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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
Date of Report (Date of earliest event reported): June 30, 1997
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WATSON PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 0-20045 95-3872914
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File number) Identification No.)
311 Bonnie Circle
Corona, CA 91720
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 270-1400
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Former name or former address, if changed since last report
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ITEM 2. Acquisition or Disposition of Assets.
On June 30, 1997, in connection with the termination of a partnership
agreement with Rhone-Poulenc Rorer, Inc. ("RPR"), Watson Pharmaceuticals, Inc.
("Watson") obtained the exclusive U.S. and certain worldwide marketing, sales
and distribution rights to Dilacor XR(R) for $190.0 million in cash (payable as
set forth below) and future royalties. Watson also obtained the New Drug
Application, the trademark and customer lists for Dilacor XR(R). The terminated
partnership agreement granted Watson the right to earn royalties on RPR's sales
of Dilacor XR(R). Watson earned royalties of $27.2 million from such RPR sales
during 1996 and continued to earn royalties through June 30, 1997. RPR's sales
of Dilacor XR(R) in 1996 were approximately $140.0 million.
Watson obtained all worldwide rights with the exception of New Zealand,
The Republic of Korea and North Korea. Watson is responsible for obtaining all
approvals required to market Dilacor XR(R) outside of the U.S. Dilacor XR(R)
(diltiazem hydrochloride) has been available in the U.S. for the treatment of
hypertension since June 1992 and was approved for the treatment of chronic
stable angina in March 1995.
Watson has made payments of $95.0 million pursuant to the purchase of
the Dilacor XR(R) product rights. The remaining scheduled payments, excluding
royalties, are due as follows:
Due Date Amount
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January 1, 1998 $45.0 million
January 1, 1999 30.0 million
January 1, 2000 15.0 million
January 1, 2001 5.0 million
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Total $95.0 million
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Watson expects to use available cash on hand and future operating cash
flows to fund this acquisition.
Copies of the agreements between Watson and RPR and the Watson press
release dated June 30, 1997, are attached hereto.
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ITEM 7. Exhibits.
(c) Exhibits
<TABLE>
<S> <C>
10.1 License Agreement entered into as of June 30, 1997 between Rorer
Pharmaceutical Products, Inc. and Watson Laboratories, Inc.
10.2 Inventory Purchase Agreement entered into as of June 30, 1997 by
and between Rhone-Poulenc Rorer Pharmaceuticals, Inc. and Watson
Laboratories, Inc.
10.3 Manufacturing and Supply Agreement entered into as of June 30, 1997
by and between Rhone-Poulenc Rorer Pharmaceuticals, Inc. and Watson
Laboratories, Inc.
10.4 Agreement Regarding Partnership Termination entered into as of June
30, 1997 by and among Rhone-Poulenc Rorer Inc., Rhone-Poulenc Rorer
Pharmaceuticals, Inc., Watson Laboratories, Inc., Circa
Pharmaceuticals, Inc., and BOL, Inc.
99.1 Press Release of Watson Pharmaceuticals, Inc. relating to the
acquisition of rights to Dilacor XR(R).
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 14, 1997 WATSON PHARMACEUTICALS, INC.
By:
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Name: Allen Chao, Ph.D
Title: Chairman and Chief
Executive Officer
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WATSON PHARMACEUTICALS, INC.
EXHIBIT INDEX
FORM 8-K
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Page
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<S> <C> <C>
10.1 License Agreement entered into as of June 30, 1997 between
Rorer Pharmaceutical Products, Inc. and Watson Laboratories, Inc.
10.2 Inventory Purchase Agreement entered into as of June 30, 1997
by and between Rhone-Poulenc Rorer Pharmaceuticals, Inc. and
Watson Laboratories, Inc.
10.3 Manufacturing and Supply Agreement entered into as of June 30,
1997 by and between Rhone-Poulenc Rorer Pharmaceuticals, Inc.
and Watson Laboratories, Inc.
10.4 Agreement Regarding Partnership Termination entered into as
of June 30, 1997 by and among Rhone-Poulenc Rorer Inc.,
Rhone-Poulenc Rorer Pharmaceuticals, Inc., Watson Laboratories,
Inc., Circa Pharmaceuticals, Inc., and BOL, Inc.
99.1 Press Release of Watson Pharmaceuticals, Inc. relating to the
acquisition of rights to Dilacor XR(R).
</TABLE>
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EXHIBIT 10.1
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is entered into as of June 30,
1997 ("Effective Date"), between RORER PHARMACEUTICAL PRODUCTS INC., a Delaware
corporation with its principal office at 3711 Kennett Pike, Suite 200,
Greenville, Delaware 19807 ("RPPI") and WATSON LABORATORIES, INC., a Nevada
corporation with its principal office at 311 Bonnie Circle, Corona, California
91720 ("Watson").
R E C I T A L S:
WHEREAS, Watson and RPPI desire to enter into a transaction pursuant to
which, among other things: (i) RPPI will grant to Watson an exclusive license of
all of its rights throughout the Territory (as defined below) to market,
advertise, promote, sell and distribute the Royalty-Bearing Products (as defined
below); (ii) RPPI's Affiliate (as defined below) Rhone-Poulenc Rorer
Pharmaceuticals Inc. ("RPRPI") will sell to Watson, and Watson will purchase
from RPPI and RPRPI, certain inventory of and other assets related to the
Product; (iii) RPRPI will manufacture and supply the Product to Watson; and (iv)
RPPI will grant to Watson certain option rights with respect to RPPI's right,
title and interest to the Royalty-Bearing Products in the Territory, all on the
terms and conditions contained in this Agreement, the Manufacturing Agreement
(as defined below) and an Inventory Purchase Agreement (as below defined), of
even date herewith, between the parties;
NOW THEREFORE, in consideration of the mutual covenants and
consideration set forth herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
1.1 Definitions. As used herein, the following terms shall have the
meanings ascribed to them below:
"Act" shall mean the Federal Food, Drug and Cosmetic Act, as amended,
and the regulations promulgated under such Act.
"Affiliate" shall mean, when used with respect to a Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with the subject Person; provided, however, that with respect to RPPI,
only Rhone-Poulenc Rorer Inc. ("RPR") and Persons directly or indirectly
controlled by RPR shall be an Affiliate of RPPI for any provision of this
Agreement, or any of the Agreements contemplated hereby. For purposes of this
Agreement, "control" means the direct or indirect ownership of over 50% of the
outstanding voting securities of a Person, or the right to receive over
50% of the profits or earnings of a Person.
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"Bankruptcy Event" shall mean the Person in question becomes insolvent,
or a receiver or custodian is appointed for such Person, or voluntary or
involuntary proceedings by or against such Person are instituted in bankruptcy
or under any insolvency law, or proceedings are instituted by or against such
Person for corporate reorganization or the dissolution of such Person, which
proceedings, if involuntary, shall not have been dismissed within sixty (60)
days after the date of filing, or such Person makes an assignment for the
benefit of its creditors, or substantially all of the assets of such Person are
seized or attached and not released within sixty (60) days thereafter.
"Branded Versions" shall mean any and all versions of the Product and
any and all reformulations and Improvements thereon, and any bioequivalents
thereof, sold or transferred under the Licensed Trademark and/or any other
registered or unregistered trademark and any and all other products sold or
transferred under the License Trademark.
"Change of Control" shall mean (i) the direct or indirect, sale, lease
or other transfer of all or substantially all of the assets of a Person in one
or more transactions to any other Person or group of Persons acting in concert
as a partnership or other group (a "Group of Persons") other than an Affiliate
of such Person, and (ii) a Person or Group of Persons shall, as a result of a
merger or consolidation, tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial owner in
one or more transactions, within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, of securities of a Person or the entity surviving the
merger or consolidation representing 50% or more of the combined voting power of
the then outstanding securities of the Person in question ordinarily having the
right to vote in the election of directors.
"Consent Agreement" shall mean that certain Consent Agreement, dated as
of even date herewith, between Jago Research AG, Watson, Circa Pharmaceuticals,
Inc. and RPR.
"FDA" shall mean the Food and Drug Administration of the United States
Department of Health and Human Services, or any successor agency thereto.
"FDA Standards" shall mean the Act, the establishment license
requirements and the Current Good Manufacturing Practice regulations of the FDA
applicable to the Royalty-Bearing Products in question or, with respect to the
Royalty-Bearing Products, any manufacturing facility at which such
Royalty-Bearing Products are manufactured by or for RPPI, and all relevant
guidelines of the FDA.
"Generic Versions" shall mean any and all versions of the Product and
any and all reformulations and Improvements thereon, and any bioequivalents
thereof, sold or transferred without a trademark.
"Improvement" to a Royalty-Bearing Product shall mean any and all
inventions, discoveries, developments, modifications and improvements, whether
or not patented or patentable, relating to such Royalty-Bearing Product;
provided, however, that such
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Improvements must relate to any pharmaceutical preparation or formulation
consisting of diltiazem formulated for extended release using the delivery
technology licensed under the Jago License Agreement.
"Jago License Agreement" shall mean that certain Diltiazem SR
Development and License Agreement, dated August 10, 1988, between RPR (formerly
known as Rorer Group Inc.) and Jago Research AG, as amended.
"Licensed Trademark" means RPPI's Dilacor XR(R) trademark, including
all goodwill associated therewith; provided, however, in no event shall the term
"Licensed Trademark" be deemed to include the trade dress used by RPRPI or any
of its Affiliates with respect to the Product.
"Manufacturing Agreement" means that certain Manufacturing and Supply
Agreement, dated as of even date herewith, between Watson and RPRPI.
"Net Sales" shall mean, with respect to the Royalty-Bearing Products,
the gross amount invoiced on or in connection with the sale or other transfer of
Royalty-Bearing Products by Watson or its Affiliates or sublicensees appointed
by Watson to an un-Affiliated third party (other than a sale or transfer by
Watson or its Affiliates to a Watson sublicensee), (A) after subtracting all
applicable, bona fide trade and cash discounts, volume discounts and rebates, to
the extent actually paid, allowed or incurred on such sales or transfers, and
(B) taking into account all bona fide refunds and returns of such
Royalty-Bearing Product in the ordinary course of business.
"Person" shall mean any corporation, partnership, joint venture, other
entity or natural person.
"Product" shall mean the pharmaceutical preparation consisting of
diltiazem formulated for extended release using the delivery technology licensed
under the Jago License Agreement and currently marketed by RPRPI in the United
States of America under the Licensed Trademark.
"Regulatory Approval" shall mean, with respect to any country in the
Territory, filing for and receipt of all governmental and regulatory
registrations and approvals (including, but not limited to, approvals of all
final Royalty-Bearing Product labeling and all other data and documents of any
nature contained therein) required for the marketing and sale of any
Royalty-Bearing Product for the indication for which it is being marketed in
such country.
"Reserved Countries" shall mean New Zealand, the Republic of Korea and
North Korea.
"Royalty-Bearing Products" shall mean any and all Branded Versions and
Generic Versions.
"Territory" shall mean the entire world, excluding the Reserved
Countries.
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ARTICLE II
Marketing and Distribution Rights
2.1 Right to Market, Distribute and Sell the Royalty-Bearing Products.
(a) Subject to the terms and conditions of this Agreement, RPPI hereby
grants to Watson, during the term of this Agreement, the exclusive license to
all of RPPI's and its Affiliates' rights to market, advertise, promote,
distribute and sell the Royalty-Bearing Products throughout the Territory.
Watson accepts such license and agrees to use commercially reasonable efforts to
market, advertise, promote, distribute and sell the Royalty-Bearing Products in
the United States of America, and such other countries in the Territory as
Watson determines from time to time, all in accordance with the terms of this
Agreement.
(b) Subject to the terms and conditions of this Agreement, RPPI hereby
grants to Watson, and Watson hereby accepts, an exclusive right and license,
with the right to grant sublicenses on terms subject to and consistent with this
Agreement, all of RPPI's and its Affiliates' rights to use the Licensed
Trademark during the term of this Agreement in connection with the marketing,
advertising, promotion, distribution and sale of the Royalty-Bearing Products
throughout the Territory. During the term of this Agreement, except to the
extent necessary to perform its obligations under this Agreement and the
Manufacturing Agreement or in connection with the exercise of its rights with
respect to the Royalty-Bearing Products and/or the Licensed Trademark outside
the Territory, RPPI shall not use the Licensed Trademark or grant to any other
Person any rights to use the Licensed Trademark in the Territory. During the
term of this Agreement, Watson shall not use the Licensed Trademark or authorize
any of its sublicensees to use the Licensed Trademark for any purpose other than
in connection with the marketing, advertising, promotion, distribution and sale
of the Royalty-Bearing Products throughout the Territory and in making reports
to its shareholders, the Securities & Exchange Commission or any other
government entities.
(c) Nothing in this Agreement shall impair or limit the right and ability
of RPPI or any Affiliate of RPPI to make or have made Branded Versions and/or
Generic Versions within the Territory and to sell or transfer such products to
Affiliate(s) and/or un-Affiliated third parties for marketing, distribution,
sale or use in the Reserved Countries. Notwithstanding anything contained herein
to the contrary, RPRPI shall have the right, but not the obligation, during the
third calendar quarter of 1997 to continue to detail and promote the Product to
cardiologists in the United States through the distribution of Product samples
and promotional and other materials retained by Seller pursuant to Sections
2.2(a) and 2.2(d) respectively of the Inventory Purchase Agreement, dated of
even date herewith, between RPRPI and Watson.
(d) Subject to compliance with the terms of this Agreement and the Jago
License Agreement, Watson shall have the right to grant one or more Persons
exclusive or non-exclusive marketing, sales, sales agency and/or distribution
rights, with respect to any rights conferred upon Watson under this Agreement,
for one or more countries within the Territory, without the necessity of
obtaining the prior written consent of RPPI.
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(e) Watson shall not use the Licensed Trademark outside the Territory, nor
shall it sell the Royalty-Bearing Products to any Person (other than RPPI or its
Affiliates) that Watson knows or has reason to know, or believes, will sell such
Royalty-Bearing Product outside the Territory, either during the term of this
Agreement or after the expiration or termination hereof, notwithstanding
Watson's exercise of the Purchase Option, as hereinafter defined.
(f) The granting of the licenses set forth by this Section 2.1 is
conditioned upon Watson's timely payment of the amounts set forth in Sections
2.2(a)(i) and 2.5(a).
2.2 Annual Licensing Fees
(a) In consideration of the rights granted Watson under this Agreement,
Watson shall pay to RPPI, as specified below and by wire transfer to an account
specified in writing by RPPI, a licensing fee with respect to each calendar year
or portion thereof during the term of this Agreement in the amount and on the
date indicated below:
(i) With respect to the second half of calendar year 1997, the sum of
Forty Million Dollars ($40,000,000), due July 1, 1997;
(ii) With respect to calendar year 1998, the sum of Forty-Five Million
Dollars ($45,000,000), due within ten (10) business days after January 1, 1998;
(iii) With respect to calendar year 1999, the sum of Thirty Million
Dollars ($30,000,000), due within ten (10) business days after January 1, 1999;
(iv) With respect to calendar year 2000, the sum of Fifteen Million
Dollars ($15,000,000), due within ten (10) business days after January 1, 2000;
and
(v) With respect to calendar year 2001, the sum of Five Million Dollars
($5,000,000), due within ten (10) business days after January 1, 2001.
2.3 Royalties
(a) In further consideration of the rights granted to Watson under this
Agreement, Watson shall pay to RPPI the following royalties on Net Sales of
Royalty-Bearing Products in the Territory ("Royalties"):
(i) in respect of Net Sales resulting from sales or transfers of a
Branded Version, a Royalty of five percent (5.0%) of Net Sales attributable to
such Royalty-Bearing Product shall be paid by Watson to RPPI; provided, however,
such Royalty shall be two percent (2.0%) of the Net Sales attributable to any
specific Branded Version sold or transferred in a specific country (other than
the United States of America) if (A) at least one extended release, once-a-day
diltiazem product labeled for cardiovascular indications is being sold by a
third party competitor in that country at the time such
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Branded Version is initially launched for sale in that country, and (B) such
Branded Version is launched with a published list price or governmentally
regulated price (or the closest analogous price if both such prices are
inapplicable in that country) that is 75.0% or less of the comparable price
charged for the substantially equivalent product that is the Market Leader (as
defined below) in that country. "Market Leader" means an extended release,
once-a-day diltiazem product labeled for cardiovascular indications with the
largest annual sales volume in that country, measured in the applicable local
currency.
(ii) in respect of Net Sales resulting from sales or transfers of a
Generic Version, a Royalty of two percent (2.0%) of Net Sales attributable to
such Royalty-Bearing Product shall be paid by Watson to RPPI .
(b) Royalties payable in respect of sales outside the United States of
America will be payable by Watson to RPPI at its offices in Greenville, Delaware
in United States Dollars calculated in accordance with the following exchange
rate policies and procedures: Each calendar quarter Watson shall translate Net
Sales made in each country outside the United States of America into United
States Dollars at the average rate of exchange for the applicable currency for
such quarter, based upon daily exchange rate information reported in the Wall
Street Journal, New York edition.
(c) With respect to Royalties owed with respect to sales or transfers in
the United States of America, Watson shall deliver to RPPI at its offices in
Greenville, Delaware, within forty-five (45) days after the close of each
calendar quarter, a written report of Watson's best good faith estimates of Net
Sales during such calendar quarter and corresponding estimated Royalties owed,
which report shall be accompanied by the estimated Royalties due for such
calendar quarter as shown on the report. With respect to Royalties owed with
respect to sales or transfers outside of the United States of America, Watson
shall deliver to RPPI at its offices in Greenville, Delaware, within sixty (60)
days after the close of each calendar quarter a written report of Watson's best
good faith estimates of Net Sales during such calendar quarter, the applicable
currency conversion rates and corresponding estimated Royalties owed, separately
with respect to each country in the Territory, which report shall be accompanied
by the estimated Royalties due for such calendar quarter as shown on the report.
Each report with respect to a particular calendar quarter shall also contain a
reconciliation of the report for the preceding calendar quarter with the final
figures for Net Sales as reported on the formal books of Watson and its
Affiliates and sublicensees, and any adjustments indicated thereby will be added
or subtracted, as the case may be, to or from the current calendar quarter's
payment.
(d) With respect to Royalties payable on sales or transfers outside the
United States of America, Watson may deduct and withhold from such payments for
or on account of income taxes of RPPI if and as required to comply with
applicable local law. In such event, Watson shall timely pay or remit all
amounts so withheld to the appropriate taxing authorities on RPPI's behalf and
promptly provide RPPI with a written tax receipt for such amount issued by such
taxing authority. Watson shall reasonably cooperate with RPPI in lawfully
avoiding or mitigating any such requirement and shall obtain for RPPI, at its
request, any other documentation, receipt or certificate necessary
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or desirable for RPPI to apply for and/or receive any corresponding tax refund
or credit under any applicable tax law or treaty.
2.4 Records and Audit Rights.
(a) Watson shall maintain, and cause to be maintained by its Affiliates and
other parties to which Watson or its Affiliates may grant marketing, sales and
distribution rights under this Agreement, complete and accurate books and
records with respect to Net Sales and all related transactions and all Royalties
paid or payable by Watson under this Agreement, along with such other
reconciliation and other information as may be necessary or desirable to
calculate or verify all Net Sales and the consideration paid or payable by
Watson under this Agreement.
(b) Watson and such Affiliates and other parties shall maintain such books
and records in accordance with generally accepted accounting principles
consistently applied and for a period of three (3) years after the submission of
each report required to be submitted by Watson to RPPI under this Agreement;
provided, however, that if there is a good faith dispute between the parties
continuing at the end of any such three (3) year period with respect to such
books or records, then the time period hereunder to maintain such books and
records under dispute shall be extended until such time as the dispute is
finally resolved.
(c) RPPI shall have the right itself or through an independent accountant
selected by it and acceptable to and approved by Watson (which approval shall
not be unreasonably withheld or delayed) to have access to the relevant books
and records during reasonable business hours for the purpose of verifying,
inspecting or auditing, at the sole expense of RPPI (except as provided for in
Section 2.4(d) below), the Net Sales by country and the Royalties provided for
in this Agreement for any of the preceding three (3) years, but this right may
not be exercised more than once in any calendar year. RPPI shall solicit or
receive only information relating to or necessary or desirable to verify or
audit the accuracy of the information reported and the payments made or due
under this Agreement. Watson shall be entitled to withhold approval of an
accountant which RPPI nominates unless the accountant agrees to sign a
confidentiality agreement with Watson which shall obligate such accountant to
hold the information he receives from Watson in confidence, except for
disclosure to RPPI of information necessary to establish the accuracy of the
reports and amounts paid or payable to RPPI. Such audit rights shall survive for
three (3) years after the expiration or termination of this Agreement.
(d) Any underpayment determined pursuant to subparagraph (c) above shall be
paid within thirty (30) days of the delivery of a detailed written accountants'
report to the parties hereto. In the event of any such underpayment of ten
percent (10%) or more, Watson shall also at the same time reimburse RPPI for the
out-of-pocket costs of the verification, inspection or audit conducted. Any
overpayment shall be credited to the next payment due from Watson. If no further
payments from Watson will be due then a refund of any such overpayment will be
made within sixty (60) days of the audit.
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(e) The provisions of this Section 2.4 shall survive the expiration or
sooner termination of the term of this Agreement.
2.5 Purchase Option.
(a) Watson shall have the exclusive right and option described in this
Section 2.5 (the "Purchase Option") to acquire from RPPI, upon the scheduled
termination of this Agreement as set forth in Section 5.1 hereof, (i) all of
RPPI's rights to market, sell and distribute the Royalty-Bearing Products in the
Territory (including the assignment of rights under the Jago License Agreement
set forth in the Consent Agreement) and (ii) an exclusive, perpetual license to
use the Licensed Trademark in the Territory (collectively, the "Royalty-Bearing
Product Rights").
(b) The purchase price for the Royalty-Bearing Product Rights shall be
Fifteen Million Dollars ($15,000,000.00) (the "Rights Purchase Price"). The
Rights Purchase Price shall be paid in advance by Watson to RPPI on July 1,
1997, by wire transfer to an account specified in writing by RPPI.
(c) The Purchase Option shall be conclusively deemed to have been exercised
by Watson as of February 1, 2001, unless Watson delivers to RPPI a written
notice specifically stating its election not to exercise the Purchase Option;
provided, however, that such notice shall be effective solely if it is given
between December 1, 2000 and January 31, 2001; and provided further that time is
expressly made of the essence for purposes of this Section 2.5(c). After
delivery of such a notice timely electing not to exercise the Purchase Option,
RPPI shall within thirty (30) days after the scheduled expiration of this
Agreement in accordance with Section 5.1 hereof return the Rights Purchase Price
to Watson, together with interest accrued thereon at 6.0% per annum.
(d) In the event Watson exercises or is deemed to have exercised the
Purchase Option during the time period set forth in Section 2.5(c) or as
provided in Section 2.5(e), then the purchase hereunder of the Royalty-Bearing
Product Rights shall be effective as of, and shall occur at 11:59 p.m. on, the
scheduled expiration of this Agreement in accordance with Section 5.1 hereof and
the parties shall promptly execute such assignments and other documents of
conveyance and transfer as may be necessary or appropriate in order to transfer
the Royalty-Bearing Product Rights to Watson on and as of that date and time.
(e) Notwithstanding anything herein to the contrary, in the event of a
Change of Control of Watson, RPPI shall have the right within 60 days of such
Change of Control of Watson to accelerate the Purchase Option and deem it duly
exercised, such right to be exercised by delivery to Watson of a written notice
declaring the Purchase Option so accelerated and exercised. In such event any
rights hereunder of Watson to elect not to exercise the Purchase Option and
receive a refund of the Rights Purchase Price shall terminate.
(f) Watson shall have the unconditional right during the term of this
Agreement to make Improvements to the formulation of any Royalty-Bearing
Product.
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All such Improvements created or developed pursuant to the terms hereof, by or
on behalf of Watson, during the term of this Agreement shall, as between RPPI
and Watson, be the property of Watson, provided, however, that Watson's rights
in such Improvements do not include any rights to own or use the underlying
formulation separate from the rights granted hereunder. In the event that Watson
does not exercise the Purchase Option, Watson shall, upon termination of this
Agreement, grant RPPI a nonexclusive, worldwide, perpetual, royalty-free
license, with the right to sublicense and assign such rights, in form and
substance satisfactory to each of the parties hereto, to use the Improvements
and the Research (as hereinafter defined).
(g) Watson hereby grants to RPPI, for the term of this Agreement, a
non-exclusive, royalty-free license, (with the right to sublicense and assign
such rights) to use any and all Improvements and Research in connection with the
development, manufacture, distribution, marketing, promotion, advertising and
sale of Royalty-Bearing Products outside the Territory.
(h) All marketing, clinical research and similar information and/or data
developed by Watson and its Affiliates relating to the Royalty-Bearing Products
(the "Research") shall remain the property of Watson or its Affiliates.
ARTICLE III
General Terms and Conditions
3.1 Confidentiality; Press Releases.
(a) Pursuant to the terms hereof, from time to time during the term of this
Agreement, each of Watson and RPPI and/or its respective Affiliates (in such
capacity, the "Disclosing Party") have disclosed and will be disclosing to the
other party and/or its Affiliates (in such capacity, the "Receiving Party")
certain proprietary information, technical data, trade secrets and know-how of
the Disclosing Party including, without limitation, know-how, plans, designs,
methods, formulations, ingredients, samples, processes, machines, processing and
control information, Royalty-Bearing Product performance data, manuals, INDs,
NDAs, Regulatory Approvals, the content of any unpublished patent applications,
drawings, formulae, devices, structures, models, prototypes, data, test results,
photographs, film, techniques, apparatus, tapes, disks, unpublished trademarks,
trade names and copyrights, customer lists, supplier lists, operating methods
and procedures, marketing, distribution and sales methods and systems, sales
figures, projections, finances and other business information. The Receiving
Party shall, during the term of this Agreement, and for seven (7) years after
the expiration or sooner termination of the term of this Agreement, make no use
of such confidential information except to advance the purposes of this
Agreement and of the agreements contemplated herein or therein or executed
concurrently herewith in accordance with their provisions, and shall use the
same efforts to keep secret and prevent the disclosure of such confidential
information to third parties as it would use with respect to its own
confidential information. Information disclosed by the Disclosing Party shall
remain the sole and absolute property of the Disclosing Party, subject to the
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rights granted in this Agreement and the transactions contemplated herein. The
above restrictions on the use and disclosure of information shall not apply to
any information which: (i) is already known to the Receiving Party at the time
of disclosure, as demonstrated by competent proof; (ii) is or becomes generally
available to the public other than through any act or omission of the Receiving
Party in breach of this Agreement; (iii) is acquired by the Receiving Party from
a third party who is not, directly or indirectly, under an obligation of
confidentiality to the Disclosing Party with respect to same; (iv) is required
to be disclosed pursuant to applicable law, rule or regulation; (v) is required
to be disclosed to government regulatory authorities to obtain Regulatory
Approval for the Royalty-Bearing Products or to respond to a regulatory or
governmental inquiry concerning the Royalty-Bearing Products; or (vi) is
developed independently by the Receiving Party without use, direct or indirect,
of information that is required to be held confidential hereunder.
(b) Notwithstanding this Section 3.1, but still subject to compliance with
the terms of the Jago License Agreement, Watson shall be permitted to disclose
to its distributors, wholesalers and other direct customers such confidential
information relating to the Royalty-Bearing Products as Watson shall reasonably
determine to be necessary in order to effectively market and distribute the
Royalty-Bearing Products, provided that such entities undertake the
substantially same confidentiality obligation as Watson has with respect to
RPPI's confidential information.
(c) Except as may be required by applicable laws, rules or regulations,
neither party will originate any publicity, press or news release, or other
public announcement, written or oral, whether to the public press or otherwise,
relating to this Agreement and the other agreements contemplated hereby or
thereby or executed concurrently therewith, the transactions contemplated hereby
or thereby, or to the existence of an arrangement between the parties, without
the prior written approval of the other party. In the event disclosure of this
Agreement, any of the agreements referred to herein or therein, any of the terms
and conditions of this Agreement or such agreements, or any of the transactions
contemplated by this Agreement or such agreements, is required by applicable
law, rules or regulations, then the party required to so disclose such
information shall, to the extent possible, provide to the other party for its
prior approval (such approval not to be unreasonably withheld or delayed) a
written copy of such public announcement. When practicable, the disclosing party
will provide such copy to the other party at least three (3) business days prior
to disclosure.
(d) Except as otherwise provided herein, neither party shall use the name
of the other for marketing, advertising or promotional claims without the prior
written consent of the other party.
(e) The provisions of this Section 3.1 shall survive the expiration or
sooner termination of this Agreement.
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3.2 Noncompetition.
(a) RPPI acknowledges and agrees that Watson's business will be conducted
throughout the Territory and that Watson would be irreparably damaged if RPPI
were to provide Royalty-Bearing Products, rights or services to any person or
entity in violation of the restrictions contained in this Agreement.
Accordingly, as an inducement to Watson to enter into this Agreement, RPPI
agrees, subject to Section 2.1(c), that during the term of this Agreement and,
assuming the Purchase Option set forth in Section 2.5 is exercised or deemed
exercised by Watson, for two (2) years thereafter, RPPI shall not, and will
cause each of its Affiliates not to, directly or indirectly, without the prior
written consent of Watson and except as necessary to perform its obligations
under this Agreement and the Manufacturing Agreement: (i) in the U.S.A. produce,
supply, market, distribute or sell any pharmaceutical product containing
diltiazem that competes with the Product, or acquire, own or maintain an
interest in any Person that in the U.S.A., directly or indirectly, produces,
supplies, markets, distributes or sells any such pharmaceutical product, as a
direct or indirect proprietor, partner, stockholder, officer, director,
principal, agent or trustee; or (ii) outside the U.S.A. but in the Territory,
produce, supply, market, distribute or sell the Product or any bioequivalent
pharmaceutical product, or acquire, own or maintain an interest in any Person
that outside the U.S.A. but in the Territory, directly or indirectly, produces,
supplies, markets, distributes or sells the Product or any bioequivalent
pharmaceutical product, as a direct or indirect proprietor, partner,
stockholder, officer, director, principal, agent or trustee; provided, however,
that nothing herein shall in any way limit or restrict RPPI's and its
Affiliates' rights to engage in any of such activities, or to acquire any such
interest, solely in connection with its exercise of its rights with respect to
the Royalty-Bearing Products, or any other product that is covered by this
non-competition provision, outside the Territory.
(b) Watson acknowledges and agrees that RPPI's business will be conducted
throughout the Territory in the event that this Agreement terminates without
exercise of the Purchase Option and that RPPI would be irreparably damaged if
Watson were to provide Royalty-Bearing Products, rights or services to any
person or entity in violation of the restrictions contained in this Agreement.
Accordingly, as an inducement to RPPI to enter into this Agreement, upon the
termination or expiration of this Agreement at a time when Watson shall not
theretofore have exercised the Purchase Option, and for five (5) years
thereafter, Watson shall not, and will cause each of its Affiliates not to,
directly or indirectly, produce, supply, market, distribute or sell the Product
or any bioequivalent pharmaceutical product anywhere in the world or acquire,
own or maintain any interest in any Person that anywhere in the world, directly
or indirectly, produces, supplies, markets, distributes or sells the Product or
any bioequivalent pharmaceutical product, as a direct or indirect proprietor,
partner, stockholder, officer, director, principal, agent or trustee.
(c) RPPI or Watson (as the case may be) will not be considered in breach of
Section 3.2(a) or 3.2(b), as applicable, by reason of an acquisition of a Person
if (i) the activity of such Person which would cause such breach in the absence
of this provision is not the primary business of such Person; (ii) prior to the
closing of such acquisition said party commits in writing to the other party, on
terms acceptable to such other party (not to be unreasonably withheld or
delayed), to promptly divest itself of the offending assets
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and/or activity and (iii) such party diligently and reasonably pursues such
divestiture and, in the event such divestiture is not completed within twelve
(12) months after the date of such acquisition, such Person thereupon ceases all
such activity.
(d) Each party and its Affiliates recognize that the territorial, time and
scope limitations set forth in this Section 3.2 are reasonable and are required
for the protection of the other party and in the event that any such
territorial, time or scope limitation is deemed to be unreasonable by a court of
competent jurisdiction, RPPI and Watson agree to the reduction of either or any
of said territorial, time or scope limitations to such an area, period or scope
as said court shall deem reasonable under the circumstances. In the event of any
breach of Section 3.2(a) or 3.2(b), the time period of the breached covenant
shall be extended for the period of such breach.
(e) Each party specifically recognizes that any breach by it of this
Section 3.2 will cause irreparable injury to the other party and that actual
damages may be difficult to ascertain, and in any event, may be inadequate.
Accordingly (and without limiting the availability of legal or equitable,
including injunctive, remedies under any other provisions of this Agreement),
such party agrees that in the event of any such breach, such other party shall
be entitled to injunctive relief in addition to such other legal and equitable
remedies that may be available.
(f) The provisions of this Section 3.2 shall survive the expiration or
sooner termination of this Agreement.
3.3 Trademark Rights
(a) Maintenance
(i) Watson shall undertake and shall bear all costs of the maintenance
of the Licensed Trademark in the Territory; provided, however, that Watson shall
not abandon, let lapse or otherwise fail to maintain such Licensed Trademark in
any jurisdiction in which it is registered on the Effective Date without the
consent of RPPI. In connection with Watson's maintenance of the Licensed
Trademark, RPPI shall cooperate with Watson, at Watson's expense, by executing
any necessary documents, supplying Watson with specimens and performing other
reasonable acts, as requested by Watson in writing from time-to-time.
(ii) Watson shall not use any variation of the Licensed Trademark, or
any new trademark in connection with the Branded Versions in the Territory,
without the prior written consent of RPPI, which consent shall not be
unreasonably withheld or delayed. In the event RPPI gives its prior written
approval for the use of such a variation or new trademark, Watson may apply for
a registration of that variation or trademark in the United States Patent and
Trademark Office or the trademark office or other appropriate similar office in
any foreign jurisdiction in the Territory ("PTO") in the name of RPPI or its
designee. If such an application is filed by Watson, upon the receipt by Watson
of a serial number for an application from the PTO, the trademark shall become a
Licensed Trademark hereunder and be subject to the terms of this Agreement. All
costs of filing
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and prosecuting any such application and maintaining any registration resulting
therefrom shall be paid by Watson. No additional licensing fees shall be owed
Watson for the use by Watson of such variations or new trademarks referred to
herein.
(iii) In foreign jurisdictions in the Territory where registered user
agreements apply, the parties will promptly execute and file with the
appropriate authority all required instruments or agreements relating to this
Agreement and the Licensed Trademark.
(b) Infringement or Other Actions.
(i) If either party shall become aware of any infringement or
threatened infringement of the Licensed Trademark in the Territory or any unfair
competition, disparagement or other tortious act by any third party in relation
to the Licensed Trademark or Royalty-Bearing Products in the Territory, then the
party having such knowledge shall give notice to the other within ten (10) days
of becoming aware of such infringement, unfair competition, disparagement or
threatened infringement, unfair competition, disparagement or other tortious
act.
(ii) Watson shall have the right to take such action as it deems
appropriate to protect and enforce the Licensed Trademark in the Territory,
including but not limited to bringing an action, suit or other appropriate
proceeding to prevent or eliminate the infringement of such Licensed Trademark,
or the unfair competition, disparagement or other tortious act by any third
party in relation to the Licensed Trademark or Royalty-Bearing Products in the
Territory. RPPI agrees to cooperate with Watson in any reasonable manner in any
such action, suit or proceeding, at Watson's expense, including joining as a
party to such action, suit or proceeding, if necessary to maintain standing.
(iii) Watson shall consult with RPPI with respect to its decision
whether to take any action of the nature specified in Section 3.3(b)(ii), giving
due consideration to RPPI's views with respect to the necessity or desirability
of taking such action. Watson further agrees that it will take action of the
nature specified in Section 3.3(b)(ii) if, in Watson's reasonable business
judgment, after considering the value of the Licensed Trademark and the
Royalty-Bearing Products and the cost of such action and giving due
consideration to RPPI's right of reversion under Section 5.2 hereof, such action
is commercially reasonable; provided, however, that nothing in this Section
3.3(b)(iii) shall in any way diminish or reduce Watson's obligations under
Section 3.5(a) hereof.
(c) Watson acknowledges that as between Watson and RPPI the Licensed
Trademark belongs to RPPI.
(d) During the term of this Agreement and thereafter Watson shall not
challenge RPPI's ownership in or right to use the Licensed Trademark or attempt
to register the Licensed Trademark in its own name.
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3.4 Third Party Claims
(a) If either party shall become aware of any action, suit or proceeding or
threat of action, suit or proceeding, by a third party alleging that the use of
the Licensed Trademark, or manufacture, use or sale of Royalty-Bearing Products
in the Territory infringes a trademark or violates any other proprietary right
of any third party, the party so aware shall promptly notify the other party of
the same and fully disclose the basis therefor.
(b) Watson shall use commercially reasonable efforts to defend such action,
suit or proceeding within the Territory if in Watson's reasonable business
judgment, after considering the value of the Licensed Trademark and
Royalty-Bearing Products and the cost of each such action, suit or proceeding,
and giving due consideration to RPPI's right of reversion under Section 5.2
hereof, such action, suit or proceeding is commercially reasonable; provided,
however, that nothing in this Section 3.4(b) shall diminish or reduce Watson's
obligations under Section 3.5(a) hereof. Watson will keep RPPI fully informed
with respect to all significant aspects of such action, suit or proceeding. RPPI
shall assist Watson, at Watson's expense, by providing information in the
possession and control of RPPI and otherwise cooperating with Watson as may be
reasonably necessary to such defense. RPPI shall have the right at any time, and
at its expense, to consult with Watson with respect to any such action, suit or
proceeding or to take control of such action, suit or proceeding should Watson
elect not to defend or settle it. Watson shall not enter into any agreement or
settle any action, suit or proceeding specified in this Section 3.4 without the
express written consent of RPPI, which consent shall not be unreasonably
withheld or delayed, if such agreement would in any way limit or reduce the
nature or scope of Watson's or any other Person's rights with respect to the
Licensed Trademark or the Royalty-Bearing Products at the time such agreement is
executed or at a future date. All amounts awarded as damages, profits or
otherwise in connection with any such litigation shall be paid to and become the
sole property of Watson.
3.5 Quality Control
(a) Watson will use commercially reasonable efforts to advertise and
promote the Royalty-Bearing Products, and to use the Licensed Trademark in
connection with the distribution, advertising, marketing and sale of the Branded
Versions, in the U.S.A., and such other countries in the Territory as Watson
determines from time to time, all in accordance with the terms of this
Agreement.
(b) Watson and its Affiliates shall not use the Licensed Trademark in any
manner which will tarnish or disparage the Licensed Trademark or otherwise have
a material adverse effect upon the Licensed Trademark or the goodwill associated
therewith.
(c) The Licensed Trademark shall be used in substantially the same form as
it was heretofore used by RPPI or its Affiliates in connection with the Product.
In the event Watson or any of its Affiliates wishes to use the Licensed
Trademark in a substantially different form, Watson shall submit such different
form to RPPI for approval, which shall not be unreasonably withheld or delayed.
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(d) Watson agrees that the nature and quality of all Royalty-Bearing
Products, and the advertising, packaging and other materials associated
therewith, sold by Watson or any of its distributors bearing the Licensed
Trademark shall be of a quality at least as high as the Product heretofore sold
under the Licensed Trademark and the advertising, packaging and other materials
heretofore associated therewith, as the case may be. Watson shall, and shall
cause its Affiliates to, comply with applicable foreign, federal, state and
local laws, rules and regulations in distributing, marketing, promoting,
advertising, selling, storing and packaging the Royalty-Bearing Products,
including without limitation all FDA Standards and all applicable portions of
the Regulatory Approvals for the Royalty-Bearing Products.
(e) RPPI shall have the following rights to exercise quality control over
Watson's use of the License Trademark to assure itself of Watson's adherence to
the standards set forth in Sections 3.5(b), (c) and (d):
(i) Watson shall upon request by RPPI, from time to time, submit to
RPPI a reasonable number of samples of any Royalty-Bearing Product and any
packaging, advertising and other materials which bear or are used with the
Licensed Trademark, provided however, that nothing in this Section 3.5 shall be
deemed to give RPPI the right to preapprove, prior to the initial dissemination
thereof, the advertising, packaging, and other materials used by Watson in
connection with the Royalty-Bearing Products; and
(ii) With respect to any Royalty-Bearing Product that RPPI does not
manufacture or have manufactured for Watson, RPPI shall have the right, during
regular business hours, after reasonable advance written notice to Watson, to
undertake up to two (2) inspections per annum of any facilities used to
manufacture or store such Royalty-Bearing Product.
(f) In the event of a material breach of any of the quality control
provisions set forth in this Section 3.5 by Watson or any of its Affiliates,
RPPI shall provide Watson with written notice specifying in detail the nature of
the alleged breach. Watson shall then have 60 business days, from its receipt of
such notice, to cure the breach. If Watson fails to do so by the end of such
60-business day period, RPPI shall provide Watson with additional written notice
of such failure and the parties shall then endeavor to cooperate and negotiate
in good faith, for a period of 20 business days, their dispute concerning such
alleged breach of the Agreement. If the parties do not resolve their dispute at
the expiration of the foregoing negotiation period, RPPI shall be entitled to
bring suit against Watson hereof seeking a declaratory judgment that Watson has
materially breached this Agreement and injunctive relief as appropriate to
prevent Watson's further breaches of the quality control provisions. Watson
agrees that a material breach of the quality control provisions set forth in
this Section 3.5 would constitute irreparable harm to RPPI, entitling RPPI to
such injunctive relief appropriate under the circumstances
3.6 Adverse Event Reports.
Each of RPPI and Watson shall report to the other potentially serious
alleged adverse drug experiences with respect to the Royalty-Bearing Products of
which it becomes aware
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promptly and in no event later than five (5) days after initial receipt of the
information by such party. Each such report shall identify lot numbers and
customers affected, if known. Each of RPPI and Watson will report to the other
party summaries of other adverse drug experiences with respect to the
Royalty-Bearing Products of which it becomes aware every twelve (12) months. The
terms of this Section 3.6 will survive the expiration or sooner termination of
this Agreement.
ARTICLE IV
Indemnification
4.1 In order to distribute among themselves the responsibility for claims
arising out of this Agreement, and except as otherwise specifically provided for
herein, the parties agree as follows:
(a) Watson shall defend, indemnify and hold RPPI its Affiliates, and
their respective officers, directors, agents, employees and shareholders
(collectively, "RPPI Indemnitees") harmless, from and against, any and all
losses, obligations, liabilities, penalties, and damages (including but not
limited to compensatory and punitive damages), costs and expenses (including
reasonable attorneys' fees), which the RPPI Indemnities may incur or suffer, and
all deficiencies, actions (including without limitation, any proceedings to
establish insurance coverage), claims, suits, legal, administrative,
arbitration, governmental or other proceedings or investigations, and judgments,
with which any of them may be faced arising out of (1) the manufacture (with
respect to Royalty-Bearing Products not supplied by RPPI or any of its
Affiliates, directly or indirectly), storage, handling or use of the
Royalty-Bearing Products or the marketing, advertising, promotion, distribution
or sale of the Royalty-Bearing Products by Watson and its Affiliates and other
parties to which Watson or its Affiliates may grant marketing, sales and
distribution rights under this Agreement; and (2) the enforcement by the RPPI
Indemnitees of their rights under this Section 4.1(a).
(b) If any action, claim, suit, proceeding or investigation arises as
to which a right of indemnification provided in this Article IV applies, the
RPPI Indemnitee in question (the "indemnified party"), shall promptly notify the
party obligated under this Article IV to indemnify the indemnified party (the
"indemnifying party") thereof in writing, and allow the indemnifying party and
its insurers the opportunity to assume direction and control of the defense
against such action, claim, suit, proceeding or investigation, at its sole
expense, including without limitation, the settlement thereof at the sole option
of the indemnifying party or its insurers to the extent that the indemnified
party's liability is not thereby invoked. The indemnified party shall fully
cooperate with the indemnifying party and its insurer in the disposition of any
such matter and the indemnified party will have the right and option to
participate in (but not control) the defense of any action, claim, suit,
proceeding or investigation as to which this Article IV applies, with separate
counsel at its election and cost. If the indemnifying party fails or declines to
assume the defense of any such action, claim, suit, proceeding or investigation
within thirty (30) days after notice thereof, the indemnified party may assume
the defense thereof for the account and at the risk of the indemnifying party.
The indemnifying party
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shall pay promptly to the indemnified party any losses, obligations,
liabilities, penalties, damages, judgments, reasonable costs and expenses
(including reasonable legal fees) to which the indemnity under this Article IV
applies, as incurred.
4.2 The provisions of this Article IV shall survive the expiration or
sooner termination of the term of this Agreement.
ARTICLE V
Term and Rights on Expiration or Termination
5.1 The term of this Agreement shall commence on the Effective Date and
shall continue until December 31, 2001.
5.2 Upon the termination or expiration of this Agreement at a time when
Watson shall not have theretofore exercised the Purchase Option: (i) all rights
granted hereunder to Watson with respect to the Royalty-Bearing Products, and
the Licensed Trademark shall revert to RPPI; (ii) Watson shall cease marketing,
advertising, promoting, distributing and selling the Royalty-Bearing Products
and using the Licensed Trademark; and (iii) Watson shall return to RPPI all
written or other materials, including all preclinical and clinical research and
development data, if any, relating to the Royalty-Bearing Products that is in
the possession or control of Watson or its Affiliates; provided, however, that,
unless RPPI or one of its Affiliates shall have elected to acquire all of the
stock of Royalty-Bearing Products that Watson and its Affiliates possess or
control or have bona fide commitments to purchase from third parties at a price
equal to the amount Watson or such Affiliate paid or is committed to pay for the
same, Watson and its Affiliates shall have one hundred eighty (180) days in
which to sell out its stock of any Royalty-Bearing Products it possesses or has
committed to purchase under this Agreement (it being understood that Watson's
payment obligations to RPPI under this Agreement shall continue to apply to any
such sales).
ARTICLE VI
Default
6.1 The occurrence of any one or more of the following acts, events or
occurrences shall constitute an "Event of Default" under this Agreement:
(a) Watson shall fail to pay to RPPI when due any licensing fee under
Section 2.2 above or any Royalty under Section 2.3 above, and such failure shall
continue for more than sixty (60) days after notice thereof from RPPI; or
(b) either party commits a material breach of this Agreement or the
Manufacturing Agreement, or materially defaults in the performance or observance
of any provision of this Agreement or the Manufacturing Agreement, and fails to
remedy such breach or default within one hundred eighty (180) days after receipt
of notice thereof.
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Article VII
Remedies
7.1 Immediately upon the occurrence of any Event of Default by RPPI
pursuant to Section 6.1 hereof, then Watson shall have the right to terminate
this Agreement, exercisable by delivering written notice thereof to RPPI, and/or
to pursue any and all remedies available to it at law or in equity including,
without limitation, the right to seek to recover from RPPI any and all damages
and losses of any nature whatsoever (including, without limitation,
consequential damages, lost profits, and direct damages); provided, however,
that, without in any way limiting Watson's right to recover damages, RPPI shall
not be obliged under any such circumstance to refund all or any portion of any
licensing fee paid by Watson under Section 2.2 above.
7.2 Immediately upon the occurrence of any Event of Default by Watson
pursuant to Section 6.1 hereof, RPPI shall have the right to terminate this
Agreement, exercisable by delivering written notice thereof to Watson, and/or to
pursue any and all remedies available to it at law or in equity including,
without limitation, the right to seek to recover from Watson any and all damages
and losses of any nature whatsoever (including, without limitation,
consequential damages, lost profits, and direct damage).
7.3 The parties expressly acknowledge that the remedy provisions contained
in this Article are reasonable, considering the intended nature and scope of
this Agreement.
7.4 Without limiting the indemnification rights set forth in Article IV
hereof, if either party terminates this Agreement in accordance with the terms
herein, the terminating party shall owe no statutory termination penalty or
indemnity or other similar payment that might otherwise be due under local law
to the terminated party on account of such termination.
7.5 The obligations of RPPI and Watson under this Agreement shall be
subject to any delays or non-performance caused by: acts of God, earthquakes,
fires, floods, explosion, sabotage, riot, accidents; regulatory, governmental,
or military action or inaction; strikes, lockouts or labor trouble; perils of
the sea; or failure or delay in performance by third parties, including
suppliers and service providers; or any other cause beyond the reasonable
control of either party. The party which is not performing its obligations under
this Agreement as a result of any such event of force majeure shall use
commercially reasonable efforts to resume compliance with this Agreement as soon
as possible.
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ARTICLE VIII
Certain Additional Covenants
8.1 During the term of this Agreement, each of RPPI and its Affiliates
shall:
(a) Comply with, perform, observe and enforce in all material respects
its obligations, if any, under the provisions of the Jago License Agreement to
the extent such obligations survive as its respective responsibility after the
Effective Date;
(b) Provide Watson in a timely manner, but in no event less than thirty
(30) days following the request therefor, all information in RPPI's possession
or control which Watson reasonably requests regarding the Royalty-Bearing
Products in order to comply with applicable foreign, federal and state laws.
8.2 During the term of this Agreement, each of Watson and its Affiliates
shall:
(a) Comply with, perform, observe and enforce in all material respects
its obligations under the provisions of the Jago License Agreement to the extent
such obligations are its respective responsibility after the Effective Date.
(b) Provide RPPI in a timely manner, but in no event less than thirty
(30) days following the request therefor, all information in Watson's possession
or control which RPPI reasonably requests regarding the Royalty-Bearing Product
in order to comply with applicable foreign, federal and state laws.
ARTICLE IX
Miscellaneous
9.1 In making and performing this Agreement, the parties are acting and
shall act as independent contractors. Nothing in this Agreement shall be deemed
to create an agency, joint venture or partnership relationship between the
parties hereto. Neither party shall have the authority to obligate the other
party in any respect, and neither party shall hold itself out as having any such
authority. All personnel of RPPI shall be solely employees of RPPI and shall not
represent themselves as employees of Watson. All personnel of Watson shall be
solely employees of Watson and shall not represent themselves as employees of
RPPI.
9.2 Neither RPPI nor Watson may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the other
party, which shall not be unreasonably withheld or delayed. No such assignment
shall relieve assignor of any of its obligations or liabilities under this
Agreement.
9.3 This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
contained herein shall give to any other Person any benefit or any legal or
equitable right, remedy or claim.
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9.4 This Agreement may only be modified, amended or supplemented by an
instrument in writing executed by RPPI and Watson.
9.5 No term or provision hereof will be considered waived by either party,
and no breach excused by either party, unless such waiver or consent is in
writing signed on behalf of the party against whom the waiver is asserted. No
consent by either party to, or waiver of, a breach by either party, whether
express or implied, will constitute a consent to, waiver of, or excuse of any
other, different, or subsequent breach by either party.
9.6 All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be delivered personally
or sent by facsimile transmission, air courier, or registered or certified mail,
return receipt requested, addressed as follows:
If to Watson: If to RPPI:
Watson Laboratories, Inc. c/o Rhone-Poulenc Rorer Pharmaceuticals Inc.
311 Bonnie Circle 500 Arcola Road
Corona, California 91720 Collegeville, Pennsylvania 19426
Fax: (909) 270-1429 Fax: (610) 454-2294
Attn: Dr. Allen Chao Attn: Senior Vice President and General
Manager, the Americas
With copies to: With copies to:
D'Ancona & Pflaum Rhone-Poulenc Rorer Pharmaceuticals Inc.
30 North LaSalle, Suite 2900 500 Arcola Road
Chicago, Illinois 60602 Collegeville, Pennsylvania 19426
Fax: (312) 580-0923 Attn: General Counsel
Attn: Michel J. Feldman Fax: (610) 454-3807
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
communication shall be deemed to have been delivered (i) when delivered, if
delivered personally, (ii) when sent (with confirmation received), if sent by
facsimile transmission on a business day, (iii) on the first business day after
dispatch (with confirmation received), if sent by facsimile transmission on a
day other than a business day, (iv) on the second business day after dispatch,
if sent by air courier, and (v) on the fifth business day after mailing, if sent
by mail.
9.7 This Agreement shall become binding when any one or more counterparts
hereof, individually or taken together, shall bear the signatures of each of the
parties hereto. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original as against the party whose signature
appears thereon, but all of which taken together shall constitute but one and
the same instrument.
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9.8 The article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.9 This Agreement and any claims, disputes or causes of action relating to
or arising out of this Agreement shall be construed in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
9.10 Any of the provisions of this Agreement which are determined to be
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability in such jurisdiction, without rendering
invalid or unenforceable the remaining provisions hereof or affecting the
validity or enforceability of any of the provisions of this Agreement in any
other jurisdiction.
9.11 This Agreement and the other agreements contemplated hereby or thereby
or executed concurrently herewith embody the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements, commitments, arrangements, negotiations or
understandings, whether oral or written, between the parties hereto and their
respective Affiliates with respect thereto, including, without limitation, that
certain letter of intent, dated May 20, 1997, between RPR and Watson. There are
no agreements, covenants or undertakings with respect to the subject matter of
this Agreement and the other agreements contemplated hereby or thereby other
than those expressly set forth or referred to herein or therein and no
representations or warranties of any kind or nature whatsoever, express or
implied, are made or shall be deemed to be made herein by the parties hereto
except those expressly made in this Agreement and the other agreements
contemplated hereby or thereby.
9.12 Each party agrees to execute, acknowledge and deliver such further
instruments, and to do all such other acts, as may be reasonably necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
date first above written.
WATSON LABORATORIES, INC. RORER PHARMACEUTICAL
PRODUCTS INC.
By: ______________________ By: _______________________
Its:_______________________ Its:________________________
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EXHIBIT 10.2
INVENTORY PURCHASE AGREEMENT
THIS AGREEMENT is entered into as of June 30, 1997 by and between
RHONE-POULENC RORER PHARMACEUTICALS INC., a Delaware corporation with its
principal office at 500 Arcola Road, Collegeville, Pennsylvania 19426 ("Seller")
and WATSON LABORATORIES, INC., a Nevada corporation with its principal office at
311 Bonnie Circle, Corona, California 91720 ("Purchaser").
R E C I T A L S
A. Seller is engaged in the business of distributing and selling the
Product (as defined below), a diltiazem based pharmaceutical product currently
marketed in the United States under the trademark Dilacor XR(R).
B. Until September 1, 1993, the manufacture and sale of the Product was
conducted on behalf of a partnership between Seller and an Affiliate (as defined
below) of Purchaser. The partnership transferred to Seller as of September 1,
1993 all of its rights with respect to the manufacture and sale of branded
versions of the Product (i.e., versions sold under a trademark) in the United
States of America and, as of April 27, 1993, all of its rights outside the
United States of America with respect to the manufacture and sale of branded and
generic (i.e., versions not sold under a trademark) versions of the Product.
Prior to the effective date of this Agreement, the partnership has continued in
existence for purposes of manufacturing and selling generic versions of the
Product in the United States of America.
C. Seller and Purchaser desire to enter into a series of transactions
pursuant to which, among other things: (i) Seller and an Affiliate of Purchaser
will terminate the partnership; (ii) an Affiliate of Seller will grant to
Purchaser an exclusive license of all of its rights to market, advertise,
promote, sell and distribute branded and generic versions of the Product in the
Territory (as defined below); (iii) Seller will arrange for the manufacture and
will supply such versions of the Product to Purchaser; and (iv) an Affiliate of
Seller will grant to Purchaser certain option rights with respect to acquisition
of such Affiliate's rights to the Products in the Territory (collectively, the
"Transaction").
D. As part of the Transaction, Seller desires to sell to Purchaser
certain inventory of and other assets relating to the Product, and Purchaser
desires to purchase said inventory and assets, all on the terms and subject to
the conditions contained in this Agreement.
A G R E E M E N T S
Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
<PAGE> 2
ARTICLE I
1.1 Definitions. As used herein, the following terms shall have the
meanings ascribed to them below:
"Act" shall mean the Federal Food, Drug and Cosmetic Act, as amended,
and the regulations promulgated under such Act.
"Affiliate" shall mean, when used with respect to a Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with the subject Person; provided, however, that with respect to Seller,
only Rhone-Poulenc Rorer Inc. ("RPR") and Persons directly or indirectly
controlled by RPR shall be an Affiliate of Seller for any provision of this
Agreement, or any of the Agreements contemplated hereby. For purposes of this
Agreement, "control" means the direct or indirect ownership of over 50% of the
outstanding voting securities of a Person, or the right to receive over 50% of
the profits or earnings of a Person.
"Consent Agreement" shall mean that certain Consent Agreement, dated as
of even date herewith, between Jago Research AG, Watson, Circa and RPR.
"FDA" shall mean the Food and Drug Administration of the United States
Department of Health and Human Services, or any successor agency thereto.
"FDA Standards" shall mean the Act, the establishment license
requirements and the Current Good Manufacturing Practice regulations of the FDA
applicable to the Product or, with respect to the Product, any manufacturing
facility at which the Product is manufactured by or for Seller, and all relevant
guidelines of the FDA.
"Jago License Agreement" shall mean that certain Diltiazem SR
Development and License Agreement, dated August 10, 1988, between RPR (formerly
known as Rorer Group Inc.) and Jago Research AG, as amended.
"License Agreement" means that certain License Agreement, dated as of
even date herewith, between Purchaser and Rorer Pharmaceutical Products Inc.
("RPPI").
"Licensed Trademark" means RPPI's Dilacor XR(R) trademark and the
goodwill associated therewith.
"Manufacturing Agreement" means that certain Manufacturing and Supply
Agreement, dated as of even date herewith, between Purchaser and Seller.
"Partnership Termination Agreement" means that certain Agreement
Regarding Partnership Termination, dated as of even date herewith, among
Purchaser, Circa Pharmaceuticals, Inc., BOL Inc., RPR, and Seller.
"Product" shall mean the pharmaceutical preparation consisting of
diltiazem formulated for extended release using the delivery technology licensed
under the Jago License Agreement and currently marketed by Seller in the U.S.A.
under the Dilacor XR(R) trademark.
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"Regulatory Approval" shall mean, with respect to any country in the
Territory, filing for and receipt of all governmental and regulatory
registrations and approvals (including, but not limited to, approvals of all
final Product labeling and all other data and documents of any nature contained
therein) required for the marketing and sale of the Product for the indication
for which it is being marketed in such country.
"Related Agreements" shall mean the Consent Agreement, License
Agreement, the Manufacturing Agreement and the Partnership Termination
Agreement.
"Reserved Countries" shall mean New Zealand, the Republic of Korea and
North Korea.
"Territory" shall mean the entire world, excluding the Reserved
Countries.
ARTICLE II
Purchase and Sale of Assets
2.1 Purchase and Sale of Assets. Seller does hereby sell, transfer,
convey, assign and deliver to Purchaser (subject to Seller's rights pursuant to
Section 6.8), and Purchaser hereby purchases and accepts, all of the Purchased
Assets (as defined below). The Purchased Assets shall be sold to Purchaser free
and clear of any liens, title claims, encumbrances or security interests.
2.2 Enumeration of Purchased Assets. The "Purchased Assets" consist of
the following items and no others:
(a) Inventory. All of Seller's finished, packaged inventory
(including samples) of the Product existing as of the date hereof which have an
expiration date occurring on or after June 30, 1998 (or May 1, 1998, in the case
of samples) and are in any of Seller's distribution centers or are in transit
from the site of manufacturing to such distribution centers, excluding any of
such Products held in quarantine and also excluding samples in the possession or
control of Seller's sales representatives (collectively, the "Inventory");
(b) Customer and Other Information. Originals or duplicate copies
of all customer lists, customer records and information, and books and records
held by Seller on the date hereof exclusively relating to the Purchased Assets
or the marketing, advertising, promotion, sale and distribution of the Product
in the Territory;
(c) Contracts. To the extent assignable by Seller, all of the
contracts listed on Exhibit 2.2(c);
(d) Sales Literature. All sales and promotional materials and
advertising literature currently approved for use in the Territory and held by
Seller in inventory on the date hereof relating exclusively to Product,
excluding sales and promotional materials and advertising literature in the
possession or control of Seller's sales representatives; and
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<PAGE> 4
(e) The Regulatory Approvals listed on Exhibit 2.2(e), attached
hereto; provided, however, said Regulatory Approvals will be sold, transferred,
conveyed and delivered to Purchaser as provided in Section 6.13 hereof.
2.3 Excluded Assets. Notwithstanding anything to the contrary contained
herein, the Purchased Assets shall not include, and the Seller shall retain all
of its rights, title and interest in and to, all assets, properties or rights of
Seller other than those specifically enumerated as Purchased Assets in Section
2.2 (the "Excluded Assets"). Without limiting the generality of the foregoing,
the Purchased Assets shall not include (i) any right, title or interest in the
Licensed Trademark, with Purchaser's rights with respect thereto being limited
to those granted under the License Agreement; (ii) any right, title or interest
in the trade dress used by Seller and its Affiliates with respect to the
Product; (iii) any accounts receivable or other right to receive payment arising
out of or relating to Product shipped by Seller on or before June 30, 1997
except as provided in Section 6.4; or (iv) any right, title or interest in
Seller's corporate name, service mark or logo or NDC numbers used with respect
to the Product except as provided in Section 6.7.
2.4 Transition Arrangements. To facilitate the transfer to Purchaser of
the sale and distribution in the United States of America of the Product as
contemplated by the Transaction, Seller will provide to Purchaser, post-Closing,
certain services relating to certain Managed Care Contracts as set forth in
Section 6.12 and certain other services on a transition basis as set forth in
Exhibit 2.4.
ARTICLE III
Assumption of Liabilities
3.1 Assumption of Liabilities. Subject to the terms and conditions of
this Agreement, as of the date hereof, the Purchaser shall assume, and shall be
solely and exclusively liable with respect to, and shall pay, perform, discharge
and satisfy when due, only those liabilities of the Seller which are
specifically enumerated below (collectively, the "Assumed Liabilities"):
(a) all liabilities of the Seller under any portion of any contract
included in the Purchased Assets which according to such contract relate to
periods after the date hereof and are to be paid, performed, discharged or
satisfied after the date hereof; provided, however the Seller shall retain the
balance of the liabilities under such contracts including without limitation,
all accounts payable as of the date hereof;
(b) all liabilities for damages to third parties or their property
arising out of the sale of the Inventory after the date hereof; provided,
however, that Purchaser shall not assume, and Seller shall retain, any such
liabilities for any damages attributable to Products manufactured prior to the
date hereof that, as of the date hereof, were adulterated or misbranded within
the meaning of the Act or otherwise would fail to conform to the representations
and warranties set forth in Sections 3.1(a) and 3.1(b) of the Manufacturing
Agreement had such Inventory been manufactured and delivered thereunder;
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<PAGE> 5
(c) all liabilities in respect of Product warranties and returned
Products provided, however, that:
(i) in respect of such liabilities attributable to defective
Products that were manufactured prior to the date hereof, the Seller shall
reimburse the Purchaser within thirty (30) days of being invoiced by the
Purchaser for the out-of-pocket costs of replacing such Products or the rebate
or credit issued in lieu of such replacement; and
(ii) in respect of such liabilities attributable to Products
that are returned in the ordinary course of business and in accordance with
Seller's returned goods policy, a copy of which is attached hereto as Exhibit
3.1(c)(ii), (without solicitation or inducement by Purchaser) and that were sold
by Seller prior to the date hereof, are not defective and have expired, the
Seller shall reimburse the Purchaser with thirty (30) days of being invoiced by
the Purchaser for the out-of-pocket costs of replacing such Products or the
rebate or credit issued in lieu of such replacement; provided, however, that
where such returned Products are from a lot a portion of which was sold by the
Seller and a portion of which was sold by the Purchaser, the Seller shall
reimburse the Purchaser as specified above pro rata based on the proportion of
such lot sold by the Seller as determined by the Closing Inventory Statement
(defined below). The Purchaser will provide the Seller with copies of such
backup documentation as is reasonably satisfactory to the Seller to support
Purchaser's reimbursement claims under this Section 3.1(c);
(d) all liabilities in respect of chargebacks, rebates or discounts
under the Managed Care Contracts (as defined below) and all governmental
chargebacks, rebates or discounts (including without limitation Medicaid
rebates) with respect to the Product (collectively, "Rebates"); provided,
however, that Purchaser shall not assume, and Seller shall retain, such
liabilities with respect to Rebates reflecting an Activity Date (as defined
below) (i) on or prior to the date hereof or (ii) after the date hereof but
prior to the thirty-first (31st) calendar day after the date hereof; provided,
further, however that the maximum liability of Seller under this clause (ii)
shall be $550,000. "Activity Date" as used herein shall mean, in the case of all
Rebates paid for the benefit of a customer (other than a wholesaler) that takes
possession of the Product, the date of sale of the Product by a wholesaler to
such customer, and in the case of all Rebates paid for the benefit of a customer
that does not take possession of the Product, the date of dispensing of the
Product to the patient; and
(e) all liabilities (other than for Rebates, which are provided for
in Section 3.1(d)) in respect of the Product under each Managed Care Contract
arising in respect of the period during which Seller is administering such
Managed Care Contract on Purchaser's behalf pursuant to Section 6.12.
3.2 No Assumption of Liabilities. Except for the Assumed Liabilities
and Purchaser's other obligations under this Agreement and the Related
Agreements, Purchaser is not assuming and will not in any way be liable or
responsible for any liabilities, obligations or indebtedness of Seller, whether
relating to the Purchased Assets or otherwise, of any kind or nature whatsoever,
whether due or to become due, absolute or contingent, direct or indirect,
asserted or unasserted, including, without limitation, claims relating to
product defects, warranties and/or destruction of Products.
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<PAGE> 6
ARTICLE IV
Purchase Price, Manner of Payment and Closing
4.1 Purchase Price. Subject to the adjustments set forth in this
Article III, the purchase price of the Purchased Assets shall equal:
(a) Twenty Million Dollars ($20,000,000.00); plus
(b) Seller's standard cost for the Inventory (the "Inventory
Value"), determined in accordance with Section 4.2 below, for which Seller's
good-faith estimate of the Inventory Value, based upon the most recent
ascertainable financial information, is $2,125,000.00 as of the date hereof (the
"Estimated Inventory Amount").
4.2 Determination of Inventory Value. The Inventory Value shall be
determined based on Seller's standard cost as set forth on Schedule 4.2
("Standard Costs") and a physical inventory of the Inventory as of the close of
business on June 30, 1997 conducted by Seller on July 1, 1997 (July 15, 1997 in
report of Inventory in Puerto Rico) (the "Closing Inventory"). A report of the
Closing Inventory (the "Closing Inventory Statement") shall be prepared by
Seller in accordance with generally accepted accounting principles ("GAAP")
applied in a manner consistent with the accounting principles applied in the
preparation of Seller's books and records and delivered to Purchaser not later
than thirty (30) days after the date hereof. Seller shall make available to
Purchaser and Purchaser's accountants its work papers with respect to the
Closing Inventory Statement.
4.3 Disputes Regarding Closing Inventory Statement. Disputes with
respect to the Closing Inventory Statement shall be dealt with as follows:
(a) Purchaser shall have thirty (30) days after receipt of the
Closing Inventory Statement (the "Dispute Period") to dispute any of the
elements of or amounts reflected on the Closing Inventory Statement (a
"Dispute"). If Purchaser does not give written notice of a Dispute within the
Dispute Period to Seller (a "Dispute Notice"), the Closing Inventory Statement
shall be deemed to have been accepted and agreed to by Purchaser in the form in
which it was delivered by Seller, and shall be final and binding upon the
parties hereto. If Purchaser has a Dispute, Purchaser shall give Seller a
Dispute Notice within the Dispute Period, setting forth in reasonable detail the
elements and amounts with which it disagrees. Within thirty (30) days after
delivery of such Dispute Notice, the parties hereto shall attempt to resolve
such Dispute and agree in writing upon the final content of the disputed Closing
Inventory Statement.
(b) If Purchaser and Seller are unable to resolve any Dispute
within the thirty (30) day period after Seller's receipt of a Dispute Notice,
the parties hereto shall select by mutual agreement a nationally recognized
certified public accounting firm who is not rendering (and during the preceding
two-year period has not rendered) services to either Seller or Purchase as to an
Affiliate of either, to serve as the arbitrating accountant (the "Arbitrating
Accountant") engaged as the arbitrator hereunder to settle such Dispute as soon
as practicable. The parties and the Arbitrating Account shall attempt in good
faith to resolve any Dispute by September 30, 1997. In connection
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<PAGE> 7
with the resolution of any Dispute, the Arbitrating Accountant shall have access
to all documents, records, work papers, facilities and personnel necessary to
perform its function as arbitrator. Seller shall be entitled to withhold such
access unless the Arbitrating Accountant agrees to sign a confidentiality
agreement with Seller which shall obligate such accountant to hold the
information he receives by reason of such access in confidence, except for
disclosure to Seller and Purchaser of information necessary to establish the
accuracy of the Closing Inventory Report and to render an award resolving the
Dispute. The arbitration before the Arbitrating Accountant shall be conducted in
accordance with the commercial arbitration rules of the American Arbitration
Association. The Arbitrating Accountant's award with respect to any Dispute
shall be final and binding upon the parties hereto, and judgment may be entered
on the award. Seller and Purchaser shall each pay one-half of the fees and
expenses of the Arbitrating Accountant with respect to any Dispute.
4.4 Manner of Payment of the Purchase Price. At the Closing (as defined
below), Purchaser shall pay to Seller an amount equal to $22,125,000.00
(representing $20,000,000.00 plus the Estimated Inventory Amount) by wire
transfer to an account or accounts designated in writing by Seller. Following
the Closing, the parties shall determine the final Purchase Price, employing the
procedures and criteria set forth in Sections 4.2 and 4.3 above. If, based on
the Purchase Price as finally determined: (i) the Inventory Value exceeds the
Estimated Inventory Amount, Purchaser shall forthwith pay the excess to Seller
as additional consideration hereunder; or (ii) the Estimated Inventory Amount
exceeds the actual Inventory Value, Seller shall forthwith refund such excess to
Purchaser.
4.5 Time and Place of Closing. Except as contemplated by Section 6.13,
the transaction contemplated by this Agreement shall be consummated (the
"Closing") at 10:00 a.m. at the offices of D'Ancona & Pflaum, 30 North LaSalle,
Suite 2900, Chicago, Illinois, 60602 on the date hereof. The Closing shall be
deemed to be effective as of 11:59 p.m. on the date hereof at Chicago, Illinois.
4.6 Closing Deliveries. At the Closing, the parties shall execute and
deliver such bills of sale, assignments, documents of title, instruments of
assumption, closing certificates, and other documents as are reasonably required
in order to effectuate the consummation of the transaction contemplated hereby.
All documents to be delivered by a party shall be in form and substance
reasonably satisfactory to the other party.
ARTICLE V
Representations and Warranties
5.1 Purchaser's Representations and Warranties. Purchaser represents
and warrants to Seller as of the date hereof that:
(a) Organization. Purchaser is a corporation duly organized,
existing and in good standing, under the laws of the State of Nevada.
(b) Power, Authority and Enforceability. Purchaser has full
corporate power and authority to enter into and perform this Agreement, the
Related Agreements and all documents and instruments to be executed by Purchaser
pursuant to this Agreement (collectively, "Purchaser's
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<PAGE> 8
Ancillary Documents"). This Agreement, the Related Agreements and Purchaser's
Ancillary Documents have been duly executed and delivered by duly authorized
officers of Purchaser. This Agreement, the Related Agreements and Purchaser's
Ancillary Documents are valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms.
(c) Consents. Except for consents obtained on or prior to the date
hereof, no consent, authorization, order or approval of, or filing or
registration with, any governmental authority or other person is required for
the execution and delivery by Purchaser of this Agreement, the Related
Agreements and Purchaser's Ancillary Agreements, and the consummation by
Purchaser of the transaction contemplated by this Agreement, the Related
Agreements and Purchaser's Ancillary Documents.
(d) No Violation. Upon compliance by the parties with applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), neither the execution and delivery of this Agreement,
the Related Agreements and Purchaser's Ancillary Documents by Purchaser, as the
case may be, nor the consummation by Purchaser of the transaction contemplated
hereby and thereby, will conflict with or result in a breach of any of the
terms, conditions or provisions of Purchaser's Certificate of Incorporation or
By-laws, or of any statute or administrative regulation, or of any order, writ,
injunction, judgment or decree of any court or governmental authority or of any
arbitration award or any agreement binding upon Purchaser.
(e) No Default. Purchaser is not a party to any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture,
mortgage, debenture, note or other instrument under the terms of which
performance by Purchaser according to the terms of this Agreement and the
Related Agreements will be a default, or whereby timely performance by Purchaser
according to the terms of this Agreement and the Related Agreements may be
prohibited, prevented or delayed.
(f) Litigation. There is no action or proceeding pending or, to
personal knowledge of Purchaser's executive officers, threatened against
Purchaser or any of its Affiliates before any court, arbitrator, administrative
agency or other tribunal which could impact upon Purchaser's right, power and
authority to enter into this Agreement and the Related Agreements, to receive
the rights granted to Purchaser hereunder and thereunder, or to otherwise carry
out its obligations hereunder, or which might have a material adverse effect on
Purchaser's business or condition, financial or otherwise.
5.2 Seller's Representations and Warranties. Seller represents and
warrants to Purchaser as of the date hereof that:
(a) Organization. Each of Seller and each of its Affiliates that is
a party to this Agreement or any Related Agreement is a corporation duly
organized, existing and in good standing, under the laws of the State of its
incorporation. Seller has all necessary corporate power and authority to market
and sell the Product in the Territory as such activities and now being
conducted.
(b) Power, Authority and Enforceability. Seller has full corporate
power and authority to enter into and perform this Agreement, the Related
Agreements and all documents and instruments to be executed by Seller pursuant
to this Agreement (collectively, "Seller's Ancillary
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Documents"). This Agreement, the Related Agreements and Seller's Ancillary
Documents have been duly executed and delivered by duly authorized officers of
Seller and/or one of its Affiliates. This Agreement, the Related Agreements and
Seller's Ancillary Documents are valid and binding obligations of Seller and/or
such Affiliates, enforceable against each of them in accordance with their
respective terms.
(c) No Consent. Except for consents obtained on or prior to the date
hereof and except as set forth on Schedule 5.2(c), no consent, authorization,
order or approval of, or filing or registration with, any governmental authority
or other person is required for the execution and delivery of this Agreement,
the Related Agreements and Seller's Ancillary Documents and the consummation by
Seller and its Affiliates of the transaction contemplated by this Agreement, the
Related Agreements and Seller's Ancillary Documents
(d) No Violation. Upon compliance by the parties with applicable
requirements of the HSR Act, neither the execution and delivery of this
Agreement, the Related Agreements and Seller's Ancillary Documents, as the case
may be, nor the consummation by Seller or its Affiliates of the transaction
contemplated hereby and thereby, will conflict with or result in a breach of any
of the terms, conditions or provisions of Seller's or its Affiliate's Articles
of Incorporation or By-laws, or of any statute or administrative regulation, or
of any order, writ, injunction, judgment or decree of any court or any
governmental authority or of any arbitration award or any material agreement
binding upon Seller or its Affiliates.
(e) Title to Purchased Assets. Seller has good and marketable title to
or, as the case may be, a valid contract right in, and the corporate power to
sell, the Purchased Assets, free and clear of any liens, title claims,
encumbrances and security interests. No unreleased mortgage, trust deed, chattel
mortgage, security agreement, financing statement or other instrument
encumbering any of the Purchased Assets has been recorded, filed, executed or
delivered.
(f) Compliance with Laws--FDA.
(i) Seller is in substantial compliance with all applicable
provisions of the Regulatory Approvals for the Product in the Territory and,
insofar as the Product is concerned, all applicable provisions of 21 U.S.C.
Sections 355, and 21 C.F.R. Parts 314 et. seq.
(ii) Seller is in compliance with all applicable registration and
listing requirements set forth in 21 U.S.C. Section 360 and 21 C.F.R. Part 207
applicable to the Inventory.
(iii) With respect to the Inventory, all manufacturing operations
conducted by or, to the knowledge of the Seller, for the benefit of the Seller
and its Affiliates have been and are being conducted in substantial compliance
with FDA Standards.
(iv) Seller has made available to Purchaser copies of any and all
Form 483s, Warning Letters and Notice of Violation Letters with respect to the
Product received by Seller from the FDA within the last three years that
indicate or suggest lack of compliance with the FDA Standards with respect to
the Product.
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(v) Except as disclosed to Purchaser, neither the Seller nor any of
its Affiliates has received any written notice that the FDA has commenced, or
threatened to initiate, any action to withdraw the Product's Regulatory Approval
or request the recall of the Product.
(vii) The Inventory is not adulterated or misbranded within the
meaning of 21 U.S.C. Sections 301c et. seq.
(g) Litigation. Except as set forth on Schedule 5.2(g), there is no
litigation or proceeding, in law or in equity, before any court, arbitrator,
administrative agency or other tribunal and there are no proceedings or
governmental investigations before any commission or other administrative
authority, pending, or, to the personal knowledge of Seller's executive
officers, threatened, against Seller or its Affiliates, with respect to the
Product or the consummation of the transaction contemplated hereby, the Licensed
Trademark, the rights under the Jago License Agreement, or the use, ownership or
sale of the Purchased Assets by Seller prior to the Closing or the intended
ownership or sale by Purchaser after the Closing as contemplated by the
Transaction.
(h) Warranties. Except as set forth on Schedule 5.2(h), and in this
Agreement, the Related Agreements and the agreements set forth on Exhibit 6.12,
Seller has not made any oral or written warranties with respect to the quality
or absence of defects in the Product sold in the Territory which are in force as
of the date hereof. Except as set forth on Schedule 5.2(h), there are no
material claims pending or, to the personal knowledge Seller's executive
officers, threatened, against Seller or any of its Affiliates with respect to
the quality of or absence of defects in the Product.
(i) Interim Conduct of Business. Except as otherwise contemplated by
this Agreement, since April 1, 1997, Seller has not:
(i) sold or agreed to sell or otherwise disposed of the Product
except for sales in the usual and ordinary course of business in accordance with
the Seller's past practices;
(ii) waived any material right arising out of the conduct of, or
with respect to, its business of selling and distributing the Products; or
(iii) without limitation by the enumeration of any of the
foregoing, entered into any transaction with respect to the Product other than
in the usual and ordinary course of business in accordance with past practices
with respect to marketing, selling and distributing the Products.
Notwithstanding the foregoing, the Company shall not be deemed to have breached
the terms of this Section 5.2(i) by entering into this Agreement and the Related
Agreements or by consummating the transactions contemplated hereby and thereby.
(j) Inventory. All the Inventory consists of items of a quantity that
will be useable and/or salable in the normal course of business, based on past
practice.
(k) Contracts. Schedule 5.2(k) correctly and completely lists and
describes all material contracts, and agreements in the Territory to which
Seller is a party and which relate to the sale of
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the Products that are: agreements with managed care providers and similar
agreements; license agreements; and clinical study agreements. As to the
contracts, leases and other instruments referred to in Sections 2.2(c) and 6.12:
(i) such contracts, leases and other instruments are in full force and binding
upon Seller, and to Seller's knowledge, the other parties thereto; (ii) no
default by Seller has occurred thereunder and (iii) to Seller's knowledge, no
default by the other contracting parties has occurred thereunder. No event,
occurrence or condition exists which, with the lapse of time, the giving of
notice, or both, or the happening of any further event or condition, would
become a default by Seller thereunder.
(l) Intellectual Property Rights.
Except as set forth in Schedule 5.2(l):
(i) Rorer Pharmaceutical Products Inc. ("RPPI") has the right,
power and authority, including all necessary right, title and interest to the
Royalty Bearing Product Rights, in order to grant Watson the licenses and
purchase options set forth in Section 2.1 of the License Agreement;
(ii) RPPI has all right, title and interest in and to the Licensed
Trademark in the jurisdictions in the Territory in which RPPI or an Affiliate
has a trademark registration with respect to said mark, as set forth in Schedule
5.2(l)(ii), free and clear of any liens, title claims, encumbrances or security
interests; and
(iii) To Seller's knowledge, the manufacture, use and sale of the
Product in the Territory does not infringe any patents, patent rights, patent
applications, trade secret or other proprietary or property rights of any third
parties.
(m) Approval. The Product is approved by the FDA for the indications
set forth in its approved labeling, a copy of which is attached hereto as
Exhibit 5.2 (m).
5.3 Where a representation or warranty contained in this Article V is
stated to be to a party's knowledge, this shall mean to the actual knowledge of
all of the officers and appropriate key personnel of such party, after
reasonable inquiry.
5.4 All exceptions noted in the applicable schedules to this Agreement
shall be numbered to correspond to the applicable Sections of the Agreement to
which such exception refers; provided, however, that any disclosure set forth on
any particular schedule shall be deemed disclosed in reference to all applicable
schedules.
5.5 The provisions of this Article V shall survive both the Closing and the
expiration or sooner termination of the term of this Agreement for a period of
twelve (12) months.
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ARTICLE VI
Post-Closing Agreements
6.1 Post-Closing Agreements. From and after the Closing, the parties shall
have the respective rights and obligations which are set forth in the remainder
of this Article VI, all of which shall survive both the Closing and the
expiration or sooner termination of this Agreement.
6.2 Inspection of Records. Seller and Purchaser shall each retain and make
any books and records exclusively relating to the marketing, sale or
distribution of Products in the Territory ("Books and Records") in their
possession available for inspection by the other party, or by its duly
accredited representatives, for reasonable business purposes at all reasonable
times during normal business hours and at their normal location, for a seven (7)
year period after the date hereof. As used in this Section 6.2, the right of
inspection includes the right reasonably to make extracts or copies. The
representatives of a party inspecting the records of the other party shall be
reasonably satisfactory to the other party and shall first sign a
confidentiality agreement with the other party which shall obligate such
representative to hold the information he receives by reason of such access in
confidence, except for disclosure to such party of information reasonably
required by the other party to accomplish the purposes of the Transaction.
6.3 Certain Assignments. Any other provision of this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
transfer or assign, or a transfer or assignment of, any claim, contract, lease,
commitment, sales order or purchase order, or any benefit arising thereunder or
resulting therefrom, if an attempt at transfer or assignment thereof without the
consent required or necessary for such assignment, would constitute a breach
thereof or in any way adversely affect the rights of Purchaser or Seller
thereunder. If such a consent or agreement to transfer or assign is not obtained
for any reason, Purchaser and Seller shall cooperate in any arrangement mutually
agreed in writing to provide Purchaser the benefits under such claim, contract,
lease, commitment or order.
6.4 Excess Sales Make-Up Payment. Within forty-five (45) days after the
date hereof, Seller shall provide Purchaser with a written report, specifying
the Net Sales (as defined below) of the Product in the United States of America
by month for the three month period ended June 30, 1997. To the extent that such
Net Sales during any calendar month during such three month period exceeds the
"Average Monthly Sales Amount" (as defined below), Seller shall forthwith pay to
Purchaser the amount by which such monthly Net Sales exceeds the Average Monthly
Sales Amount ("Excess Sales"), minus (i) Seller's Standard Cost to manufacture
the Products to which the Excess Sales relate, and (ii) the proportionate amount
of any royalty payments attributable to such Excess Sales that are payable to
Circa Pharmaceuticals, Inc. pursuant to Section 7 of the Partnership Termination
Agreement. For purposes hereof, (i) the term "Average Monthly Sales" shall mean
the monthly average of Net Sales of the Product by Seller in the United States
of America for the twelve calendar months preceding the date hereof, and (ii)
the term "Net Sales" shall have the same meaning ascribed to such term in the
Partnership Termination Agreement.
6.5 Sales and Transfer Taxes and Fees. Purchaser shall pay when due all
sales taxes and/or use taxes, recording fees, personal property title
application fees, patent and trademark
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assignment registration fees and all other taxes and fees on transfer of the
Purchased Assets and the Assumed Liabilities arising by virtue of the sale of
the Purchased Assets to Purchaser, regardless of whether the liability for said
taxes or fees is imposed by law upon Seller or upon Purchaser.
6.6 Further Assurances. The parties shall execute such further documents,
and perform such further acts, as may be reasonably necessary to transfer and
convey the Purchased Assets to Purchaser, on the terms herein contained, and to
otherwise comply with the terms of this Agreement and consummate the transaction
contemplated hereby.
6.7 Use of RPR Name; Trade Dress, and NDC Numbers.
(a) The Seller hereby grants to the Purchaser effective immediately
after the Closing, the royalty-free nontransferable right and non-exclusive
license to use for a reasonable time (not to exceed six (6) months after the
Closing) Seller's corporate names, service mark or logo (the "Marks") and the
trade dress of the Product as of the date of this Agreement ("Trade Dress") in
the same manner as they are presently used on all labels and packaging for the
Product, in the ordinary course of the business. The Purchaser agrees that the
nature and quality of any Product sold under such Marks and Trade Dress shall
conform substantially to the Seller's past practices, standards and
specifications. If the Seller at any time during the Purchaser's use of such
materials reasonably determine that the requirements of the foregoing provision
have not been complied in all material respects, Seller shall have the right to
terminate the right and license granted under this Section 6.7 by giving written
notice of such breach to the Purchaser and the opportunity for 30 days to cure
such breach. In addition, the Purchaser shall indemnify and hold the Seller
harmless for any Damages (as hereinafter defined) to the Seller arising from the
right and license granted hereunder.
(b) Following the Closing the Purchaser will use commercially
reasonable efforts to develop and have approved, if necessary, its own labels
and packaging for the Product so as to eliminate its use of the Marks and Trade
Dress, to change the manufacturer code portion of the NDC number for the Product
to a Purchaser manufacturer code, and to remove the Seller's manufacturer code
from all Product labels as promptly as possible and in any event within six (6)
months.
6.8 Reconveyance of Purchased Assets. Following expiration or termination
of the License Agreement at a time when Purchaser shall not have theretofore
exercised the Purchase Option (as defined therein), the Purchaser shall sell,
convey, assign and deliver to the Seller for no additional consideration, all
Regulatory Approvals, books and records and contracts or agreements necessary
for the marketing, advertising, promotion, sale or distribution of the Royalty
Bearing Products (as defined in the License Agreement) in the Territory and held
by the Purchaser or any Affiliate of the Purchaser so long as the Seller assumes
all the liabilities under such contracts and agreements from and after the
transfer date. In the event the Purchaser transfers any of such Regulatory
Approvals, books and records or contracts or agreements after the Closing, such
transfer shall be subject to this Section 6.8. The Purchaser shall take such
actions and execute and deliver such documents and instruments as the Seller may
reasonably request to effectuate the provisions of this Section 6.8.
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6.9 Reference Rights. Following the Closing and in perpetuity the Purchaser
shall permit the Seller to reference (and upon request shall so advise the FDA
or other applicable regulatory authority), and upon Seller's request shall
accord Seller access to, and copies of, all data contained in the Purchaser's
Regulatory Approvals for the Royalty Bearing Products (as defined in the License
Agreement) to the extent necessary to permit Seller to market and distribute the
Royalty Bearing Products outside the Territory and to obtain and maintain
Regulatory Approvals to market and distribute the Royalty Bearing Products
outside the Territory. Purchaser shall promptly advise Seller of any changes
made in any Royalty Bearing Product Regulatory Approval that could reasonably be
expected to have an impact on such Regulatory Approvals of Seller outside the
Territory.
6.10 Medicaid Rebates. Purchaser shall calculate, prepare and deliver to
Seller in a timely manner all data and information relating to the Product
including, without limitation pricing data, average manufacturers price data and
best price data, required to be submitted under Seller's agreement with the
Health Care Financing Administration ("HCFA") regarding the payment of Medicaid
rebates (the "Medical Rebate Agreement"). Purchaser shall provide all such data
to Seller at least ten (10) days prior to any date upon which Seller is
obligated to submit the relevant data to HCFA or any state Medicaid agency and
shall be solely liable for any fines or penalties imposed on Sellers as a result
any delay by Purchaser in providing such data to Seller. Purchaser shall
maintain books and records with respect to all data provided to Seller hereunder
sufficient to meet the requirements of the Medicaid Rebate Agreement and all
applicable laws with respect to the payment of Medicaid rebates. Purchaser shall
have full responsibility for initiating and resolving any disputes with HCFA or
any state Medicaid agency with respect to the payment of Medicaid rebates for
any Product for which Purchaser has liability.
6.11 MMD Lawsuit.
(a) Purchaser agrees to be bound by and shall fully comply with all
orders, judgments or decrees issued at any time, whether previously or in the
future, by any court in the lawsuit Rhone-Poulenc Rorer Pharmaceuticals Inc. v.
Marion Merrell Dow, Inc., Nos. 93-0144-CV-W-1 and 93-0149-CV-W-1 (W.D. Mo),
including any appeals or remands in connection therewith and any settlements or
other agreements entered into by the parties to such lawsuit in connection
therewith (the "MMD Lawsuit").
(b) Seller shall consult with Purchaser regarding the management of
the MMD Lawsuit and keep Purchaser informed of material developments in the MMD
Lawsuit; provided, however, that this shall not in any way limit Seller's right,
in its sole discretion, to make all final decisions with respect to the MMD
Lawsuit. Upon request, Seller shall cooperate with Purchaser in arranging for
Purchaser to be substituted for Seller as a party to the MMD Lawsuit, and upon
such substitution, and the full and complete removal and release of Seller as a
party to the MMD Lawsuit, Seller will transfer full and complete control and
responsibility for the management of the MMD Lawsuit to Purchaser.
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6.12 Managed Care Contracts.
(a) On behalf of Purchaser, Seller shall use commercially reasonable
efforts consistent with its own policies and practices to maintain the Product
on the contracts listed on Exhibit 6.12 (the "Managed Care Contracts"), under
and in accordance with the terms of the Managed Care Contracts, and to
administer the Managed Care Contracts with respect to the Product until, in the
case of each Managed Care Contract, the earliest of (1) the expiration,
termination or first renewal date of such contract, (2) deletion of the Product
therefrom pursuant to Section 6.12(b), or (3) December 31, 1997. In exchange for
Seller's performing the services provided for in this Section 6.12 with respect
to the Managed Care Contracts, Purchaser shall assume certain liabilities under
the Managed Care Contracts, as set forth in Sections 3.1(d) and (e), and shall
reimburse Seller for all amounts disbursed by Seller in discharging such assumed
liabilities on Purchaser's behalf; and
(b) During the period Seller is administering a Managed Care Contract
on Purchaser's behalf pursuant to Section 6.12(a), Seller will not offer or
enter into any new contractual terms or arrangements thereunder with respect to
the Product. Upon written notice from Purchaser to Seller that Purchaser has
entered into a replacement contract with respect to the Product with the other
contracting party of that Managed Care Contract, Seller will promptly take all
necessary steps to delete the Product from such Managed Care Contract.
6.13 Purchaser's Regulatory Approvals. Purchaser shall use commercially
reasonable efforts to develop and establish the capability to administer and
manage the Regulatory Approvals listed on Exhibit 2.2(e) not later than December
31, 1997. At such time as Purchaser has done so, but in no event later than
December 31, 1997, Seller shall sell, transfer, convey, assign and deliver to
Purchaser (subject to Seller's rights pursuant to Section 6.8), and Purchaser
shall purchase and accept, the Regulatory Approvals listed on Exhibit 2.2(e) at
no additional charge (the purchase price for such Regulatory Approvals being
included in the consideration set forth in Section 4.1(a)).
6.14 NDA Administration Period. Beginning on the date hereof and continuing
during the period ending upon the transfer of the Regulatory Approvals listed on
Exhibit 2.2(e) to Purchaser as provided for in Section 6.13 (the "NDA
Administration Period"), Seller shall maintain and administer the Regulatory
Approvals listed on Exhibit 2.2(e) on Purchaser's behalf. In order to enable
Seller to perform such services, and as an inducement for Seller to do so,
Purchaser shall: (i) comply fully with all laws, rules and regulation in the
Territory applicable to such Regulatory Approvals; (ii) upon request, provide
Seller, promptly and in time for Seller to comply with all requirements
applicable to such Regulatory Approvals, with all information and materials
necessary or useful to Seller in performing such services, including without
limitation four (4) copies of the final form of all advertising and promotional
materials prior to their use; (iii) cooperate with Seller as necessary or useful
in Seller's performance of such services, including without limitation, in
conducting any investigations concerning, and in responding to, all inquiries,
notices or other communications from the FDA or any other governmental authority
relating to such Regulatory Approvals; (iv) refrain from using any Product
labels, labeling, information or material, or making any claim, in connection
with the advertising, promotion, marketing or sale of the Product until such
labels, labeling, information, material or claim has been approved by Seller in
accordance with the terms of Section 6.15 below; and (v) pay all FDA user fees
due with respect to the Product or the Regulatory Approvals for any periods
after the date hereof.
6.15 Communications. During the NDA Administration Period, Purchaser shall
provide to a designated employee of Seller all labels, labeling,
information, materials or claims that
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Purchaser intends to use or make in the marketing, distribution,
advertising or promotion of the Product (excluding only items described in
Section 2.2(d) above) for review by Seller in accordance with Seller's internal
policies and procedures for the review and approval of advertising and
promotional material. Seller shall review each such item in accordance with such
internal policies and procedures and advise Purchaser whether it has approved or
disapproved such item. Purchaser shall bear the responsibility of modifying and
resubmitting for review in accordance with this Section 6.15 any disapproved
item that Seller continues to want to use. Purchaser shall comply with and abide
by all of Seller's internal policies and procedures for the review and approval
of advertising and promotional material, and it shall be the responsibility of
Purchaser's marketing personnel to manage the review and approval process for
all items described herein.
6.16 Documents. During the NDA Administration Period, Seller shall notify
Purchaser of, and (to the extent applicable) provide Purchaser copies of, all
notices and letters from, and communications and meetings with, the FDA or any
comparable regulatory authority with respect to any of the Regulatory Approvals
listed on Exhibit 2.2(e). Such notice shall be given promptly, taking into
account the nature and substance of the applicable notice, letter or
communications. Seller shall consult with Purchaser in preparing all letters,
responses and communications to the FDA and such other regulatory authorities
with respect to the Product or the Regulatory Approvals and shall permit
Purchaser to attend any such meetings with the FDA or such other regulatory
authorities.
6.17 SEC Filing. Upon reasonable request, Seller shall make available to
Purchaser such estimated, historical sales, cost of sales, and other operating
expense information as Seller possesses in its books and records relating to the
Product and periods prior to the Closing if and to the extent Purchaser is
required to file or disclose such information to comply with any and all of
Purchaser's reporting requirements under the Securities Exchange Act of 1934, as
amended (the "34 Act") with respect to the Transaction. Seller will not
knowingly provide any false information pursuant to this Section 6.17, but
otherwise Seller shall have no responsibility for the accuracy or completeness
of any information provided pursuant to this Section 6.17, and Purchaser will
not attribute such information to Seller or specify Seller as the source thereof
in any such '34 Act filing (or otherwise), without Seller's written consent.
ARTICLE VII
Indemnification
7.1 General. From and after the Closing, the parties shall indemnify each
other as provided in this Article VII. As used in this Agreement, the term
"Damages" shall mean all liabilities, demands, claims, actions or causes of
action, regulatory, legislative or judicial proceedings or investigations,
assessments, levies, losses, fines, penalties, damages, costs and expenses,
including, without limitation, reasonable attorneys', accountants',
investigators', and experts' fees and expenses, sustained or incurred in
connection with the defense or investigation of any such claim.
7.2 Indemnification Obligations of Seller. Seller shall defend, indemnify,
save and keep harmless Purchaser and its Affiliates and their respective
successors and permitted assigns against and from all Damages sustained or
incurred by any of them resulting from or arising out of or by virtue of:
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(a) Representations. Any material inaccuracy in or material breach of
any representation and warranty made by Seller in this Agreement or in any
Seller's Ancillary Document; provided, however, that (i) Seller shall not have
any liability under this Section 7.2(a) unless and until, and then only to the
extent, the aggregate, cumulative amount of such Damages exceeds $2,000,000 (the
"Indemnity Deductible Amount") and (ii) in no event shall the aggregate,
cumulative liability of Seller for Damages under this Section 7.2(a) exceeds
$25,000,000 (the "Indemnity Cap Amount");
(b) Certain Covenants. Any material breach by Seller of, or material
failure by Seller to comply with, any of its respective covenants or obligations
that are a part of its responsibility for the Assumed Liabilities prior to the
Closing;
(c) MMD Lawsuit. All expenses incurred by Purchaser as a result of its
obligation to comply with the covenant set forth in Section 6.11(a) hereof other
than (i) the expense of pre-clearing with the FDA advertising claims as provided
for in the District Court orders in the MMD Lawsuit, and (ii) any and all costs,
expenses and liabilities incurred in complying with obligations, orders,
judgments and decrees attributable to the acts or omissions of Purchaser and its
Affiliates subsequent to the date hereof; or
(d) Operation of Business. Any claims by parties other than Purchaser
for Damages which arise or arose out of Seller's manufacture, marketing, sale or
distribution of the Product, or Seller's ownership of the Purchased Assets, on
or prior to the Closing, excluding all Assumed Liabilities and except as
specifically provided herein.
7.3 Purchaser's Indemnification Covenants. Purchaser shall defend,
indemnify, save and keep harmless Seller and its Affiliates and their respective
successors and permitted assigns against and from all Damages sustained or
incurred by any of them resulting from or arising out of or by virtue of:
(a) Representations. Any material inaccuracy in or material breach of
any representation and warranty made by Purchaser in this Agreement or in any
Purchaser's Ancillary Document; provided, however, that (i) Purchaser shall not
have any liability under this Section 7.3(a) unless and until, and then only to
the extent, the aggregate, cumulative amount of such Damages exceeds the
Indemnity Deductible Amount and (ii) in no event shall the aggregate, cumulative
liability of Purchaser for Damages under this Section 7.3(a) exceeds the
Indemnity Cap Amount; or
(b) Covenants. Any material breach by Purchaser of, or material failure
by Purchaser to comply with, any of its respective covenants or obligations that
are a part of its responsibilities for the Assumed Liabilities from and after
the Closing; or
(c) Operation of Business. Subject to Section 3.2 hereto, any claims by
parties other than Seller for Damages which arise or arose out of Purchaser's
marketing, sale or distribution of the Product, or Purchaser's ownership of the
Purchased Assets, from and after the Closing.
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7.4 Procedure. If any action, claim, suit, proceeding or investigation
arises as to which a right of indemnification provided in this Article VII
applies, party seeking indemnification (the "indemnified party"), shall promptly
notify the party obligated under this Article VII to indemnify the indemnified
party (the "indemnifying party") thereof in writing, and allow the indemnifying
party and its insurers the opportunity to assume direction and control of the
defense against such action, claim, suit, proceeding or investigation, at its
sole expense, including without limitation, the settlement thereof at the sole
option of the indemnifying party or its insurers to the extent that the
indemnified party's liability is not thereby invoked. The indemnified party
shall fully cooperate with the indemnifying party and its insurer in the
disposition of any such matter and the indemnified party will have the right and
option to participate in (but not control) the defense of any action, claim,
suit, proceeding or investigation as to which this Article VII applies, with
separate counsel at its election and cost. If the indemnifying party fails or
declines to assume the defense of any such action, claim, suit, proceeding or
investigation within thirty (30) days after notice thereof, the indemnified
party may assume the defense thereof for the account and at the risk of the
indemnifying party. The indemnifying party shall pay promptly to the indemnified
party any losses, obligations, liabilities, penalties, damages, judgments,
reasonable costs and expenses (including reasonable legal fees) to which the
indemnity under this Article VII applies, as incurred.
7.5 Survival. The provisions of this Article VII shall survive both the
Closing and the expiration or sooner termination of the term of this Agreement.
ARTICLE VIII
Miscellaneous
8.1 Notices. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail. Notices
delivered by hand, by facsimile, or by nationally recognized private carrier
shall be deemed given on the first business day following receipt; provided,
however, that a notice delivered by facsimile shall only be effective if such
notice is also delivered by hand, or deposited in the United States mail,
postage prepaid, registered or certified mail, on or before two (2) business
days after its delivery by facsimile. All notices shall be addressed as follows:
If to Purchaser: If to Seller:
Watson Laboratories, Inc. Rhone-Poulenc Rorer Pharmaceuticals Inc.
311 Bonnie Circle 500 Arcola Road
Corona, California 91720 Collegeville, Pennsylvania 19426
Fax: (909) 270-1429 Fax: (610) 454-2294
Attn: Dr. Allen Chao Attn: Senior Vice President and General
Manager, the Americas
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With copies to: With copies to:
D'Ancona & Pflaum Phone-Poulenc Rorer Pharmaceuticals Inc.
30 North LaSalle, Suite 2900 500 Arcola Road
Chicago, IL 60602 Collegeville, Pennsylvania 19426
Fax: (909) 270-1429 Attn: General Counsel
Attn: Michel J. Feldman Fax: (610) 454-3807
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 8.1.
8.2 Expenses. Each party hereto shall bear all fees and expenses incurred
by such party in connection with, relating to or arising out of the execution,
delivery and performance of this Agreement and the consummation of the
transaction contemplated hereby, including, without limitation, attorneys',
accountants' and other professional fees and expenses.
8.3 Entire Agreement. This Agreement and the other agreements contemplated
hereby or thereby or executed concurrently herewith embody the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements, commitments, arrangements,
negotiations or understandings, whether oral or written, between the parties
hereto and their respective Affiliates with respect thereto, including, without
limitation, that certain letter of intent, dated May 20, 1997, between RPR and
Purchaser. There are no agreements, covenants or undertakings with respect to
the subject matter of this Agreement and the other agreements contemplated
hereby or thereby other than those expressly set forth or referred to herein or
therein and no representations or warranties of any kind or nature whatsoever,
express or implied, are made or shall be deemed to be made herein by the parties
hereto except those expressly made in this Agreement and the other agreements
contemplated hereby or thereby.
8.4 Further Actions. Each party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be reasonably
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
8.5 Non-Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, right or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.
8.6 Applicable Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal laws of the State of New York applicable to contracts
made in that State.
8.7 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to confer on
any person other than the parties hereto, and their respective successors and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
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8.8 Assignability. This Agreement shall not be assignable by either party
without the prior written consent of the other party, which consent shall not be
unreasonably withheld or delayed. No such assignment shall relieve the assignor
of any of its obligations or liabilities under this Agreement.
8.9 Amendments. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of each of
the parties hereto.
8.10 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect the meaning or interpretation of this
Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
WATSON LABORATORIES, INC. RHONE-POULENC RORER
PHARMACEUTICALS INC.
By: _______________________ By: ________________________
Its:_______________________ Its:________________________
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EXHIBIT 10.3
MANUFACTURING AND SUPPLY AGREEMENT
MANUFACTURING AND SUPPLY AGREEMENT ("Agreement") is entered into as of
June 30, 1997 ("Effective Date"), by and between RHONE-POULENC RORER
PHARMACEUTICALS INC., a Delaware corporation with its principal office at 500
Arcola Road, Collegeville, Pennsylvania 19426 ("RPRPI"), and WATSON
LABORATORIES, INC., a Nevada corporation with its principal office at 311 Bonnie
Circle, Corona, California 91720 ("Watson").
R E C I T A L S:
WHEREAS, Rorer Pharmaceutical Products, Inc. ("RPPI"), an Affiliate of
RPRPI and Watson have entered into a License Agreement dated as of even date
herewith (the "License Agreement") granting to Watson an exclusive license of
all of RPPI's rights to market, advertise, promote, sell and distribute the
Product throughout the Territory (as each such term is defined below); and
WHEREAS, RPR and Watson desire to enter into this Agreement under which
RPRPI will supply all of Watson's requirements of the Product to Watson, and
Watson will purchase all of its supply of the Product from RPRPI.
NOW THEREFORE, in consideration of the mutual covenants and
consideration set forth herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
Definitions
1.1 Definitions. As used in this Agreement, the following terms shall
have the corresponding meanings set forth below:
"Act" shall mean the Federal Food, Drug and Cosmetic Act, as amended,
and the regulations promulgated under such Act.
"Affiliate" shall mean, when used with respect to a Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with the subject Person; provided, however, that with respect to RPRPI,
only Rhone-Poulenc Rorer Inc. ("RPR") and Persons directly or indirectly
controlled by RPR shall be an Affiliate of RPRPI for any provision of this
Agreement, or any of the Agreements contemplated hereby. For purposes of this
Agreement, "control" means the direct or indirect ownership of over 50% of the
outstanding voting securities of a person, or the right to receive over 50% of
the profits or earnings of a person.
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"Bankruptcy Event" shall mean the Person in question becomes insolvent,
or a receiver or custodian is appointed for such Person, or voluntary or
involuntary proceedings by or against such Person are instituted in bankruptcy
or under any insolvency law, or proceedings are instituted by or against such
Person for corporate reorganization or the dissolution of such Person, which
proceedings, if involuntary, shall not have been dismissed within sixty (60)
days after the date of filing, or such Person makes an assignment for the
benefit of its creditors, or substantially all of the assets of such Person are
seized or attached and not released within sixty (60) days thereafter.
"Designated Manufacturer" shall mean Centeon L.L.C., the party that, as
RPRPI's designee and on RPRPI's behalf, shall manufacture the Product for supply
by RPRPI to Watson hereunder.
"FDA" shall mean the Food and Drug Administration of the United States
Department of Health and Human Services, or any successor agency thereto.
"FDA Standards" shall mean the Act, the establishment license
requirements and the Current Good Manufacturing Practice regulations of the FDA
applicable to the Product or, insofar as the Product is concerned, the
manufacturing facility of the Designated Manufacturer, and all relevant
guidelines of the FDA.
"Improvement" to a Product shall mean any and all inventions,
discoveries, developments, modifications and improvements, whether or not
patented or patentable, relating to such Product which is reflected in a
mutually agreed, written change to the Product Specification.
"Jago License Agreement" shall mean that certain Diltiazem SR
Development and License Agreement, dated August 10, 1988, between RPR and Jago
Research AG, as amended.
"Labeling" shall mean all unit Product labels, package inserts, carton
imprints and all other markings on packaging for, or other similar materials
related to, the Product supplied hereunder to Watson that are defined as labels
or labeling under any applicable law or regulation.
"Labeling Specifications" shall mean those U.S. Labeling specifications
for the Products attached hereto as Exhibit 1.1, incorporated by reference
herein (excluding those labeling specifications required under the NDA for the
Product), and any amendments to such specifications which may be mutually agreed
upon by the parties in writing and which shall be incorporated herein.
"NDA" shall mean the "New Drug Application," as defined in the Act, for
the Product and all supplements thereto.
"Person" shall mean any corporation, partnership, joint venture, other
entity or natural person.
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"Product" shall mean the pharmaceutical preparation, whether branded
(i.e., sold under a trademark) or generic (i.e., sold not under a trademark),
consisting of diltiazem formulated for extended release using the delivery
technology licensed under the Jago License Agreement and currently marketed by
RPRPI in the U.S.A. under the Dilacor XR(R) trademark and any and all
Improvements thereon.
"Product Specifications" shall mean the Product specifications and
methods set forth as of the date hereof in the manufacturing and control
sections of the NDA heretofore submitted to and approved by the FDA for the
Product, including any Labeling requirements specified therein, and any
amendments to such specifications which may be mutually agreed upon by the
parties in writing and which shall be incorporated herein.
"Specifications" shall mean the Product Specifications and the Labeling
Specifications.
"Territory" shall mean the entire world, excluding New Zealand, the
Republic of Korea and North Korea.
ARTICLE II
Supply of the Product
2.1 Exclusive Supply of Product. Except as specifically provided by the
provisions of this Agreement, during the term of this Agreement, RPRPI shall
supply Watson with all of its requirements of the Product (in finished, packaged
form except as provided in Section 2.4(g)), and Watson shall purchase all of its
requirements of the Product from RPRPI, all in accordance with the terms hereof.
The parties acknowledge that RPRPI may cause some or all of its obligations
under this Agreement, including without limitation the manufacturing, testing,
packaging and shipping of the Product, to be performed on RPRPI's behalf by the
Designated Manufacturer; provided, however, that RPRPI shall be and remain fully
liable hereunder for the performance of all such obligations.
2.2 Forecasts, Orders, Prices and Terms.
(a) Upon execution of this Agreement and no later than June 15 of
each calendar year thereafter, Watson shall provide RPRPI in writing with a good
faith forecast and best estimate of Watson's demand for the Product, by
presentation, for the next calendar year for budgeting purposes and for
determination of Standard Costs (as defined below).
(b) Watson shall provide RPRPI by the first day of each calendar
month with a written twelve (12) month rolling forecast and best estimate, by
month, of its requirements of Product. All forecasts shall be prepared in good
faith in order to facilitate RPRPI's, or its Designated Manufacturer's,
manufacture and shipment of the Product in compliance with this Agreement.
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(c) Concurrently with execution of this Agreement, Watson shall
submit and RPPI hereby accepts its firm purchase orders for shipment of Product
for the initial four months of this Agreement in accordance with Schedule 2.2(c)
hereof. Otherwise, firm purchase orders for Product shall be placed by Watson
with RPRPI not less than one hundred twenty (120) days lead time prior to the
shipment or other release date(s) requested by Watson unless RPRPI agrees to and
accepts an order for delivery in less than one hundred twenty (120) days. It is
expressly understood and agreed that, subject to the duties of Watson under the
License Agreement and Section 2.1 of this Agreement and subject to submitted
firm purchase orders, Watson has no obligation to order any minimum quantities
of Product; provided, however, RPRPI may require Watson to place orders in whole
number multiples of specified-size lots and/or in reasonable minimum batch
sizes. Each purchase order shall include (a) the quantity of Product to be
purchased; (b) the requested delivery date(s) therefor; (c) any relevant
shipping instructions; and (d) any other information dictated by the
circumstances of the order. All contrary, inconsistent or additional terms and
conditions of any purchase order, purchase order release, confirmation,
acceptance, invoice or any similar document shall be superseded by the
provisions of this Agreement and shall be disregarded and have no force or
effect.
(d) All purchase orders are subject to acceptance by RPRPI. So long
as Watson is not in default under this Agreement, RPRPI shall accept purchase
orders issued to it by Watson that are within forecast and the minimum order
lead time specified above, by written notification to Watson within ten (10)
days after receipt of such purchase order. RPRPI will use commercially
reasonable efforts to fill non-conforming orders, subject to the consent of the
Designated Manufacturer if required, but RPRPI reserves the right to charge
reasonable expedite fees and other surcharges as a condition to its accepting a
non-conforming order. Once accepted by RPRPI, a purchase order cannot be
canceled, accelerated or rescheduled, in whole or part, except with RPRPI's
written consent. Requests to increase an existing purchase order shall be
treated as a new purchase order for the incremental amount.
(e) RPRPI shall cause the Designated Manufacturer to manufacture
and ship Product pursuant to Watson's purchase orders accepted by RPRPI.
(f) The purchase price for Product ("Purchase Price") purchased
from RPRPI shall be equal to (i) RPRPI's Standard Cost (as defined below) for
such Product, plus (ii) ten percent (10%) of the Standard Cost for such Product
(and also plus any applicable sales or use taxes, duties, VAT and other similar
taxes, unless Watson provides RPRPI with a valid resale certificate or other
proof of exemption). For purposes hereof, "Standard Cost" with respect to the
Product shall equal the costs determined in accordance with the methodology set
forth in Schedule 2.2 (f) attached hereto, as such schedule may be amended from
time to time in a writing signed by an authorized representative of both the
parties, and are subject to adjustment as set forth in Section 2.4(a).
(g) The charges applicable to each shipment of Product shall be
separately invoiced by RPRPI simultaneously with delivery by RPRPI to Watson of
a certificate of
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analysis relating to such shipment. Payment shall be made within thirty (30)
days after Watson's receipt of an invoice.
(h) All shipments of the Product shall be shipped, at Watson's
option, to Watson's facilities in Corona, California or Copaigne, New York. All
shipments shall be Ex Works the manufacturing facility (Incoterms 1990), and
shall be accompanied by a packing slip which describes the Product, states the
purchase order number and shows the shipment's destination (as specified above).
Title and risk of loss shall transfer to Watson upon delivery of the goods to
the carrier for shipment as provided for herein at the Designated Manufacturer's
manufacturing facility. Watson shall designate a carrier and mode of shipment at
the time of entry of each purchase order with RPRPI; provided, however, that if
Watson fails to designate a carrier on its purchase order, RPRPI may select a
common carrier (shipment by ground) for the account and risk of Watson. For the
purposes of this Agreement, a timely shipment shall be a shipment made by RPRPI
or RPRPI's Designated Manufacturer, through Watson's carrier, a common carrier,
or other method designated by and for the account and at the expense of Watson
of a quantity of Product equal to the amount specified in the applicable
purchaser order plus or minus five percent (5%) no later than ten (10) business
days after the shipment date set forth in such purchase order.
2.3 Records and Audit Rights.
(a) RPRPI shall maintain complete and accurate books and records
with respect to the Standard Costs payable by Watson under this Agreement and
the transactions contemplated herein, along with such other reconciliation and
other information as may be necessary to calculate and verify all consideration
paid or payable by Watson under this Agreement and the transactions contemplated
herein. Upon Watson's reasonable request, RPRPI shall request from the
Designated Manufacturer documents and information necessary to determine the
Standard Costs payable by Watson hereunder.
(b) RPRPI shall maintain such books and records in accordance with
generally accepted accounting principles consistently applied and for a period
of three (3) years after the submission of each report required to be submitted
by RPRPI to Watson under this Agreement; provided, however, that if there is a
good faith dispute between the parties continuing at the end of any such three
(3) year period with respect to such books or records, then the time period for
RPRPI to maintain such books and records under dispute shall be extended until
such time as the dispute is finally resolved.
(c) Watson shall have the right itself or through an independent
accountant selected by it and acceptable to and approved by RPRPI (which
approval shall not be unreasonably withheld or delayed) to have access to the
relevant RPRPI records during reasonable business hours for the purposes of
verifying, inspecting or auditing, at Watson's expense (except as provided for
in Section 2.3(d) below), the Standard Costs provided for in this Agreement for
any of the preceding three (3) years, but this right may not be exercised more
than once in any period of twelve consecutive months. Watson shall solicit or
receive only information relating to the accuracy of the information and
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the payments made. RPRPI shall be entitled to withhold approval of an accountant
which Watson nominates unless the accountant agrees to sign a confidentiality
agreement with Watson which shall obligate such accountant to hold the
information it receives from RPRPI in confidence, except for information
necessary for disclosure to Watson, necessary to establish the accuracy of the
reports and amounts paid to RPRPI. Such audit rights shall survive for three (3)
years after the expiration or termination of this Agreement.
(d) Any underpayment for Product shipped determined pursuant to
subparagraph (c) above shall be paid within thirty (30) days of the delivery of
a detailed written accountant's report to the parties hereto. Any overpayment
for Product shipped shall be credited to the next payment due from Watson. If no
further payments from Watson will be due then a refund will be made within sixty
(60) days of the audit. In the event of any such overpayment of ten percent
(10%) or more, RPRPI shall also at the same time reimburse Watson for the
out-of-pocket costs of the verification, inspection or audit conducted.
(e) The provisions of this Section 2.3 shall survive the expiration
or sooner termination of the term of this Agreement.
2.4 Labeling and Packaging.
(a) From and after such time as the NDA for the Product has been
transferred to Watson pursuant to the terms of the Inventory Purchase Agreement
of even date herewith, between Watson and RPRPI, Watson shall bear the sole
responsibility for ensuring the accuracy of the information contained in all
Labeling and for compliance of all such Labeling and the Labeling Specifications
with all applicable law in the Territory. RPRPI shall purchase sufficient
Labeling to cover the next full quarter's forecasted amount of Product. Should
Watson desire or be required to change any component of Labeling or to introduce
a new packaging component to which Labeling will be affixed, Watson shall so
inform RPRPI and shall be responsible for updating of the artwork or text, as
applicable, and providing it to RPRPI in camera-ready form and in compliance
with the Labeling Specifications. RPRPI shall make all necessary arrangements
for such Labeling to be printed and shall provide to Watson printer's proofs of
all Labeling for Watson's review. Watson shall within fifteen (15) business days
of its receipt of such proofs either provide to RPRPI any necessary corrections
thereto or notify RPRPI of its approval of such proofs. Failure to notify RPRPI
of corrections within such fifteen (15) business days shall be deemed acceptance
for such proofs by Watson. Upon acceptance thereof by Watson, RPRPI shall return
all artwork provided by Watson to Watson. RPRPI shall be entitled to adjust its
Standard Costs for manufacturing Products hereunder, effective immediately upon
making such adjustment, to take account of all costs incurred in making changes
to Labeling and/or packaging as provided for in this Section 2.4(a), including
without limitation the costs of acquiring new Labeling in a timely manner to
meet Watson's pending purchase orders and forecasted demand and the acquisition
and disposal costs associated with obsolete inventory of Labeling, films, plates
and packaging.
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(b) Notwithstanding anything to the contrary contained above, (i)
Watson, at its option and expense, may elect by written notice to RPRPI to
assume all responsibility for and perform all packaging and labeling with
respect to all samples of the Product, and (ii) in order to facilitate Watson's
packaging and labeling of such samples, RPRPI will, upon request by Watson, ship
to Watson's Corona, California or Copaigne, New York facility (as designated by
Watson) reasonable quantities of the Product in bulk form for packaging and
labeling as samples. If Watson elects this option, the parties will discuss and
mutually agree upon (such agreement not to be unreasonably withheld) the details
of the transfer of packaging and labeling responsibility for samples to Watson.
(c) In the event Watson obtains one or more Regulatory Approval(s)
to distribute Product conforming to the Product Specifications in
jurisdiction(s) in the Territory outside the U.S. and such Regulatory
Approval(s) require Product Labeling that differs from Labeling that conforms to
the Labeling Specifications, the parties will discuss in good faith an
appropriate means of having bulk Product packaged for distribution in such
jurisdictions.
2.5 Inspection of Product.
(a) RPRPI will, or will cause the Designated Manufacturer to,
conduct quality control testing and formal release of Product in accordance with
the RPRPI standard quality control procedures that are part of the Product
Specifications ("RPRPI-Standard QA"), and to provide Watson with a certificate
of analysis for all batches of Product shipped to Watson. Delivery of any
Product by RPRPI to Watson shall constitute a certification by RPRPI that the
Product conforms to the Product Specifications, except in the case of
quarantined shipments, described below. RPRPI may ship Product to Watson
directly from the Designated Manufacturer's facility, and Watson agrees to
accept delivery for Product, in quarantine. Watson shall store all Product in
controlled conditions as specified in the Specifications. In the event a
shipment is delivered in quarantine, Watson will extract and deliver to RPRPI or
the Designated Manufacturer samples of the quarantined shipment pursuant to
RPRPI-Standard QA, for quality control testing by RPRPI. Upon satisfactory
completion of such RPRPI-Standard QA, RPRPI will, or will cause the Designated
Manufacturer to, release such shipment by delivering to Watson a written notice
releasing such shipment, accompanied by a certificate of analysis pertaining to
such shipment. In the case of quarantined shipments, such release by RPRPI will
constitute a certification by RPRPI that the Product conforms to the Product
Specifications. RPRPI will have the right at reasonable times and on reasonable
notice to inspect Watson's distribution center for compliance with the
aforementioned conditions for storage and treatment of quarantined shipments,
but such right may not be exercised more than once in any period of twelve
consecutive months unless RPRPI has a good faith reason to believe the Product
is not being handled and stored in accordance with the Product Specifications
and/or such facility is not in compliance in any material respect with FDA
Standards or other applicable law. Such inspection shall be conducted at RPRPI's
sole cost and expense in a manner so as reasonably to minimize disruption of
Watson's business operations, provided that Watson shall reimburse RPRPI for
such costs if such inspection reveals a material non-compliance with Product
Specifications, FDA Standards or any applicable law.
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(b) Within fifteen (15) days after receipt of each shipment of
Product by Watson at the destination specified in the shipping instructions,
Watson agrees to inspect promptly each shipment to determine whether any portion
of it does not conform with the applicable purchase order, the Specifications or
the representations and warranties of RPRPI set forth in Sections 3.1(a) and (b)
hereof. In the event that any portion of any shipment fails to conform to the
applicable purchase order, the Specifications or the representations and
warranties of RPRPI set forth in Sections 3.1(a) and (b) hereof, Watson may
reject the non-conforming portion of Product by giving prompt written notice to
RPRPI within fifteen (15) days after Watson's receipt of such shipment or, if
the shipment is a quarantined shipment as specified above, receipt of a
certificate of analysis as so specified; provided, however, that in no event
shall RPRPI be liable for any such noncompliance arising out of the shipment,
storage or handling of the Product following its delivery to the carrier at the
manufacturing facility. Such notice shall include a copy of Watson's test
results and specify the manner in which Product fails to meet the applicable
purchase order, Specifications or representations and warranties. Failing such
notification, Watson shall be deemed to have accepted the shipment of Product,
except as to latent defects which could not have been detected in such 15 day
period. Such acceptance by Watson shall not be deemed to be a waiver by Watson
of any of the representations or warranties made by RPRPI in Sections 3.1(a) and
(b) hereof.
(c) Upon giving RPRPI such notification of non-conformance, Watson
shall provide RPRPI with a reasonable opportunity to inspect the Product and
make any appropriate adjustment or replacement. Any dispute regarding the proper
rejection of a shipment shall be submitted for testing to an independent
laboratory to be mutually agreed upon. The independent laboratory shall be
mutually agreed upon within seven (7) business days of RPRPI's receipt of the
notice of rejection. If the independent laboratory finds that the shipment in
question or any part of it did not comply in all material respects with the
Specifications or the representations and warranties of RPRPI set forth in
Sections 3.1(a) and (b) at the time of delivery to the carrier as required by
Section 2.2(g), or if the parties agree that there is a shortage or
non-compliance, RPRPI shall use commercially reasonable efforts to cause the
Designated Manufacturer forthwith to make up the shortage, if appropriate, or
replace any non-conforming Product, such new Product to be shipped to the same
destination as the original shipment at RPRPI's expense, and if RPRPI is unable
to cause the Designated Manufacturer to do so, it shall promptly refund any
money paid by Watson with respect to such undelivered or non-complying Product
and reimburse Watson for the costs of shipping such Product. Any non-conforming
Product shall, at RPRPI's direction and expense, either be returned by Watson to
RPRPI or destroyed by Watson (and certified as so destroyed by Watson). RPRPI's
supply of substitute Product which conforms to the Product Specifications, or as
the case may be, payment of the refund and reimbursement provided for herein,
shall satisfy and discharge any claims or potential claims of Watson against
RPRPI with respect to undelivered or non-complying Product in that shipment.
(d) With respect to disputes described in subparagraph (c) above,
the parties agree to be bound by the independent laboratory's report. Costs of
the independent laboratory's activities shall be borne by Watson if the Product
in question is found to comply with the Product Specifications and the
representations and warranties of RPRPI
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set forth in Sections 3.1(a) and (b), and by RPRPI if such Product is found not
to comply with the Product Specifications or the representations and warranties
of RPRPI set forth in Sections 3.1(a) and (b).
2.6 Inspection of the Product Facility.
(a) Watson shall have the right (but no more than once each
calendar year, unless Watson has a good faith reason to believe such facility is
not in compliance in any material respect with FDA Standards or other applicable
law), upon reasonable advance notice, during regular business hours and at times
mutually agreed upon, to inspect the facilities (including the facilities of the
Designated Manufacturer) being used by RPRPI for production of the Product to
assure compliance with applicable laws, rules and regulations, including without
limitation FDA Standards, applicable portions of the NDA for the Product and
RPRPI-Standard QA (collectively, "Relevant Standards"). Such inspection and
audit shall be conducted at Watson's sole cost and expense in a manner so as to
minimize disruption of RPRPI's business operations.
2.7 Product Recalls. In the event any governmental agency having
applicable jurisdiction shall order, or in the event the parties mutually agree
that otherwise becomes necessary to perform, any corrective action or market
action with respect to the Product supplied hereunder, including any recall,
field correction, market withdrawal, stock recovery, customer notice or
restriction, caused by a breach by RPRPI of any of its representations or
warranties contained in Sections 3.1(a) and 3.1(b), then RPRPI shall be liable
for, and shall reimburse Watson for the reasonable, documented out-of-pocket
costs actually incurred by Watson in notifying its customers of such action and
replacing any Product recalled from its customers (including costs of shipment)
or from Watson's inventory. Watson shall be liable for the costs of all other
such actions and shall indemnify RPRPI for the reasonable, documented
out-of-pocket costs actually incurred by RPRPI in connection therewith. If each
of RPRPI and Watson are partly liable for such action under the terms hereof,
each party shall be responsible for its proportionate share of such costs.
2.8 Confidentiality; Press Releases.
(a) Pursuant to the terms hereof, from time to time during the term
of this Agreement, each of Watson and RPRPI and/or its respective Affiliates (in
such capacity, the "Disclosing Party") have disclosed and will be disclosing to
the other party and/or its Affiliates (in such capacity, the "Receiving Party")
certain proprietary information, technical data, trade secrets and know-how of
the Disclosing Party including, without limitation, know-how, plans, designs,
methods, formulations, ingredients, samples, processes, machines, processing and
control information, Royalty-Bearing Product performance data, manuals, INDs,
NDAs, Regulatory Approvals, the content of any unpublished patent applications,
drawings, formulae, devices, structures, models, prototypes, data, test results,
photographs, film, techniques, apparatus, tapes, disks, unpublished trademarks,
trade names and copyrights, customer lists, supplier lists, operating methods
and procedures, marketing, distribution and sales methods and systems, sales
figures, projections, finances and other business information. The
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Receiving Party shall, during the term of this Agreement, and for seven (7)
years after the expiration or sooner termination of the term of this Agreement,
make no use of such confidential information except to advance the purposes of
this Agreement and of the agreements contemplated herein or therein or executed
concurrently herewith in accordance with its provisions, and shall use the same
efforts to keep secret and prevent the disclosure of such confidential
information to third parties as it would use with respect to its own
confidential information. Information disclosed by the Disclosing Party shall
remain the sole and absolute property of the Disclosing Party, subject to the
rights granted in this Agreement and the transactions contemplated herein. The
above restrictions on the use and disclosure of information shall not apply to
any information which: (i) is already known to the Receiving Party at the time
of disclosure, as demonstrated by competent proof; (ii) is or becomes generally
available to the public other than through any act or omission of the Receiving
Party in breach of this Agreement; (iii) is acquired by the Receiving Party from
a third party who is not, directly or indirectly, under an obligation of
confidentiality to the Disclosing Party with respect to same; (iv) is required
to be disclosed pursuant to applicable law, rule or regulation; (v) is required
to be disclosed to government regulatory authorities to obtain Regulatory
Approval for the Royalty-Bearing Products or to respond to a regulatory or
governmental inquiry concerning the Royalty-Bearing Products; or (vi) is
developed independently by the Receiving Party without use, direct or indirect,
of information that is required to be held confidential hereunder.
(b) Subject to compliance with the terms of the Jago License
Agreement, Watson shall be permitted to disclose to its distributors,
wholesalers and other direct customers such confidential information relating to
the Royalty-Bearing Products as Watson shall reasonably determine to be
necessary in order to effectively market and distribute the Royalty-Bearing
Products, provided that such entities undertake the same confidentiality
obligation as Watson has with respect to RPRPI's confidential information.
(c) Except as otherwise provided herein, neither party shall use
the name of the other for marketing, advertising or promotional claims without
the prior written consent of the other party.
(d) To the extent that Watson has exercised its right under Section
2.3(a) to require RPRPI to request documents from the Designated Manufacturer or
receives any other confidential information belonging to the Designated
Manufacturer, Watson agrees to be bound by the confidentiality provisions of the
supply agreement between RPRPI and the Designated Manufacturer as if it were a
party thereto.
(e) The provisions of this Section 2.7 shall survive the expiration
or sooner termination of this Agreement.
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ARTICLE III
General Terms and Conditions
3.1 Representations and Warranties of RPRPI. RPRPI represents and
warrants to Watson that:
(a) Subject to Watson's liability with respect to the content of
Labeling under Section 2.4(a), all Product manufactured, supplied and shipped by
RPRPI, or on its behalf by the Designated Manufacturer, to Watson under this
Agreement shall be manufactured in accordance with and shall conform, at the
time of delivery to the carrier at the manufacturing facility, to the
Specifications and all applicable FDA Standards.
(b) Subject to Watson's liability with respect to the content of
Labeling under Section 2.4(a), all Product supplied by RPRPI, or on its behalf
by the Designated Manufacturer, to Watson under this Agreement shall not, at the
time of delivery to the carrier at the manufacturing facility, be adulterated or
misbranded within the meaning of Section 301 of the Act, or be an article which
may not be introduced into interstate commerce under the provisions of Section
505 of the Act.
(c) All Product sold to Watson hereunder shall be, at the time of
delivery to the carrier at the manufacturing facility, free and clear of any
liens, title claims, security interests and encumbrances of any nature.
3.2 EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
OTHERWISE, AND EACH PARTY SPECIFICALLY (1) DISCLAIMS ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE PRODUCTS
WHETHER USED ALONE OR IN COMBINATION WITH OTHER SUBSTANCES OR MATERIALS, AND (2)
RELEASES THE OTHER PARTY FROM, AND WAIVES, ANY AND ALL LIABILITY FOR SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES.
ARTICLE IV
Indemnification
In order to distribute among themselves the responsibility for claims
arising out of this Agreement, and except as otherwise specifically provided for
herein, the parties agree as follows:
4.1 RPRPI shall defend, indemnify and hold Watson, its Affiliates,
successors and permitted assigns, and the respective officers, directors,
agents, employees and shareholders of each (collectively, "Watson Indemnitees")
harmless, from and against, any and all losses, obligations, liabilities,
penalties, damages, costs and expenses (including reasonable attorneys' fees),
which the Watson Indemnitees may incur or suffer as a result of third-party
suits or claims for illness, bodily injury or death to the extent they are
attributable to any breach by RPRPI of any representation or warranty made by
RPRPI in Section 3.1(a) or (b).
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4.2 If any action, claim, suit, proceeding or investigation arises as
to which a right of indemnification provided in this Article IV applies, the
Watson Indemnitee (the "indemnified party"), shall promptly notify the party
obligated under this Article IV to indemnify the indemnified party (the
"indemnifying party") thereof in writing, and allow the indemnifying party and
its insurers the opportunity to assume direction and control of the defense
against such action, claim, suit, proceeding or investigation, at its sole
expense, including without limitation, the settlement thereof at the sole option
of the indemnifying party or its insurers to the extent that the indemnified
party's liability is not thereby invoked. The indemnified party shall fully
cooperate with the indemnifying party and its insurer in the disposition of any
such matter and the indemnified party will have the right to participate in (but
not control) the defense of any action, claim, suit, proceeding or investigation
as to which this Article IV applies, with separate counsel at its election and
at its own expense. If the indemnifying party fails or declines to assume the
defense of any such action, claim, suit, proceeding or investigation within
thirty (30) days after notice thereof, the indemnified party may assume the
defense thereof for the account and at the risk of the indemnifying party. The
indemnifying party shall pay promptly to the indemnified party any losses,
obligations, liabilities, penalties, damages, judgments, reasonable costs and
expenses (including reasonable legal fees) to which the indemnity under this
Article IV applies, as incurred.
ARTICLE V
Term
5.1 Except as otherwise provided herein, the term of this Agreement
shall commence on the Effective Date and shall continue until June 30, 1999;
provided, however, that in the event the necessary approvals have not been
obtained in order to have the Product manufactured by an entity other than
RPRPI, Watson may extend the term of this Agreement for a single, additional
year by delivering written notice to RPRPI delivered at least one hundred eighty
(180) days prior to the scheduled termination date hereof.
5.2 The following shall survive the expiration or sooner termination of
the term of this Agreement: any payment obligations of the parties hereunder
accruing prior to the date of expiration or termination; the provisions of
Articles III and IV, and any other provision herein expressly surviving
expiration or termination or necessary to interpret the rights and obligations
of the parties in connection with the expiration or termination of the term of
this Agreement.
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ARTICLE VI
Events of Default
6.1 The occurrence of any one or more of the following acts, events or
occurrences shall constitute an "Event of Default" under this Agreement:
(a) either party becomes the subject of a Bankruptcy Event; or
(b) either party breaches any material provision of this Agreement
or the License Agreement, or defaults in the performance or observance of any
material provision of this Agreement or the License Agreement, and fails to
remedy such breach or default within one hundred eighty (180) days after receipt
of notice thereof (except in the case of a failure to pay any amounts due, in
which event the default if such payment is not received within 10 business days
of the due date, shall give rise to an Event of Default unless the parties
otherwise agree).
6.2 If RPRPI materially defaults in the performance of its obligations
hereunder to supply the Product, then Watson shall be relieved of its obligation
under Section 2.1 to purchase all of its requirements for the Product from RPRPI
during the applicable cure period under Section 6.1(b) (and thereafter if such
cure is not effectuated during the first 120 days of such cure period).
ARTICLE VII
Remedies
7.1 Immediately upon the occurrence of any Event of Default by RPRPI
pursuant to Section 6.1 (a) or (b), Watson shall have the right to terminate
this Agreement by delivering written notice thereof to RPRPI and pursue any and
all remedies available to Watson.
7.2 Immediately upon the occurrence of any Event of Default by Watson
pursuant to Section 6.1(a) or (b), RPRPI shall have the right to terminate this
Agreement by delivering written notice thereof to Watson and to pursue any and
all remedies available to RPRPI.
7.3 The parties expressly acknowledge that the remedy provisions
contained in this Section are reasonable, considering the intended nature and
scope of this Agreement, and considering the investments and undertakings
required on the part of the parties in connection herewith.
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ARTICLE VIII
Force Majeure
The obligations of RPRPI and Watson hereunder shall be subject to any
delays or non-performance caused by: acts of God, earthquakes, fires, floods,
explosion, sabotage, riot, accidents; regulatory, governmental, or military
action or inaction; strikes, lockouts or labor trouble; perils of the sea; or
failure or delay in performance by third parties, including suppliers and
service providers; or any other cause beyond the reasonable control of either
party ("Force Majeure Event"). The party which is not performing its obligations
under this Agreement as a result of any such event of Force Majeure shall use
commercially reasonable efforts to resume compliance with this Agreement as soon
as possible.
ARTICLE IX
Covenants of RPRPI
9.1 During the term of this Agreement, RPRPI or its Affiliates shall
maintain at all times, either itself or through the Designated Manufacturer, the
manufacturing capacity and capabilities which shall allow it to satisfy the
provisions of this Agreement and timely supply the Product to Watson in
accordance with the terms of this Agreement.
ARTICLE X
Miscellaneous
10.1 In making and performing this Agreement, the parties are acting
and shall act as independent contractors. Nothing in this Agreement shall be
deemed to create an agency, joint venture or partnership relationship between
the parties hereto. Neither party shall have the authority to obligate the other
party in any respect, and neither party shall hold itself out as having any such
authority. All personnel of RPRPI shall be solely employees of RPRPI and shall
not represent themselves as employees of Watson. All personnel of Watson shall
be solely employees of Watson and shall not represent themselves as employees of
RPRPI.
10.2 Neither RPRPI nor Watson may assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed. No
such assignment shall relieve assignor of any of its obligations or liabilities
under this Agreement.
10.3 This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective permitted successors and assigns.
Nothing contained herein shall give to any other Person any benefit or any legal
or equitable right, remedy or claim.
10.4 This Agreement may only be modified, amended or supplemented by an
instrument in writing executed by RPRPI and Watson.
10.5 No term or provision hereof will be considered waived by either
party, and no breach excused by either party, unless such waiver or consent is
in writing signed on
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<PAGE> 15
behalf of the party against whom the waiver is asserted. No consent by either
party to, or waiver of, a breach by either party, whether express or implied,
will constitute a consent to, waiver of, or excuse of any other, different, or
subsequent breach by either party.
10.6 All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be delivered personally
or sent by facsimile transmission, air courier, or registered or certified mail,
return receipt requested, addressed as follows:
If to Watson: If to RPRPI:
Watson Laboratories, Inc. Rhone-Poulenc Rorer Pharmaceuticals Inc.
311 Bonnie Circle 500 Arcola Road
Corona, California 91720 Collegeville, Pennsylvania 19426
Fax: (909) 270-1429 Fax: (610) 454-2294
Attn: Dr. Allen Chao Attn: Vice President Industrial Operations,
the Americas
With copies to: With copies to:
D'Ancona & Pflaum Rhone-Poulenc Rorer Pharmaceuticals Inc.
30 North LaSalle, Suite 2900 500 Arcola Road
Chicago, Illinois 60602 Collegeville, Pennsylvania 19426
Fax: (312) 580-0923 Attn: General Counsel
Attn: Michel J. Feldman Fax: (610) 454-3807
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
communication shall be deemed to have been delivered (i) when delivered, if
delivered personally, (ii) when sent (with confirmation received), if sent by
facsimile transmission on a business day, (iii) on the first business day after
dispatch (with confirmation received), if sent by facsimile transmission on a
day other than a business day, (iv) on the second business day after dispatch,
if sent by air courier, and (v) on the fifth business day after mailing, if sent
by mail.
10.7 This Agreement shall become binding when any one or more
counterparts hereof, individually or taken together, shall bear the signatures
each of the parties hereto. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against the party
whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
10.8 The article and section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE> 16
10.9 This Agreement and any claims, disputes or causes of action
relating to or arising out of this Agreement, shall be construed in accordance
with and governed by the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
10.10 Any of the provisions of this Agreement which are determined to
be invalid or unenforceable in any jurisdiction shall be ineffective to the
extent of such invalidity or unenforceability in such jurisdiction, without
rendering invalid or unenforceable the remaining provisions hereof or affecting
the validity or enforceability of any of the provisions of this Agreement in any
other jurisdiction.
10.11 This Agreement and the other agreements contemplated hereby or
thereby or executed concurrently herewith embody the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements, commitments, arrangements,
negotiations or understandings, whether oral or written, between the parties
hereto and their respective Affiliates with respect thereto, including, without
limitation, that certain letter of intent, dated May 20, 1997, between RPR and
Watson. There are no agreements, covenants or undertakings with respect to the
subject matter of this Agreement and the other agreements contemplated hereby or
thereby other than those expressly set forth or referred to herein or therein
and no representations or warranties of any kind or nature whatsoever, express
or implied, are made or shall be deemed to be made herein by the parties hereto
except those expressly made in this Agreement and the other agreements
contemplated hereby or thereby.
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of date first above written.
WATSON LABORATORIES, INC. RHONE-POULENC RORER
PHARMACEUTICALS INC.
By: _______________________ By: _______________________
Its:_______________________ Its:_______________________
17
<PAGE> 1
EXHIBIT 10.4
AGREEMENT REGARDING PARTNERSHIP TERMINATION
This Agreement ("Agreement") is entered into as of June 30, 1997, by
and among Watson Laboratories, Inc., a Nevada corporation ("Watson"), Circa
Pharmaceuticals, Inc., a New York corporation ("Circa"), BOL Inc., a Delaware
corporation ("BOL"), Rhone-Poulenc Rorer Inc., a Pennsylvania corporation
("RPR"), and Rhone-Poulenc Rorer Pharmaceuticals Inc., a Delaware corporation
("RPRPI").
R E C I T A L S:
WHEREAS, Watson and Circa (formerly known as Bolar Pharmaceuticals Co.,
Inc.) are affiliated through joint ownership by their parent corporation, Watson
Pharmaceuticals, Inc., a Nevada corporation ("Watson Pharmaceuticals"); and
WHEREAS, BOL and RPRPI (as successor by merger to RPR BRG Group Inc.
(formerly known as ROR II Corp.)) are the partners of BRG Company (the
"Company"), a general partnership organized under the laws of the State of
Delaware for the purpose of commercializing, among other things, the extended
release formulation of diltiazem currently marketed in the U.S. under the
trademark Dilacor XR(R) (the "Product"); and
WHEREAS, the rights, duties and obligations of BOL and RPRPI with
respect to the Company are controlled by the General Partnership Agreement of
the Company, dated as of July 17, 1989, as amended (the "Partnership Agreement")
and a series of additional agreements (the "Related Agreements") as set forth on
Exhibit A, attached hereto entered into in furtherance of the objectives of the
Company between or among two or more of the Company, BOL, RPRPI, Circa and RPR;
and
WHEREAS, Watson, RPRPI and Rorer Pharmaceutical Products Inc., an
affiliate of RPRPI ("RPPI") desire to enter into a series of transactions
pursuant to which, among other things: (i) the parties hereto shall terminate
the Partnership Agreement and all the Related Agreements; (ii) with the consent
of Jago Research AG ("Jago"), RPPI will grant to Watson an exclusive license of
all of its rights to market, advertise, promote, sell and distribute the Product
(including both branded and generic versions of it) in certain jurisdictions,
and grant to Watson certain option rights with respect to the acquisition of
RPPI's rights to the Product in certain jurisdictions, pursuant to a License
Agreement, of even date herewith, between Watson and RPPI; (iii) RPRPI will sell
and Watson will purchase certain inventory of and other assets relating to the
Product pursuant to an Inventory Purchase Agreement, of even date herewith,
between Watson and RPRPI; and (iv) RPRPI will manufacture and supply the Product
to Watson pursuant to the terms of a Manufacturing and Supply Agreement, of even
date herewith, between Watson and RPRPI (collectively, the "Transaction");
WHEREAS, Watson, Circa, BOL, RPR and RPRPI now desire to enter into
this Agreement to set forth certain rights and obligations and to terminate the
Partnership Agreement and the Related Agreements, all on the terms and
conditions as set forth below.
<PAGE> 2
A G R E E M E N T S:
NOW, THEREFORE, Circa, Watson, BOL, RPR and RPRPI hereby agree as
follows:
Section 1. Termination. The parties hereby agree that, subject to the
fulfillment of the conditions set forth in Section 6 hereof:
(a) Effective as of 11:59 p.m. on June 30, 1997, the Partnership
Agreement and the Related Agreements are hereby terminated and of no further
force or effect whatsoever; provided, that (i) the obligations to make royalty
payments to Circa under the Partnership Agreement shall survive such termination
as and to the extent set forth in Section 7 below and (ii) the assignments and
conveyances of rights made in Section 3.a. of the Third Amendment and in Section
3.a. of the Fourth Amendment to the Partnership Agreement will not be affected
by such termination. BOL and RPRPI shall promptly take such actions as are
necessary in order to dissolve the Company effective as of said date and time
and to wind-up the affairs of the Company as soon as practicable thereafter.
(b) Without limiting subparagraph (a) above, each of BOL and RPRPI
expressly acknowledges and agrees that neither party nor any of its Affiliates
(as defined below) shall have any ongoing obligations, liabilities or
responsibilities of any nature whatsoever pursuant to the non-competition
covenant contained in Section 16(b) of the Partnership Agreement. For purposes
hereof, "Affiliate" shall mean, when used with respect to a person, any other
person directly or indirectly controlling, controlled by, or under common
control with the subject person; provided, however, that with respect to RPR and
RPRPI, only RPR and persons directly or indirectly controlled by RPR shall be an
Affiliate of such parties for any provision of this Agreement, or any of the
Agreements contemplated hereby. For purposes of this Agreement, "control" means
the direct or indirect ownership of over 50% of the outstanding voting
securities of a person, or the right to receive over 50% of the profits or
earnings of a person.
(c) All rights, assets and liabilities of the Company shall be
distributed in accordance with the Plan of Partnership Dissolution attached
hereto as Exhibit B.
Section 2. Termination Fee. In order to induce RPRPI to execute this
Agreement and enter into the Transaction, Watson shall immediately upon the
signing of this Agreement deliver to RPRPI the sum of Twenty Million Dollars
($20,000,000.00), by wire transfer to such account as may be specified in
writing by RPRPI.
Section 3. Release by RPRPI. Except for the royalty payment obligations
of the parties set forth in Section 7 below, RPRPI, for itself, its
predecessors, successors and assigns, partners, subsidiaries, and Affiliates
(collectively, the "RPR Parties"), hereby releases and forever discharges BOL,
and the predecessors, successors and assigns, partners, subsidiaries, and
Affiliates of BOL, including, without limitation, Watson and
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<PAGE> 3
Watson Pharmaceuticals and their respective predecessors, successors and assigns
(collectively, the "Circa Parties") from any and all liabilities, obligations,
expenses, losses, damages, indemnities, claims, causes of action and demands
whatsoever which RPRPI and the RPR Parties ever had, now have or may have,
whether now known or unknown, against BOL and the Circa Parties arising out of,
resulting from, or in any way related to the Company and/or the Partnership
Agreement or the Related Agreements.
Section 4. Release by BOL. Except for the royalty payment obligations
of the parties set forth in Section 7 below, BOL for itself and the Circa
Parties, hereby releases and forever discharges RPRPI and the RPR Parties from
any and all liabilities, obligations, expenses, losses, damages, indemnities,
claims, causes of action and demands whatsoever which BOL and the Circa Parties
ever had, now have or may have, whether now known or unknown, against RPRPI and
the RPR Parties arising out of, resulting from, or in any way related to the
Company and/or the Partnership Agreement or the Related Agreements.
Section 5. General Release. Each party hereby agrees, represents and
warrants that the releases in Sections 3 and 4 are not limited to matters that
are known or disclosed, and each party hereby waives any and all rights and
benefits that it now has, or in the future may have, under or by virtue of
Section 1542 of the Civil Code of the State of California (or any other statute
or common law principles of similar effect), that provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
In this connection, each party hereby also agrees, represents, and warrants that
it realizes and acknowledges that factual matters now unknown to it may have
given or may hereafter give rise to causes of action, claims, demands, debts,
controversies, damages, costs, losses and expenses that are presently unknown,
unanticipated, and unsuspected, that Sections 3 and 4 have been negotiated and
agreed upon in light of that realization and that it nevertheless hereby intends
to release, discharge, and acquit each other party from any such unknown causes
of action, claims, demands debts, controversies, damages, costs, losses and
expenses.
Section 6. Conditions to Effectiveness. As a condition precedent to the
effectiveness of this Agreement and the obligations, releases and other duties
and benefits of the parties hereunder, each of the following conditions must be
satisfied:
(a) Watson, Jago, Circa and RPR shall have entered into that certain
Consent Agreement substantially in the form attached hereto as Exhibit C;
(b) Watson and RPPI shall have entered into that certain License
Agreement, substantially in the form attached hereto as Exhibit D;
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<PAGE> 4
(c) Watson and RPRPI shall have entered into that certain Manufacturing
and Supply Agreement, substantially in the form attached hereto as Exhibit E;
and
(d) Watson and RPRPI shall have entered into that certain Inventory
Purchase Agreement, substantially in the form attached hereto as Exhibit F.
Section 7. Royalty Payments.
(a) Section 4 of the Fourth Amendment to the Partnership Agreement,
dated April 27, 1993 (the "Fourth Amendment"), as amended by that certain Letter
Agreement, dated May 3, 1995 between RPR and Circa (the "Letter Agreement"),
sets forth certain royalty payment obligations whereby, among other things, RPR
must pay Circa royalty on the Net Sales (as defined in the Fourth Amendment) of
the Branded QD Product (as defined in the Fourth Amendment) in the United States
and its territories and possessions. Each of the parties hereto acknowledges and
agrees that notwithstanding anything to the contrary contained herein, the
obligation to make any and all royalty payments due and owing to Circa under
Section 4.a. of the Fourth Amendment for periods prior to July 1, 1997 shall
survive the termination of the Partnership Agreement and be paid as set forth
below.
(b) Within forty-five (45) days after June 30, 1997, RPRPI shall
provide Circa with a written report of RPRPI's best good faith estimates of Net
Sales of the Branded QD Product during the calendar quarter ended June 30, 1997
and corresponding royalty owed, as well as a reconciliation of the report for
the preceding calendar quarter with the final figure for Net Sales as reported
on the formal books of RPRPI. Such report shall be accompanied by the royalty
due for the quarter ended June 30, 1997, subject to any adjustments for the
preceding calendar quarter. Within forty-five (45) days after September 30,
1997, RPR shall provide Circa with a reconciliation of the previous reports
provided hereunder with the final figures for Net Sales as reported on the
formal books of RPRPI, and the party owing money in connection with any
adjustment to such previous report shall promptly pay such amount.
(c) RPRPI shall keep complete and accurate records concerning Net Sales
of the Branded QD Products in the United States and its territories and
possessions for the calendar quarter ending June 30, 1997 in accordance with
generally accepted accounting principles applied on a consistent basis. At
Circa's request and expense upon reasonable notice to RPRPI, such records shall
be made available for reasonable examination by Circa or an independent
certified public accountant or auditors designated by Circa and approved by
RPRPI for the purpose of verifying the accuracy of the accounting reports and
the calculation of the royalty payment to be made pursuant to Section 7(b)
above.
Section 8. Miscellaneous.
(a) No party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the other parties
hereto. No such assignment shall relieve assignor of any of its obligations or
liabilities under this Agreement.
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<PAGE> 5
(b) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective permitted successors and assigns.
Nothing contained herein shall give to any other person any benefit or any legal
or equitable right, remedy or claim.
(c) This Agreement may only be modified, amended or supplemented by an
instrument in writing executed by each of the parties hereto.
(d) No term or provision hereof will be considered waived by either
party, and no breach excused by either party, unless such waiver or consent is
in writing signed on behalf of the party against whom the waiver is asserted. No
consent by either party to, or waiver of, a breach by either party, whether
express or implied, will constitute a consent to, waiver of, or excuse of any
other, different, or subsequent breach by either party.
(e) All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be delivered personally
or sent by facsimile transmission, air courier, or registered or certified mail,
return receipt requested, addressed as follows:
If to Watson, Circa or BOL: If to RPR or RPRPI, in care of:
Watson Laboratories, Inc. Rhone-Poulenc Rorer Pharmaceuticals Inc.
311 Bonnie Circle 500 Arcola Road
Corona, California 91720 Collegeville, Pennsylvania 19426
Fax: (909) 270-1429 Fax: (610) 454-2294
Attn: Dr. Allen Chao Attn: Senior Vice President and General
Manager, Americas
With copies to: With copies to:
D'Ancona & Pflaum Rhone-Poulenc Rorer Pharmaceuticals Inc.
30 North LaSalle, Suite 2900 500 Arcola Road
Chicago, Illinois 60602 Collegeville, Pennsylvania 19426
Fax: (312) 580-0923 Attn: General Counsel
Attn: Michel J. Feldman Fax: (610) 454-3807
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
communication shall be deemed to have been delivered (i) when delivered, if
delivered personally, (ii) when sent (with confirmation received), if sent by
facsimile transmission on a business day, (iii) on the first business day after
dispatch (with confirmation received), if sent by facsimile transmission on a
day other than a business day, (iv) on the second business day after dispatch,
if sent by air courier, and (v) on the fifth business day after mailing, if sent
by mail.
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<PAGE> 6
(f) This Agreement shall become binding when any one or more
counterparts hereof, individually or taken together, shall bear the signatures
of each of the parties hereto. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against the party
whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
(g) The article and section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) This Agreement and any claims, disputes or causes of action
relating to or arising out of this Agreement shall be construed in accordance
with and governed by the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
(i) Any of the provisions of this Agreement which are determined to be
invalid or unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or unenforceability in such jurisdiction, without rendering
invalid or unenforceable the remaining provisions hereof or affecting the
validity or enforceability of any of the provisions of this Agreement in any
other jurisdiction.
(j) This Agreement and the other agreements contemplated hereby or
thereby or executed concurrently herewith embody the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements, commitments, arrangements,
negotiations or understandings, whether oral or written, between the parties
hereto and their respective Affiliates with respect thereto, including, without
limitation, that certain letter of intent, dated May 20, 1997, between RPR and
Watson. There are no agreements, covenants or undertakings with respect to the
subject matter of this Agreement and the other agreements contemplated hereby or
thereby other than those expressly set forth or referred to herein or therein
and no representations or warranties of any kind or nature whatsoever, express
or implied, are made or shall be deemed to be made herein by the parties hereto
except those expressly made in this Agreement and the other agreements
contemplated hereby or thereby.
(k) Each party agrees to execute, acknowledge and deliver such further
instruments, and to do all such other acts, as may be reasonably necessary or
appropriate in order to carry out the purposes and intent of this Agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of date first above written.
WATSON LABORATORIES, INC. RHONE-POULENC RORER
PHARMACEUTICALS INC.
By: _______________________ By: _______________________
Its:_______________________ Its:________________________
CIRCA PHARMACEUTICALS, INC. RHONE-POULENC RORER INC.
By: _______________________ By: ________________________
Its:_______________________ Its:_________________________
BOL INC.
By: _______________________
Its:_______________________
7
<PAGE> 1
FOR: WATSON PHARMACEUTICALS
APPROVED BY: Dr. Allen Chao
Chairman and Chief Executive Officer
Watson Pharmaceuticals, Inc.
(909) 270-1400
CONTACT: Doug Sherk, Suzanne Craig, Jim Byers
(415) 296-7383
David Sasso, Josh Passman
(212) 850-5600
Morgen-Walke Associates, Inc.
Bob Pearson
(610) 454-3872
Rhone-Poulenc Rorer Inc.
WATSON PHARMACEUTICALS ACQUIRES EXCLUSIVE RIGHTS TO
DILACOR XR(R) FROM RHONE-POULENC RORER
CORONA, CA, June 30, 1997 - In a strategic move designed to increase
its sales of proprietary products, Watson Pharmaceuticals, Inc. (Nasdaq: WATS)
today announced that it has obtained exclusive worldwide rights to Dilacor
XR(r) from Rhone-Poulenc Rorer Inc. (NYSE:RPR). The agreement excludes certain
non-U.S. markets in which RPR currently markets Dilacor XR(r). During the
licensing period, Watson will pay an annual licensing fee and a royalty on
sales. The total consideration of the transaction over the 4-1/2 year licensing
period is expected to be approximately $190 million plus royalties, including a
prepayment for the option to purchase the rights at the conclusion of the
licensing period.
Dilacor XR(r) (diltiazem hydrochloride) has been available for the
treatment of hypertension since June, 1992 and was approved for the treatment
of chronic stable angina in March, 1995 in the U.S. Its extended release
feature allows for predictable and consistent 24 hour blood levels of the drug.
Dilacor XR(r) capsules are available in 120 mg, 180 mg and 240 mg dosage
strengths. Sales of this product totaled approximately $140 million in 1996.
Over 60 million Americans have high blood pressure, referred to as
hypertension. Angina is a constricting pain in the chest due to insufficient
blood supply to the heart muscle. Over 7.5 million people have been diagnosed
with angina in the U.S.
"This exclusive licensing agreement expands our branded product sales,
and is consistent with our long-term strategy of creating a revenue stream more
diversified and proprietary," commented Dr. Allen Chao, Chairman and Chief
Executive Officer. "Adding Dilacor XR(r) to our product portfolio will enhance
the strength of our recently expanded direct salesforce," he added.
(more)
<PAGE> 2
The following important factors may affect Watson's actual results and
could cause such results to differ materially from forward-looking statements
made by or on behalf of Watson. Such factors include, but are not limited to,
changing market conditions, the availability and cost of raw materials, the
impact of competitive products and pricing, the timely development, FDA
approval and market acceptance of Watson's products, and other risks detailed
herein and from time to time in Watson's Securities and Exchange Commission
filings.
Watson Pharmaceuticals, Inc., headquartered in Corona, CA, is engaged
in the manufacture and sale of off-patent medications and proprietary
pharmaceutical products.
###
