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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment Number 1 to Form 10-Q Filed on September 30, 1996)
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11397,
ICN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0628076
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3300 Hyland Avenue
COSTA MESA, CALIFORNIA 92626
(Address of principal executive offices)
(Zip Code)
(714) 545-0100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
The number of outstanding shares of the registrant's Common Stock,
$.01 par value, as of November 6, 1996 was 33,510,000.
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ITEM 6.
Exhibit 10. Material Contracts
**CERTAIN CONFIDENTIAL MATERIAL CONTAINED IN THIS DOCUMENT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO 17
C.F.R. SUBSECTION 200.80(B)(4), 200.83 AND 240.24B-2.**
EXCLUSIVE LICENSE AND SUPPLY AGREEMENT
between
ICN PHARMACEUTICALS, INC.
and
SCHERING-PLOUGH LTD.
JULY 28, 1995
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C> <C>
ARTICLE 1.
DEFINITIONS ............................................................ 2
1.1 "Affiliate" ................................................ 2
1.2 "Cost of Goods" ............................................ 2
1.3 "CPMP Opinion" ............................................. 2
1.4 "Effective Date"............................................ 2
1.5 "EU"........................................................ 3
1.6 "Exclusive Period" ......................................... 3
1.7 "FDA" ...................................................... 3
1.8 "ICN" ...................................................... 3
1.9 "ICN Facility" ............................................. 3
1.10 "ICN Trademark" ............................................ 3
1.11 "Improvements" ............................................. 3
1.12 "Know-How" ................................................. 4
1.13 "Labelling" ................................................ 4
1.14 "License Period" ........................................... 4
1.15 "Major Market" ............................................. 4
1.16 "Minimum Labelling" ........................................ 4
1.17 "NDA" ...................................................... 4
1.18 "Net Sales" ................................................ 5
1.19 "Product" .................................................. 6
1.20 "Product Price" ............................................ 7
1.21 "Product Specifications" ................................... 7
1.22 "Regulatory Approval" ...................................... 7
1.23 "Schering" ................................................. 7
1.24 "Schering Trademark" ....................................... 7
1.25 "Stock Purchase Agreement" ................................. 8
1.26 "Territory" ................................................ 8
ARTICLE 2. GRANT OF RIGHTS TO SCHERING
2.1 Grant of Exclusive License ................................ 8
2.2 Acceptance of Appointment ................................. 8
2.3 ICN Retained Rights ....................................... 9
2.4 Prices .................................................... 9
2.5 Know-How .................................................. 9
2.6 Approvals; Effective Date ................................. 10
ARTICLE 3. CERTAIN DEVELOPMENT AND REGULATORY MATTERS
DURING EXCLUSIVE PERIOD ................................... 10
3.1 Research and Development Activities ....................... 10
3.2 Product Registrations ..................................... 13
3.3 Pricing and Reimbursement Approvals ....................... 17
3.4 Failure to Obtain Approvals; Restrictions ................. 17
3.5 Governmental Inspections .................................. 18
3.6 Notice of Adverse Reactions ............................... 19
3.7 Recalls and Market Withdrawals ............................ 19
3.8 Additional Indications .................................... 20
3.9 Improvements .............................................. 21
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ARTICLE 4.
CERTAIN OBLIGATIONS OF THE PARTIES
DURING EXCLUSIVE PERIOD.......................................... 22
4.1 Diligence in Marketing the Product .......................... 22
4.2 Compliance with Laws ........................................ 23
4.3 Trademark Registrations and
Infringements ............................................. 23
ARTICLE 5.
5.1 Establishment of Scientific and Commercial Liaison
Committees ............................................ 26
5.2 Product Labelling .......................................... 28
5.3 Product Sampling ........................................... 28
ARTICLE 6.
COMPENSATION PAYABLE TO ICN; PAYMENT TERMS .................... 29
6.1 License Fee ................................................ 29
6.2 Royalty Payment ............................................ 30
6.3 Royalty Reduction .......................................... 31
6.4 Product Price to Schering .................................. 31
6.5 Royalty Payment Dates ...................................... 32
6.6 Direct Affiliate Licenses, Supporting Licenses and
Compulsory Royalties ................................... 32
6.7 Place of Royalty Payment & Currency Conversions ............ 33
6.8 Royalties on Resales ....................................... 34
6.9 Duration of Royalty Payments ............................... 34
6.10 Maintenance of Royalty Records; Audit Rights ............... 34
6.11 Equity Purchase ............................................ 36
6.12 Withholding Taxes, etc ..................................... 36
ARTICLE 7.
ICN'S MARKETING RIGHTS; DISTRIBUTION 36
7.1 ICN's Marketing Rights ..................................... 36
7.2 Distribution ............................................... 37
7.3 Ireland Sales .............................................. 38
ARTICLE 8.
SUPPLY OF PRODUCT BY ICN DURING EXCLUSIVE PERIOD ............... 39
8.1 Supply ..................................................... 39
8.2 Forecasts and Procedures ................................... 39
8.3 Schering's Right to Manufacture ............................ 42
8.4 Limited Warranty ........................................... 43
8.5 Rejection of Product ....................................... 44
ARTICLE 9.
CONFIDENTIALITY 45
9.1 Confidentiality ............................................ 45
9.2 No Publicity ............................................... 46
ARTICLE 10.
REPRESENTATIONS AND WARRANTIES 46
10.1 Representations and Warranties of
Each Party ............................................... 46
10.2 ICN'S Representations ...................................... 47
10.3 Continuing Representations ................................. 50
10.4 No Inconsistent Agreements ................................. 50
ARTICLE 11.
INDEMNIFICATION AND LIMITATION ON LIABILITY 50
11.1 Indemnification by Schering ................................ 50
11.2 Indemnification by ICN ..................................... 51
11.3 Conditions to Indemnification .............................. 51
11.4 Settlements ................................................ 52
11.5 Limitation of Liability .................................... 52
11.6 Insurance .................................................. 52
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ARTICLE 12. TERM AND TERMINATION 52
12.1 Term of Agreement ........................................... 52
12.2 Termination by Either Party ................................. 53
12.3 Continuing Obligations ...................................... 53
12.4 Partial Termination of Territory by ICN ..................... 54
12.5 Effects of Termination by Schering .......................... 54
12.6 Effects of Termination by ICN ............................... 56
12.7 Change of Control ........................................... 56
12.8 Remedy Not Exclusive ........................................ 57
ARTICLE 13.
DISPUTE RESOLUTION .................................................. 57
ARTICLE 14.
PROVISION FOR INSOLVENCY ............................................ 62
ARTICLE 15.
MISCELLANEOUS ....................................................... 64
15.1 Assignment .................................................. 64
15.2 Governing Law ............................................... 64
15.3 Waiver ...................................................... 64
15.4 Independent Relationship .................................... 64
15.5 Export Control .............................................. 65
15.6 Entire Agreement; Amendment ................................. 65
15.7 Notices ..................................................... 65
15.8 Force Majeure ............................................... 66
15.9 Non-Solicitation ............................................ 67
15.10 Severability ................................................ 67
15.11 Counterparts ................................................ 67
Exhibit A
Cost of Goods ........................................................ A-1
Exhibit B
Product Specifications ............................................... B-1
Exhibit C
Stock Purchase Agreement ............................................. C-1
Exhibit D
Research and Development Plans ....................................... D-1
Exhibit E
Adverse Event Reporting Procedures ................................... E-1
Exhibit F
Publication Procedures ............................................... F-1
Exhibit 2.1
License Agreements
</TABLE>
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1
EXCLUSIVE LICENSE AND SUPPLY AGREEMENT
This EXCLUSIVE LICENSE AND SUPPLY AGREEMENT ("Agreement") is made as
of July 28, 1995, by and between ICN PHARMACEUTICALS, INC., a Delaware
corporation ("ICN"), and SCHERING-PLOUGH LTD., a corporation organized under the
laws of Switzerland ("Schering"), each on behalf of itself and its Affiliates.
ICN and Schering are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
WHEREAS, ICN has developed ribavirin, an oral antiviral product; and
WHEREAS, Schering wishes to obtain a license to use the know-how and data
developed by ICN concerning ribavirin; and
WHEREAS, Schering wishes to market, sell and distribute the Product
(as hereinafter defined) for the treatment of chronic hepatitis C under the
terms and conditions of this Agreement; and
WHEREAS, ICN wishes to grant Schering such right under the terms and
conditions of this Agreement and any and all exhibits hereto.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and intending to be legally bound hereby, the Parties hereby agree as
follows:
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2
ARTICLE I
DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the meanings set forth below. Capitalized terms in this Agreement used in the
plural shall have the meaning as for the singular and vice versa.
1.1 "Affiliate" means any individual or entity directly or indirectly
controlling, controlled by or under common control with, the specified
individual or entity. For purposes of this Agreement, the direct or indirect
ownership of over 50% of the outstanding voting securities of an entity, or the
right to receive over 50% of the profits or earnings of an entity shall be
deemed to constitute control. Such other relationship as in fact results in
actual control over the management, business and affairs of an entity, shall
also be deemed to constitute control.
1.2 "Cost of Goods" means the cost to ICN or Schering, as the case may
be, of Products shipped in finished bulk capsules. As used herein, the cost of
the Product means (i) in the case of products and services acquired from third
parties, payments made to such third parties, and (ii) in the case of
manufacturing services performed by the Parties, including manufacturing
services in support of third party manufacturing, the actual unit costs of
manufacture in bulk form or final manufacturing, as the case may be. Actual unit
costs shall consist only of direct material and direct labor costs plus
manufacturing overhead directly attributable to the Product at standard cost,
all calculated in accordance with reasonable cost accounting methods,
consistently applied, of the party performing the work, and as more fully set
forth on Exhibit A hereto.
1.3 "CPMP Opinion" means a final, written majority or unanimous
positive opinion by the committee on Proprietary Medicinal Products of the
European Community ("CPMP"), or any successor to the CPMP.
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3
1.4 "Effective Date" means the receipt of requisite boards of
directors' approvals and expiration or earlier termination of any notice and
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
1.5 "EU" means each of the countries of the European Union (or its
successor), which currently include Austria, Belgium, United Kingdom, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain and Sweden, as such membership may change from time to time, and
includes countries upon their admission for full membership (with commercial
rights and privileges substantially comparable to those of the foregoing
countries); provided, however, that for purposes of this Agreement, if a country
is or becomes a member of the European Union (or its successor) at any time
during the Exclusive Period, such country shall be deemed to be included in the
EU even if such country in fact withdraws from or is otherwise no longer a
member of the European Union (or its successor).
1.6 "Exclusive Period" means the period commencing on the Effective
Date and continuing until the earlier of (i) the tenth anniversary of the first
commercial sale of the Product in the last country in the Major Market in which
the Product was introduced into commerce, or (ii) the fifteenth anniversary of
the Effective Date, unless terminated earlier in accordance with Section 12.2
hereof.
1.7 "FDA" means the United States Food and Drug Administration or any
corresponding foreign drug registration governmental authority, or its successor
agency.
1.8 "ICN" means ICN Pharmaceuticals, Inc.
1.9 "ICN Facility" means the facility or facilities (which may be a
third party facility or facilities) used by ICN for the manufacture of the
Product to meet Schering's supply requirements under this Agreement.
1.10 "ICN Trademark" means Virazole and any and all variations thereof
and/or substitute marks proposed, chosen, owned or controlled by ICN or its
Affiliates for use with the Product in the Territory.
1.11 "Improvements" means any change with respect to the Product for
use in the treatment of chronic hepatitis C, including without limitation, any
change in formulation, dosage or mode of delivery, any additional indications
and any change in the Product resulting from a change in the manufacturing
process.
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4
1.12 "Know-How" means all ideas, inventions, data, instructions,
package inserts, promotional materials (after commercial launch), know-how,
processes, formulas, expert opinion and information (whether or not patented or
patentable), technology and other intellectual property (including patents and
any pending patent applications, but excluding the ICN Trademark) owned or
controlled by ICN and its Affiliates, or under which ICN and its Affiliates have
the right to grant sublicenses, on the Effective Date or during the Exclusive
Period, as all of the foregoing relate to the discovery, research, development,
manufacture, marketing, use or sale of Product for the treatment of chronic
hepatitis C, including, without limitation, all biological, chemical,
pharmacological, toxicological, pharmaceutical, physical and analytical,
clinical, safety, manufacturing and quality control data and information related
thereto, all correspondence with the FDA relating to the Product and all other
documents pertaining to communications with the FDA (including, but not limited
to, minutes of any FDA communications relating to the Product) and all
applications for Regulatory Approval.
1.13 "Labelling" means the bottle label, the package inserts and the
packaging for the Product sold in the Territory, including, where applicable the
Minimum Labelling.
1.14 "License Period" means the period commencing on the Effective
Date and continuing in perpetuity thereafter.
1.15 "Major Market" means each of France, Germany, Italy, Spain, the
United Kingdom, the United States and Japan.
1.16 [REDACTED]
(i) [REDACTED].
(ii) [REDACTED].
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5
1.17 "NDA" means a New Drug Application, Product License Application
or its equivalent in the United States or any corresponding foreign application,
registration or certification for approval to market the Product, including
where applicable, applications for pricing, pricing reimbursement approval and
Labelling.
1.18 "Net Sales" means, with respect to each country in the Territory,
the proceeds actually received by Schering or its Affiliates on all sales of
Product to an unaffiliated third party (whether an end-user, a distributor or
otherwise) including prelicense sales of the Product made prior to Regulatory
Approval, and exclusive of intercompany transfers or sales in the Territory,
less the reasonable and customary accrual-basis deductions from such gross
amounts including: (i) normal and customary trade, cash and quantity discounts,
allowances and credits; (ii) credits or allowances actually granted for damaged
goods, returns or rejections of Product and retroactive price reductions; (iii)
sales or similar taxes (including duties or other governmental charges levied
on, absorbed or otherwise imposed on the sale of Product including, without
limitation, value added taxes or other governmental charges otherwise measured
by the billing amount, when included in billing); (iv) freight, postage,
shipping, customs duties and insurance charges; (v) with respect to sales
outside the EU only, charge back payments and rebates granted to managed health
care organizations or to federal, state and local governments, their agencies,
and purchasers and reimbursers or to trade customers, including but not limited
to, wholesalers and chain and pharmacy buying groups; and (vi) commissions paid
to third parties other than sales personnel and sale representatives or sales
agents. For purposes of calculating Net Sales under this Agreement, all sales of
Product hereunder, whether made for cash or otherwise, shall be deemed to be
made for cash, at the applicable fair market value of the Product.
In the event that Product is sold in the form of a combination product
containing one or more active ingredients other than ribavirin ("Combination
Product"), Net Sales for such Combination Product will be calculated by
multiplying actual Net Sales of such Combination Product by the fraction A/(A+B)
where A is the invoice price of the Product if sold separately by Schering, an
Affiliate or sublicensee and containing ribavirin as the only active ingredient
and B is the invoice price of any other active component or components in the
Combination Product if sold separately by Schering, an Affiliate or sublicensee.
In the event that the Product is sold in the form of a Combination Product
containing one or more active ingredients other than ribavirin and one or more
such active ingredients of the Combination Product are not sold separately, then
the above formula shall be modified such that A shall be the total cost to
Schering, its Affiliate or sublicensee of the Product and B shall be the total
cost to Schering, its Affiliate or sublicensee of any other active component or
components in the combination.
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6
1.19 "Product" means any oral product containing as its sole active
ingredient ribavirin and any Improvements thereto. The term "Product" also shall
include any pharmaceutical product for the treatment of chronic hepatitis C
containing oral ribavirin in combination with another active ingredient;
provided, however, that nothing in this Agreement shall be deemed to grant to
ICN any rights or license to recombinant interferon alfa 2b.
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7
1.20 "Product Price" has the meaning specified in Section 6.4 hereof.
1.21 "Product Specifications" means the general specifications for the
Product set forth as Exhibit B hereto, as such may be modified to reflect an
Improvement. The Product Specifications also shall be supplemented and/or
modified from time to time to the extent required by any regulatory authority in
the Territory with respect to obtaining or maintaining a Regulatory Approval,
and may otherwise be modified only by the written agreement of ICN and Schering.
The Product Specifications and any supplements or modifications thereto shall be
documented in such reasonable level of detail as is customary in the
pharmaceutical industry
1.22 "Regulatory Approval" means the technical, medical and scientific
licenses, registrations, authorizations and/or approvals of the Product for the
treatment of chronic hepatitis C in combination therapy with recombinant
interferon alfa 2b or as monotherapy and the marketing authorizations based upon
such approvals (including any prerequisite manufacturing approvals or
authorizations related thereto) that are required or deemed necessary by any
national, supra-national (e.g., the European Commission or the Council of the
European Union), regional, state or local regulatory agency, department, bureau
or other governmental entity in the Territory, including the CPMP Opinion, if
applicable, and any pricing, third party reimbursement approvals and Labelling
approvals as necessary for the manufacture, distribution, use or sale of Product
in a regulatory jurisdiction.
1.23 "Schering" means Schering-Plough Ltd.
1.24 "Schering Trademark" means any and all trademarks proposed,
chosen, owned or controlled by Schering or its Affiliates for use with the
Product in the Territory.
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8
1.25 "Stock Purchase Agreement" means the Stock Purchase Agreement, in
the form attached hereto as Exhibit C, providing for the purchase by
Schering-Plough Corporation of certain common stock of ICN.
1.26 "Territory" means the entire world.
ARTICLE 2
GRANT OF RIGHTS TO SCHERING
2.1 Grant of Exclusive License. Subject to the other applicable terms
and conditions of this Agreement, ICN hereby grants to Schering, as of the
Effective Date, (a) the exclusive licenses, exclusive even with respect to ICN,
to make, have made, develop, use, sell and distribute Product for the treatment
of chronic hepatitis C, in each country in the Territory during the Exclusive
Period (1) under the Know-How and (2) at Schering's option, under either the ICN
Trademark or the Schering Trademark, and (b) the non-exclusive license in and to
the Know-How to enable Schering to make, have made, develop, use, sell and
distribute the Product for the treatment of chronic hepatitis C in the Territory
during the License Period. The exclusive licenses granted in this Section 2.1
(i) are subject to the rights of ICN retained by or reserved to ICN under this
Agreement, including without limitation, the rights to manufacture the Product
and to distribute, market and sell the Product as provided for in Section 7.1
hereof; (ii) do not include the right to sublicense, except to Affiliates of
Schering; (iii) shall prohibit ICN from selling the Product for the treatment of
chronic hepatitis C through any distributorship agreements, marketing
arrangements or similar agreements other than those in effect on the Effective
Date and set forth in Exhibit 2.1 hereto; and (iv) shall prohibit ICN from
selling ribavirin in bulk form to any third parties (except pursuant to
agreements relating to respiratory syncytial virus and those agreements set
forth on Exhibit 2.1).
2.2 Acceptance of Appointment. Subject to the other applicable terms
and conditions of this Agreement, Schering hereby accepts the granted licenses
and agrees to serve as ICN's exclusive licensee of the Product in the Territory
during the Exclusive Period (except for ICN's rights under Sections 2.1 and
7.1), and as ICN's non-exclusive licensee of the Product in the Territory during
the License Period, to sell the Product in accordance with the terms of this
Agreement.
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9
2.3 ICN Retained Rights. During the License Period, ICN retains all
rights to the Product in the Territory that are not explicitly granted to
Schering under this Agreement. Without in any way limiting the foregoing, ICN
retains, both during and after the License Period, all rights in the Territory
for products owned or controlled by it other than the Product, including,
without limitation, the right to distribute, market and sell any such other
product in the Territory (e.g. lyophilized ribavirin, or cream, ointment or
liquid ribavirin). Except for such retained rights or as expressly provided
elsewhere in this Agreement, nothing in this Section 2.3 shall be deemed to
compromise or limit the exclusive license granted to Schering under Section 2.1.
2.4 Prices. During the Exclusive Period, Schering shall have the sole
authority to determine the price, payment terms, discounts, allowances and other
terms of sale extended by Schering to third party purchasers of the Product in
the Territory. Nothing in this Section 2.4 or elsewhere in this Agreement shall
be deemed to limit or restrict ICN in any way with respect to its sole authority
to determine the price, payment terms, discounts, allowances and other terms of
sale extended by ICN to third party purchasers of the Product in the EU.
2.5 Know-How. ICN shall furnish Schering promptly after the Effective
Date all Know-How which is necessary or useful to enable Schering to exploit its
rights under this Agreement. ICN shall promptly identify to Schering and
disclose to Schering, during the Exclusive Period, all additional Know-How,
which could relate to making, developing, using or selling Product licensed
hereunder, to which ICN or its Affiliates have or obtain rights, and such
Know-How shall be automatically deemed to be within the scope of the licenses
herein granted without payment of any additional compensation. ICN shall provide
reasonable technical assistance at no additional cost to enable Schering to
utilize such additional Know-How if Schering elects to do so; provided that
Schering shall promptly reimburse ICN for any out-of-pocket expenses incurred by
ICN in providing such assistance.
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10
2.6 Approvals; Effective Date.
(a) Promptly after execution of this Agreement, the Parties shall
proceed diligently to make all appropriate filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), and to proceed to obtain
necessary approvals under HSR, including but not limited to the expiration or
earlier termination of any and all applicable waiting periods required by the
HSR. In addition the Parties shall proceed to obtain any other authorizations,
approvals and permits, if any, required for the consummation of the transactions
contemplated by this Agreement and the Stock Purchase Agreement.
(b) If the Effective Date does not occur by December 15, 1995, then
either Party (or Schering-Plough Corporation, in the case of the Stock Purchase
Agreement) may terminate this Agreement and the Stock Purchase Agreement on five
day's notice to the other Party, in which event each such agreement shall be
terminated and all provisions of each such agreement shall be of no further
force or effect.
ARTICLE 3
CERTAIN DEVELOPMENT AND REGULATORY MATTERS
DURING EXCLUSIVE PERIOD
3.1 Research and Development Activities.
(a) Following the Effective Date, Schering or its Affiliates shall
assume and incur all costs and expenses in connection with the research and
development activities which in its sole judgment are necessary to obtain any
CPMP Opinion or Regulatory Approval for the Product for the chronic hepatitis C
indication in the Territory. ICN shall supply Schering with all of its
requirements of Product for such research and development activities in finished
bulk capsules, and bulk substance as necessary for preclinical studies, [
REDACTED ]. During the Exclusive Period, Schering shall also be responsible, at
its cost and expense, for all preclinical studies, pre-marketing and
compassionate use programs, clinical trials, chemistry/pharmacy data, any post
approval studies required as a condition of obtaining any CPMP Opinion or
Regulatory Approval for the Product for the chronic hepatitis C indication in
the Territory, and any other information and data required as a condition of
obtaining any CPMP Opinion or Regulatory Approval for the Product for the
chronic hepatitis C indication in the Territory. The studies which Schering
intends to undertake, together with preliminary timetables and preliminary
budgets, are set forth in Exhibit D attached hereto and incorporated herein by
reference. Schering shall commence, within 45 days after the Effective Date,
the activities necessary to obtain Regulatory Approval in the EU, and shall
diligently pursue and conduct such activities as may be necessary in order to
obtain regulatory Approval for the Product for the chronic hepatitis C
indication in each country in the Territory, in accordance with Section 3.2.
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11
(b) During the Exclusive Period, ICN shall assist Schering from time
to time, at Schering's reasonable request, in the design and implementation of
clinical studies, if Schering chooses, to undertake such studies for a CPMP
Opinion or Regulatory Approval for the chronic hepatitis C indication for the
Product. ICN shall assist Schering at Schering's reasonable request, in the
identification of clinical study sites in the Territory, the recruitment of
investigators, the review of study protocols and the monitoring of the clinical
studies (to the extent feasible in conjunction with ICN's own scheduled
monitoring for studies related to its other products, without the need for
additional resources). Schering shall reimburse ICN for its reasonable
out-of-pocket costs and expenses (equitably prorated, if applicable, for
monitoring expenses) incurred in rendering such assistance, unless otherwise
agreed by ICN. ICN shall invoice Schering for such expenses, and, upon request,
shall provide documentation for the invoice. The invoice shall be payable to ICN
or its designee(s) thirty (30) days after receipt by Schering of the invoice.
(c) During the Exclusive Period, Schering shall be responsible for any
quality of life, cost-benefit, cost-effectiveness, pharmacoeconomic and any
other studies (or portions of studies) necessary or desirable for pricing and
reimbursement approvals in the Territory, as well as any pre-marketing studies
prior to Regulatory Approval and post-marketing studies conducted following a
Regulatory Approval. ICN shall assist Schering from time to time, at Schering's
reasonable request, with incidental support in the conduct of the studies.
(d) All data obtained by Schering or ICN which is reasonably available
to be reported from any activities conducted under Section 3.1(a), (b) or (c)
shall be jointly owned by the Parties, and Schering and ICN shall each have the
right to use all such data for all purposes contemplated or permitted by this
Agreement. Notwithstanding such joint ownership, any such data shall be subject
to the publication procedures set forth in Exhibit F. ICN will use its
reasonable efforts to apply such procedures to any studies that commenced prior
to and are planned as of the Effective Date.
(e) Schering shall have the right to use for all purposes in
connection with obtaining Regulatory Approval for the Product in the Territory
for the treatment of chronic hepatitis C, all existing data relating thereto
owned, controlled or in the possession of ICN as of the Effective Date.
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12
(f) The Parties recognize that ICN's development studies with respect
to other indications of the Product should not interfere with the development
activities conducted by Schering with respect to the chronic hepatitis C
indication. Accordingly:
(i) ICN shall promptly disclose to Schering all studies in
progress and planned as of the Effective Date relating to
the Product in connection with any hepatitis indications;
(ii) If Schering determines in its reasonable business judgment
that the continuation of any such studies by ICN would
significantly interfere with Schering's studies with respect
to chronic hepatitis C, Schering may require ICN to postpone
such studies for so long as is necessary such that ICN's
continuation of its studies would not interfere with
Schering's studies, but such postponement shall not be more
than [REDACTED];
(iii)If after the Effective Date ICN wishes to commence a
clinical development program for the Product for a hepatitis
indication other than the chronic hepatitis C indication,
then ICN shall consult with Schering with respect to the
possible joint development of such indication. If Schering
declines or does not agree within 30 days to participate
in such a joint development program, then ICN shall be free
to continue such development. If Schering determines in its
reasonable business judgment that the continuation of any
such studies by ICN would significantly interfere with
Schering's studies with respect to chronic hepatitis C,
Schering may require ICN to postpone such studies for so
long as is necessary such that ICN's continuation of its
studies would not interfere with Schering's studies, but
such postponement shall not be more than [REDACTED].
<PAGE>
13
3.2 Product Registrations.
(a) Schering shall be responsible, at its cost and expense, and in
its sole judgment, for determining the appropriate regulatory
strategy, and for obtaining and maintaining all Regulatory
Approvals for the sale of the Product in the Territory, except
for costs and expenses to be borne by ICN with respect to its own
Regulatory Approval in the EU as provided in this Agreement.
Schering shall use its reasonable efforts to diligently obtain
Regulatory Approvals with Minimum Labelling within the Territory
and in any event shall file for such Regulatory Approvals in each
country in the Major Market within nine months of the completion
of clinical trials and studies required in each such country for
Regulatory Approval, including any additional or supplemental
clinical trials or studies subsequently required by a regulatory
authority for such Regulatory Approval. For purposes of this
Section 3.2, "completion of clinical trials" shall in no event be
deemed to occur sooner than the time of availability of the
integrated summary of safety reports and integrated summary of
efficacy reports. Schering shall use reasonable efforts to
complete such reports promptly after completion of treatment.
With respect to countries in the Territory other than the Major
Market, Schering's efforts shall be commensurate with those
efforts used to pursue regulatory approval for its own products
of similar potential, value and status in such country or a
comparable country in the Territory, as the case may be, or, if
Schering has no such similar products in a comparable country,
Schering's efforts shall be commensurate with the efforts that
other reputable pharmaceutical companies of comparable size and
product portfolio would use with respect to a product of similar
potential, value and status in such country. In connection with
any health registration application of ICN relating to the
Product pending as of the Effective Date with the CPMP or FDA or
any successor to the CPMP or FDA, ICN shall, at Schering's
request, provide to Schering in a prompt manner, but in no event
later than December 31, 1995, responses to non-clinical questions
which have been raised by the CPMP or FDA. In addition, at the
request of Schering, ICN shall provide to Schering
chemistry-pharmacy data and any other technical information which
Schering may reasonably require in order to obtain any CPMP
Opinion or Regulatory Approval for the Product in the Territory.
At the request of Schering, ICN may agree to continue its current
efforts, and undertake where necessary and commercially
<PAGE>
14
practicable additional efforts, including clinical trials in
addition to those already in progress, to maximize the
opportunities of Schering to obtain Regulatory Approval with
Minimum Labelling in each country in the Territory at the time of
initial Regulatory Approval in such country, or as soon
thereafter as possible. All costs incurred by ICN in making such
efforts shall be included in the costs incurred in pursuing
Regulatory Approval for purposes of Section 3.2(e).
Notwithstanding the foregoing, ICN acknowledges that there can be
no assurance that Minimum Labelling will be obtained in any
country in the Territory. ICN shall advise and assist Schering,
upon request, in the CPMP process and the local registration
process.
(b) Except as to the EU, each Regulatory Approval shall be placed in
Schering's name or the name of a designated Schering Affiliate
unless local law requires (whether because of the Product
Labelling provisions of this Agreement, pricing approval
requirements, or otherwise), or ICN and Schering otherwise agree,
that a Regulatory Approval be in the name of ICN or a designated
ICN Affiliate. In such event, Schering shall transfer the
Regulatory Approval to ICN upon request at any time that is
commercially reasonable, or as soon thereafter as and to the
extent permitted by law. ICN agrees that notwithstanding such
transfer of Regulatory Approval from Schering to ICN, Schering
shall retain the exclusive rights to make, have made, develop,
use, sell and distribute Product under the terms of this
Agreement.
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15
(c) In the EU, the Parties shall each file applications for
Regulatory Approval in its own name and shall each be responsible
for its own filing fees. Schering shall use its reasonable
efforts to provide ICN on a timely basis with all reports, data,
samples (if necessary), and, if specifically requested by a
regulatory authority, other information, necessary to allow ICN
to file for Regulatory Approval in the EU concurrently with
Schering.
(d) Prior to Regulatory Approval of the Product in each country in
the Territory, each Party shall promptly furnish to the other
Party's designated regulatory representative all data, and a copy
of all material correspondence and other material documents,
received or sent to the FDA or a regulatory authority in the
Territory relevant to such Regulatory Approval.
(e) ICN shall reimburse Schering for [REDACTED], up to a maximum
amount of [REDACTED] to be reimbursed by ICN, of the reasonable
costs and expenses incurred by Schering in pursuing Regulatory
Approval in the EU for clinical and preclinical trials performed
in the EU specifically required for EU Regulatory Approval, and
for regulatory costs required for EU Regulatory Approval (other
than each Party's filing fees, which shall be for the Parties'
respective accounts); provided, however, that such costs and
expenses shall exclude the cost of any studies performed in the
EU or otherwise which are not specifically required for EU
Regulatory Approval. Schering shall invoice ICN after the end of
each calendar quarter commencing September 30, 1995, for ICN's
share of such costs and expenses, and shall provide ICN with a
statement of such costs and expenses, describing the costs and
expenses in reasonable detail. If ICN fails to pay any such
invoice (or, in the event of a good faith dispute with respect to
such invoice, fails to pay the amount of the invoice into escrow
in accordance with the provisions of this Section 3.2(e)), by
l7:00 Lucerne time on the 90th day after the date on which
it is received by ICN, then the royalties that would otherwise be
due to ICN for Net Sales of the Product in the EU shall be
permanently reduced to [REDACTED] of the amounts set forth in
Article 6. If, following such a failure to pay an invoice, ICN
fails to pay a second invoice (or, in the event of a good faith
<PAGE>
16
dispute with respect to such invoice, fails to pay the amount of
the invoice into escrow in accordance with the provisions of this
Section 3.2(e)), by 17:00 Lucerne time on the 90th day after the
date on which it is received by ICN, then at 17:00 Lucerne time
on the 90th day day after the date on which ICN received such
second invoice, the rights granted to Schering by this Agreement
as to the EU shall become exclusive, even as to ICN. In the event
of a good faith dispute as to any invoice rendered pursuant to
this Section 3.2(e), ICN may deposit the amount of the invoice
with an independent third party escrow agent mutually acceptable
to the Parties, in an interest-bearing account, pending
resolution of such dispute. In such event, the Parties shall
promptly negotiate in good faith in an attempt to resolve any
such dispute; provided, however, that if the Parties are unable
to resolve such dispute within 30 days after the date on which
payment of the invoice was due, such dispute shall be resolved in
accordance with the provisions of Article 13. Upon resolution of
such dispute, the interest, if any, earned on the amount held in
escrow shall belong to the Party entitled to receive the amount
in escrow, appropriately allocated for any allocation of the
principal amount in escrow. ICN, through its independent public
accountants, shall have the right at reasonable times and on
reasonable notice to audit the books and records of Schering for
the purpose of verifying the costs and expenses charged to ICN
under this Section 3.2(e) in accordance with and subject to the
procedures set forth in Section 6.10(a).
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17
3.3 Pricing and Reimbursement Approvals.
(a) Schering shall be responsible for obtaining and maintaining any
pricing and reimbursement approvals required for the sale by
Schering of the Product in each country in the Territory. In the
EU, ICN shall be responsible for ICN's pricing and reimbursement
approvals and structure. Schering shall use its reasonable
efforts to diligently obtain pricing and reimbursement approvals
for the Product in each country within the Territory throughout
the Exclusive Period, except as provided in the last sentence of
Section 4.1. Schering shall undertake reasonable efforts,
including additional studies of the type contemplated under
Section 3.1(c), to diligently maximize the opportunities to
obtain commercially reasonable pricing for the Product in each
country in the Territory by the time of initial launch of the
Product in such country. Such efforts shall be commensurate with
those efforts used for its other products of similar potential,
value and status in such country or, if Schering has no
comparable product in such country, a comparable country in the
Territory.
(b) Except as to the EU, each pricing and reimbursement approval
shall be placed in Schering's name or the name of a designated
Schering Affiliate unless local law requires, or ICN and Schering
otherwise agree, that such approval be in the name of ICN or a
designated ICN Affiliate. In the EU, pricing and reimbursement
approvals shall be placed separately in the names of ICN and
Schering, or their respective designated Affiliates.
3.4 Failure to Obtain Approvals; Restrictions.
(a) If Schering does not file for Regulatory Approval in any country
or countries in the Major Market as required by Section 3.2(a),
the rights granted to Schering under this Agreement shall
automatically terminate in such country or countries. If Schering
does not file for Regulatory Approval in any country or countries
in the Territory (other than the Major Market) as required by
Section 3.2(a), then ICN at any time may notify Schering that ICN
intends to pursue Regulatory Approval in such country or
countries within 90 days after the date of such notice by ICN
to Schering. Schering shall have the right, by giving notice to
ICN within 30 days after receipt of such notice from ICN, to
elect to pursue Regulatory Approval in such country or countries;
provided, however, that if Schering does not file for Regulatory
Approval in such country or countries as required by Section 3.2
within 60 days after its notice to ICN, the rights granted to
Schering under this Agreement shall automatically terminate in
such country or countries. If Schering does not exercise its
right to elect to pursue Regulatory Approval as provided above,
then ICN shall commence pursuing Regulatory Approval in such
country or countries within 90 days after the date of its
notice to Schering; if ICN does not do so, then the Parties shall
have such rights as if ICN did not provide an initial notice to
Schering pursuant to this Section 3.4(a).
(b) If Schering at any time decides not to pursue Regulatory Approval
in any country or countries in the Territory, then Schering shall
notify ICN within 30 days of such decision. In such event, ICN
at any time may notify Schering that ICN intends to pursue
Regulatory Approval in such country or countries within
90 days after the date of such notice by ICN to Schering. If
ICN does not commence pursuing Regulatory Approval in such
country or countries within 90 days after the date of its
notice to Schering, then the Parties shall have such rights as if
ICN did not provide an initial notice to Schering pursuant to
this Section 3.4(b).
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18
3.5 Governmental Inspections. During the Exclusive Period, each Party
shall advise and provide a reasonable description to the other Party of any
governmental visits to, or written or oral inquiries about, any facilities or
procedures for the manufacture, storage or handling of Product, promptly (but in
no event later than five (5) calendar days) after such visit or inquiry. Each
Party shall furnish to the other Party, (a) within two (2) days after receipt,
any report or correspondence issued by the governmental authority in connection
with such visit or inquiry, including but not limited to, any FDA Form 483
Establishment Inspection Reports, warning letters, and (b) at the same it
provides to a governmental authority, copies of any and all responses or
explanations relating to items set forth in Section 3.5(a), in each case purged
only of trade secrets of the receiving Party that are unrelated to the other
Party's activities under this Agreement and any information that is unrelated to
the Product.
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19
3.6 Notice of Adverse Reactions. During the Exclusive Period, either
Party shall promptly report to the other Party any information regarding adverse
events related to the use of the Product in accordance with the Adverse Event
Reporting Procedures (as may be amended from time to time upon mutual agreement)
set forth as Exhibit E and incorporated herein by reference.
3.7 Recalls and Market Withdrawals.
(a) If at any time during the Exclusive Period (i) any governmental or
regulatory authority in the Territory issues a request, directive, or order that
the Product be recalled or withdrawn, or (ii) a court of competent jurisdiction
orders such a recall or withdrawal in the Territory, or (iii) either Party
determines in its sole discretion that the Product should be recalled or
withdrawn, the Parties shall take all appropriate corrective actions. The final
decision of a Party to recall pursuant to (iii) of this subsection shall not be
subject to arbitration under Article 13 of this Agreement (or any other legal
action, subject to Section 13(g)), although the consequences to the other Party
of any improper decision shall be subject to arbitration.
(b) If the negligent act or omission by one Party or the breach by one
Party of an applicable product warranty (which, in the case of Product
manufactured by ICN shall be the warranty contained in Section 8.4(a)) is the
proximate cause of a recall or withdrawal under any provision of Section 3.7(a),
that Party shall be solely responsible for such costs and expenses for its own
account. If the negligent act or omission or breach of product warranty by one
Party is not the proximate cause of such a recall or withdrawal, (i) the costs
and expenses of notification and destruction or return of the recalled or
withdrawn Product in connection with a recall or withdrawal resulting from a
determination pursuant to Section 3.7(a)(iii), above shall be borne by the Party
making such determination, and (ii) the costs and expenses of notification and
destruction or return of the recalled or withdrawn Product in connection with a
recall or withdrawal pursuant to Section 3.7(a)(i) or (ii) shall be borne
equally by the Parties.
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20
3.8 Additional Indications. In further recognition by the Parties that
ICN's development studies with respect to other indications of the Product
should not interfere with the development activities conducted by Schering with
respect to the chronic hepatitis C indication, if ICN pursues an additional
indication for the Product in any country in the Territory, then (subject to
compliance with Section 3.1(f) in the case of a hepatitis C indication):
(i) ICN may so notify Schering by providing Schering with a
description of ICN's development activities, all associated
preclinical and clinical data, ICN's aggregate costs and
expenses incurred in pursuing such development activities to
date, and the estimated costs and expenses for remaining
activities, and such other information as Schering may
reasonably request. In such event, Schering shall have the
right, exercisable by notice to ICN given not later than
75 days after receipt of the notice from ICN, to elect to
have such indication become included in and subject to the
terms and conditions of this Agreement (including without
limitation, those relating to territory and royalties), and
all definitions shall be appropriately adjusted to include
such additional indication, effective upon receipt by ICN of
Regulatory Approval with respect to such indication in any
country in the Territory. If Schering exercises such right,
then (A) Schering shall assume and be responsible for any
and all further development activities with respect to such
indication in accordance with the terms and conditions of
this Agreement, and (B) promptly after receiving such
Regulatory Approval, ICN shall notify Schering of ICN's
aggregate costs and expenses incurred in pursuing Regulatory
Approval for such indication, and Schering shall reimburse
ICN for such costs and expenses within 45 days after
receipt of an invoice from ICN. Schering shall have the
right to audit such costs and expenses in accordance with
the provisions of Section 6.10(b).
(ii) If ICN does not provide such notice to Schering or if
Schering declines to exercise such rights, then ICN shall be
free to pursue such indication without further obligation to
Schering, except as expressly provided under this Agreement;
provided, however, that (i) ICN shall not sell the Product
for any such indication in any country in the Territory
until five years after the date of the first commercial sale
in such country by Schering of the Product for the chronic
hepatitis C indication, and (ii) ICN shall not sublicense
any third party to develop, make, have made, use, sell or
distribute the Product for such indication in such countries
and shall only sell the Product in such countries directly
or through its direct or indirect subsidiaries, and only
under the brand name for the Product which ICN is then using
for the hepatitis C indication.
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21
3.9 Improvements.
(a) Any Improvements relating to the Product made after the
Effective Date relating to the indication for chronic
hepatitis C developed during the Exclusive Period by or on
behalf of a Party shall be deemed to be included in the
Product for all purposes under this Agreement. Without in
any way limiting the foregoing, each Party shall have the
fully paid-up, non-exclusive license to commercialize any
such Improvements made by the other Party during and after
the Exclusive Period, in those countries of the Territory
where each Party has rights under this Agreement, subject to
the other terms and conditions of this Agreement; provided,
however, if the non-exclusive licensee breaches this
Agreement, becomes insolvent or undergoes a change in
control (as defined in Section 12.7) or Schering exercises
its right under Section 12.2(a), no such licenses to
Improvements shall be granted.
(b) Any Improvements (other than those relating to the
indication for chronic hepatitis C) developed during the
Exclusive Period by or on behalf of a Party shall be owned
by the Party or Parties whose employee(s), contractee(s) or
designee(s) would be deemed to be the inventor under U.S.
patent laws; provided, however, that (i) if Schering
develops such an Improvement then ICN shall have the right
to commercialize any such Improvement on such commercially
reasonable terms as to which the Parties shall agree
following good faith negotiations, and (ii) if ICN develops
such an Improvement (other than an additional indication
covered by Section 3.8) then Schering shall have the right
to commercialize any such Improvement for use in connection
with the treatment of hepatitis (other than hepatitis A and
hepatitis B) on such commercially reasonable terms as to
which the Parties shall agree following good faith
negotiations.
(c) For the avoidance of doubt, ICN acknowledges that Schering
or its Affiliates are not granting any type of right or
license to ICN under any alpha-interferon patent rights or
know-how owned, controlled or licensed to Schering and its
Affiliates.
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22
ARTICLE 4
CERTAIN OBLIGATIONS OF THE PARTIES
DURING EXCLUSIVE PERIOD
4.1 Diligence in Marketing the Product.
Schering agrees to make a commercial launch of Product in each country
within the Territory within six (6) months of obtaining Regulatory Approval in
each country (including, where applicable, pricing and third party reimbursement
approval). Schering shall use its reasonable efforts to diligently promote,
market and sell the Product in each country within the Territory throughout the
Exclusive Period. Such efforts shall be commensurate with those efforts used to
promote its own products of similar potential, value and status in such country
or a comparable country in the Territory, as the case may be, or, if Schering
has no such similar products in a comparable country, commensurate with the
efforts that other reputable pharmaceutical companies of comparable size and
product portfolio would use with respect to a product of similar potential,
value and status in such country. Both Parties recognize that extenuating
circumstances may arise that warrant a delay in launching the Product, including
but not limited to, unfavorable pricing, pricing reimbursement or Labelling. The
Parties agree that such circumstances shall be considered in connection with
excusing Schering from its obligation to launch within the specified six (6)
month period. Notwithstanding the foregoing, however, Schering shall not be
required to use reasonable efforts to diligently launch, market or sell Product
or pursue pricing and reimbursement approvals under this Agreement in any
country within the Territory where a Regulatory Approval has been obtained that
is less than the Minimum Labelling for the Product. The Parties agree that if
ICN makes a commercial launch of the Product in any country of the EU prior to
Schering making such a launch in such country, and Schering has not made such
launch because of unfavorable pricing, pricing reimbursement or Labelling, then
Schering shall be relieved of its obligation to pay minimum royalties (as
described in Section 6.2) in all of the countries of the EU.
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23
4.2 Compliance with Laws. During the Exclusive Period, each of
Schering and ICN shall comply with all material laws, rules and regulations
applicable to its respective activities under this Agreement.
4.3 Trademark Registrations and Infringements.
(a) Notwithstanding the grant of rights to Schering under
Section 2.1, ICN acknowledges that Schering intends to
develop and use Schering Trademarks for the Product in the
Territory, and that Schering shall not be required to use
the ICN Trademark in connection with the rights granted to
Schering under this Agreement and shall be free to use the
Schering Trademark, the use of the ICN Trademark being
solely at the election of Schering. Schering acknowledges
that ICN intends to use ICN Trademarks for the Product in
the EU, as provided in this Agreement.
(b) Should Schering elect to use the ICN Trademark in any
country in the Territory, Schering shall notify ICN in
writing, and, if the ICN Trademark is filed or registered
there, ICN shall prosecute, maintain and defend in its or an
Affiliate's name, and at its own cost and expense, the ICN
Trademark in such country relating to the marketing or sale
of the Product. If the ICN Trademark is not filed or
registered in such country, then ICN shall so notify
Schering and, upon Schering's written request, which shall
not be unreasonably refused, ICN shall file and prosecute
the ICN Trademark in such country, with the reasonable
out-of-pocket costs of ICN for such filing and prosecution
to be reimbursed to ICN by Schering. In addition, Schering
shall provide reasonable cooperation to ICN so as to be
entered as a Registered User or recorded licensee of the ICN
Trademark in any country of the Territory, including the
execution of any documents pursuant to ICN's reasonable
request. Upon termination of this Agreement for any reason,
Schering shall also provide reasonable cooperation to ICN,
so as to be removed as Registered User or recorded licensee
of the ICN Trademark in the Territory, including the
execution of any documents pursuant to ICN's reasonable
request, and this obligation shall survive termination of
this Agreement.
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24
(c) Schering and ICN each acknowledge the rights of the other in
their respective trademarks, trade names, trade dress and
logos used in connection with the Product, and, except and
to the extent expressly provided in this Agreement, nothing
in this Agreement shall be deemed to give either Party
during or after the duration of this Agreement any right,
title or interest in the trademarks, trade names, trade
dress or logos of the other Party.
(d) Neither Schering nor ICN shall use nor seek to register any
trademarks which are confusingly similar to each others'
respective trademarks, trade names, trade dress or logos
used in connection with the Product, without the other
Party's prior written consent.
(e) ICN agrees that, except for the rights retained by it
pursuant to this Agreement (including without limitation,
the rights to manufacture the Product and to distribute,
market and sell the Product in the EU under the ICN
Trademark), ICN shall neither use itself, nor grant to a
third party or to an Affiliate, the right to the use of the
ICN Trademark in the Territory during the Exclusive Period
for the Product in any country where Schering has elected to
use the ICN Trademark as permitted by this Agreement without
the consent of Schering, which shall not be unreasonably
withheld.
(f) Should Schering elect to use the ICN Trademark, Schering
shall submit to ICN, in writing, intended formats for use on
the ICN packaging and on promotional and sales materials
prior to the first use thereof by Schering. Should ICN not
provide a reasonable basis for disapproval of the intended
formats within thirty (30) days of receipt, Schering may
then use the ICN Trademark in the formats submitted on those
and on subsequently developed packaging and promotional
materials. Schering agrees that it will not thereafter
implement any changes to such formats unless the same has
been submitted to ICN in accordance with the procedure set
forth in the preceding sentence.
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25
(g) In any country of the Territory where Schering elects to use
the ICN Trademark, Schering shall notify ICN promptly and in
writing upon learning that the ICN Trademark is actually or
potentially infringed by a third party, or if an allegation
is made the ICN Trademark may infringe the rights of a third
party. ICN shall be responsible for taking appropriate
action to stop the infringement or to defend the right to
the continued use of its trademark. Should ICN decline to
take action within thirty (30) days of receipt of notice
from Schering in a country of the Territory where Schering
has elected to use the ICN Trademark, then Schering is not
obligated to but may, at its option, take reasonable action
to stop the infringement or to defend the right to the
continued use of the ICN Trademark. The Party bringing the
action shall be deemed the "Litigating Party" and the other
Party, the "Non-Litigating Party" for purposes of this
Section 4.3.
(h) In any action brought pursuant to Section 4.3(g), the costs
of the action shall be borne and any recovery shall be
retained by the Litigating Party; provided, however that if
the Litigating Party recovers damages attributable to (i)
the profits of a third party infringer; or (ii) lost profits
or lost sales of the Non-Litigating party; or (iii) punitive
damages against the third party infringer; then any net
recovery to the Litigating Party (i.e. total amount of
recovery, less court costs and attorneys' fees), shall be
divided equally between ICN and Schering. If Schering is the
Litigating Party in an action to defend the right to the
continued use of the ICN Trademark and is successful in
obtaining a final judgment of a court of competent
jurisdiction defending the right to the continued use of the
ICN Trademark, then ICN shall reimburse Schering for half of
its reasonable out-of-pocket net costs in obtaining the
judgment (i. e. court costs and reasonable attorneys' fees
less any recoveries received).
(i) In any action brought pursuant to this Section 4.3, the
Non-Litigating Party shall provide reasonable assistance and
information to the Litigating Party and shall be reimbursed
for its reasonable out-of-pocket costs and expenses.
(j) Should for any reason the ICN Trademark, in any country of
the Territory where Schering has elected to use it, or the
Schering Trademark, in any country of the Territory, be
prevented from being used, then the Parties shall consult as
to a suitable other trademark for use in connection with the
Product for purposes of this Agreement and in accordance
with its terms and conditions.
(k) At the termination or expiration of the rights granted by
this Agreement or the Exclusive Period in any country of the
Territory for any reason, Schering shall cease all use of
the ICN Trademark, except for any sell-off of Inventory of
Product by Schering following termination of this Agreement.
<PAGE>
26
ARTICLE 5
MARKETING ACTIVITIES
5.1 Establishment of Scientific and Commercial Liaison Committees.
(a) Promptly following the Effective Date, Schering and ICN
shall establish a Scientific Liaison Committee and a
Commercial Liaison Committee (the "Committees") that shall
be advisory committees only. Schering shall promptly provide
to the Committees material data, reports and other
information concerning scientific and commercial matters
relating to the Product. Schering shall be the final
decision-maker as to the scope of the activities within the
purview of the Committees.
(b) The activities set forth in Exhibit D, incorporated herein
by reference, among others, related to the Product within
the Territory during the Exclusive Period shall be within
the purview of the advisory Scientific Liaison Committee.
Notwithstanding the foregoing, such activities, to the
extent they relate to the EU, shall not be within the
purview of such committee following Regulatory Approval in
the EU.
(c) The following activities, among others, related to the
Product within the Territory during the Exclusive Period
shall be within the purview of the advisory Commercial
Liaison Committee:
(i) worldwide Product branding for promotional materials,
(ii) consideration of positioning statements and detailing
message for the Product for the Territory;
(iii) planning market research and exchanging market research
data;
(iv) review of advertising and promotional materials;
(v) coordination of international symposia and congresses;
(vi) publication planning; and
(vii) opinion leader development.
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Notwithstanding the foregoing, such activities, to the
extent they relate to the EU, shall not be within the
purview of such committee following Regulatory Approval in
EU.
(d) Schering shall be entitled to designate in writing to ICN up
to three (3) members of each Committee, and ICN shall be
entitled to designate in writing to Schering up to three (3)
members. A Party may change its designated members at any
time, upon written notice to the other Party. Each Party
also shall be entitled to bring a reasonable number of
non-member attendees to each meeting of the Committees. The
chairs of the Committees shall be designated by Schering
during the Exclusive Period.
(e) The Committees shall meet from time to time, as mutually
agreed to by the members, but not fewer than two times each
calendar year during the Exclusive Period, unless the
members determine that fewer meetings are required.
(f) The chairs of the Committees shall designate the location of
the meetings of the Committees, but unless ICN otherwise
agrees, at least half of the meetings shall take place in
California. All travel, lodging and similar expenses
incurred by a member in attending meetings of the Committees
shall be borne by the corresponding Party.
(g) During the Exclusive Period, the members designated by ICN
and Schering shall be entitled to provide input and comments
with respect to the activities of the Committees. It is
understood that the Committees are to serve as forums for
information and input by ICN as to the activities outlined
in subsections (b) and (c) above, but it is further
understood that Schering is not required to empower the
Committees to make final decisions as to such matters.
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5.2 Product Labelling.
(a) During the Exclusive Period, the Labelling shall, if Schering
elects to use the ICN Trademark, contain the ICN Trademark and
shall otherwise be consistent in format (but not substance) with
the Labelling for Schering's other pharmaceutical products sold
in the corresponding country within the Territory at the time in
question. Unless prohibited by applicable law, if Schering elects
to use the ICN Trademark, the Labelling shall indicate that the
Product is under license from ICN.
(b) To the extent Schering elects to use the ICN Trademark, Schering
shall not change the Labelling in format (but not substance)
during the Exclusive Period without the prior written
authorization of ICN (which shall not be unreasonably withheld),
except that ICN's consent is not required if Schering, at its own
cost and expense, desires to change the colors and other elements
of trade dress to conform to the trade dress of Schering's other
pharmaceutical products, provided that such change does not
affect the other applicable Labelling requirements of this
Section 5.2.
5.3 Product Sampling.
(a) Schering may provide sampling for the Product for use in the
treatment of chronic hepatitis C in a country within the
Territory, in reasonable quantities comparable to the sampling
conducted for its other anti-viral and/or oncology products in
that country; provided, however, that subsequent to commercial
launch of the Product in any country, the amount of such sampling
in such country shall be limited to [REDACTED]. The free use of
Product prior to commercial launch for the treatment of chronic
hepatitis C in (i) pre-marketing programs (where permitted by
applicable law) and compassionate programs, and (ii) other
marketing and Phase IV studies, shall all be deemed sampling of
the Product. All samples of the Product shall be purchased at a
price equal to [REDACTED].
(b) Subsequent to commercial launch of the Product by ICN in any
country, the amount of sampling in such country by ICN shall be
limited to [REDACTED]. If the amount of such sampling by ICN in
any such country exceeds [REDACTED], then ICN shall pay to
Schering an amount equal to the [REDACTED], determined in
accordance with the provisions of Section 6.2.
(c) The distribution of Product by Schering during the [REDACTED]
preceding the date on which Schering reasonably expects to
receive Regulatory Approval shall be consistent with the Research
and Development Plan set forth as Exhibit D and with Schering's
previous historical compassionate use programs for ribavirin in
connection with the treatment of chronic hepatitis C. Schering
shall not engage in pre-approval distribution of the Product
(other than for clinical trials, which are those with protocols
and case report forms) in a manner that could reasonably be
expected to compromise the distribution by ICN of the Product in
the EU following Regulatory Approval.
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ARTICLE 6
COMPENSATION PAYABLE TO ICN; PAYMENT TERMS
6.1 License Fee. On the Effective Date, Schering shall pay ICN a
license fee in the amount of $23.0 million, by wire transfer of immediately
available funds to an account designated by ICN.
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6.2 Royalty Payment. In partial consideration of the grant of rights
to Schering by ICN under this Agreement, Schering shall pay ICN a royalty in the
following amount:
(a) with respect to sales of Product in the EU, [REDACTED] of Net
Sales, [REDACTED], but in no event less than [REDACTED] of Net
Sales; and
(b) with respect to sales of Product in the Territory, other than in
the EU:
[REDACTED];
[REDACTED]; and
[REDACTED];
provided, however, that in no event shall the royalty on sales of the Product in
any country in the Territory (including the EU) be less than [REDACTED] per
capsule sold based on a [REDACTED], [REDACTED] per capsule sold based on a
[REDACTED], and [REDACTED] sold based on a [REDACTED], such amounts to be
proportionately adjusted based on a scale of [REDACTED] for other capsule sizes
less than [REDACTED] and based on a scale of [REDACTED] for other capsule sizes
in excess of [REDACTED]; provided further, however, that if in any country in
the Territory ICN is also marketing the Product, and if at any time ICN's
current actual net selling price for the Product is less than [REDACTED] of
Schering's current actual net selling price for the Product (based on the same
capsule size and comparable terms and conditions, and other than due to
increases in price by Schering), then such minimum royalty shall no longer apply
to sales of the Product by Schering in such country (and such minimum royalty
shall not be reinstated). In the event any third party is also marketing oral
ribavirin in any country in the Territory, then Schering shall not be obligated
to pay the minimum royalty provided for in this Section 6.2 for that country.
[REDACTED] For purposes of this Section 6.2, the current actual net selling
price shall be determined on a country-by-country basis, for each calendar
quarter, by dividing the Net Sales of capsules of a particular capsule strength
by the total number of capsules of the same strength that were sold and sampled
in such country during such period. Each Party shall have the right to audit the
books and records of the other Party for the purpose of verifying the current
actual net selling price, in accordance with the procedures set forth in Section
6.10.
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6.3 Royalty Reduction. The royalty payable by Schering pursuant to
this Agreement shall be reduced by [REDACTED] until the cumulative royalty that
would otherwise be payable but for such reduction equals [REDACTED] million.
6.4 Product Price to Schering.
(a) The price to be charged to Schering for supplies of finished bulk
Product furnished pursuant to Article 8, FOB ICN's plant, shall
be the greater of (i) [REDACTED] of Net Sales, calculated on a
country-by-country basis, or (ii) ICN's Cost of Goods plus
[REDACTED]. Schering shall have the right to verify ICN's cost
price of Product pursuant to the procedures set forth in Section
6.10 hereof.
(b) Schering shall establish an estimated sales price per unit
("Estimated Selling Price") for the Product in each country of
the Territory. Schering agrees to apply the same policy in
establishing the Estimated Selling Price for the Product as
Schering would do in the case of its own products of similar
status. Schering shall pay for all Product purchased under this
Agreement within 30 days after receipt of an invoice from ICN,
which shall be rendered upon shipment, based on the Estimated
Selling Price, subject to adjustment for the final price as
provided in Section 6.4(e).
(c) Schering may change its Estimated Selling Price on a quarterly
basis by notifying ICN at least fifteen (15) days prior to the
beginning of any calendar quarter and such Estimated Selling
Price shall then apply for the calculation of the price at which
Schering shall purchase Product from ICN and all orders of
Product delivered to Schering in that quarter shall be effected
at said purchase price, subject to adjustment for the final
price as provided in Section 6.4(e).
(d) The price to be invoiced to Schering at time of shipment for
supplies of finished bulk Product shall be equal to [REDACTED] of
the Estimated Selling Price of the Product in the Territory, plus
relevant customs duties, shipping, bulk packaging and insurance
costs, which shall be the responsibility of and shall be duly
paid by Schering.
(e) Reconciliations of the price paid to ICN for Product based on the
Estimated Selling Prices as against actual Net Sales (in order to
arrive at the [REDACTED] calculation of Net Sales), shall be made
by Schering on a quarterly basis within ninety (90) days of the
end of each calendar quarter.
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32
6.5 Royalty Payment Dates. Within 60 days after the end of each
March, June, September and December in each and every calendar year during the
Exclusive Period, following the commencement of marketing of Product, Schering
shall furnish and deliver to ICN a full and true accounting of its worldwide Net
Sales of Product hereunder during the three (3) month period ending with the
previous March 31st, June 30th, September 30th and December 31st and shall
simultaneously pay to ICN, for the account of Schering or the applicable
Affiliate or sublicensee, as the case may be, a sum equal to the aggregate of
the royalty due thereon as calculated pursuant to Section 6.2 hereof (reconciled
for any previous overpayments or underpayments), to such account as ICN shall
have designated from time to time in writing to Schering.
6.6 Direct Affiliate Licenses, Supporting Licenses and Compulsory
Royalties.
(a) Whenever Schering shall reasonably demonstrate to ICN that, in
order to facilitate direct royalty payments by an Affiliate, it
is desirable that a separate license agreement be entered into
between ICN and such Affiliate, ICN will grant such licenses
directly to such Affiliate by means of an agreement which shall
be consistent with all of the provisions hereof, provided that
Schering guarantees the Affiliate's obligations thereunder or
otherwise provides to ICN assurances of performance satisfactory
to ICN in its sole discretion.
(b) If Schering, its Affiliates or sublicensees are legally obliged
by any governmental authority in any country in the Territory to
grant licenses under the Know-How to any third party to make,
use, or sell Product at royalty rates less than those payable
pursuant to this Agreement, then the royalty payable
prospectively hereunder with respect to Net Sales in such country
shall be reduced to such lesser rate as long as such reduced
royalty remains effective.
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33
6.7 Place of Royalty Payment and Currency Conversions. All royalties,
with the exception of those payable on sales to customers in the United States,
shall be paid by Schering from its office in Lucerne, Switzerland. Royalties
payable on U.S. sales shall be paid directly to ICN by Schering Corporation from
its offices in Kenilworth, New Jersey. All royalty payments shall be made in
United States dollars to the extent that free conversion to United States
dollars is permitted. Royalties payable on sales in countries other than the
United States shall be calculated by multiplying the appropriate royalty rate
times the sales in each currency in which they are made and converting the
resulting amount into United States dollars at the rates of exchange used by
Schering for reporting such sales for United States financial statement
purposes. If, due to restrictions or prohibitions imposed by a national or
international authority, payments cannot be made as aforesaid, the Parties shall
consult with a view to finding a prompt and acceptable solution, and Schering
will, from time to time, deal with such monies as ICN may lawfully direct at no
additional out-of-pocket expense to Schering. Notwithstanding the foregoing, if
royalties cannot be remitted to ICN for any reason within six (6) months after
the end of the calendar quarter during which they are earned, then Schering
shall be obligated to deposit the royalties in a bank account in Switzerland in
the name of ICN. Royalties payable by Schering shall be net of any foreign
withholding taxes due, it being understood that such withholding taxes are the
obligation of ICN. Schering shall forward to ICN in a timely manner all tax
receipts relating to such withholding taxes.
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34
6.8 Royalties on Resales. No earned royalty shall be payable in
respect of sales between and among Schering, its Affiliates and sublicensees, it
being understood that royalties are to be paid on resale of Product to
independent third parties.
6.9 Duration of Royalty Payments. With respect to Net Sales of any
Product in any country in the Territory, royalties shall be paid hereunder with
respect to Net Sales of such Product until [REDACTED] from the date of first
commercial sale after Regulatory Approval of such Product in such country, but
no longer than the duration of the Exclusive Period.
6.10 Maintenance of Royalty Records; Audit Rights.
(a) Schering shall maintain and cause its Affiliates to maintain
books of account and adequate records of all Net Sales of
Product, including those made by sublicensees. ICN shall have the
right, following written request by ICN, by its regularly
employed independent certified public accounting firm of national
standing, and at its own expense, during normal business hours,
to examine pertinent books and records of Schering at all
reasonable times (but no later than forty-five (45) days after
written request is made and not more often than once each
calendar year) for the purpose of verifying and reporting to ICN
as to the computation of the royalty payments made hereunder; it
being understood that the right to conduct such examination and
the actual examination with respect to any quarterly accounting
period hereunder shall take place not later than two (2) years
years following the expiration of said period. Said accounting
firm shall only report as to the computation of the royalty
payments made to ICN and shall not disclose to ICN any other
information. The accounting firm representatives shall execute
customary confidential agreements prior to any examination.
<PAGE>
35
(b) ICN shall maintain at a location in the United States accurate
books and records in accordance with generally accepted
accounting principles, in sufficient detail to enable ICN's Cost
of Goods hereunder to be verified. All such records shall be
maintained for three (3) years after the submission of each
report required to be provided under this Agreement. The
independent certified public accountant of Schering shall have
access, subject to a customary confidentiality agreement, during
normal business hours and following reasonable prior notice to
ICN, to the books and records of ICN to conduct a review or audit
thereof to verify the calculation of ICN's Cost of Goods. Such
access shall be available not more than once each calendar year
and for eighteen (18) months after the expiration or termination
of this Agreement, but in no event shall Schering be entitled to
review or audit ICN's Cost of Goods calculation occurring more
than three years before the requested date of the review or
audit.
(c) If Schering manufactures Product pursuant to this Agreement, then
Schering shall maintain accurate books and records in accordance
with generally accepted accounting principles, in sufficient
detail to enable Schering's Cost of Goods hereunder to be
verified. All such records shall be maintained for three (3)
years after the submission of each report required to be provided
under this Agreement. The independent certified public accountant
of ICN shall have access, subject to a customary confidentiality
agreement, during normal business hours and following reasonable
prior notice to Schering, to the books and records of Schering to
conduct a review or audit thereof to verify the calculation of
Schering's Cost of Goods. Such access shall be available not more
than once each calendar year and for eighteen (18) months after
the expiration or termination of this Agreement, but in no event
shall ICN be entitled to review or audit Schering's Cost of Goods
calculation occurring more than three years before the requested
date of the review or audit.
(d) Nothing in this Section 6.10 shall limit the rights of any Party
to obtain any and all relevant information for purposes of an ADR
(as defined in Article 13) or otherwise pursuant to legal process
in the event of a dispute under this Agreement.
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36
6.11 Equity Purchase. ICN and Schering-Plough Corporation are
contemporaneously with this Agreement entering into the Stock Purchase
Agreement.
6.12 Withholding Taxes, etc. If at any time during or after the
Agreement, any jurisdiction within the Territory requires that taxes be withheld
from any payment (or portion thereof) of ICN's compensation under this Article
6, Schering may deduct such amount from the corresponding payment, or, if
applicable, ICN will promptly reimburse Schering or its designee(s) such
amounts. Schering shall provide ICN with documentation of such withholding and
payment in a manner that is satisfactory for purposes of the U.S. Internal
Revenue Service. Any withholdings paid when due hereunder shall be for the
account of ICN and shall not be included in the calculation of Net Sales. ICN
shall be liable for any deficiency, and any fine, assessment or penalty imposed
by any taxing authority in the Territory for any deficiency in the amount of any
such withholding or the failure to make such withholding payment; if Schering is
required to pay any such deficiency, or any fine, assessment or penalty for any
such deficiency, ICN shall promptly reimburse Schering for such payments, which
shall not be included in the calculation of Net Sales. Notwithstanding the
foregoing, in no event shall ICN be liable for any deficiency, fine, assessment
or penalty resulting from Schering's failure to withhold the proper amount in
accordance with the written instructions of ICN to Schering given in accordance
with Section 15.7 hereof.
ARTICLE 7
ICN'S MARKETING RIGHTS; DISTRIBUTION
7.1 ICN's Marketing Rights. Notwithstanding the rights granted to
Schering under this Agreement, ICN shall have the right at any time following
ICN's receipt of Regulatory Approval in the EU to distribute, market, use and
sell the Product for the treatment of chronic hepatitis C, at ICN's expense, in
the EU; provided, however, that ICN shall not sell the Product to any entity in
the EU that could reasonably be expected to resell the Product outside the EU,
except for resales to non-EU countries that are members of the European Economic
Area. In addition, in recognition of ICN's current sales of the Product for the
treatment of chronic hepatitis C pursuant to a Regulatory Approval in Egypt, ICN
shall have the right under its existing contractual obligations (on a
semi-exclusive basis with Schering) at any time to distribute, market, use and
sell the Product for the treatment of chronic hepatitis C, at ICN's expense, in
Egypt; provided, however, that ICN shall not sell the Product to any entity in
Egypt that could reasonably be expected to resell the Product outside Egypt.
<PAGE>
37
7.2 Distribution. In furtherance of the rights granted to Schering to
distribute Product throughout the Territory as and to the extent provided in
this Agreement:
(a) Promptly after the Effective Date, ICN shall deliver to Schering
a report of sales of Product by ICN in the Territory during each
of the four most recently ended fiscal quarters of ICN.
(b) ICN shall provide to Schering a sales report on a quarterly basis
showing all sales and all units shipped of Product by ICN in the
Territory during the preceding quarter.
(c) As promptly as practicable following sales of the Product to new
customers by ICN, ICN shall provide to Schering a report of such
new customers for the Product.
(d) If, at any time, Schering determines, based on the quarterly
reports provided pursuant to Section 7.2(b), that there has been
a significant change in purchasing patterns by any customer or
customers of ICN, then Schering may require ICN to provide to
Schering, in advance of acceptance by ICN, all orders from such
customer or customers, and Schering shall have the right to
require ICN to reject any such orders as to which Schering
reasonably concludes that the Product covered by such orders are
likely to be resold for use for chronic hepatitis C outside the
country from which the order was placed. For purposes of this
Section 7.2(d), a "significant change in purchasing patterns"
means [REDACTED]. Schering shall not be entitled to require ICN
to reject any order as to which ICN reasonably believes is
justifiable in light of new indications, changed labelling,
outbreaks of disease or similar circumstances.
(e) ICN shall notify its existing distributors and customers that it
intends to restrict orders for off-label and similar purposes.
(f) If Schering has required ICN to provide it with all orders prior
to acceptance as provided above, then ICN shall cause its
independent auditors to certify to Schering after the end of each
calendar quarter, that ICN has provided to Schering all such
orders for such quarter.
(g) ICN's obligations under this Section 7.2 shall terminate as to
each country in the EU upon ICN's receipt of Regulatory Approval
in each such country of the EU.
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38
7.3 Ireland Sales. In furtherance of the rights granted to Schering to
distribute Product throughout the Territory as and to the extent provided in
this Agreement, ICN grants to Schering the right to, and Schering shall, at its
option, assume, perform or discontinue, and ICN shall cease, until receipt by
Schering of Regulatory Approval of the Product in the EU, the distribution,
marketing and sale of the Product currently being conducted by ICN or any
Affiliate of ICN in Ireland (including without limitation, any obligations of
ICN under distribution and other marketing agreements and arrangements relating
to Ireland). Schering shall pay to ICN, during each year during the Exclusive
Period (other than any year during the Exclusive Period during which ICN
actually sells the Product in Ireland, with the permission of Schering) until
receipt by Schering of Regulatory Approval of the Product in the EU, an amount
determined by [REDACTED] for sale of Product in Ireland in 1994, [REDACTED],
times [REDACTED], payable annually on January 10 of each year. Schering shall
have the right to audit the books and records of ICN once, within [REDACTED]
after the Effective Date, solely to verify such [REDACTED], and otherwise in
accordance with the provisions of Section 6.10(b).
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39
ARTICLE 8
SUPPLY OF PRODUCT BY ICN DURING EXCLUSIVE PERIOD
8.1 Supply.
(a) Subject to the provisions of Section 8.3, Schering shall purchase
the Product from ICN, and ICN shall supply all of Schering's
requirements of the Product (including, but not limited to,
research and development requirements, including placebos, which
shall be in accordance with reasonable procedures for ordering
and production as agreed by the Parties) in finished bulk
capsules, or bulk substance as necessary, subject to the terms
and conditions of this Article 8. If at any time ICN experiences
a shortage of Product supply and the available supplies are not
sufficient to satisfy all of Schering's requirements for the
Product in the Territory, ICN shall allocate its available
worldwide supplies (including inventory in excess of customary
supplies) equitably among its own requirements and Schering's,
based on the purchasing history of such entities during the prior
six-month period.
(b) For so long as ICN is supplying Product to Schering, ICN shall
furnish Schering with all information related to the pre-approval
inspections for the Product and shall promptly resolve, at ICN's
expense, any manufacturing deficiencies in order to receive
timely Regulatory Approval. ICN shall thereafter be solely
responsible, at ICN's expense, for compliance with current Good
Manufacturing Practices as determined by the FDA. ICN shall
promptly address and remedy any deficiencies noted in any Form
483 reports or warning letters issued by the FDA.
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39
8.2 Forecasts and Procedures.
(a) Product will be supplied by ICN to Schering in finished bulk
capsules and only against receipt of Schering's written purchase
order and ICN's written confirmation of the same. The delivery
shall be within [REDACTED] from the receipt of Schering's firm
purchase order if the quantity ordered does not exceed the
current forecast provided in accordance with Section 8.2(b) by
more than [REDACTED], and within [REDACTED] if the ordered
quantity exceeds the current forecast by more than [REDACTED] but
less than [REDACTED]. The Parties shall discuss and mutually
agree on delivery schedules if the quantity ordered exceeds the
current forecast by more than [REDACTED]. ICN shall within
five days of receipt of any Schering written purchase order
confirm receipt of such purchase order (via facsimile to a
facsimile number supplied by Schering for this purpose).
(b) To better enable ICN to plan its Product production program for
the Territory, Schering agrees to provide ICN monthly its then
current forecast for the quantities of the Product that Schering
will require during the successive eighteen (18) months. Schering
shall break down each forecast indicating the quantity and a
requested delivery date by month for the first successive twelve
(12) months followed by the next six (6) months indicated in two
(2) quarterly aggregates. Each monthly forecast issued shall
reflect a continuously rolling/progressive eighteen (18) month
cycle. Each current monthly forecast shall be deemed to be a
binding purchase order. Schering shall purchase from ICN at least
[REDACTED] of the sum of its estimated Product orders for the
second calendar quarter indicated in the latest forecast;
provided, however, that if, for the third and fourth calendar
quarters indicated in such monthly forecast, Schering does not
purchase at least [REDACTED] of the sum of its estimated Product
orders, Schering shall pay to ICN, at the time of payment for
Product purchased for such quarters, an amount equal to ICN's
carrying cost (including warehousing, finance costs and similar
items) of the amount of inventory (including bulk substance and
finished capsules) reflected in such
<PAGE>
40
estimated Product orders in excess of the amount of Product
purchased for such quarters. ICN shall not be under any
obligation to accept any order of the Product which is in excess
of [REDACTED] of the latest forecast relating to Schering's
requirement for the first twelve (l2) months.
(c) Schering shall place orders in increments of single batches
equivalent to [REDACTED]; provided, however, that solely for
purposes of clinical trials the minimum batch size shall be
[REDACTED]. ICN will use reasonable efforts to provide capsules
having the longest available shelf life for purposes of such
clinical trials.
(d) ICN may reject Schering's purchase order if the purchase order
fails to substantially comply with the requirements of this
Article 8. In the event of any discrepancy between a purchase
order for the Product and this Agreement, the terms of this
Agreement shall govern. ICN shall use commercially reasonable
efforts to meet any Product requirements of Schering.
(e) All Product shall be packed for air freight shipment and storage
in accordance with Schering's specifications as mutually agreed
upon and in accordance with applicable laws and regulations.
(f) Schering shall be responsible for the costs, including customs
duties, freight and insurance, that may be required to ship the
Product from ICN's plant to any destination.
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(g) Risk of loss and damage to the Product shall pass to Schering
upon tender of the Product at ICN's plant.
(h) ICN shall prepare, obtain, and transmit to Schering such
documents as shall be required for Schering to take over customs
clearance and to satisfy other import formalities into the
Territory. Schering shall use diligent efforts to promptly clear
shipments of Product through customs and shall handle and store
the Product thereafter in a manner which maintains the integrity
of the Product.
(i) At the reasonable request of Schering at any time during the
Exclusive Period, ICN shall promptly enter into a written supply
agreement for supply of Product to a Schering Affiliate (located
within the Territory) designated by Schering on terms and
conditions consistent with those contained in this Agreement as
well as any additional terms as may be required by applicable law
and any customary additional terms as shall be agreed to by the
Parties (such consent not to be unreasonably withheld). If there
is any inconsistency between this Agreement and such supply
agreement, the terms of this Agreement shall control.
(j) ICN shall provide to Schering, at the commencement of Schering's
purchases of Product from ICN, and shall update from time to
time, the test methodologies used by ICN in preparing the
certificates of analysis referred to in Section 8.4, and any
differences between the then-current specifications for the
Product and the Product Specifications.
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42
8.3 Schering's Right to Manufacture.
(a) Within 24 months after the Effective Date, Schering shall notify
ICN as to whether Schering elects to continue to purchase Product
from ICN or to discontinue all or, if agreed to by ICN, a part of
Schering's purchase of Product from ICN, and to manufacture
Product itself or have Product manufactured for it by a third
party. If Schering elects to continue to purchase Product from
ICN, then the Parties shall negotiate in good faith as to any
capacity requirements, and the cost of any related capital
investment, required to meet Schering's requirements. Subject to
agreement of the Parties as to such matters, from the Effective
Date, ICN shall only be required to supply Schering to the extent
of ICN's current available capacity, taking into account ICN's
own requirements and commitments with respect to Product. ICN
represents that ICN has adequate capacity to supply Schering's
requirements of Product for clinical programs for Regulatory
Approval. If, after deciding to manufacture or have manufactured
the Product, Schering wishes to again purchase Product from ICN,
Schering shall give ICN not less than 6 months' notice. ICN may,
but shall not be required to, supply Product to Schering, on such
terms to which the Parties may agree.
(b) In the event that Schering elects to manufacture Product itself
or have Product manufactured for it by a third party, then so
long as this Agreement remains in effect, Schering shall, at the
request of ICN, supply Product to ICN at a price and on other
terms and conditions consistent with the terms and conditions on
which ICN supplies Product to Schering under this Agreement.
Schering shall only be required to supply ICN to the extent of
Schering's available capacity, taking into account Schering's own
requirements and commitments with respect to Product. For so long
as Schering is supplying Product to ICN, Schering shall furnish
ICN with all information related to the pre-approval inspections
for the Product and shall promptly resolve, at Schering's
expense, any manufacturing deficiencies in order to receive
timely Regulatory Approval. Schering shall thereafter be solely
responsible, at Schering's expense, for compliance with current
Good Manufacturing Practices as determined by the FDA. Schering
shall promptly address and remedy any deficiencies noted in any
Form 483 reports or warning letters issued by the FDA.
(c) If Schering elects to purchase Product from ICN, ICN shall
maintain its production facilities (including those of any third
party supplier) used to manufacture the Product, so as to permit
the importation and supply of Product in a timely manner under
this Agreement in all applicable countries in the Territory. So
long as Schering is purchasing Product from ICN, ICN will permit
Schering representatives to inspect the Product-related portion
of its production facilities, at Schering's cost and expense, at
any time during normal business hours and upon reasonable prior
notice. Any such inspection that involves third party facilities
shall be subject to such limitations (including confidentiality
obligations) as may be imposed under the applicable agreement
between ICN and the third party.
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8.4 Limited Warranty.
(a) ICN warrants that each shipment of the Product supplied to
Schering pursuant to this Agreement, when shipped from the ICN
Facility, shall conform to the Product Specifications, shall be
manufactured by ICN and supplied to Schering in accordance with
the requirements of applicable law in the country of manufacture
and any other applicable regulatory legal requirements in the
Territory, including, without limitation, any current Good
Manufacturing Practices requirements, and shall be of
substantially equivalent quality as the Product produced by ICN
for its own use. ICN shall provide to Schering concurrently with
each shipment of Product a Certificate of Analysis which contains
analytical results and specifications of the batch. THE WARRANTY
PROVIDED FOR IN THIS SECTION 8.4(a) IS EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WHETHER
PERTAINING TO THE PRODUCT AND WHETHER ARISING BY LAW, CUSTOM,
CONDUCT, OR USAGE OR TRADE, AND THE RIGHTS AND REMEDIES PROVIDED
IN SECTION 8.4(b) ARE EXCLUSIVE AND IN LIEU OF ALL OTHER RIGHTS
AND REMEDIES (EXCEPT AS PROVIDED IN SECTION 8.4(d)).
(b) Subject to Section 3.7(b) if any Product is shown to be in breach
of ICN's warranty ("Non-Conforming Product") contained in Section
8.4(a), Schering's exclusive remedy shall be to return to ICN the
Non-Conforming Product and to receive a credit (with ICN paying
related transportation costs) in the amount paid to ICN hereunder
for such Non-Conforming Product and related transportation costs
(including costs of returning such Non-Conforming Product) or to
have ICN replace such Non-Conforming Product.
(c) EXCEPT FOR ICN'S OBLIGATION TO REFUND OR REPLACE NON-CONFORMING
PRODUCT AS SET FORTH IN SECTION 8.4(b) ABOVE, ICN SHALL NOT BE
LIABLE TO SCHERING FOR, AND SCHERING WAIVES ANY AND ALL CLAIMS
AGAINST ICN FOR, ALL DAMAGES, INCLUDING SPECIAL, INDIRECT,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, WHICH MAY BE CAUSED BY, OR
IN ANY WAY RESULT FROM, THE PRODUCT OR THEIR DELIVERY UNDER THIS
AGREEMENT, INCLUDING DAMAGES RESULTING FROM DELAYS IN DELIVERY,
OR FAILURE TO DELIVER, ANY PRODUCT WHETHER BASED ON BREACH OF
WARRANTY, STRICT LIABILITY OR ANY OTHER CAUSE OF ACTION.
(d) NOTHING IN THIS SECTION SHALL BE DEEMED IN ANY WAY TO LIMIT
SCHERING'S RIGHTS OF INDEMNIFICATION PURSUANT TO SECTIONS
11.2(a)(ii) AND 11.2(b)
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8.5 Rejection of Product.
(a) Schering may reject any shipment of Product from ICN that does
not meet ICN's warranty set forth in Section 8.4, upon notice to
ICN delivered within forty five (45) days after receipt by
Schering of such shipment or, in the case of any latent defect,
after Schering discovered or had a reasonable basis for
discovering such defect. Any shipment of Product that is not
rejected by Schering within such period shall be deemed accepted.
In no event shall ICN be liable for any nonconformity of the
Product resulting from the shipment, storage or handling of the
Product after tender by ICN in accordance with Section 8.2(g)
(unless resulting from the fault of ICN, such as not shipping in
accordance with agreed specifications), or the tampering,
alteration or mishandling of the Product by any person (including
any customer of Schering) following such tender.
(b) Upon the request of ICN, Schering shall furnish evidence of
nonconformity of the shipment of Product. If ICN confirms the
nonconformity, ICN will use diligent efforts to, at Schering's
request, either promptly replace the Product at no additional
charge to Schering with a conforming shipment (which may include
rework of the Product if feasible), or issue a credit to Schering
(pro rated, if less than a full shipment is rejected) for the
Product Price and any other costs and expenses incurred by
Schering in shipping the rejected Product to ICN. If ICN
disagrees with Schering's determination, the Parties shall
promptly submit the dispute to a mutually acceptable laboratory
for a binding determination (in lieu of the procedures described
in Article 13) of the conformance or nonconformity of the Product
and ICN shall submit as part of its documentation retained
manufacturing samples. The non-prevailing Party shall pay the
costs and expenses of the laboratory tests.
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ARTICLE 9
CONFIDENTIALITY
9.1 Confidentiality. ICN and Schering shall use only in accordance
with this Agreement and shall not disclose to any third party any confidential
or proprietary information, whether patentable or not, related to the subject
matter of this Agreement furnished by the other Party pursuant to this Agreement
or otherwise, without the prior written consent of the other Party. The
foregoing obligations shall survive the expiration or termination of this
Agreement for a period of twenty (20) years. These obligations shall not apply
to:
(a) Information that is known to the receiving Party prior to the
time of disclosure, to the extent evidenced by written records of
the receiving Party;
(b) Information disclosed to the receiving Party by a third party
which has a right to make such disclosure;
(c) Information that is at the time of disclosure or thereafter
becomes published or otherwise part of the public domain without
breach of this Agreement by the receiving Party;
(d) Information which is independently developed by employees of the
receiving Party or its Affiliates and such independent
development can be properly demonstrated by the receiving Party;
or
(e) Information that is required to be disclosed by law, regulation,
rule, act or order of the FDA or similar authority or agency or a
court of competent jurisdiction; provided that the receiving
Party gives the other Party sufficient advance notice to permit
it to seek a protective order or other similar order with respect
to such information and thereafter discloses only the minimum
information required to be disclosed in order to comply with the
request, whether or not a protective order or other similar order
is obtained by the other Party.
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9.2 No Publicity. A Party may not use the name of the other Party in
any publicity or advertising and, except as provided in section 9.1, may not
issue a press release or otherwise publicize or disclose any information related
to this Agreement or the terms or conditions hereof, without the prior written
consent of the other Party. The Parties shall agree on a form of initial press
release that may be used by either Party to describe this Agreement. Nothing in
the foregoing, however, shall prohibit a Party from making such disclosures to
the extent deemed necessary under applicable federal or state securities laws or
any rule or regulation of any nationally recognized securities exchange; in such
event, however, the disclosing Party shall use good faith efforts to consult
with the other Party prior to such disclosure and, where applicable, shall
request confidential treatment to the extent available.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties of Each Party. Each of ICN and
Schering hereby represents, warrants and covenants to the other Party hereto as
follows:
(a) It is a corporation duly organized and validly existing under the
laws of the state or other jurisdiction of incorporation or
formation;
(b) The execution, delivery and performance of this Agreement by such
Party has been duly authorized by all requisite corporate action,
subject only to receipt of requisite boards of directors'
approvals;
(c) It has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
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(d) The execution, delivery and performance by such Party of this
Agreement and its compliance with the terms and provisions hereof
does not and will not conflict with or result in a breach of any
of the terms and provisions of or constitute a default under (i)
a loan agreement, guaranty, financing agreement, agreement
affecting a product or other agreement or instrument binding or
affecting it or its property; (ii) the provisions of its charter
documents or bylaws; or (iii) any order, writ, injunction or
decree of any court or governmental authority entered against it
or by which any of its property is bound;
(e) Except for the governmental and regulatory approvals required to
market the Product in the Territory, the execution, delivery and
performance of this Agreement by such Party does not require the
consent, approval or authorization of, or notice, declaration,
filing or registration with, any governmental or regulatory
authority and the execution, delivery or performance of this
Agreement will not violate any law, rule or regulation applicable
to such Party;
(f) This Agreement has been duly authorized, executed and delivered
and constitutes such Party's legal, valid and binding obligation
enforceable against it in accordance with its terms subject, as
to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to the availability of particular remedies
under general equity principles; and
(g) It shall comply with all applicable material laws and regulations
relating to its activities under this Agreement.
10.2 ICN'S Representations. ICN hereby represents, warrants and
covenants to Schering as follows:
(a) ICN owns or has sufficient rights in and to the Know-How and ICN
Trademark, free and clear of any liens or encumbrances, to grant
the rights to Schering as contained in this Agreement;
(b) ICN is not aware of any existing third party trademark, trade
name or other intellectual property rights in the Territory that
might be infringed by the import, distribution, marketing, use or
sale of the Product in the Territory under the ICN Trademark or
through the use of the ICN name;
(c) During the Exclusive Period, ICN will use diligent efforts not to
diminish the right under its Know-How and ICN Trademark granted
to Schering hereunder, including without limitation by not
committing or permitting any acts or omissions which would cause
the breach of any agreements between itself and third parties
which provide for intellectual property rights applicable to the
development, manufacture, use or sale of Product. ICN agrees to
provide Schering promptly with notice of any such alleged breach.
ICN is in compliance in all material respects with any such
agreements with third parties;
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48
(d) Data summaries provided to Schering by ICN prior to the Effective
Date relating to the clinical trials of the Product, taken as a
whole, accurately represent the underlying raw data;
(e) ICN has provided to Schering a summary of all adverse events
known to ICN relating to the Product;
(f) ICN has disclosed to Schering all information known to ICN
concerning (i) patents owned by third parties that might be
infringed by Schering's use of the Product to treat chronic
hepatitis C; or (ii) patent applications owned, or reasonably
believed by ICN to be owned, by third parties that, if issued as
a patent, might be infringed by Schering's use of the Product to
treat chronic hepatitis C;
(g) ICN has no knowledge of any circumstances that (i) would
adversely affect the commercial utility of the use of the Product
to treat chronic hepatitis C; or (ii) that would render Schering
liable to a third party for patent infringement as a consequence
of Schering's use of the Product to treat chronic hepatitis C;
and
(h) (i) ICN has disclosed to Schering all distributorship agreements,
marketing arrangements or similar agreements whereby ICN is
selling, distributing or supplying the Product (including
directly or through Affiliates of ICN) or whereby ICN has
authorized third parties to make, sell, distribute or supply the
Product (collectively "License Agreements"); (ii) Exhibit 2.1
sets forth a list of all License Agreements; (iii) no contract,
agreement or understanding, either oral or in writing, modifies,
amends or supplements the License Agreements; and (iv) ICN shall
not enter into any License Agreements between the date hereof and
the Effective Date.
(i) Except as set forth in Exhibit 2.1, ICN has not granted any
rights under the Know-How to any third party to either make,
sell, distribute or supply the Product.
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49
(j) As soon as practicable following the Effective Date, ICN shall at
its sole cost and expense (A) terminate (and not renew, where
applicable), or allow to expire, the License Agreements listed on
Exhibit 2.1(A); (B) terminate (by agreement with the other Party
thereto, or otherwise) the License Agreements listed on Exhibit
2.1(B); and (C) use reasonable efforts to amend the License
Agreements listed on Exhibit 2.1(C) to prohibit the other party
from making, selling, distributing or supplying any oral
formulation of the Product in the Territory in derogation of
Schering's rights under this Agreement. Except as previously
disclosed to Schering or as contemplated by Article 7, Article 8
or this Section 10.2(j), during the Exclusive Period, ICN shall
not distribute, market, sell or supply the Product (including
directly or through Affiliates of ICN) in any country in the
Territory.
(k) Neither ICN nor any officer of ICN or Affiliate of such officer
is currently engaged in any research or development programs for
any other products for the treatment of hepatitis C (including
directly or through Affiliates of ICN).
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50
10.3 Continuing Representations. The representations and warranties of
each Party contained in Sections 10.1 and 10.2 shall survive the execution of
this Agreement and shall remain true and correct after the date hereof with the
same effect as if made as of the date hereof.
10.4 No Inconsistent Agreements. Neither Party has in effect and after
the Effective Date neither Party shall enter into any oral or written agreement
or arrangement that would be inconsistent with its obligations under this
Agreement.
ARTICLE 11
INDEMNIFICATION AND LIMITATION ON LIABILITY
11.1 Indemnification by Schering.
(a) Schering shall indemnify, defend and hold harmless ICN and its
Affiliates, and each of its and their respective employees,
officers, directors and agents (each, a "ICN Indemnified Party")
from and against any and all liability, loss, damage, cost, and
expense (including reasonable attorneys' fees), subject to the
limitations in section 11.5 (collectively, a "Liability") which
the ICN Indemnified Party may incur, suffer or be required to pay
resulting from or arising in connection with (i) the breach by
Schering of any covenant, representation or warranty contained in
this Agreement, (ii) any negligent act or omission or willful
misconduct of Schering (or any Affiliate thereof) in the
promotion, marketing and sale of the Product or any other
activity conducted by Schering under this Agreement which is the
proximate cause of injury, death or property damage to a third
party, or (iii) the successful enforcement by an ICN Indemnified
Party of any of the foregoing.
(b) Schering also shall indemnify, defend and hold harmless each ICN
Indemnified Party from and against any Liability which the ICN
Indemnified Party may incur, suffer or be required to pay
resulting from or arising in connection with any negligent act or
omission or willful misconduct of Schering (or any Affiliate
thereof) in the manufacture, promotion or marketing of the
Product or any other activity conducted by Schering under this
Agreement after the Exclusive Period which is the proximate cause
of injury, death or property damage to a third party.
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51
11.2 Indemnification by ICN.
(a) ICN shall indemnify, defend and hold harmless Schering and its
Affiliates, and each of its and their respective employees,
officers, directors and agents (each, an "Schering Indemnified
Party") from and against any Liability which the Schering
Indemnified Party may incur, suffer or be required to pay
resulting from or arising in connection with (i) the breach by
ICN of any covenant, representation or warranty contained in this
Agreement, (ii) any negligent act or omission or willful
misconduct of ICN (or any Affiliate thereof) in providing the
Know-How or in the manufacture, promotion, marketing or sale of
the Product or any other activity conducted by ICN under this
Agreement which is the proximate cause of injury, death or
property damage to a third party, or (iii) the successful
enforcement by an Schering Indemnified Party of any of the
foregoing.
(b) ICN also shall indemnify, defend and hold harmless each Schering
Indemnified Party from and against any Liability which the
Schering Indemnified Party may incur, suffer or be required to
pay resulting from or arising in connection with any negligent
act or omission or willful misconduct of ICN (or any Affiliate
thereof) in the manufacture, promotion or marketing of the
Product or any other activity conducted by ICN under this
Agreement after the Exclusive Period which is the proximate cause
of injury, death or property damage to a third party.
11.3 Conditions to Indemnification. The obligations of the
indemnifying Party under paragraphs 11.l and 11.2 are conditioned upon the
delivery of written notice to the indemnifying Party of any potential Liability
promptly after the indemnified Party becomes aware of such potential Liability.
The indemnifying Party shall have the right to assume the defense of any suit or
claim related to the Liability if it has assumed responsibility for the suit or
claim in writing; however, if in the reasonable judgment of the indemnified
Party, such suit or claim involves an issue or matter which could have a
materially adverse effect on the business operations or assets of the
indemnified Party, the indemnified Party may waive its rights to indemnity under
this Agreement and control the defense or settlement thereof, but in no event
shall any such waiver be construed as a waiver of any indemnification rights
such Party may have at law or in equity. If the indemnifying party defends the
suit or claim, the indemnified Party may participate in (but not control) the
defense thereof at its sole cost and expense.
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52
11.4 Settlements. Neither Party may settle a claim or action related
to a Liability without the consent of the other Party, if such settlement would
impose any monetary obligation on the other Party or require the other Party to
submit to an injunction or otherwise limit the other Party's rights under this
Agreement. Any payment made by a Party to settle any such claim or action shall
be at its own cost and expense.
11.5 Limitation of Liability. With respect to any claim by one Party
against the other arising out of the performance or failure of performance of
the other Party under this Agreement, the Parties expressly agree that the
liability of such Party to the other Party for such breach shall be limited
under this Agreement or otherwise at law or equity to direct damages only and in
no event shall a Party be liable for, punitive, exemplary or consequential
damages.
11.6 Insurance. Each Party acknowledges that they each maintain and
shall, during the term of this Agreement, maintain a self-insurance program for
liability insurance, including products liability and contractual liability
insurance, adequately covering such Party's obligations under this Agreement.
Each Party shall provide the other Party with evidence of such self-insurance
program, upon request.
ARTICLE 12
TERM AND TERMINATION
12.1 Term of Agreement. The term of this Agreement shall begin on the
Effective Date and shall continue in perpetuity unless terminated earlier in
accordance with this Article 12. Upon the expiration of the Exclusive Period,
(a) Schering shall be granted a worldwide, perpetual, fully-paid up,
non-exclusive license in and to the Know-How to enable Schering to develop,
make, have made, use, sell and distribute Product in the Territory, and (b)
Schering shall grant ICN reference to any Regulatory Approvals and pricing or
reimbursement approvals relating to the Product in the Territory.
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53
12.2 Termination by Either Party. This Agreement may be terminated
upon written notice to the other Party in the event of any of the following:
(a) unilaterally by Schering at any time, with or without cause, upon
[REDACTED] written notice;
(b) by either Party upon nonpayment of any properly due and payable
amount that is continuing for twenty (20) business days after the
defaulting Party has received written notice from the
non-defaulting Party of such nonpayment;
(c) by either Party upon material breach by the other Party of any
provision herein that is continuing forty-five (45) days after
the non-breaching Party gives the breaching Party notice of such
breach specifying in reasonable detail the particulars of the
alleged breach; or
(d) by either Party in the event the other Party becomes insolvent,
or voluntary or involuntary proceedings are instituted by or
against the other Party and are not dismissed within 60 days, or
a receiver or custodian is appointed for such Party's business,
or a substantial portion of such Party's business is subject to
attachment or similar process, or the other Party is unable to
satisfy its obligations as they become due, enters into any
composition or arrangement with its creditors or enters into
liquidation.
12.3 Continuing Obligations. Neither ICN nor Schering shall be
relieved of their respective obligations to pay any sums of money due or payable
or accrued under this Agreement as of the effective date of such termination.
All accounts between ICN and Schering shall be settled in full within ninety
(90) days following the expiration or termination of this Agreement. Articles 9,
10 and 13 and Sections 3.1(d), 3.9, 4.3(b), 4.3(k), 6.10, Article 11, 12.7(a),
15.9, this Section 12.3 and any other provision which by its terms is stated to
survive this Agreement, shall survive the termination or expiration of this
Agreement. In addition, any other provision required to interpret and enforce
the Parties' rights and obligations under this Agreement also shall survive to
the extent required for the full observation and performance of this Agreement
by the Parties hereto.
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54
12.4 Partial Termination of Territory by ICN. Subject to the terms and
conditions of Section 3.4 hereof, ICN may terminate Schering's rights with
respect to a particular country within the Territory, effective upon sixty (60)
days' written notice to Schering if Schering has failed to make any commercial
sale of the Product in such country within six (6) months following Regulatory
Approval with the Minimum Labelling with respect to the Product in such country.
Upon such termination, Schering shall grant ICN reference to all applicable
Regulatory Approvals and pricing or reimbursement approvals related to the
Product in order to enable ICN to market, sell or promote the Product in such
country, or appoint any agent, distributor or other entity to do so, without
liability to Schering.
12.5 Effects of Termination by Schering.
(a) In the event of termination of this Agreement by Schering under
Section 12.2 (a), and if termination occurs prior to Regulatory
Approval of the Product in any country of the Territory then the
following shall occur: (i) Schering shall be granted a worldwide,
perpetual, non-exclusive license in and to the Know-How to enable
Schering to make, have made, use and sell Product in the
Territory; (ii) Schering shall provide to ICN all reports, data,
samples (if necessary), and, if specifically required by a
regulatory authority, other information, necessary to allow ICN
to file for Regulatory Approval in any such country either
concurrently with Schering or, if Schering is not then pursuing
Regulatory Approval in such country, within a reasonable time
period; (iii) Schering shall pay to ICN the royalties (including
minimum royalties) provided for under and in accordance with
Section 6.2 hereof with respect to any and all sales of Product
by Schering in the Territory; and (iv) Schering-Plough
Corporation shall have no obligation to make the purchases of
common stock of ICN as set forth in the Stock Purchase Agreement
which are triggered by Regulatory Approval in the United States
and the EU if the relevant Regulatory Approval has not occurred
as of the termination by Schering.
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(b) In the event of termination of this Agreement by Schering under
Section 12.2(a) and if termination occurs after Regulatory
Approval of the Product in any country of the Territory then the
following shall occur: (i) Schering shall be granted a worldwide,
perpetual, non-exclusive license and in to the Know-How to enable
Schering to make, have made, use and sell Product in the
Territory; (ii) Schering shall grant ICN reference to any
Regulatory Approvals and pricing or reimbursement approvals
relating to the Product outside of the EU; (iii) Schering shall
provide to ICN all reports, data, samples (if necessary), and, if
specifically required by a regulatory authority, other
information, necessary to allow ICN to file for Regulatory
Approval in the Territory; (iv) Schering shall pay to ICN the
royalties (including minimum royalties) provided for and in
accordance with the terms of Section 6.2 hereof with respect to
any and all sales of Product by Schering in the Territory; and
(v) Schering-Plough Corporation shall have no obligation to make
the purchases of common stock of ICN as set forth in the Stock
Purchase Agreement which are triggered by Regulatory Approval in
the United States and the EU if the relevant Regulatory Approval
has not occurred as of the termination by Schering.
(c) In the event of termination of this Agreement by Schering under
Section 12.2(a), unless Schering fully complies with the
provisions of Sections 12.5(a) and 12.5(b) above, Schering shall
not manufacture, use or sell the Product in the Territory for a
period of three years from the date of termination of this
Agreement.
(d) In the event of termination of this Agreement by Schering under
Sections 12.2(b), (c) or (d), without limiting any other rights
or remedies Schering may have, the following shall occur: (i)
Schering shall retain a worldwide, perpetual, fully-paid up,
exclusive license (exclusive even as to ICN, including in the EU)
in and to the Know-How to enable Schering to develop, make, have
made, use, sell and distribute Product in the Territory; (ii)
Schering shall be obligated to pay to ICN any royalties (other
than any minimum royalties) provided for under Section 6.2 hereof
with respect to any and all sales of Product by Schering in the
Territory; provided, however, that such royalties shall be offset
and/or reduced to reflect damage suffered by Schering in the
event of a breach of this Agreement giving rise to Schering's
right to terminate, to the extent determined by the neutral in
accordance with the provisions of Article 13; and (iii)
Schering-Plough Corporation shall have no obligation to make the
purchases of common stock of ICN as set forth in the Stock
Purchase Agreement which are triggered by Regulatory Approval in
the United States and the EU if the relevant Regulatory Approval
has not occurred as of the termination by Schering.
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12.6 Effects of Termination by ICN.
(a) In the event of termination of this Agreement by ICN under
Sections 12.2(b) or (d) then all of the rights granted to
Schering under this Agreement shall terminate. Except as set
forth immediately below in Section 12.6(b), in the event of
termination of this Agreement by ICN pursuant to 12.2(c), all of
the rights granted to Schering under this Agreement shall
terminate.
(b) In the event of a material breach by Schering of its obligations
under Section 3.1(a) (research and development obligations), or
Section 4.1 (diligence in marketing the Product), which material
breach is continuing after the cure period provided for in
Section 12.2(c), then the rights granted to Schering under this
Agreement shall terminate on a country-by-country basis relative
to the country of the Territory in which Schering's breach
occurred.
12.7 Change of Control.
(a) Schering agrees not to effect or in any way participate in or
facilitate a change of control of ICN for a period of [REDACTED]
following the date of this Agreement, unless requested by ICN's
board of directors.
(b) For purposes of this Section 12.7, a "change of control" means
(i) a merger, consolidation or combination in which a Party to
this Agreement is not the surviving corporation, (ii) any
"person" (within the meaning of Section 13(d) and Section 14(d)
(2) of the Securities Exchange Act of 1934) is or becomes the
beneficial owner, directly or indirectly, of securities of the
Party representing [REDACTED] or more of the combined voting
power of the Party's then-outstanding securities; or (iii) during
any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors cease
for any reason to constitute at least a majority thereof, unless
the election of each new director by the Party's stockholders was
approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the
period.
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12.8 Remedy Not Exclusive. The exercise by a Party of any right of
termination under this Agreement shall be in addition to, and shall not
constitute a waiver of, any other right or remedy the Party may have at law or
in equity.
ARTICLE 13
DISPUTE RESOLUTION
(a) The Parties recognize that a bona fide dispute as to certain
matters may from time to time arise during the Exclusive Period
which relate to either Party's rights and/or obligations
hereunder. In the event of the occurrence of such a dispute,
either Party may, by written notice to the other Party, have such
dispute referred to their respective officers designated below or
their successors, for attempted resolution by good faith
negotiations within thirty (30) days after such notice is
received. Said designated officers are as follows:
For ICN [REDACTED]- President
For Schering [REDACTED] - President
In the event the designated officers are not able to resolve such dispute
through good faith negotiations within such (30) thirty-day period, either Party
may invoke the provisions of paragraph (b) below any time within such thirty day
period.
(b) Except for Schering's unilateral right to terminate this
Agreement pursuant to Section 12.2(a), which shall not be subject
to the dispute resolution process set forth in this Article 13,
any dispute, controversy or claim arising out of or relating to
the validity, construction, enforceability or performance of this
Agreement including disputes relating to an alleged breach or
termination of this Agreement shall be settled by binding
Alternative Dispute Resolution ("ADR") in the manner described
below; provided, however, that in resolving any such dispute the
neutral referred to below shall give effect to the provisions of
this Agreement and shall not adjust, modify or change the effects
of termination as set forth in Sections 12.5 and 12.6:
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(i) If a Party intends to begin an ADR to resolve a dispute,
such Party shall provide written notice (the "ADR Request")
by certified or registered mail or properly documented
overnight delivery to the other Party informing such other
Party of such intention and the issues to be resolved. The
notice shall explain the nature of the complaint and refer
to the relevant sections of the Agreement upon which the
complaint is based. The complaining Party shall also set
forth a proposed solution to the problem, including a
suggested time frame within which the Parties must act.
(ii) The non-complaining Party must respond in writing within
forty-five (45) of receiving the notice with an explanation,
including references to the relevant provisions of the
Agreement and a response to the proposed solution and
suggested time frame for action. The non-complaining Party
may add additional issues to be resolved.
(iii)Within fifteen (15) days of receipt of the response from the
non-complaining Party, the Parties shall meet and discuss
options for resolving the dispute. The complaining Party
must initiate the scheduling of this resolution meeting.
Each Party shall make available all appropriate personnel to
meet and confer with the other Party within the fifteen (15)
days period following the complaining Party's receipt of the
response by the non-complaining Party.
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(iv) Any and all disputes that cannot be resolved pursuant to
Section 13(b)(iii) shall be submitted to a neutral who shall
be selected by the then-President of the Center for Public
Resources ("CPR"), 680 Fifth Avenue, New York, New York
10019. The neutral shall be an individual who shall preside
over and resolve any disputes between the Parties. The
neutral selected shall be a former judge of a state or
federal court selected from the Judicial Panel of the CPR
and shall not be an employee, director or shareholder of, or
otherwise have any current or previous relationship with,
either Party or of an Affiliate of any Party. Either Party
shall have ten (10) business days from the date the neutral
is selected to object in good faith to the selection of that
person. If either Party makes such an objection, the Parties
shall instruct the then-President of the CPR to select, as
soon as possible thereafter and in any event within ten (10)
days, another neutral under the same conditions set forth
above. This second selection shall be final. The ADR shall
be conducted in accordance with the rules of the CPR then in
effect, subject to the time periods and other provisions of
this Article 13.
(v) Consistent with the time schedule established pursuant to
Section 13(b)(vi), the neutral shall hold a hearing to
resolve each of the issues identified by the Parties and
shall render the award as expeditiously thereafter as
possible but in no event more than thirty (30) days after
the close of hearings. In making the award the neutral shall
rule on each disputed issue and shall adopt in whole or in
part the proposed ruling of one of the Parties on each
disputed issue.
(vi) During the meeting referred to in Section 13(b)(iii), the
Parties shall negotiate in good faith the scope and schedule
of discovery, relating to depositions, document production
and other discovery devices, taking into account the nature
of the dispute submitted for resolution. If the Parties are
unable to reach agreement as to the scope and schedule of
discovery, the neutral may order such discovery as he deems
necessary. To the extent practicable taking into account the
nature of the dispute submitted for resolution, such
discovery shall be completed within sixty (60)days from the
date of selection of the neutral. At the hearing, which
shall commence within twenty (20) days after completion of
discovery unless the neutral otherwise orders, the Parties
may present testimony (either by live witness or
deposition), subject to cross-examination, and documentary
evidence. To the extent practicable taking into account the
nature of the dispute submitted for resolution and the
availability of the neutral, the hearing shall be conducted
over thirty (30) consecutive business days, with each Party
entitled to approximately half of the allotted time unless
otherwise ordered by the neutral. The hearing shall be held
in the United States at such place as
<PAGE>
60
agreed upon by the Parties or if they are unable to agree at
a place designated by the neutral. Each Party shall have the
right to be represented by counsel. The neutral shall have
sole discretion with regard to the admissibility of any
evidence and all other matters relating to the conduct of
the hearing. The neutral shall, in rendering his decision,
apply the substantive law of New Jersey. The decision of the
neutral shall be final and not appealable, except in cases
of fraud or bad faith on the part of the neutral or any
Party to the ADR proceeding in connection with the conduct
of such proceedings.
(vii)At least twenty (20) bussiness days prior to the date set
for the hearing, each Party shall submit to each other Party
and the neutral a list of all documents on which such Party
intends to rely in any oral or written presentation to the
neutral and a list of all witnesses, if any, such Party
intends to call at such hearing and a brief summary of each
witness' testimony. At least five (5) business days prior to
the hearing, each Party must submit to the neutral and serve
on each other Party a proposed findings of fact and
conclusions of law on each issue to be resolved. Following
the close of hearings, the Parties shall each submit such
post-hearing briefs to the neutral addressing the evidence
and issues to be resolved as may be required or permitted by
the neutral.
(c) The neutral shall determine the proportion in which the Parties
shall pay the costs and fees of the ADR. Each Party shall pay its
own costs (including, without limitation, attorneys fees) and
expenses in connection with such ADR; provided, however, that if
the neutral determines that the action of any Party was
arbitrary, frivolous or in bad faith, the neutral may award such
costs (including, without limitation, attorneys fees) and
expenses to the prevailing Party.
<PAGE>
61
(d) The ADR proceeding shall be confidential and, except as required
by law, neither Party shall make (or instruct the neutral to
make) any public announcement with respect to the proceedings or
decision of the neutral without the prior written consent of the
other Party. The existence of any dispute submitted to ADR, and
the award of the neutral, shall be kept in confidence by the
Parties and the neutral, except as required in connection with
the enforcement of such award or as otherwise required by
applicable law.
(e) For the purposes of this Article 13, the Parties acknowledge
their diversity and agree to accept the jurisdiction of the
Federal District Court in Newark, New Jersey for the purposes of
enforcing awards entered pursuant to this Article and for
enforcing the agreements reflected in this Article.
(f) Nothing contained herein shall be construed to permit the
arbitrator(s) or any court or any other forum to award punitive,
exemplary or any similar damages. By entering into this Agreement
to arbitrate, the Parties expressly waive any claim for punitive,
exemplary or any similar damages. The only damages recoverable
under this Agreement are compensatory damages.
(g) The procedures specified in this Article 13 shall be the sole and
exclusive procedures for the resolution of disputes between the
Parties arising out of or relating to this Agreement; provided,
however, that a Party, without prejudice to the above procedures,
may seek a preliminary injunction or other provisional judicial
relief (which may include an order of specific performance), if
in its sole judgment such action is necessary to avoid
irreparable damage or to preserve the status quo (including,
without limitation, in the event of a breach by Schering of
Section 12.7(a)). If a preliminary injunction is granted, the
Parties agree that the final relief, including but not limited
to, the issuance of a permanent injunction, will be decided by
the neutral according to the procedures outlined in this Article
13. If a preliminary injunction is denied, the preliminary
injunction action will be discontinued and the neutral shall be
responsible for deciding the issue that was the subject of the
preliminary injunction action, and all costs and expenses
incurred by the prevailing Party in defending such a preliminary
injunction action shall be reimbursed by the non-prevailing
Party. Despite the preliminary injunction action the Parties will
continue to participate in good faith in the ADR according to the
procedures specified in this Article 13.
<PAGE>
62
ARTICLE 14
PROVISION FOR INSOLVENCY
(a) All rights and licenses granted under or pursuant to this
Agreement by ICN to Schering are, for all purposes of Section
365(n) of Title 11 of the U.S. Code ("Title 11"), licenses of
rights to intellectual property as defined in Title 11. ICN
agrees during the Exclusive Period to maintain and preserve any
current copies of all such intellectual property which are in
existence and in its possession as of the commencement of a case
under Title 11 by or against ICN. If a case is commenced by or
against ICN under Title 11, then, unless and until this Agreement
is rejected as provided in Title 11, ICN (in any capacity,
including debtor-in-possession) and its successors and assigns
(including, without limitation, a Title 11 Trustee) shall, as
Schering may elect in a written request, immediately upon such
request (A) (i) perform all of the obligations provided in this
Agreement to be performed by ICN, or (ii) provide to Schering all
such intellectual property (including all embodiments thereof)
held by ICN and such successors and assigns as of the
commencement of a case under Title 11 by or against ICN and from
time to time thereafter, and (B) not interfere with the rights of
Schering as provided in this Agreement, or any agreement
supplementary hereto, to such intellectual property (including
all such embodiments thereof, including any right of Schering to
obtain such intellectual property (or such embodiment) from any
other entity.
(b) If a Title 11 case is commenced by or against ICN, this Agreement
is rejected as provided in Title 11 and Schering elects to retain
its rights hereunder as provided in Title 11, then ICN (in any
capacity, including debtor-in-possession) and its successors and
assigns (including, without limitation, a Title 11 Trustee) shall
provide to Schering all such intellectual property (including all
embodiments thereof) held by ICN and such successors and assigns
immediately upon Schering's written request therefor. Whenever
ICN or any of its successors or assigns provides to Schering any
of the intellectual property licensed hereunder (or any
embodiment thereof) pursuant to this Article 14, Schering shall
have the right to perform the obligations of ICN hereunder with
respect to such intellectual property, but neither such provision
nor such performance by Schering shall release ICN from any such
obligation or liability for failing to perform it; provided,
however, that in such event Schering shall not be entitled to
compel specific performance by ICN under this Agreement except to
the extent of enforcing the exclusivity of the license granted
hereunder.
<PAGE>
63
(c) All rights, powers, remedies, obligations and conditions of
Schering provided herein are in addition to and not in
substitution for any and all other rights, powers, remedies,
obligations and conditions of ICN or Schering now or hereafter
existing at law or in equity (including, without limitation,
Title 11) in the event of the commencement of a Title 11 case by
or against ICN. Schering, in addition to the rights, power and
remedies expressly provided herein, shall be subject to all
obligations and conditions, and shall be entitled to exercise all
other such rights and powers and resort to all other such
remedies as may now or hereafter exist at law or in equity
(including, including, without limitation, Title 11) in such
event. The Parties agree that they intend the foregoing rights
and obligations of Schering to apply to the maximum extent
permitted by law, including without limitation for purposes of
Title 11, (i) the right of access to any intellectual property
(including all embodiments thereof) of ICN, or any third party
with whom ICN contracts to perform an obligation of ICN under
this Agreement, and, in the case of the third party, which is
necessary for the development, registration and manufacture of
Product, and (ii) the right to contract directly with any third
party described in clause (i) in this sentence to complete the
contracted work.
<PAGE>
64
ARTICLE 15
MISCELLANEOUS
15.1 Assignment. Neither this Agreement nor any or all of the rights
and obligations of a Party hereunder shall be assigned, delegated, sold,
transferred, sublicensed or otherwise disposed of, by operation of law or
otherwise, to any third party other than an Affiliate of such Party, without the
prior written consent of the other Party, and any attempted assignment,
delegation, sale, transfer, sublicense or other disposition, by operation of law
or otherwise, of this Agreement or of any rights or obligations hereunder
contrary to this Section 15.1 shall be a material breach of this Agreement by
the attempting Party, and shall be void and without force or effect. This
Agreement shall be binding upon, and inure to the benefit of, each Party, its
Affiliates, and its permitted successors and assigns. Each Party shall be
responsible for the compliance by its Affiliates with the terms and conditions
of this Agreement.
15.2 Governing Law. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New Jersey, without giving
effect to conflict of law principles.
15.3 Waiver. A waiver of any breach or any provision of this Agreement
shall not be construed as a continuing waiver of other breaches of the same or
other provisions of this Agreement.
15.4 Independent Relationship. Nothing herein contained shall be
deemed to create an employment, agency, joint venture or partnership
relationship between the Parties hereto or any of their agents or employees, or
any other legal arrangement that would impose liability upon one Party for the
act or failure to act of the other Party. Neither Party shall have any power to
enter into any contracts or commitments or to incur any liabilities in the name
of, or on behalf of, the other Party, or to bind the other Party in any respect
whatsoever.
<PAGE>
65
15.5 Export Control. This Agreement is made subject to any
restrictions concerning the export of products or technical information from the
United States of America which may be imposed upon or related to ICN or Schering
from time to time by the government of the United States of America.
Furthermore, Schering agrees that it will not export, directly or indirectly,
any technical information acquired from ICN under this Agreement or any products
using such technical information to any country for which the United States
government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from the Department of Commerce or other agency of the United
States government when required by an applicable statute or regulation.
15.6 Entire Agreement; Amendment. This Agreement, including the
Exhibits hereto, sets forth the complete, final and exclusive agreement and all
the covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and supersedes and terminates all
prior agreements and understandings between the Parties. There are no covenants,
promises, agreements, warranties, representations, conditions or understandings,
either oral or written, between the Parties other than as are set forth herein
and therein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties unless reduced to writing and signed
by an authorized officer of each Party.
15.7 Notices. Each notice required or permitted to be given or sent
under this Agreement shall be given by facsimile transmission (with confirmation
copy by registered first-class mail) or by registered or overnight courier
(return receipt requested), to the Parties at the addresses and facsimile
numbers indicated below.
If to ICN, to:
ICN Pharmaceuticals, Inc.
ICN Plaza
330 Hyland Avenue
Costa Mesa, California 92626
Attention: President
Facsimile Number (714) 641-7276
If to Schering, to:
Schering-Plough Ltd.
Toepferstrasse 5
CH-6004 Lucerne,
Switzerland
Attention: President
FAX: 41-41-52-1626
with copies to:
Schering-Plough International
2000 Galloping Hill Road
Kenilworth, NJ 07033
Attention: President
FAX: (908) 298-5379
<PAGE>
66
and
Schering Corporation
1 Giralda Farms
Madison, NJ 07940
Attention: Joseph C. Connors,
Senior Vice President and
General Counsel
FAX: (201) 822-1960
Any such notice shall be deemed to have been received on the earlier of the date
actually received and the date five (5) days after the same was posted. Either
Party may change its address or its FAX number by giving the other Party written
notice, delivered in accordance with this Section.
15.8 Force Majeure. Failure of any Party to perform its obligations
under this Agreement (except the obligation to make payments when properly due)
shall not subject such Party to any liability or place them in breach of any
term or condition of this Agreement to the other Party if such failure is caused
by any cause beyond the reasonable control of such non-performing Party,
including without limitation acts of God, fire, explosion, flood, drought, war,
riot, sabotage, embargo, strikes or other labor trouble, failure in whole or in
part of suppliers to deliver on schedule materials, equipment or machinery,
interruption of or delay in transportation, a national health emergency or
compliance with any order or regulation of any government entity acting with
color of right. If a condition constituting force majeure as defined herein
exists for more than ninety (90) consecutive days, the Parties shall meet to
negotiate a mutually satisfactory solution to the problem, if practicable.
<PAGE>
67
15.9 Non-Solicitation. To the maximum extent permitted by applicable
law, during the Exclusive Period and for one (1) year thereafter, neither Party
shall, directly or indirectly, solicit any individual who is then an employee of
a Party or its Affiliate within the Territory and who was involved in the
manufacturing, marketing, distribution or sale of the Product under this
Agreement, unless consented to in writing by the other Party.
15.10 Severability. If any provision of this Agreement is declared
invalid or unenforceable by a court having competent jurisdiction, it is
mutually agreed that this Agreement shall endure except for the part declared
invalid or unenforceable by, order of such court. The Parties shall consult and
use their best efforts to agree upon a valid and enforceable provision which
shall be a reasonable substitute for such invalid or unenforceable provision in
light of the intent of this Agreement.
15.11 Counterparts. 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 an original as against either
Party whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have caused their duly
authorized officers to execute this Agreement.
ICN PHARMACEUTICALS, INC.
By: /s/ DAVID C. WATT
---------------------------------
Name: David C. Watt
Title: Executive Vice President,
General Counsel & Corporate Secretary
SCHERING-PLOUGH LTD.
By: /s/ DAVID POORVIN, Ph.D.
------------------------------
Name: David Poorvin, Ph.D.
Title: Prokurist
<PAGE>
GUARANTEE
In consideration of ICN's execution of the foregoing Exclusive License
and Supply Agreement dated the date hereof ("Agreement"), Schering Corporation
("Schering") hereby guarantees to ICN as principal and not as surety the
performance by Schering-Plough Ltd. and any Affiliate of Schering-Plough Ltd. of
all of Schering-Plough Ltd.'s obligations under the Agreement.
Schering hereby consents to the jurisdiction of the courts (including
the Federal courts) in the State of California with respect to any and all
disputes, claims, actions or proceedings arising out of the execution, delivery
or performance of this Guarantee and waives all rights it might otherwise have
to object to venue before, and the jurisdiction of, such courts. Nothing herein
shall in any way detract from or limit the obligation of the Parties to submit
any dispute arising under the Agreement to arbitration and to be bound by any
decision of the neutral rendered in accordance with the dispute resolution
procedures set forth in Article 13 of the Agreement.
This Guarantee shall survive the expiration or other termination of the
Agreement and shall survive and apply regardless of any amendments, waivers,
extensions, modifications or other changes in the obligations of Schering-Plough
Ltd. under the Agreement.
July 28, 1995 SCHERING CORPORATION
By: /s/ David Poorvin
-----------------------
Its: Vice President
<PAGE>
Exhibit A
ICN shall not be required to supply Product at a price less than ICN's Cost of
Goods plus five percent.
Cost of Goods, if ICN or any Affiliate or third party is the manufacturer of
finished Product, shall include the following categories:
1. Direct Materials
Materials used in the manufacturing process that are traced directly
to the completed Product, including, but not limited to:
- Inert raw materials or excipients
- Active substances/ingredients
- Packaging components such as bottles, caps, labels, etc.
2. Direct Labor
The Cost of employees engaged in production activities that are directly
identifiable with Product costs. Excludes supervision (which is included
in indirect labor) and production support activities such as inspection,
plant and equipment maintenance labor, and material handling personnel.
Direct Labor cost includes:
- Base pay, overtime, vacation and holidays, illness, personal time
with pay, and shift differential.
- Cost of employee fringe benefits such as health and life insurance
payroll taxes, welfare, pension and profit sharing.
3. Indirect Manufacturing Costs
Costs which are ultimately allocated to Product based on an appropriate
method such as standard direct labor hours, tank hours, grams, vials,
etc. of the operating departments. These costs include:
- Indirect Production Labor - salaries of employees engaged in
production activities who are not classified as direct labor,
including supervision, clerical, etc.
- Costs of certain direct labor - employees not utilized for the
manufacturing of Product, such as training, downtime and general
duties.
- Indirect Materials - supplies and chemicals which are used in the
manufacturing process and are not assigned to specific Product but
are included in manufacturing overhead costs. Includes supplies
for which direct assignment to Product is not practical.
<PAGE>
- Utilities - expenses incurred for communications, fuel, electricity
and water in providing power for production and other plant
equipment.
- Maintenance and repairs - amount of expense incurred in-house or
purchased to provide services for plant maintenance and repairs of
facilities and equipment.
- Other services - purchased outside services and rentals, such as the
cost of security, ground maintenance, etc.
- Depreciation of plant and equipment utilizing the straight-line
method of calculation.
- Insurance - cost of comprehensive and other insurance necessary for
the safeguard of manufacturing plant and equipment.
- Taxes - expense incurred for taxes on real and personal property
(manufacturing site, buildings and the fixed assets of equipment,
furniture and fixtures, etc.). If manufacturing site includes
other operations (marketing, R&D, etc.), taxes are allocated to
manufacturing on the basis of total real and personal property.
- Cost of manufacturing service departments such as (where applicable):
- Packaging Engineering
- Manufacturing Maintenance
- Industrial Engineering
- Receiving and Warehousing
- Production Scheduling
- Inventory Scheduling
- Plant Materials management
- Central Weigh
- Manufacturing Administration
- Purchasing
- Accounting
- Allocated costs of services provided to manufacturing including:
(where applicable):
- Cafeteria
- Personnel Operations
- Health and Safety Services
- Division Engineering and Operations Services
- Plant Services (housekeeping)
- Manufacturing Information Services
- Plant Power
- Office of VP Manufacturing
Various basis are used for allocating these costs to manufacturing operating
departments including head count, square feet, metered utilities use,
estimated services rendered, EDP computer hours, etc.
<PAGE>
4. Quality Assurance Costs - direct labor and indirect costs for Quality
Assurance departments' testing and approving materials used in manufac-
turing and completed manufacturing batches and finished Product. This
includes all manufacturing in-process testing and testing of finished
materials. Excluded from Product costs are QA costs related to researchd
and development, stability testing, etc.
The following are not included in manufacturing costs:
a) Inventory Carrying Costs
b) Regulatory Affairs costs
c) Pilot plant costs - research batches and other similar costs prior
to turnover to manufacturing. This excludes commercial goods
produced by a research facility.
d) Costs incurred for special projects to establish and certify new
production processes, batch sizes, product line improvements and
new vendor certification of equipment and primary materials
components.
e) Manufacturing start-up costs and initial one-time extraordinary
manufacturing costs incurred prior to plant operations and
achievement of a normal production activity level. Includes costs
training, testing, qualification/validation of new equipment and
facilities and initial trial batches.
f) Significant idle capacity is eliminated from factory overhead and
Product cost.
g) Shipping and other distribution costs.
h) Product liability and/or business interruption insurance expenses.
<PAGE>
Exhibit B
[REDACTED]
Product Specifications
<PAGE>
Exhibit C
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ICN PHARMACEUTICALS, INC.
AND
SCHERING-PLOUGH CORPORATION
July 28, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
1. Purchase and Sale of Shares............................................-1-
1.1 Purchase of Shares............................................-1-
1.2 Closing Dates; Delivery.......................................-2-
2. Representations and Warranties of the Company..........................-3-
2.1 Organization and Corporate Power..............................-3-
2.2 Authorization.................................................-3-
2.3 Capitalization................................................-4-
2.4 Subsidiaries..................................................-4-
2.5 Financial Statements..........................................-4-
2.6 Absence of Undisclosed Liabilities............................-5-
2.7 Absence of Certain Developments...............................-5-
2.8 Title to Properties...........................................-5-
2.9 Tax Matters...................................................-5-
2.10 Intellectual Property.........................................-5-
2.11 Effect of Transactions........................................-6-
2.12 No Governmental Consent or Approval Required..................-6-
2.13 Litigation....................................................-7-
2.14 Securities Laws...............................................-7-
2.15 Business......................................................-7-
2.16 Brokerage.....................................................-8-
2.17 Insurance.....................................................-8-
2.18 Environmental and Safety Laws.................................-8-
2.19 Retirement Obligations, etc...................................-8-
2.20 Investment Company............................................-8-
2.21 Registration Rights...........................................-8-
2.22 Employees.....................................................-8-
2.23 Absence of Certain Business Practices.........................-9-
2.24 Disclosure....................................................-9-
3. Representations and Warranties of Schering and Other
Agreements.............................................................-9-
3.1 Representations and Warranties................................-9-
3.2 Further Provisions Regarding Disposition.....................-12-
3.3 Legends......................................................-12-
4. Conditions to Schering's Obligations at Closing.......................-12-
4.1 Initial Milestone Closing....................................-12-
4.2 U.S. Milestone Closing ......................................-14-
4.3 EU Milestone Closing.........................................-15-
5. Conditions of the Company's Obligations at Closing....................-16-
5.1 Initial Milestone Closing....................................-16-
5.2 U.S. Milestone Closing.......................................-17-
5.3 EU Milestone Closing.........................................-18-
<PAGE>
6. Registration of Common Stock; Covenants of the Company;
Other Agreements......................................................-18-
6.1 Definitions..................................................-18-
6.2 Demand Registration..........................................-19-
6.3 Piggyback Registration.......................................-21-
6.4 Registration Expenses........................................-23-
6.5 Registration Procedures......................................-23-
6.6 Form S-3 Registration........................................-25-
6.7 Indemnification..............................................-26-
6.8 Reports under Exchange Act...................................-29-
6.9 Transferability..............................................-30-
6.10 Cross-Default................................................-30-
6.11 Limitation of Liability......................................-30-
7. Miscellaneous.........................................................-30-
7.1 Survival of Warranties.......................................-30-
7.2 Incorporation by Reference...................................-31-
7.3 Parties in Interest..........................................-31-
7.4 Amendments and Waivers.......................................-31-
7.5 Governing Law................................................-31-
7.6 Notices......................................................-31-
7.7 Counterparts.................................................-32-
7.8 Effect of Headings...........................................-32-
7.9 Entire Agreement.............................................-32-
7.10 Publicity....................................................-32-
7.11 Severability.................................................-32-
</TABLE>
<PAGE>
1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made as of this 28th
day of July, 1995, by and between ICN Pharmaceuticals, Inc., a Delaware
corporation (the "Company") and Schering-Plough Corporation, a New Jersey
corporation ("Schering").
RECITAL
The Company and Schering are entering into this Agreement as an
inducement for the Company to enter into that certain Exclusive License and
Supply Agreement dated of even date herewith (the "License Agreement"). Pursuant
to this Agreement, Schering intends to invest in the Company and the proceeds of
such investment will be used by the Company for general corporate purposes.
Other than the right of Schering to vote its shares of Company common stock as
Schering deems appropriate, nothing contained in this Agreement is intended to
confer, or be deemed to confer, on Schering the power to direct, influence or
control the management, policies or operations of the Company.
THE PARTIES AGREE AS FOLLOWS:
1. Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement and on the basis of the representations and warranties set forth
herein, the Company agrees to sell to Schering, and Schering agrees to purchase
from the Company, shares of the Company's common stock (the "Common Stock"), as
set forth below. The shares of Common Stock being purchased hereunder are
hereinafter referred to as the "Shares."
1.1 Purchase of Shares.
(a) On the Initial Milestone Closing Date (as defined below), the
Company shall sell to Schering and Schering shall purchase from the Company, for
a total consideration of [REDACTED], that number of Shares which equals (A)
[REDACTED] divided by (B) the average closing price of the Common Stock as
quoted on the New York Stock Exchange ("NYSE") for the 20 trading days ending on
the day immediately preceding the Initial Milestone Closing Date (or, if a stock
split or recapitalization occurred during such 20 day trading day period, then
for the 20 trading day period ending on the date of such stock split or
recapitalization).
(b) On the U.S. Milestone Closing Date (as defined below), the Company
shall sell to Schering and Schering shall purchase from the Company, for a total
consideration of [REDACTED], that number of Shares which equals (A) [REDACTED]
divided by (B) the average closing price of the Common Stock as quoted on the
NYSE for the 20 trading days ending on the day immediately preceding the U.S.
Milestone Closing Date (or, if a stock split or recapitalization occurred during
such 20 trading day period period, then for the 20 trading day period ending on
the date of such stock split or recapitalization).
(c) On the EU Milestone Closing Date (as defined below), the Company
shall sell to Schering and Schering shall purchase from the Company, for a total
consideration of [REDACTED] that number of Shares which equals (A) [REDACTED]
divided by (B) the lower of (i) [REDACTED] (adjusted for stock splits,
recapitalizations, reclassifications or similar events occurring after the date
hereof and prior to the EU Milestone Closing Date) or (ii) the average closing
price of the Common Stock as quoted on the NYSE for the 20 trading day period
ending on the day immediately preceding the EU Milestone Closing Date (or, if a
stock split or recapitalization occurred during such 20 trading day period, then
for the 20 trading day period ending on the date of such stock split or
recapitalization).
<PAGE>
2
(a) Within 30 days following the satisfaction of the conditions set
forth in Section 4.1 below, the closing of the purchase and sale of Shares
hereunder as set forth in Section 1.1(a) above (the "Initial Milestone Closing")
shall be held at the offices of Schering-Plough Corporation (or such other place
as the parties shall mutually agree) at such time as the parties shall mutually
agree (the date of the Initial Milestone Closing is referred to herein as the
"Initial Milestone Closing Date"). At the Initial Milestone Closing, the Company
shall deliver to Schering a certificate or certificates, registered in
Schering's name, representing the Shares purchased at the Initial Milestone
Closing, and Schering shall pay the total consideration for such Shares by wire
transfer in immediately available funds to an account designated by the Company.
(b) Within 30 days following the satisfaction of the conditions set
forth in Section 4.2 below, the closing of the purchase and sale of Shares
hereunder as set forth in Section 1.1(b) above (the "U.S. Milestone Closing")
shall be held at the offices of Schering-Plough Corporation (or such other place
as the parties shall mutually agree) at such time as the parties shall mutually
agree (the date of the U.S. Milestone Closing is referred to herein as the "U.S.
Milestone Closing Date"). At the U.S. Milestone Closing, the Company shall
deliver to Schering a certificate or certificates, registered in Schering's
name, representing the Shares purchased at the U.S. Milestone Closing, and
Schering shall pay the total consideration for such Shares by wire transfer in
immediately available funds to an account designated by the Company.
1.2 Closing dates; Delivery.
(c) Within 30 days following the satisfaction of the conditions set
forth in Section 4.3 below, the closing of the purchase and sale of Shares
hereunder as set forth in Section 1.1(c) above (the "EU Milestone Closing")
shall be held at the offices of Schering-Plough Corporation (or such other place
as the parties shall mutually agree) at such time as the parties shall mutually
agree (the date of the EU Milestone Closing is referred to herein as the "EU
Milestone Closing Date"). At the EU Milestone Closing, the Company shall deliver
to Schering a certificate or certificates, registered in Schering's name,
representing the Shares purchased at the EU Milestone Closing, and Schering
shall pay the total consideration for such Shares by wire transfer in
immediately available funds to an account designated by the Company.
<PAGE>
3
2. Representations and Warranties of the Company. Company hereby
represents and warrants to Schering that:
2.1 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business as a foreign corporation in
each jurisdiction where failure to so qualify would have a Material Adverse
Effect on the Company. For purposes of this Agreement, a "Material Adverse
Effect" or a "Material Adverse Change" shall mean, with respect to the Company,
any adverse effect or change in the condition (financial or other), business,
results of operations, assets, liabilities or operations of the Company or on
the ability of the Company to consummate any of the transactions contemplated
hereby, or any event or condition that would, with or without the passage of
time, constitute a "Material Adverse Effect" or "Material Adverse Change." The
Company has full power and authority to own its property, to carry on its
business as presently conducted and to carry out the transactions contemplated
hereby. The copies of the Certificate of Incorporation and Bylaws of the
Company, as amended to date, which have been furnished to Schering by the
Company, are correct and complete.
2.2 Authorization. The Company has full power to execute, deliver and
perform this Agreement and each other agreement entered into by the Company in
connection with this Agreement. Each such agreement has been duly executed and
delivered by the Company and is the legal, valid and, assuming due execution by
the other parties hereto and thereto, binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors, rights generally, and to general equitable principles. The
execution, delivery and performance of this Agreement, including the sale,
issuance and delivery of the Shares and each other agreement entered into by the
Company in connection with this Agreement, has been duly authorized by all
necessary corporate action of the Company.
<PAGE>
4
2.3 Capitalization. The entire authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, of which 29,188,829 shares are
issued and outstanding, and 1,000,000 shares of Series A Preferred Stock, none
of which are issued and outstanding. The shares of Common Stock outstanding are
duly authorized, validly issued and outstanding, fully paid and nonassessable,
and were issued in compliance with all applicable federal and state securities
laws. No shares of Common Stock are held in the Company's treasury. When issued
in accordance with the terms of this Agreement, the Shares will be duly
authorized, validly issued and outstanding, fully paid and nonassessable, free
of any preemptive rights or rights of first refusal and will be issued in
compliance with all applicable federal and state securities laws. Except as
disclosed in the Financial Statements and SEC Filings (each as defined below),
there are no outstanding warrants, rights of first refusal, options or other
rights to purchase or acquire, or exchangeable for or convertible into, any
shares of Common Stock. The Company has reserved 5,333,000 shares of Common
Stock under its stock option plans. There are no preemptive rights with respect
to the issuance or sale by the Company of any of its securities. Upon
consummation of the transactions contemplated hereby, Schering will acquire good
and valid title to the Shares, free and clear of any encumbrances, liens,
claims, charges or assessments of any nature whatsoever.
2.4 Subsidiaries. The Company has no subsidiaries, except as set forth
in Schedule 2.4.
2.5 Financial Statements. The Company has delivered to Schering a copy
of the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 (the "1994 10-K"), containing audited balance sheets, statements of
operations and cash flows for the Company for the fiscal years ended December
31, 1994, December 31, 1993, and December 31, 1992 (the "Financial Statements")
and copies of the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1994, June 30, 1994, September 30, 1994 and March 31, 1995
(collectively, together with the 1994 10-K, the "SEC Filings"). The Financial
Statements are complete and correct in all matters and respects, are in
accordance with the books and records of the Company, have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly present the financial position of the Company as of each such date
and the results of operations for each such period then ended.
<PAGE>
5
2.6 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or stated in the SEC Filings and the Financial Statements, and except
for liabilities arising in the ordinary course of its business and consistent
with past practice, and liabilities not required to be set forth in the
Financial Statements, the Company has no material debts, liabilities or
obligations of any nature, whether accrued, contingent or absolute, assigned or
otherwise, or whether due or to become due.
2.7 Absence of Certain Developments. Since January 1, 1995, except as
disclosed in the Financial Statements, there has not been (a) any Material
Adverse Change with respect to the Company, (b) any declaration, setting aside
or payment of any dividend or other distribution with respect to the capital
stock of the Company, (c) loss, destruction or damage to any property of the
Company, whether or not insured, which had or may have a Material Adverse Effect
on the Company, (d) any issuance of any stock, bonds or other securities of the
Company or options, warrants or rights or agreements or commitments to purchase
or issue such securities or grant such options, warrants or rights, or (e) any
change in the accounting methods or practices by the Company.
2.8 Title to Properties. Except as disclosed in the Financial
Statements, the Company has good and marketable title to, or has a valid
leasehold interest in, or a valid license for, all of the material properties
and assets reflected in the Financial Statements, free and clear of all
mortgages, security interests, liens, restrictions or encumbrances other than
(i) the lien of current taxes not yet due and payable, and (ii) possible minor
liens and encumbrances which do not in any case, individually or in the
aggregate, materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and would not result in the
occurrence of a Material Adverse Change, and which have not arisen otherwise
than in the ordinary course of business.
2.9 Tax Matters. The provisions for taxes in the Financial Statements
are sufficient for the payment of all accrued and unpaid federal, state, county
and local taxes of the Company.
2.10 Intellectual Property
(a) The Company has good title to and ownership of, free and clear of
all liens, claims and encumbrances of any nature, or a valid license to, all
patents, patent rights, patent applications, inventions, trademarks, service
marks, trade names, copyrights and information, proprietary rights and processes
necessary to the proper conduct of its business as described in the SEC Filings
and the Financial Statements (the "Proprietary Rights"); and (ii) to the best
knowledge of the Company, such business does not conflict with or constitute an
infringement of the rights of others.
(b) The Company has not received any communications alleging that, and
has no knowledge that the Company has violated or, by conducting its business,
would violate any of the patents, patent applications, inventions, trademarks,
service marks, trade names, copyrights or trade secrets, information,
proprietary rights or processes of any other person or entity.
<PAGE>
6
(c) No other firm, corporation, association or person (i) has notified
the Company that such firm, corporation, association or person is claiming any
ownership of or right to use any of the Proprietary Rights or (ii) to the best
of the Company's knowledge, is infringing upon any such Proprietary Rights in
any way that could reasonably be expected to have a Material Adverse Effect on
the Company.
2.11 Effect of Transactions. The execution, delivery and performance
of this Agreement and the transactions contemplated hereby, and compliance with
the provisions hereof by the Company, do not and will not, with or without the
passage of time or the giving of notice or both, (a) violate, in any material
respect, any provision of law, statute, rule or regulation or any ruling, writ,
injunction, order, judgment or decree of any court, administrative agency or
other governmental body or (b) conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default (or give rise to
any right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company under the Certificate of Incorporation or
Bylaws, as amended to date, of the Company or any material note, indenture,
mortgage, lease, agreement, contract, purchase order or other material
instrument, document or agreement to which the Company is a party or by which it
or any of its properties or assets is bound or affected, except as would not
have a Material Adverse Effect on the Company.
2.12 No Governmental Consent or Approval Required. Based in part on
the representations made by Schering in Section 3 of this Agreement, no
authorization, consent, approval or other order of, declaration to, or
registration, qualification, designation or filing with, any federal, state or
local governmental agency or body is required for or in connection with the
valid and lawful authorization, execution and delivery by the Company of this
Agreement or any other agreement entered into by the Company in connection with
this Agreement, and the consummation of the transactions contemplated hereby or
thereby, or for or in connection with the valid and lawful authorization,
issuance, sale and delivery of the Shares other than the qualification (or
taking of such action as may be necessary to secure an exemption from
qualification if available) of the offer and sale of the Shares under the
applicable state securities laws, which filings and qualifications, if required,
will be accomplished in a timely manner so as to comply with such qualification
or exemption from qualification requirements.
<PAGE>
7
2.13 LITIGATION. Except as disclosed in the SEC Filings, there is no
claim, arbitration, action, suit, proceeding, investigation or inquiry pending,
or to the best knowledge of the Company, threatened against the Company, which
questions the validity of this Agreement or any other agreement entered into by
the Company in connection with this Agreement or the right of the Company to
enter into any such agreements or to consummate the transactions contemplated
hereby or thereby, or which might result, either individually or in the
aggregate, in any Material Adverse Effect on the Company, or any change in the
current equity ownership of the Company. The information described on Schedule
2.13 is not material to the business, assets or operations of the Company or its
subsidiaries (taken as a whole), no Current Report on Form 8-K need be filed
with the Securities and Exchange Commission (the "SEC") to report such
information, and such information will be disclosed in the Company's Quarterly
Report on Form 10-Q for the second quarter to be filed with the SEC on or before
August 14, 1995. The Company is not a party to, or subject to the provisions of,
any order, writ, injunction, judgment or decree of any court or governmental
agency or instrumentality which would have a Material Adverse Effect on the
Company.
2.14 SECURITIES LAWS. Assuming that Schering's representations and
warranties contained in Section 3 of this Agreement are true and correct, the
offer, issuance and sale of the Shares are and will be exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as amended (the "1933 Act"), and have been registered or qualified (or are
exempt from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
2.15 BUSINESS. The Company has all franchises, permits, governmental
licenses and other governmental rights and privileges necessary to permit it to
own its properties and to conduct its present business or its business as
proposed to be conducted, except where the failure to hold such franchises,
permits, governmental licenses or other rights would not have a Material Adverse
Effect on the Company.
<PAGE>
8
2.16 BROKERAGE. There are no claims for brokerage commissions or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement made by or on behalf of
the Company and the Company agrees to indemnify and hold Schering harmless
against any damages incurred as a result of any such claim.
2.17 INSURANCE. The Company maintains in full force such types and
amounts of insurance issued by issuers of recognized responsibility insuring the
Company, with respect to its liability, workers' compensation, business and
properties, in such amounts and against such losses and risks as are adequate
against risks usually insured against by other corporations, entities or persons
operating similar businesses and properties.
2.18 ENVIRONMENTAL AND SAFETY LAWS. To the best of the Company's
knowledge, except with respect to the Portland facility as previously described
to Schering (which to the best knowledge of the Company will not have a Material
Adverse Effect on the Company), the Company is in substantial compliance with
every applicable statute, law or regulation relating to the environment or
occupational health and safety, and no material expenditures are required in
order to comply with any such existing statute, law or regulation, except in
each case as would not have a Material Adverse Effect on the Company.
2.19 RETIREMENT OBLIGATIONS, ETC. The Company does not have any
Employee Benefit Plan, as defined in the Employee Retirement Income Security Act
of 1974 other than as disclosed in the SEC Filings or the Financial Statements.
2.20 INVESTMENT COMPANY. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended and will
not, as a result of the transactions contemplated hereby, become an "investment
company."
2.21 REGISTRATION RIGHTS. Except with respect to the obligations of
the Company to register its securities on Form S-8 in connection with its stock
option plans, the Company is not under any contractual obligation to register
any of its currently outstanding securities or any of its securities that may
hereafter be issued.
2.22 EMPLOYEES. The Company has complied in all material respects with
all applicable state and federal laws and regulations respecting employment and
employment practices, terms and conditions of employment, wages and hours and
other laws related to employment.
<PAGE>
9
2.23 ABSENCE OF CERTAIN BUSINESS PRACTICES. To the best of the
Company's knowledge, none of the Company, or any agent of the Company, or any
other person or entity acting on behalf of or associated with the Company,
acting alone or together, has: (a) received, directly or indirectly, any
rebates, payments, commissions, promotional allowances or any other economic
benefits, regardless of their nature or type, from any customer, supplier,
employee or agent of any customer or supplier, official or employee of any
government (domestic or foreign) or other person; or (b) directly or indirectly,
given or agreed to give any money, gift or similar benefit to any customer,
supplier, employee or agent of any customer or supplier, official or employee of
any government (domestic or foreign), or any political party or candidate for
office (domestic or foreign) or other person or entity who was, is or may be in
a position to help or hinder the business of the Company (or assist the Company
in connection with any actual or proposed transaction) which (i) may subject the
Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not continued in the future, may have a
Material Adverse Effect on the Company or subject the Company to suit or penalty
in any private or governmental litigation or proceeding. The Company's existing
accounting controls and procedures are sufficient to cause it to materially
comply with the Foreign Corrupt Practices Act of 1977, as amended ("FCPA"), in
all areas, except as to operations in the former country of Yugoslavia where, to
the best of the Company's knowledge (without the benefit of an internal audit),
it believes that its existing accounting controls and procedures are sufficient
to cause it to materially comply with the FCPA.
<PAGE>
10
2.24 DISCLOSURE. The Company has provided Schering with all the
information that it has requested for deciding whether to purchase the Shares.
Neither the SEC Filings, nor the representations and warranties of the Company
contained in this Agreement and schedules delivered in connection herewith,
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein or therein, at the time and in light of
the circumstances under which they were made, not misleading.
3. REPRESENTATIONS AND WARRANTIES OF SCHERING AND OTHER AGREEMENTS.
3.1 REPRESENTATIONS AND WARRANTIES. Schering hereby represents and
warrants to the Company that:
(a) ORGANIZATION AND CORPORATE POWER. Schering is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and is qualified to do business as a foreign corporation in each
jurisdiction where failure to so qualify would have a Material Adverse Effect on
Schering. Schering has full power and authority to own its property, to carry on
its business as presently conducted and to carry out the transactions
contemplated hereby.
(b) AUTHORIZATION. Schering has full power to execute, deliver and
perform this Agreement and each other agreement entered into by Schering in
connection with this Agreement. Each such agreement has been duly executed and
delivered by Schering and is the legal, valid and, assuming due execution by the
other parties hereto and thereto, binding obligation of Schering, enforceable
against Schering in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting creditors,
rights generally, and to general equitable principles. The execution, delivery
and performance of this Agreement and each other agreement entered into by
Schering in connection with this Agreement, has been duly authorized by all
necessary corporate action of Schering.
(c) NO GOVERNMENTAL CONSENT OR APPROVAL REQUIRED. No authorization,
consent, approval or other order of, declaration to, or registration,
qualification, designation or filing with, any federal, state or local
governmental agency or body is required for or in connection with the valid and
lawful authorization, execution and delivery by Schering of this Agreement or
any other agreement entered into by Schering in connection with this Agreement,
and the consummation of the transactions contemplated hereby or thereby.
(d) LITIGATION. Except as disclosed in Schering's filings with the
Securities and Exchange Commission, there is no claim, arbitration, action,
suit, proceeding or investigation pending, or to the best knowledge of Schering,
threatened against Schering, which questions the validity of this Agreement or
any other agreement entered into by Schering in connection with this Agreement
or the right of Schering to enter into any such agreements or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any Material Adverse Effect on Schering.
Schering is not a party to, or subject to the provisions of, any order, writ,
injunction, judgment or decree of any court or governmental agency or
instrumentality which would have a Material Adverse Effect on Schering.
<PAGE>
11
(e) PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares to be received by
Schering will be acquired for investment for Schering's own account, not as a
nominee or agent and not with a view to the distribution of any portion thereof.
Schering has no present intention of selling, granting any participation in, or
otherwise distributing the Shares. Schering does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participation to such person or to any third person, with respect to any
of the Shares.
(f) RESTRICTIONS ON DISPOSITION. Schering covenants that in no event
will it dispose of any of the Shares (other than pursuant to Rule 144
promulgated under the 1933 Act ("Rule 144") or pursuant to a registration
statement filed with the Securities and Exchange Commission (the "SEC") pursuant
to the 1933 Act) unless and until (i) Schering shall have notified the Company
of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition; and (ii) if
requested by the Company, Schering shall have furnished the Company with an
opinion of Schering's counsel, reasonably satisfactory in form and substance to
the Company and the Company's counsel, to the effect that (a) such disposition
will not require registration under the 1933 Act or (b) appropriate action
necessary for compliance with the 1933 Act and any applicable state, local or
foreign law has been taken. The restrictions on transfer imposed by this Section
3.1(f) shall cease and terminate as to the Shares when: (i) such securities
shall have been effectively registered under the 1933 Act and sold by the holder
thereof in accordance with such registration; or (ii) an opinion of the kind
described in the preceding sentence states that all future transfers of such
securities by the holder thereof would be exempt from registration under the
1933 Act. Each certificate evidencing the Shares shall bear an appropriate
restrictive legend as set forth in Section 3.3 below, except that such
certificate shall not be required to bear such legend after a transfer thereof
if the transfer was made in compliance with Rule 144 or pursuant to a
registration statement or, if the opinion of counsel referred to above is issued
and provides that such legend is not required in order to establish compliance
with any provisions of the 1933 Act.
(g) RECEIPT OF INFORMATION. Schering has been furnished access to the
business records of the Company and all such additional information and
documents Schering has requested and has been afforded an opportunity to ask
questions of and receive answers from representatives of the Company concerning
the terms and conditions of this Agreement and the purchase of the Shares.
(h) BROKERAGE. There are no claims for brokerage commissions or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Schering, and Schering agrees to indemnify and hold the Company
harmless against any damages incurred as a result of any such claims.
<PAGE>
12
3.2 FURTHER PROVISIONS REGARDING DISPOSITION.
(a) TRANSFER TO AFFILIATES. Notwithstanding the provisions of Section
3.1(f) above, no registration statement or opinion of counsel shall be necessary
for a transfer by Schering of the Shares to a subsidiary, shareholder or
affiliate of Schering, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if such transferee were Schering hereunder.
(b) NEW CERTIFICATES. Whenever the restrictions imposed by Section
3.1(f) shall terminate as herein provided, the holder of the securities as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense, one or more new certificates not bearing restrictive
legends and not containing any reference to the restrictions imposed by this
Agreement.
3.3 LEGENDS. Subject to Sections 3.1(f) and 3.2(b), the certificates
evidencing the Shares shall bear substantially the following legends:
(a) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.
(b) Any legend required by the laws of any other applicable
jurisdiction.
4. CONDITIONS TO SCHERING'S OBLIGATIONS AT CLOSING.
4.1 INITIAL MILESTONE CLOSING. The obligation of Schering under
Section 1.1(a) of this Agreement to purchase the Shares at the Initial Milestone
Closing is subject to the fulfillment on or before the Initial Milestone Closing
of each of the following conditions:
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13
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 above shall be true on and as of the
Initial Milestone Closing Date with the same effect as though such
representations and warranties had been made on and as of the Initial Milestone
Closing Date.
(b) PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Initial
Milestone Closing Date.
(c) QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required for consummation of the transactions contemplated by
this Agreement shall have been duly obtained, including, without limitation, the
expiration or earlier termination of any notice and waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and shall be
effective on and as of the Initial Milestone Closing Date.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Initial Milestone Closing
and all documents incident thereto shall be reasonably satisfactory in form and
substance to Schering and Schering's counsel, and they shall have received all
such counterpart original and certified or other copies of such documents as
they may reasonably request.
(e) OTHER AGREEMENTS. The License Agreement shall have been executed
and delivered by the Company.
(f) OPINION OF COMPANY COUNSEL. Schering shall have received from
counsel for the Company an opinion addressed to Schering substantially covering
the matters set forth in Sections 2.1, 2.2, 2.3 (as to the due authorization,
valid issuance, full payment and nonassessability of the Shares), 2.12, 2.13 and
2.14 (as to federal law).
(g) COMPLIANCE CERTIFICATE. The Chief Executive Officer of the Company
shall deliver to Schering at the Initial Milestone Closing a certificate
certifying that the conditions specified in Sections 4.1(a), 4.1(b), and 4.1(c)
hereof have been fulfilled and stating that there has been no Material Adverse
Change in the Company since January 1, 1995.
(h) APPROVAL. This Agreement, the License Agreement and the
transactions contemplated hereby and thereby shall have been approved by the
board of directors of Schering.
(i) [REDACTED]
<PAGE>
14
4.2 U.S. MILESTONE CLOSING. The obligation of Schering under Section
1.1(b) of this Agreement to purchase the Shares at the U.S. Milestone Closing is
subject to the fulfillment of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the U.S.
Milestone Closing Date with the same effect as though such representations and
warranties had been made on and as of the U.S. Milestone Closing Date.
(b) PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the U.S. Milestone
Closing Date.
(c) QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required for consummation of the transactions contemplated by
this Agreement shall have been duly obtained, including, without limitation, the
expiration or earlier termination of any notice and waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and shall be
effective on and as of the U.S. Milestone Closing Date.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the U.S. Milestone Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Schering and Schering's counsel, and they shall have received all
such counterpart original and certified or other copies of such documents as
they may reasonably request.
(e) OPINION OF COMPANY COUNSEL. Schering shall have received from
counsel for the Company an opinion addressed to Schering substantially covering
the matters set forth in Sections 2.1, 2.2, 2.3 (as to the due authorization,
valid issuance, full payment and nonassessability of the Shares to be purchased
at the U.S. Milestone Closing), 2.12, 2.13 and 2.14 (as to federal law).
(f) COMPLIANCE CERTIFICATE. The Chief Executive Officer of the Company
shall deliver to Schering at the U.S. Milestone Closing a certificate certifying
that the conditions specified in Sections 4.2(a), 4.2(b), and 4.2(c) hereof have
been fulfilled and stating that there has been no Material Adverse Change in the
Company since the Initial Closing.
(g) LICENSE AGREEMENT MILESTONE. The earlier of (i) the Regulatory
Approval of the Product with Minimum Labelling (as defined in the License
Agreement) by the United States Food and Drug Administration, or (ii) the date
on which, following any 12 month period, the royalties for that 12 month period
due to the Company on sales in the United States after Regulatory Approval (as
defined in the License Agreement) in the United States exceed [REDACTED], shall
have occurred.
(h) APPROVAL. This Agreement, the License Agreement and the
transactions contemplated hereby and thereby shall have been approved by the
board of directors of Schering.
<PAGE>
15
4.3 EU MILESTONE CLOSING. The obligation of Schering under Section
1.1(c) of this Agreement to purchase the Shares at the EU Milestone Closing is
subject to the fulfillment of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the date of the
EU Milestone Closing Date with the same effect as though such representations
and warranties had been made on and as of the date of the EU Milestone Closing
Date.
(b) PERFORMANCE. The Company shall have performed and complied with
all agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the EU Milestone
Closing Date.
(c) QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required for consummation of the transactions contemplated by
this Agreement shall have been duly obtained, including, without limitation, the
expiration or earlier termination of any notice and waiting period under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and shall be
effective on and as of the EU Milestone Closing Date.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the EU Milestone Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Schering and Schering's counsel, and they shall have received all
such counterpart original and certified or other copies of such documents as
they may reasonably request.
(e) OPINION OF COMPANY COUNSEL. Schering shall have received from
counsel for the Company an opinion addressed to Schering substantially covering
the matters set forth in Sections 2.1, 2.2, 2.3 (as to the due authorization,
valid issuance, full payment and nonassessability of the Shares to be purchased
at the EU Milestone Closing), 2.12, 2.13 and 2.14 (as to federal law).
(f) COMPLIANCE CERTIFICATE. The Chief Executive Officer of the Company
shall deliver to Schering at the EU Milestone Closing a certificate certifying
that the conditions specified in Sections 4.3(a), 4.3(b), and 4.3(c) hereof have
been fulfilled and stating that there has been no Material Adverse Change in the
Company, since the Initial Closing.
(g) LICENSE AGREEMENT MILESTONE. The Regulatory Approval of the
Product in the European Union (including, as applicable, the CPMP or the
European Agency for the Evaluation of Medicinal Products) with Minimum Labelling
(as defined in the License Agreement) in at least [REDACTED] of the [REDACTED],
shall have occurred.
(h) APPROVAL. This Agreement, the License Agreement and the
transactions contemplated hereby and thereby shall have been approved by the
board of directors of Schering.
<PAGE>
16
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
5.1 INITIAL MILESTONE CLOSING. The obligations of the Company under
Section 1.1(a) of this Agreement are subject to the fulfillment on or before the
Initial Milestone Closing of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Schering contained in Section 3 shall be true on and as of the Initial
Milestone Closing Date with the same effect as though such representations and
warranties had been made on and as of the Initial Milestone Closing Date.
(b) PERFORMANCE. Schering shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Initial
Milestone Closing Date.
(c) QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required for consummation of the transactions contemplated by
this Agreement shall have been duly obtained, including, without limitation, the
expiration or earlier termination of any notice and waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and shall be
effective on and as of the Initial Milestone Closing Date.
(d) OTHER AGREEMENTS. The License Agreement shall have been executed
and delivered by Schering-Plough Ltd.
(e) OPINION OF SCHERING COUNSEL. The Company shall have received from
counsel for Schering an opinion addressed to the Company covering the matters
set forth in Sections 3.1(a), (b), (c) and (d).
<PAGE>
17
(f) COMPLIANCE CERTIFICATE. An officer of Schering shall deliver to
the Company at the Closing a certificate certifying that the conditions
specified in Sections 5.1(a), 5.1(b), and 5.1(c) hereof have been fulfilled.
(g) APPROVAL. This Agreement, the License Agreement and the
transactions contemplated hereby and thereby shall have been approved by the
board of directors of the Company.
5.2 U.S. MILESTONE CLOSING. The obligations of the Company under
Section 1.1(b) of this Agreement are subject to the fulfillment on or before the
U.S. Milestone Closing of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Schering contained in Section 3 shall be true on and as of the U.S. Milestone
Closing Date with the same effect as though such representations and warranties
had been made on and as of the U.S. Milestone Closing Date.
(b) PERFORMANCE. Schering shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the U.S. Milestone
Closing Date.
(c) QUALIFICATIONS. ALL AUTHORIZATIONS, APPROVALS, OR PERMITS, IF ANY,
OF ANY GOVERNMENTAL AUTHORITY OR REGULATORY BODY OF THE UNITED STATES OR OF ANY
STATE THAT ARE REQUIRED FOR CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, SHALL HAVE BEEN DULY OBTAINED, INCLUDING, WITHOUT LIMITATION,
THE EXPIRATION OR EARLIER TERMINATION OF ANY NOTICE AND WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND SHALL BE
EFFECTIVE ON AND AS OF THE U.S. MILESTONE CLOSING DATE.
5.3 EU MILESTONE CLOSING. The obligations of the Company under Section
1.1(c) of this Agreement are subject to the fulfillment on or before the EU
Milestone Closing of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Schering contained in Section 3 shall be true on and as of the EU Milestone
Closing Date with the same effect as though such representations and warranties
had been made on and as of the date of the EU Milestone Closing Date.
<PAGE>
18
(b) PERFORMANCE. Schering shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the EU Milestone
Closing Date.
(c) QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required for consummation of the transactions contemplated by
this Agreement, shall have been duly obtained, including, without limitation,
the expiration or earlier termination of any notice and waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and shall be
effective on and as of the EU Milestone Closing Date.
6. REGISTRATION OF COMMON STOCK; COVENANTS OF THE COMPANY; OTHER
AGREEMENTS.
6.1 DEFINITIONS. Unless the context otherwise requires, the terms
defined in this Section 6 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined.
"BOARD" means the Board of Directors of the Company.
"HOLDER" of any security means the record or beneficial owner of such
security or any permitted assignee thereof.
"PERSON" means any natural person, corporation, trust, association,
company, partnership, joint venture or other entity or any government,
governmental agency, instrumentality or political subdivision.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 Act, and the declaration for ordering of the
effectiveness of such registration statement.
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock sold
pursuant to this Agreement and (ii) any Common Stock issued or issuable (either
directly or upon the conversion of or exercise of any warrant, right or other
security) with respect to the Common Stock referred to in clause (i) above by
way of a stock dividend or stock split or in connection with a combination of
shares, reclassification, recapitalization, merger or consolidation or
reorganization; provided, however that such shares of Common Stock shall only be
treated as Registrable Securities if and so long as they have not been (x) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (y) sold in a transaction exempt from the
registration and prospectus delivery requirements of the 1933 Act pursuant to
Rule 144 thereunder so that all the transfer registrations and restrictive
legends with respect to such Common Stock are removed upon the consummation of
such sale and the Company receives an opinion of counsel for the Company (with a
copy to the seller of such Common Stock), which shall be in form and content
reasonably satisfactory to the Company, to the effect that such Common Stock in
the hands of the purchaser is freely transferable without restriction or
registration under the 1933 Act in any public or private transaction.
<PAGE>
19
6.2 DEMAND REGISTRATION.
(a) If and whenever the Company shall receive at any time after
[REDACTED] after the earlier to occur of the Initial Milestone Closing Date, the
U.S. Milestone Closing Date or the EU Milestone Closing Date hereunder, a
written request therefor from the Holders of at least 30 percent of the
Registrable Securities then outstanding, the Company agrees to prepare and file
promptly a registration statement under the 1933 Act covering the shares of
Registrable Securities which are the subject of such request and agrees to use
its best efforts to cause such registration statement to become effective as
expeditiously as possible. Upon the receipt of such request, the Company agrees
to give prompt written notice to all Holders of Registrable Securities that such
registration is to be effected. The Company agrees to include in such
registration statement such shares of Registrable Securities for which it has
received a written request to register such shares by the Holders thereof within
twenty (20) days after the receipt by the Holders of the written notice from the
Company.
(b) The Company shall be obligated to prepare, file and cause to
become effective only [REDACTED] registration statements pursuant to this
Section 6.2. A registration required to be effected by the Company pursuant to
this Section 6.2 shall not be deemed to have been effected even though a
registration statement with respect thereto has become effective (i) if, after
it has become effective, such registration is interfered with by any stop order,
injunction, or other order or requirement of the SEC or other governmental
agency or court, for any reason not attributable to the Holders initiating the
registration request hereunder (the "Initiating Holders") with respect to such
registration statement, and has not thereafter become effective or (ii) if the
conditions to closing specified in the underwriting agreement, if any, entered
into in connection with such registration are not satisfied or waived, other
than by reason of a failure on the part of the Initiating Holders with respect
to such registration statement.
<PAGE>
20
(c) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they agree to
provide the Company with the name of the managing underwriter or underwriters
(the "Managing Underwriter") that the Initiating Holders holding a majority of
the Shares to be included in the registration propose to employ, as part of
their request made pursuant to this Section 6.2, and the Company agrees to
include such information in its written notice referred to in Section 6.2(a). In
such event, the right of any Holder to registration pursuant to this Section 6.2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by the Holders of a majority of the shares of
Registrable Securities to be included in such registration and such Holder). All
Holders proposing to distribute their securities through such underwriting agree
to enter into (together with the Company) an underwriting agreement with the
underwriter or underwriters elected for such underwriting, in the manner set
forth above, provided that such underwriting agreement is in customary form and
is reasonably acceptable to the Holders of a majority of the shares of
Registrable Securities to be included in such registration.
(d) Notwithstanding the foregoing, if the Managing Underwriter of an
underwritten distribution advises the Company and the Holders of Registrable
Securities participating in such registration in writing that in its good faith
judgment the number of shares of Registrable Securities and the other securities
requested to be included in such registration exceeds the number of shares of
Registrable Securities and the other securities which can be sold in such
offering, then (i) the other securities so requested to be included in such
registration shall initially be reduced and the number of shares of Registrable
Securities so requested to be included in such registration shall subsequently
be reduced, together to that number of shares which in the good faith judgment
of the Managing Underwriter can be sold in such offering and (ii) the reduced
number of Registrable Securities to be included in the underwriting shall be
allocated pro rata among all Holders of Registrable Securities. Those
Registrable Securities which are excluded from the underwriting by reason of the
Managing Underwriter's marketing limitation shall not be included in such
registration and shall be withheld from the market by the Holders thereof for a
period not in excess of 120 days, which the Managing Underwriter reasonably
determines is necessary to effect the underwritten public offering.
<PAGE>
21
(e) Notwithstanding any other provision of this Section 6.2, if within
ten (10) days following receipt of a request to file a demand registration
statement under this Section 6.2, the Company shall furnish to Schering and the
Holders a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of the Company it would be
seriously detrimental to the Company or its shareholders for a registration
statement to be filed in the near future, then the Company's obligation to file
a registration statement under this Section 6.2 shall be deferred for a period
not to exceed three (3) months; provided, however, that the Company shall not
obtain such a deferral to file any registration statement under this Section 6.2
more than once in any 12-month period.
6.3 "PIGGYBACK" REGISTRATION
(a) Each time the Company shall determine to file a registration
statement under the 1933 Act (other than pursuant to Section 6.2 hereof and
other than on Form S-4, S-8 or a registration statement on Form S-1 covering
solely any employee benefit plan) in connection with the proposed offer and sale
for money of any of its securities either for its own account or on behalf of
any other security holder, the Company agrees to give prompt written notice of
its determination to all Holders of Registrable Securities. Upon the written
request of a Holder of any shares of Registrable Securities given within twenty
(20) days after the receipt of such written notice from the Company, the Company
agrees to cause all such Registrable Securities, the Holders of which have so
requested registration thereof, to be included in such registration statement
and to use its best efforts to cause such registration statement to become
effective under the 1933 Act, all to the extent requisite to permit the sale or
other disposition by the prospective seller or sellers of the Registrable
Securities to be so registered. In the event that the proposed registration by
the Company is, in whole or in part, an underwritten public offering of
securities of the Company, any request pursuant to this Section 6.3(a) to
register Registrable Securities may specify that such securities are to be
included in the underwriting (i) on the same terms and conditions as the shares
of Common Stock, if any, otherwise being sold through underwriters, under such
registration, or (ii) on terms and conditions comparable to those normally
applicable to offerings of Common Stock in reasonably similar circumstances in
the event that no shares of Common Stock other than Registrable Securities are
being sold through underwriters in such registration.
<PAGE>
22
(b) If the registration of which the Company gives written notice
pursuant to Section 6.3(a) is for an underwritten public offering, the Company
agrees to so advise the Holders as a part of its written notice. In such event
the right of any Holder to registration pursuant to this Section 6.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting agree to enter into (together with the
Company and the other Holders distributing their securities through such
underwriting) an underwriting agreement with the underwriter or underwriters
selected for such underwriting by the Company.
(c) Notwithstanding any other provision of this Section 6.3, if the
Managing Underwriter of an underwritten distribution advises the Company and the
Holders of the Registrable Securities requesting participation in such
registration in writing that in its good faith judgment the number of shares of
Registrable Securities and the other securities requested to be registered under
this Section 6.3 exceeds the number of shares of Registrable Securities and
other securities which can be sold in such offering, then (i) the number of
shares of Registrable Securities and other securities so requested to be
included in the offering shall be reduced to that number of shares which in the
good faith judgment of the Managing Underwriter can be sold in such offering
(except for shares to be issued by the Company in a public offering, which shall
have priority over the Registrable Securities), and (ii) such reduced number of
shares shall be allocated among all participating Holders of Registrable
Securities and holders of other securities in proportion, as nearly as
practicable, to the respective number of shares of Registrable Securities and
other securities requested to be registered held by such Holders at the time of
filing the registration statement. All Registrable Securities and other
securities which are excluded from the underwriting by reason of the Managing
Underwriters's marketing limitation and all other Registrable Securities not
originally requested to be so included shall not be included in such
registration and shall be withheld from the market by the Holders thereof for a
period, not in excess of 120 days, which the Managing Underwriter reasonably
determines is necessary to effect the underwritten public offering.
<PAGE>
23
6.4 REGISTRATION EXPENSES.
(a) The Company shall pay all expenses incurred in effecting the
registration of Registrable Securities pursuant to Section 6 including, without
limitation, all federal and state registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the Company, reasonable
fees and disbursements of one counsel for the participating Holders together,
blue sky fees and expenses, and the expense of any special audits incident to or
required by any such registration, but not including underwriting discounts,
commissions and expenses.
(b) Notwithstanding the foregoing, in the event that a registration
pursuant to Section 6.2 is requested by the Initiating Holders and such request
is withdrawn prior to the filing of a registration statement by the Company, or
such Holders cause the Company to withdraw a registration statement prior to its
effectiveness, then either (i) the Initiating Holders and other Holders
requesting inclusion of their shares in such registration shall bear pro rata
all fees, costs and expenses of the registration and preparation of the
registration statement or (ii) such requested registration shall be deemed to be
one of the registrations the Company is required to effect pursuant to Section
6.2 hereof; provided however, if at the time of the withdrawal, the Initiating
Holders and the other Holders have learned of a Material Adverse Change with
respect to the Company which was not known to such Holders at the time of their
request, then such Holders shall not be required to pay any of such registration
expenses and shall retain their rights pursuant to Section 6.2.
6.5 REGISTRATION PROCEDURES. If and whenever the Company is required
by the provisions of Section 6 to effect the registration of Registrable
Securities under the 1933 Act, the Company will, as expeditiously as possible:
(a) prepare and file with the SEC a registration statement which
includes the Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective until the distribution
described in the registration statement has been completed;
<PAGE>
24
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the 1933 Act with respect to the sale or other
disposition of Registrable Securities covered by such registration statement
whenever a Holder shall desire to sell or otherwise dispose of the same;
(c) furnish to each participating Holder (and to each underwriter, if
any, of Registrable Securities) such number of copies of a prospectus, including
a preliminary prospectus, in conformity with the requirements of the 1933 Act,
and such other documents, as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such state securities or
blue sky laws of such jurisdiction as each participating Holder shall reasonably
request and do any and all other acts and things which may be necessary under
such securities or blue sky laws to enable such Holder to consummate the public
sale or other disposition of the Registrable Securities in such jurisdictions,
except that the Company shall not for any purpose be required to consent
generally to service of process or qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) before filing the registration statement or prospectus or
amendments or supplements thereto, furnish to counsel selected by the
participating Holders copies of such documents proposed to be filed which shall
be subject to the reasonable approval of such counsel;
(f) enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the Managing Underwriter of such
offer;
(g) notify the participating Holders at any time when a prospectus
relating to any Registrable Securities covered by such registration statement is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and promptly
file such amendments and supplements as may be necessary so that, as thereafter
delivered to such Holders of such Registrable Securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and use its best
efforts to cause each such amendment and supplement to become effective;
(h) furnish at the request of the participating Holders on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to Section 6 (i) an opinion addressed to
the underwriters, if any, and to such Holders, dated such date, of the counsel
representing the Company for purposes of such registration in form and substance
as is customarily given by company counsel to the underwriters in an
underwritten public offering, and (ii) a letter dated such date addressed to the
underwriters, if any, and to such Holders, from the independent certified public
<PAGE>
25
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering; and
(i) use its best efforts to cause all such Registrable Securities to
be listed on the securities exchange, if any, or the NMS, on which the Common
Stock is then listed.
6.6 FORM S-3 REGISTRATION. In case the Company shall at any time after
[REDACTED] after the earlier to occur of the Initial Milestone Closing Date, the
U.S. Milestone Closing Date or the EU Milestone Closing Date hereunder, receive
from any Holder or Holders a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company shall:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, file a registration statement and effect
such registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders joining in such request as are
specified, in a written request given within 15 business days after receipt of
such written notice from the Company, provided, however, that the Company shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 6.6: (i) if Form S-3 is not available for such offering
by the Holders; (ii) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriters' discounts or commissions) of less
than Five Hundred Thousand Dollars ($500,000); (iii) if the Company shall
furnish to the Holders a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board, it
would be seriously detrimental to the Company and its stockholders for such Form
S-3 Registration to be effected at such time, in which event the Company shall
have the right to defer the filing of the Form S-3 Registration Statement for a
period of not more than 60 days after receipt of the request of the Holder or
Holders under this Section 6.6; provided, however, that the Company shall not
utilize this right more than once in any 12-month period; (iv) if the Company
has, within the 12-month period preceding the date of such request, already
effected two registrations on Form S-3 for the Holders pursuant to this Section
6.6; or (v) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
(c) Registrations effected pursuant to this Section 6.6 shall be
counted as demands for purposes of the number of registrations effected pursuant
to Section 6.2.
<PAGE>
26
6.7 INDEMNIFICATION. In the event Registrable Securities are
registered pursuant to this Section 6:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder of Registrable Securities which are included in a
registration statement pursuant to the provisions of this Agreement and any
underwriter (within the meaning of the 1933 Act) with respect to the Registrable
Securities, and each officer, director, employee and agent thereof and each
person, if any, who otherwise controls such Holder or underwriter (within the
meaning of the 1933 Act), against any losses, claims, damages, expenses or
liabilities, joint or several, to which they may become subject under the 1933
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
other federal or state law, or otherwise, insofar as such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue or allegedly untrue statement of any material fact
contained in the registration statement for the Registrable Securities,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, or any document incident to the
registration or qualification of any Registrable Securities, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or allegedly necessary to make the statements
therein not misleading or arise out of any violation or alleged violation by the
Company of the 1933 Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the 1933 Act, the Exchange Act or any state
securities law; and will reimburse such Holder, any underwriter, officer,
director, employee, agent or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 6.7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, expense, liability or action
if such settlement is effected without the written consent of the Company, which
shall not be unreasonably withheld, nor shall the Company be liable under this
Section 6.7(a) to such Holder, such underwriter, officer, director, employee,
agent or controlling person for any such loss, claim, damage, expense, liability
or action to the extent that it arises out of, or is based upon, an untrue
statement or allegedly untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus, final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with information furnished in writing expressly for use in connection
with such registration by such Holder, such underwriter, officer, director,
employee, agent or such controlling person.
<PAGE>
27
(b) To the extent permitted by law, each Holder of Registrable
Securities which are included in a registration statement pursuant to the
provisions of this Agreement will indemnify and hold harmless the Company, each
of its employees, agents, directors and officers, each person, if any, who
otherwise controls the Company (within the meaning of the 1933 Act), and any
underwriter (within the meaning of the 1933 Act) against any losses, claims,
damages, expenses or liabilities to which the Company or any such person or
underwriter may become subject under the 1933 Act, the Exchange Act or other
federal or state law or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions in respect thereof) arise out of, or are
based upon any untrue or allegedly untrue statement of any material fact
contained in a registration statement for the Registrable Securities, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or any document incident to the registration
or qualification of any Registrable Securities, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or allegedly necessary to make the statements therein not
misleading; in each case to the extent that such untrue statement or allegedly
untrue statement or omission or alleged omission was made in such registration
statement, preliminary prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with information furnished in writing by such
Holder expressly for use in connection with such registration; provided,
however, that the indemnity agreement contained in this Section 6.7(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage, expense,
liability or action if such settlement is effected without the written consent
of such Holder, which shall not be unreasonably withheld; and such Holder will
reimburse the Company or any such person or underwriter for any legal or other
expenses reasonably incurred by the Company or any such person or underwriter in
connection with investigating or defending such loss, claim, damage, liability,
expense or action.
<PAGE>
28
(c) Promptly after receipt by an indemnified party under this Section
6.7 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 6.7, notify the indemnifying party in writing of the commencement
thereof and generally summarize such action. The indemnifying party shall have
the right to participate in and to assume the defense thereof with counsel
mutually satisfactory to the parties. An indemnifying party shall not have the
right to direct the defense of such an action on behalf of an indemnified party
if such indemnified party has reasonably concluded that there may be defenses
available to it that are different from or additional to those available to the
indemnifying party; provided, however, that in such event, the indemnifying
party shall bear the fees and expenses of only one (1) separate counsel for all
indemnified parties. The failure to notify an indemnifying party promptly of the
commencement of any such action if prejudicial to the ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 6.7, but the omission so to notify the
indemnifying party will not relieve such party of any liability that such party
may have to any indemnified party otherwise than under this Section 6.7.
(d) To the extent permitted by law, the indemnification provided for
under this Section 6.7 will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling person (within the meaning of the 1933 Act) of such
indemnified party and will survive the transfer of any securities.
(e) If for any reason the foregoing indemnity is unavailable to, or is
insufficient to hold harmless an indemnified party, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, expenses or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, or provides a lesser sum to the indemnified party than the
amount representing such proportion as is appropriate to reflect not only the
relative benefits received by the indemnifying party on the one hand and the
indemnified party on the other but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. Notwithstanding the foregoing, no underwriter, if any, shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
<PAGE>
29
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligation of any underwriters to contribute pursuant to
this Section 6.7(e) shall be several in proportion to their respective
underwriting commitments and not joint.
6.8 REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the 1933 Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
Registrable Securities to the public without registration, and with a view to
making it possible for any such Holder to register the Registrable Securities
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available at all times, as those
terms are understood and defined in Rule 144;
(b) take such action as is necessary to enable a Holder to utilize
Form S-3 for the sale of Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the Exchange Act; and
(d) furnish to a Holder owning any Registrable Securities upon request
(i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the Exchange Act, or that it
qualifies as a registrant whose Registrable Securities may be resold pursuant to
Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
required in availing any Holder of Registrable Securities of any rule or
regulation of the SEC which permits the selling of any such Registrable
Securities without registration or pursuant to such form.
<PAGE>
30
6.9 TRANSFERABILITY. The right to cause the Company to register
Registrable Securities granted by the Company to the Holders under this
Agreement may be assigned by any Holder to a transferee or assignee of any
Registrable Securities, provided that the Company must receive written notice
prior to or at the time of said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
rights are being assigned. The limitations set forth in this Section 6 with
respect to registration rights shall apply to all transferees or assignees of
Registrable Securities.
6.10 CROSS-DEFAULT. The termination, expiration or failure of the
License Agreement to become effective for any reason other than a breach thereof
by Schering-Plough Ltd. or any of its affiliates shall terminate this Agreement
as of the date of such termination (or, if Schering-Plough Ltd. terminates the
License Agreement without cause, as of the date Schering-Plough Ltd. provides
Company with notice of such termination). In the event of the termination of the
License Agreement by the Company upon the breach thereof by Schering-Plough,
Ltd., then such breach shall be deemed to be a material breach of this Agreement
and this Agreement shall also terminate. Any such termination shall be without
prejudice to any other rights the Company may have. The Company's obligations
and the rights of Schering and other Holders of Registrable Securities under
this Article 6 shall survive any termination of this Agreement with respect to
Registrable Securities owned by Schering and other Holders as of the date of
such termination.
6.11 LIMITATION OF LIABILITY. With respect to any claim by one party
against the other arising out of the performance or failure of performance of
the other party under this Agreement, the parties expressly agree that the
liability of such party to the other party for such breach shall be limited
under this Agreement or otherwise at law or equity to direct damages only and in
no event shall a party be liable for, punitive, exemplary or consequential
damages.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations,
agreements, covenants and undertakings of the Company or Schering contained in
or made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Initial Closing, the U.S. Milestone Closing and the EU
Milestone Closing, as the case may be, and shall in no way be affected by an
investigation of the subject matter thereof made by or on behalf of Schering or
the Company.
<PAGE>
31
7.2 INCORPORATION BY REFERENCE. All schedules appended to this
Agreement are herein incorporated by reference and made a part hereof.
7.3 PARTIES IN INTEREST. All terms, covenants, agreements,
representations, warranties and undertakings in this Agreement made by and on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any Shares), subject to Section 6.9 hereof.
7.4 AMENDMENTS AND WAIVERS. Changes in or additions to this Agreement
may be made or compliance with any term, covenant, agreement, condition or
provision set forth herein may be omitted or waived, only upon the written
consent of the Company and Schering.
<PAGE>
32
7.5 GOVERNING LAW. This Agreement shall be deemed a contract made
under the laws of the State of New Jersey and, together with the rights or
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State.
7.6 NOTICES. All notices, requests, consents and demands shall be in
writing and shall be deemed given when (i) personally delivered, (ii) mailed in
a registered or certified envelope, postage prepaid or (iii) sent by Federal
Express or another nationally recognized overnight delivery service (paid by
sender):
to the Company at:
ICN Pharmaceuticals, Inc.
ICN Plaza
330 Hyland Avenue
Costa Mesa, CA 92626
Attention: President
Facsimile Number: (714) 641-7276
or to Schering at:
Schering-Plough Corporation
2000 Galloping Hill Road
Kenilworth, NJ 07033
Attention: President
Facsimile Number: (908) 298-5379
or such other address as may be furnished in writing by a party to the
other party hereto.
7.7 COUNTERPARTS. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
7.8 EFFECT OF HEADINGS. The section and paragraph headings herein are
for convenience only and shall not affect the construction hereof.
7.9 ENTIRE AGREEMENT. This Agreement, the Supply Agreement and the
schedules hereto and thereto constitute the entire agreement between the Company
and Schering with respect to the subject matter hereof. There are no
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein. This
Agreement supersedes all prior agreements between the parties with respect to
the Shares purchased hereunder and the subject matter hereof.
7.10 PUBLICITY. No party shall originate any publicity, news release,
or other announcement, written or oral, relating to this Agreement, or to
performance hereunder or the existence of an arrangement between the parties
hereto without the prior written approval of the other. Nothing contained herein
shall prevent any party from at any time furnishing any information to any
governmental authority which it is by law so obligated to disclose or from
making any disclosure which its counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations under applicable law or the rules of
the New York Stock Exchange.
<PAGE>
33
7.11 SEVERABILITY. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written, by the duly authorized representatives of parties hereto.
ICN PHARMACEUTICALS, INC.
By: /s/ DAVID C. WATT
---------------------------
Name: David C. Watt
Title: Executive Vice President,
General Counsel and Corporate Secretary
SCHERING-PLOUGH CORPORATION
By: /s/ David Poorvin, Ph.D.
----------------------------
Name: David Poorvin, Ph.D.
Title: Authorized Signatory
<PAGE>
SCHEDULE 2.13
In the Company's Form 10-Q for the period ended March 31, 1995, under Item 3,
"Legal Proceedings," reference was made to various actions, including securities
class actions (the "Securities Actions") and shareholder derivative actions (the
"Federal Derivative Actions") filed in February and March 1995 in the United
States District Court for the Central District of California, alleging, INTER
ALIA, that the Company and certain of its officers and directors had made
various deceptive and untrue statements of material fact and omitted to state
material facts in connection with information it received from the U.S. Food and
Drug Administration ("FDA") regarding the Company's New Drug Application ("NDA")
for the use of Virazole(R) for the treatment of chronic hepatitis C (the
"Hepatitis C NDA"), and that certain officers of the Company had allegedly
engaged in illegal insider trading.
By order dated May 2, 1995, the Securities Actions were consolidated and
directed to be coordinated with the related Federal Derivative Actions. PURSUANT
TO THE TIME SCHEDULES SET FORTH IN THE MAY 2 ORDER, ON JUNE 15 AN AMENDED
CONSOLIDATED COMPLAINT WAS SERVED IN THE SECURITIES ACTIONS, AND AN AMENDED
CONSOLIDATED COMPLAINT WAS SERVED IN THE FEDERAL DERIVATIVE ACTIONS. PURSUANT TO
THE ORDER, DEFENDANTS HAVE UNTIL AUGUST 1 TO ANSWER OR MOVE WITH RESPECT
THERETO.
In May 1995, an additional securities class action was filed against the Company
and its chairman in the Central District of California alleging that, INTER
ALIA, the proxy materials and prospectus prepared in connection with the merger
of ICN Pharmaceuticals, Inc. ("Old ICN"), SPI Pharmaceuticals, Inc. ("SPI"),
Viratek, Inc. and ICN Biomedicals, Inc. ("Biomedicals"), effective November 10,
1994 ("the Merger"), contained false and misleading information regarding the
potential approval by the FDA of Virazole(R) for the Hepatitis C indication, and
that defendants had therefore established an excessive value for the shares of
Viratek in setting the exchange ratios for the four companies in connection with
the Merger. Plaintiff further alleges that the Company's chairman had engaged in
illegal insider trading of the Company's common stock. On behalf of a purported
class of individuals who exchanged their shares of Old ICN, SPI or Biomedicals
for newly issued shares of New ICN, plaintiff seeks damages and related relief.
Counsel for defendants has agreed with counsel for the plaintiffs to adjourn
defendants' time to answer or move with respect to the complaint until August 1,
1995. This action was consolidated with the Securities Actions as described
above.
Pursuant to an Order Directing Private Investigation Officers to Take Testimony,
entitled IN THE MATTER OF ICN PHARMACEUTICALS, INC., (P-177) (the "Order"), a
private investigation is being conducted by the SEC with respect to certain
matters pertaining to the status and disposition of the Company's Hepatitis C
NDA. As set forth in the Order, the investigation concerns whether, during the
period June 1994, through February 1995, the Company, persons or entities
associated with it and others, in the offer and sale or in connection with the
purchase and sale of ICN common stock, engaged in possible violations of Section
17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and
Exchange Act of 1934 and Rule 10b-5 thereunder, by having possibly (i) made
false or misleading statements or omitted to state material facts with respect
to the status and disposition of the Hepatitis C NDA, or (ii) purchased or sold
ICN common stock while in possession of material, non-public information
concerning the status and disposition of the Hepatitis C NDA or (iii) conveyed
material, non-public information concerning the status and disposition of the
Hepatitis C NDA to other persons who may have purchased or sold ICN stock. The
Company is cooperating with the SEC in its investigation.
<PAGE>
Exhibit D
[REDACTED]
<PAGE>
Exhibit E
Adverse Event Reporting Procedures
The Parties hereby agree that the following terms will govern disclosures of
each Party to the other with respect to adverse event reporting relating to the
Product as clinically tested or marketed by or on behalf of either Party.
1. An Adverse Event ("AE) is defined as:
(a) any experience which is adverse, including what are
commonly described as adverse or undesirable experiences, adverse events,
adverse reactions, side effects, or death due to any cause associated with or
observed in conjunction with the use of a drug, biological product, or devise in
humans, whether or not considered related to the use of that product:
* occurring in the course of the use of the drug, biological product
or device,
* associated with, or observed in conjunction with product overdose,
whether accidental or intentional,
* associated with, or observed in conjunction with product abuse,
and/or
* associated with, or observed in conjunction with product withdrawal.
(b) Any significant failure of expected pharmacological or biologic
therapeutical action (with the exception of in clinical trials).
2. Serious or Non-Serious is defined as:
(a) A Serious AE is one that is life threatening or fatal,
permanently disabling, requires or prolongs in-patient hospitalization or
prolonged hospitalization, or is a congenital anomaly, cancer or overdose. In
addition, end organ toxicity, including hematological, renal, hepatic, and
central nervous system AE's, may be considered serious. In laboratory tests in
animals, a serious AE includes any experience suggesting significant risk for
human subjects.
(b) A Non-Serious AE is any AE which does not meet the criteria for a
serious AE.
3. Life-threatening is defined as: the patient is at immediate risk of
death from the AE as it occurs.
4. End-Organ Toxicity is defined as: A medically significant event or
lab value change in which a patient may not necessarily be hospitalized or
disabled, but is clinically significant enough to warrant monitoring (e.g.
seizures, blood dyscrasias).
5. Expected or unexpected to defined as:
(a) Expected AE - An AE which is listed in the Investigator's
Brochure for clinical trials, included in local labelling (e.g., Summary of
Product Characteristics) for Marketed Drugs, or in countries with no local
labelling, in the Corporate Standard Prescribed Document.
<PAGE>
(b) Unexpected AE - An AE that does not meet the criteria for
an expected AE or an AE which is listed but differs from that event in terms of
severity or specificity.
6. Associated with or related to the use of the drug is defined as: A
reasonable possibility exists that the AE was caused by the drug.
7. Un-associated or unrelated to the use of the drug is defined as: A
reasonable possibility exists that the AE may not have been caused by the drug.
8. NDA Holder is defined as: An "Applicant" as defined in 21 CFR Part
314.3(b), for regulatory approval of a Product in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.
9. NDA Holder is defined as: A "Sponsor" as defined in 21 CFR Part
312.3(b) of an investigational new drug in any regulatory jurisdiction,
including a holder of a foreign equivalent thereto.
10. Capitalized terms not defined in this Exhibit shall have the
meaning assigned thereto in the Exclusive License and Supply Agreement (the
"Agreement").
11. With respect to the Product, the Parties agree as follows:
All initial reports and any follow-up information (oral or
written) for any and all Serious AEs as defined above, (other
than with respect to animal studies) which become known to
either Party (other than from disclosure) by or on behalf of
the other Party must be communicated by telephone, telefax, or
electronically directly to the other Party and/or the NDA
Holder, IND Holder (individually and collectively referred to
as "Holders") within forty-eight hours of receipt of the
information. Written confirmation of the Serious AE received
by such Party should be sent to the other Party and/or the
Holders as soon as it becomes available, but in any event
within forty eight hours of initial report of the Serious AE
by such Party.
Both Parties shall exchange Medwatch and/or CIOMS forms and
other health authority reports within forty eight hours of
submission to any regulatory agency.
All initial reports and follow-up information received for all
Non-Serious AEs for marketed Product which become known to a
Party (other than from disclosure by or on behalf of the other
Party) must be communicated in writing, by telefax or
electronically to the other Party on a monthly basis.
<PAGE>
Exhibit F
Publication Procedures
