<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
September 5, 1996
(Date of Report - earliest event reported)
DURA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 000-19809 95-3645543
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
5880 PACIFIC CENTER BLVD., SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE IS (619) 457-2553
Page 1
Exhibit Index on Page 11
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
a. On August 21, 1996, Dura Pharmaceuticals, Inc. (the "Company") signed a
Licensing Agreement (the "Licensing Agreement") with Eli Lilly and Company
("Lilly") to acquire exclusive U.S. marketing rights to the patented antibiotics
Keftab(R) (cephalexin hydrochloride) and Ceclor(R) CD (cefaclor extended release
tablets). The acquisition closed on September 5, 1996. The purchase price
consisted of $100.0 million paid in cash at closing. Additional future
contingent payments of an aggregate of $75.0 million starting in the year 1999
are subject to Ceclor(R) CD remaining available by prescription only with no
competitive products, as defined in the Licensing Agreement. The Company and
Lilly determined the purchase price in arms'-length negotiations prior to August
21, 1996.
The Keftab(R) product generated U.S. sales revenues for Lilly in 1993,
1994, and 1995 of approximately $13.0 million, $18.0 million, and $19.0 million
respectively, and direct product cost of sales in 1993, 1994, and 1995 of
approximately $2.5 million, $3.5 million, and $3.8 million, respectively.
Ceclor(R) CD received marketing approval from the U.S. FDA in June 1996;
therefore, there is no historical financial information available for Ceclor(R)
CD. The Company expects to launch Ceclor(R) CD this fall.
Lilly will manufacture Keftab(R) and Ceclor(R) CD products for the
Company under a separate Manufacturing Agreement executed on August 21, 1996
(the "Manufacturing Agreement"). The Company does not expect the Manufacturing
Agreement with Lilly to significantly impact the products' future cost of sales
as a percent of sales revenue as compared to its historical percentages.
The Keftab(R) products are being marketed by the Company primarily to
the same respiratory physician specialists currently targeted by the Company's
national sales force. The Company expects to increase the number of field sales
force personnel to support the Ceclor(R) CD product launch in time for the
upcoming respiratory season (which traditionally begins in October), and expects
to continue sales force growth in 1997.
Item 7. Financial Statements and Exhibits
b. Pro Forma Financial Information:
The following pro forma balance sheet and statements of operations
combine the Company, the current acquisition of the exclusive U.S. marketing
rights to the patented antibiotics Keftab(R) and Ceclor(R) CD, the acquisition
of certain Entex(R) products in July 1996, the previously reported acquisition
of Furadantin(R) in May 1996, and the 1995 acquisitions of Health Script
Pharmacy Services, Inc., Dura Delivery Systems, Inc., and the Rondec(R) products
(as reported in prior Current Reports on Form 8-K) as of June 30, 1996 and the
results of their operations for the six months ended June 30, 1996 and the year
ended December 31, 1995 as if the acquisitions had taken place on January 1,
1995. Ceclor(R) CD received marketing approval from the FDA in June 1996;
therefore there is no pro forma financial information available for Ceclor(R)
CD. The Company's financial information included in the pro forma balance sheet
as of June 30, 1996 and the pro forma statement of operations for the six months
ended June 30, 1996 was previously reported in the Company's Form 10-Q for the
quarter ended June 30, 1996. The Dura financial information included in the pro
forma statement of operations for the year ended December 31,
2
<PAGE> 3
1995 was previously reported in the Company's Form 10-K, as amended, for the
year ended December 31, 1995. In the opinion of management all pro forma
adjustments necessary to state fairly such pro forma financial information have
been made. The per share data and weighted average number of shares have been
adjusted to reflect the Company's two-for-one split of its common stock in the
form of a 100% stock dividend, effective July 1, 1996. The computations of net
income (loss) per share are unchanged on a fully-diluted basis for all periods
presented.
The pro forma balance sheet and statements of operations should be
read in conjunction with the notes included in this report. The pro forma
financial information is not necessarily indicative of what the actual financial
results would have been had the acquisitions occurred on January 1, 1995. In
addition, the pro forma financial information does not purport to indicate the
results of future operations or financial position of the Company from the
acquisition date forward.
c. Exhibits:
2.1 Licensing Agreement dated August 21, 1996 between the Company and
Lilly.* The exhibits referenced in the Licensing Agreement have not been
included because they are either disclosed in the agreement or would not be
material to an investment decision; they will be provided to the Commission upon
request.
2.2 List of Schedules and Exhibits to the Licensing Agreement dated
August 21, 1996 between the Company and Lilly. The exhibits referenced in the
Licensing Agreement have not been included because they are either disclosed in
the agreement or would not be material to an investment decision; they will be
provided to the Commission upon request.
99.1 Press Release dated August 22, 1996 issued by the Company.
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
3
<PAGE> 4
DURA PHARMACEUTICALS, INC. ITEM 7b.
PRO FORMA BALANCE SHEET (UNAUDITED)
JUNE 30, 1996
- --------------------------------------------------------------------------------
IN THOUSANDS
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Increase Pro Forma
Dura (Decrease) Results
---- ---------- -------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $107,003 (81,000)(a.)(d.) $ 26,003
Short-term investments 100,595 (44,000)(a.) 56,595
Accounts and other receivables 9,397 9,397
Inventory 3,294 3,294
Prepaid and other 417 417
-------- --------- --------
Total current assets 220,706 (125,000) 95,706
Property 18,914 18,914
License Agreements and Product Rights 45,160 145,000 (a.)(d.) 190,160
Goodwill 6,857 6,857
Other 8,561 8,561
-------- --------- --------
TOTAL 300,198 20,000 320,198
======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 8,715 $ 8,715
Accrued wages, taxes and benefits 2,596 2,596
Current portion of long-term obligations 7,897 20,000 (d.) 27,897
-------- --------- --------
Total current liabilities 19,208 20,000 39,208
-------- --------- --------
Long-Term Obligations:
Other long-term obligations 9,134 9,134
-------- --------- --------
Total long-term obligations 9,134 -0- 9,134
Other Non-Current Liabilities 894 894
-------- --------- --------
Total liabilities 29,236 20,000 49,236
-------- --------- --------
Shareholders' Equity:
Common stock 369,219 369,219
Accumulated deficit (94,655) (94,655)
Unrealized loss on investments 3 3
Warrant subscriptions receivable (3,605) (3,605)
-------- --------- --------
Total shareholders' equity 270,962 -0- 270,962
-------- --------- --------
TOTAL $300,198 $ 20,000 $320,198
======== ========= ========
</TABLE>
See notes to pro forma financial statements for description of pro forma
adjustments.
4
<PAGE> 5
DURA PHARMACEUTICALS, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
IN THOUSANDS, EXCEPT PER SHARE DATA
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pro Forma Adjustments
Increase (Decrease)
--------------------------------
Other Lilly Pro Forma
Dura Acquisitions Acquisition Results
---- ------------ ----------- -------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 26,960 $ 20,054(e.) $ 8,360(b.) $ 55,374
Contract 10,426 10,426
-------- -------- -------- --------
Total revenues 37,386 20,054 8,360 65,800
-------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Cost of sales 7,422 2,093(e.) 1,672(b.) 11,187
Clinical, development and regulatory 7,119 7,119
Selling, general and administrative 15,046 7,807(e.)(f.) 2,901(b.)(c.) 25,754
Goodwill amortization 226 226
-------- -------- -------- --------
Total operating costs and expenses 29,813 9,900 4,573 44,286
OPERATING INCOME 7,573 10,154 3,787 21,514
-------- -------- -------- --------
OTHER :
Interest income 2,410 2,410
Interest expense (516) (516)
Other expense (2) (2)
-------- -------- -------- --------
Total other 1,892 0 0 1,892
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 9,465 10,154 3,787 23,406
PROVISION FOR INCOME TAXES 800 4,062(e.) 1,515(b.) 6,377
-------- -------- -------- --------
NET INCOME $ 8,665 $ 6,092 $ 2,272 $ 17,029
======== ======== ======== ========
NET INCOME PER SHARE $ 0.23 $ 0.46
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES 37,277 37,277
</TABLE>
See notes to pro forma financial statements for description of pro forma
adjustments.
5
<PAGE> 6
DURA PHARMACEUTICALS, INC.
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1995
IN THOUSANDS, EXCEPT PER SHARE DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pro Forma Adjustments
Increase (Decrease)
-----------------------------------
Other Lilly Pro Forma
Dura Acquisitions Acquisition Results
---- ------------ ----------- -------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 39,308 $ 51,871 (e.) $ 19,000(b.) $110,179
Contract 12,194 (7,762)(e.) 4,432
-------- -------- -------- --------
Total revenues 51,502 44,109 19,000 114,611
-------- -------- -------- --------
OPERATING COSTS AND EXPENSES:
Cost of sales 10,618 5,374 (e.) 3,800(b.) 19,792
Clinical, development and regulatory 8,408 311 (e.) 8,719
Selling, general and administrative 25,580 21,422 (e.)(f.) 6,594(b.)(c.) 53,596
Goodwill amortization 375 86 (h.) 461
Charge for acquired in-process
technology and purchase options 43,773 (30,773)(e.) 13,000
-------- -------- -------- --------
Total operating costs and expenses 88,754 (3,580) 10,394 95,568
-------- -------- -------- --------
OPERATING INCOME (37,252) 47,689 8,606 19,043
-------- -------- -------- --------
OTHER :
Interest income 2,768 345 (i.) 3,113
Interest expense (906) (1,131)(e.)(g.) (2,037)
Other 18 18
-------- -------- -------- --------
Total other 1,880 (786) -0- 1,094
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES (35,372) 46,903 8,606 20,137
PROVISION FOR INCOME TAXES 406 1,574 (e.) 380(b.) 2,360
-------- -------- -------- --------
NET INCOME (LOSS) $(35,778) $ 45,329 $ 8,226 $ 17,777
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE $ (1.53) $ 0.57
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES 23,440 7,711(j.)(k.) 31,151
</TABLE>
See notes to pro forma financial statements for description of pro forma
adjustments.
6
<PAGE> 7
DURA PHARMACEUTICALS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
IN THOUSANDS
- --------------------------------------------------------------------------------
On August 21, 1996, Dura Pharmaceuticals, Inc. ("Dura" or the "Company") signed
an agreement with Eli Lilly and Company ("Lilly") to acquire the exclusive U.S.
marketing rights to the patented antibiotics Keftab(R) and Ceclor(R) CD (the
"Lilly products"). The acquisition closed on September 5, 1996. The following
pro forma adjustments reflect the impact from the acquisition as if it had
occurred on January 1, 1995.
a. Adjustment to record acquired Lilly product rights.
<TABLE>
<S> <C> <C>
Lilly product rights $100,000
Cash & Cash equivalents $56,000
Short-term investments $44,000
b. Adjustments to record product sales, cost of sales and related product
activities.
Six Months Ended June 30, 1996
Cash - net $ 2,665
Cost of sales $ 1,672
Marketing expenses (SG&A) $ 2,508
Provision for income taxes $ 1,515
Sales revenues $ 8,360
Year Ended December 31, 1995
Cash - net $ 9,120
Cost of sales $ 3,800
Marketing expenses (SG&A) $ 5,700
Provision for income taxes $ 380
Sales revenues $19,000
c. Adjustments to amortize acquired product rights.
Six Months Ended June 30, 1996
Amortization expense (SG&A) $ 393
Product rights $ 393
Year Ended December 31, 1995
Amortization expense (SG&A) $ 894
Product rights $ 894
</TABLE>
7
<PAGE> 8
On July 3, 1996, the Company acquired the Entex(R) product rights from Procter &
Gamble Pharmaceuticals, Inc. ("P&G") for $45.0 million in cash. On May 7, 1996,
the Company acquired the Furadatin(R) product rights from P&G for $7.0 million.
On December 29, 1995, the Company acquired Dura Delivery Systems, Inc. ("DDSI"),
and as a result of the acquisition, DDSI is now a wholly-owned subsidiary of the
Company. On June 14, 1995, Dura signed an agreement with the Ross Products
Division of Abbott Laboratories to acquire the U.S. rights to the Rondec(R)
products, consisting of six prescription cough/cold drugs. On March 22, 1995,
Dura acquired the common stock of Health Script Pharmacy Services, Inc. and
certain assets of Quintex, Ltd. The following pro forma adjustments reflect the
impact from these acquisitions as if they had occurred on January 1, 1995.
d. Adjustment to record acquired product rights.
<TABLE>
<S> <C> <C>
Product rights $45,000
Cash & Cash Equivalents $25,000
Other obligations $20,000
e. Adjustments to record operating activities of acquired companies and
product rights, and to eliminate the non-recurring charges resulting from
the acquisition of DDSI.
Six Months Ended June 30, 1996
Cash - net $12,503
Cost of sales $ 2,093
Marketing expenses (SG&A) $ 1,396
Provision for income taxes $ 4,062
Sales revenues $20,054
Year Ended December 31, 1995
Cash $32,789
Cost of sales $ 5,374
Clinical, development & regulatory $ 311
Marketing expenses (SG&A) $ 6,601
Interest Expense $ 671
Provision for income taxes $ 1,574
Contract revenue $ 7,762
Accumulated deficit $27,562
Charge for acquired in-process options $30,773
Sales revenues $51,871
f. Adjustments to amortize acquired product rights.
Six Months Ended June 30, 1996
Amortization expenses (SG&A) $ 6,411
Product Rights $ 6,411
Year Ended December 31, 1995
Amortization expenses (SG&A) $14,821
Product Rights $14,821
g. Adjustments to amortize discount on long-term obligations.
Year Ended December 31, 1995
Interest expense $ 460
Discount on long-term obligations $ 460
</TABLE>
8
<PAGE> 9
h. Adjustment to record amortization of acquired intangibles.
<TABLE>
<S> <C> <C>
Year Ended December 31, 1995
Goodwill amortization expense $ 86
Goodwill $ 86
i. Adjustment to record interest income on short-term investments.
Year Ended December 31, 1995
Cash and cash equivalents $345
Interest income $345
</TABLE>
j. Shares of Dura common stock issued to acquire DDSI.
k. Dilutive effect of common stock equivalents resulting from pro forma net
income versus Dura net loss.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
DURA PHARMACEUTICALS, INC.
Date: September 19, 1996 /s/ MITCHELL R. WOODBURY
-------------------------------
Mitchell R. Woodbury
Vice President and General Counsel
10
<PAGE> 11
DURA PHARMACEUTICALS, INC.
FORM 8-K
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Licensing Agreement dated August 21, 1996 between
the Company and Lilly.*
2.2 List of Schedules and Exhibits to the License Agreement dated
August 21, 1996 between the Company and Lilly.
99.1 Press Release dated August 22, 1996 issued by the Company.
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
11
<PAGE> 1
EXHIBIT 2.1
LICENSING AGREEMENT
This LICENSING AGREEMENT ("Agreement"), dated as of August 21, 1996, by
and between ELI LILLY AND COMPANY, an Indiana corporation with offices located
at Lilly Corporate Center, Indianapolis, Indiana 46285 ("Lilly"), and DURA
PHARMACEUTICALS, INC., a California corporation with offices located at 5880
Pacific Center Boulevard, San Diego, California 92121-4204 ("Dura").
RECITALS
1. Lilly is engaged, among other things, in the business of
manufacturing, marketing and selling anti-infective pharmaceutical products; and
2. Subject to the terms and conditions set forth in this Agreement,
Lilly wishes to license to Dura and Dura wishes to license from Lilly certain
rights under certain of the assets which Lilly uses in the conduct of its
anti-infective pharmaceutical business.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Activities" shall mean the manufacturing, marketing and selling of the
Products in the United States as conducted on the Closing Date by Lilly.
"Affiliates" shall mean, with respect to any Person, any Persons
directly or indirectly controlling, controlled by, or under common control with,
such other Person. For purposes hereof, the term "controlled" (including the
terms "controlled by" and "under common control with"), as used with respect to
any
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 2
Person, shall mean the direct or indirect ability or power to direct or cause
the direction of management policies of such Person or otherwise direct the
affairs of such Person, whether through ownership of voting securities or
otherwise.
"Assumed Liabilities" shall have the meaning set forth in Section 2.5
hereof.
"Bulk Patents" shall include those United States patent applications
pending or filed by Lilly or its Affiliates (or the rights to which have been
assigned to Lilly) as of the date hereof relating to bulk cefaclor and bulk
cephalexin and those patents set forth on Schedule 5.4 hereto, including any
patent application or patent which constitutes an extension, registration,
confirmation, reissue, renewal, reexamination or continuation-in-part of such
patent application or patent. Notwithstanding anything herein to the contrary,
"Bulk Patents" shall not include any Product Patents whatsoever.
"Bulk Technology" shall mean all of Lilly's Bulk Patents, technology,
know-how and all other information necessary to the manufacture of bulk cefaclor
and bulk cephalexin. Notwithstanding anything herein to the contrary, "Bulk
Technology" shall not include any Product Technology whatsoever.
"Ceclor(R) CD" shall mean cefaclor extended release tablets in 375 mg
and 500 mg presentations and all other dosage strengths and sizes that may,
pursuant to applicable laws and regulations, be manufactured, marketed and sold
in the United States under the approved NDA, together with all expansions and
improvements to Ceclor CD which may be included in any supplement, modification
or addition to the NDA.
"Closing Date" shall have the meaning given in Section 4.3 hereof.
"Copyrights" shall mean all of Lilly's copyright rights in the United
States that are used or exercised by Lilly solely in connection with the
Activities, including, without limitation, Lilly's copyright rights in the
Marketing and Pricing Data and the Marketing Materials.
-2-
<PAGE> 3
"Damages" shall mean any and all costs, losses, claims, liabilities,
fines, penalties, damages and expenses, court costs, and reasonable fees and
disbursements of counsel, consultants and expert witnesses incurred by a party
hereto (including interest which may be imposed in connection therewith).
"FDA" shall mean the United States Food and Drug Administration.
"Indemnified Party" shall have the meaning given in Section 8.2 hereof.
"Indemnifying Party" shall have the meaning given in Section 8.2
hereof.
"Intellectual Property" shall mean, collectively, (i) the Copyrights,
(ii) the Trademarks, and (iii) the Marketing Materials.
"Keftab" shall mean cephalexin hydrochloride in a 500 mg presentation
and all other dosage strengths and sizes that may, pursuant to applicable laws
and regulations, be manufactured, marketed and sold in the United States under
the approved NDA, together with all expansions and improvements to Keftab which
may be included in any supplement, modification or addition to the NDA.
"Licensed Assets" shall have the meaning set forth in Section 2.1
hereof.
"Manufacturing Agreement" shall mean the Manufacturing Agreement, dated
as of the date of this Agreement, between Lilly and Dura, which provides for the
manufacture by Lilly of the Products for Dura for the period specified therein.
"Marketing and Pricing Data" shall mean, with respect to Keftab, all
Lilly customer lists, sales data, price lists and, subject to confidentiality
obligations to third parties, all other pricing information in the possession or
control of Lilly relating solely to sales of Keftab occurring in the most recent
12-month period prior to the date of this Agreement for which such information
is available.
"Marketing Materials" shall mean all labeling, marketing and
promotional materials and inserts currently used by Lilly solely in connection
with the Activities.
-3-
<PAGE> 4
"NDAs" shall have the meaning set forth in Section 2.1(a).
"Net Sales" shall mean, with respect to the Products, the gross amount
invoiced to unrelated third parties for the Products in the United States, less:
(a) Trade, quantity and cash discounts allowed;
(b) Commissions, discounts, refunds, rebates,
chargebacks, retroactive price adjustments and any
other allowances which effectively reduce the net
selling price; and
(c) Product returns, credits and allowances.
Such amounts shall be determined from books and records maintained in
accordance with GAAP, consistently applied.
"PDMA" shall mean the Prescription Drug Marketing Act of 1987, as
amended from time to time, together with any rules or regulations promulgated
thereunder.
"Person" shall mean a natural person, a corporation, a partnership, a
trust, a joint venture, a limited liability company, any governmental authority
or any other entity or organization.
"Product Patents" shall include those United States patent applications
pending or filed by Lilly or its Affiliates (or the rights to which have been
assigned to Lilly) as of the date hereof relating to the Products and those
patents set forth on Schedule 5.4 hereto including any patent application or
patent which constitutes an extension, registration, confirmation, reissue,
renewal, reexamination or continuation-in-part of such patent application or
patent. Notwithstanding anything herein to the contrary, "Product Patents" shall
not include any Bulk Patents whatsoever.
"Product Technology" shall mean all of Lilly's Product Patents,
technology, know-how and all other information necessary to the manufacture of
the
-4-
<PAGE> 5
Products. Notwithstanding anything herein to the contrary,
"Product Technology" shall not include any Bulk Technology whatsoever.
"Products" shall mean Ceclor CD and Keftab.
"Promotional Materials" shall mean any tangible advertising and
promotional labeling bearing a Product name (trade name or generic name) used in
the promotion of the Product including promotional materials produced by Dura
(examples include, but are not limited to, journal ads, brochures, service
items, managed care pull through sheets, formulary presentations, price lists,
monographs, Internet pages and telephone or television advertisements) and
materials produced by outside sources (examples include, but are not limited to,
medical reprints, textbooks and CME materials) to the extent funded by, created
in cooperation with, reviewed, or distributed by Dura. The definition of
Promotional Materials shall also include press releases and other releases of
information to the media regarding any Product.
"Trademarks" shall mean all of Lilly's right, title and interest in and
to:
(a) the United States trademark CECLOR(R) CD;
(b) the United States registered trademark KEFTAB(R), U.
S. Trademark registration number 1,473,842,
registration date January 26, 1988; and
(c) all registrations thereof, all variations thereof and
logos used in connection therewith, and all goodwill
associated therewith.
With respect to Ceclor CD, "Trademarks" shall include the non-exclusive
license from Lilly to use the U. S. Registered Trademark CECLOR(R), registration
number 1,101,155, registration date September 5, 1978, solely in connection with
the trademark CECLOR(R) CD.
"United States" shall mean the fifty (50) states and the District of
Columbia comprising the United States of America.
-5-
<PAGE> 6
SECTION 2
GRANT OF LICENSES, OPTION TO TRANSFER ASSETS, AND ASSUMPTION OF LIABILITIES
2.1 Grant of Marketing and Sales Licenses. Upon the terms and subject
to the conditions of this Agreement, Lilly hereby grants to Dura:
(a) an exclusive, even as to Lilly (except as set forth
in Section 2.8 of this Agreement), license under the
following assets solely for the purpose of marketing
and selling the Products in the United States (such
assets are referred to herein collectively as the
"Licensed Assets"):
(i) all of Lilly's rights under the approved New
Drug Applications filed by Lilly with the
FDA for each Product, and all subsequent
submissions thereto (collectively, the
"NDAs"), which NDAs are described in
SCHEDULE 2.1(a);
(ii) the Intellectual Property;
(iii) the Marketing and Pricing Data; and
(b) a non-exclusive, limited license to use the
registered trademark CECLOR(R), registration number
1,101,155, registration date September 5, 1978,
solely in connection with the trademark CECLOR(R)CD.
With respect to such license, Dura shall ensure that
any use of CECLOR(R)on or in Promotional Materials
(i) shall not cause confusion as to source of origin
or adversely affect the goodwill of Lilly in
CECLOR(R), (ii) shall not be false or misleading with
regard to Ceclor(R)or violate in any other manner
Dura's obligations under Section 7.3, and (iii) shall
be consistent in manner and style with the
Promotional Materials reviewed by Lilly and
-6-
<PAGE> 7
pre-cleared by the FDA for use in the launch by Dura
of CECLOR(R)CD.
2.2 Grant of Technology Licenses. Subject to the terms of this
Agreement and the Manufacturing Agreement, Lilly hereby grants to Dura:
(a) an exclusive, even as to Lilly (except as set forth
in Section 2.8 of this Agreement), license to the
Product Patents and Product Technology solely for the
purposes of manufacturing, or having manufactured,
marketing and selling the Products for sale within
the United States, solely to the extent such action
is authorized by, and in accordance with, the
provisions of this Agreement and the Manufacturing
Agreement, and
(b) a non-exclusive, limited license to the Bulk Patents
and Bulk Technology solely for the purpose of
manufacturing, or having manufactured, the Products
for sale within the United States and solely to the
extent such manufacturing is authorized by, and in
accordance with, the provisions of this Agreement and
the Manufacturing Agreement.
2.3 Excluded Assets. Anything herein to the contrary notwithstanding,
the Licensed Assets exclude the trademarks "ELI LILLY AND COMPANY" and "LILLY"
and any variation thereof and any other rights in or to such names.
2.4 Lilly's Option to Transfer Licensed Assets. At any time after Lilly
has ceased to provide Dura with bulk cefaclor and/or bulk cephalexin pursuant to
and in accordance with the terms of the Manufacturing Agreement, Lilly shall
have the right and option, upon twelve (12) months prior written notice to Dura,
to assign, transfer and convey to Dura all of Lilly's right, title and interest
in and to the Licensed Assets (including the underlying NDA(s)) and Dura hereby
agrees to accept such assignment, transfer and conveyance. To effectuate the
assignment, transfer and conveyance of the Licensed Assets, Lilly shall execute
and deliver to Dura at the end of the twelve (12) month notice period: (i) a
Bill of Sale (substantially in the form of EXHIBIT A), (ii) a Trademark
Assignment
-7-
<PAGE> 8
(substantially in the form of EXHIBIT B), (iii) a Copyright Assignment
(substantially in the form of EXHIBIT C), and (iv) a certificate, dated as of
the date of the transfer of the Licensed Assets and executed by an officer of
Lilly, certifying that the representations and warranties set forth in Sections
5.3, 5.4, 5.5, 5.6, and 5.7 of this Agreement are true and correct as of such
date. The licenses granted to Dura pursuant to Section 2.2 hereof shall remain
in effect in accordance with the provisions of this Agreement and the
Manufacturing Agreement.
2.5 Liabilities Assumed by Dura. Except as otherwise provided in this
Agreement, Dura hereby assumes and agrees to bear and be responsible for and to
perform and satisfy all responsibilities, duties (including, without limitation,
compliance with all applicable laws and regulations), obligations, claims,
Damages, liabilities, burdens and problems of any nature whatsoever
(collectively, the "Obligations") associated directly or indirectly with Dura's
licensing, operation and/or use of the Licensed Assets (and ownership of the
Licensed Assets in the event of transfer of the Licensed Assets by Lilly to Dura
pursuant to Section 2.4), as well as those associated directly or indirectly
with the manufacture (but only after the manufacturing has been transferred to
Dura pursuant to the provisions of the Manufacturing Agreement), marketing and
sale of the Products from and after the Closing Date, including, without
limitation, all recalls, all warranty claims and all product liability claims
(without regard to the nature of the causes of action alleged or theories of
recovery asserted) arising in connection with Products sold on or after the
Closing Date, except for (i) those Obligations with respect to which Lilly is
providing indemnification pursuant to the provisions of Section 8.1 of this
Agreement, and (ii) the hereinafter defined Excluded Liabilities, which items
shall remain the responsibility of Lilly as set forth herein. All of the
foregoing are hereinafter collectively referred to as the "Assumed Liabilities."
2.6 Liabilities Not Assumed by Dura. Anything herein to the contrary
notwithstanding, Dura shall not be deemed to assume any of the following
(collectively, the "Excluded Liabilities"):
-8-
<PAGE> 9
(a) Any Damages arising out of a claim of any third party
with respect to Lilly's activities relating to the
Products prior to the Closing Date.
(b) Any Damages arising out of any claim of any third
party in connection with Lilly's activities in
manufacturing the Products for Dura under the
Manufacturing Agreement;
(c) Any Damages arising out of any claim by the FDA that
Lilly has failed to fulfill Lilly's regulatory
obligations in connection with the NDAs (unless such
Damages arise as a result of any action or inaction
on the part of Dura);
(d) Any Damages arising with respect to the manufacture,
marketing or sale of the Products prior to the
Closing Date; and
(e) Any Damages arising out of any claim of any third
party relating to the Product Patents, the Product
Technology, the Bulk Patents or the Bulk Technology
(unless such Damages arise as a result of any action
or inaction on the part of Dura).
2.7 Sublicenses. This Agreement and the licenses granted herein shall
not, except as expressly provided herein, be sublicensed by Dura without the
prior written consent of Lilly, which consent shall not be unreasonably
withheld; provided, however, that such consent shall be conditioned upon the
following:
(a) Dura shall inform Lilly in advance of the identity of
the potential sublicensee and the scope of work it
will be engaged to perform;
(b) Lilly shall have the opportunity to prohibit such
sublicense for good cause shown;
-9-
<PAGE> 10
(c) the potential sublicensee to which Lilly consents
shall enter into an agreement of confidentiality and
non-use substantially similar to that set forth in
Section 7.5 of this Agreement; and
(d) Dura shall guarantee the performance of such
sublicensee in a form reasonably acceptable to Lilly.
2.8 Lilly Retained Rights. Anything herein contained to the contrary
notwithstanding, Lilly shall retain at all times during the term of this
Agreement, and shall bear all costs associated with, all rights necessary: (a)
to manufacture, or to have manufactured, the Products for Dura under the
Manufacturing Agreement and otherwise fulfill its obligations under this
Agreement, (b) to make or have the Products made in the United States to use or
sell the Products outside of the United States, (c) to make such changes as
Lilly may deem reasonably appropriate in connection with any differing approach
to manufacturing it may adopt in a facility(ies) in which any of the Products
are produced, and (d) to make or have made in the United States to use or sell
in or outside of the United States bulk cefaclor and bulk cephalexin subject to
the licenses granted to Dura under Section 2.2 of this Agreement; provided,
however, that the rights retained by Lilly in subsection (a), above, shall
terminate effective upon the termination of the Manufacturing Agreement and
Dura's rights under Section 2.2 shall thereafter be effective in accordance with
the terms of this Agreement.
2.9 No Inurement. Lilly retains ownership of all right, title, and
interest in and to the registered trademark CECLOR(R), registration number
1,101,155, registration date September 5, 1978, except those rights specifically
granted to Dura in Section 2.1(b), above. Without limiting the foregoing, all
use by Dura of the registered trademark CECLOR(R) shall inure solely to the
benefit of Lilly.
SECTION 3
PAYMENTS
-10-
<PAGE> 11
In consideration of Lilly granting to Dura the licenses and other
rights herein contained, Dura shall pay the following amounts to Lilly:
3.1 Payment Upon Signing. On the Closing Date, Dura shall pay to Lilly
the sum of One Hundred Million Dollars ($100,000,000) by Federal Reserve
electronic wire transfer in immediately available funds to an account designated
by Lilly.
3.2 Annual Payments. Subject to the provisions set forth in Section
3.3, Dura shall pay the following amounts to Lilly, on the scheduled due dates,
by Federal Reserve electronic wire transfer in immediately available funds to an
account designated by Lilly:
<TABLE>
<CAPTION>
Amount Due Date
------ --------
<S> <C>
******************************** *************
******************************** *************
******************************** *************
******************************** *************
******************************** *************
</TABLE>
3.3 Availability of Competitive Product. Dura shall not be required to
make any of the scheduled payments to Lilly as set forth in Section 3.2, above,
if, *************************************************************************
********************************************************************************
*************************************************************************
***********************************************************************
*****************************************************************************
**********************************************************************
**************************************************************************
********************************************************************************
********************* Dura agrees that neither it nor any of its Affiliates
shall, directly
-11-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 12
or indirectly, assist any third party in making a competitive Product available
for purchase in accordance with the terms of this Section 3.3 until on or after
************.
3.4 Audits. Lilly and Dura shall each keep full and accurate books and
records relating to the performance required of it under this Agreement. Each
party shall have the right, during regular business hours and upon reasonable
advance notice, to have such books and records of the other party audited so as
to verify the accuracy of the information previously reported to the requesting
party. The party requesting the audit shall, for purposes of such audit, utilize
only the services of the other party's regular outside certified public
accounting firm. As of the date of this Agreement, Lilly's regular outside
certified public accounting firm is Ernst & Young and Dura's is Deloitte &
Touche, LLP. Such audit may cover the two (2) calendar years preceding the date
of the request for such audit, and shall occur no more frequently than one (1)
time per calendar year. Such accountants shall keep confidential any information
obtained during such audit and shall report to the requesting party and the
other party only their conclusions. The cost of such audit shall be borne by the
party requesting the audit; however, in the event such audit reveals that the
information previously reported to the requesting party deviates by five percent
(5%) or more from that revealed by the audit, the cost of the audit shall be
borne by the other party. Dura shall include in all sublicenses an audit
provision substantially similar to the foregoing requiring the sublicensee to
keep full and accurate books and records relating to the Products and granting
Lilly the right to have an independent public accounting firm audit the accuracy
of the information reported by the sublicensee in connection therewith.
3.5 Refund. Except as set forth below in this Section 3.5, Dura shall
pay to Lilly the amounts described in Sections 3.1 and 3.2 without offset,
refund or other relief:
(a) In the event that (i) Lilly breaches any of its
representations, warranties or covenants contained in
this Agreement or the Manufacturing Agreement
(collectively, a "Termination Event") (other than a
Termination Event directly or indirectly caused by
the action or inaction of
-12-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 13
Dura) and such breach results in Dura's being able
to terminate this Agreement with respect to one or
both Products pursuant to the provisions of Section 9
hereof or the Manufacturing Agreement pursuant to the
provisions of Section 6 thereof, or (ii) a force
majeure event occurs to Lilly that would permit Dura
to terminate the Manufacturing Agreement with respect
to one or both Products pursuant to Section 8.14
thereunder ("Force Majeure Event" and collectively
with a Termination Event, the "Refund Event"), Lilly
shall refund (or, if not yet paid by Dura, Dura shall
not be obligated to pay) a portion of the amounts
otherwise paid or due pursuant to such sections
according to the following schedule:
-13-
<PAGE> 14
<TABLE>
<CAPTION>
Lilly shall refund
If the Refund Event Occurs: (or Dura may withhold):
- ------------------------------------------------------------------------------------------------
For a Ceclor CD For a Keftab
Refund Event Refund Event
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
On or ************************ *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
After ***************** and on or before ********
******** *********** ***********
- ------------------------------------------------------------------------------------------------
Thereafter -0- -0-
- ------------------------------------------------------------------------------------------------
</TABLE>
(b) In addition to the right to refund set forth in
subparagraph (a), above, Dura shall have a fully
paid-up exclusive license as set forth in Section
2.1; ***********************************************
****************************************************
****************************************************
****************************************************
****************************************************
****************************************************
****************************************************
****************************************************
3.6 Late Payments. Any amounts not paid by Dura when due under this
Agreement or the Manufacturing Agreement shall be subject to interest from and
including the date payment is due through and including the date upon
-14-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 15
which Lilly has collected immediately available funds in an account designated
by Lilly at a rate equal to the sum of two percent (2%) plus the prime rate of
interest quoted in the Money Rates section of The Wall Street Journal,
calculated daily on the basis of a 360-day year, or similar reputable data
source.
3.7 No Excuse. Dura shall not be excused from or relieved of its
obligations to pay the amounts described in this Section 3 by any claimed or
actual event of force majeure, commercial or other impracticability or
impossibility, or frustration of essential purpose, except to the extent
otherwise provided in this Agreement or Manufacturing Agreement.
SECTION 4
CONDITIONS PRECEDENT TO THE CLOSING; CLOSING DATE;
TERM OF AGREEMENT
4.1 Conditions Precedent to Dura's Obligations. Subject to waiver as
set forth in Section 10.3, all obligations of Dura to close the transactions
contemplated under this Agreement are subject to the fulfillment or satisfaction
of each of the following conditions precedent:
(a) Representations and Warranties True as of the Closing
Date. The representations and warranties of Lilly
contained in this Agreement or in any schedule,
certificate or document delivered by Lilly to Dura
pursuant to the provisions hereof shall have been
true on the date hereof and shall be true on the
Closing Date with the same effect as though such
representations and warranties were made as of such
date.
(b) Compliance with this Agreement. Lilly shall have
performed and complied with all agreements and
conditions required by this Agreement to be performed
or complied with by it prior to or by the Closing
Date.
(c) Closing Certificate. Dura shall have received a
certificate from Lilly, executed by an officer of
Lilly, certifying in such detail as Dura may
reasonably request that the conditions
-15-
<PAGE> 16
specified in Sections 4.1(a) and 4.1(b), above, have
been fulfilled and certifying that Lilly has obtained
all consents and approvals required by Section
4.1(e), below.
(d) No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or
injunction or final judgment relating thereto, shall,
to the best of Lilly's knowledge, be threatened or be
pending before any court or governmental or
regulatory official, body or authority in which it is
sought to restrain or prohibit or to obtain damages
or other relief in connection with this Agreement or
the consummation of the transactions contemplated
hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending or,
to the best of Lilly's knowledge, threatened.
(e) Consents and Approvals. Lilly shall have either
received notice from the Federal Trade Commission
(the "FTC") of early termination of the waiting
period provided by Section 7A(b)(1) of the Clayton
Act and Section 803.10(b) of the premerger
notification rules or such waiting period shall have
expired with no further action required by the FTC on
the part of Lilly.
4.2 Conditions Precedent to Lilly's Obligations. Subject to waiver as
set forth in Section 10.3, all obligations of Lilly to close the transactions
contemplated under this Agreement are subject to the fulfillment or satisfaction
of each of the following conditions precedent:
(a) Representations and Warranties True as of the Closing
Date. The representations and warranties of Dura
contained in this Agreement or in any schedule,
certificate or document delivered by Dura to Lilly
pursuant to the provisions hereof shall have been
true on the date hereof and shall be true on the
Closing Date with the same effect as though such
representations and warranties were made as of such
date.
-16-
<PAGE> 17
(b) Compliance with this Agreement. Dura shall have
performed and complied with all agreements and
conditions required by this Agreement to be performed
or complied with by it prior to or by the Closing
Date.
(c) Closing Certificate. Lilly shall have received a
certificate from Dura, executed by an officer of
Dura, certifying in such detail as Lilly may
reasonably request that the conditions specified in
Sections 4.2(a) and 4.2(b), above, have been
fulfilled and certifying that Dura has obtained all
consents and approvals required by Section 4.2(e),
below.
(d) No Threatened or Pending Litigation. On the Closing
Date, no suit, action or other proceeding, or
injunction or final judgment relating thereto, shall,
to the best of Dura's knowledge, be threatened or be
pending before any court or governmental or
regulatory official, body or authority in which it is
sought to restrain or prohibit or to obtain damages
or other relief in connection with this Agreement or
the consummation of the transactions contemplated
hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending or,
to the best of Dura's knowledge, threatened.
(e) Consents and Approvals. Dura shall have either
received notice from the FTC of early termination of
the waiting period provided by Section 7A(b)(1) of
the Clayton Act and Section 803.10(b) of the
premerger notification rules or such waiting period
shall have expired with no further action required by
the FTC on the part of Dura.
-17-
<PAGE> 18
4.3 Closing Date.
(a) Subject to Section 4.3(b), below, the closing of the
transactions contemplated by this Agreement shall
take place at 10:00 a.m., local time, on the business
day following the day on which the last of the
certificates required by Sections 4.1(c) and 4.2(c)
has been delivered by one party to the other or on
such other date as may be mutually agreed upon in
writing by the parties (the "Closing Date") at the
offices of Eli Lilly and Company, Lilly Corporate
Center, Indianapolis, Indiana. Each party hereby
agrees to use its best efforts to deliver the
certificate described herein to the other in a timely
manner.
(b) If the closing of the transactions contemplated
hereby shall not have taken place on or before
November 1, 1996, or such later date as shall be
mutually agreed to in writing by Lilly and Dura,
because the conditions described in Sections 4.1(e)
and 4.2(e), above, have not been satisfied, then
Lilly and Dura agree to discuss in good faith which
substantive terms set forth in this Agreement, the
Manufacturing Agreement, or any document attached
thereto need to be modified as a result of the delay
in such closing. Each party hereby agrees to use its
best efforts to consummate the transactions
contemplated herein, as modified, on or before such
November 1 date; provided, however, that if the
parties are unable to close the transactions
contemplated hereby by December 20, 1996, or such
later date as shall be mutually agreed to in writing
by Lilly and Dura, then all of the rights and
obligations of the parties under this Agreement shall
terminate without liability.
4.4 Term. The term of this Agreement shall begin upon the Closing
Date and, unless sooner terminated as hereinafter provided, shall end upon the
fortieth (40th) annual anniversary thereof.
-18-
<PAGE> 19
SECTION 5
REPRESENTATIONS AND WARRANTIES OF LILLY
Lilly hereby represents and warrants to Dura that, as of the date
hereof:
5.1 Organization, Power and Authority. Lilly is a corporation duly
organized and validly existing under the laws of the State of Indiana. Lilly has
all necessary corporate power and authority to enter into, and be bound by the
terms and conditions of, this Agreement, the Manufacturing Agreement, and to
license the Licensed Assets, Product Technology, and Bulk Technology to Dura
pursuant hereto.
5.2 Due Authority; No Breach. The execution, delivery and performance
by Lilly of this Agreement, the Manufacturing Agreement, and each agreement or
instrument contemplated by this Agreement, and the performance of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action by Lilly. This Agreement and the Manufacturing
Agreement are, and each agreement or instrument contemplated by this Agreement,
when executed and delivered by Lilly in accordance with the provisions hereof,
will be (assuming the due execution and delivery hereof and thereof by Dura) the
legal, valid and binding obligation of Lilly, in each case enforceable against
Lilly in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, moratorium, reorganization, or similar
laws from time to time in effect which affect the enforcement of creditors'
rights generally and by legal and equitable limitations on the availability of
specific performance and other equitable remedies against Lilly. All persons who
have executed this Agreement or the Manufacturing Agreement on behalf of Lilly,
or who will execute on behalf of Lilly any agreement or instrument contemplated
by this Agreement or the Manufacturing Agreement, have been duly authorized to
do so by all necessary corporate action. Neither the execution and delivery of
this Agreement or the Manufacturing Agreement by Lilly, or any such other
agreement or instrument by Lilly, nor the performance of the obligations
contemplated hereby and thereby, will (i) conflict with or result in any
violation of or constitute a breach of any of the terms or provisions of, or
result in the acceleration of any obligation under, or constitute a default
under any provision of the Articles of Incorporation or By-laws of Lilly or any
material
-19-
<PAGE> 20
contract or any other material obligation to which Lilly is a party or to which
it is subject or bound, or (ii) violate any judgment, order, injunction, decree
or award of any court, administrative agency, arbitrator or governmental body
against, or affecting or binding upon, Lilly or upon the securities, property or
business of Lilly, or (iii) constitute a violation by Lilly of any applicable
law or regulation of any jurisdiction as such law or regulation relates to
Lilly, or to the property or business of Lilly except for such conflict,
acceleration, default, breach or violation that is not reasonably likely to have
a material adverse effect on Lilly's ability to perform its obligations under
this Agreement or under any agreement or instrument contemplated hereby.
5.3 NDAs. Lilly has furnished Dura with access to a complete copy of
each of the NDAs, including all material amendments and supplements thereto.
Lilly is the lawful holder of all rights under each of the NDAs. Although the
Keftab NDA is not "state-of-the-art", to the best of Lilly's knowledge, Lilly
has complied in all material respects with all applicable laws and regulations
in connection with the preparation and submission to the FDA of each of the
NDAs, and each of the NDAs has been approved by, and nothing has come to the
attention of Lilly which has, or reasonably should have, led Lilly to believe
that any of the NDAs are not in good standing with, the FDA. Lilly has filed
with the FDA all required notices, supplemental applications and annual or other
reports, including adverse experience reports, with respect to each NDA (to the
extent applicable with respect to the Ceclor CD NDA) which are material to the
ability of Lilly to conduct the Activities. There is no pending or overtly
threatened action by the FDA which will have a material adverse effect on the
Activities and, to the best of Lilly's knowledge, no future action by the FDA is
required to lawfully market the Products. Except for the representations
contained in this Section 5.3, upon which Dura is relying (which Lilly hereby
acknowledges), Dura has had full and adequate opportunity to review and evaluate
the NDAs and Dura is relying solely upon its own judgment and experience in
connection therewith.
5.4 Intellectual Property. Set forth on SCHEDULE 5.4 hereto is a list
of all Intellectual Property, Product Patents, and Bulk Patents. Except as set
forth on SCHEDULE 5.4 hereto, (i) Lilly is the lawful owner of the Intellectual
Property, Product Technology, and Bulk Technology, (ii) Lilly can license the
Intellectual Property, Product Technology, and Bulk Technology without the
consent of any
-20-
<PAGE> 21
third party, (iii) there is no pending or overtly threatened claim against Lilly
asserting that any of the Intellectual Property, Product Technology, or Bulk
Technology infringes or violates the rights of third parties or that Dura, by
practicing under the Licensed Assets in running the Activities, would violate
any of the intellectual property rights of any third party, and (iv) nothing has
come to the attention of Lilly which has, or reasonably should have, led Lilly
to believe that the Intellectual Property, Product Technology, and Bulk
Technology infringe or violate the right of third parties. Except as set forth
on SCHEDULE 5.4 hereto, Lilly has not given any notice to any third parties
asserting infringement by such third parties upon any of the Intellectual
Property, Product Technology, or Bulk Technology. Lilly is not aware of and has
not received any communications challenging the ownership, validity or
effectiveness of the Intellectual Property, the Product Technology, the Bulk
Technology, or any other intellectual property rights relating to the
Activities. Lilly has not granted any right to any third party relating to the
Activities which would violate the terms of or conflict with the rights granted
to Dura pursuant to this Agreement or the Manufacturing Agreement.
5.5 Technology Rights. The Product Patents and the Product Technology
contain all the technology, patents, know-how, trade secrets and other
intellectual property necessary to manufacture the Products. The Bulk Patents
and the Bulk Technology contain all the technology, patents, know-how, trade
secrets and other intellectual property necessary to manufacture bulk cefaclor
and bulk cephalexin.
5.6 Litigation. There are no pending or, to the best of Lilly's
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof against Lilly relating to the
Activities, the Licensed Assets, the Product Patents or the Bulk Patents which,
either individually or together with any other, would have a material adverse
effect on the Activities, the Licensed Assets, the Product Patents or the Bulk
Patents or the ability of Lilly to perform its obligations under this Agreement
or any agreement or instrument contemplated hereby. Except as set forth on
SCHEDULE 5.4 hereto, there are no pending actions or suits relating to the
Activities, the Licensed Assets, the Product Patents or the Bulk Patents brought
by Lilly against others.
-21-
<PAGE> 22
5.7 Governmental Approval. No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution, delivery and performance
of this Agreement, or any agreement or instrument contemplated by this
Agreement, by Lilly or the performance by Lilly of its obligations contemplated
hereby and thereby other than (a) the filings required of both parties pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act (the "H-S-R Act"), and (b)
in the case of Lilly exercising its right to assign, transfer and convey the
Licensed Assets to Dura pursuant to Section 2.4, the information submissions to
the FDA provided for in Section 7.1 and compliance with FDA requirements, if
any, in connection therewith.
5.8 Brokerage. No broker, finder or similar agent has been employed by
or on behalf of Lilly, and no Person with which Lilly has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation, in connection with this Agreement or the
transactions contemplated hereby.
5.9 Implied Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 5,
LILLY MAKES NO REPRESENTATION OR WARRANTY AS TO THE LICENSED ASSETS, THE PRODUCT
PATENTS, THE BULK PATENTS, THE PRODUCT TECHNOLOGY, THE BULK TECHNOLOGY OR THE
ACTIVITIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY
STATUTE OR OTHERWISE, AND LILLY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR
STATUTORY WARRANTIES. Without limiting the foregoing, Dura acknowledges that it
has not and is not relying upon any implied warranty of merchantability, fitness
for a particular purpose or otherwise, or upon any representation or warranty
whatsoever as to the prospects (financial, regulatory or otherwise), or the
validity or likelihood of success of the Activities after the date of this
Agreement.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF DURA
Dura represents and warrants to Lilly that, as of the date hereof:
-22-
<PAGE> 23
6.1 Organization, Power and Authority. Dura is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Dura has all necessary corporate power and authority to enter into,
and be bound by the terms and conditions of, this Agreement, the Manufacturing
Agreement, and to license the Licensed Assets, the Product Technology, and the
Bulk Technology from Lilly pursuant hereto.
6.2 Due Authority; No Breach. The execution, delivery and performance
by Dura of this Agreement, the Manufacturing Agreement, and each agreement or
instrument contemplated by this Agreement, and the performance of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action by Dura. This Agreement and the Manufacturing
Agreement are, and each agreement or instrument contemplated by this Agreement,
when executed and delivered by Dura in accordance with the provisions hereof,
will be (assuming due execution and delivery hereof and thereof by Lilly) the
legal, valid and binding obligation of Dura, in each case enforceable against
Dura in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, moratorium, reorganization, or similar
laws from time to time in effect which affect the enforcement of creditors'
rights generally and by legal and equitable limitations on the availability of
specific performance and other equitable remedies against Dura. All persons who
have executed this Agreement or the Manufacturing Agreement on behalf of Dura,
or who will execute on behalf of Dura any agreement or instrument contemplated
by this Agreement or the Manufacturing Agreement, have been duly authorized to
do so by all necessary corporate action. Neither the execution and delivery of
this Agreement or the Manufacturing Agreement by Dura, or any such other
agreement or instrument by Dura, nor the performance of the obligations
contemplated hereby and thereby, will (i) conflict with or result in any
violation of or constitute a breach of any of the terms or provisions of, or
result in the acceleration of any obligation under, or constitute a default
under any provision of the Articles of Incorporation or By-laws of Dura or any
material contract or any other material obligation to which Dura is a party or
to which it is subject or bound, or (ii) violate any judgment, order,
injunction, decree or award of any court, administrative agency, arbitrator or
government body against, or affecting or binding upon, Dura or upon the
securities, property or business of
-23-
<PAGE> 24
Dura, or (iii) constitute a violation by Dura of any applicable law or
regulation of any jurisdiction as such law or regulation relates to Dura or to
the property or business of Dura, except for such conflict, acceleration,
default, breach or violation that is not reasonably likely to have a material
adverse effect on Dura's ability to perform its obligations under this Agreement
or any agreement or instrument contemplated hereby.
6.3 Brokerage. No broker, finder or similar agent has been employed by
or on behalf of Dura and no Person with which Dura has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation, in connection with this Agreement or the
transactions contemplated hereby.
6.4 Litigation. There are no pending or, to the best of Dura's
knowledge, threatened judicial, administrative or arbitral actions, claims,
suits or proceedings pending as of the date hereof against Dura which, either
individually or together with any other, will have a material adverse effect on
the ability of Dura to perform its obligations under this Agreement or any
agreement or instrument contemplated hereby.
6.5 Governmental Approval. No consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any governmental
authority is required in connection with the execution, delivery and performance
of this Agreement, or any agreement or instrument contemplated by this
Agreement, by Dura or the performance by Dura of its obligations contemplated
hereby and thereby other than (a) the filings required of both parties pursuant
to the H-S-R Act, and (b) in the case of Lilly exercising its right to assign,
transfer and convey the Licensed Assets to Dura pursuant to Section 2.4, the
information submissions to the FDA provided for in Section 7.1 and compliance
with FDA requirements, if any, in connection therewith.
SECTION 7
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
7.1 Governmental Filings. Lilly and Dura each agree to prepare and file
whatever filings, requests or applications are required to be filed with any
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<PAGE> 25
governmental authority in connection with this Agreement and to cooperate with
one another as reasonably necessary to accomplish the foregoing including,
without limitation, the filing required by the parties under the H-S-R Act,
which the parties agree shall be filed as promptly as possible following the
execution of this Agreement but in no event later than ten (10) business days
following such execution. Without limiting the generality of the foregoing,
prior to the assignment, transfer and conveyance by Lilly to Dura of the
Licensed Assets pursuant to Section 2.4, Lilly shall submit to the FDA the
information required of a former owner pursuant to 21 C.F.R. Section 314.72 with
respect to each NDA, and Dura shall submit to the FDA the information required
of a new owner pursuant to 21 C.F.R. Section 314.72 with respect to each NDA.
7.2 Responsibility for NDAs.
(a) Lilly shall remain responsible (until transfer of the
NDAs by Lilly to Dura pursuant to Section 2.4, at
which time Dura shall become and remain responsible)
for fulfilling all regulatory requirements with
respect to the Products that are imposed upon Lilly
as the owner of the NDAs; provided, however, ********
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*****************************************************
*************** Lilly shall provide Dura, upon
request after reasonable notice from Dura, with
access to copies of all filings submitted by Lilly to
the NDAs and, with respect to Ceclor CD, copies of
the Application Summary, which provides a
comprehensive summary of all clinical trials
conducted under the Ceclor CD NDAs. Nothing set forth
herein shall permit Dura to photocopy or otherwise
make a reproduction of the NDAs without the consent
of Lilly. Dura
-25-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 26
shall, on a timely basis, provide to Lilly all
information that Dura has that Lilly does not have
that is reasonably necessary and relevant to Lilly's
obligations hereunder to fulfill such requirements
including, but not limited to, sales distribution
information concerning the Products, and shall
otherwise cooperate with Lilly as reasonably
necessary in connection therewith. Without limiting
the generality of the foregoing sentence, in the
event that any supplements to the NDAs or any other
regulatory requirements are necessitated as a result
of transferring manufacturing of the Products from
Lilly to any other manufacturer or as a result of any
action by Dura (including, but not limited to,
acquisition by a third party of substantially all of
the assets or outstanding shares of Dura, or merger
with Dura) or such other manufacturer, Dura shall, on
a timely basis and at Dura's expense, develop and
provide to Lilly all information that is reasonably
necessary and relevant to Lilly's obligation
hereunder to file such supplements or to fulfill such
requirements and shall otherwise cooperate with Lilly
as reasonably necessary in connection therewith.
Lilly shall have the final decision-making authority
(until transfer of the NDAs by Lilly to Dura pursuant
to Section 2.4, at which time Dura shall have the
final decision-making authority) in every case on
whether and how to supplement, amend or otherwise
alter the NDAs and any other issues in connection
with the NDAs (including, but not limited to,
decisions to recall the Products) and on whether and
how to communicate with the FDA in connection
therewith. Dura shall submit to Lilly for Lilly's
prior review and approval any request by Dura to
pursue approval of any new indication for any
Product, to conduct any studies with respect to any
Product, and to make any submissions to the FDA with
respect to any Product; provided, however, that Lilly
shall have the right, in its reasonable judgment and
based solely on the scientific merit of the request,
to refuse any such request. If Lilly elects to
undertake such an obligation, such election shall be
-26-
<PAGE> 27
subject to Lilly and Dura mutually agreeing upon the
terms and conditions (including, but not limited to,
compensation to Lilly) of any such obligation.
(b) Dura and Lilly have jointly developed written
procedures for (i) the reporting of adverse drug
experiences, as set forth on EXHIBIT D, (ii) the
submission by Dura to Lilly and by Lilly to FDA of
labeling and promotional materials related to the
Products as set forth in EXHIBIT E, (iii) the
administration of and response to medical inquiries
concerning the Products by consumers, physicians,
pharmacists and other health care professionals as
set forth in EXHIBIT F, and (iv) the administration
and analysis of and response to complaints concerning
the Products as set forth in EXHIBIT G. Dura and
Lilly shall each comply with the provisions thereof.
7.3 Compliance with Law. Dura and Lilly shall each comply with all
federal, state and local laws and regulations applicable to manufacturing,
marketing and selling the Products in the United States, the Licensed Assets,
the Product Patents, the Product Technology, the Bulk Patents, the Bulk
Technology or the performance of their respective obligations hereunder and
under the Manufacturing Agreement Without limiting the generality of the
foregoing sentence, Dura shall not promote the Products for any indications not
contained in the approved NDAs or in any manner in conflict with (i) the
approved labeling, (ii) with respect to Ceclor CD, the FDA approval letter dated
June 25, 1996, and (iii) all other applicable laws or regulations. Dura shall
store and distribute samples of the Products in compliance with all applicable
laws, including, without limitation, the PDMA. Lilly and Dura each shall keep
all records and reports required to be kept by applicable laws and regulations,
and each shall make its facilities available at reasonable times during business
hours for inspection by representatives of governmental agencies. Lilly and Dura
each shall notify the other within twenty-four (24) hours of receipt of any
notice or any other indication whatsoever of any FDA or other governmental
agency inspection, investigation or other inquiry, or other material notice or
communication of any type, involving the Products. Dura and Lilly shall
cooperate with each other during any such inspection, investigation or other
inquiry including, but not limited to, allowing
-27-
<PAGE> 28
upon request a representative of the other to be present during the applicable
portions of any such inspection, investigation or other inquiry and providing
copies of all relevant documents. Dura and Lilly shall discuss any response to
observations or notifications received in connection with any such inspection,
investigation or other inquiry and each shall give the other an opportunity to
comment upon any proposed response before it is made. In the event of
disagreement concerning the form or content of such response, however, Lilly
shall be responsible for deciding the appropriate form and content of any
response with respect to any of its cited activities and Dura shall be
responsible for deciding the appropriate form and content of any response with
respect to any of its cited activities.
7.4 Recall. Lilly and Dura shall each maintain such traceability
records as may be necessary to permit a recall or field correction of any
Products. Each party shall give telephonic notice (to be confirmed in writing)
to the other within twenty-four (24) hours of the receipt of any information
which indicates a recall may be necessary. The decision to conduct and the right
to control a recall shall be solely that of the NDA holder after appropriate
consultation with the other party. Each party will cooperate fully with the
other in connection with any recall efforts.
-28-
<PAGE> 29
7.5 Confidentiality. Dura shall treat as confidential the Licensed
Assets, the Bulk Patents, the Bulk Technology, the Product Patents, the Product
Technology, and all other information of Lilly of which Dura becomes aware
(whether in writing or orally or by sensory detection) in connection with this
Agreement or the Manufacturing Agreement (collectively, "Lilly Proprietary
Information"). Dura shall neither disclose Lilly Proprietary Information to any
third party nor use Lilly Proprietary Information for any purpose other than as
set forth in this Agreement. Lilly shall treat as confidential all information
of Dura of which Lilly becomes aware (whether in writing or orally or by sensory
detection) in connection with this Agreement or the Manufacturing Agreement
(collectively, "Dura Proprietary Information"). Lilly shall neither disclose
Dura Proprietary Information to any third party nor use Dura Proprietary
Information for any purpose other than as set forth in this Agreement.
Nothing contained herein will in any way restrict or impair either
party's (the "Using Party's") right to use, disclose or otherwise deal with any
Proprietary Information of the other party which:
(a) at the time of disclosure is known to the public or
thereafter becomes known to the public by publication
or otherwise through no fault of the Using Party;
(b) the Using Party can establish was in its possession
prior to the time of the disclosure and was not
obtained directly or indirectly from the other party;
(c) is independently made available as a matter of right
to the Using Party by a third party who is not
thereby in violation of a confidential relationship
with the other party;
(d) is developed by the Using Party independently of the
Proprietary Information received from the other party
and the Using Party can establish such development;
or
(e) is information required to be disclosed by legal or
regulatory process; provided, in each case the Using
Party timely
-29-
<PAGE> 30
informs the other party and uses reasonable efforts
to limit the disclosure and maintain confidentiality
to the extent possible and permits the other party to
intervene and contest or attempt to limit the
disclosure.
Dura shall obtain no right or license of any kind under the Lilly
Proprietary Information except as set forth in this Agreement. Lilly shall
obtain no right or license of any kind under the Dura Proprietary Information
except as set forth in this Agreement.
7.6 Expenses. Lilly and Dura shall each bear their own direct and
indirect expenses incurred in connection with the negotiation and preparation of
this Agreement and, except as set forth in this Agreement, the performance of
the obligations contemplated hereby.
7.7 Customers. Lilly and Dura shall cooperate with each other in
notifying all customers relating to the Activities and other interested parties
of the consummation of the transactions contemplated hereby as set forth in
APPENDIX B to the Manufacturing Agreement.
7.8 Reasonable Efforts. Lilly and Dura each hereby agrees to use all
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or proper to make effective the
transactions contemplated by this Agreement, including such actions as may be
reasonably necessary to obtain approvals and consents of governmental Persons
and other Persons (including, without limitation, all applicable drug listing
and NDA notifications to the FDA identifying Dura as a distributor of the
Products); provided that no party shall be required to (i) pay money (other than
as expressly required pursuant to this Agreement), or (ii) assume any other
material obligation not otherwise required to be assumed by this Agreement.
7.9 Publicity. The parties agree that no publicity release or
announcement concerning the transactions contemplated hereby or in the
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<PAGE> 31
Manufacturing Agreement shall be issued without the advance written consent of
the other, except as such release or announcement may be required by law, in
which case the party making the release or announcement shall, before making any
such release or announcement, afford the other party a reasonable opportunity to
review and comment upon such release or announcement. Dura and Lilly recognize
that disclosure of this Agreement and the Manufacturing Agreement (including
copies of each) to the IRS and other tax authorities is likely to be required,
and each waives the requirements of this subsection with respect to disclosure
(and copies) to such entities.
7.10 Cooperation. If either party shall become engaged in or
participate in any investigation, claim, litigation or other proceeding with any
third party, including the FDA, relating in any way to the Products or any of
the Licensed Assets, the Product Patents, the Product Technology, the Bulk
Patents, or the Bulk Technology, the other party shall cooperate in all
reasonable respects with such party in connection therewith, including, without
limitation, using its reasonable efforts to make available to the other such
employees who may be helpful with respect to such investigation, claim,
litigation or other proceeding, provided that, for purposes of this provision,
reasonable efforts to make available any employee shall be deemed to mean
providing a party with reasonable access to any such employee at no cost for a
period of time not to exceed 24 hours (e.g., three 8-hour business days).
Thereafter, any such employee shall be made available for such time and upon
such terms and conditions (including, but not limited to, compensation) as the
parties may mutually agree.
7.11 No Sale for Resale. Neither Dura nor any sublicensee of Dura shall
knowingly sell any Products to anyone in the United States for subsequent
distribution or resale outside the United States and each shall take all
reasonable precautions to prevent such distribution or resale outside the United
States. Lilly shall not knowingly sell any Products to anyone in the United
States or outside the United States for subsequent distribution or resale in the
United States and Lilly shall take all reasonable precautions to prevent such
distribution or resale in the United States.
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<PAGE> 32
*Confidential Treatment Requested
7.12 Product Returns. Dura shall be responsible for all rebates,
chargebacks and returns of Products sold on or after the date of this Agreement
and Lilly shall be responsible for all rebates, chargebacks and returns of
Products sold prior to the date of this Agreement; provided, however, that if
the parties are unable to determine whether a particular Product was sold before
or after the date of this Agreement, then with respect to any such Product, Dura
shall be responsible for all rebates, chargebacks and returns of Products
returned more than *************** after the date of this Agreement, and Lilly
shall be responsible for all rebates, chargebacks and return of Products
returned within *************** after the date of this Agreement.
Notwithstanding the above, Lilly shall (a) *************************************
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********** and (b) *************************************************************
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7.13 Conflicting Rights. Lilly shall not grant any right to any third
party relating to the Activities which would violate the terms of or conflict
with the rights granted to Dura pursuant to this Agreement or the Manufacturing
Agreement.
7.14 Patent Maintenance. Lilly shall be solely responsible for filing,
prosecuting, and maintaining all of the Product Patents and Bulk Patents, and
Lilly shall pay the costs associated therewith. Lilly shall file, prosecute, and
maintain all Product Patents and Bulk Patents so as to fully continue the
benefits under the licenses granted to Dura hereunder. In the event that any
extension, registration, confirmation, reissue, renewal, reexamination or
continuation-in-part is to be filed with respect to a Product Patent, Lilly
shall provide Dura with the opportunity to review such extension, registration,
confirmation, reissue, renewal, reexamination or continuation-in-part and
provide input thereto.
-32-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 33
7.15 Infringement; Enforcement of Proprietary Rights.
(a) Infringement of Patent Rights. Each party shall
promptly notify the other of any alleged infringement
by third parties of any Product Patent or Bulk Patent
and provide any information available to that party
relating to such alleged infringement. Lilly shall
have the responsibility to investigate such alleged
infringement and act diligently to end any
infringement of such rights, including, but not
limited to, bringing suit against such third party
infringer.
(b) Procedures. No settlement, consent judgment or other
voluntary final disposition of the suit may be
entered into without the consent of each party, which
consent shall not be unreasonably withheld or
delayed. Any recovery of damages in any such suit
shall be retained by the party bearing the costs of
such suit. In the event of any infringement suit
against a third party brought by either party
pursuant to this Section 7.15, the party not bringing
such suit shall cooperate in all respects, execute
any documents reasonably necessary to permit the
other party to prosecute such suit, and to the extent
reasonable shall make available its employees and
relevant records to provide evidence for such suit.
(c) Infringement of Third Party Rights. If, during the
term of this Agreement, any third party (other than
an Affiliate of Dura) claims that Dura's marketing or
selling of Products hereunder infringes on a third
party patent based upon claims that dominate claims
in the Product Patents, within 120 days after notice
by Dura, Lilly shall (i) initiate an action for a
declaratory judgment of invalidity and/or
non-infringement of any such patents, or (ii) procure
for Dura the right to exercise all rights licensed
under this Agreement without any additional payment
therefor by Dura.
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<PAGE> 34
7.16 Supply of Product. Subject to the terms and conditions set forth
in the Manufacturing Agreement, Lilly shall maintain the capacity throughout the
term of the Manufacturing Agreement to meet the requirements of Dura thereunder.
7.17 Technology. Lilly shall be solely responsible for maintaining the
Product Technology and the Bulk Technology in accordance with the terms set
forth herein and in the Manufacturing Agreement.
7.18 Deemed Breach of Covenant. Neither Lilly nor Dura shall be deemed
to be in breach of any covenant contained in this Section 7 if such party's
deemed breach is the result of any action or inaction on the part of the other
party.
SECTION 8
INDEMNIFICATION
8.1 Indemnification. (a) Lilly shall indemnify, defend and hold Dura
(and its directors, officers, employees, and Affiliates) harmless from and
against any and all Damages incurred or suffered by Dura (and its directors,
officers, employees, and Affiliates) (excluding incidental or consequential
Damages suffered or incurred by Dura directly (as opposed to incidental or
consequential Damages suffered or incurred by third parties who are, in turn,
seeking the same from Dura, which shall be covered by the indemnity set forth
herein)) as a consequence of:
(i) any breach of any representation or warranty
made by Lilly in this Agreement, or in the
Manufacturing Agreement, provided that, in
the case of a breach of any representation
or warranty made by Lilly in this Agreement,
notice of a claim based upon any such breach
is received by Lilly prior to the expiration
of such representation and warranty pursuant
to Section 10.4;
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<PAGE> 35
(ii) any failure to perform duly and punctually
any covenant, agreement or undertaking on
the part of Lilly contained in this
Agreement or in the Manufacturing Agreement;
(iii) any material misrepresentation in or
material omission from any agreement,
instrument or document delivered by Lilly
pursuant to the terms of this Agreement, or
the Manufacturing Agreement; or
(iv) any Excluded Liabilities.
(b) Dura shall indemnify, defend and hold Lilly (and its
directors, officers, employees, and Affiliates)
harmless from and against any and all Damages
incurred or suffered by Lilly (and its directors,
officers, employees, and Affiliates) (excluding
incidental or consequential Damages suffered or
incurred by Lilly directly (as opposed to incidental
or consequential Damages suffered or incurred by
third parties who are, in turn, seeking the same from
Lilly, which shall be covered the indemnity set forth
herein)) as a consequence of:
(i) any breach of any representation or warranty
made by Dura in this Agreement, or in the
Manufacturing Agreement, provided that, in
the case of a breach of any representation
or warranty made by Dura in this Agreement,
notice of a claim based upon any such breach
is received by Dura prior to the expiration
of such representation and warranty pursuant
to Section 10.4;
(ii) any failure to perform duly and punctually
any covenant, agreement or undertaking on
the part of Dura contained in this Agreement
or in the Manufacturing Agreement;
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<PAGE> 36
(iii) any material misrepresentation in or
material omission from any agreement,
instrument or document delivered by Dura
pursuant to the terms of this Agreement or
the Manufacturing Agreement; or
(iv) any Assumed Liabilities.
8.2 Notice and Opportunity To Defend. Promptly after receipt by a party
hereto of notice of any claim which could give rise to a right to
indemnification pursuant to Section 8.1, such party (the "Indemnified Party")
shall give the other party (the "Indemnifying Party") written notice describing
the claim in reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein shall not relieve the Indemnifying Party of
its obligations under this Section , except to the extent that such failure to
give notice materially prejudices the Indemnifying Party's ability to defend
such claim. The Indemnifying Party shall have the right, at its option, to
compromise or defend, at its own expense and by its own counsel, any such matter
involving the asserted liability of the party seeking such indemnification. If
the Indemnifying Party shall undertake to compromise or defend any such asserted
liability, it shall promptly (and in any event not less than ten (10) days after
receipt of the Indemnified Party's original notice) notify the Indemnified Party
in writing of its intention to do so, and the Indemnified Party agrees to
cooperate fully with the Indemnifying Party and its counsel in the compromise or
defense against any such asserted liability. All reasonable costs and expenses
incurred in connection with such cooperation shall be borne by the Indemnifying
Party. If the Indemnifying Party elects not to compromise or defend the asserted
liability, fails to notify the Indemnified Party of its election to compromise
or defend as herein provided, fails to admit its obligation to indemnify under
this Agreement with respect to the claim, or, if in the reasonable opinion of
the Indemnified Party, the claim could result in the Indemnified Party becoming
subject to injunctive relief or relief other than the payment of money damages
that could materially adversely affect the ongoing business of the Indemnified
Party in any manner, the Indemnified Party shall have the right, at its option,
to pay, compromise or defend such asserted liability by its own counsel and its
reasonable costs and expenses shall be included as part of the indemnification
obligation of the Indemnifying Party hereunder. Notwithstanding the foregoing,
neither the
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<PAGE> 37
*Confidential Treatment Requested
Indemnifying Party nor the Indemnified Party may settle or compromise any claim
over the objection of the other; provided, however, that consent to settlement
or compromise shall not be unreasonably withheld. In any event, the Indemnified
Party and the Indemnifying Party may participate, at their own expense, in the
defense of such asserted liability. If the Indemnifying Party chooses to defend
any claim, the Indemnified Party shall make available to the Indemnifying Party
any books, records or other documents within its control that are necessary or
appropriate for such defense. Notwithstanding anything to the contrary in this
Section 8.2, (i) the party conducting the defense of a claim shall (A) keep the
other party informed on a reasonable and timely basis as to the status of the
defense of such claim (but only to the extent such other party is not
participating jointly in the defense of such claim), and (B) conduct the defense
of such claim in a prudent manner, and (ii) the Indemnifying Party shall not
cease to defend, settle or otherwise dispose of any claim without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld).
8.3 Indemnification Payment Obligation. No Indemnifying Party will have
any obligations under Sections 8.l(a) or 8.1(b) until the cumulative aggregate
amount of Damages incurred or suffered by the Indemnified Party which the
Indemnifying Party is otherwise subject to under this Agreement exceeds
******** at which time the entire cumulative aggregate amount of such Damages
shall be covered. The provisions of this Section 8.3 shall not limit or
otherwise affect the obligations of any Indemnifying Party under any other
Section of this Agreement.
8.4 Indemnification Payment Adjustments. The amount of any Damages for
which indemnification is provided under this Section 8 shall be reduced to take
account of any net tax benefit and shall be increased to take account of any net
tax detriment arising from the incurrence or payment of any such Damages or from
the receipt of any such indemnification payment and shall be reduced by the
insurance proceeds received and any other amount recovered, if any, by the
Indemnified Party with respect to any Damages; provided, however, that an
Indemnified Party shall not be subject to an obligation to pursue an insurance
claim relating to any Damages for which indemnification is sought hereunder. If
any Indemnified Party shall have received any payment pursuant
-37-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 38
to this Section 8 with respect to any Damages and shall subsequently have
received insurance proceeds or other amounts with respect to such Damages, then
such Indemnified Party shall pay to the Indemnifying Party an amount equal to
the difference (if any) between (i) the sum of the amount of those insurance
proceeds or other amounts received and the amount of the payment by such
Indemnifying Party pursuant to this Section 8 with respect to such Damages and
(ii) the amount necessary to fully and completely indemnify and hold harmless
such Indemnified Party from and against such Damages; provided, however, in no
event will such Indemnified Party have any obligation pursuant to this sentence
to pay to such Indemnifying Party an amount greater than the amount of the
payment by such Indemnifying Party pursuant to this Section 8 with respect to
such Damages.
8.5 Indemnification Payment. Upon the final determination of
liability and the amount of the indemnification payment under this Section 8,
the appropriate party shall pay to the other, as the case may be, within ten
(10) business days after such determination, the amount of any claim for
indemnification made hereunder.
8.6 Survival. The provisions of Section 8 shall survive any
termination of this Agreement and any termination of the Manufacturing
Agreement. Each Indemnified Party's rights under Section 8 shall not be deemed
to have been waived or otherwise affected by such Indemnified Party's waiver of
the breach of any representation, warranty, agreement or covenant contained in
or made pursuant this Agreement or the Manufacturing Agreement, unless such
waiver expressly and in writing also waives any or all of the Indemnified
Party's right under Section 8.
SECTION 9
TERMINATION
9.1 Termination. Anything herein to the contrary notwithstanding,
this Agreement may be terminated as follows:
(a) Termination for Insolvency. If either Dura or Lilly
(i) makes a general assignment for the benefit of
creditors or becomes
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<PAGE> 39
insolvent; (ii) files an insolvency petition in
bankruptcy; (iii) petitions for or acquiesces in the
appointment of any receiver, trustee or similar
officer to liquidate or conserve its business or any
substantial part of its assets; (iv) commences under
the laws of any jurisdiction any proceeding involving
its insolvency, bankruptcy, reorganization,
adjustment of debt, dissolution, liquidation or any
other similar proceeding for the release of
financially distressed debtors; or (v) becomes a
party to any proceeding or action of the type
described above in (iii) or (iv) and such proceeding
or action remains undismissed or unstayed for a
period of more than sixty (60) days, then the other
party may by written notice terminate this Agreement
in its entirety with immediate effect.
(b) Termination for Default.
(i) Dura and Lilly each shall have the right to
terminate this Agreement with respect to a
specific Product for default upon the
other's failure to comply in any material
respect with the terms and conditions of
this Agreement or the Manufacturing
Agreement that relate to such specific
Product. At least ninety (90) days prior to
any such termination for default, the party
seeking to so terminate shall give the other
written notice of its intention to terminate
this Agreement in accordance with the
provisions of this Section 9.1(b), which
notice shall set forth the default(s) which
form the basis for such termination. If the
defaulting party fails to correct such
default(s) within ninety (90) days after
receipt of notification, or if the same
cannot reasonably be corrected or remedied
within ninety (90) days, then if the
defaulting party has not commenced curing
said default(s) within said ninety (90) days
and be diligently pursuing completion of
same, then such
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<PAGE> 40
party immediately may terminate this
Agreement with respect to such Product.
(ii) This Section 9.1(b) shall not be exclusive
and shall not be in lieu of any other
remedies available to a party hereto for any
default hereunder on the part of the other
party, including without limitation, Dura's
rights with respect to a Refund Event.
(c) Termination Upon Transfer. If Lilly elects to
transfer the Licensed Assets relating to both
Products to Dura pursuant to Section 2.4, this
Agreement shall, subject to the provision of
subparagraph (e) of this Section 9, terminate
automatically, and without the need for notice,
simultaneously with the execution and delivery by
Lilly to Dura of the Bill of Sale, Trademark
Assignment and Copyright Assignment described in
Section 2.4. If Lilly elects to transfer the Licensed
Assets relating solely to one Product, this Agreement
shall remain in full force and effect with respect to
the remaining Product. All of the rights under the
licenses granted by Lilly to Dura pursuant to
Sections 2.1 and 2.2 hereof shall remain in full
force and effect.
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<PAGE> 41
(d) Rights Upon Termination.
(i) Lilly Rights Upon Termination Upon Default
by Dura. In the event of termination of this
Agreement by Lilly under Section
9.1(b)*******
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(ii) Dura Rights Upon Termination Upon Default by
Lilly. In the event of termination of this
Agreement by Dura under Section
9.1(b)********
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-41-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 42
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(e) Continuing Obligations. Termination of this Agreement
for any reason shall not relieve the parties of any
obligation accruing prior thereto with respect to the
terminated Product and any ongoing obligations
hereunder with respect to the remaining Product and
shall be without prejudice to the rights and remedies
of either party with respect to any antecedent breach
of the provisions of this Agreement. Without limiting
the generality of the foregoing, no termination of
this Agreement, whether by lapse of time or
otherwise, shall serve to terminate the obligations
of the parties hereto under subsections 2.2 (but only
to the extent Dura has rights to such licenses upon
termination as provided for in the provisions
contained herein and in the Manufacturing Agreement),
2.3, 3.2, 3.4, 3.6, 7.2, 7.3, 7.4, 7.5, 7.10, 7.12,
7.13, 7.14, 7.15, section 8, subsections 9.1(e),
9.1(f) and section 10 (except for subsection 10.4,
which shall expire in accordance with the term
contained therein) hereof, and such obligations shall
survive any such termination.
(f) Returned Materials. On the termination of this
Agreement (other than pursuant to Section 9.1(c)),
Lilly and Dura each shall return to the other all
information which it possesses or controls that
belongs to the other, except that each may retain a
copy for recordkeeping purposes.
-42-
*Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed with
The Secretary of the Commission without the Mark pursuant to the Company's
application requesting confidential treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
<PAGE> 43
SECTION 10
MISCELLANEOUS
10.1 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that neither Lilly nor Dura may assign any of
its rights, duties or obligations hereunder without the prior written consent of
the other, which consent may be withheld in the other's sole discretion, except
that no prior written consent shall be required in the event that a third party
acquires substantially all of the assets or outstanding shares of, or merges
with, Dura or Lilly, as the case may be. No assignment of this Agreement or of
any rights hereunder shall relieve the assigning party of any of its obligations
or liability hereunder.
10.2 Notices. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand, prepaid telex, cable, telegram or facsimile and
confirmed in writing, or mailed first class, postage prepaid, by registered or
certified mail, return receipt requested (mailed notices and notices sent by
telex, cable or telegram shall be deemed to have been given on the date
received) as follows:
If to Lilly, as follows:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Facsimile: (317) 277-3354
Attn: President, North American Pharmaceutical Operations
With a copy to:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Facsimile: (317) 276-6221
Attn: General Counsel
-43-
<PAGE> 44
If to Dura, as follows:
Dura Pharmaceuticals, Inc.
5880 Pacific Center Boulevard
San Diego, California 92121-4204
Attn: Office of the General Counsel
or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 10.2 by any party hereto to the other
party.
10.3 Waiver; Remedies. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument executed by such party. No delay on the part of Lilly or Dura in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either Lilly or Dura of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The indemnification
provided in Section 8 shall be the sole remedy available for any Damages arising
out of or in connection with this Agreement except for any rights or remedies
which the parties hereto may otherwise have in equity.
10.4 Survival of Representations. Each of the representations and
warranties made in this Agreement (but not including the Manufacturing
Agreement, which shall be governed by the terms and conditions contained
therein) shall survive only for a period of two (2) years after the Closing Date
and shall thereafter be extinguished.
10.5 Entire Agreement. This Agreement, together with the Manufacturing
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreements or understandings
of the parties relating thereto.
10.6 Amendment. This Agreement may be modified or amended only by
written agreement of the parties hereto.
-44-
<PAGE> 45
10.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.
10.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Indiana excluding any choice of law
rules which may direct the application of the law of another state.
10.9 Captions. All section titles or captions contained in this
Agreement, in any Schedule referred to herein or in any Exhibit annexed hereto,
and the table of contents, if any, to this Agreement are for convenience only,
shall not be deemed a part of this Agreement and shall not affect the meaning or
interpretation of this Agreement.
10.10 No Third-Party Rights. No provision of this Agreement shall be
deemed or construed in any way to result in the creation of any rights or
obligation in any Person not a party to this Agreement.
10.11 Severability. If any provision of this Agreement is found or
declared to be invalid or unenforceable by any court or other competent
authority having jurisdiction, such finding or declaration shall not invalidate
any other provision hereof, and this Agreement shall thereafter continue in full
force and effect.
10.12 Attachments. All Schedules, Exhibits and other attachments to
this Agreement are by this reference incorporated herein and made a part of this
Agreement.
10.13 Use of the Word "Products". Unless the context indicates
otherwise, the use of the word "Products" shall be construed to mean the
individual products Ceclor CD and/or Keftab, as appropriate.
-45-
<PAGE> 46
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.
ELI LILLY AND COMPANY DURA PHARMACEUTICALS, INC.
By: /s/ Sidney Taurel By: /s/ Cam L. Garner
-------------------- -------------------------------
Title: President and Chief Title: Chairman, President and
Operating Officer Chief Executive Officer
Dura/License Agreement - 8/20/96
-46-
<PAGE> 1
EXHIBIT 2.2
LIST OF SCHEDULES AND EXHIBITS
TO LICENSE AGREEMENT
NUMBER DESCRIPTION
- ------ -----------
Schedule 2.1(a) NDAs
Schedule 5.4 Intellectual Property
Exhibit A Bill of Sale
Exhibit B Trademark Assignment
Exhibit C Copyright Assignment
Exhibit D Adverse Drug Experience Reporting Procedures
Exhibit E Submission of Labeling and Promotional Materials Procedures
Exhibit F Medical Inquires Procedures
Exhibit G Product Complaint Procedures
<PAGE> 1
EXHIBIT 99.1
CONTACT: CAM L. GARNER
CHAIRMAN, PRESIDENT AND CEO
DURA PHARMACEUTICALS, INC.
(619) 457-2553
DURA PHARMACEUTICALS ANNOUNCES ACQUISITION OF
CECLOR(R) CD AND KEFTAB(R) FROM ELI LILLY
SAN DIEGO, CA -- August 22, 1996 -- Dura Pharmaceuticals, Inc. (Nasdaq
NNM:DURA) today announced that it has signed an agreement with Eli Lilly and
Company to acquire exclusive U.S. marketing rights to the patented cephalosporin
antibiotics Keftab(R) (cephalexin hydrochloride) and Ceclor(R) CD (cefaclor
extended release tablets) for $100 million plus additional contingent amounts.
As part of the agreement, Lilly will manufacture the products for Dura. The
transaction is expected to close next month, and is subject to review under the
Hart-Scott-Rodino Act.
The Company believes that the two products could generate combined
annual sales of $100 million in the year 2000. The market for oral antibiotics
in the U.S. was approximately $4.8 billion in 1995. Keftab has current annual
sales of approximately $15 million. Currently, there are approximately four
million prescriptions written annually in the United States for the solid form
of Ceclor. Ceclor CD, for which Lilly received marketing approval from the FDA
in June and which Dura expects to launch this fall, will offer the advantage of
twice-a-day dosing.
The addition of Ceclor CD and Keftab complements Dura's existing line
of prescription products and is expected to have both strong strategic and
positive financial impact. The products are not only expected to produce
incremental earnings and continued strong sales growth, they will also enable
Dura to grow its field sales force to effectively launch its first Spiros(TM)
product (albuterol) expected in late 1998. Dura will immediately undertake
expansion of its field sales force from approximately 140 to over 200 by the end
of 1996, and expects to continue sales force growth in 1997.
Dura will begin promoting Keftab to physicians immediately after the
transaction closes and will launch and vigorously promote Ceclor CD in time for
the upcoming respiratory season. Ceclor CD is expected to be heavily prescribed
for bronchitis by Dura's current physician base.
Commenting on the announcement, Dura's Chairman, President and Chief
Executive Officer Cam L. Garner stated, "Keftab and Ceclor CD are ideally suited
for Dura as they should provide strong revenue and
<PAGE> 2
earnings growth and support the expansion of our sales force to position Dura
for an effective launch of our Spiros products. Keftab is a well-established
product that has been shown to be very responsive to promotional efforts. Ceclor
CD has exciting potential and will benefit from the strong brand recognition of
Ceclor.
"We will immediately begin investing in the launch of these products,
including the expansion of the sales force," Garner said. "Earnings from these
products should build significantly starting in 1997."
"We have been pleased with our relationship with Dura, which began in
1995 with a similar agreement involving Capastat(R) Sulfate (capreomycin
sulfate, USP) and Seromycin(R) (cycloserine capsules, USP)," said Mitch Daniels,
president of North American operations for Lilly. "This agreement will allow
both companies to best utilize resources and at the same time deliver valuable
products to our customers."
Dura Pharmaceuticals is a San Diego-based developer and marketer of
prescription pharmaceutical products for the treatment of allergies, asthma and
related respiratory conditions. Dura's mission is to be the leading niche
pharmaceutical and drug delivery company in the high-growth U.S. respiratory
market. The company is pursuing that goal through two major strategies: (1)
acquiring late-stage prescription pharmaceuticals for marketing to
high-prescribing respiratory physicians and (2) developing Spiros(TM), a
proprietary pulmonary drug delivery system.
Lilly is a global research-based pharmaceutical corporation
headquartered in Indianapolis, Indiana, dedicated to creating and delivering
superior health care solutions -- by combining pharmaceutical innovations,
existing pharmaceutical technology, disease prevention and management, and
information technologies -- in order to provide customers worldwide with optimal
clinical and economic outcomes.
Except for the historical and factual information contained herein, the
matters discussed in this press release contain forward-looking statements which
involve risks and uncertainties, including competitive products and pricing, and
other risks detailed from time to time in the Dura's filings with the Securities
and Exchange Commission. Actual results may differ materially from those
projected. These forward-looking statements represent the Company's judgment as
of the date of this release. The Company disclaims, however, any intent or
obligation to update these forward-looking statements.
News releases from Dura Pharmaceuticals are available at no charge
through PR Newswire's On-Call fax service. For a menu of available news releases
or to retrieve a specific release made by Dura, please call (800- 758-5804,
extension 197051).
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