<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
or the transition period from to
Commission file number 0-18443
MEDICIS PHARMACEUTICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 52-1574808
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4343 East Camelback Road
Phoenix, Arizona 85018-2700
(Address of principal executive offices)
(602) 808-8800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 9, 1999
----- -------------------------------
Class A Common Stock $.014 Par Value 18,767,808
Class B Common Stock $.014 Par Value 281,974
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MEDICIS PHARMACEUTICAL CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C> <C>
Item 1-- Financial Statements
Condensed Consolidated Balance Sheets as of
December 31, 1998, and June 30, 1998 3
Condensed Consolidated Statements of
Operations for the Three Months and Six Months
Ended December 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended
December 31, 1998 and 1997 6
Notes to the Condensed Consolidated Financial Statements 7
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 4 -- Submission of Matters to a Vote of Security Holders 20
Item 6 -- Exhibits and Reports on Form 8-K 22
SIGNATURE 23
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 74,308,683 $147,411,127
Short-term investments 151,253,090 90,510,029
Accounts receivable, net 23,215,774 18,899,868
Inventories, net 11,074,594 9,208,384
Deferred tax assets 3,086,470 3,300,000
Accrued interest income 1,793,031 2,050,264
Other current assets 9,385,240 6,750,170
------------ ------------
Total current assets 274,116,882 278,129,842
------------ ------------
Property and equipment, net 1,436,045 1,343,603
Intangible assets:
Intangible assets related to 143,417,858 70,386,665
acquisitions
Other intangible assets 5,888,625 6,874,626
Less accumulated amortization 8,090,213 5,977,399
------------ ------------
Net intangible assets 141,216,270 71,283,892
------------ ------------
Other non-current assets 1,724,334 1,592,907
------------ ------------
$418,493,531 $352,350,244
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
3
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MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
------------- -------------
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable $ 5,024,034 $ 5,496,526
Notes payable 17,137 11,364
Accrued incentives 1,369,295 1,786,392
Accrued royalties 1,570,541 1,040,993
Short-term contract obligation 22,000,000 --
Other accrued liabilities 3,596,475 6,838,397
------------- -------------
Total current liabilities 33,577,482 15,173,672
------------- -------------
Long-term liabilities:
Notes payable 88,783 94,556
Other non-current liabilities 117,454 124,115
Long-term contract obligation 33,274,948 --
Deferred tax liability 6,782,076 10,502,416
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 2,010,934 1,960,000
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.01 par value, 5,000,000
shares authorized; no shares issued -- --
Class A Common Stock, $0.014 par value;
shares authorized: 50,000,000; issued and
outstanding: 18,730,638 and 18,474,256 at December
31, 1998 and at June 30, 1998, respectively
262,229 258,640
Class B Common Stock, $0.014 par value;
shares authorized:1,000,000; issued and
outstanding: 281,974 at December 31,
1998 and at June 30, 1998 3,948 3,948
Additional paid-in capital 350,729,035 344,107,350
Accumulated deficit (8,353,358) (19,874,453)
------------- -------------
Total stockholders' equity 342,641,854 324,495,485
------------- -------------
$ 418,493,531 $ 352,350,244
============= =============
</TABLE>
The accompanying notes are an integral part of this statement.
4
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MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------------------- -----------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 28,016,287 $ 16,927,572 $ 52,797,891 $ 30,838,903
-------------- -------------- -------------- --------------
Operating costs and expenses:
Cost of product revenue 5,315,953 3,003,499 10,023,671 5,549,238
Selling, general and administrative 8,907,353 6,205,934 18,204,319 11,581,544
Research and development 707,766 903,563 733,634 1,447,684
In-process research and development 9,500,000 35,400,000 9,500,000 35,400,000
Depreciation and amortization 1,349,380 608,149 2,305,795 1,091,706
-------------- -------------- -------------- --------------
Operating costs and expenses 25,780,452 46,121,145 40,767,419 55,070,172
-------------- -------------- -------------- --------------
Operating income (loss) 2,235,835 (29,193,573) 12,030,472 (24,231,269)
Interest income 2,490,157 930,323 5,596,829 2,126,965
Interest expense (2,577) (6,563) (10,235) (14,889)
-------------- -------------- -------------- --------------
Income (loss) before taxes 4,723,415 (28,269,813) 17,617,066 (22,119,193)
Income tax expense (1,542,842) (2,780,773) (6,346,105) (5,180,491)
-------------- -------------- -------------- --------------
Net income (loss) $ 3,180,573 $ (31,050,586) $ 11,270,961 $ (27,299,684)
============== ============== ============== ==============
Basic net income (loss) per common
share $ 0.17 $ (2.16) $ 0.60 $ (1.90)
============== ============== ============== ==============
Diluted net income (loss) per common
share $ 0.16 $ (2.16) $ 0.58 $ (1.90)
============== ============== ============== ==============
Shares used in computing basic net
income (loss) per share 18,851,374 14,367,123 18,812,151 14,340,235
============== ============== ============== ==============
Shares used in computing diluted net
income (loss) per share 19,722,388 14,367,123 19,498,234 14,340,235
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of this statement.
5
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MEDICIS PHARMACEUTICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------
December 31, 1998 December 31, 1997
--------------- ---------------
<S> <C> <C>
Net income $ 11,270,961 $ (27,299,684)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
In-process research and development 9,500,000 35,400,000
Minority interest 50,934 --
Depreciation and amortization 2,305,795 1,091,706
Provision for doubtful accounts 222,079 138,000
Deferred income tax (benefit) expense (3,506,810) 3,915,000
Other non-cash expenses 10,000 14,000
Gain on sale of available-for-sale securities 25,672 --
Accretion of discount of investments (292,204) (72,359)
Accretion of discount on contract obligation 360,377 --
Change in operating assets and liabilities:
Inventories (2,022,501) (1,734,264)
Accounts receivable (4,381,694) (2,867,088)
Accounts payable (472,492) 360,371
Accrued incentives (417,097) (384,279)
Other current liabilities (2,712,374) (1,399,451)
Other current assets (60,071) (301,333)
--------------- ---------------
Net cash provided by operating activities 9,880,575 6,860,619
--------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment (285,423) (222,565)
Purchase of intangible assets (23,774,081) (58,382,620)
Payment of license agreement (973,999) (627,750)
Increase in other assets (131,427) --
Purchase of available-for-sale investments (116,676,868) (32,002,249)
Sale of available-for-sale securities 27,200,808 40,714,373
Maturity of available-for-sale securities 29,350,000 20,500,000
--------------- ---------------
Net cash used in investing activities (85,290,990) (30,020,811)
--------------- ---------------
Cash flows from financing activities:
Proceeds from the exercise of stock options 2,414,967 715,194
Decrease in other non-current liabilities (6,661) (28,484)
--------------- ---------------
Net cash provided by financing activities 2,408,306 686,710
--------------- ---------------
Effect of foreign currency exchange rate
on cash and cash equivalents (100,335) --
--------------- ---------------
Net decrease in cash and cash equivalents (73,102,444) (22,473,482)
Cash and cash equivalents at beginning of period 147,411,127 33,623,397
--------------- ---------------
Cash and cash equivalents at end of period $ 74,308,683 $ 11,149,915
--------------- ---------------
</TABLE>
The accompanying notes are an integral part of this statement.
6
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MEDICIS PHARMACEUTICAL CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
Medicis Pharmaceutical Corporation ("Medicis" or the "Company") is the
leading independent pharmaceutical company in the United States
focusing primarily on the treatment of dermatological conditions. The
Company offers prescription, over-the-counter ("OTC"), and cosmetic
dermatology products emphasizing the clinical effectiveness, quality,
affordability and cosmetic elegance of its products. Medicis has
achieved a leading position in branded products for the treatment of
acne, acne-related conditions, psoriatic conditions and anti-pruritic
conditions while also offering the leading OTC fade cream product line
in the United States. The Company has built its business by
successfully introducing prescription pharmaceuticals such as the
DYNACIN(R) and TRIAZ(R) products for the treatment of acne and
LUSTRA(R) for the treatment of dyschromia and other discolorations of
the skin. The Company's business has also been built by acquiring and
successfully marketing prescription pharmaceuticals such as the
LIDEX(R) and SYNALAR(R) corticosteroid products for thE treatment of
psoriasis and eczema; LOPROX(R) for the treatment of fungal infections;
NOVACET(R) for the treatment of acne rosacea; and such OTC products as
ZOSTRIX(R) topical analgesics and ESOTERICA(R) fade cream products.
The financial information is unaudited but reflects all adjustments,
consisting only of normal recurring accruals, which are, in the opinion
of the Company's management, necessary to a fair statement of the
results for the interim periods presented. Interim results are not
necessarily indicative of results for a full year. The financial
statements should be read in conjunction with the Company's audited
financial statements and notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations relating
thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1998 ("fiscal 1998"). Certain immaterial
amounts on the face of the balance sheet have been reclassified to
conform with the current period's presentation.
2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosure about Segments of an Enterprise
and Related Information," ("SFAS No. 131"). SFAS No. 131 establishes a
new method by which companies will report operating segment
information. This method is based on the manner in which management
organizes the segments within a company for making operating decisions
and assessing performance. The Company is evaluating the provisions of
SFAS No. 131 and, upon adoption, may report operating segments. The
adoption of SFAS No. 131 will have no impact on the Company's
consolidated results of operations, financial position or cash flows.
7
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As of July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," ("SFAS No. 130"). SFAS No. 130 establishes new
rules for the reporting and display of comprehensive income and
shareholders' equity. SFAS No. 130 requires certain items such as
unrealized foreign currency exchange gains or losses and unrealized
gains or losses on the Company's available-for-sale securities to be
included in other comprehensive income as separately presented portions
of other comprehensive income in shareholders equity. During the second
quarter of fiscal 1999 and fiscal 1998, the amounts of unrealized
foreign currency exchange gains and losses and unrealized gains or
losses on such securities were not material.
3. ACQUISITION OF THE HOECHST MARION ROUSSEL, INC. PRODUCTS
In November 1998, the Company agreed to license with an option to
purchase the LOPROX(R), TOPICORT(R) and A/T/S(R) products from Hoechst
Marion Roussel, Inc. The Company, using cash reserves, paid $22.0
million and will make two additional annual payments of $22.0 million.
Medicis then has the option to purchase the products for $16.5 million.
The Agreement has been accounted for as the acquisition of products and
the Company has recorded an obligation for the present value of the
required license payments and purchase option as a contract obligation.
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) $ 3,181 $(31,051) $ 11,271 $(27,300)
-------- -------- -------- --------
Denominator for basic
earnings per common
share 18,851 14,367 18,812 14,340
Effect of dilutive
securities:
Stock options 871 -- 686 --
-------- -------- -------- --------
Denominator for diluted
earnings per common
share 19,722 14,367 19,498 14,340
======== ======== ======== ========
Basic net income per common
share $ 0.17 $ (2.16) $ 0.60 $ (1.90)
======== ======== ======== ========
Diluted net income per
common share $ 0.16 $ (2.16) $ 0.58 $ (1.90)
======== ======== ======== ========
</TABLE>
Options to purchase 6,900 and 22,060 shares of common stock at prices
ranging from $57.44 to $63.00 and $46.25 to $63.00 per share were
outstanding for the three and six months ended December 31,1998,
respectively. These were not included in the computation of diluted
earnings per share because the option exercise price was greater than
the average market price of the Company's common shares and, therefore,
the effect would
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be anti-dilutive. The Company also has no dilutive securities for the
1997 periods given that inclusion of such securities would be dilutive
to net loss.
5. CONTINGENCIES
The Company and certain of its subsidiaries, from time to time, are
parties to certain actions and proceedings incident to their business.
Liability in the event of final adverse determinations in any of these
matters is either covered by insurance and/or established reserves or,
in the opinion of management, after consultation with counsel, should
not, in the aggregate, have a material adverse effect on the
consolidated financial position or results of operations of the Company
and its subsidiaries.
6. INVENTORIES
Although the Company utilizes third parties to manufacture and package
inventories held for sale, the Company takes title to certain
inventories and records the associated liability once inventories are
manufactured. Inventories are valued at the lower of cost or market as
determined by net realizable value using the first-in-first-out method.
Inventories, net of reserves, at December 31, 1998, and June 30, 1998,
consist of the following:
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1998
------------------ -----------------
<S> <C> <C>
Raw materials $ 2,699,066 $ 1,086,585
Finished goods 8,375,528 8,121,799
------------------ -----------------
Total inventories $ 11,074,594 $ 9,208,384
================== =================
</TABLE>
7. INCOME TAXES
Income taxes have been provided using the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes." The
provision for income taxes reflects management's estimation of the
effective tax rate expected to be applicable for the full fiscal year.
This estimate is reevaluated by management each quarter based on
estimated tax expenses for the year.
At December 31, 1998, the Company took advantage of additional tax
deductions available relating to the exercise of non-qualified stock
options and disqualified dispositions of incentive stock options.
Accordingly, the Company recorded a $3.8 million increase to equity
with a corresponding $3.8 million reduction to taxes payable. Quarterly
adjustments for the exercise of non-qualified stock options and
disqualified dispositions of incentive stock options may vary as they
relate to the actions of the option holder or stockholder.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
attached condensed consolidated financial statements and notes thereto
and with the Company's audited financial statements, notes to the
consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations relating
thereto included or incorporated by reference in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1998 (the "1998
Form 10-K").
This report on Form 10-Q contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995. In addition, from time to time, the Company or its
representatives have made or may make forward-looking statements,
orally or in writing. Forward looking statements involve known and
unknown risks and uncertainties. The Company's actual actions or
results could differ materially from those anticipated in forward
looking statements as a result of certain factors including, but not
limited to, those factors discussed in the documents filed by the
Company with the Securities and Exchange Commission from time to time,
including the prospectus dated February 6, 1998, which is set forth in
the Company's Registration Statement on Form S-3 and the 1998 Form
10-K. The Company undertakes no obligation to update any forward
looking statements.
OVERVIEW
Medicis was founded in 1987 to develop and market prescription and
over-the-counter ("OTC") products to treat dermatological conditions.
Innovative Therapeutics, Inc. (the predecessor of the Company) was
incorporated under the laws of the District of Columbia on July 1,
1987, subsequently changed its name to Medicis Corporation and was
merged with and into Medicis Corporation, which was incorporated in
July 29, 1988 under the laws of Delaware, pursuant to an Agreement of
Merger dated July 29, 1988. Medicis Corporation subsequently changed
its name to Medicis Pharmaceutical Corporation.
Medicis is the leading independent pharmaceutical company in the United
States focusing primarily on the treatment of dermatological
conditions. The Company offers prescription, OTC, and cosmetic
dermatology products, emphasizing the clinical effectiveness, quality,
affordability and cosmetic elegance of its products. Medicis has
achieved a leading position in Dermatology by competing successfully in
the sales market and development of branded products for the treatment
of acne, acne-related conditions, psoriatic conditions, and
anti-pruritic conditions, while also offering the leading OTC capsaicin
and fade cream product lines in the United States. The Company has
built its business through successfully introducing prescription
pharmaceuticals such as DYNACIN(R) and TRIAZ(R) products for the
treatment of acne, LUSTRA(R) for the treatment of dyschromia and other
discolorations of the skin. The Company's business has also been built
by acquiring and successfully marketing prescription pharmaceuticals
such as the LIDEX(R) and SYNALAR(R) corticosteroid products for the
treatment of psoriasis and eczema; LOPROX(R) for the treatment of
fungal infections; NOVACET(R) for
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the treatment of acne rosacea; and such OTC products as ZOSTRIX(R)
topical analgesics and ESOTERICA(R) fade cream products.
Prescription pharmaceuticals accounted for 77.0%, 86.5% and 83.2% of
net sales in the fiscal years ending June 30, 1998 ("fiscal 1998"),
June 30, 1997 ("fiscal 1997") and June 30, 1996 ("fiscal 1996"),
respectively. Although DYNACIN(R) products accounted for a majority of
the Company's total sales in fiscal 1997 and fiscal 1996, the Company
believes it will no longer derive the majority of its net sales from
DYNACIN(R) in the future.
The Company derives a majority of its revenue from sales of DYNACIN(R),
LIDEX(R), TRIAZ(R), LUSTRA(R) and ZOSTRIX(R) products and the recently
acquired LOPROX(R) product from HMR (the "Key Products"). The Company
believes that sales of the Key Products will constitute the majority of
net sales for the foreseeable future. Accordingly, any factor adversely
affecting the sale of the Key Products individually or collectively
would have a material adverse effect on the Company's business,
financial condition and results of operations. Each of the Key Products
could be rendered obsolete or uneconomical by regulatory or competitive
changes. The sale of Key Products could also be affected adversely by
other factors, including manufacturing or supply interruptions, the
development of new competitive pharmaceuticals to treat the conditions
addressed by the Key Products, technological advances, factors
affecting the cost of production, marketing or pricing actions by one
or more of the Company's competitors, changes in the prescribing
practices of dermatologists, changes in the reimbursement policies of
third-party payors, product liability claims or other factors.
The Company's results of operations may vary from period to period due
to a variety of factors, including expenditures incurred to acquire,
license and promote pharmaceuticals; expenditures and timing relating
to acquisition and integration of businesses; changes in prescribing
practices of dermatologists; the introduction of new products by the
Company or its competitors; cost increases from third-party
manufacturers; supply interruptions; the availability and cost of raw
materials; the mix of products sold by the Company; changes in
marketing and sales expenditures; market acceptance of the Company's
products; competitive pricing pressures; general economic and industry
conditions that affect customer demand; and the Company's level of
research and development activities. In addition, the Company's
business has historically been subject to seasonal fluctuations, with
lower sales generally being experienced in the first quarter of each
fiscal year. As a result of customer buying patterns, a substantial
portion of the Company's revenues has been in the last month of each
quarter. The Company schedules its inventory purchases to meet
anticipated customer demand. As a result, relatively small delays in
the receipt of manufactured products by the Company could result in
revenues being deferred or lost. The Company's operating expenses are
based on anticipated sales levels, and a high percentage of the
Company's expenses are relatively fixed in the short term.
Consequently, variations in the timing of recognition of revenue could
cause significant fluctuations in operating results from period to
period and may result in unanticipated periodic earnings shortfalls or
losses. There can be no assurance that the Company will maintain or
increase revenues or profitability or avoid losses in any future
period.
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The Company's strategy for growth is substantially dependent upon its
continued ability to acquire products primarily targeted at the skin
care market. The Company engages in limited proprietary research and
development of new products and must rely upon the willingness of other
companies to sell or license product lines or technologies. Other
companies, including those with substantially greater financial,
marketing and sales resources, compete with the Company to acquire such
products. There can be no assurance that the Company will be able to
acquire rights to additional products on acceptable terms, or at all.
The failure of the Company to acquire additional products or
successfully introduce new products could have a material adverse
effect on the Company's business, financial condition and results of
operations. Further, any new internally developed or acquired products
may have different distribution channels, pricing resources and levels
and competition than the Company's current products. Consequently,
there can be no assurance that the Company will be able to compete
favorably and attain market acceptance in any new product category or
successfully integrate any acquired products or businesses. In
addition, any such products may require the Company to significantly
increase its sales force and incur commensurate expense levels in
anticipation of a new product introduction. Failure of the Company to
successfully introduce and market new products, whether internally
developed or acquired from third parties, would have a material adverse
effect on the Company's business, financial condition and results of
operations.
The Company has recently experienced and will continue to experience a
period of significant expansion of its operations that has placed a
significant strain upon its management system and resources. The
Company's ability to compete effectively and to manage future growth,
if any, will require the Company to continue to improve its financial
and management controls, reporting systems and procedures on a timely
basis and expand, hire, train and manage an increasing number of
employees. The Company's failure to do so would have a material adverse
effect upon the Company's business, financial condition and results of
operations. The Company's business strategy includes potential
acquisitions of products and businesses and introductions of new
products. The Company anticipates that the integration of additional
new businesses or potential products, if any, would require significant
expense and management time and attention. Failure to manage such
change effectively would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company recognizes revenues from sales upon shipment to its
customers. At the time of sale, the Company records reserves for
returns based on estimates using historical experience. Sales are
reported net of actual and estimated product returns and net of pricing
adjustments and/or discounts. The Company applies royalty obligations
to the cost of sales in the period the corresponding sales are
recognized.
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Medicis' customers include the nation's leading wholesale
pharmaceutical distributors, such as McKesson Drug Company
("McKesson"), Bergen Brunswig Drug Company ("Bergen Brunswig"),
Cardinal Health, Inc. ("Cardinal"), and other major drug chains. In
fiscal 1998, McKesson, Bergen Brunswig and Cardinal accounted for
16.9%, 13.2% and 12.6%, respectively, of the Company's sales. In fiscal
1997, McKesson, Cardinal and Bergen Brunswig accounted for 20.6%, 16.3%
and 10.9%, respectively, of the Company's sales. The loss of, or
deterioration in, any of these customer accounts could have a material
adverse effect upon the Company's business, financial condition or
results and operations.
To enable Medicis to focus on its core marketing and sales activities,
the Company selectively out-sources certain non-sales and non-marketing
functions, such as laboratory research, manufacturing and warehousing.
As the Company expands its activities in these areas, additional
financial resources are expected to be utilized. The Company typically
does not enter into long-term manufacturing contracts with third-party
manufacturers. Whether or not such contracts exist, there can be no
assurance that the Company will be able to obtain adequate supplies of
such products in a timely fashion, or at all.
The Company may increase total expenditures for research and
development and expects that research and development expenditures as a
percentage of net sales will fluctuate from period to period. Actual
expenditures will depend on a variety of factors, including the
Company's financial condition, as well as the results of clinical
testing, delays or changes in government-required testing and approval
procedures, technological and competitive developments and strategic
marketing decisions. There can be no assurance that any product or
technology under development will result in the successful introduction
of any new product.
The Year 2000 issue results from the inability of some computer
programs to identify the year 2000 properly, potentially leading to
errors or system failure. A company's business may be adversely
affected if it, or any of its suppliers and customers or others with
whom it transacts business (including its banks and governmental
agencies), have not timely resolved the year 2000 issue. In response to
its rapid growth, the Company selected a new management information
system in fiscal 1997, which was implemented in fiscal 1998, that is
expected to meet its presently anticipated needs. In selecting a
system, Year 2000 compliance was one of the criteria. The Company is
reviewing the areas within its business and operations which could be
adversely affected by Year 2000 issues and evaluating the costs
associated with modifying and testing its systems for the Year 2000.
Although the Company is not yet able to estimate its incremental cost
for the Year 2000 issues, within its internal information systems,
based on its preliminary review to date, the Company does not believe
Year 2000 issues will have a material adverse effect on the Company's
business, financial condition and results of operations. The Company is
currently working with critical third parties to determine the impact
of Year 2000 issues on their business and operations and its collateral
impact on the business and operations of the Company and to determine
such third parties plans to remediate Year 2000 issues where their
systems interface with the Company's systems. The assessment and
13
<PAGE> 14
necessary modification for the Year 2000 issue are estimated to be
completed in late 1999.
RESULTS OF OPERATIONS
The following table sets forth certain data as a percentage of net
sales for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------------------- -----------------------------------
1996 1997 1998 1996 1997 1998
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit 73.5 82.3 81.0 73.3 82.0 81.0
In-process research and
development -- (209.1) (33.9) -- (114.8) (18.0)
Operating expenses (1) (46.5) (45.6) (39.1) (48.6) (45.8) (40.2)
Operating income (loss) 27.0 (172.4) 8.0 24.7 (78.6) 22.8
Net interest income 15.4 5.4 8.9 9.0 6.9 10.6
Income tax benefit (expense) (4.2) (16.4) (5.5) 9.8 (16.8) (12.0)
----- ----- ----- ----- ----- -----
Net income (loss) 38.2% (183.4)% 11.4% 43.5% (88.5)% 21.4%
===== ===== ===== ===== ===== =====
</TABLE>
(1) Excludes in-process research and development
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE THREE MONTHS ENDED
DECEMBER 31, 1997
Net Sales
Net sales for the three months ended December 31, 1998 (the "second
quarter of fiscal 1999") increased 65.5%, or $11.0 million, to $28.0
million from $16.9 million for the three months ended December 31, 1997
(the "second quarter of fiscal 1998"). The Company's net sales
increased in the second quarter of fiscal 1999 primarily as a result of
the effect of sales associated with the acquisition of the Hoechst
Marion Roussel, Inc. products ("HMR Products") which were acquired in
November 1998 and the GenDerm products acquired in December 1997 and
the unit and dollar sales growth of the Company's LUSTRA(R) product.
The Company's prescription products accounted for 74.4% of net sales in
the second quarter oF fiscal 1999 and 80.5% of net sales in the second
quarter of fiscal 1998. The OTC and doctor-dispensed products accounted
for 25.6% of net sales and 19.5% of net sales in the second quarter of
fiscal 1999 and 1998, respectively.
Gross Profit
Gross profit during the second quarter of fiscal 1999 increased 63.0%,
or $8.8 million, to $22.7 million from $13.9 million in the second
quarter of fiscal 1998. As a percentage of net sales, gross profit
decreased to 81.0% in the second quarter of fiscal 1999 from 82.3% in
the second quarter of fiscal 1998, primarily as a result of greater OTC
sales as a percentage
14
<PAGE> 15
of total net sales. OTC products have a lower gross profit percentage
than the Company's prescription brands.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the second quarter of
fiscal 1999 increased 43.5%, or $2.7 million, to $8.9 million from $6.2
million in the second quarter of fiscal 1998, primarily due to the
expenses associated with the promotion and administration of the
Company's GenDerm products which were acquired in December 1997 and
advertising associated with the Company's existing brands, including
LUSTRA(R).
Additionally, selling, general and administrative costs also increased
due to an increase in variable costs commensurate with increased sales
volume, the expansion of the Company's sales force to 68 sales
representatives from 47 sales representatives at fiscal year end June
30, 1998 and additional personnel costs attributable to the hiring of
additional full-time equivalent employees and cost-of-living salary
adjustments. Selling, general and administrative costs, as a percentage
of net sales, decreased 4.9 percentage points in the second quarter of
fiscal 1999 relative to the second quarter of fiscal 1998.
Research and Development Expenses
Research and development expenses in the second quarter of fiscal 1999
decreased 21.7%, or $196,000, to $708,000 from $904,000 in the second
quarter of fiscal 1998, primarily due to the timing of various research
and development projects offset by expenses associated with the
clinical support of the Company's existing products.
In-Process Research and Development
The Company recorded a $9.5 million charge to operations as in-process
research and development during the second quarter of fiscal 1999 as
part of the allocated purchase price of HMR. In the second quarter of
fiscal 1998 the Company recorded a $35.4 million charge to operations
as in-process research and development as part of the allocated
purchase price of GenDerm. The amounts allocated to in-process research
and development were based on independent appraisals.
Depreciation and Amortization Expenses
Depreciation and amortization expenses in the second quarter of fiscal
1999 increased 121.9%, or $741,000, to $1,349,000 from $608,000 in the
second quarter of fiscal 1998, primarily due to amortization of
intangible assets associated with the Company's acquisition of the HMR
Products in November 1998 and GenDerm in December 1997.
Operating Income
Operating income during the second quarter of fiscal 1999, absent
special charges for in-process research and development increased
89.1%, or $5.5 million, to $11.7 million from $6.2 million in the
second quarter of fiscal 1998. This increase was primarily a result of
15
<PAGE> 16
higher sales volume, coupled with a of 6.5 percentage point decrease in
operating costs as a percentage of net sales offset by a lower gross
profit as a percentage of net sales.
Interest Income
Interest income in the second quarter of fiscal 1999 increased 167.7%,
or $1.6 million, to $2.5 million from approximately $0.9 million in the
second quarter of fiscal 1998, primarily due to higher cash equivalent
and short-term investment balances in the second quarter of fiscal
1999. These balances are primarily the result of the Company's February
1998 receipt of cash proceeds from its public offering and the
Company's cash flow from operations.
Income Tax Expense
Income tax expense during the second quarter of fiscal 1999 decreased
$1.3 million to $1.5 million from $2.8 million in the second quarter of
fiscal 1998. The provision for income taxes recorded for the second
quarter of fiscal 1999 reflects management's estimate of the effective
tax rate expected to be applicable for the full fiscal year. This
estimate is reevaluated by management each quarter based on forecasts
of income before taxes for the year. The decrease in income tax expense
as compared to the second quarter of fiscal 1998 is due to a reduction
in pre-tax income. The decrease in pre-tax income is primarily related
to the reduction of the special charge for in-process research and
development in fiscal 1998 for which no tax benefit was realized. The
fiscal 1999 charge for in-process research and development which
represents a tax benefit to the Company and is deducted to reach
pre-tax income. The decrease in the effective tax rate as compared to
the first quarter of fiscal 1998 is primarily attributable to an
increase in tax exempt interest income.
Net Income
Net income during the second quarter of fiscal 1999 increased
approximately $34.2 million, to $3.2 million from a loss of $31.0
million from the second quarter of fiscal 1998. The increase is a
result of the $35.4 million charge to operating expenses in fiscal 1998
for in-process research and development. Absent the special charges for
in-process research and development in fiscal 1999 and fiscal 1998, net
income increased approximately 191.6%, or $8.3 million, to $12.7
million from $4.4 million in the second quarter fiscal 1999 compared to
the second quarter of fiscal 1998. The increase is primarily
attributable to an increase in sales volume, lower operating expenses
as a percentage of sales, and interest income generated by higher cash
and cash equivalent balances.
SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THE SIX MONTHS ENDED
DECEMBER 31, 1997
Net Sales
Net sales for the six months ended December 31, 1998 (the "1999 six
months") increased 71.2% or $22.0 million, to $52.8 million from $30.8
million for the six months ended December 31, 1997 (the "1998 six
months") primarily as a result of the GenDerm
16
<PAGE> 17
acquisition in December 1997 and the HMR Product acquisition in
November 1998. The Company net sales also increased as result of an
increase in unit and dollars sales of LUSTRA(R), which was introduced
by the Company in the third quarter of fiscal 1998. The company's
prescription products accounted for 69.2% of net sales in the 1999 six
months as compared to 83.8% of net sales in the 1998 six months. The
OTC and doctor-dispensed products accounted for 30.8% of net sales in
the 1999 six months as compared to 16.2% of net sales for the 1998 six
months.
Gross Profit
Gross Profit in the 1999 six months increased 69.1%, or $17.5 million,
to $42.8 million from 25.3 million in the 1998 six months. As a
percentage of net sales, gross profit decreased 1.0 percentage points
to 81.0% in the 1999 six months from 82.0% in the 1998 six months,
primarily as a result of greater OTC sales as a percentage of total net
sales. OTC products have a lower gross profit percentage than the
Company's prescription products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the 1999 six months
increased 52.2%, or $6.1 million, to $17.7 million from $11.6 million
in the 1998 six months. The increase is primarily due to an increase in
selling, general and administrative expenses associated with promotion
and administration of the Acquired Brands and also the HMR Products
acquired in November 1998, and the sampling and advertising of the
Company's existing products.
Additionally, selling, general and administrative expenses increased
due to variable compensation commensurate with increased sales volume,
personnel costs attributable to an increase in full-time equivalent
employees, and cost-of-living salary adjustments. Selling, general and
administrative costs, as a percentage of net sales, have decreased 4.2
percentage points in the 1999 six months compared to the 1998 six
months.
Research and Development Expenses
Research and development expenses in the 1999 six months decreased
12.6% or $173,000 to approximately $1.2 million, from $1.4 million in
the 1998 six months primarily due to the timing of various research and
development projects offset by expenses associated with the clinical
support of the Company's existing products.
Depreciation and Amortization Expenses
Depreciation and amortization expenses in the 1999 six months increased
111.2%, or $1.2 million, to $2.3 million from $1.1 million in the 1998
six months primarily due to amortization of the intangible assets
associated with the Company's acquisition of the HMR Products in
November 1998 and a full six months of amortization as a result of the
GenDerm acquisition in December 1997.
17
<PAGE> 18
In-Process Research and Development
The Company recorded a $9.5 million charge to operations as in-process
research and development during the 1999 six months as part of the
allocated purchase price of HMR. In the 1998 six months the Company
recorded a $35.4 million charge to operations as in-process research
and development as part of the allocated purchase price of GenDerm. The
amounts allocated to in-process research and development were based on
independent appraisals.
Operating Income
Operating income in the 1999 six months increased $36.3 million to
$12.0 million from net operating loss of $24.3 million in the 1998 six
months primarily as a result of the $35.4 charge for in-process
research and development to operating expenses relating to the
Company's purchase of GenDerm in December 1997. Absent special charges,
operating income in the 1999 six months increased 92.8%, or $10.4
million, to $21.5 from $11.1 million in the 1998 six months as a result
of higher sales volume, coupled with an 4.2 percentage point decrease
in the Company's selling, general and administrative expenses as a
percentage of net sales.
Interest
Interest income in the 1999 six months increased 163.1%, or $3.5
million to $5.6 million from approximately $2.1 million in the 1998 six
months, primarily due to higher cash and short-term investment balance
in the 1999 six months generated from cash flow from operations and the
public offering completed by the Company in February 1998.
Income Tax
Income tax expense in the 1999 six months increased 22.5%, or $1.1
million to $6.3 million from of $5.2 million in the 1999 six months.
The provision for income taxes recorded for the 1998 six months
reflects management's estimate of the effective tax rate expected to be
applicable for the full fiscal year. This estimate is reevaluated by
management each quarter based on forecasts of income before taxes for
the year. The increase in income tax expense in the 1999 six months as
compared to the 1998 six months is due to a increase in pre-tax income
offset by the special charge for in-process research and development in
fiscal 1998 for which no tax benefit was realized. A tax benefit is
associated with the charge for in-process research and development
incurred in the 1999 six months as a result of the HMR Product
acquisition. No income tax benefit is associated with the charge for
in-process research and development incurred in the 1998 six months as
a result of the GenDerm acquisition. The decrease in the effective tax
rate in the 1999 six months as compared to the 1998 six months is
primarily attributable to an increase in tax exempt interest income.
18
<PAGE> 19
Net Income
Net income in the 1999 six months increased approximately $38.6 million
to $11.3 million from a net loss of $27.3 million in the 1998 six
months. This increases is a result of the $35.4 million charge for
in-process research and development to operating expenses relating to
the Company's purchase of GenDerm in the 1998 six months. Absent
special charges, net income in the 1999 six months increased 156.4%, or
$12.7 million, to $20.8 million from $8.1 million in the 1998 six
months as a result of an increase in sales volume, and a decrease in
selling, general and administrative costs as a percentage of sales.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998 and June 30, 1998, the Company had cash
equivalents and short-term investments of approximately $225.6 million
and $237.9 million, respectively. The Company's working capital was
$240.5 million and $263.0 million at December 31, 1998 and June 30,
1998, respectively. The decrease in working capital is primarily
attributable to a $22.0 million payment and a short-term obligation of
$22.0 million incurred by the Company as a result of the HMR
acquisition offset by the Company's cash flow from operations of
approximately $9.9 million.
At December 31, 1998 and June 30, 1998, the Company had inventories of
$11.1 million and $9.2 million, respectively. The increase in the
Company's inventory balances is primarily related to inventory
associated with the HMR Products acquired by the Company in November
1998 and an increase in the Company's inventory held by third parties
which the Company is required to record in its inventory balance and
which fluctuates due to the timing of the third parties manufacturing
cycles which the Company does not control.
At December 31, 1998 and June 30, 1998, the Company had current
liabilities of $33.6 million and $15.2 million, respectively. The
increase is primarily due to the $22.0 million short-term obligation
incurred by the Company as a result of the acquisition of the HMR
products.
In accordance with various manufacturing agreements, the Company is
required to provide manufacturers with pro forma estimated production
requirements by product and in accordance with minimum production runs.
From time to time, the Company may not take possession of all
merchandise which has been produced by the manufacturer. However, the
Company records its obligation to the manufacturer at the time finished
inventory is produced.
In November 1998, the Company agreed to license with an option to
purchase the LOPROX(R), TOPICORT(R) and A/T/S(R) products from Hoechst
Marion Roussel, Inc. The Company, using cash reserves, paid $22.0
million and will make two additional annual payments of $22.0 million.
Medicis then has the option to purchase the products for $16.5 million
after three years. The $22.0 million due on the first anniversary of
the transaction is recorded as a short-term obligation and the
remaining $33.3 million is recorded as a long-term obligation.
19
<PAGE> 20
On January 12, 1999, the Company announced that its Board of Directors
had approved a 3-for-2 stock split to be effected in the form of a 50%
stock dividend. The dividend will be paid to holders of record of the
Class A and Class B Common Stock and all stock option holders on
January 29, 1999, i.e. the record date for payment on February 16,
1999, i.e. the payment date. Holders of the Company's Class A and Class
B Common Stock receive one additional share of Common Stock for each
two shares held. Similar adjustments will be made under the Company's
Rights Agreement, dated as of August 15, 1995 (as amended from
time-to-time) between the Company and Norwest Bank Minnesota, N.A., so
that one additional right shall be issued to accompany each share of
Common Stock issued pursuant to the dividend.
Inflation did not have a significant impact upon the results of the
Company during the three months ended December 31, 1998.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 24, 1998, the Company held its 1998 Annual Meeting of
Stockholders (the "Annual Meeting"). The holders of 15,303,664 shares
of Class A Common Stock and 281,974 shares Class B Common Stock were
present in person or represented by proxy at the meeting. At the Annual
Meeting the Company's stockholders approved the following:
1) Election of Directors
The stockholders elected the following persons to serve as
directors of the Company for terms of three years, or until
their successors are duly elected and qualified. Votes were
cast as follows:
<TABLE>
<CAPTION>
Number of
Votes for Which
Number of Proxy Withheld
Votes for Authority
----------- ---------
<S> <C> <C>
Jonah Shacknai 18,069,014 54,390
Michael A. Pietrangelo 18,069,014 54,390
Lottie Shackelford 18,069,014 54,390
</TABLE>
2) Approved the adoption of the 1998 Medicis Pharmaceutical
Corporation Stock Option Plan, (the "1998 Plan"). The 1998
Plan provides for the reservation of 3,000,000 shares of Class
A Common Stock for issuance pursuant to incentive stock
options or non-qualified options. Votes were cast as follows:
<TABLE>
<CAPTION>
Number of Number of Number of
Votes for Votes Against Votes Abstaining
--------- ------------- ----------------
<S> <C> <C>
9,832,995 5,603,704 29,965
</TABLE>
3) Approve the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending June 30, 1999. Votes were
cast as follows:
<TABLE>
<CAPTION>
Number of Number of Number of
Votes for Votes Against Votes Abstaining
--------- ------------- ----------------
<S> <C> <C>
18,039,599 71,754 12,051
</TABLE>
20
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORMS 8-K
(a) Exhibits
No. 10.72(d) THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT dated the
22nd day of November 1998 by and between MEDICIS PHARMACEUTICAL
CORPORATION, a Delaware corporation, ("Borrower"), and NORWEST BANK
ARIZONA, NATIONAL ASSOCIATION, a national banking association, as
successor-in-interest to NORWEST BUSINESS CREDIT., a Minnesota
corporation ("Lender").
No. 10.73(c) AMENDED AND RESTATED PATENT COLLATERAL ASSIGNMENT AND
SECURITY AGREEMENT made the 22nd day of November 1998 by and between
MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation ("Assignor")
and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a national banking
association ("Lender").
No. 10.74(c) AMENDED AND RESTATED TRADEMARK, TRADENAME, AND SERVICE
MARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT made as of the 22nd
day of November 1998 by and between MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation ("Assignor"), and NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking association ("Lender").
No. 10.77(a) FIRST AMENDMENT TO SECURITIES ACCOUNT PLEDGE AND SECURITY
AGREEMENT made as of the 22nd day of November 1998 by and between
MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation,
("Borrower"), and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a
national banking association ("Lender").
No. 10.78(a) FIRST AMENDMENT TO ACKNOWLEDGMENT OF CONTROL OF PLEDGED
SECURITIES ACCOUNT made the 22nd day of November 1998 by and among
Medicis Pharmaceutical Corporation, a Delaware corporation
("Borrower"), and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a
national banking association ("Lender").
No. 10.88 REPLACEMENT ACQUISITION REVOLVING NOTE made as of the 22nd
day of November 1998 by and between MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation ("Borrower"), and NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking association ("Lender").
No. 10.89 ASSET PURCHASE AGREEMENT made the 15th day of November 1998
by and among MEDICIS PHARMACEUTICAL CORPORATION and HOECHST MARION
ROUSSEL, INC., HOECHST MARION ROUSSELL DEUTSCHLAND GMBH and HOECHST
MARION ROUSSEL, S.A.
22
<PAGE> 22
No. 10.90 LICENSE AND OPTION AGREEMENT made the 15th day of November
1998 by and among MEDICIS PHARMACEUTICAL CORPORATION and HOECHST MARION
ROUSSEL, INC., HOECHST MARION ROUSSEL DEUTSCHLAND GMBH and HOECHST
MARION ROUSSEL, S.A.
No. 10.91 LOPROX LOTION SUPPLY AGREEMENT made the 15th day of November
1998 by and between MEDICIS PHARMACEUTICAL CORPORATION and HOECHST
MARION ROUSSEL, INC.
No. 10.92 SUPPLY AGREEMENT made the 15th day of November 1998 by and
between MEDICIS PHARMACEUTICAL CORPORATION and HOECHST MARION ROUSSEL
DEUTSCHLAND GMBH.
No. 27.1 Financial Data Schedule
(see Note 3 to the Notes to the Condensed Consolidated
Financial Statements incorporated herein for computation of Per Common
Share results.)
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
23
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MEDICIS PHARMACEUTICAL CORPORATION
Date: 2/16/99 By: /s/ Jonah Shacknai
------------------------------------
Jonah Shacknai
Chairman and Chief Executive Officer
Date: 2/16/99 By: /s/ Mark A. Prygocki Sr.
------------------------------------
Mark A. Prygocki, Sr.
Chief Financial Officer
Secretary and Treasurer
24
<PAGE> 24
Exhibits
Exhibit Index
No. 10.72(d) THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT dated the
22nd day of November 1998 by and between MEDICIS PHARMACEUTICAL
CORPORATION, a Delaware corporation, ("Borrower"), and NORWEST BANK
ARIZONA, NATIONAL ASSOCIATION, a national banking association, as
successor-in-interest to NORWEST BUSINESS CREDIT., a Minnesota
corporation ("Lender").
No. 10.73(c) AMENDED AND RESTATED PATENT COLLATERAL ASSIGNMENT AND
SECURITY AGREEMENT made the 22nd day of November 1998 by and between
MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation ("Assignor")
and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a national banking
association ("Lender").
No. 10.74(c) AMENDED AND RESTATED TRADEMARK, TRADENAME, AND SERVICE
MARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT made as of the 22nd
day of November 1998 by and between MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation ("Assignor"), and NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking association ("Lender").
No. 10.77(a) FIRST AMENDMENT TO SECURITIES ACCOUNT PLEDGE AND SECURITY
AGREEMENT made as of the 22nd day of November 1998 by and between
MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation,
("Borrower"), and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a
national banking association ("Lender").
No. 10.78(a) FIRST AMENDMENT TO ACKNOWLEDGMENT OF CONTROL OF PLEDGED
SECURITIES ACCOUNT made the 22nd day of November 1998 by and among
Medicis Pharmaceutical Corporation, a Delaware corporation
("Borrower"), and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a
national banking association ("Lender").
No. 10.88 REPLACEMENT ACQUISITION REVOLVING NOTE made as of the 22nd
day of November 1998 by and between MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation ("Borrower"), and NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking association ("Lender").
No. 10.89 ASSET PURCHASE AGREEMENT made the 15th day of November 1998
by and among MEDICIS PHARMACEUTICAL CORPORATION and HOECHST MARION
ROUSSEL, INC., HOECHST MARION ROUSSELL DEUTSCHLAND GMBH and HOECHST
MARION ROUSSEL, S.A.
<PAGE> 25
No. 10.90 LICENSE AND OPTION AGREEMENT made the 15th day of November
1998 by and among MEDICIS PHARMACEUTICAL CORPORATION and HOECHST MARION
ROUSSEL, INC., HOECHST MARION ROUSSEL DEUTSCHLAND GMBH and HOECHST
MARION ROUSSEL, S.A.
No. 10.91 LOPROX LOTION SUPPLY AGREEMENT made the 15th day of November
1998 by and between MEDICIS PHARMACEUTICAL CORPORATION and HOECHST
MARION ROUSSEL, INC.
No. 10.92 SUPPLY AGREEMENT made the 15th day of November 1998 by and
between MEDICIS PHARMACEUTICAL CORPORATION and HOECHST MARION ROUSSEL
DEUTSCHLAND GMBH.
No. 27.1 Financial Data Schedule
<PAGE> 1
Exhibit 10.72
THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT (the "Amendment") is
made as of the 22nd day of November, 1998 by and between MEDICIS PHARMACEUTICAL
CORPORATION, a Delaware corporation ("Borrower"), and NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION, a national banking association, as successor-in-interest
to NORWEST BUSINESS CREDIT, INC., a Minnesota corporation ("Lender").
R E C I T A L S:
WHEREAS, Borrower and Norwest Business Credit, Inc. ("NBCI") are parties
to that certain Credit and Security Agreement dated as of August 3, 1995, as
modified by letter agreements dated March 6, 1996 and April 11, 1996, First
Amendment to Credit and Security Agreement dated as of May 29, 1996 among
Borrower, NBCI and Lender, and Second Amendment to Credit and Security Agreement
dated as of November 22, 1998 between Borrower and Lender (collectively, the
"Credit Agreement"), pursuant to which Lender agreed to make available to
Borrower, on a revolving basis, a sum not to exceed $2,000,000 (the "Revolving
Loan"), which Revolving Loan is evidenced by that certain Promissory Note dated
August 3, 1995 from Borrower to NBCI in an amount not to exceed $2,000,000 (the
"Revolving Note"), and committed to advance $3,000,000 (the "Term Credit
Facility") to finance capital expenditures, product development costs, brand
purchase contracts, licensing agreements and other financial needs mutually
agreed upon in writing by Borrower and Lender in their sole and absolute
discretion, which Term Credit Facility is evidenced by that certain Multiple
Advance Note dated May 29, 1996 from Borrower to Lender in an amount not to
exceed $3,000,000 (the "Term Note"), and an additional $20,000,000 revolving
credit facility (the "Acquisitions Credit Facility") to finance acquisition of
complementary businesses, brand product lines, brand purchase contracts,
licensing agreements, and internal product research and development costs, which
Acquisitions Credit Facility is evidenced by that certain Acquisitions Revolving
Note dated November 22, 1996 from Borrower to Lender in an amount not to exceed
$20,000,000 (the "Original Acquisitions Revolving Note");
WHEREAS, the Revolving Loan and the Term Credit Facility expired unused on
the Termination Date and Lender has no further obligation to advance any sums
under the Revolving Loan or the Term Credit Facility;
WHEREAS, Borrower has requested that Lender increase the Acquisitions
Credit Facility to $25,000,000 and extend the term of the Credit Agreement and
Acquisitions Credit Facility for an additional two (2) years and make certain
modifications and amendments to the terms of the Credit Agreement and other Loan
Documents, and Lender is willing to do so on the terms and conditions contained
herein;
WHEREAS, on or about January 14, 1998, Lender agreed, in connection with
the next modification of the Credit Agreement, to amend and restate the Patent
Collateral Assignment and Security Agreement dated August 3, 1995, as amended,
and the Trademark, Tradename and Service Mark Collateral Assignment and Security
Agreement dated August 3, 1995, as amended,
<PAGE> 2
to further confirm that the collateral was assigned by Borrower to Lender as
security rather than as an absolute assignment; and
WHEREAS, the origination fee paid by Borrower in connection with the
Second Amendment was fully amortized over the initial two-year term of the
Acquisitions Credit Facility and will not be applied as a credit to any
subsequent fees from Borrower to Lender;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender, intending to
be legally bound, agree as follows:
1. INTERPRETATION. Except as otherwise defined herein, all capitalized
terms used herein shall have the meanings ascribed thereto in the Credit
Agreement.
2. RECITALS. The recitals set forth above are true and accurate in every
respect.
3. OUTSTANDING INDEBTEDNESS. As of November 22, 1998: the outstanding
principal balance of the Revolving Loan is $0.00 and the accrued and unpaid
interest on the Revolving Loan is $0.00; the outstanding principal balance of
the Term Credit Facility is $0.00 and the accrued and unpaid interest on the
Term Credit Facility is $0.00; and the outstanding principal balance of the
Acquisitions Credit Facility is $0.00 and the accrued and unpaid interest on the
Acquisitions Credit Facility is $0.00.
4. NO OFFSETS. Borrower acknowledges with respect to the amounts owing to
Lender that, as of the date of execution of this Amendment (which may be after
the effective date of this Agreement), Borrower has no offset, defense or
counterclaim with respect thereto, no claim or defense in the abatement or
reduction thereof, or any other claim against Lender or with respect to any
document forming part of the transaction in respect of which the Revolving Loan
or the Term Credit Facility was made or forming part of any other transaction
under which Borrower is indebted to Lender. Borrower acknowledges that all
interest imposed under the Revolving Note and the Term Note through the date of
execution hereof, and all fees and other charges that have been collected from
or known by Borrower to have been imposed upon Borrower with respect to the
Revolving Loan evidenced by the Revolving Note or the Term Credit Facility
evidenced by the Term Note were and are agreed to, and were properly computed
and collected, and that Lender has fully performed all obligations that it may
have had or now have to Borrower, and Lender has no obligation to make any
additional loan or extension of credit to or for the benefit of Borrower, except
as provided in the Credit Agreement, as amended by this Amendment.
5. REPRESENTATIONS AND WARRANTIES OF BORROWER. To induce Lender to enter
into this Amendment and the arrangement contemplated by this Amendment, Borrower
represents and warrants to Lender as follows:
(a) This Amendment and all other instruments executed and delivered
to Lender concurrently herewith, were executed in accordance with the
requirements of law and in accordance with any requirements of Borrower's
certificate of incorporation and bylaws and any amendments thereto.
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<PAGE> 3
(b) The execution and delivery of this Amendment and any other
instruments executed and delivered to Lender concurrently herewith, and the full
and complete performance of the provisions hereof will not result in any breach
of, or constitute a default under, or result in the creation of any lien, charge
or encumbrance upon any property or assets of Borrower under any indenture,
mortgage, deed of trust, bank loan or credit agreement or other instrument to
which Borrower is a party or by which Borrower is bound.
(c) The Loan Documents executed by Borrower and this Amendment are
the legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their terms.
(d) Except as previously disclosed to Lender in writing, there are
no actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or affecting Borrower or any of its Subsidiaries or the
properties of Borrower or any of its Subsidiaries before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if determined adversely to the Borrower or any of
its Subsidiaries, would reasonably be expected to have a material adverse effect
on the financial condition, properties or operations of the Borrower or any
Subsidiaries and where such claim(s) exceed $200,000, individually, or $500,000
in the aggregate.
(e) Except for the sale of TRIAZ under an Applicable License,
Borrower has not derived ten percent (10%) or more of Borrower's Net Sales in
any Fiscal Year from any Applicable License as described in Section 6.14 of the
Credit Agreement.
(f) Except as disclosed by Borrower to Lender in writing
contemporaneously with the execution and delivery of this Amendment, Borrower
does not have any new patent applications pending since January 29, 1998 before
the PTO Office; and none of the pending patent applications as of January 29,
1998 and thereafter has yet been approved by the PTO Office.
(g) There are no oral agreements, understandings or course of
conduct that would modify, amend, rearrange, vary, diminish or impair the Loan
Documents or the obligation of Borrower to pay the indebtedness evidenced
thereby or to perform fully the obligations of Borrower in strict accordance
with the Loan Documents, or which would permit Borrower to void or avoid its
obligations in whole or in part.
(h) All of the respective representations and warranties made by
Borrower in the Loan Documents remain true, complete and correct as of the date
hereof, including, without limitation, the representations and warranties in
Section 5 of the Credit Agreement, except to the extent of any changes to such
representations and warranties previously disclosed in writing to Lender.
No representation or warranty made by Borrower and contained herein or in the
other Loan Documents, and no certificate, information or report furnished or to
be furnished by Borrower in connection with any of the Loan Documents or any of
the transactions contemplated hereby or thereby, contains or will contain a
misstatement of material fact, or omits or will omit to state a
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<PAGE> 4
material fact required to be stated in order to make the statements contained
herein or therein not misleading in the light of the circumstances under which
such statements were made.
6. CONTINUED ENFORCEABILITY OF LOAN DOCUMENTS. Except as modified herein,
all of the terms and provisions of the Loan Documents remain in full force and
effect. In the event of any conflict between the terms and provisions of this
Amendment and the terms and provisions of the Loan Documents, the terms and
provisions of this Amendment shall govern and prevail. Borrower acknowledges,
confirms and ratifies the enforceability of the Credit Agreement, the
Acquisitions Revolving Note and the Loan Documents, as modified pursuant to this
Amendment, and the continuing validity, enforceability and priority of the liens
and security interests granted in the Loan Documents.
7. RELEASE OF CLAIMS.
(a) Borrower hereby releases Lender and its officers, employees and
agents from all claims and demands (known and unknown) it may have on the date
hereof arising out of or in any way relating to the extension or denial of
credit by Lender to Borrower or other matters relating to the indebtedness, any
collateral securing payment and performance of such indebtedness, or any matter
preliminary to the execution and delivery by Borrower and Lender of this
Amendment. The release set forth above shall not extend to any claim arising
after the date of execution hereof (which may be after the effective date of
this Agreement) to the extent based on acts or omissions of Lender occurring
after such date, except that such release is specifically intended by the
parties to include the transactions leading up to the execution of this
Amendment. This Amendment and the release provisions contained in this Section 7
are contractual, and not a mere recital.
(b) Borrower acknowledges and agrees that Lender is not, and shall
not be, obligated in any way to continue or undertake any loan, financing or
other credit arrangement with Borrower, including, without limitation, any
renewal of the indebtedness evidenced by the Loan Documents, except on the terms
and subject to the conditions set forth in the Loan Documents as hereby amended
and modified.
(c) Borrower understands and acknowledges that Lender and Account
Holder are separate and distinct corporate entities, as well as affiliate
corporations, and Borrower has knowingly and consciously made the determination
to proceed with the credit arrangements with Lender as provided in this Credit
Agreement and to maintain the investment advisor and custodian relationship with
Account Holder as provided in the Investment Agreement. Borrower (i) knowingly
waives and releases Lender for, from and against any claim, demand, cause of
action, liability, damages and expenses incurred by Borrower and (ii) covenants
and agrees that it will not claim, or attempt to claim, rights of setoff,
off-set, recoupment or the like against Lender, in the case of both clauses (i)
and (ii), arising out of, based upon, relating to, or otherwise occurring as a
result of, any acts or omissions of, or any breach of contract or tort or any
other theory of liability by, Account Holder. This provision is not intended to
affect any rights or remedies of Borrower against Lender pursuant to the Credit
Agreement.
8. CONDITIONS OF CLOSING. Lender's obligation to enter into this Amendment
and the other documents and instruments required hereunder shall be subject to
the satisfaction of all of
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<PAGE> 5
the following conditions on or before December 31, 1998 (the "Closing" or the
"Closing Date") in a manner, form and substance satisfactory to Lender, which
conditions may be waived by Lender in writing in its sole and absolute
discretion.
(a) On the Closing Date, the representations and warranties of
Borrower set forth in the Loan Documents shall be true and correct in all
material respects when made and at and as of the time of the Closing.
(b) The following shall have been delivered to Lender, each duly
authorized, executed and acknowledged, where applicable:
(i) This Amendment.
(ii) A Replacement Acquisitions Revolving Note from Borrower
payable to the order of Lender in the principal amount of $25,000,000.
(iii) An Amended and Restated Patent Collateral Assignment
and Security Agreement.
(iv) An Amended and Restated Trademark, Tradename and Service
Mark Collateral Assignment and Security Agreement.
(v) The First Amendment to the Securities Account Pledge and
Security Agreement.
(vi) The First Amendment to Acknowledgment of Control of
Pledged Securities Account.
(c) Borrower shall have performed and complied in all material
respects with all agreements and conditions contained in the Loan Documents to
be performed by or complied with by Borrower prior to or at the Closing, and no
Event of Default or Default shall have occurred and be continuing or would occur
by Borrower entering into this Amendment and each condition precedent to the
effectiveness of each of the Loan Documents shall have been satisfied.
(d) Lender shall have received such documents as Lender shall
require to establish the proper organization and good standing of Borrower, the
authority of Borrower to execute this Amendment and any other documents or
instruments required hereunder, and evidence that all approvals and/or consents
of, or other action by, any shareholder, governmental agency or other Person
whose approval or consent is necessary or required to enable Borrower to (a)
enter into and perform its obligations under the Loan Documents and (b) grant to
Lender the Security Interests, have been obtained.
(e) All filings of Uniform Commercial Code financing statements and
other filings and actions necessary to perfect and maintain the Security
Interests as first, valid and perfected security interest in the Collateral
shall have been filed or taken (or such filings delivered for filing immediately
following the Closing, to Lender or a third party acceptable to Lender) and
confirmation thereof shall have been received by Lender.
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<PAGE> 6
(f) Lender shall have determined to its satisfaction that, as of the
Closing Date, there has been no material adverse change in the financial
condition of Borrower from the financial statements dated as of September 30,
1998 and other documents submitted by Borrower to Lender prior to the Closing
Date.
(g) Borrower shall have paid to Lender an extension fee of $37,500,
which shall be fully earned and non-refundable upon Lender's execution and
delivery of this Amendment, and, when invoiced, Lender's reasonable attorneys'
fees and costs incurred in connection with this Amendment.
(h) Lender shall be satisfied that (a) Borrower has good and
indefeasible title to all of the Collateral and (b) Borrower at all times shall
be entitled to the use and quiet enjoyment of all assets necessary and desirable
for the continued ownership and operation of Borrower's business, including,
without limitation, the use of equipment, licenses, fixtures and warehouses.
(i) Lender shall have received an opinion of counsel to the
Borrower, addressed to Lender, with respect to the transactions contemplated by
this Amendment, in form and substance reasonably satisfactory to Lender and its
counsel.
9. DEFINITIONS. (a) The definitions of "Acquisitions Committed Amount",
"Acquisitions Credit Facility", "Acquisitions Revolving Note", "Borrowing Base"
and "Net Income" in Section 1.1 of the Credit Agreement are hereby deleted in
their entirety and the following inserted therefor:
"Acquisitions Committed Amount" means a principal amount of
$25,000,000.
"Acquisitions Credit Facility" means the revolving credit
facility in a principal amount not to exceed the Acquisitions
Committed Amount.
"Acquisitions Revolving Note" means that certain Replacement
Acquisitions Revolving Note dated November 22, 1998 from Borrower to
Lender in a principal amount not to exceed the Acquisitions
Committed Amount, and any note or notes taken in exchange or
replacement therefor and any modifications, renewals, extensions or
increases thereof.
"Borrowing Base" means seventy-five percent (75%) of the
Market Value of the Securities Accounts.
"Net Income" means, for any period, all income less costs and
expenses for the applicable period, determined in accordance with
GAAP, plus, to the extent deducted in initially determining Net
Income, any extraordinary, non-recurring acquisition expenses
reflected in the proforma consolidated financial statements provided
to Lender in connection with any acquisition transaction
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<PAGE> 7
that is the subject of an Advance under the Acquisitions Credit
Facility.
and (b) Section 1.1 of the Credit Agreement is hereby amended to add the
following definitions in proper alphabetical order:
"Market Value of the Securities Accounts" means the value of
all of the financial assets in any Securities Accounts that
constitute Collateral securing the obligations of the Borrower in
which Lender holds a valid, enforceable first priority lien and
security interest, free and clear of any other liens, claims or
encumbrances, and, with respect to all such non-cash financial
assets, the value of such financial assets marked-to-market as of
the close of business on the last Banking Day of the immediately
preceding month.
"Maturity Date" means November 22, 2000.
"Securities Account" or "Securities Accounts" means,
individually or collectively, any "securities account" (as defined
in the Uniform Commercial Code, as adopted in the States of Arizona
and Minnesota, maintained by Borrower or any Affiliate of Borrower
with Norwest Bank Minnesota, National Association, pursuant to that
certain Investment Advisory Agreement dated as of October 17, 1996
(as it may be amended, modified, supplemented, rested, extended or
replaced from time to time) that constitute Collateral securing the
obligations of the Borrower in which Lender holds a valid,
enforceable first priority lien and security interest, free and
clear of any other liens, claims or encumbrances.
"Third Amendment" means that certain Third Amendment to Credit
and Security Agreement dated as of November 22, 1998 between
Borrower and Lender.
10. ADVANCES. (a) The preface to Section 2.1 of the Credit Agreement is
hereby deleted in its entirety and the following inserted therefor:
Section 2.1 Advances. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make Advances to the
Borrower from time to time during the period from the date hereof to
and including the Maturity Date with respect to the Acquisitions
Credit Facility, or the earlier date of termination in whole of the
Acquisitions Credit Facility pursuant to Sections 2.4(a) or 8.2
hereof, in an aggregate principal amount at any time outstanding not
to exceed the lesser of (a) the Borrowing Base and (b) the
Acquisitions Committed Amount, which Advances shall be
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<PAGE> 8
secured by the Collateral as provided in Article 3 hereof. The
Acquisitions Credit Facility shall be a revolving credit facility
and it is contemplated that the Borrower will request Advances, make
prepayments and request additional Advances thereunder, and it is
contemplated that Borrower will request Advances for financing
acquisition of complementary businesses, brand product lines, brand
purchase contracts, licensing agreements, and internal product
research and development costs and other purposes mutually agreed
upon in writing by Borrower and Lender in their sole and absolute
discretion, which Advances will be repaid in accordance with the
terms of this Agreement. The Borrower agrees to comply with the
following procedures in requesting Advances under this Section 2.1:
(b) Section 2.1(a) of the Credit Agreement is hereby deleted in its entirety and
the following inserted therefor:
(a) The Borrower will not request any Advance under this
Section 2.1 if, after giving effect to such requested Advance, the
sum of the outstanding and unpaid Advances under this Section 2.1 or
otherwise, would exceed the Borrowing Base.
and (c) Section 2.1(b) of the Credit Agreement is hereby deleted in its entirety
and the following inserted therefor:
(b) Each request for an Advance under this Section 2.1 shall
be made to the Lender prior to 11:00 a.m. (Phoenix time) of the day
of the requested Advance by the Borrower. Each request for an
advance may be made in writing or by telephone, specifying the date
of the requested Advance and the amount thereof, and shall be made
by (A) any officer of the Borrower; or (B) any person designated as
the Borrower's agent by any officer of the Borrower in a writing
delivered to the Lender; or (C) any person reasonably believed by
the Lender to be an officer of the Borrower or such a designated
agent.
11. NOTE. Section 2.2 of the Credit Agreement is hereby deleted in its
entirety and the following inserted therefor:
Section 2.2 Note. All Advances made by the Lender under this
Section 2.1 shall be evidenced by and repayable with interest in
accordance with the Acquisitions Revolving Note. The principal of
the Acquisitions Revolving Note shall be payable as provided herein
and on the earlier of the Maturity Date or acceleration by the
Lender pursuant to Section 8.2 hereof, and shall bear interest as
provided herein.
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<PAGE> 9
12. INTEREST. Section 2.3(a) of the Credit Agreement is hereby deleted in
its entirety and the following inserted therefor:
(a) Except as otherwise provided in Section 2.13, clause (b),
the principal of the Loans outstanding from time to time during any
month shall bear interest (computed on the basis of actual days
elapsed in a 360-day year) at the Floating Rate; provided, however,
that from the first day of any month during which any Default or
Event of Default occurs or exists at any time, in the Lender's
discretion and without waiving any of its other rights and remedies,
the principal of the Loans outstanding from time to time shall bear
interest at the Default Rate during the entire Default Period; and
provided, further, that in any event no rate change shall be put
into effect which would result in a rate greater than the highest
rate permitted by applicable law. Interest accruing on the principal
balance of the Advances outstanding from time to time shall be
payable on the first day of each succeeding month and on the
Maturity Date, or earlier demand or prepayment in full. The Borrower
agrees that the interest rate contracted for includes the interest
rate set forth herein, plus any other charges or fees set forth
herein and costs and expenses incident to this transaction paid by
the Borrower to the extent the same are deemed interest under
applicable law. In the event, and on each occasion, that Lender
shall have determined that dollar deposits in the aggregate amount
of the Acquisition Credit Facility Advances are not generally
available in the London interbank market, or that the rates at which
such dollar deposits are being offered will not adequately and
fairly reflect the cost to Lender of making or maintaining the
outstanding Acquisitions Credit Facility Advances, or that
reasonable means do not exist for ascertaining the Floating Rate,
Lender shall, as soon as practicable thereafter, give written or
facsimile transmission notice of such determination to Borrower. In
the event of any such determination, until Lender shall have advised
Borrower that the circumstances giving rise to such notice no longer
exist, the interest rate on any outstanding Acquisitions Credit
Facility Advances shall be the Base Rate, as such Base Rate changes
from time to time, plus 125 basis points. Each determination by
Lender hereunder shall be conclusive absent manifest error.
13. MANDATORY PREPAYMENT. (a) Section 2.5(a) of the Credit Agreement is
hereby deleted in its entirety and the following inserted therefor:
Section 2.5 Remargining and Mandatory Prepayment of Credit
Facilities. (a) If, as of the end of any calendar month, the
Advances exceed the Borrowing Base due to a decrease in the Market
Value of the Securities Account, then, on or before five (5) Banking
Days after Borrower's receipt of written notice thereof,
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<PAGE> 10
Borrower shall cause the aggregate outstanding principal amount of
the Advances to equal the Borrowing Base by (a) prepaying the
Advances to the extent necessary to reduce the sum of the
outstanding principal balance of the Advances to the Borrowing Base
or less, and/or (b) depositing additional cash or financial assets
into the Securities Accounts. Any payment received by the Lender
under this Section 2.5(a) or under Section 2.4 may be applied to the
Advances, including interest thereon and any fees, commissions,
costs and expenses due and unpaid hereunder and under the Security
Documents, in such order and in such amounts as the Lender, in its
discretion, may from time to time determine.
and (b) Section 2.5(b) of the Credit Agreement is hereby deleted in its entirety
and the following inserted therefor:
(b) Without notice or demand, except as provided in Section
2.5(a) above, if the sum of the outstanding principal balance of the
Advances shall at any time exceed the Borrowing Base, Borrower shall
within forty-eight (48) hours (excluding Saturdays, Sundays and
Holidays) thereof cause the aggregate outstanding principal amount
of the Advances to equal the Borrowing Base by (a) prepaying the
Advances to the extent necessary to reduce the sum of the
outstanding principal balance of the Advances to the Borrowing Base
or less, and/or (b) depositing additional cash or financial assets
into the Securities Accounts. Any payment received by the Lender
under this Section 2.5(b) or under Section 2.4 may be applied to the
Advances, including interest thereon and any fees, commissions,
costs and expenses due and unpaid hereunder and under the Security
Documents, in such order and in such amounts as the Lender, in its
discretion, may from time to time determine.
14. FEES. (a) Section 2.11(c) of the Credit Agreement is hereby deleted in
its entirety and the following inserted therefor:
Except as otherwise required by applicable laws or regulatory
or internal audit requirements, so long as no Advances are
outstanding and no Default or Event of Default has occurred and is
continuing, Lender shall not undertake any collateral audits or
inspections of the operations or business of the Borrower. To the
extent that Lender is required by applicable laws or regulatory or
internal audit requirements to undertake any collateral audits or
inspections of the operations or business of the Borrower when no
Advances are outstanding (and no Default or Event of Default has
occurred and is continuing), Borrower shall not be required to pay
any audit fees or out-of-pocket costs and expenses incurred by
Lender in connection therewith. Upon any request for an Advance
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<PAGE> 11
by Borrower (but not as a condition to such Advance), Lender may
undertake a collateral audit and inspection of the operation and
business of the Borrower and so long as any Advance remains
outstanding (and provided that no Default or Event of Default has
occurred and is continuing), Lender shall not undertake more than
two (2) collateral audits or inspections of the operations or
business of the Borrower in any Fiscal Year and Borrower shall not
be required to pay any audit fees or out-of-pocket costs and
expenses incurred by Lender in connection therewith. Upon the
occurrence of a Default or Event of Default and during the
continuance thereof, Lender may undertake such collateral audits and
inspections of the operations or business of the Borrower as Lender
deems necessary in its sole and absolute discretion and the Borrower
hereby agrees to pay the Lender, on demand, audit fees of $60 per
hour (or the then applicable rate charged by Lender) per auditor in
connection with any such audits or inspections by the Lender of any
collateral or the corresponding operations or business of the
Borrower, together with all actual out-of-pocket costs and expenses
incurred in conducting any such audit or inspection.
and Section 2.11 is hereby amended to add the following:
(e) Borrower hereby agrees to pay to Lender an extension fee
of $37,500, which shall be fully earned and non-refundable upon
Lender's execution and delivery of the Third Amendment, and, when
invoiced, Lender's reasonable attorneys' fees and costs incurred in
connection with the Third Amendment.
15. CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. Section 4.1 of the Credit
Agreement is hereby amended to add the following:
(dd) The Acquisitions Revolving Note in
the maximum principal amount of $25,000,000.
(ee) An amended and restated Patent Collateral
Assignment and Security Agreement, in form and substance reasonably
satisfactory to Lender.
(ff) An amended and restated Trademark, Tradename and
Service Mark Collateral Assignment and Security Agreement, in form
and substance reasonably satisfactory to Lender.
(gg) A First Amendment to the Securities Account Pledge
and Security Agreement, in form and substance reasonably
satisfactory to Lender.
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<PAGE> 12
(hh) A First Amendment to Acknowledgment of Control of
Pledged Securities Account, in form and substance reasonably
satisfactory to Lender.
(ii) A certificate of the Secretary or an Assistant
Secretary of the Borrower, certifying as to the resolutions of the
directors and, if required, the shareholders of the Borrower,
authorizing the execution, delivery and performance of the Third
Amendment, the Acquisitions Revolving Note, and all other documents
and instruments incident thereto and to the transactions
contemplated by the Third Amendment, reasonably satisfactory to
Lender and its counsel.
(jj) An opinion of counsel to the Borrower, addressed to
Lender, with respect to the transactions contemplated by the Third
Amendment, in form and substance reasonably satisfactory to Lender
and its counsel.
16. CONDITIONS PRECEDENT TO ALL ADVANCES. Section 4.2(c) of the Credit
Agreement is hereby deleted in its entirety and the following inserted therefor:
(c) Borrower has not been required to remargin the
Acquisitions Credit Facility by depositing additional cash or
financial assets into the Securities Accounts and/or by reducing the
outstanding principal balance of the Advances in any two (2)
consecutive months, pursuant to Section 2.5(a).
17. FINANCIAL CONDITION; NO ADVERSE CHANGE. Section 5.5 of the Credit
Agreement is hereby deleted in its entirety and the following inserted therefor:
Section 5.5 Financial Condition; No Adverse Change. The
Borrower has heretofore furnished to the Lender audited financial
statements of the Borrower for its Fiscal Year ended June 30, 1998
and such statements fairly present the financial condition of the
Borrower on the dates thereof and the results of its operations and
cash flows for the period then ended and were prepared in accordance
with generally accepted accounting principles applied in a
consistent manner. Since the date of such financial statements of
the Borrower, there has been no material adverse change in the
business, properties or condition (financial or otherwise) of the
Borrower.
18. NET INCOME AFTER TAXES. Section 6.12 of the Credit Agreement is hereby
deleted in its entirety and the following inserted therefor:
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<PAGE> 13
Section 6.12 Net Income After Taxes. Borrower's Net Income
After Taxes, on a consolidated basis, shall be no less than the
following for the following periods:
<TABLE>
<CAPTION>
=======================================================
PERIOD NET INCOME AFTER TAXES
-------------------------------------------------------
<S> <C>
October 1, 1998 through $2,500,000
December 31, 1998
-------------------------------------------------------
January 1, 1999 through $8,000,000
June 30, 1999 and each six
month period thereafter
during the term of this
Agreement
=======================================================
</TABLE>
19. CURRENT RATIO. Section 6.18 of the Credit Agreement is hereby deleted
in its entirety and the following inserted therefor:
Section 6.18 Current Ratio. During the term of this Agreement,
Borrower shall maintain on a consolidated basis, measured quarterly
as of the last day of each fiscal quarter commencing with the fiscal
quarter ending September 30, 1998, a Current Ratio of no less than
3:1.
20. CAPITAL EXPENDITURES. Section 7.10 of the Credit Agreement is hereby
deleted in its entirety and the following inserted therefor:
Section 7.10 INTENTIONALLY DELETED
21. PATENT APPLICATIONS. The list of all of Borrower's patent applications
filed with, and/or approved by, the PTO Office is attached hereto as Schedule 1
to this Amendment and such patent applications are hereby incorporated as
Exhibit F to the Credit Agreement and Schedule "A" to the Amended and Restated
Patent Collateral Assignment.
22. TRADEMARK, TRADENAME AND SERVICE MARK APPLICATIONS. The list of all of
Borrower's trademark, tradename and service mark applications filed with, and/or
approved by, the PTO Office is attached hereto as Schedule 2 to this Amendment
and such trademark, tradename and service mark applications are incorporated as
Exhibit F to the Credit Agreement and Schedule "A" to the Amended and Restated
Trademark Collateral Assignment.
23. MISCELLANEOUS.
(a) Arbitration Agreement; Waiver of Right to Jury Trial. The
Agreement contains an arbitration provision, governing law provision and waiver
of right to jury trial. In the event of any dispute arising out of or related to
this Amendment, the provisions of Section 9.12 of the Agreement shall apply.
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<PAGE> 14
(b) Voluntary Agreement. Borrower represents and warrants to Lender
that (i) it is, or has had the opportunity to be, represented by legal counsel
of its choice in regard to the transaction provided for by this Amendment and
that such counsel (if engaged) has explained the significance of the terms, and
the meaning and effect of this Amendment; (ii) it is fully aware and clearly
understands all of the terms and provisions contained in this Amendment; (iii)
it has voluntarily, with full knowledge and without coercion or duress of any
kind, entered into this Amendment and the documents executed in connection with
this Amendment; (iv) it is not relying on any representations, either written or
oral, express or implied, made to it by Lender other than as set forth in this
Amendment; and (v) the consideration received by Borrower to enter into this
Amendment and the arrangement contemplated by this Amendment has been actual and
adequate.
(c) Entire Agreement. This Amendment and the Loan Documents
constitute the entire agreement among the parties as to the agreements and
understandings contemplated by this Amendment. All parties to this Amendment
acknowledge that there are no agreements, understandings, warranties or
representations among the parties except as set forth in the Loan Documents and
this Amendment.
(d) Counterpart Execution. This Amendment may be executed in
counterparts, each of which shall be deemed an original document, and all of
which combined shall constitute a single document.
(e) Waiver. Neither this Amendment nor any of the provisions hereof
may be changed, waived, discharged or terminated, except by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
(f) Headings. Paragraph or other headings contained in this
Amendment are for reference purposes only and are not intended to affect in any
way the meaning or interpretation of this Amendment.
(g) Severability. If any clause or provision of this Amendment is
determined to be illegal, invalid, or unenforceable under any present or future
law by the final judgment of a court of competent jurisdiction, such clause or
provision shall be ineffective, but the remainder of this Amendment will not be
affected thereby.
(h) Binding Effect. All of the provisions of this Amendment shall be
binding upon and shall inure to the benefit of Borrower and Lender and their
permitted successors and assigns, including, without limitation, any successor
holder of any Note and any successor mortgagee/beneficiary under any security
document.
(i) Time of the Essence. Time is of the essence of each and every
provision under this Amendment.
(j) Amendment. Except as specifically set forth herein, the
Agreement and the other Loan Documents shall remain in full force and effect. In
the event of a conflict between the terms and provisions of this Amendment and
the terms and provisions of the Agreement, the terms and provisions of this
Amendment shall govern and control. Nothing
-14-
<PAGE> 15
contained in this Amendment is intended to or shall be construed as relieving
any person or entity, whether a party to this Amendment or not, of any of such
person's or entity's obligations to Lender.
-15-
<PAGE> 16
IN WITNESS WHEREOF, this Amendment is executed to be effective as of the
date first above written.
BORROWER:
MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Prygocki, Sr.
------------------------------
Name: Mark A. Prygocki, Sr.
Title: Chief Financial Officer
Execution Date: November 22, 1998
LENDER:
NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking
association
By: /s/ Tim Billings
------------------------------
Name: Tim Billings
Title: Vice President
Execution Date: November 22, 1998
-16-
<PAGE> 17
SCHEDULE 1
<PAGE> 18
SCHEDULE 2
<PAGE> 1
Exhibit 10.73
AMENDED AND RESTATED
PATENT COLLATERAL ASSIGNMENT AND
SECURITY AGREEMENT
THIS AMENDED AND RESTATED PATENT COLLATERAL ASSIGNMENT AND SECURITY
AGREEMENT (the "Agreement") is made and entered into as of this 22nd day of
November, 1998 by and between MEDICIS PHARMACEUTICAL CORPORATION, a Delaware
corporation ("Assignor"), and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a
national banking association ("Lender").
RECITALS:
A. Assignor and Lender, as successor-in-interest to Norwest Business
Credit, Inc. ("NBCI"), are parties to that certain Patent Collateral Assignment
and Security Agreement dated August 3, 1995, as amended (the "Original
Collateral Assignment");
B. In connection with Assignor's prior securities offering, Lender agreed
to amend and restate the Collateral Assignment for the purpose of, among other
things, confirming that the Collateral was assigned by Assignor to Lender as
security rather than as an absolute assignment;
C. The Revolving Loan and the Term Credit Facility expired unused on the
Termination Date and Lender has no further obligation to advance any sums under
the Revolving Loan or the Term Credit Facility;
D. Assignor has requested that Lender increase the Acquisitions Credit
Facility to $25,000,000 and extend the term of the Credit and Security Agreement
dated August 3, 1995, as amended (as it may be amended, modified, restated,
extended and/or renewed from time to time, the "Loan Agreement") and the
Acquisitions Credit Facility for an additional two (2) years and make certain
modifications and amendments to the terms of the Loan Agreement and other Loan
Documents, and Lender is willing to do so on certain terms and conditions,
including, without limitation, Assignor's reaffirmation in the form of this
Agreement of Assignor's grant of a security interest to Lender in certain
trademark, tradename and service mark rights upon the terms and subject to the
conditions of this Agreement;
NOW, THEREFORE, in consideration of premises, the covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Original Collateral Assignment
is hereby amended and restated in its entirety and Assignor hereby agrees with
Lender as follows:
1. Definitions. Except as otherwise defined herein, all capitalized terms
used herein shall have the meanings given to such terms in the Loan Agreement.
2. Grant. For value received, Assignor hereby grants, assigns and conveys
to Lender, not as an ownership interest, but as security for the Obligations
(hereinafter defined), all of Assignor's patent rights used in connection with
or related to Assignor's business, as the same may be amended pursuant hereto
from time to time, (being collectively called a "Patent"), now existing anywhere
in the world or hereafter adopted or acquired, whether currently in use or not,
all registrations and recordings thereof, and all applications in connection
therewith, whether
<PAGE> 2
pending or in preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any office
or agency of the United States of America or any state thereof or any foreign
country, including, without limitation, those Patents referred to in Schedule A
attached hereto and incorporated herein by this reference; (ii) all of
Assignor's right, title and interest in all Patent licenses relating to the
Patents (whether as licensee or licensor), including each Patent license, if
any, referred to in Schedule A attached hereto and incorporated herein by this
reference; (iii) all reissues, extensions or renewals of any of the items
described in clauses (i) and (ii) of this Section 2; and (iv) all proceeds of,
and rights associated with, the foregoing, including any claim by Assignor
against third parties for past, present or future infringement or dilution of
any Patent, Patent registration or Patent license, including any Patent, Patent
registration or Patent license referred to in Schedule A, or for breach or
enforcement of any Patent license. All of the foregoing property, interests and
rights are hereinafter collectively referred to as the "Patent Collateral".
Assignor agrees not to sell or assign its interest in, or grant any license of,
the Patent Collateral without the prior written consent of Lender, which may be
withheld in Lender's sole and absolute discretion.
3. Obligations Secured. The foregoing collateral assignment and grant of
security interest is made for the purpose of securing (in such order of priority
as Lender may elect) the following (the "Obligations"):
(a) The payment of indebtedness in the total principal amount of up
to $25,000,000, with interest thereon, evidenced by the Loan Agreement and
Acquisitions Revolving Note;
(b) Payment of all sums advanced by Lender to protect the Patent
Collateral pursuant to the Loan Agreement and/or this Agreement, with interest
thereon at a rate equal to the Default Rate (which rate of interest is
hereinafter referred to as the "Agreed Rate");
(c) Payment of all fees and late charges now or hereafter due
pursuant to the Loan Documents and other sums, with interest thereon, that may
hereafter be loaned to Assignor, or its successors or assigns, by Lender, or its
successors and assigns, when evidenced by a promissory note or notes reciting
that they are secured by this Agreement;
(d) Performance of every obligation of Assignor contained in the
Loan Documents;
(e) Performance of every obligation, covenant and agreement of
Assignor contained in any agreement, document or instrument now or hereafter
executed by Assignor reciting that the obligations thereunder are secured by
this Agreement or the Loan Documents; and
(f) For the benefit of Lender, compliance with and performance of
each and every provision of any other agreement, document, instrument, law, rule
or regulation by which the Trademark Collateral is bound or may be affected.
4. Representations and Warranties. Assignor represents, warrants,
covenants and agrees that:
2
<PAGE> 3
(a) The Patents referred to on Schedule A hereto are existing and
have not been adjudged invalid or unenforceable, in whole or in part;
(b) Except as provided in this Agreement and the other Loan
Documents, Assignor is the exclusive owner of the entire and unencumbered right,
title and interest in and to the Patent Collateral except those items of Patent
Collateral in respect of which Assignor is licensor, and to the best knowledge
of Assignor, except as set forth on Schedule A, no claim has been made that the
use of any Patent Collateral does or may violate the asserted rights of any
third party;
(c) To the best knowledge of Assignor, Assignor owns directly or is
entitled to use, by license or otherwise, all Patent Collateral and rights with
respect thereto used in, necessary for, or of importance to the conduct of
Assignor's business; and
(d) Assignor has the unqualified right to enter into this Agreement
and perform its terms.
5. Notification of Lender. Assignor shall immediately notify Lender in
writing of any change in the legal, trade or fictitious business names used by
Assignor and shall, upon Lender's request, execute any additional financing
statements and other assignments, agreements and certificates necessary, in
Lender's opinion, to reflect the change in trade names or fictitious business
names.
6. Use of Patent Collateral. Assignor shall have the duty, through counsel
experienced in patent matters and reasonably acceptable to Lender, to prosecute
diligently any Patent applications of the Patents pending as of the date of this
Agreement or thereafter until the Assignor's obligations to Lender shall have
been paid in full, to file and prosecute opposition and cancellation proceedings
and to do any and all acts which are necessary or desirable to preserve and
maintain all rights in the Patents, except those Patent applications and Patents
pending which are not necessary for or used in the operation of the Assignor's
business. Any expenses incurred in connection with the Patents shall be borne by
Assignor. Assignor shall not abandon any Patent without the consent of the
Lender, which consent shall not be unreasonably withheld.
7. Abandonment. Assignor shall notify Lender immediately if it knows, or
has reason to know, that any application or registration relating to any item of
the Patent Collateral listed on Schedule A hereto may be suspended, cancelled,
or dedicated to the public or placed in the public domain, or of any material
adverse final determination or development (including any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office, or any foreign counterpart thereof or any
court) regarding Assignor's ownership of any of the Patent Collateral, its right
to register the same, or to keep and maintain and enforce the same.
8. Applications. Assignor shall provide Lender with notice of the adoption
of any new Patents necessary for or related to the operation of Assignor's
business, and upon request of Lender, Assignor shall execute and deliver any and
all agreements, instruments, documents and papers as Lender may reasonably
request to evidence Lender's security interest in such Patent
3
<PAGE> 4
Collateral. Assignor shall take all reasonable steps, including in any
proceeding before the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof, to
maintain and pursue any application with respect to the Patent Collateral listed
on Schedule A hereto (and any other Patent Collateral with respect to which
Assignor is obligated to give the notice described in Section 7 above). Assignor
shall appear in and contest any action or proceeding purporting to affect this
Agreement or the rights or powers of Lender, and shall pay all costs and
expenses (including, without limitation, costs of litigation and attorneys'
fees) in any such action or proceeding in which Lender may appear.
9. Inspections. Assignor hereby grants to Lender and its employees and
agents the right to visit Assignor's facilities which relate to any of the
Patent Collateral, and to inspect the facilities upon prior written notice at
reasonable times during regular business hours.
10. Patent Enforcement. If no Event of Default shall have occurred and be
continuing, Assignor shall have the right, and if an Event of Default shall have
occurred and be continuing, Assignor shall have the right, with the prior
written consent of Lender, which will not be unreasonably withheld, to bring any
opposition proceedings, cancellation proceedings or lawsuit in its own name to
enforce or protect the Patents, in which event Lender may, if necessary, be
joined as a nominal party to such suit if Lender shall have been satisfied that
it is not thereby incurring any risk of liability because of such joinder.
Assignor shall promptly, upon demand, reimburse and indemnify Lender for all
damages, costs and expenses, including attorneys' fees, incurred by Lender in
the fulfillment of the provisions of this Section.
11. Other Agreements. Assignor agrees that, until all of the Obligations
shall have been satisfied in full, it will not enter into any agreement which is
inconsistent with Assignor's obligations or Lender's rights under this
Agreement, without Lender's prior written consent in Lender's sole and absolute
discretion. Assignor shall not amend or modify in any material respect any of
the license agreements listed on Schedule A hereto without the consent of Lender
in Lender's sole and absolute discretion.
12. Events of Default. If any Event of Default shall have occurred and be
continuing and applicable contractual cure and grace periods shall have expired,
Lender shall have, in addition to all other rights and remedies given it by this
Agreement, those allowed by law and the rights and remedies of a secured party
under the Uniform Commercial Code as enacted in any jurisdiction in which the
Patent Collateral may be located and, without limiting the generality of the
foregoing, the Lender may immediately, without demand of performance and without
other notice (except as set forth next below) or demand whatsoever to Assignor,
all of which are hereby expressly waived, and without advertisement, sell at
public or private sale or otherwise realize upon, in Phoenix, Arizona, or
elsewhere, all or from time to time any of the Patent Collateral, or any
interest which the Assignor may have therein, and after deducting from the
proceeds of sale or other disposition of the Patent Collateral all expenses
(including all reasonable expenses for brokers' fees and legal services), shall
apply the balance of proceeds as provided with respect to other personal
property securing the Loan. Notice of any sale or other disposition of the
Patent Collateral shall be given to Assignor at least thirty (30) days before
the time of any intended public or private sale or other disposition of the
Patent Collateral is to be made, which Assignor hereby agrees shall be
reasonable notice of such sale or other disposition.
4
<PAGE> 5
At any such sale or other disposition, any holder of the Note or Lender may, to
the extent permissible under applicable law, purchase the whole or any part of
the Patent Collateral sold, free from any right of redemption on the part of
Assignor, which right is hereby waived and released.
13. Fees and Costs. Any and all fees, costs and expenses, of whatever kind
or nature, including, without limitation, (i) attorneys' fees and expenses
incurred by Lender in connection with the preparation of this Agreement and all
other documents relating hereto and the consummation of this transaction, the
filing or recording of any documents (including all taxes in connection
therewith) in public offices, (ii) the payment or discharge of any taxes,
maintenance fees, encumbrances and (iii) those incurred in or otherwise
protecting, maintaining or preserving the Patent Collateral after Assignor shall
have failed to do so in accordance with the terms of this Agreement and/or the
Loan Documents, or in defending or prosecuting any actions or proceedings
arising out of or related to the Patent Collateral, shall be borne and paid by
Assignor on demand by Lender and until so paid shall be added to the principal
amount of the Obligations and shall bear interest at the Agreed Rate.
14. Power of Attorney. Assignor hereby makes, constitutes and appoints
Lender or any officer or agent of Lender as Lender may select as Assignor's true
and lawful attorney-in-fact, with the power to endorse Assignor's name on all
applications, documents, papers and instruments necessary to Lender to use the
Patent Collateral, or to grant or issue any exclusive or non-exclusive license
under the Patent Collateral to anyone else, or necessary for Lender to assign,
pledge, convey or otherwise transfer title in or dispose of the Patent
Collateral to anyone else. Assignor hereby ratifies all that such attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney shall
be irrevocable for the life of this Agreement and may be exercised by Lender
only at any time after the occurrence and during the continuance of an Event of
Default.
15. Indemnification. Assignor shall and does hereby agree to indemnify,
defend and hold Lender harmless for, from and against any and all liability,
loss or damage which it may or might incur under or by reason of the Patent
Collateral or under or by reason of this Agreement and for, from and against any
and all claims and demands whatsoever which may be asserted against Lender by
reason of any alleged obligation or undertaking in its part to perform or
discharge any of the terms, covenants or agreements under or by reason of the
Patent Collateral or under or by reason of this Agreement; provided, however,
that the foregoing agreement to indemnify, defend and hold harmless shall not
apply to the extent that such claims and demands arise from the gross negligence
or intentional misconduct of Lender. Except as provided in the immediately
preceding sentence, should Lender incur any such liability, loss or damage, or
in the defense of any such claim or demand, the amount thereof, including costs,
expenses and reasonable attorneys' fees, together with interest thereon at the
Agreed Rate, shall be secured hereby and by the other Loan Documents, and
Assignor shall reimburse Lender therefor (together with such interest)
immediately upon demand. Upon receiving knowledge of any suit, claim or demand
asserted by a third party that Lender believes is covered by this indemnity,
Lender shall give Assignor notice of the matter and the opportunity to defend
it, at Assignor's sole cost and expense, with legal counsel satisfactory to
Lender. Lender may require Assignor to defend the matter. If Assignor promptly
undertakes its responsibility to defend the matter,
5
<PAGE> 6
Assignor shall, at reasonable intervals, keep Lender apprised of the status of
the matter and Assignor's actions pertaining thereto. In addition, even if
Assignor accepts and undertakes its responsibility to defend the matter, Lender
may, at its sole cost and expense, retain separate legal counsel to advise
Lender with respect to the matter. Assignor or its counsel shall cooperate with
such separate counsel of Lender. If Assignor does not promptly accept and
undertake its responsibility to so defend the matter, Lender may employ an
attorney or attorneys to protect its rights hereunder, and in the event of such
employment, Assignor shall upon demand pay Lender all reasonable attorneys' fees
and expenses incurred by Lender, whether or not an action is actually commenced.
16. Release. Upon payment in full and performance of all the Obligations
secured hereby and termination of all obligations of Lender to make loans and
advances and otherwise extend credit to Assignor (other than by reason of the
exercise by Lender of its rights and remedies), this Agreement shall become and
be void and of no effect, but the affidavit of any officer of Lender showing
that any such conditions to release have not been satisfied shall be and
constitute conclusive evidence of the validity, effectiveness and continuing
force of this Agreement, and any person may and is hereby authorized to rely
thereon. Upon such termination, all the estate, right, title, interest, claim
and demand of Lender in and to the Patent Collateral shall revert to Assignor,
and Lender shall, at the request of Assignor and at the sole cost and expense of
Assignor, deliver to Assignor one or more instruments canceling the Assignment
and reassigning the Agreement to Assignor.
17. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by certified mail, postage prepaid, return receipt requested,
through the United States Postal Service to the addresses set forth in the Loan
Agreement or such other address which the parties may provide to one another in
accordance with the Loan Agreement. Such notices, requests, demands and
consents, if sent by mail shall be deemed given when delivered.
18. No Prior Assignments. Assignor hereby represents and warrants to
Lender that no previous assignment of its interest in the Patent Collateral has
been made (except for the Original Collateral Assignment and such as have been
terminated or reassigned to Assignor) and, except for transfers to Lender,
Assignor agrees not to assign, sell, pledge, transfer, or otherwise encumber its
interest in the Patent Collateral so long as this Agreement is in effect.
19. No Release. This Agreement shall not effect the release of any other
collateral now or hereafter held by Lender as security for the Obligations, nor
shall the taking of additional security for the Obligations hereafter effect a
release or termination of this Agreement or any terms or provisions hereof.
20. Further Assurances. Assignor, upon request of Lender, shall execute
and deliver such further documents, as may be reasonably necessary to carry out
the intent of this Agreement and to perfect and preserve the rights and
interests of Lender hereunder and the priority thereof.
21. No Waiver. No failure or delay on the part of Lender in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial
6
<PAGE> 7
exercise of any right, power, or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
rights, powers and remedies hereunder are cumulative and may be exercised by
Lender either independently of or concurrently with any other right, power or
remedy contained herein or in any document or instrument executed in connection
with the Obligations.
22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, WITHOUT GIVING
EFFECT TO CONFLICT OF LAWS PRINCIPLES.
23. Cumulative Rights. All of Lender's rights and remedies with respect to
the Patent Collateral, whether established hereby or by the Loan Agreement, or
by any other agreements or by law shall be cumulative and may be exercised
singularly or concurrently.
24. Severability. The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
25. Successors and Assigns. The benefits and burdens of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties.
26. Authority of Assignor and Signatories. Assignor hereby represents and
warrants to Lender that all necessary consents and approvals have been obtained
and that this Agreement has been duly authorized by all necessary action and
that it constitutes and will constitute a valid and binding obligation of
Assignor. Assignor hereby represents and warrants that the signatory executing
this Agreement on behalf of the Assignor has been duly authorized by Assignor to
execute this Agreement on behalf of Assignor as an officer of Assignor.
27. Number and Gender. In this Agreement, the singular shall include the
plural and the masculine shall include the feminine and neuter gender, and vice
versa, if the context so requires.
28. Counterparts. This Agreement may be executed and acknowledged in
counterparts, all of which executed and acknowledged counterparts shall together
constitute a single document. Signature and acknowledgment pages may be detached
from the counterparts and attached to a single copy of this Agreement to form
physically one document, which may be recorded.
29. Integration. The Loan Documents contain the complete understanding and
agreement of Assignor and Lender and supersede all prior representations,
warranties, agreements, arrangements, understandings and negotiations.
7
<PAGE> 8
30. Survival. Subject to the applicable provisions of the Loan Agreement,
the representations, warranties and covenants of Assignor in the Loan Documents
shall survive the execution and delivery of the Loan Documents and the making of
the Loan described therein.
31. Filing/Recordation. This Agreement may be filed/recorded in such
public offices and with such governmental authorities as Lender may determine
from time to time. Lender may so file/record this Agreement as a "security
interest", "collateral assignment", "assignment" or similar designation as
Lender may determine (so long as such designation is consistent with the terms
of this Agreement) and Lender may from time to time rerecord/refile or take
other action to change the designation under which this Agreement is recorded
(so long as such designation is consistent with the terms of this Agreement).
32. Affirmation of Security Interest. This Agreement amends, restates and
supersedes (except as provided herein) the Original Collateral Assignment.
Notwithstanding the amendment and restatement of the Original Collateral
Assignment, Assignor acknowledges that consideration has been given by Lender
for this Agreement and nothing contained herein is intended to impair, limit or
otherwise affect Lender's continuing first lien priority security interest in
the Patent Collateral.
IN WITNESS WHEREOF, this Agreement is made as of the date first above
written.
MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Prygocki, Sr.
----------------------------------
Name: Mark A. Prygocki, Sr.
-------------------------------
Title: Chief Financial Officer
-------------------------------
NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking
association
By: /s/ Tim Billings
----------------------------------
Name: Tim Billings
-------------------------------
Title: Vice President
-------------------------------
8
<PAGE> 9
SCHEDULE A
LIST OF PATENT COLLATERAL
<PAGE> 1
Exhibit 10.74
AMENDED AND RESTATED
TRADEMARK, TRADENAME AND SERVICE MARK
COLLATERAL ASSIGNMENT AND
SECURITY AGREEMENT
THIS AMENDED AND RESTATED TRADEMARK, TRADENAME AND SERVICE MARK COLLATERAL
ASSIGNMENT AND SECURITY AGREEMENT (the "Agreement") is made and entered into as
of this 22nd day of November, 1998 by and between MEDICIS PHARMACEUTICAL
CORPORATION, a Delaware corporation ("Assignor"), and NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION, a national banking association ("Lender").
RECITALS:
A. Assignor and Lender, as successor-in-interest to Norwest Business
Credit, Inc. ("NBCI"), are parties to that certain Trademark, Tradename and
Service Mark Collateral Assignment and Security Agreement dated August 3, 1995,
as amended (the "Original Collateral Assignment");
B. In connection with Assignor's prior securities offering, Lender agreed
to amend and restate the Collateral Assignment for the purpose of, among other
things, confirming that the Collateral was assigned by Assignor to Lender as
security rather than as an absolute assignment;
C. The Revolving Loan and the Term Credit Facility expired unused on the
Termination Date and Lender has no further obligation to advance any sums under
the Revolving Loan or the Term Credit Facility;
D. Assignor has requested that Lender increase the Acquisitions Credit
Facility to $25,000,000 and extend the term of the Credit and Security Agreement
dated August 3, 1995, as amended (as it may be amended, modified, restated,
extended and/or renewed from time to time, the "Loan Agreement") and the
Acquisitions Credit Facility for an additional two (2) years and make certain
modifications and amendments to the terms of the Loan Agreement and other Loan
Documents, and Lender is willing to do so on certain terms and conditions,
including, without limitation, Assignor's reaffirmation in the form of this
Agreement of Assignor's grant of a security interest to Lender in certain
trademark, tradename and service mark rights upon the terms and subject to the
conditions of this Agreement;
NOW, THEREFORE, in consideration of premises, the covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Original Collateral Assignment
is hereby amended and restated in its entirety and Assignor hereby agrees with
Lender as follows:
1. Definitions. Except as otherwise defined herein, all capitalized terms
used herein shall have the meanings given to such terms in the Loan Agreement.
2. Grant. For value received, Assignor hereby grants, assigns and conveys
to Lender, not as an ownership interest, but as security for the Obligations
(hereinafter defined), (a)
<PAGE> 2
all of Assignor's trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature used in connection with
or related to Assignor's business (all of the foregoing items in this clause
(a), as the same may be amended pursuant hereto from time to time, being
collectively called a "Trademark"), now existing anywhere in the world or
hereafter adopted or acquired, whether currently in use or not, all
registrations and recordings thereof, and all applications in connection
therewith, whether pending or in preparation for filing, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America or
any state thereof or any foreign country, including, without limitation, those
Trademarks referred to in Schedule A attached hereto and incorporated herein by
this reference; (b) all of Assignor's right, title and interest in Trademark
licenses relating to the Trademarks (whether as licensee or licensor), including
each Trademark license referred to in Schedule A attached hereto and
incorporated herein by this reference; (c) all reissues, extensions or renewals
of any of the items described in clauses (a) and (b) of this Section 2; (d) all
of the goodwill of the business connected with the use of, and symbolized by the
items described in, clauses (a) and (b) of this Section 2; and (e) all proceeds
of, and rights associated with, the foregoing, including any claim by Assignor
against third parties for past, present or future infringement or dilution of
any Trademark, Trademark registration or Trademark license, including any
Trademark, Trademark registration or Trademark license referred to in Schedule
A, or for any injury to the goodwill associated with the use of any such
Trademark or for breach or enforcement of any Trademark license. All of the
foregoing property, interests and rights are hereinafter collectively referred
to as the "Trademark Collateral". Assignor agrees not to sell or assign its
interest in, or grant any license of, the Trademark Collateral without the prior
written consent of Lender, which may be withheld in Lender's sole and absolute
discretion.
3. Obligations Secured. The foregoing collateral assignment and grant of
security interest is made for the purpose of securing (in such order of priority
as Lender may elect) the following (the "Obligations"):
(a) The payment of indebtedness in the total principal amount of up
to $25,000,000, with interest thereon, evidenced by the Loan Agreement and
Acquisitions Revolving Note;
(b) Payment of all sums advanced by Lender to protect the Trademark
Collateral pursuant to the Loan Agreement and/or this Agreement, with interest
thereon at a rate equal to the Default Rate (which rate of interest is
hereinafter referred to as the "Agreed Rate");
(c) Payment of all fees and late charges now or hereafter due
pursuant to the Loan Documents and other sums, with interest thereon, that may
hereafter be loaned to Assignor, or its successors or assigns, by Lender, or its
successors and assigns, when evidenced by a promissory note or notes reciting
that they are secured by this Agreement;
(d) Performance of every obligation of Assignor contained in the
Loan Documents;
2
<PAGE> 3
(e) Performance of every obligation, covenant and agreement of
Assignor contained in any agreement, document or instrument now or hereafter
executed by Assignor reciting that the obligations thereunder are secured by
this Agreement or the Loan Documents; and
(f) For the benefit of Lender, compliance with and performance of
each and every provision of any other agreement, document, instrument, law, rule
or regulation by which the Trademark Collateral is bound or may be affected.
4. Representations and Warranties. Assignor represents, warrants,
covenants and agrees that:
(a) The Trademarks referred to on Schedule A hereto are existing and
have not been adjudged invalid or unenforceable, in whole or in part;
(b) Except as provided in this Agreement and the other Loan
Documents, Assignor is the exclusive owner of the entire and unencumbered right,
title and interest in and to the Trademark Collateral except those items of
Trademark Collateral in respect of which Assignor is licensor, and to the best
knowledge of Assignor, except as set forth on Schedule A, no claim has been made
that the use of any Trademark Collateral does or may violate the asserted rights
of any third party;
(c) To the best knowledge of Assignor, Assignor owns directly or is
entitled to use, by license or otherwise, all Trademark Collateral and rights
with respect thereto used in, necessary for, or of importance to the conduct of
Assignor's business; and
(d) Assignor has the unqualified right to enter into this Agreement
and perform its terms.
5. Notification of Lender. Assignor shall immediately notify Lender in
writing of any change in the legal, trade or fictitious business names used by
Assignor and shall, upon Lender's request, execute any additional financing
statements and other assignments, agreements and certificates necessary, in
Lender's opinion, to reflect the change in trade names or fictitious business
names.
6. Use of Trademark Collateral. Assignor shall have the duty, through
counsel experienced in trademark matters and reasonably acceptable to Lender, to
prosecute diligently any Trademark applications of the Trademarks pending as of
the date of this Agreement or thereafter until the Assignor's obligations to
Lender shall have been paid in full, to file and prosecute opposition and
cancellation proceedings and to do any and all acts which are necessary or
desirable to preserve and maintain all rights in the Trademarks, except those
items of Trademark Collateral which are not necessary for or used in the
operation of the Assignor's business. Any expenses incurred in connection with
the Trademarks shall be borne by Assignor. Assignor shall not abandon any
Trademark without the consent of the Lender, which consent shall not be
unreasonably withheld.
3
<PAGE> 4
7. Abandonment. Assignor shall notify Lender immediately if it knows, or
has reason to know, that any application or registration relating to any item of
the Trademark Collateral listed on Schedule A hereto may be suspended,
cancelled, or dedicated to the public or placed in the public domain, or of any
material adverse final determination or development (including any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office, or any foreign counterpart
thereof or any court) regarding Assignor's ownership of any of the Trademark
Collateral, its right to register the same, or to keep and maintain and enforce
the same.
8. Applications. Assignor shall provide Lender with notice of the adoption
of any new Trademarks necessary for or related to the operation of Assignor's
business, and upon request of Lender, Assignor shall execute and deliver any and
all agreements, instruments, documents and papers as Lender may reasonably
request to evidence Lender's security interest in such Trademark Collateral and
the goodwill and general intangibles of Assignor relating thereto or represented
thereby. Assignor shall take all reasonable steps, including in any proceeding
before the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue any application with respect to the Trademark Collateral listed on
Schedule A hereto (and any other Trademark Collateral with respect to which
Assignor is obligated to give the notice described in Section 7 above). Assignor
shall appear in and contest any action or proceeding purporting to affect this
Agreement or the rights or powers of Lender, and shall pay all costs and
expenses (including, without limitation, costs of litigation and attorneys'
fees) in any such action or proceeding in which Lender may appear.
9. Inspections. Assignor hereby grants to Lender and its employees and
agents the right to visit Assignor's facilities which relate to any of the
Trademark Collateral, and to inspect the facilities upon prior written notice at
reasonable times during regular business hours.
10. Trademark Enforcement. If no Event of Default shall have occurred and
be continuing, Assignor shall have the right, and if an Event of Default shall
have occurred and be continuing, Assignor shall have the right, with the prior
written consent of Lender, which will not be unreasonably withheld, to bring any
opposition proceedings, cancellation proceedings or lawsuit in its own name to
enforce or protect the Trademarks, in which event Lender may, if necessary, be
joined as a nominal party to such suit if Lender shall have been satisfied that
it is not thereby incurring any risk of liability because of such joinder.
Assignor shall promptly, upon demand, reimburse and indemnify Lender for all
damages, costs and expenses, including attorneys' fees, incurred by Lender in
the fulfillment of the provisions of this Section.
11. Other Agreements. Assignor agrees that, until all of the Obligations
shall have been satisfied in full, it will not enter into any agreement which is
inconsistent with Assignor's obligations or Lender's rights under this
Agreement, without Lender's prior written consent in Lender's sole and absolute
discretion. Assignor shall not amend or modify in any material respect any of
the license agreements listed on Schedule A hereto without the consent of Lender
in Lender's sole and absolute discretion.
4
<PAGE> 5
12. Events of Default. If any Event of Default shall have occurred and be
continuing and applicable contractual cure and grace periods shall have expired,
Lender shall have, in addition to all other rights and remedies given it by this
Agreement, those allowed by law and the rights and remedies of a secured party
under the Uniform Commercial Code as enacted in any jurisdiction in which the
Trademark Collateral may be located and, without limiting the generality of the
foregoing, the Lender may immediately, without demand of performance and without
other notice (except as set forth next below) or demand whatsoever to Assignor,
all of which are hereby expressly waived, and without advertisement, sell at
public or private sale or otherwise realize upon, in Phoenix, Arizona, or
elsewhere, all or from time to time any of the Trademark Collateral, or any
interest which the Assignor may have therein, and after deducting from the
proceeds of sale or other disposition of the Trademark Collateral all expenses
(including all reasonable expenses for brokers' fees and legal services), shall
apply the balance of proceeds as provided with respect to other personal
property securing the Loan. Notice of any sale or other disposition of the
Trademark Collateral shall be given to Assignor at least thirty (30) days before
the time of any intended public or private sale or other disposition of the
Trademark Collateral is to be made, which Assignor hereby agrees shall be
reasonable notice of such sale or other disposition. At any such sale or other
disposition, any holder of the Note or Lender may, to the extent permissible
under applicable law, purchase the whole or any part of the Trademark Collateral
sold, free from any right of redemption on the part of Assignor, which right is
hereby waived and released.
13. Fees and Costs. Any and all fees, costs and expenses, of whatever kind
or nature, including, without limitation, (i) attorneys' fees and expenses
incurred by Lender in connection with the preparation of this Agreement and all
other documents relating hereto and the consummation of this transaction, the
filing or recording of any documents (including all taxes in connection
therewith) in public offices, (ii) the payment or discharge of any taxes,
maintenance fees, encumbrances and (iii) those incurred in or otherwise
protecting, maintaining or preserving the Trademark Collateral after Assignor
shall have failed to do so in accordance with the terms of this Agreement and/or
the Loan Documents, or in defending or prosecuting any actions or proceedings
arising out of or related to the Trademark Collateral, shall be borne and paid
by Assignor on demand by Lender and until so paid shall be added to the
principal amount of the Obligations and shall bear interest at the Agreed Rate.
14. Power of Attorney. Assignor hereby makes, constitutes and appoints
Lender or any officer or agent of Lender as Lender may select as Assignor's true
and lawful attorney-in-fact, with the power to endorse Assignor's name on all
applications, documents, papers and instruments necessary to Lender to use the
Trademark Collateral, or to grant or issue any exclusive or non-exclusive
license under the Trademark Collateral to anyone else, or necessary for Lender
to assign, pledge, convey or otherwise transfer title in or dispose of the
Trademark Collateral to anyone else. Assignor hereby ratifies all that such
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney shall be irrevocable for the life of this Agreement and may be
exercised by Lender only at any time after the occurrence and during the
continuance of an Event of Default.
15. Indemnification. Assignor shall and does hereby agree to indemnify,
defend and hold Lender harmless for, from and against any and all liability,
loss or damage which it may or
5
<PAGE> 6
might incur under or by reason of the Trademark Collateral or under or by reason
of this Agreement and for, from and against any and all claims and demands
whatsoever which may be asserted against Lender by reason of any alleged
obligation or undertaking in its part to perform or discharge any of the terms,
covenants or agreements under or by reason of the Trademark Collateral or under
or by reason of this Agreement; provided, however, that the foregoing agreement
to indemnify, defend and hold harmless shall not apply to the extent that such
claims and demands arise from the gross negligence or intentional misconduct of
Lender. Except as provided in the immediately preceding sentence, should Lender
incur any such liability, loss or damage, or in the defense of any such claim or
demand, the amount thereof, including costs, expenses and reasonable attorneys'
fees, together with interest thereon at the Agreed Rate, shall be secured hereby
and by the other Loan Documents, and Assignor shall reimburse Lender therefor
(together with such interest) immediately upon demand. Upon receiving knowledge
of any suit, claim or demand asserted by a third party that Lender believes is
covered by this indemnity, Lender shall give Assignor notice of the matter and
the opportunity to defend it, at Assignor's sole cost and expense, with legal
counsel satisfactory to Lender. Lender may require Assignor to defend the
matter. If Assignor promptly undertakes its responsibility to defend the matter,
Assignor shall, at reasonable intervals, keep Lender apprised of the status of
the matter and Assignor's actions pertaining thereto. In addition, even if
Assignor accepts and undertakes its responsibility to defend the matter, Lender
may, at its sole cost and expense, retain separate legal counsel to advise
Lender with respect to the matter. Assignor or its counsel shall cooperate with
such separate counsel of Lender. If Assignor does not promptly accept and
undertake its responsibility to so defend the matter, Lender may employ an
attorney or attorneys to protect its rights hereunder, and in the event of such
employment, Assignor shall upon demand pay Lender all reasonable attorneys' fees
and expenses incurred by Lender, whether or not an action is actually commenced.
16. Release. Upon payment in full and performance of all Obligations
secured hereby and termination of all obligations of Lender to make loans and
advances and otherwise extend credit to Assignor (other than by reason of the
exercise by Lender of its rights and remedies), this Agreement shall become and
be void and of no effect, but the affidavit of any officer of Lender showing
that any such conditions to release have not been satisfied shall be and
constitute conclusive evidence of the validity, effectiveness and continuing
force of this Agreement, and any person may and is hereby authorized to rely
thereon. Upon such termination, all the estate, right, title, interest, claim
and demand of Lender in and to the Trademark Collateral shall revert to
Assignor, and Lender shall, at the request of Assignor and at the sole cost and
expense of Assignor, deliver to Assignor one or more instruments canceling the
Assignment and reassigning the Agreement to Assignor.
17. Notices. All notices, requests, demands and consents to be made
hereunder to the parties hereto shall be in writing and shall be delivered by
hand or sent by certified mail, postage prepaid, return receipt requested,
through the United States Postal Service to the addresses set forth in the Loan
Agreement or such other address which the parties may provide to one another in
accordance with the Loan Agreement. Such notices, requests, demands and
consents, if sent by mail shall be deemed given when delivered.
6
<PAGE> 7
18. No Prior Assignments. Assignor hereby represents and warrants to
Lender that no previous assignment of its interest in the Trademark Collateral
has been made (except for the Original Collateral Assignment and such as have
been terminated or reassigned to Assignor) and, except for transfers to Lender,
Assignor agrees not to assign, sell, pledge, transfer, or otherwise encumber its
interest in the Trademark Collateral so long as this Agreement is in effect.
19. No Release. This Agreement shall not effect the release of any other
collateral now or hereafter held by Lender as security for the Obligations, nor
shall the taking of additional security for the Obligations hereafter effect a
release or termination of this Agreement or any terms or provisions hereof.
20. Further Assurances. Assignor, upon request of Lender, shall execute
and deliver such further documents, as may be reasonably necessary to carry out
the intent of this Agreement and to perfect and preserve the rights and
interests of Lender hereunder and the priority thereof.
21. No Waiver. No failure or delay on the part of Lender in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power, or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. The rights, powers and remedies hereunder are cumulative and may be
exercised by Lender either independently of or concurrently with any other
right, power or remedy contained herein or in any document or instrument
executed in connection with the Obligations.
22. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA, WITHOUT GIVING
EFFECT TO CONFLICT OF LAWS PRINCIPLES.
23. Cumulative Rights. All of Lender's rights and remedies with respect to
the Trademark Collateral, whether established hereby or by the Loan Agreement,
or by any other agreements or by law shall be cumulative and may be exercised
singularly or concurrently.
24. Severability. The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid and unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Agreement in any jurisdiction.
25. Successors and Assigns. The benefits and burdens of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties.
26. Authority of Assignor and Signatories. Assignor hereby represents and
warrants to Lender that all necessary consents and approvals have been obtained
and that this Agreement has been duly authorized by all necessary action and
that it constitutes and will constitute a valid and binding obligation of
Assignor. Assignor hereby represents and warrants that the signatory
7
<PAGE> 8
executing this Agreement on behalf of the Assignor has been duly authorized by
Assignor to execute this Agreement on behalf of Assignor as an officer of
Assignor.
27. Number and Gender. In this Agreement, the singular shall include the
plural and the masculine shall include the feminine and neuter gender, and vice
versa, if the context so requires.
28. Counterparts. This Agreement may be executed and acknowledged in
counterparts, all of which executed and acknowledged counterparts shall together
constitute a single document. Signature and acknowledgment pages may be detached
from the counterparts and attached to a single copy of this Agreement to form
physically one document, which may be recorded.
29. Integration. The Loan Documents contain the complete understanding and
agreement of Assignor and Lender and supersede all prior representations,
warranties, agreements, arrangements, understandings and negotiations.
30. Survival. Subject to the applicable provisions of the Loan Agreement,
the representations, warranties and covenants of Assignor in the Loan Documents
shall survive the execution and delivery of the Loan Documents and the making of
the Loan described therein.
31. Filing/Recordation. This Agreement may be filed/recorded in such
public offices and with such governmental authorities as Lender may determine
from time to time. Lender may so file/record this Agreement as a "security
interest", "collateral assignment", "assignment" or similar designation as
Lender may determine (so long as such designation is consistent with the terms
of this Agreement) and Lender may from time to time rerecord/refile or take
other action to change the designation under which this Agreement is recorded
(so long as such designation is consistent with the terms of this Agreement).
32. Affirmation of Security Interest. This Agreement amends, restates and
supersedes (except as provided herein) the Original Collateral Assignment.
Notwithstanding the amendment and restatement of the Original Collateral
Assignment, Assignor acknowledges that consideration has been given by Lender
for this Agreement and nothing contained herein is intended to impair, limit or
otherwise affect Lender's continuing first lien priority security interest in
the Trademark Collateral.
IN WITNESS WHEREOF, this Agreement is made as of the date first above
written.
MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Prygocki, Sr.
----------------------------------
Name: Mark A. Prygocki, Sr.
-------------------------------
Title: Chief Financial Officer
-------------------------------
8
<PAGE> 9
NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking
association
By: /s/ Tim Billings
----------------------------------
Name: Tim Billings
-------------------------------
Title: Vice President
-------------------------------
9
<PAGE> 10
SCHEDULE A
LIST OF TRADEMARK COLLATERAL
<PAGE> 1
Exhibit 10.77
FIRST AMENDMENT
TO
SECURITIES ACCOUNT PLEDGE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECURITIES ACCOUNT PLEDGE AND SECURITY AGREEMENT
(the "Amendment") is made as of the 22nd day of November, 1998 by and between
MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation ("Borrower"), and
NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a national banking association
(Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender are parties to that certain Securities
Account Pledge and Security Agreement dated as of November 22, 1996 (as amended
hereby and as hereafter amended, modified, supplemented, restated, extended or
replaced from time to time, the "Security Agreement"), pursuant to which
Borrower pledged and granted to Lender a security interest in and to all of
Borrower's right, title and interest in and to the Securities Account and all
financial assets now or hereafter held in the Securities Account and all
security entitlements in connection therewith, to secure the payment and
performance of Borrower obligations to Lender pursuant to that certain Credit
and Security Agreement dated as of August 3, 1995, as amended (the "Credit
Agreement");
WHEREAS, Borrower and Lender intend to increase the Acquisitions Credit
Facility to $25,000,000 and extend the term of the Credit Agreement and the
Acquisitions Credit Facility for an additional two (2) years and make certain
modifications and amendments to the terms of the Credit Agreement and other Loan
Documents; and
WHEREAS, Borrower has requested that Lender amend the Security Agreement
to amend Borrower's covenant to maintain a certain minimum amount of Collateral
in the Securities Account;
NOW, THEREFORE, in consideration of the foregoing premises, the covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Borrower and
Lender hereby agree as follows:
1. Definitions. Except as otherwise defined herein, all capitalized terms
used herein shall have the meanings ascribed thereto in the Credit Agreement.
2. Right to Direct Account Holder. Section 3 of the Agreement is hereby
deleted in its entirety and the following inserted therefor:
3. Right to Direct Account Holder. Provided that no Default or Event
of Default has occurred and is continuing, Borrower may effect Entitlement
Orders, withdrawals, investment requests or directions to the Account
Holder with respect to the
<PAGE> 2
Securities Collateral from time to time, provided that any such
Entitlement Order, withdrawal, investment request or direction shall be
made in strict accordance with the Investment Agreement and the Medicis
Pharmaceutical Corporation Corporate Investment Policy, a copy of which is
attached as Exhibit "A" to the Acknowledgment of Control of Pledged
Securities Account of even date herewith among Borrower, Lender and
Account Holder (the "Acknowledgment"), and, provided, further, before and
after affecting the Entitlement Order, withdrawal, investment request or
direction of Borrower, the ratio of the outstanding and unpaid Advances to
the Market Value of the Securities Accounts (the "Loan-to-Value Ratio") is
and will continue to be .75:1.0 or less. Notwithstanding anything to the
contrary in the Acknowledgment, in the event that Account Holder elects to
resign as investment advisor and custodian under the Investment Agreement,
Borrower may select a successor Account Holder, subject to the reasonable
approval of Lender (and provided that such successor Account Holder enters
into an investment management or custodial agreement and an acknowledgment
of control of pledged securities account agreement in substantially the
form of the Acknowledgment), and Lender will notify Account Holder of such
election and authorize Account Holder to pay over or deliver to such
successor Account Holder any documents, instruments, certificates and
securities with respect to the Securities Account.
3. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Arizona.
4. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
combined shall constitute one and the same instrument. This Amendment shall be
deemed effective upon each party's receipt of a signed facsimile copy of this
Amendment from the other party.
5. Successors and Assigns. This Amendment shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
6. Amendment. Except as otherwise amended hereby, all of the terms and
provisions of the Agreement shall remain in full force and effect.
[THE REMAINDER OF THIS PAGE
IS LEFT INTENTIONALLY BLANK]
-2-
<PAGE> 3
IN WITNESS WHEREOF, Borrower and Lender have caused this Amendment to be
executed as of the day and year first above written.
BORROWER:
MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Prygocki, Sr.
--------------------------------------
Name: Mark A. Prygocki, Sr.
Title: Chief Financial Officer
LENDER:
NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking
association
By: /s/ Tim Billings
--------------------------------------
Name: Tim Billings
Title: Vice President
-3-
<PAGE> 1
Exhibit 10.78
FIRST AMENDMENT
TO
ACKNOWLEDGMENT OF CONTROL OF PLEDGED SECURITIES ACCOUNT
THIS FIRST AMENDMENT TO ACKNOWLEDGMENT OF CONTROL OF PLEDGED SECURITIES
ACCOUNT (the "Amendment") is made as of the 22nd day of November, 1998 by and
among MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation ("Borrower"),
and NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a national banking association
(Lender"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association ("Account Holder").
W I T N E S S E T H:
WHEREAS, Borrower, Lender and Account Holder are parties to that certain
Acknowledgment of Control of Securities Account Pledge and Security Agreement
dated as of November 22, 1996 (as amended hereby and as hereafter amended,
modified, supplemented, restated, extended or replaced from time to time, the
"Agreement"), which governs the relationship among Borrower, Lender and Account
Holder with respect to the Securities Account;
WHEREAS, Borrower and Lender intend to increase the Acquisitions Credit
Facility to $25,000,000 and extend the term of the Credit and Security Agreement
dated as of August 3, 1995, as amended (the "Credit Agreement") and the
Acquisitions Credit Facility for an additional two (2) years and make certain
modifications and amendments to the terms of the Credit Agreement and other Loan
Documents; and
WHEREAS, Borrower and Lender intend to make certain modifications to the
Securities Account Pledge and Security Agreement dated November 22, 1996, as
amended (the "Pledge Agreement"), and such amendments must be reflected in the
terms, provisions and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, the covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Borrower, Lender
and Account Holder hereby agree as follows:
1. Definitions. Except as otherwise defined herein, all capitalized terms
used herein shall have the meanings ascribed thereto in the Agreement.
2. Recital. The second Recital of the Agreement is hereby deleted in its
entirety and the following inserted therefor:
WHEREAS, Borrower and Account Holder are parties to that certain
Investment Advisory Agreement dated as of October 17, 1996 (as it may be
amended, modified, supplemented, replaced, restated or extended from time
to time with the consent of Lender, the "Investment Agreement"), pursuant
to which
<PAGE> 2
Account Holder has opened and maintains that certain Reserve Asset
Management Account No. 13275500 (such account and any other "securities
accounts" (as defined in the Uniform Commercial Code, as adopted in the
States of Arizona and Minnesota), maintained by Borrower or any Affiliate
of Borrower with Account Holder pursuant to the Investment Agreement that
constitute Collateral securing the obligations of the Borrower in which
Lender holds a valid, enforceable first priority lien and security
interest, free and clear of any other liens, claims or encumbrances, are
collectively referred to as the "Securities Account") and holds in the
Securities Account all cash and securities initially deposited plus any
additional cash and securities that may be received from time to time for
the Securities Account, subject to Borrower's right to effect Entitlement
Orders, withdrawals, investment requests or directions to the Account
Holder with respect to the Securities Collateral from time to time;
3. Account Holder's Responsibility. Section 2(d) of the Agreement is
hereby deleted in its entirety and the following inserted therefor:
(d) Notwithstanding anything to the contrary contained herein,
Account Holder shall refuse any Entitlement Order or any other withdrawal,
investment request or direction of Borrower with respect to the Securities
Account and the financial assets therein, if, before or after affecting
the Entitlement Order, withdrawal, investment request or direction of
Borrower, the ratio of the outstanding and unpaid Advances to the Market
Value of the Securities Accounts (the "Loan-to-Value Ratio") is or will be
more than .75:1.0. For purposes hereof, the "Market Value of the
Securities Account" means the value of all of the financial assets in any
Securities Account that constitutes Collateral securing the obligations of
the Borrower in which Lender holds a valid, enforceable first priority
lien and security interest, free and clear of any other liens, claims or
encumbrances, and, with respect to all such non-cash financial assets, the
value of such financial assets marked-to-market as of the close of
business on the last Banking Day of the immediately preceding month. Upon
the written request of Borrower or Account Holder, Lender shall forthwith
notify Account Holder of the then outstanding and unpaid Advances.
4. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Arizona.
5. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
combined shall constitute one and the same instrument. This Amendment shall be
deemed effective upon each party's receipt of a signed
-2-
<PAGE> 3
facsimile copy of this Amendment from the other party.
6. Successors and Assigns. This Amendment shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
7. Amendment. Except as otherwise amended hereby, all of the terms and
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Borrower, Lender and Account Holder have caused this
Amendment to be executed as of the day and year first above written.
BORROWER:
MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Prygocki, Sr.
-----------------------------------
Name: Mark A. Prygocki, Sr.
Title: Chief Financial Officer
LENDER:
NORWEST BANK ARIZONA, NATIONAL ASSOCIATION,
a national banking association
By: /s/ Tim Billings
-----------------------------------
Name: Tim Billings
Title: Vice President
ACCOUNT HOLDER:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
a national banking association
By:
-----------------------------------
Name:
Title:
-3-
<PAGE> 1
Exhibit 10.88
REPLACEMENT ACQUISITIONS REVOLVING NOTE
Phoenix, Arizona
November 22, 1998
For value received, the undersigned, MEDICIS PHARMACEUTICAL CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay on or before the
Maturity Date to the order of NORWEST BANK ARIZONA, NATIONAL ASSOCIATION, a
national banking association (the "Lender"), at its main office in Phoenix,
Arizona, or at any other place designated at any time by the holder hereof, in
lawful money of the United States of America and in immediately available funds,
the principal sum of the Acquisitions Committed Amount, or so much thereof as
shall be outstanding from time to time, together with interest on the principal
amount outstanding from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and Security
Agreement dated as August 3, 1995 by and between Norwest Business Credit, Inc.,
the predecessor-in-interest to Lender, and the Borrower, as amended (the "Credit
Agreement"). Except as otherwise defined herein, all capitalized terms used
herein shall have the meanings ascribed thereto in the Credit Agreement.
The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. The principal amount of this Note
may be borrowed, repaid and reborrowed from time to time in accordance with the
Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Acquisitions Revolving Note referred to in the Credit Agreement.
This Note is secured, among other things, pursuant to the Credit Agreement
and the Loan Documents (as defined in the Credit Agreement), and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced, as more particularly enumerated
in the Credit Agreement.
The Borrower agrees that the interest rate contracted for includes the
interest rate set forth in the Credit Agreement plus any other charges or fees
set forth herein and costs and expenses incident to this transaction paid by the
Borrower to the extent the same are deemed interest under applicable law.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
<PAGE> 2
This Note replaces and supersedes that certain Acquisitions Revolving Note
dated November 22, 1996 from Borrower in favor of Lender in the original
principal amount of $20,000,000 (the "Original Acquisitions Revolving Note").
Notwithstanding the replacement of the Original Acquisitions Revolving Note,
Borrower acknowledges that consideration has been given by Lender for this Note
and the execution and delivery of this Note does not constitute an accord and
satisfaction or repayment of the Original Acquisitions Revolving Note and this
Note is not made as payment or satisfaction of the Original Acquisitions
Revolving Note, but simply as a replacement and increase of the Original
Acquisitions Revolving Note. Borrower acknowledges, confirms and ratifies the
enforceability of this Note, the Loan Documents, as modified, and the continuing
validity, enforceability and priority of the liens and security interests
granted in the Loan Documents and securing the Original Acquisitions Revolving
Note and this Note.
IN WITNESS WHEREOF, this Note is executed and delivered as of the date
first above written.
MEDICIS PHARMACEUTICAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Prygocki, Sr.
---------------------------------
Name: Mark A. Prygocki, Sr.
------------------------------
Title: Chief Financial Officer
------------------------------
-2-
<PAGE> 1
Exhibit 10.89
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT
BY AND AMONG
HOECHST MARION ROUSSEL, INC.,
HOECHST MARION ROUSSEL DEUTSCHLAND GmbH,
HOECHST MARION ROUSSEL, S.A.
AND
MEDICIS PHARMACEUTICAL CORPORATION
DATED AS OF NOVEMBER 15, 1998
TRADEMARK NOTICE: 'Loprox', 'Topicort' and 'A/T/S' are registered trademarks of
HMR, certain rights to which are granted to MEDICIS in accordance with this
AGREEMENT. The use of such trademarks in this AGREEMENT is in each case deemed
to be accompanied by an appropriate notice of trademark registration.
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.........................................................1
1.1 "AAA"...........................................................1
1.2 "ACTIVE INGREDIENTS"............................................1
1.3 "AFFILIATE".....................................................1
1.4 "AGREEMENT".....................................................2
1.5 "APPLICABLE LAWS"...............................................2
1.6 "ASSETS"........................................................2
1.7 "CICLOPIROX"....................................................2
1.8 "CLAIM".........................................................2
1.9 "COMPETING NAIL TOPICAL PRODUCT"................................2
1.10 "CONFIDENTIAL INFORMATION"......................................2
1.11 "COPLEY"........................................................3
1.12 "COPLEY PRODUCT AGREEMENT"......................................3
1.13 "DEVELOPMENT STAGE PRODUCT".....................................3
1.14 "EXCLUDED HMR PRODUCT LIABILITY"................................3
1.15 "FDA"...........................................................3
1.16 "HERBERT".......................................................3
1.17 "HERBERT AGREEMENT".............................................3
1.18 "HMR"...........................................................3
1.19 "HMR GmbH"......................................................3
1.20 "HMRI"..........................................................3
1.21 "HMR INDEMNIFIED PARTY".........................................3
1.22 "HMR NEWLY DEVELOPED PRODUCT"...................................3
i
<PAGE> 3
ASSET PURCHASE AGREEMENT
1.23 "HMR NOTICE"....................................................3
1.24 "HMR RIGHT OF FIRST OFFER"......................................3
1.25 "HMR SA"........................................................4
1.26 "HMR SUPPLIED PRODUCTS".........................................4
1.27 "IMPROVEMENT"...................................................4
1.28 "INTELLECTUAL PROPERTY".........................................4
1.29 "INTERNET SIDE LETTER"..........................................4
1.30 "KNOW-HOW"......................................................4
1.31 "LIABILITIES"...................................................4
1.32 "LICENSE AND OPTION AGREEMENT"..................................4
1.33 "LICENSE EFFECTIVE DATE"........................................4
1.34 "LINE EXTENSIONS"...............................................4
1.35 "LOPROX LOTION".................................................4
1.36 "LOPROX LOTION SUPPLY AGREEMENT"................................5
1.37 "MEDICIS".......................................................5
1.38 "MEDICIS INDEMNIFIED PARTY".....................................5
1.39 "MEDICIS NEWLY DEVELOPED PRODUCT"...............................5
1.40 "MEDICIS NOTICE"................................................5
1.41 "MEDICIS RIGHT OF FIRST OFFER"..................................5
1.42 "NDAs"..........................................................5
1.43 "NEW A/T/S GEL MANUFACTURER"....................................5
1.44 "OTHER INFORMATION".............................................5
1.45 "PACO"..........................................................5
1.46 "PACO AGREEMENTS"...............................................5
1.47 "PACO A/T/S AGREEMENT"..........................................6
ii
<PAGE> 4
ASSET PURCHASE AGREEMENT
1.48 "PACO LOPROX AGREEMENT".........................................6
1.49 "PACO LOPROX ASSIGNMENT AGREEMENT"..............................6
1.50 "PATENTS".......................................................6
1.51 "PRODUCT KNOW-HOW"..............................................6
1.52 "PRODUCTS"......................................................6
1.53 "PURCHASE DATE".................................................6
1.54 "PURCHASE PRICE"................................................6
1.55 "RULES".........................................................6
1.56 "SHARED KNOW-HOW"...............................................6
1.57 "SIMILAR PRODUCTS"..............................................7
1.58 "SUPPLY AGREEMENT"..............................................7
1.59 "TERRITORY".....................................................7
1.60 "TRADEMARK LICENSE AGREEMENT"...................................7
1.61 "TRADEMARKS"....................................................7
1.62 "TRANSACTION DOCUMENTS".........................................7
1.63 "TRANSITION SERVICES AGREEMENT".................................7
ARTICLE II. PURCHASE AND SALE OF ASSETS........................................8
2.1 Sale, Transfer and Assignment of the PATENTS, the
TRADEMARKS and the PRODUCT KNOW-HOW.............................8
2.2 Transfer of the NDAs............................................8
2.3 PACO LOPROX ASSIGNMENT AGREEMENT................................8
2.4 ACTIVE INGREDIENTS Not Included in ASSETS.......................9
2.5 A/T/S/ Gel......................................................9
2.6 MEDICIS Use of Drug Master Files and NDAs.......................9
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
ARTICLE III. PURCHASE PRICE; CONDITION TO PURCHASE............................11
3.1 PURCHASE PRICE; Conveyance.....................................11
3.2 Condition to Purchase..........................................11
3.3 Interest; Taxes................................................12
ARTICLE IV. GRANT OF LICENSES; RELATED RIGHTS.................................12
4.1 Grant of Licenses by HMR.......................................12
4.2 Grant of Licenses by MEDICIS...................................13
4.3 IMPROVEMENTS...................................................14
4.4 Generic Products...............................................14
4.5 Certain Restrictions on Sale of ACTIVE INGREDIENTS.............15
ARTICLE V. RIGHTS OF FIRST OFFER..............................................16
5.1 MEDICIS RIGHT OF FIRST OFFER...................................16
5.2 HMR RIGHT OF FIRST OFFER.......................................18
5.3 Development of Newly Developed Products........................19
5.4 Rilopirox......................................................19
5.5 Theramycin Z Product...........................................20
ARTICLE VI. GREY-MARKET RESTRICTIONS..........................................20
6.1 No Sales By MEDICIS Outside the TERRITORY......................20
6.2 No Sales by HMR Inside the TERRITORY...........................20
ARTICLE VII. REGULATORY MATTERS; RECALLS......................................21
7.1 Communication with Agencies....................................21
7.2 Product Recalls................................................21
ARTICLE VIII. PROMOTION AND MARKETING.........................................22
8.1 Party Names; Change of Promotional Material....................22
8.2 Medical and Other Inquiries....................................22
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
ARTICLE IX. INTELLECTUAL PROPERTY.............................................22
9.1 Notices........................................................22
9.2 Actions........................................................23
ARTICLE X. REPRESENTATIONS AND WARRANTIES; COVENANTS..........................23
10.1 Representations and Warranties of the Parties..................24
10.2 Representations and Warranties of HMR..........................26
10.3 Mutual Limitations on Warranties and Damages...................26
10.4 Survival of Representations and Warranties.....................27
10.5 Covenants of the Parties.......................................27
ARTICLE XI. CONFIDENTIAL INFORMATION..........................................27
11.1 Ownership......................................................27
11.2 Confidentiality................................................27
11.3 Public Announcements and Statements............................27
ARTICLE XII. MANUFACTURING....................................................28
12.1 Manufacturing by MEDICIS.......................................28
ARTICLE XIII. INDEMNIFICATION AND LIMITATION OF LIABILITY.....................28
13.1 Indemnification by MEDICIS.....................................28
13.2 Indemnification by HMR.........................................28
13.3 Process of Indemnification.....................................29
13.4 Settlements....................................................29
13.5 Right of Set-Off...............................................29
ARTICLE XIV. MISCELLANEOUS....................................................30
14.1 Governing Law..................................................30
14.2 Headings and References........................................30
14.3 Dispute Resolution.............................................30
v
<PAGE> 7
ASSET PURCHASE AGREEMENT
14.4 Severability...................................................32
14.5 Entire Agreement...............................................32
14.6 Amendment......................................................32
14.7 Notices........................................................32
14.8 Assignment, Sublicense and Binding Effect......................33
14.9 No Agency......................................................34
14.10 No Strict Construction.........................................34
14.11 Waiver.........................................................34
14.12 Counterparts...................................................34
EXHIBITS
EXHIBIT A - List of NDAs
EXHIBIT B - List of PATENTS
EXHIBIT C - List of PRODUCTS
EXHIBIT D - List of TRADEMARKS
vi
<PAGE> 8
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "AGREEMENT") is entered into as of
November 15, 1998, by and among Hoechst Marion Roussel, Inc., a Delaware
corporation ("HMRI"), Hoechst Marion Roussel Deutschland GmbH, a German limited
liability company ("HMR GmbH"), Hoechst Marion Roussel, S.A., a French
corporation ("HMR SA"), and Medicis Pharmaceutical Corporation, a Delaware
corporation ("MEDICIS"). Capitalized terms used in this AGREEMENT shall have the
meanings ascribed to them in Article I hereof or as otherwise set forth herein.
RECITALS
A. HMRI, HMR SA and HMR GmbH (sometimes collectively and jointly and
severally referred to herein as "HMR") and MEDICIS are parties to the LICENSE
AND OPTION AGREEMENT which provides for the contemporaneous execution and
delivery of this document.
B. MEDICIS desires to purchase from HMR, and HMR desires to sell, transfer
and assign to MEDICIS, effective as of the PURCHASE DATE, the ASSETS.
C. The parties are willing to grant certain licenses to each other as
specified in Article IV hereof.
D. Pursuant to and as provided in this AGREEMENT, HMRI, MEDICIS and PACO
have entered into the PACO LOPROX ASSIGNMENT AGREEMENT.
NOW, THEREFORE, in consideration of the mutual promises hereinafter made
and the mutual benefits to be derived from this AGREEMENT, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 "AAA" shall have the meaning set forth in Section 14.3(b)
hereof.
1.2 "ACTIVE INGREDIENTS" means CICLOPIROX, desoximetasone and
erythromycin, or any of them, as the case may be.
1.3 "AFFILIATE" means any individual, corporation or other legal
entity which any party directly or indirectly through one or more intermediaries
controls or which is controlled by or under common control with such party. For
the purpose of this AGREEMENT, "control" means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of an individual, corporation or other legal entity, whether through
the ownership of voting securities, by contract, or otherwise; provided,
however, that COPLEY shall not be an AFFILIATE of HMR.
1
<PAGE> 9
ASSET PURCHASE AGREEMENT
1.4 "AGREEMENT" means this Asset Purchase Agreement by and among
HMRI, HMR GmbH, HMR SA and MEDICIS.
1.5 "APPLICABLE LAWS" shall mean all applicable laws, statutes,
rules, regulations, ordinances, orders, decrees, writs, judicial or
administrative decisions and the like of any nation or government, any state or
other political subdivision thereof, any entity exercising executive, judicial,
regulatory or administrative functions of or pertaining to government
(including, without limitation, any governmental authority, agency, department,
board, commission or instrumentality of any governmental unit or any political
subdivision thereof), any tribunal or arbitrator of competent jurisdiction, and
any self-regulatory organization.
1.6 "ASSETS" means the PATENTS, the PRODUCT KNOW-HOW, the TRADEMARKS
and the NDAs being sold, transferred and assigned by HMR to MEDICIS under
Article II hereof.
1.7 "CICLOPIROX" means ciclopirox acid and/or ciclopirox olamine.
1.8 "CLAIM" shall have the meaning set forth in Section 14.3(a).
1.9 "COMPETING NAIL TOPICAL PRODUCT" means any product or products
for topical application to the nail containing CICLOPIROX, or that would
otherwise be similar to or competitive with the DEVELOPMENT STAGE PRODUCT.
1.10 "CONFIDENTIAL INFORMATION" means any and all data and
information of a proprietary or confidential nature that are owned or controlled
by any party hereto or their respective AFFILIATES and are made available by one
party or its AFFILIATES to any other party or its AFFILIATES prior to, on or
after the PURCHASE DATE and that are directly or indirectly related to the
PRODUCTS and/or IMPROVEMENTS or the manufacture, use or sale thereof, including,
but without limitation, clinical or non-clinical data, formulations, processing
information, technical reports and specifications, marketing and sales
information, customer lists, supplier lists and pricing information.
CONFIDENTIAL INFORMATION shall not include information which:
(i) was known or used by the receiving party or its AFFILIATES
prior to its date of disclosure to the receiving party, as evidenced by the
prior written records of the receiving party or its AFFILIATES;
(ii) either before or after the date of the disclosure to the
receiving party is lawfully disclosed without restriction on disclosure to the
receiving party or its AFFILIATES by an independent, unaffiliated third party
whose disclosure of such information does not violate any obligation to or right
of the party owning or controlling the CONFIDENTIAL INFORMATION; or
(iii) either before or after the date of the disclosure to the
receiving party becomes published or generally known in the industry through no
fault or admission on the part of the receiving party or its AFFILIATES.
2
<PAGE> 10
ASSET PURCHASE AGREEMENT
1.11 "COPLEY" means Copley Pharmaceutical, Inc., a Delaware
corporation.
1.12 "COPLEY PRODUCT AGREEMENT" shall have the meaning set forth in
Section 4.4(a) hereof.
1.13 "DEVELOPMENT STAGE PRODUCT" shall have the meaning set forth in
Schedule 5.1 hereto.
1.14 "EXCLUDED HMR PRODUCT LIABILITY" means any LIABILITY of HMR or
their AFFILIATES arising under any applicable federal, state, local or other
product liability law, regulation, common law principle, court order or
judgment, jury verdict or arbitral award arising out of or related to the
manufacture of the HMR SUPPLIED PRODUCTS by HMR or its AFFILIATES after the
PURCHASE DATE; excluding, however, any such LIABILITY due to, caused by,
resulting from or arising out of any breach by HMR or any of their AFFILIATES of
Article VI of the SUPPLY AGREEMENT or Article VI of the LOPROX LOTION SUPPLY
AGREEMENT.
1.15 "FDA" means the United States Food and Drug Administration, or
any successor to its responsibilities with respect to pharmaceutical products
such as the PRODUCTS.
1.16 "HERBERT" means Vision Pharmaceuticals L.P., a Texas limited
partnership (formerly known as Herbert Laboratories), the general partner of
which is Allergan General, Inc., a Delaware corporation that is a subsidiary of
Allergan, Inc.
1.17 "HERBERT AGREEMENT" means the Manufacturing Agreement, dated as
of June 11, 1990, between HMRI and HERBERT, relating to 'A/T/S' Gel, including
any amendments thereto.
1.18 "HMR" means HMRI, HMR SA and HMR GmbH, collectively and jointly
and severally.
1.19 "HMR GmbH" means Hoechst Marion Roussel Deutschland GmbH, a
German limited liability company.
1.20 "HMRI" means Hoechst Marion Roussel, Inc., a Delaware
corporation.
1.21 "HMR INDEMNIFIED PARTY" shall have the meaning set forth in
Section 13.1 hereof.
1.22 "HMR NEWLY DEVELOPED PRODUCT" shall have the meaning set forth
in Section 5.1 hereof.
1.23 "HMR NOTICE" shall have the meaning set forth in Section 5.1(a)
hereof.
1.24 "HMR RIGHT OF FIRST OFFER" shall have the meaning set forth in
Section 5.2 hereof.
3
<PAGE> 11
ASSET PURCHASE AGREEMENT
1.25 "HMR SA" means Hoechst Marion Roussel, S.A., a French
corporation.
1.26 "HMR SUPPLIED PRODUCTS" means the HMR MANUFACTURED PRODUCTS (as
defined in the SUPPLY AGREEMENT) and the LOPROX LOTION.
1.27 "IMPROVEMENT" means any and all modifications or refinements
related to any PRODUCT or its use or the manufacturing processes thereof,
whether patented or not patented, which may be made, developed or acquired by a
party prior to, on or after the PURCHASE DATE including, without limitation,
modifications in the size, dosage strength or excipients of any PRODUCT, but not
including LINE EXTENSIONS.
1.28 "INTELLECTUAL PROPERTY" means the KNOW-HOW, the PATENTS and the
TRADEMARKS.
1.29 "INTERNET SIDE LETTER" means that certain side letter agreement
pertaining to Internet Domain Names between HMRI and MEDICIS, dated as of the
LICENSE EFFECTIVE DATE.
1.30 "KNOW-HOW" means the SHARED KNOW-HOW and the PRODUCT KNOW-HOW.
1.31 "LIABILITIES" means any and all liabilities, losses, damages,
penalties, fines, assessments, expenses and costs of any kind or nature, primary
or secondary, direct or indirect, absolute or contingent, known or unknown,
including without limitation costs of settlement, reasonable attorneys fees and
related costs and expenses and any liabilities for claims of personal injury or
death, suffered or incurred by an indemnified party hereunder.
1.32 "LICENSE AND OPTION AGREEMENT" means the License and Option
Agreement, dated as of November 15, 1998, among HMRI, HMR SA, HMR GmbH and
MEDICIS.
1.33 "LICENSE EFFECTIVE DATE" means the LICENSE EFFECTIVE DATE as
defined in the LICENSE AND OPTION AGREEMENT, which date is November 15, 1998.
1.34 "LINE EXTENSIONS" means human dermatology products containing
the ACTIVE INGREDIENTS of the PRODUCTS but in a different dosage form from the
PRODUCTS (e.g., products in a gel rather than a cream form), but not including
(i) IMPROVEMENTS or (ii) the additional Loprox PRODUCT discussed in Schedule 13
to the LICENSE AND OPTION AGREEMENT, Loprox Gel, Topicort Ointment 0.05% or the
DEVELOPMENT STAGE PRODUCT.
1.35 "LOPROX LOTION" shall have the meaning set forth in the LOPROX
LOTION SUPPLY AGREEMENT.
4
<PAGE> 12
ASSET PURCHASE AGREEMENT
1.36 "LOPROX LOTION SUPPLY AGREEMENT" means the Loprox Lotion Supply
Agreement, dated as of the LICENSE EFFECTIVE DATE, between HMRI and MEDICIS.
1.37 "MEDICIS" means Medicis Pharmaceutical Corporation, a Delaware
corporation.
1.38 "MEDICIS INDEMNIFIED PARTY" shall have the meaning set forth in
Section 13.2 hereof.
1.39 "MEDICIS NEWLY DEVELOPED PRODUCT" shall have the meaning set
forth in Section 5.2 hereof.
1.40 "MEDICIS NOTICE" shall have the meaning set forth in Section
5.2(a) hereof.
1.41 "MEDICIS RIGHT OF FIRST OFFER" shall have the meaning set forth
in Section 5.1 hereof.
1.42 "NDAs" means HMR's New Drug Applications, Abbreviated New Drug
Applications and Abbreviated Antibiotic Drug Applications (as such terms are
defined by the FDA) for the PRODUCTS (except A/T/S Gel which is owned by
HERBERT) filed and approved in accordance with the requirements of the FDA, as
they may be amended or supplemented from time to time, and as set forth on
Exhibit A hereto.
1.43 "NEW A/T/S GEL MANUFACTURER" shall have the meaning set forth
in Schedule 2.5 hereto.
1.44 "OTHER INFORMATION" means: (i) information relating to a
disapproval or cancellation of an NDA (or any similar approval, disapproval or
cancellation outside of the TERRITORY); (ii) information on modifications
required to be made in the contents of an NDA (or any similar approval outside
the TERRITORY) in order to prevent, or to warn against risks of, death or bodily
harm; (iii) information on withdrawal of a PRODUCT from the marketplace in the
TERRITORY (or outside the TERRITORY); (iv) information on important revisions of
the precautions in the usage of a PRODUCT as set forth in the labeling pursuant
to an NDA (or any similar revisions outside the TERRITORY); and (v) any
information which could adversely impact the marketing of a PRODUCT in the
TERRITORY.
1.45 "PACO" means Paco Pharmaceutical Services, Inc., a Delaware
corporation.
1.46 "PACO AGREEMENTS" means the PACO LOPROX AGREEMENT and the PACO
A/T/S AGREEMENT.
5
<PAGE> 13
ASSET PURCHASE AGREEMENT
1.47 "PACO A/T/S AGREEMENT" means the Toll Manufacturing Agreement,
dated as of the LICENSE EFFECTIVE DATE, between HMRI and PACO relating to the
A/T/S Solution, including any amendments thereto.
1.48 "PACO LOPROX AGREEMENT" means the Toll Manufacturing Agreement,
dated as of the LICENSE EFFECTIVE DATE, between HMRI and PACO relating to Loprox
Lotion, including any amendments thereto.
1.49 "PACO LOPROX ASSIGNMENT AGREEMENT" means the Assignment and
Assumption Agreement, dated as of the LICENSE EFFECTIVE DATE, by and among PACO,
HMRI and MEDICIS relating to the PACO LOPROX AGREEMENT, which shall only be
effective on the PURCHASE DATE.
1.50 "PATENTS" means the U.S. patent applications and U.S. patents
issuing therefrom owned by HMR or their AFFILIATES corresponding to, or that
shall correspond to, and which are limited to the subject matter described in
the PCT patent applications specified in Exhibit B hereto, other than to the
extent of claims for active ingredients other than the ACTIVE INGREDIENTS; for
the avoidance of doubt claims related to rilopirox, the DEVELOPMENT STAGE
PRODUCT or HMR's CICLOPIROX Powder shall not be included within the PATENTS.
1.51 "PRODUCT KNOW-HOW" means technical, scientific and medical
information, knowledge, know-how, inventions and trade secrets, other than the
SHARED KNOW-HOW, pertaining to or related to the development, registration,
manufacturing, formulation, sale, use and commercialization of solely the
PRODUCTS, including, but without limitation, physico-chemical data,
specifications, quality control information and procedures and information
concerning the clinical, toxicological and pharmacological properties of the
PRODUCTS, owned by HMR or their AFFILIATES, excluding, however, technical
scientific and medical information, knowledge, know-how, inventions and trade
secrets which are solely related to the manufacture or formulation of the ACTIVE
INGREDIENTS.
1.52 "PRODUCTS" means the human dermatology products and (unless the
context indicates otherwise) samples thereof listed in Exhibit C to this
AGREEMENT, but not the ACTIVE INGREDIENTS thereof.
1.53 "PURCHASE DATE" shall mean the date this AGREEMENT is effective
in accordance with Section 3.2 of this AGREEMENT.
1.54 "PURCHASE PRICE" shall mean U.S. $16.5 million, subject to
adjustment in accordance with Schedules 4.3A and 4.3B of the LICENSE AND OPTION
AGREEMENT.
1.55 "RULES" shall have the meaning set forth in Section 14.3(b)
hereof.
1.56 "SHARED KNOW-HOW" means technical, scientific and medical
information, knowledge, know-how, inventions and trade secrets, other than the
PRODUCT
6
<PAGE> 14
ASSET PURCHASE AGREEMENT
KNOW-HOW, which (i) is owned by HMR or their AFFILIATES and pertain or relate to
the PRODUCTS and other products of HMR or its AFFILIATES, or (ii) is controlled
by or licensed to HMR or their AFFILIATES on a non-exclusive basis, but not
owned by HMR or their AFFILIATES, and are necessary for, used in or relate to
the development, registration, manufacturing, formulation, sale, use and
commercialization of the PRODUCTS, including, but without limitation,
manufacturing processes and techniques, quality control information and
procedures, and technical, scientific and medical information, knowledge,
know-how, inventions and trade secrets which are the subject of the PACO
AGREEMENTS, excluding technical, scientific and medical information, knowledge,
know-how, inventions and trade secrets which are related solely to the
manufacture or formulation of the ACTIVE INGREDIENTS, or which are the subject
of the HERBERT AGREEMENT.
1.57 "SIMILAR PRODUCTS" mean any products for human dermatological
purpose containing the ACTIVE INGREDIENTS of the PRODUCTS, including without
limitation, any products based upon any IMPROVEMENTS and any LINE EXTENSIONS of
the PRODUCTS.
1.58 "SUPPLY AGREEMENT" means the Supply Agreement, dated as of the
LICENSE EFFECTIVE DATE, by and between HMR GmbH and MEDICIS.
1.59 "TERRITORY" means the United States of America and its
territories and possessions.
1.60 "TRADEMARK LICENSE AGREEMENT" means the Trademark License
Agreement dated as of the LICENSE EFFECTIVE DATE, by and among HMRI, HMR GmbH,
HMR SA and MEDICIS.
1.61 "TRADEMARKS" means the trademarks associated with the PRODUCTS
in the TERRITORY set forth on Exhibit D hereto held by HMR or their AFFILIATES.
1.62 "TRANSACTION DOCUMENTS" means this AGREEMENT, the LICENSE AND
OPTION AGREEMENT, the TRADEMARK LICENSE AGREEMENT, the INTERNET SIDE LETTER, the
TRANSITION SERVICES AGREEMENT, the SUPPLY AGREEMENT, the LOPROX LOTION SUPPLY
AGREEMENT, the TECHNICAL AGREEMENT, the HERBERT ASSIGNMENT AGREEMENT, the PACO
A/T/S ASSIGNMENT AGREEMENT and the PACO LOPROX ASSIGNMENT AGREEMENT.
1.63 "TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement, dated as of the LICENSE EFFECTIVE DATE, by and between HMRI and
MEDICIS.
Unless the context clearly indicates otherwise, the use herein of the
singular shall include the plural, and the use of the masculine shall include
the feminine and vice versa.
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ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1 Sale, Transfer and Assignment of the PATENTS, the TRADEMARKS and
the PRODUCT KNOW-HOW. Subject to Section 4.4 of this AGREEMENT, effective as of
the PURCHASE DATE, HMR hereby sells, assigns and transfers to MEDICIS all right,
title and interest in and to (i) the PRODUCT KNOW-HOW and the TRADEMARKS, along
with the goodwill represented by the TRADEMARKS for all of the PRODUCTS in the
TERRITORY, and (ii) the PATENTS, except that, if any of such PATENTS are
required to be commonly owned with the PATENTS retained by HMR pursuant to the
following sentence, then the PATENTS subject to this requirement shall not be
assigned to MEDICIS, subject to the grant to MEDICIS by HMR of a paid-up,
royalty free, exclusive license under such PATENTS. HMR retains all right, title
and interest in and to all of the patents and patent applications arising from
the NON-PRODUCT CLAIMS (as such term is defined in the LICENSE AND OPTION
AGREEMENT). HMR shall execute and deliver to MEDICIS all documents that may be
required in order to vest legal, record ownership of the assigned rights and
properties in MEDICIS.
2.2 Transfer of the NDAs. Subject to Section 2.6 hereof, HMR hereby
transfer to MEDICIS all right, title and interest in and to the NDAs in the
TERRITORY (other than rights to such know-how and information related to the
ACTIVE INGREDIENTS which have been superseded and are the subject of Drug Master
Files established by HMR pursuant to Section 2.5 of the LICENSE AND OPTION
AGREEMENT, which MEDICIS covenants not to access) and represent and warrant to
MEDICIS that HMR have provided prior to the PURCHASE DATE, or shall provide
within thirty (30) days after PURCHASE DATE, to MEDICIS all necessary product
regulatory and/or manufacturing documentation, information and OTHER INFORMATION
in HMR's possession or control comprising or relating to the NDAs in the
TERRITORY (other than rights to such know-how and information related to the
ACTIVE INGREDIENTS which have been superseded and are the subject of Drug Master
Files established by HMR pursuant to Section 2.5 of the LICENSE AND OPTION
AGREEMENT, which MEDICIS covenants not to access) which has not been provided to
MEDICIS on or before the PURCHASE DATE. From and after the PURCHASE DATE, HMR
shall promptly take all necessary actions reasonably requested by MEDICIS to
facilitate all required approvals of or with respect to the transfer of the NDAs
in the TERRITORY. MEDICIS acknowledges that the NDA and the manufacturing
information for A/T/S Gel is not being transferred to MEDICIS hereunder and that
with respect to such A/T/S Gel MEDICIS has instead been assigned and has all
rights and benefits accruing to HMRI under the HERBERT AGREEMENT. The Drug
Master Files for the PRODUCTS and the ACTIVE INGREDIENTS (or equivalent
information in the NDAs pursuant to Section 2.5 of the LICENSE AND OPTION
AGREEMENT) shall remain with HMRI (except for A/T/S Gel which remains with
HERBERT) and shall not be available for review by MEDICIS, but MEDICIS shall
have certain rights of reference thereto (except for A/T/S Gel) pursuant to
Section 2.6 hereof.
2.3 PACO LOPROX ASSIGNMENT AGREEMENT. Effective as of the PURCHASE
DATE, HMRI, MEDICIS and PACO have entered into the PACO LOPROX
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ASSET PURCHASE AGREEMENT
ASSIGNMENT AGREEMENT pursuant to which HMRI has assigned to MEDICIS all of its
rights under the PACO LOPROX AGREEMENT.
2.4 ACTIVE INGREDIENTS Not Included in ASSETS. Notwithstanding
anything to the contrary contained in this AGREEMENT but subject to Article V of
this AGREEMENT, any rights to the ACTIVE INGREDIENTS of the PRODUCTS shall not
be included in the ASSETS other than (i) the rights (but not development or
manufacturing rights as to the ACTIVE INGREDIENTS) necessary to develop, make,
have made, use, distribute, sell and have sold PRODUCTS containing the ACTIVE
INGREDIENTS; (ii) the right to enforce the restrictions on sale of the ACTIVE
INGREDIENTS set forth in this AGREEMENT; (iii) the rights conferred by the
SUPPLY AGREEMENT and the LOPROX LOTION SUPPLY AGREEMENT; (iv) the rights to
reference the NDAs and Drug Master Files corresponding thereto in accordance
with Section 2.6(b) hereof (but not development or manufacturing rights as to
the ACTIVE INGREDIENTS) necessary to develop, sell, make and have made
IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS other than any COMPETING NAIL
TOPICAL PRODUCT; and (v) the rights necessary to conduct clinical tests or to
conduct tests as required by APPLICABLE LAWS with respect to or using the
PRODUCTS, the ACTIVE INGREDIENTS (if manufactured or supplied by or on behalf of
HMR and other than for the development or registration of a COMPETING NAIL
TOPICAL PRODUCT) and any IMPROVEMENTS and any MEDICIS NEWLY DEVELOPED PRODUCTS
other than any COMPETING NAIL TOPICAL PRODUCT; provided, however, that MEDICIS,
its AFFILIATES, and their successors, assigns, licensees and sublicensees shall
not violate the restrictions specified in Section 2.6 hereof in exercising their
rights under this Section 2.4.
2.5 A/T/S/ Gel. HMR GmbH and MEDICIS have agreed to certain matters,
rights and obligations relating to A/T/S Gel as set forth in Schedule 2.5
hereto.
2.6 MEDICIS Use of Drug Master Files and NDAs.
(a) New Drug Master Files. MEDICIS acknowledges that as of the
LICENSE EFFECTIVE DATE no Drug Master Files had been prepared for
desoximetasone, ciclopirox acid and ciclopirox olamine and that the information
contained in the NDAs of the PRODUCTS that relate to the raw materials and/or
the ACTIVE INGREDIENTS shall not be available for access, review, utilization or
disclosure by MEDICIS, its AFFILIATES and their successors and assigns and their
licensees and sublicensees, and MEDICIS covenants and agrees that it shall not,
directly or indirectly, access, utilize or disclose such information. If not
already accomplished by the PURCHASE DATE, HMR shall complete the preparation
and filing with the FDA Drug Master Files for desoximetasone, ciclopirox acid
and ciclopirox olamine. Upon acceptance of such Drug Master Files by the FDA,
MEDICIS shall instruct the FDA to supersede, and if permitted delete, the
information corresponding to such Drug Master Files in the relevant NDA with
that of the Drug Master Files. The Drug Master Files and such portions of the
NDAs as would be covered in such Drug Master Files shall remain with and shall
at all times be the sole property of HMR and their AFFILIATES (except for A/T/S
Gel which remains with and is the property of HERBERT), shall not be assigned or
otherwise transferred to
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ASSET PURCHASE AGREEMENT
MEDICIS hereunder, and shall not be available for review by MEDICIS, its
AFFILIATES, their successors and assigns and their licensees and sublicensees,
but MEDICIS shall have a limited right of reference thereto in accordance with
paragraph (b) of this Section 2.6.
(b) Rights to Reference Drug Master Files and the NDAs.
Subject to the other provisions of this Section 2.6 and Sections 5.2 and 6.1,
MEDICIS shall have a limited right of reference solely in the TERRITORY to the
NDAs and Drug Master Files of the PRODUCTS solely for the PRODUCTS, IMPROVEMENTS
and MEDICIS NEWLY DEVELOPED PRODUCTS, which shall not include any rights for or
related to (i) information and NDAs related to A/T/S Gel and (ii) the
development, regulatory approval and/or commercialization of any COMPETING NAIL
TOPICAL PRODUCT. Subject to the provisions of Sections 5.1 and 6.2 hereof, HMR,
their AFFILIATES, their successors and assigns and their licensees and
sublicensees shall (i) have an unrestricted right of reference to the Drug
Master Files and the NDAs for the DEVELOPMENT STAGE PRODUCT and HMR's CICLOPIROX
Powder, and (ii) retain the right to utilize and reference any data and/or
intellectual property rights (other than the TRADEMARKS, except for the
trademark rights licensed to HMR pursuant to Section 4.2(c) hereof) necessary to
support the regulatory approval, manufacture, commercialization and marketing of
the DEVELOPMENT STAGE PRODUCT and HMR's CICLOPIROX Powder.
(c) DEVELOPMENT STAGE PRODUCT. Notwithstanding any other
provision of this AGREEMENT or any provision of the other TRANSACTION DOCUMENTS,
and except to the extent that rights or information are lawfully available to a
third party (which is not HMR or their AFFILIATES, or their successors, assigns,
licensees or sublicensees), for such purposes as are utilized by MEDICIS, its
AFFILIATES, their successors and assigns and their licensees and sublicensees,
under applicable U.S. Federal statutes or the regulations or rules promulgated
thereunder (including those rights that any such third party would have under
the U.S. Federal Food, Drug and Cosmetic Act, the U.S. Freedom of Information
Act or any other U.S. Federal statute, but excluding (A) rights triggered or
provided by any contractual or license rights granted to any such third party by
HMR or their AFFILIATES or their successors and assigns or their licensees and
sublicensees or (B) information which enters the public domain due to, by or
pursuant to the action or inaction, directly or indirectly, of MEDICIS, its
AFFILIATES, their successors and assigns and their licensees and sublicensees),
MEDICIS, its AFFILIATES, their successors and assigns and their licensees and
sublicensees shall not directly or indirectly access, review, disclose,
reference or utilize the Drug Master Files, the NDAs or the INTELLECTUAL
PROPERTY (including but not limited to New Drug Applications for the MEDICIS
NEWLY DEVELOPED PRODUCTS, any IMPROVEMENTS, the HMR NEWLY DEVELOPED PRODUCTS,
the DEVELOPMENT STAGE PRODUCT, or the additional Loprox PRODUCT discussed in
Schedule 13 hereto, or any other regulatory approval based upon, arising out of
or related to the Drug Master Files, the NDAs, such New Drug Applications or the
INTELLECTUAL PROPERTY (other than the TRADEMARKS) or any information contained
therein) (i) for the development, regulatory approval and/or commercialization
of a COMPETING NAIL TOPICAL PRODUCT, or (ii) that relate to the ACTIVE
INGREDIENTS; provided, however, that in no event or circumstance whatsoever
shall the existence of such information in the public domain be deemed a
release, modification or waiver of the restrictions
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ASSET PURCHASE AGREEMENT
on rights of reference specified in this paragraph (c) or in paragraph 2.6(b)
hereof unless a third party (which is not HMR, their AFFILIATES, or their
successors and assigns or their licensees or sublicensees) would have rights of
reference to such information (except to the extent (A) such rights are
triggered or provided by any contractual or license rights granted to any such
third party by HMR or their AFFILIATES or their successors and assigns or their
licensees and sublicensees or (B) such information enters the public domain due
to, by or pursuant to the action or inaction, directly or indirectly, of
MEDICIS, its AFFILIATES, their successors and assigns and their licensees and
sublicensees). Nothing in this Section 2.6 shall limit MEDICIS, its AFFILIATES
and their successors and assigns or their licensees and sublicensees from using
any ACTIVE INGREDIENTS lawfully manufactured or supplied by a third party (which
is not HMR or their AFFILIATES or their successors and assigns or their
licensees and sublicensees) lawfully using information available to such third
party for the purposes utilized by such third party without using information
which is proprietary to HMR or its AFFILIATES or their successors and assigns or
their licensees and sublicensees.
ARTICLE III.
PURCHASE PRICE; CONDITION TO PURCHASE
3.1 PURCHASE PRICE; Conveyance. Subject to the terms and conditions
of this AGREEMENT, including the conditions set forth in Section 3.2, and the
set-off rights in Section 13.5 of this AGREEMENT, in reliance on the
representations, warranties, covenants and agreements of HMR contained herein,
and in partial consideration of the sale, conveyance, assignment, transfer and
delivery of the ASSETS provided for in Article II hereof, and the licenses
granted to MEDICIS to the SHARED KNOW-HOW and IMPROVEMENTS and the other rights
granted under this AGREEMENT, MEDICIS shall pay to HMR in accordance with
Schedule 3.1 on the third anniversary of the LICENSE EFFECTIVE DATE, in full
payment therefor, the PURCHASE PRICE by wire transfer in immediately available
funds, to such account as HMR shall have designated to MEDICIS in writing prior
to the third anniversary of the LICENSE EFFECTIVE DATE.
3.2 Condition to Purchase. Notwithstanding any other provision of
this AGREEMENT or the LICENSE AND OPTION AGREEMENT, this AGREEMENT and the
rights and obligations of the parties hereunder, including without limitation
the sale, conveyance, assignment, transfer and delivery of the ASSETS and the
grant of the various licenses provided for herein, shall not be effective until
MEDICIS has made full payment of, and HMR has received, the PURCHASE PRICE in
accordance with the provisions of Section 3.1 hereof and all amounts payable by
MEDICIS under Section 3.1 and Sections 13.4 and 13.6 of Schedule 13 of the
LICENSE AND OPTION AGREEMENT; provided, however, that in the event of a bona
fide good faith dispute among the parties with respect to any amount or amounts
payable under Sections 13.4 or 13.6 of Schedule 13 of the LICENSE AND OPTION
AGREEMENT, for purposes of this Section 3.2 the foregoing condition with respect
to payment of such amount or amounts shall be deemed to be waived without
further action by the parties. Except to the extent of any waiver under the
immediately preceding sentence, the payment by MEDICIS and receipt by HMR of the
PURCHASE PRICE and such amounts under Section 3.1 and Schedule 13 of the
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ASSET PURCHASE AGREEMENT
LICENSE AND OPTION AGREEMENT are an express condition precedent to the
effectiveness of the rights and obligations of the parties hereunder and the
sale, conveyance, assignment, transfer and delivery of the ASSETS and to the
grant of the various licenses provided for herein. This AGREEMENT shall
automatically terminate in the event that this AGREEMENT will not become
effective as expressly provided for in Article XV of the LICENSE AND OPTION
AGREEMENT, or if MEDICIS notifies HMR that it will not exercise the OPTION (as
defined in the LICENSE AND OPTION AGREEMENT).
3.3 Interest; Taxes. Any payment under this AGREEMENT that is not
paid when due shall bear interest from the due date until payment in full, at a
rate equal to one (1) percent per month. If Federal, State or local laws or
regulations require that taxes be withheld on any payment made under this
AGREEMENT, the paying party shall be entitled to (i) deduct those taxes from the
payment, (ii) pay the taxes to the proper taxing authority and (iii) send
evidence of the obligation together with proof of payment to the other parties
hereto.
ARTICLE IV.
GRANT OF LICENSES; RELATED RIGHTS
4.1 Grant of Licenses by HMR. Subject to (i) the right of HMR and
their AFFILIATES to manufacture the PRODUCTS in the TERRITORY for sale by HMR
and their AFFILIATES to others solely for use or resale outside the TERRITORY,
and (ii) Section 4.4 hereof, effective as of the PURCHASE DATE:
(a) HMR hereby grant to MEDICIS a perpetual, royalty-free,
non-exclusive license, with the right to transfer, sublicense or assign pursuant
to Section 14.8 hereof, to use and exploit the SHARED KNOW-HOW to (i) develop,
make, have made, use, distribute, sell and have sold the PRODUCTS and any
IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS (but not any COMPETING NAIL
TOPICAL PRODUCT) in the TERRITORY and (ii) make and have made the PRODUCTS and
any IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS (but not any COMPETING
NAIL TOPICAL PRODUCT) outside the TERRITORY solely within North America solely
for use and resale in the TERRITORY.
(b) HMR hereby grant to MEDICIS a perpetual, royalty-free,
non-exclusive license, with the right to transfer, sublicense or assign pursuant
to Section 14.8 hereof, to use and exploit in the TERRITORY any other patents
owned by HMR or their AFFILIATES in the TERRITORY pertaining to any of the
PRODUCTS (except patents pertaining to the ACTIVE INGREDIENTS and rilopirox)
owned by HMR or their AFFILIATES for the respective period of validity of each
such patent, required (i) for developing, making, having made, using,
distributing, selling or having sold the PRODUCTS in the TERRITORY and (ii) to
make and have made the PRODUCTS outside the TERRITORY solely within North
America solely for use and resale in the TERRITORY.
(c) HMR hereby grant to MEDICIS a perpetual, royalty-free,
exclusive license, with the right to transfer, sublicense or assign pursuant to
Section 14.8 hereof,
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ASSET PURCHASE AGREEMENT
to use and exploit IMPROVEMENTS developed by HMR or their AFFILIATES prior to,
on or after the PURCHASE DATE with the PRODUCTS, other IMPROVEMENTS, MEDICIS
NEWLY DEVELOPED PRODUCTS and HMR NEWLY DEVELOPED PRODUCTS sold and/or licensed
to MEDICIS in accordance with Section 5.1 hereof, but in no event any COMPETING
NAIL TOPICAL PRODUCT, (i) within the TERRITORY and (ii) outside the TERRITORY
solely within North America solely for use and resale in the TERRITORY.
4.2 Grant of Licenses by MEDICIS. Subject to the right of MEDICIS to
manufacture the PRODUCTS outside the TERRITORY solely within North America
solely for use and resale in the TERRITORY, effective as of the PURCHASE DATE:
(a) Subject to the terms of this AGREEMENT, MEDICIS hereby
grants to HMR a perpetual, royalty-free, exclusive license, with the right to
transfer, sublicense or assign pursuant to Section 14.8 hereof, to use and
exploit IMPROVEMENTS developed by MEDICIS or its AFFILIATES prior to, on or
after the PURCHASE DATE with the PRODUCTS, other IMPROVEMENTS, HMR NEWLY
DEVELOPED PRODUCTS and MEDICIS NEWLY DEVELOPED PRODUCTS sold and/or licensed to
HMR in accordance with Section 5.2 hereof (i) outside the TERRITORY and (ii)
within the TERRITORY solely for use and resale outside the TERRITORY.
(b) MEDICIS hereby grants to HMR a perpetual, royalty-free,
non-exclusive license, with the right to transfer, sublicense or assign pursuant
to Section 14.8 hereof, to use and exploit the PATENTS and the PRODUCT KNOW-HOW
solely to make and have made the PRODUCTS, any IMPROVEMENTS and any HMR NEWLY
DEVELOPED PRODUCTS within the TERRITORY solely for use and resale outside the
TERRITORY.
(c) Notwithstanding the rights provided to MEDICIS hereunder,
MEDICIS hereby grants to HMR a perpetual, royalty-free, exclusive license to use
and exploit the Loprox trademark in the TERRITORY, with the right to freely
transfer, sublicense or assign, which right shall not be limited by Section 14.8
hereof, solely in connection with the DEVELOPMENT STAGE PRODUCT, solely in the
event and provided that (i) HMR, their AFFILIATES and their successors, assigns,
licensees and sublicensees elect to market, license or sell the DEVELOPMENT
STAGE PRODUCT in the TERRITORY; and (ii) if HMR, their AFFILIATES and their
successors, assigns, licensees and sublicensees use the TRADEMARK 'Loprox' in
the initial filing of the NDA for the DEVELOPMENT STAGE PRODUCT with the FDA,
HMR, their AFFILIATES and their successors, assigns, licensees and sublicensees
shall amend such NDA filing to change such TRADEMARK to a trademark other than
the TRADEMARK 'Loprox' as soon as feasible; provided, however, if HMR, their
AFFILIATES and their successors, assigns, licensees and sublicensees are
mandated by the FDA to use the TRADEMARK 'Loprox' as a condition to securing
regulatory approval for the DEVELOPMENT STAGE PRODUCT, HMR, their AFFILIATES and
their successors, assigns, licensees and sublicensees shall have the right to
use such TRADEMARK in connection with the DEVELOPMENT STAGE PRODUCT.
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ASSET PURCHASE AGREEMENT
(d) Subject to the terms of this AGREEMENT, unless the
RILOPIROX OPTION (as defined in the LICENSE AND OPTION AGREEMENT) has been
exercised and the RILOPIROX RIGHTS (as defined in the LICENSE AND OPTION
AGREEMENT) have been licensed to MEDICIS, MEDICIS hereby grants to HMR a
perpetual, royalty-free, exclusive license, with the right to transfer,
sublicense or assign, which right shall not be limited by Section 14.8 hereof,
to use and exploit within and outside the TERRITORY any rights related to
rilopirox incidentally transferred to MEDICIS hereunder.
(e) Pursuant to Section 13.7 of Schedule 13 to the LICENSE AND
OPTION AGREEMENT, if required pursuant to such Section, MEDICIS hereby grants to
HMR a perpetual, royalty-free, exclusive license to use and exploit the PATENTS
and PRODUCT KNOW-HOW (to the extent not released or conveyed to HMR otherwise
pursuant to such Section 13.7) in the TERRITORY to develop, make, have made,
use, distribute, sell and have sold the additional Loprox product discussed in
Schedule 13 to the LICENSE AND OPTION AGREEMENT, with the right to transfer,
sublicense or assign, which right shall not be limited by Section 14.8 hereof.
(f) MEDICIS hereby grants to HMR a perpetual, royalty-free,
exclusive license, with the right to transfer, sublicense or assign, which right
shall not be limited by Section 14.8 hereof, to use and exploit within and
outside the TERRITORY any rights (including without limitation rights within the
PATENTS and PRODUCT KNOW-HOW) related to the DEVELOPMENT STAGE PRODUCT, HMR's
CICLOPIROX Powder and active ingredients other than the ACTIVE INGREDIENTS
incidentally transferred to MEDICIS hereunder.
4.3 IMPROVEMENTS. All IMPROVEMENTS developed by a party to any
PRODUCT after the PURCHASE DATE shall be the sole and exclusive property of such
party, subject to the licenses granted in this Article IV.
4.4 Generic Products.
(a) Notwithstanding anything to the contrary contained in
Section 4.1, the sale of the ASSETS and other rights provided by HMR to MEDICIS
pursuant to this AGREEMENT are subject to COPLEY's exclusive right to market and
sell in the future generic versions of the PRODUCTS pursuant to the Product
Agreement, dated as of October 8, 1993, by and between an AFFILIATE of HMRI and
COPLEY (the "COPLEY PRODUCT AGREEMENT"). HMR represent and warrant to MEDICIS,
as of the PURCHASE DATE, that in accordance with the terms of the COPLEY PRODUCT
AGREEMENT and as of the LICENSE EFFECTIVE DATE, an AFFILIATE of HMR had notified
COPLEY that the COPLEY PRODUCT AGREEMENT would be terminated, effective June 1,
1999, and COPLEY had provided to an AFFILIATE of HMR its written acknowledgment
of such termination of the COPLEY PRODUCT AGREEMENT.
(b) In addition to and without limiting the provisions of
Section 6.2, HMR agrees that from and after the PURCHASE DATE, neither HMR nor
any of their AFFILIATES shall (i) except as specifically required by the COPLEY
PRODUCT
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ASSET PURCHASE AGREEMENT
AGREEMENT, enter into any agreement or otherwise grant to COPLEY or any other
person or entity (whether or not an AFFILIATE of HMR), any right to market, sell
and/or manufacture in the TERRITORY a generic version of any PRODUCT, any
SIMILAR PRODUCT or any human dermatology product containing an ACTIVE
INGREDIENT; (ii) except as specifically required by the COPLEY PRODUCT
AGREEMENT, sell to COPLEY any ACTIVE INGREDIENT for inclusion in any human
dermatology product sold, marketed or distributed in the TERRITORY or license or
otherwise convey to any person any rights to use or exploit the PRODUCT
KNOW-HOW; or (iii) utilize, direct or cause COPLEY or its AFFILIATES to conduct
activities in violation of HMR's covenants, duties or obligations hereunder.
Notwithstanding the foregoing, the restrictions on the sale of ACTIVE
INGREDIENTS set forth in this Section 4.4(b) shall not apply to erythromycin.
(c) From and after the PURCHASE DATE, HMR and their AFFILIATES
shall not grant to COPLEY the right to market, sell and/or manufacture in the
TERRITORY a generic version of any PRODUCT, any SIMILAR PRODUCT, or any human
dermatology product containing any ACTIVE INGREDIENT or sell any ACTIVE
INGREDIENT for inclusion in any human dermatological product sold, marketed or
established in the TERRITORY to COPLEY, subject to any rights granted to COPLEY
pursuant to the COPLEY AGREEMENT prior to its termination, provided such grant
of rights was not in violation of HMR's obligations under the LICENSE AND OPTION
AGREEMENT. In addition, HMR and its AFFILIATES shall not enter into any
agreement or other arrangement with COPLEY other than continuing arrangements as
specifically contemplated by the COPLEY PRODUCT AGREEMENT or any agreement or
other arrangement with any other third party, pursuant to which COPLEY or such
third party would have the right to manufacture, market and/or sell in the
TERRITORY any generic or other versions of any PRODUCT or any product having the
same ACTIVE INGREDIENTS as the PRODUCTS.
4.5 Certain Restrictions on Sale of ACTIVE INGREDIENTS. In addition
to and without limiting the provisions of Section 6.2, and subject to the right
of HMR to supply ACTIVE INGREDIENTS to licensees or purchasers of HMR NEWLY
DEVELOPED PRODUCTS pursuant to Section 5.1 hereof, the DEVELOPMENT STAGE PRODUCT
and HMR's CICLOPIROX Powder, HMR agrees that, during the TERM and subject to
Section 4.4(b) and any rights of HMR hereunder with respect to the DEVELOPMENT
STAGE PRODUCT, neither HMR nor any of their AFFILIATES shall sell to any person
or entity (whether or not an AFFILIATE of HMR) any ACTIVE INGREDIENT for
inclusion in any human dermatology product sold, marketed or distributed in the
TERRITORY or license or otherwise convey to any person any rights to use or
exploit the PRODUCT KNOW-HOW in the TERRITORY. Notwithstanding the foregoing,
the restrictions on the sale of ACTIVE INGREDIENTS set forth in this Section 4.5
shall not apply: (i) to erythromycin; or (ii) from and after the PURCHASE DATE
if MEDICIS has purchased prior to the PURCHASE DATE, or from and after such time
as MEDICIS purchases on or after the PURCHASE DATE, more than ten percent (10%)
of its requirements for any ACTIVE INGREDIENT (other than erythromycin) from
parties other than HMR or their AFFILIATES, as to that ACTIVE INGREDIENT;
provided, however, that such restrictions shall continue to apply in the event
MEDICIS has purchased or purchases more than ten (10%) of such requirements from
parties other than HMR
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ASSET PURCHASE AGREEMENT
or their AFFILIATES due to the inability of HMR or their AFFILIATES to
fulfill the requirements of MEDICIS as to that ACTIVE INGREDIENT, provided that
in such event MEDICIS purchases no more than a four (4) month supply (or, if
greater, the supplier's minimum batch quantity) of such ACTIVE INGREDIENT from
an alternate supplier or suppliers and, if HMR or their AFFILIATES' inability to
fulfill MEDICIS' requirements continues or will continue beyond the exhaustion
of such alternate supply, MEDICIS may continue to purchase such ACTIVE
INGREDIENT in such four (4) month or greater supply amounts as permitted by this
Section 2.4. From and after the PURCHASE DATE and for so long as the
restrictions on the sale of ACTIVE INGREDIENTS under this Section 4.5 are
applicable, MEDICIS shall notify HMRI in writing of any purchases of more than
ten percent (10%) of its requirements for any ACTIVE INGREDIENT (other than
erythromycin) from parties other than HMR or their AFFILIATES, which notice
shall indicate if such purchases were due to the inability of HMR or their
AFFILIATES to fulfill the requirements of MEDICIS as to that ACTIVE INGREDIENT
and were within the quantity limitations set forth in the immediately preceding
sentence.
ARTICLE V.
RIGHTS OF FIRST OFFER
5.1 MEDICIS RIGHT OF FIRST OFFER. If at any time on or after the
PURCHASE DATE, HMR or its AFFILIATES shall develop or cause to be developed any
human dermatology product containing an ACTIVE INGREDIENT, including without
limitation any LINE EXTENSION but excluding (i) IMPROVEMENTS and (ii) the
DEVELOPMENT STAGE PRODUCT (each, an "HMR NEWLY DEVELOPED PRODUCT"), MEDICIS
shall have a right of first offer to license on an exclusive basis or purchase
all patents, patent applications and proprietary know-how solely related thereto
(but not to the ACTIVE INGREDIENTS) necessary for the manufacture and sale in
the TERRITORY of the HMR NEWLY DEVELOPED PRODUCT (except for intellectual
property rights constituting shared know-how relating to the HMR NEWLY DEVELOPED
PRODUCT, which shall be licensed to MEDICIS on a non-exclusive basis) subject to
the terms set forth in this Section 5.1 below (the "MEDICIS RIGHT OF FIRST
OFFER"):
(a) Notice of an HMRI NEWLY DEVELOPED PRODUCT. Upon completion
of Phase III clinical trials for an HMR NEWLY DEVELOPED PRODUCT and no later
than upon submission of an NDA for such HMR NEWLY DEVELOPED PRODUCT, HMR shall
give to MEDICIS written notice (the "HMR NOTICE") setting forth: (i) a
description of the HMR NEWLY DEVELOPED PRODUCT, (ii) the terms and conditions,
which shall be commercially reasonable, of the proposed license and/or sale to
MEDICIS and (iii) the payment terms, which shall be commercially reasonable, of
the proposed license and/or sale to MEDICIS.
(b) Exercise of MEDICIS RIGHT OF FIRST OFFER. At any time
within ninety (90) days after receipt of an HMR NOTICE, MEDICIS may, by giving
written notice to HMRI, elect to exercise the MEDICIS RIGHT OF FIRST OFFER on
the terms set forth in the HMR NOTICE or any such other terms as the parties may
agree, which shall be
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documented in a written agreement. During such ninety (90) day period, neither
HMR nor their AFFILIATES, or any person acting on their behalf, will directly or
indirectly solicit or encourage any inquiries or proposals for, or enter into
any discussions with respect to, the license and/or sale in the TERRITORY of the
HMR NEWLY DEVELOPED PRODUCT to any third party.
(c) Effect of Refusal. In the event the parties cannot reach
agreement with respect to MEDICIS' acquisition or license of an HMR NEWLY
DEVELOPED PRODUCT in accordance with this Section 5.1, HMR and/or an AFFILIATE
may license or sell such HMR NEWLY DEVELOPED PRODUCT to a third party which is
not an AFFILIATE of HMR (but shall not themselves directly sell, market, promote
or distribute such HMR NEWLY DEVELOPED PRODUCT), provided that (i) the terms and
conditions of any such license or sale are no less favorable to HMR than those
offered by HMR to MEDICIS pursuant to this Section 5.1, in which case no consent
or approval by, or right of first refusal for, MEDICIS shall be required for HMR
to enter into a written agreement with such third party, or (ii) if the terms
and conditions of any such license or sale are less favorable to HMR than those
offered by HMR to MEDICIS pursuant to this Section 5.1, MEDICIS shall have a
right of first refusal, exercisable within thirty (30) calendar days after HMR
provides notice of such less favorable terms and conditions to MEDICIS, to
license or acquire the HMR NEWLY DEVELOPED PRODUCT on such terms and conditions.
(d) No Rights Conferred upon MEDICIS. This Section 5.1 does
not confer upon MEDICIS or its AFFILIATES the right to use or exploit any
intellectual property right of HMR or their AFFILIATES with respect to HMR NEWLY
DEVELOPED PRODUCTS, including those granted hereunder. Any agreement that may be
executed between the parties with respect to any HMR NEWLY DEVELOPED PRODUCT
shall include provisions mutually acceptable to the parties regarding the use,
or prohibition against the use of, such intellectual property rights.
(e) DEVELOPMENT STAGE PRODUCT. Notwithstanding any other
provision of this AGREEMENT, the DEVELOPMENT STAGE PRODUCT shall not be an HMR
NEWLY DEVELOPED PRODUCT for purposes of this AGREEMENT, and is not subject to
the MEDICIS RIGHT OF FIRST OFFER. The parties have agreed to certain matters,
rights and obligations pertaining to the DEVELOPMENT STAGE PRODUCT as set forth
on Schedule 5.1 hereto, the terms of which are incorporated herein by reference.
(f) Certain Products. The parties acknowledge and agree that
(i) the additional Loprox PRODUCT discussed in Schedule 13 to the LICENSE AND
OPTION AGREEMENT, Loprox Gel and Topicort Ointment 0.05% (but not line
extensions thereof) are not to be considered HMRI NEWLY DEVELOPED PRODUCTS; and
(ii) HMR's CICLOPIROX Powder and Loprox Vaginal Cream shall be considered HMR
NEWLY DEVELOPED PRODUCTS; provided, however, that the exercise of the MEDICIS
RIGHT OF FIRST OFFER with respect to HMR's CICLOPIROX Powder and Loprox Vaginal
Cream shall not be subject to the notice provisions of Section 5.1(a) or (b).
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ASSET PURCHASE AGREEMENT
5.2 HMR RIGHT OF FIRST OFFER. If at any time on or after the
PURCHASE DATE, MEDICIS or its AFFILIATES shall develop or cause to be developed
any human dermatology product containing an ACTIVE INGREDIENT of any PRODUCT,
including without limitation a LINE EXTENSION but excluding IMPROVEMENTS (each,
a "MEDICIS NEWLY DEVELOPED PRODUCT"), HMR shall have a right of first offer on
the terms and conditions set forth in this Section 5.2 to license on an
exclusive basis or purchase all patents, patent applications and proprietary
know-how owned by MEDICIS or its AFFILIATES and necessary for the manufacture
and sale outside the TERRITORY of such MEDICIS NEWLY DEVELOPED PRODUCT (except
for intellectual property constituting shared know-how relating to the MEDICIS
NEWLY DEVELOPED PRODUCT, which shall be licensed to HMRI on a non-exclusive
basis) (the "HMR RIGHT OF FIRST OFFER"):
(a) Notice of a MEDICIS NEWLY DEVELOPED PRODUCT. Upon
completion of Phase III clinical trials for a MEDICIS NEWLY DEVELOPED PRODUCT
and no later than upon submission of an NDA for such MEDICIS NEWLY DEVELOPED
PRODUCT, MEDICIS shall give to HMRI on behalf of HMR written notice (the
"MEDICIS NOTICE") setting forth: (i) a description of the MEDICIS NEWLY
DEVELOPED PRODUCT, (ii) the terms and conditions, which shall be commercially
reasonable, of the proposed sale to HMR and (iii) the payment terms, which shall
be commercially reasonable, of the proposed sale to HMR.
(b) Exercise of HMR RIGHT OF FIRST OFFER. At any time within
ninety (90) days after receipt of the MEDICIS NOTICE, HMR may, by giving written
notice to MEDICIS, elect to exercise the HMR RIGHT OF FIRST OFFER on the terms
set forth in the MEDICIS NOTICE or such other terms as the parties may agree,
which shall be documented in a written agreement. During such ninety (90) day
period, neither MEDICIS nor its AFFILIATES, or any person acting on their
behalf, will directly or indirectly solicit or encourage any inquiries or
proposals for, or enter into any discussions with respect to, the license and/or
sale outside the TERRITORY of the MEDICIS NEWLY DEVELOPED PRODUCT to any third
party.
(c) Effect of Refusal. In the event the parties cannot reach
agreement with respect to HMR's acquisition or license of a MEDICIS NEWLY
DEVELOPED PRODUCT in accordance with this Section 5.2, MEDICIS and/or an
AFFILIATE may license or sell such MEDICIS NEWLY DEVELOPED PRODUCT to a third
party which is not an AFFILIATE of MEDICIS (but shall not themselves directly
sell, market, promote or distribute such MEDICIS NEWLY DEVELOPED PRODUCT),
provided that (i) the terms and conditions of any such license or sale are no
less favorable to MEDICIS than those offered by MEDICIS to HMR pursuant to this
Section 2.5, in which case no consent or approval by, or right of first refusal
for, HMR shall be required for MEDICIS to enter into a written agreement with
such third party, (ii) if the terms and conditions of any such license or sale
are less favorable to MEDICIS than those offered by MEDICIS to HMR pursuant to
this Section 5.2 HMR shall have a right of first refusal, exercisable within
thirty (30) calendar days after MEDICIS provides notice of such less favorable
terms and conditions to HMR, to license or acquire the MEDICIS NEWLY DEVELOPED
PRODUCT on such terms and conditions.
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ASSET PURCHASE AGREEMENT
(d) No Right Conferred upon HMR. This Section 5.2 does not
confer upon HMR or their AFFILIATES the right to use or exploit any intellectual
property right of MEDICIS or its AFFILIATES with respect to MEDICIS NEWLY
DEVELOPED PRODUCTS, including any rights granted hereunder. Any agreement that
may be executed between the parties with respect to any MEDICIS NEWLY DEVELOPED
PRODUCT shall include provisions mutually acceptable to the parties regarding
the use, or prohibition against the use of, such intellectual property rights.
5.3 Development of Newly Developed Products. HMRI and MEDICIS shall
on a periodic basis keep the other party informed of development work on any HMR
NEWLY DEVELOPED PRODUCT or MEDICIS NEWLY DEVELOPED PRODUCT, respectively, being
developed by such party or any of its AFFILIATES and MEDICIS shall assume
primary responsibility for organizing and scheduling periodic communications for
that purpose.
5.4 Rilopirox. In the event MEDICIS exercises the RILOPIROX OPTION
(as defined in the LICENSE AND OPTION AGREEMENT) pursuant to Section 5.4(a) of
the LICENSE AND OPTION AGREEMENT but the parties do not reach agreement with
respect to MEDICIS' acquisition of the RILOPIROX RIGHTS (as defined in the
LICENSE AND OPTION AGREEMENT) in accordance with such Section 5.4(a), HMR and/or
an AFFILIATE may license the RILOPIROX RIGHTS to a third party, provided that
(i) the terms and conditions of any such license are no less favorable to HMR
than those offered to HMR by MEDICIS pursuant to Section 5.4(a) of the LICENSE
AND OPTION AGREEMENT, and that no consent or approval by, or right of first
refusal for, MEDICIS shall be required, (ii) if the terms and conditions of any
such license are less favorable to HMR than those offered to HMR by MEDICIS
pursuant to Section 5.4(a) of the LICENSE AND OPTION AGREEMENT, MEDICIS shall
have a right of first refusal, exercisable within thirty (30) calendar days
after HMR provides notice to MEDICIS thereof, to license the RILOPIROX RIGHTS on
such terms and conditions, and if such right of refusal is not so exercised by
MEDICIS by notice to HMR, no consent or approval by MEDICIS shall be required
and (iii) from and after the PURCHASE DATE, neither HMR nor their AFFILIATES
shall use or exploit the RILOPIROX RIGHTS in the TERRITORY for human dermatology
products for human medical uses without the prior written consent of MEDICIS.
For purposes of this Section 5.4, "human dermatology products for human medical
uses" shall not include products which are or have been developed or used for
mucosal infections, such as oral lozenges, vaginal creams and vaginal ovulas.
MEDICIS acknowledges that Clariant GmbH (i) has been granted the right to
develop cosmetology products containing rilopirox, such as products for
dandruff, deodorants, human medical applications like cleansing preparations for
the intimate region (mucous membrane application) and liquid cleansing
preparations for the whole body; (ii) shall retain such rights even if Clariant
GmbH has become or in the future becomes an AFFILIATE of HMR; provided, however,
in such case HMR shall not assist Clariant GmbH in the development of such
products other than providing Clariant GmbH, its affiliates, successors, assigns
or licensees with a license of necessary intellectual property rights (other
than INTELLECTUAL PROPERTY which is exclusively licensed or sold to MEDICIS
hereunder) and rights of reference to Drug Master Files and New Drug
Applications held by HMR and/or their AFFILIATES; and (iii) Clariant GmbH has
certain rights in U.S.
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ASSET PURCHASE AGREEMENT
Patent No. 5,494,658 (related to antidandruff agents and cosmetic preparations)
which are not included within the PATENTS.
5.5 Theramycin Z Product. Notwithstanding any provision of Section
5.2 or any other provision of this AGREEMENT, neither HMR nor their AFFILIATES
shall have any rights in or to erythromycin as contained in MEDICIS' Theramycin
Z product line or any similar products, improvements thereto or line extensions
thereof, whether existing prior to, on or after the PURCHASE DATE.
ARTICLE VI.
GREY-MARKET RESTRICTIONS
The parties recognize that the value on the intellectual property rights
being conveyed hereunder to each party will depend on the degree to which
products of one party incorporating the intellectual property rights are sold in
areas in which the other party owns the intellectual property rights. To permit
the parties to reach mutual agreement on the value of the rights being conveyed,
to minimize transaction costs, and to avoid future litigation for infringement,
the parties have agreed as follows:
6.1 No Sales By MEDICIS Outside the TERRITORY. Except in the case of
products as to which a written agreement is executed pursuant to Section 5.2,
MEDICIS, its AFFILIATES and any successors or assigns of MEDICIS or its
AFFILIATES shall not at any time on or after the PURCHASE DATE, (i) sell,
market, promote or distribute, directly or indirectly, any PRODUCTS or SIMILAR
PRODUCTS outside the TERRITORY, or (ii) sell or distribute any PRODUCTS or
SIMILAR PRODUCTS to any person in the TERRITORY if MEDICIS has actual knowledge
that such person intends to sell such PRODUCTS or SIMILAR PRODUCTS outside the
TERRITORY. In providing or granting any rights to the PRODUCTS or SIMILAR
PRODUCTS in the TERRITORY from and after the PURCHASE DATE, MEDICIS shall secure
from each grantee, licensee, beneficiary or acquiree of such rights its
agreement to restrictions relating to outside the TERRITORY contained in this
AGREEMENT, including an agreement to refrain from knowingly engaging, directly
or indirectly, in parallel importation or dealing in "grey market" products in
connection with its sale and distribution of the PRODUCTS or SIMILAR PRODUCTS.
6.2 No Sales by HMR Inside the TERRITORY. In addition to and without
limiting the provisions of Section 4.4, and except as specifically provided in
Sections 4.1, clauses (i) and (ii), 4.4 and 5.1(e), or in the case of products
as to which a written agreement has been executed pursuant to Section 5.1, HMR,
their AFFILIATES and any successors or assigns of HMR or their AFFILIATES shall
not at any time on or after the PURCHASE DATE, (i) sell, market, promote or
distribute, directly or indirectly, any PRODUCTS or SIMILAR PRODUCTS in the
TERRITORY; or (ii) sell or distribute any PRODUCTS, SIMILAR PRODUCTS or any
ACTIVE INGREDIENT to any person outside the TERRITORY if HMR has actual
knowledge that such person intends to sell such PRODUCTS or SIMILAR PRODUCTS or
human dermatology products containing such ACTIVE INGREDIENT in the TERRITORY.
In providing or granting any rights to the PRODUCTS or SIMILAR PRODUCTS, outside
the
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ASSET PURCHASE AGREEMENT
TERRITORY, HMR shall secure from each such grantee, licensee, beneficiary or
acquiree of such rights its agreement to restrictions relating to inside the
TERRITORY contained in this AGREEMENT, including an agreement to refrain from
knowingly engaging, directly or indirectly, in parallel importation or dealing
in "grey market" products in connection with its sale and distribution of the
PRODUCTS or SIMILAR PRODUCTS. Notwithstanding the foregoing, MEDICIS
acknowledges that (i) HMR and their AFFILIATES, and their grantees, licensees,
beneficiaries and acquirees of any rights related to the DEVELOPMENT STAGE
PRODUCT, shall be free to commercialize the DEVELOPMENT STAGE PRODUCT and any
other product for topical application to the nail in the TERRITORY without
restriction, and that the restrictions in this Section 6.2 and in Section 4.5
hereof shall not apply with respect to the DEVELOPMENT STAGE PRODUCT, and (ii)
subject to Section 5.4 hereof, this Section 6.2 shall not apply to HMR's
exploitation of the RILOPIROX RIGHTS.
ARTICLE VII.
REGULATORY MATTERS; RECALLS
7.1 Communication with Agencies. From and after the PURCHASE DATE,
MEDICIS shall have responsibility for all communication with the FDA relating to
the PRODUCTS. The parties shall also cooperate at their own expense to ensure
that (i) MEDICIS obtains, in a timely manner, all information concerning the
PRODUCTS outside the TERRITORY necessary to meet its regulatory obligations in
the TERRITORY, and (ii) that HMRI receives, in a timely manner, all information
concerning the PRODUCTS inside the TERRITORY necessary to meet the regulatory
obligations of HMR and their AFFILIATES outside the TERRITORY.
7.2 Product Recalls. In the event that on or after the PURCHASE DATE
(i) any governmental agency or authority issues a request or directive or order
that any PRODUCT in the TERRITORY be recalled or retrieved, (ii) a court of
competent jurisdiction orders that any PRODUCT in the TERRITORY be recalled or
retrieved, or (iii) MEDICIS reasonably determines (or MEDICIS reasonably
determines after consulting in good faith with HMRI in the case of PRODUCTS
which were manufactured by HMR or one of their AFFILIATES and with respect to
which MEDICIS believes HMR may be responsible under this Section 7.2) that any
PRODUCT should be recalled or retrieved in the TERRITORY or a "dear doctor"
letter is required relating to restrictions on the use of any PRODUCT in the
TERRITORY, MEDICIS shall conduct such activity (unless by mutual agreement
MEDICIS has not yet assumed regulatory responsibility pursuant to Section 7.2 of
the LICENSE AND OPTION AGREEMENT for the PRODUCT being recalled or retrieved,
whereupon HMR shall conduct such activity) and, in the event that clauses (i) or
(ii) in the following sentence apply, HMR shall reasonably assist MEDICIS in
taking all appropriate corrective actions and shall cooperate in the
investigation surrounding the recall. To the extent that any such actions on or
after the PURCHASE DATE primarily relate to or arise out of (i) the PRODUCTS
prior to the LICENSE EFFECTIVE DATE; or (ii) the manufacture or supply of
PRODUCTS by HMR or their AFFILIATES or by PACO pursuant to the PACO LOPROX
AGREEMENT after the LICENSE EFFECTIVE DATE in breach of Article VI of the SUPPLY
AGREEMENT, HMR
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ASSET PURCHASE AGREEMENT
shall be solely responsible for all costs and expenses of or associated with any
such action, including reimbursement of MEDICIS for any out-of-pocket costs
incurred by MEDICIS as a result of such action. To the extent that any such
actions on or after the LICENSE EFFECTIVE DATE do not primarily relate to or
arise out of any of the foregoing, MEDICIS shall be solely responsible for all
costs and expenses of or associated with any such action, including
reimbursement of HMR therefor.
ARTICLE VIII.
PROMOTION AND MARKETING
8.1 Party Names; Change of Promotional Material. From and after the
PURCHASE DATE, all advertising and promotional materials for the PRODUCTS sold
in the TERRITORY shall identify MEDICIS as the marketer of the PRODUCTS sold in
the TERRITORY, to the extent the marketer is identified in such materials, in
such form as MEDICIS shall determine. From and after the PURCHASE DATE, subject
to the provisions of the SUPPLY AGREEMENT and the LOPROX LOTION SUPPLY
AGREEMENT, and if requested by HMR or as required by APPLICABLE LAWS, packaging
of the HMR SUPPLIED PRODUCTS sold in the TERRITORY shall identify HMR or one of
their AFFILIATES or PACO as the manufacturer of the HMR SUPPLIED PRODUCTS if HMR
or one or their AFFILIATES or PACO, as the case may be, is the manufacturer of
such HMR SUPPLIED PRODUCTS.
8.2 Medical and Other Inquiries. From and after the PURCHASE DATE,
MEDICIS shall have all responsibility for all correspondence and communication
with physicians and other health care professionals in the TERRITORY relating to
the PRODUCTS, except for correspondence and communication relating to the
manufacturing of the HMR SUPPLIED PRODUCTS or the ACTIVE INGREDIENTS thereof by
HMR or an AFFILIATE pursuant to the SUPPLY AGREEMENT or the LOPROX LOTION SUPPLY
AGREEMENT, in which case HMR shall take such actions as MEDICIS may reasonably
request.
ARTICLE IX.
INTELLECTUAL PROPERTY
9.1 Notices. From and after the PURCHASE DATE, MEDICIS and HMR shall
each promptly, but in any event no later than fifteen (15) calendar days after
such party receives notice of or becomes aware of any of the following, notify
the other in writing of:
(a) Any suit, claim or proceeding by a third party against
HMRI or MEDICIS, or any AFFILIATE or sublicensee of HMR or MEDICIS, alleging
infringement of such third party's intellectual property rights as a result of
the manufacture, use, sale, promotion or marketing of the PRODUCTS anywhere in
the TERRITORY;
(b) Any patent nullity actions, declaratory judgment actions
or alleged patent invalidity or non-infringement of patent or patents pursuant
to a Paragraph IV patent
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ASSET PURCHASE AGREEMENT
certification by a party filing an Abbreviated New Drug Application ("ANDA")
with respect to the PATENTS in the TERRITORY;
(c) Any actual or threatened unlawful disclosure or
infringement by any third party of all or any part of the PATENTS, TRADEMARKS or
the KNOW-HOW in the TERRITORY; or
(d) Any information that may reasonably be considered material
to the validity or enforceability of the PATENTS.
9.2 Actions. From and after the PURCHASE DATE, but subject to
Article XIII of this AGREEMENT, MEDICIS shall have the sole right and
obligation, at its expense, to enforce and defend the rights to the PATENTS, the
PRODUCT KNOW-HOW and the TRADEMARKS in the TERRITORY, including without
limitation the sole right and obligation to (i) defend any action or claim by
any third party alleging that MEDICIS' manufacture, marketing, distribution,
sale or promotion of the PRODUCTS in the TERRITORY infringes such third party's
intellectual property rights and (ii) prosecute any actual or threatened
unauthorized disclosure or any infringement in the TERRITORY of the PATENTS, the
PRODUCT KNOW-HOW or the TRADEMARKS. Any amounts recovered in connection with any
such any such enforcement or defense shall be awarded solely to MEDICIS. HMR and
their AFFILIATES shall reasonably cooperate with and assist MEDICIS in
prosecuting patent applications based on the PATENTS and in prosecuting or
defending actions in which the validity, infringement or enforceability of the
PATENTS may be in issue. Such cooperation may include responding to discovery
requests, providing such documentary evidence and truthful testimony (in written
or oral form), making available current HMR employees with relevant knowledge,
and assisting MEDICIS in locating and requesting information from former HMR
employees with relevant knowledge, as MEDICIS may reasonably request, but shall
not include becoming a plaintiff or co-plaintiff or otherwise a party (unless
joined by a party which is not MEDICIS or its AFFILIATES, whereupon MEDICIS
shall not have the sole right to control the conduct of such action(s)). Such
assistance shall not include making available or providing testimony from former
HMR employees. MEDICIS shall reimburse HMR and their AFFILIATES their reasonable
expenses (including without limitation attorneys' fees) in providing the
cooperation and assistance called for by this Section 9.2 and will hold them
harmless for all liability and all costs or expenses associated with or arising
out of their truthful and good faith actions in providing cooperation and
assistance.
ARTICLE X.
REPRESENTATIONS AND WARRANTIES; COVENANTS
10.1 Representations and Warranties of the Parties. HMR and MEDICIS
each represent and warrant to the other, as of the PURCHASE DATE, as follows:
(a) Each party has the power, authority and right to enter
into this AGREEMENT and to perform its obligations hereunder, and its execution,
delivery and
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ASSET PURCHASE AGREEMENT
performance of this AGREEMENT does not conflict with any material term of any
other agreement to which it is a party or by which it is bound.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency is required to
be obtained or made by or with respect to such party in connection with its
execution, delivery and performance of this AGREEMENT.
(c) Each party is a corporation or limited liability company,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
consummate the transactions contemplated hereby. The execution and delivery of
this AGREEMENT by each party and the consummation and performance of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate and other proceedings, and this AGREEMENT has been duly
authorized, executed and delivered by each party and, assuming the
enforceability against the other party hereto, constitutes the legal, valid and
binding obligation of each party, enforceable in accordance with its terms
except (i) if such enforcement would be subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally; and (ii) as specific performance and other equitable remedies are
subject to the general discretion of the court.
10.2 Representations and Warranties of HMR. Subject to the matters
specifically disclosed to MEDICIS in the applicable subsection of Schedule 10.2
hereto, HMRI, HMR SA and HMR GmbH hereby jointly and severally represent and
warrant to MEDICIS, as of the PURCHASE DATE, that:
(a) HMR or their AFFILIATES own all right, title and interest
in and to the PATENTS, the NDAs, the PRODUCT KNOW-HOW and the TRADEMARKS in the
TERRITORY, free and clear of any and all liens, encumbrances, claims, mortgages,
security interests, charges or restrictions.
(b) HMR or their AFFILIATES have (i) the sole legal right to
assign and convey good and marketable title to the PATENTS and the TRADEMARKS to
MEDICIS in the TERRITORY pursuant to this AGREEMENT, (ii) the legal right in the
TERRITORY to assign the PRODUCT KNOW-HOW to MEDICIS in the TERRITORY, free and
clear of all liens, encumbrances, claims, mortgages, security interests, charges
or restrictions, (iii) the legal right to license the SHARED KNOW-HOW to MEDICIS
in the TERRITORY, free and clear of any and all liens, encumbrances, claims,
mortgages, security interests, charges or restrictions and (iv) the legal right
to grant to MEDICIS the other rights described in Section 4.1 hereof. HMR's
execution and delivery of this AGREEMENT and the other related documents
delivered by HMR in connection with transactions contemplated herein and the
performance of this AGREEMENT by HMR (and the transactions contemplated herein):
(i) do not and will not conflict with, violate or constitute or result in a
default or an event creating rights of acceleration, termination or
cancellation, or a loss of right, under any law, judgment, order or decree,
under the articles of incorporation or bylaws of HMR or under any mortgage,
contract or agreement to
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ASSET PURCHASE AGREEMENT
which HMR is a party or by which HMR is bound; and (ii) will not result in the
creation or imposition of any lien, charge, mortgage, claim, pledge, security
interest, restriction or encumbrance of any kind on, or liability with respect
to, the INTELLECTUAL PROPERTY in the TERRITORY.
(c) All material registrations and filings, including the
payment of maintenance and renewal fees, have been timely made in the TERRITORY
for the PATENTS and the TRADEMARKS, as are necessary to preserve the rights of
HMR or to prosecute patent applications in the ordinary course of HMR's
management of their intellectual property rights. MEDICIS acknowledges that no
patent applications had been filed by HMR, and no patents have issued, for the
PATENTS in the TERRITORY as of the LICENSE EFFECTIVE DATE.
(d) HMRI or their AFFILIATES own all right, title and interest
in and to the NDA's, free and clear of any and all liens, encumbrances, claims,
mortgages, security interests, charges or restrictions thereon and has the legal
right to transfer to MEDICIS all right, title and interest in and to the NDA's
for the PRODUCTS in the TERRITORY. Neither HMRI nor their AFFILIATES have with
respect to the PRODUCTS made any untrue statement of a material fact or a
fraudulent statement to the FDA, failed to disclose a material fact required to
be disclosed to the FDA or committed an act, made a statement or failed to make
a statement that could reasonably be expected to provide a basis for the FDA to
invoke its policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery and Illegal Gratuities" as set forth in 56 Fed. Reg. 46191 (September
10, 1991). Except as previously disclosed in writing to MEDICIS, HMR has not
received any notice that the FDA has commenced or threatened to initiate any
action to withdraw its approval or request the recall of any PRODUCT, or
commenced or threatened to initiate any action to enjoin production at any
facility for the manufacture of the PRODUCTS.
(e) No default by HMR or their AFFILIATES under the PACO
LOPROX AGREEMENT has been declared and is continuing and, to the knowledge of
HMR, no condition exists which, with notice or lapse of time or both, would
constitute a default by HMRI or their AFFILIATES under such agreement. Such
agreement is valid and subsisting and is in full force and effect, and to the
knowledge of HMR, no claim exists or has been asserted with respect to such
agreement that would adversely affect the rights granted to MEDICIS hereunder.
Except as previously disclosed in writing to MEDICIS, (i) HMR has not received
notice that PACO intends to cancel or terminate such agreement or to exercise or
not exercise any options or rights under such agreement based upon any breach of
such agreement by HMR; or (ii) to the knowledge of HMR, PACO is not in breach of
the PACO LOPROX AGREEMENT and no condition exists which, with notice or lapse of
time or both, would constitute a default by PACO under such agreement.
(f) Except (i) as specifically permitted by the express terms
of the LICENSE AND OPTION AGREEMENT and this PURCHASE AGREEMENT; and (ii) for
obligations specifically assumed by MEDICIS under the TRANSACTION DOCUMENTS,
neither HMR nor any of their AFFILIATES has taken any action, failed to take any
action required of them or otherwise caused the covenants contained in Section
10.5(c) of the LICENSE
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ASSET PURCHASE AGREEMENT
AND OPTION AGREEMENT to be breached or otherwise to be untrue as of and on the
PURCHASE DATE.
(g) MEDICIS acknowledges that (i) Topicort Ointment 0.05% was
not sold in the TERRITORY as of the LICENSE EFFECTIVE DATE; (ii) none of the
representations, warranties and covenants made in this Section 10.2 with respect
to the PRODUCTS shall apply to Topicort Ointment 0.05%; and (iii) the sole
representations, warranties and covenants made by HMR with respect to Topicort
Ointment 0.05% are that HMR has the requisite power, authority and right to
convey the rights conveyed in this AGREEMENT with respect to the Topicort
Ointment 0.05%, free and clear of any and all liens, encumbrances or security
interests.
10.3 Mutual Limitations on Warranties and Damages.
(a) OTHER THAN THE REPRESENTATIONS AND WARRANTIES MADE BY THE
PARTIES PURSUANT TO SECTIONS 10.1 AND 10.2 OR ELSEWHERE HEREIN, THE PARTIES
DISCLAIM ANY AND ALL OTHER WARRANTIES WHETHER EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR ANY WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
(b) IN ADDITION TO THEIR RESPECTIVE REMEDIES UNDER ARTICLE
XIII AND ANY REMEDY PROVIDED HEREIN, AT LAW OR IN EQUITY FOR BREACH OF THIS
AGREEMENT AS LIMITED BY THIS SECTION 10.3, MEDICIS AND HMR SHALL EACH BE
ENTITLED TO ANY AND ALL RIGHTS AND REMEDIES PROVIDED HEREUNDER OR AVAILABLE AT
LAW OR IN EQUITY OR UNDER THE TRANSACTION DOCUMENTS WITH RESPECT TO RIGHTS AND
OBLIGATIONS ARISING HEREUNDER; PROVIDED, HOWEVER, THAT UNDER NO CIRCUMSTANCES
SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING LOSS OF PROFITS. FURTHERMORE,
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, IN NO EVENT SHALL THE AGGREGATE
LIABILITY OF HMR OR MEDICIS PURSUANT TO ARTICLE XIII OR OTHERWISE HEREUNDER,
AND/OR UNDER THE LICENSE AND OPTION AGREEMENT, THE TRANSITION SERVICES
AGREEMENT, THE TRADEMARK LICENSE AGREEMENT OR THE TECHNICAL AGREEMENT EXCEED
U.S. $82.5 MILLION LESS OR PLUS ANY ADJUSTMENTS PURSUANT TO SCHEDULES 4.3A, 4.3B
AND 13 OF THE LICENSE AND OPTION AGREEMENT, PROVIDED THAT SUCH LIMITATION SHALL
NOT APPLY WITH RESPECT TO LIABILITY TO ANY THIRD PARTY UNDER ARTICLE XIII OR
OTHERWISE.
10.4 Survival of Representations and Warranties. The representations
and warranties made by HMR and by MEDICIS in this Article X are made as of the
PURCHASE DATE, and they shall only be valid and survive for a period of two (2)
years from and after the
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<PAGE> 34
ASSET PURCHASE AGREEMENT
PURCHASE DATE and shall thereafter be of no force or effect except to the extent
required to enforce the parties' accrued rights and obligations hereunder
following the end of such two (2) year period for any claims which have been
properly notified by one party to any other party prior to the expiration of
such two (2) year period.
10.5 Covenants of the Parties. MEDICIS on the one hand and HMR on
the other each covenants to the other that it shall comply in all material
respects with all laws, including tax laws, applicable to it and its activities
under this AGREEMENT. The parties further agree that they shall, without payment
or further consideration, execute and deliver any further or additional
instruments or documents and perform any acts which may be reasonably necessary
in order to effectuate and carry out the purposes of this AGREEMENT.
ARTICLE XI.
CONFIDENTIAL INFORMATION
11.1 Ownership. CONFIDENTIAL INFORMATION furnished hereunder by any
party to any other party shall remain the sole property of the disclosing party;
provided, however, that CONFIDENTIAL INFORMATION comprising or included within
the PATENTS or the PRODUCT KNOW-HOW shall be included in the ASSETS. Data and
inventions concerning the PRODUCTS developed or made from and after the LICENSE
EFFECTIVE DATE shall be owned by the developing or inventing party.
11.2 Confidentiality. Each party agrees that at all times after the
PURCHASE DATE it shall keep, and cause its AFFILIATES and/or permitted
sublicensees to keep, confidential all CONFIDENTIAL INFORMATION, and none of the
parties nor any of their AFFILIATES and/or permitted sublicensees shall use or
disclose the CONFIDENTIAL INFORMATION except as expressly permitted in this
AGREEMENT. Each party acknowledges that the CONFIDENTIAL INFORMATION is highly
valuable, proprietary and confidential and that any disclosure to any officer,
employee, or agent of such party or any of its AFFILIATES shall be made only to
the extent necessary to carry out its responsibilities under this AGREEMENT and
only if such officer, employee or agent shall be bound by an agreement to
maintain such information in confidence.
11.3 Public Announcements and Statements. Neither HMR nor MEDICIS,
nor any AFFILIATE thereof, shall issue or cause publication of any press release
or other public announcement or public communication with respect to this
AGREEMENT or the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed. No party shall use the name of any other party in any public statement
or press release without the prior written approval of the other party, which
approval may not be unreasonably withheld or delayed; provided, however, that
the disclosing party shall give the other parties a minimum of five (5) business
days to review any such press release or other public statement. Notwithstanding
the foregoing, each party may make any disclosure which such party, in the
opinion of its counsel, is obligated to make pursuant to applicable law, in
which case such party shall still endeavor to give the other party an
opportunity to review such disclosure but shall not be obligated to do so if
such disclosure must,
27
<PAGE> 35
ASSET PURCHASE AGREEMENT
in the opinion of its counsel, be made without time for review. The failure of a
party to draft such disclosure in a timely fashion shall not be deemed a reason
to avoid submitting such disclosure to the other party hereto.
ARTICLE XII.
MANUFACTURING
12.1 Manufacturing by MEDICIS. Subject to the terms of the SUPPLY
AGREEMENT, MEDICIS shall have the right to manufacture the PRODUCTS in the
TERRITORY (and as permitted herein in other countries in North America, to the
extent legally permissible) from and after the PURCHASE DATE; provided, however,
that MEDICIS' rights to manufacture (i) the LOPROX LOTION and A/T/S Solution
shall be subject to the PACO AGREEMENTS, and (ii) A/T/S Gel shall be subject to
the HERBERT AGREEMENT.
ARTICLE XIII.
INDEMNIFICATION AND LIMITATION OF LIABILITY
13.1 Indemnification by MEDICIS. In addition to any other rights HMR
may have at law or in equity, and subject to Section 10.3, MEDICIS shall
indemnify, defend and hold harmless HMR and their AFFILIATES, employees, agents,
officers and directors, and their successors and assigns (each, an "HMR
INDEMNIFIED PARTY"), from and against any and all LIABILITIES which the HMR
INDEMNIFIED PARTY may incur, suffer or be required to pay resulting from or
arising out of: (i) the marketing, distribution, sale or promotion of the
PRODUCTS by MEDICIS after the LICENSE EFFECTIVE DATE; (ii) the manufacture of
the PRODUCTS by MEDICIS or its AFFILIATES or by a third party (other than an
AFFILIATE of HMR) after the LICENSE EFFECTIVE DATE, unless HMR had knowledge as
of the LICENSE EFFECTIVE DATE that, based on facts in existence and
circumstances persisting on the LICENSE EFFECTIVE DATE, such third party's
manufacture of the PRODUCTS after the LICENSE EFFECTIVE DATE would be likely to
result in or create such LIABILITIES; and (iii) any breach of any
representation, warranty or covenant of MEDICIS or its AFFILIATES in the
TRANSACTION DOCUMENTS.
13.2 Indemnification by HMR. In addition to any other rights MEDICIS
may have at law or in equity, and subject to Section 10.3, HMRI, HMR SA and HMR
GmbH shall jointly and severally indemnify, defend and hold harmless MEDICIS and
its AFFILIATES, employees, agents, officers and directors, and its successors
and assigns (each, a "MEDICIS INDEMNIFIED PARTY"), from and against any and all
LIABILITIES which the MEDICIS INDEMNIFIED PARTY may incur, suffer or be required
to pay resulting from or arising out of: (i) the manufacture or supply of the
PRODUCTS by HMR or their AFFILIATES prior to the LICENSE EFFECTIVE DATE or after
the LICENSE EFFECTIVE DATE in breach of HMR GmbH's representations, warranties,
covenants and obligations under the SUPPLY AGREEMENT or HMRI's representations,
warranties, covenants and obligations under the LOPROX LOTION SUPPLY AGREEMENT,
other than for any EXCLUDED HMR PRODUCT LIABILITY; (ii) any liability arising
prior to the LICENSE EFFECTIVE DATE in
28
<PAGE> 36
ASSET PURCHASE AGREEMENT
any way relating to any PRODUCT, regardless of the date of first assertion of
any claim or action relating thereto; (iii) any breach of any representation,
warranty or covenant by HMR or any AFFILIATE in this AGREEMENT; or (iv) any
LIABILITIES arising from or related to any litigation or claim asserted by
COPLEY, relating to the COPLEY PRODUCT AGREEMENT or the TRANSACTION DOCUMENTS.
13.3 Process of Indemnification. Promptly after an indemnified party
becomes aware of any potential LIABILITY hereunder, such party shall deliver
written notice to the indemnifying party stating the nature of the potential
LIABILITY; provided, however, that the failure to give such notification shall
not affect the indemnification provided hereunder except to the extent the
indemnifying party is actually prejudiced as a result of such failure. The
indemnified party shall give the indemnifying party such information with
respect to the potential LIABILITY as the indemnifying party may from time to
time reasonably request. The indemnifying party shall have the right to conduct
the defense of any suit or claim related to the LIABILITY if it has assumed
responsibility for the suit, claim or other proceeding in writing; provided,
however, that if in the reasonable judgment of the indemnified party such suit,
claim or other proceeding involves an issue or matter which could have a
material adverse effect on the business, operations or assets of the indemnified
party, the indemnified party may elect, at its own expense, to conduct a
separate defense thereof, but in no event shall any such election be construed
as a waiver of any indemnification rights such indemnified party may have under
this Article XIII, at law or in equity, or otherwise. 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; provided, however,
that the indemnifying party shall pay the reasonable fees and costs of any
separate counsel required for the indemnified party to the extent such
representation is due to a conflict of interest between the parties.
13.4 Settlements. No party may settle any claim, action or
proceeding related to a LIABILITY to a third party without the consent of the
other parties, which consent shall not be unreasonably withheld or delayed, 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, and any payment made by a party in such a
settlement without obtaining such consent shall be at its own cost and expense.
Notwithstanding the foregoing, the indemnifying party will be liable under this
Article XIII for any settlement effected without its consent if the indemnifying
party has refused to acknowledge liability for indemnification hereunder and/or
declines to defend the indemnified party in any such claim, action or proceeding
and it is determined by arbitration pursuant to Section 14.3 hereof that the
indemnifying party was liable to the indemnified party for indemnification
related to such settlement.
13.5 Right of Set-Off. In addition to any other remedies the parties
may have for indemnification under this AGREEMENT or at law or in equity, any
party may set off against any amount otherwise due and yet unpaid to the other
party hereunder any amount owed by such first party to another party under any
provision of this AGREEMENT or the LICENSE AND OPTION AGREEMENT or any
instrument or agreement delivered pursuant hereto, or otherwise.
29
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ASSET PURCHASE AGREEMENT
ARTICLE XIV.
MISCELLANEOUS
14.1 Governing Law. This AGREEMENT shall be deemed to have been made
in the State of Delaware and its form, execution, validity, construction and
effect shall be determined in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
14.2 Headings and References. All section headings contained in this
AGREEMENT are for convenience of reference only and shall not affect the meaning
or interpretation of this AGREEMENT.
14.3 Dispute Resolution.
(a) Any dispute, controversy or claim arising out of or
relating to this AGREEMENT, or the breach, termination or invalidity of this
AGREEMENT or the rights of any party for indemnification hereunder (each, a
"CLAIM"), shall be submitted in the first instance to the President, North
American Region of HMRI, for HMR and the Chief Executive Officer of MEDICIS for
MEDICIS.
(b) If any CLAIM cannot be resolved by the individuals
designated in Section 14.3 (a) within thirty (30) days after being submitted to
them, and except for the right of any party to apply to a court of competent
jurisdiction for a temporary restraining order to preserve the status quo or to
prevent irreparable harm pending the selection and confirmation of a panel of
arbitrators in accordance herewith, such CLAIM shall be settled by arbitration
in accordance with the Commercial Arbitration Rules (the "RULES") of the
American Arbitration Association (the "AAA") in effect on the day the
arbitration is commenced in accordance with this AGREEMENT, except as modified
by this Section 14.3. After expiration of the thirty (30) day period pursuant to
Section 14.3(a) hereof, any party may commence arbitration by serving upon the
other party a written demand for arbitration sent by a courier service of
internationally recognized reputation in accordance with this AGREEMENT, with a
copy of the same delivered by a courier service of internationally recognized
reputation to the AAA regional office in which any party is then located. The
number of arbitrators shall be three, one of whom is selected by MEDICIS, one of
whom is selected by HMRI and one of whom is selected by HMRI and MEDICIS (or by
the other two arbitrators if the parties cannot, within thirty (30) days after
the commencement of the arbitration proceeding, agree on the third arbitrator).
In the event that any party shall fail to appoint an arbitrator within thirty
(30) days after the commencement of the arbitration proceeding, such arbitrator
and the third arbitrator shall be appointed by the AAA in accordance with the
RULES. The arbitration award shall be rendered by a majority of the members of
the board of arbitration. Except as expressly provided in Section 14.4 hereof,
the panel shall not be entitled to modify this AGREEMENT or the transactions
contemplated herein. The arbitration proceeding shall be conducted in the
English language and shall be brought in Chicago, Illinois, unless the parties
agree in writing to conduct the arbitration in another location. The AAA shall
have jurisdiction over all parties to this AGREEMENT for purposes of the
arbitration.
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<PAGE> 38
ASSET PURCHASE AGREEMENT
(c) The arbitration decision shall be final and binding and
shall not be appealable to any court in any jurisdiction. The prevailing party
may enter such decision in any court having competent jurisdiction.
(d) Any statute of limitations or other equitable or legal
doctrine which would otherwise be applicable to any action brought by either of
the parties shall be applicable in the arbitration. In the event any party to
this AGREEMENT files a petition under the bankruptcy laws of the United States
or has a petition filed against it which results in an order for relief or other
indicia that a bankruptcy case has commenced, it is the express intention of the
parties that this AGREEMENT shall control and be enforced in accordance with its
terms and conditions that any CLAIM shall remain subject to arbitration to the
maximum extent permitted by law.
(e) There shall be no rights of discovery in connection with
the arbitration except as follows:
(i) Each party shall have the right to request the
arbitrators to issue subpoenas for documents in accordance with the RULES.
(ii) Each party shall have the right to initiate two
(2) depositions of each other party to the arbitration; and each party shall
have the right to initiate one (1) additional oral deposition pursuant to a
subpoena issued by the arbitrators or any court of competent jurisdiction.
(iii) At any time following the tenth day after the
commencement of the arbitration in accordance with this AGREEMENT, a written
notice served upon all parties shall be sufficient to compel the attendance of
any party at a deposition upon not less than sixty (60) days notice and no
subpoena shall be required for that purpose. If a person fails or refused to
testify at a deposition, that person shall not be permitted to testify at the
hearing, except for good cause shown. The number of depositions that may be
initiated by any party may be varied by agreement of all parties to the
arbitration but not by any action, order or request of the arbitrators or any
court.
(iv) Not less than thirty (30) days prior to the
scheduled arbitration proceeding, the arbitrator shall conduct a preliminary
hearing in accordance with the AAA guidelines. Not less than five (5) days prior
to the preliminary hearing, all parties to the arbitration shall serve upon all
other parties to the arbitration a written list of witnesses and exhibits to be
used at the arbitration hearing. Except for good cause shown, no witness or
exhibit may be utilized at the arbitration hearing other than as set forth on
such list. The arbitrators shall receive evidence at a single hearing. The
arbitrators shall award reasonable attorneys' fees and costs in favor of the
prevailing party or parties. The arbitrator shall issue a final award not more
than twenty (20) days following the conclusion of the hearing. The arbitrators
shall have the power to hear and decide, by documents only or with a hearing (at
the arbitrators' sole discretion) any prehearing motions in the nature of a
pre-trial motion to dismiss or for summary judgment.
(f) The arbitrators shall be entitled to receive reasonable
compensation at an hourly rate to be established between the arbitrators and the
AAA. If required by the
31
<PAGE> 39
ASSET PURCHASE AGREEMENT
arbitrators, MEDICIS on the one hand, and HMRI, on the other, will deposit with
the AAA an equal share of the total anticipated fee of the arbitrators in an
amount to be estimated by the AAA. The non-prevailing party in the proceedings
shall be ordered to pay, and shall have the ultimate responsibility for, all
arbitrators' fees and the fees of the AAA and such fees shall be included in the
judgment to be entered against the non-prevailing party.
(g) Notwithstanding any other provision of this AGREEMENT, any
party may apply to a court of competent jurisdiction within the TERRITORY, for
an order in true nature of a temporary restraining order or preliminary
injunction for purposes of maintaining the status quo pending the final
resolution of any dispute pursuant to the arbitration provisions hereof.
(h) Each party consents to the jurisdiction and administration
of the AAA for purposes of the arbitration proceedings contemplated herein.
14.4 Severability. If any provision of this AGREEMENT is held by a
court of competent jurisdiction to be invalid or unenforceable, it shall be
modified to the minimum extent necessary to make it valid and enforceable.
14.5 Entire Agreement. This AGREEMENT, including the exhibits
hereto, and the other TRANSACTION DOCUMENTS constitute the entire AGREEMENT
between the parties and their AFFILIATES relating to the subject matter hereof
and supersede all previous writings and understandings, whether oral or written,
including without limitation the Confidentiality Agreement, dated as of May 28,
1998, and the Letter of Intent, dated June 8, 1998, by and between HMRI and
MEDICIS relating to the subject matter of this AGREEMENT.
14.6 Amendment. This AGREEMENT may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both parties
that specifically refers to this AGREEMENT.
14.7 Notices. Any notice required or permitted under this AGREEMENT
shall be in writing and sent by reputable courier service, charges prepaid, or
by facsimile transmission with confirmation by reputable courier service, to the
address or facsimile number specified below. Such notices shall be deemed given
three (3) business days after such deposit in the mail or with a courier or one
(1) business day after such facsimile transmission.
If to HMR: Hoechst Marion Roussel, Inc.
Route 202-206
P. O. Box 6800
Bridgewater, New Jersey 08807-0800
Fax Number: (908) 231-3730
Attention: Vice President, Licensing & Alliances
32
<PAGE> 40
ASSET PURCHASE AGREEMENT
with copies to: Hoechst Marion Roussel, Inc.
Route 202-206
P. O. Box 6800
Bridgewater, New Jersey 08807-0800
Fax Number: (908) 231-2243
Attention: Vice President and General Counsel
Hoechst Marion Roussel Deutschland GmbH
Konigsteiner Strasse 10
65812, Bad Soden
Germany
Fax Number: +49-69-305-17905
Attention: General Manager
Hoechst Marion Roussel, S.A.
102, route de Noisy
93235 Romainville
France
Fax Number: 33-1-4991-3916
Attention: General Counsel
If to MEDICIS: Medicis Pharmaceutical Corporation
4343 East Camelback Road
Phoenix, Arizona 85018
Attention: Jonah Shacknai
Fax Number: (602) 808-3875
with a copy to: Bryan Cave LLP
Two North Central Avenue, Suite 2200
Phoenix, Arizona 85004-4408
Fax Number: (602) 364-7000
Attention: Frank M. Placenti, Esq.
14.8 Assignment, Sublicense and Binding Effect. Each party shall
have the right to assign or sublicense its rights in whole or in part under this
AGREEMENT to an AFFILIATE of such party without the other party's consent or to
a third party with the other party's prior written consent, which consent shall
not be unreasonably withheld, provided that (i) in either case such party
guarantees to the other party all of such party's obligations hereunder; (ii) in
the case of any sublicense by MEDICIS hereunder, the sublicensee agrees in a
written, executed agreement delivered to HMR and naming HMR as an intended third
party beneficiary therein to (a) observe and perform those obligations of
MEDICIS hereunder reasonably determined by MEDICIS to relate to such sublicense;
and (b) acquire its requirements for the HMR MANUFACTURED PRODUCTS (as defined
in the SUPPLY AGREEMENT) from HMR GmbH pursuant to the SUPPLY AGREEMENT during
its term and subject to its conditions; and (c) in the case of any sublicense by
HMR hereunder, the sublicensee agrees in a
33
<PAGE> 41
ASSET PURCHASE AGREEMENT
written executed agreement delivered to MEDICIS and naming MEDICIS as an
intended third party beneficiary therein to observe and perform those
obligations of HMR hereunder reasonably determined by HMR to relate to such
sublicense.
14.9 No Agency. It is understood and agreed that each party shall
have the status of an independent contractor under this AGREEMENT and that
nothing in this AGREEMENT shall be construed as authorization for any party to
act as agent for the other. MEDICIS shall not incur any liability for any act or
failure to act by employees of HMR and vice versa. Notwithstanding anything to
the contrary in this Section 14.9, HMR GmbH and HMR SA each hereby appoint HMRI,
and any duly appointed statutory agent of HMRI, as its agent for service of
process as to any proceeding commenced pursuant to or in connection with this
AGREEMENT or the TRANSACTION DOCUMENTS.
14.10 No Strict Construction. This AGREEMENT has been prepared
jointly and shall not be strictly construed against any party.
14.11 Waiver. No waiver of any of the provisions of this AGREEMENT
shall be deemed, or shall constitute, a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver,
and no waiver shall be binding unless executed in writing by the party making
the waiver.
14.12 Counterparts. This AGREEMENT may be executed in counterparts,
each of which shall be an original as against any party whose signature appears
thereon but all of which together shall constitute one and the same instrument.
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<PAGE> 42
ASSET PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties, through their authorized officers, have
duly executed this as of the date first written above.
HOECHST MARION ROUSSEL, INC. MEDICIS PHARMACEUTICAL CORPORATION
By: /s/ Thomas Hofstaetter By: /s/ Jonah Shacknai
Name: Thomas Hofstaetter Name: Jonah Shacknai
Title: Senior Vice President Title: Chairman and Chief Executive Officer
HOECHST MARION ROUSSEL
DEUTSCHLAND GmbH
By: /s/ Peter Schlikker
Name: DR. PETER SCHLIKKER
Title: Member of the Board
By: /s/ Dieter Kohl
Name: Dieter Kohl
Title: Member of the Board
HOECHST MARION ROUSSEL, S.A.
By: /s/ O. Jacquesson
Name: O. Jacquesson
Title: Member of the Board
35
<PAGE> 43
ASSET PURCHASE AGREEMENT
EXHIBIT A
List of NDAs (Per Section 1.42)
As used in this AGREEMENT, the term "NDAs" shall include the following U.S.
regulatory approvals, but shall exclude information contained in such approvals
which would normally be included within a Drug Master File:
'A/T/S' Solution AADA#62-405
'Loprox' Cream NDA #18-748
'Loprox' Lotion NDA #19-824
'Loprox' Gel NDA #20-519
'Topicort' Emollient Cream NDA #17-856
'Topicort' Gel NDA #18-586
'Topicort' LP Emollient Cream NDA #18-309
'Topicort' Ointment 0.05%* NDA #18-594
'Topicort' Ointment 0.25% NDA #18-763
- ----------
*Non-commercialized in the TERRITORY
A-1
<PAGE> 44
ASSET PURCHASE AGREEMENT
EXHIBIT B
List of PATENTS (Per Section 1.50)
U.S. patent applications and U.S. patents corresponding to, or claiming a right
or priority based upon the subject matter described in, the following Patent
Cooperation Treaty (PCT) patent applications, other than to the extent of claims
for active ingredients other than the ACTIVE INGREDIENTS; for the avoidance of
doubt, claims related to rilopirox or the DEVELOPMENT STAGE PRODUCT or HMR's
CICLOPIROX Powder shall not be included within the PATENTS:
1. 'Loprox' Gel: WO 98/13042 PCT/EP97/05068, filed 16 September 1997
(Antimycotic gel with high active substance release)
2. 'Loprox' Shampoo: WO 98/13009 PCT/EP97/05070, filed 16 September 1997 (Use
of a shampoo containing 1-hydroxy - 2-pyridones for the treatment of
seborrhoic dermatitis)
3. 'Loprox': WO 98/13043 PCT/EP/9705069, filed 16 September 1997 (Use of
1-hydroxy - 2-pyridones for the treatment of skin disorders which are
caused by antibiotic resistant bacteria)
4. W/O 97/20560, PCT/EP96/05132, filed 4 December 1995 (Use of 1-hydroxy -
2-pyridones for the topical treatment of mycotic infections which are
caused by azole resistant fungi)
B-1
<PAGE> 45
ASSET PURCHASE AGREEMENT
EXHIBIT C
List of PRODUCTS (Per Section 1.52)
1. A/T/S - Erythromycin based topical acne treatment
a) 2% solution, formulated as approved in AADA #62-405.
b) 2% gel, formulated as approved in NDA #50-617 (owned by
HERBERT).
2. Loprox - CICLOPIROX based topical anti-fungal.
a) 0.77% cream, formulated as approved in NDA #18-748, or as
formulated pursuant to the LOPROX CREAM PLAN.
b) 0.77% lotion, formulated as approved in NDA #19-824, or as
formulated pursuant to the LOPROX LOTION PLAN.
c) 0.77% gel, formulated as approved in NDA #20-519.
d) the additional Loprox PRODUCT discussed in Schedule 13 to the
LICENSE AND OPTION AGREEMENT, as described in Investigational
New Drug Application #51,286.
3. Topicort - Desoximetasone based topical anti-inflammatory.
a) 0.25% cream, formulated as approved in NDA #17-856.
b) 0.05% gel, formulated as approved in NDA #18-586.
c) 0.05% cream, formulated as approved in NDA #18-309.
d) 0.25% ointment, formulated as approved in NDA #18-763.
e) 0.05% ointment, formulated as approved in NDA #18-594
(non-commercialized in the TERRITORY).
C-1
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ASSET PURCHASE AGREEMENT
EXHIBIT D
List of TRADEMARKS (Per Section 1.61)
List of TRADEMARKS U.S. Registration No.
------------------ ---------------------
'Topicort' 1046658
'Topicort' 621695
'A/T/S' 1284012
'Loprox' 1221402
'Loprox TA' Application No. 75/207.214
10.2-1
<PAGE> 1
Exhibit 10.90
LICENSE AND OPTION AGREEMENT
LICENSE AND OPTION AGREEMENT
BY AND AMONG
HOECHST MARION ROUSSEL, INC.,
HOECHST MARION ROUSSEL DEUTSCHLAND GMBH,
HOECHST MARION ROUSSEL, S.A.
AND
MEDICIS PHARMACEUTICAL CORPORATION
DATED AS OF NOVEMBER 15, 1998
TRADEMARK NOTICE: 'Loprox', 'Topicort', 'Dermatop' and 'A/T/S' are registered
trademarks of HMR, certain rights to which are granted to MEDICIS in accordance
with the TRADEMARK LICENSE AGREEMENT (as defined herein). The use of such
trademarks in this AGREEMENT is in each case deemed to be accompanied by an
appropriate notice of trademark registration.
<PAGE> 2
LICENSE AND OPTION AGREEMENT
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS.......................................... 1
1.1 "AAA"..................................... 1
1.2 "ACTIVE INGREDIENTS"...................... 1
1.3 "AFFILIATE"............................... 2
1.4 "AGREEMENT"............................... 2
1.5 "ALTERNATE SITE".......................... 2
1.6 "APPLICABLE LAWS"......................... 2
1.7 "CANADA".................................. 2
1.8 "CANADIAN AGREEMENTS"..................... 2
1.9. "CANADIAN OPTION"......................... 2
1.10 "CANADIAN RIGHTS"......................... 2
1.11 "CICLOPIROX".............................. 2
1.12 "CLAIM"................................... 2
1.13 "COMPETING NAIL TOPICAL PRODUCT".......... 2
1.14 "COMPLETE FRANKFURT DATA"................. 2
1.15 "CONFIDENTIAL INFORMATION"................ 2
1.16 "COPLEY".................................. 3
1.17 "COPLEY PRODUCT AGREEMENT"................ 3
1.18 "CRO"..................................... 3
1.19 "DEVELOPMENT STAGE PRODUCT"............... 3
1.20 "EXCLUDED HMR PRODUCT LIABILITY".......... 3
1.21 "FORCE MAJEURE"........................... 3
1.22 "FDA"..................................... 3
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LICENSE AND OPTION AGREEMENT
1.23 "FRANKFURT DATA"......................... 4
1.24 "FRANKFURT SITE"......................... 4
1.25 "HERBERT"................................ 4
1.26 "HERBERT AGREEMENT"...................... 4
1.27 "HERBERT ASSIGNMENT AGREEMENT"........... 4
1.28 "HMR".................................... 4
1.29 "HMR GmbH"............................... 4
1.30 "HMRI"................................... 4
1.31 "HMR INDEMNIFIED PARTY".................. 4
1.32 "HMR NEWLY DEVELOPED PRODUCT"............ 4
1.33 "HMR NOTICE"............................. 4
1.34 "HMR RIGHT OF FIRST OFFER"............... 4
1.35. "HMR SUPPLIED PRODUCTS".................. 4
1.36. "HMR SA"................................. 4
1.37 "HSR ACT"................................ 4
1.38 "IMPROVEMENT"............................ 4
1.39 "INTELLECTUAL PROPERTY".................. 5
1.40 "INTERNET SIDE LETTER"................... 5
1.41 "JOINT PATENT COUNSEL"................... 5
1.42 "KNOW-HOW"............................... 5
1.43 "LIABILITIES"............................ 5
1.44 "LICENSE"................................ 5
1.45 "LICENSE EFFECTIVE DATE"................. 5
1.46 "LINE EXTENSIONS"........................ 5
1.47 "LOPROX CREAM MATTER".................... 5
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LICENSE AND OPTION AGREEMENT
1.48 "LOPROX CREAM PLAN"........................ 5
1.49 "LOPROX CREAM REGULATORY GOALS"............ 5
1.50 "LOPROX LOTION"............................ 5
1.51 "LOPROX LOTION MATTER"..................... 6
1.52 "LOPROX LOTION PLAN"....................... 6
1.53 "LOPROX LOTION REGULATORY GOALS"........... 6
1.54 "LOPROX LOTION SUPPLY AGREEMENT"........... 6
1.55 "MEDICIS".................................. 6
1.56 "MEDICIS INDEMNIFIED PARTY"................ 6
1.57 "MEDICIS NEWLY DEVELOPED PRODUCT".......... 6
1.58 "MEDICIS NOTICE"........................... 6
1.59 "MEDICIS RIGHT OF FIRST OFFER"............. 6
1.60 "NDAs"..................................... 6
1.61 "NEW A/T/S GEL MANUFACTURER"............... 6
1.62 "NON-PRODUCT CLAIMS"....................... 6
1.63 "OPTION"................................... 6
1.64 "OTHER INFORMATION"........................ 6
1.65 "PACO"..................................... 7
1.66 "PACO AGREEMENTS".......................... 7
1.67 "PACO A/T/S AGREEMENT"..................... 7
1.68 "PACO A/T/S ASSIGNMENT AGREEMENT".......... 7
1.69 "PACO LOPROX AGREEMENT".................... 7
1.70 "PACO LOPROX ASSIGNMENT AGREEMENT"......... 7
1.71 "PATENTS".................................. 7
1.72 "PRODUCT KNOW-HOW"......................... 7
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LICENSE AND OPTION AGREEMENT
1.73 "PRODUCTS"....................................... 8
1.74 "PURCHASE AGREEMENT"............................. 8
1.75 "PURCHASE DATE".................................. 8
1.76 "PURCHASE PRICE"................................. 8
1.77 "RILOPIROX OPTION"............................... 8
1.78 "RILOPIROX RIGHTS"............................... 8
1.79 "RULES".......................................... 8
1.80 "SHARED KNOW-HOW"................................ 8
1.81 "SIMILAR PRODUCTS"............................... 8
1.82 "SUPPLY AGREEMENT"............................... 8
1.83 "TERM"........................................... 8
1.84 "TERRITORY"...................................... 8
1.85 "TRADEMARK LICENSE AGREEMENT".................... 9
1.86 "TRADEMARKS"..................................... 9
1.87 "TRANSACTION DOCUMENTS".......................... 9
1.88 "TRANSITION SERVICES AGREEMENT".................. 9
ARTICLE II. GRANT OF LICENSE; RELATED RIGHTS........................... 9
2.1 Grant of LICENSE................................. 9
2.2 ACTIVE INGREDIENTS Not Included in the LICENSE... 10
2.3 Generic Products; COPLEY......................... 10
2.4 Certain Restrictions on Sale of
ACTIVE INGREDIENTS............................... 12
2.5 MEDICIS Use of Drug Master Files and NDAs........ 13
2.6 A/T/S Gel........................................ 14
ARTICLE III. LICENSE AND DISTRIBUTION FEES............................. 15
3.1 LICENSE and Distribution Fees.................... 15
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LICENSE AND OPTION AGREEMENT
ARTICLE IV. OPTION TO PURCHASE......................................... 15
4.1 Option to Purchase............................... 15
4.2 Effect of the OPTION Being Exercised............. 16
4.3 Loprox Cream Schedule and LOPROX LOTION Schedule. 16
4.4 Grant of CANADIAN OPTION......................... 16
ARTICLE V. RIGHTS OF FIRST OFFER....................................... 17
5.1 MEDICIS RIGHT OF FIRST OFFER..................... 17
5.2 HMR RIGHT OF FIRST OFFER......................... 19
5.3 Development of Newly Developed Products.......... 20
5.4 Grant of RILOPIROX OPTION........................ 20
5.5 Theramycin Z Product............................. 21
ARTICLE VI. SCOPE OF LICENSE EXCLUSIVITY............................... 21
6.1 No Sales By MEDICIS Outside the TERRITORY........ 22
6.2 No Sales by HMR Inside the TERRITORY............. 22
ARTICLE VII. REGULATORY MATTERS; ADVERSE REACTIONS; RECALLS............ 22
7.1 Licenses, Filings, Registrations,
Permits and Regulatory Approvals................. 22
7.2 Communication with Agencies...................... 23
7.3 Governmental Inspections......................... 23
7.4 Adverse Reactions................................ 24
7.5 Product Recalls.................................. 24
ARTICLE VIII. PROMOTION AND MARKETING.................................. 25
8.1 Party Names; Change of Promotional Material...... 25
8.2 Advertising and Promotional Materials............ 25
8.3 Medical and Other Inquiries...................... 25
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LICENSE AND OPTION AGREEMENT
8.4 Customer Complaints.............................. 26
ARTICLE IX. INTELLECTUAL PROPERTY...................................... 26
9.1 Notices.......................................... 26
9.2 Actions During the Term.......................... 27
9.3 Actions After the PURCHASE DATE.................. 28
9.4 Patent Prosecution............................... 28
ARTICLE X. REPRESENTATIONS AND WARRANTIES; COVENANTS................... 29
10.1 Representations and Warranties of the Parties.... 29
10.2 Representations and Warranties of HMR............ 30
10.3 Covenants of the Parties......................... 33
10.4 Covenants of MEDICIS............................. 34
10.5 Covenants of HMR................................. 34
10.6 Mutual Limitations on Warranties and Damages..... 35
10.7. Survival of Representations and Warranties....... 35
ARTICLE XI. CONFIDENTIAL INFORMATION................................... 36
11.1 Ownership........................................ 36
11.2 Confidentiality.................................. 36
11.3 Public Announcements and Statements.............. 36
ARTICLE XII. IMPROVEMENTS.............................................. 36
12.1 Improvements..................................... 36
12.2 Regulatory Responsibility with
Respect to Improvements.......................... 37
ARTICLE XIII. ADDITIONAL LOPROX PRODUCT................................ 37
13.1 Additional Loprox Product........................ 37
ARTICLE XIV. MANUFACTURING............................................. 37
14.1 Manufacturing by MEDICIS......................... 37
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LICENSE AND OPTION AGREEMENT
ARTICLE XV. TERM AND TERMINATION....................................... 37
15.1 Term of the AGREEMENT............................ 37
15.2 Termination by HMR............................... 38
15.3 Termination by MEDICIS........................... 38
ARTICLE XVI. RIGHTS AND DUTIES UPON TERMINATION OR
EXPIRATION; REMEDIES............................. 39
16.1 Monies Paid or Due............................... 39
16.2 Survival of Rights............................... 39
16.3 Remaining PRODUCT................................ 40
16.4 Damages.......................................... 40
16.5 Transition Upon Termination...................... 40
ARTICLE XVII. PAYMENT TERMS GENERALLY; taxes........................... 41
17.1 Place of Payment; Interest....................... 41
17.2 Taxes............................................ 41
ARTICLE XVIII. INDEMNIFICATION and LIMITATION OF LIABILITY............. 41
18.1 Indemnification by MEDICIS....................... 41
18.2 Indemnification by HMR........................... 41
18.3 Process of Indemnification....................... 42
18.4 Settlements...................................... 43
18.5 Right of Set-Off................................. 43
ARTICLE XIX. MISCELLANEOUS............................................. 43
19.1 FORCE MAJEURE.................................... 43
19.2 Governing Law.................................... 44
19.3 Headings and References.......................... 44
19.4 Dispute Resolution............................... 44
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LICENSE AND OPTION AGREEMENT
19.5 Severability..................................... 46
19.6 Entire Agreement................................. 46
19.7 Amendment........................................ 46
19.8 Notices.......................................... 46
19.9 Assignment, Sublicense and Binding Effect........ 47
19.10 No Agency........................................ 48
19.11 No Strict Construction........................... 48
19.12 Waiver........................................... 48
19.13 Counterparts..................................... 48
EXHIBITS
EXHIBIT A - List of PRODUCTS
EXHIBIT B - List of NDAs
EXHIBIT C - List of PATENTS
EXHIBIT D - List of TRADEMARKS
EXHIBIT E - List of Canadian Products and New Drug Submissions
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LICENSE AND OPTION AGREEMENT
LICENSE AND OPTION AGREEMENT
This License and Option Agreement (the "AGREEMENT") is entered into as
of November 15, 1998, by and among Hoechst Marion Roussel, Inc., a Delaware
corporation ("HMRI"), Hoechst Marion Roussel Deutschland GmbH, a German limited
liability company ("HMR GmbH"), Hoechst Marion Roussel, S.A., a French
corporation ("HMR SA"), and Medicis Pharmaceutical Corporation, a Delaware
corporation ("MEDICIS"). Capitalized terms used in this AGREEMENT shall have the
meanings ascribed to them in Article I hereof or as otherwise set forth herein
or in the Schedules hereto.
RECITALS
A. HMRI, HMR SA and HMR GmbH (sometimes collectively and jointly and
severally referred to herein as "HMR") have developed and currently sell, or
have obtained the rights to sell, the PRODUCTS in the TERRITORY during the TERM
of this AGREEMENT.
B. MEDICIS is willing to acquire from HMR, and HMR is willing to grant
to MEDICIS, under the PATENTS and the KNOW-HOW, a license during the TERM to
make, have made, use, sell and have sold the PRODUCTS in the TERRITORY.
C. MEDICIS is willing to acquire from HMR, and HMR is willing to grant
to MEDICIS, an option to purchase, upon the expiration of the TERM, the PATENTS,
the PRODUCT KNOW-HOW, the TRADEMARKS and the associated goodwill for all of the
PRODUCTS in the TERRITORY and an option to license the SHARED KNOW-HOW to make,
have made, use, sell and have sold the PRODUCTS in the TERRITORY, on the terms
and subject to the conditions set forth in the PURCHASE AGREEMENT executed
simultaneously herewith.
D. Pursuant to and as provided in this AGREEMENT, HMR GmbH and MEDICIS
are entering into the SUPPLY AGREEMENT, and HMRI and certain of its AFFILIATES
and MEDICIS are entering into, among others, the LOPROX LOTION SUPPLY AGREEMENT,
the TRADEMARK LICENSE AGREEMENT and the TRANSITION SERVICES AGREEMENT.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
made and the mutual benefits to be derived from this AGREEMENT, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 "AAA" shall have the meaning set forth in Section 19.4(b) hereof.
1.2 "ACTIVE INGREDIENTS" means CICLOPIROX, desoximetasone and
erythromycin, or any of them, as the case may be.
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LICENSE AND OPTION AGREEMENT
1.3 "AFFILIATE" means any individual, corporation or other legal entity
which any party directly or indirectly through one or more intermediaries
controls or which is controlled by or under common control with such party. For
the purpose of this AGREEMENT, "control" means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of an individual, corporation or other legal entity, whether through
the ownership of voting securities, by contract, or otherwise; provided,
however, that COPLEY shall not be an AFFILIATE of HMR.
1.4 "AGREEMENT" means this License and Option Agreement by and among
HMR and MEDICIS.
1.5 "ALTERNATE SITE" shall have the meaning set forth in Section
13.2(a) of Schedule 13.
1.6 "APPLICABLE LAWS" shall mean all applicable laws, statutes, rules,
regulations, ordinances, orders, decrees, writs, judicial or administrative
decisions and the like of any nation or government, any state or other political
subdivision thereof, any entity exercising executive, judicial, regulatory or
administrative functions of or pertaining to government (including, without
limitation, any governmental authority, agency, department, board, commission or
instrumentality of any governmental unit or any political subdivision thereof),
any tribunal or arbitrator of competent jurisdiction, and any self-regulatory
organization.
1.7 "CANADA" means Canada and its territories and possessions.
1.8 "CANADIAN AGREEMENTS" shall have the meaning set forth in Section
4.4(a) hereof.
1.9. "CANADIAN OPTION" shall have the meaning set forth in Section
4.4(a) hereof.
1.10 "CANADIAN RIGHTS" shall have the meaning set forth in Section
4.4(a) hereof.
1.11 "CICLOPIROX" means ciclopirox acid and/or ciclopirox olamine.
1.12 "CLAIM" shall have the meaning set forth in Section 19.4(a)
hereof.
1.13 "COMPETING NAIL TOPICAL PRODUCT" means any product or products for
topical application to the nail containing CICLOPIROX, or that would otherwise
be similar to or competitive with the DEVELOPMENT STAGE PRODUCT.
1.14 "COMPLETE FRANKFURT DATA" shall have the meaning set forth in
Section 13.3(a) of Schedule 13.
1.15 "CONFIDENTIAL INFORMATION" means any and all data and information
of a proprietary or confidential nature that are owned or controlled by any
party hereto or their respective AFFILIATES and are made available by one party
or its AFFILIATES to any other
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LICENSE AND OPTION AGREEMENT
party or its AFFILIATES prior to, during or after the TERM and that are directly
or indirectly related to the PRODUCTS and/or IMPROVEMENTS or the manufacture,
use or sale thereof, including, but without limitation, clinical or non-clinical
data, formulations, processing information, technical reports and
specifications, marketing and sales information, customer lists, supplier lists
and pricing information. CONFIDENTIAL INFORMATION shall not include information
which:
(i) was known or used by the receiving party or its AFFILIATES
prior to its date of disclosure to the receiving party, as evidenced by the
prior written records of the receiving party or its AFFILIATES;
(ii) either before or after the date of the disclosure to the
receiving party is lawfully disclosed without restriction on disclosure to the
receiving party or its AFFILIATES by an independent, unaffiliated third party
whose disclosure of such information does not violate any obligation to or right
of the party owning or controlling the CONFIDENTIAL INFORMATION; or
(iii) either before or after the date of the disclosure to the
receiving party becomes published or generally known in the industry through no
fault or admission on the part of the receiving party or its AFFILIATES.
1.16 "COPLEY" means Copley Pharmaceutical, Inc., a Delaware
corporation.
1.17 "COPLEY PRODUCT AGREEMENT"shall have the meaning set forth in
Section 2.3(a) hereof.
1.18 "CRO" shall have the meaning set forth in Section 13.3(a) of
Schedule 13.
1.19 "DEVELOPMENT STAGE PRODUCT" shall have the meaning set forth in
Schedule 5.1.
1.20 "EXCLUDED HMR PRODUCT LIABILITY" means any LIABILITY of HMR or
their AFFILIATES arising under any applicable federal, state, local or other
product liability law, regulation, common law principle, court order or
judgment, jury verdict or arbitral award arising out of or related to the
manufacture of the HMR SUPPLIED PRODUCTS by HMR or its AFFILIATES after the
LICENSE EFFECTIVE DATE; excluding, however, any such LIABILITY due to, caused
by, resulting from or arising out of any breach by HMR or any of their
AFFILIATES of Article VI of the SUPPLY AGREEMENT or Article VI of the LOPROX
LOTION SUPPLY AGREEMENT.
1.21 "FORCE MAJEURE" shall have the meaning set forth in Section 19.1
hereof.
1.22 "FDA" means the United States Food and Drug Administration, or any
successor to its responsibilities with respect to pharmaceutical products such
as the PRODUCTS.
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LICENSE AND OPTION AGREEMENT
1.23 "FRANKFURT DATA" shall have the meaning set forth in Section 13.1
of Schedule 13.
1.24 "FRANKFURT SITE" shall have the meaning set forth in Section 13.1
of Schedule 13 hereto.
1.25. "HERBERT" means Vision Pharmaceuticals L.P., a Texas limited
partnership (formerly known as Herbert Laboratories), the general partner of
which is Allergan General, Inc., a Delaware corporation that is a subsidiary of
Allergan, Inc.
1.26 "HERBERT AGREEMENT" means the Manufacturing Agreement, dated as of
June 11, 1990, between HMRI and HERBERT, relating to 'A/T/S' Gel, including any
amendments thereto.
1.27 "HERBERT ASSIGNMENT AGREEMENT" means the Assignment and Assumption
Agreement, dated as of the LICENSE EFFECTIVE DATE, by and among HERBERT, HMRI
and MEDICIS.
1.28 "HMR" means HMRI, HMR SA and HMR GmbH, collectively and jointly
and severally.
1.29 "HMR GmbH" means Hoechst Marion Roussel Deutschland GmbH, a German
limited liability company.
1.30 "HMRI" means Hoechst Marion Roussel, Inc., a Delaware corporation.
1.31 "HMR INDEMNIFIED PARTY" shall have the meaning set forth in
Section 18.1 hereof.
1.32 "HMR NEWLY DEVELOPED PRODUCT" shall have the meaning set forth in
Section 5.1 hereof.
1.33 "HMR NOTICE" shall have the meaning set forth in Section 5.1(a)
hereof.
1.34 "HMR RIGHT OF FIRST OFFER" shall have the meaning set forth in
Section 5.2 hereof.
1.35. "HMR SUPPLIED PRODUCTS" means the HMR MANUFACTURED PRODUCTS (as
defined in the SUPPLY AGREEMENT) and the LOPROX LOTION.
1.36. "HMR SA" means Hoechst Marion Roussel, S.A., a French
corporation.
1.37 "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
1.38 "IMPROVEMENT" means any and all modifications or refinements
related to any PRODUCT or its use or the manufacturing processes thereof,
whether patented or not
4
<PAGE> 14
LICENSE AND OPTION AGREEMENT
patented, which may be made, developed or acquired by a party during or prior to
the TERM, including, without limitation, modifications in the size, dosage
strength or excipients of any PRODUCT, but not including LINE EXTENSIONS.
1.39 "INTELLECTUAL PROPERTY" means the KNOW-HOW, the PATENTS and the
TRADEMARKS.
1.40 "INTERNET SIDE LETTER" means that certain side letter agreement
pertaining to Internet Domain Names between HMRI and MEDICIS, dated as of the
LICENSE EFFECTIVE DATE.
1.41 "JOINT PATENT COUNSEL" shall have the meaning set forth in Section
9.4(a) hereof.
1.42 "KNOW-HOW" means the SHARED KNOW-HOW and the PRODUCT KNOW-HOW.
1.43 "LIABILITIES" means any and all liabilities, losses, damages,
penalties, fines, assessments, expenses and costs of any kind or nature, primary
or secondary, direct or indirect, absolute or contingent, known or unknown,
including without limitation costs of settlement, reasonable attorneys' fees and
related costs and expenses and any liabilities for claims of personal injury or
death, suffered or incurred by an indemnified party hereunder.
1.44 "LICENSE" shall mean the licenses granted by HMR to MEDICIS in
Section 2.1 hereof.
1.45 "LICENSE EFFECTIVE DATE" means the date of this AGREEMENT as first
set forth above.
1.46 "LINE EXTENSIONS" means human dermatology products containing the
ACTIVE INGREDIENTS of the PRODUCTS but in a different dosage form from the
PRODUCTS (e.g., products in a gel rather than a cream form), but not including
(i) IMPROVEMENTS; or (ii) the additional Loprox PRODUCT discussed in Schedule 13
hereto, Loprox Gel, Topicort Ointment 0.05% or the DEVELOPMENT STAGE PRODUCT.
1.47 "LOPROX CREAM MATTER" shall have the meaning set forth in Section
4.3A(a) of Schedule 4.3A hereto.
1.48 "LOPROX CREAM PLAN" shall have the meaning set forth in Section
4.3A(b) of Schedule 4.3A hereto.
1.49 "LOPROX CREAM REGULATORY GOALS" shall have the meaning set forth
in the LOPROX CREAM PLAN.
1.50 "LOPROX LOTION" shall have the meaning set forth in the LOPROX
LOTION SUPPLY AGREEMENT.
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<PAGE> 15
LICENSE AND OPTION AGREEMENT
1.51 "LOPROX LOTION MATTER" shall have the meaning set forth in Section
4.3B(a) of Schedule 4.3B hereto.
1.52 "LOPROX LOTION PLAN" shall have the meaning set forth in Section
4.3B(b) of Schedule 4.3B hereto.
1.53 "LOPROX LOTION REGULATORY GOALS" shall have the meaning set forth
in the LOPROX LOTION PLAN.
1.54 "LOPROX LOTION SUPPLY AGREEMENT" means the Loprox Lotion Supply
Agreement, dated as of the LICENSE EFFECTIVE DATE, between HMRI and MEDICIS.
1.55 "MEDICIS" means Medicis Pharmaceutical Corporation, a Delaware
corporation.
1.56 "MEDICIS INDEMNIFIED PARTY" shall have the meaning set forth in
Section 18.2 hereof.
1.57 "MEDICIS NEWLY DEVELOPED PRODUCT" shall have the meaning set forth
in Section 5.2 hereof.
1.58 "MEDICIS NOTICE" shall have the meaning set forth in Section
5.2(a) hereof.
1.59 "MEDICIS RIGHT OF FIRST OFFER" shall have the meaning set forth in
Section 5.1 hereof.
1.60 "NDAs" means HMR's New Drug Applications, Abbreviated New Drug
Applications and Abbreviated Antibiotic Drug Applications (as such terms are
defined by the FDA) for the PRODUCTS (except A/T/S Gel which is owned by
HERBERT) filed and approved in accordance with the requirements of the FDA, as
they may be amended or supplemented from time to time, and as set forth on
Exhibit B hereto.
1.61 "NEW A/T/S GEL MANUFACTURER" shall have the meaning set forth in
Section 1 of Schedule 2.6 hereto.
1.62 "NON-PRODUCT CLAIMS" shall have the meaning set forth in Section
9.4(b) hereof.
1.63 "OPTION" shall have the meaning set forth in Section 4.1 hereof.
1.64 "OTHER INFORMATION" means: (i) information relating to a
disapproval or cancellation of an NDA (or any similar approval, disapproval or
cancellation outside of the TERRITORY); (ii) information on modifications
required to be made in the contents of an NDA (or any similar approval outside
the TERRITORY) in order to prevent, or to warn against risks of, death or bodily
harm; (iii) information on withdrawal of a PRODUCT from the marketplace in the
TERRITORY (or outside the TERRITORY); (iv) information on important revisions of
the precautions in the usage of a PRODUCT as set forth in the labeling pursuant
to an NDA (or
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<PAGE> 16
LICENSE AND OPTION AGREEMENT
any similar revisions outside the TERRITORY); and (v) any information which
could adversely impact the marketing of a PRODUCT in the TERRITORY.
1.65 "PACO" means Paco Pharmaceutical Services, Inc., a Delaware
corporation.
1.66 "PACO AGREEMENTS" means the PACO A/T/S AGREEMENT and the PACO
LOPROX AGREEMENT.
1.67 "PACO A/T/S AGREEMENT" means the Toll Manufacturing Agreement,
dated as of the LICENSE EFFECTIVE DATE, between HMRI and PACO relating to the
A/T/S Solution, including any amendments thereto.
1.68 "PACO A/T/S ASSIGNMENT AGREEMENT" means the Assignment and
Assumption Agreement, dated as of the LICENSE EFFECTIVE DATE, by and among PACO,
HMRI and MEDICIS relating to the PACO A/T/S AGREEMENT.
1.69 "PACO LOPROX AGREEMENT" means the Toll Manufacturing Agreement,
dated as of the LICENSE EFFECTIVE DATE, between HMRI and PACO relating to LOPROX
LOTION, including any amendments thereto.
1.70 "PACO LOPROX ASSIGNMENT AGREEMENT" means the Assignment and
Assumption Agreement, dated as of the LICENSE EFFECTIVE DATE, by and among PACO,
HMRI and MEDICIS relating to the PACO LOPROX AGREEMENT, which shall only be
effective on the PURCHASE DATE.
1.71 "PATENTS" means the U.S. patent applications and U.S. patents
issuing therefrom owned by HMR or their AFFILIATES corresponding to, or that
shall correspond to, and which are limited to the subject matter described in
the PCT patent applications specified in Exhibit C hereto, other than to the
extent of claims for active ingredients other than the ACTIVE INGREDIENTS; for
the avoidance of doubt claims related to rilopirox, the DEVELOPMENT STAGE
PRODUCT or HMR's CICLOPIROX Powder shall not be included within the PATENTS.
1.72 "PRODUCT KNOW-HOW" means technical, scientific and medical
information, knowledge, know-how, inventions and trade secrets, other than the
SHARED KNOW-HOW, pertaining to or related to the development, registration,
manufacturing, formulation, sale, use and commercialization of solely the
PRODUCTS, including, but without limitation, physico-chemical data,
specifications, quality control information and procedures and information
concerning the clinical, toxicological and pharmacological properties of the
PRODUCTS, as owned or controlled by or licensed to HMR or their AFFILIATES on an
exclusive basis, excluding, however, technical, scientific and medical
information, knowledge, know-how, inventions and trade secrets which are solely
related to the manufacture or formulation of the ACTIVE INGREDIENTS.
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LICENSE AND OPTION AGREEMENT
1.73 "PRODUCTS" means the human dermatology products and, unless the
context indicates otherwise, samples thereof listed in Exhibit A to this
AGREEMENT, but not the ACTIVE INGREDIENTS thereof.
1.74 "PURCHASE AGREEMENT" means the Asset Purchase Agreement, dated as
of the LICENSE EFFECTIVE DATE and effective as of the PURCHASE DATE, by and
among HMRI, HMR GmbH, HMR SA and MEDICIS.
1.75 "PURCHASE DATE" shall have the meaning set forth in the PURCHASE
AGREEMENT.
1.76 "PURCHASE PRICE" shall mean U.S. $16.5 million, subject to
adjustment in accordance with Schedules 4.3A and 4.3B hereto. 1.77 "RILOPIROX
OPTION" shall have the meaning set forth in Section 5.4(a) hereof.
1.78 "RILOPIROX RIGHTS" shall have the meaning set forth in Section
5.4(a) hereof.
1.79 "RULES" shall have the meaning set forth in Section 19.4(b)
hereof.
1.80 "SHARED KNOW-HOW" means technical, scientific and medical
information, knowledge, know-how, inventions and trade secrets, other than the
PRODUCT KNOW-HOW, which (i) is owned by HMR or their AFFILIATES and pertain or
relate to both the PRODUCTS and other products of HMR or their AFFILIATES, or
(ii) is controlled by or licensed to HMR or their AFFILIATES on a non-exclusive
basis, but not owned, by HMR or their AFFILIATES and are necessary for, used in
or relate to the development, registration, manufacturing, formulation, sale,
use and commercialization of the PRODUCTS, including, but without limitation,
manufacturing processes and techniques, quality control information and
procedures, and technical, scientific and medical information, knowledge,
know-how, inventions and trade secrets which are the subject of the PACO
AGREEMENTS, excluding technical, scientific and medical information, knowledge,
know-how, inventions and trade secrets which are related solely to the
manufacture or formulation of the ACTIVE INGREDIENTS, or which are the subject
of the HERBERT AGREEMENT.
1.81 "SIMILAR PRODUCTS" mean any products for human dermatological
purpose containing the ACTIVE INGREDIENTS of the PRODUCTS, including without
limitation, any products based upon any IMPROVEMENTS and any LINE EXTENSIONS of
the PRODUCTS.
1.82 "SUPPLY AGREEMENT" means the Supply Agreement, dated as of the
LICENSE EFFECTIVE DATE, by and between HMR GmbH and MEDICIS.
1.83 "TERM" shall have the meaning set forth in Section 15.1 hereof.
1.84 "TERRITORY" means the United States of America and its territories
and possessions.
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LICENSE AND OPTION AGREEMENT
1.85 "TRADEMARK LICENSE AGREEMENT" means the Trademark License
Agreement, dated as of the LICENSE EFFECTIVE DATE, by and among HMRI, HMR GmbH,
HMR SA and MEDICIS.
1.86 "TRADEMARKS" means the trademarks associated with the PRODUCTS in
the TERRITORY set forth on Exhibit D hereto held by HMR or their AFFILIATES.
1.87 "TRANSACTION DOCUMENTS" means this AGREEMENT, the PURCHASE
AGREEMENT, the TRADEMARK LICENSE AGREEMENT, the INTERNET SIDE LETTER, the
TRANSITION SERVICES AGREEMENT, the SUPPLY AGREEMENT, the LOPROX LOTION SUPPLY
AGREEMENT, the TECHNICAL AGREEMENT, the HERBERT ASSIGNMENT AGREEMENT, the PACO
A/T/S ASSIGNMENT AGREEMENT and the PACO LOPROX ASSIGNMENT AGREEMENT.
1.88 "TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement, dated as of the LICENSE EFFECTIVE DATE, by and between HMRI and
MEDICIS.
Unless the context clearly indicates otherwise, the use herein of the
singular shall include the plural, and the use of the masculine shall include
the feminine, and vice versa.
ARTICLE II.
GRANT OF LICENSE; RELATED RIGHTS
2.1 Grant of LICENSE. Subject to (i) the right of HMR and/or their
AFFILIATES to manufacture the PRODUCTS for sale by HMR and/or their AFFILIATES
to others solely for use and resale outside the TERRITORY and for sale by HMR to
MEDICIS in accordance with the terms of the SUPPLY AGREEMENT and the LOPROX
LOTION SUPPLY AGREEMENT, (ii) the provisions of the COPLEY PRODUCT AGREEMENT and
the obligations of HMRI and its AFFILIATES under the COPLEY PRODUCT AGREEMENT
referenced in Section 2.3 hereof, (iii) the provisions of the HERBERT AGREEMENT,
the PACO AGREEMENTS, the SUPPLY AGREEMENT, the LOPROX LOTION SUPPLY AGREEMENT
and the TRADEMARK LICENSE AGREEMENT, (iv) the restrictions of Section 2.5 and
Article VI hereof, (v) the exclusive right of HMR, their AFFILIATES and their
successors, assigns, licensees and sublicensees to use and exploit the PATENTS
for the DEVELOPMENT STAGE PRODUCT and HMR's CICLOPIROX Powder, and active
ingredients other than the ACTIVE INGREDIENTS, and (vi) the other terms and
conditions of this AGREEMENT, each as more fully set forth in this AGREEMENT,
upon the LICENSE EFFECTIVE DATE:
(a) HMR hereby grant to MEDICIS an exclusive royalty-free
license to use and exploit the PATENTS and the PRODUCT KNOW-HOW to develop,
make, have made, use, distribute, sell and have sold the PRODUCTS and any
IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS (but not any COMPETING NAIL
TOPICAL PRODUCT) in the TERRITORY during the TERM and to make and have made the
PRODUCTS and any IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS (but not any
9
<PAGE> 19
LICENSE AND OPTION AGREEMENT
COMPETING NAIL TOPICAL PRODUCT) outside the TERRITORY solely within North
America during the TERM solely for use and resale in the TERRITORY;
(b) HMR hereby grant to MEDICIS a non-exclusive royalty-free
license to use and exploit the SHARED KNOW-HOW to develop, make, have made, use,
distribute, sell and have sold the PRODUCTS and any IMPROVEMENTS and MEDICIS
NEWLY DEVELOPED PRODUCTS (but not any COMPETING NAIL TOPICAL PRODUCT) in the
TERRITORY during the TERM and to make and have made the PRODUCTS and any
IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS (but not any COMPETING NAIL
TOPICAL PRODUCT) outside the TERRITORY solely within North America during the
TERM solely for use and resale in the TERRITORY; and
(c) Subject to Article XII hereof, HMR hereby grant to MEDICIS
an exclusive royalty-free license to use and exploit in the TERRITORY during the
TERM any IMPROVEMENTS to any PRODUCTS and MEDICIS NEWLY DEVELOPED PRODUCTS (but
not any COMPETING NAIL TOPICAL PRODUCT) for human dermatological use developed
by HMR or their AFFILIATES during the TERM.
2.2 ACTIVE INGREDIENTS Not Included in the LICENSE. Notwithstanding
anything to the contrary contained in this AGREEMENT but subject to Article V of
this AGREEMENT, any rights to the ACTIVE INGREDIENTS shall not be included in
the LICENSE (including without limitation rights to use the NDAs provided
hereunder) other than (i) the rights (but not development or manufacturing
rights as to the ACTIVE INGREDIENTS) necessary to sell PRODUCTS containing the
ACTIVE INGREDIENTS; (ii) the right to enforce the restrictions on sale of the
ACTIVE INGREDIENTS set forth in this AGREEMENT; (iii) the rights conferred by
the SUPPLY AGREEMENT and the LOPROX LOTION SUPPLY AGREEMENT; (iv) the rights to
reference the NDAs and Drug Master Files corresponding thereto in accordance
with Section 2.5(b) hereof (but not development or manufacturing rights as to
the ACTIVE INGREDIENTS) necessary to develop, sell, make and have made
IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS other than any COMPETING NAIL
TOPICAL PRODUCT; and (v) the rights necessary to conduct clinical tests or to
conduct tests as required by APPLICABLE LAWS with respect to or using the
PRODUCTS, the ACTIVE INGREDIENTS (if manufactured or supplied by or on behalf of
HMR and other than for the development or registration of a COMPETING NAIL
TOPICAL PRODUCT), and any IMPROVEMENTS and MEDICIS NEWLY DEVELOPED PRODUCTS
other than any COMPETING NAIL TOPICAL PRODUCT; provided, however, that MEDICIS,
its AFFILIATES, and their successors, assigns, licensees and sublicensees shall
not violate the restrictions specified in Section 2.5 hereof in exercising their
rights under this Section 2.2.
2.3 Generic Products; COPLEY.
(a) Notwithstanding anything to the contrary contained in this
AGREEMENT, the LICENSE and the sale and/or license of the INTELLECTUAL PROPERTY
and NDAs by HMRI to MEDICIS pursuant to the PURCHASE AGREEMENT (upon its
effectiveness) are each subject to COPLEY's exclusive right to market and sell
in the future
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<PAGE> 20
LICENSE AND OPTION AGREEMENT
generic versions of the PRODUCTS pursuant to the Product Agreement, dated as of
October 8, 1993, by and between an AFFILIATE of HMRI and COPLEY (the "COPLEY
PRODUCT AGREEMENT"). Except as set forth in Schedule 2.3, HMR represent and
warrant to MEDICIS as of the LICENSE EFFECTIVE DATE as follows: (i) pursuant to
the COPLEY PRODUCT AGREEMENT, COPLEY has the exclusive right to market and sell
a generic version of certain products, including the PRODUCTS, that the
AFFILIATE of HMR determines to allow to be marketed in a generic version or that
become, or are about to become, subject to multi-source competition; (ii) the
existing products distributed and marketed by COPLEY under the COPLEY PRODUCT
AGREEMENT do not include a generic version of any of the PRODUCTS or any product
containing any of the ACTIVE INGREDIENTS; (iii) in accordance with the terms of
the COPLEY PRODUCT AGREEMENT, an AFFILIATE of HMR has notified COPLEY that the
COPLEY PRODUCT AGREEMENT will be terminated, effective June 1, 1999, and COPLEY
has provided to an AFFILIATE of HMR its written acknowledgment of such
termination of the COPLEY PRODUCT AGREEMENT; (iv) neither HMR nor any of their
AFFILIATES have granted to COPLEY the right to market, sell and/or manufacture a
generic version of any PRODUCT or any product containing any or all of the
ACTIVE INGREDIENTS; (v) neither HMR nor their AFFILIATES have sold to COPLEY any
ACTIVE INGREDIENTS pursuant to the COPLEY PRODUCT AGREEMENT; and (vi) to the
actual knowledge of HMR, none of the PRODUCTS listed on Exhibit A under the
caption "Loprox" are, or are about to become, subject to multi-source
competition within the meaning of the COPLEY PRODUCT AGREEMENT. HMR further
represents, warrants and covenants that its interpretation of the COPLEY PRODUCT
AGREEMENT is that a product "is, or is about to become, subject to multi-source
competition" in the TERRITORY if, when and only when the FDA has given final
approval of an ANDA for a generic version of that product.
(b) In addition to and without limiting the provisions of
Section 6.2, HMR agrees that, during the TERM, neither HMR nor any of their
AFFILIATES shall (i) except as specifically required by the COPLEY PRODUCT
AGREEMENT, enter into any agreement or otherwise grant to COPLEY or any other
person or entity (whether or not an AFFILIATE of HMR) any right to market, sell
and/or manufacture in the TERRITORY a generic version of any PRODUCT, any
SIMILAR PRODUCT or any human dermatology product containing an ACTIVE
INGREDIENT; (ii) except as specifically required by the COPLEY PRODUCT
AGREEMENT, sell to COPLEY any ACTIVE INGREDIENT for inclusion in any human
dermatology product sold, marketed or distributed in the TERRITORY or license or
otherwise convey to any person any rights to use or exploit the PRODUCT
KNOW-HOW; or (iii) utilize, direct or cause COPLEY or its affiliates to conduct
activities in violation of HMR's covenants, duties or obligations hereunder.
Notwithstanding the foregoing, the restrictions on the sale of ACTIVE
INGREDIENTS set forth in this Section 2.3 shall not apply to erythromycin.
(c) HMR and their AFFILIATES shall not grant to COPLEY the
right to market, sell and/or manufacture in the TERRITORY a generic version of
any PRODUCT, any SIMILAR PRODUCT, or any human dermatology product containing
any ACTIVE INGREDIENT or sell any ACTIVE INGREDIENT for inclusion in any human
dermatological product sold, marketed or established in the TERRITORY to COPLEY,
unless (i) HMR determines in good faith that the PRODUCT is, or is about to be,
subject to "multi-source
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<PAGE> 21
LICENSE AND OPTION AGREEMENT
competition" within the meaning of the COPLEY PRODUCT AGREEMENT (as interpreted
by HMR and set forth in Section 2.3(a) or as may be otherwise determined by
court order) and that the AFFILIATE of HMR is contractually obligated under the
COPLEY PRODUCT AGREEMENT to grant such right to sell a generic version of the
PRODUCT or to sell such ACTIVE INGREDIENT; and (iii) HMR gives written notice at
least fifteen (15) days in advance to MEDICIS of HMR's determination that its
AFFILIATE is required by the COPLEY PRODUCT AGREEMENT to grant such rights or to
sell such ACTIVE INGREDIENT to COPLEY, stating in reasonable detail the facts
and circumstances upon which HMR based its determination. In addition, HMR and
its AFFILIATES shall not enter into any agreement or other arrangement with
COPLEY other than as specifically contemplated by the COPLEY PRODUCT AGREEMENT
or any agreement or other arrangement with any other third party, pursuant to
which COPLEY or such third party would have the right to manufacture, market
and/or sell in the TERRITORY any generic or other versions of any PRODUCT or any
product having the same ACTIVE INGREDIENTS as the PRODUCTS.
(d) MEDICIS covenants during the TERM that it shall not take any
action or fail to take any action or otherwise cause the PRODUCTS to be subject
to "multi-source competition" within the meaning of the COPLEY PRODUCT AGREEMENT
(as defined in Section 2.3(a) or as may be otherwise determined by court order).
2.4 Certain Restrictions on Sale of ACTIVE INGREDIENTS. In addition to
and without limiting the provisions of Section 6.2, and subject to the right of
HMR to supply ACTIVE INGREDIENTS to licensees or purchasers of HMR NEWLY
DEVELOPED PRODUCTS pursuant to Section 5.1 hereof, the DEVELOPMENT STAGE PRODUCT
and HMR's CICLOPIROX Powder, HMR agrees that, during the TERM and subject to
Section 2.3(b) and any rights of HMR hereunder with respect to the DEVELOPMENT
STAGE PRODUCT, neither HMR nor any of their AFFILIATES shall sell to any person
or entity (whether or not an AFFILIATE of HMR) any ACTIVE INGREDIENT for
inclusion in any human dermatology product sold, marketed or distributed in the
TERRITORY or license or otherwise convey to any person any rights to use or
exploit the PRODUCT KNOW-HOW in the TERRITORY. Notwithstanding the foregoing,
the restrictions on the sale of ACTIVE INGREDIENTS set forth in this Section 2.4
shall not apply: (i) to erythromycin; or (ii) from and after such time as
MEDICIS purchases more than ten percent (10%) of its requirements for any ACTIVE
INGREDIENT (other than erythromycin) from parties other than HMR or their
AFFILIATES, as to that ACTIVE INGREDIENT; provided, however, that such
restrictions shall continue to apply in the event MEDICIS purchases more than
ten (10%) of such requirements from parties other than HMR or their AFFILIATES
due to the inability of HMR or their AFFILIATES to fulfill the requirements of
MEDICIS as to that ACTIVE INGREDIENT, provided that in such event MEDICIS
purchases no more than a four (4) month supply (or, if greater, the supplier's
minimum batch quantity) of such ACTIVE INGREDIENT from an alternate supplier or
suppliers and, if HMR or their AFFILIATES' inability to fulfill MEDICIS'
requirements continues beyond the exhaustion of such alternate supply, MEDICIS
continues to purchase such ACTIVE INGREDIENT in such four (4) month or greater
supply amounts as permitted by this Section 2.4. For so long as the restrictions
on the sale of ACTIVE INGREDIENTS under this Section 2.4 are applicable, MEDICIS
shall notify HMRI in writing of
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<PAGE> 22
LICENSE AND OPTION AGREEMENT
any purchases of more than ten percent (10%) of its requirements for any ACTIVE
INGREDIENT (other than erythromycin) from parties other than HMR or their
AFFILIATES, which notice shall indicate if such purchases were due to the
inability of HMR or their AFFILIATES to fulfill the requirements of MEDICIS as
to that ACTIVE INGREDIENT and were within the quantity limitations set forth in
the immediately preceding sentence.
2.5 MEDICIS Use of Drug Master Files and NDAs.
(a) New Drug Master Files. MEDICIS acknowledges that no Drug Master
Files have been prepared for desoximetasone, ciclopirox acid and ciclopirox
olamine and that the information contained in the NDAs of the PRODUCTS that
relate to the raw materials and/or the ACTIVE INGREDIENTS shall not be available
for access, review, utilization or disclosure by MEDICIS, its AFFILIATES and
their successors and assigns and their licensees and sublicensees, and MEDICIS
covenants and agrees that it shall not, directly or indirectly, access, utilize
or disclose such information. As soon as reasonably practicable after the
LICENSE EFFECTIVE DATE, HMR shall prepare and file with the FDA Drug Master
Files for desoximetasone, ciclopirox acid and ciclopirox olamine. Upon
acceptance of such Drug Master Files by the FDA, HMR shall instruct the FDA to
supersede, and if permitted delete, the information corresponding to such Drug
Master Files in the relevant NDA with that of the Drug Master Files. The Drug
Master Files and such portions of the NDAs as would be covered in such Drug
Master Files shall remain with and shall at all times be the sole property of
HMR and their AFFILIATES (except for A/T/S Gel which remains with and is the
property of HERBERT), shall not be included within the LICENSE, and shall not be
available for review by MEDICIS, its AFFILIATES, their successors and assigns
and their licensees and sublicensees, but MEDICIS shall have a limited right of
reference thereto in accordance with paragraph (b) of this Section 2.5.
(b) Rights to Reference Drug Master Files and the NDAs. Subject to
the other provisions of this Section 2.5 and Sections 5.2 and 6.1, MEDICIS shall
have a limited right of reference solely in the TERRITORY to the NDAs and Drug
Master Files of the PRODUCTS solely for the PRODUCTS, IMPROVEMENTS and MEDICIS
NEWLY DEVELOPED PRODUCTS, which shall not include any rights for or related to
(i) information and NDAs related to A/T/S Gel and (ii) the development,
regulatory approval and/or commercialization of any COMPETING NAIL TOPICAL
PRODUCT. Subject to the provisions of Sections 5.1 and 6.2 hereof, HMR, their
AFFILIATES, their successors and assigns and their licensees and sublicensees
shall (i) have an unrestricted right of reference to the Drug Master Files and
the NDAs for the DEVELOPMENT STAGE PRODUCT and HMR's CICLOPIROX Powder, and (ii)
retain the right to utilize and reference any data and/or intellectual property
rights (other than the TRADEMARKS, except for the trademark rights reserved or
licensed to HMR pursuant to Section 2 of the TRADEMARK LICENSE AGREEMENT and
Section 4.2(c) of the PURCHASE AGREEMENT) necessary to support the regulatory
approval, manufacture, commercialization and marketing of the DEVELOPMENT STAGE
PRODUCT and HMR's CICLOPIROX Powder.
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<PAGE> 23
LICENSE AND OPTION AGREEMENT
(c) DEVELOPMENT STAGE PRODUCT. Notwithstanding any other
provision of this AGREEMENT or any provision of the other TRANSACTION DOCUMENTS,
and except to the extent that rights or information are lawfully available to a
third party (which is not HMR or their AFFILIATES, or their successors, assigns,
licensees or sublicensees), for such purposes as are utilized by MEDICIS, its
AFFILIATES, their successors and assigns and their licensees and sublicensees,
under applicable U.S. Federal statutes or the regulations or rules promulgated
thereunder (including those rights that any such third party would have under
the U.S. Federal Food, Drug and Cosmetic Act, the U.S. Freedom of Information
Act or any other U.S. Federal statute, but excluding (A) rights triggered or
provided by any contractual or license rights granted to any such third party by
HMR or their AFFILIATES or their successors and assigns or their licensees and
sublicensees or (B) information which enters the public domain due to, by or
pursuant to the action or inaction, directly or indirectly, of MEDICIS, its
AFFILIATES, their successors and assigns and their licensees and sublicensees),
MEDICIS, its AFFILIATES, their successors and assigns and their licensees and
sublicensees shall not directly or indirectly access, review, disclose,
reference or utilize the Drug Master Files, the NDAs or the INTELLECTUAL
PROPERTY (including but not limited to New Drug Applications for the MEDICIS
NEWLY DEVELOPED PRODUCTS, any IMPROVEMENTS, the HMR NEWLY DEVELOPED PRODUCTS,
the DEVELOPMENT STAGE PRODUCT, or the additional Loprox PRODUCT discussed in
Schedule 13 hereto, or any other regulatory approval based upon, arising out of
or related to the Drug Master Files, the NDAs, such New Drug Applications or the
INTELLECTUAL PROPERTY (other than the TRADEMARKS) or any information contained
therein) (i) for the development, regulatory approval and/or commercialization
of a COMPETING NAIL TOPICAL PRODUCT, or (ii) that relate to the ACTIVE
INGREDIENTS; provided, however, that in no event or circumstance whatsoever
shall the existence of such information in the public domain be deemed a
release, modification or waiver of the restrictions on rights of reference
specified in this paragraph (c) or in paragraph 2.5(b) hereof unless a third
party (which is not HMR, their AFFILIATES, or their successors and assigns or
their licensees or sublicensees) would have rights of reference to such
information (except to the extent (A) such rights are triggered or provided by
any contractual or license rights granted to any such third party by HMR or
their AFFILIATES or their successors and assigns or their licensees and
sublicensees or (B) such information enters the public domain due to, by or
pursuant to the action or inaction, directly or indirectly, of MEDICIS, its
AFFILIATES, their successors and assigns and their licensees and sublicensees).
Nothing in this Section 2.5 shall limit MEDICIS, its AFFILIATES and their
successors and assigns or their licensees and sublicensees from using any ACTIVE
INGREDIENTS lawfully manufactured or supplied by a third party (which is not HMR
or their AFFILIATES or their successors and assigns or their licensees and
sublicensees) lawfully using information available to such third party for the
purposes utilized by such third party without using information which is
proprietary to HMR or its AFFILIATES or their successors and assigns or their
licensees and sublicensees.
2.6 A/T/S Gel. HMR GmbH and MEDICIS have agreed to certain matters,
rights and obligations relating to A/T/S Gel as set forth in Schedule 2.6
hereto.
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LICENSE AND OPTION AGREEMENT
ARTICLE III.
LICENSE AND DISTRIBUTION FEES
3.1 LICENSE and Distribution Fees. Subject to the terms and conditions
of this AGREEMENT, in consideration of the LICENSE granted to MEDICIS for the
TERM hereunder and for the OPTION:
(a) Subject to any adjustments in accordance with Schedule 13 or
Schedules 4.3A or 4.3B hereto, MEDICIS shall pay to HMR in accordance with
Schedule 3.1 and Article XVII hereof U.S. $22 million on (or, if such day is not
a business day, on the first business day after) each of the LICENSE EFFECTIVE
DATE, the first anniversary of the LICENSE EFFECTIVE DATE, and the second
anniversary of the LICENSE EFFECTIVE DATE, for a total of U.S. $66 million.
(b) Except as set forth in this Section 3.1 and in Schedules 2.6
and 13, no other royalties or fees of any kind shall be paid by MEDICIS for the
LICENSE and other rights granted to MEDICIS hereunder.
ARTICLE IV.
OPTION TO PURCHASE
4.1 Option to Purchase. MEDICIS shall have the option to purchase, upon
the expiration of the TERM, all right, title and interest in and to (i) the
PATENTS, the PRODUCT KNOW-HOW, the TRADEMARKS and the associated goodwill for
all of the PRODUCTS in the TERRITORY, (ii) a license to the SHARED KNOW-HOW and
IMPROVEMENTS, and (iii) certain other rights, subject to the terms of the COPLEY
PRODUCT AGREEMENT and the following terms and conditions as more fully set forth
in the PURCHASE AGREEMENT executed contemporaneously herewith (the "OPTION"):
(a) ACTIVE INGREDIENTS Not Included in OPTION. Notwithstanding the
provisions of this Section 4.1 and except for the rights in the SUPPLY AGREEMENT
and the LOPROX LOTION SUPPLY AGREEMENT, any rights to the ACTIVE INGREDIENTS of
the PRODUCTS shall not be subject to the OPTION.
(b) Exercise of the OPTION. The OPTION shall be deemed to be
exercised unless MEDICIS provides written notice to HMRI no later than the
second anniversary of the LICENSE EFFECTIVE DATE of its election not to exercise
the OPTION. The giving of such notice shall not affect the LICENSE granted in
Section 3.1 hereof, which shall remain in effect in accordance with its terms
through the end of the TERM.
(c) Payment. Subject to the provisions of Schedules 4.3A and 4.3B
and the termination of this AGREEMENT pursuant to Section 15.3, if the OPTION is
exercised pursuant to Section 4.1(b), MEDICIS shall pay the PURCHASE PRICE to
HMR on the third anniversary of the LICENSE EFFECTIVE DATE.
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<PAGE> 25
LICENSE AND OPTION AGREEMENT
4.2 Effect of the OPTION Being Exercised. If the OPTION is exercised,
each of MEDICIS and HMR shall, upon payment of the amount required by Section
4.1(c), take any actions necessary to implement the PURCHASE AGREEMENT.
4.3 Loprox Cream Schedule and LOPROX LOTION Schedule. The parties have
agreed to certain matters, rights and obligations pertaining to (i) Loprox
Cream, as set forth in Schedule 4.3A hereto, the terms and exhibit to which are
incorporated herein by reference, and (ii) LOPROX LOTION, as set forth in
Schedule 4.3B hereto, the terms and exhibit to which are incorporated herein by
reference.
4.4 Grant of CANADIAN OPTION.
(a) HMR hereby grants to MEDICIS the option (the "CANADIAN OPTION")
to acquire a license together with an option to purchase and license all
trademark, know-how, patent and other intellectual property and proprietary
rights necessary to make, develop, have made, use, distribute, sell and have
sold in CANADA the products listed in Exhibit E hereto (which Exhibit also lists
such products' Canadian New Drug Submission), which products are the only
products which contain the ACTIVE INGREDIENTS (other than erythromycin) sold in
CANADA by HMR or their AFFILIATES as of the LICENSE EFFECTIVE DATE, and an
option to license all trademark, know-how, patent and other intellectual
property and proprietary rights of HMR and their AFFILIATES in CANADA necessary
to develop, make, have made, use, distribute, sell and have sold human
dermatology products for human medical uses containing rilopirox in CANADA (the
"CANADIAN RIGHTS"). The CANADIAN OPTION shall be exercisable by MEDICIS on or
before the date which is sixty (60) days from the LICENSE EFFECTIVE DATE by
giving written notice to HMR in accordance with Section 19.8 hereof. If MEDICIS
exercises the CANADIAN OPTION, then on or before March 1, 1999, HMR and MEDICIS
(and/or their appropriate AFFILIATES) shall enter into agreements with respect
to the CANADIAN RIGHTS on substantially similar terms as set forth in this
AGREEMENT, the PURCHASE AGREEMENT, the SUPPLY AGREEMENT (except for those
provisions relating to the supply of free product samples to MEDICIS), the
TRADEMARK LICENSE AGREEMENT and the TRANSITION SERVICES AGREEMENT (collectively,
the "CANADIAN AGREEMENTS"), which agreements shall also provide that (i) MEDICIS
shall pay to HMR (or its designated AFFILIATES) U.S. $2.5 million upon the
parties' mutual execution and delivery of such agreements and an additional U.S.
$2.5 million on each of the first and second anniversaries of the LICENSE
EFFECTIVE DATE, for a total of U.S. $7.5 million; (ii) MEDICIS shall pay an
additional U.S. $2.5 million on the date of purchase of the CANADIAN RIGHTS by
MEDICIS; and (iii) the supply prices to MEDICIS of the products subject to the
CANADIAN OPTION shall be not more than five percent (5%) greater than the cost
to HMR's Canadian AFFILIATE of manufacturing and shipping such products at and
from its Canadian manufacturing facility. MEDICIS shall not be required to make
any additional payment to HMR in connection with MEDICIS' acquisition of the
CANADIAN RIGHTS pertaining to the additional Loprox PRODUCT discussed in
Schedule 13 hereto, and HMR shall not be required to pay any costs for the
development or regulatory approval of such additional Loprox PRODUCT in CANADA.
The CANADIAN AGREEMENTS shall also contain such other terms and provisions
regarding manufacture,
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<PAGE> 26
LICENSE AND OPTION AGREEMENT
supply and delivery in CANADA of the products to MEDICIS, transition services,
regulatory matters, intellectual property rights, promotion, marketing and other
matters the parties may reasonably agree, and as may be necessary or appropriate
to reflect the Canadian context, Canadian law and regulations and other matters
mutually deemed relevant by the parties.
(b) For a period of sixty (60) days after the LICENSE
EFFECTIVE DATE, upon reasonable advance notice by MEDICIS to HMR, HMR shall
afford to MEDICIS and its employees, auditors, legal counsel and other
authorized representatives reasonable opportunity and access during normal
business hours to inspect, investigate, and audit the operations and business of
HMR that relate solely to the CANADIAN RIGHTS and shall provide MEDICIS with
such information and materials as MEDICIS may reasonably request (other than the
equivalent of Drug Master Files) in connection with its due diligence review of
the CANADIAN RIGHTS and the related business and operations of HMR and its
AFFILIATES. MEDICIS acknowledges that such information shall be deemed to be
CONFIDENTIAL INFORMATION of HMR subject to Article XI hereof.
ARTICLE V.
RIGHTS OF FIRST OFFER
5.1 MEDICIS RIGHT OF FIRST OFFER. If at any time during the TERM, HMR
or its AFFILIATES shall develop or cause to be developed any human dermatology
product containing an ACTIVE INGREDIENT, including without limitation any LINE
EXTENSION but excluding (i) IMPROVEMENTS and (ii) the DEVELOPMENT STAGE PRODUCT
(each, an "HMR NEWLY DEVELOPED PRODUCT"), MEDICIS shall have a right of first
offer to (i) license on an exclusive basis all patents, patent applications and
proprietary know-how solely related thereto (but not to the ACTIVE INGREDIENTS)
necessary for the manufacture and sale in the TERRITORY of the HMR NEWLY
DEVELOPED PRODUCT (except for intellectual property rights constituting shared
know-how relating to the HMR NEWLY DEVELOPED PRODUCT, which shall be licensed to
MEDICIS on a non-exclusive basis) subject to the terms set forth in this Section
5.1 below; and (ii) if the OPTION is or has been exercised pursuant to Section
4.1 hereof, purchase and/or license all of such rights on the terms set forth in
the PURCHASE AGREEMENT (the "MEDICIS RIGHT OF FIRST OFFER"):
(a) Notice of an HMR NEWLY DEVELOPED PRODUCT. Upon completion of
Phase III clinical trials for an HMR NEWLY DEVELOPED PRODUCT and no later than
upon submission of an NDA for such HMR NEWLY DEVELOPED PRODUCT, HMR shall give
to MEDICIS written notice (the "HMR NOTICE") setting forth: (i) a description of
the HMR NEWLY DEVELOPED PRODUCT, (ii) the terms and conditions, which shall be
commercially reasonable, of the proposed license and/or sale to MEDICIS and
(iii) the payment terms, which shall be commercially reasonable, of the proposed
license and/or sale to MEDICIS.
(b) Exercise of MEDICIS RIGHT OF FIRST OFFER. At any time within
ninety (90) days after receipt of an HMR NOTICE, MEDICIS may, by giving written
notice to HMRI, elect to exercise the MEDICIS RIGHT OF FIRST OFFER on the terms
set forth in the
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LICENSE AND OPTION AGREEMENT
HMR NOTICE or any such other terms as the parties may agree, which shall be
documented in a written agreement. During such ninety (90) day period, neither
HMR nor its AFFILIATES, or any person acting on their behalf, will directly or
indirectly solicit or encourage any inquiries or proposals for, or enter into
any discussions with respect to, the license and/or sale in the TERRITORY of the
HMR NEWLY DEVELOPED PRODUCT to any third party.
(c) Effect of Refusal. In the event the parties cannot reach
agreement with respect to MEDICIS' acquisition or license of an HMR NEWLY
DEVELOPED PRODUCT in accordance with this Section 5.1, HMR and/or an AFFILIATE
may license or sell such HMR NEWLY DEVELOPED PRODUCT to a third party which is
not an AFFILIATE of HMR (but shall not themselves directly sell, market, promote
or distribute such HMR NEWLY DEVELOPED PRODUCT), provided that (i) the terms and
conditions of any such license or sale are no less favorable to HMR than those
offered by HMR to MEDICIS pursuant to this Section 5.1, in which case no consent
or approval by, or right of first refusal for, MEDICIS shall be required for HMR
to enter into a written agreement with such third party, or (ii) if the terms
and conditions of any such license or sale are less favorable to HMR than those
offered by HMR to MEDICIS pursuant to this Section 5.1, MEDICIS shall have a
right of first refusal, exercisable within thirty (30) calendar days after HMR
provides notice of such less favorable terms and conditions to MEDICIS, to
license or acquire the HMR NEWLY DEVELOPED PRODUCT on such terms and conditions.
(d) No Rights Conferred to MEDICIS. This Section 5.1 does not
confer upon MEDICIS or its AFFILIATES the right to use or exploit any
intellectual property right of HMR or their AFFILIATES, including those granted
hereunder, with respect to any HMR NEWLY DEVELOPED PRODUCTS. Any agreement that
may be executed between the parties with respect to any HMR NEWLY DEVELOPED
PRODUCT shall include provisions mutually acceptable to the parties regarding
the use, or prohibition against the use of, such intellectual property rights.
(e) DEVELOPMENT STAGE PRODUCT. Notwithstanding any other provision
of this AGREEMENT, the DEVELOPMENT STAGE PRODUCT shall not be an HMR NEWLY
DEVELOPED PRODUCT for purposes of this AGREEMENT, and is not subject to the
MEDICIS RIGHT OF FIRST OFFER. The parties have agreed to certain matters, rights
and obligations pertaining to the DEVELOPMENT STAGE PRODUCT as set forth on
Schedule 5.1 hereto, the terms of which are incorporated herein by reference.
(f) Certain Products. The parties acknowledge and agree that (i)
the additional Loprox PRODUCT discussed in Schedule 13 hereto, Loprox Gel and
Topicort Ointment 0.05% (but not line extensions thereof) are not to be
considered HMR NEWLY DEVELOPED PRODUCTS; and (ii) HMR's CICLOPIROX Powder and
Loprox Vaginal Cream shall be considered HMR NEWLY DEVELOPED PRODUCTS; provided,
however, that the exercise of the MEDICIS RIGHT OF FIRST OFFER with respect to
HMR's CICLOPIROX Powder and Loprox Vaginal Cream shall not be subject to the
notice provisions of Section 5.1(a) or (b).
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LICENSE AND OPTION AGREEMENT
5.2 HMR RIGHT OF FIRST OFFER. If at any time during the TERM, MEDICIS
or its AFFILIATES shall develop or cause to be developed any human dermatology
product containing an ACTIVE INGREDIENT, including without limitation any LINE
EXTENSION but excluding IMPROVEMENTS (each, a "MEDICIS NEWLY DEVELOPED
PRODUCT"), HMR shall have a right of first offer to (i) license on an exclusive
basis all patents, patent applications and proprietary know-how solely related
thereto necessary for the manufacture and sale outside the TERRITORY of such
MEDICIS NEWLY DEVELOPED PRODUCT (except for intellectual property rights
constituting shared know-how relating to the MEDICIS NEWLY DEVELOPED PRODUCT,
which shall be licensed to HMRI on a non-exclusive basis) subject to the terms
of this Section 5.2 below; and (ii) if the OPTION has been exercised pursuant to
Section 4.1 hereof, to purchase and/or license all of such rights, on the terms
and conditions set forth in the PURCHASE AGREEMENT (the "HMR RIGHT OF FIRST
OFFER"):
(a) Notice of a MEDICIS NEWLY DEVELOPED PRODUCT. Upon completion of
Phase III clinical trials for a MEDICIS NEWLY DEVELOPED PRODUCT and no later
than upon submission of an NDA for such MEDICIS NEWLY DEVELOPED PRODUCT, MEDICIS
shall give to HMRI on behalf of HMR written notice (the "MEDICIS NOTICE")
setting forth: (i) a description of the MEDICIS NEWLY DEVELOPED PRODUCT, (ii)
the terms and conditions, which shall be commercially reasonable, of the
proposed license and/or sale to HMR and (iii) the payment terms, which shall be
commercially reasonable, of the proposed license and/or sale to HMR.
(b) Exercise of HMR RIGHT OF FIRST OFFER. At any time within ninety
(90) days after receipt of the MEDICIS NOTICE, HMR may, by giving written notice
to MEDICIS, elect to exercise the HMR RIGHT OF FIRST OFFER on the terms set
forth in the MEDICIS NOTICE or such other terms as the parties may agree, which
shall be documented in a written agreement. During such ninety (90) day period,
neither MEDICIS nor its AFFILIATES, or any person acting on their behalf, will
directly or indirectly solicit or encourage any inquiries or proposals for, or
enter into any discussions with respect to, the license and/or sale outside the
TERRITORY of the MEDICIS NEWLY DEVELOPED PRODUCT to any third party.
(c) Effect of Refusal. In the event the parties cannot reach
agreement with respect to HMR's acquisition or license of a MEDICIS NEWLY
DEVELOPED PRODUCT in accordance with this Section 5.2, MEDICIS and/or an
AFFILIATE may license or sell such MEDICIS NEWLY DEVELOPED PRODUCT to a third
party which is not an AFFILIATE of MEDICIS (but shall not themselves directly
sell, market, promote or distribute such MEDICIS NEWLY DEVELOPED PRODUCT),
provided that (i) the terms and conditions of any such license or sale are no
less favorable to MEDICIS than those offered by MEDICIS to HMR pursuant to this
Section 5.2, in which case no consent or approval by, or right of first refusal
for, HMR shall be required for MEDICIS to enter into a written agreement with
such third party, or (ii) if the terms and conditions of any such license or
sale are less favorable to MEDICIS than those offered by MEDICIS to HMR pursuant
to this Section 5.2, HMR shall have a right of first refusal, exercisable within
thirty (30) calendar days after MEDICIS provides notice of such less favorable
terms and conditions to HMR, to license or acquire the MEDICIS NEWLY DEVELOPED
PRODUCT on such terms and conditions.
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LICENSE AND OPTION AGREEMENT
(d) No Rights Conferred to HMR. This Section 5.2 does not confer
upon HMR or its AFFILIATES the right to use or exploit any intellectual property
right of MEDICIS or its AFFILIATES, including any rights granted hereunder, with
respect to any MEDICIS NEWLY DEVELOPED PRODUCT. Any agreement that may be
executed between the parties with respect to any MEDICIS NEWLY DEVELOPED
PRODUCTS shall include provisions mutually acceptable to the parties regarding
the use, or prohibition against the use of, such intellectual property rights.
5.3 Development of Newly Developed Products. HMRI and MEDICIS shall on
a periodic basis keep the other party informed of development work on any HMR
NEWLY DEVELOPED PRODUCT or MEDICIS NEWLY DEVELOPED PRODUCT, respectively, being
developed by such party or any of its AFFILIATES and MEDICIS shall assume
primary responsibility for organizing and scheduling periodic communications for
that purpose.
5.4 Grant of RILOPIROX OPTION.
(a) HMR grants to MEDICIS the option to license (the "RILOPIROX
OPTION") all trademark, know-how, patent and other intellectual property and
proprietary rights of HMR and their AFFILIATES in the TERRITORY necessary to
make, develop, have made, use, distribute, sell and have sold in the TERRITORY
human dermatology products for human medical uses containing rilopirox (the
"RILOPIROX RIGHTS"). The RILOPIROX OPTION shall be exercisable by MEDICIS on or
before the date which is thirty (30) days after the date on which HMR shall have
made available for review in Frankfurt, Germany by MEDICIS substantially all of
the due diligence materials relating to the RILOPIROX RIGHTS which have been
reasonably requested by MEDICIS in writing within twenty (20) calendar days
after the LICENSE EFFECTIVE DATE. The RILOPIROX OPTION may be exercised by
MEDICIS by giving written notice to HMR in accordance with Section 19.8 hereof.
Following exercise by MEDICIS of the RILOPIROX OPTION, HMR and MEDICIS (and/or
their appropriate AFFILIATES) shall negotiate in good faith to enter into (i)
within sixty (60) days after the exercise of the RILOPIROX OPTION, a letter of
intent with respect to MEDICIS' license of the RILOPIROX RIGHTS and (ii) on or
before April 1, 1999, a definitive license agreement and any other necessary
agreements for such license of the RILOPIROX RIGHTS by MEDICIS. In the event
MEDICIS exercises the RILOPIROX OPTION but the parties cannot reach agreement
with respect to MEDICIS' acquisition of the RILOPIROX RIGHTS in accordance with
this Section 5.4(a), HMR and/or an AFFILIATE may license the RILOPIROX RIGHTS to
a third party, provided that (i) the terms and conditions of any such license
are no less favorable to HMR than those offered to HMR by MEDICIS pursuant to
this Section 5.4(a), in which case no consent or approval by, or right of first
refusal for, MEDICIS shall be required, (ii) if the terms and conditions of any
such license are less favorable to HMR than those offered to HMR by MEDICIS
pursuant to this Section 5.4(a), MEDICIS shall have a right of first refusal,
exercisable within thirty (30) calendar days after HMR provides notice to
MEDICIS thereof, to license the RILOPIROX RIGHTS on such terms and conditions,
and if such right of refusal is not so exercised by MEDICIS by notice to HMR, no
consent or approval by MEDICIS shall be required for the license on such terms
and conditions and (iii) neither HMR nor their AFFILIATES shall use or exploit
the RILOPIROX RIGHTS in the TERRITORY for human dermatology products
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LICENSE AND OPTION AGREEMENT
for human medical uses during the TERM (or, if the OPTION is exercised,
thereafter) without the prior written consent of MEDICIS. For purposes of
Section 4.4(a) hereof and this Section 5.4(a), "human dermatology products for
human medical uses" shall not include products which are or have been developed
or used for mucosal infections, such as oral lozenges, vaginal creams and
vaginal ovulas. MEDICIS acknowledges that Clariant GmbH (i) has been granted the
right to develop cosmetology products containing rilopirox, such as products for
dandruff, deodorants, human medical applications like cleansing preparations for
the intimate region (mucous membrane application) and liquid cleansing
preparations for the whole body; (ii) shall retain such rights even if Clariant
GmbH becomes an AFFILIATE of HMR in the future; provided, however, in such case
HMR shall not assist Clariant GmbH in the development of such products other
than providing Clariant GmbH, its affiliates, successors, assigns or licensees
with a license of necessary intellectual property rights (other than
INTELLECTUAL PROPERTY which is exclusively licensed to MEDICIS hereunder) and
rights of reference to Drug Master Files and New Drug Applications held by HMR
and/or their AFFILIATES; and (iii) Clariant GmbH has certain rights in U.S.
Patent No. 5,494,658 (related to antidandruff agents and cosmetic preparations)
which are not included within the PATENTS or the LICENSE.
(b) From and after the LICENSE EFFECTIVE DATE and throughout the
period in which the RILOPIROX OPTION is exercisable, upon reasonable advance
notice by MEDICIS to HMR, HMR shall afford to MEDICIS and its employees,
auditors, legal counsel and other authorized representatives reasonable
opportunity and access during normal business hours to inspect, investigate and
audit the development files of HMR that relate solely to the RILOPIROX RIGHTS
and shall provide MEDICIS with such information and materials as MEDICIS may
reasonably request (other than the equivalent of Drug Master Files) in
connection with its due diligence review of the RILOPIROX RIGHTS and the related
business and operations of HMR and its AFFILIATES. MEDICIS acknowledges that
such information shall be deemed to be CONFIDENTIAL INFORMATION of HMR subject
to Article XI hereof.
(c) HMR's rights and obligations with respect to claims in the
PATENTS for rilopirox shall be as provided in Section 9.4 hereof, and if the
RILOPIROX RIGHTS are licensed by MEDICIS, in the definitive license agreement
for the RILOPIROX RIGHTS.
5.5 Theramycin Z Product. Notwithstanding any provision of Section 5.2
hereof or any other provision of this AGREEMENT, neither HMR nor their
AFFILIATES shall have any rights in or to erythromycin as contained in MEDICIS'
Theramycin Z product line or any similar products, improvements thereto or line
extensions thereof, whether existing prior to, on or after the LICENSE EFFECTIVE
DATE.
ARTICLE VI.
SCOPE OF LICENSE EXCLUSIVITY
In order to permit the parties to place a value on the exclusive nature
of the LICENSE set forth in Section 2.1 hereof and to reduce uncertainty about
the rights being conveyed, the parties have agreed to more fully define the
exclusive nature of the exclusive licenses provided hereunder in this Article
VI.
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LICENSE AND OPTION AGREEMENT
6.1 No Sales By MEDICIS Outside the TERRITORY. Except in the case of
products as to which a written agreement is executed pursuant to Section 5.2,
MEDICIS, its AFFILIATES and any successors or assigns of MEDICIS or its
AFFILIATES shall not, during the TERM, (i) sell, market, promote or distribute,
directly or indirectly, any PRODUCTS or SIMILAR PRODUCTS outside the TERRITORY,
or (ii) sell or distribute any PRODUCTS or SIMILAR PRODUCTS to any person in the
TERRITORY if MEDICIS has actual knowledge that such person intends to sell such
PRODUCTS or SIMILAR PRODUCTS outside the TERRITORY. In providing or granting any
rights to the PRODUCTS or SIMILAR PRODUCTS in the TERRITORY, MEDICIS shall
secure from each grantee, licensee, beneficiary or acquiree of such rights its
agreement to restrictions relating to outside the TERRITORY contained in this
AGREEMENT, including an agreement to refrain from knowingly engaging, directly
or indirectly, in parallel importation or dealing in "grey market" products in
connection with its sale and distribution of the PRODUCTS or SIMILAR PRODUCTS.
6.2 No Sales by HMR Inside the TERRITORY. In addition to and without
limiting the provisions of Section 2.3, and except as specifically provided in
Sections 2.1, clauses (i) through (v), 2.3 and 5.1(e), or in the case of
products as to which a written agreement has been executed pursuant to Section
5.1, HMR, their AFFILIATES and any successors or assigns of HMR or their
AFFILIATES shall not, during the TERM: (i) sell, market, promote or distribute,
directly or indirectly, any PRODUCTS or SIMILAR PRODUCTS in the TERRITORY; or
(ii) sell or distribute any PRODUCTS, SIMILAR PRODUCTS or any ACTIVE INGREDIENT
to any person outside the TERRITORY if HMR has actual knowledge that such person
intends to sell such PRODUCTS or SIMILAR PRODUCTS or human dermatology products
containing such ACTIVE INGREDIENT in the TERRITORY. In providing or granting any
rights to the PRODUCTS or SIMILAR PRODUCTS outside the TERRITORY, HMR shall
secure from each such grantee, licensee, beneficiary or acquiree of such rights
its agreement to restrictions relating to inside the TERRITORY contained in this
AGREEMENT, including an agreement to refrain from knowingly engaging, directly
or indirectly, in parallel importation or dealing in "grey market" products in
connection with its sale and distribution of the PRODUCTS or SIMILAR PRODUCTS.
Notwithstanding the foregoing, MEDICIS acknowledges that (i) HMR and their
AFFILIATES, and their grantees, licensees, beneficiaries and acquirees of any
rights related to the DEVELOPMENT STAGE PRODUCT, shall be free to commercialize
the DEVELOPMENT STAGE PRODUCT and any other product for topical application to
the nail in the TERRITORY without restriction, and that the restrictions in this
Section 6.2 and in Section 2.4 hereof shall not apply with respect to the
DEVELOPMENT STAGE PRODUCT PRODUCT, and (ii) subject to Section 5.4 hereof, this
Section 6.2 shall not apply to HMR's exploitation of the RILOPIROX RIGHTS.
ARTICLE VII.
REGULATORY MATTERS; ADVERSE REACTIONS; RECALLS
7.1 Licenses, Filings, Registrations, Permits and Regulatory Approvals.
Subject to the provisions of Schedules 4.3A, 4.3B and 13 hereto, on such date
within six (6) months after the LICENSE EFFECTIVE DATE as MEDICIS may in its
sole discretion determine, HMR and
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LICENSE AND OPTION AGREEMENT
MEDICIS agree that (i) MEDICIS shall assume responsibility in the TERRITORY for
all FDA regulatory matters for all PRODUCTS except the Loprox Cream and the
LOPROX LOTION, and (ii) MEDICIS and HMRI shall each send a letter to the FDA
informing the FDA that MEDICIS has assumed such responsibility. HMRI shall
provide MEDICIS with all assistance and data, reports and other information
reasonably requested by MEDICIS to assume such responsibilities. From and after
MEDICIS' assumption of such responsibilities, HMRI shall timely provide such
manufacturing-related information to MEDICIS as may be necessary for MEDICIS to
meet its regulatory obligations to maintain the NDAs and file the required
reports thereunder. Each party shall cooperate with and undertake such efforts
as are commercially reasonable to assist the other party in making and
maintaining all regulatory filings that may be necessary in connection with the
execution, delivery and performance of this AGREEMENT. Until the LOPROX CREAM
REGULATORY GOALS are achieved, HMRI shall remain responsible for all FDA
regulatory matters pertaining to the Loprox Cream and, until the LOPROX LOTION
REGULATORY GOALS have been achieved, HMRI shall remain responsible for all FDA
regulatory matters pertaining to the LOPROX LOTION.
7.2 Communication with Agencies. During the TERM, each party shall
promptly provide the other party with copies of any significant communications
to or from the FDA with respect to the PRODUCTS. From and after the date on
which MEDICIS assumes responsibility for FDA regulatory matters for all PRODUCTS
except the Loprox Cream and the LOPROX LOTION pursuant to Section 7.1 hereof,
MEDICIS shall have responsibility for all communication with the FDA relating to
the PRODUCTS other than the Loprox Cream and the LOPROX LOTION. From and after
such date, the parties shall also cooperate at their own expense to ensure that
(i) MEDICIS obtains, in a timely manner, all information concerning the PRODUCTS
outside the TERRITORY necessary to meet its regulatory obligations in the
TERRITORY, and (ii) that HMRI receives, in a timely manner, all information
concerning the PRODUCTS inside the TERRITORY necessary to meet the regulatory
obligations of HMR and their AFFILIATES outside the TERRITORY. Upon the earlier
of (i) the PURCHASE DATE; or (ii) achievement of the LOPROX CREAM REGULATORY
GOALS, MEDICIS and HMRI shall each send a letter to the FDA informing the FDA
that MEDICIS is assuming all responsibility for FDA regulatory matters as to the
Loprox Cream and MEDICIS shall thereafter do so. Upon the earlier of (i) the
PURCHASE DATE; or (ii) achievement of the LOPROX LOTION REGULATORY GOALS,
MEDICIS and HMRI shall each send a letter to the FDA informing the FDA that
MEDICIS is assuming all responsibility for FDA regulatory matters as to the
LOPROX LOTION and MEDICIS shall thereafter do so.
7.3 Governmental Inspections. During the TERM, each party shall advise
the other party in writing of any governmental visits to, or written or oral
inquiries about, any facilities or procedures for the manufacture, storage or
handling of the PRODUCTS, or the marketing, selling, promotion or distribution
of the PRODUCTS promptly after any such visit or inquiry (and in advance for any
scheduled visits). Each party shall promptly furnish to the other party any
report, correspondence, warning letter and other documents issued by or provided
to the governmental authority in connection with such visit or inquiry, purged
only of trade secrets of such party that are unrelated to the other party's
activities under this AGREEMENT and any information that is unrelated to the
PRODUCTS. Each party shall permit the relevant
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<PAGE> 33
LICENSE AND OPTION AGREEMENT
governmental authorities to inspect its facilities in connection with the
activities contemplated by this AGREEMENT.
7.4 Adverse Reactions. From and after the date on which MEDICIS assumes
responsibility for FDA regulatory matters for all PRODUCTS except the Loprox
Cream and the LOPROX LOTION pursuant to Section 7.2 hereof, MEDICIS shall during
the TERM be responsible for reporting of adverse experience information to meet
the current requirements for Adverse Drug Reaction reporting to the FDA for all
PRODUCTS except the Loprox Cream and the LOPROX LOTION. MEDICIS shall be
responsible during the TERM for Adverse Drug Reaction reporting with respect to
(i) Loprox Cream only upon achievement of the LOPROX CREAM REGULATORY GOALS and
(ii) LOPROX LOTION only upon the achievement of the LOPROX LOTION REGULATORY
GOALS. Promptly after the LICENSE EFFECTIVE DATE, the parties shall develop and
comply with a standard operating procedure for the reporting of adverse events
that shall permit each party to comply with its FDA and other regulatory
reporting obligations with respect to adverse events. This would include 15-day
alerts, periodic reports, exchange of label changes pertinent to safety and
exchange of information on safety issues. In the event of MEDICIS exercising the
CANADIAN OPTION a standard operating procedure describing the handling of
adverse events and reporting within CANADA shall promptly be developed by the
parties. Each party may audit the other company for compliance with the standard
operating procedures mentioned in this paragraph.
7.5 Product Recalls. In the event that during the TERM (i) any
governmental agency or authority issues a request or directive or orders that
any PRODUCT in the TERRITORY be recalled or retrieved, (ii) a court of competent
jurisdiction orders that any PRODUCT in the TERRITORY be recalled or retrieved
or (iii) HMRI and MEDICIS reasonably determine that any PRODUCT should be
recalled or retrieved in the TERRITORY or a "dear doctor" letter is required
relating to restrictions on the use of any PRODUCT in the TERRITORY, MEDICIS
shall conduct such activity (unless MEDICIS has not yet assumed regulatory
responsibility pursuant to Section 7.2 hereof for the PRODUCT being recalled or
retrieved, whereupon HMR shall conduct such activity) and the parties shall take
all appropriate corrective actions and shall cooperate in the investigation
surrounding the recall. To the extent that any such actions during the TERM
primarily relate to or arise out of (i) the PRODUCTS prior to the LICENSE
EFFECTIVE DATE; (ii) the manufacture or supply of PRODUCTS by HMR or their
AFFILIATES in breach of Article VI of the SUPPLY AGREEMENT or Article VI of the
LOPROX LOTION SUPPLY AGREEMENT or by PACO pursuant to the PACO LOPROX AGREEMENT,
after the LICENSE EFFECTIVE DATE; (iii) the LOPROX CREAM MATTER prior to
achievement of the LOPROX CREAM REGULATORY GOALS or after achievement of the
LOPROX CREAM REGULATORY GOALS if such actions relate to, arise out of or are
attributed to any act, event or omission occurring, or the manufacture of the
Loprox Cream prior to, achievement of the LOPROX CREAM REGULATORY GOALS; or (iv)
the LOPROX LOTION MATTER prior to achievement of the LOPROX LOTION REGULATORY
GOALS or after achievement of the LOPROX LOTION REGULATORY GOALS if such actions
relate to, arise out of or are attributed to any act, event or omission
occurring, or the manufacture of the LOPROX LOTION prior to, achievement of the
LOPROX LOTION REGULATORY GOALS, HMR shall be solely responsible for all costs
and expenses of or associated with any such action,
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LICENSE AND OPTION AGREEMENT
including reimbursement of MEDICIS for any out-of-pocket costs incurred by
MEDICIS as a result of such action. To the extent that any such actions during
the TERM do not primarily relate to or arise out of any of the foregoing,
MEDICIS shall be solely responsible for all costs and expenses of or associated
with any such actions, including reimbursement of HMR therefor.
ARTICLE VIII.
PROMOTION AND MARKETING
8.1 Party Names; Change of Promotional Material. Promptly after
execution of this AGREEMENT and from and after such date or dates as HMR and
MEDICIS shall reasonably agree, subject to applicable regulatory approvals, all
advertising and promotional materials for the PRODUCTS sold in the TERRITORY
shall identify MEDICIS as the marketer of the PRODUCTS sold in the TERRITORY, in
such form as MEDICIS shall determine; provided, however, that HMR acknowledges
and agrees that MEDICIS may market, sell and distribute after the LICENSE
EFFECTIVE DATE any trade or sample inventory of HMRI or its AFFILIATES which
bears the name of HMRI or an AFFILIATE and which is acquired by MEDICIS pursuant
to the SUPPLY AGREEMENT or the LOPROX LOTION SUPPLY AGREEMENT. Subject to the
provisions of the SUPPLY AGREEMENT and the LOPROX LOTION SUPPLY AGREEMENT, and
if requested by HMRI or as required by applicable law, packaging of the HMR
SUPPLIED PRODUCTS sold in the TERRITORY shall identify HMRI or one of its
AFFILIATES or PACO as the manufacturer of the HMR SUPPLIED PRODUCTS.
8.2 Advertising and Promotional Materials.
(a) During the TERM, MEDICIS shall be responsible for development
of all new advertising and promotional materials related to the PRODUCTS sold in
the TERRITORY, which materials shall in all material respects comply with
applicable law.
(b) Promptly after the LICENSE EFFECTIVE DATE, HMRI shall submit an
appropriate letter to the FDA, designating MEDICIS to the FDA as the contact for
review and discussion of all promotional materials for the PRODUCTS, after which
time MEDICIS shall timely file with the FDA, in accordance with all applicable
laws and regulations, all promotional materials for the PRODUCTS required to be
filed with the FDA.
8.3 Medical and Other Inquiries. Promptly after the LICENSE EFFECTIVE
DATE, MEDICIS shall assume all responsibility for all correspondence and
communication with physicians and other health care professionals in the
TERRITORY relating to the PRODUCTS, except for correspondence and communication
relating to the manufacturing of the PRODUCTS or the ACTIVE INGREDIENTS thereof
by HMR or an AFFILIATE, in which case HMR shall take such actions as MEDICIS may
reasonably request. HMR shall use commercially reasonable efforts to provide
MEDICIS with such assistance as MEDICIS may reasonably request in connection
with the handling of inquiries from and communication to physicians and other
health care professionals; provided, however, that MEDICIS acknowledges that HMR
and their AFFILIATES plan to dissolve their worldwide dermatology group as of
December 31, 1998. MEDICIS shall include the PRODUCTS in its programs for
communications with physicians
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LICENSE AND OPTION AGREEMENT
and other health care professionals, as such programs may from time to time
exist. MEDICIS shall keep such records and make such reports as shall be
reasonably necessary to document such communications in compliance with all
applicable regulatory requirements. Except in the case of medical emergency, HMR
shall refer all questions relating to the PRODUCTS sold in the TERRITORY raised
by health care professionals and customers to MEDICIS for its response. In the
case of medical emergency questions handled by HMR, HMR shall provide MEDICIS
with a report identifying the individual making the inquiry and containing the
question(s) asked and the information provided in response promptly after
handling the question.
8.4 Customer Complaints. As soon as practicable after execution of this
AGREEMENT, the parties shall develop mutually agreed upon standard operating
procedures applicable to customer complaints and inquiries. The parties intend
that customer complaints shall be initially received by MEDICIS, which shall log
the complaint and determine whether a response by MEDICIS or HMRI is
appropriate. All complaints reasonably expected to relate to manufacturing
processes of HMR SUPPLIED PRODUCTS shall be referred to HMRI for investigation.
ARTICLE IX.
INTELLECTUAL PROPERTY
9.1 Notices. During the TERM, MEDICIS and HMR shall each promptly, but
in any event no later than fifteen (15) calendar days after such party receives
notice of or becomes aware of any of the following, notify the other in writing
of:
(a) Any suit, claim or proceeding by a third party against HMR or
MEDICIS, or any AFFILIATE or sublicensee of HMR or MEDICIS, alleging
infringement of such third party's intellectual property rights as a result of
the manufacture, use, sale, promotion or marketing of the PRODUCTS anywhere in
the TERRITORY;
(b) Any patent nullity actions, declaratory judgment actions or
alleged patent invalidity or non-infringement of patent or patents pursuant to a
Paragraph IV patent certification by a party filing an Abbreviated New Drug
Application ("ANDA") with respect to PATENTS in the TERRITORY;
(c) Any actual or threatened unlawful disclosure or infringement by
any third party of all or any part of the PATENTS, TRADEMARKS, or the KNOW-HOW
in the TERRITORY; or
(d) Any information that may reasonably be considered material to
the validity or enforceability of the PATENTS.
The parties agree that time is of the essence with respect to the timing of
notices given or required to be given under Sections 9.1 and 9.2.
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9.2 Actions During the TERM. During the TERM, and subject to Sections
9.3 and 18.3 hereof:
(a) HMR shall have the first right, at its sole expense, to respond
to, defend or prosecute any actions, claims, proceedings, infringements or the
like with respect to which notice is given by one party to the other pursuant to
Section 9.1 hereof. In the event HMR elects to undertake any such response,
defense or prosecution, MEDICIS shall, at HMR's reasonable request and at HMR's
expense, cooperate with and assist HMR and its legal counsel in such
undertaking, including without limitation by being a plaintiff or co-plaintiff
and by causing its officers to execute pleadings and other necessary documents.
HMR shall also cooperate with MEDICIS and its legal counsel with respect to, and
keep MEDICIS and its counsel reasonably informed regarding the status of any
actions taken by HMR pursuant to this Section 9.2(a).
(b) In the event that within ten (10) calendar days after giving or
receiving notice pursuant to Section 9.1 hereof, HMR has not undertaken action
deemed by MEDICIS in its reasonable discretion to be appropriate to respond to,
defend or prosecute any actions, claims, proceedings, infringements or the like
with respect to which such notice has been given or received by HMR, or if at
any time HMR abandons any such undertaking, then, in such event, MEDICIS shall
have the option, at its expense, to respond to, defend or prosecute any such
action, claim, proceeding, infringement or the like, and HMR shall, at MEDICIS'
reasonable request and expense, cooperate with and assist MEDICIS in such
undertaking, including without limitation by being a plaintiff or co-plaintiff
and by causing its officers to execute pleadings and other necessary documents.
MEDICIS shall also keep HMR and its counsel reasonably informed at all times as
to the status of any actions taken by MEDICIS pursuant to this Section 9.2(b).
(c) Neither party shall settle any suit or claim relating to the
PATENTS or the KNOW-HOW without obtaining the prior written consent of the other
party, which consent shall not be unreasonably withheld.
(d) All costs and damages obtained by or awarded to a party
defending or prosecuting an action or claim pursuant to this Section 9.2 shall,
after each party has been reimbursed for all costs and expenses of every kind
and character relating to such action, including reasonable attorneys' fees, be
awarded (i) 90% to MEDICIS and 10% to HMR as to damages relating to periods
after the LICENSE EFFECTIVE DATE; and (ii) 50% to MEDICIS and 50% to HMR with
respect to damages relating to periods prior to the LICENSE EFFECTIVE DATE;
provided, however, that with respect to damages relating to periods after the
LICENSE EFFECTIVE DATE, if MEDICIS has defended or prosecuted such action or
claim, any and all such amounts remaining after the reimbursement of expenses
shall be awarded to MEDICIS; and, provided, further, that in the event HMR is
paid only 10% of any award pursuant to this Section 9.2(d) and the OPTION is not
exercised other than as a result of any breach of this AGREEMENT by HMR or any
termination of this AGREEMENT by MEDICIS pursuant to Section 15.3 hereof,
MEDICIS shall pay to HMR an amount equal to 80% of such award within ten (10)
business days following the expiration of the TERM. Subject to the respective
reimbursement obligations of the parties pursuant to this Section 9.2, the party
defending or prosecuting any such action or claim shall have the first right to
reimbursement for
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LICENSE AND OPTION AGREEMENT
its costs and expenses out of any sums obtained or awarded in any such action or
claim or in its settlement.
(e) With respect to any action for infringement occurring both
within and outside the TERRITORY, the parties will confer in good faith
regarding the management of the action and any damage award shall be allocated
proportionately between the parties based upon damages occurring within and
outside the TERRITORY following reimbursement of expenses to the party defending
or prosecuting the action.
9.3 Actions After the PURCHASE DATE. After the PURCHASE DATE, the
provisions of the PURCHASE AGREEMENT shall govern the rights and obligations of
the parties to (i) defend any action or claim by any third party alleging that
MEDICIS' manufacture, marketing, distribution, sale or promotion of the PRODUCTS
in the TERRITORY infringes such third party's intellectual property rights and
(ii) prosecute any actual or threatened unauthorized disclosure or any
infringement in the TERRITORY of the PATENTS or the KNOW-HOW.
9.4 Patent Prosecution. Patent applications in the TERRITORY based on
the PATENTS shall be prosecuted in accordance with the provisions of this
Section 9.4.
(a) HMR and MEDICIS shall jointly retain U.S. patent counsel
("JOINT PATENT COUNSEL") who currently neither represents nor is adverse to
either HMR or MEDICIS to prosecute U.S. patent applications based on or claiming
the priority of the PCT applications identified as Items 1 through 4 of Exhibit
C. JOINT PATENT COUNSEL may be discharged only by agreement of HMR and MEDICIS.
(b) JOINT PATENT COUNSEL shall be instructed to timely prosecute
the patent applications in such a manner that, by use of continuations,
continuations-in-part, or divisionals, claims covering the ACTIVE INGREDIENTS,
active ingredients other than the ACTIVE INGREDIENTS (including without
limitation rilopirox), the DEVELOPMENT STAGE PRODUCT, or HMR's CICLOPIROX
Powder, or their use, or their manufacture ("NON-PRODUCT CLAIMS") shall be
presented in separate applications than those which contain all other claims
within the PATENTS for the PRODUCTS, any IMPROVEMENTS and/or MEDICIS NEWLY
DEVELOPED PRODUCTS (but not any COMPETING NAIL TOPICAL PRODUCT), their use, or
their manufacture ("PRODUCT CLAIMS"). JOINT PATENT COUNSEL shall also be
instructed to prosecute the applications in such a manner as to avoid, if
possible, the filing of a terminal disclaimer that would require that
applications containing PRODUCT CLAIMS and those that contain NON-PRODUCT CLAIMS
be jointly owned.
(c) JOINT PATENT COUNSEL shall be instructed to keep HMR and
MEDICIS regularly and promptly informed as to the progress of the prosecution of
applications containing PRODUCT CLAIMS. JOINT PATENT COUNSEL shall also be
instructed that its sole responsibility and obligation in prosecuting
applications containing PRODUCT CLAIMS is to obtain in a timely manner the
greatest possible, commercially meaningful patent protection for the PRODUCTS,
and that it shall use its best professional judgment to achieve that result. Any
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LICENSE AND OPTION AGREEMENT
further instructions to JOINT PATENT COUNSEL shall be issued only by agreement
of HMR and MEDICIS.
(d) JOINT PATENT COUNSEL shall be instructed to keep HMR and
MEDICIS regularly and promptly informed as to the progress of the prosecution of
applications containing NON-PRODUCT CLAIMS. JOINT PATENT COUNSEL shall prosecute
these applications on instructions from HMR.
ARTICLE X.
REPRESENTATIONS AND WARRANTIES; COVENANTS
10.1 Representations and Warranties of the Parties. HMR and MEDICIS
each represent and warrant to the other, as of the LICENSE EFFECTIVE DATE, as
follows:
(a) Each party and any of its AFFILIATES who are parties to the
TRANSACTION DOCUMENTS has the power, authority and right to enter into the
TRANSACTION DOCUMENTS to which it is a party and to perform its obligations
thereunder. The execution, delivery and performance of the TRANSACTION DOCUMENTS
by each party and any of its AFFILIATES who are parties to the TRANSACTION
DOCUMENTS do not conflict with any material term of any other agreement to which
it or any of its AFFILIATES is a party or by which it or any of its AFFILIATES
is bound.
(b) None of such parties, nor any of their employees or consultants
who shall be undertaking any activities related to this AGREEMENT or the
PRODUCTS, has been debarred or the subject of debarment proceedings by the FDA.
(c) Except with respect to the filing of a pre-merger notification
report under the HSR ACT, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency is required to
be obtained or made by or with respect to such party in connection with its
execution, delivery and performance of this AGREEMENT.
(d) Each party is a corporation or limited liability company, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
consummate the transactions contemplated hereby. The execution and delivery of
this AGREEMENT by each party and the consummation and performance of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate and other proceedings, and this AGREEMENT has been duly
authorized, executed and delivered by each party and, assuming the
enforceability against the other party hereto, constitutes the legal, valid and
binding obligation of each party, enforceable in accordance with its terms
except (i) if such enforcement would be subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally; and (ii) as specific performance and other equitable remedies are
subject to the general discretion of the court. The SUPPLY AGREEMENT, the LOPROX
LOTION SUPPLY AGREEMENT, the PURCHASE AGREEMENT, the TRADEMARK LICENSE
AGREEMENT, the TRANSITION SERVICES AGREEMENT and all other documents executed by
each party or its
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LICENSE AND OPTION AGREEMENT
AFFILIATES and delivered as of the LICENSE EFFECTIVE DATE constitute the valid
and binding obligation of such party or its AFFILIATE enforceable in accordance
with their respective terms, subject to the same exceptions as set forth above.
10.2 Representations and Warranties of HMR. Subject to the matters
specifically disclosed in the applicable subsection of Schedule 10.2 hereto,
HMRI, HMR SA and HMR GmbH hereby jointly and severally represent and warrant to
MEDICIS, as of the LICENSE EFFECTIVE DATE, that:
(a) Except for the DEVELOPMENT STAGE PRODUCT, the PRODUCTS are the
only human dermatology products containing the ACTIVE INGREDIENTS which, as of
the LICENSE EFFECTIVE DATE, HMR or their AFFILIATES sell or have developed for
sale in the TERRITORY; provided, however, that in the event that HMR or their
AFFILIATES have developed other human dermatology products containing the ACTIVE
INGREDIENTS for sale in the TERRITORY, HMR's sole obligation and liability
hereunder shall be to convey rights to such products to MEDICIS on substantially
the same terms as provided herein as to Topicort Ointment 0.05% pursuant to
Section 10.2(m) hereof without payment of further consideration by MEDICIS. For
purposes of this Section 10.2(a) only (and for no other provision of this
AGREEMENT) "developed for sale in the TERRITORY" as to any product shall mean
having filed an Investigative New Drug Application or NDA as to such product.
(b) HMR or their AFFILIATES own all right, title and interest in
and to the PATENTS, the NDAs, the PRODUCT KNOW-HOW (except for rights
constituting PRODUCT KNOW-HOW which are not owned but which are controlled or
licensed by HMR) and the TRADEMARKS in the TERRITORY, free and clear of any and
all liens, encumbrances, claims, mortgages, security interests, charges or
restrictions. Except for the corporate names of HMR and their AFFILIATES or
contract manufacturers, the TRADEMARKS constitute all of the trademarks, trade
names and service marks used in connection with the development, marketing,
promotion, sale and distribution of the PRODUCTS in the TERRITORY within the two
(2) year period prior to the LICENSE EFFECTIVE DATE.
(c) HMR or their AFFILIATES have (i) the sole legal right in the
TERRITORY to license the PATENTS, license the TRADEMARKS pursuant to the
TRADEMARK LICENSE AGREEMENT, and assign and convey good and marketable title to
the PATENTS and the TRADEMARKS to MEDICIS in the TERRITORY; and (ii) the legal
right to license the PRODUCT KNOW-HOW and the SHARED KNOW-HOW in the TERRITORY
free and clear of all liens, encumbrances, claims, mortgages, security
interests, charges or restrictions; and (iii) the legal right to grant to
MEDICIS the rights described in Sections 4.1 and 4.4 hereof. HMR's execution and
delivery of this AGREEMENT and the other related documents delivered by HMR in
connection with transactions contemplated herein and the performance of this
AGREEMENT by HMR or their AFFILIATES (and the transactions contemplated herein):
(i) do not and will not conflict with, violate or constitute or result in a
default or an event creating rights of acceleration, termination or
cancellation, or a loss of right, under any law, judgment, order or decree,
under the articles of incorporation or bylaws of HMR or under any mortgage,
contract or agreement to which HMR or their AFFILIATES is a party or
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LICENSE AND OPTION AGREEMENT
by which HMR or their AFFILIATES is bound; and (ii) will not result in the
creation or imposition of any lien, charge, mortgage, claim, pledge, security
interest, restriction or encumbrance of any kind on, or liability with respect
to, the INTELLECTUAL PROPERTY in the TERRITORY.
(d) (i) All NDAs required for the marketing and sale of the
PRODUCTS in the TERRITORY have been approved by the FDA, and all PRODUCTS are
eligible for immediate sale in the TERRITORY without regulatory limitations, and
HMR is in full compliance with all material terms and conditions of such NDAs.
HMR has not received any notice that the FDA has commenced or threatened to
initiate any action to withdraw its approval or request the recall of any
PRODUCT or commenced or threatened to initiate any action to enjoin production
at any facility for the manufacture of the PRODUCTS.
(ii) All manufacturing operations for the PRODUCTS sold in the
TERRITORY conducted by or on behalf of HMR or its AFFILIATES have been and are
being conducted in compliance with the good manufacturing practice regulations
set forth in 21 C.F.R. Parts 210 and 211 and neither HMR nor their AFFILIATES
has, with respect to the PRODUCTS, made an untrue statement of a material fact
or fraudulent statement to the FDA, failed to disclose a material fact required
to be disclosed to the FDA or committed an act, made a statement or failed to
make a statement that could reasonably be expected to provide a basis for the
FDA to invoke its policy respecting "Fraud, Untrue Statements of Material Facts,
Bribery and Illegal Gratuities" as set forth in 56 Fed. Reg. 46191 (September
10, 1991). No PRODUCTS sold in the TERRITORY are or have been adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act of
1938, as amended, 21 U.S.C. Sections 301 et. seq., in any manner that gives rise
to any liability on the part of HMRI or its AFFILIATES. With respect to any NDA
relating to the PRODUCTS submitted to but not approved by the FDA, HMR has
complied in all material respects with the requirements of 21 U.S.C. Sections
355 and 357 and 21 C.F.R. Parts 312, 314 and 430 et. seq. and has provided all
additional information and taken all additional action requested by the FDA in
connection therewith. HMR has made available for MEDICIS' inspection copies of
any and all material reports of inspection observations, establishment
inspection reports, warning letters and other documents received by HMR from the
FDA that indicate or suggest lack of compliance with the FDA regulatory
requirements in connection with the manufacture or sale of the PRODUCTS.
(e) No default under any material agreement or other material
arrangement relating to the PRODUCTS in the TERRITORY, including without
limitation the HERBERT AGREEMENT and the PACO AGREEMENTS, has been declared and
is continuing and, to the knowledge of HMR, no condition exists which, with
notice or lapse of time or both, would constitute a default under any such
material agreement or other material arrangement. All of such agreements are
valid and subsisting and are in full force and effect and, to the knowledge of
HMR, no claim exists or has been asserted with respect to such agreements that
would adversely affect the rights granted to MEDICIS hereunder. HMR has not
received notice that any party to any such agreements intends to cancel or
terminate such agreements or to exercise or not exercise any options or rights
under such agreements.
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LICENSE AND OPTION AGREEMENT
(f) The manufacture, marketing, distribution, sale and promotion
of the PRODUCTS in the TERRITORY: (i) does not in any material respect violate
or conflict with any NDA, law, governmental specification, authorization or
requirement, or any decree, judgment, order or similar restriction, and (ii) to
the knowledge of HMR, has not been the subject of any investigation or inquiry
by any governmental agency or authority regarding violations or alleged
violations of law or been found by any such agency or authority to be in
violation of any law.
(g) No proceedings have been instituted or are pending in the
TERRITORY which challenge any rights of HMR with respect to, or the validity of,
the PATENTS or the TRADEMARKS. Neither the PRODUCTS, the INTELLECTUAL PROPERTY
nor HMR's business relating to the manufacture of the PRODUCTS or the marketing
and sale of the PRODUCTS in the TERRITORY is the subject of: (i) any outstanding
judgment, order, writ, injunction or decree of, or settlement agreement with,
any person, corporation, business entity, court, arbitrator or administrative or
governmental authority or agency, limiting, restricting or affecting the
PRODUCTS, the INTELLECTUAL PROPERTY or such business in a way that would have an
adverse effect on MEDICIS' manufacture, sale and marketing of the PRODUCTS as
contemplated herein; and (ii) any pending or, to the knowledge of HMR,
threatened claim, suit, proceeding, charge, inquiry, investigation or action of
any kind.
(h) All material registrations and filings, including the payment
of maintenance and renewal fees, have been timely made in the TERRITORY for the
PATENTS and the TRADEMARKS, as are necessary to preserve the rights of HMR or to
prosecute patent applications in the ordinary course of HMR's management of
their intellectual property rights. MEDICIS acknowledges that no patent
applications have been filed by HMR, and no patents have issued, for the PATENTS
in the TERRITORY as of the LICENSE EFFECTIVE DATE.
(i) To the actual knowledge of HMR after due inquiry the use and
exploitation by MEDICIS of the PATENTS, the KNOW-HOW and the TRADEMARKS for the
manufacture, use, marketing and sale of the PRODUCTS in the TERRITORY shall not
infringe the valid intellectual property rights of any third party.
(j) Neither HMR nor any of its AFFILIATES is a party to or is
bound by any agreement or other arrangement pursuant to which HMR or such
AFFILIATE has agreed to grant or honor chargebacks, rebates or the like in
connection with the sale and/or distribution of the PRODUCTS in the TERRITORY.
(k) The financial statements previously provided to MEDICIS
relating to the sales of the PRODUCTS in the TERRITORY by HMR fairly present the
information stated therein for the respective periods.
(l) HMR has not, nor to the knowledge of HMR has PACO or HERBERT,
received any notice that the FDA has commenced, or threatened to initiate any
action to withdraw its approval or request a recall of any PRODUCT, or commenced
or threatened to initiate any action to enjoin production in any facility in
which a PRODUCT is manufactured. To the knowledge of HMR, there is no
outstanding injunction, judgment, order, decree, ruling or
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LICENSE AND OPTION AGREEMENT
charge relating to any PRODUCT in the TERRITORY, or any action, suit,
proceeding, hearing or investigation in or before any court or quasi judicial or
administrative agency of any federal, state or local jurisdiction pertaining to
any PRODUCT in the TERRITORY, nor, has any such proceeding been threatened. To
the knowledge of HMR, there are no facts which, if known by a potential claimant
or governmental authority, would give rise to a claim or proceeding which, if
asserted or conducted, would materially adversely affect any PRODUCT in the
TERRITORY.
(m) MEDICIS acknowledges that (i) Topicort Ointment 0.05% is not
currently sold in the TERRITORY; (ii) none of the representations, warranties
and covenants made in this Section 10.2 with respect to the PRODUCTS shall apply
to Topicort Ointment 0.05%; and (iii) the sole representations, warranties and
covenants made by HMR with respect to Topicort Ointment 0.05% are that HMR has
the requisite power, authority and right to convey the rights conveyed in this
AGREEMENT with respect to the Topicort Ointment 0.05%, free and clear of any and
all liens, encumbrances or security interests.
10.3 Covenants of the Parties.
(a) MEDICIS on the one hand and HMR on the other each covenants to
the other that it shall comply in all material respects with all laws, including
tax laws, applicable to it and its activities under this AGREEMENT. The parties
further agree that they shall, without payment or further consideration, execute
and deliver any further or additional instruments or documents and perform any
acts which may be reasonably necessary in order to effectuate and carry out the
purposes of this AGREEMENT.
(b) HMR has delivered to MEDICIS a list which identifies each
agreement pursuant to which HMRI has agreed to grant or honor rebates in
connection with the sale and/or distribution of the PRODUCTS. Within five (5)
days following the LICENSE EFFECTIVE DATE, HMRI shall request in writing of the
other party to each such agreement that any and all PRODUCTS subject to such
agreement be immediately withdrawn therefrom and, if MEDICIS is a party to a
similar agreement with such other party and if MEDICIS so requests, that the
PRODUCTS be made subject to MEDICIS' agreement with such other party. In the
event of any such request by MEDICIS, MEDICIS shall also within such five (5)
day period request in writing of the other party that the PRODUCTS be made
subject to MEDICIS' agreement with such other party. If the other party to any
such agreement initially refuses to withdraw the PRODUCTS from such agreement,
HMRI shall, at MEDICIS' request, assist MEDICIS in adding such PRODUCTS to any
existing rebate arrangement between MEDICIS and such other party or in entering
into its own rebate arrangement with such other party with respect to the
PRODUCTS. HMRI and MEDICIS shall each use their commercially reasonable good
faith efforts to implement the provisions of this Section 10.3(b). If, after the
parties have taken any and all actions required under this Section 10.3(b), any
PRODUCTS cannot be withdrawn from any agreement identified in the list delivered
to MEDICIS as provided in this Section 10.3(b), (i) MEDICIS shall reimburse HMRI
for the amounts of any rebates required to be paid by HMRI thereunder in
connection with the sale and/or distribution of the PRODUCTS from and after the
LICENSE EFFECTIVE DATE on a monthly basis within thirty (30) days after
presentation by HMR of an invoice therefor, and (ii) HMRI shall take any and all
actions required to ensure that
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LICENSE AND OPTION AGREEMENT
the PRODUCTS are not in any manner subject either to any renewal of such
agreement or to any new agreement entered into between HMRI and the other party
to such agreement.
10.4 Covenants of MEDICIS.
(a) During the TERM, MEDICIS shall use its reasonable commercial
efforts to promote the PRODUCTS, using efforts comparable to the efforts devoted
by a company the size of MEDICIS to products with commercial potential similar
to that of the PRODUCTS.
(b) MEDICIS shall not at any time during the TERM take any action
or omit to take any action which will in any material way compromise its rights
under the HERBERT AGREEMENT or the PACO A/T/S AGREEMENT, or materially increase
its obligations thereunder.
(c) No provision of the HERBERT AGREEMENT or the PACO AGREEMENTS
shall be amended during the TERM without the prior written consent of HMRI,
which consent shall not be unreasonably withheld or delayed. If the OPTION is
not exercised by MEDICIS, the HERBERT AGREEMENT and the PACO A/T/S AGREEMENT
shall be deemed to be reassigned to HMRI upon the expiration of the TERM.
10.5 Covenants of HMR.
(a) NEITHER HMR nor any of their AFFILIATES will at any time
during the TERM take any action or omit to take any action which will in any
material way compromise HMRI's rights under the PACO LOPROX AGREEMENT, or
materially increase HMR's obligations thereunder.
(b) Following the LICENSE EFFECTIVE DATE, HMR shall reimburse and
indemnify MEDICIS promptly upon its request for any and all losses suffered or
amounts paid by MEDICIS as a result of any chargeback and/or rebate agreements
or arrangements entered into by HMRI or an AFFILIATE which relate to the sale of
the PRODUCTS and are not disclosed on the portion of Schedule 10.2 hereto
relating to Section 10.2(j) of this AGREEMENT.
(c) Except (i) as specifically permitted by the express terms of
this AGREEMENT; and (ii) for obligations specifically assumed by MEDICIS under
the TRANSACTION DOCUMENTS, neither HMR nor any of their AFFILIATES shall take
any action, fail to take any action required of them or otherwise cause (1) any
of the representations and warranties contained in Section 10.2 of the PURCHASE
AGREEMENT; or (2) any of the representations and warranties contained in
Sections 10.2(b), (c), (d), (e), (f), (g) (except to the extent such
representations and warranties in Section 10.2(g) relate to the PATENTS), (h),
(i) or (l) (subject to Section 7.5, which shall control) herein, to be untrue
during the TERM or as of the PURCHASE DATE. Notwithstanding any other provision
of this Section 10.5(c), HMR shall have no responsibility for (i) the
obligations of HERBERT or PACO under the HERBERT AGREEMENT or the PACO A/T/S
AGREEMENT arising after the LICENSE EFFECTIVE
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DATE; or (ii) obligations, including regulatory obligations, specifically
assumed by MEDICIS under the TRANSACTION DOCUMENTS.
10.6 Mutual Limitations on Warranties and Damages.
(a) OTHER THAN THE REPRESENTATIONS AND WARRANTIES MADE BY THE
PARTIES PURSUANT TO SECTIONS 10.1 AND 10.2 OR ELSEWHERE HEREIN, THE PARTIES
DISCLAIM ANY AND ALL OTHER WARRANTIES WHETHER EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR ANY WARRANTY ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
(b) EXCEPT AS EXPRESSLY SET FORTH IN SCHEDULES 4.3A, 4.3B AND 13
HERETO AND IN ADDITION TO THEIR RESPECTIVE REMEDIES UNDER ARTICLE XVIII AND ANY
REMEDY PROVIDED HEREIN, AT LAW OR IN EQUITY FOR BREACH OF THIS AGREEMENT AS
LIMITED BY THIS SECTION 10.6, MEDICIS AND HMR SHALL EACH BE ENTITLED TO ANY AND
ALL RIGHTS AND REMEDIES AVAILABLE AT LAW OR IN EQUITY OR UNDER THE TRANSACTION
DOCUMENTS WITH RESPECT TO RIGHTS AND OBLIGATIONS ARISING THEREUNDER; PROVIDED,
HOWEVER, THAT UNDER NO CIRCUMSTANCES SHALL ANY PARTY BE LIABLE TO ANY OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND,
INCLUDING LOSS OF PROFITS. FURTHERMORE, NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, IN NO EVENT SHALL THE AGGREGATE LIABILITY OF HMR OR MEDICIS PURSUANT TO
ARTICLE XVIII OR OTHERWISE HEREUNDER, AND/OR UNDER THE PURCHASE AGREEMENT, THE
TRANSITION SERVICES AGREEMENT, THE TRADEMARK LICENSE AGREEMENT OR THE TECHNICAL
AGREEMENT EXCEED U.S. $82.5 MILLION LESS OR PLUS ANY ADJUSTMENTS TO THE LICENSE
FEES OR PURCHASE PRICE MADE PURSUANT TO SCHEDULES 4.3A, 4.3B OR 13 HERETO,
PROVIDED THAT SUCH LIMITATION SHALL NOT APPLY WITH RESPECT TO ANY LIABILITY TO
ANY THIRD PARTY UNDER ARTICLE XVIII OR OTHERWISE.
10.7. Survival of Representations and Warranties. The representations
and warranties made by HMR and by MEDICIS in this AGREEMENT are made as of the
LICENSE EFFECTIVE DATE, and they shall only be valid and survive for a period
ending on the earlier of the three (3) year anniversary of the LICENSE EFFECTIVE
DATE or the date which is one (1) year after the date of termination of this
AGREEMENT and shall thereafter be of no force or effect, except to the extent
required to enforce the parties' accrued rights and obligations hereunder
following the end of such period for any claims which have been properly
notified by one party to any other party prior to the expiration of such period.
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ARTICLE XI.
CONFIDENTIAL INFORMATION
11.1 Ownership. Without limiting the rights granted to and by the
parties under this AGREEMENT, CONFIDENTIAL INFORMATION furnished hereunder by
either party to the other shall remain the sole property of the disclosing
party. Data and inventions concerning the PRODUCTS developed or made during the
TERM shall be owned by the developing or inventing party.
11.2 Confidentiality. Each party agrees that during the TERM and at all
times thereafter, it shall keep, and cause its AFFILIATES and/or permitted
sublicensees to keep, confidential all CONFIDENTIAL INFORMATION, and neither
party nor any of its AFFILIATES and/or permitted sublicensees shall use or
disclose the CONFIDENTIAL INFORMATION except as expressly permitted in this
AGREEMENT. Each party acknowledges that the CONFIDENTIAL INFORMATION is highly
valuable, proprietary and confidential and that any disclosure to any officer,
employee, or agent of such party or any of its AFFILIATES shall be made only to
the extent necessary to carry out its responsibilities under this AGREEMENT and
only if such officer, employee or agent shall be bound by an agreement to
maintain such information in confidence.
11.3 Public Announcements and Statements. Neither HMR nor MEDICIS, nor
any AFFILIATE thereof, shall issue or cause publication of any press release or
other public announcement or public communication with respect to this AGREEMENT
or the transactions contemplated hereby without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed.
Neither party shall use the name of the other party in any public statement or
press release without the prior written approval of the other party, which
approval may not be unreasonably withheld or delayed; provided, however, that
both parties shall give the other party a minimum of five (5) business days to
review any such press release or other public statement. Notwithstanding the
foregoing, each party may make any disclosure which such party, in the opinion
of its counsel, is obligated to make pursuant to applicable law, in which case
such party shall still endeavor to give the other party an opportunity to review
such disclosure but shall not be obligated to do so if such disclosure must, in
the opinion of its counsel, be made without time for review. The failure of a
party to draft such disclosure in a timely fashion shall not be deemed a reason
to avoid submitting such disclosure to the other party hereto.
ARTICLE XII.
IMPROVEMENTS
12.1 Improvements. All IMPROVEMENTS developed by a party to any PRODUCT
during the TERM shall be the sole and exclusive property of such party;
provided, however, that subject to the respective obligations of the parties
under Article VI hereof, (i) HMR shall grant to MEDICIS pursuant to Section 2.1
hereof an exclusive royalty-free license during the TERM to use and exploit in
the TERRITORY, and outside the TERRITORY solely within North America to make and
have made PRODUCTS for use and resale in the TERRITORY, any
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LICENSE AND OPTION AGREEMENT
IMPROVEMENTS to any PRODUCTS for human dermatological use developed by HMR or
its AFFILIATES during the TERM solely with the PRODUCTS and with other
IMPROVEMENTS, LINE EXTENSIONS, MEDICIS NEWLY DEVELOPED PRODUCTS and HMR NEWLY
DEVELOPED PRODUCTS sold and/or licensed to MEDICIS in accordance with Section
5.1 hereof; and (ii) MEDICIS hereby grants to HMRI an exclusive royalty-free
license during the TERM to use and exploit, outside the TERRITORY, and within
the TERRITORY to make and have made PRODUCTS for use and resale outside the
TERRITORY, any IMPROVEMENTS to any PRODUCTS for human dermatological use
developed by MEDICIS or its AFFILIATES during the TERM solely with the PRODUCTS
and with other IMPROVEMENTS, LINE EXTENSIONS, HMR NEWLY DEVELOPED PRODUCTS and
MEDICIS NEWLY DEVELOPED PRODUCTS sold and/or licensed to HMR in accordance with
Section 5.2 hereof.
12.2 Regulatory Responsibility with Respect to IMPROVEMENTS.
Notwithstanding any provision of this AGREEMENT granting a license to any
IMPROVEMENT by or to any party: (i) MEDICIS shall bear all costs and expenses
associated with obtaining regulatory approval for sales within the TERRITORY of
any IMPROVEMENT licensed by HMR to MEDICIS hereunder; and (ii) HMR shall bear
all costs and expenses associated with obtaining regulatory approval for sales
outside of the TERRITORY of any IMPROVEMENT licensed by MEDICIS to HMR
hereunder.
ARTICLE XIII.
ADDITIONAL LOPROX PRODUCT
13.1 Additional Loprox Product. The parties have made certain
agreements regarding an additional Loprox PRODUCT which are set forth in
Schedule 13 attached hereto and incorporated herein.
ARTICLE XIV.
MANUFACTURING
14.1 Manufacturing by MEDICIS. Subject to the terms of the SUPPLY
AGREEMENT, MEDICIS shall have the right to manufacture the PRODUCTS in the
TERRITORY (and in other countries in North America, to the extent legally
permissible) during the TERM; provided, however, that MEDICIS' rights during the
TERM to manufacture (i) LOPROX LOTION and A/T/S Solution shall be subject to the
PACO AGREEMENTS, and (ii) A/T/S Gel shall be subject to the HERBERT AGREEMENT.
ARTICLE XV.
TERM AND TERMINATION
15.1 Term of the AGREEMENT. The term of this AGREEMENT (the "TERM")
shall commence on the LICENSE EFFECTIVE DATE and, subject to earlier termination
pursuant to Sections 15.2 and 15.3 hereof, shall terminate on the third
anniversary of the LICENSE
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LICENSE AND OPTION AGREEMENT
EFFECTIVE DATE, without any further action of HMR or MEDICIS; provided, however,
that if MEDICIS has initiated an irrevocable wire transfer or otherwise
irrevocably commenced payment of the PURCHASE PRICE on or before the third
anniversary of the LICENSE EFFECTIVE DATE, the TERM shall continue for up to
three (3) business days to permit the PURCHASE AGREEMENT to become effective.
Subject to the terms of the PURCHASE AGREEMENT upon its effectiveness, after the
expiration or termination of this AGREEMENT, MEDICIS thereafter shall not have
any right hereunder to make, have made, use, sell or have sold the PRODUCTS in
the TERRITORY under this AGREEMENT. Upon such expiration, the TRANSACTION
DOCUMENTS (other than the PURCHASE AGREEMENT) shall simultaneously terminate in
accordance with their respective terms, without any further action of HMR or
MEDICIS, and the PURCHASE AGREEMENT shall not become effective.
15.2 Termination by HMR. Subject to Section 16.2 hereof, HMR may
terminate this AGREEMENT upon written notice to MEDICIS at any time in the event
of nonpayment of any amount duly payable by MEDICIS under Sections 3.1 or 4.1(c)
or Sections 13.4 or 13.6 of Schedule 13 hereof that is continuing for sixty (60)
days after MEDICIS has received written notice from HMR of such nonpayment and
such breach has not been cured within such sixty (60) day period; provided,
however, that this AGREEMENT may not be terminated based upon nonpayment of any
amount by MEDICIS that is subject to a right of set-off pursuant to Section
18.5. If HMR terminates this AGREEMENT pursuant to this Section 15.2, the
TRANSACTION DOCUMENTS (other than the PURCHASE AGREEMENT) shall simultaneously
terminate in accordance with their respective terms, without any further action
of HMR or MEDICIS, and the PURCHASE AGREEMENT shall not become effective.
15.3 Termination by MEDICIS. Subject to Section 16.2 hereof, MEDICIS
may terminate this AGREEMENT during the TERM upon written notice to HMR at any
time in the event of: (i) a material breach by HMR of any representation,
warranty or covenant relating to the INTELLECTUAL PROPERTY or any part thereof
in Sections 10.2(b), (c), (d)(i), (g), (h) or (i) or Section 9.4 of this
AGREEMENT; (ii) a material breach by HMR or its AFFILIATES of Sections 2.1, 2.3,
4.2 or Schedules 4.3A or 4.3B hereof; (iii) a material breach by HMR of Section
1 of the TRADEMARK LICENSE AGREEMENT, in each of the foregoing cases (i), (ii)
and (iii), where such breach is continuing for sixty (60) days after HMR has
received written notice from MEDICIS of such breach, specifying in reasonable
detail the particulars of the alleged breach, and such breach has not been cured
within such sixty (60) day period or, if such breach cannot by its nature be
cured within sixty (60) days, if reasonable progress as determined by MEDICIS in
its sole and exclusive discretion has not been made by HMR during such sixty
(60) day period toward curing such breach; (iv) any termination of the SUPPLY
AGREEMENT pursuant to Section 3.3(c) of the SUPPLY AGREEMENT, provided written
notice of termination hereunder is provided within thirty (30) days following
such termination of the SUPPLY AGREEMENT; or (v) except as specifically
permitted by the express written terms of this AGREEMENT and for obligations
specifically assumed by MEDICIS under the TRANSACTION DOCUMENTS, HMR or any of
its AFFILIATES takes any action, fails to take any action or otherwise causes
(1) any of the representations and warranties contained in Section 10.2 of the
PURCHASE AGREEMENT or (2) any of the representations and warranties contained in
Sections 10.2(b), (c), (d)(i), (g) (except to the extent such representations
and
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LICENSE AND OPTION AGREEMENT
warranties in Section 10.2(g) relate to the PATENTS), (h) or (i) herein to be
untrue during the TERM or as of the PURCHASE DATE. If MEDICIS terminates this
AGREEMENT pursuant to this Section 15.3, the TRANSACTION DOCUMENTS (other than
the PURCHASE AGREEMENT) shall simultaneously terminate in accordance with their
respective terms, without any further action of HMR or MEDICIS and the PURCHASE
AGREEMENT shall not become effective.
ARTICLE XVI.
RIGHTS AND DUTIES UPON TERMINATION
OR EXPIRATION; REMEDIES
16.1 Monies Paid or Due.
(a) Upon the termination or expiration of this AGREEMENT under
Article XV and subject to (i) any liability of either party pursuant to Article
XVIII hereof; (ii) the provisions of Section 4.3A(d) of Schedule 4.3A hereto and
of Section 4.3B(c) of Schedule 4.3B hereto; and (iii) the provisions of Sections
16.4 and 18.5 hereof, each party shall have the right to retain all payments
already received from the other party pursuant to this AGREEMENT, and each party
shall pay to the other all sums accrued hereunder which are then due, including
without limitation and by way of example only: (1) any sums then due and payable
to HMR under Sections 3.1(a) or 4.1(c) hereof or Sections 13.4 or 13.6 of
Schedule 13 hereto, and (2) any sums then due and payable to MEDICIS under
Schedule 2.6 and Section 4.3A(d) of Schedule 4.3A hereto, Section 4.3B of
Schedule 4.3B(c) hereto or Sections 13.2 or 13.3 of Schedule 13 hereof.
(b) The termination of this AGREEMENT by MEDICIS under Section
15.3 hereof shall terminate MEDICIS' obligation to make any payments set forth
in Sections 3.1(a) or 4.1(c) or in Schedule 13 of this AGREEMENT that would
accrue after, and are not due and payable at the time of, the effective date of
the termination.
(c) The termination of this AGREEMENT by HMR under Section 15.2
hereof shall terminate HMR's obligation to make any payments set forth in
Schedules 4.3A, 4.3B or 13 to this AGREEMENT that would accrue after, and are
not due and payable at the time of, the effective date of the termination.
16.2 Survival of Rights.
(a) Subject to Section 16.2(c) hereof, upon effectiveness of the
PURCHASE AGREEMENT in accordance with its terms, the PURCHASE AGREEMENT shall
thereafter govern the continuing rights of the parties, and no provision of this
AGREEMENT shall survive except that (i) the obligations of HMR pursuant to
Section 4.3A(c) of Schedule 4.3A hereto if the LOPROX CREAM REGULATORY GOALS
have not been obtained as of the end of the TERM and (ii) the provisions of
Schedule 13 hereto shall survive as provided therein.
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LICENSE AND OPTION AGREEMENT
(b) Subject to Section 16.2(c) hereof, in the event that the
PURCHASE AGREEMENT for whatever reason does not become effective in accordance
with its terms, the provisions of Sections 2.5, 4.1(c) (if the OPTION has been
exercised and the PURCHASE AGREEMENT does not become effective solely because
MEDICIS has failed to pay the amounts payable under Sections 3.1 and 4.1(c)
hereof and Sections 13.4 and 13.6 of Schedule 13 hereof), 9.2 (except for
MEDICIS' right to initiate the prosecution of any action, claim, proceeding,
infringement or the like under paragraph (b) of Section 9.2 hereof), 10.6, 15.1,
17.2, 19.2, 19.4, 19.5, 19.6, 19.7, 19.8, 19.10, 19.11 and 19.12 and of Articles
XI and XVIII hereof and this Article XVI and Section 13.7 of Schedule 13 shall
survive the termination or expiration of this AGREEMENT.
(c) The termination or expiration of this AGREEMENT shall not
affect the accrued rights and obligations of HMR or MEDICIS arising under or out
of this AGREEMENT or claims arising during the TERM, subject to Section 10.7
hereof, and the obligations relating to such claims. In addition, any provision
required to interpret and enforce the parties' rights and obligations under this
AGREEMENT shall survive to the extent required for the full observation and
performance of this AGREEMENT by the parties hereto.
16.3 Remaining PRODUCT. Upon termination of this AGREEMENT without
exercise of the OPTION, MEDICIS, in its sole discretion, may elect (i) to sell
all or any portion of the PRODUCTS remaining in inventory or ordered by MEDICIS
prior to the effective date of the termination, for a period following such
termination not to exceed six (6) months; or (ii) resell any such unexpired
PRODUCTS with at least twelve (12) months of shelf life remaining to HMR at the
actual purchase price paid by MEDICIS for such PRODUCTS; provided, however, that
in the event of termination of this AGREEMENT by HMR pursuant to Section 15.1
due to a nonpayment by MEDICIS, the foregoing election shall be made by HMR. In
the event that either party elects the option set forth in clause (i) above, the
parties shall cooperate to achieve a smooth transition with respect to the
marketing of the PRODUCTS, and HMRI shall have no obligation to pay or reimburse
MEDICIS for any PRODUCTS that MEDICIS has on hand at the end of the specified
period.
16.4 Damages. Subject to Section 10.6, a party shall be entitled to
damages from the other party if the other party breaches any provision of this
AGREEMENT. In the event that this AGREEMENT is terminated by MEDICIS pursuant to
Section 15.3(iv) hereof upon termination of the SUPPLY AGREEMENT pursuant to
Section 3.3(c) thereof, such termination shall not be automatically presumed to
be a breach of this AGREEMENT by HMR, and HMR shall only be liable to MEDICIS
for damages hereunder relating to such termination if HMR is in breach of the
provisions of this AGREEMENT.
16.5 Transition Upon Termination. If this AGREEMENT expires or is
terminated in accordance with its terms or by mutual agreement and the PURCHASE
AGREEMENT does not become effective, MEDICIS shall upon expiration or
termination of the TERM (i) cooperate with HMR and/or their AFFILIATES to assure
a smooth transition to HMR and/or their AFFILIATES of the sale, marketing and
distribution of the PRODUCTS in the TERRITORY, including providing services to
HMR and/or their AFFILIATES of a similar nature to those
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LICENSE AND OPTION AGREEMENT
provided by HMRI to MEDICIS pursuant to the TRANSITION SERVICES AGREEMENT; and
(ii) transfer (without further consideration other than the payment of the
expenses of such transfer) to HMRI all right, title and interest in and to any
IMPROVEMENTS developed by MEDICIS or its AFFILIATES to use solely with the
PRODUCTS, other IMPROVEMENTS, LINE EXTENSIONS, HMR NEWLY DEVELOPED PRODUCTS,
and/or MEDICIS NEWLY DEVELOPED PRODUCTS sold and/or licensed to HMR in
accordance with Section 5.2 hereto, for use outside of the TERRITORY.
ARTICLE XVII.
PAYMENT TERMS GENERALLY; TAXES
17.1 Place of Payment; Interest. All amounts to be paid under this
AGREEMENT shall be paid in United States dollars by wire transfer in immediately
available funds, to such account as the receiving party shall have designated on
the LICENSE EFFECTIVE DATE and from time to time thereafter in writing not less
than ten (10) days prior to the date of payment; and any such payment shall be
deemed to have been paid when recorded in the proper account. Any payment that
is not paid when due shall bear interest from the due date until payment in
full, at a rate equal to one (1) percent per month.
17.2 Taxes. If Federal, State or local laws or regulations require that
taxes be withheld on any payment, MEDICIS shall be entitled to (i) deduct those
taxes from the payment, (ii) pay the taxes to the proper taxing authority and
(iii) send evidence of the obligation together with proof of payment to HMR.
ARTICLE XVIII.
INDEMNIFICATION AND LIMITATION OF LIABILITY
18.1 Indemnification by MEDICIS. In addition to any other rights HMR
may have at law or in equity, and subject to Section 10.6, MEDICIS shall
indemnify, defend and hold harmless HMR and their AFFILIATES, employees, agents,
officers and directors, and their successors and assigns (each, an "HMR
INDEMNIFIED PARTY"), from and against any and all LIABILITIES which the HMR
INDEMNIFIED PARTY may incur, suffer or be required to pay resulting from or
arising out of: (i) the marketing, distribution, sale or promotion of the
PRODUCTS by MEDICIS or its AFFILIATES after the LICENSE EFFECTIVE DATE; (ii) the
manufacture of the PRODUCTS by MEDICIS or its AFFILIATES or by a third party
(other than an AFFILIATE of HMR) after the LICENSE EFFECTIVE DATE, unless HMR
had knowledge as of the LICENSE EFFECTIVE DATE that, based on facts in existence
and circumstances persisting on the LICENSE EFFECTIVE DATE, such third party's
manufacture of the PRODUCTS after the LICENSE EFFECTIVE DATE would be likely to
result in or create such LIABILITIES; and (iii) any breach of any
representation, warranty or covenant of MEDICIS or its AFFILIATES in the
TRANSACTION DOCUMENTS.
18.2 Indemnification by HMR. In addition to any other rights MEDICIS
may have at law or in equity, and subject to Section 10.6, HMRI, HMR SA and HMR
GmbH shall jointly and
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LICENSE AND OPTION AGREEMENT
severally indemnify, defend and hold harmless MEDICIS and its AFFILIATES,
employees, agents, officers and directors, and its successors and assigns (each,
a "MEDICIS INDEMNIFIED PARTY"), from and against any and all LIABILITIES which
the MEDICIS INDEMNIFIED PARTY may incur, suffer or be required to pay resulting
from or arising out of: (i) the manufacture or supply of the PRODUCTS by HMR or
their AFFILIATES prior to the LICENSE EFFECTIVE DATE or after the LICENSE
EFFECTIVE DATE in breach of any of HMR GmbH's representations, warranties,
covenants and obligations under the SUPPLY AGREEMENT or of any of HMRI's
representations, warranties, covenants and obligations under the LOPROX LOTION
SUPPLY AGREEMENT, other than for any EXCLUDED HMR PRODUCT LIABILITY; (ii) any
liability arising prior to the LICENSE EFFECTIVE DATE in any way relating to any
PRODUCT, regardless of the date of first assertion of any claim or action
relating thereto; (iii) any breach of any representation, warranty or covenant
by HMR or any AFFILIATE in the TRANSACTION DOCUMENTS, including failure or
refusal to implement the LOPROX CREAM PLAN or the LOPROX LOTION PLAN (other than
as related to the infringement of the intellectual property rights of third
parties as described in the following subsections (v) and (vi)); (iv) any
LIABILITIES arising from or related to any litigation or claim asserted by
COPLEY relating to the COPLEY PRODUCT AGREEMENT or the TRANSACTION DOCUMENTS;
(v) any infringement of the valid intellectual property rights of any third
party as a result of the use and exploitation by MEDICIS of the PATENTS, the
KNOW-HOW and the TRADEMARKS for the manufacture, use, marketing and sale of the
PRODUCTS in the TERRITORY if such infringement was known to HMR as of the
LICENSE EFFECTIVE DATE or relates to or arises from the manufacture of the
ACTIVE INGREDIENTS; or (vi) any infringement of the type described in the
preceding subsection (v) if such infringement was not known but should have been
known to HMR as of the LICENSE EFFECTIVE DATE after due inquiry; provided
however, that HMR shall only be required to indemnify and hold harmless the
MEDICIS INDEMNIFIED PARTIES for fifty percent (50%) of any such LIABILITIES
under this subsection (vi).
18.3 Process of Indemnification. Promptly after an indemnified party
becomes aware of any potential LIABILITY hereunder, such party shall deliver
written notice to the indemnifying party stating the nature of the potential
LIABILITY; provided, however, that the failure to give such notification shall
not affect the indemnification provided hereunder except to the extent the
indemnifying party is actually prejudiced as a result of such failure. The
indemnified party shall give the indemnifying party such information with
respect to the potential LIABILITY as the indemnifying party may from time to
time reasonably request. The indemnifying party shall have the right to conduct
the defense of any suit or claim related to the LIABILITY if it has assumed
responsibility for the suit, claim or other proceeding in writing; provided,
however, that if in the reasonable judgment of the indemnified party such suit,
claim or other proceeding involves an issue or matter which could have a
material adverse effect on the business, operations or assets of the indemnified
party, the indemnified party may elect, at its own expense, to conduct a
separate defense thereof, but in no event shall any such election be construed
as a waiver of any indemnification rights such indemnified party may have under
this Article XVIII, at law or in equity, or otherwise. 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; provided, however,
that the indemnifying party shall pay the reasonable fees
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LICENSE AND OPTION AGREEMENT
and costs of any separate counsel required for the indemnified party to the
extent such representation is due to a conflict of interest between the parties.
18.4 Settlements. Neither party may settle any claim, action or
proceeding related to a LIABILITY to a third party without the consent of the
other party, which consent shall not be unreasonably withheld or delayed, 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, and any payment made by a party in such a
settlement without obtaining such consent shall be at its own cost and expense.
Notwithstanding the foregoing, the indemnifying party will be liable under this
Article XVIII for any settlement effected without its consent if the
indemnifying party has refused to acknowledge liability for indemnification
hereunder and/or declines to defend the indemnified party in any such claim,
action or proceeding and it is determined by arbitration pursuant to Section
19.4 hereof that the indemnifying party was liable to the indemnified party for
indemnification related to such settlement.
18.5 Right of Set-Off. In addition to any other remedies any party may
have for indemnification under this AGREEMENT or at law or in equity, any party
may set off against any amount otherwise due and yet unpaid to the other party
hereunder any amount owed by such first party to the other party under any
provision of this AGREEMENT or any instrument or agreement delivered pursuant
hereto, or otherwise.
ARTICLE XIX.
MISCELLANEOUS
19.1 FORCE MAJEURE. If the performance by any party of any obligation
under this AGREEMENT is prevented, restricted, interfered with or delayed by
reason of FORCE MAJEURE, the party so affected shall, upon giving written notice
to the other party, be excused from such performance to the extent of such
prevention, restriction, interference or delay, provided that the affected party
uses its reasonable efforts to avoid or remove such causes of non-performance
and continues performance with the utmost dispatch whenever such causes are
removed; provided, however, that notwithstanding anything contained in this
Section 19.1, either party may exercise any right to terminate this AGREEMENT
which arises under Section 15.2 or 15.3 hereof. For the purposes of this
AGREEMENT, "FORCE MAJEURE" is defined as follows: acts of God; acts,
regulations, orders, decrees or laws of any government or agency thereof that
are not due to or caused by any action or inaction of the party claiming the
benefit of force majeure where such action or inaction is in violation of such
party's obligations under the TRANSACTION DOCUMENTS or APPLICABLE LAWS; war;
damage to or destruction of facilities; labor disturbances (whether or not any
such labor disturbance is within the power of the affected party to settle);
epidemic; civil commotion; and failure of suppliers, public utilities or common
carriers. In the event of FORCE MAJEURE lasting more than three (3) months (or
which the parties acknowledge will last more than three (3) months), the parties
agree to meet and discuss how this AGREEMENT can be justly and fairly
implemented under the circumstances.
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LICENSE AND OPTION AGREEMENT
19.2 Governing Law. This AGREEMENT shall be deemed to have been made in
the State of Delaware and its form, execution, validity, construction and effect
shall be determined in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
19.3 Headings and References. All section headings contained in this
AGREEMENT are for convenience of reference only and shall not affect the meaning
or interpretation of this AGREEMENT.
19.4 Dispute Resolution.
(a) Any dispute, controversy or claim arising out of or relating
to this AGREEMENT, or the breach, termination or invalidity of this AGREEMENT or
the rights of either party for indemnification hereunder (each, a "CLAIM"),
shall be submitted in the first instance to the President, North American Region
of HMRI, for HMR and the Chief Executive Officer of MEDICIS for MEDICIS.
(b) If any CLAIM cannot be resolved by the individuals designated
in Section 19.4 (a) within thirty (30) days after being submitted to them, and
except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order to preserve the status quo or to
prevent irreparable harm pending the selection and confirmation of a panel of
arbitrators in accordance herewith, such CLAIM shall be settled by arbitration
in accordance with the Commercial Arbitration Rules (the "RULES") of the
American Arbitration Association (the "AAA") in effect on the day the
arbitration is commenced in accordance with this AGREEMENT, except as modified
by this Section 19.4. After expiration of the thirty (30) day period pursuant to
Section 19.4(a) hereof, either party may commence arbitration by serving upon
the other party a written demand for arbitration sent by a courier service of
internationally recognized reputation, in accordance with this AGREEMENT, with a
copy of the same delivered by a courier service of internationally recognized
reputation, to the AAA regional office in which either party is then located.
The number of arbitrators shall be three, one of whom is selected by MEDICIS,
one of whom is selected by HMRI and one of whom is selected by HMRI and MEDICIS
(or by the other two arbitrators if the parties cannot, within thirty (30) days
after the commencement of the arbitration proceeding, agree on the third
arbitrator). In the event that either party shall fail to appoint an arbitrator
within thirty (30) days after the commencement of the arbitration proceeding,
such arbitrator and the third arbitrator shall be appointed by the AAA in
accordance with the RULES. The arbitration award shall be rendered by a majority
of the members of the board of arbitration. Except as expressly provided in
Section 19.5 hereof, the panel shall not be entitled to modify this AGREEMENT or
the transactions contemplated herein. The arbitration proceeding shall be
conducted in the English language and shall be brought in Chicago, Illinois,
unless the parties agree in writing to conduct the arbitration in another
location. The AAA shall have jurisdiction over all parties to this AGREEMENT for
purposes of the arbitration.
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(c) The arbitration decision shall be final and binding and shall
not be appealable to any court in any jurisdiction. The prevailing party may
enter such decision in any court having competent jurisdiction.
(d) Any statute of limitations or other equitable or legal
doctrine which would otherwise be applicable to any action brought by either of
the parties shall be applicable in the arbitration. In the event any party to
this AGREEMENT files a petition under the bankruptcy laws of the United States
or has a petition filed against it which results in an order for relief or other
indicia that a bankruptcy case has commenced, it is the express intention of the
parties that this AGREEMENT shall control and be enforced in accordance with its
terms and conditions that any Claim shall remain subject to arbitration to the
maximum extent permitted by law.
(e) There shall be no rights of discovery in connection with the
arbitration except as follows: (i) Each party shall have the right to request
the arbitrators to issue subpoenas for documents in accordance with the RULES.
(ii) Each party shall have the right to initiate two (2)
depositions of each other party to the arbitration; and each party shall have
the right to initiate one (1) additional oral deposition pursuant to a subpoena
issued by the arbitrators or any court of competent jurisdiction.
(iii) At any time following the tenth day after the
commencement of the arbitration in accordance with this AGREEMENT, a written
notice served upon all parties shall be sufficient to compel the attendance of
any party at a deposition upon not less than sixty (60) days notice and no
subpoena shall be required for that purpose. If a person fails or refused to
testify at a deposition, that person shall not be permitted to testify at the
hearing, except for good cause shown. The number of depositions that may be
initiated by either party may be varied by agreement of all parties to the
arbitration but not by any action, order or request of the arbitrators or any
court.
(iv) Not less than thirty (30) days prior to the scheduled
arbitration proceeding, the arbitrator shall conduct a preliminary hearing in
accordance with the AAA guidelines. Not less than five (5) days prior to the
preliminary hearing, all parties to the arbitration shall serve upon all other
parties to the arbitration a written list of witnesses and exhibits to be used
at the arbitration hearing. Except for good cause shown, no witness or exhibit
may be utilized at the arbitration hearing other than as set forth on such list.
The arbitrators shall receive evidence at a single hearing. The arbitrators
shall award reasonable attorneys' fees and costs in favor of the prevailing
party or parties. The arbitrator shall issue a final award not more than twenty
(20) days following the conclusion of the hearing. The arbitrators shall have
the power to hear and decide, by documents only or with a hearing (at the
arbitrators' sole discretion) any prehearing motions in the nature of a
pre-trial motion to dismiss or for summary judgment.
(f) The arbitrators shall be entitled to receive reasonable
compensation at an hourly rate to be established between the arbitrators and the
AAA. If required by the arbitrators,
45
<PAGE> 55
LICENSE AND OPTION AGREEMENT
MEDICIS on the one hand, and HMRI, on the other, will deposit with the AAA an
equal share of the total anticipated fee of the arbitrators in an amount to be
estimated by the AAA. The non-prevailing party in the proceedings shall be
ordered to pay, and shall have the ultimate responsibility for, all arbitrators'
fees and the fees of the AAA and such fees shall be included in the judgment to
be entered against the non-prevailing party.
(g) Notwithstanding any other provision of this AGREEMENT, any
party may apply to a court of competent jurisdiction within the TERRITORY, for
an order in true nature of a temporary restraining order or preliminary
injunction for purposes of maintaining the status quo pending the final
resolution of any dispute pursuant to the arbitration provisions hereof.
(h) Each party consents to the jurisdiction and administration
of the AAA for purposes of the arbitration proceedings contemplated herein.
19.5 Severability. If any provision of this AGREEMENT is held by a
court of competent jurisdiction to be invalid or unenforceable, it shall be
modified to the minimum extent necessary to make it valid and enforceable.
19.6 Entire Agreement. This AGREEMENT, including the exhibits hereto,
and the TRANSACTION DOCUMENTS, constitute the entire AGREEMENT between the
parties and their AFFILIATES relating to the subject matter hereof and supersede
all previous writings and understandings, whether oral or written, including
without limitation the Confidentiality Agreement, dated as of May 28, 1998, and
the Letter of Intent, dated June 8, 1998, by and between HMRI and MEDICIS,
relating to the subject matter of this AGREEMENT.
19.7 Amendment. This AGREEMENT may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both parties
that specifically refers to this AGREEMENT.
19.8 Notices. Any notice required or permitted under this AGREEMENT
shall be in writing and sent by reputable courier service, charges prepaid, or
by facsimile transmission with confirmation by reputable courier service, to the
address or facsimile number specified below. Such notices shall be deemed given
three (3) business days after such deposit in the mail or with a courier or one
(1) business day after such facsimile transmission.
If to HMRI, HMR Hoechst Marion Roussel, Inc.
GmbH or HMR SA: Route 202-206
P. O. Box 6800
Bridgewater, New Jersey 08807-0800
Fax Number: (908) 231-3730
Attention: Vice President, Licensing & Alliances
46
<PAGE> 56
LICENSE AND OPTION AGREEMENT
with copies to: Hoechst Marion Roussel, Inc.
Route 202-206
P. O. Box 6800
Bridgewater, New Jersey 08807-0800
Fax Number: (908) 231-2243
Attention: Vice President and General Counsel
Hoechst Marion Roussel Deutschland GmbH
Konigsteiner Strasse 1010
65812, Bad Soden
Germany
Fax Number: +49-69-305-17905
Attention: General Manager
Hoechst Marion Roussel, S.A.
102, route de Noisy
93235 Romainville
France
Fax Number: 33-1-4991-3916
Attention: General Counsel
If to MEDICIS: Medicis Pharmaceutical Corporation
4343 East Camelback Road
Phoenix, Arizona 85018
Attention: Jonah Shacknai
Fax Number: (602) 808-3875
with a copy to: Bryan Cave LLP
Two North Central Avenue, Suite 2200
Phoenix, Arizona 85004-4408
Fax Number: (602) 364-7000
Attention: Frank M. Placenti, Esq.
19.9 Assignment, Sublicense and Binding Effect. Each party shall have
the right to assign or sublicense its rights in whole or in part under this
AGREEMENT to an AFFILIATE of such party without the other party's consent or to
a third party with the other party's prior written consent, which consent shall
not be unreasonably withheld, provided that (i) in either case such party
guarantees to the other party all of such party's obligations hereunder; and
(ii) in the case of any sublicense by MEDICIS hereunder, the sublicensee agrees
in a written, executed agreement delivered to HMR and naming HMR as an intended
third party beneficiary therein to (a) observe and perform those obligations of
MEDICIS hereunder reasonably determined by MEDICIS to relate to such sublicense;
(b) acquire its requirements for the HMR MANUFACTURED PRODUCTS from HMR GmbH
pursuant to the SUPPLY AGREEMENT, during its term and subject to its conditions;
and (c) acquire its requirements of the LOPROX LOTION from HMRI
47
<PAGE> 57
LICENSE AND OPTION AGREEMENT
pursuant to the LOPROX LOTION SUPPLY AGREEMENT, during its term and subject to
its conditions.
19.10 No Agency. It is understood and agreed that each party shall have
the status of an independent contractor under this AGREEMENT and that nothing in
this AGREEMENT shall be construed as authorization for either party to act as
agent for the other. MEDICIS shall not incur any liability for any act or
failure to act by employees of HMR and vice versa. Notwithstanding anything to
the contrary in this Section 19.10, HMR GmbH and HMR SA hereby appoint HMRI, and
any duly appointed statutory agent of HMRI, as its agent for service of process
as to any proceeding commenced pursuant to or in connection with this AGREEMENT
or the TRANSACTION DOCUMENTS.
19.11 No Strict Construction. This AGREEMENT has been prepared jointly
and shall not be strictly construed against either party.
19.12 Waiver. No waiver of any of the provisions of this AGREEMENT
shall be deemed, or shall constitute, a wavier of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver,
and no waiver shall be binding unless executed in writing by the party making
the waiver.
19.13 Counterparts. This AGREEMENT may be executed in counterparts,
each of which shall be an original as against any party whose signature appears
thereon but all of which together shall constitute one and the same instrument.
48
<PAGE> 58
LICENSE AND OPTION AGREEMENT
IN WITNESS WHEREOF, the parties, through their authorized officers,
have duly executed this as of the date first written above.
HOECHST MARION ROUSSEL, INC. MEDICIS PHARMACEUTICAL
CORPORATION
By: /s/ Thomas Hofstaetter By: /s/ Jonah Shacknai
---------------------- -------------------
Name: Thomas Hofstaetter Name: Jonah Shacknai
Title: Senior Vice President Title: Chairman and Chief Executive Officer
HOECHST MARION ROUSSEL
DEUTSCHLAND GmbH
By: /s/ Peter Schlikker
---------------------
Name: DR. PETER SCHLIKKER
Title: Member of the Board
By: /s/ Dieter Kohl
----------------------
Name: Dieter Kohl
Title: Member of the Board
HOECHST MARION ROUSSEL, S.A.
By: /s/ O. Jacquesson
----------------------
Name: O. Jacquesson
Title: Member of the Board
49
<PAGE> 59
LICENSE AND OPTION AGREEMENT
EXHIBIT A
List of PRODUCTS (Per Section 1.73)
1. A/T/S - Erythromycin based topical acne treatment
a) 2.0% solution, formulated as approved in AADA
#62-405.
b) 2.0% gel, formulated as approved in NDA #50-617
(owned by HERBERT).
2. Loprox - CICLOPIROX based topical anti-fungal.
a) 0.77% cream, formulated as approved in NDA #18-748,
or as formulated pursuant to the LOPROX CREAM PLAN.
b) 0.77% lotion, formulated as approved in NDA #19-824,
or as formulated pursuant to the LOPROX LOTION PLAN.
c) 0.77% gel, formulated as approved in NDA #20-519.
d) the additional Loprox PRODUCT discussed in Schedule
13 to this AGREEMENT, as described in Investigational
New Drug Application #51,286.
3. Topicort - Desoximetasone based topical anti-inflammatory.
a) 0.25% cream, formulated as approved in NDA #17-856.
b) 0.05% gel, formulated as approved in NDA #18-586.
c) 0.05% cream, formulated as approved in NDA #18-309
d) 0.25% ointment, formulated as approved in NDA
#18-763.
e) 0.05% ointment, formulated as approved in NDA #18-594
(non-commercialized in the TERRITORY).
A-1
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LICENSE AND OPTION AGREEMENT
EXHIBIT B
List of NDAs (Per Section 1.60)
As used in this AGREEMENT, the term "NDAs" shall include the following U.S.
regulatory approvals, but shall exclude information contained in such approvals
which would normally be included within a Drug Master File:
'A/T/S' Solution AADA #62-405
'Loprox' Cream NDA #18-748
'Loprox' Lotion NDA #19-824
'Loprox' Gel NDA #20-519
'Topicort' Emollient Cream NDA #17-856
'Topicort' Gel NDA #18-586
'Topicort' LP Emollient Cream NDA #18-309
'Topicort' Ointment 0.05%* NDA #18-594
'Topicort' Ointment 0.25% NDA #18-763
- --------------------
* Non-commercialized in the TERRITORY.
B-1
<PAGE> 61
LICENSE AND OPTION AGREEMENT
EXHIBIT C
List of PATENTS (Per Section 1.71)
U.S. patent applications and U.S. patents corresponding to, or claiming a right
of priority based upon the subject matter described in, the following Patent
Cooperation Treaty (PCT) patent applications, other than to the extent of claims
for active ingredients other than the ACTIVE INGREDIENTS; for the avoidance of
doubt claims related to rilopirox or the DEVELOPMENT STAGE PRODUCT or HMR's
CICLOPIROX Powder shall not be included within the PATENTS:
1. 'Loprox' Gel: WO 98/13042 PCT/EP97/05068, filed 16 September 1997
(Antimycotic gel with high active substance release)
2. 'Loprox' Shampoo: WO 98/13009 PCT/EP97/05070, filed 16 September 1997
(Use of a shampoo containing 1-hydroxy - 2 - pyridones for the
treatment of seborrheic dermatitis)
3. 'Loprox': WO 98/13043 PCT/EP/9705069, filed 16 September 1997 (Use of
1-hydroxy - 2- pyridones for the treatment of skin disorders which are
caused by antibiotic resistant bacteria)
4. W/O 97/20560, PCT/EP96/05132, filed 4 December 1995 (Use of 1-hydroxy -
2 - pyridones for the topical treatment of mycotic infections which are
caused by azole resistant fungi)
Those rights under any and all other patents owned by HMR and their AFFILIATES
pertaining to any of the PRODUCTS for use in the TERRITORY.
C-1
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LICENSE AND OPTION AGREEMENT
EXHIBIT D
List of TRADEMARKS (Per Section 1.86)
List of TRADEMARKS U.S. Registration No.
------------------ ---------------------
'Topicort' 1046658
'Topicort' 621695
'A/T/S' 1284012
'Loprox' 1221402
'Loprox TA' Application No. 75/207.214
D-1
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LICENSE AND OPTION AGREEMENT
EXHIBIT E
List of Canadian Products and New Drug Submissions (Per Section 4.4)
Part I. Canadian Products
'Loprox'
- --------
Topical Cream, 1%
Lotion, 1%
'Topicort'
- ----------
Emollient Cream, 0.25%
Gel, 0.05%
Mild Emollient Cream, 0.05%
Ointment, 0.25%
'Dermatop'*
- -----------
Emollient Cream, 0.1%
Ointment, 0.1%
*Never manufactured or sold in CANADA
Part II. Canadian New Drug Submissions
'Loprox': 9427 - H28-71
'Topicort': 9427-H28-59
'Dermatop': 9427-H0028/8-45
D-1
<PAGE> 1
Exhibit 10.91
LOPROX LOTION SUPPLY AGREEMENT
LOPROX LOTION SUPPLY AGREEMENT
BY AND BETWEEN
HOECHST MARION ROUSSEL, INC.
AND
MEDICIS PHARMACEUTICAL CORPORATION
DATED AS OF NOVEMBER 15, 1998
TRADEMARK NOTICE: 'Loprox' and 'A/T/S' are registered trademarks of HMR, certain
rights to which are granted to MEDICIS in accordance with the TRADEMARK LICENSE
AGREEMENT (as defined herein). The use of such trademarks in this AGREEMENT is
deemed to be accompanied by an appropriate notice of trademark registration.
<PAGE> 2
LOPROX LOTION SUPPLY AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. DEFINITIONS............................................................................................5
1.1 "AAA"...................................................................................................5
1.2 "ACT"...................................................................................................5
1.3 "ACTIVE INGREDIENT".....................................................................................5
1.4 "AFFILIATE".............................................................................................5
1.5 "AGREEMENT".............................................................................................6
1.6 "APPLICABLE LAWS".......................................................................................6
1.7 "BACKORDERS"............................................................................................6
1.8 "cGMP"..................................................................................................6
1.9 "CICLOPIROX"............................................................................................6
1.10 "CLAIM".................................................................................................6
1.11 "CONTRACT YEAR".........................................................................................6
1.12 "CPI"...................................................................................................6
1.13 "CPI INCREASE"..........................................................................................6
1.14 "EFFECTIVE DATE"........................................................................................6
1.15 "EXCLUDED HMR PRODUCT LIABILITY"........................................................................6
1.16 "EXTENDED SUPPLY INTERRUPTION"..........................................................................6
1.17 "FDA"...................................................................................................7
1.18 "FORCE MAJEURE".........................................................................................7
1.19 "FORECAST MONTH"........................................................................................7
1.20 "HERBERT"...............................................................................................7
1.21 "HERBERT AGREEMENT".....................................................................................7
1.22 "HMR GmbH"..............................................................................................7
1.23 "HMRI"..................................................................................................7
1.24 "HMRI INDEMNIFIED PARTY"................................................................................7
1.25 "INITIAL TERM"..........................................................................................7
1.26 "INTERRUPTED MEDICIS ORDERS"............................................................................7
1.27 "LIABILITY".............................................................................................7
1.28 "LICENSE AND OPTION AGREEMENT"..........................................................................7
</TABLE>
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LOPROX LOTION SUPPLY AGREEMENT
<TABLE>
<S> <C>
1.29 "LOPROX LOTION".........................................................................................7
1.30 "LOST SALES"............................................................................................7
1.31 "MEDICIS"...............................................................................................7
1.32 "MEDICIS INDEMNIFIED PARTY".............................................................................8
1.33 "NDAs"..................................................................................................8
1.34 "NET SALES".............................................................................................8
1.35 "PACO"..................................................................................................8
1.36 "PACO AGREEMENTS".......................................................................................8
1.37 "PACO A/T/S AGREEMENT"..................................................................................8
1.38 "PACO LOPROX AGREEMENT".................................................................................8
1.39 "PURCHASE AGREEMENT"....................................................................................8
1.40 "RULES".................................................................................................8
1.41 "QUALIFIED ALTERNATE SUPPLIER"..........................................................................8
1.42 "SHORTFALL".............................................................................................8
1.43 "SPECIFICATIONS"........................................................................................8
1.44 "SUPPLY AGREEMENT"......................................................................................8
1.45 "SUPPLY INTERRUPTION"...................................................................................8
1.46 "TERRITORY".............................................................................................8
1.47 "TRADE QUOTA"...........................................................................................8
1.48 "TRADEMARK LICENSE AGREEMENT"...........................................................................9
1.49 "TRANSITION SERVICES AGREEMENT".........................................................................9
1.50 "24-MONTH FORECAST".....................................................................................9
ARTICLE II. MANUFACTURE, PURCHASE AND SALE OF LOPROX LOTION.......................................................9
2.1 Purchase and Sale........................................................................................9
2.2 A/T/S Solution and A/T/S Gel.............................................................................9
2.3 Labeling and Packaging..................................................................................10
2.4 Forecasts...............................................................................................10
2.5 Communication...........................................................................................11
2.6 Minimum Inventory.......................................................................................11
2.7 Delivery................................................................................................12
2.8 Shortages/Damaged Goods/Rejected Goods..................................................................12
2.9 Current Inventory, including A/T/S Solution and A/T/S Gel...............................................13
</TABLE>
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LOPROX LOTION SUPPLY AGREEMENT
<TABLE>
<S> <C>
2.10 SUPPLY INTERRUPTION.....................................................................................14
2.11 Supply Price for LOPROX LOTION..........................................................................18
2.12 Payment.................................................................................................19
2.13 Advertising/Marketing/Sales Costs and Product Pricing...................................................19
2.14 Samples.................................................................................................19
2.15 Compliance with APPLICABLE LAWS.........................................................................21
2.16 Rights Necessary for Manufacturing......................................................................21
ARTICLE III. TERM AND TERMINATION................................................................................21
3.1 Term of this AGREEMENT..................................................................................21
3.2 Renewal Periods.........................................................................................21
3.3 Early Termination.......................................................................................21
3.4 Consequences of Termination and Survival................................................................22
3.5 Accrued Obligations.....................................................................................23
ARTICLE IV. MANUFACTURING COMPLIANCE, ACCESS AND REGULATORY MATTERS..............................................23
4.1 Tests; Retained Samples.................................................................................23
4.2 Manufacturing Compliance................................................................................23
4.3 Changes in SPECIFICATIONS...............................................................................24
4.4 Access to Facilities....................................................................................24
4.5 Regulatory Correspondence...............................................................................25
4.6 Inquiries and Complaints relating to LOPROX LOTION......................................................25
4.7 Response to Complaints and/or Adverse Drug Reactions (or Events)........................................25
4.8 Additional Information..................................................................................25
ARTICLE V. LOPROX LOTION RECALLS................................................................................26
5.1 Recalls During INITIAL TERM.............................................................................26
5.2 Recalls Thereafter......................................................................................26
ARTICLE VI. WARRANTIES AND REMEDIES..............................................................................26
6.1 FDA Approval............................................................................................26
6.2 Conformity with SPECIFICATIONS..........................................................................26
6.3 Compliance with the Federal Food, Drug and Cosmetic Act.................................................26
6.4 No Liens................................................................................................27
6.5 Exclusion of Other Warranties...........................................................................27
</TABLE>
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LOPROX LOTION SUPPLY AGREEMENT
<TABLE>
<S> <C>
ARTICLE VII. INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE..............................................27
7.1 Indemnification by MEDICIS..............................................................................27
7.2 Indemnification by HMRI.................................................................................28
7.3 Process of Indemnification..............................................................................28
7.4 Settlements.............................................................................................28
7.5 Limitation of Liability.................................................................................29
7.6 Distribution Insurance..................................................................................29
7.7 Manufacturer's Insurance................................................................................29
7.8 LOPROX LOTION Liability Claims..........................................................................29
ARTICLE VIII. GENERAL PROVISIONS.................................................................................30
8.1 FORCE MAJEURE...........................................................................................30
8.2 Governing Law...........................................................................................30
8.3 Headings and References.................................................................................30
8.4 Dispute Resolution......................................................................................30
8.5 Severability............................................................................................33
8.6 Entire Agreement........................................................................................33
8.7 Amendment...............................................................................................33
8.8 Notices.................................................................................................33
8.9 Assignment and Binding Effect...........................................................................34
8.10 No Agency..............................................................................................34
8.11 No Strict Construction.................................................................................34
8.12 Counterparts...........................................................................................34
</TABLE>
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LOPROX LOTION SUPPLY AGREEMENT
LOPROX LOTION SUPPLY AGREEMENT
This Supply Agreement (the "AGREEMENT") is entered into as of November
15, 1998, by and between Hoechst Marion Roussel, Inc., a Delaware corporation
("HMRI"), and Medicis Pharmaceutical Corporation, a Delaware corporation
("MEDICIS"). Capitalized terms shall have the meanings ascribed to them in
Article I hereof or as otherwise set forth in this AGREEMENT.
RECITALS
A. HMRI is engaged in the manufacture of or has toll manufactured
LOPROX LOTION pursuant to certain NDAs owned during the INITIAL TERM by HMRI or
its AFFILIATES.
B. MEDICIS is willing to purchase its requirements for LOPROX
LOTION from HMRI in accordance with, and for the INITIAL TERM of, this
AGREEMENT.
C. HMRI is willing to supply such LOPROX LOTION to MEDICIS in
accordance with, and for the INITIAL TERM of, this AGREEMENT.
D. In addition to the actions contemplated by this AGREEMENT,
HMRI, certain AFFILIATES of HMRI and MEDICIS are entering into the LICENSE AND
OPTION AGREEMENT, the SUPPLY AGREEMENT, the TRADEMARK LICENSE AGREEMENT, the
TRANSITION SERVICES AGREEMENT and the PURCHASE AGREEMENT.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
made and the mutual benefits to be derived from this AGREEMENT, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 "AAA" shall have the meaning set forth in Section 8.4 hereof.
1.2 "ACT" means the United States Federal Food, Drug and Cosmetic
Act, as amended.
1.3 "ACTIVE INGREDIENT" means CICLOPIROX.
1.4 "AFFILIATE" means any individual, corporation or other legal
entity which either party directly or indirectly through one or more
intermediaries controls or which is controlled by or under common control with
such party. For the purpose of this AGREEMENT, "control" means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of an individual, corporation or other legal entity,
whether through
E-1
<PAGE> 7
LOPROX LOTION SUPPLY AGREEMENT
the ownership of voting securities, by contract, or otherwise; provided,
however, that Copley Pharmaceutical, Inc., a Delaware corporation, shall not be
an AFFILIATE of HMRI.
1.5 "AGREEMENT" means this LOPROX LOTION Supply Agreement between
HMRI and MEDICIS.
1.6 "APPLICABLE LAWS" shall mean all applicable laws, statutes,
rules, regulations, ordinances, orders, decrees, writs, judicial or
administrative decisions and the like of any nation or government, any state or
other political subdivision thereof, any entity exercising executive, judicial,
regulatory or administrative functions of or pertaining to government
(including, without limitation, any governmental authority, agency, department,
board, commission or instrumentality of any governmental unit or any political
subdivision thereof), any tribunal or arbitrator of competent jurisdiction, and
any self-regulatory organization.1.7
1.7 "BACKORDERS" shall have the meaning set forth in Section 2.10(c)
(i)(B)(3) hereof.
1.8 "cGMP" shall mean the then-current Good Manufacturing
Practices as promulgated under the ACT at 21 CFR (chapters 210, 211, 600 and
610), as the same may be amended or re-enacted from time to time and as
interpreted in accordance with then-current industry standards and FDA policies.
1.9 "CICLOPIROX" means ciclopirox acid and/or ciclopirox olamine.
1.10 "CLAIM" shall have the meaning set forth in Section 8.4(a)
hereof.
1.11 "CONTRACT YEAR" shall mean the twelve (12) month period
commencing on the EFFECTIVE DATE and ending on the first anniversary of the
EFFECTIVE DATE and each consecutive twelve (12) month period thereafter during
the INITIAL TERM.
1.12 "CPI" shall have the meaning set forth in Section 2.11(a)
hereof.
1.13 "CPI INCREASE" shall have the meaning set forth in Section 2.11
(a) hereof.
1.14 "EFFECTIVE DATE" means the date of this AGREEMENT as first set
forth above.
1.15 "EXCLUDED HMR PRODUCT LIABILITY" means any LIABILITY of HMR or
their AFFILIATES arising under any applicable federal, state, local or other
product liability law, regulation, common law principle, court order or
judgment, jury verdict or arbitral award arising out of or related to the
manufacture of the LOPROX LOTION by or on behalf of HMRI or its AFFILIATES after
the EFFECTIVE DATE; excluding, however, any such LIABILITY due to, caused by,
resulting from or arising out of any breach by HMRI or any AFFILIATE of Article
VI of this AGREEMENT.
1.16 "EXTENDED SUPPLY INTERRUPTION" shall have the meaning set forth
in Section 2.10(c)(i)(B)(1) hereof.
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LOPROX LOTION SUPPLY AGREEMENT
1.17 "FDA" means the United States Food and Drug Administration or
any successor entity thereto.
1.18 "FORCE MAJEURE" shall have the meaning set forth in Section 8.1
hereof.
1.19 "FORECAST MONTH" shall have the meaning set forth in Section 2.4
(b) hereof.
1.20 "HERBERT" means Vision Pharmaceuticals L.P., a Texas limited
partnership (formerly known as Herbert Laboratories), the general partner of
which is Allergan General, Inc., a Delaware corporation that is a subsidiary of
Allergan, Inc.
1.21 "HERBERT AGREEMENT" means the Manufacturing Agreement, dated as
of June 11, 1990, between HMRI and HERBERT, as amended, relating to A/T/S Gel.
1.22 "HMR GmbH" means Hoechst Marion Roussel Deutschland GmbH, a
German limited liability company.
1.23 "HMRI" means Hoechst Marion Roussel, Inc., a Delaware
corporation.
1.24 "HMRI INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.1 hereof.
1.25 "INITIAL TERM" means the three (3) year period commencing upon
the EFFECTIVE DATE.
1.26 "INTERRUPTED MEDICIS ORDERS" shall have the meaning set forth in
Section 2.10(c)(i)(B)(4) hereof.
1.27 "LIABILITY" means any and all liabilities, losses, damages,
penalties, fines, assessments, expenses and costs of any kind or nature required
to be paid by a party hereunder (or its AFFILIATE) to any third party (which
shall not include any AFFILIATE of such paying party), primary or secondary,
direct or indirect, absolute or contingent, known or unknown, including without
limitation costs of settlement, reasonable attorneys' fees and related costs and
expenses and any liabilities for claims of personal injury or death, suffered or
incurred by an indemnified party hereunder.
1.28 "LICENSE AND OPTION AGREEMENT" means the License and Option
Agreement, of even date herewith, among HMRI, certain of its AFFILIATES and
MEDICIS.
1.29 "LOPROX LOTION" means the human dermatology products listed in
Exhibit B to this AGREEMENT and (unless the context indicates otherwise) samples
thereof as listed in Exhibit C to this AGREEMENT as manufactured for sale in the
TERRITORY.
1.30 "LOST SALES" shall have the meaning set forth in Section 2.10(c)
(i)(B)(2) hereof.
1.31 "MEDICIS" means Medicis Pharmaceutical Corporation, a Delaware
corporation.
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LOPROX LOTION SUPPLY AGREEMENT
1.32 "MEDICIS INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.2 hereof.
1.33 "NDAs" means the New Drug Applications, Abbreviated New Drug
Applications and Abbreviated Antibiotic Drug Applications (as such terms are
defined by the FDA) for the LOPROX LOTION filed and approved in accordance with
the requirements of the FDA, as may be amended or supplemented from time to
time, and as set forth on Exhibit A hereto.
1.34 "NET SALES" shall have the meaning set forth in Section 2.10(c)
(i)(B)(5) hereof.
1.35 "PACO" means Paco Pharmaceutical Services, Inc., a Delaware
corporation.
1.36 "PACO AGREEMENTS" means the PACO A/T/S AGREEMENT and the PACO
LOPROX AGREEMENT.
1.37 "PACO A/T/S AGREEMENT" means the Toll Manufacturing Agreement,
dated of even date herewith, between HMRI and PACO relating to A/T/S Solution,
including any amendments thereto.
1.38 "PACO LOPROX AGREEMENT" means the Toll Manufacturing Agreement,
dated of even date herewith, between HMRI and PACO relating to Loprox Lotion,
including any amendments thereto.
1.39 "PURCHASE AGREEMENT" means the PURCHASE AGREEMENT as defined in
the LICENSE AND OPTION AGREEMENT.
1.40 "RULES" shall have the meaning set forth in Section 8.4(b)
hereof.
1.41 "QUALIFIED ALTERNATE SUPPLIER" shall have the meaning set forth
in Section 2.10(b) hereof.
1.42 "SHORTFALL" shall have the meaning set forth in Section 2.14
hereof.
1.43 "SPECIFICATIONS" mean the written specifications for the LOPROX
LOTION contained in the NDAs, as the same may be amended from time to time by
HMRI pursuant to the provisions of Section 4.3 herein.
1.44 "SUPPLY AGREEMENT" shall mean the Supply Agreement, dated of
even date herewith, between HMR GmbH and MEDICIS.
1.45 "SUPPLY INTERRUPTION" shall have the meaning set forth in
Section 2.10 hereof.
1.46 "TERRITORY" means the United States of America and its
possessions and territories.
1.47 "TRADE QUOTA" shall have the meaning set forth in Section 2.14
(a) hereof.
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LOPROX LOTION SUPPLY AGREEMENT
1.48 "TRADEMARK LICENSE AGREEMENT" means the Trademark License
Agreement, dated of even date herewith, among HMR GmbH, HMRI, an AFFILIATE of
HMRI and MEDICIS.
1.49 "TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement, dated of even date herewith, between HMRI and MEDICIS.
1.50 "24-MONTH FORECAST" shall have the meaning set forth in Section
2.4(b) hereof.
Unless the context clearly indicates otherwise, the use herein of the
singular shall include the plural, and the use of the masculine shall included
the feminine.
ARTICLE II.
MANUFACTURE, PURCHASE AND
SALE OF LOPROX LOTION
2.1 Purchase and Sale. Pursuant and subject to the terms and conditions
of this AGREEMENT, HMRI agrees to manufacture or have manufactured MEDICIS'
requirements for LOPROX LOTION for sale or distribution by MEDICIS in the
TERRITORY during the INITIAL TERM of this AGREEMENT, and MEDICIS agrees to
purchase from HMRI its requirements for LOPROX LOTION for sale or distribution
by MEDICIS in the TERRITORY during the INITIAL TERM of this AGREEMENT; provided,
however, that if during any CONTRACT YEAR during the INITIAL TERM MEDICIS
purchases from HMRI LOPROX LOTION having an aggregate supply price of U.S.
$400,000 (plus the CPI INCREASE for the second and third CONTRACT YEAR), MEDICIS
may in such CONTRACT YEAR or in the next succeeding CONTRACT YEAR purchase from
the QUALIFIED ALTERNATIVE SUPPLIER LOPROX LOTION having an aggregate supply
price of not more than U.S. $65,000. HMRI may during the INITIAL TERM abandon
its manufacture of LOPROX LOTION due to the regulatory requirement of any
government or agency thereof; provided, however, that in the event HMRI at any
time is required to so abandon such manufacture, HMRI shall immediately notify
MEDICIS in writing of such requirement; and, provided further, that such right
of abandonment shall not prejudice any rights and remedies, if any, MEDICIS may
have hereunder in connection with or as a result of such abandonment, including
without limitation any rights and remedies relating to any SUPPLY INTERRUPTION
or EXTENDED SUPPLY INTERRUPTION or the termination rights under Section 3.3(c)
of the SUPPLY AGREEMENT arising therefrom.
2.2 A/T/S Solution and A/T/S Gel. MEDICIS shall purchase its
requirements of (i) A/T/S Solution from PACO pursuant to the PACO A/T/S
AGREEMENT and the Assignment and Assumption Agreement, dated of even date
herewith, assigning such agreement from HMRI to MEDICIS, and (ii) A/T/S Gel from
HERBERT pursuant to the HERBERT AGREEMENT and the Assignment and Assumption
Agreement, dated of even date herewith, assigning such agreement from HMRI to
MEDICIS. If the OPTION (as defined in the LICENSE AND OPTION AGREEMENT) is not
exercised in accordance with Section 4.1 of the LICENSE AND
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LOPROX LOTION SUPPLY AGREEMENT
OPTION AGREEMENT, after the INITIAL TERM, MEDICIS, its AFFILIATES, or its
successors, assigns or sublicensees shall in no event obtain supply of A/T/S Gel
or samples thereof from HERBERT, its AFFILIATES, or its successors, assigns or
sublicensees pursuant to the HERBERT AGREEMENT or otherwise, nor A/T/S Solution
or LOPROX LOTION or samples thereof from PACO, its AFFILIATES, or its
successors, assigns or sublicensees pursuant to the PACO AGREEMENTS or
otherwise.
2.3 Labeling and Packaging. MEDICIS shall be responsible for paying all
out-of-pocket costs of the design of any new packaging and labeling of HMRI or
MEDICIS for the LOPROX LOTION and shall provide to HMRI (which shall actually
prepare such packaging and labeling) MEDICIS' logo, color codes, designs,
information, graphics and art work to be applied to LOPROX LOTION, which MEDICIS
warrants shall be consistent with the FDA approved labeling for LOPROX LOTION,
shall be in accordance with APPLICABLE LAWS and shall not knowingly infringe
upon the proprietary rights of any third party. MEDICIS shall provide such logo,
color codes, designs, information, graphics and art work pursuant to this
Section 2.3 to HMRI by such time in advance of the delivery requirements for the
LOPROX LOTION as HMRI shall have notified MEDICIS in writing is sufficient for
purposes of this AGREEMENT.
2.4 Forecasts.
(a) Long-Range Forecasts. Upon execution of this AGREEMENT, and
thereafter at least six (6) months prior to the commencement of each succeeding
calendar year, commencing with the first (1st) calendar year, MEDICIS shall
provide HMRI with a rolling annual forecast of the quantities of LOPROX LOTION,
by finished dosage form and package size (SKU), with the first two (2) calendar
years divided by months, that MEDICIS intends to order during the five (5) year
period commencing with that calendar year or part thereof. The parties
acknowledge that such forecasts shall represent reasonable good faith estimates,
and not purchase or supply commitments.
(b) Short-Term Forecasts. Upon execution of this AGREEMENT, and
thereafter no later than the tenth (10th) calendar day of any calendar month
(the "FORECAST MONTH") (with the previous month's forecast to govern in the
event of the failure or delay of such delivery), MEDICIS shall deliver to HMRI a
rolling monthly forecast of the quantities of LOPROX LOTION, by finished dosage
form and package size (SKU), that MEDICIS intends to order during the ensuing
twenty-four (24) month period (including the FORECAST MONTH) after receipt by
HMRI of the forecast. It is acknowledged that the monthly forecasts in the
24-MONTH FORECAST for the period from the LICENSE EFFECTIVE DATE through the end
of the third (3rd) full calendar month following the LICENSE EFFECTIVE DATE
shall constitute confirmed MEDICIS orders for purposes of this AGREEMENT. HMRI
may, by notice to MEDICIS given within ten (10) business days following its
receipt of a forecast, elect not to confirm, in whole or in part, the forecast
for the third calendar month after the FORECAST MONTH which (i) is made at a
time when HMRI has the right to suspend the provision of LOPROX LOTION pursuant
to Section 2.12(b) hereof, (ii) cannot be filled due to circumstances arising
under Section 8.1 hereof, (iii) are in excess of the quantities forecasted by
MEDICIS in the 24-MONTH FORECAST (which quantities HMRI may, at its option,
apportion pro rata
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LOPROX LOTION SUPPLY AGREEMENT
among each month in a calendar quarter in the 24 MONTH FORECAST for purposes of
this clause), or (iv) relates to any period of time beyond the 24-MONTH
FORECAST. All rejections, in whole or in part, of MEDICIS orders by HMRI must be
in writing and delivered within such ten (10) business day period. Unless so
rejected by HMRI, the forecast for such third (3rd) calendar month after the
FORECAST MONTH shall become a binding obligation on MEDICIS to purchase, and a
binding obligation on HMRI to supply, such quantities. MEDICIS' first short term
forecast (the "24-MONTH FORECAST") is attached hereto as Exhibit D. Unless
mutually agreed by HMRI and MEDICIS in writing, the monthly forecast submitted
by MEDICIS for such third calendar month shall be at least eighty per cent (80%)
and not be more than one hundred twenty per cent (120%) of the most recent
forecast for such third calendar month provided to HMRI pursuant to Section
2.4(a) hereof.
(c) HMRI Twenty Four (24) Month Supply Commitment. Subject to
Sections 2.4(b)(i), 2.10 and 8.1 hereof, HMRI covenants and agrees that during
each of the successive calendar quarters reflected in the 24-MONTH FORECAST,
HMRI shall confirm and deliver to MEDICIS at least the quantities of LOPROX
LOTION forecasted to be ordered by MEDICIS for such calendar quarter as set
forth in the 24-MONTH FORECAST, provided that such quantities are actually
ordered by MEDICIS pursuant to Section 2.4(b) hereof.
2.5 Communication MEDICIS acknowledges that LOPROX LOTION is produced
in full lot quantities, as set forth on Exhibit E attached hereto. Separate
orders are not necessary and are not legally binding. The written forecasts from
MEDICIS as confirmed by HMRI pursuant to Section 2.4(b) hereof shall constitute
legally binding orders between MEDICIS and HMRI for the LOPROX LOTION. All
forecasts by MEDICIS hereunder shall be in writing and addressed as follows:
Hoechst Marion Roussel, Inc.
HMRI External Manufacturing PPU
Marion Park Building C
Kansas City, Missouri 64137
Attention: Jerry Malone
Telephone: (816) 966-5017
Fax: (816) 966-7130
MEDICIS shall be obligated to purchase all such LOPROX LOTION which is confirmed
by HMRI in accordance with Section 2.4(b), provided that such LOPROX LOTION
meets the SPECIFICATIONS. After receipt by MEDICIS of HMRI's written
confirmation, no other purchase order, shipping document, confirmation or
waybill shall be deemed to modify, supplement or substitute for the terms and
conditions of this AGREEMENT, except upon the mutual written agreement of the
parties. All such documents shall be subject to, and shall be deemed to
incorporate, the terms and conditions of this AGREEMENT.
2.6 Minimum Inventory. Subject to the constraints imposed by any breach
by HMRI of any of the terms of this AGREEMENT, by any SUPPLY INTERRUPTION or by
any EXTENDED SUPPLY INTERRUPTION, and subject to HMRI's fulfillment of its
delivery
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LOPROX LOTION SUPPLY AGREEMENT
obligations under Sections 2.4(b) and 2.4(c) hereof, MEDICIS shall maintain at
its expense at all times after the six (6) month anniversary of the EFFECTIVE
DATE, including immediately prior to delivery of a new shipment of LOPROX
LOTION, inventory of LOPROX LOTION equivalent to the quantities of such LOPROX
LOTION sold by MEDICIS over a three (3) month period (or by HMRI and/or its
AFFILIATES for any period prior to the EFFECTIVE DATE) which shall be computed
as being the average of the quantities sold during the three (3) most recently
completed calendar quarters.
2.7 Delivery. The LOPROX LOTION shall be shipped by HMRI FOB the place
of manufacture or an HMRI warehouse facility in the TERRITORY. MEDICIS shall pay
for all freight and insurance costs with respect to shipment within the
TERRITORY. All shipments shall be made by refrigerated carriers. All deliveries
of confirmed MEDICIS orders shall be available for shipment to MEDICIS on or
before the last day of the calendar month for which the relevant order was
confirmed by HMRI hereunder.
2.8 Shortages/Damaged Goods/Rejected Goods.
(a) Shortages/Damaged Goods. MEDICIS shall notify HMRI in writing
of any obvious visible damage or obvious shortage in quantity of any shipment of
LOPROX LOTION within its possession within six (6) business days after receipt
at MEDICIS' regional distribution centers. In the event of (a) any shortage in
quantity of any shipment of LOPROX LOTION that is not within MEDICIS'
possession, (b) any non-obvious shortage in quantity of any shipment of LOPROX
LOTION within MEDICIS' possession or (c) any non-obvious damage to any LOPROX
LOTION, MEDICIS shall notify HMRI in writing within the earlier of (i) ten (10)
business days after discovery of such shortage or damage or (ii) the shelf life
of such LOPROX LOTION, provided that MEDICIS shall provide documentation
reasonably satisfactory to HMRI demonstrating that such shortage or damage
existed when such LOPROX LOTION was delivered by HMRI. Notification under this
Section 2.8(a) shall specify the finished dosage form and package size (SKU) of
such LOPROX LOTION. In the event of any shortage or damage as described in this
Section 2.8(a) (and provided HMRI is reasonably satisfied with any required
documentation relating thereto), HMRI shall make up the shortage or replace the
damaged shipment within thirty (30) business days after notification by MEDICIS,
if replacement LOPROX LOTION stock is available, or, if no such replacement
stock is available, as soon as reasonably practicable after receiving such
notice. MEDICIS shall deduct the invoiced amount relating to any shortage of
LOPROX LOTION or damaged LOPROX LOTION from payment of the HMRI invoice or
invoices for such LOPROX LOTION.
(b) Rejected Goods. MEDICIS shall notify HMRI in writing of any
claim relating to LOPROX LOTION failing to meet the SPECIFICATIONS at the time
title passes to MEDICIS in accordance with Section 2.7 hereof (other than due
solely to storage, handling or shipping by MEDICIS, its AFFILIATES, customers
and/or carriers) within the earlier of (i) thirty (30) business days after
discovery of such failure to meet the SPECIFICATIONS or (ii) the shelf life of
such LOPROX LOTION. Such notification shall specify the finished dosage form and
package size (SKU) of such LOPROX LOTION. Subject to the provisions of Section
2.8(c) hereof, HMRI shall replace any such LOPROX LOTION that fails to meet the
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LOPROX LOTION SUPPLY AGREEMENT
SPECIFICATIONS within thirty (30) business days after notification by MEDICIS,
if replacement LOPROX LOTION stock is available, or, if no such replacement
stock is available, as soon as reasonably practicable after receiving such
notice. MEDICIS shall not be responsible, and shall receive a credit from HMRI,
for any additional costs of shipping and freight required to be paid as a result
of any replacement of LOPROX LOTION under this Section 2.8(b). The provisions of
this Section 2.8(b) shall not apply to LOPROX LOTION which fails to meet the
SPECIFICATIONS due solely to storage, handling or shipping by MEDICIS, its
AFFILIATES, customers and/or carriers. MEDICIS shall deduct the invoiced amount
for any LOPROX LOTION which fails to meet the SPECIFICATIONS (other than due
solely to storage, handling or shipping by MEDICIS, its AFFILIATES, customers
and/or carriers) from payment of the HMRI invoice or invoices for such LOPROX
LOTION.
(c) Disputes. In the event of a dispute regarding whether any
LOPROX LOTION fails to meet the SPECIFICATIONS which HMRI and MEDICIS are unable
to resolve, a sample of such LOPROX LOTION shall be submitted by MEDICIS to an
independent laboratory reasonably acceptable to both parties for testing and the
test results obtained by such laboratory shall be final and controlling. The
fees and expenses of such laboratory testing and all additional shipping and
transportation costs incurred as a result of the dispute shall be borne entirely
by the party against whom such laboratory's findings are made. In the event the
test results indicate that the LOPROX LOTION in question fails to meet the
SPECIFICATIONS, HMRI shall replace such LOPROX LOTION within thirty (30)
business days after receipt of such results if replacement LOPROX LOTION stock
is available, or, if no such replacement stock is available, as soon as
reasonably practicable after receiving such notice. MEDICIS shall not be
responsible, and shall receive a credit from HMRI, for any additional costs of
shipping and freight required to be paid as a result of any replacement of
LOPROX LOTION under this Section 2.8(c). MEDICIS shall deduct the invoiced
amount for any LOPROX LOTION which is so determined to fail to meet the
SPECIFICATIONS from payment of the HMRI invoice or invoices for such LOPROX
LOTION.
2.9 Current Inventory, including A/T/S Solution and A/T/S Gel. In
accordance with the terms of the TRANSITION SERVICES AGREEMENT, HMRI or its
AFFILIATES shall deliver to MEDICIS in its initial or subsequent shipments to
MEDICIS at the prices set forth in Exhibit B (for this purpose the supply price
for A/T/S Solution is U.S. $1.55 per 60 ml bottles and for A/T/S Gel is U.S.
$3.25 per 30 gm tube) and Exhibit C, respectively, attached hereto, existing
inventory of the LOPROX LOTION, A/T/S Solution and A/T/S Gel and all existing
samples thereof in inventory of HMRI and its AFFILIATES and in process with at
least twelve (12) months of shelf life remaining. If MEDICIS has distributed
such existing inventory of LOPROX LOTION, A/T/S Solution and A/T/S Gel first,
MEDICIS shall notify HMRI in writing of the quantities of LOPROX LOTION, A/T/S
Solution and A/T/S Gel that have not been sold or given to MEDICIS' customers,
as the case may be, at a date as of nine (9) months prior to their respective
expiration dating. HMRI shall instruct MEDICIS in writing whether, at HMRI's
expense, to destroy such LOPROX LOTION, A/T/S Solution and A/T/S Gel or to
return such LOPROX LOTION, A/T/S Solution and A/T/S Gel to HMRI or its
AFFILIATES. Within ten (10) days after receiving each such notification by
MEDICIS, HMRI shall reimburse MEDICIS for all amounts paid by MEDICIS to HMRI
for such destroyed or returned LOPROX LOTION,
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LOPROX LOTION SUPPLY AGREEMENT
A/T/S Solution and A/T/S Gel and any and all reasonable disposal, shipping or
other expenses incurred by MEDICIS in connection with the destruction or return
of such LOPROX LOTION, A/T/S Solution and A/T/S Gel.
2.10 SUPPLY INTERRUPTION. For purposes of this AGREEMENT, a "SUPPLY
INTERRUPTION" shall be deemed to occur: (i) if HMRI's ability to supply adequate
quantities of LOPROX LOTION in saleable form in a timely manner to MEDICIS is
adversely affected or inhibited as reasonably determined by both parties, (ii)
if HMRI fails to deliver to MEDICIS, in saleable form in accordance with the
terms of this AGREEMENT, any portion, greater than 6% in quantity, of any
confirmed order for any SKU of LOPROX LOTION, or (iii) if in any calendar
quarter covered by the 24-MONTH FORECAST, HMRI fails to deliver, in saleable
form in accordance with the terms of this AGREEMENT, LOPROX LOTION in accordance
with the 24-MONTH FORECAST or, if less, in the applicable portion of MEDICIS'
last short-term forecast provided prior to the SUPPLY INTERRUPTION. For purposes
of this AGREEMENT, a SUPPLY INTERRUPTION shall be deemed to have been fully
cured once HMRI has delivered to MEDICIS all confirmed orders and, for any
calendar months for which there have been no confirmed orders due to the SUPPLY
INTERRUPTION, at least the minimum quantities in saleable form of LOPROX LOTION
forecasted to be ordered by MEDICIS during such calendar months as set forth in
the 24-MONTH FORECAST or, if less, in the applicable portion of MEDICIS' last
short-term forecast provided prior to the SUPPLY INTERRUPTION. In the event of
any SUPPLY INTERRUPTION, the following terms and conditions shall apply:
(a) Pro Rata Entitlement. In the event of a SUPPLY INTERRUPTION,
MEDICIS shall be entitled to a pro rata (in unit quantity) share of the
manufacturing capacity of HMRI and its AFFILIATES (in the event HMRI or its
AFFILIATES are then manufacturing LOPROX LOTION and not PACO) for the
manufacture of LOPROX LOTION, and HMRI and its AFFILIATES shall also be subject
to a pro rata (in unit quantity) entitlement to such manufacturing capacity. If,
for example, during a period of SUPPLY INTERRUPTION, HMRI receives orders for a
total of 2,000 units, of which 500 units (i.e., 25% of the total orders) are
ordered by MEDICIS and 1,500 units (i.e., 75% of the total orders) are ordered
by third parties or by AFFILIATES of HMRI, MEDICIS shall be entitled to receive
25% of HMRI's manufacturing capacity during the period of such SUPPLY
INTERRUPTION. Thus, if HMRI were able to manufacture only 1,000 units during the
period of such SUPPLY INTERRUPTION, MEDICIS would be entitled to receive 25% of
such total number of units (i.e., 250 units) and third parties and AFFILIATES of
HMRI would be entitled to receive 75% of such total number of units (i.e., 750
units). MEDICIS' entitlement to HMRI's and its AFFILIATES' manufacturing
capacity under this Section 2.10(a) shall be in addition to any other rights and
remedies MEDICIS may have under this AGREEMENT as a result of any SUPPLY
INTERRUPTION.
(b) QUALIFIED ALTERNATE SUPPLIER. At any time during the INITIAL
TERM, MEDICIS shall have the right to designate and qualify one and only one
qualified alternate supplier, which selection shall be reasonably acceptable to
HMRI (the "QUALIFIED ALTERNATE SUPPLIER"). The QUALIFIED ALTERNATE SUPPLIER may
only be utilized by MEDICIS during the INITIAL TERM as specifically set forth in
this Section 2.10 or in Section 2.1 hereof. HMRI, at MEDICIS' sole expense,
shall promptly provide at such
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times and locations as may reasonably be requested by MEDICIS, reasonable
cooperation to MEDICIS in qualifying such alternate supplier for LOPROX LOTION.
Such cooperation shall include, without limitation, participation by HMRI's
representatives in at least two meetings in North America during the INITIAL
TERM. From the time that any SUPPLY INTERRUPTION begins until such SUPPLY
INTERRUPTION is fully cured, MEDICIS may obtain any resulting shortage of LOPROX
LOTION from the QUALIFIED ALTERNATE SUPPLIER. If the OPTION (as defined in the
LICENSE AND OPTION AGREEMENT) is not exercised in accordance with Section 4.1 of
the LICENSE AND OPTION AGREEMENT, (i) MEDICIS, its AFFILIATES, or its
successors, assigns or sublicensees shall not obtain supply of LOPROX LOTION,
A/T/S Solution and A/T/S Gel or of the ACTIVE INGREDIENT from the QUALIFIED
ALTERNATE SUPPLIER, its AFFILIATES, or its successors, assigns or sublicensees
for a period of three (3) years after the INITIAL TERM, and (ii) HMRI, its
AFFILIATES, or its successors, assigns or sublicensees after the INITIAL TERM
may obtain supply of the LOPROX LOTION, A/T/S Solution and A/T/S Gel or of the
ACTIVE INGREDIENT from such QUALIFIED ALTERNATE SUPPLIER, its AFFILIATES, or its
successors, assigns or sublicensees after the INITIAL TERM.
(c) LOST SALES Remedy.
(i) (A) For each calendar quarter or portion thereof during an
EXTENDED SUPPLY INTERRUPTION and as liquidated damages and not as a
penalty, HMRI shall pay to MEDICIS an amount equal to MEDICIS' LOST
SALES as provided herein.
(B) For purposes of this Section 2.10(c) and this
AGREEMENT:
(1) An "EXTENDED SUPPLY INTERRUPTION" shall mean a period
which:
(a) begins on the sixty-first (61st) consecutive day
of a SUPPLY INTERRUPTION; provided that during the first six
(6) months during the term hereof, the first (1st) day of a
SUPPLY INTERRUPTION shall begin such period (which in all
cases must be before the two (2) month anniversary of the date
on which the FDA approves the QUALIFIED ALTERNATE SUPPLIER or,
if earlier, the date that is eighteen (18) months after the
EFFECTIVE DATE); and
(b) ends on the earliest of (x) the date as of which
HMRI has fully cured the SUPPLY INTERRUPTION, (y) the date
that is eighteen (18) months after the EFFECTIVE DATE, or (z)
the two (2) month anniversary of the date on which the FDA
approves the QUALIFIED ALTERNATE SUPPLIER.
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LOPROX LOTION SUPPLY AGREEMENT
(2) "LOST SALES" shall mean, determined on a quarterly
basis for each calendar quarter or portion thereof during an EXTENDED
SUPPLY INTERRUPTION, the greater of:
(a) 65% of the dollar amount MEDICIS would have
invoiced for BACKORDERS placed with MEDICIS during such
quarter or portion thereof; or
(b) 70% of the average of NET SALES for the four (4)
most recently completed calendar quarters prior to the
commencement of the SUPPLY INTERRUPTION immediately preceding
such EXTENDED SUPPLY INTERRUPTION; provided, however, that (i)
for any such calculation for any calendar quarter or portion
thereof in 1998, such average shall be of NET SALES for the
three (3) rather than four (4) most recently completed
calendar quarters prior to the commencement of such SUPPLY
INTERRUPTION, (ii) any calculation under this Section for a
portion of a calendar quarter shall be made on a pro rata
basis based on a ninety (90) day calendar quarter, (iii) to
the extent that NET SALES for any calendar quarter (or pro
rata portion thereof) are based on sales of quantities of
LOPROX LOTION which exceeds the quantity of the INTERRUPTED
MEDICIS ORDERS for such LOPROX LOTION for the calendar quarter
(or portion thereof) for which LOST SALES are being
determined, the corresponding NET SALES value of such
quantities in excess of the INTERRUPTED MEDICIS ORDERS shall
be excluded from the determination of NET SALES, and (iv) only
quantities of inventory for which MEDICIS is out-of-stock due
to the SUPPLY INTERRUPTION shall be included in the
calculation of NET SALES.
(c) Notwithstanding anything to the contrary in
subparagraphs 2(a) or 2(b) above, in the event MEDICIS is
out-of-stock for LOPROX LOTION during any period of any
EXTENDED SUPPLY INTERRUPTION due solely to MEDICIS' failure to
maintain a minimum inventory of such LOPROX LOTION in
accordance with Section 2.6 hereof and subject to the
qualifications set forth therein, in determining LOST SALES
hereunder: (i) any BACKORDERS or portions thereof which cannot
be filled due solely to the failure on the part of MEDICIS in
accordance with Section 2.6 shall be excluded from the
calculation pursuant to subparagraph 2(a) above, and (ii) the
corresponding NET SALES value of any such quantities of
inventory which MEDICIS has failed to maintain in accordance
with Section 2.6 shall be excluded from the determination of
NET SALES for purposes of subparagraph 2(b) above.
(3) "BACKORDERS" shall mean orders actually received by
MEDICIS from third-party customers of MEDICIS (which cannot be
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LOPROX LOTION SUPPLY AGREEMENT
AFFILIATES of MEDICIS) for LOPROX LOTION which MEDICIS cannot fill
because it is out-of-stock due to a SUPPLY INTERRUPTION, which must be
within the quantities of the INTERRUPTED MEDICIS ORDERS.
(4) An "INTERRUPTED MEDICIS ORDER" shall mean any
quantities of LOPROX LOTION (other than samples) which was ordered or
forecasted to be ordered by MEDICIS but not delivered by HMRI in
saleable form because of a SUPPLY INTERRUPTION, which shall be limited:
(a) for time periods within the relevant short-term
forecasts submitted by MEDICIS and confirmed by HMRI pursuant
to Section 2.4(b) hereof, to the quantities that were actually
included by MEDICIS in such confirmed short-term forecasts
prior to the SUPPLY INTERRUPTION; or
(b) for time periods beyond such confirmed short-term
forecasts, to the quantities set forth in the 24-MONTH
FORECAST or, if less, in the applicable portion of MEDICIS'
last short-term forecast (which would not have yet been
confirmed by HMRI) submitted prior to the SUPPLY INTERRUPTION
pursuant to Section 2.4(b).
(5) "NET SALES" shall mean the gross invoice amount of
LOPROX LOTION invoiced by MEDICIS, HMRI or HMRI on behalf of MEDICIS to
third parties in the TERRITORY during a calendar quarter, less (i)
promotional and trade discounts; (ii) sales and excise taxes,
value-added and other taxes, shipping costs and insurance premiums and
duties which are billed to customers as separate items on invoices;
(iii) allowances for short shipments, claims for returned goods and
price adjustments; and (iv) contracts charge-backs and government
rebates (provided that for any calendar quarters after the EFFECTIVE
DATE, such charge-backs and rebates shall be limited to those which are
the responsibility of MEDICIS under the LICENSE AND OPTION AGREEMENT).
HMRI shall promptly provide MEDICIS with any and all documents and
information reasonably requested by MEDICIS in order to enable MEDICIS
to make any determination of NET SALES required under this AGREEMENT.
(C) MEDICIS covenants and agrees that it shall not solicit
orders from customers outside the ordinary course of business, make or announce
any price increases or otherwise act in any manner not in the ordinary course of
business with respect to the LOPROX LOTION subject to the EXTENDED SUPPLY
INTERRUPTION where such actions would have the effect of increasing the
quantities of BACKORDERS, during any period (i) in which an EXTENDED SUPPLY
INTERRUPTION is continuing, or (ii) after such time that HMRI notifies MEDICIS
that an EXTENDED SUPPLY INTERRUPTION is likely to occur until such time as the
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LOPROX LOTION SUPPLY AGREEMENT
EXTENDED SUPPLY INTERRUPTION is cured or avoided as further notified by
HMRI to MEDICIS.
(D) During the period of any such EXTENDED SUPPLY
INTERRUPTION, MEDICIS shall invoice HMRI quarterly for LOST SALES, and
HMRI shall pay each such invoice not later than ten (10) business days
after its receipt thereof. Each such invoice shall be accompanied by
documentation reasonably satisfactory to HMRI setting forth the LOST
SALES covered by the invoice.
(ii) Notwithstanding anything to the contrary in Section
2.10(c)(i) hereof, MEDICIS shall have no right to recover for LOST
SALES under Section 2.10(c)(i) in connection with any EXTENDED SUPPLY
INTERRUPTION which is caused solely and directly by force majeure due
to: (a) an act of God; (b) any act, regulation, order, decree or law of
any government or agency thereof which is not a result of or caused by
any action or inaction on the part of HMRI or an AFFILIATE in violation
of its obligations under any of the TRANSACTION DOCUMENTS or APPLICABLE
LAWS; (c) war or civil commotion; (d) damage to or destruction of
HMRI's or PACO's manufacturing facilities resulting from an act of God;
(e) labor disturbances which are not specific to the operations or
facilities of HMRI or its AFFILIATES or PACO and which are not within
the power of HMRI or its AFFILIATES or PACO to settle or control; (f)
epidemic; (g) failure of a sole source of supply to HMRI or PACO of a
particular supply item for LOPROX LOTION or failure of PACO to supply
LOPROX LOTION to HMRI by reason of any force majeure (as force majeure
is defined in this Section 2.10(c)(ii)); (h) failure of all sources of
supply to HMRI or PACO of a particular supply item for LOPROX LOTION
where HMRI or PACO has multiple sources of supply for such item,
provided such failure is not due to or caused by any action or inaction
on the part of HMRI or PACO; (i) the failure of public utilities; or
(j) the failure of common carriers.
2.11 Supply Price for LOPROX LOTION. The supply price of LOPROX LOTION
to be paid by MEDICIS to HMRI for the INITIAL TERM shall be as specified in
Exhibits B and C attached hereto; provided, however, that the supply prices
shall be increased on March 1 of each year by the increase in the U.S. consumer
price index released by the U.S. Department of Labor (the "CPI") using March 1,
1998 as the base reference point (the "CPI INCREASE"); provided, further, if the
supply price set forth in Exhibits B and C for LOPROX LOTION is less than HMRI's
costs to manufacture and/or supply such LOPROX LOTION to MEDICIS, the price for
such LOPROX LOTION shall be increased by an amount so that the supply price for
such LOPROX LOTION equals the cost for such LOPROX LOTION. HMRI shall use its
reasonable commercial efforts to lower the prices of other trade or sample
LOPROX LOTION to the fullest extent possible to give MEDICIS the same economic
benefits that it would have received under this AGREEMENT had such price not
been increased.
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2.12 Payment.
(a) All payments required by this AGREEMENT shall be made in United
States Dollars. All invoices are net and payment must be received not later than
(i) forty-five (45) calendar days after the date of invoice or (ii) if later,
thirty (30) days after delivery pursuant to Section 2.7 hereof. The date of each
invoice shall be on or about the date of shipment of LOPROX LOTION. Payment
shall be made without deduction, deferment, set-off, lien or counterclaim of any
nature, other than for rejected or returned goods. Time for payment shall be of
the essence. Unless MEDICIS notifies HMRI in writing of a good faith dispute,
with respect to payments not received within five (5) calendar days after the
end of such forty-five (45) calendar day or longer period, interest shall
accrue on any amount overdue, at the rate of prime plus two percent (2%) per
annum, such interest to begin accruing on a daily basis from the date of
invoice, and shall accrue both before and after judgment; provided, however, in
the case of a good faith dispute regarding payment resolved to be due and not
paid within five (5) business days after such resolution, interest shall accrue
on any amount overdue, at the rate of prime plus two percent (2%) per annum,
such interest to begin accruing on a daily basis from the date such payment
becomes overdue, and shall accrue both before and after judgment; provided,
further, in the case of a good faith dispute regarding payment, MEDICIS may in
its discretion determine to pay such amounts disputed to be overdue and in the
event amounts are finally determined not to be due, HMRI shall repay such excess
amounts determined not be due to MEDICIS, and interest shall accrue on any such
amount, at the rate of prime plus two percent (2%) per annum, such interest to
begin accruing on a daily basis from the date such disputed payment was received
by HMRI.
(b) With respect to defaults of payment not cured within fifteen
(15) business days after receipt of written notice from HMRI to MEDICIS, HMRI
shall, in its sole discretion, and without prejudice to any other of its accrued
rights, be entitled to suspend the provision of LOPROX LOTION; provided,
however, a good faith bona fide dispute by MEDICIS regarding a payment pursuant
to this AGREEMENT shall not be considered a default of payment so long as
MEDICIS notifies HMRI in writing of such dispute within sixty (60) calendar days
from the date of invoice. MEDICIS understands that it shall notify HMRI promptly
upon a determination that a dispute exists regarding a payment.
2.13 Advertising/Marketing/Sales Costs and Product Pricing. MEDICIS
shall be responsible for all advertising, marketing and sales costs associated
with the distribution of LOPROX LOTION in the TERRITORY. MEDICIS shall have
complete authority for all pricing decisions for LOPROX LOTION in the TERRITORY.
MEDICIS shall not alter the LOPROX LOTION and shall not recommend or knowingly
sell the LOPROX LOTION for any uses except as described in the FDA approved
LOPROX LOTION labeling.
2.14 Samples.
(a) During each CONTRACT YEAR of the INITIAL TERM, HMRI shall
provide MEDICIS with samples of LOPROX LOTION with a value totaling U.S.
$130,000, based upon the sample unit prices set forth in Exhibit C hereto (plus
the CPI INCREASE for the
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LOPROX LOTION SUPPLY AGREEMENT
second and third CONTRACT YEAR), at no cost to MEDICIS; provided, however, that
subject to the terms of this AGREEMENT, if MEDICIS does not purchase LOPROX
LOTION other than samples with an aggregate supply price of U.S. $400,000 (as
increased by the CPI INCREASE for any portion of a CONTRACT YEAR for which such
CPI INCREASE is in effect) (the "TRADE QUOTA") from HMRI during any CONTRACT
YEAR of the INITIAL TERM (a "SHORTFALL"), at the end of such CONTRACT YEAR
containing a SHORTFALL, MEDICIS shall reimburse HMRI for the samples on a pro
rata basis at the full sample unit prices set forth in Exhibit C hereto (plus
the CPI INCREASE, as applicable). By way of example only and without taking into
account the CPI INCREASE during the first CONTRACT YEAR, if during such CONTRACT
YEAR MEDICIS purchases LOPROX LOTION other than samples with an aggregate supply
price of U.S. $300,000, the amount of the reimbursement by MEDICIS under this
Section 2.14(a) would be equal to the product of One-Fourth (1/4) and U.S.
$130,000, or U.S. $32,500.
(b) In the event a SUPPLY INTERRUPTION occurs in the same CONTRACT
YEAR in which a SHORTFALL occurs, then (i) to the extent that the aggregate
quantities of LOPROX LOTION other than samples purchased by MEDICIS from the
QUALIFIED ALTERNATE SUPPLIER during the period of such SUPPLY INTERRUPTION
exceeds by more than 5% the quantities of the INTERRUPTED MEDICIS ORDERS for
such period, MEDICIS' TRADE QUOTA under Section 2.14(a) for the next succeeding
CONTRACT YEAR shall be increased by the aggregate supply price of such excess
quantities (as determined by reference to the prices in the CONTRACT YEAR in
which the SUPPLY INTERRUPTION occurs); (ii) the aggregate supply price of the
quantities of all LOPROX LOTION other than samples purchased by MEDICIS from the
QUALIFIED ALTERNATE SUPPLIER during the period of such SUPPLY INTERRUPTION shall
be credited towards MEDICIS' TRADE QUOTA for such CONTRACT YEAR under Section
2.14(a) hereof, but only to the extent such quantities do not exceed the
quantities of the INTERRUPTED MEDICIS ORDERS for such period; and (iii) in the
event that the QUALIFIED ALTERNATE SUPPLIER has not been qualified prior to the
commencement of such SUPPLY INTERRUPTION, MEDICIS shall receive credit towards
its TRADE QUOTA pursuant to Section 2.14(a) to the extent of the INTERRUPTED
MEDICIS ORDERS. With respect to subpart (ii) of the immediately preceding
sentence and by way of example only, without taking into account any CPI
INCREASE, if during any such CONTRACT YEAR MEDICIS were to purchase from HMRI
and the QUALIFIED ALTERNATE SUPPLIER LOPROX LOTION other than samples with
aggregate supply prices of U.S. $300,000 and U.S. $100,000, respectively, and
the aggregate supply price for the INTERRUPTED MEDICIS ORDERS for the period of
the SUPPLY INTERRUPTION during such CONTRACT YEAR were U.S. $50,000, the amount
of the reimbursement by MEDICIS under Section 2.14(a) hereof would be equal to
(1) U.S. $50,000 divided by U.S. $400,000, multiplied by (2) U.S. $130,000, or
U.S. $16,250.
(c) Except as otherwise provided by this Section 2.14, prices for
samples of LOPROX LOTION purchased by MEDICIS from HMRI shall be at the full
sample unit price set forth in Exhibit C attached hereto.
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(d) MEDICIS shall select the mix of the samples of the LOPROX
LOTION which MEDICIS is to receive, which shall be within HMR HMRI's
manufacturing capacities for each such sample as reasonably determined by HMRI.
(e) Samples shall be delivered to MEDICIS by HMRI in accordance
with Section 2.7 hereof.
2.15 Compliance with APPLICABLE LAWS. HMRI and its AFFILIATES shall
comply fully with APPLICABLE LAWS in the performance of this AGREEMENT.
2.16 Rights Necessary for Manufacturing. In accordance with the terms
and conditions of the LICENSE AND OPTION AGREEMENT during the INITIAL TERM, HMRI
reserves the right, and in accordance with the terms of the PURCHASE AGREEMENT
during any mutually agreed extension of the term hereof, MEDICIS grants to HMRI
a royalty-free, non-exclusive license, to use the PATENTS, the TRADEMARKS and
the PRODUCT KNOW-HOW solely to make and have made LOPROX LOTION in the TERRITORY
(i) for sale to MEDICIS under and pursuant to this AGREEMENT and (ii) for use
and resale outside the TERRITORY in accordance with the terms of the LICENSE AND
OPTION AGREEMENT and the PURCHASE AGREEMENT.
ARTICLE III.
TERM AND TERMINATION
3.1 Term of this AGREEMENT. The term of this AGREEMENT shall be the
INITIAL TERM unless this AGREEMENT is earlier terminated in accordance with the
provisions of Section 3.3 hereof.
3.2 Renewal Periods. The term of this AGREEMENT shall only be extended
by the mutual agreement of the parties. MEDICIS acknowledges that if the OPTION
is exercised, then the PACO LOPROX AGREEMENT is automatically assigned by HMRI
to MEDICIS and is automatically assumed by MEDICIS on the third (3rd)
anniversary of this AGREEMENT pursuant to that certain Assignment and Assumption
Agreement between MEDICIS and HMRI of even date herewith.
3.3 Early Termination.
(a) This AGREEMENT shall automatically be terminated upon the
termination of the LICENSE AND OPTION AGREEMENT by HMRI pursuant to Section 15.2
thereof or by MEDICIS pursuant to Section 15.3 thereof.
(b) Either of MEDICIS or HMRI, as the case may be, may terminate
this AGREEMENT forthwith by notice in writing to the other party upon the
occurrence of any of the following events:
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LOPROX LOTION SUPPLY AGREEMENT
(i) if the other party commits a material breach of this
AGREEMENT, which in the case of a breach capable of remedy shall not have been
remedied within sixty (60) days of the receipt by the other party of a notice
identifying the breach and requiring its remedy or such longer time as the party
in breach may demonstrate to the other party is necessary to remedy the breach
using its reasonable efforts to do so; or
(ii) if the other party ceases for any reason to carry on
business or convenes a meeting of its creditors or has a receiver or manager
appointed in respect of all or substantially all of its assets or is the subject
of an application for an administration order or of any proposal for a voluntary
arrangement or enters into liquidation (whether compulsorily or voluntarily) or
undergoes any analogous act or proceedings under foreign law; or
(iii) the enactment of any law, order or regulation by
governmental authority that would render it impossible for such party to perform
its obligations hereunder; provided, however, that if the enactment of any such
law, order or regulation renders it impossible for HMRI to perform hereunder and
such law, order or regulation is enacted as a result of or is caused by any
action or inaction on the part of HMRI, HMRI shall have no right to terminate
this AGREEMENT under this Section 3.3(b) as a result of such enactment.
(c) MEDICIS shall additionally have certain rights to terminate
this AGREEMENT, the SUPPLY AGREEMENT and the LICENSE AND OPTION AGREEMENT
pursuant to Section 3.3(c) of the SUPPLY AGREEMENT and Section 15.3 of the
LICENSE AND OPTION AGREEMENT.
3.4 Consequences of Termination and Survival.
(a) Termination of this AGREEMENT for whatever reason shall not
affect the accrued rights and obligations of HMRI or MEDICIS arising under or
out of this AGREEMENT. The provisions of Articles V (LOPROX LOTION Recalls), VI
(Warranties and Remedies) and VII (Indemnification, Limitation of Liability and
Insurance) and of Sections 2.2, 2.8, 2.9, 2.10(b), 2.10(c), 2.12, 3.5, 8.2, 8.4,
8.5, 8.6, 8.8, 8.10 and 8.11 of this AGREEMENT and this Section 3.4 shall
survive the expiration or termination of this AGREEMENT or of any extensions
thereof. In addition, any other provisions which are required to interpret and
enforce the parties' rights and obligations under this AGREEMENT shall also
survive such expiration or termination to the extent required for the full
observation and performance of this AGREEMENT by the parties hereto.
(b) If the OPTION (as defined in the LICENSE AND OPTION AGREEMENT)
is exercised pursuant to Section 4.1 of the LICENSE AND OPTION AGREEMENT, upon
the expiration of the INITIAL TERM of this AGREEMENT, at MEDICIS' request, the
parties or their AFFILIATES shall enter into a supply agreement for the supply
of the ACTIVE INGREDIENT for the LOPROX LOTION by HMR GmbH or its AFFILIATES to
MEDICIS pursuant to which HMR GmbH or its AFFILIATES shall agree: (i) to sell
the ACTIVE INGREDIENT to MEDICIS for as long as HMR GmbH or its AFFILIATES
manufacture the ACTIVE INGREDIENT at a supply price equal to U.S. $3,295 per
kilo of ciclopirox acid and $2,540 per kilo of ciclopirox olamine subject to any
CPI
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LOPROX LOTION SUPPLY AGREEMENT
INCREASE or exchange rate adjustment pursuant to Section 2.11 of the SUPPLY
AGREEMENT; (ii) to manufacture and sell to MEDICIS at least a four (4) year
supply of the ACTIVE INGREDIENT if HMR GmbH ceases to manufacture such ACTIVE
INGREDIENT, where such four (4) year supply is based on the amount of such
ACTIVE INGREDIENT purchased by MEDICIS during the twelve (12) month period prior
to HMR GmbH's ceasing to manufacture such ACTIVE INGREDIENT for MEDICIS; and
(iii) in the event HMR GmbH ceases to manufacture the ACTIVE INGREDIENT, HMRI
shall, at its election, either (a) provide the specifications and production
process flow chart to allow MEDICIS to initiate and establish a source of supply
with an FDA approved third party manufacturer with whom MEDICIS shall enter into
an exclusive supply agreement, prohibiting such manufacturer from manufacturing
for or selling or providing know how to any other person or entity, or (b)
arrange for an alternative source of supply from a third party supplier
reasonably acceptable to MEDICIS and on terms and conditions reasonably
acceptable to MEDICIS.
3.5 Accrued Obligations. In the event that this AGREEMENT is terminated
by HMRI pursuant to the provisions of Section 3.3 hereof, MEDICIS shall
immediately pay to HMRI (i) all amounts outstanding and remaining to be paid for
LOPROX LOTION supplied prior to the termination, (ii) all amounts that would be
due to HMRI related to binding quantities of LOPROX LOTION ordered pursuant to
Section 2.4 hereof, (iii) all amounts outstanding and remaining to be paid for
samples supplied pursuant to Section 2.14(b) hereof prior to the termination,
and (iv) subject to Section 2.14(b) hereof, an amount equal to the value of the
samples supplied pursuant to Section 2.14(a)(i) hereof prior to the termination
if during the CONTRACT YEAR in which this AGREEMENT is terminated MEDICIS has
not purchased LOPROX LOTION other than samples with an aggregate supply price of
at least an amount equal to U.S. $400,000 (plus the CPI INCREASE for the second
and third CONTRACT YEAR) multiplied by a fraction, the numerator of which is
equal to the number of days during the then current CONTRACT YEAR during which
this AGREEMENT was in effect prior to its termination and the denominator of
which is equal to 365.
ARTICLE IV.
MANUFACTURING COMPLIANCE,
ACCESS AND REGULATORY MATTERS
4.1 Tests; Retained Samples. HMRI shall perform, or cause to be
performed, tests on each lot of LOPROX LOTION, including all samples thereof,
manufactured pursuant to this AGREEMENT before delivery to MEDICIS. Such tests
shall include required assay and stability testing and the testing of LOPROX
LOTION for compliance with the SPECIFICATIONS and the NDAs. HMRI shall maintain
in accordance with prudent industry standards all retained samples of LOPROX
LOTION and of the raw materials for LOPROX LOTION.
4.2 Manufacturing Compliance. LOPROX LOTION, including all samples
thereof, shall be manufactured in accordance with the SPECIFICATIONS, cGMPs and
the NDAs and shall be manufactured and supplied from plants approved in the
relevant NDA, and the choice of
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LOPROX LOTION SUPPLY AGREEMENT
locations shall be in HMRI's sole discretion; provided, however, that HMRI
hereby represents and warrants to MEDICIS that any change in manufacturing
location as permitted by this Section 4.2 shall not (i) materially adversely
affect HMRI's ability to perform and comply fully with all of its obligations
under this AGREEMENT or (ii) materially adversely affect HMRI's capacity to
supply any quantities of LOPROX LOTION within the 24-MONTH FORECAST as compared
to HMRI's capacity to supply such quantities prior to the date of such change in
location.
4.3 Changes in SPECIFICATIONS. Any changes in SPECIFICATIONS or the
test methods or manufacturing processes referenced in the NDAs shall not be made
by HMRI without MEDICIS' prior substantive involvement and written approval,
which approval shall not be unreasonably withheld or delayed. Any changes in
SPECIFICATIONS or the test methods or manufacturing processes referenced in the
NDAs shall not be made by MEDICIS without HMRI's prior substantive involvement
and written approval, which approval shall not be unreasonably withheld or
delayed. If, upon a change in SPECIFICATIONS or such test methods or
manufacturing processes made by MEDICIS without HMRI's prior substantive
involvement and written approval, LOPROX LOTION no longer meets the old or new
SPECIFICATIONS or does not pass inspection under the old or new test method,
then MEDICIS shall bear responsibility for such problem and any financial
consequences flowing from such failure, including without limitation failed lots
and recalls. If, upon a change in SPECIFICATIONS or such test methods or
manufacturing processes made by HMRI without MEDICIS' prior substantive
involvement and written approval, LOPROX LOTION no longer meets the old or new
SPECIFICATIONS or does not pass inspection under the old or new test method,
then HMRI shall bear responsibility for such problem and any financial
consequences flowing from such failure, including without limitation failed lots
and recalls.
4.4 Access to Facilities.
(a) MEDICIS Access. Upon the reasonable prior written request of
MEDICIS, MEDICIS shall have the right to inspect those portions of the
manufacturing and testing facilities where LOPROX LOTION is being manufactured
or tested, as the case may be, during regular business hours, to ascertain
compliance with cGMP and the SPECIFICATIONS. If the FDA or other applicable
governmental regulatory agency asserts any notice to the effect that there has
been a failure to comply with any law or regulation in connection with the
manufacture of LOPROX LOTION, or if HMRI delivers LOPROX LOTION that does not
meet the SPECIFICATIONS, then MEDICIS shall have the right to inspect such
portions of the manufacturing facilities that relate to the manufacture of
LOPROX LOTION upon reasonable notice and during normal business hours.
(b) HMRI Access. Upon the reasonable prior written request of HMRI,
HMRI shall have the right to inspect those portions of the warehouse and
distribution facilities of MEDICIS where the LOPROX LOTION is being stored and
distributed, during regular business hours, to observe LOPROX LOTION storage and
distribution or other related activities. If the FDA or other applicable
governmental regulatory agency asserts any notice to the effect that MEDICIS has
failed to comply with any law or regulation in connection with the storage or
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LOPROX LOTION SUPPLY AGREEMENT
distribution of LOPROX LOTION, then MEDICIS shall promptly notify HMRI and HMRI
shall have the right to inspect such portions of the warehouse and distribution
facilities of MEDICIS that relate to the storage or distribution of LOPROX
LOTION upon reasonable notice and during normal business hours.
4.5 Regulatory Correspondence. MEDICIS shall promptly provide to HMRI
copies of all MEDICIS correspondence to or from the FDA relating to LOPROX
LOTION. HMRI shall notify MEDICIS in writing of and make available (or cause to
be made available) to MEDICIS within three (3) days after receipt by HMRI all
regulatory correspondence regarding regulatory letters and correspondence
bearing on the safety and efficacy of LOPROX LOTION.
4.6 Inquiries and Complaints relating to LOPROX LOTION. Except for
technical product complaints relating to the manufacture of LOPROX LOTION or as
otherwise required by law or governmental regulation, MEDICIS shall be
responsible for investigating and responding to all inquiries, complaints and
adverse events regarding LOPROX LOTION. It shall be MEDICIS' responsibility to
comply with all material federal, state and local governmental reporting
requirements regarding adverse drug events and quality matters relating to the
LOPROX LOTION from and after the date on which MEDICIS assumes responsibility
for such matters pursuant to the LICENSE AND OPTION AGREEMENT. From and after
the date on which MEDICIS assumes responsibility pursuant to the LICENSE AND
OPTION AGREEMENT for FDA regulatory matters for LOPROX LOTION, MEDICIS shall
comply with the standard operating procedures to be developed under Section 7.4
of the LICENSE AND OPTION AGREEMENT. In the event of a dispute in respect of the
therapeutic action or quality of LOPROX LOTION: (i) if the dispute involves only
MEDICIS and a subsequent purchaser, then MEDICIS and HMRI shall consult prior to
any compromise or settlement of such dispute; and (ii) if the dispute involves
MEDICIS, HMRI and a subsequent purchaser, then both parties must consent in
writing prior to any compromise or settlement of such dispute.
4.7 Response to Complaints and/or Adverse Drug Reactions (or Events).
Pursuant to any reported complaint and/or adverse drug reaction (or event), if
the nature of the reported complaint and/or adverse drug reaction (or event)
requires testing, HMRI shall, at MEDICIS' reasonable request and expense,
perform ,or cause to be performed, analytical testing of corresponding retention
samples and provide the results thereof to MEDICIS as soon as reasonably
practicable; provided, however, that HMRI shall be responsible for the
reasonable costs of such testing and reporting to the FDA or any other
governmental regulatory agency if it is mutually and reasonably agreed upon
between MEDICIS and HMRI that HMRI is responsible for such reported complaint
and/or adverse drug reaction (or event). Such testing shall be performed using
approved testing procedures.
4.8 Additional Information. HMRI shall provide to MEDICIS in a timely
manner, but in no event less than sixty (60) days prior to the due date of
MEDICIS' annual report to the FDA with respect to LOPROX LOTION, all information
(in written form) which MEDICIS reasonably requests regarding LOPROX LOTION in
order to comply with applicable federal and state drug laws. MEDICIS shall also
be responsible for assuring that all labeling, packaging and
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LOPROX LOTION SUPPLY AGREEMENT
promotional material produced by it relating to LOPROX LOTION complies with
federal, state and local law.
ARTICLE V.
LOPROX LOTION RECALLS
5.1 Recalls During INITIAL TERM. In the event that during the INITIAL
TERM (i) any governmental agency or authority issues a request or directive or
order that LOPROX LOTION in the TERRITORY be recalled or retrieved, (ii) a court
of competent jurisdiction orders such a recall or retrieval, or (iii) HMRI and
MEDICIS reasonably determine that LOPROX LOTION should be recalled or retrieved
in the TERRITORY or a "dear doctor" letter is required relating to restrictions
on the use of LOPROX LOTION in the TERRITORY, the rights and obligations of the
parties shall be governed by Section 7.5 of the LICENSE AND OPTION AGREEMENT,
which is incorporated herein by this reference.
5.2 Recalls Thereafter. In the event that after the INITIAL TERM (i)
any governmental agency or authority issues a request or directive or order that
LOPROX LOTION in the TERRITORY be recalled or retrieved, (ii) a court of
competent jurisdiction orders such a recall or retrieval, or (iii) MEDICIS
reasonably determines that LOPROX LOTION should be recalled or retrieved in the
TERRITORY or a "dear doctor" letter is required relating to restrictions on the
use of LOPROX LOTION in the TERRITORY, the rights and obligations of the parties
shall be governed by Section 7.2 of the PURCHASE AGREEMENT, which is
incorporated herein by this reference.
ARTICLE VI.
WARRANTIES AND REMEDIES
6.1 FDA Approval. HMRI warrants as of the date hereof that LOPROX
LOTION is approved by the FDA for the uses set forth in the LOPROX LOTION
labeling approved by HMRI as of the date hereof. LOPROX LOTION shall conform to
and shall be manufactured in conformity with, the regulations of the FDA.
6.2 Conformity with SPECIFICATIONS. HMRI warrants that the LOPROX
LOTION sold to MEDICIS pursuant to this AGREEMENT shall meet the SPECIFICATIONS
for LOPROX LOTION in effect at the time title to such LOPROX LOTION passes from
HMRI to MEDICIS pursuant to Section 2.7 hereof.
6.3 Compliance with the Federal Food, Drug and Cosmetic Act. HMRI
warrants that all LOPROX LOTION delivered to MEDICIS pursuant to this AGREEMENT
shall, at the time of such delivery, not be adulterated within the meaning of
the ACT and shall not be an article which may not, under the provisions of the
ACT, be introduced into interstate commerce.
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LOPROX LOTION SUPPLY AGREEMENT
6.4 No Liens. HMRI warrants that all LOPROX LOTION delivered to MEDICIS
pursuant to this AGREEMENT shall, at the time of such delivery, be free and
clear of all liens, security interests and other encumbrances.
6.5 Exclusion of Other Warranties.
(a) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
EXPRESS WARRANTIES PROVIDED IN SECTIONS 6.1, 6.2, 6.3 AND 6.4 ARE IN LIEU OF,
AND HMRI HEREBY DISCLAIMS, ALL CONDITIONS, WARRANTIES AND STATEMENTS IN RESPECT
OF LOPROX LOTION AND IN RESPECT OF THE MANUFACTURING SERVICES PROVIDED
HEREUNDER, WHETHER EXPRESS OR IMPLIED, BY STATUTE, CUSTOM OF THE TRADE OR
OTHERWISE (INCLUDING WITHOUT LIMITATION ANY SUCH CONDITION, WARRANTY OR
STATEMENT RELATING TO THE DESCRIPTION OR QUALITY OF LOPROX LOTION, THEIR
MERCHANTABILITY OR THEIR FITNESS FOR A PARTICULAR PURPOSE OR USE UNDER ANY
CONDITIONS) AND ANY SUCH CONDITION, WARRANTY OR STATEMENT IS HEREBY EXCLUDED.
(b) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 2.10(c) HEREOF AND IN
ADDITION TO THEIR RESPECTIVE REMEDIES UNDER ARTICLE VII AND ANY REMEDY PROVIDED
HEREIN, AT LAW OR IN EQUITY FOR BREACH OF THIS AGREEMENT AS LIMITED BY SECTION
6.5(a), MEDICIS AND HMRI SHALL BE ENTITLED TO ANY AND ALL RIGHTS AND REMEDIES
AVAILABLE AT LAW OR IN EQUITY OR UNDER THE TRANSACTION DOCUMENTS WITH RESPECT TO
RIGHTS AND OBLIGATIONS ARISING THEREUNDER; PROVIDED, HOWEVER, THAT IN NO EVENT
SHALL HMRI OR MEDICIS BE LIABLE TO THE OTHER PARTY UNDER OR WITH RESPECT TO THIS
AGREEMENT FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY
KIND, INCLUDING LOSS OF PROFITS.
ARTICLE VII.
INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE
7.1 Indemnification by MEDICIS. In addition to any other rights HMRI
may have at law or in equity and subject to Section 6.5 hereof, MEDICIS shall
indemnify, defend and hold harmless HMRI and its AFFILIATES, and their
employees, officers and directors, and their successors and assigns (each, an
"HMRI INDEMNIFIED PARTY"), from and against any and all LIABILITIES which the
HMRI INDEMNIFIED PARTY may incur, suffer or be required to pay resulting from or
arising in connection with: (i) the marketing, distribution, sale or promotion
of the LOPROX LOTION by MEDICIS or its AFFILIATES after the EFFECTIVE DATE; or
(ii) the manufacture of the LOPROX LOTION by MEDICIS or its AFFILIATES or by a
third party (other than an AFFILIATE of HMRI) after the EFFECTIVE DATE, unless
HMRI had knowledge as of the EFFECTIVE DATE that, based on facts in existence
and circumstances persisting on the EFFECTIVE DATE, such third party's
manufacture of LOPROX LOTION after the EFFECTIVE DATE would be likely to result
in or create such LIABILITIES.
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LOPROX LOTION SUPPLY AGREEMENT
7.2 Indemnification by HMRI. In addition to any other rights MEDICIS
may have at law or in equity and subject to Section 6.5 hereof, HMRI shall
indemnify, defend and hold harmless MEDICIS and its AFFILIATES, employees,
officers and directors and its successors and assigns (each, a "MEDICIS
INDEMNIFIED PARTY"), from and against any and all LIABILITIES which the MEDICIS
INDEMNIFIED PARTY may incur, suffer or be required to pay resulting from or
arising in connection with: (i) the manufacture of LOPROX LOTION by HMRI or its
AFFILIATES or its subcontractors prior to the EFFECTIVE DATE or after the
EFFECTIVE DATE in breach of any of HMRI's representations, warranties, covenants
and obligations under this AGREEMENT, excluding, however, any EXCLUDED HMR
PRODUCT LIABILITY; (ii) the manufacture, marketing, distribution, sale or
promotion of the PRODUCTS by HMRI or by its AFFILIATES or its subcontractors or
by any third party prior to the EFFECTIVE DATE, regardless of the date of first
assertion of any claim or action relating thereto; or (iii) the manufacture
(except for matters which are the subject of subpart (i) of this Section 7.2),
marketing, distribution, sale or promotion of LOPROX LOTION outside the
TERRITORY by HMRI or by any AFFILIATE of HMRI or by any third party (other than
MEDICIS, MEDICIS' AFFILIATES, assignees and sublicensees and the QUALIFIED
ALTERNATE SUPPLIER) after the EFFECTIVE DATE.
7.3 Process of Indemnification. Promptly after an indemnified party
becomes aware of any potential LIABILITY hereunder, such party shall deliver
written notice to the indemnifying party, stating the nature of the potential
LIABILITY; provided, however, that the delay in giving or the failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the indemnifying party shall have been actually prejudiced as a
result of such delay or failure. The indemnified party shall give the
indemnifying party such information with respect to the potential LIABILITY as
the indemnifying party may from time to time reasonably request. The
indemnifying party shall have the right to conduct the defense of any suit,
claim or other proceeding related to the LIABILITY if it has assumed
responsibility for the suit, claim or other proceeding in writing; provided,
however, if in the reasonable judgment of the indemnified party, such suit,
claim or proceeding involves an issue or matter which could have a material
adverse effect on the business, operations or assets of the indemnified party,
the indemnified party may elect, at its own expense, to conduct a separate
defense thereof, but in no event shall any such election be construed as a
waiver of any indemnification rights such indemnified party may have under this
Article VII, at law or in equity, or otherwise. 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; provided, however,
that the indemnifying party shall pay the reasonable fees and costs of any
separate counsel to the extent such representation is due to a conflict of
interest between the parties.
7.4 Settlements. Neither party may settle a claim or action related to
a LIABILITY without the consent of the other party, which consent shall not be
unreasonably withheld, 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, and any payment
made by a party in such a settlement without obtaining such consent shall be at
its own cost and expense. Notwithstanding the foregoing, the indemnifying party
will be liable under this Article VII for any settlement effected without its
consent if the indemnifying party
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LOPROX LOTION SUPPLY AGREEMENT
has refused to acknowledge liability for indemnification hereunder and/or
declines to defend the indemnified party in any such claim, action or proceeding
and it is determined by arbitration pursuant to Section 8.4 hereof that the
indemnifying party was liable to the indemnified party for indemnification
related to such settlement.
7.5 Limitation of Liability. Subject to the terms of this AGREEMENT,
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 in
equity to direct damages only and in no event shall a party be liable to the
other party for indirect, incidental, special or consequential damages,
including without limitation, lost profits.
7.6 Distribution Insurance. MEDICIS shall obtain and maintain in effect
for the term of this AGREEMENT liability insurance or indemnity policies with an
insurer reasonably acceptable to HMRI, in an amount not less than U.S. $5
million with an indemnity to principals clause with respect to the distribution
of LOPROX LOTION, which policies shall name HMRI as additional insured and shall
be blanket policies. Such policies shall insure against liability on the part of
MEDICIS and any of its AFFILIATES, as their interests may appear, due to injury,
disability or death of any person or persons, or injury to property, arising
from the distribution of the LOPROX LOTION. Upon the execution of this AGREEMENT
and thereafter on January 1 of each year during the term, MEDICIS shall provide
to HMRI a certificate of insurance (i) summarizing such insurance coverage, (ii)
identifying any exclusions and (iii) indicating that the terms of MEDICIS'
insurance policies are in accordance with this Section 7.6. MEDICIS shall
promptly notify HMRI of any material alterations to the terms of such policies
or in the amounts for which insurance is provided.
7.7 Manufacturer's Insurance. HMRI shall obtain and maintain in effect
for the term of this AGREEMENT liability insurance or indemnity policies with an
insurer reasonably satisfactory to MEDICIS, in an amount not less than U.S. $5
million with an indemnity to principals clause with respect to the manufacture
of the LOPROX LOTION, which policies shall name MEDICIS as an additional insured
and shall be blanket policies. Such policies shall insure against liability on
the part of HMRI and any of its AFFILIATES, as their interests may appear, due
to injury, disability or death of any person or persons, or injury to property
arising from the negligence of HMRI or its AFFILIATES in the manufacture of the
LOPROX LOTION. Upon the execution of this AGREEMENT and thereafter on January 1
of each year during the term, HMRI shall provide to MEDICIS a certificate of
insurance (i) summarizing such insurance coverage, (ii) identifying any
exclusions and (iii) indicating that the terms of HMRI's insurance policies are
in accordance with this Section 7.7. HMRI shall promptly notify MEDICIS of any
material alterations to the terms of such policies or in the amounts for which
insurance is provided.
7.8 LOPROX LOTION Liability Claims. As soon as it becomes aware, each
party shall give the other party prompt written notice of any claim involving
LOPROX LOTION, any injury alleged to have occurred as a result of the use or
application of LOPROX LOTION, and
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LOPROX LOTION SUPPLY AGREEMENT
any circumstances that may give rise to litigation or recall of LOPROX LOTION or
regulatory action that may affect the sale or manufacture of LOPROX LOTION,
specifying, to the extent the party has such information, the time, place and
circumstances thereof and the names and addresses of the persons involved. Each
party shall also furnish promptly to the other party copies of all papers
received in respect of any claim, action or suit arising out of such alleged
defect, injury or regulatory action.
ARTICLE VIII.
GENERAL PROVISIONS
8.1 FORCE MAJEURE. If the performance by either party of any obligation
under this AGREEMENT, is prevented, restricted, interfered with or delayed by
reason of FORCE MAJEURE, the party so affected shall, upon giving written notice
to the other party, be excused from such performance to the extent of such
prevention, restriction, interference or delay, provided that the affected party
shall use its reasonable efforts to avoid or remove such causes of
non-performance and shall continue performance with the utmost dispatch whenever
such causes are removed and, provided further, that notwithstanding anything
contained in this Section 8.1, MEDICIS shall be entitled to any and all rights
and remedies which may arise under Sections 2.10 and 3.3(c) hereof as a result
of or in connection with any such prevention, restriction, interference with or
delay of HMRI's performance of any of its obligations hereunder. For the
purposes of this AGREEMENT (and except with respect to "force majeure" for
purposes of Section 2.10(c)), "FORCE MAJEURE" is defined as follows: acts of
God; acts, regulations, orders, decrees or laws of any government or agency
thereof that are not due to or caused by any action or inaction of the party
claiming the benefit of force majeure where such action or inaction is in
violation of such party's obligations under the TRANSACTION DOCUMENTS or
APPLICABLE LAWS; war; civil commotion; damage to or destruction of facilities;
labor disturbances (whether or not any such labor disturbance is within the
power of the affected party to settle); epidemic; and failure of suppliers,
public utilities or common carriers.
8.2 Governing Law. This AGREEMENT shall be construed in accordance with
the laws of the State of Delaware in the United States of America, without
giving effect to the principles of conflicts of law thereof.
8.3 Headings and References. All section headings contained in this
AGREEMENT are for convenience of reference only and shall not affect the meaning
or interpretation of this AGREEMENT.
8.4 Dispute Resolution.
(a) Any dispute, controversy or claim arising out of or relating to
this AGREEMENT, or the breach or termination of this AGREEMENT or the rights of
either party for indemnification hereunder (each, a "CLAIM"), shall be submitted
in the first instance to the President, North American Region of HMRI, for HMR
and the Chief Executive Officer of MEDICIS for MEDICIS.
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LOPROX LOTION SUPPLY AGREEMENT
(b) If any CLAIM cannot be resolved by the individuals designated
in Section 8.4 (a) within thirty (30) days after being submitted to them, and
except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order to preserve the status quo or to
prevent irreparable harm pending the selection and confirmation of a panel of
arbitrators in accordance herewith, such CLAIM shall be settled by arbitration
in accordance with the Commercial Arbitration Rules (the "RULES") of the
American Arbitration Association (the "AAA") in effect on the day the
arbitration is commenced in accordance with this AGREEMENT, except as modified
by this Section 8.4. After expiration of the thirty (30) day period pursuant to
Section 8.4(a) hereof, either party may commence arbitration by serving upon the
other party a written demand for arbitration sent by a courier service of
internationally recognized reputation, in accordance with this AGREEMENT, with a
copy of the same delivered by a courier service of internationally recognized
reputation, to the AAA regional office in which either party is then located.
The number of arbitrators shall be three, one of whom is selected by MEDICIS,
one of whom is selected by HMRI and one of whom is selected by HMRI and MEDICIS
(or by the other two arbitrators if the parties cannot, within thirty (30) days
after the commencement of the arbitration proceeding, agree on the third
arbitrator). In the event that either party shall fail to appoint an arbitrator
within thirty (30) days after the commencement of the arbitration proceeding,
such arbitrator and the third arbitrator shall be appointed by the AAA in
accordance with the RULES. The arbitration award shall be rendered by a majority
of the members of the board of arbitration. Except as expressly provided in
Section 8.5 hereof, the panel shall not be entitled to modify this AGREEMENT or
the transactions contemplated herein. The arbitration proceeding shall be
conducted in the English language and shall be brought in Chicago, Illinois,
unless the parties agree in writing to conduct the arbitration in another
location. The AAA shall have jurisdiction over all parties to this AGREEMENT for
purposes of the arbitration and the parties hereby expressly consent to such
jurisdiction.
(c) The arbitration decision shall be final and binding and shall
not be appealable to any court in any jurisdiction. The prevailing party may
enter such decision in any court having competent jurisdiction, and the parties
expressly agree that the state and federal courts in the State of Delaware shall
have such jurisdiction. Each party hereby expressly waives any right to object
to such jurisdiction on the basis of venue or forum non conveniens.
(d) Any statute of limitations or other equitable or legal doctrine
which would otherwise be applicable to any action brought by either of the
parties shall be applicable in the arbitration. In the event either party to
this AGREEMENT files a petition under the bankruptcy laws of the United States
or has a petition filed against it which results in an order for relief or other
indicia that a bankruptcy case has commenced, it is the express intention of the
parties that this AGREEMENT shall control and be enforced in accordance with its
terms and conditions that any CLAIM shall remain subject to arbitration to the
maximum extent permitted by law.
(e) There shall be no rights of discovery in connection with the
arbitration except as follows:
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LOPROX LOTION SUPPLY AGREEMENT
(i) Each party shall have the right to request the arbitrators
to issue subpoenas for documents in accordance with the RULES.
(ii) Each party shall have the right to initiate two (2)
depositions of each other party to the arbitration; and each party shall have
the right to initiate one (1) additional oral deposition pursuant to a subpoena
issued by the arbitrators or any court of competent jurisdiction.
(iii) At any time following the tenth day after the
commencement of the arbitration in accordance with this AGREEMENT, a written
notice served upon all parties shall be sufficient to compel the attendance of
any party at a deposition upon not less than sixty (60) days notice and no
subpoena shall be required for that purpose. If a person fails or refused to
testify at a deposition, that person shall not be permitted to testify at the
hearing, except for good cause shown. The number of depositions that may be
initiated by either party may be varied by agreement of all parties to the
arbitration but not by any action, order or request of the arbitrators or any
court.
(iv) Not less than thirty (30) days prior to the scheduled
arbitration proceeding, the arbitrator shall conduct a preliminary hearing in
accordance with the AAA guidelines. Not less than five (5) days prior to the
preliminary hearing, all parties to the arbitration shall serve upon all other
parties to the arbitration a written list of witnesses and exhibits to be used
at the arbitration hearing. Except for good cause shown, no witness or exhibit
may be utilized at the arbitration hearing other than as set forth on such list.
The arbitrators shall receive evidence at a single hearing. The arbitrators
shall award reasonable attorneys' fees and costs in favor of the prevailing
party or parties. The arbitrator shall issue a final award not more than twenty
(20) days following the conclusion of the hearing. The arbitrators shall have
the power to hear and decide, by documents only or with a hearing (at the
arbitrators' sole discretion) any prehearing motions in the nature of a
pre-trial motion to dismiss or for summary judgment.
(f) The arbitrators shall be entitled to receive reasonable
compensation at an hourly rate to be established between the arbitrators and the
AAA. If required by the arbitrators, MEDICIS on the one hand, and HMRI, on the
other, will deposit with the AAA an equal share of the total anticipated fee of
the arbitrators in an amount to be estimated by the AAA. The non-prevailing
party in the proceedings shall be ordered to pay, and shall have the ultimate
responsibility for, all arbitrators' fees and the fees of the AAA and such fees
shall be included in the judgment to be entered against the non-prevailing
party.
(g) Notwithstanding any other provision of this AGREEMENT, any
party may apply to a court of competent jurisdiction within the TERRITORY for an
order in the nature of a temporary restraining order or preliminary injunction
for purposes of maintaining the status quo pending the final resolution of any
dispute pursuant to the arbitration provisions hereof.
(h) Each party consents to the jurisdiction and administration of
the AAA for purposes of the arbitration proceedings contemplated herein.
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LOPROX LOTION SUPPLY AGREEMENT
8.5 Severability. If any provision of this AGREEMENT is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified
to the minimum extent necessary to make it valid and enforceable.
8.6 Entire Agreement. This AGREEMENT, including the Exhibits and
Schedules hereto, and the TRANSACTION DOCUMENTS constitute the entire AGREEMENT
between the parties and their AFFILIATES relating to the subject matter hereof
and supersede all previous writings and understandings, whether oral or written,
relating to the subject matter of this AGREEMENT.
8.7 Amendment. This AGREEMENT may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both parties
that specifically refers to this AGREEMENT.
8.8 Notices. Any notice required or permitted under this AGREEMENT
shall be in writing and sent by a courier service of internationally recognized
reputation, charges prepaid, or by facsimile transmission with confirmation by
reputable courier service, to the address or facsimile number specified below.
Such notices shall be deemed given three (3) business days following deposit
with such courier service or one (1) business day following such facsimile
transmission.
If to HMRI: Hoechst Marion Roussel, Inc.
HMRI External Manufacturing PPU
Marion Park Building C
Kansas City, Missouri 64137
Attention: Jerry Malone
Fax: (816) 966-7130
Copy to: Hoechst Marion Roussel, Inc.
Route 202-206
P.O. Box 6800
Bridgewater, New Jersey 08807-0800
Attention: Vice President and General Counsel
Fax: 908-231-2243
If to MEDICIS: Medicis Pharmaceutical Corporation
4343 East Camelback Road
Phoenix, Arizona 85018
Attention: Jonah Shacknai
Fax: 602-808-3875
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LOPROX LOTION SUPPLY AGREEMENT
Copy to: Bryan Cave LLP
Two North Central Avenue, Suite 2200
Phoenix, Arizona 85004-4408
Fax Number: (602) 364-7000
Attention: Frank M. Placenti, Esq.
8.9 Assignment and Binding Effect. Each party shall have the right to
assign its rights in whole or in part under this AGREEMENT to an AFFILIATE of
such party without the other party's consent or to a third party with the other
party's prior written consent, which consent shall not be unreasonably withheld,
provided that in either case such party guarantees to the other party all of
such party's obligations hereunder and the assignee agrees in writing to observe
and perform the obligations of the assignor hereunder.
8.10 No Agency. It is understood and agreed that each party shall have
the status of an independent contractor under this AGREEMENT and that nothing in
this AGREEMENT shall be construed as authorization for either party to act as
agent for the other. Neither party shall incur any liability for any act or
failure to act by employees of the other party.
8.11 No Strict Construction. This AGREEMENT has been prepared jointly
and shall not be strictly construed against either party.
8.12 Counterparts. This AGREEMENT may be executed in two counterparts,
each of which shall be an original as against any party whose signature appears
thereon but both of which together shall constitute one and the same instrument.
Remainder of this page left blank intentionally.
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LOPROX LOTION SUPPLY AGREEMENT
IN WITNESS WHEREOF, the parties, through their authorized officers,
have duly executed this as of the date first written above.
HOECHST MARION ROUSSEL, INC. MEDICIS PHARMACEUTICAL CORPORATION
By: /s/ Thomas Hofstaetter By: /s/ Jonah Shacknai
---------------------------- -------------------------------
Name: Thomas Hofstaetter Name: Jonah Shacknai
Title: Senior Vice President Title: Chairman and Chief Executive
Officer
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Exhibit 10.92
SUPPLY AGREEMENT
SUPPLY AGREEMENT
BY AND BETWEEN
HOECHST MARION ROUSSEL DEUTSCHLAND GMBH
AND
MEDICIS PHARMACEUTICAL CORPORATION
DATED AS OF NOVEMBER 15, 1998
TRADEMARK NOTICE: 'Loprox' and 'Topicort' are registered trademarks of HMR,
certain rights to which are granted to MEDICIS in accordance with the TRADEMARK
LICENSE AGREEMENT (as defined herein). The use of such trademarks in this
AGREEMENT is in each case deemed to be accompanied by an appropriate notice of
trademark registration.
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SUPPLY AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS.................................................................................... 6
1.1 "AAA"............................................................................... 6
1.2 "ACT"............................................................................... 6
1.3 "ACTIVE INGREDIENTS"................................................................ 6
1.4 "AFFILIATE"......................................................................... 6
1.5 "AGREEMENT"......................................................................... 7
1.6 "APPLICABLE EXCHANGE RATE".......................................................... 7
1.7 "APPLICABLE LAWS"................................................................... 7
1.8 "AVERAGE EXCHANGE RATE"............................................................. 7
1.9 "BACKORDERS"........................................................................ 7
1.10 "cGMP".............................................................................. 7
1.11 "CICLOPIROX"........................................................................ 7
1.12 "CLAIM"............................................................................. 7
1.13 "CONTRACT YEAR"..................................................................... 7
1.14 "CPI"............................................................................... 7
1.15 "CPI INCREASE"...................................................................... 7
1.16 "EFFECTIVE DATE".................................................................... 7
1.17 "EXCLUDED HMR PRODUCT LIABILITY".................................................... 8
1.18 "EXTENDED SUPPLY INTERRUPTION"...................................................... 8
1.19 "FDA"............................................................................... 8
1.20 "FORCE MAJEURE"..................................................................... 8
1.21 "FORECAST MONTH".................................................................... 8
</TABLE>
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<TABLE>
<S> <C>
1.22 "HMR GmbH".......................................................................... 8
1.23 "HMR GmbH INDEMNIFIED PARTY"........................................................ 8
1.24 "HMR MANUFACTURED PRODUCTS"......................................................... 8
1.25 "HMRI".............................................................................. 8
1.26 "INITIAL RENEWAL PERIOD"............................................................ 8
1.27 "INITIAL TERM"...................................................................... 8
1.28 "INTERRUPTED MEDICIS ORDERS"........................................................ 8
1.29 "LIABILITY"......................................................................... 8
1.30 "LICENSE AND OPTION AGREEMENT"...................................................... 9
1.31 "LOPROX LOTION"..................................................................... 9
1.32 "LOPROX LOTION SUPPLY AGREEMENT".................................................... 9
1.33 "LOST SALES"........................................................................ 9
1.34 "MEDICIS"........................................................................... 9
1.35 "MEDICIS INDEMNIFIED PARTY"......................................................... 9
1.36 "NDAs".............................................................................. 9
1.37 "NET SALES"......................................................................... 9
1.38 "PURCHASE AGREEMENT"................................................................ 9
1.39 "RENEWAL PERIOD".................................................................... 9
1.40 "RULES"............................................................................. 9
1.41 "QUALIFIED ALTERNATE SUPPLIER"...................................................... 9
1.42 "SHORTFALL"......................................................................... 9
1.43 "SPECIFICATIONS".................................................................... 9
1.44 "SUPPLY INTERRUPTION"............................................................... 9
1.45 "TERRITORY"......................................................................... 10
1.46 "TRADE QUOTA"....................................................................... 10
</TABLE>
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<TABLE>
<S> <C>
1.47 "TRADEMARK LICENSE AGREEMENT"....................................................... 10
1.48 "TRANSITION SERVICES AGREEMENT"..................................................... 10
1.49 "24-MONTH FORECAST"................................................................. 10
ARTICLE II. MANUFACTURE, PURCHASE AND SALE OF HMR MANUFACTURED PRODUCTS................................... 10
2.1 Purchase and Sale................................................................... 10
2.2 [Reserved].......................................................................... 11
2.3 Labeling and Packaging.............................................................. 11
2.4 Forecasts........................................................................... 11
2.5 Communication....................................................................... 12
2.6 Minimum Inventory................................................................... 13
2.7 Delivery............................................................................ 13
2.8 Shortages/Damaged Goods/Rejected Goods.............................................. 13
2.9 Current Inventory................................................................... 15
2.10 SUPPLY INTERRUPTION................................................................. 15
2.11 Supply Price for HMR MANUFACTURED PRODUCTS and Exchange Rate and
Adjustment.......................................................................... 20
2.12 Payment............................................................................. 21
2.13 Advertising/Marketing/Sales Costs and Product Pricing............................... 22
2.14 Samples............................................................................. 22
2.15 Compliance with APPLICABLE LAWS..................................................... 23
2.16 Rights Necessary for Manufacturing.................................................. 23
ARTICLE III. TERM AND TERMINATION......................................................................... 24
3.1 Term of this AGREEMENT.............................................................. 24
3.2 RENEWAL PERIODS..................................................................... 24
</TABLE>
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SUPPLY AGREEMENT
<TABLE>
<S> <C>
3.3 Early Termination................................................................... 25
3.4 Consequences of Termination and Survival............................................ 26
3.5 Accrued Obligations................................................................. 27
ARTICLE IV. MANUFACTURING COMPLIANCE, ACCESS AND REGULATORY MATTERS....................................... 28
4.1 Tests; Retained Samples............................................................. 28
4.2 Manufacturing Compliance............................................................ 28
4.3 Changes in SPECIFICATIONS........................................................... 28
4.4 Access to Facilities................................................................ 29
4.5 Regulatory Correspondence........................................................... 29
4.6 Inquiries and Complaints relating to the HMR MANUFACTURED PRODUCTS.................. 29
4.7 Response to Complaints and/or Adverse Drug Reactions (or Events).................... 30
4.8 Additional Information.............................................................. 30
4.9 Technical Agreement................................................................. 30
ARTICLE V. HMR MANUFACTURED PRODUCTS RECALLS.............................................................. 30
5.1 Recalls During INITIAL TERM......................................................... 30
5.2 Recalls During RENEWAL PERIODS or Thereafter........................................ 31
ARTICLE VI. WARRANTIES AND REMEDIES....................................................................... 31
6.1 FDA Approval........................................................................ 31
6.2 Conformity with SPECIFICATIONS...................................................... 31
6.3 Compliance with the Federal Food, Drug and Cosmetic Act............................. 31
6.4 No Liens............................................................................ 31
6.5 Exclusion of Other Warranties....................................................... 31
</TABLE>
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SUPPLY AGREEMENT
<TABLE>
<S> <C>
ARTICLE VII. INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE....................................... 32
7.1 Indemnification by MEDICIS.......................................................... 32
7.2 Indemnification by HMR GmbH......................................................... 33
7.3 Process of Indemnification.......................................................... 33
7.4 Settlements......................................................................... 33
7.5 Limitation of Liability............................................................. 34
7.6 Distribution Insurance.............................................................. 34
7.7 Manufacturer's Insurance............................................................ 34
7.8 HMR MANUFACTURED PRODUCT Liability Claims........................................... 35
ARTICLE VIII. GENERAL PROVISIONS.......................................................................... 35
8.1 FORCE MAJEURE....................................................................... 35
8.2 Governing Law....................................................................... 35
8.3 Headings and References............................................................. 35
8.4 Dispute Resolution.................................................................. 36
8.5 Severability........................................................................ 38
8.6 Entire Agreement.................................................................... 38
8.7 Amendment........................................................................... 38
8.8 Notices............................................................................. 38
8.9 Assignment and Binding Effect....................................................... 39
8.10 No Agency........................................................................... 39
8.11 No Strict Construction.............................................................. 39
8.12 Counterparts........................................................................ 39
</TABLE>
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SUPPLY AGREEMENT
SUPPLY AGREEMENT
This Supply Agreement (the "AGREEMENT") is entered into as of November
15, 1998, by and between Hoechst Marion Roussel Deutschland GmbH, a German
limited liability company ("HMR GmbH"), and Medicis Pharmaceutical Corporation,
a Delaware corporation ("MEDICIS"). Capitalized terms shall have the meanings
ascribed to them in Article I hereof or as otherwise set forth in this
AGREEMENT.
RECITALS
A. HMR GmbH is engaged in the manufacture of the HMR MANUFACTURED
PRODUCTS pursuant to certain NDAs owned during the INITIAL TERM by HMR GmbH or
its AFFILIATES.
B. MEDICIS is willing to purchase its requirements for the HMR
MANUFACTURED PRODUCTS from HMR GmbH in accordance with, and for the INITIAL TERM
and any RENEWAL PERIOD of, this AGREEMENT.
C. HMR GmbH is willing to supply such HMR MANUFACTURED PRODUCTS to
MEDICIS in accordance with, and for the INITIAL TERM and any RENEWAL PERIOD of,
this AGREEMENT.
D. In addition to the actions contemplated by this AGREEMENT, HMR GmbH,
certain AFFILIATES of HMR GmbH and MEDICIS are entering into the LOPROX LOTION
SUPPLY AGREEMENT, the LICENSE AND OPTION AGREEMENT, the TRADEMARK LICENSE
AGREEMENT, the TRANSITION SERVICES AGREEMENT and the PURCHASE AGREEMENT.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
made and the mutual benefits to be derived from this AGREEMENT, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 "AAA" shall have the meaning set forth in Section 8.4 hereof.
1.2 "ACT" means the United States Federal Food, Drug and Cosmetic Act,
as amended.
1.3 "ACTIVE INGREDIENTS" means CICLOPIROX and desoximetasone, or either
of them, as the case may be.
1.4 "AFFILIATE" means any individual, corporation or other legal entity
which either party directly or indirectly through one or more intermediaries
controls or which is
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SUPPLY AGREEMENT
controlled by or under common control with such party. For the purpose of this
AGREEMENT, "control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of an individual,
corporation or other legal entity, whether through the ownership of voting
securities, by contract, or otherwise; provided, however, that Copley
Pharmaceutical, Inc., a Delaware corporation, shall not be an AFFILIATE of HMR
GmbH.
1.5 "AGREEMENT" means this Supply Agreement between HMR GmbH and
MEDICIS.
1.6 "APPLICABLE EXCHANGE RATE" shall have the meaning set forth in
Section 2.11(b) hereof.
1.7 "APPLICABLE LAWS" shall mean all applicable laws, statutes, rules,
regulations, ordinances, orders, decrees, writs, judicial or administrative
decisions and the like of any nation or government, any state or other political
subdivision thereof, any entity exercising executive, judicial, regulatory or
administrative functions of or pertaining to government (including, without
limitation, any governmental authority, agency, department, board, commission or
instrumentality of any governmental unit or any political subdivision thereof),
any tribunal or arbitrator of competent jurisdiction, and any self-regulatory
organization.
1.8 "AVERAGE EXCHANGE RATE" shall have the meaning set forth in Section
2.11(b) hereof.
1.9 "BACKORDERS" shall have the meaning set forth in Section
2.10(c)(i)(B)(3) hereof.
1.10 "cGMP" shall mean the then-current Good Manufacturing Practices as
promulgated under the ACT at 21 CFR (chapters 210, 211, 600 and 610), as the
same may be amended or re-enacted from time to time and as interpreted in
accordance with then-current industry standards and FDA policies.
1.11 "CICLOPIROX" means ciclopirox acid and/or ciclopirox olamine.
1.12 "CLAIM" shall have the meaning set forth in Section 8.4(a) hereof.
1.13 "CONTRACT YEAR" shall mean the twelve (12) month period commencing
on the EFFECTIVE DATE and ending on the first anniversary of the EFFECTIVE DATE
and each consecutive twelve (12) month period thereafter during the INITIAL TERM
and any RENEWAL PERIOD.
1.14 "CPI" shall have the meaning set forth in Section 2.11(a) hereof.
1.15 "CPI INCREASE" shall have the meaning set forth in Section 2.11(a)
hereof.
1.16 "EFFECTIVE DATE" means the date of this AGREEMENT as first set
forth above.
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SUPPLY AGREEMENT
1.17 "EXCLUDED HMR PRODUCT LIABILITY" means any LIABILITY of HMR or
their AFFILIATES arising under any applicable federal, state, local or other
product liability law, regulation, common law principle, court order or
judgment, jury verdict or arbitral award arising out of or related to the
manufacture of the HMR MANUFACTURED PRODUCTS by HMR GmbH or its AFFILIATES after
the EFFECTIVE DATE; excluding, however, any such LIABILITY due to, caused by,
resulting from or arising out of any breach by HMR GmbH or any AFFILIATE of
Article VI of this AGREEMENT.
1.18 "EXTENDED SUPPLY INTERRUPTION" shall have the meaning set forth in
Section 2.10(c)(i)(B)(1) hereof.
1.19 "FDA" means the United States Food and Drug Administration or any
successor entity thereto.
1.20 "FORCE MAJEURE" shall have the meaning set forth in Section 8.1
hereof.
1.21 "FORECAST MONTH" shall have the meaning set forth in Section
2.4(b) hereof.
1.22 "HMR GmbH" means Hoechst Marion Roussel Deutschland GmbH, a German
limited liability company.
1.23 "HMR GmbH INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.1 hereof.
1.24 "HMR MANUFACTURED PRODUCTS" means the human dermatology products
listed in Exhibit B to this AGREEMENT and (unless the context indicates
otherwise) samples thereof as listed in Exhibit C to this AGREEMENT as
manufactured for sale in the TERRITORY.
1.25 "HMRI" means Hoechst Marion Roussel, Inc., a Delaware corporation.
1.26 "INITIAL RENEWAL PERIOD" shall have the meaning set forth in
Section 3.2 (a) hereof.
1.27 "INITIAL TERM" means the three (3) year period commencing upon the
EFFECTIVE DATE.
1.28 "INTERRUPTED MEDICIS ORDERS" shall have the meaning set forth in
Section 2.10(c)(i)(B)(4) hereof.
1.29 "LIABILITY" means any and all liabilities, losses, damages,
penalties, fines, assessments, expenses and costs of any kind or nature required
to be paid by a party hereunder (or its AFFILIATE) to any third party (which
shall not include any AFFILIATE of such paying party), primary or secondary,
direct or indirect, absolute or contingent, known or unknown, including without
limitation costs of settlement, reasonable attorneys' fees and related costs and
expenses and any liabilities for claims of personal injury or death, suffered or
incurred by an indemnified party hereunder.
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SUPPLY AGREEMENT
1.30 "LICENSE AND OPTION AGREEMENT" means the License and Option
Agreement, of even date herewith, among HMR GmbH, certain of its AFFILIATES and
MEDICIS.
1.31 "LOPROX LOTION" shall have the meaning set forth in the LOPROX
LOTION SUPPLY AGREEMENT.
1.29 "LOPROX LOTION SUPPLY AGREEMENT" means the Loprox Lotion Supply
Agreement, of even date herewith, between HMRI and MEDICIS.
1.33 "LOST SALES" shall have the meaning set forth in Section
2.10(c)(i)(B)(2) hereof.
1.34 "MEDICIS" means Medicis Pharmaceutical Corporation, a Delaware
corporation.
1.35 "MEDICIS INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.2 hereof.
1.36 "NDAs" means the New Drug Applications, Abbreviated New Drug
Applications and Abbreviated Antibiotic Drug Applications (as such terms are
defined by the FDA) for the HMR MANUFACTURED PRODUCTS filed and approved in
accordance with the requirements of the FDA, as may be amended or supplemented
from time to time, and as set forth on Exhibit A hereto.
1.37 "NET SALES" shall have the meaning set forth in Section
2.10(c)(i)(B)(5) hereof.
1.38 "PURCHASE AGREEMENT" means the PURCHASE AGREEMENT as defined in
the LICENSE AND OPTION AGREEMENT.
1.39 "RENEWAL PERIOD" means the INITIAL RENEWAL PERIOD and any
additional renewal periods pursuant to Section 3.2(b) hereof.
1.40 "RULES" shall have the meaning set forth in Section 8.4(b) hereof.
1.41 "QUALIFIED ALTERNATE SUPPLIER" shall have the meaning set forth in
Section 2.10(b) hereof.
1.42 "SHORTFALL" shall have the meaning set forth in Section 2.14
hereof.
1.43 "SPECIFICATIONS" mean the written specifications for the HMR
MANUFACTURED PRODUCTS contained in the NDAs, as the same may be amended from
time to time by HMR GmbH pursuant to the provisions of Section 4.3 herein.
1.44 "SUPPLY INTERRUPTION" shall have the meaning set forth in Section
2.10 hereof.
<PAGE> 11
SUPPLY AGREEMENT
1.45 "TERRITORY" means the United States of America and its possessions
and territories.
1.46 "TRADE QUOTA" shall have the meaning set forth in Section 2.14(a)
hereof.
1.47 "TRADEMARK LICENSE AGREEMENT" means the Trademark License
Agreement, dated of even date herewith, among HMR GmbH, HMRI, an AFFILIATE of
HMRI and MEDICIS.
1.48 "TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement, dated of even date herewith, between HMRI and MEDICIS.
1.49 "24-MONTH FORECAST" shall have the meaning set forth in Section
2.4(b) hereof.
Unless the context clearly indicates otherwise, the use herein of the
singular shall include the plural, and the use of the masculine shall included
the feminine.
ARTICLE II.
MANUFACTURE, PURCHASE AND
SALE OF HMR MANUFACTURED PRODUCTS
2.1 Purchase and Sale. Pursuant and subject to the terms and conditions
of this AGREEMENT, HMR GmbH agrees to manufacture or have manufactured MEDICIS'
requirements for the HMR MANUFACTURED PRODUCTS for sale or distribution by
MEDICIS in the TERRITORY during the INITIAL TERM and any RENEWAL PERIOD of this
AGREEMENT, and MEDICIS agrees to purchase from HMR GmbH its requirements for the
HMR MANUFACTURED PRODUCTS for sale or distribution by MEDICIS in the TERRITORY
during the INITIAL TERM and any RENEWAL PERIOD of this AGREEMENT; provided,
however, that if during any CONTRACT YEAR during the INITIAL TERM MEDICIS
purchases from HMR GmbH HMR MANUFACTURED PRODUCTS having an aggregate supply
price of U.S. $2.6 million (plus the CPI INCREASE for the second and third
CONTRACT YEAR), MEDICIS may in such CONTRACT YEAR or in the next succeeding
CONTRACT YEAR purchase from the QUALIFIED ALTERNATIVE SUPPLIER HMR MANUFACTURED
PRODUCTS having an aggregate supply price of not more than U.S. $435,000. HMR
GmbH may during the INITIAL TERM or any RENEWAL TERM abandon its manufacture of
any HMR MANUFACTURED PRODUCT due to the regulatory requirement of any government
or agency thereof; provided, however, that in the event HMR GmbH at any time is
required to so abandon such manufacture, HMR GmbH shall immediately notify
MEDICIS in writing of such requirement; and, provided further, that such right
of abandonment shall not prejudice any rights and remedies, if any, MEDICIS may
have hereunder in connection with or as a result of such abandonment, including
without limitation any rights and remedies relating to any SUPPLY INTERRUPTION
or EXTENDED SUPPLY INTERRUPTION or the termination rights under Section 3.3(c)
arising therefrom.
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SUPPLY AGREEMENT
2.2 [Reserved].
2.3 Labeling and Packaging. MEDICIS shall be responsible for paying all
out-of-pocket costs of the design of any new packaging and labeling of HMR GmbH
or MEDICIS for the HMR MANUFACTURED PRODUCTS and shall provide to HMR GmbH
(which shall actually prepare such packaging and labeling) MEDICIS' logo, color
codes, designs, information, graphics and art work to be applied to each HMR
MANUFACTURED PRODUCT, which MEDICIS warrants shall be consistent with the FDA
approved labeling for the HMR MANUFACTURED PRODUCTS, shall be in accordance with
APPLICABLE LAWS and shall not knowingly infringe upon the proprietary rights of
any third party. MEDICIS shall provide such logo, color codes, designs,
information, graphics and art work pursuant to this Section 2.3 to HMR GmbH by
such time in advance of the delivery requirements for the HMR MANUFACTURED
PRODUCTS as HMR GmbH shall have notified MEDICIS in writing is sufficient for
purposes of this AGREEMENT.
2.4 Forecasts.
(a) Long-Range Forecasts. Upon execution of this AGREEMENT, and
thereafter at least six (6) months prior to the commencement of each succeeding
calendar year, commencing with the first (1st) calendar year, MEDICIS shall
provide HMR GmbH with a rolling annual forecast of the quantities of each HMR
MANUFACTURED PRODUCT, by finished dosage form and package size (SKU), with the
first two (2) calendar year divided by months, that MEDICIS intends to order
during the five (5) year period commencing with that calendar year or part
thereof. The parties acknowledge that such forecasts shall represent reasonable
good faith estimates, and not purchase or supply commitments.
(b) Short-Term Forecasts. Upon execution of this AGREEMENT, and
thereafter no later than the tenth (10th) calendar day of any calendar month
(the "FORECAST MONTH") (with the previous month's forecast to govern in the
event of the failure or delay of such delivery), MEDICIS shall deliver to HMR
GmbH a rolling monthly forecast of the quantities of each HMR MANUFACTURED
PRODUCT, by finished dosage form and package size (SKU), that MEDICIS intends to
order during the ensuing twenty four (24) month period (including the FORECAST
MONTH) after receipt by HMR GmbH of the forecast. It is acknowledged that the
monthly forecasts in the 24-MONTH FORECAST for the period from the LICENSE
EFFECTIVE DATE through the end of the third (3rd) full calendar month following
the LICENSE EFFECTIVE DATE shall constitute confirmed MEDICIS orders for
purposes of this AGREEMENT. HMR GmbH shall within ten (10) business days
following its receipt of each forecast confirm in writing, in whole or in part,
the quantities of HMR MANUFACTURED PRODUCT that HMR GmbH shall supply hereunder,
and such confirmation shall pertain only to the third (3rd) month after the
FORECAST MONTH.
HMR GmbH may elect not to confirm, in whole or in part, any
forecast which (i) is made at a time when HMR has the right to suspend the
provision of HMR MANUFACTURED PRODUCTS pursuant to Section 2.12(b) hereof, (ii)
cannot be filled due to circumstances arising under Section 8.1, (iii) are in
excess of the quantities forecasted by
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SUPPLY AGREEMENT
MEDICIS in the 24-MONTH FORECAST (which quantities HMR GmbH may, at its option,
apportion pro rata among each month in a calendar quarter in the 24-MONTH
FORECAST for purposes of this clause), or (iv) relates to any period of time
beyond the 24-MONTH FORECAST. All rejections, in whole or in part, of MEDICIS
orders by HMR GmbH must be in writing and delivered within such ten (10)
business day confirmation period. By virtue of HMR GmbH's written confirmation
and to the extent of such written confirmation, the forecast for such third
(3rd) calendar month after the FORECAST MONTH shall become a binding obligation
on MEDICIS to purchase, and a binding obligation on HMR GmbH to supply, such
quantities. MEDICIS' first short term forecast (the "24-MONTH FORECAST") is
attached hereto as Exhibit D. Unless mutually agreed by HMR GmbH and MEDICIS in
writing, MEDICIS shall be required to purchase that percentage of the quantity
of each HMR MANUFACTURED PRODUCT specified in each short-term forecast for
successive quarters as follows:
<TABLE>
<CAPTION>
Percentage of HMR MANUFACTURED
PRODUCTS indicated in Each Short-Term
Period of the Forecast Forecast that MEDICIS is Required to Purchase
---------------------- ---------------------------------------------
<S> <C>
First Three Month Period 100%
Second Three Month Period 75%
Third Three Month Period 50%
Fourth Three Month Period 25%
</TABLE>
(c) HMR GmbH Twenty Four (24) Month Supply Commitment. Subject to
Sections 2.4(b)(i), 2.10 and 8.1 hereof, HMR GmbH covenants and agrees that
during each of the successive calendar quarters reflected in the 24-MONTH
FORECAST, HMR GmbH shall confirm and deliver to MEDICIS at least the quantities
of HMR MANUFACTURED PRODUCTS forecasted to be ordered by MEDICIS for such
calendar quarter as set forth in the 24-MONTH FORECAST, provided that such
quantities are actually ordered by MEDICIS pursuant to Section 2.4(b) hereof.
2.5 Communication MEDICIS acknowledges that each HMR MANUFACTURED
PRODUCT is produced in full lot quantities, as set forth on Exhibit E attached
hereto. Separate orders are not necessary and are not legally binding. The
written forecasts from MEDICIS as confirmed by HMR GmbH pursuant to Section
2.4(b) hereof shall constitute legally binding orders between MEDICIS and HMR
GmbH for the HMR MANUFACTURED PRODUCTS. All forecasts by MEDICIS hereunder shall
be in writing and addressed as follows:
Hoechst Marion Roussel Deutschland GmbH
Demand Management
D-65926 Frankfurt
Germany
Attention: Juergen Herberg, Demand Manager
Telephone: 49-69-305-15292
Fax: 49-69-359356
<PAGE> 14
SUPPLY AGREEMENT
MEDICIS shall be obligated to purchase all such HMR MANUFACTURED PRODUCTS which
are confirmed by HMR GmbH in accordance with Section 2.4(b), provided that such
HMR MANUFACTURED PRODUCTS meet the SPECIFICATIONS. After receipt by MEDICIS of
HMR GmbH's written confirmation, no other purchase order, shipping document,
confirmation or waybill shall be deemed to modify, supplement or substitute for
the terms and conditions of this AGREEMENT, except upon the mutual written
agreement of the parties. All such documents shall be subject to, and shall be
deemed to incorporate, the terms and conditions of this AGREEMENT.
2.6 Minimum Inventory. Subject to the constraints imposed by any breach
by HMR GmbH of any of the terms of this AGREEMENT, by any SUPPLY INTERRUPTION or
by any EXTENDED SUPPLY INTERRUPTION, and subject to HMR GmbH's fulfillment of
its delivery obligations under Sections 2.4(b) and 2.4(c) hereof, MEDICIS shall
maintain at its expense at all times after the six (6) month anniversary of the
EFFECTIVE DATE, including immediately prior to delivery of a new shipment of HMR
MANUFACTURED PRODUCTS, inventory of each HMR MANUFACTURED PRODUCT equivalent to
the quantities of such HMR MANUFACTURED PRODUCT sold by MEDICIS over a three (3)
month period (or by HMR GmbH and/or its AFFILIATES for any period prior to the
EFFECTIVE DATE) which shall be computed as being the average of the quantities
sold during the three (3) most recently completed calendar quarters.
2.7 Delivery. The HMR MANUFACTURED PRODUCTS shall be shipped by HMR
GmbH Delivered Duty Unpaid (DDU), per Incoterms 1990, to the port of New York or
such other mutually agreeable port in the TERRITORY. MEDICIS shall pay for all
import licenses and charges and all freight and insurance costs with respect to
shipment within the TERRITORY. All deliveries of confirmed MEDICIS orders shall
be made on or before the last day of the calendar month for which the relevant
order was confirmed by HMR GmbH hereunder; for the avoidance of doubt, for
purposes of this sentence, "deliveries" shall be deemed to be made when the HMR
MANUFACTURED PRODUCTS physically arrive in the TERRITORY, and shall not be
considered to be the time when the HMR MANUFACTURED PRODUCTS clear U.S. customs.
2.8 Shortages/Damaged Goods/Rejected Goods.
(a) Shortages/Damaged Goods. MEDICIS shall notify HMR GmbH in
writing of any obvious visible damage or obvious shortage in quantity of any
shipment of an HMR MANUFACTURED PRODUCT within its possession within six (6)
business days after receipt at MEDICIS' regional distribution centers. In the
event of (a) any shortage in quantity of any shipment of an HMR MANUFACTURED
PRODUCT that is not within MEDICIS' possession, (b) any non-obvious shortage in
quantity of any shipment of an HMR MANUFACTURED PRODUCT within MEDICIS'
possession or (c) any non-obvious damage to any HMR MANUFACTURED PRODUCT,
MEDICIS shall notify HMR GmbH in writing within the earlier of (i) ten (10)
business days after discovery of such shortage or damage or (ii) the shelf life
of such HMR MANUFACTURED PRODUCT, provided that MEDICIS shall provide
documentation reasonably satisfactory to HMR GmbH demonstrating that such
shortage
<PAGE> 15
SUPPLY AGREEMENT
or damage existed when such HMR MANUFACTURED PRODUCT was delivered by HMR GmbH.
Notification under this Section 2.8(a) shall specify the finished dosage form
and package size (SKU) of such HMR MANUFACTURED PRODUCT. In the event of any
shortage or damage as described in this Section 2.8(a) (and provided HMR GmbH is
reasonably satisfied with any required documentation relating thereto), HMR GmbH
shall make up the shortage or replace the damaged shipment within thirty (30)
business days after notification by MEDICIS, if replacement HMR MANUFACTURED
PRODUCT stock is available, or, if no such replacement stock is available, as
soon as reasonably practicable after receiving such notice. MEDICIS shall deduct
the invoiced amount relating to any shortage of HMR MANUFACTURED PRODUCTS or
damaged HMR MANUFACTURED PRODUCTS from payment of the HMR GmbH invoice or
invoices for such HMR MANUFACTURED PRODUCTS.
(b) Rejected Goods. MEDICIS shall notify HMR GmbH in writing of any
claim relating to an HMR MANUFACTURED PRODUCT failing to meet the SPECIFICATIONS
at the time title passes to MEDICIS in accordance with Section 2.7 hereof (other
than due solely to storage, handling or shipping by MEDICIS, its AFFILIATES,
customers and/or carriers) within the earlier of (i) thirty (30) business days
after discovery of such failure to meet the SPECIFICATIONS or (ii) the shelf
life of such HMR MANUFACTURED PRODUCT. Such notification shall specify the
finished dosage form and package size (SKU) of such HMR MANUFACTURED PRODUCT.
Subject to the provisions of Section 2.8(c) hereof, HMR GmbH shall replace any
such HMR MANUFACTURED PRODUCT that fails to meet the SPECIFICATIONS within
thirty (30) business days after notification by MEDICIS, if replacement HMR
MANUFACTURED PRODUCT stock is available, or, if no such replacement stock is
available, as soon as reasonably practicable after receiving such notice.
MEDICIS shall not be responsible, and shall receive a credit from HMR GmbH, for
any additional costs of shipping, freight, customs and duties required to be
paid as a result of any replacement of HMR MANUFACTURED PRODUCTS under this
Section 2.8(b). The provisions of this Section 2.8(b) shall not apply to HMR
MANUFACTURED PRODUCTS which fail to meet the SPECIFICATIONS due solely to
storage, handling or shipping by MEDICIS, its AFFILIATES, customers and/or
carriers. MEDICIS shall deduct the invoiced amount for any HMR MANUFACTURED
PRODUCTS which fail to meet the SPECIFICATIONS (other than due solely to
storage, handling or shipping by MEDICIS, its AFFILIATES, customers and/or
carriers) from payment of the HMR GmbH invoice or invoices for such HMR
MANUFACTURED PRODUCTS.
(c) Disputes. In the event of a dispute regarding whether any HMR
MANUFACTURED PRODUCT fails to meet the SPECIFICATIONS which HMR GmbH and MEDICIS
are unable to resolve, a sample of such HMR MANUFACTURED PRODUCT shall be
submitted by MEDICIS to an independent laboratory reasonably acceptable to both
parties for testing and the test results obtained by such laboratory shall be
final and controlling. The fees and expenses of such laboratory testing and all
additional shipping and transportation costs incurred as a result of the dispute
shall be borne entirely by the party against whom such laboratory's findings are
made. In the event the test results indicate that the HMR MANUFACTURED PRODUCT
in question fails to meet the SPECIFICATIONS, HMR GmbH shall replace such HMR
MANUFACTURED PRODUCT within thirty (30) business days after
<PAGE> 16
SUPPLY AGREEMENT
receipt of such results if replacement HMR MANUFACTURED PRODUCT stock is
available, or, if no such replacement stock is available, as soon as reasonably
practicable after receiving such notice. MEDICIS shall not be responsible, and
shall receive a credit from HMR GmbH, for any additional costs of shipping,
freight, customs and duties required to be paid as a result of any replacement
of HMR MANUFACTURED PRODUCTS under this Section 2.8(c). MEDICIS shall deduct the
invoiced amount for any HMR MANUFACTURED PRODUCTS which are so determined to
fail to meet the SPECIFICATIONS from payment of the HMR GmbH invoice or invoices
for such HMR MANUFACTURED PRODUCTS.
2.9 Current Inventory. In accordance with the terms of the TRANSITION
SERVICES AGREEMENT, HMR GmbH or its AFFILIATES shall deliver to MEDICIS in its
initial or subsequent shipments to MEDICIS at the prices set forth in Exhibit B
and Exhibit C, respectively, attached hereto, existing inventory of the HMR
MANUFACTURED PRODUCTS and all existing samples thereof in inventory of HMR GmbH
and its AFFILIATES and in process with at least twelve (12) months of shelf life
remaining. If MEDICIS has distributed such existing inventory of HMR
MANUFACTURED PRODUCTS first, MEDICIS shall notify HMR GmbH in writing of the
quantities of each such HMR MANUFACTURED PRODUCT that have not been sold or
given to MEDICIS' customers, as the case may be, at a date as of nine (9) months
prior to their respective expiration dating. HMR GmbH shall instruct MEDICIS in
writing whether, at HMR GmbH's expense, to destroy such HMR MANUFACTURED
PRODUCTS or to return such HMR MANUFACTURED PRODUCTS to HMR GmbH or its
AFFILIATES. Within ten (10) days after receiving each such notification by
MEDICIS, HMR GmbH shall reimburse MEDICIS for all amounts paid by MEDICIS to HMR
GmbH for such destroyed or returned HMR MANUFACTURED PRODUCTS and any and all
reasonable disposal, shipping or other expenses incurred by MEDICIS in
connection with the destruction or return of such HMR MANUFACTURED PRODUCTS.
2.10 SUPPLY INTERRUPTION. For purposes of this AGREEMENT, a "SUPPLY
INTERRUPTION" shall be deemed to occur: (i) if HMR GmbH's ability to supply
adequate quantities of HMR MANUFACTURED PRODUCTS in saleable form in a timely
manner to MEDICIS is adversely affected or inhibited as reasonably determined by
both parties, (ii) if HMR GmbH fails to deliver to MEDICIS, in saleable form in
accordance with the terms of this AGREEMENT, any portion, greater than 6% in
quantity, of any confirmed order for any SKU of any HMR MANUFACTURED PRODUCT, or
(iii) if in any calendar quarter covered by the 24-MONTH FORECAST, HMR GmbH
fails to deliver, in saleable form in accordance with the terms of this
AGREEMENT, HMR MANUFACTURED PRODUCTS in accordance with the 24-MONTH FORECAST
or, if less, in the applicable portion of MEDICIS' last short-term forecast
provided prior to the SUPPLY INTERRUPTION. For purposes of this AGREEMENT, a
SUPPLY INTERRUPTION shall be deemed to have been fully cured once HMR GmbH has
delivered to MEDICIS all confirmed orders and, for any calendar months for which
there have been no confirmed orders due to the SUPPLY INTERRUPTION, at least the
minimum quantities in saleable form of HMR MANUFACTURED PRODUCTS forecasted to
be ordered by MEDICIS during such calendar months as set forth in the 24-MONTH
FORECAST or, if less, in the applicable portion of MEDICIS' last short-term
forecast provided prior to the SUPPLY
<PAGE> 17
SUPPLY AGREEMENT
INTERRUPTION. In the event of any SUPPLY INTERRUPTION, the following terms and
conditions shall apply:
(a) Pro Rata Entitlement. In the event of a SUPPLY INTERRUPTION,
MEDICIS shall be entitled to a pro rata (in unit quantity) share of the
manufacturing capacity of HMR GmbH and its AFFILIATES for the manufacture of HMR
MANUFACTURED PRODUCTS, and HMR GmbH and its AFFILIATES shall also be subject to
a pro rata (in unit quantity) entitlement to such manufacturing capacity. If,
for example, during a period of SUPPLY INTERRUPTION, HMR GmbH receives orders
for a total of 2,000 units, of which 500 units (i.e., 25% of the total orders)
are ordered by MEDICIS and 1,500 units (i.e., 75% of the total orders) are
ordered by third parties or by AFFILIATES of HMR GmbH, MEDICIS shall be entitled
to receive 25% of HMR GmbH's manufacturing capacity during the period of such
SUPPLY INTERRUPTION. Thus, if HMR GmbH were able to manufacture only 1,000 units
during the period of such SUPPLY INTERRUPTION, MEDICIS would be entitled to
receive 25% of such total number of units (i.e., 250 units) and third parties
and AFFILIATES of HMR GmbH would be entitled to receive 75% of such total number
of units (i.e., 750 units). MEDICIS' entitlement to HMR GmbH's and its
AFFILIATES' manufacturing capacity under this Section 2.10(a) shall be in
addition to any other rights and remedies MEDICIS may have under this AGREEMENT
as a result of any SUPPLY INTERRUPTION.
(b) QUALIFIED ALTERNATE SUPPLIER. At any time during the INITIAL
TERM and any RENEWAL PERIOD, MEDICIS shall have the right to designate and
qualify one and only one qualified alternate supplier, which selection shall be
reasonably acceptable to HMR GmbH (the "QUALIFIED ALTERNATE SUPPLIER"). The
QUALIFIED ALTERNATE SUPPLIER may only be utilized by MEDICIS during the INITIAL
TERM and any RENEWAL PERIOD as specifically set forth in this Section 2.10 or in
Section 2.1 hereof. HMR GmbH, at MEDICIS' sole expense, shall promptly provide
at such times and locations as may reasonably be requested by MEDICIS,
reasonable cooperation to MEDICIS in qualifying such alternate supplier for the
HMR MANUFACTURED PRODUCTS. Such cooperation shall include, without limitation,
participation by HMR GmbH's representatives in at least two meetings in North
America during the INITIAL TERM. From the time that any SUPPLY INTERRUPTION
begins until such SUPPLY INTERRUPTION is fully cured, MEDICIS may obtain any
resulting shortage of HMR MANUFACTURED PRODUCTS from the QUALIFIED ALTERNATE
SUPPLIER. If the OPTION (as defined in the LICENSE AND OPTION AGREEMENT) is not
exercised in accordance with Section 4.1 of the LICENSE AND OPTION AGREEMENT,
(i) MEDICIS, its AFFILIATES, or its successors, assigns or sublicensees shall
not obtain supply of the HMR MANUFACTURED PRODUCTS or of the ACTIVE INGREDIENTS,
in their current formulations, from the QUALIFIED ALTERNATE SUPPLIER, its
AFFILIATES, or its successors, assigns or sublicensees for a period of three (3)
years after the INITIAL TERM, and (ii) HMR GmbH, its AFFILIATES, or its
successors, assigns or sublicensees after the INITIAL TERM may obtain supply of
the HMR MANUFACTURED PRODUCTS or of the ACTIVE INGREDIENTS from such QUALIFIED
ALTERNATE SUPPLIER, its AFFILIATES, or its successors, assigns or sublicensees
after the INITIAL TERM.
<PAGE> 18
SUPPLY AGREEMENT
(c) LOST SALES Remedy.
(i) (A) For each calendar quarter or portion thereof during an
EXTENDED SUPPLY INTERRUPTION and as liquidated damages and not as a penalty, HMR
GmbH shall pay to MEDICIS an amount equal to MEDICIS' LOST SALES as provided
herein.
(B) For purposes of this Section 2.10(c) and this AGREEMENT:
(1) An "EXTENDED SUPPLY INTERRUPTION" shall mean a period
which:
(a) begins on the sixty-first (61st) consecutive day of a
SUPPLY INTERRUPTION; provided that during the first six (6) months
during the term hereof, the first (1st) day of a SUPPLY
INTERRUPTION shall begin such period (which in all cases must be
before the two (2) month anniversary of the date on which the FDA
approves the QUALIFIED ALTERNATE SUPPLIER or, if earlier, the date
that is eighteen (18) months after the EFFECTIVE DATE); and
(b) ends on the earliest of (x) the date as of which HMR
GmbH has fully cured the SUPPLY INTERRUPTION, (y) the date that is
eighteen (18) months after the EFFECTIVE DATE, or (z) the two (2)
month anniversary of the date on which the FDA approves the
QUALIFIED ALTERNATE SUPPLIER.
(2) "LOST SALES" shall mean, determined on a quarterly basis
for each calendar quarter or portion thereof during an EXTENDED SUPPLY
INTERRUPTION, the greater of:
(a) 65% of the dollar amount MEDICIS would have invoiced
for BACKORDERS placed with MEDICIS during such quarter or portion
thereof; or
(b) 70% of the average of NET SALES for the four (4) most
recently completed calendar quarters prior to the commencement of
the SUPPLY INTERRUPTION immediately preceding such EXTENDED SUPPLY
INTERRUPTION; provided, however, that (i) for any such calculation
for any calendar quarter or portion thereof in 1998, such average
shall be of NET SALES for the three (3) rather than four (4) most
recently completed calendar quarters prior to the commencement of
such SUPPLY INTERRUPTION, (ii) any calculation under this Section
for a portion of a calendar quarter shall be made on a pro rata
basis based on a ninety (90) day calendar quarter, (iii) to the
extent that NET SALES for any calendar quarter (or pro rata
portion thereof) are based on sales of
<PAGE> 19
SUPPLY AGREEMENT
quantities of an HMR MANUFACTURED PRODUCT which exceed the
quantities of the INTERRUPTED MEDICIS ORDERS for such HMR
MANUFACTURED PRODUCT for the calendar quarter (or portion thereof)
for which LOST SALES are being determined, the corresponding NET
SALES value of such quantities in excess of the INTERRUPTED
MEDICIS ORDERS shall be excluded from the determination of NET
SALES, and (iv) only quantities of inventory for which MEDICIS is
out-of-stock due to the SUPPLY INTERRUPTION shall be included in
the calculation of NET SALES.
(c) Notwithstanding anything to the contrary in
subparagraphs 2(a) or 2(b) above, in the event MEDICIS is
out-of-stock for any HMR MANUFACTURED PRODUCT during any period of
any EXTENDED SUPPLY INTERRUPTION due solely to MEDICIS' failure to
maintain a minimum inventory of such HMR MANUFACTURED PRODUCT in
accordance with Section 2.6 hereof and subject to the
qualifications set forth therein, in determining LOST SALES
hereunder: (i) any BACKORDERS or portions thereof which cannot be
filled due solely to the failure on the part of MEDICIS in
accordance with Section 2.6 shall be excluded from the calculation
pursuant to subparagraph 2(a) above, and (ii) the corresponding
NET SALES value of any such quantities of inventory which MEDICIS
has failed to maintain in accordance with Section 2.6 shall be
excluded from the determination of NET SALES for purposes of
subparagraph 2(b) above.
(3) "BACKORDERS" shall mean orders actually received by
MEDICIS from third-party customers of MEDICIS (which cannot be
AFFILIATES of MEDICIS) for HMR MANUFACTURED PRODUCTS which MEDICIS
cannot fill because it is out-of-stock due to a SUPPLY INTERRUPTION,
which must be within the quantities of the INTERRUPTED MEDICIS ORDERS.
(4) An "INTERRUPTED MEDICIS ORDER" shall mean any quantities
of HMR MANUFACTURED PRODUCTS (other than samples) which were ordered or
forecasted to be ordered by MEDICIS but not delivered by HMR GmbH in
saleable form because of a SUPPLY INTERRUPTION, which shall be limited:
(a) for time periods within the relevant short-term
forecasts submitted by MEDICIS and confirmed by HMR GmbH pursuant
to Section 2.4(b) hereof, to the quantities that were actually
included by MEDICIS in such confirmed short-term forecasts prior
to the SUPPLY INTERRUPTION; or
<PAGE> 20
SUPPLY AGREEMENT
(b) for time periods beyond such confirmed short-term
forecasts, to the quantities set forth in the 24-MONTH FORECAST
or, if less, in the applicable portion of MEDICIS' last short-term
forecast (which would not have yet been confirmed by HMR GmbH)
submitted prior to the SUPPLY INTERRUPTION pursuant to Section
2.4(b).
(5) "NET SALES" shall mean the gross invoice amount of HMR
MANUFACTURED PRODUCTS invoiced by MEDICIS, HMRI or HMRI on behalf of
MEDICIS to third parties in the TERRITORY during a calendar quarter,
less (i) promotional and trade discounts; (ii) sales and excise taxes,
value-added and other taxes, shipping costs and insurance premiums and
duties which are billed to customers as separate items on invoices;
(iii) allowances for short shipments, claims for returned goods and
price adjustments; and (iv) contracts charge-backs and government
rebates (provided that for any calendar quarters after the EFFECTIVE
DATE, such charge-backs and rebates shall be limited to those which are
the responsibility of MEDICIS under the LICENSE AND OPTION AGREEMENT).
HMRI shall promptly provide MEDICIS with any and all documents and
information reasonably requested by MEDICIS in order to enable MEDICIS
to make any determination of NET SALES required under this AGREEMENT.
(C) MEDICIS covenants and agrees that it shall not solicit
orders from customers outside the ordinary course of business, make or
announce any price increases or otherwise act in any manner not in the
ordinary course of business with respect to the HMR MANUFACTURED PRODUCTS
subject to the EXTENDED SUPPLY INTERRUPTION where such actions would have
the effect of increasing the quantities of BACKORDERS, during any period
(i) in which an EXTENDED SUPPLY INTERRUPTION is continuing, or (ii) after
such time that HMR GmbH notifies MEDICIS that an EXTENDED SUPPLY
INTERRUPTION is likely to occur until such time as the EXTENDED SUPPLY
INTERRUPTION is cured or avoided as further notified by HMR GmbH to
MEDICIS.
(D) During the period of any such EXTENDED SUPPLY INTERRUPTION,
MEDICIS shall invoice HMR quarterly for LOST SALES, and HMR GmbH shall pay
each such invoice not later than ten (10) business days after its receipt
thereof. Each such invoice shall be accompanied by documentation
reasonably satisfactory to HMR GmbH setting forth the LOST SALES covered
by the invoice.
(ii) Notwithstanding anything to the contrary in Section 2.10(c)(i)
hereof, MEDICIS shall have no right to recover for LOST SALES under
Section 2.10(c)(i) in connection with any EXTENDED SUPPLY INTERRUPTION
which is caused solely and directly by force majeure due to: (a) an act of
God; (b) any act, regulation, order, decree or law of any government or
agency thereof which is not a result of or caused by any action or
inaction on the part of HMR GmbH or an AFFILIATE in violation of its
obligations under any of the TRANSACTION
<PAGE> 21
SUPPLY AGREEMENT
DOCUMENTS or APPLICABLE LAWS; (c) war or civil commotion; (d) damage to or
destruction of HMR GmbH's manufacturing facilities resulting from an act
of God; (e) labor disturbances which are not specific to the operations or
facilities of HMR GmbH or its AFFILIATES and which are not within the
power of HMR GmbH or its AFFILIATES to settle or control; (f) epidemic;
(g) failure of a sole source supply to HMR GmbH of a particular supply
item for HMR MANUFACTURED PRODUCTS by reason of any force majeure (as
force majeure is defined in this Section 2.10(c)(ii)); (h) failure of all
sources of supply to HMR GmbH of a particular supply item for HMR
MANUFACTURED PRODUCTS where HMR GmbH has multiple sources of supply for
such item, provided such failure is not due to or caused by any action or
inaction on the part of HMR GmbH; (i) the failure of public utilities; or
(j) the failure of common carriers.
2.11 Supply Price for HMR MANUFACTURED PRODUCTS and Exchange Rate and
Adjustment.
(a) The supply price of the HMR MANUFACTURED PRODUCTS to be paid by
MEDICIS to HMR GmbH for the INITIAL TERM and the INITIAL RENEWAL PERIOD shall be
as specified in Exhibits B and C attached hereto; provided, however, that the
supply prices shall be increased on March 1 of each year by the increase in the
U.S. consumer price index released by the U.S. Department of Labor (the "CPI")
using March 1, 1998 as the base reference point (the "CPI INCREASE"); provided,
further, if the supply price set forth in Exhibits B and C for a particular HMR
MANUFACTURED PRODUCT is less than HMR GmbH's costs to manufacture and supply
such HMR MANUFACTURED PRODUCT to MEDICIS, the price for such HMR MANUFACTURED
PRODUCT shall be increased by an amount so that the supply price for such HMR
MANUFACTURED PRODUCT equals the cost for such HMR MANUFACTURED PRODUCT. HMR GmbH
shall use its reasonable commercial efforts to lower the prices of other trade
or sample HMR MANUFACTURED PRODUCTS to the fullest extent possible to give
MEDICIS the same economic benefits that it would have received under this
AGREEMENT had such price not been increased.
(b) Exchange Rate and Adjustment. The reference exchange rate for
this AGREEMENT is 1.80 Deutsche Mark buys U.S. $1.00 ("APPLICABLE EXCHANGE
RATE"). In the event of changes of such exchange rate as indicated below, the
purchase prices shall be adjusted as set forth below, with the overriding
premise being that the parties shall equally bear the impact of any such change
in the APPLICABLE EXCHANGE RATE.
Initial Six (6) Month Period. In the event that the average
exchange rate for the Deutsche Mark to the U.S. Dollar in a particular month (as
computed by the Frankfurt am Main currency exchange and published monthly by the
Deutsche Bundesbank Devisenkursstatistik) ("AVERAGE EXCHANGE RATE") during the
first six (6) months should exceed 2.15 DM/U.S. $ or decrease below 1.45 DM/U.S.
$, then a new purchase price shall be immediately renegotiated in good faith and
be immediately applicable prior to the expiration of the first six (6) month
period.
<PAGE> 22
SUPPLY AGREEMENT
Subsequent To Initial Six (6) Month Period. In the event that the
AVERAGE EXCHANGE RATE calculated for the last six (6) months ending at the end
of each six (6) month period should deviate from the prevailing APPLICABLE
EXCHANGE RATE by five percent (5%) or more, then the purchase price for all
deliveries for each of the HMR MANUFACTURED PRODUCTS supplied to MEDICIS during
the ensuing six (6) month period shall be adjusted using a new APPLICABLE
EXCHANGE RATE as follows:
APPLICABLE EXCHANGE RATE + AVERAGE EXCHANGE RATE = new APPLICABLE EXCHANGE RATE
- ------------------------------------------------
2
The purchase prices shall then be adjusted as follows:
Current purchase price x APPLICABLE EXCHANGE RATE = Adjusted purchase price
------------------------
New APPLICABLE EXCHANGE RATE
Example:
Current purchase price in U.S. $ per
60 gram tube of 'Topicort' Cream: U.S. $ 5.35
APPLICABLE EXCHANGE RATE: 1.80 DM:1 U.S. $
AVERAGE EXCHANGE RATE: 1.70 DM: 1 U.S. $
Calculation of new APPLICABLE EXCHANGE RATE:
1.80x1.70 = 1.75 (which is the new APPLICABLE EXCHANGE RATE)
--------
2
Calculation of adjusted purchase price for 60 gram tube:
5.35 x 1.80 = 5.50 U.S. $ (which is the adjusted purchase price)
----
1.75
2.12 Payment.
(a) All payments required by this AGREEMENT shall be made in United
States Dollars. All invoices are net and payment must be received not later than
(i) forty-five (45) calendar days after the date of invoice or (ii) if later,
thirty (30) days after delivery to the port of New York or such other port in
the TERRITORY as the parties have mutually agreed pursuant to Section 2.7
hereof. The date of each invoice shall be on or about the date of shipment of
HMR MANUFACTURED PRODUCTS. Payment shall be made without deduction, deferment,
set-off, lien or counterclaim of any nature, other than for rejected or returned
goods. Time for payment shall be of the essence. Unless MEDICIS notifies HMR
GmbH in writing of a good faith dispute, with respect to payments not received
within five (5) calendar days after the end of such forty-five (45) calendar day
or longer period, interest shall accrue on any amount overdue, at the rate of
prime plus two percent (2%) per annum, such interest to begin accruing on a
daily basis from the date of invoice, and shall accrue both before and after
judgment; provided, however, in the case of a good faith dispute regarding
payment resolved to be due and not paid within five (5) business days after such
resolution, interest shall accrue on any amount overdue, at the rate of prime
plus two percent (2%) per annum, such interest to begin accruing on a daily
basis from the date such payment becomes overdue, and
<PAGE> 23
SUPPLY AGREEMENT
shall accrue both before and after judgment; provided, further, in the case of a
good faith dispute regarding payment, MEDICIS may in its discretion determine to
pay such amounts disputed to be overdue and in the event amounts are finally
determined not to be due, HMR GmbH shall repay such excess amounts determined
not be due to MEDICIS, and interest shall accrue on any such amount, at the rate
of prime plus two percent (2%) per annum, such interest to begin accruing on a
daily basis from the date such disputed payment was received by HMR GmbH.
(b) With respect to defaults of payment not cured within fifteen (15)
business days after receipt of written notice from HMR GmbH to MEDICIS, HMR GmbH
shall, in its sole discretion, and without prejudice to any other of its accrued
rights, be entitled to suspend the provision of HMR MANUFACTURED PRODUCTS;
provided, however, a good faith bona fide dispute by MEDICIS regarding a payment
pursuant to this AGREEMENT shall not be considered a default of payment so long
as MEDICIS notifies HMR GmbH in writing of such dispute within sixty (60)
calendar days from the date of invoice. MEDICIS understands that it shall notify
HMR GmbH promptly upon a determination that a dispute exists regarding a
payment.
2.13 Advertising/Marketing/Sales Costs and Product Pricing. MEDICIS shall
be responsible for all advertising, marketing and sales costs associated with
the distribution of HMR MANUFACTURED PRODUCTS in the TERRITORY. MEDICIS shall
have complete authority for all pricing decisions for the HMR MANUFACTURED
PRODUCT in the TERRITORY. MEDICIS shall not alter the HMR MANUFACTURED PRODUCTS
and shall not recommend or knowingly sell the HMR MANUFACTURED PRODUCTS for any
uses except as described in the FDA approved HMR MANUFACTURED PRODUCTS labeling.
2.14 Samples.
(a) During each CONTRACT YEAR of the INITIAL TERM, HMR GmbH shall
provide MEDICIS with samples of the HMR MANUFACTURED PRODUCTS with a value
totaling U.S. $870,000, based upon the sample unit prices set forth in Exhibit C
hereto (plus the CPI INCREASE for the second and third CONTRACT YEAR), at no
cost to MEDICIS; provided, however, that subject to the terms of this AGREEMENT,
if MEDICIS does not purchase HMR MANUFACTURED PRODUCTS other than samples with
an aggregate supply price of U.S. $2.6 million (as increased by the CPI INCREASE
for any portion of a CONTRACT YEAR for which such CPI INCREASE is in effect)
(the "TRADE QUOTA") from HMR GmbH during any CONTRACT YEAR of the INITIAL TERM
(a "SHORTFALL"), at the end of such CONTRACT YEAR containing a SHORTFALL,
MEDICIS shall reimburse HMR GmbH for the samples on a pro rata basis at the full
sample unit prices set forth in Exhibit C hereto (plus the CPI INCREASE, as
applicable). By way of example only and without taking into account the CPI
INCREASE during the first CONTRACT YEAR, if during such CONTRACT YEAR MEDICIS
purchases HMR MANUFACTURED PRODUCTS other than samples with an aggregate supply
price of U.S. $1.95 million, the amount of the reimbursement by MEDICIS under
this Section 2.14(a) would be equal to the product of One-Fourth (1/4) and U.S.
$870,000, or U.S. $217,500.
<PAGE> 24
SUPPLY AGREEMENT
(b) In the event a SUPPLY INTERRUPTION occurs in the same CONTRACT
YEAR in which a SHORTFALL occurs, then (i) to the extent that the aggregate
quantities of HMR MANUFACTURED PRODUCTS other than samples purchased by MEDICIS
from the QUALIFIED ALTERNATE SUPPLIER during the period of such SUPPLY
INTERRUPTION exceeds by more than 5% the quantities of the INTERRUPTED MEDICIS
ORDERS for such period, MEDICIS' TRADE QUOTA under Section 2.14(a) for the next
succeeding CONTRACT YEAR shall be increased by the aggregate supply price of
such excess quantities (as determined by reference to the prices in the CONTRACT
YEAR in which the SUPPLY INTERRUPTION occurs); (ii) the aggregate supply price
of the quantities of all HMR MANUFACTURED PRODUCTS other than samples purchased
by MEDICIS from the QUALIFIED ALTERNATE SUPPLIER during the period of such
SUPPLY INTERRUPTION shall be credited towards MEDICIS' TRADE QUOTA for such
CONTRACT YEAR under Section 2.14(a) hereof, but only to the extent such
quantities do not exceed the quantities of the INTERRUPTED MEDICIS ORDERS for
such period; and (iii) in the event that the QUALIFIED ALTERNATE SUPPLIER has
not been qualified prior to the commencement of such SUPPLY INTERRUPTION,
MEDICIS shall receive credit towards its TRADE QUOTA pursuant to Section 2.14(a)
to the extent of the INTERRUPTED MEDICIS ORDERS. With respect to subpart (ii) of
the immediately preceding sentence and by way of example only, without taking
into account any CPI INCREASE, if during any such CONTRACT YEAR MEDICIS were to
purchase from HMR GmbH and the QUALIFIED ALTERNATE SUPPLIER HMR MANUFACTURED
PRODUCTS other than samples with aggregate supply prices of U.S. $1.95 million
and U.S. $650,000, respectively, and the aggregate supply price for the
INTERRUPTED MEDICIS ORDERS for the period of the SUPPLY INTERRUPTION during such
CONTRACT YEAR were U.S. $325,000, the amount of the reimbursement by MEDICIS
under Section 2.14(a) hereof would be equal to (1) U.S. $325,000 divided by U.S.
$2.6 million, multiplied by (2) U.S. $870,000, or U.S. $108,750.
(c) Except as otherwise provided by this Section 2.14, prices for
samples of HMR MANUFACTURED PRODUCTS purchased by MEDICIS from HMR GmbH shall be
at the full sample unit price set forth in Exhibit C attached hereto.
(d) MEDICIS shall select the mix of the samples of the HMR
MANUFACTURED PRODUCTS which MEDICIS is to receive, which shall be within HMR
GmbH's manufacturing capacities for each such sample as reasonably determined by
HMR GmbH.
(e) Samples shall be delivered to MEDICIS by HMR GmbH in accordance
with Section 2.7 hereof.
2.15 Compliance with APPLICABLE LAWS. HMR GmbH and its AFFILIATES shall
comply fully with APPLICABLE LAWS in the performance of this AGREEMENT.
2.16 Rights Necessary for Manufacturing. In accordance with the terms and
conditions of the LICENSE AND OPTION AGREEMENT during the INITIAL TERM, HMR GmbH
reserves the right, and in accordance with the terms of the PURCHASE AGREEMENT
during
<PAGE> 25
SUPPLY AGREEMENT
any RENEWAL PERIODS, MEDICIS grants to HMR GmbH a royalty-free, non-exclusive
license, to use the PATENTS, the TRADEMARKS and the PRODUCT KNOW-HOW solely to
make and have made the HMR MANUFACTURED PRODUCTS in the TERRITORY (i) for sale
to MEDICIS under and pursuant to this AGREEMENT and (ii) for use and resale
outside the TERRITORY in accordance with the terms of the LICENSE AND OPTION
AGREEMENT and the PURCHASE AGREEMENT.
ARTICLE III.
TERM AND TERMINATION
3.1 Term of this AGREEMENT. The term of this AGREEMENT shall be the
INITIAL TERM unless a RENEWAL PERIOD is applicable in accordance with Section
3.2 hereof, or unless this AGREEMENT is earlier terminated in accordance with
the provisions of Section 3.3 hereof.
3.2 RENEWAL PERIODS.
(a) If the OPTION (as defined in the LICENSE AND OPTION AGREEMENT) is
exercised pursuant to Section 4.1 of the LICENSE AND OPTION AGREEMENT and unless
MEDICIS provides written notice to HMR GmbH no later than the second anniversary
of the EFFECTIVE DATE of its election not to extend this AGREEMENT, this
AGREEMENT shall be extended under the same terms and conditions as those set
forth herein, subject to the CPI INCREASES each year, for a period of two (2)
years after the expiration of the INITIAL TERM (the "INITIAL RENEWAL PERIOD").
In the alternative, if the OPTION is exercised and upon the request of MEDICIS
by written notice to HMR GmbH given no later than the second anniversary of the
EFFECTIVE DATE, from and after the date of such notice the parties shall
negotiate in good faith to extend the term of this AGREEMENT for an additional
period of two (2) years after the expiration of the INITIAL TERM under the same
conditions as those set forth herein, subject to the CPI INCREASES each year,
except that (i) this AGREEMENT would no longer be deemed to be on a requirements
basis and MEDICIS would be free to obtain the HMR MANUFACTURED PRODUCTS from
third parties, (ii) there would be no penalty for HMR GmbH's delay or failure to
supply the HMR MANUFACTURED PRODUCTS hereunder, and (iii) the parties would
negotiate mutually acceptable minimum purchases (by product SKU) which would
become an additional obligation of MEDICIS hereunder. Any extension of this
AGREEMENT pursuant to the immediately preceding sentence of this Section 3.2
shall be effected pursuant to a written amendment to this AGREEMENT executed by
each of the parties hereto.
(b) Upon expiration of the INITIAL RENEWAL PERIOD, the term of this
AGREEMENT may be extended for additional consecutive two (2) year periods upon
the mutual written agreement of the parties entered into no later than one (1)
year prior to the expiration of the then-current RENEWAL PERIOD.
<PAGE> 26
SUPPLY AGREEMENT
3.3 Early Termination.
(a) This AGREEMENT shall automatically be terminated upon the
termination of the LICENSE AND OPTION AGREEMENT by HMRI pursuant to Section 15.2
thereof or by MEDICIS pursuant to Section 15.3 thereof.
(b) Either of MEDICIS or HMR GmbH, as the case may be, may terminate
this AGREEMENT forthwith by notice in writing to the other party upon the
occurrence of any of the following events:
(i) if the other party commits a material breach of this
AGREEMENT, which in the case of a breach capable of remedy shall not have been
remedied within sixty (60) days of the receipt by the other party of a notice
identifying the breach and requiring its remedy or such longer time as the party
in breach may demonstrate to the other party is necessary to remedy the breach
using its reasonable efforts to do so; or
(ii) if the other party ceases for any reason to carry on
business or convenes a meeting of its creditors or has a receiver or manager
appointed in respect of all or substantially all of its assets or is the subject
of an application for an administration order or of any proposal for a voluntary
arrangement or enters into liquidation (whether compulsorily or voluntarily) or
undergoes any analogous act or proceedings under foreign law; or
(iii) the enactment of any law, order or regulation by
governmental authority that would render it impossible for such party to perform
its obligations hereunder; provided, however, that if the enactment of any such
law, order or regulation renders it impossible for HMR GmbH to perform hereunder
and such law, order or regulation is enacted as a result of or is caused by any
action or inaction on the part of HMR GmbH, HMR GmbH shall have no right to
terminate this AGREEMENT under this Section 3.3(b) as a result of such
enactment.
(c) In addition to its right to terminate this AGREEMENT pursuant to
Section 3.3(b) hereof, MEDICIS may terminate this AGREEMENT and the LOPROX
LOTION SUPPLY AGREEMENT forthwith by notice in writing to HMR GmbH in the event
that during the INITIAL TERM and prior to the earlier of the date which is
twenty four (24) months after the EFFECTIVE DATE and the date on which the FDA
approves the QUALIFIED ALTERNATE SUPPLIER, (i) HMR GmbH abandons or terminates
the manufacture of the HMR MANUFACTURED PRODUCTS, or (ii) HMR GmbH is unable or
fails to supply to MEDICIS hereunder and HMRI is unable or fails to supply to
MEDICIS under the LOPROX LOTION SUPPLY AGREEMENT, or MEDICIS, with the written
consent of HMR GmbH and HMRI, which consent shall not be unreasonably withheld
or delayed, reasonably and in good faith determines that HMR GmbH and HMRI will
be unable to supply to MEDICIS for six (6) or more consecutive months hereunder
and under the LOPROX LOTION SUPPLY AGREEMENT, HMR MANUFACTURED PRODUCTS and
LOPROX LOTION with an aggregate supply price equal to at least 50% of the total
U.S. Dollar amount of the quantities of HMR MANUFACTURED PRODUCTS and LOPROX
LOTION included by MEDICIS in confirmed orders for such period and, for any
months during such period for which there are no confirmed
<PAGE> 27
SUPPLY AGREEMENT
orders, the quantities of HMR MANUFACTURED PRODUCTS and LOPROX LOTION forecasted
to be ordered during such months as set forth in the 24-MONTH FORECAST hereunder
and the "24-MONTH FORECAST" as defined in the LOPROX LOTION SUPPLY AGREEMENT or,
if less, in the applicable portion of MEDICIS' last short-term forecasts
submitted hereunder and under Section 2.4(b) of the LOPROX LOTION SUPPLY
AGREEMENT prior to such six (6) month or longer period; provided, however, that
MEDICIS may not terminate this AGREEMENT or the LOPROX LOTION SUPPLY AGREEMENT
pursuant to this Section 3.3(c) if the abandonment, termination or failure to
supply is caused solely and directly by force majeure due to: (a) an act of God;
(b) any act, regulation, order, decree or law of any government or agency
thereof which is not a result of or caused by any action or inaction on the part
of HMR GmbH or an AFFILIATE in violation of its obligations under any of the
TRANSACTION DOCUMENTS or APPLICABLE LAWS; (c) war or civil commotion; (d) damage
to or destruction of HMR GmbH's manufacturing facilities resulting from an act
of God; (e) labor disturbances which are not specific to the operations or
facilities of HMR GmbH or its AFFILIATES and which are not within the power of
HMR GmbH or its AFFILIATES to settle or control; (f) epidemic; (g) failure of a
sole source of supply to HMR GmbH or its AFFILIATES of a particular supply item
for HMR MANUFACTURED PRODUCTS or LOPROX LOTION by reason of any force majeure
(as force majeure is defined in this Section 3.3(c)); (h) failure of the source
of supply for LOPROX LOTION to supply LOPROX LOTION to HMRI by reason of any
force majeure (as force majeure is defined in this Section 3.3(c)); (i) failure
of all sources of supply to HMR GmbH or its AFFILIATES of a particular supply
item for HMR MANUFACTURED PRODUCTS where HMR GmbH or its AFFILIATES has multiple
sources of supply for such item, provided such failure is not due to or caused
by any action or inaction on the part of HMR GmbH or its AFFILIATES; (j) the
failure of public utilities; (k) the failure of common carriers; or (l) an event
of force majeure as defined in Section 2.10(c)(ii) of the LOPROX LOTION SUPPLY
AGREEMENT. MEDICIS shall additionally have certain rights to terminate the
LICENSE AND OPTION AGREEMENT upon termination of this AGREEMENT pursuant to this
Section 3.3(c) and Section 15.3 of the LICENSE AND OPTION AGREEMENT.
3.4 Consequences of Termination and Survival.
(a) Termination of this AGREEMENT for whatever reason shall not
affect the accrued rights and obligations of either HMR GmbH or MEDICIS arising
under or out of this AGREEMENT. The provisions of Articles V (HMR MANUFACTURED
PRODUCT Recalls), VI (Warranties and Remedies) and VII (Indemnification,
Limitation of Liability and Insurance) and of Sections 2.8, 2.9 (last sentence),
2.10(b), 2.10(c), 2.12, 3.5, 8.2, 8.4, 8.5, 8.6, 8.8, 8.10 and 8.11 of this
AGREEMENT and this Section 3.4 shall survive the expiration or termination of
this AGREEMENT or of any extensions thereof. In addition, any other provisions
which are required to interpret and enforce the parties' rights and obligations
under this AGREEMENT shall also survive such expiration or termination to the
extent required for the full observation and performance of this AGREEMENT by
the parties hereto.
(b) If the OPTION (as defined in the LICENSE AND OPTION AGREEMENT) is
exercised pursuant to Section 4.1 of the LICENSE AND OPTION
<PAGE> 28
SUPPLY AGREEMENT
AGREEMENT, upon the expiration of the INITIAL TERM and any RENEWAL PERIOD of
this AGREEMENT, at MEDICIS' request, the parties or their AFFILIATES shall enter
into a supply agreement for the supply of the ACTIVE INGREDIENT CICLOPIROX for
the HMR MANUFACTURED PRODUCTS by HMR GmbH or its AFFILIATES to MEDICIS pursuant
to which HMR GmbH or its AFFILIATES shall agree: (i) to sell the ACTIVE
INGREDIENT CICLOPIROX to MEDICIS for as long as HMR GmbH or its AFFILIATES
manufacture the ACTIVE INGREDIENT CICLOPIROX at a supply price equal to U.S.
$3,295 per kilo of ciclopirox acid and $2,540 per kilo of ciclopirox olamine
subject to any CPI INCREASE or exchange rate adjustment pursuant to Section 2.11
hereof; (ii) to manufacture and sell to MEDICIS at least a four (4) year supply
of the ACTIVE INGREDIENT CICLOPIROX if HMR GmbH ceases to manufacture such
ACTIVE INGREDIENT, where such four (4) year supply is based on the amount of
such ACTIVE INGREDIENT CICLOPIROX purchased by MEDICIS during the twelve (12)
month period prior to HMR GmbH's ceasing to manufacture such ACTIVE INGREDIENT
CICLOPIROX for MEDICIS; and (iii) in the event HMR GmbH ceases to manufacture
the ACTIVE INGREDIENT CICLOPIROX, HMR GmbH shall, at its election, either (a)
provide the specifications and production process flow chart to allow MEDICIS to
initiate and establish a source of supply with an FDA approved third party
manufacturer with whom MEDICIS shall enter into an exclusive supply agreement,
prohibiting such manufacturer from manufacturing for or selling or providing
know how to any other person or entity, or (b) arrange for an alternative source
of supply from a third party supplier reasonably acceptable to MEDICIS and on
terms and conditions reasonably acceptable to MEDICIS.
(c) If the OPTION is exercised pursuant to Section 4.1 of the LICENSE
AND OPTION AGREEMENT, upon termination of the INITIAL TERM and any RENEWAL TERM
of this AGREEMENT, at MEDICIS' request, the parties or their AFFILIATES may
enter into a supply agreement for the supply of the ACTIVE INGREDIENT
desoximetasone for the HMR MANUFACTURED PRODUCTS by HMR GmbH to MEDICIS upon
terms mutually agreeable to the parties.
3.5 Accrued Obligations. In the event that this AGREEMENT is terminated
by HMR GmbH pursuant to the provisions of Section 3.3 herein, MEDICIS shall
immediately pay to HMR GmbH (i) all amounts outstanding and remaining to be paid
for HMR MANUFACTURED PRODUCTS supplied prior to the termination, (ii) all
amounts that would be due to HMR GmbH related to binding quantities of HMR
MANUFACTURED PRODUCTS ordered pursuant to Section 2.4 hereof, (iii) all amounts
outstanding and remaining to be paid for samples supplied pursuant to Section
2.14(b) prior to the termination, and (iv) subject to Section 2.14(b), an amount
equal to the value of the samples supplied pursuant to Section 2.14(a)(i) prior
to the termination if during the CONTRACT YEAR in which this AGREEMENT is
terminated MEDICIS has not purchased HMR MANUFACTURED PRODUCTS other than
samples with an aggregate supply price of at least an amount equal to U.S. [$2.6
million] (plus the CPI INCREASE for the second and third CONTRACT YEAR)
multiplied by a fraction, the numerator of which is equal to the number of days
during the then current CONTRACT YEAR during which this AGREEMENT was in effect
prior to its termination and the denominator of which is equal to 365.
<PAGE> 29
SUPPLY AGREEMENT
ARTICLE IV.
MANUFACTURING COMPLIANCE,
ACCESS AND REGULATORY MATTERS
4.1 Tests; Retained Samples. HMR GmbH shall perform, or cause to be
performed, tests on each lot of HMR MANUFACTURED PRODUCT, including all samples
thereof, manufactured pursuant to this AGREEMENT before delivery to MEDICIS.
Such tests shall include required assay and stability testing and the testing of
the HMR MANUFACTURED PRODUCTS for compliance with the SPECIFICATIONS and the
NDAs. HMR GmbH shall maintain in accordance with prudent industry standards all
retained samples of the HMR MANUFACTURED PRODUCTS and of the raw materials for
the HMR MANUFACTURED PRODUCTS.
4.2 Manufacturing Compliance. HMR GmbH shall manufacture the HMR
MANUFACTURED PRODUCTS, including all samples thereof, in accordance with the
SPECIFICATIONS, cGMPs and the NDAs. HMR GmbH shall manufacture and supply HMR
MANUFACTURED PRODUCTS from HMR GmbH's plants approved in the relevant NDA, and
the choice of locations shall be in HMR GmbH's sole discretion; provided,
however, that HMR GmbH hereby represents and warrants to MEDICIS that any change
in manufacturing location as permitted by this Section 4.2 shall not (i)
materially adversely affect HMR GmbH's ability to perform and comply fully with
all of its obligations under this AGREEMENT or (ii) materially adversely affect
HMR GmbH's capacity to manufacture any quantities of HMR MANUFACTURED PRODUCTS
as compared to HMR GmbH's capacity to manufacture such quantities prior to the
date of such change in location.
4.3 Changes in SPECIFICATIONS. Any changes in SPECIFICATIONS or the test
methods or manufacturing processes referenced in the NDAs shall not be made by
HMR GmbH without MEDICIS' prior substantive involvement and written approval,
which approval shall not be unreasonably withheld or delayed. Any changes in
SPECIFICATIONS or the test methods or manufacturing processes referenced in the
NDAs shall not be made by MEDICIS without HMR GmbH's prior substantive
involvement and written approval, which approval shall not be unreasonably
withheld or delayed. If, upon a change in SPECIFICATIONS or such test methods or
manufacturing processes made by MEDICIS without HMR GmbH's prior substantive
involvement and written approval, an HMR MANUFACTURED PRODUCT no longer meets
the old or new SPECIFICATIONS or does not pass inspection under the old or new
test method, then MEDICIS shall bear responsibility for such problem and any
financial consequences flowing from such failure, including without limitation
failed lots and recalls. If, upon a change in SPECIFICATIONS or such test
methods or manufacturing processes made by HMR GmbH without MEDICIS' prior
substantive involvement and written approval, an HMR MANUFACTURED PRODUCT no
longer meets the old or new SPECIFICATIONS or does not pass inspection under the
old or new test method, then HMR GmbH shall bear responsibility for such problem
and any financial consequences flowing from such failure, including without
limitation failed lots and recalls.
<PAGE> 30
SUPPLY AGREEMENT
4.4 Access to Facilities.
(a) MEDICIS Access. Upon the reasonable prior written request of
MEDICIS, MEDICIS shall have the right to inspect those portions of the
manufacturing and testing facilities of HMR GmbH where HMR MANUFACTURED PRODUCTS
are being manufactured or tested, as the case may be, during regular business
hours, to ascertain compliance with cGMP and the SPECIFICATIONS. If the FDA or
other applicable governmental regulatory agency asserts any notice to the effect
that HMR GmbH has failed to comply with any law or regulation in connection with
the manufacture of the HMR MANUFACTURED PRODUCTS, or if HMR GmbH delivers HMR
MANUFACTURED PRODUCTS that do not meet the SPECIFICATIONS, then MEDICIS shall
have the right to inspect such portions of the manufacturing facilities of HMR
GmbH that relate to the manufacture of the HMR MANUFACTURED PRODUCTS upon
reasonable notice and during normal business hours.
(b) HMR GmbH Access. Upon the reasonable prior written request of HMR
GmbH, HMR GmbH shall have the right to inspect those portions of the warehouse
and distribution facilities of MEDICIS where the HMR MANUFACTURED PRODUCTS are
being stored and distributed, during regular business hours, to observe HMR
MANUFACTURED PRODUCTS storage and distribution or other related activities. If
the FDA or other applicable governmental regulatory agency asserts any notice to
the effect that MEDICIS has failed to comply with any law or regulation in
connection with the storage or distribution of the HMR MANUFACTURED PRODUCTS,
then MEDICIS shall promptly notify HMR GmbH and HMR GmbH shall have the right to
inspect such portions of the warehouse and distribution facilities of MEDICIS
that relate to the storage or distribution of the HMR MANUFACTURED PRODUCTS upon
reasonable notice and during normal business hours.
4.5 Regulatory Correspondence. MEDICIS shall promptly provide to HMR GmbH
copies of all MEDICIS correspondence to or from the FDA relating to the HMR
MANUFACTURED PRODUCTS. HMR GmbH shall notify MEDICIS in writing of and make
available (or cause to be made available) to MEDICIS within three (3) days after
receipt all regulatory correspondence regarding regulatory letters and
correspondence bearing on the safety and efficacy of the HMR MANUFACTURED
PRODUCTS.
4.6 Inquiries and Complaints relating to the HMR MANUFACTURED PRODUCTS.
Except for technical product complaints relating to the manufacture of HMR
MANUFACTURED PRODUCTS or as otherwise required by law or governmental
regulation, MEDICIS shall be responsible for investigating and responding to all
inquiries, complaints and adverse events regarding HMR MANUFACTURED PRODUCTS.
From and after the date on which MEDICIS assumes responsibility for FDA
regulatory matters for all HMR MANUFACTURED PRODUCTS except the 'Loprox' Cream
pursuant to the LICENSE AND OPTION AGREEMENT, it shall be the responsibility of
MEDICIS to comply with all material federal, state and local governmental
reporting requirements regarding adverse drug events and quality matters
relating to the HMR MANUFACTURED PRODUCTS other than the 'Loprox' Cream. It
shall be MEDICIS' responsibility to comply with such requirements relating to
the
<PAGE> 31
SUPPLY AGREEMENT
'Loprox' Cream from and after the respective dates on which MEDICIS assumes
responsibility for such matters for each such HMR MANUFACTURED PRODUCT. From and
after the date on which MEDICIS assumes responsibility pursuant to the LICENSE
AND OPTION AGREEMENT for FDA regulatory matters for an HMR MANUFACTURED PRODUCT,
MEDICIS shall comply with the standard operating procedures to be developed
under Section 7.4 of the LICENSE AND OPTION AGREEMENT. In the event of a dispute
in respect of the therapeutic action or quality of a HMR MANUFACTURED PRODUCT:
(i) if the dispute involves only MEDICIS and a subsequent purchaser, then
MEDICIS and HMR GmbH shall consult prior to any compromise or settlement of such
dispute; and (ii) if the dispute involves MEDICIS, HMR GmbH and a subsequent
purchaser, then both parties must consent in writing prior to any compromise or
settlement of such dispute.
4.7 Response to Complaints and/or Adverse Drug Reactions (or Events).
Pursuant to any reported complaint and/or adverse drug reaction (or event), if
the nature of the reported complaint and/or adverse drug reaction (or event)
requires testing, HMR GmbH shall, at MEDICIS' reasonable request and expense,
perform analytical testing of corresponding retention samples and provide the
results thereof to MEDICIS as soon as reasonably practicable; provided, however,
that HMR GmbH shall be responsible for the reasonable costs of such testing and
reporting to the FDA or any other governmental regulatory agency if it is
mutually and reasonably agreed upon between MEDICIS and HMR GmbH that HMR GmbH
is responsible for such reported complaint and/or adverse drug reaction (or
event). Such testing shall be performed using approved testing procedures.
4.8 Additional Information. HMR GmbH shall provide to MEDICIS in a timely
manner, but in no event less than sixty (60) days prior to the due date of
MEDICIS' annual report to the FDA with respect to the HMR MANUFACTURED PRODUCTS,
all information (in written form) which MEDICIS reasonably requests regarding
the HMR MANUFACTURED PRODUCTS in order to comply with applicable federal and
state drug laws. MEDICIS shall also be responsible for assuring that all
labeling, packaging and promotional material produced by it relating to HMR
MANUFACTURED PRODUCTS complies with federal, state and local law.
4.9 Technical Agreement. The parties have agreed to the allocation of
certain responsibilities as set forth in the Technical Agreement attached hereto
as Attachment 1. In the event of any conflict between the provisions of this
AGREEMENT and such Technical Agreement, the provisions of this AGREEMENT shall
govern. During the INITIAL TERM and any RENEWAL PERIOD, the parties hereto shall
keep each other informed as to any changes which may be necessary to such
Technical Agreement.
ARTICLE V.
HMR MANUFACTURED PRODUCTS RECALLS
5.1 Recalls During INITIAL TERM. In the event that during the INITIAL
TERM (i) any governmental agency or authority issues a request or directive or
order that an HMR MANUFACTURED PRODUCT in the TERRITORY be recalled or
retrieved, (ii) a court of
<PAGE> 32
SUPPLY AGREEMENT
competent jurisdiction orders such a recall or retrieval, or (iii) HMR GmbH and
MEDICIS reasonably determine that any HMR MANUFACTURED PRODUCT should be
recalled or retrieved in the TERRITORY or a "dear doctor" letter is required
relating to restrictions on the use of any HMR MANUFACTURED PRODUCT in the
TERRITORY, the rights and obligations of the parties shall be governed by
Section 7.5 of the LICENSE AND OPTION AGREEMENT, which is incorporated herein by
this reference.
5.2 Recalls During RENEWAL PERIODS or Thereafter. In the event that
during any RENEWAL PERIOD or thereafter (i) any governmental agency or authority
issues a request or directive or order that an HMR MANUFACTURED PRODUCT in the
TERRITORY be recalled or retrieved, (ii) a court of competent jurisdiction
orders such a recall or retrieval, or (iii) MEDICIS reasonably determines that
any HMR MANUFACTURED PRODUCT should be recalled or retrieved in the TERRITORY or
a "dear doctor" letter is required relating to restrictions on the use of any
HMR MANUFACTURED PRODUCT in the TERRITORY, the rights and obligations of the
parties shall be governed by Section 7.2 of the PURCHASE AGREEMENT, which is
incorporated herein by this reference.
ARTICLE VI.
WARRANTIES AND REMEDIES
6.1 FDA Approval. HMR GmbH warrants as of the date hereof that each HMR
MANUFACTURED PRODUCT is approved by the FDA for the uses set forth in the HMR
MANUFACTURED PRODUCT labeling approved by HMR GmbH as of the date hereof. All
HMR MANUFACTURED PRODUCTS shall conform to, and the HMR MANUFACTURED PRODUCTS
manufactured by HMR GmbH shall be manufactured in conformity with, the
regulations of the FDA.
6.2 Conformity with SPECIFICATIONS. HMR GmbH warrants that each HMR
MANUFACTURED PRODUCT manufactured by HMR GmbH and sold to MEDICIS pursuant to
this AGREEMENT shall meet the SPECIFICATIONS for such HMR MANUFACTURED PRODUCT
in effect at the time title to such HMR MANUFACTURED PRODUCT passes from HMR
GmbH to MEDICIS pursuant to Section 2.7 hereof.
6.3 Compliance with the Federal Food, Drug and Cosmetic Act. HMR GmbH
warrants that all HMR MANUFACTURED PRODUCT delivered to MEDICIS pursuant to this
AGREEMENT shall, at the time of such delivery, not be adulterated within the
meaning of the ACT and shall not be an article which may not, under the
provisions of the ACT, be introduced into interstate commerce.
6.4 No Liens. HMR GmbH warrants that all HMR MANUFACTURED PRODUCTS
delivered to MEDICIS pursuant to this AGREEMENT shall, at the time of such
delivery, be free and clear of all liens, security interests and other
encumbrances.
6.5 Exclusion of Other Warranties.
<PAGE> 33
SUPPLY AGREEMENT
(a) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
EXPRESS WARRANTIES PROVIDED IN SECTIONS 6.1, 6.2, 6.3 AND 6.4 ARE IN LIEU OF,
AND HMR GMBH HEREBY DISCLAIMS, ALL CONDITIONS, WARRANTIES AND STATEMENTS IN
RESPECT OF HMR MANUFACTURED PRODUCTS AND IN RESPECT OF THE MANUFACTURING
SERVICES PROVIDED HEREUNDER, WHETHER EXPRESS OR IMPLIED, BY STATUTE, CUSTOM OF
THE TRADE OR OTHERWISE (INCLUDING WITHOUT LIMITATION ANY SUCH CONDITION,
WARRANTY OR STATEMENT RELATING TO THE DESCRIPTION OR QUALITY OF HMR MANUFACTURED
PRODUCTS, THEIR MERCHANTABILITY OR THEIR FITNESS FOR A PARTICULAR PURPOSE OR USE
UNDER ANY CONDITIONS) AND ANY SUCH CONDITION, WARRANTY OR STATEMENT IS HEREBY
EXCLUDED.
(b) IN ADDITION TO THEIR RESPECTIVE REMEDIES UNDER ARTICLE VII AND
ANY REMEDY PROVIDED HEREIN, AT LAW OR IN EQUITY FOR BREACH OF THIS AGREEMENT AS
LIMITED BY SECTION 6.5(A), MEDICIS AND HMR GMBH SHALL BE ENTITLED TO ANY AND ALL
RIGHTS AND REMEDIES AVAILABLE AT LAW OR IN EQUITY OR UNDER THE TRANSACTION
DOCUMENTS WITH RESPECT TO RIGHTS AND OBLIGATIONS ARISING THEREUNDER; PROVIDED,
HOWEVER, THAT EXCEPT AS EXPRESSLY SET FORTH IN SECTION 2.10(C) HEREOF, IN NO
EVENT SHALL HMR GMBH OR MEDICIS BE LIABLE TO THE OTHER PARTY UNDER OR WITH
RESPECT TO THIS AGREEMENT FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES OF ANY KIND, INCLUDING LOSS OF PROFITS.
ARTICLE VII.
INDEMNIFICATION, LIMITATION OF LIABILITY AND INSURANCE
7.1 Indemnification by MEDICIS. In addition to any other rights HMR GmbH
may have at law or in equity and subject to Section 6.5 hereof, MEDICIS shall
indemnify, defend and hold harmless HMR GmbH and its AFFILIATES, and their
employees, officers and directors, and their successors and assigns (each, an
"HMR GmbH INDEMNIFIED PARTY"), from and against any and all LIABILITIES which
the HMR GmbH INDEMNIFIED PARTY may incur, suffer or be required to pay resulting
from or arising in connection with: (i) the marketing, distribution, sale or
promotion of the HMR MANUFACTURED PRODUCTS by MEDICIS or its AFFILIATES after
the EFFECTIVE DATE; or (ii) the manufacture of the HMR MANUFACTURED PRODUCTS by
MEDICIS or its AFFILIATES or by a third party (other than an AFFILIATE of HMR
GmbH) after the EFFECTIVE DATE, unless HMR GmbH had knowledge as of the
EFFECTIVE DATE that, based on facts in existence and circumstances persisting on
the EFFECTIVE DATE, such third party's manufacture of the HMR MANUFACTURED
PRODUCTS after the EFFECTIVE DATE would be likely to result in or create such
LIABILITIES.
<PAGE> 34
SUPPLY AGREEMENT
7.2 Indemnification by HMR GmbH. In addition to any other rights MEDICIS
may have at law or in equity and subject to Section 6.5 hereof, HMR GmbH shall
indemnify, defend and hold harmless MEDICIS and its AFFILIATES, employees,
officers and directors and its successors and assigns (each, a "MEDICIS
INDEMNIFIED PARTY"), from and against any and all LIABILITIES which the MEDICIS
INDEMNIFIED PARTY may incur, suffer or be required to pay resulting from or
arising in connection with: (i) the manufacture of the HMR MANUFACTURED PRODUCTS
by HMR GmbH or its AFFILIATES prior to the EFFECTIVE DATE or after the EFFECTIVE
DATE in breach of any of HMR GmbH's representations, warranties, covenants and
obligations under this AGREEMENT, excluding, however, any EXCLUDED HMR PRODUCT
LIABILITY; (ii) the manufacture, marketing, distribution, sale or promotion of
the PRODUCTS by HMR GmbH or by any AFFILIATE of HMR GmbH or by any third party
prior to the EFFECTIVE DATE, regardless of the date of first assertion of any
claim or action relating thereto; or (iii) the manufacture (except for matters
which are the subject of subpart (i) of this Section 7.2), marketing,
distribution, sale or promotion of the PRODUCTS outside the TERRITORY by HMR
GmbH or by any AFFILIATE of HMR GmbH or by any third party (other than MEDICIS,
MEDICIS' AFFILIATES, assignees and sublicensees and the QUALIFIED ALTERNATE
SUPPLIER) after the EFFECTIVE DATE.
7.3 Process of Indemnification. Promptly after an indemnified party
becomes aware of any potential LIABILITY hereunder, such party shall deliver
written notice to the indemnifying party, stating the nature of the potential
LIABILITY; provided, however, that the delay in giving or the failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the indemnifying party shall have been actually prejudiced as a
result of such delay or failure. The indemnified party shall give the
indemnifying party such information with respect to the potential LIABILITY as
the indemnifying party may from time to time reasonably request. The
indemnifying party shall have the right to conduct the defense of any suit,
claim or other proceeding related to the LIABILITY if it has assumed
responsibility for the suit, claim or other proceeding in writing; provided,
however, if in the reasonable judgment of the indemnified party, such suit,
claim or proceeding involves an issue or matter which could have a material
adverse effect on the business, operations or assets of the indemnified party,
the indemnified party may elect, at its own expense, to conduct a separate
defense thereof, but in no event shall any such election be construed as a
waiver of any indemnification rights such indemnified party may have under this
Article VII, at law or in equity, or otherwise. 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; provided, however,
that the indemnifying party shall pay the reasonable fees and costs of any
separate counsel to the extent such representation is due to a conflict of
interest between the parties.
7.4 Settlements. Neither party may settle a claim or action related to a
LIABILITY without the consent of the other party, which consent shall not be
unreasonably withheld, 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, and any payment
made by a party in such a settlement without obtaining such consent shall be at
its own cost and expense. Notwithstanding the foregoing, the indemnifying party
will be liable under this Article VII for any settlement effected without its
consent if the indemnifying party
<PAGE> 35
SUPPLY AGREEMENT
has refused to acknowledge liability for indemnification hereunder and/or
declines to defend the indemnified party in any such claim, action or proceeding
and it is determined by arbitration pursuant to Section 8.4 hereof that the
indemnifying party was liable to the indemnified party for indemnification
related to such settlement.
7.5 Limitation of Liability. Subject to the terms of this AGREEMENT, 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 in
equity to direct damages only and in no event shall a party be liable to the
other party for indirect, incidental, special or consequential damages,
including without limitation, lost profits.
7.6 Distribution Insurance. MEDICIS shall obtain and maintain in effect
for the term of this AGREEMENT liability insurance or indemnity policies with an
insurer reasonably acceptable to HMR GmbH, in an amount not less than U.S. $5
million with an indemnity to principals clause with respect to the distribution
of each HMR MANUFACTURED PRODUCT, which policies shall name HMR GmbH as an
additional insured and shall be blanket policies. Such policies shall insure
against liability on the part of MEDICIS and any of its AFFILIATES, as their
interests may appear, due to injury, disability or death of any person or
persons, or injury to property, arising from the distribution of the HMR
MANUFACTURED PRODUCTS. Upon the execution of this AGREEMENT and thereafter on
January 1 of each year during the term, MEDICIS shall provide to HMR GmbH a
certificate of insurance (i) summarizing such insurance coverage, (ii)
identifying any exclusions and (iii) indicating that the terms of MEDICIS'
insurance policies are in accordance with this Section 7.6. MEDICIS shall
promptly notify HMR GmbH of any material alterations to the terms of such
policies or in the amounts for which insurance is provided.
7.7 Manufacturer's Insurance. HMR GmbH shall obtain and maintain in
effect for the term of this AGREEMENT liability insurance or indemnity policies
with an insurer reasonably satisfactory to MEDICIS, in an amount not less than
U.S. $5 million with an indemnity to principals clause with respect to the
manufacture of the HMR MANUFACTURED PRODUCTS, which policies shall name MEDICIS
as an additional insured and shall be blanket policies. Such policies shall
insure against liability on the part of HMR GmbH and any of its AFFILIATES, as
their interests may appear, due to injury, disability or death of any person or
persons, or injury to property arising from the negligence of HMR GmbH or its
AFFILIATES in the manufacture of the HMR MANUFACTURED PRODUCTS. Upon the
execution of this AGREEMENT and thereafter on January 1 of each year during the
term, HMR GmbH shall provide to MEDICIS a certificate of insurance (i)
summarizing such insurance coverage, (ii) identifying any exclusions and (iii)
indicating that the terms of HMR GmbH's insurance policies are in accordance
with this Section 7.7. HMR GmbH shall promptly notify MEDICIS of any material
alterations to the terms of such policies or in the amounts for which insurance
is provided.
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SUPPLY AGREEMENT
7.8 HMR MANUFACTURED PRODUCT Liability Claims. As soon as it becomes
aware, each party shall give the other party prompt written notice of any claim
involving an HMR MANUFACTURED PRODUCT, any injury alleged to have occurred as a
result of the use or application of an HMR MANUFACTURED PRODUCT, and any
circumstances that may give rise to litigation or recall of an HMR MANUFACTURED
PRODUCT or regulatory action that may affect the sale or manufacture of an HMR
MANUFACTURED PRODUCT, specifying, to the extent the party has such information,
the time, place and circumstances thereof and the names and addresses of the
persons involved. Each party shall also furnish promptly to the other party
copies of all papers received in respect of any claim, action or suit arising
out of such alleged defect, injury or regulatory action.
ARTICLE VIII.
GENERAL PROVISIONS
8.1 FORCE MAJEURE. If the performance by either party of any obligation
under this AGREEMENT, is prevented, restricted, interfered with or delayed by
reason of FORCE MAJEURE, the party so affected shall, upon giving written notice
to the other party, be excused from such performance to the extent of such
prevention, restriction, interference or delay, provided that the affected party
shall use its reasonable efforts to avoid or remove such causes of
non-performance and shall continue performance with the utmost dispatch whenever
such causes are removed and, provided further, that notwithstanding anything
contained in this Section 8.1, MEDICIS shall be entitled to any and all rights
and remedies which may arise under Sections 2.10 and 3.3(c) hereof as a result
of or in connection with any such prevention, restriction, interference with or
delay of HMR GmbH's performance of any of its obligations hereunder. For the
purposes of this AGREEMENT (and except with respect to "force majeure" for
purposes of Sections 2.10(c) and 3.3(c) hereof), "FORCE MAJEURE" is defined as
follows: acts of God; acts, regulations, orders, decrees or laws of any
government or agency thereof that are not due to or caused by any action or
inaction of the party claiming the benefit of force majeure where such action or
inaction is in violation of such party's obligations under the TRANSACTION
DOCUMENTS or APPLICABLE LAWS; war; civil commotion; damage to or destruction of
facilities; labor disturbances (whether or not any such labor disturbance is
within the power of the affected party to settle); epidemic; and failure of
suppliers, public utilities or common carriers.
8.2 Governing Law. This AGREEMENT shall be construed in accordance with
the laws of the State of Delaware in the United States of America, without
giving effect to the principles of conflicts of law thereof.
8.3 Headings and References. All section headings contained in this
AGREEMENT are for convenience of reference only and shall not affect the meaning
or interpretation of this AGREEMENT.
<PAGE> 37
SUPPLY AGREEMENT
8.4 Dispute Resolution.
(a) Any dispute, controversy or claim arising out of or relating to
this AGREEMENT, or the breach or termination of this AGREEMENT or the rights of
either party for indemnification hereunder (each, a "CLAIM"), shall be submitted
in the first instance to the President, North American Region of HMRI, for HMR
and the Chief Executive Officer of MEDICIS for MEDICIS.
(b) If any CLAIM cannot be resolved by the individuals designated in
Section 8.4 (a) within thirty (30) days after being submitted to them, and
except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order to preserve the status quo or to
prevent irreparable harm pending the selection and confirmation of a panel of
arbitrators in accordance herewith, such CLAIM shall be settled by arbitration
in accordance with the Commercial Arbitration Rules (the "RULES") of the
American Arbitration Association (the "AAA") in effect on the day the
arbitration is commenced in accordance with this AGREEMENT, except as modified
by this Section 8.4. After expiration of the thirty (30) day period pursuant to
Section 8.4(a) hereof, either party may commence arbitration by serving upon the
other party a written demand for arbitration sent by a courier service of
internationally recognized reputation, in accordance with this AGREEMENT, with a
copy of the same delivered by a courier service of internationally recognized
reputation, to the AAA regional office in which either party is then located.
The number of arbitrators shall be three, one of whom is selected by MEDICIS,
one of whom is selected by HMR GmbH and one of whom is selected by HMR GmbH and
MEDICIS (or by the other two arbitrators if the parties cannot, within thirty
(30) days after the commencement of the arbitration proceeding, agree on the
third arbitrator). In the event that either party shall fail to appoint an
arbitrator within thirty (30) days after the commencement of the arbitration
proceeding, such arbitrator and the third arbitrator shall be appointed by the
AAA in accordance with the RULES. The arbitration award shall be rendered by a
majority of the members of the board of arbitration. Except as expressly
provided in Section 8.5 hereof, the panel shall not be entitled to modify this
AGREEMENT or the transactions contemplated herein. The arbitration proceeding
shall be conducted in the English language and shall be brought in Chicago,
Illinois, unless the parties agree in writing to conduct the arbitration in
another location. The AAA shall have jurisdiction over all parties to this
AGREEMENT for purposes of the arbitration and the parties hereby expressly
consent to such jurisdiction.
(c) The arbitration decision shall be final and binding and shall not
be appealable to any court in any jurisdiction. The prevailing party may enter
such decision in any court having competent jurisdiction, and the parties
expressly agree that the state and federal courts in the State of Delaware shall
have such jurisdiction. Each party hereby expressly waives any right to object
to such jurisdiction on the basis of venue or forum non conveniens. For purposes
of any such legal proceeding and any arbitration under this Section 8.4, HMR
GmbH hereby irrevocably appoints HMRI as its agent for service of process in the
United States of America.
<PAGE> 38
SUPPLY AGREEMENT
(d) Any statute of limitations or other equitable or legal doctrine
which would otherwise be applicable to any action brought by either of the
parties shall be applicable in the arbitration. In the event either party to
this AGREEMENT files a petition under the bankruptcy laws of the United States
or has a petition filed against it which results in an order for relief or other
indicia that a bankruptcy case has commenced, it is the express intention of the
parties that this AGREEMENT shall control and be enforced in accordance with its
terms and conditions that any CLAIM shall remain subject to arbitration to the
maximum extent permitted by law.
(e) There shall be no rights of discovery in connection with the
arbitration except as follows:
(i) Each party shall have the right to request the arbitrators to
issue subpoenas for documents in accordance with the RULES.
(ii) Each party shall have the right to initiate two (2)
depositions of each other party to the arbitration; and each party shall have
the right to initiate one (1) additional oral deposition pursuant to a subpoena
issued by the arbitrators or any court of competent jurisdiction.
(iii) At any time following the tenth day after the commencement
of the arbitration in accordance with this AGREEMENT, a written notice served
upon all parties shall be sufficient to compel the attendance of any party at a
deposition upon not less than sixty (60) days notice and no subpoena shall be
required for that purpose. If a person fails or refused to testify at a
deposition, that person shall not be permitted to testify at the hearing, except
for good cause shown. The number of depositions that may be initiated by either
party may be varied by agreement of all parties to the arbitration but not by
any action, order or request of the arbitrators or any court.
(iv) Not less than thirty (30) days prior to the scheduled
arbitration proceeding, the arbitrator shall conduct a preliminary hearing in
accordance with the AAA guidelines. Not less than five (5) days prior to the
preliminary hearing, all parties to the arbitration shall serve upon all other
parties to the arbitration a written list of witnesses and exhibits to be used
at the arbitration hearing. Except for good cause shown, no witness or exhibit
may be utilized at the arbitration hearing other than as set forth on such list.
The arbitrators shall receive evidence at a single hearing. The arbitrators
shall award reasonable attorneys' fees and costs in favor of the prevailing
party or parties. The arbitrator shall issue a final award not more than twenty
(20) days following the conclusion of the hearing. The arbitrators shall have
the power to hear and decide, by documents only or with a hearing (at the
arbitrators' sole discretion) any prehearing motions in the nature of a
pre-trial motion to dismiss or for summary judgment.
(f) The arbitrators shall be entitled to receive reasonable
compensation at an hourly rate to be established between the arbitrators and the
AAA. If required by the arbitrators, MEDICIS on the one hand, and HMRI, on the
other, will deposit with the AAA an equal share of the total anticipated fee of
the arbitrators in an amount to be estimated by the AAA. The non-prevailing
party in the proceedings shall be ordered to pay, and shall have the ultimate
<PAGE> 39
SUPPLY AGREEMENT
responsibility for, all arbitrators' fees and the fees of the AAA and such fees
shall be included in the judgment to be entered against the non-prevailing
party.
(g) Notwithstanding any other provision of this AGREEMENT, any party
may apply to a court of competent jurisdiction within the TERRITORY for an order
in the nature of a temporary restraining order or preliminary injunction for
purposes of maintaining the status quo pending the final resolution of any
dispute pursuant to the arbitration provisions hereof.
(h) Each party consents to the jurisdiction and administration of the
AAA for purposes of the arbitration proceedings contemplated herein.
8.5 Severability. If any provision of this AGREEMENT is held by a court
of competent jurisdiction to be invalid or unenforceable, it shall be modified
to the minimum extent necessary to make it valid and enforceable.
8.6 Entire Agreement. This AGREEMENT, including the Exhibits and
Schedules hereto, and the TRANSACTION DOCUMENTS constitute the entire AGREEMENT
between the parties and their AFFILIATES relating to the subject matter hereof
and supersede all previous writings and understandings, whether oral or written,
relating to the subject matter of this AGREEMENT.
8.7 Amendment. This AGREEMENT may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both parties
that specifically refers to this AGREEMENT.
8.8 Notices. Any notice required or permitted under this AGREEMENT shall
be in writing and sent by a courier service of internationally recognized
reputation, charges prepaid, or by facsimile transmission with confirmation by
reputable courier service, to the address or facsimile number specified below.
Such notices shall be deemed given three (3) business days following deposit
with such courier service or one (1) business day following such facsimile
transmission.
If to HMR GmbH: Hoechst Marion Roussel Deutschland GmbH
Konigsteiner Strasse 10
65812, Bad Soden
Germany
Attention: General Manager
Fax: +49-69-305-17905
Copy to: Hoechst Marion Roussel, Inc.
Route 202-206
P.O. Box 6800
Bridgewater, New Jersey 08807-0800
Attention: Vice President and General Counsel
Fax: 908-231-2243
<PAGE> 40
SUPPLY AGREEMENT
If to MEDICIS: Medicis Pharmaceutical Corporation
4343 East Camelback Road
Phoenix, Arizona 85018
Attention: Jonah Shacknai
Fax: 602-808-3875
Copy to: Bryan Cave LLP
Two North Central Avenue, Suite 2200
Phoenix, Arizona 85004-4408
Fax Number: (602) 364-7000
Attention: Frank M. Placenti, Esq.
8.9 Assignment and Binding Effect. Each party shall have the right to
assign its rights in whole or in part under this AGREEMENT to an AFFILIATE of
such party without the other party's consent or to a third party with the other
party's prior written consent, which consent shall not be unreasonably withheld,
provided that in either case such party guarantees to the other party all of
such party's obligations hereunder and the assignee agrees in writing to observe
and perform the obligations of the assignor hereunder.
8.10 No Agency. It is understood and agreed that each party shall have
the status of an independent contractor under this AGREEMENT and that nothing in
this AGREEMENT shall be construed as authorization for either party to act as
agent for the other. Neither party shall incur any liability for any act or
failure to act by employees of the other party. Notwithstanding anything to the
contrary in this Section 8.10, HMR GmbH hereby appoints HMRI and any duly
appointed statutory agent of HMRI as its agent for service of process as to any
proceeding commenced pursuant to or in connection with this AGREEMENT.
8.11 No Strict Construction. This AGREEMENT has been prepared jointly and
shall not be strictly construed against either party.
8.12 Counterparts. This AGREEMENT may be executed in two counterparts,
each of which shall be an original as against any party whose signature appears
thereon but both of which together shall constitute one and the same instrument.
<PAGE> 41
SUPPLY AGREEMENT
IN WITNESS WHEREOF, the parties, through their authorized officers,
have duly executed this as of the date first written above.
HOECHST MARION ROUSSEL, INC. MEDICIS PHARMACEUTICAL CORPORATION
By: /s/ Peter Schlikker By: /s/ Jonah Shacknai
---------------------- -------------------
Name: DR. PETER SCHLIKKER Name: Jonah Shacknai
Title: Member of the Board Title: Chairman and Chief
Executive Officer
By: /s/ Dieter Kohl
----------------------
Name: Dieter Kohl
Title: Member of the Board
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