1
LICENSING AGREEMENT
This LICENSING AGREEMENT ("Agreement") dated as of August 31,
1995, by and between ▇▇▇ ▇▇▇▇▇ AND COMPANY, an Indiana corporation
with offices located at Lilly ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ ("Lilly"), and ▇▇▇▇▇ MEDICAL INDUSTRIES, INC., a Delaware
corporation with offices located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("JMED").
W I T N E S S E T H:
--------------------
WHEREAS, Lilly is engaged, among other things, in the business of
manufacturing, marketing and selling rapid ultrashort-acting
barbiturate anesthetic pharmaceutical products; and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, Lilly wishes to license to JMED and JMED wishes to license
from Lilly certain rights and assets which Lilly uses in the conduct
of the above-described business;
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following
-----------
terms shall have the meanings set forth below:
"Affiliates" shall mean, with respect to any Person, any Persons
----------
directly or indirectly controlling, controlled by, or under common
control with, such other Person. For purposes hereof, the term
"controlled" (including the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
direct or indirect ability or power to
2
direct or cause the direction of management policies of such Person or
otherwise direct the affairs of such Person, whether through ownership
of voting securities or otherwise.
"Business" shall mean the business of marketing and selling the
--------
Product in the United States as conducted at the date of this
Agreement by Lilly.
"Copyrights" shall mean all of Lilly's copyright rights in the
----------
United States that are used by Lilly solely in connection with the
Business, including, but not limited to, Lilly's copyright rights in
the Marketing Materials and the Marketing and Pricing Data.
"Damages" shall mean any and all costs, losses, claims,
-------
liabilities, fines, penalties, damages and expenses, court costs, and
reasonable fees and disbursements of counsel, consultants and expert
witnesses incurred by a party hereto (including interest which may be
imposed in connection therewith).
"DEA" shall mean the United States Drug Enforcement
---
Administration.
"FDA" shall mean the United States Food and Drug Administration.
---
"Intellectual Property" shall mean, collectively, (i) the
---------------------
Copyrights, (ii) the Trademark, and (iii) the Marketing Materials.
"Manufacturing Agreement" shall mean the Manufacturing Agreement,
-----------------------
dated as of the date of this Agreement, between Lilly and JMED, which
provides for the manufacture by Lilly of the Product for JMED as
specified therein.
"Marketing and Pricing Data" shall mean all customer lists, sales
--------------------------
data, price lists and, subject to confidentiality obligations to third
parties, all other pricing information in the possession or control of
Lilly relating solely to sales of the Product in the United States
occurring
2
3
in the most recent 36-month period prior to the date of this Agreement
for which such information is available.
"Marketing Materials" shall mean all labeling, marketing and
-------------------
promotional materials, promotional literature and inserts that are
used by Lilly solely in connection with the Business.
"Net Sales" shall mean, with respect to the Product, the gross
---------
amount invoiced to unrelated third parties for the Product in the
United States, less:
(a) Trade, quantity and cash discounts allowed;
(b) Commissions, discounts, refunds, rebates, chargebacks,
retroactive price adjustments, and any other allowances which
effectively reduce the net selling price;
(c) Product returns, credits and allowances; and
(d) Any tax or other governmental charges levied or imposed
with respect to the sale or delivery of the Product.
Such amounts shall be determined from books and records
maintained in accordance with generally accepted accounting
principles, consistently applied.
"Person" shall mean a natural person, a corporation, a
------
partnership, a trust, a joint venture, a limited liability company,
any governmental authority or any other entity or organization.
"Product" shall mean: Brevital(R) Sodium (methohexital sodium
-------
for injection, USP) in the following presentations:
(a) 500 mg (with 30 mg anhydrous sodium carbonate), 50 ml
size, multiple dose (1s);
(b) 500 mg (with 30mg anhydrous sodium carbonate), 50 ml
size, multiple dose (25s);
3
4
(c) 500 mg (with 30 mg anhydrous sodium carbonate), 50 ml
size, multiple dose, with one 50 ▇▇ ▇▇▇▇ sterile water for injection
(1s);
(d) 2.5g (with 150 mg anhydrous sodium carbonate), 20 ml
size (25s);
(e) 5g (with 300 mg anhydrous sodium carbonate), 30 ml size
(1s); and
(f) Any other presentations of the Product approved under
the NDA and any supplements thereto or thereof.
"Technology" shall mean all of Lilly's technology, know-how,
----------
methods of operation, manufacturing systems details, processes,
information, production details, recipes, formulations, files,
records, specifications, data and other information necessary to, or
that assist in, the manufacture of Product.
"Trademark" shall mean all of Lilly's right, title and interest
---------
in and to the United States trademark Brevital(R), U.S. Trademark
registration number 695,950, registration date April 12, 1960,
together with the registration thereof, all variations thereof and
logos used in connection therewith, and all goodwill associated
therewith.
"United States" shall mean the fifty (50) states and the District
-------------
of Columbia comprising the United States of America.
SECTION 2. GRANT OF LICENSE, OPTION TO TRANSFER ASSETS AND
ASSUMPTION OF LIABILITIES
2.1 Grant of License. Upon the terms and subject to the
----------------
conditions of this Agreement, Lilly hereby grants to JMED an
exclusive, even as to Lilly (except as set forth in Section 2.7 of
this Agreement), perpetual license under the following assets solely
for the purpose of marketing
4
5
and selling the Product in the United
States (such assets are referred to herein collectively as the
"Licensed Assets"):
---------------
(a) all of Lilly's rights under the approved New Drug
Application for the Product filed by Lilly with the FDA, and
all subsequent submissions thereto (collectively, the
"NDA"), which NDA is described in SCHEDULE 2.L(A);
---------------
(b) the Intellectual Property; and
(c) the Marketing and Pricing Data.
2.2 Excluded Assets. Anything herein to the contrary
---------------
notwithstanding, the Licensed Assets exclude the trademarks "▇▇▇ ▇▇▇▇▇
AND COMPANY" and "LILLY" and any variation thereof and any other
rights in or to such names.
2.3 Lilly's Option to Transfer the Licensed Assets. (a)
----------------------------------------------
Subject to the provisions of paragraph (b) of this Section 2.3, Lilly
shall have the right and option at any time, upon six (6) months
notice to JMED, to assign, transfer and convey to JMED all, and not
less than all, of Lilly's right, title and interest in and to the
Licensed Assets and JMED shall accept such assignment, transfer and
conveyance. In order to effectuate the assignment, transfer and
conveyance of the Licensed Assets, Lilly shall execute and deliver to
JMED at the end of the six (6) month notice period, (i) a ▇▇▇▇ of Sale
(substantially in the form of EXHIBIT A), (ii) a Trademark Assignment
---------
(substantially in the form of EXHIBIT B), and (iii) such other
---------
documents as JMED may reasonably request.
(b) Notwithstanding the provisions of paragraph (a) above,
Lilly shall not transfer the Licensed Assets to JMED until after the
later of (i) December 31, 1996, and (ii) such time as Lilly has complied
with all provisions of 21 C.F.R. 201.57(f)(9)--Specific Requirements
5
6
on Content and Format of Labeling for Human Prescription Drugs; Revision
of "Pediatric Use" Subsection in the Labeling (the "Regulation") as the
same pertains to Product, it being the understanding of the parties that
the Licensed Assets shall not be transferred until Lilly has complied
with the regulatory requirements of said Regulation as the same pertains
to Product.
2.4 Liabilities Assumed by JMED. Except as otherwise provided
---------------------------
in this Agreement, JMED hereby assumes and agrees to bear and be
responsible for and to perform and satisfy all responsibilities,
duties (including, without limitation, compliance with all applicable
laws and regulations), obligations, claims, Damages, liabilities,
burdens, and problems of any nature whatsoever (collectively,
"Obligations") associated directly or indirectly with the ownership of
the Licensed Assets when transferred by Lilly to JMED pursuant to the
provisions of Section 2.3 above, and the manufacturing (but only after
the manufacturing has been transferred to JMED pursuant to the
provisions of the Manufacturing Agreement), marketing and sale by JMED
of the Product from and after the date of this Agreement, including,
but not limited to, all recalls, all warranty claims, and all product
liability claims (without regard to the nature of the causes of action
alleged or theories of recovery asserted), except for (i) those
Obligations with respect to which Lilly is providing indemnification
pursuant to the provisions of Section 8.1 of this Agreement, and (ii)
the hereinafter defined Excluded Liabilities, which said items (i) and
(ii) shall remain the responsibility of Lilly. All of the foregoing
are hereinafter collectively referred to as the "Assumed Liabilities."
-------------------
2.5 Liabilities Not Assumed by JMED. Anything herein to the
-------------------------------
contrary notwithstanding, JMED is not assuming, and shall not be
deemed to assume any of the following, all of which shall remain and
be the responsibility of Lilly (collectively, the "Excluded
Liabilities"):
6
7
(a) Any Obligations arising out of any claim of any third party
in connection with Lilly's negligence in manufacturing the Product for
JMED under the Manufacturing Agreement; or
(b) Any Obligations arising out of any claim by the FDA or any
other government entity or regulatory body that Lilly has failed to
fulfill Lilly's regulatory obligations in connection with the NDA; or
(c) Any Obligations arising with respect to the manufacture,
marketing or sale of Product prior to the date of this Agreement; or
(d) Any Obligations that Lilly covenants and agrees to perform
pursuant to the provisions of this Agreement or the Manufacturing
Agreement.
2.6 No Sublicenses. This Agreement and the license granted
--------------
herein shall not be sublicensed by JMED, except, subject to the
consent of Lilly which will not be unreasonably withheld, to
Affiliates of JMED.
2.7 Lilly Retained Rights. Anything herein to the contrary
---------------------
notwithstanding, Lilly shall retain at all times all rights to
manufacture the Product including, but not limited to, all rights
necessary (a) to manufacture the Product for JMED under the
Manufacturing Agreement and otherwise fulfill its obligations to JMED,
(b) to make or have the Product made in the United States in order to
use and sell the Product outside of the United States, and (c) to make
such changes as Lilly may deem reasonably appropriate in connection
with any differing approach to manufacturing it may adopt in the
facility in which the Product is produced.
2.8 Sharing of Technology. Lilly hereby grants to JMED a
---------------------
non-exclusive perpetual license to utilize the Technology, as the
same may be applicable to, and solely for the purpose of
7
8
manufacturing, or having manufactured, the Product for sale within the
United States, said use to be subject to and in accordance with the
provisions of the Manufacturing Agreement.
SECTION 3. PAYMENTS
In consideration of Lilly (i) granting to JMED the license and
other rights herein contained, (ii) supplying Product in accordance
with the provisions of the Manufacturing Agreement, and (iii)
performing its obligations under this Agreement and the Manufacturing
Agreement, JMED shall pay to Lilly, an amount equal to Fourteen
Million Dollars ($14,000,000) plus interest and royalties as more
specifically set forth in Sections 3.1, 3.2 and 3.3 hereof:
3.1 Payment Upon Signing. Simultaneously with execution of this
--------------------
Agreement by JMED and by Lilly, JMED shall pay to Lilly the sum of
Seven Million Dollars ($7,000,000) by wire transfer of immediately
available funds to an account designated by Lilly.
3.2 Annual Payments. (a) JMED shall pay the remaining Seven
---------------
Million Dollars ($7,000,000) plus interest at the rate of 7% per annum
to Lilly, on or before the indicated due dates, by wire transfer of
immediately available funds to an account designated by Lilly:
Amount Due Date
------ --------
Four Million Dollars plus interest, August 31, 1996
in the amount of Two Hundred
Eighty Thousand Dollars ($4,280,000)
Three Million Dollars plus interest, August 31, 1997
in the amount of Four Hundred
Thirty Four Thousand Seven
Hundred Dollars ($3,434,700)
8
9
(b) JMED shall have the right, at any time, to prepay
any or all of the amount payable to Lilly pursuant to the
provisions of this Section 3.2 without penalty or premium of any
kind, and in the event of any such prepayment, interest shall be
paid to the date of such prepayment.
3.3 Royalty. JMED shall, for a period of ten (10) years
-------
after the date of this Agreement, pay to Lilly a royalty of five
percent (5%) on all Net Sales of the Product by JMED and its
Affiliates (excluding any intercompany sales or transfers)
beginning with Net Sales of the Product occurring on the date of
this Agreement. On or before April 30, July 31, October 31 and
January 31 each year (to the Attention of: Royalty Administration,
▇▇▇ ▇▇▇▇▇ and Company, Lilly Corporate Center, Indianapolis,
Indiana 46285), JMED shall report to Lilly (i) all Net Sales of
the Product during the preceding three (3) months ending March 31,
June 30, September 30 or December 31 as the case may be, and (ii)
the amount of royalty due in connection therewith, and shall pay
to Lilly the royalty payment due in connection therewith by JMED
check.
3.4 Audits. JMED and its Affiliates shall keep full and
------
accurate books and records relating to the performance required of
it under this Agreement including, but not limited to, records of
Net Sales of the Product in sufficient detail to permit Lilly to
confirm the accuracy of the reported Net Sales. Lilly shall have
the right, during regular business hours and upon reasonable
advance notice, to have such books and records audited by an
independent auditor reasonably acceptable to JMED so as to verify
the accuracy of the information previously reported to Lilly.
Such audit may cover the three (3) calendar years preceding the
date of the request for such audit, and shall occur no more
frequently than one (1) time per calendar year. The auditor shall
report to Lilly and JMED the results of the audit. The cost of
such audit shall be borne by Lilly; however, in
9
10
the event such audit reveals that the information previously reported to
Lilly deviates by five percent (5%) or more from that revealed by the
audit, the cost of the audit shall be borne by JMED.
3.5 Late Payments. Any amounts not paid by JMED when due
-------------
under this Agreement or the Manufacturing Agreement shall be
subject to interest from and after the due date at a rate equal to
the sum of two percent (2%) (200 basis points) plus the prevailing
prime rate of interest in the United States as reported by The
Wall Street Journal or similar reputable data source.
3.6 No Excuse. JMED shall not be excused from or relieved
---------
of its obligations to pay the amounts described in this Section 3
by any claimed or actual event of force majeure, commercial or
other impracticability or impossibility, or frustration of
essential purpose, except to the extent otherwise provided in this
Agreement or the Manufacturing Agreement
SECTION 4. TERM OF AGREEMENT
The term of this Agreement shall begin upon the date of this
Agreement and, unless sooner terminated as hereinafter provided,
shall be perpetual.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇
▇▇▇▇▇ represents and warrants to JMED that, as of the date
hereof:
5.1 Organization, Power and Authority. Lilly is a
---------------------------------
corporation duly organized and validly existing under the laws of
the State of Indiana. Lilly has all necessary corporate power
and authority to enter into, and be bound by the terms and
conditions of, this Agreement and the Manufacturing Agreement.
10
11
5.2 Due Authority: No Breach. The execution, delivery and
------------------------
performance by Lilly of this Agreement, the Manufacturing
Agreement and each agreement or instrument contemplated by this
Agreement, and the performance of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary
corporate action by Lilly. This Agreement and the Manufacturing
Agreement are, and each agreement or instrument contemplated by
this Agreement, when executed and delivered by Lilly in
accordance with the provisions hereof, will be (assuming the due
execution and delivery hereof and thereof by JMED), the legal,
valid and binding obligation of Lilly, in each case enforceable
against Lilly in accordance with its respective terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization, or similar laws from time
to time in effect which affect the enforcement of creditors'
rights generally and by legal and equitable limitations on the
availability of specific performance and other equitable remedies
against Lilly. All Persons who have executed this Agreement or
the Manufacturing Agreement on behalf of Lilly, or who will
execute on behalf of Lilly, any agreement or instrument
contemplated by this Agreement or the Manufacturing Agreement
have been duly authorized to do so by all necessary corporate
action. Neither the execution and delivery of this Agreement, or
the Manufacturing Agreement by Lilly, or any such other agreement
or instrument by Lilly, nor the performance of the obligations
contemplated hereby and thereby, will (i) conflict with or result
in any violation of or constitute a breach of any of the terms or
provisions of, or result in the acceleration of any obligation
under, or constitute a default under any provision of the
Articles of Incorporation or By-laws of Lilly or any contract or
any other obligation to which Lilly is a party or to which it is
subject or bound, or (ii) violate any judgment, order,
injunction, decree or award of any court, administrative agency,
11
12
arbitrator or government body against, or affecting or binding
upon, Lilly or upon the securities, property or business of
Lilly, or (iii) constitute a violation by Lilly of any applicable
law or regulation of any jurisdiction as such law or regulation
relates to Lilly or to the property or business of Lilly, except
for such conflict, acceleration, default, breach or violation
that is not reasonably likely to have a material adverse effect
on Lilly's ability to perform its obligations under this
Agreement, the Manufacturing Agreement or under any agreement or
instrument contemplated hereby.
5.3 NDA. Lilly has furnished JMED with access to a
---
complete copy of the NDA, including all amendments and
supplements thereto. Lilly is the lawful holder of all rights
under the NDA free and clear of the claims of all Persons.
Although the NDA is not "state-of-the-art" (which JMED hereby
acknowledges), to the best of Lilly's knowledge, Lilly has
complied in all material respects with all applicable laws and
regulations in connection with the preparation and submission to
the FDA of the NDA. The NDA has been approved by, and nothing
has come to the attention of Lilly which has, or reasonably
should have, led Lilly to believe that the NDA is not in good
standing with, the FDA. Lilly has all requisite right and
authority to license and/or transfer the NDA to JMED as set forth
in this Agreement without the consent or approval of any Person.
The NDA is not subject to any right, license or use in the United
States except as provided in this Agreement or incident to sales
outside of the United States.
5.4 Intellectual Property. Set forth on SCHEDULE 5.4
--------------------- ------------
hereto is a true, complete and accurate list of all of the
Intellectual Property. Lilly does not use any patent, process,
technology, trademark or other intellectual property incident to
the manufacture or sale of Product in the United States, except
for the Licensed Assets and the Technology, all of which are
being licensed
12
13
to JMED on either an exclusive or non-exclusive basis pursuant to
this Agreement. Except as set forth on SCHEDULE 5.4 hereto, (i)
------------
Lilly is the lawful owner of the Intellectual Property and has good,
valid and marketable title to the Intellectual Property, free and
clear of all claims, liens, licenses, charges and other
encumbrances; (ii) Lilly can sell and/or license the Intellectual
Property to JMED without the consent of any Person; (iii) there are
no pending or, to the knowledge of Lilly, threatened claims against
Lilly asserting that any of the Intellectual Property infringes or
violates the rights of third parties, and Lilly has no knowledge of
any threatened claims asserting that any of the Intellectual
Property or the manufacture or sale of the Product from and after
the date of this Agreement, infringes or violates the rights of
third parties; (iv) nothing has come to the attention of Lilly which
has, or reasonably should have, led Lilly to believe that the
Intellectual Property, or JMED's use thereof, infringes or
violates the rights of third parties; (v) the rights granted and
licensed to JMED pursuant to this Agreement constitute all of the
rights reasonably necessary for JMED to conduct the Business;
(vi) Lilly has not given any notice to any third parties
asserting infringement by such third parties upon any of the
Intellectual Property; and (vii) the Intellectual Property is not
subject to any license, royalty arrangement or other contract
with respect to the sale of Product in the United States.
5.5 Litigation, Actions and Proceedings. There are no
-----------------------------------
pending or, to the knowledge of Lilly, threatened judicial,
administrative or arbitral actions, claims, suits or proceedings
against or by Lilly relating to the Licensed Assets, the Product,
or the Business, which, either individually or together with any
other, may have a material adverse effect on (i) the Licensed
Assets, the Product or the Business, or (ii) the ability of Lilly
to perform its obligations under this Agreement, the Manufacturing
Agreement or any agreement or instrument contemplated hereby, or
(iii) the
13
14
ability of JMED to market and sell the Product from and after the
date of this Agreement. There are no pending actions or suits
relating to the Licensed Assets, the Product or the Business,
brought by Lilly against others. To the best of Lilly's knowledge,
there are no product liability claims against or involving Lilly
with respect to the Product currently outstanding and, except as set
forth on Schedule 5.5 hereto, no such claims have been settled,
------------
adjudicated or otherwise disposed of since January 1, 1990.
There are no letters of adverse finding, Form 483s, or other
similar regulatory actions or other similar regulatory
correspondence or communications with the FDA or any other state
or federal government agencies pertaining to the Product and
received by Lilly at any time since January 1, 1990, except as
identified on SCHEDULE 5.5 attached hereto.
------------
5.6 Governmental Approval. No consent, approval, waiver,
---------------------
order or authorization of, or registration, declaration or filing
with, any governmental authority is required in connection with
the execution, delivery and performance of this Agreement, the
Manufacturing Agreement or any agreement or instrument
contemplated by this Agreement, by Lilly or the performance by
Lilly of its obligations contemplated hereby and thereby other
than (a) the filings required of both parties pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, (b) in the case of
Lilly exercising its right to assign, transfer and convey the
Licensed Assets to JMED pursuant to Section 2.3, the information
submissions to the FDA provided for in Section 7.1 and compliance
with FDA requirements, if any, in connection therewith, and (c)
notification to DEA by Lilly and JMED and compliance with DEA
requirements in connection therewith.
5.7 Brokerage. No broker, finder or similar agent has
---------
been employed by or on behalf of Lilly and no Person with which
Lilly has had any dealings or communications of any kind
14
15
is entitled to any brokerage commission, finder's fee or any similar
compensation, in connection with this Agreement or the
transactions contemplated hereby.
5.8 No Implied Warranties. EXCEPT AS EXPRESSLY PROVIDED IN
---------------------
THIS SECTION 5, LILLY MAKES NO REPRESENTATION OR WARRANTY AS TO
THE LICENSED ASSETS OR THE BUSINESS, EXPRESS OR IMPLIED, EITHER
IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE AND LILLY
SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY
WARRANTIES. Without limiting the generality of the foregoing,
JMED acknowledges that it has not relied upon any implied
warranty of merchantability, fitness for a particular purpose, or
upon any representation or warranty whatsoever as to the
prospects (financial, regulatory or otherwise), or the validity
or likelihood of success of the Business.
5.9 Licensed Assets. Except for the Copyrights, the
---------------
Marketing and Pricing Data and the Marketing Materials, there are
no copyright rights in the United States, customer lists, sales
data, price lists, pricing information, labeling, marketing and
promotional materials, promotional literature or inserts that are
required in the Business. The Licensed Assets, when transferred
to JMED, shall vest in JMED good and valid title thereto, free
and clear of all claims, liens, licenses, security interests and
encumbrances of any kind.
5.10 Sales History. The statement of sales of the Product
-------------
for 1993, 1994 and the first six months of 1995, a copy of which
is attached hereto as SCHEDULE 5.10, is true and accurate in all
-------------
respects and fairly presents the sales of the Product in the
United States by Lilly for those periods.
15
16
5.11 Compliance with Laws. Except as set forth in SCHEDULE
-------------------- --------
5.11 hereto, to the knowledge of ▇▇▇▇▇, ▇▇▇▇▇ is not in
----
violation, and Lilly has never received notice of any alleged
violation, of any applicable federal, state or local ordinance,
regulation, order, judgment, injunction, award, decree or other
requirement of any governmental or regulatory body, court or
arbitrator, which violation could have a material adverse affect
on the manufacturing, marketing or sale of the Product in the
United States. Lilly holds, and at all times has held, all
licenses, permits, registrations and authorizations necessary for
the lawful manufacture and sale of the Product in the United
States pursuant to all applicable laws, statutes, ordinances,
rules and regulations. To the best of Lilly's knowledge, all
reports required by law have been filed with the regulatory
agency having jurisdiction and there is no action pending or, to
the knowledge of Lilly, threatened by any regulatory agency which
could materially adversely affect the Business or the
manufacturing and sale of the Product in the United States from
and after the date of this Agreement.
5.12 Contracts. Attached hereto as SCHEDULE 5.12 is a
--------- -------------
listing of all contracts currently in effect, or currently being
negotiated, involving the Licensed Assets or the Product in the
United States. Lilly has no contract involving the manufacture
or sale of the Product in the United States, except as set forth
on SCHEDULE 5.12 or SCHEDULE 5.14. For purposes hereof,
------------- -------------
"contracts" means any and all oral and written contracts,
agreements, notes, instruments, leases, licenses, royalty agreements,
territorial and agency agreements, sales representative
agreements, distribution or distributor agreements, manufacturer's
representative agreements, commitments or other arrangements of any
kind. Lilly is not in default of any such contracts nor to its
knowledge,
16
17
is any other party to any such contract in default thereunder, nor,
to the knowledge of Lilly, does any condition exist that with notice
or lapse of time or both would constitute a default thereunder.
5.13 Customers. Lilly has not sold the Product in the
---------
United States to any customer in the last two (2) years other
than (i) those customers identified on SCHEDULE 5.13 hereto, and
-------------
(ii) members of the National Wholesalers Druggists Association
(the NWDA).
5.14 Suppliers. SCHEDULE 5.14 hereto identifies the
--------- -------------
supplier(s) of raw material for the Product and also sets forth
any contracts or agreements with respect to the supply of raw
material for the Product. Except as set forth on SCHEDULE 5.14,
-------------
Lilly knows of no reason why any supplier of raw material for the
Product will not supply raw material for manufacturing after the
date of this Agreement.
5.15 Full Disclosure. All documents and other papers
---------------
delivered by or on behalf of Lilly pursuant to this Agreement are
true, complete and authentic. There is no fact of which Lilly
has, or reasonably should have, knowledge that has not been
disclosed to JMED in writing that materially adversely affects
the ability of Lilly to perform its obligations under this
Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF JMED
JMED represents and warrants to Lilly that, as of the date
hereof:
6.1 Organization, Power and Authority. JMED is a
---------------------------------
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. JMED has all necessary
corporate power and authority to enter into, and be bound by the
terms and conditions of, this Agreement and the Manufacturing
Agreement.
17
18
6.2 Due Authority, No Breach. The execution, delivery and
------------------------
performance by JMED of this Agreement, the Manufacturing
Agreement and each agreement or instrument contemplated by this
Agreement, and the performance of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary
corporate action by JMED. This Agreement and the Manufacturing
Agreement are, and each agreement or instrument contemplated by
this Agreement, when executed and delivered by JMED in accordance
with the provisions hereof, will be (assuming the due execution
and delivery hereof and thereof by Lilly) the legal, valid and
binding obligation of JMED, in each case enforceable against JMED
in accordance with its respective terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization, or similar laws from time
to time in effect which affect the enforcement of creditors'
rights generally and by legal and equitable limitations on the
availability of specific performance and other equitable remedies
against JMED. All Persons who have executed this Agreement or
the Manufacturing Agreement on behalf of JMED, or who will
execute on behalf of JMED any agreement or instrument
contemplated by this Agreement or the Manufacturing Agreement,
have been duly authorized to do so by all necessary corporate
action. Neither the execution and delivery of this Agreement or
the Manufacturing Agreement by JMED, or any such other agreement
or instrument by JMED, nor the performance of the obligations
contemplated hereby and thereby, will (i) conflict with or result
in any violation of or constitute a breach of any of the terms or
provisions of, or result in the acceleration of any obligation
under, or constitute a default under any provision of the
Certificate of Incorporation or By-laws of JMED or any contract
or any other obligation to which JMED is a party or to which it
is subject or bound, or (ii) violate any judgment, order,
injunction, decree or award of any court,
18
19
administrative agency, arbitrator or government body against, or
affecting or binding upon, JMED or upon the securities, property or
business of JMED, or (iii) constitute a violation by JMED of any
applicable law or regulation of any jurisdiction as such law or
regulation relates to JMED or to the property or business of JMED,
except for such conflict, acceleration, default, breach or violation
that is not reasonably likely to have a material adverse effect on
JMED's ability to perform its obligations under this Agreement, the
Manufacturing Agreement, or any agreement or instrument contemplated
hereby.
6.3 Litigation. There are no pending or, to the knowledge
----------
of JMED, threatened judicial, administrative or arbitral actions,
claims, suits or proceedings against or by JMED which, either
individually or together with any other, may have a material
adverse effect on the ability of JMED to perform its obligations
under this Agreement, the Manufacturing Agreement or any
agreement or instrument contemplated hereby.
6.4 Governmental Approval. No consent, approval, waiver,
---------------------
order or authorization of, or registration, declaration or filing
with, any governmental authority is required in connection with
the execution, delivery and performance of this Agreement, the
Manufacturing Agreement or any agreement or instrument
contemplated by this Agreement, by JMED or the performance by
JMED of its obligations contemplated hereby and thereby other
than (a) the filings required of both parties pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, (b) in the case of
Lilly exercising its right to assign, transfer and convey the
Licensed Assets to JMED pursuant to Section 2.3, the information
submissions to the FDA provided for in Section 7.1 and compliance
with FDA requirements, if any, in connection therewith, and (c)
notification to DEA by Lilly and JMED and compliance with DEA
requirements in connection therewith.
19
20
6.5 Brokerage. No broker, finder or similar agent has
---------
been employed by or on behalf of JMED and no Person with which
JMED has had any dealings or communications of any kind is
entitled to any brokerage commission, finder's fee or any similar
compensation, in connection with this Agreement or the
transactions contemplated hereby.
SECTION 7. ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
7.1 Governmental Filings. Lilly and JMED each agree to
--------------------
prepare and file whatever filings, requests or applications are
required to be filed with any governmental authority in
connection with this Agreement and to cooperate with one another
as reasonably necessary in order to accomplish the foregoing.
Without limiting the generality of the foregoing, prior to the
assignment, transfer and conveyance by Lilly to JMED of the
Licensed Assets pursuant to Section 2.3, Lilly shall submit to
the FDA the information required of a former owner pursuant to 21
C.F.R. Section 314.72 with respect to the NDA, and JMED shall submit to
the FDA the information required of a new owner pursuant to 21
C.F.R. Section 314.72 with respect to the NDA.
7.2 Responsibility for NDA. (a) Lilly shall remain
----------------------
responsible (until transfer of the NDA by Lilly to JMED pursuant
to Section 2.3, at which time JMED shall become and remain
responsible) for fulfilling and shall fulfill all regulatory
requirements with respect to the Product that are imposed upon
Lilly as the owner of the NDA; provided, however, that JMED shall
-------- -------
reimburse Lilly, within thirty (30) days of written request by
Lilly therefor (which request shall include all support
documentation reasonably required by JMED to verify the requested
reimbursement), for the amount of any and all annual product user
fees (with respect to sales of Product in the United States), any
NDA supplement user fees in connection with any Product-
20
21
related submission to the FDA, and related or similar fees paid by
Lilly to the FDA in connection with the NDA or sale of the Product
in the United States (except establishment user fees for Lilly
facilities and any other fees in connection with Product to be
sold outside of the United States, all of which shall be paid by
Lilly). SCHEDULE 7.2 hereto lists all annual product user fees,
------------
NDA supplement user fees and other related or similar fees paid
by Lilly to the FDA in connection with the NDA from and after
January 1, 1993. Lilly shall furnish JMED, upon request after
reasonable notice from JMED, with access to copies of all filings
submitted by Lilly to the NDA with respect to the Product. JMED
shall, on a timely basis after request by Lilly, provide to Lilly
all information that JMED has that Lilly does not have that is
reasonably necessary and relevant to Lilly's obligations
hereunder to fulfill such requirements including, but not limited
to, sales distribution information concerning the Product, and
JMED shall otherwise cooperate with Lilly as reasonably necessary
in connection therewith. Without limiting the generality of the
foregoing sentence, in the event that any supplements to the NDA
or any other regulatory requirements are necessitated as a result
of transferring manufacturing of the Product from Lilly to JMED
or as a result of any action by JMED (including, but not limited
to, acquisition by a third party of substantially all of the
assets or outstanding shares of JMED, or merger with JMED), JMED
shall, on a timely basis and at JMED's expense, develop and
provide to Lilly all information that is reasonably necessary and
relevant to Lilly's obligation hereunder to file such supplements
or to fulfill such requirements and shall otherwise cooperate
with Lilly as reasonably necessary in connection therewith.
Lilly shall have the final decision-making authority (until
transfer of the NDA by Lilly to JMED pursuant to Section 2.3, at
which time JMED shall have the final decision-making authority)
in every case on whether and how to supplement, amend or
otherwise alter the
21
22
NDA and on any other issues in connection with the NDA (including,
but not limited to, decisions to recall the Product) and on whether
and how to communicate with the FDA in connection therewith;
provided, however, that no material supplement, amendment or
alteration of the NDA shall occur unless and until Lilly has
consulted in good faith with JMED with respect to such proposed
material supplement, amendment or alteration of the NDA prior to
making any final determination with respect thereto, and Lilly has
considered in good faith whether such proposed material supplement,
amendment or alteration of the NDA would have an adverse effect on
(A) JMED's ability to market or sell the Product, (B) the ability of
Lilly or JMED to manufacture the Product or (C) the fees paid by
JMED pursuant to the provisions of this Section 7.2, and provided
further, however, that in the event that the parties are unable
to agree, Lilly's good faith decision shall be final and binding
upon JMED.
(b) JMED and Lilly have jointly developed written
procedures for (i) the reporting of adverse drug experiences, as
set forth on EXHIBIT C, (ii) the submission by JMED to Lilly and
---------
by Lilly to FDA of labeling and promotional materials related to
the Product as set forth on EXHIBIT D, (iii) administration of
---------
and response to medical inquiries concerning the Product by
consumers, physicians, pharmacists and other health care
professionals as set forth on EXHIBIT E, and (iv) administration
---------
and analysis of and response to complaints concerning the Product
as set forth on EXHIBIT F. JMED and Lilly shall each comply with
---------
the provisions thereof.
7.3 Compliance with Law. JMED and Lilly shall each comply
-------------------
with all applicable federal, state and local laws and
regulations. Without limiting the generality of the foregoing
sentence, JMED shall not promote the Product for any indications
not approved in the NDA or in any manner in conflict with
applicable laws or regulations. Lilly and JMED each shall keep all
22
23
records and reports required to be kept by applicable laws
and regulations, and each shall make its facilities available at
reasonable times during business hours for inspection by
representatives of governmental agencies. Lilly and JMED each
shall notify the other within twenty-four (24) hours of receipt
of any notice of any FDA or other governmental agency inspection,
investigation or other similar inquiry, or other similar notice
or communication of any type, involving the Product. JMED and
Lilly shall cooperate with each other during any such inspection,
investigation or other inquiry including, but not limited to,
allowing upon request a representative of the other to be present
during the applicable portions of any such inspection,
investigation or other inquiry and providing copies of all
relevant documents. JMED and Lilly shall discuss any response to
observations or notifications received in connection with any
such inspection, investigation or other inquiry and each shall
give the other an opportunity to comment upon any proposed
response before it is made. In the event of disagreement
concerning the form or content of such response, however, Lilly
shall be responsible for deciding the appropriate form and
content of any response with respect to any of its cited
activities and JMED shall be responsible for deciding the
appropriate form and content of any response with respect to any
of its cited activities.
7.4 Recall. Lilly and JMED shall each maintain such
------
traceability records as may be necessary to permit a recall or
field correction of the Product. Each party shall give immediate
telephonic notice (to be confirmed in writing) to the other upon
discovery that the Product should, as reasonably determined by
said party, be recalled or may be required to be recalled. In
the event that a recall is necessary prior to transfer of the NDA
by Lilly to JMED pursuant to Section 2.3, Lilly and JMED shall
jointly develop, and Lilly shall control the recall plan. In the
event that a recall is necessary after transfer of the NDA by
Lilly to JMED pursuant to Section
23
24
2.3, and Lilly is manufacturing the Product for JMED, Lilly and JMED
shall jointly develop, and JMED shall control, the recall plan. In
any event, each party will cooperate fully with the other in
connection with any such recall efforts.
7.5 Confidentiality. JMED shall treat as confidential the
---------------
Licensed Assets and all other information of Lilly of which JMED
becomes aware (whether in writing or orally or by sensory
detection) in connection with this Agreement or the Manufacturing
Agreement (collectively, "Lilly Proprietary Information"). JMED
shall neither disclose Lilly Proprietary Information to any third
party nor use Lilly Proprietary Information for any purpose other
than as set forth in this Agreement. Lilly shall treat as
confidential all information of JMED of which Lilly becomes aware
(whether in writing or orally or by sensory detection) in
connection with this Agreement or the Manufacturing Agreement
(collectively "JMED Proprietary Information"). Lilly shall
neither disclose JMED Proprietary Information to any third party
nor use JMED Proprietary Information for any purpose other than
as set forth in this Agreement.
Nothing contained herein will in any way restrict or impair
either party's (the "Using Party") right to use, disclose or
otherwise deal with any Proprietary Information which:
(a) at the time of disclosure is known to the public or
thereafter becomes known to the public by publication
or otherwise through no fault of the Using Party;
(b) the Using Party can establish was in its possession
prior to the time of the disclosure and was not
obtained directly or indirectly from the other party;
(c) is independently made available as a matter of right to
the Using Party by a third party who is not thereby in
violation of a confidential relationship with the other
party;
24
25
(d) is developed by the Using Party independently of the
Proprietary Information received and the Using Party
can establish such development; or
(e) is information required to be disclosed by legal or
regulatory process, provided that the Using Party
timely informs the other party and uses reasonable
efforts to limit the disclosure and maintain
confidentiality to the extent possible and permits the
other party to intervene and contest or attempt to
limit the disclosure.
JMED shall obtain no right or license of any kind under the
Lilly Proprietary Information except as set forth in this
Agreement.
7.6 Expenses. Lilly and JMED shall each bear their own
--------
direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and each agreement
or instrument contemplated by this Agreement and the performance
of their respective obligations contemplated hereby and thereby.
7.7 Reasonable Efforts. Lilly and JMED each shall use all
------------------
reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary or proper to
make effective the transactions contemplated by this Agreement,
including such actions as may be reasonably necessary to obtain
approvals and consents of governmental Persons and other Persons;
provided that no party shall be required to (i) pay money (other
--------
than as expressly required pursuant to this Agreement), or (ii)
assume any other material obligation not otherwise required to be
assumed by this Agreement.
7.8 Publicity. The parties agree that no publicity
---------
release or announcement concerning the transactions contemplated
hereby or in the Manufacturing Agreement shall be issued without
the advance written consent of the other, except as such release
or announcement may be required
25
26
by law, in which case the party making the release or announcement
shall, before making any such release or announcement, afford the
other party a reasonable opportunity to review and comment upon such
release or announcement. JMED and Lilly recognize that disclosure
of this Agreement and the Manufacturing Agreement (including copies
of each) to the Securities Exchange Commission, the IRS and other
tax authorities is likely to be required, and each waives the
requirements of this subsection with respect to disclosure (and
copies) to such entities.
7.9 Cooperation. If either party shall become engaged in
-----------
or participate in any investigation, claim, litigation or other
proceeding with any Person, including the FDA, relating in any
way to the Product or any of the Licensed Assets, the other party
shall cooperate in all reasonable respects with such party in
connection therewith, including, without limitation, using its
reasonable efforts to make available to the other such employees
who may be helpful with respect to such investigation, claim,
litigation or other proceeding, provided that, for purposes of
this provision, reasonable efforts to make available any employee
shall be deemed to mean providing a party with reasonable access
to any such employee at no cost for a period of time not to
exceed 24 hours (e.g., three 8-hour business days). Thereafter,
any such employee shall be made available for such time and upon
such terms and conditions (including, but not limited to,
compensation) as the parties may mutually agree.
7.10 No Sale for Resale. JMED shall not knowingly sell any
------------------
Product to anyone in the United States for subsequent distribution
or resale outside the United States and shall take all reasonable
precautions to prevent such distribution or resale outside the
United States. Lilly shall not knowingly sell any Product to anyone
outside of the United States for subsequent distribution
26
27
or resale inside the United States and shall take all reasonable
precautions to prevent such distribution or resale inside the United
States.
7.11 Product Returns. JMED shall be responsible for all
---------------
returns of Product sold on or after the date of this Agreement
and Lilly shall be responsible for all returns of Product sold
prior to the date of this Agreement; provided, however, in the
event the parties are unable to determine whether the Product was
sold before or after the date of this Agreement, then with
respect to any such Product, JMED shall be responsible for all
Product returned more than sixty (60) days after the date of this
Agreement, and Lilly shall be responsible for all Product
returned within sixty (60) days after the date of this Agreement.
7.12 Notification of Customers. Lilly agrees to cooperate
-------------------------
with JMED as set forth in Appendix B to the Manufacturing
Agreement, at JMED's request, in the notification to customers of
the transactions contemplated by this Agreement, with such notice
(the "Joint Notice") being in a form reasonably satisfactory to
both Lilly and JMED.
7.13 Customer Orders. Lilly shall take such steps as may be
---------------
reasonably required to insure that all customer orders for
Product received after the date of this Agreement are forwarded
to JMED within 24 hours after received by Lilly. Lilly agrees
that any customer ordering or requesting any information with
respect to the Product will (i) be informed that JMED is now
supplying the Product, and (ii) be forwarded a copy of the Joint
Notice if said customer has not received the initial notification
as required above.
7.14 Restrictive Covenants. (a) For and during the ten
---------------------
(10) year period following the date of this Agreement (the
"Restricted Period"), neither Lilly nor any of its Affiliates
shall directly or indirectly, within the United States, whether
as a shareholder, agent, partner,
27
28
proprietor, joint venturer, consultant or otherwise, of any business
or entity, take part, participate or become interested in, in any
manner whatsoever, a business or organization which directly or
indirectly manufactures, distributes or sells in the United States,
injectable methohexital products in competition with the Product;
provided, however, that nothing set forth herein shall prevent
Lilly from (i) manufacturing Product for sale to JMED, or (ii)
manufacturing methohexital products for sale outside of the
United States, or (iii) acquiring a company which at the time of
acquisition, manufactures, markets or sells methohexital
products; and provided further that, the foregoing to the
contrary notwithstanding, JMED acknowledges and agrees that the
following activities, events and conditions shall not be a breach
or violation of the Restrictive Covenants (hereafter defined) and
JMED shall not be entitled to injunctive or any other relief at
law or in equity or any other rights or remedies (including, but
not limited to, those set forth in this Section 7.14) in
connection with: Lilly or any of its Affiliates engaging in any
merger, acquisition, joint venture, partnership, alliance,
license, research and/or development collaboration, or
combination, arrangement or relationship of any nature whatsoever
(each, a "Relationship") in which the other party or parties
involved in such Relationships (each, a "Significant Other") at
that time already conducts or engages in, directly or indirectly,
anywhere in the United States, whether as a shareholder, agent,
partner, proprietor, join venturer, consultant or otherwise, the
manufacturing, marketing, distributing or selling of injectable
methohexital products ("Methohexital Business"), provided that
--------
the Methohexital Business (i) does not constitute a material part
of the overall business of the Significant Other prior to the
Relationship, and (ii) will not constitute a material part of the
overall business of either such Relationship or Lilly, as the
case may be, following consummation of the Relationship.
Further, no provision herein contained shall prevent or limit in
28
29
any fashion the right and ability of Lilly or any of its
Affiliates to conduct or engage in the pharmaceutical benefits
management business, integrated disease management business,
pharmaceutical mail order business and any similar or related
businesses. Notwithstanding the foregoing, nothing set forth
herein shall (i) impact or affect the exclusivity of the license
granted to JMED in this Agreement, nor (ii) permit Lilly to
manufacture or develop a generic methohexital product for sale in
the United States. Furthermore, and notwithstanding anything
herein to the contrary, Lilly covenants and agrees that for such
period of time as Lilly is required to manufacture Product for
JMED pursuant to the provisions of the Manufacturing Agreement,
neither Lilly nor any of its Affiliates shall, directly or
indirectly, manufacture or develop a generic methohexital product
for sale in the United States.
(b) If a party (the " Breaching Party") breaches, or
threatens to commit a breach of, any of the provisions of
paragraph (a) above or of Section 7.5 (the "Restrictive
Covenants"), the other party (the "Non-Breaching Party") shall
have the following rights and remedies, each of which shall be
independent of the others and severally enforceable, and each of
which is in addition to, and not in lieu of, any other rights and
remedies available to the Non-Breaching Party at law or in
equity: (i) the right and remedy to have the Restrictive
Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened
breach of the Restrictive Covenants would cause irreparable
injury to the Non-Breaching Party and that money damages would
not provide an adequate remedy to the Non-Breaching Party; (ii)
the right and remedy to require the Breaching Party to account
for and pay over to the Non-Breaching Party, all compensation,
profits, monies, accruals, increments or other benefits derived
or received by the Breaching Party and/or by any other Person as
the result of, or
29
30
in any way incident to any conduct or transactions constituting a
breach of the Restrictive Covenants; and/or (iii) the right to cease
paying royalties or other amounts due under this Agreement. It is
further agreed that the amount of any bond that the Non-Breaching
Party may be required to post incident to any equitable relief
sought hereunder shall not exceed $5,000 and that said amount shall
be deemed reasonable and proper.
(c) Lilly acknowledges and agrees that the Restrictive
Covenants are reasonable in geographical and temporal scope and
in other respects. If any court determines that any of the
Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Restrictive Covenants shall
not thereby be affected and shall be given full effect, without
regard to the invalid portions.
(d) If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable
because of the duration or geographic scope of such provision,
such court shall have the power to reduce the duration or scope
of such provision, as the case may be, and, in its reduced form,
such provision shall then be enforceable.
(e) The Restrictive Covenants set forth herein shall
survive the termination of this Agreement but only if such
termination is effected pursuant to the provisions of Section
9.1(c) of this Agreement.
SECTION 8. INDEMNIFICATION
8.1 Indemnification. (a) Lilly shall indemnify, defend and
---------------
hold JMED (and its directors, officers, employees, Affiliates,
successors and assigns) harmless from and against any
30
31
and all Damages incurred or suffered by JMED (and its directors,
officers, employees, Affiliates, successors and assigns) as a
consequence of:
(i) any breach of any representation or warranty made
by Lilly in this Agreement, or in the
Manufacturing Agreement, provided that, in the
case of a breach of any representation or warranty
made by Lilly in this Agreement, notice of a claim
based upon any such breach is given to Lilly prior
to the expiration of such representation or
warranty pursuant to Section 10.4;
(ii) any failure to perform duly and punctually any
covenant, agreement or undertaking on the part of
Lilly contained in this Agreement or in the
Manufacturing Agreement;
(iii) any misrepresentation in or omission from any
agreement, instrument or document delivered
by Lilly pursuant to the terms of this
Agreement or the Manufacturing Agreement;
(iv) any Excluded Liabilities; or
(v) Lilly's negligent acts or omissions in
manufacturing the Product for JMED.
(b) JMED shall indemnify, defend and hold Lilly (and its
directors, officers, employees, Affiliates, successors and
assigns) harmless from and against any and all Damages incurred
or suffered by Lilly as a consequence of:
(i) any breach of any representation or warranty made
by JMED in this Agreement, or in the Manufacturing
Agreement, provided that, in the case
31
32
of a breach of any representation or warranty made by
JMED in this Agreement, notice of a claim based upon
any such breach is given to JMED prior to the
expiration of such representation or warranty
pursuant to Section 10.4;
(ii) any failure to perform duly and punctually any
covenant, agreement or undertaking on the part of
JMED contained in this Agreement or in the
Manufacturing Agreement;
(iii) any misrepresentation in or omission from any
agreement, instrument or document delivered
by JMED pursuant to the terms of this
Agreement or the Manufacturing Agreement; or
(iv) any Assumed Liabilities.
(c) Subject to the limits set forth in Section 8.3, the
amount of such indemnification shall include, without limitation,
the amount of money or other consideration necessary to make the
inadequate representation or warranty true and correct, or the
amount necessary to cure any breach of covenant or agreement
under this Agreement.
8.2 Notice and Opportunity To Defend. Promptly after
--------------------------------
receipt by a party hereto of notice of any claim which could give
rise to a right to indemnification pursuant to Section 8.1, such
party (the "Indemnified Party") shall give the other party (the
"Indemnifying Party") written notice describing the claim in
reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein shall not relieve the
Indemnifying Party of its obligations under this Section, except
to the extent that such failure to give notice materially
prejudices the Indemnifying Party's ability to defend such claim.
The Indemnifying Party shall have the right, at its option, to
32
33
compromise or defend, at its own expense and by its own counsel,
any such matter involving the asserted liability of the party
seeking such indemnification. If the Indemnifying Party
undertakes to compromise or defend any such asserted liability,
it shall promptly (and in any event not more than ten (10) days
after receipt of the Indemnified Party's original notice) notify
the Indemnified Party in writing of its intention to do so, and
the Indemnified Party shall cooperate fully with the Indemnifying
Party and its counsel in the compromise of or defense against any
such asserted liability. All reasonable costs and expenses
incurred in connection with such cooperation shall be borne by
the Indemnifying Party. If the Indemnifying Party elects not to
compromise or defend the asserted liability, fails to notify the
Indemnified Party of its election to compromise or defend as
herein provided, fails to admit its obligation to indemnify under
this Agreement with respect to the claim, or the claim could
result in the Indemnified Party becoming subject to injunctive
relief or relief other than the payment of money damages that
could materially adversely affect the ongoing business of the
Indemnified Party in any manner, the Indemnified Party shall have
the right, at its option, to pay, compromise or defend, by its
own counsel, such asserted liability. The Indemnifying Party
shall have the right to compromise any claim with respect to
which it takes responsibility provided that prior to any such
settlement or compromise the Indemnifying Party gives the
Indemnified Party at least fifteen (15) days prior notice of its
intent to settle or compromise a claim and further affords the
Indemnified Party an opportunity to provide input to the
settlement or compromise. The Indemnified Party may not settle
or compromise any claim over the objection of the Indemnifying
Party; provided, however, that consent to settlement or
-------- -------
compromise shall not be unreasonably withheld. In any event, the
Indemnified Party and the Indemnifying Party may participate, at
their own expense, in the defense of such asserted liability.
33
34
If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall make available to the Indemnifying Party
any books, records or other documents within its control that are
necessary or appropriate for such defense. Notwithstanding
anything to the contrary in this Section 8.2, (i) the party
conducting the defense of a claim shall (A) keep the other party
informed on a reasonable and timely basis as to the status of the
defense of such claim (but only to the extent such other party is
not participating jointly in the defense of such claim), and (B)
conduct the defense of such claim in a prudent manner, and (ii)
the Indemnifying Party shall not cease to defend, settle or
otherwise dispose of any claim without the prior written consent
of the Indemnified Party (which consent shall not be unreasonably
withheld).
8.3 Indemnification Costs and Expenses.
----------------------------------
(a) The costs and expenses, including, but not limited to,
fees and disbursements of counsel, incurred by an Indemnified
Party in connection with any claim for which the Indemnifying
Party is obligated to indemnify hereunder shall be reimbursed on
a calendar quarterly basis by the Indemnifying Party without
prejudice to the Indemnifying Party's right to, in good faith,
contest the Indemnified Party's right to indemnification and
receive a refund in the event the Indemnifying Party is
ultimately held not obligated to provide indemnity hereunder;
provided, however, that the Indemnifying Party shall not be
required to pay the fees and disbursements of counsel for the
Indemnified Party from and after the date on which the
Indemnifying Party commences its defense of the Indemnified Party
pursuant to the provisions hereof.
(b) No Indemnifying Party will have any obligations under
Sections 8.1(a)(i), (ii), (iii), or 8.1(b)(i), (ii), (iii) until
the cumulative aggregate amount of Damages incurred or suffered by
34
35
the Indemnified Party which the Indemnifying Party is
otherwise subject to under this Agreement exceeds $25,000, at
which time the entire cumulative aggregate amount of such Damages
shall be covered. The cumulative aggregate amount of (1) Damages
for which any Indemnifying Party shall be liable pursuant to
Sections 8.1(a)(i), (ii), (iii), or 8.1(b)(i), (ii), (iii) or
8.1(c), and (2) incidental or consequential Damages for which any
Indemnifying Party shall be liable pursuant to Sections
8.1(a)(iv), (v) or 8.1(b)(iv), shall not exceed Thirty Million
Dollars ($30,000,000), plus (ii) the amount of royalties paid by
JMED to Lilly pursuant to the provisions of Section 3.3 hereof.
The provisions of this Section 8.3(b) shall not limit or
otherwise affect the obligations of any Indemnifying Party under
any other Section of this Agreement or the Manufacturing
Agreement.
(c) The amount of any Damages for which indemnification is
provided under this Section 8 shall be reduced to take account of
any net tax benefit and shall be increased to take account of any
net tax detriment arising from the incurrence or payment of any
such Damages or from the receipt of any such indemnification
payment and shall be reduced by the insurance proceeds received
and any other amount recovered, if any, by the Indemnified Party
with respect to any Damages. If any Indemnified Party shall have
received any payment pursuant to this Section 8 with respect to
any Damages and shall subsequently have received insurance
proceeds or other amounts with respect to such Damages, then such
Indemnified Party shall pay to the Indemnifying Party an amount
equal to the difference (if any) between (i) the sum of the
amount of those insurance proceeds or other amounts received and
the amount of the payment by such Indemnifying Party pursuant to
this Section 8 with respect to such Damages and (ii) the amount
necessary to fully and completely indemnify and hold harmless
such Indemnified Party from and
35
36
against such Damages, provided, however, in no event will such
Indemnified Party have any obligation pursuant to this sentence to
pay to such Indemnifying Party an amount greater than the amount of
the payment by such Indemnifying Party pursuant to this Section 8
with respect to such Damages; and further provided, that nothing set
forth herein shall in any way limit or bar any rights of subrogation
that accrue to an insurance company or other Person who has paid any
proceeds to the Indemnified Party with respect to such Damages.
8.4 Survival. The provisions of Section 8 shall survive
--------
any termination of this Agreement and any termination of the
Manufacturing Agreement. Each Indemnified Party's rights under
Section 8 shall not be deemed to have been waived or otherwise
affected by such Indemnified Party's waiver of the breach of any
representation, warranty, agreement or covenant contained in or
made pursuant to this Agreement or the Manufacturing Agreement,
unless such waiver expressly and in writing also waives any or
all of the Indemnified Party's rights under Section 8.
SECTION 9. TERMINATION
9.1 Termination. Anything herein to the contrary
-----------
notwithstanding, this Agreement may be terminated as follows:
(a) Termination for Insolvency. If either JMED or Lilly
--------------------------
(i) makes a general assignment for the benefit of creditors or
becomes insolvent; (ii) files an insolvency petition in bankruptcy;
(iii) petitions for or acquiesces in the appointment of any
receiver, trustee or similar officer to liquidate or conserve its
business or any substantial part of its assets; (iv) commences under
the laws of any jurisdiction any proceeding involving its
insolvency, bankruptcy,
36
37
reorganization, adjustment of debt, dissolution, liquidation or any
other similar proceeding for the release of financially distressed
debtors; or (v) becomes a party to any proceeding or action of the
type described above in (iii) or (iv) and such proceeding or action
remains undismissed or unstayed for a period of more than sixty (60)
days, then the other party may by written notice terminate this
Agreement with immediate effect. In the event of termination of
this Agreement by Lilly under this Section 9.1(a), payment by
JMED to Lilly of all amounts set forth in Section 3.2 shall be
immediately accelerated and all such amounts shall be immediately
due and payable by JMED to Lilly on the date of termination.
(b) Termination for Default. (i) Subject to mediation as
-----------------------
provided in Section 9.1(f) hereof, JMED and Lilly shall each have
the right to terminate this Agreement for default upon the
other's failure to comply in any material respect with the terms
and conditions of this Agreement. Prior to any such termination
for default the party seeking to so terminate shall give the
other written notice of its intention to terminate this Agreement
in accordance with the provisions of this Section 9. l(b), which
notice shall set forth the default(s) which form the basis for
such termination. If the defaulting party fails to correct such
default(s) within thirty (30) days after receipt of the
notification with respect to monetary defaults, and ninety (90)
days after the receipt of notification with respect to non-
monetary defaults, or if the non-monetary default cannot be
corrected or remedied within ninety (90) days then if the
defaulting party has not commenced curing said default(s) within
said ninety (90) days and be diligently pursuing completion of
same, then such party may immediately terminate this Agreement.
In addition, any default by a party under the Manufacturing
Agreement shall be deemed to be a default by such party
hereunder. In the event of termination of this Agreement by
Lilly under this Section 9.1 (b), payment by JMED
37
38
to Lilly of all amounts set forth in Section 3.2 shall be
immediately accelerated and all such amounts shall be immediately
due and payable by JMED to Lilly on the date of termination.
(ii) this Section 9.1(b) shall not be exclusive and
shall not be in lieu of any other remedies available to a party
hereto for any default hereunder on the part of the other party.
(c) Termination Upon Transfer. In the event Lilly elects
-------------------------
to transfer the Licensed Assets to JMED pursuant to Section 2.3,
this Agreement shall, subject to the provisions of paragraph (d)
of this Section 9.1, terminate automatically, and without the
need for notice, simultaneously with the execution and delivery
by Lilly to JMED of the ▇▇▇▇ of Sale and Trademark Assignment
described in Section 2.3 and such other documents as JMED shall
reasonably request. Notwithstanding the foregoing, termination
by Lilly under this Section 9.1(c) shall not affect the rights
and obligations of the parties pursuant to the Manufacturing
Agreement, nor the licensing of the Technology by Lilly to JMED
pursuant to Section 2.8 of this Agreement, all of which shall
continue to survive unless and until otherwise terminated
pursuant to the provisions of this Agreement or of said
Manufacturing Agreement.
(d) Continuing Obligations. Termination of this Agreement
----------------------
for any reason shall not relieve the parties of any obligation
accruing prior thereto and shall be without prejudice to the
rights and remedies of either party with respect to any
antecedent breach of the provisions of this Agreement. Without
limiting the generality of the foregoing and except as otherwise
provided herein, no termination of this Agreement, whether by
lapse of time or otherwise, shall serve to terminate the
obligations of the parties hereto under Sections 2.2, 2.4, 2.5,
2.8 (but only if termination occurs pursuant to Section 9.1(c)),
3.2, 3.3, 3.4, 3.5, 3.6, Section 5, Section 6, 7.2, 7.3, 7.4,
7.5, 7.8, 7.9, 7.11, 7.14 (as described in 7.14(e)), Section 8,
9.1(d), 9.1(e), 9.1(f), 10.2,
38
39
10.3 and 10.4 (but only if termination occurs pursuant to Section
9.1(c)) hereof, and such obligations shall survive any such
termination, except that in the event that JMED terminates this
Agreement pursuant to the provisions of Sections 9.1(a) or 9.1(b),
then JMED shall have no continuing obligation to make any further
payments to Lilly pursuant to any provisions of this Agreement.
(e) Returned Materials. On the termination of this
------------------
Agreement (other than pursuant to Section 9.1(c)), Lilly and JMED
each shall return to the other all information which it possesses
or controls that belongs to the other, except that each may
retain a copy for recordkeeping purposes.
(f) Mediation. Notwithstanding anything in this Agreement
---------
to the contrary, in the event that any dispute arises with
respect to this Agreement or any alleged default hereunder, then
prior to a declaration of default, termination of this Agreement,
and/or the institution of litigation between the parties, the
parties shall mediate such dispute pursuant to the provisions of
this Section 9.1(f).
(i) A dispute shall be submitted to mediation by
written notice to the other party. In the
mediation process, the parties will try to
resolve their differences voluntarily with the aid
of an impartial mediator, who will attempt to
facilitate negotiations. The mediator will be
selected by agreement of the parties. If the
parties cannot agree on a mediator, a mediator
will be designated by the American Arbitration
Association ("AAA") or JAMS/Endispute at the
request of a party. Any mediator so designated
must be acceptable to both parties.
39
40
(ii) The mediation will be conducted as specified by
the mediator and agreed upon by the parties. The
parties agree to discuss their differences in good
faith and to attempt, with the assistance of the
mediator, to reach an amicable resolution of the
dispute.
(iii) The mediation will be treated as a settlement
discussion and therefore will be
confidential. The mediator may not testify
for either party in any later proceeding
relating to the dispute. No recording or
transcript shall be made of the mediation
proceedings.
(iv) Each party will bear its own costs in the
mediation. The fees and expenses of the mediator
will be shared equally by the parties.
SECTION 10. MISCELLANEOUS
10.1 Successors and Assigns. This Agreement shall be
----------------------
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however,
that neither Lilly nor JMED may assign any of its rights, duties
or obligations hereunder without the prior written consent of the
other, which consent may be withheld in the other's sole
discretion. Nothing set forth in this Section 10.1 shall prevent
or restrict either JMED or Lilly from assigning its rights and
obligations under this Agreement without the consent of the
other, (i) to its Affiliates (subject to the consent of the other
which said consent shall not be unreasonably withheld), or (ii)
incident to the sale of all or substantially all of its assets or
stock, or (iii) incident to the merger or reorganization of said
party. No assignment of this Agreement or
40
41
of any rights hereunder shall relieve the assigning party of any of
its obligations or liability hereunder.
10.2 Notices. All notices or other communications required
-------
or permitted to be given hereunder shall be in writing and shall
be deemed to have been duly given if delivered by hand or mailed
first class, postage prepaid, by registered or certified mail,
return receipt requested (notices shall be deemed to have been
given on the date received) as follows:
If to Lilly, as follows:
▇▇▇ ▇▇▇▇▇ and Company
Lilly ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President, North American Pharmaceutical Operations
With a copy to:
▇▇▇ ▇▇▇▇▇ and Company
Lilly ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
If to JMED, as follows:
▇▇▇▇▇ Medical Industries, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
With a copy to:
▇▇▇▇▇▇ ▇. Chod, Esq.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇, P.C.
1800 Equitable Building
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
41
42
or in any case to such other address or addresses as hereafter
shall be furnished as provided in this Section 10.2 by any party
hereto to the other party.
10.3 Waiver: Remedies. No delay on the part of Lilly or
----------------
JMED in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of
either Lilly or JMED of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege
hereunder nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder. The indemnification provided in Section 8
of this Agreement shall be the sole remedy available for any
Damages arising out of or in connection with this Agreement,
except for any rights or remedies which the parties hereto may
otherwise have in equity, in Section 7.14(b), or in Section
9.1(f) of this Agreement.
10.4 Survival of Representations. Each of the
---------------------------
representations and warranties made in this Agreement (but not
including the Manufacturing Agreement, which shall be governed by
the terms and conditions contained therein) shall survive for a
period of three (3) years following the date on which all
Licensed Assets have been transferred to JMED.
10.5 Entire Agreement. This Agreement, together with the
-----------------
Manufacturing Agreement, constitute the entire agreement between
the parties with respect to the subject matter hereof and
supersedes all prior agreements or understandings of the parties
relating thereto.
10.6 Amendment. This Agreement may be modified or amended
---------
only by written agreement of the parties hereto.
42
43
10.7 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed an original
but all of which together shall constitute a single instrument.
10.8 Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of Indiana
excluding any choice of law rules which may direct the
application of the law of another state.
10.9 Captions. All section titles or captions contained in
--------
this Agreement, in any Schedule referred to herein or in any
Exhibit annexed hereto, and the table of contents, if any, to
this Agreement are for convenience only, shall not be deemed a
part of this Agreement and shall not affect the meaning or
interpretation of this Agreement.
10.10 No Third-Party Rights. No provision of this
---------------------
Agreement shall be deemed or construed in any way to result in
the creation of any rights or obligations in any Person not a
party to this Agreement.
10.11 Severability. If any provision of this Agreement
------------
is found or declared to be invalid or unenforceable by any court
or other competent authority having jurisdiction, such finding or
declaration shall not invalidate any other provision hereof, and
this Agreement shall thereafter continue in full force and effect
except that such invalid or unenforceable provision, and (if
necessary) other provision(s) thereof, shall be reformed by a
court of competent jurisdiction so as to effect insofar as is
practicable, the intention of the parties as set forth in this
Agreement, provided that if such court is unable or unwilling to
effect such reformation, the invalid or unenforceable provision
shall be deemed deleted to the same extent as if it had never
existed.
43
44
10.12 Attachments. All Schedules, Exhibits and other
-----------
attachments to this Agreement are by this reference incorporated
herein and made a part of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed effective as of the day and year first above
written.
▇▇▇ ▇▇▇▇▇ AND COMPANY ▇▇▇▇▇ MEDICAL INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------- -----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------- ---------------------------
Title: Executive Vice President Title: Executive Vice President
-------------------------- --------------------------
44
45
SCHEDULES AND EXHIBITS
----------------------
TO
--
LICENSING AGREEMENT
-------------------
Schedule 2.1(a) - NDA
Schedule 5.4 - Intellectual Property
Schedule 5.5 - Litigation, Actions and Proceedings
Schedule 5.10 - Sales History
Schedule 5.11 - Compliance with Laws
Schedule 5.12 - Contracts
Schedule 5.13 - Customers
Schedule 5.14 - Suppliers
Schedule 7.2 - User Fees
Exhibit A - ▇▇▇▇ of Sale
Exhibit B - Trademark Assignment
Exhibit C - Adverse Drug Experience Reporting
Exhibit D - Submission of Labeling and Promotional Materials
Exhibit E - Medical Inquiries
Exhibit F - Product Complaints
45