EXHIBIT 10.26
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.
INVESTMENT AND ROYALTY AGREEMENT
This Investment and Royalty Agreement (this "Agreement") is made as of December
17, 2001, by and among Kos Pharmaceuticals, Inc., a Florida corporation ("Kos"),
PharmaBio Development, Inc., a North Carolina corporation ("PharmaBio"), and
Innovex LP, a New Jersey Limited Partnership ("Innovex").
BACKGROUND AND OVERVIEW
A. Kos, Innovex and PharmaBio have executed a Master Services Agreement on
the date hereof, pursuant to which Innovex will provide contract sales
services in the Territory for the Products.
B. Kos and PharmaBio have agreed that PharmaBio will fund the payments for
certain of the services provided by Innovex under the Master Services
Agreement pursuant to the terms and conditions set forth herein.
FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE
HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:
1.0 DEFINITIONS.
1.1 "Advicor" shall mean the product currently known as Advicor(TM), as
such name may change from time to time, for any and all formulations
and delivery mechanisms.
1.2 "Affiliate" shall mean, as to any person or entity, any corporation or
business entity controlled by, controlling, or under common control
with such person or entity. For this purpose, "control" shall mean
direct or indirect beneficial ownership of at least fifty percent (50%)
of the voting stock or income interest in such corporation or other
business entity, or such other relationship as, in fact, constitutes
actual control.
1.3 "Annual Period" shall mean a twelve-month period beginning on the
Launch Date and each anniversary thereof.
1.4 "Commercialization Expenses" shall mean the fees and expenses payable
to Innovex under the Master Services Agreement for providing one
hundred and fifty (150) sales representatives, eight (8) field
managers, and one (1) national sales manager. For purposes of the
funding obligations of PharmaBio under this Agreement, notwithstanding
anything to the contrary contained in this Agreement,
"Commercialization Expenses" shall not include (i) Excess Fees payable
under Section G(2) of the Work Order (as defined in the Master Services
Agreement) or (ii) Pass-Through Expenses payable under Section 3.1 of
the Master Services Agreement.
1.5 "Commercialization Services" shall mean the recruitment, deployment and
management of a sales force for the promotion of the Products pursuant
to the terms of the Master Services Agreement.
1.6 "Royalty Term" shall mean the five (5) consecutive Annual Periods
beginning on the Launch Date.
1.7 "FDA" shall mean the US Food and Drug Administration.
1.8 "Launch Date" shall mean January 1, 2002.
1.9 "Maximum Investment" shall mean Innovex's charges for the
Commercialization Expenses for providing one hundred and fifty (150)
sales representatives, eight (8) field managers, and one (1) national
sales manager for each of the two (2) Annual Periods following the
Launch Date.
1.10 "Minimum Sales Force Level" shall mean a Kos sales force size of not
less than *** Kos sales representatives promoting the Products in the
first and second detailing positions.
1.11 "Net Sales" means the amount billed by Kos or an Affiliate or any
sublicensee (or other transferee), or on behalf of or for the benefit
of Kos or an Affiliate or any sublicensee (or other transferee), for
sales of the Products to a third party in the Territory, subject to any
deferrals of such Net Sales required by generally accepted accounting
principles ("GAAP"), less provisions for: (i) discounts, including cash
and quantity discounts, charge-back payments, refunds and rebates
granted to managed health care organizations or similar organizations
or to federal, state and local governments (including, without
limitation, Medicaid rebates), their agencies, and purchasers and
reimbursers or to trade customers, including but not limited to,
wholesalers and chain and pharmacy buying groups, (ii) credits or
allowances resulting from customer claims, damaged goods, rejections or
returns of the Products, including recalls, regardless of the party
requesting such, (iii) freight, postage, shipping and insurance charges
actually allowed or paid for delivery of Products, to the extent
billed, (iv) taxes, duties or other governmental charges levied on,
absorbed or otherwise imposed on sale of such Products, including
without limitation value-added taxes, or other governmental charges
otherwise measured by the billing, when included in billing, as
adjusted for rebates, charge-backs and refunds, and (v) actual or
expected write-offs of uncollectible customer accounts for recorded
sales or for other reserves or provisions established consistent with
GAAP.
1.12 "Niaspan" shall mean the product currently known as Niaspan(R), as such
name may change from time to time, for any and all formulations and
delivery mechanisms.
1.13 "Products" shall mean Advicor(TM)and Niaspan(R).
1.14 "Territory" shall mean the United States.
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2.0 MASTER SERVICES AGREEMENT.
The Master Services Agreement is in the form attached hereto as EXHIBIT
A. All defined terms used herein but not defined in this Agreement
shall have the meanings set forth in the Master Services Agreement.
3.0 INVESTMENT AND ROYALTIES; RELATED AGREEMENTS.
3.1 PharmaBio will support the commercialization of the Products as
follows:
(a) PharmaBio shall fund one hundred percent (100%) of the
Commercialization Expenses for the period beginning on the
Launch Date and ending on the second (2nd) anniversary of the
Launch Date (the "Commitment Period"), subject to the Maximum
Investment for each such year and the other terms and
conditions in this Agreement.
(b) PharmaBio shall fund the amounts payable under Section 3.1(a)
by paying the invoices submitted by Innovex that correspond to
the applicable Commercialization Expenses that accrue during
the Commitment Period, which payments shall be made by
PharmaBio through an inter-company payment directly to
Innovex. Innovex shall accept such payments from PharmaBio in
full satisfaction of the Commercialization Expenses. In no
event shall Kos be responsible for the payment of the
Commercialization Expenses, and each of Innovex and PharmaBio
agree to hold Kos harmless from such expenses.
3.2 In consideration for the performance by PharmaBio of its funding
commitments set forth in Section 3.1, Kos shall pay PharmaBio royalties
on Net Sales during the Royalty Term. The royalty payments payable by
Kos to PharmaBio with respect to each Annual Period are as follows:
------------------------------------ ------------------------------
ANNUAL PERIOD DURING THE
ROYALTY TERM ROYALTY ON NET SALES
------------------------------------ ------------------------------
1 **%
------------------------------------ ------------------------------
2 **%
------------------------------------ ------------------------------
3 **%
------------------------------------ ------------------------------
4 **%
------------------------------------ ------------------------------
5 **%
------------------------------------ ------------------------------
Notwithstanding anything to the contrary contained in this Agreement,
the total royalties payable to PharmaBio under this Section 3.2 shall
not (i) exceed in the aggregate for all Annual Periods the amount of
$75,000,000 (and, accordingly, PharmaBio's right to receive royalties
will end upon PharmaBio's receipt of $75 Million in royalties paid by
Kos), or (ii) be less than $45 Million in the aggregate for all Annual
Periods, provided that there shall not be any minimum royalty
commitment by Kos in the event that this Agreement or the Master
Services Agreement is terminated prior to the end of the Project Term
(as such term is defined in the Master Services Agreement) or under
Section 3.4, 3.7, or 6.0 of this Agreement. As it relates to the
minimum royalty commitment, at the end of the fifth (5th) Annual
Period, if PharmaBio has not received at least $45 Million in aggregate
royalties under this Section 3.2, then Kos will pay PharmaBio the
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difference between the amount of royalties actually received and $45
Million. The $45 Million minimum payment shall be payable by Kos to
PharmaBio notwithstanding the actual sales of the Product or other
Product-related events.
In consideration for Innovex's failure to achieve the target of one
hundred and fifty sales representatives on or before April 1, 2002
under the Master Services Agreement (and the expectation that the
number of sales representatives will be below one hundred and fifty for
much of the first quarter following the Launch Date), Kos shall be
entitled to reduce its quarterly royalty payments to PharmaBio by the
amount of $62,500 per quarter for the first eight quarters following
the Launch Date. In calculating the minimum and maximum royalty
obligations pursuant to the preceding paragraph, the parties shall use
the net amount of the royalty payments made to PharmaBio (i.e., after
giving effect to the reduction described in the preceding sentence). In
no event shall PharmaBio be obligated to pay such $62,500 payments
other than as an offset to royalties payable by Kos under this
Agreement.
The royalty payments under this Section 3.2 shall be paid as soon as
reasonably practicable following the end of each calendar quarter (but
not later than forty five (45) days following the end of each calendar
quarter, except following the fourth quarter, in which case Kos shall
have up to 60 days) during the five (5) Annual Periods in the Royalty
Term. Kos shall provide PharmaBio with the sales data for the Products
that are available to Kos.
3.3 Kos shall use its commercially reasonable efforts to commercialize the
Products in the Territory. In this regard, Kos will provide a sales
force of an average size, calculated on a quarterly basis, not less
than the Minimum Sales Force Level during the Royalty Term. If, at any
time during such period, Kos reduces the Products' average sales force
below the Minimum Sales Force Level for a period of more than sixty
(60) days, then Kos and PharmaBio will negotiate in good faith to
restructure PharmaBio's commitments under Section 3.1 and the
corresponding royalty amounts under Section 3.2, which negotiations
will take into account the implications of the reduced sales force size
on future sales of the Products. If the parties are unable to agree to
such restructuring within thirty (30) days after PharmaBio gives
written notice to Kos of its intent to pursue a remedy under this
Section 3.3 for Kos' failure to maintain the Minimum Sales Force Level,
then PharmaBio may, at its sole discretion by written notice to Kos,
elect to (i) suspend all future funding obligations under Section 3.1;
and (ii) extend the Royalty Term (including, without limitation, the
then-current Annual Period). During the suspension and extension
period, PharmaBio shall continue to receive royalties at the rate equal
to the royalty amount applicable immediately prior to the effective
date of the suspension and extension period. If PharmaBio elects this
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remedy, the then operating Annual Period for royalty payments under
Section 3.2, and the funding commitments under Section 3.1, shall be
extended until the Minimum Sales Force Level is satisfied. The funding
commitments under Section 3.1, shall resume as soon as Kos achieves the
Minimum Sales Force Level, and the end of the then current Annual
Period shall be extended for the amount of the suspension and extension
period, such that PharmaBio enjoys the full length of the five (5)
Annual Periods described in Section 3.2 with the benefit of the Minimum
Sales Force Level for five (5) full twelve-month periods, and the term
"Royalty Term" shall, for all purposes under this Agreement, be
extended accordingly. PharmaBio's remedies under this Section 3.3 shall
not apply for any period that Innovex fails to satisfy its sales force
staffing obligations under the Master Services.
3.4 In the event that Kos terminates the Master Services Agreement under
Section 11.2 of the Master Services Agreement during the First or
Second Annual Period, this Agreement shall be terminated and PharmaBio
shall be entitled to receive royalties on Net Sales as provided in
Section 3.2 only through the date of termination of the Master Services
Agreement. PharmaBio shall also be entitled to receive the amount equal
to (x) amounts funded by PharmaBio under Section 3.1 of this Agreement
through the effective date of termination less any royalties paid to
PharmaBio pursuant to Section 3.2, PLUS (y) interest on such net funded
amounts at the Prime Rate plus one percent (1%), provided however, that
Kos shall be entitled to pay such amount in equal quarterly
installments within thirty (30) days following the end of each quarter
over the two year period following the termination. In the event of
termination under this section, Kos shall not be obligated to meet any
minimum royalty commitment to PharmaBio.
3.5 As further consideration for PharmaBio's funding obligations under this
Agreement, Kos hereby makes the representations and warranties set
forth on Schedule 3.5.
3.6 Each Party shall keep or cause to be kept such records as are required
to determine, in a manner consistent with GAAP, the sums or credits due
under this Agreement. Each party shall have the right, at such party's
expense, through a certified public accountant or like person
reasonably acceptable to the other Party, upon execution of a
confidentiality agreement, to examine such records during regular
business hours upon reasonable notice during the life of this Agreement
and for twelve (12) months after its termination; provided however,
that (i) such examination shall not take place more than once a year
and shall not cover such records for more than the preceding Annual
Period, and (ii) such accountant shall report to both Parties only as
to the accuracy of the reports or payments provided or made by the
other Party under this Agreement. Any adjustments required as a result
of overpayments or underpayments identified through a Party's exercise
of audit rights, and any other adjustments that may be required from
time to time in order to correct overpayments or underpayments under
this Agreement, shall be made by subtracting or adding, as appropriate,
amounts from or to the next royalty payment in accordance with Section
3.2. The Party requesting the audit shall bear the full cost of the
audit unless such audit correctly discloses that the discrepancy for
the Annual Period differs by more than five (5) percent from the amount
the accountant determines is correct, in such case the owing Party
shall pay the reasonable fees and expenses charged by the accountant.
In the event that a Party disputes an invoice or other payment
obligation under this Agreement, such Party shall timely pay the amount
of the invoice or other payment obligation, and the Parties shall
resolve such dispute in Accordance with Section 11.
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3.7 Within seventy five (75) days following the first (1st) anniversary of
the Launch Date, if (i) actual cumulative Net Sales for the Products
are less than $*** for the first Annual Period, and (ii) the aggregate
Net Sales for the Products for Kos' fourth fiscal quarter of 2002 are
less than **% greater than the aggregate Net Sales of the Products
during Kos' third fiscal quarter of 2002, each of Kos and PharmaBio
shall have the right to (i) terminate this Agreement and the Master
Services Agreement upon thirty (30) days written notice to the other
parties hereto. In the event of any such termination, Kos shall pay
PharmaBio an amount equal to (x) amounts funded by PharmaBio under
Section 3.1 of this Agreement through the effective date of termination
less any royalties paid to PharmaBio pursuant to Section 3.2, PLUS (y)
interest on such net funded amounts at the Prime Rate plus one percent
(1%), provided however, that Kos shall be entitled to pay such amount
in equal quarterly installments over the two year period following the
termination. In the event of termination under this section, Kos shall
not have any minimum royalty commitment to PharmaBio.
4.0 CONFIDENTIALITY AND OWNERSHIP OF INFORMATION.
4.1 Kos on the one part and PharmaBio on the other part each acknowledges
that, in the course of performing its obligations hereunder, it may
receive information from the other party which is proprietary to the
disclosing party and which the disclosing party wishes to protect from
public disclosure ("Confidential Information"). Each receiving party
agrees to retain in confidence, during the Royalty Term, and thereafter
for a period of seven (7) years, all Confidential Information disclosed
to it by or on behalf of the other party, and that it will not, without
the written consent of such other party, use Confidential Information
for any purpose other than the purposes indicated herein. These
restrictions shall not apply to Confidential Information which: (i) is
or becomes public knowledge (through no fault of the receiving party);
(ii) is made lawfully available to the receiving party by an
independent third party that, to the knowledge of the receiving party,
is under no duty of confidentiality to the disclosing party; (iii) is
already in the receiving party's possession at the time of receipt from
the disclosing party (and such prior possession can be demonstrated by
competent evidence by the receiving party); (iv) is independently
developed by the receiving party and/or Affiliates (and such
independent development can be demonstrated by competent evidence by
the receiving party); or (v) is required by law, regulation, rule, act
or order of any governmental authority or agency to be disclosed by the
receiving party, provided, however, if reasonably possible, such
receiving party gives the disclosing party sufficient advance written
notice to permit it to seek a protective order or other similar order
with respect to such Confidential Information and, thereafter, the
receiving party discloses only the minimum Confidential Information
required to be disclosed in order to comply.
4.2 PharmaBio on the one hand and Kos on the other hand shall limit
disclosure of the other party's Confidential Information to only those
of their respective officers, representatives, agents and employees
(collectively "Agents") who are directly concerned with the performance
of this Agreement and have a legitimate need to know such Confidential
Information in the performance of their duties.
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4.3 All Kos inventions, processes, know-how, patents, trade secrets,
copyrights, trade names, trademarks, service marks, marketing
materials, proprietary materials or other intellectual property of any
kind, and all improvements to any of the foregoing (collectively, "Kos
Property"), disclosed, used, improved, modified or developed in
connection with the relationship contemplated by this Agreement shall
remain the sole and exclusive property of Kos. Neither PharmaBio nor
Innovex shall have any right, title or interest in or to any Kos
Property.
4.4 Kos acknowledges that PharmaBio (and its Affiliates) possess certain
inventions, processes, know-how, trade secrets, improvements, other
intellectual properties and other assets, including but not limited to
analytical methods, procedures and techniques, computer technical
expertise and software, and business practices, including, but not
limited to the Innovex Territory Management System (ITMS), which have
been independently developed by PharmaBio and/or its Affiliates
(collectively "PharmaBio Property"). Any PharmaBio Property or
improvements thereto which are disclosed, used, improved, modified or
developed under or during the term of this Agreement shall remain the
sole and exclusive property of PharmaBio or the respective Affiliate.
4.5 Neither PharmaBio, Innovex, nor Kos or any of their Affiliates shall
make any public announcements regarding this Agreement or the terms and
conditions thereof without the prior written approval of Kos on the one
hand and PharmaBio or Innovex on the other hand.
5.0 INDEPENDENT CONTRACTOR RELATIONSHIP.
For the purposes of this Agreement, Kos, PharmaBio and Innovex are
independent contractors and nothing contained in this Agreement shall
be construed to place them in the relationship of partners, principal
and agent, employer and employee or joint venturers. Neither Kos,
PharmaBio, nor Innovex shall have the power or right to bind or
obligate the other party, nor shall either party hold itself out as
having such authority.
6.0 TERMINATION.
Either party may terminate this Agreement for material breach upon
thirty (30) days written notice specifying the nature of the breach, if
such breach (i) has not been substantially cured within the thirty (30)
day period or (ii) is not curable within such 30-day period and the
breaching party has not commenced and diligently continued during such
30-day period reasonable actions to cure such breach. During the 30-day
cure period for termination due to breach, each party will continue to
perform its obligations under this Agreement. Either party may
terminate this Agreement immediately upon provision of written notice
if the other party becomes insolvent or files for bankruptcy or is not
otherwise able to pay its obligations as they become due and payable.
Any termination under this Section 6 shall be without prejudice to any
claims for damages or other relief by the terminating party.
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7.0 INDEMNIFICATION AND LIABILITY LIMITS.
7.1 PharmaBio shall indemnify, defend and hold harmless Kos, its Affiliates
and its and their respective directors, officers, employees and agents
from and against any and all losses, claims, actions, damages,
liabilities, penalties, costs and expenses (including reasonable
attorneys' fees and court costs) (collectively, "Losses"), resulting
from any: (i) breach by PharmaBio (or its employees) of its obligations
hereunder; (ii) willful misconduct or grossly negligent acts or
omissions of PharmaBio or its employees; and (iii) violation by
PharmaBio or its employees of any municipal, county, state or federal
laws, rules or regulations applicable to the performance of PharmaBio's
obligations under this Agreement; except, in each case, to the extent
such Losses are determined to have resulted from the gross negligence
or willful misconduct of Kos or its employees.
7.2 Kos shall indemnify, defend and hold harmless PharmaBio and its
Affiliates and their respective directors, officers, employees and
agents from and against any and all Losses resulting from: (i) any
third party claim arising from the manufacture, storage, packaging,
production, transportation, distribution, use, sale or other
disposition of the Products; (ii) breach by Kos (or its employees) of
its obligations hereunder; (iii) willful misconduct or grossly
negligent acts or omissions of Kos or its employees; and (iv) violation
by Kos or its employees of any municipal, county, state or federal
laws, rules or regulations applicable to the performance of Kos'
obligations under this Agreement, except, in each case, to the extent
such Losses are determined to have resulted from the gross negligence
or willful misconduct of PharmaBio or Innovex or any of their
employees.
7.3 In the event of a third party claim or lawsuit, the party seeking
indemnification hereunder (the "Indemnified Party") shall give the
party obligated to indemnify (the "Indemnifying Party") prompt written
notice of any claim or lawsuit (including a copy thereof), provided
that the failure of an Indemnified Party to notify the Indemnifying
Party on a timely basis will not relieve the Indemnifying Party of any
liability that it may have to the Indemnified Party unless the
Indemnifying Party demonstrates that the defense of such action is
materially prejudiced by the Indemnified Party's failure to give such
notice. The Indemnified Party and its employees shall fully cooperate
with Indemnifying Party and its legal representatives in the
investigation and defense of any matter the subject of indemnification,
which defense shall be managed by the Indemnifying Party in a manner,
including the selection of legal counsel, reasonably acceptable to the
Indemnified Party. The Indemnified Party shall not unreasonably
withhold its approval of the settlement of any such claim, liability,
or action by Indemnifying Party covered by this indemnification
provision; provided that such settlement does not include an admission
or acknowledgement of liability or fault of the Indemnified Party.
7.4 Neither PharmaBio nor Kos, nor any of such party's Affiliates,
directors, officers, employees, subcontractors or agents shall have,
under any legal theory (including, but not limited to, contract,
negligence and tort liability), any liability to any other party hereto
for any loss of opportunity or goodwill, or any type of special,
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incidental, indirect or consequential damage or loss, in connection
with or arising out of this Agreement. For the avoidance of doubt, a
claim by PharmaBio for royalties on Net Sales payable by Kos hereunder
or a claim by Kos for payments pursuant to Section 3.1 shall not be
limited in any way pursuant to the provisions set forth in the
preceding sentence.
8.0 NOTICES.
Any notice required to be given by either party shall be in writing.
All notices shall be to the parties and addresses listed below, and
shall be deemed sufficiently given (i) when received, if delivered
personally or sent by facsimile transmission with confirmed receipt, or
(ii) one business day after the date mailed or sent by an
internationally recognized overnight delivery service with charges
prepaid.
If to PharmaBio: PharmaBio Development, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: President
Fax: 000-000-0000
With a copy to: General Counsel
PharmaBio Development, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
If to Kos: Kos Pharmaceuticals, Inc.
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, XX 00000
Attn: President
Secretary
Vice President, Commercial Operations
Fax: 000-000-0000
With a copy to: Holland & Knight LLP
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Esq.
Fax: 000-000-0000
9.0 ASSIGNMENT.
No party may assign any of its rights or obligations under this
Agreement to any third party other than an Affiliate without the
written consent of the other party, except that Kos may assign its
rights or obligations under this Agreement to a bona fide third party
that acquires all of Kos' business to which this Agreement relates (a
"Permitted Sale") provided that such party assumes all of Kos' rights
and obligations under this Agreement. PharmaBio may at any time assign
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or transfer any of its rights or obligations under this Agreement to an
Affiliate. Nothing in this Section 9.0 shall preclude the transfer of a
party's rights and obligations under this Agreement in conjunction with
a merger in which such party is not the surviving entity.
10.0 GENERAL PROVISIONS.
10.1 Section 3.6, Section 4.0, Section 7.0, and Section 11.0 shall survive
the termination of this Agreement for any reason.
10.2 This Agreement contains the entire understanding of the parties with
respect to the subject matter herein and cancels all previous
agreements (oral and written), negotiations and discussions dealing
with the same subject matter. The parties, from time to time during the
term of this Agreement, may modify any of the provisions hereof only by
an instrument in writing duly executed by the parties.
10.3 No failure or delay on the part of a party in either exercising or
enforcing any right under this Agreement will operate as a waiver of,
or impair, any such right. No single or partial exercise or enforcement
of any such right will preclude any other or further exercise or
enforcement thereof or the exercise or enforcement of any other right.
No waiver of any such right will have effect unless given in a signed
writing. No waiver of any such right will be deemed a waiver of any
other right.
10.4 If any part or parts of this Agreement are held to be illegal, void or
ineffective, the remaining portions of this Agreement shall remain in
full force and effect. If any of the terms or provisions are in
conflict with any applicable statute or rule of law, then such term(s)
or provision(s) shall be deemed inoperative to the extent that they may
conflict therewith, and shall be deemed to be modified or conformed
with such statute or rule of law. In the event of any ambiguity
respecting any term or terms hereof, the parties agree to construe and
interpret such ambiguity in good faith in such a way as is appropriate
to ensure its enforceability and viability.
10.5 The headings contained in this Agreement are used only as a matter of
convenience, and in no way define, limit, construe or describe the
scope or intent of any section of this Agreement.
10.6 The individuals signing below are authorized and empowered to bind the
parties to the terms of this Agreement.
11.0 DISPUTE RESOLUTION:
11.1 GOVERNING LAW. This Agreement, including, without limitation, the
interpretation, performance, enforcement, breach or termination thereof
and any remedies relating thereto, shall be governed by and construed
in accordance with the laws of the State of New York, United States of
America, as applied to agreements executed and performed entirely in
the State of New York, without regard to conflicts of law rules.
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11.2 INTERNAL REVIEW. In the event that a dispute, difference, claim,
action, demand, request, investigation, controversy, threat, Kos
request or request for testimony or information or other question
arises pertaining to any matters which arise under, out of, in
connection with, or in relation to this Agreement (a "Dispute") and
either party so requests in writing, prior to the initiation of any
formal legal action, the Dispute will be submitted to the Chief
Executive Officers of Kos and Quintiles Corp. For all Disputes referred
to the Chief Executive Officers, the Chief Executive Officers shall use
their good faith efforts to meet at least two times in person and to
resolve the Dispute within ten (10) days after such referral.
11.3 ARBITRATION.
(a) If the parties are unable to resolve any Dispute under Section
11.2, then either party may by election within ten (10) days
after the end of the period set forth in Section 11.2, require
the matter to be settled by final and binding arbitration by
sending written notice of such election to the other party
clearly marked "Arbitration Demand". Thereupon such Dispute
shall be arbitrated in accordance with the terms and
conditions of this Section 11.3. Notwithstanding the
foregoing, either party may apply to a court of competent
jurisdiction for a temporary restraining order, a preliminary
injunction, or other equitable relief to preserve the status
quo or prevent irreparable harm.
(b) The arbitration panel will be composed of three arbitrators,
one of whom will be chosen by Kos, one by Quintiles, and the
third by the two so chosen. If both or either of Kos or
Quintiles fails to choose an arbitrator or arbitrators within
fourteen (14) days after receiving notice of commencement of
arbitration, or if the two arbitrators fail to choose a third
arbitrator within fourteen (14) days after their appointment,
the American Arbitration Association shall, upon the request
of both or either of the parties to the arbitration, appoint
the arbitrator or arbitrators required to complete the panel.
The arbitrators shall have reasonable experience in the matter
under dispute. The decision of the arbitrators shall be final
and binding on the parties, and specific performance giving
effect to the decision of the arbitrators may be ordered by
any court of competent jurisdiction.
(c) Nothing contained herein shall operate to prevent either party
from asserting counterclaim(s) in any arbitration commenced in
accordance with this agreement, and any such party need not
comply with the procedural provisions of this Section 11.3 in
order to assert such counterclaim(s).
(d) The arbitration shall be filed with the office of the American
Arbitration Association ("AAA") located in New York, New York
or such other AAA office as the parties may agree upon
(without any obligation to so agree). The arbitration shall be
conducted pursuant to the Commercial Arbitration Rules of AAA
as in effect at the time of the arbitration hearing, such
arbitration to be completed in a sixty (60) day period. In
addition, the following rules and procedures shall apply to
the arbitration.
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(e) The arbitrators shall have the sole authority to decide
whether or not any Dispute between the parties is arbitrable
and whether the party presenting the issues to be arbitrated
has satisfied the conditions precedent to such party's right
to commence arbitration as required by this Section 11.3.
(f) The decision of the arbitrators, which shall be in writing and
state the findings the facts and conclusions of law upon which
the decision is based, shall be final and binding upon the
parties, who shall forthwith comply after receipt thereof.
Judgment upon the award rendered by the arbitrator may be
entered by any competent court. Each party submits itself to
the jurisdiction of any such court, but only for the entry and
enforcement to judgment with respect to the decision of the
arbitrators hereunder.
(g) The arbitrators shall have the power to grant all legal and
equitable remedies (including, without limitation, specific
performance) and award compensatory damages provided by
applicable law, but shall not have the power or authority to
award punitive damages. No party shall seek punitive damages
in relation to any matter under, arising out of, or in
connection with or relating to this Agreement in any other
forum.
(h) The parties shall bear their own costs in preparing for and
participating in the resolution of any Dispute pursuant to
this Section 11.3, and the costs of the arbitrator(s) shall be
equally divided between the parties; provided, however, that
each party shall bear the costs incurred in connection with
any Dispute brought by such party that the arbitrators
determine to have been brought in bad faith.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
through their duly authorized officers on the date(s) set forth below.
PHARMABIO DEVELOPMENT, INC. KOS PHARMACEUTICALS, INC.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxx Xxxxx
---------------------------- ----------------------------
Name: Xxxxxx X. Xxxxxx Name Xxxxxx Xxxxx
---------------------------- ----------------------------
Title: President Title: President and COO
---------------------------- ----------------------------
INNOVEX LP
By: /s/ Xxxxx X. Overs
----------------------------
Name: Xxxxx X. Overs
----------------------------
Title: Chief Financial Officer
----------------------------
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Schedule 3.5
1. INTELLECTUAL PROPERTY. Kos owns or has valid and enforceable rights
to use all Intellectual Property (as defined below) necessary to conduct Kos'
business as described in the SEC Reports (as defined below) including without
limitation to develop, commercialize, market, make and distribute Niaspan and
Advicor as described in the SEC reports (collectively, the "Kos Intellectual
Property"). To the knowledge of Kos, none of the Kos Intellectual Property
infringes, misappropriates or makes any unauthorized use of any Intellectual
Property of any other person. Kos has received no notice or other communication
of any actual, alleged, or potential infringement, misappropriation or
unauthorized use of Intellectual Property owned or used by any other person. To
the knowledge of Kos, no person is infringing, misappropriating or making any
unauthorized use of any Kos Intellectual Property. Kos has not entered into any
agreement or arrangement, and Kos is not subject to any judgment, order or
decree of any court or governmental or regulatory body limiting Kos' ability to
exploit freely the Kos Intellectual Property or to transact business in any
market with any person. There is no pending or, to the knowledge of Kos,
threatened action, claim, suit, proceeding or investigation before any court or
any governmental or regulatory body challenging the validity, scope, ownership,
or right to use the Kos Intellectual Property, except for an opposition
proceeding that has been filed with the Trademark Trial and Appeal Board of the
U.S. Patent and Trademark Office objecting to the application for registration
of the Advicor(TM) trademark. There are no actions, claims, suits or proceedings
by Kos against any other person regarding the Kos Intellectual Property or the
Intellectual Property of such person. Kos is not aware of any Intellectual
Property owned or controlled by any other person, or of any facts, circumstances
or events, that would materially impair or prevent Kos from developing,
commercializing, marketing, making and distributing Niaspan and Advicor as
contemplated by the SEC Reports, except as described in the SEC Reports.
"Intellectual Property" shall mean all material: trade, business and product
names; trademarks; service marks; copyrights; patents; discoveries; trade
secrets; business and technical information; proprietary compilations of data or
information; know-how; inventions; formulas and techniques; methods; regulatory
filings; computer software; all intellectual property rights, registrations,
licenses and applications pertaining to any of the foregoing; and all related
documentation and goodwill. "SEC Reports" shall mean the following reports filed
by Kos with the Securities and Exchange Commission: Form 10-K for the fiscal
year ended December 31, 2000; Form 10-Q for the quarterly period ended September
30, 2001; and any documents filed with the SEC after September 30, 2001 and
prior to the date of this Agreement.
2. CONTRACTS. All of the contracts and agreements of Kos described in
the SEC Reports (the "Material Contracts"), including without limitation
regarding Niaspan and Advicor, are in full force and effect, valid and binding,
and enforceable in accordance with their terms, in all material respects. Kos is
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not and, to the knowledge of Kos, no other party is in violation, breach or
default of any Material Contract in any material respect or in any manner that
would permit a party to terminate such Material Contract. To the knowledge of
Kos, no event or condition exists or has occurred which would permit a party to
terminate any Material Contract. Kos is not a party to any agreement or
arrangement regarding the promotion by any other person of Niaspan or Advicor
and, without limiting the generality of the foregoing, any such agreement
between Kos and DuPont Pharmaceuticals Company or any affiliate thereof has been
terminated or expired. The execution, delivery and performance by Kos of this
Agreement will not violate or conflict in any material respect with any
agreement or instrument to which the Kos is a party or by which Kos or its
properties is bound.
3. Product Launch. Advicor will be in a position to be launched,
including all reasonable components of the distribution, manufacturing and
supply chain, by February 1, 2002.; and Kos shall pursue the launch of Advicor
no later than such date.
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