party, or which
would otherwise affect the use or license of the New Information as permitted by
this Agreement.
7.11 PROGRESS REPORTS. From time to time after the execution of this
Agreement, but at least quarter-annually (unless the parties otherwise agree, as
warranted by such activities), each of Sano and TPC shall submit progress
reports to the other covering their respective activities relating to the
development and testing of Licensed Products and obligations (as applicable) to
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obtain Registrations in connection therewith (to the extent not already
communicated to the other party pursuant to other provisions of this Agreement).
Progress reports hereunder shall be made for each Licensed Product until the
first commercial sale of such Licensed Product occurs. Progress reports
submitted hereunder shall summarize, without limitation, the following: (a) work
completed from the date of the last report; (b) work in progress at the date of
the report; (c) current schedule of anticipated events or milestones; and (d)
when appropriate, and as applicable, market plans for the introduction of
Licensed Products.
7.12 CONTACTS WITH REGULATORY AGENCIES. The parties agree that, except (a)
to the extent specifically requested to do so by Sano or a Regulatory Agency,
(b) as necessary, in TPC's opinion, to address matters relating to the Compound
or (c) as otherwise required by law, TPC shall not initiate contact with
Regulatory Agencies within the Territory with respect to Licensed Products. TPC
shall report to Sano any such permitted contact, the subject matter of which
might bear on the progress of Registrations or otherwise on any Licensed
Product.
8. SUBLICENSE AGREEMENTS.
Each Sublicense Agreement shall contain the following provisions, among
other provisions acceptable to the parties and otherwise in accordance with this
Agreement, provided, that the inclusion of any such provision in a Sublicense
Agreement shall not relieve Sano of any of its obligations under this Agreement:
8.1 MARKETING AND DISTRIBUTION. Any Sublicensee that will market, sell or
distribute any Licensed Product shall use commercially reasonable efforts to (a)
develop a broad market for such Licensed Product, and (b) distribute such
Licensed Product widely throughout its territory, according to a schedule to be
agreed upon by Sano and the Sublicensee, in each case in
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
accordance with the requirements of this Agreement. Such schedule shall require
Registrations to be made, as required for the Sublicensee to perform its other
obligations under the Sublicense Agreement, on a timely basis. The Sublicensee
shall sell and distribute Licensed Products only under applicable Product
Trademarks, in accordance with all applicable laws, rules and regulations, and
otherwise in accordance with this Agreement, including its provisions relating
to Public Organization sales, pricing and supply. No Sublicensee or any
Affiliate of any thereof shall have been debarred by the FDA.
8.2 INDEMNITY. The Sublicensee shall indemnify TPC, [*****], Sano
and their respective Affiliates, trustees, directors, shareholders, officers,
employees and agents, and hold them harmless from and against all claims, suits
and demands and all Losses incurred or payable by any of them arising out of or
in connection with the types of events or circumstances described in clauses (i)
- - (iv) of Section 7.3(a). The Sublicensee shall provide insurance covering all
such risks, in such amounts and to be placed with such carriers, reasonably
satisfactory to TPC, [*****] and Sano, as set forth in Section 7.4.
8.3 CONFIDENTIALITY. The Sublicensee shall keep confidential all
proprietary information developed by it with respect to the Compound or any
Licensed Product, or disclosed to it by TPC or Sano, in accordance with the
terms set forth in Section 7.1.
8.4 NEW INFORMATION: SUBLICENSE. The Sublicensee shall make available to
TPC any new information that it discovers or develops, promptly upon acquiring
or developing such information as set forth in Section 4.2(e), and shall grant
to TPC a non-exclusive license to use all such information, with the right to
grant sublicenses, including to Sano, to the extent set forth in Section 2.2.
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8.5 EXPORT REGULATIONS. The Sublicensee shall comply with all applicable
laws pertaining to the export of technology.
8.6 PURCHASE OF PRODUCT FROM SANO. As long as a Licensed Product is
manufactured, supplied and sold by Sano in accordance with this Agreement, the
Sublicensee shall purchase all of its requirements of such Licensed Product
exclusively from Sano.
8.7 ROYALTIES. The Sublicensee shall pay to TPC, quarterly in arrears, the
royalties set forth in, and subject to, Section 5.2.
8.8 TERMINATION. A Sublicense Agreement shall terminate immediately upon
the termination of this Agreement, but the licenses granted to TPC therein shall
survive any such termination.
9. TERM AND TERMINATION, CONDITIONS
9.1 TERM. Unless earlier terminated as provided herein, this Agreement
shall remain in effect with respect to a Licensed Product until (a) the
expiration of the last to expire of the patents from time to time contained in
the Licensed Technical Information or, if later with respect to any Licensed
Product, (b) the fifteenth anniversary of the date of the first commercial sale
of such Licensed Product. Thereafter this Agreement shall be automatically
renewed for additional periods of two years each unless either party gives
notice of its intent to terminate this Agreement at least six months prior to
the end of the initial term or any such renewal term. The parties' obligations
under Sections 2.2, 3.3(c), 7.1, 7.3, and 7.4 shall survive any termination of
this Agreement.
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
9.2 EARLY TERMINATION.
(a) TERMINATION FOR BANKRUPTCY OR BREACH. Either party hereto shall have
the right to terminate this Agreement on 60 days' prior written notice to the
other party if such other party shall (i) become insolvent, file a petition in
bankruptcy or similar proceedings, have a receiver appointed with respect to all
or a substantial part of its assets or make an assignment for the benefit of
creditors; (ii) be dissolved or liquidated; (iii) be subject to any event
equivalent under the laws of any foreign country to any of the events set forth
in clauses (i) and (ii) above or otherwise be prevented from performing its
material obligations hereunder by any law, governmental or other action; or (iv)
materially default in its performance of its obligations under this Agreement,
which default has not been cured within such 60-day period, provided, that a
party shall be entitled to cure only the first of any type of default hereunder.
(b) TERMINATION BY SANO ON OTHER EVENTS. Sano may terminate this Agreement
at any time before the submission of the first NDA on a Licensed Product, upon
30 days' prior written notice to TPC (i) and receive a refund of the amounts
paid to TPC pursuant to Section 5.1 through the date of such termination, if (A)
TPC does not obtain from [*****] Corporation an extension, acceptable to Sano,
but which shall not be required to be more than the extension that would result
from reestablishing the start date for such requirements as the date of this
Agreement, of the time within which the diligence requirements set forth in
Sections 3(c)(i) and (ii) of the [*****] Agreement must be complied with or (B)
Sano has not entered into a Supply Agreement with [*****] or another source of
supply for the Compound, in each case in accordance with the terms of this
Agreement, or (ii) if Sano determines in good faith that the
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
development, manufacture and/or marketing and sale of Licensed Products
hereunder is not commercially feasible. 10. MISCELLANEOUS
10.1 ASSIGNMENT. This Agreement may not be assigned, in whole or in part,
by either party without the prior written consent of the other party, provided
that the rights and obligations of Sano under this Agreement may be assigned
without TPC's consent to the successor to substantially all of the business and
assets of Sano, whether by merger, consolidation or a sale of all or
substantially all of such business and assets.
10.2 AMENDMENTS.
(a) Except as set forth in Section 10.2(b), no amendment or modification of
this Agreement shall be valid or binding upon the parties unless made in writing
and signed by both parties.
(b) If TPC's rights to certain Licensed Technical Information granted under
the Joint Development Agreement or any other license agreement to which TPC is a
party are terminated, the obligations and rights of the parties under this
Agreement shall be, and shall be deemed to be, modified to the extent necessary
to permit the parties to continue performance hereunder without violating any
continuing proprietary rights of [*****] or any such licensee of TPC.
10.3 NO PARTNERSHIP. Nothing contained in this Agreement shall be construed
to constitute either party the partner or agent of the other party, nor shall
either party have any authority to bind the other party in any respect, except
as otherwise expressly set forth herein.
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSIONS
10.4 NO THIRD-PARTY BENEFITS. Other than the provisions requiring Sano to
grant certain rights to [*****], nothing in this Agreement shall be
construed to confer upon any Person not a party hereto any right, remedy or
claim hereunder or with respect hereto.
10.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between TPC and Sano respecting the development, manufacture, marketing and
distribution of Licensed Products and supersedes all prior agreements between
TPC and Sano respecting the subject matter hereof.
10.6 SEVERABILITY. If any provision of this Agreement is held to be
invalid, illegal or unreasonable, the validity, legality and enforceability of
the remaining provisions shall not be affected or impaired thereby.
10.7 NOTICES. All notices and other communications given hereunder shall be
in writing and shall be deemed to have been duly given five business days after
being dispatched by registered mail, postage prepaid, or one business day after
delivery to a nationally-recognized air courier, in each case, addressed to the
party as set forth below, or if by facsimile, when transmitted to the facsimile
number of the party set forth below or to such other address or facsimile number
as may be furnished by such party by notice in the manner provided herein:
TPC: One Dag Hammarskjold Plaza
New York, New York 10017
Attn: President
Facsimile: (212) 755-6052
Sano: 3250 Commerce Parkway
Miramar, Florida 33025
Attn: Reginald L. Hardy, President
Facsimile: 954-704-2247
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10.8 HEADINGS. Section headings have been inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
10.9 WAIVER. The waiver of a breach of or default under any provision of
this Agreement shall not be deemed a waiver of any subsequent breach or default
of any kind or nature. Notwithstanding any other provision hereof, neither party
shall be required to take any action in violation of any applicable law and
shall not be deemed in breach hereof for declining to so act.
10.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida applicable to agreements made
and fully to be performed therein by residents thereof.
10.11 RESOLUTION OF DISPUTES. Any dispute arising out of or relating to any
provision of this Agreement or to the parties' performance of any of their
respective obligations hereunder, including, but not limited to, any claim for
indemnification under Section 7.3, whether or not any such dispute involves a
cause of action or claim for relief within the jurisdiction of a court of law or
equity, shall be resolved in the following manner: such dispute shall be set
forth in writing by representatives of both TPC and Sano and shall promptly be
presented to the President of TPC and the President of Sano. The President of
TPC and the President of Sano shall forthwith negotiate in good faith in order
to resolve such dispute as soon as possible. In the event that the President of
TPC and the President of Sano are unable to resolve such dispute within 20 days,
such dispute shall be finally resolved by arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Any such arbitration
shall take place in New York, New York, if commenced by Sano, or Broward County,
Florida, if commenced by TPC,
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before three arbitrators, one of which shall be appointed by Sano, one by TPC
and the third by the arbitrators so appointed; provided that (a) no arbitrator
shall be an employee of either party or any of its Affiliates and (b) the
parties may by mutual agreement designate a single arbitrator. The parties
further agree that (i) the arbitrators shall be empowered to order injunctive
and other equitable relief and to include arbitration costs and attorney fees in
the award to the prevailing party, in such proceedings and (ii) the award in
such proceedings shall be final and binding on the parties.
10.12 ACKNOWLEDGMENT. Sano acknowledges that, in furtherance of TPC's
goals, TPC will continue to sponsor the development of reproductive health and
other products that may, from time to time, compete with the Licensed Products,
and that TPC may receive compensation from licensees of such competing products
in respect of sales thereof. In addition, Sano acknowledges that TPC shall have
the right to grant licenses with respect to Licensed Products outside the
Territory and within the Territory, to the extent Sano loses any of its
exclusive rights with respect thereto under this Agreement. Nothing contained
herein shall prevent such sponsorship or activities by TPC, or compensation to
TPC, or otherwise be deemed to affect the parties' relations described in this
Agreement, except as expressly provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
THE POPULATION COUNCIL, INC.
By:/S/ SANDRA ARNOLD
-----------------
Name: Sandra Arnold
Title: Vice President
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SANO CORPORATION
By:/S/ REGINALD L. HARDY
---------------------
Name: Reginald L. Hardy
Title: President
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
EXHIBIT A
PATENT RIGHTS COVERING NESTORONE
Patents and Patent Applications - North America
Mexico MX [*****] Issued [*****]
Canada Patent Application No. [*****]
Patent Application No. [*****]
United States [***** *****]
[*****]
[*****]
[*****]
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
EXHIBIT B
[*****] TERRITORY
Albania
Bulgaria
Czechoslovakia
Hungary
Poland
Romania
the countries and territories comprising
the former USSR
or any countries which may, in the future, constitute the same geographical area
which these countries constituted as of October, 1992.
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CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
EXHIBIT C
SUMMARY OF CARCINOGENICITY STUDIES AND TIMETABLE
SUMMARY OF CARCINOGENICITY STUDIES
1. Submit draft protocols for the carcinogenicity studies and supporting data
to FDA for approval.
2. Complete any additional range finding or other nonclinical studies required
by FDA to finalized the design of the carcinogenicity studies.
3. Prepare Nestorone(R) implants similar to the ones to be tested in humans.
Several sizes of implants have to be tested.
4. Implant rats and mice with different lengths of implants. Collect blood
samples at 1, 2, 4, 8, and 16 weeks or longer and measure serum
Nestorone(R) levels.
5. Select an implant size that will achieve a blood level of [*****] in the
rats and mice. This will be the highest dose used in the carcinogenicity
study and is 10 to 15 fold higher than the blood level achieved in women
during contraceptive use. The implants have to maintain the blood levels in
the animals for 24 months. If the life of the implant is shorter, as
determined in the preliminary pharmacokinetic study, the implants will have
to be replaced as necessary.
6. Once the size of the high dose implants and the duration of their usable
period is determined, the study can be designed. The treatment group will
be as follows:
<TABLE>
<CAPTION>
Number of Animals per Group
GROUP DOSE RATS MICE
----- ---- ---- ----
<S> <C> <C> <C> <C>
1 Placebo 100 100
2 Low 100 100
3 Intermediate 100 100
4 High 100 100
</TABLE>
The blood level aimed for in the intermediate dose group will be three
times lower than that in the high dose group and the low dose will be three
times lower than the intermediate dose.
7. Select a contract toxicology laboratory to undertake the study and finalize
the carcinogenicity protocol. The protocols are fairly standard as far as
carrying out the study is concerned.
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
8. Manufacture implants for the study using the [*****] scaled-up preparation
of Nestorone(R). Depending upon the usable life of the implants, this could
involve manufacturing one to four thousand implants.
<PAGE>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
TIMETABLE
1. Submit draft protocols for the carcinogenicity studies and supporting data
to FDA for approval within 90 days of execution of the agreement.
2. When the scale-up preparation of Nestorone(R) is available from [*****],
the timetable begins.
3. Begin additional FDA-required range finding or other nonclinical studies,
if any, within 6 months of notification by FDA, but no sooner than when the
scaled-up preparation of Nestorone(R) is available from [*****].
4. Pharmacokinetic study to determine implant size, estimated time for
completion is 8 months after the scaled-up preparation of Nestorone(R) is
available.
5. Design a draft protocol, obtain quote from contract labs, estimated time of
completion is 2 months after the pharmacokinetic study to determine implant
size is completed.
6. Select a lab for the study and do a Good Laboratory Practices audit by
Q.A., estimated time of completion is 2 months after quotes are obtained
from contract labs.
7. Begin carcinogenicity study, and estimated 2 months after lab selection.
8. Preliminary results of carcinogenicity studies will be available an
estimated 2 years after the carcinogenicity studies begin.
9. Final carcinogenicity study will be available an estimated 2 months after
the preliminary results are available.
<PAGE>
<TABLE>
<CAPTION>
CONFIDENTIAL INFORMATION OMMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
ASTERIKS DENOTE SUCH OMMISSION
EXHBIT D
MINIMUM ROYALTIES
U.S. and Canada
- --------------------------------------------------------------------------------------------------------------------
YEAR DURING TERM MINIMUM NET SALES MINIMUM ROYALTIES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Year 1 following date of US $[*****] US $[*****]
first commercial
introduction
- --------------------------------------------------------------------------------------------------------------------
2 [***** ]
- --------------------------------------------------------------------------------------------------------------------
3 [***** ]
- --------------------------------------------------------------------------------------------------------------------
4 [***** ]
- --------------------------------------------------------------------------------------------------------------------
5 [***** ]
- --------------------------------------------------------------------------------------------------------------------
6 [***** ]
- --------------------------------------------------------------------------------------------------------------------
each of 7-10 [***** ]
- --------------------------------------------------------------------------------------------------------------------
[further periods to be agreed]
</TABLE>
[*****] REQUIREMENTS
<PAGE>
EXHIBIT E
NEWS
CONTACT:
Reginald L. Hardy Marcia A. Kean
President, Sano Corp. Feinstein Kean Partners Inc.
954/430-3340 617/577-8110
Sandra Waldman
Director, Public Information
The Population Council, Inc.
(212) 339-0525
FOR IMMEDIATE RELEASE
SANO OBTAINS AN EXCLUSIVE LICENSE FOR TWO HORMONE
REPLACEMENT PRODUCTS FROM THE POPULATION COUNCIL, INC.
--LEADING DEVELOPER OF CONTROLLED RELEASE PHARMACEUTICALS BROADENS
ITS PRESENCE IN THE HORMONE REPLACEMENT MARKET-
MIRAMAR, FLORIDA, JULY XX, 1997 - Sano Corporation (Nasdaq: SANO), a developer
of controlled release pharmaceutical products, announced today that it has
obtained, from The Population Council, Inc., an exclusive license for the North
American rights to use Nestorone(R), a novel progestin, in transdermal patches
for female hormone replacement therapy and contraception. The license also
includes an option for Sano to secure the exclusive, worldwide rights for the
transdermal use of a patented, synthetic androgen, MENT, for the treatment of
hypogonadism (testosterone deficiency), male contraception and muscle wasting in
males.
"Our agreement with The Population council reflects Sano's strategy of
maintaining a broad pipeline of proprietary products in numerous therapeutic
areas at various stages of development," said Reginald L. Hardy, President of
Sano. Mr. Hardy continued, "This agreement will expand Sano's role in the field
of hormone replacement therapy and enable Sano to provide patients with what we
believe will be a more effective progestin combination treatment than currently
available therapies."
<PAGE>
Sano management noted that it has already developed a combination transdermal
patch containing estradiol/ Nestorone(R) for hormone replacement therapy in
women. The Company intends to file an Investigational New Drug (IND) application
on the combination patch and commence human clinical trials by year-end 1997. In
addition, the Company plans to file an IND on a Nestorone(R) transdermal patch
for female contraception.
Under the terms of the agreement, Sano has the right to develop, test and market
Nestorone(R) patches, with or without a partner, in the U.S. and Canada. In
return, Sano is obligated to pay an upfront license fee to The Population
Council, and a royalty payment upon marketing clearance for the product.
Commenting on the agreement, Elof Johansson, M.D., Ph.D., Vice President of The
Population Council and Director of its Center for Biomedical Research, said
"Sano was attractive to the Council as a commercial partner because of its
expertise in patch technology. Our scientists have demonstrated the advantages
of Nestorone(R) under laboratory and clinical trial conditions. Sano will
continue the process by taking Nestorone(R) patches through the regulatory
approval process and making it available in a transdermal hormone delivery
system to North American women."
Nestorone(R) is a synthetic progestin similar to the natural hormone
progesterone. Studies conducted by The Population Council have show that
Nestorone(R) can be developed into various dosage forms for use alone or in
combination with an estrogen, both for contraception and hormone replacement
therapy. Nestorone(R) is ideally suited for transdermal drug delivery systems
since it is readily absorbed through the skin into the bloodstream. Thus its
biological effects can be maintained with low, daily doses from a small patch.
Clinical advantages of Nestorone(R) are that it has no effect on serum lipids or
insulin sensitivity and has no androgenic effects. Nestorone(R) is the
registered trademark of The Population Council. The patches containing
Nestorone(R) are being developed by Sano Corporation in cooperation with The
Population Council.
MENT is a synthetic androgen 10 times more potent than testosterone. This
increase potency makes it more suitable for transdermal delivery than
testosterone. The Population Council clinical studies have show that MENT has a
unique biological property, maintains normal sexual functions and muscle mass
without over-stimulating prostate growth, a current problem with testosterone
therapy. As a consequence, MENT should be an ideal androgen for the treatment of
hypogonadism.
Sano Corporation develops novel controlled release drug delivery systems for
drug therapies licensed from others and for off-patent drugs. Sano's transdermal
delivery systems use a patch that incorporates the drug dosage into an adhesive
that attaches the patch to the skin. The Company has filed with the FDA for
approval of three generic transdermal products, and has a number of other
proprietary and generic products in various stages of development.
<PAGE>
The Population Council, an international, non-profit research organization,
seeks to improve reproductive health and to help achieve a sustainable balance
between population and resources. The Council's work encompasses the biomedical,
social and health sciences.
This press release contains forward-looking statements regarding future events
and the future performance of Sano that involve risks and uncertainties that
could cause actual results to differ materially including, but not limited to,
timely development, FDA approval and the commencement of sales. We refer you to
the documents that Sano files from time to time with the Securities and Exchange
Commission, such as the Company's Form 10-K, form 10Q and Form 8-K reports,
which contain additional important factors that could cause our actual results
to differ from our current expectations and the forward-looking statements
contained in this press release.
<PAGE>
EXHIBIT F
(Tag-line)
The patches containing Nestorone(R) are being developed by Sano Corporation in
cooperation with The Population Council, Inc.
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