EXHIBIT 10.34
August 12, 1998
Xx. Xxxx-Xxxx X. Xxxx
10680 SW 00 Xxxxx
Xxxxx, XX 00000
Dear Xx. Xxxx:
This shall confirm our discussions regarding the February 26, 1993
Royalty Agreement between you and Andrx Corporation, as amended on March 17,
1994 (the "Royalty Agreement"):
1. Under Section 3(a) of the Royalty Agreement, both as originally
drafted and as amended, you are entitled to receive a royalty from Andrx with
respect to:
3.33% of the Net Operating Revenues derived by Andrx FROM THE SALE OF
DILTIAZEM CD. For purposes of the foregoing `Net Operating Revenues'
shall be determined by deducting from Andrx' gross revenues any
discounts, returns allowances and freight expenses actually incurred by
Andrx." (emphasis added --- March 17, 1994 language).
"33.33% of the `Net Profits', as defined below, realized FROM THE SALE
OF DILTIAZEM CD. `Net Profits' shall be determined by deducting from
the gross revenues realized by Xxxxx FROM THE SALE OF DILTIAZEM CD ..."
(emphasis added -- February 26, 1993 language).
2. Under the September 24, 1997 Stipulation and Agreement with Hoechst
Xxxxxx Xxxxxxx, Inc. ("HMR"), Andrx will begin receiving quarterly payments from
HMR of $10 million upon obtaining FDA marketing approval for Cardizem CD (the
"Interim Payments"). While the Interim Payments from HMR are non-refundable,
Andrx will be required to pay a substantial patent licensing fee and royalty if
HMR were to prevail in the patent infringement litigation.
3. As the Royalty Agreement specifically conditions your royalty to
amounts received by Andrx from the sale of Diltiazem CD, the Royalty Agreement
does not obligate Andrx to pay a royalty to you on the Interim Payments.
However, in the event Andrx prevails in its litigation with HMR, the Interim
Payments will be supplemented by an additional payment from HMR, in an amount
that Andrx and HMR intended would
make the total amount received by Andrx equal to "the profits that Xxxxx would
have realized from the sale of [Diltiazem CD]" (the "Supplemental Payment").
4. As the term Net Operating Revenues in the Royalty Agreement includes
only specified deductions from revenue (discounts, returns allowances and
freight expenses actually incurred by Andrx) and does not include any catch-all
terms such as "other similar deductions", the Royalty Agreement does not allow
Andrx to deduct the license fee and royalty payable to HMR in the event the
court were to conclude that the Andrx product infringes upon HMR's patents with
respect to Diltiazem CD.
5. To deal with these issues, Xxxxx and you have agreed to the
following:
a. Within 10 days of receiving Interim Payments, the Supplemental
Payment or any other revenues with respect to Diltiazem CD, Andrx
shall pay to you 3.33% of the gross amount Andrx receives from the
HMR payments and 3.33% of the Net Operating Revenues (as the
definition of such term is modified below) that Andrx receives from
the sale or licensing of Diltiazem CD, both prior to and after the
litigation with HMR is concluded;
b. In the event HMR prevails in its litigation with Andrx and Andrx
licenses the HMR patents, your royalty shall be based on the Net
Operating Revenues derived by Andrx after payment of the licensing
fee and royalty paid or payable to Andrx by HMR. Accordingly, you
will not receive any additional royalty payments from Andrx until
Andrx has fully recouped your 3.33% share of the licensing fee and
royalty attributable to any Interim Payments for which you received
a 3.33% payment.
c. In the event HMR prevails in its litigation with Xxxxx and Xxxxx
decides not to obtain a license for the patents, you will retain
any amounts you received pursuant to Section 5(a) above.
6. The terms of this Agreement shall constitute the entire
understanding between you and Andrx with respect to the computation of royalties
with respect to Diltiazem CD under the Royalty Agreement. Any rights, claims or
privileges (but not obligations) under this Agreement may be waived at any time
by either you or Andrx; provided, however, that no waiver is to be implied from
any omission to act. No waiver on one occasion shall be deemed to be a waiver in
any other circumstance. This Agreement and the Royalty Agreement may only be
further modified or amended by a written agreement signed by you and by Xxxxx.
7. This Agreement shall be governed in accordance with Florida law and
any action taken to interpret or enforce it shall be conducted in any court with
proper jurisdiction in Broward County, Florida.
If the foregoing terms and conditions are acceptable, please indicate
your acceptance by executing and dating a copy of this Agreement and returning
that executed copy to us. However, because you are an officer and director of
Xxxxx, we must have this letter agreement approved by the outside members of our
Board of directors. Accordingly, this Agreement will not be binding upon either
Andrx or you unless a majority of those outside directors approve this
Agreement, by adding their signatures below as well.
Sincerely,
/S/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
Chairman and CEO
AGREED TO AND ACCEPTED ON
THIS 14 DAY OF JULY, 1998:
/S/ XXXX-XXXX XXXX
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Xxxx-Xxxx Xxxx
OUTSIDE DIRECTOR APPROVAL:
/S/ XXXXX XXXXX
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Xxxxxx Xxxxx on 7/ 17 /98
/S/ XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx on 7/ /98
/S/ XXXXXXX X. XXXXXXXX
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Xxxxxxx X. Xxxxxxxx on 7/ /98
/S/ XXXXXX XXXXXXX, MD
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Xxxxxx Xxxxxxx on 7/ /98
