LIMITED PARTNERSHIP AGREEMENT ("Agreement") dated the day of April,
2002, among PAR SVC, LLC, a New York limited liability company ("PAR"), SVC
PHARMA INC., a Delaware corporation ("SVC"), and UDF LP, a Delaware limited
partnership ("UDF"),
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, SVC, PAR and UDF desire to form a limited partnership upon
the terms and conditions set forth herein;
NOW, THEREFORE, it is agreed as follows:
Section 1. FORMATION. SVC, PAR and UDF hereby form a limited
partnership (the "Partnership") pursuant to the provisions of the Delaware
Revised Uniform Limited Partnership Act, as the same may be amended from time to
time (the "Delaware Act").
Section 2. PARTNERS.
(a) GENERAL PARTNER. SVC shall be the general partner of the
Partnership.
(b) LIMITED PARTNERS. PAR and UDF shall be the limited partners of
the Partnership.
(c) DEFINED TERMS. SVC, together with any person or entity that
becomes a substituted or additional general partner as provided herein, shall
sometimes be referred to herein as the "General Partner," PAR and UDF, together
with any person or entity that becomes a substituted or additional limited
partner as provided herein, shall sometimes be referred to herein individually,
as a "Limited Partner," and collectively, as the "Limited Partners," and the
General Partner and the Limited Partners shall sometimes be collectively
referred to herein as the "Partners."
Section 3. NAME. The business of the Partnership shall be conducted
under the name SVC Pharma LP or such other name or names as the General Partner
may determine.
Section 4. PURPOSES. The purpose of the Partnership is to research,
develop, commercialize and market pharmaceutical preparations for human therapy
as from time to time determined by the General Partner through subcontracting
arrangements or otherwise, and any business ancillary or incidental to or in
furtherance of any of the foregoing purpose, and such other business or
businesses as the General Partner may, from time to time, determine to be in the
interests of the Partnership.
Section 5. PLACE OF BUSINESS. The Partnership may carry on business
at such locations as may be determined by the General Partner. The principal
office of the Partnership shall be located in Spring Valley, New York or such
other place within or outside the State of New York as the General Partner may
determine.
Section 6. TERM. The Partnership shall begin on the date a
Certificate of Limited Partnership is filed in the office of the Secretary of
State of the State of Delaware, and shall continue for a period of ten years
from the date of initial commercialization of a product to be automatically
extended each year unless the Partners otherwise agree or unless the Partnership
is otherwise dissolved in accordance with the provisions hereof or as otherwise
provided by law.
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Section 7. CAPITAL CONTRIBUTIONS.
(a) AMOUNTS TO BE CONTRIBUTED.
(i) BY PAR. $9,900.00
(ii) BY UDF. $9,900.00
(iii) BY SVC. $200.00
(b) LIABILITY FOR CAPITAL CONTRIBUTIONS. Each Partner shall be
liable only for the making of the capital contribution set forth opposite such
Partner's name in Section 7(a) hereof, and only such additional capital
contribution as may be required pursuant to Section 8(a) hereof.
(c) WITHDRAWAL OF CAPITAL CONTRIBUTIONS. Except with the consent of
all the Partners, no Partner shall have the right to withdraw its capital
contribution prior to dissolution and winding up of the Partnership pursuant to
the terms of this Agreement.
(d) INTEREST ON CAPITAL CONTRIBUTIONS. No interest shall accrue on
the initial or any subsequent contributions to the capital of the Partnership.
(e) LOANS. Loans, if any, by any Partner to the Partnership shall
not be considered capital contributions.
Section 8. ADDITIONAL CAPITAL CONTRIBUTIONS; LIMITATION.
(a) ADDITIONAL CAPITAL AMOUNTS. In the event that the General
Partner determines that additional capital is required for the business of the
Partnership, each Partner hereby agrees to make additional capital contributions
from time to time, as presented in Section 11(i), in accordance with and as
limited by Section 8(b) below, in the aggregate amount so determined
("Additional Capital Amount"). In the event that a Limited Partner fails to make
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the additional capital contribution as provided in Section 11(i), the provisions
of Section 18(d) or 17(c), as applicable, shall control.
(b) PROPORTIONATE CAPITAL CONTRIBUTIONS. The Additional Capital
Amount to be contributed by each Partner shall be proportionate to such
Partner's Percentage Interest (as defined in Section 9(a) below) ("Proportionate
Capital Contribution").
Section 9. ALLOCATION OF PROFITS AND LOSSES.
(a) PERCENTAGE INTERESTS. All items of income, gain, loss, deduction
and credit of the Partnership shall be allocated among the Limited Partners as
set forth below:
SVC 1.0%
PAR 49.5%
UDF 49.5%
-----
100.0%
=====
The percentage set forth opposite a Partner's name above shall constitute such
Partner's percentage interest in the Partnership and is referred to herein as a
Partner's "Percentage Interest."
(b) CAPITAL ACCOUNTS. Notwithstanding any other provision of this
Agreement, any allocation of income, gain, loss, deduction and credit of the
Partnership made hereunder shall be made in such manner as will, after giving
effect to such allocation, cause the Capital Accounts (as defined in Section
10(a) below) of the Partners to be in the ratio of the Partners' percentage
interests.
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Section 10. CAPITAL ACCOUNTS; ALLOCATIONS AND DISTRIBUTIONS.
(a) DEFINED. As to any Partner, "Capital Account" shall mean an
account maintained by the General Partner in accordance with Section 10(b)
below.
(b) ESTABLISHMENT AND MAINTENANCE. The General Partner shall
establish and maintain a Capital Account for the Partners. Each such Capital
Account shall be credited with (1) the amount of such Partner's Capital
Contributions and (2) the amount of Net Income allocated to such Partner
pursuant hereto. Each such Capital Account shall be debited with (i) any
property distributed to such Partner, (ii) any cash distributions to such
Partner, and (iii) the amount of Net Loss allocated to such Partner. In
determining the balance of each Partner's Capital Account, and for all other
purposes of this Agreement, the fair market value of any asset contributed to or
distributed by the Partnership shall be determined in good faith by the General
Partner, except as specifically provided herein. Any license granted pursuant to
the Partnership by a Partner or an Affiliate of a Partner shall not be deemed an
asset contributed to the Partnership. For purposes of this Agreement,
"Affiliate" shall mean in the case of PAR, Par Pharmaceutical, Inc., a New
Jersey corporation, and in the case of UDF, Xxxxxx Technologies, a Delaware
General Partnership.
(c) DISTRIBUTIONS. Subject to Section 10(e), the distributions shall
be made to the Partners at times and in amounts determined by the General
Partner; PROVIDED that all distributions are made PRO RATA in accordance with
the Percentage Interests of the Partners. Distributions shall be made by the
General Partner to the Partners as provided for herein of all amounts
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contributed to the Partnership by the Partners which are no longer required to
fund the Annual Budget.
(d) TAX DISTRIBUTIONS. Subject to Section 10(e) hereof:
(i) If the aggregate amounts distributed to a Partner pursuant
to Section 10(c) hereof for any Fiscal Year of the Partnership is
less than the Estimated Tax Amount (as hereinafter defined) of that
Partner for such Fiscal Year, the General Partner, in its discretion
may, and shall, upon receipt of a written request from any Partner,
cause the Partnership to distribute additional amounts of cash to
the Partners in proportion to their relative allocations of taxable
income, until each Partner has received an amount of distributions
for such Fiscal Year equal to its Estimated Tax Amount. For purposes
hereof, Estimated Tax Amount shall mean, with respect to a Limited
Partner, an amount of cash which in the good faith judgment of the
General Partner (e) equals the amount of taxable income allocable to
such Limited Partner in respect of such fiscal year multiplied by
40%; PROVIDED, HOWEVER, that, notwithstanding the foregoing
calculation, distributions to each Limited Partner hereunder shall
be in an equal amount.
(ii) The General Partner shall cause the Partnership to make
distributions in accordance with Section 10(d)(i) hereof to the
Partners of their Estimated Tax Amounts for that period not later
than the thirtieth (30th) day following the close of the fiscal
quarter. The General Partner shall use its best efforts to ensure
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that the Estimated Tax Amounts distributed by the Partnership in
accordance with Section 10(d)(i) hereof shall be distributed to the
Partners regardless of whether the Partnership otherwise has cash
available for this purpose. At the close of the Fiscal Year, the
General Partner shall make such proper adjustments as may be
necessary to the character and amounts of such distributions to
reconcile the final Estimated Tax Amounts of the Partners as of the
close of the Fiscal Year with the projected Estimated Tax Amounts
previously distributed to the Partners with respect to such Fiscal
Year.
(e) NO DEFICIT BALANCE. Notwithstanding the provisions of Section
10(c) and 10(d), the General Partner shall have the right to cause the
Partnership to reduce or withhold distributions to any Partner to avoid a
deficit balance in such Partner's Capital Account.
(f) DISTRIBUTIONS UPON DISSOLUTION. Notwithstanding the provisions
of Section 10(c), upon dissolution the General Partner shall make distributions
to the Partners in the manner specified in Section 18.
(g) TAX ELECTIONS. All matters concerning the allocation of tax
items among the Partners, tax elections (except as otherwise required by income
tax laws) and accounting procedures not expressly and specifically provided for
by the terms of this Agreement or the Shareholder Agreement of even date
herewith between PAR SVC, LLC and Xxxxxx Technologies shall be determined in
good faith by the General Partner on a basis that is equitable among the
Partners.
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(h) TAX MATTERS PARTNER. The General Partner shall serve for each
taxable year as the "Tax Matters Partner" of the Partnership under Internal
Revenue Code ("Code") section 6231(a)(7) and section 301.6231(a)(7)-1 of the
Treasury Regulations promulgated under the Code ("Regulations"). The General
Partner shall have the power to manage and control, on behalf of the
Partnership, any administrative proceeding at the Partnership level with the
Internal Revenue Service relating to the determination of any item of
Partnership income, gain, loss, deduction, or credit for federal income tax
purposes. In furtherance of the foregoing, the General Partner shall have all
the powers and responsibilities of such position provided in the Code and (a)
shall promptly furnish the Internal Revenue Service with information sufficient
to cause each Limited Partner to be treated as a "notice partner" as defined in
Code section 6231(a)(8), (b) shall not file any action or suit or extend any
statute of limitations relating to Partnership tax matters without first
notifying each Limited Partner and obtaining the unanimous consent of all
Limited Partners, and (c) shall not settle any action or suit relating to
Partnership tax matters without first notifying all Limited Partners and
obtaining the unanimous consent of all Limited Partners. Reasonable expenses
incurred by the General Partner, in its capacity as such, will be treated as an
operating expense of the Partnership and part of the Annual Budget hereunder.
Any Limited Partner shall have the right to participate in any administrative
proceedings relating to the determination of Partnership tax items at the
Partnership level.
(i) TAX ELECTIONS. The General Partner may, in its sole and absolute
discretion, make or revoke, on behalf of the Partnership, such elections for
federal income tax purposes as are permitted to be made under the Code,
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including elections in accordance with Code section 754.
(j) EFFECT OF CASH FLOW LOSSES. To the extent the Capital Account of
any Partner is depleted by Cash Flow losses, such Capital Account shall be
replenished from income of the Partnership before any net income distributions
are made to the Partners. For the purposes of this Section 10(j), "Cash Flow"
shall mean all net income of the Partnership as determined on the Partnership's
books according to U.S. generally accepted accounting principles, plus (i) any
amortization charge taken on the books for the amortization of intangible assets
and (ii) depreciation, if any, taken on any assets including real property.
Section 11. DUTIES AND OBLIGATIONS OF THE PARTNERS.
(a) MANAGEMENT OF PARTNERSHIP BUSINESS. The General Partner shall
have sole responsibility for managing and operating the business of the
Partnership and shall exert its best efforts to promote the Partnership's
success. In addition to any other rights and powers that the General Partner may
possess under this Agreement and the Delaware Act, the General Partner, in the
name and on behalf of the Partnership, shall, except to the extent otherwise
provided herein, have all specific rights and powers required for or appropriate
to the management of the Partnership's business.
(b) FIDUCIARY DUTY OF GENERAL PARTNER. The General Partner shall be
under a fiduciary duty to conduct the affairs of the Partnership in the best
interests of the Partnership and of the Limited Partners, including the
safekeeping of all Partnership funds and assets and the use thereof for the
exclusive benefit of the Partnership.
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(c) PROPOSALS AND PROJECTS.
(i) The General Partner shall consider and review proposals
submitted to the General Partner by a Limited Partner or an
Affiliate (each, a "Proposal") to research, develop, commercialize
and market pharmaceutical preparations for human therapy
concentrating on pharmaceutical preparations having the potential
for competitive advantage in the marketplace based upon unique
formulations or dosage forms, new or expanded indications and/or
patentability as to product, process or use (each, a "Product" and
collectively the "Products"). Each Proposal shall be in such format
as determined by the General Partner and shall include a proposed
budget calculated to bring such Product successfully to market and a
proposed timeline for so doing. No Limited Partner or its Affiliate
has any obligation to present a Proposal to the General Partner on
behalf of the Partnership with respect to any particular Product.
(ii) The General Partner shall approve or reject each Proposal
within a reasonable time period, based upon the specific
characteristics and circumstances of each Proposal. Upon the
approval of the General Partner, such Proposal (as may be modified
by the General Partner) shall be designated a "Project" and such
proposed budget (as may be modified by the General Partner) shall be
designated the "Project Budget." The Project Budget shall be funded
by the Partnership pursuant to a capital contributions schedule,
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which generally shall require, unless the General Partner determines
otherwise, that capital contributions in respect of the Annual
Budget shall be made quarterly in advance and which shall generally
consist of an initial portion, covering start-up and projected
research and development costs through the end of the then current
Fiscal Year, and subsequent annual portions pursuant to annual
budgets (each, an "Annual Project Budget") developed each year by
the General Partner, as may be amended from time to time by the
General Partner in the event that it determines that such Annual
Project Budget shall be insufficient to fund the Project for the
then-current year. If the General Partner determines that a Project
Budget shall not be sufficient to bring such Project to market
successfully, whether due to cost overruns, adverse market
conditions, unexpected developments or otherwise, the General
Partner shall decide whether to increase the Project Budget or
terminate the Project on behalf of the Partnership. Any Project
Budget (including any modification by the General Partner) must be
approved by the General Partner within 45 days of the General
Partner's determination thereof failing which such Project Budget
and the Project associated therewith shall be deemed rejected on
behalf of the Partnership. Each Project Budget and each amendment or
modification thereto shall be supported with detailed cost
worksheets.
(d) PROJECT DEVELOPMENT. The General Partner shall use commercially
reasonable efforts to have a Project developed on behalf of the Partnership in
accordance with the requirements of applicable law in such order of priority as
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is determined by the General Partner. The Limited Partners acknowledge that
there is no guaranty or warranty of the General Partner on behalf of the
Partnership that development of any Product will be commenced or continued or
successfully completed within any specific time period, if at all.
(e) PROJECT SUBCONTRACTING. On a case-by-case basis, the General
Partner shall decide where to subcontract the research, development,
commercializing and/or marketing of a Project to an outside party, preferably a
Limited Partner or an Affiliate; PROVIDED, HOWEVER, that (i) any subcontractor
(including a Limited Partner or an Affiliate) that market, sells, distributes
and collects receipts from sales of any Product shall be required to pay its
gross profit (as determined in accordance with Exhibit A attached hereto) for
such Product to the Partnership, except as otherwise determined by the General
Partner, (ii) any Limited Partner or Affiliate that performs research on behalf
of the Partnership shall be reimbursed for its research and development costs as
determined in accordance with Exhibit B, (iii) any subcontractor shall be
required to indemnify the Partnership in accordance with the terms prescribed by
the General Partner, (iv) any subcontractor shall be required to purchase
products liability insurance in such amount as the General Partner shall
determine, (v) any subcontractor shall be required to comply with Current Good
Manufacturing Practices (as hereinafter defined), and any material noncompliance
with Current Good Manufacturing Practices by any subcontractor shall result in
termination of such Person as a subcontractor, and (vi) any Person who is
debarred, or whose affiliate is debarred, by the U.S. Food and Drug
Administration or U.S. Defense Logistics Agency ("Debarment"), shall not be
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engaged as a subcontractor hereunder, and any existing subcontracting
arrangement with such Person shall automatically terminate upon such Debarment.
"Current Good Manufacturing Practices" shall mean current good manufacturing
practices for the methods used in, and the facilities and controls used for, the
manufacture, processing, packaging and holding of the Product, all as set forth
from time to time by the FDA pursuant to the Federal Food, Drug, and Cosmetic
Act, as amended from time to time, and the rules and regulations promulgated
thereunder (including specifically, Title 21, parts 210 and 211 of the Code of
Federal Regulations of the United States). In the event a Limited Partner or an
Affiliate is a subcontractor to the Partnership with respect to a Project, such
Limited Partner's or Affiliate's compensation for its services to the
Partnership on any Project shall be such amount approved by the General Partner.
Where commercially reasonable, the General Partner will subcontract the Project,
including primary Product development, research and development of active
pharmaceutical ingredients, drug formulation and/or chemical composition,
product approval and registration, bulk manufacturing, manufacturing of finished
dosage form, marketing, distribution and sales, financial management, and legal
compliance among the Limited Partners or their Affiliates. The General Partner
shall have full and final authority over the distribution of responsibilities
for each Project as it deems appropriate and desirable for the Partnership.
Where any portion of a Project is subcontracted to a Limited Partner or an
Affiliate, (x) the role played by such party shall be that of a subcontractor to
the Partnership, and such party shall carry out its duties in accordance with
the mandate of the General Partner; and (y) such party's compensation for its
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services to the Partnership on such Project shall be the amount approved
therefor by the General Partner. In the event that a Limited Partner or an
Affiliate exceeds the amount approved by the General Partner with respect to
such party's undertaking as a subcontractor, such excess amount shall not be
reimbursed by the Partnership unless such reimbursement is approved by the
General Partner.
(f) PROGRESS REPORTS. The General Partner shall require each
subcontractor under each Project to report on the progress of such Project on a
periodic basis as determined by the General Partner. The General Partner shall
monitor the progress of each Project and apprise the Partnership of such
progress on a periodic basis as determined by the General Partner. The General
Partner shall promptly report to the Partners any significant changes to the
progress of a Project or its projected cost, schedule, or likelihood of success.
(g) DUE ANALYSIS. In a Limited Partner's or an Affiliate's
consideration of a Proposal intended to be submitted to the General Partner, the
Limited Partner considering such submission agrees to undertake and agrees to
cause its Affiliate to undertake such analyses with respect to the potential
commercial viability of the Product or Products part thereof as such Limited
Partner or Affiliate employs in determining whether or not to pursue the
development of products within its own organization.
(h) GROSS PROFIT PAYMENT. Payment to the Partnership of Gross Profit
required under Section 11(c) hereof shall be made within forty-five (45) days
following the conclusion of the calendar month in which the sale of the Product
occurred.
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(i) ANNUAL BUDGET. Each year during the term of this Agreement, the
General Partner shall develop and approve an annual operating budget covering
general operations for the upcoming year and incorporating, as separate line
items, each Annual Project Budget (together, the "Annual Budget"). If the
General Partner determines that an Annual Budget shall not be sufficient to fund
the Partnership's obligations for the current year, whether due to cost
overruns, adverse market conditions, unexpected developments or otherwise, the
Annual Budget may be amended by the General Partner and upon such amendment the
General Partner shall provide each Partner with written notice of any additional
capital contribution due from such Partner pursuant to the amended Annual
Budget, together with an explanation of such increase. Each Partner shall make
an additional capital contribution to the Partnership in accordance with its
Percentage interest to fund the Annual Budget.
(j) DELIVERY OF FINANCIAL STATEMENTS. The General Partner shall
deliver to the Partners financial statements of the Partnership as soon as
practicable after the end of each fiscal year.
(k) PARTNERSHIP TAX RETURNS. The General Partner shall cause the
preparation and timely filing of all the Partnership's tax returns and shall
promptly deliver copies thereof to the Partners.
(l) LIMITATION ON ACTIONS OF LIMITED PARTNERS. The Limited Partners
shall not participate in the control of the Partnership business or have the
authority or right to act for or bind the Partnership.
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(m) PERMITTED ACTIONS BY LIMITED PARTNERS. The Limited Partners are
hereby entitled to possess or exercise one or more of the following powers or
act in one or more of the following capacities and, in accordance with ss.
17-303 of the Delaware Act, any such possession, exercise or action shall not
constitute participation in the control of the Partnership business within the
meaning of the Delaware Act:
(i) To be an independent contractor for or to transact business
with, including being a contractor for, or to be an agent or
employee of, the Partnership or a General Partner, or to be an
officer, director or stockholder of a corporate General Partner, or
to be a limited partner of a partnership that is a General Partner
of the Partnership, or to be a trustee, administrator, executor,
custodian or other fiduciary or beneficiary of an estate or trust
which is a General Partner, or to be a trustee, officer, advisor,
stockholder or beneficiary of a business trust which is a General
Partner, or to be a member, manager, agent or employee of a limited
liability company which is a general partner;
(ii) To consult with or advise a General Partner or any other
person with respect to any matter, including the business of the
Partnership, or to act or cause a General Partner or any other
person to take or refrain from taking any action, including by
proposing, approving, consenting or disapproving, by voting or
otherwise, with respect to any matter, including the business of the
Partnership;
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(iii) To act as surety, guarantor or endorser for the
Partnership or a General Partner, to guaranty or assume one or more
obligations of the Partnership or a General Partner, to borrow money
from the Partnership or a General Partner, to lend money to the
Partnership or a General Partner, or to provide collateral for the
Partnership or a General Partner;
(iv) To call, request, attend or participate at a meeting of the
Partners or the Limited Partners;
(v) To wind up the Partnership pursuant to ss. 17-803 of the
Delaware Act;
(vi) To take any action required or permitted by law to bring,
pursue or settle or otherwise terminate a derivative action in the
right of the Partnership;
(vii) To serve on a committee of the Partnership or the Limited
Partners or Partners or to appoint, elect or otherwise participate
in the choice of a representative or another person to serve on any
such committee, and to act as a member of any such committee
directly or by or through any such representative or other person;
(viii) To act or cause the taking or refraining from the taking
of any action, including by proposing, approving, consenting or
disapproving, by voting or otherwise, with respect to one or more of
the following matters:
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(A) The dissolution and winding up of the Partnership or an
election to continue the Partnership or an election to continue
the business of the Partnership;
(B) The sale, exchange, lease, mortgage, assignment, pledge
or other transfer of, or granting of a security interest in, any
asset or assets of the Partnership;
(C) The incurrence, renewal, refinancing or payment or other
discharge of indebtedness by the Partnership;
(D) A change in the nature of the business of the
Partnership;
(E) The admission, removal or retention of a General
Partner;
(F) The admission, removal or retention of a Limited
Partner;
(G) A transaction or other matter involving an actual or
potential conflict of interest;
(H) An amendment to this Agreement or the Partnership's
Certificate of Limited Partnership;
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(I) The merger or consolidation of the Partnership;
(J) The indemnification of any Partner or other person;
(K) The making of, or calling for, or the making of other
determinations in connection with contributions;
(L) The making of, or the making of other determinations in
connection with or concerning, investments, including
investments in property, whether real, personal or mixed, either
directly or indirectly, by the Partnership; or
(M) Such other matters as are stated in this Agreement or in
any other agreement or in writing;
(ix) To serve on the board of directors or a committee of, to
consult with or advise, to be an officer, director, stockholder,
partner (other than a general partner of a General Partner of the
Partnership), member, manager, trustee, agent or employee of, or to
be a fiduciary or contractor for, any person in which the
Partnership has an interest or any person providing management,
consulting, advisory, custody or other services or products for, to
or on behalf of, or otherwise having a business or other
relationship with, the Partnership or a General Partner of the
Partnership; or
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(x) Any right or power granted or permitted to the Limited Partners
under the Delaware Act and not specifically enumerated in this
Section 11(f).
(n) OTHER ACTIONS BY LIMITED PARTNERS NOT CONSTITUTING CONTROL. The
enumeration in Section 11(m) does not mean that the possession or exercise of
any other powers or having or acting in other capacities by a Limited Partner
constitutes participation by it in the control of the business of the
Partnership.
(o) CONSENT OF LIMITED PARTNERS. The Limited Partners hereby consent
to the exercise by the General Partner of the powers conferred on the General
Partner by this Agreement.
Section 12. RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNER.
(a) LIMITATIONS ON ACTIONS OF GENERAL PARTNER. The General Partner,
in its conduct and management of the business and affairs of the Partnership,
shall have all the powers conferred by the Delaware Act on general partners of a
limited partnership; PROVIDED, HOWEVER, that the General Partner shall not take
any of the following actions:
(i) Do any act in contravention of this Agreement or which would
make it impossible to carry on the ordinary business of the
Partnership; or
(ii) Admit any person or entity as an additional or substitute
General Partner or as an additional or substitute Limited Partner,
except as otherwise provided herein.
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(b) ACTIONS REQUIRING CONSENT OF LIMITED PARTNERS. The General
Partner shall not, without the consent of each of the Limited Partners, take any
of the following actions:
(i) Mortgage, assign or otherwise encumber its interest, if any,
in the Partnership; or
(ii) Extend the term of the Partnership.
Section 13. LIMITED PARTNERS' LIABILITIES.
(a) NO LIABILITY FOR LIABILITIES OF GENERAL PARTNER OR PARTNERSHIP.
The Limited Partners shall not be liable for the debts or liabilities of the
General Partner or the Partnership.
(b) LIMITATION ON LIABILITY FOR DISTRIBUTIONS. A Limited Partner who
receives a distribution from the Partnership shall have no liability under the
Delaware Act or other applicable law for the amount of the distribution after
the expiration of three years from the date of distribution.
Section 14. DISABILITY OF THE LIMITED PARTNERS; ASSIGNMENT BY OR
SUBSTITUTION OF LIMITED PARTNER. (
a) RIGHT TO CONTINUE BUSINESS. Upon the death, bankruptcy,
dissolution or liquidation and termination of a Limited Partner (the "Affected
Limited Partner"), the remaining Partners shall have the right to continue the
business of the Partnership; PROVIDED, HOWEVER, that upon such event the
administrator, committee, trustee or other legal representative or successor in
interest of the Affected Limited Partner shall have all of the rights and
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liabilities of the Affected Limited Partner as are necessary for the purpose of
settling or managing the estate or the affairs of the Affected Limited Partner.
(b) RIGHT TO ASSIGN PARTNERSHIP INTEREST. Subject to the
restrictions on transferability contained in Section 20 below, the Affected
Limited Partner (or its administrator, committee, trustee or other legal
representative or successor in interest) shall have the right to assign its
interest in the Partnership or to appoint such assignee as a substitute Limited
Partner with respect to that interest. The General Partner shall make such
amendments to this Agreement and the Partnership's Certificate of Limited
Partnership, and file and record such amendments and other documents or
instruments necessary to reflect such substitution.
Section 15. REMOVAL OF THE GENERAL PARTNER.
(a) RIGHT TO REMOVE GENERAL PARTNER. The Limited Partners, upon
unanimous consent, shall have the right, exercisable by written notice to the
General Partner, to remove the General Partner and appoint a substitute General
Partner.
(b) TERMINATION OF PARTNERSHIP INTEREST. The removed General
Partner's Partnership Interest shall be terminated upon the date of such removal
but it shall be entitled to receive the distributions, fees or other
compensation then due to it pursuant to this Agreement or otherwise.
(c) LIMITATION ON PERSONAL LIABILITY. The exercise of the right of
removal granted in this Agreement or the removal of the General Partner shall
not in any way impose any personal liability on the Limited Partners or render
the Limited Partners general partners. If the General Partner is removed and a
substitute General Partner is appointed, then, immediately upon the removal of
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the General Partner, the Partners, including the substitute General Partner,
shall amend the Partnership's Certificate of Limited Partnership and shall take
or cause to be taken all filings and steps required in connection therewith, all
in accordance with the Delaware Act or other applicable law.
Section 16. ADMISSION OF AN ADDITIONAL GENERAL PARTNER. Any person
or entity shall be admitted as an additional General Partner upon the unanimous
written consent of the Partners. Upon any such event, there shall be promptly
filed and caused to be recorded an appropriate amendment of the Partnership's
Certificate of Limited Partnership.
Section 17. EVENTS CAUSING DISSOLUTION. The happening of any one or
more of the following events shall cause a dissolution of the Partnership:
(a) WITHDRAWAL OF GENERAL PARTNER. The removal, death, bankruptcy,
dissolution or liquidation and termination of the General Partner or other event
of withdrawal of the General Partner which under the Delaware Act causes the
dissolution of the Partnership, unless either (i) at the time of any such event
there is at least one other General Partner, in which event the Partnership
business may be carried on by the remaining General Partner or (ii) if there is
no other General Partner, all the remaining Partners, within 90 days after any
such event, (x) agree in writing to continue the business of the Partnership and
(y) appoint effective as of the date of any such event a substituted General
Partner; or
(b) AGREEMENT TO DISSOLVE. An agreement to dissolve by the Limited
Partners.
23
(c) Any failure by a Partner to make an Additional Capital
Contribution as provided for in Section 8 hereof and (i) such failure continues
for a period of 45 days of the written notice of such failure by another Partner
and (ii) such failure is not subject to the provisions of Section 18(d) hereof.
Section 18. CERTAIN CONTINGENCIES; LIQUIDATION.
(a) LIQUIDATING AGENT. Upon the dissolution of the Partnership, the
Partnership shall be liquidated in accordance with this Agreement and the
Delaware Act. The liquidation shall be conducted and supervised by the General
Partner or, if there is no General Partner, by a person who shall be designated
for such purpose by the Limited Partners (the General Partner or such person so
designated being herein referred to as the "Liquidating Agent"). The Liquidating
Agent shall have all of the rights and powers with respect to the assets and
liabilities of the Partnership in connection with the liquidation and
termination of the Partnership that the General Partner has with respect to the
assets and liabilities of the Partnership during the term of the Partnership,
and the Liquidating Agent is hereby expressly authorized and empowered to
execute any and all documents necessary or desirable to effectuate the
liquidation and termination of the Partnership and the transfer of any asset or
liability of the Partnership. The Liquidating Agent shall have the right from
time to time, by revocable powers of attorney, to delegate to one or more
persons or entities any or all such rights and powers and such authority and
power to execute documents, and, in connection therewith, to fix the reasonable
compensation of each such person or entity, which compensation shall be charged
as an expense of liquidation.
24
(b) LIQUIDATION PROCEDURE. Upon dissolution of the Partnership, the
Partnership shall be wound up and liquidated in accordance with the Delaware Act
and the following provisions:
(i) Any gain or loss realized on liquidating sales of the
Partnership's assets, and all income, gain, deduction or loss for
the taxable year (or fraction thereof) in which such liquidation
occurs, shall be credited or charged to the Capital Accounts of the
Partners in accordance with Section 9 hereof and the Capital
Accounts of the Partners shall be further adjusted to reflect the
manner in which any unrealized income, gain, loss or deduction
inherent in any Partnership property to be distributed in kind
(which has not previously been reflected in Capital Accounts) would
be allocated among the Partners if there were a taxable disposition
of such property for its fair market value on the date of such
distribution.
(ii) Each Partner shall pay to the Partnership all amounts owed
by such Partner to the Partnership.
(iii) The assets of the Partnership, including any monies
received pursuant to Section 18(b)(ii) above, shall be applied in
the following order:
FIRST, to the payment of creditors of the Partnership, other than
the Partners.
25
SECOND, to the establishment of any reserves that the Liquidating
Agent, acting pursuant to this Agreement, in accordance with reasonable business
judgment, deems reasonably necessary to provide for the payment when due of any
contingent or unforeseen liabilities or obligations of the Partnership (which
reserves may be paid over by the Liquidating Agent to a trustee or escrow agent
for purposes of (A) distributing such reserves in payment of the aforementioned
contingencies, and (B) distributing the balance of such reserves in the manner
provided herein).
THIRD, to the payment of liabilities of the Partnership to the
Partners.
FOURTH, to the Partners in proportion to their positive Capital
Accounts, if any, in an amount as will bring each Limited Partner's Capital
Account to zero and then to each Partner in accordance with its Percentage
Interest.
The choice of which, if any, Partnership assets are to be
distributed among the Limited Partners shall be within the sole discretion of
the Liquidating Agent and shall be binding upon all Partners. If assets are to
be distributed in kind, the Liquidating Agent may, in its discretion, distribute
such assets to the Limited Partners PRO RATA in accordance with each Partner's
Percentage Interest, or cause, prior to distribution, the value of such assets
to be determined by an independent appraiser chosen by the Liquidating Agent.
Such value, as so determined, shall be binding upon all Limited Partners.
(c) CONTINUATION OF PRODUCT SALES. In the event that on the date of
dissolution a Product or Products is being commercialized by the Partnership,
the General Partner or the Liquidating Agent, as applicable, shall
notwithstanding any provision to the contrary herein take reasonable commercial
efforts to the end that the Product or Products shall continue to be
26
commercialized for the ten (10) year period following dissolution on such basis
that each Limited Partner shall receive on a quarterly basis fifty percent (50%)
of the Gross Profit derived from the continued commercialization of same. The
Partners may upon unanimous agreement elect to continue the marketing of such
Products after the conclusion of the ten (10) year period provided for herein,
failing which, the marketing of such Products shall cease. Any license granted
by a Limited Partner or an Affiliate to the Partnership and required by the
other Limited Partner or its Affiliate for the continued commercialization of
any Products shall remain in effect for the ten (10) year period (or any
extension thereof) provided for herein.
(d) WITHDRAWAL FROM A PROJECT. In the event a Limited Partner does
not contribute its entire share of an additional capital contribution as
provided for in Section 11(i) hereof within the timeframe determined by the
General Partner in accordance with the provisions hereof and such Limited
Partner fails to remedy such failure within thirty (30) days of receipt of
written notice thereof by the other Limited Partner, unless such failure is
through no fault of such Limited Partner, then the non-contributing Limited
Partner shall immediately provide notice to the other Partners identifying the
specific Project and line item Annual Project Budget with respect to which such
Limited Partner is withholding its additional capital contribution. In the event
that PAR is the non-contributing Limited Partner, PAR agrees that (i) that the
Project so identified shall cease to be a Project of the Partnership, (ii) UDF
shall be free to pursue the Product underlying such Project, (iii) PAR shall
license or cause to be licensed to UDF any intellectual property the subject
matter of which was or was to be licensed by PAR or its Affiliate to the
27
Partnership in connection with the Project on the same terms and conditions as
such intellectual property was licensed to or was to be licensed to the
Partnership and (iv) PAR shall continue to perform, at UDF's expense, under any
contract granted to PAR or its Affiliate by the Partnership with respect to the
Project on terms and conditions substantially similar to those provided for in
the contract with the Partnership. In the event that UDF is the non-contributing
Limited Partner, UDF agrees that (i) the Project as identified shall cease to be
a Project of the Partnership, (ii) PAR shall be free to pursue the Project
underlying such Product, (iii) UDF shall license or cause to be licensed to PAR
any intellectual property the subject matter of which was or was to be licensed
by UDF or its Affiliate to the Partnership in connection with the Project on the
same terms and conditions as such intellectual property was licensed to or was
to be licensed to the Partnership and (iv) UDF shall continue to perform, at
PAR's expense, under any contract granted to UDF or its Affiliate by the
Partnership with respect to the Project on terms and conditions substantially
similar to these provided for in the contract with the Partnership.
Section 19. MEETINGS OF PARTNERS.
(a) NOTICE OF MEETING; QUORUM. Any Partner may at any time call a
meeting of Partners. Notice of any meeting of Partners shall be mailed to each
Partner at least 15 and not more than 30 business days prior to the date of the
meeting unless all of the Partners consent to a shorter notice period. Meetings
will be held at such time and place as shall be agreed to by all the Partners.
Partners constituting 100% in Percentage Interest present in person or by proxy
throughout the meeting shall constitute a quorum for the transaction of business
at any meeting. All Partners, officers and directors of Partners, the
28
Partnership's auditors and their respective counsel may attend and speak at any
meeting of the Partners.
(b) VOTING. A quorum being present, each question presented to any
meeting of the Partners shall be decided by the unanimous vote of the Partners.
Any question may be decided by the consent in writing by all of the Partners.
Any question so decided shall be binding on all the Partners and their
respective heirs, executors, administrators, successors and assigns. All
proceedings and decisions at meetings of Partners and all written consents of
Partners shall be recorded in a minute book which shall be available for
inspection by the Partners at the principal place of business of the
Partnership.
Section 20. TRANSFERS OR DISPOSITIONS OF PARTNERSHIP INTERESTS;
WITHDRAWAL OF A LIMITED PARTNER.
(a) DEFINITION OF "SPECIFIED PERSON". "Specified Person" for
purposes of this Agreement shall mean either:
(i) with respect to PAR, its permitted successors and assigns
shall mean any individual, corporation or partnership (whether
limited or general), limited liability company, association, nominee
or any other individual or entity in its own or any representative
capacity which directly or indirectly controls, is controlled by or
is under common control with PAR. For purposes of the foregoing
sentence, "Control" shall mean an equity or income interest of 50%
or more in, or the possession, directly or indirectly, of the power
to cause the direction and management of any person or entity
29
described in the first sentence of this Section 20(i) whether
through the ownership of voting securities by contract or
declaration of trust, or otherwise.
(ii) with respect to UDF, its permitted successors and assigns
shall mean any person, individual, corporation or partnership
(whether limited or general), limited liability company,
association, nominee or any other individual or entity in its own or
any representative capacity which directly or indirectly controls,
is controlled by or is under common control with UDF. For purposes
of the foregoing sentence, control shall mean an equity or income
interest of 50% or more in, or the power, directly or indirectly to
cause the direction and management of any person or entity described
in the first sentence of this Section 20(ii).
(b) LIMITATION ON DISPOSITION OF PERCENTAGE INTEREST. No Partner
will directly or indirectly sell, offer for sale, or entertain an offer (whether
solicited or unsolicited), transfer, pledge or otherwise dispose of any of its
Percentage Interest in the Partnership, except to a Specified Person of such
Partner, without the agreement of the other Partners.
(c) RULES OF CONSTRUCTION. For purposes of the construction,
interpretation and enforcement of this Section 20, it is agreed that the
disposition by a Limited Partner of all or any portion of its Percentage
Interest shall be deemed analogous to a disposition by a shareholder of the
shares of common stock of a corporation organized under the laws of the State of
New York ("New York Shares") and that this Section 20 shall be construed,
30
interpreted and enforced in accordance with the laws of the State of New York as
such laws relate to a disposition of New York Shares without giving effect to
any principles of conflict of laws which would otherwise render the laws of New
York inapplicable to such disposition.
(d) WITHDRAWAL OF LIMITED PARTNER. A Limited Partner may not
withdraw from the Partnership prior to the dissolution and winding up of the
Partnership, subject to the provisions contained in Section 20(a) and (b).
Section 21. CONFIDENTIALITY.
(a) CONFIDENTIAL NATURE OF AGREEMENT. Each Partner agrees that,
without the prior written consent of the other Partners, or except as may be
required by law or court order, the existence and terms of this Agreement shall
remain confidential and shall not be disclosed to any Person other than (i)
employees and professional advisers of such Partner or its Affiliate who
reasonably require knowledge of the existence or terms of this Agreement and who
are bound to such Partner or its Affiliate by a like obligation of
confidentiality and (ii) governmental agencies where such disclosure is required
by or advisable under applicable law. Each Partner shall advise its Affiliate,
employees and advisors of the nature and existence of the confidentiality
undertakings of this Agreement and of the applicability of such undertakings to
them and shall have such Affiliate, employees and advisors agree to be bound
hereby.
(b) DUTY OF CONFIDENTIALITY. Each Partner agrees to hold in trust
and confidence (and to cause its Affiliate to hold in trust and confidence) for
the benefit of the other Partner (and its Affiliate) all Confidential
Information (as hereinafter defined) of such other Partner and its Affiliate and
31
each further agrees to safeguard, and to cause its Affiliate to safeguard, the
Confidential Information of the other Partner (or its Affiliate) to the same
extent that it does with its own confidential information and to limit and
control copies, extracts and reproductions made of such Confidential
Information. No Partner will, without the express written consent of the other,
directly or indirectly, use (or authorize, permit or suffer its Affiliate to
use) any Confidential Information of the other Partner or of its Affiliate for
any purpose other than to implement the provisions of this Agreement, in
regulatory proceedings, in litigation, or where disclosure to a governmental
agency is required by or advisable under applicable law. Except as set forth in
the preceding sentence, no Partner will disclose Confidential Information to any
Person, other than its employees or other representatives or those of its
Affiliate who have a need to know to fulfill the provisions and intent of this
Agreement (where such provisions and intent cannot property be fulfilled without
such disclosure) and who have been informed of the confidential nature of the
information and have agreed to be bound by the terms hereof. Each Partner shall
use its best efforts to prevent unauthorized use or disclosure of the
Confidential Information of the other Partner or its Affiliate and shall use
protective measures no less stringent than those used by it in its own business
to protect its own confidential information, including segregating such
information at all times from the confidential material of others so as to
prevent any commingling.
(c) COMPULSORY DISCLOSURES. In the event that any Partner (or its
Affiliate) shall be legally compelled or required by a court of competent
jurisdiction to disclose all or any part of the Confidential Information of
another Partner (or its Affiliate), it shall provide prompt notice to the other
32
so that such other Partner (or its Affiliate) may determine whether or not to
seek a protective order or any other appropriate remedy. If a protective order
or other appropriate remedy is not obtained before such disclosure is required,
the Partner required to make disclosure will disclose only those portions of the
Confidential Information in question which it is advised by written opinion of
counsel (which opinion shall be addressed to such Partner and to the other
Partner), it is legally required to disclose and will exercise its best efforts
to obtain reliable assurances that confidential treatment will be accorded such
Confidential Information.
(d) RETURN OF CONFIDENTIAL INFORMATION. Upon dissolution of the
Partnership pursuant hereto, each Partner shall, except as may be required for
the continued commercialization of Product(s) pursuant to Section 18(c),
immediately return to the other Partner all material containing or reflecting or
referring to any Confidential Information of another Partner or its Affiliate
(including all notes, summaries, analysis or other documents prepared or derived
therefrom) and all copies thereof in any form whatsoever under the power or
control of such Partner or its Affiliate, except that one copy may be retained
for legal archival purposes, and such Partner shall delete such Confidential
Information from all retrieval systems and data bases or destroy same as
directed by the other Partner and furnish to the other Partner, if requested, a
certificate of a senior officer of such Partner, certifying such return,
deletion and/or destruction. Where only a particular Product/Products or
Project/Projects is terminated by the General Partner on behalf of the
Partnership in accordance with Section 18(d), then the foregoing obligations
33
shall thereupon apply to Confidential Information relating to such
Product/Products or Project/Projects.
(e) SURVIVAL. The obligations of each Partner under this Section 21
shall survive termination of this Agreement and shall continue in full force and
effect for a period of three (3) years following any such termination.
(f) DEFINITION OF CONFIDENTIAL INFORMATION. "Confidential
Information" shall mean information of a Partner or its Affiliate disclosed to
or obtained by another Partner or its Affiliate (including information obtained
by one Partner or its Affiliate as a result of access to the facilities of
another Partner or its Affiliate or as a result of its relationship with the
other Partner or its Affiliate in connection with this Agreement) either prior
to or during the term of this Agreement that is non-public, confidential or
proprietary in nature (including, without limitation, trade secrets, financial
data, product information, manufacturing methods, market research data,
marketing plans, identity of customers, or product information (including the
nature and source of raw materials, product formulation and methods of
producing, testing and packaging)) and which relates to the disclosing party's
past, present or future research, development or business activities.
Confidential Information shall not, however, include information that a party
can demonstrate by written evidence:
(i) is in the public domain (provided that information in the
public domain has not and does not come into the public domain as a
result of a breach by a party hereto (or its Affiliate) of its
obligations of confidentiality contained herein;
34
(ii) is known by the receiving party prior to disclosure by the
other party as shown by documentation of the receiving party
existing on the date of such disclosure sufficient to establish such
knowledge;
(iii) which has been developed by the receiving party
independent of any disclosure by the other party; or
(iv) is subsequently, lawfully and in good faith obtained by the
receiving party on a non-confidential basis from a third party as
shown by documentation sufficient to establish the third party as
the source of the information, provided that such third party was
not under an obligation to treat such information in a confidential
manner and had a lawful right to make such disclosure.
Section 22. NOTICES. Any notice, communication, payment or demand to
be given to any party hereto pursuant to this Agreement shall be in writing and
shall be sufficiently given or made for all purposes if delivered personally to
such party, if sent to such party by receipt confirmed telecommunications, or if
sent to such party by recognized courier, addressed as follows:
SVC: SVC Pharma Inc.
c/o Pharmaceutical Resources, Inc.
Xxx Xxx Xxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Attention: President
PAR: PAR SVC, LLC
c/o Pharmaceutical Resources, Inc.
Xxx Xxx Xxxxx Xxxx
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
35
UDF: UDF LLC
0 Xxxxxxxxx Xxx
Xxxxxxxxx, XX 00000
Attention: Chairman
With copies in any event to:
Xxxxxx X. Xxxxx
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
and
Xxxxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Any such notice, communication, payment
or demand shall be deemed to be received upon personal delivery, upon the day
sent by telecommunications, or upon the first business day following deposit
with a recognized courier for next day delivery.
Section 23. FISCAL YEAR. The fiscal year of the Partnership shall
end on the 31st day of December of each year.
Section 24. BOOKS AND RECORDS. The books and records of the
Partnership shall be maintained at its principal office. Each Partner shall have
the right to inspect and audit said books and records upon reasonable notice and
at reasonable times.
Section 25. APPLICABLE LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
except for the provisions of Section 20 which shall be governed by, and
36
construed and enforced in accordance with the law of the State of New York as
provided in Section 20(c).
Section 26. SEVERABILITY. This Agreement is intended to be valid and
effective under any applicable law and, to the extent permissible under
applicable law shall be construed in a manner to avoid violation or invalidity
under any applicable law. Should any terms or provisions of this Agreement be or
become invalid, illegal or unenforceable under any applicable law, the other
provisions of this Agreement shall not be affected and shall remain in full
force and effect, and to the extent permissible under applicable law, any such
invalid, illegal or unenforceable provision shall be deemed lawfully amended to
conform with the intent of the parties.
Section 27. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes
the entire agreement of the parties hereto with respect to the subject matter
hereof. No amendment, modification, termination or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing and signed
by all of the parties hereto.
Section 28. HEADINGS. The headings in this Agreement are for
reference purposes only and shall not in any manner affect the meaning,
interpretation, enforceability or validity of this Agreement.
Section 29. BINDING EFFECT. This Agreement shall be binding upon the
parties hereto, their heirs, legatees, executors, legal representatives,
successors in interest, assignees, transferees, creditors (including judgment
creditors), trustees (including trustees in bankruptcy) and any person acting in
a representative capacity for any of the foregoing.
37
Section 30. COUNTERPARTS. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts together shall constitute
one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective the date aforesaid.
SVC PHARMA, INC.
By /s/ XXXXXX X. XXXXXXXX
----------------------
Title: President
PAR SVC, LLC
By: Pharmaceutical Resources, Inc.
its Managing Member
By /s/ XXXXXXX X. XXXXXX
---------------------
Xxxxxxx X. Xxxxxx, President
UDF LP
By: Xxxxxx Technologies Inc.
its General Partner
By /s/ XXXXXX X. XXXXXXXX
----------------------
Title:
38
EXHIBIT A
---------
Gross Profit Determination
Gross Sales: The invoiced amount billed to third parties
for Products excluding any amount included
in the invoiced amount in respect of sales
taxes, tariffs, customs, duties, excise
taxes, value added taxes, other taxes based
upon the amount invoiced and other
governmental charges incurred in connection
with the sale, exportation or importation
of Products.
Sales Deductions: The cost of returns, cash, credit or such
reasonable level of free goods allowances
(to the extent associated directly with the
sale of Products) retroactive price
reductions and amounts refunded for
spoiled, rejected, damaged, outdated
Products, all as actually allowed, incurred
or paid but not passed on to the purchaser
and allowance for bad debts.
Rebates: The cost of the sum of rebates to
wholesalers and chain drug stores, health
maintenance organizations, buying groups,
closed provider pharmacies, vendor
chargebacks, discount to wholesalers,
stocking allowances, rebates to other
health provision plans, hospices, in
respect of Medicaid, Medicare or other
government health schemes and all other
government mandated rebates or allowances
as actually allowed, incurred or paid.
Where pricing or rebates are granted to
customers by one of the parties acting as
subcontractor for Sales and Marketing
combining Company and non-Company Products
as part of a package or bundle, the share
of discounts from list or rebates, etc.,
attributable to the products will be the
discounts or rebates agreed in a budget OR,
if not specifically agreed in a budget, the
lesser of (1) such discounts or rebates
calculated on a pro rata basis, using list
prices of relevant bundled products as a
basis for apportionment or (2) such
discounts or rebates calculated of relevant
bundled products calculated at the highest
discount or highest rebate offered as a
basis for apportionment.
COG: The amount equal to the sum of direct
out-of-pocket costs for materials, supplies
and direct labor for Products, shipping and
insurance, to the extent applicable, as
shipped calculated using US GAAP and
including customary direct and indirect
manufacturing overheads based on the
greater of actual capacity utilization or a
two (2) shift, five (5) day week
utilization of the specific manufacturing
facility in respect of the manufacture of
Products, all other subcontractor's total
direct out-of-pocket costs in respect of
the manufacture of Products for materials,
supplies and direct labor using GAAP and
including customary direct and indirect
manufacturing overheads in respect of the
manufacture of Products. Where kits, other
preparations or combination products are
included in sales, the COG may include
amounts relating to such sales, calculated
on the same proportionate basis as used in
recognizing the relevant Gross sales.
Cost of Promotion: The out-of-pocket cost of marketing and
promotion of the Product, including without
limitation, the cost of telemarketing, promotions,
promotional materials, market research and samples.
Shipping and The amount equal to actual out-of-pocket
Warehousing: costs incurred for shipping, transportation
and warehousing of Products plus an allocation for
personnel and warehouse overhead as approved by the
Board of Directors.
General and An amount equal to the actual costs of
Administrative order taking, customer service, invoicing
Expenses: and collections and administrative
functions, not to exceed in the aggregate 2% of
gross sales determined in accordance with this
Exhibit A.
2
Gross Profit: The amount equal to Gross Sales minus the
aggregate of COG, Sales Deductions,
Rebates, Cost of Promotion, Shipping and
Warehousing Expense and General and
Administrative Expense.
3
EXHIBIT B
---------
Research and Development Costs shall be calculated at $85.00 per hour
(subject to an inflation adjustment to be agreed and approved by the Board of
Directors) plus out-of-pocket costs of special equipment and materials consumed.
If underlying costs increase, the Board of Directors may approve an upward
adjustment to the hourly rate stated herein.
