Exhibit 10.5
[REDACTED - OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION AND
IS DENOTED HEREIN BY **.]
INVESTMENT AND ROYALTY AGREEMENT
This Investment and Royalty Agreement (the "Agreement") is made as of June 22,
2001, by and between Pilot Therapeutics, Inc., a North Carolina corporation
("Pilot"), and PharmaBio Development, Inc., a North Carolina corporation
("PharmaBio").
BACKGROUND AND OVERVIEW
A. Pilot and Innovex LP ("Innovex"), an Affiliate of PharmaBio, have
executed a Commercialization Agreement (herein so called) on the date
hereof, pursuant to which Innovex will provide exclusive Sales Force
Services in the United States for the Product.
B. Pilot and PharmaBio have agreed that PharmaBio will fund certain of the
Sales Force Services and issue a loan commitment to Pilot, pursuant to
the terms and conditions set forth herein.
C. Pilot has agreed as set forth herein to grant to Quintiles
Transnational Corp. ("Quintiles") a preferred relationship as set forth
in Section 4.0.
FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE
HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:
1.0 DEFINITIONS.
1.1 "Adjusted Commitment" shall mean, as of the date on which it is being
determined, the sum of (x) the Commitment Amount actually theretofore
funded by PharmaBio and (y) the estimated Commitment Amount remaining
based upon the most recent Sales and Marketing Expense Budget of the
JMC.
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 party 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.
1.3 "Annual Period" shall mean a twelve-month period beginning on the
Funding Date and each anniversary thereof.
1.4 "Commitment Amount" shall mean 50% of the Sales and Marketing Expenses
incurred during the period beginning on the SF Commencement Date and
ending on the fifth anniversary thereof.
1.5 "FDA" shall mean the US Food and Drug Administration.
1.6 "Funding Date" shall mean the later of (x) the SF Commencement Date or
(y) the Launch Date.
1.7 "Initial Sales Forecast" shall mean the Net Sales forecast as of the
date hereof for each Annual Period in the Royalty Term set forth on
Exhibit A, which Net Sales forecast shall not include projected Net
Sales outside of the United States.
1.8 "IRR" shall mean PharmaBio's internal rate of return, calculated as
described and clarified on Schedule 1.8.
1.9 "JMC" shall mean the joint marketing committee established under the
Commercialization Agreement. If for any reason the Commercialization
Agreement is terminated (including, but not limited to, termination as
described in Section 3.6 herein), or the JMC is otherwise disbanded
under the Commercialization Agreement, then Pilot and PharmaBio shall
in good faith form an advisory body composed of an equal number of
designees of Pilot and PharmaBio; provided, that Pilot shall have at
least the same rights and authority with respect to such advisory body
as it had with respect to the JMC. In such event, the advisory body
shall perform all of the obligations under this Agreement that would
otherwise have been performed by the JMC, and all references to the JMC
herein shall thereafter be deemed references to such advisory body.
1.10 "Launch Date" shall mean the date upon which the Product is first
shipped in the United States for commercial sale.
1.11 "Maximum Investment" shall mean $** Million. (All dollar references in
this Agreement shall refer to United States Dollars.)
1.12 "Minimum IRR" shall mean an IRR for the full Royalty Term equal to
seventy percent (70%) of the Target IRR.
1.13 "Minimum Sales Force Level" shall mean eighty percent (80%) of the
sales force size for the Product recommended by the JMC from time to
time pursuant to Section 3.3 and thereafter pursuant to the
Commercialization Agreement.
1.14 "Net Sales" means the amount billed by Pilot or an Affiliate, or on
behalf of or for the benefit of Pilot or an Affiliate, for sales of the
Product to a non-Affiliate third party in the Territory less: (i)
discounts, including cash and quantity discounts, charge-back payments,
refunds and rebates granted to managed health care 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 actually granted
upon claims, damaged goods, rejections or returns of such Product,
including recalls, regardless of the party requesting such, (iii)
freight, postage, shipping and insurance charges actually allowed or
paid for delivery of Product, to the extent billed, (iv) taxes, duties
or other governmental charges levied on, absorbed or
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otherwise imposed on sale of such Product, including without limitation
value-added taxes, or other governmental charges otherwise measured by
the billing, when included in billing, as adjusted for rebates and
refunds, and (v) bad debts related to Product sales (defined as any
bills unpaid for 120 days after due), provided that (a) any subsequent
collection by Pilot on such bad debt shall be restored as Net Sales at
the time of collection, and in the amount, of such collection, and (b)
Pilot shall follow commercially reasonable practices of collecting and
otherwise administering debt related to Product sales.
1.15 "Pre-Launch Sales Forecast shall mean the revised Net Sales forecast
calculated by the JMC for each Annual Period in the Royalty Term based
upon all clinical data and other relevant information available to the
JMC (including, without limitation, Pilot's reasonably expected budget
for sales, marketing and other promotional expenses) a reasonable time
prior to the earlier of the SF Commencement Date or the Launch Date,
which Net Sales forecast shall not include projected Net Sales outside
of the United States.
1.16 "Product" shall mean the product currently known as PLT 3514, as such
name may change from time to time, for the treatment of any and all
indications.
1.17 "Quintiles Group" shall mean collectively Innovex, PharmaBio and
Quintiles.
1.18 "Royalty Term" means the seven consecutive Annual Periods beginning on
the Funding Date.
1.19 "Sales and Marketing Expenses" shall mean the fees and expenses payable
to Innovex under the Commercialization Agreement for Sales Force
Services.
1.20 "Sales and Marketing Expense Budget," as of the date on which it is
being determined, shall mean the budgeted Sales and Marketing Expenses
determined by the JMC to be required to reasonably support sales of the
Product in the United States at the levels set forth in the most recent
Net Sales projections of the JMC.
1.21 "Sales Force Services" shall mean the recruitment, deployment and
management of a dedicated sales force for the promotion of the Product
pursuant to the terms of the Commercialization Agreement.
1.22 "SF Commencement Date" shall mean the first date upon which Innovex
provides Sales Representatives under the Commercialization Agreement.
1.23 "Target IRR" shall mean an IRR for the full Royalty Term equal to
thirty percent (30%).
1.24 "Territory" shall mean the United States (including Puerto Rico) and
Canada.
2.0 COMMERCIALIZATION AGREEMENT.
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The Commercialization Agreement is in the form attached hereto as
Exhibit B. All defined terms used herein but not defined in this
Agreement shall have the meanings set forth in the Commercialization
Agreement.
3.0 INVESTMENT AND ROYALTY; RELATED AGREEMENTS.
3.1 PharmaBio will support the commercialization of the Product as follows:
(a) PharmaBio shall support the commercialization of the Product
by funding the Commitment Amount, subject to the Maximum
Investment and other terms and conditions contained in the
Agreement.
(b) Subject to Section 3.1(c), the Commitment Amount shall be
funded as follows: (i) an amount equal to ten percent (10%) of
the estimated Commitment Amount, calculated using the JMC's
five-year budget for Sales and Marketing Expenses prepared
pursuant to Section 3.3, shall be paid by PharmaBio to Pilot
within ten (10) days of the SF Commencement Date; and (ii) an
amount equal to fifty percent (50%) of the actual Sales and
Marketing Expenses shall be paid by PharmaBio to Pilot within
thirty (30) days of receipt by Pilot of the corresponding
invoice from Innovex.
(c) Notwithstanding the above, without the approval of PharmaBio,
in no event shall any portion of any payment be made to Pilot
to the extent that such portion would cause the amount paid to
exceed (i) $6 Million for any Annual Period, or (ii) the
Maximum Investment for all Annual Periods.
3.2 In consideration for PharmaBio's funding commitments set forth in
Section 3.1, Pilot shall pay PharmaBio a royalty on Net Sales during
the Royalty Term. The royalty payments payable by Pilot to PharmaBio
with respect to each Annual Period are as follows:
----------------------------------- -----------------------
ANNUAL PERIOD DURING THE ROYALTY ROYALTY ON NET SALES
TERM
----------------------------------- -----------------------
1 **%
----------------------------------- -----------------------
2 **%
----------------------------------- -----------------------
3 **%
----------------------------------- -----------------------
4 **%
----------------------------------- -----------------------
5 **%
----------------------------------- -----------------------
6 **%
----------------------------------- -----------------------
7 **%
----------------------------------- -----------------------
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 sixty (60) days following the end of each calendar
quarter) during the seven Annual Periods in the Royalty Term, except
that (i) the first payment shall be made as soon as reasonably
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practicable following the last day of the calendar quarter in which the
Funding Date occurs (but not later than sixty (60) days following the
end of such calendar quarter) and (ii) the last payment shall be made
not later than sixty (60) days following the seventh anniversary of the
Funding Date.
3.3 The JMC shall take the following actions a reasonable time prior to the
earlier of the Launch Date or the SF Commencement Date: (i) prepare the
Pre-Launch Sales Forecast; (ii) agree to the sales force size and
required promotional activities to reasonably support sales of the
Product in the United States at the levels set forth in the Pre-Launch
Sales Forecast; and (iii) agree to a five-year budget for Sales and
Marketing Expenses and the resulting estimated Commitment Amount. If
the Pre-Launch Sales Forecast differs from the Initial Sales Forecast
such that the projected IRR (based on the estimated Commitment Amount
derived from the five-year budget for Sales and Marketing Expenses)
differs from the Target IRR, then the JMC shall establish adjusted
royalty amounts payable to PharmaBio during the Royalty Term such that
(x) PharmaBio's projected IRR (based on the estimated Commitment Amount
derived from the five-year budget for Sales and Marketing Expenses)
equals (y) the Target IRR. The adjusted royalty amounts established by
the JMC pursuant to the preceding sentence will replace the royalty
amounts set forth in Section 3.2 for all purposes. The adjustments to
the royalty payments based upon the Pre-Launch Sales Forecast, as set
forth in this Section 3.3, shall be the only situation where royalty
amounts are adjusted so that PharmaBio's projected IRR on the estimated
Commitment Amount (derived from five-year budget for Sales and
Marketing Expenses) equals the Target IRR. Notwithstanding the
procedures for JMC decisions set forth in the Commercialization
Agreement, in the event that the representatives of the JMC are unable
to unanimously agree to a Pre-Launch Sales Forecast, the size of the
sales force, or the related Sales and Marketing Expense Budget (and the
resulting estimated Commitment Amount) as set forth in this Section
3.3, the following process shall be followed:
(a) Each party shall promptly, and in no event later than thirty
(30) days following deadlock by the JMC, select a nationally
recognized consulting firm with expertise in the
pharmaceutical industry to determine the relevant calculation.
Such firms shall be instructed to render their respective
calculations within sixty (60) days of their respective
engagements. If the calculations of the two consulting firms
do not vary by more than ten percent (10%) (determined as a
percentage of the lower calculation value), the calculation
value shall be the average of the two values. Each party shall
bear the fees and expenses of the consulting firm it engages.
(b) If the calculations of the two consulting firms vary by more
than ten percent (10%) (determined as a percentage of the
lower calculation value), unless the parties otherwise agree
to average the results as specified in subparagraph (a) above,
the two firms shall, within twenty (20) days, select a
mutually recognized consulting firm with expertise in the
pharmaceutical industry to render a report containing a
determination of the relevant calculation within sixty (60)
days of its engagement. In such event, the calculation value
shall be equal to the
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average of (i) the calculation value as determined by the
third consulting firm and (ii) the average of the two
calculation values determined in accordance with subparagraph
(a) above. The fees and expenses of the third consulting firm
shall be borne equally by the parties.
On or about each anniversary of the date of the Pre-Launch Forecast,
the JMC shall (i) prepare an updated Net Sales forecast; (ii) agree to
the sales force size and required promotional activities to reasonably
support sales of the Product in the United States at the levels set
forth in the updated Net Sales forecast; and (iii) agree to an updated
Sales and Marketing Budget and resulting estimated Commitment Amount.
For the avoidance of doubt, the process described in (a) and (b) above
shall be applicable for five (5) Annual Periods (plus any period during
with the Royalty Term is suspended pursuant to Section 3.4) to the
extent the JMC is unable to unanimously agree on the matters set forth
in the preceding sentence.
3.4 Pilot shall use commercially reasonable efforts to commercialize the
Product. In this regard, Pilot will provide a sales force of a size not
less the Minimum Sales Force Level during the first five Annual
Periods. If, at any time during such five-year period, Pilot reduces
the Product sales force below the Minimum Sales Force Level for a
period of more than sixty (60) days, then Pilot 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 (as
the same may be adjusted pursuant to Section 3.3), which negotiations
will take into account the implications of the reduced sales force size
on future sales of the Product. If the parties are unable to agree to
such restructuring within thirty (30) days after PharmaBio gives
written notice to Pilot of its intent to pursue a remedy under this
Section 3.4 for Pilot's failure to maintain the Minimum Sales Force
Level, then PharmaBio may, at its sole discretion by written notice to
Pilot, elect to suspend the following: (i) all future funding
obligations under Section 3.1; and (ii) the running of the Royalty Term
(including, without limitation, the then-current Annual Period). During
the suspension period, PharmaBio shall continue to receive royalties at
the rate of 10%. If PharmaBio elects this remedy, the then operating
Annual Period for royalty payments under Section 3.2, and the funding
commitments under Section 3.1, shall be suspended until the Minimum
Sales Force Level is satisfied. Such Annual Period, and the funding
commitments under Section 3.1, shall restart when the Minimum Sales
Force Level is satisfied, at the same time point such Annual Period was
suspended, such that PharmaBio enjoys the full length of the seven (7)
Annual Periods described in Section 3.2 with the benefit of the Minimum
Sales Force Level for five full twelve-month periods, and the term
"Royalty Term" shall, for all purposes under this Agreement, be
extended accordingly. The exercise of PharmaBio's remedy in this
Section 3.4 in no way impacts PharmaBio's right to receive the Minimum
IRR. PharmaBio's remedies under this Section 3.4 shall be suspended for
any period that Innovex fails to satisfy its sales force staffing
obligations under the Commercialization Agreement. Notwithstanding
anything herein to the contrary, PharmaBio's rights under this Section
3.4 shall be expressly subject to the provisions of Section 3.6.
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For the avoidance of doubt, the process described in Section 3.3(a) and
Section 3.3(b) shall be applicable for five (5) Annual Periods to the
extent the JMC is unable to unanimously agree on the Minimum Sales
Force Level.
3.5 The parties agree to adjust royalty payments under Section 3.2 (as the
same may be adjusted pursuant to Section 3.3) if actual royalty
payments (or deemed royalty payments as set forth in Section
3.6(b)(iv)) based upon Net Sales result in a projected IRR (based on
the Adjusted Commitment) for the full Royalty Term below the Minimum
IRR. In this regard, the JMC will review Net Sales for the period
ending on the second anniversary of the Launch Date and for each Annual
Period thereafter. Based upon such review, if Net Sales fall below
forecasted Net Sales such that PharmaBio's projected IRR (based on the
Adjusted Commitment) for the full Royalty Term falls below the Minimum
IRR, the royalty amounts applicable to future Annual Periods shall be
increased to a level projected (based upon revised Net Sales forecasts)
to achieve the Minimum IRR. The adjusted royalty amounts shall be set
by the JMC and shall be applied over remaining Annual Periods as
determined by the JMC and designed to achieve the Minimum IRR.
If at the end of the third or any subsequent anniversary of the Launch
Date, PharmaBio's projected IRR for the full Royalty Term (based on the
Adjusted Commitment derived from the revised Net Sales forecasts)
exceeds the Minimum IRR and any portion of such excess is attributable
to increased royalty levels as provided in this Section 3.5 above, the
royalty amounts applicable to future Annual Periods shall be decreased
to a level projected (based on the Adjusted Commitment derived from the
revised Net Sales forecasts) to achieve the Minimum IRR, but in no
event shall such royalty decrease be greater than the sum of all
royalty increases made in accordance with the preceding paragraph. The
adjusted royalty amounts shall be set by the JMC and shall be applied
over remaining Annual Periods as determined by the JMC.
A final reconciliation will occur within sixty (60) days after the end
of the Royalty Term. During the final reconciliation, actual royalty
payments to PharmaBio will be measured against the Minimum IRR and, to
the extent a variance exists, either (i) royalty payments to PharmaBio
based upon increased royalty amounts pursuant to this Section 3.5 that
exceed the IRR to which PharmaBio would have been entitled based on the
royalty rates set forth in Section 3.2 (as adjusted pursuant to Section
3.3 but assuming no other adjustment had been made) shall be returned
to Pilot within ten (10) days after such final reconciliation, or (ii)
an additional royalty will be granted to PharmaBio if actual royalties
paid to PharmaBio fell below the Minimum IRR so that PharmaBio will
achieve the Minimum IRR upon receipt of additional royalties paid after
the Royalty Term (with such additional royalties designed to deliver
PharmaBio the additional royalties in a period of not less than two
years following the final reconciliation). For the avoidance of doubt,
PharmaBio shall not be obligated to return any portion of the royalty
payments under clause (i) that would result in PhamaBio's failing to
achieve the Minimum IRR.
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Notwithstanding the procedures for JMC decisions set forth in the
Commercialization Agreement, in the event that the JMC representatives
are unable to unanimously agree to an adjusted royalty structure
pursuant to this Section 3.5, then the consulting firm process
described in Sections 3.3(a) and 3.3(b) shall be followed.
3.6 In the event that Pilot terminates the Commercialization Agreement
under Section 12.3 thereof, then:
(a) Pilot shall use commercially reasonable efforts in good
faith to identify, retain and train a new sales force (the "New Sales
Force") as soon as practicable to perform substantially similar
functions as were to have been provided by Innovex under the
Commercialization Agreement;
(b) during the period (the "Transition Period") beginning on
the effective date of Pilot's termination of the Commercialization
Agreement and ending on the first day of the month next following the
date on which the New Sales Force begins detailing physicians:
(i) Pilot's obligation to provide the Minimum Sales
Force Level shall be suspended;
(ii) PharmaBio shall have none of the suspension or
other remedial rights that it would otherwise have under
Section 3.4 as a result of Pilot's failure to provide the
Minimum Sales Force Level or otherwise;
(iii) in lieu of the royalty rate set forth in
Section 3.2 (as adjusted in accordance with Sections 3.3 and
3.5), Pilot's royalty obligation to PharmaBio hereunder shall
equal the product of (A) the royalty rate set forth in Section
3.2 (as adjusted in accordance with Sections 3.3 and 3.5)
multiplied by (B) the percentage that Net Sales is during the
Transition Period of projected Net Sales for the Transition
Period (based on the JMC's most recent Net Sales projections,
prorated, to the extent necessary, on a reasonable, good faith
basis);
(iv) for purposes of any calculation hereunder with
respect to PharmaBio's receipt of the Minimum IRR, PharmaBio
shall be deemed to have been paid royalties in an amount equal
to the greater of (A) actual royalty payments under Section
3.6(b)(iii), or (B) the royalty payments that would have been
paid to PharmaBio if Net Sales during the Transition Period
had been equal to the projected Net Sales for the Transition
Period (based on the JMC's most recent Net Sales projections,
prorated, to the extent necessary, on a reasonable, good faith
basis); and
(v) the Royalty Term shall continue to run during the
Transition Period such that it will continue to expire on the
seventh anniversary on the Funding Date;
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(c) PharmaBio's funding commitments under Section 3.1 shall
continue in full force and effect, and all references hereunder to
Innovex shall be deemed to refer to the New Sales Force (and all
references to (i) the Commercialization Agreement hereunder shall be
deemed to refer to the agreement, if any, pursuant to which Pilot
retains the New Sales Force and (ii) Innovex hereunder shall be deemed
to refer to the New Sales Force or the contract provider of the New
Sales Force, as applicable); and
(d) For the remainder of the Royalty Term, "Minimum IRR" shall
mean 60% of the Target IRR.
3.7 As of the date hereof, the parties have entered into a Loan Agreement.
Such Loan Agreement is in the form attached hereto as Exhibit C.
Pursuant to the Loan Agreement, PharmaBio will extend to Pilot a loan
in the amount of up to $6 Million.
3.8 Notwithstanding anything to the contrary in this Agreement, PharmaBio's
funding commitments under Section 3.1 shall terminate unless the
Pre-Launch Sales Forecast projects that annual peak sales of the
Product will be at least $** Million for any of the seven (7) Annual
Periods in the Royalty Term.
3.9 Each Party shall keep or cause to be kept such records as are required
to determine, in a manner consistent with generally accepted accounting
principles in the United States, the sums or credits due under this
Agreement. Upon the written request of either party, the other party
shall permit an independent certified public accountant appointed by
such party and reasonably acceptable to the other party, accompanied by
representatives of the financial department of such party at reasonable
times and upon reasonable notice, to audit only those records as may be
necessary to determine the correctness or completeness of any report or
payment made under this Agreement. Results of any such audit shall be
(i) limited to information relating to the Product, (ii) made available
to both parties and (iii) subject to the confidentiality protections
set forth herein. The party requesting the audit shall bear the full
cost of the performance of any such audit, unless such audit discloses
a variance of more than five percent (5%) from the amount of the
original report, royalty or payment calculation. In such case, the
party being audited shall bear the full cost of the performance of such
audit.
3.10 The representations and warranties set forth in the Loan Agreement are
incorporated in this Agreement by reference and form part of the
consideration given to PharmaBio in exchange for PharmaBio's
commitments set forth herein.
3.11 Without the prior approval of PharmaBio, Pilot shall not, nor shall it
allow any Affiliate or third party acting on behalf of or for the
benefit of Pilot or any Affiliate to, commercialize a product that
would reasonably be expected to compete with the Product during the
Royalty Term (e.g., a product designed to reduce asthmatic episodes or
to reduce the inflammation underlying asthma). PharmaBio shall not
unreasonably withhold such approval if Pilot offers PharmaBio the
opportunity to participate in the commercialization of such product
(including receipt of royalty payments by
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PharmaBio) such that PharmaBio will be in an economic position at least
as favorable as it would have been if the competing product were not
commercialized.
4.0 GRANT OF FIRST AND PREFERRED OPPORTUNITY BY PILOT TO QUINTILES.
Pilot hereby grants to Quintiles the first and preferred opportunity to
negotiate with Pilot to provide (a) clinical trial coordination and
execution and (b) commercialization services of the type commonly
provided by Innovex that Pilot has, in its sole discretion, determined
to outsource for the period beginning on the date hereof and ending
five years following the Funding Date; provided that, as determined in
Pilot's sole discretion: (i) the applicable services fall with the
areas of recognized expertise of Quintiles (or its Affiliates), (ii)
Quintiles (or its Affiliates) provides such services at competitive
rates and makes its proposal on a competitive time schedule, and (iii)
Quintiles (or its Affiliates) expressly agrees to provide such services
to meet Pilot's timeline.
5.0 CONFIDENTIALITY AND OWNERSHIP OF INFORMATION.
5.1 Pilot 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 properly
demonstrated by the receiving party); (iv) is independently developed
by the receiving party and/or Affiliates (and such independent
development can be properly demonstrated 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.
5.2 PharmaBio on the one hand and Pilot 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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5.3 All Pilot 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,
"Pilot Property"), disclosed, used, improved, modified or developed in
connection with the relationship contemplated by this Agreement shall
remain the sole and exclusive property of Pilot. Except as otherwise
expressly provided in the Commercialization Agreement, no member of the
Quintiles Group shall have any right, title or interest in or to any
Pilot Property.
5.4 Pilot acknowledges that the Quintiles Group possesses 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 the Quintiles Group (collectively
"Innovex Property"). Any Innovex Property or improvements thereto which
are disclosed, used, improved, modified or developed by Innovex under
or during the term of this Agreement shall remain the sole and
exclusive property of Innovex.
6.0 INDEPENDENT CONTRACTOR RELATIONSHIP.
For the purposes of this Agreement, Pilot and PharmaBio 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 Pilot nor PharmaBio
shall have the power or right to bind or obligate the other party, nor
shall either party hold itself out as having such authority.
7.0 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.
8.0 INDEMNIFICATION AND LIABILITY LIMITS.
8.1 PharmaBio shall indemnify, defend and hold harmless Pilot, 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
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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 negligence or willful misconduct
of Pilot or its employees.
8.2 Pilot 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 Product; (ii) breach by Pilot (or its employees) of
its obligations hereunder; (iii) willful misconduct or grossly
negligent acts or omissions of Pilot or its employees; and (iv)
violation by Pilot or its employees of any municipal, county, state or
federal laws, rules or regulations applicable to the performance of
Pilot's obligations under this Agreement, except, in each case, to the
extent such Losses are determined to have resulted from the negligence
or willful misconduct of PharmaBio or any of its employees.
8.3 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.
8.4 Neither PharmaBio nor Pilot, 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,
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 Pilot
hereunder shall not be limited in any way pursuant to the provisions
set forth in the preceding sentence.
9.0 INSURANCE.
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Prior to the SF Commencement Date, Pilot will present Quintiles with a
form of product liability insurance contract with coverage amounts
reasonable and customary under the circumstances. Upon request, Pilot
shall provide Innovex with an original signed certificate of insurance
evidencing such coverage and showing PharmaBio (or other Quintiles
Affiliates) as additional insureds under such insurance, within thirty
(30) days after such request. The certificate must provide that thirty
(30) days prior written notice of cancellation or material changes in
insurance coverage will be provided. In any event, Pilot shall maintain
during all Annual Periods insurance coverage in form and substance and
with limitation amounts that are reasonable and customary under the
circumstances.
10.0 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 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.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: General Counsel
PharmaBio Development Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Pilot: Pilot Therapeutics, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
11.0 ASSIGNMENT.
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No party may assign any of its rights or obligations under this
Agreement to any third party without the written consent of the other
party, except that Pilot may assign its rights or obligations under
this Agreement to a bona fide third party that (i) acquires all of
Pilot's nutraceutical business (a "Permitted Sale") and (ii) assumes
all of Pilot's rights and obligations under this Agreement. Other than
pursuant to a Permitted Sale, Pilot may not, without the written
approval of PharmaBio, assign any of its rights in the Product to a
third party. Nothing in this Section 11.0 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.
12.0 GENERAL PROVISIONS.
12.1 This Agreement shall be construed, governed, interpreted, and applied
in accordance with the laws of the State of North Carolina, without
giving effect to the principles of conflict of laws.
12.2 The provisions of Articles 1, 2, 5, 8, 10, 12 and 13 shall survive the
termination of this Agreement for any reason.
12.3 This Agreement contains the entire understandings 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.
12.4 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.
12.5 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.
12.6 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.
12.7 The individuals signing below are authorized and empowered to bind the
parties to the terms of this Agreement.
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13.0 DISPUTE RESOLUTION:
13.1 Internal Review. In the event that a dispute, difference or question
arises pertaining to any matters which are the subject of 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 JMC, which will use its good faith efforts to resolve
the Dispute within ten (10) days. If the JMC is unable to resolve the
Dispute in such period, the JMC will refer the Dispute to the Chief
Executive Officers of Pilot and Quintiles Transnational Corp. For all
Disputes referred to the Chief Executive Officers, the Chief Executive
Officers shall use their good faith efforts to resolve the Dispute
within ten (10) days after such referral.
13.2 Arbitration. If the parties are unable to resolve disputes under 13.1,
then either party can seek binding arbitration to be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, sitting in Raleigh, North Carolina, as in
effect at the time of the arbitration hearing, such arbitration to be
completed in a sixty (60) day period. The arbitration panel will be
composed of three arbitrators, one of whom will be chosen by Pilot,
one by PharmaBio, and the third by the two so chosen. If both or
either of Pilot or PharmaBio 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 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.
13.3 Costs. The parties shall bear their own costs in preparing for and
participating in the resolution of any Dispute, and the costs of
mediator(s) and arbitrator(s) shall be equally divided between the
parties.
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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. PILOT THERAPEUTICS, INC.
By: /s/▇▇▇ ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------- -----------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------- -----------------------
Title: VP & General Counsel Title: CEO
------------------------- -----------------------
Attachments:
Exhibit A--Initial Sales Forecast
Exhibit B--Commercialization Agreement (filed in a separate exhibit)
Exhibit C--Loan Agreement (filed in a separate exhibit)
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Exhibit A
Annual Period following Funding Date Net Sales
------------------------------------ ---------
Year 1 $38.76 Million
Year 2 $49.4 Million
Year 3 $64.6 Million
Year 4 $115.52 Million
Year 5 $148.2 Million
Year 6 $148.2 Million
Year 7 $148.2 Million