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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 2000.
REGISTRATION NO. 333-30764
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FIRST HORIZON PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 2834 58-2004779
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
660 HEMBREE PARKWAY, SUITE 106
ROSWELL, GA 30076
(770) 442-9707
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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MAHENDRA G. SHAH, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
FIRST HORIZON PHARMACEUTICAL CORPORATION
660 HEMBREE PARKWAY, SUITE 106
ROSWELL, GA 30076
TELEPHONE: (770) 442-9707
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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Copies to:
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STEPHEN D. FOX, ESQ. LESLIE E. DAVIS, ESQ.
ARNALL GOLDEN & GREGORY, LLP TESTA, HURWITZ & THIBEAULT, LLP
2800 ONE ATLANTIC CENTER 125 HIGH STREET
1201 WEST PEACHTREE STREET BOSTON, MA 02110
ATLANTA, GA 30309 TEL: (617) 248-7000
TEL: (404) 873-8500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1) FEE(2)
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Common Stock, $0.001 par value per share 4,370,000 shares $14.00 $61,180,000 $16,151.52
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(1) Includes 570,000 shares to cover an over-allotment option granted by the
Registrant to the Underwriters.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(a) promulgated under the Securities Act. This fee was
paid previously.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 24, 2000
3,800,000 SHARES
1ST HORIZON LOGO
COMMON STOCK
This is an initial public offering of common stock by First Horizon. We are
selling 3,800,000 shares of common stock. We estimate that the initial public
offering price will be between $12.00 and $14.00 per share.
------------------
Prior to this offering, there has been no public market for our common
stock. Our shares of common stock have been approved for quotation on the Nasdaq
National Market under the symbol FHRX.
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Per Share Total
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Initial public offering price............................... $ $
Underwriting discounts and commissions......................
Proceeds to First Horizon, before expenses..................
</TABLE>
We have granted the underwriters an option for a period of 30 days to
purchase up to 570,000 additional shares of common stock.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CHASE H&Q
BANC OF AMERICA SECURITIES LLC
THOMAS WEISEL PARTNERS LLC
, 2000
<PAGE> 3
NITROLINGUAL(R) PUMPSPRAY is an oral spray of nitroglycerin used for the
acute relief or prevention of angina pectoris, which is the medical term for
chest pain due to coronary heart disease.
[GRAPHICS-BOTTLE OF NITROLINGUAL PUMPSPRAY]
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 1
Risk Factors................................................ 5
Tradenames and Trademarks used in this Prospectus........... 15
Forward-Looking Statements.................................. 15
Use of Proceeds............................................. 15
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 27
Management.................................................. 40
Certain Relationships and Related Transactions.............. 51
Principal Stockholders...................................... 53
Description of Capital Stock................................ 55
Shares Eligible for Future Sale............................. 58
Underwriting................................................ 60
Legal Matters............................................... 62
Experts..................................................... 62
Additional Information...................................... 62
Index to Financial Statements............................... F-1
</TABLE>
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SUMMARY
THE COMPANY
First Horizon Pharmaceutical Corporation markets and sells brand name
prescription drugs. We focus on the treatment of chronic conditions, including
cardiovascular diseases, respiratory and gastroenterological disorders, and pain
and inflammation. Our strategy is to acquire pharmaceutical products that other
companies do not actively market that we believe have a high sales growth
potential and complement our existing products. In addition, we seek to develop
new patentable formulations, use new delivery methods and seek regulatory
approval for new indications of existing products.
Large multinational companies dominate the U.S. prescription pharmaceutical
market. These companies are increasingly divesting products which, as a result
of consolidation or lack of strategic fit, do not meet the threshold level of
sales required for continued marketing and promotion. In 1999 alone, we acquired
and licensed products from American Home Products Corporation and Aventis
(formerly Rhone-Poulenc Rorer).
Since 1992, we have introduced 12 products, three of which use the same
brand name. We market our products through our nationwide sales and marketing
force of 133 professionals. Our key products include the angina product,
Nitrolingual, the gastrointestinal products, Robinul and Robinul Forte, and the
liquid cold and allergy product, Tanafed. In 1999, we acquired marketing rights
from Aventis and Pohl-Boskamp to Nitrolingual, a product used for the acute
relief or prevention of chest pain resulting from heart disease. According to
information from IMS Health Retail and Provider Perspective Audits, this product
had U.S. sales to drug stores and non-retail purchasers of approximately $12
million in 1998, a 12.6% increase over 1997. In February 2000, we launched an
improved version of this product called Nitrolingual Pumpspray. We acquired
Robinul and Robinul Forte from American Home Products Corporation in January
1999. Since 1993, we have marketed Tanafed, a liquid cold and allergy product
primarily for children. Third parties manufacture all of our products.
We recently concluded development agreements with Penwest Pharmaceuticals
Co. and Inpharmakon Corporation for a product that we are developing for the
treatment of migraine headache. The FDA has approved the marketing of the active
ingredient in this product for the treatment of other conditions. We are also
currently developing a new use of the active ingredient in Robinul to treat
symptoms associated with the excessive production of saliva.
Our net revenues have grown from approximately $1.6 million for the year
ended December 31, 1995 to approximately $18.6 million for the year ended
December 31, 1999. We achieved this through a combination of increased sales of
existing products and acquisitions.
RECENT DEVELOPMENTS
On April 14, 2000, we acquired from Warner-Lambert Company exclusive rights
to market, distribute and sell a prescription product called "Ponstel" in the
United States. The FDA has approved this product for the relief of mild to
moderate pain for patients 14 years of age and older when therapy for the pain
will not exceed one week and for pain associated with menstruation. The purchase
price for the rights to this product was $13 million. We paid $9.5 million in
cash, which we borrowed under a bridge loan from LaSalle Bank National
Association, and we issued a promissory note to Warner-Lambert for the remaining
$3.5 million. We intend to repay LaSalle Bank and Warner-Lambert from the
proceeds of this offering. Based on customary investigations with the seller, we
believe Ponstel had U.S. sales of approximately $3.3 million in 1999, a 16%
increase over 1998.
In addition, on April 14, 2000, we entered into an agreement with
Warner-Lambert to purchase exclusive rights in the United States and other
countries to market, distribute and sell a product called "Cognex", as well as
all of Warner-Lambert's rights to a new unapproved version of Cognex,
1
<PAGE> 6
called "Cognex CR". The FDA has approved Cognex for the treatment of mild to
moderate dementia associated with Alzheimer's disease. The purchase of Cognex is
contingent on Warner-Lambert receiving FTC approval for the transaction and upon
satisfaction of other specified conditions. Warner-Lambert must divest certain
assets in order to complete its pending merger with Pfizer Inc. and the FTC must
approve its product divestitures. If we conclude this acquisition, we will be
required to pay $3.5 million in cash for the product. Based on customary
investigations with the seller, we believe Cognex had sales of approximately
$7.7 million in 1999, a decline of 35% from 1998, $2.7 million of which was in
the United States.
We must pay Warner-Lambert up to an additional $1.5 million in purchase
price if we receive FDA approval to market a new version of Cognex, called
Cognex CR. If approved, Cognex CR will also treat mild to moderate dementia
associated with Alzheimer's disease, but we believe that the new version will
offer convenience to patients by reducing the number of tablets required from
four times per day to one time per day.
We believe that the acquisition of the rights to these products complements
our growth strategy of acquiring products that others do not actively market.
We incorporated in 1992. Our principal office is located at 660 Hembree
Parkway, Suite 106, Roswell, Georgia 30076 and our telephone number is (770)
442-9707. Our corporate Internet address is www.horizonpharm.com. We do not
intend the information contained on our website to be a part of this prospectus.
2
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THE OFFERING
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Common stock offered................................. 3,800,000 shares
Common stock to be outstanding after the
offering(1)........................................ 12,339,643 shares
Use of proceeds...................................... We estimate that the net proceeds from the
sale of the 3,800,000 shares that we are
offering will be $44,942,000. We intend to
apply the proceeds from the offering as
follows: to repay approximately $12,680,000
of debt outstanding as of April 14, 2000
under our credit facility with LaSalle
Bank, to pay $3,500,000 under our
promissory note with Warner-Lambert
relating to the purchase of Ponstel, to pay
$3,500,000 if we conclude the purchase of
Cognex, to pay a $200,000 fee due under our
amended product development agreement, and
for general corporate purposes, including
the development of new products, the
expansion of our sales and marketing force
and new product acquisitions.
Nasdaq National Market symbol........................ FHRX
</TABLE>
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(1) This number excludes 1,767,500 shares subject to options granted under our
stock plans.
The information presented in this prospectus assumes that the underwriters
do not exercise their over-allotment option.
3
<PAGE> 8
SUMMARY FINANCIAL DATA
The following summary historical and as adjusted financial data should be
read together with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and related notes
included elsewhere in this prospectus. The as adjusted balance sheet data
summarized below reflects the sale of the 3,800,000 shares of common stock we
are offering at an assumed initial public offering price of $13.00 per share
after deducting the underwriting discounts and commissions and our estimated
offering expenses and the use of proceeds from the offering to repay $3,720,000
of debt outstanding as of March 31, 2000.
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<CAPTION>
THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------------
----------------------------------------------------------------- MARCH 31, MARCH 31,
1995 1996 1997 1998 1999 1999 2000
----------- ----------- ---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
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STATEMENT OF
OPERATIONS DATA:
Net revenues.......... $1,620,720 $2,516,616 $5,557,700 $9,252,058 $18,624,514 $4,199,934 $7,119,638
Operating income
(loss).............. (37,715) (395,185) (288,018) 269,421 1,655,049 697,380 (10,952)
Net income (loss)..... (92,025) (344,348) (180,446) 135,554 770,464 375,901 (38,531)
Net income (loss) per
common share:
Basic:............ $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.10 $ 0.05 $ (0.00)
Diluted:.......... $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.09 $ 0.04 $ (0.00)
Weighted average
common shares
outstanding:
Basic:............ 5,636,137 5,830,000 7,576,580 7,978,234 8,028,673 7,981,248 8,539,643
Diluted:.......... 5,636,137 5,830,000 7,576,580 8,584,329 8,975,493 8,759,904 8,539,643
</TABLE>
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MARCH 31, MARCH 31,
2000 2000
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ACTUAL AS ADJUSTED
(UNAUDITED) (UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 735,337 $41,957,337
Working capital............................................. (1,002,183) 42,699,817
Total assets................................................ 13,683,087 54,905,087
Borrowings under revolving loan agreement................... 2,000,000 --
Long-term debt including current portion.................... 2,575,708 855,708
Accumulated deficit......................................... (935,353) (935,353)
Total stockholders' equity.................................. 3,664,302 48,606,302
</TABLE>
4
<PAGE> 9
RISK FACTORS
RISKS RELATED TO OUR BUSINESS
WE CURRENTLY DEPEND ON TWO KEY PRODUCTS FOR A LARGE PORTION OF OUR SALES, AND
SUBSTANTIAL DECLINES IN EITHER OF THEM WOULD RESULT IN OUR BEING UNPROFITABLE.
Any factor that adversely affects the sale of our key products could
significantly decrease our sales and profits. Tanafed accounted for 24% and
Robinul and Robinul Forte accounted for 28% of our total revenues in 1999.
OUR GROWTH WILL SUFFER IF WE DO NOT ACQUIRE RIGHTS TO NEW PRODUCTS AND INTEGRATE
THEM SUCCESSFULLY.
We depend on acquisitions of rights to products from others as our primary
source for new products. Risks in acquiring new products include the following:
- the availability of new products that we find attractive and
complementary to our business; and
- the price to acquire or obtain a license for these products.
We often face significant competition from other pharmaceutical companies
in acquiring rights to products, which makes it more difficult to find
attractive products on acceptable terms. On February 1, 2000, we introduced
Nitrolingual Pumpspray and have no prior experience selling this product. On
April 14, 2000, we acquired Ponstel and immediately took over all of the
responsibilities relative to managing and selling this product. We are also
presently in the process of seeking to acquire a new product called Cognex. We
have only two senior managerial personnel devoted to product introductions and
we believe that these recent activities, together with other duties may cause
these persons to have insufficient time to integrate new products while
simultaneously continuing to effectively market existing products. Failure to do
this successfully could limit our ability to sell existing and new products.
WE MAY ENCOUNTER PROBLEMS IN THE MANUFACTURE OF OUR PRODUCTS THAT COULD LIMIT
OUR ABILITY TO SELL OUR PRODUCTS.
We depend entirely on third parties to manufacture our products.
Third parties manufacture all of our products, and we do not currently have
the ability to manufacture products. Except for any rights and remedies which we
may have because of contracts with our manufacturers, we have no control over
the availability of our products, or their quality or cost to us. We do not
maintain alternative manufacturing sources for any of our products and we may
not be able to locate alternative manufacturers on commercially acceptable terms
in the event of a manufacturing interruption. We do not have business
interruption insurance. Furthermore, due to the patent held on Nitrolingual
Pumpspray by our supplier, Pohl-Boskamp, no alternative source for Nitrolingual
exists. Similarly, the manufacturing process for producing the raw materials for
Tanafed is patented, and no other source for these materials is currently
available.
We will need to replace our supply source for Ponstel.
Warner-Lambert has agreed to manufacture Ponstel for us only until December
31, 2000, and will manufacture only specified quantities of Ponstel even if
demand increases. We must secure a new manufacturer to commence supplying
Ponstel at the time that the Warner-Lambert manufacturing agreement expires. We
may not be able to timely locate and contract with a manufacturer capable of
manufacturing and supplying us with Ponstel at an acceptable cost. In addition,
our supply agreement requires that we purchase a fixed quantity of Ponstel. If
demand for Ponstel increases or we are delayed in securing a replacement
manufacturer, we may have insufficient quantities of Ponstel to fulfill orders.
5
<PAGE> 10
We have no written agreements for the manufacture of our Zoto-HC and Protuss-D
products.
Because we do not have a written agreement with the manufacturer of our
Zoto-HC and Protuss-D products, we may lack rights and remedies which may be
available under a written supply agreement.
Our existing supply agreements may prohibit us from entering into potentially
more favorable supply relationships with others.
Our third-party manufacturing agreements for our Nitrolingual, Robinul,
Tanafed, Zebutal and Protuss products require that we purchase all of our
product requirements from the manufacturers that are a party to those
agreements. This could hinder our ability to enter into manufacturing agreements
with other manufacturers for these five products that may be more beneficial or
less costly to us.
THE AVAILABILITY OF A PREVIOUS VERSION OF OUR NITROLINGUAL PRODUCT COULD REDUCE
ITS SALES.
The availability of a previous version of our Nitrolingual Pumpspray
product may affect our sales. We have exclusive rights to sell Nitrolingual
Pumpspray in the United States. However, Aventis previously marketed another
version of this product named Nitrolingual Spray. Although Aventis has never
manufactured and no longer markets this product, existing inventories of
Nitrolingual Spray remain with distributors which, along with retailers, may
wish to sell these existing inventories prior to purchasing our Nitrolingual
product. In addition, Aventis did not actively market Nitrolingual in 1999 and
we believe that it will take time to rebuild loyalty to Nitrolingual and restore
sales to formerly achieved levels.
WE FACE COMPETITION FROM GENERIC PRODUCTS THAT COULD LOWER PRICES AND UNIT
SALES.
Nitrolingual competes with a generic tablet product. Our Zebutal Capsules,
Protuss Liquid, Protuss-DM Tablets, Protuss-D Liquid, Zoto-HC ear drops and
Mescolor Tablets are not protected by patents and face competition from less
expensive generic products. In addition, competitors could develop generics to
compete with our Robinul, Robinul Forte and recently acquired Ponstel products
which are not protected by patents. Third-party payors and pharmacists can
substitute generics for our products even if physicians prescribe them.
Government agencies and third-party payors often put pressure on patients to
purchase generic products instead of brand-name products as a way to reduce
healthcare costs. An increase in the amount of generic competition against any
one or more of our products could lower prices and unit sales.
STRONG COMPETITION EXISTS FOR MARKETING OUR PRODUCTS AND COMPETITORS HAVE
INTRODUCED NEW PRODUCTS AND THERAPIES THAT COULD MAKE OUR PRODUCTS OBSOLETE.
Our Protuss line and Tanafed, Zebutal, Defen-LA and recently acquired
Ponstel products compete against products sold both over-the-counter and by
prescription and which are marketed by larger pharmaceutical companies with
greater financial resources for marketing and manufacturing. In addition,
barriers to entry for products competitive with these products are low, which
makes it easier for smaller companies to enter the market. Competitors have
recently introduced new products to treat angina and short-term pain.
Competitors have also recently developed a new therapy for pain and a surgical
procedure to treat angina. These technological changes and new therapies may
reduce the need for our products. The high level of competition in our industry
could force us to reduce the price at which we sell our products or require us
to spend more to market our products.
6
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A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A LARGE PORTION OF OUR SALES AND THE
LOSS OF ONE OF THEM, OR CHANGES IN THEIR PURCHASING PATTERNS, COULD RESULT IN
THE INABILITY TO SUCCESSFULLY SELL OUR PRODUCTS.
We sell most of our products to a small number of wholesale drug
distributors. In 1999, sales to Bergen Brunswig Corporation, Cardinal Health,
Inc. and McKesson HBOC, Inc. represented approximately 10%, 19% and 28%,
respectively, of our total sales. Because of the small number of wholesale drug
distributors, further consolidation in this industry or financial difficulties
of these distributors could result in the combination or elimination of
warehouses, which could increase returns of our products or, as a result of
distributors reducing inventory levels, delay the purchase of our products.
IF OUR PRODUCTS UNDER DEVELOPMENT FAIL IN CLINICAL STUDIES OR IF WE FAIL OR
ENCOUNTER DIFFICULTIES IN OBTAINING REGULATORY APPROVAL FOR NEW PRODUCTS OR NEW
USES OF EXISTING PRODUCTS, WE WILL HAVE EXPENDED SIGNIFICANT RESOURCES FOR NO
RETURN.
We are beginning clinical studies of our migraine headache product under
development and plan to initiate clinical trials for our excessive salivation
product under development. If we cannot obtain FDA approval for these or other
products which we may seek to develop in the future, our rate of sales growth
will suffer. We do not have experience in obtaining FDA approval for new
products or new uses of already-approved products. As a result, we rely on
third-parties to formulate, develop and manufacture the materials needed for
clinical trials for our products under development to treat migraine headache,
excessive salivation and a once-a-day formulation for Cognex. We also rely on
third parties to conduct clinical trials for us. If our product is not
successful in clinical trials or if we do not obtain FDA approval, we will have
expended significant resources with no return.
Our ongoing clinical studies might be delayed or halted for various
reasons, including:
- these products are not shown to be effective;
- we do not comply with requirements concerning the protection of the
rights and welfare of human subjects;
- patients experience unacceptable side effects or die during clinical
trials;
- patients do not enroll in the studies at the rate we expect; and
- product supplies are not sufficient to treat the patients in the studies.
In addition, the party from whom we license rights to develop a component
of our migraine product could terminate the agreement if we fail to achieve
certain scheduled performance milestones, including the completion of clinical
trials by April 2002, applying for FDA approval of the product within six months
after completing clinical trials, and commercially launching the product within
two months after obtaining FDA approval.
7
<PAGE> 12
WE OR THIRD-PARTIES MAY VIOLATE GOVERNMENT REGULATIONS AND WE MAY INCUR
SIGNIFICANT EXPENSES TO COMPLY WITH SUCH REGULATIONS.
All of our third-party manufacturers and product packaging companies are
subject to inspection by the FDA and, in appropriate cases, the Drug Enforcement
Administration and foreign regulators. From time to time, some of our
third-party manufacturers have received warning letters from the FDA concerning
noncompliance with manufacturing requirements. If our third-party manufacturers
do not comply with FDA regulations in the future, they may not be able to
deliver products to us or we may have to recall products. Many government
agencies regulate our business, including the following:
- the FDA;
- the Drug Enforcement Administration;
- the Consumer Product Safety Commission;
- the Occupational Safety and Health Administration;
- the Health Care Financing Administration;
- the Environmental Protection Agency; and
- state, local and foreign governments.
IF THIRD-PARTY PAYORS DO NOT ADEQUATELY REIMBURSE PATIENTS FOR OUR PRODUCTS,
DOCTORS MAY NOT PRESCRIBE THEM.
Because our products are sold by prescription, we depend on third-party
payors, such as the government, private healthcare insurers and managed care
organizations, to include these products on their lists of products for which
third-party payors will reimburse patients. Third-party payors continuously
challenge the pricing of medical products and services by substituting cheaper
products on their approved lists. Because our Nitrolingual, Zebutal, Protuss,
Zoto, Mescolor, Robinul and Ponstel products are susceptible to generic
competition and because of the new entrants that compete with Nitrolingual and
Ponstel, we face an increased risk of third-party payors substituting these
products. If third-party payors remove any of these products from their lists or
choose not to pay for our product prescriptions, patients and pharmacies may not
continue to choose our products.
WE DEPEND ON HIGHLY TRAINED MANAGEMENT, AND WE MAY NOT BE ABLE TO KEEP CURRENT
MANAGEMENT OR HIRE QUALIFIED MANAGEMENT PERSONNEL IN THE FUTURE.
We currently have only nine key regulatory, technical and management
personnel. The loss of any of these persons therefore would hurt our ability to
develop and market products. If we are able to sustain our rate of growth, we
will need to attract new operational and marketing personnel, and we may have
difficulty hiring personnel at an acceptable cost. In addition, Dr. Mahendra G.
Shah, our chief executive officer, does not provide exclusive full-time services
to us.
PRODUCT LIABILITY CLAIMS AND PRODUCT RECALLS COULD LIMIT OUR ABILITY TO SELL
PRODUCTS.
Side effects could occur from our Ponstel, Nitrolingual and Robinul
products. Side effects or marketing or manufacturing problems pertaining to any
of our products could result in product liability claims or adverse publicity.
These claims could be expensive, or could result in withdrawal of approval to
market the product or recall of the product. These problems often occur with
little or no notice in connection with the sale of pharmaceutical products. For
instance, we instituted a voluntary recall on our Protuss-DM product in January
1999 because of a labeling error. However, we quickly corrected the error and
the financial impact was immaterial to our results of operations.
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OUR LEVEL OF DEBT COULD REDUCE OUR GROWTH.
As of April 14, 2000, we had total outstanding indebtedness of
approximately $17,036,000, or approximately 82% of our total capitalization.
Even after this offering and the repayment of the term loan and bridge loan
under our credit facility with LaSalle Bank, we expect that we may incur
additional indebtedness to implement our growth strategy.
Significant debt could:
- limit our operating flexibility as a result of requirements of our
lender;
- require us to use a large portion of our cash flow from operations for
debt payments that would reduce the availability of our cash flow to fund
operations, product acquisitions, the expansion of our sales force and
facilities and research and development efforts; and
- limit additional acquisitions due to restrictive covenants in our credit
facility.
WE EXPECT TO REQUIRE ADDITIONAL FUNDING AND IF WE CANNOT OBTAIN IT, OUR SALES,
PROFITS, ACQUISITIONS AND DEVELOPMENT PROJECTS COULD SUFFER.
After the offering, we expect that we will need additional funds to acquire
or obtain licenses for new products, expand our sales force, support the
marketing and sales of new products and facilities and develop and test new
products. We may seek additional funding through public and private financing,
including equity and debt offerings. Adequate funds for these purposes, whether
through the financial markets or from other sources, may not be available when
we need them or on terms acceptable to us. Insufficient funds could cause us to
delay, scale back, or abandon some or all of our product acquisitions, licensing
opportunities, marketing, and product development programs and manufacturing
opportunities.
IF WE DO NOT SECURE OR ENFORCE OUR PATENTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS, WE COULD ENCOUNTER INCREASED COMPETITION THAT COULD ADVERSELY AFFECT OUR
OPERATING RESULTS.
We do not hold patent rights covering the products we are distributing and
do not in some cases have the right to enforce patents our licensors hold. We
obtained exclusive distribution rights in the United States to distribute our
Nitrolingual Pumpspray and Tanafed products but have no or only limited rights
to enforce the patents relating to these products. We have a license from
Penwest Pharmaceuticals Co. to use the patented TIMERx technology in our
migraine product under development. If we complete the Cognex acquisition, we
will acquire certain patent rights relating to the use of an active ingredient
in Cognex to treat conditions associated with Alzheimer's disease. Any
exclusivity afforded by any of these patents could cease because the other party
could terminate the license or because we have no or only limited rights to
enforce patents or to require enforcement actions by the owners of the patents.
Proceedings involving our rights in patents or patent applications could
result in adverse decisions. In addition, the confidentiality agreements
required of our employees and third-parties may not provide adequate protection
for our trade secrets, know-how and other proprietary information which we rely
on to develop and sell our products. If any of our employees or third-parties
disclose any of our trade secrets or know-how, we could encounter increased
competition.
OUR PRODUCTS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES,
WHICH COULD REQUIRE US TO PAY LICENSE FEES OR DEFEND LITIGATION THAT COULD BE
EXPENSIVE OR PREVENT US FROM SELLING PRODUCTS.
The manufacture, use or sale of our products may infringe on the patent,
trademark and other intellectual property rights of others. Based on the nature
of competition, patent and trademark infringement problems occur frequently in
connection with the sale and marketing of cough, cold, allergy, headache and
other pharmaceutical products. If we do not avoid infringement of the
9
<PAGE> 14
intellectual property rights of others, we may have to seek a license to sell
our products, defend an infringement action or challenge the validity of the
intellectual property in court, all of which could be expensive and time
consuming. In addition, if we are found liable for infringing a patent, we may
have to stop selling some of our products and pay damages.
Even though most of our product agreements under which we license
intellectual property rights from others contain provisions that allow us to
recover costs and damages if we have to defend or are found liable for
infringing a patent of a third party, the agreements under which we obtained
rights to Nitrolingual and Ponstel and our agreement to acquire Cognex do not
contain these indemnification provisions. It could be very costly if we have to
defend the patents or trademarks covering Nitrolingual Pumpspray, Ponstel or
Cognex, or if we were found liable for infringement.
THE REGULATORY STATUS OF SOME OF OUR PRODUCTS MAKES THESE PRODUCTS SUBJECT TO
INCREASED COMPETITION AND OTHER RISKS.
The regulatory status of our Protuss, Protuss-D, Protuss-DM, Zoto-HC,
Tanafed, Mescolor and Defen-LA products allows third parties to more easily
introduce competitive products, and may make it more difficult for us to sell
these products in the future. Currently, an FDA program allows us to manufacture
and market these products and permits others to manufacture and market the same
and similar products without submitting safety or efficacy data. These markets
are already highly competitive and, except for a license to one of the raw
materials in Tanafed, we do not hold rights in patents protecting us against
such competitive pressures. This results in increased competition because other
companies can enter the market without having to submit safety and efficacy data
to sell competing products. On several occasions, the FDA has considered
changing the classification of these types of drugs from prescription to
over-the-counter use. If they do change the classification, we might have to
reformulate them, submit safety and efficacy data on our products which could be
costly, or we might have to discontinue selling these products if the FDA does
not approve our marketing application. We could lose third-party reimbursement
for the products and face increased competition. We are unable to predict the
timing of any of these actions, but they could occur soon.
WE HAVE BEEN INVOLVED IN CONFLICTS IN THE PAST UNDER ONE OF OUR DEVELOPMENT
AGREEMENTS WITH A RELATED PARTY AND MAY ENCOUNTER CONFLICTS IN THE FUTURE.
John N. Kapoor, Ph.D., our majority stockholder and director, also
beneficially owns 50% of the common stock of Inpharmakon Corporation, a party to
one of our product development agreements. Mahendra G. Shah, Ph.D., our Chairman
and Chief Executive Officer, is a director and the Chairman of Inpharmakon. The
other owner of Inpharmakon has in the past renegotiated some of the terms of our
development agreement by seeking to terminate our development agreement with
Inpharmakon. On May 3, 2000, we entered into an amendment to this agreement in
which both parties released each other from any previous claims or disputes
under the agreement. Conflicts between the parties may develop in the future and
may not be resolved in our favor. Under some circumstances, if Inpharmakon
terminates this agreement, it will have rights to develop and market this
product using the data and information that we have developed and for which we
have expended significant resources.
POHL-BOSKAMP CAN TERMINATE OUR RIGHTS TO NITROLINGUAL.
Based on industry data suggesting that Nitrolingual had sales of
approximately $12 million in 1998, Nitrolingual may become one of our key
products. Pohl-Boskamp can terminate our distribution agreement for Nitrolingual
if we do not sell specified quantities of the product each year, if a company
with a product competitive with Nitrolingual acquires direct or indirect
influence or control over our company, or if a very significant change in our
stockholders occurs so that Kapoor-Pharma Investments and our employees,
management and directors, and any of their
10
<PAGE> 15
respective affiliates, do not in the aggregate directly or indirectly
beneficially own at least 20% of our shares. These provisions could reduce the
price some investors might be willing to pay for our shares of common stock, and
could delay or prevent a third-party from acquiring us.
OUR AGREEMENT TO ACQUIRE COGNEX CREATES ADDITIONAL RISKS.
Our growth will suffer if we do not conclude the purchase of Cognex.
Our agreement to purchase rights to market and sell Cognex is contingent
upon receiving FTC approval of the purchase and the satisfaction of other
customary conditions. If the FTC does not approve the purchase, or if the other
conditions to closing are not satisfied, we would encounter lost sales
opportunities.
Our sales force has no experience selling products like Cognex.
As a drug for the treatment of conditions associated with Alzheimer's
disease, Cognex is primarily prescribed by neurologists, psychiatrists and
geriatric physicians. Our sales force has not made sales to neurologists,
psychiatrists and geriatric physicians in the past and is not trained in this
area. We will be required to incur additional selling expenses to develop our
sales staff to sell Cognex, and we risk delays and inefficiencies in the sale of
Cognex pending completion of our sales force development for these purposes.
If the Cognex acquisition closes, we will sell the product outside the United
States and we have no experience with international sales and regulations.
If the Cognex transaction closes, we intend to actively market Cognex both
in the United States and abroad. We have no experience selling products outside
the United States. We are not familiar with registering or obtaining other
regulatory approvals outside of the United States and we have no international
marketing presence or sales force. We intend to enter into a transition services
agreement with Warner-Lambert under which it will provide some transitional
administrative services to us until November 30, 2000 in connection with the
sale of Cognex in specified European countries. We currently have no
arrangements for third party support to sell and market Cognex in Europe, or to
provide administrative, selling and marketing services for international markets
other than several specified countries in Europe. To the extent we are unable to
obtain, either internally or from third parties, necessary administrative and
selling and marketing services for international sales of Cognex, we may be
forced to suspend or abandon such sales which accounted for approximately 65% of
1999 sales of Cognex.
Potential adverse side effects may cause the FDA to revoke its approval of
Cognex.
One of Cognex's potential side effects is a short term increase in liver
enzymes which can cause liver malfunction problems. The FDA could decide to
revoke its marketing approval for Cognex based on these side effects.
Cognex has declining sales and new competing products may further erode its
sales.
We believe worldwide sales of Cognex declined from $11.8 million in 1998 to
$7.7 million in 1999. We also face competition from existing and new Alzheimer
drugs. For instance, Pfizer Inc. began marketing "Aricept", a product for the
treatment of conditions associated with Alzheimer's disease, in 1997. Aricept
has some marketing advantages over Cognex including that it is a once a day
formulation and that it does not require liver monitoring. Novartis Inc.
recently received FDA approval to market another product for the treatment of
conditions associated with Alzheimer's disease called "Excellon". Novartis
currently markets this product worldwide. Shire Pharmaceuticals Group plc and
Janssen Pharmaceutica have entered into an agreement to co-market a product
called "Remanyl" for patients suffering from Alzheimer's disease. The FDA has
not approved
11
<PAGE> 16
Remanyl yet, however these companies have marketed the product in other
countries. The marketing and selling of Excellon and Remanyl may further erode
sales of Cognex.
We may not be able to obtain rights to market Cognex CR.
Because Cognex CR has not yet been approved by the FDA, we must obtain such
approval before we can market Cognex CR. In addition, a third-party controls the
manufacture and the intellectual property rights for the drug delivery system of
Cognex CR. If we are not able to obtain a license from this third-party or enter
into a manufacturing and supply agreement with this party, we may not be able to
manufacture or market and sell Cognex CR.
The FTC may order us to return Cognex to Warner-Lambert.
Our agreement to acquire Cognex states that the FTC may order us to return
Cognex to Warner-Lambert to then be sold by Warner-Lambert to a third party if
we voluntarily cease to sell Cognex for 60 days or more, or we otherwise fail to
pursue good efforts to sell Cognex in the United States, other than for reasons
outside our control. In addition, the FTC may order us to return Cognex to
Warner-Lambert if we fail to pursue the sale and manufacture or third party
manufacture of Cognex within one year from receiving FTC approval, subject to an
extension.
RISKS RELATED TO OUR OFFERING
AFTER THE OFFERING, EXISTING OFFICERS, DIRECTORS AND OUR PRINCIPAL STOCKHOLDER
WILL RETAIN A SUBSTANTIAL BLOCK OF STOCK THAT WILL ALLOW THEM TO ELECT DIRECTORS
AND DIRECT THE OUTCOME OF MATTERS REQUIRING STOCKHOLDER APPROVAL.
After the offering, our officers, directors and principal stockholder will
beneficially own approximately 65% of our outstanding common stock.
Kapoor-Pharma Investments, L.P. will own approximately 53% of our outstanding
common stock after the offering. As majority stockholder, Kapoor-Pharma
Investments has the power to elect all of our directors. As long as
Kapoor-Pharma Investments has the right to elect a majority of the board of
directors, it will hold significant control or influence over our policies and
acts. John N. Kapoor, Ph.D., one of our directors, is president and sole
shareholder of EJ Financial Enterprises, Inc. EJ Financial Enterprises is the
managing general partner of Kapoor-Pharma Investments, L.P. In addition,
Mahendra G. Shah, Ph.D., our Chairman and Chief Executive Officer, is
vice-president of EJ Financial Enterprises.
THE MARKET PRICE OF OUR COMMON STOCK AFTER THE OFFERING MIGHT NOT EXCEED THE
OFFERING PRICE.
Prior to this offering, there was no public market for our common stock,
and a significant public trading market may not develop or continue after this
offering. We and the underwriters determined the initial public offering price
through negotiations. If the market price of the common stock after the offering
does not exceed the initial public offering price, investors will not realize
any return on their investment. If the market price of the common stock after
the offering is less than the initial public offering price, investors may lose
some or all of their investment.
OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE.
The market prices for securities of drug companies are highly volatile.
Various factors, including factors that are not related to our operating
performance, may cause significant volume and price fluctuations in the market.
The following factors may cause fluctuations in our stock price:
- fluctuations in operating results;
- rates of product acceptance;
12
<PAGE> 17
- timing or delay of regulatory approvals, including our migraine product
under development or our line extension of Robinul to treat symptoms
associated with excessive salivation;
- whether third-party manufacturers experience interruptions in the supply
of raw materials or encounter regulatory problems;
- failure to meet financial estimates or expectations of securities
analysts;
- developments in or disputes regarding patent or other proprietary rights;
and
- future sales of substantial amounts of common stock by our existing
stockholders.
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET AFTER THE OFFERING COULD
CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.
Our shareholders could sell substantial amounts of our common stock in the
public market following the offering. As a result, the aggregate number of
shares of our common stock available to the public would increase and,
consequently, the price of our common stock could fall. We cannot predict the
timing or amount of future sales of shares of our stock or the effect, if any,
that market sales of shares, or the availability of shares for sale, will have
on the prevailing market price of our common stock. Upon completion of the
offering, we will have 12,339,643 outstanding shares of common stock, assuming
no exercise of outstanding options. Of these shares, the 3,800,000 shares sold
in this offering will be freely tradeable. This leaves 8,539,643 currently
outstanding shares that will be eligible for sale in the public market as
follows:
- 100,000 available for immediate sale on the date of this prospectus; and
- 8,439,643 available for sale 180 days after our stock begins trading on
the Nasdaq National Market, subject in some cases to volume and other
restrictions
In addition, 1,767,500 shares are issuable upon the exercise of currently
outstanding options. These shares will be eligible for sale 180 days after our
stock begins trading on the Nasdaq National Market, subject in some cases to
restrictions contained in stock option agreements which defer the exercisability
of the options.
After this offering, we expect to file a registration statement covering
shares of common stock issuable upon exercise of options and other grants under
our stock plans. This will allow shares purchased upon the exercise of such
options to be sold in the public markets, subject in some cases to volume and
other restrictions.
ANTI-TAKEOVER PROVISIONS COULD DISCOURAGE A THIRD PARTY FROM MAKING A TAKEOVER
OFFER THAT COULD BE BENEFICIAL TO STOCKHOLDERS.
Some of the provisions in our Restated Certificate of Incorporation and
bylaws, and the anti-takeover provisions under Delaware Law could delay or
prevent a third party from acquiring us or replacing members of our board of
directors, even if the acquisition or the replacements would be beneficial to
our stockholders. These provisions could also reduce the price that certain
investors might be willing to pay for shares of our common stock and result in
the market price being lower than it would be without these provisions. Our
charter documents contain anti-takeover devices including:
- only one of the three classes of directors is elected each year;
- stockholders cannot amend our bylaws unless at least two-thirds of the
shares entitled to vote approve it;
- our board of directors can issue shares of preferred stock without
shareholder approval under any terms, conditions, rights and preferences
that the board determines; and
13
<PAGE> 18
- stockholders must give advance notice to nominate directors or to submit
proposals for consideration at stockholder meetings.
STOCKHOLDERS WILL EXPERIENCE SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK VALUE
OF THEIR COMMON STOCK.
Investors will suffer immediate and substantial dilution. The initial
public offering price per share will significantly exceed the net tangible book
value per share of ($0.22). Accordingly, investors will suffer immediate and
substantial dilution. This dilution will result because our existing investors
paid substantially less than the initial public offering price when they bought
their shares of our common stock. The exercise of outstanding options to
purchase our common stock will result in further dilution to new investors.
THE NET PROCEEDS FROM THE OFFERING MAY BE ALLOCATED IN WAYS WITH WHICH YOU AND
OTHER STOCKHOLDERS MAY NOT AGREE.
Except for repayment of our bridge loan with LaSalle Bank, the payment of a
$200,000 fee to Inpharmakon Corporation under our amended development agreement
and the payment of our promissory note with Warner-Lambert, management will have
significant flexibility in applying the net proceeds of this offering.
Therefore, management could use these proceeds for purposes other than those
contemplated at the time of the offering.
14
<PAGE> 19
TRADENAMES AND TRADEMARKS USED IN THIS PROSPECTUS
We own or have rights to tradenames and registered trademarks that we use
in connection with the sale of our products. We have filed an application to
register the trademark Zebutal in the United States. We own the U.S. registered
trademarks Ponstel(R), Tanafed(R), Protuss(R), Mescolor(R), Zoto-HC(R) and
Defen(R). If we complete our acquisition of Cognex, we will acquire the U.S.
registered trademark Cognex(R) and its international counterparts currently held
by Warner-Lambert. Nitrolingual(R), Robinul(R) and TIMERx(R) are registered U.S.
trademarks of G. Pohl Boskamp GmbH & Co., American Home Products Corporation and
Penwest Pharmaceuticals Co., respectively.
FORWARD-LOOKING STATEMENTS
Many statements made in this prospectus under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and elsewhere are forward-looking
statements that are not based on historical facts. Because these forward-looking
statements involve risks and uncertainties, there are important factors that
could cause actual results to differ materially from those expressed or implied
by these forward-looking statements, including those discussed under "Risk
Factors."
The forward-looking statements made in this prospectus relate only to
events as of the date on which the statements are made.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 3,800,000 shares of
common stock that we are offering will be $44,942,000 after deducting estimated
offering expenses and assuming an initial public offering price of $13.00 per
share. If the underwriters' over-allotment option is exercised in full, assuming
an initial public offering price of $13.00 per share, we estimate that the net
proceeds will be $51,833,300.
We anticipate using the net proceeds from this offering as follows: for
general corporate purposes, including the development of new products, the
expansion of our sales and marketing force, new product acquisitions, repayment
of approximately $12,680,000 of debt outstanding as of April 14, 2000 under the
term loan and bridge loan of our credit facility with LaSalle Bank, repayment of
$3,500,000 under our promissory note with Warner-Lambert and payment of a
$200,000 fee due under our amended product development agreement with
Inpharmakon Corporation. If we acquire Cognex, we will use $3,500,000 of the net
proceeds to fund the acquisition.
Borrowings under the term loan bear interest at our choice of either the
prime rate of interest or LIBOR plus 2%, and the note matures on May 2, 2001.
Borrowings under the bridge loan, which we used to purchase Ponstel, bear
interest at our choice of the prime rate of interest or LIBOR plus 1.5%.
Borrowings under the bridge loan mature on our receipt of the proceeds from this
offering. Our promissory note with Warner-Lambert, which we entered into to pay
the remaining amount of the purchase price of Ponstel, is interest-free and
matures upon our receipt of the proceeds from this offering.
We will retain broad discretion over the use of the net proceeds of this
offering. The amounts and timing of the expenditures may vary significantly
depending on numerous factors, such as the progress of our development efforts,
technological advances and the competitive environment for our products. We
might also use a portion of the net proceeds to acquire or invest in
complementary businesses, products and technologies. Other than the agreement to
acquire Cognex and other than as described under "Business -- Product
Development", we are not currently a party to any agreements to acquire or
invest in any new businesses, products or technologies. However, we regularly
review opportunities for new acquisitions and investments.
15
<PAGE> 20
Pending use of the net proceeds, we intend to invest the net proceeds in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. The payment of cash
dividends is subject to the discretion of our board of directors and will be
dependent upon many factors, including our earnings, our capital needs and
general financial condition. We anticipate that for the forseeable future, we
will retain earnings, if any, in order to finance the expansion and development
of our business. Our credit facility prohibits the payment of any dividends or
other distributions on any shares of our stock.
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<PAGE> 21
CAPITALIZATION
The following table sets forth as of March 31, 2000, the actual
capitalization of our company and our capitalization, as adjusted to reflect the
issuance and sale of the 3,800,000 shares of common stock we are offering at an
assumed public offering price of $13.00 per share and the use of the proceeds
from the offering to repay $3,720,000 of debt outstanding as of March 31, 2000.
This table should be read in conjunction with our financial statements and the
notes to the financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
----------------------------------
ACTUAL AS ADJUSTED
----------- --------------------
<S> <C> <C>
Borrowings under revolving credit facility.............. $ 2,000,000 $ 0
Long-term debt, including current portion............... 2,575,708 855,708
Stockholders' equity:
Preferred stock, $0.001 par value; 1,000,000 shares
authorized, no shares outstanding, actual and as
adjusted........................................... -- --
Common stock, $0.001 par value; 40,000,000 shares
authorized, 8,539,643 shares issued and outstanding
in 1999 and 12,339,643 as adjusted shares issued
and outstanding.................................... 8,540 12,340
Additional paid-in capital.............................. 5,788,220 50,726,420
Deferred compensation................................... (1,197,105) (1,197,105)
Accumulated deficit..................................... (935,353) (935,353)
----------- ------------
Total stockholders' equity.................... 3,664,302 48,606,302
----------- ------------
Total capitalization.......................... $ 8,240,010 $ 49,462,010
=========== ============
</TABLE>
The number of shares of common stock to be outstanding after this offering
does not include:
- 1,767,500 shares issuable upon exercise of options outstanding as of May
3, 2000, at a weighted average exercise price of $1.61 per share; and
- 570,000 shares issuable pursuant to the underwriters' over-allotment
option.
The board of directors approved the grant of options under our 2000 Stock
Plan to purchase 187,950 shares subject to completion of this offering at an
exercise price equal to the initial public offering price per share in this
offering. Following this grant, there will be 1,812,050 shares available for
future grants under this plan.
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<PAGE> 22
DILUTION
Our net tangible book value as of March 31, 2000 was ($1.865) million, or
($0.22) per share of common stock. Net tangible book value per share represents
the amount of total tangible assets less total liabilities divided by the number
of shares of common stock outstanding at that date. After giving effect to the
sale of the 3,800,000 shares of common stock at an assumed initial public
offering price of $13.00 per share, and after deducting underwriting discounts
and commissions and estimated offering expenses, our as adjusted net tangible
book value as of March 31, 2000 would have been $43.077 million, or $3.49 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.71 per share to existing stockholders, and an immediate dilution of
$9.51 per share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Net tangible book value per share at March 31, 2000....... ($0.22)
Increase per share attributable to new investors.......... 3.71
------
Pro forma net tangible book value per share after this 3.49
offering..................................................
------
Dilution per share to new investors......................... $ 9.51
======
</TABLE>
The following table summarizes, on an as adjusted basis as of March 31,
2000, the differences between the number of shares of common stock that we
issued, the total consideration paid and the average price per share paid by
existing stockholders and by the new investors purchasing shares in this
offering at an assumed initial public offering price of $13.00 per share.
<TABLE>
<CAPTION>
SHARES ISSUED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders......... 8,539,643 69.2% $ 4,234,900 8.6% $ 0.50
New investors.......... 3,800,000 30.8 44,942,000 91.4 11.83
---------- ----- ----------- -----
Total........ 12,339,643 100.0% 49,176,900 100.0%
========== ===== =========== =====
</TABLE>
The discussion regarding dilution and these tables assumes no exercise of
any outstanding stock options. The discussion does not include: (a) 1,767,500
shares issuable upon exercise of options outstanding under our 1997
Non-Qualified Stock Option Plan at a weighted average exercise price of $1.61 or
(b) 570,000 shares issuable at an assumed price of $13.00 per share pursuant to
the underwriters' over-allotment option. The board of directors approved the
grant of options to purchase 187,950 shares under our 2000 Stock Plan subject to
completion of this offering, at an exercise price equal to the public offering
price per share in this offering. Following this grant, there will be 1,812,050
shares available for future grants under our 2000 Stock Plan.
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<PAGE> 23
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to and
should be read in conjunction with, our financial statements and the related
notes and other financial information included elsewhere in this prospectus, as
well as "Management's Discussion and Analysis of Financial Condition and Results
of Operations". The selected financial data as of December 31, 1997, 1998, and
1999 and for the years ended December 31, 1997, 1998, and 1999 were derived from
our financial statements that have been audited by Arthur Andersen LLP,
independent public accountants. The selected financial data as of December 31,
1995 and 1996 and March 31, 1999 and 2000 were derived from unaudited financial
statements which, in the opinion of management, include all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of our financial condition and results of operations. These results may not be
indicative of future results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $ 1,620,720 $ 2,516,616 $ 5,557,700 $ 9,252,058 $18,624,514
Operating costs and expenses:
Cost of revenues..................... 329,692 489,905 1,136,691 1,903,054 3,140,416
Selling, general and administrative
expenses, excluding non-cash
compensation expense............... 1,302,766 2,393,018 4,545,254 6,789,358 12,400,439
Non-cash selling, general and
administrative expense............. -- -- 133,500 -- 143,986
Depreciation and amortization........ 25,977 28,878 30,273 35,225 424,274
Research and development............. -- -- -- 255,000 860,350
----------- ----------- ----------- ----------- -----------
Total operating costs and expenses:... 1,658,435 2,911,801 5,845,718 8,982,637 16,969,465
Operating (loss) income............... (37,715) (395,185) (288,018) 269,421 1,655,049
Other (expense) income:
Interest expense..................... (54,310) (67,461) (5,496) (14,017) (356,598)
Interest income...................... -- 3,314 2,909 4,383 11,950
Other................................ -- -- 3,629 (2,749) 8,059
----------- ----------- ----------- ----------- -----------
Total other (expense) income.......... (54,310) (64,147) 1,042 (12,383) (336,589)
----------- ----------- ----------- ----------- -----------
(Loss) income before benefit
(provision) for income taxes......... (92,025) (459,332) (286,976) 257,038 1,318,460
Benefit (provision) for income
taxes................................ -- 114,984 106,530 (121,484) (547,996)
----------- ----------- ----------- ----------- -----------
Net (loss) income..................... $ (92,025) $ (344,348) $ (180,446) $ 135,554 $ 770,464
=========== =========== =========== =========== ===========
Net (loss) income per common share:
Basic................................ $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.10
=========== =========== =========== =========== ===========
Diluted.............................. $ (0.02) $ (0.06) $ (0.02) $ 0.02 $ 0.09
=========== =========== =========== =========== ===========
Weighted average common shares
outstanding:
Basic................................ 5,636,137 5,830,000 7,576,580 7,978,234 8,028,673
=========== =========== =========== =========== ===========
Diluted.............................. 5,636,137 5,830,000 7,576,580 8,584,329 8,975,493
=========== =========== =========== =========== ===========
<CAPTION>
THREE MONTHS ENDED
---------------------------------
MARCH 31, 1999 MARCH 31, 2000
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $4,199,934 $ 7,119,638
Operating costs and expenses:
Cost of revenues..................... 719,432 1,061,737
Selling, general and administrative
expenses, excluding non-cash
compensation expense............... 2,550,153 5,491,653
Non-cash selling, general and
administrative expense............. 10,722 87,269
Depreciation and amortization........ 79,302 114,639
Research and development............. 142,945 375,292
---------- -----------
Total operating costs and expenses:... 3,502,554 7,130,590
Operating (loss) income............... 697,380 (10,952)
Other (expense) income:
Interest expense..................... (55,758) (72,060)
Interest income...................... 2,197 5,591
Other................................ 2,450 9,822
---------- -----------
Total other (expense) income.......... (51,111) (56,647)
---------- -----------
(Loss) income before benefit
(provision) for income taxes......... 646,269 (67,599)
Benefit (provision) for income
taxes................................ (270,368) 29,068
---------- -----------
Net (loss) income..................... $ 375,901 $ (38,531)
========== ===========
Net (loss) income per common share:
Basic................................ $ 0.05 $ (0.00)
========== ===========
Diluted.............................. $ 0.04 $ (0.00)
========== ===========
Weighted average common shares
outstanding:
Basic................................ 7,981,248 8,539,643
========== ===========
Diluted.............................. 8,759,904 8,539,643
========== ===========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------- AS OF MARCH 31,
1995 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- ----------- --------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............ $ 71,652 $ 30,986 $ 244,766 $ 425,023 $ 219,688 $ 735,337
Working capital...................... 188,995 (645,249) 687,426 640,090 (733,884) (1,002,183)
Total assets......................... 643,639 834,238 1,758,872 2,933,101 11,077,744 13,683,087
Borrowings under revolving loan
agreement........................... -- -- -- 602,928 800,000 2,000,000
Long-term debt including current
portion............................. -- -- -- -- 2,898,886 2,575,708
Accumulated deficit.................. (1,278,046) (1,622,394) (1,802,840) (1,667,286) (896,822) (935,353)
Total stockholders' (deficit)
equity.............................. (131,660) (477,011) 814,326 956,130 3,615,564 3,664,302
</TABLE>
19
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We currently market and sell 12 brand name prescription drugs through our
nationwide sales and marketing force of 133 professionals. We seek to acquire
and obtain licenses for pharmaceutical products that other companies do not
actively market and to increase sales through aggressive promotion and
marketing. As part of this strategy, on April 14, 2000, we acquired exclusive
rights to distribute, market and sell Ponstel in the United States, and entered
into an agreement to acquire exclusive rights in the United States and other
countries to distribute, market and sell Cognex, pending FTC approval and other
conditions. In addition, we seek to increase the value of existing products by
developing new formulations and new delivery methods, and seeking new
indications for existing products.
We have historically increased revenues and seek to increase revenues in
the future from our ability to make product acquisitions and increase sales of
current products.
QUARTERS ENDED MARCH 31, 2000 AND MARCH 31, 1999
Net Revenues. Revenues from product sales are recognized upon shipment to
customers and are shown net of sales adjustments. Net revenues are net of
provisions for discounts, rebates to customers, returns, and other adjustments
which are provided in the same period that the related sales are recorded. Net
revenues for the quarter ended March 31, 2000 were $7,120,000 compared to
$4,200,000 for the quarter ended March 31, 1999, a 70% increase. Of this
increase, $2,698,000 is due to our commencing sales of Zebutal in January 1999,
Robinul and Robinul Forte in February 1999 and Nitrolingual Pumpspray in
February 2000. Sales of products sold prior to 1999 or "existing products"
increased $222,000 due to expansion of our sales force into new territories and
increased demand for our products. Deductions from revenue increased $781,000
due to higher Medicaid rebates primarily on Robinul and Robinul Forte, higher
customer rebates for sales of Nitrolingual Pumpspray, and higher discounts due
to customers taking advantage of our prompt pay discount.
Net revenues for the quarter ended March 31, 2000 do not include the effect
of sales of Ponstel. We acquired Ponstel in April 2000, and believe that Ponstel
had annual sales of $3,264,000 in 1999.
Cost of Revenues. Cost of revenues for the quarter ended March 31, 2000
were $1,062,000, compared to $719,000 for the quarter ended March 31, 1999, a
48% increase. Costs of revenues for the quarter ended March 31, 2000 do not
include the cost of revenues for Ponstel.
Gross Margin. Gross margin for the quarter ended March 31, 2000 was 85%,
compared to 83% for the quarter ended March 31, 1999. This increase primarily
resulted from the higher gross margin earned on Robinul and Robinul Forte. Gross
margin for the quarter ended March 31, 2000 does not include the effect of net
revenues and cost of sales of Ponstel. We believe that the gross margin earned
on Ponstel will be comparable to our current gross margin for all products
currently sold.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of salaries, commissions, bonuses, training and
education costs, sample and promotional costs, royalty and commission payments
to product licensors, office expenses, travel expenses, payroll taxes, rent and
utilities, insurance, outside professional services, taxes, bad debts and other
general office expenses. Selling, general and administrative expenses for the
quarter ended March 31, 2000 were $5,492,000, compared to $2,550,000 for the
quarter ended March 31, 1999, a 115% increase. Selling related expenses
increased due to the addition of sales force representatives, increased
commission expense due to higher sales and increased salaries for existing sales
representatives. We also incurred significantly higher marketing and promotional
expense due to the launch of Nitrolingual Pumpspray and increased sampling.
Royalty expense increased due to
20
<PAGE> 25
increased sales of Robinul and Robinul Forte, and due to royalties on sales of
Nitrolingual Pumpspray. Also, on January 1, 2000, we entered into a licensing
agreement with Jame Fine Chemicals, Inc., a supplier of a raw material for
Tanafed. Under the terms of the agreement, we began paying royalties based on
net sales of Tanafed. There was no comparable royalty expense on Tanafed for the
quarter ended March 31, 1999. Management expects selling expenses to continue to
increase for the remainder of 2000 due to marketing and promotional expenses for
the launch of Ponstel and due to continued sales force expansion.
General and administrative expenses increased due to the addition of
managers and support personnel in our corporate headquarters, increased
insurance cost, and higher reserves for doubtful accounts. In addition, in March
2000, we engaged a consulting firm to make recommendations on the alignment and
optimization of our sales force.
Non-Cash Selling, General and Administrative Expense. Non-cash selling,
general and administrative expense for the quarter ended March 31, 2000 were
$87,000, compared to $11,000 for the quarter ended March 31, 1999. This increase
resulted from our issuing stock options at exercise prices that were less than
the market value of our stock at the time of issuance, as determined by an
independent valuation.
Depreciation and Amortization Expense. Depreciation and amortization
expense was $115,000 for the quarter ended March 31, 2000, compared to $79,000
for the quarter ended March 31, 1999, a 46% increase. This increase resulted
from higher amortization expense related to the January 1999 acquisition of
Robinul and Robinul Forte and increased depreciation expense on furniture,
computers and software used in our corporate headquarters.
Research and Development Expense. Research and development expenses
consist primarily of costs incurred to develop formulations, engage contract
research organizations to conduct clinical studies, test products under
development and engage medical and regulatory consultants. We expense all
research and development costs as incurred. Research and development expense was
$375,000 for the quarter ended March 31, 2000, as compared to $143,000 for the
quarter ended March 31, 1999, a 162% increase. This increase resulted from
continued development of our migraine headache product. Also, on January 1, 2000
we entered into the licensing agreement with Jame Fine Chemicals. Under the
terms of the agreement, we paid an up-front license fee of $225,000. We do not
owe any other licensing fees under our agreements, however we will continue to
incur significant research and development expenses as we continue to develop
our migraine headache product. We expect to incur approximately $1,300,000 of
research and development expenses during the remainder of 2000 related to the
development of the migraine headache product.
Interest Expense. Interest expense was $72,000 for the quarter ended March
31, 2000, compared to $56,000 for the quarter ended March 31, 1999, a 29%
increase. This increase resulted from higher than average borrowings under our
credit facility.
Income Tax Benefit. The company recorded an income tax benefit of $29,000
for the quarter ended March 31, 2000, compared to a provision for income taxes
of $270,000 for the quarter ended March 31, 1999. This $299,000 change resulted
from the company incurring a pre-tax loss for the quarter ended March 31, 2000
versus pre-tax income for the quarter ending March 31, 1999.
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Net Revenues. Net revenues for the year ended December 31, 1999 were
$18,625,000, compared to $9,252,000 for the year ended December 31, 1998, a 101%
increase. Of this increase, $6,206,000 resulted from product acquisitions and
licensing agreements made in 1999, or from products that earned revenues for the
first time in 1999. Sales of existing products were $12,419,000, a $3,167,000 or
34% increase over 1998. This increase primarily resulted from the expansion of
our sales force, increased marketing efforts and the continued increase in
demand for our products as a
21
<PAGE> 26
result of current and prior efforts of our sales force. Rebates and other sales
allowances were $2,156,000 in 1999 primarily related to Medicaid rebates on
Robinul and Robinul Forte.
Net revenues for 1999 do not include the effect of sales of Nitrolingual
Pumpspray or Ponstel. We began selling Nitrolingual Pumpspray in February, 2000
and acquired Ponstel in April, 2000. We believe the U.S. sales of Nitrolingual
were $12,000,000 in 1998, and sales of Ponstel were $3,264,000 in 1999.
Cost of Revenues. Cost of revenues for the year ended December 31, 1999
were $3,140,000, compared to $1,903,000 for the year ended December 31, 1998, a
65% increase. Cost of revenues for 1999 do not include the costs of revenues for
Nitrolingual or Ponstel.
Gross Margin. Gross margin for the year ended December 31, 1999 was 83%,
compared to 79% in 1998. The increase in gross margin primarily resulted from
the higher gross margin earned on Robinul and Robinul Forte which we began
selling in February 1999.
Gross margin for 1999 and 1998 does not include the effect of net revenues
and cost of revenues for Nitrolingual Pumpspray or Ponstel. We believe that the
gross margin for Nitrolingual Pumpspray and Ponstel will be comparable to our
current gross margin for all products currently sold.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1999 were $12,400,000,
compared to $6,789,000 for the year ended December 31, 1998, an 83% increase.
Selling-related expenses increased over the previous year due to increased
expenses related to sales force expansion, higher commission and royalty
payments and larger sample, marketing and promotional costs. General and
administrative expenses increased over the previous year due to increased
compensation and related expenses, and increased costs as a result of relocation
of our corporate offices from a 7,603-square-foot facility to a
24,300-square-foot facility in September 1998.
Management expects a significant increase in selling expenses during 2000
due to increased marketing expenses associated with the company's launch of
Nitrolingual Pumpspray and Ponstel. Management also expects an increase in
selling expenses due to expansion of the company's sales force in 2000. In
addition, selling expenses in 2000 and beyond will include royalty expenses and
sales representative commissions for Nitrolingual Pumpspray. The company did not
incur any royalty expense or commission expense for Nitrolingual Pumpspray in
1999.
Non-cash Selling, General and Administrative Expense. Non-cash
compensation expenses were $144,000 for the year ended December 31, 1999,
compared to no expense for the year ended December 31, 1998. This expense
resulted from our issuing stock options in 1999 at exercise prices that were
less than the market value of our stock at time of issuance, as determined by an
independent valuation.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses were $424,000 for the year ended December 31, 1999, compared to $35,000
for the year ended December 31, 1998. This increase primarily resulted from
amortization expense related to the purchase in 1999 of Robinul and Robinul
Forte.
Amortization expenses will increase in 2000 and beyond to reflect
amortization expense related to the company's acquisition of Ponstel in April
2000. This expense could further increase if the company concludes any other
product acquisitions.
Research and Development Expenses. Research and development expenses were
$860,000 for the year ended December 31, 1999, compared to $255,000 for the year
ended December 31, 1998. This increase resulted from our continuing development
of a new product for the treatment of migraine headache and our continuing
development of a line extension of Robinul for the treatment of symptoms
associated with excessive salivation.
22
<PAGE> 27
The company will continue to incur significant research and development
expenses as it continues to develop the migraine headache product. Management
anticipates that the company will incur approximately $1,600,000 of research and
development cost in 2000 related to the migraine headache product and
approximately $3,000,000 in subsequent years through 2002 related to conducting
clinical trials, filing a new drug application and making payments to Penwest
Pharmaceuticals Co., Impharmakon Corporation and Parexel International under our
development agreements.
Interest Expense. Interest expense for the year ended December 31, 1999
was $357,000, compared to $14,000 for the year ended December 31, 1998. The
$343,000 increase resulted primarily from borrowings for the acquisition of
Robinul and Robinul Forte.
Interest Income. Interest income for the year ended December 31, 1999 was
$12,000, compared to $4,000 for the year ended December 31, 1998. This $8,000
increase resulted from increased average cash balances resulting from improved
financial performance.
Income Tax Expense. Income tax expense for the year ended December 31,
1999 was $548,000, compared to $121,000 for the year ended December 31, 1998.
The $427,000 increase resulted from increased pre-tax income.
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Net Revenues. Net revenues for the year ended December 31, 1998 were
$9,252,000, compared to $5,558,000 for the year ended December 31, 1997, a 66%
increase. The increase resulted from the expansion of our sales force from 47
sales representatives and three district managers at the end of 1997 to 69 sales
representatives and three district managers at the end of 1998 and the continued
increase in demand for our products as a result of prior efforts of our sales
force.
Cost of Revenues. Cost of revenues for the year ended December 31, 1998
were $1,903,000, compared to $1,137,000 for the year ended December 31, 1997, a
67% increase.
Gross Margin. Gross margins for the years ended December 31, 1998 and 1997
were 79%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended December 31, 1998 were $6,789,000,
compared to $4,545,000 for the year ended December 31, 1997, a 49% increase.
Selling-related expenses increased over the previous year due to increased
expenses related to sales force expansion, higher commission and royalty
payments and larger sample, marketing and promotional costs. General and
administrative expenses increased over the previous year due to increased
compensation and related expenses, and increased costs as a result of relocation
of our corporate offices from a 7,603-square-foot facility to a
24,300-square-foot facility in September, 1998.
Non-cash Selling, General and Administrative Expense. We had non-cash
compensation expenses of $0 for the year ended December 31, 1998, compared to
$134,000 for the year ended December 31, 1997. The 1997 non-cash compensation
expense resulted from our issuing stock options in 1997 at exercise prices that
were less than the market value of our stock at the time of issuance, as
determined by an independent valuation.
Research and Development Expenses. Research and development expenses were
$255,000 for the year ended December 31, 1998, compared to no expenses for the
year ended December 31, 1997. We paid $200,000 in development fees to
Inpharmakon Corporation for the fee for licensing our migraine product under
development.
Depreciation and Amortization Expense. Depreciation and amortization
expense was $35,000 for the year ended December 31, 1998, compared to $30,000
for the year ended December 31, 1997, a 17% increase. The increase resulted from
purchases of computers for new personnel and furniture related to our corporate
office relocation.
23
<PAGE> 28
Interest Income. Interest income for the year ended December 31, 1998 was
$4,000, compared to $3,000 for the year ended December 31, 1997. The $1,000
increase resulted from increased average cash balances resulting from improved
financial performance.
Interest Expense. Interest expense for the year ended December 31, 1998
was $14,000, compared to $5,000 for the year ended December 31, 1997. The $9,000
increase resulted primarily from borrowings on our line of credit with LaSalle
Bank.
Income Tax Expense. Income tax expense for the year ended December 31,
1998 was $121,000, compared to a benefit of $107,000 for the year ended December
31, 1997. The $228,000 increase resulted from 1998 being our first profitable
operating year.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity requirements arise from debt service, working capital
requirements and funding of acquisitions. We have met these cash requirements
through cash from operations, proceeds from our line of credit, borrowings for
product acquisitions, and the issuance of common stock to our majority
stockholder.
Our cash and cash equivalents were $735,000 at March 31, 2000. Our cash and
cash equivalents at December 31, 1999, 1998 and 1997 were $220,000, $425,000 and
$245,000, respectively. Net cash used in operating activities for the quarter
ended March 31, 2000 was $273,000. This use of cash was primarily the result of
increased purchases of inventories primarily for our launch of Nitrolingual
Pumpspray, partially offset by an increase in accounts payable and accrued
expenses. Net cash provided by operating activities for the year ended 1999 was
$1,018,000. Our sources of cash were primarily from net income and increases in
accounts payable and accrued expenses partially offset by increases in accounts
receivable, inventories and deferred taxes. Net cash used in operating
activities for the years ended 1998 and 1997 was $181,000 and $196,000,
respectively. Our use of net cash was primarily a result of increases in
accounts receivable and inventories partially offset by increases in deferred
taxes, accounts payable and accrued expenses plus net income. Our purchases of
inventory impacts our cash liquidity. We estimate that our supply agreements
with our manufacturers require that we purchase a minimum of between $3,100,000
and $3,500,000 of inventory during the last three quarters of 2000. We expect to
incur significant cash for operating activities in the future in connection with
the development of our migraine product. We expect to incur approximately
$1,300,000 of research and development expenses through the end of 2000 and
approximately $3,000,000 in 2001 and 2002 related to conducting clinical trials,
filing a new drug application and making payments to Penwest Pharmaceuticals
Co., Inpharmakon Corporation and Parexel International.
Net cash used in investing activities for the quarter ended March 31, 2000
was $69,000 for the purchase of property and equipment for our corporate
headquarters. We purchased rights to market Robinul and Robinul Forte in 1999
for $4,000,000 in cash with an additional $1,800,000 financed by the seller of
which the remaining balance at May 24, 2000 is $647,000 payable quarterly
through February 2001. As a part of the acquisition, we also assumed estimated
liabilities of $218,000 for returns of products shipped by the seller prior to
the acquisition date. In addition, we spent $186,000 for the purchase of
property and computer related items in 1999. Net cash used in investing
activities in 1998 and 1997 was $208,000 and $121,000, respectively. These
investments were primarily for the purchase of property and computer related
items.
Net cash provided by financing activities for the quarter ended March 31,
2000 was $858,000. This cash was the result of increased borrowings from our
line of credit, offset by payments on long term debt. During 1999, we borrowed
$4,000,000 and incurred indebtedness of $1,800,000 for the purchase of
intangible assets. In 1999, we also made payments of $1,235,000 on long-term
debt and had a net increase of $197,000 on our revolving line of credit. During
1998, we borrowed $563,000 under our revolving line of credit. During 1997, we
financed our capital requirements by raising $550,000 through the issuance of
stock to our majority shareholder.
24
<PAGE> 29
In May 1998, we entered into a credit facility with LaSalle Bank National
Association which was subsequently amended and currently consists of a revolving
loan, a term loan and a bridge loan. The revolving loan is subject to borrowing
base limitations and inventory balances. The revolving credit facility provides
for borrowings of up to $3,500,000 which reduces to $2,500,000 on June 30, 2000.
Borrowings under the revolving credit facility bear interest at the bank's prime
rate, and are due on May 2, 2001. At March 31, 2000, the outstanding balance
under the revolving loan was $2,000,000 with an interest rate of 9.00%, and we
had additional availability under the terms of the facility of $1,500,000. We
borrowed $2,400,000 under our term loan facility in January 1999 bearing
interest at our choice of either LaSalle's prime rate or LIBOR plus 2%. The term
loan is repayable in monthly payments of $40,000 plus accrued interest and
matures on May 2, 2001. At March 31, 2000 outstanding indebtedness under the
term loan was $1,720,000 with an interest rate of 7.53%. We plan to repay this
term loan in full with proceeds from this offering.
On April 14, 2000, the credit facility was amended to provide for bridge
financing of up to $13,000,000 to finance product acquisitions. On April 14,
2000, we borrowed $9,500,000 under this bridge loan for our purchase of Ponstel.
We will borrow an additional $3,500,000 to purchase Cognex if we conclude this
acquisition prior to conclusion of this offering. Borrowings under the bridge
loan bear interest at our choice of the prime rate of interest or LIBOR plus
1.5%. Interest on the bridge loan is payable monthly beginning on May 1, 2000.
Borrowings under the bridge loan mature on our receipt of the proceeds from this
offering.
As a condition to entering into the bridge loan, LaSalle Bank required that
the bridge loan be secured by a pledge by the 1992 Kapoor Children's Trust to
LaSalle Bank of an interest in securities and investments in the amount of
$10,000,000. We entered into a Reimbursement Agreement with the Trust on April
14, 2000 to obtain this pledge of assets. As consideration for this pledge, we
will pay the Trust a fee in of $100,000 per year, pro rated for the amount of
time that the pledge is in effect, plus all of the Trust's expenses incurred in
connection with the Reimbursement Agreement.
Our credit facility with LaSalle Bank is secured by our accounts
receivable, inventories, equipment and intangible assets including our
intellectual properties.
Under the terms of our credit facility, we must maintain a minimum net
worth plus subordinated debt of $3,300,000 plus 75% of net income, a ratio of
liabilities to net worth plus subordinated debt after the conclusion of this
offering of 2.25 to 1.00, a minimum specified EBITDA, and a fixed charge
coverage ratio ranging from .75 to 1.00 to 1.25 to 1.00. The credit facility
also limits our ability to incur additional indebtedness, and prohibits
substantial asset sales and cash dividends.
On April 14, 2000, we also issued a promissory note to Warner-Lambert
evidencing $3,500,000 of the purchase price of Ponstel. This promissory note is
interest-free and matures upon our receipt of the proceeds from this offering.
We expect that the proceeds from this offering, cash from operations and
borrowings under our credit facility will be adequate to fund our current
operations and current working capital requirements for the next eighteen
months. In the event that we make significant future product acquisitions, we
expect that we will need to raise additional funds. Adequate funds for these
purposes, whether through the financial markets or from other sources, may not
be available when needed or on terms acceptable to us. Insufficient funds may
cause us to delay, scale back or abandon some or all of our future product
acquisition opportunities.
Our future capital requirements and the adequacy of our available funds
will depend on many factors, including:
- the timing and cost of product acquisitions and licensing agreements;
- regulatory approval of our migraine product under development and the
Robinul product extension;
25
<PAGE> 30
- size and scope of our development efforts for additional products;
- cost, timing and outcomes of regulatory reviews;
- expansion of our sales and marketing force;
- determinations as to the commercial potential of our products under
development;
- status of competitive products;
- defending and enforcing intellectual property rights; and
- establishment, continuation or termination of third-party manufacturing
agreements.
IMPACT OF INFLATION
We have experienced only moderate price increases under our agreements with
third-party manufacturers as a result of raw material and labor price increases.
We have passed these price increases along to our customers.
SEASONALITY
Although our business is generally non-seasonal, sales of certain products,
such as cough and cold products, increase slightly between October and March due
to the cold and flu season. We expect the impact of seasonality to decrease as
we acquire or obtain licenses for products that treat chronic conditions.
However, we anticipate that the seasonality may continue to affect sales for the
foreseeable future.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." We must adopt SFAS No. 133 for the year
ending December 31, 2000. SFAS No. 133 established methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. Adoption of SFAS No. 133 is not
expected to have a material impact on our financial condition or results of
operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Our operating results and cash flows are subject to fluctuations from
changes in foreign currency exchange rates and interest rates.
Our purchases of Nitrolingual Pumpspray under our agreement with
Pohl-Boskamp are made in German Deutsche marks. Our next purchase obligation
under this agreement is payable on June 23, 2000 and we expect to make purchases
several times per year. In connection with our currently pending purchase
obligation, based on our evaluation of exchange rates with the German Deutsche
mark on May 23, 2000, we purchased a contract payable in $510,488 of U.S.
dollars at an exchange rate of 2.15 Deutsche marks to the dollar to satisfy our
purchase obligation on June 23, 2000. While the effect of foreign currency
translations has not been material to our results of operations to date,
currency translations on export sales or import purchases could be adversely
affected in the future by the relationship of the U.S. dollar with foreign
currencies.
To the extent that following conclusion of this offering we borrow under
our credit facility with LaSalle Bank, we will experience market risk with
respect to changes in the general level of the interest rates and its effect
upon our interest expense. Borrowings under our credit facility with LaSalle
Bank bear interest at variable rates. Because such rates are variable, an
increase in interest rates will result in additional interest expense and a
reduction in interest rates will result in reduced interest expense.
26
<PAGE> 31
BUSINESS
OVERVIEW
We currently market and sell 12 brand name prescription drugs to
high-prescribing primary care and select specialty physicians through our
nationwide sales and marketing force of 133 professionals. Since our formation,
we have introduced 12 products including two line extensions. Our strategy is to
acquire and obtain licenses for pharmaceutical products that other companies do
not actively market and to increase sales through aggressive promotion and
marketing. In addition, we seek to increase the value of existing products by
developing new formulations and new delivery methods, and seeking new
indications. We incorporated in 1992 as the surviving corporation of a merger in
July 1992 between Century Pharmaceutical Corporation and Horizon Pharmaceutical
Corporation. The company originally promoted over-the-counter cough and cold
products. In late 1992, we launched the prescription cough and cold products
Defen-LA and Protuss Liquid and began focusing on prescription drugs for chronic
conditions.
Our key products include Nitrolingual, Robinul and Robinul Forte, and
Tanafed. In 1999, we acquired marketing rights to Robinul and Robinul Forte from
American Home Products Corporation and to Nitrolingual from Pohl-Boskamp. In
February 2000, we began marketing a new version of this product called
Nitrolingual Pumpspray. We have marketed Tanafed since 1993. We recently entered
into development agreements with Penwest Pharmaceuticals Co. and Inpharmakon
Corporation for a product that we are developing for the treatment of migraine
headache. We are also currently developing a line extension of Robinul to treat
symptoms associated with the excessive production of saliva.
Our net revenues have grown from approximately $1.6 million for the year
ended December 31, 1995 to approximately $18.6 million for the year ended
December 31, 1999. We achieved this from a combination of increased sales of
existing products and product acquisitions and licenses.
On April 14, 2000, we acquired exclusive rights to market, distribute and
sell Ponstel in the United States from Warner-Lambert and entered into an
agreement to acquire exclusive rights from Warner-Lambert to market, distribute
and sell Cognex in the United States and other countries, pending FTC approval
and the satisfaction of other customary conditions.
FIRST HORIZON STRATEGY
We believe that our ability to market, acquire and develop brand name
products and our ability to increase our sales and improve our marketing
infrastructure uniquely positions us to continue to grow. We focus on products
that treat chronic conditions primarily because patients and physicians remain
loyal to such products. This results in repeat use over an extended period of
time, generates recurring consistent revenue streams and lowers marketing costs
necessary to maintain existing sales.
The key elements of our strategy include:
- Increase sales of products through targeted promotion. We seek to
increase sales by promoting our products to high-prescribing primary care
and specialty physicians through our nationwide sales and marketing force
that includes 133 professionals. We also use targeted direct mail and
telemarketing to promote our products.
- Identify and license or acquire brand name prescription products. We
seek to acquire the rights to brand name pharmaceutical products that we
believe will benefit from increased marketing efforts to high-prescribing
primary care and specialty physicians, leverage our existing sales
infrastructure, complement our existing products and have the potential
for market exclusivity.
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- Develop proprietary products and line extensions. We seek to reduce the
costs and risks of development by focusing on drugs that the FDA has
already approved in the United States. We plan to develop products,
including line extensions of our current drugs, using patent-protected
delivery systems or formulations that offer market differentiation and
the potential for market exclusivity.
PRODUCTS
We currently market and sell the following products:
<TABLE>
<CAPTION>
DATE OF
PRODUCT INTRODUCTION PRODUCT INDICATION
- ------- -------------------- ------------------
<S> <C> <C>
Ponstel.......................... 2000 Relief of mild to moderate pain
for patients 14 years of age and
older for therapies lasting less
than a week and for painful
menstruation
Nitrolingual Pumpspray........... 2000 Acute relief or prevention of an
attack of angina pectoris due to
heart disease
Robinul and Robinul Forte........ 1999 Adjunctive therapy for the
treatment of peptic ulcer
Zebutal Capsules................. 1999 Tension headache
Protuss DM Tablets............... 1997 Cough and congestion
Mescolor Tablets................. 1994 Allergy and runny nose
Protuss-D Liquid................. 1994 Cough and congestion
Zoto-HC Ear Drops................ 1994 Swimmer's ear infections
Tanafed Suspension............... 1993 Allergy and cold
Defen-LA Tablets................. 1992 Cough and cold
Protuss Liquid................... 1992 Cough and congestion
</TABLE>
We have entered into an agreement to acquire rights to Cognex pending FTC
approval and the satisfaction of other customary conditions. The FDA has
approved Cognex under a new drug application for the treatment of mild to
moderate dementia associated with Alzheimer's disease.
The FDA approved Ponstel, Nitrolingual Pumpspray, Robinul and Robinul Forte
under new drug applications. The FDA also approved an abbreviated new drug
application for Zebutal. Our other products are classified by the FDA as drugs
that may be marketed without submitting safety and efficacy data.
Nitrolingual
On February 1, 2000, we began marketing Nitrolingual Pumpspray for which we
acquired from Pohl-Boskamp exclusive distribution rights in the United States.
Nitrolingual Pumpspray is an oral spray of nitroglycerin used for the acute
relief or prevention of chest pain associated with angina pectoris that results
from heart disease. Pohl-Boskamp holds a patent that was issued in 1993 on the
formulation of Nitrolingual.
Aventis previously had the rights to market the chlorofluorocarbon (CFC)
version of this product named Nitrolingual Spray. We believe that Nitrolingual
Pumpspray has marketing advantages over Nitrolingual Spray. Unlike the previous
version, Nitrolingual Pumpspray is packaged in a translucent, plastic-coated
glass bottle, that allows patients to easily see the amount
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of product left in the bottle. In addition, Nitrolingual Pumpspray does not
contain CFC, making it environmentally friendly.
The primary competitor to Nitrolingual Pumpspray is nitroglycerin tablets.
Unlike tablets, which begin to lose their potency immediately upon opening the
bottle, Nitrolingual Pumpspray maintains its potency for two years. Further,
studies have shown that Nitrolingual Pumpspray provides for more rapid
absorption than the tablets. Each metered dose provides for consistent delivery
of nitroglycerin. Also, unlike the tablets, Nitrolingual Pumpspray requires no
special storage or handling to maintain its potency.
According to the American Heart Association, about 6.2 million Americans
suffer from angina pectoris.
Robinul and Robinul Forte
On January 29, 1999, we acquired exclusive rights in the United States to
Robinul and Robinul Forte, which is a higher-strength dosage of Robinul. Both
Robinul and Robinul Forte belong to a class of drugs known as anticholinergics,
which reduce the motion of the gastrointestinal tract. The FDA has approved both
products for use as a therapy in conjunction with other therapeutics in the
treatment of peptic ulcer. Compared to other anticholinergics, the Robinul
product line has an overall better side effect profile and is longer acting,
thereby requiring fewer doses. We are currently developing a line extension and
will seek regulatory approval to use the active ingredient in Robinul to treat
symptoms associated with the excessive production of saliva. Since acquiring the
products, we have substantially increased the sales of Robinul and Robinul
Forte. Industry sources estimate that the U.S. market for anticholinergics was
$130 million in 1999.
Tanafed
Tanafed is a liquid cold and allergy product marketed for children. We
believe that pediatricians prescribe Tanafed because it is effective and
children prefer its taste. The National Center for Health Statistics estimated
that 20 million days were lost from school in 1994 due to colds.
Cough, Cold and Allergy Products
Our other products for the treatment of cough, cold and allergy are
Defen-LA Tablets, Mescolor Tablets and the Protuss product line, which includes
Protuss Liquid, Protuss DM Tablets and Protuss-D Liquid.
Ponstel
On April 14, 2000, we acquired exclusive rights from Warner-Lambert to
market, distribute and sell Ponstel in the United States. Ponstel has been
manufactured and marketed by Warner-Lambert or its affiliates. Ponstel capsules
are used for the relief of mild to moderate pain for patients 14 years of age
and older if therapy will be for less than one week and for primary
dysmenorrhea, which is pain associated with menstruation.
According to the American Pain Foundation, one in three American adults
lose more than twenty hours of sleep each month due to pain. Pain costs an
estimated $100 billion each year and lost workdays due to pain add up to over 50
million days a year. One class of frequently prescribed pain relievers is
nonsteroidal anti-inflammatory drugs ("NSAIDs"). Ponstel is a well known NSAID
and we believe that its advantages are its non-addictive qualities, low
stomach-related side effects and efficacy.
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Cognex
On April 14, 2000, we entered into an agreement with Warner-Lambert to
purchase exclusive rights in the United States and other countries to market,
distribute and sell Cognex, as well as rights to a new unapproved controlled
release version of Cognex. Our acquisition of this product is subject to FTC
approval of the transaction and the satisfaction of customary conditions. Cognex
is marketed by Warner-Lambert or its affiliates and manufactured by one of its
affiliates. Cognex tablets are used for the treatment of mild to moderate
dementia associated with Alzheimer's disease.
Alzheimer's disease is a progressive, degenerative disease that attacks the
brain and results in impaired memory, thinking and behavior. Although no cure
for Alzheimer's disease is currently available, good planning and medical and
social management can ease the burdens on the patient and family. According to
the Alzheimer's Association, approximately 4 million Americans have Alzheimer's
disease. Cognex is one of only three FDA-approved drug treatments for mild to
moderate dementia associated with Alzheimer's disease.
Cognex is currently sold in twenty-one countries, including the United
States. We intend to actively market the product in the United Sates and in
Europe and intend to enter into an agreement with Warner-Lambert to provide
transitional administrative services in specific European countries until
November 30, 2000. In order for us to continue to sell Cognex outside the United
States, we will be required to obtain, either internally or through third
parties, the necessary administrative and marketing and selling support
services.
Other Products
We sell Zoto-HC ear drops for the treatment of swimmer's ear infections and
Zebutal Capsules for the treatment of tension headaches. A study has shown that
approximately nine out of ten people have at least one headache in any given
year. Headaches account for approximately 18 million outpatient visits annually
to hospitals and healthcare clinics.
PRODUCT DEVELOPMENT
We seek to maximize the value of drugs by developing new patentable
formulations, using new delivery methods and seeking regulatory approval for new
indications. Through the use of these distinct formulations and patent-protected
delivery systems, we plan to create a marketing advantage over generic drugs and
reduce substitution by the pharmacist. Some of these development projects
include line extensions which allow us to extend the life cycle of our key
products. We expect the strength of extensive literature-based clinical data on
the active ingredients in our products under development, current acceptance and
usage of the active ingredients in these products by healthcare professionals,
and the safety profile of the active ingredients in approved products will
reduce development costs and risks associated with FDA approval.
Migraine Product (FHPC 01)
We are developing a proprietary formulation of a product named FHPC 01 for
the treatment of migraine headaches, which contains an active ingredient that is
currently approved by the FDA for other indications. We have entered into a
development agreement with Penwest Pharmaceuticals Co. to develop a product
using Penwest's patented TIMERx controlled-release technology. Penwest has also
granted us the right to reference their Drug Master File as necessary for us to
file a new drug application for this product. A Drug Master File is a submission
to the FDA, often in support of a new drug application, that companies may use
to provide confidential, detailed information about facilities, processes or
articles used in the manufacturing, processing, packaging and storing of one or
more human drugs. We have developed a once a day formulation for this product
and we filed an investigational new drug application for this product on
February 17, 2000 which has been
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accepted by the FDA. We have engaged Parexel International to conduct clinical
trials for this product. A study has shown that an estimated 23.6 million
Americans suffer from migraine headaches. Of these, approximately half suffer
from migraines that are moderately to severely disabling.
Excessive Salivation Product (FHPC 02)
We are developing a product named FHPC 02 for the treatment of the symptoms
associated with the excessive production of saliva primarily in children. This
product will be a line extension of our Robinul products. We have entered into
an agreement with Mikart to develop a new dosage form. We plan to initiate
clinical trials and file for a supplementary new drug application to market the
product. Excessive salivation, also known as Sialorrhea, is a socially
embarrassing condition that occurs in patients who suffer from cerebral palsy
and Parkinson's disease.
Formulation and Clinical Trials
We generally seek to contract third parties to formulate, develop and
manufacture materials needed for clinical trials and to perform scale-up work.
We select third-party contractors that we believe have the capability to
commercially manufacture the products. By selecting qualified third parties
capable of both developing formulations and providing full-scale manufacturing
services, we believe we will be able to shorten development and scale-up times
necessary for production. The key advantage to this approach is that the
third-party contractor will have the equipment, operational parameters and
validated testing procedures already in place for the commercial manufacture of
our products. Our management team has experience in selecting and managing
activities of third-party contract companies.
SALES AND MARKETING
To maximize the effectiveness of our selling efforts, our sales force
focuses on high-prescribing primary care and select specialty physicians. Our
sales force seeks to develop close relationships with these physicians and
respond to their needs. We intend to enhance our existing marketing and sales
channels to expand and increase the penetration of our products. We have
expanded our sales and marketing force to 133 professionals nationwide.
We sell our products to pharmaceutical wholesalers (who in turn distribute
to pharmacies), chain drug stores, other retail merchandisers and, on a limited
basis, directly to pharmacies. In 1999, sales to our top five pharmaceutical
wholesalers accounted for over 72% of all of our sales. Three of the five
wholesalers each accounted for 10% or more of all of our sales: McKessonHBOC
(28%), Cardinal Health (19%) and Bergen Brunswig (10%).
We have traditionally targeted our sales efforts in areas with low
managed-care penetration in which it is easier to establish a presence. In
addition, we have a group of sales professionals that focuses exclusively on
building relationships with managed-care organizations that can be leveraged
across markets. We continue to strengthen this group to gain access to
formularies and develop long-term working relationships that may lead to
adoption of our products.
During 1999, our Robinul line accounted for 27.5% of our revenues and our
cough, cold and allergy products accounted for 57.5% of our revenues. During
1998, our cough, cold and allergy products accounted for 82.0% of our revenues
and Zoto-HC accounted for 18.0% of our revenues. During 1997, our cough, cold
and allergy products accounted for 80.9% of our revenues and Zoto-HC accounted
for 19.1% of our revenues.
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THIRD-PARTY AGREEMENTS
Nitrolingual Pumpspray
In July 1999, we acquired from Pohl-Boskamp the exclusive rights to
distribute, market and sell Nitrolingual Pumpspray beginning on February 1, 2000
in the United States for five years plus an additional five-year renewal period
subject to establishing mutually acceptable minimum sales requirements. Under
the agreement, Pohl-Boskamp supplies us with our requirements of product at
prices that decrease as volume purchased in each year increases. We must
purchase designated minimum quantities in each year of the agreement and pay a
royalty on net sales of the product. Also, Pohl-Boskamp can terminate our
distribution agreement for Nitrolingual if we do not sell specified minimum
quantities of the product each year, if a company with a product competitive
with Nitrolingual acquires direct or indirect influence or control over our
company, or if a very significant change in our stockholders occurs so that
Kapoor-Pharma Investments and Horizon employees, management, directors, and any
of their respective affiliates, do not in the aggregate directly or indirectly
beneficially own at least 20% of our shares. In addition, if we do not sell a
specified minimum quantity of Nitrolingual each year, we may have to pay a fee
to keep the agreement in effect.
Aventis had exclusive rights through January 2000, to a version of the
product containing CFC named Nitrolingual Spray. To promote earlier adoption of
Nitrolingual Pumpspray, we obtained exclusive marketing rights from Aventis to
market Nitrolingual Spray in the United States as of November 22, 1999. We
promoted Nitrolingual Spray for a short period of time to reduce inventories of
the product in the distribution channels. Since the launch of Nitrolingual
Pumpspray, we have not marketed this CFC product.
Robinul/Robinul Forte
On January 29, 1999, we acquired exclusive rights in the United States to
Robinul and Robinul Forte tablets from American Home Products Corporation. We
will pay the remaining portion of the original purchase price quarterly through
February 2001. As of May 24, 2000, the remaining portion of the purchase price
is $647,302. In addition, we must pay royalties on net sales. We negotiated for
American Home Products Corporation or its designee to continue to manufacture
and supply the product to us until January 29, 2001. We have an agreement with
Mikart, dated April 23, 1999, for Mikart to become qualified under applicable
regulations to manufacture and supply our requirements for Robinul. Under this
agreement, Mikart will manufacture the products for five years from the time
Mikart becomes a qualified manufacturer plus renewal terms of one year until
either party elects not to renew. The agreement with Mikart requires that we
purchase certain designated minimum quantities.
Tanafed
On January 1, 1996, we obtained exclusive distribution rights from
Unisource, Inc. to Tanafed in North America through December 31, 2003 plus an
additional seven years at our option. The agreement requires us to purchase all
of our requirements for Tanafed from Unisource, including at least certain
minimum quantities of Tanafed in each year of the agreement. We entered into a
patent license agreement with Jame Fine Chemicals, Inc., a supplier of a raw
material for Tanafed, effective January 1, 2000. This agreement grants us a
semi-exclusive license to use, sell and distribute finished products containing
an active ingredient used in Tanafed. The licensed patent covers the
manufacturing process of an active ingredient used in Tanafed. The license
continues through the life of the licensed patent which expires in 2014. We paid
an upfront license fee and agreed to pay certain royalties based on net sales of
Tanafed at rates which we believe are within industry customary ranges. Another
party also has a license for one of the active ingredients in Tanafed.
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Migraine Product (FHPC 01)
On October 31, 1998, we entered into an agreement with Inpharmakon
Corporation in which we acquired rights to the proprietary information for the
migraine product FHPC 01 for which we plan to conduct clinical studies and
submit a new drug application. The agreement expires on October 31, 2008, but we
may renew it indefinitely after expiration. On May 3, 2000, we entered into an
amendment to this agreement in which Inpharmakon Corporation released us from
all previous claims that Inpharmakon Corporation may have had under the
agreement, and deleted the required time within which we must commence clinical
trials and file for regulatory approval of the product. Under the amended
agreement, we must develop a workable once-a-day formulation for the drug,
conduct clinical trials, and file for and exert reasonable efforts to obtain
regulatory approval for the drug. If we do not obtain regulatory approval of the
drug within three years after filing for such approval and thereafter commence
and continue to aggressively market and sale the product, Inpharmakon may
terminate the agreement. In the event that Inpharmakon terminates the agreement
for failure to achieve these milestones, Inpharmakon may purchase rights to
develop the drug at our costs to date. We must also pay up to an aggregate of
$950,000 in non-refundable fees to Inpharmakon at various developmental
milestones through and including regulatory approval of the product, and, in the
event of commercial sales of the product, we must pay royalties at rates which
we believe are within industry customary ranges. We must also pay Inpharmakon
$200,000 within 30 days after this offering. If we elect to sell the business
opportunity to a third party, we must share the proceeds of the sale with
Inpharmakon.
On March 25, 1999, we acquired rights from Penwest Pharmaceuticals Co. to
use Penwest's TIMERx controlled-release technology to develop a product
containing the active ingredient in FHPC 01. Under the Penwest agreement, we
have the right to manufacture, use and sell the developed product in North
America and Mexico for a period extending fifteen years from the date a new drug
application is issued for the product, as well as a license under certain
Penwest patents. We must pay Penwest up to an aggregate of approximately
$2,600,000 of non-refundable fees upon achieving specified development
milestones through the first anniversary of the first commercial sale of the
product following regulatory approval and royalties upon any sales of the
migraine product at rates which we believe are within industry customary ranges.
Penwest may terminate the agreement in the event we fail to timely achieve
designated performance milestones within prescribed time periods including the
completion of clinical trials by April 2002, applying for FDA approval of the
product within six months after completing clinical trials and commercially
launching the product within two months after obtaining FDA approval. Penwest
may also terminate the agreement if we fail to either sell specified minimum
quantities of the product each year after approval of the product or pay the
applicable royalty to Penwest as if we had sold such minimum quantity.
Ponstel
On April 14, 2000, we acquired exclusive rights from Warner-Lambert to
market, distribute and sell Ponstel in the United States. The total purchase
price for the rights to Ponstel was $13 million. We paid $9.5 million in cash,
which we borrowed under a bridge loan from LaSalle Bank, and issued a promissory
note to Warner-Lambert for $3.5 million for the rights to this product. Under
the asset purchase agreement, we purchased the following:
- the U.S. Ponstel trademark;
- all regulatory approvals and regulatory applications for Ponstel in the
United States, including its new drug application;
- all technical information, know-how and market research results relating
to the manufacture, packaging, testing, development, distribution,
marketing, use and sale of Ponstel, including the raw materials used in
its manufacture; and
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<PAGE> 38
- managed care agreements used for the sale of Ponstel.
Under this agreement, we also assumed certain specified and customary
liabilities and obligations arising out of our ownership of Ponstel which arise
after the closing of the transaction.
In addition we agreed to purchase all of the current inventories of Ponstel
for approximately $100,000.
On April 14, 2000, we also entered into a supply agreement under which
Warner-Lambert will supply and we will purchase designated quantities of Ponstel
until December 31, 2000. We will pay Warner-Lambert an agreed upon price for the
supply of Ponstel. We plan to secure a replacement manufacturer for Ponstel in
the near future and are currently in negotiations with a potential manufacturer.
Cognex
On April 14, 2000, we entered into an agreement with Warner-Lambert to
purchase exclusive rights in the United States and other countries to market,
distribute and sell Cognex as well as rights to a new unapproved version of
Cognex, called Cognex CR. The purchase of Cognex is contingent on Warner-Lambert
receiving FTC approval for the transaction and the satisfaction of other
customary conditions. If we acquire Cognex, we will be required to pay $3.5
million in cash for the product. Warner-Lambert may terminate this agreement if
the transaction has not closed by June 30, 2000, unless it has not closed
because of a delay in receiving FTC approval. The purchase agreement provides
for the purchase of the following:
- the U.S. Cognex trademark and its international counterparts;
- certain patent rights relating to the use of an active ingredient in
Cognex to treat conditions associated with Alzheimer's disease.
- all worldwide regulatory approvals and regulatory applications for
Cognex, including its new drug application in the United States;
- all technical information, know-how and market research results relating
to the manufacture, packaging, testing, development, distribution,
marketing, use and sale of Cognex, including the raw materials used in
its manufacture;
- all of the royalties that Warner-Lambert has prepaid with respect to a
patent covering the use of an active ingredient in Cognex; and
- all promotional materials related to Cognex, including advertising,
promotional and sales training materials owned by Warner-Lambert.
In addition, we acquired rights to a new unapproved version of Cognex,
called Cognex CR. We must pay Warner-Lambert up to $1.5 million in additional
purchase price if we obtain FDA approval to market Cognex CR. If approved,
Cognex CR will also treat mild to moderate dementia associated with Alzheimer's
disease, but we believe that the new version will offer convenience to patients
by reducing the number of tablets required from four times per day to one time
per day. Warner-Lambert has provided us with the new drug application package
for our use in seeking this approval from the FDA and international regulatory
authorities. We may have to undertake additional clinical studies for this
approval.
Under this agreement, if the Cognex transaction closes, we must submit
reports to the FTC regarding the status of FDA approvals of Cognex and our
efforts to market the product. In the event that we voluntarily stop selling
Cognex for 60 days or more, or we otherwise fail to pursue good efforts to sell
Cognex in the United States other than for reasons outside our control, the FTC
may order that Cognex revert back to Warner-Lambert and be divested by the FTC
to another purchaser. In addition, the FTC may order us to return Cognex if we
fail to pursue the sale and
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manufacture or third party manufacture of Cognex within one year from receiving
FTC approval, subject to an extension.
Under the purchase agreement for the Cognex transaction, we will be
required to pay royalties on net sales of Cognex. However, we will be entitled
to apply the amount of royalties that Warner-Lambert has prepaid for these
patents and we do not expect to pay significant royalties in the near future.
The asset purchase agreement for Cognex provides for a supply agreement
under which an affiliate of Warner-Lambert will manufacture and supply to us
either Cognex or the active ingredient in Cognex for two years after the Cognex
transaction closes, subject to a one year renewal. We will pay an agreed upon
price for the supply of Cognex and the active ingredient. The supply agreement
contains designated quantities of Cognex and its active ingredient that Warner-
Lambert's affiliate will supply to us and that we must purchase. We plan to
secure a replacement manufacturer for Cognex and are currently in negotiations
with a potential manufacturer.
Pursuant to the purchase agreement, we intend to enter into a transition
services agreement with Warner-Lambert under which it will provide transitional
administrative services to us until November 30, 2000 in connection with the
sale of Cognex in certain specified European countries. These services will
include maintenance of Cognex registrations, contact with regulatory authorities
including reporting requirements, responding to customer complaints, sales
administration, shipping management, billing, processing of returns, storage,
responding to any regulatory inquiries or investigations, responding to any
customer complaints and communicating with physicians in relation to the
product. Warner-Lambert may terminate this agreement if any person or entity
acquires ownership or control of 50% or more of our common stock or acquires
substantially all of our assets.
Other Products
Generally, our other products are manufactured pursuant to manufacturing
and supply agreements for remaining terms ranging from one to five years.
Generally, these agreements require that we purchase all of our requirements for
these products from the manufacturers which are a party to these agreements,
including specified minimum purchase quantities of the product for each year.
Except for our Defen-LA, Protuss-D and Zoto-HC products, these agreements
generally state that the product supplier will provide products only to us.
MANUFACTURERS AND SINGLE SOURCE SUPPLIERS
We use third-party manufacturers for the production of our products for
development and commercial purposes. Given the general under-utilization of
resources, the availability of excess capacity for manufacturing in the
marketplace, and the lower cost of outsourcing, we intend to continue to
outsource our manufacturing for the near-term.
We currently use the services of seven third-party manufacturers for our
products. These manufacturers manufacture our products pursuant to our product
specifications. We have manufacturing and supply agreements with six of these
manufacturers. The terms of these agreements generally range from two years to
ten years except that we have a transitional supply agreement with
Warner-Lambert for Ponstel which expires December 31, 2000. Under some of these
agreements, the manufacturers or other third-parties own the rights to the
product that we have under our marketing licenses. We have not entered into
agreements for alternative manufacturing sources for any of our products. The
suppliers of Nitrolingual Pumpspray and the raw material for Tanafed hold
patents relating to their respective products. The patents may provide us with a
competitive advantage because the patents create a barrier to entry to other
companies that might otherwise seek to develop similar products.
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TRADEMARKS
Because of the large number of products on the market which compete with
our products, we believe that our brand names are an important factor in
establishing product recognition. We have a U.S. registered trademark for
Horizon Pharmaceutical and have filed for the trademark for First Horizon
Pharmaceutical. Our products are sold under a variety of trademarks registered
in the United States, including Ponstel, Zoto-HC, Protuss, Mescolor, Defen and
Tanafed. We have filed for the trademark Zebutal. Further, we have been licensed
rights to use the Nitrolingual and Robinul trademarks in the United States from
Pohl-Boskamp and American Home Products, respectively. We have rights to the
TIMERx trademark pursuant to our rights to market the product we have under
development with Penwest. If we acquire Cognex, we will own the U.S. rights to
the Cognex trademark and its international counterparts. Our trademark
registrations could be challenged by others which could result in the loss of
use of one or more of our trademarks. Maintenance of our trademarks requires
that we enforce our rights by preventing infringement by third parties, and we
may not have the resources to stop others from infringing our trademarks.
PATENTS
We consider the protection afforded by patents important to our business.
We intend to seek patent protection in the United States and selected foreign
countries where deemed appropriate for products we develop.
Nitrolingual Pumpspray
By virtue of our distribution agreement with Pohl-Boskamp for Nitrolingual
Pumpspray, we are afforded marketing exclusivity arising from Pohl-Boskamp's
1993 U.S. patent relating to the product. This patent expires in 2010.
Tanafed
We entered into a licensing agreement with the raw material supplier for
our Tanafed product effective January 1, 2000. This agreement grants us a
license to market and distribute Tanafed for which the manufacturer has a patent
covering the manufacturing process of one of its active ingredients. This patent
expires in 2014.
Migraine Product (FHPC 01)
Pursuant to our development agreement with Penwest for a once-a-day
migraine product, we are the licensee of certain Penwest patents for the purpose
of manufacturing and marketing the product under development. These patents
expire from 2008 through 2016.
Active Ingredient in Robinul/Robinul Forte
In 1999, we filed a patent application directed to the use of
glycopyrrolate for the treatment of certain new indications. Glycopyrrolate is
the active ingredient in Robinul and Robinul Forte.
Cognex
In the event we acquire Cognex pursuant to our purchase agreement with
Warner-Lambert, we may acquire certain patent rights relating to the use of an
active ingredient in Cognex to treat conditions associated with Alzheimer's
disease. These patents expire from 2001 to 2007.
COMPETITION
The market for drugs is highly competitive with many established
manufacturers, suppliers and distributors actively engaged in all phases of the
business. We believe that competition in the sale of our products is based
primarily on price, service, availability and product efficacy. Our brand-
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name pharmaceutical products may be subject to competition from alternate
therapies during the period of patent protection and thereafter from generic
equivalents. Some of our products have generic equivalents in the marketplace.
We also compete with other pharmaceutical companies for new products and
product line acquisitions. These competitors include Dura Pharmaceuticals, Inc.,
Forest Laboratories, Inc., Watson Pharmaceuticals, Inc., King Pharmaceuticals,
Inc., Shire Pharmaceuticals Group plc, Jones Pharma Inc. and other companies
that acquire branded product lines from other pharmaceutical companies.
GOVERNMENT REGULATION
According to the Federal Food, Drug, and Cosmetic Act ("FDC Act"), all new
drugs are subject to premarket approval by the FDA. Applicable FDA law will
treat our development of new products and new uses for approved products or the
development of any of our line extensions as "new drugs," which requires the
submission of a New Drug Application ("NDA") or a supplemental NDA ("sNDA"), and
approval by the FDA.
The steps required for approval of an NDA or sNDA may include:
- pre-clinical studies;
- submission to the FDA of an Investigational New Drug application ("IND"),
which must become effective before human clinical trials commence;
- adequate and well-controlled human clinical trials to establish the
safety and effectiveness of the product;
- submission of an NDA or an sNDA to the FDA; and
- FDA approval of the NDA or sNDA prior to any commercial sale or shipment
of the product.
Pre-clinical studies generally include laboratory evaluation of product
chemistry and formulation, as well as animal studies, if appropriate, to assess
quality and safety. An applicant submits the results of the pre-clinical studies
with chemistry, manufacturing, and control information and pharmacology and
toxicology data to the FDA as a part of an IND and for review by the FDA prior
to the commencement of human clinical trials. Unless the FDA objects to an IND,
the IND will become effective 30 days following its receipt by the FDA.
Clinical trials involve the administration of the investigational new drug
to humans. The trials are subject to extensive regulation including compliance
with Good Clinical Practices, obtaining informed patient consent and review and
approval of each study by an Institutional Review Board. Clinical trials are
typically conducted in three sequential phases, although phases may overlap. In
Phase I, the investigational new drug usually is administered to healthy human
subjects and is tested for safety. Phase II usually involves studies in a
limited patient population to:
- determine the initial effectiveness of the investigational new drug for
specific indications;
- determine dosage tolerance and optimal dosage; and
- identify possible adverse effects and safety risks.
When an investigational new drug is found to be effective and to have an
acceptable safety profile in Phase II evaluation, Phase III trials are
undertaken to further evaluate clinical effectiveness and to further test for
safety within an expanded patient population. The FDA reviews both the clinical
plans and the results of the trials and may require the study to be discontinued
at any time if there are significant safety issues. In some cases, the FDA can
request Phase IV clinical studies after approval of the NDA. These studies can
be designed to obtain additional safety and efficacy data, detect new uses for
or abuses of a drug, or determine effectiveness for labeled indications under
conditions of widespread usage. These studies can involve significant additional
expenses.
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<PAGE> 42
Once the FDA has approved an NDA, the holder of the NDA may request changes
in the conditions of approval contained in its NDA through a sNDA. The format,
content and procedures applicable to NDA supplements are generally the same as
those for NDAs. However, the only information required in a supplement is that
needed to support the requested change. If the NDA or sNDA is based on new
clinical investigations which are essential to the approval of the application,
other than bioavailability studies, it may qualify for a three-year period of
exclusivity, distinct from any applicable patent protection that may exist. The
FDA may also require user fees for prescription drug NDAs or sNDAs. Supplements
proposing to include a new indication for use in pediatric populations are not
subject to user fees.
Another form of an NDA is the so-called "505(b)(2)" NDA, which applicants
submit pursuant to Section 505(b)(2) of the FDC Act. This type of NDA permits
the inclusion of safety and effectiveness studies that the applicant has not
conducted or been granted a right of reference by the sponsor of the studies. In
addition, the FDA recommends a 505(b)(2) NDA for a modification, such as a new
dosage form, of a previously approved drug which requires more than merely
bioequivalence data. This NDA is similar to a full NDA, except that, under
conditions prescribed by the FDA, it may be supported in whole or in part by one
or more study investigations published in scientific literature in lieu of the
applicant's clinical trials. We intend to submit this type of application to
market potential product line extensions or new uses of already-approved
products.
In addition, if we submit a certain type of new drug application, the FDA
will require us to certify as to any patent which covers the drug for which we
seek approval. If there is a patent in existence, a certain type of
certification is made and proper notice to the patent holder of our intent to
market the drugs is given, and the patent holder makes an infringement claim
within a specified time period, then the FDA will not approve our marketing
application for thirty months or until the patent litigation is resolved,
whichever occurs sooner. In addition, distinct from patent considerations,
approval of a certain type of new drug application could be delayed because of
the existence of non-patent exclusivity afforded by the FDA for the innovator
drug.
The least burdensome application for new drug approval is the abbreviated
NDA ("ANDA"), which may apply to a new drug that is shown to be bioequivalent to
a drug previously approved by the FDA for safety and effectiveness and listed as
the drug to which bioequivalence must be shown. An applicant may submit an ANDA
for products that are the same as an approved drug regarding active
ingredient(s), route of administration, dosage form, strength and conditions of
use recommended on the labeling. The ANDA requires bioequivalence data and other
technical and manufacturing information, but typically no safety and
effectiveness studies.
Even after obtaining regulatory approval, such approval may require
post-marketing testing and surveillance to monitor the safety of the product. In
addition, the product approval may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing. At
present, companies cannot export pharmaceutical products that cannot be lawfully
sold in the United States unless certain statutorily prescribed conditions are
met.
FDA regulations require that we report adverse events, submit new marketing
and promotional materials, submit changes we plan to make to the product
manufacturing or labeling and comply with recordkeeping requirements and
requirements relating to the distribution of drug samples to physicians. In the
event that we do not comply with the FDA requirements, the manufacture, sales
and distribution of our products may be suspended, and we may be prevented from
obtaining FDA approval of new products.
Our third-party manufacturers must adhere to FDA regulations relating to
current good manufacturing practice ("cGMP") regulations, which include
requirements relating to organization of personnel, buildings and facilities,
equipment, control of components and drug product containers and closures,
production and process controls, packaging and labeling controls, holding and
distribution, laboratory controls, records and reports, and returned and
salvaged products.
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<PAGE> 43
Ongoing compliance with cGMP procedures, labeling and other regulatory
requirements are monitored through periodic inspections and market surveillance
by state and federal agencies, including the FDA. Failure by our third-party
manufacturers to comply with these rules could result in sanctions being
imposed, including fines, injunctions, civil penalties, suspension or withdrawal
of FDA approvals, seizures or recalls of products, operating restrictions and
criminal prosecutions. In addition, we rely upon our third-party manufacturers
to provide many of the documents that we use to comply with our FDA reporting
requirements for Ponstel, Robinul, Robinul Forte, and Nitrolingual.
In addition, we are subject to fees under the Prescription Drug User Fee
Act for new drug applications for new drug products and sNDAs for new uses,
except that we may qualify for a waiver of the fee for our first new drug
application. We will be responsible for paying these fees for sNDAs and
subsequent submissions, unless we receive approval from the FDA for a waiver,
reduction or refund.
We are also subject to regulation under other federal and state laws,
including the Occupational Safety and Health Act and other environmental laws
and regulations, national restrictions on technology transfer, and import,
export and customs regulations. In addition, some of our products that contain
controlled substances, such as Protuss and Protuss-D, are subject to Drug
Enforcement Administration regulations relating to storage, distribution,
importation and sampling procedures. We have registered with the Drug
Enforcement Administration under the Controlled Substances Act which
establishes, among other things, registration, security and recordkeeping
requirements. We must also comply with federal and state anti-kickback and other
healthcare fraud and abuse laws.
In addition, whether or not we obtain FDA approval, we must obtain approval
of a pharmaceutical product by comparable governmental regulatory authorities in
foreign countries prior to the commencement of clinical trials and subsequent
marketing of such product in such countries. The approval procedure varies from
country to country, and the time required may be longer or shorter than that
required for FDA approval.
REIMBURSEMENT
Our ability to market our products successfully will depend in part on the
extent to which reimbursement for the costs of the products will be available
from government health administration authorities, private health insurers, and
managed care organizations in the United States and in any foreign markets where
we may sell our products. Third-party payors can affect the pricing or relative
attractiveness of our products by regulating the reimbursement they provide on
our products and competing products. Insurance carriers may not reimburse
healthcare providers for use of our products used for new indications. Domestic
and foreign government and third-party payors are increasingly attempting to
contain healthcare costs by limiting both coverage and the level of
reimbursement for new pharmaceutical products.
PRODUCT LIABILITY INSURANCE
We currently maintain a product liability insurance policy. We do not
currently maintain business interruption insurance.
EMPLOYEES
We had 150 full-time employees as of December 31, 1999, including 127 sales
and marketing employees in the field, and 23 in management, finance and
administration. We also maintain active independent contractor relationships
with various individuals with whom we have consulting agreements. We believe our
employee relations are good. None of our employees is subject to a collective
bargaining agreement.
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<PAGE> 44
PROPERTIES
We lease a 24,300 square-foot facility in Roswell, Georgia. Our facility
includes space for offices and a warehouse. This lease expires on August 31,
2003. We also lease executive office space on a short-term basis in Raleigh,
North Carolina, and Phoenix, Arizona, for our regional managers. We believe that
our facilities are adequate for our current requirements; however, we anticipate
that as we grow, we will require additional facilities.
LEGAL PROCEEDINGS
From time to time, we may become involved in routine litigation. Currently,
we are not a party to any material legal proceedings.
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<PAGE> 45
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following are our executive officers and directors as of the date of
this prospectus:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Mahendra G. Shah, Ph.D............ 55 Chairman of the Board and Chief Executive Officer
R. Brent Dixon.................... 55 President and Director
Gregory P. Hauck.................. 33 Secretary and Vice President, Developed Products
Balaji Venkataraman............... 34 Vice President and Chief Financial Officer
Robert D. Godfrey, Jr............. 38 Vice President, Sales
William G. Campbell............... 44 Controller
John N. Kapoor, Ph.D.(1).......... 56 Director
Pierre Lapalme(1)(2).............. 60 Director
Jon S. Saxe(1)(2)................. 63 Director
</TABLE>
- ------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mahendra G. Shah, Ph.D. is the Chairman of the Board and Chief Executive
Officer. Dr. Shah has been a director since 1993, and his present term as
director will expire in 2001. Dr. Shah became Chief Executive Officer in October
1999. Dr. Shah maintains other employment and expects to dedicate a majority of
his working time to the company. From 1991 to the present, he has been a Vice
President of EJ Financial Enterprises, Inc., which manages a fund that invests
in healthcare companies. From 1996 to the present, he has been the President of
Protomed Pharmaceuticals, Inc. which is a privately-held drug development
company. From 1987 to 1991, he was the Senior Director of New Business
Development with Fujisawa USA, Inc. Prior to that time, he worked in various
scientific and management positions with Schering-Plough and Bristol
Myers-Squibb Company. He serves on the board of Structural Bioinformatics Inc.,
Zarix, Introgen Therapeutics and Inpharmakon Corporation. He previously served
on the board of Unimed Pharmaceuticals. Dr. Shah received a Ph.D. degree in
Industrial Pharmacy from St. John's University. EJ Financial Enterprises, Inc.
is the sole shareholder and managing general partner of Kapoor-Pharma
Investments, L.P., our largest shareholder.
R. Brent Dixon is the President and a director of the company. He has been
a director since 1993, and his present term as director will expire in 2002. Mr.
Dixon has been with the company since its formation. He has been our President
since 1993 and served as a Vice-President from 1992 to 1993. He has over 30
years of operational, sales, and strategic market development experience in the
pharmaceutical industry. Prior to working at the company, he was President of
Dixon and Associates, a healthcare consulting company. Prior to that he served
as National Sales Manager for Center Laboratories, a subsidiary of Merck AG. Mr.
Dixon has also served as a Regional and District Manager for Roberts
Pharmaceuticals and Adams Laboratories. Mr. Dixon attended St. Petersburg Junior
College and the University of Mississippi.
Gregory P. Hauck is the Secretary and Vice President of Developed Products.
He has been with the company since its formation and has been serving as
Vice-President since 1993. He is responsible for developing product promotional
materials as well as product line marketing strategies. In his previous position
as Vice President of Sales and Marketing for the company from 1994 to 1997, he
was responsible for implementing its sales strategies. Mr. Hauck began working
with the company in 1992 as the National Sales Manager where he was primarily
responsible for the
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<PAGE> 46
hiring and training of all new sales representatives. He entered the
pharmaceutical industry in 1989 as a sales representative with Hauck
Pharmaceuticals and Roberts Pharmaceuticals. Mr. Hauck received a B.S. degree in
Education from the University of Georgia and, afterwards, spent a brief period
of time as an educator.
Balaji Venkataraman has been the Vice President and Chief Financial Officer
since October 1999. Between August 1998 and September 1999, he was Vice
President of Corporate Development and Strategic Planning at the company. He
also served as a consultant to the company during his employment as the Director
of Strategic Planning at EJ Financial Enterprises, Inc. from September 1997 to
August 1998. From 1995 to 1997, he was an Associate, Licensing and New Business
Start-Up, at the University of Pennsylvania Center for Technology Transfer. From
1994 to 1995, he was the Marketing Manager at Curative Technologies Inc., a
wound care services company. From 1993 to 1994, he was a Technical Sales
Representative for Millipore Corporation. From 1991 to 1993 he was the Senior
Research Chemist at Scios Inc. He has also held product management and finance
positions at Schering Plough and Pfizer. Mr. Venkataraman received an M.S.
degree in Organic Chemistry from Case Western Reserve University and an M.B.A.
degree from the Wharton School at the University of Pennsylvania.
Robert D. Godfrey, Jr. has been Vice President of Sales since 1998. He
served as the National Sales Manager between 1996 and 1998. He began his career
with the company in 1992 as a Sales Representative for the Jacksonville,
Florida, territory and was promoted in 1994 to District Manager of the entire
Florida sales territory. At that time, in addition to his managerial
responsibilities, he continued to promote First Horizon products to physicians
and pharmacies until 1995. Prior to his career with the company, Mr. Godfrey
held the position of Marketing Research Consultant with MGT Information Systems
and also worked independently as a Research Consultant in the southeastern
United States. Mr. Godfrey received an M.B.A. degree and a B.S. degree in
Marketing from Jacksonville University.
William G. Campbell has been our Controller and Treasurer since 1998. Prior
to joining First Horizon, from 1995 to 1998, Mr. Campbell was the Controller/CFO
of DialysisAmerica, Inc. He was the Associate Administrator/CFO of Stringfellow
Memorial Hospital from 1993 to 1995; and from 1989 to 1993, he was the Director
of Budgets, Costs and Reimbursement at Grady Memorial Hospital, a large public
teaching hospital. His prior professional experience also includes a number of
profit and not-for-profit consulting, big five public accounting, governmental
auditing and internal audit positions. Mr. Campbell is a Certified Public
Accountant and received a B.A. degree in Accounting from Walsh College of
Accountancy and Business Administration and an M.B.A. degree in Accounting from
Kennesaw State College.
John N. Kapoor, Ph.D. has been one of our directors since 1996, and his
present term as director will expire in December 2000. Dr. Kapoor has over 20
years of experience in the healthcare field through his ownership and management
of healthcare-related businesses. In 1990, Dr. Kapoor founded Kapoor-Pharma
Investments, L.P., our largest stockholder, and its managing partner, EJ
Financial Enterprises, Inc., of which he is the President and sole shareholder.
EJ Financial provides funds and strategic advice to healthcare businesses. Dr.
Kapoor is the Chairman of OptionCare, Inc., Akorn, Inc. and NeoPharm, Inc. Dr.
Kapoor is a director of Integrated Surgical Systems, Inc., as well as a Chairman
of a private company and a director of several other private companies. Dr.
Kapoor received a B.Sc. degree from Bombay University and a Ph.D. degree in
medicinal chemistry from the State University of New York.
Dr. Kapoor was previously the chairman and president of Lyphomed Inc.
Fujisawa Pharmaceutical Co. Ltd. was a major stockholder of Lyphomed from the
mid-1980s until 1990, at which time Fujisawa completed a tender offer for the
remaining shares of Lyphomed, including the shares held by Dr. Kapoor. In 1992,
Fujisawa filed suit in federal district court in Illinois against Dr. Kapoor
alleging that between 1980 and 1986, Lyphomed filed a large number of allegedly
fraudulent new drug applications with the FDA, and that Dr. Kapoor's failure to
make certain
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<PAGE> 47
disclosures to Fujisawa constituted a violation of federal securities laws and
the Racketeer Influenced and Corrupt Organizations Act. Fujisawa also alleged
state law claims. Dr. Kapoor countersued, and in 1999, the litigation was
settled on terms mutually acceptable to the parties. The terms of the settlement
are subject to a confidentiality agreement. Dr. Kapoor also controls Inpharmakon
Corporation, a party to one of our development agreements.
Pierre Lapalme was elected a director in April 2000. His term as director
will expire in 2002. Mr. Lapalme has served as President and Chief Executive
Officer of the North American division of Ethypharm, Inc. since 1997. Mr.
Lapalme is the non-executive Chairman of the Board of DiagnoCure Inc. From 1994
to 1997, he served as President and General Manager of Lavipharm Inc. Mr.
Lapalme served as Senior Vice President and General Manager for the North
American division of Rhone-Poulenc Rorer Inc. U.S.A. from 1990 to 1993 and as
President and Chief Executive Officer of the North American division of
Rhone-Poulenc Pharmaceuticals from 1979 to 1990. From 1964 to 1979, Mr. Lapalme
held various executive positions at Ciba-Geigy Pharmaceuticals in Canada. Mr.
Lapalme received a Business Administration degree in Marketing from the
University of Western Ontario.
Jon S. Saxe was elected a director in January 2000. His term as director
will expire in December, 2001. He also serves as a Director of Protein Design
Labs, Inc. Mr. Saxe served as President of Protein Design Labs, Inc. from
January 1995 to May 1999. In addition, he is a Director of Questcor
Pharmaceuticals Inc., Incyte Pharmaceuticals Inc., ID Biomedical Corporation,
InSite Vision, and is Chairman of Point Biomedical Corporation and Iconix
Pharmaceuticals. Mr. Saxe served as President of Saxe Associates, a
biotechnology consulting firm, from May 1993 to December, 1994. He served as the
President, Chief Executive Officer and a Director of Synergen, Inc., a
biopharmaceutical company, from October 1989 to April, 1993. Mr. Saxe served in
various positions including Vice President of Licensing and Corporate
Development and Head of the Patent Law Department for Hoffmann-LaRoche, Inc.
from 1960 through 1989. Mr. Saxe received a B.S. Ch.E. degree from
Carnegie-Mellon University, a J.D. degree from George Washington University
School of Law, and an L.L.M. degree from New York University School of Law.
EXECUTIVE OFFICERS
Each officer serves at the discretion of our board of directors and holds
office until his successor is elected and qualified or until his earlier
resignation or removal. There are no family relationships among any of our
directors or executive officers.
ELECTION OF DIRECTORS
Dr. Shah, Mr. Dixon and Dr. Kapoor were elected to the board under a
stockholder agreement. Under the terms of this agreement, the board of directors
was set at three members. In addition, Kapoor-Pharma Investments has the right
to elect two directors, and Dr. Shah, Mr. Dixon and Mr. Hauck have the right to
elect one director by majority vote. This agreement will terminate upon
completion of this offering.
Our board of directors increased the number of directors from three to five
in January 2000. Pursuant to our bylaws, the board filled the two vacancies
created by the increase by appointing Jon S. Saxe and John E. Robson as
directors. Mr. Robson resigned as director in April 2000 and the board filled
the resulting vacancy by appointing Pierre Lapalme.
BOARD COMPOSITION
Pursuant to our Restated Certificate of Incorporation, the board of
directors is divided into three classes of directors:
- Class A, whose term will expire at the annual meeting of stockholders to
be held in the year 2000;
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<PAGE> 48
- Class B, whose term will expire at the annual meeting of stockholders to
be held in the year 2001;
- Class C, whose term will expire at the annual meeting of stockholders to
be held in the year 2002.
John N. Kapoor is a Class A director. Mahendra G. Shah and Jon S. Saxe are
Class B directors. R. Brent Dixon and Pierre Lapalme are Class C directors.
Directors within each class are elected to serve three-year terms and
approximately one-third of the directors sit for election at each annual meeting
of the Company's stockholders.
A classified board of directors may have the effect of deterring or
delaying any attempt by any group to obtain control of the company by a proxy
contest since a third party would be required to have its nominees elected at
two separate meetings of the board of directors in order to elect a majority of
the members of the board.
BOARD COMMITTEES
The board of directors has formed an audit committee to review the results
and scope of the audit of our annual financial statements, to discuss various
matters with the auditors, to receive statements from the auditors and to make
recommendations to the board of directors regarding the inclusion of audited
financial statements in our annual reports. The current members of our audit
committee are Jon S. Saxe, John E. Kapoor and Pierre Lapalme.
The board of directors has also formed a compensation committee to
recommend salaries and incentive compensation for executive officers and to
administer our stock plan. The members of the compensation committee are Jon S.
Saxe and Pierre Lapalme.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
In January 2000, our board of directors established a compensation
committee. Messrs. Lapalme and Saxe currently serve as members of the
compensation committee. For the year ended December 31, 1999, the entire board
of directors determined executive compensation. Two members of our board of
directors, Mahendra G. Shah and R. Brent Dixon, are also employees. Dr. Shah has
participated in certain transactions with us in the past. See "Certain
Relationships and Related Transactions."
DIRECTOR COMPENSATION
We reimburse each member of our board of directors for out-of-pocket
expenses incurred in connection with attending board meetings. Each director who
is not an employee also receives a fee of $12,000 per year and $1,000 for each
board meeting attended. Each director who is not an employee and not affiliated
with a greater than 10% stockholder receives options to purchase shares of our
common stock upon election to the board.
SCIENTIFIC ADVISORY BOARD
We have engaged a scientific and medical advisor to advise us on issues
related to specific pharmaceutical products. The current advisor is an expert in
clinical development, medical sciences and drug development. We plan to add
additional members with different expertise to support our growth. In certain
cases, this advisor has agreed to be available for consultation for a specified
number of days each year, but he may consult and meet informally with us on a
more frequent basis. Our current scientific and medical advisor may have other
commitments that may limit his availability to us. Our scientific advisory board
consists of the following individual:
Nelson L. Levy, M.D., Ph.D., is currently the Chief Executive Officer of
the CoreTechs Corporation, which implements a unique paradigm of technology
transfer and which starts
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<PAGE> 49
science-based companies. He was previously President of Fujisawa Pharmaceutical
Company, where he refocused and revitalized the sales and marketing
organizations, in-licensed two major pharmaceuticals and filed an NDA for FK-506
(Prograf), Fujisawa's leading product. From 1981 to 1984, he was the Vice
President for Pharmaceutical Research at Abbott Laboratories. He is on the board
of directors of two public and three private companies and on the scientific
advisory boards of three other companies, two of which are publicly traded. He
is a Summa Cum Laude graduate of Yale University, received his M.D. degree from
the Columbia College of Physicians and Surgeons and a Ph.D. degree in Immunology
from Duke University.
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<PAGE> 50
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the
compensation awarded to or earned by our chief executive officer and by each of
our four other most highly compensated executive officers (the "Named Executive
Officers") who earned in excess of $100,000 in cash compensation during the year
ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS ALL
------------------ ---------------------- OTHER
SHARES COMPEN-
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS SATION(1)
- --------------------------- -------- ------- ---------------------- ---------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D.(1)
Chairman and Chief Executive Officer $ -- $55,200 300,000 $ --
R. Brent Dixon
President and Director............... 100,000 27,600 60,000 1,567(2)
Balaji Venkataraman
Vice President and Chief Financial
Officer........................... 93,400 21,250 200,000 24(3)
Gregory P. Hauck
Vice President, Developed Products... 89,000 20,000 50,000 624(4)
Robert D. Godfrey, Jr.
Vice President, Sales................ 85,950 20,000 70,000 2,024(5)
</TABLE>
- ------------------------------
(1) Dr. Shah did not receive a salary in 1999.
(2) Represents $1,543 contributed under the 401(k) plan and $24 for term life
insurance premiums.
(3) Represents $24 for term life insurance premiums.
(4) Represents $600 contributed under the 401(k) plan and $24 for term life
insurance premiums.
(5) Represents $2,000 contributed under the 401(k) plan and $24 for term life
insurance premiums.
STOCK OPTION GRANTS
The following tables show for the year ended December 31, 1999, information
regarding options granted to, and held at year end by, the Named Executive
Officers.
Amounts reported in the potential realizable value column below are
hypothetical values that may be realized upon exercise of the options
immediately prior to the expiration of their term, calculated by assuming that
the stock price on the date of grant as determined by the board of directors
appreciates at the indicated annual rate compounded annually for the entire term
of the option (10 years). The 0% annual rate of appreciation shows the value at
the grant date based upon the stated market price of the stock on the date of
grant. The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent our estimate or
projection of the future common stock price.
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<PAGE> 51
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL OPTIONS MARKET
UNDERLYING GRANTED TO EXERCISE PRICE ON
OPTIONS EMPLOYEES IN PRICE PER DATE OF
NAME GRANTED FISCAL YEAR(1) SHARE GRANT EXPIRATION DATE
- ---- ---------- -------------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D....... 25,000(2) 3.2% $2.50 $3.08 3/17/09
275,000(3) 35.0 2.65 4.48 10/22/09
R. Brent Dixon............... 60,000(4) 7.6 2.50 3.08 3/17/09
Balaji Venkataraman.......... 40,000(5) 5.1 1.88 4.48 9/1/09
60,000(3) 7.6 1.88 4.48 10/22/09
100,000(3) 12.7 2.65 4.48 10/22/09
Robert D. Godfrey, Jr........ 20,000(4) 2.5 2.50 3.08 3/17/09
50,000(3) 6.4 2.65 4.48 10/22/09
Gregory P. Hauck............. 50,000(4) 6.4 2.50 3.08 3/17/09
<CAPTION>
POTENTIAL REALIZABLE VALUE OF
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
----------------------------------
NAME 0% 5% 10%
- ---- -------- ---------- ----------
<S> <C> <C> <C>
Mahendra G. Shah, Ph.D....... $ 14,500 $ 62,925 $ 137,218
503,250 1,278,048 2,466,741
R. Brent Dixon............... 34,800 151,020 329,324
Balaji Venkataraman.......... 104,000 216,698 389,599
156,000 325,047 584,398
183,000 464,745 896,997
Robert D. Godfrey, Jr........ 11,600 50,340 109,775
91,500 232,372 448,498
Gregory P. Hauck............. 29,000 125,850 274,436
</TABLE>
- ------------------------------
(1) In 1999, options to purchase a total of 785,500 shares of common stock were
granted.
(2) The option holder may exercise the option to purchase 25% of these shares of
common stock on March 17, 1999 and an additional 25% per year on the next
three anniversaries thereof.
(3) The option holder may exercise the option to purchase 25% of these shares of
common stock on October 22, 2000 and an additional 25% per year on the next
three anniversaries thereof.
(4) The option holder may exercise the option to purchase 25% of these shares of
common stock on March 17, 2000 and an additional 25% per year on the next
three anniversaries thereof.
(5) The option holder may exercise the option to purchase 25% of these shares of
common stock on September 1, 1999 and an additional 25% per year on the next
three anniversaries thereof.
None of our Named Executive Officers exercised stock options in the fiscal
year ended December 31, 1999. The following table sets forth information
concerning the number and value of unexercised options held by each of our Named
Executive Officers on December 31, 1999. There was no public market for our
common stock as of December 31, 1999. Accordingly, the fair market value on
December 31, 1999 is based on an assumed initial public offering price of $13.00
per share. This valuation at December 31, 1999 does not represent the actual
value of our stock at December 31, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1999
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mahendra G. Shah, Ph.D........................ 106,250 293,750 $1,303,125 $3,043,125
R. Brent Dixon................................ 265,000 135,000 3,309,375 1,558,125
Balaji Venkataraman........................... 10,000 190,000 111,200 2,035,800
Robert D. Godfrey, Jr......................... 35,000 115,000 414,375 1,228,125
Gregory P. Hauck.............................. 265,000 125,000 3,309,375 1,453,125
</TABLE>
EXECUTIVE OFFICERS EMPLOYMENT AGREEMENTS
On January 1, 2000, we entered into employment agreements with Mahendra G.
Shah, Ph.D., R. Brent Dixon, Balaji Venkataraman, Robert D. Godfrey, Jr.,
Gregory P. Hauck and William G. Campbell. These employment agreements may be
terminated by us with or without cause. The officers may terminate employment
upon sixty days written notice to us. Upon termination of Messrs. Shah, Dixon
and Venkataraman's employment without cause, as defined in the agreement,
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<PAGE> 52
each officer will be entitled to receive his salary for twelve months following
termination, a lump sum equal to 100% of the bonus he received the preceding
calendar year, if any, continued health insurance coverage substantially
equivalent to that provided to the officer prior to termination for twelve
months following termination, a car allowance for twelve months following
termination, and all of the officer's unvested options will immediately vest and
become exercisable.
Upon termination of Messrs. Godfrey, Hauck and Campbell's employment
without cause, each officer will be entitled to receive his salary for six
months following termination, a lump sum equal to 50% of the bonus he received
the preceding calendar year, if any, continued health insurance coverage
substantially equivalent to that provided to the officer prior to termination
for six months following termination, a car allowance for six months following
termination and all of the officer's unvested options will immediately vest and
become exercisable.
Upon termination by us for cause, termination in the event of death or
termination by the officer, each officer or his estate is entitled to receive
all accrued but unpaid salary as of the date of termination. Upon any
termination of these agreements, each officer or his estate will have 120 days
from the date of termination to exercise any vested options.
These employment agreements provide for a base salary of $110,000 for Dr.
Shah, $102,000 for Mr. Dixon, $95,000 for Mr. Venkataraman, $90,000 for Mr.
Godfrey, $85,000 for Mr. Hauck and $80,000 for Mr. Campbell. In addition, these
employment agreements entitle each executive officer to receive a bonus based on
the percentage of his salary, if we and/or the officer meets certain performance
goals to be established by the board of directors each year. The compensation
committee will review the performance goals and determine whether or not we
and/or the executive have achieved the performance goals based on our financial
statements. The board retains the right to award additional compensation to each
officer based on the officer's contributions to the company.
The agreements provide that in the event of a change of control, as defined
in the agreements, all options become fully vested and immediately exercisable.
The employment agreements restrict each officer from engaging in or having
any financial interest in a business that is in competition with our business
during that officer's employment with the company and for thirty-six months
following termination of employment. A business is in competition with us if it
involves research and development work involving products that we market at the
time of termination or that were under study by us at that time and were
expected to be marketed within six months. This provision does not prevent the
officers from investing in a publicly held company, provided that the officer's
beneficial ownership of securities does not exceed 5% of the outstanding class
of the publicly held company's securities. The employment agreements also
restrict each officer from soliciting our suppliers, customers or clients for
thirty-six months after employment. This provision does not prohibit an officer
from soliciting wholesale customers, managed care agencies, scientific or
computer consultants, lawyers or manufacturers as long as manufacturers have
excess capacity. The employment agreements also prohibit each officer from
soliciting, employing or engaging any of our employees or affiliates for
thirty-six months following employment. The employment agreements prohibit each
officer from disclosing any of our trade secrets, confidential information or
ideas that the officer may have acquired or developed relating to our business
for twelve months following employment.
EMPLOYEE BENEFIT PLANS
1997 Non-Qualified Stock Option Plan
Our 1997 Non-Qualified Stock Option Plan, as amended, was adopted by our
board of directors and approved by our stockholders June 18, 1997. The 1997 plan
authorizes the issuance of up to 4,000,000 shares of our common stock.
Currently, options to purchase an aggregate of 1,767,500 shares of our common
stock at a weighted average exercise price of $1.61 per share are outstanding
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<PAGE> 53
under the 1997 plan. Upon the closing of this offering, no additional grants of
stock options will be made under this 1997 plan.
Options granted under the plan are not transferable by the optionee except
by will or by the laws of descent and distribution. Options will become
immediately exercisable in the event of a change of control if the surviving
company does not assume the options granted under the plan.
The 2000 Stock Plan
Our board of directors and stockholders approved the 2000 Stock Plan in
February 2000. This plan provides for the granting of:
- incentive stock options under the Internal Revenue Code of 1986;
- options that do not qualify as incentive stock options;
- stock awards or stock bonuses; and
- sales of stock.
The 2000 Stock Plan provides for the grants of these options and other
awards to officers, directors, full and part-time employees, advisors and
consultants. Only full-time employees may receive incentive stock options. We
have reserved 2,000,000 shares of common stock for issuance under the 2000 Stock
Plan. Our compensation committee administers the 2000 Stock Plan and has the
sole authority to determine:
- the meaning and application of the terms of the plan and all grant
agreements;
- the persons to whom option or stock grants are made;
- the nature and amount of option or stock grants;
- the price to be paid upon exercise of each option;
- the period within which options may be exercised;
- the restrictions on stock awards; and
- the other terms and conditions of awards.
In order to meet one of the requirements of Section 162(m) of the Internal
Revenue Code, the 2000 Stock Plan limits to 500,000 the number of shares that
may be covered by grants to any single person in any one calendar year.
The exercise price per share for incentive stock options cannot be less
than the fair market value of our common stock on the date of the grant. If a
recipient owns more than 10% of our common stock, incentive stock options
granted to that recipient must have an exercise price of not less than 110% of
the fair market value of our common stock on the grant date. Determinations of
fair market value are made in accordance with the plan. The compensation
committee has the authority to determine the exercise price for non-qualified
stock options.
The compensation committee has the authority to determine the term of each
option. However, the term of stock options may not exceed 10 years from the date
of grant. In the case of an incentive option granted to an owner of more than
10% of our common stock, the term may not exceed five years from the date of
grant.
Generally, the recipient of an option may exercise it only while employed
by us, except that a recipient may exercise vested options for 60 days after
termination of employment or such later date as set forth in the grant
agreement, a recipient may exercise vested options for twelve months following
disability, and if a recipient dies while employed by us, his or her estate,
heirs or beneficiaries may exercise vested options held by the recipient within
twelve months following the
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<PAGE> 54
date of death. The plan also provides for the acceleration of vesting and
exercisability of options and vesting of stock awards if we are subject to a
change of control.
The compensation committee has the authority to award stock under the plan
as stock bonuses. In addition, the compensation committee may issue stock under
the plan for consideration, including promissory notes and services. The
compensation committee also has the authority to determine the terms, conditions
and restrictions of stock awards and sales of stock, which may include
restrictions on transferability, voting, repurchase by us and forfeiture of
shares. If shares of the stock are subject to forfeiture, we will retain all
dividends or other distributions paid on the stock until the shares are no
longer subject to forfeiture, at which time we will pay all accumulated amounts
to the recipient. Unless otherwise determined by the compensation committee,
shares awarded as a stock bonus to an officer or director may not be sold until
six months after the date of the award. All shares relating to stock awards or
stock sales are counted against the aggregate number of shares available for
granting awards under the 2000 Stock Plan.
If a stock split, stock dividend, consolidations, recapitalizations,
reorganizations or similar event occurs, we will make proportional adjustments
to the number of shares of common stock reserved for issuance under the 2000
Stock Plan and issuable under outstanding options and adjustments to the
exercise prices of outstanding options.
Awards under the plan are not transferable except by will or the laws of
descent and distribution. The 2000 Stock Plan will terminate in February, 2010,
and we may not grant awards under it after termination. Our board of directors
may amend, alter or discontinue the plan at any time, provided that we must
obtain shareholder approval for any change that would increase the number of
shares reserved for issuance or would change the class of persons eligible to
receive grants. In addition, the board may not amend the plan to:
- fix the exercise price per share for incentive stock options at less than
100% of the fair market value of a share of common stock on the date of
grant;
- extend the expiration date of the plan;
- extend the maximum period of ten years during which holders may exercise
options; or
- materially increase the benefits to participants under the plan.
In no event may the board or shareholders amend the plan, alter or impair
the rights of an existing recipient without their consent.
As a condition to the exercise of an option, the vesting or award of a
stock bonus or the vesting or sale of stock, we may require the recipient to pay
over to us all applicable federal, state and local taxes that we must withhold.
At the discretion of the compensation committee and upon the request of a
recipient, the withholding tax requirements may be satisfied by withholding
shares of stock otherwise issuable to the recipient.
The board of directors approved the grant of options, subject to completion
of this offering, to purchase 187,950 shares at an exercise price per share
equal to the public offering price per share in this offering. These options
will be issued upon completion of this offering. Following this grant, there
will be 1,812,050 shares available for future option grants under the 2000 Stock
Plan.
Employee Stock Purchase Plan
Our employee stock purchase plan was adopted in February 2000 and is
intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code. We have reserved 500,000 shares of
common stock for the stock purchase plan. In order to participate in the stock
purchase plan, employees must meet eligibility requirements, including length of
employment. At present participating employees will be able to direct us to make
payroll deductions of up to 7% of their regular compensation during an offering
period for the purchase of shares of our common stock. Each offering period will
be six months, with the first offering period
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<PAGE> 55
beginning on the later of July 1, 2000 or the effective date of the registration
statement for the plan. The stock purchase plan will provide participating
employees with the right, subject to specific limitations, to purchase our
common stock at a price equal to 85% of the lesser of the fair market value of
our common stock on the first or last day of the offering period. The stock
purchase plan will terminate on December 31, 2010. The board of directors has
the authority to amend, suspend or discontinue the stock purchase plan as long
as the change will not adversely affect participants without their consent and
as long as we receive any shareholder approval required by law.
401(k) Profit Sharing Plan
We have established a tax-qualified employee savings and retirement plan
for all of our employees who satisfy certain eligibility requirements, including
requirements relating to age and length of service. Under the 401(k) plan,
employees may elect to reduce their current compensation by up to 15% or the
statutory dollar limit, whichever is less, and have us contribute the amount of
this reduction to the 401(k) plan. In addition, we match a percentage of an
employee's contribution that we establish from time to time. Each employee is
fully vested in his or her salary contributions and our matching contributions
vest over six years.
We intend for the 401(k) plan to qualify under Section 401 of the Code so
that contributions by employees or by us to the 401(k) plan, and income earned
on plan contributions, are not taxable to employees until withdrawn from the
401(k) plan. Our contributions, if any, will be deducted by us when made.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Officers and Directors
Mahendra G. Shah, Ph.D., our Chairman and Chief Executive Officer, is the
Vice President of EJ Financial Enterprises, Inc. John N. Kapoor, Ph.D., one of
our directors, is President and sole shareholder of EJ Financial. EJ Financial
is the Managing General Partner of Kapoor-Pharma Investments, L.P. which
beneficially owns 76% of our Common Stock.
Reimbursement Agreement
On April 14, 2000, we entered into a Reimbursement Agreement with the
Kapoor Children's 1992 Trust (the "1992 Trust"). Under this agreement, the 1992
Trust agreed to pledge to LaSalle Bank as collateral for our bridge loan,
securities and investments in the amount of $10 million. John Kapoor is the
husband of Editha Kapoor, the Trustee of the 1992 Trust, and their children are
the beneficiaries. As consideration for this pledge, we will pay the Trust a fee
of $100,000 per year, pro rated for the amount of time that the pledge is in
effect, plus all of the 1992 Trusts' expenses incurred in connection with the
Reimbursement Agreement.
Collaboration Agreement
In 1998, we entered into a collaboration agreement with Inpharmakon
Corporation under which we acquired rights to the proprietary information for
our migraine product FHPC 01 currently under development. Under the agreement,
we must develop a workable once-a-day formulation for the drug, conduct clinical
trials, file for and obtain regulatory approval, and begin commercial sales of
the product within prescribed times. If we do not reach specified milestones on
a timely basis, Inpharmakon may terminate the agreement. In the event that
Inpharmakon terminates the agreement, the rights to develop FHPC 01 will revert
back to Inpharmakon who will, under certain circumstances, be free to develop
and market the product using the once a day formulation and the data from
clinical trials and all other information acquired or developed by us in
connection with our development efforts. We must also pay up to an aggregate of
$950,000 in non-refundable fees at various developmental milestones through and
including regulatory approval of the product, and, in the event of commercial
sales of the product, we must pay royalties at rates which we believe are within
industry customary ranges. If we elect to sell the business opportunity to a
third party, we must share the proceeds of the sale with Inpharmakon. We paid
$200,000 and $1,352 to Inpharmakon in 1998 and 1999, respectively, under this
agreement. The agreement expires on October 31, 2008 with automatic five-year
renewals thereafter. The terms of this agreement were negotiated at arms' length
by management, and we believe the terms are fair to us. The John N. Kapoor
Trust, dated September 30, 1989 (the "Trust"), owns 50% of the shares of
Inpharmakon Corporation. John N. Kapoor is Trustee of the Trust, and the Trust
is a partner of Kapoor-Pharma Investments. In addition, Dr. Shah is a director
of Inpharmakon Corporation and owns options to purchase 25,000 shares of
Inpharmakon.
The other owner of Inpharmakon has previously sought to renegotiate some of
the terms of this agreement based on disputes concerning our achievement of
milestones. On May 3, 2000, we entered into an amendment of this development
agreement in which both parties released each other from any previous claims or
disputes under the agreement. This amendment deletes provisions permitting
Inpharmakon to terminate the agreement if we do not initiate clinical trials
within a specified time period after completing a clinical biostudy on our
migraine product under development or if we do not file an NDA within a
specified time period after completing clinical trials. In addition, the
amendment provides for an increase in the total aggregate amount of milestone
payments that we must pay for development of the migraine product from $700,000
to $950,000. The amendment also requires that we pay Inpharmakon $200,000 within
thirty days after this offering.
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Packaging Agreement
In 1997, we entered into a packaging agreement with Diversified Healthcare
Services, Inc., under which we agreed to exclusively use Diversified Healthcare
to package samples of our Defen-LA, Mescolor, Protuss-DM and Zebutal products.
Under this agreement, Diversified Healthcare has the right to provide exclusive
packaging services for these products. We paid $83,000, $132,152 and $282,493 to
Diversified Healthcare in 1997, 1998 and 1999, respectively, under this
agreement. The term of this agreement is three years, with automatic yearly
renewals unless terminated by either party. The terms of this agreement were
negotiated at arm's length by management, and we believe the terms are fair to
us. Warren Hauck, Chief Executive Officer of Diversified Healthcare, is the
father of Gregory P. Hauck, our Vice President of Developed Products, and Daniel
C. Hauck, who currently owns 5.6% of our common stock. Steven Hauck, the
President of Diversified Healthcare, is the brother of Gregory and Daniel Hauck.
Non-compete Agreements
In 1996, we entered into two agreements with Crabapple Enterprises, Inc., a
prior and potential competitor, under which Crabapple agreed not to market
products that compete with our Protuss, Protuss-D and Zoto-HC products. We paid
$91,000, $159,902 and $162,768 to Crabapple in 1997, 1998 and 1999,
respectively, under these agreements. These agreements require us to pay
royalties on sales of these products at rates which we believe are within
industry customary standards. The term of the agreement for Protuss and
Protuss-D is seven years with an option to renew for an additional five years.
The term of the agreement for Zoto-HC is ten years with an option to renew for
an additional five years. Crabapple may cancel these agreements if minimum
royalty amounts are not paid. The terms of these agreements were negotiated at
arm's length by management, and we believe the terms are fair to us. Warren
Hauck, Chief Executive Officer of Crabapple, and Mary Hauck, Secretary of
Crabapple, are the parents of Gregory and Daniel Hauck.
Conversion of Notes into Common Stock
On January 11, 1999, Kapoor-Pharma Investments loaned us $1,600,000 at an
interest rate of 2% over the prime rate. In December, 1999, we converted
principal and $144,984 of accrued interest into 558,395 shares of common stock
pursuant to the terms of the loan agreement. We used this loan to acquire the
Robinul product line.
During 1997, we converted $385,000 in loans from Kamal R. Kapoor plus
$124,363 accrued interest into 814,978 shares of our common stock at a
conversion rate of $0.625 per share. Kamal Kapoor is John N. Kapoor's brother.
During 1997, we converted $150,000 in loans from the Trust plus $3,345
accrued interest into 245,352 shares of common stock at a conversion rate of
$0.625 per share.
During 1997, we converted $100,000 in loans from EJ Financial Enterprises
plus $25,575 accrued interest into 200,918 shares of common stock at a
conversion rate of $0.625 per share.
Sale of Common Stock
On January 27, 1997, we issued 320,000 shares of common stock to the Trust
for $200,000 or $0.625 per share.
On June 30, 1997, we issued 560,000 shares of common stock to Kapoor-Pharma
Investments for $350,000 or $0.625 per share.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock and as adjusted to reflect the sale of the shares
of common stock in this offering, by:
- each person or entity we know to own beneficially more than 5% of our
common stock;
- each of our directors;
- each of the Named Executive Officers; and
- all directors and executive officers as a group.
Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power, or shares voting and/or investment power
with his or her spouse, with respect to all shares of capital stock listed as
owned by that person or entity. Except as otherwise noted below, the address of
each person listed below is our address.
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission and assumes
the underwriters do not exercise their over-allotment option. the information is
not necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and any shares as to which
the individual has the right to acquire beneficial ownership within 60 days of
the date of this prospectus through the exercise of any stock option, warrant or
other right. The inclusion in the following table of those shares, however, does
not constitute an admission that the named stockholder is a direct or indirect
beneficial owner of those shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY
OWNED
NUMBER OF SHARES --------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ------------------------------------ ------------------- --------------- --------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Kapoor-Pharma Investments, L.P.(1).... 6,487,583 76.0% 52.6%
225 E. Deerpath, Suite 250
Lake Forest, IL 60045
Daniel C. Hauck(2).................... 480,000 5.6 3.9
842 Gable Gate Turn
Roswell, GA 30076
DIRECTORS AND NAMED EXECUTIVE OFFICERS
John N. Kapoor, Ph.D.(1).............. 6,487,583 76.0 52.6
R. Brent Dixon(3)..................... 785,000 8.9 6.2
Gregory P. Hauck(4)................... 782,500 8.9 6.2
Mahendra G. Shah, Ph.D.(5)............ 424,560 4.9 3.4
Robert D. Godfrey, Jr.(6)............. 55,000 * *
Balaji Venkataraman(7)................ 10,000 * *
Pierre Lapalme........................ -- -- --
Jon S. Saxe........................... -- -- --
All directors and executive officers
as a group (9 persons)(8)........... 8,549,643 91.6 65.1
</TABLE>
- ------------------------------
* Represents less than 1%.
(1) John N. Kapoor, Ph.D., one of our directors, is the president and sole
stockholder of the managing general partner of Kapoor-Pharma Investments,
L.P. In such capacity, Mr. Kapoor has the authority to vote and dispose of
the shares owned by Kapoor-Pharma Investments and is therefore deemed the
beneficial owner of those shares.
(2) Includes 240,000 shares owned through Gable Gate Enterprises, LLP, a family
limited partnership of which Mr. Hauck is the general partner.
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(3) Includes 305,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(4) Includes 302,500 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(5) Includes 112,500 shares of common stock issuable upon exercise of stock
options exercisable within 60 days. Also includes 10,000 shares that Dr.
Shah owns as custodian for his daughter that he may be deemed to
beneficially own.
(6) Includes 55,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(7) Includes 10,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
(8) Includes 790,000 shares of common stock issuable upon exercise of stock
options exercisable within 60 days.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 40,000,000 shares of common stock,
par value $.001, and 1,000,000 shares of preferred stock, par value $.001. Upon
the closing of this offering, there will be 12,339,643 shares of common stock
outstanding assuming that the underwriters do not exercise their over-allotment
right, and no shares of preferred stock outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of our stockholders. The holders of
common stock have no cumulative voting rights with respect to the election of
directors or any other matter.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the board of directors may from time to time
determine.
Upon the liquidation, dissolution, distribution of assets or winding up of
the company, holders of common stock are entitled to share ratably, in
proportion to the number of shares of common stock held, all the assets
remaining after distribution of the full preferential amounts due to the holders
of the outstanding shares of preferred stock, if any.
Holders of common stock are not entitled to preemptive rights or rights to
covert their common stock into any other securities. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Under our Restated Certificate of Incorporation, the board of directors has
the authority, without further action by the stockholders, to issue up to
1,000,000 shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, without any further vote or action by the
stockholders. The issuance of preferred stock could adversely affect the voting
power of holders of common stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of the company, which could have a depressive effect on the
market price of our common stock. We have no present plan to issue any shares of
preferred stock.
DELAWARE ANTI-TAKEOVER PROVISIONS
We are subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. Section 203, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder unless:
- Prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- Upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares
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owned by persons who are directors and also officers, and employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered
in a tender or exchange offer; or
- On or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
- Any merger or consolidation involving the corporation and the interested
stockholder;
- Any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- Subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder; or
- The receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity
or person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
CHARTER AND BYLAWS ANTI-TAKEOVER PROVISIONS
Pursuant to our Restated Certificate of Incorporation, the board of
directors is divided into three classes of directors. Directors within each
class are elected to serve three-year terms and approximately one-third of the
directors sit for election at each annual meeting of stockholders. A classified
board of directors may have the effect of deterring or delaying any attempt by
any group to obtain control of the company by a proxy contest since a third
party would be required to have its nominees elected at two separate meetings of
the board of directors in order to elect a majority of the member of the board.
A director may be removed only for cause and requires a vote of at least
two-thirds of the shares entitled to vote for election of directors.
In addition, our Restated Certificate of Incorporation also provides that
amendment of our bylaws by shareholders requires a vote of at least two-thirds
of the shares entitled to vote for the election of directors. This supermajority
restriction makes it more difficult for stockholders to require an amendment of
the bylaws and enhances the board's power with respect to matters of corporate
governance that are governed by the bylaws.
Our bylaws establish an advance notice procedure for stockholders to bring
matters before stockholder meetings, including proposed nominations of persons
for election to the board of directors and bringing business matters or
stockholder proposals before a meeting. These procedures specify the information
stockholders must include in their notice and the timeframe in which they must
give us notice. At a stockholder meeting, stockholders may only consider
nominations or proposals specified in the notice of meeting, nominations or
proposals brought before the meeting by or at the direction of the board of
directors, and nominations or proposals by a person who was a stockholder of
record on the record date for the meeting, who is entitled to vote at the
meeting and who has given us timely written notice, in proper form, of his or
her intention to bring that nomination or proposal before the meeting.
The bylaws do not give the board of directors the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a meeting. However, our bylaws may have the effect
of precluding the conduct of that item of business at a meeting if the proper
procedures are not followed. These provisions may discourage or deter a
57
<PAGE> 62
potential third party from conducting a solicitation of proxies to elect their
own slate of directors or otherwise attempting to obtain control of our company.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our Restated Certificate of Incorporation contains certain provisions
permitted under Delaware law relating to the liability of directors. These
provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in circumstances involving
certain wrongful acts, such as:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for any acts under Section 174 of the Delaware General Corporation Law;
or
- for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or any stockholder's
rights to seek non-monetary relief, such as an injunction or rescission, in the
event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws.
In addition, our Restated Certificate of Incorporation and Bylaws provide
the directors and executive officers indemnification protection to the fullest
extent permitted by Delaware law. We believe that these provisions will assist
us in attracting and retaining qualified individuals to serve as directors and
officers. Our Bylaws permit us to enter into agreements providing to each
officer or director indemnification rights substantially similar to those set
forth in the Bylaws and such agreements have been entered into by each member of
our board of directors and each of our executive officers. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by our Bylaws, it provides greater assurances to directors and
executive officers that indemnification will be available because, as a
contract, it cannot be modified unilaterally in the future by the board of
directors or by the stockholders to eliminate the rights it provides.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is LaSalle Bank
National Association.
LISTING
The shares of common stock of First Horizon have been approved for
quotation on the Nasdaq National Market under the symbol "FHRX."
58
<PAGE> 63
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices of shares of First
Horizon. In addition, since no shares outstanding prior to this offering will be
available for sale shortly after this offering because of certain contractual
and legal restrictions on resale as described below, sales of substantial
amounts of common stock in the public market after these restrictions lapse
could adversely affect the prevailing market price of shares of First Horizon
and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
12,339,643 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and excluding 1,767,500 shares issuable upon exercise of
outstanding options. Of these shares, all of the shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act, unless such shares are purchased by "affiliates" as that term is
defined in Rule 144 under the Securities Act. The remaining 8,539,643 shares of
common stock currently outstanding and 1,767,500 shares issuable upon the
exercise of outstanding options are "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if registered or if they qualify for an exemption from
registration described below under Rules 144, 144(k) or 701 promulgated under
the Securities Act.
Beginning either on the date of this prospectus or 90 days after the date
of this prospectus, all 8,539,643 shares currently outstanding and 1,767,500
shares issuable upon the exercise of outstanding options will become eligible
for sale in the public market under Rule 144(k), Rule 144 or Rule 701. All but
100,000 of the shares currently outstanding are subject to lock-up agreements.
All 1,767,500 shares issuable upon the exercise of outstanding options are
subject to lock-up agreements. These lock-up agreements provide that the
stockholders will not sell or otherwise dispose of any shares of common stock
without the prior written consent of Chase Securities Inc. for a period of 180
days from the date our shares commence trading on the Nasdaq National Market.
Chase Securities Inc. may release all or any portion of the securities subject
to the lock-up agreements without notice. See "Underwriting."
Rule 144
Under Rule 144, beginning 90 days after the date the registration statement
of which this prospectus is a part is declared effective, a person, or persons
whose shares are aggregated, who has beneficially owned restricted shares for at
least one year, which generally includes the holding period of any prior owner
other than an affiliate, would generally be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the outstanding shares of our common stock then outstanding, which
will equal approximately 123,396 shares immediately after this offering;
or
- The average weekly trading volume of First Horizon's common stock on the
Nasdaq National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the company.
Rule 144(k)
Under Rule 144(k), a person who was not an affiliate of the company at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, which generally includes the
holding period of any prior owner except an affiliate, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
59
<PAGE> 64
Rule 701
In general, under Rule 701 of the Securities Act, any of our employees,
consultants or advisors, other than affiliates, who purchases or receives shares
from us in connection with a compensatory stock purchase plan or option plan or
other written agreement will be eligible to resell such shares beginning 90 days
after the effective date of the registration statement of which this prospectus
is a part, subject only to the manner of sale provisions of Rule 144, and by
affiliates under Rule 144 without compliance with the Rule 144 holding period
requirements.
We intend to file a registration statement under the Securities Act
covering the 2,000,000 shares of common stock reserved for issuance under our
2000 Stock Plan following completion of this offering. Thereafter, shares that
are issued under the plan will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market.
60
<PAGE> 65
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives, Chase Securities Inc.,
Banc of America Securities LLC and Thomas Weisel Partners LLC, have severally
agreed to purchase from us the following numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
Chase Securities Inc........................................
Banc of America Securities LLC..............................
Thomas Weisel Partners LLC..................................
-------
Total.............................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are conditioned on the absence of any material adverse change in
our business and the receipt of certificates, opinions and letters from us, our
counsel and our independent auditors. The underwriters are committed to purchase
all shares of common stock offered in this prospectus if any shares are
purchased.
The underwriters propose to offer the shares of common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus and to dealers at the public offering price less a concession not in
excess of $ per share. The underwriters may allow and the dealers may
reallow a concession not in excess of $ per share to other dealers. After
the public offering of the shares, the underwriters may change this offering
price and other selling terms. The representatives of the underwriters have
informed us that the underwriters do not intend to confirm discretionary sales
in excess of 5% of the shares of common stock offered by this prospectus.
We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to 570,000 additional
shares of common stock at the public offering price, less the underwriting
discount set forth on the cover page of this prospectus. To the extent that the
underwriters exercise this option, each underwriter will have a firm commitment
to purchase a number of shares that approximately reflects the same percentage
of total shares the underwriter purchased in the above table. We will be
obligated to sell shares to the underwriters to the extent the option is
exercised. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of common stock offered in this
prospectus.
The following table shows the per share and total underwriting discounts
and commissions that we will pay to the underwriters. The underwriting discount
was determined based on an arms' length negotiation between the representatives
of the underwriters and us. These amounts are shown assuming both no exercise
and full exercise of the underwriters' over-allotment option to purchase
additional shares.
<TABLE>
<CAPTION>
PAID BY FIRST HORIZON
-----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................. $ $
Total................................................. $ $
</TABLE>
We estimate that our share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$1,000,000. This offering of the shares is made for delivery when, as and if
accepted by the underwriters and subject to prior sale and to withdrawal,
61
<PAGE> 66
cancellation or modification of this offering without notice. The underwriters
reserve the right to reject an order for the purchase of shares in whole or in
part.
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act, and to contribute to payments the
underwriters may be required to make in respect to those liabilities.
Each executive officer and director of First Horizon and substantially all
other holders of our securities have agreed during the period of 180 days after
the effective date of this prospectus, subject to specified exceptions, not to
offer to sell, contract to sell, or otherwise sell, dispose of, loan, pledge or
grant any rights with respect to any shares of common stock or any options or
warrants to purchase any shares of common stock, or any securities convertible
into or exchangeable for shares of common stock owned as of the date of this
prospectus or thereafter acquired directly by those holders or with respect to
which they have the power of disposition, without the prior written consent of
Chase Securities Inc. However, Chase Securities Inc. may, in its sole discretion
and at any time or from time to time, without notice, release all or any portion
of the securities subject to lock-up agreements. There are no existing
agreements between the representatives and any of our stockholders with respect
to any shares subject to a lock-up agreement providing consent to the sale of
shares prior to the expiration of the lock-up period.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of Chase Securities Inc., subject to certain
exceptions, consent to the disposition of any shares held by stockholders
subject to lock-up agreements prior to the expiration of the lock-up period, or
issue, sell, contract to sell, or otherwise dispose of, any shares of common
stock, any options or warrants to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering, the issuance of our
common stock upon the exercise of outstanding options or warrants, and the
issuance of options under existing stock option and incentive plans provided
that those options do not vest prior to the expiration of the lock-up period.
See "Shares Eligible for Future Sale."
At our request, the underwriters have reserved up to five percent of the
shares of common stock to be sold in this offering to be offered for sale,
exclusive of the shares subject to the over-allotment option, at the initial
public offering price, to our directors, officers, employees, business
associates such as customers and suppliers and persons related to, or affiliated
with the foregoing persons. The number of shares available for sale to the
general public in this offering will be reduced to the extent these persons
purchase the reserved shares. Any reserved shares not so purchased will be
offered to the general public on the same basis as the other shares offered by
this prospectus.
Persons participating in this offering may over-allot or effect
transactions that stabilize, maintain or otherwise affect the market price of
the common stock at levels above those that might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or the effecting of any purchase of the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
this offering. A penalty bid means an arrangement that permits the underwriters
to reclaim a selling concession from a syndicate member in connection with this
offering when shares of common stock sold by the syndicate member are purchased
in syndicate covering transactions. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise.
Stabilizing, if commenced, may be discontinued at any time.
Before this offering, there was no public market for the common stock. The
initial public offering price for the common stock will be determined by
negotiations between ourselves and the representatives of the underwriters.
Among the factors to be considered in determining the initial
62
<PAGE> 67
public offering price will be prevailing market and economic conditions, our
revenues and earnings, market valuations of other companies engaged in
activities similar to ours, estimates of our business potential and prospects,
the present state of our business operations, our management and other factors
deemed relevant.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners has been named as a lead or co-manager on 166 filed
public offerings of equity securities, of which 113 have been completed, and has
acted as a syndicate member in an additional 92 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
us or any of our officers, directors or other controlling persons, except with
respect to its contractual relationship with us pursuant to the underwriting
agreement entered into in connection with this offering.
LEGAL MATTERS
The validity of the shares of common stock that we are offering will be
passed upon for us by Arnall Golden & Gregory, LLP. Certain legal matters in
connection with this offering will be passed upon for the underwriters by Testa,
Hurwitz & Thibeault, LLP.
EXPERTS
The audited financial statements and schedule included in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act with
respect to the shares of common stock we are offering. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedule filed with it. We have omitted certain items in accordance
with the rules and regulations of the Commission. For further information with
respect to our business and the common stock we are offering, please see the
registration statement and the exhibits and schedule filed therewith. Statements
contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each statement being qualified in all
respects by such reference. You may inspect a copy of the registration
statement, and the exhibits and schedule filed with it, without charge at the
public reference facilities maintained by the Commission in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's regional offices
located at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048, and you can obtain copies of all or any part of the registration
statement from these offices upon the payment of the fees prescribed by the
Commission. You can obtain information on the operation of the public reference
room by calling the Commission at 1-800-SEC-0330. The Commission maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov. We have
electronically filed the registration statement, including all exhibits and
schedule filed with it, with the Commission.
63
<PAGE> 68
FIRST HORIZON PHARMACEUTICAL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Horizon Pharmaceutical Corporation:
We have audited the accompanying balance sheets of FIRST HORIZON
PHARMACEUTICAL CORPORATION (formerly Horizon Pharmaceutical Corporation, a
Delaware corporation) as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Horizon Pharmaceutical
Corporation as of December 31, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 17, 2000 (except with respect to
the matters discussed in Note 12
as to which the date is May 3, 2000.)
F-2
<PAGE> 70
FIRST HORIZON PHARMACEUTICAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- -----------
1998 1999 2000
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 425,023 $ 219,688 $ 735,337
Accounts receivable, net of allowance for doubtful
accounts, discounts and contractual adjustments of
$35,395, $55,783 and $125,188 at December 31,
1998, 1999 and March 31, 2000 respectively........ 1,147,248 2,900,623 2,861,497
Inventories.......................................... 402,397 798,615 1,795,464
Samples and other prepaid expenses................... 470,382 553,614 1,691,725
Deferred tax assets.................................. 146,931 550,780 550,781
----------- ----------- -----------
Total current assets......................... 2,591,981 5,023,320 7,634,804
----------- ----------- -----------
Property and equipment, net............................ 305,247 422,096 469,025
Other Assets:
Note receivable from related party................... 30,000 30,000 50,372
Intangibles, net..................................... 5,873 5,602,328 5,528,886
----------- ----------- -----------
Total other assets........................... 35,873 5,632,328 5,579,258
----------- ----------- -----------
Total assets................................. $ 2,933,101 $11,077,744 $13,683,087
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................... $ 553,318 $ 794,088 $ 1,773,379
Accrued expenses..................................... 795,645 2,892,727 3,593,219
Borrowings under revolving loan agreement............ 602,928 800,000 2,000,000
Current portion of long-term debt.................... -- 1,270,389 1,270,389
----------- ----------- -----------
Total current liabilities.................... 1,951,891 5,757,204 8,636,987
----------- ----------- -----------
Long-Term Liabilities:
Long-term debt, net of current maturities............ -- 1,628,497 1,305,319
Deferred tax liabilities............................. 25,080 76,479 76,479
----------- ----------- -----------
Total liabilities............................ 1,976,971 7,462,180 10,018,785
----------- ----------- -----------
Commitments and Contingencies (Notes 1,5,6,8,10 and 11)
Stockholders' Equity:
Preferred stock, 1,000,000 shares authorized and none
outstanding....................................... -- -- --
Common stock, $0.001 par value; 40,000,000 shares
authorized; 7,981,248 and 8,539,643 shares issued
and outstanding at December 31, 1998, 1999 and
March 31, 2000 respectively....................... 7,982 8,540 8,540
Additional paid-in capital........................... 2,615,434 5,788,220 5,788,220
Deferred compensation................................ 0 (1,284,374) (1,197,105)
Accumulated deficit.................................. (1,667,286) (896,822) (935,353)
----------- ----------- -----------
Total stockholders' equity................... 956,130 3,615,564 3,664,302
----------- ----------- -----------
Total liabilities and stockholders' equity... $ 2,933,101 $11,077,744 $13,683,087
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 71
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------------
------------------------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999 2000
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues....................... $5,557,700 $9,252,058 $18,624,514 $4,199,934 $7,119,638
Operating costs and expenses
Cost of revenues................. 1,136,691 1,903,054 3,140,416 719,432 1,061,737
Selling, general and
administrative expenses,
excluding the non-cash expense
presented below................ 4,545,254 6,789,358 12,400,439 2,550,153 5,491,653
Non-cash selling general and
administrative expense......... 133,500 -- 143,986 10,722 87,269
Depreciation and amortization.... 30,273 35,225 424,274 79,302 114,639
Research and development
expense........................ -- 255,000 860,350 142,945 375,292
---------- ---------- ----------- ---------- ----------
Total operating costs and
expenses................ 5,845,718 8,982,637 16,969,465 3,502,554 7,130,590
---------- ---------- ----------- ---------- ----------
Operating (loss) income............ (288,018) 269,421 1,655,049 697,380 (10,952)
---------- ---------- ----------- ---------- ----------
Other income (expense):
Interest expense................. (5,496) (14,017) (356,598) (55,758) (72,060)
Interest income.................. 2,909 4,383 11,950 2,197 5,591
Other............................ 3,629 (2,749) 8,059 2,450 9,822
---------- ---------- ----------- ---------- ----------
Total other income
(expense)............... 1,042 (12,383) (336,589) (51,111) (56,647)
---------- ---------- ----------- ---------- ----------
Income before benefit (provision)
for income taxes................. (286,976) 257,038 1,318,460 646,269 (67,599)
Benefit (provision) for income
taxes............................ 106,530 (121,484) (547,996) (270,368) 29,068
---------- ---------- ----------- ---------- ----------
Net (loss) income.................. $ (180,446) $ 135,554 $ 770,464 $ 375,901 $ (38,531)
========== ========== =========== ========== ==========
Net (loss) income per common share:
Basic............................ $ (0.02) $ 0.02 $ 0.10 $ 0.05 $ (0.00)
========== ========== =========== ========== ==========
Diluted.......................... $ (0.02) $ 0.02 $ 0.09 $ 0.04 $ (0.00)
========== ========== =========== ========== ==========
Weighted average common shares
outstanding:
Basic............................ 7,576,580 7,978,234 8,028,673 7,981,248 8,539,643
========== ========== =========== ========== ==========
Diluted.......................... 7,576,580 8,584,329 8,975,493 8,759,904 8,539,643
========== ========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 72
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT TOTAL
--------- ------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996........... 5,830,000 $5,830 $1,139,553 $ -- $(1,622,394) $ (477,011)
Conversion of debt to equity....... 1,261,248 1,262 787,021 -- -- 788,283
Proceeds from sale of stock........ 880,000 880 549,120 -- -- 550,000
Deferred compensation.............. -- -- 133,500 -- -- 133,500
Net loss........................... -- -- -- -- (180,446) (180,446)
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1997........... 7,971,248 7,972 2,609,194 -- (1,802,840) 814,326
Stock options exercised............ 10,000 10 6,240 -- -- 6,250
Net income......................... -- -- -- -- 135,554 135,554
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1998........... 7,981,248 7,982 2,615,434 -- (1,667,286) 956,130
Conversion of debt to equity....... 558,395 558 1,744,426 -- -- 1,744,984
Deferred compensation.............. -- -- 1,428,360 (1,284,374) -- 143,986
Net income......................... -- -- -- -- 770,464 770,464
--------- ------ ---------- ----------- ----------- ----------
Balance, December 31, 1999........... 8,539,643 $8,540 $5,788,220 $(1,284,374) $ (896,822) $3,615,564
========= ====== ========== =========== =========== ==========
Deferred Compensation (unaudited).. -- -- -- 87,269 -- 87,269
--------- ------ ---------- ----------- ----------- ----------
Net Loss (unaudited)............... -- -- -- -- (38,531) (38,531)
--------- ------ ---------- ----------- ----------- ----------
Balance, March 31, 2000
(unaudited)........................ 8,539,643 $8,540 $5,788,220 $(1,197,105) $ (935,353) $3,664,302
========= ====== ========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 73
FIRST HORIZON PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, --------------------------
----------------------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999 2000
--------- --------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................... $(180,446) $ 135,554 $ 770,464 $ 375,901 $ (38,531)
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation and amortization................... 30,273 35,225 424,274 79,302 114,639
Non-cash interest expenses...................... -- -- 144,984 --
Deferred tax provision.......................... (108,867) 102,000 (352,450) --
Non-cash compensation expense................... 133,500 -- 143,986 10,722 87,269
Loss on disposal of equipment................... -- 4,404 --
Changes in assets and liabilities net of
acquired assets and liabilities:
Accounts receivable........................... (226,597) (486,629) (1,753,375) (822,353) 39,126
Inventories................................... 35,309 (261,368) (396,218) (1,874) (996,849)
Samples and other prepaid expenses............ (304,815) (139,445) (83,232) 1,435 (1,138,112)
Note receivable from related party............ -- (30,000) -- -- (20,372)
Accrued expenses.............................. 153,621 446,429 1,763,019 317,500 700,492
Accounts payable.............................. 272,031 13,288 356,850 (106,307) 979,291
--------- --------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities................................ (195,991) (180,542) 1,018,302 (145,674) (273,047)
--------- --------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of intangibles........................... 500 -- (4,000,000) (4,000,000) --
Purchase of property and equipment................ (121,272) (208,464) (185,709) (75,020) (68,959)
--------- --------- ----------- ----------- -----------
Net cash used in investing activities....... (120,772) (208,464) (4,185,709) (4,075,020) (68,959)
Cash flows from financing activities:
Proceeds from revolving loan agreement............ -- 563,013 197,072 1,200,000
Proceeds from long-term debt...................... -- -- 4,000,000 4,000,000 (342,345)
Principal payments on long-term debt.............. (19,457) -- (1,235,000) (47,764) --
Proceeds from issuance of common stock............ 550,000 6,250 -- --
--------- --------- ----------- ----------- -----------
Net cash provided by financing activities... 530,543 569,263 2,962,072 3,952,236 857,655
--------- --------- ----------- ----------- -----------
Net change in cash and cash equivalents............. 213,780 180,257 (205,335) (268,458) 515,649
Cash and cash equivalents, beginning of period...... 30,986 244,766 425,023 425,023 219,688
--------- --------- ----------- ----------- -----------
Cash and cash equivalents, end of period............ $ 244,766 $ 425,023 $ 219,688 $ 156,565 $ 735,337
========= ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 74
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
First Horizon Pharmaceutical Corporation (formerly Horizon Pharmaceutical
Corporation, the "Company") is an emerging pharmaceutical company that markets
and sells brand name prescription drugs to high-prescribing primary care and
select specialty physicians in the United States through their nationwide sales
and marketing field force. The Company focuses on the treatment of chronic
conditions, including cardiovascular diseases, respiratory and
gastroenterological disorders, and pain and inflammation. The Company's strategy
is to acquire and obtain licenses for pharmaceutical products that other
companies do not actively market, and to increase sales through aggressive
promotion and marketing. In addition, the Company seeks to maximize the value of
their drugs by developing new patentable formulations, using new delivery
methods and seeking regulatory approval for new indications.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The financial statements as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the unaudited financial statements for
these interim periods have been included. The results of interim periods are not
necessarily indicative of results to be obtained for a full year.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment to customers and
are shown net of sales adjustments. Provisions for discounts, rebates to
customers, returns, and other adjustments are provided in the same period that
the related sales are recorded. Cost of revenues is comprised of purchased
product costs.
ROYALTIES AND COMMISSION COSTS
The Company pays royalties and commissions on the sale of certain products.
These costs are included in selling general and administrative costs in the
accompanying statement of operations. Total royalties and commission costs were
$81,000, $194,000, $620,000, $91,000 and $358,000 for the years ending December
31, 1997, 1998 and 1999, and for the three months ended March 31, 1999 and 2000,
respectively.
RESEARCH AND DEVELOPMENT
Research and development expenses consist primarily of costs incurred to
develop formulations, engage contract research organizations to conduct clinical
studies, test products under development and engage medical and regulatory
consultants. The Company expenses all research and development costs as
incurred. Research and development costs were $0, $255,000, $860,350, $142,945,
and $375,292 for the years ended December 31, 1997, 1998 and 1999, and for the
three months ended March 1, 1999 and 2000, respectively.
F-7
<PAGE> 75
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
RETURNS AND REBATE ALLOWANCES
The Company provides all customers with a right of return within six months
of the expiration date of the product, and as a result records a provision for
returns at the time of sale. The Company is contractually obligated to pay
rebates on the sale of certain prescription drugs. The reserve for returns and
rebates is estimated based upon historical experience and other relevant
information, in accordance with generally accepted accounting principles. There
is no certainty that future returns and rebates will not exceed established
reserves.
CASH AND CASH EQUIVALENTS
The Company considers only those investments that are highly liquid, and
readily convertible to cash with an original maturity of three months or less to
be cash equivalents. The Company had no cash equivalents at December 31, 1998,
1999 or March 31, 2000.
CONCENTRATION OF CREDIT RISK
The Company extends credit on an uncollateralized basis primarily to
wholesale drug distributors and retail pharmacy chains throughout the United
States. Historically, the Company has not experienced significant credit losses
on its accounts.
The Company's five largest customers accounted for approximately 79%, 66%,
and 68% of accounts receivable at December 31, 1998, 1999 and March 31, 2000,
respectively.
The following table represents a summary of sales to significant customers
as a percentage of the Company's total revenues:
<TABLE>
<CAPTION>
CUSTOMER 1997 1998 1999
- -------- ---- ---- ----
<S> <C> <C> <C>
McKesson HBOC, Inc.......................................... 29% 29% 28%
Cardinal Health, Inc........................................ 28 28 19
Bergen Brunswig Corporation................................. 12 12 10
</TABLE>
The Company relies on third-party suppliers to produce its products. The
supply of a product whose sales comprised 24% of the Company's sales in 1999 is
exclusively available through a single supplier.
Two products accounted for 46%, 49%, 51%, 41% and 51% of the Company's
sales in 1997, 1998 and 1999, and for the three months ended March 31, 1999 and
2000, respectively.
SEGMENT REPORTING
The Company operates in a single segment, the sale and marketing of
prescription drugs.
INVENTORIES
Inventories consist of purchased pharmaceutical products and are stated at
the lower of cost or market. Cost is determined using the first-in, first-out
method.
SAMPLES AND OTHER PREPAID EXPENSES
Samples and other prepaid expenses primarily consist of product samples
used in the sales and marketing efforts of the Company's products. Samples are
expensed upon distribution.
F-8
<PAGE> 76
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major improvements, which extend
the lives of existing property and equipment, are capitalized. Depreciation is
provided for on the straight-line basis over the estimated useful lives of the
assets. Accelerated depreciation is used for income tax purposes. Expenditures
for maintenance and repairs that do not extend the lives of the applicable
assets are charged to expense as incurred.
The estimated useful lives of the classes of assets generally are as
follows:
<TABLE>
<S> <C>
Office equipment........................................... Five to ten years
Furniture and fixtures..................................... Five to ten years
Computer hardware and software............................. Three to seven years
Leasehold improvements..................................... Five years
</TABLE>
The components of property and equipment as of December 31, 1998 and 1999,
and March 31, 2000 are as follows:
<TABLE>
<CAPTION>
1998 1999 MARCH 31, 2000
-------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Office equipment................................ $ 36,583 $ 42,315 $ 52,437
Furniture and fixtures.......................... 81,641 131,065 162,764
Computer hardware and software.................. 172,892 294,414 321,552
Leasehold improvements.......................... 89,617 98,648 98,648
-------- --------- ---------
380,733 566,442 635,401
Less accumulated depreciation and
amortization.................................. (75,486) (144,346) (166,376)
-------- --------- ---------
Property and equipment, net........... $305,247 $ 422,096 $ 469,025
======== ========= =========
</TABLE>
Depreciation and amortization expense related to property and equipment,
for the years ended December 31, 1997, 1998, 1999, and for the three months
ended March 31, 1999 and 2000, was $29,924, $34,745, $68,860, $14,560 and
$22,030, respectively.
In the event that facts and circumstances indicate that the carrying
amounts of property and equipment may be impaired, an evaluation of
recoverability is performed using the estimated future undiscounted cash flows
associated with the asset compared to the asset's carrying amount to determine
if a write-down is required.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or "SOP," No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. The Company was required to implement SOP No.
98-1 for the year ending December 31, 1999. The adoption of SOP No. 98-1 had no
impact to the financial condition or results of operations of the Company.
INTANGIBLE ASSETS
The costs of obtaining patents and product licenses are capitalized and
amortized on a straight-line basis over the estimated periods benefited by the
asset (15 to 20 years). Amortization of such assets is included in depreciation
and amortization expense in the accompanying financial statements. Amortization
expense for the years ended December 31, 1997, 1998, and 1999, and for
F-9
<PAGE> 77
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
the three months ended March 31, 1999 and 2000 was $979, $480, $269,326, $32,342
and $73,442, respectively.
The Company continually reevaluates the propriety of the carrying amount of
intangibles as well as the related amortization period to determine whether the
current events and circumstances warrant adjustments to the carrying values
and/or estimates of useful lives. This evaluation is performed using the
estimated projected future undiscounted cash flows associated with the asset
compared to the asset's carrying amount to determine if a write-down is
required. To the extent such projections indicate that the undiscounted cash
flows are not expected to be adequate to recover the carrying amounts, the
assets are written down to fair value as determined by discounting future cash
flows.
INCOME TAXES
The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes."
SFAS No. 109 requires recognition of deferred tax assets and liabilities using
currently enacted tax rates.
ADVERTISING COSTS
The Company follows the policy of charging the costs of advertising to
expense as incurred. Advertising expenses were $46,188, $39,233, $178,929,
$45,725 and 453,726 for the years ending December 31, 1997, 1998 and 1999, and
for the three months ended March 31, 1999 and 2000, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's borrowings under its variable rate long-term debt agreements
are recorded at cost, which approximates fair value.
EARNINGS PER SHARE
As required by SFAS No. 128, "Earnings Per Share," the Company has
presented basic and diluted earnings per common share amounts in the
accompanying financial statements. Basic earnings per common share is calculated
based on the weighted average common shares outstanding during the year, while
diluted earnings per common share also gives effect to all potential dilutive
stock equivalents during each year such as options, warrants, and contingently
issuable shares. The Company incurred a net loss in 1997 and for the three
months ended March 31, 2000 and, as such, the weighted average number of common
shares used for diluted earnings per common share does not consider the
potential dilutive effect of 502,126 and 1,557,571 common stock equivalents,
respectively, as such consideration would have an antidilutive effect on
earnings per common share.
F-10
<PAGE> 78
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Below is the calculation of basic and diluted net (loss) income per common
share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------------- -------------------------------
1997 1998 1999 MARCH 31, 1999 MARCH 31, 2000
---------- ---------- ----------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net (loss) income.......... $ (180,446) $ 135,554 $ 770,464 $ 375,901 $ (38,531)
========== ========== =========== ========== ==========
Weighted average common
shares
outstanding -- basic..... 7,576,580 7,978,234 8,028,673 7,981,248 8,539,643
Dilutive effect of stock
options.................. N/A 606,095 946,820 778,656 N/A
---------- ---------- ----------- ---------- ----------
Weighted average common
shares
outstanding -- diluted... 7,576,580 8,584,329 8,975,493 8,759,904 8,539,643
========== ========== =========== ========== ==========
Basic net (loss) income per
share.................... $ (0.02) $ 0.02 $ 0.10 $ 0.05 $ (0.00)
========== ========== =========== ========== ==========
Diluted net (loss) income
per share................ $ (0.02) $ 0.02 $ 0.09 $ 0.04 $ (0.00)
========== ========== =========== ========== ==========
</TABLE>
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year financial statement presentation.
RESTATED FINANCIAL STATEMENTS
The financial statements for the period ending December 31, 1997 have been
restated to reflect certain adjustments for accrued expenses net of taxes.
SUPPLEMENTAL CASH FLOW DISCLOSURES
The Company purchased intangible assets for $4,000,000 in cash with an
additional $1,800,000 financed by the seller. Pursuant to the acquisition, the
Company also assumed estimated liabilities of $218,460 for returns of products
shipped by the seller prior to the acquisition date in 1999.
The Company issued 1,261,248 and 558,395 shares of common stock in the
conversion of outstanding convertible debt (including accrued interest) totaling
$788,283 and $1,744,984 and in 1997 and 1999, respectively.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, ---------------------
------------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999 2000
---- ------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid for taxes................... $ -- $ -- $777,927 $ 9,380 $324,741
==== ======= ======== ======== ========
Cash paid for interest................ $970 $10,855 $235,889 $ 27,010 $135,939
==== ======= ======== ======== ========
</TABLE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company must
adopt SFAS No. 133 for the year ending December 31, 2000. SFAS No. 133
established methods of accounting for derivative financial
F-11
<PAGE> 79
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
instruments and hedging activities related to those instruments as well as other
hedging activities. Management believes adoption of SFAS No. 133 will not have a
material impact on the Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires additional disclosure and presentation of
amounts comprising comprehensive income beyond net income. The Company had no
items of other comprehensive income amounts for the periods presented. As a
result, the adoption had no impact on the Company's reporting under generally
accepted accounting principles.
2. REVOLVING LOAN AGREEMENT
In May 1998, the Company entered into a revolving loan agreement with a
bank under which the Company can borrow up to $1,000,000, subject to borrowing
base limitations based on eligible accounts receivable and inventory balances,
as defined in the agreement. The revolving loan agreement was amended and
restated on December 22, 1998 to provide for partial financing of a product
acquisition through a term loan. Under the amended agreement, terms of the
revolving loan facility provide for up to $2,500,000, subject to borrowing base
limitations based on eligible accounts receivable and inventory, as defined in
the agreement. Borrowings under the revolving loan facility bear interest at the
bank's prime rate, and are due on January 31, 2001. At December 31, 1999, the
outstanding balance under the revolving loan was $800,000 with an interest rate
of 8.5%, and the Company had additional availability under the terms of the
agreement of approximately $1,700,000. During January 2000, the loan agreement
was amended and restated to provide for borrowings up to $3,500,000 through June
30, 2000, reverting back to $2,500,000 from June 30, 2000 to January 31, 2001.
The revolving loan agreement contains certain restrictive covenants including,
among other things, minimum EBITDA levels and debt to equity ratio. Any failure
to comply with these requirements could have a material adverse effect on the
Company's operations, unless waivers are obtained.
F-12
<PAGE> 80
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and 1999, and
March 31, 2000:
<TABLE>
<CAPTION>
1998 1999 MARCH 31, 2000
-------- ----------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Term note payable (initial amount of
$2,400,000) to a bank bearing interest at
the lesser of Prime or LIBOR plus 2%
(7.96% at December 31, 1999), with
monthly payments of $40,000 plus accrued
interest maturing in December 2001....... $ -- $ 1,840,000 $ 1,720,000
Obligation to a seller of intangible assets
payable in quarterly installments of
$225,000 through February 2001, net of an
unamortized discount of $52,850, using an
interest rate of 8.75%................... -- 1,058,886 855,708
-------- ----------- -----------
-- 2,898,886 2,575,708
Less current maturities.................... -- (1,270,389) (1,270,389)
-------- ----------- -----------
Total............................ $ -- $ 1,628,497 $ 1,305,319
======== =========== ===========
</TABLE>
The term note payable contains certain restrictive covenants including,
among other things, minimum EBITDA levels and debt to equity ratio. Any failure
to comply with these requirements could have a material adverse effect on the
Company's operations, unless waivers are obtained.
Future maturities of long-term debt are $1,270,389 and $1,628,497 for the
years ended December 31, 2000 and 2001, respectively.
4. ACCRUED EXPENSES
Accrued expenses consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- THREE MONTHS ENDED
1998 1999 MARCH 31, 2000
-------- ---------- ----------------------
(UNAUDITED)
<S> <C> <C> <C>
Employee compensation and benefits.... $510,578 $ 949,325 $ 585,957
Customer return allowance............. 140,000 272,423 325,524
Product rebates....................... -- 851,248 1,479,404
Interest.............................. 15,028 64,011 25,480
Other................................. 130,039 755,720 1,176,854
-------- ---------- ----------
$795,645 $2,892,727 $3,593,219
======== ========== ==========
</TABLE>
5. STOCKHOLDER'S EQUITY
In 1998, the Company approved a four-for-one common stock split, thus
increasing authorized common shares from 10 million to 40 million. All common
stock information for all periods presented herein has been restated to give
effect to this stock split.
F-13
<PAGE> 81
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCKHOLDER'S EQUITY -- (CONTINUED)
Through 1996, the Company borrowed $635,000 from related parties accruing
interest at Prime plus 2%. During 1997, the Company issued 1,261,248 shares of
common stock by converting the $635,000 of debt to shareholders, plus accrued
interest of $153,283 to common stock at a rate of $0.625 per share, the then
estimated fair market value. Additionally, the Company issued 880,000 shares of
common stock at $0.625 per share in exchange for $550,000 in cash.
In 1998, 10,000 shares of common stock were issued upon exercise of stock
options at an exercise price of $0.625 per share.
In December 1999, the Company issued 558,395 shares of common stock to the
Company's majority stockholder upon the conversion of $1.6 million of
convertible debt incurred in January 1999 for the purchase of a product license
and accrued interest of $144,984 thereon to common stock. The shares were
converted at a rate of $3.125 as stipulated in the applicable agreement. The
original debt agreement stipulated an interest rate of Prime plus 2% (10.25% at
the conversion date) with the full principal amount due by December 1, 2001.
Under the Company's Restated Certificate of Incorporation the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 1,000,000 shares of preferred stock in one or more series and to fix
the rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any series
or the designation of such series, without any further vote or action by the
stockholders. The issuance of preferred stock could adversely affect the voting
power of holders of common stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of the Company, which could have a depressive effect on the
market price of our common stock. The Company has no present plan to issue any
shares of preferred stock. As of December 31, 1998 and 1999 and March 31, 2000
there were no shares of preferred stock outstanding.
6. STOCK OPTIONS
Pursuant to the Company's 1997 Non-Qualified Stock Option Plan (the
"Plan"), the Board of Directors approved the issuance of options to purchase
shares of common stock of the Company to various employees. Under the Plan,
4,000,000 shares (adjusted for the 1998 four-for-one stock split) of common
stock were reserved for issuance. Vesting periods range from immediate to four
years, and options granted generally expire seven years from the date of grant.
All options also include accelerated vesting provisions in the event of a change
in control, as defined in the Plan.
F-14
<PAGE> 82
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTIONS -- (CONTINUED)
The Company has granted stock options to officers, directors, and employees
as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
OF SHARES AVERAGE
SUBJECT TO EXERCISE
OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding at December 31, 1996........................... -- N/A
Granted.................................................. 870,000 $0.556
Canceled................................................. -- N/A
---------
Outstanding at December 31, 1997........................... 870,000 0.556
Granted.................................................. 122,000 1.875
Canceled................................................. (10,000) 1.375
Exercised................................................ (10,000) 0.625
---------
Outstanding at December 31, 1998........................... 972,000 0.712
Granted.................................................. 785,500 2.494
Canceled................................................. (5,000) 2.250
Exercised................................................ -- N/A
---------
Outstanding at December 31, 1999........................... 1,752,500 $1.506
=========
Granted (unaudited)...................................... 47,500 8.350
Cancelled (unaudited).................................... (5,000) 2.125
Exercised (unaudited).................................... -- N/A
---------
Outstanding at March 31, 2000 (unaudited).................. 1,795,000 1.685
=========
Shares vested at December 31, 1999......................... 753,750
=========
Shares vested at March 31, 2000 (unaudited)................ 830,625
=========
</TABLE>
At December 31, 1999, approximately 2,237,500 shares remained reserved for
issuance under the 1997 Plan. Subsequent to year-end the Company retired the
1997 Plan. Prior to the retirement of the 1997 Plan the Company's board approved
the issuance of an additional 47,500 options, exercisable at $8.35 per share. At
February 14, 2000, 1,800,000 options were issued and outstanding under the 1997
Plan. The intent of Company management is to no longer issue options under the
1997 Plan. The following table sets forth the range of exercise prices, number
of shares, weighted average exercise price, and remaining contractual lives by
similar price and grant date at December 31, 1999.
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------- -----------------------
OUTSTANDING WEIGHTED WEIGHTED EXERCISABLE WEIGHTED
AT AVERAGE AVERAGE AT AVERAGE
DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICE 1999 CONTRACTUAL LIFE PRICE 1999 PRICE
- ----------------------------- ------------ ---------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.500 - $0.625 856,000 4.9 years $0.556 706,000 $0.540
1.875 - 1.880 234,000 7.7 years 1.876 41,500 1.877
2.500 - 2.650 662,500 9.6 years 2.605 6,250 2.500
--------- -------
Total 1,752,500 753,750
========= =======
</TABLE>
F-15
<PAGE> 83
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTIONS -- (CONTINUED)
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock options. Accordingly, the Company obtained appraisals
of the fair market value of the stock on the date of the option grant and will
recognize compensation expense over the vesting period of the options. The
Company has recognized compensation expense related to stock option grants of
$133,500, $0, $143,986, $10,722 and $87,269 in 1997, 1998 and 1999, and for the
three months ended March 31, 1999 and 2000 respectively. Had compensation costs
for these options been determined using the minimum value option pricing model
prescribed by SFAS 123, "Accounting for Stock Based Compensation," the Company's
Pro forma net (loss) income per common share would have been reported as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1997 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Net (loss) income:
As reported..................................... $(180,446) $135,554 $770,464
Pro-forma....................................... (251,889) 111,734 476,823
Net (Loss) Income per Common Share -- basic:
As Reported..................................... (0.02) 0.02 0.10
Pro-forma....................................... (0.03) 0.01 0.06
Net (Loss) Income per Common Share -- diluted:
As Reported..................................... (0.02) 0.02 0.09
Pro-forma....................................... (0.03) 0.01 0.05
</TABLE>
The weighted average minimum value of options granted during 1997, 1998 and
1999 is estimated at $0.44, $1.51, and $2.01 per share. The minimum value of
options is estimated on the date of the grant using the following weighted
average assumptions:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate........................... 6.19% 5.53% 5.57%
Expected dividend yield........................... -- -- --
Expected lives.................................... 4 years 4 years 4 years
Expected volatility............................... -- % -- % -- %
</TABLE>
On February 14, 2000, the Board of Directors and stockholders approved the
2000 Stock Plan. This plan provides for the granting of incentive stock options
under the Internal Revenue Code of 1986; options that do not qualify as
incentive stock options, stock awards or stock bonuses, and sales of stock. The
2000 Stock Plan provides for the grants of these options and other awards to
officers, directors, full- and part-time employees, advisors and consultants.
Only full-time employees may receive incentive stock options. The Company has
reserved 2,000,000 shares of common stock for issuance under the 2000 Stock
Plan. The Company's compensation committee administers the 2000 Stock Plan and
has the sole authority to determine the meaning and application of the terms of
the plan and all grant agreements, the persons to whom option or stock grants
are made, the nature and amount of option or stock grants, the price to be paid
upon exercise of each option, the period within which options may be exercised,
the restrictions on stock awards, and the other terms and conditions of awards.
The 2000 Stock Plan will terminate in February 2010. Subsequent to the approval
of this plan, the Company's Board of Directors approved the grant of options to
purchase 177,950 shares of common stock which will become effective upon the
issuance of stock by the Company in a public offering. Such options will be
exercisable at the offering price.
F-16
<PAGE> 84
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTIONS -- (CONTINUED)
The Company adopted an employee stock purchase plan on February 14, 2000
that is intended to qualify as an employee stock purchase plan within the
meaning of Section 423 of the Internal Revenue Code. The Company has reserved
500,000 shares of common stock for the stock purchase plan. In order to
participate in the stock purchase plan, employees must meet eligibility
requirements, including length of employment. Participating employees will be
able to direct the Company to make payroll deductions of up to 7% of their
compensation during an offering period for the purchase of shares of the
Company's common stock. Each offering period will be six months, beginning on
July 1, 2000. The stock purchase plan will provide participating employees with
the right, subject to specific limitations, to purchase the Company's common
stock at a price equal to 85% of the lesser of the fair market value of the
Company's common stock on the first or last day of the offering period. The
Board of Directors has the authority to amend, suspend or discontinue the stock
purchase plan as long as the change will not adversely affect participants
without their consent and as long as the Company receives the shareholder
approval required by law. The stock purchase plan will terminate on December 31,
2010.
7. INCOME TAXES
The benefit (provision) for income taxes for 1997, 1998 and 1999 consisted
of the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Current....................................... $ (2,337) $ (19,484) $(900,446)
Deferred...................................... 108,867 (102,000) 352,450
-------- --------- ---------
Total............................... $106,530 $(121,484) $(547,996)
======== ========= =========
</TABLE>
A reconciliation of the statutory rate to the effective rate as recognized
in the statement of operations is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate.................................... 35% (35)% (35)%
State taxes, net.......................................... 4 (4) (4)
Nondeductible meals and entertainment expenses............ (2) (8) (3)
-- --- ---
37% (47)% (42)%
== === ===
</TABLE>
F-17
<PAGE> 85
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES -- (CONTINUED)
Deferred tax assets and liabilities reflect the impact of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts recognized for income tax purposes.
Significant components of the Company's net deferred tax assets as of December
31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Current deferred tax assets:
Net operating loss carryforward........................... $ 33,196 $ --
Accrued liabilities....................................... 60,335 439,785
Deferred compensation..................................... 53,400 110,995
-------- --------
146,931 550,780
-------- --------
Long-term deferred tax liabilities:
Depreciation and amortization............................. 25,080 76,479
-------- --------
Net deferred tax assets........................... $121,851 $474,301
======== ========
</TABLE>
8. LICENSE AGREEMENTS AND PRODUCT RIGHTS
On January 1, 1996, the Company obtained exclusive distribution rights from
Unisource, Inc. for Tanafed in North America through December 31, 2003 with an
option for an additional seven years. The agreement requires the Company to
purchase all of their requirements for Tanafed from Unisource, including at
least certain minimum quantities of Tanafed in each year of the agreement. The
Company entered into a patent and license agreement with the raw materials'
supplier for Tanafed dated January 2000, which provides a license to a patent
covering an active ingredient in Tanafed.
On October 31, 1998, the Company entered into an agreement with Inpharmakon
Corporation in which the Company acquired rights to the proprietary information
for a migraine product for which the Company plans to conduct clinical studies
and submit a new drug application. The agreement expires on October 31, 2008,
but the Company may renew it indefinitely after expiration. If the Company does
not obtain regulatory approval of the drug within a specified time after filing
for such approval and thereafter commence and continue to aggressively market
and sale the product, Inpharmakon may terminate the agreement. In the event that
Inpharmakon terminates the agreement for failure to achieve these milestones,
Inpharmakon may purchase rights to develop the drug. The Company must also pay
up to an aggregate of $950,000 in non-refundable fees to Inpharmakon at various
developmental milestones through and including regulatory approval of the
product, and, in the event of commercial sales of the product, the Company must
pay royalties at rates which management believes are within industry customary
ranges. If the Company elects to sell the business opportunity to a third party,
the Company must share the proceeds of the sale with Inpharmakon.
On January 29, 1999, the Company acquired exclusive rights in the United
States to Robinul and Robinul Forte tablets from American Home Products
Corporation for $4,000,000 in cash with an additional $1,800,000 financed by the
seller (See Note 3). Pursuant to the acquisition, the Company also assumed
estimated liabilities of $218,460 for returns of products shipped by the seller
prior to the acquisition date. The Company has recorded the total purchase price
for this acquisition as an intangible asset in its financial statements. The
Company agreed to pay royalties on net sales as long as the Company sells the
product. The Company negotiated for AHP, or its
F-18
<PAGE> 86
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. LICENSE AGREEMENTS AND PRODUCT RIGHTS -- (CONTINUED)
designee, to continue to manufacture and supply the product to the Company until
January 29, 2001. The Company has an agreement with a supplier, dated April 23,
1999, for the supplier to become qualified under applicable regulations to
manufacture and supply the requirements for Robinul. Under this agreement, the
supplier will manufacture the products for five years from the time the supplier
becomes a qualified manufacturer plus renewal terms of one year until either
party elects to not renew. The agreement with the supplier requires that the
Company purchase certain designated minimum quantities. The Company has
capitalized the cost of obtaining the license and is amortizing it over an
estimated economic life of 20 years.
On March 25, 1999, the Company acquired the rights from Penwest
Pharmaceuticals Co. to the application of Penwest's controlled release TIMERx
technology to the active ingredient in the migraine product. Under the Penwest
agreement, the Company has the right to manufacture, use and sell the developed
product in North America and Mexico for a period extending fifteen years from
the date a new drug application is issued for the product, as well as a license
to the TIMERx(R) patents for such purpose. The Company must pay Penwest an
aggregate of up to approximately $2,600,000 of non-refundable fees upon
achieving specified development milestones through the first anniversary of the
first commercial sale of the product following regulatory approval and royalties
upon any sales of the migraine product. Penwest may terminate the agreement in
the event the Company fails to timely achieve designated performance milestones
within prescribed time periods.
In July 1999, the Company entered in to an agreement with Pohl-Boskamp for
the exclusive rights to distribute, market and sell Nitrolingual Pumpspray
beginning on February 1, 2000 in the United States for five years plus an
additional five year renewal period subject to establishing mutually acceptable
minimum purchase requirements. Under the agreement, Pohl-Boskamp supplies the
Company with their requirements of product at prices that decrease as volume
purchased in each year increases. The Company must purchase designated minimum
quantities in each year of the agreement and pay a royalty on net sales of the
product. Aventis had exclusive rights through January 2000 to a version of the
product containing CFC named Nitrolingual Spray. To promote earlier adoption of
Nitrolingual Pumpspray, the Company obtained exclusive rights from Aventis to
market this CFC product in the United States as of November 22, 1999.
Each of the Company's third-party manufacturing agreements requires that
the Company purchase all of their product requirements from the manufacturers
that are a party to those agreements.
The Company uses third-party manufacturers for the production of its
products for development and commercial purposes. Given the general
under-utilization of resources, the availability of excess capacity for
manufacturing in the marketplace, and the lower cost of outsourcing, the Company
intends to continue to outsource manufacturing for the near-term.
The Company currently uses the services of six third-party manufacturers
for manufacturing of the Company's products pursuant to the Company's product
specifications. The Company has manufacturing and supply agreements with five of
these manufacturers. The remaining terms of these agreements generally range
from one to five years. Under some of these agreements, the manufacturers or
other third parties own the rights to the product that the Company has under
their marketing licenses. Except for our Defen-LA, Protuss-D, and Zoto-HC
products, these agreements generally state that the product supplier will
provide products only to us. The Company has not entered into agreements for
alternative manufacturing sources for any of its products. The
F-19
<PAGE> 87
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. LICENSE AGREEMENTS AND PRODUCT RIGHTS -- (CONTINUED)
suppliers of Nitrolingual Pumpspray and the raw materials for Tanafed hold
patents for their respective products.
9. RETIREMENT PLAN
In 1996, the Company began a qualified defined contribution 401(k) plan,
which provides benefits to substantially all employees. The annual contribution,
if any, to the trust is at the discretion of the Board of Directors of the
Company. There were no employer contributions to the plan for the year ended
December 31, 1997. Employer contributions to the plan for the years ended
December 31, 1998 and 1999, and for the three months ended March 31, 1999 and
2000 were $20,695, $36,055, $8,781 and $29,593, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under a cancelable operating lease that
expires in August 2003. The total rent expense was $38,962, $90,315, $211,533,
$51,498, and $63,759 for the years ended December 31, 1997, 1998, and 1999, and
for the three months ended March 31, 1999 and 2000, respectively. The Company
leases vehicles for certain employees under cancelable lease agreements expiring
in 2001. The total vehicle lease expense under the lease agreement for the years
ended December 31, 1997, 1998 and 1999, and for the three months ended March 31,
1999 and 2000 was $0, $0, $434,393, $0 and $244,540, respectively.
The total minimum future commitment under leases for years succeeding
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
2000...................................................... $ 999,969
2001...................................................... 621,903
2002...................................................... 198,073
2003...................................................... 137,640
2004...................................................... 8,525
----------
Total............................................. $1,966,110
==========
</TABLE>
Subsequent to year end, the Company entered in employment contracts with
certain executives. These contracts provide base salaries ranging from $80,000
to $110,000.
11. RELATED-PARTY TRANSACTIONS
The Company purchases repackaging services from Diversified Healthcare
Services, a related party. For the years ended December 31, 1997, 1998, and 1999
and the three months ended March 31, 1999 and 2000, the amounts paid for
repackaging were approximately $83,000, $132,000, $282,000, $43,800 and $84,134,
respectively.
The Company pays royalties to a related party for particular products sold.
For the years ended December 31, 1997, 1998, and 1999 and the three months ended
March 31, 1999 and 2000, the amounts paid for royalties were approximately
$91,000, $160,000, $163,000, $29,344, and $42,797 respectively.
During 1997, the Company converted $385,000 in loans from Kamal Kapoor, a
related party, plus $124,363 accrued interest, into 814,978 shares of common
stock at a rate of $0.625 per share.
F-20
<PAGE> 88
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. RELATED-PARTY TRANSACTIONS -- (CONTINUED)
During 1997, the Company converted $150,000 in loans from the John N.
Kapoor Trust dated September 30, 1989, an affiliate of the Company, plus $3,345
accrued interest, into 245,352 shares of common stock at a rate of $0.625 per
share.
The Chairman and Chief Executive Officer of the Company did not receive a
salary for the year ended December 31, 1999.
During 1997, the Company converted $100,000 in loans from EJ Financial
Enterprises, plus $25,575 accrued interest, into 200,918 shares of common stock
at a rate of $0.625 per share.
On January 27, 1997, the Company issued 320,000 shares of its common stock
to the John Kapoor Trust in exchange for $200,000.
On June 30, 1997, the Company issued 560,000 shares of its common stock to
Kapoor-Pharma Investments in exchange for $350,000.
The Company extended a non-interest bearing note receivable to an officer
of the Company during 1998. As of December 31, 1998 and 1999 the amount due to
the Company under this note was $30,000.
During 1998, the Company entered into a collaboration agreement with
Inpharmakon Corporation, an affiliate of an officer of the Company, under which
Inpharmakon will assist the Company in developing their FHPC 01 product. The
Company paid $200,000, and $1,352 to Inpharmakon in 1998 and 1999, respectively,
under this agreement.
On January 11, 1999, Kapoor-Pharma Investments, an affiliate of the
Director of the Company, loaned the Company $1,600,000 at an interest rate of 2%
over the Prime Rate of Interest. In November 1999, the Company converted
principal and $144,984 of accrued interest totaling $1,744,984 into 558,395
shares of common stock at $3.125 per share, pursuant to the terms of the loan
agreement.
12. SUBSEQUENT EVENTS (UNAUDITED)
PRODUCT AGREEMENTS
On April 14, 2000, the Company acquired exclusive rights from
Warner-Lambert to distribute, market, and sell the drug Ponstel in the United
States for $9.5 million in cash and a $3.5 million promissory note to the
seller. The Company financed $9.5 million of the transaction under a bridge loan
agreement with LaSalle Bank. The agreement includes the purchase of the
licensing rights described above as well as certain trademarks. In addition the
Company agreed to purchase all of the outstanding inventory of Ponstel for
approximately $100,000. The promissory note is payable in full upon the receipt
of proceeds from an initial public offering of the Company's common stock and in
all cases no later than November 30, 2000.
The Company negotiated with Warner-Lambert to continue to manufacture and
supply the Ponstel product to the Company through December 31, 2000. The Company
is currently in negotiations to secure a replacement manufacturer for Ponstel.
On April 14, 2000, the Company entered into an agreement with
Warner-Lambert to purchase exclusive rights in the United States and other
countries to market, distribute and sell a drug called Cognex, as well as rights
to a new unapproved version of Cognex, called Cognex CR. The purchase of Cognex
is contingent on Warner-Lambert receiving Federal Trade Commission ("FTC")
approval for the transaction and the satisfaction of other customary conditions.
If the Company
F-21
<PAGE> 89
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED) -- (CONTINUED)
acquires Cognex, the Company will be required to pay $3.5 million in cash for
the product. Warner-Lambert may terminate this agreement if the transaction has
not closed by June 30, 2000, unless it has not closed because of a delay in
receiving FTC approval.
The Company must also pay Warner-Lambert up to $1.5 million in additional
purchase price if the Company obtains FDA approval to market Cognex CR. The
Company may have to undertake additional studies for this approval. In the event
that the Company voluntarily stops selling Cognex for 60 days or more other than
for reasons outside their control, the FTC may order that Cognex revert back to
Warner-Lambert and be divested by the FTC to another purchaser.
The agreement for the Cognex transaction provides for a sublicense to the
Company of Warner-Lambert's rights to an active ingredient in Cognex. The
Company will be required to pay royalties on net sales of Cognex. However, the
Company will be entitled to apply the amount of royalties that Warner-Lambert
has prepaid for these patents and the Company does not expect to pay royalties
in the near future.
The agreement for Cognex provides for a supply agreement under which an
affiliate of Warner-Lambert will manufacture and supply Cognex to the Company
and supply to the Company the active ingredient in Cognex for two years after
the Cognex transactions close, subject to a one year renewal. The Company will
pay Warner-Lambert's affiliate a production fee for its manufacture of Cognex
and the active ingredient. The supply agreement contains designated quantities
of Cognex and its active ingredient that Warner-Lambert's affiliate will supply
and that the Company must purchase. The Company plans to secure a replacement
manufacturer for Cognex and is currently in negotiations with a potential
manufacturer.
As a condition to closing the Cognex purchase the Company intends to enter
into a transition services agreement with Warner-Lambert under which
Warner-Lambert will provide transitional administrative services to the Company
until November 30, 2000 in connection with the sale of Cognex in European
countries. These services will include maintenance of Cognex registrations,
contact with regulatory authorities including reporting requirements, responding
to customer complaints, sales administration, shipping management, billing,
processing of returns, storage, responding to any regulatory inquiries or
investigations, responding to any customer complaints and communicating with
physicians in relation to the product. Warner-Lambert may terminate this
agreement if any person or entity acquires ownership or control of 50% or more
of the Company's common stock or acquires substantially all of the Company's
assets.
BRIDGE LOAN AGREEMENT
In conjunction with the product acquisitions discussed above, the Company
entered into an amended credit facility with LaSalle Bank that provided for
bridge financing of up to $13,000,000 to finance the Company's product
acquisitions. On April 14, 2000 the Company borrowed $9,500,000 under this
bridge loan for the Company's purchase of Ponstel. The Company intends to borrow
an additional $3,500,000 to purchase Cognex if the Cognex transaction is closed
prior to conclusion of the Company's public offer of common stock. Borrowings
under the bridge loan bear interest at the Company's choice of the prime rate of
LIBOR plus 1.5% and in the event that the bridge loan is not paid in full within
six months thereafter the loan shall bear interest at the Company's choice of
prime rate or LIBOR plus 2.0%. Interest on the bridge loan is payable monthly
beginning on May 1, 2000. Borrowings under the bridge loan mature upon the
Company's receipt of proceeds from a public offering of the Company's common
stock and no later than April 14, 2001. In the event that the Company does not
complete a public offering within six months, the Company shall make
F-22
<PAGE> 90
FIRST HORIZON PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. SUBSEQUENT EVENTS (UNAUDITED) -- (CONTINUED)
monthly principal installments of $150,000 commencing October 30, 2000 through
May 2, 2001, with the remaining outstanding balance at that point in time due as
a balloon payment.
Under the terms of the bridge loan agreement, the Company must maintain a
minimum net worth plus subordinated debt of $3,300,000 plus 75% of net income, a
ratio of liabilities to net worth plus subordinated debt after the conclusion of
the Company's public offering of common stock of 2.25 to 1.00, a minimum
specified EBITDA, ranging from $100,000 to $200,000 and a fixed charge coverage
ratio ranging from .75 to 1.00 to 1.25 to 1.00. The agreement limits the
Company's ability to incur additional indebtedness, and prohibits substantial
asset sales and cash dividends. Additionally the agreement amends the maturity
dates of the revolving loan agreement (Note 2) and the term note payable (Note
3) between LaSalle Bank and the Company to May 2, 2001. In addition to the
collateral assigned under the original agreements with LaSalle Bank, the Company
pledged, as collateral for the bridge loan, a security interest in the Ponstel
trademarks to LaSalle Bank.
As additional collateral, for the bridge loan financing, John Kapoor (a
director of the Company) and his wife pledged a security interest in the
securities and investments of the Kapoor Children's 1992 Trust totaling $10
million. As consideration for the Pledge, the Company will pay the Kapoor
Children's Trust $100,000 per year, for as long as the pledge is in effect, and
all of the Trusts expenses incurred in connection with perfecting the security
interest.
INPHARMAKON COLLABORATION AGREEMENT
On May 3, 2000 the Company entered into an agreement with Inpharmakon
Corporation, a related party, to amend certain payment terms under the existing
product development agreement between Inpharmakon and the Company whereby the
Company must pay to Inpharmakon an additional $200,000 within thirty days of
completion of a public offering of the Company's common stock. In the event that
the Company does not complete a public offering of their common stock by October
20, 2000 the Company is obligated to pay Inpharmakon an additional $100,000 and
provided further that in the event the Company has not completed a public
offering of their common stock by April 20, 2001 the Company must pay an
additional $100,000 to Inpharmakon.
F-23
<PAGE> 91
3,800,000 SHARES
(1ST HORIZON LOGO)
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
CHASE H&Q
BANC OF AMERICA SECURITIES LLC
THOMAS WEISEL PARTNERS LLC
-----------------------
, 2000
-----------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
UNTIL , 2000 (25 DAYS AFTER COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT BUY, SELL, OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All the amounts are estimates except for
the registration fee, the Nasdaq listing fee and the NASD filing fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- ------
<S> <C>
Registration fee............................................ $ 16,152
Nasdaq National Market listing fee.......................... 83,875
NASD filing fee............................................. 6,618
Blue sky qualification fees and expenses.................... 5,000
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 328,355
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 25,000
----------
Total............................................. $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Delaware law, the Registrant's Restated Certificate of
Incorporation provides that no director of the Registrant will be personally
liable to the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of duty of
loyalty to First Horizon or to its stockholders, (b) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for
any transaction from which the director derived an improper personal benefit.
The Registrant's Restated Certificate of Incorporation further provides that the
Registrant must indemnify its directors and executive officers and may indemnify
its other officers and employees and agents to the fullest extent permitted by
Delaware law. The Registrant maintains a policy of directors and officers
insurance that provides insurance against certain expenses and liabilities which
may be incurred by directors and officers.
The Underwriting Agreement (Exhibit 1) will provide for indemnification by
the underwriters of the Registrant, its directors, its officers who sign the
registration statement, and the Registrant's controlling persons for certain
liabilities, including liabilities arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, the Registrant has sold or issued the
following unregistered securities:
(1) As of December 8, 1999, the Registrant issued an aggregate of
558,395 shares of its common stock for an aggregate consideration of
$1,744,984 to an accredited investor pursuant to the conversion of a
convertible promissory note issued to such accredited investor as of
January 11, 1999.
(2) As of December 7, 1998, the Registrant made effective a four for
one stock split with respect to its issued and outstanding common stock.
II-1
<PAGE> 93
(3) As of April 20, 1998, the Registrant issued 10,000 shares of its
common stock for an aggregate consideration of $6,250 to an employee
pursuant to the exercise of its stock option.
(4) As of June 30, 1997, the Registrant issued 560,000 shares of its
common stock for an aggregate consideration of $350,000 to one accredited
investor.
(5) At various times during the relevant three-year time period, the
Registrant issued to certain employees and consultants options to purchase
in the aggregate up to 1,725,500 shares of its common stock at exercise
prices ranging from $0.50 to $2.65 per share.
Exemption from the registration provisions of the Securities Act for the
transaction described in paragraph 2 above was claimed on the basis that such
transaction did not constitute an "offer," "offer to sell," "sale," or "offer to
buy" under Section 5 of the Securities Act. Exemption from the registration
provisions of the Securities Act for the other transactions described above was
claimed under Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder on the basis that such transaction did not involve any
public offering, the purchasers were sophisticated with access to the kind of
information registration would provide and that such purchasers acquired such
securities without a view towards distribution thereof. In addition, exemption
from the registration provisions of the Securities Act for the transactions
described in paragraphs 3 and 5 was claimed under Section 3(b) of the Securities
Act on the basis that such securities were sold pursuant to a written
compensatory benefit plans or pursuant to a written contract relating to
compensation and not for capital raising purposes under Rule 701 of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this
registration statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
1 * -- Form of Underwriting Agreement
3.1* -- Restated Certificate of Incorporation of the Registrant
3.2* -- Amended and Restated Bylaws of the Registrant
4.1* -- Form of Stock Certificate
4.2* -- Amended and Restated Loan and Security Agreement dated as of
December 22, 1998 between the Registrant and LaSalle Bank
National Association
4.3* -- First Amendment to Amended and Restated Loan and Security
Agreement dated as of May 10, 1999 between the Registrant
and LaSalle Bank National Association
4.4* -- Second Amendment to Amended and Restated Loan and Security
Agreement dated as of January 2, 2000 between the Registrant
and LaSalle Bank National Association
4.5* -- Third Amendment to Amended and Restated Loan and Security
Agreement dated as of April 14, 2000 between the Registrant
and LaSalle Bank National Association
4.6* -- Reimbursement Agreement dated April 14, 2000 between the
Registrant and Kapoor Children's 1992 Trust
5 * -- Opinion of Arnall Golden & Gregory, LLP
10.1* -- 1997 Non-Qualified Stock Option Plan
10.2* -- 2000 Stock Plan
10.3* -- Form of Nonqualified Stock Option Agreement
</TABLE>
II-2
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
10.4* -- Form of Employment Agreement dated as of January 1, 2000
between the Registrant and certain of its executive officers
10.5* -- Convertible Term Loan Note dated January 11, 1999 made by
the Registrant for the benefit of Kapoor Pharma Investments,
L.P., as amended by Amendment No. 1 to the Convertible Term
Note dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.6* -- Convertible Term Note Agreement dated January 11, 1999
between the Registrant and Kapoor Pharma Investments, L.P.,
as amended by Amendment No. 1 to the Convertible Term Note
dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.7* -- Lease Agreement dated June 28, 1998 between the Registrant
and ASC North Fulton Associates Joint Venture
10.8***+ -- Product Development and Supply Agreement dated March 25,
1999 between the Registrant and Penwest Pharmaceuticals Co.
10.9***+ -- Collaboration Agreement dated October 31, 1998 between the
Registrant and Inpharmakon Corporation
10.10***+ -- Exclusive Patent License Agreement dated January 1, 2000
between the Registrant and Jame Fine Chemicals, Inc.
10.11***+ -- Exclusive Distribution Agreement dated January 1, 1996
between the Registrant and Unisource, Inc.
10.12***+ -- Manufacturing and Supply Agreement dated April 23, 1999
between the Registrant and Mikart, Inc.
10.13***+ -- Product Supply Agreement dated January 29, 1999 between the
Registrant and American Home Products Corporation
10.14***+ -- License Agreement dated January 29, 1999 between the
Registrant and American Home Products Corporation
10.15*** -- Distribution Agreement dated July 22, 1999 between the
Registrant and G. Pohl-Boskamp GmbH & Co.
10.16* -- Form of Indemnity Agreement between the Registrant and its
directors and executive officers
10.17*** -- Asset Purchase Agreement dated April 10, 2000 between the
Registrant and Warner-Lambert Company
10.18*** -- Supply Agreement dated April 14, 2000 between the Registrant
and Warner-Lambert Company
10.19***+ -- Asset Purchase Agreement dated April 14, 2000 between the
Registrant and Warner-Lambert Company
10.20* -- Amendment No. 1 to the Product Development and Supply
Agreement, dated May 3, 2000 between the Registrant and
Penwest Pharmaceuticals Co.
10.21+ -- Amendment to the Collaboration Agreement, dated May 3, 2000
between the Registrant and Inpharmakon Corporation
23.1+ -- Consent of Arthur Andersen LLP
23.2* -- Consent of Arnall Golden & Gregory, LLP (included in Exhibit
5)
</TABLE>
II-3
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
24.1* -- Powers of Attorney
27 * -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Previously filed
*** First Horizon has requested confidential treatment for certain portions of
this exhibit pursuant to Rule 406 of the Securities Act of 1933, as
amended.
+ Filed herewith
(b) The following is the schedule filed as a part of the registration
statement: Schedule II -- Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide the underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will governed by the final adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 96
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement on Form S-1 to be signed
on its behalf by the undersigned, in the City of Roswell, State of Georgia on
the 24th day of May, 2000.
FIRST HORIZON PHARMACEUTICAL CORPORATION
By: /s/ R. BRENT DIXON
---------------------------------------
R. Brent Dixon
President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MAHENDRA G. SHAH, PH.D.* Chairman of the Board and Chief May 24, 2000
- --------------------------------------------- Executive Officer (principal
Mahendra G. Shah, Ph.D. executive officer)
/s/ R. BRENT DIXON President and Director May 24, 2000
- ---------------------------------------------
R. Brent Dixon
/s/ JOHN. N. KAPOOR, PH.D.* Director May 24, 2000
- ---------------------------------------------
John. N. Kapoor, Ph.D.
/s/ BALAJI VENKATARAMAN* Vice President and Chief Financial May 24, 2000
- --------------------------------------------- Officer (principal financial and
Balaji Venkataraman accounting officer)
/s/ JON S. SAXE* Director May 24, 2000
- ---------------------------------------------
Jon S. Saxe
/s/ PIERRE LAPALME* Director May 24, 2000
- ---------------------------------------------
Pierre Lapalme
*By: /s/ R. BRENT DIXON
--------------------------------------
R. Brent Dixon
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 97
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To First Horizon Pharmaceutical Corporation:
We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements of FIRST HORIZON PHARMACEUTICAL
CORPORATION (formerly Horizon Pharmaceutical Corporation, a Delaware
corporation) included in this registration statement and have issued our report
thereon dated February 17, 2000. Our audit was made for the purpose of forming
an opinion on the basic financial statements taken as a whole. The schedule
located in this registration statement at item 16(b) is the responsibility of
the company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 17, 2000
II-6
<PAGE> 98
SCHEDULE II
FIRST HORIZON PHARMACEUTICAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED
BEGINNING COSTS AND TO OTHER
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS BALANCE
-------------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1997 Allowance for doubtful accounts $ -- $ 25,924 $ -- $ (12,674) $ 13,250
Allowance for customer returns 100,000 38,289 -- (38,289) 100,000
1998 Allowance for doubtful accounts 13,250 40,714 (18,569) 35,395
Allowance for customer returns 100,000 80,994 (40,994) 140,000
1999 Allowance for doubtful accounts 35,395 51,493 (31,105) 55,783
Allowance for customer returns 140,000 366,904 (234,481) 272,423
Allowance for product rebates -- 1,294,072 (442,824) 851,248
</TABLE>
II-7
<PAGE> 99
EXHIBIT INDEX
The following is a list of exhibits filed as a part of this registration
statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
1* -- Form of Underwriting Agreement
3.1* -- Restated Certificate of Incorporation of the Registrant.
3.2* -- Amended and Restated By-Laws of the Registrant.
4.1* -- Form of Stock Certificate
4.2* -- Amended and Restated Loan and Security Agreement dated as of
December 22, 1998 between the Registrant and LaSalle Bank
National Association
4.3* -- First Amendment to Amended and Restated Loan and Security
Agreement dated as of May 10, 1999 between the Registrant
and LaSalle Bank National Association
4.4* -- Second Amendment to Amended and Restated Loan and Security
Agreement dated as of January 2, 2000 between the Registrant
and LaSalle Bank National Association
4.5* -- Third Amendment to Amended and Restated Loan and Security
Agreement dated as of April 14, 2000 between the Registrant
and LaSalle Bank National Association
4.6* -- Reimbursement Agreement dated April 14, 2000 between the
Registrant and the Kapoor Children's 1992 Trust
5* -- Opinion of Arnall Golden & Gregory, LLP
10.1* -- 1997 Non-Qualified Stock Option Plan
10.2* -- 2000 Stock Plan
10.3* -- Form of Nonqualified Stock Option Agreement
10.4* -- Form of Employment Agreement dated as of January 1, 2000
between the Registrant and certain of its executive officers
10.5* -- Convertible Term Loan Note dated January 11, 1999 made by
the Registrant for the benefit of Kapoor Pharma Investments,
L.P., as amended by Amendment No. 1 to the Convertible Term
Note dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.6* -- Convertible Term Note Agreement dated January 11, 1999
between the Registrant and Kapoor Pharma Investments, L.P.,
as amended by Amendment No. 1 to the Convertible Term Note
dated January 11, 1999 made by the Registrant for the
benefit of Kapoor Pharma Investments, L.P.
10.7* -- Lease Agreement dated June 28, 1998 between the Registrant
and ASC North Fulton Associates Joint Venture
10.8***+ -- Product Development and Supply Agreement, dated March 25,
1999 between the Registrant and Penwest Pharmaceuticals Co.
10.9***+ -- Collaboration Agreement dated October 31, 1998 between the
Registrant and Inpharmakon Corporation
10.10***+ -- Exclusive Patent License Agreement dated January 1, 2000
between the Registrant and Jame Fine Chemicals, Inc.
</TABLE>
II-8
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- -----------
<C> <C> <S>
10.11***+ -- Exclusive Distribution Agreement, dated January 1, 1996,
between the Registrant and Unisource, Inc.
10.12***+ -- Manufacturing and Supply Agreement, dated April 23, 1999,
between the Registrant and Mikart, Inc.
10.13***+ -- Product Supply Agreement, dated January 29, 1999, between
the Registrant and American Home Products Corporation
10.14***+ -- License Agreement, dated January 29, 1999, between the
Registrant and American Home Products Corporation
10.15*** -- Distribution Agreement dated July 22, 1999 between the
Registrant and G. Pohl-Boskamp GmbH & Co.
10.16* -- Form of Indemnity Agreement between the Registrant and its
directors and executive officers
10.17*** -- Asset Purchase Agreement dated April 10, 2000 between the
Registrant and Warner-Lambert Company
10.18*** -- Supply Agreement dated April 14, 2000 between the Registrant
and Warner-Lambert Company
10.19***+ -- Asset Purchase Agreement dated April 14, 2000 between the
Registrant and Warner-Lambert Company
10.20* -- Amendment No. 1 to the Product Development and Supply
Agreement, dated May 3, 2000 between the Registrant and
Penwest Pharmaceuticals Co.
10.21+ -- Amendment to the Collaboration Agreement, dated May 3, 2000
between the Registrant and Inpharmakon Corporation
23.1+ -- Consent of Arthur Andersen LLP
23.2* -- Consent of Arnall Golden & Gregory, LLP (included in Exhibit
5)
24.1* -- Powers of Attorney
27* -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Previously filed.
*** First Horizon has requested confidential treatment for certain portions of
this exhibit pursuant to Rule 406 of the Securities Act of 1933, as amended.
+ Filed herewith
II-9
<PAGE> 1
EXHIBIT 10.8
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately
With The Securities and Exchange Commission.
PRODUCT DEVELOPMENT AND SUPPLY AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of March 25, 1999
(the "Effective Date") by and between Penwest Pharmaceuticals Co., a Washington
corporation with a principal place of business at 2981 Route 22, Patterson, New
York 12563 ("Penwest"), and Horizon Pharmaceutical Corporation, a Delaware
corporation with a principal place of business at 660 Hembree Parkway, Suite
106, Roswell, Georgia 30076 ("Horizon").
A. Whereas Penwest has developed a controlled-release agent covered by
one or more patents, patent applications, know-how and other proprietary
technology, which agent Penwest markets under the name "TIMERx" ("TIMERx"), and
Penwest is the owner of certain patents covering controlled release formulations
of the active ingredient [***];
B. Whereas Horizon is interested in developing for manufacture and
marketing a pharmaceutical product incorporating [***] in a solid-dosage
controlled-release delivery system for oral administration in humans; and
C. Whereas the parties desire to engage in certain research,
development, and testing activities designed to determine if Penwest's TIMERx
controlled-release system can be adapted and combined with [***] to make a
controlled-release version of [***] for oral solid-dosage administration in
humans in a 24 hour release form in a 200 mg dosage strength and, if such
activities are successful, Horizon desires to contract for a supply of TIMERx
for use in the manufacture of such a controlled-release form of [***], and
Penwest is willing to supply the same, provided that Horizon agrees to obtain
all of its requirements for controlled-release agents for [***] products in the
form of TIMERx from Penwest as provided herein;
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS.
1.1 "Affiliate" shall mean any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by, or is under common control
with a specified person or entity. For purposes of this Section 1.1, "control"
shall mean (a) in the case of corporate entities, direct or indirect ownership
of at least fifty percent (50%) of the stock or shares having the right to vote
for the election of directors, and (b) in the case of non-corporate entities,
direct or indirect ownership of at least fifty percent (50%) of the equity
interest with the power to direct the management and policies of such
non-corporate entities.
-1-
<PAGE> 2
[***] - CONFIDENTIAL TREATMENT REQUESTED
1.2 "Approval Date" shall mean the date on which the Designated Product
is first approved by the FDA for commercial sale in oral solid-dosage form for
administration in humans, pursuant to an NDA.
1.3 "Capable Entity" shall mean any third party that, in Penwest's
reasonable judgment, (a) has, as applicable, (i) a sales force in the Exclusive
Territory that exceeds Horizon's sales force therein, (ii) annual sales that
exceed those of Horizon, (iii) a financial capacity to market the Designated
Product that exceeds that of Horizon and (iv) a capacity to manufacture the
Designated Product in finished form that exceeds that of Horizon, and (b) does
not manufacture, market or promote any oral, controlled-release drug delivery
product.
1.4 "Certification Period" shall mean the period beginning on the
Submission Date and ending on the earlier of:
1.4.1 the Approval Date; or
1.4.2 the termination of this Agreement as provided herein.
1.5 "Confidential Information" shall mean all information, technology
and know-how disclosed hereunder that is, at the relevant time hereunder,
protected or required to be protected by both parties hereto as confidential
information pursuant to Article 8 hereof.
1.6 "Covered Infringement" shall have the meaning set forth for such
term in Section 9.1.
1.7 "Designated Product" shall mean the solid-dosage form of a
controlled-release pharmaceutical for oral administration in humans that
combines a racemic mixture of [***] with TIMERx and other excipients, as more
fully described in Exhibit A, which exhibit is subject to modifications as
Penwest and Horizon may mutually agree during the Development Period.
1.8 "Development Period" shall mean the period from the Effective Date
through the Submission Date or the earlier termination of this Agreement as
provided herein.
1.9 "Development Tasks" shall have the meaning set forth for such term
in Section 3.4.
1.10 "DMF" shall mean Drug Master File with respect to Formulated
TIMERx as defined in 21 CFR 300 et seq., including amendments and supplements
which will be filed by Penwest.
1.11 "FDA" shall mean the U.S. Food and Drug Administration.
1.12 "Formulated TIMERx" shall mean TIMERx and certain additives in a
formulation to be developed hereunder specifically for use in the Designated
Product.
1.13 "Horizon Test and Regulatory Data" shall mean any and all test
data, test designs and protocols, clinical studies and results thereof,
government licenses and applications therefor, government certifications and
findings, and related materials, information and rights (including without
limitation information regarding bioavailability and bioequivalence, and any
adverse drug reactions), developed, commissioned or otherwise obtained by
Horizon or any of its Affiliates or sublicensees during the term of this
Agreement (or, with respect to such sublicensees, during the term of the
respective sublicenses) relating to TIMERx, TIMERx Improvements, the Designated
Product, Penwest Patents, Penwest Technology, and/or Penwest's Confidential
Information, together with all intellectual property and other rights and
interests of Horizon and its Affiliates or sublicensees thereto and therein,
worldwide.
1.14 "Horizon Trademarks" shall mean trademarks which are the exclusive
property of and which shall remain at all times the exclusive property of
Horizon or its Affiliates.
-2-
<PAGE> 3
1.15 "IMS Data" shall mean data published in the IMS Retail
Perspective(TM), published by IMS America, Ltd.
1.16 "IND" shall mean an investigational new drug application filed
with the FDA.
1.17 "Inpharmakon" shall mean Inpharmakon Corporation.
1.18 "Indication" shall mean the treatment and/or prophylaxis of
migraine.
1.19 "Joint Developments" shall mean any and all inventions,
improvements, modifications, alterations, or enhancements, other than TIMERx
Improvements, that are made jointly by Horizon or any of its Affiliates or
sublicensees, on the one hand, and Penwest or any of its Affiliates or
sublicensees, on the other hand, in the course of this Agreement, together with
all United States and foreign intellectual property and other rights and
interests of the parties and their respective Affiliates thereto and therein,
including without limitation patents, trade secrets, copyright, periods of
market exclusivity, and other related rights or interests, to the extent the
same remain protected by any such rights and interests from being used freely by
others; provided, however, that none of the Penwest Test and Regulatory Data or
Horizon Test and Regulatory Data shall be considered Joint Developments.
1.20 "License Term" shall mean the cumulative period covered by the
Development Period, the Certification Period, and the Marketing Period.
1.21 "Marketing Period" shall have the meaning set forth for such term
in Section 5.1.
1.22 "Minimum Sales" shall have the meaning set forth for such term in
Exhibit G.
1.23 "NDA" shall mean a new drug application filed with the FDA.
1.24 "Net Sales" shall have the meaning set forth for such term in
Exhibit B.
1.25 "Penwest Patents" shall mean:
1.25.1 those patents and patent applications listed in Exhibit
C and all divisions, continuations, reissues, or extensions thereof, any periods
of marketing exclusivity relating thereto, and any letters patent that issue
thereon; and
1.25.2 Penwest's rights in and to any United States patents or
patent applications other than those included in Section 1.20.1, obtained and in
force during the License Term covering any inventions included in the Penwest
Technology.
1.26 "Penwest Technology" shall mean any technology and know-how
belonging to Penwest from time to time during the term of this Agreement that
directly relate to, and/or are necessary for the production of, the Designated
Product, and Penwest's rights therein and thereto.
1.27 "Penwest Test and Regulatory Data" shall mean any and all test
data, test designs and protocols, clinical studies and results thereof,
government licenses and applications therefor, government certifications and
findings, and related materials, information and rights (including without
limitation information regarding bioavailability and any adverse drug
reactions), developed, commissioned or otherwise obtained by Penwest or any of
its Affiliates during the term of this Agreement relating to TIMERx, Penwest
Patents, Penwest Technology, and/or Penwest's Confidential Information, together
with all intellectual property and other rights and interests of Penwest and its
Affiliates thereto and therein in the Territory.
-3-
<PAGE> 4
1.28 "Penwest Trademark(s)" shall mean those names, symbols and/or
characters described in Exhibit D hereto, as the same may be amended from time
to time during the terms of this Agreement by Penwest on at least six (6)
months' prior written notice to Horizon, that are owned and registered (or are
registrable) by Penwest and that have been designated by it for use in
conjunction with Horizon's packaging and promotion of the Designated Product
hereunder, pursuant to Section 6.10.
1.29 "Project Contact(s)" shall mean the persons appointed by each
party to serve as contact persons between the parties during the Development
Period and the Certification Period. The initial Project Contact for Penwest is
Mr. Michael Mallon and the initial Project Contact for Horizon is Mr. Bala
Venkataraman. Each party shall promptly notify the other party of any
substitution of other personnel as its Project Contact. Each party may select
and supervise its other project staff as needed.
1.30 "Royalties" (or "Royalty") shall mean the royalties payable to
Penwest pursuant to Article 5 hereof.
1.31 "Sales Differential" shall have the meaning set forth for such
term in Section 11.2.2.
-4-
<PAGE> 5
[***]-CONFIDENTIAL TREATMENT REQUESTED
1.32 "Specifications" shall mean such standards and analytical methods
established and mutually agreed to in writing by Penwest and Horizon as are
reasonably necessary or appropriate to assure the identity, strength, quality
and purity of the TIMERx and Formulated TIMERx, as set forth in Exhibit E, which
(a) shall be mutually agreed to by the parties hereto, and (b) may be modified
from time to time by mutual agreement of the parties hereto.
1.33 "Submission Date" shall mean the date on which Horizon submits to
the FDA an NDA for the Designated Product (in any dosage strength).
1.34 "Territory" shall mean Canada, the United States, Mexico and their
respective territories and possessions.
1.35 "TIMERx Improvements" shall mean any and all improvements,
modifications, alterations, or enhancements to any of the inventions covered by
the Penwest Patents or included in the Penwest Technology or Penwest's
Confidential Information, that are developed, owned, or controlled by Horizon or
any of its Affiliates or sublicensees, either alone or jointly with Penwest or
any of its Affiliates or sublicensees, or in which Horizon or any of its
Affiliates or sublicensees otherwise has any rights or interests during the term
of this Agreement (or, with respect to such sublicensees, during the term of the
respective sublicenses) together with all United States and foreign intellectual
property and other rights and interests of Horizon and its Affiliates and
sublicensees thereto and therein, including without limitation patents, trade
secrets, copyright, periods of market exclusivity, and other related rights or
interests, to the extent the same remain protected by any such rights and
interests from being used freely by others.
1.36 "Unit Price" shall mean [***] U.S. dollars (US$[***]) per kilogram
of Formulated TIMERx, subject to adjustment no more often than once annually to
reflect any increase in the Pharmaceutical Producers' Price Index.
2. GRANT OF LICENSES AND TRANSFER OF TECHNOLOGY.
2.1 GRANTS BY PENWEST.
2.1.1 Penwest hereby grants to Horizon an exclusive,
royalty-bearing license, under the Penwest Patents, the Penwest Technology, the
Joint Developments, the TIMERx Improvements and Penwest's Confidential
Information disclosed to Horizon hereunder, to manufacture, use and sell and
register the Designated Product in the Territory during the License Term. Such
license does not extend to (a) the making of TIMERx or Formulated TIMERx, but
does cover the incorporation of Formulated TIMERx into the Designated Product,
or (b) any metabolite, isolated enantiomer or non-racemic mixture of [***].
Horizon shall have the right to grant sublicenses of its rights hereunder to any
Affiliate(s) of Horizon (and this Agreement shall thereby be binding upon and
inure to the benefit of such Affiliate(s) within the area of such sublicense),
but shall otherwise have no right to grant sublicenses hereunder without the
prior written consent of Penwest. Such consent of Penwest shall be based on
whether, as of the time the proposed sublicense is to be granted, the proposed
sublicensee is a Capable Entity, unless Horizon is able to demonstrate to
Penwest's reasonable satisfaction that such proposed sublicensee, based on the
particular characteristics of such proposed sublicensee, including but not
limited to the region of the Territory in which such proposed sublicensee would
operate, is a suitable sublicensee despite its failure to qualify as a Capable
Entity. Penwest shall, throughout the License Term, promptly notify Horizon of
all Penwest Patents referred to in Section 1.20.2 and provide Horizon with
access to all of the same, solely for use within the scope of the license stated
in this section.
2.1.2 Penwest hereby grants to Horizon and its Affiliates
(with the right to sublicense only as such right is granted under Section 2.1.1)
a nonexclusive, paid-up license under all rights of
-5-
<PAGE> 6
Penwest and its Affiliates in and to the Penwest Test and Regulatory Data to use
the same as is necessary for purposes of complying with governmental
requirements, but solely with respect to the Designated Product for marketing or
use in the Territory. Penwest hereby consents to Horizon's and its Affiliates'
and such sublicensees' cross-referencing the DMF as is necessary for the filing
of an NDA for the Designated Product hereunder.
2.1.3 Penwest hereby grants to Horizon and its Affiliates an
exclusive license (with the right to sublicense only as such right is granted
under Section 2.1.1) under any and all rights of Penwest in and to the Penwest
Trademark(s), to use the Penwest Trademark(s) solely in connection with the
manufacture, distribution, and sale of the Designated Product in the Territory
for the term of this Agreement.
2.2 GRANTS BY HORIZON.
2.2.1 Horizon hereby grants to Penwest and its Affiliates a
nonexclusive, paid-up, license, with the right to sublicense, under any and all
patents, patent applications, trade secrets, copyrights, and other intellectual
property rights of any sort owned or controlled by Horizon or its Affiliates or
sublicensees, to make and have made anywhere in the world, and to use and sell
to Horizon and its Affiliates and permitted sublicensees Formulated TIMERx for
use in the Designated Product during the License Term, if and to the extent such
license is necessary for Penwest to do so as agreed hereunder.
-6-
<PAGE> 7
[***]-CONFIDENTIAL TREATMENT REQUESTED
2.2.2 Horizon shall grant to Penwest and its Affiliates a
nonexclusive, paid-up license, with the right to sublicense, under all rights of
Horizon and its Affiliates and sublicensees in and to that portion of the
Horizon Test and Regulatory Data that is disclosed or provided to Penwest
hereunder, granting to Penwest the right to use the same for purposes of
complying with governmental requirements of any country, other than with respect
to the Designated Product for marketing or use in the Territory. Horizon shall
consent to Penwest's and its Affiliates' and sublicensees' cross-referencing, in
any filings that are essentially the equivalent of the sorts of filings that are
termed NDA filings if made with the FDA, made by them within the scope of such
license, any NDA filing made or FDA master file created by Horizon or its
Affiliates or sublicensees relating to or containing any of the Horizon Test and
Regulatory Data. Such license under this Section 2.2.2 shall survive any
termination or expiration of the term of this Agreement, except a termination
under Section 11.5 due to an uncured breach by Penwest. Horizon shall,
throughout the License Term and solely for use within the scope of such license,
promptly provide to Penwest copies of all of the Horizon Test and Regulatory
Data in or coming into Horizon's possession or otherwise reasonably available to
it.
2.3 PENWEST TECHNOLOGY TRANSFER TO HORIZON. Penwest shall, at its
expense, exert reasonable efforts to make knowledgeable personnel reasonably
available within thirty (30) days from the date of Horizon's written request, to
consult with Horizon to the extent necessary to enable Horizon to produce
Designated Product for Horizon and its Affiliates pursuant to this Agreement;
provided, however, that Horizon shall reimburse Penwest, at the rate of one
thousand U.S. dollars (US$1,000) per person per day, for Penwest personnel costs
associated with any such consultation that is not performed at Penwest. The
parties understand and agree that Horizon's performance under this Agreement
depends upon the communication of the Penwest Technology, and that, if for any
reason, it is not possible to transfer such technology to Horizon, this will not
lead to liability on Horizon's part. The Penwest Technology will be deemed to
have been successfully transferred upon completion of scale-up on
production-scale equipment and demonstration of dissolution results comparable
to those obtained for pilot scale batches.
2.4 PRODUCT DEVELOPMENT OUTSIDE THE TERRITORY. In the event that,
during the License Term, either party hereto approaches the other party with a
proposal that development of the Designated Product be undertaken outside the
Territory, such other party agrees to reasonably consider negotiating a separate
agreement with such party concerning such development, provided that any such
negotiation shall take into account a variety of factors including but not
limited to the parties' respective costs relating to, and proceeds realized
from, the development of the Designated Product.
2.5 HORIZON'S RIGHTS WITH RESPECT TO OTHER TIMERX PRODUCTS.
2.5.1 During the License Term, with respect to any product
that (a) is not the Designated Product and (b) combines TIMERx and [***], not
including any metabolite, isolated enantiomer or non-racemic mixture of [***]
for any therapeutic or prophylactic use(s) in humans, Penwest and Horizon agree
to discuss collaborations concerning the development and commercialization of
such product in the Territory. When Penwest recognizes the possibility for
developing any such product, it shall present such information to Horizon in
writing and Horizon shall have a period of forty-five (45) days in which to
initiate good faith negotiations concerning a potential collaboration with
respect to such product. If Horizon initiates such negotiations, the parties
shall have a period of ninety (90) days in which to execute a definitive
agreement, the terms and conditions of which shall govern any collaboration
between the parties with respect to such product. If either (a) a negotiation
concerning a potential collaboration with respect to any such product is not
initiated, or (b) the parties cannot agree to the terms of a collaboration witH
respect to such product, then Penwest shall have the exclusive right, either
alone or in collaboration with a third party, to undertake the development and
commercialization of
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such product, unless (i) such product is for use for the Indication or (ii)
Horizon demonstrates to Penwest's reasonable satisfaction that such product is
likely to be used off-label for the Indication, in which case Penwest shall not
have the right, either alone or in collaboration with a third party, to
undertake the development and commercialization of such product in the
Territory.
2.5.2 During the License Term, with respect to any product
that (a) is not the Designated Product and (b) combines TIMERx and any
metabolite, isolated enantiomer or non-racemic mixture of [***] for any
therapeutic or prophylactic use(s) in humans, Penwest agrees promptly to notify
Horizon in writing when Penwest recognizes the possibility for developing such
product in the Territory. Horizon shall have a period of forty-five (45) days
following such notification in which to provide to Penwest a written request
that Penwest refrain from pursuing the development and commercialization of such
product in the Territory. If (a) Horizon makes such request and (b) (i) such
product is for use for the Indication or (ii) within thirty (30) days following
Penwest's receipt of such request, Horizon demonstrates to Penwest's reasonable
satisfaction that such product is likely to be used off-label for the Indication
in the Territory, Penwest shall refrain from pursuing the development and
commercialization of such product in the Territory either on its own or with a
third party. If Horizon (a) fails to provide such request or (b) makes such
request but (i) such product is not for the Indication or (ii) Horizon fails to
make such demonstration, then Penwest shall have the right to pursue the
development and commercialization of such product in the Territory either on its
own or with a third party.
2.6 PENWEST USE OF TIMERX. Horizon acknowledges that (a) subject to
other provisions of this Agreement, Penwest and its Affiliates, for themselves
and for others, apply, and will seek to apply, TIMERx and Formulated TIMERx to
products in and outside of the Territory and (b) subject to Sections 2.5.1 and
2.5.2, no provision hereof, and no exclusivity hereunder, shall prevent Penwest
from so applying TIMERx, Formulated TIMERx or other oral, controlled release
drug delivery technology, so long as the end product is not the Designated
Product hereunder for commercial use and/or sale in the Territory; provided,
however, that, subject to Sections 2.5.1 and 2.5.2, Penwest hereby affirms that,
in the Territory, neither it nor its Affiliates shall apply, for themselves or
for others, TIMERx, Formulated TIMERx or other oral, controlled release drug
delivery technology to products containing [***].
2.7 COMMERCIALLY REASONABLE EFFORTS. During License Term, each of
Penwest and Horizon shall exert their continuing commercially reasonable efforts
to perform their respective tasks hereunder in order to create and produce the
Designated Product, and each shall cooperate with the other in such efforts. It
is understood that the exertion of a party's commercially reasonable efforts
shall mean that this project will receive a priority at least as high as any of
such party's other drug development efforts. Each party shall, promptly and
throughout the term of this Agreement, provide to the other all necessary
information in or coming into its possession or reasonably available to it for
such purposes. Notwithstanding anything else to the contrary contained herein,
nothing shall require either party to disclose confidential information for
which such party has an obligation of confidentiality to a third party.
3. DEVELOPMENT PERIOD.
3.1 INITIAL FEE. In consideration of Penwest's entering into this
Agreement, Horizon shall pay Penwest two (2) non-refundable, non-creditable
payments of [***] U.S. dollars (US$[***]) each, (a) the first such payment to be
made on the Effective Date, and (b) the second such payment to be made within
seventy-five (75) days following the Effective Date.
3.2 NON-COMPETITION BY HORIZON. As additional inducement to Penwest to
enter into this Agreement, Horizon hereby affirms that, other than (a)
confidentiality agreements not binding either
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party to any further agreement and (b) that certain Collaboration Agreement
between Horizon and Inpharmakon, dated October 31, 1998, it currently has no
agreement or arrangement with any party other than Penwest for or including the
development, design, testing, certification, manufacture or marketing by it or
such other party (or the Affiliate(s) of either) in the Territory of any
controlled-release product that incorporates [***], and agrees that it will
refrain from entering into any such agreement or arrangement (other than such
confidentiality agreements) for the term of this Agreement.
3.3 DEVELOPMENT PERIOD OBLIGATIONS. Each party understands and agrees
that the other does not warrant or commit that the Designated Product will be
successfully developed, and neither party shall have any liability or
responsibility to the other or to third parties for any such failure of the
development process hereunder, except to the extent such failure results from
said party's intentional misconduct, gross negligence, or material breach of its
duties or obligations as set forth herein.
3.4 DEVELOPMENT PERIOD SCHEDULE AND MILESTONES. During the Development
Period, Penwest and Horizon shall use their commercially reasonable efforts to
perform their respective tasks set forth in the Development Tasks and Success
Criteria contained in Exhibit F hereto (the "Development Tasks") within the
estimated time periods set forth for such tasks therein in order to create and
produce the Designated Product. (The schedule laid out in Exhibit F shall serve
as a general guide for the parties' personnel in pursuing such tasks, but,
except as provided in Section 11.2, strict conformance to such schedule shall
not be an independent criterion of success.) Each party shall bear its own costs
associated with the Development Tasks, except as is otherwise specified in
Exhibit F and Section 3.7. The parties hereby agree to the following:
3.4.1 Within [***] days following the successful completion of
preformulation, formulation, dissolution testing, and biostudy formulation
finalization with respect to the Designated Product, Horizon shall pay Penwest a
non-refundable, non-creditable milestone payment of [***] U.S. dollars
(US$[***]).
3.4.2 Within [***] days following the successful completion of
a proof-of-principal biostudy for the Designated Product, Horizon shall pay
Penwest a non-refundable, non-creditable milestone payment of [***] U.S. dollars
(US$[***]).
3.5 GOVERNMENTAL REQUIREMENTS. Subject to Section 2.4, in all countries
of the Territory where the Designated Product is being developed, manufactured,
used and/or sold by Horizon, its Affiliates and/or sublicensees, Horizon shall
be responsible for, and hereby agrees to conduct or arrange for, at the expense
of Horizon, substantial compliance with all material and relevant governmental
requirements imposed in the Territory with respect to such development,
manufacture, use, and/or sale.
3.6 REPORTS BY PROJECT CONTACTS. Each party's Project Contact shall
provide written reports to the other party's Project Contact at least monthly
throughout the Development Period, stating in detail all efforts made and in
process, and all significant progress achieved and difficulties encountered in
the development effort since the last such report. Each party's Project Contact
shall also be available throughout the Development Period to answer any
reasonable questions from the other party's Project Contact. The parties shall
cooperate reasonably during the Development Period such that the sites for
meetings among their respective personnel shall be alternated between the
parties' facilities to the extent practicable.
3.7 SUPPLY OF MATERIALS. The price for any Formulated TIMERx purchased
by Horizon from Penwest during the Development Period shall be determined as set
forth in Section 6.2. Penwest shall supply, at its own expense, all TIMERx that
it requires for the conduct of its own Development
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Period activities hereunder. Penwest shall manufacture, at its own expense, a
clinical batch of the Designated Product for the first proof-of-principal
biostudy. Horizon shall pay to Penwest [***] U.S. dollars (US$[***]) for each
clinical batch of the Designated Product for any additional proof-of-principal
biostudy.
4. CERTIFICATION PERIOD.
4.1 FILING OF NDA. During the Certification Period, Horizon shall be
responsible for the preparation of all documentation necessary for the filing of
an NDA for the Designated Product and shall file such NDA. Each party
understands and agrees that the other does not warrant or commit that the
Designated Product will be successfully certified for marketing by the FDA, and
neither party shall have any liability or responsibility to the other or to
third parties for any such failure of the certification process hereunder,
except to the extent such failure results from said party's intentional
misconduct, gross negligence, or material breach of its duties or obligations as
set forth herein.
4.2 CERTIFICATION PERIOD MILESTONES. Horizon agrees to pay Penwest,
within [***] days following the filing by Horizon of an NDA for the Designated
Product, a non-refundable, non-creditable milestone payment of [***] U.S.
dollars (US$[***]).
4.3 REPORTS BY PROJECT CONTACTS. Horizon's Project Contact shall
provide written reports to Penwest's Project Contact at least quarterly
throughout the Certification Period, stating in reasonable detail all efforts
made and in process, and all significant progress achieved and difficulties
encountered in the certification effort since the last such report. Horizon's
Project Contact also shall be available throughout the Certification Period to
answer any reasonable questions from Penwest's Project Contact.
4.4 SUPPLY OF MATERIALS. During the Certification Period, Horizon shall
provide, at its own expense, all [***] and other materials and manufacturing and
testing services reasonably required to support the testing and certification
effort. Horizon shall purchase from Penwest, in accordance with the terms set
forth in Section 6.2, all Formulated TIMERx that Horizon requires for the
conduct of Horizon's Certification Period activities hereunder. Penwest shall
supply, at its own expense, all TIMERx that it requires for the conduct of its
own Certification Period activities hereunder.
5. MARKETING PERIOD.
5.1 TERM OF MARKETING PERIOD. The Marketing Period shall extend from
the Approval Date until fifteen (15) years thereafter, unless this Agreement is
terminated earlier pursuant to Article 11. The Marketing Period may be renewed
by agreement of the parties for one (1) or more additional terms of five (5)
years each, provided that such agreement is reached at least one hundred eighty
(180) days prior to the expiration of this Agreement or any such additional
term.
5.2 REASONABLE COMMERCIAL EFFORTS BY HORIZON. Subject to the granting
of all necessary governmental approvals or concurrences to sell the Designated
Product, Horizon hereby agrees to market, promote and sell the Designated
Product throughout the Territory. Each party understands and agrees that the
other does not warrant or commit that the Designated Product will be
successfully marketed, and neither party shall have any liability or
responsibility to the other or to third parties for any such failure of the
development process hereunder, except to the extent such failure results from
said party's intentional misconduct, gross negligence, or material breach of its
duties or obligations as set forth herein.
5.3 AMOUNT OF ROYALTIES. Horizon hereby agrees to pay to Penwest
royalties on Net Sales made during the Marketing Period ("Royalties"), as
follows:
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5.3.1 [***] of Net Sales on all Net Sales until cumulative Net
Sales of [***] U.S. dollars (US$[***]) have been attained;
5.3.2 [***] of Net Sales on all Net Sales after cumulative Net
Sales of [***] U.S. dollars (US$[***]) have been attained until cumulative Net
Sales of [***] US. dollars (US$[***]) have been attained; and
5.3.3 [***] of Net Sales on all Net Sales after Net Sales of
[***] U.S. dollars (US$[***]) have been attained.
Such Royalties shall be reduced by [***] (e.g. a [***] Royalty would become a
[***] Royalty) with respect to Net Sales of a Designated Product as to which (a)
no license to Penwest Patents or to patent applications or patents included in
the Joint Developments or TIMERx Improvements hereunder is applicable to the
manufacture, sale or use of such Designated Product, or (b) a license to a
patent application included in the Penwest Patents, Joint Developments or TIMERx
Improvements is applicable to the manufacture, sale or use of such Designated
Product, but no patent has yet issued thereon; provided, however, that, with
respect to Section 5.3.3(b), (i) as of the date of issue of any such patent, the
unreduced Royalty shall become payable on all subsequent Net Sales of such
Designated Product and (ii) within ten (10) days following such date, Horizon
shall pay to Penwest an amount equal to the unreduced Royalty that would have
been payable on Net Sales of such Designated Product up until such date less the
total amount of Royalties already paid on such sales.
5.4 PAYMENT OF ROYALTIES. All Royalties payable pursuant to this
Agreement shall be due quarterly within sixty (60) days following the end of
each calendar quarter for Net Sales in such calendar quarter. Each such payment
shall be accompanied by a statement of Net Sales for the quarter and the
calculation of Royalties payable hereunder. All Royalties and all other amounts
which are overdue under this Agreement shall bear interest at the rate of one
and one-half percent (1 1/2%) per month from the date due through the date of
payment. Horizon shall keep and shall cause its Affiliates and its and their
sublicensees to keep complete, true and accurate records for the purpose of
showing the derivation of all Royalties payable to Penwest under this Agreement.
Penwest's duly accredited representatives (which representatives are approved
for such purpose by Horizon, which approval shall not be unreasonably withheld
nor shall it be revocable by Horizon following the start of any inspection
hereunder) shall have the right to inspect, copy, and audit such records at any
time during reasonable business hours upon reasonable prior notice to Horizon or
any of its Affiliates or sublicensees, respectively, but such right shall not be
exercised more often than once annually (it being understood that a single
exercise of such right may include a series of related or continuing
inspections, copying and audits). Any such audit shall be at the expense of
Penwest, unless the audit reveals that, with respect to the period under audit,
less than ninety-five percent (95%) of the Royalties due to Penwest hereunder
have been reported, in which event Horizon shall pay or reimburse Penwest for
the reasonable expenses of such audit, in addition to Penwest's other remedies
for such underpayment. In the event that any such audit reveals that, with
respect to the period under audit, Horizon has paid to Penwest Royalties in
excess of those due hereunder, Horizon shall be entitled to offset the full
amount of such excess payment against future Royalties due to Penwest.
5.5 MARKETING PERIOD MILESTONES. Horizon also agrees to pay Penwest the
following non-refundable, non-creditable milestone payments:
5.5.1 within [***] days following the first commercial sale of
the Designated Product, [***] U.S. dollars (US$[***]); and
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5.5.2 [***] following the first commercial sale of the
Designated Product, [***] U.S. dollars (US$[***]).
5.6 FORM OF PAYMENT. All monies due hereunder shall be paid in United
States Dollars to Penwest in Patterson, New York, USA. Said payment may be made
at Horizon's option by check or wire transfer.
6. SUPPLY OF FORMULATED TIMERX.
6.1 SUPPLY AND REQUIREMENTS OF FORMULATED TIMERX. During the term of
this Agreement, Penwest shall supply Horizon and its Affiliates and
sublicensees, in accordance with the terms set forth in Section 6.2, with
sufficient quantities of Formulated TIMERx to meet their reasonable requirements
for TIMERx, and Horizon shall purchase, all of its requirements, and shall
ensure that its Affiliates and sublicensees purchase all of their requirements,
for controlled-release agents for [***] products that are essentially equivalent
to the Designated Product in the form of Formulated TIMERx from Penwest.
6.2 PRICE OF TIMERX. The price for all Formulated TIMERx sold hereunder
shall equal the Unit Price multiplied by the number of kilograms of Formulated
TIMERx purchased; provided, however, that the price for the first [***] ([***])
kilograms of Formulated TIMERx sold during the Development Period and/or the
Certification Period shall be [***] U.S. dollars (US$[***]) multiplied by the
number of kilograms of Formulated TIMERx purchased. All sales of Formulated
TIMERx hereunder shall be F.O.B. Patterson, New York, and Horizon shall bear all
transportation, insurance, taxes, duties, and other costs and risks of loss,
spoilage and damage associated with the shipping and delivery of Formulated
TIMERx to Horizon or its Affiliates or sublicensees. Horizon shall pay for all
Formulated TIMERx purchased from Penwest hereunder within thirty (30) days after
receipt by Horizon or any of its Affiliates or sublicensees of an invoice and
the Formulated TIMERx shipped by Penwest.
6.3 CHANGES TO PENWEST DMF. Penwest warrants that it will not change or
modify its DMF, the Specifications, or its method of manufacture for Formulated
TIMERx without prior written consent from Horizon, which consent shall not be
unreasonably withheld.
6.4 QUALITY CONTROL. Penwest shall perform quality control tests with
respect to each lot or batch of Formulated TIMERx as required by the FDA as set
forth in the DMF, such testing to be at the expense of (a) Penwest to the extent
such testing pertains to TIMERx or Formulated TIMERx and (b) Horizon to the
extent such testing pertains to [***]. In addition, Penwest may perform such
other tests as Penwest deems necessary in accordance with its applicable
policies. No other or special tests by Penwest with respect to the raw materials
or Formulated TIMERx will be required during the License Term, unless and to the
extent that Horizon establishes that any such other or special tests are
required in order to obtain or maintain FDA approval to market the Designated
Product in the Territory, in which case any such other or special tests that are
to be performed by Penwest shall be agreed to by Penwest, such testing to be at
the expense of (a) Penwest to the extent such testing pertains to TIMERx or
Formulated TIMERx and (b) Horizon to the extent such testing pertains to [***].
Penwest shall, promptly upon completion of any such other or special tests,
deliver to Horizon a copy of the results of such other or special tests. Each
shipment of the Formulated TIMERx shall:
6.4.1 be accompanied by a Certificate of Analysis and a
Certificate of Origin;
6.4.2 meet all present applicable FDA requirements and the
Specifications; and
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6.4.3 be manufactured, packaged, stored and shipped in
conformance with the Specifications and current Good Manufacturing Practices or
other relevant regulations and requirements promulgated by the FDA and
applicable to Formulated TIMERx.
6.5 NON-ACCEPTANCE OF FORMULATED TIMERX BY HORIZON. Within a reasonable
period but not more than thirty (30) days after receipt, Horizon shall analyze
each shipment of the Formulated TIMERx. If Horizon considers any such shipment
not to conform to the Specifications, Horizon shall notify Penwest immediately
and provide Penwest with the relevant analysis. If Penwest does not agree, the
parties shall submit such disagreement to the arbitration of one mutually
accepted neutral analytical laboratory. The cost of the neutral analytical
laboratory shall be borne by the party whose testing results are determined to
have been in error. If Penwest or the neutral analytical laboratory agrees with
Horizon, Penwest shall not have any obligation to Horizon other than to
accomplish the following:
i) at its own expense accept return of any shipment not
accepted or reimburse Horizon for the cost of
disposal or destruction, at Horizon's option; and
ii) use commercially reasonable efforts to replace the
non-conforming shipment with conforming Formulated
TIMERx.
6.6 HORIZON ACCESS TO PENWEST FACILITIES. Horizon shall have the right
to enter into Penwest's manufacturing facilities and the manufacturing
facilities of its Affiliates and sublicensees, of any, at times agreed by the
parties and/or to take other appropriate methods to check the quality of the
Formulated TIMERx manufactured or offered by Penwest and its Affiliates and
sublicensees, of any, from time to time during the term of this Agreement after
reasonable prior notice to Penwest and its Affiliates and sublicensees, if any.
6.7 FORECASTING OF ORDERS BY HORIZON. Throughout the term of this
Agreement, Horizon shall deliver to Penwest, and shall ensure that its
Affiliates and sublicensees, if any, deliver to Penwest, a firm written order
stating their requirements for Formulated TIMERx for each calendar quarter to be
used for production of the Designated Product for commercial use or sale (a
"Firm Order") no less than ninety (90) days in advance of each required delivery
date during such calendar quarter (each a "Firm Order Quarter"). Horizon shall
be responsible for purchasing from Penwest one hundred percent (100%) of the
quantity of Formulated TIMERx specified in each such Firm Order. The first Firm
Order shall be submitted immediately following the reasonable determination by
Horizon that the NDA for the Designated Product will be approved by the FDA and
shall be accompanied by a written, non-binding estimate of Horizon's
requirements for Formulated TIMERx to be used for production of the Designated
Product for commercial use or sale (an "Estimated Order") during the next three
(3) calendar quarters following the first Firm Order Quarter. On or before the
first day of (a) the calendar quarter following the first Firm Order Quarter and
(b) each Firm Order Quarter thereafter, Horizon shall deliver to Penwest an
Estimated Order covering the three (3) calendar quarters following each such
Firm Order Quarter.
6.8 ADHERENCE TO ESTIMATED ORDERS. Unless the parties otherwise agree
in writing, Penwest shall not be obligated to supply Horizon with quantities of
Formulated TIMERx during any calendar quarter in excess of one hundred forty
percent (140%) of the quantity estimated in Horizon's most recent Estimated
Order applicable to that quarter. Horizon shall be responsible for purchasing
from Penwest in each calendar quarter at least seventy-five percent (75%) of the
quantity estimated in Horizon's most recent Estimated Order applicable to that
quarter.
6.9 PRODUCT SAFETY; GOVERNMENT INSPECTIONS. Each party shall promptly
notify the other of any fact, circumstance, condition or knowledge dealing with
TIMERx, Formulated TIMERx or the
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Designated Product of which the party becomes aware that bears upon the safety
or efficacy of TIMERx, Formulated TIMERx or the Designated Product. Each party
shall immediately notify the other of any inspection or audit relating to
TIMERx, Formulated TIMERx or the Designated Product by any governmental
regulatory authority in the Territory. If a representative of the governmental
authority takes samples in connection with such audit or inspection, the parties
shall immediately provide each other, as appropriate, with samples from the same
batch. The party in receipt of such notice shall provide the other party, within
seventy-two (72) hours, with copies of all relevant documents, including but not
limited to FDA Forms 482, 483, warning letters and other correspondence and
notifications as such other party may reasonably request. Penwest and Horizon
agree to cooperate with each other during any inspection, investigation or other
inquiry by the FDA or other governmental entity, including but not limited to
providing information and/or documentation, as requested by the FDA or other
governmental entity. To the extent permissible, Penwest and Horizon also agree
to discuss any responses to observations or notifications received and to give
the other party an opportunity to comment on any proposed response before it is
made. In the event of disagreement concerning the content or form of such
response, Horizon shall be responsible for deciding the appropriate form and
content of any response with respect to any of its cited activities and Penwest
shall be responsible for deciding the appropriate form and content of any
response with respect to any of its cited activities. Each party shall inform
the other of all comments and conclusions received from the governmental
authority.
6.10 PACKAGING OF DESIGNATED PRODUCT; USE OF PENWEST TRADEMARK(S).
Horizon shall manufacture and package the Designated Product in accordance with
all applicable laws and regulations in the Territory. Provided that the Penwest
Trademark(s) remain registered in the Territory, and that Penwest undertakes
reasonable efforts to protect and defend the same in the Territory, Horizon
agrees, upon and only upon Penwest's request, to market the Designated Product
in the Territory in conjunction with the appropriate Penwest Trademark(s). In
the event that Penwest so requests, the parties agree to the following:
6.10.1 Horizon acknowledges that all Penwest Trademark(s) and
all rights therein or registrations thereof, worldwide, shall belong exclusively
to Penwest, and Penwest shall use all reasonable efforts to obtain and maintain
registrations for the Penwest Trademark(s) in the Territory. All use of the
Penwest Trademark(s) as contemplated in this Agreement by Horizon shall accrue
to the benefit of Penwest. Neither Horizon nor its Affiliates or sublicensees
shall (a) make use of any of the Penwest Trademark(s) except to identify and
promote the Designated Product as contemplated hereunder for sale in the
Territory, or (b) continue using the Penwest Trademark(s) after termination or
expiration of this Agreement, nor after the removal or alteration of any such
Penwest Trademark(s) from Exhibit D, except to complete sale of reasonable
quantities of inventory of the Designated Product on hand at the time of
termination or expiration, or at the time of such removal or alteration.
6.10.2 Horizon shall cooperate with Penwest, at Penwest's
request and at Penwest's expense, to protect the interest of Penwest in the
Penwest Trademark(s), and shall neither attempt to register nor authorize others
to register the Penwest Trademark(s) without the prior written consent of
Penwest in each instance.
6.10.3 Horizon shall use, and shall ensure that its Affiliates
and sublicensees, if any, use, all appropriate notices of trademark status of
the Penwest Trademark(s), including the "(TM)" designation (or the (R) symbol
for registered marks), in all labeling and promotional materials and shall
otherwise conform with, and shall ensure that its Affiliates and sublicensees,
if any, conform with, all policies and notices of Penwest's rights in the
Penwest Trademark(s) and for the protection of the
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Penwest Trademark(s), including without limitation the inclusion of an
appropriate footnote acknowledging the use of the Penwest Trademark(s) under
license.
6.10.4 Representative samples of the Designated Product and
any advertising, promotional materials or packaging related thereto shall be
provided by Horizon to Penwest, at Horizon's expense, at least thirty (30) days
prior to the first use or sale thereof, quarterly thereafter and at other times
upon the reasonable written request of Penwest. So long as Horizon is using the
Penwest Trademark(s) in the Territory, Penwest shall have the right to enter
into Horizon's manufacturing facilities and the manufacturing facilities of its
Affiliates and sublicensees, if any, at times agreed by the parties and/or to
take other appropriate methods to check the quality of the Designated Product
manufactured or offered by Horizon and its Affiliates and sublicensees, if any,
from time to time during the term of this Agreement after reasonable prior
notice to Horizon and its Affiliates and sublicensees, if any. If at any time or
times Penwest determines that the quality of the Designated Product manufactured
or offered by Horizon and its Affiliates and sublicensees, if any, or the
packaging or promotional materials therefor, does not comply with Penwest
standards as communicated in writing from time to time to Horizon and its
Affiliates and sublicensees, if any, Penwest (a) shall so notify Horizon and its
Affiliates and sublicensees, if any, in writing and (b) if Horizon and/or its
Affiliates and sublicensees, as the case may be, has not cured such
non-compliance within sixty (60) days following such notice, shall have the
right (as its only remedy as to trademark matters) to suspend or prohibit the
use of the Penwest Trademark(s), immediately upon written notice to Horizon and
its Affiliates and sublicensees; provided, however, that Penwest need not give
such opportunity to cure any non-compliance that has been the subject of more
than two such notices on prior occasions during the preceding twelve (12)
months.
7. OWNERSHIP OF TECHNOLOGY AND INTELLECTUAL PROPERTY.
7.1 OWNERSHIP OF INTELLECTUAL PROPERTY. Horizon agrees to assign and
ensure that each of its Affiliates and sublicensees, if applicable, assigns its
rights in and to any and all TIMERx Improvements to Penwest. All right, title,
and interest in and to any and all Joint Developments shall be owned jointly by
Horizon and Penwest, and, except as specifically provided in this Agreement,
each party shall have the full right to practice and license such Joint
Developments, without obligation to obtain the approval of or to make payment of
any kind to the other party in respect thereof. Horizon shall have the right to
obtain, at its sole expense, and shall solely own any trademarks relating to the
Designated Product, subject to the approval of Penwest, which approval shall not
be unreasonably withheld. Neither party makes any grant of rights by
implication.
7.2 PROSECUTION AND MAINTENANCE OF INTELLECTUAL PROPERTY. Penwest shall
be responsible for the filing and prosecution of any and all patent applications
with respect, in whole or in part, to its own intellectual property and for the
maintenance of any available patent protection with respect thereto; provided,
however, that Penwest does not represent that any such patent protection will be
available or continuous hereunder.
7.3 MARKING OF PATENTED PRODUCTS. Horizon agrees to mark and to have
marked by its Affiliates and sublicensees (if any) every Designated Product
manufactured, used or sold by it or its Affiliates or sublicensees in the
Territory, in accordance with the laws of the United States relating to the
marking of patented articles with notices of patent.
8. CONFIDENTIALITY
8.1 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. In the course of
performance under this Agreement, a party may disclose to the other Confidential
Information belonging to such party in writing,
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orally or by demonstration or sample, which information is marked or stated in
writing at or within thirty (30) days after its disclosure to be "confidential"
or "trade secret" information. All such Confidential Information of a party
shall be maintained in confidence by the other and shall not be used by the
other party for any purpose except as authorized hereunder. Each party shall
exercise, and shall cause its Affiliates, sublicensees, consultants, agents and
employees to exercise, a reasonable degree of care and at least the same degree
of care as it uses to protect its own confidential information of similar nature
to preserve the confidentiality of such information of the other party. Each
party shall safeguard such information against disclosure to third parties,
including without limitation employees and persons working or consulting for
such party that do not have an established, current need to know such
information for purposes authorized under this Agreement. This obligation of
confidentiality does not apply to information and material that:
8.1.1 were properly in the possession of the receiving party,
without any restriction on use or disclosure, prior to receipt from the other
party;
8.1.2 are at the time of disclosure hereunder in the public
domain by public use, publication, or general knowledge;
8.1.3 become general or public knowledge through no fault of
the receiving party or its Affiliates or sublicensees following disclosure
hereunder;
8.1.4 are properly obtained by the receiving party from a
third party not under a confidentiality obligation to the disclosing party
hereto;
8.1.5 consist merely of an idea or conception for the
combination of one or more active drug ingredients with a controlled-release
agent such as TIMERx; or
8.1.6 are required to be disclosed by order of any court or
governmental authority.
8.2 NON-DISCLOSURE OF TERMS OF OR WORK UNDER AGREEMENT. Neither party
shall make any disclosure, public announcement or other publication regarding
this Agreement (whether as to the existence, conditions or terms thereof) or the
development work or projects performed hereunder or the results thereof,
including but not limited to the results of any clinical trial involving the
Designated Product, without the prior, written consent of the other party, which
consent shall not be unreasonably withheld; provided, however, that either party
may disclose the terms and conditions of this Agreement (a) as required, in the
opinion of counsel to the disclosing party, by any court, administrative agency,
or other governmental body, after making all reasonable efforts to protect the
confidentiality thereof and providing notice to the disclosing party, (b) as
otherwise required by law, (c) in confidence, to legal counsel, accountants,
banks, and financing sources and their advisors, (d) in confidence, in
connection with the enforcement of this Agreement or rights under this
Agreement, or (e) in confidence, in connection with a merger or acquisition or
proposed merger or proposed acquisition. Each party shall ensure that its
Affiliates, sublicensees, consultants, agents and employees comply with the
provisions of this Section 8.2.
9. INFRINGEMENT.
9.1 NOTICE AND PREVENTION OF INFRINGEMENT. Penwest shall (a) promptly
inform Horizon of any suspected infringement of any of the Penwest Patents or
Penwest Trademark(s) or the infringement or misappropriation of any of the
Penwest Technology, the Joint Developments or TIMERx Improvements by a third
party, to the extent such infringement involves the manufacture, use or sale of
the Designated Product in the Territory ("Covered Infringement") and (b)
consistent with its policies as to
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its TIMERx patent and trade secret portfolio generally, exert reasonable efforts
to monitor and to attempt to stop any Covered Infringement. Horizon shall
promptly inform Penwest of any suspected infringement of any of the Penwest
Patents or Penwest Trademark(s) or infringement or misappropriation of any of
the Penwest Technology, the Joint Developments or TIMERx Improvements, whether
or not the same involves a Covered Infringement.
9.2 PENWEST ACTION AGAINST INFRINGERS. If the suspected infringement or
misappropriation does not involve a Covered Infringement, Penwest may take, or
refrain from taking, any action it chooses, with written notice to Horizon, and
Horizon shall have no right to take any action with respect to such suspected
infringement or misappropriation, nor to any recoveries with respect thereto. If
the suspected infringement or misappropriation involves a Covered Infringement,
Penwest shall, within thirty (30) days of the first notice referred to in
Section 9.1, inform Horizon whether or not Penwest intends to institute suit
against such third party with respect to a Covered Infringement. Horizon shall
not take any steps toward instituting suit against any third party involving a
Covered Infringement until Penwest has informed Horizon of its intention
pursuant to the previous sentence, and then only in accordance with the terms
set forth in Sections 9.2.2 and 9.3.
9.2.1 If Penwest notifies Horizon that it intends to institute
suit against a third party with respect to a Covered Infringement, and Horizon
does not agree to join in such suit as provided in Section 9.2.2, Penwest may
bring such suit on its own and shall in such event bear all costs of, and shall
exercise all control over, such suit Horizon agrees to, at its expense, provide
any assistance to and cooperate as reasonably necessary with Penwest to
institute and/or maintain any such suit with respect to any Covered
Infringement. Recoveries, if any, whether by judgment, award, decree or
settlement, shall belong solely to Penwest.
9.2.2 If Penwest notifies Horizon that it intends to institute
suit against such third party with respect to a Covered Infringement, and
Horizon notifies Penwest within thirty (30) days after receipt of such notice
that Horizon desires to institute suit jointly, the suit shall be brought
jointly in the names of both parties and all costs thereof shall be borne
equally. Recoveries, if any, whether by judgment, award, decree or settlement,
shall, after the reimbursement of each of Penwest and Horizon for its share of
the joint costs in such action, be shared between Penwest and Horizon equally;
provided, however, that any portion of such net recoveries that constitutes the
equivalent of, or damages or payments in lieu of, defendant's net sales shall
not be shared equally, but shall belong to Horizon and be added to Horizon's Net
Sales for the purpose of determining Royalties payable to Penwest.
10. REPRESENTATIONS, WARRANTIES AND INDEMNITIES.
10.1 AUTHORITY TO ENTER INTO AGREEMENT; VALIDITY OF PATENTS; DEBARMENT.
Each party represents and warrants to the other that, to the best of its current
knowledge, it has the full right and authority to enter into this Agreement and
to grant the licenses granted herein. Each party believes, to the best of its
current knowledge, that any existing patents licensed by it to the other party
under this Agreement are valid. Each party represents and warrants to the other
that neither it nor any of its officers, directors, or employees performing
services under this Agreement has been debarred, or convicted of a crime which
could lead to debarment, under the Generic Drug Enforcement Act of 1992, 21
United States Code ss.ss.306(a) and (b). In the event that either party, or any
of its officers, directors, or employees performing services under this
Agreement, (a) becomes debarred or receives notice of action or threat of action
with respect to its debarment or (b) becomes the object of any investigation or
subject of any report regarding such party, or any of its officers, directors,
or employees performing services under this Agreement, in connection with any
activity that could result in debarment or suspension or refusal of
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approval, including without limitation any inspection report, warning letter,
notice of opportunity for hearing in a case of debarment, or any other Justice
Department, FDA or other federal or state government inquiry or action bearing
on potentially illegal activities, such party shall notify the other party
immediately.
10.2 PENWEST WARRANTIES TO TIMERX. Penwest represents and warrants that
any Formulated TIMERx supplied by it to Horizon hereunder for use in the
Designated Product, at the point of delivery (a) has been manufactured in
accordance with cGMP, (b) will conform to the Specifications, and (c) to the
best of Penwest's current knowledge, will not infringe upon an article patent of
any third party.
PENWEST MAKES NO REPRESENTATIONS OR WARRANTIES AS TO ANY TIMERX OR FORMULATED
TIMERX SUPPLIED BY IT TO HORIZON EXCEPT AS ARE EXPLICITLY STATED HEREIN.
10.3 GOVERNMENT LICENSES, PERMITS AND AUTHORIZATIONS. Each party
represents and warrants to the other party that it has obtained and will at all
times during the term of this Agreement, hold and comply with all licenses,
permits and authorizations necessary to perform this Agreement and to test,
manufacture, market, export, and import the products and assistance to be
provided by it hereunder, as now or hereafter required under any applicable
statutes, laws, ordinances, rules and regulations of the United States and any
applicable foreign, state, and local governments and governmental entities.
10.4 GOVERNMENT REGULATORY REQUIREMENTS. Horizon warrants that any
Designated Product manufactured, marketed or distributed by Horizon or its
Affiliates or sublicensees shall meet and be manufactured, packaged, labeled,
sold, and promoted in accordance with all applicable regulatory requirements
within the Territory.
10.5 INDEMNIFICATION BY PENWEST AGAINST INFRINGEMENT CLAIMS. Penwest
shall indemnify, defend and hold Horizon and its Affiliates and sublicensees
harmless from any claim, action or damages arising out of any alleged
infringement by reason of the manufacture, use, sale or distribution by Horizon
of the Designated Product to the extent such infringement would apply as well to
the manufacture, sale or distribution of TIMERx alone. If Horizon or its
Affiliate or sublicensee, by reason of its manufacture, sale or distribution of
the Designated Product, is accused of infringing the patent of a third party,
and such claim of infringement, as framed by the claimant, would apply as well
to the manufacture, sale or distribution of TIMERx alone, Horizon shall
immediately so notify Penwest and provide Penwest with all available
information, and the parties shall consult reasonably as to the proper course of
action. If Penwest and Horizon jointly determine that such claim is likely to
prevail, or if an arbitrator hereunder or a court of competent jurisdiction so
determines, Horizon shall be entitled to offset against any Royalties payable to
Penwest hereunder the full amount of any third party royalties for which Horizon
or its Affiliate or sublicensee becomes liable. For any given year following the
Approval Date, such offset shall not reduce the Royalties payable to Penwest to
less than (a) if such Royalties have not been reduced pursuant to Section 5.3,
fifty percent (50%) of the Royalty amount otherwise due Penwest absent such
offset, or (b) if such Royalties have been reduced pursuant to Section 5.3,
twenty-five percent (25%), of the Royalty amount otherwise due Penwest absent
such offset and reduction; provided, however, that Horizon may carry forward any
unutilized portion of such offset to future years.
10.6 INDEMNIFICATION BY PENWEST AGAINST OTHER THIRD PARTY CLAIMS.
Penwest shall indemnify, defend and hold Horizon and its Affiliates and
sublicensees harmless from any and all third-
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party claims (other than infringement claims) to the extent arising from, in
connection with, based upon, by reason of, or relating in any way to:
10.6.1 Penwest's contributions to the formulation or
development of the Formulated TIMERx and the Specifications therefor hereunder;
10.6.2 any failure of the Formulated TMERx supplied by Penwest
to Horizon hereunder for use in the Designated Product to conform to the
Specifications; or
10.6.3 any failure of Penwest to comply with its obligation
under Section 6.9 to notify Horizon of any information coming into Penwest's
possession and bearing on the safety of TIMERx or the Designated Product;
and, with respect to Sections 10.6.1, 10.6.2 and 10.6.3, not arising from any
other aspect of the Designated Product or its formulation, development, supply,
production, manufacture, sale, delivery, distribution or use, or from any act or
omission of Horizon with respect to the Formulated TIMERx following its delivery
to Horizon hereunder.
10.7 INDEMNIFICATION BY HORIZON AGAINST OTHER THIRD PARTY CLAIMS.
Horizon shall indemnify, defend and hold Penwest harmless from any and all
third-party claims to the extent arising from, in connection with, based upon,
by reason of, or relating in any way to, the formulation, development, supply,
production, manufacture, sale, delivery, distribution or use of the Designated
Product, except for any matters which are covered by Penwest's indemnities under
Sections 10.5 and 10.6.
10.8 INDEMNIFICATION BY HORIZON AGAINST INFRINGEMENT CLAIMS. Horizon
shall indemnify, defend and hold Penwest harmless from and against any patent
claims or litigation (and all damages and expenses associated therewith,
including without limitation reasonable attorneys fees and other costs of
defense and of the preparation of a defense, at all stages of proceedings) based
on any feature of the Designated Product or its formulation, independent of the
TIMERx component by itself. Penwest shall cooperate and assist Horizon
reasonably with the defense of any such claims or litigation. It is understood
that neither Horizon nor Penwest shall have the right to force the other into
any settlement or compromise of any such litigation, nor to dictate the terms
thereof.
10.9 INDEMNIFICATION DISCLAIMER. Notwithstanding anything to the
contrary set forth elsewhere herein, neither Horizon nor Penwest shall be
obligated to indemnify the other party for claims or liabilities to the extent
arising from such other party's, or its Affiliates', sublicensees' or assigns',
gross negligence, intentional misconduct, or material breach of its duties,
obligations, warranties or representations set forth herein.
10.10 INDEMNIFIED PARTIES; NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
Whenever indemnification is provided for a party under this Agreement with
respect to any claim or action, such right of indemnification shall extend also
to the indemnified party's Affiliates, officers, directors, shareholders,
successors, assigns, agents, employees, and insurers to the extent the same
become subject to such claim or action in such capacity. The party seeking
indemnification shall provide the indemnifying party with written notice of such
claim or action within ten (10) days of its receipt thereof and shall afford the
indemnifying party the right to control the defense and settlement of such claim
or action. The party seeking indemnification shall provide reasonable assistance
to the indemnifying party in the defense of such claim or action. If the
defendants in any such action include both Horizon and Penwest and either party
concludes that there may be legal defenses available to it which are different
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from, additional to, or inconsistent with, those available to the other, that
party shall have the right to select separate counsel to participate in the
defense of such action on its behalf, and such party shall thereafter bear the
cost and expense of such separate defense. Should the indemnifying party
determine not to defend such claim or action, the other party shall have the
right to maintain the defense of such claim or action and the indemnifying party
agrees to provide reasonable assistance to it in the defense of such claim or
action. Neither party to this Agreement shall settle or defend such claim or
action in a way that prejudices or adversely affects the other party to this
Agreement without the prior approval of such other party (which approval shall
not be unreasonably withheld).
10.11 DISPUTES CONCERNING INDEMNIFICATION. Any dispute concerning
indemnification shall be determined by arbitration in accordance with Section
12.10 of this Agreement.
10.12 LIMITATION OF WARRANTIES. THE FOREGOING WARRANTIES ARE IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS, IMPLIED OR ARISING BY LAW, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
REPRESENTATION OR WARRANTY (A) BY PENWEST AS TO THE PATENTABILITY, VALIDITY
(EXCEPT AS STATED IN SECTION 10.1), OR SCOPE OF ANY PENWEST PATENTS, PENWEST
TECHNOLOGY, PENWEST'S CONFIDENTIAL INFORMATION, JOINT DEVELOPMENTS, OR PENWEST
TEST AND REGULATORY DATA; OR (B) BY HORIZON AS TO THE PATENTABILITY, VALIDITY
(EXCEPT AS STATED IN SECTION 10.1), OR SCOPE OF ANY TIMERX IMPROVEMENTS, JOINT
DEVELOPMENTS, OR HORIZON TEST AND REGULATORY DATA.
10.13 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, NEITHER PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE FOR ANY
THIRD PARTY CLAIMS (OTHER THAN THE INDEMNIFICATIONS STATED IN THIS ARTICLE 10)
OR FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES INCLUDING ANY
LOST PROFITS OR SAVINGS, ARISING FROM ANY BREACH OF WARRANTY OR THE PERFORMANCE
OR BREACH OF ANY OTHER PROVISION OF THIS AGREEMENT OR THE USE OR INABILITY TO
USE TIMERx, FORMULATED TIMERx, THE DESIGNATED PRODUCT, PENWEST PATENTS, PENWEST
TECHNOLOGY, PENWEST'S CONFIDENTIAL INFORMATION, JOINT DEVELOPMENTS, PENWEST TEST
AND REGULATORY DATA, TIMERX IMPROVEMENTS, OR HORIZON TEST AND REGULATORY DATA,
EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
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10.14 INSURANCE COVERAGE. Each party shall, at its own cost and
expense, obtain and maintain from a qualified insurance company comprehensive
general liability and products liability insurance coverage during the term of
this Agreement (and any subsequent period of sale or distribution pursuant to
Section 11.6). Such insurance shall be in an amount no less than one million
U.S. dollars (US$1,000,000) combined single limit for each occurrence for bodily
injury and/or property damage. Each party agrees to provide the other party with
a certificate of insurance evidencing such insurance within thirty (30) days
after the Effective Date and again thereafter from time to time as reasonably
requested by such other party.
11. TERM AND TERMINATION.
11.1 TERM. The term of this Agreement shall begin on the Effective Date
and shall, unless extended or earlier terminated as provided herein, continue
until fifteen (15) years following the Approval Date.
11.2 TERMINATION BY PENWEST. Penwest may at its option terminate this
Agreement upon thirty (30) days' prior written notice to Horizon if:
11.2.1 Horizon fails to:
11.2.1.1 file an IND for the Designated Product
within twelve (12) months following the Effective Date, unless Horizon's failure
to do so is attributable to Penwest;
11.2.1.2 initiate a program of clinical trials for
the Designated Product within three (3) months following successful completion
of preformulation, formulation, dissolution testing and biostudy formulation
finalization with respect to the Designated Product, unless Horizon's failure to
do so is attributable to Penwest;
11.2.1.3 complete a program of clinical trials for
the Designated Product within twenty-four (24) months following the initiation
of such program, unless Horizon's failure to do so is attributable to Penwest;
11.2.1.4 file an NDA for the Designated Product
within six (6) months following the successful completion of a program of
clinical trials for the Designated Product, unless Horizon's failure to do so is
attributable to Penwest; or
11.2.1.5 commercially launch the Designated Product
within two (2) months following approval by the FDA of an NDA for the Designated
Product, unless Horizon's failure to do so is attributable to Penwest; or
11.2.2 Horizon fails to meet the relevant Minimum Sales, as
specified in Exhibit G, for any two (2) consecutive years following the Approval
Date, unless (a) the sum of the Minimum Sales for all years since the Approval
Date less the sum of Horizon's Net Sales for such years (the "Sales
Differential") is equal to or less than zero, or (b) if the Sales Differential
is greater than zero Horizon makes, within such thirty (30) day period, an
additional payment to Penwest equal to the product of (i) the Sales Differential
and (ii) the applicable royalty percentage set forth in Section 5.3.
11.3 TERMINATION BY HORIZON. Horizon shall have the right, at its
option, to terminate this Agreement:
11.3.1 at any time prior to the first anniversary of the
Effective Date upon ninety (90) days' prior notice to Penwest, if Horizon,
despite its commercially reasonable efforts, expects to be unable to meet the
Minimum Sales specified in Exhibit G for the first year following the Approval
Date;
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provided, however, that Horizon shall pay Penwest an early termination fee
of five hundred thousand U.S. dollars (US$500,000) at the time of any exercise
of Horizon's option to terminate for this reason; or
11.3.2 upon ninety (90) days' prior written notice to Penwest,
if Horizon fails to meet the relevant Minimum Sales, as specified in Exhibit G,
for any two (2) consecutive years following the Approval Date.
11.4 EXTENSION OF LICENSES. Following any expiration or termination of
this Agreement, other than due to an uncured breach on the part of Penwest (but
subject to Section 11.8), Penwest may request that the license to Penwest under
Section 2.2.2 be extended to include (in addition to their coverage as stated in
such section) making, using and selling the Designated Product in the Territory
and the use of Horizon Test and Regulatory Data for purposes of complying with
governmental requirements with respect to the Designated Product for marketing
or use in the Territory, and otherwise continue to be governed by the terms
stated in such section. In the event of such a request by Penwest, Horizon
agrees to enter into good faith negotiations with Penwest concerning a
reasonable payment to be made by Penwest to Horizon in consideration of such an
extension.
11.5 TERMINATION DUE TO BREACH. In the event that either party
materially breaches any of the terms, conditions or agreements contained in this
Agreement to be kept, observed or performed by it, then the other party may
terminate this Agreement, at its option, by giving the party who committed the
breach (a) in the case of breach of obligations other than the payment of money,
ninety (90) days' notice in writing, unless the notified party within such
ninety (90) day period shall have cured the breach, and (b) in the case of
breach of an obligation for the payment of money, thirty (30) days' notice in
writing, unless the notified party within such thirty (30) day period shall have
cured the breach, including any required payment of interest on previously
unpaid amounts as set forth herein; provided, however, that:
11.5.1 no termination of this Agreement under this Section 11.5
shall become effective during the pendency of a good faith dispute between the
parties as to the existence of grounds for such a termination, provided that the
parties are complying with the process in Section 12.10 in good faith in order
to resolve such dispute, and that such termination shall become effective
immediately upon any binding determination that such grounds did exist at the
time the notice of termination was given; and
11.5.2 if a notice of termination is given pursuant to this
Section 11.5 and it is subsequently determined that grounds for such a notice
did not exist, the giving of such notice shall not itself constitute a
repudiation or default under this Agreement, so long as such notice was given in
the good faith belief that such grounds did exist.
No termination of this Agreement under this Section 11.5 shall impair either
party's right to seek other legal or equitable rights or remedies.
11.6 DELETION OF INVENTORY FOLLOWING TERMINATION. In the event of any
expiration or termination of this Agreement, Horizon shall be entitled to sell
and distribute reasonable inventories of Designated Product remaining on hand as
of the effective date of such expiration or termination, provided that such
sales and distribution are otherwise in conformance with this Agreement. Horizon
may continue to make, use or sell such Designated Product only until Horizon has
exhausted remaining raw materials in its possession at the time of expiration or
termination of this Agreement. Net Sales of the Designated Product pursuant to
this Section 11.6 shall be subject to the Royalty payment obligations set forth
in Section 5.3.
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11.7 TERMINATION OR ASSIGNMENT OF SUBLICENSEES. Any sublicenses granted
by Horizon or its Affiliates under this Agreement shall provide for termination
or assignment to Penwest, at the option of Penwest, of Horizon's or its
Affiliate's interest therein upon expiration or termination of this Agreement.
11.8 SURVIVAL OF TERMS. Horizon's obligations regarding payment of
Royalties accrued as of the date of expiration or termination of this Agreement,
and the provisions of Sections 7.1, 8, 10, 11 and 12 hereof shall survive any
expiration or termination of this Agreement.
11.9 RETURN OF DATA AND MATERIALS. In the event of any termination or
expiration of this Agreement, (a) Horizon shall return to Penwest all Penwest
data and materials and (b) Penwest shall return to Horizon all Horizon data and
materials, except to the extent such Horizon data and materials are necessary to
permit Penwest to fully exercise its retained rights hereunder.
12. MISCELLANEOUS.
12.1 FURTHERANCE OF AGREEMENT. Each of Penwest and Horizon agrees to
duly execute and deliver, or cause to be duly executed and delivered, such
further instruments and cause to be done such further acts and things as are
reasonably within its control and its responsibilities under this Agreement,
including, without limitation, the filing of such additional assignments,
agreements, documents and instruments, that may be necessary or as the other
party hereto may from time to time reasonably request in connection with this
Agreement to carry out more effectively the provisions and purposes of this
Agreement.
12.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof.
12.3 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their Affiliates, successors and permitted
assigns; provided, however, that except for assignments or delegations to
Affiliates of a party (which shall not release such party from any of its rights
or responsibilities hereunder), or as part of the transfer of all or
substantially all assets to a single buyer or pursuant to a merger, sale of all
or substantially all of such party`s stock or any similar transaction, or as
otherwise specifically permitted hereunder, neither party shall assign or
delegate any of its rights or obligations hereunder at any time without the
prior written consent of the other party hereto, which consent shall not be
unreasonably withheld. Penwest's decision with respect to such consent shall be
based on whether, as of the time of the proposed assignment, the proposed
assignee is a Capable Entity. Penwest shall notify Horizon of such decision
within sixty (60) days following Penwest's receipt from Horizon of any written
proposal concerning assignment of this Agreement. Notwithstanding the foregoing,
Horizon shall have the right to assign or delegate any of its rights or
oblations hereunder to Inpharmakon without the prior written consent of Penwest;
provided, however, that (a) any such assignment or delegation to Inpharmakon
shall be limited to Horizon's rights and obligations hereunder with respect to
the Designated Product for use for the Indication, and (b) six (6) months
following such assignment or delegation, (i) such right shall become ineffective
and (ii) Horizon shall terminate any such assignment or delegation, unless
Inpharmakon has entered into an agreement with a Capable Entity for development
of the Designated Product. Horizon shall reimburse Penwest for reasonable
attorneys' fees incurred by Penwest in connection with such assignment to
Inpharmakon, whether or not such assignment remains effective and continues
beyond the end of such six (6) month period. In no event shall Horizon assign
rights hereunder unless the proposed assignee agrees to assume those of
Horizon's
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obligations hereunder that are relevant to the scope of the proposed
assignment, including but not limited to Horizon's due diligence and
confidentiality obligations and Horizon's obligation to pay milestones. Out of
any Assignment-Related Compensation received by Horizon from any third party,
Horizon shall reimburse Penwest for Penwest's costs incurred in connection with
the development of the Designated Product, except to the extent such costs have
already been reimbursed by Horizon through the payment of milestones hereunder.
For the purposes of this Section 12.3, "Assignment-Related Compensation" shall
mean any payments of any kind whatsoever received by Horizon from a third party
in consideration for, or otherwise in connection with, the assignment of all or
any part of Horizon's rights under this Agreement. In the event that this
Agreement is assigned as part of the sale of all or substantially all of the
assets of Horizon, or Horizon is acquired pursuant to a merger, sale of stock or
similar transaction, then, out of the proceeds from such transaction, Horizon
shall reimburse Penwest for Penwest's costs incurred in connection with the
development of the Designated Product, except to the extent such costs have
already been reimbursed by Horizon through the payment of milestones hereunder.
12.4 NOTICES. All notices, requests or other communication provided for
or permitted hereunder shall be given in writing and shall be hand delivered or
sent by facsimile, reputable courier or by registered or certified mail, postage
prepaid, return receipt requested, to the address set forth on the signature
page of this Agreement, or to such other address as either party may inform the
other of in writing. Notices will be deemed delivered on the earliest of
transmission by facsimile, actual receipt or three days after mailing as set
forth herein.
12.5 MODIFICATIONS; WAIVERS. No change, modification, extension,
termination or waiver of any obligation, term or provision contained herein
shall be valid or enforceable unless same is reduced to writing and signed by a
duly authorized representative of each of the parties to be bound hereby. No
waiver of any right in any one instance shall constitute a waiver of that right
or of any other right in other instances under this Agreement.
12.6 SEVERABILITY. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, such provision shall be enforced to the
maximum extent permitted by law and the parties' fundamental intentions
hereunder, and the remaining provisions shall not be affected or impaired.
12.7 INDEPENDENT CONTRACTORS. Nothing herein contained shall constitute
this a joint venture agreement or constitute either party as the partner,
principal or agent of the other, this being an Agreement between independent
contracting entities. Neither party shall have the authority to bind the other
in any respect whatsoever. Except as provided herein, nothing contained in this
Agreement shall be construed as conferring any right on either party to use any
name, trade name, trademark or other designation of the other party hereto,
unless the express, written permission of such other party has been obtained.
12.8 FORCE MAJEURE. In the event that either party hereto is prevented
from carrying out its obligations under this Agreement by events beyond its
reasonable control, including without limitation acts or omissions of the other
party, acts of God or government, natural disasters or storms, fire, political
strife, labor disputes, failure or delay of transportation, default by suppliers
or unavailability of parts, then such party's performance of its obligations
hereunder shall be excused during the period of such event and for a reasonable
period of recovery thereafter, and the time for performance of such obligations
shall be automatically extended for a period of time equal to the duration of
such event or events.
12.9 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York without
regard to its conflict of laws rules.
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12.10 DISPUTE RESOLUTION. Any dispute, controversy, or claim arising
out of or relating to this Agreement or to a breach thereof, including its
interpretation, performance, or termination, other than any dispute, controversy
or claim concerning patent infringement, validity or enforceability, shall be
finally resolved by arbitration. The arbitration shall be conducted by three (3)
arbitrators, one to be appointed by the party initiating the proceeding within
ten (10) days of filing its claim, one to be appointed within thirty (30) days
thereafter by the other party, and the third being nominated by the two
arbitrators so selected within thirty days thereafter or, if they cannot agree
on a third arbitrator, by the President of the American Arbitration Association.
The arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, which shall administer the
arbitration, and the laws of the State of New York. The arbitration, including
the rendering of the award, shall take place in New York, New York. The decision
of the arbitrators shall be binding upon the parties to this Agreement, and the
expense of the arbitration (including without limitation the award of the
attorneys' fees to the prevailing party) shall be paid as the arbitrators
determine. The decision of the arbitrators shall be final, and judgment thereon
may be entered by any court of competent jurisdiction. Notwithstanding this,
application may be made to any court for a judicial acceptance of the award or
order of enforcement. In the event of any dispute relating to patent
infringement, validity or enforceability, the parties agree to waive their
respective rights to a jury trial.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and acknowledge this Agreement as of the
Effective Date. This Agreement may be executed in one or more counterparts, each
of which shall be an original instrument, but all of which together shall
constitute a single agreement creating one set of rights and obligations.
Horizon Pharmaceutical Corporation: Penwest Pharmaceuticals Co.:
By: By:
-------------------------------- -------------------------
Brent Dixon Tod R. Hamachek
President Chairman and
Chief Executive Officer
Address: Address:
660 Hembree Parkway 2981 Route 22
Suite 106 Patterson, NY 12563
Roswell, GA 30076 FAX: (914) 878-3420
FAX: (770) 442-9594 Attn: Michael T. Mallon
Attn: Brent Dixon
-25-
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and acknowledge this Agreement as of the Effective Date.
This Agreement may be executed in one or more counterparts, each of which shall
be an original instrument, but all of which together shall constitute a single
agreement creating one set of rights and obligations.
Horizon Pharmaceutical Corporation: Penwest Pharmaceuticals Co.:
By: By:
-------------------------------- -------------------------
Brent Dixon Tod R. Hamachek
President Chairman and
Chief Executive Officer
Address: Address:
660 Hembree Parkway 2981 Route 22
Suite 106 Patterson, NY 12563
Roswell, GA 30076 FAX: (914) 878-3420
FAX: (770) 442-9594 Attn: Michael T. Mallon
Attn: Brent Dixon
-26-
<PAGE> 27
[***] - CONFIDENTIAL TREATMENT REQUESTED
Exhibit A
DESIGNATED PRODUCT
[***] form of a controlled-release pharmaceutical for oral administration in
humans in a 24 hour release form in a [***] strength that (a) combines a racemic
mixture of [***] with TIMERx and other excipients and (b) is eligible for
approval, or has been approved, by the FDA under an NDA.
A-1
<PAGE> 28
Exhibit B
NET SALES
"Net Sales" shall mean gross invoice price for sales by Horizon or its
Affiliates or sublicensees to unrelated third parties ("Customers"), less
deductions for (to the extent such amounts are included in the gross invoiced
sales price for the Designated Product) (a) statutory or contractual liability
for rebates to any governmental entity, rebates paid pursuant to the Medicaid
Rebate legislation, and any state and local governmental rebate programs; (b)
cash discounts generally available at the time of sale; (c) adjustments for
allowances or credits for returned Designated Product, free Designated Product
provided in lieu of discounts or rebates, damaged Designated Product, commercial
rebates, chargebacks, or trade discounts, whether or not paid directly to the
Customer; and (d) sales, excise, turnover, inventory, value-added, and similar
taxes and duties assessed on the sale of Designated Product. Notwithstanding the
foregoing, no discount, allowance, rebate, management fee, wholesaler
chargeback, or any similar amount however designated, that is given or
associated with the purchase by the Customer or its affiliates or associates of
any product other than the Designated Product, or with the purchase or provision
of any service, shall be taken into consideration in calculating any deductions
from the gross invoice. To the extent any of the amounts described in the
immediately preceding sentence are afforded to a Customer prior to the
calculation of the gross invoice price, such gross invoice price shall be
increased to reflect such amounts, solely for purposes of the calculation of Net
Sales under this Agreement. In the case of Designated Product sold to any
customer together with other products or services, the price of such Designated
Product, solely for purposes of the calculation of Net Sales under this
Agreement, shall be deemed to be no less than the price at which Designated
Product would be sold in a similar transaction to a customer not also purchasing
other products or services.
B-1
<PAGE> 29
[***] - CONFIDENTIAL TREATMENT REQUESTED
Exhibit C
PENWEST PATENTS
<TABLE>
<CAPTION>
U.S. Patent Date Title Inventor
Number
<S> <C> <C> <C> <C>
[***] [***] [***] [***] [***]
</TABLE>
C-1
<PAGE> 30
Exhibit D
PENWEST TRADEMARK(S)
TIMERx(R) Oral Delivery System
D-1
<PAGE> 31
Exhibit E
SPECIFICATIONS
(to be attached)
E-1
<PAGE> 32
Exhibit F
DEVELOPMENT TASKS AND SCHEDULE
(attached)
Page 1
<PAGE> 33
[***] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
TIMERx - [***] Development Plan - DRAFT
Effective March 25,1999
- ----------------------------------------------------------------------------------------------------------------------------------
ID Task Name Duration Start Finish December January February March April
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
1 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
2 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
3 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
4 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
5 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
6 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
7 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
8 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
9 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
10 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
11 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
12 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
13 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
14 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
15 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
16 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
17 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
18 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
19 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
20 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
21 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
Page 1
<PAGE> 34
[***] - CONFIDENTIAL TREATMENT REQUESTED
TIMERx - [***] Development Plan - DRAFT
Effective March 25, 1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ID Task Name Duration Start Finish December January February March April
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
22 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
23 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
24 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
25 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
26 [***] [***] [***] [***]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
Page 2
<PAGE> 35
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
May June July August September October November December January
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
Page 1
<PAGE> 36
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
May June July August September October November December January
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
Page 2
<PAGE> 37
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
February March April May June July August September October November
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
Page 3
<PAGE> 38
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
February March April May June July August September October November
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Project Task Graphic Summary Graphic Rolled Up Progress Graphic
Date: Thu 3/25/99 Progress Graphic Rolled Up Task Graphic
Milestone Graphic Rolled Up Milestone Graphic
</TABLE>
Page 4
<PAGE> 39
Exhibit G
MINIMUM SALES
The "Minimum Sales" shall be equal to the level of Net Sales of the Designated
Product for each of the years following the Approval Date set forth in the table
below.
<TABLE>
<CAPTION>
Year Minimum Sales
---- -------------
<S> <C>
1 one million U.S. dollars
(US $1,000,000)
2 three million U.S. dollars
(US $3,000,000)
3 seven million U.S. dollars
(US $7,000,000)
4 and each ten million U.S. dollars
subsequent year (US $10,000,000)
</TABLE>
Page 1
<PAGE> 1
[***] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.9
CONFIDENTIAL TREATMENT REQUEST
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
HORIZON PHARMACEUTICAL & INPHARMAKON
COLLABORATION AGREEMENT
THIS AGREEMENT made as of the 31st day of October, 1998 ("Effective Date")
between Horizon Pharmaceutical Corporation, a Delaware corporation of 660
Hembree Parkway, Suite 106, Roswell, Georgia 30076 ("Horizon") and InpharmaKon
Corporation, a Delaware corporation of 191 Waukegan Road, Suite 206,
Northfield, Illinois 60099 ("Inpharmakon").
RECITALS:
A. Horizon is a pharmaceutical product development and marketing
company;
B. Inpharmakon is in the business of developing and assembling
literature based product registration packages for the purpose of enabling
marketing partners to file NDAs (defined below) with the FDA (defined below)
for marketing approval of off label indications for FDA approved pharmaceutical
products.
C. Horizon wishes to collaborate with Inpharmakon and Inpharmakon
wishes to collaborate with Horizon for the purpose of preparing a NDA for
submission by Horizon to the FDA requesting approval to market [***] for the
indicated use of migraine prophylaxis on the following terms and conditions.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
In this Agreement the following expressions shall have the meaning set
forth in this Article.
1.01 ACCOUNTING PERIOD. The term "Accounting Period" means a calendar
quarter.
1.02 AFFILIATE. The term "Affiliate" means a corporation or business
entity which, directly or indirectly, is controlled by one of the parties or
controls one of the parties. For this purpose, the meaning of the word
"control" shall include, but not be limited to, ownership of fifty percent
(50%) or more of the voting shares or interest of such corporation or business
entity.
1
<PAGE> 2
[***] - CONFIDENTIAL TREATMENT REQUESTED
1.03 ANDA. The term "ANDA" means an Abbreviated New Drug Application.
1.04 CLINICAL TRIALS. The term "Clinical Trials" refers to the
clinical trials which Horizon is required to perform under Section 3.01 (ii)
below.
1.05 CONFIDENTIAL INFORMATION. The term "Confidential Information" is
defined in Article VII below.
1.06 FDA. The term "FDA" means the United States Food and Drug
Administration.
1.07 FIRST COMMERCIAL SALE. The term "First Commercial Sale" means the
first sale of the Product to a third party purchaser after NDA approval of the
Product for the Indication.
1.08 FORMULATION. The term "Formulation" is defined in Section 3.01(i)
below.
1.09 HORIZON AFFILIATE. The term "Horizon Affiliate" means an
Affiliate of Horizon.
1.10 INDICATION. The term "Indication" means the indication for
migraine prophylaxis.
1.11 INPHARMAKON AFFILIATE. The term "Inpharmakon Affiliate" means an
Affiliate of Inpharmakon.
1.12 NDA. The term "NDA" means a New Drug Application submitted to the
FDA requesting approval to market the Product for the Indication.
1.13 NET SALES. The term "Net Sales" means the gross invoice price of
all Product using the Formulation actually billed by Horizon, Horizon
Affiliates or sublicensees and their Affiliates to unrelated third party
customers less (i) any direct or indirect credits and allowances or adjustments
granted to such customers, including, without limitation, credits and
allowances on account of price adjustments or on account of rejection or return
of Product previously sold, (ii) any trade and cash discounts, and rebates,
(iii) any sales, excise, turnover and similar taxes, and any duties and other
governmental charges imposed upon the production, use or sale of Product or
partly processed Product, and (iv) transportation, insurance and other handling
charges provided that such charges can be reasonably allocated to such billings
and are not separately invoiced.
1.14 OPPORTUNITY PACKAGE. The term "Opportunity Package" means the
existing opportunity package already delivered to Horizon, receipt of which is
hereby acknowledged, which describes the Product, the targeted indication, and
an overview of its off label usage and was based upon a review of the published
clinical data for the Product and a patent search to establish prima facie
feasibility.
1.15 PRODUCT. The term "Product" means [***].
2
<PAGE> 3
1.16 SUBLICENSE. The term "Sublicense" is defined in Section 4.02
below.
ARTICLE II
COLLABORATION
2.01 SCOPE. Horizon shall work to obtain NDA registration for and
commercialization of the Product indicated for the Indication. Horizon shall
develop a once a day proprietary formulation for the Product and have primary
responsibility for clinical, formulation, manufacturing, and regulatory issues,
and preparation of the NDA for the Product for the Indication.
2.02. OPPORTUNITY PACKAGE. Inpharmakon shall give Horizon the
exclusive right to use the Opportunity Package for the purposes of preparing
and filing a NDA for the Product with the FDA for the Indication. Subject to
Inpharmakon's rights upon termination under Article IX below, with effect from
the Effective Date, Inpharmakon shall assert against Horizon no claim to the
ownership of the following intellectual property related to the Product (i) the
Formulation developed by or for Horizon under Section 3.01(i) below, or (ii)
the data arising from the Clinical Trials, nor to the rights to sales,
marketing and distribution for the Product for the Indication. After Horizon
has contracted with a formulator to develop the Formulation, Horizon shall have
the right and power to sublicense its exclusive rights to use the Opportunity
Package.
2.03 SUBLICENSES. In the event Horizon enters into any Sublicenses,
Horizon shall provide Inpharmakon with a copy of each such Sublicense within 10
days of its execution.
ARTICLE III
RESPONSIBILITIES OF THE PARTIES
3.01. RESPONSIBILITIES OF HORIZON. Horizon's responsibilities are as
follows:
i) To develop or have developed for it a workable once a day
formulation (the "Formulation") for the Product or, with
Inpharmakon's consent which consent will not be unreasonably
withheld, substitute another formulation (also referred to as
the "Formulation") with strong marketable differences over
available generic formulations of the Product;
ii) To conduct such clinical trials ("Clinical Trials") as may be
necessary to prepare and file a NDA for the Product using the
Formulation and indicated for the Indication; and
iii) To prepare and file with the FDA a NDA registration package
for the Product using the Formulation indicated for migraine
prophylaxis, and exert all reasonable efforts to obtain
approval of the NDA and commercialize the Product in the
United States of America.
3
<PAGE> 4
3.02 LICENSE OF FORMULATION. In the event Horizon licenses the
Formulation from a third party, Horizon shall ensure that the license permits
Horizon to assign its interest in the Formulation to Inpharmakon should
Inpharmakon exercise its rights to assume Horizon's rights to the Formulation
under Sections 9.01 and 9.02 below.
3.03 RESPONSIBILITIES OF INPHARMAKON: Inpharmakon's
responsibilities are to provide Horizon with the following services:
i) To deliver the Opportunity Package to Horizon plus, at no
additional cost to Horizon, provide additional review of such
published clinical trials not found in the Opportunity
Package as the FDA may require after its initial review of
the NDA for the Indication;
ii) To cooperate with and assist Horizon to design, conduct, and
evaluate the Clinical Trials using the Formulation for the
purpose of establishing safety and efficacy for the Product
indicated for the Indication;
iii) To cooperate with and assist Horizon to assemble the NDA for
the Product indicated for the Indication, including assembly
of published clinical literature and summaries;
iv) To assist and advise Horizon concerning follow-up information
required by the FDA in support of the NDA, including
attendance at meetings with the FDA; and
v) Provide other reasonable services as may be agreed by the
parties in support of Horizon's efforts to obtain approval of
the NDA for the Product for the Indication.
3.04 FDA REGULATORY SUPPORT. In the event that Horizon requires
support with regard to its activities regulated by the FDA over and above
Inpharmakon's services under Section 3.03(ii) through iv) above, Inpharmakon or
an Inpharmakon Affiliate shall provide reasonable support requested by Horizon.
Such support shall be free of charge during the first 8 months of the term of
this Agreement. Thereafter Inpharmakon shall charge Horizon at the provider's
(Inpharmakon's or the Inpharmakon Affiliate's) regular rates presently $120 per
hour and Horizon shall pay such charges within 30 days of the invoice date.
3.05 INPHARMAKON EXPENSES. Horizon shall reimburse Inpharmakon for
Inpharmakon's documented out of pocket travel expenses related to the
performance of its responsibilities under Section 3.03(ii) through (v) above.
Horizon shall make such reimbursements within 30 days of the invoice date.
4
<PAGE> 5
ARTICLE IV
COMPENSATION
4.01 FEES AND ROYALTIES. Horizon shall pay to Inpharmakon as
compensation for its services:
i) $200,000.00 within 30 days after the Effective Date;
ii) $100,000.00 within 30 days after filing the NDA for the
Product for the Indication
iii) $400,000.00 within 30 days after approval of such NDA; and
iv) A royalty of 5% of the Net Sales by Horizon or Horizon
Affiliates payable 45 days after the end of each Accounting
Period on all sales of the Product using the Formulation for
so long as Horizon or a Horizon Affiliate sell the Product.
Under no circumstances shall payments received by Inpharmakon under paragraphs
(i) through (iii) of this Section be refundable in whole or in part.
4.02 SUBLICENSES. In the event that Horizon grants any third party
a sublicense or other rights (together referred to as a "Sublicense") to make,
have made, use, import, market or sell the Product for the Indication, Horizon
shall pay to Inpharmakon the following royalties:
i) If a Sublicense is granted after Horizon enters into a
contract for development of the Formulation, 50% of the
consideration (cash and in kind) other than royalties under
paragraph (v) of this Section received by Horizon less costs
incurred by Horizon on behalf of the sublicensee and
reimbursed by the sublicensee;
ii) If a Sublicense is granted after development of the
Formulation has been completed, 33% of the consideration
(cash and in kind) other than royalties under paragraph (v)
of this Section received by Horizon less costs incurred by
Horizon on behalf of the sublicensee and reimbursed by the
sublicensee;
iii) If a Sublicense is granted after completion of the Clinical
Trials, 25% of the consideration (cash and in kind) other
than royalties under paragraph (v) of this Section received
by Horizon less costs incurred by Horizon on behalf of the
sublicensee and reimbursed by the sublicensee; or
iv) If a Sublicense is granted after approval of the NDA for the
Product indicated for the Indication, 20% of the
consideration (cash and in kind) other than royalties under
paragraph (v) of this Section received by Horizon less costs
incurred by Horizon on behalf of the sublicensee and
reimbursed by the sublicensee; and
5
<PAGE> 6
[***] - CONFIDENTIAL TREATMENT REQUESTED
v) With effect from the First Commercial Sale, 5% of Net Sales
by sublicencees and their Affiliates.
4.03 NO RELEASE OF SECTION 4.01 PAYMENTS. The grant of Sublicenses
by Horizon shall not release Horizon from its obligations to make the payments
required by Section 4.01(i) through (iii) above.
4.04 OTHER INDICATIONS. Provided that Horizon has paid all of the
payments required by Section 4.01(i) through (iii) above, Horizon shall have
the right to prepare and file ANDAs and NDAs for the Product for indications
other than the Indication. In that event the following provisions shall apply:
i) If Product sold by Horizon or Horizon Affiliates for such
indications use the Formulation, Horizon shall pay to
Inpharmakon the royalties as provided under Section 4.01(iv)
above.
ii) If Product sold by Horizon or Horizon Affiliates for such
indications does not use the Formulation (i.e. it uses
another formulation useful in the therapeutic range for
migraine prophylaxis which improves on generically available
formulations for the Product) but the Product is prescribed
for migraine prophylaxis, Horizon shall pay to Inpharmakon
the royalties as provided under Section 4.01(iv) above on all
such sales of the Product for such prescriptions.
iii) Horizon shall pay to Inpharmakon the royalties provided under
Section 4.02(v) on all sales of Product by sublicensees and
their Affiliates which, if made by Horizon, would be subject
to royalty payments under paragraphs (i) or ii) of this
Section.
iv) No royalties shall be due or payable on the Product for such
indications where the Product uses a formulation that is
neither useful in the therapeutic range of migraine
prophylaxis nor a formulation which improves on generically
available formulations for the Product, and the formulation
is not prescribed for migraine prophylaxis.
For the purposes of paragraphs (ii) and (iv) of this Section the term
"improves" refers to a technical or non-technical difference in the formulation
not found in generically available formulations for the Product which
difference differentiates the Product from other [***] products (using either
the Formulation or a generically available formulation) for marketing purposes.
6
<PAGE> 7
ARTICLE V
CLINICAL TRIALS
For the purposes of Section 3.01(ii) above, Horizon shall contract
with LAB Biosyn of Montreal, Canada or another clinical research organization
to perform clinical trials the same as or equivalent to (1) the program
prepared by LAB Biosyn, a copy of which Inpharmakon shall provide to Horizon
contemporaneously with the execution of this Agreement, or (2) that recommended
by the FDA.
ARTICLE VI
PAYMENT OF ROYALTIES; AUDIT
6.01 PAYMENT OF ROYALTIES. Horizon shall remit all royalty payments to
Inpharmakon no later than 45 days after the close of each Accounting Period.
Each royalty payment shall be accompanied by a report of the Net Sales subject
to royalty during the Accounting Period. Horizon will deduct withholding taxes
from payments to Inpharmakon only if required by applicable law.
6.02 AUDIT RIGHTS. The following provisions shall apply:
(i) Inpharmakon, at its own expense, shall have the right, upon
reasonable prior notice, but no more than once in any year,
to appoint independent auditors and have them during normal
business hours, inspect and copy the books and accounts of
Horizon, Horizon Affiliates and Horizon's sublicensees, if
any, related to the payment and calculation of royalties
arising under this Agreement. Horizon shall cooperate and
cause Horizon Affiliates and sublicensees, if any, to
cooperate with such auditors. The auditors performing the
audit shall disclose to Inpharmakon only information relating
to the accuracy of records kept and the payments made, and
shall be under a duty to keep confidential any other
information obtained from such records.
(ii) If any such audit establishes that Horizon has underpaid or
overpaid the amount due, Horizon shall promptly pay any
remaining amounts due as established by such audit or, in the
event of an overpayment, Inpharmakon shall promptly refund any
such over payment. If the underpayment is by 5% or more during
any Accounting Period, Horizon shall reimburse Inpharmakon for
its out of pocket expense of such audit, and shall pay to
Inpharmakon interest on the amount of the underpayment at a
rate of 3% above the official prime rate, as announced from
time to time by Citibank NA, New York, or at such lower rate
as shall then be the maximum rate permitted by law that may be
charged on any such overdue payment from the date due until
paid.
7
<PAGE> 8
ARTICLE VII
CONFIDENTIALITY
For a period of 5 years after first disclosure, the parties shall keep
completely confidential, shall not publish or otherwise disclose, and shall not
use for any purpose other than the purposes contemplated by this Agreement, any
Confidential Information without the consent of the disclosing party first had
and obtained. The term "Confidential Information" is that information furnished
by either party to the other in writing and marked "Confidential", or if first
disclosed orally, disclosed in writing and marked "Confidential" within 30 days
after first disclosure. Confidential Information shall not include information
that the receiving party can establish by competent proof:
(i) was already known to it prior to disclosure by the disclosing
party as evidenced by written record or other proof;
(ii) was or becomes public knowledge through no fault of the
receiving party;
(iii) has been received from a third party who did not acquire it
directly or indirectly from the disclosing party;
(iv) is independently developed by the receiving party without
reference to any Confidential Information received from the
disclosing party under this Agreement; or
(v) is compelled to be disclosed in the course of litigation with
a third party, provided that the compelled party provides the
disclosing party with notice of such compulsion sufficiently
in advance of disclosure so as to provide the disclosing
party with a reasonable time period to seek a protective
order.
Notwithstanding the above, the parties may disclose such Confidential
Information to their legal representatives and employees, and to consultants,
to the extent such disclosure is reasonably necessary to achieve the purposes
of this Agreement, obtaining an NDA for the Product for the Indication, and
provided such representatives, employees, and consultants are covered by
obligations of confidentiality with respect to such information no less
stringent than those set forth above.
ARTICLE VIII
TERM AND TERMINATION
8.01 TERM. The term of this Agreement shall commence on the Effective
Date and shall continue for a period of 10 years thereafter, with automatic
renewal for successive 5 year terms for so long as Inpharmakon, Horizon, and
their respective Affiliates are in substantial compliance with the terms of
this Agreement, unless otherwise terminated earlier pursuant to this Article
VIII.
8
<PAGE> 9
8.02 TERMINATION FOR MATERIAL BREACH. Either party may terminate
this Agreement in the event the other party materially breaches in the
performance of its obligations under this Agreement, and such breach continues
for 90 days after written notice specifying the breach was provided to the
breaching party by the non-breaching party. Any such termination shall become
effective at the end of such 90 day period unless the breaching party (or any
other party on its behalf) has cured any such breach prior to the expiration of
the 90 day period. A material breach is (i) the assertion of ownership rights
by Inpharmakon in violation of Section 2.02, (ii) the failure by either party
to perform in a timely manner the respective obligations and responsibilities
of the parties under Article III above, (iii) the failure by Horizon to pay the
compensation due under Article IV above, or (iv) the breach by either party of
the confidentiality provisions of Article VII above.
8.03 BANKRUPTCY. Either party may terminate this Agreement upon the
filing or institution of bankruptcy, reorganization, liquidation or
receivership proceedings, or upon an assignment of substantially all of the
assets for the benefit of creditors by the other party; provided, however, in
the case of an involuntary bankruptcy proceeding such right to terminate shall
only become effective if the party consents to the involuntary bankruptcy or
such proceeding is not dismissed within 90 days after the filing thereof.
8.04 TERMINATION BY INPHARMAKON. Inpharmakon shall have the right
to terminate this Agreement on notice to Horizon in the event of:
(i) The failure of Horizon, within 4 months after the Effective
Date to acquire or authorize a formulator to develop a
workable once a day formulation for the Product.
(ii) The failure of Horizon, within 12 months after the Effective
Date to complete, in connection with the development of the
Formulation, all necessary in-vitro clinical studies and
complete a clinical bioavailability study in a small group of
at least 8 patients, provided that in the event that
technical difficulties with such study are encountered, such
12 month period will be extended by 3 months to 15 months if
the bioavailability study was initiated within such 12 month
period.
(iii) The failure of Horizon, within 6 months after completing the
clinical bio-availability study on the Formulation under
paragraph (ii) above, to authorize or initiate the Clinical
Trials.
(iv) The failure of Horizon to file the NDA within 8 months after
completion of the Clinical Trials, including the full
statistical analyses.
(v) The failure of the FDA within 3 years of the filing date of
the NDA for the Product for the Indication, to approve the
NDA unless the FDA is holding up approval pending agreement
on labeling requirements for the Formulation, in which case
the period will be 4 years;
9
<PAGE> 10
[***] CONFIDENTIAL TREATMENT REQUESTED
(vi) The failure of Horizon to make the First Commercial Sale
within 6 months after receipt of the NDA approval for the
Product for the Indication, and to thereafter aggressively
market and sell the Product for the Indication.
Should Horizon have informed Inpharmakon in due time of serious
reasons for the delay in the achievement of the events under
paragraphs (iii), (iv) or (v) above, the parties shall negotiate in
good faith an extension or extensions of time for Horizon to complete
the event delayed without Inpharmakon exercising its termination
rights provided that such serious reasons do not delay the
commercialization of the Product beyond 5 years after the Effective
Date. Any waiver by Inpharmakon in one instance shall not obligate
Inpharmakon to grant any additional or other waivers of Horizon's
obligations.
ARTICLE IX
CONSEQUENCES OF TERMINATION
9.01 DEFAULT OF HORIZON. If this Agreement is terminated for failure
of Horizon to pay any of the Article IV payments, or is terminated under
Section 8.04(i) through (iv) and no default of Inpharmakon was the primary
cause of the default, Inpharmakon shall have the exclusive right to proceed
with a NDA for the Product for the Indication using the Formulation and the
data from the Clinical Trials as has been acquired or developed by Horizon at
the date of termination, and shall have the right to assume Horizon's rights to
the same and the NDA, if applicable, without cost to Inpharmakon or Inpharmakon
Affiliates. In that event Horizon shall release to Inpharmakon its rights to
the Opportunity Package, the Formulation, the related not publicly available
information provided by Inpharmakon or developed by or for Horizon, and
registration data related to the NDA for the Product for the Indication.
9.02 FAILURE TO COMMERCIALIZE. If this Agreement is terminated under
Section 8.04(vi) for failure to commercialize the Product for the Indication,
Inpharmakon shall have the exclusive option to purchase Horizon's rights to the
Formulation and the NDA for the Product for the Indication, if applicable, and
the exclusive right to use the data from the Clinical Trials, all for a price
equal to Horizon's booked costs incurred to obtain the same. In that event,
Inpharmakon shall have the right to proceed with a NDA for the Product for the
Indication by itself or through others.
9.03 NO FAULT TERMINATION. If this Agreement is terminated under
Section 8.04(v) Horizon shall have the right to proceed with an ANDA or NDA
with any formulation of [***] for any indication, including hypertension,
without further obligation to Inpharmakon, including but not limited to no
obligation to pay royalties on Net Sales of any and all formulations of the
Product. In that event Inpharmakon shall have an option to purchase Horizon's
rights to the Formulation and the data from the Clinical Trials at Horizon's
booked costs incurred to obtain the same, but only for the Indication.
10
<PAGE> 11
[***] CONFIDENTIAL TREATMENT REQUESTED
9.04 CONDITIONS TO INPHARMAKON RIGHTS. Inpharmakon's rights under
Sections 9.01 and 9.02 above are conditioned upon the termination not arising
primarily from problems with the Opportunity Package or Inpharmakon's
regulatory support under Section 3.03ii) or iv). If the termination is as a
result of such problems Inpharmakon shall have no rights to the Formulation or
the data from the Clinical Trials. However, should Inpharmakon so request and
have informed Horizon in due time the reasons for the problems, the parties
shall negotiate in good faith an extension or extensions of time for
Inpharmakon to repair or cure the problems without Horizon exercising its
termination rights hereunder. Any waiver by Horizon in one instance shall not
obligate Horizon to grant additional or other waivers of Inpharmakon's
obligations.
9.05 NO RELEASE OF PRIOR OBLIGATIONS. Termination of this Agreement
for any reason shall not release either party from any liability which, at the
time of such termination, has already accrued to the other party or which is
attributable to a period prior to such termination nor preclude either party
from pursuing all rights and remedies it may have under this Agreement or at
law or in equity with respect to any breach of the Agreement.
9.06 SURVIVAL OF TERMS. Articles IV, VI, VII, X, XI, XII and XIII, and
Sections 3.02 and 9.01 through 9.05 shall survive the expiration or termination
of this Agreement for any reason.
ARTICLE X
REPRESENTATIONS & WARRANTIES, DISCLAIMERS & INDEMNITIES
10.01 REPRESENTATIONS & WARRANTIES.
(a) Horizon warrants and represents to Inpharmakon that it has or
prior to commercialization will have the right to manufacture, market and sell
[***], and that such manufacturing, marketing and sale will not infringe the
rights of any third parties.
(b) Inpharmakon warrants and represents that it has evaluated
and, to the best of its knowledge and belief, accurately reported all clinical
information, including safety and efficacy data, ft has included in the
Opportunity Package.
10.02 INPHARMAKON DISCLAIMER. Inpharmakon specifically disclaims any
guarantee that the NDA for the Product for the Indication will be successful,
in whole or in part. Inpharmakon will evaluate and accurately report all
clinical information, including safety and efficacy data, it includes in the
literature package for the NDA, but expressly disclaims any responsibility to
independently verify such information for accuracy or completeness. Further,
Inpharmakon expressly disclaims any responsibility for independently verifying
that such clinical information pulled from publicly available or commercial
sources does not infringe third party proprietary rights. However, Inpharmakon
has and will exercise reasonable judgment in deciding whether or not such
information should be used in the NDA. Inpharmakon expressly disclaims
responsibility for the scientific methodologies, clinical protocols and results
obtained and reported in the published literature.
11
<PAGE> 12
10.03. INDEMNIFICATION. Horizon shall indemnify, defend and hold
Inpharmakon harmless from and against all product liability claims, actions,
suits and other proceedings, and related costs, including legal fees and
expenses, liabilities, damages and other expenses arising from (i) Horizon's
use of the scientific methodologies, clinical protocols and results referenced
in Section 10.02 above and (ii) the manufacture and sale of the Product. In
addition, in the event of any claims, actions, suits or other proceedings
alleging that Horizon's use, manufacture, marketing or sale of the Product
infringes the rights of third parties, Horizon shall indemnify, defend and hold
Inpharmakon harmless from and against all such claims, actions, suits or other
proceedings, and related costs, including legal fees and expenses, liabilities,
damages, and other expenses incurred by Inpharmakon arising therefrom. Horizon
shall not be obligated to indemnify Inpharmakon as aforesaid unless Inpharmakon
promptly notifies Horizon of the claim, action, suit, or other proceeding and
Inpharmakon thereafter cooperates with and assists Horizon, at Horizon's
expense, in the defense of such claim, action, suit or other proceeding.
ARTICLE XI
NOTICES
All information, reports, notices and other communications under this
Agreement will be in writing. Such information, reports, notices and other
communications, and payments will be deemed given to a party when sent to such
party by certified or registered mail, return receipt requested, postage
prepaid; by hand; by facsimile, receipt confirmed; or by overnight courier
which provides confirmation of delivery, at the appropriate address set forth
above. Either party may change its address for the giving of notice by written
notice to the other party as set forth above.
ARTICLE XII
ARBITRATION
Any dispute arising out of the interpretation or performance of this
Agreement or the breach thereof, shall be submitted to arbitration in Chicago,
Illinois in accordance with the Commercial Rules of the American Arbitration
Association. The arbitration award shall be final and binding on the parties.
The arbitrators' fees shall be borne by the losing party. If both parties are
found liable, the arbitrators' fees shall be borne in proportion to the extent
to which each party is found liable. In the event either party is forced to
take legal action in order to enforce an arbitral award hereunder, the
defending party shall pay the claimant party's costs and expenses, including
reasonable attorney fees and expenses, incurred to enforce such arbitral award.
ARTICLE XIII
MISCELLANEOUS
12
<PAGE> 13
13.01 INDEPENDENT CONTRACTORS. The relationship of the parties is that
of independent contractors. The parties are not deemed to be agents, partners
or joint venturers with the other for any purpose as a result of this Agreement
or the transactions contemplated thereby.
13.02 AMENDMENT. This Agreement may not be amended, supplemented, or
otherwise modified except by an instrument in writing signed by both parties.
13.03 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parries relating to the subject matter of
this Agreement. It supersedes all previous communications, proposals,
representations and agreements (including the Confidential Disclosure Agreement
dated June 25, 1998 and the Term Sheet dated October 13, 1998 between the
parties), whether oral or written, relating to the subject matter of this
Agreement.
13.04 SEVERANCE. Should any provision of this Agreement be determined
by a court of competent jurisdiction to violate or contravene any applicable
law or policy, such provision shall be severed or modified to the extent
necessary to comply with the applicable law or policy, and such modified
provision and the remainder of the provisions hereof will continue in full
force and effect.
13.05 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois, excluding any
choice of law rules which may direct the application of the law of any other
jurisdiction.
13.06 ASSIGNMENT. Neither party may assign its rights or obligations
under this Agreement without the prior written consent of the other.
13.07 SECTION HEADINGS. All section headings are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
13.08 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement.
13
<PAGE> 14
IN WITNESS WHEREOF, the duly authorized officers of the parties have
executed this Agreement as of the Effective Date.
INPHARMAKON CORPORATION
By:
-------------------------------
Title:
----------------------------
HORIZON PHARMACEUTICAL
CORPORATION
By:
-------------------------------
Title:
----------------------------
14
<PAGE> 1
[***] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.10
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions of this Agreement Which Have Been Redacted Are
Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
EXCLUSIVE PATENT LICENSE AGREEMENT
THIS AGREEMENT made and effective this 1st day of January, 2000, by
and between Jame Fine Chemicals, Inc., having a place of business at 100 West
Main Street, Bound Brook, New Jersey 08805 (hereinafter referred to as
"Licensor").
and
Horizon Pharmaceutical, Corporation., having a place of business at
660 Hembree Parkway, Suite 106, Roswell, Georgia 30076 (collectively
hereinafter referred to as "Licensee").
WHEREAS, Licensor is the owner of the entire right, title and interest
in, to and under Letters Patent of the United States [****], directed to
phenylephrine tannate compositions and Letters of Patent of the United States
No. 5,663,415 granted September 2, 1997, directed to processes for producing
tannate products (said patents collectively referred to as the Licensed
Patents); and
WHEREAS, Licensee is desirous of securing and Licensor is willing to
grant a semi-exclusive license under the Licensed Patents to use, sell and
distribute Finished Dosage Products (defined below) containing to
Chlorpheniramine Tannate;
NOW, THEREFORE, in consideration of the covenants and obligations
hereinafter set forth to be well and truly performed, the parties hereto hereby
agree as follows:
SECTION ONE
The following definitions will apply to the respective terms as used
throughout this Agreement.
(a) "Net Sales" shall mean Licensee's gross invoice price of sales of
Finished Dosage Products covered by the claims of the Licensed Patents in the
Territory to third party customers after deduction of (i) cash, trade and/or
quantity discounts actually allowed; (ii) amounts repaid or credited by reason
of rejection or returns of goods, rebates (including government mandated
rebates) or because of retroactive price reductions unrelated to the sale or
pricing of another product of Licensee; and (iii) freight, postage, and duties
paid for and separately identified on invoices. A sale of a product is deemed
to have occurred upon the earliest of invoicing, shipment or transfer of title
in the product to a party other than Licensee or its affiliates or
sublicensees.
(b) "Baseline Net Sales" shall mean Licensee's actual Net Sales for the
period January 1, 1999 through December 31, 1999.
(c) "Annual Net Sales" shall mean Licensee's actual Net Sales for a
twelve month period January 1 to December 31 of a given year.
<PAGE> 2
[***] - CONFIDENTIAL TREATMENT REQUESTED
(d) "Territory" means the United States of America, including its
territories and possessions and Puerto Rico.
(e) "Contract Year" shall mean the twelve (12) month period commencing
on January 1, 2000 and ending December 31, 2000 for the first Contract Year and
subsequent twelve (12) month periods commencing on the anniversary of the day
immediately following the end of the first Contract Year.
(f) "Finished Dosage Products" means products that contain active
pharmaceutical ingredients and are in a form ready for sale to a final consumer
(including, without limitation, a liquid suspension or tablet).
SECTION TWO
(a) Licensor agrees to grant and does hereby grant to Licensee under
the Licensed Patents the exclusive right and license to use, sell and distribute
Finished Dosage Products containing Chlorpheniramine Tannate covered by the
Licensed Patents in the Territory, except only as to the license rights of
Unisource, Inc., a Colorado corporation (Unisource) and or Carter Wallace Inc.
pertaining to products that contain Chlorpheniramine Tannate and are covered by
the Licensed Patents.
(b) Licensee agrees that it will purchase or otherwise obtain Finished
Dosage Products containing Chlorpheniramine Tannate from Unisource, Inc. and
its successors or assigns.
SECTION THREE
(a) Upon execution of this Agreement, Licensee agrees to pay to
Licensor a license fee of [***] less the [***] advance paid by Licensee to
Licensor.
(b) Effective at the beginning of the first Contract Year, Licensee
further agrees to pay to Licensor, as royalty, [***] of its Annual Net Sales
derived by Licensee from all sales of Finished Dosage Products covered by the
Licensed Patents and made in accordance with the inventions covered thereby;
"sales" as herein employed shall mean sales of the Finished Dosage Products
covered by the Licensed Patents which are made in the United States, its
territories, possessions and Puerto Rico.
(c) Suspension of royalties:
(i) Generic. For purposes of this Section THREE (c),
"Generic" shall mean a generic to Rynatan or Tanafed but shall not include (A)
products that infringe upon the Licensed Patents or (B) products made from raw
material supplied by Licensor prior to the effective date of this Agreement.
(ii) Suspension. If a Generic enters the market, then, per a
determination made as of December 31 of such year of entry and December 31 of
each subsequent year of this Agreement (all of which calendar years, including
the year of entry, shall collectively be referred to as the "Calendar Years
Potentially Suspended"), Licensee's obligation for the royalty may be suspended
for one or more Calendar Years Potentially Suspended as determined as follows.
Licensee is not obligated for the royalty for any given Calendar Year
Potentially Suspended if i) the gross sales in ounces in the entirety of such
Calendar Year Potentially Suspended do not exceed the Threshold Sales
(hereinafter defined) applicable to that Calendar Year Potentially Suspended
AND ii) the Generic is available in the Territory at any time during such
Calendar Year Potentially Suspended.
<PAGE> 3
[***] - CONFIDENTIAL TREATMENT REQUESTED
(iii) Refund of Royalties. Accordingly, if Licensee is not
obligated for the royalty in a given Calendar Year Potentially Suspended, then,
within 30 days after the end of that calendar year, Licensor shall (A) refund
royalties to Licensee so that the net effect of such refund will be that
Licensee did not pay any royalties for such calendar year and (B) pay Licensee
interest on the royalties refunded at the prime rate as of December 31 of the
calendar year for which royalties are being refunded. In the event Licensee is
not obligated for the royalties in a given calendar year, Licensee may still be
obligated for the royalty in future year(s).
(iv) THRESHOLDS. The Threshold Sales are as follows:
<TABLE>
<S> <C>
Potential Threshold Sales applicable to the
corresponding Calendar Year
Suspension Potentially Suspended
Calendar Year
2000 Gross sales of [***] ounces (which is [***]
of Licensee's gross sales in ounces in 1999
which was [***] ounces)
2001 [***] of the gross sales (in ounces) in
calendar years 1999 or 2000, whichever is
higher
2002 [***] of the gross sales (in ounces) in
calendar years 1999, 2000 or 2001,
whichever is highest
2003 and thereafter [***] of the gross sales (in ounces) in
calendar years 1999, 2001, 2002 or any
other subsequent Calendar Year Potentially
Suspended, whichever is highest
</TABLE>
(v) Partial Refund of Licensing Fee: If in the year 2000,
there is a Generic available AND Licensee's Gross Sales do not exceed [***]
ounces, then Licensor will refund one half of the up-front fees paid upon
execution of this agreement.
(v) Example:
2000
Based on a calculation made as of December 31, 2000, i) if Licensee's gross
sales (in ounces) for calendar 2000 (including gross sales in calendar 2000
prior to the entry of the generic) do not exceed [***] ounces, AND ii) the
Generic is available in the Territory at any time during such Calendar Year
Potentially Suspended then Licensee would not be obligated for royalties for
the entirety of calendar 2000 and would be refunded calendar 2000 royalties
accordingly; and
2001
Based on a calculation made as of December 31, 2001, i) if Licensee's gross
sales in ounces for calendar 2001 do not exceed [***] of the gross sales (in
ounces) in calendar years 1999 or 2000, whichever is highest, AND ii) the
Generic is available in the Territory at any time during such Calendar Year
Potentially Suspended then Licensee would not be obligated for royalties for
the entirety of calendar 2001 and would be refunded calendar 2001 royalties
accordingly; and
2002
Based on a calculation made as of December 31, 2002, i)
if Licensee's gross sales (in ounces) for calendar 2002 do not exceed [***] of
the gross sales (in ounces) of calendar years 1999, 2000 or 2001, whichever is
highest, AND ii) the Generic is available in the Territory at any time during
such Calendar Year Potentially Suspended then Licensee would not be obligated
for royalties for the entirety of calendar 2002 and would be refunded calendar
2002 royalties accordingly; and 2003 and thereafter
<PAGE> 4
Based on a calculation made as of December 31 of 2003 and of each year
thereafter, if i) Licensee's gross sales (in ounces) for any such calendar year
do not exceed [***] of the gross sales (in ounces) of the previous calendar
year of this Agreement in which Gross sales (in ounces) were the highest, AND
ii) the Generic is available in the Territory at any time during such Calendar
Year Potentially Suspended, then Licensee would not be obligated for royalties
for the entirety of the calendar year ending on the December 31 on which such
calculation was made, and would be refunded royalties for such calendar year
accordingly.
(d) The term of this Agreement shall be from the date hereof to the
later of the expiration of either of the Licensed Patents or any reissue,
continuation or extension of the Licensed Patents. In the event that Licensor
becomes the owner of or has rights to patents in addition to the Licensed
Patents which additional patents pertain to the products covered by the
Licensed Patents, the term of this Agreement shall automatically extend to the
expiration of such additional patents. In any event, Licensee may continue to
renew this Agreement for five (5) year renewal periods beyond the
above-referenced patent expiration dates by providing Licensor written notice
of its intent to so renew prior to such patent expiration dates.
SECTION FOUR
It is mutually understood and agreed that the sale of compositions
covered by the Licensed Patents may be subject to approval and/or regulation by
the Food and Drug Administration or other applicable government agency and in
the event that such approval is refused or such regulation prohibits the sale
of products covered by the Licensed Patents, Licensee shall have the right to
cancel this Agreement and the license herein granted to it; in the event of
such cancellation, Licensee shall not be liable to Licensor for the payment of
any royalties hereunder or any additional license fees, as the case may be.
SECTION FIVE
All royalties provided for by this License Agreement shall be due and
payable quarterly and Licensee agrees to pay to Licensor on or before the last
day of each of the months of February, May, August and November of each
Contract Year during which this Agreement is in force, the total amount of
royalties due and payable on account of its operations under this Agreement
during the calendar quarter immediately preceding said dates.
SECTION SIX
Licensee agrees that it will render to Licensor with each such royalty
payment a written statement setting forth the total Annual Net Sales from its
royalty-bearing sales during the period covered by such statement and Licensee
agrees to keep a separate record in a suitable book or set of books provided
for the purpose, in sufficient detail to enable the royalties payable hereunder
to be determined, and further agrees that it will permit such book or set of
books to be examined by an auditor or accountant, authorized by Licensor, at
any reasonable time during business hours to the extent necessary to verify the
records and payments here provided for, it being agreed that such auditor or
accountant shall make his report to Licensor in such manner that names of
customers or other information deemed confidential by Licensee will not be
disclosed to Licensor.
SECTION SEVEN
In the event that Licensor makes or acquires any improvements or
additional patents in or relating to the inventions covered by the Licensed
Patents, such improvements and patents shall be and are hereby included as part
of the Licensed Patents upon the same terms and conditions as the said Licensed
Patents; Licensee shall not be obligated to pay to Licensor any further or
<PAGE> 5
[***] CONFIDENTIAL TREATMENT REQUESTED
additional royalty or other consideration for the license to any such
additional improvements or patents. Licensee's only obligation to Licensor
shall be to continue to pay the royalty stipulated in Section Three until the
expiration of the last such patent or any reissue or extension thereof unless
otherwise provided herein.
SECTION EIGHT
Licensee shall, at its option, with the prior written consent of
Licensor, have power to institute and prosecute, at its own expense, suits for
infringement of the Licensed Patents, and, Licensor will cooperate in such
suits by furnishing such evidence, documents, and testimony as may reasonably
be required, and if required by law, Licensor will join as a party plaintiff in
such suits. All expenses in such suits will be borne entirely by Licensee and
Licensee will pay to Licensor [***] of any excess of recoveries over expenses
(including without limitation attorney fees) in such suits.
SECTION NINE
(a) Licensor warrants, that effective as of the date hereof, Licensor
and Unisource have established a business relationship (the Relationship)
whereby Unisource Inc. may purchase Chlorpheniramine Tannate and Pseudophedrine
Tannate from Jame Fine Chemicals and the Relationship shall continue for a
duration at least as long as the duration of this Agreement. Licensor further
warrants that pursuant to the Relationship, for a period of 12 months, and
thereafter it will not increase the prices for such Active Pharmaceutical
Ingredients by an amount exceeding the percentage increase in the PPI (except
that Licensor may increase such price to reflect documented increases in direct
costs which include labor, raw materials, utilities and direct overhead costs
to maintain its existing profit margin which increases will not be subject to
the PPI cap, but which increases shall have been documented to the satisfaction
of Licensee and Unisource). Licensor will decrease the prices of the Active
Pharmaceutical Ingredients to reflect decreases in the cost of such
manufacturing components. Under the terms of the Relationship, Licensor will
notify Unisource and Licensee of the change in dollars per Kg and the effective
date of any price change of each Active Pharmaceutical Ingredient utilized by
Unisource for Finished Dosage Product supplied to Licensee.
(b) Licensor warrants that, if for any reason Licensor is unable to
supply product to meet all of the needs of Unisource, Unisource shall have the
exclusive right, along with Wallace, to receive Licensor's production of the
products covered by the Licensed Patents based on the respective amounts of
such products ordered during the preceding twelve (12) month period.
SECTION TEN
(a) Licensor represents and warrants that, as of the date hereof, it
has entered into a license agreement with Carter-Wallace, a corporation having
a place of business in Cranbury, New Jersey, in a form similar to this
Agreement and whereby Carter-Wallace has a semi-exclusive license to the
Licensed Patents as they pertain to Chlorpheniramine Tannate. (b) Licensor
warrants that in its Relationship and Licensing Agreement with Unisource, (i)
Unisource is prohibited from selling or distributing Finished Dosage Products
containing Chlorpheniramine Tannate to any person or entity other than Licensee
and (ii) Unisource does not have the right to sell Chlorpheniramine Tannate as
a stand alone active ingredient.
(b) Licensor warrants that (a) it owns the Licensed Patents; (b) it
has the right to license the Licensed Patents to Licensee; (c) no third party
has filed any civil action against Licensor in connection with the Licensed
Patents or notified Licensor that the Licensed Patents violate such third
party's patent, trademark, copyright, or trade secret rights; (d) to the best
of Licensor's knowledge, the Licensed Patents do not infringe any third party's
copyright or patent;
<PAGE> 6
(e) it has not granted to any third party any rights in or to the Licensed
Patents that are inconsistent with any right granted to Licensee under this
License Agreement or that will adversely affect any exercise by the Licensee of
its rights granted under this License Agreement.
(c) Licensor agrees to indemnify, defend, and hold harmless Licensee
against any losses, liabilities, claims, damages, costs, and expenses
(including reasonable attorney's fees) (the "Claims") that result from
Licensor's material breach of any of the above warranties. Licensor shall
assume all expenses with respect to the defense, settlement, adjustment, or
compromise of any Claims as to which this section requires Licensor to
indemnify, defend, or hold harmless Licensee and, upon such assumption, shall
have sole control over the defense, settlement, adjustment, or compromise of
such Claims; provided, however, that (i) Licensor shall obtain prior written
approval of Licensee, which Licensee shall not unreasonably withhold, before
entering into any settlement, adjustment, or compromise of such Claims; and
(ii) Licensee may, if it so desires, employ counsel at its own expense to
assist in the handling of such claim or undertake sole control of the defense,
settlement, adjustment, or compromise of such Claims.
SECTION ELEVEN
In the event that Licensee defaults or breaches any of the provisions
of this License Agreement or fails to account for or pay to Licensor any of the
royalties due and payable to Licensor hereunder, Licensor reserves the right to
cancel the license here granted upon sixty (60) days' written notice to
Licensee; provided, however, that if Licensee, within the sixty (60) day period
referred to, cures the said default or breach, the license herein granted shall
continue in full force and effect until the expiration of the Licensed Patents
or any reissue, continuation or extension thereof. In the event of the
termination of the license herein granted by Licensor to Licensee, Licensee
shall not be relieved of the duty and obligation to pay in full royalties
accrued and due and payable at the effective date of such termination.
SECTION TWELVE
In the event of any adjudication of bankruptcy, appointment of a
Receiver by a court of competent jurisdiction, assignment for the benefit of
creditors or levy of execution directly involving Licensee, this Agreement
shall thereupon forthwith terminate and no longer be of any further force and
effect.
SECTION THIRTEEN
This Agreement shall be governed by, interpreted in accordance with,
and enforced under the laws of the State of New Jersey, U.S.A. (regardless of
its or any other jurisdiction's choice of law principles), or, as necessary,
the laws of the United States of America.
SECTION FOURTEEN
This Agreement constitutes the entire agreement between the parties
hereto respecting the subject matter hereof, and supersedes and terminates all
prior agreements respecting the subject matter hereof, whether written or oral,
and may be amended only by an instrument in writing executed by both parties
hereto.
SECTION FIFTEEN
(a) Indemnification by Licensee - Licensee shall indemnify and hold
Licensor harmless against all liability, damage, cost or expense (including
reasonable attorneys' fees) arising out of the promotion, distribution, sale or
use of products made using the products supplied by Licensor or its designee to
Licensee hereunder, including those resulting from any personal injury
(including death) to any person including employees, servants, or agents of
Licensee, except to the extent such liability, damage, cost or expense is
caused by the negligence, omission, failure to act, intentional malfeasance,
willful misconduct, and/or breach
<PAGE> 7
of the warranties or other obligations of Licensor under this agreement. In the
event of any claim arising under this indemnity, prompt notice of such claim
shall be given by Licensor to Licensee which shall have the right to conduct
the defense in respect thereto, but Licensor may have counsel present at its
own expense and shall be entitled to participate in the defense of any such
claim. Licensor shall cooperate with Licensee in such defense at the expense of
Licensee. No settlement of any such matter shall be made without the written
approval of Licensee and Licensor, which will not be unreasonably withheld.
(b) Indemnification by Licensor - Licensor shall indemnify and hold
Licensee harmless against all liability, damage, cost or expense (including
reasonable attorneys' fees) arising out of any breach of this Agreement by
Licensor and/or the manufacturing, packaging and storing of products supplied
by Licensor.
SECTION SIXTEEN
This Agreement and the license herein granted shall be binding upon
and inure to the benefit of each of the parties hereto, their successors and
the assigns of the entire business relating thereto of each of the parties.
SECTION SEVENTEEN
If any term or provision of this Agreement is found held to be
excessive, or invalid, void or unenforceable, the offending term or revision
shall be deleted or revised to the extent necessary to be enforceable, and, if
possible, replaced by a term or provision which, so far as practicable,
achieves the legitimate aims of the parties.
SECTION EIGHTEEN
Any notice or other communication given by either party hereto to the
other party relating to this Agreement shall be sent by registered or certified
mail, return receipt requested, addressed to such other party at the address
set forth above. Changes of address shall be given in the same manner as any
other notice.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized representatives as of the day and year
first above written.
JAME FINE CHEMICALS, IN.
Attest: By:
-------------------------
Title:
----------------------
HORIZON PHARMACEUTICALS, INC.
Attest: By:
-------------------------
Title:
----------------------
<PAGE> 1
EXHIBIT 10.11
CONFIDENTIAL TREATMENT REQUEST
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
EXCLUSIVE DISTRIBUTION AGREEMENT
This Exclusive Distribution Agreement (the "Agreement") is dated
effective as of January 1, 1996 by and between UNISOURCE, INC., a Colorado
corporation, with its principal place of business at 1919-14th St., Suite 606,
Boulder, Colorado 80302 ("Unisource"), and HORIZON PHARMACEUTICAL CORPORATION,
a Delaware corporation, with its principal place of business at 1125
Northmeadow Parkway, Suite #130, Roswell, Georgia 30076 ("Horizon").
W I T N E S S E T H :
A. Unisource is engaged in the business of developing, manufacturing
and selling pharmaceutical products;
B. Horizon is engaged in the business of marketing and distributing
pharmaceutical products;
C. Unisource and Horizon previously entered into an Exclusive
Distribution Agreement dated July 30, 1993 (the "Prior Agreement") for a
pharmaceutical product known as TANAFED (the "Product"), as described in
Exhibit A hereto, which exhibit is expressly incorporated herein by this
reference; and
D. The parties desire to enter into a new Exclusive Distribution
Agreement superseding the "Prior Agreement" effective as of the date indicated
above, according to the following terms and conditions. It is the express
intention of the parties that this "Agreement" shall replace and supersede the
"Prior Agreement", curing any and all defaults which may exist under the "Prior
Agreement" by either Unisource or Horizon, without any time elapsing between
the termination of the "Prior Agreement" and the effective date of this
"Agreement".
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, IT IS AGREED:
<PAGE> 2
[***] - CONFIDENTIAL TREATMENT REQUESTED
l. Exclusivity; Requirements Contract; Pricing; and Terms of
Sale.
1.1 Exclusivity.
(a) Unless and until Horizon's exclusivity for
the Product is terminated pursuant to the provisions of Section 1.1(b) hereof,
Unisource shall supply the Product exclusively to Horizon and shall not sell
the Product in the Continent of North America or the Caribbean to anyone other
than Horizon without Horizon's prior written consent. Likewise, Horizon agrees
during the term hereof to purchase the Product exclusively from Unisource for
North American and Caribbean distribution. It is agreed that the mutual
exclusivity provisions of this Agreement shall apply to the Product regardless
of package size or the nature of any packaging.
(b) Unisource shall have the right to terminate
Horizon's exclusivity hereunder if Horizon's aggregate purchases for the
Product during any calendar year beginning in 1996 are less than the scheduled
amount set forth below for such year. Such right to terminate Horizon's
exclusivity must be exercised, if at all, by written notice given within thirty
(30) days after the end of any calendar year. Unisource's right to terminate
Horizon's exclusivity hereunder shall be Unisource's sole remedy for Horizon's
failure to order the scheduled amount during any calendar year. The scheduled
amount for the Product, regardless of package size is as follows:
(i) 1996 - [***];
(ii) 1997 - [***];
(iii) 1998 - [***];
(iv) 1999 and subsequent years - [***]
For purposes of this Agreement, if more gallons are purchased than scheduled
during a particular year, the overage above scheduled gallons will carry over
to the next year's scheduled obligations as a credit.
For purposes of this Agreement, a gallon shall be defined as 128-fl. oz. to be
packaged in various package sizes.
(c) Horizon shall have the right of first refusal on
all other dosage forms or pharmaceutical products containing Pseudoephedrine
Tannate developed by Unisource. Unisource agrees to offer said products in all
forms to Horizon first, and to negotiate terms with Horizon in good faith.
Horizon shall also have the right to match any bona fide offer from any third
party for any said products in all forms, and by agreeing to match the bona
fide offer, Horizon shall be granted exclusivity to the same extent granted
herein for TANAFED.
<PAGE> 3
1.2 Requirements Contract.
(a) During the term of this Agreement, Horizon shall
purchase the Product exclusively from Unisource and Unisource shall exclusively
supply all of Horizon's requirements of the Product for the distribution
channels heretofore defined. Horizon shall not during the term of this
Agreement purchase or manufacture a comparable Product (comparable Product is
defined as any product containing Pseudoephedrine Tannate, alone or in
combination with other ingredients, and which is intended for the same
therapeutic use as the Product) from anyone other than Unisource. The foregoing
obligation of Unisource to supply all of Horizon's requirements of the Product
and Horizon's obligation to purchase all of its requirements of the Product
exclusively from Unisource shall apply even if Horizon's exclusivity is
terminated by Unisource pursuant to Section 1.1 hereof. Horizon shall have the
right to terminate Unisource's exclusivity hereunder if Unisource is unable to
fulfill all of Horizon's requirements for the Product at any time, subject to
the sixty (60)-day cure period described in Subsection 6.2 below.
1.3 Price and Terms of Sale.
(a) The price to be charged to Horizon for Product
in various package sizes bearing the Horizon or a subsidiary label shall be the
same as those currently quoted to Horizon, as shown on Exhibit "B" attached
hereto and incorporated herein. However, the price charged to Horizon for the
Product shall be reduced if: (1) Unisource engages a new manufacturer who
supplies Product to Unisource at a lower cost, or (2) increased volume orders
by Horizon result in per-unit savings to Unisource because of economies of
scale. In the event of the occurrence of either of these contingencies,
Unisource and Horizon agree to negotiate a price reduction in good faith,
promptly upon receipt of written notice from Horizon of a desire to negotiate
price reduction as a result of the occurrence of one or both contingencies. No
other price changes shall be made without the written consent of both parties.
(b) Horizon shall pay Unisource for the Product
within thirty (30) days after shipment of the Product to the location
specified. Unisource warrants that when invoiced the Product will conform to
those specifications documented in Exhibit A and Unisource will cause the
manufacturer to provide to Horizon a Certificate of Assay, batch assay sheets
and all current material safety data sheets applicable to the Product for each
batch shipped to Horizon. Horizon will not be obligated to pay for a
non-conforming batch of the Product or a batch for which a Certificate of Assay
has not been provided.
(c) All shipments of the Product to Horizon at the
location specified will be made FOB, Unisource site of manufacture.
2. Term of Agreement and Termination. This Agreement shall
commence on January 1, 1996, at which time the "Prior Agreement" shall be
superseded instantly and this Agreement shall continue for a period of seven
(7) years until December 31, 2003. If upon expiration of this initial term
ending December 31, 2003, Horizon is not in default of any of the material
terms and conditions of this Agreement, Horizon shall have an option to extend
this Agreement for an additional term of seven (7) years. This option shall be
automatically
-3-
<PAGE> 4
[***] - CONFIDENTIAL TREATMENT REQUESTED
exercised unless Horizon gives written notice to Unisource of its
intent not to exercise the option prior to December 31, 2003. This Agreement
shall also terminate immediately upon any voluntary or involuntary dissolution,
act of bankruptcy or reorganization for the benefit of creditors of either
party, and may not be reinstated thereafter except with the other party's
written consent.
In the event that Horizon exercises the seven year
option, Horizon agrees to purchase [***] of Product in each of the first three
years of the option period, and [***] of Product in each of the remaining four
years, pursuant to the exclusivity and requirements provisions of subsection 1
above.
3. Representations and Warranties of Unisource.
Unisource represents and warrants to Horizon that the Product supplied
hereunder will be merchantable and that the Product supplied hereunder will be
manufactured in accordance with the then FDA current good manufacturing
practices for comparable products. Unisource shall cause the manufacturer of
the Product (the "Manufacturer") to supply Horizon with the standard form FDA
continuing guaranty. Unisource further represents and warrants to Horizon that
it is the sole and exclusive owner of the Product and that no consents are
required from any person to grant Horizon the rights granted to it hereunder.
Unisource hereby agrees to indemnify and hold harmless Horizon from and against
any breach of its representations and warranties set forth in this Agreement.
In no event, however, will Unisource be liable to Horizon for consequential
damages.
4. Insurance. Unisource shall cause the Manufacturer to
maintain product liability insurance in a minimum amount of One Million Dollars
($1,000,000) and, prior to the delivery of the first order of Product,
Unisource shall cause the Manufacturer to provide Horizon with a certificate of
insurance naming Horizon as an additional insured on Manufacturer's insurance
policy. Thereafter, Unisource shall cause the manufacturer to provide periodic
verification of the liability insurance coverage on each renewal of the policy,
and in any event at least each year on the anniversary date of the policy.
5. Default.
5.1 Notice of Default. Subject to Section 6.2,
if a default occurs hereunder, then the non-defaulting party shall be entitled
to terminate this Agreement upon sixty (60) days' written notice to the
defaulting party, if the defaulting party has not cured the default as provided
in paragraph 6.2, which notice shall describe the default in reasonable detail.
5.2 Effect of Default and Cure. The party in
default shall have a period of sixty (60) days from receipt of the Notice of
Default provided for in paragraph 6.1 within which to cure the specified
default. If the default is cured and corrected within sixty (60) days after
proper notice, this Agreement shall continue in full force and effect as if no
default had existed. If the default is not timely cured as set forth in this
Subsection 6.2, then the non-defaulting party shall have the option to
terminate this Agreement, and such termination shall be without prejudice to
any claim for damages which the non-defaulting party may have.
-4-
<PAGE> 5
6. Force Majeure and Termination.
6.1 Force Majeure. A party to this Agreement shall be
excused from performance under this Agreement to the extent that and for so
long as such performance is substantially hindered or prevented by force
majeure such as acts of God, strikes, or acts of war.
6.2 Right of Termination. If any performance excused
pursuant to Subsection 6.1 is both protracted and material with reference to
the objectives and purposes of this Agreement, the party not excused thereby
may terminate this Agreement upon fifteen (15) days' written notice to the
other party, and such terminating party shall be entitled to an equitable
adjustment of its rights and obligations hereunder.
7. Applicable Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Colorado without
giving effect to the principles of conflict of laws thereof.
8. Notices. Any notice, demand or other communication
required or authorized to be given under this Agreement shall, if reasonably
practicable, be transmitted by telecopier to the number specified below,
confirmed by hard copy via U.S. Mail, or such notice may be sent by personal
delivery, national overnight commercial delivery service which provides package
tracking services ("Overnight Courier") or by U.S. Mail, certified, return
receipt requested. Any such notice shall be deemed received as of the first
business day after it is sent if delivered by telecopy, Overnight Courier or
personal delivery, or on the day actually received and signed for if sent by
Certified U.S. Mail. All notices shall be sent to the respective parties at the
following telecopy numbers and addresses, or such other telecopy number or
address as a party may provide to the other by written notice complying with
this Section 9:
Horizon Pharmaceutical Corporation
1125 Northmeadow Parkway, Suite #130
Roswell, Georgia 30076
Attention: President
Fax No. 770-442-9594
Unisource, Inc.
1919-14th Street, Suite 606
Boulder, Colorado 80302
Attention: President
Fax No. 303-442-6919
9. Assignment; Binding Effect. This Agreement may not
be assigned by either party without the prior written consent of the other
party, and any attempt by either party to assign this Agreement without such
consent shall be null and void ab initio. This Agreement shall inure to the
benefit of, and be binding upon, the respective successors and permitted
assigns of the parties.
-5-
<PAGE> 6
10. Modification. This Agreement may not be modified or
amended in any respect except in writing signed by both parties.
11. The Prior Agreement. The Prior Agreement is hereby
superseded in its entirety by mutual consent of both parties. Each party
represents and warrants to the other that no default exists under the terms of
the Prior Agreement.
12. Entire Agreement. This is the entire Agreement between
the parties and no prior representations, statements, warranties or inducements
form a part of this contract or vary, modify or expand upon any of the terms or
conditions contained in this written Agreement.
IN WITNESS WHEREOF, the parties hereto have signed, sealed and
delivered this Agreement effective January 1, 1996.
Attest: UNISOURCE, INC.
By:
- ------------------------------- -----------------------------
Attest: HORIZON PHARMACEUTICAL
CORPORATION
By:
- ------------------------------- -----------------------------
-6-
<PAGE> 7
EXHIBIT A
TANAFED
FORMULA A
Pediatric Suspension BID
Each 5 mL contains:
Chlorpheniramine tannate 4.5 mg.
Pseudoephedrine tannate 75.0 mg.
Inactive ingredients: benzoic acid, FD&C Red No. 40, flavors (natural
and artificial), glycerin, kaolin, magnesium aluminum silicate,
methylparaben, pectin, water, saccharin sodium and sucrose.
FORMULA B
Pediatric Suspension BID
Each 5 mL contains:
Chlorpheniramine tannate 4.5 mg.
Pseudoephedrine tannate 75.0 mg.
Inactive ingredients: Citric acid, D&C Red #28, flavors, glycerin,
magnesium aluminum silicate, methyiparaben, sodium benzoate, sodium
citrate, sodium saccharin, sucrose, zanthan gum.
-7-
<PAGE> 8
[***] - CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
[***]
Chlorpheniramine tannate 4.5 mg.
Pseudoephedrine tannate 75.0 mg.
<TABLE>
<S> <C> <C>
Quantity: [***] order [***] order or more
1. Packaging: Pints Pints
Price: $[***] $[***]
2. Packaging: [***] [***]
Price: $[***] $[***]
3. Packaging: [***] [***]
Price; $[***] $[***]
</TABLE>
-8-
<PAGE> 1
EXHIBIT 10.12
CONFIDENTIAL TREATMENT REQUEST
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[***]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
MANUFACTURING AND SUPPLY AGREEMENT
THIS MANUFACTURING AND SUPPLY AGREEMEENT (the "Agreement") is made and
entered into this 23rd day of April, 1999 (the "Effective Date"), by and
between HORIZON PHARMACEUTICAL CORPORATION ("Horizon") and MIKART, INC.
("Mikart"). Mikart is a Georgia corporation with its principal place of
business at 1750 Chattahoochee Avenue, Atlanta, Georgia 30318. Horizon is a
Delaware corporation with its principal place of business at 660 Hembree
Parkway, Suite 106, Roswell, Georgia 30076.
BACKGROUND:
Subject to the terms and conditions contained in this Agreement,
Horizon desires to engage Mikart to manufacture the "Products" (as hereinafter
defined) for commercial distribution by Horizon, and Mikart desires to accept
such appointment.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premise, Ten Dollars
($10.00) in hand paid, the mutual promises, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
The following words, terms and phrases, when used herein, shall have
the following respective meanings:
1.1 "Batch" shall mean either: (a) the quantity of [***] tablets
of the Product to be marketed and sold as "Robinul;" or (b) the quantity of
[***] tablets of the Product to be marketed and sold as "Robinul Forte."
1.2 "Contract Year" shall mean a twelve (12) consecutive month
period after the Qualification Date and during the term of this Agreement. The
first Contract Year shall commence as of the Qualification Date, and subsequent
Contract Years shall commence on each anniversary of the Qualification Date.
1.3 "FDA" shall mean the United States Food and Drug
Administration or any successor agency thereof.
<PAGE> 2
1.4 "Health Registrations" shall mean the NDA issued by the FDA
with respect to the Products and any other governmental or regulatory consents,
registrations, approvals or permits necessary to sell or manufacture the
Products in the Territory.
1.5 "Products" shall mean Glycopyrrolate 1 mg U.S.P. tablets
(regardless of how packaged), which Product shall be marketed and sold by
Horizon as "Robinul," and Glycopyrrolate 2 mg U.S.P. tablets (regardless of how
packaged), which Product shall be marketed and sold by Horizon as "Robinul
Forte."
1.6 "Qualification Date" shall mean the date on which Mikart
satisfactorily completes its validation and testing pursuant to Article 2 of
this Agreement such that it becomes authorized to begin manufacturing the
Products under the Health Registrations in accordance with the terms of this
Agreement.
1.7 "Specifications" shall mean the specifications for the
manufacturing, packaging and labeling of the Products described on Exhibit A
attached hereto and incorporated herein by reference.
1.8 "Territory" shall mean the United States of America and its
territories and such other locations as may be designated by the parties hereto
pursuant to Section 2.6.
ARTICLE 2
VALIDATION AND TESTING
2.1 GENERAL. Mikart shall become authorized to manufacture and
package the Products under the Health Registrations as contemplated by Section
2.3. To accomplish the same, it is the current intention of Mikart and Horizon
to effect a transfer according to the SUPAC Guidelines; provided, however, if
such a transfer cannot be accomplished, Mikart shall (with Horizon paying
Mikart's reasonable out-of-pocket expenses therefor) develop an alternative
manufacturing process and prepare and file on behalf of Horizon with the FDA
and any other applicable agency or authority supplements to the Health
Registrations which, when and if approved, would permit Mikart to manufacture
the Products pursuant to this Agreement. In any event, Mikart will use all
reasonable efforts to become authorized to manufacture the Products as soon as
reasonably practicable after the Effective Date.
2.2 RIBBON BLENDER. Within sixty (60) days after the Effective
Date, Mikart will lease (for a period of five (5) years with monthly rental
payments in the amount of $405.00) and have installed a ribbon blender with a
minimum working capacity of thirty (30) cubic feet (the "Blender") for use in
manufacturing the Products. On or before the fifth (5th) day of such month
during the term of such lease, Horizon shall pay to Mikart an amount equal to
$405.00, and Horizon shall have the right, at its sole expense, to require
Mikart to purchase the Blender on Horizon's behalf.
-2-
<PAGE> 3
[***] - CONFIDENTIAL TREATMENT REQUESTED
2.3 VALIDATION. After its receipt of the Blender, Mikart shall
begin analytical methods development validation and process and cleaning
validation with respect to the Products. All of Mikart's costs incurred in
connection therewith (up to a maximum aggregate amount of [$***]) shall be
billed to and paid by Horizon on a quarterly basis (but based on a three (3)
year amortization schedule).
2.4 TESTING. Upon its successful completion of the validations
described in Section 2.3, Mikart will conduct stability testing on the Products
as required by federal law. All of Mikart's costs incurred in connection
therewith shall be periodically billed to and paid by Horizon on a quarterly
basis (but based on a three (3) year amortization schedule).
2.5 HEALTH REGISTRATIONS. Horizon shall maintain the Health
Registrations in full force and effect at all times during the term of this
Agreement; provided, however, upon the reasonable request of Horizon, Mikart
shall assist Horizon in connection therewith; provided further in exchange
therefor Horizon will pay Mikart its standard fees therefor. Mikart hereby
acknowledges and agrees that the Health Registrations are owned by, in the name
of and for the benefit of Horizon and that Mikart has no rights in or to any of
the Health Registrations, except to the extent it is expressly authorized to
manufacture the Products for Horizon pursuant to this Agreement.
2.6 ADDITIONAL LOCATIONS. In the event Horizon desires to market,
distribute or sell the Products in any location not set forth in Section 1.8
(or previously designated pursuant to this Section 2.6), then Mikart shall, at
Horizon's request, cooperate in good faith with Horizon to obtain any Health
Registrations necessary or appropriate therefor (and Horizon shall pay all of
Mikart's reasonable out-of-pocket expenses therefor); provided, however,
Horizon shall not market, distribute or sell any Products in such locations
unless and until Mikart obtains such Health Registrations.
ARTICLE 3
MANUFACTURE
3.1 EXCLUSIVITY. Subject to the terms and conditions contained
herein, Mikart shall manufacture, package and sell the Products exclusively to
Horizon from and after the Qualification Date and throughout the remainder of
the term of this Agreement (the "Manufacturing Period"), and Horizon shall
purchase exclusively from Mikart all of Horizon's requirements of the Products
during the Manufacturing Period. Except as otherwise permitted hereby, Mikart
agrees not to manufacture, package or sell to any other person or entity during
the term of this Agreement in any unit size or strength any other product which
contains the active ingredient Glycopyrrolate and either (a) contains no other
active ingredient, or (b) is approved for an indication for which the Products
are or become approved. Horizon hereby agrees that, in the event it desires to
sell, market or distribute any other product which contains the active
ingredient Glycopyrrolate during the term of this Agreement, it will negotiate
exclusively with Mikart regarding the manufacture thereof (which would be on
commercial terms other than price substantially similar to those contained
herein) for a period of at least ninety (90) days prior to negotiating therefor
with any other person or entity.
-3-
<PAGE> 4
3.2 LIMITED WARRANTIES. Mikart hereby represents and warrants to
Horizon that the Products manufactured and sold to Horizon hereunder shall
conform to the Specifications and shall be free of all defects in materials and
workmanship. The Products, when manufactured, packaged and sold to Horizon
shall comply with all applicable federal, state and local laws, rules and
regulations in the Territory, including without limitation the current Good
Manufacturing Practices as published and amended from time to time by the FDA,
and Mikart's manufacturing and storage facilities shall comply with all
applicable federal state and local laws, rules and regulations in the
Territory. EXCEPT AS SET FORTH IN THIS SECTION 3.2, MILKART MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE PRODUCTS
MANUFACTURED BY IT HEREUNDER AND SPECIFICALLY DISCLAIMS ALL SUCH OTHER
REPRESENTATIONS AND WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. With
respect to each batch of a Product manufactured hereunder, this Section 3.2
shall remain effective until the expiration date noted on such Product.
3.3 QUALITY CONTROL.
(a) Mikart will perform quality control testing on the
Products in accordance with normal industry standards to determine
whether such Products conform to the Specifications. Contemporaneously
with each shipment of Product hereunder, Mikart will provide Horizon
with a certificate of analysis with respect to such Product. In
addition, Mikart will perform, at Horizon's expense, any and all other
testing relating to the Products which is reasonably requested by
Horizon and promptly provide Horizon with the results thereof;
provided, however, Horizon shall not be responsible for the expenses
associated with any such testing which shows that such Product does
not meet the Specifications.
(b) In addition, Mikart shall be responsible for conducting
an ongoing stability program for the Products as required by federal
law. Mikart shall provide the results of such testing to Horizon in a
timely manner as this data is generated or received by Mikart.
Mikart's cost therefor shall be billed to and paid by Horizon on a
quarterly basis (but based on a three (3) year amortization schedule).
(c) Mikart will, upon the reasonable request of Horizon,
assay any Product returned to Horizon by a third party purchaser.
Horizon shall reimburse Mikart for the costs of any such assay unless
the results thereof prove the cause of return is as a result of
Mikart's negligence or willful misconduct or the failure of such
Product to comply with the limited warranties contained in Section 3.2
hereof.
(d) In the event that any Batch is subject to a recall,
Horizon, at its expense, shall conduct the recall, except that Mikart
shall reimburse Horizon for the costs of such recall (including
reimbursing Horizon for the Product at the invoice prices paid by
Horizon therefor) in the Territory to the extent such recall results
from the manufacture, packaging or storage of such Product by Mikart.
-4-
<PAGE> 5
(e) Each party hereto shall promptly notify the other of any
recall of either Product which has been directed by it or by any
governmental or regulatory entity or agency for any reason whatsoever.
Such notice shall identify the reason for the recall and all relevant
details thereof.
(f) Each party hereto shall promptly deliver to the other a
copy of all notices received by it from the FDA during the term of
this Agreement relating to the manufacture, packaging, storage or sale
of the Products.
(g) Upon the reasonable advance request of Horizon, Mikart
shall permit a representative of Horizon to inspect its facilities
where the Products are manufactured, packaged and stored, provided
such representative first executes a copy of Mikart's standard visitor
confidentiality agreement.
3.4 PACKAGING MATERIALS. Mikart shall order from time to time, at
Horizon's request and expense, labels, package inserts and other packaging
materials in sufficient quantities to permit the packaging of the Products
ordered by Horizon from time to time hereunder.
3.5 TRADEMARKS. Mikart acknowledges that the trademarks "Robinul"
and "Robinul Forte" (the "Trademarks") are registered trademarks licensed to
Horizon. Mikart further agrees not to use either of such trademarks except as
specifically authorized by Horizon under this Agreement in connection with the
manufacture, packaging and sale of the Products to Horizon.
ARTICLE 4
ORDERS AND SALES
4.1 FORECASTS. Commencing on the Qualification Date, and
thereafter at least thirty (30) days prior to the commencement of each calendar
quarter, Horizon shall provide Mikart with a non-binding, rolling twelve (12)
month forecast of its requirements for the Products.
4.2 PURCHASE ORDERS. Horizon shall place its orders for the
Products no later than ninety (90) days prior to the requested delivery date
using separately numbered, written purchase orders. Each purchase order must be
for one or more full Batches (provided Horizon shall have the right to specify
the size packaging requirements of each order from among 100 tablet bottles and
any other package sizes agreed to by the parties hereto). Purchase orders shall
be transmitted to Mikart via U.S. mail, private courier, or facsimile
transmission. Each purchase order shall include complete and accurate
information with respect to the requested Product, quantity, sizes, shipment
dates, shipment method and delivery destination. Subject to this Section 4.2,
Mikart will ship Product within five (5) days after the requested shipment date
in the corresponding purchase order. Mikart shall promptly notify Horizon upon
its receipt of any purchase orders containing shipment dates which need to be
rescheduled, and Mikart and Horizon shall work together in good faith to
schedule a new shipment date for such order (which shall not be later than
thirty (30) days after the date requested by Horizon). In addition, Horizon may
postpone a requested shipment date by providing Mikart at least sixty (60) days
prior written notice thereof.
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<PAGE> 6
[***] - CONFIDENTIAL TREATMENT REQUESTED
4.3 MINIMUM PURCHASE. During each Contract Year, Horizon shall
purchase from Mikart the following minimum number of aggregate Batches of
Products:
<TABLE>
<CAPTION>
Contract Year Minimum Batches
------------- ---------------
<S> <C>
1 [***]
2 [***]
3 [***]
4 [***]
5 [***]
</TABLE>
ARTICLE 5
PRICES, TERMS OF PAYMENT
5.1 PRICE. The prices to be paid for the Products by Horizon to
Mikart for shipments made during the first year after the Effective Date shall
be based on a Glycopyrrolate price of $12,000 per kilogram and are set forth
below; provided, however, in the event Mikart's price for Glycopyrrolate
changes in any material manner, the price of the Products shall be increased or
decreased (as the case may be) to reflect such change.
FOR ROBINUL: Size Price
100 tablet $[***]
FOR ROBINUL FORTE: Size Price
100 tablet $[***]
Notwithstanding anything else contained herein to the contrary, within thirty
(30) days after the end of any Contract Year in which Horizon purchases less
than [***] Batches, Horizon shall pay to Mikart an amount equal to the product
of (a) $[***] multiplied by (b) the difference between (i) [***] and (ii) the
number of Batches actually purchased by Horizon in such Contract Year.
5.2 PRICE ADJUSTMENTS. Mikart shall have the right to increase
the prices charged for the Products pursuant to Section 5.1 hereof one time
during each year after the Effective Date to reflect any increase in the costs
of goods and services necessary to manufacture the Product ("Total Product
Costs'); provided, however, in the event Mikart so increases such prices in any
such year and after the effective date thereof, Mikart's cost of raw materials
or components for manufacturing the Products ("Materials Cost") further
increases by more than five percent (5%) during such year, Mikart shall have
the right, by providing at least sixty (60) days written notice to Horizon to
further increase such prices in such year by a percentage amount equal to the
percentage increase in Total Product Costs that are attributable to the
percentage increase in Materials Cost in excess of five percent (5%); provided
further, that Mikart shall provide Horizon with documented evidence of any such
additional cost increases and shall use its reasonable efforts to prevent any
such cost increases from occurring. In addition, Mikart shall reduce its prices
charged hereunder to reflect any material decrease in the prices paid by it for
the active ingredient raw materials used to manufacture the Products.
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<PAGE> 7
5.3 PAYMENT TERMS. Mikart shall invoice Horizon for the price of
the Products sold at the time of shipment, and Horizon shall pay each such
invoice within thirty (30) days after its receipt thereof.
5.4 EXCLUSIVITY. Horizon shall not purchase either Product from
any person or entity other than Mikart during the term hereof without the prior
written consent of Mikart, which consent must specifically state that Mikart is
consenting to waive its exclusive rights hereunder. However, in the event that
Mikart notifies Horizon in writing that it will not or cannot supply any
Products ordered by Horizon in accordance with the terms hereof, or in the
event that Mikart has failed to deliver any Products ordered by Horizon within
the period of time required under Section 4.2 (exclusive of any cure period
provided by Section 7.2(a)), then Horizon may purchase a product identical to
that of such Product in the quantity specified in the unfilled purchase order
from any available alternate source without fast obtaining the written consent
required above. In the event Horizon is permitted to purchase Product from any
person or entity other than Mikart in accordance with this Section 5.4, any
amounts so purchased by Horizon shall apply toward the minimum batch purchase
obligations set forth in Section 4.3 for such year, and, upon Horizon's
request, Mikart shall provide reasonable assistance to enable such other person
or entity to manufacture the Products under the Health Registrations (provided
Mikart shall not be required to pay any out-of-pocket costs or expenses in
connection therewith). In the event that said notice or failure occurs on two
or more occasions within a one hundred eighty (180) day period, this Section
5.4 shall no longer be of any force or effect and Horizon shall be relieved of
its obligations pursuant to Section 4.3 hereof. Nothing in this Section 5.4
shall be construed so as to limit or eliminate any other remedies available to
Horizon in the event of a breach of Mikart's obligations under this Agreement,
including its obligation to manufacture, package and deliver the Products
ordered by Horizon.
ARTICLE 6
SHIPPING DEFECTS, RETURNS
6.1 SHIPPING. Mikart will ship all Products ordered hereunder to
Horizon f.o.b. Mikart's manufacturing facility, at which point the risk of loss
for such Products will pass to Horizon. Title to such Products shall pass to
Horizon only upon Mikart's receipt of payment in full therefor. Mikart shall
ship the Products to the location designated by Horizon on its purchase order.
The parties agree that the method and route of shipment are at Mikart's
discretion unless Horizon furnishes Mikart explicit instructions with the
purchase order. Horizon agrees to pay all costs of shipping and any costs of
freight insurance obtained by Mikart at the request of Horizon. Mikart agrees
to provide reasonable support to assist Horizon in pursuing any claims it may
have against carriers.
6.2 NOTIFICATION OF DEFECTS. Horizon shall notify Mikart in
writing as soon as reasonably practicable after delivery to Horizon of any
non-conforming Product containing obvious defects in such Product discoverable
without affecting the integrity of such Product's packaging (but in any event
within twenty (20) days after delivery) and within thirty (30) days of the
earlier of its discovery or its notification by a third party of any latent
defects. Horizon shall be responsible for its costs to inspect all Products.
-7-
<PAGE> 8
6.3 RETURNS. Mikart shall accept for return and replacement or
credit (at invoiced cost) any Product sold to Horizon under this Agreement
which does not conform with the warranties set forth herein and for which
proper notice has been given in accordance with Section 6.2, provided Horizon
obtains prior shipping authorization from Mikart. All returns of Products with
obvious defects must be in the original manufactured condition. Mikart will pay
reasonable return freight and shipping charges, but Horizon shall assume the
risk of loss in transit associated with such returns.
ARTICLE 7
TERM AND TERMINATION
7.1 TERM. Unless earlier terminated in accordance with the
provisions hereof, the term of this Agreement shall commence on the Effective
Date and shall thereafter continue in effect until the fifth (5th) anniversary
of the Qualification Date (the "Initial Term"). At the end of the Initial Term
and each subsequent "Renewal Term" (as hereinafter defined), the term of this
Agreement shall be automatically renewed and extended for a one (1) year period
(a "Renewal Term'), unless either party delivers a written termination notice
to the other party at least six (6) months prior to the end of the Initial Term
or the then current Renewal Term, as the case may be.
7.2 TERMINATION. Either party may terminate this Agreement on
written notice to the other party, effective immediately if:
(a) the other party commits a material breach of any of its
obligations hereunder which is not cured within sixty (60) days of
written notice from the other party specifying the breach;
(b) the other party is dissolved or liquidated, files or has
filed against it a petition under any bankruptcy or insolvency law,
makes an assignment to the benefit of its creditors, has a receiver
appointed for all or substantially all of its property, or has a
petition under any bankruptcy or insolvency law filed against it which
is not dismissed within sixty (60) days; or
(c) the Qualification Date has not occurred within two (2)
years after the Effective Date.
Such right of termination shall be in addition to any other remedy a
non-defaulting party may have at law or in equity due to the other party's
breach of is obligations hereunder.
7.3 POST-TERMINATION RESTRICTIONS. Upon any expiration or
termination of this Agreement (other than by Horizon pursuant to Section 7.2),
Horizon shall grant Mikart at least sixty (60) days to produce all open orders
in house in accordance with the conditions of the open orders and this
Agreement. In the event Horizon terminates this Agreement pursuant to Section
7.2: (a) Mikart shall not manufacture, package or sell to any other person or
entity for a period of two (2) years thereafter any product Mikart is
prohibited from making during the term of this Agreement pursuant to Section
3.1; and (b) upon the request of Horizon, Mikart will provide Horizon with
reasonable assistance in locating or establishing a new manufacturer for the
Products.
-8-
<PAGE> 9
7.4 CHANGED CIRCUMSTANCES. In the event that the market for the
Products materially changes or either party, in good faith, believes that a
material change in such party's circumstances beyond their control has occurred
which materially affects its ability to perform its obligations pursuant to
this Agreement, the parties hereto shall, in good faith, negotiate towards
mutually acceptable revisions to this Agreement to address the impact of such
material changes; provided, however, the terms of this Agreement shall continue
in full force and effect unless and until the parties hereto agree otherwise.
7.5 FORCE MAJEURE.
(a) The failure of either of the parties hereto to perform
any obligation under this Agreement solely by reason of any cause
beyond its control (and due to no fault of its own), including,
without limitation, acts of God, acts of government, riots, wars,
strikes and accidents in transportation, shall not be deemed to be a
breach of this Agreement; provided, however, that the party so
prevented from complying herewith shall continue to take all actions
within its power, including payment of outstanding invoices, to comply
as fully as possible herewith.
(b) If, due to force majeure, Mikart is prevented or expected
to be prevented from supplying Horizon with the Products for a period
exceeding one hundred twenty (120) days, then Horizon shall have the
right to terminate this Agreement with immediate effect and upon the
request of Horizon at Horizon's expense Mikart will provide reasonable
assistance in establishing or locating a new manufacturer for the
Products. Likewise, should Horizon be unable to purchase the Products
for a period exceeding one hundred twenty (120) days, then Mikart
shall have the right to terminate this Agreement, provided Horizon
shall remain obligated to pay to Mikart any amounts owed hereunder.
7.6 SPECIAL TERMINATION. Notwithstanding anything else contained
herein to the contrary, but subject to Section 7.5, in the event Horizon fails
in any Contract Year to meet its minimum Batch purchase requirements set forth
in Section 4.3 hereof for any reason other than a breach of this Agreement by
Mikart, then Mikart shall have the right to terminate this Agreement effective
immediately by delivering written notice thereof to Horizon; provided, however,
Horizon may apply purchases in excess of the minimum Batch purchases in any
Contract Year to meet such requirements in subsequent Contract Years.
7.7 POST-TERMINATION OBLIGATIONS. Notwithstanding anything else
contained herein to the contrary, following any termination or expiration of
this Agreement:
(a) Mikart, at its option, shall either deliver the Blender
to Horizon (in which case Horizon shall assume all of Mikart's
remaining obligations under its lease therefor) or pay to Horizon
amount in cash equal to the then-current net book value of the
Blender;
(b) Horizon shall purchase from Mikart (at Mikart's cost
therefor) all of Mikart's remaining inventory of the active ingredient
in the Products (but only to the extent necessary to manufacture the
Products equal to Horizon's forecast for the subsequent four (4) month
period); and
-9-
<PAGE> 10
(c) Subject to Section 7.3 hereof, Mikart shall have not
further rights to use any of the Health Registrations.
ARTICLE 8
INDEMNIFICATION AND INSURANCE
8.1 INDEMNIFICATION. Mikart hereby indemnifies and agrees to
defend and hold Horizon harmless from and against losses, claims, damages,
liabilities, costs and expenses (including, without limitation, attorneys' fees
and court costs) incurred by Horizon as a result of any breach of this
Agreement by Mikart or the manufacture, package or storage of any Products by
Mikart. Horizon hereby indemnifies and agrees to defend and hold Mikart
harmless from and against losses, claims, damages, liabilities, costs and
expenses (including, without limitation, attorneys' fees and court costs)
incurred by Mikart as a result of any breach of this Agreement by Horizon, the
storage, sale or distribution of the Products, or any failure by Horizon to
provide any instructions regarding the proper use of the Products to any user
thereof.
8.2 INSURANCE. Each party hereto shall maintain with a
financially sound and reputable insurer throughout the term of this Agreement
comprehensive general liability insurance, including, without limitation,
product liability insurance with liability limits of at least $5,000,000 per
occurrence and in the aggregate. Each party hereto shall also name the other
party as an additional insured party on its policy and provide the other party
with such evidence thereof as is reasonably requested by the other party from
time to time.
ARTICLE 9
WARRANTIES AND REPRESENTATIONS OF THE PARTIES
9.1 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF MIKART. Mikart
hereby additionally represents and warrants to Horizon the following:
(a) Mikart is a corporation duly organized and existing in
good standing under the laws of the State of Georgia;
(b) There are no material adverse claims pending or, to the
best of Mikart's knowledge, threatened against Mikart by any entity
with respect to the Products;
(c) Mikart is neither a party to nor otherwise bound by any
agreement or instrument which prohibits or prevents it from performing
its obligations under this Agreement; and
(d) Mikart's manufacturing, packaging and storage facilities
comply in all material respects with all applicable federal, state and
local laws, rules and regulations in the Territory.
-10-
<PAGE> 11
(e) Mikart is using a combination of internal and external
resources to assess and make any necessary changes to its information
technology systems to ensure that they will function without error in
connection with the date January 1, 2000. Mikart has communicated with
(and will continue to communicate with) its suppliers and others with
whom it does business to monitor and evaluate such "Year 2000"
conversion.
Nonetheless, Mikart does not expect such conversion to have a material adverse
effect on its ability to perform its obligations under this Agreement.
9.2 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF HORIZON.
Horizon hereby additionally represents and warrants to Mikart the following:
(a) Horizon is a corporation duly organized and existing
under the laws of the State of Delaware;
(b) There are no material adverse claims pending or, to the
best of Horizon's knowledge, threatened against Horizon by any entity
with respect to any of its products or business;
(c) Horizon is neither a party to nor otherwise bound by any
agreement or instrument which prohibits or prevents it from performing
its obligations under this Agreement; and
(d) Horizon owns all of the Health Registrations and holds a
valid license to use the Trademarks and has the full power and
authority to grant to Mikart the right to manufacture and purchase the
Products under the Health Regulations and to use the Trademarks in
connection therewith, all in accordance herewith.
ARTICLE 10
CONFIDENTIALITY AND NONSOLICITATION OF PERSONNEL
10.1 CONFIDENTIALITY. Each party hereto acknowledges that it has
been and will be exposed to certain "Confidential Information" and "Trade
Secrets" (both as hereinafter defined) of the other party in connection with
the transactions contemplated by this Agreement and that its unauthorized use
or disclosure of such information or data could cause immediate and irreparable
harm to such other party. Accordingly, except to the extent that it is
necessary to use such information or data to perform its obligations under this
Agreement, neither party shall, without the express prior written consent of
the other party, redistribute, market, publish, disclose or divulge to any
person or entity, or use or modify for use, directly or indirectly, in any way
for any person or entity: (a) any of the other party's Confidential Information
during the term of this Agreement and for a period of three (3) years after any
expiration or termination of this Agreement; and (b) any of the other party's
Trade Secrets at any time during which such information constitutes a trade
secret under applicable law. For purposes hereof, "Confidential Information"
shall mean all competitively sensitive, non-public information (other than
"Trade Secrets") of or about a party which is not generally known by or
available to such party's competitors, and "Trade Secrets" shall mean "Trade
Secrets" as defined under applicable law.
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<PAGE> 12
10.2 NONSOLICITATION OF PERSONNEL. Neither party hereto shall,
without the prior written consent to the other party, either directly or
indirectly, alone or in conjunction with any other person or entity, solicit or
attempt to solicit any "key or material" employee, consultant, contractor or
personnel of such other party in the State of Georgia to terminate, alter or
lessen his or her affiliation with such other party at any time during the term
of this Agreement and for a period of one (1) year thereafter.
ARTICLE 11
ARBITRATION OF DISPUTES
All disputes arising out of or in connection with the interpretation,
application or enforcement of this Agreement shall be settled by final and
binding arbitration. Such arbitration shall be conducted in Atlanta, Georgia,
pursuant to the commercial arbitration rules of the American Arbitration
Association in effect at the time the arbitration is commenced. The decision of
the arbitrators, which may include interest, shall be final and binding on the
parties hereto and may be entered and enforced in any court of competent
jurisdiction by any party. The arbitration shall be pursued and brought to
conclusion as rapidly as possible. The prevailing party in the arbitration
proceeding shall be awarded reasonable attorneys' fees, expert witness costs
and expenses, and all other costs and expenses incurred in connection with such
proceeding, unless the arbitrators shall for good cause determine otherwise.
ARTICLE 12
NOTICES
12.1 DELIVERY. All notices, consents, requests and other
communications hereunder shall be in writing and shall be sent by hand
delivery, by certified or registered mail (return-receipt requested), or by a
recognized national overnight courier service as set forth below:
If to Mikart: Mikart, Inc.
1750 Chattahoochee Avenue
Atlanta, Georgia 30318
Attention: Miguel I. Arteche
If to Horizon: Horizon Pharmaceutical Corporation
660 Hembree Parkway
Suite 106
Roswell, Georgia 30076
Attention: Brent Dixon
12.2 EFFECTIVE TIME. Notices delivered pursuant hereto shall be
deemed given: (a) at the time delivered, if personally delivered; (b) at the
time received, if mailed; and (c) one (1) business day after timely delivery to
the courier, if by overnight courier service.
12.3 CHANGES. Either party hereto may change the address to which
notice is to be sent by written notice to the other party in accordance with
the provisions of this Article 12.
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<PAGE> 13
ARTICLE 13
MISCELLANEOUS
13.1 SEVERABILITY. If any provision of this Agreement is held to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired, and
the parties shall use their best efforts to substitute a valid, legal and
enforceable provision, which, insofar as practical, implements the purpose of
this Agreement.
13.2 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall be deemed one and the same instrument.
13.3 GOVERNING LAW. This Agreement shall be governed by, and any
matter or dispute arising out of this Agreement shall be determined by, the
laws of the State of Georgia.
13.4 HEADINGS: GENDER. "Article," "Section" and other headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. All personal
pronouns used in this Agreement shall include the other genders, whether used
in the masculine, feminine or neuter gender, and the singular shall include the
plural and vice versa, whenever and as often as may be appropriate.
13.5 ENTIRE AGREEMENT. This Agreement represents the entire
agreement of the parties with respect to its subject matter. Any and all prior
discussions or agreements with respect hereto are merged into and superseded by
the terms of this Agreement. This Agreement may be modified or amended only in
writing signed by both parties which expressly refers to this Agreement and
states an intention to modify or amend it. No such amendment or modification
shall be effected by use of any purchase order, acknowledgment, invoice or
other form of either party and in the event of conflict between the terms of
this Agreement and any such form, the terms of this Agreement shall control.
13.6 NOTICES. Any notice or payment required or permitted hereunder
shall be in writing and sent by certified mail, overnight express, or
personally delivered, addressed to the party to receive the notice as set out
below.
13.7 NO ASSIGNMENT. Neither party hereto may assign this Agreement,
in whole or in part, without the prior written consent of the other party
(which consent shall not be unreasonably withheld or delayed), and any
attempted assignment not in accordance herewith shall be null and void and of
no force or effect.
13.8 BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
heirs, representatives and permitted assigns.
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<PAGE> 14
13.9 INTERPRETATION. This Agreement was fully negotiated by both
parties hereto and shall not be construed more strongly against either party
hereto regardless of which party is responsible for its preparation.
13.10 NO CONSEQUENTIAL DAMAGES. Neither party to this Agreement
shall have any liability to the other party for any consequential or indirect
damages arising out of any breach of this Agreement, including, without
limitation, loss of profit, loss of use or business stoppage.
13.11 FURTHER ASSURANCES. Upon the reasonable request of the other
party, each party hereto agrees to take any and all actions necessary or
appropriate to give effect to the terms set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the day and year
first above written.
"Mikart"
MIKART, INC.
By:
---------------------------------
Miguel I. Arteche, President
"Horizon"
HORIZON PHARMACEUTICAL
CORPORATION
By:
---------------------------------
Brent Dixon, President
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<PAGE> 15
EXHIBIT A: PRODUCT SPECIFICATIONS
ROBINUL(R) TABLETS (GLYCOPYRROLATE 1 MG)
Description: White, round, flat beveled tablet debossed with "HPC 200"
on one side and bisect on other side.
Assay: 93 - 107% of label claim
Content Uniformity: USP limits
ROBINUL(R) FORTE TABLETS (GLYCOPYRROLATE 2 MG)
Description: White, round, flat beveled tablet debossed with "HORIZON"
and "205" with bisect on one side and no debossing on other side.
Assay: 93 - 107% of label claim
Content Uniformity: USP limits
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<PAGE> 1
EXHIBIT 10.13
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ([***]). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
PRODUCT SUPPLY AGREEMENT
THIS PRODUCT SUPPLY AGREEMENT (the "Agreement") is entered into as of
January 29, 1999 (the "Effective Date"), by and between AMERICAN HOME PRODUCTS
CORPORATION, located at Five Giralda Farms, Madison, New Jersey 07940
(hereinafter "AHP"), and HORIZON PHARMACEUTICAL CORPORATION located at 660
Hembree Parkway, Suite 106, Roswell, Georgia 30076 (hereinafter "Horizon"). AHP
and Horizon may each be referred to herein individually as a "Party" and
collectively as the "Parties."
WHEREAS, on January 29, 1999 Horizon and AHP entered into a license
agreement concerning AHP's grant of a license to Horizon of AHP's interest in
the Robinul(R) oral dosage form human pharmaceutical business in the United
States, its territories and possessions (including the Commonwealth of Puerto
Rico); and
WHEREAS, Horizon desires AHP to manufacture or have manufactured and
supply to Horizon certain Robinul(R) products for sale by Horizon in the
Territory (as such term is defined below) and AHP desires to manufacture or
have manufactured and supply Horizon with such products on the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual premises, covenants and conditions contained in this Agreement, the
Parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
1.1 "ACCEPTABLE PRODUCT" shall have the meaning set forth in
Section 6.1 hereof.
1.2 "AFFILIATE" shall mean, in the case of either Party, any
corporation, joint venture, or other business entity which
directly or indirectly controls, is controlled by, or is
under common control with that Party. "Control", as used in
this Section 1.2, shall mean having the power to direct, or
cause the direction of, the management and policies of an
entity, whether through ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, for
purposes of this Agreement, the term "Affiliate" shall not
include subsidiaries in which a Party or its Affiliates owns
a majority of the ordinary voting power to elect a majority
of the board of directors but is restricted from electing
such majority by contract or otherwise, until such time as
such restrictions are no longer in effect.
<PAGE> 2
1.3 "BINDING QUARTERLY FORECAST" shall have the meaning set forth
in Section 2.3.1.
1.4 "CALENDAR QUARTER" shall mean the respective periods of three
(3) consecutive calendar months ending on March 31, June 30,
September 30 or December 31, for so long as this Agreement is
in effect.
1.5 "CERTIFICATE OF ANALYSIS" shall mean the certificate for each
batch of Product delivered hereunder in the form contemplated
by Section 2.6 of this Agreement.
1.6 "CGMP" shall mean current good manufacturing practices of the
FDA, including compliance with the FD&C Act, 21 C.F.R. parts
210 and 211 and all applicable FDA rules, regulations,
policies and guidelines in effect at a given time.
1.7 "COMMERCIALLY REASONABLE EFFORTS" shall mean efforts and
resources normally used by a Party for a compound or product
owned by it or to which it has rights, which is of similar
market potential at a similar stage in its product life,
taking into account the competitiveness of the marketplace,
the proprietary position of the compound or product, the
regulatory structure involved, the profitability of the
applicable products, and other relevant factors.
1.8 "FDA" shall mean the United States Food and Drug
Administration, and any successor thereto.
1.9 "FD&C ACT" shall mean the United States Federal Food, Drug and
Cosmetic Act, as amended.
1.10 "FULLY ABSORBED COST" shall mean with respect to AHP's
manufacture of the Product, the sum of AHP's standard unit
costs of raw materials, direct labor and allocated overhead.
The calculation of direct labor and allocated overhead costs
will be consistent with AHP's then current cost accounting
policies and procedures and in accordance with generally
accepted accounting procedures.
1.11 "KNOW-HOW" shall mean all proprietary technical and clinical
information, data and know-how relating to the manufacture of
the Product, whether or not patentable, owned or controlled,
as of the Effective Date or acquired during the term of this
Agreement, by AHP or its Affiliates (with the right to have
or disclose). Know-How shall include, without limitation, all
processes, formulas, discoveries and inventions whether
relating to biological, chemical, pharmacological,
toxicological, pharmaceutical, physical and analytical
safety, quality control and clinical data, including, without
limitation, phase IV clinical study data. The term
"Know-How", however, shall not include (i) any know-how,
processes, information and data which is, as of the Effective
Date or later becomes, generally available to the public or
(ii) any general manufacturing know-how not specific to the
Product.
1.12 "LICENSE AGREEMENT" shall mean the License Agreement between
AHP and Horizon relating to, among other things, the grant by
AHP to Horizon of an exclusive license pertaining to certain
of AHP's Robinul(R) Products within the Territory which
License Agreement was executed on January 29, 1999.
<PAGE> 3
1.13 "MATERIALS" shall mean any or all Substances, inactive
ingredients, excipients, components, labels, packaging
materials and other consumable materials used in the
manufacture of the Products, provided, however, that
Materials shall not include any equipment used in the
manufacture of the Products.
1.14 "MG." shall mean milligrams.
1.15 "NDA" shall mean a New Drug Application as defined in the
FD&C Act and applicable regulations thereunder, as amended
from time to time.
1.16 "PRODUCTS" shall mean the following compositions and dosage
forms containing Substance in the following amounts and
supplied to Horizon pursuant to this Agreement:
<TABLE>
<S> <C>
Product A (Robinul(R))
Tablets
Glycopyrrolate
1 mg.
Supplied in: Bottles of 100
Product B (Robinul(R) Forte)
Tablets
Glycopyrrolate
2 mg.
Supplied in: Bottles of 100
</TABLE>
In addition, Products shall include 1 mg. Tablets
(Product C) and 2 mg. Tablets (Product D) supplied
in bulk but only for Horizon's requirements to
self-package for sampling purposes.
It is understood by the Parties hereto that the
Products are to (a) be substantially similar to
those Products currently manufactured and marketed
by AHP in the Territory, (b) comply with the
Specifications and (c) be sold under the trademark
Robinul(R).
1.17 "REGULATORY APPROVALS" shall mean all (i) authorizations by
the appropriate Regulatory Authorities which are required for
the manufacture (other than manufacturing facility licenses,
approvals or authorizations), marketing, promotion, pricing
and sale of the Products in the Territory, and (ii)
investigational new drug applications permitting the clinical
study of the Product in the Territory, each of which are
owned by AHP or its Affiliates.
1.18 "REGULATORY AUTHORITY" shall mean any national,
supra-national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental
entity in the Territory involved in the granting of
Regulatory Approval for the Product, including, without
limitation, the FDA.
1.19 "SPECIFICATIONS" shall mean specifications for or concerning
the manufacturing, testing, and packaging of Products as set
forth in the Regulatory Approvals for the Product and in
Schedule 1.19 hereto, or as may be agreed upon by the Parties
in writing from time to time.
<PAGE> 4
1.20 "SUBSTANCE" shall mean the chemical substance
3-[(cyclopentylhydroxy phenylacetyl)oxy]-1,
1-dimethylpyrrolidinium bromide, otherwise known as
glycopyrrolate.
1.21 "TERM" shall have the meaning set forth in Section 10.1
hereof.
1.22 "TERRITORY" shall mean the United States, its territories and
possessions (including the Commonwealth of Puerto Rico).
1.23 "THIRD PARTY(IES) shall mean any person(s) or party(ies)
other than Horizon, AHP or their respective Affiliates.
1.24 "TRANSACTION AGREEMENTS" shall mean this Agreement and the
License Agreement.
1.25 "$" shall mean United States dollars.
2. SUPPLY OF PRODUCTS.
2.1 OBLIGATION TO SUPPLY. Subject to the provisions of this
Agreement, during the Term of this Agreement, AHP shall
manufacture or have manufactured for and supply to Horizon
Products for sale by Horizon, its Affiliates or its permitted
sublicensees in the Territory, and Horizon shall purchase
from AHP its entire requirements of Products for sale in the
Territory. All Products supplied under this Agreement are to
be supplied in finished form, as specified in Horizon's
purchase orders placed with AHP pursuant to Section 2.4
below.
2.2 SUBCONTRACTING; ASSIGNMENT OF OBLIGATIONS.
2.2.1 RIGHT TO SUBCONTRACT OR ASSIGN. AHP may subcontract
or assign any part of its manufacturing and supply
obligations hereunder if it provides no less than
six (6) months' written notice of its intent to do
so to Horizon, subject to Horizon's prior right to
take over such manufacturing and supply obligations.
AHP and Horizon agree that, prior to transfer of
manufacturing obligations to such subcontractor or
assignee, such subcontractor or assignee must (i)
have an FDA approved facility for the manufacture of
Product and a supplement to the Regulatory Approvals
permitting the manufacture of Product in such
facilities must be approved by the FDA, and (ii)
must agree in writing to comply with the obligations
set forth in this Agreement. AHP shall assist in the
qualification of such third party manufacturers or
Horizon; provided, however, that AHP's assistance
shall be limited to providing reasonable technical
assistance not to exceed 30 man-days and the
delivery of the following documentation: Batch
records for both strengths of the Product, copies of
change control history, all method validations
(including new HPLC methods), active ingredient
specification sheets, raw material test procedures,
copies of process and cleaning validations, and a
copy of the Product dossier made available to
Horizon during the due diligence process. AHP shall
notify Horizon or obtain Horizon's consent with
respect to its purchase of Materials from qualified
Third Parties for use in its manufacture of Product
hereunder.
<PAGE> 5
2.2.2 COSTS. In the event that (i) during the Term of this
Agreement AHP subcontracts or assigns its
manufacturing and supply obligations to a Third
Party pursuant to Horizon's request or (ii) Horizon
assumes, either directly or through a Third Party,
the responsibilities for manufacturing and supplying
Product during the Term of this Agreement as
permitted under Section 2.2.1 hereof, Horizon shall
pay the out-of-pocket expenses incurred by either
Party in transferring such manufacturing and supply
responsibilities.
2.3 FORECASTS
2.3.1 ROLLING FORECASTS. Throughout the term of this
Agreement, Horizon shall provide AHP with a rolling
one (1) year forecast of its expected purchases of
each Product, the mechanism for which shall be as
follows:
(i) On or before the Effective Date, Horizon shall have
provided AHP with a written forecast of its expected
purchases of each of the Products for the period
extending three (3) Calendar Quarters beyond the
Calendar Quarter containing the Effective Date.
Subject to Section 2.3.2, the forecast for this
period, excluding the last two (2) Calendar
Quarters, shall be binding upon Horizon.
<PAGE> 6
(ii) Beginning on the date of the first Calendar Quarter
following the Effective Date and then on or prior to
the first day of each subsequent Calendar Quarter,
Horizon shall provide AHP with an update to its
previously submitted forecast of its expected
purchases of each of the Products. Such update shall
consist of a repetition of the previously forecasted
three (3) Calendar Quarters along with a newly
introduced forecast for the Calendar Quarter
subsequent to the last Calendar Quarter previously
forecasted, provided, however, that the quantity
forecasted for each Product for any Calendar Quarter
shall not, without AHP's prior written consent, be
more than one hundred twenty-five percent (125%) of
the quantity forecasted for such Product for the
immediately preceding Calendar Quarter. Subject to
Section 2.3.2, the forecast for this period,
excluding the last two (2) Calendar Quarters, shall
be binding upon Horizon.
(iii) Under each of Sections 2.3.1(i) and 2.3.1(ii) above,
the forecast for those quarters which is binding
upon Horizon shall be a "Binding Quarterly
Forecast."
2.3.2 QUANTITY LIMITATIONS. The quantity of each Product
ordered by Horizon to be supplied by AHP in
accordance with such orders in any Calendar Quarter
shall not be less than seventy-five percent (75%) of
the quantity of such Product specified in the most
recent Binding Quarterly Forecast applicable to such
Calendar Quarter. Additionally, AHP shall not be
obligated to supply that quantity of any Product in
any Calendar Quarter that is more than one hundred
twenty-five percent (125%) of the quantity of such
Product specified for the most recent Binding
Quarterly Forecast applicable to such Calendar
Quarter, but shall use its Commercially Reasonable
Efforts to meet requirements in excess of such
quantity. AHP shall provide sixty (60) days' written
notice to Horizon in the event AHP determines that
it cannot fill an order.
2.4 PURCHASE ORDERS
2.4.1 SUBMISSION OF PURCHASE ORDERS. From time to time,
Horizon shall place purchase orders with AHP, in a
format agreed upon by the Parties, for each of the
Products specifying the quantities of the Products
desired, and the place(s) to which and the manner
and dates by which delivery is to be made; said
delivery dates to be no earlier than one hundred
twenty (120) calendar days after the purchase order
date. All purchase orders shall be sent by Horizon
to the attention of the following employee of AHP or
as otherwise instructed by AHP.
Wyeth-Ayerst Pharmaceuticals
P.O. Box 861
Paoli, PA 19301
Attn: Mr. Tom Higgins,
Finished Stock Requirements Division
FAX: (610) 651-3659
<PAGE> 7
[***]-CONFIDENTIAL TREATMENT REQUESTED
Purchase orders made in accordance with the
provisions of this Article 2 shall be deemed to be
accepted by AHP if AHP has not rejected said
purchase orders within ten (10) business days of
receipt of the same, provided, however, that AHP
shall not reject any purchase order specifying
quantities within the quantity limitations set forth
in Section 2.3.2 hereof and which purchase orders
are otherwise in accordance with the provisions of
this Article 2. To the extent the terms of any
purchase order or acknowledgment thereof are
inconsistent with the terms of this Agreement, the
terms of this Agreement shall control.
2.4.2 SIZE OF ORDERS. All purchase orders for each Product
placed by Horizon shall be whole number multiples of
the production batch sizes used by AHP. These are
set forth below (or as mutually agreed in writing by
the Parties):
<TABLE>
<CAPTION>
Product Batch Size - Expected Yield
<S> <C>
Products A and C
1 mg. tablets [***] tablets
Products B and D
2 mg. tablets [***] tablets
</TABLE>
2.5 DELIVERY. AHP shall execute all accepted purchase orders
consistent with this Agreement by delivery ex works to
Horizon's designated carrier at AHP's manufacturing or
distribution facility of all ordered quantities of the
Products no later than the delivery dates provided in
Horizon's purchase orders. Title and risk of loss will pass
to Horizon when each order of Products is delivered to the
designated carrier of Horizon at AHP's manufacturing or
distribution facility.
2.6 SPECIFICATIONS; CERTIFICATE OF ANALYSIS. As of the time of
such delivery by AHP, each batch of the Products will conform
to the Specifications. AHP shall perform release testing in a
manner consistent with testing methods agreed upon by the
Parties. AHP shall provide to Horizon a Certificate of
Analysis with each shipment of the Products to Horizon or its
designated recipient stating that the Products conform to the
Specifications and meet release specifications. The
Certificate of Analysis shall be in a format agreed upon by
the Parties and, if required under cGMP, such Certificate of
Analysis shall include the Specifications and the results of
release testing conducted by AHP on such Products. Upon
Horizon's written request, AHP will also provide Horizon with
a copy of the manufacturing and controls information for the
applicable batch(es) delivered.
2.7 LABELING. Within thirty (30) days after the Effective Date,
Horizon, at its own expense, will provide AHP with Horizon's
new labeling for the Product (including a new NDC number for
each Product) bearing Horizon's corporate name and trade
dress. If such labeling is changed in any manner other than a
new NDC number and Horizon's corporate name and tradedress,
such labeling shall be subject to the approval of AHP, which
approval will not be unreasonably withheld. AHP agrees to
either approve or disapprove such labeling within thirty (30)
business days of AHP's receipt thereof from Horizon. AHP, at
Horizon's expense, will print, either directly or through a
Third Party, labels and other printed material to be included
as part of the finished Product. Product
<PAGE> 8
manufactured by AHP after AHP's receipt and approval of
Horizon's new labeling for the Product, shall bear such new
labeling, provided, however, that AHP shall have no
responsibility with respect to the content of such labeling,
provided the content of the labeling printed by AHP is the
same as the content of the labeling provided by Horizon.
Horizon shall reimburse AHP for all reasonable costs incurred
(on a Fully-Absorbed Cost basis) by AHP in making
modifications to labeling, branding or imprinting, packaging
and/or manufacturing processes to accommodate Horizon's new
labeling or to accommodate any other changes requested by
Horizon. Such reimbursement shall be made pursuant to invoices
submitted by AHP to Horizon, which invoices shall be payable
within thirty (30) days after Horizon's receipt thereof. In
addition, should such new labeling result in any increase in
AHP's cost of manufacturing the Product hereunder, the
purchase price for such Product as calculated under Section
5.1 hereof, shall be increased by such additional costs.
Notwithstanding the foregoing, AHP may supply Horizon with
Product bearing AHP's labeling if such Product was
manufactured and labeled prior to the Closing, it being agreed
that Product manufactured from and after the Closing shall
bear (i) AHP's label, or (ii) Horizon's new label.
2.8 PURCHASE OF RESIDUAL INVENTORIES. Upon expiration or upon
termination of this Agreement by AHP, upon AHP's request
Horizon shall purchase from AHP (i) reasonable quantities of
AHP's residual inventories of Products having not less than
twelve months' remaining dating at the then current purchase
price as determined in accordance with Section 5.1 hereof,
and (ii) reasonable quantities of AHP's residual inventories
of Product specific Materials, including, without limitation,
all labels and other Product specific packaging materials,
but excluding all stocks of Substance and Materials used for
the manufacture of Substance, at AHP's Fully Absorbed Cost
for such Materials.
2.9 INITIAL DELIVERY. AHP agrees to provide initial delivery of
Products, subject to the timely receipt of an appropriate
purchase order from Horizon in accordance with this Article
2, on or before Closing in accordance with procedures and
terms to be set forth in the Systems Transfer documents
developed by the Parties pursuant to Section 3.2 of the
License Agreement.
3. MANUFACTURE OF PRODUCTS.
3.1 MANUFACTURE OF PRODUCT. AHP agrees to manufacture and supply
the Products in accordance with (i) the Specifications, (ii)
the applicable Regulatory Approvals, as may be amended from
time to time, and (iii) cGMP requirements, and all other
applicable laws, rules and regulations. If
(a) upon Horizon's request the Parties mutually
agree to change part or all of the Product
manufacturing process, or
(b) any Product specific change in the
applicable Regulatory Approvals (other than
a change included under clause (a) above),
applicable laws, rules or regulations
requires a change in the Product
manufacturing process
<PAGE> 9
Horizon shall reimburse AHP for all Fully Absorbed Costs
incurred by AHP in connection with making such changes in the
Product manufacturing process. Additionally, if either making
any such change in the Product manufacturing process or any
Product specific change in the applicable Regulatory
Approvals, applicable laws, rules or regulations requires AHP
to conduct development, testing or other activities (e.g.,
process development, stability testing, validation of new
specifications, etc...) (collectively referred to as
"Activities") in addition to those activities AHP conducted
or is required to conduct in its manufacture of the Product
immediately prior to such change in either the Product
manufacturing process or the Product specific applicable
Regulatory Approvals, applicable laws, rules or regulations
being implemented, Horizon shall reimburse AHP for all Fully
Absorbed Costs incurred by AHP in connection therewith. In
addition to the foregoing, in the event that the Product
manufacturing process is changed or AHP is required to
conduct Activities in accordance with this Section 3.1, the
purchase price for Product, other than for Product already
manufactured and in inventory, shall be increased in an
amount equivalent to the increase in AHP's manufacturing cost
for Product, which increase shall be effective immediately
upon AHP becoming aware of any proposed changes in the
Regulatory Approvals, applicable laws, rules or regulations
which requires either (i) a change in the Product
manufacturing process or (ii) to AHP to conduct Activities,
it will promptly notify Horizon and will consult with Horizon
regarding the proposed changes and Activities, and will
obtain Horizon's written consent prior to implementing the
Activities and the changes, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, in the
event that Horizon requests changes in the manufacturing
process, AHP shall not be obligated to make such change or
conduct any Activities with respect thereto unless the
parties mutually agree to make such change in the Product
manufacturing process.
3.2 PROCUREMENT OF MATERIALS. AHP shall use its Commercially
Reasonable Efforts to timely procure all Materials necessary
for the production of the Products. Title to all such
Materials shall reside in AHP. Notwithstanding the foregoing,
AHP's obligation to supply Horizon with Product hereunder is
subject to AHP's ability to obtain from Third Parties
Materials in sufficient quantities to meet Horizon's and
AHP's requirements for the manufacture of Products. AHP may,
during any period of shortage of any Materials, prorate its
supply of such Materials between Horizon and AHP's other uses
(e.g., for sales of Products outside of the Territory or use
in products other than Products) according to the relative
quantities purchased/used by each during the immediately
preceding twelve (12) months (or such shorter period of time
that AHP has actually been supplying Product to Horizon
hereunder if such shortage of Materials occurs prior to the
first anniversary of the Effective Date) without regard to
price. AHP shall use Commercially Reasonable Efforts to avoid
entirely any such shortage or, if avoidance is not possible,
to limit such period and amount and shall promptly inform
Horizon if it becomes aware of any potential shortage. In the
event that, after May 30, 1999, AHP is unable to supply the
lesser of seventy-five percent (75%) of (i) the average
number of bottles of Product A and Product B sold by Horizon
for the previous three full calendar months ("Sale
Minimums"), or (ii) 7,600 bottles of Product A and 2,650
bottles of Product B ("Bottle Minimums") for a period greater
than thirty (30) days, then, provided the shortage has not
been resolved prior to the next License Fee payment date,
Horizon may reduce or
<PAGE> 10
suspend the payment of the amounts otherwise due and payable
under Section 4.1 of the License Agreement until AHP is again
able to supply Horizon such quantities of Products based on
the schedule set forth in Table I below, provided, that in no
event shall Horizon reduce or suspend such payments more than
two consecutive calendar quarters nor more than three
calendar quarters during the eight calendar quarter period
specified in Section 4.1(ii) of the License Agreement.
TABLE I
<TABLE>
<CAPTION>
AMOUNT OF
PRODUCTS SUPPLIED PAYMENT REDUCTION
----------------- -----------------
<S> <C>
less than 75% but 50%
or more of Sale Minimums or 50%
Bottle Minimums, as applicable
less than 50% but 25% or more 75%
less than 25% full suspension
</TABLE>
3.3 REGULATORY FILINGS. Horizon shall provide to AHP copies of
all annual reports to the FDA.
3.4 COMPLIANCE WITH LAWS AND REGULATIONS. While the Products are
in its possession or under its control, AHP shall comply with
all applicable federal, state and local statutory and
regulatory requirements regarding the manufacture, packaging,
handling and storage of the Products.
3.5 PRODUCT COMPLAINTS. Horizon shall be solely responsible for
interacting with the public with respect to complaints
regarding Product quality. With respect to any such
complaints, each Party shall have the responsibility for
promptly conducting an investigation of any activities
conducted by it under the Transaction Agreements which may be
relevant to the complaint and each Party shall promptly
report the results of such investigation to the other Party.
The Parties shall cooperate in any investigation by the other
Party of each such complaint which involves the Parties'
duties under this Agreement.
4. TECHNOLOGY TRANSFER.
4.1 TRANSFER OF PRODUCT MANUFACTURING KNOW-HOW. As soon as
practicable after Horizon's request, and only if Horizon has
complied with all of its obligations under the Transaction
Agreements including, without limitation, the payment of all
fees and payments that become due and payable prior to such
time, AHP shall furnish Horizon with one copy of the
Know-How, including all technical, manufacturing and AHP's
other written information, including but not limited to
process sheets, raw material and process specifications,
manuals, vendors lists, and other writings specifically
relating to the Products, which are currently used by AHP,
its Affiliates or sub-contractors to manufacture or have
manufactured Products according to the methods used by AHP or
its Affiliates or subcontractors. AHP agrees that Horizon,
its Affiliates or its permitted sublicensees, may use all
Know-How listed in the preceding sentence for the manufacture
of Products for sale in the Territory.
<PAGE> 11
[***]-CONFIDENTIAL TREATMENT REQUESTED
4.2 TRAINING. In connection with the transfer of information
described in Section 4.1, AHP shall permit a reasonable
number of Horizon's technically skilled personnel and
consultants designated by Horizon (with travel and living
expenses paid by Horizon) to make one or more visits to such
facilities of AHP or its Affiliates as may be engaged in the
manufacture of Products for up to an aggregate of thirty (30)
man-days in order to inspect and be instructed in all
manufacturing techniques and procedures used by AHP, its
Affiliates or subcontractors in the manufacture of Products.
4.3 HORIZON'S USE OF KNOW-HOW. Horizon agrees that it shall use
all Know-How provided to Horizon by or on behalf of AHP, its
Affiliates or subcontractors pursuant to the Transaction
Agreements for the sole purpose of making, using and/or
selling the Products only in the Territory and shall not use
or permit any Third Party to use such Know-How for the
purpose of making Products for sale outside the Territory or
for use as veterinary pharmaceutical products within or
outside of the Territory. In the event, due to Horizon's
failure to comply with any provision of the Transaction
Agreements, such Know-How is used for the purpose of making
Products for either sale outside the Territory or sale as
veterinary pharmaceutical products within or outside of the
Territory during such time period, Horizon shall immediately
cease such use and/or sale and take such action as may be
necessary to prevent a Third Party from using such Know-How
for the purpose of making Products for sale outside the
Territory and/or for sale as veterinary pharmaceutical
products within or outside the Territory. The provisions of
this Section shall not limit any other remedy AHP has on
account of the use of such Know-How for the purpose of making
Products for sale outside the Territory or for sale as
veterinary pharmaceutical products within or outside the
Territory.
5. PURCHASE PRICE.
5.1 PRICE. Horizon shall purchase from AHP and AHP shall sell to
Horizon Products at the purchase prices set forth in Schedule
5.1 hereof, which purchase prices shall be increased once
each year by [****]
5.2 FREIGHT, INSURANCE AND TAXES. Horizon shall pay all actual
freight, insurance and government sales tax imposed on
purchasers for resale, and duties and other fees (except tax
on income to AHP) incurred in connection with the sale and
shipment of the Products to Horizon.
5.3 PAYMENT. Payments to AHP for the purchase price of delivered
Products (as well as any other payment due from Horizon to
AHP under this Agreement) shall be made by Horizon within
thirty (30) days after the date of invoice, except as to
Product orders which are rejected by Horizon in accordance
with the procedures recited in Article 6, or which the
Parties dispute are in conformance with the Specifications.
In the event Product is rejected by Horizon, but is
determined to be Acceptable Product pursuant to Section 6.2
hereof, the payment for such Product shall be due and payable
within ten (10) days after the determination with respect to
such Product is made in accordance with Section 6.2 hereof.
<PAGE> 12
5.4 MAINTENANCE OF RECORDS; AUDITS. AHP shall keep complete
records of AHP's Fully Absorbed Costs for the manufacture and
supply of Products hereunder, and shall permit an independent
certified public accountant selected by Horizon and
reasonably acceptable to AHP, at Horizon's expense, at the
time of (a) any price adjustment under Section 5.1, or (b)
request by AHP for reimbursement of costs incurred under
Sections 2.7 and 3.1 hereof, but, in any event, no more than
once per year, to inspect and review such records during
normal business hours and upon reasonable prior notice, in
order to verify or determine such costs and whether an
increase in such costs has occurred. The independent
certified public accountant may not disclose to Horizon
specific manufacturing cost breakdowns, but only whether or
not the increase in AHP's Fully Absorbed Cost reported by AHP
are correct. Horizon shall bear the costs and fees associated
with such inspections and reviews unless it is determined by
the independent certified public accountant that such price
adjustment was unjustified (in excess of five percent (5%)
more than the price increase determined by the independent
certified public accountant to be justified), in which case
AHP shall bear the costs and fees of such audit and shall
promptly refund to Horizon any overpayments made by Horizon
because of such unjustified price adjustment.
6. INSPECTION OF PRODUCT.
6.1 INSPECTION; REJECTION OF PRODUCT. Horizon shall analyze
representative samples of each lot of Product delivered to
Horizon for purposes of determining whether the same meets
the Specifications and was manufactured in accordance with
the NDA and cGMP ("Acceptable Product") and, if performed,
will do so within thirty (30) days from the date of delivery
of such Products to Horizon's carrier. Horizon shall notify
AHP in writing within said thirty (30) days of any of the
Product or portion thereof, which Horizon is rejecting
because it is not Acceptable Product. If Horizon fails to
notify AHP that it is rejecting a lot of Product within such
thirty (30) day period, such lot of Product shall be deemed
to be Acceptable Product. In the event of a recall of
Product, Section 9.1 hereof shall govern.
6.2 THIRD PARTY ANALYSIS. If AHP, after good faith consultation
with Horizon, disputes any finding by Horizon that Product is
not Acceptable Product, representative samples of such
Product shall be forwarded to a Third Party jointly selected
by AHP and Horizon, in their reasonable discretion, for
analysis, which analysis shall be performed in compliance
with applicable FDA regulations for retesting of
pharmaceutical products. The findings of such Third Party
regarding whether the Product was Acceptable Product shall be
binding upon the Parties. The cost of such analysis by such
Third Party shall be borne by the Party whose findings
differed from those generated by such Third Party.
6.3 REPLACEMENT OF PRODUCT. AHP shall replace any Product order,
or portion thereof, which is not Acceptable Product (unless
such non-conformance is due to any negligent or wrongful act
or omission by Horizon or its agents or subcontractors), at
its cost and expense, including shipping costs.
<PAGE> 13
6.4 DISPOSITION OF REJECTED PRODUCT. AHP shall instruct Horizon
as to the disposition of any Product order or portion thereof
determined not to be Acceptable Product. At the sole option
of AHP, said Product may be returned to AHP, at AHP's expense
including shipping costs, or destroyed in an environmentally
acceptable manner, at AHP's expense.
7. INSPECTION AND ACCESS TO FACILITY AND RECORDS.
7.1 INSPECTION BY REGULATORY AUTHORITIES. Upon the request of the
FDA or other regulatory agency, such agency shall have access
to observe and inspect AHP's or its Affiliates' facilities
and procedures used for the manufacture, testing or
warehousing of the Products and to audit such facilities for
compliance with cGMP and/or other applicable regulatory
standards.
7.2 NOTIFICATION OF INQUIRIES AND INSPECTIONS. AHP also agrees to
notify Horizon within ten (10) business days or such shorter
time as may be required by the notification of the
inspection, of any written or oral inquiries, notifications
or inspection activity by the FDA or other regulatory agency
in regard to any Product. AHP shall permit not more than two
(2) Horizon representatives to attend any such inspections,
and shall provide a reasonable description of any such
governmental inquiries, notifications or inspections promptly
after such visit or inquiry. AHP shall furnish to Horizon (i)
within ten (10) business days after receipt, any report or
correspondence issued by the FDA or other governmental agency
in connection with such visit or inquiry, including but not
limited to, any FDA Form 483 (List of Inspectional
Observations) or applicable portions of any FDA Warning
Letters which pertain to the Products in the Territory and
(ii) not later than ten (10) business days prior to the time
it provides to the FDA or other regulatory agency, copies of
proposed responses or explanations relating to items set
forth above (each, a "Proposed Response"), in each case
redacted of trade secrets or other confidential or
proprietary information of AHP that are unrelated to the
obligations under this Agreement or are unrelated to the
Products. AHP shall discuss with Horizon and consider in good
faith any comments provided by Horizon on the Proposed
Response. After the filing of a response with the FDA or
other regulatory agency, AHP will notify Horizon of any
further contacts with such agency relating to the subject
matter of the response.
7.3 INSPECTION BY HORIZON. AHP shall permit Horizon to inspect
once annually that portion of the AHP facility where Product
is manufactured and review such Product documents as is
reasonably necessary for the purpose of assessing AHP's
compliance with applicable regulations. Such inspection and
document review shall be conducted upon reasonable prior
notice by Horizon, but not less than thirty (30) days prior
to the proposed inspection, at a time and date mutually
agreeable to the Parties. In addition, in the event Horizon
has received two or more shipments of Product determined not
to be Acceptable Product pursuant to the procedures of
Article VI hereof within a single Calendar Quarter, Horizon
shall be permitted to conduct an additional such inspection
to help determine the reason(s) for delivery of such
non-Accepted Product.
<PAGE> 14
8. WARRANTIES AND INDEMNITIES.
8.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY. As of the
Effective Date, each of Horizon and AHP hereby represents,
warrants and covenants to the other Party hereto a follows:
(a) it is a corporation or entity duly organized and
validly existing under the laws of the state or
other jurisdiction of incorporation or formation;
(b) the execution, delivery and performance of this
Agreement by such Party has been duly authorized by
all requisite corporate action and do not require
any shareholder action or approval;
(c) it has the power and authority to execute and
deliver this Agreement and to perform its
obligations hereunder;
(d) the execution, delivery and performance by such Party
of this Agreement and its compliance with the terms
and provisions hereof does not and will not conflict
with or result in a breach of any of the terms and
provisions of or constitute a default under (i) a
loan agreement, guaranty, financing agreement,
agreement affecting a product or other agreement or
instrument binding or affecting it or its property;
(ii) the provisions of its charter or operative
documents or bylaws; or (iii) any order, writ,
injunction or decree of any court or governmental
authority entered against it or by which any of its
property is bound; and
(e) it shall at all times comply with all applicable
material laws and regulations relating to its
activities under this Agreement.
8.2 REPRESENTATIONS AND WARRANTIES OF AHP. In addition to the
representations and warranties made by AHP in Section 8.1
hereof, AHP hereby represents and warrants to Horizon as
follows:
(a) that all Products supplied hereunder conform to the
Specifications, will be (and with respect to the
initial delivery of Product to Horizon hereunder,
were) manufactured in accordance with the applicable
Regulatory Approvals and cGMP, and, subject to
Section 2.7 hereof, will not be (and, with respect
to the initial delivery of Product to Horizon
hereunder, were not) adulterated or misbranded while
in AHP's possession; and
(b) that it has not and will not use in any capacity the
services of any persons debarred under 21 U.S.C.
ss.335(a) or 335(b) in connection with the
manufacture of the Products.
8.3 COVENANTS OF HORIZON. In addition to the representations and
warranties made by Horizon in Section 8.1 hereof and the
covenants made by Horizon elsewhere in this Agreement,
Horizon hereby covenants to AHP that it shall not sell the
Products manufactured by AHP hereunder in countries other
than those within the Territory and that it shall not sell
such Products for veterinary use within or outside the
Territory. Horizon further covenants that it shall not sell
such
<PAGE> 15
Products to any Third Party which Horizon has reason to
believe might sell the Products in countries other than those
within the Territory. In the case of any such Third Party
sales, Horizon shall exercise its Commercially Reasonable
Efforts, consistent with applicable law, to gain a cessation
of such Third Party sales of Products within such countries,
including, to the extent possible, terminating its sales of
Product to such Third Party.
8.4 NO OTHER WARRANTIES. EXCEPT FOR THE WARRANTIES EXPRESSLY MADE
BY AHP IN SECTIONS 8.1 AND 8.2 HEREOF, AHP MAKES NO OTHER
REPRESENTATION OR WARRANTIES, EITHER EXPRESS OR IMPLIED
(WHETHER WRITTEN OR ORAL), INCLUDING, WITHOUT LIMITATION, ANY
WARRANTY OF MERCHANTABILITY OR ANY WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE PRODUCTS OR AHP'S
OBLIGATIONS HEREUNDER. ADDITIONALLY, EXCEPT FOR THE
WARRANTIES MADE BY HORIZON IN THIS AGREEMENT, HORIZON MAKES
NO OTHER REPRESENTATION OR WARRANTY, EITHER EXPRESS OR
IMPLIED (WHETHER WRITTEN OR ORAL) WITH RESPECT TO HORIZON'S
OBLIGATIONS HEREUNDER.
8.5 INDEMNIFICATION BY AHP. AHP shall indemnify, defend and hold
harmless Horizon, its Affiliates and their respective
officers, directors, shareholders, employees, agents and
representatives (each a "Horizon Indemnified Party") from any
claims, losses, liabilities, costs, expenses (including
reasonable attorney's fees) and damages to Third Parties,
including any related to property or personal injury (each a
"Liability") which the Horizon Indemnified Party may incur,
suffer or be required to pay resulting from or arising in
connection with (a) the breach by AHP of any representation
or warranty contained in this Agreement; (b) any violation by
AHP of any applicable federal, state or local regulation,
statute or order in the manufacture and packaging of Products
arising out of AHP's duties under this Agreement which is not
attributable to printed materials provided by Horizon; or (c)
any negligent act or omission by AHP or its affiliates in
carrying out its obligations under this Agreement.
Notwithstanding the foregoing, AHP shall have no obligations
to defend, indemnify or hold harmless any Horizon Indemnified
Party for any Liability that results from the negligence or
intentional misconduct of Horizon, its Affiliates, or any of
its permitted sublicensees or any of their respective
officers, directors, employees, agents, consultants or
representatives.
8.6 INDEMNIFICATION BY HORIZON. Horizon shall indemnify, defend
and hold harmless AHP and its Affiliates, and each of its and
their respective employees, officers, directors and agents
(each, an "AHP Indemnified Party") from and against any
Liability which the AHP Indemnified Party may incur, suffer
or be required to pay resulting from or arising in connection
with (a) the breach by Horizon of any representation or
warranty contained in this Agreement; (b) materials or
promotional claims (except to the extent that AHP has
previously reviewed and approved the specific material or
promotional claim under Section 8.2 of the License
Agreement), (c) the manufacture, packaging, promotion,
distribution, testing, use, marketing, sale or other
disposition of Products by Horizon, its Affiliates, its
permitted sublicensees or their respective subcontractors; or
(d) the use of the Trademark by Horizon, its Affiliates, its
<PAGE> 16
permitted sublicensees or their respective subcontractors.
Notwithstanding the foregoing, Horizon shall have no
obligations to indemnify, defend, or hold harmless any AHP
Indemnified Party for any Liability that results from the
international misconduct or negligence of AHP, its
Affiliates, its permitted sublicensees or any of their
respective employees, officers, directors or agents,
consultants or representatives.
8.7 CONDITIONS TO INDEMNIFICATION. The obligations of the
indemnifying Party under Sections 8.5 and 8.6 are conditioned
upon the delivery of written notice to the indemnifying Party
of any potential Liability promptly after the indemnified
Party becomes aware of such potential Liability. The
indemnifying Party shall have the right to assume the defense
of any suit or claim relating to the Liability if it has
assumed responsibility for the suit or claim in writing;
however, if in the reasonable judgment of the indemnified
Party, such suit or claim involves an issue or matter which
could have a materially adverse effect on the business
operations or assets of the indemnified Party, the
indemnified Party may waive its rights to indemnity under
this Agreement and control the defense or settlement thereof,
but in no event shall any such waiver be construed as a
waiver of any indemnification rights such Party may have at
law or in equity. If the indemnifying Party defends the suit
or claim, the indemnified Party may participate in (but not
control) the defense thereof at its sole cost and expense.
8.8 SETTLEMENTS. Neither Party may settle a claim or action
related to a Liability without the consent of the other
Party, if such settlement would impose any monetary
obligation on the other Party or require the other Party to
submit to an injunction or otherwise limit the other Party's
rights under this Agreement. Except as otherwise expressly
set forth in this Article 8, any payment made by a Party to
settle any such claim or action shall be at its own cost and
expense.
8.9 LIMITATION OF LIABILITY. With respect to any claim by one
Party against the other arising out of the performance or
failure of performance of the other Party under this
Agreement, the Parties expressly agree that the liability of
such Party to the other Party for such breach shall be
limited under this Agreement or otherwise at law or equity to
direct damages only and in no event shall a Party be liable
for, punitive, exemplary or consequential damages. The
limitations set forth in this Section 8.9 shall not apply
with respect to the obligations of either Party to indemnify
the other under Sections 8.5 or 8.6 hereof in connection with
a Liability to a third party.
8.10 INSURANCE. Horizon shall obtain and maintain at all times
during the term of this Agreement Commercial General
Liability Insurance, including Products Liability, with
limits of liability of not less than Five Million Dollars
($5,000,000) per occurrence and Ten Million Dollars
($10,000,000) in the aggregate. Horizon shall provide AHP
with a Certificate of Insurance evidencing this coverage
within thirty (30) days of the Effective Date. Such insurance
policy shall name AHP as an additional insured and Horizon
shall use its Commercially Reasonable Efforts to ensure such
insurance policy contains a provision requiring ten (10) day
advance notification to AHP in the event of its cancellation
or termination. AHP shall maintain self insurance and/or
insurance obtained from Third Party insurers in amounts
sufficient to cover its obligations under Section 8.5. Upon
Horizon's written request, AHP shall provide Horizon with
evidence of such insurance coverage.
<PAGE> 17
9. RECALLS.
9.1 PRODUCT RECALLS. In the event of an actual or threatened
recall of any Product required or recommended by a
governmental agency or authority of competent jurisdiction
within the Territory or if recall of any Product is (i)
reasonably deemed advisable by AHP or by Horizon, or (ii)
jointly deemed advisable by AHP and Horizon, such recall
shall be promptly implemented and administered by Horizon in
a manner which is appropriate and reasonable under the
circumstances and in conformity with accepted trade
practices. In the event that a recall is caused because, due
to negligent acts or omissions of AHP, its Affiliates or
subcontractors, Product supplied by AHP to Horizon does not
conform to the Specifications or was not manufactured in
accordance with the applicable Regulatory Approvals and cGMP,
the cost, including Horizon's reasonable out-of-pocket
expenses, of any such recall shall be borne by AHP. Horizon
shall pay all costs, including AHP's reasonable out-of-pocket
expenses, associated with a recall for any other reason,
including without limitation, recalls (i) caused by actions
of Third Parties occurring after such Product is sold by
Horizon, (ii) due to packaging or label defects for which
Horizon has responsibility or (iii) due to any other breach
by Horizon of its duties under this Agreement.
9.2 NOTICE OF EVENTS THAT MAY LEAD TO PRODUCT RECALL. Each Party
shall keep the other fully and promptly informed of any
notification, event or other information, whether received
directly or indirectly, which might affect the marketability,
safety or effectiveness of Products or might result in a
recall of Products by the FDA.
9.3 RECALL DUE TO BREACH BY AHP. In the event of any recall for
which AHP would be responsible for the costs in accordance
with Section 9.1 hereof, AHP shall, at the election of
Horizon either:
(a) supply Products, without charge to Horizon, in an
amount sufficient to replace the amounts of Products
recalled, or
(b) refund to Horizon or give credit to Horizon against
outstanding receivables due from Horizon for the
price of Products to be delivered to Horizon in the
future, in amounts equal to the price paid by
Horizon to AHP for Products so recalled plus the
reasonable transportation costs incurred by Horizon
and not recovered by Horizon in respect of such
recalled Products.
In addition, if, as a direct result of any recall for which
AHP would be responsible for the costs in accordance with
Section 9.1 hereof, Horizon's aggregate sales of Products in
any consecutive thirty (30) day period fall below fifty
percent (50%) of Horizon's average monthly sales of Products
for the preceding six (6) months, then Horizon may postpone
payment of the first and second payments following the recall
otherwise due and payable under Section 4.1(ii) of the
License agreement for six (6) months, after which Horizon
shall resume making such payments, including immediate
payment of the two postponed payments.
<PAGE> 18
[***] - CONFIDENTIAL TREATMENT REQUESTED
9.4 DEFINITION OF RECALL. For Purposes of this Article 9,
"recall" shall mean any action by Horizon and its Affiliates,
or AHP and its Affiliates, to recover title or possession or
halt distribution, prescription or consumption of Products
sold or shipped to Third Parties. The term "recall" also
applies to Product which would have been subject to recall if
it had been sold or shipped.
9.5 SURVIVAL OF OBLIGATIONS. The provisions and obligations of
this Article 9 shall survive any termination of this
Agreement.
10. TERM AND TERMINATION.
10.1 TERM. This Agreement shall become effective upon the
Effective Date of the License Agreement and, unless earlier
terminated as provided below, shall remain in full force and
effect for a period ending on the second (2nd) anniversary of
the Effective Date (the "Term"). Thereafter, the term of this
Agreement may be extended by Horizon on six (6) months' prior
written notice for up to six (6) additional months provided
that the Parties agree upon all terms and conditions of such
extension not later than the expiration of the Term. The
Supply Price would be negotiated but shall not be less than
AHP's Fully Absorbed Cost plus a [***] percent [***] mark-up.
If the Parties have not extended the term of this Agreement or
signed a new supply agreement before the expiration of the
Term, AHP shall have no obligation to supply Horizon with any
Product after expiration of the Term. Upon expiration or
termination of this Agreement for any reason, all unpaid
amounts due pursuant to Section 5.1 shall become immediately
due and payable.
10.2 TERMINATION BY AHP. AHP may terminate this Agreement, except
as limited hereinafter, immediately upon written notice, in
the event
(a) Horizon fails to make any payment due and owing
within thirty (30) days after notice thereof from
AHP that such payment has not been made by Horizon
by the date specified in Section 5.3; or
(b) Horizon commits a breach of any material provision
of this Agreement which breach remains uncured for
sixty (60) days, measured from the date written
notice of such breach is given to Horizon, or if
such breach is not susceptible of cure within such
sixty (60) day period and Horizon uses good faith
efforts to cure such breach, for one hundred eighty
(180) days after written notice to Horizon; or
` (c) the License Agreement is terminated for any reason,
other than AHP's breach of the License Agreement,
prior to the expiration of the Term of this
Agreement.
10.3 TERMINATION BY HORIZON. Horizon may terminate this Agreement,
in whole or with regard to a specific Product as applicable,
immediately upon written notice in the event (a) AHP commits
a breach of any material provision of this Agreement, which
is not cured within thirty (30) days in case of a failure to
make any payment due and owing; or (b) AHP commits a breach
of any material provision of this Agreement which breach
remains uncured for sixty (60) days, measured from the date
written notice of such breach is given to AHP, or if such
breach is not susceptible of cure within such sixty (60) day
period and AHP uses good faith efforts to cure such breach,
for one hundred eighty (180) days after written notice to
AHP; or (c) the License Agreement is terminated for any
reason other than Horizon's breach of the License Agreement
prior to the expiration of the Term of this Agreement.
<PAGE> 19
10.4 INSOLVENCY. Either party may terminate this Agreement upon
the filing or institution of bankruptcy, reorganization,
liquidation or receivership proceedings, or upon an
assignment of a substantial portion of the assets for the
benefit of creditors by the other Party, or in the event a
receiver or custodian is appointed for such party's business,
or if a substantial portion of such Party's business is
subject to attachment or similar process; provided, however,
that in the case of any involuntary bankruptcy proceeding
such right to terminate shall only become effective if the
proceeding is not dismissed within ninety (90) days after the
filing thereof.
10.5 EFFECT OF TERMINATION. Upon termination or expiration of this
Agreement, except in the event of termination of the
Agreement by AHP pursuant to Sections 10.2 or 10.4, AHP shall
have the obligations set forth in Sections 4.1 and 4.2. If
AHP terminates this Agreement pursuant to either Section 10.2
or 10.4, the obligations set forth in Sections 4.1 and 4.2
hereof shall survive termination if Horizon has made or
accelerates payment of all payments to AHP required under
Section 4.1 of the License Agreement, and otherwise the
obligations under Sections 4.1 and 4.2 hereof shall not
survive termination. In the event that Horizon terminates
this Agreement pursuant to Section 10.3 hereof because of a
failure to supply Product to Horizon which failure to supply
results in an uncured breach of this Agreement by AHP,
Horizon shall thereafter be permitted to manufacture Product
either directly or through a Third Party and the transfer of
manufacturing Know-How under Section 4.1 shall be
accomplished as soon as practicable, but in no event more
than thirty (30) days, after this Agreement is so terminated
and the reasonable out-of-pocket costs incurred by the
Parties in transferring such Product manufacturing
responsibilities from AHP to either Horizon, its Affiliates
or a Third Party shall be borne by AHP.
10.6 ACCRUED OBLIGATIONS. Termination of this Agreement for any
cause shall not release either Party from any obligation
theretofore accrued.
10.7 NO WAIVER. The failure on the part of either Party to
exercise or enforce any right conferred upon it hereunder
shall not be deemed to be a waiver of any such right nor
operate to bar the exercise or enforcement thereof at any
time thereafter.
10.8 OUTSTANDING ORDERS. Upon termination of this Agreement for
any reason other than pursuant to Sections 10.2 or 10.5
hereof, AHP shall fill all outstanding purchase orders of
Horizon or its Affiliates for the Products, unless otherwise
instructed by Horizon.
10.9 BULK SUBSTANCE. To the extent permitted under the supply
agreement planned to be entered into between AHP and its
supplier of Substance (the "Bulk Substance Supply
Agreement"), AHP will use commercially reasonable efforts to
have such supplier enter into a direct supply agreement for
Substance with Horizon upon expiration of this Agreement, on
the same terms and conditions, including price, as the Bulk
Substance Supply Agreement. AHP shall not be required, as
part of its commercially reasonable efforts, to pay any money
or provide any other form of consideration to such supplier.
Upon expiration of this Agreement, if such direct supply
agreement is not entered into, AHP and Horizon will cooperate
in a mutually agreeable arrangement under which to the extent
feasible Horizon would obtain the benefits and assume the
obligations of AHP under the Bulk
<PAGE> 20
Substance Supply Agreement as it relates to Substance,
including subcontracting to Horizon, or under which AHP would
enforce for the benefit of Horizon, with Horizon assuming
AHP's obligations, any and all rights of AHP against such
supplier. The purpose of such an arrangement would be for
Horizon to obtain price, quantity, destination and delivery
date terms comparable to AHP's rights under the Bulk
Substance Supply Agreement.
10.10 SURVIVAL. Subject to Section 10.5 hereof, the following
provisions shall survive expiration or termination of this
Agreement: Sections 2.8, 3.3, 4.1, 4.2, 4.3, 5.4, 10.9,
10.10, 12.6 and 12.7 and Articles 8, 9 and 11.
11. CONFIDENTIALITY.
11.1 NONDISCLOSURE OBLIGATION. Each of Horizon and AHP shall use
only in accordance with this Agreement and shall not disclose
to any Third Party any information including, without
limitation, Know-How, received by it from the other Party
(the "Information"), without the prior written consent of the
other Party. The foregoing obligations shall survive the
expiration or earlier termination of the last of the
Transaction Agreements to so expire or to be so terminated
for a period of five (5) years. These obligations shall not
apply to Information that:
(i) is known by the receiving Party at the time
of its receipt, and not through a prior
disclosure by the disclosing Party, as
documented by business records;
(ii) is at the time of disclosure or thereafter
becomes published or otherwise part of the
public domain without breach of this
Agreement by the receiving Party;
(iii) is subsequently disclosed to the receiving
Party by a Third Party who has the right to
make such disclosure;
(iv) is developed by the receiving Party
independently of the Information received
from the disclosing Party and such
independent development can be documented
by the receiving Party; or
(v) is required by law, regulation, rule, act or
order of any governmental authority or
agency to be disclosed by a Party, provided
that notice is promptly delivered to the
other Party in order to provide an
opportunity to seek a protective order or
other similar order with respect to such
Information and thereafter the disclosing
Party discloses to the requesting entity
only the minimum Information required to be
disclosed in order to comply with the
request, whether or not a protective order
or other similar order is obtained by the
other Party.
11.2 PERMITTED DISCLOSURES. Information may be disclosed to
employees, agents, consultants, sublicensees or suppliers of
the recipient Party or its Affiliates, but only to the extent
required to accomplish the purposes of this Agreement and
<PAGE> 21
only if the recipient Party obtains prior agreement from its
employees, agents, consultants, sublicensees, suppliers or
Third Party manufacturers to whom disclosure is to be made to
hold in confidence and not make use of such Information for
any purpose other than those permitted by this Agreement.
Each Party will use at least the same standard of care as it
uses to protect proprietary or confidential information of
its own to ensure that such employees, agents, consultants,
sublicensees, suppliers or Third Party manufacturers do not
disclose or make any unauthorized use of the Information.
11.3 DISCLOSURE OF AGREEMENT. Neither Horizon nor AHP shall
release to any Third Party or publish in any way any
non-public information with respect to the terms of this
Agreement or concerning their cooperation without the prior
written consent of the other, which consent will not be
unreasonably withheld or delayed, provided, however, that
either Party may disclose the terms of this Agreement to the
extent required to comply with applicable laws, including,
without limitation, the rules and regulations promulgated by
the United States Securities and Exchange Commission,
provided, however, that prior to making any such disclosure,
the Party intending to so disclose the terms of this
Agreement shall (i) provide the nondisclosing Party with
written notice of the proposed disclosure and an opportunity
to review and comment on the intended disclosure which is
reasonable under the circumstances and (ii) shall seek
confidential treatment for as much of the disclosure as is
reasonable under the circumstances, including, without
limitation, seeking confidential treatment of any information
as may be requested by the other Party. Notwithstanding any
other provision of this Agreement, each Party may disclose
the terms of this Agreement to lenders, investment bankers
and other financial institutions of its choice solely for
purposes of financing the business operations of such Party
either (i) upon the written consent of the other Party or
(ii) if the disclosing Party uses reasonable efforts to
obtain a signed confidentiality agreement with such financial
institution with respect to such information on terms
substantially similar to those contained in this Article 11.
11.4 PUBLICITY. Subject to Section 11.3, all publicity, press
releases and other announcements relating to this Agreement
or the transactions contemplated hereby shall be reviewed in
advance by, and shall be subject to the approval of, both
Parties. The Party responding to a request for such approval
shall respond to the other Party in writing within five (5)
days of such request.
11.5 WAIVER. AHP agrees that, upon AHP and its supplier of
Substance entering into the Bulk Substance Supply Agreement,
AHP shall waive its rights under the Confidentiality
Agreement among AHP, Horizon, EJ Financial and Mikart, the
License Agreement and this Agreement to the extent such
agreements prohibit Horizon from communicating with such
supplier and entering into agreement(s) regarding the
Substance with such supplier.
12. MISCELLANEOUS.
12.1 FORCE MAJEURE. Neither Party shall be liable to the other for
delay or failure in the performance of the obligations on its
part contained in this Agreement if and to the extent that
such failure or delay is due to circumstances beyond its
control (including, without limitation, AHP's inability to
obtain, from a Third Party,
<PAGE> 22
sufficient quantities of the raw materials needed for the
manufacture of Substance to meet its manufacturing
obligations hereunder) which it could not have avoided by the
exercise of reasonable diligence. It shall notify the other
Party promptly should such circumstances arise, giving an
indication of the likely extent and duration thereof, and
shall use all Commercially Reasonable Efforts to resume
performance of its obligations as soon as practicable.
12.2 ASSIGNMENT.
12.2.1 ASSIGNMENT BY HORIZON. Horizon may assign any or all
of its right or obligations under this Agreement in
the Territory to any of its Affiliates, for so long
as they remain Affiliates. In addition, Horizon may
assign any or all of its rights or obligations under
this Agreement in the Territory in conjunction with
a merger or acquisition of Horizon. Horizon may not
otherwise assign any of its rights or obligations
under this Agreement without AHP's prior written
consent, which consent shall not be unreasonably
withheld. AHP shall respond to such requests by
Horizon for assignment within thirty (30) days from
such request. Any permitted assignment shall not
relieve Horizon of its responsibilities for
performance of its obligations under this Agreement.
12.2.2 ASSIGNMENT BY AHP. AHP may assign any or all of its
rights or obligations under this Agreement to any of
its Affiliates or to any Third Party, provided,
however, that AHP may assign all or part of its
obligations to a Third Party only after receiving
Horizon's prior written consent, which consent shall
not be unreasonably withheld or delayed; provided,
further, that such assignment shall not relieve AHP
of its responsibilities for performance of its
obligations under this Agreement. Notwithstanding
the foregoing, Horizon's consent shall not be
required for any assignment made by AHP in
connection with a merger or similar reorganization
of AHP or its parent company or the sale of all or
substantially all of AHP's or AHP's parent company's
pharmaceutical assets.
12.2.3 BINDING NATURE OF ASSIGNMENT. This Agreement shall
be binding upon and inure to the benefit of the
successors and permitted assigns of the Parties. Any
assignment not in accordance with this Section 12.2
shall be void.
12.3 NO WAIVER. The failure of either Party to require performance
by the other Party of any of that other Party's obligations
hereunder shall in no manner affect the right of such Party
to enforce the same at a later time. No waiver by any Party
hereto of any condition, or of the breach of any provision,
term, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach, or of any
other condition or of the breach of any other provision,
term, representation or warranty hereof.
12.4 SEVERABILITY. If a court or other tribunal of competent
jurisdiction should hold any term or provision of this
Agreement to be excessive, or invalid, void or unenforceable,
the offending term or provision shall be deleted or revised
to the
<PAGE> 23
extent necessary to be enforceable, and, if possible,
replaced by a term or provision which, so far as practicable,
achieves the legitimate aims of the Parties.
12.5 RELATIONSHIP BETWEEN THE PARTIES. Both Parties are
independent contractors under this Agreement. Nothing herein
contained shall be deemed to create an employment, agency,
joint venture or partnership relationship between the Parties
hereto or any of their agents or employees, or any other
legal arrangement that would impose liability upon one party
for the act or failure to act of the other Party. Neither
Party shall have any express or implied power to enter into
any contracts or commitments or to incur any liabilities in
the name of, or on behalf of, the other Party, or to bind the
other Party in any respect whatsoever.
12.6 CORRESPONDENCE AND NOTICES.
12.6.1 ORDINARY NOTICES. Correspondence, reports,
documentation, and any other communication in
writing between the Parties in the course of
ordinary implementation of this Agreement shall be
delivered by hand, sent by facsimile, overnight
courier or by airmail to the employee or
representative of the other Party who is designated
by such other Party to receive such written
communication.
12.6.2 EXTRAORDINARY NOTICES. Extraordinary notices and
communications (including, without limitation,
notices of termination, force majeure, material
breach, change of address) shall be in writing and
sent by prepaid registered or certified air mail, or
by facsimile confirmed by prepaid registered or
certified air mail letter, and shall be deemed to
have been properly served to the addressee upon
receipt of such written communication.
12.6.3 ADDRESSES. In the case of Horizon, the proper
address for communications and for all payments
shall be:
Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Mr. Brent Dixon
Fax: (770) 442-9594
and in the case of AHP, the proper address for
communications and for all payments shall be:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania 19087
Attn: Senior Vice President, Global
Business Development
Fax: (610) 688-9498
with a copy to:
American Home Products Corporation
5 Giralda Farms
<PAGE> 24
Madison, New Jersey 07940
Attn: Senior Vice President and General
Counsel
Fax: (973) 660-7156
12.7 CHOICE OF LAW. This Agreement is subject to and governed by
the laws of the State of Delaware, excluding its conflict of
law provisions.
12.8 ENTIRE AGREEMENT; AMENDMENT. This Agreement, together with
the other Transaction Agreements and the Confidential
Disclosure Agreement between AHP and E.J. Financial
Enterprises Inc. (an equity holder in Horizon) dated April
28, 1998, and all the covenants, promises, agreements,
warranties, representations, conditions and understandings
contained herein and therein sets forth the complete, final
and exclusive agreement between the Parties and supersedes
and terminates all prior and contemporaneous agreements and
understandings between the Parties, whether oral or in
writing. There are no covenants, promises, agreements,
warranties, representations, conditions or understandings,
either oral or written, between the Parties other than as are
set forth in the Transaction Agreements. No subsequent
alteration, amendment, change, waiver or addition to this
Agreement shall be binding upon the Parties unless reduced to
writing and signed by an authorized officer of each Party. No
understanding, agreement, representation or promise, not
explicitly set forth herein, has been relied on by either
Party in deciding to execute this Agreement.
12.9 HEADINGS. The headings and captions used in this Agreement
are solely for the convenience of reference and shall not
affect its interpretation.
12.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be an original and all of
which shall constitute together the same document.
12.11 FURTHER ACTIONS. Each Party agrees to execute, acknowledge
and deliver such further instruments, and to do all other
acts, as may be necessary or appropriate in order to carry
out the purposes and intent of this Agreement including,
without limitation, any filings with any antitrust agency
which may be required.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the Parties as of the date set forth below.
AMERICAN HOME PRODUCTS CORPORATION HORIZON PHARMACEUTICAL CORPORATION
By: By:
--------------------------------- ---------------------------------
Name: Name:
------------------------------- -------------------------------
Title: Title:
------------------------------ ------------------------------
<PAGE> 25
SCHEDULE 1.19
SPECIFICATIONS
PRODUCT SPECIFICATIONS ARE SET FORTH ON THE FOLLOWING 22 PAGES
<PAGE> 26
[***] - CONFIDENTIAL TREATMENT REQUESTED
GENERAL PRODUCT INFORMATION
LABEL CLAIM: Glycopyrrolate, [***]
DOSAGE FORM: [***]
LOT SIZE: [***]
PACKAGE SIZE: [***]
PRODUCT CODE: 7824
NDA NO.: [***]
RX OR OTC: Rx
OFFICIAL NF OR USP: [***]
DEA CLASS: [***]
FORM 6 NO.: [***]
EXPIRATION DATE: 3 years
MFD. BY: A. H. Robins Company
TABLE OF CONTENTS
PAGE 2 - GENERAL PRODUCT INFORMATION
PAGE 3 - IN-PROCESS - DURING COMPRESSION
PAGE 7 - BULK FINISHED PRODUCT - AFTER COMPRESSION
PAGE 17 - REGULATORY SPECIFICATIONS AND METHODS
PAGE 19 - PACKAGED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
<PAGE> 27
[***] - CONFIDENTIAL TREATMENT REQUESTED
AFTER COMPRESSION
SAMPLING
This sample is the composite of in-process samples collected during the
compression of the lot and shall consist of at least [***] tablets.
TESTS
<TABLE>
<S> <C>
Description
------------
Specification: A white, round, flat-face, beveled-edge, compressed tablet, [***] mm
in diameter and [***] mm thick. One side is engraved [***] - 7824, the
obverse side is scored. Odor shall be characteristic of product.
Test: [***]
Weight (Average of [***] Tablets)
---------------------------------
Specification: Theoretical average weight [***]
Acceptable range [***]
Test: Record the average tablet weight of [***] tablets as determined from
[***].
Dissolution - Glycopyrrolate
----------------------------
Specification: [***]
Principle [***]
Reagants [***]
Calculation [***] glycopyrrolate [***]
</TABLE>
Discussion
Start-up and Shut-down of System
Assay-Glycopyrrolate
[***]
<PAGE> 28
[***] - CONFIDENTIAL TREATMENT REQUESTED
Specification: [***]
Reagants: [***]
glycopyrrolate [****]
glycopyrrolate [****]
Procedure [***]
Calculation [***] glycopyrrolate [****]
[***]
Calculation [***] glycopyrrolate [****]
Calculation [***] glycopyrrolate [***]
Discussion
Start-up and Shut-down of System
Assay - Glycopyrrolate
Specification: [***]
Reagents [***]
glycopyrrolate [****]
glycopyrrolate [****]
Procedure [***]
Calculation [***] glycopyrrolate [****]
Glycopyrrolate Identification
[****] glycopyrrolate [****]
Uniformity of Dosage Units
<PAGE> 29
[***] - CONFIDENTIAL TREATMENT REQUESTED
Method: [***]
Specification: [***]
<PAGE> 30
[***] - CONFIDENTIAL TREATMENT REQUESTED
Test: [***]
Principles [***]
Apparatus [***]
Reagents [***]
gylcopyrrolate [****]
Procedure 1. [***]
2. [***]
3. [***]
Calculation [***]
<PAGE> 31
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
[****] GLYCOPYRROLATE ROBINS PRODUCT
PRODUCT GRAPH OMITTED
<PAGE> 32
PRODUCT SCAN GRAPH OMITTED
<PAGE> 33
[***] - CONFIDENTIAL TREATMENT REQUESTED
ACCEPT/REJECT
[***]
1. [***]
2. [***]
<PAGE> 34
[***] - CONFIDENTIAL TREATMENT REQUESTED
INSPECTION
During the packaging of the product at A. H. Robins Company, the
following [***].
PRODUCT IDENTIFICATION
[***]
SHELF SAMPLE
[***]
NET CONTENTS OF CONTAINERS
Specification: [***]
Test: [***]
BOTTLES AND CAPS
Specification: Complies with standard
Test: Each bottle sampled shall be examined for the
following:
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
6. [***]
7. [***]
<PAGE> 35
[***] - CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<S> <C>
LABELS
Specification: Complies with standard
Test: The label of each bottle sampled shall be examined for the following:
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
CARTONS
Specification: Complies with standard
Test: Each carton sampled shall be examined for the following:
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
INSERTS
Specification: Complies with standard
Test: The insert of each bottle sampled shall be examined for the following:
1. [***]
2. [***]
3. [***]
4. [***]
</TABLE>
<PAGE> 36
[***] - CONFIDENTIAL TREATMENT REQUESTED
STANDARDS
[***] by the A.H. Robins Company. [****] by the A.H. Robins Company [****]
ACCEPT/REJECT
[***]
1. [***]
2. [***]
Specification Approved May, 1990
Robert W. Alexander, Jr. A. Edwin Martin
Director, Quality Assurance Vice President, GMP
A. H. Robins Company A. H. Robins Company
- -------------------------------- --------------------------------
<PAGE> 37
[***] - CONFIDENTIAL TREATMENT REQUESTED
GRAPHIC
WHITEHALL
ROBINS
WHITEHALL ROBINS
ANALYTICAL DEVELOPMENT - TEST METHOD
Method: [***] Glycopyrrolate [****] Glycopyrrolate
WH#/Product: [***]
Method#: [***]
Date:
Supersedes: [***]
Developed by: [***]
Checked by:
Reviewed by:
<PAGE> 38
[***] - CONFIDENTIAL TREATMENT REQUESTED
- -------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
COMPOSITE ASSAY FOR GLYCOPYRROLATE [***]
Reagents
Glycopyrrolate - Whitehall Robins [***]
Apparatus
[***]
Preparation of Standard Solution
NOTE: Prepare this solution fresh daily.
1. [***]
2. [***]
3. [***]
4. [***]
1 of 7
<PAGE> 39
[***] - CONFIDENTIAL TREATMENT REQUESTED
- -------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- -------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
Preparation of Sample Solution
1. [***] glycopyrrolate [****] glycopyrrolate [***]
2. [***]
3. [***]
4. [***]
5. [***]
Procedure
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
2 of 7
<PAGE> 40
[***] - CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
6. [***]
7. [***] glycopyrrolate [****]
Manual Calculations
[***] glycopyrrolate [****]
glycopyrrolate [****]
3 of 7
<PAGE> 41
[***] - CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
PRODUCT EQUATION OMITTED
where:
Au = absorbance of sample
As = absorbance of standard
Ws = weight of standard, in mg
n = number of tablets used
CONTENT UNIFORMITY FOR GLYCOPYRROLATE [***]
Reagents
Refer to section under [***]Glycopyrrolate".
Apparatus
Refer to section under [***]Glycopyrrolate."
Preparation of Standard Solution
Refer to section under [***]Glycopyrrolate."
4 of 7
<PAGE> 42
[***] - CONFIDENTIAL TREATMENT REQUESTED
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
Preparation of Sample Solution
1. [***]
2. [***]
3. [***]
4. [***]
Procedure
Refer to section under [***]Glycopyrrolate."
Manual Calculations
[***] glycopyrrolate [****]
For [***] tablets:
PRODUCT EQUATION OMITTED
5 of 7
<PAGE> 43
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
PRODUCT EQUATION OMITTED
For [****] tablets:
PRODUCT EQUATION OMITTED
6 of 7
<PAGE> 44
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
- --------------------------------------------------------------------------------
GRAPHIC ANALYTICAL DEVELOPMENT - TEST METHOD
- --------------------------------------------------------------------------------
Robinul Tablets, Robinul Forte Tablets
WH#: [***] Date: [***]
Method#: [***] Supersedes: [***]
- --------------------------------------------------------------------------------
PRODUCT EQUATION OMITTED
where:
Au = absorbance of sample
As = absorbance of standard
Ws = weight of standard, in mg
7 OF 7
<PAGE> 45
[***] - CONFIDENTIAL TREATMENT REQUESTED
BULK FINISHED PRODUCT SPECIFICATIONS AND TEST PROCEDURES
SCHEDULE 5.1
INITIAL PURCHASE PRICES
<TABLE>
<CAPTION>
Product Strength Package Size AHP NDC# Initial Purchase Price
- ------- --------- ------------ -------- ----------------------
<S> <C> <C> <C> <C>
Robinul tablets 1 mg bottles of 100 7824-63 $ [***]
Robinul tablets 2 mg bottles of 100 7840-63 $ [***]
Robinul tablets 2 mg bulk N/A $ [***] per [***]
Robinul tablets 2 mg bulk N/A $ [***] per [***]
</TABLE>
<PAGE> 46
EXHIBIT G
PENDING LIABILITIES
1. The following civil actions are pending with respect to AHP's sale of the
Product in the Territory:
Shimshock v. Truta, et al., Superior Court of California,
County of San Mateo, No. 400614
<PAGE> 1
EXHIBIT 10.14
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions of This Agreement Which Have Been Redacted Are
Marked With Brackets ([***]). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is entered into as of the 29th
day of January, 1999, by and between HORIZON PHARMACEUTICAL CORPORATION, a
company incorporated under the laws of Delaware, with its principal place of
business at 660 Hembree Parkway, Suite 106, Roswell, Georgia 30076 ("Horizon"),
and AMERICAN HOME PRODUCTS CORPORATION, a company incorporated under the laws of
Delaware, with its principal place of business at Five Giralda Farms, Madison,
New Jersey 07940, USA ("AHP"). Both Horizon and AHP are referred to herein
individually as a "Party" and collectively as the "Parties".
WHEREAS, AHP has rights to certain Know-How (as hereinafter defined)
and Trademarks (as hereinafter defined) relating to the Products (as hereinafter
defined);
WHEREAS, Horizon is qualified to market pharmaceutical products in the
Territory (as hereinafter defined);
WHEREAS, Horizon desires to engage AHP's or its Affiliate's (as
hereinafter defined) facilities and services to manufacture (a) the Product for
distribution and sale by Horizon, and AHP is willing to enter into a separate
manufacturing and supply agreement contemporaneously herewith; and
WHEREAS, AHP desires to grant and transfer to Horizon and Horizon
desires to receive a license and other rights and assets under the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and conditions contained in this Agreement, the
Parties agree as follows:
1. DEFINITIONS.
For the purposes of this Agreement, the capitalized terms hereunder
shall have the meanings defined below:
1.1 "AFFILIATE(S)" shall mean, in the case of either Party, any
corporation, joint venture, or other business entity which
directly or indirectly controls, is controlled by, or is under
common control with that Party. "Control", as used in this
Section 1.1, shall mean having the power to direct, or cause
the direction of, the
-1-
<PAGE> 2
management and policies of an entity, whether through
ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, for purposes of this Agreement,
the term "Affiliate" shall not include subsidiaries in which a
Party or its Affiliates owns a majority of the ordinary voting
power to elect a majority of the board of directors but is
restricted from electing such majority by contract or
otherwise, until such time as such restrictions are no longer
in effect.
1.2 "CLOSING" shall have the meaning set forth in Section 3.3
hereof.
1.3 "COMMERCIALLY REASONABLE EFFORTS" shall mean efforts and
resources normally used by a Party for a compound or product
owned by it or to which it has rights, which is of similar
market potential at a similar stage in its product life,
taking into account the competitiveness of the marketplace,
the proprietary position of the compound or product, the
regulatory structure involved, the profitability of the
applicable products, and other relevant factors.
1.4 "CUSTOMER CONTRACTS" shall mean those contracts and
outstanding bids listed in Exhibit A hereto, between AHP or
its Affiliates and certain Third Parties pursuant to which
such Third Parties, inter alia, purchase Products from AHP or
such Affiliates in the Territory.
1.5 "EFFECTIVE DATE" shall mean the date on which the Closing
occurs in accordance with Section 3.3 hereof.
1.6 "FIELD" shall mean use in humans, excluding injectable forms
of the Substance for human use.
1.7 "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
1.8 "KNOW-HOW" shall mean all proprietary technical and clinical
information, data and know-how relating to the Products,
whether or not patentable, owned as of the Effective Date or
acquired during the term of this Agreement, by AHP or its
Affiliates. Know-How shall include, without limitation, all
processes, formulas, discoveries and inventions whether
relating to biological, chemical, pharmacological,
toxicological, pharmaceutical, physical and analytical safety,
quality control and clinical data, including, without
limitation, phase IV clinical study data. Know-How shall also
include relevant medical information relating to the Products
(such as customer questions, responses thereto and adverse
drug event (ADE) history) in AHP's possession. The term
"Know-How", however, shall not include (i) any know-how,
processes, information and data which is, as of the Effective
Date or later becomes, generally available to the public or
(ii) any general manufacturing know-how not specific to the
Products.
-2-
<PAGE> 3
1.9 "LETTER OF INTENT" shall mean that certain Letter of Intent
which (i) is dated as of December 14, 1998 and (ii) relates to
the transaction contemplated by this Agreement.
1.10 "NET SALES" shall mean amounts invoiced for sales of the
Products by Horizon, its Affiliates and sublicensees to Third
Parties in the Territory, less the sum of (i) trade, quantity
and cash discounts actually allowed or paid, (ii) credits or
allowances given or made for return of previously sold
products, (iii) rebates and chargebacks specifically
identified to the sale of the Products by Horizon, its
Affiliates and sublicensees, and (iv) taxes, duties or other
governmental charges levied on or measured by the billing
amount, as adjusted for rebates and refunds. Such amounts
shall be determined from the books and records of Horizon, its
Affiliates and sublicensees which shall be maintained in
accordance with generally accepted accounting principles.
Sales of Products by and between Horizon, its Affiliates and
sublicensees are not sales to Third Parties and shall be
excluded from Net Sales calculations for all purposes.
1.11 "PRODUCT(S)" shall mean those Products listed in Exhibit B,
for use in the Field, each of which have been marketed by AHP
as of the date this Agreement was signed by the Parties.
1.12 "PRODUCT SUPPLY AGREEMENT" shall have the meaning set forth in
Section 7.1 hereof.
1.13 "REGULATORY APPROVAL" shall mean all authorizations by the
appropriate Regulatory Authorities which are required for the
manufacture (other than manufacturing facilities licenses,
approvals or authorizations) marketing, promotion, pricing and
sale of the Products in the Territory, including an approved
New Drug Application(s) for the Product(s) which are owned by
AHP or its Affiliates.
1.14 "REGULATORY AUTHORITY" shall mean any national,
supra-national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental
entity in the Territory involved in the granting of Regulatory
Approvals for the Product including, without limitation, the
United States Food and Drug Administration ("FDA").
1.15 "SUBSTANCE" shall mean the chemical substance
3-[(cyclopentylhydroxy phenyl acetyl) oxy] -1, 1-dimethyl
(pyrrolidinium bromide, otherwise known as glycopyrrolate).
1.16 "SUPPLY PRICE" shall mean the price paid by Horizon to AHP
under the Product Supply Agreement for the purchase of a unit
of Product.
1.17 "SYSTEMS TRANSFER PLAN" shall have the meaning set forth in
Section 3.2 hereof.
-3-
<PAGE> 4
1.18 "TERRITORY" shall mean the United States of America, its
territories and possessions, and the Commonwealth of Puerto
Rico.
1.19 "THIRD PARTY(IES)" shall mean any person(s) or entity(ies)
other than Horizon, AHP, or their respective Affiliates.
1.20 "TRADEMARKS" shall mean the trademarks listed on Exhibit C
hereto, which, as of the date this Agreement was signed by the
Parties, has been used by AHP in connection with the
promotion, marketing and sale of the Products.
1.21 "TRANSACTION AGREEMENTS" shall mean this Agreement and the
Product Supply Agreement.
1.22 "$" shall mean United States Dollars.
2. RIGHTS GRANTED.
2.1 LICENSES.
2.1.1 LICENSE OF KNOW-HOW. Subject to the terms and
conditions contained in this Agreement, AHP, as of
the Effective Date, hereby grants to Horizon an
exclusive license (exclusive, even as to AHP, subject
to the provisions of Section 2.3), under the Know-How
to make, have made, use, market, distribute, offer
for sale and sell the Product in the Territory.
Horizon accepts all the obligations set forth in this
Agreement and agrees to use the Know-How only in
connection with the manufacture, sale and promotion
of the Products in the Territory, only for so long as
the licenses granted under this Section 2.1.1 remain
in effect.
2.1.2 LICENSE OF TRADEMARK. Subject to the terms and
conditions contained in this Agreement, AHP, as of
the Effective Date, hereby grants to Horizon an
exclusive license (exclusive, even as to AHP), to use
the Trademark only in connection with the
manufacture, sale and promotion of the Products in
the Territory. Horizon accepts all the obligations
set forth in this Agreement and agrees to use the
Trademark in the Territory, only for so long as the
license granted under this Section 2.1.2 remains in
effect.
2.1.3 SUBLICENSES. Horizon may grant one or more Affiliates
or Third Parties sublicenses under the licenses
granted to Horizon under Sections 2.1.1 and 2.1.2 in
the Territory, provided that:
(a) Horizon obtains AHP's prior written consent,
such consent not to be unreasonably
withheld;
-4-
<PAGE> 5
(b) The parties to and the economic terms of any
such agreement shall be fully disclosed to
AHP, and the terms of such agreement shall
be consistent with all of the relevant terms
and provisions of this Agreement;
(c) To the extent that any such Third Party is
to Perform any obligation of Horizon under
this Agreement, Horizon shall remain liable
for such performance; and
(d) Horizon shall pay AHP the trademark
royalties on all Net Sales of Product by
such Affiliate or Third Party, as set forth
in Section 4.2.1.
2.2 ASSIGNMENT OF REGULATORY APPROVALS. Subject to the terms and
conditions contained in this Agreement, AHP shall assign to
Horizon at the Closing ownership of all its right, title and
interest in and to the Regulatory Approvals in the Territory.
At the Closing, all of AHP's obligations under this Agreement
with respect to such Regulatory Approvals shall immediately
terminate (with the exception of reporting, as required under
Section 6.2 hereof, to Horizon significant safety and efficacy
issues relating to Product or Substance of which AHP is aware
and which are required for NDA reporting in the United States)
and thereafter, AET shall have no further right in or to such
Regulatory Approvals in the Territory, except as provided in
Section 6.1.2 hereof Subject to the notice and cure provisions
of Section 11.2.2, if Horizon fails to pay to AHP the entire
amount of the License Fee when due, Horizon shall immediately
reassign the Regulatory Approvals to AHP.
2.3 RETAINED RIGHTS. Notwithstanding the licenses granted to
Horizon under Section 2.1, after the Closing, AHP shall retain
ownership of and all rights to (i) the current NDC numbers and
Product Codes it uses for each of the Products (subject to
Horizon's right to sell Product under Section 2.7 of the
Product Supply Agreement), (ii) the real and personal property
(including, without limitation, all equipment) and general
manufacturing know-how used by AHP in manufacturing the
Products (either before, during or after the term of this
Agreement) other than Know-How, (iii) all accounts receivable
from sales of the Products by or on behalf of AHP, and (iv)
all inventories of the Products that have not otherwise been
purchased by Horizon pursuant to Section 7.1 hereof and the
Product Supply Agreement. Additionally, AHP retains ownership
of and the right to use the Know-How (i) to manufacture
Products for Horizon pursuant to Section 7.1 hereof and the
Product Supply Agreement; (ii) to manufacture Products for
sale outside of the Territory (including, without limitation,
for sale to AHP's Affiliates or Third Parties in the
Territory, for final distribution and sale outside of the
Territory); (iii) to manufacture products containing Substance
for use or sale, both in and outside of the Territory, as
veterinary pharmaceutical products and as injectable product
for human use; and (iv) to manufacture, use and sell Products
in the Territory if this Agreement is terminated by AHP
pursuant to Section 11.2.2 hereof and all payments due to AHP
pursuant to Section 4.1.1 have not been fully paid to AHP.
-5-
<PAGE> 6
2.4 HORIZON'S COVENANT NOT TO COMPETE. Horizon agrees that, during
the term of this Agreement, Horizon and its Affiliates will
not utilize the Know-How, Regulatory Approvals or Trademarks
in any manner to make, have made, use, market, offer to sell
or sell any product containing the Substance as a
pharmaceutically active ingredient for use as a veterinary
pharmaceutical agent or for injectable dosage forms for human
use.
3. PRE-CLOSING ACTIVITIES; CLOSING.
3.1 GOVERNMENT APPROVALS. Each of Horizon and AHP shall use its
good faith efforts to eliminate any concern on the part of any
court or government authority regarding the legality of the
proposed transaction, including, if required by state
antitrust authorities, promptly taking all steps to secure
government antitrust clearance, including, without limitation,
cooperating in good faith with any government investigation
including the prompt production of documents and information
demanded by a second request for documents and of witnesses if
requested. Horizon and AHP will cooperate and use respectively
all reasonable efforts to make all registrations, filings and
applications, to give all notices and to obtain by the Closing
all governmental or other consents, transfers, approvals,
orders, qualifications, authorizations, permits and waivers,
if any, and to do all other things necessary or desirable for
the consummation of the transactions as contemplated hereby.
Neither Party shall be required, however, to divest products
or assets or materially change its business if doing so is a
condition of obtaining approval under the governmental
approvals of the transactions contemplated by this Agreement.
3.2 SYSTEMS TRANSFER. During the time period between the signing
of this Agreement by the Parties and the Closing, the Parties
will develop a mutually acceptable post Closing operation plan
substantially in the form of Exhibit D hereto (the "Systems
Transfer Plan") to transfer the processing of chargebacks,
government rebates, returns (including the processing of
customer credits), obligations under Customer Contracts,
customer service functions, and regulatory reporting functions
from AHP to Horizon and Know-How necessary to enable Horizon
to use, market, distribute and sell Product in the Territory.
Such plan shall be reduced to writing by Horizon and approved
by both Parties and shall be implemented by the Parties as
soon as practicable after the Closing.
3.3 THE CLOSING.
3.3.1 TIME AND PLACE. The Closing of the transactions
contemplated hereby shall take place at 10:00 A.M.
(local time) on January 29, 1999 at the offices of
Wyeth-Ayerst Laboratories Division of American Home
Products Corporation, St Davids, Pennsylvania, or at
such other time and place as the Parties may agree.
The Closing shall be effective as of midnight on the
Effective Date.
-6-
<PAGE> 7
[***] - CONFIDENTIAL TREATMENT REQUESTED
3.3.2 PAYMENT OF LICENSE FEE. At the Closing, Horizon shall
make the payment required by Section 4.1(i) hereof,
which payment shall be made by wire transfer in funds
immediately available to such bank account as AHP may
designate at least three (3) business days in
advance.
3.3.3 CUSTOMER INFORMATION. To the extent the following
items have not previously been provided to Horizon,
AHP, at the Closing, will deliver to Horizon
(a) complete and accurate copies of AHP's
relevant customer lists including relevant
sales data for the Products; and
(b) copies of current and pending customer sales
contracts for the Product, which contracts
shall be redacted for purposes of deleting
information that is not related to the
Product and other confidential information.
3.3.4 OTHER AGREEMENTS. At the Closing, Horizon and AHP
shall each execute and deliver to the other the
Systems Transfer Plan and the Product Supply
Agreement in the form attached hereto as Exhibit F.
3.3.5 CERTIFICATIONS OF REPRESENTATIONS AND WARRANTIES. At
the Closing, each Party shall certify to the other
that the representations and warranties set forth in
Article 10 hereof remain true and in effect as of the
day of Closing. In the event that one or more of the
representations and warranties do not remain true and
in effect as of the day of Closing, the Party
receiving such certification shall have the option to
(i) complete the Closing (and such Party shall be
required to expressly waive its rights under the
specific representation and warranty which is no
longer true and/or in effect as of the day of
closing) or (ii) terminate this Agreement as provided
in Section 11.2.1.
3.4 CONDUCT OF BUSINESS FROM SIGNING TO CLOSING. AHP covenants and
agrees that, during the period between the signing of this
Agreement and Closing, it will use its Commercially Reasonable
Efforts to conduct the business relating to Product in a
manner consistent with its prior practices.
4. CONSIDERATION.
4.1 LICENSE FEE. In partial consideration of the licenses granted
to Horizon under Section 2.1 hereof and the other rights and
assets transferred to Horizon hereunder, Horizon shall pay AHP
a nonrefundable, noncreditable license fee (the "License Fee")
as follows (i) four million dollars ($4,000,000) which shall
be due and payable at the Closing and (ii) eight calendar
quarter payments each in the
-7-
<PAGE> 8
[***] - CONFIDENTIAL TREATMENT REQUESTED
amount of two hundred twenty five thousand dollars ($225,000)
due May 1, 1999; August 1, 1999; November 1, 1999; February 1,
2000; May 1, 2000; August 1, 2000; November 1, 2000; and
February 1, 2001, for a total of one million eight hundred
thousand dollars ($1,800,000) in addition to the payment due
under Section 4.1(i) above.
4.2 ROYALTIES.
4.2.1 ROYALTY RATES. In further consideration of the
trademark license granted to Horizon under Section
2.1.2 hereof, during the term of this Agreement,
Horizon shall pay AHP royalties in the amount of
(a) [***] of the Net Sales for all Products sold
by or on behalf of Horizon, its Affiliates
and sublicensees prior to the [***]
anniversary of the Effective Date up to
annual Net Sales of $[***]; and
(b) [***] of the Net Sales for all Products sold
by or on behalf of Horizon, its Affiliates
and sublicensees prior to the [***]
anniversary of the Effective Date of Net
Sales above annual Net Sales of $[***]; and
(c) [***] of the Net Sales for all Products sold
by or on behalf of Horizon, its Affiliates
and sublicensees after the [***] anniversary
of the Effective Date.
4.2.2 MINIMUM ROYALTIES. During the period from the
Effective Date to the fifth anniversary of the
Effective Date, Horizon shall pay a minimum royalty
to AHP each calendar quarter of [***] dollars
($[***]).
4.2.3 SCOPE OF ROYALTY OBLIGATIONS. No royalties shall be
due upon the sale or other transfer among Horizon and
its Affiliates, but in such cases the royalty shall
be due and calculated upon Horizon's or its
Affiliates' Net Sales to the first independent Third
Party.
4.2.4 ROYALTIES PAID QUARTERLY. For each calendar quarter,
or part thereof, in which Horizon sells Product and
is obligated to pay to AHP royalties with respect to
such sales pursuant to this Section 4.2, Horizon
shall, for the first four calendar quarters following
the Effective Date within forty five (45) calendar
days, and for each calendar quarter thereafter within
thirty (30) calendar days, following the close of
each such calendar quarter furnish to AHP a written
report for the calendar quarter showing (i) the
number of units of each Product (by NDC number) sold
by Horizon, its Affiliates and sublicensees in the
Territory during such calendar quarter, (ii) the Net
Sales of Product (by NDC number) sold by Horizon, its
-8-
<PAGE> 9
Affiliates and sublicensees in the Territory during
such calendar month, and (iii) the royalties payable
under this Agreement for such calendar quarter.
Simultaneously with the submission of the written
report, Horizon shall pay to AHP a sum equal to the
aggregate royalty due for such calendar quarter
calculated in accordance with this Agreement
(reconciled for any previous overpayments,
underpayments or credits).
4.3 METHOD OF PAYMENT. All payments to be made by Horizon to AHP
pursuant to Section 4.2 hereof shall be made in United States
dollars by wire transfer simultaneously with the submission of
the report required under Section 4.2.4 hereof.
4.4 MAINTENANCE OF RECORDS BY HORIZON; AUDITS.
4.4.1 RECORD KEEPING BY HORIZON. Horizon and its Affiliates
shall, and shall cause its sublicensees to, keep
accurate books and accounts of record in connection
with the sale by or on behalf of Horizon, its
Affiliates and sublicensees of the Products in
sufficient detail (i) to permit accurate
determination of all figures necessary for
verification of payments required to be paid
hereunder and (ii) to verify compliance with the
provisions of Section 8.3 hereof. Horizon, its
Affiliates and sublicensees shall maintain such
records for a period of three (3) years after the end
of the year in which they were generated.
4.4.2 AUDIT BY AHP. AHP, through an independent certified
public accountant reasonably acceptable to Horizon,
shall have the right, at its own expense, to access
the books and records of Horizon, its Affiliates and
sublicensees as may be reasonably necessary (i) to
verify the accuracy of the royalty reports and all
payments made hereunder and (ii) to verify compliance
with the provisions of Section 8.3 hereof, including,
without limitation, the determination of any
additional payments that may be due to AHP pursuant
to Section 8.3 hereof. Such access shall be conducted
after reasonable prior written notice to Horizon and
during ordinary business hours and shall not be more
frequent than once per calendar year, in respect of
any calendar year ending not more than thirty (30)
months prior to the date of such notice. Upon the
expiration of the thirty (30) month period described
in the immediately preceding sentence, the
calculation of amounts payable with respect to such
time periods shall be binding and conclusive upon
AHP, and Horizon, its Affiliates and sublicensees
shall be released from any liability or
accountability with respect to payments for such time
periods. The parties agree that such independent
certified public accountant shall disclose to AHP
only whether the royalty reports are correct or
incorrect, the specific details concerning any
discrepancies in such reports, whether the provisions
of Section 8.3 hereof have been complied with and the
specific details concerning any noncompliance with
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the provisions of Section 8.3 hereof. AHP agrees to
keep in strict confidence all information learned in
the course of such audit, except when it is necessary
to reveal such information in order to enforce its
rights under this Agreement.
4.4.3 UNDERPAYMENTS/OVERPAYMENTS. If such independent
certified public accountant's report shows any
underpayment, Horizon shall remit or shall cause its
Affiliates and sublicensees to remit to AHP within
thirty (30) days after AHP's receipt of such report,
(i) the amount of such underpayment (ii) interest on
such underpayment at the prime rate quoted by Chase
Manhattan Bank N.A. from the date payment was first
due until the date of payment of such underpayment
and (iii) if such underpayment exceeds five percent
(5%) of the total amount owed for the calendar year
then being audited, the reasonable fees and expenses
of such independent certified public accountant
performing the audit. Any overpayments, less the
reasonable fees and expenses of such independent
certified public accountant, shall be fully
creditable against amounts payable in subsequent
payment periods.
4.5 TAXES AND WITHHOLDING. All taxes levied or incurred on account
of any payments from Horizon to AHP accruing under this
Agreement, by national, state or local governments, will be
assumed and paid by Horizon, except taxes levied thereon as
income to AHP and if such taxes are required to be withheld by
Horizon they will be deducted from payments due to AHP and
will be timely paid by Horizon to the proper taxing authority
for the account of AHP, a receipt or other proof of payment
therefor secured and sent to AHP as soon as practicable.
5. DISCLOSURE OF KNOW-HOW; ASSUMPTION OF OBLIGATIONS
5.1 DISCLOSURE OF KNOW-HOW. At or immediately after the Closing,
in accordance with Section 3.2, AHP shall promptly disclose to
Horizon that Know-How currently utilized by or on behalf of
AHP or its Affiliates which is necessary to enable Horizon to
use, market, distribute and sell the Product in accordance
with the Transaction Agreements.
5.2 CUSTOMER CONTRACTS. A complete and accurate list of each of
the current and pending Customer Contracts pursuant to which
AHP or an AHP Affiliate is, with respect to the current
Customer Contracts immediately prior to the date of this
Agreement, selling Products, along with other products of AHP
and its Affiliates, to Third Party buyers is attached hereto
as Exhibit A. AHP agrees that between the date of signing of
this Agreement and Closing, no new Customer Contracts shall be
executed without first consulting with Horizon. AHP further
agrees that between the date of signing of this Agreement and
Closing, no new bids shall be made without first consulting
with and obtaining the written consent of Horizon. The parties
agree that bids outstanding as of the date of the signing of
this
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[***] - CONFIDENTIAL TREATMENT REQUESTED
Agreement shall be handled in AHP's normal course of
business. The Parties understand and agree that
because the right to sell Product is being
transferred to Horizon pursuant to this Agreement, as
of the Effective Date AHP will no longer have the
right to sell or, except as provided below, adjust
the price of Product under the Customer Contracts,
provided, however, that Horizon agrees that it will
continue to honor all of AHP's commitments made in
each such Customer Contract with respect to supplying
the Product, including, without limitation, the sale
prices as adjusted in accordance with such Customer
Contracts, for the Products throughout the term of
each such Customer Contract. After the Closing, upon
Horizon's request, AHP and Horizon will request each
Third Party to the Customer Contracts to relieve AHP
of its obligations to provide Product under each such
Customer Contract. In addition, to the extent that
AHP and Horizon are unable to obtain a release from a
Third Party of AHP's obligations to supply the
Product under such Customer Contract, then upon the
request of Horizon, AHP shall use its Commercially
Reasonable Efforts to take actions that are permitted
under the terms of such Customer Contract to minimize
the commitment for Product thereunder, including
without limitation, adjusting Product prices,
reducing the term of such Customer Contract solely
with respect to the Product and terminating AHP's
obligations with respect to Product under any such
Customer Contract, provided, however, that AHP shall
not be required to either (i) adjust prices or terms
relating to products other than Products, (ii) make
any payments to such Third Party in consideration for
making such price adjustments or modifications to the
Customer Contract or (iii) terminate any such
Customer Contract with respect to products other than
Products. AHP agrees that following the signing of
this Agreement, it will not take any action with
respect to any Customer Contract which will extend
the term of such Customer Contract for any Product or
otherwise adversely affect Horizon with respect to
any Product, without the prior written consent of
Horizon. All sales of the Product after the Closing
shall be booked by Horizon.
5.3 CHARGEBACKS. As of the Closing, Horizon will be responsible
for all customer chargebacks for Product sold in the
Territory, provided, however, that, with respect to such
Product sales, AHP, for a period of [***] after the Effective
Date, will reimburse Horizon for all qualified customer
chargebacks having Activity Dates prior to the Effective Date.
For purposes of this Section 5.3, the "Activity Date" is the
date a wholesaler ships the Product to a customer under terms
of a customer sales contract or pursuant to a purchase order
issued by such customer.
5.4 REBATES. As of the Closing, Horizon will be fully responsible
for all Federal, State and Third Party rebate programs for
Product sold in the Territory under Horizon's NDC numbers,
including all reporting activities associated with such
programs. Additionally, as of the Closing, Horizon will be
financially responsible for all Federal, State and Third Party
rebate programs for Product sold in the Territory under AHP's
label, provided, however, that with respect to such Product
sales, AHP will continue to prepare the appropriate Federal
and State rebate
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<PAGE> 12
reports and process Federal and State rebates for the sale of
such Product and Horizon will reimburse AHP for (i) 50% of all
such rebates paid which have a Report Date after the Closing
and on or before March 31, 1999 and (ii) one hundred percent
(100%) of all such rebates paid which have a Report Date after
March 31, 1999. For purposes of this Section 5.4, the "Report
Date" is the date a qualified rebate invoice is issued under
applicable Federal or State Rebate Programs.
5.5 RETURNS. As of the Effective Date, Horizon will be responsible
for all returns of Product sold in the Territory, provided,
however, that AHP will reimburse Horizon for all qualified
returns of such Product sold by AHP to Third Parties prior to
the Effective Date. The Parties agree to track sales and
returns of Product by lot number to determine whether such
Product was sold to Third Parties by AHP prior to the
Effective Date or by Horizon after the Effective Date. AHP's
liability pursuant to this Section 5.5 for such returns shall
not exceed twenty five thousand dollars ($25,000.00) and all
returns in excess of such limitation shall be borne solely by
Horizon.
5.6 REIMBURSEMENT. AHP shall reimburse Horizon for chargebacks,
rebates and returns according to Sections 5.3, 5.4 and 5.5 as
follows: Horizon agrees to provide AHP with an invoice for
amounts due under Sections 5.3, 5.4 and 5.5 within thirty (30)
days after the end of each calendar month with the
documentation required to verify the same. AHP agrees to
reimburse Horizon in accordance with Sections 5.3, 5.4 and 5.5
hereof within thirty (30) days after the receipt of the
invoice and all required documentation.
6. REGULATORY MATTERS.
6.1 HORIZON RESPONSIBILITIES.
6.1.1 DISCLOSURE OF REGULATORY APPROVALS. Within thirty
(30) days after the Effective Date, AHP shall provide
Horizon with a copy of all correspondence or other
documents reasonably related to such Regulatory
Approvals. Additionally, within such thirty (30) day
period, AHP shall provide to Horizon a current list
of suppliers for Materials used in the manufacture of
Products.
6.1.2 RIGHT OF REFERENCE. Horizon irrevocably grants to AHP
the right to reference the Regulatory Approvals to
support AHP's Product related activities outside of
the Territory and to support any veterinary
pharmaceutical products containing Substance or any
injectable products for human use, which AHP
currently markets or sells or may, in the future,
market or sell. Horizon shall not amend the
Regulatory Approvals without the prior written
consent of AHP, such consent not to be unreasonably
withheld, and AHP shall respond to Horizon's request
for consent within thirty (30) days from such
request.
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<PAGE> 13
6.1.3 RESPONSIBILITIES. After the Effective Date, Horizon
shall be solely responsible for conducting all
activities in connection with such Regulatory
Approvals, including, without limitation,
communicating and preparing and filing all reports
(including, without limitation, adverse drug
experience reports) with the appropriate Regulatory
Authorities in the Territory and interacting with any
Third Parties with respect to Products sold or
distributed in the Territory; provided, however, that
for up to sixty (60) days after the Effective Date,
AHP shall assist and cooperate in the transition of
such activities to Horizon. Additionally, to the
extent that Horizon is obligated, under applicable
laws and regulations, to report to the Regulatory
Authorities in the Territory, adverse drug
experiences associated with Product sold by or on
behalf of AHP outside of the Territory, AHP shall
provide Horizon with information about such adverse
drug experiences in accordance with the provisions of
Section 6.2 hereof and to the extent that, AHP is
obligated under applicable laws and regulations to
report adverse drug experiences associated with
Product sold by or on behalf of Horizon inside the
Territory, Horizon shall provide AHP with information
about such adverse drug experiences in accordance
with the provisions of Section 6.2 hereof. Upon
written request of Horizon, AHP shall provide Horizon
with all additional written information in AHP's
possession which directly relates to the Products in
the Field as AHP shall have developed and which would
be useful in supporting the Regulatory Approvals.
6.1.4 PAYMENT OF FEES. After the Effective Date, Horizon
shall pay all NDA maintenance fees and any
establishment license fees of Horizon, its Affiliates
or Third Parties which must be paid with respect to
facilities used in the manufacture of Product by or
on behalf of Horizon. Notwithstanding the foregoing,
for so long as AHP is supplying Product to Horizon in
accordance with the Product Supply Agreement, AHP
shall pay any establishment license fees which must
be paid with respect to AHP's, its Affiliate's or
subcontractor's facilities used for the manufacture
of such Product.
6.2 ADVERSE DRUG EXPERIENCE REPORTING. In order for the Parties to
comply with their respective responsibilities under this
Article 6 and otherwise relating to the reporting of adverse
drug experiences, to the extent either Party receives any
information regarding adverse drug experiences related to the
use of the Product, whether such use is within or outside of
the Territory, such Party shall promptly provide the other
Party with such information in accordance with the Adverse
Event Reporting Procedures (as may be amended from time to
time upon mutual agreement) set forth in Exhibit E.
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<PAGE> 14
[***] - CONFIDENTIAL TREATMENT REQUESTED
7. SUPPLY.
7.1 SUPPLY OF PRODUCT BY AHP. For the term set forth in the
Product Supply Agreement, AHP, either directly or through one
or more subcontractors, shall manufacture and supply Products
to Horizon for sale in the Territory and Horizon shall
purchase from AHP its entire requirements of Products for sale
in the Territory, all in accordance with the terms and
conditions of the Product Supply Agreement, in the form
attached hereto as Exhibit F, to be entered into by the
Parties at the Closing.
7.2 SUPPLY OF PRODUCT BY HORIZON. Following the term set forth in
the Product Supply Agreement and thereafter:
(a) Horizon shall be responsible, at its own expense, for
manufacturing its requirements of Product, either by
itself or through a Third Party;
(b) Upon AHP's request, Horizon shall purchase from AHP
(i) reasonable quantities of AHP's residual
inventories of Products having not less than twelve
months remaining dating at the then current purchase
price and (ii) reasonable quantities of AHP's
useable, residual inventories of Product specific
Materials (as defined in the Product Supply
Agreement), including, without limitation, all labels
and other Product specific packaging materials at
AHP's fully-absorbed manufacturing costs;
(c) Upon AHP's request, Horizon would supply AHP's
requirements of Products for sale by AHPC outside the
Territory at Horizon's then fully-absorbed
manufacturing cost plus a [***] mark-up, which
purchase prices shall be increased once each year by
[***].
(d) Upon AHP's request, Horizon will use its Commercially
Reasonable Efforts to facilitate discussions between
AHP and any Third Party manufacturer with which
Horizon may be in discussions regarding the
manufacture of the Product following the term of the
Product Supply Agreement.
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<PAGE> 15
7.3 SUPPLY OF SUBSTANCE BY HORIZON. Following the term set forth
in the Product Supply Agreement, and thereafter:
(a) Horizon shall be responsible, at its own expense,
for manufacturing its requirements of bulk
Substance, either by itself or through a Third
Party;
(b) Upon AHP's request, Horizon shall purchase from AHP
(i) reasonable quantities of AHP's residual
inventories of the bulk Substance and (ii) reasonable
quantities of AHP's residual inventories of Substance
specific Materials (as defined in the Substance
Supply Agreement), including without limitation, all
labels and other Substance specific packaging
materials, in each case at AHP's fully-absorbed
manufacturing costs; and
(c) Upon AHP's request, Horizon will use its Commercially
Reasonable Efforts to facilitate discussions between
AHP and any Third Party manufacturer with which
Horizon may be in discussions regarding the
manufacture of the Substance following the term of
the Product Supply Agreement.
8. PROMOTION, MARKETING AND SALE OF PRODUCTS.
8.1 DILIGENCE. As of the Closing, Horizon shall be solely
responsible for and shall use its Commercially Reasonable
Efforts to promote, market, sell and distribute the Products
in the Territory.
8.2 MATERIALS AND PROMOTIONAL CLAIMS. Horizon at all times shall
be solely responsible for complying with all applicable laws
and regulations in its promotion and marketing of the
Products.
8.3 TIMING OF SALES. Horizon agrees that it and its Affiliates
shall not, by any action or act of omission cause sales of
Products that would have otherwise occurred prior to the end
of the fifth anniversary of the Effective Date, to occur after
the fifth anniversary of the Effective Date.
Such actions or acts of omission may include, without
limitation, announcing or implementing changes in the price of
Products, or delaying the filling of orders. AHP shall have
the right to audit, in accordance with Section 4.5.2 hereof
all of Horizon's records reasonably necessary to verify
compliance with this Section and if AHP determines that either
Horizon or its Affiliates has taken any such actions or
committed any such act of omission then, for purposes of the
payment of royalties under Section 4.2 hereof, the Net Sales
of Product made during the three months after the fifth
anniversary of the Effective Date shall be treated as if such
sales occurred prior to the fifth anniversary of the Effective
Date.
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9. TRADEMARKS.
9.1 USE OF TRADEMARKS. Horizon agrees to use the Trademarks only
in connection with the Products and in the manner and style
which shall have the prior written approval of AHP. Horizon
shall submit to AHP samples of all commercial materials
containing any of the Trademarks. AHP, within thirty (30) days
of its receipt of such materials, shall have the right to
reasonably comment on the usage of the Trademarks in such
materials and Horizon, at its own cost and expense, will
promptly correct any improper usage of the Trademarks. Horizon
agrees not to claim or to assert any right of ownership in or
to such Trademarks or the goodwill associated therewith and
shall take no action which may destroy, damage or impair in
any way the ownership or rights of AHP in and to such
Trademarks. Horizon shall not register anywhere in the world
in its own name, or on behalf of any other person or entity,
any trademark, trade dress, brands, labeling, designs or other
indicia of ownership identical to, or confusingly similar to,
the Trademarks, and shall not associate the Trademarks with
any articles other than the Products and shall, at the request
of AHP, do all such acts and things and execute all such
documents as AHP shall in its reasonable discretion consider
necessary or proper to register or maintain the registration
of the Trademarks in any country of the Territory. Should
usage of the Trademarks in any country vest title thereto in
Horizon, then Horizon shall at AHP's request, immediately
assign and transfer such title to AHP.
9.2 QUALITY CONTROL. Horizon will not permit the quality of
Products to deteriorate while in its possession so as to
adversely affect the goodwill associated with the Trademarks.
Horizon shall upon request of AHP, from time to time furnish
AHP, without charge, specifications and samples of Products
for quality review by AHP. AHP or an authorized representative
thereof shall have the right, at all reasonable times, to
inspect the finished goods in relation to which the Trademarks
are to be used, as part of appropriate quality control.
9.3 INFRINGEMENT OF TRADEMARKS. In the event that, either Horizon
or AHP learn that any of the Trademarks pertaining to Products
is being infringed in the Territory by any Third Party, it
shall promptly notify the other Party of such infringement.
AHP shall have the right, but not the obligation, to act to
terminate any such Third Party infringement, including,
without limitation, prosecuting a lawsuit or other legal
proceeding, at AHP's own expense. In the event that AHP takes
any such action to terminate such infringement, Horizon may,
at its sole option, take appropriate steps to join AHP in such
action and share equally in the costs thereof. If and only if
Horizon joins such action as stated in the preceding sentence,
AHP and Horizon shall share equally in any recovery which may
be received as a result of such action less the reimbursement
of each Party for the out-of-pocket expenses incurred in
taking, joining and prosecuting such action. Notwithstanding
the foregoing, Horizon shall fully cooperate with AHP in any
action AHP takes to terminate such infringement and, to the
extent AHP recovers
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<PAGE> 17
damages from such Third Party, through settlement or
otherwise, shall be reimbursed by AHP for all reasonable
expenses incurred in connection therewith. If AHP fails to
take any action within sixty (60) days after Horizon's
request, Horizon shall have the right to act as it sees fit to
terminate the infringement, including without limitation,
prosecuting a lawsuit or other legal proceeding, at Horizon's
own expense. Horizon may deduct its costs and expenses for
such action from trademark royalties accruing under Section
4.2 after the date of filing of such action. In the event that
Horizon takes any such action to terminate such infringement,
AHP may, at its sole option, take appropriate steps to join
Horizon in such action and share equally in the costs thereof.
If and only if AHP joins such action as stated in the
preceding sentence, AHP and Horizon shall share equally in any
recovery which may be received as a result of such action less
the reimbursement of each Party for the out-of-pocket expenses
incurred in taking, joining and prosecuting such action.
Notwithstanding the foregoing, AHP shall fully cooperate with
Horizon in any action Horizon takes to terminate such
infringement, including without limitation, agreeing to be
joined as party plaintiff and approving any reasonable
settlement agreement achieved by Horizon, and to the extent
Horizon receives damages from such Third Party, through
settlement or otherwise, shall be reimbursed by Horizon for
all reasonable expenses incurred in connection therewith and
deductions from trademark royalties pursuant to this Section
9.3.
10. REPRESENTATIONS AND WARRANTIES.
10.1 REPRESENTATIONS AND WARRANTIES OF EACH PARTY. As of the
signing of this Agreement, each of Horizon and AHP hereby
represents, warrants and covenants to the other Party hereto
as follows:
(a) it is a corporation or entity duly organized and
validly existing under the laws of the state or other
jurisdiction of incorporation or formation;
(b) the execution, delivery and performance of this
Agreement by such Party has been duly authorized by
all requisite corporate action and do not require any
shareholder action or approval;
(c) it has the power and authority to execute and deliver
this Agreement and to perform its obligations
hereunder;
(d) the execution, delivery and performance by such Party
of this Agreement and its compliance with the terms
and provisions hereof does not and will not conflict
with or result in a breach of any of the terms and
provisions of or constitute a default under (i) a
loan agreement, guaranty, financing agreement,
agreement affecting a product or other agreement or
instrument binding or affecting it or its property;
(ii) the provisions of its charter or operative
documents or bylaws; or (iii) any order, writ,
injunction or decree of any court or governmental
authority entered against it or by which any of its
property is bound; and
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<PAGE> 18
(e) it shall at all times comply with all applicable
material laws and regulations relating to its
activities under this Agreement.
10.2 REPRESENTATIONS AND WARRANTIES OF AHP. As of the signing of
this Agreement, AHP hereby represents and warrants to Horizon
as follows:
(a) Except as listed in Exhibit G, there are no (i)
pending or, to AHP's knowledge, threatened product
liability, breach of warranty or other claims,
actions, arbitrations, administrative or other
proceedings regarding the Product or the Trademarks,
to which AHP is a party in the Territory; or (ii)
pending or, to AHP's knowledge, overtly threatened
claim against AHP asserting that any of the Know-How
infringes or violates the rights of Third Parties.
(b) AHP is the sole owner of the Trademarks, the Know-How
and the Regulatory Approvals for the Product in the
Territory and AHP has not sublicensed, pledged,
encumbered, assigned, transferred or granted any
rights or interest therein to any Third Party
inconsistent with the rights granted to Horizon under
the Transaction Agreements, and prior to the Closing,
AHP will enter into no such agreement with any
Affiliate or Third Party.
(c) AHP has furnished Horizon with access to a complete
copy of the Regulatory Approvals, including all
material amendments and supplements thereto. To the
best of AHP's knowledge, the Regulatory Approvals are
in good standing and nothing has come to the
attention of AHP which has, or reasonably should
have, led AHP to believe that the Regulatory
Approvals are not in good standing. To the best of
AHP's knowledge, there is no pending or overtly
threatened action by the FDA which will have a
material adverse effect on the Regulatory Approvals.
(d) AHP represents and warrants that the list of Customer
Contracts provided herein is accurate and complete
with respect to current Customer Contracts and is, to
the best of AHP's knowledge, accurate and complete
with respect to pending Customer Contracts.
(e) AHP has not given any notice to any Third Parties
asserting misappropriation of trade secrets relating
to the Know-How.
(f) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT OR IN THE PRODUCT SUPPLY AGREEMENT, AHP
MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EITHER
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE PRODUCTS OR
THE TRADEMARKS OR HORIZON'S USE THEREOF.
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<PAGE> 19
10.3 REPRESENTATIONS AND WARRANTIES OF HORIZON. As of the signing
of this Agreement, Horizon represents and warrants to AHP that
it has properly determined that the net present value of the
transactions contemplated by this Agreement is less than
fifteen million dollars ($15,000,000) and no HSR filing is
required in connection with the transactions contemplated
hereby.
10.4 REPRESENTATION BY LEGAL COUNSEL. Each Party hereto represents
that it has been represented by legal counsel in connection
with this Agreement and acknowledges that it has participated
in the drafting hereof. In interpreting and applying the terms
and provisions of this Agreement, the Parties agree that no
presumption shall exist or be implied against the Party which
drafted such terms and provisions.
11. TERM AND TERMINATION.
11.1 TERM. This Agreement shall be effective as of the Effective
Date and, unless terminated earlier by mutual written
agreement of the Parties or pursuant to this Article 11, shall
remain in full force and effect for so long as Horizon sells
Product in the Territory (the "Term"). Notwithstanding the
foregoing, upon the payment of all amounts due pursuant to
Section 4.1 hereof the Know-How license granted to Horizon
pursuant to Section 2.1.1 hereof shall become a fully paid-up,
perpetual exclusive (exclusive except as to veterinary
pharmaceutical products and injectable human uses by AHP and
its Affiliates neither of which shall have the right to
sublicense) license.
11.2 TERMINATION.
11.2.1 CERTIFICATIONS OF REPRESENTATION AND WARRANTIES.
Either Party may terminate this Agreement if, in
accordance with Section 3.3.5 hereof, the other Party
certifies that one or more of its representations and
warranties set forth in Article 10 hereof do not
remain true and in effect as of the day of Closing.
11.2.2 TERMINATION FOR CAUSE BOTH PARTIES. This Agreement
may be terminated by written notice by either Party
(subject to the provisions of Section 11.2.3) at any
time during the Term of this Agreement:
(a) for material breach by the other Party,
which breach remains uncured for thirty (30)
days in the case of nonpayment of any amount
due and ninety (90) days for all other
breaches, each measured from the date
written notice of such breach is given to
the breaching Party, or, if such breach is
not susceptible of cure within such ninety
(90) day period and the breaching Party uses
diligent good faith efforts to cure such
breach, for one hundred eighty (180) days
after written notice to the breaching Party;
or
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<PAGE> 20
(b) upon the filing or institution of
bankruptcy, reorganization, liquidation or
receivership proceedings, or upon an
assignment of a substantial portion of the
assets for the benefit of creditors by the
other Party, or in the event a receiver or
custodian is appointed for such Party's
business, or if a substantial portion of
such Party's business is subject to
attachment or similar process; provided,
however, that in the case of any involuntary
bankruptcy proceeding such right to
terminate shall only become effective if the
proceeding is not dismissed within ninety
(90) days after the filing thereof.
11.2.3 EFFECT OF TERMINATION FOR CAUSE ON LICENSE.
(a) In the event that Horizon breaches this
Agreement pursuant to Section 11.2.2 then it
shall be AHP's sole option:
(i) to terminate this Agreement, in
which case all rights to the
Know-How, the Regulatory Approvals
and the Trademarks shall revert to
AHP (unless all payments under
Section 4.1 have been fully paid to
AHP) and Horizon shall remain
obligated to make all payments under
Sections 4.1 and 4.2 which have
accrued as of the date of
termination; or
(ii) to accelerate the payments required
under Section 4.1 so that they shall
become immediately due and payable,
in which case this Agreement shall
remain in full force and effect, and
Horizon shall remain obligated to
make all payments required under
Sections 4.1 and 4.2; or
(iii) to pursue all legal and equitable
remedies available to it, in which
case the Agreement shall remain in
full force and effect and Horizon
shall remain obligated to make all
payments required under Sections 4.1
and 4.2.
(b) In the event that AHP breaches this
Agreement pursuant to Section 11.2.2 then it
shall be Horizon's sole option:
(i) to terminate this Agreement, in
which case all rights to the
Know-How and the Regulatory
Approvals shall be vested in
Horizon (if all payments under
Section 4.1 have been fully paid to
AHP) and the license under the
Trademarks shall be deemed to be
fully paid-up and Horizon shall
remain obligated to make only those
payments under Section 4.2 which
have accrued as of the date of
termination; or
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<PAGE> 21
(ii) to pursue all legal and equitable
remedies available to it, in which
case the Agreement shall remain in
full force and effect and Horizon
shall remain obligated to make all
payments required under Sections 4.1
and 4.2.
11.3 SURVIVAL. The provisions of Articles 1, 2, 6, 12 and 13 and
Sections 4.4, 4.5, 11.2.3, 14.2.3, 14.6, 14.7, 14.8, 14.9, and
14.10 shall survive expiration or any earlier termination of
this Agreement. Any payments that become due and payable prior
to expiration, which have not been paid, shall survive
expiration or any earlier termination of this Agreement.
12. INDEMNIFICATION.
12.1 NOTICE AND ASSISTANCE. Each Party shall promptly notify the
other, in writing, if it learns of any litigation, claim,
administrative or criminal proceedings (collectively
"Actions"), related to the Product, the Substance, the
Trademark, or any Regulatory Approval, asserted or threatened
against such Party (the "Defending Party"). With respect to
any Actions relating to the Product, the Substance, the
Trademark or any Regulatory Approval asserted against a
Defending Party, the other Party shall, at no out-of-pocket
expense to it except as otherwise provided in this Article 12,
reasonably cooperate with and provide such reasonable
assistance to such Defending Party as such Defending Party may
reasonably request in connection with its defense against such
Actions. Such reasonable assistance may include, without
limitation, providing copies of all relevant correspondence
and other materials that the Defending Party may reasonably
request, provided, however, that any Confidential Information
so provided shall be treated in accordance with the provisions
of Article 13 hereof.
12.2 INDEMNIFICATION BY AHP. AHP shall indemnify, defend and hold
harmless Horizon, its Affiliates or its permitted
sublicensees, and each of its and their respective employees,
officers, directors and agents (each, a "Horizon Indemnified
Party") from and against any and all liability, loss, damage,
cost, and expense (including reasonable attorneys' fees)
(collectively, a "Liability") which the Horizon Indemnified
Party may incur, suffer or be required to pay resulting from
or arising in connection with (i) the breach by AHP of any
representation or warranty contained in this Agreement, (ii)
the manufacture, promotion, distribution, testing, use,
marketing, sale or other disposition of the Substance or
Products by AHP outside of the Territory and Field, whether
before or after the Effective Date; (iii) the manufacture,
promotion, distribution, testing, use, marketing, sale or
other disposition of the Substance or Products by AHP within
the Territory and Field before the Effective Date; or (iv) the
use of the Trademarks by AHP or its Affiliates within or
outside the Territory, whether before or after the Effective
Date. Notwithstanding the foregoing, AHP shall have no
obligation under this Agreement to indemnify, defend or hold
harmless any
-21-
<PAGE> 22
Horizon Indemnified Party with respect to claims, demands,
costs or judgments which result from willful misconduct or
negligent acts or omissions of Horizon, its Affiliates, its
permitted sublicensees, or any of their respective employees,
officers, directors or agents.
12.3 INDEMNIFICATION BY HORIZON. Horizon shall indemnify, defend
and hold harmless AHP and its Affiliates, and each of its and
their respective employees, officers, directors and agents
(each, an "AHP Indemnified Party") from and against any
Liability which the AHP Indemnified Party may incur, suffer or
be required to pay resulting from or arising in connection
with (i) the breach by Horizon of any representation or
warranty contained in this Agreement; (ii) the manufacture
(but only upon the commencement of Horizon's manufacturing the
Products pursuant to the Product Supply Agreement), promotion,
distribution, testing, use, marketing, sale or other
disposition of Products by Horizon, its Affiliates, its
permitted sublicensees or their respective subcontractors; or
(iii) the use of the Trademark by Horizon, its Affiliates, its
permitted sublicensees or their respective subcontractors.
Notwithstanding the foregoing, Horizon shall have no
obligation under this Agreement to indemnify, defend, or hold
harmless any AHP Indemnified Party with respect to claims,
demands, costs or judgments which result from willful
misconduct or negligent acts or omissions of AHP, its
Affiliates, its permitted sublicensees or any of their
respective employees, officers, directors or agents.
12.4 CONDITIONS TO INDEMNIFICATION. The obligations of the
indemnifying Party under Sections 12.2 and 12.3 are
conditioned upon the delivery of written notice to the
indemnifying Party of any potential Liability promptly after
the indemnified Party becomes aware of such potential
Liability. The indemnifying Party shall have the right to
assume the defense of any suit or claim related to the
Liability if it has assumed responsibility for the suit or
claim in writing; however, if in the reasonable judgment of
the indemnified Party, such suit or claim involves an issue or
matter which could have a materially adverse effect on the
business operations or assets of the indemnified Party, the
indemnified Party may waive its rights to indemnity under this
Agreement and control the defense or settlement thereof, but
in no event shall any such waiver be construed as a waiver of
any indemnification rights such Party may have at law or in
equity. If the indemnifying Party defends the suit or claim,
the indemnified Party may participate in (but not control) the
defense thereof at its sole cost and expense.
12.5 SETTLEMENTS. Neither Party may settle a claim or action
related to a Liability without the consent of the other Party,
if such settlement would impose any monetary obligation on the
other Party or require the other Party to submit to an
injunction or otherwise limit the other Party's rights under
this Agreement or otherwise. Except as otherwise expressly set
forth in this Article 12, any payment made by a Party to
settle any such claim or action shall be at its own cost and
expense.
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<PAGE> 23
12.6 LIMITATION OF LIABILITY. With respect to any claim by one
Party against the other arising out of the performance or
failure of performance of the other Party under this
Agreement, the Parties expressly agree that the liability of
such Party to the other Party for such breach shall be limited
under this Agreement or otherwise at law or equity to direct
damages only and in no event shall a Party be liable for
punitive, exemplary or consequential damages. The limitations
set forth in this Section 12.6 shall not apply with respect to
the obligations of either Party to indemnify the other under
Sections 12.2 or 12.3 hereof in connection with a Liability to
a Third Party.
12.7 INSURANCE. Horizon shall obtain and maintain at all times
during the term of this Agreement, Commercial General
Liability Insurance, including Products Liability Insurance,
with reputable and financially secure insurance carriers to
cover its indemnification obligations under Section 12.3, with
limits of not less than five million dollars ($5,000,000) per
occurrence and ten million dollars ($10,000,000) in the
aggregate. Horizon shall provide AHP with a Certificate of
Insurance evidencing this coverage within thirty (30) days
after the Closing. Such insurance policy shall name AHP as an
additional insured and Horizon shall use its Commercially
Reasonable Efforts to ensure that such insurance policy
contains a provision requiring ten (10) day advance
notification to AHP in the event of its cancellation or
termination. AHP shall maintain self-insurance and/or obtain
insurance from a Third Party insurer in amounts sufficient to
cover its obligations under Section 12.2. Upon Horizon's
written request, AHP shall provide Horizon with evidence of
such insurance coverage.
13. CONFIDENTIALITY.
13.1 NONDISCLOSURE OBLIGATION. Each of Horizon and AHP shall use
only in accordance with this Agreement and shall not disclose
to any Third Party any information including, without
limitation, Know-How, received by it from the other Party (the
"Information"), without the prior written consent of the other
Party. The foregoing obligations shall survive the expiration
or earlier termination of the last of the Transaction
Agreements to so expire or to be so terminated for a period of
five (5) years. These obligations shall not apply to
Information that:
(i) is known by the receiving Party at the time
of its receipt, and not through a prior
disclosure by the disclosing Party, as
documented by business records;
(ii) is at the time of disclosure or thereafter
becomes published or otherwise part of the
public domain without breach of this
Agreement by the receiving Party;
-23-
<PAGE> 24
(iii) is subsequently disclosed to the receiving
Party by a Third Party who has the right to
make such disclosure;
(iv) is developed by the receiving Party
independently of the Information received
from the disclosing Party and such
independent development can be documented by
the receiving Party, or
(v) is required by law, regulation, rule, act or
order of any governmental authority or
agency to be disclosed by a Party, provided
that notice is promptly delivered to the
other Party in order to provide an
opportunity to seek a protective order or
other similar order with respect to such
Information and thereafter the disclosing
Party discloses to the requesting entity
only the minimum Information required to be
disclosed in order to comply with the
request, whether or not a protective order
or other similar order is obtained by the
other Party.
13.2 PERMITTED DISCLOSURES. Information may be disclosed to
employees, agents, consultants, sublicensees or suppliers of
the recipient Party or its Affiliates, but only to the extent
required to accomplish the purposes of this Agreement and only
if the recipient Party obtains prior agreement from its
employees, agents, consultants, sublicensees, suppliers or
Third Party manufacturers to whom disclosure is to be made to
hold in confidence and not make use of such Information for
any purpose other than those permitted by this Agreement. Each
Party will use at least the same standard of care as it uses
to protect proprietary or confidential information of its own
to ensure that such employees, agents, consultants,
sublicensees, suppliers or Third Party manufacturers do not
disclose or make any unauthorized use of the Information.
13.3 DISCLOSURE OF AGREEMENT. Neither Horizon nor AHP shall release
to any Third Party or publish in any way any non-public
information with respect to the terms of this Agreement or
concerning their cooperation without the prior written consent
of the other, which consent will not be unreasonably withheld
or delayed, provided, however, that either Party may disclose
the terms of this Agreement to the extent required to comply
with applicable laws, including, without limitation the rules
and regulations promulgated by the United States Securities
and Exchange Commission, provided, however, that prior to
making any such disclosure, the Party intending to so disclose
the terms of this Agreement shall (i) provide the
nondisclosing Party with written notice of the proposed
disclosure and a opportunity to review and comment on the
intended disclosure which is reasonable under the
circumstances and (ii) shall seek confidential treatment for
as much of the disclosure as is reasonable under the
circumstances, including, without limitation, seeking
confidential treatment of any information as may be requested
by the other Party. Notwithstanding any other provision of
this
-24-
<PAGE> 25
Agreement, each Party may disclose the terms of this Agreement
to lenders, investment bankers and other financial
institutions of its choice solely for purposes of financing
the business operations of such Party either (i) upon the
written consent of the other Party or (ii) if the disclosing
Party uses reasonable efforts to obtain a signed
confidentiality agreement with such financial institution with
respect to such information on terms substantially similar to
those contained in this Article 13.
13.4 PUBLICITY. Subject to Section 13.3, all publicity, press
releases and other announcements relating to this Agreement or
the transactions contemplated hereby shall be reviewed in
advance by, and shall be subject to the approval of, both
Parties.
14. MISCELLANEOUS.
14.1 FORCE MAJEURE. Neither Party shall be liable to the other for
delay or failure in the performance of the obligations on its
part contained in this Agreement if and to the extent that
such failure or delay is due to circumstances beyond its
control (including, without limitation, AHP's inability to
obtain, from a Third Party, sufficient quantities of the raw
materials needed for the manufacture of Substance to meet its
manufacturing obligations under Article 7) which it could not
have avoided by the exercise of reasonable diligence. It shall
notify the other Party promptly should such circumstances
arise, giving an indication of the likely extent and duration
thereof and shall use all Commercially Reasonable Efforts to
resume performance of its obligations as soon as practicable.
14.2 ASSIGNMENT.
14.2.1 ASSIGNMENT BY HORIZON. Horizon may assign any or all
of its rights or obligations under this Agreement in
the Territory to any of its Affiliates, for so long
as they remain Affiliates. In addition, Horizon may
assign any or all of its rights or obligations under
this Agreement in the Territory in conjunction with a
merger or acquisition of Horizon or its Affiliates.
Horizon may not otherwise assign any of its rights or
obligations under this Agreement without AHP's prior
written consent, not to be unreasonably withheld. AHP
shall respond to such requests by Horizon for
assignment within thirty (30) days from such request.
Any permitted assignment shall not relieve Horizon of
its responsibilities for performance of its
obligations under this Agreement. Notwithstanding the
foregoing, Horizon may not assign or otherwise
transfer the Regulatory Approvals to any Third Party
until the later to occur of (i) all payments are made
under Article 4.1, and (ii) termination of the
Product Supply Agreement.
14.2.2 ASSIGNMENT BY AHP. AHP may assign any or all of its
rights or obligations under this Agreement to any of
its Affiliates or to any Third
-25-
<PAGE> 26
Party, provided, however, that AHP may assign all or
part of its obligations to a Third Party only after
receiving Horizon's prior written consent, which
consent shall not be unreasonably withheld or
delayed; provided, further, that such assignment
shall not relieve AHP of its responsibilities for
performance of its obligations under this Agreement.
Notwithstanding the foregoing, Horizon's consent
shall not be required for any assignment made by AHP
in connection with a merger or similar reorganization
of AHP or its parent company or the sale of all or
substantially all of AHP's or AHP's parent company's
pharmaceutical assets.
14.2.3 BINDING NATURE OF ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the
successors and permitted assigns of the Parties. Any
assignment not in accordance with this Article 14
shall be void.
14.3 NO WAIVER. The failure of either Party to require performance
by the other Party of any of that other Party's obligations
hereunder shall in no manner affect the right of such Party to
enforce the same at a later time. No waiver by any Party
hereto of any condition, or of the breach of any provision,
term, representation or warranty contained in this Agreement
whether by conduct or otherwise, in any one or more instances,
shall be deemed to be or construed as a further or continuing
waiver of any such condition or breach, or of any other
condition or of the breach of any other provision, term,
representation or warranty hereof.
14.4 SEVERABILITY. If a court or other tribunal of competent
jurisdiction should hold any term or provision of this
Agreement to be excessive, or invalid, void or unenforceable,
the offending term or provision shall be deleted or revised to
the extent necessary to be enforceable, and, if possible,
replaced by a term or provision which, so far as practicable
achieves the legitimate aims of the Parties.
14.5 RELATIONSHIP BETWEEN THE PARTIES. Both Parties are independent
contractors under this Agreement. Nothing herein contained
shall be deemed to create an employment, agency, joint venture
or partnership relationship between the Parties hereto or any
of their agents or employees, or any other legal arrangement
that would impose liability upon one Party for the act or
failure to act of the other Party. Neither Party shall have
any express or implied power to enter into any contracts or
commitments or to incur any liabilities in the name of, or on
behalf of, the other Party, or to bind the other Party in any
respect whatsoever.
14.6 CORRESPONDENCE AND NOTICES.
14.6.1 ORDINARY NOTICES. Correspondence, reports,
documentation, and any other communication in writing
between the Parties in the course of ordinary
implementation of this Agreement shall be delivered
by hand,
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<PAGE> 27
sent by facsimile, overnight courier or by airmail to
the employee or representative of the other Party who
is designated by such other Party to receive such
written communication.
14.6.2 EXTRAORDINARY NOTICES. Extraordinary notices and
communications (including, without limitation,
notices of termination, force majeure, material
breach, change of address) shall be in writing and
sent by prepaid registered or certified air mail, or
by facsimile confirmed by prepaid registered or
certified air mail letter, and shall be deemed to
have been properly served to the addressee upon
receipt of such written communication.
14.6.3 ADDRESSES. In the case of Horizon, the proper address
for communications and for all payments shall be:
Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Mr. Brent Dixon
Fax: (770) 442-9594
and it the case of AHP, the proper address for
communications and for all payments shall be:
Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania 19087
Attn: Senior Vice President, Global
Business Development
Fax: (610) 688-9498
with a copy to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General
Counsel
Fax: (973) 660-7156
14.7 CHOICE OF LAW. This Agreement is subject to and governed by
the laws of the State of Delaware, excluding its conflict of
laws provisions.
14.8 ENTIRE AGREEMENT AMENDMENT. This Agreement, together with the
other Transaction Agreements and the Confidential Disclosure
Agreement between AHP and E.J. Financial Enterprises Inc. (an
equity holder in Horizon) dated April 28, 1998, and all the
covenants, promises, agreements, warranties, representations,
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<PAGE> 28
conditions and understandings contained herein and therein
sets forth the complete, full and exclusive agreement between
the Parties and supersedes and terminates all prior and
contemporaneous agreements and understandings between the
Parties, whether oral or in writing. There are no covenants,
promises, agreements, warranties, representations, conditions
or understandings, either oral or written, between the Parties
other than as are set forth in the Transaction Agreements. No
subsequent alteration, amendment, change, waiver or addition
to this Agreement shall be binding upon the Parties unless
reduced to writing and signed by an authorized officer of each
Party. No understanding, agreement, representation or promise,
not explicitly set forth herein, has been relied on by either
Party in deciding to execute this Agreement.
14.9 HEADINGS. The headings and captions used in this Agreement are
solely for the convenience of reference and shall not affect
its interpretation.
14.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be an original and all of
which shall constitute together the same document.
14.11 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all other acts, as
may be necessary or appropriate in order to carry out the
purposes and intent of this Agreement including, without
limitation, any filings with any antitrust agency which may be
required.
IN WITNESS WHEREOF, this Agreement has been executed by the duly
authorized representatives of the Parties as of the date set forth below.
AMERICAN HOME PRODUCTS HORIZON PHARMACEUTICALS, INC.
CORPORATION
- ----------------------------- --------------------------------
Name: Name:
Title: Title:
-28-
<PAGE> 29
EXHIBIT A
CUSTOMER CONTRACTS
The Customer Contracts are listed on the following two pages.
<PAGE> 30
[***] - CONFIDENTIAL TREATMENT REQUESTED
WYETH-AYERST LABORATORIES
BID ANALYSIS SYSTEM
CONTRACT PRODUCT PRICES BY NDC - ACTIVE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NDC: 00031-7824-63 ROBINUL TABLETS PKG SIZE: [***]
- -----------------------------------------------------------------------------------------------------------------------------------
CTLG PRICE: [***] FACTOR COST: [***] FSS PRICE: [***]
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENT BEST: [***] CURRENT NOMINALS: [***] FUTURE BEST: [***] FUTURE NOMINAL: [***]
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
GRP/CUST GRP/CUSTOMER NAME CITY STATE CLS CONTRACT START DATE END DATE SALES PRICE DISC
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01 - NON-GUARANTEED TYPE
- -----------------------------------------------------------------------------------------------------------------------------------
000000489 PUERTO RICO HOSP GROUP SAN JUAN PR 0000046178 11/01/1997 11/30/1998 [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
791000010 HOSPITAL DEL MAESTRO HATO REY PR 14 0000046045 11/01/1997 11/30/1998 [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
02 - GUARANTEED
- -----------------------------------------------------------------------------------------------------------------------------------
000000344 PHS BETHESDA MD 0000058826 10/01/1998 12/31/1998 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
000000340 VETERANS STATE HOME HINES IL 0000046309 01/01/1998 11/30/1998 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
000000355 PHS FEDERAL GOVT ACCTS WASHINGTON DC 0000046308 01/01/1998 11/30/1998 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
000000406 MILITARY RADNOR PA 0000046199 01/01/1998 11/30/1998 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
000000310 VA PRIME VENDOR RADNOR PA 00000046196 01/01/1998 11/30/1998 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
000000164 ISD (INTERNAL SVCS DEPT) LOS ANGELES CA 0000027546 02/01/1998 01/31/1999 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
000000195 NEW YORK CITY HLTH & HOS NEW YORK NY 0000037145 09/15/1997 09/30/2000 [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
0000002003 STATE OF ARKANSAS LITTLE ROCK AR 0000043007 01/01/1998 12/31/1998 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
0000000027 MINNESOTA MULTI-STATE ST. PAUL MN 0000046643 05/01/1998 04/30/1999 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
0000002046 STATE OF SOUTH CAROLINA COLUMBIA SC 0000046472 05/01/1998 04/30/1999
- -----------------------------------------------------------------------------------------------------------------------------------
0000009585 NEW PUERTO RICO HOSP ST. DAVIDS PA 0000047764 04/30/1998 04/27/1999 [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
0000000253 TENET HEALTHCARE DALLAS TX 0000022284 09/01/1998 08/31/1999 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
000000309 HEALTH SERVS CORP AMER BRIDGETON MO 0000024878 10/01/1998 09/30/1999 [***] [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
0000002004 STATE OF CALIFORNIA SACRAMENTO CA 0000057964 10/05/1998 09/30/2000 [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
0000002048 STATE OF TENNESSEE NASHVILLE TN 0000060276 10/22/1998 07/31/1999 [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
04 - GUARANTEED W/OUT-CLAUSE
- -----------------------------------------------------------------------------------------------------------------------------------
0000009341 MICH STATE UNIV AFFIL EAST LANSING MI 0000046646 02/01/98 01/31/99 [***] [***]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
05 - GUAR W/PRC ESC & OUT CLS
- -------------------------------------------------------------------------------------------------------------------------------
GRP/CUST GRP/CUSTOMER NAME CITY STATE CLS CONTRACT START DATE END DATE SALES PRICE DISC %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
000000407 OWEN HEALTHCARE HOUSTON TX 0000031263 07/01/1998 03/31/2000 [***] [***] [***]
- -------------------------------------------------------------------------------------------------------------------------------
000000418 PACT (C/MEDMGNT) PLYMOUTH MN 0000046216 07/01/1998 03/31/2000 [***] [***]
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 32
EXHIBIT B
PRODUCTS
<TABLE>
<CAPTION>
Country NDC No. Strength Dosage Form Package Size
------- ------- -------- ----------- ------------
<S> <C> <C> <C> <C>
USA 7824-63 1 mg tablets bottles of 100
USA 7840-63 2 mg tablets bottles of 100
</TABLE>
<PAGE> 33
EXHIBIT C
TRADEMARKS
<TABLE>
<CAPTION>
Country Trademark Registration No. Renewal Date
------- --------- ---------------- ------------
<S> <C> <C> <C>
United States Robinul 728,458 03/13/2002
</TABLE>
<PAGE> 34
EXHIBIT D
SYSTEMS TRANSFER PLAN
Pursuant to Section 3.2 of that certain License Agreement entered into
by and between Horizon Pharmaceutical Corporation ("Horizon") and American Home
Products Corporation, acting through its Wyeth-Ayerst Laboratories Division
("AHP") on January 29, 1999 (the "License Agreement"), Horizon and AHP, by
signing below, each agree that the documents identified below and attached
hereto constitute the Systems Transfer Plan. Horizon and AHP each further agree
that to the extent any of the attached documents are inconsistent with the
License Agreement or the Product Supply Agreement which also was entered into by
Horizon and AHP on January 29, 1999, the terms and conditions of the License
Agreement or the Product Supply Agreement, as applicable, shall control. The
Parties recognize that this document serves as a guideline for the transition of
responsibilities for the Product from AHP to Horizon and that, to the extent
that this Systems Transfer Plan imposes timelines which are not expressly stated
within the License Agreement or the Product Supply Agreement, the failure to
strictly adhere to any such timelines set forth in this Systems Transfer Plan
shall not constitute a breach of either the License Agreement or the Product
Supply Agreement
Attachments
1. Initial inventory shipment; Outstanding sales orders; Initial
forecast; On-going purchase orders
2. Product/Quality Complaints
3. Labeling, Product Inserts, Tooling
4. Customer Contracts
5. Rebates
6. Manufacturing Plant Services
7. Regulatory
8. Returns
9. Chargebacks
HORIZON PHARMACEUTICAL AMERICAN HOME PRODUCTS
CORPORATION CORPORATION acting through its
Wyeth-Ayerst Laboratories Division
By: By:
---------------------------- -----------------------------
Name: Name:
-------------------------- ---------------------------
Title: Title:
------------------------- --------------------------
Date: Date:
-------------------------- ---------------------------
<PAGE> 35
EXHIBIT E
ADVERSE DRUG EVENT REPORTING PROCEDURE
The Parties hereby agree that the following terms will govern
disclosures of each Party to the other with respect to adverse event reporting
relating to the Product or Substance as clinically tested or marketed by or on
behalf of either Party.
1. Definitions.
1.1 An Adverse Drug Experience ("ADE") is defined as:
a) any experience which is adverse, including what are
commonly described as adverse or undesirable
experiences, adverse events, adverse reactions, side
effects, or death due to any cause associated with,
or observed in conjunction with the use of a drug,
biological product, or device in humans, whether or
not considered related to the use of that product:
- occurring in the course of the use of a
drug, biological product or device,
- associated with, or observed in conjunction
with product overdose, whether accidental or
intentional
- associated with, or observed in conjunction
with product abuse, and/or
- associated with, or observed in conjunction
with product withdrawal.
b) Any significant failure of expected pharmacological
or biologic therapeutical action (with the exception
of in clinical trials).
1.2 Serious or Non-Serious is defined as:
a) A Serious ADE is any adverse drug experience
occurring at any dose that results in any of the
following outcomes: death, a life-threatening adverse
drug experience, inpatient hospitalization or
prolongation of existing hospitalization, a
persistent or significant disability/incapacity, or a
congenital anomaly/birth defect. Other important
medical events that may not result in death, be
life-threatening, or require hospitalization may be
considered a serious adverse drug experience when,
based upon appropriate medical judgment, they may
jeopardize the patient or subject and may require
medical or surgical intervention to prevent one of
the outcomes listed in this definition. Examples of
such medical events
<PAGE> 36
include allergic bronchospasm requiring intensive
treatment in an emergency room or at home, blood
dyscrasias or convulsions that do not result in
inpatient hospitalization, or the development of drug
dependency or drug abuse.
b) A Non-Serious ADE is any ADE which does not meet the
criteria for a serious ADE.
1.3 Life-threatening adverse drug experience is defined as any
adverse drug experience that places the patient, in the view
of the initial reporter, at immediate risk of death from the
adverse drug experience as it occurred, i.e., it does not
include an adverse drug experience that, had it occurred in a
more severe form, might have caused death.
1.4 Disability is defined as a substantial disruption of a
person's ability to conduct normal life functions.
1.5 An Unexpected ADE is defined as any ADE that is not listed in
the current labeling for the drug product. This includes
events that may be symptomatically and pathophysiologically
related to an event listed in the labeling, but differ from
the event because of greater severity or specificity.
1.6 Associated with or related to the use of the drug is defined
as: A reasonable possibility exists that the ADE was caused by
the drug.
1.7 NDA Holder is defined as: An "Applicant" as defined in 21 CFR
Part 314.3(b), for regulatory approval of a Product in any
regulatory jurisdiction, including a holder of a foreign
equivalent thereto.
1.8 IND Holder is defined as: A "Sponsor" as defined in 21 CFR
Part 313.1 (b) of an investigational new drug in any
regulatory jurisdiction, including a holder of a foreign
equivalent thereto.
1.9 Capitalized terms not defined in this Exhibit shall have the
meaning assigned thereto in the Agreement.
2. With respect to the Product or Substance, the Parties agree as follows:
a. All initial reports and any follow-up information (oral or
written) for any and all Serious ADEs as defined above (other
than with respect to animal studies) which become known to
either Party (other than from disclosure by or on behalf of
the other Party) must be communicated by telephone, telefax or
electronically directly to the other Party and/or the NDA
Holder, IND Holder (individually and collectively referred to
as "Holders") within forty-eight (48) hours of receipt of the
information. Written confirmation of the Serious ADE received
by such Party
<PAGE> 37
should be sent to the other Party and/or the Holders as soon
as it becomes available, but in any event within forty-eight
(48) hours of initial report of the Serious ADE by such Party.
b. Both Parties shall exchange Medwatch and/or CIOMs forms and
other health authority reports within forty-eight (48) hours
of submission to any Regulatory Authority.
c. All initial reports and follow-up information received for all
Non-Serious ADEs for marketed Product which become known to a
Party (other than from disclosure by or on behalf of the other
Party) must be communicated in writing, by telefax or
electronically to the other Party within ten (10) days, on
Medwatch or CIOMs forms (where possible).
d. Each Party shall coordinate and cooperate with the other
whenever practicable to prepare a single written report
regarding all Serious and/or Non-Serious ADEs, provided,
however, that neither Party shall be obligated to delay
reporting of any ADE in violation of applicable law or
regulations regarding the reporting of ADEs.
3. The Parties further agree that:
a. A written report be forwarded to the other Party within
forty-eight (48) hours of receipt by the Party making the
report, for ADEs for animal studies which suggest a potential
significant risk for humans;
b. Each Party will give the other Party a report via a print-out
or computer disk of all ADEs reported to it and its Affiliates
relating to the Product or Substance within the last year,
within thirty (30) days of receipt of a request from the other
Party but not more often than four (4) times a year;
c. If either Party wishes access to ADE Reports of the other
Party relating to the Product or Substance, upon request of
that Party, the other Party shall make available its ADE
records relating to the Product or Substance (including
computer disks) for viewing and copying by the other Party.
The Parties may discuss the transfer of ADE Reports by
computer disk.
d. Disclosure of information hereunder by a Party to the other
Party shall continue as long as either Party and/or its
Affiliates or designees continue to clinically test or market
Product or Substance.
4. Each Party shall diligently undertake the following further obligations
where both Parties are or will be commercializing the Product or
Substance pursuant to the Agreement and/or performing clinical trials
with respect to the Product or Substance:
<PAGE> 38
a. Upon the Effective Date, each Party shall identify individuals
who shall be responsible for identifying all ADE reporting
requirements in all countries of the Territory as set forth in
the Agreement, and any amendments thereto;
b. To immediately consult with the other Party, with respect to
the investigation and handling of any Serious ADE disclosed to
it by the other Party or by a third Party and to allow the
other Party to review the Serious ADE and to participate in
the follow-up investigation;
c. To immediately advise the other Party of any Product and/or
Substance safety communication received from a health
authority and consult with the other Party with respect to any
Product and/or Substance warning, labeling change or change to
an investigators' brochure involving safety issues proposed by
the other Party, including, but not limited to the safety
issues agreed to by the Parties;
d. To diligently handle in a timely manner the follow-up
investigation and resolution of each ADE reported to it;
e. To provide the other Party mutually agreed upon audit rights
of its ADE reporting system and documentation, upon prior
notice, during normal business hours, at the expense of the
auditing Party and under the confidentiality obligations set
forth in the Agreement;
f. To meet in a timely fashion from time to time as may be
reasonably required to implement the adverse event reporting
and consultation procedures described in this Exhibit E,
including identification of those individuals in each Party's
Drug Safety group who will be responsible for reporting to and
receiving ADE information from the other Party, and the
development of a written standard operating procedure with
respect to adverse event reporting responsibilities, including
reporting responsibilities to investigators;
g. Where possible, to transmit all data electronically;
h. To report to each other any addenda, revisions or changes to
the Agreement (e.g., change in territories, local regulations,
addition of new licensors/licensees to the Agreement, etc.)
which might alter the adverse event reporting responsibilities
hereunder;
i. To utilize English as the language of communication and data
exchange between the Parties;
j. To develop a system of exchange of documents and information
in the event that the Agreement involves more than two
Parties;
k. To work together to develop an electronic system to transmit
ADE data.
-32-
<PAGE> 39
5. The Parties may meet after the Effective Date of the Agreement to
establish a separate agreement for adverse event exchange which will
supersede this Exhibit E.
<PAGE> 1
EXHIBIT 10.19
CONFIDENTIAL TREATMENT REQUESTED
Confidential Portions Of This Agreement Which Have Been Redacted Are
Marked With Brackets ("[****]"). The Omitted Material Has Been Filed Separately
With The Securities And Exchange Commission.
- -------------------------------------------------------------------------------
COGNEX(R)
ASSET PURCHASE AGREEMENT
between
WARNER-LAMBERT COMPANY
and
FIRST HORIZON PHARMACEUTICAL CORPORATION
Dated as of April 14, 2000
- -------------------------------------------------------------------------------
<PAGE> 2
This ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
April 14, 2000, by and among WARNER-LAMBERT COMPANY, a Delaware corporation with
offices at 201 Tabor Road, Morris Plains, New Jersey 07950 ("Warner-Lambert")
and FIRST HORIZON PHARMACEUTICAL CORPORATION, a Delaware corporation with
offices at 660 Hembree Parkway, Suite 106, Roswell, Georgia 30076 ("Horizon").
RECITALS
WHEREAS, Warner-Lambert and its Affiliates (as hereinafter defined)
are engaged in the business of manufacturing and selling pharmaceutical products
and own certain rights related to products containing tacrine hydrochloride
(1,2,3,4-tetrahydro-9-acridinamine monohydrochloride monohydrate) as its sole
active ingredient in the Territory and listed on Exhibit A hereto (the "Product"
or "Cognex");
WHEREAS, in addition to the Product, Warner-Lambert and its Affiliates
also own certain rights related to a once a day control release version of the
Product ("Cognex CR"); and
WHEREAS, the parties hereto intend that Warner-Lambert and each of the
Affiliates of Warner-Lambert that will be caused by Warner-Lambert to transfer
Assets (as hereinafter defined) pursuant to this Agreement (collectively the
"Selling Affiliates") shall sell to Horizon, and Horizon shall purchase from
Warner-Lambert and the Selling Affiliates, certain assets related to the Product
and Cognex CR upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises, representations, warranties, covenants and agreements
hereinafter set forth, and intending to be legally bound, the parties do hereby
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 SALE OF ASSETS. Pursuant to the terms and conditions set forth in
this Agreement, Warner-Lambert agrees to sell and to cause the Selling
Affiliates to sell, convey, assign, grant, transfer and deliver to Horizon, and
Horizon agrees to purchase, acquire and receive from Warner-Lambert and the
Selling Affiliates on the date that is three (3) Business Days after the date of
receipt of clearance from the Federal Trade Commission for the transactions
contemplated by this Agreement or such other date as the parties agree upon in
writing (the "Closing Date"), Warner-Lambert's entire interest in all of the
following assets related to the Product and Cognex CR (collectively, the
"Assets"):
1.1.1 Inventory. The inventories of finished Product owned by
Warner-Lambert on the Closing Date and held for use in the Territory as
specified on Exhibit 1.1.1 hereto (the "Inventory"); provided, that the
expiration date for such Inventory of finished Product is at least fifteen (15)
months after the Closing Date. Inventory purchased by Horizon hereunder shall be
<PAGE> 3
delivered to Horizon as soon as practicable after Closing but in any event no
later than fifteen (15) days thereafter;
1.1.2 Intellectual Property. The Intellectual Property (as
hereinafter defined) and all valid and binding rights under contract to use such
Intellectual Property, including without limitation the Intellectual Property
listed on Exhibit 1.1.2. As used herein, "Intellectual Property" means, with
respect to the Product and Cognex CR, all of the following without limitation
and whether registered, issued, pending or in a draft form: all patents,
trademarks and trademark rights (the "Trademarks"), service marks and service
mark rights, service names and service name rights, brand names, logos, slogans,
trade secrets, trade dress, processes, designs, methodologies, technical
information and know-how, in each case relating to the manufacture, packaging,
development, testing, distribution, marketing, use or sale of such Product;
1.1.3 Registrations. All regulatory approvals and applications
for regulatory approval for the Product and Cognex CR (including the Marketing
Authorizations for the Product) held by Warner-Lambert or its Affiliates
(defined below) (collectively, the "Registrations") set forth on Exhibit 1.1.3.
Warner-Lambert shall deliver such Registrations to Horizon as soon as
practicable after Closing but in any event no later than forty-five (45) days
thereafter. As used herein: the term "Affiliate" means (i) any company or
entity, more than fifty percent (50%) of whose voting stock or participating
profit interest is owned or controlled, directly or indirectly, by a party; (ii)
any Person which owns or controls, directly or indirectly, more than fifty
percent (50%) of the voting stock or participating profit interest of a party
and (iii) any Person which is under common control with a party hereto and the
term "common control" means a third party has direct or indirect ownership of
fifty percent (50%) or more of the voting stock or participating profit interest
of both the other company or entity and the party to this Agreement; "Marketing
Authorization" means the authorization to sell the Product as granted by the
relevant Governmental or Regulatory Authority (as hereinafter defined); and
"Person" means any natural person, corporation, general partnership, limited
partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority. Notwithstanding the
foregoing, Warner-Lambert shall be permitted to retain one archive copy of the
Registrations;
1.1.4 Information and Know-How. All technical information
(including the master batch record, analytical methods including validation
protocol, and the drug master file), know-how, market research results, and the
like specifically relating to the manufacture, packaging, testing, development,
distribution, marketing, use or sale of the Product and Cognex CR (including the
raw materials used in the manufacture thereof) owned or possessed by
Warner-Lambert or the Selling Affiliates on the Closing Date (collectively, the
"Information"). The Information, to the extent such Information has not
previously been provided to Horizon, shall be transferred as soon as practicable
after the Closing Date, but in any event no later than (a) thirty (30) days
thereafter with respect to Germany, Greece, France, Spain and Austria (the
"Primary Countries"); (b) sixty (60) days thereafter with respect to Australia,
Belgium, French Export Countries (Guadaloupe, Martinique, La Reunion, New
Caledonia and Tunisia), Hong Kong, Korea, Luxembourg, Portugal, Switzerland, the
United States and Puerto Rico (and, together with the Primary Countries, the
"Territory"); and (c) ninety (90) days thereafter with respect to countries
outside of the Territory. Notwithstanding the foregoing, Warner-Lambert shall
retain one archive copy of the Information pursuant to Section 5.14;
2
<PAGE> 4
1.1.5 Managed Care Agreements. To the extent their assignment
in part is permitted under the terms thereof or by the other party thereto, all
Managed Care Agreements (as hereinafter defined), to which Warner-Lambert is a
party and which are utilized in connection with the sale of the Product by
Warner-Lambert in the United States;
1.1.6 Goodwill. All goodwill associated with the Product other
than goodwill associated with any trademark, trade name, service mark, service
name, slogan or logo used by Warner-Lambert or any of its Affiliates prior to
the date hereof and not transferred to Horizon pursuant to this Agreement or any
of the other operative agreements which are necessary to completely sell,
convey, assign, grant, transfer and deliver the Assets to Horizon (the
"Operative Agreements");
1.1.7 Prepaid Royalties. All prepaid royalties relating to
the Assets and listed in Exhibit 1.1.7; and
1.1.8 Promotional Materials. The advertising and promotional
materials and sales training materials owned by Warner-Lambert related to the
Product (collectively, the "Promotional Materials").
1.2 EXCLUDED ASSETS. Notwithstanding anything in this Agreement to
the contrary, the following assets of Warner-Lambert and the Selling Affiliates
(the "Excluded Assets") shall be excluded from and shall not constitute Assets:
1.2.1 Accounts Receivable. All trade accounts receivable and
all notes, bonds and other evidences of indebtedness and rights to receive
payments arising out of sales of the Product prior to the Closing Date,
including any rights of Warner-Lambert or its Affiliates with respect to any
third party collection procedures or any contract or any other actions which
have accrued prior to the Closing Date in connection with the manufacture, sale
or use of any Product;
1.2.2 Litigation Claims. Any rights (including
indemnification), claims and recoveries under litigation of Warner-Lambert or
its Affiliates against third parties arising out of or relating to events
occurring prior to the Closing Date;
1.2.3 Excluded Contract Rights. The rights of Warner-Lambert
or any of its Affiliates in, to and under all contracts of any nature, the
obligations of Warner-Lambert or any of its Affiliates under which are not
expressly assumed by Horizon herein; and
1.2.4 Excluded Intellectual Property. Warner-Lambert shall
retain the right and title to any Intellectual Property and Information
utilized in connection with the manufacture, packaging, testing, development,
distribution, marketing, use or sale of any of Warner-Lambert's or its
Affiliates' products, other than the Product and Cognex CR, including, but not
limited to, those that are also used by Warner-Lambert and its Affiliates on
the Product, such as the Parke-Davis trademark, logo and designs.
1.3 ASSUMED LIABILITIES. Horizon shall assume and agrees to pay,
perform and discharge when due the following liabilities and obligations of
Warner-Lambert or its Affiliates arising in connection with the Product (the
"Assumed Liabilities"):
3
<PAGE> 5
1.3.1 Returns. All liabilities and obligations with respect
to (i) the returned units of the Product, from and after the date that is
twelve (12) months after the Closing Date and (ii) the returned units of the
Product during the first twelve (12) months following the Closing Date to the
extent such returns exceed $1.8 million;
1.3.2 Rebates and Chargebacks. All liabilities and
obligations arising from (i) all rebates to state Medicaid and other state and
local governmental programs and to pharmacy benefit management companies,
health plans, insurance companies, mail service pharmacies and other health
care providers based upon the utilization of the Product (collectively,
"Rebates") and (ii) all credits, chargebacks, reimbursements, administrative
fees and other payments to wholesalers and other distributors, group purchasing
organizations, insurers and other institutions (collectively, "Chargebacks"),
occurring in the third calendar quarter of 2000 and thereafter, subject to the
Rebate and Chargeback Reimbursement (defined below) to be paid to Horizon by
Warner-Lambert, provided, however, that Horizon shall not be liable for any
Chargebacks or Rebates occurring in the first and second calendar quarters of
2000. For purposes of this Section 1.3.2, Rebates shall be deemed to have
occurred in the calendar quarter in which the pharmacy or other applicable
entity is reimbursed by Medicaid or other applicable entity and Chargebacks
shall be deemed to have occurred in the calendar quarter in which the
wholesaler or other applicable entity ships the Product that results in the
chargeback. As used herein, "Rebate and Chargeback Reimbursement" shall mean an
amount equal to the product of (i) the Rebates and Chargebacks occurring in the
third calendar quarter of 2000 and (ii) a fraction, the denominator of which is
92 and the numerator of which is the number of days elapsed in the second
quarter through the Closing Date. To the extent that Warner-Lambert is unable
to assign any agreement of Warner-Lambert for the payment of Rebates and
Chargebacks ("Managed Care Agreements") to Horizon with respect to the Product,
Horizon agrees to reimburse Warner-Lambert for the amount of such Rebates and
Chargebacks under the Managed Care Agreements paid by Warner-Lambert within
thirty (30) days after receipt by Horizon of a written invoice from
Warner-Lambert for same;
1.3.3 Registrations. All liabilities and obligations with
respect to the Registrations arising or incurred from and after the Closing
Date, provided, however, with respect to the NDA establishment fee, Horizon
shall only be responsible for such fees which are incurred in connection with
the period beginning with the first full calendar year following the expiration
or earlier termination of the Supply Agreement (as defined herein);
1.3.4 Recalls. From and after the Closing Date, all
liabilities, obligations and responsibilities relating to voluntary and
involuntary recalls of Product sold by Horizon after the Closing Date, except to
the extent that such recall is for a failure of the Inventory to meet the
product specifications set forth in the Marketing Authorizations as such
specifications exist on the date hereof (the "Specifications"), where such
failure is due solely to the actions or omissions of Warner-Lambert;
1.3.5 Product Liability. From and after the Closing Date, all
liabilities, obligations and responsibilities relating to product liability
claims or threatened claims relating to Product sold by Horizon after the
Closing Date, other than product liability that results from a failure of the
Inventory to meet the Specifications, where such failure is due solely to the
actions or omissions of Warner-Lambert;
1.3.6 Research and Development. All liabilities, obligations
and responsibilities
4
<PAGE> 6
for any research and development conducted by Horizon and relating to the
Product after the Closing Date; and
1.3.7 Product Regulatory Obligations. All liabilities,
obligations and responsibilities undertaken by Horizon pursuant to Section 5.4.
1.4 RETAINED LIABILITIES. Except for the Assumed Liabilities,
Horizon shall not assume by virtue of this Agreement or any of the Operative
Agreements or the transactions contemplated hereby, and shall have no liability
for, any liabilities, debts or obligations of Warner-Lambert of any kind,
character or description whatsoever (the "Retained Liabilities").
5
<PAGE> 7
ARTICLE 2
CONSIDERATION FOR TRANSFER OF ASSETS
2.1 PURCHASE PRICE. (a) Subject to the terms and conditions of this
Agreement, in consideration for the sale and transfer of the Assets, Horizon
shall pay to Warner-Lambert (i) a non-refundable payment of Three Million Five
Hundred Thousand Dollars ($3,500,000) payable to Warner-Lambert on the Closing
Date, (ii) One Million Five Hundred Thousand Dollars ($1,500,000) payable to
Warner-Lambert upon the approval by the United States Food and Drug
Administration (the "FDA") of a new drug application ("NDA") for Cognex CR in
the United States which includes an approved package insert with the attributes
provided in Exhibit 2.1, as adjusted by the Price Adjustment described in
Section 2.1(b) below, if any; provided, however, that Horizon shall not be
required to seek approval of the NDA for Cognex CR from the FDA, and (iii) an
amount equal to the value of the Inventory transferred to Horizon pursuant to
the terms of this Agreement based on the Closing Inventory Value (as defined
below) payable to Warner-Lambert within thirty (30) days after the Closing Date.
The amounts set forth in Section 2.1 (a)(i), (ii) and (iii) are hereinafter
referred to collectively as the "Purchase Price". As used herein, "Business Day"
means a day during which banks are generally open for business in New York and
"Closing Inventory Value" means the value of the Inventory (including samples)
as of the Closing Date based on Warner-Lambert's calculation of the standard
cost of the Product.
(b) The amount payable pursuant to Section 2.1(a)(ii) above will be
reduced by an amount which is equal to the product of (i) total third-party
out-of-pocket expenses, reasonably incurred by Horizon relating to (A) the
performance by or on behalf of Horizon of additional studies in connection with
the approval of the NDA for Cognex CR to the extent required by the FDA
(including, but not limited to, manufacturing costs in connection with the
manufacture of trial batches of the Product and costs of literature searches and
analysis required for such studies) plus (B) returns incurred during the twelve
(12) month period following the Closing Date for Product sold prior to the
Closing Date by Warner-Lambert in an aggregate amount greater than $1.8 million
but less than $2.8 million ("Total Expense") and (ii) the applicable Factor (as
hereinafter defined) (the "Price Adjustment"). "Factor" shall be determined as
follows: if Total Expense is (i) less than or equal to $200,000 then the factor
will be 1.35, and (ii) greater than $200,000 and less than or equal to $500,000
then the factor will be 1.50. If Total Expenses is greater than $500,000 then
Horizon will not have any obligation to pay the amount set forth in Section
2.1(a)(ii). Under no circumstances shall Warner-Lambert incur any obligation to
pay Horizon as a result of the calculation of the Price Adjustment.
Warner-Lambert makes no representation or warranty that the NDA for Cognex CR
will be accepted for filing or approved by the FDA.
(c) Within thirty (30) days of the approval of the NDA for Cognex CR,
Horizon shall prepare and deliver to Warner-Lambert a written report showing the
components of Total Expenses (including returns) and the amount payable pursuant
to Section 2.1(a)(ii), if any (the "Report"). Concurrently with the submission
of such written report, Horizon shall pay Warner-Lambert the amount shown to be
due thereon; provided, however, if the NDA for Cognex CR is approved by the FDA
during the twelve month period following the Closing Date, Horizon shall prepare
the Report within thirty (30) days following the end of such twelve (12) month
period.
(d) Horizon shall keep accurate records in sufficient detail to
determine the amount payable under Section 2.1(a)(ii). Warner-Lambert may
designate an independent public accountant mutually acceptable to Warner-Lambert
and Horizon to review such records to verify
6
<PAGE> 8
the accuracy of information provided to Warner-Lambert. Warner-Lambert shall
pay the cost of any review of records conducted at the request of
Warner-Lambert under this Section; provided, however, that if the independent
public accountant conducting the review concludes that the amount payable under
Section 2.1(a)(ii) was understated by 5% or more, Horizon shall pay the cost of
such review.
(e) All payments under this Section shall be made by wire transfer or
other immediately available funds to an account indicated by Warner-Lambert.
2.2 ALLOCATION. The parties agree to allocate the Purchase Price among
the Assets in accordance with Exhibit 2.2.
2.3 CLOSING. The Closing shall take place at 11:00 a.m. EDT at 201
Tabor Road, Morris Plains, New Jersey on the Closing Date or at such time and
place as the parties hereto may otherwise mutually agree.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 LEGAL AUTHORITY. Each party represents and warrants that it has
the legal power, authority and right to enter into this Agreement and to
perform its respective obligations set forth herein.
3.2 NO CONFLICTS. Each party represents and warrants that it is not a
party to any agreement or arrangement with any third party or under any
obligation or restriction, including pursuant to its Articles of Incorporation,
By-Laws or other organizational documents, which in any way limits or conflicts
with its ability to fulfill any of its obligations set forth herein.
3.3 TITLE TO ASSETS. Warner-Lambert hereby represents and warrants
that: (i) it or the applicable Selling Affiliate has good and marketable title
to the Assets, free and clear of all liens; (ii) to its knowledge, except as
set forth in Exhibit 1.1.2, no sublicenses have been granted to any third party
with respect to the Assets; and (iii) to its knowledge, there are no adverse
claims of ownership to the Assets.
3.4 INTELLECTUAL PROPERTY RIGHTS. (a) Except as disclosed in Licenses
Out listed on Exhibit 1.1.2, (i) Warner-Lambert and its Affiliates has the
exclusive right to use the Trademarks and (ii) all registrations with and
applications to Governmental or Regulatory Authorities in respect of such
Trademarks are valid and in full force and effect.
(b) Warner-Lambert hereby represents and warrants that, to its
knowledge without any inquiry of third parties, there are no patents,
trademarks, trade names or copyrights or any other proprietary rights of any
third person which would be infringed by the manufacture, use or sale of the
Product in the Territory.
7
<PAGE> 9
3.5 INVENTORY. The Inventory will be of salable quality, will meet the
Specifications, have been manufactured in accordance with current good
manufacturing practices and other applicable law.
3.6 LITIGATION. (a) Warner-Lambert hereby represents and warrants
that, to its knowledge, there is no litigation, action, suit, inquiry,
investigation, arbitration or other proceeding pending or threatened against
Warner-Lambert or its Affiliates specifically with respect to the Product, the
Assets or Warner-Lambert's right and ability to consummate the transaction
contemplated by this Agreement, nor does Warner-Lambert know of any basis for
any such proceedings, investigations or inquiries.
(b) Horizon hereby represents and warrants that, to its knowledge,
there is no litigation, action, suit, inquiry, investigation, arbitration or
other proceeding pending or threatened against Horizon with respect to its
right and ability to consummate the transactions contemplated by this
Agreement.
3.7 CONSENTS AND APPROVALS. (a) Except as disclosed in Exhibit 3.7(a),
no consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority (as hereinafter defined) or any third party on the part of
Warner-Lambert or any Selling Affiliate is required in connection with the
execution, delivery and performance of this Agreement or any of the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby, except (i) where the failure to obtain any such
consent, approval or action, to make any such filing or to give any such notice
will not adversely affect the ability of Warner-Lambert to consummate the
transactions contemplated by this Agreement or the ability of Warner-Lambert or
any Selling Affiliate to consummate the transactions contemplated by any
Operative Agreement or to perform its obligations hereunder or thereunder, or
have a material adverse effect on the condition of the Business or impair the
ability of Horizon to operate the Business in the ordinary course, and (ii)
those as would be required solely as a result of the identity or the legal or
regulatory status of Horizon or any of its Affiliates. As used herein,
"Governmental or Regulatory Authority" means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of the United
States or any relevant country, state, province, county, city or other
political subdivision.
(b) Except as disclosed in Exhibit 3.7(b), no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority
(as hereinafter defined) or any third party on the part of Horizon is required
in connection with the execution, delivery and performance of this Agreement or
any of the Operative Agreements to which it is a party or the consummation of
the transactions contemplated hereby or thereby, except where the failure to
obtain any such consent, approval or action, to make any such filing or to give
any such notice will not adversely affect the ability of Horizon to consummate
the transactions contemplated by this Agreement or the ability of Horizon to
consummate the transactions contemplated by any Operative Agreement or to
perform its obligations hereunder or thereunder.
(c) The parties acknowledge that transfer of the NDA for the Product
will not be completed until receipt and acceptance by the FDA of the
Warner-Lambert Assignment Letters and the Horizon Assumption Letters.
3.8 HORIZON'S REPRESENTATION AND WARRANTY REGARDING THE PRODUCT.
Horizon represents and warrants that it and its Affiliates have not
manufactured, used or sold the
8
<PAGE> 10
Product anywhere worldwide or used the Trademarks anywhere worldwide prior to
the Closing Date. Horizon hereby acknowledges that it has been afforded the
opportunity to conduct due diligence with respect to the Product and to secure
such information from Warner-Lambert with respect to the Product as it deems
necessary to evaluate the merits of entering into the transactions contemplated
in this Agreement.
3.9 NO BROKERAGE FEE. Each party represents and warrants that no
broker, financial advisor or other Person is entitled to any brokerage fee or
commission in respect of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
3.10 MANAGED CARE AGREEMENTS. Warner-Lambert represents and warrants
that the agreements of Warner-Lambert with the customers listed on Exhibit 3.10
hereto are all the Managed Care Agreements as of April 14, 2000. Also set forth
on Exhibit 3.10 are the rebate and/or discount terms with respect to each such
Managed Care Agreement as of April 14, 2000. Warner-Lambert shall deliver a
revised Exhibit 3.10 at the Closing listing all the Managed Care Agreements as
of the Closing Date. Each party will use its best efforts to notify the
customers set forth on Exhibit 3.10 that the Product has been transferred to
Horizon within three (3) Business Days after the Closing Date. Promptly after
the Closing Date, but in no event later than ten (10) Business Days following
the Closing Date, Warner-Lambert shall, subject to the required consent of the
applicable customer, assign all Managed Care Agreements existing on the Closing
Date and shall notify Horizon on a regular basis regarding each such consent
and assignment; provided, however, that with respect to those Managed Care
Agreements that Warner-Lambert is unable to assign, Warner-Lambert shall
fulfill all its obligations under each such Managed Care Agreement until its
expiration (it being understood and agreed that Horizon has an obligation to
reimburse Warner-Lambert for Rebates and Chargebacks with respect to the
Managed Care Agreements pursuant to Section 1.3.2 hereof).
3.11 REGISTRATIONS. Warner-Lambert hereby represents and warrants that
in the Territory, to its knowledge, (i) the Registrations are in good standing
and (ii) there is no pending or threatened action by the FDA or any relevant
Governmental or Regulatory Authority which will have a material adverse effect
on the Registrations. Warner-Lambert has paid the NDA maintenance fee for the
Product for the year 2000. Warner-Lambert makes no representation or warranty
that the NDA for Cognex CR will be accepted for filing or approved by the FDA.
3.12 CERTAIN FINANCIAL INFORMATION. Warner-Lambert represents and
warrants that the 1999 financial information provided to Horizon as of December
31, 1999, specifically, the gross sales, net sales, standard cost of goods and
gross profit of the Product as set forth in Section X of the Offering
Memorandum relating to the Product provided to Horizon, was based upon the
information contained in the books and records of Warner-Lambert and, as such,
are accurate in all material respects. As used herein, "net sales" shall mean
the aggregate sales of Warner-Lambert and its Affiliates of Product to
unaffiliated third parties (but not including sales between Warner-Lambert and
its Affiliates) less (i) bad debts related to the Product, and (ii) sales
returns and allowances, including, without limitation, trade, quantity and cash
discounts and any other adjustments, including, but not limited to, those
granted on account of price adjustments, billing errors, rejected goods,
damaged goods, recalls, returns, rebates, chargeback rebates, fees,
reimbursements or similar payments granted or given to wholesalers or other
distributors, buying groups, health care insurance carriers or other
institutions, freight and insurance charges billed to the customers, customs or
excise duties, sales tax and other taxes (except income taxes) or duties
relating to sales, and any payment in respect of sales to
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any Governmental or Regulatory Authority in respect of any Federal or state
Medicaid, Medicare or similar program, all as determined in a manner consistent
with the books and records of Warner-Lambert.
3.13 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED HEREIN,
WARNER-LAMBERT DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD
TO THE PRODUCTS, INCLUDING THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE FOREGOING, HORIZON
ACKNOWLEDGES THAT WARNER-LAMBERT HAS MADE NO REPRESENTATION OR WARRANTY AS TO
THE ABILITY TO MANUFACTURE OR SELL ANY OF THE PRODUCTS IN ACCORDANCE WITH
APPLICABLE LAW.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION BY WARNER-LAMBERT. Warner-Lambert shall indemnify,
defend and hold harmless Horizon against any loss, expense, liability or other
damages, including reasonable costs of investigation, interest, penalties and
attorneys' fees (collectively, "Losses") incurred by Horizon, its Affiliates or
any of their respective officers, directors, agents or employees (collectively,
the "Horizon Group") to the extent relating to or resulting from (a) any
inaccuracy of a representation or breach of a warranty made by Warner-Lambert
in this Agreement or (b) the Retained Liabilities; provided, however, that
Warner-Lambert will have no obligations under this Section for Losses to the
extent that they are caused by (i) any inaccuracy of a representation or breach
of a warranty made by Horizon in this Agreement or (ii) the gross negligence or
willful misconduct of any member of the Horizon Group. Horizon hereby agrees
that Warner-Lambert's liability under this Agreement from whatever cause,
whether pursuant to this Section or any other cause arising under this
Agreement, is limited to the amounts paid by Horizon to Warner-Lambert pursuant
to Section 2.1 as of the date of determination of such liability, provided,
however, that the limitation on liability contained in this sentence shall not
apply to a failure of the Inventory to meet the Specifications, where such
failure was due solely to the actions or omissions of Warner-Lambert.
Furthermore, the parties agree that in no event will Warner-Lambert be liable
to Horizon hereunder for special, consequential, indirect, punitive or similar
damages.
4.2 INDEMNIFICATION BY HORIZON. Horizon shall indemnify, defend and
hold harmless Warner-Lambert against any Losses incurred by Warner-Lambert, its
Affiliates or any of their respective officers, directors, agents or employees
(collectively, the "Warner Group") relating to or resulting from (a) any
inaccuracy of a representation or breach of a warranty made by Horizon in this
Agreement; (b) any liabilities, obligations, commitments of, or claims against
any member of the Warner Group based on the manufacture, use or sale of the
Product in the Territory or use of the Trademarks or the Registrations in the
Territory, on and after the Closing Date; and (c) the Assumed Liabilities;
provided, however, that Horizon will have no obligations under this Section for
Losses to the extent that they are caused by (a) any inaccuracy of a
representation or breach of a warranty made by Warner-Lambert in this Agreement
or (b) the gross negligence or willful misconduct of any member of the Warner
Group. Furthermore, the
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parties agree that in no event will Horizon be liable to Warner-Lambert
hereunder for special, consequential, indirect, punitive or similar damages.
4.3 INDEMNIFICATION PROCEDURES. In any case under this Agreement where
one party has indemnified the other against any claim or legal action,
indemnification will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way
of settlement and release) at its own cost and expense. The indemnified party
may, but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated
to, defend, contest or otherwise protect against the same, and make any
compromise or settlement thereof and recover the entire costs thereof from the
indemnifying party, including reasonable attorneys fees, disbursements and all
amounts paid as a result of such claim or suit or the compromise or settlement
thereof; provided, however, that if the indemnifying party undertakes the
timely defense of such matter, the indemnified party will not be entitled to
recover from the indemnifying party its costs incurred in the defense thereof.
The indemnified party will cooperate and provide such assistance as the
indemnifying party may reasonably request in connection with the defense of the
matter subject to indemnification.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 MONTHLY REPORTS; RETURNS. (a) During the twelve month period
following the Closing Date, Horizon shall prepare and deliver to Warner-Lambert
a written monthly report showing all returns received by Horizon of Product sold
prior to the Closing Date by Warner-Lambert (the "Returns"). Within thirty (30)
days of the receipt of such monthly report, Warner-Lambert shall reimburse
Horizon for payments made by Horizon with respect to such Returns up to $1.8
million in the aggregate.
(b) Horizon shall keep accurate records in sufficient detail to
determine the amount of the reimbursement payable by Warner-Lambert under this
Section 5.1. Warner-Lambert may designate an independent public accountant
mutually acceptable to Warner-Lambert and Horizon to review such records to
verify the accuracy of information provided to Warner-Lambert. Warner-Lambert
shall pay the cost of any review of records conducted at the request of
Warner-Lambert under this Section; provided, however, that if the independent
public accountant conducting the review concludes that the amount payable under
this Section 5.1 were overstated by 5% or more, Horizon shall pay the cost of
such review.
5.2 USE OF WARNER-LAMBERT NAME. (a) Horizon shall not use the name of
Warner-Lambert, Parke-Davis or any of Warner-Lambert's Affiliates (collectively,
the "Warner-Lambert Name") in any manner whatsoever in connection with the
manufacture, use, sale, promotion, advertising or distribution of the Product
after the Closing Date, provided, however, Horizon may use the inventory and
Promotional Materials purchased from Warner-Lambert by Horizon
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hereunder bearing the Warner-Lambert Name (including inventory purchased under
the Supply Agreement) until such inventory expires or is depleted, whichever
occurs first ("Final Inventory Sell Off Date"). Except as otherwise set forth
in this Section 5.2 or in Section 5.3 hereof, Horizon shall have no right to
use the Warner-Lambert Name without the prior written consent of
Warner-Lambert.
(b) Horizon hereby agrees that any Inventory purchased from
Warner-Lambert hereunder and bearing the Warner-Lambert Name will be held,
maintained and distributed in accordance with applicable pharmaceutical current
good manufacturing practices, the Registrations, and all applicable laws.
Warner-Lambert shall have no responsibility for costs and expenses associated
with any recall of the Inventory on or after the Closing Date attributable to a
determination by a Governmental or Regulatory Authority that the use of the
Warner-Lambert Name on such Inventory would constitute misbranding within the
meaning of the Federal Food, Drug, and Cosmetic Act or similar laws in the
Territory.
5.3 USE OF PROMOTIONAL MATERIALS. Horizon hereby agrees that any
Promotional Materials purchased from Warner-Lambert hereunder and bearing the
Warner-Lambert Name (i) will not be used after the Final Inventory Sell Off
Date; and (ii) will be held, maintained and distributed in accordance with the
Registrations and all applicable laws. From the Closing Date until the Final
Inventory Sell Off Date, Horizon shall have the right, subject to
Warner-Lambert's prior written consent, to apply the Warner-Lambert Name on any
new promotional materials (including, but not limited to, journal ads,
convention materials, sales aids, and medical education materials) for the
Product. Horizon shall submit such promotional materials in final form, together
will all data and documentation required to support any claims made therein, to
Warner-Lambert's regulatory group which shall determine, within ten (10)
Business Days after receipt, whether to grant written consent to use such
promotional materials. Horizon shall have no other right to use the
Warner-Lambert Name other than as set forth herein and in Section 5.2 above.
Horizon agrees that after the Final Inventory Sell Off Date all promotional
materials and Promotional Materials containing the Warner-Lambert Name shall be
destroyed at Horizon's sole cost and expense. Use of the Warner-Lambert Name on
promotional materials and the use of the Promotional Materials by Horizon shall
be at Horizon's risk.
5.4 PRODUCT REGULATORY OBLIGATIONS.
5.4.1. FDA Contacts. On and after the Closing Date, Horizon
shall be responsible for all contacts with the FDA and other regulatory
authorities with respect to the Product, and all other responsibilities under
the Registrations; provided that either party shall notify the other party
immediately, and in no event later than (A) forty-eight (48) hours after receipt
of any contact or communication from the FDA or any other Governmental or
Regulatory Authority in the Territory and (B) five (5) Business Days after
receipt of any contact or communication with any other third party, that in
either case, in any way requests or suggests the need for a recall or withdrawal
of a lot of Product manufactured by or on behalf of Warner-Lambert or otherwise
calls into question the quality or safety of such a Product lot. Horizon shall
be responsible for investigating any such request or suggestion and for any
communications with any Governmental or Regulatory Authority relating thereto;
provided that Horizon shall comply with all reasonable requests by
Warner-Lambert.
5.4.2. Customer Complaints. Horizon shall be solely
responsible for responding to any Product complaint received on or after the
Closing Date. Each party shall notify the other
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in the event that such a party receives a report of a Product complaint
relating to a Product lot manufactured by or on behalf of Warner-Lambert. The
complaint recipient shall use all reasonable efforts to provide such notice to
the other party within forty eight (48) hours if the complaint involves
allegations of suspected or actual product tampering, contamination or
mislabeling, and shall provide such notice to the other party within five (5)
Business Days in the case of all other complaints. Horizon shall be responsible
for investigating all such Product complaints and responding to the
complainant, provided each party shall comply with all reasonable requests from
the other in connection therewith.
5.4.3. Adverse Event Reporting. (a) On and after the Closing
Date until such date that each of the Registrations are transferred to Horizon
(the "Transfer Date"), each party shall have a continuing obligation to notify
the other party of any adverse drug experience reported to such party arising
from or in connection with the use of the Product. This notification shall occur
within seventy-two (72) hours for an unexpected fatal or life-threatening
serious adverse drug experience (as defined in 21 CFR 312.32) associated with
the Product and arising during clinical trials. For post-marketing adverse drug
experience reports, the parties agree as follows:
(i) Warner-Lambert shall report to Horizon all adverse drug
experiences within five (5) Business Days after the time such
report becomes known to any employee, agent or Affiliate of
Warner-Lambert. All other post-marketing adverse drug
experience reports for the Product shall be reported to
Horizon by Warner-Lambert on a rolling fifteen (15)-day
basis.
(ii) Horizon shall report to Warner-Lambert all serious adverse
drug experience reports for the Product within five (5)
Business Days after the time such report becomes known to any
employee, agent or Affiliate of Horizon and all other adverse
drug experience reports for the Product on a rolling fifteen
(15)-day basis.
All notifications pursuant to this paragraph shall be by fax or e-mail at such
numbers (or e-mail addresses) agreed upon by the parties' respective drug safety
organizations. Horizon shall have sole responsibility to investigate such
adverse experience reports and for reporting such reports to Governmental and
Regulatory Authorities. Except as otherwise stated above, the terms "adverse
drug experience" and "serious adverse drug experience" used in this paragraph
shall have the meanings set forth in 21 CFR 314.80.
(b) On and after the Transfer Date, Warner-Lambert shall have
a continuing obligation to notify Horizon of any postmarketing adverse drug
experience reported to Warner-Lambert arising from or in connection with the use
of a Product in post-marketed use. This notification shall occur within five (5)
days for all post-marketing adverse drug experience reports. This notification
shall be by fax. Horizon shall have sole responsibility to investigate such
adverse experience reports and for reporting such reports to applicable
Governmental or Regulatory Authorities. Following the Closing Date, Horizon
shall provide Warner-Lambert with reasonable access to the post-marketing and
clinical safety database for the Product as necessary in connection with any
ongoing legal and/or regulatory requirements of Warner-Lambert.
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(c) The parties shall use reasonable efforts to enter into a
separate drug safety sharing agreement describing the procedures and other
logistics to implement the provisions in this Section 5.4 within ninety (90)
days after execution of this Agreement.
5.4.4 Assistance with Regulatory Obligations Transfer. For a
period of up to sixty (60) days following the Closing Date, Warner-Lambert
agrees to provide assistance and cooperation reasonably requested by Horizon in
connection with the transfer of the Registrations to Horizon in the United
States and all other countries except the European countries in the Territory.
During the term of the Transition Services Agreement and for a period of up to
sixty (60) days following the termination of the Transition Services Agreement,
Warner-Lambert agrees to provide assistance and cooperation reasonably requested
by Horizon in connection with the transfer of the Registrations to Horizon in
the European countries in the Territory.
5.4.5 Transfer of Registration. The parties shall use all
reasonable efforts to transfer the Registrations from Warner-Lambert and the
Selling Affiliates to Horizon or its designee six (6) months after the Closing
Date.
5.5 PAYMENT OF TRANSACTION EXPENSES. All sales taxes, use taxes, value
added taxes, transfer taxes, filing fees (including trademark assignment fees)
and similar taxes, fees, charges and expenses (excluding any taxes arising from
income or gains earned by Warner-Lambert) required to be paid in connection with
the sale of the Assets to Horizon will be borne and paid by Horizon. All legal
fees and other expenses incurred on behalf of Warner-Lambert in connection with
the negotiation of this Agreement will be borne by Warner-Lambert; and all legal
fees and other expenses incurred on behalf of Horizon in connection with the
negotiation of this Agreement will be borne by Horizon.
5.6 ACCESS TO WARNER-LAMBERT RECORDS. To the extent required by the
Securities and Exchange Commission in connection with an initial public offering
of or other financing for Horizon and upon five Business Days' prior written
notice from Horizon, Warner-Lambert agrees to provide Horizon and up to two (2)
employees of an independent accounting firm designated by Horizon with
reasonable access to financial records pertaining to the Product covering a
period ending not more than three (3) years prior to the date of such request.
Prior to granting any access to such records, the designated accounting firm
shall first agree not to disclose any confidential information contained in such
financial records. Horizon shall pay all costs and expenses in connection with
the review of such financial records.
5.7 LIMITATION ON TRANSFER. Horizon hereby agrees that until such time
as Horizon has discharged all its payment obligations hereunder (other than the
payment obligation set forth in Section 2.1(a)(ii)), it shall not convey, sell,
assign, transfer, license or otherwise dispose of any of the Assets (other than
Inventory in the ordinary course of business) without the prior written consent
of Warner-Lambert, which consent shall not be unreasonably withheld, provided,
that Horizon shall have the right to assign its rights and obligations under
this Agreement to any third party successor to all or substantially all of its
entire business. Warner-Lambert will respond to such written request for
transfer of the Assets within forty-five (45) days after receipt of such written
request from Horizon.
5.8 CONFIDENTIALITY. For a period of five (5) years from the Closing
Date, each party shall hold in confidence and use its best efforts to have all
of their respective Affiliates and representatives hold in confidence all
confidential information of the other party, and, except as
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contemplated by this Agreement, shall not disclose, publish, use or permit
others to use the same; provided, however, that the foregoing restriction shall
not apply to any portion of the foregoing which was or becomes available on a
non-confidential basis to the other party or when such disclosure is required
by a Governmental or Regulatory Authority or is otherwise required by law or is
necessary in order to establish rights under this Agreement or any other
agreements referred to herein. In the event the transaction contemplated hereby
is not consummated, upon the request of the other party, each party hereto
will, and will cause its Affiliates, any Person who has provided, or who is
providing, financing to such party and their respective Representatives to,
promptly (and in no event later than five (5) Business Days after such request)
redeliver or cause to be redelivered all copies of confidential documents and
information furnished by the other party in connection with this Agreement or
the transactions contemplated hereby and destroy or cause to be destroyed all
notes, memoranda, summaries, analyses, compilations and other writings related
thereto or based thereon prepared by the party furnished such documents and
information or its representatives, provided, however, that each party shall be
entitled to keep one archival copy of such confidential documents and
information and related materials solely as evidence of what was redelivered
and destroyed hereunder, and for no other purpose.
5.9 TRANSITION SERVICES. Subsequent to the Closing Date, Warner-Lambert
agrees to provide certain transition services to Horizon pursuant to the
Transition Services Agreement (as hereinafter defined).
5.10 FURTHER ASSURANCES. Warner-Lambert, at any time after the Closing
Date, at the request of Horizon and at Horizon's sole expense, shall execute,
acknowledge and deliver any further assignments, and other assurances, documents
and instruments of transfer that may be reasonably necessary for the purpose of
assigning and granting to Horizon all Assets to be conveyed pursuant to this
Agreement.
5.11 THIRD PARTY CONSENTS. To the extent that any Managed Care Contract
is not assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such assignment
or attempted assignment would constitute a breach thereof. Warner-Lambert and
Horizon shall use their commercially reasonable efforts to obtain the consent of
such other party to the assignment of any such Managed Care Contract to Horizon
in all cases in which such consent is or may be required for such assignment. If
any such consent shall not be obtained, Warner-Lambert shall cooperate with
Horizon in any reasonable arrangement designed to provide for Horizon the
benefits intended to be assigned to Horizon under the relevant Managed Care
Contract, including enforcement at the cost and for the account of Horizon of
any and all right of Warner-Lambert or any of its Affiliates against the other
party thereto arising out of the breach or cancellation thereof by such other
party or otherwise. If and to the extent that such arrangement cannot be made,
Horizon shall have no obligation pursuant to Section 1.3 or otherwise with
respect to any such Managed Care Contract. The provisions of this Section 5.11
shall not affect the right of Horizon not to consummate the transactions
contemplated by this Agreement if the condition to its obligations hereunder
contained in Section 3.7 has not been fulfilled.
5.12 NOTIFICATION TO THE TRADE. The parties shall each use their best
efforts to notify Warner-Lambert's customers in the United States of the sale of
the Product to Horizon within three (3) Business Days after the Closing Date.
The parties will agree to notify Warner-
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Lambert's customers outside the United States upon the transfer of the
Registration of the Product.
5.13 POST CLOSING OPERATION OF BUSINESS. For twelve (12) months
following the Closing Date, Horizon will operate the Business only in the
ordinary course.
5.14 DOCUMENT RETENTION. Each party agrees for a period which is the
longer of three (3) years after the Closing Date and the applicable period
required by law or any Governmental or Regulatory Authority not to destroy or
otherwise dispose of any Registrations or Information unless such party shall
first offer in writing to surrender such documentation to the other party and
such other party shall not agree in writing to take possession thereof during
the ten (10) day period after such offer is made.
5.15 CERTAIN FTC UNDERTAKINGS. (a) Horizon shall, within ten (10) days
after the Closing Date, submit to the United States Federal Trade Commission
(the "Commission") a certification attesting to its good faith intention to
obtain expeditiously all of the necessary FDA approvals to sell and manufacture
or have manufactured Cognex, together with a business plan setting forth the
forecasted dates for completion of necessary preparations and final FDA
approvals.
(b) Horizon shall, submit to the Commission and Interim Trustee
periodic reports setting forth, in detail, the efforts of Horizon to market the
Product and to obtain FDA approvals to sell and manufacture or have manufactured
the Product. Horizon shall submit the first such report sixty (60) days after
the date of the Consent Order relating to the merger of Warner-Lambert and
Pfizer Inc., and every sixty days thereafter, until all necessary FDA approvals
are obtained by or on behalf of Horizon.
(c) In the event that Horizon (i) ceases to sell the Product in the
United States for a period exceeding sixty (60) days, or (ii) abandons its
efforts to obtain all necessary FDA approvals to sell and manufacture or have
manufactured Cognex, Horizon shall notify the Commission and the Interim Trustee
within ten (10) days thereafter. Horizon shall provide the Commission and the
Interim Trustee with access to all records and facilities that relate to its
efforts to manufacture and sell the Product.
(d) In the event that Horizon, other than for reasons that are outside
of its control, (i) voluntarily ceases for sixty (60) days or more the sale of,
or otherwise fails to pursue good efforts to sell the Product in the United
States prior to obtaining all necessary FDA approvals; (ii) fails to pursue sale
and manufacture (or third party manufacture) of the Product within one (1) year
from the date the Commission approves this Agreement, provided, however, that
the one (1) year period may be extended by the Commission in three (3) month
increments for a period not to exceed one (1) year if it appears that such FDA
approvals are likely to obtain with such extended period, the Commission may
order that the Product revert to Warner-Lambert and the Product will be divested
by the divestiture trustee appointed by the Commission to a new purchaser.
Horizon shall be entitled to receive the proceeds from the sale of the Product
by the divestiture trustee, up to a maximum of $3.5 million, within thirty (30)
days after Warner-Lambert receives such proceeds. Warner-Lambert shall have no
further obligation or liability to Horizon in connection with the reversion of
Product to Warner-Lambert hereunder.
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ARTICLE 6
COVENANTS OF THE PARTIES
6.1 COVENANTS OF WARNER-LAMBERT. Warner-Lambert covenants and agrees
with Horizon that, at all times from and after the date hereof until the
Closing, Warner-Lambert will comply with all covenants and provisions of this
Section 6.1, except to the extent Horizon may otherwise consent in writing.
6.1.1 Investigation by Horizon. Warner-Lambert will provide
Horizon and its Representatives with full access, upon reasonable prior notice
and during normal business hours, to the officers, employees and agents of
Warner-Lambert who have any responsibility for the conduct of the Business, to
Warner-Lambert's accountants and to the Assets.
6.1.2 Conduct of Business. Warner-Lambert will operate the
Business only in the ordinary course, consistent with past practice.
6.1.3 Fulfillment of Conditions. Warner-Lambert will execute
and deliver at the Closing each Operative Agreement that Warner-Lambert is
required hereby to execute and deliver as a condition to the Closing, will take
all commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each other condition to the obligations of Horizon
contained in this Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment of any such
condition.
6.1.4 Regulatory and Other Approvals. Warner-Lambert will take
all commercially reasonable steps necessary or desirable to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Warner-Lambert to consummate the transactions
contemplated hereby and by the Operative Agreements, including without
limitation those described in Exhibits 3.7(a) and 3.7(b).
6.2 COVENANTS OF HORIZON. Horizon covenants and agrees with
Warner-Lambert that, at all times from and after the date hereof until the
Closing, Horizon will comply with all covenants and provisions of this Section
6.2, except to the extent Warner-Lambert may otherwise consent in writing.
6.2.1 Fulfillment of Conditions. Horizon will execute and
deliver at the Closing each Operative Agreement that Horizon is hereby required
to execute and deliver as a condition to the Closing, will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each other condition to the obligations of Warner-Lambert contained
in this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.
6.2.2 Regulatory and Other Approvals. Horizon will take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Horizon to consummate the transactions
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contemplated hereby and by the Operative Agreements, including without
limitation those described in Exhibits 3.7(a) and 3.7(b).
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PARTIES
7.1 CONDITIONS TO OBLIGATIONS OF HORIZON. The obligations of Horizon
hereunder to purchase the Assets and to assume and pay, perform and discharge
the Assumed Liabilities are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of which may be waived
in whole or in part by Horizon in its sole discretion):
7.1.1 Representations and Warranties. The representations and
warranties made by Warner-Lambert in this Agreement, taken as a whole, shall be
true and correct, in all material respects, on and as of the Closing Date as
though made on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on and as
of such earlier date.
7.1.2 Performance. Warner-Lambert shall have performed and
complied with, in all material respects, the agreements, covenants and
obligations required by this Agreement to be so performed or complied with by
Warner-Lambert at or before the Closing.
7.1.3 Orders and Laws. There shall not be in effect on the
Closing Date any order or law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
7.1.4 Deliveries. Warner-Lambert shall have delivered to
Horizon an Assignment, Assumption and Bill of Sale in the form of Exhibit
7.1.4(a) (the "Assignment, Assumption and Bill of Sale"), a Trademark assignment
in the form of Exhibit 7.1.4(b) and except as otherwise provided herein, such
other documents and instruments as may be necessary to completely sell, convey,
assign, grant, transfer and deliver the Assets to Horizon.
7.1.5 Supply Agreement. Warner-Lambert shall have delivered to
Horizon a manufacturing and supply agreement between Warner-Lambert or its
Affiliate and Horizon in the form of Exhibit 7.1.5 (the "Supply Agreement").
7.1.6 Warner-Lambert Assignment Letters. Warner-Lambert shall
have delivered to Horizon letters from Warner-Lambert to the FDA, transferring
all rights and responsibilities under the Registrations to Horizon, in form
reasonably satisfactory to counsel for Horizon (the "Warner-Lambert Assignment
Letters").
7.1.7 Third Party Consents. The consents (or in lieu thereof
waivers) listed on Exhibit 3.7(a) shall have been obtained and shall be in full
force and effect.
7.1.8 Sublicense. Warner-Lambert shall have delivered to
Horizon a sublicense of the License Agreement between William K. Summers, M.D.
and Warner-Lambert dated September 27, 1990 substantially in the form of Exhibit
7.1.8 (the "Sublicense").
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7.1.9 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to the relevant Governmental
or Regulatory Authority set forth in Exhibits 3.7(a) and 3.7(b), necessary to
permit Horizon and Warner-Lambert to perform their obligations under this
Agreement, to permit Horizon, Warner-Lambert and the Selling Affiliates to
perform their respective obligations under the Operative Agreements and to
consummate the transactions contemplated hereby and thereby shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any such Governmental
or Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
7.1.10 Transition Services Agreement. Warner-Lambert shall
have delivered to Horizon a transition services agreement between Warner-Lambert
or its Affiliate and Horizon substantially in the form of Exhibit 7.1.10 (the
"Transition Services Agreement").
7.1.11 Assignment of Licenses. Warner-Lambert shall have
delivered to Horizon an assignment and assumption agreement in the form of
Exhibit 7.1.11 (the "License Agreement").
7.2 CONDITIONS TO OBLIGATIONS OF WARNER-LAMBERT. The obligations of
Warner-Lambert hereunder to sell or cause the Selling Affiliates to sell the
Assets are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
Warner-Lambert in its sole discretion):
7.2.1 Representations and Warranties. The representations and
warranties made by Horizon in this Agreement, taken as a whole, shall be true
and correct in all material respects on and as of the Closing Date as though
made on and as of the Closing Date.
7.2.2 Performance. Horizon shall have performed and complied
with, in all material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Horizon at or
before the Closing.
7.2.3 Orders and Laws. There shall not be in effect on the
Closing Date any order or law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
7.2.4 Deliveries. Horizon shall have delivered to
Warner-Lambert the Assignment, Assumption and Bill of Sale and except as
otherwise provided herein, such other documents and instruments as may be
necessary to completely sell, convey, assign, grant, transfer and deliver the
Assets to Horizon.
7.2.5 Supply Agreement. Horizon shall have delivered to
Warner-Lambert the Supply Agreement.
7.2.6. Horizon Assumption Letters. Horizon shall have
delivered to Warner-Lambert letters from Horizon to the FDA assuming all rights
and responsibilities under the Registrations, in form reasonably satisfactory to
counsel for Warner-Lambert (the "Horizon Assumption Letters").
19
<PAGE> 21
7.2.7 Third Party Consents. The consents (or in lieu thereof
waivers) listed on Exhibit 3.7(b) shall have been obtained and shall be in full
force and effect.
7.2.8 Sublicense. Horizon shall have delivered to
Warner-Lambert the Sublicense.
7.2.9 Regulatory Consents and Approvals. All consents,
approvals and actions of, filings with and notices to the relevant Governmental
or Regulatory Authority set forth in Exhibits 3.7(a) and 3.7(b), necessary to
permit Horizon and Warner-Lambert to perform their obligations under this
Agreement, to permit Horizon, Warner-Lambert and the Selling Affiliates to
perform their respective obligations under the Operative Agreements and to
consummate the transactions contemplated hereby and thereby shall have been duly
obtained, made or given and shall be in full force and effect, and all
terminations or expirations of waiting periods imposed by any such Governmental
or Regulatory Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements shall have occurred.
7.2.10 Transition Services Agreement. Horizon shall have
delivered to Warner-Lambert the Transition Services Agreement.
7.2.11 Assignment of Licenses. Horizon shall have delivered
to Warner-Lambert the License Agreement.
ARTICLE 8
GENERAL
8.1 ASSIGNMENT. Until such time as Horizon has discharged all its
payment obligations hereunder (other than the payment obligation set forth in
Section 2.1(a)(ii)), this Agreement may not be assigned by Horizon without the
prior written consent of Warner-Lambert; provided, that Horizon shall have the
right to assign its rights and obligations under this Agreement to any third
party successor to all or substantially all of its entire business.
Warner-Lambert will respond to Horizon's written request for assignment within
forty-five (45) days after receipt of such written request from Horizon. This
Agreement will be binding upon and will inure to the benefit of permitted
assigns and successors. Notwithstanding anything to the contrary in this herein,
Horizon may sublicense the Assets to a third party manufacturer to the extent
and only to the extent necessary to manufacture the Product for Horizon.
8.2 NOTICES. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received on the date when
delivered by hand delivery with receipt acknowledged, or upon the next business
day following receipt of telex or telecopy transmission, or upon the third day
after deposit in the United States mail, registered or certified with postage
prepaid, return receipt requested, addressed as set forth below:
(a) If to Warner-Lambert:
20
<PAGE> 22
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attn: President, Pharmaceutical Sector
Fax: 973-385-4009
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attn: Senior Vice President and General Counsel
Fax: (973) 385-3927
(b) If to Horizon:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Vice President, Corporate Development
Fax: (770) 442-9594
with a copy to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Legal Counsel
Fax: (770) 442-9594
Any party may alter the addresses to which communications or copies are to be
sent by giving, notice of such change of address in conformity with the
provisions of this Section for giving notice.
8.3 TERMINATION. (a) Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated at any time prior to
the Closing Date: (i) by the mutual consent of the parties; (ii) by
Warner-Lambert if the Closing shall not have occurred on or before June 30,
2000, other than due to a delay in receiving clearance from the Federal Trade
Commission to proceed with the transactions contemplated herein; (iii) by either
party in the event of a material breach by the other party of any of its
agreements, representations or warranties contained herein, as the case may be,
and the failure of such breaching party to cure such breach within fourteen (14)
days after receipt of notice from the non-breaching party requesting such breach
to be cured, or (iv) by either party if consummation of the transactions
contemplated hereby shall violate a decree, injunction or similar order of any
Governmental or Regulatory Authority.
(b) Any party desiring to terminate this Agreement pursuant to Section
8.3(a) shall provide five (5) days' prior written notice of such termination to
the other party to this Agreement.
21
<PAGE> 23
(c) If this Agreement is validly terminated pursuant to Section
8.3(a), this Agreement will forthwith become null and void, and there will be
no liability or obligation on the part of Warner-Lambert or Horizon (or any of
their representatives or Affiliates), except that the provisions with respect
to expenses in Section 5.5 and confidentiality in Section 5.8 will continue to
apply following any such termination.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Warner-Lambert in this Agreement shall survive from the
Closing Date for a period of two (2) years and terminate thereafter. All
indemnification provisions made by the parties hereto under this Agreement
shall survive indefinitely.
8.5 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, the remaining provisions will continue
in full force without being impaired or invalidated in any way, and the parties
agree to replace any invalid provision with a valid provision which most
closely approximates the intent and economic effect of the invalid provision.
8.6 HEADINGS. Headings used in this Agreement are for reference
purposes only and in no way define, limit, construe or describe the scope or
extent of such paragraph, or in any way affect this Agreement.
8.7 NO WAIVER. No term or provisions hereof shall be deemed waived,
and no breach excused, unless such waiver or consent is in writing and signed
by the party claimed to have waived or consented. The waiver by any party of a
breach of any provision of this Agreement will not operate or be interpreted as
a waiver of any other or subsequent breach.
8.8 RELATIONSHIP OF THE PARTIES. Nothing in this Agreement should be
construed to create a partnership, agency, joint venture or employer-employee
relationship. None of the parties has the authority to assume or create any
obligation, express or implied, on behalf of any other party.
8.9 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York. Each party hereby consents
to the personal jurisdiction of the state and federal courts located in New
York.
8.10 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including all
Exhibits and Schedules hereto (which Exhibits and Schedules are hereby
incorporated into and made a part of this Agreement), and the additional
documents required to be delivered on the Closing Date, constitute the final,
complete and exclusive agreement among the parties with respect to the subject
matter hereof and supersede any previous proposals, negotiations, agreements,
arrangements or warranties, whether verbal or written, made among the parties
with respect to such subject matter. This Agreement may be amended or modified
only by mutual agreement in writing of the authorized representatives of the
parties.
8.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof shall bear the signatures of all
parties indicated as signatories hereto.
22
<PAGE> 24
8.12 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
8.13 PUBLIC ANNOUNCEMENTS. Warner-Lambert and Horizon will not issue or
make any reports, statements or releases to the public or generally to the
employees, customers, suppliers or other Persons with respect to this Agreement
or the transactions contemplated hereby without the consent of the other
parties, which consent shall not be unreasonably withheld. If any party is
unable to obtain the approval of its public report, statement or release from
the other party and such report, statement or release is, in the opinion of
legal counsel to such parties, required by law in order to discharge such
party's disclosure obligations, then such party may make or issue the legally
required report, statement or release and promptly furnish the other parties
with a copy thereof. Warner-Lambert and Horizon will also obtain the other
parties' prior approval of any press release to be issued immediately following
the Closing Date announcing the consummation of the transactions contemplated by
this Agreement.
23
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WARNER-LAMBERT COMPANY
By:
--------------------------------------
Name:
Title:
FIRST HORIZON PHARMACEUTICAL CORPORATION
By:
--------------------------------------
Name:
Title:
24
<PAGE> 26
EXHIBIT A
PRODUCT
Cognex
<PAGE> 27
EXHIBIT 1.1.1
[****]-CONFIDENTIAL TREATMENT REQUESTED
FINISHED PRODUCT INVENTORY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINISHED PRODUCT INVENTORY (PACKAGED)
- ---------------------------------------------------------------------------------------------------------------------
COUNTRY DOSAGE STRENGTH QUANTITY EXPIRATION DATE COST (US$)
------- --------------- -------- --------------- ----------
<S> <C> <C> <C> <C>
US
10 mg 2,100* 07/31/2001 $[*****]
20 mg 31,900* 03/30/2002 $[*****]
40 mg 7,200* 05/30/2001 $[*****]
* - 120 ct bottles
FRANCE
40 mg 103*** 10/01/2001 $[*****]
*** - 112 ct packages
GREECE
10 mg 1,000* 08/01/2001 $[*****]
30 mg 520* 10/01/2001 $[*****]
40 mg 1,223* 10/01/2001 $[*****]
* - 56 ct packages
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FINISHED PRODUCT IN GERMANY (PACKAGED BUT NOT SHIPPED)
- ---------------------------------------------------------------------------------------------------------------------
COUNTRY DOSAGE STRENGTH QUANTITY EXPIRATION DATE COST
------- --------------- -------- --------------- ----
<S> <C> <C> <C> <C>
GREECE 40 mg 1,520 (56 ct) 10/01/2001 $[*****]
GRAND TOTAL $[*****]
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
EXHIBIT 1.1.2
INTELLECTUAL PROPERTY
TRADEMARKS
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
USA COGNEX 73/762382 07NO1988 1543222
13JE1989 13JE2009 WLP G
ANDO COGNEX 12903 04DE1998 12467
04DE1998 04DE2008 WLP G
AOIP COGNEX 82989 16NO1993 33312
15SE1994 16NO2003 WLP G
ARGE COGNEX 1668032 19OC1988 1419731
26FE1993 26FE2003 WLP G
ARME COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ASTL COGNEX 497479 01MY1995 A497479
01MY1995 17OC2009 WLP G
ATRA COGNEX AM4962/89 11OC1989 129313
09MR1990 31JA2000 WLP G
ATRA COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
AZER COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BELA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BENE COGNEX 65023 14SE1998 457086
02FE1999 26OC2008 WLP G
BENE COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
BRAZ COGNEX 68344 29DE1999 814501605
28AU1990 28AU2000 WLP G
BRAZ COGNEX CR 819637173 04NO1996 819637173
13JL1999 13JL2009 WLP G
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BULG COGNEX 21382 08SE1992 21730
30SE1993 08SE2002 WLP G
BULG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
CAMB COGNEX 1803 08OC1992 1801
21AP1993 08OC2002 WLP G
CHIL COGNEX 443093 12MR1999 539520
01JL1999 27AP2009 WLP G
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CHIL COGNEX CR 357493 10OC1996 489543
14JL1997 14JL2007 WLP G
CHIN COGNEX 93125913 02DE1993 765722
14SE1995 13SE2005 WLP G
COLO COGNEX 309872 11SE1989 147849
10NO1993 10NO2003 WLP G
COLO COGNEX CR 96056701 25OC1996 197101
15MY1997 15MY2007 WLP G
COST COGNEX NONE 07DE1994 95326
27MR1996 27MR2006 WLP G
CTM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
CUBA COGNEX 1033/96 11JE1996 125203
28FE1997 11JE2006 WLP G
CZEC COGNEX 71543-92 04SE1992 179288
31AU1994 04SE2002 WLP G
DENM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
DENM COGNEX 6580/1989 07SE1989 7273/1992
07AU1992 07AU2002 WLP G
DREP COGNEX NONE 03NO1993 70025
15JA1994 15JA2014 WLP G
ECUA COGNEX 42184/93 08OC1993 3834-94
14NO1994 14NO2004 WLP G
EGYP COGNEX 88550 11OC1993 88550
22JE1998 11OC2003 WLP G
ESTO COGNEX 9303722 14AP1993 16105
30JE1995 30JE2005 WLP G
FINL AXONYL 4039/91 27AU1991 122292
21SE1992 21SE2002 WLP G
FINL COGNATEX 4040/91 27AU1991 122293
21SE1992 21SE2002 WLP G
FINL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
FINL COGNEX 5965/89 21NO1989 119949
06JL1992 06JL2002 WLP G
FRAN AXONYL 102120 30NO1998 1513315
08JA1999 10JA2009 WLP G
FRAN COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
FRAN COGNEX 963139 01JE1998 1495729
10JL1998 25OC2008 WLP G
GBRI COGNEX 1361554 21SE1995 1361554
21SE1995 25OC2005 WLP G
GBRI COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
GBRI COGNEX CR 2111743 03OC1996 2111743
04AP1997 03OC2006 WLP G
GEOR COGNEX TM1998013151 24FE1998 11272
11DE1998 11DE2008 WLP G
GERM COGNEX W38616/5WZ 16FE1999 1158143
16FE1999 31OC2008 WLP G
GERM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
GERM COGNEX IN CYRILLIC 39629332.8 04JL1996 39629332
21NO1996 31JL2006 PDGB G
GREC COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
GREC COGNEX 95564 30MR1999 95564
30MR1999 12SE2009 WLP G
GUAT COGNEX 7368-93 05NO1993 80261
24JE1996 23JE2006 WLP G
HAIT COGNEX 539/0 25OC1993 73/100
12JL1994 12JL2004 WLP G
HOND COGNEX 10427/93 20OC1993 59959
25MY1994 25MY2004 WLP G
HONG COGNEX 6695/88 21AU1995 686/1990
06OC1995 21OC2009 WLP G
HONG COGNEX IN CHINESE CHARACTERS 95/04659 21AP1995 4917/1997
01MY1997 21AP2004 WLP G
HONG COGNEX IN CHINESE CHARACTERS 9703229 11MR1997 B6434/1998
25JE1998 11MR2004 PDA G
HONG COGNEX IN CHINESE CHARACTERS 9703228 11MR1997 B7477/1998
27JL1998 11MR2004 PDA G
HUNG COGNEX M9204478 15SE1992 137076
17AU1993 15SE2002 WLP G
ICEL COGNEX NONE 09AU1999 1038/1989
14OC1999 08DE2009 WLP G
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INDI COGNEX WLP F 609118 11OC1993
INDO COGNEX NONE 11SE1989 271725
13FE1992 13AU2001 WLP G
INTL COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
IREL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
IREL COGNEX 6377/89 27NO1996 135633
27NO1996 26NO2006 WLP G
ISRA COGNEX 89254 14OC1993 89254
13SE1995 13OC2000 WLP G
ITAL COGNEX WLP F RM005925 03DE1997
ITAL COGNEX RM98C005339 28OC1998 557807
13JA1992 03NO1998 WLP G
ITAL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
JAMA COGNEX 5/4953 19OC1993 27282
14NO1996 19OC2000 WLP G
JAPA COGNEX 119497/1988 20OC1988 2313556
28JE1991 28JE2001 WLP G
JORD COGNEX NONE 15NO1999 33170
23OC1993 23OC2000 WLP G
KAZA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
KENY COGNEX 40928 23NO1993 40928
30MR1995 23NO2000 WLP G
KORS COGNEX 93-35581 07OC1993 307643
08FE1995 08FE2005 WLP G
KORS COGNEX IN KOREAN CHARACTERS 94-49286 09DE1994 331529
16JA1996 16JA2006 PDA G
KYRG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
LAOS COGNEX 1342 11SE1992 1437
20JL1993 11SE2002 WLP G
LATV COGNEX M-93-2209 08MR1993 M33894
20OC1996 08MR2003 WLP G
LEBA COGNEX WLP F 61860 18AU1994
LITH COGNEX 12922 05OC1993 23927
16DE1996 05OC2003 WLP G
MACE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
MAYS COGNEX NONE 03JL1996 MA/5572/89
22JL1996 12SE2010 WLP G
MEXI COGNEX 160501 11FE1993 452998
24FE1994 11FE2003 WLP G
MOLD COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 B G
MONG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
NEWZ COGNEX NONE 14DE1994 188209
14DE1994 19OC2009 WLP G
NICA COGNEX 93-02730 29NO1993 26207
12JL1994 11JL2004 WLP G
NIGE COGNEX WLP F NONE 26OC1993
NORW AXONYL 91/4361 28AU1991 175093
14MR1996 14MR2006 WLP G
NORW COGNATEX 91/4360 28AU1991 154564
14JA1993 14JA2003 WLP G
NORW COGNEX 89/4387 11SE1989 144521
21MR1991 21MR2001 WLP G
PAKI COGNEX WLP F 104073 27SE1989
PANA COGNEX 77106 04SE1995 77106
28OC1996 28OC2006 WLP G
PARA COGNEX 18125 18DE1991 154686
24JE1992 24JE2002 WLP G
PERU COGNEX 240536 20AP1994 79857
19AU1994 10MY2004 WLP G
PHIL COGNEX 76718 08JL1991 55601
02JL1993 02JL2013 WLP G
POLA COGNEX Z-113342 09SE1992 79098
28OC1994 09SE2002 WLP G
PORT COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
PORT COGNEX 259054 12OC1989 259054
06MY1993 06MY2003 WLP G
PUER COGNEX NONE 20JL1993 33734
04NO1994 04NO2004 WLP G
ROMA COGNEX 27765 16SE1992 19848
26MR1996 16SE2002 WLP G
RUSS COGNEX 165803 09NO1992 120087
09NO1992 09NO2002 WLP G
RUSS COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
SAFR COGNEX NONE 26MR1999 89/9005
29MR1999 26SE2009 WLP G
SALV COGNEX 3743 14OC1993 156
08MY1995 08MY2005 WLP G
SAUD COGNEX 22612 16OC1993 314/37
25JL1994 26JE2003 WLP G
SING COGNEX 5960/89 02JL1996 S/5960/89
19FE1997 08SE2006 WLP G
SLOV COGNEX Z-9870111 27JA1998 9870111
05OC1998 26JA2008 WLP G
SLVK COGNEX 0-71543-92 04SE1992 174926
14JE1995 04SE2002 WLP G
SPAI COGNEX 1521725 05MY1999 1521725
01JA2000 28SE2009 WLP G
SPAI COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SPAI COGNEX CR 2050172 02OC1996 2050172
05MR1997 02OC2006 WLP G
SWED COGNEX 89-08491 23AU1989 244648
30DE1992 30DE2002 WLP G
SWED COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SWED COGNEX CR 96-09133 08OC1996 326021
16JA1998 16JA2008 WLP G
SWIT COGNEX 7341 02OC1989 376663
12JL1990 02OC2009 WLP G
SYRI COGNEX WLP D
TADJ COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
TAIW COGNEX (78)01408 28JA1989 477796
16MR1990 15MR2000 WLP G
TAIW COGNEX IN CHINESE CHARACTERS 82059910 06DE1993 654939
16SE1994 15SE2004 WLP G
THAI COGNEX 371708 09NO1998 KOR83130
08DE1998 09NO2008 WLP G
TUNI COGNEX WLP F
EE991593 24SE1999
TURK COGNEX 11383/93 20OC1993 147828
20OC1993 19OC2003 WLP G
UKRA COGNEX 93084114 03AU1993 8843
31OC1997 03AU2003 WLP G
UKRA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
URUG COGNEX 265939 15OC1993 265939
11AU1994 11AU2004 WLP G
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
URUG COGNEX CR 290345 09OC1996 290345
01SE1997 01SE2007 WLP G
UZBE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
VENE COGNEX WLP F 19772-88 24OC1988
VENE COGNEX CR WLP F 86384 05NO1996
VIET COGNEX 8630 06AU1992 7554
22FE1993 06AU2002 WLP G
YUGO COGNEX Z-1124/92 16SE1992 40303
19SE1997 16SE2002 WLP G
YUGO COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ZIMB COGNEX 874/93 12OC1993 974/93
14FE1994 12OC2003 WLP G
</TABLE>
PATENTS
MASTER FILE REPORT PCMASTER REPORTER
13MR2000 9 05 PAGE: 1
TACRINE PATENT PORTFOLIO
<TABLE>
<CAPTION>
Docket Number Ctry CsTp RlTp FlTp FlNo St
- ------ ------ ---- ---- ---- ---- ---- --
<S> <C> <C> <C> <C> <C> <C> <C>
3626 USA P 01 G
APP#: 391808
DATE:09AU1989
PAT#: 5019395
DATE:28MY1991
EXP.DT:28MY2008
ABSTRACT:
PD-3626 US *** THE PENETRATION OF VARIOUS
DRUGS THROUGH LIVING MEMBRANES IS IMPROVED BY
THEIR USE IN TRANSDERMAL COMPOSITIONS
CONTAINING CERTAIN PENETRATION-ENHANCING
SYSTEMS. THIS APPLICATION IS A C-I-P OF USSN
165,322 FILED 3/8/88.
3626 ASTL G
APP#: 30258/89
DATE:23FE1989
PAT#: 611771
DATE:03DE1991
EXP.DT:23FE2009
3626 ASTL 02 G
APP#: 70061/91
DATE:29JA1991
PAT#: 634015
DATE:18JE1993
EXP.DT:29JA2011
3626 ATRA E G
APP#: E90571
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C>
3626 ATRA E 02 G
APP#: E114481
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 BELG E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 BELG E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 DENM F
APP#: 1096/89
DATE:07MR1989
PAT#:
DATE:
EXP.DT:
3626 DENM E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 EPC E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 EPC E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 FRAN E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 FRAN E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 GBRI E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C>
3626 GBRI E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 GERM E 02 G
APP#: EP0499662
DATE:19FE1991
PAT#: P69105480.0
DATE:30NO1994
EXP.DT:19FE2011
3626 GERW E G
APP#: EP0332147
DATE:07MR1989
PAT#: P68907081.0
DATE:16JE1993
EXP.DT:07MR2009
3626 GREC E G
APP#: EP0332147
DATE:07MR1989
PAT#: 3008708
DATE:16JE1993
EXP.DT:07MR2009
3626 GREC E 02 G
APP#: EP0499662
DATE:19FE1991
PAT#: 3014988
DATE:30NO1994
EXP.DT:19FE2011
3626 IREL G
APP#: 390/89
DATE:07FE1989
PAT#: 62871
DATE:15FE1995
EXP.DT:07FE2009
3626 IREL 02 G
APP#: 305/91
DATE:29JA1991
PAT#: 64308
DATE:10JL1995
EXP.DT:29JA2011
3626 ITAL E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 ITAL E 02 G
APP#: 20674BE/95
DATE:19FE1991
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C>
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 JAPA G
APP#: 53069/89
DATE:07MR1989
PAT#: 2939264
DATE:11JE1999
EXP.DT:07MR2009
3626 KORS 02 G
APP#: 1750/91
DATE:01FE1991
PAT#: 191456
DATE:25JA1999
EXP.DT:01FE2011
3626 LUXE E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 LUXE E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 NETH E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 NETH E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 NEWZ G
APP#: 228094
DATE:22FE1989
PAT#: 228094
DATE:20FE1992
EXP.DT:22FE2009
3626 NEWZ 02 G
APP#: 236921
DATE:28JA1991
PAT#: 236921
DATE:09FE1994
EXP.DT:28JA2011
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C>
3626 PHIL G
APP#: 38267
DATE:01MR1989
PAT#: 26548
DATE:19AU1992
EXP.DT:19AU2009
3626 PHIL 02 G
APP#: 41919
DATE:31JA1991
PAT#: 31671
DATE:18JA1999
EXP.DT:18JA2016
3626 PORT 02 G
APP#: 96779
DATE:15FE1991
PAT#: 96779
DATE:26JE1998
EXP.DT:26JE2013
3626 SAFR G
APP#: 89/1031
DATE:09FE1989
PAT#: 89/1031
DATE:31OC1990
EXP.DT:09FE2009
3626 SAFR 02 G
APP#: 91/0624
DATE:28JA1991
PAT#: 91/0624
DATE:28OC1992
EXP.DT:28JA2011
3626 SPAI E G
APP#: EP0332147
DATE:07MR1989
PAT#: 2056981
DATE:16JE1993
EXP.DT:07MR2009
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C>
3626 SPAI E 02 G
APP#: EP0499662
DATE:19FE1991
PAT#: 2064780
DATE:30NO1994
EXP.DT:19FE2011
3626 SWED E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 SWED E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3626 SWIT E G
APP#: 89104017.2
DATE:07MR1989
PAT#: EP0332147
DATE:16JE1993
EXP.DT:07MR2009
3626 SWIT E 02 G
APP#: 91102354.7
DATE:19FE1991
PAT#: EP0499662
DATE:30NO1994
EXP.DT:19FE2011
3884 USA G
APP#: 387722
DATE:31JL1989
PAT#: 4999430
DATE:12MR1991
EXP.DT:31JL2009
</TABLE>
ABSTRACT:
NOVEL PRODRUGS OR DEPOT DERIVATIVES OF
1,2,3,4-TETRAHYDRO-9-ACRIDINAMINE ARE
DESCRIBED, AS WELL AS, METHODS FOR THE
PREPARATION AND PHARMACEUTICAL COMPOSITIONS
OF SAME, WHICH ARE USEFUL AS ANALGESIC AGENTS
FOR THE TREATMENT OF PAIN, AS SLEEP AIDS AND
AS AGENTS FOR TREATING THE SYMPTOMS OF SENILE
DEMENTIA, ALZHEIMER'S DISEASE, HUNTINGTON'S
CHOREA, TARDIVE DYSKINESIA, HYPERKINESIA,
MANIA, OR SIMILAR CONDITIONS OF CEREBRAL
INSUFFICIENCY CHARACTERIZED BY DECREASED
CEREBRAL A CETYLCHOLINE PRODUCTION OR
RELEASE.
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C>
3884 ATRA E G
APP#: E119885
DATE:03JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:03JL2010
3884 ATRA D E 01 G
APP#: E186908
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 BELG E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 BELG D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 CANA F
APP#: 2022297
DATE:30JL1990
PAT#:
DATE:
EXP.DT:
3884 DENM E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 DENM D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 EPC E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 EPC D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
</TABLE>
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C>
DATE:24NO1999
EXP.DT:31JL2009
3884 FRAN E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 FRAN D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 GBRI E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 GBRI D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 GERM D E 01 G
APP#: EP0628548
DATE:30JL1990
PAT#: 69033369.2
DATE:24NO1999
EXP.DT:31JL2009
3884 GERW E G
APP#: EP0411534
DATE:30JL1990
PAT#: P69017789.5
DATE:15MR1995
EXP.DT:30JL2010
3884 GREC E G
APP#: EP0411534
DATE:30JL1990
PAT#: 3016106
DATE:15MR1995
EXP.DT:30JL2010
3884 GREC D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
</TABLE>
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C>
3884 IREL G
APP#: 2751/90
DATE:30JL1990
PAT#: 66823
DATE:16JA1996
EXP.DT:30JL2010
3884 IREL D 01 F
APP#: 950609
DATE:11AU1995
PAT#:
DATE:
EXP.DT:
3884 ITAL E G
APP#: 24477BE/95
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 ITAL D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 JAPA G
APP#: 199361/90
DATE:30JL1990
PAT#: 2930245
DATE:21MY1999
EXP.DT:30JL2010
3884 LUXE E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 LUXE D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 NETH E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 NETH D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C>
EXP.DT:31JL2009
3884 SPAI E G
APP#: EP0411534
DATE:30JL1990
PAT#: 2068955
DATE:15MR1995
EXP.DT:30JL2010
3884 SPAI D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 SWED E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 SWED D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
3884 SWIT E G
APP#: 90114586.2
DATE:30JL1990
PAT#: EP0411534
DATE:15MR1995
EXP.DT:30JL2010
3884 SWIT D E 01 G
APP#: 94112223.6
DATE:30JL1990
PAT#: EP0628548
DATE:24NO1999
EXP.DT:31JL2009
4370 USA P 01 G
APP#: 098871
DATE:24SE1987
PAT#: 4816456
DATE:28MR1989
EXP.DT:09SE2007
</TABLE>
ALL PATENTS WITH THE DOCKET NUMBER
4370 ARE SUBJECT TO THE LICENSE WITH
WILLIAM SUMMERS (SEE OTHER LEGAL
MATTERS SECTION)
ABSTRACT:
A METHOD FOR TREATING CENTRAL NERVOUS SYSTEM
OR PERIPHERAL NERVOUS SYSTEM CHOLOINERGIC
DEFICIT STATES SUCH AS ALZHEIMER'S DISEASE
IN A MAMMAL, SAID METHOD COMPRISING
ADMINISTERING TO SAID MAMMAL AN AMOUNT OF A
MONOAMINE ACRIDINE DERIVATIVE EFFECTIVE IN
THE TREATMENT OF A CHOLINERGIC DEFICIT STATE
AN
<PAGE> 44
<TABLE>
D FOR A TIME SUFFICIENT TO ACHIEVE A SUITABLE BLOOD LEVEL TO
TREAT SAID CHOLINERGIC DEFICIT STATE. THE PREFERRED MONOAMINE
ACRIDINE DERIVATIVE IS 1,2,3,4-TETRAHYDRO-5-AMINO
ACRIDINE A UNIT DOSAGE PHARMACEUTICAL COMPOSITION OF MATTER
COMPRISING AN EFFECTIVE AMOUNT OF SAID MONOAMINE ACRIDINE
DERIVATIVE SUFFICIENT TO TREAT SAID CHOLINERGIC DEFICIT
STATE AND A PHARMACEUTICALLY ACCEPTABLE INERT CARRIER
THEREFOR IS ALSO DISCLOSED. CIP OF U.S. SERIAL NO. 914,076
FILED 01OC1986. NO PRIORITY
<S> <C> <C> <C>
4370 ASTL G
APP#: 80707/87
DATE:28SE1987
PAT#: 621035
DATE:03MR1993
EXP.DT:28SE2007
4370 ASTL D 02 F
APP#: 78886/94
DATE:17NO1994
PAT#:
DATE:
EXP.DT:
4370 ATRA E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:26OC2014
4370 ATRA X G
APP#: E106245
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 ATRA J X G
APP#: SZ9/96
DATE:23MY1996
PAT#: SZ9/96
DATE:23FE1998
EXP.DT:05MY2009
4370 BELG E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 BELG X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 BELG J X F
APP#: 96C0021
DATE:05JE1996
PAT#:
</TABLE>
<PAGE> 45
<TABLE>
<S> <C> <C>
DATE:
EXP.DT:
4370 DENM P F
APP#: 2958/88
DATE:28SE1987
PAT#:
DATE:
EXP.DT:
4370 EPC E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 EPC X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 FRAN E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 FRAN X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 GBRI X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 GERM E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 GERM X G
APP#: EP0328535
DATE:28SE1987
PAT#: P3789967.2
DATE:01JE1995
EXP.DT:28SE2007
</TABLE>
<PAGE> 46
<TABLE>
<S> <C> <C>
4370 ITAL E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 ITAL X G
APP#: 4919/BE94
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 LUXE E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 LUXE X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 MEXI F
APP#: 923762
DATE:29JE1992
PAT#:
DATE:
EXP.DT:
4370 NETH E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
</TABLE>
<PAGE> 47
<TABLE>
<S> <C> <C>
4370 SWIT X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT J G
APP#: 52934
DATE:16JE1995
PAT#: C0328535/01
DATE:30AP1996
EXP.DT:16JE2010
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C> <C>
4627 USA C 01 G
APP#: 08/422019
DATE:12AP1995
PAT#: 5576022
DATE:19NO1996
EXP.DT:19NO2013
ABSTRACT:
RELEASE COMPOSITION COMPRISING;(A) A
WATER-INSOLUBLE POLYMER IN AN AMOUNT FROM
ABOUT 40% TO ABOUT 90%; (B) A WATER-SOLUBLE
POLYMER IN AN AMOUNT UP TO ABOUT 10%; AND (C)A
SECOND PLASTICIZING AGENT IN AN AMOUNT UP TO
ABOUT 10%; WHEREIN THE SUSTAINING LAYER AND
THE IMMEDIATE RELEASE COMPOSITION ARE PRESENT
IN THE SUSTAINED RELEASE COMPOSITION IN A
RATIO BY WEIGHT FROM ABOUT 1:9 TO ABOUT 4:6,
RESPECTIVELY, AND THE IMMEDIATE RELEASE
COMPOSITION AND THE SUSTAINED RELEASE
COMPOSITION ARE PRESENT IN THE DRUG DELIVERY
SYSTEM IN A RATIO BY WEIGHT FROM ABOUT 0.0 1:1
TO ABOUT 1:1, RESPECTIVELY. CONTINUATION OF
USSN 08/096140 FILED 7/22/93.
5180 USA G
APP#: 07/999999
DATE:22DE1986
PAT#: 4631286
DATE:23DE1986
EXP.DT:22DE2006
ABSTRACT: PATENTS WITH THE DOCKET NUMBER
5180 ARE SUBJECT TO THE LICENSE
AGREEMENT WITH HOECHST-ROUSSEL
(SEE OTHER LEGAL MATTERS SECTION)
5180 USA C 01 G
APP#: 07/999999
DATE:27JE1988
PAT#: 4754050
DATE:28JE1988
EXP.DT:22DE2006
5180 USA C 02 G
APP#: 07/999999
DATE:29MY1989
PAT#: 4835275
DATE:30JE1989
EXP.DT:22DE2006
5180 USA C 03 G
APP#: 07/999999
DATE:12JE1989
PAT#: 4839364
DATE:13JE1989
EXP.DT:22DE2006
5180 USA P 01 G
APP#: 07/999999
DATE:22DE1986
PAT#: 4695573
DATE:23DE1986
EXP.DT:22DE2006
5180 ASTL G
APP#: 99999
DATE:23OC1981
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C> <C>
PAT#: 589141
DATE:24OC1981
EXP.DT:23OC2001
5180 ASTL 01 G
APP#: 99999
DATE:18JL1985
PAT#: 615768
DATE:19JL1985
EXP.DT:18JL2005
5180 ATRA E G
APP#: E63903
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 BELG E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 CANA G
APP#: 99999
DATE:02DE1988
PAT#: 1292744
DATE:03DE1988
EXP.DT:03DE2005
5180 CZEC D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 DENM G
APP#: 99999
DATE:23OC1985
PAT#: 167250
DATE:24OC1985
EXP.DT:23OC2005
5180 DENM 01 G
APP#: 99999
DATE:25NO1992
PAT#: 168704
DATE:26NO1992
EXP.DT:25NO2012
</TABLE>
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
5180 EPC E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 FINL G
APP#: 99999
DATE:22OC1985
PAT#: 86421
DATE:23OC1985
EXP.DT:22OC2005
5180 FRAN E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 GBRI E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 GERM E G
APP#: EP0179383
DATE:14OC1985
PAT#: P3582995.0
DATE:15OC1985
EXP.DT:14OC2005
5180 HUNG G
APP#: 99999
DATE:17OC1985
PAT#: 196183
DATE:18OC1985
EXP.DT:17OC2005
5180 ISRA D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 ISRA 01 D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 ITAL E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
</TABLE>
<PAGE> 51
<TABLE>
<S> <C> <C> <C>
5180 JAPA D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 JAPA 01 D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 KORS D
APP#:
DATE:
PAT#:
DATE:
EXP.DT:
5180 LUXE E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 NETH E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 NEWZ G
APP#: 213932
DATE:22OC1981
PAT#: 213932
DATE:23OC1981
EXP.DT:22OC2001
5180 NEWZ 01 G
APP#: 229248
DATE:22OC1981
PAT#: 229248
DATE:23OC1981
EXP.DT:22OC2001
5180 NORW G
APP#: 99999
DATE:23OC1985
PAT#: 169121
DATE:24OC1985
EXP.DT:23OC2005
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
5180 NORW 01 G
APP#: 99999
DATE:29OC1990
PAT#: 172847
DATE:30OC1990
EXP.DT:29OC2010
5180 PHIL G
APP#: 99999
DATE:16OC1985
PAT#: 22614
DATE:17OC1985
EXP.DT:17OC2002
5180 PORT G
APP#: 81362
DATE:29NO1982
PAT#: 81362
DATE:30NO1982
EXP.DT:29NO2002
5180 SAFR G
APP#: 85/08136
DATE:23OC1985
PAT#: 85/08136
DATE:24OC1985
EXP.DT:23OC2005
5180 SPAI G
APP#: 99999
DATE:22OC1985
PAT#: 548137
DATE:23OC1985
EXP.DT:23OC2005
5180 SPAI 01 G
APP#: 99999
DATE:29AP1986
PAT#: 554568
DATE:30AP1986
EXP.DT:30AP2006
5180 SPAI 02 G
APP#: 99999
DATE:29AP1986
PAT#: 554569
DATE:30AP1986
EXP.DT:30AP2006
5180 SWED E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
5180 SWIT E G
APP#: 99999
DATE:14OC1985
PAT#: EP0179383
DATE:15OC1985
EXP.DT:14OC2005
</TABLE>
<PAGE> 53
LICENSES
Licenses In:
1. Royalty Agreement between Mount Sinai School of Medicine and
Warner-Lambert Company dated as of September 8, 1987.
2. Agreement between Shire Holdings Limited and Warner-Lambert Company
dated as of April 20, 1990.
3. License Agreement between William K. Summers, M.D. and Warner-Lambert
Company dated as of September 27, 1990.
4. Settlement and License Agreement between Hoechst-Roussel
Pharmaceuticals Inc. and Warner-Lambert Company dated as of September
28, 1994.
Licenses Out:
1. Technology License Agreement between Je Il Pharmaceutical Co., Ltd. and
Warner-Lambert Company dated as of November 1, 1995. (Korea)
2. Trademark License Agreement between Je Il Pharmaceutical Co., Ltd. and
Warner-Lambert Company dated as of November 1, 1995. (Korea)
3. Amendment Agreement among Warner-Lambert Company, Parke-Davis & Company
and G&M S.A. dated as of August 1, 1994 to the Pharmaceutical License
Agreement dated March 17, 1989 between the parties. (Argentina)
<PAGE> 54
EXHIBIT 1.1.3
REGULATORY APPROVALS
The following Marketing Authorizations relating to the Product:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
REGISTRATION REGISTRATION REGISTRATION
COUNTRY FILED APPROVED NUMBER
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EUROPEAN
UNION
-------------------------------------------------------------------------------------------------------------------
Austria 17-Jan-94 18-Dec-95
-------------------------------------------------------------------------------------------------------------------
Belgium 2-May-94 11-Dec-95
-------------------------------------------------------------------------------------------------------------------
France Jun-90 5-May-94
-------------------------------------------------------------------------------------------------------------------
French Export
Countries
-------------------------------------------------------------------------------------------------------------------
Germany 3-May-94 22-Jun-95
-------------------------------------------------------------------------------------------------------------------
Greece 3-May-94 31-July-95
-------------------------------------------------------------------------------------------------------------------
Luxembourg 3-May-94 29-Nov-95
-------------------------------------------------------------------------------------------------------------------
Norway
-------------------------------------------------------------------------------------------------------------------
Portugal 5-May-94 1-July-97
Nacional
-------------------------------------------------------------------------------------------------------------------
Spain 27-Apr-94 15-Dec-95
-------------------------------------------------------------------------------------------------------------------
Switzerland 7-Feb-94 16-Jun-95
-------------------------------------------------------------------------------------------------------------------
U.K. 29-Apr-94 22-May-97
-------------------------------------------------------------------------------------------------------------------
Australia 7-Nov-93 30-Nov-94
-------------------------------------------------------------------------------------------------------------------
U.S. 1-Jun-90 9-Sep-93
-------------------------------------------------------------------------------------------------------------------
LATIN AMERICA
-------------------------------------------------------------------------------------------------------------------
Argentina 15-Jun-94
-------------------------------------------------------------------------------------------------------------------
Brazil 15-Sep-94
-------------------------------------------------------------------------------------------------------------------
Chile 17-Dec-94
-------------------------------------------------------------------------------------------------------------------
Colombia 29-Jun-95
-------------------------------------------------------------------------------------------------------------------
Ecuador 30-Oct-95 (10+40 mg)
13-Nov-95 (30 mg)
-------------------------------------------------------------------------------------------------------------------
El Salvador 30-Aug-95
-------------------------------------------------------------------------------------------------------------------
Guatemala 17-May-94
-------------------------------------------------------------------------------------------------------------------
Peru 21-Aug-95
-------------------------------------------------------------------------------------------------------------------
Puerto Rico
-------------------------------------------------------------------------------------------------------------------
Uruguay 15-Oct-94
-------------------------------------------------------------------------------------------------------------------
VENEZUELA 9-Dec-94
-------------------------------------------------------------------------------------------------------------------
ASIA
-------------------------------------------------------------------------------------------------------------------
Hong Kong 1-Aug-95
-------------------------------------------------------------------------------------------------------------------
Israel Oct-96
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
REGISTRATION REGISTRATION REGISTRATION
COUNTRY FILED APPROVED NUMBER
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Korea 9-Feb-96
-------------------------------------------------------------------------------------------------------------------
Philippines 14-May-96
-------------------------------------------------------------------------------------------------------------------
Singapore 24-Aug-95
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 56
EXHIBIT 1.1.7
[****]-CONFIDENTIAL TREATMENT REQUESTED
PREPAID ROYALTIES
An amount equal to $[****] less the actual royalty payable by Warner-Lambert to
Licensor under the License Agreement dated as of September 27, 1990 between
William K. Summers, M.D. and Warner-Lambert Company for the period beginning
April 1, 2000 and ending on May 31, 2000.
<PAGE> 57
EXHIBIT 2.1
PACKAGE INSERT PROVISIONS FOR COGNEX CR
INDICATIONS
COGNEX CR is indicated for the treatment of mild to moderate dementia of the
Alzheimer type.
CLINICAL ADVERSE EXPERIENCES, WARNINGS, PRECAUTIONS
COGNEX CR labeling will include liver monitoring recommendations that are no
worse than that of COGNEX IR.
DOSAGE AND ADMINISTRATION
The dosage range of COGNEX CR is 100 to 200 mg once a day.
<PAGE> 58
EXHIBIT 2.2
ALLOCATION
The Purchase Price is allocated as follows:
$500,000 of the Purchase Price should be allocated to Intellectual Property and
any licenses. Any remaining portion of the Purchase Price should be allocated
to goodwill.
<PAGE> 59
EXHIBIT 3.7(A)
GOVERNMENTAL AND THIRD PARTY CONSENTS
Issuance of a Decision and Order by the Federal Trade Commission in the matter
of Pfizer Inc., a corporation; and Warner-Lambert Company, a corporation,
approving Horizon as the purchaser of the Cognex Divestiture Assets, as defined
therein.
Consent of Mount Sinai School of Medicine ("Mt. Sinai") to the assignment of the
Agreement dated September 8, 1987 between Warner-Lambert and Mt. Sinai.
<PAGE> 60
EXHIBIT 3.7(B)
GOVERNMENTAL AND THIRD PARTY CONSENTS
Issuance of a Decision and Order by the Federal Trade Commission in the matter
of Pfizer Inc., a corporation; and Warner-Lambert Company, a corporation,
approving Horizon as the purchaser of the Cognex Divestiture Assets, as defined
therein.
<PAGE> 61
EXHIBIT 3.10
MANAGED CARE CUSTOMERS
<PAGE> 62
[*****]-CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
COGNEX CONTRACTS
ALPHA LISTING
Renewal/ Current Rights to
Term. Rights Rebate/ Contract Change Assign. Primary Admin.
Name Type Contact Phone Term Both Parties Discount Price Price/ Rights Whole- Fee Amend.
Person Number Rebate saler
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*****]
- -----------------------------------------------------------------------------------------------------------------------------------
PENDING
-----------------------------------------------------------------------------------------------------------------
[*****]
- -----------------------------------------------------------------------------------------------------------------------------------
*[*****]
</TABLE>
<PAGE> 63
EXHIBIT 7.1.4(A)
ASSIGNMENT, ASSUMPTION AND BILL OF SALE
THIS GENERAL ASSIGNMENT, ASSUMPTION AND BILL OF SALE is
entered into this __ day of May, 2000, by and among FIRST HORIZON
PHARMACEUTICAL CORPORATION, a Delaware corporation ("Horizon"), and
WARNER-LAMBERT COMPANY, a Delaware corporation ("Warner-Lambert").
WHEREAS, Horizon and Warner-Lambert have entered into a
Asset Purchase Agreement, dated as of April 14, 2000 (the "Asset Purchase
Agreement"; capitalized terms not defined herein shall have the meanings
ascribed to them in the Asset Purchase Agreement), pursuant to which
Warner-Lambert has agreed to sell to Horizon and Horizon has agreed to purchase
from Warner-Lambert certain of the assets of Warner-Lambert relating to the
Product and Horizon has agreed, in consideration therefor, to assume certain
obligations in connection therewith;
NOW, THEREFORE, the parties hereto agree as follows:
1. Conveyance and Acceptance. (a) Warner-Lambert hereby irrevocably sell,
assign, and transfer to Horizon, free and clear of all liens, all of
Warner-Lambert's right, title and interest in the Assets and Assumed
Liabilities, other than the Retained Liabilities, as the same shall exist on the
date hereof (collectively, the "Assigned Assets").
(b) Horizon hereby accepts the sale, assignment and transfer of
the Assigned Assets.
2. Further Assurances. (a) At any time or from time to time after the date
hereof, at Horizon's request and without further consideration, Warner-Lambert
shall execute and deliver to Horizon such other instruments of sale, transfer,
conveyance, assignment and confirmation, provide such materials and information
and take such other actions as Horizon may reasonably deem necessary or
desirable in order more effectively to sell, assign and transfer to Horizon and
to confirm Horizon's title to, all of the Assigned Assets, and, to the fullest
extent permitted by law, to put Horizon in actual possession and operating
control of the Assigned Assets and to assist Horizon in exercising all rights
with respect thereto.
(b) Warner-Lambert hereby constitutes and appoints Horizon the
true and lawful attorney of Warner-Lambert, with full power of substitution, in
the name of Warner-Lambert or Horizon, but on behalf of and for the benefit of
Horizon: (i) to demand and receive from time to time any and all of the
Assigned Assets and to make endorsements and give receipts and releases for and
in respect to the same and any part thereof; (ii) to institute, prosecute,
compromise and settle any and all Actions that Horizon may deem proper in order
to collect, assert or enforce any claim, right or title of any kind in or to
the Assigned Assets; (iii) to defend or compromise any and all Actions in
respect of any of the Assigned Assets; and (iv) to do all such acts and things
in relation to the matters set forth in the preceding clauses (i) through (iii)
as Horizon shall deem desirable. Warner-Lambert hereby acknowledges that the
appointment hereby made and the powers hereby granted are coupled with an
interest and are not and shall not be revocable by it in any manner or for any
reason. Horizon shall indemnify and hold harmless Warner-Lambert
<PAGE> 64
and its officers, directors, employees, agents and Affiliates from any and all
Losses caused by or arising out of any breach of law by Horizon in its exercise
of the aforesaid powers.
3. Assumption of Liabilities. (a) Horizon hereby undertakes and agrees from
and after the date hereof, subject to the limitations contained herein, to
assume and to pay, perform and discharge when due the Assumed Liabilities.
(b) Nothing contained herein shall require Horizon to pay or discharge
any debts or obligations expressly assumed hereby so long as Horizon shall in
good faith contest or cause to be contested the amount or validity thereof.
(c) Other than as specifically stated above or in the Asset Purchase
Agreement, Horizon assumes no debt, liability or obligation of Warner-Lambert,
including without limitation the Retained Liabilities, by this General
Assignment, Assumption and Bill of Sale, and it is expressly understood and
agreed that all debts, liabilities and obligations not assumed hereby by
Horizon shall remain the sole obligation of Warner-Lambert, its successors and
assigns.
(d) No person other than the Warner-Lambert and its respective
successors and assigns shall have any rights under the provisions of this
Section 3.
4. Miscellaneous. (a) This General Assignment, Assumption and Bill of
Sale may be executed in any number of counterparts, each of which will be deemed
an original, but all of which together will constitute one and the same
instrument.
(b) This General Assignment, Assumption and Bill of Sale shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York applicable to a contract executed in that State.
(c) This General Assignment, Assumption and Bill of Sale shall be
binding upon and shall inure to the benefit of permitted assigns and
successors.
IN WITNESS WHEREOF, this General Assignment, Assumption and
Bill of Sale has been duly executed and delivered by a duly authorized officer
of each party on the day and year first above written.
FIRST HORIZON PHARMACEUTICALS CORPORATION
By:
--------------------------------------
Name:
Title:
WARNER-LAMBERT COMPANY
By:
--------------------------------------
Name:
Title:
<PAGE> 65
EXHIBIT 7.1.4(B)
TRADEMARK ASSIGNMENT
WHEREAS, [WARNER-LAMBERT COMPANY] [NAME OF AFFILIATE], a corporation organized
and existing under the laws of the state of [Delaware][State of Incorporation],
with an office and place of business at 201 Tabor Road, Morris Plains, New
Jersey 07950, is the owner of the trademarks listed on the attached schedule
(the "Trademarks"), and
WHEREAS, FIRST HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and
existing under the laws of Delaware, with an office and place of business at
660 Hembree Parkway, Suite 106, Roswell, Georgia 30076, pursuant to an Asset
Purchase Agreement dated April 14, 2000 among said parties, is desirous of
acquiring all rights, title and interest in and to the Trademark, including the
goodwill associated therewith;
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, said WARNER-LAMBERT COMPANY hereby assigns to said FIRST
HORIZON PHARMACEUTICAL CORPORATION all rights, title and interest in the
Trademark and the goodwill associated therewith.
[WARNER-LAMBERT COMPANY]
[NAME OF AFFILIATE]
---------------------------
Name:
Title:
Date:
<PAGE> 66
TRADEMARK ASSIGNMENT
SCHEDULE OF TRADEMARKS
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
USA COGNEX 73/762382 07NO1988 1543222
13JE1989 13JE2009 WLP G
ANDO COGNEX 12903 04DE1998 12467
04DE1998 04DE2008 WLP G
AOIP COGNEX 82989 16NO1993 33312
15SE1994 16NO2003 WLP G
ARGE COGNEX 1668032 19OC1988 419731
26FE1993 26FE2003 WLP G
ARME COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ASTL COGNEX 497479 01MY1995 A497479
01MY1995 17OC2009 WLP G
ATRA COGNEX AM4962/89 11OC1989 129313
09MR1990 31JA2000 WLP G
ATRA COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
AZER COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BELA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
BENE COGNEX 65023 14SE1998 457086
02FE1999 26OC2008 WLP G
BENE COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
BRAZ COGNEX 68344 29DE1999 814501605
28AU1990 28AU2000 WLP G
BRAZ COGNEX CR 819637173 04NO1996 819637173
13JL1999 13JL2009 WLP G
</TABLE>
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BULG COGNEX 21382 08SE1992 21730
30SE1993 08SE2002 WLP G
BULG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
CAMB COGNEX 1803 08OC1992 1801
21AP1993 08OC2002 WLP G
CHIL COGNEX 443093 12MR1999 539520
01JL1999 27AP2009 WLP G
CHIL COGNEX CR 357493 10OC1996 489543
14JL1997 14JL2007 WLP G
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INDI COGNEX WLP F 609118 11OC1993
INDO COGNEX NONE 11SE1989 271725
13FE1992 13AU2001 WLP G
INTL COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
IREL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
IREL COGNEX 6377/89 27NO1996 135633
27NO1996 26NO2006 WLP G
ISRA COGNEX 89254 14OC1993 89254
13SE1995 13OC2000 WLP G
ITAL COGNEX WLP F RM005925 03DE1997
ITAL COGNEX RM98C005339 28OC1998 557807
13JA1992 03NO1998 WLP G
ITAL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
JAMA COGNEX 5/4953 19OC1993 27282
14NO1996 19OC2000 WLP G
JAPA COGNEX 119497/1988 20OC1988 2313556
28JE1991 28JE2001 WLP G
JORD COGNEX NONE 15NO1999 33170
23OC1993 23OC2000 WLP G
KAZA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
KENY COGNEX 40928 23NO1993 40928
30MR1995 23NO2000 WLP G
KORS COGNEX 93-35581 07OC1993 307643
08FE1995 08FE2005 WLP G
KORS COGNEX IN KOREAN CHARACTERS 94-49286 09DE1994 331529
16JA1996 16JA2006 PDA G
KYRG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
LAOS COGNEX 1342 11SE1992 1437
20JL1993 11SE2002 WLP G
LATV COGNEX M-93-2209 08MR1993 M33894
20OC1996 08MR2003 WLP G
LEBA COGNEX WLP F 61860 18AU1994
LITH COGNEX 12922 05OC1993 23927
16DE1996 05OC2003 WLP G
MACE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
CHIN COGNEX 93125913 02DE1993 765722
14SE1995 13SE2005 WLP G
COLO COGNEX 309872 11SE1989 147849
10NO1993 10NO2003 WLP G
COLO COGNEX CR 96056701 25OC1996 197101
15MY1997 15MY2007 WLP G
COST COGNEX NONE 07DE1994 95326
27MR1996 27MR2006 WLP G
CTM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
CUBA COGNEX 1033/96 11JE1996 125203
28FE1997 11JE2006 WLP G
CZEC COGNEX 71543-92 04SE1992 179288
31AU1994 04SE2002 WLP G
DENM COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
DENM COGNEX 6580/1989 07SE1989 7273/1992
07AU1992 07AU2002 WLP G
DREP COGNEX NONE 03NO1993 70025
15JA1994 15JA2014 WLP G
ECUA COGNEX 42184/93 08OC1993 3834-94
14NO1994 14NO2004 WLP G
EGYP COGNEX 88550 11OC1993 88550
22JE1998 11OC2003 WLP G
ESTO COGNEX 9303722 14AP1993 16105
30JE1995 30JE2005 WLP G
FINL AXONYL 4039/91 27AU1991 122292
21SE1992 21SE2002 WLP G
FINL COGNATEX 4040/91 27AU1991 122293
21SE1992 21SE2002 WLP G
FINL COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- ------------------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
MAYS COGNEX NONE 03JL1996 MA/5572/89
22JL1996 12SE2010 WLP G
MEXI COGNEX 160501 11FE1993 452998
24FE1994 11FE2003 WLP G
MOLD COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
MONG COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
NEWZ COGNEX NONE 14DE1994 188209
14DE1994 19OC2009 WLP G
NICA COGNEX 93-02730 29NO1993 26207
12JL1994 11JL2004 WLP G
NIGE COGNEX WLP F NONE 26OC1993
NORW AXONYL 91/4361 28AU1991 175093
14MR1996 14MR2006 WLP G
NORW COGNATEX 91/4360 28AU1991 154564
14JA1993 14JA2003 WLP G
NORW COGNEX 89/4387 11SE1989 144521
21MR1991 21MR2001 WLP G
PAKI COGNEX WLP F 104073 27SE1989
PANA COGNEX 77106 04SE1995 77106
28OC1996 28OC2006 WLP G
PARA COGNEX 18125 18DE1991 154686
24JE1992 24JE2002 WLP G
PERU COGNEX 240536 20AP1994 79857
19AU1994 10MY2004 WLP G
PHIL COGNEX 76718 08JL1991 55601
02JL1993 02JL2013 WLP G
POLA COGNEX Z-113342 09SE1992 79098
28OC1994 09SE2002 WLP G
PORT COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
PORT COGNEX 259054 12OC1989 259054
06MY1993 06MY2003 WLP G
PUER COGNEX NONE 20JL1993 33734
04NO1994 04NO2004 WLP G
ROMA COGNEX 27765 16SE1992 19848
26MR1996 16SE2002 WLP G
RUSS COGNEX 165803 09NO1992 120087
09NO1992 09NO2002 WLP G
RUSS COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
SAFR COGNEX NONE 26MR1999 89/9005
29MR1999 26SE2009 WLP G
SALV COGNEX 3743 14OC1993 156
08MY1995 08MY2005 WLP G
SAUD COGNEX 22612 16OC1993 314/37
25JL1994 26JE2003 WLP G
SING COGNEX 5960/89 02JL1996 S/5960/89
19FE1997 08SE2006 WLP G
SLOV COGNEX Z-9870111 27JA1998 9870111
05OC1998 26JA2008 WLP G
SLVK COGNEX 0-71543-92 04SE1992 174926
14JE1995 04SE2002 WLP G
SPAI COGNEX 1521725 05MY1999 1521725
01JA2000 28SE2009 WLP G
SPAI COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SPAI COGNEX CR 2050172 02OC1996 2050172
05MR1997 02OC2006 WLP G
SWED COGNEX 89-08491 23AU1989 244648
30DE1992 30DE2002 WLP G
SWED COGNEX 80846 01AP1996 80846
03AU1998 01AP2006 WLP G
SWED COGNEX CR 96-09133 08OC1996 326021
16JA1998 16JA2008 WLP G
SWIT COGNEX 7341 02OC1989 376663
12JL1990 02OC2009 WLP G
SYRI COGNEX WLP D
TADJ COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
TAIW COGNEX (78)01408 28JA1989 477796
16MR1990 15MR2000 WLP G
TAIW COGNEX IN CHINESE CHARACTERS 82059910 06DE1993 654939
16SE1994 15SE2004 WLP G
THAI COGNEX 371708 09NO1998 KOR83130
08DE1998 09NO2008 WLP G
TUNI COGNEX WLP F
EE991593 24SE1999
TURK COGNEX 11383/93 20OC1993 147828
20OC1993 19OC2003 WLP G
UKRA COGNEX 93084114 03AU1993 8843
31OC1997 03AU2003 WLP G
UKRA COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
URUG COGNEX 265939 15OC1993 265939
11AU1994 11AU2004 WLP G
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
Ctry Trademark
Curr Reg D Renewal Owner Status Curr App No Cur App Dt Curr Reg No
- ---------- --------- ----- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
URUG COGNEX CR 290345 09OC1996 290345
01SE1997 01SE2007 WLP G
UZBE COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
VENE COGNEX WLP F 19772-88 24OC1988
VENE COGNEX CR WLP F 86384 05NO1996
VIET COGNEX 8630 06AU1992 7554
22FE1993 06AU2002 WLP G
YUGO COGNEX Z-1124/92 16SE1992 40303
19SE1997 16SE2002 WLP G
YUGO COGNEX IN CYRILLIC NONE 21NO1996 IR666352
21NO1996 21NO2006 PDGB G
ZIMB COGNEX 874/93 12OC1993 974/93
14FE1994 12OC2003 WLP G
</TABLE>
<PAGE> 72
EXHIBIT 7.1.5
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (the "Agreement") is made and entered
into as of [____], 2000 (the "Effective Date"), by and between PARKE-DAVIS
PHARMACEUTICALS LIMITED, a company organized and existing under the laws of the
Cayman Islands ("SUPPLIER"), and FIRST HORIZON PHARMACEUTICAL CORPORATION, a
corporation organized and existing under the laws of Delaware ("PURCHASER").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in Article 1.
WITNESSETH:
WHEREAS, PURCHASER has purchased the Product from SUPPLIER pursuant to
an asset purchase agreement between Warner-Lambert Company and PURCHASER dated
as of April 14, 2000 (the "Asset Purchase Agreement");
WHEREAS, PURCHASER does not have immediate capacity for manufacturing
or causing to be manufactured the Products or the Active Ingredient;
WHEREAS, pursuant to the terms of the Asset Purchase Agreement,
SUPPLIER has undertaken to supply Product and the Active Ingredient to
PURCHASER;
WHEREAS, SUPPLIER is a manufacturer with adequate capacity for
manufacturing PURCHASER's Product and Active Ingredient;
WHEREAS, the parties desire to enter into a Supply Agreement pursuant
to which SUPPLIER shall supply the Products and the Active Ingredient to
PURCHASER; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained herein, the parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have the meanings
set forth below:
"Active Ingredient" means tacrine hydrochloride.
"Affiliate" means (i) any company or entity, more than fifty percent
(50%) of whose voting stock or participating profit interest is owned or
controlled, directly or indirectly, by a party; (ii) any company, entity or
person which owns or controls, directly or indirectly, more than fifty percent
(50%) of the voting stock or participating profit interest of a party and (iii)
any company, entity or person which is under common control with a party hereto.
The term "common control" means a third party has direct or indirect ownership
of fifty percent (50%) or more of the voting stock or participating profit
interest of both the other company or entity and the party to this Agreement.
"Asset Purchase Agreement" has the meaning set forth in the Recitals.
<PAGE> 73
"Business Day" means a day during which banks are generally open for
business in New York.
"GMPs" means the regulatory standards and the principles and
guidelines of good manufacturing practice, as in effect from time to time,
relating to the manufacture of medicinal products including, but not limited to,
standards for equipment, facilities, production and quality control established
by the applicable Governmental or Regulatory Authority.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, agency, commission, official or other instrumentality of the
European Community or any relevant country, state, province, county, city or
other political subdivision.
"Marketing Authorization" means the authorization to sell the Product,
as granted by the relevant Governmental or Regulatory Authorities.
"Manufacturing Authorization" means any authorization necessary to
manufacture the Product, as granted by the relevant Governmental or Regulatory
Authorities.
"Product" means the filled capsule shells and the fully-finished and
packaged pharmaceutical product, in each case containing the Active Ingredient
supplied pursuant to this Agreement and set forth in Schedule A or otherwise
pursuant to Article 2 of this Agreement.
"Production Fee" means the appropriate fees set forth on Exhibit I to
this Agreement.
"Proprietary Information" has the meaning set forth in Section 6.1.
"Raw Materials" means all raw materials and packaging materials
(including labeling), other than the Active Ingredient, needed to produce the
Product.
"Reimbursement Amount" has the meaning set forth in Section 5.4.
"Specifications" means the specifications and procedures currently
utilized by SUPPLIER in testing Raw Materials and the Active Ingredient and in
manufacturing and testing the Product which are according to the Marketing
Authorizations for the Product in effect on the date hereof or such other
manufacturing specifications as are mutually agreed upon in writing by the
parties hereto, including all stability requirements set forth therein.
2. PRODUCTION ARRANGEMENT.
2.1 Appointment. PURCHASER hereby appoints SUPPLIER and SUPPLIER
hereby agrees to be a supplier of the Product and the Active Ingredient to
PURCHASER pursuant to and for the term of this Agreement.
2.2 Agreement to Supply and Purchase the Product. (a) Schedule A
hereto sets forth the total number of filled capsule shells of Product that
SUPPLIER will supply to PURCHASER during the year 2000. Schedule A shall
indicate the allocation of such filled capsule shells as between the U.S. and
the "rest of world."
<PAGE> 74
(b) On or prior to April 21, 2000, PURCHASER shall provide to
SUPPLIER a schedule (the "Production Schedule") indicating the manner in which
such filled capsule shells shall be packaged and labeled. The Production
Schedule shall include the information set forth on Schedule B to this
Agreement. SUPPLIER shall promptly confirm its ability to manufacture and
package the product in accordance with the Production Schedule. Thereafter,
SUPPLIER shall use its commercially reasonable efforts to supply to PURCHASER
the Product in such quantities and on such dates as set forth in the agreed-upon
Production Schedule, subject to SUPPLIER's ability to complete any required
packaging and labeling changes. In the event SUPPLIER is unable to supply the
Product to PURCHASER on a delivery date set forth on the Production Schedule,
for a reason other than SUPPLIER's inability to complete packaging and labeling
changes in time, SUPPLIER shall use its commercially reasonable efforts to
deliver such Product as soon as practicable thereafter, but in any event, no
later than thirty (30) days after the applicable delivery date.
(c) PURCHASER shall purchase from SUPPLIER Product in the
quantities and on the delivery dates set forth in the Production Schedule. In
the event PURCHASER fails at any time to purchase all Product manufactured and
made available for delivery by SUPPLIER as specified in this Section 2.2(b),
PURCHASER shall pay to SUPPLIER an amount equal to the total Production Fee
which would have otherwise been paid to SUPPLIER had PURCHASER purchased the
quantity specified on the Production Schedule on the applicable date.
2.3 Active Ingredient and Raw Materials. (a) SUPPLIER will at all
times acquire, at its own cost and expense, the Active Ingredient and Raw
Materials, in such quantities as are necessary to enable SUPPLIER to manufacture
and supply the desired quantities of the Product during the term of this
Agreement. SUPPLIER will perform all quality control procedures with respect to
the Active Ingredient and Raw Materials in accordance with the Specifications.
(b) SUPPLIER will, or will cause its Affiliates to, use its
commercially reasonable efforts to provide PURCHASER with the Active Ingredient
in the quantity, on the delivery date and at the price set forth on Schedule C
hereto. In the event SUPPLIER or its Affiliate is unable to supply the Active
Ingredient to PURCHASER on the delivery date set forth on Schedule C, SUPPLIER
shall, or shall cause its Affiliate to, use its commercially reasonable efforts
to deliver such Active Ingredient as soon as practicable thereafter, but in any
event, no later than thirty (30) days after the original delivery date.
(c) PURCHASER shall purchase from SUPPLIER the Active Ingredient
in the quantities and on the delivery dates set forth in Schedule C. Subject to
Section 10.3 hereof, in the event PURCHASER fails at any time to purchase all of
the Active Ingredient manufactured and made available for delivery by SUPPLIER
as specified in this Section 2.3(c), PURCHASER shall pay to SUPPLIER an amount
equal to the total Production Fee which would otherwise have been paid to
SUPPLIER had PURCHASER purchased the quantity specified on Schedule C on the
applicable date.
2.4 Changes to Production Schedule. Purchaser may request changes
to the Production Schedule relating to the allocation of Product among
countries, quantity and dosage strength and SUPPLIER shall use commercially
reasonable efforts to effectuate such changes; provided, however, that such
changes shall not in any way decrease the obligation of
<PAGE> 75
PURCHASER to purchase the aggregate equivalent amount of Product as set forth on
the Production Schedule as originally agreed upon by the parties.
2.5 Controlling Provisions. In ordering and delivering, PURCHASER
and SUPPLIER may employ their standard forms, but nothing in those forms shall
be construed to modify or amend the terms of this Agreement and in case of
conflict herewith, this Agreement shall control.
3. DELIVERY AND ACCEPTANCE.
3.1 Delivery. The Products and Active Ingredient shall be
delivered to a carrier designated by PURCHASER at SUPPLIER's or its Affiliates
plants in Holland, Michigan, Vega Baja, Puerto Rico or Frieburg, Germany, as
PURCHASER shall direct. Title to and risk of loss for the Product or Active
Ingredient shall transfer to PURCHASER upon delivery to PURCHASER or its
designee at the designated location(s) set forth above.
3.2 Acceptance of Shipments. After receipt of a shipment of
Products or Active Ingredient, PURCHASER shall within ten (10) Business Days
after delivery thereof, visually inspect the Product or Active Ingredient
shipment and communicate acceptance or rejection to SUPPLIER in writing. The
parties agree that PURCHASER's visual inspection consists of (i) comparing the
applicable order against the documentation accompanying the shipment to verify
that the delivery date, identity, quantity and exterior shipment labeling comply
with the order and (ii) visually inspecting the exterior of the shipment to
verify that the shipment appears to be in good condition.
3.3 Failure to meet Specifications. In addition, after the date of
acceptance by PURCHASER pursuant to Section 3.2, PURCHASER shall be entitled to
return any shipment of Product or Active Ingredient, in whole or in part, to the
extent that such Product or Active Ingredient fails to meet Specifications (as
such Specifications existed on the date of delivery), where such failure is due
solely to the actions or omissions of SUPPLIER.
4. PRODUCTION FEE AND PAYMENT.
4.1 Production Fees. Subject to Sections 2.2(c) and 2.3(c),
PURCHASER will pay SUPPLIER the applicable Production Fees for Product
(including costs of Active Ingredient, Raw Materials, manufacturing, filling,
inspecting, quality control, stability testing and packaging) or Active
Ingredient delivered to PURCHASER hereunder.
4.2 Invoices. SUPPLIER will issue an invoice to PURCHASER for the
full Production Fee with each shipment of the Product and Active Ingredient
delivered in accordance with Section 3.1. SUPPLIER will invoice PURCHASER in
U.S. dollars for all other amounts due hereunder on or after performance or
occurrence of the event that entitles SUPPLIER to be paid such amount by
PURCHASER. All invoices hereunder will be due and payable by PURCHASER in U.S.
dollars within thirty (30) days after receipt of the invoice by PURCHASER.
4.3 Taxes. In addition to payment of the Production Fee, PURCHASER
will be responsible for the payment of any sales and use taxes on the Product or
Active Ingredient delivered by SUPPLIER to PURCHASER.
<PAGE> 76
5. QUALITY CONTROL.
5.1 Manufacturing Process and Quality Assurance. The Product will
be manufactured by SUPPLIER in compliance with applicable laws and the
Specifications and in accordance with the manufacturing, quality assurance and
validation procedures currently employed by SUPPLIER in manufacturing the
Product or such other procedures as may be mutually agreed upon, or as may be
required under the applicable Marketing Authorizations.
5.2 Modifications. Any request for modification of the
Specifications (including a change of the Raw Materials or Active Ingredient)
will be made by the requesting party to the other party in writing. SUPPLIER
will inform PURCHASER of the amount of any additional costs (including capital
expenditures) that any such modification would reasonably entail, if any, and,
if PURCHASER elects to adopt the modification, the Production Fee will be
increased by the amount of such additional costs, and the relevant documents and
related schedules will be revised accordingly. If SUPPLIER is technically unable
to comply with a modification proposed by PURCHASER or if PURCHASER is unwilling
to pay the additional costs associated with any modification, the requesting
party will have the option to withdraw the proposed modification or, if the
requesting party can demonstrate that it reasonably requires such modification
for business or regulatory reasons, to terminate this Agreement. Each party will
notify the other party as soon as reasonably possible of any proposed changes to
the Specifications, procedures or other areas that have an impact on the other
party's performance of this Agreement. In no event will SUPPLIER be required to
make (or not to make) a modification that it deems prohibited (or required) by
applicable regulations or regulatory authorities. Notwithstanding the foregoing,
SUPPLIER shall not have the right to terminate this Agreement pursuant to this
Section 5.2 if PURCHASER is unwilling to pay the additional costs associated
with any modification proposed by SUPPLIER, other than modifications that are
required for regulatory reasons.
5.3 Testing. SUPPLIER will perform such quality assurance testing
as required under the applicable Specifications, and will provide evidence of
such testing to PURCHASER or its designee in a certificate of analysis for each
Product lot which confirms that the Product lot has been manufactured and
analyzed by SUPPLIER according with the applicable Specifications. SUPPLIER
shall provide a copy of the applicable certificate of analysis to PURCHASER with
each Product lot that is delivered to PURCHASER or by facsimile on the date of
delivery.
5.4 Reimbursement for Non-Conforming Product. If the Product fails
to meet the Specifications, where such failure is due solely to the actions or
omissions of SUPPLIER, SUPPLIER will credit PURCHASER with the Reimbursement
Amount. The "Reimbursement Amount" will be deemed equal to the sum of any costs
reasonably expended by PURCHASER in order to identify the defect (i.e.,
testing), plus all Production Fees paid on account of the subject Product. The
Reimbursement Amount will be payable sixty (60) days after rejection of the
subject Product in accordance with this Section. At PURCHASER's option, (i)
SUPPLIER will be relieved of any obligation to deliver any Product with respect
to the non-conforming batch, or (ii) SUPPLIER will replace the non-conforming
batch with substitute Product that conforms with the Specifications and any
other requirements of this Agreement, within sixty (60) calendar days from the
date PURCHASER notifies SUPPLIER of its election of option (ii) of this Section
5.4, in which case PURCHASER will pay to SUPPLIER amounts in accordance with
Article 4 based on the substitute Product. SUPPLIER will dispose of the
non-conforming Product at its own expense This Section 5.4 sets forth
PURCHASER's sole remedy for non-conforming
<PAGE> 77
Product that is identified before sale thereof by PURCHASER to PURCHASER's
customer, and under no circumstances will SUPPLIER be liable to PURCHASER for
any damages, including, without limitation, direct, special, incidental or
consequential damages (including, without limitation, loss of business, profits,
or goodwill), arising therefrom (whether in contract, tort, negligence or
otherwise) or in connection with its performance under this Agreement.
5.5 Access for Quality Control. Subject to SUPPLIER's reasonable
ability to assure the confidentiality of its other projects, SUPPLIER will
permit PURCHASER's representatives and representatives of applicable
Governmental or Regulatory Authorities to enter SUPPLIER's plants located in
Holland, Michigan, Vega Baja, Puerto Rico or Freiburg, Germany upon reasonable
advance written notice and at reasonable intervals during regular business hours
solely for the purpose of making quality control inspections of the facilities
used in production of the Product or Active Ingredient for PURCHASER, including
manufacturing, receiving, sampling, analyzing, storing, handling, packaging,
shipping and disposing of the Active Ingredient and the Product. In addition,
the parties agree that a member of SUPPLIER's pharmaceutical quality assurance
team shall be present at all such inspections.
6. CONFIDENTIAL INFORMATION.
6.1 Confidentiality. PURCHASER and SUPPLIER will at all times
maintain as confidential any information, technology, formulation, process,
packaging, analytical methods, stability data, registration data or know-how of
a proprietary or confidential nature relating to the Product or Active
Ingredient disclosed by the other party pursuant to or in connection with this
Agreement (the "Proprietary Information"); provided, however, that the term
"Proprietary Information" does not include information which becomes available
to the receiving party following the date of this Agreement on a
non-confidential basis from a source other than the disclosing party, its
representatives or Affiliates, if such source is not under an obligation,
(whether contractual, legal or fiduciary) to the disclosing party, its
representatives or its Affiliates to keep such information confidential.
6.2 Survival of Confidentiality. PURCHASER and SUPPLIER hereby
agree that the provisions of this Article 6 and the obligations of
confidentiality herein will endure for a period of five (5) years after the
expiration or termination of this Agreement; provided, however, that with
respect to Proprietary Information regarding, arising out of, relating to,
reflecting, incorporating or based upon scientific, technological (including,
without limitation, analytical, manufacturing or formulation technology),
regulatory or compliance matters, the obligations of confidentiality herein will
not terminate.
7. INDEMNIFICATION.
7.1 Indemnification of SUPPLIER. PURCHASER will defend, indemnify,
and hold harmless SUPPLIER, its officers, agents, employees and Affiliates from
any loss, claim, action, damage, penalty, fine, expense or liability (including
reasonable defense costs and attorneys fees) ("Claim") to the extent the same
arises out of or is related to (a) the breach of any representation, warranty or
guarantee made by PURCHASER herein, (b) the handling, possession or use of the
Product following delivery to PURCHASER in accordance with Section 3.1
including, without limitation, express and implied warranties of
merchantability, fitness for a particular purpose and strict liability, unless
the claim results from the applicable Product failing
<PAGE> 78
to conform to the Specifications, where such non-compliance is due solely to the
actions or omissions of SUPPLIER or (c) any other negligent act or omission of
PURCHASER.
7.2 Indemnification of PURCHASER. SUPPLIER will defend, indemnify,
and hold harmless PURCHASER, its officers, agents, employees and Affiliates from
any Claim to the extent the same arises out of or is related to (a) the breach
of any representation, warranty or guarantee made by SUPPLIER herein or (b) any
other negligent act or omission of SUPPLIER.
7.3 Indemnification Procedures. In any case under this Agreement
where one party has indemnified the other against any claim or legal action,
indemnification will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way of
settlement and release) at its own cost and expense. The indemnified party may,
but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated to,
defend, contest or otherwise protect against the same, and make any compromise
or settlement thereof and recover the entire costs thereof from the indemnifying
party, including reasonable attorneys fees, disbursements and all amounts paid
as a result of such claim or suit or the compromise or settlement thereof;
provided, however, that if the indemnifying party undertakes the timely defense
of such matter, the indemnified party will not be entitled to recover from the
indemnifying party its costs incurred in the defense thereof. The indemnified
party will cooperate and provide such assistance as the indemnifying party may
reasonably request in connection with the defense of the matter subject to
indemnification.
8. RECALLS.
8.1 Recalls. If any Product must be recalled by reason of failure
to meet the Specifications, any requirements of any applicable Governmental or
Regulatory Authority or any other requirements of law, PURCHASER will pay all
costs and expenses in order to effect the recall unless such recall is caused by
a failure of the Product to meet the Specifications, where such failure is due
solely to the actions or omissions of SUPPLIER. However, SUPPLIER will, in any
event, comply with any regulatory obligations arising from its status as
manufacturer of the recalled Product, and otherwise cooperate as reasonably
required in PURCHASER's efforts.
8.2 Reimbursement by PURCHASER. PURCHASER will reimburse SUPPLIER
for any costs reasonably expended by SUPPLIER to effect the recall, including
any cost associated with the Product that cannot be shipped due to the condition
requiring the recall, unless the recall is required due to the failure of the
Product to meet the Specifications, where such failure is due solely to the
actions or omissions of SUPPLIER.
8.3 Reimbursement by SUPPLIER. If PURCHASER can demonstrate that
the failure to meet applicable legal requirements is caused by failure of the
Product to meet the Specifications, where such failure is due solely to the
actions or omissions of SUPPLIER, SUPPLIER will reimburse PURCHASER for (a) any
cost reasonably expended by PURCHASER to effect the recall and (b) the
Reimbursement Amount in accordance with Section 5.4.
<PAGE> 79
9. RECORDS AND AUDITS.
9.1 Hold Period. For one (1) year after the expiration date of any
particular Product batch(es), or longer if required by applicable law or
Governmental or Regulatory Authority (the "Hold Period"), each party will
maintain, as applicable, records and samples relating to such batch(es)
sufficient to substantiate and verify its duties and obligations hereunder,
including but not limited to, records of orders sent and received, Product
manufactured, work in progress, Product analyses and quality control tests,
distribution of the Product and the like. During the Hold Period, neither party
will destroy any records relating to regulatory compliance or quality assurance
without giving the other party advance written notice and an opportunity to take
possession of or copy such records.
9.2 Notice of Governmental or Regulatory Authority Actions. Each
party agrees to advise the other party in a timely manner of any actions by any
Governmental or Regulatory Authority with respect to the Product. Such notice
remains subject, in all respects, to the provisions of Article 6.
10. TERM AND TERMINATION.
10.1 Term. Subject to the termination provisions of Section 10.2,
this Agreement will expire on the date (the "Termination Date") which is two
years from the Effective Date. PURCHASER shall have the option, by providing
SUPPLIER with at least 90 days' prior written notice of the Termination Date, to
extend the term of this Agreement for an additional one year period, provided
PURCHASER has used good faith efforts to arrange for an alternative source of
supply of the Product and Active Ingredient. In the event PURCHASER elects to
extend this Agreement for an additional one year period, the parties shall
commence good faith negotiations regarding terms and conditions for the
continued supply of Active Ingredient or Product by SUPPLIER.
10.2 Termination. PURCHASER shall have the right to terminate this
Agreement upon 60 days' prior written notice to SUPPLIER. In addition, each
party will have the right to terminate this Agreement (i) by giving the other
party written notice thereof if the other party fails to perform or violates any
material provision of this Agreement in any material respect, and such failure
continues unremedied for a period of thirty (30) days after the date the
notifying party gives written notice to the defaulting party with respect
thereto; or (ii) immediately if the other party is declared insolvent or
bankrupt by a court of competent jurisdiction, or a voluntary petition of
bankruptcy is filed in any court of competent jurisdiction by the other party,
or the other party makes or executes any assignment for the benefit of
creditors.
10.3 Effect of Termination. Unless otherwise agreed to between the
parties, all Raw Materials, Active Ingredient, work in progress or Product on
hand as of the effective date of expiration or termination of this Agreement
will be treated as follows as soon as practicable following such expiration or
termination:
(a) Raw Materials presently owned by SUPPLIER, as set forth on
Schedule D hereto, or otherwise purchased by SUPPLIER
reasonably based on any purchase orders for Product or Active
Ingredient submitted by PURCHASER, and not utilized by
SUPPLIER for the manufacture of the Product up to and
including
<PAGE> 80
the date of such expiration or termination, shall be delivered
by SUPPLIER to PURCHASER, whereupon PURCHASER will pay
SUPPLIER therefor in accordance with the costs set forth on
Schedule D or in an amount equalling SUPPLIER's actual cost
for such materials as documented by SUPPLIER to PURCHASER;
(b) Work in progress commenced by SUPPLIER in accordance with this
Agreement will, at the option of PURCHASER (but at the option
of either party in the case of termination hereof by it under
Section 10.2), (i) cease, and such work in progress will
remain with SUPPLIER (in which case PURCHASER will pay
SUPPLIER an amount equal to SUPPLIER's actual costs incurred
in connection with the performance and cessation of such work
less the cost to SUPPLIER of materials that can be returned by
SUPPLIER or used by SUPPLIER in later batches of other
products manufactured by SUPPLIER as reasonably determined by
SUPPLIER) or (ii) be completed by SUPPLIER and delivered to
PURCHASER, whereupon PURCHASER will pay SUPPLIER therefor in
accordance with the terms hereof; provided, however, that in
the case of expiration under Section 10.1, PURCHASER will not
have such option and will proceed under clause (ii) of this
provision; and
(c) Active Ingredient and Product manufactured pursuant to
Schedule C and the Production Schedule, respectively, will be delivered by
SUPPLIER to PURCHASER, whereupon PURCHASER will pay SUPPLIER therefor in
accordance with the terms hereof.
10.4 No Release. The expiration or termination of this Agreement
will not operate to release any party from any liability incurred prior to or
upon termination hereof or which subsequently arises under the operation of
Article 22.
11. REGULATORY MATTERS.
11.1 Compliance. Each party will provide reasonable assistance to
the other if necessary to respond to any Governmental or Regulatory Authority
audits, inspections, inquiries or requests concerning the Product or otherwise
necessary to comply with GMPs. PURCHASER's employees present at the facility
will at all times adhere to safety regulations, GMPs and work schedules
generally applicable to SUPPLIER's own employees.
11.2 Compliance Audits. Each party will notify the other party
within forty-eight (48) hours after it receives notice of a Governmental or
Regulatory Authority audit involving the Product or any component thereof and
will provide to such party copies of any resulting document of action (FDA Form
483 inspectional observation report (or other equivalent report), regulatory
letters, etc.) or of relevant sections thereof, resulting from these audits
within five (5) Business Days after receipt (solely to the extent such documents
directly relate to the Product).
12. TRADEMARKS AND LABELING.
12.1 Trademarks and Labeling for U.S. Product. (a) PURCHASER shall
provide SUPPLIER with labeling instructions for Product to be sold in the U.S.
prior to or on the Effective Date. SUPPLIER will affix labeling to the Product
to be sold in the U.S. as instructed by PURCHASER. PURCHASER shall pay all costs
incurred by SUPPLIER in connection with the
<PAGE> 81
implementation of such labels bearing PURCHASER's name and trademark. Nothing
contained herein will give PURCHASER any right to use any SUPPLIER trademark and
PURCHASER will not obtain any right, title or interest in any SUPPLIER trademark
by virtue of this Agreement or the performance by SUPPLIER of services
hereunder; provided, however, that SUPPLIER will permit PURCHASER to use
SUPPLIER's trademark in connection with the Product to the extent permitted
under the Asset Purchase Agreement or required by applicable law or regulation.
(b) SUPPLIER and PURCHASER shall use their best efforts to
complete the conversion of labels to PURCHASER's name and trademark for Product
to be sold in the U.S.
(c) As between PURCHASER and SUPPLIER and with respect to Product
to be sold in the U.S., PURCHASER shall be solely responsible for ensuring that
approved Product labels, Product inserts and other printed materials, if any,
comply with all applicable laws, provided, however, that SUPPLIER warrants that
Product supplied hereunder prior to the conversion of labels to PURCHASER's name
and trademark in accordance herewith shall comply with the applicable Marketing
Authorization as it exists on the date hereof.
(d) No change to Product labels or Product inserts for Product to
be sold in the U.S. may be made without the prior written approval of PURCHASER.
12.2 Trademarks and Labeling for Non-U.S. Product. (a) PURCHASER
will, for a period of approximately one year, or such other period as is
appropriate or required under applicable local law or as directed by any
Governmental or Regulatory Authority (the "Transition Period"), sell Product
outside of the U.S. that bears the labeling and tradedress of an Affiliate of
SUPPLIER. PURCHASER and SUPPLIER shall use good faith efforts to mutually agree
on a schedule for the transition to PURCHASER's labeling and tradedress which
shall allow such transition to occur prior to the end of the Transition Period.
SUPPLIER will, or will cause its Affiliates to, affix labeling to the Product to
be sold outside of the U.S. as instructed by PURCHASER. PURCHASER shall pay all
costs incurred by SUPPLIER in connection with the implementation of such labels
bearing PURCHASER's name and trademark for Product to be sold outside of the
U.S. From and after the change of such labels and tradedress, nothing contained
herein will give PURCHASER any right to use any SUPPLIER trademark and PURCHASER
will not obtain any right, title or interest in any SUPPLIER trademark by virtue
of this Agreement or the performance by SUPPLIER of services hereunder;
provided, however, that SUPPLIER will permit PURCHASER to use SUPPLIER's
trademark in connection with the Product to the extent permitted under the Asset
Purchase Agreement or required by applicable law or regulation.
(b) As between PURCHASER and SUPPLIER and with respect to Product
to be sold outside of the U.S., PURCHASER shall be solely responsible for
ensuring that approved Product labels, Product inserts and other printed
materials, if any, comply with all applicable laws, provided, however, that
SUPPLIER warrants that Product supplied hereunder prior to the conversion of
labels to PURCHASER's name and trademark in accordance herewith shall comply
with the applicable Marketing Authorizations as they exist on the date hereof.
(c) Subject to this Section 12.2, No change to Product labels or
Product inserts may be made without the prior written approval of PURCHASER for
Product to be sold outside of the U.S.
<PAGE> 82
13. RELATIONSHIP OF PARTIES.
13.1 Independent Contractors. It is not the intent of the parties
hereto to form any partnership or joint venture. Each party will, in relation to
its obligations hereunder, act as an independent contractor, and nothing in this
Agreement will be construed to give either party the power or authority to act
for, bind or commit the other party in any way whatsoever.
13.2 Public Statements. SUPPLIER and PURCHASER each agree not to
disclose the terms or status of this Agreement in any public statements, whether
oral or written, including but not limited to shareholder reports,
communications with stock market analysts, statements to other customers or
prospective customers, press releases or other communications with the media, or
prospectuses, without the other party's prior written consent, which will not be
unreasonably withheld, or as required by applicable law. If possible, each party
will give the other at least five (5) Business Days advance written notice of a
disclosure required by applicable law and will cooperate with the other party to
minimize the scope and content of such disclosure.
14. WARRANTIES.
14.1 SUPPLIER's Warranty. SUPPLIER hereby represents and warrants
as follows:
(a) The Product will conform with the Specifications.
(b) Subject to Section 5.2(b) of the Asset Purchase Agreement,
SUPPLIER will comply in all material respects with any law, regulation,
ordinance, order, injunction, decree or requirement applicable to the
manufacture of the Product or Active Ingredient (including GMPs); provided that
PURCHASER will reimburse SUPPLIER for any increased costs that SUPPLIER
reasonably incurs (and cannot reasonably defer) in manufacturing the Product or
Active Ingredient, or operating the respective facilities in which the Product
or Active Ingredient is manufactured, as a result of any change in such laws or
regulations.
(c) SUPPLIER will maintain in effect all material governmental
permits, licenses, orders, applications and approvals required of it and make
all filings and notifications required of it regarding the manufacturing of the
Product and Active Ingredient; and SUPPLIER will manufacture the Product and
Active Ingredient in material compliance with all such permits, licenses,
orders, applications and approvals.
(d) SUPPLIER and SUPPLIER's employees and Affiliates have never
been (i) debarred or (ii) convicted of a crime for which a person can be
debarred, under Section 306(a) or 306(b) of the Generic Drug Enforcement Act of
1992. SUPPLIER agrees that it will promptly notify PURCHASER in the event of any
such debarment or conviction. The terms of the preceding sentence shall survive
the termination or expiration of this Agreement.
(e) The Product shall, at the time it is delivered under Section
3.1, not be adulterated or misbranded within the meaning of the FFDCA or any
equivalent local legislation. SUPPLIER shall have no responsibility for costs
and expenses associated with any recall of Product on or after the date hereof
attributable to a determination by a governmental or regulatory authority that
the use of the Warner-Lambert Name on such Product would constitute misbranding
within the meaning of the FFDCA.
<PAGE> 83
(f) SUPPLIER has full authority to enter into this Agreement.
14.2 PURCHASER's Warranty. PURCHASER hereby represents and warrants
as follows:
(a) PURCHASER owns all rights to the Product trademarks and trade
names, if any, and the Product labeling bearing PURCHASER's name and trademarks
meets regulatory requirements.
(b) The use and sale of the Product (in the country where sold and
for its indicated purpose) bearing PURCHASER's name and trademarks by or on
behalf of PURCHASER or its customers will not infringe any trademark or trade
name of any third person.
(c) PURCHASER will comply in all material respects with any law,
regulation, ordinance, order, injunction, decree or requirement applicable to
the marketing of the Product.
(d) PURCHASER will maintain in effect all material required
governmental permits, licenses, orders, applications and approvals regarding the
marketing of the Product, including the respective Marketing Authorizations, and
PURCHASER will market the Product in accordance with all such permits, licenses,
orders, applications and approvals. PURCHASER shall not make any changes to the
respective Marketing Authorizations affecting the Specifications without the
prior written consent of SUPPLIER, which will not be unreasonably withheld.
SUPPLIER shall respond to PURCHASER'S written request for any such change within
thirty (30) days after receipt of such written request from PURCHASER.
(e) PURCHASER warrants and represents that it has full authority
to enter into this Agreement, that it has been granted full rights and license
to sell the Product and that nothing contained in any other agreement prohibits
or restricts PURCHASER from entering into any part of this Agreement.
14.3 NO IMPLIED WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
THIS AGREEMENT, SUPPLIER AND PURCHASER MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OF ANY KIND REGARDING THE SUPPLY OF THE PRODUCT, EITHER EXPRESS OR
IMPLIED, INCLUDING, IN THE CASE OF SUPPLIER, ANY EXPRESS OR IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
15. ASSIGNMENT.
15.1 Until such time as PURCHASER has discharged all its payment
obligations under the Asset Purchase Agreement (other than the payment
obligation set forth in Section 2.1(a)(ii) thereof), this Agreement may not be
assigned by PURCHASER without the prior written consent of SUPPLIER; provided,
that PURCHASER shall have the right to assign its rights and obligations under
this Agreement to any third party successor to all or substantially all of its
entire business. SUPPLIER will respond to PURCHASER's written request for
assignment within forty-five (45) days after receipt of such written request
from PURCHASER. This Agreement will be binding upon and will inure to the
benefit of permitted assigns and successors.
<PAGE> 84
16. GOVERNING LAW.
16.1 This Agreement will be governed by the laws of the State of
New York. Each party hereby consents to the personal jurisdiction of the state
and federal courts located in New York.
17. FORCE MAJEURE.
17.1 Except in the case of monetary obligations of one party to the
other hereunder, neither party hereto will be liable to the other in damages
for, nor will this Agreement be terminable by reason of, any delay or default in
such party's performance hereunder if such delay or default is caused by
conditions beyond such party's control including, but not limited to, acts of
nature, regulation or law or other action of any government or any agency
thereof, war, insurrection, civil commotion, destruction of production
facilities or materials by earthquake, fire, flood or storm, strikes, epidemic,
or unforeseen failure of suppliers, public utilities or common carriers. Each
party hereto agrees promptly to notify the other party of any event of force
majeure above and to employ all reasonable efforts towards prompt resumption of
its performance hereunder when possible if such performance is delayed or
interrupted by reason of such event.
18. NOTICES.
18.1 All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received on the date when delivered by
hand delivery with receipt acknowledged, or upon the next Business Day following
receipt of telex or telecopy transmission, or upon the third day after deposit
in the United States mail, registered or certified with postage prepaid, return
receipt requested, addressed as set forth below:
If to PURCHASER:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Vice President, Corporate Development
Fax: (770) 442-9594
with a copy to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30076
Attn: Legal Counsel
Fax: (770) 442-9594
<PAGE> 85
If to SUPPLIER:
Parke-Davis Pharmaceuticals Limited
Km. 1.9 Road 689
Vega Baja, Puerto Rico 00693
Attn: General Manager
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Attention: Vice President, Pharmaceutical
Manufacturing
Fax: (973) 385-7269
with a copy to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: Senior Vice President and General Counsel
Fax: (973) 385-3927
Any party may alter the addresses to which communications or copies are to be
sent by giving, notice of such change of address in conformity with the
provisions of this section for giving notice.
19. HEADINGS.
19.1 Headings used in this Agreement are for reference purposes only
and in no way define, limit, construe or describe the scope or extent of such
paragraph, or in any way affect this Agreement.
20. SEVERABILITY.
20.1 If any provision of this Agreement is held to be invalid or
unenforceable for any reason, the remaining provisions will continue in full
force without being impaired or invalidated in any way, and the parties agree to
replace any invalid provision with a valid provision which most closely
approximates the intent and economic effect of the invalid provision.
21. WAIVER.
21.1 No term or provisions hereof shall be deemed waived, and no breach
excused, unless such waiver or consent is in writing and signed by the party
claimed to have waived or consented. The waiver by any party of a breach of any
provision of this Agreement will not operate or be interpreted as a waiver of
any other or subsequent breach.
22. SURVIVAL.
22.1 The provisions of Sections 2.3(b), 5.4, 5.5, 10.3, 10.4 and
13.2 and Articles 6-9 and 11 will survive the termination or expiration of this
Agreement.
<PAGE> 86
22.2 The provisions of this Agreement which do not survive termination
or expiration hereof (as the case may be) will, nonetheless, be controlling on,
and will be used in construing and interpreting, the rights and obligations of
the parties hereto with regard to any dispute, controversy or claim that may
arise under, out of, in connection with, or relating to this Agreement.
23. ENTIRE AGREEMENT.
23.1 This Agreement, together with the Schedules hereto and the Asset
Purchase Agreement, constitutes the entire agreement and understanding between
the parties hereto and Warner-Lambert Company with respect to the subject matter
hereof and supersedes any prior agreements, negotiations, understandings,
representations, statements and writings relating thereto. To the extent there
is any conflict between this Agreement, any purchase order and any of the
Schedules attached hereto, this Agreement will take precedence. This Agreement
may not be amended or modified unless such amendment or modification is made in
writing and executed by a duly authorized officer or agent of each party hereto.
24. COUNTERPARTS.
24.1 This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which shall together constitute
one and the same instrument. This Agreement shall become binding when one or
more counterparts hereof shall bear the signatures of all parties indicated as
signatories hereto.
25. NO THIRD PARTY BENEFICIARY.
25.1 The terms and provisions of this Agreement are intended solely for
the benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person or entity.
IN WITNESS WHEREOF, the parties have caused this Agreement to be entered into by
their duly authorized representatives, to be effective as of the date first
above written.
PARKE-DAVIS FIRST HORIZON PHARMACEUTICAL
PHARMACEUTICALS LIMITED CORPORATION
By: By:
--------------------------- -------------------------
Name: Name:
Title: Title:
<PAGE> 87
[****]-CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT I - PRODUCTION FEES*
<TABLE>
<CAPTION>
PRODUCT: TACRINE
AFFILIATE PRESENTATION WITH UNIT OF MEASURE CONSOLIDATED COST
--------- --------------------------------- -----------------
<S> <C> <C>
Austria 10 mg x 56 [*****]
20 mg x 56 [*****]
30 mg x 112 [*****]
40 mg x 112 [*****]
France 10 mg x 56 HOSP [*****]
10 mg x 56 [*****]
10 mg x 28 [*****]
10 mg x 28 MS [*****]
20 mg x 56 [*****]
20 mg x 28 [*****]
30 mg x 112 [*****]
30 mg x 28 [*****]
40 mg x 112 HOSP [*****]
40 mg x 112 [*****]
40 mg x 28 [*****]
Germany 10 mg x 56 [*****]
10 mg x 112 [*****]
10 mg x 112 TAP5 [*****]
20 mg x 56 [*****]
20 mg x 112 [*****]
20 mg x 112 TAP5 [*****]
30 mg x 56 [*****]
30 mg x 112 [*****]
30 mg x 112 TAP5 [*****]
40 mg x 56 [*****]
40 mg x 112 [*****]
40 mg x 112 TAP5 [*****]
10 mg x 56 - samples [*****]
Greece 10 mg x 56 [*****]
20 mg x 56 [*****]
30 mg x 56 [*****]
40 mg x 56 [*****]
Puerto Rico 10 mg x 120 [*****]
20 mg x 120 [*****]
30 mg x 120 [*****]
40 mg x 120 [*****]
Spain 10 mg x 56 (Zaimer) [*****]
20 mg x 56 (Zaimer) [*****]
30 mg x 112 (Zaimer) [*****]
40 mg x 112 (Zaimer) [*****]
United States 10 mg x 120 [*****]
</TABLE>
<PAGE> 88
<TABLE>
<S> <C> <C>
20 mg x 120
30 mg x 120 [*****]
40 mg x 120 [*****]
Active Ingredient $[*****] per kilo
Filled Capsule Shells $
</TABLE>
* Fifteen Days prior to each scheduled delivery date, SUPPLIER shall set the
Production Fee based on Suppliers calculation of the standard cost which shall
include the costs of Active Ingredient, Raw Materials, manufacturing, filling,
inspecting, quality control, stability testing and packaging. The Production Fee
for the Product to be delivered in the year 2000 is set forth herein. The
Production Fee is subject to adjustment as provided in the Agreement.
<PAGE> 89
SCHEDULE A
<TABLE>
<CAPTION>
DOSAGE STRENGTH NUMBER OF CAPSULES FOR U.S. NUMBER OF CAPSULES FOR "REST OF WORLD"
- --------------- --------------------------- --------------------------------------
<S> <C> <C>
10 mg 3,828,000* none
20 mg None 3,828,000
30 mg 3,828,000 none
40 mg 3,828,000 3,828,000
</TABLE>
* 600,000 of these capsules will be provided to PURCHASER in containers for use
by PURCHASER in packaging samples.
<PAGE> 90
SCHEDULE B
FORM OF PRODUCTION SCHEDULE*
<TABLE>
<CAPTION>
Country Dosage Strength Quantity Delivery Date
------- --------------- -------- -------------
<S> <C> <C> <C>
</TABLE>
* The Production Schedule submitted by PURCHASER to SUPPLIER pursuant to Section
2.2(b) of this Agreement will provide the above information for the Product
manufactured by SUPPLIER in 2000 plus an allocation of the following filled
capsule shells currently located in SUPPLIER's Affiliate in Freiburg, Germany
(for non-U.S.
Product):
BULK CAPSULES IN GERMANY (UNPACKAGED)
<TABLE>
<CAPTION>
COUNTRY DOSAGE STRENGTH QUANTITY EXPIRATION DATE
(CAPSULES)
<S> <C> <C> <C>
GERMANY
10 mg 3,600,000 09/01/2001
30 mg 2,290,000 11/01/2001
40 mg 1,720,000 11/01/2001
</TABLE>
<PAGE> 91
SCHEDULE C
[****]-CONFIDENTIAL TREATMENT REQUESTED
TACRINE HYDROCHLORIDE SUPPLY SCHEDULE
ITEM DELIVERY DATE
QUANTITY PRICE/UNIT
Tacrine Hydrochloride [*****]* [*****] [*****]
Tacrine Hydrochloride [*****]** [*****] [*****]
* PURCHASER shall provide SUPPLIER with at least 90 days' notice prior to the
date on which it desires to receive the Active Ingredient. PURCHASER's desired
date of delivery shall fall within the range set forth above. SUPPLIER shall use
commercially reasonable efforts to deliver the Active Ingredient on such date.
In the event PURCHASER desires to receive from SUPPLIER Product manufactured
using this batch of Active Ingredient, PURCHASER shall provide to SUPPLIER a
purchase order which shall specify the quantities, dosage strengths, country of
destination and any other information necessary for SUPPLIER to fill such order;
provided that any Product shall be manufactured in full batch sizes for any
particular dosage strength. Such purchase order shall be delivered to SUPPLIER
no earlier than the date on which such Active Ingredient would otherwise be
delivered as provided above and, in any event, at least 90 days prior to the
date on which such Product is to be delivered by SUPPLIER to PURCHASER. SUPPLIER
shall use commercially reasonable efforts to supply to PURCHASER the Product in
such quantities and on such dates as provided in such purchase order.
** PURCHASER shall provide SUPPLIER, prior to the date which is 180 days prior
to the Termination Date, written notice of its desire to receive this batch of
Active Ingredient. SUPPLIER shall use commercially reasonable efforts to deliver
the Active Ingredient on or prior to the Termination Date. In the event
PURCHASER desires to receive from SUPPLIER Product manufactured using this batch
of Active Ingredient PURCHASER shall provide to SUPPLIER with notice of its
desire at least 9 months prior to the Termination Date. Thereafter, PURCHASER
shall provide to SUPPLIER a purchase order which shall specify the quantities,
dosage strengths, country of destination and any other information necessary for
SUPPLIER to fill such order; provided that any Product shall be manufactured in
full batch sizes for any particular dosage strength. Such purchase order shall
be delivered to SUPPLIER on the date which is 90 days prior to the Termination
Date. SUPPLIER shall use commercially reasonable efforts to supply to PURCHASER
the Product on or prior to the Termination Date.
<PAGE> 92
SCHEDULE D
[****]-CONFIDENTIAL TREATMENT REQUESTED
RAW MATERIALS SCHEDULE
PRIMARY TACRINE HYDROCHLORIDE RAW MATERIALS
<TABLE>
<CAPTION>
CURRENT AFTER 1 LOT AFTER 2 LOTS AFTER 3 LOTS
KG/LOT COST/KG INV. VALUE INV. VALUE INV. VALUE INV. VALUE
------ ------- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2-Aminobenzonitrile 273 [*****] 1,114 [*****] 841 [*****] 568 [*****] 295 [*****]
Sodium Carbonate 500 [*****] 545 [*****] 45 [*****] 0 [*****] 0 [*****]
Zinc Chloride 390 [*****] 800 [*****] 410 [*****] 20 [*****] 0 [*****]
TOTAL [*****] [*****] [*****] [*****]
</TABLE>
<PAGE> 93
EXHIBIT 7.1.8
SUBLICENSE
THIS AGREEMENT is made as of the ___ day of May 2000 by and between
WARNER-LAMBERT COMPANY, corporation organized and existing under the laws of
the state of Delaware and having its principal place of business at 201 Tabor
Road, Morris Plains, New Jersey 07950 (hereinafter referred to as "LICENSOR")
and FIRST HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and
existing under the laws of the state of Delaware and having its principal place
of business at 660 Hembree Parkway, Roswell, Georgia 30036 (hereinafter
referred to as "LICENSEE"). This Sublicense is a sublicense pursuant to Section
2.01 of the License Agreement dated the 27th day of September, 1990 by and
between WILLIAM K. SUMMERS, M.D., an individual having his principal place of
business at 2400 Louisiana NE, Suite 530, Albuquerque, New Mexico 87110
(hereinafter referred to as "SUMMERS") and LICENSOR (the "License Agreement").
Unless otherwise defined herein, all capitalized terms shall have the meanings
set forth in Article I.
W I T N E S S E T H:
WHEREAS, SUMMERS is the owner of the Licensed Patents (as hereinafter
defined) and has developed and is the owner of the Agreement Compound Studies
(as hereinafter defined);
WHEREAS, pursuant to the License Agreement, SUMMERS granted LICENSOR
an exclusive license under the Licensed Patents throughout the world (except
Canada where SUMMERS may wish to grant a license to LICENSOR and to
PharmaScience Inc., a Canadian corporation ("PharmaScience"));
WHEREAS, on the date hereof, LICENSEE has purchased from LICENSOR,
pursuant to the Asset Purchase Agreement dated April 14, 2000, certain assets
relating to the Cognex(R) business and LICENSOR has agreed to sublicense the
Licensed Patents to LICENSEE pursuant to Section 2.1 thereof;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, LICENSOR and LICENSEE agree as follows:
I. DEFINITIONS
The following terms as used in this Agreement shall have the meanings set forth
in this Article:
1.01 "Affiliate", with respect to any Person, means any other Person
controlling, controlled by or under direct or indirect common control with such
Person in question. A Person shall be deemed to control a corporation (or other
entity) if such Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of such corporation (or
other entity), whether through the ownership of voting securities, by contract,
or otherwise.
1.02 "Agreement Compound" means the pharmaceutical compound
1,2,3,4-tetrahydro-9-aminoacridine (known by the generic names "Tacrine" and
"THA"), including all salts and hydrates.
1
<PAGE> 94
1.03 "Agreement Compound Studies" means all Data together with all of
SUMMER's protocols, write-ups, analyses, compilations and other writings
relating to the Data in whatever stage of completion and whether in preparation
for submission to regulatory authorities or otherwise.
1.04 "Data" means, whether generated by SUMMERS or any of SUMMER's
researchers or investigators, all preclinical (including, but not limited to,
chemistry, formulation stability and analytical development methodology),
clinical, toxicology and other data (including, but not limited to, raw and
underlying data such as patient records, computer software, adverse events
data, etc.) resulting from, referring, or relating to, all studies performed or
to be performed or completed by or on behalf of SUMMERS in connection with
Agreement Compound.
1.05 "Exclusivity Period" means, with respect to a given country, the
period of time during which no third party can obtain governmental approval to
sell Agreement Compound based, in whole or in part, on data submitted by
LICENSOR to obtain its approval to sell Agreement Compound in said country.
1.06 "Licensed Compound" means Agreement Compound which (or the use or
sale of which) is covered by a Valid Claim.
1.07 "Licensed Patents" means all, patents and patent applications
covering the manufacture, use or sale of Product, Agreement Compound or
compounds used in the production thereof, owned or controlled by SUMMERS at any
time during the term of this Agreement, or under which SUMMERS is or shall
become empowered to grant licenses, including, but not limited to, the United
States Patent and all patents issuing from corresponding applications in
countries outside the United States, and any and all reissues, reexaminations,
extensions, substitutions, confirmations, registrations, revalidations,
additions, continuations, continuations-in-part or divisions of or to any of
the aforesaid patents. If a particular patent or patent application is directed
toward an invention of general applicability to all pharmaceuticals or
pharmaceuticals across a broad range of therapeutic areas, it would not be
deemed to be covered within the definition of "Licensed Patents" because such
patent or patent application may have incidental applicability to Agreement
Compound.
1.08 "Losses" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, reasonable fees of attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any claim, default or
assessment).
1.09 "NDA" means the United States New Drug Application filed by the
LICENSOR on June 1, 1990 (NDA #20-070) in connection with the use of Agreement
Compound for the treatment of Alzheimer's disease.
1.10 "Net Sales" means the actual gross sales of Licensed Compound and
Products by LICENSEE and its Affiliates to nonaffiliated customers less trade,
cash and quantity discounts and broker's or agent's commissions, if any,
actually allowed or paid; returns, allowances and adjustments actually granted
customers; prime vendor and institutional rebates; freight insurance and other
transportation costs and all taxes (except income taxes), tariffs, duties and
other similar governmental charges paid by LICENSEE, its Affiliates or
sublicensees. In the event of sale of Products containing Licensed Compound in
combination with other active ingredients, the Net Sales for such products
shall be determined by multiplying what would otherwise be the Net Sales of
such products by a fraction, the numerator of which shall be the production
cost of Licensed Compound contained therein
2
<PAGE> 95
and the denominator of which shall be the total production cost of all active
ingredients contained therein, the production cost of each to be determined
using the standard production cost formula of LICENSEE, provided, however, that
in no event shall the Net Sales for combination products be reduced by more
than sixty-five percent (65%).
1.11 "Payable Royalties" means the amount of royalties calculated to
be paid by LICENSEE, its Affiliates or sublicensees pursuant to this Agreement
reduced by (a) any amounts paid to third parties pursuant to Section 3.08 and
(b) the provisions of Section 3.09.
1.12 "Person" means any corporation, company, partnership, joint
development, other entity or natural person.
1.13 "Product" means any finished pharmaceutical product which
contains Agreement compound as an active ingredient, whether alone or in
combination form which (or the use or sale of which) is covered by a Valid
Claim.
1.14 "United States Patent" means United States Patent No. 4,816,456
and any reexaminations or reissues thereof.
1.15 "Valid Claim" means a claim which but for the license granted
hereunder, would be infringed by LICENSOR's, its Affiliate's or sublicensee's
manufacture, use or sale of Product and/or Licensed Compound, and which is in
an unexpired issued patent owned by SUMMERS included within the Licensed
Patents which has not been held invalid or unenforceable by a decision of a
court of competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, and which has not been held by an applicable governmental
agency, or expressly admitted in writing by the owner, to be invalid through
reissue, reexamination, disclaimer or otherwise, and, in the case of a holding,
is unappealable or unappealed within the time allowed for appeal.
II. GRANT
2.01 Grant of License. LICENSOR hereby grants to LICENSEE an exclusive
sublicense (and the right to sublicense) under the Licensed Patents to make,
use, and sell Licensed Compound and Products in all countries of the world;
provided, however, that SUMMERS may, in addition to the license granted to
LICENSOR in Canada, grant a nonexclusive license (without the right to
sublicense) under the Canadian Licensed Patents to PharmaScience for the sole
purpose of making, using, and selling Licensed Compound and Product in Canada
without the right to send Agreement Compound and/or Product outside of Canada.
To the extent Net Sales are made by any sublicensee of LICENSEE, they will be
treated for royalty purposes as if made by LICENSEE.
2.02 Sublicense Subject To License. LICENSEE acknowledges that, as a
licensee under the License Agreement, LICENSOR can not sublicense to LICENSEE
rights other than those it has been granted under the License Agreement.
III. PAYMENTS
3.01 Payments to LICENSOR. In consideration of the aforesaid grant of
license to LICENSEE and the further covenants contained in this Agreement,
including the covenant contained in Section [****]-CONFIDENTIAL TREATMENT
REQUESTED
3
<PAGE> 96
6.03(a), LICENSEE shall pay to LICENSOR's Designee the amounts set forth below
pursuant to the terms set forth herein.
3.02 In the event that SUMMERS, without LICENSOR's prior written
consent and unless compelled by applicable court or agency order, takes an
affirmative action that permits a third party (other than PharmaScience in
Canada) to make, use or sell Product or Agreement Compound in any country such
that LICENSEE does not have an exclusive market in such country for Product or
Agreement Compound (i.e. SUMMERS disclaims a Licensed Patent, or grants a
license to, covenants not to sue, or otherwise agrees not to enforce a Licensed
Patent or indemnifies a third party), LICENSOR shall pay to LICENSEE an amount
equal to all amounts recovered by LICENSOR pursuant to Section 3.02 of the
License Agreement, less reasonable costs and expenses of LICENSOR in effecting
such recovery. LICENSOR shall use its commercially reasonably efforts to
recover what it is entitled to under Section 3.02 of the License Agreement.
LICENSOR agrees that any request by SUMMERS pursuant to Section 3.02 of the
License Agreement will be communicated to LICENSEE in writing promptly and that
LICENSOR shall not consent or object without direction to so do from LICENSEE.
3.03 Royalty. (a) In further consideration of the rights granted
hereunder, LICENSEE shall pay to LICENSOR's Designee from June 1, 2000, and for
the remaining term of this Agreement, except as hereinafter provided, the
following royalties:
(1) [INTENTIONALLY OMITTED]
(2) [*****] of Net Sales in the United States, until the date
of expiration of the United States Patent;
(3) In each country outside the United States where there is
a Licensed Patent, [*****] of Net Sales in said country; such
royalties shall continue thereafter until the end of the Exclusivity
Period in said country; and
(4) Beginning with the end of the Exclusivity Period in each
country outside the United States where there is a Licensed Patent,
[*****] of Net Sales in said country; such royalties shall continue
thereafter until the date of expiration of the applicable Licensed
Patent.
(b) Notwithstanding the foregoing, the amount of Payable Royalties in
any quarter shall be reduced by any and all Prepaid Royalties until such time
that all Prepaid Royalties have been credited against Payable Royalties. As
used herein, "Prepaid Royalties" means royalties in the amount of $[*****] that
were prepaid by LICENSOR to SUMMERS, less an amount equal to the amount of
royalties payable by LICENSOR to SUMMERS under the License Agreement for the
period beginning April 1, 2000 and ending May 31, 2000.
(c) For purposes of this Agreement, and in response to the advice of
the United States Federal Trade Commission in connection with the approval of
the merger of LICENSOR and Pfizer Inc., LICENSOR irrevocably appoints Dr.
William K. Summers as its Designee (where indicated) for purposes of Articles
III and IV of this Agreement.
[****]-CONFIDENTIAL TREATMENT REQUESTED
4
<PAGE> 97
3.04 Payment. (a) All payments to be made by LICENSEE to LICENSOR's
Designee hereunder shall be made as follows:
(i) Seventy-five percent (75%) to William K. Summers, M.D. or a bank
account designated in writing by William K. Summers.
(ii) Twenty-five percent (25%) to Burns, Doane, Swecker & Mathis.
Current wiring instructions are:
Crestar Bank
[*****]
Burns, Doane, Swecker & Mathis LLP
[*****]
The payment pursuant to clause (a)(ii) is mandated by a Stipulation and Order
Re Enforcement of Judgment and, by order of the Superior Court of the State of
California for the County of Los Angeles, may not be revoked by SUMMERS for any
reason.
(b) All payments to be made by LICENSEE as provided in Section 3.04(a)
above shall be made in United States dollars in the United States. For
converting into United States dollars a royalty accrued in another currency,
the conversion rate shall be the closing commercial buying rate of exchange for
United States dollars and such other currency quoted by Citibank, N.A. (or its
successors in interest) in New York for the last business date of the quarterly
period for which payment is being made.
3.05 Taxes Withheld. Any income or other tax that LICENSEE or its
Affiliates is required to withhold and pay on behalf of LICENSOR's Designee
with respect to the royalties payable to LICENSOR's Designee under this
Agreement shall (without regard to the provisions of Section 3.03(b)) be
deducted from such royalties prior to remittance to LICENSOR's Designee.
LICENSEE shall provide LICENSOR's Designee with documentary evidence of said
payments.
3.06 Computation of Royalties. All sales of Product and Licensed
Compound between LICENSEE and any of its Affiliates and/or sublicensees shall
be disregarded for purposes of computing royalties under this Article III.
Nothing herein contained shall obligate LICENSEE to pay LICENSOR's Designee
more than one royalty on any unit of a Product.
3.07 Licenses to Affiliates. (a) LICENSOR shall, at the request of
LICENSEE, sign sublicense agreements directly with LICENSEE's Affiliates in
those countries where the sale of Licensed Compound or Product by LICENSEE or
its Affiliates would infringe a Valid Claim. Such license agreements shall
contain substantially the same language as contained herein with appropriate
changes in parties and territory. It shall be LICENSEE's responsibility to
register such agreements with the appropriate authorities.
(b) Royalties received by LICENSOR's Designee directly from LICENSEE's
Affiliates pursuant to such agreements shall be credited towards LICENSEE's
royalty obligation under Section 3.03 hereof.
5
<PAGE> 98
(c) Notwithstanding any other term or provision of this Agreement, the
failure of LICENSOR to comply with the provisions of Section 3.07(a) within
sixty (60) days of a request by LICENSEE or such Affiliate to comply with such
provision, shall immediately release LICENSEE of any and all obligations of
LICENSEE to make payments of any kind, including, but not limited to, payments
pursuant to Sections 3.03 and 6.04, until LICENSOR has complied with such
provisions.
3.08 Offset of Royalties. LICENSEE shall be entitled to offset against
the royalties otherwise due hereunder any amounts payable to third parties in
respect of other patent rights covering the manufacture, use or sale of
Agreement Compound that would preclude LICENSEE from practicing a Licensed
Patent without obtaining a license thereunder, except royalties due under the
Settlement and License Agreement dated as of September 28, 1994 between
Hoechst-Roussel Pharmaceuticals Inc. and LICENSOR.
3.09 Reduction of Royalties. (a) In the event that any third party
begins the sale of Product in any country where there is a Licensed Patent and
the sale of Product by all such third parties in the aggregate in such country
reaches or exceeds the percentages set forth below of the sales of Product in
such country made by LICENSEE, its Affiliates and any sublicensees in any
fiscal quarter, then payment of royalties (and the obligation to pay royalties)
shall be reduced with respect to Net Sales in such country pursuant to the
schedule set forth below for so long as such third party sales shall continue.
The amount of aggregate third party sales for a fiscal quarter shall be
determined by LICENSEE (a) in the United States, by data obtained from
Information Management Systems ("IMS") and (b) in any other country in which
there is a Licensed Patent, by data obtained from IMS drugstore audits
supplemented by LICENSEE's sampling of hospital and other institutional
purchasers.
6
<PAGE> 99
<TABLE>
<CAPTION>
Aggregate Third Party
Sales as Percentage Percentage of
of LICENSEE's Sales Royalties Suspended
in Any Fiscal Quarter for Such Fiscal Quarter
<S> <C>
10% and greater but 25%
less than 15%
15% and greater but 50%
less than 20%
20% and greater but 75%
less than 25%
25% and greater but 90%
less than 35%
35% and greater 100%
</TABLE>
(b) Upon the resumption of full royalty payment following any
reduction of payment under any Section of this Agreement, no payment shall be
made with respect to any royalties not received during the period of reduction.
(c) Notwithstanding any other term or provision of this Agreement, the
payment of royalties (and the obligation to pay royalties) shall terminate in
its entirety in a particular country in the event that SUMMERS, without
LICENSOR's prior written consent and unless compelled by applicable court or
agency order, takes an affirmative action that permits a third party (other
than PharmaScience in Canada) to make, use or sell Product or Agreement
compound in such country such that LICENSEE does not have an exclusive market
in such country for Product or Agreement Compound (e.g. SUMMERS grants a
license to, covenants not to sue, or otherwise agrees not to enforce a Licensed
Patent or indemnifies such third party). LICENSOR agrees that any request by
SUMMERS pursuant to Section 3.09(c) of the License Agreement will be
communicated to LICENSEE in writing promptly and that LICENSOR shall not
consent or object without direction to so do from LICENSEE.
IV. RECORDS AND PAYMENTS
4.01 Quarterly Reports and Payments. Beginning one hundred and twenty
(120) days after the second fiscal quarter of 2000 and one hundred and twenty
(120) days after the end of any subsequent fiscal quarter during the term of
this Agreement, LICENSEE shall deliver or cause to be delivered to LICENSOR's
Designee and to Burns, Doane, Swecker & Mathis LLP, a written report showing
all sales of Product by LICENSEE and its Affiliates during the preceding
quarterly period and showing the calculation of Net Sales and the amount
payable as royalties as calculated in accordance with Article III hereof,
provided, however, that the first such report shall cover only the month of
June 2000. Concurrently with the submission of each such written report,
LICENSEE shall pay LICENSOR's Designee or cause to be paid the amount of
royalties shown to be due thereon, subject to the other provisions of this
Agreement.
7
<PAGE> 100
4.02 Records. LICENSEE shall keep or cause to be kept accurate records
in sufficient detail to enable the royalties payable hereunder to be
determined. Upon the request of LICENSOR's Designee (but not more frequently
than once in each fiscal year), LICENSOR's Designee may designate an
independent public accountant mutually acceptable to LICENSOR's Designee and
LICENSEE to review such records to verify the accuracy of the royalty payments
made or payable hereunder during the preceding fiscal year, but only as to any
period ending not more than two (2) years prior to the date of such request.
Said accountant shall not disclose to LICENSOR or any other party any
information except that which should properly be contained in a royalty report
required under this Agreement. LICENSOR's Designee shall pay the cost for any
review of records conducted at the request of LICENSOR's Designee under this
Section 4.02; provided, however, that in the event that such review shall
reveal a discrepancy of greater than twenty percent (20%) in the royalty
payment due to LICENSOR's Designee hereunder, LICENSEE shall pay the cost of
such review. In addition, in the event that LICENSEE seeks indemnification
under Section 9.03 of this Agreement or if LICENSOR reasonably needs access to
such records in connection with any action or proceeding against LICENSOR by
SUMMERS, LICENSOR shall have the right to review LICENSEE's records to verify
the accuracy of the royalty payments made or payable hereunder, upon reasonable
notice and during regular business hours.
V. PATENT PROSECUTION AND INFRINGEMENT
5.01 Prosecution. LICENSOR shall use all reasonable measures to cause
SUMMERS to prosecute all applications for Licensed Patents and maintain all
such applications and issued Licensed Patents at his own expense and LICENSOR
shall keep LICENSEE currently advised of all steps taken or to be taken in the
prosecution of such applications (including reissues and reexaminations) and
improvements therein and shall furnish LICENSEE with copies of all such patent
applications and papers received from and filed with each patent office
promptly after filing or receipt. SUMMER's has undertaken in the License
Agreement to take all reasonable and necessary actions to obtain and maintain
Licensed Patents. In the event that SUMMERS elects or has elected not to file
applications in any country or countries or not to continue to prosecute any
application, including an application involved in an appeal or opposition
proceeding, or not to maintain any Licensed Patent or application for Licensed
Patent by failure to pay any required annuity, renewal or working fee, LICENSOR
shall so advise LICENSEE in time to enable LICENSEE to take appropriate action
and LICENSEE shall be entitled to file such applications or take such other
action at its expense and to own such resultant patents without the obligation
to pay any royalties under such patents pursuant to this Agreement or
otherwise. In such event, LICENSOR shall and shall use all reasonable measures
to cause SUMMERS, at LICENSEE's request, but at no additional cost to LICENSEE,
execute whatever documents are necessary to transfer to LICENSEE full ownership
of such application or Licensed Patent. Notwithstanding any other term or
provision of this Agreement, the payment of royalties (and the obligation to
pay royalties) shall terminate in its entirety in a particular country in the
event that SUMMERS fails to comply with the provisions of Section 5.1 of the
License Agreement with respect to such country.
5.02 Infringement Actions. LICENSOR and LICENSEE shall promptly notify
each other of any infringement of the Licensed Patents which may come to their
attention. SUMMERS, at his sole discretion, may undertake to obtain a
discontinuance of the aforesaid infringement and/or SUMMERS may bring suit
against such infringer.
8
<PAGE> 101
It is understood and agreed that SUMMERS shall bear solely all costs and
expenses associated with any suit or action pursuant to Section 5.02 of the
License Agreement and shall be entitled to retain and keep any and all sums
received, obtained, collected or recovered whether by judgment, settlement or
otherwise, as a result of such suit. SUMMERS shall have the right to prosecute
by counsel of his choice, and in connection therewith shall have the full right
to conduct the prosecution thereof.
VI. CONFIDENTIALITY AND OTHER OBLIGATIONS
6.01 Confidentiality. (a) Each party agrees that, without the prior
written consent of the other party or unless required by law, it shall not
disclose to any third party the terms of this Agreement or any confidential
information regarding the other party or the business of such party which has
been made available to it pursuant to Article III or Article IV hereof. It is
understood that LICENSEE and LICENSOR, without the consent of the other party,
may disclose in press releases or to third parties the existence and general
nature of this Agreement without disclosing the specific terms hereof.
(b) It is further understood that LICENSOR shall not be entitled to
disclose to any third party or to publish for any purpose (scholarly,
educational or otherwise) any Agreement Compound Study or any portion, extract
or analysis (partial or full) thereof without the prior written consent of
LICENSEE. It is understood that such restriction is a worldwide restriction.
If any third party has an obligation to present a document relating to
Agreement Compound to LICENSOR prior to its publication for LICENSOR's comment
and approval, LICENSOR shall give LICENSEE access to such document and assist,
in all respects requested, LICENSEE in communicating to such third party its
comments or concerns relating to the publication of any such document. LICENSEE
may instruct LICENSOR to withhold its approval in the event that, in LICENSEE's
reasonable opinion, its commercial position regarding Product may be prejudiced
by such publication.
(c) LICENSOR shall take all reasonable measures to restrain SUMMERS,
his employees, agents and advisors and former employees, agents and advisors
from publishing or disclosing to any third party the Agreement Compound Studies
or any portion, extract or analysis (partial or full) thereof.
(d) LICENSOR shall refrain from making untrue statements regarding
Agreement Compound or Licensed Patents.
(e) Notwithstanding any other provision of this Section 6.01, LICENSEE
or LICENSOR shall be permitted to respond to any lawful court or other tribunal
demand (including subpoenas, interrogatories, or document requests) seeking
information or documents relating to the validity of the Licensed Patents.
6.02 Agreement Compound Studies. In addition to the provisions of
Section 6.01(b), LICENSOR shall take all reasonable measures to prevent SUMMERS
from selling or conveying the Agreement Compound Studies to any third party or
allowing the Agreement Compound Studies to be used by any third party for
purposes of gaining approval for any Person other than LICENSEE from any
governmental body to market Agreement Compound or Product. LICENSEE shall not
sell or convey its equivalent of the Agreement Compound Studies (the "Licensee
Studies") to any third party nor allow the Licensee Studies to be used by any
third party for purposes of gaining approval for any
9
<PAGE> 102
such third party from any governmental body to market Licensed Compound or
Product unless the sales by such third party are included in the calculation of
Net Sales.
6.03 Non-Competition. (a) During the term of this Agreement, LICENSOR
shall not assist and shall use all reasonable measure to prevent SUMMERS from
assisting (other than PharmaScience with respect to Canada only) any third
party to develop, register, promote or market Agreement Compound or Product.
(b) During the term of this Agreement, LICENSEE shall not assist any
third party to develop, register, promote or market Licensed Compound or
Product where the sale or use of Product or Licensed Compound is covered by a
Licensed Patent; provided, however, that LICENSEE is permitted to assist a
third party if the sales of such third party, if any, are included in the
calculation of Net Sales.
(c) Notwithstanding any other term or provision of this Agreement, the
payment of royalties shall terminate in its entirety in the event that LICENSOR
breaches the obligations of Section 6.03(a) or SUMMERS breaches the obligations
of Section 6.03(a) of the License Agreement.
6.04 Activities of LICENSEE. It is understood that LICENSEE regularly
has discussions with other Persons with respect to licensing and related
activities with respect to pharmaceutical products, including those in the
field of cognition, as a result of which LICENSEE may, during the term of this
Agreement, market products (not containing Licensed Compound) that will compete
with Product. In the event that during the term of this Agreement LICENSEE
commences the sale or promotion in the United States of a product (other than
Product) for the treatment of Alzheimer's Disease and at the time of such
commencement the payment of royalties due under this Agreement for Net Sales in
the United States has not been reduced by more than twenty-five percent (25%)
or terminated pursuant to Section 3.09 hereof or otherwise, LICENSEE will pay
to LICENSOR's Designee a one-time payment of one million dollars
($1,000,000.00). This payment is in full and complete compensation for any loss
of royalties to LICENSOR's Designee that might be caused by LICENSEE's sale of
competing product(s) inside or outside the United States. Payment of the amount
due under this Section 6.04 shall not relieve LICENSEE of the obligations to
pay royalties on this sale of Product pursuant to the terms of this Agreement.
Notwithstanding the foregoing, if LICENSOR incurs the obligation under the
terms of Section 6.04 of the License Agreement to make payment to SUMMERS,
LICENSEE shall not be obligated to make any payment pursuant to this Section
6.04, as it is a one-time payment.
VII. REPRESENTATIONS AND WARRANTIES
7.01 Representations and Warranties of LICENSOR. LICENSOR hereby
represents and warrants the following:
(a) LICENSOR is the valid licensee of the Licensed Patents pursuant to
the terms of the License Agreement.
(b) LICENSOR has the right to enter into this Agreement and grant the
sublicense under the Licensed Patents pursuant to this Agreement. LICENSOR is
not a party to any other agreement or under any obligation to any third party
that would prevent LICENSOR from entering into this Agreement.
10
<PAGE> 103
(c) To LICENSOR's knowledge, as of the date hereof, the Licensed
Patents are composed of the patents listed on Exhibit A.
(d) To LICENSOR's knowledge, except as set forth in Exhibit B hereof,
there are no patents owned by others and there are no trade secret or
proprietary rights of others which would be infringed or violated by the
making, using or selling of Agreement Compound or Products by LICENSEE anywhere
in the world.
(e) As of the date of this Agreement, there are no adverse
actions, suits or claims pending against LICENSOR, or to LICENSOR's knowledge,
against SUMMERS in any court or by or before any governmental body or agency
with respect to Licensed Patents or Agreement Compound and to the best of
LICENSOR's knowledge, no such actions, suits or claims have been threatened
against LICENSOR.
(f) No other Person or organization presently has any effective option
or license with respect to the manufacture, use or sale of Agreement Compound
or Products anywhere in the world, or is presently authorized to use the
Agreement Compound Studies anywhere in the world.
(g) LICENSOR makes no warranties other than as expressly stated
herein.
VIII. TERM OF AGREEMENT
8.01 Term. Unless sooner terminated as provided herein, this Agreement
shall commence as of the date first above written and shall continue until the
expiration of the last-to-expire Licensed Patent.
8.02 Termination. This Agreement may be terminated by either party
upon breach of this Agreement by the other party on sixty (60) days' prior
written notice to the breaching party, the notice to become effective at the
end of the-sixty (60) day period unless the breach is sooner cured by the
breaching party. The parties hereto agree that neither the reduction in
royalties pursuant to Section 3.09 nor the sales by a third party in a country
where there is a Licensed Patent shall constitute a breach of this Agreement by
which either party may terminate this Agreement.
8.03 Continuing Rights. Termination of this Agreement for any reason
shall be without prejudice to:
(a) LICENSOR's right to receive all royalties accrued and unpaid and
then due to be paid to LICENSOR's Designee by LICENSEE pursuant to the terms of
this Agreement on the effective date of such termination;
(b) the rights and obligations provided in Section 4.02 and Section
8.02 hereof; and
(c) any other remedies which either party may then or thereafter have
hereunder or otherwise.
[****]-CONFIDENTIAL TREATMENT REQUESTED
11
<PAGE> 104
8.04 Waiver. Failure to terminate this Agreement following breach or
failure to comply with this Agreement shall not be deemed a waiver of the
non-breaching party's defenses, rights or causes of action arising from such or
any future breach or noncompliance.
IX. MISCELLANEOUS
9.01 Force Majeure. If for reasons of Force Majeure, as hereinafter
defined, either party fails to comply with its obligations hereunder, such
failure shall not constitute breach of contract. For the purpose of this
Article, Force Majeure shall mean acts of God; acts, regulations or laws of any
government; wars; civil commotion; destruction of production facilities or
materials; fire; earthquake or storm; labor disturbances; failure of public
utilities or common carriers and any other causes (not resulting from an action
of or failure to act by either party) beyond the reasonable control of either
party.
9.02 Assignment. LICENSEE may assign this Agreement in whole or in
part to any Affiliate or Affiliates who shall be substituted directly in whole
or in part for it hereunder, provided, however, that LICENSEE shall guarantee
the performance of its Affiliate assignee hereunder. This Agreement shall not
otherwise be assignable by either party without the prior written consent of
the other party, except to the successor or assignee of all or substantially
all of its business related to Licensed Products and provided that LICENSOR's
Designee shall be permitted to assign his right to receive monies under this
Agreement.
9.03 Indemnification.
(a) Indemnification by LICENSOR. LICENSOR shall indemnify and hold
LICENSEE and its agents, directors, officers and employees and representatives
harmless from and against any and all Losses which they may at any time incur
by reason of any action or proceeding brought by any third party against
LICENSEE arising out of or resulting from any misrepresentation, breach of
warranty or non-fulfillment of or failure to perform any agreement or covenant
made by LICENSOR in this Agreement, where the Loss is not one for which LICENSOR
is indemnified by LICENSEE pursuant to Section 9.03(b).
(b) Indemnification by LICENSOR. LICENSEE shall indemnify and hold
LICENSOR and its agents, directors, officers and employees and representatives
harmless from and against any and all Losses which they may at any time incur
by reason of any action or proceeding brought by any third party including, but
not limited to, LICENSOR's Designee, against LICENSOR arising out of or
resulting from any misrepresentation, breach of warranty or non-fulfillment of
or failure to perform any agreement or covenant made by LICENSEE in this
Agreement.
(c) Survival. The obligation of the parties in this Section 9.03 shall
survive the expiration or earlier termination of this Agreement to the extent
permitted by applicable Law.
9.04 Expenses. Whether or not the transactions contemplated hereby are
consummated, all costs, expenses and disbursements incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party hereto incurring such costs and expenses.
9.05 Notices. Any notice or report required or permitted to be given
or made under this Agreement by one of the parties hereto to the other shall be
in writing and sent to the other party at its
12
<PAGE> 105
address indicated below or to such other address as the addressee shall have
theretofore furnished in writing to the addressor:
If to LICENSEE:
First Horizon Pharmaceutical Corporation
600 Hembree Parkway
Roswell, Georgia 30036
Attention: Chief Financial Officer
With a copy to: Legal Counsel
If to LICENSOR:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: President, Pharmaceutical Sector
with a copy to: Vice President and General Counsel
If to Designee:
William K. Summers, M.D.
2400 Louisiana NE, Suite 530
Albuquerque, New Mexico 87110
If to Burns, Doane, Swecker & Mathis LLP:
Burns, Doane, Swecker & Mathis LLP
Suite 500
1737 King Street
Alexandria, Virginia 22314
9.07 Governing Law. This Agreement shall be construed and the
respective rights of the parties hereto determined according to the substantive
law of New Jersey, United States of America other than those provisions
governing conflict of laws. Each party hereto hereby irrevocably submits to the
jurisdiction of any court in the State of New Jersey.
9.08 Entire Agreement. The terms and provisions contained in this
Agreement constitute the entire Agreement between the parties and shall
supersede all previous communications, representations, agreements or
understandings, either oral or written, between the parties hereto with respect
to the subject matter hereof, and no agreement or understanding varying or
extending this Agreement shall be binding upon either party hereto, unless in
writing which specifically refers to this Agreement, signed by duly authorized
officers or representatives of the respective parties and the provisions of
this Agreement not specifically amended thereby shall remain in full force and
effect.
13
<PAGE> 106
9.09 Non-Waiver. Any waiver must be explicitly in writing. The waiver
by either of the parties to this Agreement of any breach of any provision
hereof by the other party shall not be construed to be a waiver of any
succeeding breach of such provision or a waiver of the provision itself.
9.10 Severability. If and to the extent that any court or tribunal of
competent Jurisdiction holds any of the terms, provisions or conditions or
parts thereof of this Agreement, or the application hereof to any
circumstances, to be invalid or to be unenforceable in a final nonappealable
order, the remainder of this Agreement and the application of such term,
provision or condition or party thereof to circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby, and
each of the other terms, provisions and conditions of this Agreement shall be
valid and enforceable to the fullest extent of the law.
9.11 Agency. The relationship of the parties under this Agreement is
that of independent contractors. Neither party shall be deemed to be the agent
of the other, and neither is authorized to take any action binding upon the
other.
9.12 Counterparts and Headings. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both together
shall be deemed to be one and the same Agreement. All headings in this
Agreement are inserted for convenience of reference only and shall not affect
its meaning or interpretation.
IN WITNESS WHEREOF, LICENSOR and LICENSEE have executed this Agreement in
duplicate as of the day and year first above written.
WARNER-LAMBERT COMPANY
----------------------------
Name:
Title:
FIRST HORIZON PHARMACEUTICAL CORPORATION
-----------------------------
Name:
Title:
14
<PAGE> 107
EXHIBIT A
<TABLE>
<S> <C> <C>
4370 USA P 01 G
APP#: 098871
DATE:24SE1987
PAT#: 4816456
DATE:28MR1989
EXP.DT:09SE2007
ABSTRACT:
A METHOD FOR TREATING CENTRAL NERVOUS SYSTEM OR PERIPHERAL
NERVOUS SYSTEM CHOLOINERGIC DEFICIT STATES SUCH AS ALZHEIMER'S
DISEASE IN A MAMMAL, SAID METHOD COMPRISING ADMINISTERING
TO SAID MAMMAL AN AMOUNT OF A MONOAMINE ACRIDINE DERIVATIVE
EFFECTIVE IN THE TREATMENT OF A CHOLINERGIC DEFICIT STATE AND
FOR A TIME SUFFICIENT TO ACHIEVE A SUITABLE BLOOD LEVEL TO TREAT
SAID CHOLINERGIC DEFICIT STATE. THE PREFERRED MONOAMINE ACRIDINE
DERIVATIVE IS 1,2,3,4-TETRAHYDRO-5-AMINO ACRIDINE A UNIT DOSAGE
PHARMACEUTICAL COMPOSITION OF MATTER COMPRISING AN EFFECTIVE
AMOUNT OF SAID MONOAMINE ACRIDINE DERIVATIVE SUFFICIENT TO TREAT
SAID CHOLINERGIC DEFICIT STATE AND A PHARMACEUTICALLY ACCEPTABLE
INERT CARRIER THEREFOR IS ALSO DISCLOSED. CIP OF U.S. SERIAL NO.
914,076 FILED 01OC1986. NO PRIORITY
4370 ASTL G
APP#: 80707/87
DATE:28SE1987
PAT#: 621035
DATE:03MR1993
EXP.DT:28SE2007
4370 ASTL D 02 F
APP#: 78886/94
DATE:17NO1994
PAT#:
DATE:
EXP.DT:
4370 ATRA E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:26OC2014
4370 ATRA X G
APP#: E106245
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
</TABLE>
15
<PAGE> 108
<TABLE>
<S> <C> <C>
4370 ATRA J X G
APP#: SZ9/96
DATE:23MY1996
PAT#: SZ9/96
DATE:23FE1998
EXP.DT:05MY2009
4370 BELG E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 BELG X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 BELG J X F
APP#: 96C0021
DATE:05JE1996
PAT#:
DATE:
EXP.DT:
4370 DENM P F
APP#: 2958/88
DATE:28SE1987
PAT#:
DATE:
EXP.DT:
4370 EPC E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 EPC X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 FRAN E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 FRAN X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
</TABLE>
16
<PAGE> 109
<TABLE>
<S> <C> <C>
4370 GBRI X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 GERM E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 GERM X G
APP#: EP0328535
DATE:28SE1987
PAT#: P3789967.2
DATE:01JE1995
EXP.DT:28SE2007
4370 ITAL E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 ITAL X G
APP#: 4919/BE94
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 LUXE E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 LUXE X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 MEXI F
APP#: 923762
DATE:29JE1992
PAT#:
DATE:
EXP.DT:
</TABLE>
17
<PAGE> 110
<TABLE>
<S> <C> <C>
4370 NETH E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWED X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT E F
APP#: 931177982.4
DATE:26OC1994
PAT#:
DATE:
EXP.DT:
4370 SWIT X G
APP#: 87906711.4
DATE:28SE1987
PAT#: EP0328535
DATE:01JE1995
EXP.DT:28SE2007
4370 SWIT J G
APP#: 52934
DATE:16JE1995
PAT#: C0328535/01
DATE:30AP1996
EXP.DT:16JE2010
</TABLE>
In addition, there are corresponding patents in Canada, Japan and Brazil which
are in the process of being abandoned. It may be possible to revive these
patents if Horizon so desires.
18
<PAGE> 111
EXHIBIT B
Settlement and License Agreement dated as of September 28, 1994 between
Hoechst-Roussel Pharmaceuticals Inc. and Warner-Lambert Company (Shutske patent)
Agreement dated September 8, 1987 between Warner-Lambert Company and Mount Sinai
School of Medicine
19
<PAGE> 112
EXHIBIT 7.1.10
TRANSITION SERVICES AGREEMENT
TRANSITION SERVICES AGREEMENT, dated May ___, 2000, between FIRST
HORIZON PHARMACEUTICAL CORPORATION, a corporation organized and existing under
the laws of Delaware, whose principal office is located at 660 Hembree Parkway,
Suite 106, Roswell, Georgia 30076 ("Horizon"), and WARNER-LAMBERT COMPANY, a
corporation organized and existing under the laws of Delaware, whose principal
office is located at 201 Tabor Road, Morris Plains, New Jersey 07950
("Warner-Lambert"). All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Asset Purchase Agreement, dated as of
April 14, 2000 (the "Purchase Agreement"), by and between Warner-Lambert and
Horizon.
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement, Warner-Lambert has agreed
to sell and Horizon has agreed to purchase the Assets;
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Purchase Agreement that Warner-Lambert and Horizon enter
into this Agreement;
WHEREAS, the parties wish to facilitate an orderly transfer of the
Cognex business to Horizon; and
WHEREAS, Warner-Lambert and certain of its Affiliates (the "Service
Providers") are willing to provide certain transitional administrative services
to Horizon upon the terms and conditions set forth below;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the parties hereto agree as follows:
Article 1. Definitions. As used in this Agreement, the following terms will
have the meanings set forth below:
"Business" means the Cognex business in the European countries in the
Territory.
"Business Data" means all files, documents, books and records relating
to the Business in the possession or under the control of Warner-Lambert or
certain of its Affiliates in connection with the Services.
"Incremental Services" will have the meaning set forth in Section 5.2.
"Invoice" will have the meaning set forth in Section 5.3.
"Service Providers" will have the meaning set forth in the forepart of
this Agreement.
"Services" will have the meaning set forth in Section 2.1.
1
<PAGE> 113
Article 2. Services.
2.1 Services to be Made Available. In accordance with the terms
and provisions of this Agreement, Warner-Lambert agrees to provide or cause to
be provided to Horizon the transitional services relating to the Business that
are described on Schedule A hereto (collectively, the "Services") for the term
of this Agreement. Except as may be agreed by Warner-Lambert, provision of each
such Service will be limited to substantially the same number and quality of
employees as are currently involved in the conduct of the Business.
2.2 Controlling Provisions. In ordering and delivering Services
and Incremental Services hereunder, Warner-Lambert, the Service Providers and
Horizon may employ their standard forms, but nothing in those forms will be
construed to modify or amend the terms of this Agreement and in case of conflict
herewith, this Agreement will control.
2.3 Cash Management. In the event that provision of any of the
Services requires Warner-Lambert or any Service Provider to receive cash or
other moneys on behalf of Horizon, Warner-Lambert will utilize or cause to be
utilized commercially reasonable efforts to assure that such cash or other
moneys are promptly credited to one or more accounts designated by Horizon.
Horizon agrees that payments to Horizon may be made in local currency and that
if Horizon elects to receive payment in any currency other than the currency of
payment, Horizon bears all currency exchange costs and risk related thereto.
Article 3. Title to Equipment and Media.
3.1 Property of Warner-Lambert. Unless furnished to Warner-Lambert
or any Service Provider by Horizon, all equipment used in connection with
providing the Services and all media upon which information of Horizon is stored
in connection with the Services is and will remain the property of
Warner-Lambert or the relevant Service Provider.
Article 4. Intentionally Omitted.
Article 5. Billing.
5.1 Fees. Services relating to the maintenance of the Business in
the ordinary course will be provided to Horizon for the term of this Agreement,
free of charge.
5.2 Incremental Services and Out-of-Pocket Expenses. (a) Horizon
will be charged, per hour, the amount shown in Schedule A for the Incremental
Services referred to therein, plus applicable value added taxes; provided,
however, Horizon will not be charged for Incremental Services to the extent such
Incremental Services are required solely as a result of a breach of this
Agreement by Warner-Lambert or the Service Providers. As used herein,
"Incremental Services" means Services that would not, in the ordinary course of
business, be required to operate the Business, including, but not limited to
responding to investigations by Governmental or Regulatory Authorities regarding
the Product. Horizon will have the option of terminating an Incremental Service
and its corresponding fees, as set forth in Schedule A hereto, upon seven (7)
days' written notice to Warner-Lambert.
(b) Horizon will be charged for all of Warner-Lambert's
and the Service Providers' unrelated third-party out-of-pocket expenses,
reasonably incurred in connection with providing the Services and Incremental
Services; provided, however, Horizon will not be charged for any such unrelated
third-party out-of-pocket
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expenses to the extent such unrelated third-party out-of-pocket expenses
resulted solely from a breach of this Agreement by Warner-Lambert or the Service
Providers. Before incurring any single such expense in excess of the local
equivalent of U.S.$5,000, Warner-Lambert will notify Horizon or cause Horizon to
be notified. Horizon promptly will approve or reject such expense. If Horizon
rejects such expense, Warner-Lambert will be released from all obligations to
provide any Services or Incremental Services reasonably dependent upon the
activities related to such expense.
5.3 Payment. Unless otherwise agreed, Warner-Lambert will
issue or cause to be issued a monthly invoice (the "Invoice(s)") for the fees
relating to Incremental Services rendered pursuant to this Agreement and for
reimbursement of any third party, out-of-pocket expense incurred in connection
with providing the Services or Incremental Services (which invoice will include
copies of all third party invoices that exceed the local equivalent of
U.S.$5,000) and Horizon will pay or cause to be paid such Invoice to an account
designated by Warner-Lambert in immediately available funds within thirty (30)
days from the date of invoice. Unless Horizon specifically objects in writing,
Warner-Lambert will be entitled to cause any Invoice that is unpaid within such
thirty (30) day period to be paid from funds of any Horizon account that
Warner-Lambert may manage on Horizon's behalf hereunder. Horizon acknowledges
that the out-of-pocket expenses will be incurred in local currency, and the
terms of reimbursement thereof in any alternative currency shall be subject to
the agreement of Warner-Lambert.
Article 6. Indemnification.
6.1 Indemnification by Horizon. Horizon will indemnify and hold
Warner-Lambert and its respective Affiliates, agents, directors, officers,
employees and representatives harmless from and against any and all Losses which
they may at any time incur by reason of any Action brought by any Governmental
Authority or other third party arising out of or resulting from (a) any
misrepresentation, breach of warranty or non-fulfillment of or failure to
perform any agreement or covenant made by Horizon in this Agreement, (b) any
negligent act or omission of Horizon or any of its Affiliates and (c) provision
of the Services or Incremental Services, provided that in providing the Services
or Incremental Services Warner-Lambert employs at least the same level of care
as it currently employs in providing similar services for its own businesses.
6.2 Indemnification by Warner-Lambert. Warner-Lambert will
indemnify and hold Horizon and its respective Affiliates, agents, directors,
officers, employees and representatives harmless from and against any and all
Losses which they may at any time incur by reason of any Action brought by any
Governmental Authority or other third party arising out of or resulting from any
misrepresentation, breach of warranty or non-fulfillment of or failure to
perform any agreement or covenant made by Warner-Lambert in this Agreement;
provided, however, that with respect to the provision of Services or Incremental
Services, Warner-Lambert will be liable only to the extent of its failure to
employ at least the same level of care as it employs in providing similar
services for its own businesses or the gross negligence or willful misconduct of
Warner-Lambert.
6.3 Indemnification Procedures. Indemnification under Section 6.1
or Section 6.2 will be conditioned on compliance with the procedure outlined
below. Provided that prompt notice is given of any claim or suit for which
indemnification might be claimed, the indemnifying party promptly will defend,
contest or otherwise protect against any such claim or suit (including by way of
settlement and release) at its own cost and expense. The indemnified party may,
but will not be obligated to, participate at its own expense in a defense
thereof by counsel of its own choosing, but the indemnifying party will be
entitled to control the defense unless the indemnified party has relieved the
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indemnifying party from liability with respect to the particular matter. If the
indemnifying party fails timely to defend, contest or otherwise protect against
any such claim or suit, the indemnified party may, but will not be obligated to,
defend, contest or otherwise protect against the same, and make any compromise
or settlement thereof and recover the entire costs thereof from the indemnifying
party, including reasonable attorneys fees, disbursements and all amounts paid
as a result of such claim or suit or the compromise or settlement thereof;
provided, however, that if the indemnifying party undertakes the timely defense
of such matter, the indemnified party will not be entitled to recover from the
indemnifying party its costs incurred in the defense thereof. The indemnified
party will cooperate and provide such assistance as the indemnifying party may
reasonably request in connection with the defense of the matter subject to
indemnification.
6.4 Disclaimer. Except as expressly provided herein, the Services
and Incremental Services are provided "as is" and without any express or implied
warranties, including the warranties of merchantability and fitness for a
particular purpose.
6.5 Certain Losses. Under no conditions will Warner-Lambert be
liable for any special, incidental or consequential damages (including, without
limitation, loss of business, profits or good will) in connection with its
performance under this Agreement.
6.6 Survival. The provisions of this Article 6 will survive the
expiration or earlier termination of this Agreement for so long as an
indemnified party hereunder may have liability under applicable Law.
Article 7. Term; Termination.
7.1 Term. This Agreement will expire on November 30, 2000, or
earlier upon termination of all Services and Incremental Services pursuant to
Section 7.2.
7.2 Termination. (a) In the event that either party materially
fails to perform any of its duties or obligations pursuant to this Agreement and
such failure is not cured within thirty (30) days after notice to such party
specifying the nature of such material failure, the other party may terminate
this Agreement upon further notice to the defaulting party.
(b) Horizon may terminate this Agreement upon thirty (30)
days' prior written notice to Warner-Lambert. Horizon will be relieved of any
obligation to pay for terminated Services and Incremental Services from and
after the effective date of such termination; provided, however, that Horizon
will continue to pay for any noncancellable commitments reasonably made by
Warner-Lambert in anticipation of providing the Services as required herein.
Warner-Lambert agrees to use its commercially reasonable efforts to provide
Horizon with a list of any such noncancellable commitments at least seven (7)
days prior to the termination of the Agreement by Horizon.
(c) Either party may, in its discretion and without
prejudice to its other rights and remedies at law, terminate this Agreement
immediately in the event that the other party becomes insolvent, has a receiver,
examiner or liquidator appointed over the whole or any part of its assets, has
an order made or resolution passed for it to be wound up or enters into any
arrangement or composition with its creditors.
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(d) Warner-Lambert may terminate this Agreement if any
entity or person (other than Horizon or any of its Affiliates) acquires
ownership or control of 50% or more of Horizon's voting capital stock or
substantially all of its assets.
7.3 Effect of Termination. (a) Expiration or termination of this
Agreement for any reason, will not release either party from any liability which
at said time it has already incurred to the other party, nor affect in any way
the survival of any rights, duties or obligations of either party that are
expressly stated elsewhere in this Agreement to survive said expiration or prior
termination. Nothing in the immediately preceding sentence will affect the right
of the party aggrieved by any breach of this Agreement to be compensated for any
injury or damage resulting therefrom that is incurred before or after such
expiration or termination.
(b) Upon expiration or termination of this Agreement, all
fees owed by Horizon to Warner-Lambert for Services and Incremental Services
provided through the date of such expiration or termination will be paid within
thirty (30) days of the date of such expiration or termination.
(c) Promptly after the expiration or earlier termination
of this Agreement, Warner-Lambert will deliver or make available to Horizon all
of the Business Data, and if at any time after the termination of this Agreement
Warner-Lambert discovers in its possession or under its control any other
Business Data, it will forthwith deliver such Business Data to Horizon.
Notwithstanding the foregoing, to the extent any of the Business Data are items
susceptible to duplication and are either (x) used in connection with any of
Warner-Lambert's businesses other than the Business or (y) are required by Law
to be retained by Warner-Lambert, Warner-Lambert may deliver photostatic copies
or other reproductions from which, in the case of Business Data referred to in
clause (x).
Article 8. Miscellaneous.
8.1 Further Assurances. Subject to the provisions hereof, each of
Warner-Lambert and Horizon will execute and deliver such other agreements,
documents or instruments and take or cause to be taken such other actions as may
be reasonably required in order to effect the purposes of this Agreement and to
consummate the transactions contemplated hereby. Subject to the provisions
hereof, each of Warner-Lambert and Horizon will, in connection with entering
into this Agreement, performing its obligations hereunder and taking any and all
actions relating hereto, comply with all applicable Laws, obtain all required
consents and approvals and make all required filings with any Governmental
Authority and promptly provide the other with all such information as the other
party may reasonably request in order to be able to comply with the provisions
of this sentence.
8.2 Notices. All demands, notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally or by facsimile transmission or by mail
(first class, postage prepaid) to the parties at the following addresses or
facsimile numbers:
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if to Warner-Lambert, addressed to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: President, Pharmaceutical Sector
Fax No: (973) 385-4009
if to HORIZON, addressed to:
First Horizon Pharmaceutical Corporation
660 Hembree Parkway, Suite 106
Roswell, Georgia 30036
Attention: Chief Financial Officer
Fax No: (770) 442-9594
a copy of all notices and communications hereunder having the effect of
amending, supplementing, modifying or assigning this Agreement shall be
provided to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Attention: Senior Vice President and General Counsel
Facsimile No. (973) 385-3927
or to such other address as a party hereto shall specify to the other party
hereto in writing.
8.3 Confidentiality. All confidential information of
Warner-Lambert disclosed to Horizon or any of its Affiliates in connection
herewith and all confidential information of Horizon and its Affiliates
disclosed to Warner-Lambert or its Service Providers in connection herewith will
be held in confidence and will not be disclosed by the other party to any third
party or used outside the scope of this Agreement, except that Horizon or
Warner-Lambert, as the case may be, may disclose such information to its
Affiliates or its employees who are under a similar obligation of secrecy in
furtherance of the purposes of this Agreement; provided, however, that the
aforesaid obligation of confidentiality assumed by Horizon and its Affiliates
and Warner-Lambert and its Service Providers hereunder will not apply to any
confidential information (collectively referred to as "Information" for purposes
of this Section 8.3) which (i) was or becomes available to Horizon or
Warner-Lambert, as the case may be, on a non-confidential basis from a source
that is not under an obligation (whether contractual, legal or fiduciary) to the
other party to keep such information or data confidential, (ii) was previously
known to the Receiving Party (defined below), as established by competent
evidence or (iii) was or becomes a part of the public domain through no fault of
the Disclosing Party (defined below). If the party receiving Information of the
other party (the "Receiving Party") is requested in any judicial or
administrative proceeding or by any Governmental Authority to disclose any
Information of the other party (the "Disclosing Party"), the Receiving Party
will give the Disclosing Party prompt notice of such request so that the
Disclosing Party may seek an appropriate protective order. The Receiving Party
will cooperate fully with the Disclosing Party in obtaining such an order. If in
the absence of a protective order the Receiving Party is nonetheless compelled
to disclose Information of the Disclosing Party, the Receiving Party may make
such disclosure without liability hereunder, provided that the Receiving Party
gives the Disclosing Party written notice of the Information to be disclosed as
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far in advance of its disclosure as is practical and, upon the Disclosing
Party's request and at its expense, the Receiving Party will use reasonable
efforts to obtain reasonable assurances that confidential treatment will be
accorded to such Information. The obligations of confidentiality in this Section
8.3 will survive the expiration or earlier termination of this Agreement until
the confidential information disclosed hereunder is no longer "Information" as
defined herein.
8.4 Third Party Beneficiaries. Each party intends that this
Agreement will not benefit or create any right or cause of action in or on
behalf of any Person other than Warner-Lambert, the Service Providers and
Horizon.
8.5 Entire Agreement. This Agreement, including all Schedules
hereto (which Schedules are hereby incorporated into and made a part of this
Agreement), constitutes the entire agreement between the parties and supersedes
all previous communications, representations, agreements or understandings,
either oral or written, between the parties with respect to the subject matter
hereof and this Agreement may be amended, supplemented or modified only by a
written instrument duly executed by or on behalf of each party hereto.
8.6 Authority. Horizon hereby authorizes Warner-Lambert and its
Affiliates and subcontractors to do all such things in the name or for the
account of Horizon as may be necessary or desirable for, or incidental to, the
performance of any of the Services in the ordinary course of business, including
the execution and delivery of any document.
8.7 Contractual Relationship. Nothing contained in this Agreement
will be deemed to create any joint venture, partnership or principal-agent
relationship between Warner-Lambert and Horizon or any of their respective
Affiliates and neither of the parties will hold itself out in any manner which
would indicate any such relationship with the other.
8.8 Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party. This Agreement will be
binding upon and, subject to the terms of the foregoing sentence, inure to the
benefit of the parties hereto, their respective successors, legal
representatives and assigns.
8.9 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver will be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
will be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
8.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
8.11 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any applicable present or future
law, and if the rights or obligations of any party hereto under this Agreement
will not be affected materially and adversely thereby, (a) such provision will
be fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or
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unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added as a part of this Agreement by mutual agreement
of the parties, a legal, valid and enforceable provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible.
8.12 Force Majeure. Except in the case of monetary obligations
hereunder, the occurrence of an event which materially interferes with the
ability of a party to perform its obligations or duties hereunder that is not
within the reasonable control of the party affected, not due to malfeasance and
that could not with the exercise of due diligence have been avoided ("Force
Majeure"), including, but not limited to, fire, accident, labor difficulty,
strike, riot, civil commotion, act of nature, delay or errors by shipping
companies or change in Law will not excuse such party from the performance of
its obligations or duties under this Agreement, but will merely suspend such
performance during the continuation of Force Majeure. The party prevented from
performing its obligations or duties because of Force Majeure will promptly
notify the other party hereto (the "Other Party") of the occurrence and
particulars of such Force Majeure and will provide the Other Party, from time to
time, with its best estimate of the duration of such Force Majeure and with
notice of the termination thereof. The party so affected will use its best
efforts to avoid or remove such causes of nonperformance. Upon termination of
Force Majeure, the performance of any suspended obligation or duty will promptly
recommence. Except as otherwise specifically provided herein, neither party will
be liable to the other party for any direct, indirect, consequential,
incidental, special, punitive or exemplary damages arising out of or relating to
the suspension or termination of any of its obligations or duties under this
Agreement by reason of the occurrence of Force Majeure. In the event that Force
Majeure has occurred and is continuing for a period of at least 2 months, the
Other Party will have the right to terminate this Agreement upon 30 days notice.
8.13 Governing Law. This Agreement and the rights and obligations
of the parties hereunder will be governed by, and construed and interpreted in
accordance with, the laws of New York applicable to a contract executed and
performed in such state.
8.14 Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original, but both of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party, as of the date first above
written.
WARNER-LAMBERT COMPANY
By:
---------------------------------------
Name:
-------------------------------
Title:
-------------------------------
FIRST HORIZON PHARMACEUTICAL CORPORATION
By:
---------------------------------------
Name:
-------------------------------
Title:
-------------------------------
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Schedule A
[****]-CONFIDENTIAL TREATMENT REQUESTED
SERVICES
1. Services :
Services
Regulatory Services :
Maintenance of Registrations, including processing of payments for renewal and
annual fees
Contact with Governmental and Regulatory Authorities with respect to the
Product, including reporting of adverse events
Responding to customer complaints or physician inquiries
Providing a Qualified Person for the release of the Product in the European
countries in the Territory
Preparation and filing of Product Periodic Safety Update Report
Sales administration: Sales orders, shipping management, billing, processing of
returns (including providing Horizon with monthly reports of returns in the
Primary Countries) and collection services
Storage of Product (to the extent ordinarily stored in facilities of
Warner-Lambert or its Affiliates)
Assistance with transferring the foregoing functions to Horizon or its designee
2. Incremental Services
<TABLE>
<CAPTION>
Services Hourly Fee*
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Regulatory Services: $ [*****]
</TABLE>
Investigation of
- - any request or suggestions that the Product needs to be recalled or
withdrawn**
- - any request or suggestion that calls into question the quality** or safety of
the Product
<PAGE> 122
- -adverse events
Quality investigations of customer complaints including but not limited to
complaints alleging suspected or actual product tampering, contamination** or
mislabeling***
Any communications with physicians in relation to the Product.
Any periodic testing of Product as requested by Governmental or Regulatory
Authorities
Responding to an investigation or inquiry of any Governmental or Regulatory
Authority concerning the Product, including but not limited to further
investigation or inquiry regarding the mouse carcinogenicity study.
Management of Product recalls**
*Plus applicable value added taxes
** Horizon shall not bear the cost of such service where the recall is for a
failure of Products manufactured by Warner-Lambert to meet Specifications, where
such failure is due solely to the actions or omissions of Warner-Lambert.
***Horizon shall not bear the cost of such service where the investigation is
for a failure of Products manufactured by Warner-Lambert to meet Specifications,
where such failure is due solely to the actions or omissions of Warner-Lambert
<PAGE> 123
EXHIBIT 7.1.10
LICENSE AGREEMENT (ASSIGNMENT AND ASSUMPTION)
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated May __, 2000, by and between
First Horizon Pharmaceutical Corporation, a company incorporated under the laws
of Delaware and having its principal place of business at 660 Hembree Parkway,
Suite 106, Roswell, Georgia 30036 ("Horizon") and Warner-Lambert Company, a
company incorporated under the laws of Delaware and having its principal place
of business at 201 Tabor Road, Morris Plains, New Jersey 07950, U.S.A.
("Warner"). Capitalized terms not otherwise defined herein shall have the
meanings set forth in Article 1.
WHEREAS, Warner entered into the contracts listed in Appendix A hereof (the
"Contracts"), in connection with the development, manufacturing, marketing,
promotion and sale of the Cognex products; and
WHEREAS, on the date hereof, Warner has sold its Cognex business to Horizon
pursuant to the terms of an Asset Purchase Agreement dated April 14, 2000 (the
"Asset Purchase Agreement");
WHEREAS, Warner wishes, pursuant to the terms of the Asset Purchase Agreement,
to assign the Contracts to Horizon and Horizon is willing to accept the rights
and assume the obligations relating thereto;
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, the Parties hereto agree as follows:
ARTICLE 1
ASSIGNMENT AND ASSUMPTION
1.1 Assignment. Warner hereby transfers and assigns to Horizon, its
successors and permitted assigns, all right, title and interest of Warner in, to
and under the Contracts.
1.2 Assumption. Horizon hereby assumes as its own liability until
discharged in full, and agrees to perform, each and every obligation on the part
of Warner arising and to be performed under the Contracts on and after the date
hereof, with the same force and effect as if Horizon had been originally a party
to the Contracts.
ARTICLE 2
MISCELLANEOUS
2.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York.
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2.2 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any applicable present or future law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement, a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
2.3 Assignment. This Agreement and any rights and obligations hereunder
shall not be assignable by a party hereto, without the prior written consent of
the other party; provided that Horizon may assign this Agreement to one or more
of its affiliates.
2.4 Further Assurances. Each party hereto shall execute such other
documents and instruments and take such other actions as may be necessary to
effect the transactions contemplated hereby and further to comply with all
applicable Laws in connection with this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives, on the day and year set forth above.
FIRST HORIZON PHARMACEUTICAL CORPORATION
----------------------------------------
Name:
Title:
WARNER-LAMBERT COMPANY
----------------------------------------
Name:
Title:
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<PAGE> 125
APPENDIX A
CONTRACTS
1. Settlement and License Agreement dated as of September 28, 1994 between
Warner-Lambert Company and Hoechst-Roussel Pharmaceuticals Inc.
2. Agreement dated September 8, 1987 between Warner-Lambert Company and
Mount Sinai School of Medicine.
3. Agreement dated April 20, 1990 between Warner-Lambert Company and Shire
Holdings Limited.
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<PAGE> 1
EXHIBIT 10.21
AMENDMENT TO COLLABORATION AGREEMENT
May 3, 2000
Donald L. Barbeau
President
Inpharmakon Corporation
191 Waukegan Avenue
Suite 206
Northfield, Illinois 60099
Dear Donald,
This letter records the terms on which First Horizon Pharmaceutical Corporation
(formerly Horizon Pharmaceutical Corporation) ("First Horizon") and Inpharmakon
Corporation ("Inpharmakon") have agreed to settle their differences with regard
to certain issues arising out of their Collaboration Agreement made as of
October 31, 1998 ("Collaboration Agreement").
1. First Horizon shall pay to Inpharmakon a total of $200,000 (the "IPO
Payment") within 30 days of the closing of First Horizon's initial
public offering of its shares of Common Stock ("IPO"); provided,
however, that In the event that the IPO has not closed by October 20,
2000, First Horizon shall pay to Inpharmakon one half of the IPO
Payment ($100,000) on October 20, 2000 and provided further, that in
the event that the IPO has not closed by April 20, 2001, First Horizon
shall pay to lnpharmakon the remaining balance of the IPO Payment
($100,000) on April 20, 2001. For the purposes of this paragraph
"closing" of the IPO refers to the date on which First Horizon's
underwriters fund the purchase of IPO shares from First Horizon. The
IPO is a firm commitment underwriting.
2. Secondly the Collaboration Agreement is amended to provide for the
following:
a. First Horizon shall pay to Inpharmakon a total of $200,000, in
place of the $100,000 payment required by Section 4.01(ii) of
the Collaboration Agreement, such payment to be made on the
earlier to occur of (i) within 30 days after the filing of the
NDA for the Product for the Indication by First Horizon, and
(ii) December 31, 2001.
b. First Horizon shall pay to Inpharmakon a total of $500,000 in
place of the payment of $400,000 required by Section 4.01
(iii) of the Collaboration Agreement, within 30 days after
approval of such NDA.
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<PAGE> 2
3. Subsections 8.04(iii) and (iv) of the Collaboration Agreement are
deleted.
4. In order to avoid future misunderstandings and to foster a closer
spirit of collaboration, First Horizon will designate Mr. Ralph Jordan,
or such other individual as First Horizon may designate from time to
time as Project Liaison between Inpharmakon and First Horizon and as
the individual to whom Inpharmakon may direct all questions and
inquiries regarding the development of, and FDA registration activities
concerning, the Product. In addition First Horizon agrees to provide
Inpharmakon with detailed written quarterly reports to be delivered to
Inpharmakon within 30 days after the end of each quarter during the
term of the Collaboration Agreement, such reports to include but not be
limited to a reasonable explanation of the progress of and any changes
in Horizon's regulatory strategies for the Product. In addition to the
foregoing and as part of its undertaking hereunder, First Horizon will
provide Inpharmakon with (a) at the same time as the FDA, the summary
sections of any IND, New Drug Application (whether full, partial or
abbreviated) and amendments thereto, excluding attachments, filed for
the Product with the FDA until such time as the FDA has approved the
NDA, and (b) copies of all other written communications to or from the
FDA concerning the Product, including but not limited to
correspondence, filings, minutes of meetings, briefing documents,
responses to and from the FDA, and supporting documentation whether in
printed or electronic form. First Horizon agrees to make available to
Inpharmakon knowledgeable personnel with the knowledge and authority to
discuss all such activities and to give Inpharmakon access in Horizon's
offices, at no cost to First Horizon, to the attachments to Horizon's
filings for the Product with the FDA on not less than 48 hours notice
to Horizon.
5. Provided that First Horizon makes the payments in accordance with the
provisions of the above Paragraphs 1 and 2, each of Inpharmakon and
First Horizon shall and does hereby remise, release and forever
discharge and, by these presents, does, for itself, its directors,
officers, agents, successors, assigns, employees and representatives
and each of them, release and forever discharge the other party and its
directors, officers, agents, successors, assigns employees and
representatives, and each of them. from and against all manner of
actions, complaints, causes of action, claims, suits, debts, breaches,
sums of money, accounts, reckonings, contracts, torts, controversies,
agreements, promises, damages, judgments, executions, claims and
demands whatsoever in law or in equity arising out of, directly or
indirectly, any matter. transaction, representation, event or thing
from the first day in time to and including the date of this letter,
including, but without limitation, any and all previously unreleased
and/or unfulfilled obligations of either party arising under or
pursuant to the Collaboration Agreement.
6. As a material inducement to Inpharmakon agreeing to the terms and
conditions of this Letter, First Horizon hereby represents and warrants
to Inpharmakon that (a) the only formulation for the Product that it is
now being developed is for the Indication; (b) it will promptly inform
Horizon in the event it abandons such formulation or does or causes
others to do any work on any other formulation for the Product, (c) it
has provided Inpharmakon with true copies of all written communications
through the date of this letter
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<PAGE> 3
to or from the FDA concerning the Product, including but not limited to
correspondence, filings, minutes of meetings, briefing documents,
responses to and from the FDA, and supporting documentation whether in
printed or electronic form; (d) the attached amendment to the Product
Development and Supply Agreement entered into as of March 25, 1999 by
and between Penwest Pharmaceuticals Co. (Penwest") and First Horizon
(the "Penwest Agreement") is a true and correct copy of an amendment to
the Penwest Agreement executed by the parties thereto on May 3, 2000,
which amendment is in full force and effect, and (a) it will not
further amend the assignment provisions of the Penwest Agreement
without Inpharmakon's prior written consent which consent will not be
unreasonably withheld.
7. In the event of a material breach or material default by First Horizon
under the representations and warranties contained in Paragraph 6
above, Inpharmakon may give notice of termination to First Horizon
specifying the breach or default, in which event the Collaboration
Agreement shall terminate immediately if the breach or default is not
capable of cure, or, if the breach or default is capable of cure, after
30 days unless First Horizon cures the breach or default within the 30
period. In the event that the Collaboration Agreement is terminated
pursuant to Inpharmakon's notice hereunder, Inpharmakon shall have the
exclusive right to proceed with a NDA for the Product for the
Indication using the Formulation and the data from the Clinical Trials
as has been acquired or developed by Horizon at the date of
termination, and shall have the right to assume Horizon's rights to the
same and the NDA, 9 applicable, without cost to Inpharmakon or
Inpharmakon Affiliates. In that event Horizon shall release to
Inpharmakon its rights to the Opportunity Package, the Formulation, the
related not publicly available information provided by Inpharmakon or
developed by or for Horizon, and registration data related to the NDA
for the Product for the Indication.
8. In the event that First Horizon grants Penwest a sublicense under the
provisions of Section 11.4 of the Penwest Agreement or otherwise to the
Horizon Test and Regulatory Data (as defined in the Penwest Agreement),
Horizon agrees to pay to Inpharmakon the royalties provided under the
provisions of Section 4.02 of the Collaboration Agreement whether or
not the Collaboration Agreement is still in force provided that the
Collaboration Agreement is not terminated by First Horizon under
Section 8.02 of the Collaboration Agreement in which case the right to
such royalties would terminate with the Collaboration Agreement.
9. Defined terms used in this letter have the same meaning as they have in
the Collaboration Agreement.
10. All other provisions of the Collaboration Agreement will continue in
full force and effect except to the extent changed by the provisions of
this letter.
11. The parties agree to execute a formal amendment to the Collaboration
Agreement within 30 days of the date of this letter incorporating the
above provisions into the Collaboration Agreement. At such time as that
amendment has been executed and exchanged by the parties, the amendment
will replace the agreement contained in this letter.
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12. This letter agreement may be executed in one or more counterparts, each
of which shall be an original, but all of which taken together shall
constitute one and the same agreement,
If the above terms and conditions accurately record our agreement,
please sign and return the acknowledgment at the foot of this letter.
Sincerely,
AGREED AND ACCEPTED
Inpharmakon Corporation
William G. Campbell
Controller
Donald L. Barbeau
President
cc: Christopher R. Manning (Burke, Warren, MacKay & Serritella)
Michael J. Hogg (Business Counsel)
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the use of our reports
(and to all references to our Firm) included in or made part of this
registration statement.
Arthur Andersen LLP
Atlanta, Georgia
May 24, 2000
